Is Bernanke Ready?

Ben Bernanke, the nominee to replace Alan Greenspan this month as Chairman of the US Federal Reserve Board, is a highly capable economist who has devoted his professional life to understanding the historical role of central banks and the problems that they have faced. His views represent, as much as can be expected, a consensus among those who have studied the issues carefully.

But that does not mean that Bernanke is prepared to ensure that healthy economic growth continues in the US in the coming years and provide the kind of leadership that the world needs. By the standards of what is generally understood today, he will do a good job. Unfortunately, that may not be enough.

John Maynard Keynes once said that monetary policy may work like a string. A central bank can pull the string (raise interest rates) to rein in an economy that is galloping ahead unsustainably. But it cannot push the string up: if economic growth stalls, as when confidence is seriously damaged, lowering interest rates may not be enough to stimulate demand. In that case, a recession can occur despite the central bank’s best efforts.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/RCHZJ9v;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.