The case against Bernanke

December 4, 2009

Some self-incriminating evidence (Bernanke in his own words) supplied by David Leonhardt of the NYTimes:

* July 1, 2005 (responding to a CNBC question about whether there was a housing bubble and whether it could cause a recession): “It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

* May 17, 2007: “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

* July 18, 2007 (a month before the subprime mortgage market began having problems and five months before the recession began): “Employment should continue to expand. … The global economy continues to be strong. … Financial markets have remained supportive of economic growth.”

* Feb. 28, 2008: “Among the largest banks, the capital ratios remain good, and I don’t expect any serious problems … among the large, internationally active banks that make up a very substantial part of our banking system.”

* June 9, 2008 (six months into the recession and three months before the financial panic began): “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

* May 5, 2009: “Currently, we don’t think [the unemployment rate] will get to 10 percent.” (Five months later, the rate reached 10.2 percent.)

3 comments

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The fact that Mr. Bernanke is/was wrong on these issues is not the point. What IS important is that, with all the information and analysis and timely statistics the Fed generates and Mr. Bernanke views on a daily basis, these guys STILL can’t predict the future. Not a year from now, not six months from now, not next week or even this afternoon. If the Fed, with all these resources, can’t figure out the current path of the US economy, then who can and why should we believe them? Crystal balls only exist in fairy tales.

Posted by gotthardbahn | Report as abusive

They can’t predict the the future of the economy a couple months from now, but what the government CAN predict is the environment and global temperatures 100 years from now.

Posted by Rob | Report as abusive

The truest words I have heard in weeks, gotthardbahn! Ever consider running for office? lol