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For it to be in fail, Bernanke would have had to have done something horrifyingly embarrassing, like accidentally light himself on fire while trying to answer the question.

I don't think mere pandering and spin quite qualifies it for lies. We usually reserve lies for blatant falsehoods (Palin was against the bridge to nowhere, CO2 is harmless because it's natural, John Yoo stood up for human rights, etc.).

I don't know that Bernanke was all that mad about this, but I find it plausible that he came to the conclusion that it was necessary, and even plausible that this is contrary to his ideological leanings.

how about a brain slug attached to ben bernanke? Ok serious. Well you said it's unlikely that bernanke is a crook. I will agree with that, but I will say that an honest banker is a oxymoron or a contradiction.

Thanks for the kind reply bro

I agree with 1-3.

However, I will say unequivocally that Ben Bernanke is not an idiot. Crook is possible, but I think that's unlikely. As for deflation, let's put it this way: Bernanke has expanded/is expanding the money supply radically, and we're seeing no response from the CPI, and unemployment is still going up. If Bernanke reversed course, and contracted the money supply, do you think the CPI would go up, or down? Would unemployment go up, or down?

Personally I think the simple answer is that America has neglected the importance of actually creating real goods and services for people, and instead have built an entire economy out of get-rich-quick schemes. A particularly large bundle of "get rich quick schemes" all just got found out, and shut down (by investors, mostly). Thinking that adjustments to our monetary policy is all we need to fix things seems like another get rich quick scheme, and one we should shut down.

I think what we need is a return to a postwar-style New Deal economy. Seems to me, the bad stuff started happening when we started ditching that about 30 years ago...

This recession has been long in the making, but the housing bubble, in a nutshell, was caused by the moral hazards generated by federal institutions taking an interest in the real estate market and the Fed keeping artificially low interest rates for so long. Everything else you mentioned is mostly a consequence.

I hear this a lot from Austro-libertarians. If this were true, banks should never work right, either. The people making the investment choices, and choices about loans are not the people who own the banks.

I can't tell whether you're terrible at making analogies or very good at making terrible analogies.

Banks are given money *voluntarily*, that means they'll tend to receive less money if they're careless with it (reputation?). You might ask, "So why would banks be careless with money given by govt? Don't they know that govt might not give them more money if they're careless too?".

Well, just look at the bailouts. Govt gave these banks billions even after they lost copious amounts of it. Either these banks are evil geniuses or, at the risk of sounding like a conspiracy theorist, I'd say there is some collusion between govt and big investment banks, wouldn't you agree?

The most risk they have to bear is getting fired, and often they get lavish severance packages even when they are fired, and are almost immediately rehired by another bank.

I agree, your accusations about the banking sector being inefficient are very plausible. Like I said, they're in bed together, govt and banks, it's probably the most highly regulated sector of the economy. The more regulated a sector of the economy is, the higher its costs, the bigger its potential for corruption and the worse its services are going to be.

I also think government spending is best directed at things that are unlikely to turn a direct profit, but are useful for humanitarian purposes, or a general positive impact on the economy (e.g. infrastructure).

I understand where you're coming from, but I still think govt should mostly stay out of that too. Most people are led to consider profit a bad thing, when concern with profit is what's actually more humanitarian than pursuing anything with alleged "humanitarian" goals and taxpayer money. Profit is not something strictly selfish (well, actually it is, but profit is usually obtained by providing services to others, which is where the "selfless" magic behind profit lies), a growing economy eventually allows itself to have longer and longer-term goals while still being bound by a profit-seeking mentality, even if we're talking highways or space exploration.

What Bernanke believes is that the Fed should have known better and reacted by massively expanding the money supply to stave off deflation, and rescuing the failing banks.

I know. Even though he acknowledged that the Fed helped cause it, he gathered the wrong conclusion: That the Fed didn't do enough. Well, he's been putting those beliefs in action so we'll all get to see how that works out real soon.

Austrians say it will cause hyperinflation, keynesians will either say "yay, it worked!" or "hyperinflation only happened because the Fed didn't expand the money supply enough and didn't save enough failing banks".

We won't solve the Austrian-keynesian blame game over the Great Depression here, specially if you're saying Austrians caused it, so I'd like to move on.

What if we bring inflation into this discussion, because it best illustrates a basic disagreement we probably have. Keynesians embrace inflation as a tool, which is why I consider keynesianism an ideological tool of the state. The govt loves inflation and it will never openly admit to that love, or admit to using it A LOT, because people obviously don't like inflation.

Inflation can only be effectively used when the govt has a monopoly over the currency, which, to me, explains why you're so in favor of central banks and opposed to parallel currencies: So people can't flee from inflation.

Inflation produces easy money for the govt at the expense of everyone's wealth denominated in that currency. It's the ultimate stealth taxing tool: The govt/Fed just prints money and we all get poorer, and they get to give that money to those who are politically connected.

It's like an upside-down redistribution of wealth, everyone gets slowly robbed (the poor getting hit the hardest for having less resources) and usually the ones at the top get the most benefit first, specially if they're in bed with govt.

Govt, as always, gets a free pass and points its finger at capitalism, business owners, the market, banks, foreign lenders, ANYTHING and people will buy it if they're keynesian, statist or stupid enough.

The wage conversation is a bit of a tangent, but from my point of view the right answer is to expand unemployment benefits and welfare, rather than reduce the minimum wage. I might be convinced that yes, people in certain situations should be able to work for less, but I'd rather the market just adjust to knowing that projects that rely on cheaper labor can't be done here.

As for your assertion that the entire housing asset bubble was caused by Fannie and Freddie and the 1977 Community Reinvestment Act...I'm disappointed. I'd thought you were more well-read than to believe that story.

Here's the most basic, simplistic response -- if it was all Fannie and Freddie's fault (two formerly privately-owned and operated companies, BTW), why are other banks in trouble? Why is AIG in trouble?

I agree that the problem here was moral hazard, but I disagree that it was government that created that situation. It seems that the market's own mechanisms for accurately gauging risk failed utterly.

>> ^gtjwkq:
Money spent by govt is, in principle, rarely spent as wisely as money spent by people, because people work to earn and therefore value their money, they usually have to be productive to earn it (which isn't easy), while govt is just politicians and bureaucrats deciding over money they easily appropriate from productive people. I don't know how I can put this in simpler terms.

I hear this a lot from Austro-libertarians. If this were true, banks should never work right, either. The people making the investment choices, and choices about loans are not the people who own the banks. The most risk they have to bear is getting fired, and often they get lavish severance packages even when they are fired, and are almost immediately rehired by another bank.

I agree that having some skin in the game helps motivate people to be more wise with their money, but I don't think there are any people in government who're casually disinterested in how taxpayer money is spent -- on the contrary, I think they're highly interested in either spending it on altruistic things (like unemployment, healthcare, green technology incentives) or spending it on selfish things (tax cuts/subsidies for industries that donated to you, aid in skewing regulation to benefit donors). I like to vote for the former, and call for the latter to be jailed (though it seems they're all guilty of both in varying ratios).

I also think government spending is best directed at things that are unlikely to turn a direct profit, but are useful for humanitarian purposes, or a general positive impact on the economy (e.g. infrastructure).

I would like to see less military spending, but I think that will be politically difficult when there are two wars going on, and a recession. I like the way Obama/Gates have shuffled the military budget in terms of reallocating money between different military projects, but I'm annoyed that the budget did still get an increase for next year.

As for the bank bailouts, I feel like they were a necessary evil. I would rather they'd asked more in the way of concessions from the bank in return, but I do think letting them fail would have just made things worse.

When I give you money, the money is now yours, what you do with it is your own business. But when I'm the govt, and I give you money, I'm giving you money that IS NOT MINE and that I SHOULDN'T BE GIVING TO YOU (at least that's what I'm arguing, a keynesian might think differently). So there lies the root of the problem: govt is to blame for handing out free money, not what people did with it, because it's expected that people will be careless about money that is freely handed to them, as opposed to money that is earned.
People with guns don't inevitably commit murder. About the bus driver, it's expected that he'll drive poorly and crash when drunk (maybe not though if he's lucky), even though I said he was force-fed the alcohol, which is not accurate since I'm not sure investment banks were legally obligated to accept govt money, but it's easy to imagine how a bank might be strongly influenced to accept money if it has no strings attached and it's also offered to its competitors.

This, I think is a crucial part of our disagreement. Say you're a well-known investor who's made ridiculous profits through shrewdly investing in successful business. I walk up to you, give you a million dollars, no strings attached. Are you going to necessarily be reckless and wasteful with that money, simply because it was a gift? What if the money had come from some investment that simply performed better than your expectations? Does that make you unwise?

Would it make any difference how I got the money I gave you? Even if I conned it out of a bunch of nice old ladies, wouldn't you still invest it correctly? That's why I think the Austrian theory doesn't make sense, especially on this topic.

It would make sense if the government, before the economy went haywire, said "do whatever ya like, we'll absorb all your losses" -- but it didn't do that, implicitly or explicitly.

All that said, I disagree with your characterization of there being a qualitative difference between money given to companies being theirs, but that money given to government to pay taxes still somehow remains yours. It's this whole idea that government is operating as a giant racketeering organization (which seems utterly incorrect). It's like the managing corporation of a condominium. By living here, you agree to a contract with the government, and you have to abide by the obligations in the contract, like obeying the laws, and paying taxes.

Regardless of how you think government got the money to give away, I don't see why money government gives to banks somehow will automatically be frittered away, especially if they say "this is yours, no strings attached".

Even though I think Ben Bernanke is an idiot, he's smart enough to be the current chairman of the Fed and even he thinks the Fed helped cause the Great Depression. The conclusions one can take about what happened in the 20's and 30's are not as clear cut as you'd think. What is important to understand are the motivations behind those that acted and those who interpret what happened.

I think you should perhaps read that speech of his more carefully -- I find what Bernanke says about the Great Depression persuasive. He's mostly talking about how much he loves Milton Friedman, but the key paragraph is:

Friedman's emphasis on avoiding monetary disruptions arose, like many of his other ideas, from his study of U.S. monetary history. He had observed that, in many episodes, the actions of the monetary authorities, despite possibly good intentions, actively destabilized the economy. The leading case, of course, was the Great Depression, or as Friedman and Schwartz called it, the Great Contraction, in which the Fed's tightening in the late 1920s and (most importantly) its failure to prevent the bank failures of the early 1930s were a major cause of the massive decline in money, prices, and output. It is likely that Friedman's study of the Depression led him to look for means, such as his proposal for constant money growth, to ensure that the monetary machine did not get out of order. I hope, though of course I cannot be certain, that two decades of relative monetary stability have not led contemporary central bankers to forget the basic Hippocratic principle.

He doesn't go into why the Fed thought what it was doing was the right idea here, but it should sound refreshingly Austrian -- they were worried about deviating from the gold standard too much, and weren't concerned about bank failures because they figured, as you do now, that banks failing is a blessing in disguise: ownership just moves from incompetent managers to competent ones, no muss, no fuss (liquidationism, it's called these days).

What Bernanke believes is that the Fed should have known better and reacted by massively expanding the money supply to stave off deflation, and rescuing the failing banks. What it actually did was contract the monetary supply and let them fail, and that was pouring gasoline on the fire (or as one economist said of Austrian advice at the time, it was "to cry, 'Fire! Fire!' in Noah's flood.")

I don't contest that the Fed has a lot of power, and that if wielded incorrectly it can cause a lot of damage. But I think the period of time between the Great Depression and now is a testament to the stability a central bank can create. There were recessions, but no Depressions, or Panics. There's already a debate about whether Greenspan could have prevented this one, but so far that debate is leaning towards the relaxation of banking regulation being at fault, rather than a FRB monetary policy error.

I don't really think debate on the history of the Great Depression is over; Keynesians and Monetarists are still fighting about aspects of it. But Austrian economics fell out of the mainstream in the aftermath of the Great Depression, largely because their policy prescriptions were carried out, to disastrous results. Present-day Austrians don't even deny that a contractionary monetary policy in the late 20's was a bad idea, they just deny it was their idea, even though it's what people like Hayek and Schumpeter were calling for at the time, and what they're calling for now.

That's why I can be perhaps a bit over the top when trying to quash Austrians as quacks; in my opinion their policies caused both Depressions.

I wouldn't say low salaries are completely unavoidable, there are jobs that can only offer such salaries but the long-term tendency in a free market is for better salaries to be available to those more competent and specialized, with a general increase in quality of life and purchasing power attenuating most concerns on the lower end.

Minimum wages today are calculated with goals like "sustaining a family of four" or something, but teenagers or people who live with their parents sometimes are just working for extra bucks, or they might be looking for entry level employment for the experience, to acquire a skill, etc. So the govt steps in and says NO, and that represses an entire market for lesser jobs in every sector of the economy, taking away freedom of choice both from the unemployed and the employers. In the end, it won't matter when unemployment reaches high percentages and desperation sets in.

Why did Fannie Mae and Freddy Mac (FM2) offer free credit and backed up loans made in the real estate market? Because politicians decided it should be easier for people to have houses, yay! A noble goal any politician would promise for votes.

Now here's a thing about the nature of people: They're greedy, but they're also fearful. It's a very important balance because they want stuff, but they also fear losing what they have. But FM2 stepped in and took away the fear: ZERO risk, we are federal institutions and we totally back up all your loans! So people were free to be greedy without the fear. That's the housing bubble in an austrian nutshell for you.

Money spent by govt is, in principle, rarely spent as wisely as money spent by people, because people work to earn and therefore value their money, they usually have to be productive to earn it (which isn't easy), while govt is just politicians and bureaucrats deciding over money they easily appropriate from productive people. I don't know how I can put this in simpler terms.

The govt isn't just police officers and VA hospitals. How about our multi-trillion dollar warfare machine, how can any liberal think that's indispensable? What about institutions like Homeland Security, Departments of Education, Agriculture, DEA, FDA, and countless other needless resource wasting bureaucracies at the Federal level? I'm all for cutting them out first.

You say you're not pleased with the bailouts, yet you don't consider govt at fault for handing money to investment banks. Could you elaborate on this apparent contradiction?

When I give you money, the money is now yours, what you do with it is your own business. But when I'm the govt, and I give you money, I'm giving you money that IS NOT MINE and that I SHOULDN'T BE GIVING TO YOU (at least that's what I'm arguing, a keynesian might think differently). So there lies the root of the problem: govt is to blame for handing out free money, not what people did with it, because it's expected that people will be careless about money that is freely handed to them, as opposed to money that is earned.

People with guns don't inevitably commit murder. About the bus driver, it's expected that he'll drive poorly and crash when drunk (maybe not though if he's lucky), even though I said he was force-fed the alcohol, which is not accurate since I'm not sure investment banks were legally obligated to accept govt money, but it's easy to imagine how a bank might be strongly influenced to accept money if it has no strings attached and it's also offered to its competitors.

The rest of us go bankrupt or get jail time if we lose or steal money, a politician, with luck, doesn't get reelected. That's what I meant with "exempt from accountability".

Even though I think Ben Bernanke is an idiot, he's smart enough to be the current chairman of the Fed and even he thinks the Fed helped cause the Great Depression. The conclusions one can take about what happened in the 20's and 30's are not as clear cut as you'd think. What is important to understand are the motivations behind those that acted and those who interpret what happened.

The privileges granted from the govt to the Fed make it a very very powerful institution, and the govt LIKES the Fed. Just keep that in mind.

Schiff is good. Yes.

But cmon. Obama, Bernanke.. They're not stupid people. They are educated and know what they're doing and have a plan. They would not purposely destroy the country.

would they?

Tags for this video have been changed from 'fox, fascism, bush was actually pretty awesome' to 'fox, fascism, bush was actually pretty awesome, bernanke' - edited by doogle

Love you, Rach, but you're dead wrong about the FED.

You should know better.

When Bernanke can get away with not telling congress where the money's going, something is rotten in Denmark.

Seriously, Glenn needs to get a more up-to-date camera for when they film Bernanke.

What I've learned from this clip is that Sen. Sanders is a complete noob.

I don't think Bernanke's responses were even remotely out of line.

8:22 is the part that keeps me up at night, he says when the economy "recovers" they'll raise interest rates and decrease the money supply. Does he not know that that will kill any recovery in its tracks? Rising interest rates are what triggered this bust, so he'll wait for the next bubble then pop that one and somehow everything will be fine this time around. Economies can't and shouldn't be managed. Politicians need to find a way to separate themselves from the macro-economy and get rid of the commissars. People need to educate themselves and learn to save money and realize that recessions are a natural part of the business cycle and it's their responsibility to prepare for them not the government. Jon Stewart said it best, "This isn't a fucking game."

The reporter asks "Why are you doing this interview?"

Even though the Fed is a private organization, they are a creature of government and their right to exist is dependent on their ability to quietly fuck the people through inflation. For anyone who has seen the HBO series "The Wire", Bernanke is the Police commissioner and Bush and Obama are the Mayors who ask him to "juke" the stats so they look good for reelection. Makes me sick.

Figured you'd find this interesting:
http://www.videosift.com/video/Fed-Chairman-Ben-Bernanke-Interview-on-60-Minutes

Thank you!

In reply to this comment by my15minutes:
*promote

>> ^StukaFox:
"He came in with a recession" -- WHAT?!?!?!


Clinton's entire term was a dot-com stock market bubble whose inevitable and proportionate bust began to occur in 2000 when Bush took office. Greenspan was very loose with money as Fed chairman under both Clinton and Bush, and Bernanke is even worse. Not wanting the painful withdrawal to happen under his watch, Bush did what was politically expedient and shot up the veins with record deficit spending and artificially low lending rates. Greenspan price fixed interest rates down to a record low 1% rate in the middle of a recession and held them there for a year. That transformed the speculative misallocations from stocks to real estate, got consumers borrowing and spending instead of saving to produce, and the day of reckoning was effectively postponed and enlarged until Obama's term. Obama is essentially choosing the same reinflationary path, and it's really only a matter of time before our creditors become net sellers of our bonds and turn the game into a hyperinflationary nightmare.

It also helped that Clinton repealed Glass-Steagall, which allowed much higher leverage and the securitization of mortgages. Ideally, we'd just get rid of the spiker and stop trying to regulate the drunken behavior, but Republicrats don't seem to think in those terms, they're quite party-whipped. I talk to Democrats who think Clinton decreased the national debt, social security is a success, Vietnam was a Republican war, banks don't create money, the dollar is still backed by gold, trade deficits are good. It's quite sad, just two socialist parties who spend all day trying to figure out who's more to blame while libertarians sit back and watch the country go to hell.