Ludwig von Mises
The history of economic central planning is not exactly glorious. In fact, as American economist Thomas Sowell once noted, "in general [central planning] has a record of failure so blatant that only an intellectual could ignore or evade it."
Human progress has been three steps forward, two steps back. That a non-fringe candidate of a major political party in the United States can call himself a socialist constitutes a leap backward. That it can happen after a century of socialistic horrors: impoverishment, ruination, tyranny, war, and tens of millions dead, bespeaks not just deadly ignorance and delusion, but depravity.
Will the Fed be able to keep the game going? In a word, no. We’ve already seen that even the tiniest of interest rate hikes has gone hand in hand with a huge drop in the markets. Furthermore, the Fed’s subsidies to the banks are now on the order of $11 billion annually, but if they want to raise the fed funds rate to, say, 2 percent, then the annual payment would swell to more than $40 billion.
We cannot be sure what shape the next crisis will take, although it seems likely that it will be yet another “deflation scare”, mainly caused by falling asset prices. However, we do know what the last crisis of the current system will look like. It will entail a crumbling of the public’s faith in fiat money and the institutions that issue and administer it.
While Brazilians are angry and tired of their economic hardships, they are also incensed at the country’s history of corruption, which now includes a massive presidential scandal carried out by politicians and lobbyists during the current and previous administrations. This misconduct has given residents of all walks of life enough incentive to take their demands to the streets. Mainstream media has covered the major protests overtaking the streets of Brazil at the outset of an apparent political revolution, but few discuss the problems that have been brewing for decades in South America’s largest nation.
If you thought negative interest rates were as bad as it could get with central banks, you might be in for a surprise. Central banks have been so spectacularly unsuccessful with their accommodative monetary policies that they are discussing pulling out all the stops to get the results they want. Either you support free markets and freedom of pricing or you support central bank price-fixing and creeping socialism. There is no third way or middle road — socialism and the free market are mutually incompatible.
In response to recent claims by the Obama administration and others that “millions of jobs” have recently been created We 'skeptically' examined the data to see if the claims were true. It turns out that job growth since the 2008 recession has actually been quite weak, and hardly something to boast about. Nevertheless, our conclusions from these analyses tend to rest on the idea that job growth is synonymous with gains in wealth and economic prosperity. But is that a good assumption?
Rubio post-mortems miss the point. In the end, it is just more fall-out from crony capitalism.
What made Europe and Japan agree that negative rates - with all their known and unknown consequences - are a solution to our current economic malaise?
There once was a time when economists would have been in an uproar upon witnessing the shenanigans of today’s central bankers. Nowadays they are not only acquiescing to them, they are actively demanding more and more intervention. Instead of being the voice of reason warning of the dangers such policies harbor, they have become cheerleaders for them. It is only a very small consolation that they will eventually be discredited. The cost will be extremely high.
"The loss of traditional human connections, the dehumanization of man in mass society, and the corruption of the political and economic marketplaces, Röpke argued, had created the sociological and psychological conditions for the emergence of and receptivity to the collectivist idea and its promise of a new community of a better society designed according to a central plan." In the dark days immediately following the rise to power of Adolf Hitler and his Nazi movement in Germany in January 1933, Willhelm Röpke refused to remain silent. He proceeded to deliver a public address in which warned his audience that Germany was in the grip of a "revolt against reason, freedom and humanity."
The real pity is that the busts and crackups could all have been avoided if central bankers recognized that falling prices eventually create the conditions for a normal economic revival. Deflation is not a death spiral as the Keynesians believe. Nevertheless, expect more central banks to follow the early leaders — Switzerland, Sweden, Denmark, and even the European Central Bank itself — into negative interest rate territory. The crying shame is that it will not work and will cause great harm to hundreds of millions of people.
Eighty years go, on February 4, 1936, one of the most influential books of the last one hundred years was published, British economist, John Maynard Keynes’s The General Theory of Employment, Interest and Money. With it was born what has become known as Keynesian Economics. In the process Keynes helped undermine what had been three of the essential institutional ingredients of a free-market economy: the gold standard, balanced government budgets, and open competitive markets. In their place Keynes’s legacy has given us paper-money inflation, government deficit spending, and more political intervention throughout the market.
There is no reason to fear recessions or to intervene in them. They represent a healing process. Only by liquidating the malinvestments of the boom and rearranging the economy’s structure of production as quickly as possible to the actual wishes of consumers can a sound recovery be achieved. "Thus, what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health maintain a strict hands off, 'laissez-faire' policy. Anything it does will delay and obstruct the adjustment process of the market."
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”