Alan Greenspan's name is familiar to many people. Even if individuals have no clue as to what Greenspan did, he was in the news so many times during his tenure as the 13th Chairman of the Board of Governors of the Federal Reserve that his name could become a registered trademark. Now, it seems that the current credit "crisis" and housing market woes could mark the beginning of Ben Bernanke's claim to fame as Greenspan's successor. But, "Bernanke" is just a name. Who is this guy, and does he know what he's doing?

Perhaps the easiest way to learn about Ben (not Benjamin) Shalom Bernanke is to read his abbreviated biography at Wikipedia. Although this cited information offers a cited background on this man, it doesn't lend insight to how Bernanke might react to current housing and lending problems. But, when this information is added to recent news articles and his speeches, perhaps the reader can come to a few conclusions.

First, there are several items that I'd like to point out in the Wikipedia article:

1. When Bernanke was in high school in Dillon, South Carolina, he taught himself calculus and he rated the highest SAT score in the state. From this information, you might conclude that Bernanke is a self-starter and intelligent. Plus, he handles pressure well, as the SAT is a high-pressure high school experience.
   
   
2. Bernanke asked for more pressure as he achieved his BA in economics at Harvard (summa cum laude), his PhD at Massachusetts Institute of Technology (MIT), and as he went on to teach as professor in Princeton's Department of Economics.
   
   
3. He has co-authored (not the sole writer as Wikipedia states) three textbooks on macroeconomics and one on microeconomics. He's also the co-author of Inflation Targeting: Lessons from the International Experience, and Princeton University Press has published his Essays on the Great Depression. The first sentence from his Essays states, "To understand the Great Depression is the Holy Grail of macro-economics." Mark Toma, from Financial History Review wrote that, "Not only is [Bernanke] technically proficient but his ability to place his results in a larger macroeconomic context is unparalleled."

The fact that Bernanke is interested in and knowledgeable about the Great Depression is interesting information, as the word, "recession" has been surfacing in the media lately. I'm not implying that Bernanke brought on any economic fears; instead, as you'll discover, the media is partly responsible for that endeavor.

The final few paragraphs at Wikipedia are important, as they offer a glimpse into how Bernanke might handle a "meltdown," as some media have described the current economic housing and lending problems. First, Bernanke is in favor of creating money to avoid deflation. In other words, the government can make money to cover losses to avoid deflation, an economic condition that's the reverse of inflation. I could explain further, but this statement says it all:

"Bernanke noted that, 'people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation.'"

Now, don't get your feathers ruffled with that remark, or you could end up looking as foolish as Jim Cramer [video] on national television. Instead, know that moderate inflation is a result of economic growth, and that's the type of inflation that Bernanke talks about. Too often, people equate "inflation" with "hyperinflation," where the rise in price of goods and services, or Consumer Price Index (CPI), rises at rates of 100% or more annually.

This lack of tact about inflation talk is, perhaps, one of Bernanke's weakest points. His initial goal to make Federal Reserve policy more transparent was a fiasco, as the media tended to inflate his perspectives on inflation. Now, some media are more moderate - or possibly more confused - about Bernanke's words and actions.

In a recent CNN Money article, you'll read quotes that state that the Feds may lower the interest rate in September, and then you'll read more quotes that state that the Feds need to "move cautiously." Between those remarks, you'll read remarks centered on Bernanke's academic background, which - according to his critics - seems an impediment to his understanding of how the 'real world' works.

This article makes me wonder how the 'real world' does work, especially when fund managers and mortgage brokers are asking Bernanke to base decisions on "anecdotal evidence" rather than historical and current hard numbers. 'Anecdotal' in this case doesn't refer to a funny story. Instead, Bernanke is being asked to listen to specific individual cases rather than to controlled and clinical studies. That request is rather obscure and illogical, don't you think?

Frankly, I'm impressed with Bernanke's background and with his caution. If he understands how to avoid a depression, and if he knows how to lower the perception of the national debt ($8,993,068,217,422.16 as of Sunday morning, 2 September 2007) with moderate inflation, then I'm all for that game until the national debt can be resolved.

Now that you know a bit more about Bernanke, please take time to read Bernanke's speeches, linked both in this article and in the CNN article. Perhaps you'll read more between the lines than the media, and understand that - while the housing market slump has created unwillingness for risk amongst investors - the housing market is just one market in an economy run by private industry and free trade. Take a look elsewhere to find some industries that are steals at deflated prices.

In the meantime, expect the markets to be volatile, and expect that volatility to make no sense whatsoever until the mid-September Federal Reserve meeting. The good news? It's a good time to accumulate as the market trades sideways. As a long-term investor, I'm going to rest easy, as Bernanke is a macroeconomic pro, he knows how to avoid deflation, and we're nowhere near a 100% hyperinflationary period.

Until Next Week,
Linda Goin