The Failure of Ben Bernanke. Part I: "It's All Academic"
[Printer Friendly PDF File]
The content and context of the following quote nicely summarizes the Federal Reserve Chairman’s tragic flaw.
“We've never had a decline in housing prices on a nationwide basis.”
Ben Bernanke, 2005
Bernanke’s classical fault is a false conviction born from a comprehensive but rigid understanding of historical events, which he is unable to apply dynamically to unique, economic circumstances.
Bernanke clearly documented his belief that it was unlikely that housing prices could fall nationally because they had not done so in the past. His perception of the present and expectations for the future are based on uncorrelated past events which occurred during fundamentally different circumstances. The distant past is not a predictor of the future if the relevant conditions have changed dramatically.
In summary, he is the worst kind of academic. A man who spent a career becoming a self-described expert on the subject of The Great Depression, but whose comprehension of the event is historical and only applicable to those distant, frozen events. His “expertise” does not afford him to ability to develop an understanding of current economic reality.
"To understand the Great Depression is the Holy Grail of macroeconomics."
From Bernanke's book, Essays on the Great Depression published in 2004.
Bernanke’s definition of the “Holy Grail” is his Achilles Heel. What would have worked during the Great Depression must work in any future economic calamity! He is tragically wrong. There are parallels between any Depression, but it is the idiosyncrasies which are important.
Bernanke spent a life-time honing a play-book which would have been usefully applied during The Great Depression. When the present economic downturn manifested itself he reacted reflexively, implementing strategies that would certainly have been beneficial in 1929, but that had little relevance or bearing to our present predicament.
It may console some that Mr. Bernanke is well suited to write the definitive history book on The Affordable Mortgage Depression twenty years from now after he has had sufficient time to digest what happened and conjure the appropriate public policy response.
Part II: "Ignorance is Bliss"
The content and context of the following quote nicely summarizes the Federal Reserve Chairman’s tragic flaw.
“We've never had a decline in housing prices on a nationwide basis.”
Ben Bernanke, 2005
Bernanke’s classical fault is a false conviction born from a comprehensive but rigid understanding of historical events, which he is unable to apply dynamically to unique, economic circumstances.
Bernanke clearly documented his belief that it was unlikely that housing prices could fall nationally because they had not done so in the past. His perception of the present and expectations for the future are based on uncorrelated past events which occurred during fundamentally different circumstances. The distant past is not a predictor of the future if the relevant conditions have changed dramatically.
In summary, he is the worst kind of academic. A man who spent a career becoming a self-described expert on the subject of The Great Depression, but whose comprehension of the event is historical and only applicable to those distant, frozen events. His “expertise” does not afford him to ability to develop an understanding of current economic reality.
"To understand the Great Depression is the Holy Grail of macroeconomics."
From Bernanke's book, Essays on the Great Depression published in 2004.
Bernanke’s definition of the “Holy Grail” is his Achilles Heel. What would have worked during the Great Depression must work in any future economic calamity! He is tragically wrong. There are parallels between any Depression, but it is the idiosyncrasies which are important.
Bernanke spent a life-time honing a play-book which would have been usefully applied during The Great Depression. When the present economic downturn manifested itself he reacted reflexively, implementing strategies that would certainly have been beneficial in 1929, but that had little relevance or bearing to our present predicament.
It may console some that Mr. Bernanke is well suited to write the definitive history book on The Affordable Mortgage Depression twenty years from now after he has had sufficient time to digest what happened and conjure the appropriate public policy response.
Part II: "Ignorance is Bliss"
Comments