Most of the loudest critics of the Federal Reserve are aghast at Ben Bernanke’s recent interview, in which he stated that:
We’re not printing money.
The amount of currency in circulation is not changing.
The money supply is not changing in any significant way.
– Ben Bernanke, 60 Minutes Interview, December 2010
What on earth, people wonder, does he mean by that? How could he say such an obviously crazy thing?
I mean, he is spending NEW money buying up bonds and notes…everyone but Bernanke is calling this QE2 (Quantitative Easing)…and the whole point of this is to add money to the economy.
How can he say the money supply is not changing?
But he isn’t simply crazy…he means something specific, and sane (if misguided).
He means this:
Quantity Times Velocity
The real money supply is not simply the number of dollars in existence. As Nobel-laureate economist Friedrich Hayek pointed out, real money supply is really a multiplication of the amount of money, times how much the money is moving around.
(S)upply equals (Q)uantity times (V)elocity.
And right now, money velocity is as low as it’s been since the Great Depression…not surprising, since this is the first depression the US has suffered, since.
That means it’s moving very little. In fact, it’s mostly sitting around in banks, doing nothing. It is, as Bernanke implied, effectively out of circulation.
That money is as absent from the economy as if it did not exist. This is the Fed’s fault, because they started paying interest on reserves held idle right at the beginning of this depression, but that’s a separate article.
So even though we now have more Quantity than ever, it’s multiplied by an abnormally low Velocity, to the real supply is lacking.
Right now, Austrians like Hayek and socialists like Keynes would agree that our real money supply is actually at a traumatic low, because much of the quantity is sitting around, unavailable.
Let’s hear Hayek agree with Keynes, himself:
On the first issue — whether to use one’s money or whether to hoard it — there is no important difference between us. It is agreed that hording money, whether in cash or in idle balances, is deflationary in its effects. No one thinks that deflation is in itself desirable.
— Hayek in an open letter to Keynes, 1932, regarding how to respond to the Great Depression
Money, money, everywhere, but not a cent to spend.
Like the ocean in my favorite poet’s most famous poem, the money sitting around in banks is, ironically, unavailable for the real money supply.
Bernanke is trying to fix this, by temporarily buying up bonds and treasury notes, therefore bypassing the banks’ massive reserves, putting money directly in the economy.
For the moment, he is correct, that this isn’t boosting the real money supply, because so much of the money is lying salted in (virtual) bank vaults, useless.
Now his critics, those who know enough monetary theory to understand about velocity the way you now do, say this doesn’t matter, because eventually the velocity will recover, and then we’ll have normal velocity times much more quantity. And that would mean inflation…there’s no way around that.
Bernanke would point out, correctly, that this is not correct, either…
See, the Fed doesn’t consider the money it is printing real. It is ephemeral, temporary money, like a Virtual Particle in physics…popped into existence for a bit, then gone.
And this is true:
When the Fed lends money to a bank overnight, the bank is required to pay it back the next day, plus interest. The same for its more recent, unhealthy bout of lending for thirty or ninety days…after that time, the bank pays the money back, with interest.
And when that money is paid back, it literally “vanishes”, into the “thin air” out of which it was created.
For now, the banks keep re-borrowing money, keeping the extra Quantity in a cycle…but when the Fed decides things are getting better, it can start making that borrowing less desirable, so banks re-borrow less, causing the Quantity of money to decline.
When it engages in Quantitative Easing (Bernanke hates that term, and calls it Credit Easing…bureaucrats love euphemisms), the same thing happens;
The Fed buys notes, adding money to the economy…but later it can SELL those notes, and destroy the money paid for them. It will probably sell them at a higher price than it bought, allowing it to actually destroy MORE money than it created, if it chooses.
So it could, in theory, keep the real money supply at a constant, stable level, allowing prices to be natural.
So Bernanke is Right, Everything Is OK?
The first problem is that Bernanke, and his peers, don’t understand some economic basics:
We’ve been very, very clear that we will not allow inflation to rise above two percent or less…We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.
Now THAT is the part that makes me gasp in horror…he thinks he can stop inflation in fifteen minutes? Doesn’t he know the fishtail effect?
Bernanke’s predecessor, Alan Greenspan, and the Nobel Laureate Chicago school economist Milton Friedman, both understood that when the Fed meddles with the economy, its effects take up to EIGHTEEN MONTHS to show up.
So the day that Bernanke decides “Oh, we’ve hit two percent inflation”, he will raise rates…and then inflation will KEEP GOING UP for at least the next eighteen months.
Eighteen months is a LONG time, in economic terms.
It’s long enough that the Fed will become frantic, as its efforts fail to show any results…they’ll keep raising rates, selling notes and bonds, destroying money, until the economy finally seems to be turning around…weakening.
Then they will have overshot the actual mark by around 18 months. For the next 18 months the economy will KEEP getting worse, KEEP getting slower, until it enters into a recession. Because of the amount of money the Fed bubbled in during this depression, and has to suck out, it will probably be the worst recession since the Stagflation of the late seventies and resulting recessions, which were the worst in history.
It’s like when you are on an icy road, and you try to turn…the car doesn’t respond, so you turn the wheel more, and more…by the time the car responds, you’ve turned too much. You straighten the wheel happily, but the car KEEPS turning past where you wanted. So you turn in the other direction…but it keeps turning the original direction. By the time it responds, you turned too much the other way…et cetera.
This is the source of the modern “business cycle” of recessions, that have happened since the US left the Gold Standard in the 1930s. The Fed, and the rest of government, are constantly meddling with the economy, and then discovering the damage they did when it shows up years later, then reacting to that with even more damaging behavior, back and forth in an endless cycle of unintended consequences.
Now this has, up to now, been better than the “business cycle” of depressions and panics the US suffered from 1873-1933, when the US was on a fiat gold standard. But now we’re suffering a depression, despite being off the gold standard, so that’s all out the window.
What we need, of course, is for the Federal Reserve’s monopoly dollar to be replaced by a free market in money, as Friedrich Hayek proposed.
But, failing that, we need the Fed to at least go back to mostly staying out of the economy, as Alan Greenspan tried to do, instead of constantly expanding its meddling, as Bernanke has done, helping lock us into this cycle of economic devastation.
We are slowly coming to face the fact that many trendy “green” things actually harm the environment, instead of helping it.
Unfortunately, some of us are not learning their lesson, and new “green” activities are being pushed that are just as lacking in forethought, just as harmful to the planet.
One perfect example of this is the new composting fetish:
It is actually better for the environment to throw away garbage, than to compost it, if you’re worried about greenhouse gases, instead of just wanting good, free fertilizer.
Composting Releases Greenhouse Gas
Carbon dioxide, methane, and nitrous oxide are the second through fourth most significant greenhouse gases, after water vapor.
The materials in a compost heap contain nitrogen and carbon, locked away from the atmosphere.
The act of composing specifically converts nitrogen into nitrous oxide, and carbon into prodigous amounts of methane and carbon dioxide. No actual environmental scientist will deny this. It’s just a fact of chemistry…the two links above are pro-composting, environmentalist organizations, yet they confirm this.
Just to be clear on this:
- Water vapor is the main source of the natural greenhouse effect, causing about 50% of all heat retention, depending on local humidity. All scientists agree that nothing humans can do changes the overall amount of water vapor in our atmosphere.
- Carbon Dioxide, CO2, is the next greatest source, producing about 20% of warming.
- Methane, CH4, is 30 times more powerful, but there’s less in the atmosphere, so it contributes about 6%.
- Nitrous Oxide, N2O, is THREE HUNDRED TIMES more powerful, but even rarer, producing about 2% of natural warming. The biggest impact we could have, if any, would be to produce more of this more powerful, less common gas.
To be clear, composting produces extremely high amounts of nitrous oxide, as well as large amounts of methane, and even under the best conditions, more CO2 than almost anything else, in your entire household.
Landfills Reduce Greenhouse Gases
On the other hand, if you were to throw those compostables away, they would probably end up in a land fill. Recently, environmental scientists have bothered to actually check, and have realized that, in fact, materials in landfills do not rot the way they normally would, because of the way they’re compacted together. The International Encyclopaedia of Environmental Laws, pointing out that paper and corn don’t rot in landfills, asks why one should even bother substituting paper for plastic, or “biodegradable” corn bags.
Again, those are environmentalists saying these things.
Environmental scientist and Green advocate Bill Rothje says that you can find readable newspaper that has been in landfills for at least 30 years. That means the carbon in newspaper (which comprises 19% of all landfill space) can be retained in the landfill for decades…or released into the atmosphere by composting.
So, according to Environmental scientists, trash in landfills is removed from the carbon/nitrogen cycle, staying out of the atmosphere. A landfill is, in fact, a tremendous REDUCTION in our “carbon footprint”.
In fact, next time you’re thinking about “recycling” paper, remember that this requires more energy, fossil fuel, and chemicals than making new paper…and that if you just throw the paper away, you’re removing its carbon from the atmosphere for the long-term.
It Gets Worse
Some governments are using taxpayer dollars to force the production of “worm composting”. Yet nitrous oxide is an inevitable by-product of worm composting. Remember, this is about 300 times more powerful a greenhouse gas than CO2.
Meanwhile, not only do landfills produce mainly methane, not Nitrous Oxide, but nearly half of the methane they produce can be captures for use as green energy. Methane engines simply produce water vapor as a waste product.
Jim Frederickson, senior research fellow at Britain’s Open University, says “”We need to investigate all alternative systems for greenhouse potential.
“The emissions that come from these worms can actually be 290 times more potent than carbon dioxide and 20 times more potent than methane. In all environmental systems you get good points and bad points.”
The whole “composting” craze, from expensive plastic countertop bins to government-mandated worm farms, is just another example of people not caring what is ACTUALLY good for the environment, but pushing any ill-thought-out plan down our throats.
Well, it’s unofficially official:
2009 was, according to the National Oceanic and Atmospheric Administration, the coldest year in a decade, and they expect 2010 to be worse, perhaps the coldest since 1996.
Oh, don’t worry, you won’t find this news posted on the main page of their website, or in any press releases. They quietly stopped posting charts of annual temperatures in 2006, when the cooling started. But you can find the numbers buried on their site, for example here, and my contacts at NOAA and NASA (I once was a consultant for both) affirm that they have the 2009 numbers, but that the mandate is to sit on them as long as possible, and find ways to present them that will do the least damage to the global warming cause.
Because their budgets depend on scaring people with the global warming myth, various government organizations and bureaucrats have desperately been spinning this cooling trend, even as they avoid directly mentioning it. Around 2006, there started a growing trend to refer to it as “climate change”, not global WARMING, because they wanted to re-brand it before the cooling became well-known.
Now, as the global cooling trend has continued for five years, you can actually find global warming profiteers saying as crazily anti-scientific things as “global warming will probably take a break for a while”, as if it were a tired old man, not a weather phenomenon.
The Climate Bogeyman
Now we’re all familiar with witch-hunt logic:
We throw the unpopular woman in the lake:
- If she drowns, she was innocent.
- If she floats and survives, she’s a witch and we burn her at the stake.
This kind of evil trick has been used by people seeking power through fear, for as long as recorded history.
It is one thing that Principles of Justice, and the Scientific Method, are supposed to counteract.
Sadly, this appears to be the same logic that the global warming profiteers use.
If the weather is warm, it’s proof of global warming, if it’s cold, it’s proof the weather has been disrupted by global warming.
The scientific method does not stop them, even though they are “climate scientists”, because they do not use it. They have long-ago abandoned the rules of hard science.
When we had an abnormally large number of hurricanes back around the time of Katrina, this was a result of global warming, and we could only expect things to get worse.
When the next few years were abnormally quiet, including one of the mildest hurricane seasons in history, it meant nothing.
When it’s really hot somewhere locally, they say it’s evidence of global warming.
When it’s really cold, it not only means nothing, “that’s weather, not climate”, but maybe it’s because global warming is disrupting the weather, so it proves global warming.
A few glaciers are shrinking faster than normal…global warming.
Some other glaciers are growing larger than in recorded history: Not worth mentioning.
The north polar ice cap had a significant melt: Warming.
The Antarctic ice sheet grew larger than in recorded history: Silence.
The Fall of Global Warming
As the actual global cooling trend creates an environment that dooms the global warming profiteers’ gravy train, it is accompanied by snowballing evidence of the fraud and money-motivation of those who perpetrated this scam in the first place.
- Climategate, for example, was just the first in a series of revelations of actual attempts to cover up global cooling, and create an illusion of global warming, going back to 1996.
- The Climate Change Timeline documents the pattern of claims that the earth was suffering runaway cooling, warming, cooling, then warming, every time the temperature naturally rose or fell in a perfectly healthy cycle.
- For the third time, key Russian figures supporting global warming officially turn out to have been false, with the truth supporting global cooling.
- A growing number of global warming “scientists” are reversing their positions, admitting to “mistakes” that created a false appearance of global warming…here is the latest.
Why haven’t they given up? There’s no money in that.
Like I was told by a NOAA exec when I was consulting for that organization:
A government agency can’t justify its budget by telling people GOOD news.
I was reading over some discussion of the Climate Change Timeline, and realized that people are failing to notice the most important news it contains:
We are, according to NOAA, currently in our fourth year of global cooling.
This is even more significant than the 114 year cycle of taking each minor change in temperature and projecting ice ages or global warming four different times.
NOAA and NASA avoid actually saying this, because they have a lot invested in profiting from global warming…but their own data say the earth is cooling, and has been for years. I will show this below, using their own numbers, without any changes made to them. I just don’t cut it off the details in the middle of the decade, like they do. I’m too honest.
Why Stop Reporting Temperature Changes?
You’ve probably seen that scary chart they like to show, where the temperature climbs way to the top. It’s pretty much everywhere on their side.
Here’s NOAA’s copy:
Notice that its dates are very vague, and that it stops in the middle of this decade, with the very last temperature actually declining a bit. You may need to click it to see the large version.
The big problem with the chart, hidden by the vague dating, is that it ends in 2006. I have been unable to find a NOAA chart that actually includes the last two years of data.
This makes no sense, because they have data all the way up to the beginning of 2009, and have for a long time.
All you hear about, these days, is that each new year is “one of the ten warmest on record”. But that is a spin on their data…2006, 2007, and 2008 were each cooler than the year before. Why not mention this cooling trend?
The Coldest Year Since 2000
Here, on the left, is NOAA’s global mean temp for each of the past 10 years. They measure this in ten thousandths of one degree from the 100 year average:
Blue is cooling, red is warming.
Why do those who are profiting from the global warming industry describe 2008 as one of the ten warmest years on record, instead of as the coldest year since 2000?
You can also see this, if you zoom in, on the chart at the right.
By the way, the trendline added in black is calculated from their data as an 11 year moving average, which makes sense to use just in case the sun is actually influencing temperatures on our planet. It is therefore very slow to show a reversal in trend…see how it falls behind the change in every other case. Yet it’s now showing a cooling trend, at the far right.
With the numbers on the left, you can see it is not only growing cooler, each year since 2005, but that it cooled fastest in 2008. If we graphed this trend, 0, -529, -140, -646…the curve says we should be in an actual ice age by 2020 or so. I did that last bit in my head, but if you work it out formally, send me a copy.
The Next Ice Age?
By the way, don’t actually worry about that cooling trend, yet. Real scientists know that static analysis is worse than useless. You can’t just take any four data points and assume they will go on that way forever. If you do that, you end up looking as foolish as “we have 20 years until the end of civilization” crackpots Thomas Maltus and Paul Ehrlich.
On the other hand, EVERY time you have a reversal of three points in the same new direction, on the above chart, it turns out to be a reversal in the overall trend.
For example, 2005-2008 is a mirror image of 1909-1913, where the cooling had reached its peak, and the global mean was about to move toward warming.
And, overall, global cooling is worse for humanity and civilization than global warming.
Whether by coincidence or not, many failures of civilizations and economies have appeared to hinge around sudden cooling periods. There is no corresponding evidence of warming bringing down societies.
Regardless of what the actual temperature trend is, if anything, or what actually is causing it, the motivation of people who report every year the global temperature rises, but are silent every year it falls, seems worse than suspect.
These people are no more to be trusted than a tobacco scientist, and for the same reason.
Anyone puzzled by how some Americans don’t take science seriously need look no farther than how few scientists, themselves, take the scientific method seriously.
There is no better example of that credibility gap than the Big Bang Theory.
And this is the worst possible place for the flaw to occur, because the Big Bang has become the poster child for “science is smart, religion is stupid”…yet it’s not actually science.
Even my favorite sitcom, wherein some producer had the crazy nerve to try to create a show around the situation of INTELLIGENT people, The Big Bang Theory, assumes its name (apparently) as an attempt to show intellectual, potential viewers that it’s for them, not the common proles.
But the Big Bang Theory is pseudoscience, at best.
By the rules of hard science, it’s not even a theory. A theory can be tested in a way that would be sure to fail if it were wrong. This, with the Big Bang, is impossible so far. So it doesn’t qualify. It is a hypothesis.
For supposed scientists to refer to it as a theory is akin to Catholic priests and bishops referring to a contemporary televangelist as a Saint. There are strict rules for sainthood, and for scientific theoryhood, and if you just go tossing either word around you discredit the whole genre. Saint Tammy Fae Baker would undermine the concept of Christian sainthood exactly the way the Big Bang Theory undermines the concept of cosmogony as a science.
But it’s worse than that; the Big Bang Hypothesis is not just treated with the unearned dignity of being a “theory”, but even like a fact, despite having failed even the basic test of prediction.
Original big bang-based predictions of the temperature of the universe, its expansion, and the even-ness of background radiation all failed…but, in violation of the principles of science, bureaucrats just turned around and reverse-engineered new predictions that matched the existing observations.
But even if they had not, no theory EVER rises to the level of fact, based solely on its matching of predictions.
To quote Stephen Hawking:
Any physical theory is always provisional, in the sense that it is only a hypothesis; you can never prove it. No matter how many times the results of experiments agree with some theory, you can never be sure that the next time the result will not contradict the theory. On the other hand, you can disprove a theory by finding even a single observation that disagrees with the predictions of the theory.
You don’t have to go as far as Anthropogenic Global Warming, to find scientists treating failed hypotheses as Settled Science, which is denied by not only Stephen Hawking above, but the Fallibilist roots of hard science.
But it gets worse, still, when extreme atheists try to trot out The Big Bang as a solution for the Prime Mover paradox.
See, one of the arguments used by Creationists is that everything in the universe apparently needs to be caused by something else. Things don’t just happen out of nothing, there’s always a “cause and effect”. This means that, if the universe ever had a start at all, HOW it could start seems impossible to explain. There has to have been to be a First Event, that was not caused by anything at all, and that should be impossible.
“Science has solved that with the Big Bang”, the claim is made.
But it’s untrue.
In fact, the Big Bang hypothesis brings focus on the very power of the Prime Mover paradox. It appears to have the whole universe go back to a single point, but then does nothing to explain why it was AT that point in the first place. There is no way to explain why the potential for the vacuum fluctuation that (maybe) produced the Big Bang existed in the first place.
If the Creator of the universe were a timeless Christian god, perhaps that’s what caused the Big Bang. Sadly for science, this makes as much sense as anything the mainstream cosmologists have proposed to start it, so far*.
When people stick to the rules of hard science, they have an absolute right to say “see, this produces sounder results and more verifiable Truth than religion”, when it does. The problem is that modern “scientists” quite often are NOT. They don’t stick by those rules, and therefore earn the disdain that people heap on them.
Oh, and let’s not forget that I’m using the criteria of real science to argue this. Among the people who agree with me are Einstein, a Scientific Realist who opposed the instrumentalist pseudoscience of modern quantum physics, Schroedinger, whose famous cat experiment was intended to mock unscientific physics, and the father of modern hard science, Karl Popper whom Stephen Hawking is paraphrasing in his quote, above.
Next time some horrified Discovery Channel /NPR pundit moans quaveringly that “a majority of Americans don’t even believe in science over religion”, or the downright sneering at global warming claims, remember that this is as much the fault of the supposed scientists breaking their own rules, as anything else.
Superstring hypotheses say the Big Bang is just the collision of “branes” (think membranes) in a much larger, more complex 10+ dimensional universe. But, while this provides the closest thing to a Unified Theory, it’s mostly ignored by the mainstream cosmologists. And, anyway, it does nothing to explain why the whole multiverse exists in the first place.