Mr. Bernanke needs to be replaced

Albert H. Teich / Shutterstock.com

If ever one doubted that Ben Bernanke needs to step down from heading the Federal Reserve when his term expires in January 2014, all one needed to do was to watch his press conference following yesterday's FOMC meeting. For far from allaying the market's concerns about the way that the Fed would eventually exit its third round of quantitative easing (QE3), he gave the market every reason to be more concerned about an abrupt end to that quantitative easing program.

Had Mr. Bernanke been in tune with the market's concerns about an early start to the tapering off of the Fed's massive bond buying program, he would have stuck strictly to the script that any tapering off of that program would be data dependent. In that context, he might have limited himself to reiterating that the Federal Reserve did not see that the US economy was presently strong enough to start tapering now and that the Fed would calibrate any eventual tapering strictly to the way that the economy was performing and to the way that the labor market was healing.

Instead, Mr. Bernanke took it upon himself to venture that according to the Fed's own economic forecasts not only could he envisage a start to the tapering off beginning by the end of 2013 but he could envisage an end to the whole program of Federal Reserve bond buying by the middle of 2014. It is little wonder then that a market that until yesterday was concerned about an early start to the tapering process is now roiled by the prospect of the end to QE3 by as early as the middle of next year.

The irony of Mr. Bernanke's poor communication with the market is that he might have created market conditions that will ensure that the economy is not strong enough for him to either start tapering by the end of 2013 or to end the program by mid-2014 as he suggested he might do at yesterday's press conference. 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Desmond
Lachman
  • Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
  • Phone: 202-862-5844
    Email: dlachman@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202.862.5862
    Email: emma.bennett@aei.org

What's new on AEI

image The Census Bureau and Obamacare: Dumb decision? Yes. Conspiracy? No.
image A 'three-state solution' for Middle East peace
image Give the CBO long-range tools
image The coming collapse of India's communists
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Wednesday, April 23, 2014 | 12:00 p.m. – 1:30 p.m.
Graduation day: How dads’ involvement impacts higher education success

Join a diverse group of panelists — including sociologists, education experts, and students — for a discussion of how public policy and culture can help families lay a firmer foundation for their children’s educational success, and of how the effects of paternal involvement vary by socioeconomic background.

Thursday, April 24, 2014 | 12:00 p.m. – 1:30 p.m.
Getting it right: A better strategy to defeat al Qaeda

This event will coincide with the release of a new report by AEI’s Mary Habeck, which analyzes why current national security policy is failing to stop the advancement of al Qaeda and its affiliates and what the US can do to develop a successful strategy to defeat this enemy.

Friday, April 25, 2014 | 9:15 a.m. – 1:15 p.m.
Obamacare’s rocky start and uncertain future

During this event, experts with many different views on the ACA will offer their predictions for the future.   

No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.