Federal Reserve Board Chairman Ben Bernanke is afflicted with an Atlas complex, financial writer and bond market commentator Jim Grant told attendees at the 2nd Annual Fiduciary Gatekeeper Research Manager Summit in Boston today.
"Don't you miss interest rates?" Grant asked the financial professionals over a luncheon. "The large-scale experiment of price controls [of interest rates] will prove his undoing."
Grant predicted that the current "yield famine" will end eventually and insurance companies will be able to prosper once again. When bond prices are permitted to fall and return to market levels, insurers and other businesses that run their businesses by matching assets and liabilities will no longer have to wrestle with their current conundrum.
Bernanke's single-minded focus on the Great Depression and his effort to implement policies designed to prevent "one single event" were misplaced, according to Grant. He suggested that Bernanke study the 1920-21 depression more closely.
In those years, the Federal Reserve raised interest rates and Congress ran a budget surplus. Many farmers were wiped out, but it ended when people "with cash started buying stuff." Within a few years, unemployment fell to under 4%.
"Just because Bernanke studied it [the Great Depression] in college doesn't mean that he has to live it in life," Grant quipped.