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Two problems I see so far with his tenure:
1. He claimed from the day he began 'running' a
campaign for this job that he would be totally
transparent and state his intentions and actions
regularly to the public [that's US, not the insiders,
by the way]. He stated this because there was a famous
case of monetarism turning a dire situation around in
New Zealand. What they did there was truly wonderful
and daring: They got rid of their old system and put
in Fed Governors t hat had to vote in money supply
targets [narrow ranges], growth targets and inflation
targets. They each had four year terms if I remember
correctly and if they performed well, they would be
retained. If not, they would throuw the bums out and
get another 'guv' and tell him or her to meet the
targets as promised OR ELSE. It was clearly a
monetarist based policy and I remember watching it
unfold like it was yesterday...the transparency and
the utter simplicity of them saying these are the
targets for the various things [they set realistic
goals and worked towards a long-term 'best case' set
of standards] made the process refreshing and it
worked like a charm! There is no doubt in my mind our
current Fed Governor was hoping the people that were
likely to put him office would remember this novel
experiment and he parrotted its details without naming
it directly.
But he has NOT been transparent. He has NOT given
targets. He's been pretty mute. Shame on him.
2. It's way too early to know just what effect his
policies are having [even if we actually knew what he
was doing in the background] because the lag is at
least 18 months if not 36 months, especially in an
economy this large with this many cross currents and
problems.
So far...Ben has not been stellar. Umm...he's Chairman
for life, you know. I hope he get's a clue or has
actually been doing all the right things and been too
bashful to tell us the miracles he is about to pull
off...
Tim
--- Deosaran Bisnath <deobisnath@xxxxxxxxx> wrote:
> More like the Defence of Bernanke. One should be
> sufficently eduated before assuming the Head of Fed.
>
>
>
>
> The Education of Ben Bernanke By ROGER LOWENSTEIN
> Published: January 20, 2008
> This article will appear in this Sunday's Times
> Magazine.
> Nigel Parry for The New York Times
>
>
> Enlarge This Image
> Nigel Parry for The New York Times
> The headquarters of the Federal Reserve, in
> Washington.
>
>
>
> Ben Bernanke?s first exposure to monetary policy
> was reading the works of Milton Friedman, the Nobel
> laureate. That was 30 years ago, when Bernanke was a
> graduate student at M.I.T., and he has been studying
> central banking ever since. By the time President
> Bush nominated him to run the Federal Reserve, at
> the end of 2005, Bernanke knew more about central
> banking than any economist alive. On virtually every
> topic of significance ? how to prevent deflationary
> panics, for instance, or to gauge the effect of Fed
> moves on stock-market prices ? Bernanke wrote one of
> the seminal papers. He championed ideas for
> improving communications between the Fed ? whose
> previous chairman, Alan Greenspan, spoke in riddles
> ? and the public, believing that clearer guidance
> about the Fed?s aims would help the economy run more
> smoothly. And having devoted much of his career to
> studying the causes of the Great Depression,
> Bernanke was the academic expert on how to prevent
> financial crises from
> spinning out of control and threatening the general
> economy. One line from his ?Essays on the Great
> Depression? sounds especially prescient today: ?To
> the extent that bank panics interfere with normal
> flows of credit, they may affect the performance of
> the real economy.?
> Bernanke, who came to the job with a refreshing
> humility ? a desire to be less an oracle like
> Greenspan than a plain-speaking technocrat ?faces
> exactly this sort of crisis now. Ever since last
> summer, a meltdown in financial markets has led to
> daunting losses in the banking industry and
> throughout Wall Street. Despite having written
> extensively on how to deal with such episodes,
> Bernanke has thus far been unable to reinstill a
> sense of confidence. His faith in modern forecasting
> models notwithstanding, he failed to foresee that
> the sudden rise in homeowner defaults, which
> triggered the crisis, would have such far-reaching
> effects. And the monetary medicine that he has
> prescribed, including some of the very tools that he
> lovingly detailed in his research, have yet to
> produce a turnaround.
> At the same time, Bernanke?s attempt to improve
> the way the Fed communicates has misfired and often
> left investors confused, partly because he has
> repeatedly shifted course over the future direction
> of interest rates. His hero, Milton Friedman, is
> said to have warned against an indecisive Fed acting
> like a ?fool in the shower? fumbling with first the
> hot water and then the cold. Bernanke has gotten
> close. Perhaps worst of all, he has failed to
> persuade investors that the Federal Reserve, which
> was formed in 1913 for the very purpose of halting
> market panics, is up to the job. ?Bernanke is
> seriously behind the curve,? says David Rosenberg,
> chief North American economist for Merrill Lynch,
> one of many critics who maintain that the Fed has
> not responded to the crisis with sufficient vigor.
> For Bernanke, who is now 54, it has been an
> education unlike any at M.I.T. And yet there is a
> case to be made that he has made many more right
> moves than wrong ones. The current crisis is a
> hangover from a half-decade of heady speculation in
> both housing and home mortgages and does not
> necessarily admit to a speedy fix. Moreover, it has
> fallen into Bernanke?s lap just as oil prices have
> spiked to a record $100 a barrel, the dollar has hit
> an all-time low against the euro and unemployment
> has ticked upward. None other than Alan Greenspan
> has said that constellation of problems facing
> Bernanke is tougher than anything he experienced in
> the 18 years that he held the job.
> Many observers, including Lawrence Summers, the
> former Treasury secretary, as well as a group of
> bearish stock traders, say the United States may
> already be sinking into a recession. The rise in
> unemployment reported two weeks ago stoked those
> fears. The White House has started talking about
> proposing relief. And just recently, Bernanke sent
> the clearest signal yet that the 17-member Federal
> Open Market Committee (which governs the Fed?s
> interest-rate policy, and over which Bernanke
> presides) would cut interest rates when it meets at
> the end of the month. In a speech, Bernanke warned
> that ?the downside risks to growth have become more
> pronounced,? a gloomier assessment of the economy
> than he had given previously.
> Bernanke also has strong reasons to worry,
> however, about easing rates too much. Inflation has
> failed to fall as the Fed expected. (In fact, lately
> it has been rising.) Also, lower interest rates
> induce foreigners to switch out of
> dollar-denominated investments like Treasuries and
> into currencies with higher yields. Thus, any rate
> cut would tend to escalate the stampede out of the
> dollar.
> Perhaps the last Fed chief to face such a
> difficult one-two punch of inflation and slowing
> growth was Arthur Burns, who was also the last
> academic to hold the job. President Richard Nixon,
> concerned that high unemployment could cost him
> re-election in 1972, told Burns to concentrate on
> revving up the economy. ?No one ever lost an
> election on account of inflation,? Nixon confidently
> told him. Burns did as he was directed. An eventual
> result was runaway inflation and, for Burns, a
> legacy of failure.
> Bernanke is aware that he holds the same potential
> for influence as Burns ? which is to say he has a
> profound ability to affect the political landscape
> this year. Polls show that the economy is now the
> most important issue to voters in the presidential
> election (more important even than the war). A
> recession would seem to be a clear repudiation of
> President Bush?s policies and, by extension, the
> Republican Party. Those who know Bernanke, however,
> say he is not motivated by politics. ?He wants to be
> known as a great central banker,? says Mark Gertler,
> his close friend and an economics professor at New
> York University. ?Those with the worst reputations
> are the ones who helped politicians.?
> A wage-and-price spiral similar to that in the
> 1970s would not only be a political nightmare for
> the Republicans, it would also be a crushing blow to
> Bernanke?s reputation as a Fed chief. And with oil
> and food prices going through the roof, inflation is
> already a worry. The consumer price index surged 4.3
> percent over the past 12 months ? more than twice
> the inflation rate that Bernanke has delineated as
> the upper bound of his comfort range. (The widely
> watched ?core? rate of inflation, which does not
> include volatile food or energy prices, is not as
> high as the overall rate, but it, too, has edged
> higher than Bernanke would like.)
> ?I think Bernanke is in a very difficult
> situation,? Paul Volcker told me. Volcker was the
> Fed chief who preceded Greenspan and who conquered,
> painfully, the great inflation of the 1970s and
> early ?80s. (He was chairman from 1979 to 1987.)
> ?Too many bubbles have been going on for too long,?
> Volcker added. ?The Fed is not really in control of
> the situation.?
> This past fall, as markets and sometimes the world
> seemed to be tumbling all around Bernanke, I met him
> in his office for a mostly off-the-record chat. We
> sat at a coffee table from which I could make out a
> Bloomberg terminal at his desk, some framed bills
> from the first series of Federal Reserve notes, his
> certificate of nomination by President Bush and
> shelves of economics books. I returned for a second
> visit a month later for lunch in his private dining
> room (Bernanke ordered turkey and steamed
> vegetables) and followed up, at Bernanke?s
> suggestion, with a third and final interview, this
> time by phone.
> Bernanke has a serious manner, befitting a scholar
> who once expected to spend his entire career in
> academia. He is shy and seemed faintly ill at ease,
> stiffly folding his arms while we talked; his hand
> trembled slightly when he gave me one of his books.
> He answered questions with an absence of emotion but
> with a torrent of carefully worded fact.
> ?It?s been a challenging economic situation,? he
> granted, ?and also a difficult, rather tenacious set
> of problems in credit markets. However, I have the
> advantage of having a terrific committee? ? the
> Federal Open Market Committee ? ?and strong staff
> support, and I think we have a good hold and
> understanding of the situation.?
> Behind the modesty and blandness of such remarks,
> Bernanke is uncommonly thoughtful and also
> resilient. He was late to recognize the severity of
> the subprime mortgage crisis, which intensified when
> European banks experienced credit problems in
> August, but he has dealt with it deliberately and
> creatively since then. With more than a million
> households facing the possibility of home
> foreclosure in the next year, he will need all of
> his resourcefulness and more. ?Every central-bank
> governor goes through tests of some sort,? says
> Stanley
=== message truncated ===
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