Monday, October 27, 2008


Bob Murphy generally does a good job of rebutting the regular nonsense blogged by Tyler Cowen. However, today, I have to step into the fray, since Cowen touches on topic near and dear to my heart, the business cycle.

In a post titled, Assorted Links, Cowen lists Greg Mankiw's recent column. About the column, he writes,"My favorite Greg Mankiw column so far."

I have a decidedly different take, since in his column Mankiw discusses the current downturn and the Great Depression, yet fails to even mention the possibility of a business cycle theory that could explain the two declines.

Cowen also links to a column by Jeffrey Rogers Hummel. About this column, Cowen writes, "Jeff Hummel blames Bernanke and Paulson for what has happened. I don't agree but we are committed to passing along many different points of view."

Say what?

Hummel writes a detailed blow by blow of Fed money manipulations over recent months. He details what I have been pointing out in real time all summer, that the Fed only started expanding the money supply in late September.

Hummel also does an excellent job of explaining what the recent explosion in the monetary base and Fed credit is all about. (

Although, there are several points of Hummel's that I disagree with, for example, he fails to note that M1 is climbing because of the fear factor, and that the explosion in the monetary base may not, in itself, cause a money supply explosion since the huge Treasury deposit is just sitting there and not entering the system, it is one of the best columns I have read that describes the current monetary situation. Cowen disagrees. He prefers the Mankiw puff piece.

Read the two columns for yourself, and decide who is writing a detailed explanation of the current situation and who is writing puff. Cowen's choice between these two columns is the kind of off center stuff that he regularly posts, which makes it easy to understand how Murphy is able to plant brutal knockout blow after knockout blow on Cowen.

Mankiw's column is here. Hummel's is here.

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