Debt | - Part 6

Ben Bernanke’s Legacy

This beautiful song, written and performed by Elaine Diane Taylor, chronicles some of Ben Bernanke’s accomplishments over the last eight years.

It will take some time to judge the Bernanke term at the Fed. Given the sequence of events for the last Fed Chair transition, analysts are understandably cautious about giving him a big thumbs-up at this point. Recall that, after the Greenspan term at the Fed ended in January 2006, it took a year of two for the policies enacted during that time to really flower.

Meltzer on Bernanke

In this story at Reuters, Federal Reserve historian Allan Melzer shares a few thoughts on what lies ahead for incoming Fed Chair Janet Yellen following tomorrow’s departure of current Fed Chairman Ben Bernanke. One thing seems clear, as was the case for Alan Greenspan, we won’t know the full impact of Bernanke’s policies for years to come.

To Allan Meltzer, a leading Fed historian, no outcome looks good for Bernanke. “If they go too fast, we’re going to get a recession. If they go too slowly, we are going to get serious inflation. If they do neither, we could get both,” he said.

The first round of quantitative easing in 2008 and 2009 was heroic, Meltzer said. But the second and third rounds were “just a mistake, a serious mistake, that will have problems.”

“History will judge his response to the 2009 crisis very well,” he said of Bernanke. “They will judge the aftermath as being much too strong and unnecessary.”

Another thing that seems clear is that the image above will be an enduring one.

The Next Big Risk

This CNBC poll contradicts the views of those at the Davos World Economic Forum where inequality was seen as the biggest risk to the global economy and financial markets.

At the moment, China tops the list of possible flashpoints for the next fiscal or monetary crisis, though there are plenty of other parts of the world that could cause similar trouble.

QE Prisons, Fed Endgames, etc.

After catching up a bit on all the commentary related to the Federal Reserve’s ongoing money printing effort such as this item from yesterday and today’s offering from Jim Jubak at MSN Money where it was concluded that “The Fed has no endgame“,  refreshing the simplified graphic of the central bank’s balance sheet below seemed like a good idea, particularly since they are rapidly closing in on the $4 trillion mark.

Fed Balance Sheet

Of course, there is a growing consensus that this is all benign (or at least irrelevant as long as stock prices are rising) and that argument is lent some credence by the low rates of inflation for consumer prices reported in the West (inflation in developing nations is an entirely different matter). Somehow, it seems the quadrupling of the Fed’s balance sheet (and then some) will prove to be anything but benign.

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