Ben Bernanke to Succeed Alan Greenspan at the Fed

The appointment of Ben Bernanke to the chairmanship of the Federal Reserve is one of President Bush’s wiser moves. After the Harriet Miers fiasco, one had worried that Tex had finally lost his fingernail grip on reality. Mercifully, it appears that slender handhold remains. Dr. Bernanke is a decent enough choice for the Fed’s top job, and there’s even reason to hope he’s a bit better than Mr. Greenspan.

First off, unlike Ms. Miers, Dr. Bernanke has a rather long and lucid paper trail of relevant work for the world to survey. This is in addition to his education (Harvard AB, MIT PhD), teaching work (Stanford and currently Princeton, where he chairs the Econ Department) and some federal work (Chairman of the President’s Council of Economic Advisors). Golly, he’s a real live economist who might actually know something about what he’s supposed to be doing.

He is in the tradition of Alan Greenspan, Paul Volcker and the German central bankers in that he views inflation as the great dragon to keep under control. At the same time, he has written cogently and accurately on the dangers of deflation as well as inflation that is too low. While it is difficult to believe that there can be such a thing as too little inflation, the current sluggishness of Europe’s bigger economies can be traced to the excessively tough line the European Central Bank as taken on inflation.

The Wall Street folks were pretty tickled about the appointment. They sent the Dow up three digits’ worth despite the hurricane beating on Florida and looming White House indictments. Pure and simple, they don’t think there is a radical change in the offing. Dr. Bernanke himself said, “I haven't recommended very sharp changes in the approach to monetary policy.” However, he does suggest that explicit inflation targets are preferable to the current opaque Fed approach. So long as he factors in the need for some additional inflation in the system to counter balance potential terrorist attacks and their negative effects on the global economy, the extra transparency will be welcome.

Mr. Bush hasn’t had a good couple of months, and there is worse to come if Scooter Libby and Karl Rove wind up indicted. However, this appointment proves that all is not lost. In a way, the Fed Chairman’s job is more important than any judicial appointment. If the Supremes screw up, one loses a bit of justice. If the Fed screws up, well, that’s what happened in 1929. There is no reason for a Senator to vote “no” on this appointment, and the confirmation hearings should reassure any solitary worrywarts that the departure of Chairman Greenspan is not the end of the world. If not a perfect choice, it was an exceptionally good one. After all, the Senate has OKed him three times already in his earlier Fed and White House appointments.

© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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