When Ben Bernanke became chairman of the US Federal Reserve in 2006, few imagined his doctoral thesis from decades earlier would prove to be so useful. And yet, a year and half into his tenure, his deep understanding of America’s Great Depression suddenly had very real political relevance.
Mr Bernanke leaves the Federal Reserve, the country’s central bank, today, after eight years at the helm. During that time, the US has navigated its way through the worst financial crisis in living memory.
Throughout 2007, the US economy exhibited worrying signs, but when, at the end of that year, it slipped into recession, the crisis began in earnest for Mr Bernanke. Within months, the Fed invoked emergency powers and poured loans into the economy. A wobbly year followed before, in September 2008, Lehman Brothers collapsed, becoming the biggest firm in US history to declare bankruptcy. The crisis had gone public.
For Mr Bernanke, these were the most taxing weeks. Slashing interest rates didn’t work and the Fed looked to a new idea that would soon enter common currency: quantitative easing. By using new money to buy up debt and securities from banks, the government swelled the reserves of banks, giving them more money to invest and lend.
What happened in the US, the world’s largest economy, could not be contained and the financial crisis was felt everywhere. In this region, oil prices were badly hit. From a historic high in July 2008 of $150 (Dh551) a barrel, the price crashed, within eight months, to $40. Money that had previously poured into the coffers of the Gulf reduced to a trickle and much of the planned development from pre-2008 had to be rethought.
Mr Bernanke’s legacy will be long discussed. Quantitative easing, now into its third round, continues, and US national debt has grown exponentially, to more than US$17tn. But oil prices have recovered. What can certainly be said about America’s top banker is that he stopped the crisis getting worse, halting the slide of the recession. For the Gulf states, that had benefits, because although the price of oil took a tumble, the knock-on effects in the Gulf would have been worse in a deeper recession.
If demand had slowed globally, there would have been less demand for oil, as well as the knock-on effects of reduced tourism, fewer flights and a more inward focus in international economies. Mr Bernanke is hardly a household name in the Gulf, but, overall, his eight years have contributed to more money in the pockets of regional households.