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Source link: http://archive.mises.org/10328/the-shameless-blame-shifting-minneapolis-fed/

The Shameless, Blame-Shifting, Minneapolis Fed

July 21, 2009 by

I recently received in the mail the 2008 Annual Report of the Federal Reserve Bank of Minneapolis. The title of the report is “The Current Economic Crisis: What Should We Learn from the Great Depressions of the 20th Century?” After reading the report, it is clear to me that either the Fed has learned almost nothing about 20th-century depressions or it is lying through its teeth in order to shift the blame for causing the current depression (or both). FULL ARTICLE

{ 15 comments }

Michael Wagner July 21, 2009 at 6:55 am

As I’ve said to friends many, many times these guys are either ignorant, in which case they have no business being in charge, OR they are lying through their teeth, in which case they have no business being in charge.
This statement applies equally to virtually all politicians, a certain Congressman from Texas excepted. It applies in spades to the current occupant of the White House.

Dave July 21, 2009 at 9:02 am

Not only do we have fiat money, but I am convinced we now have fiat government as well.

Matt July 21, 2009 at 9:12 am

OK lets face facts.
The FED and crew and most of congress know what and why it’s happening and that they are the prime cause of the problems.
However to keep their jobs and their power base in tact we will be bombarded with more and more of the same non sequiturs and finger pointing in all directions except at themselves.
Like a drug addict everything will be done and said to keep the addiction going, unfortunately with this type of mentality disaster lies ahead. But then the mentality is lets keep this going as long as possible for in the long run we are dead… however the long run has arrived. The barbarians are within the gates.

Matt July 21, 2009 at 9:12 am

OK lets face facts.
The FED and crew and most of congress know what and why it’s happening and that they are the prime cause of the problems.
However to keep their jobs and their power base in tact we will be bombarded with more and more of the same non sequiturs and finger pointing in all directions except at themselves.
Like a drug addict everything will be done and said to keep the addiction going, unfortunately with this type of mentality disaster lies ahead. But then the mentality is lets keep this going as long as possible for in the long run we are dead… however the long run has arrived. The barbarians are within the gates.

JP White July 21, 2009 at 10:01 am

What I find interesting is that by claiming the cause was a savings glut from Asia which pushed down interest rates they are implicitly conceding the case that central bank policy which artificially lowers interest rates could cause the same problem. I’ll call that a minor victory.

Lucas M. Engelhardt July 21, 2009 at 10:03 am

Nice piece. I think the key problem with many modern macro guys is that they believe that “money is special” for some reason. Most agree that it makes little sense for government to regulate the supply of haircuts, or beef, or *insert favorite commodity here*. (That’s not to say we DON’T regulate all of these things, as we obviously do.) Then, when you start talking about money, the same people switch into some alternate dimension where central planning and “price fixing” (though we’ll call it “inflation targeting”) are obviously the best idea.

Personally, I blame Milton Friedman. He did great work arguing against many of the Keynesian errors – but still bought into the lie that money is special and must be regulated by government mandate. So, on the one hand, you have the Friedmanites saying government needs to regulate money. On the other hand, you have the Keynesians saying government needs to regulate money.

Dan July 21, 2009 at 11:18 am

“In reality, worldwide savings rates during the 2001–2008 period were actually lower than they were during the previous 15-year period.”

Not doubting this statement, I just want to know where it was derived from.

Jonathan Finegold Catalán July 21, 2009 at 12:03 pm

Well, it should be considered that many of these economists are corrupted by their service to the state. Take for example Alan Greenspan, who in 1966 published Gold and Economic Freedom. He argues against the creation of credit by the government, suggesting that this is the worst way to confiscate one’s savings. Yet, during his tenure as chairman of the Federal Reserve the size of the money supply spiked exponentially.

They admit that the low interest rates played a part in the current crisis, but ignore how it was the Federal Reserve that lowered interest rates by expanding the money supply (and openly admits to it). In that sense, I think this is a quasi-victory for the Austrian School of Thought.

Dan, here is a chart with net savings rate for multiple dates.

Jonathan Finegold Catalán July 21, 2009 at 12:07 pm

Well, I guess comments here don’t allow embedded links, so the link to the chart is: http://www.economicthought.net/wp-content/uploads/2009/07/net_worth_saving_chart.png

Ben Ranson July 21, 2009 at 12:45 pm

Mr. Engelhardt,

I agree that Milton Friedman is to some degree responsible current monetary policies, as well as a number of other policies, such as school vouchers and the withholding income tax. Perhaps the most unfortunate result of his work is the identification of interventionist policies with “the free market.”

In Friedman’s defense, he did present cogent arguments against many varieties of government intervention. Many of the policies that he advocated were genuine free market policies. Although the most vocal group of Friedman’s followers are interventionists, other students read his works, eventually recognized the errors, and moved on to the writings of better economic scientists.

Gunnar Tómasson July 21, 2009 at 12:47 pm

The most shameless excuse in the economics business – that the collapse of world financial arrangements two years ago could not have been foreseen – is addressed by my Gang8 colleague Dirk Bezemer in a recent article:

http://seekingalpha.com/article/148232-no-…rticle_sb_picks

In preparation for his article, Dirk contacted me to check if I had published any articles along the lines of my multiple comments on the subject matter on the Gang8 website since it came online ten years ago:

http://finance.groups.yahoo.com/group/gang8/messages

Here is the first – typical – of 65 comments of mine turned up by a quick search of the Gang8 archives:

1. Message # 166 – Sep 24, 1999

In my own case, the sense of urgency that underlies your proposal was translated in the mid-1970s into a firm conviction

(a) that present world monetary arrangements are unsustainable;

(b) that mainstream monetary theorists are clueless why that is so;

(c) that absent such clue, their “reform” proposals are worthless;

(d) that monetary economics must be reconstructed from the ground up;

(e) that such reconstruction is a sine qua non for world monetary reform;

(f) that the powers that be are not impressed by this line of reasoning;

(g) that, absent bloody revolution, they must be overthrown by events;

(h) that such events must strike close to home; and

(i) that the associated turmoil will pave the way for new ideas.

With respect to the institutional aspects of all this, the world community, acting through national governments, get the IMF and the World Bank that it deserves. The same applies to a World Bank for Economic Acceleration.

When harsh reality awakens the world community to new ideas, the IMF and World Bank provide a ready-made institutional framework for translating such ideas into a new world economic order.

Dan July 21, 2009 at 1:03 pm

Thanks for the chart, but it looks like that’s US data. I was looking for “worldwide savings rates during the 2001–2008 period.”

Emil Suric July 21, 2009 at 4:06 pm

It’s simple really; we substituted savings with inflation in order to lengthen our structure of production. This requires forced savings, and/or additional inflation. The Chinese financed this artificial lengthening process with their 40% savings rate, while we continued to mass produce fiduciary media. Once demand for current consumption goods rises either in the U.S, and/or in China, the whole scheme ends.

Bruce Koerber July 21, 2009 at 9:07 pm

Money and Ethics
Tuesday, July 21, 2009

Bernanke Tiptoes Through The Tulips Handing Congress A Song And Dance.

Not quite a fetal position but Ben Bernanke is very close to sucking his thumb (he resorts to sucking his fingers) when he is about to field the questions from Ron Paul.

Who out there has encountered a person, say a child or a teenager, who is caught doing something wrong and then has all the facial expressions and nervous twitches and shifting eyes that are associated with lying? Ben Bernanke is before Congress and he is lying. As far as I can tell that is a crime! Barry Bonds did it and is in trouble but he hurt only himself. Bernanke is doing it over and over again, is not in trouble, and yet he is causing great economic terrorism to everyone’s wealth worldwide, that is except the members of the inner circle of the unConstitutional coup and their buddies.

Congressman Alan Grayson laughs at the ridiculous and unscrupulously false statements made by Bernanke when he describes how he and his accomplices dance around everything ethical, dancing like Tiny Tim tiptoeing through the tulips!

When will Congress muster the courage to charge Bernanke with perjury and all of the members of the unConstitutional coup with treason?

Bruce Koerber July 21, 2009 at 9:42 pm

Apolitical Political Commentary!
Tuesday, July 21, 2009

Inflation Is Really The Aftermath Of The Theft!

“Monetary policy should not be politicized!”

What this half-truth smokescreen means in the language of the ego-driven interventionists is that counterfeiting is legal when the government does it but illegal otherwise.

Dear birdbrain and corrupt Mr. Bernanke, counterfeiting is only illegal in principle because it is unethical; because it is theft.

You, the Federal Reserve, the ego-driven interventionists of all stripes, and any and all counterfeiters have no moral authority to steal value from the currency and distribute it to yourselves or others who spend it before prices go up.

Inflation is really the aftermath of the theft. By the time the prices go up the money that went to the buddies of the unConstitutional coup has already been used to feather their nests.

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