Economic Comment

How did Fed Chairman Greenspan rack up such a stunning record of success? I call it fourth dimensional thinking that can only be spawned out of Ayn Rand's style of free market thinking.

Does Bernanke have it? If the yield curve can be used as a measure, the street may be saying "no". The yield curve had inverted out to the ten year as he took office, and stretched to a thirty-year inversion on the eve of his initial Congressional Finance Committee testimony.

Did his testimony change street perception? I don't think so. Among his many level headed responses, he threw in a couple that concerned me. First, I think I heard him say something to the effect that this time the yield curve inversion doesn't necessarily mean there is a recession ahead. Perhaps he's right. Perhaps the inversion will evaporate - but why try to push a rope??

I think I also heard Bernanke say that thirty-year Treasury Bond issues were previously cut off because the deficit was declining, and they were relaunched recently because the deficit has gone back to its old habit of expanding. To my way of thinking, it's bad news if he believes this, and it's also bad news if he thinks that Wall Street is gullible enough to believe it.

You must remember that during the Clinton years, SEC and NYSE market oversite was systematically short circuited. You can probably recall the total disappearance of what were formerly our most respected national auditing firms - firms that shut themselves down in disgrace. With no SEC, NYSE or audit oversight, reported earnings were padded and they soared through the roof. Markets followed all the way to the bubble of the year 2000. We all remember that, of course.

Now here's my point. When criminals took over Wall Street, markets soared, but U.S. credit quality plummeted toward third world status. Third world countries don't issue 30-year bonds because nobody will buy them. In my view, that is why the U.S. stopped issuing 30-year bonds.

Since the year 2000, many Wall Street criminals have gone to trial, and after six years of work by the Bush administration, we are finally at a point where the 30-year Treasury maturity can be issued at less than third world rates of interest.

I would be a lot happier with Mr. Bernanke if he'd simply said nothing about 30-year bonds, and even if he's right about ignoring the yield curve inversion, why take the risk of talking about it. I miss Chairman Greenspan.