He has joined Christine Romer, the internal memo at Goldman Sachs, New Keynesians like Krugman and Delong-along of course with the Market Monetarists who have been front and center in this whole drive. Sumner I imagine is already preparing another jubilant post.
Bartlett's-this old Reaganite- priorities are mine, which makes his endorsement for me particularly meaningful. He get's it exactly right:
"Many economists, myself included, believe that a more aggressive Federal Reserve policy is needed to turn the economy around. Additional fiscal stimulus would also help. As the chairman of the Federal Reserve Board, Ben Bernanke put it at a Nov. 2 news conference, “It would be helpful if we could get assistance from some other parts of the government to work with us to create jobs.”
http://economix.blogs.nytimes.com/2011/11/08/can-the-fed-stimulate-growth-or-only-inflation/
"However, such assistance will not be coming. President Obama’s jobs package has been blocked by Republicans in Congress, and the order of the day is fiscal tightening, with the Joint Select Committee on Deficit Reduction poised to offer recommendations for $1.5 trillion in additional deficit reduction by Nov. 23."
"With fiscal stimulus off the table, monetary stimulus is all that is available. But the Republican view is that monetary policy is incapable of stimulating real growth – that it will stimulate only inflation. This view is regularly enforced by The Wall Street Journal editorial page, which establishes the ideological line for Republicans on Fed policy."
Bartlett then provides an interesting catalogue of the many conservative Republicans who have warned of galloping inflation and stagflation just around the corner in the last three years. Say this for Bernanke's Depression studies-he is at least fixated on a better decade; the stagflation alarmists continue to be stuck in the 70s.
Moving from their science fiction to the facts Barlett points out:
"More than two years later, none of those predictions has come to pass. According to the Federal Reserve Bank of Cleveland, inflationary expectations have been falling for years and continue to fall. Indeed, recent reports from Reuters and CNNMoney found that deflation – falling prices – is a growing problem."
Just like in Bernanke's Depression there are deflationists who actually believe this to be a "necessary" thing that we should watch as it works its course. Here the words of the great monetarist economist, Gustav Cassell,back in 1933 are of moment:
"The notion that the fall of prices is a natural process to which we must resignedly submit has been proclaimed during the whole period in which the deflation has been proceeding, those who proclaim it having learnt nothing from the terrible consequences which the deflation has entailed. Not even such a catastrophe as the collapse of the international gold standard system in September 1931 could bring them to their senses. Deflationism recognizes no responsibility for the havoc it has caused, and even in the United States it has continued to the very last, whilst a general collapse has been impending, to clamour for a further ‘adjustment’ to the falling commodity prices. To combat views of people who have proved to be so incapable of learning even from the most cruel experience, is a hopeless undertaking."
Cassell was one who had spent the 20s warning about the instability of the gold standard. In the 30s you still had flat earthers-or Austrians as the case may be-arguing for delfation and a return to the gold standard. Let us however learn from Cassell the most relevant lesson of all about the hopeless undertaking it is dealing with those who are incapable of learning from "the most cruel experience." I think the last few years qualify for the "most cruel experience."
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