The Courage to Act: A Memoir of a Crisis and Its Aftermath

Review of Bernanke’s "The courage to act" by Paul F. Ross Economic events of the magnitude of the 2007-2009 world recession affect everyone’s lives worldwide, actually affecting generations of lives, and occur only a few times in a century. In this instance, two or three American leaders in finance in federal government roles (Bernanke, Geithner, Paulson), backed up by active, informed, energetic staffs, the support of two US Presidents, and the cooperation of ____________________________________________________________________________________Bernanke, Ben S. "The courage to act: A memoir of a crisis and its aftermath" 2015, W. W. Norton & Company, New York NY, xix + 610 pages____________________________________________________________________________________central bankers in several nations, acted in innovative ways that avoided the collapse of the US and world economies illustrated most recently by the 1929-1933 collapse of American and world economies in the Great Depression. The 2007 – 2009 rescue was accomplished despite limits in authority prescribed by US law and regulations as accumulated in over a century, the prescriptions intended to protect economies and their actors from self injurious practices. Bernanke’s memoir of the 2007-2009 economic crisis and its aftermath, seen from his position as chairman of the US central bank, the Federal Reserve, needs to be reading fare for every educated leader in the world. It is a remarkably clear description of economic events in language every thoughtful person can understand. Bernanke describes his youth and preparation for serving as chair of the US Federal Reserve in 100 pages, recalls events in the first four years of his duties as chair in 300 pages, and recalls events in the second four years of his duties in 100 pages. See the key events and their dates in Table 1. Clearly his account is a memoir about those eight years as chair of the US Federal Reserve, not an autobiography. The lines of Table 1 list all the major financial events we readers “experienced” reading our newspapers from 2007 to 2014 while the page count conveys the emphasis that Bernanke assigns to each event. Several book-length accounts have been published describing and explaining the events of 2007-2009 and later, Sorkin (2009), Paulson (2010), Lowenstein (2010), Morgenson and Rosner (2011), Blinder (2013), Geithner (2014), and now Bernanke (2015) among them. My reviews of each of these books – except the Paulson account which I have not read – can be found on Amazon.com. This reader’s view is that the US and the world are lucky to have had the leaders of the US financial agencies, especially the US Treasury Secretaries and the US Federal Reserve, in place at the time of these events. Their insights leading to the use of not previously tried methods, their cooperation with and trust in each other, their shared New Keynesian understanding about how to rekindle failed financial and economic functioning, their dedication to winning consensus with respect to next steps, their insights about the importance of communicating clearly the essential goals and processes leading to those goals, and their understanding of the global effects of events in the US and elsewhere were key contributions to avoiding (so far … for the US) the deflation and economic stagnation that occurred in the 1929-1933 crisis and the subsequent Great Depression. While reading Bernanke’s account in 2015, it is ever so clear that the US and world have not yet accomplished fully functioning economies. The world’s economies are still suffering the after effects of the 2007-2009 downturn along with continuing challenges following from an aging world population, declining birth rates, and the stresses of migrations motivated by war. The debts incurred as governments have taken on their roles in stabilizing financial systems and economies remain to be handled. Still, from this reader’s perspective, Bernanke, Geithner, Paulson, and many other key players in the events described by Bernanke win admiration and thanks for helping the US and the world avoid the long sad consequences experienced in 1929-1933 and later.Table 1Key events in the 2007-2009 economic crisisPage Date Event 1 Bernanke describes his background/preparation for the USFed chair116 1 Feb 2006 George W. Bush names Ben Bernanke as chairman of the USFed133 9 Aug 2007 BNP Paribas barred withdrawals from three investment funds190 9 Jan 2008 Bank of America buys Countrywide Financial217 14 Mar 2008 USFed lends to J.P.Morgan Chase and it buys Bear Stearns245 5 Sep 2008 Fannie Mae and Freddie Mac taken into US conservatorship268 15 Sep 2008 Bank of America buys Merrill Lynch269 15 Sep 2008 Lehman Brothers declares bankruptcy284 16 Sep 2008 USFed lends to AIG to avoid its failure300 18 Sep 2008 announce USFed currency swap lines with European central banks310 19 Sep 2008 GoldmanSachs-Morgan Stanley made “bank holding companies”323 25 Sep 2008 Washington Mutual is purchased by J.P.Morgan Chase335 3 Oct 2008 Troubled Asset Relief Program (TARP) signed by President Bush348 8 Oct 2008 USFed and central banks elsewhere cut interbank rate to 1.5%332 9 Oct 2008 Wells Fargo purchase of Wachovia approved by USFed353 13 Oct 2008 Secretary Paulson asking, nine good-bank CEOs accept TARP loans356 4 Nov 2008 Barach Obama wins US presidency over John McCain418 Dec 2008 USFed purchased Fannie Mae and Freddie Mac debt397 Dec 2008 TARP funds loaned to GMAC, General Motors' financial arm418 Jan 2009 USFed purchased mortgage-backed securities – Quantitative Easing #1383 20 Jan 2009 Barach Obama sworn in as US President392 Jan 2009 Geithner becomes Secretary of the Treasury394 10 Feb 2009 Geithner starts “stress test” for banks422 1 Mar 2009 USFed increases AIG support422 2 Mar 2009 AIG announces $62 B 4th quarter loss bringing year’s loss to $99 B422 15 Mar 2009 $165 M bonuses to executives in AIG Financial Products Division429 25 Aug 2009 Barach Obama names Ben Bernanke for second term at USFed476 Oct 2009 Greece reports its debt considerably higher than previously disclosed479 23 Apr 2010 Greece asks European Union for help for its debt situation490 Nov 2010 USFed announced Quantitative Easing #2531 Sep 2012 USFed announced QE #3, open ended, half buying Mortg. Backed Sec.562 30 Jan 2014 Ben Bernanke departs US Fed chair563 3 Feb 2014 Janet Yellen becomes US Fed chair579 end of text This memoir is a fascinating story about Bernanke’s life events leading to his chairmanship of the USFed, the issues faced and actions taken to manage the US and world economies between 2006 and 2014, the influences affecting these economies both within and outside the control of the “monetary” [USFed and other regulatory agencies’ influence on money supply] and “fiscal” [US legislative and executive branches’ influence on taxes and government spending] responsibilities of government, and the look ‘behind closed doors’ as USFed policy is developed … a step in the direction of transparency that Bernanke is convinced is needed and is so effectively enhanced by him as compared with US historical precedents and central bank practices today in other countries. While the reader can expect some self-justification to influence the stories of any author who was a key player in the events (Bernanke, Geithner, Paulson), it is this reader’s impression that Bernanke uses more words in clear defense of his actions and in describing the pain of being the focus of frequent criticism – what public servant, what leader, has not felt that pain !!! – than I recall from Geithner, for example. Surely we’re seeing individual differences in toleration for the criticism that comes to those exercising publicly visible responsibilities. Bernanke’s sources are not cited in the style used in conventional histories. Rather he points to active, ongoing, online data sources available from a variety of government agencies … very valuable to those wishing to push what they’ve learned from Bernanke into future tracking of financial matters and USFed activities. The reader is left to imagine that Bernanke used his personal journal or diary, his personal email archive, and probably some discussions with others in his personal and professional life space to recall and describe accurately what we read. That Bernanke realizes the importance and power of communicating the current circumstances and current direction of policy actions to many audiences simply suffuses this account. ‘Should we use this phrase, or that phrase?’ in our press release or speech seems to have been the preoccupation of Bernanke himself and of whole committees. All of us know of the famous volatility of the stock markets. We also know that the radio-TV and print analysts immediately – an hour later, a day later – report to us the specific cause of the rise, or the fall, of the Dow Jones or the price of a particular stock. Have you ever, like me, thought this is pure story telling, absolutely without foundation? Bernanke and the FOMC (Federal Open Market Committee, the USFed’s policy-guiding group) believe the importance of ‘the word, the phrase’ and spend extraordinary effort and time to ‘get it right.’ As a behavioral scientist, having done much data collection depending for its insights and accuracy on the wide understanding and use of particular words, I know this Bernanke-FOMC viewpoint about the precise meaning/connotation of particular words to be (a) widely held, (b) measurable for its influence although it remains unmeasured, (c) largely false, and (d) an extraordinarily ‘thin reed’ with which to accomplish the leverage for guiding national and worldwide decision-making. The longstanding habit of trying to find meaning where there is none is characterized beautifully in a story Bernanke repeats (p 546). French diplomat Talleyrand and Prince Metternich of Austria were arch rivals of the early nineteenth century. When Talleyrand died, Metternich was reported to have said, “I wonder what he meant by that?” Kahneman (2011), psychologist and behavioral economist at Princeton, assembled research showing that decisions made using past experience and trusted habits (“thinking fast”) are often less fruitful with respect to outcomes achieved than decisions based on thoughtfully assembled information about the issues at hand (“thinking slow”). Appreciating this truth, this reader entered this read understanding that Bernanke is a ‘numbers man,’ ‘solidly grounded in empirical research,’ and very likely to have been tying USFed decisions to carefully assembled empirical data and forecasts using statistical-mathematical models being fed steady streams of carefully observed data describing many variables. My expectation was not upheld by this account. While Bernanke frequently references the dedicated and brilliant staff work done at the USFed and Treasury (work that must have its parallels in the government halls of the Congressional Budget Office, the Bureau of Labor Statistics, and the Federal Deposit Insurance Corporation as well as more than a few private organizations like Goldman Sachs and academic organizations like MIT and Princeton), he does not describe that work or its data feedstock. One cannot even be sure from this read that such data gathering and statistical and mathematical modeling of the national economy and the world economies exists. Surely it must. The USFed does include forecasts of unemployment and inflation in some of its representatives’ speeches and its press releases, forecasts made using one or another technology … hopefully something better than an averaged forecast from all members of the American Economic Association or the American Econometric Society. If meteorologists can build statistical models of the atmosphere and predict weather (albeit mostly for only short times into the future like a few days or weeks and with their fair share of small errors), then economists and other behavioral scientists must be building econometric models. Bernanke does note in this account that ‘economists are criticized for not being able to predict the future.’ Bernanke accepts that criticism as valid. But this reader – this behavioral scientist who has built (and seen the products of others’ work producing) more than a few statistical-mathematical models grounded in data describing many variables and predicting future behavior for individuals (performance on the job in the next few years; performance in college in the next one to four years; career success as measured forty years from the time of data collection; purchasing behavior as expressed in the next hour or two, etc.) – knows that predicting human behavior is possible at levels of accuracy that have enormous practical value. These capabilities are not being widely used because it is widely believed by well educated people (even world-leading economists like Bernanke) that ‘predicting human behavior’ cannot be done. Because of that widely-believed falsehood, organizational leaders are unwilling to try decision-making based on these predictions … and research funding for behavior-predicting models and behavioral science in general is minimal to non-existent (when compared with other sciences and with the return on investment the behavioral sciences can deliver). I have spent the last few years (as a retiree) doing research for various clients with the intent of helping them and, at the same time, maintaining and satisfying my intellectual needs, research financed wholly by me, research that then has great difficulty getting published in visible places because it comes from a non-academician, someone who obviously “cannot be trusted” since “non-academic scientists always produce research setting forth conclusions that support their client’s wishes.” Given what this reader knows, his expectations and hopes for this account by Bernanke about how the financial systems of our economy are managed were severely short-changed, my hopes ‘left hanging in a tree and all but out of reach.’ It is useful to sketch the outlines of a computer-based world economic model. The model would be based on (a) 100 countries, each described by (b) 80 variables with each variable being (c) updated quarterly and (d) corrected [re-estimated] only once and not later than twelve months after the original report. The “100 countries” falls short of the 200+ countries recognized by the United Nations, but many nations may not have in place the data collection means for joining a world economic modeling effort and other countries’ governments may elect to be non-participants. “100 countries and 80 variables” is not an ideal ratio from a research-designer’s or statistician’s point of view, but experience suggests it will work and it is reasonable to hope the ratio will change in a few years in the direction of 200 :: 80 or 200 :: 100. (d) Every country (primary user) and its citizens would have access to the current statistical-mathematical model and the most recent data feeds from all countries along with all prior data feeds. (e) Primary-user countries would gather data for their own country at the primary-user country’s own expense, supplying data to the aggregation center following the data gathering profiles specified by the current model’s parameters and schedules. (f) Private users located in participating primary-user countries would have cost free access to the model and its historical database. (g) Any user could develop output estimates (forecasts) for individual nations and for aggregates of nations. For example, forecasts of the Gross Domestic Product for the US for the next ten years, school-age population growth for Ecuador for the next twenty years, intra-Euro-zone trading for the next ten years, and aggregates describing the historical past and the forecasted future for the G7 over a two-decade span could be generated. (h) There would be a contractor, say to the United Nations, that assembled input data flow and maintained/serviced/updated the current model from which current data and model updates would be available at no cost to all primary-user nations. (i) Research designing and developing the acquisition of data being fed to the model, the mathematical-statistical model itself, the software processing those data, and current operations at the world-aggregation center for the model would be supported by tax revenues gathered/supplied by the primary users in accordance with their ability to pay.With this “model” in operation, users would not be wondering what the “real meaning” is for particular words in Chairman Yellen’s report from yesterday’s meeting of the US Federal Open Market Committee. Instead, the user would examine the data inputs and outputs for that part of the model to which Chairman Yellen’s remarks refer, gather his/her own sense of the meaning of what is there, or vary the input and develop one’s own set of outputs to simulate what may happen if conditions change somewhat from those supplied by the latest data feed. Business news journalists would have to retrain in order to keep their jobs. Economics courses in universities would be up-ended. Cloud computing would be redefined. With the model in place and in use, we may even see decreases in the intra-day, day to day, and week to week variability of prices on the stock markets because the input to investors’ decisions is vastly improved by the model and orderliness (Kahneman’s “thinking slow”) guides decision-making at all levels … private organizations’ planning, government fiscal and monetary policy choices and actions, business and news reporting, and investors’ and consumers’ behavior. Computer-based stock trading and the algorithms on which they are based, sensitive now to variability and developing investment gains based on that variability, might go out of business. It would be a very different world. The argument that Bernanke cannot discuss the statistical modeling that existed while he led the USFed because the reader would not understand it and would be turned off by the description has face value but lacks validity when viewed in a larger framework. If the capabilities and possibilities for economic modeling are not discussed, ever, essential support for development and enhancement of these data-capturing and modeling capabilities cannot develop. One then is left with the likelihood of never developing what is both possible and useful. Not talking about “that complicated, math-based statistical modeling that the general reader cannot understand” is the equivalent of the health sciences having never talked about, and tried, vaccination as a health-maintenance option. Bernanke quotes (p 466) with approval US President Woodrow Wilson who said “We shall deal with our economic system as it is and as it may be modified, not as it might be if we had a clean sheet of paper to write upon; and step by step we shall make it what it should be.” That’s an attitude saying ‘Do what people will accept; don’t bother to reach for state-of-the-art.’ Pinker (2011) documents how humans are ‘killing each other now at the lowest rate in human history’ – a fact many will say is untrue – and describes the steps humans have taken over the 700,000 years or more it has taken humans to evolve to reach current achievements in this aspect of the ‘socialization’ of the human being. The moral guideline for human behavior (“Thou shalt not kill”) is at least 3,000 years old. I don’t think humans must take 700,000 years or even 3,000 years to reach today’s level of performance on this matter, a performance level clearly capable of much further improvement. However, if we take Woodrow Wilson’s (and Bernanke’s) viewpoint, seeking to adopt only what is politically possible now and not bothering to reach for state-of-the-art, much useful knowledge will lie unused for many centuries … and we’ll all suffer as a consequence of our happily cherished ignorance (unwillingness to learn) and our laziness. We cannot wait until ‘the market’ demands the forecasting outputs from these statistical-mathematical models. ‘The market’ doesn’t know those models can be built. Those who know have to build the models and advocate their use, communicating about those models with wide audiences of opinion leaders and organization leaders. Let’s learn to watch what counts, the real and complex operation of the world’s economies and the forecasts of their future performance as represented by data-informed mathematical-statistical models … not the USFed chair’s choice of words. Paralleling my sense that the research underlying the USFed’s decisions about “when, what, how much, and how long” is inadequately described in Bernanke’s account, so too I miss the tables and charts that one normally associates with reports by economists and financiers. For example, “the balance” on the US account (as Bernanke names it … others might call it the “debt” generated by quantitative easing and by the purchase of at-risk investments using TARP monies), is noted in numbers from time to time in the text, but there is no chart showing its change through time.I hope someone reading this review will contact me and point to an informed, book-length account of the state of the art in statistical-mathematical modeling-forecasting of the economic future, an account intended for an audience of organizational leaders, not for a cozy audience of fellow technicians. Bernanke correctly understands the importance of communicating economic policy making to wide audiences of leaders and the public. May the prophet pointing to the consequences of current economic activities and decision-trends soon be a computer – the prophet whose forecasts drive decisions of investors in the world’s stock exchanges, legislators deciding tax policy, governments prioritizing new government programs, and organization leaders choosing innovative steps for their organization – thus allowing the policy leaders to plan based on more valid (accurate) forecasts of the likely consequences of their choices and the scientists to turn to the task of improving that computer’s data feeds and the appropriateness of its statistical-mathematical treatment of those data. Bernanke’s account indeed documents “the courage to act,” action enabled by a team of informed, capable leaders whose leadership benefited people around the world, saving us the 1929-1933-and-later pain of the consequences of widely copied individual and organizational decisions, private and government. Bernanke’s account is worth study – along with the other accounts by Sorkin (2009), Paulson (2010), Lowenstein (2010), Morgenson and Rosner (2011), Blinder (2013), Geithner (2014) – for the lessons needed to guide our futures.Bellevue, Washington9 November 2015Copyright © 2015 by Paul F. Ross. All rights reserved.ReferencesBernanke, Ben S. The courage to act: A memoir of a crisis and its aftermath 2015, W. W. Norton & Company, New York NYBlinder, Alan S. After the music stopped: The financial crisis, the response, and the work ahead 2013, The Penguin Press, New York NYGeithner, Timothy F., Stress test: Reflections on financial crises, 2014, Crown Publishers, New York NYKahneman, Daniel Thinking, fast and slow 2011, Farrar, Straus and Giroux, New York NYLowenstein, Roger The end of Wall Street 2010, The Penguin Press, New York NYMorgenson, Gretchen, and Rosner, Joshua Reckless endangerment: How outside ambition, greed, and corruption led to economic Armageddon 2011, Henry Holt Inc., New York NYPaulson, Henry M., Jr. On the brink: Inside the race to stop the collapse of the global financial system 2010, Grand Central Publishing, New York NYPinker, Steven The better angels of our nature: Why violence has declined 2011, Viking, New York NYSorkin, Andrew Ross Too big to fail: The inside story of how Wall Street and Washington fought to save the financial system – and themselves 2009, Viking, New York NY

A fairly dry, but very important book by the man at the helm of the Fed during the "great recession." Bernanke does not give us a book where shots are delivered to those who may be have been policy opponents within government, but he does manage to get his points across diplomatically. As the financial system teetered many complex and politically difficult decisions were thrust upon Washington policy makers from both the Bush and Obama Administrations. Those decisions are still debated today. Bernanke gives us his view on those decisions, and the facts on the ground that may have led, in certain instances, to decisions that were sub-optimum, or just plain wrong.Bernanke gets to some of the big decisions of the day, including the decision to let Lehman fail. The entire "bailout" of Wall Street issue is gone over, with Bernanke giving, as much as can be expected, a dispassionate analysis of why decisions were made, and what the ramifications might have been had alternative policies been adopted. Not being an economist I looked for his views on several issues that remain controversial to this day, including Lehman, the bailouts, especially the AIG bailout, the right "medicine" for an economy in a major recession.As mentioned Bernanke is diplomatic, except when it comes to the disdain he shows for the Washington political class from both Parties. The "play-acting" in the middle of a crisis, the politics first mentality of a large segment of the elected officials he had to deal with, and the flat out lack of shame or truth by these elected officials is called out by Bernanke. He defends the bailouts as necessary, but recognizes the "moral hazard" inherent in those decisions."Some of the critics were ideologues (the free market is always right) or uninformed (the economy will be just fine if a few Wall Street firms get their just deserts). Some simply railed against the unfairness of bailing out Wall Street giants but not the little guy on Main Street. Personally, I felt considerable sympathy for this last argument. (I would wince every time I saw a bumper sticker reading “Where’s my bailout?”) But it was in everyone’s interest, whether or not they realized it, to protect the economy from the consequences of a catastrophic failure of the financial system. The opponents’ most substantive argument was that, whatever the short-run benefits of bailouts, protecting firms from the consequences of their own risky behavior would lead to riskier behavior in the longer run. I certainly agreed that, in a capitalist system, the market must be allowed to discipline individuals or firms that make bad decisions. Frank Borman, the former astronaut who became CEO of Eastern Airlines (which went bankrupt), put it nicely a quarter-century earlier: “Capitalism without bankruptcy is like Christianity without hell.” But in September 2008 I was absolutely convinced that invoking moral hazard in the middle of a major financial crisis was misguided and dangerous. I am sure that Paulson and Geithner agreed. " “You have a neighbor, who smokes in bed. . . . Suppose he sets fire to his house,” I would say later in an interview. “You might say to yourself . . . ‘I’m not gonna call the fire department. Let his house burn down. It’s fine with me.’ But then, of course, what if your house is made of wood? And it’s right next door to his house? What if the whole town is made of wood?” The editorial writers of the Financial Times and the Wall Street Journal in September 2008 would, presumably, have argued for letting the fire burn. Saving the sleepy smoker would only encourage others to smoke in bed. But a much better course is to put out the fire, then punish the smoker, and, if necessary, make and enforce new rules to promote fire safety. The firefighting argument applied equally well to LehmanBernanke, Ben S. (2015-10-05). The Courage to Act: A Memoir of a Crisis and Its Aftermath (Kindle Locations 3874-3880). W. W. Norton & Company. Kindle Edition.Despite the ferocious nature of the debate, nobody, in my view, has been able to puncture this argument.His disdain for Congress comes through clearly, in several instances:Bernanke here gives a backhanded slap, but focuses on some who would prefer to let the fire rage unabated, with the desire to let the "market" handle it all, with bad players being punished, along with everyone else, for their poor actions."Tim, in particular, complained about the “Old Testament” attitude of politicians who seemed more interested in inflicting punishment than in avoiding impending disaster. We were fine with bad actors getting their just deserts, but we believed it was better to postpone the verdict on blame and guilt until the fire was out. I had also over the years seen a great deal of feigned outrage in Washington, and I didn’t feel like playing that game."That "Old Testament" attitude keeps coming through again and again, and still manifests itself every time there is a debt crisis. We heard it loud and clear during the Greek debt crisis, when the desire to 'punish" the Greeks for poor fiscal practices outweighed the practical steps needed to solve the problem.Bernanke does deal with the outrageous demands for austerity in the face of a precipitous drop in demand, and like most folks with a modicum of common sense he calls out those folks who have been proven wrong from the get go. What were they wrong about? The predictions of:Currency debasementRunaway inflationAusterity being the right "medicine" in the face of a massive recession.Although Bernanke is a Republican, appointed by a Republican President, he takes on the "know nothing" wing of the Party with gusto. His comments even drew a rebuke from Rand Paul during one of the 2015 GOP debates. What did he say?"These and a few other exceptions notwithstanding, the increasing hostility of Republicans to the Fed and to me personally troubled me, particularly since I had been appointed by a Republican president who had supported our actions during the crisis. I tried to listen carefully and accept thoughtful criticisms. But it seemed to me that the crisis had helped to radicalize large parts of the Republican Party. The late Senator Daniel Patrick Moynihan of New York once said that everyone is entitled to his own opinion but not his own facts. Some Republicans, particularly on the far right, increasingly did not draw the distinction. They blamed the crisis on the Fed and on Fannie and Freddie, with little regard for the manifest failings of the private sector, other regulators, or, most especially, of Congress itself. They condemned bailouts as giveaways of taxpayer money without considering the broader economic consequences of the collapse of systemically important firms. They saw inflation where it did not exist and, when the official data did not bear out their predictions, invoked conspiracy theories. They denied that monetary or fiscal policy could support job growth, while still working to direct federal spending to their own districts. They advocated discredited monetary systems, like the gold standard. For me, these positions pushed the party further away from the mainstream and from traditional Republican views. I still considered myself a conservative. I believed in the importance of personal autonomy and responsibility and agreed that market economies were best for generating economic growth and improving economic welfare. But I had lost patience with Republicans’ susceptibility to the know-nothing-ism of the far right. I didn’t leave the Republican Party. I felt that the party left me."Important critiques which continue to be borne out. Wrong about inflation? Claim the books are cooked. Conspiracy theories abound from those who have made error, but refuse to admit they were wrong. Easier to cite wild conspiracy theories.Bernanke also weighs in on QE1 and QE2, and takes on those who criticized the Fed for the easing. Looking back on the program gives us today a clear picture of whether the Fed made the right moves, or whether the critics were right. From my perspective Bernanke comes out with the better of the argument, as the doom predicted by the critics just failed to materialize. An open letter to the Fed, signed by a group of conservative economists in 2010, said...."The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment." Wrong again. Bernanke took them on directly:"The economic logic underlying all three—the cartoon, the letter from the congressional Republicans, and the economists’ missive—was misguided and inaccurate. In particular, there was virtually zero risk that our policies would lead to significant inflation or “currency debasement” (a loaded term for a sharp decline in the value of the dollar). That idea was linked to a perception that the Fed paid for securities by printing wheelbarrows of money. But contrary to what is sometimes said (and I said it once or twice myself, unfortunately, in oversimplified explanations), our policies did not involve printing money—neither literally, when referring to cash, nor even metaphorically, when referring to other forms of money such as checking accounts. The amount of currency in circulation is determined by how much cash people want to hold (the demand goes up around Christmas shopping time, for example) and is not affected by the Fed’s securities purchases. Instead, the Fed pays for securities by creating reserves in the banking system. In a weak economy, like the one we were experiencing, those reserves simply lie fallow and they don’t serve as “money” in the common sense of the word.""If growth in money and credit became excessive, it would eventually result in inflation, but we could avoid that by unwinding our easy-money policies at the appropriate time. And, as I had explained on many occasions, we had the tools we needed to raise rates and tighten monetary policy when needed. The fears of hyperinflation or a collapse of the dollar were consequently quite exaggerated. Market indicators of inflation expectations—including the fact that the U.S. government was able to borrow long-term at very low interest rates—showed that investors had great confidence in the Fed’s ability to keep inflation low. Our concern, if anything, was to get inflation a little higher, which was proving difficult to accomplish."Bernanke remains a conservative, but shows that the "know-nothing" wing of the GOP could have done some real damage had their policies been enacted. Bernanke took some slings and arrows from the left, and criticizes Krugman specifically for some unfair criticism. But he is a student of Keynes, and of the Great Depression, where Hooverism and the fear of inflation had such a damaging impact on our ability to recover from disaster."As new (and old) Keynesians would predict, collapsing private demand—consumer spending, home purchases, capital investment—had sent production and employment reeling. As Keynes had first suggested in the 1930s, in an economic slump public spending could replace private spending for a time. With the economy still in free fall and with short-term interest rates already near zero, the economy certainly needed fiscal help—increased government spending, tax cuts to promote private spending, or both. I had said so (albeit in my usual cautious central bank speak) during the fall, to the point that the Wall Street Journal editorialized that I had effectively endorsed Obama for president. I wasn’t endorsing a candidate, I was endorsing a program, just as I had supported President Bush’s fiscal stimulus (in the form of tax cuts) that had passed in early 2008. On February 17, less than a month after his inauguration, Obama signed a major fiscal package, the American Recovery and Reinvestment Act of 2009."Bernanke has written a fine book that is balanced, thoughtful, and will give readers, trained in economics or not, a valuable historical perspective on the actions undertaken by the Federal Reserve in response to the Great Recession. It is well worth a read.

Los temas y el análisis que se hacen en el libro son muy buenos. Lo recomiendo para entender los motivos y los factores que incidieron en la crisis financiera de los Estados Unidos de America.

Un libro assolutamente che non può mancare nella libreria di ogni investitore

The Courage to Act by Ben Bernanke - Book ReviewI've had a unique experience reading this book:Despite it being 770+ pages long, I kept at it (After "Capital"). For some unknown reason, there was a magnetism about the honesty and narrative of this book that kept going.As a finance enthusiast, I was/am spellbound by Central Bankers and what goes on in their minds to control their Countries' Finances - aka Destiny. As the self-designated "Chief Economist" of my mobile games, I often think of myself as a Central Banker deciding how the Economy will behave for the players in our games!This book is a long, arduous read. I suggest reading the notes detailed below and then buying only IF you want more :)Some of the amazing nuggets inside (Quotes) and my #dhandhekibaat (DKB) comments below:)(If you think the quotes are spoilers, then be forewarned!)"The accuracy of both central bank and private-sector forecasters has been extensively studied, and the results are not impressive. Unfortunately, beyond a quarter or two, the course of the economy is extremely hard to forecast."DKB - Just like entrepreneurship and business!"Advanced-economy central banks generally aimed for inflation of about 2 percent rather than zero""Once I asked an idle question at a briefing. By the end of the day, the staff had sent me a ten-page memo that answered the question under four different sets of assumptions and included a bibliography. After that I only asked questions when I really needed the answer."DKB - Be respectful of your position and the impact it has on your juniors :)"Decades ago, it was common for bankers to take deposits from people they nodded hello to at the grocery store and to make mortgage loans to people in neighborhoods within a thirty-minute drive of the bank.""The government doesn’t allow sales of flammable children’s pajamas, for example, no matter how clear the warning label. Over time I would become more sympathetic to the behavioral view.....sometimes it may be better simply to ban practices that are not in consumers’ interest. "DKB - The 'aam junta' is very gullible and vulnerable."Examples of predatory practices include bait-and-switch (borrowers receive a different type of loan than they were told to expect); equity stripping (lending to borrowers without enough income to repay, with the intent of ultimately seizing their homes); loan flipping (racking up loans and fees by encouraging repeated refinances); and packing (charging borrowers at mortgage origination for unnecessary services)."DKB - 99.998% of Bankers I've met are all cheats. (Sorry in advance for hurting your sentiments)"Famously, Bush liked to tease. Once, when I was making a presentation in the Oval Office, the president walked over to me and lifted my pants leg. With a professor’s finely honed sartorial sense, I was wearing tan socks with a dark suit.“You know,” he said sternly, “this is the White House, we have standards.” I replied that I had bought the socks at the Gap, four pairs for ten dollars, and wasn’t he trying to promote conservative spending habits in the administration?He nodded, deadpan, and I went on with the presentation.The next day, I attended another Oval Office meeting. When the president entered, every member of the economic team in the room—plus Vice President Cheney—was wearing tan socks. The president tried to pretend that he didn’t notice, but before long he burst out laughing. Keith Hennessey masterminded the prank."DKB: Choo Chweet :)"My parents, like many owners of small businesses, took almost no time off."“When the music stops . . . things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”DKB - IMMORTAL words for an Entrepreneur!"Like my father, I grew distracted and unhappy when I could not usefully occupy my time.""Société Générale (SocGen), France’s second-largest bank, announced that unauthorized futures trading by a single employee, later identified as Jérôme Kerviel, had caused a $7.2 billion pre-tax loss."DKB - Be happy for the small mercies you have in your Business :)"If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” he said. Sometimes market fears can be self-fulfilling, and a strong demonstration can avoid the worst outcomes. I was reminded of the military doctrine of “overwhelming force” as the way to prompt quick surrender and minimize casualties."DKB - The power of posturing should never be underestimated!"Borman, the former astronaut who became CEO of Eastern Airlines (which went bankrupt), put it nicely a quarter-century earlier: “Capitalism without bankruptcy is like Christianity without hell.”DKB - In business, like in Love, all is fair :)“You have a neighbor, who smokes in bed. . . . Suppose he sets fire to his house,” I would say later in an interview. “You might say to yourself . . . ‘I’m not gonna call the fire department. Let his house burn down. It’s fine with me.’ But then, of course, what if your house is made of wood? And it’s right next door to his house? What if the whole town is made of wood?”DKB - "Responsibility" is a tag that's not easy to define!"Wall Street Journal editor and columnist David Wessel once told me that if a reporter was doing a good job, the officials the reporter was covering felt relieved when he or she was reassigned.""On those days, I would sometimes find solace reading a quote attributed to Abraham Lincoln... on a 3 x 5 card. I kept it next to my computer. “If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business..”DKB: Don't care about the naysayers. Just keep ploughing.“You never want a serious crisis to go to waste,” was Rahm’s motto.DKB: Positivity in negativity! Always :)

libro largo pero interesantísimo, como todos los libros que he leído de Bernanke. Libro poco ameno si no te gusta el tema, si quieres algo más pasajero creo que es mas entretenido el de Timothy Geithner. Bernanke es más técnico y Timothy más de acción.

This a superb book about Ben Berrnanke, a hero of mine, who saved the world's economy from a almost certain Second Great Depression. The book is a fascinating look into the inner workings of the Federal Reserve and Great Financial Crisis. You will learn more about how the economy works and how central banking works from this book than any university text book. Bernanke is a master at explaining complex ideas in simple grade 10 language. It is clear, easy to read and brilliantly written.