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 The Bernanke Challenge by Steve Roach |
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Theme
头衔: 海归少校
加入时间: 2004/05/03
文章: 214
海归分: 28969
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作者：Theme 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
It's easy to celebrate the man and his pedigree. We all know that Ben Bernanke is a solid economist, with impeccable credentials from many of America’s greatest universities. Leading academic journals are filled with his contributions. But that background begs the most important question of all: What we don't know is Bernanke’s ability to provide institutional leadership for a central bank that is facing a unique confluence of domestic and international imbalances — the asset-bubble/current-account nexus.
Every Fed chairman that I ever worked with or observed over the past 33 years has had to face circumstances that he was unprepared for. Arthur Burns was a business cycle expert ill-equipped to cope with inflation. G. William Miller was a businessman untrained for the vicissitudes of financial markets. Paul Volcker was a financial expert who struggled with a wrenching recession. Alan Greenspan was a business consultant who was quickly thrust into the thicket of financial crisis management. Ultimately, Volcker and Greenspan learned to adapt and cope — but not without initially going through wrenching financial market corrections. Volcker quickly faced a massive sell-off in the bond market and Greenspan had to cope with the stock market crash of 1987.
Investors are thrilled that Bernanke is precisely the right man for the right moment. After all, he is America’s most renowned expert on “inflation targeting” — the need for the Fed to be explicit in linking its policy instrument (the federal funds rate) to some stylized goal of price stability. And, of course, everybody’s worried about inflation again. The energy shock of 2005, which has taken retail energy prices up some 35% over the 12 months ending this past September, has financial markets in a tizzy. Inflation-phobic central bankers at the Fed are now chomping at the bit to rush back into battle against inflation. It’s the same movie we went to in the stagflationary 1970s.
But Hollywood has come out with a new version of this old movie. The script now incorporates a striking dichotomy that has opened up between energy prices and well-behaved “core” inflation rates in the non-energy segments of the economy. It also reflects the powerful forces of globalization that seem to explain this dichotomy quite nicely — especially the breakdown of the once critical linkage between input costs (like labor, energy, and other raw materials) and underlying prices.
Yet the warrior central banker wants to ride into battle again. And the financial markets are asking, who would be better suited to lead the charge than the world’s most prominent inflation targeter — Ben Bernanke?
Like all vintage movies, nostalgic depictions of the past are so “yesterday.” Why should we presume that Bernanke would be spared the same test that his predecessors faced? Financial markets have had an uncanny knack of finding the weak link in the new guy's chain. The history of modern day macro, to say nothing of the experience of the Fed and its various chairmen over the last several decades, warns of extrapolation. Why should we also presume that Bernanke would be the one Fed chairman who will challenged by the problem that falls neatly in his comfort zone — namely, inflation? The past is a poor guide for what to expect in the future. Talented and well-trained central bankers are invariably tested by something new and different. Wouldn’t it be neat if all we faced were an inflation scare?
Don’t count on it. America has far more serious problems on its plate that a new Fed chairman will quickly have to confront. Two of them are especially worrisome — a monstrous current account gap and the mother of all asset bubbles. And it turns out that the external deficit and the housing bubble are joined at the hip — thanks to the policy strategies of the man who is about to pass the baton to Bernanke — Alan Greenspan.
That’s right, by condoning one asset bubble after another — first equities, then property — the Greenspan Fed has encouraged American consumers to take their income-based personal saving rates into negative territory for the first time since 1933. Moreover, with the Federal government’s budget deficit pushing national saving down all the more, the US has had to draw freely on surplus saving elsewhere in the world to fund economic growth. And we have had to run record current-account and trade deficits to attract the foreign capital.
The escape act from this conundrum — the modern-day Fed’s favorite word — has yet to be written. Bernanke has opined on the circumstances in a rather disingenuous way — suggestion that a profligate America is actually doing the world a favor by consuming a global “saving glut.” If that’s his starting point on the bubble/current-account conundrum, watch out below. A saving-short US economy is hooked on asset bubbles and debt as the sustenance for economic growth. Weaning America from this dangerous recipe could be the defining challenge for the Fed and its new chairman.
A likely US current account adjustment is especially worrisome in that regard. Running at an annual rate of close to $800 billion in the first half of 2005, it currently requires foreign funding to the tune of $3 billion per business day. To accomplish that funding without a sharp ｄｒｏｐ in the dollar and/or a related back-up in interest rates requires extraordinary confidence on the part of foreign investors in U.S. assets.
The foreign confidence factor could well be Ben Bernanke’s biggest headache when he assumes the reins of power at the Fed. America’s current account deficit averaged just -1.5% of GDP at the three most recent Fed transition points — the ascendancies of Miller, Volcker, and Greenspan. By contrast, today’s deficit is more than four times larger at -6.4%. Moreover, in the face of an energy shock and a post-Katrina fiscal spending binge, there is good reason to look for a further reduction in US saving and a related widening of the current account deficit over the next year.
During the Greenspan era, the U.S. economy pushed the envelope in sustaining an increasingly dangerous strain of unbalanced growth. In doing so, it experienced an equity bubble, a housing bubble, a record current account deficit, and a monstrous overhang of household debt. America has gotten away with these imbalances because of the “kindness of strangers” — the willingness and confidence of foreigners to keep piling into dollar-based assets.
But now, America is going to be asking a lot more of the foreign investor at precisely the moment when the Fed is transitioning from Greenspan to Bernanke. As the Maestro leaves the building, the hard-won aura of foreign confidence that surrounds him could be quick to follow. Like the chairmen who preceded him, Bernanke could soon find himself dealing with a confidence crisis in the financial markets. And suddenly, the inflation targeter will be staring at a far more intractable set of problems than his research and training prepared him for. Bernanke could be faced with a dollar crisis and the related need on the part of foreign investors to seek compensation for taking currency risk. That compensation invariably spells higher interest rates — the last thing America’s housing bubble and overly-indebted consumer needs.
History warns us to expect the unexpected when America’s second toughest job changes hands. Like his predecessors, Ben Bernanke's skillset has not prepared him for the challenges he faces. Credentials alone don't make for a good Fed Chairman. History tells us that it's all about learning on the job and coping with indoctrination under fire. The great irony for the Fed is that Alan’s Greenspan's legacy may well be Ben Bernanke's albatross.
作者：Theme 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 The Bernanke Challenge by Steve Roach -- Theme - (7830 Byte) 2005-11-01 周二, 08:49 (611 reads)
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