Bernanke Reappointed

Surprising no one, Barack Obama will reappoint Ben Bernanke to a second term as Federal Reserve chair. Brad DeLong is enthusiastic about the choice. I have various doubts, including the fact that we’re now looking at a span of continued Republican Party control over this crucially important office that’s lasted over twenty years. Among other things, this seems to be entrenching some kind of precedent that only conservative Republicans are competent to do the job notwithstanding the fact that the most impressive monetary policy successes of the postwar decades were undertaken by Democrat Paul Volcker in the late 70s and early 80s.

Other concerns previously voiced here:

I would say that ever since some time last year when it become absolutely undeniable that Ben Bernanke was had been completely wrong about “The Great Moderation”, Bernanke has done an admirable job of trying to clean up the mess created by the errors of the school of thought to which he adhered. But like Kevin Drum I feel that this is a strange basis on which to rest the burgeoning Cult of Bernanke. In a reasonable world, I would think that Bernanke would probably fade away after his term ends to be replaced by someone else, and then return to the public eye a few years hence with an interesting memoir taking stock of the whole situation. Instead, he’s weirdly become an iconic figure and a shoo-in for another term.

That said, it seems like he’ll do fine in the job. One irony of the reappointment is that, as explained on NPR this morning, the announcement is being made this early in the process because the Obama administration appreciates that financial markets are unsettled by uncertainty. That kind of thing is a commonplace of the policy dialogue, and yet at the same time appears to rely on assumptions that are completely at odds with the strong faith in financial market efficiency and rationality that have typically driven financial policy over the past few decades.