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Janet, Joe, Lou, and the Babe


Our money-printer-in-chief, Janet Yellen, gave the commencement address at NYU's graduation ceremony in Yankee Stadium. She advised the 8,000 assembled graduates that it is "an unfortunate myth" that "something called 'ability'" has much to do with success. (Ability being an innate characteristic, it would of course have been politically incorrect for her to have said otherwise.) Rather Yellen touted "grit," perseverance, and passion for one's work as the most important job skills.

Highlighting the importance of perseverance, Yellen stated:

Yankee Stadium is a natural venue for another lesson: You can't succeed all the time. Even Ruth, Gehrig, and DiMaggio failed most of the time when they stepped to the plate. Finding the right path in life, more often than not, involves some missteps. My Federal Reserve colleagues and I experienced this as we struggled to address a financial crisis that threatened the global economy.

Now it is true that Ruth, Gehrig and DiMaggio were only successful in about one-third of their career at bats. But in its 100-year history the Fed has never succeeded in attaining its stated goal of providing sound money to the U.S. economy and abolishing business cycles. Its missteps have been legion and legendary, and committed in every decade of its existence. It orchestrated massive price inflation during and immediately after World War 1 and the Great Inflation of the 1970s (which began in the mid-1960s). During World War 2, the massive expansion of the money supply that it engineered in conjunction with draconian price controls caused the phenomenon of "repressed inflation" that featured a shortage of goods and coercive government rationing, not to mention the explosion of prices immediately after the war. The asset bubbles that it created in the 1920s, 1980s, 1990s and 2000s all culminated in financial crises and recessions/depressions of greater or lesser length and intensity. Its attempt to "reflate" the economy and prevent prices and wages from adjusting to market conditions after the Great Crash of 1929 was one of the factors that caused an agonizing prolongation of the Great Depression. Currently, we are confronted with signs of incipient bubbles in stocks and real estate as a result of the Bernanke/Yellen regime of quantitative easing and zero interest rate targeting.

Yes, Yellen and her predecessors have shown remarkable perseverance. But they have all persevered in a fool's errand, which no one has the "ability" to accomplish: trying to centrally plan the supply and value of money. This is why the Fed will continue to bat exactly .000 until its total failure is at last widely recognized and it is dismantled.

Joseph Salerno is academic vice president of the Mises Institute, professor emeritus of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

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