I have been writing for many years that they really don’t know what they are doing. I only wish it was that simple. There has been developing another layer or dimension to that condition, a second derivative of stupid, whereby when faced with this now well-established fact the same people, experts and authorities all, they have no frame of reference to figure out what next to do. In other words, they really don’t know what to do when they realize they really don’t know what they are doing.
Just over a week ago, former Fed Chairman Ben Bernanke wrote another blog post for economicsblog.com as a “leader” opining on his own previous thoughts about Japan’s pre-crisis QE experiments. He really should stop posting altogether, but like Greenspan it seems pretty obvious that Mr. Bernanke can sense his legacy in jeopardy. And why shouldn’t he be keenly aware? He said one thing, starting with something about subprime and continuing all the way through the fourth QE, the world turned out instead wholly different.
In picking on Japan, he must also be aware that his and the rest of the FOMC’s assessment of the Japanese situation has not aged well. There is an enormous volume of literature from the 2000’s that “diagnosed” what went wrong with the Bank of Japan that instead provided a template for what the FOMC or ECB would do anyway. Thus, at the end of last month he wrote:
Over the years, I’ve done a lot thinking and writing about challenges faced by Japanese monetary policymakers in their attempts to combat deflation. In some of my earlier pieces I argued that, if the Bank of Japan (BOJ) showed more resolve, it could readily overcome these problems. But, in recent years, the Bank has shown great resolve, and while the results have generally been positive, deflation has not been decisively vanquished. In particular, the BOJ has had difficulty meeting its goal of getting inflation sustainably to 2 percent per year.
