Ben Bernanke Needs to Learn a Lesson from Milton Friedman

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I tried to watch Ben Bernanke’s question-and-answer appearance before the Senate Banking Committee, but there was Christopher Dodd, chairman of that committee, who is the guy I accuse of being directly responsible for the entire economic mess we are in, as the economic mess we are in is the same kind of economic mess that happens every damned time the banks are allowed to act irresponsibly, and this preening Congressional-doofus was in charge of questioning the head of the Federal Reserve to keep the banks from acting crazy and keeping greedy, corrupt, lying bankers in line. But he blew it, big time, and I shall never forgive Connecticut for electing this bozo.

Almost right off the bat, Bernanke implied that Milton Friedman was wrong, and that the whole Monetarist School of economics was wrong when they said that “inflation in prices is always and everywhere a monetary phenomenon” – which is exactly, exactly right. Instead, Ben “Butthead” Bernanke says that inflation is caused, not by irresponsible over-creation of money and credit, but by rising commodity prices, especially the rising price of oil! Hahaha! What an idiot!

And ol’ Butthead says he is on the lookout for signs that the rising costs that producers of goods and services must pay are not filtering through to retail prices, and if he ever sees any inflation, he will take “action”! Hahaha! I can’t believe I am hearing this! Hahaha!

This Bernanke dim bulb, who apparently knows nothing about economics at all, was the chairman of the economics department of Princeton (which doesn’t say much for Princeton University), and is apparently unaware that Milton Friedman was right; the rise in retail prices is caused by a prior rise in the money supply, which is caused by the Federal Reserve creating excessive amounts of money and credit. High prices, therefore, are the RESULT of the ridiculous excesses of the Federal Reserve, not the cause.

And the proof is simplicity itself; if there is a static supply of money, then the only way for increased sales of one item (thus bidding up the price) to occur is if there are decreased sales of other items (dropping the price), so that aggregate inflation is zero.

But with the money supply growing at over 15% a year in the U.S.A. and as bad, or worse, almost everywhere else in the freaking world, Ben Bernanke is thus a complete idiot when he then (as I recall) said something like, “I fully expect a return to strong growth and falling inflation over the next few years ahead.” Hahahaha!

And nobody on the committee asked the one question that was burning a hole in the brains of Mister, Miz and Missus America, namely, “Why do you believe that? And what is more, how in the hell can anybody be so stupid as to think something so asinine that it makes me laugh so hard that my stomach hurts and makes me grind my teeth in outrage so hard that sparks actually fly out of my mouth from the friction?”

Since nobody asked that question, it was a delicious moment when he then finished saying that remarkable statement and then cast his eyes down; it was then I knew that he knew that I was out here watching him, and he knows that I know that he knows that I am watching him, and now he knows that I know that he has exposed himself as the lying piece of neo-Keynesian econometric crap that I figured he was, which means that he will, again, be the lead-in story in tonight’s Mogambo Inter-Galactic News (MIGN) broadcast, with the headline “Ben Bernanke: Lying piece of corrupt, neo-Keynesian econometric trash, or something worse?”

I think you know how I will finish that particular editorial rant!

The Mogambo Guru
for The Daily Reckoning Australia

Mogambo Guru
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
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6 Comments on "Ben Bernanke Needs to Learn a Lesson from Milton Friedman"

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John
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Too bad he wasn’t testifying before the House; Ron Paul would’ve torn him a new one…

Coffee Addict
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Mogambo understands the basic economics. However politics is a completly different realm and sometimes its necessary to feed the chooks (ie. chickens or politicians) the drivel they expect to hear. Ben Bernanke also understands the basic economics and the implications of what he is doing (ie. collapse of the USD, inflation, unemployment etc. etc.) . I can’t believe otherwise . However his masters are political and he sings from a pre prepared song score. As a bureaucrat,ben snswer the questions asked and say no more – he isn’t allowed to say any more. So why does Ben continue along his… Read more »
Pete
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Coffee Addict: Well said! I do find mogambo’s articles passioned and entertaining, but they do lack your depth of thought. Too often people look at politics at only face value. Personally what the politicians cannot and will not say interesting. People so often assume that they must be naive…

Catherine
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Excuse me but look what Milton Friedman’s economics did to Chile…anyone remember Pinochet? And Indonesia? Suharto?
Why is it okay to sacrifice thousands of lives for the sake of economics?

Justin
Guest

You don’t have the whole picture Mogambo.

The US dollar is not money but the debt of the Federal Reserve, or to put it another way if you hold US dollars you are a creditor of the Fed.

A static supply of Federal Reserve debt does not necessarily mean inflation is zero. Cheques that bounce do not hold their value just because their supply is static.

Penn
Guest

I think Bernanke has already learned a lesson from Milton Friedman.

Bernanke, Feb. 10: “Milton Friedman’s view was that the cause of the Great Depression was the failure of the Federal Reserve to avoid excessively tight monetary policy in the early ‘30s. That was Friedman and Schwartz’s famous book. With that lesson in mind,” Bernanke continued, “the Federal Reserve has reacted very aggressively to cut interest rates in this current crisis. Moreover, we’ve tried to avoid the collapse of the banking system.”

http://www.reason.com/news/show/135804.html

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