Paul Jacob

One hates to disagree with accomplished professionals. And yet it’s obvious that the experts of this great Age of the Accredited Professional (AAP) have really blown it. They assured us that they could manage the economy — indeed, micro-manage the economy — and that things were all right. And yet, the bust happened, and they’ve been scurrying to prevent an utter debacle.

It looks to me that, for all their trillions in bailouts, they haven’t succeeded. Government policies of deficit spending and ever-increasing debt are self-destructing, right on top of a bubble’s bursting, a bubble created by experts (mostly government, but not all) in a market created by government (the mortgage after-market) amongst institutions regulated by government (during the Bush years vast reams of new regulations clogged up the realm) and fed by the Federal Reserve (a government-created central bank).

So when historian Niall Ferguson writes that “The Fed’s Critics Are Wrong: We Need to Avert Depression,” I’m more than a bit skeptical. I suspect that he’s advocating the use of bedpans to bail out a sinking Titanic.

Ferguson gives the AAP line about boom and bust:

In normal times it would be legitimate to worry about the consequences of money printing and outsize debts. But history tells us these are anything but normal times.
We teetered on the edge of this same precipice 80 years ago, in 1931. A succession of major European banks went bust. Bailing them out was beyond the resources of fiscally overstretched governments. Failure to agree on orderly debt reductions led to disorderly defaults, tariff wars, and a further worldwide collapse of production and employment.

My problems with the historian’s history begins here. Tariff wars resulted from defaults? That’s not what I’ve read. Tariff wars started with the Smoot-Hawley Tariff, the contemplation, enactment, and enforcement of which helped cause the cascade of market crashes and bank defaults in America, and the sheer enormity of which led to retaliatory protectionism elsewhere, which helped instigate further bank defaults.


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.