Posts Tagged ‘Central Banks’

Anti-Bernanke by George Selgin

March 22, 2012

Despite the bright light streaming into my office window, reminding me of the beautiful spring weather here in Athens, I managed to spend most of yesterday afternoon listening to the first installment of Ben Bernanke’s 4-part lecture series on “The Federal Reserve and the Financial Crisis.” The lecture was given at George Washington University yesterday; the other parts will be given on the 22nd, 27th, and 29th of this month.

In this opening lecture Bernanke offers a brief overview of the role of central banks, their general origins, the specific origins of the Federal Reserve System, and the Fed’s early performance.

It would of course be silly to expect any sitting central banker, much less the head of the world’s most important central bank, to deliver an entirely candid lecture on the origins of central banking. But then again, Ben Bernanke is no run-of-the-mill central banker: he is a former academic economist and economic historian, and one with very high standing in the profession. So one might expect him to at least avoid gross distortions of the historical record to which his less academically-minded counterparts might be expected to resort. But no: as the lecture lumbered on (for Chairman Bernanke’s classroom demeanor is all too reminiscent of his demeanor when testifying to Congress), it became increasingly evident that the man lecturing at Duquès Hall was at least 99 and 44/100ths percent pure Federal Reserve spokesman.

So like any central banker, and unlike better academic economists, Bernanke consistently portrays inflation, business cycles, financial crises, and asset price “bubbles” as things that happen because…well, the point is that there is generally no “because.” These things just happen; central banks, on the other hand, exist to prevent them from happening, or to “mitigate” them once they happen, or perhaps (as in the case of “bubbles”) to simply tolerate them, because they can’t do any better than that. That central banks’ own policies might actually cause inflation, or contribute to the business cycle, or trigger crises, or blow-up asset bubbles–these are possibilities to which every economist worth his or her salt attaches some importance, if not overwhelming importance. But they are also possibilities that every true-blue central banker avoids like so many landmines. Are you old enough to remember that publicity shot of Arthur Burns holding a baseball bat and declaring that he was about to “knock inflation out of the economy”? That was Burns talking, not like a monetary economist, but like the Fed propagandist that he was. Bernanke talks the same way throughout much (though not quite all) of his lecture.

(more…)

Advertisements