Sat. 10/04/24 13:45 EDT
.post #70
[url=Spot the error - #13 by Smiling_Dave]
I guess, in this case, Bernanke’s statement is justified, although I think it’s quite clear he was talking about the more common scenario.
Several points, however, regarding transferring money from mattress to bank account:
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The re-entry of the mattress money, prior to being multiplied by the fractional reserve system, is not inflation, since no new money has been created “out of thin air.”
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The increase in MZM, even after accounting for the multiplier effect, only offsets the same DECREASE that occurred when the money originally went IN to the mattress.
Another point:
Notice how Bernanke, through the use of a metaphor (“taking money out of risky assets”) commits a “lie of omission”: He focuses on only one side of the transaction, while ignoring the other. This is the error Henry Hazlitt warned about in Economics In One Lesson.
Here’s another, easier one, from page 107:
Ron Paul: But how can you pursue this policy without addressing the subject that somebody’s losing their wealth because of a weaker dollar?
Ben Bernanke: If somebody has their wealth in dollars and they’re going to buy consumer goods in dollars - it’s a typical American - then the decline in the dollar, the only effect it has on their buying powers, it makes imported goods more expensive.
[url=Spot the error - #14 by DanielMuffinburg]
haha! Well, that’s partially my fault. I should have titled the thread “Spot the fallacy.”