Monday, July 27, 2009

Should Bernanke be reappointed?

That is the question that President Obama has to answer, since the end of Ben Bernanke's first term of office is coming up at the end of this year. And on this question I firmly stand with one of the economists that I respect more than anybody else in the economics world, Nouriel Roubini, whose claim that Ben Bernanke prevented the current recession from becoming the Great Depression 2.0 is likely true.

Look: Bernanke did *everything* that a central banker is supposed to do in a crisis of this sort. He slashed interest rates, he injected massive amounts of liquidity into the financial markets via every means at his disposal, he pushed trillions of dollars of money into the economy by cranking the Fed's presses into overdrive, there isn't a central banker anywhere on this *planet* who has ever done better than Bernanke when faced with $4.5 *TRILLION* in asset value disappearing out of the economy in the aftermath of a bubble collapse. The fact that none of this was a magic bullet that magically solved the problem is irrelevant. There *isn't* a magic bullet available to a central banker when so much wealth vaporizes out of your economy. Bernanke did everything that Fed control of monetary policy allows. Beyond that point he was reliant upon the politicians to do the right thing -- and, alas, the record of the politicians in response to this crisis is mixed. But that's not Bernanke's fault. Bernanke did his job. It's the politicians who didn't do theirs.

In short: Bernanke should be reappointed. He has done his job and done it well, and his speeches make it clear that he knows what his next job is going to be once the economy starts chugging along again (i.e., start pulling back to prevent hyperinflation). There is no (zero) reason to not re-appoint him, other than partisan politics, which is a darn foolish thing to indulge in when talking about something as important as the value of the dollar.

-- Badtux the Economics Penguin


  1. The book I am slogging through is massive, but I am glad that I am reading it. It's all about the Federal Reserve and it's fair, it's not filled with wild conspiracy theories.

    Good on you for the hike :)

  2. Well, we could just pull a reversie on the Reich-Wing, and oppose him because he was appointed by Bush.

    JzB the contrary trombonist

  3. Like I said, partisan politics is a darn foolish thing to indulge in when we're talking about the value of the dollar. Bernanke has done his job as well as is humanly possible, and I don't think there's any other economist anywhere who could have done a better job over the past two years than Bernanke did.

  4. I tend to agree-with what Greenspan left behind (a silent bomb), Bernanke did have to get a little "MacGuyver" with the solutions. I was doubtful that he'd pull it off given the market conditions-for the most part, he did...

    Politics of who appointed him are irrelevant. I chock it up to being one of the very few sound decisions Bush made while in office.


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