Stephen Moore the Austrian, Tamny Rips Apart Bernanke, Rick Perry Getting Help from BoA, and Robert Reich on the Downgrade

A few mainstream commentators actually had some pretty lucid economic insight today.  First up is Stephen Moore in his latest Wall Street Journal piece "Why Americans Hate Economics" who does a terrific job of tearing modern day Keynesianism to shreds:

Mr. Carney explained that unemployment insurance "is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring."

That's a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this.

Economic bimboism is rampant in Washington. The Center for American Progress held a forum earlier this summer arguing that raising the minimum wage would create more jobs. For this to be true, you have to believe that the more it costs a business to hire a worker, the more workers companies will want to hire.
A few months ago Mr. Obama blamed high unemployment on businesses becoming "more efficient with a lot fewer workers," and he mentioned ATMs and airport kiosks. The Luddites are back raging against the machine. If Mr. Obama really wants to get to full employment, why not ban farm equipment?
Or consider the biggest whopper: Mr. Obama's thoroughly discredited $830 billion stimulus bill. We were promised $1.50 or even up to $3 of economic benefit—the mythical "multiplier"—from every dollar the government spent. There was never any acknowledgment that for the government to spend a dollar, it has to take it from the private economy that is then supposed to create jobs. The multiplier theory only works if you believe there's a fairy passing out free dollars.

Wow, if only Moore would write like this more often maybe the Wall Street Journal wouldn't be such a laughing stock amongst those who actually understand economics.  Look for the editorial page to embrace Rick Perry for president (or better yet Mitt Romney) sometime soon.

Next up we have Mr. Ronald Reagan cheerleader himself Larry Kudlow who talks a lot about the dilemma we are facing of either an oncoming recession or a Fed-induced boom:

Amidst the financial flight-wave to safety, with stocks plunging, gold soaring, and Treasury bond rates collapsing -- and all the European banking fears which go with that -- there's an important sub-theme developing: An almost-forgotten monetary indicator, M2, which is mostly cash, demand-deposit checking accounts, savings deposits, and retail money-market funds, has been soaring.
According to the St. Louis Fed, M2 is up 24.2 percent at an annual rate over the past two months. Almost out of the blue, that comes to a near $500 billion increase. In rough terms, the M2 explosion breaks down to $165 billion in demand deposits and $335 billion in savings deposits.
What's going on here? There's a flight to government-guaranteed accounts. Some people believe Europeans are withdrawing from their own banking system and parking their money in the U.S. banking system, guaranteed by Uncle Sam. Kelly Evans reports in her Wall Street Journal column of a $30 billion outflow from equity mutual funds that has probably gone into cash.
This is a very disconcerting development. Normally, big M2 growth would signal a faster economy, and maybe even higher inflation. But as economist Michael Darda points out, the velocity, or turnover, of money seems to be plunging.

What's going on indeed.  While the Euro crisis is contributing to an overall reluctance to lend, such lending will most likely translate into inflation.  As Bob Murphy points out in a new post, it looks like the excess reserves stored at the Fed are indeed starting to leak out while reserve requirements are being increased.  In other words, not a good sign.

John Tamny has an interesting RealClearMarkets article today on whether or not Bernanke's policy of money printing is treasonous.  While Tamny has been a continual critic of the Fed over the years, his comparison of Osama bin Laden to Bernanke is compelling:

Back to reality, Perry's words hit a nerve because he spoke honestly about what many voters feel. As Keynes long ago noted, currency devaluation is the best way to inflame society, and voters are mad.

Osama bin Laden was a terrorist by all accounts, and by many accounts the terrorist act that he helped orchestrate on 9/11 inflicted great economic damage on the United States beyond the generalized horrors of that day. But were bin Laden's actions worse for the economy than those of Ben Bernanke? Let's see.
On 9/11 the price of gold was trading around $286/ounce, a gallon of gasoline (according to the Energy Information Administration) went for $1.53, and the U.S. unemployment rate stood at 5%. One year later, with the economy having absorbed the bin Laden body blow, gold traded at $317/ounce, a gallon of gas sold for $1.35, and unemployment had risen to 5.7%.
So while gas actually ticked downward somewhat, it's fair to presume that the risk aversion wrought by Osama's act had some kind of negative impact on the dollar such that gold was trading higher.

Looking at the numbers, Bernanke took over in February of 2006. At the time an ounce of gold was selling for $569/ounce (notably, gold spiked from $480 upon his nomination; this jump presumably the markets pricing in what was ahead), a gallon of gas retailed for $2.24, and unemployment had fallen back down to 4.8%. Not great numbers, particularly those of gas and gold, but somewhat calm.
Fast forward 5 ½ years later, however, and the situation is ugly. Gold, the most devaluation/inflation sensitive of all market indicators has more than tripled to over $1,800/ounce, the price of a gallon of gasoline has jumped to $3.58, and the rate of U.S. unemployment has nearly doubled to 9.1%. In the real world our blundering Fed Chairman would be gone by now, but in a Washington largely oblivious to market discipline, Bernanke has failed upward; graduating to "the world's foremost Great Depression scholar" despite economic instincts that suggest he would have felt right at home in the Hoover and FDR administrations that gave us the 1930s.

Now Tamny is smart and doesn't call Bernanke a terrorist, but the comparison of bin Laden's economic damage to Bernanke's is riveting.  Of course killing thousands of people shouldn't be compared to making the lives of millions a lot more difficult, but if commodity prices continue to soar and inflation takes hold round the world (if Ben won't let market clearing deflation do its job), Bernanke may have blood on his hands.  Arab spring wasn't due to discontent with political leaders alone.

Now this is interesting, here we have James Mahoney, Bank of America's Director of Public Policy, pledging his support to Governor Rick Perry:

"Bank of America...We will help you out.."

Any bets on whether they are bankrolling Obama's reelection too?  You gotta love plutocracy.

I will end with this humorous video from none other than Robert Reich on what the downgrade for the U.S. credit rating means:

Of course the end point Reich makes is wrong, but if the chowder Bernanke makes is as good as his monetary policy, I will pass.