So should we all feel confident about the economic future, assuming that Mr. Bernanke is confirmed? Alas, no.If only Jim Flaherty had bothered to read Krugman he wouldn't say stupid things like "no one knew". Recommend this Post
This isn't a comment on Mr. Bernanke's qualifications, although there is one talent, important in a Fed chairman, that Mr. Bernanke has yet to demonstrate (though he may have it). Mr. Greenspan, for all his flaws, has repeatedly shown his ability to divine from fragmentary and sometimes contradictory data which way the economic wind is blowing. As an academic, Mr. Bernanke never had the occasion to make that kind of judgment. We'll just have to see whether he can develop an economic weather sense on the job.
No, my main concern is that the economy may well face a day of reckoning soon after Mr. Bernanke takes office. And while he is surely the best politically possible man for the job (all the other candidates I would have been happy with are independents or Democrats), coping with that day of reckoning without some nasty shocks may be beyond anyone's talents.
The fact is that the U.S. economy's growth over the past few years has depended on two unsustainable trends: a huge surge in house prices and a vast inflow of funds from Asia. Sooner or later, both trends will end, possibly abruptly.
It's true that Mr. Bernanke has given speeches suggesting both that a "global savings glut" will continue to provide the United States with lots of capital inflows, and that housing prices don't reflect a bubble. Well, soothing words are expected from a Fed chairman. He must know that he may be wrong. (October 28, 2005)
Wednesday, April 01, 2009
Because he saw what was coming four years ago.