Stephen Roach, the longtime chief economist and now Asia head of the investment bank Morgan Stanley has grave concerns about Fed Chairman Ben Bernanke’s just-announced term extension
In a commentary for Britain’s Financial Times, Roach, who for years was the only Wall Street economist to warn sharply of an approaching crisis (A Bad Omen), called Barak Obama’s nomination of Bernanke for another term "a very short-sighted decision". Although Bernanke had been quite preserved during the crisis, one should not forget the contribution Bernanke had made to the emergence of the crisis: "It is like praising a proven quack for the invention of a miracle cure."
Bernanke is responsible for three critical errors, the most serious of which is that he, like his predecessor Alan Greenspan, held the "philosophical conviction" that central banks should ignore speculative bubbles. According to this doctrine, the task of the central bank in this respect is exclusively to break up the bubble after it has burst. After the bursting of the New Economy bubble in 2000, the cleanup consisted of flooding the financial markets with liquidity from 2001 to 2003, which contributed significantly to the "deadly mix of credit and real estate bubbles.