I was catching up on Scott Sumner’s posts on Econlog today then this one where he discusses his trip to a conference in DC that was attended by Larry Summers, Ben Bernanke and a few others caught my attention:
Larry Summers dominated the conference due to a combination of his force of personality and his intellectual brilliance. (That’s right, I don’t judge intellects based on whether they agree with me.) At one point he was asked what he’d do if put in charge of the Fed. Although Summers had expressed support for a higher inflation target, he was surprisingly cautious in response to this question… He indicated that he wasn’t sure whether it would make sense to use a lot of political capital trying to move the entire Federal Reserve System over to his preferred policy. (This is based on my memory, and may not be precisely correct.)
Summers’ comment made me think back to lots of debates I’d had in various comment sections, where I defended Bernanke for trying to nudge the Fed in the right direction. Summers’ remarks make me even more confident that I was correct, as if even an “alpha male” like Summers thinks he’d have trouble moving the Fed to his preferred policy regime, imagine the challenge facing a more mild-mannered, consensus-seeking personality like Bernanke (or me!). Summers has worked in the Treasury, and knows how difficult it is to enact policy changes in the real world.
It might be that I’ve been too hard on Bernanke. It’s true that Bernanke is just one guy. But I’ve read most of the late 2008 FOMC transcripts and the Bernanke from the transcripts is very hard to reconcile with the Bernanke discussed here. I often wonder if these are the same person because here he is spun as a well-intentioned but ineffective nudger, while in the transcripts he appears as a larger than life hardcore inflation targeter, never once bringing up the possible consequences of the decisions being made.
I see this as being a big problem not just in the context of Bernanke himself, but the wider context of the people smart enough to see the problem at the Fed and understand the gravity of the consequences for average wage earners everywhere. It is unfathomable to me how anyone with the brains to see what actually happened in 2008-09 and the calamity that followed can cover it up, like Bernanke did, or just look the other way like Summers does here. In my mind’s eye, I imagine both Bernanke and Summers rushing for the nearest sand pile and thrusting their heads into it nice and deep. And if I never have anything else to say about it, I’d just leave a parting, “Thanks for nothing.” If those so inclined to follow their lead do so, nothing would change and we’d just be here waiting for it to happen again.
I now have a richer appreciation for people who are actually trying to do something about the serious monetary problem we have and not leaving it for someone else. Godspeed to them, and words simply cannot express my boundless gratitude for at least trying to make a difference.