When it comes to deflation, mainstream economics becomes
not the science of common sense, but the science of nonsense. Most economists
today are quick to say, “a little inflation is a good thing,” and they fear deflation.
Of course, in their personal lives, these same economists hunt the newspapers
for the latest sales.
The person who epitomizes this fear of deflation best is
Ben Bernanke, chairman of the Federal Reserve. His interpretation of the Great
Depression has greatly biased his view against deflation. It is true that the
Great Depression and deflation went hand in hand in some countries; but, we
must be careful to distinguish between association and causation, and to
correctly assess the direction of causation. A recent study by Atkeson and
Kehoe spanning a period of 180 years for 17 counties found no relationship
between deflation and depressions. The study actually found a greater number of
episodes of depression with inflation than with deflation. Over this period, 65
out of 73 deflation episodes had no depression, and 21 out of 29 depressions
had no deflation….To Read More….
My Take - When Bernanke took over the FED it was reported
that he was an 'expert' on the Great Depression. My first thought
was....great....perhaps so many of the errors made by FDR's worshippers of Keynesian
economics will be avoided. FDR was like
his uncle Teddy, whom he admired and wanted to emulate, in three ways. Both were economically clueless and failed in
just about every business investment either of them made, and set in motion
public and economic policies that worked to destroy the restraints of the
Constitution on the federal government. And
both were socialists in practice and action, and FDR clearly agreed with Teddy
in his view that the U.S. Constitution was an impediment to mankind’s progress.
At any rate, I wished now that I had tracked
all the things this guy has done over the years because I kept saying to myself
time and time again; "I thought this guy was supposed to be an expert on
the Great Depression. He may be an expert but I wonder if he really understands
what happened." Nothing has changed my mind.
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