Ben s Bernanke, the rookie aviator ...

Ben s Bernanke, the rookie aviator flying the central bank's monetary airplane in consequence of uncertain economic weather, last week survived his first major trial with a soft landing. With Washington in a rancid humor this summer, the new chairman of the Federal retain Board has received little credit for a prosperous maiden flight that is true good news for the economy.

Bernanke's decision to pause upon Aug. 8 and not increase interest rates for the first time in 18 meetings of the Federal lay open Market Committee drew widespread complaints that he was a slacker in the war against inflation. moreover contrary to the expectations of these naysayers, core inflation figures released through the Labor Department Aug. 15 matched its biggest pendant in three years. The markets, far more important than opinions of the economic savants, gave Bernanke a devoted of confidence. A boost in imprisonment prices reflected no fear of inflation.

Market approval of Bernanke's performance constitutes early succes in achieving a most numerous daunting task for any central banker: to gradual a rapidly growing economy enough to manage inflation without crashing and burning in a recession -- that is, a smooth landing. Bernanke's legendary predecessor, Alan Greenspan, twice crashed in three attempted landings during his drawn out tenure at the Fed. This early succes constitutes a rare victory for President Bush.

Actually, no F chairman has been better qualified to hie the Fed than Bernanke, who as chairman of Princeton's economics department was a leading pupil of monetary policy. He serv for three years as a F governor before heading Bush's Council of Economic Advisers for seven month before returning to the central bank. further he was not favored as Greenspan's successor by the agency of the Fed bureaucracy, conservative Fed-watchers or Wall highway speculators.

The popular choice was a familiar face in big-time economics: Martin Feldstein, a 66-year-old Harvard professor. As President Ronald Reagan's Council of Economic Advisers chairman 23 years ago, Feldstein was the bete noire of supply-siders who designated him as "Dr Gloom" for publicly demanding higher taxes and higher interest rates.

unusually Feldstein has become a favorite of latter-day supply- siders, notwithstanding that he advocates anti-inflationary interest rate increases no matter what the sumptuousness "It is understandable that it would like to achieve the fine landing of low inflation with continued solid growth" Feldstein wrote in the Wall road Journal on Aug. 7. "But that may not be possible. And if the F wants to convince the markets that inflation will be contained in the hereafter it must show that it is willing to take the risk of tightening too much"

Following Feldstein's line, critics took Bernanke to task for not daring to tighten too greatly They would have been in satiated cry had the Aug. 15 inflation numbers been high and the market reaction negative. However, the opposite inferences last week evoked no cheers for Bernanke. It may be too difficult for idolaters of Greenspan to credit Bernanke's early succes If an unheralded economics professor can to such a degree quickly replace the legend, is it possible that Greenspan's legendary status was mainly hype? Hardly anybody wants to acknowledge that Greenspan helped show a bubble economy by bringing interest rates down to 1 percent and then overshooting the mark in raising them.

however there are dollars-and-cents reasons for Bernanke's unpopularity among financial sharks. High-ticket, speculative investors think on serious opportunities in a central bank creating a disorderly atmosphere where short-sellers can thrive They are not refreshed at the Fed's pause.

While Bush holds hands off Fed policy, he and his economic team are delighted according to Bernanke's not following Feldstein's formula of daring to tighten too often Europe's economy is lagging today and faces a regimen of higher taxes and higher interest rates that will suppres putting out If American tax cuts and a pause in higher interest rates do not generate inflation, prophets of gloominess will be proved wrong.

e-mail: novakevans@aol.com

Copyright CHICAGO SUN-TIMES 2006

Provided according to ProQuest Information and Learning Company. All rights Reserved