Olivier Garrett (Casey Research):

Ben Bernanke is a dubious choice to be named “Person of the Year” by Time magazine.  While Time’s Managing Editor Richard Stengel credits him with recognizing early and reacting appropriately to the ongoing financial crisis, in reality, he was wrong time and again with both his predictions and his remedies. Just remember these gems:

• On July 1, 2005, Bernanke stated without hesitation that we were not experiencing a housing bubble: “I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.”
• November 2005, on derivatives: “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.” And “the Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.”
• February 15, 2006: “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
• February 2008: “I expect there will be some failures of smaller banks” (Bear Stearns collapsed a couple of weeks later).
• But then again, I guess in regards to his nomination we are talking about achievements in 2009. That was the year Bernanke said, “Currently, we don’t think [the unemployment rate] will get to 10 percent.”

This is the same chairman of the Federal Reserve who told us that Fannie and Freddie were “adequately capitalized” and “in no danger of failing.”  

Unfortunately, he has not just been wrong about housing, unemployment, banking, and derivatives — his policies have directly contributed to all of the problems we now face.

High unemployment and the weak dollar threaten to further undermine our economy, yet his policy is to just keep borrowing. The massive debt his policies have foisted on the American taxpayer is weakening the U.S.’s position as global economic leader and hurting already tenuous relations with foreign governments. Bernanke has supported the policies of Greenspan and our current and previous administrations – the very policies that got us into this mess.  He has supported the leveraging of the American economy to rescue companies long past saving and the  borrowing of billions from foreign governments to line the pockets of corrupt investment bankers. 

I could recommend a few alternative names for runner-up, if Time’s criteria are really as dubious as they appear:

• Lloyd Blankfein from Goldman Sachs for robbing taxpayers legally
• Rick Wagoner of GM for taking the world’s largest car maker to bankruptcy in a quarter-century
• Tim Geithner for ensuring that all of our bankers prospered during the worst financial crisis since the ‘30s
• Tiger Woods for providing the nation with great dinner conversations and helping to spur tabloid sales.

Bernanke is insistent on using inflation to make our personal debts seem small, all the while setting the country up for a much larger disaster long term. Bernanke is borrowing from Peter to pay Paul… and robbing taxpayers to pay Peter. 

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The news of the day was of course the results of the Federal Open Market Committee’s meeting, at which they took the big scalpel to interest rates.

The Fed wrote that, “Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight.”

Thus it effectively announced a comprehensive quantitative easing policy, saying that it would establish a target range for the federal funds rate of zero to a quarter of a percentage point. Rates will need to be kept low “for some time,” the central bank said.

The accompanying policy statement said that, “The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth,” and it will support financial markets and stimulate the economy “through open market operations and other measures that sustain the size of the Fed’s balance sheet at a high level.”

The day’s hard data were none too cheery. The Commerce Department said that housing starts in November plunged 18.9%, to the lowest level since the beginning of record keeping in 1959. According to similar records kept elsewhere, it’s the slowest pace of construction in the entire post-World War II period.

At the same time, the Labor Department confirmed the deflationary environment by reporting that the consumer price index plummeted by a seasonally adjusted 1.7%, the biggest drop since the government began adjusting the CPI for seasonal factors in 1947.

The non-seasonally adjusted number, minus 1.9%, marks the steepest decline since January 1932, in the depth of the Great Depression. Small wonder that the Fed pulled out all the stops.

Source: Dollar Tanks After Fed Decision