01 September 2007
A Smart Guy, But....
He was the chairman of the economics department at Princeton University, and the editor of the American Economic Review, to name just two dandy resume brighteners in his bio.
But you have to wonder, in view of recent events, whether this isn't the sort of brightness that can hurt more than it helps in real-world applications.
Jim Cramer was right in a bit of his now-famous televised meltdown. Bernanke doesn't have any idea. But Cramer was right in the wrong way. Cramer was demanding, with veins popping in forehead and all, that the Fed bail out the big Wall Street institutions with a discount rate cut. To prove that he did have a clue. Bernanke agreed with the scary guy and did exactly that, proving the contrary.
The business cycle is always a credit cycle. When credit is too easy, an upswing becomesd an unsustainable bubble. The only rational thing to do about a bubble is to pop it, and accept the consequences. Instead, the easy thing to do is to work to preserve and continue expanding the bubble, which is the course Bernanke has taken.
That always means that the popping will be worse when it does come. And it will.
Bernanke once gave a speech speculating about the use of a helicopter to drop dollar bills and save the economy. He seems to be trying to do that:
Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.