Is Bernanke losing it? To QE (more) or not to QE, to raise or not to raise are the next questions the Fed must adress, but there is a small problem, Bernanke is slowly losing his friends. That could be a huge issue going forward. Bernanke looks increasingly isolated, and that is not good for stability. More on this via the Atlantic.
Behind every great president stands a great central banker. Ronald Reagan had Paul Volcker. Dwight Eisenhower had William McChesney Martin. And FDR had, well, FDR.
There’s a corollary. Behind every great central banker stands a great central banking committee. Or at least a pliant one. It’s this latter reality that President Obama still has not quite recognized. And this malign neglect of most matters monetary has added a wholly unnecessary degree-of-difficulty to the economic recovery.
Here’s a depressing reminder: We’re in a $1 trillion hole
. That’s how much income we have been losing every year
since the onset of the Great Recession. Ben Bernanke and Co. have done a good job preventing a full-on replay of the Great Depression, but Ben Bernanke and Co. have not done a good job preventing a lost decade. The key phrase here is “and Co.”
Bernanke doesn’t set monetary policy by himself. That’s what the Federal Open Market Committee (FOMC) votes on. Its structure is a bit Byzantine and not terribly important, but what is important is that the Fed Chairman usually gets his way without any dissent. That hasn’t been true lately. The Fed’s unconventional measures have unsurprisingly not been too popular with the FOMC’s more conventional members. Unfortunately, that hasn’t stopped Bernanke from trying to reach a consensus. He thinks he needs to. Bernanke recently told Roger Lowenstein
that he thinks any policy that doesn’t get at least a 7-3 majority simply won’t be credible. This political calculation gives the hawks more policy influence than they would otherwise have.