Tuesday, June 25, 2013

The Austro-nihilists?

Ambrose Evans-Pritchard is out with a new column, “The Bernanke Fed is playing with deflationary fire.”

In it, he is concerned that the Fed is playing fast and loose with the tightening:

[The Fed] has chosen to tighten monetary policy even though core PCE inflation is actually lower right now than it was when the Fed previously thought it dangerous enough to launch further QE.

He believes the US is one step away from deflation. He offers several graphs to help make his point.  He laments that this is all at a time of almost unprecedented fiscal tightening.  What on earth is Bernanke thinking?

I hope the Fed knows what it is doing.

They don’t know what they are doing, Ambrose.  They can’t know, and they never know.  You write with such certainty, yet you don’t know either.

The market is made up of billions of individuals making trillions of transactions a day.  These individuals are humans, not machines.  Their values are subjective, not possible to quantify.

Are we to conclude that Ben Bernanke has lost his nerve and joined the Austro-nihilists?

Oh, that is hurtful, Ambrose…and on the heels of another stinging comment in another Ambrose commentary (ht Daily Bell):

Marcus Nunes from the Fundação Getúlio Vargas in São Paulo said the report “reeks of Austrianism”, referring to the hard-line view of the Austrian School that debt busts lead to `creative destruction’ and should be allowed to run their course.

Austro-nihilists…Austrianism.  I don’t believe they are speaking of anything near Wien. 

Well, at least they are talking about it!

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