Home >news >world >Ben Bernanke starts blogging, goes after his critics

The big news in finance on Monday is that former Federal Reserve chairman Ben Bernanke has started a blog at the Brookings Institute.

His first post was an introduction and general disclaimer—“my opinions are my own and do not necessarily reflect the views of my former colleagues at the Fed."

His second post, titled “Why are interest rates so low?", is a more technical look at the current interest rate environment globally which goes some way to explaining what it is that the Federal Reserve can and cannot do to influence real interest rates in the economy.

That is not to say that it is a dry text. Civilian Bernanke is not chained by the polite politics of high federal office anymore, and is willing to use his freedom to take some shots at his longtime critics.

Bernanke’s first appears to be aimed at Senator Bob Corker (R-TN), among others.

While not naming Corker in the post, Bernanke says “When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus" (to use the words of one senator) by keeping interest rates low" which is an accusation Corker made in March 2013 when Bernanke was giving his semi-annual testimony to congress.

The post then goes on to refute these accusations, calling them “confused critiques" of Fed policy.

Bernanke writes, “I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative. A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments.

“The slowing economy in turn would have forced the Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent years, several major central banks have prematurely raised interest rates, only to be forced by a worsening economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns."

Corker’s criticism of Ben Bernanke’s Fed is two years old. If Bernanke is to use his blog to blast all of his former critics, he will have much to write about, and we will have much to look forward to reading. Bloomberg

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