If you want a quip –
A John Roberts, not a Harriet Miers. Actually, more of a moderate John Roberts than a John Roberts. Bernanke will have no trouble getting confirmed. Bernanke's academic credentials are second to none.
Internationally, Bernanke is most famous for his global savings glut thesis.
Like Dan Gross, I think that thesis, as originally constructed, had some problems:
- In many parts of the world, current account surpluses rose because of a fall in investment, not a rise in savings. China is a bit the exception. No one can question the presence of a Chinese savings glut.
- It downplayed reserve accumulation just a bit too much for my taste. After all, why did a surge in capital inflows to the US lead US rates to fall and US consumption to surge, lowering national savings, while a comparable surge in capital inflows have no such effect on Chinese savings?
- It is not clear why the Asian crisis of 97-98 explains the Chinese savings surge of 02-05, or why Chinaneeds to hold 50% rather than say 20% of its GDP in reserves. Asia's crisis taught me that an emerging economy probably needs 10% of its GDP in reserves, not 5% or less, but China has had more reserves than it needs to avoid another "Asia" for some time.
- It downplays the US fiscal deficit a bit too much. Cross country evidence suggests that fiscal deficits do contribute to larger current account deficits.
- The argument that if the US cut its fiscal deficit, there would be basically zero impact on the US current account deficit since there would still be more savings than investment abroad, and that excess savings would drive down US rates and push up US investment and push down US savings is a bit too US-centric. Lower rates globally might induce larger capital flows to emerging markets, more investment outside the US, or even less savings in countries with savings surpluses. There are a range of possible responses other than even higher US housing prices and even lower US household savings …
But Bernanke's savings glut speech also got two key things right -
The counterpart to the increase in the US current account deficit has been a rise in the current account surplus of the emerging world. He rightly puts far more emphasis on the emerging world than on Europe or Japan.