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Why Bernanke's analysis is wrong

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Reed Saxon/AP

(Read caption) Federal Reserve chairman Ben Bernanke walks past reporters as he arrives at a morning session of the Economic Policy Symposium at Jackson Hole in Moran, Wyo., Friday, Aug. 26. The author argues that Bernanke's comments at Jackson hole failed to pinpoint the economy's real problems.

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Below is a letter I sent to Denver post in response to an editorial praising recent remarks by Fed Chairman Bernanke: Denver Post, “Fed chief speaks loud and clear” at http://www.denverpost.com/opinion/ci_18767027 :

In your August 27, editorial “Fed chief speaks loud and clear” you correctly summarize that
the U.S. economy should bounce back and that what is standing in the way, is
the people in charge. But Chairman Bernanke’s analysis is wrong and does
not identify the true culprits. The economy has been effectively held back by
the regime uncertainty created by the anti-market rhetoric and
environment emanating from the leadership in Washington. A similar environment
forestalled recovery in the 1930s. The Fed’s near zero interest rate policy in
the 2003-05 period was, if not the cause, the enabler of the events leading to
the 2007 financial meltdown. The current Fed commitment to long term near zero
interest rates, which has been appropriately criticized by retiring Kansas City
Fed chairman Thomas Hoenig, now threatens to revive the stagflation of the 1970s.

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