Spoken Mises

For all the talk by the Federal Reserve about "inflation targeting," we now see that responding to short-run problems is paramount for the Fed. Holding the line on inflation is something the Fed does when it is convenient. Resorting to inflating the money supply when times are tough is predictable, as is a continuing loss of purchasing power of the US dollar. The only uncertainty is how fast the dollar will lose purchasing power. Will it be at a creeping rate, or at a galloping rate, or at a hyperinflationary rate? You might think that we learned our lesson about inflation during the 1970s, when we moved first from a creeping to a galloping rate, and then risked a further move to hyperinflation. The double-dip recession we then went through starting in 1979 fell in the second tier of economic downturns (below only the Great Depression). There is currently no indication that a severe downturn is on the horizon. But, if we work hard enough at it, with fiscal and monetary policy pumping up the economy and delaying and exacerbating the inevitable, we can make such a severe recession possible in the future.

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Dealing with Recession (1.58 MB)

Jonah Golberg has in the past treated libertarians with disdain, but here he offers an analysis of fascism that libertarians will find familiar. Goldberg has been influenced by John T. Flynn's comparison of Franklin Roosevelt's New Deal with Italian fascism; and he cites Friedrich Hayek with respect. He has learned from Murray Rothbard on the progressives as well. (He at one point remarks, "if libertarianism could account for children and foreign policy, it would be the ideal political philosophy.") Although Liberal Fascism contains much important information, its many mistakes require that it be used with extreme caution. Jonah Goldberg should acquire a more accurate knowledge of history before he presumes to instruct others.

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Fascism, Left and Right (2.86 MB)

Thanks to recent technological innovations, companies like 23andMe are now able to offer comprehensive genetic profiles that can reveal predispositions towards certain health problems, and allow patients to take proactive measures to prevent them. Unfortunately, this potentially lifesaving diagnosis will not be available to most individuals because of so-called "genetic privacy" laws, such as the Genetic Information Nondiscrimination Act, passed by the House last year. One common argument used to justify such laws is that genetic profiling will lead to a "second class" of people who cannot obtain insurance or employment.

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Genetic Discrimination Saves Lives (1.19 MB)

Last Tuesday, January 22, 2008, the US central bank lowered its federal funds rate target by a hefty 0.75% to 3.5%. The panicky decision to lower the fed funds rate target was made ahead of the Fed's meeting at the end of this month. Last Tuesday's cut by the Fed was the largest nonscheduled interest-rate cut in more than 20 years. Let us say that the present aggressive interest rate stance by the Fed fails to prevent the economy from falling into a recession; what kind of action is Bernanke then going to undertake? In some of his writings, he has suggested that, under such circumstances, the Fed should adopt a very aggressive stance and start pushing money on a massive scale, i.e., helicopter money. Needless to say that if this were to happen, Bernanke would run the risk of badly damaging the foundations of the real economy.

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Why Is Bernanke Trying to Fight the Bear? (1.95 MB)

For the present and the foreseeable future, writes George Reisman, there is probably nothing that will stop the Fed from continuing with its inflation. Is there anything that can be done to stop the potential destruction of the real value of all dollar-denominated savings and long-term contracts by a flood of inflation? Is there anything that can protect people from a possible tsunami of inflation in the United States? There is something that could be done. There is a financial life raft, as it were, that could be made available to everyone, that would enable people to salvage at least some significant portion of the real value of their savings and contracts denominated in fixed sums of dollars. It is something much more urgently needed, aimed at a much more realistic danger, and much more feasible than efforts to control global warming, say. What is it? It is the enactment of a creditors' protection bill, whose essential provisions would be the insertion into all outstanding contracts of a limited, contingent gold clause, and the removal of all legal obstacles to the inclusion of such clauses in all future contracts.

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A Creditors' Protection Bill (3.88 MB)

img alt="" hspace="15" src="http://mises.org/images4/BrokenWindow.png" align="right" border="0" />It is not a good thing to destroy wealth. Bastiat puts it this way: "Society loses the value of things which are uselessly destroyed." It sounds like an unexceptional claim. But herein rests the core case against everything the government does. Perhaps, then, we can see why the allegory is not better known. If we took it seriously, we would dismantle the whole apparatus of American economic intervention. If you are with me to this point, perhaps you have a hard time believing that anyone really believes that wealth destruction is actually a good thing. Let me try to show that the fallacy is as pervasive as ever.

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The Broken Window Fallacy Reapplied (3.98 MB)

Years of spending, inflating, taxing, and redistributing has left the US economy teetering on a recession that our best and brightest — meaning the ones who created this mess — claim requires a multibillion-dollar economic-relief package to quell fears, promote confidence, and spur recovery. And, one might add, to keep things calm past election time, which is the real purpose of this bipartisan proposal. It leaves you wondering about what happened to the 1990s boom, a credit-fueled expansion also influenced by a peace dividend. The end of the Cold War produced a floundering federal government that lost its rationalization to grow and found itself unsure of its purpose, thus promoting an era of relative peace and prosperity. Oh, how things changed in the 2000s, with new monsters to destroy and new justifications for centralized power!

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Fiscal Follies (1.68 MB)

Garet Garrett's classic work on FDR: 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. There are those who have never ceased to say very earnestly, "Something is going to happen to the American form of government if we don't watch out." These were the innocent disarmers. Their trust was in words. They had forgotten their Aristotle. More than 2,000 years ago he wrote of what can happen within the form, when "one thing takes the place of another, so that the ancient laws will remain, while the power will be in the hands of those who have brought about revolution in the state." Worse outwitted were those who kept trying to make sense of the New Deal from the point of view of all that was implicit in the American scheme, charging it therefore with contradiction, fallacy, economic ignorance, and general incompetence to govern.

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The Revolution Was (18.74 MB)

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Review of Gene Epstein, Econospinning (2.29 MB)

Some 70 percent of economic growth over the past years was a result of consumption. Now that consumption is slowing down — with lower retail expenditure during the Christmas season and dropping charges to credit cards — a tax rebate will again fan consumption. It will not do a thing to increase savings, from which future investments can be made, writes Wolfgag Grassl. We all know by now that the way out of a recession is through the building of capital goods, not through the temporary fattening up of American retailers and Chinese manufacturers. Second, government can finance its largesse only by either raising taxes — if for political reasons not now, then in future years — or by borrowing even more. Already today, total public debt amounts to over $9 trillion, or two thirds of annual GDP. About 44 percent of it is owed to foreign entities. It will have to be paid back — whether through years of lower consumption, or domestic inflation, or a reduction in the external value of the dollar.

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Tax Rebates: Old Wine in Old Skins (991.00 KB)