Is Bernanke Doing a Good Job?

Ben Bernanke is an economist and current Chairman of the U.S. Federal Reserve.  He got the position in early 2006, succeeding the then very popular Alan Greenspan.  In 2009 he was nominated by Barack Obama to retain this position.  The question many people are asking is:  Does he deserve to keep his job?

The Financial Collapse

In 2008 the U.S. and the rest of the world suffered an unprecedented economic collapse.  Bernanke holds arguably the most important position in the world for preventing such collapses.  Given this, why is he being kept on in the job?

The easiest answer to this question is because the seeds of the collapse were planted long before he ever received his position.  In fact, the market was already looking somewhat grim at the time he replaced Greenspan.  Greenspan's policies largely set the stage for the collapse, so certainly all the blame does not belong at Bernanke's feet.  Many suggest that Bernanke should keep his job so that he can clean up the mess he helped make.

But Is He Doing a Good Job?

Making him "clean up his mess," may be an intuitively appealing idea, however if he is doing a poor job it seems a poor choice to exacerbate the problem.  Additionally, he may not be fully to blame, but he shares some culpability, being on the Federal Reserve's Board of Governors since 2002.  While it's unlikely to think he could have changed the policy at the time, there isn't much evidence he supported the ideas.

This leads us to the ultimate paradox of whether Ben Bernanke is doing a good job.  Ultimately, the answer to this lies in whether the idea of the Federal Reserve is sound or not.  Central banking is a relatively new invention and doesn't have a track record to stand on.  In fact, many would argue that the profound boom and bust cycles we've experienced so frequently in modern times are a natural result of centrally manipulated interest rates.  The system has a natural tendency to encourage booms even when that increases the risk of a bust.

While Ben Bernanke may be very well suited to run this institution, if the institution is counter-productive there's no such thing as doing a "good job" of running it.  One can argue that the actions of the Fed may have averted a much worse crisis, but one can also argue that the crisis may have been caused by the Fed in the first place.  Propagating a flawed system may be hard to label as doing a good job.