As a devoted student of history, incoming US Federal Reserve chairman Ben Bernanke is all too aware that policy missteps can lead to economic disaster.
The respected economics professor will bring decades of academic thinking to bear when he succeeds outgoing Fed Chairman Alan Greenspan this week on the retirement of one of the US central bank's most venerated chiefs.
But whether Bernanke, 52, has the hands-on experience needed to cope with the periodic financial crises that buffet the US, and the world, economy is an open question for some economists.
The former head of economics at Princeton University returns to the Fed after a stint from 2002 to last year as a governor under Greenspan. Since last June, he has been chairman of the Council of Economic Advisers serving US President George W. Bush, who nominated him to succeed Greenspan last October.
He has impressed many with a clear speaking style that contrasts with Greenspan's delight in obscuring his message as much as possible. He has stressed the importance of transparency in the Fed's communications.
On the policy front, Bernanke differs from Greenspan in advocating the adoption by the Fed of an explicit inflation target, as other leading central banks do.
His fear of deflation is rooted in his profound study of the 1930s Great Depression, when banks and companies collapsed by the thousand and jobs disappeared by the million. While the stock market crash of 1929 is seen as the primary trigger for the economic collapse, Bernanke blames the newly created Federal Reserve for turning the crisis into disaster by jacking up interest rates in a misguided attempt to prop up the US dollar.
In a 2002 speech, Bernanke became famous for saying policymakers should consider printing cash or throwing money out of a helicopter if that is what it takes to stave off a debilitating downturn in prices.
"A closer look reveals that the economic repercussions of a stock market crash depend less on the severity of the crash itself than on the response of economic policymakers, particularly central bankers," he wrote in a 2000 article for the journal Foreign Policy.
Bernanke held up Greenspan's response to the "Black Monday" crash of October 1987 as an object lesson in how policymakers can resolve a crisis quickly and relatively painlessly.
The crash came just two months after Greenspan had succeeded another legendary Fed chairman, Paul Volcker. He earned the respect of the markets by promising ample liquidity to strained financiers and by pushing rates low.
Greenspan had more than 30 years of private-sector experience as an economic forecaster to help him navigate the storm. For some, Bernanke's academic credentials compare unfavorably.
"Often, solutions we would never embrace as a long-term policy, like flooding banks with liquidity, are essential tactics for surviving a crisis," University of Maryland business professor Peter Morici said.
"Those kinds of challenges are never adequately appreciated in the cosseted confines of college classrooms," he said.
"Mr. Bernanke's real challenges lie in accepting that markets are messy places and blackboard remedies won't do, and in finding the personal courage and political skills to act on what he learns," Morici said.
Bernanke was born on Dec. 13, 1953, in Augusta, Georgia, to a pharmacist father and a schoolteacher mother. He received a doctorate in economics four years later from the Massachusetts Institute of Technology, and worked at the Princeton for 17 years before joining the Federal Reserve Board in 2002.
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