Overview

This title offers an up-to-the-minute look at the challenge facing Fed chair Ben Bernanke in trying to clean up the problems affecting the U.S. economy that he inherited from his predecessor, Alan Greenspan, informed by a historical look at how other central bankers have dealt with similar crises. The current crises facing the economy in have thrown a sharp spotlight on US Federal Reserve chairman Ben Bernanke. Each of his moves to address worsening economic conditions have been reported and analyzed at length in the press, as he works to mitigate the effects of the sub-prime lending debacle, the spiraling rise in oil prices, and the sharp increase in food costs. Bernanke is facing a stern test as America's central banker - a test created for him, in large part, by his predecessor, Alan Greenspan. In the two decades Greenspan served as Fed chair, central bankers who formerly worked as obscure bureaucrats became geopolitical megastars with international recognition. This switch can largely be identified with Greenspan, who helped guide the U.S. to new heights of prosperity, but who also bears significant responsibility for the subprime-induced credit crisis and all the related problems plaguing the economy. But while their visibility may have changed dramatically, the underlying role played by central bankers has changed little. No one plays a bigger role in promoting those 'healthy financial conditions' than central banks, especially when it comes to price stability and the soundness of the overall financial system. The central bank also has the key power to act as lender of last resort, i.e. to 'create' money. But central bankers like Bernanke can also do much to growth and prosperity with policies that jeopardize the 'healthy financial conditions'. Deservedly, they will get the full blame for the disaster, even if sometimes others share responsibility. The consensus on Greenspan's performance as Fed chair used to be extremely positive, but more and more it's been called into question. 2008 saw Bernanke in the eye of a storm that was created largely during Greenspan's tenure. His management of the bubble of all bubbles will be a decisive factor in whether this crisis will be limited in its impact on the real economy or whether it directly leads to a major recession. This is Bernanke's Test. In examining the challenge facing Bernanke, author Johan Van Overtveldt will look back over Alan Greenspan's long record as Fed chair, as well as Ben Bernanke's career as an economist prior to replacing Greenspan. Historical context will be provided by a look at other former Fed chairmen, such as Benjamin Strong, William McChesney Martin, Arthur Burns, and especially Greenspan's predecessor, Paul Volcker.

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9781932841374

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Reviews

Here at last is a book about the US Federal Reserve that is neither impossibly technical nor populist. The author is obviously extremely familiar with the American financial and political scene.... Van Overtveldt steers a healthy middle course. Samuel Brittan, Financial Times An excellent introduction to the current financial crisis....Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer. Publishers Weekly A timely study that will help readers interpret the headlines. Kirkus Reviews A timely study that will help readers interpret the headlines. Kirkus Reviews

Should we feel better that the chairman of the Federal Reserve is an authority on the Great Depression?Perhaps so, suggests Belgium-based economist Van Overtveldt (The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business, 2007) - if only because Ben Bernanke is more sensitive to market movements and trends and more forthright in his assessments of them than his predecessor, Alan Greenspan, whose gnomic public utterances were usually vague and restrained. The central bank that both headed is, at least as ideally conceived, responsible for helping maintain the overall health of financial conditions that drive the economy. Yet the power of the Fed has grown, perhaps unintentionally, and it has become less accountable, more secretive and obscure, and perhaps less effective. Van Overtveldt examines this evolution in light of the current financial crisis, noting provocatively that whereas Greenspan was once viewed as something of an economic magician and an exemplary manager of money, recently...there has been a considerable re-evaluation of some of his decisions. As a regulator, the author writes, Greenspan was mediocre. But previous efforts to regulate diligently, guided by Keynesian views that neglected the supply side, were none too successful either, impeded by the politics of self-interest and greed. Van Overtveldt's enumeration of the succession of crises that Greenspan oversaw will make the reader wonder why anyone ever held him in esteem; this account also does much to explain the actions that Bernanke has been taking of late. The author's analysis of savings rates, deficits, monetary contraction and other matters, backed by ample graphs and plenty of hard data, is not for the numerically faint of heart, but it is accessible. Van Overtveldt is particularly clear when he examines pronouncements on the part of both Bernanke and Greenspan that he considers spectacularly wrong. A timely study that will help readers interpret the headlines, though it offers little comfort to those hoping for a quick solution to the present mess. (Kirkus Reviews)

Here at last is a book about the US Federal Reserve that is neither impossibly technical nor populist. The author is obviously extremely familiar with the American financial and political scene.... Van Overtveldt steers a healthy middle course. Samuel Brittan, Financial Times An excellent introduction to the current financial crisis....Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer. Publishers Weekly A timely study that will help readers interpret the headlines. Kirkus Reviews A timely study that will help readers interpret the headlines. Kirkus Reviews

Here at last is a book about the US Federal Reserve that is neither impossibly technical nor populist. The author is obviously extremely familiar with the American financial and political scene.... Van Overtveldt steers a healthy middle course. -- Samuel Brittan, Financial Times <br> An excellent introduction to the current financial crisis....Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer. -- Publishers Weekly <br> A timely study that will help readers interpret the headlines. -- Kirkus Reviews <br>

Author Information

Johan Van Overtveldt, PhD, is the director of the Belgium-based think tank VKW Metena, which works on a breadth of economics-related issues. Formerly editor-in-chief of the Belgian newsmagazine Trends, he has written several books in Dutch, and contributes to the Wall Street Journal Europe and other publications. He is the author of The Chicago School.

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