BERNANKE'S LEGACY

The Tragedy of Ben Bernanke
Sometimes a seminal event passes unnoticed. Subsequent developments and hindsight eventually place it in proper perspective. Just such an event may have happened or be in the process of playing out regarding Ben Bernanke, Chairman of the Federal Reserve.

Ben Bernanke’s Warning
Mr. Bernanke expressed the following regarding the precariousness of our economic and financial situation (my emboldening):

By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis.

This statement could have been issued by innumerable internet pundits. Warnings like these are commonplace from so-called internet whack-jobs. But this one came from Ben Bernanke in recent remarks to Congress. Gentle Ben is not one to exaggerate (unless it is toward the positive). His track record for forecasting has consistently erred on the side of optimism, whether it was the housing crisis, the spread of financial contagion or the condition of the economy.

More