How will the history books treat Ben Bernanke? Well, only time will tell.
Supporters will tout his integral role in saving the system.
Those who look less kindly on the Fed chair will denigrate him for 1. his participatory role in allowing Wall Street to bring our economy to its knees 2. providing excess liquidity for the well positioned to take advantage of a newly defined rent-seeking economy while the rank and file American public struggle to keep their head above water.
Perhaps he is deserving of both a measure of praise and derision but let’s take a harder look at what he really accomplished — or not — depending on how you might view things.
In terms of employment, Bernanke touts the Fed’s projection of a 7% rate as reason for his taking the foot off the QE pedal. Certainly a lower unemployment rate is good news.
However, I am still waiting to hear Ben discuss the decline in the labor participation rate. As measured by the Bureau of Labor Statistics, the unemployment rate (U-3) topped out at 10% in late 2009 and now checks in at 7.6%. Juxtapose that with the fact that the labor participation rate has moved down from 66% to a three decade low currently of 63.4%. Not so good.
In fact, one can easily make the case that there is a significant correlation between the decline in the overall unemployment rate and the decline in overall labor participation. If a shrinking of the labor pool in America is how we now define economic progress then we have even bigger issues than I thought.
What else might we look at to gauge our economic health and to grade Mr. Bernanke and his central banking and economic advisory colleagues? How about time spent working and how much we have to show for it?
The WSJ shares some less than sanguine news on both these fronts. Just this morning, the WSJ reports that Americans worked less in 2012. Additionally, the WSJ also recently highlighted the following tell tale signs in regard to what we have in our pockets:
1. Last year the “growth in disposable personal income was the lowest since such records began in 1959, excluding the 2009 swoon.”
2. Over the past five years through March, disposable personal income has risen 10.5% in total. That is the worst pace on record, reflecting not just a nasty recession but a lackluster recovery.
What does this all mean? While those in our major financial, political, and media centers would like to project that our economy is improving, we continue to have enormous structural issues weighing upon our nation. In fact, as Geoffrey Godbey, professor emeritus at Penn State says in that previously referenced WSJ link this morning,
“The recovery has basically been a recovery for a tiny fraction of the population.”
So in conclusion and back to the question posed in my title, “What exactly has Bernanke really accomplished over the last 5 years?”
He bought us time.
The hard questions and issues facing our nation remain outstanding. In fact, I would maintain that the liquidity injected by the Fed has come with many costs not the least of which is a lost sense of real urgency to address the meaningful reforms necessary in both Washington and on Wall Street.