Fed chair Ben Bernanke is both the cause and the solution to our economic problems, says financial journalist Ambrose Evans-Pritchard.
"Ben Bernanke has proved himself a heroic fire-fighter, saving world from a calamitous spiral into debt deflation by showering markets with liquidity," Evans-Pritchard writes in the UK Telegraph.
"A good thing too. He helped cause the raging fire of 2007-2009 in the first place."
Evans-Pritchard says Bernanke was picked to join the Fed because he “provided academic cover for Greenspan's view that asset bubbles do not matter.”
Bernanke, he says, “blamed credit excesses on Asia's ‘saving glut,’ arguing that reserve accumulation by export nations suppressed global bond yields,” which let the Fed off the hook for its own role in driving the U.S. savings rate to zero and consumption through the roof.
“It is this twin-sided nature of Bernanke that raises nagging questions about his reappointment as chairman of the Fed,” Evans-Pritchard notes.
“He has admitted errors: it was wrong to think the sub-prime crisis could be contained. But he has yet to acknowledge that his economic ideology is deeply flawed.”
European Central Bank President Jean-Claude Trichet said he was "extremely pleased" by the Bernanke nomination for a second term, according to media reports.
"We have had an excellent and very close working relationship during the current episode of exceptional challenges for the world economy," Trichet said.
"The Federal Reserve and the European Central Bank have, together with other central banks, initiated an unprecedented level of close cooperation, which has been key in coping with the present situation.”
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