The New head of the Federal Reserve, Ben Bernanke

Everywhere I go, people are asking me what I think of the new chairman of the Federal Reserve, Ben Bernanke.

I know Bernanke pretty well because he was Chairman of the Princeton Economics department at a time when I was very seriously thinking of moving there, but ended up turning down offers on multiple occasions (which rightfully aggravated Bernanke to no end).

I have two thoughts on Bernanke running the Federal Reserve:

1) If I had to guess, the Chairman of the Fed has a lot less impact on the day-to-day performance of the economy than most people think. Although Greenspan has been elevated to God-like status, I suspect that he has been at least as lucky as he has been good. One of the most important lessons of modern macroeconomics is that it is probably impossible at the present time to “fine tune” it. More or less, you just want the Fed to stay out of the way and not totally botch things. There is mounting evidence that the Great Depression (and maybe also the stagflation of the early 1970s) was due in large part to policymakers following exactly the wrong course of action.

2) With that in mind, I think Bernanke is a great choice to run the Fed. He has an enormous appreciation of the history of monetary economics and past failures of Fed policy (see, for instance, this book he has written on the Great Depression). But at the same time, he is not an egomaniac who will pursue dangerous policies because of illusions of grandeur.


StCheryl

A minor correction -- Bernanke has been nominated, but has not yet been confirmed by the Senate, for the post of Chairman of the Fed. He is highly qualified and relatively uncontroversial. I would be absolutely shocked if he were not confirmed quickly.

The Fed is a unique institution both nationally and internationally. It is both part of and outside of the normal US government, and is a tremendously secretive institution. Most of what goes on there will never see the light of day. (For three years in the early 90s, it was my job to make sure that the high level discussions and deliberations met the relevant legal tests renain secret.) Even the most trivial things can be kept secret, and Fed attorneys and officials work hard not to have to give up even minor financial institution inspection reports when they are subpoenaed.

Alan Greenspan succeeded as Fed Chairman for several reasons other his skills as an economist (whatever those are -- I am not qualified to comment.) First, no one ever understood what he was saying. Many people thought he was brilliant almost no matter what he said or did. He has managed for 18 years to confuse a lot of public figures who think they are very smart, and not wanting to admit publicly that they don't understand something, he doesn't get questioned. Possibly because his explanation or clarification would be just as unclear as the original statment. He does this while never overtly condescending to people.

Second, he figured out how to survive, even thrive, in Washington's strange culture. He was very popular and has led a very active social life. He also figured out how to flatter people in Congress (see above) while saying nothing.

Finally, he has had the benefit of presiding over relatively stable oil prices and the internet boom. Although there were numerous crises on his watch, people trusted him enough (see above) to follow him and let him calm the markets when necessary.

Read more...

Gringo_Nordestino

THANKS!! I was waiting to see when you would comment on this. I think too much has been made of the "helicopter" comment, and in fact it was a variation of I beleive Keynes, who said to simply print the moeny and hide it in bottles in mineshafts.

mathking

With all of the "Chicago v. Harvard" economics talk from the old blog, I just noticed that now two of the most prominent economists for the government could have Princeton connections, Bernanke and CBO director Douglas Holtz-Eakin. Both of them (and the CBO deputy as well) have also come off of stints as Chief Economist for the Council of Economic Advisors.

semivoid

Perhaps not in the day to day performance of the economy, but the Fed and the voting members of the FOMC can certainly allow things to get out of control in the long run...of course because of the God like status they are now given, one ill-advised statement will move both the bond and stock markets.

I would point out his Macroeconomics text with Dr Abel. It is well written and confirms that he is generally politically neutral.Apparently Abel was unaware that Bernanke was a Republican at the time...

That said the book has some issues. Specifically, the first third of the book has really corny 'examples'. I have found that there is a general consensus that they are an irritant to readers of the text.

RealValueAccntng.Com

Alan Greenspan is ending his reign at the Fed without having to deal with the fact that inflation for the last 700 years had two components and now still has two components. I am planning to send Mr Greenspan a copy of my book in which I identify inflation´s second component and show how we can stop it immediately and forever.
Ben Bernanke will hopefully soon only have to worry about single component inflation. Whether single component inflation will be a different beast than two component inflation we will have to wait and see. I think not - but I am not an economist.

RealValueAccounting

Alan Greenspan is ending his reign at the Fed without having to deal with the fact that inflation for the last 700 years had two components and now still has two components. I am planning to send Mr Greenspan a copy of my book in which I identify inflation´s second component and show how we can stop it immediately and forever.
Ben Bernanke will hopefully soon only have to worry about single component inflation. Whether single component inflation will be a different beast than two component inflation we will have to wait and see. I think not – but I am not an economist.

nathanhollis.org - Ben Bernanke Freaked

[...] Steven Levitt’s (theFreakonomics guy) view on Ben Bernanke [...]

The Brandon Hansen Experience :: New Head of the Federal Reserve :: October :: 2005

[...] Even though he hasn’t been confirmed by the senate yet it will be interesting to see how Ben Bernanke runs things differently then Alan Greenspan did. Here is an interesting blog to read about the subject. It is true that the public perceives that the head of the reserves has more influence on the day to day performance then he actually does. Any comments? Comments » [...]

bmc

Burning incense to Bernanke here!

vicki c

what is up with putting michael alix formerly of bear stearn as senior managing director of the federal reserve. haven't these people especially this one done enough damage. if you can't run bear stearns what make the powers that be think this guy will do any better now. this is like putting the fox in charge of the hen house. good grief haven't we learned a lesson.

Twist Image Multimarketing Studio - Mitch Joel Blog - Marketing and Communication Insights

The Power Within Bill Clinton

Today was another life-changing event and it was all because of The Power Within. What a moving day of speakers and wisdom. I came to Toronto this morning just so I could attend this jaw-dropping line-up. The morning was kicked...

Princess Leia

Great post -- thanks. --M

Snarkmarket

August's Heroes

Stephen Dubner has posted a previously unpublished interview with August Wilson on his Freakonomics blog, in which the playwright talks about the men he admired growing up. It's funny -- so many of the men Wilson identified with were fighters...

Connie Sartain

I shed a tear and I never knew the man, but I sure knew his work. August Wilson made authenticity seem easy. That's genius. Just reading his words here brings that back.

I could almost - alsmost - get caught up in boxing. Never will I understand boxing or how one could be proud of battering another human, just for sport.

palmcap

An obituary of August Wilson appeared in the Oct. 6th edition of the Economist --

http://www.economist.com/people/displayStory.cfm?story_id=4484050

qualityg

"As it turned out, my interview with Wilson never made it into Confessions. It was too good. Wilson was such a heavyweight, intellectually and emotionally, that his stories would have swamped the little story I was telling, like a big freight ship charging past a canoe."

SJD,

Confessions is hardly a "little story." It went deeper for me than just an infatuation w/ Franco. It's about strong women with dutiful sons who rise to the heights of their professions with hard work and an appreciation from where they come from.

from an ex-pug - "RIP Bear"

qg

Recording Angel

Thank you for this article and excerpts from your interview.

I'm coming upon this late--just now, a little more than two years after August died. I don't know how I missed this as I thought I was keeping up with all the coverage about his life and work. Thank you for this tribute--I knew August long ago, and I think you brought him back to life for me today.
Though he's not really dead, is he? His body may be finished but his soul and spirit are very active in the world.

Reminds me of the simple epitaph on Sonny Liston's gravestone: A MAN.

Art Sheppard

Boxers can be good role models in that they make their livelyhood by vanquishing their enemies but in my humble opinion the real hero of this time period was Dr. Martin Luther King Jr. Pound for pound he was the greatest, "fighter of all time." I once met Dr. King when I was a teenager. A local supermarket chain refused to hire black teens as bag boys and I was one of the teenagers who was not allowed to work. Dr. King's organization SCLC led a protest/picket campaign. Dr. King spoke at a local theatre one night and I got to meet him one on one! I'll remember the experience and what he told me forever I tell of this chance meeting with one of the greatest heroes in American culture, in my book, "Talking Penny."

StCheryl

A minor correction -- Bernanke has been nominated, but has not yet been confirmed by the Senate, for the post of Chairman of the Fed. He is highly qualified and relatively uncontroversial. I would be absolutely shocked if he were not confirmed quickly.

The Fed is a unique institution both nationally and internationally. It is both part of and outside of the normal US government, and is a tremendously secretive institution. Most of what goes on there will never see the light of day. (For three years in the early 90s, it was my job to make sure that the high level discussions and deliberations met the relevant legal tests renain secret.) Even the most trivial things can be kept secret, and Fed attorneys and officials work hard not to have to give up even minor financial institution inspection reports when they are subpoenaed.

Alan Greenspan succeeded as Fed Chairman for several reasons other his skills as an economist (whatever those are -- I am not qualified to comment.) First, no one ever understood what he was saying. Many people thought he was brilliant almost no matter what he said or did. He has managed for 18 years to confuse a lot of public figures who think they are very smart, and not wanting to admit publicly that they don't understand something, he doesn't get questioned. Possibly because his explanation or clarification would be just as unclear as the original statment. He does this while never overtly condescending to people.

Second, he figured out how to survive, even thrive, in Washington's strange culture. He was very popular and has led a very active social life. He also figured out how to flatter people in Congress (see above) while saying nothing.

Finally, he has had the benefit of presiding over relatively stable oil prices and the internet boom. Although there were numerous crises on his watch, people trusted him enough (see above) to follow him and let him calm the markets when necessary.

Read more...

Gringo_Nordestino

THANKS!! I was waiting to see when you would comment on this. I think too much has been made of the "helicopter" comment, and in fact it was a variation of I beleive Keynes, who said to simply print the moeny and hide it in bottles in mineshafts.