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Thursday, January 28, 2010

Paul Krugman steps up to the plate for Bernanke, swings ... and misses

Demand Side has had its bone to pick with Paul Krugman many times. We are happy at least one economist was willing to call himself a liberal during the Bush years. Unfortunately, it is not so clear to us that it was the right economist.

Supporting Bernanke with these words is evidence that the two are fellow Princetonians, not that these arguments are valid.

Bernanke's view of the Depression is deeply flawed. (See Steve Keen's recent work at Debtwatch.) His so-called "aggressive, unorthodox tactics" were old-fashioned lender of last resort to whatever bizarre innovation the banking sector came up with. It is the great danger that this backstopping will continue and extend to the gamut of derivatives traded in dark markets when they -- as they will -- also come a cropper.
Paul Krugman: The Bernanke Conundrum
by Mark Thoma
Paul Krugman's view on Ben Bernanke's reconfirmation as Fed Chair:

The Bernanke Conundrum, by Paul Krugman, Commentary, NY Times: A Republican won in Massachusetts — and suddenly it’s not clear whether the Senate will confirm Ben Bernanke for a second term as Federal Reserve chairman. That’s not as strange as it sounds: Washington has suddenly noticed public rage over economic policies that bailed out big banks but failed to create jobs. And Mr. Bernanke has become a symbol of those policies.

Where do I stand? I deeply admire Mr. Bernanke, both as an economist and for his response to the financial crisis. ... Yet his critics have a strong case. In the end, I favor his reappointment, but only because rejecting him could make the Fed’s policies worse...

Mr. Bernanke is a superb research economist..., his academic expertise and his policy role meshed perfectly, as he used aggressive, unorthodox tactics to head off a second Great Depression.


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