Taleb on banks
I’m finishing Tim Congdon’s Money in a free society. Suddenly, it is clear. New Keynesians like Bernanke emphasize bank lending. According to them, to forestall financial turmoil, one should keep a careful eye on lending and various interest rate spreads. Intervene as needed. Then financial turmoil arrives in 2007 and when you have a hammer…
I find myself wondering, although Bernanke is likely an honest broker, if his political rise was not helped by the emphasis of banking in his research. I am going off Congdon’s book here, having only read Bernanke’s work on oil supply shocks, nothing on banking. Think of it as Monte Carlo find-a-technocrat. Lots of bright researchers randomly pick fields to study. Those who build theories which bolster existing interests, rise. Sounds familiar, maybe Buchanan wrote on this…
I reckon that misaligned incentives in our bureaucracies are why it took a decentralized force like The Internet to bring NGDP level targeting to public attention and similarly to expose the deliberate lies and omissions of the nutritional and medical establishment. Both NGDP level targeting and high fat, low toxin eating would benefit the man in the street, but hurt specific interests (risk hiding banks, economists, nutritional ‘scientists’, factory farms and some doctors and politicians). The lies are only slowly being undone, but if they are true, they will win in the end.
Here is everyone’s favorite living Levantine philosopher, Nassim Taleb, to remind us how society was held hostage by the banks in 2008:
Taleb’s proposal would be unneeded under NGDP level targeting. Simply letting the banks fail would be much easier if the stock market held steadyish in a banking crisis, as it should if Market Monetarists are right. Level target NGDP and let the chips fall where they may.
