Those who know me know that I’m not particularly inclined to universally agree or disagree with any political party. Those who know me also know that I get really annoyed when people brashly make factual statements that aren’t even close to being true. Therefore, political debates are always, uh, fun for me. The latest GOP debate was no exception, especially where the Federal Reserve, Ben Bernanke and inflation were concerned. A few choice quotes:
- Newt Gingrich: “I would fire him tomorrow. I think he’s been the most inflationary, dangerous, and power-centered chairman of the Fed in history.” Gingrich even went so far as to blame Bernanke for the current price of gasoline.
- Mitt Romney: “I think Ben Bernanke has overinflated the amount of currency that he’s created.” He then goes on to say that he would take a different approach than Ben Bernanke has taken, which makes sense if for no other reason than Mitt is running for President, not Fed chair.
(I have to admit that this was the point where the audience cheered for Perry executing prisoners, and I may have immediately turned off the TV in disgust. Please let me know if there were more inflation-related comments.) Something about these comments didn’t seem quite right, so, armed with only a list of Federal Reserve Chairmen and an inflation calculator, I got to work. Here’s what I found regarding Federal Reserve Chairmen and inflation:
- Charles S. Hamlin (August 10, 1914 – August 10, 1916) – 6.86% = 3.37% annually
- William P. G. Harding (August 10, 1916 – August 9, 1922) – 52.29% = 7.26% annually
- Daniel R. Crissinger (May 1, 1923 – September 15, 1927) – 2.37% = 0.54% annually
- Roy A. Young (October 4, 1927 – August 31, 1930) – -5.17% = -1.86% annually
- Eugene I. Meyer (September 16, 1930 – May 10, 1933) – -24.10% = -9.82% annually
- Eugene R. Black (May 19, 1933 – August 15, 1934) – 6.35% = 5.05% annually
- Marriner S. Eccles (November 15, 1934 – February 3, 1948) – 74.07% = 4.27% annually
- Thomas B. McCabe (April 15, 1948 – April 2, 1951) – 8.40% = 2.73% annually
- William McChesney Martin, Jr. (April 2, 1951 – February 1, 1970) – 47.29% = 2.08% annually
- Arthur F. Burns (February 1, 1970 – January 31, 1978) – 64.47% = 6.49% annually
- G. William Miller (March 8, 1978 – August 6, 1979) – 16.40% = 11.32% annually
- Paul A. Volcker (August 6, 1979 – August 11, 1987) – 55.01% = 5.63% annually
- Alan Greenspan (August 11, 1987 – January 31, 2006) – 73.34% = 3.03% annually
- Ben S. Bernanke (February 1, 2006 – ) – 13.70% (through July 2011) = 2.40% annually
(In fairness, I may have also had some help from Microsoft Excel.) Can I paint you a picture here? Actually, I can:
Or perhaps you’d like it ordered…
The point is that, however you look at it, statements made by at least two of the candidates at the GOP presidential debate were gross misrepresentations of the actual truth. (Don’t worry, I have no doubt that Democrats do the same thing.) In fact, there have even been concerns about deflation at several points during Bernanke’s tenure. (Price instability in both directions is considered undesirable, but for different reasons.) Romney at least made his statement seem less about literal inflation and more about money supply (and technically turned his statement into a value judgment), but he’s still misleading. My calculations on historical money supply numbers indicate that Arthur Burns, not Bernanke, was the most expansionary Fed chair in recent history*, and Bernanke is actually kind of middle of the road in terms of overall monetary expansion.
Update: Due to popular demand, I’ve refined my money supply calculations and made a graph for you:
(You can thank the free wireless in JFK Terminal 5 for the somewhat timely update.) M1 and M2 are just two different measures of the money supply, with M2 using a broader definition of money than M1. Even with this limited dataset, I can’t find a reasonable expansionary horse race that Bernanke can win. I suppose I could have used absolute dollars created rather than a percentage increase, but that makes about as much sense as Rick Perry bragging that he created more jobs in Texas than Romney did in Massachusetts.
This isn’t fair to people who are actually hoping to learn something from watching these debates, and I really don’t feel comfortable voting for anyone who, knowingly or not, is so obviously comfortable doling out misinformation.
Economists make it a point to distinguish between positive and normative analysis (i.e. fact versus opinion) for a reason, namely that, as Daniel Patrick Moynihan put it, “Everyone is entitled to his own opinion, but not his own facts.”
* I am realizing that I would be much better at fantasy economists than I am at fantasy football.