I love Matt Yglesias, but I'm curious why he writes that "I’m not sure that re-appointing Ben Bernanke was a mistake."
For over a year now we've been in a situation where inflation is less than the Fed's target, where expected inflation is less than the Fed's target, and where unemployment has been at 9.4% or higher.
Consensus estimates are that unemployment will still be above 9.25% this December, and that inflation will be under 1%. Ben Bernanke sees nothing wrong with this scenario, and is unwilling to risk inflation hitting the Fed's explicit target in order to get lower unemployment.
What does Ben Bernanke need to do for it to have been a mistake?
Let's not forget that politically, I'm fairly certain getting rid of Bernanke would have been smart, since Bernanke was linked both to President Bush and the financial crisis, and could have been (perhaps should have been) a scapegoat. Not that the financial crisis was all his fault, or even that it wouldn't have happened under other central bankers -- indeed, for all his faults he's much better than his counterparts in Japan or Europe -- but that he did make clear mistakes, and in fact was continuing to make mistakes during the debate on reappointment, mistakes he's continued to make. Namely, that he's perfectly fine with below average inflation and long-term high unemployment.
The one thing going for him is that he might have more authority with the rest of the right-wingers on the FOMC than would a new appointee, which is what really makes the Obama administration's feet-dragging on FOMC appointments so egregious.
Then we've also had Bernanke reminding Congress it has the power to repeal Social Security and Medicare, calling for cuts in Congressional testimony... (Coupled with his nonchalance about high unemployment, this is really egregious...)
And earlier this year he raised the discount rate. You might say this isn't the most important Fed tool available, but the dollar did strengthen on the news, which is bad news for US jobs.
So, sorry, I totally do not see the merits of Ben Bernanke. I'm pretty sure he's been a total disaster.
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