A much simpler way of describing monetary policy

As Ben Bernanke gets ready to trudge up to Capitol Hill today to explain to Congress how he intends to fix the mess that former Fed chief Alan Greenspan made, Federal Reserve Bank of St. Louis President William Poole tells you all you really need to know about contemporary monetary policy in the first twenty seconds of this 45 minute speech.

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Mr. Poole opens by noting, "I have a much simpler way of describing monetary policy. If you print money in your basement, it's called counterfeiting. If we print money it's called monetary policy. (Sound of economists laughing) And that's literally true, we have the power to print money - that's what we do."

He then goes on to mention Charles Kindleberger's classic book "Manics, Panics, and Crashes" in relation to the bursting credit/housing bubble and, according to the Bloomberg report (sorry, couldn't make it through more than about five minutes of the video -good luck with that), went on to predict that "the housing industry's woes may not end soon and policy makers might need to consider 'additional rate cuts' should the problems spread."

It would have been better without all the laughing at the 20 second mark as once again the question comes to mind, "How can more easy money help to fix the problems caused by too much easy money?"

It is funny though how, like the former Fed chief, central bankers can view the current situation in a detached sort of way - as if they had nothing to do with the current mess.

Funny, that is, but not in a "ha-ha" sort of way.

Also at Bloomberg today, after a brief absence, Caroline Baum is back at her post with a few thoughts on Robert Rubin's Strong Stock Policy for Citigroup and a couple other topics:

For the past month, with my dominant hand in a cast, I've been relegated to the role of consumer of financial news and commentary. That's not easy for someone who's used to asking a lot of questions and expressing her views in real time.

Let's just say I have a lot of laundry that's accumulated over the last four weeks that needs to be hung out to dry. So herewith, in no particular order of importance, are some thoughts on a few subjects:

1. Daddy, What Do They Do on an Executive Committee?

Robert Rubin, everyone's favorite Treasury secretary and the Democratic Party's eminence grise, was chairman of Citigroup Inc.'s executive committee when SUV nation caught SIV fever. He had an office next to Citi CEO Chuck Prince, the cachet to reach anyone on the global stage and the stature to make a difference.

Instead of getting swept out with the boss last weekend, Rubin was elevated to interim chairman -- in part, we're told, because there was no one else to clean up the mess (in a country of 300 million people?); and in part because of his sterling credentials as a crisis manager.
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3. I'm Still Here

Remember the fellow who said you couldn't know a bubble until after it burst? With some distance from his perch at the Fed, Greenspan seems to have acquired 20-20 vision. He now dispenses bubble diagnoses freely (on the U.K. housing market and Chinese stock market), handicaps U.S. recession (the odds are less than 50 percent currently), and finally found a bailout he doesn't like (the Treasury-supported plan to combine the best assets from bank-related Structured Investment Vehicles into a Super SIV).

Rubin, Greenspan's former colleague on "The Committee to Save the World,'' as Time magazine put it in its Feb. 15, 1999, cover story, is back in the clean-up business. The job of cleaning up the mess that Greenspan made has been left to Bernanke.

Welcome back Caroline.