The US Senate should not reappoint Ben Bernanke. As Obama’s reaction to the loss of Ted Kennedy’s seat showed, real change in policy only occurs after political scalps have been taken. An economic scalp of this scale might finally shake America from the unsustainable path that reckless and feckless Federal Reserve behavior set it on over 20 years ago.
Some may think this would be an unfair outcome for Bernanke. It is not. There are solid economic reasons why Bernanke should pay the ultimate political price.
A number of readers have complained that the video of my talk at Google took up too much bandwidth, resulting in “jerky” vision. Here are the same two files in a somewhat lower quality compression–half the size of the original files.
Google runs a regular seminar series on topical issues, which I spoke at last week. There was a substantial audience (see the quick scan of the audience below) and Google’s staff lived up to their hyper-intelligent and hyper-engaged reputation.
I gave a presentation that combined my standard talk on debt and Minsky, with some exposition of the Circuit and Minsky models, befitting of an audience to whom simulation is no big deal–unlike economics conferences where such approaches are still fringe activities.
This is often treated as a “how long is a piece of string?” question, but The Economist has performed a great public service by allowing an easy comparison of the length of this piece of string across many countries and over time.
Check it out yourself. For Australian readers, house prices today are almost 2.5 times what they were in real terms in 1986; and our price bubble (in CPI-deflated terms) turns out to be smaller than some countries (notably Belgium’s) but larger than the USA’s and UK’s.
I recommend that you finish the year with a look at the News from 1930 blog, which is providing some “year in review” commentary on 1930 now–including these details on the market highs and lows. Obviously some things were much worse in 1930 than today–notably industrial production and the stock market:
Market highs and lows:
Dow industrial average high of 294.07 Apr. 17; low 157.51 Dec. 16. Rail average high of 157.94 Mar. 29; low 91.65 Dec. 16. Utility average high of 108.62 Apr. 12; low 55.14 Dec. 16.
Last weekend’s Sunday Telegraph pointed out a new record for Australia: our ratio of household debt to GDP is now higher than the USA’s. I’ve written the following commentary on this dubious “gold medal” (or is it really lead?) for the ABC’s The Drum.
In all the self-congratulations over how Australia has managed to sidestep the GFC, an inconvenient truth has been overlooked: the crisis was caused by too much debt, and Australian households have had a stronger and longer love affair with debt than even the Americans.
Eric was taken with my advocacy of what I called “Engineer Capitalists” (in contrast to the financial spivs who dominate business today in the USA) in my interview on The Keiser Report, and wanted me to elaborate for his audience. The interviews have been posted to YouTube (see below).
For Australian viewers, there was an interesting report in today’s Sunday Telegraph on the level of mortgage debt in Australia, which now exceeds 100% of our GDP–higher than America at 95.5%.
Mike Shedlock (“Mish” as he is known to all) has written an excellent piece on the deflation-inflation debate, focusing on the Achilles Heel of the latter–the fact that it is based on the belief that we live in a “fractional reserve banking” monetary system. He offered to let me cross-post here, and I’ve reproduced it in its entirety below (there’s only one point I’m not sure on–the comment that there are no reserve requirements for savings accounts. From my reading of the footnotes to Table 12 in this Federal Reserve paper, that’s true of corporate accounts but not individual ones).
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