Keynesianism: The (near) 80-year-old fallacy

One of the things that interests me about Paul Krugman is his use of the word "fallacy" when applied to economics. When I first was learning about economic fallacies, I was taught that they are committed when people believe they can circumvent or negate the Law of Scarcity and the Law of Opportunity Cost.

This was neatly expressed in the acronym TANSTAFL, or "There ain't no such thing as a free lunch." Today, however, it seems that economics, or at least the "economics" of Paul Krugman, has "evolved" and "progressed" well beyond opportunity cost. How do I know? Krugman himself has told us.

In a recent blog post, he makes some interesting, if not outrageous, statements. (Come to think of it, Krugman makes lots and lots of outrageous statements.) He declares:

...when I was younger I firmly believed that economics was a field that progressed over time, that every generation knew more than the generation before.

The question now is whether that’s still true. In 1971 it was clear that economists knew a lot that they hadn’t known in 1931. Is that clear when we compare 2011 with 1971? I think you can actually make the case that in important ways the profession knew more in 1971 than it does now.

What happened in 1971? The U.S. Dollar collapsed as President Richard Nixon declared that suddenly it had come "under attack" by those evil "speculators." Nixon said nothing about the fact that the government, through the Federal Reserve System, had inflated the dollar for years in order to pay for the Great Society and the Vietnam War, and at the same time offering gold from the treasury to foreign governments at $35 an ounce.

Not surprisingly, U.S. gold reserves were fast dwindling and there was a run on the dollar itself, so Nixon did as one might expect Nixon to do: he blamed others and failed to tell the truth about what really was happening. Furthermore, he slapped down general wage and price controls in order to try to keep consumer prices from escalating.

Nixon had the public support of a lot of economists, even those who knew that his "economic plan" (then called Phase I) would be an inflationary disaster -- and it was. What economists "knew" in 1971, if one looks at the actions of the Fed and the president's economic advisers, was that government could inflate its way out of trouble, and the government could manage the economy through various edicts.

This was the day when John Kenneth Galbraith was the king of American economists, along with Paul Samuelson. Of course, what these men "knew" turned out to be utterly untrue. Government could not inflate its way out of trouble, and the 1970s, a decade when the U.S. economy lurched from one crisis to another, proved it.

However, I suspect that Krugman would have us believe that the price controls were brilliant, that all of the problems of the dollar in 1971 were due to speculators, and that had the government left price controls on everything, we would have enjoyed unparalleled prosperity. Or something like that.

His next statement, however, is a Classic Krugman Howler:

I’ve written a lot about the Dark Age of macroeconomics, of the way economists are recapitulating 80-year-old fallacies in the belief that they’re profound insights, because they’re ignorant of the hard-won insights of the past.

What I’d add to that is that at this point it seems to me that many economists aren’t even trying to get at the truth. When I look at a lot of what prominent economists have been writing in response to the ongoing economic crisis, I see no sign of intellectual discomfort, no sense that a disaster their models made no allowance for is troubling them; I see only blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide. And no, it’s not symmetric: liberal economists by and large do seem to be genuinely wrestling with what has happened, but conservative economists don’t.

And what is the "enlightened" viewpoint? Why it is print money, bail out everyone, continue the fraud of heavily-subsidized "green energy" that Krugman and his friends insist will lead us to recovery, and have the federal government hire millions of people to engage in make work.

Now, since the General Theory was published first in 1936, it is only a 75-year-old fallacy. The "80-year-old "fallacies" apparently are things like the Law of Scarcity and the Law of Opportunity Cost. In Krugman's view, it is "progress" simply to say that when the economy is in recession, Opportunity Cost no longer holds, and that government can alleviate or even do away with Scarcity via the printing press.

Furthermore, Krugman has made it clear that anyone who might actually appeal to those "80-year-old fallacies" is immoral and has no conscience. Yeah, Krugman and the Really Smart People have done away with Scarcity simply by declaring it no longer exists, at least when government prints up the money.

Keynesianism is one big fallacy, and a cult fallacy at that. It violates the Law of Cause and Effect by declaring that effect really is cause. And it wants us to assume that work is nothing more than a transmission mechanism for money, and it does not matter what government pays people to do, just as long as it provides money so that they can spend it and make us prosperous.

This isn't economics. It is nonsense.

Krugman: "Save" the euro by inflating it to death

Like most Keynesians, in the end, Paul Krugman is a one-trick pony who always recommends inflation as the answer to economic problems. (After all, he DID say in The Return of Depression Economics that inflation could provide a "free lunch" during economic downturns. In other words, the printing press negates the Law of Opportunity Cost.)

So, I see that Krugman now is giving the "Vietnam Strategy" to the Europeans: in order to "save" the euro, you must destroy it -- via inflation. Furthermore, we are supposed to think that had the German government in 1930 embarked on a policy of inflation, that it would have "saved" the country. Somehow, I doubt it.

How should the Europeans do it? Krugman already has set out a strategy that marks the way in which the European Central Bank would purchase the short-term debt of countries like Ireland, Portugal, Spain and Greece and hope that in the future, these countries will get their fiscal house in order. (Even Krugman knows that Greece cannot and won't do it, given Greek policies and its bloated government sector. Nonetheless, he believes that maybe the European Central Bank can inflate Greece's problems away, too.)

However, Krugman does not even contemplate any realistic outcomes of his strategy. If the ECB simply acts as the Big Sugar Daddy for countries by purchasing government bonds wily-nily, what is to keep everyone else from joining the Free Lunch? Sure, the European Parliament can enact policies that supposedly will limit this foolishness, but it is doubtful that once the shower of goodies starts, that anyone will hold to fiscal discipline.

In the end, this is a strategy that would inflate the euro out of existence. Now, that might be "good" for the dollar, given that investors around the world holding money are looking for safe havens. But the dollar sucks, too, thanks to the money-pumping strategy of the Obama administration.

So, in the end we are left with blizzards of paper money. But never fear, says Krugman. After all, everyone from Princeton and Washington knows that paper is more valuable than gold because paper is managed by Really Smart People Who Know More Than Everyone Else.

What is "the social contract" of which Krugman and Elizabeth Warren speak?

[Update]: Sheldon Richman, editor of The Freeman, offers another perspective on Elizabeth Warren and her now-famous words. Between what we are hearing from Washington and Michael Moore's latest veiled call for violence against people who make less money than he does, one can bet that private capital investment in this country is going to be stunted for years.

From what I can tell, the Keynesians and the Depublicans (or maybe the Remocrats) have declared war on private capital. The rest of us will pay dearly for this, and I will say that the U.S. economy NEVER will recover as long as the present gang of thieves holds power. [End Update]

Paul Krugman makes millions of dollars a year. While I am not privy to his actual income numbers, I have been told by a very reliable source that it is in the millions. Furthermore, he has no children and a wife who also earns a high income. The guy clearly makes more money than he needs to live, and many poor families could live well if Krugman were willing to give them a "big hunk of it." (If the man has a charity by which he feeds the hungry, I am not aware of it.)

Thus, we can conclude that Paul Krugman -- if we wish to consistently apply his words, and the recent words of Elizabeth Warren -- is responsible for making other people poorer. Krugman makes a lot of money, and according to Krugman, one only can make money at the expense of others who are worse off, so by Krugman's own admission, he is violating a "social contract."

That is not what Krugman would say, and I am sure that if government agents were to seize his property and most of his holdings, he would scream bloody murder, but that is for another post. Instead, I want to zero in upon this notion of the "social contract" that suddenly seems to be the rage among the Left.

In a recent meeting that has gone viral on YouTube, Elizabeth Warren, the Harvard law professor who President Obama unsuccessfully tried to appoint as a de facto "banking czar," now is running for the U.S. Senate in Massachusetts. This is that quote that the people from Moveon claimed was perhaps the most important thing EVER said:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there – good for you.

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory….

Now look. You built a factory and it turned into something terrific or a great idea – God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

At one level she is right, but no one I know claims that a person has gained wealth by no one's efforts but his own. However, we need to read between the lines of what both Warren and Krugman are saying, and we can find something much more sinister and economically ignorant than what their supporters would like to admit.

When I heard Warren's quote, the first thing that came to mind was the scene in "Godfather II" when Don Fanucci tells a young Vito Corleone that Corleone must let him "wet my beak." In other words, Fanucci was telling Corleone that the neighborhood was his own territory and if Corleone wanted to do business there, he had to pay up -- or else.

Call it what you will, but Fanucci was presenting his own version of "the social contract." Given that Murray Rothbard on more than one occasion likened government to a criminal gang or a mafia, I would say that the "social contract" of which Warren and Krugman speak falls into that category, something neither of them ever would acknowledge.

Yet, what was Warren saying? She was making the claim that entrepreneurs -- people like Steven Jobs -- somehow reap ALL of the gains of their commercial success, and that the ONLY way that other people outside the successful entrepreneur can gain any benefit at all from that successful company is through taxation. That is it. According to Warren, companies like Apple might sell products, but they benefit only the company Big Wigs.

While the Usual Suspects applaud these words, I cannot help but think of the story of "The Little Red Hen," who prepared bread by growing wheat, making flour, and baking the loaf, all while others looked on and did nothing. In the end, the Little Red Hen shared the bread with her chicks.

In the Elizabeth Warren/Paul Krugman version of "The Little Red Hen," however, the other animals could claim that their very presence at the farm was the REAL reason that the Hen could make bread in the first place. The animals might say that since they did not knock down the wheat or burn down the hen house, that it was THEY who were responsible for the Hen's success.

As for "marauding bands," who is Warren kidding? Has anyone ever seen a police raid (and especially from the Feds) on business firms. Please don't tell me that these "law enforcement" raiders are orderly and respectful. They behave exactly like "marauding bands, and all-too-often it is discovered afterward that there was no good reason for the violent raid in the first place.

The word from Krugman and Warren is this: entrepreneurs gain success ONLY at the expense of the people who really are responsible for the entrepreneurs' success in the first place. Entrepreneurs, in their view, really are parasites for they drain the "community" of its rightful wealth.

Now, I agree that many Wall Street firms have gained wealth through political favoritism and from bailouts, but since Krugman and Warren actually supported the bailouts of those banks and financial houses, as well as the bailouts of GM and Chrysler, I'm not sure why they are complaining. The Austrians wanted those entities to bear the costs of their entrepreneurial errors, and permit those firms whose principals had not made the bad choices to be able purchase the assets of the firms that failed, but because the Austrians have wanted the "banksters" to bear the costs of their errors, Krugman and others have claimed that Austrians are "enemies of the people."

Do people have obligations to their neighbors? I believe they do, although the "social contract" of which Krugman and Warren speak is a "contract" that demonizes people who have taken risks and been successful and goes well beyond any relationship and responsibilities that I would be willing to support.

I'm sorry, but the notion that everyone else should have a claim to the income of Steven Jobs -- or even Elizabeth Warren and Paul Krugman -- because of a "social contract" they claim exists is nonsense. But I will go further; Steven Jobs has contributed much more to the well-being of people in this world than Krugman, Warren, and all of the other leftists in the world combined.

Elizabeth Warren and Paul Krugman want us to believe that the Political Classes ultimately create wealth, and that the parasites are people who saved, invested, took risks, and took an idea and were successful in business. This is not a "social contract;" it is turning reality upside down.

Krugman versus Volker: Will Krugman now attack him?

[Update] It didn't take Krugman long to attack Volker. In his blog post today, Krugman claims that inflation can be a good thing and we need more of it. Yeah, inflation is "good." And War is Peace, Freedom is Slavery, and Ignorance is Strength. [End Update]

Paul Volker is a Democrat, and that might be enough for him not to be placed in Paul Krugman's cross hairs in future columns. However, for now it is interesting to see the difference between the last Fed Chairman to really get inflation under control and an "economist" who today claims that inflation is the answer.

Volker today writes in a NYT op-ed:

...now we are beginning to hear murmurings about the possible invigorating effects of “just a little inflation.” Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the “animal spirits” of business, or so the argument goes.

It’s not yet a full-throated chorus. But remarkably, at least one member of the Fed’s policy making committee recently departed from the price-stability script.

The siren song is both alluring and predictable. Economic circumstances and the limitations on orthodox policies are indeed frustrating. After all, if 1 or 2 percent inflation is O.K. and has not raised inflationary expectations — as the Fed and most central banks believe — why not 3 or 4 or even more? Let’s try to get business to jump the gun and invest now in the expectation of higher prices later, and raise housing prices (presumably commodities and gold, too) and maybe wages will follow. If the dollar is weakened, that’s a good thing; it might even help close the trade deficit. And of course, as soon as the economy expands sufficiently, we will promptly return to price stability.

Well, good luck.

When Volker became Fed Chairman in the summer of 1979, inflation was running in double digits and the economy was moribund. G. William Miller, Volker's predecessor, believed that the way to "stimulate" the economy was to crank up the printing presses, and the results were obvious. Volker, on the other hand, was willing to slow the presses and within a few years, inflationary expectations were near-zero.

Yet, the economy recovered. During the recession of 1982, there were liquidations as the economic landscape in places like Cleveland and Pittsburgh changed drastically. (Pittsburgh has recovered well, while Cleveland stays with the old model of thwarting entrepreneurs -- it takes well over a year to get new business permits there -- and looking to government spending as its own rescue fairy. The results speak for themselves.)

According to Krugman, however, one cannot have any liquidations AND recovery. No, the only way to have an economic recovery is for government to borrow, print, and spend. His most recent claims that the U.S. Government is on an "austerity" program simply don't wash. The federal government has ramped up spending in the days of Obama, and the president promised us that if Congress would pass his 2009 plan, unemployment would not rise above 8 percent.

In calling for yet more spending and more "stimulus," Krugman writes:

In the United States, the modest federal stimulus of 2009 has faded out, while state and local governments have slashed their budgets, so that over all we’ve had a de facto move toward austerity not so different from Europe’s.

Strange to say, however, confidence hasn’t surged. Somehow, businesses and consumers seem much more concerned about the lack of customers and jobs, respectively, than they are reassured by the fiscal righteousness of their governments. And growth seems to be stalling, while unemployment remains disastrously high on both sides of the Atlantic.

The cure? He declares:

The answer is that we need a major push to get the economy moving, not at some future date, but right now. For the time being we need more, not less, government spending, supported by aggressively expansionary policies from the Federal Reserve and its counterparts abroad. And it’s not just pointy-headed economists saying this; business leaders like Google’s Eric Schmidt are saying the same thing, and the bond market, by buying U.S. debt at such low interest rates, is in effect pleading for a more expansionary policy.

And how will government finance this policy? It cannot come from the primary bond market, as that would be nothing more than a simple transfer.

No, what Krugman wants is for the Fed to purchase short-term government debt, and lots of it, and to do it on the primary market. He has not said so directly, as the Federal Reserve Act of 1913 expressly forbids the Fed from doing so. However, I believe that what Krugman wants is for Congress either to change the law or for Obama to declare an emergency or to issue a convoluted executive order like what FDR did when he confiscated gold.

Like it or not, that is Krugman's end game in which the Fed simply buys government debt on the primary market. While Krugman might claim that this constitutes a "free lunch" and the promise of prosperity, Volker knows better. It will be interesting to see when and where the collision between them occurs.

Krugman and the New Moralizing

Paul Krugman loves to take on what he calls the "moralizing" crowd, at least when it comes to making economic policy choices. If someone objects to the Federal Reserve System inflating money so that it devalues the holdings of individuals -- a confiscation of their wealth -- then that person is engaging in what Krugman calls "moralizing," and that is bad.

However, when it comes to the Welfare State, Krugman suddenly turns into Jeremiah, excoriating the Israelites for not worshiping the God of Collectivism. In his column today, he repeats the leftist canard that in a free society, one is "free to die." (The other leftist slogan is that in a free society, one is "free to starve," which is why I guess people in North Korea are going hungry.)

I did not watch the Tea Party debate the other night and am not interested in pulling up the recordings, given I just am tuned out to hearing politicians yapping. However, there was a situation in which someone asked Ron Paul a hypothetical question about a 30-year-old man who had not purchased medical insurance, Krugman writes (always trying to put Paul in the worst possible light because, after all, Ron Paul cannot possibly be as decent a human being as is Paul Krugman):

Mr. Paul replied, “That’s what freedom is all about — taking your own risks.” Mr. Blitzer pressed him again, asking whether “society should just let him die.”

And the crowd erupted with cheers and shouts of “Yeah!”

The incident highlighted something that I don’t think most political commentators have fully absorbed: at this point, American politics is fundamentally about different moral visions.

Now, there are two things you should know about the Blitzer-Paul exchange. The first is that after the crowd weighed in, Mr. Paul basically tried to evade the question, asserting that warm-hearted doctors and charitable individuals would always make sure that people received the care they needed — or at least they would if they hadn’t been corrupted by the welfare state. Sorry, but that’s a fantasy. People who can’t afford essential medical care often fail to get it, and always have — and sometimes they die as a result.

Indeed, people can die from a lack of treatment, but, as Krugman notes in this interview, if who is to die is decided by government agents wearing white coats and repeating the mantra of "lower costs, lower costs," then we should "let them die." Furthermore, the notion that many people in the medical professions are motivated ONLY by money is a huge lie.

My grandfather, Dr. William Chisholm, served as a medical missionary in Korea before World War II, and he treated many, many people who never paid him a cent. Today, my cousin, David Morton, who is Dr. Chisholm's grandson, works in the hinterlands of Malawi treating patients who cannot pay him. (According to Krugman, those men are just fantasies. No doubt, they must have evil intentions, since they were and are motivated by their Christianity, and we already know what Krugman thinks of Christians.)

Furthermore, we have many doctors all over the world, not just in the USA, who will treat patients who do not compensate them. Yes, because medical care is scarce, ultimately someone needs to pay something, and often others are willing to pay, or some doctors at least are willing to essentially charge themselves in certain situations. Furthermore, Ron Paul is a doctor and is much closer to the medical scene than Krugman, yet here is Krugman lecturing the man about medical care and essentially calling him a liar. Yes, that is what Krugman is doing.

According to Krugman, ONLY the Welfare State can ensure the moral outcomes; anything else is immoral, and those who object to any aspect of the Welfare State are immoral monsters who just want to see others suffer and starve. Am I exaggerating? Read the column and you will see what I mean.

As for morality, Krugman says that it is a good thing for governments to destroy the assets of individuals through inflation (and to oppose such a thing, according to Krugman, is immoral, as those who oppose it do so only because they selfishly want other people to be out of work and to suffer), but when a man who has been a doctor speaks of compassion within his profession, well that man is an immoral liar.

So, I guess in Wonderland, people in a free society are "free to die," and in Wonderland, Krugman is free to lie.

Krugman's Fed Road Map: Print Money, Buy Government Bonds!

In reading Paul Krugman, I am struck by the man's chutzpah, his willingness to accuse others of being immoral while simultaneously claiming that his money-printing schemes are moral. Yeah, it's confusing, but to Krugman and his followers, it all makes sense.

Krugman's latest morality play, however, even outdoes himself, and at the same time, he unwittingly presents the "road map" he believes that governments should use when they get into financial trouble. It is hard for me to believe that America's supposed "best" economist is recommending a scheme in which he both calls for governments simply buy their own bonds with their own newly-printed money, and declares that anyone who might oppose such financial trickery as being immoral, but there it is.

Krugman writes:

Here’s how such a run works: Investors, for whatever reason, fear that a country will default on its debt. This makes them unwilling to buy the country’s bonds, or at least not unless offered a very high interest rate. And the fact that the country must roll its debt over at high interest rates worsens its fiscal prospects, making default more likely, so that the crisis of confidence becomes a self-fulfilling prophecy. And as it does, it becomes a banking crisis as well, since a country’s banks are normally heavily invested in government debt.

Now, a country with its own currency, like Britain, can short-circuit this process: if necessary, the Bank of England can step in to buy government debt with newly created money. This might lead to inflation (although even that is doubtful when the economy is depressed), but inflation poses a much smaller threat to investors than outright default.

Before tackling what really is a mind-boggling proposition, let me say that "for whatever reason" is really not economic analysis. Instead, it is Krugman once again demonstrating that he does not understand what Carl Menger called the Law of Cause and Effect.

You see, there is no real reason for this sudden unwillingness for investors to purchase government bonds except for maybe changes in "animal spirits" or maybe just whatever. It is like his "under consumption" theme that under girds his theme in which there is no real cause for this sudden change of mass consumer preferences for buying anything. Blame it on "whatever."

As for the bond-buying scheme, apparently it never occurs to Krugman that once a government resorts to this kind of financial trickery -- and no other term will suffice -- that it is sending the message to investors that its bonds essentially are worthless. I simply cannot see how a contrivance would lead to anything but disaster.

If a government were to do what Krugman recommends, then there would be no constraint at all in its spending, as politicians would claim that it had "free money." Why worry about taxes? Investor confidence? We don't need no stinkin' CONFIDENCE FAIRY! Just print the money and spend!

By the way, this is exactly how Zimbabwe financed its government and it brought ruinous inflation. Yet, Krugman not only recommends this nefarious financing as a "solution," but he also has the gall to claim that anyone who might oppose it is a "moralizer," as though there were something wrong with pointing out that when governments engage in this kind of madness, they also destroy the wealth of every citizen who uses that government's currency.

Since a number of European countries are using the euro, Krugman claims that the European central bank should be printing more euros to buy the debt of countries like Spain and Italy (and I am sure he believes likewise for Greece). Here he is in his own words:

What Mr. (Jean-Claude Trichet) Trichet (the president of the European Central Bank or E.C.B.) and his colleagues should be doing right now is buying up Spanish and Italian debt — that is, doing what these countries would be doing for themselves if they still had their own currencies. In fact, the E.C.B. started doing just that a few weeks ago, and produced a temporary respite for those nations. But the E.C.B. immediately found itself under severe pressure from the moralizers, who hate the idea of letting countries off the hook for their alleged fiscal sins. And the perception that the moralizers will block any further rescue actions has set off a renewed market panic.

Notice that anyone who might point out that this "pull-the-rabbit-out-of-the-hat" finance sows its own seeds for disaster is nothing but a "moralizer" who apparently is bent on inflicting pain on others for no good reason. It doesn't take training in economics for someone to see where such a scheme would lead -- and I have no doubt that government employee unions would demand such a "fix" in order to prop up their own bloated trickery -- but from what I have read of Krugman, he seems to think that these unions really are creating wealth.

At least we see Krugman's road map for the USA: Have the Fed directly purchase short-term U.S. bonds. For now, such a scheme would be illegal, given that the Federal Reserve Act of 1913 expressly forbids exactly what Krugman has proposed for other countries to do. (No doubt, the people who wrote the original act were "moralizers," too.)

As I said before, it does not take training in economics to see where such actions would lead. However, if one has "economics" training from a lofty U.S. university, then one apparently is free to discard all laws of economics -- and all rules of common sense.

Krugman, Shame, and Politicizing Tragedies

People have sent Paul Krugman's comments on 9/11 and I admit to having a mixed reaction. As many of you know, I have not supported the U.S. wars abroad and even had a conversation with Krugman in 2004 about my opposition to them, especially the Iraq war.

However, Krugman seems to use the post-9/11 tragedy to play his usual games of political partisanship, and that is what bothers me most. George W. Bush hardly is the first politician to hype and politicize a tragedy. Yes, it is disgusting, but Bill Clinton hyped Oklahoma City and trotted out legislation that was every bit as terrible as what we saw in the Patriot Act. (In fact, much of what was in the Patriot Act was what Clinton tried to get passed but could not in the face of Republican opposition.)

Furthermore, now that the Obama administration continues the odious CIA rendition programs, sends assassination squads abroad, and keeps the prison at Guantanamo open, we hear nothing from Krugman. Nothing.

This is not a guy who support civil liberties; this is a guy who supports Democrats. Krugman will use the civil liberties weapon when it fits against Republicans, but is silent when Democrats engage in the same horrible conduct.

Yes, the Bush administration's reaction to 9/11 was shameful, just as Bill Clinton's was after Oklahoma City. Both administrations engaged in the slaughter of innocent people -- and received praise from the usual quarters.

Furthermore, when Bush was president, war was terrible. With Obama in the White House, it now is a "stimulus." Enough said.

Setting the Economy on Fire

In briefly praising President Obama's bold-but-apparently-not-bold-enough plan, I am struck by how Paul Krugman holds to the view of the homogenized economy: it doesn't matter where one spends, as all spending will "create jobs." That he believes Obama's program would "make a significant dent in unemployment" does not deviate from his overall Keynesian theory.

He adds that the Evil Republicans don't want people to go back to work (because Krugman believes they enjoy making people suffer), so the Great Plan won't be implemented, anyway. I should add that Krugman apparently does not differentiate between a "plan" that simply throws money at the economy which, at best, would employ lots of politically-connected people (most of the people who would be paid directly under this plan are members of labor unions), and something which would be economically sustainable. Like Keynes, he believes that only short-term measures are meaningful and that an economy is just a homogeneous mass of factors that automatically are employed in even proportions when governments add more money.

In his September 9 column, Krugman gives a lot of space to a recent speech by Charles Evans, the president of the Federal Reserve of Chicago, and both the speech and Krugman's reaction continue the myth of the "do-nothing Fed" that is becoming the newest mantra among Progressives. Krugman writes:

As Mr. Evans pointed out, the Fed, both as a matter of law and as a matter of social responsibility, should try to keep both inflation and unemployment low — and while inflation seems likely to stay near or below the Fed’s target of around 2 percent, unemployment remains extremely high.

So how should the Fed be reacting? Mr. Evans: “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.”

But the Fed’s hair is manifestly not on fire, nor do most politicians seem to see any urgency about the situation. These days, the best — or at any rate the alleged wise men and women who are supposed to be looking after the nation’s welfare — lack all conviction, while the worst, as represented by much of the G.O.P., are filled with a passionate intensity. So the unemployed are being abandoned.

Now, given what the Fed has done these past four years, I am not sure how anyone can claim that Ben Bernanke is fiddling while Rome burns, but I suppose that if one repeats something enough times, it becomes Truth. (With Progressives, they only need to say it one time, since Progressives Speak Only Truth. Just ask them.)

So, let us look at a few things that Uncle Ben has done since 2007:

• He provided the liquidity for the restructuring of Fannie and Freddie when they finally collapsed under the weight of their leveraged portfolios;

• He provided the backstop to the TARP funding that bailed out the Wall Street banks and financial houses;

• He continued and expanded the policies of the infamous "Greenspan Put" in which it was understood that no matter how reckless the banks and financial houses behaved with their "investments," the Fed would be there with the Big Checkbook to set all things right and to provide Holy Water (read that, "liquidity") to pour on the red ink;

• The Fed purchased hundreds of billions of dollars of private securities, as shown by the image below, after The Great Toga Party Unofficially Ended in 2007, in an attempt to shore off the disaster from the huge amounts of leverage that threatened to collapse;

• The Fed issued $1.2 trillion in secret loans to Wall Street and beyond following the 2008 crisis, and even firms like McDonald's received loans from Uncle Sugar;

• The Fed has helped to prop up central banks around the world, most notably the European Central Bank, which faces the same kind of crisis;

• The Fed has continued to purchase U.S. Government long-term debt as part of its "Quantitative Easing" initiative;

• Bernanke continues to push interest rates down to near-zero levels in its attempt to encourage lots of borrowing, especially on behalf of the U.S. Government and other governments.

This hardly reflects a "do-nothing" Fed, but the larger problem is that Krugman and Evans seem to be True Believers who follow a belief that if the Fed truly were doing its job, we would have relatively low-inflation AND low unemployment. In other words, they really believe that the Phillips Curve actually is economic law and not an empirical observation. The problem is not that the Fed has failed to "do something," but rather its "something" constitutes actions that do not get at the heart of the massive malinvestments that have thrown economies around the world over the cliff.

(Keep in mind that the inflation-unemployment relationship as espoused by Keynesians holds that there can be no such thing, theoretically speaking, as stagflation, and when it DOES happen, they give us convoluted things like "oil shocks" or some other even that supposedly happens randomly. And there always is a random event occurring, in their minds, that can explain the unexplainable. The Keynesian view is that increasing the rate of inflation serves to CUT wages across-the-board, which then makes labor relatively cheaper, which encourages more hiring.

I find this interesting, given that Krugman is among the economists claiming that INCREASING wages during a depression will increase EMPLOYMENT because the opposite -- cutting wages -- results in a downward-spiral of spending and ultimately deflation. So, we are in that absurd situation in which Krugman both demands real wages rise AND real wages be cut through inflation, and somehow all of this will turn into economic recovery. Only at Princeton at the New York Times, I guess, but we have to remember that These People Are Smarter Than We Are.)

Let us turn now to Krugman's praise of Obama's newest Pull-The-Rabbit-Out-Of-Our-Hats Scheme. Krugman writes:

O.K., about the Obama plan: It calls for about $200 billion in new spending — much of it on things we need in any case, like school repair, transportation networks, and avoiding teacher layoffs — and $240 billion in tax cuts. That may sound like a lot, but it actually isn’t. The lingering effects of the housing bust and the overhang of household debt from the bubble years are creating a roughly $1 trillion per year hole in the U.S. economy, and this plan — which wouldn’t deliver all its benefits in the first year — would fill only part of that hole. And it’s unclear, in particular, how effective the tax cuts would be at boosting spending.

Still, the plan would be a lot better than nothing, and some of its measures, which are specifically aimed at providing incentives for hiring, might produce relatively a large employment bang for the buck. As I said, it’s much bolder and better than I expected. President Obama’s hair may not be on fire, but it’s definitely smoking; clearly and gratifyingly, he does grasp how desperate the jobs situation is.

None of the things that are named in the above list will generate wealth in the U.S. economy, or at least put us on a road to real recovery. Instead, it funnels money to politically-favored groups and to Obama's pet projects of "high-speed rail" and "green energy," neither of which can exist without massive subsidies that have to come from somewhere.

In other words, the Obama program that Krugman praises would work by draining the profitable entities in the economy and diverting resources from higher-valued uses to lower-valued uses. Somehow, I think that this is what Krugman WANTS to see happening.

That's right; I believe that Krugman, like so many other Progressives, sees this crisis as an opportunity for force recalcitrant Americans into changing their lifestyles into something that would reflect how Progressives believe they should be living. What is delusional about all of this is that what Krugman, Bernanke, and all of the other Progressives believe will transform the U.S. economy actually is going to further drag it into oblivion.

Not that wealthy people like Paul Krugman are going to be hurt by all of this. No, he will have a view of the carnage from the luxury box, and all the while he will decry this moral theater, he will be demanding that more people will be thrown into the arena to be devoured by the lions of depression.

Why do I say this? I say this because had the powers-that-be permitted the malinvestments to follow their natural courses -- as opposed to governments trying in vain to prop them up -- when the balance sheets were groaning with red ink, we would be in a real economic recovery now. Instead, we have Krugman and the Progressives insisting that the malinvestments continue on their merry way and that the government add to them the unsustainable burdens of "green energy," corn-based ethanol, high-speed rail, and unionized government that are resulting in millions of people losing their livelihoods.

Let's say what needs to be said: In the name of ending unemployment, Paul Krugman is insisting that we expand the reach of the state, and if people are going to get jobs, they have to be in the areas of employment that meet HIS approval. If they have different ideas, then let them eat cake.

The President's "Let's-continue-the-depression" speech

We arrived in the USA at about 1 p.m. Thursday, got through customs, picked up our van, and navigated the traffic through New York and finally reached our hotel in Bethlehem, Pennsylvania, at about 5. By then, we were very tired, our body clocks telling us it was midnight.

We ate supper and then went to bed before 8 p.m. and woke up at 5:30 this morning. Now, why do I include such seemingly irrelevant details when I am writing about President Obama's speech? I say it because I did a very useful thing when Obama was giving his supposed "epic" address: sleeping soundly.

No, I did not hear a word Obama said, and I will admit that even had I been awake, I either would have had the TV off (which is more likely, given that we are not television watchers), or might have watched something entertaining, or even semi-educational, like the Ice Truckers.

Since I knew that the New York Times and Paul Krugman were on the job, I would have all that I need for commentary today and I must say that these folks did not disappoint. When I read words like "bold" and "passionately" and "authoritative," I knew that I had come to a place that was just one step below the White House PR room.

Hey, Obama might be presiding over the destruction of the U.S. economy, its currency, and its social fabric, but they still love him at the NYT and Princeton. So, let us deconstruct a bit what Obama has said, along with the commentary from the Expensive Seats at the NYT. (I will deal directly with Krugman's "Setting their hair on fire" column in a later post.)

Before taking a brief look at Obama's proposals, however, let me first deal with something the editors declared, which tells me that this whole thing is a religious exercise with these very secular folks:

Though he went on too long, he was authoritative in demanding that Congress pass his plan quickly and in laying out its benefits for average Americans. He directly, even mockingly, challenged the increasingly nihilistic Republican view that government’s very presence is noxious. Just as Lincoln helped start the transcontinental railroad and land-grant colleges, he said, the two parties must together push the country past its economic crisis. Waiting for the next election will waste valuable time, he said. (Emphasis mine)

I decided to look up the meaning of "nihilism" and found that it is a negation of the very meaning of life or "that life is without objective meaning, purpose, or intrinsic value." So, according to these supposedly secular people, government itself is the meaning of life, and even to question the role of the state in our lives is to engage in "nihilism."

To be honest, that tells me that the editors are arguing this whole issue from a religious viewpoint. It is not enough that something needs to be done to end this whole downturn, but it MUST BE DONE through the mechanisms of the State, or else such action will be meaningless.

That point cannot be ignored. The U.S. economy suffers from a dearth of new private capital investment in large part because we have a government full of people that are hostile to private capital investment, or at least private capital investment that does not coincide with the State's various schemes of "green energy" or some other aspect of Crony Capitalism. The editors of the NYT, who are part of the Political Class in this country, simply cannot stand the very idea of people acting in a way that both creates wealth and does it without letting members of that odious class "wet their beaks."

Thus, what we get are various schemes in which the government tries to pull yet another rabbit out of the hat. For all the talk of "boldness," we get more of the same: more money to state governments to prop up state employee unions for another year, more "infrastructure" schemes to build roads and tunnels to nowhere and to prop up (What else?) more labor unions, and short-term tax and credit schemes that might make it less expensive to currently hire employees, but do absolutely nothing to promote the very long-term capital investment that we need.

This last point is most instructive, because what the NYT and the Political Classes are demanding are nothing less than a bunch of short-term "fixes" that over time will "fix" less and less. There is no use trying to explain to these people what an economy really is because, frankly, they already have the answer: a machine that ultimately funnels money and power to the Political Classes. Anything else is unacceptable, and when we see the Mouthpiece of the Political Classes, the NYT, declare that even to question the role of the State is to question Meaning Itself, then we can be assured that Washington and those who believe that the nation's capital is as much a symbol of Religious Faith as Mecca is to the Moslems or Jerusalem to Judaism, then there really is nothing more to discuss.

As for the speech, as I said before, Obama is demanding that the Depression continue. He clearly is not interested in doing anything to improve the economy that actually might require that he and his cronies get themselves out of the picture.

No, Obama on Thursday night declared that his administration is about short-term schemes to continue the bogus magic show that has become the White House, Congress, and the rest of Washington. In the end, it is not about the economy at all; it is about the very people who have been dragging down the hopes and dreams of others continuing to make sure that they are on the lifeboats when the Titanic sinks.

Now, if government would concentrate on the weather, we would have no more hurricanes....

With the latest employment numbers looking bleak, the Usual Suspects are out in droves explaining why after spending trillions of dollars, the economy continues to sink. Leading the way is Paul Krugman, who insists that this continuing downturn exists because the government has been “concentrating” on the wrong thing: budget deficits.

Krugman writes:

I don’t mean to dismiss concerns about the long-run U.S. budget picture. If you look at fiscal prospects over, say, the next 20 years, they are indeed deeply worrying, largely because of rising health-care costs. But the experience of the past two years has overwhelmingly confirmed what some of us tried to argue from the beginning: The deficits we’re running right now — deficits we should be running, because deficit spending helps support a depressed economy — are no threat at all.

And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.

The Keynesian explanation of what is happening is pretty straightforward, and Krugman does it on a regular basis (along with Brad DeLong and, to a lesser extent, Robert Reich). Details include:

• The economy operates in a circular motion, with consumer spending propping up business activity, which in turn provides jobs for consumers so that they can continue to spend and give themselves jobs (so that they can continue to spend);

• If marginal taxes on the wealthiest people are not high enough to confiscate much, if not most, of their income, then the rich will “hoard” the money and not spend enough, which slows and ultimately breaks what Reich calls the “virtuous circle” of spending;

• When that happens, government must raise tax rates on the “rich” (Reich calls for a return of the 70 percent marginal rates that existed in 1981) in order to get money into the hands of the “middle class” (which apparently is a creation of the State) so that the spending circle can be revived;

• At the present time, interest rates are very low, which means that the economy is in a “liquidity trap” in which the only way that the spending circle can move is via more government spending, which should be financed by borrowing, and since interest rates are low, the borrowed money essentially is “free;”

• If a person makes a point of discussion that deviates from what has been presented, that person is motivated by hatred of the unemployed and wants people to lose their jobs and wants the economy to tank;

• Thus, in the end, the debate on Keynesian “solutions” ultimately is a debate on good and evil. Those who support Keynesianism are “good” and those who disagree are evil.

In the numerous columns and blog posts Krugman has written in the past few months, the theme is consistent: there can be no intellectual disagreement with Keynesian analysis because the truth of the Keynesian position is self-evident. Anything else is evil and delusional. For example, the “Regime Uncertainty” position that Robert Higgs and others have taken is nothing more than a figment of one’s imagination:

O.K., I know what the usual suspects will say — namely, that fears of regulation and higher taxes are holding businesses back. But this is just a right-wing fantasy. (Emphasis mine) Multiple surveys have shown that lack of demand — a lack that is being exacerbated by government cutbacks — is the overwhelming problem businesses face, with regulation and taxes barely even in the picture.

For example, when McClatchy Newspapers recently canvassed a random selection of small-business owners to find out what was hurting them, not a single one complained about regulation of his or her industry, and few complained much about taxes. And did I mention that profits after taxes, as a share of national income, are at record levels?

So short-run deficits aren’t a problem; lack of demand is, and spending cuts are making things much worse. Maybe it’s time to change course?

While all of this seems to be self-evident to Krugman, there are some important things that are left out. The first is the role of the economist, who is supposed to be able to look beyond the rhetoric and the “man on the street” view that ultimately leads to the “Broken Window Fallacy.” For example, the marginalist position on value is one that is not easily seen or understood by the typical layperson, who is more likely to believe that the value of a final product is determined by its cost of production.

The second is that the typical small business owner is not going to be able to relate how government “job-saving” programs like the subsidizing of corn-based ethanol or the bailout of General Motors has diverted resources from productive to unproductive uses. Instead, the business owner is going to see how people directly are purchasing products and what it costs to make them, and then make decisions from that vantage point.

As I said before, economists are supposed to be able to take in the whole picture, or to contemplate not only what is “seen,” but also what is “unseen,” to quote Frederic Bastiat. In other words, one should expect a journalist to concentrate on what is “seen,” and to miss the aspects of the larger picture. That is excusable, even if it is irritating.

However, it is unexcusable for an economist, and especially one who has the stature of a winner of the Nobel Prize, to concentrate only on what is seen and not only to ignore those important things not seen, but then to personally attack other economists who do their real duties to examine the entire picture and declare that their motivation for doing so is that they are evil and want Americans to lose their jobs.

The truth is that Krugman’s argument is a red herring; had the Obama administration and Congress done nothing but talk about jobs and launch one employment program after another, the rate of joblessness still would be high, and the fiscal picture of this government and this country would be as bad as it is now. The U.S. economy is not doing poorly because of lack of “concentration” by government officials, but because the government stands in the way of an economic recovery.

By bailing out the banks, by bailing out companies, by spending at record levels, and by holding down interest rates, the U.S. Government is preventing resources from moving from lower-valued to higher-valued uses. Furthermore, the government through political intimidation (see the recent raid on Gibson Guitars) and hostile rhetoric against firms that are legitimately profitable is sending the message that private enterprise is the enemy that ultimately must be replaced by state-sponsored enterprise.

There is another problem to this “oversight” issue, and that is the promotion of the wrong view of a “job” itself. As I read the Progressives on jobs, I have come to realize that they (and that includes “economists” such as Krugman) see the “job” solely as a transmission mechanism for income and, therefore, spending.

In other words, the actual services that one provides are irrelevant in and of themselves, or at best are secondary to the income that those providing them receive for their work. In that view, an economy is just one big circle of spending, with “spending” itself taking on a meaning that is quite removed from the actions and desires of consumers.

Spending, according to the Keynesians, is rather impersonal, and it cannot be tied to purposeful behavior by individuals. The value of “spending” is not that individuals are able to purchase goods and services in order to meet their needs, but instead is a mechanism that keeps that “virtuous circle” known as an “economy” moving in the “right” direction.

This is not economics; it is a mechanistic view of the world that ignores individual preferences and the actual movement of resources and factors of production. Unfortunately, people like Krugman add to the tragedy by claiming that those who look to actual economic explanations of this continuing saga by employing the tools of economic analysis do so because they are both stupid and evil. When the “leading lights” of modern academic economics claim that the employment of historically-accepted intellectual instruments is in itself “evil,” then one must wonder about the very future of this discipline.

Were we in paradise, but failed to realize it?

Progressives have a narrative that just won't quit, even when the facts contradict them. Whether it is Paul Krugman or Robert Reich or an editorial writer of the New York Times, the narrative goes like this: From the New Deal to 1981, America was a virtuous, prosperous country that flourished on unionized industries and high tax rates, with many key industries heavily regulated by government.

The economy was in perpetual motion, jobs were easy to find, and life was good. Then the ideologues somehow managed to convince prosperous Americans that they really were bad off and that perhaps we needed to change the tax rates and regulatory structure. That was the beginning of the end, and from 1981, the economy continually spiraled into Hell, with a brief respite coming in the Bill Clinton administration, with the economy booming because the top tax rates were raised from 33 percent to 39.6 percent.

Alas, the Evil People took over in 2001, after stealing the presidential election, and the proceeded to lower the top rates from 39.6 percent to 35 percent, and that caused the economy to collapse, first in 2001, and then in 2008, and now it is tanking further because the Evil People don't want high rates of inflation and are against raising the top tax rates to 70 percent.

Thus, if one receives a steady diet of the NYT, the solution to our problems is as follows:

• Raise the top income tax rates at least to 40 percent and preferably back to 70 percent;

• Unionize all American industries, and if workers don't want a union, force one on them, anyway;

• Get the Federal Reserve System to manipulate the monetary transmissions until the rate of inflation reaches at least 6 to 8 percent, with goals of pushing it into double-digits;

•  Create more highway-building schemes with the hopes that middle-class people will be employed, which will enable them to get more money, which means they can spend us into that "virtuous circle" of job creation.

Lest anyone think I am kidding, read the latest op-ed in the NYT from Robert Reich, the former U.S. Labor Secretary and full-time crank. Declares Reich:

Look back over the last hundred years and you’ll see the pattern. During periods when the very rich took home a much smaller proportion of total income — as in the Great Prosperity between 1947 and 1977 — the nation as a whole grew faster and median wages surged. We created a virtuous cycle in which an ever growing middle class had the ability to consume more goods and services, which created more and better jobs, thereby stoking demand. The rising tide did in fact lift all boats.

During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.

Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs.

Yes, ladies and gentlemen, blame cutting tax rates and...Steven Jobs. That's right, read what Reich says. He actually blames the entrepreneurs for increasing wealth through new capital.

So, it seems that economically speaking, we have come full circle. The Golden Age of which Reich speaks was one in which post-World War II, the USA had the capital advantages, but as other countries began to rebuild their economies, like Japan, and also adopt superior capital and production methods, the U.S. advantage began to wane.

The big warning should have been the currency crisis of 1971, but notice that people like Reich consider this to have been a triumph, since the 1970s was a decade of inflation, and Reich and his fellow Keynesians are champions of destroying the value of money. An economy, in their view, is nothing more than a big circle in which people spend and spending creates jobs and jobs allow us to spend, and the circle continues.

So, if all it takes is spending, I have a better idea, one that I am sure that Reich, Krugman, and the NYT would support: Just give everyone lots of money. Don't worry about jobs at all. Just give people money, and since production is automatic, the goods will be there as long as the government puts money into the hands of everyone.

Such a scheme should not be difficult, and we need not worry about the costly monetary transmission mechanism of "the job." Why bother when all that is needed is more spending?

So, why don't we see Reich, Krugman, and others promoting this scheme? After all, it is consistent with what they are demanding whenever they take to print or the airwaves. I mean, jobs are dangerous, bosses can be mean, and they are so, so unnecessary when all that is needed is spending.

And please don't pull a "work ethic" line on me. Progressives for years have denigrated the world of work, speaking of "dead-end-jobs" and accusing employers and business owners of exploitation of workers -- and worse. Krugman, Reich, and the NYT editorial writers and other Progressives see "jobs" mainly as transmission devices for providing incomes to the middle class, so that those people can spend us back into prosperity.

Apparently, that is what they wanted us to believe was the case in post-war America. The government taxed the rich at very high rates, unions forced up wages, and people spent like crazy, creating Reich's "virtuous circle." As one who was working in the late 1970s, I don't remember the U.S. economy being in the great shape that Krugman and Reich claim it was.

Furthermore, for all of the talk about ideology and deregulation, it was the liberal Democrats like Ted Kennedy, Jimmy Carter, and Alfred Kahn that were at the forefront of those initiatives. However, that narrative doesn't fit the current set of false facts, so like everything else, it must be shoved into the Orwellian Memory Hole so that Americans can be told by Progressives that giving the state more regulatory powers, high tax rates, and lots of inflation will bring back prosperity.

Riga Update

I want to give everyone an update on our adoption and our stay in Riga, Latvia. We arrived on August 15 and will leave Thursday, September 8. Sintija will accompany us to the USA, and we will have to return this fall to complete the Latvian side of the adoption.

This has been very challenging, as Sintija has been in a children's home most of her life and for a good part of that, pretty much had no good supervision. (The last home in Smiltene was much better, but when she arrived, she had a lot of behavior problems that still are issues.)

Sintija will be 13 in October, but clearly is not at her age in maturity. That being said, she does have a good heart and I believe God has wonderful things planned for this young lady, and I am thankful to be a part of that whole endeavor. I believe that she will develop in time, and I have to remember that her challenging us is part of growing up (and I don't take it personally).

The trip itself has been wonderful. Old Riga, where we are living, is a beautiful place, full of very old buildings, churches, narrow, winding cobblestone streets, good restaurants and shops, and a vibrant music scene. I could not have asked for a better place to stay, and am glad we have been able to take in all of this.

We also have been out of the city on several occasions and have been to the Jurmala region three times, including two trips to the beach. (Yes, the Gulf of Riga is cold, but it is invigorating, and the beach there is fine.) This Tuesday, we went to Sigulda, which is a "tourist" town and a lovely place. Although Latvia mostly is quite flat, the Sigulda area has a number of ridges and the Gauga River, and is quite scenic.

Latvia was a "republic" in the old Soviet Union for about 50 years. The country was invaded by the Soviets in 1940, and then was a back-and-forth battleground during World War II as German and Soviet troops did what they could to destroy the country. Afterward, the victorious Soviets gobbled up the country, decimated its economy (and especially the farm economy via collectivization), and shipped hundreds of thousands of Latvians to Siberia, along with bringing in hundreds of thousands ethnic Russians.

Like the rest of the U.S.S.R., Latvia was a grim place during that era. (I remember my own trip to East Berlin in 1982, and it was not a pleasant place by any means.) The Soviets build numerous concrete-and-brick apartment buildings, using pretty much the same floorplan, and these eyesores dot the region. (Yeah, they are pretty darned ugly, really ugly.)

However, the economy has done some growing since it became independent in 1991, and while it was hurt badly during this past recession, nonetheless I still is a better place to live than when it was under communist rule. For one, it actually has nice grocery stores -- and they even sell Jack Daniels in them! I had lunch recently with a friend who lived here before independence, and the changes in shopping alone have been astounding.

Prices are comparable, at least for food, to what we pay in the USA, but incomes are well below what we make. Taxes are pretty high, and gas is about $8 a gallon. Nonetheless, the country's currency, the Lat, is doing well against the dollar. When we first arrived, we were told that the apartment owner wanted to be paid in dollars, but then we found out that the last thing they wanted was the greenback. I made a trip to the bank and switched money.

Latvia is not cheap, but it is less expensive than are most areas in Europe, and especially Scandinavia. An overnight cruise ferry arrives each morning from Stockholm, and Swedish and Norwegian tourists spill off to take advantage of the lower prices.

One thing they take in is the local music scene, which is quite good, even world class, I believe. Bands have played every night in the square next to our apartment, and almost all of them have been good to excellent. (I remarked to one person that I had to cross the Atlantic to hear good American rock 'n roll.) We also went to a concert by the Riga Dom Boy's Choir (which is world famous), and also went to a concert at the Riga Dom itself.

I have included some pictures of the trip.

This young lady is playing the Kokle, which is a Latvian string instrument.

Majori Beach in Jurmala on the Gulf of Riga

Royal Square in Old Riga from our apartment window

 Young violinist playing in Jurmala

Concert in Dom Square for Riga's 810th anniversary celebration