Robert Novak

Bernanke's primary responsibility for the past week has been to coordinate with his fellow central bankers around the world and avert a global catastrophe. The Federal Reserve, European Central Bank, Bank of Japan and Reserve Bank of Australia combined to put cash into the system. Financial markets calmed, and the dollar rallied after a representative of the People's Bank of China on Monday called U.S. dollars and government bonds "an important part of China's foreign reserve investments."

Even the chairman's critics commend his handling of the first major crisis in 18 months on the job. They say the departed "Maestro," Alan Greenspan, would have acted identically -- with a single exception, in the opinion of one Fed watcher. He feels Greenspan would have leaked plans for an interest rate cut in the future to show his overriding concern about the U.S. economy.

Domestic economic indicators released on Tuesday pointed in various directions. On the bearish side, Wal-Mart and Home Depot separately reported profits that were less than expected. On the bullish side, the U.S. trade deficit dropped to an all-time low as exports reached new highs. On Wednesday, the consumer price index rose 0.2 percent (a 2.1 percent increase for the year) -- not clearly showing whether inflation is worrisome enough to inhibit the Fed from easing.

As Bernanke considers his course, the "R" word (recession) is in the Washington air. That's the reason for the Fed's secret decision to move away from neutrality toward easing, which is now on hold thanks to the global crisis.

Robert Novak

Robert Novak (1931-2009) was a syndicated columnist and editor of the Evans-Novak Political Report.

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