Is he lying, or just plain stupid?

I prefer Mr. Bernanke’s candid admission of some uncertainty to the inscrutably smug and incorrect omniscience of Mr. Greenspan.

Suppose you have two teams playing football reasonably hard, but due to the biased calls from the ref, one team is way ahead.  At half-time, the losing team and the fans complain.  The ref says, “No problem, at the end of the game, I’ll deduct 36 points from the winners, and give them to the losers.”  The losing team and the fans are happy.

Only now, the losing team doesn’t play very hard - they’ve got 36 points coming to them.  The winning team doesn’t play very hard - the ref secretly promised to make sure they are at least 42 points ahead at the end of the game and still win.

The better answer at half-time would have been to replace the ref with one who called things fairly.  It would have been a tougher step, but would give the losing team a real chance, and give the fans a better game.

The crooked ref is “social justice”.  The fair ref is “equal justice”.

A recent article in the American Economic Review found that the key factor in reversing the 1929-1932 economic decline was the actions taken by the president AND Congress that convinced business and the public that government was determined to have a recovery, a determination glaringly missing from the White House and Congress today. Before any actions in 1933 had any significant ECONOMIC impacts, the PSYCHOLOGICAL impact started a definite measurable recovery. The key actions that were taken made it crystal clear that three impediments were out the window. First, the gold standard, which prevented reflation. Second and third, the ideas of limited government and budget balance, which would have limited fiscal actions. Congress sent a further message by passing the Thomas Amendment, which effectively neutralized the Federal Reserve. The gold standard is the only one of those barriers that is not fatally present today, and the stagnation continues. Roosevelt’s actions to raise farm prices, and business confidence started a reflation, which sent REAL interest rates well into negative territory, an extremely important contributor to the recovery, conspicuously missing today. Conservative reaction to the actions, similar to what we see today, led to a weakening of Presidential and Congressional actions, and a recession in about 1936.

Another recent AER paper by Stanford economist R E Hall states that realistically, there is little possibility that any of the very obvious and very necessary curative actions will be forthcoming today. A significant part if that pessimism reflects the Republicans obvious heavy bet on the old political maxim that “there is good fishing in troubled waters.”