tag:blogger.com,1999:blog-6276561747841568697.post2716868709202233988..comments2024-03-12T08:15:56.379-04:00Comments on Krugman-in-Wonderland: Krugman's Economic Advice: Shop Until You DropWilliam L. Andersonhttp://www.blogger.com/profile/01802990642236807359noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-6276561747841568697.post-63630180203137806992010-12-20T13:10:34.977-05:002010-12-20T13:10:34.977-05:00The fractional reserve banking Selgin argues for i...The fractional reserve banking Selgin argues for is not the same as the one that exists today. That's why I suggested you actually read his work.<br /><br />Yes, I have read it, and yes I am a pro-fractional reserve economist. Thanks for labeling me when you know absolutely nothing about me.<br /><br />I just dislike when people use what others write in their favor without actually knowing the position of the author they're quoting. This is something you do quite a bit when quoting Austrian authors.Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-72967692202390995702010-12-15T16:58:11.043-05:002010-12-15T16:58:11.043-05:00Anonymous - legal tender laws are essentially mean...Anonymous - legal tender laws are essentially meaningless, as economists from Adam Smith onwards have observed. The market in money is already free, and would not change if legal tender laws were abolished tomorrow. Not surprisingly, if one understands what money is, people already have freely decided as individuals, what to use as money. Government fiat money (and the bank money based on it).Another Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-57546066076766450802010-12-15T07:37:45.486-05:002010-12-15T07:37:45.486-05:00Lord Keynes, because you are one of the smartest d...Lord Keynes, because you are one of the smartest debaters on these comment boards and one of the most brilliant economics bloggers period (and I mean it), I'm interested in seeing your response to Bill Anderson's main points, which are -<br /><br />1) The moral hazard from a heavily subsidized housing market causing bad lending practices.<br />2) The guarantees provided by government under home ownership legislations causing bad lending practices.<br />3) The fact that governments have ensured that taxpayers have the backs of lenders in the past, such as during the late 1980s and the 1960s, assured the banks further that there are no risks involved in making bad decisions.<br /><br />Note: I don't dispute your points about Australia's experience with free banking. However, it so far still seems convincing that these are aggravating factors. In order to show that they played no part in the current crisis, we can't just say that a crisis could happen without those things existing (of course it can), but rather that those things have existed without crises happening.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-56918599947490430252010-12-15T04:59:31.725-05:002010-12-15T04:59:31.725-05:00LK,
Your objections are the very reasons I consid...LK,<br /><br />Your objections are the very reasons I consider to say that the solution may not lie in treating FRB as fraud or embezzlement but by abolishing legal tender, freeing the market in money, allowing people (individuals, not the collective) to decide what to use as money, defend property and contractual rights and leaving the rest to the free market.<br /><br />Incidentally, defending property and contractual rights means no moratoria on redemption of notes and deposits in specie. That means that if a bank has over-issued notes and deposits ,d faces a ruinous run, government should not protect the bank but enforce the bank's obligatons to note and deposit holders.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-83993342098758042582010-12-15T04:46:37.281-05:002010-12-15T04:46:37.281-05:00LK,
You are priceless. The Selgin quote on the in...LK,<br /><br />You are priceless. The Selgin quote on the instability of FRB that you picked up is most hilarious. Please show evidence of FRB surviving bank runs and growing without government intervention to save banks from runs.<br /><br />BalaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-89776055827444894912010-12-15T04:39:08.258-05:002010-12-15T04:39:08.258-05:00In conclusion, in the marvelous Rothbardian paradi...In conclusion, in the marvelous Rothbardian paradise of the future, LK can start a free-banking bank and the rest of us will make sure we don't accept any of his bank notes. And we might even ban him from our private defense area.<br /><br />If he finds enough fools, I mean depositors, he might end up much richer than the rest of us.Bob Roddisnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-5422625569750473822010-12-15T04:28:16.917-05:002010-12-15T04:28:16.917-05:00My main point was that a system of FRB is inherent...<i>My main point was that a system of FRB is inherently unstable and prone to repeated collapse.</i><br /><br />Wrong, as Selgin notes:<br /><br /><i>RF: Do you consider fractional reserve banking inherently problematic? Does free banking require a commodity standard so private banks don’t issue too much currency? ....<br /><br />Selgin: .... As for fractional reserve banking, I think it’s a wonderful institution and that it’s crazy to argue that we need to get rid of it to have a stable monetary regime. Those self-styled Austrian economists, mostly followers of Murray Rothbard, who insist on its fraudulent nature or inherent instability are, frankly, making poor arguments. I don’t think the evidence supports their view, and that they overlook overwhelming proof of the benefits that fractional reserve banking has brought in the way of economic development by fostering investment.</i><br /><br />http://www.richmondfed.org/publications/research/region_focus/2009/winter/full_interview.cfmLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-87522872161594481502010-12-15T04:21:25.594-05:002010-12-15T04:21:25.594-05:00For the same reason people like candy and potato c...<i>For the same reason people like candy and potato chips more than brocolli.</i><br /><br />Idiotic.<br />The point is that businessmen and the PUBLIC have repeatedly preferred FRB in the past, as a system that has greater returns and benefits but with some risks that are taken for sake of the benefits.<br /><br />You claim to support individual property and freedom to do business (so your position has to be self-consistent), but now that is exposed as nonsense as you pontificate to other people about not engaging in FRB. <br /><br />And just who are you to tell 1 million people who freely and consensually became depositors in a FRB what to do?? You are now reduced to violating their freedom - your pro-liberty Austrian ideology is a sham.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-83304175193932302762010-12-15T04:18:35.020-05:002010-12-15T04:18:35.020-05:00"That's called utilitarianism - I thought..."That's called utilitarianism - I thought you were a Randian objectivist."<br /><br />Firstly, you got the label wrong. It is just Objectivist. Secondly, as usual, you just don't get the point. When I said<br /><br />"All that matters is the effects of FRB on the economy and what effects that has on the stability and sustainability of FRB itself."<br /><br />I meant that it matters for an economic analysis and for an argument that FRB is a product of a free-market. My main point was that a system of FRB is inherently unstable and prone to repeated collapse.<br /><br />If a free-market has a check on the growth of FRB and the records show that that check was repeatedly made inoperable by the intervention of government, any claim that people chose FRB voluntarily and that FRB is a product of a free market is hollow at best and idiotic at worst.Balanoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-52090142310576971092010-12-15T04:14:01.887-05:002010-12-15T04:14:01.887-05:00Then you cannot explain why the public continued t...<em>Then you cannot explain why the public continued to engage in FRB.</em><br /><br />For the same reason people like candy and potato chips more than brocolli. <br /><br />Why do people become Keynesians? Because bullying other people justified by ignorant myth is more fun than truth and respect for others.<br /><br />Why bother trying to be free? Slavery was universal until about 145 years ago. <br /><br />LK is getting desperate. And creepy.Bob Roddisnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-51294905942243064702010-12-15T03:16:50.785-05:002010-12-15T03:16:50.785-05:00All that matters is the effects of FRB on the econ...<i>All that matters is the effects of FRB on the economy and what effects that has on the stability and sustainability of FRB itself.</i><br /><br />That's called utilitarianism - I thought you were a Randian objectivist.<br /><br /><i>The answer to that can only be no, if the record of suspension (by government) of bankers' obligation to redeem notes and deposits in specie is as Rothbard puts it</i><br /><br />Then you cannot explain why the public continued to engage in FRB. <br />If there was widespread opposition to FRB and hatred of "evil" government support of it, then why didn't the vast majority of the public take their money and put it in gold warehouses or 100% reserve banks?Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-50956048155009653042010-12-14T23:20:48.314-05:002010-12-14T23:20:48.314-05:00People need to actually read the work they cite. I...<i>People need to actually read the work they cite. I learned this myself the hard way. </i><br /><br />Right, such as:<br /><br />Selgin, Those Dishonest Goldsmiths<br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589709 <br /><br />Debunking the ignorant nonsense that FRB in Britain began as fraud.<br /><br />I bet most of you haven't read it, won't read it, or would ignore it even if you did bother to read it.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-64930411671843927932010-12-14T21:55:29.294-05:002010-12-14T21:55:29.294-05:00People need to actually read the work they cite. ...People need to actually read the work they cite. I learned this myself the hard way.Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-31879259725657052102010-12-14T20:44:29.966-05:002010-12-14T20:44:29.966-05:00Let me see if I have this right, LK. Had there bee...<i>Let me see if I have this right, LK. Had there been no huge amount of loan guarantees, no Fannie and Freddie, both of which are government-created entities, etc etc </i><br /><br />You get nothing "right". Your comments are a feeble straw man argument, plain and simple.<br /><br />Care to tell us why a massive property bubble happened in Australia under a free banking system with no central bank and a gold standard? Care to refute Selgin et al. work on FRB?<br />I bet not.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-40271915521721263022010-12-14T18:24:52.425-05:002010-12-14T18:24:52.425-05:00WHERE IN THE WORLD IS ALL THE STUFF SUPPOSED TO CO...WHERE IN THE WORLD IS ALL THE STUFF SUPPOSED TO COME FROM TO SATISFY ALL OF THIS DEBT?<br /><br />Bob, In LK’s world, stuff, like capital, just happens.Mike Mnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-15169309623584845542010-12-14T15:39:01.014-05:002010-12-14T15:39:01.014-05:00Actually, banks do not have the right to lend my m...Actually, banks do not have the right to lend my money to anyone else when I put in deposits with the good faith that they will be returned to me upon demand. See, we used to pay banks to keep our money safe until the FDIC came along and said it wasn't necessary anymore. That was the bargain: a fee for safety with the promise of return at any time.<br /><br />Savings and Loan banks took money long term and then lent them out to others as loans. That's why we have certificates of deposit, which mean you have to leave your money in a bank's vaults for a certain amount of time (so it can be lent out to someone else without you coming and asking for it in the middle of a loan's term, you see, LK?)<br /><br />To combine to two types of banking under one roof is simply immoral. You can't expect to take my deposit, which you are supposed to return to me at any time, and then give it someone else as a loan, pretending it's your own, as a banker.<br /><br />Take your fancy terms (mutuum) and stuff it. Morality IS objective.Wille "Jack Brown" Leehttps://www.blogger.com/profile/05924623670306642079noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-15539586839305023932010-12-14T09:13:08.153-05:002010-12-14T09:13:08.153-05:00As we get sidetracked by LK's little rants, no...As we get sidetracked by LK's little rants, note that the essential question is always ignored and never answered:<br /><br />WHERE IN THE WORLD IS ALL THE STUFF SUPPOSED TO COME FROM TO SATISFY ALL OF THIS DEBT?Bob Roddisnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-34284308305784813302010-12-14T07:16:30.018-05:002010-12-14T07:16:30.018-05:00From LK’s blog:
Financial deregulation is not cor...From LK’s blog:<br /><br /><em>Financial deregulation is not correlated with better or faster growth. In fact, in the wake of financial deregulation in the 1980s, average GDP growth rates in the Western world fell sharply, as compared with the extraordinary period of post-WWII prosperity now known as the Golden Age of capitalism (1945–1973). This period was the Bretton Woods era of Keynesianism, social democracy, and financial regulation.</em><br /><br />So, let me get this straight. The debt and military Keynesianism of the 1960s led to the Nixonian Keynesianism of 1971. Then we had the Reagan military Keynesianism of the 1980s. The “Golden Age” immediately preceded Nixon cutting the gold link to the dollar. Thereafter, things got worse. LK proves Austrian theory using historical anecdotes!<br /><br /><em>But the devastating proof of the failure of globalization is the fact that those countries that have followed the rules – in Africa, the Caribbean, Latin America, and the former Soviet Union – have seen growth rates collapse to a level lower than the Bretton Woods era, and in some areas poverty rates have got worse.</em><br /><br />As we all know, Africa, the Caribbean, Latin America, and the former Soviet Union are examples of a pure Rothbardian paradise. Each has had sound money, no FRB and strict enforcement of property rights and contracts for even the most powerless of its citizens. Their recent hard times completely disprove the teachings of Murray Rothbard by the use of historical anecdotes!<br /><br />This would all be pretty funny if it weren’t so pathetic. <br /><br />Let’s all not forget that Ron Paul voted against repeal of Glass-Steagall:<br /><br />http://clerk.house.gov/evs/1999/roll276.xmlBob Roddisnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-37368614571928395772010-12-14T06:54:19.103-05:002010-12-14T06:54:19.103-05:00Let me see if I have this right, LK. Had there bee...Let me see if I have this right, LK. Had there been no huge amount of loan guarantees, no Fannie and Freddie, both of which are government-created entities, no Federal Reserve pushing down interest rates, and no government programs targeted specifically at pushing housing, that we would have seen exactly the same kind of housing bubble.<br /><br />Why? Because there was a bubble in Australia in the 1880s. And because George Selgin and Larry White had a paper in QJAE to say that one could have fiduciary media in a free banking system.<br /><br />Yep. That's Krugmanian logic. Oh, and I am sure that a socialist website is going to go to great lengths to give us an accurate view of deregulation. Just as the socialists have claimed that Castro worked an economic miracle in Cuba (his miracle was to make the blind man lame), and that Mao's China was paradise, or that Stalin was a great economic miracle worker before that.<br /><br />Yeah, I have read the socialist sites. Their gig is socialism at all costs, not the truth.William L. Andersonhttps://www.blogger.com/profile/01802990642236807359noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-46917093839825592822010-12-14T00:31:30.058-05:002010-12-14T00:31:30.058-05:00I had to look up the Australian Banking Crisis of ...I had to look up the Australian Banking Crisis of 1893. Would welcome comments from someone who's done more than read a couple web links about it.<br /><br />But it seems like the banking crisis was caused by two factors, a tremendous amount of foreign investment capital, plus a system of land speculation carried out by companies that called themselves "banks" but engaged in very reckless lending practices.<br /><br />The price of Australian exports had been falling for some time, to the point where they were being subsidized by the government, but the foreign capital just kept pouring in.<br /><br />So yes, the Australian banking system might have been free, but the credit was coming from outside that system.<br /><br />The Australians didn't just wake up one morning and say, "I think we'll start printing money." Australia was a boom economy financed by the whole world.<br /><br />I'd compare it to what Bernanke is doing to the emerging markets today. American businesses, awash in artificially cheap money, are causing all kinds of distortions in these economies.<br /><br />So even if we grant that Australia had a free banking system in 1893, ignoring the role of government subsidies and conditions of moral hazard, was the entire world banking system free?<br /><br />Or was Australia being used as a dumping ground for everybody else's cash?Michael Duffhttps://www.blogger.com/profile/15831829415507055437noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-62991881427957371732010-12-13T22:00:26.544-05:002010-12-13T22:00:26.544-05:00I'll go further. The "subprime market&quo...<i>I'll go further. The "subprime market" never would have taken off in a free market, not without real safeguards built into the system, which contrasts with the moral hazard that existed as the government told lenders directly and indirectly that the taxpayers had their backs</i><br /><br />Wrong.<br />Australia had a free banking system and no central bank under a gold standard, yet a huge property bubble occurred in Australia in the 1880s which collapsed, causing a financial crisis and extremely severe depression in the 1890s (probably worse than that in the 1930s In fact).<br /><br />See Charles R. Hickson and John D. Turner, 2002, “Free Banking Gone Awry: The Australian Banking Crisis of 1893,” Financial History Review 9: 147–167.<br /><br />No doubt you will complain that fractional reserve banking (FRB) was to blame and FRB needs to be abolished. <br /><br />But as shown by in <br /><br />G. A. Selgin and White L. H. 1996. “In Defense of Fiduciary Media – or, We are Not Devo(lutionists), We are Misesians!,” Review of Austrian Economics 9.2: 83–107; and<br /><br />Selgin, 2000. “Should We Let Banks Create Money?” Independent Review 5.1 (Summer): 93–100, <br /><br />an FRB deposit is in fact a loan (or legally “mutuum”), a “contract under which a thing is lent which is to be consumed and therefore is to be returned in kind”. The depositor who lends the money gets a credit (or IOU) from the bank and a promise to pay interest. The money has been “sold” to the bank as a mutuum and is to be returned in genere. In demand deposits, you lose your absolute property rights to the money when you lent it to the bank voluntarily, and instead have entered into a contract with the bank to allow them to use it, even though they are obliged to return to you, on demand, money to the same amount in whole or in part from their other reserves and deposits. When people freely and voluntarily engage in this practice, <b>it cannot be regarded as fraud</b>.<br />In any consistent pro-free market system, <b>the Austrian anti-FRB position is itself a evil, collectivist violation of private freedom.</b><br /><br />So you’re just stuck with a system that can cause bubbles, like Australia’s in the 1880s.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-7960760054105824522010-12-13T21:09:53.442-05:002010-12-13T21:09:53.442-05:00When Krugman is talking about debt and spending he...When Krugman is talking about debt and spending he is talking both about consumption/investment. He is not being very specific, but his "crude" theory should not substitute real Keynesian theory (and, in this case I'm not sure it's unique to Keynesianism).<br /><br />He's arguing that nominal spending should be maintained, otherwise aggregate supply is not being used to its "full potential" (i.e. there will be idle resources).<br /><br />Where it gets kind of weird, at least in Krugman's case, is that instead of "socialization of investment" (per Keynes) he argues for greater consumption spending.Jonathan M.F. Catalánhttp://www.economicthought.net/noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-37356772601128220922010-12-13T21:08:14.574-05:002010-12-13T21:08:14.574-05:00While he is right as far as he goes, unfortunately...<i>While he is right as far as he goes, unfortunately, Krugman the economist does not ask why the banks played the "band in 'Animal House'" role in thinking they could march through the wall. Why did banks abandon "sound lending" principles?</i><br /><br />Because of a deeply flawed neoliberal/New Classical inspired <i>system</i> of financial regulation:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2009/11/financial-deregulation-and-origin-of.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-294075551253230072010-12-13T15:54:41.048-05:002010-12-13T15:54:41.048-05:00Here is the scary thing. At least Krugman recogniz...Here is the scary thing. At least Krugman recognizes the problem. His prescription is wrong but he describes the ailment. Meanwhile, Bernanke and the Fed IGNORE all stock variables like level of debt and continue to treat this as a temporary flow problem and a crisis of confidence fixable with faux stock market gains. And that is if you dont believe the insidious incentive to inflate away government debt.ReturnFreeRisknoreply@blogger.com