Bernanke's Test: Ben Bernanke, Alan Greenspan, and the Drama of the Central Banker [NOOK Book]

Overview

The consensus on Alan Greenspan's performance as Fed chair used to be extremely positive, but more and more it's been called into question. Now, 2008 has seen Ben Bernanke in the eye of a storm that was created largely during Greenspan's tenure. His management of the bubble of all bubbles will be a decisive factor in whether this crisis will be limited in its impact on the real economy or whether it directly leads to a major recession. This is ...
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Bernanke's Test: Ben Bernanke, Alan Greenspan, and the Drama of the Central Banker

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Overview

The consensus on Alan Greenspan's performance as Fed chair used to be extremely positive, but more and more it's been called into question. Now, 2008 has seen Ben Bernanke in the eye of a storm that was created largely during Greenspan's tenure. His management of the bubble of all bubbles will be a decisive factor in whether this crisis will be limited in its impact on the real economy or whether it directly leads to a major recession. This is Bernanke's Test.

In examining the challenges facing Bernanke, author Johan Van Overtveldt reviews Greenspan's long record as Fed chair, as well as Ben Bernanke's career as an economist prior to replacing Greenspan. The book offers much-needed historical context by exploring the role and reach of the central banker, and how former Fed chairmen — Benjamin Strong, William McChesney Martin, Arthur Burns, and especially Paul Volcker — dealt with the same complex issues Bernanke faces today.
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Editorial Reviews

Publishers Weekly
Though a phrase like "the drama of the central banker" might once have drawn snickers, today the chairman of the Federal Reserve has become something of a star. This contemporary history, from the 1970s chairmanship of Paul Volcker on, provides an excellent introduction to the current financial crisis. Easy credit in the early-mid 2000s catalyzed the subprime mortgage debacle, but Dutch author and economist Van Overtveldt (The Chicago School) defends the Fed throughout, arguing that low interest rates kept Japanese-style deflation at bay. It's early for predictions, but Van Overtveldt portrays Bernanke as the man for the season: an academic focused on the Great Depression, Bernanke became a member of the Fed's Board of Governors in 2002. Though conventional, Bernanke's present approach-further cutting the federal funds rate to spur liquidity, keeping his hands off interest rates-and belief in regulation, set him apart from Greenspan, while his commitment to transparency and clear communication align him with the new administration. Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
Library Journal

In this study of the Alan Greenspan and Ben Bernanke Federal Reserve eras, Overtveldt (director, VKW Metena, Belgium) provides insight into the current financial crisis. He says that Greenspan was generally successful in keeping the economy vibrant and ameliorating financial shocks but that his use of low interest rates and his opposition to financial regulation fostered the growth of the housing and credit bubble. In 2007 the bubble burst, becoming first a liquidity and then a solvency crisis that could lead not simply to a severe recession but to a depression. Overtveldt examines Bernanke's life and economic thinking, especially on the Great Depression, to show he was equipped for this crisis. Though he admits that it is too early to predict success, he praises Bernanke's early recognition of the crisis, his interest-rate cuts, the innovative ways he injected liquidity into the system, and his push for greater transparency and regulation. Overtveldt's serious examination of how we got into this mess and what the Federal Reserve can do to get us out brings clarity to this period of financial chaos. Highly recommended for all interested readers, many of whom will have liked Mark Zandi's Financial Shock.
—Lawrence Maxted

Kirkus Reviews
Should we feel better that the chairman of the Federal Reserve is an authority on the Great Depression?Perhaps so, suggests Belgium-based economist Van Overtveldt (The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business, 2007)-if only because Ben Bernanke is more sensitive to market movements and trends and more forthright in his assessments of them than his predecessor, Alan Greenspan, whose gnomic public utterances were "usually vague and restrained." The central bank that both headed is, at least as ideally conceived, responsible for helping maintain the overall health of financial conditions that drive the economy. Yet the power of the Fed has grown, perhaps unintentionally, and it has become less accountable, more secretive and obscure, and perhaps less effective. Van Overtveldt examines this evolution in light of the current financial crisis, noting provocatively that whereas Greenspan was once viewed as something of an economic magician and an exemplary manager of money, "recently . . . there has been a considerable re-evaluation of some of his decisions." As a regulator, the author writes, Greenspan was mediocre. But previous efforts to regulate diligently, guided by Keynesian views that neglected the supply side, were none too successful either, impeded by the politics of self-interest and greed. Van Overtveldt's enumeration of the succession of crises that Greenspan oversaw will make the reader wonder why anyone ever held him in esteem; this account also does much to explain the actions that Bernanke has been taking of late. The author's analysis of savings rates, deficits, monetary contraction and other matters, backedby ample graphs and plenty of hard data, is not for the numerically faint of heart, but it is accessible. Van Overtveldt is particularly clear when he examines pronouncements on the part of both Bernanke and Greenspan that he considers "spectacularly wrong."A timely study that will help readers interpret the headlines, though it offers little comfort to those hoping for a quick solution to the present mess.
From the Publisher

"Here at last is a book about the US Federal Reserve that is neither impossibly technical nor populist. The author is obviously extremely familiar with the American financial and political scene.... Van Overtveldt steers a healthy middle course." — Samuel Brittan, Financial Times

"An excellent introduction to the current financial crisis....Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer.” — Publishers Weekly

"A timely study that will help readers interpret the headlines." — Kirkus Reviews

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Product Details

  • ISBN-13: 9781572846500
  • Publisher: Agate
  • Publication date: 3/1/2009
  • Sold by: Barnes & Noble
  • Format: eBook
  • Pages: 256
  • File size: 700 KB

Meet the Author

Johan Van Overtveldt, PhD, is the director of the Belgium-based think tank VKW Metena, which works on a breadth of economics-related issues. Formerly editor-in-chief of the Belgian newsmagazine Trends, he has written several books in Dutch, and contributes to the Wall Street Journal Europe and other publications. He is the author of The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business.
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Table of Contents

Introduction 9

Pt. 1 The Stage Is Set: The History of the Fed and The Undertaker's Risk-Management Approach 19

Ch. 1 The accidental creation of a powerhouse 23

Ch. 2 Volcker's inflation-fighting crusade 35

Ch. 3 High praise for a controversial chairman 47

Ch. 4 The education, private life, and ascent of Alan Greenspan 55

Ch. 5 The principles behind the rules 71

Ch. 6 Avoiding deflationary paralysis 81

Ch. 7 Regulatory refusal 89

Ch. 8 Consumption gets out of hand 95

Pt. 2 Ben Bernanke and His Intimate Knowledge of the Great Depression 111

Ch. 9 Bernanke begins 115

Ch. 10 The bubble controversy 133

Ch. 11 A genuine free marketer 139

Ch. 12 A controversial governor 147

Ch. 13 The subprime crisis sets in 161

Ch. 14 A "once-in-a-generation" event 171

Ch. 15 The odd twins 183

Ch. 16 Falling like autumn leaves 193

Ch. 17 Europe collapsing 203

Ch. 18 Crisis drivers 213

Epilogue 233

Acknowledgments 247

Bibliography 249

Endnotes 261

Index 279

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