Morning Must-Read: David Beckworth: The Two Big Failures of the Bernanke Fed

David Beckworth: The Two Big Failures of the Bernanke Fed: “The Bernanke Fed never tried Abenomics. That is, for all the Fed has done over the past five years it never tried to do the kind of monetary regime change now being done by the Bank of Japan….

So for all the praise the Bernanke Fed gets for preventing the second Great Depression, it should be equally noted that it allowed the long slump… effectively kept monetary policy tight for the past five years… failed to meaningfully address the endogenous fall in the money supply and the decrease in money velocity…. In my view, this is the biggest failure…. But it was not the only serious failure…. In the second half of 2008, housing prices, many commodity prices, inflation expectations and stocks all suggested deflation was coming. Fed officials, though, kept talking about backward-looking measures of inflation that made it look high. Their hawkish pronouncements effectively tightened monetary policy by shaping market expectations about its future direction…. Looking back, the Fed’s response from about mid-to-late 2008 was amazingly bad…. Though this Bernanke failure was big, I do view it as less heinous than the failure to do an Abenomics-like program.