ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Tuesday, October 25, 2005

So Long to Andrea Mitchell's Husband

Well, Alan Greenspan's long run as Fed Chairman is over. It appears that Bernanke will be a little more straight-forward regarding the Federal Reserve policies, at least in the short-term (until his words have severe consequences).

Here are some interesting points from this WSJ article which I find important:

Sen. Charles Schumer, a New York Democrat and member of the committee that will weigh the nomination, yesterday said he had told Mr. Bernanke by phone that the next Fed chairman should be "a cheerleader or jawboner to prevent our deficit from getting any worse." The senator said Mr. Bernanke replied that "at the Fed he would not comment on non-monetary matters," a stance that some inside the Fed would welcome.
Indeed, Mr. Bernanke, while at Princeton, co-authored an influential study that he presented at the Fed's Jackson Hole, Wyo., retreat in 1999 -- at the height of the technology-stock bubble -- arguing that the Fed shouldn't set interest-rate targets with a mind to influencing prices of stocks or other assets.
Until he joined the Council of Economic Advisers, Mr. Bernanke had little contact with Mr. Bush, and indeed in many ways is the antithesis of the power-suited business executives that Mr. Bush has preferred for top economic policy posts. But he appears to have earned Mr. Bush's trust. Earlier this year, Mr. Bush gently chided Mr. Bernanke for showing up at an Oval Office meeting wearing a dark suit with tan socks, according to several people familiar with the incident.

A few days later, Mr. Bernanke showed up early for another meeting with Mr. Bush and distributed tan socks to the meeting's other participants. When Mr. Bush arrived, all, including Vice President Dick Cheney, were wearing tan socks. Mr. Bush laughed.

1 - He's not taking Schumer's bait. (Greenspan was known to comment on the growing deficit, but not just from a tax policy side - he continued to chide the government that it was spending beyond its means. Something that Schumer probably ignored...)
2 - He's got a sense of humor and is sure of himself.

In addition, it looks like Larry Kudlow may get his wish and have a Fed Chairman that is steering the economy while looking through the windshield, instead of the rearview mirror.
In another subtle difference between Mr. Greenspan and his designated successor, Mr. Greenspan long has questioned the usefulness of complex statistical models for forecasting the economy. Mr. Bernanke has done pioneering work developing them. Mr. Bernanke probably will have a closer relationship with staff economists at the Fed because he shares their academic tool kit.

I'm not sure an explicit inflation target (mentioned in the article) is a good thing... while Greenspan certainly was operating with an implicit target, having an official target may prove counterproductive.

Only time will tell... Larry Kudlow has more here and here.

I wonder how Paul Krugman is reacting to the story (given that Bernanke is the guy that hired him into Princeton)? Unfortunately, the wall of TimesSelect prevents me from knowing. Somehow, I think this is probably a good thing.

Your Co-Conspirator,
ARC: St Wendeler