Wednesday, March 02, 2011

The Ben Bernanke On Capitol Hill Yesterday

I caught some of The Ben Bernanke's testimony on the Hill yesterday, and let me tell you, it was nauseating.

But for me, the two low points were Ben insisting:

- the Fed needs to retain its dual mandate of managing the money supply and targeting full employment.

- there's no risk of US economic inflation.

The first must have Milton Friedman spinning in his grave. And perhaps Paul Volcker spit out his cigar when/if he heard it. Ever since dim-witted Hubert Humphrey championed the added full employment mandate, the Fed has been hampered in its ability to do focus on the one thing that nobody else can do- manage the US money supply. To finally face a friendly House and possibly ambivalent Senate and refuse the chance to formally escape this monstrosity is unforgivable.

The second certainly had Milton spinning. Not to mention tons of pundits laughing at Ben's sophistry.

It got so bad that later, on CNBC, senior economic idiot Steve Liesman made up a whole spiel to explain why Ben was right.

Between excessive money creation over the past two and a half years, and easy dollar-induced rises in commodity prices, we certainly have inflation. The fact that it's not conventional labor-sector cost-push doesn't mean it isn't happening.

Friedman was right. Get rid of the Fed and use a Taylor-style rule to manage the money supply.

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