Would be most appreciated. I am about to go up against a true intellectual: He has 2 PhDs, but he doesn’t know a goddamned thing about economics. Here is what he said
"Regulation is the issue. Turns out that when the markets were unregulated (before the Great Depression) the country went through boom/bust cycles every 8-10 years. After regulation was introduced, no more b/b cycles. Start taking away regulation in the '80s, the b/b stuff starts over.
The question is not whether regulation is good, but how much, where, and watched over by whom."
Yes, he’s wrong. Of course he’s wrong. But in the medium we are using, I will need the very shortest (yet complete) explanation of the business cycle I can get.
Knight of BAAWA, you may know him: It’s Massimo Pigliucci.
Government manipulation of the money supply by either the central bank or the government issuing unbacked currency, legal tender laws, or both cause malinvestments which are unsustainable and would not have occurred in the absence of the government action. These malinvestments eventually show their unprofitability and are liquidated in the bust phase. Boom/bust cycles happened after the great depression (did Massimo forget about the recessions of the 1970s?), especially after Nixon broke off Bretton Woods in 1971 (the intergovernment agreement regarding gold redemption). If anything, since then the cycles have gotten worse.
Massimo knows biology, but he doesn’t understand econ.
First, his facts are all wrong. There have been economic booms and busts since the founding of the country as well as many since 1933.
Second, regulation has little or nothing to do with business cycles. What is his theory? The Austrian theory of the B-Cycle states that it is the Government and Central Bank’s artificial expansion of money supply and artificial lowering of interest rates which sends false market signals to business entrepreneurs. The “boom” is when longer term capital projects get started for which there is, in fact, inadequate demand and inadequate saved capital. When the inadequate demand finally manifests itself, there is a “bust”, as these projects are re-structured or abandoned and production shifted back to the true market preference.
I personally recommend Walter Block’s quick 27 minute lecture at the Mises instute, found here: www.youtube.com/watch
It’s simple, concise, and to the point.
the many boom+busts of the 1800’s were caused by fractional-reserve banking…not only that, but we also have a couple Central Banks (and wars) that distorted the money supply and caused periods of inflation (and thus, the interest rate would also be distorted).
There’s a chart floating around, however, that shows that for each inflation there was a nearly equal deflation to correct things…after 1913? 95% inflation, with two very short and very small periods of deflation (once during the Great Depression, and once, during the 50’s).
Thank you, I will check out Block’s lecture. Still yet, the shortest scholarly and comprehensive explanation of the ABCT is Thomas Woods in the first 14:31 minutes of this lecture.
Thank you all for your suggestions. Knight’s was almost bumpsticker length, and I really appreciate that.
Now, a self-described economic journalist (with 20 years experience) has chimed in:
After 20 years a a journalist writing exclusively on economy this is real news for me. The boom-bust cycle is a built-in feature of capitalism and it has been working for at least 3000 years, long before there was any central banks.Do you remember the “the 7 lean years”? The whole idea of central banks causing the cycles in economy is surreal, as they are always just responding to pressures coming from the real-world economy and most part fumbling it, of course…
The premises that there wasn’t any regulation or that there wasn’t any other type of government intervention is false. Also there’s been more regulation since the 80’s than before the 80’s.
True: as I am prepared to point out in the next round (if there is a next round), according to Thomas DiLorenzo, at the exact moment of this latest downturn, there were 15 cabinet level positions in charge of regulating some aspect of the economy, over 150 regulatory agencies, and over 72,000 pages of regulations on the books. And that’s just at the federal level. Who knows how many more regulations there were/are at the state and local levels?
dude, i have to admit i was not the best bible student at jew school but ‘7 lean years’ was in a nightmare the pharaoh had. the pharaoh. not bill gates.
I think Marx originated the idea (1848) that capitalism is inherently prone to suffer business cycles (Therefore you can’t say the idea originated objectively.)
Clearly, capitalism hasn’t been around for 3000 years - more like since the 1830’s.
Right, and as far as I know, Marx advanced no theory of a business cycle, nor did he identify any mechanism or feature of capitalism that would cause a business cycle. He just guessed, saying basically ‘correlation is causation and capitalism causes business cycles’.
The fallacy about the individual bringing up the “7 lean years” is that yes, it effected the business cycle, but it was something beyond the control of the market place…there was going to be a period of prolonged drought where little to nothing would grow…that’s going to effect any economy, regardless of how socialistic or capitalistic they are.
The WORST depression in the history of the United States happened after the creation of a central bank. Before that, all recessions were relatively short - 1 or 2 years tops.
We have had severe economic turmoil despite the proliferation of regulations. Think of the stagflation of the 1970s, or the current Great Depression II.