BERKELEY – It is difficult to read former US Federal Reserve Chair Ben Bernanke’s new memoir, The Courage to Act, as anything other than a tragedy. It is the story of a man who may have been the best-prepared person in the world for the job he was given, but who soon found himself outmatched by its challenges, quickly falling behind the curve and never quite managing to catch up.
It is to Bernanke’s great credit that the shock of 2007-2008 did not trigger another Great Depression. But his response to its aftermath was unexpectedly disappointing. In 2000, Bernanke had argued that a central bank with sufficient will could “always,” in the medium term at least, restore full prosperity via quantitative easing. If a central bank printed money and bought financial assets on a large-enough scale, people would begin to step up their spending. Even if people believed that only a fraction of quantitative easing was permanent, and even if the incentive to spend was low, the central bank could restart the economy.
