Ben Bernanke has become a whipping boy for many Republicans.
But I think they’re targeting the wrong guy. Bernanke is not the mad inflationista they seem to think he is.
"If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas," GOP presidential hopeful Rick Perry said back in August. "Printing more money to play politics at this particular time in American history is almost treacherous — or treasonous in my opinion.”
But do we have any evidence that Bernanke is really preparing to crank up the money supply in an attempt to repair the economy? Is he really as complacent about inflation as many Republicans seem to think?
Bernanke has overseen a dramatic expansion of the balance sheet of the Federal Reserve . But he has refused to even publicly mention attempting to intentionally raise inflation rates or expectations — despite pleas from people including New York Times columnist Paul Krugman.
In fact, Bernanke seems to regard higher inflation or expectations of inflation as a danger to the recovery. Policies such as the two rounds of quantitative easing did not result in a dramatic private credit expansion — perhaps because that wasn’t their aim.
BTIG’s Economics and Market Strategy note this morning makes this point:
Despite protestations to the contrary, Ben Bernanke is not an idiot.
He knows, as does the entire economics community, that unemployment cannot be lowered in the long run through increases in inflation.
Nobody honestly believes this. However, there is a growing chorus of economists that suggest a burst of inflation in the short run is hardly the worst thing in the world. Ben Bernanke is not one of those economists [who] makes the attacks on the Fed so interesting. The Chairman has used every possible opportunity to push back on the idea of changing the Fed’s target inflation level.
In other words, the Republicans are talking as if Bernanke was Krugman. But Bernanke has made it clear he disagrees with Krugman — much to Krugman’s chagrin.
By the way, the BTIG guys predict Bernanke will be “thoroughly uninfluenced” by the letter sent by Republican leaders Tuesday.
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