As a bookend to the non-answering of Queenbo’s question to economists (story here yesterday), we’ve now got the diametrical opposite to Peter Schiff’s now famous ‘Peter Schiff Was Right’ video: Ben Bernanke’s ‘I Don’t Have a Fucking Clue’ video. Here it is:
While Schiff was predicting the deep recession that would follow the bursting of the housing bubble, Bernanke didn’t even know there was a bubble going on – or realise that his own organisation was largely responsible for it.
Now just to make sure you don’t miss a word, Lilburne has both transcript and analysis – and a point worth taking. In this video, “Bernanke is shown to have been just as embarrassingly wrong as Schiff was uncannily right”; but that’s not because Bernanke is a moron – he’s a very bright guy – but because of “their differences in economic understanding.”
Schiff’s economic understanding is Austrian. Bernanke’s is mainstream. There’s the story.
UPDATE: Robert Blumen gives an example of a blatant mainstream error committed by Bernanke right out in the open here – the same error, I’ll wager, that many NZ home-owners make: i.e., the idea that a strong economy necessarily supports rising house prices.
As Blumen points out, we certainly shouldn’t expect that to be the case with a strong economy and food prices, would we, so why expect it with house prices? And in any case, shouldn’t a strong economy support generally falling prices?
[Blumen’s] point is not that it is impossible for rising incomes and rising home prices to co-exist, only that it requires a very special set of conditions and that, in general, we should expect the opposite. Bernanke's blithe statement of the obvious at best requires further explanation and is at worst illogical. It is more likely, as Reisman says, that the cause is an expansion of credit.