Four More Years

What is there to say about Ben Bernanke's reappointment that I haven't already said here and in this article? This is a terrible decision by Obama. You cannot credibly claim to be an agent of change, then praise and retain a key holdover from a disastrous administration -- a beneficiary of the same wisdom and judgment that produced Miers, Kerik and Brownie as fellow nominees, and a profoundly mediocre policymaker who played an important role in one of history's most destructive economic busts. Outside of foreign affairs, where Obama generally has met my high expectations, this reappointment really dents the admittedly vague and probably naive post-election sense of hope I had for him.

The implications for monetary policy are clear. Because of the rough ride Bernanke's had in Congress recently, another term was not a sure thing; the White House had the leverage in this reappointment. Bernanke has already curried favor with Obama by taking the fed funds rate to zero and pledging to leave it there indefinitely. But you can be sure Obama exacted a Nixonian/Arthur Burns promise from Bernanke, either tacit or explicit, to support and monetize healthcare and whatever else comes along. The fix is in.

Even if one believes, as some of his supporters apparently do, that Bernanke's role in monetary policy started the day he succeeded Greenspan, former Federal Reserve Governor Wayne Angell has a yardstick. He once said that a Fed chairman's performance can be measured by whether the price of gold is higher or lower than when he took office. This chart sums things up nicely. Gold closed at $466 on October 24, 2005, the day Bush nominated Bernanke, and it has never looked back. Where will it be in four years? Or oil, or the dollar?

At least Bernanke will be in office to take heat for the consequences of what is now undeniably his own policy. I felt the same way when Bush was reelected.