Bernanke – On the Road to Disaster?
Ben Bernanke, current chairman of the administration’s council of economic advisors, is President Bush’s nominee to succeed Alan Greenspan as chairman of the Federal Reserve. We believe will see more fine tuning of monetary policy with potentially negative implications for the dollar. We have extensively commented on Bernanke for over a year:
- Bernanke is on record as a supporter of policy that seeks to manage the entire yield curve. See Is a Dollar Crisis Looming? (October 10, 2005); see also The Modern Command Economy: the 30-Year Bond is Returning (August 4, 2005)
- Bernanke is a supply side economist. See Greenspan: "We can guarantee Cash, but we cannot guarantee purchasing power!” (February 16, 2005)
- In my view, Bernanke uses communication seeking to manage expectations in lieu of transparency. See The Fed Embraces Public Perception in Place of Sound Monetary Policy (April 18, 2005)
- We comment on how Ben Bernanke is getting more influential in The Emperor's New Clothes (October 6, 2004), and forecast that he will succeed Greenspan in Fed May Not Stop Inflation (August 18, 2005)
- We believe Bernanke promoted the plan to hand out $2,000 to hurricane victims. It is an indication of more micro-management to come. See China Is Open for Business: Will China’s growth eliminate inflation? (September 21, 2005)
- Let us not wrap up a discussion about “Helicopter Ben” without a reference to his infamous comments about throwing money out of helicopters. See China's Basket of Currencies (July 26, 2005).
24 October 2005
Axel Merk is portfolio manager of the Merk Hard Currency Fund.
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