Obama Re-Appoints Bernanke; Smart Choice for Now

President Obama today declared he was going to re-appoint Ben Bernanke chairman of the Fed. It's a good move, notwithstanding the usual critics who not only want Bernanke gone, but the whole Fed abolished.

Why is this a good move:

1. Bernanke has shown over the last two years that he has the experience and creativity to deal with the greatest economic crisis since the Great Depression. Bernanke is a student of the Great Depression and I heard him say in an interview that he would do everything in his power to prevent the world from descending into another one on his watch. That's the kind of person I want at the helm.

2. Making a change now would be a mistake. Bernanke's actions, along with the Treasury and the FDIC have stabilized the economy. Why risk changing things at this point. The last thing the economy needs is someone new to come along who precipitiously rocks the boat.

3. Bernanke has the guts to stand up to his critics. The Fed exists as an independent body, governed by the US Government but not beholden to it. Like the Supreme Court, the moment it is controlled by the politicians, it ceases to become effective. When Congress asked that the Fed allow itself to be audited, Ben said "no." Smart move. The last thing we need are Senators and Congressman mucking around more in financial policy.

Now, I read the message boards and realize that many posters (I believe a small, vocal minority) believe the Fed is involved in some conspiracy to take over the world, or is working to erode our constitutional rights. Of course this is absurd.

The fact is that before the Fed, when the US was on the gold standard, it faced many more deeper and prolonged depressions and recessions than it has faced during the tenure of the Fed. Research has shown that a gold standard or some other monetary fiat is not a panacea and will not solve economic cycles.

So, you can get rid of Ben and ban the Fed, but be prepared for more frequent and more intense recessions/depressions.

You should also be prepared for bankers to exercise even greater power on the government. In the early days of the United States, banks issued their own currency. And when the Treasury was having fiscal problems, it went to the bankers directly for a bailout.

Many criticize the Fed for "printing" money. Yes, it can regulate the supply of money in the economy and in today's case, has increased that supply. Where's the inflation? The last time I looked everything was getting cheaper except for oil and healthcare. But wait, many critics believe those two areas should be left alone. The system we have works right? Your health insurance is more affordable today than it was ten years ago? There is plenty of oil to last forever.

The point is there will always be Monday-morning quarterbacks, there will always be critics. Bernanke deserved a second term and I wish him well. Now if only he'd get those savings and cd rates up.