It’s been interesting watching the evolution of Ben Bernanke’s thinking with regard to monetary policy, and its potential role in fighting a crisis.
At one point, he was adamant that in previous crises (like in Japan, and the Great Depression) the ongoing failure to create growth was the result of bad central banking.
But in recent speeches — perhaps because he’s watched the non-impact of creative Fed policies like QE2 — he’s been singing the praises of fiscal policy instead.
And he’s sticking to that.
Alexander Bolton at The Hill reports that in a closed-door meeting with Senate Democrats, he said he was done stimulating.
But Bernanke said he’s done all he can to boost confidence through monetary policy, putting the ball in Congress’s court.
“He’s said he’s done all he can do on the monetary side, and I think it’s probably accurate,” said Senate Democratic Whip Dick Durbin (D-Ill.), who attended the meeting. “Now it’s up to us.”
Now, Bernanke could be overstating his opposition to more monetary policy in hopes Congress will do more to ask.
But it is interesting that he’s going short monetary policy at the same time the analyst class is going gaga over super-aggressive moves, like Nominal GDP targeting.
Also in the meeting he said that next week the Fed would submit ideas on what to do with the housing crisis.