Ben Bernanke Is A Walking Economic Fallacy

Ben Bernanke Is A Walking Economic Fallacy
John Tamny, 11.02.09, 12:01 AM EST
The Fed chairman has no idea what he's talking about.

The great economist Henry Hazlitt once observed that "Economics is haunted by more fallacies than any other study known to man." Were Hazlitt alive today, he surely would have a field day addressing the numerous economic fallacies offered up by our very own Federal Reserve Chairman, Ben Bernanke.

From his frequent assertions that economic growth is the cause of inflation, to his support of spending "stimulus" as though wealth redistribution actually drives economic activity, to his belief that simple money creation enhances the economy, it's fair to say that the world's most powerful central banker buys into a quite a few of these fallacies. Historians will write volumes on former President George W. Bush's biggest mistakes in office, and while the left and right will have plenty to work with, it's likely that for some at least, Bush's appointment of Bernanke will loom large.

Though it's settled "truth" that all economists believe in free trade, apparently Bernanke didn't get the memo. No doubt he pays lip service to the importance of the free flow of goods from one side of his mouth, but the other side spews nonsense about how governments must "avoid ever-increasing and unsustainable imbalances in trade and capital flows."

Bernanke uttered the above at a recent Federal Reserve Bank of San Francisco conference on Asia, and his statement was pregnant with false meaning. In Bernanke's macro view of the world, rather than an interconnected whole of self-interested economic individuals, countries have borders across which bureaucrats should manage the flow of capital and goods.

There are many problems with this thinking, but to break it down to the basics, countries quite simply do not trade. Bernanke sees a scenario in which the U.S. manages trade with China, but in truth individuals in each country make their own decisions about where to ship goods and invest capital.

Breaking trade down to the individual is essential for the simple reason that trade is all about individual freedom. As singular economic entities, we seek to exchange what we deem our surplus for that of others. We do this regardless of country border, and our ability to do so drives enormous economic efficiencies worldwide as labor specialization takes the place of labor duplication.

http://www.forbes.com/2009/10/30/ben-bernanke-trade-china-op...