Austrian Economics Vs Clueless Trolls

Tyler Durden's picture

Submitted by Pater Tenebrarum of Acting-Man blog,

First they ignore you, then they ridicule you, then they fight you, and then you win.”  Mahatma Gandhi

Bloomberg Releases an Unqualified Smear – A Good Sign?


We have previously remarked on the extremely poor quality of Bloomberg's editing, mainly in the context of the site's ongoing rape of the English language in its headlines. However, the quality of its editing processes has reached a new low when an unqualified and in places truly vile smear of the Austrian School of Economics recently slipped past its editors. Initially we didn't plan to comment on it, simply because, as the Daily Bell has put it, “one doesn't even know where to begin”. However, so many people have in the meantime mailed us the piece or a link to it that we feel compelled to address the article in a blog post.

The contributions of the Austrian School to the science of economics are as numerous as they are profound. Carl Menger contributed the theory of marginal utility (Jevons and Walras developed the same idea independently around the same time, so Menger wasn't the sole originator), and a body of theory on value and prices that corrected many of the most glaring and profound errors of the classical economists. Incidentally, Menger also provided a sound explanation of the origin of money. Eugen von Böhm-Bawerk then followed in his footsteps with a highly advanced theory of interest and capital that inspired generations of successors.

In 1912, an at the time not yet widely known economist and pupil of Böhm-Bawerk by the name of Ludwig von Mises published “Die Theorie des Geldes und der Umlaufsmittel” (The Theory of Money and Credit), which established him overnight as Europe's foremost monetary theorist. To this day Mises' book must be regarded as the definitive work on money and credit, a work that has stood the test of time. Mises then published his seminal monograph “Economic Calculation in the Socialist Commonwealth”, which sparked the socialist calculation debate that raged with great intensity until the mid 1940s. Remarkably, the debate is still ongoing, in spite of the fact that Mises' contentions were never refuted, and in spite of the fact that he has been proved right “in spades” by the economic disintegration of the Soviet command economies in the late 1980s. Two years later, Mises Published “Socialism – an Economic and Sociological Analysis”, which is one of the most profound and encompassing critiques of socialism ever written.

While working on his opus magnum “Nationalökonomie” (1938) – a treatise on economics that became better known in its revised English version as “Human Action” (1949), Mises published numerous articles in journals, many of which dealt with the systematization of the epistemological and methodological problems of economics. These remain a major bone of contention setting the Austrian school apart from other economic schools. Readers won't be surprised  that we are siding with the view that economics is not a science like physics and that the attempts to make it so have led the entire science astray.

Friedrich A. Hayek, building on the works of Mises, provided outstanding contributions to capital and production theory (e.g. “Prices and Production”, “The Pure Theory of Capital” and numerous articles in economic journals), and later expanded the scope of Austrian theorizing with his writings on the nature of knowledge and entrepreneurship (see e.g. his famous essay “The Use of Knowledge in Society”). Hayek even received a Nobel Prize in Economics in 1974, in one of the few nods the establishment has given to Austrian economics (not that this really matters, we only mention it for the sake of completeness: Hayek's Nobel lecture “The Pretense of Knowledge” in which he condemned the “scientism” of modern economics  is certainly worth reading though).

Richard von Strigl, one of the few economists who didn't flee Vienna (but certainly fell silent after the Nazi takeover) as a teacher not only greatly influenced Hayek, Machlup, Haberler,  Morgenstern and many others, but left us with a unique contribution to capital theory with his work “Capital and Production” (1934).

We could continue this list up to the present, but in the interest of brevity, want to only mention Rothbard's excellent sweeping economic treatise “Man, Economy and State” (1962; in Joseph Salerno's words “a milestone in the development of sound economic theory, […] that rescued the science from self-destruction”) which presented a systematic and complete theory of production, as well as a unique and important revision of the theory of monopoly.

Well, scratch all that. These people were “infested by alien brain worms” according to the smear published at Bloomberg. The author, one Noah Smith, evidently knows nothing about Austrian economics – and we actually doubt that he really knows anything about other economic schools either. He has certainly never read or understood a single work by an Austrian economist. The whole thing simply reads like an ad hominem attack on supporters of the theory penned by a politically motivated hack. What is especially bizarre is his insinuation that Austrian economics somehow has “antisemitic overtones” – never mind, he says, that Ludwig von Mises and Murray Rothbard, two of the preeminent Austrian scholars were themselves Jews (not the only ones by the way), they're antisemitic anyway!

We want to reprint the comment of Mr. Vincent Cook in this context (from the comments section at Bloomberg), who notes that an economic theory can hardly be refuted by mere name-calling, and addresses the above point in some detail:

“Mere name-calling doesn't amount to a refutation of any economic theory, nor does the "guilt-by-association" tactic of linking certain adherents of a given economic theory to their empirical predictions not warranted by the theory itself or to their non-economic views on politics, etc. and claiming that such predictions and views somehow invalidate the theory.


If Mr. Smith has any substantial objections to any element of Austrian economic theory that has been written over the past 140+ years, he should make the effort to cite the work in question and identify what specific premises or logical deductions he thinks the the Austrians got wrong. Characteristically Austrian ideas about the proper methodology of economics, about the nature of capital goods markets and interest rates, about the nature of boom/bust cycles, about the impossibility of economic calculation and coordination of decentralized information under central planning, etc. stand or fall on their own merits, not on what some fringe supporter of a political movement puts into a Youtube video.


The Austrian-oriented case for gold and for 100% reserve banking, for example, doesn't depend on any belief about secret banker plots or about any mechanistic link between money creation and price increases. Rather, it is based on the desirability of preventing destructive boom/bust cycles, of eliminating any long-run risk of hyperinflation, of preventing money and money-substitute creation from becoming a source of political rent-seeking and moral hazard, and of upholding the integrity of the payments system without counterproductive regulatory interventions and bailouts. Mr. Smith's misrepresentations of the case for gold and for 100% reserve banking are simply irrelevant to the issue at hand.


Mr. Smith's neo-Nazi baiting is particularly scurrilous, as it grossly misrepresents the attitudes that Austrian economists have always had about the Nazi movement. Ludwig von Mises wasn't simply a Jewish Austrian economist (and one had to flee Vienna ahead of the Anschluss), he also wrote books concerning the ideological development and political growth of militant German nationalism that are still in wide circulation among contemporary Austrian economists and that still strongly inform their understanding of the subject. Indeed, Mises's 1919 work Nation, State and Economy and his 1944 work Omnipotent Government are must-reads for anyone who wants to understand what went wrong in Germany.


I challenge Mr. Smith and anyone who takes Mr. Smith seriously to read these works and others concerning German history and the Nazis that circulate among Austrian economists (such as Günter Reimann's  The Vampire Economy). There is not the slightest trace of anti-Semitism in them, and anyone with any sense of honor and decency reviewing this literature will recognize that Mr. Smith owes the entire contemporary Austrian school an apology.”

We doubt that such an apology will be forthcoming, or that Mr. Smith will make the effort to actually read any Austrian economists. Obviously his article was never intended to be a serious critique – it is simply a hit piece. What is interesting about it is mainly that Bloomberg allowed it to be published. We have put Mahatma Gandhi's famous quote at the beginning of this article for a reason. Before the advent of the internet, it was easy for the establishment to “bury” the Austrian School's causal-realist approach to economics by simply ignoring it.  Evidently, we have now progressed to somewhere between point 2 and 3 of Gandhi's list – the 'ridiculing and fighting' stage. We can take this as a sign of progress. Ignoring the Austrians is no longer deemed sufficient.



Carl Menger, the founder of the Austrian School

(Photo via Wikimedia Commons)


A Few Remarks on Concepts Discussed by Smith

One of our readers who pointed the Bloomberg article out to us remarked that such attacks often occur close to economic and financial turning points. Readers may recall that practically the entire mainstream economic profession woke to a considerable amount of egg on its face after the 2008 crisis, as the vast majority of economists had neither predicted it, nor provided even the slightest warning of the growing imbalances in the economy that eventually led to the bust. One quite prominent economist who got it completely wrong was of course Ben Bernanke, the former Fed chairman. To state that he merely “didn't see it coming” doesn't fully describe the enormity of his forecasting errors (see this video). The public not unreasonably began to wonder what economists are actually good for. 

In the two years prior to the crisis is was however highly fashionable to ridicule and attack supporters of the Austrian School, who were indeed among the very few economists who actually did predict the crisis – in spite of the fact that they do not regard “prediction” to be among the tasks of economic theory. Prediction is akin to the study of history, a thymological task. Correct economic theory and praxeological reasoning can be helpful with respect to forecasting, in that they help with delineating the constraints of such forecasts. But forecasting as such is basically the job of entrepreneurs and speculators, not that of economists.

An entrepreneur who evinces a sound understanding of Austrian theory is Peter Schiff, who was featured prominently in televised debates on financial markets and the economy as the “token bear” in 2005 to 2007, as a foil for all the other debaters who kept insisting that everything was fine until it could no longer be denied that catastrophe had struck. Again, to say that Schiff was “ridiculed and attacked” in his appearances in those years does not fully convey the viciousness and arrogance some of his opponents displayed (there are two videos on you-tube documenting this – one 'general video' covering a range of appearances and the 'CNBC edition').

This fits with our reader's observation that such attacks tend to become especially pronounced near turning points. It took the establishment-approved defenders of the central planning statist quo a little while to get their courage up after the collapse of the tech bubble, and when they finally felt confident enough to declare that the printing press had triumphed, the next denouement wasn't far away. In that sense, the Smith article can be seen as a hint that the current inflationary boom may also be close to meeting its inevitable fate.


Professional economic forecasting in a nutshell


This brings us to several points raised by Smith which deserve some additional comment. Smith inter alia mentions that Austrian economist Robert Murphy “lost a bet on inflation” with someone. However, economics is not about winning bets, and as noted above, it is not about making predictions either. This is in spite of the fact that the Econometric Society's original motto was “Science is Prediction”.  As Rothbard points out in Man, Economy and State:

“Praxeology and economics deal with any given ends and with the formal implications of the fact that men have ends and employ means to attain them”

In short, economics is the study of the purposive employment of (scarce) means to attain ends. The formal implications thereof form the basis of economic laws, which have universal, time- and place-invariant validity.

The debate over inflation is apparently Smith's biggest bug-bear, as he devotes large parts of his screed to the topic. This is perhaps no surprise, as his main concern appears to be the defense of central banking, or putting it in more general terms, the defense of central economic planning by organs of the State.

In the process, he gets all sorts of things wrong. For instance, he alleges that the absence of a sharp rise in consumer prices to date in spite of the Federal Reserve's relentless money printing caused Austrians to “redefine inflation”. Here is the relevant passage from his article:

“The Austrians’ next defense was to redefine reality. Inflation doesn’t mean a rise in prices, they said – it means an increase in the monetary base. QE wasn’t causing inflation, it was inflation itself. Duh! Now the Austrians were safe — after all, you can define inflation as anything you want. It’s a free country, ain’t it? You can define inflation to be a rare poisonous South American tree frog if you want, and the only consequence will be that people think you’re off your rocker. And so when Austrians tried to redefine the word “inflation” to mean something other than “a rise in prices,” people duly recognized that Austrians were off their rockers.”

We haven't heard from all those people who allegedly “duly recognized that Austrian's were off their rockers”, so we are guessing that by “people”, Smith mainly refers to himself. First of all, it should be pointed out that there is a formal mistake in this paragraph, as no Austrian has ever asserted that “increases in the monetary base” constitute inflation. The monetary base consists of two major components, only one of which, namely currency, is part of the money supply. The far greater part of the monetary base nowadays consists of bank reserves, which are explicitly excluded from definitions of the money supply. While they provide the basis for the inflationary pyramiding of credit, they are themselves not “money” (although they can become part of the money supply when they are transformed into currency upon customer withdrawals from demand deposits).

More importantly though, Austrians did not suddenly “redefine the meaning of inflation”. The redefining was done by others, as inflation had always denoted an increase in the supply of money, before its meaning was deliberately changed to mask the chain of cause and effect. In his essay “Inflation and Price Control”, published in 1945, Ludwig von Mises remarked that this redefinition of the term inflation was by no means harmless:

Inflation must result in a general tendency towards rising prices. Those into whose pockets the additional quantity of currency flows are in a position to expand their demand for vendable goods and services. An additional demand must, other things being equal, raise prices. No sophistry and no syllogisms can conjure away this inevitable consequence of inflation.


The semantic revolution which is one of the characteristic features of our day has obscured and confused this fact. The term inflation is used with a new connotation. What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation. This semantic innovation is by no means harmless.


First of all there is no longer any term available to signify what inflation used to signify. It is impossible to fight an evil which you cannot name. Statesmen and politicians no longer have the opportunity to resort to a terminology accepted and understood by the public when they want to describe the financial policy they are opposed to. They must enter into a detailed analysis and description of this policy with full particulars and minute accounts whenever they want to refer to it, and they must repeat this bothersome procedure in every sentence in which they deal with this subject. As you cannot name the policy increasing the quantity of the circulating medium, it goes on luxuriantly.


The second mischief is that those engaged in futile and hopeless attempts to fight the inevitable consequences of inflation-the rise in prices-are masquerading their endeavors as a fight against inflation. While fighting the symptoms, they pretend to fight the root causes of the evil. And because they do not comprehend the causal relation-between the increase in money in circulation and credit expansion on the one hand and the rise in prices on the other, they practically make things worse.”

(emphasis added)

In addition, it should be mentioned than no Austrian economist has ever asserted that an increase in the supply of money must instantly and definitely lead to rising consumer prices (even if some have said they expected it to happen, there is nothing apodictic about it). In fact, as Mises pointed out in 1912 already, it is futile to even pretend that something like the “general level of prices” can be measured, as the exchange value of money depends on altogether four factors: the supply of money, the demand for money, and the supply of and demand for goods and services.

This is inter alia why the former correct usage of the term inflation is so important. The effects of vast increases in the money supply can be masked by a concomitant increase in productivity and the supply of goods. This is what happened e.g. in the boom of the 1920s – and it seriously misled many economists as well as the central bank at the time, as they were convinced that because consumer prices had not increased, nothing was amiss. As we know today, the boom eventually turned into the Great Depression, so this was a rather  grave error in retrospect. One must surely agree with Mises that the semantic confusion regarding the term inflation is anything but harmless. However, to return to Smith, it wasn't the Austrians who redefined the term inflation, and they most certainly didn't do so recently because they are allegedly miffed that CPI has not yet risen much in the face of a 95% increase of the broad US money supply since 2008.



Ludwig von Mises. It just might be that he knew a little bit more about inflation than Noah Smith

(Photo via Wikimedia Commons)


As an aside, Mises was inter alia concerned about the long term effect of monetary inflation on money's general purchasing power, because he had experienced several destructive hyper-inflation episodes in his lifetime, and had seen firsthand what enormous economic, social, and political damage the breakdown of monetary systems can cause. However, as Mises and other Austrian economists have never tired to point out, monetary inflation causes a “price revolution” in that it most definitely alters relative prices in the economy, even if consumer prices fail to increase much. This is in fact  the most pernicious effect of inflation, as it is the root cause of the boom-bust cycle, by dint of falsifying economic calculation.

Moreover, contrary to what Smith appears to think, Austrian economists are not particularly concerned about short term fluctuations in the gold price. They would undoubtedly regard a rising gold price as one of inflation's possible effects, and a warning signal indicating that economic confidence is waning. The Austrian support for employing gold as money is also a bit more differentiated than Smith makes it out to be. The main point Austrians are making is that money should be left to the market. Whether market participants will choose gold or something else is not of central importance, although history certainly suggests that gold would play an important  role in a free market money system.

Lastly, we want to briefly address the 5 points Smith lists at the beginning of his article as the 'Austrian beliefs' he intends to denigrate. These are:

1) Federal Reserve money-printing is a government plot to boost big banks,


2) prices are rising much faster than anyone thinks,


3) real “inflation” means money-printing, not an increase in prices,


4) printing money can never boost the economy,


5) academic economics is a plot to use mathematical mumbo-jumbo to cover up government giveaways to big banks, etc., etc.

We're not sure what is meant by “etc., etc”, so we can only address the five points explicitly mentioned.

1. As to the first point, well, check, what else does Smith think Federal Reserve money printing since 2008 was about? Rescuing dairy farmers in Kansas? As Bob Murphy adds - Does Noah deny that the Fed’s activities have helped big banks far more than the little guy? For example, did the Maiden Lane LLCs buy up underwater homes from struggling middle-class families? Did the Fed’s “extraordinary lending facilities” give loans to self-employed plumbers and dry cleaners to help them get through the crisis? No, all of the Fed’s activities directly shored up the balance sheets of huge banks.

2. As to point two, he doesn't mention which prices, but as noted above, a 'general price level' can actually not be calculated, so while measures like CPI may serve as a rough approximation of consumer price trends, they certainly don't tell the whole story. Since March of 2009, the prices of titles to capital have for instance increased by an average of 190%. This is one of the signs that the above mentioned distortion in relative prices is well underway.

3. We have addressed point three extensively above, as it seems to us it is an especially important one. Just one more remark that has to do both with the second and the third point: there is no way to predict with certainty whether and at what point an increase in the money supply will lead to large and broad-based losses in money's purchasing power. This depends largely on contingent circumstances. For instance, if the monetary authority abandons the inflationary policy in time, i.e., before the public's inflation expectations change, it may never happen. We may merely get a sizable economic bust instead. On the other hand, the progression from “lots of money printing” to “inflationary breakdown of the underlying currency system” could be observed several times in history, and what all these historical examples have in common is that there were large time lags between the money supply expansion and the point when the public came to realize that the inflationary policy wouldn't be stopped and lost confidence in the currency. As Mises wrote on this:

“This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aw-are of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy. But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.”

(emphasis added)

Note that we are not saying that this is what will necessarily happen this time. We merely wish to point out that firstly, it is bound to happen if the inflationary policy is not abandoned in time, and we secondly want to stress the point that there can be very large time lags before the effects of an expansion of the money supply become noticeable in the prices of consumer goods. In short, there is currently no proof whatsoever that these effects won't appear.


something good

Ben Bernanke's ideas about monetary policy summarized

(Cartoon by Lewis)


4. Point four is one we have discussed extensively in these pages on many previous occasions. Austrians have never said that money printing cannot “boost the economy”, since obviously, money printing is what causes economic booms. Hence, “economic activity” may well increase statistically when the central bank expands the money supply (note that this is not always the case). What we are saying is something entirely different: namely that money printing cannot possibly increase society's wealth; rather, it tends to achieve the exact opposite. The supply of capital goods cannot be increased by printing money; if it could, Zimbabwe and Venezuela would be rich instead of being economic basket cases. Money printing leads to a false prosperity, as the boom is characterized by malinvestment and consumption of capital. A boom either collapses at some point, or -  if the authorities continue to inflate – the entire underlying currency system will collapse as described above. These are the alternatives – there is no “good outcome”.

5. As to point five, quite a lot of economics nowadays indeed consists of mathematical mumbo-jumbo (mathematics should be banished from economic theorizing in our opinion; it cannot express anything that could not be better expressed verbally. It is merely an attempt to make economics look more “scientific”, but in reality it obfuscates rather than illuminates the topics discussed). As to the idea that many economists are statists, well, what can one say, except: guilty as charged! A free, unhampered market economy would have very little use for the great majority of today's macro-economists. Many of them are directly or indirectly in the government's employ and are paid wages far above their market value. It goes without saying that they will never bite the hand that feeds them.



In fact, with regard to the latter point, Austrians are inter alia clearly set apart from other economic schools in one crucial respect, and that is in their unstinting support of the free market. It matters little if this support is solely based on  utilitarian reasoning or if it is also supported by ethical considerations. Clearly though, Austrians are saying that the market economy cannot possibly be improved by government intervention. Their views are also different from those of establishment-approved “free market supporters” such as Milton Friedman, whom Smith mentions approvingly. Friedman supported free markets, except in the context of central banking and money; for some reason, he considered the free market to be inferior in providing a sound monetary system. Given the absolutely central role interest rates and the money and credit supply play in the market economy, one may be excused for harboring doubts about Mr. Friedman's free market credentials.

Austrian economists are therefore far less likely to find employ in state-supported institutions or to receive research grants from the central bank or similar agencies. One could say that they are actually diminishing their own career prospects in favor of standing up for the truth and their convictions. We can assure readers though that their failure to fall in line with the statism Smith evidently supports is not a sign of alien brain worm infection.

In fact, we are continually surprised by the eagerness with which people like Smith argue that freedom and support of freedom are somehow bad, and that being lorded over by the State is preferable. It is not as if Mr. Smith were a member of the ruling elite (at least we have never heard about him before), so one wonders what he gets out of his statolatry.



Murray Rothbard dispensing sound advice which Mr. Smith should take to heart.

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Newsboy's picture

You neoliberal boys get back to me in 5 years, whydontcha...

Greenskeeper_Carl's picture

The problem is that it's easy for them to just shut people like Peter schiff out. If he isn't invited on TV anymore, and all you get is the usual 'no one could have seen this coming' blather from the usual suspects, most people won't be aware there is another school of thought who have been hammering away at the status quo for many years. The Keynesian nonsense is front and center everywhere, you have to be curious and actually look for places like ZH or mises or lew Rockwell that tell the other side of the story, and most people aren't willing to do that

SofaPapa's picture

I have repeated this enough times people are probably getting sick of it, but:

Media, Media, Media

To my mind this is not a byproduct of change.  This is where the change has to be.  Until people have exposure to accurate information, nothing else can be accomplished.   

There is this myth that the MSM (including NPR and FOX as the endpoints of the spectrum) is "balanced" news.  Until that myth can be shown for the BS that it is, we are stuck with the power in the hands of those currently wielding it.

Media, Media, Media.

Anusocracy's picture

"it is impossible to fight an evil which you cannot name."


"While fighting the symptoms, they pretend to fight the root causes of the evil."


This is also true of the apologists who are fully capable of blaming anything but government for the problems government creates. Dozens and dozens of things to blame, but never the cause.

Thomas's picture

Here's the good part: Noahpinion is gonna have Noahchance at tenure time. A Gary North article noted that Noahcommonsense's 2011 resume (when he was in grad school) had noahpapers. I did a little sifting and updated his resume for him, which was easy because there were Noahchanges. His colleagues in academia, although embroiled in complex math of questionable (or Noah) merit on occasion, will demand intellectual rigor; Noahclue appears to have none. His bio says he returns to Stony Brook from Japan "occasionally" for his research. Oops. Noah ad hoc committee will give a shit about his cameo appearances. The boy is gonna become a full time blogger (or possibly a Fed governor given his Noahknowledge.) 

For me, the minor heartbreak is that I railed on the editor about the BloombergView and the editor said he would publish a rebuttal. So I did it. Now it sits in the editor's mailbox getting old and Noahttention: noahbody will give a shit about Noahbrain in about 24 hrs. Oh well. At the end of the year I will spill a little ink on him at Zerohedge as I summarize the year's follies, of which this one certainly registers as a hall of fame candidate. Until then, I will sleep tonight Noahing that Noahbrain's days in academia are numbered. (Ya Noahwhat I mean?)

economics9698's picture

“Intellectual rigor” lmao.  Sitting around for hours writing up shit and checking the grammar four times.

All Risk No Reward's picture

Media = Money Power propaganda.

They went to court to sue for their unalienable right to lie to the masses under the guise of news...

Unsettling Accounts

Lots of people piled into this lawsuit because they wanted to make sure they won it.

If you tell some semblance of an important truth that really goes to the heart of a Money Power Agenda, you get throttled back or eliminated from the media.

Dylan Ratigan is just example.  Most people learn never to bite the hand that "feeds them" with exorbitant pay before that hand slaps them down.

It really is elementary cost / benefit economics at play.

Nobody hires people to rat them out.

Money is Our God! Tom Simmons Comedy

Debt is not a Choice

How to be a Crook

Renaissance 2.0 Full

The Secret of Oz


Democratic koolaid's picture

The group is wanting/needing things like food, water, wifi connections etc. There is alot of wanting/needing going on in this world with what 25 billion? Things are getting more expensive.


Economists are less lickely to be pro-life? They can perhaps see the picture clearer then another?  But then the provurbial "ow no"  and those same economists are interpreting bad information from inside cooked books. They have been drinking that koolaid.


but it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard   

     This comment smells of totalitarianism and semantics.

NidStyles's picture

You trolls aren't even entertaining anymore.

Democratic koolaid's picture

I shot the sherrif not the deputy.

fucker out.

Death and Gravity's picture

The Austrains can get back to me when they understand that most of the money supply comes from private bank credit, not the central bank.

DOGGONE's picture

Date rape drugging.

The Public Be Suckered

kchrisc's picture

In a time of universal deceit - telling the truth is a revolutionary act.

George Orwell

All Risk No Reward's picture

The Austrians need to take a step back to understand the fraudulent nature of debt based money AND EXPLAIN TO THE CLUELESS MASSES, WHICH INCLUDES FAR TOO MANY LIBERTARIANS.

Debt Money Tyranny

It isn't that a policy here or there is wrong, THE WHOLE STINKIN' SYSTEM IS A PRIMA FACIE FRAUD!

Ron Paul embarrasses himself when he acts as thought the criminals running the fraud are somehow innocent of their crimes.

Perhaps he doesn't understand the criminality that underlies Debt Money Tyranny...  which would underline my original point.

I'd hate to think of the top "Mises elite" as controlled opposition for the Rockefeller interests that funded Mises' move to America and his schooling institution.

Was Mises Bankrolled by the Financial Elite?

Actually, an obvious interpretation is that the Rockefeller interests valued their ability to spin the "let privat ebusiness (dominmated by the Rockefeller interests) rule the world, not government (also dominated by the government)."

In that sense, they would view libertarianism as controlled opposition... or managed opposition.  This isn't to say that they wanted to promote him, but it is to say that they didn't want someone in Mises' place posting charts proving that the very foundation of the monetary system is a prima fascie criminal enterprise fraudulent scheme to do great damage to the average person...  and their historian admits as much in Tragedy and Hope.

Debt Money Tyranny

The Money Power Seeks to Create a World System of Financial

Control in Private Hands Able to Dominate Every Nation on Earth

     In addition to these pragmatic goals, the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.

Read that as many times as you need to in order to understand it.

Also, pretending like the Fed Chairman is some kind of "shot caller" instead of a kept puppet minion is also pretty out of touch with reality...

Norman and Strong Were Mere Agents of the Powerful Bankers

Who Remained Behind the Scenes and Operated in Secret

     It must not be felt that these heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers (also called "international" or "merchant" bankers) who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks. This dominance of investment bankers was based on their control over the flows of credit and investment funds in their own countries and throughout the world. They could dominate the financial and industrial systems of their own countries by their influence over the flow of current funds through bank loans, the discount rate, and the re-discounting of commercial debts; they could dominate governments by their control over current government loans and the play of the international exchanges. Almost all of this power was exercised by the personal influence and prestige of men who had demonstrated their ability in the past to bring off successful financial coupe, to keep their word, to remain cool in a crisis, and to share their winning opportunities with their associates. In this system the Rothschilds had been preeminent during much of the nineteenth century, but, at the end of that century, they were being replaced by J. P. Morgan whose central office was in New York, although it was always operated as if it were in London (where it had, indeed, originated as George Peabody and Company in 1838).

Flakmeister's picture

Tyler throwing out a little red meat for a holiday weekend for the denizens of the Hedge...

Just remember, there ain't no ism or school of economics that is going to fix this mess....

SilverIsMoney's picture

If what you're implying is the entire thing has to be leveled first then fine but after it's been leveled we're going to need an idea of how to rebuild it. That's when people need to drive towards the Austrian school's belief on markets and money.

FreedomGuy's picture

Silver, I think you hit the nail on the head. What would come after a meltdown? Were there any meaninful reforms after the Great Depression? No. In fact, there were things instituted which arguably made it worse.

After a meltdown who and what is likely to come to power? Statistically it is a 90% chance that people will vote the "strong man" into power and give him more power and authority because he will assert that he can fix the problems. It is a 1% chance this person will be an Austrian School fan. It is the weakness of a pluralistic society where government power is essentially unlimited.

However, the levelling is going to occur at some point and it will most definitely be a worldwide phenomenon. The question is when it will occur and what will spark it. I doubt we know the answer.

TeethVillage88s's picture

Yes, no guarantee that there will be a full reform, or a rebuilding of government & banking.

More likely, the Narrative will be spun as a narrow problem and which they have a narrow solution that wastes more money and puts more people on welfare.

But there are different levels of collapse as you know. Could be just devaluation of the US Dollar which hits us hard since we import so much. Can't see Congress doing anything unless they are forced to. Eventually you might see this become what Jim Rickards and Jim Willie are talking about with 2nd currency, SDR, or new world currency.

Here is a scary video on Collapse of Complexity you might have seen

And I think the fix will look like the collapse of 2008, the members in congress at the time end up working it with the current president and they are all HOODWINKED By the big bankers who have infiltrated US Government.

So, like the Illegal immigration going on now, change the narrative to something narrow, then provide a narrow solution to avoid a full Reform of Government & Banking.

Americans (US) don't like Reforms since there is a lot of cloudy history.

In 1929-1944 we had lots of problems. And farmers had problems with money way back in 1800s as banks didn't like the Silver certificates and money was focused on cities (lending)

But you still had civil rights problems, worker rights problems, and banks that didn't lend, and factories that paid very little. Farm, work in the factory, or work in the city.

Balkanization is talked about. And maybe if debt is too big it should be broken down into regions or states with more power over their loan creation (not from big banks), and their own taxes and their own jobs.

Guys that want to work in the city with the inflation, taxes, and those kinds of jobs are culturally different.

Guys that are conservative Mid-Westerners, Westerners, or Southerner are different.

Southern California is different.

Steady State Economy is an option. Zones. Regions. States. Why does our money have to come from the Fed & Big banks with big interest rates. Be responsible for your Zone's Exponential Debt rather than Washington DCs big handouts and Feds currency pumping. Seems like a conservative Idea, but you have to agree to limited funding for Military and Empire.

smacker's picture

Maybe not.

But my bountiful supply of rope-ism and piano.wire-ism should go some way to help solve the problem :-)

nmewn's picture

Oh I don't know, perhaps we have a clue as to a rabid troll identity.

One Noah Smith, appearing here as Top Gear ;-)

SilverIsMoney's picture

Top Gear is clearly a algo poster. No way is he real.

nmewn's picture

A lot of people seemed to think so, I'm just not one of them.

He wanted to "be my friend" toward the last of our exchanges...bots don't have emotions ;-)

Skateboarder's picture

[    0.000000] program TopGear loaded.
[    0.000001] running emotion module.
[    0.000002] running friend submodule.
[    0.000006] requesting friendship to enemy combatant nmewn
[    0.000008] waiting for response. meanwhile, trolling other threads.

nmewn's picture response was...and I quote: "Sure, Il bacio della morte."

Maybe he got tied up on other threads, he never responded to me ;-)

Greenskeeper_Carl's picture

Don't give up just yet, it's a pretty fresh article, maybe he will show. My first thought when I read the title and started on the article was that this is sure to bring out some of those 'clueless trolls' the author mentions. In sure 'international Jew' will make an appearance as well. These kinds of articles or ones that mention Sarah palin or mark levin or their ilk always bring em out of the woodwork.

mkhs's picture

No, 'international Jew' bought the farm yesterday.

Escrava Isaura's picture

Ohh Boy!!!

Let me show you somebody that has a clue: disabledvet” – Last Wednesday:

Top shelf. What has always been interesting to me since I was a student in Taiwan studying Mandarin of all things (they speak Taiwanese in Taiwan...not Mandarin) was the truly stupendous amount of capital flowing from the USA to East Asia in general and ultimately China in particular.

The profits from this "Great Downsizing" were truly stupendous...starting in the 80's...and right on through even to today. One need look no further than the successful monetization of the entire US auto industry since 2008 to the present day and the latest iteration of "liar loans."

In a term "you don't just create bubbles like this" (and no, nothing like this exists in Europe or Britain.). This type of competition entering onto the world stage has had a massive and material impact on both "real" capital (plant and equipment) and financial capital (money from the USA to the Far East.) this made Wall Street in the 90's the most liquid asset class probably in human history...and this spilled over into the "ultimate in liar loans" namely securitized debt in he form of MBS, second lien mortages and credit receivable. These "Triple Towers" at their peak in 2007 EACH reached to one TRILLION in market size...backed by ABSOLUTELY NOTHING...not even an OWNERSHIP STAKE in the underlying asset!!!

That's the basis of the book "Chimerica" and it is indeed a must read as it's creation (I was studying international affairs in Washington DC from 1991-1993 when, after the US had simply annihilated Saddam Hussein's Army and then watched as Soviet Russia collapsed "hatched the scheme."

It was a REALLY devious and TRULY diabolical plan...but while it worked it paid...well, for pretty much everything.

Since the collapse of 2008 (and lest we forget Japan saved Morgan Stanley...not the Federal Government) simply put "THE DEAL IS OFF!"

Everyone is trying to put Humpty Dumpty back on the wall...and simply put "that ain't happening." So while everything said here is spot on...both sides are still trying to recreate "the monster" that the elites in DC hatched in the 90's. It's just not gonna work because the dollar is phucking SHIT PAPER and the largesse our hapless greenback has to support (25 NUCLEAR AIRCRAFT CARRIERS ALONE!) really is "putting theory itself to the test.

In short....assets...AND THE TAX BASE TO SUPPORT THESE INFLATED ASSETS...still have to be created here. Unless and until that matter how many billions "Hitlery" blows on her "zio/nazi bitchface brigade" We the People are still confronted with the terrifying specter of a HUGE blow up in the muni market.

The obligations alone are in the trillions...let alone the maintenance costs.

Simply put "this isn't going to work." Americans are flat broke, debt servicing costs are absolutely stupendous...and the only Hitlery and Co are asking for here is "to push that thing into total oblivion."

They're rich already. They're not gonna even bother showing up in Detroit trying to figure out a solution.

So the dollar is is flooding into the USA to buy up an enormity and physical assets at fire sale prices...and the folks who are can be assured of one thing...that dollar will be sucking wind for at least a decade or more...if not forever.

My personal view is the China is simply gonna crack into various factions and start "armoring up" as the fraud of twin "real estate ponzis" (Vhina and the USA) come home to roost.

Simply put "there is no demand left." Even a modest price decline in the USA (oil to fifty bucks) would have devastating consequences to the "debt monster" created as a result of 2008. This has in fact already happened...we'll see if Puerto Rico (of all places) is the harbinger of "the Great Reset of 2014" as confidence in those incapable of monetizing is shattered sending the whole "order" spinning out of control.

I think the PTB's have pushed the absolute limit of "automobile as pay for everything" to do absolute limit...and beyond.

Anusocracy's picture

So in your opinion, the problem is?

SilverIsMoney's picture

What an idiot... Everything that's been happening since the US markets closed July 3rd have been marking a sea change.

This is indeed a peak stupidity moment...

Jabotinsky_USA's picture

About time something is written about Mises and others being Jewish.  

smacker's picture

What would you like to say about them??

Tulpa's picture

It might cause some of our Jew-baiting fellow commenters' heads to explode.

nmewn's picture


And Keynes being a socialist ;-)

MontgomeryScott's picture

This article (and the comments thread) is definetely entertaining.

I see that you are referring to 'socialism' and 'Keynes' in one sentence (undoubtedly and absolutely true).

I decided to find out who this punk 'Noah Smith' is, and find out his background. A few clicks later, and, VIOLA!

NOW, I KNOW that Detroit is about 20 miles from Ann Arbor, where the U. of M. is located; and that The Atlantic is quite a 'left-leaning' publication, and I have NO IDEA what 'Stonybrook University' is (I've heard of it, and it seems that there are a lot of 'socialist tendencies' there, but that's all).

The kid's all of 26, and he already has the beginnings of a 'double chin', and he looks soft and probably fat and unfit (in terms of being what a MAN should be). He's writing an op-ed piece in BLOOMBERG (yes, BLOOMBERG; that bans soda and guns and tells the police to beat people and films everyone in that city with CCTV).

It's a damned shame. Ann Arbor was such a nice town, and the U. of M. used to be quite good academically (but that was back when cars were made of steel and men were made of iron, and people could sit on their porches and light fireworks and leave their doors and cars unlocked).

Post Script:

Those frackers at Stonybrook 'University' are in the middle of murdering the English language. They introduce this person by stating his 'Specialization' as 'economics'. What the fuck is THAT? Is that like an 'intellectual' version of 'SPECIALTY' (but with some 'secret' meaning)?


Tulpa's picture

Smith does actually mention this, though in a very doublethink way.

"Austrianism’s antiSemitic overtones are conveniently papered over by the fact that two of its founding figures (von Mises and Murray Rothbard) were Jewish."

NidStyles's picture

How anyone pulls anti-semitism from NAP I will never understand. You idiots certainly like to reach though.

Tulpa's picture

Gandhi was an emptyheaded turd who was very fortunate to have a relatively benevolent world power as his enemy.  It would have been funny to see how well his passive resistance strategy would have worked in contemporary Kazakhstan or Tibet against real oppressors.

The fact is, most people who are ignored, ridiculed, or fought wind up losing.  So you have to be smart about what you do.

Skateboarder's picture

Different age, different people. Can't compare it to the stewing shitfest that is today.

world_debt_slave's picture

big government doesn't want to be challenged

Oldrepublic's picture

First they ignore you, then they ridicule you, then they fight you, and then you win.”  Mahatma Gandhi

Gandhi was very lucky to have done his protesting in the 1930s, today the Americans would have declared Gandhi  a terrorist and droned him!

Polymarkos's picture

Ghandi was a nutter. And his tactics rely upon a free press that will generate public sentiment in his favor.


Take that away, and how far would he have gone? Imagine were he under Hitler in Germany, instead of under the Raj in India?

SumTing Wong's picture

Did Bonhoeffer "win"? He lived under Hitler...and died under Hitler, too.

Anusocracy's picture

He also had a clearly defined and large ingroup and a clearly defined and small outgroup to deal with.

tolivian's picture

When I first glanced at your comment I read ". .. declared Gandhi a tourist and droned him." 

That seemed to be a bit harsh on tourists, then came to my senses. They don't even

arest them if they're coming from the South of the border!

ToNYC's picture

Bloomberg asks you to assume the position on the Upper East Side; Murdoch prefers the Upper West Side, please be bending at the waist while absorbing their minion's massages.

Polymarkos's picture

I tend to view all economists as moder analogs of the medieval alchemists....always promising to turn lead to gold, lots of gee whizzery and chicanery and fraud, and not much solid progress. But the Austrians ARE much closer to being chemists than alchemists.

FreedomGuy's picture

I call it about the same thing. What I think sets the Austrians apart is that they essentially say that you cannot turn lead into gold and stop trying. They Keynesians and others who advocate intervention are the opposit.

Vendetta's picture

agree.  By decreeing awards such as phds's and nobel prizes and various other accolades the overlords of monetary fraud confuse people as to the legitimacy of mainstream and 'highly regarded' economists.

Just the fact that William Black has NOT been asked to head any federal justice task force to investigate and prosecute, where warranted, financial fraud is testimony the system is a travesty of justice.  in my humble opinion of course.

PeeramidIdeologies's picture


Where does one begin with the systemic levelling of anything posted at Bloomberg? lol I often stop by there to check up on the "message" but have found over time almost everything posted there isn't worth the download. I do recall not so long ago, I wanted to post a BB article here that succinctly demonstrated the sheer hypocrisy of the global elitist agenda. Much to my surprise I found the article completely rewritten from the day before, the damning details omitted.
I like to think of myself as considerate person, not one to jump on bandwagons, but to find my own path through this maze. Articles and actions like those displayed at BB show the indignant attitude towards the general population, and is one of the many reasons I will never be able to trust the establishment. They truly believe the people can be brow beaten into intellectual submission. Despicable, and a sure sign of a failing foundation.
I enjoyed this article very much Tyler's. Thank you.

withglee's picture

Would a believer in Austian economics please confirm that this is one of their axioms: Money (they like to call it "sound" money as opposed to "fiat" money) must be backed by something of the exact value it represents and redeemable in same (ideally gold) on demand without exception.

Assuming this is confirmed: How do you back money with gold when there is only one ounce per person on earth and it takes about an ounce in equivalent resourses to create a new ounce?