This week Ben Bernanke testified before the Joint Economic Committee in Washington. And you can't talk to Bernanke these days without asking him about quantitative easing. Or to put it in English, the Fed's strategy of purchasing assets from commercial banks to keep cash flowing into the economy.
QE is controversial. It's even been called a "Jedi mind trick." This weekend being the 30th anniversary of "Return of the Jedi," we thought we'd look at that analogy.
After Luke Skywalker found out that Darth Vader is his father, he accused Obi-Wan Kenobi of lying to him. Obi-Wan said it wasn't a lie from... a certain point of view.
"A certain point of view?" Luke asks.
"You're going to find that many of the truths we cling to depend greatly on our own point of view," Obi-Wan replies.
So is quantitative easing the Darth Vader of economic policy? Well, it depends on your point of view. You might say that QE has spurred lending, created jobs and has kept inflation below 2 percent. More like a young Anakin Skywlaker before he turned to the dark side.
"He was the best star pilot in the galaxy," Obi-Wan says of Anakin.
Or, like many of its critics, you might say it's only a matter of time before QE causes inflation, it's creating artificial price bubbles, and it hasn't had any noticeable impact on unemployment.
As Darth Vader says, "Give yourself to the dark side."
Bernake says he has no plans of ending the Fed's $89 billion a month spending on Treasuries and mortgage-backed securities.
"It is the only way you can save your friends," Vader says.
So will QE save us from the dark side? We'll just have to wait for QE episode 4, directed by Ben Bernake featuring an all-star cast of commercial banks. Let's just hope it has a happy ending.
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