Federal Reserve monetary policy decisions are BORING, but less so when compared to watershed cultural moments like Bob Dylan going electric. That's the key parallel in Bloomberg Businessweek's cover story this week about the crossroads Ben Bernanke finds himself in as he tries to decide whether to curb unemployment or stave off inflation. As the magazine's Peter Coy frames it:
With the global financial crisis over (for now), Bernanke is groping for a second act, like a monetary Bob Dylan who peaked too young. The actions demanded of him are less clear this time. The U.S. economy grew at an annual rate of just 1.5 percent in the second quarter of 2012. Chronically high unemployment is a human crisis every bit as real as the financial meltdown was. Should Bernanke respond at the next FOMC meeting in September by pushing monetary policy even deeper into uncharted territory? Or should he stand still to avoid the risk of inflating new bubbles and alienating the hawks on the committee? In short, which should Ben Bernanke be—acoustic or electric?
In short, Coy depicts Bernanke in a sort of impossible dilemma. Bernanke would prefer Congress fix the economy because monetary policy has its "limits." But since it won't, he's forced into action but haggled by critics on the left and right for acting too cautiously to fix unemployment or acting too aggressively in keeping interest rates down:
“It’s sort of damned if you do, damned if you don’t,” says Michael Feroli, chief U.S. economist of JPMorgan Chase. “They’re in a tough position.” Bernanke secured his reputation during the financial crisis. Temperamentally, he may prefer a cautious approach that won’t tempt the gods of inflation. But whether he likes it or not, Bernanke is the most powerful economic policymaker in Washington at a time when the country faces a once-in-a-generation challenge. Only the reticent Professor Bernanke can decide when it’s time to turn radical again.
Whether or not this shares a lot of similarities with crowds booing Dylan for going electric during 1965's Newport Folk Festival is up to the reader. (The author doesn't really dwell on the parallel much.) But, hey, it makes for a cool cover! Below is the original 1966 Dylan poster by designer Milton Glaser.
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