Democrat From Kentucky

Democrat from Kentucky
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Bernanke Named To Replace Greenspan Monday, October 24, 2005

Ben Bernanke has been tapped to replace retiring Fed chairman Alan Greenspan. Bernanke is an inflation hit man. Questions are already being raised about his loyalty to the president however as Bernanke currently chairs the presiden't Council of Economic Advisers.

The Washington Post picked up the AP story on the subject. Greenspan's been on the job since 1987 (Reagan pick)and will retire as of Jan 31, 2006.

There had been widespread speculation that Bush might act as early as this month to give the Senate time to act on the nomination before Greenspan's term expired.

However, announcing Greenspan's successor also provided a diversion for a White House reeling under congressional criticism of the Harriet Miers' Supreme Court nomination and a federal investigation into whether top officials leaked the name of a CIA operative for political purposes.

Dr. Peter Morici sent out a quick email about the nomination with a little info on Bernanke.

Ben Bernanke

President Bush has named Ben Bernanke to replace Alan Greenspan. He appears to be giving Wall Street exactly what it asked for: an inflation hawk. That would pose real dangers but don't pigeon hole him too soon.

Bernanke is a strong advocate of inflation targeting but as simple and elegant as that sounds, it can prove an unrealistic goal. These days, too much of the inflation challenge stems from structural issues beyond the control of the Fed—for example, hypergrowth in China and the resulting pressures on oil prices, and the mismanagement of energy policy and resulting shortages of refining and natural gas capacity.

Inflation targeting can result in overreaction to surges in commodity prices that the Fed cannot affect at the expense of sacrificing growth the Fed can help the economy accomplish. The end result would be rising unemployment and falling wages—stagflation.

Wall Street, whose view of the economy rarely extends beyond two quarters, wants an inflation hawk, even if it is at the expense of sacrificing growth and the interests of ordinary working Americans. That is even sadder because too much attention to inflation is bad for Wall Street too.

The Fed is charged with both maintaining stable prices and sustaining growth. Bernanke, while on the Fed Board, advocated attention to the output gap—that counsels more moderation from strict inflation targeting and concern about unemployment. However, Wall Street’s fixation with inflation—even inflation that is inevitable and beyond the reach of the Fed--kept any viable candidate from talking too much about the importance of the Fed’s joint responsibilities.

Just like a Supreme Court nominee, we really won’t know how Bernanke will vote, until he is on the job.

Peter Morici
Robert H. Smith School of Business
University of Maryland
College Park, MD 20742-1815


The good professor generally isn't espousing one party or the other in his statements. He's a learned economist who calls them like he sees them. He is right about Bernanke. There's no way to know what he will do until he gets there.

posted by Stithmeister @ 1:18 PM

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At 3:16 PM, Blogger Cynicus said...
Dubbyah likes him.

Therefore, Bernanke is:



3)Loyal beyond reason to
George W. Bush.

Question for those who understand constitutional law: Is there any way for the American people to stop a Fed Chairmanship short of assassination?

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Location: Harrodsburg, Kentucky, United States

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