Why the Bernanke show is beside the point

April 27, 2011, 2:16 PM UTC

For a guy who supposedly has lost all credibility, Ben Bernanke commands quite an audience. Too bad nothing he says can brighten a bleak economic outlook.

Europe is on the brink of financial collapse, oil could be headed for a repeat of its 2008 spike and the fiscally unfit United States is in danger of getting downgraded.

Not the villain of this story

Yet what everyone wants to talk about this week is the Federal Reserve’s plan to, brace yourself, conduct a press conference. Though Bernanke appears regularly before Congress and speaks frequently in public, Wednesday will mark his first time taking questions from the media after a regular meeting of the policymaking Federal Open Market Committee.

Financial markets are holding their breath. Excluding holidays and short sessions, Monday’s U.S. stock trading volume was the lowest since mid-2003, notes Andrew Barber of Waverly Advisors in Corning, N.Y.

But the market obsession with the Fed is just the latest instance of Wall Street, for all its criticism of Bernanke, expecting too much from central bankers. Monetary policy, widely blamed lately for everything but bad weather, rates merely an asterisk in any sane account of the United States’ decade-long financial decline. Even if Bernanke surprised everyone and suddenly ended the hated QE2, would it really revive the dollar for long?

Alas no. This is a country in which one in six workers is underemployed and more than 40 million people are on food stamps and median income has actually dropped over the past decade. These numbers, along with the massive buildup of debt, are signs of a sick economy — one that has considerably bigger problems than loose monetary policy. Compounding those ills, the guys we elect to fix things can barely be roused to check their mail, unless of course it comes from a lobbyist employed by Goldman Sachs (GS).

So blame Bernanke if you like for soaring commodity prices. Curse all central bankers every time you pay $4 for a gallon of gasoline. Weep grateful tears every time Dick Fisher issues another empty threat to dissent over loose policy.

But remember that the wrongheaded policies that crushed the dollar and goosed gas prices were brought to you not by Bernanke but by the guys we elected to national office, our so-called political elite – and those inmates are still running the asylum. No central bank soft shoe routine can change that fact.

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What will actually happen Wednesday is no mystery. When Bernanke fails to announce the early end of QE2, his many foes will yell and scream about the dollar at a three-year low, gold above $1,500, silver near $50 and oil seemingly staying north of $100 forever.

And they are right, of course, that ultra-loose Fed policy now is not going to halt any of those unhappy trends. The proof of that pudding lies in the ridiculous strength of the euro, lately $1.46, even as several members of the European Union teeter at the abyss.

But as convenient a straw man as Bernanke makes, it wasn’t the Fed that put us in our current fix. For that we can blame ourselves, for electing politicians who cut the taxes of the rich and sent our troops off to fight two wars halfway across the globe and then mulishly refused to do anything about it when the U.S. fiscal picture fractured. It isn’t Bernanke who created those trillion-dollar deficits.

As Barry Ritholtz has been noting, the dollar’s big decline came not after the financial crisis started but in the previous seven years, 2001-2008. Does anyone really believe that docking QE2 early is going to refloat a ship that sank after we loaded it up with a bunch of lies about yellow cake?

So whatever Bernanke may or may not accomplish with his fireside chats, he is hemmed in by the cold political realities of Washington. He can talk at great length about how the Fed can ease financial market conditions, but there is nothing he can do to ease Congress toward a serious discussion about the deficit or employment or tax policy or trade.

It is how the United States addresses those questions, rather than the relatively minor issue of monetary policy, that will over time decide the value of the dollar and everything you can buy with it. No matter what Bernanke says Wednesday, that view is getting darker every day — which is why this press conference will be just as big a waste of time as any other.

Also on Fortune.com:

Follow me on Twitter @ColinCBarr.