I've spent five years and more watching the inflationphobes, who weren't particularly sensible to begin with, descend into shrill, unholy madness.
They could have reacted to the failure of their predictions — the continued absence of the runaway inflation that they insisted was just around the corner — by stepping back and reconsidering both their model and their recommendations. But no. At best, there has been a proliferation of new reasons to raise interest rates in a depressed economy, with nary an acknowledgment that previous predictions were dead wrong. At worst, there are the new conspiracy theories — we actually have double-digit inflation, but the Bureau of Labor Statistics is spiriting the evidence away in its black helicopters and burying it in Area 51.
So at this point I thought I'd seen everything. But no: the prospect that Janet Yellen, a monetary dove and the vice chairwoman of the Federal Reserve, might become the next head of the Fed has driven the right into a frenzy of — well, words fail me.
The New York Sun published an editorial in July titled "The Female Dollar," warning about a "gender-backed currency." I kid you not. And The Wall Street Journal thought this was such a great analysis that it quoted the phrase in an editorial, and argued at some length — or, actually, asserted, since if there was a rational argument there I couldn't find it — that the only possible reason people might want Ms. Yellen to succeed Ben Bernanke is that she's not just a monetary dove but also a woman.
And they have a point. After all, what possible nongender case is there for Ms. Yellen? That is, aside from the fact that she's been a highly successful team player at the Fed, has a distinguished record as a research economist on the very issues she would have to deal with as chair, and, according to a recently published assessment, has the best forecasting track record of 14 top Fed policy makers. Whose assessment? Um, The Wall Street Journal's.
I've been saying for a long time that we aren't having a rational argument over economic policy, that the inflationista position is driven by politics and psychology rather than anything the other side would recognize as analysis. But this really proves it beyond a shadow of a doubt; if you really want to understand what's going on here, the Austrian you need to read isn't Friedrich Hayek or Ludwig von Mises, it's Sigmund Freud.
The Fed Fumble
Over at the Financial Times's Alphaville blog, Cardiff Garcia says the right things about the Yellen affair: "Politics really isn't our thing," he wrote in a recent post, "but more believable for now is simply that the White House didn't do its homework, failed to anticipate the backlash, and is now clumsily trying to figure out how to handle it. The politics is unavoidable, of course. But we would just emphasize again that strictly on the merits, you hardly need to make an anti-Summers case to prefer Yellen."
One does have the sense that economic policy discussion in the White House has grown dangerously insular; just about anyone outside, if asked, could have told them what a mess they'd make by floating the idea of choosing Larry Summers, the former Treasury secretary, over Ms. Yellen.
But they seemed blissfully unaware of what was coming.