Why Oh Why Can't We Have a Better Press Corps?

For my sins, a correspondent sends me John Tamny, writing in National Review on Ben Bernanke:

John Tamny on the Ben Bernanke and the Federal Reserve on NRO Financial : And to prove that Bernanke's output-gap inflation theories are long-held, as opposed to being one-time slips-of-the-tongue, various speeches and editorials over the years make clear that in his model, neither inflation nor deflation are monetary events.

Let's go to the videotape:

Ben Bernanke: Ultimately, inflation is a monetary phenomenon, as suggested by Milton Friedman's famous dictum.... [T]he expectational Phillips curve is fully consistent with inflation's being determined by monetary forces in the long run. This point, originally made by Friedman himself, has been demonstrated in many textbooks...

Comments

[Stephanie_B]

Yes, it's true. One of the more remarkable revelations in Milton and Rose Friedman's new autobiography, Two Lucky People, is Milton Friedman's flirtation with Keynesian economics in the early 1940s. During his stint with the Treasury Department, Friedman was asked to give testimony on ways to fight inflation during World War II. His reply, couched in Keynesian ideology, mentioned several options: cutting government spending, raising taxes, and imposing price controls. Amazingly, nowhere did he mention monetary policy or controlling the money supply, the things Friedman is famous for today.

[Stephanie_B]

Yes, it's true. One of the more remarkable revelations in Milton and Rose Friedman's new autobiography, Two Lucky People, is Milton Friedman's flirtation with Keynesian economics in the early 1940s. During his stint with the Treasury Department, Friedman was asked to give testimony on ways to fight inflation during World War II. His reply, couched in Keynesian ideology, mentioned several options: cutting government spending, raising taxes, and imposing price controls. Amazingly, nowhere did he mention monetary policy or controlling the money supply, the things Friedman is famous for today.

[Stephanie_B]

Yes, it's true. One of the more remarkable revelations in Milton and Rose Friedman's new autobiography, Two Lucky People, is Milton Friedman's flirtation with Keynesian economics in the early 1940s. During his stint with the Treasury Department, Friedman was asked to give testimony on ways to fight inflation during World War II. His reply, couched in Keynesian ideology, mentioned several options: cutting government spending, raising taxes, and imposing price controls. Amazingly, nowhere did he mention monetary policy or controlling the money supply, the things Friedman is famous for today.

[Stephanie_B]

Yes, it's true. One of the more remarkable revelations in Milton and Rose Friedman's new autobiography, Two Lucky People, is Milton Friedman's flirtation with Keynesian economics in the early 1940s. During his stint with the Treasury Department, Friedman was asked to give testimony on ways to fight inflation during World War II. His reply, couched in Keynesian ideology, mentioned several options: cutting government spending, raising taxes, and imposing price controls. Amazingly, nowhere did he mention monetary policy or controlling the money supply, the things Friedman is famous for today.

[John Tamny]

For MY sins, someone sent me DR. DeLong's comments. And for past sins, I'm showing my weakness and will actually reply.

To begin, DeLong's quote of Bernanke is part of a larger quote in which the latter confirms his output-gap orientation.

Secondly, as DeLong hopefully knows but omitted despite the "reality" basis of his blog, Bernanke's assertion that inflation is a monetary phenomenon is wildly different from the definition that price-rule advocates would use. In short, a price-rule advocate would say inflation is monetary in nature and he/she would use commodity prices to show why. On the other hand, Bernanke would say excess money creation is inflationary because of the "demand" it creates.

All this said, kudos to Dr. DeLong for helping me in the lonely job of pointing out that Bernanke's reasoning is deeply rooted in output gap theory. It seems no one wants to talk about this despite all of the evidence.

John