That the administration takes its lead from the oil barons is nothing new. That too many in our Congress are at the beck and call of the oil industry's "K Street" lobbyists is a sad given. But now we have an example of the oil industry's oozing influence engulfing the one office of government that has always embodied impartiality and integrity.
A question was raised by Sen. Robert Menendez (D. NJ.) during Federal Reserve Chairman's Ben Bernanke's testimony before Congress over the past two days. Sen. Menendez asked a somewhat rhetorical question, "Who is this economy working for?" A question that took Mr. Bernanke by surprise. The question itself was not answered directly but let me give it a try.
Given Mr. Bernanke's prepared statements and responses to questions during the course of the hearings, one might rightfully conclude that the answer to "Who is the economy working for?" is, according to Mr. Bernanke, the oil industry and those who share its interests both here and abroad.
In general summary, Mr. Bernanke's emphasis in his prepared statements and subsequent comments, was that the Federal Reserves' focus is on "core inflation levels". That is to say inflation excluding food and energy. Mr. Bernanke volunteered that "core inflation" was a better indicator of inflation trends. That he expected energy inflation to flatten out and not to have much impact on the inflation scenario in the months, possibly years ahead.
After those comments they must have been popping champagne corks at Oil Headquarters Central, not only here but in Riyadh and Moscow. Earlier last week, on CNBC, Mr. T. Boone Pickens, the oil industry's bad news ambassador to the public at large said, on good authority no doubt, the Saudis and the Russians want ever higher prices and will push them ever higher, until there is some forceful push back or the world finds itself at the edge of economic crisis. He continued that he expects prices to reach well into the $80/bbl by the time he hits 80 early next year.
Mr. Bernanke made no mention of the fact that oil prices, the single most important factor of the energy equation, have increased by 50% since President Bush's State of the Union Address in January. How incredibly convenient to oil interests that a senior and otherwise respected government functionary would be running interference for them, dismissing the significance of grievous energy inflation, and even more ominously giving credence and validation to current price levels. Never mentioning that these price levels were arrived at in large measure as result of cartel manipulation.
Here we have an example of our oil influenced government, forgoing its responsibility to examine and to instruct the public on how oil prices evolve. Instead the Federal Reserve extends cover to a large and manipulated segment of our economy, designating this gorilla on the inflation horizon as a lesser indicator than say, the cost of shirts and ties. After all, as Bernanke instructed the National Bureau of Economic Research earlier this month, "Inflation is less responsive than it used to be to changes in oil prices ... ". Translation: OPEC and your brothers in the oil patch, just continue what you're doing-we'll cover for you.
If inflation has been held at reasonable levels it is because of the growing and extrordinary productivity of both labor and technology, whose efficiencies have protected us from the limitless gluttony of the oil industry. The cover-up exhibited by Mr. Bernanke's shameful performance (also see post "Bernanke, Chairman of the "Oil" Reserve, Carrying Water for OPEC" 6/16/06) targets the very heart of the Federal Reserve's integrity.