Bernanke reinvents central banking as central planning.Submitted by bobbyw24 on Sat, 11/06/2010 - 14:32
By Michael Brendan Dougherty
Ben Bernanke doesn’t look like a revolutionary. The Federal Reserve chairman has the dry, affectless manner of a timid researcher even as he rings in sweeping changes to monetary policy. He makes his actions seem qualified, tentative, easily revisable. But make no mistake: Bernanke is remaking the Fed from a mere central bank into an all-purpose policy tool.
All it took to send the dollar plummeting below parity with its Australian namesake on Oct. 15 was a few bland words from Bernanke, delivered at the Federal Reserve Bank of Boston. After agreeing that there should be “limitations” on the Fed’s “nonconventional” strategy for zero interest rates, and allowing that his critics have “understandable concerns” about inflations, he announced flatly, “there would appear—all else being equal—to be a case for further action.”
That set financial pundits squawking—“it’s what the market wants!”—and prompted goldbugs to hit “publish” on their “Gold $2,500?” articles. Fed watchers began to contemplate what it meant for the largest holder of American debt to announce that it will be in the market for even more debt. Bernanke had effectively proclaimed that the emergency measures the central bank employed during the crash of 2008 would now be standard practice. A New Fed was being born.