Avatar of admin

by

Bernanke the Comedian

February 27, 2013 in Economics

By Joseph Salerno

Dr. Brendan Brown is an eminent financial economist in the City of London and the author of The Global Curse of the Federal Reserve, initially published in 2011 and just released in its second revised edition. In his book, Brown is critical of Milton Friedman and the monetarists for ignoring the effects of monetary expansion on interest rates and asset prices and for assuming that a stable price level indicates an absence of inflation. Brown adopts Rothbard’s view that the 1920s were an inflationary decade, because, despite the rough price-level stability that obtained, asset and commodities markets were “overheated.” Brown also rejects the monetarist argument that price-level stabilization is the sine qua non of economic stability. He argues that price stabilization policy is one of the “dangerous features of Friedmanite monetarism” which “Austrian critics have long highlighted” and “which in hindsight may have played a role in the growth in Bernanke-ism.” Finally, and most insightfully, Brown also maintains that deflation is effective–and indeed, necessary–to extricate an economy from the depths of a recession or depression.

Needless to say, Dr Brown is no fan of Chairman Bernanke. In fact, in a memo today, Brown perceptively identifies the comedic aspect of Bernanke’s testimony on the first day of his semiannual monetary policy report to Congress. Writes Brown:

Comedy according to the theorists of drama is based on inflexibility of character. The lead role cannot in any way bend his stereotyped behaviour even when this would avoid an accident or disaster which is looming. And so “Don Juan” of Molière is a comedy. Even when the ghostly statue of his slain victim threatens to take Don Juan on a fiery descent into hell, the lead character cannot show remorse and desist from his life of debauchery. Chekhov listed his “Cherry Orchard” as a comedy because the lead characters could not shake themselves out of their nonchalance and avoid bankruptcy by selling the cherry orchard of their villa to a property developer on which he would build bungalows.

And so we come to the monetary comedy which played out in Washington yesterday. Professor Bernanke, adamant as always that the road to economic prosperity and stability takes the form of a rigorous targeting of inflation and supremely confident in a good outcome to his massive monetary experimentation tells his Congressional questioners that he sees no signs of asset …read more
Source: MISES INSTITUTE

Leave a reply

You must be logged in to post a comment.