"Helicopter Ben is still throwing money out there," said conservative businessman and Forbes editor Steve Forbes in his August 7, 2008, speech to The Commonwealth Club.
Forbes was referring to Ben Bernanke, the chairman of the Federal Reserve and one of the two key figures in the government's response to the credit crisis and the please-don't-call-it-a-depression recession (the other figure is the Treasury secretary). Forbes (see video below) also said, "Ben Bernanke once wrote academic papers saying the way you deal with a crisis is you print more money, throw money at it. He even made the analogy that Milton Friedman did to throwing money out of helicopters, which is why his name inside the Fed is Helicopter Ben."
Forbes was speaking back in August, when the full extent of our economic troubles was not yet known. Now comes news that Bernanke announced plans for increasing Fed Treasury purchases and mortgage-backed-securities purchases to the tune of more than $1.2 trillion. The Fed basically makes its own money, so it's printing the money and pumping it into the economy to try to unfreeze credit markets and improve the health of the financial system (which Bernanke told "60 Minutes" this past Sunday was key to recovery this year).
Forbes isn't the only person who raises an eyebrow at efforts to vastly increase the money supply. The same concern is behind the growing criticisms from the governments of Germany (a country that has strong memories of the disaster wrought by runaway inflation during the Weimar Republic) and France.
Put simply, the fear is that printing lots of money right now might bring an earlier end to the recession, but it will be nearly impossible to shrink the supply at just the right amount at just the right time at just the right speed during the recovery to prevent runaway inflation.
Is it a case of the lesser of two evils? Can Bernanke -- an expert on the Great Depression -- successfully manage the transition to recovery? Will the $1.2 trillion be enough to make a difference? Leave a comment and join the discussion.
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