Do Americans trust US Federal Reserve chairman Ben Bernanke to do the right thing for the economy?
According to one survey, the answer is “broadly yes, but that trust has eroded over time”.
Look at the chart below.
In 2007, a Gallup poll found that 50% of Americans expressed a great deal or fair amount of confidence that the Fed chairman would do or recommend the right thing for the economy, while only 25% said they had little or no confidence in him. The remaining 25% of respondents didn’t have a view.
But that confidence has eroded over time.
By 2012, 39% of respondents said they had a great or fair amount of confidence in Bernanke, while 46% said they had little or no confidence.
Lately, however, the tide seems to have turned mildly favourable for the Fed head. An April 2013 poll found 42% of respondents had a great deal of confidence in him, while 38% stayed in the little/no confidence camp.
The survey has been extracted from a newly published academic paper titled “Federal Reserve Independence in the aftermath of the financial crisis: Should we be worried?”by the Brookings Institution. The paper is authored by former Federal Reserve Vice Chairman Donald Kohn.
In the paper, Kohn argues that the central bank’s independence is at risk, thanks to the shock-and-awe monetary measures it took before and after the global financial crisis. He says keeping the central bank independent from elected politicians is crucial: Across time and across countries, there’s plenty of evidence that less independence leads to more inflation.
If you would like to read the paper, click here. (I will be writing more on this next week.)
Me? I support the man (Bernanke, that is) through and through. I believe his policies saved the US economy from The Great Depression 2.0.
While the Fed’s super-loose monetary policies haven’t produced a roaring recovery, credit must be given to Bernanke for resorting to unconventional measures — repeatedly — to prevent the economy from flat-lining, even as the government dithered and did little to help (barring the initial fiscal stimulus).
Besides, Bernanke has a sense of humour, a trait not commonly seen among economists. Given the never-ending debate on the pros and cons of quantitative easing (QE) and whether it actually works or not, Bernanke was recently asked about how confident he had been of the economic theory behind QE before introducing the stimulus.
His crushing response: “The problem with QE is it works in practice but it doesn’t work in theory.”
Really, how can you NOT like a man like that?