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Forbes to Moneynews: Bernanke a ‘Terrible Central Banker’

By    |   Wednesday, 04 April 2012 02:02 PM

Federal Reserve Chairman Ben Bernanke has been a "terrible central banker," trying so hard to guide the economy that he has lost sight of his primary role, which is to control inflation, keep the dollar healthy and let the economy guide itself, Forbes magazine editor and former presidential candidate Steve Forbes told Newsmax.TV in an exclusive interview.

Under Bernanke, the Federal Reserve has slashed interest rates to near zero and injected trillions of dollars into the economy in an effort to create jobs and stave off deflationary fears.

Editor’s Note:
Economist Unapologetically Calls Out Bernanke, Obama For Mishandling Economy. See What They Did.

Fed tools have included purchasing assets like Treasurys and mortgage-backed securities from banks, technically known as quantitative easing but dubbed by critics as printing money out of thin air, with some reports pointing out the Fed last year bought 61 percent of the total net Treasury issuance, giving the White House more leeway to borrow and spend.

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The result has been a weak dollar and mounting inflationary pressures, while unemployment still remains well above pre-crisis levels.

"Ben Bernanke is a terrible central banker," said Forbes, the president and CEO of Forbes Inc.

"He doesn't realize the purpose of a central bank is to preserve the integrity of the currency and deal with the occasional panics. That's it."

Preserving the strength of the dollar actually leads to job creation, said Forbes, who ran for the Republican presidential nomination in 1996 and 2000.

"The best way to full employment is to have a stable currency so people can make decisions for the future and not have to worry about the value of the dollar."

Weakening the currency via liquidity injections that aim to pump up stock prices so companies will issue more stock, invest and hire won't work if the future value of the dollar remains cloudy.

"The first thing you learn when you study stocks is the stock price is supposed to reflect the discounted future cash flows. Well, if you don't know what the cash flows are really going to be denominated in or what they are going to be worth, you get uncertainty, which means lower asset values," Forbes says.

"So Ben Bernanke's policies hurt the economy, and I hope the next president gives him his walking papers."

Bernanke contends that the Federal Reserve operates under a dual mandate assigned to it by Congress, which is to keep inflation rates in check on one hand and unemployment rates at optimal levels on the other.

Controlling inflation has long been the Fed's sole mandate, with the unemployment mandate added recently.

"The Fed is not like the court system, which is embedded in the Constitution. It is a creature of Congress, and Congress can do any bloody thing it wants with it," Forbes says.

"I think people like the idea of it having some independence of the vagaries of Capitol Hill, that's always a good thing, but the Fed should have a very clear mandate: sound value for the dollar and not letting it fluctuate all over the place and number two: deal with the panics."

Editor’s Note: Economist Unapologetically Calls Out Bernanke, Obama For Mishandling Economy. See What They Did.

On top of setting monetary policy, the Fed acts as a regulator over the country's banks and financial institutions as well.

The Dodd-Frank financial-overhaul law, passed in wake of the Lehman Brothers collapse, gives the Fed and other institutions greater power on bank-capital requirements, liquidity levels and risk-management practices.

The Fed shouldn't even be involved in such regulations in the first place, Forbes contends.

"Regulations can be done by other agencies. But with this Dodd-Frank — it's amazing in Washington the more you fail, the more power you get," Forbes says.

"So the Fed having mucked up in the last decade now has more powers."

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