Meandering around the website of the Cato Institute looking for the good stuff on George Selgin, I found a video of a talk he gave at the Heritage Foundation. It seemed a bit surprising that George would be giving a talk about reformation of the Federal Reserve hosted by Heritage and Jim DeMint personally.
The real surprise is that there wasn’t any discussion about NGDP crashing. And I had to sit through Lawrence Wright’s talk about the history of the Fed and the price level before getting to George. He seems like a very smart guy. But it made my head hurt. Not only because it didn’t make much sense, but also because after 100 years of complaints about the Fed’s supposed relationship to the price level, people like Lawrence White are still regurgitating the same worn out argument with what appears to be an attempt to get somewhere when there are much better arguments to be made.
Truthfully, I though George’s talk to be rather lackluster. I expected something more along the lines of the talk he gave at the Adam Smith Institute last year which was spectacular. But he touched on the point of the sterilization of the bank lending that was conducted in 2008, again making the argument that the Fed sopped up available liquidity to keep the failing institutions afloat which in turn contributed to the crash of NGDP, expanding the recession out of control. One could certainly make the argument that that particular mistake was not made because the Fed wasn’t concerned about the price level, but rather because it was concerned about that primarily while trying to “save the banks.”
I talked about a hypothetical barter economy with apples and oranges in my last post and explained how the trade in apples and oranges could be affected by supply side happenings as an illustration that inflation is pretty much a fact of life even in an economy with no money at all.
Given that example, it’s astounding to me then, that inflation arguments are raised as illustration of how the Fed is an undesirable, tyrannical institution because of changes in the price level as if that is only argument to be made when, whether the sterilization of the bank lending in 2008 was done with eyes wide open to the possible effects or not, the consequences of such a policy to avoid inflation was indeed profoundly impactful to millions of people. If I wanted to “can the Fed,” the logical truth might work a whole lot better rather than chasing some relative notion of inflation that is, frankly, intellectually dishonest.
Yet it goes on and on as if it means something important. Perhaps I just don’t get the real point. Maybe it isn’t about the theft of a career and the fruits of a lifetime of labor for millions of people over the course of a year. No, paying a penny or a nickel more for something in a year to them, perhaps, is the real theft – never mind the real price. I want to just scream at them – it’s all nominal – ARGH!
Now that I’ve vented my ultra-frustrating experience of watching that video to the keyboard, maybe I’ll just have a beer and try to forget about it.