I hope there’s no misunderstanding. I’m all for certainty and financial stability. But I think what’s really being discussed, or should I say inversely pointed out when we hear Fed Presidents and Governors talk about these issues is a serious lack of accountability at the Federal Reserve and other major central banks.

If one looks at the financial crisis the way I do, through the lens of the AS/AD model, it isn’t difficult to rationalize that hard core inflation targeting is elephant in the room.  But we don’t seem to be hearing anything about where the price pressures go when a central bank tightens policy during an oil price spike or other negative supply shock – a source of inflation that has nothing to do with monetary policy. Instead, as they would have us all believe, it was the banks that caused the crisis. It was housing and energy speculation. It was those bad, irresponsible people using their homes at ATMs so they could take an extra vacation or live it up. It was everything but collapsing NGDP, which of course causes so much financial destruction, the symptoms can look like a cause.

After the disgrace that is John Williams’ paper regarding uncertainty about what QE will do to the economy down the road as a basis for doing nothing about persistently high unemployment and hearing Bernanke babble on ensuring financial stability, I am rather worn out with excuses and attempts at throwing principles of economic freedom under the bus all to avoid a very unpleasant truth – the Fed did it.

From my point of view, it is certainly worth reflection on what all of it means. For one thing, it appears quite narcissistic. I mean really, the lack of understanding of life in, say Southern California, for example, where people buy homes where they can afford them and commute for up to a couple of hours daily for work is striking. These people had the rising cost of fuel taking a bite out of the budget and then the Fed didn’t allow it to turn into inflation, forcing downward price adjustments on markets with a demand shock. It’s true that people don’t need to use as much fuel when they are unemployed and therefore, the price goes down. But then something else happens, the kind of stuff that accompanies loss of income – foreclosures, defaults on all sorts of debt – and those losses pile up in the financial system until it reaches a critical mass.

In the aftermath of this disaster, what is basically being said is that the demand shock won’t be undone, or will only partially be undone no matter how much economic suffering is inflicted because the powers that be think we are all too stupid to do the right things with our money; so we should not look forward to having any. The really annoying thing about this is that if it were the case that stupid capitalists caused the crisis and they think a fascist economic model is more appropriate why hide it? Why continue to lie when they think that capitalism based on economic freedom is literally a bankrupt concept.

Some may think I’ve gone off the deep end on this one, as it’s obvious that Bernanke isn’t a fascist. But a rose by any other name is still a rose. It’s not the intention, but the thought that counts. Keeping the stupid capitalists from making bubbles and causing a financial disaster is not anything I’ve ever found suggested in, say, Capitalism and Freedom; and the concept is pretty difficult to reconcile with any other kind of economic model. And of course, the idea of inflation targeting itself, at least the way it was implemented by the Bernanke Fed, complete with the warning labels attached, isn’t something that I would identify as being based on, or fostering of economic freedom. It’s actually quite the contrary.