So, my take on Bernanke is that 1) He's not terribly sharp, 2) there's nothing in his academic writings which would suggest he wouldn't be opposed to aggressively expansionary monetary policy at this point, and 3) he's got all kinds of inflation-hawks whispering in his ear at the FOMC.
And yet, Obama has two Fed appointments to make. Why not, y'know, use those for appointments who are not inflation-crazies? I suspect Bernanke is quite likely to be influenced by cooler heads, so this could actually help the situation quite a bit.
But, what is Obama's Economic Team doing about those appointees? Nothing. There is one thing the administration could do with the potential to help the economy, and improve the election climate for next fall, and they aren't doing it.
Fire Larry Summers now.
My Heart Bleeds Borscht for Them
10 hours ago
Bernanke deeply confuses me. Back in 1999 Ben Bernanke wrote a paper entitled "Japanese Monetary Policy: A Case of Self-Induced Paralysis?" where essentially he chided the Bank of Japan for incompetence. It's particularly interesting to see what Ben Bernanke recommended the BOJ do.
ReplyDelete(i) He approvingly cites Krugman's 1999 article and calls on the BOJ to commit itself to 3-4% inflation "to be maintained for a number of years."
(ii) He argues that the most important policy that could be done would be rapid depreciation of the yen through large and substantial open-market sales of the yen.
(iii) Using large "money financed transfers", essentially what he calls a "helicopter drop of money on households." For example, he advocates that the government create a large tax cut and the BOJ then buy government securities equal to the tax cut.
(iv) And, if all else fails as a last resort get those open-market operations going and pump in some quantitative easing. He advocates substantial purchases of government and corporate bonds, asset-backed securities, and commercial paper. He even argued for indirect bank bailouts by removing non-performing loans off private banks balance sheets. He argues that Japan wouldn't need to do large quantitative easing if they enact the other three strategies, but he's fairly clear he would advocate more quantitative easing if they failed or were not as successful as desired.
The final section is the greatest irony of all:
"But Roosevelt's specific policy actions were, I think, less important than his willingness to be aggressive and to experiment - in short, to do whatever was necessary to get the country moving again."
"Most striking is the apparent unwillingness of the monetary authorities to experiment, to try anything that isn't absolutely going to work. Perhaps it's time for some Rooseveltian resolve in Japan."
The article is incredibly sad because if you didn't see the author you'd think this guy would make a decent Fed chairman.
But that author is our Fed chairman, is he seriously trying any of the four above? Is he showing Rooseveltian resolve and experimenting like crazy to get the economy going? Did he just become Fed chairman and say, "guess I can forget all that bullshit I pretended to believe in" ? I'm baffled, we are in our "Lost 2-Years" and he's not doing the very policies he advocated just a decade ago.
As I said, Bernanke deeply confuses me.