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Thoughts on Bernanke

23 Jan 2010
Posted by Bruce Bartlett

I have to dissent a little bit from my friend Ed. Opposing Bernanke at this point is almost costless for everyone involved. If he is not reconfirmed as chairman he will still remain a member of the Board because his position as chairman is separate from his position as a member of the Board.

Secondly, the Fed's vice chairman, Don Kohn, is highly respected and been with the organization forever. He will simply take over the formal duties as chairman once Bernanke is no longer chairman.

Third, the Fed, by its nature, tends to operate by consensus. So it doesn't really matter very much, insofar as monetary policy is concerned, whether Ben is chairman or merely a member of the Board. Remember also that the policymaking arm of the Fed is the FOMC, which includes a number of regional bank presidents.

Fourth, there is no obvious replacement for Bernanke who could get confirmed any more easily than him. Talk about Paul Krugman or someone more dovish on monetary policy is a pipe-dream and I'm pretty sure Paul has enough sense not to accept the position even if it is offered--just as Milton Friedman rejected Reagan's offer for him to replace Volcker in 1982.

Finally, Ben's strength is as an economist and analyst. Whether he is chairman or not, his perspective will be respected by the other Board members. Moreover, it's not unprecedented for a chairman to continue to serve well after his term as chairman expires. Marriner Eccles was not reappointed as chairman but remained on the Board for some years.

In conclusion, the issue of Bernanke's reconfirmation as chairman is a bit of a red herring. I don't anticipate any meaningful change in policy at least in the near term. If it turns out that this is just the opening shot in a war between Congress and the Fed, that's another matter.

Note: James Hamilton has similar thoughts here. Brad DeLong comments here and here. The case for Janet Yellen as chair here. Libertarian Jeffrey Miron supports Bernanke here. Krugman agonizes here. An inside the administration perspective here.


"Opposing Bernanke at this point is almost costless for everyone involved."

Uh, not costless for investors . . . 401K's are taking a hit on this . . . so maybe costless for the rich guys and gals in Congress, but very costly for the American middle class (what's left of it).

Warren Buffett, when asked in a CNBC interview this week what would happen if Mr. Bernanke weren't confirmed, said, "Well, just tell me a day ahead of time so I can sell some stocks."


I am disinclined to think that markets are reacting much to Bernanke's reconfirmation problems. Anyway, I was thinking more about the Senate and the politics of opposing him in my post.

The one who what have been

The one who what have been making markets react for the past two years he's rich now ...
grosse salope
video de cu

Asset price inflation is not the solution

Median-income households (between 40th and 60th percentile) have on average about $20,000 in retirement savings accounts. I guarantee you the "rich guys and gals" will get hit much harder if the stock market falls.

We have got to stop relying on asset price inflation as a substitute for real economic growth. I hope the next Fed chair agrees.


Hmmmm. That explains

why the rich are getting richer faster than the rest of us these past 20-30 years.

Another take on the market effect on Bernanke confirmation:

Making Recovery Fail

I'm inclined to think that opposition to Bernanke's confirmation is the same as opposition to HC reform, financial regulatory reform, etc, etc.

It is all a strategy to crush the recovery and make Obama fail. Don't consider good ideas, just consider what is self-serving (getting elected, re-elected, taking back power).

This is the stated (by leaders like Limbaugh) objective. It isn't about doing what's right for America or Americans, it's about crushing economic recovery so they can win the 2010 and 2012 elections.

Great. Just great. And they call themselves "patriots".

So is Olbermann a leader of your party?

1. The opposition to Bernanke is actually fairly bipartisan.

2. Many of his opponents in the Senate were skeptical of Fed monatary policy long before Obama or Bernanke (Bunning's distain for Greenspan was legendary).

3. The scepticism of fed policy on both sides of the aisle may have its weaknesses but it is not entirely unfounded either. Fed Chairmen have a 30 year track record of taking action when the fiscal tide is at the absolute lowest and then claiming credit for the subsequent rise. Many sceptics are simply wondering aloud if the tide was about to turn on its own and would have risen further and faster if the Fed had simply done nothing.

4. For all the power attributed to them, the various radio and talk show hosts combined weekly audiance does not match the MSM nightly news viewers. They are commentators, not leaders and actually have more imapct on the left where they are used as bogey men to scare small children then on the right where their prefered candidates have regularly lost primaries.

5. Right now, there is no one person or group that can claim leadership of the conservative movement or the Republican party. There are a wide variety of factions (some more leaderless than others) that both cooperate and compete with each other but none of them dominate the entire movement.

6. Political spokesman across the poitical spectrum in all parties have had one eye on the next election since Alexander Hamilton penned the Federalist Papers. Nevertheless, most of them have been, and still are, primarily motivated by belief in their economic or public policy proposals. Many of the economic proposals on the right and left may be very unrealistic but their advocates actually believe in them, which may be more scary than the alternative.

7. Economic centrists, such as those on this web site, can be much more effective with a "wake up and smell the coffee" message that challanges people to reexamine their deeply held beliefs than a "you're a pandering crook" message that tries to claim these beliefs are not deeply held or genuine. The first message challanges people without insuting them. The second message simply marginalizes the messenger.

You assume Bernanke would

You assume Bernanke would stay on as a Fed Governor after getting rejected as Chairman. That seems absurd. If he has any pride, he has to resign, no? And never mind pride. The obvious political massage to Bernanke would be "get out."

They are now acting to calm the markets

Gregg and Dodd came out tonight (Saturday) with a statement to stop the panic --

At least some of the Congress critters are smart enough to see that their political game playing idiocy is counterproductive, and they've made their statement before markets open on Monday.

Do you have a link to "Ed" here?

"I have to dissent a little bit from my friend Ed."



I was referring to the immediately previous post by Ed Andrews.

Why is the market going to react adversely?

Why will the market decline if Bernanke is not confirmed? I tend to believe it will be for one of the following three reasons:
1) The market believes he is a great Fed Chairman
2) The markets don't like uncertainty
3) Any change at the Fed will most likely result in interest rates increasing sooner or more rapidly?

I think that it is some of #2, but primarily #3. The market is concerned about rising interest rates. Rising interest rates may slow down or cut off a recovery, but it is absolutely vital to the long-term health of our economy. There needs to be less borrowing by individuals, governments, and corporations across the board!

If you speak to anyone who survived the Great Depression they will tell you that credit cards are evil and that people shouldn't buy what can't afford. Many people from that era won't even buy a car with a loan. However, what are all the economic experts saying as we come out of the Great Recession? Credit markets need to be active. The American Consumer needs to be able to borrow to kick-start the economy. No. Savings rates need to improve. People, businesses, and government need to live within their means. If borrowing is not reigned in, we will continue to move toward a depression.

Link to Ed

Thanks Sir - I popped in via somewhere else so I wasn't reading posts in sequential order.

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