One Hand Clap Ben Bernanke

Fed could not understand the economy of its own competence, banking and financial markets. In addition, the Fed maintained a broader economic point of view of the abolition of state control and the nature samostabilizuyuchu markets.

The nomination of Ben Bernanke's President Barack Obama for a second term as chairman of the U.S. Federal Reserve is a reasonable and pragmatic solution, but it is not cause for celebration.

Instead, it should be cause for reflection about the role played by ideological group thinking among economists, including Bernanke, in the development of global economic and financial crisis.



The decision to present the candidature of Bernanke is reasonable for two reasons. Firstly, the U.S. and world economies are in crisis. Although the crisis may have passed in the sense that it could avoid collapse and the economy remains vulnerable. Because this makes no sense to suggest to attack the credibility that could lead to continued economic downturn.

Second, Bernanke is the best among his colleagues. He really finally came to an understanding of the nature and seriousness of the crisis, and took decisive action to help stop the economic decline.

These facts, together with doubts about the fact that any of his colleagues have achieved greater success, means that substitution to other mainstream candidate does not make sense.

These two factors justify reappointment of Bernanke, but the weakness of praise indicates deeper problems uncovered his leadership. These problems concerning the economy and recommendations for economic policy.

One such problem is the hidden veto on Wall Street, Federal Reserve Board. Finally, the main reason for re-appointment of Bernanke is to avoid rocking the financial markets. This also explains why the only competitors Bernanke is his colleagues - the only people who are willing to accept the financial markets.

In 1990, under the pretext vtyhomyrennya financial markets received a reappointment of Bernanke's predecessor, Alan Hrinspan, and now this drive is constantly used to block changes in the Council of the Federal Reserve and other central banks.

Indeed, financial markets hidden vetoed most of the economic policy and the people who can occupy high positions, and it is time to consider how we can avoid such a power.

The second problem concerns the state of the economy. Although Bernanke is probably the best among their colleagues, the fact is that the economic crisis decisively proved that he and his colleagues were wrong.

As a group, they joined the flattery Hrinspanu, which one leading economist has announced "the largest central banker who ever lived on earth."

Almost without exception, mainstream economists failed to predict a crisis unit and even those who could, and made it the logic of events wrong.

For his part, Bernanke led the intellectual opposition to planning inflation by central banks, arguing that setting targets for annual inflation is complete and adequate framework for monetary policy.

Such thinking has fostered negligent regarding the assets and credit markets, as well as intellectual contempt for the settlement, and backed by excessive state interference in the economy, because faith in the adequacy of macroeconomic planning inflation logically connected with micro belief that the credit markets themselves will take care of themselves . According Hrinspana, self-interest credit institutions' shareholders and protect the economy from excess in lending.

This thinking explains why the Federal Reserve Board under the leadership of Bernanke so slowly reacted to the crisis that began in August 2007, and why in November 2008 there was no coherent and comprehensive feedback.

"The Fed, of course, would have reacted more quickly if it was not adherence to the model of banking, which is more in the spirit of the 1950's.

Not paying attention to the role of the shadow banking system, the Fed did not understand how it exploded inside undermine the traditional banking system.

"The Fed was simply unable to comprehend the importance of major assets avuariv traditional banks, which pereotsinyuvalysya urgently on the basis of current market prices and their own involvement in the shadow banking through pozabalansovi" structural investment companies.

Any unbiased assessment of the Fed's thinking before and during the crisis shows that she could not understand the economy of its own competence, banking and financial markets. In addition, the Fed maintained a broader economic point of view of the abolition of state control and the samostabilizuyuchu nature of markets, and discredited by its own crisis.

Although the circumstances dictate that Bernanke is the best candidate should be appointed for a second term, the real goal is a complete collection of intellectual Council of the Federal Reserve in order to clear space for alternative economic viewpoints.

Great danger lies in the fact that Bernanke's reappointment will be interpreted as the green flag for the wrong status quo.

Here comes the stage of public debate and hearings in the Senate to confirm as Bernanke. These hearings should provide an opportunity for critical analysis of where mistakes were and why.

If this happens, the re-appointment of Bernanke may serve as trigger mechanism for constructive change and not for approval discredited paradigm.


Author: Thomas I. Palli

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