Economy, Federal Reserve Bank, libertarianism, Liberty, Reason
“First and foremost, Austrian economics is not an empirical science as is mainstream economics, but a branch of logic.” As always, Professor Walter E. Block, friend and mentor, explains Austrian economics beautifully.
Here is the full, behind-the-scenes interview Walter did with a local, NBC affiliate, from which too few pearls were culled for the final segment.
A doff of the hat to EPJ for the story.
MORE.
The president has appointed Janet Yellen to chair the Federal Reserve. Here is some information about her monetary mindset, by way of a post written on 03.14.10, when Yellen was made vice chair of the Fed:
In an economy of high unemployment and inflation, Barack Obama has gone and appointed as … chair of the Federal Reserve a woman called Janet Yellen, by whose “economic” model inflation is the result of “too many people working and too much economic prosperity.” Or at least, that’s how Larry Kudlow distills the theory.
That such an economic theory exists attests to the degree to which economics and politics have become intertwined. Certainly “Keynes’s political creed guaranteed a hand-in-glove relationship between the state and its stooge economists. Most of what Keynes advocated entails giving the state enormous confiscatory powers.”
Is “the Phillips-curve model,” Yellen’s preferred theory, an extension of Keynesianism, or is it just some form of free floating statism? I have no idea. But since most economists are servants of the state in-waiting, following the Phillips Curve—which posits “a consistent inverse relationship: when unemployment is high, wages increase slowly; when unemployment is low, wages rise rapidly”—has given rise to “a menu of policy options.” Examples, courtesy of the Concise Encyclopedia of Economics, are:
with an unemployment rate of 6 percent, the government might stimulate the economy to lower unemployment to 5 percent. Figure 1 indicates that the cost, in terms of higher inflation, would be a little more than half a percentage point. But if the government initially faced lower rates of unemployment, the costs would be considerably higher: a reduction in unemployment from 5 to 4 percent would imply more than twice as big an increase in the rate of inflation—about one and a quarter percentage points.
OF COURSE, the unquestioned premise of these phillipic prescriptions is that “stimulus” does indeed lower said unemployment rates. Only in The Oink Sectors.
“Super-confused Keynesianism” is Robert Wenzel’s apt description of Yellen’s theories.
The markets like that the Federal Reserve will not follow through on its promise to stop buying government bonds at a pace of $85 billion a month. But what right does the Fed have to steal percentages off our income via this form of inflation? asks the Only Moral Congressman to have served in recent years. Why punish savers, especially poor pensioners, by eroding their purchasing power?
Ron Paul predicts a collapse of the bond market and the further weakening of the dollar.
As if Quantitative Easing were not deceptive enough a term, now we have “tapering.”
The money mafia had been “easing” to the tune of $85 billion in monthly bond purchases. If they’ve admitted to this much, you can be sure it’s much more.
The consequence of Ben Bernanke’s non-stop monetary stimulus, of course, is a rise in prices, stocks included. Homes too. It should be obvious too that an increase in the price of an item is not the same as an appreciation in it value.
UPDATE: “Gold prices soar after Fed fails to taper stimulus”:
… gold prices are suddenly soaring, following the Federal Open Market Committee saying Wednesday it will continue its push to buy $85 billion of debt securities a month.
Investors poured into gold between late 2008 and mid 2011 as the Fed injected trillions of dollars into the economy. Gold investors speculated the government’s intervention and stimulus would spark inflation, which is bullish for the yellow metal.
Gold set a record of $1,921 an ounce on Sept. 6, 2011, and jumped more than 70% between December 2008 and June 2011, Bloomberg News says. But gold prices have slipped this year as investors expected the Fed to pull back on stimulus.
Britain, Capitalism, Celebrity, Debt, Economy, Federal Reserve Bank, History, Inflation
The following is an excerpt from “John Maynard Keynes: Where’s The Genius?! (Part 2),” the conclusion of my conversation with Benn Steil. (Read part 1. ) Dr. Steil is senior fellow and director of international economics at the Council on Foreign Relations. His latest book is “The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order.”
ILANA MERCER: After reading a negative review of your book in The Times Literary Supplement, I decided to go cold turkey on what had been a guilty pleasure for over a decade. I did not renew my TLS subscription. The TLS had stupidly assigned the review to one Eric Rauchway, a left-coast history teacher. Rauchway would not let an argument favorable to the gold standard—yours—stand. Your case against the Bretton Woods system of “managed currencies” he turned on its head. Rauchway credited Harry Dexter White, one of Bretton Woods’ architects, with helping to lift the “cross of gold” from the shoulders of the world’s working classes. Since White was also a Soviet spy, Rauchway quickly concluded that the Soviets saved capitalism (an “unknown ideal” for a very long time). Sound money is suspect, but a Soviet spy is capitalism’s savior. How do you unpack that!?
BENN STEIL: You can’t get blood from a stone, and you can’t get logic from Rauchway’s review, just gobs of nonsense and libel (as I documented on on my blog ). The review’s title, “How the Soviets saved capitalism,” is so inane that the only explanation for it is that Rauchway, or his TLS editors, fell in love with the sheer childish cheekiness of it. It certainly bears no relation to Rauchway’s account of Bretton Woods, nor that of anyone who can actually claim to know anything about it.
Rauchway would no doubt mock the economist who wrote the following of the 19th century classical gold standard: “[t]he various currencies, which were all maintained on a stable basis in relation to gold and to one another, facilitated the easy flow of capital and of trade to an extent the full value of which we only realize now, when we are deprived of its advantages.”
Unless, that is, Rauchway knew who it was – none other than J. M. Keynes.
MERCER: We can both agree that John Maynard Keynes’ opposition to WWI and his “bitterness over the terms of the peace” were admirable. Priceless too was John Maynard Keynes description of President Woodrow Wilson as “slowminded and bewildered”; a “blind and deaf Don Quixote.” (pages 70-71) On the other hand, also quite admirable was the following unflattering description of Keynes’ “General Theory of Employment, Interest and Money.” It comes courtesy not of Keynes, but of our author: “It is only slightly outlandish to liken the book to the Bible: powerful in its message, full of memorable, mellifluous passages; at times obscure, tedious, tendentious, and contradictory; a work of passion driven by intuition, with tenuous logic and observation offered as placeholders until disciples could be summoned to supply the proofs.” (page 88) Have Keynes’ disciples really delivered? It would appear that the Keynesian faithful have foisted on free-market capitalists an unfalsifiable theory. Evidence that contradicts it, Keynesian kooks enlist as evidence for the correctness of their theory.
STEIL: Yes, if the economy sinks, then Paul Krugman was right about the need for massive stimulus; if it recovers in the face of plunging deficits, from spending cuts and tax increases, then Krugman was right that deficits were not a problem. Heads he wins, tails you lose.
MERCER: Keynes assessed Karl Marx’s “economic value” as “nil… apart from occasional flashes of insight.” (page 87) I would venture that in the United States, Marxism has been far less destructive to free-market capitalism than Keynesianism. Marxists honestly wish for capitalism’s demise and say as much. We can fight such an enemy. Conversely, Keynesians have redefined capitalism and banished our definition therefrom. The Keynesians then proceeded to cripple capitalism so as to ostensibly save it. Positively Orwellian.
STEIL:
The conclusion of the Steil-Mercer conversation about Keynes is now on WND. Read “John Maynard Keynes: Where’s The Genius?! (Part 2).”
If you’d like to feature this column, WND’s longest-standing, exclusive paleolibertarian column, in or on your publication (paper or pixels), contact ilana@ilanamercer.com.
JOIN THE CONVERSATION:
• At the WND Comments Section. Scroll down and “Say it.”
• On my Facebook page.
• By clicking to “Like,” “Tweet” and “Share” this week’s “Return To Reason” column.