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Abstract

YELLEN ON DECK By reelecting President Barack Obama, the American people have very likely secured the reappointment of Federal Reserve Chairman Ben S. Bernanke. Or, if not Bernanke himself, then an intellectual doppelgänger. The Ph.D. standard won in a walk two Tuesdays ago, though it wasn't even on the ballot. This back-door affirmation of professorial monetary management will eventually go down as the election's most important outcome. We say "eventually." Come the next collapsed asset bubble or the next roaring inflation, many will recall that they actually never did understand what the various distinguished former Ivy League economics department heads were talking about. Then, again, as will come to light, neither did the supposed experts. Either the lessons of monetary history are moot or our mandarins are wrong. We write, in the first place, to support the latter hypothesis, and, second, to speculate anew on the consequences of QE, ZIRP, Operation Twist and modern central bank "communications" policy. Looking back at today's ultra-low Interest rates, investors will think of the fable of the boiled frog and belatedly realize that they were the duped amphibians. IMAGE1 The "lessons of monetary history" is an admittedly vague and contentious term. But it's easy enough to show that paper currencies tend to lose their value, and that governments that borrow in paper currencies tend to overborrow. It is writ. Unwritten is the timing of the denouement of the printing of boodles of money, though the sequence of sin and suffering makes a comeuppance of ...

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