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Edited on Fri Dec-04-09 02:53 PM by Kurt_and_Hunter
Al Gore was on the Larry King show during the Bush administration and Larry asked him to name something good George Bush had done in office. Gore said, "Ben Bernanke is a fine choice at the Fed." Larry asked for a second good Bush action. Al said he couldn't think of another one.
Ben Bernanke is imperfect but so are Nancy Pelosi and President Obama and a lot of other people I don't want replaced in a big hurry. The question always must arise, replaced with what?
Ben Bernanke is Chairman of the Board of Governors of the Federal Reserve. That is a particular sort of position that is expected to be safe and steady. Were Bernanke let go he would not be replaced with someone with the instincts of a Roubini, Reich or Krugman in any scenario.
Apples to apples, by the standards of Fed Chairman Bernanke is pretty good and will someday be remembered as one of the best ever.
Did he contribute to the current crisis? Sure. Everyone in the big-money racket did. But Bernanke's mis-steps were trivial echos of the actions of his esteemed long-term predecessor Alan Greenspan. Bernanke kicked the Greenspan can down the road.
But when the wheels flew off the cart Bernanke did something I find deeply impressive... he set aside his ideology in the face of exigent circumstances and probably, in the process, saved the new-born Obama presidency that Obama would have been too intrinsically cautious to save.
Rather than riding the ghost of Milton Friedman into the abyss, which could have happened, Bernanke quietly embarked on a program that might have made Keynes blush. The Fed became a direct competitor in the mortgage market to repress mortgage rates. That's extraordinary. The Fed began creating dollars at a rate we still can't quite comprehend. The Fed quietly volunteered to be a source of magic money for purposes Congress lacked the will to authorize.
Some Fed chairman would have kept interest rates too high just for appearances. Some Fed chairman would have said that trying to prop up the housing market was outside their proper responsibilities. And a lot of Fed chairman would have stopped creating money because the numbers were just too big, even though the patient was not reviving.
Fortunately Bernake, as an academic expert on the Great Depression, knew that precisely the monetary conservatism that got him the job in the first place would be fatal in that kind of crisis. So, knowing that one door held a tiger he barreled through the other door with no guarantee it had a lady. (It could have had another tiger.)
Perhaps Bernanke's guts in following the numbers where they led arose from his academic background, where one is expected to show their work, rather than merely invoke dogma. In any event, he is not a life-time banker.
Though largely unknown to the public, in financial circles he will be remebered as the one person most responsible for pulling the world economy back from the brink. (I would put Prime Mister Brown second.) Bernanke's efforts were greater and more central to the solution than Paulson, Geithner, and Obama combined.
And nobody instructed him to save the world, or how. As Fed chair he acted unilaterally. Had President Bush or President Obama been calling the shots either man may well have sought politically smart moderation, with disastrous results.
CONCLUSION: I think President Obama did the right thing in renominating Bernanke. I would be delighted if Bernanke's renomination were tied to a commitment to allow a little inflation to develop in the economy and leave the Fed rate at 0% for several years. But it will not be... the national money mythology will put incredible pressure on the next Fed chair to raise rates and remove money from the system.
If Bernanke failed to be reconfirmed then his replacement would be picked by President Obama, not by me or you. If Obama nominated a new Fed chair specifically to not reign in the emergency monetary expansion I would support that. But Obama is publicly fretting about the deficit and saying there is no public money to deal with unemployment. Obama is not going to ever pick a radical Fed chair. Ever.
Based on his quick, dramatic and non-dogmatic response to the 2008-2009 crisis I think Bernanke has as much chance of doing something atypical/visionary as anyone else who Obama might conceivably appoint.
Two points:
1) The top recommended story on the DU Front Page is a flat lie, claiming that Bernanke called for the elimination of social security and medicaid. He did not. He did nothing of the sort. The headline of the post is a conscious lie. He was pointing out that as legislative creations that only congress has the power to control those entitlements, not recommending as policy advice that congress eliminate them. Use your common sense! Do you think anyone appearing before Congress seeking confirmation to a post would call for the elimination of social security? THINK, dammit.
2) Some would like to see Bernanke replaced with Paul Volcker. That's cool, as far as it goes. But one must recognize two things about Volcker. First, he is 326 years old. Second, he was THE architect of the early 1980s melt-down. (The last time we had 10% unemployment.) Inflation was a big problem circa 1980 and the Fed wrung inflation out of the US economy with both hands, damn the human cost. It was remarkably effective ruthlessness, along the lines of allowing Coventry to be bombed without evacuation or using the A-bomb on Hiroshima. Inflation never came back. But US wages also never came back. We have had a low inflation/low wage-growth environment since 1980, despite several bubbles along the way. The point here is, I would be okay with Volcker but he is a ruthless central banker willing to break some china in defense of capital and the system... just like Bernanke.
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