Phil Grant on Ben Bernanke being awarded the 2022 Nobel Prize in economics

This morning, the Royal Swedish Academy of Sciences announced it will award the 2022 Nobel Prize in economics to a trio of economists including Ben Bernanke, Fed chair from 2006 to 2015 and author of the central bank’s zero rate-cum-asset purchase response to the global financial crisis.  Recall that, in response to a query from 60 Minutes in 2010, Bernanke expressed “100 percent” faith in the Fed’s ability to keep a lid on inflation, adding that: "We could raise interest rates in 15 minutes if we have to." 

More broadly, Bernanke’s longstanding advocacy for the discretionary, “Ph.D. standard” of monetary management remains a stance worth scrutinizing.  In a February 2004 speech, the then-Fed governor extolled the virtues of the “great moderation,” i.e., a decline in volatility across both inflation and economic growth metrics that prevailed since Paul Volcker tamed inflation in the early 1980’s.  Among his conclusions: 

The historical pattern of changes in the volatilities of output growth and inflation gives some credence to the idea that better monetary policy may have been a major contributor to increased economic stability. 

Few disagree that monetary policy has played a large part in stabilizing inflation, and so the fact that output volatility has declined in parallel with inflation volatility, both in the United States and abroad, suggests that monetary policy may have helped moderate the variability of output as well. 

Everything in moderation, even moderation.

~ Philip Grant, "Crowd Control," Almost Daily Grant's, October 10, 2022