EC Meet The Same New Boss

It was Mervyn King who late last year roiled the delicate sensibilities of the mainstream sense of economic things when he told the truth. Despite all statements proclaiming otherwise, the global economy hadn’t actually recovered at any point before then. King was pointing out only what the data unequivocally showed. Given 2020, it obviously isn’t doing it now, either.

What was so unusual wasn’t necessarily what he said; lots of people have been making the same argument. Rather, the shock came from was who was actually saying this out loud. King, after all, ran the Bank of England for years during and after the first global financial crisis.

No one can doubt that we are once more living through a period of political turmoil. But there has been no comparable questioning of the basic ideas underpinning economic policy. That needs to change.

Conventional wisdom attributes the [post-2008] stagnation largely to supply factors as the underlying growth rate of productivity appears to have fallen. But data can be interpreted only within a theory or model. And it is surprising that there has been so much resistance to the hypothesis that, not just the United States, but the world as a whole is suffering from demand-led secular stagnation.

As Henry George once described of depressions, some impediment in the machinery of exchange.

King unlike some of his contemporaries is retired. Coincidence, surely. Take, oh, Janet Yellen, for one. One term as Federal Reserve Chairman, she wasn’t renominated for a second in 2017. It wasn’t because of anything related to job performance, no matter how anyone might have felt about it; pure partisan politics (it’s no secret Yellen wholeheartedly identifies with Democrats).

But after having left the US economy in a state of unearned inflation hysteria when her tenure expired in February 2018, she’s followed in the same path as so many before her: first to Brookings to join her immediate predecessor Ben Bernanke as a “distinguished fellow” (distinguished by pedigree, not track record) to get paid exorbitant sums by clueless audiences thinking she has worthwhile opinion to offer on anything related to her former job.

Now in late 2020, though, should Joe Biden attain the White House we’ve already learned Yellen will be his nod for Treasury Secretary. There won’t be even be partisan opposition in her case and that’s the point.

It should raise a bipartisan uproar; the interest rate fallacy and more than a decade of an economy underperforming even the 1930’s combined should sink her nomination, and her reputation, for all history.

Instead, like Tim Geithner who “led” the Federal Reserve’s crucial New York branch without materially impacting a once-in-four-generations crisis and who likewise failed upward to the top of the Treasury Department, here’s another top Federal Reserve official who’s track record is just as atrocious and yet she won’t be challenged on any of it. Congress will rubber stamp her nomination, if it gets forwarded, because groupthink and fear (of complex equations, not common sense economics) dominate.

What gets rewarded is the political ability to sell failure as somehow some kind of competence. Can you move the goalposts and make it seem slightly plausible you’re not doing that very thing? Promoted (see below)!

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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