 On Monday, Chairman Bernanke made a surprise announcement that contrary to everybody's expectations, he would not be scaling back the Fed's super ambitious stimulus program, so-called quantitative easing program, in which the Fed buys about $85 billion of bonds per month. Bernanke announced that the Fed would continue to buy bonds at the same rate. In other words, the stimulus would continue just as strongly as it has been. Everybody expected, based on remarks that Bernanke had made earlier this year, that he would be scaling back the program, the so-called tapering, meaning that the Fed would gradually, incrementally withdraw all of the stimulus from the market. The reason that tapering is so important, of course, is because the economy is so used to this massive infusion of credit from the central bank that cutting it off cold turkey, it is widely believed, would lead to a number of very harmful consequences. The economy has to be gradually weaned off of stimulus by tapering the stimulus a little bit at a time, just like a drug addict might be weaned off of an addictive substance. This is a very interesting development on a number of grounds. Just purely in terms of its effect on the economy and people's beliefs about how stimulus affects the economy, what Bernanke said is that he believes, or he and his staff believe, that the economy is too fragile to be able to withstand any sort of tapering, any scaling back of government stimulus. What does that tell you? That the economy now is so dependent on artificial stimulation from the central bank, on interest rates being artificially low. In other words, the economy is in the early stages of another artificial boom, just like the artificial boom we have been trying to get out of. Any signs of economic growth or economic progress that we've experienced since 2008 are solely the result of government stimulus. In other words, more malinvestment as the Austrians would say, more channeling resources into politically favored but economically inefficient uses. The economy is so dependent on stimulus and Bernanke's estimation that withdrawing it even just a little bit would send the economy into a tailspin. To understand this, we have to realize that from an Austrian point of view, the reason that the economy is in such a fragile state in the first place is because we're suffering from the effects of the previous artificial boom, the one created by Greenspan and Bernanke in the 90s and 2000s that led to the tech bubble and then led to the housing bubble and the financial crisis that started in 2008-2009. The only reason we're in such bad shape now is because the Fed tried to stimulate the economy into economic growth in the past. What happened in the financial crisis is that the malinvestments were revealed, as the Austrians would say. House prices were too high. Too much investment had gone into housing and real estate, construction related industries. The only way out of the problem from an Austrian point of view is to allow the bad investments to be unwound. In other words, that the government should have stopped stimulating. The government should not have bailed out banks and financial institutions. The government should not have tried to prevent foreclosures and other means of reallocating resources from lower valued to higher valued uses. In other words, the government should have stopped trying to prop up the economy in the first place and allow entrepreneurs and other market participants to make the decisions to take the actions that are necessary to get the economy back on track. Instead, the Federal Reserve along with the Treasury and the President and Congress did exactly the opposite, taking every possible measure to prevent any kind of readjustments, to keep the bad investments going, to keep the party going, in other words, rather than allow any correction, any reallocation of resources. So here we are again, limping along with the early stages of a new boom, a new bubble created by this massive monetary and fiscal stimulus, which the Fed wants to keep going. You know, a couple of things that are interesting about this. I mean, what a crazy world we live in where so much of the performance of the economy depends not only on one guy, Ben Bernanke, and his team of experts, but on the interplay between what Bernanke says by dropping little indirect hints about what the Fed might do, how investors perceive those hints, how investors react, how analysts react. In other words, the big story yesterday was not so much the Fed deciding that it would not begin the tapering, but would continue to stimulate at the same rate. But the fact that this was contrary to everybody's expectations, that all the pundits, all the experts, all the financial advisors and so forth, everyone believed that Bernanke would begin the tapering because he had hinted earlier that he would do so and he shocked everybody. He surprised everybody by going in a different direction of keeping the stimulus going. I mean, wouldn't it be better if we had an economy in which entrepreneurs, capitalists, and other market participants could make decisions about what to do, what to invest in, what kinds of businesses to start, what kind of businesses to sustain and grow, if consumers and workers can decide what to do, where to go, what to buy, where to work, and so on, based on fundamentals, based on real economic factors, not based on some weird psychology game or rhetoric game between the market and Mr. Bernanke. I mean, to his credit, Bernanke speaks in complete sentences in intelligible English, unlike his predecessor, Mr. Greenspan, who had this incomprehensible mumbling, but it's still the case that so much time and effort, so much energy, so much real wealth is destroyed because everybody's playing this game. What will the Fed do? Will the Fed do what it said it did, said it was going to do? Is it going to try to fool the market? Is Bernanke being clever or pulling some kind of a trick by saying one thing and then doing another? What a tremendous drain on the economy that we live in that kind of a world. In one other comment, everybody's been excited the last several months trying to anticipate who the president will choose as the next Fed chair after Mr. Bernanke retires. Would it be Larry Summers? Well, over the weekend, Summers announced that he was withdrawing his candidacy. Will it be Janet Yellen, who's widely considered the frontrunner now? Wouldn't it be great if we lived in an economy where nobody cared who was the Fed chair, where we didn't have a Fed chair, where the economic system was run by entrepreneurs and other market participants, where the monetary system was independent of political influence, was independent of personality, where nobody cared whether a flamboyant guy like Summers or a reticent and quiet person like Yellen were the Fed chair. That's the kind of economy I wish we had, one in which the government is so small and does so little. And there is no central bank that we wouldn't have to worry about these things. We could talk about the economy and the real things that matter in people's lives.