In The Blogs

Time to Leave the Island

| Wed Jul. 22, 2009 1:04 PM PDT

Global investors give Federal Reserve Chairman Ben S. Bernanke top marks for combating the worst financial crisis since the Great Depression and overwhelmingly favor his reappointment amid optimism that the world economy is on the mend.

Well, I don't favor it — and this has nothing to do with whether Bernanke has done a good job or not. Just look at a couple of the quotes Miller dug up. "He's the best, maybe around the world," says one guy. "If he weren't renominated, it could have potentially very serious and severe repercussions on the stock market and the economy," says another. Spare me.

Look: Bernanke isn't indispensable, any more than Alan Greenspan or Paul Volcker or William McChesney Martin were. But everyone thought they were indispensable at the time, and that's a dangerous way to think about these guys. Putting Fed chairmen on a pedestal, as the financial community does routinely, breeds both complacency and insularity. In the long run, it's bad for business.

Wall Street needs to calm down and learn that being Fed chairman for a few years doesn't make someone superhuman. The world won't end if Bernanke is replaced by one of the other dozen or so highly qualified candidates available, and Obama should take the chance to demonstrate this when he chooses Bernanke's replacement.

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Kevin Drum is a political blogger for Mother Jones. For more of his stories, click here.

Comments

Well said

Submitted by Dave Brown on Wed Jul. 22, 2009 1:11 PM PDT.

Exactly. I couldn't agree more.

C'mon

Submitted by Anonymous (not verified) on Wed Jul. 22, 2009 1:30 PM PDT.

There is a slight chance the next person won't operate under the mantra, "Banksters rule my world."

Not if they're nominated by

Submitted by alex (not verified) on Wed Jul. 22, 2009 2:10 PM PDT.

Not if they're nominated by Obama. I'm sure their vetting process would eliminate such dangerous radicals.

Let's hope it's just loose talk dept.: rumors of Larry Summers getting the Fed Chairman appt.

I'd say pretty slight. But

Submitted by Kevin Drum on Wed Jul. 22, 2009 2:10 PM PDT.

I'd say pretty slight. But you never know!

The cemeteries are full of

Submitted by Charles de Gaulle (not verified) on Wed Jul. 22, 2009 2:18 PM PDT.

The cemeteries are full of indispensable men.

Reappointing Bernanke

Submitted by Don the libertarian Democrat (not verified) on Wed Jul. 22, 2009 3:07 PM PDT.

I'm not a fan of an Independent Fed or the Fed Chairman being in charge of jawboning the markets, but, if you are, I would think that you'd find reappointing Bernanke a wise move. Having survived a term in the maelstrom, he will have acquired the gravitas to more easily fend off political meddling, and be a voice that might actually be listened to. I don't believe that a brand new Chairman would be nearly as effective in these roles.

willful ignorance

Submitted by tpx on Wed Jul. 22, 2009 3:44 PM PDT.

Early in Steinbeck's novel 'The Grapes of Wrath' the ruined farmers consider killing the individuals responsible for the demise of their lifestyles, but cannot identify any. Mr. Bernanke's willful ignoring of the real estate and finance bubbles as the Chairman of the Federal Reserve makes him an individual worthy of destruction for facilitating the economic ruin of countless average and median wage earning Americans so that financiers could continue astronomically leveraging their assets to maintain their Saudi prince lifestyles. Mr. Bernanke's reputation should be ruined, and he should be stripped of all wealth, honors and privileges that his willful ignorance has produced.

Why upset the financial markets needlessly?

Submitted by Measure for Measure (not verified) on Wed Jul. 22, 2009 3:53 PM PDT.

The next Fed chairman will be anointed by Fortune magazine et al as The Indispensable One, regardless. Picking a new guy when Bernanke's term runs out won't change this.

Besides, a guy who fears liquidity traps is good to have around during financial crises. There's no reason why Obama shouldn't give Bernanke the nod.

We MUST perpetuate the myth

Submitted by Trippp on Wed Jul. 22, 2009 4:34 PM PDT.

The entire payment scheme for CEOs, Chairmen, Executives, and the like rests on the myth that they are each special, like Michael Jackson or Michael Jordan special, and hance they deserve every penny they get plus a whole lot more, too.

Nobody in the banking or business world is ever going to admit they are simply doing a job that many people, given the proper training and opportunity, could do just as well if not better. Why if they admitted that then people would wonder why they are paid so much.

Nope. We all gotta remind each other over and over again that these guys are just so special their farts sound like the New York Symphony and smell like a field of roses.

Tripp

I think that Kevin is right

Submitted by Anonymous (not verified) on Wed Jul. 22, 2009 5:50 PM PDT.

I think that Kevin is right -- this time around.

The general rule is that an incumbent Fed Chairman is indispensable when Wall Street doesn't trust the President's economic team. It would shock the horses, or something.

This used to work against Democrats. But if there is one thing that Obama and Clinton have succeeded in doing, it is in being trusted by Wall Street. So I think that Obama could fire Bernanke without causing collywobbles in the canyons of Manhattan. But who would he replace him with? I doubt Joe Stiglitz.

Global investors give

Submitted by Luther on Wed Jul. 22, 2009 6:36 PM PDT.

Global investors give Federal Reserve Chairman Ben S. Bernanke top marks...

You'd better believe he gets top makes from global investors for bailing them out of their bad investments using US taxpayer money.

Love that graphic!

Submitted by Quiddity who can't login as Quiddity (not verified) on Wed Jul. 22, 2009 7:00 PM PDT.

Bernanke_Heaven.jpg indeed.

Oppose anything that Wall

Submitted by Anonymous (not verified) on Wed Jul. 22, 2009 9:29 PM PDT.

Oppose anything that Wall Street is for.

I don't get this.

Submitted by Brian on Thu Jul. 23, 2009 10:48 AM PDT.

Bernanke really does seem to be doing a good job, so Greenspan wasn't indispensable (did much of anyone really believe that by the end of his run?). Why get rid of him just to prove a point again?

Ben "Systemic Risk" Bernanke.

Submitted by Shalom P. Hamou (not verified) on Thu Jul. 23, 2009 11:02 PM PDT.

tagged as:

The article: Ben "Systemic Risk" Bernanke proves that Bernanke knowingly maintained a strict monetary policy long after he knew of the sub prime problem.

It shows that it was the only cause of the "Depression".

And that he probably engineered it on purpose!

If you want to sleep tonight, Don't Read It!

"In contradiction to the prevalent view of the time, that money and monetary policy played at most a purely passive role in the Depression, Friedman and Schwartz argued that "the [economic] contraction is in fact a tragic testimonial to the importance of monetary forces" (Friedman and Schwartz, 1963, p. 300).
.....

The slowdown in economic activity, together with high interest rates, was in all likelihood the most important source of the stock market crash that followed in October.

In other words, the market crash, rather than being the cause of the Depression, as popular legend has it, was in fact largely the result of an economic slowdown and the inappropriate monetary policies that preceded it.

Of course, the stock market crash only worsened the economic situation, hurting consumer and business confidence and contributing to a still deeper downturn in 1930."

Governor Ben S. Bernanke
Money, Gold, and the Great Depression.
At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University,
Lexington, Virginia.
March 2nd, 2004

You can read also: Preparing for the Crash, The Age of Turbulence Update: 22/07/09., which tries to accomplish Greenspan Mission Impossible:

"Much as we might wish otherwise, policy-makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances. Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated - if people see them coming, then the markets arbitrage them away.

.....

That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer. Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances. Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated - if people see them coming, then the markets arbitrage them away."

Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].

Plea for a New World Economic Order. explains the nature and causes of economic depressions and proposes a plausible alternative solution.