Was Bernanke responsible for the Great Recession?

Discussion in 'Economics' started by Grandluxe, Sep 28, 2012.

  1. Back Ben Bernanke's QE3 with a clothes peg on your nose
    Monetarists from across the world can mostly agree on one thing. The US Federal Reserve caused the Great Recession.
    5:30PM BST 23 Sep 2012

    Fed chair Ben Bernanke kept policy far too tight after the US economy buckled in early to mid 2008. He allowed a collapse in the money supply to run unchecked, causing avoidable disasters at Fannie, Freddie, Lehman, and AIG later that year.
    Call it the "Bernanke Depression" if you want, a term gaining traction in elite circles.

    Yet three heavyweight books now lay the blame squarely on the Fed: the 'Great Recession' by Robert Hetzel, a top insider at the Richmond Fed; 'Money in a Free Society' by Tim Congdon from International Monetary Research; and 'Boom and Bust Banking: The Causes and Cures of the Great Recession' by David Beckworth from Western Kentucky University

    They do not agree on everything.

    But monetarists of all stripes concur on the one key point. Bernanke blew it at a crucial moment.

    Simon Ward from Henderson Global Investors says the Fed is committing yet another "pro-cyclical" blunder, gunning the economy just as the money supply is coming back to life anyway. "The Fed’s decision to launch QE3 was at best otiose and at worst will prove destabilising," he said.
    His gauge -- six-month real M1 money --is gathering pace and surged by 8.5pc in August.

    Tim Congdon says the case for further QE is "far from compelling". The broad M3 money supply (which the Bernanke Fed no longer tracks) has been growing at a 7.9pc rate over the last six months. Bank deposits up $330bn so far this year to $8.82 trillion.
    He too suspects that the Fed has over-egged the pudding. The economy will take off in early 2013. Bernanke's pledge to keep interest rates near zero until mid-2015 will prove "folly of a high order". Inflation will force him to tighten much earlier in a humiliating volte-face.


    Will he cause the Great Inflation to cap off his legacy?
  2. Wouldn't it be more Greenspan?