Bernanke Is Time Person Of The Year

The last time we mentioned Time's person of the year was when we noted Time for picking Putin given our writings that the Russian economy was a bubble. Indeed it was. Time was just a tad off base as the Russian economy collapsed.

Bernanke did save the American and to a lesser extent the global economy from complete collapse for some period of time. If you have been with us for long, we have written repeatedly that the Fed does not control the economy. A ridiculous myth believed by many in the financial community has always been that the Fed indeed does control the economy. That is preposterous. The Fed has control over one simple data point. That would be credit. If you understand this statement, you realize that the Fed cannot then be responsible for the economic collapse before us. Or for an economic recovery. And, in fact, the global economy has not recovered. It continues to shed jobs while economic activity remains very muted.

The Fed does the same thing cycle after cycle after cycle. It expands the availability of credit to goose the economy and contracts it to slow the economy. If the Fed does the same thing each and ever cycle, yet the economic response is different, one of these days maybe the mainstream financial press and economists will learn to actually understand underlying fundamentals to explain the economic dynamics or what type of recovery is possible.

When the only tool you have is a hammer, everything problem looks like a nail. The Fed is using a hammer in an attempt to fix a problem that needs a wrench.

Bernanke most definitely has been the most focused upon international figure in 2009. But I would argue most of that focus is infamous rather than famous. Time's honor again is a dubious one. But then what else would we expect from Time? Does a semi-paparazzi magazine actually understand anything about economics or monetary policy?

Link here.