Ben Bernanke is in his second term as chairman of the Federal Reserve. He was nominated for his first term by George W. Bush. He was nominated for his second term by Barack Obama. Some call this continuity. I call this the difference between Bush and Obama. Their choice is the same when it comes to picking the most powerful guy in the world, at least when it comes to economic policy.
Bernanke’s second term will end on January 31, 2014. As I write this, that is less than 9 months away. Most people assume that Obama will nominate him again if Bernanke chooses to stay. The bigger question is whether Bernanke is willing to accept the position for a third term.
His decision will tell me a lot about the man. I am always curious about politicians and whether they are corrupt and lying or just ignorant. Sometimes it is a combination of both. I am really not sure with Bernanke. I don’t know if he believes the things that are coming out of his mouth.
I think his decision about whether to retire from the Fed will tell us a lot. If he stays on as chairman, that tells me he doesn’t really know how bad the economy is. He doesn’t understand that his policies have been mostly wrong. He doesn’t understand that his artificial stimulus is going to come crashing down at some point.
On the other hand, if Bernanke announces his retirement, that will be a signal that he knows more than what he says. Or, stated differently, he knows differently from what he says. Or, stated differently still, he is a liar. It means he has been playing the American people for a bunch of ignorant fools. It means he knows that there is serious economic trouble up ahead and he doesn’t want to be involved in it or blamed for it. It means he is getting out while he can.
It will also be interesting to watch if Bernanke does announce that he is not seeking a third term. This could spook the markets for more than one reason. Some will see it as I do that he knows there is trouble ahead and he is getting away from it. Others will see it as a lack of continuity. Others will see it as a possibility that the new chairman might pull the rug out from under investors and not continue with the massive monetary inflation. There will be fear that the next chairman will not fly Bernanke’s helicopter.
Perhaps a Bernanke retirement announcement will be the catalyst for a new downturn. There is trouble ahead and oftentimes it just takes one event to trigger everything.
This will be an interesting story to follow as we get closer to the end of 2013.