Ben Bernanke: Savior or Soft Central Planner?

Is Ben Bernanke the world's savior? Or ... simply an elite civil servant gamely -- valorously, even -- attempting to do the impossible?

"Savior" seems to be the position taken, to be sure provisionally, in the current cover story, by Roger Lowenstein, in the April issue of the Atlantic.



The ferocious ambivalence in which Chairman Bernanke is held is hinted at by the variant titles of this article. In the print edition: The Hero.

In the online edition: The Villain.

Identical subheadline: The left hates him. The right hates him even more. But Ben Bernanke saved the economy—and has navigated masterfully through the most trying of times.

The almost-but-not-quite idolatry is vaguely reminiscent of the 1999 Time Magazine cover featuring Fed chairman Alan Greenspan, Robert Rubin and Lawrence Summers, and captioned "The Committee to Save the World."




But Lowenstein really hits the nail on the head, here:

Ultimately, Bernanke’s legacy will depend on whether he can fully exit from the mortgage debacle without bequeathing a new one, or lighting an inflationary fire that becomes uncontainable. Alan Greenspan retired as the prince of central banking, but saw his reputation wither because of the bubble that burst on Bernanke’s watch. In office, Paul Volcker was highly controversial because of his hawkish policies; today he is practically canonized. Vincent Reinhart, who served under both Greenspan and Bernanke as the senior monetary deputy and is now retired, told me I was writing about Bernanke “five years too early.” For sure, no one knows where either inflation or unemployment will be in five years’ time. Forgoing a guess, I would offer the appraisal by Hank Paulson, the former treasury secretary, who told me recently: ”I don’t know what people expect Ben to do. To me, it’s pretty amazing. Who would have guessed when he came to Washington we would be so fortunate to get someone who was willing to think outside the box and deal with this unprecedented crisis?”

The visceral criticism of Bernanke is hard to fathom, but it is in part the flip side of the enormous trust that we are asked to place in the modern Federal Reserve. At least in the time of Nicholas Biddle, and even during the formative years of the Fed, banknotes, being liabilities, could be redeemed for something of value, usually gold. Now our dollars are exchangeable only for more dollars. This is what alarms the originalists. As the publisher, Bernanke critic, and gold bug par excellence James Grant eloquently put it, “We have exchanged the gold standard for the Ph.D. standard, for soft central planning.”

Founder and chairman of the Lehrman Institute Lewis E. Lehrman refers to the gold standard as a 'gyroscope' in the world monetary and financial order:

The gold standard had been the monetary gyroscope of the Industrial Revolution and its extraordinary economic growth, marked by one hundred years of general price stability. The general price level, almost literally, wound up at the same level in 1914 as it had almost one century before. Compare this with the forty-year period from 1971, the year President Nixon suspended dollar convertibility to gold. Adjusted for the Consumer Price Index (CPI), the dollar has in fact lost over 80 percent of its purchasing power since 1971. (See graph below.)It is certainly strange that an unhinged token, the paper dollar, is now the monetary standard of the most scientifically advanced global economy the world has ever known.

To conduct a world monetary system without the gentle, organic, stabilizing effect of the classical gold standard is as irresponsible, and borderline cruel both to pilot and passengers, as to construct a passenger airliner without gyroscopic stabilization.  As presented by Rueff as epigram to The Monetary Sins of the West,

There is tragedy in the world because men contrive, out of nothings, tragedies that are totally unnecessary—which means that men are frivolous.

With great respect for the public service, and even valor, of elite civil servants such as Paul Volcker, Alan Greenspan, and Ben Bernanke... it is time for those with the authority over the world's monetary system to cease being frivolous, to avert "tragedies that are totally unnecessary," and to restore the classical policy of the legal definition of currency as a fixed weight of gold and the convertibility of currency into gold which served America, and the world, so well, for so long.

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... Given Kwarteng’s current and, likely, future importance to the world monetary discourse it really would be invaluable were he to master the arguments of Jacques Rueff, and of Lewis Lehrman, as well as those of Triffin (who shared the same diagnosis while offering a different prescription).

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The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures.  Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
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Key Monetary Writings
Lewis E. Lehrman

Jacques Rueff, the Age of Inflation, and the True Gold Standard


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