Another naked emperor with gobs of cash
Ignorance abounds about both the cause of the present economic turmoil, and the way out of it. (I won't repeat my own comments on both, just check the archives.)
But perhaps the dumbest comments come from those who simply place their faith (and by that I do mean "belief without proof") totally in the expertise of Fed Governor Ben bloody Bernanke. Mike Moore for example in this morning's Herald, says:
Why will this not be like the Great Depression? The biggest difference is what policy-makers have learned. The President of the US Federal Reserve Bank, Ben Bernanke, did his economic thesis on the Great Depression.
But what have the policy-makers learned? And so what if Bernanke did his thesis on the Great Depression if he learned all the wrong lessons by it. How many academics do you know who are on the right side of any argument?
As an example of the former problem, Moore himself appears to have learned next to nothing. He seems to think that throwing gobs of government cash around pulled the world out of depression -- it didn't. He claims it's all about "confidence" and seems completely unaware of the real capital and real savings that those gobs of malinvested cash have been and will be consuming. And he appears to think that at "at the time of the Great Depression, there were few effective Government-owned central banks," when in fact the US Federal Reserve System, largely responsible for the crisis, was kicked off in 1913! (Moore compounds the error by claiming 'The Fed' was created in the thirties by Franklin Roosevelt, and that along with Fannie and Freddie and gazillions of dollars of phony "liquidity" it effected the recovery.)
Let's face it, the policymakers in power (or on the hustings looking for it) are no better than Moore, who no longer has any. As their answers on the economy indicate all too clearly, they really don't have a clue so they too place their faith in Bloody Bernanke.
But Bernanke has nary a clue either. He too seems to have formed the view that gobs of government cash are the answer -- and it's him who has control of the printing press. He has one tool, a printing press, and all he knows is he's going to use it, and you're going to pay for it.
The problem with putting all your faith in Bernanke and his friends is not that he's not smart -- he is -- it's that he's been blinded by a flawed economic philosophy.
If he's had his eyes open he would have seen some years ago how the product of his printing press were already causing wobbles -- just as they did in the twenties, with those wobbles eventually becoming a crash -- but the blinkers of his flawed economic philosophy blinded him to the facts then just as they do now, even when the likes of Ron Paul throws them in his face.
If he'd done his research without his Keynesian blinkers on, he would have seen that the 1929 crash wasn't caused by the Fed's deflation, it was made inevitable by the earlier monetary inflation that helped create the phony boom; and he would have noticed the recovery wasn't helped by the gobs of counterfeit credit being thrown around (in fact, that helped create a "depression within the depression" in 1937), but by the pool of real savings that canny workers kept and invested from their own earnings.
He might be smart, but his flawed economic theory just makes him another man without a clue about to lead us all into destruction.
In the latest of his seven-part series on the economic crisis, writer Jeff Perren continues his examination of The Naked Emperors with a closer look at the man to whom the faithful are now praying. But is there anything at all behind Bernanke's curtain?