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Is Bernanke the best around? - Views on News from Equitymaster
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  • Jul 22, 2009

    Is Bernanke the best around?

    He may have received flak from some full-blooded capitalists but if a survey by Bloomberg is to be believed, Ben Bernanke, the US Fed Chairman has received top marks for combating the worst financial crisis since the Great Depression. And it wasn't a marginal verdict in favour of the 55-year old Bernanke. As many as 75% of those who were polled had said they were impressed with Bernanke. What more, he was ranked higher than his counterparts at other major central banks, including European Central Bank President, Jean-Claude Trichet. Indeed, ever since the crisis broke out Bernanke has moved with lightening speed, reducing interest rates to near zero levels and in no time, doubling the Fed's balance sheet by injecting trillions of dollars into the economy, a move that many believe has helped avoid a repeat of the Great Depression and has helped stoke chances of recovery sooner than expected.

    However, not everyone has appreciated the move. There are some like Jim Rogers who have taken an extremely critical view of things, saying that by doing what Bernanke has done, we have set ourselves up for an even bigger crisis down the road. There is of course a lot of merit in his argument. By flooding the system with unprecedented liquidity, Bernanke has raised the threat of runaway inflation manifold and his biggest challenge would be to rein in the same without causing adverse effects on the economy. If he indeed manages to do the same, he might get top marks in our books as well.

    Thank God for China, says US Inc.
    At nearly US$ 600 bn, China's stimulus package is a lot less than that unveiled by the US, which stands at US$ 800 bn. But that's not the full story. If one were to compare on the basis of percentage of GDP, then China's stimulus far exceeds that of the US and this perhaps explains why a lot of US companies seem to be going ga-ga over China while announcing their most recent quarterly results. As per a leading daily, China seems to be proving one of the few bright spots during the US earnings season as the dragon nation's huge stimulus package is supporting demand for a variety of products, ranging from computers to construction equipment. Although the earnings season is far from over, the list of companies that have already mentioned China as a positive has already reached notable proportions. In fact, the number of China admirers is only likely to grow in the second half of the result season as investment in the country picks up and the multiplier effect of the stimulus further kicks in. Little wonder, people are expecting the country to recover the fastest from the global financial crisis. India isn't in a very bad position either. Although Planning Commission Deputy Chairman Montek Ahluwalia has stated that there could be no further fiscal stimulus packages for India, successful implementation of the ones that have already been approved is likely to see us through a decent enough economic growth. Furthermore, if the monsoon holds up well, we might end up with a GDP growth in the region of 6%-7%, which given the circumstances elsewhere, we would happily accept.



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