Faulty Depression History

Every time I see an investment product, like a stock or mutual fund, they always list the past earnings (always positive, of course) as a selling point. But if you notice, they are always sure to put in: "past performance does not guarantee future results." This is good advice, however. The economy consists of millions, billions even, of autonomous actors making their own decisions in an ever-changing environment. It would be foolish to look exclusively to the past to see into the future.

That is why I hate when people like Christina Romer, chairwoman of Barack Obama's Council of Economic Advisers, point to empirical evidence from the Great Depression to justify the policy of today as if it will have the same effects. But what I hate even more is when the empirical evidence doesn't even support the claim. Romer thinks it was a reduction in deficit spending that caused "the depression within the Depression" of 1937. Luckily we have Mises.org, where a great man like Robert Murphy can post an analysis of this claim. Click the link to find out why Romer's Keynesian fallacy is wrong. Hint: the empirical evidence is ambiguous and contradictory.

Reality Check: The Causes of Inflation

Frank Shostak has written a simple yet brilliant article over at Mises.org explaining the recent increases in inflation. Ben Bernanke and other establishment economists will have you believe that inflation is caused by high commodity prices, such as the record price of oil. Mr. Shostak notes, correctly, that no single commodity can cause a general rise in prices. Only an increase in the supply of money and credit can cause the overall level of prices to rise. I won't try to explain any further; just read Mr. Shostak's uncomplicated and lucid essay on the true causes of inflation.

The Ron Paul Counter-Revolution

Many libertarians laud the American colonists for instigating a revolution against the British crown, and rightly so. I don't see any more effective redress for the time and circumstances. But I have begun to think that continuing such an analogy to the Ron Paul movement is in error.

Can we really call this the Ron Paul Revolution? I say this is a Counter-Revolution. What is revolutionary about bringing back the traditions of freedom and limited government? I say it is revolutionary to call for destroying the Constitution and starting wars to "democratize" those countries we view as uncivilized.

Garet Garrett put it best in the opening of The Revolution Was:

"There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom."

We are here to take back what is rightfully ours; no more New Deal-style socialism; no more Wilsonian wars for "democracy"; we want authentic prosperity and lasting peace.

What brought this all together for me was reading a blog post by John Cochran on the Mises Institute Blog. He posted a poem by Patrick Barrington, entitled "I Want to be a Consumer":

I Want to be a Consumer

"And what do you mean to be?"
The kind old Bishop said
As he took the boy on his ample knee
And patted his curly head.
"We should all of us choose a calling
To help Society's plan;
Then what to you mean to be, my boy,
When you grow to be a man?"

"I want to be a Consumer,"
The bright-haired lad replied
As he gazed into the Bishop's face
In innocence open-eyed.
"I've never had aims of a selfish sort,
For that, as I know, is wrong.
I want to be a Consumer, Sir,
And help the world along."

"I want to be a Consumer
And work both night and day,
For that is the thing that's needed most,
I've heard Economists say,
I won't just be a Producer,
Like Bobby and James and John;
I want to be a Consumer, Sir,
And help the nation on."

"But what do you want to be?"
The Bishop said again,
"For we all of us have to work," said he,
"As must, I think, be plain.
Are you thinking of studying medicine
Or taking a Bar exam?"
"Why, no!" the bright-haired lad replied
As he helped himself to jam.

"I want to be a Consumer
And live in a useful way;
For that is the thing that is needed most,
I've heard Economists say.
There are too many people working
And too many things are made.
I want to be a Consumer, Sir,
And help to further trade."

"I want to be a Consumer
And do my duty well;
For that is the thing that is needed most,
I've heard Economists tell.
I've made up my mind," the lad was heard,
As he lit a cigar, to say;
"I want to be a Consumer, Sir,
And I want to begin today."

The true revolutionaries are those who inverted the entire discipline of economics. The Austrian economists fought for decades to show that prosperity can only be attained through production, savings, and capital accumulation.

The post-Keynesian and neoclassical economists of today would have you believe that printing money and spending it is the true path to a world of wealth. That is simply wrong; it is, however, the true path to depression and financial disarray.

I could be mistaken, but I do not see what is revolutionary about returning to sound economics, limited government, and a humble foreign policy. We had it once and they stole it from us. Let's win it back.

Long Live the Counter-Revolution!

How Counterfeiting Can Make Us Rich

One of the greatest blog posts I have seen in a while; short, yet very telling:
"NYT:

A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.

And it makes you wonder why they don't do a one-time zillion dollar infusion of 'capital' and make the whole world wealthy forever." - Jeff Tucker, Mises.org

This is why I can gladly call myself a follower of the Austrian school of economics. The neo-Keynesians and Friedmanites can't explain why Fed tinkering in the economy is bad. In fact, they encourage it. Printing new money and injecting it into an already ailing economy is not going to make us rich. The only road to true wealth is through free-markets and natural capital accumulation.