Bernanke Meets His Inept Match in Bill Dudley
by John Tamny
by John Tamny: Paul
Krugman Pulls the Race Card From the Deck's Bottom
Back in the late 90s at Goldman Sachs, it was a running joke
in the equities division that so inept were the firm's economists,
that the best way to put one's clients into profitable trades was
to bet against their projections. Though a buy-and-hold firm by
nature, Goldman had clients eager to trade, and the GS economists
served as the proverbial muse for clients seeking profitable action.
What's notable about this is that Bill
Dudley was Goldman's chief economist during the time in question,
and presumably the brains behind all those faulty, but paradoxically
profitable forecasts. Of course Dudley's reward for always being
wrong was quintessential Washington. Hired away from Goldman to
run the New York
Fed's markets desk, Dudley became a soulmate of sorts with the
walking, talking definition of economic ineptitude in the form of
Fed Chairman Ben
Bernanke, and having worked well with the latter in crafting
the bank bailouts that continue to bring our economy harm, Dudley
was eventually promoted to the top job at the New York Fed.
Failing upward is something Bernanke (see: bank
bailouts, and the subsequent "financial crisis") and
Dudley both know well, and now seemingly joined at the hip, there's
no telling the economic damage the two can achieve working together.
Sure enough it was Dudley who, according to the Wall Street Journal,
"was a key ally in Mr. Bernanke's push last November to launch
the Fed's $600 billion in purchases of U.S. Treasurys" to allegedly
"stimulate the economy."
All of which brings us to a recent speech Dudley gave to the Queens
(NY) Chamber of Commerce. According to a report in the New York
Post, Dudley's talk didn't fool many of the attendees, but given
his Bernanke-like understanding of economic growth and inflation,
no one should be surprised.
Apparently eager to make the case for the impossible, Dudley remarkably
told the audience that inflation was under control. But with many
in attendance not taking the bait, Dudley noted that "Today
you can buy an iPad2 that costs the same as an iPad1. That's twice
Nice try, but were Dudley he more in touch with the history of
consumer prices, he would know well that from flat-screen televisions
to cellphones (the original Motorola brick phone in the early 80s
retailed for $3,995) to long distance calling, prices fall by definition,
and it's often a function of increased productivity rather than
something driven by a well managed dollar.
What Dudley seemingly doesn't understand is that falling prices
on their own are not deflationary, let alone signals of a lack of
inflation. Indeed, assuming cheaper or near costless long distance,
that merely expands the range of goods individuals can buy on the
way of driving up the prices of other products and services.
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