The economy is in desperate straits and we needed to get a stimulus bill through. It deserved harsh scrutiny, and I expect everybody, Republicans and Democrats alike, to poke at and question every line item in that bill. But that's not what we saw these last few weeks; what we saw was simple partisan obstructionism. I consider it a shameful case of putting party above country.
Remember, these were the same Republicans who spent wildly during the Bush years. They spent $500 billion on prescription subsidies because that was a Republican bill. They spent a trillion dollars on the wars in the Middle East. They pushed through, with very little scrutiny, a bill to throw $700 billion at financial institutions to prop them up.
I'm not claiming that these were all bad expenses. I grudgingly admit the necessity of the bank bailout. But the Republicans are hypocrites to wrap themselves in the mantle of fiscal conservatism when they were spending like drunken sailors on their own pet projects. Do not forget that a huge budget surplus under Clinton became a gigantic budget deficit under the Republicans.
All in all, these last few weeks have demonstrated the perfidy and bad faith of Congressional Republicans. I'm glad we clobbered them last November and I hope we clobber them even worse in 2010.
19 comments:
I agree with all that you say, but I wouldn't worry overly about it. In fact you might even celebrate: what the Republicans did this week will likely hurt them in 2010 and help the Democrats make even more gains in the off-year elections.
It was partisanship all right, but it was also stupidity. More and more, the Republicans are turning themselves into a laughing stock.
This raises an interesting question: are the Republicans on a path to doom? For a long time liberals have wrapped themselves in the title "reality-based community", and there's truth in that phrase, because much of modern conservatism has lost itself in self-delusion. Some examples of this denial of reality are climate change denialism, creationism, the obsession with tax cuts over all other forms of economic management, the denial of torture, the delusions of WMD in Iraq -- the list goes on and on.
Could it be that conservatives have spent so much time in self-delusion that this has now become endemic in the conservative community and they have lost touch with reality? Certainly the conservative commentary I read has an unworldly tone to it. They're STILL ranting about socialism!
Reality always triumphs; the only question is how deep into the hole the Republicans will dig themselves before the saner elements of the party regain control. I had assumed that the electoral disaster they suffered in November would be a sufficient shock to get them thinking more honestly about the issues, but it seems that the reverse is happening. The meme bouncing around that Rush Limbaugh now represents the intellectual leadership of the Republican Party -- well, I find that astounding. Consider, for example, how disastrous a hypothetical Palin-Limbaugh ticket would be in 2012. That would be a joke, an absurdity of such magnitude as to guarantee a landslide unparalleled in American history. And yet, can we confidently rule out that possibility? I don't think we can -- and that's a good measure of the depth of the hole into which the Republican Party has dug itself.
At some point, they'll figure it out. I honestly hope that they do so sooner rather than later, because one-party rule is unhealthy. We need a vibrant debate on political issues, but right now the Republican side of that debate seems like little more than monkeys flinging feces.
Chris,
I wouldn't be so sure about the doom of the Republican parties. People are completely irrational, and Obama is going to have the blame shoveled on him (whether he's responsible or not) if:
1) The economy does not make a strong recovery
2) Our forces are mired in Afghanistan at great expense OR we get out of Afghanistan (catch-22)
3) The dollar collapses and/or America defaults from its national debt
And all three of those are possibilities.
Your points are solid. I agree, Obama will get the blame for everything, regardless of his role. If there's a terrorist attack tomorrow, even though it was all planned prior to his inauguration, he'll still get the blame for it.
However, I think the scenarios you list are too dramatic. The economy will surely recover eventually; and whether it recovers sooner or later, it will be plausible for Mr. Obama to claim success. Yes, Mr. Limbaugh will still blame him for anything short of heaven on earth; the question is, will the Republicans hold on to such unreasonable positions? I think that the American people will be more realistic, and the degree to which the Republicans are unrealistic bodes ill for their chances in the next election.
I very much doubt that the dollar will collapse or that we will default on our national debt. We're not that stupid. (I know, that's what I said about the Bush Administration invading Iraq...) I agree that the economy is in for some rough time, but ultimately the most important factor in economic performance is the confidence of the participants in the economy (weighted by the amount of money they have to sling around). So one banker with a billion dollars to sling around is just as important as a million Americans with a thousand dollars to sling around. Nevertheless, my read of the culture is that American optimism has already started to rise. I think that Americans are coming to the belief that, while times are bad now, we're finally addressing our problems and things will start getting better soon. And that increment in optimism will start the vicious circle turning into a virtuous one. In other words, I'm selling my gold.
Alex, I agree with Chris, i.e., "the scenarios you list are too dramatic." Obama in fact is in an ideal position: if things get worse he can say, with conviction, that the troubles he inherited were too big to go away quickly; if things get better, he can say, with equal conviction, that the measures he advocated were the right medicine for the situation.
In other words, it's win-win for Obama. (And the Republicans, with their extreme partisanship, are making it almost too easy for him).
You won't believe this: now that the Republicans have taken a purely partisan obstructionist strategy on the stimulus bill, they're pinning the blame for their partisanship on Mr. Obama! Here's a quote from CNN:
Top Republican lawmakers Sunday called on President Obama to change his political strategy, arguing that the passage of a massive stimulus bill on a party-line vote showed he has failed to deliver the "change" he promised.
I can't believe the chutzpah of these people!
The way you frame your argument makes it sound like there are only two groups of people in America, Democrats and Republicans. And if the Republicans oppose the plans of a Democrat president for purely opportunistic or petty reasons, then any opposition to these plans must be for these reasons.
This kind of thinking is not suited to an open-minded pursuit of the truth. I see it in other people I know who identify with political parties, Democrats and Republicans alike. They are so focused on hating or fearing the other party that they ignore the flaws of "their" party, not to mention its fundamental similarity to the "enemy". In general, they share a herd mentality, and fail to think for themselves.
It is interesting to see how much venom and hatred there is between Democrat and Republican voters, and then compare that with the relations between Democrat and Republican politicians. The latter tend to put on a show of opposition every once in a while, but always agree to "go along to get along" in the end. Neither the welfare state, nor the globe-spanning military empire, nor the ripoff monetary system are in any danger of being eliminated or even reduced (at least not by choice; economic reality will dictate otherwise sooner or later). All of these things are beneficial to the power structure, regardless of which party is in charge.
Are liberals a "reality based community"? I don't see it that way. At the very least, an appreciation for reality would preclude one from believing that scarcity can be alleviated, and more goods come into existence, by the mere printing and spending of more money. This is like believing you can make gold from straw, or bread from stones. And yet, this is the fundamental, if unspoken, premise behind the so-called "stimulus package".
And what happens when it doesn't work, as such plans have never worked in history? What happens if it actually makes things worse? The economic alchemists who provide the intellectual support for this crazed idea have already planned for such an inevitable outcome. They've said that while Obama's stimulus is better than nothing, it doesn't go nearly far enough. In other words, $787 billion of deficit spending, most of which will be financed by inflation, is really not a high enough "dosage" for this "cure" to work. So blame those "fiscal conservatives" who turned Mr. Obama into a veritable miser.
Yeah, better hurry and pass this quick (the sky is falling and all that) before anyone starts thinking that maybe, just maybe, the "stimulus package" is really a "patronage jobs creation package" by which the Democrats will buy votes in future elections with other people's money, i.e. by taking bread off the tables of the productive to enrich politically useful parasites. That would be a big surprise, wouldn't it?
"...the "stimulus package" is really a 'patronage jobs creation package' by which the Democrats will buy votes in future elections with other people's money, i.e. by taking bread off the tables of the productive to enrich politically useful parasites."
Dither: Explain, please, how the stimulus package will use "other people's money" to "take bread off the tables of the productive". Who are these "other people" whose money will be used? Who are these "productive" people who will have the break taken off their tables?
Where have you been during the past eight years while money has been literally shoveled from "other people" into the hands of the uber-wealthy? Who, by dint of their brilliance and virtue, have created the financial mess we now find ourselves in?
Dither, I agree with you that the perception of who is being partisan is a subjective one, and that each side have every reason to blame the other. However, for me the decisive objective factor was the division between the two fundamental strategies: tax cuts versus higher spending. The Republicans favor tax cuts, and the Democrats favor higher spending. The final division was 60% higher spending and 40% tax cuts. An ideologically pure division would have been 50-50. However, the Democrats have big majorities in both houses of Congress, and they have the White House; clearly a fair division would properly represent this inequality.
What's ironic about this is that, when they were in power, the Republicans were quite happy to use their majorities to cram extremely unbalanced bills down the throats of the Democrats. As Mr. Bush said, "Elections have consequences." And yet now these same Republicans are insisting that elections should not have consequences, that there should be an ideologically pure balance regardless of the elections.
I think your notions of economics are, well, pretty far out in the weeds. The stimulus package is predicated on the notion of "velocity of money" as well as our understanding of the role of consumer confidence in the health of an economy. Your belief that it's just a matter of printing money is, well, neanderthal. You should study the economic concept of money supply, and the different definitions of different forms of money supply. One way of describing our economic cataclysm is that the money supply suddenly shrank by trillions of dollars, and now the government is adding $787 billion to the money supply to counteract the loss of trillions of dollars.
And you're quite incorrect in stating that Keynesian approaches don't work. Roosevelt's application of Keynesian theory in response to the Depression was a big success. Now, it's certainly possible to quibble about the details, and it's even more reasonable to argue about the merits of Keynesian theory in other situations. But for this situation, where we've seen a sudden contraction of the money supply, Keynesian methods are proven.
Lastly, your accusations about "taking bread off the tables of the productive" to subsidize political patrons is just plain naive. Government has become a gigantic machine for redistributing wealth, and much of that redistribution is in favor of the wealthy. They gave billions of dollars to the oil companies at a time when oil companies are reporting record profits. It's impossible to figure out the net balance, whether the rich or the poor come out better, but of one thing we can be certain: the wealthy have far greater political power than the poor. Politicians who wish to be re-elected know who provides campaign contributions.
"But for this situation, where we've seen a sudden contraction of the money supply, Keynesian methods are proven."
I disagree. Now, I actually *am* an advocate of Keynesian methods in this situation, but to suggest that Keynesian methods are in any way close to "proven" is wrong. The Great Depression is one example where Keynesian methods successfully fought economic downturn, but we cannot simplify the situation to the Great Depression.
There are two things that we really do not know: (1) What conditions of the Great Depression allowed Keynesian methods to work, and (2) if Keynesian methods even were helpful in the great depression. To simplify the problem a bit, the information such a claim seems to be going on is:
(1) There was a great economic downturn after the crash in the 20s
(2) We created the W.P.A. and took other Keynesian measures
(3) There was a subsequent recovery
The problem with this analysis is that there are a ton of hidden and/or forgotten factors that may or may not have played a part. The economy is comprised of so many moving parts, that this correlation could actually be nothing more than just that. To put it simply, its quite possible that those Keynesian methods did *not* play a major role in ending/handling the Great Depression, and we just think so because of how the events played out.
That said, I think that Keynesian economics is the best theory we have to go on; but there is a massive inductive bias in saying that we have "proven" (I understand that by "proven" you mean overwhelming evidence, not logical proof) that Keynesian economics can tell us the best answer for our current problems.
This is also why I think that this economic stimulus package is not the clear answer. I'm all for it, I don't see a better option; but we will require vigorous debate for the next couple of years if we want to get any reliable answers about the economy.
You're right, Alex; I grossly overstated the case in using the word "proven". I have a great excuse, though, for being wrong: there's no place on the intellectual spectrum between your level of analysis and Dither's where I can make statements that are comprehensible at Dither's level yet respectable at your level.
Whining excuses aside, I agree that the success of Keynesian economics in the Depression does not provide us with anything like proof. Basing a recommendation on a single data point is squeezing the data pretty hard. As you say, it's the best we have to go on, so we might as well go with it. That also justifies the use of a half-measure such as this; since we're only half-sure that, say, a $1.5 trillion stimulus will work, we pass a stimulus half as large... yeah, right. This really is seat-of-the-pants stuff. And that's what makes the problem so interesting once you set aside all the silly ideology. Here we are in an very nasty situation; spending $787 billion on a hunch is really scary. On the other hand, NOT spending $787 billion on the opposing hunch is even scarier. So we hitch up our pants and take a wild leap into the unknown. Meanwhile, we've got ideologues on both sides screaming political slogans. The awful danger of this situation makes it all the more important for us to get those nitwits to shut up so we can all work this out as best we can. The debate on this bill was appallingly uninformed. Five or ten years from now, when we look back and see how things came out, will we be able to draw any useful conclusions? Or will the whole thing be buried in more partisan sloganeering?
Here are some facts.
America had a number of severe economic downturns prior to the Crash of 1929. Specifically, in 1819, 1837 and 1920-21. In all of the aforementioned cases (but especially in the first two) the government's response was, in general, one of laissez faire; it did very little and let the market correction take place. Nobody remembers these depressions because they ended quickly.
You say Keynesian methods worked during the Great Depression. But the Great Depression lasted over 12 years! That's some success story.
Popular stupido-history asserts that Herbert Hoover took a laissez-faire approach ("did nothing"), which caused the depression to worsen. In reality, the economic intervention that characterized the New Deal really began under Hoover. Here is Hoover in his own words:
"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic... No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times... Creating new jobs and giving to the whole system a new breath of life...
"Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom... We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction."
Roosevelt actually won the 1932 election on a small government, balance-the-budget platform, and even accused Hoover of leading the country down the path to socialism!
Of course, Roosevelt didn't keep his campaign promises. Instead, he spent more money than all 31 preceding presidents put together. Did it work? Here is Roosevelt's Treasury Secretary, Henry Morgenthau, addressing House Democrats in 1939:
"We have tried spending money. We are spending more than we have ever spent before and it does not work... We have never made good on our promises... I say after eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"
More recently, when Japan entered a recession in the 1990s, the Japanese government followed the Keynesian prescription. It propped up the insolvent banks and failing businesses, and never really came out of the recession. Today, the Japanese refer to the 90s as the "lost decade".
Keynesians look at these facts and their response is always the same: The Keynesian prescription works, but it needs to be executed on a much grander scale. More money needs to be spent. The Fed needs to inflate more. Throw caution to the wind. Perhaps they think the hyperinflationist Weimar Republic or Zimbabwe are good models of economic policy.
I'll respond to Chris' remarks about money supply in a future comment.
"...there's no place on the intellectual spectrum between your level of analysis and Dither's where I can make statements that are comprehensible at Dither's level yet respectable at your level."
Condescension is no substitute for sound argument, but it seems to be a recurring theme in your responses to my posts. I don't mind -- it doesn't hurt my feelings or anything -- but it certainly doesn't help you or your readers.
"Your belief that it's just a matter of printing money is, well, neanderthal. You should study the economic concept of money supply, and the different definitions of different forms of money supply. One way of describing our economic cataclysm is that the money supply suddenly shrank by trillions of dollars, and now the government is adding $787 billion to the money supply to counteract the loss of trillions of dollars."
You are conflating money with credit. Properly understood, money is a commodity that exists in a definite quanity. This distinction is blurred by our fiat monetary standard, in which money can be created out of nothing by a central bank and so-called "fractional reserve" lending. Monetary inflation is a tool used to effect credit expansion (i.e. to make credit cheaper than is warranted by economic conditions).
In effect, what has happened is a contraction of credit, not money supply. Indeed, the Fed has tried to reverse this so-called "credit crunch" by injecting massive quanitites of money into the banking system, but they can't force the banks to lend it or the public to borrow it. People are being cautious, as they should.
In effect, our economy was always on "stimulus". In the same way that a drug dealer poisons his body to get high, we have a central bank that keeps credit cheap to artificially stimulate borrowing and spending. The economy is juiced. This policy of credit expansion has led to a situation where people think they are wealthier than they really are.
As an analogy, if you quit your job and max out all your credit cards, you can live high on the hog for a while. Everyone will think you're rich as you drive around in your Mercedes Benz and watch football on your 50" flat screen TV. But when the bills come due, your standard of living will fall dramatically and precipitously. You'll have to give up your goodies and go back to work.
That's where America is today. Proponents of laissez-faire (like myself) are saying, "it's time to go back to work and save". The Keynesians and other statists are saying, "get another credit card and keep spending!"
Or, to use my drug analogy, we have to go through withdrawal before we can return to health. More drugs is not a solution to the problem of drug addiction.
The way things were, which the government wants to bring back, was unsustainable. We are in for some pain, but it could be over in a year if we take our medicine and get it over with. It is politically difficult to admit this. But grown ups should choose reality over illusion. Otherwise, we're going to learn the hard way as reality is forced upon us, perhaps sooner than later. Then things are going to get ugly.
I'm married to a foreign national. I have a Plan B, if it comes to that. If I were you, Chris, I'd hold onto that gold.
Dither, I disagree with your facts in almost every case:
1. Yes, there were earlier recessions. And there have been many later recessions. We have learned a great deal about how to respond to recessions. Usually it's best to handle them with monetary policy, not fiscal policy (lower the interest rates that the Fed charges). However, in this case, the Fed's interest rates are already near zero, so there's no maneuvering room.
2. You missed the most important prior to 1929: the Long Depression of 1873-96 (that's 23 years!). Yes, the government took a laissez-faire approach. It didn't work.
2. While Hoover may have his own explanations of what he did, history has its own explanations, and there are quite a few, but two explanations seem to be widely agreed upon. First, Hoover did nothing to keep banks solvent, and so bank failures multiplied, compounding the problem. He was hampered by the gold standard, which placed limits on the amount of money that the Fed could pump into the economy. What positive measures he did take served to contract the money supply, which was the worst possible thing he could have done.
The second major contributing factor to the Depression was the dramatic reduction in international trade resulting from protectionist legislation passed all around the world. On this, almost all economists are agreed, but there remain substantial differences as to the magnitude of the effect.
Your quote from Henry Morgenthau is interesting, but it does not represent what historians now understand to be what happened. The most striking data on this, which is almost too good to be true, is the time sequence of the US GDP. It fell sharply and steadily during Hoover's Administration, and hit bottom in 1933, just as Mr. Roosevelt took over. From that point forward it rose steadily until 1937, when there was a slight downward blip, which was quickly reversed. The GDP passed its 1929 peak in 1936-37. The downward blip is supposedly due to Mr. Roosevelt acquiescing to Republican demands for a balanced budget; when this produced a lowering of GDP, Mr. Roosevelt resumed his New Deal policies and the GDP resumed its growth.
However, although these raw numbers suggest a very simple cause-and-effect relationship between government deficit spending and GDP growth, the reality was too complicated to draw such a simple-minded conclusion. Still, the evidence we do have argues against the argument that the deficit spending didn't work.
Your attributing the Japanese extended recession to Keynesian strategy is way wrong. Although the Japanese recession was triggered by a property bubble akin to the recent American property bubble, the problem was that the Japanese government refused to permit any banks to fail. Every recession requires some deadwood to be cleared out, and the trick is to let some institutions to fail while preserving the right ones. Hoover permitted too many to fail; the Japanese permitted none to fail; the Bush Administration, to its credit, came up with a better mix. And the Obama Administration will need to maintain the proper ratio.
First off, Dither, let me apologize for my condescension. Some of the ideas you have presented are truly antediluvian, but I don't want my attacks on those ideas to be interpreted as in any way personal. I welcome your dissension because it forces me to think through my own opinions more carefully. Again, where I have gotten sloppy and permitted my assaults on your ideas to bleed over into personal attacks, I apologize.
But now let me resume my fanatical attacks on your ideas! ;-)
The very concept of money supply is inextricably interwoven with that of credit. You simply cannot draw a fine line that unambiguously separates one from the other. Let me try an example:
One day a realtor tells me that my house is worth $1 million. Wow! I'm rich! So I run to the bank and get a loan for $750K. Later that day I spend it all on videogames -- I'm an addict. The next day, the realtor tells me that the housing market has collapsed and my house is only worth $500K. Oops! Oh well, I walk away from the house and let the bank have it. But they can only sell it for $500K, so they lose $250K. On day one, the bank had $750K in assets (the loan to me). The next day, they had only $500K in assets (my house). $250K of assets simply vanished. Poof!
Now multiply this process by millions of consumers and what you get is banks losing hundreds of billions of dollars of assets. In other words, hundreds of billions of dollars simply disappear. But it gets worse. In order to maintain their normal cash flows, which were up until now paid for with regular mortgage payments, the banks have to sell off some of their other assets -- such as stocks and bonds -- for cash. This normally wouldn't be a problem, but it ALL the big banks have to do it, then suddenly there are lots of people selling stocks and not as many buying stocks. Hence the price of stocks go down. This in turn means that all the stockholders are poorer. Run this process round and round a few times and what you end up with is an economy that is suddenly worth a lot less money. If the net value of all American assets was, say, $200 trillion yesterday, it might be only $150 trillion today -- which means that $50 trillion has simply vanished.
None of this happened because Feds were printing money or burning money. The number of dollar bills and quarters and dimes in circulation hasn't changed at all. But tell me: how much of your personal worth takes the form of currency? How much is real estate, stocks, bonds, and personal property? The amount of currency in circulation is not an important part of the money supply.
Ultimately, then, the money supply depends entirely upon the aggregate attitude of the people. If everybody is optimistic, they'll be willing to pay big prices for stocks, bonds, houses, etc, and the aggregate value of all the property we own is high. And if everybody gets paranoid and pessimistic, convinced that economic doom is upon us, then the value of all those assets falls through the floor and suddenly we're all poor. This is what Mr. Roosevelt meant when he said, "The only thing we have to fear is fear itself." Fear really does destroy wealth.
Chris,
1. Manipulating interest rates is a cause of depressions. Specifically, lowering interest rates creates an artificial boom or bubble of unsound investments that must eventually be liquidated in a recession. When this policy is used to "cure" a recession, it is really just putting off (and thus making worse) the inevitable downturn by re-inflating the bubble. See my post above.
2. The Long Depression was not even a true depression. I'll just quote the data from Rothbard, in his History of Money and Banking in the USA:
"Yet what sort of 'depression' is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income? ... the decade from 1869 to 1879 saw a 3-percent-perannum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. Even the alleged 'monetary contraction' never took place, the money supply increasing by 2.7 percent per year in this period."
3. My quotes from Hoover and Morgenthau reflect reality, which is why I used those quotes instead of the interpretation of some historian or pundit with an axe to grind. For instance, Hoover ordered (and paid) farmers to destroy crops and slaughter livestock as a way of propping up agricultural prices. He raised taxes and undertook many other interventions. Yet many (especially liberal) pundits claim Hoover's was a policy of "laissez-faire". That's just flat-out false.
4. I think it was Mark Twain who said, "There are lies, damn lies, and statistics." GDP, for instance, is easily manipulated if you include government spending. In reality, people were suffering. This is why a proper theory, grounded in logic, is so important to understanding economics.
5. And what's the right ratio? Do you see how absurd is central economic planning? Its success depends on people knowing the un-knowable.
I'll respond to your comments re: money supply later tonight or tomorrow.
Dither, I think we have reached the point at which further discussion is useless. You have selected some rather unconventional sources, and you base your case on the claim that your sources are correct and everybody else is wrong. Economics is a complicated subject with a lot of different opinions. I'm quite certain that I could assemble quotes from various economists over the years to prove just about anything I wanted. I don't, because I'm not trying to prove some weird case. I look at the broad range of opinion and try to find whatever looks to be the most common view among economists. Even that can be difficult to discern. I then proceed from that mess to draw what conclusions I can. I do NOT start off with a political agenda ("laissez-faire is best") and then work backwards to prove it. This financial crisis in particular leaves me agog at the complexity of the problems. I was at first extremely reluctant to contemplate a bank bail-out, but as I learned more, I eventually decided to acquiesce to the wisdom of so many economists, even though my heart rebelled at the thought of bailing out the people who screwed everything up in the first place.
Somebody (Voltaire?) once said that the measure of intelligence is the ability to hold two contradictory points of view simultaneously. I am pleased to report my ability to recognize BOTH the need to let some banks fail (laissez-faire) AND the need to prop up the core of the financial system. I suppose that Voltaire would approve. But you seem to be saying, "laissez-faire uber alles" (forgive me for mixing two such dissimilar languages). It is precisely this kind of ideological approach towards which I am objecting. We need to solve problems, not insist on our ideologies.
"You have selected some rather unconventional sources, and you base your case on the claim that your sources are correct and everybody else is wrong."
Are you talking about Rothbard? That is one source and the quote was mainly a recitation of the economic data from the period of the so-called "Long Depression", making the point that it wasn't really a depression according to the usual standards. You are free to dispute his (and my) conclusions but the data are accurate.
I reject your assertion that I start off with a "political agenda" and then "work backwards to prove it." This is just more name-calling. I always find it disingenuous when someone claims the mantle of "non-ideological" and labels his opponents as ideologically driven. I could just as easily point out that all of your arguments are in favor of government intervention; therefore, you are ideologically predisposed towards government solutions. Where does this get us?
Yes, I believe in the free market. I don't believe that government planning of the economy works. But I didn't just assume this position as a matter of faith, nor have I presented it to you as such. I have backed up my claims with arguments and data. That doesn't mean you have to agree; I'm sure we both have a lot of background that colors our understanding of these issues, and a blog post can't cover all that ground.
You've said you base your views on whatever is the commonly held opinion among economists. That's fine, but consider the possibility that consensus is often self-reinforcing, especially in a field as politicized as economics.
The predominant view of the economics profession during the early to mid-twentieth century was that government planning -- either socialism, fascism or some other variant thereof -- was the wave of the future. If you read books from this time, you'll find people using the word "totalitarian" not as an epithet but as something to be desired. Praise for Mussolini was common. Even Keynes, in the preface to the German edition of his General Theory, famously praised the Hitler government as being better suited to his economic program than were the more liberal western governments of the US and Britain.
A number of respected economists predicted that the Soviet Union would outpace the United States in production, forcing the US to adopt communism or fall behind.
The Austrian School economists, proponents of laissez-faire capitalism, notably including the great Ludwig von Mises (mentor of F.A. Hayek) could not find a paid position in any American university. Von Mises wrote the first and most rigorous theoretical critique of socialism, and even predicted the Great Depression in a series of essays from the 1920s. His theory was correct, as was borne out by events.
Today's mainstream economics establishment didn't see the current economic downturn coming. In fact, the mainstream view has been running the show. Bernanke, Paulson, Geithner -- these big-government, pro-bailout guys who were wrong about the economy all along are still in charge.
Advocates of the Austrian view including Peter Schiff, Ron Paul and Jim Rogers are on record predicting this financial collapse as far back as 2006 (before that, in fact). Schiff was literally laughed at by the mainstream people on the financial programs while he warned of the current downturn with amazing accuracy (the videos are on YouTube). Ron Paul was laughed at by the other candidates in the Republican presidential debates.
Since you don't want to continue the discussion, I'll leave it at that. We don't have to agree, but there's no need to suggest this is because of my intransigence!
I must confess, I feel badly about underestimating your familiarity with economics. But really -- reducing monetary considerations to government printing presses! That's so off in the weeds that... oh well.
Look, you seem like a nice fellow and you have conducted yourself with integrity here. Your views are pretty far from the mainstream. I originally attributed that to dogmatism; I was wrong. Anybody who's familiar with the Austrian school has a pretty solid background. I *still* think that you're approaching this from an ideological rather than pragmatic angle -- but that leads me to another line of thinking that I'm going to develop and put up as a new topic here. That topic will directly address the difference between us, and I hope you'll show up for that discussion.
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