Bernanke is the most powerful man in the financial world, but is he also the smartest of them all? A look at his bloopers shows that he’s respected not for his smarts but for his …
Ben Bernanke is an American economist.
Ben Bernanke is a self-proclaimed student of the Great Depression.
Ben Bernanke was a tenured professor at Princeton University.
Ben Bernanke is the chairman of the Federal Reserve.
Ben Bernanke is the most powerful man in the financial universe.
But is Ben Bernanke smart? The kind of smart that’s needed to get the U. S. and global economy back on track?
Trust and a reputation are built on one’s track record. Let’s take a look at Mr. Bernanke’s track record. All we need is to compare history with Mr. Bernanke’s past assessment.
Bernanke in July 2005: “We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”
Bernanke in October 2005: “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”
Bernanke in November 2005: “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”
Bernanke in February 2006: “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
Bernanke in March 2007: “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.
Bernanke in October 2007: “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”
Bernanke in January 2008: “The U.S. economy has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”
Bernanke in January 2008: “The Federal Reserve is not currently forecasting a recession.”
Mr. Bernanke’s track record doesn’t exactly inspire confidence. He’s been wrong so often, how come everyone trusts his decisions?
The trust is obviously not in his decisions as much as in the tools available to him. Here’s how Mr. Bernanke described the powers of the Federal Reserve in November 2002:
“The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”
Aha, Ben’s ability to print gives him respect kind of like a gun slinger gets respect because of the gun and not because of what’s between his ears.
But then Bernanke claims he’s not using the printing press:
Bernanke in December 2010: “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”
Seems like even Bernanke is confused about what exactly he’s doing.
If you’ve read Andrew Ross Sorkin’s “Too Big To Fail,” the inside story of how Wall Street and Washington fought to save the financial system – and themselves, you’ll get a glimpse of Bernanke’s often overwhelmed ad hoc approach to the problems of 2008.
In all honesty, Ben Bernanke has done a good job of preventing Wall Street and the stock market from becoming unglued. Despite all of his bloopers, he’s no dummy … and he has a financial bazooka.
Unfortunately his allegiance is to the financial system, not to the average Joe. And after decades of overleveraging, the financial system seems too big to let fail and too big to bail by one man and his bazooka.