Bernanke: "You need some system to set the money supply... Every major country in the world uses a central bank, which must make some decision about the money supply."
Ron Paul: "But then there's no good information for the investor, unfortunately."
Friday, March 19, 2010
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2 comments:
Until I watched this video, I never realized just how much Ben Bernanke looks like my 11th grade English teacher. Scary!
Also, this video confirms why I shall never have any opinions about the economy. Aside from the really blatant corruption issues, like when some politician makes a quick million bucks under the table for suggesting that a particular business gets bailed out or something.... economics on the national level is so complicated and abstract that I'm not sure either side can be totally right or wrong. And also, it is about as exciting to talk about as watching paint dry. (I might rather watch paint dry, really.) Can't imagine having to deal with this stuff every day like these guys do!
Free market economics is not all that complicated. Politics is complicated.
In a free market economy, low interest rates are the result of a glut of savings. Banks have a lot of money to lend, so they must offer it at low rates. The supply of money is high and the price of money is low. This signals investors to expand their businesses.
In our centrally-planned economy, interest rates are kept low by decree--they tell nothing about the supply of money. Lacking this information, investors make poor choices and invest where they should not. These are called malinvestments.
The period of malinvestment is the "boom", when everyone is hiring, borrowing, and spending. The period when bad investments reveal themselves is the "bust", when everyone is firing, selling, and trying to save money.
Austrian economics says that central banks cause booms and busts. Unfortunately, it's hard to test that theory because like Bernanke says, pretty much every country is ruled by one.
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