Ben Bernanke Is Not Having a Fun Week

Matt Berman
National Journal

This week didn't start too badly for Ben Bernanke. In an interview with Charlie Rose that aired Monday on PBS, President Obama said that the Fed Chairman has "done an outstanding job" and that he's stuck around the Fed "longer than he wanted." It seemed like the beginning of a victory lap for the chairman: prepare for your exit, let others speculate about your successor, ruminate on your legacy.

But then, on Wednesday, Ben Bernanke held a press conference expressing optimism in the Fed's outlook for the U.S. economy. And this happened:

"Market Seems to Have Lost Confidence in Bernanke" (CNBC, 6/20)

"Stocks React Like Junkies As Bernanke Yanks Away Low Rates" (Forbes, 6/21)

"Markets Tell Bernanke to Take His Optimism and Shove It" (BloombergBuisnessweek, 6/21)

Oh, and this is what the Dow looks like since Bernanke's speech, as of the end of the day on Friday, after a 2% drop on Thursday:

Global markets aren't faring too well, either. What happened here?

Look to the world's central banks, starting with Ben Bernanke and the Federal Reserve. So write Washington Post's Neil Irwin and Katerina Soku:

This isn't a crisis like the ones that struck the United States starting in 2008 or Europe in 2010. Rather, it is a byproduct of the world's central banks, having intervened on vast scale to deal with the economic travails of the last several years, introducing uncertainty and even a little chaos as they start to contemplate how and when the era of easy money might end.

"The trigger was clearly what is going on with the Fed," the investment director of Eastspring Investments in Singapore toldThe New York Times.

What happened on Wednesday was that, after two days of policy meetings, Ben Bernanke and the Fed put forward a view of the U.S. economy that was a bit more optimistic than markets anticipated. What's so bad about a bit of optimism? It came with the suggestion that the Fed may begin to end it's stimulative bond-purchase program by the end of this year and ease up its low interest rates sooner than previously thought.

It's a similar situation to what happened in Japan earlier this month: The markets look to the central bank, see something they don't like, and have a bit of a panic. And because the central bank in this instance is the United States Federal Reserve, the market repercussions are worldwide. The strange upside here? If markets do keep collapsing in the U.S., then the Fed would reassess its optimism and potentially ride out its stimulus.

Adding to Bernanke's no fun week, not everyone at the Federal Reserve is on board with the chairman's optimism. While the Fed's policy decisions this week were approved in a 10-2 vote, one of those two dissenting votes has been quite vocal.

On Friday, the office of James Bullard, president of the St. Louis Federal Reserve Bank, put out a statement saying that the Federal Open Market Committee "should have more strongly signaled its willingness to defend its inflation target of 2 percent in light of recent low inflation readings." The news release also called the decision for Bernanke to lay out an end to the Fed's stimulus "inappropriately timed."

So far, if the global markets are any judge, James Bullard is having a bit of a better week than Chairman Bernanke.