Ben Bernanke

[FlyerInHi]

I think lessons from Japan. Japan’s central bank was very timid although the government embarked on large fiscal stimulus in the form of infrastructure spending.

Policy makers would rather have more monetary stimulus than not enough. The federal government didn’t much after 2009; and of course there was fiscal contraction at the state and local levels. Then that was followed by government shutdown, downgrade of us debt, debt limit polemic, etc…

[ltsddd]

[quote=Rich Toscano]Harvey, I’m not talking about during the crisis, I’m talking about after the crisis. The easy money continued for Bernanke’s entire tenure, years after the risk of “economic collapse” had passed. That’s the period I’m talking about.[/quote]

Hindsight is always 20/20. How many folks knew or realized that the “economic collapse” had passed while it was happening? It’s a big economy that they tried to right, the bigger the ship the slower the turn.

[Rich Toscano]

[quote=ltsdd]
Hindsight is always 20/20. How many folks knew or realized that the “economic collapse” had passed while it was happening? It’s a big economy that they tried to right, the bigger the ship the slower the turn.[/quote]

https://research.stlouisfed.org/fred2/series/USSLIND
(for example)

There were ongoing concerns about the strength of economic growth, but the “emergency” monetary policy continued for many years after the emergency was over (based on real-time indicators).

[CA renter]

Just catching up, but I absolutely love these two posts, Rich!

[quote=Rich Toscano][quote=ltsdd]Wouldn’t buy the books.

Bernanke doesn’t get enough credit for preventing a more serious economic meltdown.

Greenspan doesn’t get enough blame for the mess he “dumped” on Bernanke.

…as for Yellen, I am not exactly sure what she’s been doing.[/quote]

Bernanke gets plenty of credit for preventing a meltdown… that’s practically all I ever hear about him.

I don’t agree that he just passively had a mess “dumped” on him. He was with the Fed for a long time and was a major proponent of easy-money policy in the early 2000s. After he took over as Chairman (which was shortly before the bubble peaked), he repeatedly denied that there was a housing bubble, saying that home prices simply reflected positive economic fundamentals.

Thus, he was complicit in the last bubble. Then he went on to play a major role in stoking the next round of the bubble-and-bust, or at least “really overpriced assets-then-bust,” cycle. I’ll admit that the second statement is my opinion and the outcome remains to be seen. However, I think the state of asset valuations in the US is strongly supportive of it.

We’ll see, I guess. In the meantime, I find all the Bernanke hero-worship — which completely ignores the seemingly obvious role of the Fed in helping create these huge booms and busts — to be quite grating.[/quote]

[quote=Rich Toscano]AND ANOTHER THING. (While I am apparently ranting). I am mystified as to why left-leaning/progressive folks seem to be the loudest of Bernanke’s cheerleaders.

All things equal, high asset prices enrich the “haves” and do nothing to benefit the “have nots,” thus widening the wealth gap.

Bernanke’s policies appeared to have a minimal impact on real economic growth (once the liquidity crisis was past), but they resulted in an EPIC boom in US financial asset valuations. Thus, almost definitively, it seems to me, widening the gap between the haves and have nots. (And, on a relative purchasing power basis, benefiting the rich at the expense of the poor).

Yet the people who are most concerned with the plight of the have-nots seem to generally LOVE Bernanke. I just don’t get it.[/quote]

As everyone pretty much knows, I’m a “lefty,” and I concur 100% with this second post. Bernanke impoverished those on fixed incomes — savers, pensioners, workers, etc. Senior citizens have been destroyed by the Fed’s policies over the past 10-15 years. I’ve often wondered why there hasn’t been a huge uproar about this. Where is the AARP? Where are the unions? They should be up in arms, marching down the streets with pitchforks and torches.

[The-Shoveler]

I think you missed the point CAR, the real robbing of the middle class started in 1981 with OER and the other changes to how inflation was calculated but OER is the biggie.

[CA renter]

Agree, that’s been a big problem.

Not sure I missed anything about it, though.

[FlyerInHi]

Social policy is the domain of Congress. They can pass laws to deal with wages and social inequality. Bernanke himself said that Congress should act along with the Fed.

[CA renter]

[quote=FlyerInHi]Social policy is the domain of Congress. They can pass laws to deal with wages and social inequality. Bernanke himself said that Congress should act along with the Fed.[/quote]

True, but they intersect. Pumping money into the economy when there is nowhere for it to go (people will not start or expand their businesses when their customers are going into survival mode) will create bubbles.

The government can offset this to some extent, but if the political will is not there, it won’t happen. They should have been clamping down on speculation, putting more money into energy and healthcare R&D, rebuilding our infrastructure, etc. They did some of that, but not nearly enough, IMHO.

[livinincali]

Bernanke will be hailed as a hero until the next bubble pops. Then he’ll be the biggest idiot in the world because he’ll have failed to raise rates so they can respond to the next crisis. Greenspan was a pretty big hero until 2008 came along.

[FlyerInHi]

Only Congress has the power to put money in the pockets of American consumers to expand demand for goods and services. Bernanke advised this and knows how important it is in a Great Recession. Or government can spend to make up for lower consumer demand.

When the Fed buys treasuries in the open maket, they are putting money in the hands of financial managers who manage money for savers around the world. Of course those managers then use the money for deal making which earns them fees and increase asset prices.

[Anonymous]

Any the many Fed critics here want to suggest what the Fed should be doing now?

Which way should they turn the knob, and by how much?

(Hint: There aren’t many possibilities for an answer.)

Bonus points for providing a reasonable argument as to how your suggestion would actually benefit the economy.

I honestly don’t have a opinion, as I think the influence of the Fed on the overall economy is vastly overstated. It all makes nice material for magazine covers and gives the 24/7 economic TV stations something to talk about, but the general obsession with the Fed – especially the position that is the root of all economic evil – is way overdone.

[Rich Toscano]

[quote=harvey]Any the many Fed critics here want to suggest what the Fed should be doing now?
[/quote]

1. Attain time machine
2. Kill Baby Hitler
3. Start slowly normalizing policy once the crisis had past (2010-11 range)

As for the rest, I mostly agree… I am so tired of hearing about the Fed and whether they will raise a fraction of a percent in this month or that. It’s just obsessing about something that doesn’t matter much, and removing people’s focus from what does matter.

But I am also tired of the Bernanke hero worship, which I find to be premature at best.

And while I agree that the Fed’s importance in some things is overstated by many, I do think they have played a role, and maybe a big one, in the patterns of huge asset booms and busts that have become so prominent in the past 20 years.

[Rich Toscano]

Really, baby Hitler jokes notwithstanding, I don’t have an answer. My assertion is that Fed policy artificially boosts asset prices, that the asset vales eventually return to normal, causing an economically disruptive asset bust.

So, “what would you do right now” is not a valid counterpoint… they’ve already gone ahead and artificially boosted the asset prices. They’ve painted themselves into the corner already. I don’t pretend to know how they should get out of the corner… but that doesn’t make it invalid to point out the pattern of self-corner-painting that appears to be going on.

IE what I’d do is not paint myself into the corner in the first place, but it’s too late for that, so I don’t know.

[Anonymous]

Their mandate focuses on inflation and employment.

I understand that some interpretations of some of member’s statements have led to the claim that they strayed from their charter and were deliberately trying to increase asset prices. Maybe I need to put on my tinfoil hat, but most of what they’ve done over the past years seems to be consistent with their core charter.

IMO all of their decisions in the past 20 years or so were reasonable given the inflation and employment data at the time of the decision.

If they have found a way to deliberately increase asset prices without causing general inflation, I have to say that’s a pretty neat trick. I certainly can’t explain how they did it.

[CA renter]

[quote=livinincali]Bernanke will be hailed as a hero until the next bubble pops. Then he’ll be the biggest idiot in the world because he’ll have failed to raise rates so they can respond to the next crisis. Greenspan was a pretty big hero until 2008 came along.[/quote]

Bingo!

[Author]

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