Earth to Ben Bernanke
25/04/2012 4 comentarios
When the financial crisis struck in 2008, many economists took comfort in at least one aspect of the situation: the best possible person, Ben Bernanke, was in place as chairman of the Federal Reserve. Bernanke was and is a fine economist. More than that, before joining the Fed, he wrote extensively, in academic studies of both the Great Depression and modern Japan, about the exact problems he would confront at end of 2008. He argued forcefully for an aggressive response, castigating the Bank of Japan, the Fed’s counterpart, for its passivity. Presumably, Fed under his leadership would be different. Instead, while Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. US economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet Fed isn’t taking strong action to rectify the situation. Bernanke Conundrum, the divergence between what Professor Bernanke advocated and what Chairman Bernanke has actually done, can be reconciled in a few possible ways. Maybe Professor Bernanke was wrong, and there’s nothing more a policy maker in this situation can do. Maybe politics are the impediment, and Chairman Bernanke has been forced to hide his inner professor. Or maybe the onetime academic has been assimilated by the Fed Borg and turned into a conventional central banker. Whichever account you prefer, however, the fact is that the Fed isn’t doing the job many economists expected it to do, and a result is mass suffering for American workers (…..) My best guess is that the disappointing response of the Bernanke Fed represents the effects of both bullies and the Borg, a combination of political intimidation and the desire to make life easy for Fed as an institution. Whatever the mix of these motives, the result is clear: faced with an economy still in desperate need of help, the Fed is unwilling to provide that help. And that, unfortunately, makes the Fed part of a broader problem. Consider, if you will, current state of our nation. Despite hints of economic progress, we’re still in the midst of an immense disaster, in which unemployment and underemployment are devastating millions of American lives. And none of this need be happening! There has been no plague of locusts; we have not lost our technological know-how. Americans should be richer, not poorer, than they were five years ago. Yet economic policy across the board has become almost passive, has essentially accepted this disaster instead of trying to end it. The Fed under Bernanke is by no means the worst sinner in this failure of intellect and will, and you can argue that Ben Bernanke has done a better job than anyone else who might have held his position. Yet the fact is, he has not done remotely enough. The Fed, under its eminent chairman, was supposed to be an important part of the solution to mass unemployment. That isn’t happening.