Thursday, May 23, 2013

Ben Bernanke. Process Prophet.

Time has been good to Ben Bernanke

A year ago, Ben Bernanke was thought to be responding too slowly to the problems the country was facing. Unemployment was too high. Inflation was too low. Another Quantitative Easing program was an obvious remedy to knock out two birds with one stone. Month after month after month of speculation, Bernanke kept pushing off the announcement of QE3 even though everyone knew he wanted to begin the program. What was holding him up? 

Consensus. He could have bull-headed the program through. It's what Alan Greenspan would have done. The Chairman of the Federal Reserve only needs a simple majority to make it happen. Yet Bernanke wanted consensus, so he waited for the economic data to convince the detractors of his plan to agree on it. One by one, they saw that he was right. When the announcement came, all of the independent Governors of the Federal Reserve spoke with one voice. That consensus continues on to today. Minor disagreements over the rates, size, and timelines of QE3 still exist - as they are bound to as different economists read different economic data in different ways - but the general direction the Fed is moving is agreed upon.

The Federal Reserve will still be there long after his term ends in 2014. Because he succeeded, the programs he started will continue under his successors. QE3 will end eventually, but only at a time when the board reaches consensus for it to stop. Targets were set, again by consensus, at lower than 6.5% unemployment and/or 2.0% inflation. 

If nothing else - if and when history criticizes him (as it always will), then at least Bernanke will not be thrown under the bus like Alan Greenspan was;  because he made argument convincingly and listened to (instead of ignored) the voices that disagreed with him. Process matters. 

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