One of the puzzles of the Obama administration that I have absolutely no read on is the reappointment of Ben Bernanke. When Obama reappointed Ben Bernanke I was sure — and I had reason to be sure — that the Ben Bernanke they were reappointing was the academic I knew well, "Helicopter Ben," the intellectual advocate of much more aggressive policy responses to the collapse of the real-estate bubble in Japan in the 1990s.
Obama would, after all, have to be a complete idiot to appoint somebody who did not view the world the way Ben-Bernanke-the-academic had viewed it in the late 1990s, and who had not assured him that he did still view the world the way he had viewed it in the 1990s.
So huh?! What happened?
Perhaps this is the result of too many trips to Jackson Hole, where private conversations with the great and good can too easily convince you that the great and good all agree with you in their heart of hearts. But in August 2009, if you were someone who had never met Ben Bernanke, who had never been to Jackson Hole, who had never spoken privately with anyone of consequence in the economic community — in short, if all you had to go on was Ben Bernanke's public actions and public statements — I think you would conclude that he thought the economy was on the mend and had no intention of lighting his hair on fire over minor things like sky-high unemployment and trillion dollar output gaps. You would also, I think, conclude that he was still the same laissez faire Republican economist he has always been and had no real desire to seriously re-regulate the financial sector even after the biggest financial meltdown since 1929.
And guess what? You would have been right. I'd say that about 90% of the time, public actions and public statements are more reliable guides to reality than all the private conversations in the world. Unfortunately, the other 10% of the time they aren't, and that 10% tends to be fairly dramatic. So, like a gambler who gets a big payoff just often enough to keep him at the table, we continue to be suckered by what we think is inside knowledge. Just human nature, I suppose. Maybe I should add it to my list.