Covering the Economy: February 14: Readings: Ben Bernanke and the Fed

Bernanke at Princeton: http://www.princeton.edu/~bernanke/
Bernanke at the Fed: http://www.federalreserve.gov/bios/bernanke.htm
Bernanke at Wikipedia: http://en.wikipedia.org/wiki/Ben_Bernanke

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Finance:

Bond Brief: Pre-Bernanke Shuffle: By Katie Benner TheStreet.com Staff Reporter: "Treasuries marked time Monday as the market debated whether new Federal Reserve chairman Ben Bernanke's first public speech would be more of the same or signal a new direction in monetary policy. 'In terms of Bernanke, the market is trying to grapple with how close the Federal Reserve is to ending its tightening', says Michael Cheah, portfolio manager at AIG Sun America Asset Management. 'It is important for the Fed to show that they will not overdo it, because the risk of going wrong is now very serious.'..."

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News:

FT.com / US / Bernanke steps up - Bernanke set for debut on Capitol Hill: By Andrew Balls in Washington: "Ben Bernanke's debut on Capitol Hill this week will provide the first glimpse of the more transparent approach he intends to take as chairman of the Federal Reserve. A host of Fed watchers expect more plain language from the new Fed chairman, in contrast to the Delphic approach of his predecessor, Alan Greenspan. Reflecting his belief that the Fed should provide more quantitative guidance to market participants, Mr Bernanke is also expected to place much greater emphasis on the consensus forecasts of the Federal Open Market Committee Members. Mr Greenspan, who did not participate in the forecast round, often avoided mentioning them in testimony. But it is unlikely Mr Bernanke will provide much more detail on the likely course for the federal funds rate. He will be speaking on behalf of the whole committee, and although the need for further rate increases is a matter of debate among members, the view that decisions will be data-dependant is unanimous..."

WSJ.com - Bernanke the Inflation Fighter: By TIM ANNETT: "Economists have some advice for Ben Bernanke as he takes over at the Federal Reserve: establish your credibility as an inflation fighter. But, at the same time, they have concern that he could take that effort too far. When asked in the latest WSJ.com forecasting survey which mistake Mr. Bernanke is more likely to make -- raising rates too much or not enough -- three-quarters of economists said he is more likely to lift rates too high. The new Fed chief faces the same puzzle that always confronts the Fed: how to check inflation without lifting rates so high that economic growth is snuffed out. But the challenge is especially acute now. Soaring energy prices have nudged up inflation pressures at the same time the Fed has been steadily lifting rates. Now, Mr. Bernanke must pick the right time to stop the increases..."

http://www.economist.com/agenda/displaystory.cfm?story_id=5077535: "FOUR years ago, Ben Bernanke was a professor of economics at Princeton whose policymaking experience consisted of a stint on the local school board. On February 1st, barring any unforeseen hiccups in his Senate confirmation, he will become the most powerful central banker in the world, replacing Alan Greenspan as chairman of the Federal Reserve Board..."

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Economists:

Max Sawicky of EPI on Ben Bernanke: "The Economic Thought of Ben Bernanke: Actually it's pretty good. I was leafing through his textbook, co-authored with Robert Frank, looking for bloopers, and I was at a loss for material..." http://maxspeak.org/mt/archives/001314.html

Taking the measure of Ben Bernanke: By PETER MORICI: "Repeatedly, I have been asked: Will Ben Bernanke, who next week takes over as chairman of the Federal Reserve Board, fight inflation as effectively as Alan Greenspan? That is the wrong question. The Fed has responsibility for both containing inflation and sustaining growth. It is easy to do one, but not both. The Bundesbank and European Central Bank have demonstrated that achieving modest inflation and 10-percent unemployment is easy, whereas Alan Greenspan has shown that containing inflation and keeping unemployment at 5 percent or less is doable. But unfortunately, Bernanke will have fewer tools than did Greenspan, or his predecessor, Paul Volcker. Both had to manage monetary policy around less than prudent fiscal policies: Democratic presidents bent on punishing enterprise with high taxes and Republican presidents inclined to spend the Treasury broke. Now, President Bush and Treasury Secretary John Snow have abdicated exchange-rate and interest-rate policies to Beijing. Since 1995, China has pegged the yuan to the dollar, and bought large sums of U.S. securities to sustain an undervalued currency as its trade surplus swells..."

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Others:

: Some advice for incoming Fed Chairman Ben Bernanke By Robert B. Reich: "Dear Ben, Congratulations on taking over the Fed. You're now the most powerful person in the American economy. It would be presumptuous of me to tell you how to do your job. But 'm about to tell you anyway. First off, don't worry about speculative bubbles. Just because there's irrational exuberance in one sector or another -- high tech or housing, for example -- does,'t mean you should raise interest rates and put a brake on the economy. It's not your responsibility to protect speculators from their own foolishness. And don't pay attention to what the bond traders want.... Don't try to get inflation down to zero..."

Telegraph | Money | Ben Bernanke: An unworldly professor

: By Ambrose Evans-Pritchard: "Ben Bernanke admits with disarming candour that he has never run anything beyond deciding 'whether to serve tea or coffee' at the Princeton University faculty meetings. The new chairman of the US Federal Reserve has spent the best part of his life studying the archives of the 1930s, engrossed in the arcana of monetary policy under the gold standard.... Changes of the guard at the Fed's marble temple have a nasty habit of rattling global markets, bringing festering problems to the fore as investors suddenly shun risk..."

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(Incomprehensible) Background:

Open Market Operations: http://www.federalreserve.gov/pubs/bulletin/1997/199711lead.pdf
The Yield Curve: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.html