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Wednesday, January 14, 2009


the beginning of the end of ben bernanke

someday not too far from now i expect i will have to write a similarly titled post for barack obama. holding center stage in a titanic crisis breaks public figures with casual abandon, and the chairman of the federal reserve during a nascent depression is invariably in the line of fire -- all the more so if his academic background makes his operating hypothesis available for scrutiny as it fails to work in the real world.

yves smith links to what is sure to be the first of a fusillade directed at chairman bernanke and his neoclassical work on the great depression of the 1930s.

as an added bonus, links are provided to both hyman minsky's revolutionary paper "the financial instability hypothesis" and irving fisher's seminal "the debt-deflation theory of great depressions". professor steve keen of the university of western sydney places bernanke's work contra fisher's, and finds it -- and, by extension, bernanke's credentials and policies -- divorced from the reality of our current long-wave disequilibrium and terribly wanting.

i won't bother to quote at length as ms smith does. the ramifications are, of course, not entirely without hint -- policy response has treated the problem as a liquidity crisis from the start, a conclusion only reachable from the initial presumptions of rational economic actors and prevailing economic equilibrium precluding a massive debt bubble in need of catastrophic liquidation. but as these policies fail -- and as, eventually, bernanke is ignominiously scuttled and made scapegoat for the disaster now befalling the global economy and its american subset -- i'd wager such criticisms will grow loud and resound in the empty halls of commerce.

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