29 Aug 2015

Question for Bernanke?

Federal Reserve 27 Comments

I got this inquiry, with permission to post here:

Message: hey mr. murphy,
i am a junior in high school and this fall, ben bernanke will be speaking at my school. as a follower of yours, i agree completely with your views, and love your wit. i expect that after his speech we will be allowed to ask questions, i was wondering if you had an idea for a question that could really trip him up…

For the record, I do not endorse tripping people.

27 Responses to “Question for Bernanke?”

  1. Daniel Kuehn says:

    Ask him what he thought of his portrayal in the Papola video.

    He’ll pretend he doesn’t know what you’re talking about, but he knows. And he knows you know he knows.

  2. guest says:

    You can see if he’ll answer Hoppe’s (?) question that he wants to ask Krugman (I paraphrase):

    How does printing money create wealth?

    • E. Harding says:

      By easing nominal rigidities, thus improving economic coordination. Also, by providing liquidity to the credit market.

      • Major.Freedom says:

        Ah phrase theft. Economic coordination is no longer hampered by socialist institutions like governmental central banks, but miraculously improved by them.

        Newsflash: Printing money exacerbates nominal rigidities because people come to expect continuous, I.e. rigid, inflation.

        To then present that very same inflation as some sort of cure for what would otherwise be a non-existent problem, is about as muddled and tail eating a thought on economics as one could string together.

        Next thing we’ll hear is that central banks can improve economies because they otherwise would have periods like 2008-2009.

        Hurt the patient through your “treatment”, then when the patient gets worse and diaplays negative symptoms, blame the patient and declare that this is evidence your ” treatment” is needed after all.

        Inflation is not only not something that eases nominal rigidities, it creates them.

        Economic coordination is not improved with either artificial rigidity nor artificial easing. Economic coordination requires individual subjective values to manifest in property, production and exchanges. Coordination means coordination of individual values. Coordination is not a minimum floor statistic of production or employment.

        It takes place when what individuals are doing, which is guided by what they value, is able to be, and I hate to use this phrase because it is always twisted and turned into a weapon of socialism, it enables a “self-sustaining process” to continue without any necessary widespread correction needed.

        Full employment and an absence of an output gap does not constitute coordination. Those could very well take place in a world with massive discoordination.

        Imagine a home builder having a team of 30 people building houses. Suppose they are mistaken in how many bricks they have or will have. Their project as planned is not sustainable. There is discoordination between what they are doing, with what everyone else is doing.

        If during the first 3 months all 30 people are working, and earning money financed of course by savings, and they measure their output by the extent to which the house is getting bigger, there is “coordination” here. But there really isn’t. There is discoordination.

        In a similar way, that is the illusion central banks bring about. Rising employment and rising measured output, but underneath those aggregates, there is discoordination.

        The optimal extent of flexibility and rigidity is known via the information that only a market can bring about.

        Credit expansion is the main discoordinsting mechanism. The appearance of “not enough money” is caused by the real discoordination. A healthy market can in principle function with a total money supply that remains fixed. Credit does not need to keep growing. Coordination is possible with rising production and falling prices, even falling spending. Indeed, it is possible where coordination requires a period of declines in total spending.

      • guest says:

        Then we should all print money, so we could all become wealthy. That was what Hoppe was getting at.

        Why, in your view, are nominal rigidities a problem?

        Consider that there are two sides to any transaction. If one party wants the rigidity, how does it help economic coordination to rob other holders of the inflated currency of purchasing power?

        No one is entitled to the wealth of others, and so where liquidity is desired, it is not something that people are entitled to.

        Also, creating liquidity out of thin air for investments that are not otherwise justified by consumer demand for the final goods in the investment’s production process, is where the “over production” that gets blamed on the free market comes from.

        If consumers don’t want something, don’t produce it. Not all activity makes economic sense, no matter how often money changes hands.

        You’re focused on activity for activity’s sake, not realizing that liezure is an economic preference, too; One where *less* exchange of money makes more economic sense.

        In fact, liezure is the ultimate preference. The point of working isn’t to work, but to have the means to satisfy your preferences.

        Your standard of living goes up when you don’t need to engage in so much business activity.

      • Tel says:

        By easing nominal rigidities, thus improving economic coordination. Also, by providing liquidity to the credit market.

        By “nominal rigidities” you mean things like minimum wage and union sponsored pay scales?

        In other words, we use a bit of Keynesian stimulus to Gruber those dumb unions who don’t understand how inflation works. But those guys have been Grubered before, aren’t you worried they might be catching on by now? Here, listen to this:

        Supporters of the chained-CPI want the American people to believe that the COLAs that disabled veterans, senior citizens, and the surviving spouses and children who have lost loved ones in combat are too generous.

        That is simply not true. In two out of the last three years, disabled veterans and senior citizens did not receive any COLA. And, next year’s COLA of 1.7% is one of the lowest ever. Lowering COLAs even further through the adoption of a chained-CPI would be an absolute disaster.

        This nation has made a commitment to our military and our veterans: if you get permanently disabled defending this country, if you get seriously wounded in battle, we will always be there for you. The Veterans Administration will provide you with the disability compensation benefits you need to live in dignity and those benefits will keep pace with inflation.

        Today, more than 3.2 million disabled veterans receive disability compensation benefits from the Veterans Administration.

        Under the chained CPI, a disabled veteran who started receiving VA disability benefits at age 30 would have their benefits cut by more than $1,400 at age 45; $2,300 at age 55; and $3,200 at age 65.


        (whisper) It’s like they know.

        • guest says:

          He’ll make business sustainable by removing opportunities.

          Because a few goods are better than getting shot for smuggling more than that.

          The poor need more production but let’s disincentivize it, anyway.

          The man’s a frickin genius!


    • Major.Freedom says:

      PK’s answer to that question was (this is paraphrased):

      “I don’t believe printing money creates wealth, but rather that under certain negative circumstances, printing money can do some good.”

      I think PK inadvertantly rejected all forms of permanent government intervention, including inflation in the form of price level targeting, or any targeting, or any ongoing activity at all.

      The only way that his response could be consistent with everything else he may believe about money, would be if the only time the Fed should engage in any inflation at all, would be during only limited, isolated instances, for example when unemployment would rise above a certain rate.

      But we all know he believes in permanent central bank ongoing “policy”, which means his response contradicts those beliefs. Obviously the question is a good one if it encourages something that significant.

  3. Toby says:

    Well at least he’s honest about what he wants.

    In any case I’d recommend to ask him what his most memorable junior high school experience was and what it taught him. You have the opportunity to ask a very successful and talented man who was kind enough to take time out of his busy schedule to speak at your school a question. Don’t waste it on short term amusement. Learn from his experience to become great yourself.

    • Bob Murphy says:

      That’s probably the wisest course of action, Toby, despite our quibbles about “successful.”

      • JimS says:

        Great response you two. I would have asked if he still beat his wife but your’s is way classier. Don’t waste it is good advice. Asking about his HS experience or how he embarked on a career in economics may actually give insight as to why he behaves and thinks the way he does. It may not be as irrational as we think.

      • Toby says:

        Bob, I think I didn’t make myself very clear. I meant to say that independent from his economics or his politics, Ben Bernanke is a very successful and talented man. That is to say that he has done very well for himself and his work has had an impact. Whether this impact was good or bad that is something we can disagree about, but not that he has had his fair share of success from which this student could learn.

    • Ben B says:

      I don’t know, man….that sounds like a troll-question to me. Everybody knows junior high was hell for most professional economists. Amirite!?!

    • Colombo says:

      No, your question should be asked to Jim Grant.
      Young men have much more things to learn from him than from Bernanke.

  4. E. Harding says:

    Do you feel monetary policy during the Great Recession was too tight? If so, do you regret your performance during that time?

    • Major.Freedom says:

      Define non-tight, and then explain where you got that number, and then explain how difficult it was to pass through your colon.

    • Andrew_FL says:

      If by “too tight” you mean “the monetary base didn’t grow enough” then I think not.

      Doesn’t Scott Sumner like to claim that looser policy would have meant the Fed doing less, rather than more? If that’s true, wouldn’t Scott’s preferred policy actually look much tighter to Bob, than actual policy?

      One indicator I like is the Fed Funds rate minus the growth rate of an index of expenditures. I’ve been working on estimating such an index’s growth rate back further in time-I’m trying to emulate Skousen’s Gross Output, as the closest available thing to an actual PT index. Based on that I’d say there was a brief interval during which policy got sharply tighter. The case that it’s been excessively tight for years since the recession seems on much shakier ground to me.

      • Andrew_FL says:

        Bah, I just realized you were asking your question for Bernanke. D’oh.

  5. Andrew_FL says:

    Ask him why he did such bad job he turned Alan Greenspan into a goldbug.

  6. alexa says:


    In hindsight, Has the Fed bought any bad debt, from major US banking institutions

    And if so can you give us just One example.

    If your answer is No.

    Can you give us Just Two Examples of Good Debt

    the Fed has purchased in the past year ?

    If unable to respond, could you give us Just Two Examples of Good Debt

    the Fed has purchased at any time ?


    • Tel says:

      … can you give us just One example.


      Let’s see the Fed sell them back for what they paid, or even close.

      Yes, I am going to take inflation into account in this calculation, as would any rational operative.

  7. Darien says:

    I’d consider asking him to help find your missing shift key.

  8. Khodge says:

    It’s flattering to be told “I agree completely with your views” but you ought to first verify that your young correspondent is reading blogs which are not as witty or correct as yours…groupthink is dangerous from any perspective.

    That being said, Toby makes a valid point but I would suggest a question more along the lines I just suggested, for example, which economists do you read regularly with whom you always disagree? After all, only the most elite of Nobel laureates can pontificate for hours on the failures of his opponents without having actually read or listened to them.

  9. Colombo says:

    So mischievous. I like it. To everything there is a season…
    I would ask if he would have done anything differently if computers and the internet had never been invented.

  10. Jan Masek says:

    I’m not American so this may be perfectly fine, but “hey mr. murphy” – is that really the proper way to address someone one “follows” and presumably admires?

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