Ben Bernanke’s self promotional media blitz culminating with Orwellian Madness “Bernanke Saved The World”, was a stunning success for Bernanke in his bid to be reappointed Fed Chairman. Unfortunately, Bernanke’s win is everyone else’s loss.
Bloomberg tells the story of his reappointment in Bernanke to Be Nominated for Second Fed Term by Obama.
Obama will make the announcement tomorrow on Martha’s Vineyard, Massachusetts, where he is vacationing with his family, and Bernanke is expected to join him, Axelrod said. The nomination requires Senate approval. Bernanke’s four-year term as chairman expires Jan. 31.
“The president believes that Bernanke has provided extraordinary leadership during the most difficult financial crisis we’ve faced since the Great Depression,” Axelrod said. “As we build our economy that leadership is still needed.”
Praise Unwarranted And Galling
Check out some of the misguided praise from the article:
Richard Berner, co-head of global economics at Morgan Stanley in New York says “It’s not just that he’s done a great job of dealing creatively with the financial crisis, he has the capacity to deal with the challenges that lie ahead — continuing to help the economy and markets heal and engineering the exit strategy when it’s appropriate to do so.”
“Bernanke is a source of certainty,” according to Guy Lebas, chief-fixed income strategist at Janney Montgomery Scott LLC.
Elsewhere, Nouriel Roubini and others have called for the reappointment of Bernanke. A few level-headed thinkers like John Hussman see things quite differently.
Bernanke Sees A Recovery
Inquiring minds are reading John Hussman’s article: Bernanke Sees A Recovery – How Would He Know?
On Friday, investors took great cheer in an optimistic statement by Ben Bernanke suggesting good prospects for economic growth ahead.
“Our forecast is for moderate but positive growth going into next year. We think that by the spring, early next year, that as these credit problems resolve and, as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in other areas outside of housing, will take control and will help the economy recover to a more reasonable growth pace.”
We might be inclined to place a sliver of credibility in Chairman Bernanke’s assessment – if not for the fact that the quote above wasn’t from last week at all, but rather, hails back to November 8, 2007, just before the recent recession began. You might recall that the S&P; 500 was pushing 1500 at the time.
Bernanke’s economic research is a minefield of partial equilibrium analysis. Helicopter Ben is a lot like John Maynard Keynes, who wrote in his General Theory “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again, there need be no more unemployment.”
Solving economic problems, to our Fed Chairman, is as easy as throwing money out of helicopters. Not surprisingly, throwing money out of helicopters has been the basic core of his strategy during this crisis. This does not involve complex thought about debt restructuring, moral hazard, incentives, equitable distribution of resources, or other factors. All it requires is the three second tape playing in Bernanke’s head – “We let the banks fail in the Great Depression, and look what happened.” And then the tape repeats. Never mind that the cause of the upheaval was not the failure of banks per se, but the disorganized Lehman-style failure of banks. The tape isn’t long enough to encompass such nuances.
Unfortunately, the resources used in the recent bailout were not just free money tossed out of a helicopter. Only a partial-equilibrium economist thinks that way. No, this was an allocation of trillions of dollars of real resources that could be spent improving access of poor families to health care, finding cures for life-changing diseases, providing better education, and reversing the crowding-out of productive private investment.
A public servant willing to act this carelessly with the resources entrusted to him, and so strongly in defense of fellow bankers, frankly does not deserve the job. Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end. We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership.
Bernanke: Why are we still listening to this guy?
The following video should make people think twice about listening to anything that Chairmen of the Fed Ben Bernanke says. It’s a compilation of statements he made from 2005-2007 that will have your head spinning.
Repeating John Hussman: “We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership.”
I side with Hussman on the credit losses (see Huge Plunge In Mortgage Cure Rates Portends Foreclosure Disaster for my latest on the impending credit disaster), as well as his assessment of Bernanke.
Bernanke should not be reappointed. Indeed the proper thing to do is abolish the Fed entirely.
Mike “Mish” Shedlock
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