The Great Preventer (by Nouriel Roubini)

[dtotire]

The Great Preventer



By NOURIEL ROUBINI
Published: July 25, 2009

LAST week Ben Bernanke appeared before Congress, setting off a discussion over whether the president should reappoint him as chairman of the Federal Reserve when his term ends next January. Mr. Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0. Mr. Bernanke understands that in the Great Depression, the collapse of the money supply and the lack of monetary stimulus during contractions worsened the country’s economic free fall. This lesson has paid off. Mr. Bernanke’s decision to keep interest rates low and encourage lending has, for now, averted the L-shaped near depression that seemed highly likely after the financial collapse last fall.

To be sure, an endorsement of Mr. Bernanke’s reappointment comes with many caveats. Mr. Bernanke, a Fed governor in the early part of this decade, supported flawed policies when Alan Greenspan pushed the federal funds rate (the policy rate set by the Fed as its main tool of monetary policy) too low for too long and failed to monitor mortgage lending properly, thus creating the housing and credit and mortgage bubbles.

He and the Fed made three major mistakes when the subprime mortgage crisis began. First, he kept arguing that the housing recession would bottom out soon (it has not bottomed out even three years later). Second, he argued that the subprime problem was a contained problem when in reality it was a symptom of the biggest leverage and credit bubble in American history. Third, he argued that the collapse in the housing market would not lead to a recession, even though about one-third of jobs created in the latest economic recovery were directly or indirectly related to housing. Mr. Bernanke’s analysis was mistaken in several other important ways. He argued that monetary policy should not be used to control asset bubbles. He attributed the large United States current account deficits to a savings glut in China and emerging markets, understating the role that excessive fiscal deficits and debt accumulation by American households and the financial system played.

more:

http://www.nytimes.com/2009/07/26/opinion/26roubini.html?ref=opinion

[dtotire]

1. A different opinion

This writer has a different opinion:

http://www.nytimes.com/2009/07/26/opinion/26schwartz.html?ref=opinion

[Demeter]

2. I Wouldn't Recommend Reappointing Helicopter Ben

It's too early to tell if he made things worse or not, but he sure as hell hasn't made things better.

[prostomulgus]

3. No holdovers from the Bush administration should be reappointed

If anything, we need to go through the entire government and can ALL Bush-era appointees who are members of the republican party.

It is the only way to really clean the system.

[fasttense]

4. It seems that ROUBINI in this article is only looking at banks and Wall Street.

Those institutions were given welfare, and free reign to price their assets, to recover from huge investment mistakes they had made. If you pump billions of dollars into any institution it will show a profit after awhile. This was the great achievement of Bernanke?

But if you look at the real economy, nothing has changed. Half a million a month Job losses continue. Credit is difficult to obtain. Predatory lending and usury rate loans continue to rise. Consumers continue to save and retail sales are still down. Medical, tuition, food, and fuel, prices continue to increase at a rapid pace. Home values are still declining. Regulations on corporation are still nonexistent and the gap between the rich and everyone else, continues to grow. Minimum wage is still at 1959 levels. Outsourcing and HB1 visas are still continuing to destroy manufacturing and the American labor force. And there is No End In Sight.

When the consumers market makes up 70% of America's GDP, the welfare of the middle class consumer should be the true indicator of a healthy economy. Until the consumer is healthy again, America still sits on the brink of a 2nd Republicon Great Depression.

[izquierdista]

5. Only in economics

Three "major mistakes" and he deserves to be reappointed. :crazy: How about we appoint somebody considered to be a raving idiot because he was 100% right in predicting it before it happened?

[xchrom]

6. i love listening to mr roubini -- what a smart guy --

but no more appointing A} wall street insiders and B} no more appointing guys who broke the system.