There is no doubt that Ben Bernanke was one of the most important Fed chairman, but his legacy is far from clear and is much messier than the moving boast suggest.
Federal Reserve Chairman Ben Bernanke, the U.S. withdrew , economists and exclaimed: " The most successful president in the history of the Fed ". Former Fed chairman added : "He was determined , and I think it was well deserved , as the greatest central banker in history. " He was the man who saved the world, genius , maestro , says Wall Street Journal.
Similar praise we heard eight years ago about Alan Greenspan , who is preparing to step down after 20 years at the head of the Fed . Almost two years later, the way that looked Greenspan era was quite different because the credit bubble that he created has become an obsession that grew into a panic, which in turn is transformed into a deep recession.
This reversal of opinion should not be forgotten , given that the meeting of the Federal Open Market Committee (Federal Open Market Committee, or FOMC) in January last was Ben Bernanke . There is no doubt that Bernanke was one of the most important presidents of the central bank in its 100 -year history, but his legacy is far from clear and is much messier than the moving boast suggest .
One way to look at the era Bernanke is to divide it into three parts contingent - before, during and after the financial panic. His actions before the crisis were a complete failure . He deserves good praise for his actions in the eye of the storm. As to its extraordinary monetary effort since the beginning of the recovery , from the succession will depend mainly on them .
Bernanke has devoted much of his research on the 2008 crisis and its aftermath , but note that he had seen how to create panic . Role dates back to 2002, when delivered most popular speech , warning of deflation that does not exist . However, he and Greenspan listened to the advice of Paul Krugman to promote housing bubble to compensate crash of the bursting of the dotcom bubble .As is clear from the transcripts of the Fed , Bernanke was the intellectual leader among central bankers in the decision of June 2003 the federal funds rate to be reduced to 1% and to be kept at this level for many years. And this happens despite the rapidly accelerating economy (which registered a growth of 3.8 % in 2004) and rising prices of raw materials and real estate. Longstanding policy of the Fed to maintain negative real interest rates create the credit mania that led to the boom and the downturn in the housing sector.
From the archives of the U.S. central bank made it clear that Ben Bernanke had underestimated the extent of the decline in housing and financial contagion. But it did , and many others. Less forgivable is the fact that Bernanke refused to confirm that the Fed had made a mistake in Manila during those years.
Once the crisis hit , Bernanke and the Fed deserves to be commended for his suspicion . Only after a while - and then hindsight of what happened - it's easy to forget how quickly enveloped us financial panic . The Fed had to compensate for the collapse in the money supply by increasing the supply. Bankers did it with power and panache . Some may not agree with the special purpose programs the Fed , but then we were not caught in the financial polar vortex . It is difficult to interpret whether and how others would have done
Here comes the time to look at the actions of the Fed after the panic after the beginning of the "recovery" in the middle of 2009 These include unprecedented bond purchases Bernanke, huge swelling of the Fed's balance sheet and near-zero interest rates remaining ones already 62nd consecutive month..
All this stems from the belief of Bernanke and lessons learned from the Great Depression, the main purpose of the Fed was to avoid premature tightening after the financial meltdown. His defenders say he's done enough and without inflation, which some of his critics predicted, which also makes a hero. Recently, former chief economist of President Barack Obama Austan Goolsbee made this conclusion on the pages of the Wall Street Journal.
But despite the Fed's famed past past all previous monetary restrictions recovery remains historically low. For five consecutive years, the Fed predicted faster growth just to prerazgledzha forecasts again and again.
Central bankers blamed weak growth for fiscal policies and economic troubles around the world, but one thing you can not predict is how individual actions the Fed contributed to the distrust in politics, which undermined business investment . Bank lending remains weak . This is one reason for the fact that the money supply has not increased by much to rekindle the risk of inflation . At one point, the Fed chairman has to take some responsibility for mediocre growth and lack of growth in real incomes.
The biggest test will be when the heirs of Mr Bernanke will be obliged to grant the reins of its policies. If the Fed may suspend its program of buying bonds and switch to normal rates while retaining the pace of recovery , his monetary experiment will be truly successful . But if it ended badly , with stagnant growth , or inflation of the balloon in certain assets or if inflation boom that will require a rapid rise in interest rates , the Federal Reserve Bernanke will not be able to respond .
Another huge cost of these policies is a post-crisis intervention Fed policy as a whole and in fiscal policy . Bernanke has helped fund the historic federal loan spree while concealed future costs. Account for these loans will become clear to taxpayers only when interest rates rise . Also, Bernanke became Fed political appendage of the Ministry of Finance on the regulation and even in terms of taxes and spending , and jeopardize its independence .
This might be the greatest future risk , especially when the Fed will have to raise interest rates . Politicians - even some conservative analysts - taken for granted that the Fed is obliged to reduce unemployment and to steer the business cycle. The successor to Bernanke - Janet Yellen - I believe that hot. And it certainly will have the chance to prove it. Bernanke , Yellen legacy lies in the fact that the real test for each cycle of monetary policy is how it starts and how it ends .
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