A noted Wall Street hedge fund manager recently severely criticized Federal Reserve Board Chairman, Ben Bernanke, for running the “most inappropriate monetary policy in history”. Is this an accurate description or far from the mark?
Chairman Bernanke has led the Federal Reserve through an extremely difficult period and helped prevent a U.S. and global financial meltdown. The current path of extraordinarily low interest rates and swelling the Fed’s balance sheet at a rate of $1 trillion a year does mark unchartered territory. It entails sizable risks, including another asset price bubble or higher inflation down the road. Scaling back or ending these policies could be disruptive to both markets and the economy, but such policies cannot be sustained.
Mr. Bernanke’s rating in history will ultimately depend on the Fed’s exit strategy and how it implements that strategy.