They call her the “Flying Squirrel.” She has been turning cartwheels since she was three – only 11 years ago. Gabby Douglas was not supposed to be American team leader for women gymnasts – much less the winner of the gold medal for the all-around. But Gabby can twist and twirl better than the Federal Reserve.
While Gabby was doing her thing, the New York Times reported that elsewhere in London the manager of a major hedge fund at Moore Capital Management, returned $2 billion to investors because he could decide how to make money with their money: “The political involvement is so extreme – we have not seen this since the postwar era. What they are doing is trying to thwart natural market outcomes,” declared Louis M. Bacon to the Times. “It is amazing how important the decision-making of one person, Angela Merkel, has become to world markets.”
Now, Bacon has been trying to find a way to make money off Europe’s and the euro’s problems. You don’t need to feel sorry for his dilemma, but you do need to feel sorry for what is going on with Europe’s monetary gymnastics.
Back in the United States, Fed Chairman Ben Bernanke is singing the Carly Rae Jepson hit, “Call Me Maybe.” (Perhaps not coincidentally, both the Harvard baseball team and the U.S. Olympic swim team have videos of the Katy Perry song.)
The New York Times Editorial Board is not pleased — demanding immediate action. In an editorial headlined “The Mañana Bankers,” the Times complained: “How bad do conditions have to get before the Federal Reserve and the European Central bank new steps to support economic growth?....Despite ample evidence that the economy is weakening, the Fed chairman, Ben Bernanke, and the Fed policy committee decided on Wednesday not to undertake any additional monetary stimulus. Then, on Thursday, the E.C.B. also punted.”
Well, you don’t have to be a fan of Bernanke or Mario Draghi to wonder if their past efforts have poured water or gasoline on the fire that seems to be destroying economies around the world. So, maybe a bit of un-Olympian humility is called for.
Even better, Bernanke and Draghi might reconsider if they are playing the right sport – according to the right rules. Maybe they need to rethink the way they approach the sport – and keep changing the ground rules. A good game requires good rules.
A good monetary policy requires even better rules. Rules based in economic reality. Rules based on tangible value. Rules based on the gold standard.