Monday, September 13, 2010

Those Chinese Commies, er, Capitalists, Finally Got Us!

When I was a young person, America was taught to fear the communists. The U.S.S.R. had missiles pointed at us, Castro's Cuba was 90 miles from Key West and the Cubans were set to invade any day, and China's Maoist commies were helping the North Vietnamese in our war in Vietnam. (I remember the Cuban Missile Crisis when I was in fourth grade.) As a girl I used to date told me when I questioned whether or not we should be in Vietnam, if we let the commies win there, then they would take over country after country until they got to us.

Well, history has a funny way of working out things. The U.S.S.R. and its satellites went out of business (complete with a going-out-of-business sale in which I bought some Really Neat Stuff). Vietnam is liberalizing its economy and its society, and the Mao Suits that American Limousine Leftists loved to wear have long been replaced by real clothes, just as China has become a productive country, as it throws of the shackles of communism.

However, where once we saw a Chinese commie hiding behind every bush and tree, Paul Krugman (who usually sees a Republican hiding behind every bush and tree) now sees a Chinese Currency Manipulator hiding behind every bush and tree. Oh, the humanity! Will we ever be free from the Present Dangers from those nations of the East?

Krugman's fear is based upon one of his usual themes: China's government is deliberately underpricing its currency, the renminbi, which makes Chinese goods cheaper relative to goods that are dollar-denominated. Krugman writes:
The consequences of this policy are also stark and simple: in effect, China is taxing imports while subsidizing exports, feeding a huge trade surplus. You may see claims that China’s trade surplus has nothing to do with its currency policy; if so, that would be a first in world economic history. An undervalued currency always promotes trade surpluses, and China is no different.

And in a depressed world economy, any country running an artificial trade surplus is depriving other nations of much-needed sales and jobs. Again, anyone who asserts otherwise is claiming that China is somehow exempt from the economic logic that has always applied to everyone else.
In other words, Krugman asserts that China is engaging in a "beggar-thy-neighbor" policy, but Americans (unlike the heroic Japanese) are too timid to challenge China as it supposedly becomes wealthy at our expense. Now, in case you don't recognize the logic here, Krugman is making the arguments that were put forth by the Mercantilists four centuries ago, with many of their arguments successfully refuted by Adam Smith in 1776.

Yet, bad ideas continue to stay around. While Krugman makes his claims on the basis of Keynesianism, in truth, that "economic theology" had its roots in Mercantilism and John Maynard Keynes even praised that group in his book, The General Theory.

Now, I do realize that simply screaming "Mercantilist!" does not win any real arguments, although this brief space is not appropriate for laying out every wrongheaded notion of the Mercantilist doctrines. However, I need to point out that when Krugman declares that somehow China is at least partially responsible for our current economic downturn because of its currency policies, he conveniently forgets that the U.S. Government under the Bush administration pushed the housing bubble, and then the Obama administration proceeded to try to prop up failed banks, the housing market, and producers (Government Motors being Exhibit A) as a sop to Wall Street contributors and American labor unions. By forcing the diversion of trillions of dollars of resources to those firms and sectors that cannot stand up on their own, President Obama and his minions are aggressively and deliberately blocking the recovery.

Of course, it is more fun to blame the Chinese commies capitalists. After all, aren't they the ones who caused the housing bubble in the first place by saving lots and lots of money, which somehow made its way here and was foolishly diverted into the U.S. housing market? (Oh, that's another conspiracy theory by the Usual Suspects. Yeah, those commies finally got us. Mao himself must have hatched the plot and is laughing from Hell.)

As for blaming any subsidies that China has for its "clean energy" programs for our current situation, I must admit that such an accusation is quite rich. Doesn't the U.S. Government provide huge subsidies to "clean energy" and has not Krugman called for the government to do so in the mistaken belief that we can spend and subsidize ourselves into prosperity? I mean, from where do the subsidies come? They MUST come from the remaining healthy (or less-ill) portions of the economy. Despite the Krugman-Keynesian-Chartalist beliefs that wealth is generated by the Federal Reserve System, transfer payments ultimately must come from REAL assets, not paper ones.

One must remember that for Krugman, the end of production is, well, production. If World War II created "prosperity," then China is creating its own version of prosperity by making it more difficult for the Chinese consumers to purchase those goods that they have been making. Instead of acknowledging the basic economic truth that the end of production is consumption, Krugman is claiming that the way for us to have a recovery is to subsidize our own industries, manipulate our currency (or place economic sanctions on China, which can be interpreted as an act of war), and then we will be fat and happy.

I doubt it. We are dealing with basic economics here. Creating what clearly would be a trade war would be yet one more step in destroying not only our economy (or, what is left of our economy), but also creating havoc in the rest of the world. Yeah, punish the Chinese; that will make us all rich.

30 comments:

AP Lerner said...

Sometimes when reading Prof. Anderson’s blog, I wonder if he even has a firm grasp of the English language.

But first, a little of defense of MMT (or Chartalism as those who got their economics degree from Wikipedia University like to say). Prof. Anderson has decided to put MMT into a little Keynesian box because that’s simple and easy for him to understand. Of course, that’s just simply false. For starters, I, and anyone that understands MMT and how the monetary system of a sovereign country works, are very aware that China’s policy is a benefit for the US. Let them keep their nation poor while we consume their output in exchange for US dollars. Why should we care? You see, anyone that has actually been paying attention to MMT, would recognize Krugman is very wrong on this issue. And if you read other MMT blogs (or anything other than Mises.org), you’ll see a flood of posts all day today criticizing Krugman on this article. I’ll let a real economist explain the twin deficit myth.

http://bilbo.economicoutlook.net/blog/?p=11527

“Krugman declares that somehow China is at least partially responsible for our current economic downturn “

Where does he say this? Never. Krugman’s mistake is believing that supporting exporters will improve employment. This may be so but at a much higher cost to the rest of the economy. Even when you are right to criticize Krugman, your reasons are all wrong.

“U.S. Government under the Bush administration pushed the housing bubble”

Can you please explain where Bush forced CountryWide and New Century to hand out mortgages to people that can’t afford them? Blaming the government for the housing bubble is another neo liberal myth that the blame the government crowd has bought into. It’s been disproven by so many real macro analysts it saddens me people still repeat this nonsense. Go read Roubini’s or Ritholz’s book. Get your head out of the Austrian sand.

“Of course, it is more fun to blame the Chinese commies capitalists.”

Are you seriously claiming China is a capitalistic country? Wow. See comment above about head and sand.

“After all, aren't they the ones who caused the housing bubble in the first place by saving lots and lots of money”

Uh, more gibberish.

“Chartalist beliefs that wealth is generated by the Federal Reserve System”

Have you even read anything by Wray, Mosler, or Mitchell? Clearly you do not understand what I have written. I have never said this. I’ll repeat, one more time, it’s public deficits that provide the surpluses and financial equity to the private sector that allow the private sector to create wealth. Nobody that understands MMT. Mitchell, Mosler, Wray, or any of the other ‘real’ economist has ever made that statement. Never. English is a difficult, I know, but this is getting ridiculous.

Daniel Hewitt said...

AP Lerner,

“Krugman declares that somehow China is at least partially responsible for our current economic downturn “

"Where does he say this?"

Here:
"China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done."
http://www.nytimes.com/2010/03/15/opinion/15krugman.html

And here:
"bear in mind that in a depressed world economy, surplus countries have a lot to lose from such a conflict, while deficit countries may well end up gaining."
http://krugman.blogs.nytimes.com/2010/08/16/killer-trade-deficits/
USA, of course is a deficit country.

And here:
"by running an artificial current account surplus that is 1 percent of the combined GDPs of liquidity-trap countries, China is in effect imposing an anti-stimulus of that magnitude — which plausibly means 1.5 percent of GDP"
http://krugman.blogs.nytimes.com/2010/03/17/chinese-currency-discussion/

And here:
"if we think of the United States as bearing a proportionate share, and also use the rule of thumb that one point of GDP = 1 million jobs, we’re looking at 1.4 million U.S. jobs lost due to Chinese mercantilism"
http://krugman.blogs.nytimes.com/2009/12/31/macroeconomic-effects-of-chinese-mercantilism/

Also, could you please elaborate how a housing bubble could form without the government's interference?

mike m said...


Can you please explain where Bush forced CountryWide and New Century to hand out mortgages to people that can’t afford them? Blaming the government for the housing bubble is another neo liberal myth that the blame the government crowd has bought into. It’s been disproven by so many real macro analysts it saddens me people still repeat this nonsense. Go read Roubini’s or Ritholz’s book. Get your head out of the Austrian sand.


Perhaps not forced, but definitely ignored. The FBI warned the Bush administration of widespread fraud in the mortgage industry as early as 2004, and they did nothing. Inaction can be just as powerful as action. Perhaps you need to read Bill Black. When you are dealing with fraud, it can not be business as usual.

Let them keep their nation poor while we consume their output in exchange for US dollars. Why should we care?

Triffin's Dilemma, much?

Anonymous said...

Robert Reich says this stuff at Salon. I think he is furious people like him don't have influence in CHina and that they have prsoperity by going against the type of advice he gives. It's all just a big bubble to him, CHina is just a wild bull headed off the cliff with its crazy pro growth policies

Bob Roddis said...

Even more McCulley:

"To be sure, using the printing press in the context of full employment would tend to generate higher inflation. But in the context of full employment, fiscal deficits would be dramatically lower – nothing like getting the unemployed off the dole and onto the tax rolls to cut fiscal deficits! [AND INTO UNSUSTAINABLE LINES OF PRODUCTION!!] And the developed world is a long, long way from full employment."

To McCulley, money dilution can solve everything in a morally neutral, mindlessly mechanical manner and the state is just this morally neutral mindless mechanical tool that is ever so helpful in solving economic problems. McCulley should wear a sandwich board announcing, “I have no understanding of (or even any familiarity with) the concepts of acting man, subjective value, economic calculation, Cantillon Effects, and/or the distortion of the price and capital structure.”

BTW, this is an pro-Austrian blog employing Austrian theory to criticize Paul Krugman. You MMT (Moronic Monetary Theory) guys have not made the slightest effort to familiarize yourself with any of the basic concepts of the Austrian school. You make dumb arguments like, "You guys have ideology, we don't". You refuse to understand that your pronouncements are derived from a few basic infantile concepts that have been exposed as nonsense by Austrians decades ago. One is that humans know how to fix the price of money. Another is that “the state” is just a morally neutral mindless mechanical mechanism useful for curing economic problems. That too is an ideology and it is preposterous.

From everything you've said and from what I've read of Wray and/or McCulley, I don't see the point of wasting time reading more Wray or McCulley in order to memorize their minutiae.

Bob Roddis said...

“Despite the Krugman-Keynesian-Chartalist beliefs that wealth is generated by the Federal Reserve System, transfer payments ultimately must come from REAL assets, not paper ones.”

I see no reason why this allegation is not completely correct. Regardless of any technical policy disputes among the three, the fundamental ideological axiom of all three "schools" is a mental vision/belief that aggregates and data sets (or "the economy") are real "things" that can be manipulated mechanically by wise state officials. That fundamental foundation of these schools of thought is false. The specific detail of how a wise official might act becomes irrelevant. We make this point over and over to no avail.

AP Lerner said...

@ DH-Prof. Anderson clearly stated Krugman said China caused the downturn, which is not true. Yes Krugman (wrongly) believes China is preventing a recovery. This nay seem like splitting hairs but Prof. Anderson often (wrongly) does this to support his erroneous theory. Also, the comment on Bush and housing is all wrong. Sure the government contributed to the credit bubble, but it was the Clinton surpluses that forced savings and financial equity out of the private sector, and forcing the private sector to lever up. This and lack if regulation did more harm then Bush

@ mike-so are you saying better regulation and fraud prevention would gave helped? I'm sure Prof. Anderson and the true believers in the free market will correct you on this. There is no room in the free market for fraud, and your desire for regulations are bad, bad, bad. True believers, please correct mike.

@ anon-1 billion poor people is not prosperity. Ever been to China? Nothing at all prosperous, except for a few at the very top of the communist pyramid

Daniel Hewitt said...

AP Lerner,

Dr. Anderson said partially responsible:
"However, I need to point out that when Krugman declares that somehow China is at least partially responsible for our current economic downturn because of its currency policies"

I doubt that he thinks Krugman believes that it's all the Chinese fault. China is simply one target of Krugman's cheap demagoguery. Nationalism can work on the left too.

Regulation created the new money, funnelled it into the housing industry, subsidized home ownership, created the GSE's, and exempted them from insolvency.

Anonymous said...

"China as it supposedly becomes wealthy at our expense."

Doesn't sound like he said that at all.

"So what should we be doing? U.S. officials have tried to reason with their Chinese counterparts, arguing that a stronger currency would be in China’s own interest. They’re right about that: an undervalued currency promotes inflation, erodes the real wages of Chinese workers and squanders Chinese resources. But while currency manipulation is bad for China as a whole, it’s good for politically influential Chinese companies — many of them state-owned. And so the currency manipulation goes on."

There has also been several other blog posts by Krugman where said that this isn't good for the Chinese people either. It's bad for everyone.

Anonymous said...

Anon (10:43),

It's implied in the term "mercantilists", which Krugman calls the Chinese regularly (although not in today's column)...."artificial cost advantage" is the term he used today.

Krugman writes almost every day about the wonders that inflation could do for USA. But when it comes to China, he sees past is own ideology, and acknowleges that inflation benefits the rich at the expense of the working class.

mike m said...

There is no room in the free market for fraud, and your desire for regulations are bad, bad, bad. True believers, please correct mike.


FAIL

In truth, the leading Austrian theorists were big supporters of freedom and liberty. You can't have freedom if a handful of oligarchs are manipulating the economy without any checks and balances from the law.

Freedom of the market versus basic regulation of fraud is a false dichotomy. A free market and laws against criminal fraud are both necessary. Indeed, they are interrelated and mutually self-reinforcing.

mike m said...

Hat tip: Geaorge Washington @ Zerohedge.

Just as neo-conservatives are not really conservative and neo-liberals are not really liberal, a fake, neo-Austrian legal argument has sprung up trying to excuse the criminal fraud and manipulation of the big banks.

As William K. Black - professor of economics and law, and the senior regulator during the S&L crisis - pointed out last week, Austrian economics has been twisted by the powers-that-be and bastardized into a basis for arguing that there should be no prosecutions for fraud or criminal conduct:

Matt C. said...

Look at BOP since 1971:
http://www.census.gov/foreign-trade/statistics/historical/gands.txt

Completely the U.S.'s fault:
http://www.youtube.com/watch?v=iRzr1QU6K1o

Daniel Hewitt said...

Oops. I am the owner of anonymous comment at September 13, 2010 11:02 AM.

-Daniel Hewitt

AP Lerner said...

Sorry mike m you can't have it both ways. Put regulation in place to prevent fraud, and you scream state control. The system collapses, you scream we need better fraud prevention. No matter what the Austrian is always correct? Nonsense. And if you think the housing bubble was strictly on fraud alone you need to do some more homework. I would suggest reading Barry Ritholz or Noiriel Roubinis recent books.

Free market purist always base their theory on the almighty market being the ultimate regulator and when the government tries to track fraudsters, it's a government conspiracy. Scroll back a few posts and look at Prof. Andersons comments on Milken to see my point.

jason h said...

I believe mike m was merely pointing out one of the many ways the gov't contributed to the bubble. Fannie and Freddie also come to mind (Countrywide was their biggest client).

Austrians are not screaming for more fraud prevention measures. Simply, instead of being given a mulligan and a bailout the fraudsters should be in jail and bankrupt.

Another one of those progressive myths that fraud would disappear if we could just find the angels among men out there to be our regulators. Yet we ask them to do the impossible and track all fraudsters. In fact, most fraud is discovered by market players and insiders. The regulators will be replaced in 4-8 years and have no incentive to do a good job.

Mountains of paperwork and regulations only give a false sense of security while erecting more market entry barriers, which then gives the remaining players incentive to commit fraud. Hell, your bank could set all customers' deposits on fire and the FDIC would bail them out.

Bankruptcy and a jail cell would do more to prevent fraud than making it increasingly difficult for honest people to do business.

Xatrucho said...

@AP - (from last post but still relevant)

Ok, my apologies, not spending but public deficit / private savings ratio. If I understand your arguments correctly that means that we've had an excess of private savings so we need public deficit to balance our sheet again (so to speak). The reason behinf that argument is that public deficit = private savings which makes sense ex-post but if there has been an increase in the money supply that means that ex-ante such an equality does not hold, so what am I missing here?

On a related note if, because of an increase in the money supply, private savings != public deficit then what? We increase public deficit so it equals private savings + increase in money supply by increasing the money supply which would leave us right where we are. So what's going on here?

The other problem I find is that the market can't really decide on who benefits with the increase in public deficit because a large part of it go to bailouts of specific coorporations which means that the companies who get thme are the ones with the best lobbyist AND it also means that the govt. would be just helping ineffcient industries and companies to stay alive at the expense of the population (i.e. that money could have been put to uses that serve everyone better).

Xatrucho said...

> Put regulation in place to prevent fraud, and you scream state control. The system collapses, you scream we need better fraud prevention.

Is this a good place to point out that market is self-regulated and that there is a difference between state regulation of the market and fraud regulation which doesn't need (necessarily) the existence of a state?

> Free market purist always base their theory on the almighty market being the ultimate regulator

I don't get it, are you saying people in general (i.e. the market) are not good regulators of themselves but that some people (i.e. govt. officials) are good regulators of everyone else?

Josh W said...

Wow, stateless fraud regulation, that sounds pretty interesting!

How would you distinguish fraud from any other market tactic without standards? Or would standards of fraud be sort of clubs that ban entry to anyone who doesn't obey their rules? How would you know if someone has obeyed the rules or not?

Why might other people be better regulators of people than they are of themselves? Well it depends on who you are willing to give information to; some people might have access to more information because multiple competing market participants give them an interest in their combined success. But they would only have that interest because they are not participating in the market in the same way.

This may allow them to solve problems invisible if such a structure were not there, by providing the appropriate information to companies.

But there's no retaliation in that system, so it doesn't quite behave like a "state". But it is still regulation, in the control system meaning of the word.

Anonymous said...

@Xatrucho

"

> Free market purist always base their theory on the almighty market being the ultimate regulator

I don't get it, are you saying people in general (i.e. the market) are not good regulators of themselves but that some people (i.e. govt. officials) are good regulators of everyone else?
"

Maybe this is a good time to cue Bob Roddis to tell us why police and courts exist, if people are such good regulators of their own behaviour.

Honestly, there are times I wonder if we haven't reached a new Dark Age, or at least a very dim one.

Bob Roddis said...

It is quite obvious that our chartalist compadres have made no effort whatsoever to familiarize themselves with the basics of Austrian School thought and thus do not have the slightest understanding of it. Monetary and fiscal “stimulus” do and can stimulate economic activity. Things are built and bought that wouldn’t have been built or bought but for the “stimulus”. People get paychecks. WE KNOW THAT. IT’S CALLED A BOOM. BUT THOSE ACTIVITIES ARE NOT SUSTAINABLE PRECISELY BECAUSE THEY HAVE BEEN ARTIFICIALLY STIMULATED. And if you don’t understand at this point WHY we are insisting that they are not sustainable, then you never will and it has become pointless to further explain ourselves here.

Xatrucho said...

@Josh W

Here is an article about Rationale for Financial Self-Regulation, the interesting thing of the article are the multiple historical examples it presents (after the references) of how different groups have achieved stateless regulation, from 11th century Maghribi traders to The Tokyo Clearinghouse.

> But there's no retaliation in that system, so it doesn't quite behave like a "state". But it is still regulation, in the control system meaning of the word.

See, its not a difficult concept, cheers!

Xatrucho said...

@Anonymous (6:28 AM):

First, you're confusing the arguments. The quote you use was about regulating the market not about the need of courts or police so you're using a straw man.

Second, you didn't answer my question.

Third, I am no anarchist AND I also recognize there is a market need for courts and police which may be fulfilled by government. In fact, many readers of this blog would agree that protection of property rights via contracts is a proper role for government, but that's a political topic not an economic one so I just leave it at that.

mike m said...

Yes Jason, that's exactly what I was saying. But it seems some people wish to twist words, over-exaggerate, and even misrepresent the positions of others, in order to make their own position seem more "reasonable". That's exactly what Bill Black was talking about. Can anyone deny that Bernie Madoff or Jeffrey Skilling shouldn't be in a jail cell? Can anyone make an argument that Dick Fuld, Jamie Dimon, Lloyd Blankfien, Ken Lewis, et al shouldn't be in a cell as well? The only argument is that they were only doing what the government was "allowing" them to do.


Austrians make a good argument, in that, if banks were "required" to keep near 100% reserves, and our currency was based on a stable commodity, we wouldn't need most of the regulations that we currently have. But that's a big "if". I believe it was described as "feeding a lion with one hand, and whipping him with the other", with respect to our current system of fiat money and fractional reserve lending. Then there's that whole business of accounting control fraud.

Anonymous said...

@Bob Roddis:

"
It is quite obvious that our chartalist compadres have made no effort whatsoever to familiarize themselves with the basics of Austrian School thought and thus do not have the slightest understanding of it. Monetary and fiscal “stimulus” do and can stimulate economic activity. Things are built and bought that wouldn’t have been built or bought but for the “stimulus”. People get paychecks. WE KNOW THAT. IT’S CALLED A BOOM. BUT THOSE ACTIVITIES ARE NOT SUSTAINABLE PRECISELY BECAUSE THEY HAVE BEEN ARTIFICIALLY STIMULATED. And if you don’t understand at this point WHY we are insisting that they are not sustainable, then you never will and it has become pointless to further explain ourselves here.
"

But since government has been involved in our economy since the middle 1800's, PRECISELY HOW CAN YOU TELL WHAT IS ARTIFICIAL STIMULATION AND WHAT IS NOT? HASN'T THE ECONOMY SINCE THEN BEEN ARTIFICIALLY STIMULATED, BY YOUR LOGIC?

So, of what use is Austrian Economics if it can only describe an artificial situation that doesn't any longer exist in the real world?

Anonymous said...

@Xatrucho 7:41am

"
First, you're confusing the arguments. The quote you use was about regulating the market not about the need of courts or police so you're using a straw man.
"

How so? If you claim that people can self regulate, then why do we need courts and cops? Why doesn't it work in the real world? And what conclusion can you draw in a proposed economic sense?

"
Second, you didn't answer my question.
"

I'm sorry: I don't see your question. Ask it, and I'll attempt an answer.

"
Third, I am no anarchist AND I also recognize there is a market need for courts and police which may be fulfilled by government. In fact, many readers of this blog would agree that protection of property rights via contracts is a proper role for government, but that's a political topic not an economic one so I just leave it at that.
"

Not sure I agree on that: I think there are a number of readers on this blog that think every government intervention is an oppressive force, and when they say laissez-faire, they mean in everything.

So I've learned not to assume ...

mike m said...

Anonymous September 15, 2010 2:49 PM

Not sure I agree on that: I think there are a number of readers on this blog that think every government intervention is an oppressive force, and when they say laissez-faire, they mean in everything.

I think people that argue against government intervention suggest that governemnt should not have a monopoly on the use of force, or authority in contract disputes. Contract resolution could be handled by independent third-parties such as professional "arbitrators", "arbiters" or "arbitral tribunals", and in many cases already is. There will always be a need for "authority" in cases of contract dispute and non-compliance of contractual obligations.

Another Anonymous said...

It is quite obvious that our chartalist compadres have made no effort whatsoever to familiarize themselves with the basics of Austrian School thought and thus do not have the slightest understanding of it. To some extent true. But the pro-Austrians here have made very little effort to do so. At least us crackhead delusional neochartalistmmters have made an attempt to explain it in our own words rather than pointing to some webpage. I am interested because I think Austrians are sometimes interested in things that the mainstream isn't, like credit bubbles & ABCT and that chartalists think about too. But we never get any real Austrian thought here!

jgo said...

"The FBI warned the Bush administration of widespread fraud in the mortgage industry as early as 2004, and they did nothing."

Meanwhile, Waters and Frank were leaning on Fannie, Freddie, FHAH, Countrywide et al., telling them everything was fine, that the scheme was working great, and that they should be issuing even more bad mortgages. We've watched the videos and heard the audio.

Bush's guilt is that he failed to stop them.

"the fundamental ideological axiom of all three "schools" is a mental vision/belief that aggregates and data sets (or "the economy") are real "things" that can be manipulated mechanically by wise state officials"

Can money supply be manipulated? Yes. Does it result in devastation? Yes. The Austrian school recognizes that these aggregates are aggregates, reflecting imperfectly collected historical "data", a mere imperfect shadow of the real economy at some time in the past.

"fraud prevention would gave helped"

Yes, active investigation and penalties to discourage would have marginally helped; but the biggest frauds were the Fed pumping out money and the congressional committees via the other quangos, saying that it was perfectly OK to hand out lots of loans to people who had no honest way to pay them off. As DH wrote: "Regulation created the new money, funnelled it into the housing industry, subsidized home ownership, created the GSE's, and exempted them from insolvency."

"It's implied in the term "mercantilists", which Krugman calls the Chinese regularly"

Unfortunately, all the governments are mercantilits, now.

"Free market purist always base their theory on the almighty market being the ultimate regulator"

Free and honest markets are the ultimate economic regulator. Of course, when someone initiates force or fraud, we're not talking about a free market anymore, and the government should intervene to penalize the initiator(s).

Here's some wonderful Keynesian/Obamanomics "stimulus" spending in action. They spent $8.5M on border port refurbishing at Whitetail. Canada has announced they're closing down their side of the port in April. The usual traffic at that point is about 5 people per day.

http://billingsgazette.com/news/state-and-regional/montana/article_c4ff04ea-c69a-11df-801f-001cc4c03286.html

jgo said...

"The FBI warned the Bush administration of widespread fraud in the mortgage industry as early as 2004, and they did nothing."

Meanwhile, Waters and Frank were leaning on Fannie, Freddie, FHAH, Countrywide et al., telling them everything was fine, that the scheme was working great, and that they should be issuing even more bad mortgages. We've watched the videos and heard the audio.

Bush's guilt is that he failed to stop them.

"the fundamental ideological axiom of all three "schools" is a mental vision/belief that aggregates and data sets (or "the economy") are real "things" that can be manipulated mechanically by wise state officials"

Can money supply be manipulated? Yes. Does it result in devastation? Yes. The Austrian school recognizes that these aggregates are aggregates, reflecting imperfectly collected historical "data", a mere imperfect shadow of the real economy at some time in the past.

"fraud prevention would gave helped"

Yes, active investigation and penalties to discourage would have marginally helped; but the biggest frauds were the Fed pumping out money and the congressional committees via the other quangos, saying that it was perfectly OK to hand out lots of loans to people who had no honest way to pay them off. As DH wrote: "Regulation created the new money, funnelled it into the housing industry, subsidized home ownership, created the GSE's, and exempted them from insolvency."

"It's implied in the term "mercantilists", which Krugman calls the Chinese regularly"

Unfortunately, all the governments are mercantilits, now.

"Free market purist always base their theory on the almighty market being the ultimate regulator"

Free and honest markets are the ultimate economic regulator. Of course, when someone initiates force or fraud, we're not talking about a free market anymore, and the government should intervene to penalize the initiator(s).

Here's some wonderful Keynesian/Obamanomics "stimulus" spending in action. They spent $8.5M on border port refurbishing at Whitetail. Canada has announced they're closing down their side of the port in April. The usual traffic at that point is about 5 people per day.

Billings Gazette: senator wants to shut down port