Will Monetarism Please Go Away?

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Ben Cohen
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by Ben Cohen

There should be a simple rule of thumb for economists: If you get your sums spectacularly wrong, you don't get to prescribe the remedy for the mess you caused.

Yet that simple rule does not apply to politics. In fact, the worse your sums, the bigger your role in putting it right. Hence the prevalence of Timothy Geithner, Larry Sumers, Bob Rubin and Ben Bernanke in the effort to fix America's decimated economy.

Monetarism, the belief in markets, limited government and militant opposition to deficits, got us into the mess -- and for unknown reasons, claims to be able to get us out of it. Paul Krugman (an economist who consistently got it right about the economy) warns that this would be a disaster.

I've written at large about this before, but it is worth repeating. Monetarism is only popular because it is useful to private power. It's funny that during the initial stages of the crisis, Monetarists were largely quiet when giant corporations threatened to go under. Most of them professed displeasure at the giant bailout, but no one came out swinging against it. Why? Because without tax payers money (Socialism), the entire corporate structure of America would have fallen apart -- a system enormously beneficial to those professing its wonders.

We know that government spending during a recession is the only way to reverse the trend, yet the voices for cuts grow louder.

The sad truth is that we used Socialism to save the banks, yet we can't use Socialism to save regular people.