Fed as Dr. Benway

Steely Dan got their name from the talking dildo that appeared in Beat writer William Burrough's Naked Lunch. The book also has a character named Dr. Benway.



In a recent post J.W. Mason quoted Dr. Benway in reference to self-induced economic problems.

“Now, boys, you won’t see this operation performed very often and there’s a reason for that…. You see it has absolutely no medical value. No one knows what the purpose of it originally was or if it had a purpose at all. Personally I think it was a pure artistic creation from the beginning. 

“Just as a bull fighter with his skill and knowledge extricates himself from danger he has himself invoked, so in this operation the surgeon deliberately endangers his patient, and then, with incredible speed and celerity, rescues him from death at the last possible split second….

He imagines Larry Summers as in the Benway role:

Interestingly, Dr. Benway was worried about technological obsolescence too. “Soon we’ll be operating by remote control on patients we never see…. We’ll be nothing but button pushers,” etc. The Dr. Benways of finance like to fret about how robots will replace human labor. I wonder how much of that is a way of hiding from the knowledge that what cheap and abundant capital renders obsolete, is the capitalist?

EDIT: I'm really liking the idea of Larry Summers as Dr. Benway. It fits the way all the talk when he was being pushed for Fed chair was about how great he would be in a financial crisis. How would everyone known how smart he was -- how essential -- if he hadn't done so much to create a crisis to solve?

but I think the Federal Reserve Bank would be more accurate. As Frances Coppola tweeted:

Working my way through FOMC minutes from 2004 to 2008. Fascinating. The FOMC members primary concern is always exactly the same.
Their concern is always that core inflation will "fail to moderate" - even when staff projections are that it will fall.
But they are always really upbeat about growth, even when staff projections are that growth will fall. They ignore their own staff.
And they ignore markets, too. Investors were pricing in lower rates due to falling growth expectations from Jan 2007 onwards.
But the FOMC? Nah. Main risk in their view was inflation (even though it was falling). They kept interest rates elevated.

 Investors were rational in 2007, but turned irrational in the face of Obama. As Robert Waldmann writes:

I am assuming that, like inflation expectations, inflation perceptions have delinked from reality recently. I really really should find data on perceived inflation (which is out there somewhere). I also have to come up with a story for why this happened just in time to save us from deflation. 

I give the credit to Fox news. A large fraction of people in the US rely on Fox News (often indirectly as repeated by friends and relatives). They are out of touch with reality — there expectations and perceptions are what Roger Ailes wants them to be. He thinks inflation is bad even though in a depressed economy in the liquidity trap it is good. Therefore Fox News convinces people that inflation has been and will be high. The representative consumer is only partly living in the Fox bubble so perceived and expected inflation are moderate. Then finally actual inflation is low but positive.