So we begin: "I have called this book the General Theory of Employment, Interest and Money , placing the emphasis on the prefix general." One of the criticisms of Keynes is that he paid too much attention to the Great Depression in writing A General Theory. Obviously an economist writing when Keynes did would have the latest recession firmly in mind, but by his own standard, we should be able to find, in his theory, a policy recommendation--even if that recommendation is to do nothing--for any situation which could confront those with monetary authority. If we can't find this, his theory is not general at all.
In a footnote, Keynes defines classical as it regards economics: "'The classical economists' was a name invented by Marx to cover Ricardo and James Mill and their predecessors, that is to say for the founders of the theory which culminated in the Ricardian economics. I have become accustomed, perhaps perpetrating a solecism, to include in 'the classical school' the followers of Ricardo, those, that is to say, who adopted and perfected the theory of the Ricardian economics, including (for example) J. S. Mill, Marshall, Edgeworth and Prof. Pigou."
I'm too ignorant to comment on the prudence of lumping all of these men together. Certainly Keynes was aware of differences of opinion among economists--he comments on them in the Preface. Still, the biggest oversight here might be in leaving out other schools; Mises was forgotten by his point, but are Schumpeter and Hayek--the latter of whom was well known by Keynes--to be thrown in with Marshall et. al.? Hayek's name appears in the index, so I suppose we shall see.
He continues: "I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium." This is clumsily worded. He seems to be saying that the classical theory only deals with the economy as it exists in equilibrium--or, weaker yet, only a subset of this. I'm not sure what "the possible positions of equilibrium" could be.
More from Keynes: "Moreover, the characteristics of the special case assumed by the classical theory happen not to be those of the economic society which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience." In other words, equilibrium is a theoretical construction; in the real world, the economy is always moving toward of falling away from equilibrium, a point it never reaches because it is always changing.
Monday, September 20, 2010
Keynes - The General Theory - Preface
Keynes tells us that, while he hopes the book "will be intelligible to others", his audience is his "fellow economists". (p. v) He is going to expose the fault with "orthodox economics"--the term is not defined; presumably he is referring to Alfred Marshall, the professor who taught the only economics class Keynes ever took. Specifically, he refers to "a lack of clearness and of generality in the premises." Whether or not his predecessors were at fault for these reasons, we have a measure by which to judge The General Theory. Rethinking the premises which led those who subscribe to "the classical theory"--also not defined--will entail "highly abstract argument and much controversy."
The second paragraph contains an interesting sentence: "But, if my explanations are right, it is my fellow economists, not the general public, whom I must first convince." If the economists grok his doctrine, they will be able to pitch it to those who run governments; when the beneficent policies have been implemented, the people will then benefit. Keynes is ruling out an attempt to convince the people to behave in a certain manner because his theory is dependent--as we shall see--on the people behaving in a certain way when certain economic conditions are present.
Keynes comments on the relationship between this book and his Treatise on Money. Since I've not read this previous work, its connection to The General Theory is of no interest.
The next paragraph is more interesting: "It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics (along with the other moral sciences), where it is often impossible to bring one's ideas to a conclusive test either formal or experimental" We could make a snide remark here about Keynesianism, but I'm more concerned with whether any conceivable test could be made to prove or disprove his theory. I would, following Ludwig von Mises, posit that no such test could be conceived. But for who do not follow Mises, the massive stimuli enacted by many of the governments throughout the world in 2008 may serve to indicate something about the doctrine of Keynes. One wonders what the man himself would think.
Finally, Keynes claims: "The ideas which are here expressed so laboriously are extremely simple and should be obvious." We shall see.
The second paragraph contains an interesting sentence: "But, if my explanations are right, it is my fellow economists, not the general public, whom I must first convince." If the economists grok his doctrine, they will be able to pitch it to those who run governments; when the beneficent policies have been implemented, the people will then benefit. Keynes is ruling out an attempt to convince the people to behave in a certain manner because his theory is dependent--as we shall see--on the people behaving in a certain way when certain economic conditions are present.
Keynes comments on the relationship between this book and his Treatise on Money. Since I've not read this previous work, its connection to The General Theory is of no interest.
The next paragraph is more interesting: "It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics (along with the other moral sciences), where it is often impossible to bring one's ideas to a conclusive test either formal or experimental" We could make a snide remark here about Keynesianism, but I'm more concerned with whether any conceivable test could be made to prove or disprove his theory. I would, following Ludwig von Mises, posit that no such test could be conceived. But for who do not follow Mises, the massive stimuli enacted by many of the governments throughout the world in 2008 may serve to indicate something about the doctrine of Keynes. One wonders what the man himself would think.
Finally, Keynes claims: "The ideas which are here expressed so laboriously are extremely simple and should be obvious." We shall see.
John Maynard Keynes: The General Theory of Employment, Interest and Money
This post will contain all of the posts my brother Jeff and I put up in our discussion of John Maynard Keynes's The General Theory of Employment, Interest and Money. I'll try to keep the divisions by chapter.
Preface
Chapter I
Chapter II - Sections I and II
Chapter II - Sections III - VII
Chapter III
Chapter IV
Chapter V
Chapter VI
Chapter VII
Chapter VIII
Chapter IX
Chapter X
Chapter XI
Chapter XII
Chapter XIII
Chapter XIV
Chapter XV
Chapter XVI
Chapter XVII
Chapter XVIII
Chapter XIX
Chapter XX
Chapter XXI
Preface
Chapter I
Chapter II - Sections I and II
Chapter II - Sections III - VII
Chapter III
Chapter IV
Chapter V
Chapter VI
Chapter VII
Chapter VIII
Chapter IX
Chapter X
Chapter XI
Chapter XII
Chapter XIII
Chapter XIV
Chapter XV
Chapter XVI
Chapter XVII
Chapter XVIII
Chapter XIX
Chapter XX
Chapter XXI
Sunday, September 19, 2010
Weekly Column - 09/19/2010
This week's column:
"The man being coerced, therefore, always loses in utility as a result of the intervention, for his action has been forcibly changed by its impact.” – Murray Rothbard, Man, Economy, and State
There are few things that are so misunderstood as the free market. The very term conjures up hobgoblins: from robber barons and Dickensian businessmen, to Gordon Gecko and Bernie Madoff.
Yet the free market is nothing more than a system of voluntary exchange. A producer offers a good or a service to consumers; in a primitive economy, the consumer offers a good or a service in return; later, some form of money—historically, it has usually been silver or gold—allows a single good to take the place of an endless series of bartered items. This allowed for greater specialization: rather than having to acquire the good the producer wants, consumers can exchange money with the understanding that the producer can then, as a consumer, offer this good in exchange with another producer. Money allows for greater specialization, but it does not alter the system as one of voluntary exchange.
"The man being coerced, therefore, always loses in utility as a result of the intervention, for his action has been forcibly changed by its impact.” – Murray Rothbard, Man, Economy, and State
There are few things that are so misunderstood as the free market. The very term conjures up hobgoblins: from robber barons and Dickensian businessmen, to Gordon Gecko and Bernie Madoff.
Yet the free market is nothing more than a system of voluntary exchange. A producer offers a good or a service to consumers; in a primitive economy, the consumer offers a good or a service in return; later, some form of money—historically, it has usually been silver or gold—allows a single good to take the place of an endless series of bartered items. This allowed for greater specialization: rather than having to acquire the good the producer wants, consumers can exchange money with the understanding that the producer can then, as a consumer, offer this good in exchange with another producer. Money allows for greater specialization, but it does not alter the system as one of voluntary exchange.
Wednesday, September 15, 2010
Weekly Column - 09/13/2010
This week's column:
"By the command of the sultan, the churches and fortifications of the Latin cities were demolished; a motive of avarice or fear still opened the holy sepulchre to some devout and defenceless pilgrims; and a mournful and solitary silence prevailed along the coast which had so long resounded with the WORLD’S DEBATE." – Edward Gibbon, The Decline and Fall of the Roman Empire
Thus the master historian recounts the Fall of Acre, a pivotal battle in the story of the Kingdom of Jerusalem. While crusading to the Holy Land ceased after Acre’s fall, crusading itself continued. And while Islam retained ascendancy in the Middle East, fighting between its adherents and Christendom proceeded for centuries. The world’s debate was far from over.
Two stories this summer have assured us that the debate rages still. First, there was the issue of the ground zero mosque. As the building was being erected two blocks from the twin towers, and whereas there were already mosques—to say nothing of strip clubs—within a two block radius of ground zero, the fervor seemed far and away over the top. To a libertarian, it’s simply a matter of property rights. The owners of the property should be fit to build as they choose.
"By the command of the sultan, the churches and fortifications of the Latin cities were demolished; a motive of avarice or fear still opened the holy sepulchre to some devout and defenceless pilgrims; and a mournful and solitary silence prevailed along the coast which had so long resounded with the WORLD’S DEBATE." – Edward Gibbon, The Decline and Fall of the Roman Empire
Thus the master historian recounts the Fall of Acre, a pivotal battle in the story of the Kingdom of Jerusalem. While crusading to the Holy Land ceased after Acre’s fall, crusading itself continued. And while Islam retained ascendancy in the Middle East, fighting between its adherents and Christendom proceeded for centuries. The world’s debate was far from over.
Two stories this summer have assured us that the debate rages still. First, there was the issue of the ground zero mosque. As the building was being erected two blocks from the twin towers, and whereas there were already mosques—to say nothing of strip clubs—within a two block radius of ground zero, the fervor seemed far and away over the top. To a libertarian, it’s simply a matter of property rights. The owners of the property should be fit to build as they choose.
Sunday, September 05, 2010
A Collapse Cometh
Becoming an expert on Japanese politics is unlikely to provide a path to fame and influence in America. But writing a book that seemed to predict 9/11 might do the trick. Such has been the road traveled by Chalmers Johnson. In 2000, he wrote a book titled Blowback. The term, which comes from the CIA, encapsulates the unintended consequences of covert action by the government upon its citizens. Johnson focused on the slew of U.S. Military bases in Okinawa, Japan to demonstrate the concept. On September 11, blowback hit the U.S. in spectacular form. Previously unheralded, Johnson's book quickly became a best seller.
There followed two more books in what became known as the Blowback trilogy. Secondly came The Sorrows of Empire, published in 2004. In it, he cataloged the immense empire of bases--perhaps one thousand in number--which the U.S. occupies across well over one hundred nations throughout the world. These bases are not only costly, siphoning American wealth to rich contractors; they also foment hatred of the United States and its policies. In 2007, Nemesis rounded out the trilogy. Johnson argued that the empire threatens, not only our democracy--which is forever waging wars without the consent of the people--but the economic well-being of all Americans. If we do not change our policies, our empire will collapse, leaving the nation mired in bankruptcy.
Like the Hitchhiker's Guide, the Blowback trilogy now has more than three books. Johnson's most recent contribution is Dismantling the Empire: America's Last Best Hope. Despite the title, he leaves the reader feeling offers little by way of hope. Although he concludes by giving the reader "10 steps toward liquidating the empire", other essays supply ample evidence that the problem may prove intractable. Johnson notes that Obama has expanded the war in Afghanistan and spent more on defense in 2010 than Bush did in his last year in power. The economy may be tanking, but the Department of Defense and its legion of dependencies are still living large.
The book breaks little new ground. In fact, only two of the fifteen essays, as well as the introduction, represent previously unpublished material; the rest were written by Johnson during the last several years. Still, his book offers a reasonably complete criticism of the U.S. empire. The Blowback trilogy is well worth reading, but those who do not desire to tackle the entire thing would do well to start with Dismantling the Empire.
The book is divided into five parts, the last of which offers a program for reform. The first part recounts recent American foreign policy misadventures, from the arming of Afghani militants to fight the Soviets, up through the present Iraqi "conflict". We are reminded that, during the latter, armed forces stood by--and even partook--as ancient artifacts were stolen and buildings were pillaged and burned.
The second part examines the CIA and the ever increasing dependence of the Department of Defense on well-paid mercenaries. The Agency's stunning ineptitude is covered thoroughly. Those who believe that the CIA's mission ought to be accomplished will clamor for reform. Johnson, who finds much of the mission itself abhorrent, advocates abolition. In the third part, Johnson gives us an overview of the empire of bases he dealt with in the trilogy's second book.
The fourth part, "the pentagon takes us down" is the most fascinating. The United States spends more money on defense than the rest of the world combined. Tabulating the costs of empire can be difficult, since so much of it is hidden, but "conservatively calculated", the U.S. spent at least 1.1 trillion in fiscal year 2008. Alas, reducing the defense budget requires herculean political effort. Many thousands of Americans are remunerated lucratively by the racket in munitions.
Moreover, because politicians subscribe to what Johnson calls "military Keynesianism", any reduction in defense spending is seen as bad for the economy. The reality is that destructive spending crowds out private sector development; instead of making cars and televisions, the U.S. economy now produces fighter jets and bombs. Once the leader of the world in manufacturing, China is set to pass the U.S. by next year. These numbers obscure a reality which is direr still: "By 1990, the value of the weapons, equipment, and factories devoted to the Department of Defense was 83 percent of the value of all plants and equipment in American manufacturing." The empire wastes valuable resources, contributing only to the national debt.
Johnson is correct in noting that the empire will speed us toward bankruptcy. But he is wrong in insinuating that liquidating it will solve the problem. The debt crisis threatens to destroy much of the western world. Yet only America is cursed with empire. Eliminating this rope around the neck of the republic is a necessary step towards restoring solvency, but it is an insufficient one. When Johnson advises that the money spent on defense could be used to pay for Social Security and schools, he fails to realize that while the empire is doomed, social democracy is also facing an existential crisis.
One other caveat: twice Johnson reveals his support for abortion, once by bemoaning the fact that women who are impregnated while in the service cannot procure abortions on base. At long last, chalk one up for the empire. The world is not a better place because American women soldiers can kill their unborn children just as easily as they can slaughter an Afghani wedding party. An opposition to aggressive violence requires defending human life in all its forms.
The salient point is that, whatever his viewpoints on other topics, Johnson is completely correct when it comes to the empire. Dismantling it is an integral step in the restoration of the republic. Obama has proven that, like his progressive predecessors--Wilson, FDR, LBJ--Democrats can wage war just like Republicans. Chalmers Johnson proves that they can also offer a cogent critique of profligate defense spending. As a fellow enemy of empire, I heartily recommend Johnson's latest book. If the two parties in Washington can unite to keep the wars going, those of divergent ideological backgrounds can set aside our differences to prevent them from doing so.
There followed two more books in what became known as the Blowback trilogy. Secondly came The Sorrows of Empire, published in 2004. In it, he cataloged the immense empire of bases--perhaps one thousand in number--which the U.S. occupies across well over one hundred nations throughout the world. These bases are not only costly, siphoning American wealth to rich contractors; they also foment hatred of the United States and its policies. In 2007, Nemesis rounded out the trilogy. Johnson argued that the empire threatens, not only our democracy--which is forever waging wars without the consent of the people--but the economic well-being of all Americans. If we do not change our policies, our empire will collapse, leaving the nation mired in bankruptcy.
Like the Hitchhiker's Guide, the Blowback trilogy now has more than three books. Johnson's most recent contribution is Dismantling the Empire: America's Last Best Hope. Despite the title, he leaves the reader feeling offers little by way of hope. Although he concludes by giving the reader "10 steps toward liquidating the empire", other essays supply ample evidence that the problem may prove intractable. Johnson notes that Obama has expanded the war in Afghanistan and spent more on defense in 2010 than Bush did in his last year in power. The economy may be tanking, but the Department of Defense and its legion of dependencies are still living large.
The book breaks little new ground. In fact, only two of the fifteen essays, as well as the introduction, represent previously unpublished material; the rest were written by Johnson during the last several years. Still, his book offers a reasonably complete criticism of the U.S. empire. The Blowback trilogy is well worth reading, but those who do not desire to tackle the entire thing would do well to start with Dismantling the Empire.
The book is divided into five parts, the last of which offers a program for reform. The first part recounts recent American foreign policy misadventures, from the arming of Afghani militants to fight the Soviets, up through the present Iraqi "conflict". We are reminded that, during the latter, armed forces stood by--and even partook--as ancient artifacts were stolen and buildings were pillaged and burned.
The second part examines the CIA and the ever increasing dependence of the Department of Defense on well-paid mercenaries. The Agency's stunning ineptitude is covered thoroughly. Those who believe that the CIA's mission ought to be accomplished will clamor for reform. Johnson, who finds much of the mission itself abhorrent, advocates abolition. In the third part, Johnson gives us an overview of the empire of bases he dealt with in the trilogy's second book.
The fourth part, "the pentagon takes us down" is the most fascinating. The United States spends more money on defense than the rest of the world combined. Tabulating the costs of empire can be difficult, since so much of it is hidden, but "conservatively calculated", the U.S. spent at least 1.1 trillion in fiscal year 2008. Alas, reducing the defense budget requires herculean political effort. Many thousands of Americans are remunerated lucratively by the racket in munitions.
Moreover, because politicians subscribe to what Johnson calls "military Keynesianism", any reduction in defense spending is seen as bad for the economy. The reality is that destructive spending crowds out private sector development; instead of making cars and televisions, the U.S. economy now produces fighter jets and bombs. Once the leader of the world in manufacturing, China is set to pass the U.S. by next year. These numbers obscure a reality which is direr still: "By 1990, the value of the weapons, equipment, and factories devoted to the Department of Defense was 83 percent of the value of all plants and equipment in American manufacturing." The empire wastes valuable resources, contributing only to the national debt.
Johnson is correct in noting that the empire will speed us toward bankruptcy. But he is wrong in insinuating that liquidating it will solve the problem. The debt crisis threatens to destroy much of the western world. Yet only America is cursed with empire. Eliminating this rope around the neck of the republic is a necessary step towards restoring solvency, but it is an insufficient one. When Johnson advises that the money spent on defense could be used to pay for Social Security and schools, he fails to realize that while the empire is doomed, social democracy is also facing an existential crisis.
One other caveat: twice Johnson reveals his support for abortion, once by bemoaning the fact that women who are impregnated while in the service cannot procure abortions on base. At long last, chalk one up for the empire. The world is not a better place because American women soldiers can kill their unborn children just as easily as they can slaughter an Afghani wedding party. An opposition to aggressive violence requires defending human life in all its forms.
The salient point is that, whatever his viewpoints on other topics, Johnson is completely correct when it comes to the empire. Dismantling it is an integral step in the restoration of the republic. Obama has proven that, like his progressive predecessors--Wilson, FDR, LBJ--Democrats can wage war just like Republicans. Chalmers Johnson proves that they can also offer a cogent critique of profligate defense spending. As a fellow enemy of empire, I heartily recommend Johnson's latest book. If the two parties in Washington can unite to keep the wars going, those of divergent ideological backgrounds can set aside our differences to prevent them from doing so.
UPDATE: The link to the original column now being a dead one, I have placed the entire text of my review above.
Saturday, September 04, 2010
Voting as a Catholic
If you listen closely, you can hear the steady drums begin to beat. Listen very carefully, and the drums give way to a steady, mindless chant: "Vote for Republicans in November. Most important election ever." We are always told this.
Yet even aside from the unlikelihood that supporting the lesser-evil party will do anything to achieve conservative goals--whatever they are--there are serious ethical concerns which prohibit Catholics from voting for most politicians in 2010 America.
Courtesy of Ryan W. McMaken over at the LRC blog, fellow Catholic Mark Shea captures this point well:
I have abandoned the game of supporting candidates who advertise themselves as “30% less evil than the other leading brand.” I will not support candidates of any stripe who ask me to support intrinsic grave evil. Please don’t tell me that’s expecting perfection. It’s not. It’s a bare minimum request for least common denominator civic decency. I don’t ask perfection of either GOP or Dem. I simply ask that they stop telling me I have to support policies which Catholic moral teaching describes as “worthy of the fires of hell”. Both parties do this in various ways, therefore I will not support any candidate from either party that does. Conversely, if any candidate from either party tells me he will not be supporting grave and intrinsic evil, I will at least consider voting for him. So far, the pickings are slim.
Now, this doesn't alter my position that voting itself is of highly problematic nature. (The columns I wrote for the Lode on the matter have disappeared; if I find them, I'll try to add the links.) Anyway, Shea offers the minimum for the Catholic who believes participation in democracy is morally desirous.
It might be an amusing exercise to see how many politicians meet this criteria, but we'll save that for another day.
Yet even aside from the unlikelihood that supporting the lesser-evil party will do anything to achieve conservative goals--whatever they are--there are serious ethical concerns which prohibit Catholics from voting for most politicians in 2010 America.
Courtesy of Ryan W. McMaken over at the LRC blog, fellow Catholic Mark Shea captures this point well:
I have abandoned the game of supporting candidates who advertise themselves as “30% less evil than the other leading brand.” I will not support candidates of any stripe who ask me to support intrinsic grave evil. Please don’t tell me that’s expecting perfection. It’s not. It’s a bare minimum request for least common denominator civic decency. I don’t ask perfection of either GOP or Dem. I simply ask that they stop telling me I have to support policies which Catholic moral teaching describes as “worthy of the fires of hell”. Both parties do this in various ways, therefore I will not support any candidate from either party that does. Conversely, if any candidate from either party tells me he will not be supporting grave and intrinsic evil, I will at least consider voting for him. So far, the pickings are slim.
Now, this doesn't alter my position that voting itself is of highly problematic nature. (The columns I wrote for the Lode on the matter have disappeared; if I find them, I'll try to add the links.) Anyway, Shea offers the minimum for the Catholic who believes participation in democracy is morally desirous.
It might be an amusing exercise to see how many politicians meet this criteria, but we'll save that for another day.
Sunday, August 29, 2010
Weekly Column - 08/28/2010
This week's column:
“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.” – Garet Garrett, “The Revolution Was”
Among libertarians and contrarians of a conservative bent, it is customary to discuss the moment in history when the American Republic went awry, degenerating into an Empire and making inevitable its demise.
A small group of hardliners insist that the original mistake was ratifying the Constitution. The anti-federalists were right; the Articles of Confederation ought to have remained in place. Though drafted for noble purposes, the Constitution could too easily serve ignoble ends. The very document which enshrined limited government contained the seeds by which tyranny could grow unchecked.
Tuesday, August 24, 2010
How a bubble works
Housing prices fell during July:
Sales of previously occupied homes in the United States fell 27 percent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday. It was the largest monthly drop in the four decades that records have been kept.
Vox Day has a helpful chart over at his site.
Add this to the list of the reasons there is not and will not be an economic recovery--at least in the near future. But not only is this news not surprising, it's actually good.
Everyone recognizes that there was a bubble in housing. Apparently, though, no one knows what a bubble is. If they did, they wouldn't be greeting this as bad news. A good in a bubble is priced too highly. There are two ways to rectify this. The most obvious and straightforward way is to allow prices to fall on the bubble good; once they reach the prices the market is willing to pay, the bubble has been popped. True, those who bought at the peak of the bubble will be out of luck; but this is the inevitable nature of bubbles.
The other way to rectify the bubble problem is to inflate like mad. That way, homeowners can sell their houses at the bubble price. This is illusory, of course, since the real value of money has been reduced through inflation, but the hope is that the people don't notice this. It's problematic, too, because it runs the risk of creating another bubble. So when the dot com bubble burst, we got the housing bubble, which was worse than its predecessor.
Housing prices need to fall. They will do so. Government cannot defy the laws of economics. They can only pretend to do so for a time.
It's becoming apparent that the stimulus did little good for the economy. It is becoming even more apparent that, in the absence of government intervention, the economy will go about correcting itself. When it does this, it's called a depression.
Sales of previously occupied homes in the United States fell 27 percent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday. It was the largest monthly drop in the four decades that records have been kept.
Vox Day has a helpful chart over at his site.
Add this to the list of the reasons there is not and will not be an economic recovery--at least in the near future. But not only is this news not surprising, it's actually good.
Everyone recognizes that there was a bubble in housing. Apparently, though, no one knows what a bubble is. If they did, they wouldn't be greeting this as bad news. A good in a bubble is priced too highly. There are two ways to rectify this. The most obvious and straightforward way is to allow prices to fall on the bubble good; once they reach the prices the market is willing to pay, the bubble has been popped. True, those who bought at the peak of the bubble will be out of luck; but this is the inevitable nature of bubbles.
The other way to rectify the bubble problem is to inflate like mad. That way, homeowners can sell their houses at the bubble price. This is illusory, of course, since the real value of money has been reduced through inflation, but the hope is that the people don't notice this. It's problematic, too, because it runs the risk of creating another bubble. So when the dot com bubble burst, we got the housing bubble, which was worse than its predecessor.
Housing prices need to fall. They will do so. Government cannot defy the laws of economics. They can only pretend to do so for a time.
It's becoming apparent that the stimulus did little good for the economy. It is becoming even more apparent that, in the absence of government intervention, the economy will go about correcting itself. When it does this, it's called a depression.
Sunday, August 22, 2010
Weekly Column - 08/21/2010
I'm not going to post the full article here, as I'm trying to encourage traffic to the site which is kind enough to allow me to write for them. However, the start of the column is posted below. Follow the link for the rest of it.
“[T]here is no shortage of historical examples to support the idea that even those who nominally subscribe to an empirical approach don’t hesitate to abandon their empiricism when the data doesn’t support their theories.” – Vox Day, The Return of the Great Depression
“[T]here is no shortage of historical examples to support the idea that even those who nominally subscribe to an empirical approach don’t hesitate to abandon their empiricism when the data doesn’t support their theories.” – Vox Day, The Return of the Great Depression
The first tipoff as to the inadequacy of the current economic models should have been the inability of any of the mainstream economists to detect the economic crisis that hit the US at the end of 2007 . It’s not true to say that no one predicted it; among others, Peter Schiff certainly did. But it is true to say that both the neo-Keynesians and the monetarists were caught completely unawares. Throughout 2007, the economic advisors of both parties continued to offer reassurances to the captain’s of the economy, blissfully oblivious to the coming iceberg.
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