The Great Depression Online

Great Depression Online Archive Issue:

In Bernanke We Trust

Great Depression Online
Long Beach, CA
April 04, 2008

Inside This Issue You Will Discover…

*** Ways to Go About It
*** Seeing the Light
*** In Bernanke We Trust
*** And More

“The probabilities are that fear, worry, and anxiety are the greatest trinity of evils that a man can take into his life.  He must root them out at all cost.” – Bob D.

Ways to Go About It

Some people earn money.  Others collect it.  Some form partnerships.  Others form unions.  Some create jobs.  Others expect them.  Some pursue executive positions through hard work and merit.  Others through political appointment.  Some use persuasion.  Others use force.  Some put their faith in God.  Others put their faith in the State.

Seeing the Light

In 1908 Italian Economist Enrico Barone put down his meatballs and marinara and gazed into the outer frontiers of deep space.  Looking around, he couldn’t believe his eyes.  For in this far corner of absolute darkness, he saw something truly amazing.  Out in the distant reaches of nothingness, peering into a black hole, he saw not the dark…but rather, he saw the light.

The light being a socialist utopia achieved through “scientific management” of the economy, lorded over by the Ministry of Production.  Through this endeavor, he conceived, an economy could attain “maximum collective welfare.”  

The proposal was simple enough.  If a bounty of academics were put to the task of determining the best prices for all goods and services, supply and demand could be optimized to produce an economy without poverty, without unemployment…and without possibility.


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Of course with all these number crunchers writing all these tech memos on the optimal price of toothpaste and pizza, how could they account for a change beyond their control?  What if there’s a springtime heat wave resulting in a meager wheat harvest?  How would this affect their pre-determined price for bread?

The idea was absurd.  And this was exactly why the socialist visionaries loved it…it endorsed their conceit.  Here was a marvelous way for them to play God…muck with people’s lives at large…and remake the world in their image.

Keynes, we know, later elaborated that you can do all this by just mickey mousing with the supply of money.  If the economy slows down, increase the amount of money in circulation…and when the economy heats up, tighten it back.  But always leave some slack for inflation to goose the economy and keep the consumer spending.

Still, we’ll tip our hats to Barone for first fashioning the light of scientific management into a luminous scheme for offering the world the great ideal of “maximum collective welfare.”

In Bernanke We Trust

Today we want the economy scientifically managed for low unemployment and low inflation, with strong growth.  Alan Greenspan called this scenario the ‘Goldilocks Economy’.  And the world came to believe the “Maestro” could some how engineer it.  But really he just gave people what they wanted…cheap credit.

Federal Reserve Chairman Ben S. Bernanke testified before the Joint Economic Committee in Wednesday in Washington.  Steven R. Weisman, for the New York Times, reports the details…

“In his bleakest economic assessment to date, the Federal Reserve chairman, Ben S. Bernanke, said Wednesday that the American economy could contract in the first half of 2008, meeting the technical definition of a recession…”

After years of the Greenspan induced assed inflation, prices are now contracting.  And the financial securities that supported the inflated asset prices are crumbling…

‘“With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence,’ he said.  ‘The company’s failure could also have cast doubt on the financial positions of some of Bear Stearns’s thousands of counterparties and perhaps companies with similar businesses.”’

“In separate comments, Mr. Bernanke went further than he had in the past, suggesting that the Fed would remain aggressive and vigilant to prevent a repetition of a collapse like that of Bear Stearns…”

The great experiment of a planned and scientifically managed economy now perilously wobbles on the wit and wisdom of Fed Chairman Bernanke.  Nixon got it right when, upon severing the dollar’s backing by gold in 1971, he uttered…  “We’re all Keynesians now.”

What choice do you have?

In Bernanke we trust.


M.N. Gordon
Great Depression Online

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