Stephen Foley: Bernanke must rise above the jibes from Perry's Texas hold'em economics

Rick Perry’s comments about Ben Bernanke have been viewed as a gaffe and an unwise reminder of the rhetorical style of George W Bush

US Outlook Wanted, dead or alive: Ben Bernanke, chairman of the Federal Reserve. Yes, it has been a startling week for America's mild-mannered central banker, to have heard a supposedly serious presidential candidate calling for him to be lynched.

"If this guy prints more money between now and the election," the Texan Governor Rick Perry said of Mr Bernanke, "I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion."

The establishment reaction to Mr Perry's comments on the campaign trail has been that they were a gaffe, an unwise reminder of the rhetorical style of George W Bush and a tickling of Republican primary voters that the Governor will come to regret when he courts independents in the election next year. To my mind, they were something all together more depressing: another example of the eroding legitimacy of the Federal Reserve and the dangers to come for the world's largest economy.

Let's deconstruct Mr Perry, shall we? "This guy" is a Princeton professor whose academic work was devoted to understanding the Great Depression and whose public service has been devoted to preventing a repeat. "Playing politics" is not something the Republican Mr Bernanke could give two hoots about, "between now and the election" or ever.

And "treasonous"? The fact that the word would even pop into Mr Perry's head shows you how far the "End the Fed" movement has moved the debate in the US. Ron Paul, another Republican presidential candidate, articulates the position more intelligently, arguing that decades of loose monetary policy have eroded the purchasing power of the dollar and undermined the US's power in the world. By that logic, Mr Bernanke is indeed at the head of a fifth column.

But "printing more money" – expanding the money supply through quantitative easing – might be the last tool left to counter contractionary pressures that are everywhere you look. Consumers have gone off the idea of having giant personal debts, government at all levels is shedding staff and slashing budgets. Businesses have lost faith in the economy's ability to grow strongly. Republicans have ripped out the levers of fiscal policy, leaving Mr Bernanke as the only bulwark against a second recession. This is why, every time a Fed official hints at new round of quantitative easing, the value of American companies soars on the stock market.

There are crucial technocratic issues to be debated over how to employ unconventional monetary policy in a zero-interest rate world, and these are the issues that will occupy Fed officials at their Jackson Hole symposium in Wyoming next weekend.

Away from their mountain idyll, though, the Fed is becoming synonymous with government intervention in markets, and not very successful intervention at that. That puts it firmly on one side of the political divide, instead of above it. What is required at Jackson Hole, among all the other pressing issues, is an argument for shoring up the legitimacy of central banking and interventionist monetary policy. Mr Bernanke has plenty enough to worry about sailing the economy between the Scylla and Charybdis of rising inflation and chronic unemployment, without having to worry about being lynched, too.

As for Mr Perry and the Austin school of economics, it is enough to make you despair. He makes George W Bush sound like an Ivy League graduate.



Apotheker's HP tenure has been a muddle

Leo Apotheker lasted less than two years in the chief executive job at the German software giant SAP before the board asked him to go, and on the evidence of his disastrous start at Hewlett-Packard, he might not beat that record in his new job. The 20 per cent drop in the computer maker's shares yesterday tells you all you need to know about the strategic chaos and operational disappointment that he has unnecessarily visited on this once-great company.

Of course, not all the problems are of Mr Apotheker's making. The personal computer division that he has decided to spin off or sell may be the largest such manufacturer in the world, but it is in a commodity business and even improving efficiency there will do little for HP's bottom line overall. Any hope of cracking the new market for tablet computers was squandered when HP acquired Palm for $1.2bn last year, going up an operational cul-de-sac. Mr Apotheker is effectively shutting down Palm and giving up its mobile operating software.

These moves might ultimately be welcome, frankly, since HP can now concentrate on building its IT services business, turning itself into an Oracle or an IBM able to provide large corporations with the whole kit and caboodle, from server hardware, through storage and data management software to consulting and support.

But they are a complete volte-face from the strategy that Mr Apotheker appeared to lay out in February, in his much-hyped but cloudy "vision" for the company, when he talked a very great deal about the consumer side of the business, and which its executives have been valiantly trying to articulate ever since. When there is strategic muddle at the top, the divisions below underperform, and that is precisely what has happened at HP. There was something grimly inevitable about it having to lower its profit guidance for the third quarter in a row.

There is more muddle to come. The break with the PC division is unlikely to be clean or profitable for HP, since buyers can see how desperate it is to sell and the economic situation is hardly conducive to getting a good price. What is certain is that it will disrupt operations at the much more important enterprise division. Should salesmen there carry on bundling HP laptops and desktop computers with IT projects for large corporations, or not?

Meanwhile, executives also have to contend with integrating the grossly overpriced acquisition of Autonomy, which does not fit as clearly into HP's sales operations as it would into, say, Oracle's.

Even the announcement of these big strategic shifts was chaotic, coming piecemeal through Thursday in response to leaks. It all bodes ill for the future – and for Mr Apotheker.

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