Blaming Bernanke for inflation is foolish

Critics who claim the Fed chairman's policies have pushed food, cotton and oil prices higher know nothing about inflation. Bernanke deserves our praise, not our scorn.

By Jim Cramer Feb 8, 2011 10:10AM

jim cramerthestreetI'm starting to hear way too much chatter about Ben Bernanke causing inflation. First, let's talk about what Bernanke has done unbelievably well: provide the liquidity to allow businesses to raise debt cheaply so they can get back on their feet. He has single-handedly kept thousands of companies alive. I think many, many businesses, particularly banks, would have failed. With cheap money, he just didn't let it happen.

 

Second, he has served as the grownup in Washington. Congress has done very, very little to help this country -- something every person who has ever run a business, small or large, knows. Bernanke has done amazing things to offset government-mandated slowdowns like Obamacare and the financial reform bill.

 

Third, he did all of this without creating anything near the chaos people predicted would result from his easy-money policies.

 

Still, the chatter is that Bernanke and his QE2 printing press should shut down because it is causing rampant inflation.

 

Post continues after video:

 

I think QE2 has been a great success. It has helped the stock market regain its luster, and that in turn has allowed companies to offer stock to further fix their balance sheets. It has increased the wealth effect, which has a direct correlation to consumer spending, which has been far more robust than anyone ever predicted.

He allowed homeowners and commercial-real-estate owners to refinance at terrific levels to get the economy far, far from a second Great Depression. It has worked, and it has helped stimulate an environment in which job growth could be happening quite soon.

 

Why end it, though, until we have it? If the rest of the world is raising rates to slow wage inflation, and we have no wage inflation (in fact, we have plenty of slack). Why take our foot off the gas pedal?

 

The reason, many people suggest, is the inflation Bernanke is allegedly causing. What kind of inflation, I ask. First, it sure isn't wages (as I just mentioned), which are the scourge of an economy. Second, it isn't house prices. They are flat and show no signs of going up even as they have bottomed out.


Nope, it is commodity inflation. It's the inflation involving grains, oil, steel and cotton.

 

Does anyone really think that's Bernanke's fault? Cotton? It will be self-correcting. We read Monday that farmers will plant 14% more cotton this year. That's enough to crash cotton.

 

Oil? Dream on, that's worldwide demand. If we were to give truck companies incentives to buy trucks that run on natural gas, we could take oil down. But that's Congress' job, not Bernanke's.

 

Finally, there is grain. You know why grains keep going higher? Weather and ethanol. Nobody, not even Bernanke, can control the weather, and Congress, again, is the one responsible on the ethanol front.

 

Folks who blame Bernanke for the inflation we have are fools. They know nothing about inflation. Bernanke deserves our praise, not our scorn. The Fed chief is doing exactly what he should be doing until we have real job growth in this country.

 

Until then, Cramer to critics: Shut up!

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

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9Comments
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Cramer,

have you forgotten or just don't care to acknowledge

1. that since Bernake' QE2, interest rates have gone up a lot. Bond traders are betting inflation is here. the cheap money BB has instigated has given the means (capital) for wide spread speculation/m&a, etc leading to inflation.

2. that BB's QE2 and fed reserves' other schemes have raised national debt to unsustaainable levels and bond market given up believing that there is any creditable deficit actions forthcoming from the fed.

3. that BB's QE2 has forced dollar lower thus creating either matching money printing schemes in Europe or inflation in those countries

4. QE's and other easy credit schemes (like home nuying and auto buying tax credits and now ss tax credit and 100% eq writeoffs) cause buying but once its' over so is a lot of the demand.

and no or less tax revenue during the schemes  followed by less taxes after schemes

 

You simply can not fabricate or scheme good economies for long term. Budgets eventually have to be balanced and natural flows is the time proven way. ie: there should be no fed reserve board and budgets must be balanced.

 

 

Feb 8, 2011 3:33PM
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Bernanke is making comments about his tenure job pertaining to issues you and I  understand quite well.  He is doing that because he is nervous that HE will be perceived as the cause of so much financial malfeasance.  By comparison, his predecessor Greenspan actually caused some serous damage by NOT reporting the facts about deregulation... because the deregulators were his bosses.  I've been around long enough that I knew nodoc loans would cause damage and that deregulation would make the time to detection of that damage much longer and therefore much more damaging than it should have been.  Beyond that, we see folks like Madoff cashing everyone's checks and hiding huge amounts with his relatives and friends.  There was no need to deregulate and if you hear a Republican say that regulation costs more, just think as fast as you can that "sure it will cost more, but not nearly as much as deregulation has already cost us." Deregulation CAN be good if it is used to remove regulations that in reality DON'T protect... but deregulation just because you think a free market is best is like saying globalization is the best thing that has happened to the US... except that those in charge of oversight forgot that globalization without fair monetary policies and fair competition between US products and foreign products is tantamount to handing over the US's American dream to everyone BUT the US people.  The true facts are simple...  a simple GNP economic equation is not as simple as the economists, including Greenspan and Bernanke, have implied.  Without extreme regulation over the implementation of that policy, you get uneven global markets and no way to recover the American industry lost to foreign engineered markets... without reverting to tariffs and protecting products like we did until the 1990s when the myth of free market globalization began.  We are now living with the aftermath. 

Feb 8, 2011 4:05PM
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Um...Bernanke admitted that he wanted to increase inflation to devalue the dollar and cause Americans to spend their money rather than saving it in the bank. Of course he is the cause of inflation, he came out and said that was the entire purpose of QE2.

Forget that it is completely contrary to decades of conventional wisdom of saving money and spending when you can afford to. Attitudes like Mr. Bernanke's are what led to decades of living in debt and overspending which the US government is doing more now than ever before. Our economic situation is getting worse, not better. You can not deliberately deflate the dollar, drive up the deficit, and increase the national debt as we are continuing to do and expect to make things better. These are the very attitudes that led to this mess.

Feb 8, 2011 5:16PM
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What a comedian Cramer is.  Does anyone recall MV = PQ.  If velocity and quantity remains constant as it has done because of high unemployment, and the money supply has gone up, then prices increase.  Regulation is not in the real interests of the general public but of special interest groups, and that is why regulation continues to damage the economy.

Feb 8, 2011 6:14PM
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You know whatI I like most about television? It's the fact that it allows anyone to make a living as long as they can either be entertaining or controversial enough to keep our attention away from the real issues that effect the individual at the core of their personal problems and situations. It's the opportunity it affords those less informed or educated the moment to feel that they do understand the complex issues just by listening to fast talkers who use demagoguery as their tool to promote nonsense as though it were fact. Obviously, Mr. Cramer needs to slow down and read books with word and not so many pictures about how the economy and sustainable job creation actually work and stop waiting for the video that comes from the government to come out. Hint, sometimes the good guys aren't portrayed well in movies if the director has no vision. Mr. Bernanke has done precisely what he stated he was going to do, and now Mr. Cramer is calling him a liar by stating that what he has done is not in fact what he stated he would do. This is quite the riddle. Am I to believe the man who stated that he  wanted to create inflation through devaluation of the currency on a global level or the man that praises him for not because he, Mr. Cramer, really just wants to be entertaining or controversial on an issue that everyone in the entire global market has been screaming at us about to STOP, WTH and of course let's not forget even those who hold our debt demand that we end this foolish practice. This situation is by far the most revealing. We are now being lectured to by countries that just became capitalist on how to be capitalist. Mr. Cramer, my only advise to you would be to show a cartoon during an intermission or break in your show. This will allow you to laugh along with the rest of us and at the same time you wont look so foolish or disingenuous to your audience as you contemplate what you have just said.
Feb 9, 2011 10:18AM
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Ben Bernanke is not crying, End the Fed. Start by raising awareness by marking your dollars with END THE FED over the pyramid. That bill will circulate 18 months on an average.

http://www.youtube.com/watch?v=EzhOvdhvYHM
Feb 9, 2011 7:39AM
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I've also heard and read where tons of people have called you an idiot Jim. They're absolutely right too! Thumbs up
Feb 8, 2011 10:43PM
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Come on, Jim's only interested in worshiping at the Fed alter because they've printed enough Monopoly money to re-inflate his beloved banks, brokers, hedge funds, investment houses and the rest of the thieves that created the financial crisis.  He doesn't care about the long term as long as he's got some dribble for his MSN posts.  You can't really blame him, he's only watching out for number one just like the rest of us. 
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Bladin84 and jetmayer

 

right on target!!! especially about globalization for US does not work..primarily because we can compete on most products due to protecing the planet, safety reg's, costs of gov't etc, don't have nearly enough nat resources and those that we do can't get to duet to green nut obstructions, having our democratic form of gov't that can't compete against the Chinas, Indias, Brazils, Russias, Germany's gov't forms that have CONTINUITY in decisions with industry, etc

I forgot to note the lies or schemes the fed uses to measure inflation like stripping out foof and energy..like they don't cost money also. and various other models to make the PPI and CPI artificiallly low in order to justify QE2 and other schemes

 

Cramer,

look at the bond market again today-again int rates ratcheting up ,they know what;'s coming up soon. YOU'RE THE ONE THAT NEEDS TO SHUT UP AND WILL BEFORE YEAR IS OUT ON SAYING HOW GREAT BB IS

 

 

 

 

 

 

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