At Least He's Not Alan Greespan

    Say that for Ben Bernanke. You can debate his term as chairman but at least his public comments are not so obviously clueless as his prestigious predecessor. For my feelings on the Oracle please see below.

    http://diaryofarepublicanhater.blogspot.com/2011/10/alan-greenspan-worst-ex-fed-chairman.html

     This last week Bernanke all but told the Congressional Republicans that their preoccupation with cutting deficits in the short term is wrong, that this is a longer term concern, not for now. He also answered a question from Bernie Sanders about the Occupy Wall Street protesters in a half intelligent way.

      Greenspan meanwhile is currently trying to blame the euro crisis on the "culture" of profligacy and high wages in the southern euro countries. Will they ever, Mr. Greenspan frets, catch up to the fiscally responsible habits of the high savings and long term ivnetmens of the thrifty northerners?

     Many have been critical of Bernanke of course. Much of it is specious. The Republicans like Rick Perry and the Congressional Republican leaders-Cantor, Boehner, McConnell-have been trying to jaw bone him and warn him not to do QE3 or any more aggressive monetary policy. This jibes very well with the current Republican agenda: Operation Tank the Economy.

     For more on this highly classified operation please see:

      http://diaryofarepublicanhater.blogspot.com/2011/09/rick-perry-threatens-bernanke-again.html

      http://diaryofarepublicanhater.blogspot.com/2011/09/republican-operation-tank-economy.html

      Beranke is at least trying to heal the economy and is concerned about the weak growth and high unemployment. You have some Right wing economists now claiming that we have already reached our natural rate of employment-this is how far they are taking Operation Tank the Economy: actually trying to come up with some fuzzy monetary concept that would decree nothing must be done to help the economy.

    If anyone has an interesting critique of Beranke it is Scott Sumner and his blog, The Money Illusion. He argues that Bernake has not done a very good job with the monetary response. But the reason is less about him personally failing than the Fed mandate should change. Sumner believes that the inflation mandate should be dropped in favor of nominal GDP(NGDP) which is the sum of real GDP growth and inflation. Sumner's ideas on this are very interesting and fruitful.

   http://www.nationalaffairs.com/publications/detail/re-targeting-the-fed

    His ideas about NGDP may have some real merit. In particular I like his rationale for getting rid of the inflation rate-" inflation targeting can work, but only in a world in which policies explicitly aimed at raising the inflation rate are non-controversial. Obviously, we don't live in that world; in the universe we occupy, a nominal GDP target would be more effective."

    Of course at present they are unorthodox and outside of the mainsteram which may be a pity. Bernanke at least within the mainstream is not trying to blame the crisis on wager earners not accepting lower pay and inflation.

    At least he sees unemployment as a problem and shows some understanding of what is driving Occupy Wall Street.

     Still, Sumner further criticized Bernanke for not being enough of a dove. As Sumner explains it, Bernane's policy is to maintain the current price level, not to raise it(inflate it).

     If he is tyring to maintain it that is better than the inflation hawks who actually believe it needs to be lowered. If this is true then Bernanke has kind of set himself up as the sensible Center, the reasonable mean between the two extremes, neither a hawk nor a dove. Yet it may be that he is just being politic. Maybe-for argument sake-he needs to posture as a centrist but in his heart of hearts he gets it.

    When you think of it isn't this how power always works? Since the practice of the 19th century French Prime Minster who placed the conservatives on his right hand and the radicals on his left, isn't that what the Chief Excecutive always does? Power always seeks to define itself as the Center-here is an insight for Foucault. Stalin too was in the Center between the Right wing Bukharain and the Left wing Zimonev.

   Beranke may the feel the need to do similarly. /But when the time comes to act he will act dovishly-or so I speculate. In addition he has brought some reforms to the Fed in terms of transparency-the press conferences, etc. He actually has instituted some of the reforms that the Gonzalez bill demanded 20 years ago. Though he may not like the newest idea from Barney Frank: to either cut the number of Fed Governors or make them subject to a confirmation process. This would likely be a good thing. The "independence" that we hear so much about with the Fed means independent from the needs and desires of the American people. Maybe in a much better world we would see Sumner's NGDP and Frank's 7 rather than 12 Governors who are nominated by the President and confirmed by Congress. A middle path could be make 5 of them appointees.

   That would at least possibly give it more balance. At this point its hard not to argue that they are too responsive to the needs and desires of the banks whose bias is always anti-inflationary. Deflation actually is good business for them as it makes the loans they give out worth more and take longer to pay off.