Political Animal


August 09, 2012 11:40 AM More on Monetary Policy and Morality

By Ryan Cooper

Tyler Cowen gave me the old what for the other day for calling him a gargoyle:

I say focus ruthlessly on substance and do your best to explore and present the limits and drawbacks of your own ideas and recommendations. Years down the road — or sooner — one will end up wiser and better informed. The reasoning in this article is an excuse to dismiss moderating or inconvenient ideas, or ideas which de-moralize a topic somewhat.

I’ll cop to sort of asking for that one, it was a bit of an overheated post. And I agree that moralistic thinking can often cloud one’s thoughts. (Also, nothing personal against Tyler, who is the rare libertarianish conservative amenable to reason.) Nevertheless I still think morality has some part to play here.

The reason is that this is not a graduate seminar. The point of all this is not to assemble the correct beliefs about economics, or explore all the undoubtedly complex subtleties thereof. The point is to make the economy work! Years down the road we are all dead.

A depression is in any case not a particularly tricky problem. As Steve Randy Waldman put it:

We don’t lack for technical means to counter people’s self-defeating impulse to hoard cash and safe financial assets. On the contrary, we have a whole cornucopia of options! The squabbling that has preoccupied me lately, between market monetarists and post-Keynesians and mainstream saltwater economists, is an argument over which of many not-necessarily-mutually-exclusive options would most perfectly address address this not-really-challenging problem.

The man in charge of the Fed, Ben Bernanke, is doing right now exactly what he famously criticized the Bank of Japan for doing: being cautious, timid, and immediately hitting the brakes at the first whiff of inflation. That work made his career! As I’ve said before, it’s like we put Richard Feynman in charge of NASA and he started ranting about creationism and homeopathy. This suggests to me we’re dealing with questions of power and politics, the things economists usually pretend don’t exist. And when faced with a political obstacle, good moral arguments are among the most powerful available.

Think of the civil rights movement. They did not defeat Jim Crow over the furious, howling objections of Southern conservatives by saying, “the costs of giving black people the vote are not very high.” They went south and faced the dogs and firehoses and beatings and shotguns and thereby shamed the nation into action. (And it was a close-run thing, even then, I might add.)

I haven’t heard any argument that convincingly rebuts the points in Bernanke’s brilliant paper, though I’m happy to listen. But if, as Tyler agrees, a bit of monetary stimulus has a chance of getting us out of this funk at reasonable cost, then we have a moral obligation to try it. Millions of lives are being shattered because Ben Bernanke won’t sign some directives and speak some sentences. It’s time to make him and the rest of the financial elite face that fact.

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Ryan Cooper is a National Correspondent at The Week, and a former web editor of the Washington Monthly. Find him on Twitter: @ryanlcooper


  • Josef K on August 09, 2012 12:36 PM:

    The point is to make the economy work! Years down the road we are all dead.

    Here's another suggestion: take Corwen and Bernanke and put them in an inner city soup kitchen and have them explain to the families there how they don't dare take any action to get the economy moving because it would cause a qaurter of 1% rise in inflation.

    You were being too kind to both men, Mr Cooper. They aren't gargoyles; they're godsdamned sociopaths.

  • JC on August 09, 2012 12:47 PM:

    #1 - I think the Fed has run out of monetary bullets. Real rates are close to if not at zero, and that's his big club. The rest more sizzle than steak. #2 - that leaves fiscal policy as the only big club left, which he has no authority over, and to call for such would only inject him right smack dab into the middle of election year politics, and the central overarching issue no less - public spending and the role of the federal government in our economy. If Bernanke says so much as boo, it will only serve to make him Public Enemy Number One to half a very polarized Congress and the electorate in general. Just my .02...

  • Tony Greco on August 09, 2012 1:04 PM:

    I don't think you have anything to be apologetic about. The differences between progressives and libertarians aren't just about means--they're about basic values. Libertarians aren't generally high on compassion, and you are absolutely correct to point that out.

  • c u n d gulag on August 09, 2012 1:08 PM:

    All other things being equal, if President Obama had gotten rid of the Bush economic holdovers, and rejected the help of the Clinton era ones, he might well be on his way to a virtually uncontested election, and a secure position as one of top 5 the greatest Presidents in history.

    Also too - he should have tried the Bush Crime Family and Cabal as war criminals, and tried the architects of the financial debacle as economic criminals.

  • Lucas Kawa on August 09, 2012 1:19 PM:

    Don't blame Bernanke - blame Congress.

    Read about it at:


  • Shane Taylor on August 09, 2012 1:33 PM:

    An excellent guide to balance sheet recessions and what can be done about them was provided by Martin Wolf in a series of recent posts over at his Financial Times blog:


    It is not necessary to accept the some of the more popular progressive theories about the Fed to appreciate Wolf's perspective.

    Also, Rajiv Sethi was quite good:


  • Adventuregeek on August 09, 2012 2:09 PM:

    This depression is all about protecting creditors (particularly banks and mortgage investors, but also owners of government debt as we've seen in Europe) from having to the value of their debt obligations eroded at all costs. During the last 30 years there has been a massive transfer of wealth upward via debt from the 99% to the 1%. The 99% get the loan proceeds that make them feel like their living standard is rising and the 1% get the interest from payments from the 99%. The same scheme has been applied to government debt as well were we've had a government with stagnant income but increasing expenses. Of course without a real rise in income for the 99% this ponzi scheme can't go on forever. We're now frozen in place because the 99% can no longer pay and the 1% who wield the power will do anything to prevent the value of the paper that they hold from being eroded by inflation or write down. Of course the only real solution is moderate inflation and rising wages to reduce the value and percentage of income of the debt owed, but that would cause short term pain for the wealthy and banks and that must be avoided at ALL cost.

  • Robert Waldmann on August 09, 2012 2:22 PM:

    I disagree entirely with Waldmann. I think you do to. He describes the debate between market monetarists and salt water economists as a debate over which approach would "most perfectly" address the problem. You express doubt about whether monetary policy will work at all.

    On Bernanke, you ignore the fact that he has done much to stimulate the economy than any earlier Fed Chairman. The Fed's gigantic efforts in 2010 and 2011 dwarf anything done before Bernanke became chairman.

    Casual observers are convinced that he hasn't done much because the effects of huge megamassive unprecedented before 2008 efforts was so tiny.

    The idea that the problem is that he isn't willing to do the same thing and hope that this time it works reminds me a lot more of "creationism and homeopathy." than anything Bernanke has said.

    So I have a challenge. If existing evidence doesn't convince you that the market monetarists are totally wrong what would ? Why do you not classify market monetarism with creationism ? They have identical records of empirical success.