02 Apr 2015

Ben Bernanke Blogging

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Former Federal Reserve Chair Ben Bernanke has a new blog hosted at the Brookings Institution. What interests me is the reverence with which we are to hold the former Fed officials. Here’s how Bernanke describes why he’s happy about this opportunity:

The ability to shape market expectations of future policy through public statements is one of the most powerful tools the Fed has. The downside for policymakers, of course, is that the cost of sending the wrong message can be high. Presumably, that’s why my predecessor Alan Greenspan once told a Senate committee that, as a central banker, he had “learned to mumble with great incoherence.”

On January 31, 2014, I left the chairmanship of the Fed in the capable hands of Janet Yellen. Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers.

What bugs me about this is that in other arenas, the public would be upset at officials so brazenly admitting that they are deliberately obfuscating. Or, at the very least, if it were deemed a matter of national security, a CIA chief would very soberly explain why he had to be vague in an answer.

Yet when it comes to Greenspan, the feel of the remarks is, “Oh you! That Greenspan was such a card.”

This is significant, when many economists–not just Austrians, but also John Taylor, the economist after whom the famous “Taylor Rule” is named–blame Alan Greenspan’s artificially low interest rates after the dot-com crash for fueling the housing bubble.

And turning to Bernanke himself, here’s how the Brookings website describes him:

Ben S. Bernanke is a Distinguished Fellow in Residence with the Economic Studies Program at the Brookings Institution. From February 2006 through January 2014, he was Chairman of the Board of Governors of the Federal Reserve System. Dr. Bernanke also served as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body.

A very respectable and honored position, to be sure. And yet, there are many economists–again, not just Austrians, but including Market Monetarists–who think that the Federal Reserve under Bernanke did a terrible job.

Remember, it’s not just disagreement about what Bernanke’s Fed did after the crisis hit. He was systematically wrong (or lying) every step of the way, going into the crisis (and note that in the beginning of this clip Bernanke wasn’t at that point Fed chair, but was chairman of Bush’s Council of Economic Advisors):

On this point, listen to Tom Woods interview Mark Thornton who has a new paper showing just how wrong the Fed was in 2007.

Of course this is nothing new. Richard Nixon was an absolute pariah, but then later eventually somehow became an “elder statesman.”

It is important in the mythology of the modern American State that its leading officials are a different (and higher) category of human, no matter how abysmal their actual performances. Just the fact that they held that much raw power is enough to command the respect and awe of our media and academic institutions.

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