It is said that those whom the Gods intend to destroy they first drive mad. Is it not madness to reappoint to a second term leading the most important financial and economic institution on the planet, the Federal Reserve, a man with a forecasting record as disastrous as that of Ben Bernanke?
As a follow-up to my recent post on economic forecasting, below is the original Washington Post article by staff writer Nell Henderson, describing the intellect of Ben Bernanke in action during his presentation before Congress just prior to his nomination by President George W. Bush to succeed Alan Greenspan as Fed Chairman.
Read this article in wonderment, and try to comprehend how the author of such a catastrophic forecast on the implications of the housing price boom in the U.S. could be chosen by President Barack Obama to serve another term.
Bernanke: There’s No Housing Bubble to Go Bust
Fed Nominee Has Said ‘Cooling’ Won’t Hurt
By Nell Henderson
Washington Post Staff Writer
Thursday, October 27, 2005; Page D01
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.
U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.
Bernanke’s thinking on the housing market did not attract much attention before Bush tapped him for the Fed job Monday but will likely be among the key topics explored by members of the Senate Banking Committee during upcoming hearings on his nomination.
Many economists argue that house prices have risen too far too fast in many markets, forming a bubble that could rapidly collapse and trigger an economic downturn, as overinflated stock prices did at the turn of the century. Some analysts have warned that even a flattening of house prices might cause a slump — posing the first serious challenge to whoever succeeds Fed Chairman Alan Greenspan after he steps down Jan. 31.
Bernanke’s testimony suggests that he does not share such concerns, and that he believes the economy could weather a housing slowdown.