Thursday, October 8, 2015

Krugman Slams Bernanke

Paul Krugman writes at NYT on Ben Bernanke's new book, The Courage to Act: A Memoir of a Crisis and Its Aftermath:
Did The Fed Save The World?
I’m only part way into Ben Bernanke’s book, but I wanted to play devil’s advocate about the book’s central thesis — not to criticize BB, or question the job he did, but as a way to provoke thought about what lessons we should learn from the crisis of 2008...I’m not persuaded that the real difference between 2008 and 1930-31 (which is when the Depression turned Great) lies in central bank action, or related bailouts.
Not to criticize BB? Don't believe it for a minute. Krugman is hitting at the belly of the book and the core of Bernanke's operations while he was Fed chairman.

I suspect that the Krugman punches come about because Krugman is mentioned three times in the book and twice in a subtle unfavorable fashion. In other words, Ben Bernanke is not Lynn Greenberg.

The first Bernanke hit comes when he points out that Krugman, during the crisis, thought it might be necessary to nationalize some banks. The second hit comes when Bernanke thought he was treated unfairly by Krugman in a column. Subtle punches, but punched nonetheless.

In a breakdown of this bout, I give Krugman the edge for being the more powerful puncher with sharper, direct hits. Krugman is throwing serious Keynesian punches at Bernanke and hails fiscal policy over Bernanke's outrageous bailout of the crony parts of Wall Street. But because they are both Keynesian punchers, they are both, in a sense, punching with their cup protectors off to the side, which is to say they are way off about the true nature of the crisis and why it finally corrected.


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