Monday, December 12, 2011

Krugman: Save "democracy" via inflation

Paul Krugman is sounding the alarm on Europe and to a certain extent, I agree with him. Economic collapses tend to bring out the worst in people, and invariably, they will turn to the worst politicians who appeal to resentment, envy and hatred.

Invoking the rise of the political lunatics that took power in the 1930s, Krugman writes that "democratic values are under siege," and says that worse things are down the road. Furthermore, when "austerity" measures involve actually empowering the State to grab more in taxes in the name of "balancing budgets," I agree that "austerity" is a bad thing, but, ironically, the only thing Krugman seems to like about austerity measures is raising taxes.

I also agree with him that we are in a depression, but we fully disagree on how we got here and what must be done to get out. Krugman believes that governments should take more power, inflate the currency, borrow heavily (thus, creating new financial bubbles in sovereign debt that cannot ever be repaid with future tax revenues), confiscate more income from wealthy people, and engage in Crony Capitalist measures like funding "alternative energy."

In a nutshell, everything that Krugman demands the European and U.S. governments do will worsen this depression. Everything. From his scheme of having central banks purchase sovereign debt in the primary markets (which are no markets at all) to government bailing out failing firms and giving huge subsidies to "green" industries, Krugman is calling for putting malinvestments on steroids, in the belief that flooding the economies of the world with even more paper money will save us.

This is not something that will lead to recovery; instead, it is not just "hair of the dog," but rather a call to consume the entire dog itself. And, invoking the "babysitting cooperative" as "proof" that he is right might work at the NY Times and with fellow Keynesians, but it makes no sense in the real world.

Europe seems to be on the brink and so is the USA. And if Krugman really does believe that the "solution" involves more sovereign debt, more subsidies, and more malinvestments, then I would like to sell him some real estate in Princeton.

63 comments:

Bob Roddis said...

Krugman is such a dolt. His babysitting cooperative example is nothing but an example of pure barter with a twist thrown in, the scrip. One babysitting session for another. Issuance of more scrip seemed to get people to do more babysitting. A better analogy than to fiat money dilution might be to the issuance of smaller units of coin or currency but even that analogy fails because the additional “monetary” units represent the same thing, a single session. I don’t see the example as analogous to anything associated with Austrian theory. The example is used by Krugman, as always, simply to obfuscate, confuse and deceive.

And, of course, the miracle of social democracy is nothing but two wolves and a sheep voting on what’s for dinner.

Anonymous said...

The inflate our way to prosperity is working REALLY well in China and India - who have become the inadvertent prime beneficiaries of Bernanke's latest experiment to lift asset prices for his banking buddies.

Mike Cheel said...

I notice as of late the normal Keynesians in this comment space seem to be missing. Perhaps they are realizing that reality and what they have been preaching all this time are not the same thing after all?

Dennis said...

Krugman seems quite oblivious to the fact that a number of European governments have been heavily subsidizing "alternative energy" for a number of years now, with the result that the electricity systems of several nations are hemorrhaging money at an alarming rate. Electricity tariffs have had to be raised significantly to cover the cost of what have largely become "stranded" assets, thus further straining economies already overburdened by years of lucrative subsidies for any and all activities.

Anonymous said...

The U.S. is in a depression caused by wallstreet and deregulation basically a repeat of the 1920's and 30's with the repeal of the Glass-Stengal act; Europe economy is collapsing under austerity measures pushed on them by Germany leading to the decline in Democratic governments and you believe that Krugman is an idot? Ireland with its 14.5% unempolyment is a sucess story? I guess it is unless of course you are one of the unempolyed. Lack of demand that is the problem and the depression will continue until something is done about it.

JFF said...

Demand is irrelevant, if there is no supply.

Mr. Anonymous, your tenuous grasp of grammar, spelling, and punctuation is the problem and your lack of understanding of basic economics will continue until something is done about it.

Jim McClure said...

Bernanke may be the luckiest Fed Chair ever. If the dollar becomes the reserve currency as the Euro implodes, US inflation will be held in check.

Django said...

"Europe has its economic troubles; who doesn’t? But the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works." - Written by guess who, in 2010.

Dan said...

Great find Django, great find, lol. I'm sure Krugabee would deny ever writing it to.

TheRightRadical said...

Europe economy is collapsing under austerity measures pushed on them by Germany leading to the decline in Democratic governments and you believe that Krugman is an idiot?"""

OMG!! Do you even know what is going on over there? The bailouts that Krugman and his ilk have been calling for. Are directly leading to the loss of sovereignty, and representative democracy. The ECB, the EU, and the IMF have been leading the charge for these continuing policies, and the PIIGs are trapped inside what has been called the "Euro Prison".
Instead of letting those countries out, so that they can retrench.
Barroso, Van Rompuy, and the rest of the Eurocrat crew have been calling for more of the same for over two years now. These problems lie directly at the feet of the ECB, and the EU command. They caused it, it's getting worse, and they refuse to fix it, since this would diminish their power. Millions must suffer so they can stay on top of the Rock!
FREE GREECE!
Save her!
Let her default!

Major_Freedom said...

Anonymous @ December 12, 2011 2:12 PM:

The U.S. is in a depression caused by wallstreet and deregulation basically a repeat of the 1920's and 30's with the repeal of the Glass-Stengal act; Europe economy is collapsing under austerity measures pushed on them by Germany leading to the decline in Democratic governments and you believe that Krugman is an idot? Ireland with its 14.5% unempolyment is a sucess story? I guess it is unless of course you are one of the unempolyed. Lack of demand that is the problem and the depression will continue until something is done about it.

Congrats on saying exactly zero correct things in that post, other than Ireland's rate of unemployment.

The depression is caused by government, not the market. The government cannot regulate away the destruction unleashed by central banking and credit expansion.

The problem is not lack of demand, it's lack of investment and consumption coordination, coupled with government intervention which is preventing corrections from taking place.

A good rule of thumb for you is to accept the exact opposite of what you believe is true.

Bob Roddis said...

You crazy Austrians with your ideology. Don’t you see that the world is staring into the abyss of a deflationary spiral due to a policies imposing fiscal austerity in a "balance sheet recession”?

Just ask the MMTers. They don’t have an ideology.

http://mikenormaneconomics.blogspot.com/2011/12/richard-koo-on-state-of-world.html

I’m still not clear how government funny money is going to satisfy the government’s promise to provide $100 trillion worth of adult diaper changing services plus free knee and hip replacements, but maybe I just think too much.

LK said...

"In a nutshell, everything that Krugman demands the European and U.S. governments do will worsen this depression.

Whie you, on the other hand, would demand policies resulting in financial sector collapse, the mass loss of millions of people's savings, collapse of purchasing power, collapse of the economy, mass business failure, and unemployment far worse than now.

"This is not something that will lead to recovery; instead, it is not just "hair of the dog,"

Ah, yes: the mythical Austrian business cycle theory, with its non-existent, imaginary natural rate of interest.

Mike Cheel said...

@LK

"Whie you, on the other hand, would demand policies resulting in financial sector collapse, the mass loss of millions of people's savings, collapse of purchasing power, collapse of the economy, mass business failure, and unemployment far worse than now."

Keynesian politics has already accomplished this for us. Wouldn't you agree we should give an actual free market a chance for once?

William L. Anderson said...

Gee, LK, I had no idea that the economy was doing so well. Yeah, I want all of us to starve. (Oh, I forgot. That is what the environmentalists want.)

Major_Freedom said...

LK:

"Whie you, on the other hand, would demand policies resulting in financial sector collapse, the mass loss of millions of people's savings, collapse of purchasing power, collapse of the economy, mass business failure, and unemployment far worse than now."

That's what your Keynesian advocacies have already resulted in, and are going to get worse if you fools continue to get your way because the government listens to you and not common sense. Only it will be much worse than before, while you still adhere to the dogma that funny money and government spending can erase bad investments and forever put them into the past, instead of what it actually does, which is just kick things down the road a little more.

It's tragic that you have conflated your intentions with the actual results. It doesn't matter if you believe you are helping. Since your advocacies are destructive, then your words are irrelevant.

Major_Freedom said...

""This is not something that will lead to recovery; instead, it is not just "hair of the dog,""

"Ah, yes: the mythical Austrian business cycle theory, with its non-existent, imaginary natural rate of interest."

It's not necessary to ABCT that there be a single interest rate or single profit rate. Only a fool would believe that there was no housing bubble due to low interest rates and credit expansion, on the basis that "there was more than one mortage rate in existence, I mean Jim had a teaser rate of 1.5%, while Bob had a teaser rate of 1.6%"

The "natural interest rate" represents the collage of all interest rates that would exist in a free market. Funny money and credit expansion distorts that collage of interest rates, and manipulated them downwards.

Leave it to morons like you to actually believe that the existence of more than one interest rate somehow undercuts the entire ABCT. Hilarious.

American Patriot said...

I am more convinced than ever that there are genetic differences between progressives and everyone else. Even us classical liberals and libertarians like many here see each others point of view (they just disagree on nuances) This cannot be just education related. How can two people look at the same picture and come to diametrically opposed conclusions - especially when there is so much empirical evidence? Only if their brains are wired differently.
We need to separate ourselves from progressives because there is no middle ground to agree on. How about a peaceful divorce so we can have a progressive, social democrat state and a classically liberal state, inhabitants of neither impose on the other?

Tel said...

Anon (December 12, 2011 2:12 PM):

Can you explain in detail how exactly Germany is "pushing austerity on Greece"?

Germans do not get a vote in Greece you know, and Greece remains a sovereign nation. Germany cannot use military power against Greece because Germany is still an occupied nation, ever since the last big war... so where does this mysterious power wielded by Germany come from?

Major_Freedom said...

1/2

American Patriot:

You are going way overboard in your reaction to those who have different theories than you about how to interpret history.

The notion that there are genetic differences between progressives and everyone else is, quite frankly, a disgusting, extremely ignorant, and very dangerous dogma.

It IS in fact "education related." Specifically, it is related to the ideas and values that people have chosen to adopt over their lives.

Don't mistake your inability to change their minds, with some sort of genetic inferiority on their part. The main reason why so many progressives adhere to the ideas they adhere to, so very very strongly, often despite being presented with evidence and logic that contradicts their beliefs, is because of the deep rooted ideas and values that they adopted while growing up, from their parents, guardians, to teachers. For many, they simply have not yet dropped the fallacious ideas and values they cling to, because they have been using them for many years, since childhood. Respect authority. Obey authority. Don't rock the boat. Be grateful to authority. Etc.

The transition from obedient repeater of master-slave values, to disobedient originator of new values, is something that cannot be done without education.

Yes, at a chemical level, we all have different brains, but the logical structure is equivalent. The synapses and relationships between neurons are not forever chained to their current orientations. They can change by learning.

You ask:

"How can two people look at the same picture and come to diametrically opposed conclusions - especially when there is so much empirical evidence?"

This question makes no sense. For the empirical evidence IS the same picture we're all looking at. We're all looking at the same history. There is only one history.

I think what you are actually asking is why are there so many competing theories, even though there is the same single history and same set of data for all observers? Well, the reason for that is because for humans, understanding history requires a theory which is adopted a priori. It is one of the most sloppy and most destructive dogmas ever to believe that theories, truth, can spontaneously arise out of past history, as if complex historical data speaks for itself and shows us theories that we either have to accept or deny.

No. Theories are the primary step in understanding humanity. We must adopt a theory, and only then can we observe historical data of human choices and actions and make sense of it.

So the problem is one of adhering to a priori theories that are illogical, self-contradictory, or in some other way flawed relative to other, better a priori theories.

Let me give you an example:

Suppose we consider the single set of the entire world's history, and we see a positive correlation between growing standards of living worldwide, and growing governmental activity worldwide.

Two theories:

A. Standards of living the world over have grown BECAUSE of the growing governmental activity.

B. Standards of living the world over have grown DESPITE the growing governmental activity.

Based on the single set of world data, and the two mutually incompatible theories, is there any way that the two people can settle on which theory is wrong, if all they do is take into account historical data and nothing else?

The answer is no. Both theories are consistent with past historical data, and yet both theories cannot both be right, since they contradict each other.

This means that something OTHER than past data must be taken into account in order for the two people to know which theory is wrong.

Major_Freedom said...

2/2

American Patriot:

It is at this point that virtually all progressives fall back on their childhood experience, where they were taken care of by their parents and guardians, where they were protected, safe, had their schooling for free, had their medicine for free, had their homes for free, the roads for free, see where I am going with this? Progressives are people who have physically matured out of childhood, but have not mentally matured beyond that of small children.

They see you as a libertarian call for less government, for reasons such as less violence, less exploitation of innocent people, etc, but the progressive sees you as an evil person who is trying to take their parents and guardians away. For progressives, once they move out of their parent's homes, they lack independence, and so they try to transfer dependence on their parents, to dependence on the state. They want mommy and daddy to still take care of them, and in desperation they view the state as their new mommies and daddies.

Progressives tend to associate with
mommy aspects of government, like free healthcare, education, things that mommy used to do for them as children. They dislike conservatives and associate them with strict daddies.

Conservatives tend to associate with daddy aspects of government, like instilling morals, safety and protection from bad people, things that daddy used to do for them as children. They dislike progressives and associate them with weak mommies.

Neoconservatism, the prevailing political ideology today, is a product of marrying both mommy and daddy aspects of government: welfare and warfare. Neoconservatives insist on nuclear heterosexual government (welfare and warfare) and heterosexual families for everyone else too. They want the government to be mommy and daddy. It is successful because progressive and conservative oriented citizens, can identify with the government in some way. Progressives want welfare, conservatives want warfare.

Next time you chat with a progressive, pretend that you are talking to a small child, or teenager, who refuses to leave home because they are SCARED about losing free healthcare and free education and other forms of welfare from their mommy. Next time you chat with a conservative, pretend that you are talking to a small child, or teenager, who refuses to leave home because they are SCARED about losing security and protection and other forms of warfare from their daddy.

Don't say this stuff directly to them, at least not right away. Ease them into it. If you don't, then you WILL sound like a bad man who is coming to take mommy or daddy away from them, or them away from their mommy and daddy. When you criticize the state, progressives and conservatives interpret your intentions as an attempt to attack their parents. It's why progressives tell you you're heartless and don't know how to be humane, and it's why conservatives tell you you're cowardly and don't know how to defend a country.

"Only if their brains are wired differently."

Temporarily, yes, but not permanently. Humans have the ability to transcend their own currently adopted ideas, and adopt newer ones.

Sagittarius A said...

Interesting. One thing I don't understand though is the term "malinvestment".

The government excels at investing in ventures with enormous RAROC. Let's take examples:

- The Federal highway system
- The Panama Canal
- The Global Positioning System
- The Tevatron Particle Collider
- The Hubble Space Telescope
- The California, North Carolina, Georgia, and other public univeristy systems

The science that has come out of the last four items probably has a higher return than anything a small business has ever done. And our greatest innovations have come from Fermi, Livermore, Los Alamos, and Oakridge (all publicly funded and public/private operated), not from Apple and Chevron.

Just a thought. Consider it. Just like I have considered yours and thought it refreshing to have a counter-argument to Krugman.

PS: Im not interested in ideological mud slinging so spare that.

TheRightRadical said...

Whie you, on the other hand, would demand policies resulting in financial sector collapse"""

So we have to pay ever increasing taxes, and prices of the basics of life, so a bunch of silver spooned, Ivy-League educated punks, can stay in their Connecticut mansions, and keep driving their Ferrari's?
Thanks but no thanks!
You little elitist.

Major_Freedom said...

Sagittarious:

"Interesting. One thing I don't understand though is the term "malinvestment"."

The meaning of the term is that investments are made that are not in line with real consumer preferences, due to distortions of the pricing signals that arise from the government's manipulation of the money supply and of interest rates.

"The government excels at investing in ventures with enormous RAROC. Let's take examples:"

"- The Federal highway system"
"- The Panama Canal"
"- The Global Positioning System"
"- The Tevatron Particle Collider"
"- The Hubble Space Telescope"
"- The California, North Carolina, Georgia, and other public univeristy systems"

"The science that has come out of the last four items probably has a higher return than anything a small business has ever done."

You are ignoring the law of opportunity costs, by focusing only on what is seen, and not taking into account what is not seen, which are all the more urgently needed goods and services that were overruled by force, and replaced by the government's needs.

"And our greatest innovations have come from Fermi, Livermore, Los Alamos, and Oakridge (all publicly funded and public/private operated), not from Apple and Chevron."

Greatest according to what standard? You are in no position to determine objective values for everyone else. All values of the individual are up the individual themselves, not you.

"Just a thought. Consider it. Just like I have considered yours and thought it refreshing to have a counter-argument to Krugman."

You say this as if he hasn't considered it. The fact that he categorically rejects it doesn't mean he hasn't considered it.

"PS: Im not interested in ideological mud slinging so spare that."

Oh, and what do you call your ideological statism and your mud slinging vitriol against free association and free trade? Unbiased, objective, value-free economic science? Don't make me laugh. You just spewed out a diatribe on ideological mud slinging, and yet you pretend that it's anything but. You're a hypocrite.

Bob Roddis said...

1. Didn’t 25,000 people die building the Panama Canal? Isn’t it an ecological disaster mixing the species of the two oceans?

2. The St. Lawrence Seaway has been an economic bust and environmental disaster for the Great Lakes.

http://www.mlive.com/news/muskegon/index.ssf/2009/03/environmentalists_blast_seaway.html

But you can’t sue the government, can you? Especially the Canadian government.

In 2009, I saw five of these Chinese monster ships on Lake St. Clair and the St. Clair River in one day. I thought maybe Obama sold the lake and river to the Chinese.

http://www.flickr.com/photos/bob_roddis/4016754003/in/set-72157605866047732

I can just imagine all the cute critters floating inside that thing. All that just to ship wheat from Manitoba to wherever.

3. Tons of people were slaughtered building canals for Stalin.

http://www.historyaccess.com/josephstalin-his.html

You can’t kill people and respect their rights at the same time, now can you? Trade offs, trade offs.

4. Rothbard explains Von Mises:

http://mises.org/resources/3081

Anonymous said...

You should watch schiff's channel for debunking of the babysitting problem.

Krugies solution doesn't work even when it comes to babysitting...

Bob Roddis said...

Babysitting on Tuesday in November has less value than on New Years' Eve. The scrip system was flawed from the beginning.

Schiff explains:

http://tinyurl.com/c4zzab7

Remember, that stupid example has been deemed the ultimate refutation of Austrian economics.

Bob Roddis said...

More fun with “only the government can build canals":

Among the victims named are 141 Finnish Americans and 127 Finnish Canadians. They include the two chief organizers of the emigration, Oscar Corgan and Matti Tenhunen. But the list also includes ordinary American workers such as Eino Bjorn, born in Minnesota and shot on February 10, 1938, at age twenty- six; Walter Maki, another Minnesota native who was shot on May 15, 1938; John Siren, born in Duluth, Minnesota, shot on February 11, 1938; Mathew Kaartinen, born in Ironwood, Michigan, and shot by the KGB on December 28, 1937; Andrew Hannula, born in the state of Washington and shot on December 28, 1937; and Enoch Nelson, born in San Francisco and shot on March 5, 1938. Fourteen of the dead were native-born Americans. The rest were immigrants to the United States early in the twentieth century who had then joined the Communist-sponsored emigration to Karelia in the early 1930s. It is unknown how many of the latter were naturalized American citizens. By occupation, the largest group among those murdered by the KGB was loggers, followed by truck drivers and mechanics, then a variety of skilled tradesmen, some factory workers, a few professionals, several actors and musicians, and one hairdresser. Most of the executed were adult males but the list of the dead includes one husband and wife (Niilo and Elvira Filpus of Detroit, Michigan) executed together on January 21, 1938.

Helen Hill, born in Minnesota in 1917, is also listed. Her parents took her to Karelia in 1932 when she was a teenager. She was working as a dispatcher at a lumber camp when she was arrested. A KGB executioner put a pistol to the back of her head and blew her brains out on April 22, 1938, before she was twenty- three years old. According to the KGB her offense was that she "maintained contacts with relatives in the U.S. Collected information in favor of Finland’s intelligence service. Praised life in capitalist countries. Spoke of her intentions to cross the border creating a spirit of emigration in the workers."

Below is a list of the names, biographical data, and dates of execution of 141 Finnish Americans executed and buried in a secret KGB mass grave at Sandarmokh in the Karelian Republic of the Russian Federation.
Fourteen victims were American citizens by birth. It is unknown how many of the others, who immigrated to the United States early in the twentieth century, were naturalized citizens at the time of their move from the United States to the Soviet Union in the early 1930s.


http://tinyurl.com/bvpsd8s

Remember how the progressives used to deny that Stalin was evil even after he slaughtered virtually every hip foreign commie who moved to the USSR? Slaughter and pillage are the main problems facing mankind, not "lack of aggregate demand". Keynesian policies mandate the surrender of basic property rights that are essential to precluding slaughter and pillage. Keynesians are oblivious to these problems because they see themselves as the commissars of everyone else and cannot conceive of average people being free of control by the smart set.

"Progressives" must really hate poor people. Most rich and upper middle class people have fairly secure property rights but poor and third world people do not. This is primarily because of the export of "social democracy" to the third world which has resulted in predictable ethnic slaughter and grinding proverty.

Tel said...

Bob:

"You can’t kill people and respect their rights at the same time, now can you? Trade offs, trade offs."

That's a very interesting comment because one of the fundamental differences between government projects and private projects is that private corporation are not allowed to put a price on human life (regardless that many do, when they think they can get away with it). Governments have this capability to be brazen about killing people "for the greater good".

Consider the CEO of a private corporation standing in front of a judge and jury saying, "OK, I knowingly killed 3000 people but I did this for the benefit of 300 million people". They jury would turn white.

Yet when it comes to things like the Iraq War, that's exactly what the government tells its people, and no one blinks. OK, some people blink, but not many.

Therefore it is true that some projects can only be undertaken by government. No one else would get away with that sort of thing. Whether this is good or bad largely depends on how important you think those things really are.

LK said...

Didn’t 25,000 people die building the Panama Canal?

And how did they die?:

"An estimated 25000 people died of disease and accidents during the entire construction period"

http://books.google.com.au/books?id=fOCajLgpSDwC&pg=PA8&dq=25,000+died++Panama+Canal&hl=en&ei=j4_oTuafOaStiQf0wr3fCA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDMQ6AEwAA#v=onepage&q=25%2C000%20died%20%20Panama%20Canal&f=false

It takes a special type of dishonesty to imply that the US government is responsible for deaths from "disease and accident." By the same stupid logic, if private businesses were morally responsible for all deaths from disease and accident in their work places, then they too would be mass murderers.

LK said...
This comment has been removed by the author.
LK said...

"Greatest according to what standard? You are in no position to determine objective values for everyone else. All values of the individual are up the individual themselves, not you."

LOL... And no doubt there are no Americans who value

the Federal highway system;

cheaper goods because they came through the Panama Canal, rather than all the way around S. America;

technologies that use Global Positioning System;

public university education;

law and order that comes from the state, etc. etc.
--------

By holding to subjective utility as a measure of value, you've already shot yourself in the foot.

LK said...

"Gee, LK, I had no idea that the economy was doing so well. Yeah, I want all of us to starve."

Funny how you're not so coy in previous posts:

"Furthermore, we need deflation. That's right, far from avoiding it, we need to experience it. Yes, the initial results will be very painful (as though we are not experiencing pain now), but soon enough the factors of production will become balanced again, relative prices will make sense, and then the economy can find new lines of production that actually can be sustained.

However, because the initial stages of deflation are painful ...


http://krugman-in-wonderland.blogspot.com/2010/04/paul-krugman-we-need-inflation-and-lots.html

"there is no way to avoid the painful and terrible corrections that must follow such fiscal foolishness. "

http://krugman-in-wonderland.blogspot.com/2010/07/is-deflation-enemy-or-is-it-inflation.html

Gee, buddy, what type of "very painful" and "painful and terrible corrections" did you have in mind here??

Would it be ... financial sector collapse, the mass loss of millions of people's savings, collapse of purchasing power, collapse of the economy, mass business failure, and unemployment far worse than now?? LOL...

Bob Roddis said...

It’s heartwarming to me to know that someone like LK, who expends more energy than any living human desperately trying to “debunk” Austrian Economics, still has no comprehension of economic calculation, the nature of the state, or free exchange.

It’s all over. We’ve won.

Major_Freedom said...

LK:

"Greatest according to what standard? You are in no position to determine objective values for everyone else. All values of the individual are up the individual themselves, not you."

LOL... And no doubt there are no Americans who value

the Federal highway system;

cheaper goods because they came through the Panama Canal, rather than all the way around S. America;

technologies that use Global Positioning System;

public university education;

law and order that comes from the state, etc. etc.

LK you're a moron. You didn't even respond to the argument I made. I said that you, and hence all individuals in general, are in no position to determine objective values for everyone else. All values of the individual are up the individual themselves, not you.

All you did in your rubbish response was repeat the flawed case of putting yourself in a position of determining objective values for everyone else.

It doesn't matter if SOME people value those things you listed. By your crap logic, if some people valued the government's military, or spying program, or assassination with trial or lawyer proposal, then it would somehow constitute an objective value that everyone must have.

No LK, it doesn't matter if you, or you and 10 million or even 100 million other yahoos value government pork projects. YOU DON'T HAVE A RIGHT TO DETERMINE THE VALUES OF OTHERS.

By holding to subjective utility as a measure of value, you've already shot yourself in the foot.

No you ignoramus, that utility is subjective means it is determined by the subject, i.e. the individual human. You shot yourself in the foot, chest, and head, as soon as you spewed your verbal diarrhea.

Roddis is right, you spend all your time trying to debunk Austrian economics and libertarian ethics, and yet you still have absolutely no knowledge or understanding of Austrian economics or libertarian ethics, indeed, you have no understanding of logic or how to debate by listening to and understanding what others are actually arguing.

Blair said...

To the Inmates.

American Patriot is correct, there is a fundamental difference between Progressives and the rest:


Accuracy.


http://www.hamilton.edu/documents/Analysis-of-Forcast-Accuracy-in-the-Political-Media.pdf

Keep towing the party line kids. Don't let the true get in the way.

Major_Freedom said...

Blair:

American Patriot is wrong, not right. There is no biological difference between Progressives and the rest.

The paper you linked doesn't show what you believe it shows.

Stop towing the partisan hack line, kiddo. You're letting fallacy get in the way.

Bob Roddis said...

So now we have another deep thinker, Blair. Krugman called for the housing bubble to be created. Austrians predicted it and the bust.

http://www.lewrockwell.com/block/block168.html

Bob Roddis said...

LK, the deep thinker:

I raised the issue of the Right Marxists or “Keynesian Marxists” in the last post. There is an interesting debate here between the Post Keynesian Thomas I. Palley and the Marxists John Bellamy Foster and Robert W. McChesney on the origins and causes of the financial crisis of 2008

http://tinyurl.com/88h7la9

Oh yes, the debate is sure "interesting". After our Stalin and the Finns lesson, it's always refreshing to learn that there are still Marxists floating around and they haven't yet been arrested for hate speech.

Read both articles because they are simply amazing. As always, not a breath about the obvious problems of economic calculation induced by funny money, or that a funny money regime is anything other than "modern capitalism".

Just like when the Canadian government builds the St. Lawrence Seaway destroying the fishery of the Great Lakes, the cause, according to the "progressives" is "modern capitalism".

Stupid and dishonest is no way to go through life guys.

Scott D said...

Blair,

The methodology of that study is shockingly awful. They took predictions from 2008, an election year, including who would win the presidency and who would win majorities in the house and senate. That right there should raise some red flags, but I'll continue.

Most of the attributes of the predictor that were measured were falsifiable, verifiable facts such as gender, degree, law school, etc. Then, out of left field, they throw in "partisanship scale", a totally subjective factor that the paper writers themselves devised. There is red flag number 2.

Now, ask yourself this question: If you are a liberal, are you going to publicly predict that a conservative candidate is going to win an election race? Now reverse the question. Now, consider the 2008 election, in which candidates in the Democratic party swept all the elections. Wouldn't predictions based upon the future actions of the people from the party you support also be more accurate, since you would view their possible actions in a more moderate and favorable light?

The clincher for me is where these supposed "academics", after presenting their results, actually explicitly say that the best way to make predictions is to be a liberal, that the only other factor with any degree of correlation was a law degree (and this made someone less accurate...whatever).

All in all, a very poorly constructed, very biased study.

libertarian89 said...

Hey Roddis, apparently fed induced funny money injections have no affect on the purchasing power of the dollar. If anything, these massive funny money injections make our dollars worth more. Here's the proof. We'eve been refuted.

http://mikenormaneconomics.blogspot.com/2011/12/fed-prints-29-trillion-dollar-goes-up.html


I guess he told us diddnt he. Time for everyone to get on board with MMT. You getting on board, Bob? How about MF?

American Patriot said...

Major_Freedom:

Let me start off with saying you make a good argument, but we neverthless disagree to some extent. When you take a step back and examine, do you not see the complete, black and white, contrast in how people philosophize? My progressive friends on the most part are brilliant in their fields. Many are very logical in how they approach science or whatever their fields are, but none make any sense when economics/politics is discussed. Odd, right?

Do you honestly not see the diametrically opposed perceptions of the two ideological opposites? You think this has to do with education? Then how did some clasically liberal thinkers come out of the Soviet Union despite all the brain washing? Maybe I can be of help:

http://www.nbcsandiego.com/news/weird/Scientists-May-Have-IDd-Liberal-Gene-105917218.html

As the story from over a year ago cited, scientists from Harvard and UCSD identified what gene is responsible for a person developing progressive views and what triggered it. I thought this to be the case for the better part of the past decade but as a non-scientist, couldn't do the research. Well, others did.

You say that the logical structure of the two brains is equivalent. I say no way. If an otherwise smart person (there are many smart progressives) sticks to their views when presented with the logic and empirical evidence to back it up, they are either dishonest or incapable to process the evidence in a manner sufficient to overcome their convictions. Since not all progressives can be dishonest, the latter must be true.

Blair said...

Roddis,

Predicting the bubble, and saying it would be necessary to prevent the Tech-Sector crash, is not the same as Creating, or Advocating.

Inmates et al,

Since apparently University studies aren't sufficiently low-brow, here's Bush's speech writer:


couple of months back, Republican commentator David Frum made a startling observation on his site:

Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?



Read more: http://articles.businessinsider.com/2011-10-23/news/30312639_1_paul-krugman-spending-cuts-government-spending#ixzz1gXilUdbK

Bob Roddis said...

1. Would someone please explain to me what the WSJ editorial page or warmonger Neo-Can David Frum have to do with Austrian Economics?

2. It appears that Mr. Wray has finally discovered Cantillon Effects.

Anonymous said...

Blair said: "Since apparently University studies aren't sufficiently low-brow"

University studies? Please! That "study" reads like a freshman term paper. There is no way it is published in any peer-reviewed journal (and if it has been, then shame on that journal).

Bob Roddis said...

From the guy who blames us for the WSJ editorial page, "Human Action" is "low brow".

http://mises.org/Books/humanaction.pdf

Very sad.

LK said...

"So now we have another deep thinker, Blair. Krugman called for the housing bubble to be created. Austrians predicted it and the bust.

http://www.lewrockwell.com/block/block168.html "


Except, they mostly didn't "predict" it.

Most of the alleged "predictions" on Walter Block's LewRockwell article, in the crucial period 199-2003, are just B.S., as I have carefully shown here in this review:

http://socialdemocracy21stcentury.blogspot.com/2011/12/austrians-predicted-housing-bubble-but.html

The best you've got is a Ron Paul identification (not prediction) of the emerging housing bubble in late 2001, with a number of other false predictions, but followed only a few months later by the Keynesian Dean Baker also calling a housing bubble and serious crisis when it burst.

Lots of economists from 2002-2004 - Marxists, maverick neoclassicals, New Keynesians, Post Keynesians, Georgists - also called the housing bubble and predicted a severe economic crisis.

Scott D said...

Blair,

Since you took a few moments out of your day to characterize me as "low-brow" for not agreeing with the study you cited: Do you deny that the methodology is fundamentally flawed? I mean, really, taking predictions about the presidential candidate and being surprised that advocates for the party of the winning candidate predicted correctly? It's a huge enough bias for me to dismiss the whole thing outright. If you are a rational person, I would at least expect you to rebut my argument if you are plant to continue using that study as evidence to prove a point.

But let's talk about Krugman's economic predictions. Here are four predictions from his blog concerning the recession that he recently commented on, congratulating himself for getting them right:

1. The slump would be very prolonged, with an extended period of jobless recovery.

2. As long as we were in the liquidity trap, interest rates would stay low despite large budget deficits.

3. Also, as long as we were in a liquidity trap, large increases in the monetary base would — as in the case of Japan — matter not at all for inflation or nominal GDP.

4. Sustained high unemployment would keep wages and core inflation low, and quite likely push us toward Japan-style deflation.

These predictions are all of the "things are going to get worse before they get better" variety. While I give Krugman credit for not jumping on the bandwagon many in the media took, proclaiming a painful but short recession, all it takes is an understanding of the depth of the problems created by the housing bubble to realize that we were in for the long haul. Self-contradicting ideology and flawed economic analysis wouldn't necessarily lead someone to wrong conclusions where that was concerned.

The thing is, Austrian economics ALSO predicts the first three, but for different reasons and using different terminology. Krugman admits that the fourth wasn't exactly correct, and here, many Austrians diverge on opinions about inflation vs. deflation. The difference is that Krugman is calling for MORE intervention, MORE spending, that the bailouts and stimulus are NOT ENOUGH. Austrians want government to get the hell out of the way and let the economy heal itself.

Also, please learn the difference between the meaning of the words "conservative" and "libertarian". Conservatives are defined by their not-liberalness (hence the 1-9 scale of partisanship used in the study you cited). Libertarians are defined by their beliefs in maximum freedom and minimal harm. Sometimes this means agreement with liberal views, sometimes with conservative. Often, it rejects them both.

morse79 said...

@Scott D

Your right, it is not a great study but not for the reasons you list. The fact they use an election prediction as a measure is not problematic, not is it the only type of prediction. Even if a liberal is more likely to predict that a liberal will win an election, the study shows that they are more often right.

Coding ideology is not problematic either if they have inter-coder reliability (meaning more than one person comes to the same conclusion). Are you really going to say that Bob Herbert is not more liberal than George Will.

The issue with the study is the sample size and the types of predictions people are making. Your right, if it is clear that democrats are going to seep the house more democratic pundits are going to predict that. Also, some predictions are fairly easy to make so should they be equally considered as hard predictions.

mores79 said...

@Roddis,

I think Blair posted from David Frum to highlight how Austrian predictions have persistently been wrong.

You also need to start engaging with the argument instead of your high-school bully tactics (we won, game over man!). We get economic calculation, we just don't think it is that big of an insight or a useful one.

@ Scott

Krugman's predictions are very different from Austrian ones. Most importantly, Austrians end Neo-Classical economists have been adamant that hyper-inflation is around the corner given the massive stimulus and quantitative easing.

I remember discussion on here with prof. Anderson and Bob Roddis about their disdain for core inflation measures and talk of Cantillon Effects. Well, guess what happened to food prices? http://www.indexmundi.com/commodities/

It is just amazing to me that we have Krugman on the one side making predictions that have played out and another side that just makes excuses for why their predictions have failed. I am sure that I will get a response here that government intervention has somehow skewed economic calculation or that inflation is hidden elsewhere.

libertarian89 said...

Austrians did not say "massive inflation is around the corner." Thats simply false. Some were warning that inflation may happen in the future (not tommorow or even a year from now) if the Fed keeps easing. And even if they did, just because one said it does not mean all did.

Some Austrians were even in the deflation camp and claimed we were facing the "threat" of massive deflation. See Mish Shedlock.


And some Austrians were predicted stagflation, which we have in a way, with the CPI trending higher over the past year as unemployment stays persistantly high.

So please dont lump all us into one category and say "well, because we mistakenly thought that you guys said there would be massive inflation tommorow (even though no one said that really) then because it hasn't happend, you're all wrong!"


Krugman is an utter fool and has been wrong this whole time. He claims the stimulus diddn't work because it wasn't "big" enough, as if more of something that diddnt work will just all of a sudden "work" just because you do "more" of it. What nonsense.

In other words, the patient (the economy) is still sick after we (stimulus) gave them the keynesian medicine and all Krugman and his ilk can do is call for a higher dosage. Pathetic.

libertarian89 said...

*keynesian medicine(stimulus)

LK said...

Austrians did not say "massive inflation is around the corner." Thats simply false.

Bollucks:

Peter Schiff and Marc Faber on The Glenn Beck Show
http://www.youtube.com/watch?v=b-LavV8ucvE

Marc Faber - 100% Sure We Will Have Hyperinflation
http://www.youtube.com/watch?v=7r9o3jmyoaA

Marc Faber, Peter Schiff and Ron Paul Say Prepare for Hyperinflation

http://www.marketoracle.co.uk/Article16603.html

Bob Roddis said...

I have been an Austrian since 1973 and have not predicted that hyper-inflation is just around the corner. Since 2008, I've believed that there would be some price inflation which would be tempered with various simultaneous collapsing asset prices due to liquidation of malinvestment. Price inflation is a secondary result of money dilution. The primary result is the distortion of the price, investment and capital structure leading to malinvestments due to the impairment of economic calculation. I also predicted that super-low interest rates would lead to perpetual depression/recession. So I've been right twice.

I think that ultimately we probably will have hyper-inflation because the government has promised to provide $100 trillion worth of adult diaper changing services without any source of funding or real savings.

And no, no non-Austrian actually "gets" economic calculation. If you think you do, prove it.

libertarian89 said...

Again, just because some warned about potential high price inflation in the future, does not mean all Austrians said it would happpen. You can't lump as all into one category to discredit us. That's simply nonsense.

We have had plenty of inflation since 2008 courtesy of the Fed. Now how that inflation impacts the price levels varies on a wide range of factors. Like Roddis said, even if inflation does not result in higher prices right away, it still damages the economy by distorting the capital structure, propping up malinvestments, and impairs economic calculation, all of which makes the necessary correction that much more difficult.


Inflation is trending higher over the past year near 4% while unemployment has stayed high (near or at 9%). I thought prices can't rise in an enviornment with "idle resources." Oh wait, they are.

Not to mention you hear all these folks constantly complaining that "hey my paycheck can't buy as much as it used too" Of course it cant, why not? Its because real wages are being destroyed by the Fed and have been for quite some time now.

Prices probably have to rise in order for the problem of "my paycheck not going far enough" right?

morse79 said...

Ummmm... some people have very selective memories. Go back on this blog to discussions of how the rise in food prices was clear evidence that quantitative easing, even in the midst of deflationary pressures, was leading to inflation. Cantilon effects anyone?

This is a blog called "Krugman" in wonderland, in which Austrians misstate what Krugman has actually said to draw conclusions about any one who espouses a different economic and moral perspective. Ironic then that the criticism here is that I have drawn wrongful conclusions regarding all Austrians based on my pointed criticism of this blog.

So I will restate. William Anderson and Bob Roddis have argued that the rise in food prices in 2011 was derivative of "fed funny money" while Paul Kruman has argued that they are temporary. Both arguments are driven by different models or expectations about what drives the economy. The empirical reality is that inflation pressures in commodities has subsided, precisely as Krugman predicted.

morse79 said...

@ Roddis -

Predictable response that I anticipated when I wrote,

" I am sure that I will get a response here that government intervention has somehow skewed economic calculation or that inflation is hidden elsewhere."

Show me collapsing malinvestments and the creation of new malinvestments and how that is masking the true impact of stimulus and quantitative easing. Your statement is entirely vacuous of any real meaning or application to our immediate problems.

libertarian89 said...

Who even cares about whether commodity prices have "subsided" in the second half of 2011. Saying "he called it" does not vindicate Krugman in any way shape or form. They are still up year over year. Look at the trend.

Notice how all non austrians just try to smear and discredit us by saying "hey, wheres the inflation?" instead of addressing key concepts which are at the core of Austrian theory. They dont because they can't.


Malinvestments like housing are being propped up by Fed easing. We are also in a higher education bubble which I would consider a malinvestment as well.

However, most malinvestments only reveal themselves during the bust, where it is clear to see resources were channeled into lines of production that are no longer sustainable in light of consumer preferences. Just because you can't identify every single one now, does not mean they dont exist.


Malinvestments are the cause of our problems and they do matter. Fed easing only props up existing ones like housing while new ones form, many of which, can't be seen or truly identifed until the bust.

burkll13 said...

"I think Blair posted from David Frum to highlight how Austrian predictions have persistently been wrong. "

this makes absolutely no sense whatsoever.
i dont think you will find too many of us "low brow" austrians agreeing with frum or his former boss.

Edward said...

P. 1

Ever been to a party with some your family to a couple of new acquaintances, and everything seems to be going well.
Then, out of nowhere, the family cuckoo starts ranting and raving and accusing the host of all sorts of wrongdoings that they haven't done, and you cringe, because the dolt is family, yet he's so embarrassing?

That's how I, a neo-Friedmanite libertarian, feel about my family crazies, the Austrian libertarians,

"Krugman believes that governments should take more power, inflate the currency, borrow heavily (thus, creating new financial bubbles in sovereign debt that cannot ever be repaid with future tax revenues), confiscate more income from wealthy people, and engage in Crony Capitalist measures like funding "alternative energy."

In a nutshell, everything that Krugman demands the European and U.S. governments do will worsen this depression. Everything. From his scheme of having central banks purchase sovereign debt in the primary markets (which are no markets at all) to government bailing out failing firms and giving huge subsidies to "green" industries, Krugman is calling for putting malinvestments on steroids, in the belief that flooding the economies of the world with even more paper money will save us."


Anderson, you really haven't adressed his issue in depth at all. Leaving aside the Keynesian nonsense about subsidizing alternative energy, Krugman at least in relation to Europe, has been calling on the ECB and only the ECB to act.

You also didn't address the gist of his whole article, aside from the passing on line ("political lunatics in the 1930s) The gist of it is the fact that hard money leads to nightmarish dictators seizing power. he mentioned hungary, and I will mention Chancellor Bruning, whose hard money policies in 1930-1932 directly led to Hitler seizing power. It was not, as conservative myth implicates, the weimar republic hyperinflation, which happened in 1923

Edward said...

P.2

libertarian89


"Like Roddis said, even if inflation does not result in higher prices right away, it still damages the economy by distorting the capital structure, propping up malinvestments, and impairs economic calculation, all of which makes the necessary correction that much more difficult. "

There are two versions of ABCT, one is the soft core version, which is basically Hayek post 1971, It is ABCT, but within reason, Hayek is open about their being dangers to “secondary deflation” the other is the nonsensical hardcore oneit is the Rothbard Mises version, it is pedantic and smug, and just wont die. . It wont admit ANYTHING WHATSOEVER OF VALUE IN OPPOSING VIEWPOINTS, it will just scream STATSIM! as if thats an argument. There are so many things wrong with hardcore, unreconstructed ABCT. Many natural rates, and multiple stable equilibria. No expectations effects. If Frac reserves or the central bank lower the market rate. below the natural rate, but promises publically to raise rates later on, what then? No answer from Mises and Rothbard. Capital Structure? Capital structure is unique to every good being produced. I happen to disagree with Daniel Kuehn here, low interest rates have nothing to do with. it. More time intensive techniques? An absurdity, Yes you can produce more WITH A GIVEN SET OF TECHNIQUES up until diminishing returns. But entrepreneurs will only crank up the juice if there is demand for the products. And consumers are quite impatient, preferring products in the present all things being equal, to products in the future. Ergo, to think that the most time intensive producers will be rewarded, full stop even in a false “malinvested bubble” is pure fiction


As to Cantillon effects, they don't constitute theft, contrary to what Bob Roddis seems to think
Cantillon Effects don’t provide a justification for Austrian economics. they are most destructive when there is massive, accelerating price inflation, and hyperinflation. At, a average 2% rate of inflation its the equivalent of a pinprick to those who hold their savings in cash. Its just part of the overhead of cash saving. Remember, massive deflation is only good to CASH savers, it is murder on bonds and stocks.
No one is forcing people to hold their savings is cash or government paper for the long term. Purchasing power can be preserved by buying real and financial capital. SO where exactly is the theft here? Why do cash savers have some kind of a divine right to a risk free return on their assets?

libertarian89 said...

Edward your incoherent nonsensical ramblings reveal you know absoultley nothing about austrian theory. That seems to be the theme of most Keynesian apologists that come on this blog. Its getting quite old.

Its almost laughable to consider your childish rant a "refutation" considering everything you just said has been adressed and debunked by Austrians for years including the fact that the existence of mulpite rates poses no threat to Austrian theory whatsoever.

The rest of your dribble is just a bunch of ad hoc nonsense with some keynesian demand sided dogma throw in there. Demand does not drive employment and output. Never has and never will. Keynes never refuted says law. Nice try guy.

Bob Roddis said...

The artificial creation of fiat money results in the theft of purchasing power from those holding the existing money to those getting the new money first whether or not the event is allegedly measurable with statistics. That is the entirety of the "operational reality" of the funny money regime: transferring stolen purchasing power to someone else to whom it does not belong so that it might be immediately spent to give the economy "traction". All that theft to cure the problem that does not exist, the alleged "lack of aggregate demand".