Velocity Wanted: Effective Ways to Stability 01

 

The former Fed chairman Ben Bernanke is a Big Fan of so many:

1)     Regulation: “And I'm a big fan of regulation of the financial system. I think [sic] is very different from regulating other industries. It's a very special industry, it requires a particular type of oversight to make sure that you minimize the risk of major breakdowns.” (Speech at the Nobel reception, Dec. 2022).

2)     Fiscal policy: We might just recall the “alphabet soup” representing what Chairman Bernanke did in the Great Recession together with the two Secretaries of the Treasury. In effect, “End This Recession Now!” Not to mention, so many bailouts were included in his portfolio for the sake of an instantaneous "Ending."

3)     Monetary policy: Remember the name Helicopter Ben? The “helicopter drop of money” is suggested in Bernanke (Nov. 21, 2002) as well as in Friedman (1969).

             As we all are so well aware, fiscal policy is substantive (qualitative) in “so many veils,” while monetary policy abstract (quantitative) in just two words.

4)     Milton Friedman: “We did it. We’re very sorry. But thanks to you, we won’t do it again” in a speech (Nov. 9, 2002) to celebrate Friedman’s 90^th birthday.

              As everybody knows it, incidentally, Milton Friedman was the icon of anti-regulation and pro-monetary policy. Free to Choose, “That Was Milton Friedman!”

No wonder, Bernanke is a great scholar in macroeconomics, a discipline of alchemy as an odd mixture of incompatible elements. In the first place, he fuses Finance with Economy.

             See we told you so, the “classical bailouts” and the “neo-classical quantitative (T⁰) easing (T^-1)” of the central bankers! Every rose has its thorns: Confucius would have named respectively as “the best incentives to ‘major breakdowns’” and “quantitatively eased (T⁰) money.” “Honey, Get the Causation Correct,” in the first place!

Get the Names Correct, Sir! Finance is neither “industry” nor economy: The former balances things in equilibrium (T⁰, at a moment) typically on the balance sheet; no doubt, the naught at the bottom line). The latter creates value over the year (T^-1) generally on the income statement; viola, the surplus at the bottom. The “financial system” is not financial services of an innocent “industry,” either.

             Owing to an article of and by Bernanke which earned a fraction of Nobel Prize for Bernanke, the Great Depression was due to “major breakdown” of “the financial system.” Again, a financial crisis is a different species from an industrial one; among other discrepancies, money is homogenous while products are heterogeneous. “Markets” are always and everywhere contagious, while “the market” has never been so.

Application 1.0: The “helicopter drop” of money is not “fiscal” but “monetary”: no need for  visiting The Treasury or the Capitol Hill for the sake of conducting the policy. Just run the printing press of the Fed rather on the solid ground than in the “thin air.”

“Real” Bridge 1.0 over Troubled Water. Adam and Eve were created with really-unlimited desires, a virtually-indefinite run (L¹) of space, but a definitely-limited run (T^-1) of time. Each and every life is in troubles due to the great mismatch between the unlimited and the limited. Incidentally, the end of desires is called “consumption of utilities.” The means to consumption is production as “Adam Smith talked about” (borrowed from Larry Summers).

             Every cloud has a silver lining. Blessed, there is an effective “bridge over troubled water,” as it were. Homo Sapience has invented commerce aka “trade after specialization” David Ricardo talked about. As the producer wins in the market, so does the consumer home.  

 

Keep Digging a Ditch Just to Refill It, your Excellency!