David Stockman has a hard hitting piece on central banking community with special brickbats for Ben Bernanke.
Ben Bernanke is one of the most dangerous men walking the planet. In this age of central bank domination of economic life he is surely the pied piper of monetary ruin. At least since 2002 he has been talking about “helicopter money” as if a notion which is pure economic quackery actually had some legitimate basis. But strip away the pseudo scientific jargon, and it amounts to monetization of the public debt—–the very oldest form of something for nothing economics.
Back then, of course, Ben’s jabbering about helicopter money was taken to be some sort of theoretical metaphor about the ultimate powers of central bankers, and especially their ability to forestall the boogey-man of “deflation”.
Indeed, Bernanke was held to be a leading economic scholar of the Great Depression and a disciple of Milton Friedman’s claim that Fed stringency during 1930-1932 had caused it. This is complete poppycock, as I demonstrated in The Great Deformation, but it did give an air of plausibility and even conservative pedigree to a truly stupid and dangerous idea.
In any event, Bernanke was tilting at windmills when he implied that the collapse of the US wartime and Roaring Twenties boom had anything to do with the conditions of 2002. Even the claim that Japan was suffering from severe deflation at the time was manifestly false. In fact, during the final stages of Japan great export and credit boom, the domestic price level had risen substantially, increasing by nearly 70% between 1976 and 1993. It then simply flattened-out—–and appropriately so—-after the great credit, real estate and stock market bubble collapse of 1990-1992. So even by the evidence of Japan, there was no basis anywhere in the world for Bernanke’s fear-mongering about Great Depression style “deflation” at the turn of the century.
Instead, Bernanke was already showing himself to be a dangerous academic crank with no compunction about dispensing among democratic politicians the most toxic ideological poison known to history. Namely, an invitation to plunge the public fisc deep into the red so that the central banks would have bonds to buy in their fight against the purported scourge of deflation.
Phew..That is some hitting.
On other central bankers and their latest trick in the game – inflation targeting:
But that didn’t stop Bernanke. He even managed to hoodwink those non-Keynesians still around at the Fed in 2011 into formally embracing his pet scheme of inflation targeting. This wrong-headed idea was based on the delusional view that the US did not have enough inflation, and that, in fact, at least a 2% yearly gain on the CPI was essential for maximum economic growth and full-employment.
There is not a shred of evidence anywhere that 2.00% inflation has any different implications for real economic growth than 1.80% or 1.00% or even the absence of CPI inflation altogether.
It’s just a case of magic numbers gussied up in econometric jargon by central bankers and their Keynesian acolytes and hirelings. It’s real function is not to enable higher growth and living standards for the people, but, instead, to justify 24/7 monetary intrusion and management of financial markets by an unelected but all powerful monetary politburo.
At length, Bernanke’s insidious notion of inflation targeting has spread to virtually every central bank of the world. In the case of the ECB, it is the very raison d etre for Mario Draghi’s insane monthly purchase of $90 billion of sovereign bonds and other securities. Yet aside from the evident impact of externally originated oil and commodity deflation during the last two years, there is not a scintilla of evidence for deflation in Europe.
In fact, since 2002, the eurozone CPI has increased at an average rate of1.8% per year. In truth, that much inflation probably hindered economic growth there, and certainly eroded the living standards of retirees and wage-earners.
It is really ironical. No one believes you when you say central bankers are just Keynesians who manipulate interest rates and financial markets. One can’t blame them as standard macro books are just full of saying no to anything government and yes to anything central banking. We hardly realise that central banks are just an arm of the government and just works like one.
All this central bank intervention and dominance in daily lives is becoming just too much. We need some sanity to return..