Regular readers know that Jeremiah was for QE before he was against it. This is actually the consensus view of professional economists – Raghuram Rajan, for instance, since we were just talking about him. Chairman Bernanke will be remembered for QE #1, which averted a certain disaster. Subsequent rounds of QE were more risky and less effective. Before stepping down, Bernanke also began the process of tapering off QE.
It now seems obvious that central banks should have done what they did … restored liquidity to a world financial system that would otherwise have been insolvent
The strong dollar people hated QE from the beginning. Their fears were confirmed by inflated returns in the stock market. At the other end of the spectrum, Paul Krugman is still beating the drum for more. You can’t please everyone. Bernanke also had a hand in shoring up the euro.
It is often the mundane achievements that turn out to be the most durable. Chairman Bernanke took huge steps in making the Fed more transparent, with regular statements, published minutes, and quantitative targets.
But no amount of transparency can offset the cultism which now surrounds the Fed. On Monday, the stock market was idle, as the world waited for the new Chairman’s testimony. Bernanke retires with a good record, on balance, but there is work to be done.
Chairman Yellen must disabuse Congress, and the world, of their superstitions about the Fed. Monetary easing is a poor remedy for unemployment, not to mention inequality. Jeremiah would like to see the new Chairman remind Congress of its own responsibilities, and maybe even question the “dual mandate.”
Update: Well, that was just embarrassing. Congress begged the new Chairman for help with unemployment, inflation, mortgage lending, inequality, and the weather. The price of gold went straight up.