October 24, 2005


Greenspan's heir apparent: As Fed chief, Ben Bernanke would guide fragile economy. (Mark Trumbull, 10/25/05, The Christian Science Monitor)

Mr. Bernanke is now chairman of the President's Council of Economic Advisors. Yet his background also includes a stint as Fed governor and expertise as a monetary economist, traits that will be crucial to convincing global markets that his selection is not based merely on the political preferences of the Bush White House.

The appointment, indeed, comes at a time when the Bush administration is eager to score a political victory and to deflect attention from acrimony within the president's own party over his selection of Harriet Miers as a nominee for the Supreme Court.

The selection of Bernanke follows a pattern Bush has set in his second term of choosing close associates for high-level appointments. [...]

At the Fed, Bernanke has pushed for the central bank to be more specific in its inflation objectives. Greenspan has opposed setting a numerical target for inflation.

Bernanke also has championed openness at the Fed - a policy that Greenspan has advanced prominently. Yet he is considered more plain- spoken than Greenspan, whose economic pronouncements sometimes seemed deliberately mystifying. [...]

For any central bank, inflation is enemy No. 1, and its emergence must always be fought in the dynamics of an economy in motion.

In an interview published the Minneapolis branch of the Federal Reserve in 2004, Bernanke said that "announcing an actual number or range [for inflation] would serve to anchor public expectations of inflation more firmly and avoid the risk of 'inflation scares' that might unnecessarily raise nominal bond yields."

Financial markets, he argued in the interview, would be well served by knowing the Fed's rough target for inflation, the rate of price change in the economy.

That view reflects how the management of expectations is a critical role for central bankers.

Mr. Bernake's most important credential is that he's the first Chairman ever to comprehend the danger of deflation.

Bush Selects White House Economist Bernanke to Replace Greenspan (William Branigin, 10/24/05, Washington Post)

Posted by Orrin Judd at October 24, 2005 2:51 PM

And he has degrees from places where smart people get degrees from, so he must be qualified!

Posted by: b at October 24, 2005 3:08 PM

Well, we won't hold that against him...

Posted by: John at October 24, 2005 3:27 PM


Posted by: JonofAtlanta at October 24, 2005 3:45 PM

Seems like a good pick. And NRO's Economics/Business guru, Kudlow, likes Bernanke so it would be a surprise for the NRO types to go on the warpath over this.

Posted by: AWW at October 24, 2005 4:14 PM

One of the things that Ludwig von Mises always insisted on is that there is no golden mean in monetary policy; every decision by the Fed will benefit some and hurt others. He maintained that there are only two possibilities: deflationary, what the US had under the original gold standard of the 19th century, and inflationary, what we have had since the Federal reserve was founded.

I think that Greenspan's genius has been to place less emphasis on price indexes as a guide to monetary policy, and instead to focus on the primary danger created by inflationary practices: the threat of speculative bubbles.

Posted by: Peter Miles at October 24, 2005 6:55 PM

Can anyone opine on whether they think this will drive interest rates down a bit (in other words, if you were going to refi a mortgage loan, wait a year and hold out for a drop in rates) ...

Posted by: geoff at October 25, 2005 2:19 PM


He's certainly more dovish on inflation than Greenspan, but you're basically placing a bet on the price of oil.

Posted by: oj at October 25, 2005 2:25 PM