Jump to content

Roger Lowenstein's Profile of Ben Bernanke in The Atlantic April 2012


A_Hamilton
 Share

Recommended Posts

Bernanke is giving a series of four lectures to students at George Washington University. He is going to talk about the history of central banks, their function and the actions of the Fed during the recent financial crisis. Video of the first lecture is now available: http://www.ustream.tv/recorded/21242022. I believe the second lecture is scheduled for Thursday and the last two are scheduled for next week.

Link to comment
Share on other sites

Will Bernanke be my generations Paul Volker. Hated in the job, but revered after.

 

if he is remembered it will be as the Anti-Volker. Volker stopped inflation in it's tracks. Bernake has a lighter in his hand.

 

Though in my mind, it appears that both have done an extraordinarily wonderful job with the hand dealt. Just imagine if Bernanke had listened to traditional fiscal conservative wisdom and opted not to pursue QE...we'd be in the proverbial dark ages as velocity of money slowed with no way to keep the stock up.

 

Now Bernanke needs a President and a Congress that can step up and cut government entitlements for senior citizens and he may literally go down in history as an Alexander Hamilton or Jacques Necker.

Link to comment
Share on other sites

Will Bernanke be my generations Paul Volker. Hated in the job, but revered after.

 

if he is remembered it will be as the Anti-Volker. Volker stopped inflation in it's tracks. Bernake has a lighter in his hand.

 

Though in my mind, it appears that both have done an extraordinarily wonderful job with the hand dealt. Just imagine if Bernanke had listened to traditional fiscal conservative wisdom and opted not to pursue QE...we'd be in the proverbial dark ages as velocity of money slowed with no way to keep the stock up.

 

Now Bernanke needs a President and a Congress that can step up and cut government entitlements for senior citizens and he may literally go down in history as an Alexander Hamilton or Jacques Necker.

 

Really dark ages? How can you be sure? Bernake is great because he tells you exactly what he is going to do, which is mana from heaven for hedgies. Bernake is going to look foolish for saying st int rates are going to be zero through 2014.

 

We'll see how foolish he looks. Tax Increases set to take effect next year, and a possible push by a new Republican majority to put in place some immediate austerity measures could meaningfully sink the recovery.

 

Plus, the Fed can keep rates at 0% and increase the reserve ratio to whatever level they'd like and that will greatly dampen the number of dollars running through the system. (Holding another LTCM/AIG/CDO Squared creation constant!)

 

Link to comment
Share on other sites

We should differentiate his performance pre-2008 financial crisis from the post-2008 financial crisis. I agree with most of the criticism of his performance prior to the 2008 crisis. But during and after the financial crisis, I cannot think of a single person who is more suited, more qualified to do the job and what an outstanding job he did. It is lucky we have him as the Fed chairman.

 

Unlike Greenspan who is more of a politician, Bernanke is willing to do what he really believes in and is willing to take unpopular actions.

 

Vinod

Link to comment
Share on other sites

We should differentiate his performance pre-2008 financial crisis from the post-2008 financial crisis. I agree with most of the criticism of his performance prior to the 2008 crisis. But during and after the financial crisis, I cannot think of a single person who is more suited, more qualified to do the job and what an outstanding job he did. It is lucky we have him as the Fed chairman.

 

Unlike Greenspan who is more of a politician, Bernanke is willing to do what he really believes in and is willing to take unpopular actions.

 

Vinod

 

Hear, hear -- well said. 

Link to comment
Share on other sites

I believe it may have been posted somewhere here recently, but if you read Ray Dalio's paper on deleveragings, I  think you'll appreciate Bernanke's actions.

 

Basically what Dalio says is that in order to deleverage in an orderly fashion, a combination of deficits and quantitative easing is required to get nominal GDP growth ABOVE average interest rates. According to this template, Bernanke is brilliant - thus I would tend to think that looking back Bernanke will be viewed in a more favorable light than the the image currently portrayed by those who believe he is setting us up for hyperinflation.

Link to comment
Share on other sites

I think the mistake many are making is that you think the dislike for Bernanke rests on purely economic arguments.  It doesn't.  I would wager that, among trained, professional economists, Bernanke is quite popular and is seen as having saved the financial system.

 

The dislike from Bernanke is mostly of a populist, moral strain: he basically bailed out the financial and political elite.  I don't think he will shake this criticism over time. 

 

It's quite easy for an investing board comprised of contributors who are (a) very highly educated, especially in economic and financial matters and (b) probably very wealthy relative to everyone else, to cheer for Bernanke's actions.

 

But the average person who (a) might be unemployed, (b) might have lost their home and/or © is probably financially worse off than before the crisis to appreciate the argument that for Main Street to be saved Wall Street had to be saved too is probably not going to happen no matter the timeline. 

 

Most finance-types have a fetish for Bernanke because their portolios are up big and the good days of Wall Street are back again.  But they also, for some reason, also fail to consider what a terrible job Bernanke did before the crisis and what a terrible bank supervisor (actually a primary job of the Fed) he continues to be.  But that's also because finance-types think the job of the Fed is to keep them rich and not keep them under control too. We also forget that his "Great Moderation" idea was an academic defense of our path right over the cliff pre-crisis. 

 

Just remember: it's easy for us investors to loose perspective and become only concerned with policies that make us richer.

Link to comment
Share on other sites

I think the mistake many are making is that you think the dislike for Bernanke rests on purely economic arguments.  It doesn't.  I would wager that, among trained, professional economists, Bernanke is quite popular and is seen as having saved the financial system.

 

The dislike from Bernanke is mostly of a populist, moral strain: he basically bailed out the financial and political elite.  I don't think he will shake this criticism over time. 

 

It's quite easy for an investing board comprised of contributors who are (a) very highly educated, especially in economic and financial matters and (b) probably very wealthy relative to everyone else, to cheer for Bernanke's actions.

 

But the average person who (a) might be unemployed, (b) might have lost their home and/or © is probably financially worse off than before the crisis to appreciate the argument that for Main Street to be saved Wall Street had to be saved too is probably not going to happen no matter the timeline. 

 

Most finance-types have a fetish for Bernanke because their portolios are up big and the good days of Wall Street are back again.  But they also, for some reason, also fail to consider what a terrible job Bernanke did before the crisis and what a terrible bank supervisor (actually a primary job of the Fed) he continues to be.  But that's also because finance-types think the job of the Fed is to keep them rich and not keep them under control too. We also forget that his "Great Moderation" idea was an academic defense of our path right over the cliff pre-crisis. 

 

Just remember: it's easy for us investors to loose perspective and become only concerned with policies that make us richer.

 

 

Fair enough - but Main Street wouldn't exactly be doing cartwheels in the street had Bernanke/government followed a Jim Grant/Ron Paul type path of tight money/balanced budgets to 20% unemployment, -10% GDP growth, and a 4,000 DOW, which is exactly where we were headed in late 2008/early 2009.

 

Those collecting unemployment insurance while bashing a bailed out Wall Street are having their cake and eating it to - no bailout/deficits/quantitative easing = no unemployment insurance.

Link to comment
Share on other sites

Unlike Greenspan who is more of a politician, Bernanke is willing to do what he really believes in and is willing to take unpopular actions.

 

Vinod

 

Ala Paul Volker

 

Volker did the hard thing. stop printing.

Bernake is doing the easy thing. Start and continue printing.

 

Hardly comparable.

 

That's a non-sensical comparison. Volcker had to deal with an INFLATIONARY environment whereas Bernanke has to deal with a DEFLATIONARY environment, both of which require 100% different monetary/fiscal policies.

Link to comment
Share on other sites

I think the mistake many are making is that you think the dislike for Bernanke rests on purely economic arguments.  It doesn't.  I would wager that, among trained, professional economists, Bernanke is quite popular and is seen as having saved the financial system.

 

The dislike from Bernanke is mostly of a populist, moral strain: he basically bailed out the financial and political elite.  I don't think he will shake this criticism over time. 

 

It's quite easy for an investing board comprised of contributors who are (a) very highly educated, especially in economic and financial matters and (b) probably very wealthy relative to everyone else, to cheer for Bernanke's actions.

 

But the average person who (a) might be unemployed, (b) might have lost their home and/or © is probably financially worse off than before the crisis to appreciate the argument that for Main Street to be saved Wall Street had to be saved too is probably not going to happen no matter the timeline. 

 

Most finance-types have a fetish for Bernanke because their portolios are up big and the good days of Wall Street are back again.  But they also, for some reason, also fail to consider what a terrible job Bernanke did before the crisis and what a terrible bank supervisor (actually a primary job of the Fed) he continues to be.  But that's also because finance-types think the job of the Fed is to keep them rich and not keep them under control too. We also forget that his "Great Moderation" idea was an academic defense of our path right over the cliff pre-crisis. 

 

Just remember: it's easy for us investors to loose perspective and become only concerned with policies that make us richer.

 

 

Fair enough - but Main Street wouldn't exactly be doing cartwheels in the street had Bernanke/government followed a Jim Grant/Ron Paul type path of tight money/balanced budgets to 20% unemployment, -10% GDP growth, and a 4,000 DOW, which is exactly where we were headed in late 2008/early 2009.

 

Those collecting unemployment insurance while bashing a bailed out Wall Street are having their cake and eating it to - no bailout/deficits/quantitative easing = no unemployment insurance.

 

except you have absolutely no idea what would have happened. you're playing a guessing game, that comes off as certitude. Others would make the case that the bottom would have been deeper, but we we would have come out of it far stronger, and far faster, and with a sustainable path to growth, instead of what we have now, which as your friends at ECRI will tell you, is barely an expansion.

 

This just demonstrates a 100% lack of understanding of depressionary/deleveraging/deflationary environments.

Link to comment
Share on other sites

Unlike Greenspan who is more of a politician, Bernanke is willing to do what he really believes in and is willing to take unpopular actions.

 

Vinod

 

Ala Paul Volker

 

Volker did the hard thing. stop printing.

Bernake is doing the easy thing. Start and continue printing.

 

Hardly comparable.

 

That's a non-sensical comparison. Volcker had to deal with an INFLATIONARY environment whereas Bernanke has to deal with a DEFLATIONARY environment, both of which require 100% different monetary/fiscal policies.

 

It wasn't at all obvious that Volker was doing the right thing. He took a lot of grief for a long time going against convention. He caused a lot of pain for the economy by keeping rates high. He was courageous. Bernake is a bubble blower who knows one thing. Money expansion. He is going the Easy thing right now which is provide plenty of money. He is particularly popular with the "money" crowd, those who us OPM to make tons of it for themselves.

 

The courageous move right now is to ease/run deficits in the face of folks such as yourself that believe it's the exact wrong thing to do right now.

Link to comment
Share on other sites

I think the mistake many are making is that you think the dislike for Bernanke rests on purely economic arguments.  It doesn't.  I would wager that, among trained, professional economists, Bernanke is quite popular and is seen as having saved the financial system.

 

The dislike from Bernanke is mostly of a populist, moral strain: he basically bailed out the financial and political elite.  I don't think he will shake this criticism over time. 

 

It's quite easy for an investing board comprised of contributors who are (a) very highly educated, especially in economic and financial matters and (b) probably very wealthy relative to everyone else, to cheer for Bernanke's actions.

 

But the average person who (a) might be unemployed, (b) might have lost their home and/or © is probably financially worse off than before the crisis to appreciate the argument that for Main Street to be saved Wall Street had to be saved too is probably not going to happen no matter the timeline. 

 

Most finance-types have a fetish for Bernanke because their portolios are up big and the good days of Wall Street are back again.  But they also, for some reason, also fail to consider what a terrible job Bernanke did before the crisis and what a terrible bank supervisor (actually a primary job of the Fed) he continues to be.  But that's also because finance-types think the job of the Fed is to keep them rich and not keep them under control too. We also forget that his "Great Moderation" idea was an academic defense of our path right over the cliff pre-crisis. 

 

Just remember: it's easy for us investors to loose perspective and become only concerned with policies that make us richer.

 

Lots of people use this BS argument: only hedgies or savvy investors love Bernanke. 

 

I'm not a hedgie, but I think Bernanke did the right thing.  The fact that he did not engage in QE3 also indicates that he does not just know only one thing (i.e., money printing).

 

I'd argue that people who are obsessively focused on the purchasing power of the dollar are the ones who are only concerned with their wealth growing.  Planned inflation is a tax on savers in favor of debtors.  That's not a pro-wealthy policy.  That's a redistributive policy that focuses on the employment side of the Fed's dual mandate.

 

Yes, Bernanke messed up pre-crisis.  So did Hank Paulson.  But both atoned for their prior mistakes they made when the sh#! hit the fan.

Link to comment
Share on other sites

and how did we get so leveraged?

 

You're blaming the debt bubble on Bernanke?  Wow.

 

no I a blaming it on the bubble blowing fed and their zero percent interest rates that encourage bubbles. but I guess you don't see any cause and effect.

 

Oh, I thought this was a thread about Ben Bernanke -- not an End the Fed thread.

 

The Fed is partially to blame for the leveraging up pre-crisis.  In fact, they are probably responsible for the most dangerous leveraging up that occurred in the real estate sector. 

 

However, you can't blame everything on the Fed.  And certainly not on Ben Bernanke, who came into his office in 2006, well after the US became overlevered.

Link to comment
Share on other sites

and how did we get so leveraged?

 

You're blaming the debt bubble on Bernanke?  Wow.

 

no I a blaming it on the bubble blowing fed and their zero percent interest rates that encourage bubbles. but I guess you don't see any cause and effect.

 

Oh, I thought this was a thread about Ben Bernanke -- not an End the Fed thread.

 

The Fed is partially to blame for the leveraging up pre-crisis.  In fact, they are probably responsible for the most dangerous leveraging up that occurred in the real estate sector. 

 

However, you can't blame everything on the Fed.  And certainly not on Ben Bernanke, who came into his office in 2006, well after the US became overlevered.

 

I never said I was blaming everything on the fed. but I believe the fed and easy money policies were large contributors and set the stage for a massive leveraging.

 

You'll hear no contrary argument from me on that point. 

 

I just think the leap from that to Ben Bernanke only understanding how to print money is a big one.  From the article:

 

There was, I think, another reason for his blindness: Bernanke had an academic’s faith in the market’s essential rightness. He was so skeptical of the notion of mass-market folly that in his scholarly writings, he referred to bubbles in quotation marks. He was not, like Greenspan, ideologically opposed to government intervention, but he was dubious that anyone could identify, in real time, when markets were off course.

 

These criticisms aside, if one is assigning blame, it is important to note that the bubble inflated almost entirely on Greenspan’s watch. The time to avoid a crash was when mortgages were getting written, or when banks could still sell off assets without sparking a panic; by the time Bernanke arrived, a crisis was probably inevitable. In any case, by 2008, Bernanke was confronting the very type of banking meltdown he had spent his academic life studying. No one was better suited to the job; indeed, the Fed adopted the remedies Bernanke had outlined in his 2002 address nearly point for point.

 

And another excerpt:

 

But after talking with the chairman at length (he was generally not willing to be quoted on this issue), I think that, although Bernanke appreciates the intellectual argument in favor of raising inflation, he finds more compelling reasons for not doing so. First is the fear that inflation, once raised, could not be contained. The Fed creates inflation by adding reserves to the banking system (falling interest rates are the market’s way of registering the increasing plenitude of money). If so much money enters the system that wages and prices start ratcheting upward, the momentum can be self-perpetuating. “The notion that we can antiseptically raise the target and control it is highly questionable,” Bernanke told me.

 

This does not sound like someone who believes that money printing is the answer to everything.  Indeed, he sounds almost Austrian in the way that he doubts that the Fed can manage the economy.

 

Let's give the guy some credit.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...