None of the items listed in the title have much to do with one another, at least not topically. But yet, when considering this debate between the New York Fed’s Dudley and John Taylor about policy rules, and Scott Sumner’s new post on Econlog that is a first installment in his review of Bernanke’s book, they come together in a very tight and rather astounding package choc full of non sequiturs.
About the debate:
It’s rather incredible that a public debate about whether the central bank should follow monetary policy rules would include only the points of view of a central banker and John Taylor. I mean no disrespect to Mr. Taylor or Mr. Dudley here. However, there are plenty of other economists in the world who hold a variety of ideas about monetary policy rules who were not completely wrong about the phantom inflation that would result from QE and who also have no dog in the fight, so to speak. Simply put, the debate was a two-dimensional sham that allowed Dudley to argue against any form of rule by arguing against a Taylor rule (which is obsolete in a ZLB world) in an apparent false choice of the Taylor rule or the current arbitrary monetary free-for-all, having no rules and no accountability at all. Now let me see if I can guess which side of the argument the debate organizers line up behind…
It sort of reminds me of an episode of Carl Sagan’s Cosmos where he explains an encounter a creature living in a two-dimensional world would have with a three-dimensional creature… Mr. Flat-land meeting Mr. Width and Depth would completely blow his mind. Here are Mr. Dudley, Mr. Taylor, and the debate organizers living in a two-dimensional world of it’s this or that, and they all meet Mr. Sumner who would blow their minds. But I digress.
Anyway, be sure to watch the video of the debate and notice how Taylor appears to get the sham about 2/3 into it and says things about what the Fed should do now that could never possibly tie into his earlier argument as if he might be more occupied with getting it over with than being logically consistent. Be sure to have plenty of popcorn on hand because if it weren’t such a serious matter it would be quite entertaining.
And about Bernanke’s book:
I recently discovered that my public library has the book. The library, however, is currently closed for renovation but will be reopening soon.
Sumner’s scathing first post about it on Econlog tells me that my built-in, highly sensitive weasel verbiage detector was working as intended when I wrote as much as I can about it here. At the end of the post, Sumner links to the minutes from the September 2008 meeting and writes, “Read it and weep.” Though, I have to say that I cried an ocean of tears in the immediate aftermath and for at least a few years thereafter. I’m all cried-out with nothing to show for it. Perhaps instead of weeping, the sense of indignation can be a motivational force to be sure that this sort of operational policy nonsense and the sweeping of the entire tragedy under the rug with weasel verbiage never happens again. I mean really, Bernanke is killing me with glibness; and it makes me wonder about why some people are allowed to roam free with such a twisted view of reality while others end up in a padded cell.