Ben Bernanke is a lot of why we are still standing

[cthulu2016]

Since the world is about to fall in on Bernake's head with all Republicans claiming he is trying to fix the election for Obama, because Bernanke just had the audacity to do his job and try to stimulate the economy more today, rather than waiting until after the election, I thought I'd say something nice about the man.

I know this is not a popular sentiment here, but to me Ben Bernanke has been the single greatest benign (economic) force in the world for the last four years.

Obama has also been indespensible, of course, but on the economy Bernake has had more power to act. Bernake is not subject to Congressional sabatoge. And what I think is over-looked is that someone other than Bernanke at Fed Chair could have been every bit as economically disasterous as if McCain had won in 2008.

It is not that he did everything exactly right. He didn't. Neither did anyone else. And Winston Churchill was a right wing asshole and a pretty poor military strategist, yet is still rightly held to be the savior of his nation.

It is an almost divine fluke of luck that somehow America's worst President appointed a mainstream Keynesian academic as Fed Chair.

There is nothing obvious or automatic about all the things Bernanke has done. We could have easily had a conservative banker who would not have believed the numbers and the theory when his ideology said they were impossible. There are people on the Fed Board of Governors, any of whom Bush could have picked, who would have started raising interest rates at the first sign of recovery.

But Bernanke, whatever his ideology, is an expert on the Great Depression and enough of an academic to know that the numbers trump assumptions. Most Fed Chairs we could have had would not have found the intellectual courage that comes from the equations... that, for insatnce, vastly increasing the money supply would not cause a rise in interest rates. That the threat of deflation is greater than the threat of inflation.

When it was obvious that Congress would not introduce enough money into the system (a mix of intentional sabotage and sincere economic ignorance) Bernanke looked at the situation and said, "I'm the Fed Chair... I can create money and I can carry a balance sheet. There is nothing except convention to prevent me from using that power to the limit." (I don't know that the Fed should buy up mortgages in normal practice, but I know that this Congress will not do anything about housing.)

The Fed Chair has dictatorial power. In peacetime he is arguably the most powerful man in the country. But a typical conservative Fed Chair could easily have failed to recognize that those dictatorial powers are there for a reason... that they are there for a crisis. If you don't go all out in a crisis then what's the point of having the power?

Now, going to the limit is not the real limit. As Krugman has argued many times, Bernanke could have done the right things even more and even faster, but compare that with the prospect of doing the wrong things. But I think Krugman would agree that with Bernanke we dodged a bullet.

A conservative Fed Chair would have put the US, and the rest of the world, into Great Depression II.

I agree with Al Gore. Way before this crisis Gore was on Larry King and was asked, "Can you say anything good about George W. Bush's presidency?" and he said, "Ben Bernanke was a very good selection." Asked whether he had anything else good to say, Gore said, "no."

[Odin2005]

1. I don't get the dislike of Bernake.

it seems to be the result of the Libertarian anti-Fed BS that has infiltrated the left in the last 10 years or so.

[Cleita]

2. I like him a lot better than Greenspan. n/t

[dkf]

3. Well his speciality is the depression iirc.

One wonders what Bush knew when he appointed him.

[siligut]

4. Exactly, it would have been so much worse

Now, maintenance and prevention is the concern. There is too much money to be made out of chaos.

[dawg]

5. Bernanke runs the fed like a slightly intimidated, moderate Republican.

And for that, he is treated to a massive campaign of criticism and hatred from the far right.

[The Magistrate]

6. True Enough, Sir

Except for the part about Winnie; he was an excellent military strategist....

[Ikonoklast]

7. Gallipoli.

[The Magistrate]

10. The Right Move, Sir

And came within one admiral's pusillanimity of success with the initial purely naval effort. The only mistake in the thing was not to order de Robeck explicitly to press on regardless of casualties.

[Ikonoklast]

12. Which may have resulted in an even larger disaster.

Robeck might have lost his entire command. Blub, blub, blub.

It was a hash from the start, Churchill thought it could be done on the cheap, which usually translates into military disaster.

The Turkish resistance, after initial successes by the landing force, was not expected to be as fierce as it was, regardless of the losses on their part...but that had more to do with the ability of Attaturk than anything else.

They should have landed at Sulva Bay from the start, with all available resources they could muster.

They might have had a chance with one killing stroke instead of the scattershot method.

[The Magistrate]

13. Not So, Sir

The forts were on their last few rounds of ammunition, what the admiral thought was a dense mine barrier across the channel was just a small string along one shore.

It can certainly be argued that a landing at the start would have been better, but the fault there is not Churchill's but that of the War Office, which would not release troops for such an action. The purely naval effort was an attempt to force the hand of the War Office as well as the Straits. But the chances that Turkey would have abandoned hostilities with the fleet standing off Constantinople were very good.

Further, the basic conception, that German positions in France and Flanders should be regarded as a fortified camp, and held and bypassed rather then stormed, is extremely sound strategy. The collapse of the German defense in the west was, actually, triggered by the consequences of the Salonika breakout, which led to the prospect of an advance up the Danube.

The value of a year-round link to Russia would have been tremendous, and not only for the war effort, but likely for the rest of the century.

[Ikonoklast]

14. But there was no way for Robeck to know that.

And it is usually a Very Bad Thing to continue letting your command sink to the bottom by doing the very same thing that let it happen to begin with.

The effort was lost after Hamilton took control of it, for all intents and purposes.

Hindsight being what it is and all, the reality is Gallipoli was one mistake compounded by yet another, bad planning, poor execution, even poorer oversight by even worse leadership.

As I said before, it was an effort that was tried to be done on the cheap, with predictable results.

[The Magistrate]

17. But He Was Wrong, Sir

The difference between being a craven fool and a great captain is often just that one's nerve holds out a little longer, and if de Robeck's had, he would have been one of the great names of history, instead of an object lesson in consequences flowing from lack of intestinal fortitude.

[Ikonoklast]

20. They don't build statues to admirals that let every one of their sailors get wet.

I think that was what was holding him back.

I also rather think that his heart wasn't in the entire affair as planned.

Better a live failure than a dead one...either way, it went tits up in a hurry for him, and handing it all off to the army looked like a good way out.

[cthulu2016]

8. Fair enough

There will always be disagreement on that point, and the distinction between strategy and tactics is ambiguous here.

He authored some glorious over-bold defeats, but in totality I suppose the big picture results are their own argument.

[BlueStreak]

9. He doesn't have much to work with

He has given us, basically, the Japanese economy of the 1990s. When it comes down to it, the Fed has basically two tools that can impact the economy.

One is the overnight lending rate. And the other is the money supply itself. He has had both of those on, essentially full throttle since 2008 and it just isn't helping very much. Doing more of the same also will not help very much. But that isn't his fault. The problem is that the solutions require political choices.

The structural problems we have are:

Corporations are extremely profitable now, productivity is through the roof, which means they aren't hiring many people. And they are still off-shoring jobs and components whenever they can. It takes political decisions to change those things. We need better trade agreements. We need better tax policies that penalize job cutting and reward job-building. The Fed can't do that.

We have created a huge structural deficit through a whole series of bad decisions. The Bush years were the worst, but this has been going on since Reagan. The Fed can't fix that. Moreover, the Fed cannot EVER allow interest rates to rise to traditional levels like 5%-8% because that would topple the government. So Bernanke's hands are tied there.

We are not investing in the commons, public works, infrastructure. This is EXACTLY what is needed today. That creates millions of jobs immediately, it takes millions of people off assistance and turns them into taxpayers, which creates a nation ROI inside of 10 years. And we end up with a better infrastructure that allows us to be more competitive on the world stage. The Fed cannot do that.

Bernanke is doing what he can do. I wouldn't call him a white knight though. The one tool he is not using is the bully pulpit. Even though the Fed cannot fix the big problems, he should be advocating much more aggressively for our politicians to fix these problems. On that basis, I'd give him no better than a C-minus. We could certainly do worse, but we deserve better.

[Navl]

11. Wrong,

the loose monetary policy he has practiced has done nothing but dig us a deeper hole, one we will probably not get out of without a significant collapse of the banking industry. We have borrowed our way into oblivion. The good news is that a collapse will all but cement the democratic party as the dominant force in our society. Just as we have managed to get a good portion of our health care industry under government control (17% of our economy), and have a large stake in one of the largest corporations in America (GM, where the government controls salaries), we will have the opportunity to take significant control of the banking industry. That in conjunction with more people needing government assistance (guaranteed dem voters) will marginalize the GOP. We will also have virtually no choice but to all but confiscate the one percenter's wealth, just as Obama's father once suggested.

If you actually do the math it just doesn't work out any other way. The near term will be painful, but the long term benefits will outweigh that pain.

[Ikonoklast]

15. Oh. Really.

[The Magistrate]

18. Did You Pay For Your Tickets To '2016, Obama's Plan For America', Fella?

Or did you free-load on some Galt or other....

[Odin2005]

23. This is Libertarian "BUY GOLD NOW" nonsense.

We were in a deflationary liquidity trap, which is exactly when the money spigot needs to be turned on to full flow.

The problem was not the money, the problem was that the Banksters were not properly punished for creating the bubble in he first place, and that was Congress's fault, not Bernanke's.

[hifiguy]

16. I would tend to agree with you, cthulu

Bernanke has done what is within the Fed's power to do though he could have done it more quickly. That said, when the alternatives are considered they are almost too terrible to contemplate.

[cthulu2016]

19. Yes, he could have acted faster

But it appears that he is as onboard today as one could reasonably hope for.

[BlancheSplanchnik]

21. thanks, good instructive post.

Thank you!! More, please!

[sad sally]

22. The sentiment here that printing more free money to give to those already hoarding

trillions is seen as a good thing is somehow strange.

Thirty-year mortgage rates are at an all time low (3.5%) so that can't be seen as a reason to extend more free cash to banks; interest rates aren't stopping many from buying homes. And does anyone really think corporations sitting on their trillions in surplus cash will really start hiring because of lower interest rates?

I guess if you bow down to the stock market and believe it's the barometer of determining the health of the economy then you are cheering today. More free money to the banksters, more money to those already too rich to know what to do with their wealth except buy more wealth, the 20 percent who own over 90% of equities; trickle down economics are alive and well.

Investing, if those with the capital really cared about investing, would be in investing by refurbishing closed factories, making goods in the United States of America, and hiring PEOPLE.

The job of our elected officials (and yeah, I know, we've elected a lazy bunch of people more interested in getting theirs than governing the country), is supposed to be one of determining the fiscal policy of the country; the Fed is supposed to be in charge of monetary policy. I guess by buying bonds to stimulate short term economics and manipulating long term interest rates, congress can't be held responsible for anything; any failure or problems will be the fault of the "independent" Feds.

newspeak: quantitative easing = printing money for special people

[The Magistrate]

24. What The Mechanism Actually Does, Ma'am

Is make it cost money to sit on cash. Not just lost opportunity cost, the profit that might have been had from using the capital, but actual reduction in its value, through setting off a salutary bit of inflation. The normal means of getting an economy moving is to lower interest rates, but once these are at zero, more or less, the tool hits a boundary, and another form must be found to get the desired effect.