How to Really Wreck the Economy

Robert Barro

Dr. Robert J. Barro's prescription for "How to Really Save the Economy" would save it for only 20% of the people, if that many. His standard for a good idea is: if it benefits persons with annual incomes exceeding 2 million dollars, then it's a good idea.


Where Dr. Barro's prescription breaks down is in the definition of what is an economy. If an economy is the thing that produces GDP, and if a growing GDP is a saved economy, then Dr. Barro's prescription may well grow the economy by increasing the incomes of the very wealthy. If the incomes of the wealthy increase fast enough, then the people with incomes less than $2 million can have their incomes stagnate or even decline a bit, because the GDP will still grow, and by this definition the economy will have been saved.


But if the definition of an economy is the engine of production and distribution by which all persons obtain the goods and services they need, then Dr. Barro's prescription is for "How to Really Wreck the Economy", because the poorer 80% of the people would not benefit from his prescription, and many of them would be worse off.


Dr. Barro is wrong or partially wrong on all six counts:

What Did Ben Bernanke Say? - Part Deux

Dr. Ben S. Bernanke (Image: FRS/Wikipedia)

Dr. Ben S. Bernanke, appointed byPresident George W. Bush to the Chair of the Federal Reserve System, spoke in Jackson Hole, Wyoming on Friday, August 26, 2011.

Dr. Bernanke studied the Great Depression extensively (Essays on the Great Depression). Among other insights, he found that the countries recovering most rapidly (Britain, Germany) were those that unlinked their currencies from the gold standard. Those that adhered to the gold standard (France, United States) didn't recover until they unlinked. Today, economists generally acknowledge that economist John Maynard Keynes got it right in urging soft money(abandoning the gold standard) and deficit spending by governments, thereby sustaining the population until economic vigor can return. Today, the world-wide hard money standard is the US dollar. Unlinking from hard money is equivalent to expanding the money supply, that is, QE, "quantitative easing", the current

What Did Ben Bernanke Say?

Dr. Ben S. Bernanke (Image: FRS/Wikipedia)

Dr. Ben S. Bernanke, appointed by President George W. Bush to the Chair of the Federal Reserve System, spoke in Jackson Hole, Wyoming on Friday, August 26, 2011.

When I suggested to a friend that she read the speech, she read a bit of it and said "English, please. What did he say?"

(For a highly condensed summary of the speech, see Part Deux.)

Her comment inspired this glossary of economic and financial terms Dr. Bernanke used in his speech. Almost without exception, these terms are loosely defined in this glossary, as used by Dr. Bernanke, and in general use.