If we’re going to be handing out go-to-jail cards for culpability for the disaster of 2008–09, then one of the first should go to Bernanke himself. His policies at the Fed and those of his predecessor were the primary reason for the debacle. Worse, what Bernanke did in the aftermath of the panic is the crucial reason that the U.S. and global economies are in such sorry shape today. For that he deserves a stiff sentence, with no prospect of parole!
In the early 2000s the Federal Reserve, in cahoots with the U.S. Treasury Department, undertook a policy to deliberately and gradually weaken the dollar. The purpose was twofold: to help “stimulate” recovery from the 2000–01 recession and to boost exports, the theory being that a cheap greenback would mean lower prices for the overseas buyers of our products and services.
Bernanke, who joined the Federal Reserve Board in 2002, vigorously supported what our central bank was doing. After leaving briefly in 2005 to head up the Council of Economic Advisers, Bernanke returned and took over the Fed in 2006, repeatedly assuring one and all that the economy was in great shape and that there was nothing to worry about regarding the housing market.
But, as Bernanke was offering his soothing but woefully wrong reassurances, the weak dollar was already wreaking havoc. What Bernanke didn’t–and still doesn’t–understand is that money in and of itself is not wealth. It has no intrinsic value. It measures wealth, just as scales measure weight, clocks measure time and yardsticks measure length.
Steve Forbes is the author of “Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It”