I think most of us would agree that people who have, say, little formal schooling but labor honestly and diligently to help feed, clothe, and educate their families are deserving of greater respect – and help, if necessary – than many people who are superficially more successful. They’re more fun to have a beer with, too. That’s all that I know about sociology.
– Ben Bernanke
President Obama has made it clear that next January, when his term is up, Chairman Bernanke is going to be replaced. It’s not like the big guy is being fired, though. “Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose. “He’s already stayed a lot longer than he wanted or he was supposed to.” What else would he want to do than to be arguably the most powerful man in the world? Simple. The title “Professor Bernanke” always suited him much better than “Chairman Bernanke”.
That’s just about the only thing that his admirers and critics can agree about him – although the former might laugh it out while the latter would say it though clenched teeth.
Ben Bernanke has been a lightning rod for criticism during the Depression for one simple reason – the Federal Reserve, under his leadership, has been about the only government agency actually doing anything. Criticism that they are doing the wrong things has to be tempered by the acknowledgement that the government has not been much help and very few other agencies have used – even expanded – their power to do something for ordinary people quite like Bernanke.
So criticism of Bernanke has abounded, falling into two broad categories. The silly version has been to say that the Fed’s policies of low interest rates followed by more or less printing money through quantitative easing must be inflationary. The simple fact that there is no inflation has proven these critics wrong, at least for now. That didn’t stop the Republican candidates for President in 2012 from often competing to see who was the toughest on Gentle Ben. His reponse? “I’m not going to get involved in political rhetoric,” he said. “I have a job to do.”
And that was about that.
The other, much harsher criticism, is that Professor Bernanke is … a bit too professorial. All that money sent out into the economy should have done some great good, but as we’ve noted it’s just not moving around like it should. Deposits on hand in the Federal Reserve have ballooned in the last six years from $0.9T to $3.4. It’s money just sitting there, parked to avoid being lost in a market ruled by fear – which that same dough was supposed to pacify. And when that was supposed to lower bond rates it actually raised them due to a sell-off of the US Dollar generally out of fear that inflation was indeed coming.
It was indeed his academic background that got Bernanke the job in 2006. The famous PhD thesis on the mistakes by the Fed in the previous Depression was exactly what policy makers knew was needed – about 3 years before anyone else understood why that “D-word” was so important. Professor’s take on this? “I am very proud of my nerd-dom. In fact, the world needs more nerds.”
Bernanke is a quote machine, as proven by his commencement address to the 2013 graduating class of Princeton, from whence he came 12 years earlier. His professor’s chops were proven through his remarks that were incredibly moving, pithy, and very funny all at once. “Life is amazingly unpredictable,” he told the grads. “Any 22-year-old who thinks he or she knows where they will be in 10 years, much less in 30, is simply lacking imagination.” I recommend reading the whole address, it’s great stuff. If only every econ prof was this cool.
Who could replace Bernanke? Former Treasury Secretary Larry Summers has been talked about as a pick by Obama, and I really hope that’s not true. He’s the guy that totally mis-understood how bad things were back in the early daze of the Obama administration when a genuine “New Deal” would have done a lot of good. We can do much better than that.
But what matter is that Ben is going to get a chance to do what he does best. Hopefully his critics will, in time, come to understand that for all his possible policy mistakes, doing something was far better than doing nothing. Thank you, Chairman Bernanke, for your service. I, for one, believe you saved capitalism (for better or worse!).