One Man’s Hero Is Another Man’s Goat
Jack Welch, former Chairman and CEO of General Electric, gives CNBC his opinion of Ben Bernanke: “I think he saved the system, I think he’s a national hero,” Welch said. “I think Bernanke seems to be a guy operating on a clear intellectual framework. This guy’s done a hell of a good job.”
Perhaps Bernanke did save the system, at least for the moment, but the question remains: what do you mean by “the system”? If you mean an economy dominated by ill-managed, irresponsible big banks and other financial institutions (e.g., Fanny, Freddie, AIG) backed up by an ill-managed, irresponsible central monetary authority that stands ready to bail out these high-stakes gamblers, then, yes, Bernanke has saved the system so far. It may still crumble, however. This house of cards is surely not fated to last as long as the pyramids of Egypt.
Welch thinks Bernanke “is operating on [sic] a clear intellectual framework.” I agree. Bernanke’s career as a mainstream macroeconomist is a matter of public record. Inspecting his writings and his speeches over the years, one sees that with regard to macroeconomic stabilization, Bernanke believes in the Fed’s ability and its right to act as a monetary central planner for the U.S. economy (and to a large extent, for the world economy, owing to America’s dominant position in global trade and finance). He has never met a recession or depression he thinks cannot be prevented or moderated and reversed by sufficiently great inflation of the money stock. And he definitely practices what he preaches, as shown beyond all doubt by this evidence on the Fed’s recent doubling of the monetary base.
Welch’s approbation of Bernanke’s “clear intellectual framework,” however, must be taken with a grain of salt. What does Jack Welch know about macroeconomics or optimal monetary policy? In making such pronouncements, he follows in a long tradition of huffing and puffing about economics, politics, and all sorts of other things by men whose only proven talent is their ability to run a big company. In 1970, Herman Krooss brought forth a book about such pronouncements called Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920s-1960s. If this tome does not convince you that leading business executives tend to make fools of themselves whenever they make statements about anything other than their own businesses, then probably nothing can convince you.