Monday, August 23, 2010

An Open Letter to Paul Krugman

Dear Professor Krugman,

In your column today on extending the lower tax rates that now exist on the highest levels of income, you justify your point on two levels:
  1. The government needs more revenue and the state needs to take as much property as possible from private owners;
  2. Wealthy people are unlikely to spend every penny of their income immediately, so it is important for the Political Classes to get their hands on those funds, as governments will spend freely in the short run.
Thus, from what I can tell, you believe that it is the Very Duty of Everyone to spend everything quickly, and since you are advocating such beliefs publicly, I would like to challenge you to practice what you preach. Here are some suggestions:
  • Impose your own tax rates on yourself: If these irresponsible Democrats and Republicans don't jack up the tax rates, i.e. Herbert Hoover in 1932, then raise your own personal rate, taxing yourself at 39.6 percent, and then sending that money to Washington. Your example will inspire others to do the same, I'm sure. If you complain that to do so would require you to hire another accountant, that would be good, since you would be providing a job and we need jobs, you know;
  • Spend all of your current income: I'm not privy to what you make, but I suspect that your Princeton salary does not even pay all of your taxes, given that you probably make well over a million dollars a year and maybe more. Now, if you are to be consistent, then you need to spend everything you get when you get it, the sooner the better. Since you are not willing to do the Right Thing and turn your entire income over to the government, the next best thing you can do is to be on a permanent spending spree, with any "savings" falling into the next category;
  • Eliminate all of your "investments" except for any portfolio of government bonds: Because governments are up-front spenders, you don't have to worry about where your government bond money is going, for it will be spent quickly (perhaps not quickly enough for True Believing Keynesians, but at least more quickly than private individuals might be spending). Moreover, I would recommend that you eliminate ALL investment in stock, corporate bonds, or anything else that would be deemed "private," since government spending not only is economically superior to private spending, but also morally superior. You can feel good about yourself while still having an "investment" portfolio;
  • Don't buy gold, silver, or other commodities: Because of your own personal loathing for gold or any other hedge against inflation (because our immediate "threat" is deflation), you really should not purchase anything that would smack of a "gold standard" or any other representation of money. (This includes any "collectibles" such as gold and silver coins. No cheating, please!) I mean, if you really and truly believe that paper money is morally and economically superior to those "barbarous" relics like gold and silver, then you need to be willing to practice what you are preaching.
I realize that you might be objecting by now. After all, why should you be the fall guy? However, as I read your words, you are claiming that there not only is an economic problem with paying less taxes, saving money, and abstaining from some personal spending in order to save for the future, but also a moral problem, then I would hate for you to be forced to act both unprofessionally AND engage in immoral behavior.

Here is your opportunity to help Save The World! Yes, you can set an example for the rest of us to follow. I mean, if you announce this new Paul Krugman Personal Spending Strategy, what is next? Will Bill Gates sell all of his Microsoft stock and buy government bonds and spend the rest? Who knows?

This hardly is a "modest proposal." All I am doing is recommending that you be consistent with what you are writing, and I know that you are anxious to set that personal example so that everyone else in your income category will be shamed for saving, investing, and refusing to spend every penny today.

32 comments:

Bardhyl N. Salihu said...

If this doesn't discredit Krugman, nothing ever will.

Anonymous said...

Don't worry it won't. The people like Krugman are very well aware of the damage they are doing and they like it. They are extremely intelligent and expert at distorting facts and statistics. Krugman simply views himself and others like him as being above everybody else and entitled to their property from both rich and poor alike.

So history and evidence are of no consequence as propaganda is what they use to convince people of their foolishness.

There is cause to worry. There were 30,000 people in Atlanta who instead of looking for work or better work, or working underground, or trying start a business, instead chose to brave Atlanta summer heat and humidity to wait for government handouts.

Daniel said...

RE: "Thus, from what I can tell, you believe that it is the Very Duty of Everyone to spend everything quickly, and since you are advocating such beliefs publicly, I would like to challenge you to practice what you preach."

As someone who is often not convinced by your posts, I would recommend spending more time on the front-end working through your inferences of what Krugman is saying (like this).

Often your posts consist of:

1. A few Krugman links and quotes.

2. A statement like "from what I can tell Krugman thinks X" (X being something strange and outlandish that Krugman never ACTUALLY says), and then

3. A long series of paragraphs making fun of X.


I don't know if it's just fun for you to do this or if you're actually convinced by it or what, but your blog might benefit from working harder to connect 1. to 2..

As someone that reads Krugman, doesn't always agree with him (I actually disagree with him on this point - on the Bush tax cuts), but does think he regularly has very good insights, I often don't even have the inclination to comment on your posts (although I do read them whenever you link to Mises) because they seem so far afield to what he's actually saying. Better to comment on posts by economists that actually seem to understand what he's saying.

I only say this because I imagine others don't comment here (and thus don't provide some push-back) because they also read you as being disconnected. That's ultimately a shame because I often find criticism to be a major help in sharpening my point of view.

AP Lerner said...

An Open Letter to Prof. Anderson:

You repeatedly claim the government is criminal. You often refer to taxes as theft, yet, as a member of the Frostburg State staff, at least a portion of your paycheck stems from state and federal taxes. Marylanders pay a portion of your salary, as do federal tax payers.

My challenge to you is to return all income you have generated over the years as a professor at a tax funded university to its rightful owners: the taxpayers of Maryland, and the United States. Also, I challenge you to quit your job at Frostburg, which is clearly at least partially paid for by stealing from Marylanders. I challenge you to find employment in the ‘real’ economy. Find employment and income that is not based off of theft.

I know this may be difficult. The steady paycheck and the benefits you accrue from a government paycheck will be difficult to leave.

Also, please put all your savings and investments with Euro Pacific Capital. You have placed Peter Schiff in a class all his own, so it is only appropriate you invest all your savings with his firm.

Here is your opportunity to show you practice what you preach, and you truly believe in the ideology you are so clearly married to.

Sincerely,

US Taxpayers

Bob Roddis said...

To [the fake] APLerner:

Since [unconstricted?] revenue is constantly and relentlessly extracted from all of us, I see no problem in trying to get some of it back in the form of a job with the state while at the same time bringing truth to mis-educated college students.

Now, if Mr Anderson got a job as a lying prosecutor in northern Georgia, you might have a point. But you don't.

jason h said...

A common tactic is to take an opposing few to the logical conclusion, and attack that position. If Krugman were to actually say the things that his beliefs implies, he might actually realize the nonsense he preaches. That is all Prof. Anderson has done.

Keynesians believe spending drives an economy. A major premise of Krugman's is that during a recession the private sector isn't spending enough, and the gov't must spend on their behalf until the economy gains traction.

Now if Krugman could just convince the rest of us to ignore our common sense and spend all we have now gov't stimulus would be unnecessary and the recession would end.

Should the gov't fail to stimulate as much as he sees fit wouldn't it be his moral obligation to stimulate the economy with his own spending and convince others to do the same.

Bob Roddis said...

When are our very own Chartalists going to provide the proof that free market economies bog down if THE MAGIC STATE does not engage in money dilution, taxation, spending and government debt?

What's the practical and moral basis for not leaving people alone and for siccing SWAT teams with chains and paddy wagons upon them?

Jim Slip said...

AP Lerner came up with a perfectly reasonable argument this time.

Prof. Anderson?

William L. Anderson said...

First, when has anyone read anything in my writings in which I said all taxation is theft? Second, what you say is true: I am at a tax-subsidized institution and some of the money that pays my salary comes from people who clearly are worse off economically than I am. That certainly is not fair.

That being said, I don't know of any line of work these days in which some state control, regulation, or even subsidy is involved. I long ago gave up the idea that I could live a "pure" libertarian life. Nonetheless, I am performing a service for which I am paid, and for which I receive very high department and university ratings. In other words, I don't work 15 hours a week, use the same syllabus year after year, keep brief office hours, and then go home. I give FSU the service for which this job demands.

My criticism of Krugman is not that he works for an institution that receives tax dollars (and Princeton receives a lot of tax money). Krugman has written that saving is bad (during a depression) and that rich people should be forced to give up huge chunks of their income in order to ensure that the money will be spent in the short run.

My point is that Krugman can take the lead and make sure he spends so he can do his part to make the economy prosperous. If the government won't tax him enough, he either can give extra money to the state or buy nothing but six-month treasuries.

jason h said...

Most of the funding for public universities come from private sources. Also, they are providing a service that people voluntarily take part of, compared to income taxes taken from your paycheck given to D.C. bureaucrats to play debate club and decide what kind of insurance you will be forced to buy.

Anonymous said...

The tax issue is very small keep or remove the tax it does nothing to fix the big gov spending problem... first the CBO, which PK loves to quote has recently stated that the bush tax cuts only equaled about 5% of the total deficit since inception. Also, with the CBO projecting about 8-9 trln in deficits over the next 10 years saving 680 bln is only 8ish% of the dollars needed to close the gap! We don't have a tax problem, we have a spending problem.

Here is the scary part, I've done some research (back of the envelope style b/c data is difficult to find), but if you were to tax any income over $200k at a 100% rate (and make the crazy assumption that it does not lead to a drop in tax revenue) you still don't have enough tax dollars to cover the deficit for this year! People need to wake up here, we can't tax the rich out of this mess even they can't cover the bill, bottom line spending must be cut.

AP Lerner said...

But, Krugman is asking for his own taxes to go up. He supports tax increases on himself. He has taken the lead. His income taxes will rise under what he proposes, yours will likely fall. So he is practicing what he preaches. Why can’t you do the same? Are all your savings with Peter Schiff? How come you get to criticize government spending and how horrific it is and claim (along with Murphy and Rockwell) we are heading for bankruptcy, yet you are a product of that government spending?

Or have you, in the spirit of supporting national solvency, foregone your salary until the deficit has shrunk?

Or, is government spending on your salary ok, but not for your average fireman or teacher that you feel should lose their job in the name of austerity? Is your service more valuable than theres? Because that’s whose jobs will be lost when the austerity you and the 'dreamers' demand be imposed to ward off the phony threats of bankruptcy and hyperinflation.

jason h said...

AP you've brought up fireman and teachers before as if you don't recognize the connection between the housing bubble, property values, and the building of new schools and hiring of additional police and fireman with a bubble of tax revenues. Also, you equate federal spending with state and local spending which is wrong unless D.C. starts picking up the tab for the states.

Anonymous said...

"and that rich people should be forced to give up huge chunks of their income in order to ensure that the money will be spent in the short run."

No, that's not right. Krugman has repeatedly said that that letting the tax cuts for the rich expire was something necessary for the long run, not the short run. The government doesn't need to raise taxes to fund its short run spending.

Edward said...

"On top his repeated attempts to change the tax code, Reagan’s Fed jacked up interest rates to sky high levels in a pointless attempt to rid the economy of inflation – inflation created by OPEC setting prices, not by demand. Why would higher interest rates fight off inflation not caused by demand? By the way, it was de-regulation that took place in the late 70’s that ended the ‘inflation’, not Reagan and Volcker punishing the economy and the middle class."


Let's observe one of those rare conditions in economics, a natural experiment.

in the 1970's opec did indeed try to keep prices high. The Fed also led by Arthur Burns in the Nixon Era recklesslessly printed money,a policy continued by the Fed chief before Volckere 9i don't know his name) Nominal interest rates back then were also not zero, so the logic of ZIRP and Japan did not apply.
In the late 2000's aughts, oil prices were also high, primarily driven through speculation and hoarding. Prices crashed when the economy went south as lehman brothers failed.
So there we have it. Inflation can't continue on the supply side, through cost push, because sooner or later the law of demand would assert itself, prices will rise higher than consumers are willing to pay, demand will fall prompting a price crash. The Fed on the other hand, is the only institution with the means to continue inflation year after year. "Sustained inflation(barring zero interest rates and Japan like conditions) is always and everywhere a monetary phenomenon." (May Professor Friedman rest in peace) So Volcker did indeed save us from demand induced inflation
By the way, you never answered my questions. How much inflation is too much? I know you say there is no " right level of inflation" just what the market will bear, and too a certain extent I agree, but give me a number?

AP Lerner said...

“By the way, you never answered my questions. How much inflation is too much? I know you say there is no " right level of inflation" just what the market will bear, and too a certain extent I agree, but give me a number?”

There is no number. If the market says 4%, it’s 4%. If the market says -4%, it’s -4%. There is no magic number. Why should anyone determine the inflation rate? The concept of inflation targeting is nonexistent under MMT. Like I have said before, the Fed needs to get out of the inflation targeting business. Same thing with private surpluses. Employment. Savings. All determined by the market. I know this is hard for many to believe, but MMT is based off more free market ideology than what most Austrians believe in. MMT’ers are not calling for the government to intervene with the economy to implement austerity to avoid phony fears of bankruptcy.

To your point on inflation, a few things. First, my point on the Volker was he was given credit for breaking the back of inflation. This is not true. Deregulation of the energy markets in the late 70’s did more to eliminate inflation than Volker putting the economy into recession. Volker unnecessarily intervened with the economy.

And on Milton Friedman – everything you learned about the monetary system from Friedman was all wrong. The inflation is always a monetary event was applicable in the days of the gold standard. We are no longer on the gold standard. If you understand how the current monetary system operates, it becomes obvious the Fed has ZERO control over the money supply. Zipo. The Fed can control interest rates, but has no control over the money supply. An increased money supply comes from deficit spending. This should be obvious given what has gone on the last few years (all those excess reserves are meaningless since the banking system is never reserve constrained). Despite the claims of massive money printing by the likes of Prof. Anderson and others would lead to inflation, they are all wrong, and M2 and M3 has actually shrunk. I’m sure everyone reading this has their arms up in the air but there is enough room in this space to explain this, so go read some Mosler or Mitchell. But it’s 100% a myth to believe the Fed can actually control the money supply.

“Also, you equate federal spending with state and local spending which is wrong unless D.C. starts picking up the tab for the states.”

This is a joke right? Go to your states website and see how much federal money they receive in grants and other aid. ALL states receive Federal money for one reason or another.

And yes, I have brought up fireman and teachers before. You think just because tax revenues have fallen classroom sizes are smaller? There’s fewer fires? Less crime? Besides, you are missing my point. Prof. Anderson and his ‘dreamers’ believe we need to implement austerity now, now, now. Guess what, when government spending gets cut, the first thing that gets cut is teachers, fireman, etc. If too many teachers are on the payroll, I agree, they must go. But my local high school has a shortage of teachers. And it’s a little odd of Prof. Anderson to go on and on about government spending, when he is funded by the government. And, as a voter and taxpayer, if I’m given a choice of saving Prof. Anderson’s job or my local high school math teacher, well, that’s an easy choice.

Personally, I don’t want either to lose their job. I doubt Prof. Anderson is all that bad of an instructor, and while I disagree with most of economics and wish he was more open minded (and hope he is in the classroom) I’m sure he is a pretty good person. The thing is, I know how the monetary system operates. I know bankruptcy is not going to happen. Nor is hyperinflation. I know both my local high school teacher, AND Prof. Anderson’s job can be saved.

robmandel said...

Re: public employment

I too am a public school teacher and also very much in agreement with the Austrian School. Let's for a moment separate State (i.e. of the 50 states) from Federal government.

I won't speak for Professor Anderson, but I would think that most libertarians like myself hold out for as little federal government as possible. Article 1, Section 8 is the end, not the beginning. Even our beloved T. Jefferson supported public education - at the state level

I also believe that only sound money, commodity currency, an end to central banking, and a truly free market are the path to prosperity. That along with an absolutist view (IP I leave alone here!!) of property rights. End inflation/debt backed currency, close every federal department not specified as a direct federal gov't role, and return to the states the autonomy and sovereignty that was the intent of the founders.

I am not an anarchist. I do beleive Aristotle was right that men, even when they haven't the need, seek to form political unions. As he argued, the state was a natural creation and at times desirable. But he also understood, there would be certain, and only those and no other, functions of a state. The rest to be left to the citizens.

It is not at all inconsistent, from a libertarian point of view, to be employed in a public education establishment. Yes, I and many libertarians would rather all education be private. But as an educator, we are not a rent seeking vocation, nor are we imposing our views (cf. EPA, OSHA, et al) on others, using force and coercion to bend people's will and behavior.

We also do not forcibly transfer wealth from producers to parasites. We offer a service that the public has desired. It is a measurable end. How so is a $1 taken from someone who earned it and redistributed to another who did not? We do not demand others provide for us nor do we make a claim on anything that belongs to another.

Again, education at the state level is entirely within the bounds of libertarian thought. It's not a dogma. The states are to be the incubators and experimenters. They are tasked with pretty much all that is WITHIN the state. What lies outside the state is simply that which is outside any singular state: treaties, war, boundaries, INTERstate trade.

We Austrians/libertarians agree upon (apologies Professor!!) much. There are varying viewpoints within the libertarian circles, and unlike most other political ideologies, we are neither monolithic nor exclusive. We do not ever blacklist or shun. Just look at "pro-life" democrats for an example.

We all understand the nature of fiduciary media, malinvestment, business cycles, and interventionist policies. We abhor them as well.

Lastly, I am not stridently "anti-war". I am not a rampant militarist, but as I like to say, I've read Thucydides, and "human nature being what it is..." Sometimes, and I know, I know, but sometimes no war is worse than war. Rare, but when true...

Bob Roddis said...

I say slash the pay of teachers and firemen. And cops and lying prosecutors. There's only so much stuff. Those who own it should be able to keep it. It's none of APLerner's damned business what one does with his/her own money. And a person has a right to have his/her money safe from MAGIC STATE dilution programs.

I'm still waiting for the explanation of how the MAGIC STATE has abolished scarcity. And how the Chartalists have abolished the necessity of economic calculation and capital structure.

Ben said...

"But, Krugman is asking for his own taxes to go up. He supports tax increases on himself. He has taken the lead. His income taxes will rise under what he proposes, yours will likely fall. So he is practicing what he preaches. Why can’t you do the same?'

Paul Krugman lives in a giant multimillion dollar mansion in Princeton. I would know. I live about a half mile from it. He also has a nice penthouse in NYC. It's pretty easy to argue for progressive taxation once you've already built your castle with a moat around it. Meanwhile, those of us that aspire to be wealthy were born a few decades too late.

Anonymous said...

"Paul Krugman lives in a giant multimillion dollar mansion in Princeton. I would know. I live about a half mile from it. He also has a nice penthouse in NYC. It's pretty easy to argue for progressive taxation once you've already built your castle with a moat around it. Meanwhile, those of us that aspire to be wealthy were born a few decades too late"

What are you trying to say? That it's easier for the rich to give more of their money in taxes? Who are you? Some type of progressive? Go back to Russia.

Mike Cheel said...

Maybe the dictionary is wrong (http://dictionary.reference.com/browse/inflation):

in·fla·tion   /ɪnˈfleɪʃən/ Show Spelled[in-fley-shuhn] Show IPA
–noun
1. Economics . a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation).
2. the act of inflating.
3. the state of being inflated.

Since all of the money that is allowed to be called legal bears the words 'Federal Reserve Note', perhaps AP Lerner could explain again his statement:

"If you understand how the current monetary system operates, it becomes obvious the Fed has ZERO control over the money supply."

They print limitless amounts of it.

Who controls it then? Where does it come from? Why should I accept paper printed from a central bank over say, money I printed myself? Why is government paper more valuable than my own? Why does it say 'Federal Reserve Note' on it if came from somewhere else?

Kindly explain.

Justin Murray, CFO said...

"It is not at all inconsistent, from a libertarian point of view, to be employed in a public education establishment. Yes, I and many libertarians would rather all education be private. But as an educator, we are not a rent seeking vocation, nor are we imposing our views (cf. EPA, OSHA, et al) on others, using force and coercion to bend people's will and behavior."

So, if I refuse to pay my property taxes, the city and/or State will not come to my home to take it? Public education does steal and use coercion to take my funds to fulfill its own desired ends. I am not voluntarily funding the system, the resources are being siphoned away without my consent.

Public education is wholly incompatible with libertarian thinking because of the simple fact that public education is compulsory. Compulsory to the students and compulsory to the community forced to fund it.

All members of the community are required to spend at minimum 12 years of their lives in a public school or facility that is State sanctioned under penalty of fines and imprisonment. All members of society, whether they use the service, those who chose to obtain their education outside the system due to the sorry state public education is in today, or don't use the service at all due to lack of school age children, are forced to fund it. Failure to pay into the system resorts in fines, asset seizure (lien on homes and businesses), and imprisonment.

The core of libertarianism is that all actions and behaviors are made voluntarily without fear of reprisal. This does not remotely describe the public education system. Public education is a disgrace on our society for it is, at it's very core, a system forced upon us without our input.

AP Lerner said...

@ Mike Cheel:

“They print limitless amounts of it”

So what. Meaningless.

“Where does it come from?”

Money? Well, in the US, the US Bureau of Engraving and Printing is responsible for physically making the money Americans and lot of other folks around the world use. They are located at 14th and C Streets, SW. Washington DC. If you are asking 'where does the money supply come from', then public spending is the answer. The Fed, when it swaps non interest bearing notes for interest bearing notes (so called debt monetization), has zero impact on the money supply. This is what’s called an asset swap and all it does is change the composition of reserves in the banking system. And the banking system is never reserve constrained…

“Why should I accept paper printed from a central bank over say, money I printed myself? “

Try paying your taxes with money you print yourself. See where that gets you. Then try paying them in gold. Silver. Or sand. It all gets you to the same place.

“Why is government paper more valuable than my own? “

Because government paper is the only paper that the government accepts to pay taxes. If taxes go to zero, then the value of said government paper goes to zero as well.

“Why does it say 'Federal Reserve Note' on it if came from somewhere else”

True. Reread the quote you quoted – I’m talking about the money supply. And the central bank in a monetary system such as the US’s, regardless of how much money it ‘prints’ to buy assets, has no influence over the money supply. Zippo. The Fed sets the price of money, not the supply. It’s a neo liberal myth to think the central bank in a monetary system in a sovereign country such as the US has control over the money supply. This has nothing to do with Keynesian or Austrianism or Monetarism. It’s operational fact. This should be obvious to anyone that has been paying attention the last three years. Despite all the so called money ‘printing’, the money supply has actually shrunk. That’s because, again, debt monetization, or quantitative easing as people call it now, is a deflationary policy. It’s a total myth to think Ben Bernanke has any control over the money supply.

http://www.shadowstats.com/alternate_data/money-supply-charts

Mike Cheel said...

@AP Lerner

But other than because the government says so, why should someone place any value on government printed paper?

As far as paying taxes in something like gold, the government has outlawed gold ownership. But other people WOULD accept gold or other materials that meet the definition of money if they didn't think they would be thrown in jail. Originally banks issued bank notes to safeguard one's gold. The problem was that they were printing more notes than they had gold. When that happens, as you may know, people come around and start wanting more notes for the same goods (and \ or services). This is the inflation that I found defined in the dictionary. But the paper money these days is not convertible into gold (or anythng else). People are losing faith in the dollar. It has lost over 95% of its purchasing power since the federal reserve came into being. I believe around 40% since the gold standard was obliterated. Coincidence? I could buy a candy bar as a kid for 25 cents and today the same candy bar is a dollar.

I don't know if I agree that if the taxes goes to zero so does the value of the money. I think what is really going on is that the whole money deal is a scam perpetuated by central banks, governments in collusion with them and as far as the dollar goes, what has been termed as American dollar hegemony.

Why else would they do everything intheir power to prevent people from trading in the money of their choice?

AP Lerner said...

“But other than because the government says so, why should someone place any value on government printed paper?”

Taxes are the only good reason to place value on paper printed by a sovereign country. Otherwise, Prof. Anderson would starve.

“As far as paying taxes in something like gold, the government has outlawed gold ownership

Gold ownership has not been outlawed. You have not met my wife.

“But other people WOULD accept gold or other materials that meet the definition of money if they didn't think they would be thrown in jail”

This is false. People are free to trade goods and services as they see fit. As long as they settle their tax liability with dollars, nobody goes to jail. Other people generally do not accept gold or other materials because ultimately they need to pay their taxes with dollars.

“But the paper money these days is not convertible into gold (or anything else).”

False. It’s convertible into your tax liability.

“Originally banks issued bank notes to safeguard one's gold”

We are no longer on the gold standard. Any analysis, research or commentary you have read that is based off the gold standard is irrelevant.

“People are losing faith in the dollar.”

Who is? Peter Schiff? Prof. Anderson? If people were losing faith in the dollar, then why is the two year note at an all time low? Why is the ten year note at 2.5%? Why does China and other countries have such a demand for dollars that they are willing to keep their people poor to accumulate dollar denominated assets? Countries fight wars for the right to sell us goods so they can accumulate dollar denominated assets. Nobody has lost faith in the dollar. Don’t confuse exchange rate fluctuations with confidence in the USD. It’s another neo liberal / Austrian myth. I have not lost faith, which is why I loaded up on 30 yr. bonds about a year ago. If you are an investor, here’s some free advice: do the opposite of Peter Schiff.

“It has lost over 95% of its purchasing power since the federal reserve came into being”
Relative to what? What does this even mean? Sorry, but the same people that are telling you the US is bankrupt (Peter Schiff) are the same people dropping this nonsense line.

“I could buy a candy bar as a kid for 25 cents and today the same candy bar is a dollar”

So? Are you implying this is harmful inflation? What is your income today vs. when you were a kid? When I was a kid, computers were super expensive. Computers have depreciated over 1000% since I was a kid. Cars, over 100% depreciation. These are all irrelevant statistics. It’s all relative. Would you feel better if a candy bar was still 25 cents but you were still making a 1950’s wage? Inflation and deflation is everywhere

“I think what is really going on is that the whole money deal is a scam perpetuated by central banks, governments in collusion with them and as far as the dollar goes”
This isn’t economics. It’s paranoia. The modern monetary system is a relatively new system. So it’s not completely understood. Does it have it’s flaws? Sure. So did the gold standard. As did free banking. My point is it is not understood. It has not even made its way to most Econ 101 text books. So much of the analysis of the modern monetary system is completely wrong, since folks like Prof. Anderson, Peter Schiff, Lew Rockwell etc, don’t even understand we left the gold standard.

MMT’ers like Mosler, Mitchell, and Wray have a firm grasp of the modern monetary system. If you are curious on how the monetary/banking system operaterates (no theory, all operations) I would suggest reading some of their work. They can explain this stuff much better than I. however, if you are looking for an economic ideology to fit your political views, don’t bother.

Hope that was helpful. Thanks for the thoughtful questions.

Anonymous said...

"They can explain this stuff much better than I"

Yikes. I hope so because you have yet to explain ANYTHING. (If it helps you can start by addressing Bob Roddis's questions.)

Anonymous said...

Back in the old days, to take the ferry cost a nickel, and in those days, nickels had pictures of bumblebees on them. Give me five bees for a quarter you’d say! Now where were we? Oh yeah, the important thing was that I had an onion on my belt, which was the style at the time. You see, they didn't have white onions because of the war. And all over America, people were doing a dance called funky grandpa!

Mike Cheel said...

@AP Lerner

It is harmful inflation because it destroys the value of money saved. Yes my salary is relative to the costs of things but the dollar saved when I was a kid cannot buy the same thing as today. I just can't understand how destroying savings via inflation or spending money you don't have makes things better. Short term perhaps in the long term your purchasing powere via savings is diminished and you eventually get to the point when the credit line gets cut.

jason h said...

@ AP

What happens when the FED creates money and purchases assets directly rather than purchasing gov't bonds?

The Fed has expanded the money supply and bypassed the need for gov't spending to get the new money into circulation.

AP Lerner said...

“What happens when the FED creates money and purchases assets directly rather than purchasing gov't bonds?

The Fed has expanded the money supply and bypassed the need for gov't spending to get the new money into circulation.”

How did you reach that conclusion? Doesn’t matter what the Fed buys, its still an asset swap. The Fed buys MBS, the bank sells the MBS in exchange for a non interest bearing note. No new money has been created.

The Fed has bought sort of assets the last few years, and here’s what happened to the money supply.

http://www.shadowstats.com/alternate_data/money-supply-charts

sorry, but I don’t think you understand how a central bank operates. Try this:

http://moslerforsenate.com/wp-content/uploads/2010/06/7DIF.pdf

Troy Camplin said...

Anderson should be more "open-minded"? I love it when people say that, because what they really mean is, "You should be willinig to accept what I say, but I shouldn't have to listen to your very inconvenient facts." More than that, economics is a science. There are facts of economics that support free markets and disprove welfare statism, interventionism, and socialism -- despite what the likes of Keynes and Krugman seem to think. To argue that someone should be "open minded" when one has the facts on one's side is like telling a physicist that they should be open-minded when it comes to the existence of gravity.

Anonymous said...

Yes, and when my grandpa was a kid bread was a dime, as he so often tells me. To which I reply, "Yeah, and you were making a dollar an hour."