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As you know, former Fed Chairman Ben Bernanke just received the Nobel Prize in Economics. My friend suggested that this is the worst Nobel Prize in economics since Paul Krugman.

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I’m not sure I would go that far, but it’s probably because I know Ben and respect him as an excellent civil servant and a very good former Princeton professor. It’s actually not easy being a Republican on the faculty at Princeton.

So it’s not personal, but, but, but, but, I think his stop and go policy, especially in the early 2000s, when he kept interest rates too low for too long, when he created liquidities too high, when he took a strong dollar and made a weak dollar out of it, and when all his flimsy subtleties led to a boom in gold, goods and housing – I think it was a big mistake, and this mistake led to financial ruin, especially the mortgage collapse, from which he had to save us later.

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It’s like a fireman who starts a fire and then wants to take responsibility for putting it out. Not good. All this is too reminiscent of the mistakes of J. Powell almost 2 years ago.


Bernanke was worried about deflation after 9/11, so he initiated a major league money supply crash, when in fact George W. Bush’s tax cuts successfully spurred economic growth after 9/11.

I’m bringing this up because Bush has moved to the supply side. He doesn’t get credit for this, but he should. He lowered the top personal tax rate and eliminated tax rates on capital gains and dividends.

Thus, when everything was taxed less, including investments, we got more, and the Bush boom did not require a serious opening of the money faucets. Everything was fine with us, the proposal worked, the Laffer curve worked, but Ben Bernanke did not look, and because of this, everyone had problems. Sounds familiar?

After the pandemic, the V-shaped recovery in late 2020 and early 2021 was ignored by the Biden socialists and contemporary monetary theorists J. Powell. Remember?

All supported a $2 trillion stimulus package. That is, everyone from the left camp, but we did not need it, big inflation began, and J. Powell opened these money taps wider and wider. Despite the fact that the economy grew at a rate of 6% bequeathed by tax cuts, deregulation and Donald Trump’s energy dominance.

So here we are again. Only this is the reverse salvation. Bernanke had to save America, he thought as he turned on the taps, then turned them off, then turned them back on. J. Powell left the taps open, opened them wider, and now he crunches until tomorrow comes.

I don’t know if this is modern monetary theory or something else, but I do know that in both cases it was bad monetary practice. There is an easier and softer way. Keep the dollar stable against commodities and real commodities, keep the valves at the midpoint and we’ll get price stability. Leave growth incentives to tax, regulatory and restricted spending where they belong.

Monetary leverage for inflation, fiscal leverage for growth. Starting with Ronald Reagan, Jack Kemp, Art Laffer, Steve Forbes and many others, we have been talking about this for over four decades.

Now one more thing about Ben Bernanke. I don’t know why he and others are so determined to save failing institutions. We had a chance during this financial crisis to get rid of some real turkeys, like Fannie and Freddie, who should have been privatized or remembered crazy: Bear Sterns bailed out. Merrill was sold and Lehman went bankrupt. Entire pieces of AIG insurance may have been thrown away or thrown into a landfill, but they were salvaged.

Stanford’s John Taylor has often written that it was the incomprehensible messy bailouts that did as much or more damage to the financial world than opening the money faucets after the crisis hit us. Governments should not choose winners and losers.

However, today it seems incredible to me that Fannie and Freddie are now wholly owned by the US government, i.e. taxpayers. We don’t have to bail out student loans, mortgage lenders, gas prices, drug dealers, banks, car companies, semiconductor companies, electric car manufacturers, wind and solar power plants, and insurance firms.

How about make my day: no new bailouts or make my day: $31 trillion debt gone too far. Don’t you think?

This article is adapted from Larry Kudlow’s introductory commentary to the October 11, 2022 issue of Kudlow magazine.