Ben Bernanke is still the "Man without Agony" - 11-Jun-2008 - Generational Dynamics

Generational Dynamics Web Log for 11-Jun-2008

Ben Bernanke is still the "Man without Agony"

What was he thinking?

In 2005, I wrote something called "Ben S. Bernanke: The man without agony." I contrasted Fed chairman Alan Greenspan with the man who would soon replace him.

I included numerous quotes from both men to contrast Bernanke's "What me worry?" attitude toward economic bubbles with Greenspan's genuine agony over the fact that his gut is telling him that we're headed for a major financial crisis.

So I guess it shouldn't be too surprising that, in a speech given on Monday in Boston, Fed chairman Ben Bernanke said the following:

"Before turning to those issues, however, I would like to provide a brief update on the outlook for the economy and policy, beginning with the prospects for growth. Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly. Indeed, although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so."

This statement is so Pollyannaish that even the normally bubbly anchors on CNBC were incredulous.

Keith Hennessey, director of the National Economic Council, also assistant to the president for economic policy <font face=Arial size=-2>(Source: CNBC)</font>

Keith Hennessey, director of the National Economic Council, also assistant to the president for economic policy (Source: CNBC)

On Tuesday morning, Keith Hennessey, director of the national economic council, was a guest on CNBC and, as an Administration member, he supported Bernanke's statement. He was asked to defend the statement, given that, "Oil's up another 30% from where it was, we've got Lehman Brothers, and hard to get a mortgage credit tightness." His response:

"We always put a lot of stock in what Ben says. Obviously the President has plenty of confidence in Ben. We also think that he's right on the substance of it.

The downside risks do seem to be a little smaller than they were a few months ago. ...

Part of it though is that more time is passed, and we haven't had significant big negative surprises, we haven't had big shocks like we had back in March. Obviously the Lehman news was not good. You've had gradual price increases in oil.

But the more the time goes on and you don't have big negative shocks, the more confidence gradually accumulates."

This statement reminds me of the old joke: A man jumps off a 50-story building. As he passes a window on the 20th floor, someone yells at him: "How are you doing?" His response: "Everything's fine so far!" (11-Jun-2008) Permanent Link
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Generational Dynamics Web Log for 11-Jun-2008 Ben Bernanke is still the "Man without Agony"

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Generational Dynamics Web Log for 11-Jun-2008
Ben Bernanke is still the "Man without Agony"