Ben Bernanke Argues for his policy of Quantitive Easing
Original version: http://www.youtube.com/watch?v=h2iTPPpnMXM
Interviewer: Mister Bernankey, you are printing money, aren't you?
Ben: Not really. The amount of money is not as important as the amount times the speed
with which people spend it.
Interv: You mean the velocity of money.
Ben: Exactly. If people are spending freely and running up the balance on their charge cards,
like they did before the recent crash, then this creates more money velocity and we have to
remove money from the system so that we don't have inflation.
Interv: You mean that the FED worries about inflation?
Ben: Obviously We do. But right now inflation is present in economies which are growing
rapidly like China, India and Brazil.
Interv: So, what are you going to do about the inflation in China?
Ben: Chinese inflation has to be addressed by the Chinese bankers and we should not try to
fight inflation because we do not have inflation in the U. S.
Interv: Wait a minute. Oil is up close to 90 dollars per barrel. Gasoline prices are creeping
up in America. Isn't that inflation here in the US?
Ben: Not really because oil is going up due to its usage in China. Usage in the US is actually
down. Our economy isn't overheating, but perhaps China's is.
Interv: So, why are you so certain that you can stimulate the economy now and prevent
inflation in the future.
Ben: What we do is different than previous attempts to stabilize the economy. In earlier times,
we used our educated instinct to tell us what to do with the discount interest rate. It turns out
that economics is not intuitive at all.
Interv: So, don't you still listen to economists?
Ben: Yes, but modern economists use computer modeling to predict what the effect of a
certain policy will be.
Interv: You mean that the decisions are now made by supercomputers rather than by aged
grey haired men in wooden-paneled offices.
Ben: Well, yes. We now use computer modeling which often suggests policies that are very
counter intuitive to human emotions. What we didn't anticipate is that we would have a new
problem.
And, what is that?
Well, the unintended consequences are that we have to convince people who are used to
doing things the old way.
The old way?
Yes, people are still used to doing things according to the old rules.
And so?
So now we have to spend time convincing Congress and the public that we now know what we
are doing...or at least, that the supercomputing robots know.
So, what do your robots tell you now?
Ben: They tell us that the Quantative Easing and reinvestment have created or maintained 3
million more jobs than we would have now if we had not engaged in these quantative easing
programs.
Interv: What is the effect of the latest 600 billion dollars of Q E 2?
Ben: The robots tell us that Q E 2 will create or maintain 700,000 jobs in the US.
Interv: I have bet all of my money on the price of gold going up. Will this end up being a
mistake?
Ben: Our computer models predict that after it becomes obvious that the predicted inflation
will not be occurring, the price of gold will crash to prices below 700 dollars.
Interv: If you are correct, I will end up losing a lot of money.
Ben: Let us say that when the dust settles, there will have been a total of 3 percent inflation
each year between 2001 and 2016.
Interv: Okay, what is 3 percent compounded for 15 years?
Ben: That would be less than 56 percent total.
Interv: Isn't that a lot?
Ben: Well if gold was priced at $300 back then and undergoes even 100 percent inflation, the
price would only be $600 per ounce.
You mean that the current price of more than 1000 dollars will not prevail in five years?
Our computer models predict that after it becomes obvious that the popularly predicted
inflation doesn't occur, that the price of gold should fall to prices below 700 dollars. If you add
in an unpredictable overseas demand for gold, it may remain a few hundred dollars higher.
Well, thank you for the interview, Dr. Bernankey, I must go and warn my friends.
.
Next
Original version: http://www.youtube.com/watch?v=h2iTPPpnMXM
Interviewer: Mister Bernankey, you are printing money, aren't you?
Ben: Not really. The amount of money is not as important as the amount times the speed
with which people spend it.
Interv: You mean the velocity of money.
Ben: Exactly. If people are spending freely and running up the balance on their charge cards,
like they did before the recent crash, then this creates more money velocity and we have to
remove money from the system so that we don't have inflation.
Interv: You mean that the FED worries about inflation?
Ben: Obviously We do. But right now inflation is present in economies which are growing
rapidly like China, India and Brazil.
Interv: So, what are you going to do about the inflation in China?
Ben: Chinese inflation has to be addressed by the Chinese bankers and we should not try to
fight inflation because we do not have inflation in the U. S.
Interv: Wait a minute. Oil is up close to 90 dollars per barrel. Gasoline prices are creeping
up in America. Isn't that inflation here in the US?
Ben: Not really because oil is going up due to its usage in China. Usage in the US is actually
down. Our economy isn't overheating, but perhaps China's is.
Interv: So, why are you so certain that you can stimulate the economy now and prevent
inflation in the future.
Ben: What we do is different than previous attempts to stabilize the economy. In earlier times,
we used our educated instinct to tell us what to do with the discount interest rate. It turns out
that economics is not intuitive at all.
Interv: So, don't you still listen to economists?
Ben: Yes, but modern economists use computer modeling to predict what the effect of a
certain policy will be.
Interv: You mean that the decisions are now made by supercomputers rather than by aged
grey haired men in wooden-paneled offices.
Ben: Well, yes. We now use computer modeling which often suggests policies that are very
counter intuitive to human emotions. What we didn't anticipate is that we would have a new
problem.
And, what is that?
Well, the unintended consequences are that we have to convince people who are used to
doing things the old way.
The old way?
Yes, people are still used to doing things according to the old rules.
And so?
So now we have to spend time convincing Congress and the public that we now know what we
are doing...or at least, that the supercomputing robots know.
So, what do your robots tell you now?
Ben: They tell us that the Quantative Easing and reinvestment have created or maintained 3
million more jobs than we would have now if we had not engaged in these quantative easing
programs.
Interv: What is the effect of the latest 600 billion dollars of Q E 2?
Ben: The robots tell us that Q E 2 will create or maintain 700,000 jobs in the US.
Interv: I have bet all of my money on the price of gold going up. Will this end up being a
mistake?
Ben: Our computer models predict that after it becomes obvious that the predicted inflation
will not be occurring, the price of gold will crash to prices below 700 dollars.
Interv: If you are correct, I will end up losing a lot of money.
Ben: Let us say that when the dust settles, there will have been a total of 3 percent inflation
each year between 2001 and 2016.
Interv: Okay, what is 3 percent compounded for 15 years?
Ben: That would be less than 56 percent total.
Interv: Isn't that a lot?
Ben: Well if gold was priced at $300 back then and undergoes even 100 percent inflation, the
price would only be $600 per ounce.
You mean that the current price of more than 1000 dollars will not prevail in five years?
Our computer models predict that after it becomes obvious that the popularly predicted
inflation doesn't occur, that the price of gold should fall to prices below 700 dollars. If you add
in an unpredictable overseas demand for gold, it may remain a few hundred dollars higher.
Well, thank you for the interview, Dr. Bernankey, I must go and warn my friends.
.
Next
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