At the Washington Post, When It Comes to the Fed and the Economy "Rescue" Doesn't Mean the Same Thing as it Does Elsewhere

The print edition gave the headline, "they squabble: he rescues the economy," to a Dana Milbank column on Federal Reserve Chairman Ben Bernanke's loose money policies. Milbank's point is that Bernanke has clearly been shown to be right in having relatively expansionary monetary policies, as opposed to Republican critics who complained that this was debasing the currency and would trigger massive inflation.

However the notion of Bernanke and the Fed rescuing the economy would seem to require a bit of qualification. After it, it as Bernanke and the Fed who ignored the growth of the housing bubble until it grew so large that it eventually imploded and took the economy with it.

This is sort of like a doctor who misses the huge cancerous tumor growing out of a patient's forehead during a check-up. If he later performs the surgery that removes the tumor successfully, that could be said to save the patient's life, but it would be a bit of a stretch to give the doctor credit for rescuing the patient.

Even after the collapse the Fed has arguably been too limited in its response. When he was still a professor at Princeton Bernanke argued that Japan's central bank should deliberately target a higher rate of inflation (e.g. 3-4 percent) in order to reduce real interest rates further and thereby spur growth. Bernanke has been unable or unwilling to follow his own advice as Fed chair.

As a result of weak Fed policy, inadequate stimulus, and an over-valued dollar the economy remains horribly depressed four full years after the beginning of the recession. The first President Bush was booted from office due to an economy that looks fantastic compared to the one we have today.

Don't Mock the Hero Rescue Festish that Keeps America Safe
written by izzatzo, January 26, 2012 8:01 AM

Pure heresy by Whose Your Nanny. As Rick Santorum would say, it's not the radical individualism of Ron Paul or Ben Bernanke that keeps us safe. It's the family values like that established in central-command-and-control institutions like the Marine Core and the Fed.

Bernanke may have destroyed the village to save it but he is saving it going forward. Stop beating the dead horse of sunk costs and be thankful for a redeemed public servant with true heroic virtue. It takes a village.

Stupid liberals.

-4

dog whistle
written by frankenduf, January 26, 2012 8:05 AM

also "rescuing" the economy is code for stabilising capital interests- there has been no rescue for the lower class ie the unemployed- in an analogy to ur analogy, it is as if bernanke is in one of those orange helicopters above the titanic, with the screaming masses in the water, and he drops a line to blankfein and pulls him out, and the headline is bernanke rescues the titanic

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written by kharris, January 26, 2012 9:18 AM

Gotta go with izzy on this one. The pretense here is that Dean is offering editorial advice, fact checking and analytic error correction for the press. The press doesn't automatically repeat the history (history according to Dean) of every news event when reporting the event. Calling on them to do so belies the pretense that Dean' project is to correct error and debunk wrong-headed analysis. It turns into a mere repetition of history according to Dean. When the press gets one right, for goodness sake tell them they did. Odds they will listen to criticism are low in any case, but lets not give them a further excuse to ignore good advice.

-3

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written by bayfus, January 26, 2012 9:19 AM

"The establishment of perfect justice, of perfect liberty, and of perfect equality, is the very simple secret which most effectually secures the highest degree of prosperity to all the three classes." --Adam Smith, Wealth of Nations, pp. 545-46

Bernanke Forgets His Own Research
written by Charley James, January 26, 2012 9:29 AM

Your friend Paul Krugman has written frequently on the seeming inability of the Fed chairman to remember his own research. What is sad - but, in a way, not surprising - is that the WaPo's editors are so clueless about the economy, the Fed and the collapse.

full employment for economists
written by pete, January 26, 2012 10:01 AM

You all miss the point of the Fed. When JPMorgan and his cronies met secretly to creat this monstrosity, the goal was to keep banks profitable and from ever having to suck up losses due to their bad trades. Worked well, still working, banks still bailed out, top banks are bigger now than before the crash. Even more, the wild bubbles of the 20s, 70s, 90s, 2000s, create wonderful economic scenarios for economists to write meaningless blogs, NYTimes articles and research papers. I.e., it pays the rent. The Fed is doing exactly what economists like Dean, PK, etc. would like, creating a need for their services.

It is definitely not like a doctor missing a tumor, it is a doctor giving a patient a tumor and then saying whoops, the patient has a tumor.

August 2002 Krugman said the only cure for the economy was a housing bubble. Wow, thanks for that tumor doc.

Typo, Izzy?...Marine Corp is not an Apple Core

Marines Are Not a Corporation
written by PAUL, January 26, 2012 10:32 AM

Marine CORPS. Semper Fi!

Milbank's point was that the GOP presidential candidates are know-nothing morons when discussing the Fed and Bernanke. Anyone disagree with his assessment?

Pappy Bush had real competition
written by Scott Supak, January 26, 2012 12:53 PM

Good thing there is no Republican equivalent of Bill Clinton running on the GOP side.

Not sure where to ask for Dean to comment on this but ...
written by David, January 26, 2012 2:49 PM

What impact will cutting 92000 troops in the next 5 years have on an already horrid jobs market?

America's overvalued dollar?
written by Luke Lea, January 26, 2012 5:12 PM

You mean China's undervalued Yuan, don't you. Twenty to forty percent undervalued by various estimates. Plus they have a ten percent average tariff on imports. (Ours is 1.7 percent.) Our annual trade deficit with China is pushing a quarter of a trillion dollars. It is close to zero with the Eurozone unless I am mistaken.

Bottom line: a twenty-percent across the board tariff on Chinese imports would be a boon to US manufacturing and employment. Why are we killing ourselves for an overseas thugocracy? They haven't reformed and show not intentions of reforming.

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written by op, January 26, 2012 11:06 PM

great post

never repeated often enough

Unsustainable games
written by Beth in OR, January 27, 2012 11:50 PM

If I were Queen, I'd re-purpose 3/4 of the military and the defense budget to create a massive decentralized green energy production system and multiple national high-speed rail projects. Foreign interventions would be special projects only with the onus for implementing Fair Trade Policies on the State Dept. But that's just me looking for something to do while the bankster investigations are ongoing.

At the Washington Post, When It Comes to the Fed and the Economy "Rescue" Doesn't Mean the Same Thing as it Does Elsewhere

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