Posted tagged ‘Lew Rockwell’

Economic Report Card: Fail, Fail, Fail, Fail

June 5, 2009

Fail, Fail, Fail, Fail
by Llewellyn H. Rockwell, Jr.

How about a bit of reality? Not the ridiculous promises from Washington, the absurd talk of “green shoots” while unemployment soars and investment falls, the silly guarantees that GM has a bright future even as its stock price falls to less than the price of a Snickers bar, the nonsense about how if we spend more and inflate more, recovery will come tomorrow morning.

The war on recession is a flop. Fail, fail, fail.

The full-scale war on recession began in January 2008. Unemployment was climbing and house prices were falling, and George Bush, whose entire persona was the war mode since 2001, decided he wouldn’t tolerate declining economic conditions.

That’s when the Fed started pushing down interest rates to ridiculous lows and started gunning the money supply as much as possible. Bush put on his solemn/determined face and started talking to the American people about how he was going to destroy this recession monster in its crib.

Now, there are things politicians can do in the face of trends they don’t like. If kids aren’t learning to read, bureaucrats can cobble together carrots and sticks and gin up the scores a bit for a while. They can have their hirelings shoot consumers of illegal substances and bomb foreigners who don’t love America. They can pass out goodies to friends and take them away from enemies. From time to time, they can experience moderate success in these actions.

But the economy? Now, here is a force too big even for the biggest government in the history of the world, which is the U.S. government. That’s because economic trends are embedded in the structure of the material world and operate according to laws akin to gravity. They are social laws, if you will, features of the world that operate in all times and all places, and they are generated by the implacable fact of scarcity and the need for a system of production and allocation.

In other words, economic trends are finally beyond the control of the political class. This is the great lesson that economics has been teaching for some 700 years, generation after generation.

As Bastiat wrote, economic laws “act on the same principle whether we take the case of a numerous agglomeration of men or of only two individuals, or even of a single individual condemned by circumstances to live in a state of isolation.”

They are unavoidable features of the world, ones which the political class is forever attempting to override. The economy had been on a false foundation for some years, and the housing sector in particular had become wildly overbuilt and rested on bad debt. What can politicians do about this? Absolutely nothing. Economic foundations are built by private investment. Government has no resources of its own to build a foundation. It can only rob people of their property and thereby divert resources from where they belong to where they ought not to be.

When prices of houses started falling, we began to see only the most conspicuous sign of the rot underneath it all. But the political class blamed the symptom instead of the disease, and started trying to prop up prices, which is probably the stupidest thing these birds could ever attempt. It is utterly futile to attempt to change the direction of prices. It is about as successful as attempting to replace the water in one ocean with another or rearranging the order of the planets. It is beyond their capacity.

Bastiat said of the attempts of his time: “Modern reformers! when I see you desiring to replace this admirable natural order by an arrangement of your own invention, there are two things (although they are in reality one and the same) that confound me – namely, your want of faith in Providence, and your faith in yourselves – your ignorance, and your presumption.”

It’s not just that the attempt to undo economic law doesn’t work. It ends up mucking up the system even more, and prolonging the suffering. That is precisely what has happened. There can be no question that we would have been out of this recession by now had the politicians not intervened. But an election was coming and Bush tried to rig the system. Not only that, but after seven years of ridiculous marauding around like King of the Universe, he was flush with power and arrogance.

Bush attempted to reverse the economic river by waging a war on recession, about which I was writing back in March 2008: “All this nonsense about digging ourselves out of recession through government intervention began with the New Deal. But here is the amazing fact: not once has this strategy worked.”

By the fall and winter, it became clear that the War on Recession was not working and the economy was sinking further. Rather than give up, Bush pushed so hard that he managed to throw us all in the arms of a socialist who knows nothing about economics and has surrounded himself with big shots who affirm him in his ignorance – people like Paul Krugman, who are wedded to antique mythologies about the glories of government power.

And so we live through it again. We see the fools trying this and that with our lives and liberty, promising glorious results around the corner. Well, by now, we’ve been around the corner, the next one and the next one, and it gets worse with each turn. These people are driving us right into the abyss, and let’s be clear that this is not the fault of private investors or savers or foreigners or stock jobbers. It is the fault of the managers of this recession: the government, whoever is or has been in charge, and the Fed that operates on government authority.

They are strangling free enterprise just as surely as a mugger chokes his victim, and with it the capacity for the American worker and producer to do the hard work of restoring prosperity.

We are a generation that proudly shows off its accomplishments in all areas of science, and we preen about our love of facts and our detachment from mythology. Yet our culture is imbued with the most ridiculous faith in government to turn stones into bread, to accomplish miracles with a printing press before our very eyes. This is the age of folly.

Source link.

Obama’s AIG Outrage

March 17, 2009

Yesterday’s news of AIG executives receiving $165 million in bonus payments was indeed enraging. Even more troubling was the news that AIG paid out over $100 billion to Goldman Sachs – a private business with deep ties to the US Treasury.

Today, Barack Obama expressed “outrage” over the executives bonuses, urging Goldman Sachs insider and current Treasury Secretary Tim Geithner to use “all legal means to stop AIG bonuses“, going so far as threatening to withhold further TARP infusions.

I have only one thing to say to this. Mr. President, your “outrage” today is much too little coming much too late. If you actually had any kind of moral opposition to wasting taxpayers money like this, you would have voted against the original Bailout Bill back in October. But you didn’t. You came in from the campaign trail to vote FOR this morally reprehensible legislation along with your opponent, John McCain.

If you actually thought there might be a moral hazard to giving away billions of dollars from our children’s future you would have joined the vast majority of American citizens who called, faxed, emailed and rallied against the Bailout Bill before it was made law. But you did not.

Your words today are hollow and insulting to all of us who said in September that nothing good would come of the Bailout. It is too late now, Mr. Obama, to play at righteous indignation over something you helped create.

Also jumping on the outrage bandwagon are Ben Bernanke (who asked for and wrote the Bailout), Tim Geithner (who oversaw distribution of the Bailout), Larry Summers, NY Fed President (and ex-Goldman economist) William Dudley, Rep. Barney Frank, Sen. Bob Corker and others (who voted for the bailout).

Americans, if you are indeed outraged by what is being done with your money it is time you learn who your true friends are. The Campaign for Liberty, Lew Rockwell and the Mises Institute are among those who spoke out and coordinated efforts against the Bailout. In fact, these are the people who knew the housing bubble would pop, knew it would effect the whole economy and know that the actions being taken now to “rescue” the economy will only make matters worse. Isn’t it time you got to know your real friends?

The Fallacy of the Broken Window

February 9, 2009

The Senate will likely pass its version of the new “stimulus” bill in the next few days. It seems a good time to remember (or introduce to some) the Fallacy of the Broken Window.

Created by Frédéric Bastiat in 1850, the Fallacy of the Broken Window has been used countless times to demonstrate that government intervention in the economy is useless at best, harmful at worst. Henry Hazlitt devoted a chapter to Bastiat’s fallacy in his book Economics in One Lesson. Here is Hazlitt’s version:

 

from ECONOMICS IN ONE LESSON  by Henry Hazlitt
Chapter II, “The Broken Window”
_________

   A young hoodlum, say, heaves a brick through the window of a baker’s shop.  The shopkeeper runs out furious, but the boy is gone.  A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies.  After a while the crowd feels the need for philosophic reflection.  And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side.  It will make business for some glazier.  As they begin to think of this they elaborate upon it.  How much does a new plate glass window cost?  Two hundred and fifty dollars?  That will be quite a sun.  After all, if windows were never broken, what would happen to the glass business?  Then, of course, the thing is endless.  The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum.  The smashed window will go on providing money and employment in ever-widening circles.  The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor. 

 Now let us take another look.   The crowd is at least right in its first conclusion.  This little act of vandalism will in the first instance mean more business for some glazier.  The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death.  But the shopkeeper will be out $250 that he was planning to spend for a new suit.  Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury).  Instead of having a window and $250 he now has merely a window.  Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit.  If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer. 

   The glazier’s gain of business, in short, is merely the tailor’s loss of business.  No new “employment” has been added.  The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier.  They had forgotten the potential third party involved, the tailor.  They forgot him precisely because he will not now enter the scene.  They will see the new window in the next day or two.  They will never see the extra suit, precisely because it will never be made.  They see only what is immediately visible to the eye.*

source link: http://freedomkeys.com/window.htm

  Basic economics does not have to be so terribly difficult to understand. The problem is that we have been immersed in the hare-brained theories and intellectual gymnastics of Keynsian and Chicago School economists for far too long. But you have a choice. If you read, instead, the Austrian School economists, you will likely find that you do understand basic economics because it makes perfect sense.

In his talk at the 2008 Mises Circle, Lew Rockwell said:

When people hear the words monetary policy, they figure that this is something they will leave to experts. And central bankers have an astonishing talent for obfuscation to the point that no one knows with certainty precisely what they are doing.

The whole show is designed to make us go to sleep and not think about what is really going on.

 Isn’t it about time we wake up and begin to understand what our government is doing with our money, our children’s money, our grandchildren’s money?  Consider the following, also from Lew Rockwell’s 2008 Mises Circle talk:

I ask you to consider the absurd discussion of a stimulus package designed to rescue the economy from recession. The idea is that the government will inject funds into private markets to stimulate them to the point that they will run on their own. Not once in this debate have I heard anyone ask the core question: where is this money going to come from?

It seems that Washington wants us to believe that they have some magic machine that can turn up $150 billion in new assets without anyone having to do anything to make these assets appear. One wonders, then, why we need to wait until a recession to stimulate the economy. Why not magically create hundreds of billions every day, and not just for this country but for the entire world? Why are we holding back?

It is probably too late to prevent this new “stimulus” from becoming law, but if we do not educate ourselves now, share our knowledge with others and let our politicians know that we have awakened,  this misguided spending will happen again and again until America falls as surely as Rome fell.

Read the articles linked in this post. Go to http://www.mises.org/ and http://www.lewrockwell.com/. Learn to see that which is not seen.

Lew Rockwell – How This Happened

January 19, 2009

How This Happened

For years, many of us puzzled about how something so stupid and destructive as the New Deal could have happened. The stock market crashed because it was over-inflated. That’s nothing new. History is filled with credit-filled bubbles that pop. Resources are reallocated to reflect economic reality and we move on.

The New Deal was different. It actually began under Hoover, who initiated new spending programs and jobs programs, and tried to inflate the money supply and bail out the banks. He was blasted by FDR for his big government policies, and FDR won the election. Once in power, FDR went nuts, instituting a program of central planning that combined features of the Soviet and Fascist models.

It was one idiotic program after another. They tried to raise wages when they should have fallen. They tried to save banks that should have collapsed. They destroyed resources when they were most needed. They encouraged spending when people should have been saving. They smashed the dollar at a time when it needed to be shored up. They cartelized business when competition was most necessary.

What were the results? Economic growth went nowhere between 1933 and 1939, with real gross domestic product per adult still 27 percent below trend at the end. Per capita GDP was lower in 1939 than in 1929. Unemployment was at 17.2 percent in 1939. This was actually higher than it was in 1931. This is despite 100 percent increases in monetary expansion. Taxes had tripled. Employing people became ever more expensive due to unions and national income guarantees.

Every time the economy would bottom out and genuine recovery would begin, policy would knock it back down again. Other seeming upturns were entirely artificial: make work instead of real work, for example. Regimentation was everywhere, so that business couldn’t compete, farmers were destroying livestock and crops on command, and dissidents were being ferreted out through police-state tactics.

In other words, the whole project was a massive dud. It turned what might have been a short downturn into a decade-long national calamity, the biggest cost of which was freedom itself. And then as a cover-up for the calamity, there was war. At last FDR found some use for those unemployed workers: send them to kill and be killed at taxpayer expense. As for wartime price controls and nationalization, it was the New Deal by other means.

(For a full account, with all the detail, in scintillating prose, see Flynn’s Roosevelt Myth.)

Was it some sort of national insanity?

No, it was a power grab, and the current political moment shows precisely how this happens. A small group of elites, cut off from the broader reality, decide to finagle the system to serve themselves and their friends in the short term while forgetting the big picture and the long term. Sensible people try to point out obvious facts but their voices are drowned out.

Continue reading…

List of Troubled Banks

January 6, 2009

What bankers and politicians do not want you to know! Where does your bank stand?

LewRockwell.com Blog: List of Troubled Banks

There is also a map version, for those who are interested.

The Threat of Hyperinflation

December 19, 2008

In an article for CBS News about the auto industry bailout, Declan McCullagh references a report by Celent, a financial services consultancy.

McCullagh later wrote to Lew Rockwell that readers of the LRC Blog might be interested in some additional information he found in the Celent report, particularly that:

M0 money supply “has recently increased at a pace never seen before in US history,” and has increased as much in the last 90 days as it has in the last 83 years.

The M0, according to Wikipedia,  measures “currency (notes and coins) in circulation and in bank vaults, as well as cash (reserves) owned by banks that is held at the central bank. M0 is usually called the monetary base–the base from which other forms of money (like checking deposits, listed below) are created–and is traditionally the most liquid measure of the money supply.”

The stage has been set for hyperinflation in the United States. What remains to be seen is if the Federal Reserve Banking cartel can reign in the huge increase of currency they have created or if hyperinflation will happen despite their efforts to prevent it.

Given how wrong the Fed has been about so much lately, I’m not feeling terribly confident that they will be able to prevent hyperinflation. They don’t call him “Helicopter Ben” Bernanke for nothing.