The New York Times and Ben Bernanke both want you to know that the reason why the economy is growing at an anemic 2% rate is because of—wait for it—the earthquake in Japan! What about all those predictions of 4% growth, you ask? What about the Keynesian explosion about job-awesomeness we were promised with hundreds of billions of stimulus? If you believe in the Butterfly Effect (or the Ashton Kutcher movie by the same name that no one saw because Ashton Kutcher was in it), perhaps a little insect sat on a fault line on the coast of Honshu, Japan, caused an earthquake, there were supply disruptions, and now we’re alluding to the possibility of a double-dip recession! The Times explains:
Few economists are predicting an out-and-out return to recession, but the risk has increased, with the health of the American economy depending in part on what is really “transitory.”
During the first press conference in the central bank’s history two months ago, Federal Reserve Chairman Ben S. Bernanke used the word to describe factors — including supply chain disruptions after the earthquake and tsunami in Japan and rising oil prices — that were restraining economic growth in the first half of the year (emphasis added).
Earlier this week, Mr. Bernanke confessed that “some of these headwinds may be stronger and more persistent than we thought,” adding, “we don’t have a precise read on why this slower pace of growth is persisting.”
You “don’t have a precise read,” Ben? I think you do. And so do other economists:
[T]he unexpected shocks from Japan and the Middle East in the first half of the year go only partway toward explaining the deceleration. Many worries remain: housing prices have continued to fall, hiring is weak, wages are flat, growth in emerging economies like China and India is slowing and the debt crisis in Europe could have ripple effects.
Our troubles are certainly linked to Japan, only not in the way that Mr. Bernanke wants to admit. It isn’t the Japanese earthquake that caused our problems, but the Japanese solution to financial problems (i.e., liberalism) I wrote about in October:
In short, most of Japan’s prolonged economic woes stem from…the kind of “stimulus” programs liberals (and bizarrely, some Republicans) embrace no matter how unremarkable—and often counter productive—the track record at home or abroad.
Japan has turned into a nation of liberal zombies. Amazingly, guys like Joe Biden and Harry Reid keep proving that once you’re bitten by Keynesian undead it’s incredibly difficult to come back to reality.
If only more people watched F.A. Hayek in the Fight of Century instead of Ben Bernanke playing Ashton Kutcher, we wouldn’t be in this mess.
The government’s long been in bed
with those Wall Street execs and the firms that they’ve bled.
Capitalism is about profit and loss.
You bail out the losers there is no end to the cost.
The lesson I’ve learned is how little we know.
The world is complex, not some circular flow.
The economy is not a class you master in college,
to think otherwise is the pretense of knowledge.People aren’t chess men you move on a board
at your whim, their dreams and desires ignored.
With political incentives, discretion’s a joke.
Those dials are twisting; just mirrors and smoke.
We need stable rules and real market prices
so prosperity emerges and cuts short the crisis.
Give us a chance so we can discover
the most valuable ways to serve one another.
Douglas Ernst Blog 