Thursday, October 08, 2015

Mainstream Agrees Republican Congress Actively Trying to Sabotage Economy

You can't get much closer to conventional wisdom than Ben Bernanke.  He virtually defines the establishment, centrist, insider perspective.  So it's notable that Bernanke has come out with something I've been saying for years, i.e.
I also felt frustrated that fiscal policy makers, far from helping the economy, appeared to be actively working to hinder it.
This quote appears in a fine rant by Bill McBride at Calculated Risk.  McBride has been very optimistic on the economy and seems to feel that all is well, in spite of the fact the lawmakers are trying to sabotage the economy.  I find that unlikely and am consequently much more bearish regarding the economy.

Kevin Drum has more on Bernanke's disgust with Congress here.

Part of the reason that economic nuts are in control of Congress is that the old conventional wisdom, embodied in Ben Bernanke, is a bit nutty itself.  Mainstream economics is based upon these fictions:
  1. A currency-issuing government budget is just like a household or business budget.  We hear continually from the mainstream that our government should have a balanced budget, but we don't need to and we never do.
  2. The central bank can control unemployment and inflation.  In fact, the central bank has little control under present laws and conventions.  They tinker with interest rates, but amazingly (to the consensus), this has little effect on the economy. 
With the conventional wisdom so clearly incorrect and ineffective in resolving the country's economic problems, alternative explanations are in high demand.  Now that he is out of office, Bernanke can clearly state that he agrees with me -- The elected government leaders should manage the economy via fiscal policy, regulation, and other laws.  


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