Friday, October 23, 2015

Bernanke Attacks Austrian School Economics: Crazy Opinons

FT's Martin Wolf recently had lunch in Chicago with former Fed chairman Ben Bernanke, who is still on the road hustling his book, The Courage to Act: A Memoir of a Crisis and Its Aftermath.

During the lunch, Wolf asked Bernanke about critics who argue that the Fed shouldn't have intervened in the downturn, that the downturn would have been self-cleansing.The only economic school to hold this view is the Austrian School.

Wolf and Bernanke don't mention at their lunch the Austrian school by name, but that certainly is the school of thought they are discussing.

Here's the exchange:
Other critics argue, I note, that the Fed’s intervention prevented the cathartic effects of a proper depression. He teases me by responding that I have a remarkable ability to keep a straight face while recounting what he clearly considers crazy opinions.
I add that many critics still expect hyperinflation any day now. “Well, we were quite confident from the beginning there would be no inflation problem. And, of course, the greater problem has been getting inflation up to target. As for allowing the economy to go into collapse, this is the Andrew Mellon [US Treasury secretary] argument from the 1930s. And I would think that, certainly among mainstream economists, it has no credibility. A Great Depression is not going to promote innovation, growth and prosperity.”
I cannot disagree, since I also consider such arguments mad. Nevertheless, I note, we have to recognise that neither he nor the Fed expected the meltdown.

Actually, as Murray Rothbard and Robert Higgs have both pointed out, the Great Depression was not prolonged because of monetary policy but because of other government policies that did not permit the economy to self-cleanse.

Bottom line: Bernanke's distortion machine was working well in Chi-town. His "book" tour seems to be as much about dissing Austrian economics and gold, then it is about promoting his book. He fears the Austrians.



  1. "He fears the Austrians."

    Then he's smarter than we give him credit for.

  2. Nobody fears Austrians. Austrian school had a resurgence after the financial crisis since the Wall Street PR machine could use simplistic ABCT to put the blame on the govt but people are wising up.

    1. Everyone fears the Austrians and libertarians but Austrians and libertarians do not seem to realize it. The statists can’t bear to think about, much less express, any of the basic Austrian and libertarian concepts:

      1. The statist interventionist greatly fears the articulation of the non-aggression principle, which is really nothing more than what everyone already practices in their life at home and which they learned in nursery school. The entire scope of statist interventionism is based upon the alleged historical failures of the NAP but the interventionists can never point to a clear example. The interventionist fears the public ever hearing and understanding a clear statement of the NAP.

      2. A corollary of #1 is the failure to recognize the difference between voluntary transactions and transactions subject to, impacted by or induced by intervention. The statist interventionist fears the public learning to clearly distinguish these simple differences. They are desperate to blame the Keynesian housing collapse upon “laissez faire” which is nothing but fraud and lies.

      3. Through the obfuscation of #1 and #2, the statist can never allow a clear statement of the concepts of economic calculation and miscalculation or the concept of Cantillon Effects/injection effects to be expressed or understood. Austrian analysis cannot be understood without a firm understanding of these basic concepts.

      4. If the statist interventions did not fear the Austrians and libertarians, they would clearly state these basic concepts and they would either refute them or our application of them. The fact that they do not demonstrates that they greatly fear them. We should be able to use that against them.

      5. Similarly, both the U.S. government and the MSM do nothing but lie about Russia and U.S. foreign policy. It is high time that libertarians and Austrian realize, accept and expressly state that our opponents are not debating us in good faith. Have you EVER seen a fair statement of Austrian analysis from a non-Austrian? EVER?

    2. I'd say more avoidance and denial than fear. Though avoidance may reflect deep seated fear (or greed).

      If they fear anything, it's Austrian ideas. Because letting themselves come to understand the ideas would shatter the elaborate scheme they support that supports them back - feeds their families, gives their lives meaning.

      Austrian economists are beyond powerless in this statist society, they are non-entities. It's their ideas that jiggle the needle, albeit as a dull, far-off, distant, amorphous threat that remains safe to ignore.

  3. Can we cut to the chase? Bernanke assisted in stealing money from the productive classes to pay off the bad gambling debts of the banksters. Period.