Monday, April 30, 2012

The Fed Does Not Live on This Planet!

Richard Ebeling emails:
Dear Bob,

I read your speech at the Fed, and your postscript (on the Mises Institute site).

Brilliant! Just the type of talk that should be given in a place like that, and superbly constructed and articulated !!!!

They do live on another planet, and they do not understand how anyone can think any differently than them.

Last year I debated a U of M economist on the case for the gold standad. He had worked at the Fed and at the NBER.. But he knew nothing.

His arguments centered around:

(a) in the late 19th century prices fell in the U.S. -- see, the gold standard caused deflation and deflation is "bad" (in my reply I had to explain to him that falling prices can accompany growth and rising standards of living);

 (b) in the early and mid-1930s, those economies that abandoned the gold standard did better than  those that remained on it -- look at the chart employment and output grew faster in Germany and Japan than the U.S. due to more activist policies (I had to remind him in my rebuttal that these were totalitarian countries and their appearance of economic growth had nothing to do with a normal recovery in a market economy, unless he was endorsing fascist economics, that is);

(c) the first decade in the new century was kept on an even keel due to y the fortunate circumstance of having Greenspan and Bernanke at the helm at the Fed, otherwise the market's downturn would have been worse (I had to emphasize to him and the audience that there would not have been the "boom" or the "bust" if not for monetary manipulation that kept interests rates artificially low and induced the misdirections of resources and the capital malinvestment that made a downturn inescapable).

Their entire view of the world, the economy, and the nature and role and impact of monetary policy is totally alien to the way we see it. It is like talking to someone from another planet where things are the exact opposite of how they are on Earth.

Now, if you could talk before Congress and persuade them to abolish every department, bureau, and agency that is not mentioned in the original Constitution!

Richard


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