Bernanke Interlude

Via David Wessel’s Twitter feed, the WSJ publishes a letter:

Ben Bernanke is a good person, a fine academic and a well-respected professor. But those traits have no bearing on whether he should be reconfirmed as Federal Reserve chairman….

Applying accountability principles, there’s no way Chairman Bernanke should be reconfirmed by the Senate, let alone reappointed by the Obama administration….He’s been at the helm from the very beginning of this Great Recession. That alone warrants a “no” vote on reconfirmation.

At this point, I feel obligated to note that if you’re going to declare this The Great Recession—i.e., if you are assuming the chance of having the third Depression is over*—then Bernanke deserves credit, not blame. (Even those of us who do not assume we’re out of the woods admit we aren’t quite sunk yet, though 17.3% unemployment is problematic at best.)

In addition, the Fed’s behavior over the past 15 months has put America on a very dangerous path. The Fed has increased the monetary base (high-powered or wholesale money) by the largest amount ever, from colonial times to the present, times 10. Without an exit strategy, inflation is a virtual certainty over the coming decade, while an effective exit strategy virtually assures a further weakening of the U.S. economy. [emphasis mine]

This is Gospel for the WSJ editorial page, and a logical confusion of the first order. Any “exit strategy” assumes that the conflict is primarily over, so any exit strategy would, by definition, not weaken—let alone “further weaken,” which suggests that the writer’s faith that “the Great Recession” is accurate is wavering—the economy. (We can, and will, discuss where All That Money Has Gone; suffice to say, it’s not exactly producing a Multiplier Effect.)

But the writer saves the best for last.

And lastly, on a more personal note, [Bernanke] doesn’t have the gravitas of a Paul Volcker, Alan Greenspan or William McChesney Martin. In this day and age of crisis management, gravitas is essential. Almost anyone would be better than Mr. Bernanke.

Well, at least Arthur Burns is conspicuously excluded. It’s nice to know that Arthur Laffer believes in gravitas, while his best-known disciple believes “deficits don’t matter.”

*Yes, I could 1873-77 as a Depression in the United States. Looking at the evidence, it would be difficult not to.

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