“Bernanke’s Test: Ben Bernanke, Alan Greenspan and the Drama of the Central Banker” by Johan Van Overtveldt, c. 2009, B2 Books, $26.00, 287 pages, includes notes and index.
You walked into the living room last night and instantly felt terror. Wide-eyed, you couldn’t bear to approach the television. You had remotophobia.
Remotophobia: that fearfully sick, averse feeling you get when you use your TV’s remote control. One click, you turn on the national news and the ailing economy is all over the screen.
You don’t need to be reminded.
You’ve already watched your wallet take a walloping.
It’s easy to point fingers. There are scapegoats all over the place, but blaming isn’t fixing. So how did this happen and what can be done? Read the new book “Bernanke’s Test” by Johan Van Overtveldt, and things may be clearer.
Created in 1913, the Federal Reserve System was developed with the hope that it would, in part, reduce financial instability and perform as the “government’s banker.” Politically controversial, this was the third attempt that had been made to create a central American bank.
During the Depression, Van Overtveldt writes, the Fed stood “idly by while the American financial system collapsed…” American trust in the Fed was eroded and, in the end, the Treasury set monetary policy for the years after the Depression and until 1951. Inflation was “relatively under control” from post-World War II until the mid-1960s.
By the time Alan Greenspan took over as Fed chairman in 1987, the inflation rate had risen to uncomfortable levels, the U.S. had seen exorbitant interest rates come and go and budget deficits were skyrocketing. As for his tenure as Fed chairman, Greenspan has been lauded as “the greatest central banker who ever lived” and condemned as the reason we’re in a recession today. To be fair, Van Overtveldt writes, “Greenspan’s tenure endured more than its share of serious crises,” including a stock market crash, the events of Sept. 11, 2001, and the Enron scandal. Still, it’s been said that if Greenspan had been more on-point, the sub-prime mortgage crisis wouldn’t have happened.
Into the fray stepped Ben Bernanke in 2006. His going-on-three-year tenure has, like his predecessors, not been without controversy. Like those before him, he’s had supporters and distracters. He’s made some off-base predictions and will continue to be tested by the economy as it is. But will Bernanke pass or fail?
Reading, at times, like a stiff college thesis and suffering sorely from lack of glossary, “Bernanke’s Test” is not one of those fun-filled books you can breeze through in a weekend. It’s cavernously steeped in politics and high-level finance and takes some extremely serious thought to understand.
Having said that, this is an important book. Author and think-tank director Van Overtveldt explains the Fed in a way that’s as lively and easy to understand as it can be. Though I was occasionally discombobulated, I did get caught up in the drama that Van Overtveldt promises in his subtitle.
Despite the possible difficulty in understanding fully, this is a book that all Americans – all homeowners, anyone with a 401(k), anyone who’s employed – should at least attempt to struggle through. “Bernanke’s Test” is a book you cannot completely pass.
The Bookworm is Terri Schlichenmeyer. Terri has been reading since she was 3 years old and never goes anywhere without a book. She lives in West Salem, Wis., with her two dogs and 9,500 books.