Steve Chapman

In the Republican presidential campaign, candidates are sharply divided about Federal Reserve Board Chairman Ben Bernanke. Some want to heat up the tar. Some want to bring the feathers.

Hugo Chavez would get a warmer reception at a GOP event than Bernanke. In Tuesday's debate, former House Speaker Newt Gingrich pronounced him "disastrous." Former Massachusetts Gov. Mitt Romney charges that he has "over-inflated the amount of currency." Texas Gov. Rick Perry warned Bernanke against pursuing a monetary policy that would be "treasonous."

Bernanke's alleged sins are legion. He is blamed for bailing out Wall Street, destroying the value of the dollar, orchestrating events to re-elect Barack Obama and sinking the Titanic.

His GOP detractors don't mention that he was appointed by George W. Bush, and that the Wall Street bailout bill passed in October 2008, before Obama arrived. They also forget that Bernanke's actions helped avert a complete financial collapse that could have caused a full-fledged depression.

It's easy to dismiss the Fed's critical role back then. But had Bernanke shrunk from the task, or botched it, he would qualify as the worst Fed chairman in history.

Many conservative economists give him high marks. "The Fed got the big things right," says John Cochrane of the University of Chicago Booth School of Business, who notes that it averted the mistakes that brought on the Great Depression. "We did not have deflation. That's enormous."

As he tries to combat the recession, Bernanke is accused of making monetary policy with a fire hose -- spraying out new money that will inevitably bring back inflation. The complaint is at the heart of the Republican indictment. But it is largely a stranger to reality.

Under Bernanke, inflation has not flared out of control. Last year, the Consumer Price Index rose by just 1.6 percent. The year before, it actually fell. "The average annual inflation rate during Bernanke's term is lower than any Fed chair since 1970," notes Time magazine.

Lately, the CPI has been inching up. But that is largely a transient artifact of food and energy prices rather than a broad-based rise in prices. The core CPI, which excludes these commodities -- not because they are unimportant but because they are notoriously volatile and often misleading -- is up just 2 percent in the past year.

If investors were expecting runaway prices, they wouldn't be snatching up five-year Treasury bonds paying interest just above 1 percent per year. Rates on 30-year mortgages wouldn't be at record lows.

Steve Chapman

Steve Chapman is a columnist and editorial writer for the Chicago Tribune.

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