Scott Sumner has a post criticizing an article chock full of tabloid economics that appeared in the Financial Times recently. I really like it and highly recommend reading it. I simply can’t be bashful in admitting that I share an exasperation with people who write this kind of stuff, stuff that in not knowing any better would knock a reader’s I.Q. down about 50 points.
I actually had to read this several times to make sure that my eyes were not deceiving me. After all, this is the Financial Times, the world’s leading financial newspaper. So we are to believe that even though real GDP is expected to rise, this isn’t actually “growth,” because output in Europe and Japan measured in US dollars is expected to decline. OK, that’s pretty weird, and you wonder why he didn’t choose to measure Japanese output in terms of Brazilian reals or Indian rupees, but we’ll let that pass. What floored me was the next sentence, that measuring economic growth in real terms rather than nominal terms was an example of money illusion.
It seems like that since 2008 people can just say anything. There are no rules anymore. You can say that a good way to reduce inflation is cutting interest rates. You can say that monetary policy is ultra-expansionary in countries suffering from deflation. Say whatever you want, the lunatics have taken over the mental asylum. It’s like the Chinese Cultural Revolution—all the old orthodoxies are discredited. Anything goes.
I won’t deny that ignorance in mass media can do a lot of damage. But this problem is much worse than a bunch of financial reporters churning out trash.
The title of this post was originally going to be “Central bankers behaving badly.” They are probably the worst offenders there are. I’ve read some stories about what some of have said lately, like Williams who said that the rate hike is on track despite a weakening economy and sinking inflation, and it’s simply perplexing. Then there was the one on Reuters the other day about Dudley’s important job of sopping up “trillions” in reserves as soon as the hike or the tightening cycle begins, and how he has to be utterly sure that rates rise as required without so much as a mention about what might happen if he and the rest of his colleagues on the FOMC go too far – with the weakening economy and sinking inflation… and all! Completely absent in the story was any analysis whatsoever on the justification. There are no rules anymore.
But then I got to thinking about whether my title conveyed a wide enough scope because right underneath the Dudley article was one quoting the German Finance Minister as saying that low interest rates were hurting Germany because the potential for bubbles, adding that there’s nothing but central bank cash and debt out there.
LOL! Yeah. There’s nothing but central bank cash out there…
Since 2008 people can just say ANYTHING – even the people who are supposed to be responsible for monetary matters.
We’re in big trouble!