Blodget says Ben Bernanke has a 'secret plan'


Don't count me among Henry Blodget's admirers, but he makes an interesting argument in a recent video posted on BusinessInsider.com (see below). Blodget argues that Federal Reserve Chairman Ben Bernanke has a "secret plan" to keep interest rates too low for too long on purpose. Why? To encourage inflation. According to Blodget, Bernanke has two good reasons for doing this:

  • Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that's happier with Ben Bernanke.
  • Faster erosion of the real value of our debts. Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less. Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell -- but not quite to the point where China actually stops lending to us.

It's hard to argue with Blodget's argument. It makes perfect sense, and Bernanke's conduct may be perfectly rational.

But doesn't that make it pretty disingenuous for him to continue to insist that inflation won't be an issue because he will tighten interest rates before that happens?

While the inflation hypothesis certainly hasn't come to fruition yet -- and many pundits are still concerned about deflation -- the financial markets appear to be pricing in this risk. The Financial Times reports that "...demand for US Treasury inflation-protected securities has accelerated in the past month, reducing supplies of such bonds held by Wall Street dealers to their lowest level in three years, said the Fed."

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA-6.6612,496.15
NASDAQ+11.042,850.12
S&P 500+2.231,318.86

Last updated: May 23, 2012: 11:24 PM

Hot Stocks

General Electric

19.180.00(0.00)

Alcoa

8.61+0.12(+1.41)

Apple Inc

570.56+13.59(+2.44)

Google Inc 'A'

609.46+8.66(+1.44)

Bank of America

7.17+0.19(+2.72)

Wal-Mart Stores

64.58+0.85(+1.33)

Exxon Mobil Corp

82.04+0.09(+0.11)

Ford

10.41+0.22(+2.16)

Citigroup

27.15+0.23(+0.85)

IBM

196.12-0.70(-0.36)

Yahoo

15.38+0.09(+0.59)

Starbucks

55.29+1.92(+3.60)

Microsoft

29.11-0.65(-2.18)

Home Depot

48.74+0.48(+0.99)

DailyFinance Headlines

Benzinga Headlines

TheFlyOnTheWall.com Headlines

BioHealth Investor Headlines

WalletPop Headlines

DailyFinance BlackBerry App

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance

BioHealth Investor Headlines

Page Loaded in 1337829871672 ms.