Bizarre Updates from the John Law School of Economics

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Bernanke: Spreading Money Printing Bliss Globally, Whether or not Anyone Asked for It

Last week saw a full court press in defense of the current money printing exercise. It started with Bernanke telling us the Fed is making the whole world happy … even if the world hasn't asked for it:

“The Federal Reserve's bond-buying program is not a "beggar-thy-neighbor" policy designed to spark a devaluation of the dollar to spark the U.S. exports at the expense of other countries, said Fed Chairman Ben Bernanke on Monday. Rather, the Fed's policy is an "enrich-thy-neighbor" action because strong growth in the U.S. would spillover to trading partners, Bernanke said in a speech to a conference at the London School of Economics. Some emerging market economies have complained about the Fed's quantitative easing program, and some have called it the start of a "currency war." But Bernanke said a return to solid growth in the U.S., Europe and Japan would ultimately benefit smaller countries.”

(emphasis added)

One should not let this man loose in front of innocent students. It is certainly true that the dollars Bernanke prints are spilling over into the world at large – where they distort price signals everywhere. In most foreign nations mercantilist thinking predominates, and some even have currency pegs or quasi currency pegs. In any case, they all feel they must inflate right along with the Fed, so as to avoid that their currencies appreciate too much against the dollar. As an example, Brazil's minister of finance has been complaining for years about 'QE', and the central bank of Brazil has begun to run a very risky and far too loose policy, which has in the meantime led to a noticeable increase in money prices. The one thing money printing can definitely not achieve is 'solid growth', even though it may temporarily appear so on paper on a purely quantitative basis. Misdirecting scarce resources into bubble activities may well look like 'growth' to Bernanke, but in reality it can only weaken the economy structurally.

ben bernanke
Ben Bernanke: spreading happiness far and wide.
(Photo via nanopress.it)

Rosengren's Cost-Benefit Analysis of Money Printing

Next up to bat was Eric Rosengren of the Boston Fed, who similar to most of his colleagues is of the 'John Law School of Economics' (i.e., what the economy needs to 'get better' is 'more of the circulating medium'). Rosengren is a proponent of Anglo-Saxon central banking socialism at its finest and always likes to decorate his speeches with reams of statistics to buttress his case, but unfortunately one cannot prove or disprove points of economic theory by means of statistical data.

Here is an excerpt from his assessment of what the money printing exercise achieves that is fairly typical for Rosengren's explications:

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