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What Did Bernanke Really Accomplish?

Posted by Larry Doyle on June 21, 2013 8:23 AM |

How will the history books treat Ben Bernanke? Well, only time will tell.

Supporters will tout his integral role in saving the system.

Those who look less kindly on the Fed chair will denigrate him for: 1) his participatory role in allowing Wall Street to bring our economy to its knees, and 2) providing excess liquidity for the well positioned to take advantage of a newly defined rent-seeking economy while the rank and file American public struggle to keep their head above water.

Perhaps he is deserving of both a measure of praise and derision, but let’s take a harder look at what he really accomplished — or not — depending on how you might view things.

In terms of employment, Bernanke touts the Fed’s projection of a 7% rate as reason for his taking the foot off the QE pedal. Certainly, a lower unemployment rate is good news.

However, I am still waiting to hear Ben discuss the decline in the labor participation rate. As measured by the Bureau of Labor Statistics, the unemployment rate (U-3) topped out at 10% in late 2009 and now checks in at 7.6%. Juxtapose that with the fact that the labor participation rate has moved down from 66% to a three decade low of currently 63.4%. Not so good.

In fact, one can easily make the case that there is a significant correlation between the decline in the overall unemployment rate and the decline in overall labor participation. If a shrinking of the labor pool in America is how we now define economic progress then we have even bigger issues than I thought.

What else might we look at to gauge our economic health and to grade Mr. Bernanke and his central banking and economic advisory colleagues? How about time spent working and how much we have to show for it?

The WSJ shares some less than sanguine news on both these fronts. Just this morning, the WSJ reports that Americans worked less in 2012. Additionally, the WSJ also recently highlighted the following tell tale signs in regard to what we have in our pockets:

1. Last year the “growth in disposable personal income was the lowest since such records began in 1959, excluding the 2009 swoon.”

2.  Over the past five years through March, disposable personal income has risen 10.5% in total. That is the worst pace on record, reflecting not just a nasty recession but a lackluster recovery.

What does this all mean? While those in our major financial, political, and media centers would like to project that our economy is improving, we continue to have enormous structural issues weighing upon our nation. In fact, as Geoffrey Godbey, professor emeritus at Penn State, says in the previously referenced WSJ link this morning:

“The recovery has basically been a recovery for a tiny fraction of the population.”

So, back to the question posed in my title: “What exactly has Bernanke really accomplished over the last 5 years?”

He bought us time.

The hard questions and issues facing our nation remain outstanding. In fact, I would maintain that the liquidity injected by the Fed has  come with many costs — not the least of which is a lost sense of real urgency to address the meaningful reforms necessary in both Washington and on Wall Street.

Navigate accordingly.

Larry Doyle

For those reading this via a syndicated outlet, please visit my blog and comment on this piece of ‘sense on cents.

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Andrew

    If he only bought us time, I wonder how to distribute the cost per hour of 6 trillion over 5 years? Seems like an expensive endeavor to me.

    What he really did is debase the value of hard work and savings.

    Can we at least debunk the myth that the Fed acts independently of political influence? They repeat that often, but does anybody think that? How about we have an election for the next Fed chairman?

    Lastly, why aren’t FOMC meetings televised? If the fate of the global economy hangs in the balance, why can’t we hear what the guvs have to say about it in real time, not two weeks later?

  • fred


    The reality, Ben temporarily normalized the yield curve at lower levels. What has this accomplished? It has improved corporate profits and allowed the real estate and stock markets to establish a bottom. It has also artificially prolonged the bond market rally that began under Chairman Volker in the early 1980’s.

    It has further depreciated the value of the $US causing commodity prices to gyrate wildly which has created havoc in the emerging markets (I can vividly remember the genesis of Arab spring in Tunisia when a small business owner lit himself on fire in protest of higher taxes and food costs he could no longer afford to pay).

    The problem, normal business cycles and normally functioning markets allow an economy to purge unproductive excess and “root out” corruption with Regulatory reform.

    Given our looming fiscal problems and a total inability to develop a “political” fix, in many ways, I consider this an opportunity missed. Furthermore, any reduction in the Feds balance sheet in the future, could easily result in higher deficits (if interest rates rise in the process).

    Temporary gain for long term pain? Immigration, Medicare and Energy Policy reform are key, DC has to get it’s act together!

    • fred


      Just to follow up on the pain caused by a weak dollar, it not only impacts developing economies where the population often spends over 50% of there income on food but it also impacts us here in America.

      Check out a LT chart of the heating oil ETF (UHN), now superimpose the inverse $US (UDN), the correlation is extraordinary. Do you know the heating oil contract is very highly correlated to the cost of diesel fuel? Last I checked, cost of goods sold includes transportation expense and most of us have to heat our house in the winter.

      Although the CPI computation has been modified to reflect benign thus allowing the Fed to follow any policy objective it desires, the real damage is being done by the weakness in the dollar caused by below market interest rates and QE.

      So why are Benny and the Feds getting a free pass?

  • Mike


    He may have bought us time in the same sense that if you stay drunk you avoid the hangover. Our kids and grandkids will be left with the bill for the party. Senior citizens and other teetotalers who did not want to play his party games lost sleep from the racket they created.

  • Jim

    Great piece Larry and , yes he did buy us “time” BUT with our checkbook at massive expense w/not a whole lot to show for it in any legislation which would result w/ a long term fix.

    Instant gratification is what we’re all about now and God only knows how this will pan out for our children.

    Not good is my bet,

  • Jimmy

    The Bank for International Settlements seems to agree.

    The BIS, which counts the world’s leading monetary authorities as members, said cheap and plentiful central bank money had merely bought time, warning that more bond buying would retard the global economy’s return to health. It used its influential annual report to call on members to re-emphasise their focus on inflation and press governments to do more to spearhead a return to growth.

    Central Banks Told to Head for Exit

  • LD

    I do not necessarily agree with everything in this commentary but it makes some interesting points including:

    if the reason for abjuring low-inflation monetary stimulus is because it causes dangerous asset bubbles, then for goodness sake do it without causing asset bubbles. Little is beyond the wit of man.

    Risk of 1937 Relapse as Fed Gives up Fight Against Deflation

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