By John Tamny of Forbes
A popular opinion held by economists and writers is that “global imbalances” caused the global financial crisis. Ben Bernanke unsurprisingly embraces this fallacy with great vigor, as does Bank of England chairman Mervyn King, along with New York Times columnist David Brooks. But in a “closed” world economy imbalances are a logical impossibility. Instead there are talent and innovation imbalances that drive investment to where individuals are most productive. Henry Hazlitt once remarked that he couldn’t believe even the ignorant bought into the notion of countries attracting too much capital, but in this case lots of smart people think too much investment caused the crisis. As individuals we all know no one can ever succeed too much, but for the macro types like Bernanke, too much success and investment is inflationary despite there existing no evidence supporting such a claim.
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