Ben, are you sure you know what you're doing?

This morning's Ahead of the Tape column($) in the Wall Street Journal qualifies as another "Greenspan mess" sighting. Remember the rule - these two words within two paragraphs or 100 words of each other with total points awarded based on proximity.

Jon Hilsenrath argues it is far too early to judge Federal Reserve Chairman Ben Bernanke who celebrates his two-year anniversary as Fed chief this Friday.

Ben Bernanke can't get a break.

Two weeks ago, the Federal Reserve chairman's critics complained he was standing idly by while the markets sank, and they clamored for more-aggressive action. Last week, when he did what they asked, they called him a pawn of fickle investors. Had he done nothing, the same critics probably would have said he was ignoring the potential economic damage of a stock-market collapse.

In the end, all this hand-wringing about Mr. Bernanke's style and demeanor will be long forgotten if the Princeton professor gets his economics right. He's betting he can head off a recession by quickly lowering interest rates, possibly again tomorrow after the Fed meets. And he's betting he can do it without igniting inflation.
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It probably doesn't help Mr. Bernanke that he has to manage the situation while his former boss, Alan Greenspan, and potential successor, Lawrence Summers, chime in with opinions from places like Davos and from book tours.

If the U.S. economy somehow gets out of this mess without a recession and with inflation under control, Mr. Bernanke will be a hero regardless of what market critics say now. Wall Street might give his policies a chance before writing him off.

Yes, he could be a hero indeed.

Just like when Alan Greenspan was a hero for getting us out of that dot-com mess a few years back by inflating an even bigger asset bubble, if Ben Bernanke can find another suitable bubble to inflate, he too might stake a claim to the title "best Fed chairman ever".

Unfortunately, there are no good financial asset bubble candidates at the moment.

Of course there's alway the hard asset bubble that's been forming over the last couple years - the only problem with hard asset bubbles is that those prices show up in the inflation statistics.

While the obvious solution is to remove food and energy from the consumer price index completely - relegating overall inflation to the economic junk heap along with the M3 money supply statistic - that may not be politically possible due to the relatively large voting block of retirees who still have to put food on the table and heat in their homes.

And speaking of rising prices, writing in Bloomberg today, Craig Torres and Simon Kennedy correctly note that interest rates and inflation are pretty close to each other at the moment, but they seem to have not kept up with the latest economic data (Fed funds rate = 3.5 percent, December year-over-year inflation = 4.1 percent or compound Q4 annual rate = 5.6 percent).

Either that or they're ahead of the curve, already figuring that "inflation" is really "core inflation", which excludes rising food and energy prices.

The Federal Reserve may push interest rates below the pace of inflation this year to avert the first simultaneous decline in U.S. household wealth and income since 1974.

The threat of cascading stock and home values and a weakening labor market will spur the Fed to cut its benchmark rate by half a percentage point tomorrow, traders and economists forecast. That would bring the rate to 3 percent, approaching one measure of price increases monitored by the Fed.
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So-called negative real interest rates represent an emergency strategy by Chairman Ben S. Bernanke and are fraught with risks. The central bank would be skewing incentives toward spending, away from saving, typically leading to asset booms and busts that have to be dealt with later.

Yeah, we'll deal with the repercussions later. This is an election year after all - we can't have home prices falling and unemployment rising at the same time.

Factor in a stock market that doesn't quite know which way to go at the moment and there's only one real solution - more easy money!

Ben, are you sure you know what you're doing?