What's Wrong with Ben Bernanke
On paper, Ben Bernanke is the perfect person to be the Chairman of the Federal Reserve. He got his degree in economics from Harvard, his PhD in economics from MIT (Massachusetts Institute of Technology), and he was a tenured professor and chair of the Economics Department at Princeton University from 1996 to 2002.
Somebody with that kind of pedigree in economics from three of the most prestigious universities in the United States, and the world, must know everything there is to know about how an economy works. Someone like that must be an absolute genius in economics, right?
Wrong, that is not how life works. Someone with Ben Bernanke's academic background is far more likely to make major mistakes as Chairman of the Federal Reserve, and keep making major mistakes as chairman, for a number of reasons. I'll outline the two main reasons here.
Highly Educated People Vastly Overrate Themselves
Highly educated people think they are smarter than everyone else. They usually are not. Most highly educated people are better than everyone else at memorizing what are considered to be facts, but when such people are faced with challenges which require a thought process separate from what they have memorized, they fail.
Case in point would be Ben Bernanke's belief that "political restraints, rather than a lack of policy instruments, explain why its (Japan's) deflation has persisted for as long as it has". Bernanke expressed this belief about the Japanese economy and deflation back in 2002.
When faced with same challenge as Japan, preventing deflation, Bernanke led the Federal Reserve to do the same exact thing the Bank of Japan did, lower interest rates to record low levels. Artificially low levels which likely would not occur in a free market economy, or at least not occur for more than very brief instances.
What result has Bernanke achieved by doing exactly what the Bank of Japan did? The exact same result Japan has had for the last two plus decades. Slow to no economic growth, and high unemployment rates. You can learn why low interest rates cause slow to no economic growth by reading other articles of mine on the subject, Low Interest Rates Cause Low Economic Growth, US Economy Will Mirror Japan Until Federal Reserve Raises Interest Rates, Ben Bernanke and the Federal Reserve Are Killing the World Economy.
Because Ben Bernanke thinks he's smarter than the Japanese, (how could he not be with his education?), he believed he could generate a different outcome. He cannot. His lack of a real thought process, independent from what he has memorized, prevents him from realizing this. In his mind, what he has achieved at three of the most prestigious universities in the world, makes him smarter than everyone else. So he must be right in his thinking.
In the real world, once you think you know everything, you really know nothing. You've simply closed off your mind, and will be unable to see the truth even when is is right in front of you.
Highly Educated People are Allowed to Fail Over and Over Again
The second reason someone like Ben Bernanke is so dangerous is because someone with his background will be allowed to fail over and over again. His pedigree, earned at three different prestigious universities, leads other people to believe that Bernanke actually knows what he is doing, regardless of the facts.
When the subprime mortgage crisis occurred, Ben Bernanke repeatedly said that it was contained and would not affect the larger economy. He was as wrong as possible about the subprime crisis. Since that time, everything he has said or done should have been scrutinized with a fine tooth comb. He had already clearly demonstrated his lack of knowledge about how our economy, or any economy, works.
When someone who is supposed to be an expert in a particular subject is so wrong in a prediction as Bernanke was with the subprime crisis, that person has already clearly demonstrated they do not know what they are doing. But because of Bernanke's pedigree, he has been, and will continue to be, allowed to make many, far too many, mistakes before almost everyone finally comes to the conclusion he has no idea what he is doing.
People Like Ben Bernanke Belong in Ivory Towers and Not in Real World Decision Making Roles
In both cases outlined here, Ben Bernanke's academic background at three prestigious universities is exactly what is wrong with him. His academic background makes him think he is smarter than he is, and it also makes other people think he is smarter than he is. Such people are prone to making many bad decisions, and they are allowed to continually keep making those bad decisions due to the reasons outlined above.
For more see What Should the Federal Reserve Do? How the Federal Reserve Can Fix the US Economy
Ben Bernanke and the Federal Reserve Cause United States to Lose AAA Credit Rating
Federal Reserve Preventing Job Growth by Keeping Interest Rates Too Low
Are We Headed for Deflation?
Why Congress Created the Federal Reserve
How the Federal Reserve Caused the Great Depression
How the Federal Reserve Caused WW II
10 Reasons Why Warren Buffet Should Be Ignored on Tax Policy
Is Silver Still a Good Investment?
Somebody with that kind of pedigree in economics from three of the most prestigious universities in the United States, and the world, must know everything there is to know about how an economy works. Someone like that must be an absolute genius in economics, right?
Wrong, that is not how life works. Someone with Ben Bernanke's academic background is far more likely to make major mistakes as Chairman of the Federal Reserve, and keep making major mistakes as chairman, for a number of reasons. I'll outline the two main reasons here.
Highly Educated People Vastly Overrate Themselves
Highly educated people think they are smarter than everyone else. They usually are not. Most highly educated people are better than everyone else at memorizing what are considered to be facts, but when such people are faced with challenges which require a thought process separate from what they have memorized, they fail.
Case in point would be Ben Bernanke's belief that "political restraints, rather than a lack of policy instruments, explain why its (Japan's) deflation has persisted for as long as it has". Bernanke expressed this belief about the Japanese economy and deflation back in 2002.
When faced with same challenge as Japan, preventing deflation, Bernanke led the Federal Reserve to do the same exact thing the Bank of Japan did, lower interest rates to record low levels. Artificially low levels which likely would not occur in a free market economy, or at least not occur for more than very brief instances.
What result has Bernanke achieved by doing exactly what the Bank of Japan did? The exact same result Japan has had for the last two plus decades. Slow to no economic growth, and high unemployment rates. You can learn why low interest rates cause slow to no economic growth by reading other articles of mine on the subject, Low Interest Rates Cause Low Economic Growth, US Economy Will Mirror Japan Until Federal Reserve Raises Interest Rates, Ben Bernanke and the Federal Reserve Are Killing the World Economy.
Because Ben Bernanke thinks he's smarter than the Japanese, (how could he not be with his education?), he believed he could generate a different outcome. He cannot. His lack of a real thought process, independent from what he has memorized, prevents him from realizing this. In his mind, what he has achieved at three of the most prestigious universities in the world, makes him smarter than everyone else. So he must be right in his thinking.
In the real world, once you think you know everything, you really know nothing. You've simply closed off your mind, and will be unable to see the truth even when is is right in front of you.
Highly Educated People are Allowed to Fail Over and Over Again
The second reason someone like Ben Bernanke is so dangerous is because someone with his background will be allowed to fail over and over again. His pedigree, earned at three different prestigious universities, leads other people to believe that Bernanke actually knows what he is doing, regardless of the facts.
When the subprime mortgage crisis occurred, Ben Bernanke repeatedly said that it was contained and would not affect the larger economy. He was as wrong as possible about the subprime crisis. Since that time, everything he has said or done should have been scrutinized with a fine tooth comb. He had already clearly demonstrated his lack of knowledge about how our economy, or any economy, works.
When someone who is supposed to be an expert in a particular subject is so wrong in a prediction as Bernanke was with the subprime crisis, that person has already clearly demonstrated they do not know what they are doing. But because of Bernanke's pedigree, he has been, and will continue to be, allowed to make many, far too many, mistakes before almost everyone finally comes to the conclusion he has no idea what he is doing.
People Like Ben Bernanke Belong in Ivory Towers and Not in Real World Decision Making Roles
In both cases outlined here, Ben Bernanke's academic background at three prestigious universities is exactly what is wrong with him. His academic background makes him think he is smarter than he is, and it also makes other people think he is smarter than he is. Such people are prone to making many bad decisions, and they are allowed to continually keep making those bad decisions due to the reasons outlined above.
For more see What Should the Federal Reserve Do? How the Federal Reserve Can Fix the US Economy
Ben Bernanke and the Federal Reserve Cause United States to Lose AAA Credit Rating
Federal Reserve Preventing Job Growth by Keeping Interest Rates Too Low
Are We Headed for Deflation?
Why Congress Created the Federal Reserve
How the Federal Reserve Caused the Great Depression
How the Federal Reserve Caused WW II
10 Reasons Why Warren Buffet Should Be Ignored on Tax Policy
Is Silver Still a Good Investment?
Published by Joe Dorish
Joe Dorish is a writer who lives in the NYC area. He writes primarily about the things he is passionate about - sports, business, economics, weather and travel. He loves to drive and used to own a Limo compa... View profile
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1 Comments
Post a Commentawesome article!