It's important to remember that the Federal Reserve is an American institution. It is not the Reserve Bank for the World. It's not the European Central Bank, or the reserve bank for other economies such as: Canada, Japan, China, Australia, etc.
It's efforts are directed at the American economy.
In order to assess the success or otherwise (disastrous?) of the American Reserve Bank, I'd suggest comparing their performance with the performance of another large developed economy where quite different policies are operating.
The American economy is the second largest in the World. The European economy is the largest. The Europeans have taken quite a different monetary policy from the Americans. That is largely due to the German influence.
Here's what the OECD had to say earlier this year about the two economies:
The United States’ economy will recover faster than Europe this year, according to the OECD.
It says stimulus policies will help the US grow by 1.9 percent this year.
Stronger growth is forecast for Japan, after the government there rolled out new spending plans.
"The Paris-based think tank paints a less rosy picture for austerity-hit eurozone, which it reckons will shrink by 0.6 percent.
"That’s a far deeper contraction than the 0.1 percent that the OECD initially predicted six months.
"The organisation argues deep spending cuts, weak confidence and tight credit conditions are hampering Europe’s recovery.
"It says the European Central Bank should consider printing money to buy government bonds from the private sector as a means of rebooting the economy.
"The idea is that it would provide fresh financing to banks, which could then lend more cash to companies and individuals, boosting job creation and stimulating demand."
So - at this point in time, which Central Bank appears to have the more successful policies: surely we have to prefer the U.S. over Europe.
If any economy is leading us into a world contraction (as was suggested), one would have to look to Europe rather than America. Of course, the initial premise here is debatable.
The purpose of the Federal Reserve's bond buying program (QE) is to put liquidity into the economy - without liquidity the economy freezes up.
The Fed will ease back on the injection of liquidity when it sees the economy has improved enough to self-generate the necessary liquidity so that the economy won't freeze up. QE simply won't be needed.
Bernanke and the Federal Reserve were faced with a possible disastrous situation back in 2008. America then suffered the worst recession since the Great Depression of the 1930's. Bernanke avoided the 1930's scenario by not adopting the policies used in the 1930's.
There's no doubt that the recent Great Recession had far reaching ramifications - but Bernanke and the Federal Reserve avoided a repeat of the 1930's.
As Bernanke has often said, you can't expect a Central Bank to provide all the solutions for an economy. Matters are much more complex than that.
But at this stage in history, Bernanke is looking good. The fact that there are still problems shouldn't necessarily be sheeted home to him.
Doing so is an example of an "availability heuristic" (Daniel Kahnemann). "An 'availability heuristic' is a mental shortcut that relies on immediate examples that come to mind. When you are trying to make a decision, a number of related events or situations might immediately spring to the forefront of your thoughts. As a result, you might judge that those events are more frequent and possible than others."
It's easy to blame Bernanke for the ills (or otherwise) of the world. Whether or not that is valid is another matter.
This is important for our investment decisions if we are inclined to use fundamentals to help in those decisions. Using "availability heuristics" leads to quick answers (for better or worse) - which might be helpful in day-trading where snap decisions need to be made. But for long term investors somewhat more careful and considered thinking is required.
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