I’ve been a harsh critic of the Greenspan-Bernanke monetary policy that was the chief cause of our current economic mess. But it’s also true that, once the financial firestorm hit, Ben Bernanke, perhaps the world’s leading student of financial crises, has taken bold and creative action to douse it. Nobel laureate Bob Lucas thinks Bernanke is on the right track:
monetary policy as Mr. Bernanke implements it has been the most helpful counter-recession action taken to date, in my opinion, and it will continue to have many advantages in future months. It is fast and flexible. There is no other way that so much cash could have been put into the system as fast as this $600 billion was, and if necessary it can be taken out just as quickly. The cash comes in the form of loans. It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These seem to me important virtues.
