Uh oh, Mr. Bernanke, the natives are getting restless. Now it's not just Sarah Palin and Glenn Beck, or foreign central bankers, but more and more American economists who are starting to openly challenge the second round of "quantitative easing."
Can the government tell the Fed what to do? If Congress and the president are agreed about what to do, yes. If there is disagreement over monetary policy — and there usually is — then the Fed does pretty much what it wants.
If we wish to culminate the fall of the Berlin wall and get rid of the real socialism that still remains in the monetary and credit sector, a priority would be the elimination of central banks, which would be rendered unnecessary as lenders of last resort if a 100 percent reserve reform were introduced.
We've only had 294 failures this cycle, but it is a big deal: adjusted to current dollars, the Depression banking crisis was $100 billion, the S&L crisis was $923 billion, and the current crisis is nearly $8 trillion.
We are witnessing the fall of the American dream, which has always been about having hope in the future. This is a striking fact of our times, one made even more devastating as we look at the economic fundamentals.
Paul Krugman is despairing of late, because a growing number of mainstream economists are adopting (versions of) Austrian business-cycle theory. The most recent convert is Minneapolis Fed president Narayana Kocherlakota.
Krugman dismissed the idea that Keynesianism was best suited for totalitarianism and he ignored my inquiry about the fact that the mess we are in is precisely because the US government has pursued Keynesian policies for the past eight decades.
Some people are saying that all we need is optimism, as if our attitudes alone cause and fix the business cycle, and as if the real world doesn't matter at all. Actually, the "bad attitudes" of consumers and producers are the real fix: they lead to deleveraging and saving.
Shostak suggests that the NBER's definition does not provide an explanation of what a recession is all about. Instead it describes the various manifestations of a recession. And this is precisely what is wrong with it.
Richard Cantillon saw the essence of the business-cycle problem long ago. When the government's national bank inflates the money supply by increasing the supply of banknotes, he writes, it reduces the rate of interest and can increase the price of stocks. This is a corrupt process.
