U.S. Economy: Recent Episodes
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U.S. Economy features how the US economy works, current and past, and industry's that drive it, big and small, Apple, agriculture, technology, GM, GE, others.
In the global Ponzi scheme, thin air and deceit substitute for sound money. As hedge-fund manager Mitch Feierstein wrote in Planet Ponzi, “You don’t solve a Ponzi scheme; you end it.”
Original Article: "The Coming Collapse of the Global Ponzi Scheme"
Contrary to the government's line that "inflation hurts everyone," inflation really is a wealth transfer from those without political power to the politically connected.
Original Article: "Inflation Is a Giant "Skim" on the American People"
In this week's episode, Mark looks at PPI—the Producer Price Index—which provides evidence of the costs for suppliers in various industries, macroeconomic instability, and the potential for economic recovery. Here, very low prices provide the potential for recovery; and rising prices can indicate both recovery in the economy, as well as inflationary pressures moving forward. The Covid Bubble and restrictions caused a 50% increase in producer prices, and since the peak in 2022, PPI has only corrected about 10%.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
"Producer Price Index by Commodity: All Commodities" (PPIACO): Mises.org/Minor_PPI
We should not just be concerned about problems in the American banking system, but also about the proliferation of Eurodollars.
Original Article: "Eurodollars as a Fractional Reserve Market"
While many economists claim that high overall debt levels can lead to economic recessions, irresponsible government spending and money expansion are the real culprits.
Original Article: "Easy Money Is a Much Bigger Economic Problem than Debt"
In this episode, Mark examines Fed Chairman Jay Powell's recent confession that the Fed is "navigating by the stars on a cloudy night." This reveals the fundamental methodological weakness of the Fed's economic policy and mainstream economics in general ("data dependency"). In contrast, it also reveals the strengths of Austrian economics, economic theory, and the self regulation of the free market. Mark suggests that we all be prepared for big negative surprises in the economy and additional Federal Reserve and government power grabs.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Recommended Reading"What the Central Bank Cartel has Planned for You" by Thorsten Polleit: Mises.org/Minor34A
"Transparency or Deception: What the Fed Was Saying in 2007" by Mark Thornton: Mises.org/Minor34B
In this episode, Mark explains why we need a Crash (or very Hard) Landing in the US economy and the world economy. Specifically, why is a crash landing better to resolve the malinvestments caused by the Fed? Why is a crash landing better in many ways for the productive class of workers and savers? And, how would a crash landing place much of the pain and the overall burden on the rich, politically-connected classes?
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Additional Resources "The Fed's Real Mandate": Mises.org/Minor33A
"Black Hole or Shock Absorber: How Does a Free-Market Economy Respond to Crises?": Mises.org/Minor33B
"The REAL Solution to the Coming Economic Crisis": Mises.org/Minor33C
"Eliminating Economic Crises": Mises.org/Minor33D
"Austerity: A Real Solution to Help Heal the US Economy": Mises.org/Minor33E
"US Labor Market: Help Wanted!": Mises.org/Minor33F
"After the Boom Must Come the Bust" (Radio Rothbard): Mises.org/Minor33G
"Here's What Mounting Corporate Layoffs Tell Us about the Economy" (Radio Rothbard): Mises.org/Minor33H
Speculators are reviled in the media and by politicians and academics. Yet the speculators are the ones taking risks to ensure the rest of us can have more economic certainty.
Original Article: "Hail the Speculators! They Take the Necessary Economic Risks in Our Economy"
Will we get a soft landing or a hard landing in the economy? Or, should we hope for a crash landing? Mark Thornton explains.
See also "Soft Landing? Not Likely" featuring Bob Murphy and Jonathan Newman on the Human Action Podcast: Mises.org/HAP407
Be sure to follow Minor Issues at Mises.org/MinorIssues.
While FedNow seems benign, there is the larger problem of the entire banking system itself being built on a foundation of sand. FedNow can only make that problem worse.
Original Article: "FedNow Isn't a CBDC, but It Is Dangerous"
Banker and financial expert Caitlin Long believes that fractional reserve banking is closer than ever to collapse, and she has a 100 percent reserve banking solution in progress.
Original Article: "Can Fractional Reserve Banking Survive the Twenty-First Century?"
Study of business cycles must be based upon a satisfactory cycle theory. Gazing at sheaves of statistics without "pre-judgment" is futile. A cycle takes place in the economic world, and therefore a usable cycle theory must be integrated with general economic theory. And yet, remarkably, such integration, even attempted integration, is the exception, not the rule. Economics, in the last two decades, has fissured badly into a host of airtight compartments—each sphere hardly related to the others. Only in the theories of Schumpeter and Mises has cycle theory been integrated into general economics.Various neo-Keynesians have advanced cycle theories. They are integrated, however, not with general economic theory, but with holistic Keynesian systems—systems which are very partial indeed.
The bulk of cycle specialists, who spurn any systematic integration as impossibly deductive and overly simplified, are thereby (wittingly or unwittingly) rejecting economics itself. For if one may forge a theory of the cycle with little or no relation to general economics, then general economics must be incorrect, failing as it does to account for such a vital economic phenomenon. For institutionalists—the pure data collectors—if not for others, this is a welcome conclusion. Even institutionalists, however, must use theory sometimes, in analysis and recommendation; in fact, they end by using a concoction of ad hoc hunches, insights, etc., plucked unsystematically from various theoretical gardens. Few, if any, economists have realized that the Mises theory of the trade cycle is not just another theory: that, in fact, it meshes closely with a general theory of the economic system.There is, for example, not a hint of such knowledge in Haberler's well-known discussion. See Gottfried Haberler, Prosperity and Depression (2nd ed., Geneva, Switzerland: League of Nations, 1939). The Mises theory is, in fact, the economic analysis of the necessary consequences of intervention in the free market by bank credit expansion. Followers of the Misesian theory have often displayed excessive modesty in pressing its claims; they have widely protested that the theory is "only one of many possible explanations of business cycles," and that each cycle may fit a different causal theory. In this, as in so many other realms, eclecticism is misplaced. Since the Mises theory is the only one that stems from a general economic theory, it is the only one that can provide a correct explanation. Unless we are prepared to abandon general theory, we must reject all proposed explanations that do not mesh with general economics.
Business Cycles and Business Fluctuations It is important, first, to distinguish between business cycles and ordinary business fluctuations. We live necessarily in a society of continual and unending change, change that can never be precisely charted in advance. People try to forecast and anticipate changes as best they can, but such forecasting can never be reduced to an exact science. Entrepreneurs are in the business of forecasting changes on the market, both for conditions of demand and of supply. The more successful ones make profits pari passus with their accuracy of judgment, while the unsuccessful forecasters fall by the wayside. As a result, the successful entrepreneurs on the free market will be the ones most adept at anticipating future business conditions. Yet, the forecasting can never be perfect, and entrepreneurs will continue to differ in the success of their judgments. If this were not so, no profits or losses would ever be made in business.
Changes, then, take place continually in all spheres of the economy. Consumer tastes shift; time preferences and consequent proportions of investment and consumption change; the labor force changes in quantity, quality, and location; natural resources are discovered and others are used up; technological changes alter production possibilities; vagaries of climate alter crops, etc. All these changes are typical features of any economic system. In fact, we could not truly conceive of a changeless society, in which everyone did exactly the same things day after day, and no economic data ever changed. And even if we could conceive of such a society, it is doubtful whether many people would wish to bring it about.
It is, therefore, absurd to expect every business activity to be "stabilized" as if these changes were not taking place. To stabilize and "iron out" these fluctuations would, in effect, eradicate any rational productive activity. To take a simple, hypothetical case, suppose that a community is visited every seven years by the seven-year locust. Every seven years, therefore, many people launch preparations to deal with the locusts: produce anti-locust equipment, hire trained locust specialists, etc. Obviously, every seven years there is a "boom" in the locust-fighting industry, which, happily, is "depressed" the other six years. Would it help or harm matters if everyone decided to "stabilize" the locust-fighting industry by insisting on producing the machinery evenly every year, only to have it rust and become obsolete? Must people be forced to build machines before they want them; or to hire people before they are needed; or, conversely, to delay building machines they want—all in the name of "stabilization"? If people desire more autos and fewer houses than formerly, should they be forced to keep buying houses and be prevented from buying the autos, all for the sake of stabilization? As Dr. F.A. Harper has stated:
This sort of business fluctuation runs all through our daily lives. There is a violent fluctuation, for instance, in the harvest of strawberries at different times during the year. Should we grow enough strawberries in greenhouses so as to stabilize that part of our economy throughout the year.F.A. Harper, Why Wages Rise (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1957), pp. 118–19.
We may, therefore, expect specific business fluctuations all the time. There is no need for any special "cycle theory" to account for them. They are simply the results of changes in economic data and are fully explained by economic theory. Many economists, however, attribute general business depression to "weaknesses" caused by a "depression in building" or a "farm depression." But declines in specific industries can never ignite a general depression. Shifts in data will cause increases in activity in one field, declines in another. There is nothing here to account for a general business depression—a phenomenon of the true "business cycle." Suppose, for example, that a shift in consumer tastes, and technologies, causes a shift in demand from farm products to other goods. It is pointless to say, as many people do, that a farm depression will ignite a general depression, because farmers will buy less goods, the people in industries selling to farmers will buy less, etc. This ignores the fact that people producing the other goods now favored by consumers will prosper; their demands will increase.
The problem of the business cycle is one of general boom and depression; it is not a problem of exploring specific industries and wondering what factors make each one of them relatively prosperous or depressed. Some economists—such as Warren and Pearson or Dewey and Dakin—have believed that there are no such things as general business fluctuations—that general movements are but the results of different cycles that take place, at different specific time-lengths, in the various economic activities. To the extent that such varying cycles (such as the 20-year "building cycle" or the seven-year locust cycle) may exist, however, they are irrelevant to a study of business cycles in general or to business depressions in particular. What we are trying to explain are general booms and busts in business.
In considering general movements in business, then, it is immediately evident that such movements must be transmitted through the general medium of exchange—money. Money forges the connecting link between all economic activities. If one price goes up and another down, we may conclude that demand has shifted from one industry to another; but if all prices move up or down together, some change must have occurred in the monetary sphere. Only changes in the demand for, and/or the supply of, money will cause general price changes. An increase in the supply of money, the demand for money remaining the same, will cause a fall in the purchasing power of each dollar, i.e., a general rise in prices; conversely, a drop in the money supply will cause a general decline in prices. On the other hand, an increase in the general demand for money, the supply remaining given, will bring about a rise in the purchasing power of the dollar (a general fall in prices); while a fall in demand will lead to a general rise in prices. Changes in prices in general, then, are determined by changes in the supply of and demand for money. The supply of money consists of the stock of money existing in the society. The demand for money is, in the final analysis, the willingness of people to hold cash balances, and this can be expressed as eagerness to acquire money in exchange, and as eagerness to retain money in cash balance. The supply of goods in the economy is one component in the social demand for money; an increased supply of goods will, other things being equal, increase the demand for money and therefore tend to lower prices. Demand for money will tend to be lower when the purchasing power of the money-unit is higher, for then each dollar is more effective in cash balance. Conversely, a lower purchasing power (higher prices) means that each dollar is less effective, and more dollars will be needed to carry on the same work.
The purchasing power of the dollar, then, will remain constant when the stock of, and demand for, money are in equilibrium with each other: i.e., when people are willing to hold in their cash balances the exact amount of money in existence. If the demand for money exceeds the stock, the purchasing power of money will rise until the demand is no longer excessive and the market is cleared; conversely, a demand lower than supply will lower the purchasing power of the dollar, i.e., raise prices.
Yet, fluctuations in general business, in the "money relation," do not by themselves provide the clue to the mysterious business cycle. It is true that any cycle in general business must be transmitted through this money relation: the relation between the stock of, and the demand for, money. But these changes in themselves explain little. If the money supply increases or demand falls, for example, prices will rise; but why should this generate a "business cycle"? Specifically, why should it bring about a depression? The early business cycle theorists were correct in focusing their attention on the crisis and depression: for these are the phases that puzzle and shock economists and laymen alike, and these are the phases that most need to be explained.
The Problem: The Cluster of Error The explanation of depressions, then, will not be found by referring to specific or even general business fluctuations per se. The main problem that a theory of depression must explain is: why is there a sudden general cluster of business errors? This is the first question for any cycle theory. Business activity moves along nicely with most business firms making handsome profits. Suddenly, without warning, conditions change and the bulk of business firms are experiencing losses; they are suddenly revealed to have made grievous errors in forecasting.
A general review of entrepreneurship is now in order. Entrepreneurs are largely in the business of forecasting. They must invest and pay costs in the present, in the expectation of recouping a profit by sale either to consumers or to other entrepreneurs further down in the economy's structure of production. The better entrepreneurs, with better judgment in forecasting consumer or other producer demands, make profits; the inefficient entrepreneurs suffer losses. The market, therefore, provides a training ground for the reward and expansion of successful, far-sighted entrepreneurs and the weeding out of inefficient businessmen. As a rule only some businessmen suffer losses at any one time; the bulk either break even or earn profits. How, then, do we explain the curious phenomenon of the crisis when almost all entrepreneurs suffer sudden losses? In short, how did all the country's astute businessmen come to make such errors together, and why were they all suddenly revealed at this particular time? This is the great problem of cycle theory.
It is not legitimate to reply that sudden changes in the data are responsible. It is, after all, the business of entrepreneurs to forecast future changes, some of which are sudden. Why did their forecasts fail so abysmally?
Another common feature of the business cycle also calls for an explanation. It is the well-known fact that capital-goods industries fluctuate more widely than do the consumer-goods industries. The capital-goods industries—especially the industries supplying raw materials, construction, and equipment to other industries—expand much further in the boom, and are hit far more severely in the depression.
A third feature of every boom that needs explaining is the increase in the quantity of money in the economy. Conversely, there is generally, though not universally, a fall in the money supply during the depression.
The Explanation: Boom and Depression In the purely free and unhampered market, there will be no cluster of errors, since trained entrepreneurs will not all make errors at the same time.Siegfried Budge, Grundzüge der Theoretische Nationalökonomie (Jena, 1925), quoted in Simon S. Kuznets, "Monetary Business Cycle Theory in Germany," Journal of Political Economy (April, 1930): 127–28."Under conditions of free competition . . . the market is . . . dependent upon supply and demand . . . there could [not] develop a disproportionality in the production of goods, which could draw in the whole economic system . . . such a disproportionality can arise only when, at some decisive point, the price structure does not base itself upon the play of only free competition, so that some arbitrary influence becomes possible."Kuznets himself criticizes the Austrian theory from his empiricist, anti-cause and effect-standpoint, and also erroneously considers this theory to be "static." The "boom-bust" cycle is generated by monetary intervention in the market, specifically bank credit expansion to business. Let us suppose an economy with a given supply of money. Some of the money is spent in consumption; the rest is saved and invested in a mighty structure of capital, in various orders of production. The proportion of consumption to saving or investment is determined by people's time preferences—the degree to which they prefer present to future satisfactions. The less they prefer them in the present, the lower will their time preference rate be, and the lower therefore will be the pure interest rate, which is determined by the time preferences of the individuals in society. A lower time-preference rate will be reflected in greater proportions of investment to consumption, a lengthening of the structure of production, and a building-up of capital. Higher time preferences, on the other hand, will be reflected in higher pure interest rates and a lower proportion of investment to consumption. The final market rates of interest reflect the pure interest rate plus or minus entrepreneurial risk and purchasing power components. Varying degrees of entrepreneurial risk bring about a structure of interest rates instead of a single uniform one, and purchasing-power components reflect changes in the purchasing power of the dollar, as well as in the specific position of an entrepreneur in relation to price changes. The crucial factor, however, is the pure interest rate. This interest rate first manifests itself in the "natural rate" or what is generally called the going "rate of profit." This going rate is reflected in the interest rate on the loan market, a rate which is determined by the going profit rate.This is the "pure time preference theory" of the rate of interest; it can be found in Ludwig von Mises, Human Action (New Haven, Conn.: Yale University Press, 1949); in Frank A. Fetter, Economic Principles (New York: Century, 1915), and idem, "Interest Theories Old and New," American Economic Review (March, 1914): 68–92.
Now what happens when banks print new money (whether as bank notes or bank deposits) and lend it to business?"Banks," for many purposes, include also savings and loan associations, and life insurance companies, both of which create new money via credit expansion to business. See below for further discussion of the money and banking question. The new money pours forth on the loan market and lowers the loan rate of interest. It looks as if the supply of saved funds for investment has increased, for the effect is the same: the supply of funds for investment apparently increases, and the interest rate is lowered. Businessmen, in short, are misled by the bank inflation into believing that the supply of saved funds is greater than it really is. Now, when saved funds increase, businessmen invest in "longer processes of production," i.e., the capital structure is lengthened, especially in the "higher orders" most remote from the consumer. Businessmen take their newly acquired funds and bid up the prices of capital and other producers' goods, and this stimulates a shift of investment from the "lower" (near the consumer) to the "higher" orders of production (furthest from the consumer)—from consumer goods to capital goods industries.On the structure of production, and its relation to investment and bank credit, see F.A. Hayek, Prices and Production (2nd ed., London: Routledge and Kegan Paul, 1935); Mises, Human Action; and Eugen von Böhm-Bawerk, "Positive Theory of Capital," in Capital and Interest (South Holland, Ill.: Libertarian Press, 1959), vol. 2.
If this were the effect of a genuine fall in time preferences and an increase in saving, all would be well and good, and the new lengthened structure of production could be indefinitely sustained. But this shift is the product of bank credit expansion. Soon the new money percolates downward from the business borrowers to the factors of production: in wages, rents, interest. Now, unless time preferences have changed, and there is no reason to think that they have, people will rush to spend the higher incomes in the old consumption-investment proportions. In short, people will rush to reestablish the old proportions, and demand will shift back from the higher to the lower orders. Capital goods industries will find that their investments have been in error: that what they thought profitable really fails for lack of demand by their entrepreneurial customers. Higher orders of production have turned out to be wasteful, and the malinvestment must be liquidated.
A favorite explanation of the crisis is that it stems from "underconsumption"—from a failure of consumer demand for goods at prices that could be profitable. But this runs contrary to the commonly known fact that it is capital goods, and not consumer goods, industries that really suffer in a depression. The failure is one of entrepreneurial demand for the higher order goods, and this in turn is caused by the shift of demand back to the old proportions.
In sum, businessmen were misled by bank credit inflation to invest too much in higher-order capital goods, which could only be prosperously sustained through lower time preferences and greater savings and investment; as soon as the inflation permeates to the mass of the people, the old consumption-investment proportion is reestablished, and business investments in the higher orders are seen to have been wasteful."Inflation" is here defined as an increase in the money supply not consisting of an increase in the money metal. Businessmen were led to this error by the credit expansion and its tampering with the free-market rate of interest.
The "boom," then, is actually a period of wasteful misinvestment. It is the time when errors are made, due to bank credit's tampering with the free market. The "crisis" arrives when the consumers come to reestablish their desired proportions. The "depression" is actually the process by which the economy adjusts to the wastes and errors of the boom, and reestablishes efficient service of consumer desires. The adjustment process consists in rapid liquidation of the wasteful investments. Some of these will be abandoned altogether (like the Western ghost towns constructed in the boom of 1816-1818 and deserted during the Panic of 1819); others will be shifted to other uses. Always the principle will be not to mourn past errors, but to make most efficient use of the existing stock of capital. In sum, the free market tends to satisfy voluntarily-expressed consumer desires with maximum efficiency, and this includes the public's relative desires for present and future consumption. The inflationary boom hobbles this efficiency, and distorts the structure of production, which no longer serves consumers properly. The crisis signals the end of this inflationary distortion, and the depression is the process by which the economy returns to the efficient service of consumers. In short, and this is a highly important point to grasp, the depression is the "recovery" process, and the end of the depression heralds the return to normal, and to optimum efficiency. The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions imposed by the boom. The boom, then, requires a "bust."
Since it clearly takes very little time for the new money to filter down from business to factors of production, why don't all booms come quickly to an end? The reason is that the banks come to the rescue. Seeing factors bid away from them by consumer goods industries, finding their costs rising and themselves short of funds, the borrowing firms turn once again to the banks. If the banks expand credit further, they can again keep the borrowers afloat. The new money again pours into business, and they can again bid factors away from the consumer goods industries. In short, continually expanded bank credit can keep the borrowers one step ahead of consumer retribution. For this, we have seen, is what the crisis and depression are: the restoration by consumers of an efficient economy, and the ending of the distortions of the boom. Clearly, the greater the credit expansion and the longer it lasts, the longer will the boom last. The boom will end when bank credit expansion finally stops. Evidently, the longer the boom goes on the more wasteful the errors committed, and the longer and more severe will be the necessary depression readjustment.
Thus, bank credit expansion sets into motion the business cycle in all its phases: the inflationary boom, marked by expansion of the money supply and by malinvestment; the crisis, which arrives when credit expansion ceases and malinvestments become evident; and the depression recovery, the necessary adjustment process by which the economy returns to the most efficient ways of satisfying consumer desires.This "Austrian" cycle theory settles the ancient economic controversy on whether or not changes in the quantity of money can affect the rate of interest. It supports the "modern" doctrine that an increase in the quantity of money lowers the rate of interest (if it first enters the loan market); on the other hand, it supports the classical view that, in the long run, quantity of money does not affect the interest rate (or can only do so if time preferences change). In fact, the depression-readjustment is the market's return to the desired free-market rate of interest.
What, specifically, are the essential features of the depression-recovery phase? Wasteful projects, as we have said, must either be abandoned or used as best they can be. Inefficient firms, buoyed up by the artificial boom, must be liquidated or have their debts scaled down or be turned over to their creditors. Prices of producers' goods must fall, particularly in the higher orders of production—this includes capital goods, lands, and wage rates. Just as the boom was marked by a fall in the rate of interest, i.e., of price differentials between stages of production (the "natural rate" or going rate of profit) as well as the loan rate, so the depression-recovery consists of a rise in this interest differential. In practice, this means a fall in the prices of the higher-order goods relative to prices in the consumer goods industries. Not only prices of particular machines must fall, but also the prices of whole aggregates of capital, e.g., stock market and real estate values. In fact, these values must fall more than the earnings from the assets, through reflecting the general rise in the rate of interest return.
Since factors must shift from the higher to the lower orders of production, there is inevitable "frictional" unemployment in a depression, but it need not be greater than unemployment attending any other large shift in production. In practice, unemployment will be aggravated by the numerous bankruptcies, and the large errors revealed, but it still need only be temporary. The speedier the adjustment, the more fleeting will the unemployment be. Unemployment will progress beyond the "frictional" stage and become really severe and lasting only if wage rates are kept artificially high and are prevented from falling. If wage rates are kept above the free-market level that clears the demand for and supply of labor, laborers will remain permanently unemployed. The greater the degree of discrepancy, the more severe will the unemployment be.
Secondary Features of Depression: Deflationary Credit Contraction The above are the essential features of a depression. Other secondary features may also develop. There is no need, for example, for deflation (lowering of the money supply) during a depression. The depression phase begins with the end of inflation, and can proceed without any further changes from the side of money. Deflation has almost always set in, however. In the first place, the inflation took place as an expansion of bank credit; now, the financial difficulties and bankruptcies among borrowers cause banks to pull in their horns and contract credit.It is often maintained that since business firms can find few profitable opportunities in a depression, business demand for loans falls off, and hence loans and money supply will contract. But this argument overlooks the fact that the banks, if they want to, can purchase securities, and thereby sustain the money supply by increasing their investments to compensate for dwindling loans. Contractionist pressure therefore always stems from banks and not from business borrowers. Under the gold standard, banks have another reason for contracting credit—if they had ended inflation because of a gold drain to foreign countries. The threat of this drain forces them to contract their outstanding loans. Furthermore the rash of business failures may cause questions to be raised about the banks; and banks, being inherently bankrupt anyway, can ill afford such questions.Banks are "inherently bankrupt" because they issue far more warehouse receipts to cash (nowadays in the form of "deposits" redeemable in cash on demand) than they have cash available. Hence, they are always vulnerable to bank runs. These runs are not like any other business failures, because they simply consist of depositors claiming their own rightful property, which the banks do not have. "Inherent bankruptcy," then, is an essential feature of any "fractional reserve" banking system. As Frank Graham stated:"The attempt of the banks to realize the inconsistent aims of lending cash, or merely multiplied claims to cash, and still to represent that cash is available on demand is even more preposterous than . . . eating one's cake and counting on it for future consumption. . . . The alleged convertibility is a delusion dependent upon the right's not being unduly exercised."Frank D. Graham, "Partial Reserve Money and the 100% Proposal," American Economic Review (September, 1936): 436. Hence, the money supply will contract because of actual bank runs, and because banks will tighten their position in fear of such runs.
Another common secondary feature of depressions is an increase in the demand for money. This "scramble for liquidity" is the result of several factors: (1) people expect falling prices, due to the depression and deflation, and will therefore hold more money and spend less on goods, awaiting the price fall; (2) borrowers will try to pay off their debts, now being called by banks and by business creditors, by liquidating other assets in exchange for money; (3) the rash of business losses and bankruptcies makes businessmen cautious about investing until the liquidation process is over.
With the supply of money falling, and the demand for money increasing, generally falling prices are a consequent feature of most depressions. A general price fall, however, is caused by the secondary, rather than by the inherent, features of depressions. Almost all economists, even those who see that the depression adjustment process should be permitted to function unhampered, take a very gloomy view of the secondary deflation and price fall, and assert that they unnecessarily aggravate the severity of depressions. This view, however, is incorrect. These processes not only do not aggravate the depression, they have positively beneficial effects.
There is, for example, no warrant whatever for the common hostility toward "hoarding." There is no criterion, first of all, to define "hoarding"; the charge inevitably boils down to mean that A thinks that B is keeping more cash balances than A deems appropriate for B. Certainly there is no objective criterion to decide when an increase in cash balance becomes a "hoard." Second, we have seen that the demand for money increases as a result of certain needs and values of the people; in a depression, fears of business liquidation and expectations of price declines particularly spur this rise. By what standards can these valuations be called "illegitimate"? A general price fall is the way that an increase in the demand for money can be satisfied; for lower prices mean that the same total cash balances have greater effectiveness, greater "real" command over goods and services. In short, the desire for increased real cash balances has now been satisfied.
Furthermore, the demand for money will decline again as soon as the liquidation and adjustment processes are finished. For the completion of liquidation removes the uncertainties of impending bankruptcy and ends the borrowers' scramble for cash. A rapid unhampered fall in prices, both in general (adjusting to the changed money-relation), and particularly in goods of higher orders (adjusting to the malinvestments of the boom) will speedily end the realignment processes and remove expectations of further declines. Thus, the sooner the various adjustments, primary and secondary, are carried out, the sooner will the demand for money fall once again. This, of course, is just one part of the general economic "return to normal."
Neither does the increased "hoarding" nor the fall of prices at all interfere with the primary depression-adjustment. The important feature of the primary adjustment is that the prices of producers' goods fall more rapidly than do consumer good prices (or, more accurately, that higher order prices fall more rapidly than do those of lower order goods); it does not interfere with the primary adjustment if all prices are falling to some degree. It is, moreover, a common myth among laymen and economists alike, that falling prices have a depressing effect on business. This is not necessarily true. What matters for business is not the general behavior of prices, but the price differentials between selling prices and costs (the "natural rate of interest"). If wage rates, for example, fall more rapidly than product prices, this stimulates business activity and employment.
Deflation of the money supply (via credit contraction) has fared as badly as hoarding in the eyes of economists. Even the Misesian theorists deplore deflation and have seen no benefits accruing from it.In a gold standard country (such as America during the 1929 depression), Austrian economists accepted credit contraction as a perhaps necessary price to pay for remaining on gold. But few saw any remedial virtues in the deflation process itself. Yet, deflationary credit contraction greatly helps to speed up the adjustment process, and hence the completion of business recovery, in ways as yet unrecognized. The adjustment consists, as we know, of a return to the desired consumption-saving pattern. Less adjustment is needed, however, if time preferences themselves change: i.e., if savings increase and consumption relatively declines. In short, what can help a depression is not more consumption, but, on the contrary, less consumption and more savings (and, concomitantly, more investment). Falling prices encourage greater savings and decreased consumption by fostering an accounting illusion. Business accounting records the value of assets at their original cost. It is well known that general price increases distort the accounting-record: what seems to be a large "profit" may only be just sufficient to replace the now higher-priced assets. During an inflation, therefore, business "profits" are greatly overstated, and consumption is greater than it would be if the accounting illusion were not operating—perhaps capital is even consumed without the individual's knowledge. In a time of deflation, the accounting illusion is reversed: what seem like losses and capital consumption, may actually mean profits for the firm, since assets now cost much less to be replaced. This overstatement of losses, however, restricts consumption and encourages saving; a man may merely think he is replacing capital, when he is actually making an added investment in the business.
Credit contraction will have another beneficial effect in promoting recovery. For bank credit expansion, we have seen, distorts the free market by lowering price differentials (the "natural rate of interest" or going rate of profit) on the market. Credit contraction, on the other hand, distorts the free market in the reverse direction. Deflationary credit contraction's first effect is to lower the money supply in the hands of business, particularly in the higher stages of production. This reduces the demand for factors in the higher stages, lowers factor prices and incomes, and increases price differentials and the interest rate. It spurs the shift of factors, in short, from the higher to the lower stages. But this means that credit contraction, when it follows upon credit expansion, speeds the market's adjustment process. Credit contraction returns the economy to free-market proportions much sooner than otherwise.
But, it may be objected, may not credit contraction overcompensate the errors of the boom and itself cause distortions that need correction? It is true that credit contraction may overcompensate, and, while contraction proceeds, it may cause interest rates to be higher than free-market levels, and investment lower than in the free market. But since contraction causes no positive mal-investments, it will not lead to any painful period of depression and adjustment. If businessmen are misled into thinking that less capital is available for investment than is really the case, no lasting damage in the form of wasted investments will ensue.Some readers may ask: why doesn't credit contraction lead to malinvestment, by causing overinvestment in lower-order goods and underinvestment in higher-order goods, thus reversing the consequences of credit expansion? The answer stems from the Austrian analysis of the structure of production. There is no arbitrary choice of investing in lower or higher-order goods. Any increased investment must be made in the higher-order goods, must lengthen the structure of production. A decreased amount of investment in the economy simply reduces higher-order capital. Thus, credit contraction will cause not excess of investment in the lower orders, but simply a shorter structure than would otherwise have been established. Furthermore, in the nature of things, credit contraction is severely limited—it cannot progress beyond the extent of the preceding inflation.In a gold standard economy, credit contraction is limited by the total size of the gold stock. Credit expansion faces no such limit.
Government Depression Policy: Laissez-Faire If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don't interfere with the market's adjustment process. The more the government intervenes to delay the market's adjustment, the longer and more grueling the depression will be, and the more difficult will be the road to complete recovery. Government hampering aggravates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure. If, in fact, we list logically the various ways that government could hamper market adjustment, we will find that we have precisely listed the favorite "anti-depression" arsenal of government policy. Thus, here are the ways the adjustment process can be hobbled:
Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc.
Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their turn, will have to be liquidated in some later depression. A government "easy money" policy prevents the market's return to the necessary higher interest rates.
Keep wage rates up. Artificial maintenance of wage rates in a depression insures permanent mass unemployment. Furthermore, in a deflation, when prices are falling, keeping the same rate of money wages means that real wage rates have been pushed higher. In the face of falling business demand, this greatly aggravates the unemployment problem.
Keep prices up. Keeping prices above their free-market levels will create unsalable surpluses, and prevent a return to prosperity.
Stimulate consumption and discourage saving. We have seen that more saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved-capital even further. Government can encourage consumption by "food stamp plans" and relief payments. It can discourage savings and investment by higher taxes, particularly on the wealthy and on corporations and estates. As a matter of fact, any increase of taxes and government spending will discourage saving and investment and stimulate consumption, since government spending is all consumption. Some of the private funds would have been saved and invested; all of the government funds are consumed.In recent years, particularly in the literature on the "under-developed countries," there has been a great deal of discussion of government "investment." There can be no such investment, however. "Investment" is defined as expenditures made not for the direct satisfaction of those who make it, but for other, ultimate consumers. Machines are produced not to serve the entrepreneur, but to serve the ultimate consumers, who in turn remunerate the entrepreneurs. But government acquires its funds by seizing them from private individuals; the spending of the funds, therefore, gratifies the desires of government officials. Government officials have forcibly shifted production from satisfying private consumers to satisfying themselves; their spending is therefore pure consumption and can by no stretch of the term be called "investment." (Of course, to the extent that government officials do not realize this, their "consumption" is really waste-spending.) Any increase in the relative size of government in the economy, therefore, shifts the societal consumption-investment ratio in favor of consumption, and prolongs the depression.
Subsidize unemployment. Any subsidization of unemployment (via unemployment "insurance," relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.
These, then, are the measures which will delay the recovery process and aggravate the depression. Yet, they are the time-honored favorites of government policy, and, as we shall see, they were the policies adopted in the 1929-1933 depression, by a government known to many historians as a "laissez-faire" administration.
Since deflation also speeds recovery, the government should encourage, rather than interfere with, a credit contraction. In a gold-standard economy, such as we had in 1929, blocking deflation has further unfortunate consequences. For a deflation increases the reserve ratios of the banking system, and generates more confidence in citizen and foreigner alike that the gold standard will be retained. Fear for the gold standard will precipitate the very bank runs that the government is anxious to avoid. There are other values in deflation, even in bank runs, which should not be overlooked. Banks should no more be exempt from paying their obligations than is any other business. Any interference with their comeuppance via bank runs will establish banks as a specially privileged group, not obligated to pay their debts, and will lead to later inflations, credit expansions, and depressions. And if, as we contend, banks are inherently bankrupt and "runs" simply reveal that bankruptcy, it is beneficial for the economy for the banking system to be reformed, once and for all, by a thorough purge of the fractional-reserve banking system. Such a purge would bring home forcefully to the public the dangers of fractional-reserve banking, and, more than any academic theorizing, insure against such banking evils in the future.For more on the problems of fractional-reserve banking, see below.
The most important canon of sound government policy in a depression, then, is to keep itself from interfering in the adjustment process. Can it do anything more positive to aid the adjustment? Some economists have advocated a government-decreed wage cut to spur employment, e.g., a 10 percent across-the-board reduction. But free-market adjustment is the reverse of any "across-the-board" policy. Not all wages need to be cut; the degree of required adjustments of prices and wages differs from case to case, and can only be determined on the processes of the free and unhampered market.See W.H. Hutt, "The Significance of Price Flexibility," in Henry Hazlitt, ed., The Critics of Keynesian Economics (Princeton, N.J.: D. Van Nostrand, 1960), pp. 390–92. Government intervention can only distort the market further.
There is one thing the government can do positively, however: it can drastically lower its relative role in the economy, slashing its own expenditures and taxes, particularly taxes that interfere with saving and investment. Reducing its tax-spending level will automatically shift the societal saving-investment-consumption ratio in favor of saving and investment, thus greatly lowering the time required for returning to a prosperous economy.I am indebted to Mr. Rae C. Heiple, II, for pointing this out to me. Reducing taxes that bear most heavily on savings and investment will further lower social time preferences.Could government increase the investment-consumption ratio by raising taxes in any way? It could not tax only consumption even if it tried; it can be shown (and Prof. Harry Gunnison Brown has gone a long way to show) that any ostensible tax on "consumption" becomes, on the market, a tax on incomes, hurting saving as well as consumption. If we assume that the poor consume a greater proportion of their income than the rich, we might say that a tax on the poor used to subsidize the rich will raise the saving-consumption ratio and thereby help cure a depression. On the other hand, the poor do not necessarily have higher time preferences than the rich, and the rich might well treat government subsidies as special windfalls to be consumed. Furthermore, Harold Lubell has maintained that the effects of a change in income distribution on social consumption would be negligible, even though the absolute proportion of consumption is greater among the poor. See Harry Gunnison Brown, "The Incidence of a General Output or a General Sales Tax," Journal of Political Economy (April, 1939): 254–62; Harold Lubell, "Effects of Redistribution of Income on Consumers' Expenditures," American Economic Review (March, 1947): 157–70. Furthermore, depression is a time of economic strain. Any reduction of taxes, or of any regulations interfering with the free market, will stimulate healthy economic activity; any increase in taxes or other intervention will depress the economy further.
In sum, the proper governmental policy in a depression is strict laissez-faire, including stringent budget slashing, and coupled perhaps with positive encouragement for credit contraction. For decades such a program has been labeled "ignorant," "reactionary," or "Neanderthal" by conventional economists. On the contrary, it is the policy clearly dictated by economic science to those who wish to end the depression as quickly and as cleanly as possible.Advocacy of any governmental policy must rest, in the final analysis, on a system of ethical principles. We do not attempt to discuss ethics in this book. Those who wish to prolong a depression, for whatever reason, will, of course, enthusiastically support these government interventions, as will those whose prime aim is the accretion of power in the hands of the state.
It might be objected that depression only began when credit expansion ceased. Why shouldn't the government continue credit expansion indefinitely? In the first place, the longer the inflationary boom continues, the more painful and severe will be the necessary adjustment process, Second, the boom cannot continue indefinitely, because eventually the public awakens to the governmental policy of permanent inflation, and flees from money into goods, making its purchases while the dollar is worth more than it will be in future. The result will be a "runaway" or hyperinflation, so familiar to history, and particularly to the modern world.For the classic treatment of hyperinflation, see Costantino Bresciani-Turroni, The Economics of Inflation (London: George Allen and Unwin, 1937). Hyperinflation, on any count, is far worse than any depression: it destroys the currency—the lifeblood of the economy; it ruins and shatters the middle class and all "fixed income groups"; it wreaks havoc unbounded. And furthermore, it leads finally to unemployment and lower living standards, since there is little point in working when earned income depreciates by the hour. More time is spent hunting goods to buy. To avoid such a calamity, then, credit expansion must stop sometime, and this will bring a depression into being.
Preventing Depressions Preventing a depression is clearly better than having to suffer it. If the government's proper policy during a depression is laissez-faire, what should it do to prevent a depression from beginning? Obviously, since credit expansion necessarily sows the seeds of later depression, the proper course for the government is to stop any inflationary credit expansion from getting under way. This is not a very difficult injunction, for government's most important task is to keep itself from generating inflation. For government is an inherently inflationary institution, and consequently has almost always triggered, encouraged, and directed the inflationary boom. Government is inherently inflationary because it has, over the centuries, acquired control over the monetary system. Having the power to print money (including the "printing" of bank deposits) gives it the power to tap a ready source of revenue. Inflation is a form of taxation, since the government can create new money out of thin air and use it to bid away resources from private individuals, who are barred by heavy penalty from similar "counterfeiting." Inflation therefore makes a pleasant substitute for taxation for the government officials and their favored groups, and it is a subtle substitute which the general public can easily—and can be encouraged to—overlook. The government can also pin the blame for the rising prices, which are the inevitable consequence of inflation, upon the general public or some disliked segments of the public, e.g., business, speculators, foreigners. Only the unlikely adoption of sound economic doctrine could lead the public to pin the responsibility where it belongs: on the government itself.
Private banks, it is true, can themselves inflate the money supply by issuing more claims to standard money (whether gold or government paper) than they could possibly redeem. A bank deposit is equivalent to a warehouse receipt for cash, a receipt which the bank pledges to redeem at any time the customer wishes to take his money out of the bank's vaults. The whole system of "fractional-reserve banking" involves the issuance of receipts which cannot possibly be redeemed. But Mises has shown that, by themselves, private banks could not inflate the money supply by a great deal.See Mises, Human Action, pp. 429–45, and Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953). In the first place, each bank would find its newly issued uncovered, or "pseudo," receipts (uncovered by cash) soon transferred to the clients of other banks, who would call on the bank for redemption. The narrower the clientele of each bank, then, the less scope for its issue of pseudo-receipts. All the banks could join together and agree to expand at the same rate, but such agreement would be difficult to achieve. Second, the banks would be limited by the degree to which the public used bank deposits or notes as against standard cash; and third, they would be limited by the confidence of the clients in their banks, which could be wrecked by runs at any time.
Instead of preventing inflation by prohibiting fractional-reserve banking as fraudulent, governments have uniformly moved in the opposite direction, and have step-by-step removed these free-market checks to bank credit expansion, at the same time putting themselves in a position to direct the inflation. In various ways, they have artificially bolstered public confidence in the banks, encouraged public use of paper and deposits instead of gold (finally outlawing gold), and shepherded all the banks under one roof so that they can all expand together. The main device for accomplishing these aims has been Central Banking, an institution which America finally acquired as the Federal Reserve System in 1913. Central Banking permitted the centralization and absorption of gold into government vaults, greatly enlarging the national base for credit expansion:When gold—formerly the banks' reserves—is transferred to a newly established Central Bank, the latter keeps only a fractional reserve, and thus the total credit base and potential monetary supply are enlarged. See C.A. Phillips, T.F. McManus, and R.W. Nelson, Banking and the Business Cycle (New York: Macmillan, 1937), pp. 24ff. it also insured uniform action by the banks through basing their reserves on deposit accounts at the Central Bank instead of on gold. Upon establishment of a Central Bank, each private bank no longer gauges its policy according to its particular gold reserve; all banks are now tied together and regulated by Central Bank action. The Central Bank, furthermore, by proclaiming its function to be a "lender of last resort" to banks in trouble, enormously increases public confidence in the banking system. For it is tacitly assumed by everyone that the government would never permit its own organ—the Central Bank—to fail. A Central Bank, even when on the gold standard, has little need to worry about demands for gold from its own citizens. Only possible drains of gold to foreign countries (i.e., by non-clients of the Central Bank) may cause worry.
The government assured Federal Reserve control over the banks by (1) granting to the Federal Reserve System (FRS) a monopoly over note issue; (2) compelling all the existing "national banks" to join the Federal Reserve System, and to keep all their legal reserves as deposits at the Federal ReserveMany "state banks" were induced to join the FRS by patriotic appeals and offers of free services. Even the banks that did not join, however, are effectively controlled by the System, for, in order to obtain paper money, they must keep reserves in some member bank.; and (3) fixing the minimum reserve ratio of deposits at the Reserve to bank deposits (money owned by the public). The establishment of the FRS was furthermore inflationary in directly reducing existing reserve-ratio requirements.The average reserve requirements of all banks before 1913 was estimated at approximately 21 percent. By mid-1917, when the FRS had fully taken shape, the average required ratio was 10 percent. Phillips et al. estimate that the inherent inflationary impact of the FRS (pointed out in footnote 23) increased the expansive power of the banking system three-fold. Thus, the two factors (the inherent impact, and the deliberate lowering of reserve requirements) combined to inflate the monetary potential of the American banking system six-fold as a result of the inauguration of the FRS. See Phillips, et al., Banking and the Business Cycle, pp. 23ff. The Reserve could then control the volume of money by governing two things: the volume of bank reserves, and the legal reserve requirements. The Reserve can govern the volume of bank reserves (in ways which will be explained below), and the government sets the legal ratio, but admittedly control over the money supply is not perfect, as banks can keep "excess reserves." Normally, however, reassured by the existence of a lender of last resort, and making profits by maximizing its assets and deposits, a bank will keep fully "loaned up" to its legal ratio.
While unregulated private banking would be checked within narrow limits and would be far less inflationary than Central Bank manipulation,The horrors of "wildcat banking" in America before the Civil War stemmed from two factors, both due to government rather than free banking: (1) Since the beginnings of banking, in 1814 and then in every ensuing panic, state governments permitted banks to continue operating, making and calling loans, etc. without having to redeem in specie. In short, banks were privileged to operate without paying their obligations. (2) Prohibitions on interstate branch banking (which still exist), coupled with poor transportation, prevented banks from promptly calling on distant banks for redemption of notes. the clearest way of preventing inflation is to outlaw fractional-reserve banking, and to impose a 100 percent gold reserve to all notes and deposits. Bank cartels, for example, are not very likely under unregulated, or "free" banking, but they could nevertheless occur. Professor Mises, while recognizing the superior economic merits of 100 percent gold money to free banking, prefers the latter because 100 percent reserves would concede to the government control over banking, and government could easily change these requirements to conform to its inflationist bias.Mises, Human Action, p. 440. But a 100 percent gold reserve requirement would not be just another administrative control by government; it would be part and parcel of the general libertarian legal prohibition against fraud. Everyone except absolute pacifists concedes that violence against person and property should be outlawed, and that agencies, operating under this general law, should defend person and property against attack. Libertarians, advocates of laissez-faire, believe that "governments" should confine themselves to being defense agencies only. Fraud is equivalent to theft, for fraud is committed when one part of an exchange contract is deliberately not fulfilled after the other's property has been taken. Banks that issue receipts to non-existent gold are really committing fraud, because it is then impossible for all property owners (of claims to gold) to claim their rightful property. Therefore, prohibition of such practices would not be an act of government intervention in the free market; it would be part of the general legal defense of property against attack which a free market requires.A common analogy states that banks simply count on people not redeeming all their property at once, and that engineers who build bridges operate also on the principle that not everyone in a city will wish to cross the bridge at once. But the cases are entirely different. The people crossing a bridge are simply requesting a service; they are not trying to take possession of their lawful property, as are the bank depositors. A more fitting analogy would defend embezzlers who would never have been caught if someone hadn't fortuitously inspected the books. The crime comes when the theft or fraud is committed, not when it is finally revealed., Perhaps a libertarian legal system would consider "general deposit warrants" (which allow a warehouse to return any homogeneous good to the depositor) as "specific deposit warrants," which, like bills of lading, pawn tickets, dock-warrants, etc. establish ownership to specific, earmarked objects. As Jevons stated, "It used to be held as a general rule of law, that any present grant or assignment of goods not in existence is without operation." See W. Stanley Jevons, Money and the Mechanism of Exchange (London: Kegan Paul, 1905), pp. 207–12. For an excellent discussion of the problems of a fractional-reserve money, see Amasa Walker, The Science of Wealth (3rd ed., Boston: Little, Brown, 1867), pp. 126–32, esp. pp. 139–41.
What, then, was the proper government policy during the 1920s? What should government have done to prevent the crash? Its best policy would have been to liquidate the Federal Reserve System, and to erect a 100 percent gold reserve money; failing that, it should have liquidated the FRS and left private banks unregulated, but subject to prompt, rigorous bankruptcy upon failure to redeem their notes and deposits. Failing these drastic measures, and given the existence of the Federal Reserve System, what should its policy have been? The government should have exercised full vigilance in not supporting or permitting any inflationary credit expansion. We have seen that the Fed—the Federal Reserve System—does not have complete control over money because it cannot force banks to lend up to their reserves; but it does have absolute anti-inflationary control over the banking system. For it does have the power to reduce bank reserves at will, and thereby force the banks to cease inflating, or even to contract if necessary. By lowering the volume of bank reserves and/or raising reserve requirements, the federal government, in the 1920s as well as today, has had the absolute power to prevent any increase in the total volume of money and credit. It is true that the FRS has no direct control over such money creators as savings banks, savings and loan associations, and life insurance companies, but any credit expansion from these sources could be offset by deflationary pressure upon the commercial banks. This is especially true because commercial bank deposits (1) form the monetary base for the credit extended by the other financial institutions, and (2) are the most actively circulating part of the money supply. Given the Federal Reserve System and its absolute power over the nation's money, the federal government, since 1913, must bear the complete responsibility for any inflation. The banks cannot inflate on their own; any credit expansion can only take place with the support and acquiescence of the federal government and its Federal Reserve authorities. The banks are virtual pawns of the government, and have been since 1913. Any guilt for credit expansion and the consequent depression must be borne by the federal government and by it alone.Some writers make a great to-do over the legal fiction that the Federal Reserve System is "owned" by its member banks. In practice, this simply means that these banks are taxed to help pay for the support of the Federal Reserve. If the private banks really "own" the Fed, then how can its officials be appointed by the government, and the "owners" compelled to "own" the Federal Reserve Board by force of government statute? The Federal Reserve Banks should simply be regarded as governmental agencies.
This excerpt is taken from the first chapters of Murray Rothbard's .America's Great Depression, published in 1963.
The Trump administration doled out $700 million in CARES “loans” to trucking firm Yellow. Now Yellow has gone bankrupt, and the taxpayers may foot the bill.
Original Article: "The Taxpayers Bailed Out Yellow Trucking. It Went Bankrupt Anyway."
By corrupting the meaning of inflation, mainstream economists have given a false picture of what happens when monetary authorities expand the money supply. Mises and Rothbard understood.
Original Article: "Taking Back the Meaning of "Inflation""
In this episode, Mark updates his early March 2023 episode (Mises.org/Minor11) on the high price of toilet paper. He shows how economic changes, so far, in 2023 seem to have vindicated his forecast of lower toilet paper and paper towel prices. It also demonstrates how the market process works on a minor scale, even when large determinants like Amazon, Covid, and the US home construction industry get tangled up with politicians and bureaucrats.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
When it comes to the debt ceiling, political parties are irrelevant, and the recent debt ceiling drama, was little more than a sham.
Original Article: "The Debt Ceiling Debate Was Pure Theater"
President Biden announced recently to much fanfare that his administration will transform the US economy through central planning. This does not end well.
Original Article: "Bidenomics Is Yet Another Version of Failed Industrial Policy"
In this week's episode, Mark reviews what people have said about Fitch's downgrade of US government debt. Mark sees it as a good thing, but not good enough. The "minor issue" in the latest debt ceiling agreement is ignored by the mainstream media: politicians suspended the debt ceiling into 2025, rather than raising it to some arbitrary, higher figure.
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As Fed staffers no longer predict an impending recession, economists on social media are all assuring themselves that Americans are in store for a "soft landing." Mises Fellow Jonathan Newman joins Bob to explain why the data still support the case for recession and point out the eerie similarity to the calm before the storm in 2008.
Robert Lucas' Nobel Prize Winning Lecture: Mises.org/HAP407a Bob's Eerie Article from 2007 on the Recession: Mises.org/HAP407b 'Bernanke Was Wrong' Compilation: Mises.org/HAP407c 'Peter Schiff Was Right' Compilation: Mises.org/HAP407d
Join us in Nashville on September 23rd for a no-holds-barred discussion against the regime: Mises.org/Nashville23
In this week's episode, Mark discusses the record levels of credit card debt and how it is a major contributing factor to economic pain from the Fed's impact of causing higher prices for consumer goods. This is expected to intensify when the recession officially hits.
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This week Mark invites you to explore the Minor Issues archives. We have produced about a half a year's worth of short audio commentaries about the economy, and we are grateful to our listeners for their feedback. Topics range from the price of toilet paper to macro-business cycle topics, but our specialty is highlighting issues that the mainstream media ignores or misrepresents as insignificant. Thank you for listening.
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Mark Thornton joins Ryan and Tho on Radio Rothbard to take a closer look at the state of the US dollar and how price inflation and economic crises are likely to play out in the months and years ahead.
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The Federal Home Loan Bank (FHLB) is the latest "weapon" in the government's so-called arsenal to keep the banking system afloat. But the system needs much more than just "liquidity." It needs sound money and sound banking practices.
Original Article: "The Backstops for Banks Are Full of Holes"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
The public memory is short. We forget that, from the beginning of the Industrial Revolution in the mid-18th century until the beginning of World War II, prices generally went down, year after year. That's because continually increasing productivity and output of goods generated by free markets caused prices to fall. There was no depression, however, because costs fell along with selling prices. Usually, wage rates remained constant while the cost of living fell, so that "real" wages, or everyone's standard of living, rose steadily.
Virtually the only time when prices rose over those two centuries were periods of war (War of 1812, Civil War, World War I), when the warring governments inflated the money supply so heavily to pay for the war as to more than offset continuing gains in productivity.
We can see how free market capitalism, unburdened by governmental or central bank inflation, works if we look at what has happened in the last few years to the prices of computers. A computer used to have to be enormous, costing millions of dollars. Now, in a remarkable surge of productivity brought about by the microchip revolution, computers are falling in price even as I write. Computer firms are successful despite the falling prices because their costs have been falling, and productivity rising. In fact, these falling costs and prices have enabled them to tap a mass market characteristic of the dynamic growth of free market capitalism. "Deflation" has brought no disaster to this industry.
The same is true of other high-growth industries, such as electronic calculators, plastics, TV sets, and VCRs. Deflation, far from bringing catastrophe, is the hallmark of sound and dynamic economic growth.
For more episodes, visit Mises.org/MisesReport
In this episode, Mark looks at the "minor issue" of the value of the dollar. While everything in the economy seems great—including stock markets, price inflation, unemployment, and consumer confidence—the value of the dollar index has fallen 12% during the rebound in stocks since last October.
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With each iteration of the banking crisis, the Federal Reserve System and federal regulators gain in power and authority. Maybe the banking crisis isn’t an accident.
Original Article: "Is the Banking Crisis Being Orchestrated?"
It's fitting that the G7 recently met in Hiroshima because the policies they are following are blowing up the world economy.
Original Article: "The G7 in Hiroshima: The Latest Attempt to Impose a Unipolar World"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
Every time someone calls for the government to abandon its inflationary policies, Establishment economists and politicians warn that the result can only be severe unemployment. We are trapped, therefore, into playing off inflation against high unemployment, and become persuaded that we must therefore accept some of both.
This doctrine is the fallback position for Keynesians. Originally, the Keynesians promised us that by manipulating and fine-tuning deficits and government spending, they could and would bring us permanent prosperity and full employment without inflation. Then, when inflation became chronic and ever-greater, they changed their tune to warn of the alleged tradeoff, so as to weaken any possible pressure upon the government to stop its inflationary creation of new money.
The tradeoff doctrine is based on the alleged "Phillips curve," a curve invented many years ago by the British economist A. W. Phillips. Phillips correlated wage rate increases with unemployment, and claimed that the two move inversely: the higher the increases in wage rates, the lower the unemployment. On its face, this is a peculiar doctrine, since it flies in the face of logical, commonsense theory. Theory tells us that the higher the wage rates, the greater the unemployment, and vice versa. If everyone went to their employer tomorrow and insisted on double or triple the wage rate, many of us would be promptly out of a job. Yet this bizarre finding was accepted as gospel by the Keynesian economic establishment.
By now, it should be clear that this statistical finding violates the facts as well as logical theory. For during the 1950s, inflation was only about one to two percent per year, and unemployment hovered around three or four percent, whereas nowadays unemployment ranges between eight and 11 percent, and inflation between five and 13 percent. In the last two or three decades, in short, both inflation and unemployment have increased sharply and severely. If anything, we have had a reverse Phillips curve. There has been anything but an inflation-unemployment tradeoff.
But ideologues seldom give way to the facts, even as they continually claim to "test" their theories by facts. To save the concept, they have simply concluded that the Phillips curve still remains as an inflation-unemployment tradeoff, except that the curve has unaccountably "shifted" to a new set of alleged tradeoffs. On this sort of mind-set, of course, no one could ever refute any theory.
In fact, inflation now, even if it reduces unemployment in the short-run by inducing prices to spurt ahead of wage rates (thereby reducing real wage rates), will only create more unemployment in the long run. Eventually, wage rates catch up with inflation, and inflation brings recession and unemployment inevitably in its wake. After more than two decades of inflation, we are all now living in that "long run."
For more episodes, visit Mises.org/MisesReport
On this week's episode, Mark summarizes the many problems with EVs, and focuses on two consequences funded by taxpayer subsidy. Large, overpriced, long range vehicles have been subsidized at the expense of more efficient technological applications. These EVs are significantly heavier compared to their fossil fuel counterparts (which have engines and gas tanks). These heavier vehicles create greater crash risks for passengers and pedestrians. Failure to disclose such issues reveals some uncomfortable truths about the political elites who drive this agenda onto the American people.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Socialists like Bernie Sanders and the editors of Jacobin have decried the possible US government debt default. Marx and Lenin would have vociferously disagreed.
Original Article: "Current Socialists Should Support Government Default: Their Forebears Certainly Did"
While the faux debt ceiling drama rages in Washington, DC, governments worldwide are defaulting on their debt via inflation.
Original Article: "Default by Inflation Is the Real Drama in the Global Debt Market"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
The problem of forecasting interest rates illustrates the pitfalls of forecasting in general. People are contrary cusses whose behavior, thank goodness, cannot be forecast precisely in advance. Their values, ideas, expectations, and knowledge change all the time, and change in an unpredictable manner. What economist, for example, could have forecast (or did forecast) the Cabbage Patch Kid craze of the Christmas season of 1983? Every economic quantity, every price, purchase, or income figure is the embodiment of thousands, even millions, of unpredictable choices by individuals.
Many studies, formal and informal, have been made of the record of forecasting by economists, and it has been consistently abysmal. Forecasters often complain that they can do well enough as long as current trends continue; what they have difficulty in doing is catching changes in trend. But of course there is no trick in extrapolating current trends into the near future. You don't need sophisticated computer models for that; you can do it better and far more cheaply by using a ruler. The real trick is precisely to forecast when and how trends will change, and forecasters have been notoriously bad at that. No economist forecast the depth of the 1981–82 depression, and none predicted the strength of the 1983 boom.
The next time you are swayed by the jargon or seeming expertise of the economic forecaster, ask yourself this question: If he can really predict the future so well, why is he wasting his time putting out newsletters or doing consulting when he himself could be making trillions of dollars in the stock and commodity markets?
For more episodes, visit Mises.org/MisesReport
In this week's episode, Mark looks back at the history of the Inverted Yield Curve. While many observers have now dismissed the significance of the yield curve inversion in 2022—and no recession, yet—Mark shows that the history of the IYC may back a completely opposite interpretation.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
As we enter the dog days of summer, I have heard several media conversations and a few private ones that express exasperation over languishing capital markets. Why do things take so long to unravel? What will happen next? When will X, Y, or Z happen? Why are tech stocks so bullish now? The market takes time to process the information that it already has — or is in "process" — and everyday brings new data.
The Austrian perspective highlights the role of reality in the market process. This is especially important in this period of unprecedented government intervention and the chaos it has generated in markets.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
In 2023, self-employment has collapsed again with year-over-year self-employment growth dropping by 6.5 percent. That's the largest drop since December 2007, when the Great Recession officially began.
Original Article: "Yet Another Month of Questionable Federal Jobs Data as 310,000 Fewer People Report Having Jobs"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
The financial press now knows enough economics to watch weekly money supply figures like hawks; but they inevitably interpret these figures in a chaotic fashion. If the money supply rises, this is interpreted as lowering interest rates and inflationary; it is also interpreted, often in the very same article, as raising interest rates. And vice versa. If the Fed tightens the growth of money, it is interpreted as both raising interest rates and lowering them. Sometimes it seems that all Fed actions, no matter how contradictory, must result in raising interest rates. Clearly something is very wrong here.
The problem here is that, as in the case of price levels, there are several causal factors operating on interest rates and in different directions. If the Fed expands the money supply, it does so by generating more bank reserves and thereby expanding the supply of bank credit and bank deposits. The expansion of credit necessarily means an increased supply in the credit market and hence a lowering of the price of credit, or the rate of interest. On the other hand, if the Fed restricts the supply of credit and the growth of the money supply, this means that the supply in the credit market declines, and this should mean a rise in interest rates.
And this is precisely what happens in the first decade or two of chronic inflation. Fed expansion lowers interest rates; Fed tightening raises them. But after this period, the public and the market begin to catch on to what is happening. They begin to realize that inflation is chronic because of the systemic expansion of the money supply. When they realize this fact of life, they will also realize that inflation wipes out the creditor for the benefit of the debtor. Thus, if someone grants a loan at 5% for one year, and there is 7% inflation for that year, the creditor loses, not gains. He loses 2%, since he gets paid back in dollars that are now worth 7% less in purchasing power. Correspondingly, the debtor gains by inflation. As creditors begin to catch on, they place an inflation premium on the interest rate, and debtors will be willing to pay. Hence, in the long-run anything which fuels the expectations of inflation will raise inflation premiums on interest rates; and anything which dampens those expectations will lower those premiums. Therefore, a Fed tightening will now tend to dampen inflationary expectations and lower interest rates; a Fed expansion will whip up those expectations again and raise them. There are two, opposite causal chains at work. And so Fed expansion or contraction can either raise or lower interest rates, depending on which causal chain is stronger.
Which will be stronger? There is no way to know for sure. In the early decades of inflation, there is no inflation premium; in the later decades, such as we are now in, there is. The relative strength and reaction times depend on the subjective expectations of the public, and these cannot be forecast with certainty. And this is one reason why economic forecasts can never be made with certainty.
For more episodes, visit Mises.org/MisesReport
Ryan and Robert Aro take a look at the Fed's unconvincing explanation of why it has chickened out on interest rate hikes. This only makes sense if the economy is much weaker than the Fed claims.
Be sure to follow the Fed Watch Podcast at Mises.org/FedPod.
US trade deficits seem to be expanding, placing pressure on the dollar. However, central banks around the world are just as irresponsible as the Fed, masking the relative devaluation of US money.
Original Article: "US Trade Deficits Are Growing Larger. Or Are They?"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
Those people who are properly worried about the deficit unfortunately offer an unacceptable solution: increasing taxes. Curing deficits by raising taxes is equivalent to curing someone's bronchitis by shooting him. The "cure" is far worse than the disease.
For one reason, as many critics have pointed out, raising taxes simply gives the government more money, and so the politicians and bureaucrats are likely to react by raising expenditures still further. Parkinson said it all in his famous "Law": "Expenditures rise to meet income." If the government is willing to have, say, a 20 percent deficit, it will handle high revenues by raising spending still more to maintain the same proportion of deficit.
But even apart from this shrewd judgment in political psychology, why should anyone believe that a tax is better than a higher price? It is true that inflation is a form of taxation, in which the government and other early receivers of new money are able to expropriate the members of the public whose income rises later in the process of inflation. But, at least' with inflation, people are still reaping some of the benefits of exchange. If bread rises to $10 a loaf, this is unfortunate, but at least you can still eat the bread. But if taxes go up, your money is expropriated for the benefit of politicians and bureaucrats, and you are left with no service or benefit. The only result is that the producers' money is confiscated for the benefit of a bureaucracy that adds insult to injury by using part of that confiscated money to push the public around.
No, the only sound cure for deficits is a simple but virtually unmentioned one: cut the federal budget. How and where? Anywhere and everywhere.
For more episodes, visit Mises.org/MisesReport
For more episodes, visit Mises.org/MisesReport.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Mises Senior Editor Bill Anderson to discuss his recent article, "David French Gets to Sit with the Cool Kids at the NYT Lunch Table." Bill explains the transformation of French from a "cultural conservative" commentator to the preferred "classical liberal" of the elite.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
PROMO CODE: RothPod for 20% off
Recommended Reading "David French Gets to Sit with the Cool Kids at the NYT Lunch Table" by William L. Anderson: Mises.org/RR_138_A
"Review: Sohrab Ahmari's New Attack on Laissez-Faire Liberalism" by Zachary Yost: Mises.org/RR_138_B
""Libertarian" Is Just Another Word for (Classical) Liberal" by Ryan McMaken: Mises.org/RR_138_C
"To Stop the Left, America Needs a Rothbardian Right" by Tho Bishop: Mises.org/RR_138_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Despite "concerns" about increasing federal debt, in the end Republican legislators have gone along with whatever the ruling elites want. The Limit, Save and Grow Act of 2023 is more of the same.
Original Article: "Republicans Fail on the Debt Ceiling in 2023"
Contrary to the still-enduring myth about Republican budget cutting, there is no correlation whatsoever between Republican control of DC and the trajectory of federal spending.
Original Article: "The Republican Debt-Ceiling "Deal" Is Exactly What We Expected"
As the Fed increases interest rates to reverse the inflation it has caused, firms that depended on easy money will face the bankruptcy judge. Stay tuned; there's more to come.
Original Article: "The Bankruptcy Caravan Is Now Arriving: Time to Pay for the Easy Money"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
In recent years there has been an understandable worry over the low rate of saving and investment in the United States. One worry is that the enormous federal deficits will divert savings to unproductive government spending and thereby crowd out productive investment, generating ever, greater long-run problems in advancing or even maintaining the living standards of the public.
Some policymakers have once again attempted to rebut this charge by statistics. In 1982–83, they declare, deficits were high and increasing, while interest rates fell, thereby indicating that deficits have no crowding-out effect.
This argument once again shows the fallacy of trying to refute logic with statistics. Interest rates fell because of the drop of business borrowing in a recession. "Real" interest rates (interest rates minus the inflation rate) stayed unprecedentedly high, however — partly because most of us expect renewed heavy inflation, partly because of the crowding-out effect. In any case, statistics cannot refute logic; and logic tells us that if savings go into government bonds, there will necessarily be less savings available for productive investment than there would have been, and interest rates will be higher than they would have been without the deficits. If deficits are financed by the public, then this diversion of savings into government projects is direct and palpable. If the deficits are financed by bank inflation, then the diversion is indirect, the crowding-out now taking place by the new money "printed" by the government competing for resources with old money saved by the public.
Milton Friedman tries to rebut the crowding-out effect of deficits by claiming that all government spending, not just deficits, equally crowds out private savings and investment. It is true that money siphoned off by taxes could also have gone into private savings and investment. But deficits have a far greater crowding-out effect than overall spending, since deficits financed by the public obviously tap savings and savings alone, whereas taxes reduce the public's consumption as well as savings.
Thus, deficits, whichever way you look at them, cause grave economic problems. If they are financed by the banking system, they are inflationary. But even if they are financed by the public, they will still cause severe crowding-out effects, diverting much-needed savings from productive private investment to wasteful government projects. And, furthermore, the greater the deficits the greater the permanent income tax burden on the American people to pay for the mounting interest payments, a problem aggravated by the high interest rates brought about by inflationary deficits.
For more episodes, visit Mises.org/MisesReport.
Despite all of the inflation-fighting talk from the Fed, the truth is that the government benefits from inflating the currency. We need to know how to defend ourselves.
Original Article: "Can We Protect Ourselves from Inflation?"
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists. In this program, we present another part of "Ten Great Economic Myths". This material was prepared by Murray N. Rothbard.
In recent decades we always have had federal deficits. The invariable response of the party out of power, whichever it may be, is to denounce those deficits as being the cause of our chronic inflation. And the invariable response of whatever party is in power has been to claim that deficits have nothing to do with inflation. Both opposing statements are myths.
Deficits mean that the federal government is spending more than it is taking in in taxes. Those deficits can be financed in two ways. If they are financed by selling Treasury bonds to the public, then the deficits are not inflationary. No new money is created; people and institutions simply draw down their bank deposits to pay for the bonds, and the Treasury spends that money. Money has simply been transferred from the public to the Treasury, and then the money is spent on other members of the public.
On the other hand, the deficit may be financed by selling bonds to the banking system. If that occurs, the banks create new money by creating new bank deposits and using them to buy the bonds. The new money, in the form of bank deposits, is then spent by the Treasury, and thereby enters permanently into the spending stream of the economy, raising prices and causing inflation. By a complex process, the Federal Reserve enables the banks to create the new money by generating bank reserves of one-tenth that amount. Thus, if banks are to buy $100 billion of new bonds to finance the deficit, the Fed buys approximately $10 billion of old treasury bonds. This purchase increases bank reserves by $10 billion, allowing the banks to pyramid the creation of new bank deposits or money by ten times that amount. In short, the government and the banking system it controls in effect "print" new money to pay for the federal deficit.
Thus, deficits are inflationary to the extent that they are financed by the banking system; they are not inflationary to the extent they are underwritten by the public.
Some policymakers point to the 1982–83 period, when deficits were accelerating and inflation was abating, as a statistical "proof" that deficits and inflation have no relation to each other. This is no proof at all. General price changes are determined by two factors: the supply of, and the demand for, money. During 1982–83 the Fed created new money at a very high rate, approximately at 15 percent per annum. Much of this went to finance the expanding deficit. But on the other hand, the severe depression of those two years increased the demand for money (i.e., lowered the desire to spend money on goods), in response to the severe business losses. This temporarily compensating increase in the demand for money does not make deficits any the less inflationary. In fact, as recovery proceeds, spending will pick up and the demand for money will fall, and the spending of the new money will accelerate inflation.
For more episodes, visit Mises.org/MisesReport.
Recorded by the Mises Institute in the mid-1980s, The Mises Report provided radio commentary from leading non-interventionists, economists, and political scientists.
For more episodes, visit Mises.org/MisesReport.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the role statistics play in promoting the regime. Topics include some interesting differences in recently reported unemployment data, changes to inflation reporting over time, government withholding of various reports — including crime and money supply measures — as well as alternative measures Austrians use to better cut through state propaganda.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
PROMO CODE: RothPod for 20% off
Recommended Reading "Yet Another Month of Questionable Federal Jobs Data as 310,000 Fewer People Report Having Jobs" by Ryan McMaken: Mises.org/RR_137_A
"The "True" Money Supply: A Measure of the Supply of the Medium of Exchange in the U.S. Economy" by Joseph Salerno: Mises.org/RR_137_B
"Does GDP Present an Accurate Picture of the Economy? Not Likely" by Frank Shostak: Mises.org/RR_137_C
"World War I as Fulfillment: Power and the Intellectuals" by Murray Rothbard: Mises.org/RR_137_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Volume 1, Number 4 (1977)New York's current financial woes have a precedent, and perhaps a solution, in the pages of the distant past. Well back in its history, in the late 1830s, New York State was spending and lending money lavishly. By the early 1840s, the rapidly mounting debt had occasioned a severe financial crisis. To avert the imminent possibility of bankruptcy and default, the state legislature in 1842 passed what was known as "the stop and tax law", a levy of one mill on each dollar of taxable property. The new revenue helped the state meet its most pressing obligations. But, even more importantly in terms of the future, New York decided to take steps to prevent another such fiscal disaster. Ambitious projects for internal improvements — mostly canal construction and loans for railroad building — were cut back or abandoned unless there was a reasonable expectation that they could be funded from tolls or taxation. And the legislature also issued a call for a constitutional convention. The new Constitution adopted in 1846 placed strict limits on the state's ability to borrow money. Thus the people of New York, facing problems similar to the state's later predicament, found the answer in an old-fashioned program of reduced spending and new taxes. What is surprising, however, is that such policies had the popular support of the most democratic and liberal elements in the state.
To understand the unusual sequence of events which culminated in the New York State Constitution of 1846, one must go back in history to the Jacksonian era and the political struggles between the Democrats and the Whigs. In New York the Jacksonian Democrats included a wide-ranging constituency of radical workingmen, Irish immigrants, farmers, intellectuals, and representatives of the new rising business or small capitalist class. The preponderance of the older landed aristocracy and wealthier classes, together with the most English or Anglo-Saxon elements in the population, gravitated toward the Whig Party. The Whigs, united nationally by their opposition to Andrew Jackson's Presidency, were the ideological heirs in New York State of DeWitt Clinton, five times governor and father of the Erie Canal. Like Clinton, the Whigs supported the generous use of state funds for internal improvements as well as for various cultural, humanitarian, and educational endeavors. The Whigs' belief in positive government and social reform reflected their paternalistic conception of politics and economics.Useful general interpretations include: Dixon Ryan Fox, The Decline of Aristocracy in the Politics of New York, 1801–1840, ed. Robert V. Remini (1st pub. 1919; New York: Harper Torchbooks, 1965); Edward Pessen, Jacksonion America: Society, Personality, and Politics (Homewood, Ill.: Dorsey Press, 1968); Glyndon G. Van Deusen, "Aspects of Whig Thought in the Jacksonian Period," American Historical Review, Vol. 63 (January, 1958). pp. 305–322.
Quite different were the ideas of the Democrats who, in contrast to their Whig opponents, stood for a strict construction of the United States Constitution, limiting the governing power to its least essentials. Both nationally and in New York State, the Jacksonian Democrats adhered to the Jeffersonian agrarian maxim that the least government it the best government. In New York the leader of the Democratic Party was Martin Van Buren, head of the famed Albany Regency which controlled the state governmental machinery through most of the 1830s and '40s. The most radical Democrats, known as Locofocos, were somewhat to the left of Van Buren and the Regency. They included an interesting collection of intellectuals and politicians who espoused a negative, anti-statist democracy. As against the paternalistic philosophy of the Whigs, the Locofoco Democrats stressed complete laissez faire in government-business relations. For example, the introduction in 1837 to the first issue of the United States Magazine and Democratic Review, organ of the more radical Democrats, defined the party's belief in democratic republicanism and majority rule. But the editors added:
The best government is that which governs least. No human depositories can, with safety, be trusted with the power of legislation upon the general interests of society so as to operate directly or indirectly on the industry and property of the community. Such power must be perpetually liable to the most pernicious abuse, from the natural imperfection, both in wisdom of judgment and purity of purpose, of all human legislation, exposed constantly to the pressure of partial interests; interests which, at the same time that they are essentially selfish and tyrannical, are ever vigilant. persevering, and subtle in all the arts of deception and corruption."Introduction," United States Magazine and Democratic Review, Vol. 1 (October, 1837), p. 6.
Most forthright of the radical Democrats was William Leggett, a Locofoco colleague in the 1830s of such New York Democratic writers as James Fenimore Cooper, William Cullen Bryant, Theodore Sedgwick, and Parke Godwin. Leggett coupled adherence to the Jeffersonian natural rights philosophy with demands for the equal right to property, not its abolition. Governments had no warrant to interfere with individual pursuits by offering financial advantages to any particular class or industry. Specially chartered banks, including the Bank of the United States, were a favorite target of Leggett's scorn. "Let the banks perish," he wrote. "Now is the time for the complete emancipation of trade from legislative thralldom."On Leggett, see his A Collection of the Political Writings, ed. Theodore Sedgwick, Jr. (2 vols.; New York: Taylor & Dodd, 1840); and the studies by Richard Hofstadter, "William Leggett: Spokesman of Jacksonian Democracy," Political Science Quarterly, Vol. 58 (December, 1943), pp. 581–594; Marvin Meyers, The Jacksonsian Persuasian: Politics and Belief (Stanford, Calif.: Stanford University Press, 1957), chap. 9; Edward K. Spann, Ideals & Politics: New York Intellectuals and Liberal Democracy, 1820–1880 (Albany: State University of New York Press, 1972).
As a part of their general laissez-faire philosophy and opposition to Whig paternalism, the Democrats were also dubious of those social and humanitarian reform movements which infringed upon individual liberty and private property. Thus they were hostile to the abolitionists even though this meant ignoring the question of freedom for the black slave. Imprisonment for debt attracted little attention from either Democrats or workingmen until public interest in the matter became too strong to be ignored. The workingmen's parties were, however, in a peculiar position because wage earners wanted preferential creditor status through a mechanics' lien law. Even public schools had difficulty winning Democratic support because their expense involved heavier taxation. Charity schools and use of the Lancastrian system of pupil tutors instead won Democratic favor. A system of statewide public education would also interfere with parents' control over their children and might undermine religious freedom.Herbert Ershkowitz and William G. Shade, "Consensus or Conflict? Political Behavior in the State Legislatures during the Jacksonian Era," Journal of American History, Vol. 58 (December, 1971), pp. 591–621, reinforces the view of the age of Jackson as essentially one of laissez Faire. See also Peter J. Coleman, Debtors and Creditors in America: Insolvency, Imprisonment for Debt, and Bankruptcy, 1607–1900 (Madison: State Historical Society of Wisconsin, 1974).
In Washington, Andrew Jackson, the Democrats' hero, enjoyed an uneasy and controversial Presidency. His years in office from 1829 to 1837 formed an era in which easy credit, cheap land, and internal improvements all contributed to an inflationary prosperity. At the same time, Jackson's own inclinations tended toward the limitations on federal spending favored by his friend and political adviser Van Buren. As governor of New York in 1828, Van Buren had secured passage of the Safety Fund System to safeguard the banks and assure the state of a source of credit and wealth to go along with the Erie Canal. The state-chartered New York banks cast doubt on the need for the federal United States Bank, while the state-constructed Erie Canal rebuked the western states' clamor for federal aid for their own internal improvements. Moreover, the Jeffersonian principle of states' rights and opposition to federal centralized power, espoused by Van Buren and the New York Locofoco Democrats, was also able to gain national success by Jackson's Bank of the United States and Maysville Road vetoes.New York and Van Buren's influence on Washington and Jackson is discussed in Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (Princeton, N.J.: Princeton University Press, 1957), p. 352.
In 1836 the United States for the only time in its history was without a national debt; a year later the federal government was briefly in a position to distribute its surplus revenues to the states. But the Jacksonians, despite the President's efforts to moderate or level out the economic boom, were unable to ward off its financial aftermath in the Panic of 1837. Van Buren, Jackson's successor in the White House, fell a political victim to the Panic, and in New York in 1838 the Democrats were overturned by the Whigs who elected William H. Seward as governor. Governor Seward, it should be noted, was an admirer of DeWitt Clinton who had earlier helped inaugurate the transportation revolution in New York. Upon completion of the Erie Canal in 1825, he had urged further state expenditures for new canals, turnpikes, and eventually railroads, as well as a generous policy of chartering banks and insurance companies. Now, in 1840, the Whigs under Governor Seward called for the appropriation of four million dollars for ten years to build additional canals and railroads. Henceforth dubbed "the forty million dollar party", the Whigs to their misfortune had ignored the adverse effects of the Panic of 1837 on the state's declining credit. Alarmed critics warned that the cost of public works would soon increase the state debt to as much as 75 million dollars with annual interest charges of 4.5 million. Already by 1842, when the Democrats regained control of the legislature and passed the stop and tax law, the state debt which five years earlier amounted to 7 million dollars had grown to 27 million dollars, and state bonds were unmarketable even at a discount of 20%. Instead of continuing to spend money for internal improvements, the Democrats, at a cost of 40 million dollars in principal and interest, proposed to extinguish the statedebt in twenty years. As a result of such conservative fiscal policies, within two months of the stop and tax law the state's 7% bonds sold at par, while 5% bonds reached that level in 15 month.Charles Z. Lincoln, The Constitutional History of New York (5 vols.; Rochester, N.Y.: Layers Co-Operative, 1906), Vol. 2, pp. 76, 81–84, 91ff., 165; Steward Mitchell, Horatio Seymour of New York (Cambridge, Mass.; Harvard University Press, 1938), p. 53.
By the 1840s national opinion in regard to state aid for internal improvements was undergoing a change. The former public enthusiasm for heavy state expenditures had run its course. Some of the new states in the West were in default on their bonds. State initiative and responsibility had been necessary earlier for such ambitious undertakings as the Erie Canal, but after the return of prosperity in the 1840s private capital, just beginning to be accumulated by American manufacturing and industry, was available for investment. Railroads were now becoming the most important means of transportation, but railroads with their special rolling stock could not be considered public in the same sense as a canal, a river, or a turnpike. Although railroad builders frequently turned to the states to help raise the large amounts of capital they required, most of their funds in New York came from individual savings and from credit extended by American banks. Accordingly, while there was little foreign investment in, or municipal aid for, New York State railroads until after the Civil War, the New York Central by 1853 had 2331 stockholders.Fox, Decline of Aristocracy, pp. 405–408; Carter Goodrich, "The Revulsion Against Internal Improvements," Journal of Economic History, Vol. 10 (November, 1950), pp. 145–169; Harry H. Pierce, Railroads of New York: A Study of Government Aid, 1826–1875 (Cambridge, Mass.: Harvard University Press, 1953), pp. 8. 16.
The decline of public aid and intervention in economic enterprise was most marked in some of the eastern states where the old colonial concept of the commonwealth fell victim to a surge of anti-government feeling. Although various economic and social groups continued to desire political intervention in behalf of their own self-interests, the fear of more state taxes and increasing state indebtedness blocked heavy public expenditures throughout the 1840s. Instead of continuing to take a positive, direct role in the economy, the state granted its economic powers to private banks and stock companies. For example, the Free Banking Act passed by New York in 1838 abolished the old system requiring special legislation for each bank charter and in effect introduced competition into banking. Under general incorporation laws, state charters were now granted to all manner of enterprises which, in pursuing their own private ends, were largely freed of the public responsibility associated with governmental agencies and the earlier semiprivate corporation. Democratic reluctance to continue the specially chartered corporation for a favored few had dispersed the privilege of incorporation among many stockholders and had separated it from responsibility to the state.Oscar and Mary Flug Handlin, Commonwealth: A Study of the Role of Government in the American Economy (1st pub. 1947; rev. ed. Cambridge, Mass.: Belknap-Harvard University Press, 1969), pp. 106ff., 160–161, 191.
Legislation for free banking and general incorporation laws accordingly had the support not only of the business community but also of those opposed to all governmental aid and protection for selected enterprises. Locofoco Democrats and workingmen united in the crusade against economic monopoly and special privilege, although labor sometimes identified its own true interest with that of the whole community. In any case, the state was usually too weak in an administrative sense to enforce either its own definition of the public interest, or to give its full support to various private or special interest groups. Thus laissez faire and the cry of equal rights for all and special privileges for none was a more appealing political philosophy in the 1830s and '40s than any Whiggish notions of a paternalistic and expensive government.Compare Walter Hugins, Jacksonian Democracy and the Working Class: A Study of the New York Workingmen's Movement, 1829–1837 (Stanford, Calif.: Stanford University Press, 1960) and Douglas T. Miller, Jacksonian Aristocracy: Class and Democracy in New York (New York: Oxford University Press, 1967).
It was in response to these views that the Democrats pushed ahead with their plans for drafting a new state constitution. William C. Bouck, the conservative or Hunker Democratic successor to Seward as governor in 1843 and 1844, favored a moderate course on internal improvements despite the Democrats' stop and tax law of 1842. But when Silas Wright, a close friend of Van Buren and the staunchest disciple of Jeffersonian agrarian democracy in New York State, was put forward for the nomination of governor, Bouck and the conservative Hunker faction had to retreat. Wright in his first annual governor's message in January 1845 praised the stop and tax law for restoring the state's credit. Three fifths of the state's debt charged to the General Fund, he pointed out, had been incurred by unwise loans to railroads that had proved unable to pay their obligations. Wright also announced that he favored calling a constitutional convention.John A. Garraty, Silas Wright (New York: Columbia University Press, 1949), pp. 292, 235.
In a series of articles analyzing the progress of constitutional reform, which appeared at this time in the Democratic Review, John Bigelow, one of the party's intellectuals, listed some of the changes which he believed New York and other states should adopt. These included a provision that "The state should have no power to contract debts, or loan its credit, except in case of war, invasion, or insurrection." In the matter of a general incorporation law, Bigelow urged: "The members of such Corporations, (not excepting those established for education or charity) should be individually liable for the debts, liabilities, and acts of such Corporation, and for the consequences resulting therefrom." Furthermore: "All laws or regulations interfering with the liberty of trade or industry (such as license and inspection laws) should be abolished, and their enactment for the future prohibited." Bigelow added as miscellaneous proposals the abolishment of the death penalty and permission for women to control their own property after marriage."The Progress of Constitutional Reform in the United States," United States Magazine and Democractic Review, Vol. 18 (June, 1846), pp. 408–412, 420.
The New York Constitutional Convention, which met in the summer of 1846, completed its labors in time for the voters to approve its handiwork that same year. Although the anti-statist views of such Jeffersonian Democrats as Bigelow and Wright were subject to some modification and compromise, the New York Constitution of 1846 embodied the laissez-faire position better than any document in the state's history. Only after all debts were paid through a sinking fund could the state appropriate any surplus for canal improvements and extensions not already mandated by law. Corporations including banks were to be chartered under general laws rather than by special act. Stockholders were made liable to the amount of their shares for all debts and liabilities contracted by their banks. As an epitaph to the anti-rent wars which had reached a climax in 1846, the Constitution abolished all feudal tenures and perpetual leases. Male suffrage was made universal except for Negroes who had to possess an estate of the value of $250, unless the people in a referendum on the question voted otherwise.New York State Constitution of 1846, Article I, Section 12; II, 1; VII, 1, 2, 3; VIII, 1, 4 7. This curious and illiberal provision, which was approved by the voters, retained the clause in the 1821 Constitution in which the property qualification was removed for whites but not for blacks. The Negro vote, traditionally cast in favor of the old Federalist slaveowning class, had continued to be exercised in behalf of Clinton and then the Whigs. Though never a large vote, it was opposed by the Democrats chiefly because of labor's influence.Fox, Decline of Aristocracy, p. 269.
In a retrospectwe article on constitutional government in the Democratic Review, Bigelow reiterated his libertarian views with the warning that "A great source of inequality in the conditions of men in respect of wealth and comfort arises from the action of law. Too much government has a direct tendency to aid one man or one set of men in the 'pursuit of happiness', and in the 'acquiring, possessing, and protecting property', if not at the expense of the rest, at least without rendering them the like assistance.""Constitutional Governments," United States Magazine and Democratic Review, Vol. 20 (March, 1847), p. 202. Unfortunately the Jacksonians, despite their defeat of the Bank of the United States, had not been able to slow the growth of wealth and inequality in New York and some of the larger cities in the East in the era before the Civil War. But their more radical laissez-faire views, as embodied in the stop and tax law and 1846 Constitution, disenchanted the wealthier business class which moved more than ever into the Whig Party. Work on the Erie Canal, which the Democrats had stopped in 1842, was resumed in 1847. Moreover, until 1850 railroads had to pay canal tolls to protect the state's vested interested in "Clinton's ditch". After that, canal tolls were reduced to provide competition to the growing volume of traffic carried by the railroad.Edward Pessen, Riches, Class, and Power before the Civil War (Lexington, Mass.: D.C. Heath, 1973); Frank Otto Gatell, "Money and Party in Jacksonian America: A Quantitative Look at New York City's Men of Quality," Political Science Quarterly, Vol. 82 (January, 1967), pp. 235–252; Don C. Sowers, The Financial History of New York State from 1789 to 1912 (New York: Columbia University Studies, 1914(, pp. 75, 85, 87.
Historians of a later generation have grown accustomed to interpreting democracy and liberalism in terms of the modern welfare state. The negative democracy of the New York Democrats of the 1840s accordingly wins little contemporary approval. Democracy in the eyes of its later adherents has become synonymous with power, preferably such power as may be exercised by a strong executive in the name of people. Some historians even question whether the negative state can be democratic and reason that laissez faire must automatically favor an aristocracy of wealth.See, for example, Arthur M. Schlesinger, Jr., The Age of Jackson (Boston: Little-Brown, 1945), pp. 512–514, 519–521; Lee Benson, The Concept of Jacksonian Democracy: New York as a Test Case (Princeton, N.J.: Princeton University Press, 1961), pp. 220ff. But what passes for the welfare state today rewards most of all its largest investors in the military-industrial complex. Beneficiaries of the welfare-warfare state's largesse would be horrified by a return to the spirit of the 1840s or to any consistent across-the-board application of laissez faire. Meanwhile New York's Constitution of 1846 remains an interesting, though passing, example of the enactment of Jeffersonian anti-statism into the fundamental law.
We are familiar with the five stages of grief. However, it is not a stretch to apply those stages to what is happening to the banking system. Right now, we are in the second stage: anger.
Original Article: "The Five Stages of Bank Failure Grief"
While talk of high gas prices is no longer a headline issue, energy economics is still a vitally important aspect of understanding the economy, including the business cycle. Mark explains the basics, tells us where we now stand, and what the major implications are for the near future.
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Be sure to follow Minor Issues at Mises.org/MinorIssues.
A new Fed survey shows that banks are cutting back on lending big time. Over the past thirty-five years, this almost always predicts recession. Our economy can't survive without endless new infusions of easy money.
Original Article: "Banks Are Lending Less Money, and That's a Formula for Recession"
On this first episode of the Fed Watch Podcast, Ryan McMaken and Senior Fellow Alex Pollock talk about how the Federal Reserve has negative cash flow. The Fed will print money to "solve" the problem.
Be sure to follow the Fed Watch Podcast at Mises.org/FedPod.
Recommended Reading"The Fed’s Capital Goes Negative" by Alex J. Pollock: Mises.org/FW_01_A
"Who Owns Federal Reserve Losses and How Will They Impact Monetary Policy?" by Alex J. Pollock and Paul H. Kupiec: Mises.org/FW_01_B
"Why the Fed Is Bankrupt and Why That Means More Inflation" by Ryan McMaken: Mises.org/FW_01_C
The Biden administration has decided that the REAL problem with housing is that the wrong people are saving money and making timely mortgage payments. They must be punished.
Original Article: "Biden’s New Intersectionality: Where Equity Policies Meet Bad Economics"
With negative growth now falling to near –10 percent, money-supply contraction is now the largest we've seen since the Great Depression.
Original Article: "The Money Supply Has Plummeted in the Biggest Drop Since the Great Depression"
Despite the soothing hot air from the White House and Fed officials, the financial system is becoming increasingly fragile and unstable. Maybe all of that intervention the past decade was not wise.
Original Article: "Finance Discovers Sting: "How Fragile We Are""
Mark takes a look at all the wrong predictions of recession in recent years, including those of Austrian School economists. While the MSM and Fed officials try to downplay the coming of a recession, many of the statistics and facts that Austrian consider important are indicating a looming recession, if not a full-blown economic crisis.
Check out Anatomy of the Crash: The Financial Crisis of 2020, edited by Tho Bishop: Mises.org/AnatomyOfTheCrash
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Heritage Fellow Peter St. Onge joins Bob to set the record straight on several popular talking points about the debt ceiling.
Bob on selling Gov't resources to reduce the National Debt: Mises.org/HAP397a
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop tackle the debt ceiling debate. As negotiations continue in Washington, the corporate financial press is hard at work warning about the potential for disaster. Ryan and Tho cut through the nonsense to look at the real state of America's finances, potential ramifications in the short term, and US defaults of the past and the inevitable future.
New Radio Rothbard mugs are now available at the Mises Store. Get yours at Mises.org/RothMug
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Recommended Reading"Three Lies They're Telling You about the Debt Ceiling" by Ryan McMaken: Mises.org/RR_135_A
"Yes, the US Government Has Defaulted Before" by Ryan McMaken: Mises.org/RR_135_B
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
By any conventional measures of finance, the Federal Reserve has negative equity. In the long run, cooking the books only puts off the day of reckoning.
Original Article: "The Fed Is Overindebted, Isn’t It?"
It is the right of the consumer, not the regime, to determine what lighting sources work best for them.
Original Article: "Shedding Light on the Law of Unintended Consequences"
In this week's episode, Mark explains why the market for existing homes has been diverging from the market for new houses. The Fed ZIRP, QE and Covid bailouts have locked Americans into their mortgages and low payments, reducing the supply of existing homes. This keeps them off the market and home prices high in an economy that is headed for a recession or crisis. Buyers have been diverted to newly constructed homes where builders have more flexibility to sell and there are no existing homeowners locked into mortgages.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
While the Fed and the Biden administration try to assure Americans that their banks are safe and secure, the numbers tell a different story.
Original Article: "Charles Schwab and Other Big Banks May Be Secretly Insolvent"
After a long series of rate hikes, Fed officials and asset markets are expecting a long series of interest rate cuts. This is based on the tried and hue Phillips Curve analysis. In color theory, "hue" is the technical appearance of color that can be described mechanically as a number. Let's hope interest rate expectations are not being distorted by other factors of reality, and that current Phillips Curve model perceptions of hue are also true.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
While politicians, media mavens, and the academic elite spread fear about artificial intelligence, AI is helping make life better for ordinary consumers.
Original Article: "Prices, Food, Employment: AI and Robotics Are for Regular Folks, Not Just the Elite"
While most free market advocates are fixated on the national debt, they also should be looking at municipal debt over which taxpayers have no say. Maybe default is the answer.
Original Article: "Should Local Municipalities Default on Their Debts? Seems Like a Good Idea"
Even after two years of "transitory" inflation, America's ruling classes insist that prices are falling and that all of this is temporary. We don't believe them.
Original Article: "The Ruling Classes Are Inflation Deniers and the Ship of Fools Sails On"
Bank reserves are seldom mentioned except in cases of bank runs. The other possible mention is all the interest money the Fed pays to banks simply for holding reserves. Mark explains the role of bank reserves in the current "system" and gives a brief explanation of why the Austrian view is better and actually gets the job done.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
The current banking crises have deep roots in US financial history. Monetary authorities have engaged in inflationary behavior for more than a hundred years.
Original Article: "A Pyrrhic End to 130 Years of Vicious Bad Money and Banking Crises"
Ryan and Zack talk about some of the details from the recently leaked Pentagon documents. They reveal dysfunctional American foreign policy and just how much contempt the US regime has for its own allies.
Additional Resources"What the leaked Pentagon documents reveal — 8 key takeaways" by Paul Adams, Jean Mackenzie, and Antoinette Radford (BBC News): Mises.org/WES_10_A
"Fact Sheet on U.S. Security Assistance to Ukraine" (U.S. Department of Defense, 19 April 2023): Mises.org/WES_10_B
"U.S. doubts Ukraine counteroffensive will yield big gains, leaked document says" by Alex Horton, John Hudson, Isabelle Khurshudyan, and Samuel Oakford (Washington Post): Mises.org/WES_10_C
"Arbitrary Use of Power: Punishing Those Who Expose Not-So-Secret Government Secrets" by Bill Anderson: Mises.org/WES_10_D
Be sure to follow War, Economy, and State at Mises.org/WES.
Mark discusses something bigger than the Disney layoffs: the Wall Street Journal's April 25 frontpage article on investing in gold. It would seem that the recent rise of the price of gold is the result of tired, dumb, and disillusioned crypto currency investors throwing in the towel to "chase shiny new object—gold." Mark explains that the rational reasons for investing in gold loom larger than the entire Magic Kingdom!
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Ryan McMaken and Dr. Mark Thornton cover the state of the dollar as global reserve currency, and why employers are laying off more and more of their highest paid workers.
PROMO CODE: RothPod for 20% off
Subscribe to Mark's weekly Minor Issues podcast at Mises.org/MinorIssues.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Mark looks at the price of Apple stock—one of the best performing stocks over the last quarter century, and one of the largest holdings in stock indexes, mutual funds, and Berkshire Hathaway portfolio. Market watchers have kept a keen eye on Apple as it heads for a new all-time high; but, Mark is concerned that a downturn would have a huge ripple effect on the overall market—possibly equivalent to a tsunami.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at common American history myths baked into government school curriculums. While Republican governors have begun to prioritize removing "critical race theory" and other forms of modern "leftwing indoctrination" from textbooks, there are a number of historical episodes left unchallenged that all lead to a deification of state power and a celebration of progressive politics.
PROMO CODE: RothPod for 20% off
Recommended Reading"The Meat Packing Myth" by Murray Rothbard: Mises.org/RR_130_A
"Krugman's Hoover History" by Robert Murphy: Mises.org/RR_130_B
"Why the 1787 Constitution Did Not Bring Republican Government to America" Mises.org/RR_130_C
The Progressive Era by Murray Rothbard Mises.org/RR_130_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Ryan and Zachary talk about how wars are not nearly as cheap or economically harmless as many Americans seem to think. Rather, taxpayers must give up enormous amounts of resources to fund wars halfway across the globe that have little to do with actual defense. Americans are still paying interest on the trillions spent on Washington's many lost wars of recent decades.
Additional Resources"On Paying for the Costs of War and War Loans" by Ludwig von Mises (1918): Mises.org/WES_09_A
"The Cross of Iron" by Dwight D. Eisenhower (1953): Mises.org/WES_09_B
"Fact Sheet on U.S. Security Assistance to Ukraine" (U.S. Department of Defense, 4 April 2023): Mises.org/WES_09_C
"How the Fed Is Enabling Congress's Trillion-Dollar Deficits" by Ryan McMaken (2021): Mises.org/WES_09_D
"War and the Money Machine: Concealing the Costs of War beneath the Veil of Inflation" by Joseph T. Salerno (2021): Mises.org/WES_09_E
"As the Pentagon Fails Another Audit, Congress Wants to Spend Even More on 'Defense'" by Ryan McMaken (2022): Mises.org/WES_09_F
"Russia and Ukraine named as Europe’s most corrupt countries" by William Nattrass (3 February 2023): Mises.org/WES_09_G
Be sure to follow War, Economy, and State at Mises.org/WES.
Mark takes a look at the good news on price inflation and why it is better than reported, but probably short-lived. Other statistics are worsening and, amazingly, even landlords are starting to feel the pain!
Be sure to follow Minor Issues at Mises.org/MinorIssues.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss recent reveals about new lows for the FBI. Ryan discusses new reports about the targeting of traditional Catholic churches and the history of the American Stasi, while Tho highlights new evidence about the role of federal agents in escalating January 6.
Recommended Reading"The FBI’s Forgotten Criminal Record" by Jim Bovard: Mises.org/RR_129_A
"Abolish the FBI" by Ryan McMaken: Mises.org/RR_129_B
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Ryan and Tho talk about why Trump is the only former president to be prosecuted for crimes. The ruling class has agreed to not prosecute their own, but since they see Trump as an outsider, he is fair game. In truth, we'd be better off if more presidents and former presidents faced prosecution.
Recommended Reading"With the Trump Indictment, America Is a Step Closer to Being a Banana Republic" by Bill Anderson: Mises.org/RR_128_A
"Politics Is Turning Us into Idiots" by Lipton Matthews: Mises.org/RR_128_B
Anatomy of the State by Murray N. Rothbard: Mises.org/RR_128_C
"Yes, Virginia, There IS a Deep State—and It Is Worse than You Think" by Bill Anderson: Mises.org/RR_128_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Like the arsonist who then heroically fights the fire he set, the Fed is increasing its efforts to bail out banks both at home and abroad. This does not end well.
Original Article: "Is the Fed Trying to Bail Out the World? Sure Looks Like It"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the global moves being made against the US dollar. The regime's decade long weaponization of money and banking has both international rivals and historical allies looking for alternatives. Ryan and Tho discuss what that means for Americans, and what may come next.
Recommended Reading"World needs to end risky reliance on U.S. dollar: BoE's Carney" (Reuters, 2019): Mises.org/RR_127_A
"Governments Can't Blame Inflation on Energy and Putin Anymore" by Daniel Lacalle: Mises.org/RR_127_B
"Is the Fed Trying to Bail Out the World? Sure Looks Like It" by Kristoffer Hansen: Mises.org/RR_127_C
"Why Fractional Reserve Banking Is behind Bank Failures" by Jonathan Newman: Mises.org/RR_127_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In this episode, Mark looks at the far away minor issue of the impact of hyperinflation in Zimbabwe. Even though they have switched from Zim dollars to US dollars, ordinary people are still suffering. Their government and its inflationary monetary policy is manifesting itself in some interesting ways.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
This week on Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Peter St. Onge, a fellow at the Heritage Foundation and a regular contributor to the Mises Wire. This episode looks at the political response to the recent turmoil in the banking system and how the Austrian position looks today relative to 2008. St. Onge makes a case for optimism.
Recommended Reading"It Turns Out That Hundreds of Banks Are at Risk" by Peter St. Onge: Mises.org/RR_126_A
"The Fed Backtracks on Future Rate Hikes as Bank Failures Loom Large" by Ryan McMaken: Mises.org/RR_126_B
"Looming Bank Failures Point to More Price Inflation as Real Wages Fall Again" by Ryan McMaken: Mises.org/RR_126_C
Peter St. Onge's Substack: StOnge.substack.com
2023 Libertarian Scholars Conference: Mises.org/LSC23
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Even if Powell is sincere in this stated desire to slay inflation with more rate hikes, recent bank failures will put the Fed under enormous pressure to end its rate hikes and to once again embrace easy money to save the banks and Wall Street.
Original Article: "Looming Bank Failures Point to More Price Inflation as Real Wages Fall Again"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fed is launching a new billionaire bailout designed to keep banks afloat, and the FDIC is promising to back potentially trillions in deposits. The taxpayer will ultimately be on the hook.
Original Article: "Yes, the Latest Bank Bailout Is Really a Bailout, and You Are Paying for It."
This Audio Mises Wire is generously sponsored by Christopher Condon.
SVB Bank and Signature Bank failed this week and were bailed out. Mark explains why the banks failed and why it was bound to happen. The minor issue is that the total FDIC bailout fund is actually smaller than either one of the banks.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
It's popular for politicians to claim they will never cut Social Security. But doing nothing now about the program means imposing an even larger hit on seniors in the future.
Original Article: "Why Biden's Spending Is Unsustainable"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Mark discusses how the Federal Reserve and Covid restrictions greatly increased the price of cardboard boxes; but, with online sales softening, we should expect suppliers to shift the raw materials used to make boxes (wood pulp) into the production of other paper goods, such as toilet paper. Because our demand for toilet paper is relatively inelastic, we should see a decline in the price of toilet paper and better availability.
The market will reallocate toward consumer wants and lower prices.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Mark talks about the recent price inflation reports, as well as reports of job openings from private sector job placement companies. Inflation was higher than expected and job openings declined. What will the Fed do? People are making painful adjustments—Domino's reported disappointing sales, because their customers are "eating in".
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Mark uses Intel Corporation, the computer chip manufacturer, as a barometer of the business cycle. He looks at the stock price in recent years, its production capacity expansion, and the company's very recent cost- and dividend-cutting moves.
Check out Mark Thornton's free book, The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century: Mises.org/Curse
Be sure to follow Minor Issues at Mises.org/MinorIssues.
We're still living with the consequences of the massive monetary inflation by Trump and Biden. Prices are stubbornly high, and falling real wages are driving Americans to say things are getting worse.
Original Article: "Food and Shelter Prices Keep Climbing as CPI Growth Hits a Three-Month High"
This Audio Mises Wire is generously sponsored by Christopher Condon.
While the 1979 default was relatively small, the 1934 default affected millions of Americans who had bought Liberty Bonds mistakenly thinking the government would make good on its promises.
Original Article: "Yes, the US Government Has Defaulted Before"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Mark Thornton explains the target as another smokescreen that was originally intended to stabilize monetary policy, currencies, and exchange rates, but has become a justification for inflation and central bank manipulation.
Be sure to follow Minor Issues at Mises.org/MinorIssues.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop address whether the Ohio train disaster is an example of "capitalism gone amuck". They discuss Murray Rothbard's views on pollution, the secondary consequences of the regulatory state, and the decaying qualities of modern financialization.
Also, join the Mises Institute in Tampa this month for a special event featuring Per Bylund, Jeff Deist, Tho Bishop, and Brett Lindell, on February 25. Learn more at Mises.org/Tampa.
Recommended Reading"Are Libertarians Too Anti-Pollution?" by Ryan McMaken: Mises.org/RR_121_A
"Financialization: Why the Financial Sector Now Rules the Global Economy" by Ryan McMaken: Mises.org/RR_121_B
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
On the heels of rising stock markets, record low unemployment rates, and even the plunge in the price of gasoline, Mark discusses the latest government economic reports including the hot retail sales numbers, recent increases in the CPI, and the increases in business inventories. What can be made of these confusing numbers?
Be sure to follow Minor Issues at Mises.org/MinorIssues.
Mark Thornton takes a look back at US stock markets, the national debt, and Fed policy (ZIRP, money supply, and its balance sheet).
"After the Boom Must Come the Bust" (Radio Rothbard): Mises.org/MI_06_A
Austrian Economic Research Conference: AustrianEconomics.org
Be sure to follow Minor Issues at Mises.org/MinorIssues.
The government can't return the SS money it stole in the past. It's impossible. That money's gone. Taxing today's workers to "pay back" pensioners is just creating a new group of tax victims.
Original Article: "Social Security Taxes Aren't "Your" Money"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop feel obligated to discuss the State of the Union address. Was anything of value learned? Tune in to find out.
Also, join the Mises Institute in Tampa this month for a special event featuring Per Bylund, Jeff Deist, Tho Bishop, and Brett Lindell, on February 25. Learn more at Mises.org/Tampa.
Recommended Reading"Raise the Social Security Age to (at Least) 75" by Ryan McMaken: Mises.org/RR_120_A
"Another Recession Sign: Part-Time Work Is Growing Faster than Full-Time Work" by Ryan McMaken: Mises.org/RR_120_B
"Yes, the US Government Has Defaulted Before" by Ryan McMaken: Mises.org/RR_120_C
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
As life expectancy has risen, so have runaway costs. Raising the age won't make Social Security just, prudent, or wise. But cutting federal spending is always the right thing to do.
Original Article: "Raise the Social Security Age to (at Least) 75"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Mark Thornton discusses the history of record low unemployment rates and the business cycle.
See "Unemployment Rate" (UNRATE) from the Federal Reserve Bank of St. Louis: Mises.org/MI_04_Chart
Be sure to follow Minor Issues at Mises.org/MinorIssues.
The imposition of minimum wages harms the economy, although there are nuances in how much harm they cause. It is better not to impose minimum wages at all.
Original Article: "Yes, the Minimum Wage Harms the Economy"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss Jay Powell's exercise in Fed-speak this week. While political pressure mounts at home for the Fed to turn dovish, growing international challenges to the dollar's dominance mount. Ryan and Tho also examine the Saudi's willingness to question the petrodollar and recent rumblings down south of a South American monetary union.
Also, join the Mises Institute in Tampa this month for a special event featuring Per Bylund, Jeff Deist, Tho Bishop, and Brett Lindell, on February 25. Learn more at Mises.org/Tampa.
Recommended Reading"The Fed Is Already Flashing Signs It's Done Raising Rates" by Ryan McMaken: Mises.org/RR_119_A
"How FedGov Destroyed the Housing Market" (Human Action Podcast): Mises.org/RR_119_B
"Why the End of the Petrodollar Spells Trouble for the US Regime" by Ryan McMaken: Mises.org/RR_119_C
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Government interference into money creation and production harms the economy in a number of ways, including skewing the organization of division of labor.
Original Article: "Fiat Money Inflation Not Only Raises Prices but Also Undermines Division of Labor"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Federal Reserve has created a huge boom full of bubbles. But after the boom must eventually come a bust. Ryan and Tho talk to Mises Institute Senior Fellow Mark Thornton about what to expect from the next recession and how we got ourselves into our current inflationary mess.
Recommended Reading"Eliminating Economic Crises" by Mark Thornton: Mises.org/RR_118_A
"The REAL Solution to the Coming Economic Crisis" by Mark Thornton: Mises.org/RR_118_B
"Wholesale Price Inflation Is Slowing as Economy Worsens" by Ryan McMaken: Mises.org/RR_118_C
The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century by Mark Thornton: Mises.org/RR_118_D
"Will the Fed Pop the Everything Bubble?" by Daniel Lacalle: Mises.org/RR_118_E
"The Trillion-Dollar Coin Idea Is Just Another Way to Rip Us Off" by Ryan McMaken: Mises.org/RR_118_F
"The Fed's Real Mandate" by Mark Thornton: Mises.org/RR_118_G
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The Federal Reserve has yet to get price increases anywhere near its own arbitrary 2-percent goal, but a mild slowing in growth rates has Biden claiming that price inflation is "falling."
Original Article: "Real Wages Fall for the Twenty-First Month as Rent and Food Prices Keep Rising"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It is no coincidence that the boom in mass-produced goods made specifically for children, "coincided closely with the rise of the middle-classes, industry, and capitalism."
Original Article: "How Capitalism Made Christmas a Holiday for Children"
This Audio Mises Wire is generously sponsored by Christopher Condon.
There is no real housing market in the US. Instead, an unholy trinity of Fannie/Freddie, the US Treasury, and the Federal Reserve Bank operate to distort the market at every turn and drive home prices up dramatically. Mises Institute Senior Fellow Alex Pollock, an economist and former mortgage banker, joins Jeff to describe the reality few Americans know.
Alex Pollock's new book Surprised Again: The Covid Crisis and the New Market Bubble : Mises.org/HAP377a
Alex Pollock on how the Fed became the world's biggest S&L: Mises.org/HAP377b
Wall Street has convinced itself that the Fed will soon engineer a "soft landing" by bringing down inflation without an accompanying recession. They need to rethink their beliefs.
Original Article: "History Shows High Inflation Can Last Over Ten Years"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Bob and Jeff make their provocative 2023 predictions for the economy, the Fed, politics, world events, and cultural issues.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look ahead to 2023 with a handful of predictions for the new year. They even manage to find one reason for optimism!
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Twenty-six years ago, the debate was over whether or not the target inflation rate should be raised from zero to 2 percent. Now we're being told it should be 4 or 6 percent.
Original Article: "No Surprise: Wall Street Wants to Raise the Target Inflation Rate above 2 Percent"
This Audio Mises Wire is generously sponsored by Christopher Condon.
This week's show features a bare-knuckle discussion between Jeff and José Niño of "El Niño Speaks" on the biggest political, economic, and cultural events of 2022—and what they portend for 2023.
You don't want to miss Jeff's unvarnished thoughts on the Left, the Right, the economy, and what is sure to be a turbulent New Year.
Read José's Substack: josbcf.substack.com
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look back at 2022 and touch on some of the worst and underappreciated trends of the year. For those interested in a more holiday-themed episode, check out last year's debate on the virtues of Ebenezer Scrooge (Mises.org/RR_45).
Looking for Christmas gifts? Use promo code ROTHPOD for a 20% discount on select books featured on Radio Rothbard. Or, use code MURRAYCHRISTMAS for a special 10% discount on select new Mises apparel: Mises.org/RR_113_Store
Recommended Reading"Why Are So Many Men Leaving the Workforce?" by Ryan McMaken: Mises.org/RR_113_A
"The Jobs "Boom" Isn't So Hot When We Remember Nearly Six Million Men Are Missing from the Workforce" by Ryan McMaken: Mises.org/RR_113_B
"The Pandemic Is 'Over,' but the Feds Aren't Giving Up Their Emergency Powers" by Ryan McMaken: Mises.org/RR_113_C
"Ebenezer Scrooge: Hero or Villain?" (Radio Rothbard): Mises.org/RR_113_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
There appears to be a six-million-man gap between the number of men in the prime age group—age 25–54—and the number of those men actually in the workforce.
Original Article: "The Jobs "Boom" Isn't So Hot When We Remember Nearly Six Million Men Are Missing from the Workforce"
This Audio Mises Wire is generously sponsored by Christopher Condon.
America's military technocrats (a.k.a. "generals") specialize in losing wars and also losing your money. Naturally, Congress wants to give them even more taxpayer cash.
Original Article: "As the Pentagon Fails Another Audit, Congress Wants to Spend Even More on "Defense""
This Audio Mises Wire is generously sponsored by Christopher Condon.
From March 2022 to November, the number of total employed persons has only increased by 12,000 people meaning there are fewer employed people now than before the covid panic.
Original Article: "Total Employed Workers Fell Again in November as Savings and Incomes Fall"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Keynesian economists claim that deflation is as bad or worse than inflation. But deflation not only reverses inflation's bad effects but also allows new wealth creation.
Original Article: "Deflation Is Not a Problem: Reversing It Is"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Money supply growth slowed even more in October, and is now back to levels we last saw during the repo liquidity crunch of 2019, and in the days right before the 2007–09 recession.
Original Article: "Money Supply Growth in October Fell to a 39-Month Low. A Recession Is Now Almost Guaranteed."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Nearly everyone has heard of Bernie Madoff and rightly associates his name with financial fraud. Yet, the Social Security system is built on a Ponzi scheme similar to what Madoff created.
Original Article: "Who Has Better Ethics, the Social Security System or Bernie Madoff?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The so-called green energy strategy is no strategy at all. Instead, it is an attempt to cripple the energy industries in vain hopes that renewables will magically cover the energy shortfall.
Original Article: "Renewables and EVs in the Grip of Lesseps Syndrome"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Federal Reserve has not only mismanaged the US economy; even its own "portfolio" is underwater.
Original Article: "In the Red: The Federal Reserve’s Portfolio Joins the Rest of the Market"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Cheap money in the last decade has meant good times for companies that barely make money and hire employees who barely work. But those times are now ending.
Original Article: "Without Easy Money, the Tech Sector Faces Layoffs and Losses"
This Audio Mises Wire is generously sponsored by Christopher Condon.
One might assume that new rounds of monetary stimulus will bring new peaks in housing construction, reversing the ongoing housing shortage. That hasn't happened.
Original Article: "The Housing Boom Is Already Over. The Housing Shortage Will Continue."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Jeff and Bob record a special Thanksgiving episode for Money Talk 1010 AM on what it really takes to fix the US economy.
Mark Thornton on the coming economic crisis: Mises.org/HAP371A
Listen to Jeff on Money Talk 1010 every Thursday at 9:00am ET: Mises.org/MoneyTalk
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at conman Sam Bankman-Fried, the scam of FTX, and how regime legitimacy has fueled several fraudulent companies with unprofitable business practices.
Did post-2008 monetary policy fuel a bubble in "effective altruism?" Do examples like Elon Musk's restructuring of Twitter offer an illustration of what Big Tech firms will have to do to survive in a time of less-than-easy money, or will the regime bailout out the corporate extensions of techno-managerialism? What killed Silicon Valley's once-promising techno-libertarian style? Ryan and Tho look at this and more on this episode of Radio Rothbard.
Looking for Christmas gifts? Use promo code ROTHPOD for a 20% discount on select books featured on Radio Rothbard. Or, use code MURRAYCHRISTMAS for a special 10% discount on select new Mises apparel: Mises.org/RR_109_Store
Recommended Reading "How Easy Money Fueled the FTX Crypto Collapse" by Ryan McMaken: Mises.org/RR_109_A
"Sound Money Is Our Best Hope Against the Monopolists' Threat" by Brendan Brown: Mises.org/RR_109_B
"How Fiat Money Enriches the Unproductive" by George Ford Smith: Mises.org/RR_109_C
"Without Easy Money, the Tech Sector Faces Layoffs and Losses" by Ryan McMaken: Mises.org/RR_109_D
"The Housing Boom Is Already Over. The Housing Shortage Will Continue." by Ryan McMaken: Mises.org/RR_109_E
"Will the FTX Scandal Bring Down 'Crypto'?" by Jeff Deist and Bob Murphy (video): Mises.org/RR_109_F
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The jobs data is worse than the latest headlines suggest, and workers are staring at falling real wages, declining savings, and mounting debt. We can thank the Fed.
Original Article: "The Number of Employed Workers Fell in October and Price Inflation Continues to Outpace Wages"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Government economists "seasonally adjust" data in order to better respond with policy recommendations to deal with business cycles. The problem is that government causes the cycles.
Original Article: "Are Seasonally Adjusted Economic Data Useful?"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
In a free market, short-term and long-term rates would move toward convergence. Fed interference with interest rates ensures that won't happen.
Original Article: "Federal Reserve Tampering with Interest Rates Distorts the Shape of the Yield Curve"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
President Biden's nonsolution of partial "debt forgiveness" is in limbo, but the slow financial destruction that massive student loan debt is unleashing continues.
Original Article: "Student Loan Debt: The Financial Time Bomb Politicians Want to Ignore"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Home price growth of the sort we've seen in recent years simply cannot be sustained without a continued commitment to easy money from the central bank, and it shows.
Original Article: "Without Easy Money from the Fed, Home Prices Will Keep Falling"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
After following hyper-Keynesian policies for more than two decades, the Fed is about to create the conditions that Keynesians claimed were impossible: an inflationary recession.
Original Article: "The Fed's Current Monetary Stance Will Lead to Stagflation, Not Deflation"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Insurance protects individuals from events that cannot be foreseen. As Murray Rothbard noted, however, deposit insurance exists to "protect" a system that is inherently bankrupt.
Original Article: "Housing Is Getting Less Affordable. Governments Are Making It Worse."
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Our current deficit policy amounts to "Give me your wallet, and you will deal with the credit card balance later."
Original Article: ""Spend Now, and Deal with the Consequences Later" Is the Worst Policy"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
There are only painful options for bringing price inflation under control at this point, and that's all thanks to the Fed's creation of countless bubbles and malinvestments over the past decade.
Original Article: "We're Getting Poorer: Price Inflation Grew Faster than Wages Again in September"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
The world seems to be on fire, and much of the trouble comes from the efforts of central banks to suppress interest rates. No one understands that problem better than British historian Edward Chancellor.
Original Article: "Edward Chancellor's Much-Needed (But Not Heeded) Wisdom on Interest Rates"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Hyperinflation? Yes, it can happen here, and the more officials deny hyperinflation is possible, the more they create the conditions that causes it.
Original Article: "Inflation, High Inflation, Hyperinflation"
This Audio Mises Wire is generously sponsored by Christopher Condon. '
Recorded at the Arizona Biltmore Hotel in Phoenix, Arizona on October 7th, 2022.
Sponsored by Remy Demarest.
Recorded at the Arizona Biltmore Hotel in Phoenix, Arizona on October 6th, 2022.
Sponsored by Tracy and Joe Matarese.
On this episode of Radio Rothbard, Ryan McMaken and Joseph Solis-Mullen take a look at brewing debt crises in emerging markets and how the dollar still looks good when compared to other global currencies.
Recommended Reading "How the Fed Helped Create Another Calamity: The Ongoing Emerging Market Debt Crisis" by Joseph Solis-Mullen: Mises.org/RR_99_A
"August's Price Inflation Soared, and That Means Earnings Fell Yet Again" by Ryan McMaken: Mises.org/RR_99_B
"Greenspan Would Be Proud: A Lesson in Fed Speak" by Joseph Solis-Mullen: Mises.org/RR_99_C
"It Just Might Be Time to Listen to the Austrians" by Joseph Solis-Mullen: Mises.org/RR_99_D
"Throwing the Fed's Machinery in Reverse: Fed Interest Rate Policies Continue to Damage the Economy" by Frank Shostak: Mises.org/RR_99_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The Fed's suppression of interest rates in the USA didn't just affect this nation's economy. It also drove investors to seek higher interest rates in questionable investments.
Original Article: "How the Fed Helped Create Another Calamity: The Ongoing Emerging Market Debt Crisis"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Paul Krugman recently argued that the Federal Reserve can engineer a "soft landing" for the economy as it tries to deal with inflation. Such a view ignores economic realities.
Original Article: "Looking at the Economic Myth of the "Soft Landing""
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fed’s tampering with market signals undermines the process of wealth generation, thereby exerting an upward pressure on the time preference interest rate and the market interest rate.
Original Article: "Throwing the Fed's Machinery in Reverse: Fed Interest Rate Policies Continue to Damage the Economy"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the rhetoric surrounding the Federal Reserve. A growing chorus of pundits is attacking Jerome Powell for risking a recession, but this misses what has brought the economy to this point. Is it possible to get American attention spans to capture the true cause of our economic instability? Can monetary policy ride the wave of the current culture war? Ryan and Tho address this and more in this week's show.
Recommended Reading "Inflation: State-Sponsored Terrorism" by Jeff Deist: Mises.org/RR_98_A
"Blame the Fed for Both the Inflationary Boom and the Inevitable Bust" by Ryan McMaken: Mises.org/RR_98_B
"Inflation Kills" (Human Action Podcast) with Jeff Deist and Robert P. Murphy: Mises.org/RR_98_C
"We Cannot Interpret Economic Data Unless We Know Economic Theory" by Frank Shostak: Mises.org/RR_98_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
New York City’s subways have become a nightmare, with rampant crime, delays, derailments, and poorly capitalized. This is a gift from "backdoor socialism."
Original Article: "New York City Subways: The Woes of Socialist Enterprises"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Keynesians claim that tax cuts are good because they help increase consumer spending. But here's why this doesn't matter.
Original Article: "Do We Want Real Tax Cuts? How About Cutting Government Spending?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Before Steve Jobs and the iPhone, there was Malcolm McLean, inventor of the shipping container. McLean made the iPhone—and many other things—possible.
Original Article: "Malcolm McLean: The Unsung Capitalist Hero Who Changed the World One Container at a Time"
This Audio Mises Wire is generously sponsored by Christopher Condon.
For now, the dollar seems to be doing well against other currencies, but how long will that last?
Original Article: "Will the US Dollar Weaken against Other Currencies?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Not satisfied with putting thousands of people out of work with its infamous AB 5 legislation, California lawmakers now are going after fast-food businesses.
Original Article: "AB 257: Another Antieconomic California Boondoggle"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Between its political happy talk in the contrast to reality and its broken promises, whatever credibility the Fed had in the past is long gone
Original Article: "How the Public Lost Trust in the Federal Reserve (Which Should Never Have Been Trusted in the First Place)"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Sen. Joe Manchin has agreed to support a "Build Back Better" lite that proponents claim will reduce inflation, give us better weather, and "pay for itself" through price controls and taxes. Perhaps we should be wary of such political "victories" for the political elites.
Original Article: "A Political Victory for the Joes Is a Loss for the Country"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Just like the USA, Mexico is being hit with high inflation. This should surprise no one, given the Mexican government's recent economic policies.
Original Article: "Like Its Irresponsible Northern Neighbor, Mexico Is Also Suffering from Inflation"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Powell said that moving forward "we think it's time to just go to a meeting by meeting basis." Translation: "Things might go even more off the rails at any time, so let’s just play it by ear."
Original Article: "The Fed Is Making It Up as It Goes, So It Ditched Forward Guidance"
This Audio Mises Wire is generously sponsored by Christopher Condon.
On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss the regime's latest Orwellian word game to avoid acknowledging a recession. Is this an attempt to gaslight the country, or a reflection of economic pain being less obvious to the beltway class?
Recommended Reading "GDP Shrinks Again as Biden Quibbles over the Definition of Recession" by Ryan McMaken: Mises.org/RR_93_A
"The Fed Is Making It Up as It Goes, So It Ditched Forward Guidance" by Ryan McMaken: Mises.org/RR_93_B
"Yellen: Recession Doesn't Mean What You Think It Means" by Ryan McMaken: Mises.org/RR_93_C
"The Economy Needs a Volcker Moment" by Connor Mortell: Mises.org/RR_93_D
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
When Paul Volcker was Fed chairman forty years ago, he did what was necessary to bring down inflation. Unfortunately, the current Fed leadership at best is engaging in Volcker Lite.
Original Article: "The Economy Needs a Volcker Moment"
This Audio Mises Wire is generously sponsored by Christopher Condon.
We live in a world of constant cronyism. Nothing seems to change, no matter the party or the people in power. Was it always like this? Can we learn from it?
Download the slides from this lecture at Mises.org/MU22_PPT_35.
Recorded at the Mises Institute in Auburn, Alabama, on 29 July 2022.
Is it all bad news? There is still entrepreneurship. There is still innovation.
Download the slides from this lecture at Mises.org/MU22_PPT_27.
Recorded at the Mises Institute in Auburn, Alabama, on 28 July 2022.
On this episode of Radio Rothbard, Tho Bishop is joined by Mises Research Fellow Marcel Gautreau for a wide-ranging conversation about challenges to the American-dominated neoliberal order. Marcel is a Ph.D. candidate studying economic and other policy reforms in non-liberal states and offers his perspective on how Rothbardian power-elite analysis is a powerful tool in understanding the world's most pressing issues today. He also shares his favorite Mises U lecture.
Additional Resources "Egalitarianism as a Revolt Against Nature" by Murray Rothbard: Mises.org/RR_91_A
For a New Liberty: The Libertarian Manifesto by Murray Rothbard: Mises.org/RR_91_B
Never a Dull Moment: A Libertarian Look at the Sixties by Murray Rothbard: Mises.org/RR_91_C
"A Rothbardian Analysis of the Constitutional Convention" by Patrick Newman: Mises.org/RR_91_Video
Marcel Gautreau on Twitter: @anarchyinblack
Watch Mises University 2022 live: Mises.org/Live
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The Keynesians running our economic life may be reassured that the Fed cannot fail in a technical sense, but the public should be appalled.
Original Article: "The Fed Cannot Go Bankrupt; However, It Can Bankrupt the Country"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The ruling class is claiming that free markets are nothing more than a "trickle-down" scheme. But a free market system really does serve society best.
Original Article: "Consumers, Workers, and Monopolies: Free Markets Serve All"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The New York Times claims that the "administrative state"—that is, governance by unelected bureaucrats—protects our country and enhances democracy.
Original Article: "Turns Out the Elites Like the Administrative State Better than Democracy"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Paul Krugman denies that the Fed artificially suppressed interest rates. As usual, Krugman neither understands interest rates nor the effects of inflationary policies.
Original Article: "Krugman Is Wrong (Again): Artificially Low Interest Rates Created Bubbles"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Congress enjoys exorbitant political privilege in the form of cheap deficit spending—but it may soon come to an end.
Original Article: "Rising Interest Rates May Blow Up the Federal Budget"
This Audio Mises Wire is generously sponsored by Christopher Condon.
When conservatives applaud unlimited war spending, they not only harm our economy and body politic, but they give the Left a powerful talking point.
Original Article: "War Spending Gives MMTers and the Left a Strong Talking Point"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Federal Reserve is raising interest rates and we know what follows, given there has been more than a decade of malinvestments building up: severe recession.
Original Article: "Economic Winter Has Arrived"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Real deflation—both monetary inflation and price inflation—is necessary, and that can only be accomplished if the Fed can resist the temptation to keep doing what it's been doing since 2008.
Original Article: "What Will It Take to End Rampant Home-Price Inflation?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The United States economy may have delivered no growth in the first half of 2022 after the decline in the first quarter, narrowly avoiding a technical recession.
Original Article: "US Household Saving Rate Vanishes, Credit Card Debt Soars"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Inflation is raging and progressives want action. What kind of action? They want to return to the 1970s regime of price controls.
Original Article: "Back to the Future: Progressives Imagine the Good Old Days of Price Controls"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Peter Schiff once joked that Obama should have appointed Bernie Madoff secretary of the Treasury. The government's easy money policies ultimately lead to Ponzi schemes.
Original Article: "From the Eccles Building to Vegas: The Fed Enables the Worst Ponzi Schemes"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Anyone who doubts whether we are in a recession can stop doubting. The Fed's reverse repos show that we're headed for a crash.
Original Article: "The Great Crash of 2022"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Forget Jerome Powell's fanciful "soft landing" or the notion that the Fed can pull another rabbit from its hat. The banking system is headed for a crash and monetary authorities likely will make things worse.
Original Article: "A Perfect Storm Is Brewing in Banking and Finance"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Conventional wisdom says a country should manage its debts, but what if debt has become uncontrollable?
Original Article: "In Defense of Defaulting on the National Debt"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Inflation in Argentina is far worse than neighboring countries. It has only one cause: an extractive and confiscatory monetary policy—printing pesos without control and without demand.
Original Article: "How Money Printing Destroyed Argentina and Can Destroy Others"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Americans are looking at a grim energy future, thanks to government.
Original Article: "The Biden Administration's Ignorant Energy Policies: Higher Gas Prices Are Only the Beginning"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Biden administration, stung by low poll numbers, insists that the president is receiving unfair PR, which is hiding the "truth" about Biden's many accomplishments.
Original Article: "For Presidents, Unpopularity Is a Simple PR Problem. Biden Is No Exception"
This Audio Mises Wire is generously sponsored by Christopher Condon.
By late 2021, fueled by trillions in newly printed money, gasoline prices had surged to ten-year highs. Now, even in inflation-adjusted terms, gasoline prices are surging to new highs.
Original Article: "No, It's Not "Greed" or "Price Gouging" That's Driving up Gas Prices"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Ryan McMaken and Zachary Yost examine some reasons why early Americans hated the idea of a professional standing army, and some of the tactics used to decentralize military power in the US and Switzerland.
Recommended Reading "Why We Can't Ignore the Militia Clause of the Second Amendment" by Ryan McMaken: Mises.org/WES_02_A
"The Second Amendment's Authors Would Hate Today's Huge Federal Military" by Ryan McMaken: Mises.org/WES_02_B
"Opposing Standing Armies: A Great American Tradition" by Zachary Yost: Mises.org/WES_02_C
"When State Governors Tried To Take Back Control of the National Guard" by Ryan McMaken: Mises.org/WES_02_D
Be sure to follow War, Economy, and State at Mises.org/WES.
California's progressive political classes now have a scheme to impose a single-payer system for medical care. If imposed, it will be costly but also ineffective.
Original Article: "California Scheming: The Progressive Leadership's New Plan to Impose High-Cost, Low-Quality Medical Care"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Year-over-year PPI growth came in at over 10 percent for the sixth month in a row. This will put more pressure on the Fed to "do something."
Original Article: "Wholesale Prices Rise More than 10 Percent, Pointing to Continued Price Hikes"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Progressives believe that economies should be run by high-IQ "experts." But successful market economies require entrepreneurs with an idea and the willingness to face uncertain economic conditions.
Original Article: "Market Success Is about Giving People What They Want"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Federal Reserve is raising interest rates in hopes of reversing some of the inflationary damage it has done for more than a decade. Unfortunately, the Fed already has done incalculable damage to the economy.
Original Article: "Interest Rates Are Rising, but the Fed Continues to Be Reckless"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Progressives have long pushed for a state dominated by a new class of "scientific" experts who are supposedly nonpolitical and pursuing only "good government." It's a fantasy many people still believe.
Original Article: "Why Progressives Love Government 'Experts'"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Though Kuttner thinks the New Deal a great success, he himself lays out some of its many problems.
Original Article: "The New Deal: Admissions against Interest"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Forget the notion that the Fed "fights inflation." In fact, the Fed exists to promote inflation.
Original Article: "Even When There Is Inflation, the Fed STILL Fights Falling Prices"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Skyrocketing asset prices are great for hedge fund managers and Wall Street types, but they increasingly drive ordinary people into unsustainably large amounts of debt.
Original Article: "Are Today's Homeownership Rates Sustainable?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Fair Tax is a supposed alternative to the income tax. But the name does not matter, since a tax is still a tax.
Original Article: "The Fair Tax Is the Tax That Will Not Die"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Since the state is incorrigible and incapable of being reformed, perhaps the best way to deal with government predations is to boycott the elections.
Original Article: "Let's Boycott Them!"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Although Biden presented the formula shortage as caused by "forces" outside the USA, the shortage is homegrown. Bastiat could have explained why.
Original Article: "Bastiat Predicted the Baby Formula Crisis 170 Years before It Happened"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Airfares may surge 40 percent or more in 2022. This could be the biggest price increase in many decades.
Original Article: "Debt-Fueled Demand and Oil Price Inflation Brings Airfares Roaring Back"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Because of Elon Musk's attempt to take over Twitter, Tesla has been removed from the S&P's ESG Index, an action that exposes ESG for what it really is: a woke cartel.
Original Article: "Elon Musk versus the Woke Cartel"
This Audio Mises Wire is generously sponsored by Christopher Condon.
American politicians claim that excessive military spending makes Americans "safe." The record shows otherwise.
Original Article: "Peace through Strength? Excessive US Military Spending Encourages More War"
This Audio Mises Wire is generously sponsored by Christopher Condon.
While politicians claiming to be "fiscally responsible" call for balanced budgets, the real drag on the economy is government spending itself.
Original Article: "Government Spending Is the Real Tax; Deficits Are a Sideshow"
This Audio Mises Wire is generously sponsored by Christopher Condon.
As the economy begins to slow, the results of the Fed's money pumping are showing up in mergers and acquisitions.
Original Article: "Mergers, Acquisitions, and Market Manias: The Fed Has Made Things Worse"
This Audio Mises Wire is generously sponsored by Christopher Condon.
After the 2008 housing bust, the government supposedly set up a fail-safe mortgage program aimed at preventing future bubbles. It failed.
Original Article: "The Fed's Latest Housing Bubble"
This Audio Mises Wire is generously sponsored by Christopher Condon.
While the covid-19 pandemic brought sickness and death, another pandemic raged through Washington: abuse of executive power.
Original Article: "The Pandemic of Executive Overreach Comes to an End. When Will the Next One Begin?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Europeans are welcome to keep NATO going if they like. But the time has come for the United States to exit.
Original Article: "NATO Plans to Rip Off Americans Even More as Sweden and Finland Set to Join"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The combination of covid lockdowns, money pumping, and attempts to force a new green economy are taking their toll. This is not going away any time soon.
Original Article: "It's Not Just the USA: The Economic Instability Is Global"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Everything from huge Keynesian "stimulus" policies to the war in Ukraine is dovetailing in a bout of stagflation: the simultaneous growth of inflation and unemployment.
Original Article: "Massive State Economic Intervention Has Led to This Point"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Recorded at Maggiano’s Little Italy in Orlando, Florida, on May 14, 2022.
Special thanks to Greg and Julann Roe for sponsoring this event.
In the first episode of this new podcast, Ryan McMaken and Zachary Yost discuss NATO, Turkey, Russia, and why the USA needs to leave it all behind.
Be sure to follow War, Economy, and State at Mises.org/WES.
With the shortage have come the usual half-baked bromides about "evil corporations" and how they aren't regulated enough. The real fault lies with welfare statists, Trump-style protectionists, and the FDA.
Original Article: "Baby Formula: Thank Protectionists and the FDA for the Shortage"
This Audio Mises Wire is generously sponsored by Christopher Condon.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop discuss recent inflation news, broader chaos in financial markets, and another round of funding for Ukraine.
Recommended Reading "Inflation Up, Wages Down as Biden Passes the Buck to the Do-Nothing Fed" by Ryan McMaken: Mises.org/RR_81_A
"From El Salvador to Africa, the Next Currency War Pits Populists against Bankers" by Tho Bishop: Mises.org/RR_81_B
"Biden: Inflation Is Everybody’s Fault but Mine" by Ryan McMaken: Mises.org/RR_81_C
"Noninterventionism Is Not Isolationism: The US Government Should Stop Arming Ukraine" by Daniel Martin: Mises.org/RR_81_D
"Forget What the 'Experts' Claim about Deflation: It Strengthens the Economy" by Frank Shostak: Mises.org/RR_81_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
One will occasionally hear from a libertarian activist that Disney World is some sort of model for totally private governance. This is a huge exaggeration of the reality.
Original Article: "Disney's Special District Is Not a "City-State" or "Private City""
This Audio Mises Wire is generously sponsored by Christopher Condon.
Propping up congressional deficit spending, juicing equity markets, and constantly recapitalizing commercial banks are the Fed’s true mandates.
Original Article: "Inflation, Quick and Dirty"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Disney's special legal status in Florida is reminiscent of the mercantilist corporations of old. They were granted favors at the expense of ordinary businesses who did not enjoy the favor of state officials.
Original Article: "Disney's Corporate Welfare Is Modern Mercantilism"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Biden administration in its desire to "save" the planet from climate change has decided to destroy one of this country's most productive and important industries in the process, putting the US economy itself in jeopardy.
Original Article: "Destroying America to "Save" It? Biden's Nihilistic Destruction of the Energy Industry"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It is theoretically possible that through huge gains in productivity, the US could escape inflation and stave off a recession. But don’t count on it.
Original Article: "Why It's Looking More like the 1970s than the 1950s."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Jeff and Bob discuss the dynamics of the housing market in the context of a recent talk by Alex Pollock.
"Hazlitt, Hayek, and How the Fed Made Itself into the World's Biggest Savings and Loan": mises.org/PollockAERC
Recorded at the 2022 Austrian Economics Research Conference hosted at the Mises Institute in Auburn, Alabama, March 18–19, 2022.
The Henry Hazlitt Memorial Lecture, sponsored by Yousif Almoayyed.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop talk about this year's Austrian Economics Research Conference and the value of interdisciplinary approach.
Watch AERC at Mises.org/LIVE
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
In this episode of Radio Rothbard, Ryan McMaken and Tho Bishop look at the economic consequences of Russia's invasion of Ukraine. What has been the damage from America's weaponization of the dollar? Is Russia likely to return to the gold standard? What may be the fallout in Europe?
Recommended Reading "Can Government Successfully Counter Recessions Through Expansionary Policies? Don't Count on It" by Frank Shostak: Mises.org/RR_72_A
"Sanctions against Russia Are the Lockdowns of 2022" by Tho Bishop: Mises.org/RR_72_B
"The Steep Cost of Sanctions for Europe and Russia" by Daniel Lacalle: Mises.org/RR_72_C
"The Economy May Be Finally Peaking, and the Fed Won't Help Matters" by Brendan Brown: Mises.org/RR_72_D
"Why Sanctions Don't Work, and Why They Mostly Hurt Ordinary People" by Ryan McMaken: Mises.org/RR_72_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Jeff and Bob discuss Biden's SOTU, the immorality of sanctions, and Fed chair Powell's pregnant comments.
This week, Jeff and Bob discuss oil prices. Why are gas prices spiking in the US, and what are D.C. politicians planning for oil companies?
Virginia's stranglehold over American politics continues with President James Monroe. While high school textbooks refer to this period of one-party rule as the "Era of Good Feelings," the reality is the Second Bank of the United States offers some of the most vulgar examples of corruption the American people have seen. In this episode, Patrick Newman and Tho Bishop discuss the Panic of 1819 and the impact it had on political alliances for decades to come.
Recommended Reading The Panic of 1819: Reactions and Policies by Murray Rothbard — Mises.org/LP7_A
A Short History of Paper Money and Banking in the United States by William Gouge — Mises.org/LP7_B
"The Scandal of Smith and Buchanan: The Skeletons in the McCulloch vs. Maryland Closet" by David Bogen (PDF) — Mises.org/LP7_C
Cronyism: Liberty versus Power in Early America, 1607–1849 by Patrick Newman — Mises.org/LP_Crony
To subscribe to the Liberty vs. Power Podcast on your favorite platform, visit Mises.org/LvP.
2021 was the year of binge spending. 2022 is likely to be a hangover.
Original Article: "2022: The Year of the Hangover?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
With the prices of everything rising at historic rates, no issue is shaping politics more right now than inflation. Unfortunately for Americans, Republicans in Washington appear no more serious on the Federal Reserve than the Biden Administration.
What lessons can be learned from the past? How might the Biden Administration respond? What can be done on the issue? In this Radio Rothbard, Ryan McMaken and Tho Bishop dive into the politics of inflation.
Recommended Reading "How Easy Money Inflated Corporate Profits" by Brendan Brown: Mises.org/RR_65_A
"The Economy May Be Finally Peaking, and the Fed Won't Help Matters" by Brendan Brown: Mises.org/RR_65_B
"How Asset Price Inflation Is Different from Goods Price Inflation" by Brendan Brown: Mises.org/RR_65_C
"Monetary Inflation and Price Inflation" by Robert P. Murphy: Mises.org/RR_65_D
"Ending Fiat Money Won't Destroy the State" by Ryan McMaken: Mises.org/RR_65_E
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Friday's jobs report was weak, but the most alarming datapoint is that real wages are plummeting.
Original Article: "Real Wages Plummet as Inflation Hits the US Recovery"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Joe Biden thinks that unless there's widespread government intervention in the economy, economic inequality "brews and ferments political discord and basic revolutions."
Original Article: "How Market Freedom Combats Economic Inequality"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The causes of today's skyrocketing housing prices are different in many ways from what happened in 2008. But that doesn't mean we're barreling toward a happy ending.
Original Article: "Housing Hubris: Can Home Prices Spiral upward Forever?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
"No one, including Andrew Jackson, had ever explicitly argued before [Lincoln] that the Constitution authorized or obligated full-scale invasion and coercive measures."
Original Article: "Is the Constitution Broken beyond Repair?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The process of learning what’s most efficient and profitable includes merging with competitors and taking over different stages of the supply chain—all tactics that would be considered in violation of current antitrust laws.
Original Article: "Antitrust Regulation Assumes Bureaucrats Know the "Correct" Amount of Competition"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
It never ends well: to clean up mountains of bad debts, the Chinese regime has employed debt-for-equity schemes that could leave countless ordinary investors in deep trouble.
Original Article: "China's Financial Bubbles Remind Us of Scams like Britain's South Sea Bubble"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Our largest skyscrapers exist no longer physically, but in a world of ones and zeroes. The most groundbreaking technology projects springing from malinvestment may be digital the next time around.
Original Article: "Will the Next "Skyscraper Curse" Be Found in the Digital World?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Tho Bishop, guest-hosting A Neighbor's Choice, interviews Jonathan Newman, author of The Broken Window.
Tho and Jonathan discuss the supposedly transitory aspect of inflation, the overshadowing of economics by central planning, Keynesian economics, and more.
Purchase The Broken Window online at Mises.org/BWindow.
McAuliffe could not dissociate himself entirely from national politics because he was a national Democratic figure closely allied to the Clintons for decade
Original Article: "Paul Gottfried on the Virginia Election"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
We can see that these massive trillion-dollar stimulus programs generate a virtually nonexistent long-term positive impact, just a short-term bounce that lasts less than a quarter.
Original Article: "The Weak Jobs Report Shows the Failure of Keynesian Policies"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The chaos economy we're witnessing is not the fault of the market economy. Rather prices in some areas of the economy need to rise so high and so fast to harmonize supply and demand that entrepreneurs can hardly keep pace.
Original Article: "We're Living in a Chaos Economy. Here's How to End It."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The Feds are sitting on a huge pile of decaying buildings. A private business would sell these off, but this task is apparently too difficult for federal bureaucrats.
Original Article: "Why Bureaucrats Are Sitting on So Much Money-Losing Real Estate"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
In a free, unhampered market, businesspersons in the pursuance of their goals will not require macroeconomic indicators. Entrepreneurs require an entirely different kind of data than what government data provides.
Original Article: "Macroeconomic Data Is a Tool for Government Intervention"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Fear of China and Iran, combined with the more practical desire for continued “free” money from the federal government, will continue to fuel opposition to any serious movement toward secession.
Original Article: "Welfare Payments and Foreign Policy Fears Are the Only Things Holding America Together"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The capital gains tax cuts off start-ups and smaller entrepreneurs from access to flows of capital. The tax makes society more wasteful, less innovative, and less dynamic.
Original Article: "It’s Time to Abolish the Capital Gains Tax"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
US car owners are being preyed upon by thieves, because South African mine owners are being preyed upon by their government.
Original Article: "Why Are Thieves Stealing So Many Catalytic Converters?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
If the US wants to strengthen its economic and geostrategic position versus China, it needs to apply the same free market principles that made it prosperous and powerful in the first place.
Original Article: "If the US Wants to Beat China, Why Is It Copying China's Socialism?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Download the slides from this lecture at Mises.org/MU21_PPT_37.
Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Click here to learn more about Dr. Newman's book.
Download the slides from this lecture at Mises.org/MU21_PPT_34.
Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Stagnation is real, but it isn’t “secular”—that is, sluggish growth doesn’t have to happen. The coming stagnation isn’t foreordained; it is simply the inevitable outcome of a progressive agenda that disdains free enterprise.
Original Article: "Biden's Economic Team Predicts Long-Term Slow Growth"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The Fed isn’t here to take away the punch bowl anymore. The Fed is the punch bowl.
Original Article: "The Fed Plans to Raise Interest Rates— Years from Now"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The federal government collects a lot more in taxes than the state governments do. And the feds also spend a lot more. This tells us a lot about how the federal government came to dominate all political systems in America.
Original Article: "The Feds Collect Most of the Taxes in America—So They Have Most of the Power"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
“Mortgage companies have ramped up their purchases of government-backed mortgages in forbearance, and they are selling these loans back to investors at a profit.”
Original Article: "Mortgage Companies Cash in on Pandemic Relief"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Financial journalist John Tamny has written the definitive book on the disastrous political mismanagement of Covid-19—and the resulting (still unfolding) calamities. When Politicians Panicked is a superb analysis of the economic tradeoffs ignored by alarmist Covid policymakers, and a blow by blow account of their bungling in the early months of 2020. But this is also a book about economic growth, employment, markets and prosperity, with well-supported arguments written in Tamny's clear prose. Tamny helps readers See the Unseen, namely that terrible consequences of lockdowns far exceed any danger posed by the virus.
Let's hope the experts he skewers in this book take notice.
Mentioned in this Episode When Politicians Panicked: The New Coronavirus, Expert Opinion, and a Tragic Lapse of Reason by John Tamny: Mises.org/Panicked
JohnTamny.com
Jeff Deist and David Gornoski talk about some of the recent news and relevant topics such as the buying up of homes by Black Rock; the federal reserve’s connection to big corporations; the out of control state of the Fed’s reverse REPO market; and what the average person can do to protect themselves from government interference in the market.
Find more from David Gornoski on A Neighbor's Choice.
In Las Vegas, asset price inflation is combining with rising prices on building materials to create a real estate bubble of remarkable proportions.
Original Article: "The Real Estate Boom in Vegas Is More Frenzied Than Ever"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Only a bureaucrat would assume that putting a small child in public school is just as effective as keeping the child at home with a parent. Unfortunately for Biden, the research isn’t on his side.
Original Article: "Biden's Family Leave Is Yet Another Attack on the Family"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Tucker Carlson seems to believe that if it weren't for immigrants, America would be dominated by religiously devout, tradition-minded, liberty-loving Americans in every corner of the nation. Perhaps he's not familiar with the effects of American universities and public schools?
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
The new covid relief bill signals that whatever restraint on public spending existed before 2020 is now all but gone. And the bill represents the beginning of a new era: an era that can be likened to that of the New Deal.
Original Article: "The New New Deal Has Already Arrived. Thank the Covid Panic."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
We're now living in Biden's America. But what does that mean? It means a continuation of trends already in place: the long slow decline of America's institutions, and the public's faith in them.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Before 2020, there were growing signs of increasing economic prosperity for a wide variety of income groups in America. Whether or not this prosperity survives covid lockdowns and ever higher levels of government regulations remains to be seen.
Original Article: "American Households Made Economic Gains before Covid, but This Progress Can Be Lost"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Social activists now regard the minimum wage as another welfare program that can reduce the costs of programs like Medicaid and food stamps, and can reduce inequality. But the minimum wage is very poorly targeted for these purposes.
Original Article: "The High Cost of Using the Minimum Wage as a Form of Welfare"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
After decades of financialization and government favors, Wall Street now has little to do with free, functioning markets anymore and has largely become an adjunct of the central bank. Today, entrepreneurship is out, and bailouts are in.
Additional Resources "Financialization: Why the Financial Sector Now Rules the Global Economy" by Ryan McMaken: Mises.org/RR_52_Article
"Monetary Policy and Inequality" Karl-Friedrich Israel: Mises.org/RR_52_Video
"Speaking Truth to Monetary Power" by Lew Rockwell: Mises.org/RR_52_Article2
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
Suddenly the champions of stakeholder theory, like the predictably despicable Washington Post, find themselves singing a new tune about vulture capitalists, deciding that hedge fund short sellers are now the good guys.
Original Article: "The GameStop Saga Unravels Stakeholder Theory"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
We're supposed to believe that with Trump gone, political discourse will now be more honest and accurate. The reality is the Washington establishment is built on lies and myths and conspiracy theories. Here are just a few of them, from Russiagate to government spending.
Be sure to follow Radio Rothbard at Mises.org/RadioRothbard.
There's a lot of excessive optimism about the economy during the next four years in America. However, the US still comes out on top when compared to Europe and China.
Original Article: "Compared to Europe and China, America Is Still a Safe Bet"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
At Tuesday’s Senate confirmation hearing, former Fed chair and President Biden’s pick as US Treasury secretary Janet Yellen claimed to have an appreciation for the nation’s debt burden, then proceeded to show she clearly doesn’t.
Original Article: "Don't Worry, "the Economists" Have Everything under Control"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Strict lockdowns have devastated millions of families' incomes while failing to bring success in suppressing covid mortality.
Original Article: "Lockdowns Haven't Brought down Covid Mortality. But They Have Killed Millions of Jobs.".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The feds claim the chicken industry is trying to exploit the consumer. Yet several decades ago, chicken was more expensive than beef, but thanks to industry efforts, chicken is exceptionally affordable now.
Original Article: "Another Pointless Antitrust Campaign by Federal Regulators".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Private firearms ownership decentralizes coercive power, transferring some of it from the state to the private individual. Naturally, political regimes oppose this. But even many non-Americans embrace private arms.
Original Article: "The Right to Own a Gun Isn't Just for Americans".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
A panel featuring Jeff Deist, Daniel McAdams, and Tom Woods.
Presented at the Symposium with Ron Paul on Saturday, 7 November 2020, in Angleton, Texas.
The F-35 Joint Strike Fighter program is not worthy of a massive investment by the taxpayer—especially since the program doesn't make Americans any safer.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "The Trillion-Dollar F-35 Fighter Program Does Not Make Americans Safer".
Government policy encourages single parent household formation while discouraging full-time employment and driving up housing costs. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Three Barriers to Improving Poverty Rates in America".
Jimmy Carter doesn't get credit for his deregulation efforts, but his initiatives probably were as significant a boost to the economy as any president has accomplished since 1980.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "Carter vs. Reagan: The Last Semi-Intelligent Presidential Race".
The Fed plans to keep interest rates near zero, while monetizing debt, financing zombie companies, and pouring new dollars into the market. But that may not be enough.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "The Fed Is Planning Another Ultralong Period of Ultralow Rates".
The question is not if the current system will end. The question is how it will end.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Original Article: "The Fed's Brilliant Plan? More Inflation and Higher Prices".
Last time we met in Orlando, Bob Murphy mentioned how much worse our political and social divide would be if the economy crashed like 2008. Now we face this very problem—with COVID-19 lockdowns and George Floyd protests decimating the economy and social media exposing raw animosity along racial and "woke" lines. Congress and the Fed have gone into overdrive creating new stimulus and "liquidity," but 40 million Americans are unemployed and major cities are still recovering from turmoil. The national debt tops $26 trillion while tax receipts at all levels of government plummet.
So what does it all mean for you, for freedom, and for the future of America—economic and otherwise?
Recorded in Orlando, Florida, on August 29, 2020. Special thanks to Mr. and Mrs. Greg Roe for making this event possible.
Last time we met in Orlando, Bob Murphy mentioned how much worse our political and social divide would be if the economy crashed like 2008. Now we face this very problem—with COVID-19 lockdowns and George Floyd protests decimating the economy and social media exposing raw animosity along racial and "woke" lines. Congress and the Fed have gone into overdrive creating new stimulus and "liquidity," but 40 million Americans are unemployed and major cities are still recovering from turmoil. The national debt tops $26 trillion while tax receipts at all levels of government plummet.
So what does it all mean for you, for freedom, and for the future of America—economic and otherwise?
Recorded in Orlando, Florida, on August 29, 2020. Special thanks to Mr. and Mrs. Greg Roe for making this event possible.
Debt matters, even if interest rates are low. Increasing debt and spending means lower growth and weaker real wages in the future.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Trump's Spending Is Delaying a Recovery. Biden Would Be Even Worse."
The rising unemployment comes partly as a result of state governments forcing the closures of some businesses, or restricting operations, in the name of mandatory social distancing.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "New Unemployment Increased to 1.4 Million Last Week as Recovery Falters".
Tax revenue declined again in June, and new jobless claims increased by more than a million for the seventeenth week in a row.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "US Employment Stalls as Trillion-Dollar Deficits Mount".
Download the slides from this lecture at Mises.org/MU20_PPT_29.
Recorded at the Mises Institute in Auburn, Alabama, on 16 July 2020.
Download the slides from this lecture at Mises.org/MU20_PPT_26.
Recorded at the Mises Institute in Auburn, Alabama, on 16 July 2020.
Bob explains some of the basic–but crucial–errors in the cost/benefit analyses that have been offered by economists to justify the political lockdowns issued in light of the coronavirus. Specifically, economists have conflated voluntary physical distancing with coerced lockdowns, and they are also misusing the concept of a Value of a Statistical Life (VSL).
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
It's possible that there may yet be a V-shaped recovery as employment really takes off in the next few months. But, so far, there's little reason to assume this will be the case.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Employment Situation Is Still a Disaster".
GDP can be increased through both government spending and printing new money. So, naturally, once lockdowns end we'll see a big rebound in GDP. But that doesn't tell us if the private sector is actually better off.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Why GDP Metrics Won't Tell Us Much about the Post-COVID Recovery".
Recorded at Avondale Brewing Company in Birmingham, Alabama, on June 6, 2020. Special thanks to Mark Walker for sponsoring this event.
A no-holds-barred discussion of the economy after the coronavirus shutdown and George Floyd protests. Are we facing another Great Depression? Can there be a V-shaped recovery or is this wishful thinking? What will all the new money and credit created by Congress and the Fed mean for the dollar? What kind of economic mess will Trump or Biden inherit in 2021? How far will Fed chair Powell go to keep markets propped up? And how can you protect yourself and your savings?
Recorded at Avondale Brewing Company in Birmingham, Alabama, on June 6, 2020. Special thanks to Mark Walker for sponsoring this event.
Of course, anyone who deals in interacting with the real world (i.e., not lifelong bureaucrats like Fauci, who needs not exhibit any actual competence to collect his $400,000 paycheck) understands that preserving and augmenting wealth is key in enhancing health and life.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Cost of Lockdowns in Human Health and Human Lives Is Becoming Increasingly Clear"
One clue as to why the stock market has rebounded while daily economic news grows worse could be the flood of new punters betting on stocks, from high-flying tech shares to dead-in-the-water leisure stocks.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Pandemic Wagering: Tesla or Table Tennis?"
The editors of The Babylon Bee have a podcast, and they invited Bob on to discuss the economic situation. Then, they asked a series of fun questions, against the backdrop of their shared Christianity.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Jeff Deist and economist Daniel Lacalle present a special live seminar on the COVID-19 crisis and what it means for your economic future.
Is the world headed for another Great Depression, or will we enjoy a V-shaped recovery later this year as the virus fades and economies reopen? Are governments and central banks making the situation better or worse? Will stocks bounce back? Do we all face a less prosperous new normal, or will markets and human ingenuity overcome the economic tailwinds?
Mr. Lacalle and host Jeff Deist take an unflinching look at the economic reality.
Topics include:
Prospects for inflation vs. deflationFed and ECB responses to the crisisEffects of government "stimulus"Unemployment and small businessHousing and commercial real estateEquities and bondsOil and commoditiesGold and Bitcoin
Economist David R. Henderson returns to the podcast to explain some of the major problems with the so-called "stimulus" bill, including its payment of $600 a week to the unemployed, as well as perverse payments to airlines. He then discusses the protest he helped organize against California's lockdown.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Mark Thornton delivered this talk via Zoom to the Auburn Rotary Club on Wednesday, May 6, 2020.
Bob Murphy tackles some Keynesian and MMT fallacies that have resurfaced in light of the response to the coronavirus. In particular, he responds to Larry Summers, who viewed the lockdown as being akin to workers staying home over the weekend. And, then, to Neil Irwin on Twitter, who approvingly retweeted a thread arguing that it was mathematically impossible for state governments to have saved ahead of time in preparation.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Should we wait for COVID testing benchmarks to be met before we can reopen the economy? What if testing remains imperfect and uncertainty remains high? Our guest is Avik Roy, head of the Foundation for Research on Equal Opportunity. He returns to the show to discuss FREOPP’s plan to bring people back to work.
From medical practices to grocery shipments, governments are loosening restrictions in order to keep goods and services affordable. But if these restrictions are unnecessary now, why claim they are ever necessary?
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "COVID-19 Is Forcing Governments to Admit Their Regulations Aren't Really Necessary"
The COVID-19 depression will expose the Las Vegas convention center bubble for what it is: a massive malinvestment.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Convention Center Bubble Will Soon Pop"
Even if the COVOID-19 virus turns out to be more severe than the skeptics give us reason to think it is, we can get through it. We cannot survive the end of the division of labor. It would be the finish of civilization as we know it.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The End of Civilization?"
Pete Quinones, host of the Free Man Beyond the Wall podcast, and Ryan McMaken discuss the subjects of the articles Ryan has been covering recently about the government's and public’s responses to the Covid-19 crisis.
The lasting and far-reaching harms caused by this authoritarian precedent far outweigh those caused by the COVID-19 virus. The American people must decide for themselves how and when to reopen society and return to their daily lives.
Narrated by Millian Quinteros.
Original Article: "End the Shutdown"
We are about to enter a production slowdown—a collapse, really—not because some businesses miscalculated their investments, but because government intervened drastically and without warning to shut down all businesses.
Narrated by Millian Quinteros.
Original Article: "This Is Not a Recession—This Is a Government-Imposed Shutdown of the Private Sector"
Levi Machado is a Brazilian pathologist who trained and now works in the NYC hospital network. As a fan of libertarian writers, Levi recognizes the problems with coercive “solutions” to a pandemic. However, Levi explains in the discussion what COVID-19 actually can do to the body, and why it’s not really comparable to the flu. The conversation wraps up with tips on staying healthy.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy urges skeptics not to dismiss the panic over the coronavirus as merely due to anti-Trump fear-mongering. Although government coercion is not justified, the underlying health crisis is very real. Bob also explains the economics of the toilet paper shortage, and gives practical tips he is using to try to keep his own household safe.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
The hilarious stand-up comic and Rothbardian Dave Smith invites Bob onto his show, Part of the Problem, to talk about the government’s response to the coronavirus.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Oren Cass is the executive director of American Compass (AmericanCompass.org), a conservative think tank that stresses the importance of family and domestic industry, in opposition to a singleminded devotion to economic efficiency. Cass was previously a senior fellow at the Manhattan Institute for Policy Research, and was the domestic policy director for Mitt Romney’s 2012 presidential campaign. Bob and Oren have a friendly discussion about their disagreements on economic policy.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy comments on various aspects of the response to the coronavirus. Although many libertarians are accusing the authorities of exaggerating the threat, it would also be a “libertarian take” to accuse them of downplaying the threat early on, misleading the public on how to stay safe. Bob also tries to clarify thinking about the Fed’s repo bailouts and the outrage over hand sanitizer price gouging.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Jeff Deist joins Rick Sanchez on RT America to discuss the immense stimulus package proposed by the Trump administration to help the failing US economy.
Bob Murphy first gives some thoughts on the stock market crash and coronavirus, then discusses the jaw-dropping discussion between Brian Williams and a member of the New York Times editorial board regarding Mike Bloomberg’s claimed ability to give every American $1 million.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Harry Dent is the founder of Dent Research, which provides economic forecasting and financial recommendations. He is the author of numerous books, including Zero Hour (2017). Harry argues that demographic trends set the U.S. economy up for a major adjustment that the Federal Reserve merely postponed with its easy-money policies in 2008 and beyond. Harry now believes that a major crash is coming, which will probably begin this year.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Dr. Bob Murphy joins the Human Action Podcast to discuss one of the most important issues of all: how money and credit work in today's society. Jeff Deist recently commissioned Murphy to write a series of articles on money mechanics (Mises.org/MoneyMechanics), an exceedingly important topic for critics of the Fed — and today's podcast serves as an introduction to the project. The articles will be compiled into an e-book, with plenty of graphics to simplify the basic process of money creation in a fractional reserve system. If you want to understand how the Fed works, how money and credit come into being, how interest rates arise, and what it all means for you, don't miss this great upcoming series at mises.org.
Additional Resources Jeff Deist on Understanding Fed Money Mechanics
Bob Murphy tackles a common objection from atheist libertarians: Doesn’t Mises (in Human Action) refute the very notion of the Biblical God? Specifically, why wouldn’t an omnipotent, omniscient being remove all uneasiness with one action?
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Wojciech Kopczuk is a Columbia economics professor who co-authored (in 2004) one of the leading estimates of wealth concentration in the literature, along with current progressive darling Emmanuel Saez. But, ever since Thomas Piketty’s bestselling book on wealth inequality, Saez has published research with Gabriel Zucman showing dramatically different results. Kopczuk explains why economists can disagree on the basic facts of wealth concentration, and why there is controversy about Saez and Zucman’s latest claim that billionaires pay a lower income tax rate than the working class.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Rob Bradley is the world’s leading expert in energy economics in the Austrian tradition. His treatise Oil, Gas, and Government is the definitive record of U.S. government intervention in the oil and gas markets. Rob chose Murray Rothbard as the chair for his dissertation in Political Economy. At one point in his career, Rob served as a speechwriter for Ken Lay, CEO of Enron, which afforded Rob a firsthand view of the skullduggery that would later be wrongly blamed on capitalism.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Recorded at the Mises Circle in Seattle, 14 September 2019. Includes an introduction by Jeff Deist.
Bob Murphy gives a quick explanation of the Mises-Hayek theory of the boom-bust cycle, and how Bob used it to forecast the financial crisis in 2008 a year ahead of time. He then explains the significance of an "inverted yield curve," and shows how the Austrians can understand its predictive power much better than Keynesians like Paul Krugman can.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy has a friendly discussion and debate with Karl Smith. First, Bob pushes Karl to clarify the conditions under which government deficit spending could, even in theory, help a depressed economy. Then, they switch to the economics of climate change, and Bob’s view that the case for a carbon tax is much weaker than most economists admit.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Beyond the usual arguments about incentives and taxes, a Universal Basic Income is a dangerous policy that supercharges the state and threatens to heighten tensions between different groups in society.
Original Article: "4 Reasons to Oppose a Universal Basic Income"
Austrians will be vindicated, but will they be heard?
Original Article: "Austrian Economics is No Longer the Unheard Music"
Tucker Carlson gives unambiguous approval for Elizabeth Warren’s call for “economic nationalism,” saying her proposal sounds like “Trump at his best.” Carlson pillories American companies for outsourcing their operations to other countries, and blames Republican leadership for its dedication to doctrinaire libertarianism and Austrian economics. (Not a joke.) Bob disagrees with this take.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob replays a recent Contra Krugman episode covering a Paul Krugman column on infrastructure spending. In addition to getting the economics wrong (as usual), Krugman also makes a shocking admission about his willingness to harm the country, as long as it denies Trump a political victory.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Under Warren's plan for higher education, Warren won’t make you go to college — but she’ll make you pay for it.Original Article: "Elizabeth Warren Shows Us Why Government Must Get Out of the Student Loan Business".
Bitcoin is a shot across the bow at government’s monopoly control of money. While no one in the US appreciates the direction money is going, others are waking up.
Original Article: "Bitcoin, Gold, and the Battle for Sound Money".
The true aim of these “scholar activists,” as many academics have begun calling themselves, is to propagate socialism by redefining capitalism to encompass every evil of human history. Which means they're mostly attacking straw men.
Original Article: "How College Profs Push Students to Socialism".
The number of jobs that require an occupational license now covers 30% of the US workforce, up from 5% in 1950.
Original Article: "Occupational Licensing — An Unnecessary Evil".
The real money-creating machines are commercial banks. Loan dollars become deposit dollars. Lots of lending means the money aggregates increase. Little lending means the opposite.
Original Article: "Inflation: The Rumors of its Death are Greatly Exaggerated.
Warren and her fellow progressives have the regulatory issue with respect to free markets and public utilities almost precisely backwards.
Original Article: "Elizabeth Warren's New Antitrust Crusade: A New Progressive War on Wealth".
What is the real state of life in America? Why are we so divided, politically and otherwise? How fragile is the economy, and how much longer can debt and deficits go unaddressed? Will culture wars destroy any remaining sense of a shared American vision? Is a cold civil war—or worse—inevitable? Recorded at "The Mises Institute in Orlando: The Real State of the Union" on February 16, 2018.
Former Dallas Fed official Danielle DiMartino Booth joins the show just as Chairman Jay Powell faces his first major challenge: will he keep raising rates as promised now that autos, housing, employment, and even tech stocks look soft? And if not, will he effectively signal that the US economy is in big trouble?
DiMartino Booth and Jeff Deist discuss Powell's performance to date, the credulity of the financial press, the ugly ticking time bomb of US corporate debt, and whether Austrians and permabears overestimate the Fed's influence on the economy.
In this episode, Bob tackles Tucker Carlson's intuitive—yet wrong—claim that Jeff Bezos is unloading his labor costs onto the taxpayer. If anything, food stamps and other government assistance programs cause Amazon to pay its workers higher wages.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Almost twenty-five years after his death, unpublished material by Murray Rothbard is still being released. Professor Patrick Newman, editor of The Progressive Era, is hard at work on the long lost fifth volume of Conceived in Liberty—Rothbard's epic history of colonial America.
How did one man write so much, and what can he still teach us today? Don't miss this terrific talk from a leading Rothbard scholar.
This weekend’s show features Jeff’s recent appearance on the radio show Turning Hard Times into Good Times hosted by Jay Taylor. They discuss the big picture aspects of the US economy—namely, what's going on civilizationally with debt and central banking, and the seemingly endless civil wars in the middle east. They also deconstruct the poisoned political landscape in Washington DC, despite the lack of any meaningful policy differences between the two dominant ideologies of today: neoliberalism and neoconservatism. This is an eye-opening discussion about the state of things in DC and beyond.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
Mark Thornton's definitive work on booms and busts. His now-infamous Skyscraper Index theory draws the connection between loose monetary policy, artificially low interest rates, and vanity construction projects.
This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
Download the complete audiobook (27 MP3 files) here. This audiobook is also available on Soundcloud, Apple Podcasts, Google Podcasts, and via RSS.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years." This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 2: "And How Austrian Economists Predicted Every Major Economic Crisis of the Last 100 Years". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
From Section 1: "The Skyscraper Curse". This audiobook is made available through the generosity of Mr. Tyler Folger. Narrated by Graham Wright.
Private Graduate Seminar. Recorded at the Mises Institute in Auburn, Alabama, on July 19, 2018.
Danielle Booth, a veteran of the Dallas Fed and author of Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America, joins the show to consider whether—or if—the Fed can ever return to "normal" monetary policy. Raising interest rates might slow or even crash equity markets, while causing US debt service to spike. But leaving rates low keeps the US economy in zombie status, punishing savers and preventing bad debt and malinvestment from clearing. It's a no-win situation for new Fed Chair Jay Powell.
Nomi Prins previews her talk at our event in Ft. Worth this weekend, based on her new book Collusion: How Central Bankers Rigged the World—a damning indictment of how the Federal Reserve bullied other central banks and bailed out Wall Street in the wake of the 2008 financial crisis.
Join us in Texas this Saturday to meet Ms. Prins and receive an autographed copy of Collusion!
Jeff Deist joins his friend John O'Donnell on Power Trading Radio to talk about everything from money to Marx to whether "unilateral" free trade is a good idea.
Hosted by the Mises Institute in Nashville, Tennessee, on 14 April 2018. Special thanks to an Anonymous Donor for making this event possible.
Hosted by the Mises Institute in Nashville, Tennessee, on 14 April 2018. Includes an introduction by Jeff Deist. Special thanks to an Anonymous Donor for making this event possible.
This seminar was hosted by the Mises Institute in Nashville, Tennessee, on 14 April 2018.
The F.A. Hayek Memorial Lecture, sponsored by Greg and Joy Morin. Presented at the Austrian Economics Research Conference at the Mises Institute in Auburn, Alabama, on 23 March 2018.
It is a myth that "we don't make things in America anymore." Thanks to automation, we simply need fewer people to make more stuff. Text version: Manufacturing Jobs Are Overrated.
Economist Dan Mitchell joins Jeff Deist to discuss what might be the biggest threat of all to American prosperity: the shocking and unconscionable US government debt. What does $20 trillion in Treasury IOUs really mean for the private economy? Will the US government ever default and force bond holders to take a well-deserved haircut—or will the Fed continue to bail out Congress with low interest rates? Can this go on indefinitely, especially since other governments often have even worse fiscal and monetary policies? This is a sobering discussion of a reality politicians don't want to face.
With stock markets in turmoil earlier this week, the Mises Institute's resident expert on booms and busts joins Jeff Deist to make sense of it. Will new Fed Chair Jerome Powell do everything possible to prop up markets, or will he be more hawkish than Janet Yellen? What kinds of indicators does Mark look for to predict trouble (hint: it's not the VIX). Why does the volume of margin loans matter, and why is the Russell 2000 Index a better predictor than the Dow or Nasdaq? Are cryptocurrencies now bound up with macro trends? And is Austrian business cycle theory necessarily incomplete as a tool to help investors?
See Mark Thornton's 2004 article "Housing: Too Good to be True".
Jeff Deist joins his friend "Mance Rayder" to discuss the political and economic state of the union, the endless fractures within libertarianism, a different way to look at immigration, and how Rothbard's fans and detractors alike benefit from reading him.
By every measure extreme poverty in Third World nations is decreasing rapidly. But what about the US and the West? Economist and mises.org editor Ryan McMaken joins Jeff Deist for a wide-ranging discussion of what makes people rich, and how economists should measure wealth. This great discussion explains the decline of real incomes and savings rates in the West, the moral hazards created by central banks, and how a happy combination of technology and market innovation often manages to outpace rapacious governments. Is deflation, horribly mischaracterized by economists, the real source of wealth in a society? And should we judge our personal finances in terms of net worth or lifestyle?
DEIST: Let’s begin with your assessment of the state of Austrian economics today.
MURPHY: Well, the first thing is that it’s so much bigger than it was. I’m relatively young, but even when I was going through grad school in the early 2000s, there was still a question we asked ourselves, “If you’re a grad student in Austrian economics, do you advertise that fact or do you engage in what they were calling the stealth strategy?” With the stealth strategy, you just keep your perspective to yourself, get published, and do your dissertation on a mainstream topic. You get yourself into a school, get tenure and only then do you say “surprise, I’m an Austrian.”
Now, though, the advice that people are giving is “you want to, by all means advertise that fact because we have enough of a foothold in various places that you’ve got to let them know that you’re an Austrian because if they’re looking to hire somebody who thinks like that, you’ve got to stand out from the crowd.
And so, that’s just the most immediate thing that comes to my mind. So yes, we do have — and unfortunately it took the financial crisis to make this happen — a certain amount of recognition now. We’re definitely getting out there more.
One last thing I’ll mention: when I’m talking to a crowd of financial professionals and I show them what I think happened with the housing boom and bust, I’m using Austrian business cycle theory, but I’m not using that term necessarily. I’m just explaining how the Fed blew up a bubble, and so on. And they all soak that right up. They don’t bat an eye. That sounds perfectly plausible to them.
DEIST: Austrian economics is also becoming increasingly integrated into the larger profession. Do you think the term itself still has value, as a loose term of convenience? Or do you think we should jettison it and focus on individual Austrians and their impact?
MURPHY: It’s a tricky question. I think it was Milton Friedman who kind of flippantly said there’s just good economics or bad economics and I get that, but on the other hand, there really are schools of thought, and that’s a separate discussion as to why that is the case in economics. In physics, you don’t necessarily have it, but I think that’s partly because the social sciences are different from the natural sciences and it really does matter, and there are reasons that things that make sense in physics don’t necessarily translate over to economics.
I do think there are schools of thought and so I don’t think it’s helpful to get rid of the term. I’ll put it to you this way. The kind of people who aren’t going to like it because of the label, I don’t think you’re going to convince them by switching the label to something else like coordination economics or whatever some of the other phrases are that have been offered. I’m being a bit of a hypocrite because I just mentioned that when I speak to a crowd of financial professionals, I don’t necessarily volunteer right off the bat, “Hey everyone, this is the Austrian theory of the business cycle.” Depending on how much time I have, I might get back with them and say hey, if you want to learn more, this is coming from Ludwig von Mises and F.A. Hayek, you may have heard of them. I’ll do that because with some crowds, if you say this is the Austrian explanation, you’re kind of telling them, this is something that is an obscure theory and so they might somewhat shut down. They think that you’re lecturing them and just giving them some irrelevant hobby horse. It depends on the crowd, but in terms of being a professional academic economist and publishing, I certainly think we need journals dedicated to Austrian economics.
DEIST: What about economics as a profession. Is economics doing any good? Does it benefit society? Its models certainly seem useless at predicting or explaining anything.
MURPHY: That’s a good question. I’m thinking, if everybody just took a standard principles class on microeconomics, even on net, that makes the world a better place. I don’t necessarily mean a microeconomics class taught by one of my buddies, either.
Just seeing the arguments about rent control, just to know what tradeoffs are, to realize that there’s scarcity, that kind of stuff, I think that helps people. In general, the kind of information that would be covered, even if they used a standard textbook.
It gives them enough of a foothold, a grounding to think critically and better understand the purpose of high prices when there’s a natural disaster, and the politicians start talking about “price gouging.” It is easier to get that message across to somebody who has literally at least taken one economics class in his or her life.
But, beyond that, economics is not necessarily helpful to people. The way that macroeconomics is taught in standard courses, I think that’s actively harmful. They begin to think, “Spending’s what drives the economy.”
So, yes, I think you don’t really need that many economists walking around. There are way too many people going into the field of economics in terms of what I think is actually useful socially.
The stuff you would learn in a basic principles micro class, that’s pretty helpful because that’s what Austrians would think of as normal price theory, and it helps people to think like an economist. I guess that’s the way I’ll say it. People should know how to think like an economist. Students should know what it means to think like an economist just like a well-rounded student should know what’s utilitarianism is, what did this philosopher think, what happened to ancient Rome, and so on. These are basic things one should know to be an informed citizen, and some of them are learned in economics classes.
DEIST: What is the state of economics in terms of its place in academia? We judge professors by their ability to publish in relatively obscure journals, journals that few people read, rather than judging them by their teaching ability.
MURPHY: Yes, it’s a good question and I’m a little bit cynical on this, so take it with a grain of salt. But something’s screwed up with the system.
An example of this can be found in the so-called “replication crisis” in other areas of the social sciences where new results have been published in areas that people thought were rock solid. Now, researchers are going back and trying to replicate those results and are not able to do it in a shocking number of cases. And so, there is this growing realization in the social sciences generally — not just economics — that maybe we don’t have things figured out as much as we thought we did.
And with economics in particular, it really was an eye opening experience for the profession. It has been a crisis for the profession in the sense that there have been guys like Robert Lucas, and other heavyweights in the 2000s who had said things along the lines of “We basically solved the business cycle, we can move on now to something else.” Well, that clearly wasn’t the case, but the hubris and overconfidence is pretty shocking.
Just to go back to the distinction between the natural sciences and the social sciences, people a lot of times pooh-pooh Mises on this and state, he was an obscure person making these medieval distinctions. But it really is true that it’s important to realize that the techniques are different and that’s why it can still be the case that Keynesians and Austrians — and Chicago school, for that matter — argue about what happened in the 1930s, and why we still argue about was the Obama stimulus good or bad.
As a result, the state of the literature in economics, it’s not good. I think people would be shocked to learn the details of the economics models we were using when I was in graduate school 15 years ago.
The standard workhorse models you would learn there, they would have one consumer or one household who lived forever and they would have one representative firm. It was a very simplistic model. The profession doesn’t use these models because the scholars are lazy. It was just because the full mathematical model gets really complicated and so to be able to “solve a model,” by which they meant lay out what the equilibrium states were, it couldn’t get too complicated. Otherwise, you wouldn’t be able to solve it.
And so, you have people informing monetary policy and writing academic papers telling the Federal Reserve what it should do in certain circumstances. But the underlying model was incredibly crude.
Just think, if NASA said they were going to send a manned mission to Mars, but their model didn’t include moons because they didn’t have enough computing power. That would make you think, “I don’t want to get on that spaceship.” But, that’s the kind of reasoning that’s going into what’s guiding the Federal Reserve. So, to answer your question, I understand why, if you thought economics was a science like physics, it would make sense that you wouldn’t want Einstein and Niels Bohr and such heavyweights to be bogged down by teaching undergrads basic principles about Newton’s Laws, that would be crazy. You’d want them sitting in the lab or writing the latest cutting-edge research.
But with economics, I think the latest cutting-edge research is very flawed and so that sort of analogy breaks down. The good that economists do is in teaching basic principles like scarcity and opportunity cost to the general public so they can at least evaluate political claims, even if they’re not reading the latest thing in the American Economic Review.
DEIST: As a student and a scholar you’ve spent time at Hillsdale, at NYU, and now at Texas Tech. Do you think the undergraduate and graduate education model in general — which is very costly in terms of time, debt, and money — is broken, or do you think it’s salvageable?
MURPHY: I think it’s unsustainable at the current scale and I was saying this even when I was a professor at Hillsdale. That was back from 2003 to 2006, and at that point, I felt like half of the students that were going to college shouldn’t have been there.
This isn’t a knock against those students. I’m not saying they weren’t smart enough. That’s not even the issue. You could clearly tell, there were plenty of students that were there to get a business degree or something similar and they were only taking my class because they had to check a box to get a degree. They weren’t interested in economics, and their real goal was to run the family business and get an MBA. There’s nothing wrong with that, but it just meant that half the people in class had that attitude, and that affected the way you could teach. The result was that everybody was kind of miserable. Many of the people who were there didn’t really need to be in college. They should have gone right into the workforce after high school or gone to a trade school. They were miserable. But then there were other students that were there because they loved learning for its own sake — they were also miserable because you couldn’t teach just to them because that would leave everybody else behind.
How this system is funded makes a big difference and if genuine market forces were allowed to work that could be a big part of how the problem could eventually fix itself.
The effects of the current subsidized system can be seen this way: I say to people, do you think everyone in the United States should get a PhD before they get a job? And of course that would be crazy. It would be very expensive, most people would be miserable, and it would lower the quality of what does a PhD mean if everybody as a matter of course gets one. Having a PhD would then be no big deal. By the same token, why do we just assume, “Oh, you’ve got to go to college or else you won’t get a good job.” That’s kind of crazy when you see what it means in practice. The stereotypes about students partying all the time are true. I’m not just talking about big huge state schools, but I’m including many schools I’ve visited and seen — which are somewhat elite private liberal arts schools. So the stereotype of what many students really spend their time doing is not completely made up out of whole cloth. And nowadays they’re coming out of school with tens of thousands of dollars of debt and they can’t even get a job. So, clearly that system can’t last.
DEIST: Turning back to the profession itself, what do you see as the dominant thought in economics today? Has Keynesianism led to “neo-liberalism,” whatever that is?
MURPHY: Even though we might like to make jokes about it, it is true that the average economist is generally a fan of markets. They’re not rabid laissez-faire, obviously. With most economists, though, they know socialism doesn’t work and they understand that yes, the way to bring prosperity to the third world is not just a matter of sending them aid. There’s a growing realization that yes, they need to have private property rights and solid social institutions, and that it’s not just a mere matter of technology.
So, there is a growing acknowledgement of the importance of those social institutions and that’s a good thing. But on the other hand, there is hostility toward the term neo-liberal — the critique is a little bit off with the people who rail against neo-liberalism and they complain about the World Bank and the IMF foisting free trade policies.
That’s all misguided, but the people who criticize neoliberalism are not just making all the negative aspects of it up. It is true that in many cases, this is what happens: In the stereotypical, paradigmatic case, there’s a country that maybe the military takes over. They’re in a shambles. They need foreign currency because they’ve been running their own printing press and so yeah, the World Bank or the IMF might come in and impose an “austerity” program on them. The World Bank and IMF say “yes, you have to liberalize, get rid of your state run enterprises. You need to tie your currency to gold or do these other things tied to the dollar. Open up your markets to imports.”
And some of that is coming out of a textbook for economic policies moving toward markets. But a lot of it is causing the citizens in that country to eat the losses that were imposed on them by their corrupt ruling regime as opposed to just letting the government suffer the consequences of years of mismanagement. The people again, they smell a rat and I think they’re largely correct.
They know that these outsiders are coming in and they don’t have their people’s interests at heart and they’re in bed with these big corporations and other huge nongovernmental organizations. So, I think they’re right to be suspicious. It’s just that their conclusion is “something’s wrong with capitalism per se.” Then, obviously, they come to the wrong conclusions.
DEIST: Last year, the economist Richard Thaler won the Nobel Prize in Economics for his work in behavioral economics and he’s being lauded as someone who has integrated economics with psychology. Of course, 70–80 years ago, Mises and the Austrians were talking about what humans actually do. Has behavioral economics borrowed from Austrianism?
MURPHY: It’s a difficult question to answer and I don’t know that I have enough interaction with certain regular mainstream economists who are not familiar with the Austrian tradition to be able to give a confident answer. There are two ways of looking at it and I’ve seen this reaction among my colleagues, either pessimism or optimism in reaction to the announcement that Thaler won. So, the good way to look at it is to say, “Oh, this is great, at long last the mainstream profession is admitting problems with the standard neoclassical textbook models of how rational economic man operates. That’s not how real people behave and so thank goodness, the mainstream finally kicking and screaming has been dragged to the point where they’re willing to admit it.”
So, there’s that element, but on the other hand — and here’s where the pessimist’s take comes in — it’s sort of like this: yes, the mainstream’s finally realizing what thinkers like Mises were saying long ago, that the way to model human behavior, if you will, is not to try to come up with a precise mathematical description that makes quantitative predictions.
But that’s not what the people who are embracing Thaler are saying. What they’re saying is “okay, so now we’re going to refrain from this hubris in trying to predict behavior and treat people like automatons.” But, for them, that just means updating the model. It’s not that they’re trying to get rid of mathematical modeling of people, they’re just trying to make the math model more accurate.
And so, if what you think is no, they’re fundamentally going down the wrong path here and that’s not the way to approach economic science, it’s a bit disheartening. Also, it’s unavoidable to bring up the fact that Thaler is involved with the whole “nudge” literature and using this knowledge of how people respond to incentives to say, “this is the way we can influence people, this is the way we can modify their behavior in ways that we economists desire.” In some settings, that’s pretty creepy.
DEIST: When Thaler claims that humans don’t always act rationally, he’s not refuting Mises — he’s simply not distinguishing between action and motivation.
MURPHY: Oh, absolutely, right. And this is again sort of the frustration one might have with Thaler. So, the neoclassical mainstream, when they say, as a working assumption, “we assume people are rational, that means people solve their economic optimization problems the way a mainstream economist would.” And so, number one, it means that people are experts at using calculus and solving difficult mathematical problems. Here’s your budget constraint and what’s your consumption path over time? This is stuff that grad students initially don’t even know how to solve because it’s too hard mathematically. And yet, economists routinely assume that consumers, when they go to the store, are able to unconsciously do the same problem.
Beyond that, there’s the way economists talk about what rational behavior is looking at in a strategic setting. One example of this is the so-called Prisoner’s Dilemma. Even if people play a situation like that a thousand times in a row, mainstream economists will say the “rational thing” to do is to keep screwing the other guy a thousand times in a row, even if they could be better off by cooperating.
But no, cooperating's not the way you solve the model, so it’s therefore “not rational.” There’s that element. So yes, when Thaler says “hey, people aren’t rational,” what he means is they behave in ways that this narrow economistic model would not have predicted. In contrast, when Mises says people are rational, all that means is “they’re engaging in human action to try to achieve some goal that they value.”
Assigning motives is not the approach you take when someone throws a rock up in the air and then it comes back down, we don’t say, “ah, the rock desired to be closer to the earth and that’s why it chose to do so.” No, we use a completely neutral, objective measure without any motivation or preferences involved because that’s the way that science has gone. In our minds, that’s the correct way you deal with predicting the motion of matter.
But when it comes to the social sciences, we do attribute motives to people, so that’s what Mises means by rational, there’s a reason, so that’s where reasoning comes in, not that the people are superhuman calculators, just that yes, they’re a being with an ego and they have preferences. But those preferences could be anything. It could be, you want to go get cocaine or heroin, or it could be you want to go help set up a homeless shelter. From that level of analysis, it doesn’t matter what the content of your preferences are, it’s just that you have them and then you use your reason to try to achieve it. So, the classic example that Mises offers is, you’re looking at some primitive tribe — primitive by your standards — and they’re dancing around and their crops need rain. A rain dance is perfectly rational in the Misesian framework. Because again, it doesn’t mean that “from our scientific viewpoint, we think that’s the right means to an end.” We just mean, “ah, I’m going to interpret what I’m observing by saying these beings have subjective preferences and they have this cause and effect relationship in their minds that they’re trying to invoke to change the future.”
DEIST: There are endless debates within Austrian circles about how best to advance our ideas. The two broad ideas have been what we might call a Hayekian top-down model, where we win over academics and their ideas trickle down to other intellectuals. The other we might call a bottom-up Rothbardian populist strategy.
MURPHY: It’s going to sound like I’m trying to be wishy-washy and not take a firm stand, but I really do think both are important and I mean it in the following way.
Part of why Mises, Hayek, and Rothbard were so able to influence the masses, is that they had academic posts. If Murray Rothbard had written word for word Man, Economy, and State and you found out that he was a chiropractor and he just in his spare time was this genius who had absorbed Human Action, it wouldn’t have carried the same weight. And in a sense, that’s a shame, that shouldn’t matter. Credentials shouldn’t matter, but yet they certainly do, if only just to guide people. You might just say, “this huge thick book that a chiropractor wrote on economics, what are the chances that this guy knows what he’s talking about?” So, I think it is important that Austrians, to get their message out — to change the world to use a bold goal — they can’t abandon academia.
Appealing right to the public is also a good thing, as opposed to just spending one’s whole life trying to convince academic colleagues and trying to convince the Dean of Harvard to take your business cycle seriously. I think that’s a waste of time when you’re setting yourself up for heartache and frustration. The idea of just teaching students and publishing peer reviewed papers for the rest of your life and going to conferences and talking with other economists — to some people, that sounds like the most horrible hell ever, and to some people, that sounds great. So, if you’re in the latter group then by all means do that, but again, it’s because that will give you a platform so that the public is more likely to listen to you. Also, if you get something like an op-ed published in a newspaper, you’re more likely to be able to do that if the byline says that you’re an Economics Professor at such and such university. I definitely do agree that going to the masses is the important thing to do right now, as opposed to tweaking the latest mathematical economics model. But again, that doesn’t mean you should ignore academia because I think there’s an interplay there.
DEIST: As a strategic matter, are some of the debates within Austrian economics harmful or helpful in your view? For example, there are debates about Mises versus Kirzner on entrepreneurship or Rothbard and Hoppe versus Selgin and White on free banking. Do you think we ought to spend time on these internal debates?
MURPHY: Well, I’m going to be debating Selgin on fractional reserve banking in New York at some point in the spring of 2018, so I hope that’s not a waste of time, I hope it’s useful.
I definitely understand the people who say, come on, guys, these internal battles, they’re not productive and they just make us look like a weird cult. I understand where those people are coming from and I used to be somewhat sympathetic when I was younger. But on the other hand, you could just as well flip it and say, well wait a minute, if we’re supposed to be a science, then of course we’re going to debate with each other and disagree. If we all just uniformly had the same answer on everything to put on our show for outsiders to where we’re trying to attract followers, that would be creepy too. That reallywould be a cult.
And so, I don’t think that to gain popularity, we ought to restrict our arguments — even if that strategy actually worked. I reject that in part because it means we’re sort of being dishonest to the public and I don’t want to do that. I’m not personally going down that road if that’s what we’ve got to do to gain popularity. But having said all that, I actually don’t think that that’s really the trade-off.
I think what is true, and it is true for anything in life, is you don’t need to be a jerk about it. I get the sense that sometimes there are people within the Austrian camp who genuinely just dislike some of the other people and they want to have a fight and they use these particular doctrinal differences as the pretext to have a fight with someone they don’t like. And yes, that’s probably not productive — just because in general, going around having a grudge against somebody is not helpful. I think that these debates are important and because that’s how it’s going to progress, that actually the critics are wrong. This isn’t a cult, it’s not that we look at Mises and Hayek and Rothbard as our prophets and we’re not allowed to disagree with them. No, that’s not true at all and so there is a vigorous disagreement and that’s how this thing progresses. Yes, be civil about it, but if there’s somebody you think is wrong, then it’s your job as a scholar to try to correct it.
DEIST: A few years ago, you had some run-ins with the aforementioned Paul Krugman, also Brad DeLong on issues like quantitative easing and inflation and Austrian business cycle theory. How do you assess those run-ins today?
MURPHY: For people who don’t know the backstory: After the financial crisis, a woman emailed me and she said, “I just saw Paul Krugman in a Barnes and Noble and he was on a book tour. In the Q&A period, I asked him ‘why don’t you debate Austrians on business cycle theory?’ His answer was, ‘this is going to sound elitist, but mainstream economists, the profession doesn’t listen to those guys anymore. They were big like in the 20s, but they’ve been eclipsed since then, so I wouldn’t give them a platform.’”
And so then I thought, “okay, well he’s going to ignore us that way, so I have to somehow provoke him.” I set up this goofy effort to challenge him to a debate, and then we were going to raise money to go to a New York City food kitchen, if he debated me. And so, that was kind of a publicity stunt. It was kind of funny, but I think that’s why he knew who I was and why he specifically attacked me later. Obviously, he was not happy with my shenanigans.
The official CPI did not jump as much in response to the Fed’s quantitative easing as I predicted in those years right after the Crash of ’08. Then Brad DeLong and Paul Krugman noticed people arguing on my blog and responded, “Aha, these Austrians, what a bunch of religious people here in the sense that they don’t respond to objective evidence. This guy Murphy made a prediction, he was wrong and yet he’s not updating his model.”
This shows how slippery these guys were because the economists I was busy debating about QE were not exactly in agreement with DeLong and Krugman. Bryan Caplan at George Mason is an anarcho-capitalist, for example, and Krugman and DeLong obviously weren’t about to declare Caplan right. Obviously, they didn’t say “anarcho-capitalism is vindicated because that anarcho-capitalist Bryan Caplan was right and Murphy was wrong.”
In their minds Keynesianism was right, even though there was nothing expressly Keynesian about QE. And the jury is still very much out concerning what the ultimate effects of monetary expansion willbe now that the Fed says it will reduce its balance sheet over the next few years. Admittedly, though, I should have been more careful with predictions that reflected my personal view. I mean, Austrian economists, number one, don’t make quantitative forecasts based on Austrian theory, per se. That’s one of the hallmarks of Mises’s view, if you think you’re going to predict the stock market just by using praxeology, then you’ve misunderstood what praxeology does for you.
So, there’s that element. But also, the Austrians themselves make important distinctions when it comes to price inflation. In the 1920s, the Austrians were saying just because there’s not rampant price inflation, doesn’t mean things are good. But since I had been poking Krugman and some people were learning their Austrian economics through my writings, I should have been more careful. And this is what I say to this day at Mises U and at other events with students: whether it’s fair or not, we’re in the minority, the mainstream is going to use any excuse to discredit us. And so, it’s sort of like you’re representing Austrian economics and watch yourself and don’t commit unforced errors.
That’s sort of my takeaway. Ben Bernanke, for instance, made a string of mistaken predictions, and you can go watch them on YouTube. You can see just how wrong he was time and time again going up to the crisis, and of course, Krugman, once Bernanke got reappointed was lauding him on his blog and saying, there’s nobody he would rather have at the helm of the Fed than Ben Bernanke. So, obviously Krugman doesn’t think a bad prediction disproves a theory. But when an Austrian gets caught losing one particular bet to other free-market guys, that’s somehow supposed to discredit an entire theory.
DEIST: What do you say to young people who ask you whether they ought to pursue a PhD, in economics or otherwise?
MURPHY: One thing I’ll do right away is just say, do you want to teach or at least is that acceptable to you? Could you imagine that is your day job for the rest of your life, that you’re at a college teaching the students and writing peer reviewed papers and if the answer is yes, then I say yeah, by all means, go ahead and go into it.
But if the motivation is “I really love Austrian economics or libertarianism and the free market and I guess, gee, the next logical step is to go get a PhD,” then I would say be careful and caution them that they could be wasting some valuable years of their lives.
Fortunately, a PhD in economics is more marketable beyond just academia — compared to, say, a PhD in philosophy. So, there is that element that you’re not as constrained if you get a PhD in economics as you would be in some other fields.
But, I do caution them that if you’re not sure if you want to go into academia, a PhD might be not worth the cost, all things considered. And I don’t mean money. I mean the time, the available years that you’re losing time you could have been out earning experience in industry or whatever you’re going to do with your life.
If you are going to go into it, though, be sure to work on research that you’re passionate about because that’s going to be the thing you’re known for. You’re going to be a world expert in this little thing that your dissertation’s on. You’d better be interested in it.
Another upside to the degree is there’s a huge area of overlap between financial economics and Austrian economics. A lot of the conflict between Austrians and other schools isn’t there when it comes to talking to people in the financial sector. I think there are a lot of applications that young Austrian economists in academia could do by publishing articles relevant to a financial crowd as opposed to the more official economics journals.
DEIST: Finally, you have been outspoken on your personal blog and otherwise about your own Christian beliefs. Why have you chosen to be outspoken about this and do you think that this has in any way helped or hindered you career wise?
MURPHY: It’s a great question. I’m outspoken on it just for the obvious reason that if you’re a Christian, that’s the most important thing, period. And so, why you would be focusing on other things and not talking about that is problematic if you really are a Christian. If you believe that the state of people’s souls are resting on an issue, that’s far more important than the heterogeneity of the capitalist structure. But, as far as whether it is helping or hurting, I really can’t say. My guess is that there are plenty of my colleagues who are agnostic or outright atheists who might see the things that I post on Sundays on my blog and think, “Bob’s very rational, but I’m glad he can compartmentalize because when he talks about economics, he’s real smart and rational and gee, when he starts talking about the Bible I just don’t get it.”
I’m sure there’s plenty of people who think like that, but I think probably they just say well, there’s a lot of religious people and that’s just how they were raised and they move on and they kind of give us a pass, if you will. So, to be honest, I don’t think it’s really hurt me. I do consulting work in the insurance sector, and not that anything in terms of professional relationship has anything to do with a religious litmus test, but I have noticed just as I reflect, that a lot of the people that I work the most closely with in that realm are also Christian.
I think it’s more of a worldview thing, that the kind of people who believe in the Bible, they see the world a certain way and so, if they hear me talking about the Federal Reserve, that’s going to resonate with them even if we’re not literally talking about scripture. I do think this sort of goes back to what we were saying about the state of Austrian economics. Some people might say, “You want to keep that to yourself so people don’t blackball you.” But on the other hand, if there is the remnant out there, the minority who thinks like you, they need to know who you are, so they can find you and work with you. I think there’s something like that too with my spiritual beliefs, that hiding it, that’s going to make me feel bad and I’m going to feel miserable, afraid to share my beliefs. But also, you should be a beacon of light to the other people who think like you.
The last thing I’ll say is, it wasn’t that I was worried about professional blowback. In the beginning I was worried about some pretty militant atheists in the free-marketsort-of-libertarian community, and they did hammer me in the beginning but I think they just got bored of it. Things like, “Can’t you see that the state and the church are identical?” They both tell you, you need us, give us your money or you’re going to suffer. I certainly get those superficial similarities, but like I said, it kind of went away and what really encouraged me though, was I got a lot of emails over the years from people saying, “hey, I keep my head down because I don’t feel like fighting with people online, but I’m glad you’re out there doing that.” I used to think I was one of the few Christian libertarians. Now I realize that’s not the case.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
Narrated by Jim Vann. Published in 1982, this is Ron Paul's revolutionary book on monetary reform.
In this course, Professor Patrick Newman walks students through the highlights and major themes of Murray Rothbard’s recently published book, The Progressive Era. Rothbard’s power-elite historical analysis shows how big business, big unions, and big government conspired to cartelize industries in order to further their own interests. Programs and agencies started in the Progressive Era have a destructive legacy that has carried on for a century.
Patrick Newman, in addition to being a professor and former Mises Summer Research Fellow, is also editor of this previously unpublished Rothbard gem. Patrick discusses not only the book's content but also Rothbard’s methods of historical analysis and other related materials.
This online course is free, and is designed to be taken along with reading Murray Rothbard's previously unpublished work, The Progressive Era. You can order a paperback or hardcover copy of The Progressive Era from the Mises Bookstore or access the ebook for free. Please consider a donation to help support the creation of more courses!
Quarterly Journal of Austrian Economics 20, no. 1 (Spring 2017)
[GDP: A Brief but Affectionate History by Diane Coyle.]
GDP is undoubtedly the most known and widely used metric of macroeconomic performance. As a former economic advisor to the English Government, Diane Coyle is able to masterfully recount known problems and complications with measuring GDP while highlighting some new concerns pertinent to any student of economics. Unfortunately, the valuable insights in the book are scattered throughout sporadic, sometimes partisan, chapters that read more like a casual history of world events than a history of GDP.
Like many historical events, it is hard to attribute the rise of national income accounting to a single person, place or moment in time. Coyle argues that an interest in national income accounting gained a critical mass in the late nineteenth century. Specifically, the rapid economic growth during the industrial revolution gave rise to an interest in measuring the economy (p. 12).
While the industrial revolution may have sparked an interest in national income accounting, ultimately political forces and world economic events shaped modern GDP. During the Great Depression, British economist Colin Clark and American economist, Simon Kuznets, were charged with producing national income accounts. Kuznets’ numbers showed an economy that had been cut in half between 1929 and 1932. President Roosevelt cited the figures in announcing the new recovery program and subsequently used supplemental figures for in budget proposals. According to Coyle, the GDP numbers validated FDR’s desire to act (p. 13).
Though Kuznets is credited with generating the first national income accounts, they did not reflect a method he desired to use. Kuznets wanted to create a measure that could be used to understand welfare, not simply output. He thought advertising, financial industries, speculative activities, subways, and certain types of expensive urban housing, among other things, including government spending ought not be included (p. 14). However, these original definitions of national income would show the economy shrinking if private output available for private consumption was used for government action. “The Office of Price Administration and Civilian Supply, established in 1941, found that its recommendation to increase government expenditure in the subsequent year was rejected on this basis” (p. 14).
Hence national income, from its inception, was created and defined with political motives; that is to serve an interventionist, Keynesian ideology. Since the definition of ‘national income’ is defined by economists, what constituted ‘income,’ ‘output,’ etc., were determined based on the intellectual climate of the time along with the political and military needs of the moment (p. 11). Ultimately, “Kuznets lost and wartime realpolitik won,” giving birth to a practical tool that upholds and economic and political legacy to this day (p. 16)
Coyle reminds us that Keynes himself advocated for national income accounts: Keynes wrote, “Every government since the last war has been unscientific and obscurantist, and has regarded the collection of essential facts as a waste of money” (Keynes, 1940). Inspired by Keynes’s writings on the matter, UK economist Austin Robinson commissioned his government to collect more statistics (p. 18). National Accounts, the rise of econometrics, and Keynesian ideas were all mutually enforcing, and they all served to solidify the importance of collecting information for GDP and to justify calculating GDP as a measure of output—which ought to include government activity since it acts as a stimulus on an economy prone to demand deficiencies. “The availability of national accounts statistics made demand management seem not only feasible but also scientific” (p. 20).
The new scientific status of both GDP and Keynesian economics encouraged widespread use and improvement of national income accounting. The UN, IMF, and World Bank came to depend on GDP numbers as key indicators of development and key indicators regarding the necessity of aid. Since GDP became the gold standard as a development metric, it is no surprise that many developing countries resisted attempts to improve GDP on political grounds if the improvements would make those countries appear richer, and thus ineligible for aid. Coyle describes one case in which China debated a revised GDP figure (revised to take account for the purchasing power of Chinese citizens using a PPP conversion) with the World Bank—ultimately convincing the World Bank to lower China’s GDP per capita below the threshold level for concessional loans (p. 53).
Coyle’s book documents several methodological changes to GDP calculations and their political implications. The following are some of the most striking: “Ghana between 5 and 6 November 2010, its GDP increased by 60 percent overnight, turning it officially into a “low-middle-income” country. The reality had not changed, but the GDP statistics had, because the country’s statistical agency had updated the weights used in calculating the price index, and consequently real GDP, for the first time since 1993” (p. 31). After similar adjustments, Nigeria added a whopping 89 percent to GDP overnight in 2014, and Kenya added 25 percent (p. 32). Of course, there is no ‘objective’ platonic ideal of GDP nor how one ought to calculate it. Any definition can be justified depending on one’s worldview; hence, the politically expedient options seem to be chosen.
These methodological changes and simple revisions to previous GDP calculations can be the source of major political and economic events. As an example, Coyle cites the 1976 crisis in the UK. Chancellor of the Exchequer Denis Healey abruptly requested an emergency loan from the IMF. Upon a simple revision of the GDP numbers, Healey commented, “If we had had the right figures, we would never have needed to go for the loan.” Based on these comments, Coyle speculates: “Who knows whether Mrs. Thatcher would have won the same kind of election victory if her predecessors in power had not had to bring in the IMF?” (p. 37).
Coyle argues that one of the most consequential defects of modern GDP is the metric’s inability to account for innovation. Economists have known that there is a ‘quality bias’ in GDP figures: increases or decreases in prices are often divorced from the change in quality of a product. Some products have gone up in price, and GDP has subsequently gone up, but the quality of these products has increased faster than their prices. Conversely, some products have dropped in price while their quality has increased exponentially; some products carry a zero price. The inaccuracies in GDP as a result of innovation are likely significant. Consider: software, TV, and other parts of the information sector have made up only 4 percent of GDP for the past 25 years while zero price Google search gives consumers an estimated $150 billion of value annually (p. 135).
Coyle tells a rich and compelling story about the history of GDP. Unfortunately, the book seeks to answer a history of thought question using the chronological history of macroeconomic events in the past century. Coyle obviously believes this is acceptable since, “the story of GDP since 1940 is also the story of macroeconomics” (p. 20). This author doubts the link is as clear as Coyle claims; her formatting does a disservice to her research and readers for two principal reasons.
Firstly, by telling the history of macroeconomic events, Coyle is forced to rush through a century of events and concepts which lead her to explain and opine on several topics unrelated to the core of the book. Her explanations are often brief, and the short opinions offered during historical explanations are controversial to say the least. For example, pertaining to the financial crisis, “the arrogance was the triumphalism about the prevailing model of economic growth. It was based on technological innovation, of course, but also on financial market deregulation and the broader ideology of ‘free markets, and the globalization of finance and trade” (p. 95). Coyle remarks that the crash can be blamed on those who forgot the “purpose of business” (p. 97). The format Coyle chose for telling valuable history on GDP is handicap, but we will not consider such orthogonal issues in a review on GDP.
Secondly, writing about GDP via a chronology of macroeconomic events requires Coyle to put the history of GDP into a boom-bust narrative: From inception to the 1970s are labeled the ‘golden years’ and again from 1995–2005 there is a period of expansion followed by an economic crisis. Certainly GDP influenced these events, but the reader cannot determine from the evidence presented in this book that these historical events were the principal drivers of economic thinking as they relate to GDP. This author has little doubt that since GDP was ultimately conceived in the political arena, world macroeconomic events will play a role in its historical development, but the link between all macroeconomic events and GDP, as this book suggests, seems exaggerated—at least in the 150 pages Coyle devotes to the topic.
While Austrian economists will certainly disagree with much of Coyle’s commentary in the book, we can agree with many of her conclusions regarding government use of GDP over the past century. Coyle writes, “they overlooked the fact that by design GDP would increase when those policy levers were operated, at least in the short term. The definition of GDP was constructed around Keynes’s model of how the economy works” (p. 65). The GDP measure is defined to support a certain school of thought. Coyle is also concerned about sustainability issues, which are absent from GDP; here, again, Austrians can sympathize since the measure makes no distinction of the trade-off between present and future consumption—boosting GDP requires increasing present production and consumption. GDP figures do not account for the long run sustainability of production—capital is homogenous and thus perfectly substitutable so far as GDP is concerned.
Austrians have long been critical of how increased government spending may very well stimulate the economy, and boost GDP numbers, but at the cost of malinvestment. Coyle explains a similar mechanism is at play in the financial sector:
UN System of National Accounts introduced the concept of “financial intermediation services indirectly measured,” or FISIM. This current measure compares banks’ borrowing and lending rates on their loan and deposit portfolios to a risk-free “reference rate” such as the central bank’s policy rate, and multiplies the difference by the stock of outstanding balances in each case (p. 102).
Hence, banks that take on more risk contribute more to GDP; Coyle points out that so far as GDP is concerned, more risk is counted like more growth. Therefore, current GDP methodology not only encourages malinvestment by only considering present spending, but also encourages malinvestment by favoring risky investments.
After reading Coyle’s book, any reader will be more skeptical about our ability to understand macroeconomic health or fluctuations from GDP data. Upon further reflection it is unclear that GDP can simply be improved. After all, GDP is a measure of aggregates that are the outcome of a complex and spontaneous market process; those aggregates cannot be directly acted upon. Any attempt to boost those aggregates will only distort what they were originally proximate measurements of.
Coyle disagrees. Despite documenting 150 pages worth of the measure’s shortcomings, she concludes that GDP is superior to all currently available alternatives; she even writes, “GDP, for all its flaws, is still a bright light shining through the mist” (p. 145). This is of course a non sequitur: regardless as to whether GDP is the ‘best’ measure we have, that is not a reason for continuing to use it.
Arguments for a "rules based" Fed are gaining momentum on both the political Left and Right — and even among some libertarians. Would the adoption of ideas like NGDP targeting and the "Taylor Rule" really make the Fed less dangerous? Would they be an improvement on the Fed's current discretionary approach? Can monetary "rules" really contain booms and busts, or would Yellen and company simply break them at the first sign of the next crash? Professor Peter Klein joins Jeff for a discussion.
Read Rothbard's What Has Government Done to Our Money? here.
More than 20 years after his death, Murray Rothbard continues to publish new books! Our guest Patrick Newman is the editor of a Rothbard manuscript dating to the 1970s entitled Roots of the Modern State, which the Mises Institute will release as a book later this year.
Rothbard's topic is the Progressive Era of the late 19th and early 20th centuries, and he doesn't disappoint. Murray exposes the puritanical impulses of the Roosevelts, Tafts, and Wilsons, along with the self-interested motivations behind the then-burgeoning intellectual-business partnership. Altar and throne, the power centers of previous ages, were replaced by a technocratic elite and the veneer of democracy. Scientism replaced religion, libertarian self-reliance fell to public schooling and labor unions, and statism replaced (relative) laissez-faire.
If you want to understand the roots of modern progressivism, and how the West went wrong, you need to read this book. Professor Patrick Newman, a Mises Institute scholar and assistant professor at Florida Gulf Coast University, joins us to discuss Rothbard's unique analysis of this critical time in US history.
Tom Woods and Bob Murphy demolish the latest claims of the state's favorite court economist, Paul Krugman, in front of a live audience at Town Hall Seattle on 20 May 2017.
The media insists the US economy has recovered from the 2008 crash. Equities markets have enjoyed a bull run since the election. Housing prices are rising in expensive coastal cities. Government offices continue to report that GDP is growing while inflation remains in check. And insiders like JPMorgan Chase CEO Jamie Dimon insist that American consumers and businesses are upbeat about the future.
But is the supposed recovery an illusion, fueled by an artificial supply of money and cheap credit from the Fed? Are housing and equity prices headed for a fall? Is inflation actually much higher than reported? Will older Americans ever recover their savings lost in the last crash? Will savers continue to lose ground to artificially low interest rates?
Has the US economy recovered, or is it a house of cards? Jeff Deist assesses the Trump economy.
The great Austrian economist Friedrich Hayek celebrated a birthday earlier this week, while the prominent monetarist (and Fed historian) Allan Meltzer passed away the same day. Joining us to discuss monetarism is our friend Bob Murphy, who lays out the central tenets of the Chicago school and its godfather Milton Friedman. At its heart, Bob explains, monetarism is a cousin of Keynesianism—one advocates fiscal stimulus, the other monetary stimulus. Both go astray when it comes to money, and both fail to see the trees in the macro forest. Bob explains why in this great discussion of the differences between the Austrian and Chicago schools.
Women in the workforce are constantly bombarded by rhetoric intended to make us feel less appreciated than our male colleagues. Politicians and Hollywood celebrities — many of whom have never worked one day in a traditional office setting — seem to take great pleasure in telling females that we are victims of the alleged gender wage gap.
Asserting that today’s working women make only 78 cents for every dollar earned by a man, high profile personalities from comedian Sarah Silverman to former President Barack Obama have perpetuated this myth and used it to further their own agenda: more government control over wages.
Unfortunately for these wage crusaders, when the data is examined more closely what we find is not necessarily a wage gap, but what could more accurately be described as a “preference” gap that exists because of personal choice rather than gender.
True, if we were to add up the salaries of every working man in the country, and then we compared that average to the average of the combined salaries of all working women, there would most certainly be a wage gap present. However, this statistic doesn’t tell the whole story.
The gender wage gap neglects to account for any other contributing factors aside from gender and wage earnings. It does not take into consideration, for example, that each individual, regardless of gender, is driven by a unique set of incentives. Instead, it assumes that wages are the end-all, be-all for every single American worker.
Human behavior is not a predictable science. We can never know for certain what drives another person to make their decisions, but the decisions themselves may tell us what a person values most.
Dedicating her career to understanding the gender wage gap, economist Claudia Goldin discovered that in the early years of career development there was virtually no wage gap between men and women working in the same field. In fact, when she compared male and female colleagues with almost identical resumes and intellect, a wage gap of less than one percent existed between them.
However, as time went on this gap did eventually widen as some of these working women began making the decision to marry and have children. Once these women decided to take on more caregiving responsibilities, flexibility began to outweigh the opportunity to earn higher wages. In other words, their priorities shifted.
Instead of seeking a promotion, which often means more responsibility and more time spent in the office, many females with caretaking responsibilities have instead chosen to accept lower pay in exchange for the benefit of spending more time outside the office.
A woman’s decision to accept lower wages in exchange for added flexibility does not mean her employer has assigned less value to her work due to her gender. Instead, it shows that for many female employees, flexibility is worth more than having a higher salary and more office responsibilities. It is a manifestation of choice and human action.
When the 2014 Sony leaks revealed that Hollywood actress Jennifer Lawrence had made less money than her male costars in the film American Hustle, Hollywood was outraged and demanded that government help bridge the gender wage gap.
Actress Robin Wright took a different approach to this issue by taking matters into her own hands. When it came time to negotiate her salary for the next season of House of Cards, Wright went into her contract meeting prepared to demonstrate her worth. Armed with data showing her character’s rising popularity among viewers, she demanded to be paid as much as her male costar, Kevin Spacey. Once she presented her case, her demands were met and she was compensated accordingly.
For Wright, putting up a fight was well worth potentially dragging out the negotiations process if it meant receiving higher wages. However, not all actresses value higher earnings over the burdensome struggle of salary negotiations.
When asked how she felt about being paid less than her male costars, Lawrence admitted that the pay discrepancy was largely a result of her own unwillingness to negotiate a higher salary. Already making millions from two successful film franchises, Lawrence had no desire to drag out negotiations when she didn’t really need or want the extra money. In short, she valued convenience over higher earnings and chose to end the negotiation process early.
The gender wage gap theory relies on a statistic that attempts to draw a very narrow conclusion from a very broad set of data. As individuals, we are each fueled by unique value systems which help us make thousands of decisions on a daily basis. To reduce each individual decision down to a person’s gender is not only insulting, it also completely neglects the importance of human action.
Talk of the Fed's upcoming FOMC meeting, which takes place March 14–15, has largely been centered around the prospects of a rate hike — with a plethora of Fed members coming out with a hard "hawkish" push. Here is a round up of their recent comments.
Fed Chair Janet Yellen:
We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect.
New York Fed President William Dudley:
So, put it all together, I think the case for monetary policy tightening has become a lot more compelling ... sooner rather than later.
Fed Governor Lael Brainard:
Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path.
Dallas Fed President Robert Kaplan:
We want to guard against a situation where we get behind the curve on inflation.
Fed Vice Chairman Stanley Fischer:
If there has been a conscious effort [to hike in March] I’m about to join it. ... I think the advice that has been given by a large number of members of the Fed, of the [FOMC], is correct, and I strongly support it.
Philadelphia Fed President Patrick Harker:
Seeing any data that is not consistent with what I see as continued growth in the economy. We'll see. But I don't think March should be taken off the table at this point.
Fed Governor Jerome Powell:
The case for a rate increase in March has come together.
Cleveland Fed President Loretta Mester:
I'd be comfortable, if the economy continues on, for interest rates to be higher than they are now.
Richmond Fed President Jeffrey Lacker. (Referring to the idea that the Fed should hike to avoid inflationary pressures):
Monetary policy in the 1960s makes for a sobering tale, but I believe we can avoid repeating those mistakes.
San Francisco Fed President John Williams:
In my view, a rate increase is very much on the table for serious consideration at our March meeting. We need to gradually ease our foot off the gas in order to avoid a 'too hot' economy that in the end isn’t sustainable.
St. Louis Fed President James Bullard was the only major dissenter of the above hawkishness:
I wouldn’t see any reason to be especially aggressive about interest-rate hikes in this environment.
What actually ends up happening remains to be seen. Next week is the final week before the March meeting. Anything can happen and we will be sure to report on any changes in the narrative.
On Yellen's Humphrey-Hawkins testimony, the Reuter's headline says it best: "Fed on course to raise interest rates at an upcoming meeting." Translation: Fed continues on path to do something someday.
Her time before Congress was a continuation of Yellen's unique ability to say absolutely nothing while pretending that she's got everything under control. There was no further information on the overrated Fed Funds rate hike issue — overrated because it is both meaningless and a distraction to the real problems at hand. We cannot emphasize Joe Salerno's point strongly enough:
The targeted variable and its targeted level are not important per se. It is the increase of bank reserves and the resulting expansion of the money supply when banks loan these reserves out that artificially reduces market interest rates and misleads entrepreneurs and capitalists into investment decisions that result in malinvestment and overconsumption. These inflation-fueled malinvestments result in bubbles in real estate, commodity, and financial markets and a distortion of the real structure of production that invariably culminate in financial crises, unemployment and recession or depression.
The Fed and the feebleminded financial press are obsessed with interest rate talk and ignore the elephant in the economy: malinvestment and the destruction of capital.
But of course, it's not just the lack of new information on a meaningless rate increase; it's also the convoluted and contradictory approach of "Fed Speak." On one hand, we get this: "As I noted on previous occasions, waiting too long to remove accommodation would be unwise." As if upping the Fed Funds target another 25 basis points (.25%) is "removing accomodation." On the other hand, however, she was eager to emphasize how "gradual" rate hikes would be.
Being worried about waiting too long and bending over backward to stress how slowly "rates" would rise hardly communicates knowledgeable resolve. Instead, it reinforces the increasingly obvious idea that the Fed has no clue what it is doing and it is merely buying time; trying to save face and save bureaucratic positions in Washington.
Regarding the balance sheet issue, the WSJ reports that "the Fed has no plans to use the balance sheet as an 'active tool of monetary policy management.'" By this, she clearly means what has been obvious to anyone paying attention: the Fed is afraid to reverse its absurd monetary policy of soaking up massive amounts of Federal debt. There's little desire to sell its holdings because no one wants to prick the bubble.
On interest rates, the balance sheet, Dodd-Frank repeal, and fiscal policy, Yellen's testimony is best summed up as: "I'm not sure, we'll just have to see." In this light, Yellen has been entirely consistent, unsurprising. She's always employed convoluted FedSpeak to communicate nothing of substance.
For those that follow the Fed's rate hike hoopla, one of the more obnoxious aspects is all the "economist expectations" that are reported on throughout the year. They've been vocalizing their lousy expectations since 2010. Consider this one, based on a survey of "leading economists:
2012 came and went and there were no hikes. And every year since then, economists — professionals that they are — gave their routine expectations, all of which came up short. Nothing happened until December 2015. In a recent speech, the St. Louis Fed president even gave the following graph, which hilariously exposes the fact that these economists and the projections are always missing the mark.
Even just this week there was another report on a WSJ survey which indicates that "Most Economists Expect Next Fed Rate Increase in June." The funny thing about it is that it is the exact same headline as a 2016 survey which ran the previous year. That June, of course, nothing happened.
The economists continue to project, to expect, and depend religiously on their models. Models though can't account for human action and correspondingly, can't account for what is actually happening to the capital structure upon which the economy rests.
By now, decades of absurd monetary policy should have completely disgraced mainstream economics. But alas, we still suffer through the announcement of their expectations filling the headlines.
CNBC claims that the Fed has been “crying wolf” and will back off raising interest rates even a tiny bit more.
See the article by Hunter Lewis on the Mises Wire:
Will Janet Yellen Lend Trump a Helping Hand?
Jeff Deist and Tom Woods discuss everything happening with Donald Trump in Washington, DC—especially the Left-Progressive reaction to it—and analyze Trump from a libertarian perspective.
Nearly four decades ago, political pundits were shocked as voters turned away President Jimmy Carter and voted in Ronald Reagan, who promised to bring fundamental change to Washington and the indwelling political establishment. At the time, unemployment was rising quickly and inflation raged in double-digits, and Reagan had promised to deal with the economic failures by cutting income tax rates, slashing government spending, and reducing the regulatory burden.
As we know, Reagan succeeded in convincing Congress to do one of those three things — cut income tax rates — but the spending and regulatory monster continued to grow. The Carter administration already had initiated most of the major deregulation initiatives, and Reagan’s role in that area was minor at best. Reagan had to deal with something else in 1982 that threatened to turn his presidency into a one-term failure: a major recession in which the nation’s unemployment rate rose to above 10 percent and the disappearance of whole swaths of the nation’s industrial sector, resulting in what has been called the “Rust Belt” of the northern United States.
Ending 1970s-Style InflationWe know the rest of the story. The economy recovered (despite interest rates that were above 10 percent) and Reagan won re-election in 1984 in a huge electoral landslide. We also know that while the Reagan administration had many failures, capital investment nonetheless turned toward the “high-technology” sectors and telecommunications.
The one thing that was on no one’s political agenda in 1980 was on Federal Reserve Chairman Paul Volcker’s mind: how to wring inflation out of the system and reestablish some balance in the monetary sector. Reagan claimed that by cutting tax rates, businesses would follow with new investments and increase the supply of goods available to consumers, thus reducing inflation on the “supply side.” This is why the Reaganites referred to their plan as “Supply-side Economics.”
Volcker understood, however, that while supply-side’s boosters might have claimed it to be a painless way to end inflation, it clearly would be doomed to failure, something Austrian economists like Murray Rothbard and others also comprehended. Inflation is first and foremost a monetary phenomenon and reducing inflation would not come about by just cutting taxes and producing more goods. Instead, Volcker and the Fed needed to stop expanding the economy’s money supply and also allow interest rates to rise — and rise they did.
Unfortunately, the pundits (along with most economists — who should have known better) employed the post hoc ergo propter hoc fallacy, claiming that higher interest rates caused the severe recession of 1982. Instead, the higher interest rates exposed the economic malinvestments that needed to be liquidated before the economy could have a real recovery, and while Austrian economists are not necessarily satisfied with what the Fed and US government did during the 1980s, some positive things happened with the economy during the 1980s.
Will Trump Pop the Bubble?Donald Trump faces a much different situation post-election than did Ronald Reagan, but nonetheless a recession looms, as the Federal Reserve policies of the past two decades have piled up a mountain of malinvestments, and especially since 2008, when the housing bubble finally crashed.
Since then, the economic “game plan” for the Fed and the Barack Obama administration has been to prop up the weak sectors of the economy through a combination of outright subsidies and Fed security purchases. The stunning diagram below explains in part why both interest rates are extraordinarily low and the US economy remains sluggish.
As one can readily see, Fed purchases pre-2008 meltdown consisted mostly of six-month U.S. Treasury Bills, with the dollar amount being about 5 percent of US Gross Domestic Product (GDP). Post-meltdown purchases, however, have skyrocketed, and the Fed, while cutting back on six-month T-bills, has engaged in two very questionable activities, including the purchase of massive numbers of mortgage securities to continue what is left of the housing bubble, and buying long-term US bonds in order to decrease the interest rate spread between short-term and long-term securities. This is something that former Fed Chairman Ben Bernanke called “Operation Twist” (or what Peter Schiff more aptly said should be named “Operation Screw”).
The purchases tended to level off after 2014, but not until the Fed was propping up a quarter of U.S. GDP through its purchases. Yes, the official rate of unemployment in this country is less than 5 percent, but no one — not even Paul Krugman — is claiming that all is well. Certainly, both Bernie Sanders and Donald Trump were able to generate a lot of political enthusiasm for saying the economy is in peril.
The Real Problems Underlying This "Expansion"Because Keynesians are wedded to the false “theory” of aggregate demand and aggregate supply, they are incapable of understanding the real issues facing the economy, and no one should be surprised. After all, Japan’s political and business leaders have been delusional for a quarter of a century, as the government now is trying to “stimulate” the economy via negative interest rates, something that truly places the government in a war with nature. For that matter, Krugman’s recent claims that future “austerity” measures — presumably imposed by the future Trump administration — will lead to a recession actually demonstrates a terrible ignorance of what actually causes economic downturns.
The US economy clearly is sluggish, yet interest rates are very low, thanks to Fed programs like quantitative easing. Yet, while Keynesians call for increased amounts of government borrowing and spending (called “fiscal policy” in Keynesian jargon), the problem isn’t a lack of government-bred “stimulus.” The problem is that of large-scale malinvestments. When the Fed finds it necessary to use its large checkbook to manipulate huge swaths of the economy through playing with interest rates, there is no doubt that there are large underlying weaknesses throughout the economic system. Combine that with the vast government subsidies of “green” energy and the gargantuan amounts of money being poured into the unproductive US Armed Forces, and one can see that the government is cannibalizing the productive sectors in order to prop up the unproductive ones.
What Must Be DoneWhat needs to be done, or more specifically, what must the government not do so that a real economic recovery can occur? First, and most important, the Fed must stop purchasing mortgage securities and long-term treasuries. That means that both mortgage rates and long-term interest rates will rise, and this also will pull up short-term rates. The economy cannot have a recovery if the Fed fails to do this.
All of this seems to be counterintuitive, since both Keynesians and Austrians agree that the immediate effect of the Fed’s discontinuation of such purchases would mean a steep, short-term recession. Permitting interest rates to rise means that both housing and related industries will be hit hard (as was the case in 1982 — and the industry demanded a bailout). The current economy — sluggish as it is — is addicted to low rates, and this cannot go on if the USA is going to avoid the fate of Japan and Europe, where the economy also is weak.
Austrians vs. KeynesiansHowever, Austrians and Keynesians diverge at interpreting what actually is happening after interest rates increase. Keynesians claim that aggregate demand is falling and will continue to fall until the economy reaches bottom unless government intervenes through spending and more money creation. Austrians, on the other hand, realize that in the short term, malinvestments that built up during the credit-caused boom are being liquidated, and if government and monetary authorities permit the liquidation and do not block the redirection of resources, entrepreneurs will lead the economy into a real recovery.
For that matter, Austrians and Keynesians are not even on the same planet when it comes to interpreting the role of interest. Austrians note that interest rates are connected to time preferences of borrowers and savers, and that interest rates send signals regarding the direction of capital goods and consumer goods. Keynesians, on the other hand, see interest rates as the gateway for aggregate demand, and suggest that interest rates generally should be lower than they would be if set by the market.
This difference of thinking is crucial. Keynesians demand an economic version of the alleged Einstein definition of insanity: doing the same thing repeatedly and expecting different results. Japan has engaged both in massive government spending (read that, building tunnels, roads, and bridges to nowhere) and monetary manipulation, even resorting to negative interest rates, and yet Japan suffers from anemic economic growth — and will continue to experience the same until someone is willing to admit that 25 years of “stimulus” does not an economy make.
Donald Trump will face this moment, like it or not. Barack Obama faced it and decided to kick the can down the road and opt for yet more “stimulus.” How Trump deals with it will determine whether or not the US economy recovers from bad policies, or goes the way of Japan and Europe.
The irony (at least for Keynesians and fellow True Believers) is that the very thing that Keynesians believe will create long-term economic downturn — raising interest rates — is what the US economy needs most. More than a decade of artificially-low interest rates has distorted the economy’s structures of production to the point where it will take a sharp recession to bring back productive balance — as counterintuitive as that may seem to many readers. There is no doubt that should Trump agree to allow rates to rise, he will pay a steep political price, as there is no doubt that the Dow Jones Average will tank and short-run liquidation of malinvestments will create some havoc.
What should Trump do when higher interest rates expose many of the dislocations? In a word, nothing. When the 1982 recession was in full force and much of official Washington, along with journalists, was calling for reflation of the economy, bailouts, and other “corrective” measures, President Reagan simply replied, “Stay the course.” Although, as noted earlier, Reagan did a number of things that were both politically and economically harmful throughout his presidency, nonetheless, he was right on that point, and ultimately his stubbornness bore some economic fruit.
William L. Anderson is professor of economics at Frostburg State University in Frostburg, Maryland, and is an Associated Scholar of the Mises Institute. His Ph.D. in economics is from Auburn University, where he was a Mises Fellow.
Richmond Fed president Jeffrey Lacker is allegedly one of the hawks, though that term can’t mean what is used to — not in a world where it takes 8 years to get to .5%–.75% on the Fed Funds Rate target.
Monday, Lacker repeated his position that the Fed is “getting behind the curve.” This puts him sharply at odds with “Dovish” Yellen who in her recent Stanford speech opined the opposite on “getting behind the curve.” Lacker wants a few more minuscule rate increases than Yellen.
What a meaningless disagreement over quarters of a percentage point on a meaningless interest rate. Right under their noses, of course, Fed’s monetary actions over the years have driven financial asset prices skyward, home prices to absurdity, and commodity prices up 40% (even after dropping since 2014). But all they see on the price inflation front is less than 2% on the personal consumption expenditure (PCE) statistic!
But despite all the faux concern over an “overheating economy,” lies the fact that manufacturing sales have largely plateaued since 2012, industrial production has fallen since 2014, and Obama is the first president since Hoover to not have a single year of over 3% GDP growth.
What a time to be alive. Not only has the Fed successfully stagnated the economy, but we are still getting the same tired talk of a push toward interest rate normalization. With a stagnating economy and rising prices, they used to call this stagflation. Now it is dismissed as “the new normal.”
And indeed this has become the new normal, seemingly. But perhaps instead of conducting the same old tired monetarist/Keynesian econometric experiments, the Fed should take a look in the mirror. We certainly can’t expect a growing economy while the world’s central banks actively undermine our vital pool of funding via fiscal and monetary interventionism.
Our guest this weekend is John Tamny, a writer and editor at Real Clear Markets and Forbes. Jeff Deist and John dissect Trump's economics, especially Trump's reflexive trade protectionism and fetish for exports over imports. They also talk about the policies Trump might get right, especially when it comes to the Fed.
John has a great Misesian take on everything the new administration might mean — pro and con — so don't miss this interview.
Statistics issued by the federal government about the economy—from CPI to GDP—are fake, and our guest John Williams of Shadowstats.com explains how and why.
John is a vocal critic of modern economic reporting, which is manipulated to make the economy appear stronger than it is. So, he devoted his professional life to telling the real story, through statistics he painstakingly compiles himself. And, his statistics paint an alarming picture: virtually all "growth" in the US economy since the Crash of '08 has been artificially engineered by the Fed, while the risk of debt contagion has increased.
Jeff and John discuss the "Fed tax," what a radical increase in the monetary base means for your financial future, and whether Janet Yellen will be forced to resort to more QE in 2017.
This is a must-hear interview if you're interested in sober economic reality.
Justin Raimondo, editorial director of Antiwar.com, joins Jeff for a great discussion of what Trump's election really means for libertarians. Does 2016 mark the end of globalism's inevitability, or are Brexit and Trump mere speed bumps for progressive elites? Does Trump represent a real threat to the War Party, or will he succumb to neoconservative control over foreign policy? What are the best-case and worst-case scenarios for libertarians in the first year of a Trump administration, and will his cabinet picks contain any happy surprises?
Nobody is better suited to untangle the Trump uprising than the no-holds barred Mr. Raimondo. Stay tuned.
Click here to read Justin's article "How We Will Win" on Antiwar.com.
A panel discussion featuring Bob Murphy, Ziad Burkett, Ryan Griggs, Marta Hidalgo, and Brittany Hunter. Recorded at the Dallas-Ft. Worth Mises Circle, 5 November 2016.
Recorded at "The End of Politics"—the Dallas-Ft. Worth Mises Circle—on 5 November 2016.
Recorded at "The End of Politics"—the Dallas-Ft. Worth Mises Circle—on 5 November 2016.
On Mises Weekends, this week, Jeff Deist joins Andy Duncan of the Fin Tales podcast to talk about next week's Presidential election. Going beyond the electoral horse race, Jeff and Andy also discuss the impact each candidate could have on the Federal Reserve, gold prices, and US foreign policy.
Recorded at the Mises Circle in Boston, on the campus of Harvard University, on 1 October 2016.
Recorded at the Mises Circle in Boston, on the campus of Harvard University, on 1 October 2016.
Recorded at the Mises Circle in Boston, on the campus of Harvard University, on 1 October 2016.
Recorded at the Mises Circle in Boston, on the campus of Harvard University, on 1 October 2016. Includes a question and answer period.
On the heels of the Fed's annual meeting in Jackson Hole, "extraordinary" monetary policy may be the new normal. Janet Yellen refuses to raise rates for now, and Former Chair Ben Bernanke openly questions whether the Fed's Treasury-laden balance sheet—swollen after successive rounds of QE—will ever be unwound. Real growth is flat, real incomes are stagnant, inflation is higher than the government admits, and millions of Americans still haven't recovered from the Crash of '08.
Is economics broken? Have we entered a new era of technocratic impotence, where mainstream economists simply have run out of monetary policy tools? Can we undo the damage caused by the Fed's relentless attack on savers? Do most professional economists understand the role of interest rates at all? And what kind of revolution is needed to save economics as a profession?
Dr. Joe Salerno, professor of economics and Academic VP of the Mises Institute, joins us to makes sense of it all.
Our own Senior Fellow Dr. Mark Thornton recently appeared on Press TV to make the libertarian case for real free trade, as opposed to unholy negotiated trade deals like the Trans-Pacific Partnership. Brent Budowsky, a journalist for The Hill newspaper in Washington DC, also joined the show to present a pro-union, left-populist perspective. They both conclude that complex trade schemes, which often involve creating supra-national regulatory bodies, are bad for America and the economy — but for totally different reasons.
Donald Trump has announced his economic advisory team and unveiled a preliminary broad brush economic program that his prospective administration would implement. He has promised to fill in the details of his America First Economic Plan as the election approaches. So how should we grade his choice of advisers and his economic plan at this point?
Trump’s thirteen-man economic advisory team has more current or former CEOs (4), more billionaires (5), and more guys named Steve (6) than it does former academic economists with a PhD (1). And the lone academic economist, Peter Navarro, while a Harvard PhD is a faculty member at the University of California at Irvine, hardly an elite institution. As the title of one article harrumphed, “Trump’s economic team has a lot of billionaires, very few economic experts.” But this, of course, is all to the good.
Although economist Navarro is very well published, his ten books are written primarily for popular and investor audiences and most of his specialized articles were published in business and policy journals aimed at business professionals and policymakers rather than his fellow academic economists. He has never published an article in a top economics journal, although he has co-authored a book about US economic policy with R. Glenn Hubbard, the prominent Columbia economist and former chief of the Council of Economic Advisers under George W. Bush. Of late, Navarro has been a one-note economist who takes an old-fashioned protectionist stance on international trade, especially with regard to China. He favors a crackdown by the US government on China’s “unfair trade practices” such as export subsidies, currency manipulation, and intellectual property theft. Between 2008 and 2015 Navarro wrote three luridly titled books and produced a low-budget Netflix documentary about the economic and geopolitical risks posed by China.
Now the absurd and counterproductive China bashing and raw protectionism of Trump, Navarro and some others on the Trump team should be roundly condemned. However, there are two good things about old-fashioned protectionists. First, their naïve fallacies are easy to refute and, second — and maybe more important — they tend to be anti-globalists who reject phony multilateral “free trade” deals. These deals are opaquely crafted by design, run to thousands of pages, and mainly benefit US politicians and bureaucrats and their allied bankers and crony capitalists. And, indeed, Navarro and Trump passionately oppose the Trans-Pacific Partnership agreement, NAFTA, CAFTA, and the South Korean Free Trade Agreement.
Now, simple unilateral free trade — legally guaranteeing the right of domestic residents to freely trade with a resident of any foreign nation regardless of its trade regime — is always the ideal policy for a nation from the point of view of justice and prosperity. However, the nineteenth-century style bilateral trade “deals” that a Trump administration promises to negotiate with other nations are much more transparent and more likely to produce movement toward genuine free trade than the secretive and labyrinthine deal-making that characterizes modern multilateral trade agreements. One need only think of the great Anglo-French treaty of 1860 negotiated by the classical liberal free-traders Michel Chevalier of France and Richard Cobden of Great Britain.
Trump’s America First Economic Plan also deserves some applause. It is true the plan seems to take only a modest step toward lightening the burden of taxes on the long-suffering American middle class and freeing US business from increasingly onerous taxes and regulations that are choking off capital accumulation and growth in labor productivity, but it is a movement in the right direction. More important is the populist anti-globalism theme that pervades the document, because it clarifies and changes the entire tenor of the debate on US international economic policy. For no less than old-fashioned protectionism, genuine free trade is also a populist, America First, anti-globalist policy.
Both policies are represented by their supporters as the proper means for promoting the welfare and prosperity of American consumers and workers. Unfortunately, since the Bretton Woods conference in 1944, the genuine free trade position has not gotten a fair hearing among the American public. The reason is that the term “free trade” has been co-opted by advocates of an alien, globalist doctrine that has very little to do with promoting the economic welfare of ordinary Americans and everything to do with centralizing control of international trade, investment, and monetary affairs in the hands of US and foreign political elites.
Consider that post-World War II multilateral economic agreements and supranational organizations (GATT, WTO, IMF, World Bank, NAFTA, EU, TPP) are all explicitly aimed at “coordinating” and collectively “managing” economic activities among nation-states. As Murray Rothbard insightfully wrote about NAFTA: “What the Establishment wants is government-directed, government-negotiated trade, which is mercantilism not free trade. What it wants also is institutions of internationalist super-government to take decision-making out of American hands and into the hands of super-governments, which would rule over Americans and not be accountable to the American people. … [NAFTA] is worse than open socialism; for it’s international socialism camouflaged in the fair clothing of freedom and free markets. Populists, even protectionist populists, are right to view it with deep suspicion.”
Trump’s economic team and economic plan also merit praise for whom and what they exclude: orthodox macro-economists and their relentless and profoundly fallacious promotion of the Federal Reserve and its ultra-Keynesian policies aimed at stimulating spending, as the panacea for the serious problems afflicting the US economy. As noted above, the Trump team includes only one academic economist, and a heterodox one at that. Aside from its flawed trade policy, the Trump plan is broadly consistent with sound classical Austrian economics and focuses on cutting taxes, spending, and regulations and balancing the budget. While the plan is unfortunately silent on how a Trump administration would deal with the Fed and what monetary regime it would pursue, it is refreshingly free of any endorsement of the current Fed’s unconventional techniques for endless money creation, which redistributes real wealth and resources from productive Americans to parasitic financial firms and other capitalist cronies.
In sum, pending further details, I assign a tentative grade of C+ to Mr. Trump’s performance in economic policy. But I am a notoriously easy grader who gives students multiple opportunities to earn extra points and increase their grades, so if Mr. Trump adds items to his plan dealing with “auditing the Fed,” or “subjecting the Fed’s budget to Congressional appropriations,” or “considering the gold standard as a monetary alternative,” I will gladly raise his grade to a B.
Joseph T. Salerno is professor of economics in the Lubin School of Business of Pace University in New York. He is editor of the Quarterly Journal of Austrian Economics; Academic Vice President of the Mises Institute, and Director of the Mises Institute Fellows Program. Contact: email.
Consistency has long been one of the most glaring causalities of our political life; but the typical views on the mess in higher education have been hopelessly muddled even by contemporary standards. Thus, for years conservatives have been attacking the huge and swollen bureaucracies engaged in dispensing higher education, especially the gigantic and ever burgeoning state universities.
Then, two or three years ago, a profound and widespread rebellion against this educational Moloch emerged and accelerated among the students trapped in these universities. Yet, far from embracing these natural allies on the “New Left,” the conservatives reacted in horror, called for stamping out the upsurge of youth whom they found to violate their tastes in clothes and hair styling.
For their part, the New Left kids have proven to be almost as self-contradictory. For years they have instructed us all on the impersonal and subtly dictatorial factories these groves of academe have become: and for years Clark Kerr, president of one of the mightiest behemoths of them all, the University of California, has been held up as the most dangerous theoretician of this new and collectivistic “multiuniversity.”
But now that Kerr has been fired from his post, the New Left, with the honorable exception of Mario Savio, has leaped to his defense instead of breaking out with cheers of rejoicing.
Furthermore, the New Left has not realized that Governor Reagan, by moving to cut the university’s swollen budget has acted to reduce the very gigantic university system that the students have properly denounced. And the New Left, in protesting against Reagan’s proposal for charging tuition, has failed to understand that there is nothing progressive about forcing the taxpayers to pay for someone else’s education. On the contrary, shifting the burden of payment to the student himself will give the student-consumers far more power over their own education, and ultimately over their own fate.
One common argument in favor of conscription-slavery is that everyone has an “equal obligation to serve” the U.S. government. But apart from the dubious morality of forcing everyone to suffer as much as everyone else, this equality of obligation is impossible to achieve, because not everyone can have equal time in the front lines. Only a few can be in the front lines, to say nothing of cripples, the physically handicapped, etc.
Another common argument for the draft is that this degree of compulsion is necessary for “defense.” But then the question arises: defense of whom? Logically, this can be either the defense of the drafted person himself, or the defense of other people. In short, we can conscript A either to defend himself, or to defend B, C, D, etc.
The idea that A should be drafted because it is necessary for his own defense is a rather peculiar one. If Mr. Jones needs to be in the army in order to defend himself, then one would think that he should be permitted to decide this for himself voluntarily, and would leap at the glorious chance offered to him. If he really needs to be in the army in order to defend himself, then he will see this and make the choice on his own; there is no need for the State to employ coercion to make him do it. Besides, the idea that adults should be forced to do things “for their own good” is a completely totalitarian one. It is good, let us say, for Mr. Jones to have X number of vitamins per day. Does that mean that he should be forced by law to consume this amount, and that a vast Gestapo of law enforcers be hired to see to it that de does not flout the majesty of the law?
Furthermore, enslavement is a peculiar kind of “defense” against some foe’s hypothetical future aggression against Mr. Jones. We may well ask: what kind of aggression would this mistily far-off “enemy” commit against Jones that would be worse, or nearly as bad as, being enslaved into an army in which he might well kill and be killed?
Nothing that any future and dimly seen enemy will do to him is likely to be as vicious as the action committed against him by “his” government, here and now. A curious kind of defense indeed!
And who, we may ask, is around now to defend Jones against the people who are aggressing against him to the point of enslaving him into a military machine? Who is there to defend the draftee against his self-proclaimed “defenders”?
For centuries governments have been trumpeting far-off bogeys as an excuse for enslaving and sending to their deaths people who could be no worse off if the bogey ever really materialized. It is about time that we call a halt. It is about time that we stop our rulers from using this kind of con game to justify slavery and murder on a massive scale.
Any current drive for the abolition of slavery would only draw apathetic shrugs from the American public. Wasn’t slavery abolished in the United States over a century ago, and aren’t the only remaining signs of it confined to such backward countries as Yemen and Saudi Arabia? The answer is emphatically, No! and we shall be devoting a series of columns to pointing out the vast amount of slavery that still exists — unheeded and accepted — in the good old US of A. As in all cases of slavery, they cry out for abolition, but so far few if any voices have been raised to take up that noble cry.
The outstanding example of slavery still existing in the United States is, of course, the draft. A century ago Americans added the 13th Amendment to the Constitution, which abolished involuntary servitude. If the draft isn’t involuntary servitude, it is hard to know how that term can be defined, and yet no part of the American judicial system has bothered to bring the servitude of conscription under the rubric of the Thirteenth Amendment.
Almost everyone admits that the current operations of the draft system are absurd and inequitable, in which some young men are grabbed while other go permanently free. To correct this kind of inequity of oppression, there are two directions in which we can move: draft everyone, or abolish the draft altogether. This idea that if some are drafted then all should feel the yoke is tantamount to saying, in the days of Negro slavery, (a) that if one slave manages to run away, he should be dragged back to slavery in order to be “fair” to his fellow victims, and (b) that everyone in the society should be enslaved equally. The libertarian, in contrast, wants everyone to be free of either the draft or old-style slavery, but he cheers when anyone is able to escape the monstrous yoke. The “draft-everyone” school of egalitarians, furthermore, can never succeed in their aim of imposing compulsory uniformity on all. Because even if everyone is drafted for “national service,” a state that Secretaries [Robert S.] McNamara and [W. Willard] Wirtz may be aiming for, only a small number will be sent to the front lines of military service; others will have to grow food, produce equipment, man the supply lines, etc. So any attempt to impose equality of condition violates the nature of the world and must fail.
The rational course, therefore, is to cheer when anyone escapes the draft and to call for its abolition, not to try to make everyone suffer “equally.” The only equality that can be achieved in the world, hence the only rational concept of equality, is equality in liberty.
[From the Introduction by Justin Raimondo.]
Murray Rothbard was a true polymath. He wasn’t just the number one theoretician of the modern libertarian movement — author of the monumental Man, Economy, and State; Conceived in Liberty, a four-volume history of the American Revolution; the two-volume An Austrian Perspective on the History of Economic Thought; and essays too numerous to list — he was also its most tireless publicist, at least in its early days.
He didn’t live in an ivory tower: far from it. As he wrote in a 178-page memo entitled “Strategy For Libertarian Social Change”:
If the advancement of liberty requires a movement as well as a body of ideas, it is our contention that the overriding goal of a libertarian movement must be the victory of liberty in the real world, the bringing of the ideal into actuality. [Emphasis in original]“Strategy for Libertarian Social Change,” unpublished manuscript, 1978.
For Rothbard, libertarianism wasn’t an intellectual parlor game, nor was it a personal affectation: for him, it was a banner that was meant to be carried into battle. Ever the happy warrior, he sought to bring the radical libertarian perspective to bear on the events of the day, and it was a task he delighted in. While he tended to write his more serious books and articles in the dead of night, staying up at all hours pounding away on his old-fashioned (even for the time) typewriter, his “mornings” (noonish) were devoted to relatively lighter fare — the polemical journalism which, over the years, found various outlets. In the 1940s he wrote a personal newsletter, The Vigil, which was typewritten and mailed to his closest friends and associates. Later on, he was appointed “Washington Correspondent” for Christian Economics magazine, a publication put out by a group known as Spiritual Mobilization, headed up by the Rev. James Fifield, and devoted to economic laissez-faire.
This lasted a few years but eventually he was let go: the right-wing Protestant pastors who were the main audience of Christian Economics were appalled by his anti-interventionist polemics when it came to the foreign policy issue. As the cold war got colder there was less tolerance for the “isolationism” of the Old Right, which by that time was largely forgotten by the conservative rank-and-file. Those rightist ministers thought he was a Communist! So there was a parting of the ways.
His sojourn as an occasional writer for William F. Buckley, Jr.’s National Review was even briefer, as Rothbard’s patience with the warmongering that emanated like a radioactive cloud from that publication soon wore thin. The Buckleyites’ crazed desire for a nuclear showdown with Moscow was a bit too much for the old “isolationist” to take, and his refusal to show enthusiasm for World War III soon led to his excommunication from a church to which he had never properly belonged.
But no matter: the hegemony of cold war ideology was about to receive a serious challenge, as the 1960s dawned. An independent libertarian movement — organizationally separate as well as ideologically differentiated from National Review-style conservatism — was about to make its debut, in large part due to Rothbard’s efforts. He and Leonard Liggio had started Left & Right, a magazine directed at the burgeoning New Left movement, which was beginning to make waves, starting on the campus of the University of California at Berkeley. However, the magazine was a quarterly, not a good format for someone who wanted to comment on current events, and so when Robert Lefevre of the Freedom School contacted him to write a syndicated newspaper column for the School’s Pine Tree Features, Rothbard eagerly took up the task.
These short columns — usually no more than two typewritten pages each — appeared in the Freedom Newspapers, a chain owned by R.C. Hoiles, who was a devotee of Lefevre’s and a committed libertarian. Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968, addressing the campus revolt; the massive antiwar demonstrations; the Six-Day War between Israel and the Arab powers; the Newark riots; the Vietnam war; the persecution of H. Rap Brown, the assassination of Martin Luther King, the abdication of Lyndon Baines Johnson, the rise of Richard Nixon — in those two crucial years there was, as they say, never a dull moment.
We might call this Rothbard’s “left” period: he sided with the student protestors, the African-Americans fighting cops who had invaded their neighborhoods; he stood with the Vietnamese people against the American soldiers who had invaded their neighborhood; he stood with the Palestinians against their Israeli conquerors, he valorized the “heroic” Malcolm X and denounced Martin Luther King for calling for federal troops to put down black “rioters” — but he never pandered to his intended audience. Unlike some of the “left-libertarians” of today, who have adopted the politically correct check-your-privilege jargon of white liberalism, he always addressed the issues in straightforward libertarian terms.
This bluntness is apparent in the very first column, written sometime in January of 1967, cheering the firing of University of California chancellor Clark Kerr, and praising Mario Savio — who had the honesty to say “Good riddance to bad rubbish” — while some New Leftists rushed to defend him. He wondered why conservatives, who had formerly been critics of the educational bureaucracy, didn’t side with the student rebels who were rising up against “this educational Moloch” instead of attacking them for “their tastes in clothes and hair styling.” Yet the students weren’t let off easy, either: instead of protesting Governor Ronald Reagan’s threatened cuts to the state university system’s budgets, he wrote, they should be cheering and demanding yet more cuts because this “acted to reduce the very gigantic university system that the students have properly denounced.” So, the New Leftists wanted “self-determination” — or, to put it in the New Age-y terminology of the time, “self-actualization” — as opposed to subservience to a soul-less pedagogical Leviathan? Well, then, “shifting the burden of payment to the student himself will give the student-consumer far more power over their own education” than under the wrong-headed “free tuition” regime.
Rothbard didn’t pander: he didn’t try to imitate the rhetoric of the students, he didn’t insult them by trying to make them think he was “cool”: Rothbard was strictly Old School, and never pretended otherwise. What he did was apply libertarian principles to the concrete day-to-day issues that rose up in those two tumultuous years, revealing the radical evil of the State and the unadorned radicalism of the libertarian stance in every case.
He didn’t pretend to be a leftist: the idea was to win over the left-leaning students, and the revolutionary blacks, to libertarianism, not to masquerade in the fashionable rhetoric of the moment. He never disguised or watered down his libertarianism to suit his audience: unlike the self-styled “left-libertarians” of today, he rejected any modification or “addition” to the central axiom of libertarian political theory, which is the nonaggression principle plain and simple. In answer to the “check your privilege” sloganeering of the cultural left, Rothbard would have said “Check your cultural prejudices at the door.”
Although himself a traditionalist, Rothbard always maintained that there could be no such thing as a “libertarian” culture: those who wanted to “live liberty” were living under a delusion, namely the entirely false idea that some particular “lifestyle” could be derived from the central axioms of what is only a political philosophy and not a “way of life.” He had, after all, been badly burned by the cultural totalitarianism of the “Objectivist” cult around novelist Ayn Rand, which had a “party line” on every subject under the sun, including music (Rachmaninoff good, Mozart bad) and even physics. The libertarian movement, or at least a substantial portion of it, had been down that road before, and found it to be a dead end.
To the younger readers of this volume, Rothbard’s writings from the 1960s may seem like a recounting of ancient history, and only tangentially relevant to the world we live in today. That this is not so is underscored by one of his more prescient pieces: in “The Coming American Fascism” Rothbard comments on various acts of retaliation against critics of the Vietnam war and writes: “At home we have the fascist corporate state economy: an economy of monopolies, subsidies, privileges runs by a tripartite coalition of Big Business, Big Unions, and Big Government.” While “[i]n foreign affairs we have expanded all over the globe, grabbing bases and running governments everywhere, all in the name of a global crusade against the ‘international Communist conspiracy’.”
Substitute “international terrorist conspiracy” for that last phrase and we have a snapshot of the future — the one we are living in today.
One of the longer lasting aspects of the Great Ecology Scare of the 1969–70 intellectual season (a craze which seems to have faded away since the orgiastic exercises of “Earth Day”), is the Population Hysteria. The Left has clasped to its collective bosom the idea that population growth is the root cause of our Environmental Crisis, and Zero Population Growth clubs have sprouted over the nation’s colleges. Young men and women solemnly take the pledge never to have more than two children and thereby cause population growth. What is far worse, the same people are just as convinced that no one be allowed to have more than her two-child quota. Hardly have we begun to be freed from the tyranny of the outlawry of birth control, when, lo and behold!, birth control is now to be made compulsory.Particularly grotesque is the “free-market” variant of this slave measure proposed by the distinguished economist Kenneth Boulding. Boulding would maximize individual freedom within the Zero Population Growth framework by granting every woman (or is it wife?) two baby-rights, and then permit women to sell these baby-rights to one another. So that if one woman wished to have four kids she could do so, but only if two other women limited their number to one apiece, or one decided to go without. Which makes about as much “free market” sense as allowing a market in slaves.
There is no need to detail here the monstrous tyranny entailed by this fascistic proposal. We need only remark that it is curious that the same leftists who properly assert every woman’s absolute right over her own body in denouncing abortion laws, are grossly inconsistent in not applying this very right to every woman’s right to bear children. Hopefully, Justice [Arthur] Goldberg’s remarkable landmark decision in the Connecticut birth-control case, striking down that law for invasion of the Ninth Amendment natural right of privacy, will suffice to block any compulsory birth control law.Griswold v. Connecticut (1965). Before this case, the Supreme Court, recognizing the enormous libertarian implications of the Ninth Amendment, had never dared to apply it. The Ninth Amendment reads: “The enumeration in the Constitution of certain rights, shall not be construed to deny or disparage others retained by the people.” Thus, the Amendment flatly states that the people do retain other rights, and what are they? Anyone understanding the terminology of the time knows that this means natural rights, and among such is the now-proclaimed right to privacy. On the Ninth Amendment and its significance see Bennett B. Patterson, The Forgotten Ninth Amendment (Indianapolis: Bobbs-Merrill, 1955); “Discovering the Ninth Amendment,” Left and Right (Autumn, 1965), pp. 8–12. Even at that time, the anti-populationists, while hailing the decision, grumbled that the bringing in of the Ninth Amendment might destroy their cherished goal of compulsory birth control.See James D. Carroll, “The Forgotten Amendment,” The Nation (September 6, 1965), pp. 8–12.
Apart from the question of compulsion, what of the Population Problem? Are we suffering from “too much” population? The first question to ask is simply: how much is “too much?” Why has it suddenly become imperative to freeze the U.S. population at its present level of approximately 200 million? Also, why stop at 200 million? Is this a divinely imposed figure? Why not press on to allowing only one kid per family, thereby soon cutting the population in half? Or allow only one kid per ten families? Or, indeed, go the whole way by arbitrarily killing every tenth, or every fifth, or whatever person?
In short, how much is too much? Before the European colonization, the North American continent supported less than one million Indians, and these at near-starvation levels. That continent now supports almost three hundred million people, at enormously greater and, what is more, growing affluence. It should be clear, then, that the “proper” population level must be relative to the capital equipment and the industrial development of the area. A land area that barely supported one million people five hundred years ago now very readily supports three hundred times that number.
The question: how much is too much, then, can only be answered in the context of the capital and the extent of the market enjoyed by the economic system. The only cogent criterion, which has been worked out by economists, and which is never mentioned by the Population Hysterics, is the concept of the “optimum population” point. Setting aside the unfortunate moralistic connotation of the term, that this is the morally proper or best population level, the optimum population concept focuses on the point that, given any particular level of capital and technology, as we increase the population hypothetically from zero, the economy’s total production per head will increase, will eventually level off, and finally decline. That population level which, for any given capital and technology, yields the maximum production per person — the highest standard of living per person — is the “optimum” level.
Take, for example, the present United States economy. Suppose that a natural disaster suddenly wipes out three-fourths of the U.S. population. It is obvious that total production per head will fall drastically, simply because an enormous amount of equipment and jobs will lie idle for lack of workers. On the other hand, if the population of the U.S. should magically triple tonight, obviously the total production per head would also fall, since the given equipment would hardly absorb, or suffice, for the additional labor force. Somewhere in between lies the optimum population point.
Empirically, it is impossible to say for certain where this population point lies, whether we are at present below or above it. But one thing is certain: the production per person has continued to increase steadily in the United States, despite all the shackling of the market economy and despite (or helped by?) the continuing population growth. As long as the standard of living continues to rise, we surely cannot be very much beyond the optimum population level, if at all, and we surely have little or nothing to worry about on the score of population. Furthermore, while the economy grows, while capital increases and technology improves, as they have continued to do, the optimum population level continues to increase, just as it has already increased from far below a million to about two hundred million. The Population Scare is just that: still another bogey designed to scare the American public into more statist dictation.
Furthermore, the rate of population growth is not simply an arbitrary given; it has always been highly responsive to social and economic conditions. Before the advent of capitalism and the Industrial Revolution, population was indeed an enormous problem; for population in the famous words of Malthus, kept “pressing on the means of subsistence.” Population growth is the spectre that haunts all frozen, caste, pre-industrial societies; for a caste system can assign the son of a carpenter to be a carpenter as well, but what is to be done with the second son? It was the specter of population growth, and not some sort of unusually barbaric streak in their character, that caused the Spartans to put their newborn babies out into the woods overnight; it was their form of “population control.”
But all this was changed with modern capitalism and the Industrial Revolution. For now a rapidly growing and developing economy at last replaced the frozen systems of status. The enormous growth of capital and production enabled a great growth of population, largely by slashing the death rate. But, as in every subsequent case of a growing standard of living, this cut in the death rate was soon followed by a cut in the birth rate by people who wanted to preserve their new-found improvement in living conditions. It is precisely the undeveloped nations of Asia, for example, who have not enjoyed the benefits of capitalist development, whose birth rate remains high, and who may be said to suffer from “overpopulation.” But, the United States and Europe, who have enjoyed rising living standards, have far lower birth rates; in short, people attune themselves to higher living standards, and then make sure they are preserved by voluntarily lowering their birth rates.
Again, then “over-population” is not an absolute, but strictly relative to the capital and technology of the land areas concerned. India is now “overpopulated” for much the same reason that the United States would also be overpopulated if we only had the capital equipment and the market development of a century ago to service our two hundred million population. All this is well illustrated by the case of Japan. Eager to develop and industrialize rapidly after World War II, Japan encouraged birth control among its public to cut down on its seeming “over-population.” Now, however, with the same meager land area and virtual absence of natural resources but with a flourishing industrial economy and a very rapid growth rate, Japan finds, on the contrary, that it is beginning to suffer from a labor shortage — that it cannot fill the jobs available. As a result, it is wisely beginning to drop its artificial encouragements to birth control.
That “over” or “under” population are strictly relative to time and place is also seen by the fact that by no means all underdeveloped areas are in any sense densely populated. Just as the Indians of North America were only “overpopulated” in relation to their capital and technology, so are most areas of Africa and South America — in contrast to Asia — quite sparsely populated, especially in relation to their natural resources. What they lack is capital — and capitalism; given that, they would require a far greater population than they have today.
As for the United States, its birth rate has, over the long run and in recent years, tended downward. In fact, during the 1930s the birth rate was so low in the United States and particularly in France, that cries arose of imminent “racial suicide.” What happened was that after World War II, the desire for roots among returning Gl’s, along with a sudden upsurge (now gone) in pro-baby values in our culture, led to the famous “baby boom,” and to a consequent acceleration of population growth. But that baby boom is now over, and the U.S. birth rate began tending downwards in 1957. The rate of U.S. population growth in the decade of the sixties was only 14%, the second lowest decennial increase on record. By 1969, in fact, the average increase of the U.S. population was only 1 percent per year, less than half the world rate, and the American birth rate was the lowest ever recorded in this country.See Dennis H. Wrong, “Portrait of a Decade,” New York Sunday Times Magazine (August 2, 1970), pp. 22ff. The United States, furthermore, remains lower in population density (average number of persons per square mile), than such relatively uncrowded countries as Britain, Mexico, or Switzerland.
Not only that, but within the United States, far from population growth filling all the open spaces, there is actually, as Professor Wrong points out, “more open space in the United States today then there was a generation ago, and ... much of it is actual or potential farmland in the middle of the country.”Ibid., p. 27. In the decade of the sixties fully one-third of all the counties in the U.S. actually lost population (Zero Population Growth fulfilled with a vengeance!), most of them in the South and Middle West. In fact, since 1966, the central cities of the United States have been steadily losing population as well.
Under steadily growing capitalism, then, the Population Scare is a bogey from two directions: the optimum population point tends to increase continually; and the birth rate tends to level off naturally to preserve the higher living standards.
We have seen that the population problem is strictly relative to the economic conditions of a time and place; one country’s or one era’s “overpopulation” can easily become the opposite, and vice versa if economic growth is shackled or reversed. In fact, the Population Hysterics are, presumably unwittingly, trying desperately to create the very problem they are bellyaching about. For we have seen that population growth is no problem under growing and developing capitalism. But it does become a real problem when the economy is prevented from growing, when the progress under capitalism is replaced by frozen status. And since the anti-populationists are also opposed to economic growth in order to “save” scarce natural resources, this means that the Environmentalists, if they are allowed their way, will create the over-population menace which so far has been only a phantasm of their own making. Allow these opponents of progress their head, and we too can become another Sparta.
If the population question is relative to capital and technology, it is also relative to something else that is very important but that “nice” people don’t like to talk about: the quality of the population. In short, it we deal only with quantities, with the numbers of people in different age groups, etc., we are in danger of forgetting that one person is not equivalent to another. A country or a region can be “over-populated” if the citizenry are lacking the qualities of hard work, thrift, and entrepreneurial foresight; let people enter the country with these very qualities, and both they and the original citizens will benefit. Even given existing capital, then, the country would not be “over-populated” with respect to these more productive and more entrepreneurial groups. In fact, few countries at few times are anything but short of such highly productive citizens.
To illustrate the importance of population quality, consider the Chinese — in general a highly productive and entrepreneurial group. They have migrated to other “over-populated” parts of Asia, coming, it should be noted, with little or no capital, and just as poor — if not more so — than the indigenous population. And yet, within a few years, these Chinese will have risen, become wealthy, created jobs and prosperity for themselves and much of the native population. The same is true of Lebanese who migrated to the “overpopulated” West Indies.Thus, the leading economist of “underdeveloped” countries writes:“The Chinese in Malaya, the Indians in East Africa, and Lebanese in West Africa — usually migrants without capital and without much formal education — have quite soon greatly surpassed the economic performance of the indigenous population. ... These differences in economic quality and performance are also relevant to overpopulation and population pressure. There is heavy emigration from the West Indies, which are said to be severely overpopulated. Yet the Lebanese are anxious to migrate to the West Indies, and those few who are admitted generally prosper and accumulate capital. Thus even at current levels of technique the West Indies are not overpopulated in terms of Lebanese although they are in terms of West Indians.” Peter T. Bauer, Economic Analysis and Policy in Underdeveloped Countries (Durham, N.C.: Duke University Press, 1957), pp. 74–76. On the crippling effects of immigration restrictions on Lebanese in West Africa, see P.T. Bauer and B.S. Yamey, “Economic Aspects of Immigration Policy in Nigeria and the Gold Coast,” South African Journal of Economics (1954), 223–232.
While we have used the concept of optimum population to explode the Population Bomb, we must recognize that even this concept makes too many concessions to the anti-populationists. First, because of its neglect of the differences in population quality; and second, because of the implicit assumption that the “optimum” is the morally correct. But people obviously have children because they want to and enjoy having them, and therefore people may well decide to accept a lower than optimum production per man in order to benefit from the enjoyment of having more children. A family might have four children instead of two, even though it knows that it will have a lower standard of living per member of the family. And surely that decision, that choice between the competing benefits of having more or less children, at lower or higher standards of living, is strictly up to each person, to each family to make. Their own free choice is the moral “optimum,” and not the imposed ethical standard of some outside observer.
There is something else of importance that we may say about the anti-populationists. It may seem extreme to say this, but they are not simply anti-population, they are also anti-people. Libertarians and opponents of the welfare state are accustomed to being denounced as “inhumane”; but it is the Environmentalists who are profoundly and deeply anti-human. Consider their basic social philosophy. Before the advent of man, they assert, everything was marvelous. Nature was in perfect harmony with itself, and each species of life lived in harmonious ecological balance with each other. They had to, since each species was passively determined by its given environment, by the “nature” in which it found himself. Then, in the midst of this perfect harmonious idyll, there came the great disturber, the great pain-in-the-neck: man. Man, by his nature, is not passively determined by his environment; and so man began to survive and flourish by transforming his environment, by changing things, by “conquering nature” instead of being determined by its “rhythms.” While the rest of nature is determined and “circular,” man persists in being purposeful and “linear,” endlessly changing his environment to improve his lot. The basic aim of the Environmentalists is to eradicate this purposefulness of man, to shackle his linearity and purpose, to reduce him to the primitive, animal status of a species “in harmony with nature” instead of its master. But this means, in essence, that the Environmentalists are bent upon eradicating man’s humanity, and therefore on destroying the human race itself. Jack Bulloff, professor of the history of science at SUNY, Albany, does not exaggerate when he writes:
The first idea [of the Environmentalists] holds that the natural environment is benign. To leave it alone, or restore it, would solve all environmental problems. But the record of two billion years is directly contrary to this. Paleontology is a record of the dead. ... Nature is inevitably lethal. ...
Certainly man pollutes. But he cannot survive otherwise. Man saved himself and advanced from animal to civilized being only by overcoming the lethal natural environment. By imposing social evolution on biological evolution man created an environment far more suited to human life than the mythical bliss of pre-social man. ...
It is strange that [the Environmentalists] ... should hunger for the unsafe, unenlightened, unaesthetic life of the savage. The idea that a world safe for rhinoceroses — or cobras or doddoes — is best for man appeals only in its innocences. Its proponents are really advocating genocide.Jack Bulloff, “A World Safe for Rhinos Is Not Best for Men,” University Review (State University of New York), Summer 1970.
Is there nothing we can do, then, about the Population Problem? Are there no measures that we can advocate? On the contrary, there are several things we can do, none of which, oddly enough, I have ever seen propounded by our Population Hysterics. We can return to (or rather, advance toward) laissez-faire by removing the host of government subsidies to population growth. We can remove the myriad governmental incentives for having more children. For example, we can stop levying higher income taxes on bachelors or on childless couples than on couples with children. The income tax system now subsidizes large families by levying taxes in inverse proportion to the number of children. We can also end the policy of the welfare system in paying welfare mothers per child, once again subsidizing larger and larger families, this time among mothers who can least afford to raise them. And finally, we can end the free public school system, which taxes bachelors and childless couples for the benefit of families with children and the more numerous the children the greater the subsidy. When families will have to pay for their own education, then this artificial and coerced subsidy to large families will be removed. Let us think in terms of achieving freedom by removing subsidies to larger families, rather than agitate to impose a coercive despotism on us all in behalf of a Population Myth that reflects a deep-seated hostility to the human race itself.
[Reprinted from The Individualist, January 1971.]
There is nothing more important for those who think they believe in freedom, in free enterprise and in private property, than bringing these high-flown generalities to bear on the concrete problems of their daily lives. It is very easy to say, or believe, that one is devoted to freedom, so long as freedom remains a lofty and unanalyzed generality. There is nothing, of course, wrong with such generalities; on the contrary, they are indispensable for any thought or action on this vital subject. But, to be effective or meaningful, they must not remain on the level of generalities; they must brought down and applied, consistently and with determination, to our daily lives.
Take, for one among an infinite number of examples, our zoning laws. The vast majority of people who support and vote for zoning laws undoubtedly think themselves to be staunch adherents to the concepts of free enterprise and private property, while actually their support is one of the most important tools in undermining these very principles.
Here is a man, Mr. Smith, living on a certain lot in a $20,000 house. He then finds that Mr. Jones has purchased the vacant lot next door and intends to build a $10,000 house on the property — or, worse, yet, aims to move in a trailer (or “mobile home”) in which to live. Smith becomes highly agitated; he fears that a far cheaper house next door will lower the market value of his own property, or perhaps he is esthetically repelled at the sight of a mobile home. What, then, does he typically do in our gloriously free society? He goes to his local town council and has them pass an ordinance forbidding anyone to build a house worth less than $20,000 on the property — in short, he has turned to that club of tyranny known as the zoning law. He has ruthlessly trampled on the freedom of enterprise and on the property right of his neighbor.
What else could Smith do, one might ask, to maintain the value of his property or the esthetic qualities of the lot next door? The answer is really quite simple. In a truly free society, he would buy the lot next door himself, or, as an alternative, pay Jones, if the latter is willing, the costs of putting up a more expensive dwelling. In short, in a truly free society, each man must pay for what he wants to achieve; he must not load the burden of getting what he wants on to the next man by use of the club and bayonet of organized government.
Mr. [Stephen P.] Halbrook’s article in the May Outlook is a veritable curiosity, akin to the talking dog or the two-headed man. If nothing else, Mr. Halbrook’s portrait of Mao Tse-tung as libertarian and free enterpriser is certainly original. The tone of his thesis, however, has an all-too-familiar quality; one is reminded of nothing so much as the most starry-eyed of the Stalinist tracts of the 1930s: when we were treated to a picture of the happy and productive Soviet society. Under the watchful and benign eye of Comrade Stalin, the happy peasants and the industrious workers busily went about their tasks of Building Socialism and Creating the New Socialist Man, as balalaikas strummed in the background. Comrade Stalin is of course now decidedly unfashionable, and even Mr. Halbrook joins in his denunciation; oddly enough, one of the very few people who still quote Stalin with reverence is none other than Comrade Mao, whom Halbrook would offer to us as the great anti-Stalinist of our epoch. But the same leitmotif is there; note, for example, how the defects and evils which Mr. Halbrook sometimes concedes to exist in Communist China are always and unfailingly attributed to bad guys who worked against or betrayed the great Chairman, in the same way, in the 1930s, whatever flaws were conceded to be in Soviet society were invariably due to bad guys (Trotsky, Bukharin, et al.) who had betrayed the Stalinist vision. Eventually, one begins to wonder how a Leader of such greatness and infallibility could always surround himself with hand-picked comrades who invariably betray him and his policies.
As for Halbrook’s curious portrayal of Mao and the Cultural Revolution as free-marketeers it is enough to point to Professor Walter Galenson’s recent review of the Maoist tract by Wheelwright and McFarlane,Walter Galenson, “Review of E.L. Wheelwright and Bruce McFarlane, The Chinese Road to Socialism,” Journal of Economic Literature (March, 1972), p. 80. on which Halbrook relies for much of his thesis. Galenson points out what every student of China knows: that these Maoist authors portray the goals of Maoism as: universal dedication by every individual to “serve the people”; the abolition of material incentives “and their replacement by moral and ideological drives”; “the rejection of profit as a criterion of efficiency”; and, last, but not least, “the rejection of mass consumption as a social goal.” Wheelwright and McFarlane join Mao in condemning Liu Shao-chi for the crime of “raising output and productivity by the non-Maoist expedients of ‘putting profits in command,’ of emphasizing expertness rather than ‘redness’ as qualification for managerial jobs, of differentiating pay, and of using the market to distribute goods.”
But enough: there is no need for a libertarian to engage in a sober and quiet refutation of the thesis that the creator of the most totalitarian nation in the history of mankind has really been leading his people into a libertarian and even — ye gods! — a “free-market” Utopia. I am reminded of an instructive incident of a few years ago, when a young Maoist of my acquaintance took a flight out of Hanoi on a Communist Chinese airline. It was a flight in which “bourgeois individualism” was sweetly but firmly transcended. As the loudspeaker played incessantly the Red Chinese anthem, “East is Red,” the stewardess went up to the young American, pressed a song book into his hand, and quietly but firmly insisted that he sing along; refusal to sing would, of course, be taken as an indication of hostility to the “mass line” and to the Chinese people. It was a short flight; but when he emerged, shaken and sweating a bit, the bloom of the Maoist Utopia had faded for good. One begins to think that it is far, far easier to idolize Chairman Mao amidst the comfort of a Florida campus than it would be in Peking or, worse yet, in some agricultural commune in Sinkiang.
It is far more interesting to ponder the question: how did Stephen Halbrook get this way? How in the world could he begin as a full-fledged and ardent libertarian, and then rapidly proceed to the point of being a worshipful and adoring Maoist overlaid with a patina of libertarian rhetoric?
Halbrook is correct in the point that Liu Shao-chi was a bureaucrat and centralist, and that Mao’s “Cultural Revolution” was indeed a prodding of the masses to destroy the Communist Party and the (then existing) State apparatus. Even here, however, his implication that the State per se has been smashed in China is grotesque: what happened was that the Army took over the state functions. Furthermore, Halbrook fails to mention the fact that his heroes on the “left wing” of the Cultural Revolution, notably Lin Piao, have now been repudiated and purged by Mao, and that a functioning State apparatus has been reconstituted under Chou En-lai. But let us omit this and concentrate on the aims of the “left” Cultural Revolutionaries. Yes, they were against central planning; yes, they were opposed to bureaucracy; but does this make them libertarians and free-marketeers?
The problem is that Halbrook has been misled by the anti-centralizing and anti-bureaucratic rhetoric and policies. He could indeed have strengthened his case for the moment by pointing out that Mao, in his early days, was an avowed Anarchist before he became a Marxist. But the nub of the problem is that the “anarchism,” the anti-centralism toward which the Cultural Revolutionaries were pointing, was not individualist anarchism, or free-market capitalism. It was, rather, left-wing anarchism, or “anarcho-communism.” The drive to establish decentralized communes, the push toward self-sufficiency of these communes, all of these were attempts to arrive at the anarcho-communist goal by coercive, statist means. The lesson that this should drive home to every libertarian is that we have nothing in common with communist anarchists; that their goals would mean death for the individual, death for his happiness and productivity, and death, too, for the human race, as a result of the stamping out of the division of labor which is the goal of every true communist, be he anarchist or not.
At the heart of the matter is Halbrook’s adulation of the Great Leap Forward of the late 1950s. For the Great Leap was a desperate attempt by Mao — one of the last of the “fundamentalist” communists on the world scene — to leap into communism at one blow. The Soviets, for all their bureaucracy and statism, did have the great good sense to abandon long ago the communist dream, and to push it off to a remote future, after productivity shall have been enormously increased. But the Maoists, heedless of economics, heedless of the terribly destructive effects on production of abolishing the division of labor — the essence of the “communist stage” — tried to hurl themselves into Utopia. Halbrook is surely one of the few people in the world who think of the Great Leap Forward as a success; even the Chinese Communists themselves were reluctantly forced to abandon that Leap, because of the economic collapse that came about through the attempts, for example, to build steel plants in every backyard. Just as Lenin prudently retreated from “War Communism” when he saw the economic disaster it had brought, so did Mao retreat from the Great Leap Forward when its disaster became starkly evident to everyone but Steve Halbrook. The Cultural Revolution was another attempt to accomplish a similar goal; and it too has been abandoned.
But the costs of these attempts — in human and in economic terms — were enormous. In each try the key was the attempt to abolish the division of labor; to eliminate what the Marxists idiotically call the “contradiction between intellectual and physical labor” and the “contradiction between industry and countryside.” (For “contradiction,” read specialization and the division of labor.) That is why every rural commune had to have its own steel plant; and that is why, during the Cultural Revolution, all the schools were closed for several years, and millions of students shipped permanently to rural frontiers such as Sinkiang so as to “eliminate their contradiction between intellectual and physical labor.” And this is what all types of communism, whether “anarchist” or Maoist, mean in the end: an evil, ant heap society of faceless automatons, with all individuality, and all individual development, stamped out by the fanatical ideologues of egalitarianism.
To say that the herding of millions of students, for example, into frontier communes was “voluntary” is surely a grotesque perversion of the term. But there is something more at stake here, for the centralizing State is not the only enemy of individual liberty; for the communist ideal (anarchist or Maoist) involves a total tyranny over each person by his own beloved decentralized commune. And that is why it is China, not Russia, which has mobilized every block, every acre of earth, into local committees in which the soul of every individual member is laid bare and tyrannized over by his neighbors. Every member is forced or induced to confess his sins in public “self-criticism” sessions: the sins, of course, being any deviation from the opinion of his “decentralized” neighbors. And the “material” incentives to production are to be stamped out in favor of an egalitarian “moral” incentive in which the “good of the mass” is supposedly the individual’s only incentive for work and action.
No sir; if I were forced to choose between the Russian and the Chinese societies, I would take the Russian every time. For all its bureaucracy and statism, Russia does have a developed division of labor and at least the rudiments of a market, and hence a fairly productive economy; and, in abandoning its absurd goal of communism, the Russian society provides at least a portion of room for individuality and for personal freedom. For the libertarian, the triumph of Mao over Liu was something to deplore and not to cheer about; the main hope for the future of China, indeed, is that Mao and his fanatical comrades are all aging rapidly; that the younger generation cannot, after all, be imbued with the same revolutionary fervor; and that therefore the adoption of the Russian — and perhaps eventually the infinitely freer Yugoslavian — modes is the most likely prognosis for the Chinese future.
But again: how did Steve Halbrook get that way? The devolution of Mr. Halbrook is an object lesson for all libertarians, a lesson in the destructive pursuit of a one-sided logic. A few years ago, several militant libertarians began the instructive process of needling the right wing, of correcting the errors of a simplistic anti-Communism that had diverted the Right from opposition to the State itself. Pursuing this corrective beyond sensible bounds, Mr. Halbrook has lamentably wound up as an apologist for rampant totalitarianism.
[Reprinted from Outlook, July 8, 1972.]
Hysteria is sweeping the land about the supposed honor of the American flag, and throughout the country, state, and federal legislators are competing with each other in proposing ever stiffer punishments for the high crime of desecration. Eager-eyed snoopers ferret out any use of flag cloth for covering or in the theater, and the long arm of the law quickly reaches out to apprehend and chastise these often unwitting criminals. We await some fervent patriot proposing death by torture for the high crime of mistreating a piece of cloth with red and white stripes.
For, if we sit back for a moment and reflect on the whole issue, the first thing that should be clear is that this is what the flag is: a simple piece of cloth with parallel stripes of certain colors. And the first thing we should ask ourselves is: What is there about a piece of cloth that suddenly makes it sacred, holy, and above defilement when red and white stripes are woven into it? Contrary to many hysterical politicians, the flag is not our country, and it is not the freedom of the individual. The flag is simply a piece of cloth. Period. Therefore, he who tampers with or desecrates that piece of cloth is not posing a grave threat to our freedoms or to our way of life.
Consider the implications of taking the opposite position: if the flag is not just a piece of cloth, this means that some form of mystical transubstantiation takes place, and that weaving a piece of cloth in a certain manner suddenly invests it with great sanctity. Most people who revere the flag in this way are religious; but to apply to a secular object this kind of adoration is nothing more nor less than idolatry. Religious people should be on their guard always against the worship of grave images, and their worship of State flags is just that kind of idolatry.
If, indeed, the flag is a symbol of anything throughout history, it has been the battle standard of the State, the banner it raises when it goes into battle to kill, burn, and maim innocent people of some other country. All flags are soaked in innocent blood, and to revere these particular kinds of cloth becomes not only idolatry, but grotesque idolatry at that, for anyone who loves individual liberty.
There is another crucial point in this whole controversy that nobody seems to have mentioned. When someone buys flag cloth, this cloth is his private property, to do with as he wishes ... to revere, to place in his closet ... or to desecrate. How can anyone believe otherwise who believes in the right of private property? Anti-desecration laws and ordinances are outrageous invasions of the right of private property, and on this ground alone they should be repealed forthwith.
Conscription is quite obviously the most blatant example of slavery in American life, and happily many voices from both Left and Right are now being raised to call for abolition of this unmitigated despoiler of liberty. But there are other critical and pervasive examples of slavery on the American scene that have, for some reason, gone unnoticed even among dedicated libertarians.
One vital example is the armed forces itself. For even a volunteer army practices slavery on a grand scale! It is true that a volunteer army draws its recruits by free choice of the men who enlist. But what happens after they enlist? Suppose that a man enlists in the army for five years. Suppose that after two years he becomes fed up with the regimentation of military life and decides to quit for a better job? Can he do so? Certainly not! In every other occupation in society, a man may quit his job whenever he wants to, and either take another job or quit working altogether. Surely this right is fundamental to a free society; without the right to quit, a man is a slave, even if he originally took the job purely voluntarily. But an enlistee in the armed forces is not allowed to quit before his term expires. If he tries to, he is court-martialed and jailed under harsh military law. This is forced labor and involuntary servitude, however one looks at it.
There are other occupations, too, where a man may sign a contract to work for a term of years; he may, for example, sign on for five years as a geologist to work in Arabia. But he is allowed to quit; he may be considered a moral leper if he thus breaks his contract, he may be blacklisted by other firms hiring geologists, but he is not incarcerated for doing so.
Contrast, then, the armed forces with a very similar kind of occupation: the local police force. A man is free to quit the police force any time he wishes; why then should he not be free to quit the army as well? The armed forces will be centers of slavery not only so long as the draft exists, but even further, so long as a man is forced to stay in the army for any length of time after he decides he would rather call it a day.
No man is free if he does not have the right to quit his job. No one denies this right in every occupation — but one: in the armed forces, where this quitting is called “desertion” and met with imprisonment or even the firing squad.
If we would call ourselves a free country, this system must be abolished.
abortion, 148
African-Americans, 37–38, 43–46, 102, 160
and conscription, 122
and conservatives, 159
and Rothbard, 151
as colonized people, 41–42, 46
Agnew, Spiro, 127–28
Algeria, 119
Americans for Democratic Action, 61, 62, 159
American Telephone and Telegraph, 50
Anarchism, 125–26, 160
An Austrian Perspective on the History of Economic Thought (Rothbard), 11
antiwar movement, 83–84, 100, 109–10, 129–30
and liberalism, 159
Arendt, Hannah, 159
Bay of Pigs, 86
Biafra, 48
Boulding, Kenneth, 137
Bozell, L. Brent, 156
Britain, 69–70
Brown, H. Rap, 13, 46, 57, 160
Brundage, Avery, 96
Brezhnev, Leonid, 116
Bright, John, 152
Buckley, William F., Jr., 12, 147–48, 158–59
as cold warrior, 154–55
Buffett, Howard, 152–53
Bukharin, Nicolai, 131
Bulloff, Jack, 144–45
Burke, Edmund, 156
Burnham, James, 149, 155, 160–61
Business Executives Move for a Vietnam Peace, 55–56
Carmichael, Stokely, 46
Chambers, Whittaker, 155
Chamberlain, John, 155
Chicago Tribune, 152
and Big Business, 158
and Korean war, 153
China, 119, 126, 131–35
and “Cultural Revolution,” 132–34
Chodorov, Frank, 25, 152
Christian Economics, 12
Civil War (US), 48
Cobden, Richard, 152
Coffin, William Sloane, 84
Cohn-Bendit, Daniel, 125
collective security, 27–28
Columbia University, 111, 113–15
Commercial and Financial Chronicle, 152
Committee to Aid the National Liberation Front, 84
Communist Party, 126
China, 131–35
East Germany, 116
ex-communists, 155
France, 120
US, 153
Congress of Racial Equality, 160
conscription, 21–26, 31–34, 73–74, 104, 109, 121–22
and emigration, 110
and jury duty, 39–40
and libertarians, 148, 161
and Old Right, 151–52
The Conservative Mind (Kirk), 155
Conservative Union, 111
conservatism, 62, 63, 147–49
and draft, 160–61
and fascism, 149
and Lyndon Johnson, 62
and McCarthyism, 153–54
and National Review, 154–57
and Nixon, 148
and Old Right, 151–53
and statism, 148, 159
Containment and Change (Oglesby), 1160
Council for a Volunteer Military, 26
crime, 107–08
Cuba, 119
Cyprus, 69–70
Daley, Richard, 107
de Gaulle, Charles, 47, 67–68, 80, 115
de Maistre, Joseph, 156
de Toledano, Ralph, 155
Delury, John, 89–90
Democratic party, 66, 99
Dewey, Thomas E., 128
Dodd, Thomas J., 62
Douglas MacArthur Club, 111
draft, see conscription
Duberman, Martin, 160
Dutschke, Rudi, 116–17, 125
Eccles, Marriner S., 56
education, 15–16, 33–34, 83
and statism, 115–16
Eisenhower, Dwight, 56, 66
environmentalism, 137–45
Evers, Medgar, 117
Fair Deal, 123, 147, 161
Farmer, James, 26
fascism, 76, 83–84, 149
Fifield, James, 12
Fleming, D. F., 157
Flynn, John T., 152
Ford, Henry II, 50
France, 119–20
see also: de Gaulle, Charles
Frankfurter, Felix, 159
Freedom Newspapers, 12
Freedom School, 12
Friedenburg, Edgard Z., 34
Friedman, Milton, 26
Fulbright, William J., 105
Galenson, Walter, 132
Gandhi, Mahatma, 102
Garrison, William Lloyd, 149
Gavin, James M., 66
Garrison, Jim, 75–76
Gaza, 27
General Dynamics, 50
General Electric, 50
General Motors, 50
Germany, 126
Gimbel, Mike, 84
gold, 68, 79–82
Goldwater, Barry, 159
Gomulka, Wadislaw, 116
Goodman, Paul, 34
Greece, 69–70
Griswold v. Connecticut, 138
Grivas, Giorgio, 70
Guevara, Ernesto “Che,” 116
Gulf of Tonkin, 86
Gullander, W. P., 50
gun control, 59–60
Halbrook, Stephen P., 131–35
Hamilton, Alexander, 156
Hamowy, Ronald, 159–60
Hatcher, Richard G., 66
Hatfield, Mark, 66
Herberg, Will, 155
Herbert, Auberon, 152
Hershey, Lewis B., 73, 84
Hess, Karl, 26
Hillenkoeter, Roscoe H., 153
Ho Chi Minh, 116
Hoiles, Raymond C., 12
homesteading, 148
Hook, Sidney, 159
Hoover, Herbert, 153, 160
Hoover, J. Edgar, 73, 125
Hughes, Richard J., 43, 65
Humphrey, Charles, 74
Humphrey, Hubert, 103, 112, 123, 128
and civil liberties, 154
Hungarian Revolution (1956), 119
Industrial Revolution, 140
Israel, 28, 35–36
Japan, 126
Jackson, Andrew, 149
Jackson, Henry M., 86
Jefferson, Thomas, 149, 152, 156
Johnson, Lyndon, 13, 45–46, 50, 61–62, 65–66, 71, 80, 81–82, 93–94
and Eugene McCarthy, 111–12
and peace talks, 105–06
withdraws, 99–100, 103
Jones, LeRoi, 84
Katanga, 48
Kempton, Murray, 86
Kendall, Willmoore, 156
Kennedy, John F., 101, 117
Kennedy, Joseph P., 153
Kennedy, Robert F., 103, 105, 117
Kerr, Clark, 13, 15
Keynes, John Maynard, 51, 52, 82, 152
Keynesianism, see Keynes, John Maynard
King, Martin Luther, 13, 99, 101–02, 107, 117
Kirk, Grayson, 113–14
Kirk, Russell, 155
Kolko, Gabriel, 49, 158
Korean war, 56, 106, 153, 154
Kristol, Irving, 159
Lamont, Corliss, 153
Lefevre, Robert, 12
Left and Right, 12, 159
Lerner, Max, 159
Liggio, Leonard, 12, 157–58
liberalism, 46, 50, 61–62
and Old Right, 147
corporate, 158
of Eugene McCarthy, 112
libertarian movement, 26, 49
and New Left, 135, 159–60
and Nixon, 123–24
“left”-libertarians, 13–14
split with conservatives, 147–49, 157–58
Lindsay, John, 89–90, 107
Liu Shao-chi, 132–33, 135
Lynd, Staughton, 160
Lyons, Eugene, 155
Madison, James, 156
Malthus, Thomas, 140
The Managerial Revolution (Burnham), 160
Mao Tse-tung, 116, 131–35
Malcolm X, 117
Man, Economy, and State (Rothbard), 11
Matthews, J. B., 155
McCarran Act, 154
McCarthy, Eugene, 66, 103, 105–06, 112, 123
McCarthy, Joseph, 153–54
McNamara, Robert S., 22
Mencken, Henry L., 147, 156
Metternich, Klemens von, 156
Meyer, Frank S., 155
Mill, John Stuart, 160
Morton, Thruston, 56, 66
Moynihan, Daniel Patrick, 159
The Nation, 152
and red-baiting, 153
National Association of Manufacturers, 50
National Liberation Front of Vietnam, 56, 71–72, 87–88, 91–94, 106, 112
program of, 97–98
National Review, 147–49, 154–57, 160
and liberalism, 158–59
and Rothbard, 12
nationalism, 48
NATO, 152
New Deal, 29, 49, 123, 161
and Old Right, 147
The New Leader, 159
New Left, 15–16, 50, 120, 122
and Rothbard, 13–14, 151, 158–60
The New Republic, 153
Niles, Henry E., 56
Nineteen Eighty-Four (Orwell), 76
Ninth Amendment, 138
Nixon, Richard, 13, 103, 123–24, 127–28
and conservatives, 148
Nock, Albert J., 147, 156, 158
Nunn, Louie B., 65
Oglesby, Carl, 160
O’Hara, Almerin, C., 43–44
Old Right, 12, 151–53
and Robert Taft, 130
Olympics, 95–96
Oswald in New Orleans (Weisberg), 76
pacifism, 107
Paine, Thomas, 149, 152, 156
Partisan Review, 160
Peace and Freedom Party, 151
Percy, Charles, 66
police brutality, 119–20
Power and Market (Rothbard), 11
Progressive movement, 49
Prohibition, 59–60
Quebec, 47–48
Rand, Ayn, 14, 49, 158
Ratliff, John Milton, 73–74
Reagan, Ronald, 13, 16
Republican party, 65–66, 127–30
and McCarthyism, 154
and Old Right, 152
Rockefeller, David, 50
Rockefeller, Nelson, 90, 103, 123
Romney, George W., 66, 103
Roosevelt, Franklin, 61, 62
and civil liberties, 154
Rostow, Walter, 112
Rothbard, Murray N., 11–14
and Old Right, 151–53
and National Review, 156–57
and New Left, 151, 158–60
Rueff, Jacques, 68, 80
Ruml, Beardsley, 54
Rusk, Dean, 77
Russia, 126, 134–35
Savio, Mario, 13, 15
Schlamm, William S., 155
Schlesinger, Arthur, Jr., 155
secession, 47–48
socialism
as centrism, 157–58
in Israel, 35–36
on war, 55
Socrates, 156
Spanish-American War, 94
Spencer, Herbert, 152
Spiritual Mobilization, 12
Spock, Benjamin, 84
Spooner, Lysander, 152
Stalin, Joseph, 61, 131
Stassen, Harold, 129
Stokes, Carl, 66
“Strategy for Libertarian Social Change” (Rothbard), 11
Student Nonviolent Coordinating Committee, 46, 57, 160
Students for a Democratic Society, 74, 160
Studies on the Left, 160
Sulzberger, C. L., 125
Taft, Robert A., 130, 147, 149, 152
taxes, 49–52, 148
withholding, 53–54
Taylor Law, 89
Teague, Walter, 84
Thomas, Norman, 26
Thoreau, Henry David, 152, 156
Thoughts of the Young Radicals (Kopind), 160
Thurmond, Strom, 86
Trotsky, Leon, 131
Trotskyists, 134, 160
True, Arnold, 56
Truman, David, 113–14
Truman, Harry, 61, 62
Truman Doctrine, 152–53
Tucker, Benjamin R., 152
Turkey, 69–70
U-2 incident, 86
United Nations, 28, 153
Vietcong, see National Liberation Front of Vietnam
Vietnam war, 13, 43, 44, 45, 55–56, 65, 66, 71–72, 77–78, 85–88, 91–92, 99–100, 109–10, 119
and Eugene McCarthy, 111–12
and liberals, 159
and National Liberation Front, 97–98
and peace talks, 105–06
and Rothbard, 159
The Vigil (Rothbard), 12
Village Voice, 109
Walter, Paul W., Jr., 129–30
Warren Commission, 76
Weisberg, Harold, 76
Westmoreland, William, 92
Wheelwright, E. L., 132
Williams, William Appleman, 158
Wilson, James Harold, 79, 82
Wirtz, Willard, 22
Wittfogel, Karl, 155
World War I, 94
World War II, 94
Wrong, Dennis H., 141
Young Americans for Freedom, 109–10
Zionism, 36
zoning laws, 17
Murray Rothbard was a true polymath. He wasn’t just the number one theoretician of the modern libertarian movement — author of the monumental Man, Economy, and State; Conceived in Liberty, a four-volume history of the American Revolution; the two-volume An Austrian Perspective on the History of Economic Thought, and essays too numerous to list — he was also its most tireless publicist, at least in its early days.
He didn’t live in an ivory tower: far from it. As he wrote in a 178-page memo entitled “Strategy For Libertarian Social Change”:
If the advancement of liberty requires a movement as well as a body of ideas, it is our contention that the overriding goal of a libertarian movement must be the victory of liberty in the real world, the bringing of the ideal into actuality. [Emphasis in original]“Strategy for Libertarian Social Change,” unpublished manuscript, 1978.
For Rothbard, libertarianism wasn’t an intellectual parlor game, nor was it a personal affectation: for him, it was a banner that was meant to be carried into battle. Ever the happy warrior, he sought to bring the radical libertarian perspective to bear on the events of the day, and it was a task he delighted in. While he tended to write his more serious books and articles in the dead of night, staying up at all hours pounding away on his old-fashioned (even for the time) typewriter, his “mornings” (noonish) were devoted to relatively lighter fare — the polemical journalism which, over the years, found various outlets. In the 1940s he wrote a personal newsletter, The Vigil, which was typewritten and mailed to his closest friends and associates. Later on, he was appointed “Washington Correspondent” for Christian Economics magazine, a publication put out by a group known as Spiritual Mobilization, headed up by the Rev. James Fifield, and devoted to economic laissez-faire.
This lasted a few years but eventually he was let go: the right-wing Protestant pastors who were the main audience of Christian Economics were appalled by his anti-interventionist polemics when it came to the foreign policy issue. As the cold war got colder there was less tolerance for the “isolationism” of the Old Right, which by that time was largely forgotten by the conservative rank-and-file. Those rightist ministers thought he was a Communist! So there was a parting of the ways.
His sojourn as an occasional writer for William F. Buckley, Jr.’s National Review was even briefer, as Rothbard’s patience with the warmongering that emanated like a radioactive cloud from that publication soon wore thin. The Buckleyites’ crazed desire for a nuclear showdown with Moscow was a bit too much for the old “isolationist” to take, and his refusal to show enthusiasm for World War III soon led to his excommunication from a church to which he had never properly belonged.
But no matter: the hegemony of cold war ideology was about to receive a serious challenge, as the 1960s dawned. An independent libertarian movement — organizationally separate as well as ideologically differentiated from National Review-style conservatism — was about to make its debut, in large part due to Rothbard’s efforts. He and Leonard Liggio had started Left & Right, a magazine directed at the burgeoning New Left movement, which was beginning to make waves, starting on the campus of the University of California at Berkeley. However, the magazine was a quarterly, not a good format for someone who wanted to comment on current events, and so when Robert Lefevre of the Freedom School contacted him to write a syndicated newspaper column for the School’s Pine Tree Features, Rothbard eagerly took up the task.
These short columns — usually no more than two typewritten pages each — appeared in the Freedom Newspapers, a chain owned by R.C. Hoiles, who was a devotee of Lefevre’s and a committed libertarian. Starting in January of 1967, Rothbard churned out fifty-eight columns, the last one written in the summer of 1968, addressing the campus revolt; the massive antiwar demonstrations; the Six-Day War between Israel and the Arab powers; the Newark riots; the Vietnam war; the persecution of H. Rap Brown, the assassination of Martin Luther King, the abdication of Lyndon Baines Johnson, the rise of Richard Nixon — in those two crucial years there was, as they say, never a dull moment.
We might call this Rothbard’s “left” period: he sided with the student protestors, the African-Americans fighting cops who had invaded their neighborhoods; he stood with the Vietnamese people against the American soldiers who had invaded their neighborhood; he stood with the Palestinians against their Israeli conquerors, he valorized the “heroic” Malcolm X and denounced Martin Luther King for calling for federal troops to put down black “rioters” — but he never pandered to his intended audience. Unlike some of the “left-libertarians” of today, who have adopted the politically correct check-your-privilege jargon of white liberalism, he always addressed the issues in straightforward libertarian terms.
This bluntness is apparent in the very first column, written sometime in January of 1967, cheering the firing of University of California chancellor Clark Kerr, and praising Mario Savio — who had the honesty to say “Good riddance to bad rubbish” — while some New Leftists rushed to defend him. He wondered why conservatives, who had formerly been critics of the educational bureaucracy, didn’t side with the student rebels who were rising up against “this educational Moloch” instead of attacking them for “their tastes in clothes and hair styling.” Yet the students weren’t let off easy, either: instead of protesting Governor Ronald Reagan’s threatened cuts to the state university system’s budgets, he wrote, they should be cheering and demanding yet more cuts because this “acted to reduce the very gigantic university system that the students have properly denounced.” So, the New Leftists wanted “self-determination” — or, to put it in the New Age-y terminology of the time, “self-actualization” — as opposed to subservience to a soul-less pedagogical Leviathan? Well, then, “shifting the burden of payment to the student himself will give the student-consumer far more power over their own education” than under the wrong-headed “free tuition” regime.
Rothbard didn’t pander: he didn’t try to imitate the rhetoric of the students, he didn’t insult them by trying to make them think he was “cool”: Rothbard was strictly Old School, and never pretended otherwise. What he did was apply libertarian principles to the concrete day-to-day issues that rose up in those two tumultuous years, revealing the radical evil of the State and the unadorned radicalism of the libertarian stance in every case.
He didn’t pretend to be a leftist: the idea was to win over the left-leaning students, and the revolutionary blacks, to libertarianism, not to masquerade in the fashionable rhetoric of the moment. He never disguised or watered down his libertarianism to suit his audience: unlike the self-styled “left-libertarians” of today, he rejected any modification or “addition” to the central axiom of libertarian political theory, which is the nonaggression principle plain and simple. In answer to the “check your privilege” sloganeering of the cultural left, Rothbard would have said “Check your cultural prejudices at the door.”
Although himself a traditionalist, Rothbard always maintained that there could be no such thing as a “libertarian” culture: those who wanted to “live liberty” were living under a delusion, namely the entirely false idea that some particular “lifestyle” could be derived from the central axioms of what is only a political philosophy and not a “way of life.” He had, after all, been badly burned by the cultural totalitarianism of the “Objectivist” cult around novelist Ayn Rand, which had a “party line” on every subject under the sun, including music (Rachmaninoff good, Mozart bad) and even physics. The libertarian movement, or at least a substantial portion of it, had been down that road before, and found it to be a dead end.
To the younger readers of this volume, Rothbard’s writings from the 1960s may seem like a recounting of ancient history, and only tangentially relevant to the world we live in today. That this is not so is underscored by one of his more prescient pieces: in “The Coming American Fascism” Rothbard comments on various acts of retaliation against critics of the Vietnam war and writes: “At home we have the fascist corporate state economy: an economy of monopolies, subsidies, privileges runs by a tripartite coalition of Big Business, Big Unions, and Big Government.” While “[i]n foreign affairs we have expanded all over the globe, grabbing bases and running governments everywhere, all in the name of a global crusade against the ‘international Communist conspiracy’.”
Substitute “international terrorist conspiracy” for that last phrase and we have a snapshot of the future — the one we are living in today.
The material herein is presented in chronological order and is published exactly as written: my insertions are in brackets. The two final essays provide the vital context for the preceding material, explaining Rothbard’s break with the conservatives and prefiguring the rise of libertarianism as an independent movement — a development for which he was largely responsible.
Twenty years ago I was an extreme right-wing Republican, a young and lone “Neanderthal” (as the liberals used to call us) who believed, as one friend pungently put it, that “Senator Taft had sold out to the socialists.” Today, I am most likely to be called an extreme leftist, since I favor immediate withdrawal from Vietnam, denounce US imperialism, advocate Black Power and have just joined the new Peace and Freedom Party. And yet my basic political views have not changed by a single iota in these two decades!
It is obvious that something is very wrong with the old labels, with the categories of “left” and “right,” and with the ways in which we customarily apply these categories to American political life. My personal odyssey is unimportant; the important point is that if I can move from “extreme right” to “extreme left” merely by standing in one place, drastic though unrecognized changes must have taken place throughout the American political spectrum over the last generation.
I joined the right-wing movement — to give a formal name to a very loose and informal set of associations — as a young graduate student shortly after the end of World War II. There was no question as to where the intellectual right of that day stood on militarism and conscription: it opposed them as instruments of mass slavery and mass murder. Conscription, indeed, was thought far worse than other forms of statist controls and incursions, for while these only appropriated part of the individual’s property, the draft, like slavery, took his most precious possession: his own person. Day after day the veteran publicist John T. Flynn — once praised as a liberal and then condemned as a reactionary, with little or no change in his views — inveighed implacably in print and over the radio against militarism and the draft. Even the Wall Street newspaper, the Commercial and Financial Chronicle, published a lengthy attack on the idea of conscription.
All of our political positions, from the free market in economics to opposing war and militarism, stemmed from our root belief in individual liberty and our opposition to the state. Simplistically, we adopted the standard view of the political spectrum: “left” meant socialism, or total power of the state; the further “right” one went the less government one favored. Hence, we called ourselves “extreme rightists.”
Originally, our historical heroes were such men as Jefferson, Paine, [Richard] Cobden, [John] Bright and [Herbert] Spencer; but as our views became purer and more consistent, we eagerly embraced such near-anarchists as the voluntarist, Auberon Herbert, and the American individualist-anarchists, Lysander Spooner and Benjamin R. Tucker. One of our great intellectual heroes was Henry David Thoreau, and his essay, “Civil Disobedience,” was one of our guiding stars. Right-wing theorist Frank Chodorov devoted an entire issue of his monthly, Analysis, to an appreciation of Thoreau.
In our relation to the remainder of the American political scene, we of course recognized that the extreme right of the Republican Party was not made up of individualist anti-statists, but they were close enough to our position to make us feel part of a quasi-libertarian united front. Enough of our views were present among the extreme members of the Taft wing of the Republican Party (much more so than in Taft himself, who was among the most liberal of that wing), and in such organs as the Chicago Tribune, to make us feel quite comfortable with this kind of alliance.
What is more, the right-wing Republicans were major opponents of the Cold War. Valiantly, the extreme rightist Republicans, who were particularly strong in the House, battled conscription, NATO and the Truman Doctrine. Consider, for example, Omaha’s Representative Howard Buffett, Senator Taft’s midwestern campaign manager in 1952. He was one of the most extreme of the extremists, once described by The Nation as “an able young man whose ideas have tragically fossilized.”
I came to know Buffett as a genuine and thoughtful libertarian. Attacking the Truman Doctrine on the floor of Congress, he declared: “Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns.”
When the Korean War came, almost the entire old left, with the exception of the Communist Party, surrendered to the global mystique of the United Nations and “collective security against aggression,” and backed Truman’s imperialist aggression in that war. Even Corliss Lamont backed the American stand in Korea. Only the extreme rightist Republicans continued to battle U.S. imperialism. It was the last great political outburst of the Old Right of my youth.
Howard Buffett was convinced that the United States was largely responsible for the eruption of conflict in Korea; for the rest of his life he tried unsuccessfully to get the Senate Armed Services Committee to declassify the testimony of CIA head Admiral [Roscoe H.] Hillenkoeter, which Buffett told me established American responsibility for the Korean outbreak. The last famous isolationist move came late in December 1950, after the Chinese forces had beaten the Americans out of North Korea. Joseph P. Kennedy and Herbert Hoover delivered two ringing speeches back-to-back calling for American evacuation of Korea. As Hoover put it, “To commit the sparse ground forces of the non-communist nations into a land war against this communist land mass [in Asia] would be a war without victory, a war without a successful political terminal ... that would be the graveyard of millions of American boys” and the exhaustion of the United States. Joe Kennedy declared that “if portions of Europe or Asia wish to go communistic or even have communism thrust upon them, we cannot stop it.”
To this The Nation replied with typical liberal Red-baiting: “The line they are laying down for their country should set the bells ringing in the Kremlin as nothing has since the triumph of Stalingrad”; and the New Republic actually saw Stalin sweeping onwards “until the Stalinist caucus in the Tribune Tower would bring out in triumph the first communist edition of the Chicago Tribune.”
The main catalyst for transforming the mass base of the right wing from an isolationist and quasi-libertarian movement to an anti-communist one was probably “McCarthyism.” Before Senator Joe McCarthy launched his anti-communist crusade in February 1950, he had not been particularly associated with the right wing of the Republican Party; on the contrary, his record was liberal and centrist, statist rather than libertarian.
Furthermore, Red-baiting and anti-communist witch hunting were originally launched by liberals, and even after McCarthy the liberals were the most effective at this game. It was, after all, the liberal Roosevelt Administration which passed the Smith Act, first used against Trotskyites and isolationists during World War II and then against communists after the war; it was the liberal Truman Administration that instituted loyalty checks; it was the eminently liberal Hubert Humphrey who was a sponsor of the clause in the McCarran Act of 1950 threatening concentration camps for “subversives.”
McCarthy not only shifted the focus of the right to communist hunting, however. His crusade also brought into the right wing a new mass base. Before McCarthy, the rank-and-file of the right wing was the small-town, isolationist middle west. McCarthyism brought into the movement a mass of urban Catholics from the eastern seaboard, people whose outlook on individual liberty was, if anything, negative.
If McCarthy was the main catalyst for mobilizing the mass base of the new right, the major ideological instrument of the transformation was the blight of anti-communism, and the major carriers were Bill Buckley and National Review.
In the early days, young Bill Buckley often liked to refer to himself as an “individualist,” sometimes even as an “anarchist.” But all these libertarian ideals, he maintained, had to remain in total abeyance, fit only for parlor discussion, until the great crusade against the “international communist conspiracy” had been driven to a successful conclusion. Thus, as early as January 1952, I noted with disquiet an article that Buckley wrote for Commonweal, “A Young Republican’s View.”
He began the article in a splendid libertarian manner: our enemy, he affirmed, was the state, which, he quoted Spencer, was “begotten of aggression and by aggression.” But then came the worm in the apple: the anti-communist crusade had to be waged. Buckley went on to endorse “the extensive and productive tax laws that are needed to support a vigorous anti-communist foreign policy”; he declared that the “thus far invincible aggressiveness of the Soviet Union” imminently threatened American security, and that therefore “we have to accept Big Government for the duration — for neither an offensive nor a defensive war can be waged ... except through the instrument of a totalitarian bureaucracy within our shores.” Therefore, he concluded — in the midst of the Korean War — we must all support “large armies and air forces, atomic energy, central intelligence, war production boards and the attendant centralization of power in Washington.”
The right wing, never articulate, has not had many organs of opinion. Therefore, when Buckley founded National Review in late 1955, its erudite, witty and glib editorials and articles swiftly made it the only politically relevant journal for the American right. Immediately, the ideological line of the right began to change sharply.
One element that gave special fervor and expertise to the Red-baiting crusade was the prevalence of ex-communists, ex-fellow travelers and ex-Trotskyites among the writers whom National Review brought into prominence on the right-wing scene. These ex-leftists were consumed with an undying hatred for their former love, along with a passion for bestowing enormous importance upon their apparently wasted years. Almost the entire older generation of writers and editors for National Review had been prominent in the old left. Some names that come to mind are: Jim Burnham, John Chamberlain, Whittaker Chambers, Ralph de Toledano, Will Herberg, Eugene Lyons, J.B. Matthews, Frank S. Meyer, William S. Schlamm and Karl Wittfogel.
An insight into the state of mind of many of these people came in a recent letter to me from one of the most libertarian of this group; he admitted that my stand in opposition to the draft was the only one consistent with libertarian principles, but, he said, he can’t forget how nasty the communist cell in Time magazine was in the 1930s. The world is falling apart and yet these people are still mired in the petty grievances of faction fights of long ago!
Anti-communism was the central root of the decay of the old libertarian right, but it was not the only one. In 1953, a big splash was made by the publication of Russell Kirk’s The Conservative Mind. Before that, no one on the right regarded himself as a “conservative”; “conservative” was considered a left smear word. Now, suddenly, the right began to glory in the term “conservative,” and Kirk began to make speaking appearances, often in a kind of friendly “vital center” tandem with Arthur Schlesinger, Jr.
This was to be the beginning of the burgeoning phenomenon of the friendly-though-critical dialogue between the liberal and conservative wings of the Great Patriotic American Consensus. A new, younger generation of rightists, of “conservatives,” began to emerge, who thought that the real problem of the modern world was nothing so ideological as the state vs. individual liberty or government intervention vs. the free market; the real problem, they declared, was the preservation of tradition, order, Christianity and good manners against the modern sins of reason, license, atheism and boorishness.
One of the first dominant thinkers of this new right was Buckley’s brother-in-law, L. Brent Bozell, who wrote fiery articles in National Review attacking liberty even as an abstract principle (and not just as something to be temporarily sacrificed for the benefit of the anti-communist emergency). The function of the state was to impose and enforce moral and religious principles.
Another repellent political theorist who made his mark in National Review was the late Willmoore Kendall, NR editor for many years. His great thrust was the right and the duty of the majority of the community — as embodied, say, in Congress — to suppress any individual who disturbs that community with radical doctrines. Socrates, opined Kendall, not only should have been killed by the Greek community, whom he offended by his subversive criticisms, but it was their moral duty to kill him.
The historical heroes of the new right were changing rapidly. Mencken, Nock, Thoreau, Jefferson, Paine — all these either dropped from sight or were soundly condemned as rationalists, atheists or anarchists. From Europe, the “in” people were now such despotic reactionaries as Burke, Metternich, de Maistre; in the United States, Hamilton and Madison were “in,” with their stress on the imposition of order and a strong, elitist central government — which included the southern “slavocracy.”
For the first few years of its existence, I moved in National Review circles, attended its editorial luncheons, wrote articles and book reviews for the magazine; indeed, there was talk at one time of my joining the staff as an economics columnist.
I became increasingly alarmed, however, as NR and its friends grew in strength because I knew, from innumerable conversations with rightist intellectuals, what their foreign policy goal was. They never quite dared to state it publicly, although they would slyly imply it and would try to whip the public up to the fever pitch of demanding it. What they wanted — and still want — was nuclear annihilation of the Soviet Union. They want to drop that Bomb on Moscow. (Of course, on Peking and Hanoi too, but for your veteran anti-communist — especially back then — it is Russia which supplies the main focus of his venom.) A prominent editor of National Review once told me: “I have a vision, a great vision of the future: a totally devastated Soviet Union.” I knew that it was this vision that really animated the new conservatism.
In response to all this, and seeing peace as the crucial political issue, a few friends and I became Stevensonian Democrats in 1960. I watched with increasing horror as the right wing, led by National Review, continually grew in strength and moved ever closer to real political power.
Having broken emotionally with the right wing, our tiny group of libertarians began to rethink many of our old, unexamined premises. First, we restudied the origins of the Cold War, we read our D.F. Fleming and we concluded, to our considerable surprise, that the United States was solely at fault in the Cold War, and that Russia was the aggrieved party. And this meant that the great danger to the peace and freedom of the world came not from Moscow or “international communism,” but from the U.S. and its Empire stretching across and dominating the world.
And then we studied the foul European conservatism that had taken over the right wing; here we had statism in a virulent form, and yet no one could possibly think these conservatives to be “leftist.” But this meant that our simple “left/total government — right/no government” continuum was altogether wrong and that our whole identification of ourselves as “extreme rightists” must contain a basic flaw. Plunging back into history, we again concentrated on the reality that in the nineteenth century, laissez-faire liberals and radicals were on the extreme left and our ancient foes, the conservatives, on the right. My old friend and libertarian colleague Leonard Liggio then came up with the following analysis of the historical process.
First there was the old order, the ancien régime, the regime of caste and frozen status, of exploitation by a despotic ruling class, using the church to dupe the masses into accepting its rule. This was pure statism; this was the right wing. Then, in seventeenth and eighteenth century western Europe, a liberal and radical opposition movement arose, our heroes, who championed a popular revolutionary movement on behalf of rationalism, individual liberty, minimal government, free markets, international peace and separation of church and state, in opposition to throne and altar, to monarchy, the ruling class, theocracy and war. These — “our people” — were the left, and the purer their vision the more “extreme” they were.
So far so good; but what of socialism, which we had always considered the extreme left? Where did that fit in? Liggio analyzed socialism as a confused middle-of-the-road movement, influenced historically by both the libertarian left and the conservative right. From the individualist left the socialists took the goals of freedom: the withering away of the state, the replacement of the governing of men by the administration of things, opposition to the ruling class and a search for its overthrow, the desire to establish international peace, an advanced industrial economy and a high standard of living for the mass of the people. From the right the socialists adopted the means to achieve these goals — collectivism, state planning, community control of the individual. This put socialism in the middle of the ideological spectrum. It also meant that socialism was an unstable, self-contradictory doctrine bound to fly apart in the inner contradiction between its means and ends.
Our analysis was greatly bolstered by our becoming familiar with the new and exciting group of historians who studied under University of Wisconsin historian William Appleman Williams. From them we discovered that all of us free marketeers had erred in believing that somehow, down deep, Big Businessmen were really in favor of laissez-faire, and that their deviations from it, obviously clear and notorious in recent years, were either “sellouts” of principle to expediency or the result of astute maneuverings by liberal intellectuals.
This is the general view on the right; in the remarkable phrase of Ayn Rand, Big Business is “America’s most persecuted minority.” Persecuted minority, indeed! Sure, there were thrusts against Big Business in the old McCormick Chicago Tribune and in the writings of Albert Jay Nock; but it took the Williams-[Gabriel] Kolko analysis to portray the true anatomy and physiology of the American scene.
As Kolko pointed out, all the various measures of federal regulation and welfare statism that left and right alike have always believed to be mass movements against Big Business are not only now backed to the hilt by Big Business, but were originated by it for the very purpose of shifting from a free market to a cartelized economy that would benefit it. Imperialistic foreign policy and the permanent garrison state originated in the Big Business drive for foreign investments and for war contracts at home.
The role of the liberal intellectuals is to serve as “corporate liberals,” weavers of sophisticated apologias to inform the masses that the heads of the American corporate state are ruling on behalf of the “common good” and the “general welfare” — like the priest in the Oriental despotism who convinced the masses that their emperor was all-wise and divine.
Since the early 1960s, as the National Review right has moved nearer to political power, it has jettisoned its old libertarian remnants and has drawn ever closer to the liberals of the Great American Consensus. Evidence of this abounds. There is Bill Buckley’s ever-widening popularity in the mass media and among liberal intellectuals, as well as widespread admiration on the intellectual right for people and groups it once despised: for The New Leader, for Irving Kristol, for the late Felix Frankfurter (who always opposed judicial restraint on government invasions of individual liberty), for Hannah Arendt and Sidney Hook. Despite occasional bows to the free market, conservatives have come to agree that economic issues are unimportant; they therefore accept — or at least do not worry about — the major outlines of the Keynesian welfare-warfare state of liberal corporatism.
On the domestic front, virtually the only conservative interests are to suppress Negroes (“shoot looters,” “crush those riots”), to call for more power for the police so as not to “shield the criminal” (i.e., not to protect his libertarian rights), to enforce prayer in the public schools, to put Reds and other subversives and “seditionists” in jail and to carry on the crusade for war abroad. There is little in the thrust of this program with which liberals can now disagree; any disagreements are tactical or matters of degree only. Even the Cold War — including the war in Vietnam — was begun and maintained and escalated by the liberals themselves.
No wonder that liberal Daniel Moynihan — a national board member of Americans for Democratic Action incensed at the radicalism of the current anti-war and Black Power movements — should recently call for a formal alliance between liberals and conservatives, since after all they basically agree on these, the two crucial issues of our time! Even Barry Goldwater has gotten the message; in January 1968 in National Review, Goldwater concluded an article by affirming that he is not against liberals, that liberals are needed as a counterweight to conservatism, and that he had in mind a fine liberal like Max Lerner — Max Lerner, the epitome of the old left, the hated symbol of my youth!
In response to our isolation from the right, and noting the promising signs of libertarian attitudes in the emerging new left, a tiny band of us ex-rightist libertarians founded the “little journal,” Left and Right, in the spring of 1965. We had two major purposes: to make contact with libertarians already on the new left and to persuade the bulk of libertarians or quasi-libertarians who remained on the right to follow our example. We have been gratified in both directions: by the remarkable shift toward libertarian and anti-statist positions of the new left, and by the significant number of young people who have left the right-wing movement.
This left/right tendency has begun to be noticeable on the new left, praised and damned by those aware of the situation. (Our old colleague Ronald Hamowy, an historian at Stanford, set forth the left/right position in the New Republic collection, Thoughts of the Young Radicals [1966].) We have received gratifying encouragement from Carl Oglesby who, in his Containment and Change (1967), advocated a coalition of new left and old right, and from the young scholars grouped around the unfortunately now defunct Studies on the Left. We’ve also been criticized, if indirectly, by Staughton Lynd, who worries because our ultimate goals — free market as against socialism — differ.
Finally, liberal historian Martin Duberman, in a recent issue of Partisan Review, sharply criticizes SNCC and CORE for being “anarchists,” for rejecting the authority of the state, for insisting that community be voluntary, and for stressing, along with SDS, participatory instead of representative democracy. Perceptively, if on the wrong side of the fence, Duberman then links SNCC and the new left with us old rightists: “SNCC and CORE, like the Anarchists, talk increasingly of the supreme importance of the individual. They do so, paradoxically, in a rhetoric strongly reminiscent of that long associated with the right. It could be Herbert Hoover ... but it is in fact Rap Brown who now reiterates the Negro’s need to stand on his own two feet, to make his own decisions, to develop self-reliance and a sense of self-worth. SNCC may be scornful of present-day liberals and ‘statism,’ but it seems hardly to realize that the laissez-faire rhetoric it prefers derives almost verbatim from the classic liberalism of John Stuart Mill.” Tough. It could, I submit, do a lot worse.
I hope to have demonstrated why a few compatriots and I have shifted, or rather been shifted, from “extreme right” to “extreme left” in the past twenty years merely by staying in the same basic ideological place. The right wing, once in determined opposition to Big Government, has now become the conservative wing of the American corporate state and its foreign policy of expansionist imperialism. If we would salvage liberty from this deadening left/right fusion in the center, this needs be done through a counter-fusion of old right and new left.
James Burnham, an editor of National Review and its main strategic thinker in waging the “Third World War” (as he entitles his column), the prophet of the managerial state (in The Managerial Revolution), whose only hint of positive interest in liberty in a lifetime of political writing was a call for legalized firecrackers, recently attacked the dangerous trend among some young conservatives to make common cause with the left in opposing the draft. Burnham warned that he learned in his Trotskyite days that this would be an “unprincipled” coalition, and he warned that if one begins by being anti-draft one might wind up opposed to the war in Vietnam:
And I rather think that some of them are at heart, or are getting to be, against the war. Murray Rothbard has shown how right-wing libertarianism can lead to almost as anti-US a position as left-wing libertarianism does. And a strain of isolationism has always been endemic in the American right.
This passage symbolizes how deeply the whole thrust of the right wing has changed in the last two decades. Vestigial interest in liberty or in opposition to war and imperialism are now considered deviations to be stamped out without delay. There are millions of Americans, I am convinced, who are still devoted to individual liberty and opposition to the Leviathan state at home and abroad, Americans who call themselves “conservatives” but feel that something has gone very wrong with the old anti-New Deal and anti-Fair Deal cause.
Something has gone wrong: the right wing has been captured and transformed by elitists and devotees of the European conservative ideals of order and militarism, by witch hunters and global crusaders, by statists who wish to coerce “morality” and suppress “sedition.”
America was born in a revolution against Western imperialism, born as a haven of freedom against the tyrannies and despotism, the wars and intrigues of the old world. Yet we have allowed ourselves to sacrifice the American ideals of peace and freedom and anti-colonialism on the altar of a crusade to kill communists throughout the world; we have surrendered our libertarian birthright into the hands of those who yearn to restore the Golden Age of the Holy Inquisition. It is about time that we wake up and rise up to restore our heritage.
[Reprinted from Ramparts, June 15, 1968.]