Hi everyone,
I’m a new member, but longtime supporter of Ron Paul and Tom Woods, which is how I found Mises. I admit I’m not adept in these types of discussion, so I would appreciate and comments and opinions on this piece I saw recently. Tom suggested I post it here to get a variet of responses. Thanks.
http://illexposed.wordpress.com/ To read whole article, click link…
January 7, 2010 by Jeremy Sofian
Congressman Ron Paul recently posted a short article on his “Texas Straight Talk” column entitled “Keynesianism Delivers a Decade of Zero“
We are going to start on the premise that the Austrian School and the Keynsian School of economics are deeply flawed, the former more so than the latter. I advocate neither and this article is going to focus on Ron Paul and the ideas he is putting forward.
Upon examination of this article it appears to be nothing more than a finger pointing rant against Paul Krugman, who has been wrong on so many issues that it appears to have the goal of propping up Ron Paul’s monetary ideas by scapegoating an incompetent economist for something far deeper than Keynsian Economics. I am going to respond to key excerpts of the article.
Afterall, Krugman is still scratching his head as to why “no” economists saw the housing bust coming. How in the world did they miss it? Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.
So, we have Ron Paul attacking Paul Krugman here, apparently in attempt to preach the infallible “Austrian” doctrine. He maintains policy makers “must” start listening to Austrian teachings if they want solid progress in the future. This is of course, disregarding the fact that the cause of the current situation was not a housing bubble, it was a derivative bubble. He then asserts the necessary “correction” is going to take a very long time.
Correction? is that what this is? a “correction” ? I would argue this is the fraud based looting of the economy by a private banking cartel and i will get into that in detail in a moment.
The Austrian free-market economists use common sense principles. You cannot spend your way out of a recession. You cannot regulate the economy into oblivion and expect it to function.
Well i have news for Congressman Paul, this is not a recession, nor a depression – but a complete systemic break-down of the entire monetary system. However, according to the backwards monetary theory of the Austrian School, no matter what happens, the economy will automatically “correct” itself so long as there are no regulations and the government stays out of the way.
I am curious as to what regulations Congressman Paul is speaking of when he mentions regulating the economy into “oblivion”, because he appears to be molding reality so it conforms to his theory. And we will touch on the very specific de-regulations that have landed us here in the first place in a moment. As far as i can see it, there has been a sweeping de-regulation of the entire financial system.
Insofar as spending your way out of a “recession”, the only spending i have seen is the donation of 24 trillion dollars to Wall Street by the privately owned (Non-Governmental Institution) Federal Reserve System. Then there is the massive war budget, which is not mentioned in this article, and finally the comparatively minuscule “stimulus” package which was a complete mess, but atleast expanded a few necessities such as food stamps for people who are starving due to the near 25% unemployment rate and destruction of many 401k, IRA and Pension retirement plans. Of course, the Federal Government insists unemployment is a mere 10% but the reality of the situation is those statistics are completely cooked.
You cannot tax people and businesses to the point of near slavery and expect them to keep producing. You cannot create an abundance of money out of thin air without making all that paper worthless. The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever. You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.
Correct, you cannot tax people or businesses to the point of near slavery and expect them to keep producing, however you also cannot blatantly ignore that fact that businesses are not producing because they are in perpetual debt and 70% of the liquidity in the banking system has been destroyed by toxic illiquid derivatives, thus banks are unable to lend. Please bear in mind, these derivatives are creations of the free-markets (In this case, the banks who are free to do what they please) and not the Government.
Congressman Paul then asserts you cannot create an abundance of money “out of thin air”. Well, this statement begs the question, how does money come into existence in the first place? Contrary to the half baked Austrian theory that a currency will have intrinsic value if it is a precious metal, a currency derives its value from the national net production out-put relative to it’s population density. Thus if gold for instance, were used as money without issuing it into something that expands the economy’s ability to produce it would also be money created “out of thin air”.
Austrian School fanatics routinely suggest or imply that a necessary ingredient to solving this problem is to simply halt or slow the creation (or “printing”) of money, but as any objective observer can now see, not only would that not solve anything — since it would neither halt nor even slow the compounding of the countless billions in unpayable interest debt that hangs over our heads — it would, by increasing the built-in money shortage, merely accelerate the speed by which the banking elite could foreclose on countless properties and businesses nationwide.
