Ranking Bernanke

Submitted by Chris Turner via dshort.com Advisor Perspectives,

With Ben Bernanke's tenure closing, many financial TV pundits delight in touting the stellar performance of Ben Bernanke as Federal Reserve Chairman with just a couple months left in his term. Before the re-writers of history begin spinning performance, I thought why not compare Mr. Bernanke against all the other Federal Reserve Chairman to determine which Chairman deserves recognition. Picking the first two categories seemed easy enough, the "mandates" of the FED.

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."

  • Stable Prices as measured through the Consumer Price Index
  • Employment (though this wasn't a fed mandate until late 1970's) as measured by:
    • Total Employment
    • Employment Population Ratio
    • Unemployment rate

After comparing the Fed's mandate, I looked at categories that the Fed impacts via policy decisions;

  • Total Credit
  • Fed Credit Outstanding
  • Monetary Base
  • Real Income Growth

Other categories seemed plausible as Federal Reserve policies may stimulate growth in the private sector via policy decisions which show in the components of GDP;

  • Net exports
  • Personal consumption expenditures
  • Domestic investment

Although Government Spending is part of GDP, I removed this because I measured many parts of Government spending to include deficits, total budget growth, Gross federal debt, tax receipts & many more. Most of these categories would be better suited to a presidential or congressional measurement rather than a Federal Reserve Chairman (but I have all the data for those that may be interested).

Let's get to know the 14 Chairman and method of measurements. Here is a snapshot of the previous Chairmen, when they started and finished, which presidents were in office, and their total tenure.


Since not all data measured was available back to 1913, I compared the Chairmen since 1948 (when most data began to coincide). Most people understand Basketball scores and not Golf, so I rank ordered the Chairmen in a high to low with 7 points possible as the best in a category and 1 being the worst (representing the 7 chairman). The high score of all categories, wins. In most, I measured the growth (or decline) as a compounded annual growth rate to account for total years of tenure, then sorted the rankings appropriately. Once the categories were ranked, I tallied the score as shown below.

The yellow highlight shows the total of all nine categories. Martin's tenure of 18.85 years produced the best combination of the nine categories and the overall best in the Fed mandates. Although Bernanke scored higher than 2 others in the mandates, his overall score was the lowest (let the spin begin counterfactualists).



What is a post at Doug's Advisor Perspectives site without charts – so let's start with the best of the mandates for Bernanke; CPI. The chart below shows the Consumer Price Index, All Urban with 1982 set to 100 (data available from St. Louis Federal Research – FRED). The alternating grey and white bars show the terms for the respective Chairman.



The above chart contains one of the few full datasets back to the original Chairman, however, only the group of 7 were "ranked." Here is another view from the TABLEto show the results indexed to zero:



And that's about the end of the good news for Mr. Bernanke. The second favorite metric based on the Fed's mandate stems from employment. How did the Keynesian prodigal son compare?



Ouch – in the last 8 years, the table below shows the annual growth rate for the employment situation. Mr. Bernanke gets a score of 1 (that's last) and Arthur Burns as the highest ranking.

Here is the column graph that show under Bernanke, the nation lost jobs on an annual basis.



What about the average unemployment rate during the Chairman's tenure? Here is a depiction of the average unemployment rate during each Chairman's term.



Transitioning to Gross Domestic Product – readers are reminded that GDP calculation consists of the following:

GDP = Consumption + Investment + Gov't Spending + Net Exports (Exports-Imports)

Looking at the first GDP component, the following chart shows a measure of consumption in the Personal Consumption Expenditures:



The first category of GDP shows both the nominal and real PCE since 1929. The following TABLEprovides the ranking in this category.

Sorry, Mr. Bernanke, with growth rate stagnating by a third of the next Chairman gives you the worst ranking (take a 1 for that). The chart below shows the TABLEindexed to zero to display the information.



What about investment? The following chart shows the long run history of Gross Domestic Private Investment.



The gross private domestic investment results do not fare much better for Mr. Bernanke. Placing last seems to be a common trait – as the only Fed Chairman since 1948 to score a negative annual growth rates in both employment and domestic investment.

The table below highlights the actual destruction of investment under Chairman Bernanke.



We will skip government spending and go straight to net exports. In this category, I did not calculate a compounded annual growth rate but summed the total of all net exports during the term.



Nice job, the Maestro takes last in this regime and gets the coveted 1 point, but at least he remains within good company of Mr. Bernanke ranking a close 2nd worst.

The table above shows the nominal data, but just to show parity between the dollar values, I adjusted the TABLEby the CPI.



In transitioning to credit creation measurements, I looked at Total Credit, Federal Government Credit, and St Louis Monetary Base. For the faint of heart, buckle your seatbelts.

Starting with Total Credit created, the following chart illustrates the data (note, the total credit in the system is just under 60 Trillion).



Bernanke strikes a win! The table below shows the result of "a funny thing happened on the way to the balloon popping ceremony."

The following column chart indicates the data above and shows that Bernanke's term resulted in the least amount of credit growth.



In stark contrast however, peruse the following Monetary Base chart.



At least we know what "The Bernank" can be really good at (hint, involves helicopters).

To better illustrate the jaw dropping attempt at reflating the Russell 2000 (with extreme success), the following column chart should suffice.



Readers should understand that the data above is annual compounded growth rate! For 8 years, Bernanke has increased the monetary base by 20% per year (pretty sure this might not end well). If the time period is the late 90's and your money is in the Nasdaq – you would enjoy the 20% returns…

As the readers stop breathing momentarily – we found the ultimate successful trait for Mr. Bernanke, the money creator. The following shows total Federal Government Credit outstanding.



I wonder if providing extremely low rates (zero) helps or hurts the spending addict… (Note: data was not available for McCabe, which placed him last).

The column graph below highlights the table above.



Moving to how each person feels when they open their unadjusted-by-a-real-CPI paycheck, the last category measured involves income. The following chart shows the historical rise in median incomes adjusted for CPI.



The table below indicates the order for income growth (or loss) based upon policy actions.


Again, readers are reminded that the compounded annual growth rate under Bernanke has decreased your wages by nearly 1% per year for the last 8 years.

The graph below further depicts Chairman Bernanke's lack of success to help those working.



With so much credit given to Mr. Bernanke during the great recession (by large financial firms and TV), readers may be better armed to make their own determinations based upon data readily available. During the research, I measured 22 categories but pared those down to the ones the Federal Reserve touts so often, price stability, maximum employment, and economic growth. History will surely show that the true beneficiaries of the current policies do not translate to the overwhelming majority of Americans.

The data suggests that Mr. Bernanke ranks last in performance between the two mandates since 1948. Quite an accomplishment considering what events transpired during the last 60+ years; Korea & Vietnam, Oil Shock, high interest rates, etc… Before exiting the post, here is a true unintended consequence of letting the government borrow at zero interest rates:



Though not counted in the tally – the chart above shows the inflation adjusted sum of government deficits (amount added to debt) during each tenure. What readers need to glean from massive spending since the 80's – is that the last three Chairman were the last three in performance. While under Bernanke, the Federal Government has nearly doubled the amount of debt in 8 years as the previous 19 under Greenspan.

WWYD – (What Will Yellen Do)?


via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MmXZ586Lt5o/story01.htm Tyler Durden

Leave a Reply

Your email address will not be published.