Bernanke reinvents central bank to avoid catastrophe
The current financial crisis—perhaps the biggest since the Great Depression—has turned Federal Reserve Chairman Ben Bernanke into a reluctant revolutionary. The quiet academic who wanted to make the post of Fed chairman less heroic is leading a dramatic expansion of the central bank's role. In the process, he is setting the stage for the next big boom—or bubble.
In the short run, Bernanke is waging a war to keep the financial markets from collapsing. The biggest move so far: On Sunday, Mar. 16, the Fed brokered the fire sale of troubled investment bank Bear Stearns to JPMorgan Chase and announced that it would be willing to lend directly to major Wall Street brokers, which have never before had access to loans from the central bank.
The two moves represented a new level of direct Fed involvement in the financial markets and made it clear that Bernanke would take any step needed to prevent a financial catastrophe. These maneuvers should work, says Julian Jessop, chief international economist of London-based research firm Capital Economics. "At the end of the day, the Fed can provide a lot of support," he says. "It certainly won't prevent a sharp downturn, but it should prevent a debt deflation spiral."
Are Bernanke's actions actually helping the economy? By helping the Bear Stearns financial corporation, he is just keeping the weak afloat. The mass surge of money he is pumping into the economy is simply increasing inflation; therefore, consumers and bankers are slow to release their own money because they know that they are paying more for things than they normally would. The picture is best displaying Bernanke in front of red because his actions
destroying the U.S. dollar like any foreign communist would do. His actions are far too extreme to render a stable economy immediately after this "R" word is over.
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