A mea culpa from the economic establishment

A one Mr. Ambrose Evans-Pritchard, of the Telegraph in London, has issued a poignant mea culpa that doubles as a scathing indictment of Ben Bernanke’s excessively loose monetary policy.  It is absolutely worth reading in its entirety, but I’ll reproduce some of its more powerful segments here. 

It is worth noting at this juncture that Mr. Evans-Pritchard veers off into monetarism-land despite titling his piece “Shut Down the Fed (Part II).”  I recognize that many believe monetarism to be a far better guiding theory than Keynesianism, or as it’s termed in the article, “creditism.”  That’s an assertion that I would not necessarily disagree with, but I can’t help but think that an article entitled “Shut Down the Fed” should perhaps advocate shutting down the Fed.  In any case, it is very nice to see the economic media establishment coming around to the idea that what crippled us before will not cure us now.  Revolutionary, I know.

 Evans-Pritchard begins:

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

This is the progressive trap: the idea that once we put the right people in power, there can be no problems with governance per se, only with extent and details of policy prescriptions.  Of course, as we’ve seen constantly, putting a person in power subjects the power wielded to the infinite fallibilities of the human being in charge. 

And Evans-Pritchard goes on to reveal how fallible a human we are dealing with in Ben Bernanke.  Even if you accept Keynesian doctrine, it is difficult to see the upside to Bernanke’s policies:

Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”,  a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes).

Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills.  Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk eighty years ago.

Again, the article is worth reading in its entirety, and I encourage you to do so.  But perhaps my favorite part of the article isn’t within the article itself.  It’s this picture, and its caption, which I’ll again reproduce here:

Inflation targeting: is Bernanke the new Von Havenstein, head of the Weimar Reichsbank?