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October 24, 2005
Bush taps Bernanke for Fed Chairman (Econoblog alert!)
A number of economist bloggers were asked by the Wall Street Journal for comment on the Bernanke selection.
You can read all of our comments at the WSJ Econoblog page.
NY Times story here.
More to follow.
UPDATE: Greg Ip writes a very nice article in the Wall St. Journal with many links in the sidebar. (subscribers only) The quote I wish to highlight comes from across the Atlantic.
In Europe, Jean-Claude Trichet, President of the European Central Bank, was quick to praise Mr. Bush's choice. "Ben Bernanke is a highly respected central banker, a remarkable economist and a man of experience. I will be very happy to have the possibility to develop with him the same highly close and fruitful cooperation, and enjoy the same confident and friendly personal relationship that I had with Alan Greenspan."
And, now that you've read the quick comments posted on Econoblog, it's time to see the longer versions coming out in the blogosphere. After all, people have been holding all of this in a long time.
Larry Kudlow posts on his blog and at The Corner (NRO):
Thank heavens that Fed board member Donald Kohn, who is a demand-sider and a Phillips Curver, did not get the nod.
This prompts Brad DeLong to tear his hair.
But Ben Bernanke is a demand-sider and a Phillips Curver. Here's a representative speech:
FRB: Speech, Bernanke--An unwelcome fall in inflation?--July 23, 2003: Much of the analytic framework used by the [Federal Reserve] staff and other leading forecasters can be summarized by an expectations-augmented Phillips curve, of the type implied by the work of [Milton] Friedman (1968) and [Ned] Phelps (1969), further augmented by measures of "supply shocks," as suggested for example by the work of Robert Gordon (for a recent application, see Gordon, 1998). This model is familiar from many textbook treatments. In addition, most variants of the model include dynamic elements, in order to capture aspects of expectations formation, multi-year contracts, and other factors.... If aggregate demand is below potential output, implying a positive output gap, the rate of increase in labor compensation and other input costs should slow, firms should be less able to pass price increases, and thus inflation should slow....
DeLong quotes even more of the speech, but you get the idea. For the record, DeLong is happy with the choice
Tyler Cowen runs down a list of Bernanke's major contributions to economics. Can't say I disagree. I was just starting grad school about the time that his paper on the Great Depression came out. As a first year grad student, I hadn't been introduced to some of his previous work yet, so this is the first thing I remembered him for. Of course I followed his work as he started to write about inflation targeting as well.
Over at the Volokh Conspiracy, Juan "Non-Volokh" writes,
If Cowen and DeLong agree — and the markets are up — who am I to suggest otherwise. (After all, I'm just a law professor.)
The New Economist has a great opening line:
After a serious of dubious political appointments it seems common sense has finally prevailed at the White House when it really matters...
Mark Thoma is pleased. He links to Bernanke's homepage. He closes his post with these thoughts:
Who will oppose Bernanke? The strongest statement against him is this tirade by John Tamny from the NRO. As noted in the write-up on Tamny's statement and by Brad Delong, Tamny's arguments have little validity. The piece seems to have been motivated by Bernanke's refusal to drop solvency as part of Social Security reform.
The speculation isn't over as this brings up more questions. Who will be the next chair of the CEA? Who will fill the other open seat on the Federal Reserve Board of Governors?
Well, I think that Bernanke will face some questions about his "helicopter drop" speech. (The speech was about the possibility of deflation.) Now hear me well: I didn't find anything objectionable in the speech, but some financial reporters didn't understand the context. I mention this only because I think I heard this come up in Scott McClellan's White House press briefing today before the announcement (I'll check the transcript when it's up). He will also have to answer some questions regarding the "global savings glut" (I mentioned this in the Econoblog comment).
As more is written, and as he answers those questions, I'm sure there will be more to talk about. The bottom line is that I'm very happy with the choice. I expect Ben Bernanke to be a good communicator of the policy of the Fed (even though he will need to learn how to obfuscate a little bit). He's got his ear to the ground regarding the latest economic research. And he doesn't wear his politics on his sleeve. All of these are good traits to have in a Fed chair.
I expect more discussion in days ahead, but I'll stop here for now.
UPDATE 2: James Hamilton sums it up nicely:
He absolutely has a first-rate mind, just as sharp as they come. And he'll need all the gray matter that can be mustered in his new job, I fear, to figure out how to respond to simultaneous threats of recession, inflation, global imbalances, and systemic financial risk.
I've disagreed with Bernanke on a number of specific issues over the years. Some of those arguments I admit that he won, and some I still view as unresolved. I certainly reserve the pundit's prerogative to start criticizing whatever he does with monetary policy the day he takes charge, nay, even before he assumes the office, I shall feel free to kvetch. But I will be doing so from a position of respect for the new office holder.
Posted by William Polley at October 24, 2005 12:58 PM
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» I OPPOSE THE NOMINATION OF BEN BERNANKE from PrestoPundit
as Chairman of the Federal Reserve. Bernanke's economically illiterate view on deflation have made him perhaps the leading inflationist of our time -- and disqualify him for such a position on the Federal Reserve.
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Tracked on October 24, 2005 03:49 PM
» Bernanke round-up from New Economist
Plenty of media and blog coverage today of Ben Bernanke's appointment as the next Fed Chairman. My previous posts covered the initial blog commentary, but see also Tyler Cowen's piece on Bernanke's contributions as an economist, and William Polley and ... [Read More]
Tracked on October 25, 2005 03:07 AM
Comments
More from the National Review. Darda is not happy. But then this Angrybear reads Darda and decides I'm very happy with Bush's choice. But then I was even before I read Darda and posted.
Posted by: pgl at October 24, 2005 05:04 PM