Is today “Hate On Ben Bernanke Day”? Over at Minyanville Todd Harrison piles on:
The DNA of the global financial marketplace is what concerns me most and this isn’t sour grapes or trades gone awry. A few weeks ago, it genuinely felt as if Ben Bernanke finally found free-market religion; after five years of A Grand Experiment that cost trillions of dollars and failed to produce any semblance of legitimate economic growth, he seemed intent on beginning the long hard road of weaning the markets off synthetic stimulus and steering capitalism toward meritocracy.
Almost immediately after financial markets began to self-correct—and we’re talking about a few percentage points—his top lieutenants began to backtrack, saying their Fed head was “misunderstood.” We asked at the time whether the jawbone was connected to the backbone; last night, we got our answer.
A decade ago, Alan Greenspan was praised as the Maestro of the Markets. We at Minyanville took the “other side” of that trade and warned of the cumulative comeuppance brewing in the background, imploring folks to pay attention to the why rather than the what—and make no mistake, the “why†was self-evident to anyone who chose to pay attention.
Mr. Greenspan’s legacy shifted dramatically in the years that followed; the bloom quickly faded from that rose. Big Ben, for his part and in my view, is following in the footsteps of his predecessor.
The funny thing is nothing really changed. The Fed will still very likely taper when unemployment hits 7.0, they just backed off a confidence level in the date of when they think that might happen.
There’s a big assumption in that article – that Greenspan’s loose money caused the current crisis. It couldn’t possibly have been Bernanke’s tight money policy in 2008 when inflation expectations were nosediving?
How can monetary policy only be bad when it’s too loose, but it doesn’t matter at all if it’s too tight?
This shows how dangerous it can be to listen to opinions. Harrison thinks monetary policy is fueled by tax dollars, when the Fed openly acknowledges (and every economist is aware) it simply credits accounts. If someone is making that basic a mistake, I suggest we should question their knowledge of everything else on the subject.