Ben Bernanke, Worthy of Person of the Year?

Federal Reserve Chairman Ben Bernanke, Time magazine Person of the Year 2009.

As Matt Taibbi recently commented, “Well, now I’ve seen everything.”

I for one couldn’t agree more.

Someone who believes that printing money and lending it at zero rates to what in the end means just about anyone is not for me.  All this does is discourage savings, the very foundation of economic prosperity, in favor of consumption, or worse still, wasteful speculation.

Indeed, economic prosperity is not achieved by printing money and lending it to those who would rather consume, instead of to those who would rather produce.  An economy must produce in order to consume, lest before long there is nothing left to consume.  If printing money was the road to economic prosperity, we would all be rich.

Someone who believes that printing money, with the deliberate intent to depreciate the value of that money, is good policy, as long as it’s not overdone, is not what I would call a very good steward of our money.  All this does is devalue people’s hard earned wages and savings and hurt all those on fixed incomes.  In point of fact, such a policy sounds like outright theft to me.

Even though he claims he wasn’t happy about it, and I do take him at his word, someone who makes it policy to bail out the incompetent at the expense of the competent, highflying speculators at the expense of prudent savers, is not my cup of tea.  In the end, all the economy is left with is incompetent, highflying speculators.  Not the way to foster economic prosperity, is it?

And finally, someone who believes that is was NOT the low interest rate and loose monetary policy of the 1920’s that brought on the stock market crash of 1929 and economic bust of the early 1930’s, and its was NOT the massive government intervention of the 1930’s that turned what would have been a more mild recession into the Great Depression, but it was just the opposite – a tight monetary policy before and after the stock market crash and too little government intervention thereafter – is simply a bad economist.

It is with this in mind that I find Bernanke’s so called “heroic” exploits in 2008 and 2009, the ones Time now praises, downright scary and certainly not something anyone would want to celebrate.

Did this man, so determined not to repeat the “mistakes” of the 1930’s, really save us from economic disaster?  And will his actions really put us back on the road to economic prosperity?

Or did he, by flooding the economy with money, by taking interest rates to zero and by encouraging, indeed spearheading massive government intervention in the economy, simply postpone the inevitable and perhaps set the stage for an even bigger economic bust to come?

Well, even if you are not an Austrian economist like me, and believe the latter, that nothing has been solved with this Person of the Year’s exploits, only postponed, you may be wondering the same thing.

You may be wondering – forget the 1930’s, these policies of Bernanke, are they not the same interventionist policies pursued only recently by former Federal Reserve Chairman Greenspan, the kind of policies that preceded not only the recent Housing Bust and Credit Implosion, but the Savings and Loan Crisis, the Peso Crisis, the Asian Crisis, Long Term Capital Management and the Tech Bust too.

The answer of course is yes.

You even may have noticed a disturbing pattern; that being, each crisis begets a larger interventionist response, yet before long we find ourselves in the midst of the next, even bigger crisis.  You may then be tempted to conclude that despite repeated and ever growing monetary largesse, despite repeated and growing government intervention in the economy, the crises are getting bigger and bigger and bigger.

And you would be right.

Maybe then, you think, the policies that Bernanke holds so dear don’t work.  In fact, maybe they are the very source of the crises themselves.

You would be right once again.

Well, the Bernanke led response to this, the mother of all modern crises, has been one for the ages, hasn’t it?  So, is it blue skies ahead, or is it crisis delayed, but in all likelihood at the cost of the mother of all crises to come, perhaps one as big as the Great Depression itself?

I think you can guess where I come out.

I ask you, are these the kind of actions worthy of Person of the Year, something to celebrate?

Now, even if you agree with me, you may think I am being a bit unfair to Bernanke.  Sure, his policies are a disaster, but what else was Bernanke to do?  He inherited a mess from Greenspan, the biggest financial crisis since the Great Depression, and had no other choice but to print money and bail out the banks.

I say, not so fast.  First, Bernanke was pretty much there from the genesis of this crisis, supporting all of Greenspan’s policies without reservation, first as a member of the Board of Governors of the Federal Reserve and later as chairman of President Bush’s Council of Economic Advisers.  Second, if super easy monetary policy and government intervention were the cause of the crisis, than how can more of the same be the solution.  Of course it can’t, indeed it will make things even worse.

Bernanke had no idea this crisis was coming, and when it did hit, how bad it would get.  He doesn’t get it, and it’s going to cost the US dearly.

I’ll end this missive with this final thought.  At the end of the last decade, Chairman Greenspan was named Co-Person of the Year by Time for his “heroic” exploits.  We all know what followed.

I wonder if Time gave that any thought before they gave this year’s Person of the Year to Chairman Bernanke.