Monday, October 24, 2005
Today Ben Bernanke was announced as the successor to Federal Reserve Chairman Alan Greenspan and the Dow Jones jumped 170 points. Wall Street is voting with their dollars and it is clear they like the new man. This morning before the announcement, I was asked by a friend about the strong rumors that Bernanke was going to get the job. I said that ever since he was appointed Chairman of the Council of Economic Advisors, he was considered the front-runner for the job, but I was surprised that he was apparently getting it, and I thought it might take awhile to get used to him. He was a virtual unknown among investment people even 4 years ago. He had built a strong reputation in academic circles while at Princeton University for his study of the Great Depression and the Fed's role in it. My friend said what is your gut feel of the guy? I said three things come to mind immediately. He is said to be utterly brilliant, he is a strong believer in encouraging the private sector to grow the economy instead of the government, and he is a bit of an unusual duck. I'm guessing the stock market's uptick today was its approval that his positions are considered to be along the lines of Alan Greenspan's. He is considered by many as a supply side proponent, meaning he favors low taxes on income and capital gains. His brilliance was on display when he began talking about the possibility of deflation in 2002 and 2003. It is dangerous stuff to talk about deflation because the word in many economists' minds has a direct link to the depression. When he was not shouted down by the economic elite of this country, it was clear that, even though I did not know who he was, the power-elite did. I remember I had the clear impression that his statements were so bold that he would not be saying them if they did not have the blessing of Alan Greenspan. When I looked into who Ben Bernanke was, I found a somewhat unusual man for the job of operating in the public light. He wore a beard and did not like to wear suits. He wore cowboy boots and rode a motorcycle. I remember the Wall Street Journal commenting that if he were to become Fed Chairman things would be a whole lot different during Fed reports on capitol hill. Whereas Mr. Greenspan would humor every question and drone on for indeterminable minutes on the esoterics of economics, Ben did not suffer fools well, and his speaking style was short and . . . short. Today's Wall Street Journal had a funny piece about President Bush noticing that Ben had on light socks with his dark suit at a formal occasion and suggesting to him that black socks might be more appropriate. At the next Council of Economic Advisors Ben arrived early and passed out light socks to all the members, who were then wearing them when the president arrived. Ben Bernanke is a character, but he is no fool, and he possesses one of the great minds of our time on economic theory and how to apply it in the real world. I have been a fan of Alan Greenspan's since the beginning. I remember that rumors appeared soon after he was appointed Fed Chairman that outgoing chairman Paul Volker did not think he was tough enough to handle the politics of the job. I'm glad Mr. Volker was wrong. The same questions will, no doubt, be asked of Ben Bernanke. Time will tell, but most guys I know who ride motorcycles are not all that easy to push around. If white socks can give the market a boost, count me in, Ben.
Labels: The Fed