Two boys were camping one night and their campfire needed more wood. Since Mike started the fire, Ben thought it would be a gesture of goodwill if he took on the chore of resupplying the fire with more wood. He gathered some wood he found around the wood line and went to place the wood in the fire. “Hey Ben, I know you’re trying to help man but that’s wet wood!” Exclaimed Mike.
“Ya, I know,” Ben replied, “so what?”
“Why don’t you get the dry wood I already have by the tent?” Mike enquired.
“Wet wood is better.” Ben explained.
“Are you serious right now?” Mike replied in disbelief.
“Ya, everyone knows water’s made up of two very flammable elements; hydrogen and oxygen.” Ben lectured condescendingly.
“Ya, but water puts out fire, it doesn’t help.” Mike countered.
“I’ll prove it to you.” Ben declared.
He placed the wood on the fire. The small remaining flame went out, but it might have gone out anyway because of the sudden drop of wood. Mike didn’t say anything. The flame gone, he took out his phone to find something to do. The glowing coals started to warm the wood and steam slowly mixed with the wood. Five minutes went by when Ben, thought out loud, “You know, I probably didn’t put enough wet wood on the fire.” He gathered more wet wood from the tree line and placed ito on top.
“It’s not going to work Ben, you need dry wood. If you had put dry wood on it, we’d have a recovered fire by now.
“It’s going to work, just give it some time. Besides, it would have been worse if I hadn’t put the wet wood on there.” Ben explained.
“Ben, I started the fire with dry wood and some paper. I know what works” Mike reasoned.
“How you start a fire and how you keep it going are two totally different things.” Ben replied. I probably need more wet wood.” He continued; determined to prove Mike wrong.
“You’ve already put two piles of wood on the fire, if that didn’t work so far, it’s not going to work this time.” Mike interjected, annoyed that he even had to argue about what was so obvious.
Ben gathered wet wood again from the tree line and added it to the fire. “You just watch, this thing is going to take off.” Ben assured Mike.
Mike shook his head and stared back at his phone. It didn’t matter, the night would soon be over and they would be going to their tents to sleep anyway. The coals continued to burn slowly underneath the wet sticks eventually evaporating the water. After some thirty or forty minutes, the sticks began to burn.
“See!” Mike exclaimed, “look at that fire! It finally paid off. I told you it would work.” He proclaimed.
“Ya, the water is all gone, that’s why.” Mike muttered as he thumb typed a response to someone with his phone.
This story illustrates the flawed logic that was used to explain the weak (and some would say non-existent) results of monetary policy from 2008-2016. Unfortunately, I don’t see enough evidence that it has worked. Their promises and projections have been way off. Like Ben in our story, their first response was, “It wasn’t enough, we need more (stimulus).” So they did a round two, then round three, creating trillions of new dollars to buy bonds, hoping it would help recover everything. Then they said, “Well, it would have been worse if we hadn’t done the stimulus.” I don’t think one gets to fail at a prediction (or two or three) on what actually happens then gets to turn around and predict what would have happen in a non-existing timeline of events. Now, they just declare that it worked. How do they know it wouldn’t have taken six years to recover without interventionist policies?
We may never know because the unfortunate reality is that politicians don’t get credit for actions they didn’t take. Even if inaction was the best course. Therefore, their impulse is to “take action.” What they really want is to take credit. Credit that will benefit them politically. Politicians from both sides fall prey to this impulse.