Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Ben Bernanke's Dark Age Economics

Chairman of the Federal Reserve Ben Bernanke speaks at the Federal Deposit Insurance Corporation headquarters, on February 16, 2012 in Arlington, Virgina.
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One of the more interesting aspects of Federal Reserve Chairman Ben Bernanke's lecture today (Thursday) at George Washington University was the affirmation of the crowding-out thesis.

The crowding-out argument states that bailouts and stimulus plans don't work when backed by deficit spending.

"The added debt absorbs savings that would otherwise go to private investment. In the end, despite the existence of idle resources, bailouts and stimulus plans do not add to current resources in use. They just move resources from one use to another," economist Eugene Fama has argued.

It's a controversial idea. Fama's use of it provoked Paul Krugman to announce that we had entered the "Dark Age of Economics."