The Bernanke Redemption
25 Feb 2012
It is not very often that chairmen of the US Federal Reserve come under the extreme criticism that the current incumbent Ben Bernanke has had to face since the 2008 global financial crisis. Few economists, on the right or the left, agree with his policies or methods that are generally considered to have been ineffective so far.
Prominent liberal economists like Paul Krugman accuse him of timidity, for not doing enough when they say the Fed should be hyper-active to support the economy. Those on the right believe the Fed has gone too far with monetary easing and, by ignoring long-run inflation risks, has lit the fire that will lead to an explosion in future interest rates and devaluing the dollar.
To make it even worse, the Republican presidential hopefuls have been racing against one another to verbally abuse the Fed and its chairman. Mitt Romney, the on-and-off frontrunner for the Republican nomination, and Newt Gingrich have promised to fire Bernanke as soon as they can. Ron Paul, the torchbearer of libertarians, has long campaigned for eliminating the Fed itself and going back to the gold standard.
Before his presidential campaign imploded because of repeated instances of brain freeze, Texas Governor Rick Perry even threatened Bernanke if the Fed continues to print money that Perry believed, for reasons known only to him, is treasonous. Rick Santorum, who is now the leading the nomination race, was upright enough to castigate Perry for his remarks, though he too doesn't think much of Bernanke's policies.
Most, including those who hold extreme political views, would quietly agree that not many former Fed chairmen, or any former central bank chief anywhere in the world for that matter, have had to face the kind of challenges Bernanke has. Even then, critics have hardly held back their opprobrium.
Bernanke joined as a Fed governor when the US economy was still recovering from the twin blows of the internet bubble burst and 9/11, and deserves to share some of the blame for the monetary policy that precipitated the financial crisis in 2008. Alan 'The Maestro' Greenspan was at the helm of the Fed and was widely revered as a genius who could do no wrong.
