Who Was That Tough-Talking Economist?
To continue with fun things this morning…
Paul Krugman’s New York Times op-ed column: Paralysis at the Fed.
Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.
At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.
That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”Who was that tough-talking economist? Ben Bernanke…
LOL
Link to the Mr. Bernanke paper.
The rest of the article is crap, as it advocates further (Keynesian style) monetary stimulus. My belief is that this just doesn’t work in real world.