Self-Inflicted Helplessness

The political and monetary authorities have behaved wonderfully since the 2008 collapse. They are shown brilliantly the technique called learned helplessness. Or so the story goes.

In truth, the leaders have simply ignored their responsibility and their capability and are abetted by their enablers, the media. Here's a bit by Dean Baker on his Beat the Press blog pointing this out:

The Post Wrongly Tells Readers That Central Banks Can't Do More to Boost Growth

In an article about the IMF reversing its pro-austerity stance, the Post told readers:

"Central banks, which have already reduced interest rates to extremely low levels, have little remaining ability to boost economic activity."

This is not true. Central banks could explicitly target higher rates of inflation. This would lower real interest rates and reduce debt burdens. This policy has been advocated by many prominent economists, including Paul Krugman, Ken Rogoff, the former chief economist of the IMF, and Ben Bernanke when he was still a professor at Princeton.

I'm reading Sylvia Nasar's Grand Pursuit and it really, really sad to realize that this same flailing about and impotence in the face of a crying need for action marked the 1930s as it does today. It simply means that tens of millions suffer because the "leaders" can't lead. Instead the leaders are fearful of "little voices" in their heads whispering about dreaded inflation or the need to appease some hidden actor requiring "confidence". Even in the 1930s there were a number of leading economists, Keynes being the preeminent example, who properly diagnosed the situation and gave political and monetary authorities the needed guidance. But then, as now, these "leaders" simply ignored the advice and played their hand as if the economy were a morality play requiring "excesses" to be punished by many, many years of suffering by the innocent, the unemployed workers with absolutely no responsibility for the crash.