PRESTOPUNDIT -- "It's a team sport, baby!"

A gov. official accepting responsibility for gov. actions? Yes, it's true. Fed. Reserve Governor Ben Bernanke accepted Fed. responsibility for the economic slump -- not the current one, mind you -- but the little downturn we had some 70 years ago: "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it." So spoke the Fed. Reserve Governor at Milton Friedman's 90's birthday party in Nov. Quoted in Frank Shostak's analysis of the "deflation" excuse for expanding the size of government and increasing the burden of inflation. Dont' miss Shostak's nice little chart mapping of the continued rapid expansion of the money supply. And there is this:

If Friedman's way of thinking is correct, why hasn't it worked in Japan, which for over a decade now has been struggling to stage a meaningful economic recovery? In fact according to the latest Bank of Japan report on the economy, the economy is continuing to deteriorate. The usual response from the adherents of monetary pumping is that the Bank of Japan (BOJ) has not done enough—it hasn't been pumping enough money. But how can this be, if in July 2001 the yearly rate of increase in monetary pumping, as depicted by the BOJ balance sheet, stood at over 44%? If one allows for lags from rises in monetary pumping to economic activity surely by now the Japanese economy should have been booming.

In truth, the Japanese episode is one further nail in the coffin of both Keynesian economics and Friedmanian economics. How many times do these theories need to be disproven in the court of real life before the economics profession accepts responsibility for teaching theoretically and empirically failed "science".

Posted by Greg Ransom