The Long Crisis

Ben Bernanke was recently confirmed by the United States Senate for a second term as chairman of the Federal Reserve Board. While 30 senators opposed the Bernanke nomination the fact that he was reappointed indicates that in Ben Bernanke we trust. After all, the man has the second most powerful job in the world at a time when the US and the global economy are suffering the worst economic downturn since the Great Depression. The decisions that he and the Federal Reserve Bank makes will be crucial to restoring economic growth for the US economy.

However, when one looks at the Bernanke track record prior to and during the crises that occurred during his first term in office one has to wonder why in the world the man’s judgment could still be trusted? While he seems to be a sincere enough and nice enough guy, as shown in the video, he has consistently been wrong in his judgment as to the status of the US economy.

While considered to be an expert as to why the United States entered into a Great Depression and in how the nation was restored to economic growth Bernanke seems to have a simplistic view as to how the economy works. He seems to think that the economy works as some kind of mechanical machine. All one has to do to keep it running smoothly is to pull a few levers here and push a few levers there. Apparently he thinks that market forces can be overcome by fine tuning the machine. He shows no signs of realizing just how much human emotions enter into the mix.

While Bernanke acted aggressively and quickly once the economy began to fall apart during the latter part of 2007, as you will see in the video, he had absolutely no clue that bubbles were being formed in the real estate market as well as in equities that would soon pop with devastating results. Unfortunately, I fear that we will soon see that the actions of the Federal Reserve Bank, as led by helicopter Ben, may have helped early on to stabilize the economy the actions will have disastrous long-term effects.

For one thing under his leadership the Federal Reserve Bank engaged in a “cash for trash” program that extended credit to favored banks and institutions, such as AIG, in exchange for toxic assets of questionable value. The strength of the Federal Reserve’s balance sheet had to be seriously impaired due to this and other actions initiated by Bernanke.

All one has to do is to watch the video to see how truly clueless Ben Bernanke was during his first term as chairman. However, the President and the Senate seem to still be confident that he is a man that we can trust to help guide the nation out of the economic wilderness. Based upon his track record so far, the question is why?

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