Tag Archives: economics

A pretty good clue that the guy in charge of our economy doesn’t have a clue about economics

In the file labeled: “Famous Predictions of Ben Bernanke.”

“It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.” (July 2005)

“We see no serious broad spillover to banks or thrift institutions from the problems in the subprime market.” (May 2007)

“The Federal Reserve is not currently forecasting a recession.” (January 2008, a month after the recession began)

“Currently, we don’t think [the unemployment rate] will get to 10%.” (May 2009, six months before it hit 10.2%).

It’s almost amazing how consistently wrong the guy is — he’s mis-predicted every major economic event — and he’s in charge of the money supply!  He decides whether stimulate or starve the economy based on what he thinks it’s going to do next, and he gets it wrong, every time!

Yet another reason to switch to a gold standard money supply, which cannot be manipulated by bankers.

via Target Date for a Bubble Bursting | 5 Min. Forecast.

Tab clearing: Freedom and Economics Edition

Connor Boyack wrote a profoundly insightful essay on the proper role of government, and how both liberals and conservatives think freedom means being able to use badges and guns to keep people from doing things you don’t agree with.

Libertarians recognize that laws must be based on nothing more than “punishing injustice,” as Bastiat wrote. Jefferson put it more succinctly: “But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others.”

Jefferson went on to explain that he referenced the limits of others’ equal rights for a specific reason. “I do not add ‘within the limits of the law,’” wrote Jefferson, “because law is often but the tyrant’s will, and always so when it violates the right of an individual.” In other words, not all laws are legitimate, and many directly violate “rightful liberty.”

Herein lies the distinction between the individual liberty championed by libertarians, and the statism supported by all other political ideologies, including conservatism. Driving the wedge between these differing views even further, one of the radio hosts claimed that society would altogether cease to exist “if you got rid of law and law enforcement.” Addressing such a general statement as this first requires analyzing the moral justification of what law is being discussed. As Bastiat further stated, “We must remember that law is force, and that, consequently, the proper functions of the law cannot lawfully extend beyond the proper functions of force.”

If the law entails punishment for murder, fraud, rape, robbery, vandalism, or other clear violations of one’s life, liberty, or property, then libertarians absolutely support actions to “punish injustice” and seek retribution for that aggressive act. Defensive acts in response to another’s aggression are a proper function of force, and are therefore a proper function of the law.

But if the law is a mandate which prevents a business owner from selling a beverage to a consenting adult who wishes to purchase and consume it, then libertarians rightly recognize that that law has no legitimate justification, and is thus not worthy of support. Imposing a fine upon or incarcerating a person who engaged in this consensual, peaceful act is not a proper function of force, and therefore is not a proper function of the law.

via The Legitimacy of Licensure and Laws Against Licentiousness | Connor’s Conundrums.

One problem with getting government to ban things you don’t agree with is that eventually the people you don’t agree with get in charge and start banning the things you agreed with.

It’s similar to this story, where liberals love environmental laws, until those laws get in the way of the things they want to build.

So sad!

That “badges and guns” phrase I used earlier? I got it from this essay by Gary North on how conservatives think “free trade” means having people with badges and guns decide with whom you can or cannot commerce:

I have never had any illusions about persuading people who trust in the creativity of badges and guns. The universal trust in state power in every area of life is an extension of what I call the power religion. It is the religion of every empire.

[…]

The defenders of mercantilism have a religion: the religion of state worship. They do not believe that individuals acting in their own self-interest by trading with each other in order to benefit themselves are reliable sources of innovation, exploration, and creativity. They believe that the free market is an incomplete organization. They believe that there must be a sovereign judicial entity which provides guidance, by which they really mean coercion, in directing the flow of scarce economic resources. They believe that bureaucrats are trustworthy, that politicians act in the interest of the people. They believe that the state is a reliable source of economic wisdom, correct understanding of the future, correct understanding of the present, and is therefore the proper agency to equate supply with demand.

Just wondering – if those bureaucrats and regulators are so good at understanding supply and demand and market forces, why aren’t they making a fortune in the market instead of making a meager salary preventing other people from doing so?

via Free Trade: The Litmus Test of Economics by Gary North.

Plunder is not compassion

Walter E. Williams says it simply and well:

Suppose I saw an elderly woman painfully huddled on a heating grate in the dead of winter. She’s hungry and in need of shelter and medical attention. To help the woman, I walk up to you using intimidation and threats and demand that you give me $200. Having taken your money, I then purchase food, shelter and medical assistance for the woman. Would I be guilty of a crime? A moral person would answer in the affirmative. I’ve committed theft by taking the property of one person to give to another.

Most Americans would agree that it would be theft regardless of what I did with the money. Now comes the hard part. Would it still be theft if I were able to get three people to agree that I should take your money? What if I got 100 people to agree – 100,000 or 200 million people? What if instead of personally taking your money to assist the woman, I got together with other Americans and asked Congress to use Internal Revenue Service agents to take your money? In other words, does an act that’s clearly immoral and illegal when done privately become moral when it is done legally and collectively? Put another way, does legality establish morality? Before you answer, keep in mind that slavery was legal; apartheid was legal; the Nazi’s Nuremberg Laws were legal; and the Stalinist and Maoist purges were legal. Legality alone cannot be the guide for moral people. The moral question is whether it’s right to take what belongs to one person to give to another to whom it does not belong.

[…]

Our current economic crisis, as well as that of Europe, is a direct result of immoral conduct. Roughly two-thirds to three-quarters of our federal budget can be described as Congress’ taking the property of one American and giving it to another. Social Security, Medicare and Medicaid account for nearly half of federal spending. Then there are corporate welfare and farm subsidies and thousands of other spending programs, such as food stamps, welfare and education. According to a 2009 Census Bureau report, nearly 139 million Americans – 46 percent – receive handouts from one or more federal programs, and nearly 50 percent have no federal income tax obligations.

Charity is laudable, but stealing from others to assuage your own guilt is reprehensible.

via Immoral Beyond Redemption by Walter E. Williams.

Lessons from the Paul vs. Paul Debate by Vedran Vuk

A few days ago, I saw this really funny “debate” between Ron Paul and Paul Krugman.  It wasn’t really a debate because of the time lag between when each would talk and the other could hear it, and because Krugman has no idea what he’s talking about and just makes it up as he goes.  Even I could see holes in his arguments.

Vedran Vuk wrote up a good debunking of Krugman’s arguments, and I have a few more to add.

Early on in the debate, Krugman says, “You know you can’t leave the government out of monetary policy …. The central bank is always going to be in the business of managing monetary policy. If you think that you can avoid that, you’re living in some – you’re living in the world as it was 150 years ago.”

Either Krugman has been hanging around Joe Biden too long and has completely lost track of time, or he does not know that the Federal Reserve is barely 99 years old.  The United States did not have a central bank from 1833 through 1913

And times were good!  Without monster central banks controlling the currency and inflation, booms and busts were limited to small geographic regions, and involved very few banks.  When banks acted foolishly, they went bankrupt and were replaced by more responsible banks.

But Krugman has to pretend that was not the case, and insists:

Krugman goes on: “And look, history tells us that in fact a completely unmanaged economy is subject to extreme volatility – subject to extreme downturns. I know that there’s legends that people, probably like you Congressman, have, that the Great Depression was somehow caused by the government – caused by the Federal Reserve – but it’s not true. The reality is that was a market economy run amok. Which happens. It happened repeatedly over the past couple of centuries.”

The Oblivious Economist has to pretend like it wasn’t the central bank’s market policies that have caused every nationwide boom and bust since its inception, and has to be both ignorant and dumb to imagine that our completely managed economy hasn’t been subject to extreme volatility.

And since he’s an idiot, he doesn’t have to reconcile the contradictions in his assertions: that the Fed is required in order to eliminate extreme market volatility and to prevent market economies from running amok, while both ignoring that all this has happened on the Fed’s watch — which means it’s a failure — and the Fed’s contributions to every boom and bust since its inception — which also means it is a failure.

I like how Vuk wraps up:

And here, Krugman completely verifies the validity of Paul’s criticism. It’s impossible for central planners to figure out the perfect interest rate. Similarly, Krugman doesn’t know what the limit to the debt should be. And I don’t blame him for having a tough time – who does know the solution to these problems? Maybe our national debt as a percentage of GDP can reach 200%, 150%, or maybe it’s approaching Armageddon at 130%. It’s impossible to say for sure. In the same way, it’s impossible for the Federal Reserve to set an appropriate interest rate. Is zero too low for inflation? Is raising it to 4% too high? What are the consequences to finding some middle ground?

These are truly unanswerable questions. Without the Fed, the market would find the interest rate itself. You can fill a whole room with Nobel-Prize-winning economists, and they still won’t be able to figure out what the market would do with interest rates. If they knew, most would be millionaires and running their own hedge funds – not employees of quasi-governmental agencies and universities.

Unfortunately, a lack of knowledge doesn’t stop economists from making policy decisions much like what Krugman advocates. He admits to not knowing the limit to our national debt, but at the same time advocates pushing the debt to 130%. What if that’s too high and the result is the start of a final death spiral for the US economy? “Whoops; sorry America.”

This is the general problem with the Fed and all central planners. They try to guide the economy, but more often than not, they create the very recessions that the system is supposed to prevent. The Federal Reserve either leaves rates too low for too long, or it raises them so high as to create an economic slowdown of its own. The Federal Reserve isn’t the wonderful safety net economic idealists imagine. Instead, it’s much closer to driving a car while blindfolded. Unfortunately, people like Krugman are more than willing to take the keys knowing full well the dangers of driving blindfolded. And when these Fed economists inevitably crash into a brick wall, it is the passenger – the American worker – who gets creamed.

via Lessons from the Paul vs. Paul Debate by Vedran Vuk.