Is there some kind of law saying that any long magazine profile of Ben Bernanke must mention Milton Friedman in the opening sentence and the Great Depression in the opening paragraph? First Roger Lowenstein did it, and now Steve Matthews is following suit, for Bloomberg Markets.
You won’t learn a lot from Matthews’ piece that you didn’t learn from Lowenstein, although he does go a bit further, calling Bernanke "the most powerful–and inventive–Federal Reserve chairman in the 95-year history of the central bank". Bernanke comes across very well, largely because the pro-forma attacks on him seem to miss the mark so widely:
Allan Meltzer, a Fed historian and economics professor at Carnegie Mellon University in Pittsburgh, agrees that Bernanke is swatting a fly with a sledgehammer. "In monetary policy, he has not been good," Meltzer, 80, says. "It is a silly policy designed to head off a recession that may come but hasn’t come yet."
Meltzer says the Fed, by ignoring the inflationary potential in its latest rate cuts, is creating the possibility of negative real interest rates. He also says the Fed should never take credit risks, especially to save floundering banks.
When the worst that anybody can say of Bernanke is that he’s "creating the possibility of negative real interest rates," you can rest assured he’s doing OK. (Of course real interest rates are negative. That’s entirely deliberate.) As for the Fed taking credit risks, that’s the "inventive" bit that Matthews is talking about. Just because it hasn’t historically been done doesn’t mean it isn’t a good idea.
(HT: Ritholtz)