Cato Institute writer Alan Reynolds posted an indispensable piece on the Cato At Liberty blog the other day. Like Alan, I’ve been struck by the bizarre parochialism of the news media. They’ve been covering the worldwide recession as if it were all a manifestation of faulty U.S. banking regulation or something, which is entirely at odds with the empirical data and basic cause-effect logic. Alan make a key point:
Compare the decline in real GDP over the past 4 quarters (from The Economist):
U.S.
-0.2%
France
-1.0
Germany
-1.6
Britain
-1.8
Italy
-2.6
Japan
-4.6
Does it make sense to blame the largest declines in GDP on one country with the smallest decline? If so, then we need some explanation of how some uniquely American ?illness has spread? to so many innocent victims.
No, it doesn’t. The reality is that central banks across the world, including the Federal Reserve, massively inflated the money supply right after 9/11, which created artificially low interest rates and set off a series of unsustainable booms in equities, housing, and commodities. The booms became busts. Prices and expectations are in the process of resetting to reality. Pretty much everything else you see in the mainstream media can be put into two categories: foolishness or propaganda.
