His first point is that the Fed was always going to take unorthodox measures once it became clear we were headed towards a Great Depression redux, no matter who was at the helm. I sort of agree with that but I would point out that Bernanke literally wrote the book on how to deal appropriately with a replay of the Great Depression. Any other Fed chief would have, in effect, followed the Bernanke playbook and, given the choice, I'd rather have the playbook's author himself running things than anyone else.
His second point is that two of Bernanke's decisions really stunk and are unforgivable in retrospect. One is his 75 basis point interest cut after Société Générale's star rogue trader Jérôme Kerviel did his deed. It was a wasteful, uncalled for waste of what could've been precious bullets later on. The other is his non-cut the Tuesday after Lehman's collapse. I agree that those were indeed bad decisions but we mostly know that because of 20-20 hindsight. If we were to compute the number of crucial decisions Bernanke had to make, then add to that the decisions he didn't make or even think to make, we would find out that bad decisions were statistically inevitable.
So all in all I do agree with Economics of Contempt's reservations but I'm not sure they are sufficient to remove Ben Bernanke from his Fed perch. Something else entirely worries me though and that is the fact that the job of Fed chairman going forward will likely be very different from what it has been over the past few years. Ben Bernanke, having been pretty much the ideal person to avoid another Great Depression, might not be the best person to steer this economy back toward decent growth while avoiding all the potential traps.
1 comment:
Let's see what kind of policy he is going to support.
I said it before, and I am going to say it again: What we need in this country is vigorous economic growth. If other countries can grow at 10% a year, so can we! It is all a matter of putting in place the right policies and tax incentives.
This is the only way out of this mess that we are in. Strong growth reduces unemployment. This is a prerequisite for homeowners to have a paycheck to pay the mortgage, so that real estate stabilizes and the banking crisis abates.
It will also increase company profits and help the stock market move higher to help people's retirement plans catch up. Why don't we do it? Wish I knew. All the focus has been on irrelevant issues and not on this important one. Hopefully it will be addressed soon.
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