Bernanke’s Latest Book

The newly-minted Nobel Laureate in Central Banking, Ben Bernanke, is out with a new edition of his book. It’s not the one about his “Courage To Act,” a title he blamed on his wife. It’s the one about “21st Century Monetary Policy” — about how the Congress should keep its nose out of the Fed’s business. That’s not a new theme for Mr. Bernanke, who has throughout his tenure complained about politicians meddling with the Fed.The question to keep in mind as one reads his book is why the Constitutional framers gave 100 percent of the monetary powers of the government to, in the Congress, the most political branch in the whole contraption. Banking and monetary policy were the stuff of fierce debate on Capitol Hill — as well as presidential and congressional elections — until 1913, when Congress abdicated its duty and handed its monetary powers to the Federal Reserve.Mr. Bernanke seems even to take exception to so much as a gripe from the people’s elected representatives over the Fed’s handling of economic affairs. In his afterword he laments how “political pressure could grow” if the Fed doesn’t fix the inflation crisis quickly enough. He frets that “Fed losses on its balance sheet” might “draw political attention,” warning of possible “criticism from legislators.” Perish the thought.Mr. Bernanke’s vexation over “political pressure” is of a piece with the central bank’s conception of itself as an Olympian institution, with its unelected PhD economists above the fray and unaccountable to voters. Yet with inflation raging and fears rising over the health of the banking sector that the Fed oversees, there’s growing sense on Capitol Hill and beyond that the Fed’s fiat money is itself the source of our economic troubles.Utah’s senior senator, Mike Lee, grasps how the Fed, “by keeping many decisions involving monetary policy away from elected officials,” is given “a degree of deference historically reserved for despots.” He is joined by the House Freedom Caucus, which sees that the Fed has “set the conditions for this crisis.” It stirs hopes that lawmakers, in stretching long-atrophied muscles, are readying to reclaim their powers over America’s monetary policy.Well, not if Mr. Bernanke has anything to say about it. One senses that it was galling to him to have his book meant to extol the Fed as a national treasure get published just as an inflationary wave was hitting. It ran to eight percent as the book hit shelves. Mr. Bernanke found himself peppered with questions about what went wrong. “The problem with writing a book about current events,” he grouses in his afterword, “is that the world changes.” So Mr. Bernanke jumps at the chance to explain away the inflation that still grips the economy. Why did the Fed “initially underestimate the inflation threat?” he asks. Disappointment will greet anyone expecting some candor, or even contrition, from the progenitor of Quantitative Easing, in which the central bank lit the fuse for the inflation spiral by racking up trillions in assets while keeping interest rates artificially low.Mr. Bernanke instead parrots the same talking points we’ve heard from his successors at the Fed, Secretary Yellen and Chairman Jerome Powell, about Covid-era supply chain snarls and Russia’s invasion of Ukraine sparking inflation. Yet we recall how, in 2010, Mr. Bernanke brushed off a warning, in an open letter* in the Wall Street Journal from a group of investors, economists, and thinkers that his plan risked “currency debasement and inflation.” Mr. Bernanke assured that “this fear of inflation, I think is way overstated” and “We could raise interest rates in 15 minutes if we have to.” Politicians warned of the inflation danger in 2021 when Mr. Bernanke says the Fed was “slow to recognize” the threat. So how can the Nobelist now say insulating the central bank from politics — “letting the Fed do its job” — “offers the best chance of achieving both low inflation and a healthy jobs market”?________* The two-dozen signers included two former owners of the Sun, Roger Hertog and Paul Singer, and journalist and historian Amity Shlaes, who is married to the editor of the Sun.

Bernanke’s Latest Book

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