Mises Wire

For April 1: Exclusive Mises Institute Interview with Ben Bernanke!

Mises Wire Ryan McMaken

First, he started up a new blog, and now Ben Bernanke has agreed to an exclusive interview with the Mises Institute for Mises Wire. We sent our correspondent Mateusz Machaj to speak with Ben about business cycles, 100 percent certainty, and why it’s different this time.

Matt Machaj: Are you happy about the work you did at the Fed?

Ben Bernanke: It depends how one interprets happiness. One cannot speak of the absolute level of happiness, but only about the relative, ordinal level of happiness in comparison to existing alternatives. Once we take such a subjective perspective, my level of satisfaction is pretty high, since I preferred my position to, say, a career at Lehman Brothers.

MM: Speaking of Lehman… was the collapse impossible to predict?

BB: Some Austrians predicted it, and I always thought that Hayek and the Austrians are right most of the time, but I require absolute certainty. Austrians are right only about 95 percent of the time. That is why, despite being right, they may as well be wrong.

MM: But isn’t it the case that every artificially stimulated boom through lowering of interest rates by the central bank must result in a crisis?

BB: [Leans in. Lowers voice.] Of course that’s the case. Artificially low interest rates distort the production structure and lead to relative misallocations in the factor markets. This has to be corrected after the recession comes, which will bring about equilibrating tendencies in the economy.  Additionally the whole process may take place along-side stability of the consumer prices.  This has been proven by the experience of the roaring 1920’s in the US, and especially by Japanese experience from the 1980’s.

MM: Why then, was it decided that interest rates should be kept so low in the first years of the 21st century?

BB: We thought it would be different this time.

MM: Why would it be different this time?

BB: Because all the data were different than previously. Companies now have many more computers, and new technological equipment, workers are trained, and completely new types of management have been implemented. We have reached the level where asymmetry of information has been broken. We have entered the New Economy!

MM: Uhhh, how is the New Economy supposed to prevent distortions caused by the central bank’s alteration in the interest rates?

BB: I dunno, but we cannot have absolute certainty about everything. I refer back to that 95% thing. Anyhoo, why not take a risk? Business firms are undertaking risks everyday and cause creative destruction. Why not have a central bank trying the same?

MM: Because the central banks are externalizing the costs onto the whole society and leading to inefficient redistribution of resources away from the people who are not responsible for those risks?

BB: Everyone’s a critic these days.

MM: Will the new lower interest rates that you implemented after the 2008 crisis create the new boom?

BB: If we get on our knees and pray, we won’t get fooled again.

MM: What are you prognoses for the future of the world economy?

BB: In the United States: more spending, more waste, more money, more jobless recovery. In Europe fiscal decisions of the national governments shall be outsourced to independent centers in Berlin.

MM: Don’t you think that the European Central Bank threatened its reputation and transparency policy by breaking a promise not to buy government bonds?

BB: Transparency and communication policy of the central bank are delicate matters. Central banks do make promises, but the most important long term promise is to act so that things go well. Even if it means breaking some promises. If the ECB kept its other promises, it would have to break one most important promise: that it will act so that things go well. That is why I do not think ECB broke any promises, even though it broke some promises.

MM: Is it true that you were considered as a potential reviewer of Walter Block’s doctoral thesis?

BB: Yes, but the Committee decided I was too radical, and they preferred someone more moderate.

MM: Thank you.

 

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