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Home Publications Blogs Beat the Press The Man Who Sank the Economy Warns of Deficits

The Man Who Sank the Economy Warns of Deficits

Tuesday, 05 October 2010 07:06

That would be Ben Bernanke, who by his own claim brought us to the edge of a second Great Depression. The Post told readers that Bernanke:

"has aimed to use the weight of his words to try to give more momentum to efforts to reduce the budget deficit in the medium to long term."

It would have been reasonable to note the irony that a person who failed so miserably at his job -- causing tens of millions to be unemployed or underemployed, and also causing deficits to soar -- would lecture Congress and the public about deficits.

Comments (5)Add Comment
written by izzatzo, October 05, 2010 8:00
Like Bernanke, I'm an expert on deep sea ocean liners like the Titantic, trained to insure no more ever sink like that again.

The essential early warning tool developed after that accident is Iceberg Bubble Binoculars. As soon as an iceberg bubble is detected, run onto the deck and rearrange the deck chairs until it goes away.

If the ship hits the iceberg anyway and begins taking on water, hit the Austerity Alarm to round up the passengers and start throwing the heavy ones overboard to balance the deficit of incoming water with less weight.
Bernanke is clueless.
written by Ralph Musgrave, October 05, 2010 11:15
Perhaps the most idiotic aspect of this speech is that Bernanke claims an excessively large national debt leads to high interest rates. So how come Japan has a debt to GDP ratio three times that of the U.S., yet interest rates in Japan are around 1%? Bernanke does not address this awkward point (because he can’t).

Also the bulk of his argument is based on the idea that deficits lead to expanding national debts. Well as Keynes and Milton Friedman made clear, deficits can accumulate EITHER as extra debt OR extra monetary base. Perhaps Bernanke hasn’t heard of Keynes or Friedman. And as to the idea that extra base automatically leads to inflation, well the U.S. base expanded by an astronomic and unprecedented amount around 18 months ago, with no obvious effect on anything!

I could try explaining the relationship between the base and inflation to Bernanke, but I doubt he’d understand.

who ya gonna call
written by frankenduf, October 05, 2010 12:35
yo Ralph Musgrave- i totally agree- in fact, the IMF recently released a report echoing what u say, namely that the Japan 'case study' is a more damning indictment of austerity measures than other case studies used to defend austerity- too bad a keen sense of history, even recent history, is lacking in our current statesmen
written by skeptonomist, October 05, 2010 6:32
Bernanke has indicated that he doesn't know what he is talking about in several ways, but I doubt if anyone at the Fed would claim that monetary base is directly correlated with inflation anymore. This is because they fought for and won the power to pay interest on reserves, leading to a huge expansion. So far, this expansion doesn't seem to have done much of anything other than make work for Fed and bank bookkeepers (and mislead economists, as when Krugman thought it was due to deposits).
written by justasking, October 06, 2010 3:09
Without excusing or accusing any of the players in the recent and continuing economic disaster, I would like to ask a question. Didn't the housing and credit bubble generate many jobs that would not be there without it, say in over-building and furnishing new homes? Wouldn't some or most of the unemployment we see now reflect the fact that the bubble economy got way out in front of the nation's requirements for housing? And didn't home-equity loans based on delusional home prices also support manufacturing employment to satisfy delusional spending? I have not seen much, or any, serious discussion of these questions.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.