Helicopter 'Ben' is back:

The reappointment of Ben Bernanke, six months ahead of his term end has significant importance. Not just for his appointment but for the time of announcement. Doing it ahead of time shows that the Obama Administration is not getting into the politics of it all. He has not appointed a Democrat.

This decision has been welcomed and hailed by a many a economists and central bankers, the world over. He has had his share of critics which isn’t a surprise considering the type of decisions he has had to make. But by and large everyone seems to understand the importance of continuation especially at a time when things are looking up and sooner some hard steps would need to be taken. Who better than the person who initiated the steps in the first place. Following are the reasons why I think this is a good decision:

1. As mentioned earlier, continuation plays a crucial role when large stakes are involved. And in this case, it is the US economy, the largest in the world and it has a direct impact on the rest of the world economy.

2. He is a student of the Great Depression of 1930s. He would never have thought that he would be the person steering the world economy through a similar crisis or rather I should say, a collapse. There cannot be a better person, atleast academically to continue the process further.

3. He was on the Board of Directors of the Federal Reserve under the then Fed Chairman Alan Greenspan. He has seen from close quarters the things that have gone wrong. Thus he knows the exact way to get out of this rut.

4. This is his plan of action. The plan for massive fiscal stimulus which he convinced the US Congress for, the monetary easing through unconventional means such as quantitative easing and the buy back of US treasuries. He has openly talked about the reasons for him doing what he did and the results he expects from the decisions. These are unprecedented times which call for unprecedented ways of communication for which Ben Bernanke has succeeded.

5. He knows the time when recovery has reached a level from where the actions have to be withdrawn i.e. the fiscal and monetary actions. The slush liquidity has to be absorbed and let the real economy take over.

6. He is a stable person intellectually without getting swayed by short term gains. He thinks long term. His possible replacement could have been Larry Summers, economic advisor to President Obama who is outstanding economist but a bit temperamental and volatile. His elevation could have increased political interference in the working of the fed. This decision to retain Ben Bernanke has clearly avoided this situation.

Lastly, it is better to be a bit conservative in the approach to appoint such an important designation rather than being experimental. A new person brings a new thought process with a new way of doing things. Present conditions require more pragmatism than experimenting. Thus this is the best that could have been done.