Bryan Caplan jumps all over Lew Rockwell for blasting CEA chairman Ben Bernanke. Bryan argues that Ben and Mises hold the same position on paper money, namely that “under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
But Bryan, the difference is that Mises is passionately against this policy, whereas Ben is bragging about the power possesssed by the government, and would be for using it under the right conditions–at least if we accept his public statements at face value. Thus did Ben call for 0.0% interest rates back in July 2003 in an attempt to forestall a fall in the inflation rate which he somehow sees as the most dreaded fate that can befall an economy. He favors the use of monetary policy to achieve the “mandated goals of price stability [i.e. no deflation] and maximum sustainable output and employment.”
In short, I think we can say with confidence that Bernanke is no Misesian. (I apologize for having used this blog to state the incredibly obvious.)
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Absolutely no apology needed. It is unfortunate that you have to spend your time, which could be used more productively in other endeavors, to point out obvious mistakes. One of the major themes running throughout Mises’s monetary writings (especially his latter ones) is his trenchant opposition to attempts to lower the rate of interest by injecting additional loanable funds not backed by previous real savings into the loan market.
And regarding Mr. Bernanke’s alleged goal of price stability (putting aside the insurmountable problems inherent in scientifically measuring the “price level”), he is evidently comfortable with two-to-three percent annual inflation, but any possibility of a decrease in the price level is a crisis situation. This position by Mr. Bernanke is inconsistent and illogical.
If the number of goods and resources can really be made bigger by artificially lowering the interest rate, they I see no reason why the interest rate should not be a negative rate – why borrowers should not receive a profit for taking a loan out.
As the population increases, so must the quantity of money in circulation.
As the population increases, so must the quantity of money in circulation.
True, if the goal is a neutral currency and stable pricing. But population has increased at a much slower rate than inflation itself has. And this still doesn’t provide any reason why governments have to do this, or how you get central banks to adhere to that goal.
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