Daniel Gross

Ben Bernanke, Existentialist

In 2008 and 2009, Bernanke sprung into action to avoid a collapse of the financial system. Now he seems mired in existential angst. These are tough times that call for difficult actions. Others should take action. There are things the Fed could do, but the Fed Chairman isn't going to say what they are or when he might do them.

We've gone from Waiting for Superman to Waiting for Godot.

That's my takeaway from the much-awaited speech Federal Reserve Chairman Ben Bernanke delivered this morning at the Kansas City Fed's annual conference in Jackson Hole, Wyoming.

In large measure, Bernanke stuck with the theme of the conference, which is long-term growth. He expressed optimism (which I share) that the U.S. can, in time, work its way out of its current morass and get back on to a path of sustainable, more satisfying growth. "Although important problems certainly exist, the growth fundamentals of the United States do no appear to have been permanently altered by the shocks of the past four years."

But it's the short-term that is more worrisome. And here, Bernanke didn't offer much reason for hope. Yes, the economy has been growing for nine quarters and manufacturing has picked up. But the usual gears of a post-recession cycle haven't fully engaged, he said, in part because of the deadly combination of a disastrous housing market and a wounded financial sector. Here, he's reading chapter and verse from Carmen Reinhart and Kenneth Rogoff's This Time is Different: Eight Centuries of Financial Folly. It just takes longer to recover from recessions induced by credit and financial crises.

We know that. But what is Bernanke, who loves to talk about the successful exertions the Fed undertook to stave off panic and crisis in 2008 and 2009, prepared to do about our crisis of weak short-term growth? After all, one of the Fed's mandates is to promote full employment. And on this measure, the Fed is clearly falling down on the job.

Bernanke is a great student of the 1930s. His actions in 2008-09 were clearly intended to ward off a repeat of the tragic calamities of 1929-33. And they largely succeeded. His task is now to avoid the events of 1937-38, when fiscal and monetary contraction helped lead to a sharp recession after four years of growth. The hope — and expectation -- was that Bernanke would signal some of his thinking as to how Washington — the Fed, Congress, the White House — could help avoid a potential slowdown.

Here, however, Bernanke disappointed. While noting that the Fed's open market committee "has marked down its outlook for the likely pace of growth over coming quarters," he didn't offer any new policy prescriptions beyond the earlier promise to keep interest rates low. Bernanke did note that "the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus" but didn't stipulate what they were and under what circumstances they would be deployed. Translation: no third round of quantitative easing is in the cards at the moment.

Bernanke essentially pleaded with his larger audience to stop expecting so much from the Fed. As he noted, "most of the economic policies that support robust economic growth in the long run are outside the province of the central bank." Fiscal policy — government spending and tax policy — can help promote (or torpedo) growth. Bernanke, who usually avoids offering specific prescriptions on taxes and spending, devoted a chunk of his speech to fiscal policy. But here again he was short on details, beyond offering a gentle rebuke to those who engineered the debt ceiling impasse. "The country would be well served by a better process for making fiscal decisions."

All in all, blah. No deep insight. No call to action. Very few specifics.

If investors, politicians, economists and analysts hadn't gotten the message by this morning, they should get it loud and clear today: This Federal Reserve Chairman isn't going to do anything major anytime soon to goose the economy.

Daniel Gross is economics editor at Yahoo! Finance.

Email him at grossdaniel11@yahoo.com; follow him on Twitter @grossdm.

View Comments (185)