Knows Bernanke Is a Joke
by Bob Murphy: WaPo
Hit Piece on DiLo
and other digital media move beyond computer-savvy young people
into the ranks of even stodgy businessmen, these subversive outlets
become serious problems for the ruling elite. This trend is epitomized
by the radical change in the Federal Reserve's image. In just a
few short years, the Fed has transformed in public opinion from
a mysterious, wise, and boring institution into a fascinating engine
of corruption and comedy.
in the Fed's armor of legitimacy are multiplying, all made possible
by the ease of producing and distributing high-quality critiques.
An early example was the spoof
of The Police's "Every Breath You Take" that Columbia
Business School students made in "honor" of Ben Bernanke's
ascent to Fed chairman over their own dean, Glenn Hubbard.
the satirical music video really wasn't a critique of Bernanke's
policies; after all, he had only just been given the keys to the
printing press. Nonetheless, it illustrated the new power of the
Internet. Creating the video took a lot of effort, and it would
probably not have been worth doing had the students only been able
to distribute it through, say, copying it on VHS cassettes.
At the same
time, although the potential market people who would have
appreciated geeky references to "bips" (basis points)
and the like was substantial, it was dispersed throughout
the population. Saturday Night Live certainly wouldn't have
run such a video, and even higher-brow shows such as Bill Maher's
wouldn't have done it either, simply because the niche was too limited.
and specifically YouTube, solved these problems. As of this writing,
the video has been watched some 1.7 million times, making it an
obvious hit. The creative students were rewarded for their efforts
in terms of esteem and fame, and hundreds of thousands of financially
savvy people got a good laugh or two.
"The Bernank," Not With Him
If the music
satire was all in good fun, the more recent animated video, "Quantitative
Easing Explained" was anything but. Relying on the same
Xtranormal technology that I used for launching my debate
challenge to Paul Krugman, this video features two bears discussing
the Fed's program of massive bond purchases.
The tone of
this video is much edgier and harsher than that of the music-video
spoof. While the fake Sting dreams of punching Bernanke in the face,
it is clearly in jest. In contrast, when the cute bears curse and
accuse Bernanke of lying in order to shovel billions into the hands
of his rich buddies, the creator really means it.
of "Common Knowledge"
As a grad student
at NYU, I once listened to a fascinating presentation in the Austrian
Colloquium on the importance of multiple levels of knowledge. The
presenter argued that in certain areas of life, it wasn't enough
for people to know (or believe) something, it was important that
they know others know it too.
if an advertiser buys a 30-second TV spot on the Super Bowl, it's
not merely that tens of millions of people will see the ad. Beyond
that is the crucial fact that tens of millions of people will
know tens of millions of people are seeing the same ad. The
presenter argued that this explains why advertisers push "network
goods," such as smart phones or Macs versus PCs, during the
Super Bowl and other events with high ratings.
In other words,
if a particular good's value to a user depends not just on its intrinsic
properties, but also on how many other people are using it, then
(this presenter claimed) its producers tend to advertise it during
the Super Bowl, or perhaps on a busy subway car, where people who
see the ad will know that other people are seeing the ad too.
Moving to the
political arena, the presenter elaborated on why totalitarian regimes
are so quick to clean up graffiti and other public challenges to
the authorities. It's possible for a dictator to remain in power
even if a large number of his subjects hate him, so long as they
think they are relatively isolated. But when someone writes, "Down
with the Regime!" on a bridge, it is a signal that rallies
the malcontents. Not only do they realize that they are not alone,
but they know that other people like them are seeing the same subversive
In this context,
the significance of YouTube and similar media is even larger than
it seems at first glance. For example, I was thrilled when I saw
video, not because I learned something new from it
I already thought the Fed was a corrupt engine of inflation
but because I saw how many millions of other people had seen
the video. And we can push it even further: I knew that they
knew how many people were seeing the video.
This was the
importance of "common knowledge," which the game theorists
formally describe as something that (a) everyone knows, (b) everyone
knows that everyone knows, (c) everyone knows that everyone knows
that everyone knows ... and so on forever. At first blush it might
seem as if the deepening layers of knowledge are superfluous, but
in some contexts they can be crucial.
To take an
example adopted from the presenter at the NYU colloquium: Suppose
Bill and John are on a crowded subway car, separated by dozens of
people. The two are going to a Broadway show, and John is not familiar
with the subway system, so Bill needs to signal to John when they
should both get off the subway. However, because they are separated
by so many densely packed people, the two men will have to use different
exits to get off their car.
As the subway
approaches the proper stop, Bill gives John a signal to get off.
However, because there are so many people jostling about, Bill isn't
quite sure that John saw his hand motion. So Bill isn't sure whether
to get off himself, because it would be catastrophic if he stepped
off and left John on the subway.
In this somewhat
contrived example, we see the importance of layers of knowledge.
Even if John did see the message so that Bill knows
it's time to get off, and John knows that it's time to get
off that isn't enough. Bill needs to know that John
knows. Yet that too is insufficient, because John needs to know
that Bill knows John knows, and so on. (If John thought that Bill
didn't realize John had correctly interpreted Bill's signal, then
John might expect Bill to stay on the subway car, not wanting to
abandon John. Hence John might not get off the car himself, even
though he knows it's the right stop, and even though Bill knows
that John knows this.)
musings shed more light on the power of YouTube's viewership statistics,
which greatly amplify the impact of the Bernanke-bashing bears.
It isn't merely that over 4 million people have seen the video blasting
the Fed, but that we all know how many of us have seen it.
In a related
vein, the surprising popularity of the Hayek-Keynes
rap video, and the traffic
rankings of explicitly Austrian sites such as Mises.org
and LewRockwell.com, have
encouraged more and more Austrians to come out of the closet, as
it were. They can brush off the put-downs of the "respectable"
mainstream economists, because they know that growing numbers of
people agree that the Austrians have an important and neglected
perspective when it comes to both economic theory and policy.
Not so long
ago, the prevailing wisdom was that a young economist was committing
career suicide by pursuing an explicitly Austrian research program.
This is no longer the case. As I joked to the Grove City undergraduates
at this year's Austrian Student Scholar's Conference, nowadays a
young scholar is merely cutting off his left arm by announcing his
love for Mises and Rothbard. This is progress!
have extensively discussed
the impact of Twitter and Facebook on the events in Egypt and
elsewhere in the Middle East. What is less obvious is the tarnishing
of the image of the Federal Reserve.
"AmpedStatus" (in affiliation with the hactivist group
"Operation Empire State Rebellion," in a YouTube
video warning of nonviolent civil disobedience if the Federal
Reserve doesn't change course. The creepy video complete
with a distorted voice specifically demands the resignation
of Ben Bernanke as a sign of good faith.
"disrespectful-punk" websites catering to financial readers,
epitomized by ZeroHedge
take it as a matter of course that Bernanke has no clothes. The
anonymity of the Internet ensures that plenty of respectable Wall
Street pros turn to these alternative media to get the real
news about the economy when their boss isn't looking, of
at the Federal Reserve and other power centers aren't ignoring the
budding green shoots of dissent. Bernanke's
duplicitous 60 Minutes appearance was a PR damage-control
move that we normally would expect from politicians, not central
bankers. Before the present financial crisis, the operations of
the Federal Reserve were mysterious and boring.
central banking, as in politics, the ruling elite must keep the
people in the dark."
because of Bernanke's boldness, the ascendancy of the Ron
Paul movement, and the resurgence in Austrian economics, among
other factors a large segment of the public is very interested
indeed in what "the Bernank" is up to.
As Murray Rothbard
emphasized, our modern banking system is based on fractional reserves,
meaning the bankers are always vulnerable to a sudden loss in confidence.
Just as political
regimes can topple overnight with a change in public opinion,
so too can the "strongest" of modern financial systems
crumble in the face of a large-scale run on the banks.
banking, as in politics, the ruling elite must keep the people in
the dark. The rise of the Internet, and in particular outlets such
as YouTube, are making that task far more difficult.
Murphy [send him mail],
adjunct scholar of the Mises Institute,
is the author of The
Politically Incorrect Guide to Capitalism,
Human Action Study Guide,
Man, Economy, and State Study Guide.
His latest book is The
Politically Incorrect Guide to the Great Depression and the New
Best of Bob Murphy