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On Attacking Austrian Economics

Tyler Durden's picture


Submitted by James Miller of the Ludwig von Mises Institute of Canada

Josh Barro’s and David Frum’s Pathetic Attack on Austrian Economics

Josh Barro of Bloomberg has an interesting theory.  According to him, conservatives in modern day America have become so infatuated with the school of Austrian economics that they no longer listen to reason.  It is because of this diehard obsession that they reject all empirical evidence and refuse to change their favorable views of laissez faire capitalism following the financial crisis.  Basically, because the conservative movement is so smitten with the works of Ludwig von Mises and F.A. Hayek, they see no need to pose any intellectual challenge to the idea that the economy desperately needs to be guided along by an “always knows best” government; much like a parent to a child.  CNN and Newsweek contributor David Frum has jumped on board with Barro and levels the same critique of conservatives while complaining that not enough of them follow Milton Friedman anymore.

To put this as nicely as possible, Barro and Frum aren’t just incorrect; they have put their embarrassingly ignorant understandings of Austrian economics on full display for all to see.

First off, no conservative, besides perhaps Michele Bachman, has shown any interest in the Austrian school as of late.  In most aspects, Ron Paul can hardly be considered a conservative.  If Frum, with all his political credentials, can show me another true blooded conservative that has read through Human Action or Man, Economy, and State, I am all ears.  The fact remains that traditional conservatives aren’t brushing up on their Mises when they aren’t attending Tea Party rallies or asking their Congressman to nuke Iran into smithereens.

On the subject of Austrian economics itself; the school isn’t against empirical evidence per say.  What it opposes is methodological positivism which is using empirical data by itself to formulate theories about how an economy functions.

Austrians don’t see the social sciences as one in the same with the physical sciences like chemistry.  Closed experiments can’t be conducted on humans that will always yield the exact same results.  Because humans posses the ability to make choices, there are no constants in human behavior.  As economist Robert Wenzel puts it

In the science of physics, we know that water freezes at 32 degrees. We can predict with immense accuracy exactly how far a rocket ship will travel filled with 500 gallons of fuel. There is preciseness because there are constants, which do not change and upon which equations can be constructed.

There are no such constants in the field of economics since the science of economics deals with human action, which can change at any time.

Austrian economics relies on deductive reasoning and one a priori law that Ludwig von Mises worded as “human action is purposeful behavior.”  That is, man acts to achieve ends or otherwise he would not act.  This statement is what Murray Rothbard, considerably the most known Austrian economist next to Mises and Hayek, called “radically empirical” since it is absolutely self evident to any observer.  A few subsidiary axioms can then be derived from the human action axiom such as “individuals vary” and that people “regard leisure as a valuable good.”

Austrians don’t reject empirical evidence but look at it with the theory of human action in mind.  They don’t see an increase in ice cream sales coinciding with an increase in kidnappings and automatically assume that as people eat more ice cream, they become more prone to abducting people.  They may consider that because warmer weather tends to result in more people going outside for leisurely activity, the opportunities for kidnappings to occur increases as does the appetite for ice cream.  This isn’t a rejection of empirical evidence but merely viewing the world with a theory to help explain the complex happenings of society.

As for the financial crisis which should have changed the minds of the true believers, if Barro or Frum were paying even the slightest amount of attention to the Austrian school during the run up to the housing bubble burst, they would have seen a number of warnings from those versed in Misean economics.  This includes Gary North, Robert Wenzel, Doug FrenchJim Rogers, Hans Sennholz, Frank Shostak, Ron Paul, and Peter Schiff.  Austrian economist Mark Thorton even wrote this back in 2004:

It has now been three years since the U.S. stock market crash. Greenspan has indicated that interest rates could soon reverse their course, while longer-term interest rates have already moved higher. Higher interest rates should trigger a reversal in the housing market and expose the fallacies of the new paradigm, including how the housing boom has helped cover up increases in price inflation. Unfortunately, this exposure will hurt homeowners and the larger problem could hit the American taxpayer, who could be forced to bailout the banks and government-sponsored mortgage guarantors who have encouraged irresponsible lending practices.

So how did so many observers that understood Austrian economics see a crisis on the horizon?  Unbeknownst to Barro and Frum, the school has a theory that explains why economic booms and busts are a product of money supply manipulation by a central bank and fractional reserve banking.  The Austrian Business Cycle theory stipulates that as credit expansion occurs unbacked by real savings, an inflationary boom takes hold where many are deceived into believing themselves richer than they truly are.  As the money supply is increased by a central bank, so too are banks enticed to expand credit.  As Rothbard explains:

Businesses, in short, happily borrow the newly expanded bank money that is coming to them at cheaper rates; they use the money to invest in capital goods, and eventually this money gets paid out in higher rents to land, and higher wages to workers in the capital goods industries. The increased business demand bids up labor costs, but businesses think they can pay these higher costs because they have been fooled by the government-and-bank intervention in the loan market and its decisively important tampering with the interest-rate signal of the marketplace.

This credit expansion is fully sanctioned by the government that not only provides a public backstop to banks that may find themselves insolvent but also join the bandwagon of taking advantage of cheap borrowing costs.  As the inflationary boom wears on, capital is consumed as more and more of the public get caught up in the exuberance.  When the money supply expansion inevitably ends (as it must less the complete destruction of the currency takes hold), the market and prices must readjust accordingly as malinvestments finally come to light.  During the boom the production structure of the economy is distorted to the point where both increased investment in capital goods and increased consumer spending tend to take place.  Put simply, credit expansion throws off what would otherwise be a natural rate of consumption and saving.  Once it is realized that producer goods have been bid up far too high to be purchased with existing savings, prices must fall and losses are felt.  This is precisely how the recent housing bubble played out as the price of homes, which are generally considered good investments, reached a point too high to be mass marketable.  As economist Joseph Salerno documents:

The events of 9/11 led the Fed to ratchet up its expansionary monetary policy. From the beginning of 2001 to the end of 2005, the Fed’s MZM monetary aggregate increased by about $1 billon per week and the M2 aggregate by about $750 million per week. During the same period the monetary base, which is completely controlled by the Fed, increased by about $200 billion, a cumulative increase of 33.3 percent.

The Federal Funds rate was driven down below 2 percent and held there for almost three years, pegged at 1 percent for a year (Figure 5). The result was that the real interest rate, as measured by the difference between the Federal Funds rate and headline CPI, was negative from roughly 2003 to 2005. Rates on 30-year conventional mortgages fell sharply from over 7 percent in 2002 to a low of 5.25 percent in 2003 and, aside from brief upticks in 2003 and again in 2004, fluctuated between 5.5 percent and 6.0 percent until late 2005 (Figure 6). Perhaps, more significantly, 1-year ARM rates plummeted from a high of 7.17 percent in 2000 to a low of 3.74 percent in 2003, rising to 4.1 percent in 2004 and to slightly over 5 percent in 2005. In addition, credit standards were loosened and unconventional mortgages, including interest-only, negative equity, and no-down-payment mortgages, proliferated.

When housing prices began to fall, so did the perception of wealth by homeowners, mortgage lenders, and house flippers.  Because the global economy is so interconnected, the unemployment that occurs in just one industry has a devastating ripple effect.  When the housing bubble finally popped, recession set in as the economy contracted.

Barro and Frum have given no indication that they are familiar with the Austrian theory of the trade cycle.  Where they come off as critical of the school is its preferred solution to economic recession.

Austrians stress the importance of prices as signals to all economic actors.  Because prices are so vital to market coordination, they must be allowed to adjust to a new normal defined by the new spending and investment patterns.  Anything the government does to prevent the painful but necessary readjustment from occurring (such as bailing out politically favored industries, enacting price and wage controls, subsidizing the unemployed, or providing loans in the form of taxpayer dollars to businesses that would otherwise be unable to afford their borrowing costs) puts the brakes on the recovery.  This is why Austrians are against all government interference in the marketplace to prevent a much needed correction following a bust caused predominantly by the government’s own inflationist agenda.

None of this is a blind allegiance to an ideology.  The laissez faire attitude among Austrians is rooted in an understanding of the complexities of the marketplace and the vital importance of capital and production.  Perhaps more importantly, many followers of the school see modern day banking for what it really is: a racket based on fractional reserve lending that is held together by both the government and its central bank’s promise to guarantee its solvency.  Barro claims that his own opinions on monetary policy and banking regulation have changed since the financial crisis.  Unlike many Austrians, he never saw the crisis coming.  He has no systematic theory to explain why the bubble occurred and what steps are needed to prevent it from happening again.  Hilariously, Barro has admitted to attempting to read Mises’ grand treatise Human Action but that he couldn’t understand it and therefore claims “it actually makes no sense.”  Upon reading select chapters from Human Action, even the most casual reader would see that Mises doesn’t completely reject the use of empirical data as Barro claims.  What the economist needs, according to Mises, is “the power to think clearly and to discern in the wilderness of events what is essential from what is merely accidental.”  That means looking at historical data with a correct understanding on market functions to be able to interpret it so it makes sense and provides a possible explanation for outliers.

When it comes to conservatives “dumping” Milton Friedman as David Frum laments, all this writer can say is good riddance.  Friedman was as statist as they come.  From his advocacy for the dreaded “withholding tax” while employed by the U.S. Treasury to his comfortableness with the Federal Reserve, Friedman was hardly the liberty fighter he is often made out to be.  Yes, he has provided some eloquent defenses of capitalism and the morality of free choice.  But as Rothbard made sure to point out way back in 1971:

And so, as we examine Milton Friedman’s credentials to be the leader of free-market economics, we arrive at the chilling conclusion that it is difficult to consider him a free-market economist at all.

At the same time, we find Friedman calling for absolute control by the State over the supply of money – a crucial part of the market economy. Whenever the government has, fitfully and almost by accident, stopped increasing the money supply (as Nixon did for several months in the latter half of 1969), Milton Friedman has been there to raise the banner of inflation once again. And wherever we turn, we find Milton Friedman, proposing not measures on behalf of liberty, not programs to whittle away the Leviathan State, but measures to make the power of that State more efficient, and hence, at bottom, more terrible.

And while Friedman famously argued, along with Anna Schwartz, that blame for the Great Depression should be laid on the Federal Reserve’s reluctance to offset the declining money supply, Rothbard (alone at the time) argued that it was because of the Fed’s previous inflationary policy in the latter half of the 1920s that a stock market bubble and real estate really took off.  Because the inflation was hidden in the rise of certain asset prices and overall increases in productivity, many economists missed the Fed’s role in the boom.  Additionally, Rothbard concluded in his much overlooked book America’s Great Depression that the Depression really became great because of Herbert Hoover’s unprecedented interventionist policy of massive increases in government expenditures, the propping up of wages, price supports, and the enactment of protectionist tariffs.  Though Friedman’s view is still held as the conventional explanation for the Depression, especially by Federal Reserve chairman Ben Bernanke, Rothbard’s explanation is attracting more followers by the day.  Back in 2009, eminent UCLA economist Lee E. Ohanian even published a working paper for the Journal of Economic Theory that supported much of Rothbard’s explanation for the Depression.

In the end, all Josh Barro’s attack on Austrian economics shows is his utter lack of knowledge on the subject.  To claim that conservatives are devout followers of the school is incredibly misleading.  Mitt Romney isn’t brushing up on his Mises or Hayek during campaign stops.  Rush Limbaugh isn’t reciting essays by Rothbard on his radio show.  And Sean Hannity isn’t lecturing his viewers on the nuances of the Austrian Business Cycle theory.  The Federal Reserve only became a topic of discussion during the past Republican primary race because of Ron Paul’s ability to make it a relevant issue.

Barro claims to have a bookshelf of Austrian literature.  He would do well to crack open a book sometime as he desperately needs a refresher course.  David Frum would be just as wise to check out the Austrian school for himself rather than learn it second hand from someone who clearly doesn’t have a firm grasp on the subject.


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Tue, 07/10/2012 - 22:25 | 2604519 Payne
Payne's picture

just for once I would like to see something that a politician has done right that qualifies them to judge even a dog show.

Tue, 07/10/2012 - 22:30 | 2604536 markmotive
markmotive's picture

Politics is destroying this world. Politicians don't know shit.

Russia just sent warships to Syria. Someone send Hilary Clinton a memo.

Tue, 07/10/2012 - 22:48 | 2604597 ghenny
ghenny's picture

So what would you substitute for politics? War, a Mormon or Muslim or Southern Baptist Theocracy, a Kingdom, a dictatorship, a police state, no state with the associated anarchy?  Politics aint perfect but its better than the alternatives.  We get enough checks and balances in our system to pretty much neutralize the government so the market can work without too much interference.  What goes wrong is crony capitalism, crony socialism and as you here say, sometimes the quasi independent Federal Reserve.  Try to be a little more sophisticated in your thinking and commenting.

Tue, 07/10/2012 - 23:29 | 2604630 AUD
AUD's picture

Something whose quality remains unaltered despite the 'human action' of passing dud cheques to obfuscate bankruptcy.


Tue, 07/10/2012 - 23:48 | 2604791 knukles
knukles's picture

Let's get a grip
It's all gonna be OK

Ben and Timmah are gonnna (Oppps!  Almost typed "Gonad") testicleify before something of other in Congress, probably the Joint Committee on Smokescreens and Horseshit.
We all know that the reassuring prognostication shall essentially be summarized as folows;

Ben:  "I don't know anything."

Timmah:  "LIBOR Rat?  Isn't that Minnie Mouse's sister?"

God, it just don't get any better than this.

Wed, 07/11/2012 - 00:02 | 2604825 AldousHuxley
AldousHuxley's picture

austrian school is like catholic school for catholic school is just going to make them more eager for easing.


if you want to teach the people about hyperinflation, let them have hyperinflation. bring about 20% annual inflation and then see what even the most dumbest hick thinks about money printing.


behaviors won't change unless pendulum swings to one extreme

Wed, 07/11/2012 - 00:09 | 2604850 CrazyCooter
CrazyCooter's picture

if you want to teach the people about hyperinflation, let them have hyperinflation. bring about 20% annual inflation and then see what even the most dumbest hick thinks about money printing.

Sir, that has to be one of the most concise and brilliant comments I have read on ZH in quite some time.



Wed, 07/11/2012 - 06:13 | 2605204 Bendromeda Strain
Bendromeda Strain's picture

I concur - expect for the fact that "dumb hicks" will grok the true nature of the situation long before academics and other elite cheerleaders.

Wed, 07/11/2012 - 09:48 | 2605708 Nothing To See Here
Nothing To See Here's picture

Money printers will always say that what didnt work happened because they didnt print enough or borrow enough or spend enough. Look at what hyperinflation brought about in Weimar. It never came close of becoming a libertarian place, whereas you'd think they would have had enough of central planning...  The vulnerable masses are even more easily manipulated. They will turn to MORE government, not less, because there will always be some big-mouthed douchebag who will promise to save them.

Tue, 07/10/2012 - 23:05 | 2604652 GFKjunior
GFKjunior's picture

I see that you're new here. Most of us are Austrians and truly believe the answer is close to non-existent government. A few more weeks of reading ZH and you too will see the truth.

Wed, 07/11/2012 - 00:21 | 2604880 knukles
knukles's picture

And the truth shall set you on edge for a very long while whilst you attempt to disentangle your prior processing lessons.  Clarity will come.  And when it does, a great relief, serenity and peace, accompanied by healthy cynicism shall be its very own reward.
It is your own perception which changes.
For the better.
Welcome to reality, unvarnished.

Wed, 07/11/2012 - 03:03 | 2605110 forrestdweller
forrestdweller's picture

if you believe in a 'close to non existent government', please go live in somalia en come back in half a year. i will ask you the same question again then.

Wed, 07/11/2012 - 04:40 | 2605159 Hobbleknee
Hobbleknee's picture

The government shut down several times in the 80s.  Everyone went about their business as usual. 

Do you think there would be total chaos just because we didn't have Janet Napolitano telling us to spy on each other?  On the contrary, there would be more prosperity for everyone without the government consuming 40% of our wealth.

Wed, 07/11/2012 - 05:53 | 2605192 TWSceptic
TWSceptic's picture

We were basically without government in Belgium for a whole year. No problems whatsoever even though the media and politicians were panicking.


Necessity for government is an illusion my friend. America used to have one of the smallest governments in the world, Americans prospered at that time. Now it has the biggest government in the world, things have never been as bad as they are now...

Wed, 07/11/2012 - 08:36 | 2605434 DOT
DOT's picture

Belgium leads the way !



Wed, 07/11/2012 - 06:50 | 2605237 Mitzibitzi
Mitzibitzi's picture

I am getting so fucking sick of people using the Somalia argument. The place was a war zone when it DID have a functioning government. Has in fact been a war zone, on and off, for most of the last 150 years - a coincidence that this is when Britain and Italy stuck their bankster-guided, Imperialist noses into the region? And there'd been low level conflict in the area for a good 1500 years before that! There are literally hundreds of running feuds between different groups, divided along religious, ethnic, economic and philosophical lines. Have been almost forever.

What Somalia is suffering from is not a lack of government, it's the aftermath of shoving 5 or 6 independent 'states' (4 fairly large ones and a couple of smaller ones, if memory serves) together, originally into one British and one Italian colony - later into just one aggregation, in the interests of making the area cheaper to govern (read, steal the resources of). And a result of deliberate policy by the UN to keep much of Africa in poverty and conflict; again for reasons of exploitation by the First World (and these days, the Second World as well!).

There are places where settlement / annexation by Imperial powers, primarily the British, did a lot of good in the long run - But Somalia wasn't one of them. It's largely in the state it is now because WE, the West, fucked it up quite spectacularly in the name of profit. So yeah, government WAS the problem; the thoughtless imposition of it, not the lack of it!


Wed, 07/11/2012 - 11:08 | 2606090 Calculated_Risk
Calculated_Risk's picture

So people can't be civil unless they have the government there to make them civil?! BAHAHAHAHA

Wed, 07/11/2012 - 09:35 | 2605646 rwe2late
rwe2late's picture


Humans organize. There are benefits to organization. And pitfalls. Those who head organizations tend to use the organizations they head to accrue privileges and power to the detriment of the rest of the population. As heads, they become isolated, even paranoid, further compounding and self-justifying the tendency to wreak havoc on others and on the environment.

The "anarchist" solution is to have no organizations with power. Impossible to realize, and impossible to enforce.

All this is required to happen, one must suppose, in daily ‘new years‘, when everyone begins with equal wealth, property, and control of government.

The “anarchist” spin-off of “capitalism” imagines that by allowing the accrual of great wealth and property, and by restricting the government to protecting that wealth and property, abuses and oppression will end, presumably because those with wealth and property will refrain from using their wealth to influence establish, entrench, and enhance their “rights” and privilege.

Tue, 07/10/2012 - 23:06 | 2604655's picture


So what would you substitute for politics?


A respect for individual liberty.


 We get enough checks and balances in our system to pretty much neutralize the government so the market can work without too much interference.


Did you sleep through 2008?


Try to be a little more sophisticated in your thinking and commenting.


Don't assume that that which you fail to understand is unsophisticated.

Wed, 07/11/2012 - 00:48 | 2604914 caconhma
caconhma's picture

Milton Friedman was a fraud but a very skillful one. He was selling the same lies as Krugman under a cover of the free market disguise.

It was Milton Friedman who claimed that the Great Depression would be avoided if only FED has printed more money.


Wed, 07/11/2012 - 05:44 | 2605187 TWSceptic
TWSceptic's picture

Or he just made that one mistake and you are unfairly labeling him as a fraud for that.

Wed, 07/11/2012 - 06:17 | 2605208 Bendromeda Strain
Bendromeda Strain's picture

That wasn't a mistake, that was a fatal error and a disqualification.

Wed, 07/11/2012 - 00:26 | 2604898 Stoploss
Stoploss's picture


Shit, forgot. The full moon retards all come out at the same time.

Kinda like a mini retard tsunami every thirty days.

We need retard tampons or something..

Wed, 07/11/2012 - 01:17 | 2604989 NumNutt
NumNutt's picture

Looks like a couple of people didn't think your comment was very funny.  I, Sir, on the other hand thought it was so funny I almost blew beer out my nostrils.

Wed, 07/11/2012 - 03:59 | 2605133 Inthemix96
Inthemix96's picture


I have been a follower of ZH for years.  That one post by you is the best fucking piece of parody I have ever personally seen on these pages.  Fucking first class mate, you seriously dont know what the fuck you are talking about.

Hahahahahahahaha, (golf clapping)

Wed, 07/11/2012 - 05:12 | 2605174 Lebensphilosoph
Lebensphilosoph's picture

War is politics, or at least a method of politics. It is politicians who create wars between states. Theocracies, dictatorships, police states, are all of them political entities. If you are going to accuse others of having a lack of sophistication in their thinking, you had better show some in your own if you don't want to look like an utter prat.

Wed, 07/11/2012 - 05:38 | 2605182 TWSceptic
TWSceptic's picture

There are so many errors in that one post. You describe anarchy as chaos, but they are two entirely different things. Then you mention "crony capitalism" capitalism is not crony, cronyism is crony. Cronyism is always present, it will never go away, but when cronyism becomes official policy, that's when you got fascism. That's our world today.

Wed, 07/11/2012 - 07:26 | 2605288 sansnobel
sansnobel's picture

How about Rule of Law?  Maybe Justice?  Would that be suitable for you there ghenny?

Wed, 07/11/2012 - 08:38 | 2605425 Bagbalm
Bagbalm's picture

Why is it always 'sophisticated' to put up with inexcusable shit?

Wed, 07/11/2012 - 10:12 | 2605793 Mr. Magniloquent
Mr. Magniloquent's picture

Name a war not started by politicians. Name a criminal organization that has oppressed, murdered, and plundered to any degree that governments have. Governments are the worst perpetrators of the very ills and evils they are supposed to bullwark against. The difference is that their victims are captive, sometimes willingly born of their own ignorance to reality. Perhaps you ought to heed your own advice.

Wed, 07/11/2012 - 10:30 | 2605886 monoloco
monoloco's picture

At least with a Monarchy there is a chance to get an enlightened leader once every few centuries.

Wed, 07/11/2012 - 10:30 | 2605887 JimBowie1958
JimBowie1958's picture

So what would you substitute for politics?

There was a time we were trying to not elect mere politicians but STATESMEN who knew better than to work for the crooks because if we all did that then we all lose.

I dont think we have seen statesmen run things in DC for several generations.

All we get now are the photogenic dregs the corporate masters can dig up from the bottom feeding whores who then tell them what to say, think and do to get elected.

Romney and Obama are two excellent examples of what I am talking about. Tweedle Dee and Tweedle Dum with not a shred of any virtue working for them.

Tue, 07/10/2012 - 22:49 | 2604605 flacon
flacon's picture

Tom Woods responds:


Neoconservative David Frum Hearts the Fed

Tue, 07/10/2012 - 23:17 | 2604684 TruthInSunshine
TruthInSunshine's picture

If John Maynard Keynes were alive today, he would sue Krugman et al. for libel & slander, and file a motion requesting a permanent injunction barring The Krugman Circle Jerk Chorus from ever invoking his name or from engaging in any future butchering and torturing of what Keynes believed and endorsed.


By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”


--John Maynard Keynes

from The Economic Consequences of the Peace (p. 235-6)

Tue, 07/10/2012 - 23:26 | 2604722 Michael
Michael's picture

If Austrian economics and the Gold standard were implemented, a loaf of bread could cost 10 cents and not inflate in price for decades.

It also puts the virtual hand cuffs on the money changers and pillagers.

Tue, 07/10/2012 - 23:32 | 2604741 El Tuco
El Tuco's picture

But couldn't the same fuckers that manipulate the dollar/interest rates/information, etc, etc manipulate and control gold?

Just asking......

Wed, 07/11/2012 - 00:12 | 2604822's picture

As long as any gold backed paper is redeemable in gold then manipulation becomes much more difficult. Remember that even though the US stopped using gold money domestically in 1933 the Breton-Woods agreement made US dollars redeemable in gold by foreign nations until 1971. This did not stop excess printing entirely but it kept a lid on it. It was not until Nixon closed the gold window that inflation really got going. To the best of my recollection the dollar has lost about 95% of its value since 1913 but a full 70% of that value was lost after 1971.

Wed, 07/11/2012 - 02:49 | 2605025 Michael
Michael's picture

A work in progress.

Tue, 07/10/2012 - 23:45 | 2604782 granolageek
granolageek's picture

Until there's a gold refining breakthrough that changes the relative values of glod and bread.


When Spain looted the new world in the 1500s, the resulting strictly gold based inflation ruined thousands of nobles who had converted their labor based prerogatives to gold rents.


Gold is not magic. It is a commodity. It has always been a valuable commodity. But that value has changed by factors of 2 abd 4 at different times. Claiming it  has not simply shows ignorance.

Wed, 07/11/2012 - 01:02 | 2604968 JR
JR's picture

On the other hand, Hunter Lewis in his book, Where Keynes Went Wrong, presents Keynes’ arguments that "look to the State for economic leadership."

Among them, each here with a brief extrapolation from Lewis’ comments, are:

1.      The state should decide on the “volume of investment.”  Lewis: “This means that if investment is too low to absorb all savings, and if lower interest rates do not bring up investment sufficiently, the state should make investments itself.”

2.      The level of government investment should be carefully calibrated in order to foster a perpetual “quasi-boom."  Lewis: “[T]his follows from Keynes’s view that, most of the time, investment lags savings, so that money remains idle, and the economy falters. A boom should therefore be nursed and kept going as long as possible…  One might ask…might not the combination of consumer demand and investment run so strong that the boom finally goes get out of control…even cause inflation? ...  Keynes acknowledged that this could conceivably happen… however, he did not want to increase interest rates. As he said: ‘We must find other means of [cooling the economy] than a higher rate of interest. For if we allow the rate of interest to [rise], we cannot easily reverse the trend.’”

3.      The state’s usual job is to fill up the investment tank, not to drain it. Keeping it full is what matters most. But there are other reasons to welcome a larger role for the state in investment.  Lewis: “On the whole, Keynes appeared to sympathize with the idea that government would do a better of investing than private markets.”

4.      The state’s control of the economy should not stop with interest rates, investment, taxation, and exchange rates. Lewis: “Moreover, over time, the very distinction between private and public economic activity will gradually fade. Private companies will become semi-socialized and eventually ‘Public Boards’ and ‘Private Companies’ will only differ with respect to how the directors are appointed.” …

Et cetera! And this is just a smidgen of “where Keynes went wrong” along with all his followers, especially the ever faithful Ben S. Bernanke, on their pathway to the current worldwide economic disaster.

Tue, 07/10/2012 - 23:28 | 2604731 El Tuco
El Tuco's picture

Zionism is destroying the world.....

and don't count on the Russians for anything. They can barely stay sober.

Tue, 07/10/2012 - 23:51 | 2604799 Vic Vinegar
Vic Vinegar's picture

What does Zionism mean to you?  I think that many people have a clearly-defined understanding of the term but for others like myself it's a bit nebulous.

So if it's really destroying the world, it would really help to know: a) what it means and b) what I should do about it.  Thank you

And on a related-note - and on-topic - I've never read Human Action or Man, Economy, and State.  If reading these books means something more than reading the guidebook to 'Magic: The Gathering' then I will.  I would also appreciate an explanation as to why these books are important.

This comment ain't trolling but rather a genuine lack of understanding.

Wed, 07/11/2012 - 01:31 | 2605011 Questan1913
Questan1913's picture

Vic Vinegar,

If you are serious about educating yourself, I would suggest you not tackle one of the treatises you mention before some preparation.  I would suggest the following reading list in the following order to get the biggest gain in knowledge per time spent.

"The Law"  F. Bastiat    Approximately 75 pages in large type written in simple yet precise prose.  If your initial reaction is highly negative and you find yourself thinking "this guy is nuts". you need go no further.  You are too brain damaged by pernicious propaganda to benefit from reading anything that is counter to your brainwashed state; just return to the TV, and live happily ever after.

If you find "The Law revelatory and uplifting here is the rest of the list.

"The State"  Franz Oppenheimer.  One of the most important books one can read and another foundation builder.

"A Letter to Grover Cleveland"  Lysander Spooner.  A simple 130 page paperback that nicely restates and sums up his voluminous previous works.  If you can get through it and understand it, you have received the equivalent of 3 or 4 college educations in the US today, and then some. It is extremely dense with ideas and information.  If you want to sharpen your mind, this book works like magic!

"The Road to Serfdom" F.A. Hayek.  Will explain the mechanism that has transformed the US from a vibrant first world powerhouse nation to a seedy, stagnant, corrupt and twisted funhouse mirror carricature of a third world helll hole.  This one book is equal to another college education.

Good luck.


Wed, 07/11/2012 - 02:30 | 2605083 Vic Vinegar
Vic Vinegar's picture

No offense Q-dog, and I will give you a greenie for trying.

But my goal was not to: explain the mechanism that has transformed the US from a vibrant first world powerhouse nation to a seedy, stagnant, corrupt and twisted funhouse mirror carricature of a third world helll hole. 

I wanted actionable items.

In the meantime, I'm gonna rock out to my favorite Katy Perry video, OK?

Wed, 07/11/2012 - 09:19 | 2605488 i-dog
i-dog's picture

I don't know why people keep junking you for entirely reasonable questions?! :/ (Maybe it's because they, like I, have often considered you to be a collaborator in the past...and you may still be, though I now doubt it).

There is no "actionable item" that an individual can pursue to bring a screeching halt to what has been unfolding, in very decisive steps, over the past few centuries -- with the planning and execution carried out by thousands of ideologues working together in the seats of financial, political and social power. Those at the very top have periodically reviewed progress, and changed their master plan along the way, to ensure success and we are now at the dénouement.

There are countermeasures we could still take ... for example, through initiating a mass defection of state governments from the globalist central planning 'unions' ... but I, for one, fear that time is now too short for that to take hold. In any event, the people of the USA and EU would prefer to listen to the platitudes and continue receiving the bennies printed by their respective central governments -- and would therefore fight dissolution even more vigourously than TPTB themselves!!! prepared to defend yourself from your neighbours...long before you will see a drone taking aim on your redoubt!

Wed, 07/11/2012 - 01:49 | 2605036 NidStyles
NidStyles's picture

Being a long time player of Magic, I can tell you that you should read all of those books. You'll be better at Magic too. Don't worry about the down arrows there's a lot of cranky and frustrated investors here these days. 

Wed, 07/11/2012 - 07:37 | 2605306 Fort
Fort's picture

These books are important because they are glossed over in most University curriculums, that may not always be the best recommendation, but with these books it actually is. They are also considered controversial in main stream which is much more Keynesian oriented. Main stream argue that the relative peace of the last 6 or so decades has proven the success of Keynesian theory. I would counter that argument with the argument that the destruction reaped by the black plaque in medieval times also was followed by long terms of relative peace and economic prosperity. The last decades of peace followed the destructive WWII. I guess when a lot has to be rebuild there simply are many opportunities for prosperity. Rebuilding things gives a distraction from recent suffering. Personally I think the road to serfdom from Hayek was one of the most comprehensible books on economics’ I ever read. In my view reading Human action and Man, Economy and State offer an education; Magic The Gathering offers a distraction from reality you chose which you require most at this point in time. Distraction may be far more tempting, so are drugs, alcohol and other escapes. This brings me to your first question:

Zionism can best be learned about by reading the Protocols of Zion. (Google, wiki, Amazon etc.) Read them and make up your own mind.

A few comments on the protocols; the protocols in my humble opinion were not written by Jews, but were used aggressively in propaganda to condemn Jews which ultimately lead to the massacres of WWII. The protocols to this day are used in this manner; I think this offers a distraction from the real culprits and authors of the protocols. Surrounding the protocols is another controversy namely whether they are false or real. They are extremely prophetic and not in the Nostradamus type of way. They quite literally describe the world we are living in today. Much more can be said about this subject, but I would recommend reading them first and then read into all controversies, keep an open and very critical mind. Don't come to conclusion to fast and don't ever start believing you hold the ultimate prove that all conspiracy is actually true. Let your own mind be your guiding sovereign, reality is after all in the eye of the beholder.

What you can do about it? People always hold all the power; once people say it is enough a tidal wave of revolution comes in motion, which cannot be stopped. I personally think we have to rebel as taxpayers and ultimate financiers of governments and banks but not by killing each other but by destroying the banking system. Voting has proven to change nothing and as you will read will not do anything but put the most desired puppet in power. Simply stop depositing money in banks collectively is way more effective. This is a form of voting as well, with your feet. Events have built up too far and pain and suffering can no longer be prevented, but if people start resisting now, it might change fast enough to make it a nice world for our children again with not too much bloodshed, preferably none. The internet offers an opportunity that this time; our children might actually safe the knowledge required to truly prevent this from ever happening again. After all our modern times have the most complete records ever. This time there is a group not represented very often in historic files and archives. The common people have voiced their opinion and real situation on the internet. This time history may not be written at all, but it will just exist, because there are simply too many versions of what happened. I find that an interesting consideration.

You can also replace the chicken and egg in the famous question which came first with chaos (Austrian school) and order (Keynesian school). That discussion is at the heart of the matter and it saves you a hell of a lot of time reading This simple summary does not do justice to the theories, but it does boil down to it. If you do decide to educate yourself, I think it is worth it. 

Wed, 07/11/2012 - 03:51 | 2605131 Inthemix96
Inthemix96's picture

And another thing mark,

Why is there a media block-out over in Mexico, I would post a link but I'm a fucking clown on a computer, I can only type I'm afraid.  The website I looked on is 'Newordernews', and by all accounts, and pictures, and one video they have up, there is fucking millions of mexicans demonstrating.

I'm in England and youtube has it blocked cos' the gubbermint asked it to.  Any ideas fellas???

Wed, 07/11/2012 - 07:09 | 2605257 Mitzibitzi
Mitzibitzi's picture

It would appear they're protesting election results.

Seems that a significant proportion of the population have worked out that the 'official' results are totally bogus. Apparently, some sneaky pro-democracy group was quietly monitoring the voting and conducting 'Exit' polls. Which point to the official results being a total fabrication, cos they ain't even close to what was observed on the ground.

There isn't much info online, though, and I had to sidestep Google to get what little I did.

Wed, 07/11/2012 - 10:47 | 2605980 monoloco
monoloco's picture

I live in Mexico, the people here are so condititioned to political corruption that I suspect that the only reason they are protesting is because the PRI burned them on the gift cards they gave out to buy votes. They were supposed to be worth 500 pesos but when they went to redeem them they only received 100 pesos.

Tue, 07/10/2012 - 22:31 | 2604542 James_Cole
James_Cole's picture

James E. Miller holds a BS in public administration with a minor in business from Shippensburg University, PA. 


Tue, 07/10/2012 - 22:38 | 2604563 Tyler Durden
Tyler Durden's picture

Guess the identity of the following 'brilliant' mind:

At age 16, he entered the Massachusetts Institute of Technology, where he originally intended to study physics but soon switched to economics. He was also an active member of the MIT debating team. He attended Harvard University as a graduate student. In 1983, at age 28, he became one of the youngest tenured professors in Harvard's history.

Tue, 07/10/2012 - 22:41 | 2604571 Aziz
Aziz's picture

Larry Summers — who, according to Brad DeLong is someone who the crisis of 2008 has vindicated.

"The big lesson is simple: trust those who work in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger. That means trusting economists like Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right. "

Talk about cognitive dissonance...

Tue, 07/10/2012 - 22:50 | 2604609 ghenny
ghenny's picture

So where are Greenspan and Paulson in all this?

Wed, 07/11/2012 - 01:20 | 2604995 Votewithabullet
Votewithabullet's picture

Critical thinking will not do. Leader McConell and Speaker Boner were not in the meeting when Paulson was doing his end of the world dance? All our troubles are because of the negro and his "party of the negros". HT jesse helms

Tue, 07/10/2012 - 22:50 | 2604610 LetThemEatRand
LetThemEatRand's picture

Larry Summers has an agenda like most of his ilk.  His education gives him the weapons he needs to pursue that agenda.

Wed, 07/11/2012 - 16:11 | 2607539 monoloco
monoloco's picture

Larry Fucking Summers is one of the cheif architects of the unfettered kleptocracy we are now enjoying.

Tue, 07/10/2012 - 22:43 | 2604577 James_Cole
James_Cole's picture

I just found it funny he went to a small public uni studying public administration yet writes (poorly) about Austrian economics. 

Tue, 07/10/2012 - 23:02 | 2604647 Bohm Squad
Bohm Squad's picture

Perhaps if you attacked the man's opinions rather than his credentials, you'd find more support for your post.

Tue, 07/10/2012 - 23:39 | 2604764 James_Cole
James_Cole's picture

This is the rare mises institute article I mostly agree with (granted there's very little content in this long-winded disconnected rant). I'm always curious to check the background on people who can't write worth a shit but have newsletters etc. wondering where they come from.

Newsletter writers are often the worst snake oil salesmen around, when you meet them at trade shows unscripted it all becomes pretty clear. 

I could care less if people junk my posts, I bet lots of others on here have met such people and been left scratching their heads. 

Wed, 07/11/2012 - 00:14 | 2604864 Bohm Squad
Bohm Squad's picture

I understand your position.  For what it's worth, I rarely "junk" anyone's post.  Mostly, they're simply opposing views to my own...if I were to fail to embrace them, it would signal I'm scared of them...the only reason I'd be scared of them is because my own ideas, beliefs, and paradigm can't withstand their attacks.  In this case, I think you were wrong for attacking a person's credentials rather than the beliefs he shared.  From your point of view, he came off as a "snake oil salesmen" (sic) and was therefore untrustworthy.  Whether or not you trust the writer, do you believe his or her ideas?  No writer should ever be totally trusted because they write to influence others...even me...even you.

Wed, 07/11/2012 - 00:46 | 2604945 James_Cole
James_Cole's picture

When looking into his credentials I was curious of his background (which I found to be ironic) his crap writing stands alone - don't need any credential check to figure that out. 

Interestingly, Bloomberg has an article which is in a lot of ways about Austrian economics but discussing economics in relation to biology. Much more interesting look at Austrian school than the drivel by mises institute.

"This is a way of describing “too big to fail,” although it would be more accurate to say “too central to fail.” Meanwhile, a high density of interconnections in the network creates ever more channels along which contagion can move. This problem encourages banks to “hoard” funds in times of stress -- the least desirable behavior in a network of banks trying to share resources to meet their momentary funding demands.

Unlike organisms, of course, financial systems haven’t undergone evolutionary competition from which only the fit have emerged. We have little reason to expect that what exists would be anything like optimal, or even reasonable."

Wed, 07/11/2012 - 01:54 | 2605045 NidStyles
NidStyles's picture

You do realize that that particular article is actually in support of Centralization as long as there is re-distrubution of wealth, right?


That's hardly Austrian in nature, and your ad-hom directed at Mises is highly questionable to your own particular motives here. 

Wed, 07/11/2012 - 14:41 | 2607042 James_Cole
James_Cole's picture

You do realize that that particular article is actually in support of Centralization as long as there is re-distrubution of wealth, right?

Wrong. Reading comprehension skills would do many people in this thread a lot of good. 

Right near the top there's a pretty clear thesis statement:

"Our human organizations obviously also follow hierarchies, as do our buildings, technological devices, even our writing -- words make sentences, which build paragraphs, which then make up essays or chapters.

Scientists and philosophers since Aristotle have noted as much, but Simon, one of the most creative minds of the 20th century (he died in 2001), was perhaps the first to ask why. He also proposed an answer."

The rest of the piece touches at various points on bounded rationality.

"Daniel Kahneman proposes bounded rationality as a model to overcome some of the limitations of the rational-agent models in economic literature."

And ends with:

"Both high concentration and high interconnectedness contribute to an “everything is linked to everything” outcome that is the very opposite of modularity, and a likely recipe for instability. Financial engineering should learn to avoid this architecture, just as surely as biology has."

How you come away with "that particular article is actually in support of Centralization as long as there is re-distrubution of wealth, right?" is anyone's guess. 

"Unlike organisms, of course, financial systems haven’t undergone evolutionary competition from which only the fit have emerged."

Wed, 07/11/2012 - 16:04 | 2607497 NidStyles
NidStyles's picture

No, you should learn to use a god damned dictionary before being an arrogant iliterate turd with an ego. Go back and re-read what he wrote again with understanding of the definition of the word he was pushing again. Here's the definition for your reference:



noun, plural hi·er·ar·chies. 1.
any system of persons or things ranked one above another. 2.
government by ecclesiastical rulers. 3.
the power or dominion of a hierarch. 4.
an organized body of ecclesiastical officials in successiveranks or orders: the Roman Catholic hierarchy. 5.
one of the three divisions of the angels, each made up ofthree orders, conceived as constituting a graded body.


Wed, 07/11/2012 - 17:31 | 2607827 James_Cole
James_Cole's picture

Do you have some sort of an argument here or just dictionary definitions? Take issue with any of these points:

"The growth of modern finance seems to have violated the principle of hierarchical structures, and with gusto. Two trends in the past 30 years -- the merging of banks into huge institutions and the explosion of derivatives that link them around the globe -- have made the network much less modular.


Both high concentration and high interconnectedness contribute to an “everything is linked to everything” outcome that is the very opposite of modularity, and a likely recipe for instability. Financial engineering should learn to avoid this architecture, just as surely as biology has."

Hayek - "How can the combination of fragments of knowledge existing in different minds bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess? To show that in this sense the spontaneous actions of individuals will, under conditions which we can define, bring about a distribution of resources which can be understood as if it were made according to a single plan, although nobody has planned it, seems to me indeed an answer to the problem which has sometimes been metaphorically described as that of the "social mind."

^ Could well be a definition of biological evolution. 

Wed, 07/11/2012 - 00:00 | 2604815 TruthInSunshine
TruthInSunshine's picture

James_Cole launched an ad hominem assault on the eve of August 10th, 2012, and even by the quite abysmal, desperate and lowly standards of ad hominem attacks, it failed miserably.

Wed, 07/11/2012 - 00:14 | 2604857 James_Cole
James_Cole's picture

Impressive you can time travel. Who this ad hominem attack will be against shall remain a mystery I guess.

Wed, 07/11/2012 - 00:47 | 2604933 TruthInSunshine
TruthInSunshine's picture

You do not claim ownership of:




Was that not ad hominem?

Do one-legged swans swim in circles?

Wed, 07/11/2012 - 00:48 | 2604950 James_Cole
James_Cole's picture

Unlike in the movie my name originates from I can't time travel so I don't know what happens on the eve of Aug 10th 2012. 

Wed, 07/11/2012 - 00:51 | 2604955 TruthInSunshine
TruthInSunshine's picture

Very clever, Mr. Cole.

You zinged me on a technicality, as I mistakenly wrote "August 10th" rather than "July 10th."

You are shrewd and calculating, and I shall watch for your cunning ways henceforth.

Tue, 07/10/2012 - 23:48 | 2604793 Peter Pan
Peter Pan's picture

The elite are focusing on just two things: How to keep the system from collapsing while simultaneously being able to continue to rape it. Therefore as I see it, the battle between the two schools of economic thought are largely for show purposes even though the Austrians are miles ahead in terms of what is correct.

Wed, 07/11/2012 - 01:23 | 2605000 Walt D.
Walt D.'s picture

Obama ate dog - does that qualify him?

Wed, 07/11/2012 - 02:35 | 2605089 dvfco
dvfco's picture

I love when politicians repeat facts (and I do believe Austrian Economics is just a fact based system) and then mock them. 

The best part is that, especially in the good old US of A, they can go on talk shows 3 days later, with the video of them mocking the system right next to them, and say - no, no, you've got it all wrong - that was the answer to a different question - the one about whether I think we should have more sun and I said, "yes, they should start printing it and never, ever stop." 

I didn't mean dollar bills because people would have thought I was 'daft' <daft, as a word, only used if the audience is expected to have a 9th grade reading level or better - or actually be in any school.>

Never underestimate the stupidity of the American Voter.

   Never underestimate the intellifegence of the American Voter.

Those are two statements seeimingly at odds with one another - but I've yet to meet someone trulu filthy rich who hasn't subscribed to one theor or another!

Good luck

Tue, 07/10/2012 - 22:31 | 2604539 entropos
entropos's picture

You lost me when you named Gary North as some kind of great mind. He's no luminary. He's just another douchebag trying to spot the next trend so he can make a buck off it. 
Y2K, anyone?



Tue, 07/10/2012 - 22:36 | 2604556 Stanley Lord
Stanley Lord's picture

Frum is a fucking clown.

Tue, 07/10/2012 - 23:50 | 2604802 prole
prole's picture

Agreed 100%

Another thing some of these clowns have in common: Made up names, NeoCon statist Credentials, See I Aye Backgrounds, an absolute loathing for any free market, Libertarian, Austrian Ideas

Max Boot (Stupidest made up name ever award)
Wolf Blitzer (Close second for chickenhawk Chickenshit tough sounding made up name award)
Josh Borrow (so0unds made up)
Jonay Goldberg (actual name likely)
Anderson Vanderbilt Cooper(actual name likely)

I totally disagree with OP conclusion that these NeoCon propagandists Froom and Borrow "lack knowledge" on Austrian econ. They are simply lying and obfuscating the subject to better bamboozle the already questionable heads of their Jingo audience.

Wed, 07/11/2012 - 02:06 | 2605058 Questan1913
Questan1913's picture


Yes.  Lying,  swinish, disinformation specialists whose lifelong endeavor is to serve the interests of the swindle class, keeping the "proles" in a constant state of stupefaction while raising their masters and employers to the level of godlike deities, all good and all knowing and worthy of universal worship. 

Tue, 07/10/2012 - 22:40 | 2604568 GoldandSilverTrain
GoldandSilverTrain's picture

If Austrian economics was really a diehard obsession like Barro and Frum claim, then the world would be a much better place. Here's hoping that Austrian economics does get that big!

Tue, 07/10/2012 - 22:42 | 2604569 dwdollar
dwdollar's picture

Let me get this straight...

Keynesian theory is the prevalent policy for all Western economies of the last +50 years. So now that the West is declining, they blame it all on the Austrians? That's a hoot!

Tue, 07/10/2012 - 22:53 | 2604620 Dr Benway
Dr Benway's picture

Yeah this one literally left me speechless going WTF.


They attack the *only* school of thought that predicted and tried to prevent the crisis we are in?


I mean people are fucking insane

Wed, 07/11/2012 - 00:25 | 2604890 Temporalist
Temporalist's picture

It's truly amazing the hypocrisy.  Just on the fraud alone; has fraud like this really ever happened on such a global scale ever?  I don't think so. Be it rulers of nations or corporations or law or justice...where is real justice I don't think anyone has seen her lately she's not the only one that's blind.

If the Keynesian system is leading in anything it's corruption or fraud on massive scales like none have ever seen before. 


How demented a mind must be to bemoan the enormous wealth disparity between rich and poor, and yet, it is in this exact system that this is happening!  They promote people not being responsible, to have children when they aren't able to care for themselves, to take medications to solve every problem, to never care about anything as long as there are rich people who can be blamed for your plight and the nanny state will make sure you get something because your lot in life just sucks and we know it and we can get you stuff as long as you keep us in power.

That people aren't enraged that so many people in government are tied in with banks and bankers and corporations and the list goes on...


Quite possibly the worst part of it all is that it is a "self-reinforcing process of disintegration" as George Soros put it but in more ways than one.  The people that this system is creating are the exact people that are running it now.  The worst kind of people that tell you that you are immoral because you don't want to give everybody everything without having a fucking clue how to obtain it other than to say "just pretend aliens are attacking."  Clearly it is not immoral to convince people that everything will be okay as long as they listen to you but your core message is that everything is free, nobody has to learn any lessons about responsibility or self control, and that you know what is best for them because you are smart and have smart friends that, while sycophantic self congratulatory power whores who aspire to tell you what to do and how to live, will do everything that is in your best interest without expecting anything that is in their interest whatsoever.


The key is trust.  It's gone.  In any system if you can't trust the parts to work...failure.  Nobody trusts anyone and rightly so.  This system is not the capitalism nor free markets because in a free market frauds are found out and collapse as the system can't take them.  Business depends on trust.  Reputations needed to matter once and they should again.  People that have predicted this crisis most accurately have been Austrian economists as far as I can tell they just aren't media darlings like the Keynesian Kabal because they tell the truth and clearly nobody can handle the truth. 


I don't know what system works best but this one sucks and it's so obvious to people around the world who are poor and uneducated and are still suffering as a result of it.

Wed, 07/11/2012 - 04:45 | 2605055 NidStyles
NidStyles's picture

The problem is that it's in those person's who promote this systems best interests to own the media and keep the lie going. The longer they keep it going, the more wealth they can steal until eventually they are the only ones left standing or holding the wealth. It's like Stalin/Lenin on crack. 


The system that works best is the one that doesn't exist, as it's been said throughout history. As in it doesn't exist at all, there's no system in place and people are free to voluntary interact with each other. That's what the people that tell you that the Republic and Democracy are saying when they say the perfect system doesn't exist. 

Wed, 07/11/2012 - 03:34 | 2605127 verum quod lies
verum quod lies's picture

Part of it is what some psychologists call "projection":

Psychological projection or projection bias is a psychological defense mechanism where a person subconsciously denies his or her own attributes, thoughts, and emotions, which are then ascribed to the outside world, usually to other people. Thus, projection involves imagining or projecting the belief that others originate those feelings.”

The other part is just, as has been pointed out, things like keeping the scam going and not wanting to incur disfavor with people who naturally hate Austrian economics and support ever more centralization of power and destruction of traditional America (e.g., your typical cultural Marxist media head).


Tue, 07/10/2012 - 23:26 | 2604723 tmosley
tmosley's picture

Lefties have a disturbing tendency to do this.  No matter what they do or screw up, they always point to "the free market", or "evil capitalists" as the culprits, even if there are none to be found.

Wed, 07/11/2012 - 00:23 | 2604887 IBelieveInMagic
IBelieveInMagic's picture

Mislabeling. in the current US political context, guys labeled Lefties/Righties are all equally disasterous. What passes as conservatives in the US is not economic conservatism but social conservatism (distracting with gays, abortion, religion). So, let us not wrongfully suggest that the Republicans are the paragons of virtue in economic conservativism...

Wed, 07/11/2012 - 01:27 | 2604939 Bay of Pigs
Bay of Pigs's picture

Would that be posters like gene and falak pema who went Full Retard on this very topic today?

Wed, 07/11/2012 - 02:05 | 2605056 NidStyles
NidStyles's picture

That's how they justify their push for more Government control over everything. 

Wed, 07/11/2012 - 06:10 | 2605202 Acet
Acet's picture

You know that by attacking "Lefties" and ascribing behaviours and flaws to them as a group you are doing the same kind of thing as you acuse them of doing?

The world is far more complex than just Left and Right and frankly just concentrating on the political axis that measures one's level of belief in the importance of equality is shortsighted:

- The current "war" is being fought on the axis of Liberalism (the original one, not the US neo-con strawman liberalism) vs State Power, and that is pretty orthogonal with Left-vs-Right since in both the Left and the Right there is a wide range of beliefs on how much power should be in the hands of the state (it's perfectly possible to be a "leftie" and lean towards Liberalism).

More in general, the whole Left bogeyman seems to be a very American thing, maybe a leftover system of indoctrination that comes from the time of MaCarthyism!?

Have you ever read anything that is not a US source of information (at least BBC Worldnews, but something in German or French would be even better)?

Wed, 07/11/2012 - 10:24 | 2605854 Bay of Pigs
Bay of Pigs's picture

Yes, those men I described above support State Power, not individual freedom. I'm not 'attacking' them, just stating a fact. That was my point.

Tue, 07/10/2012 - 22:44 | 2604579 Dr. Richard Head
Dr. Richard Head's picture

So was Libor manipulated down with the increase in money supply in order to fuel the bull, then manipulated back up to pop the alt-a, option payment, subprime cluster fuck? If so, how closely did that time with the increased CDS on their own MBS rehypothicated cum swap of shit? Fucking Christ!

I guess that defines Dimon's timing of his class a board status at the Fed and why the blind prosecutorial eye has glossed over 2 bil in segregated account thefts with CFG and MFGlobal over The last 8 months. Class act for sure.

Or perhaps me be drinking again!

Tue, 07/10/2012 - 23:08 | 2604659 sumo
sumo's picture

"It's a big club, and you ain't in it." - George Carlin

" I think I joined the wrong mob." - Lucky Luciano

Tue, 07/10/2012 - 22:45 | 2604583 mjk0259
mjk0259's picture

If it's so great, why don't Austrian's use it?

Tue, 07/10/2012 - 22:50 | 2604606 Dr. Richard Head
Dr. Richard Head's picture

Who was that monkey that debated western economics against Austrian and some rebuttal about the country of Austria's GDP is irrelevant? Aggregate demand fans make me giggle.

Tue, 07/10/2012 - 22:52 | 2604586 LetThemEatRand
LetThemEatRand's picture

Austrians are indeed brilliant.  Except for the part of not understanding that the most "productive" tend to be sociopaths who would kill us all for a buck.

Tue, 07/10/2012 - 22:57 | 2604634 dwdollar
dwdollar's picture

So how's that financial regulation working out recently? Please tell us how we need tens of thousands of new bureaucrats and it will all finally work at last. Really it will.

Tue, 07/10/2012 - 22:59 | 2604639 LetThemEatRand
LetThemEatRand's picture

The sociopaths have taken over government.  That is an indictment of the sociopaths, not government.

Tue, 07/10/2012 - 23:08 | 2604650 dwdollar
dwdollar's picture

So turning to government isn't the solution??? I think we are making progress with you.

I mean if the sociopaths are in control of it, your salvation isn't going to come from there. Regardless of whether it is ultimately the problem or just a weapon of the sociopaths.

Tue, 07/10/2012 - 23:09 | 2604666 LetThemEatRand
LetThemEatRand's picture

Except we have an elected government, whereas the private sector would allow the sociopaths to breed and hand the keys to their kids in perpetuity.

Tue, 07/10/2012 - 23:27 | 2604714 dwdollar
dwdollar's picture

Whether the elections are legitimate or not is open to debate. Regardless, we both know the sociopaths are in charge. So why give them a bigger weapon by increasing the size of government and/or giving government more authority (as if there's any left to give)?

Also, a private sector has a thing called competition. Governments do not.

Tue, 07/10/2012 - 23:39 | 2604761 LetThemEatRand
LetThemEatRand's picture

The Kings and Queens were quite competitive and had many wars.

Tue, 07/10/2012 - 23:42 | 2604777 dwdollar
dwdollar's picture

You mean Obama and Hillary?

Tue, 07/10/2012 - 23:44 | 2604780 LetThemEatRand
LetThemEatRand's picture

Yes. And Romney and Bush too.  

Tue, 07/10/2012 - 23:50 | 2604800 dwdollar
dwdollar's picture

So how has this government "competition" been working recently?

Wed, 07/11/2012 - 00:00 | 2604818 LetThemEatRand
LetThemEatRand's picture

Ask any Rothschlild.  Perfectly.

Wed, 07/11/2012 - 00:09 | 2604838 dwdollar
dwdollar's picture

Exactly... They use government to increase their power.

We're back to the sociopaths are in charge. How the hell are we going to get out of this? More bureaucracy?

Wed, 07/11/2012 - 00:46 | 2604938 Temporalist
Temporalist's picture

Just to but in between you two love birds it is also the 4th estate that is corrupt, bought out, partisan, pwned by corps and govt. 

I think LTER dosen't get the cognitive dissonance part yet...but you have done some amazing work in a short time.


The benefit of free market is that people can speak their mind not by buying things, as Colbert likes to describe it, but by NOT buying things from companies that have soiled reputations.  When corrupt companies are embedded in gov and own the media'll never hear a peep about it so they maintain power.


--Crap I missed this discussion below...

Wed, 07/11/2012 - 00:59 | 2604962 LetThemEatRand
LetThemEatRand's picture

Thank God we didn't buy internet posting shit.......

Wed, 07/11/2012 - 01:18 | 2604993 James_Cole
James_Cole's picture

My two cents..

What you both seem to be talking about as a problem is really about centralization. Centralization of power / capital is a bad thing and that's where so much of the trouble comes from. 

Capital for billions of people is holed up more or less in a handful of banks headquartered in a few capitals. Centralization of power in the US comes from 2 parties who more or less agree with each other on most core issues (they pretend not to).

Decentralize the power so that most legislation affecting 300 million actually happens at the local level and I bet most of this argument becomes irrelevent.

And there should be no "party" system, that only benefits the politicians.

Wed, 07/11/2012 - 06:36 | 2605223 Acet
Acet's picture

"The benefit of free market is that people can speak their mind not by buying thing"

Free Market is not quite as free as all that:

- Homo Sapiens is not Homo Economicus - In practice people are too overloaded with information to make informed decisions: most purchasing decisions are made from habit and new purchase decisions are made using mental shortcuts such as heuristics (i.e. gut feeling) rather that informed consideration (which is why marketing works, things like creating mental associations between an aftershave and sexual success wouldn't work if people made logical informed decisions)

- People don't have access to the full information amongs other things because companies will do everything in their power to either keep relevant information secret or hide it behind a curtain of irrelevant noise: notice on how something as simple as a gym membership involves a contract which is many pages of mainly obscure legal terms. Even sources of information which might be independent are often purposefully "poluted" (Google for "astroturfing")

- People might not have the knowledge necessary to understand the information they do have.

[ As a side note, the use of very long contracts with obscure terms actually preys on all of "information overload", "high cost of informed decision-making forcing people to use heuristics" and "ignorance" ]

Humans can only mantain track of about 200-300 relationships. This is not just relationships with People, but also relationships with Brands and Companies. Effectivelly this means that people will only really shun the products or services of a company if they have a very strong dislike for them AND which they know the products and services are from that company (and often companies have many brands and use daughter companies when the parent brand is damaged).


This is why the "magic" of the Free Market doesn't actually work as well as it has been sold to us in the last 2 decades.

That said, maybe technology will help with that. I started my own Tech Startup exactly with the vision of levelling the playing field and using technology to help people make trully informed purchasing decisions easilly.

Wed, 07/11/2012 - 08:16 | 2605370 blabam
blabam's picture

If Coca Cola started bombing countries, I would stop buying their prodcuts.

Tue, 07/10/2012 - 23:16 | 2604680's picture


The sociopaths have taken over government.  That is an indictment of the sociopaths, not government.


A just government supposedly operates according to the will of the governed. However the defining trait of government is that it exercises a monopoly on the use of violence in order to force the governed to do what they would not willing do. Such a system is sociopathic by definition.

Tue, 07/10/2012 - 23:36 | 2604751 LetThemEatRand
LetThemEatRand's picture

Not true when you conisider that the alternative is unelected force.

Tue, 07/10/2012 - 23:47 | 2604787's picture

Elected force is supposed to operate according to the will of the people but it doesn't. For example, one who opposes wars of choice can not stop funding Bush or Obama when they murder tens of thousands of innocent people. In a free market I would not be forced to pay for those murders. Only those who really wanted to see Muslim families dismembered by cluster bombs would pay. There would be far fewer such crimes against humanity in a free market simply because the majority of those who are currently forced to support the act if murder du jour would see little reason to pay for such acts out of their own pockets voluntarily. A free market does not force one to enter into the "big tent"of politics along with murderers and sociopaths simply because one wants individual security, adjudication or highways.

Wed, 07/11/2012 - 00:01 | 2604820 LetThemEatRand
LetThemEatRand's picture

Tell me about the free market system that has existed.  Ever.  P.S.  I think unicorns are cool.

Wed, 07/11/2012 - 00:08 | 2604840's picture

Man can learn and change. He can envision a world that is more moral and efficient and work to educate others in the wisdom of non-violent cooperation. If man constrains his actions to only that which is understood or perfected today then all progress stops.

Wed, 07/11/2012 - 00:08 | 2604846 monad
monad's picture

when the choice is Crazy Barry or Williard, what exactly do you mean by election? Whoever selected these worthless assholes should be executed for treason. Not funny. 

Tue, 07/10/2012 - 23:33 | 2604745 adr
adr's picture

The concentration of power into fewer hands will always alow corruption to take hold. Say you have 100 people who make the laws for all, you don't need 50 to have complete control. 25 are enough if they always vote in a single block. If each one convinces one other to follow, now you have your majority. Some of the other 50 will abstain, not caring. A total minority can force its collective will on the majority, the complete opposite of the ideal of freedom.

Now what happens when you have even less controlling all. One bad bank out of four, if assets are divided equally, can destroy 25% of the wealth. One corporation going out of business destroys 25% of the jobs.

The point is, a few hundred politicians in Washington controlling the lives of 300 million people is not a fair system. If those few hundred are wrong it affects 300 million. Having the power spread out as much as possible prevents bad decisions from affecting a large amount of people. If Stockton, CA goes bust, it doesn't affect Aurora, CO.

You don't need a powerfull central authority as long as the power of failure is allowed. Without government propping up bloated corporate bureaucracy, it could not exist. A 300lb asthmatic can't beat a 175lb trained runner in a 100 meter sprint no matter how hard he tries, unless someone from the outside trips the runner and holds him down.

Tue, 07/10/2012 - 23:54 | 2604807 Burnbright
Burnbright's picture

You talk in circles. You tend to promote communism and socialism, yet you acknowledge that our government is run by sociopaths. WTF is wrong with you? Austrian economics is about not having capital controls for the very reason that power corrupts and absolute power corrupts absolutely. The only solution to a corrupt government isn't to replace the actors in it, but rather strip government of its power.


Wed, 07/11/2012 - 06:19 | 2605196 TWSceptic
TWSceptic's picture

"The sociopaths have taken over government.  That is an indictment of the sociopaths, not government."


It's an indictment that government attracts sociopaths.


It's typical for a freedom and free market hater to hate the productive. As a communist you prefer the unproductive properties of a completely "equal" society working for a dictator who supposedly knows best how to run the economy.

Tue, 07/10/2012 - 22:58 | 2604637 Dr Benway
Dr Benway's picture

You are correct in the sense that the most capable will have the most capacity for both good and evil, and the endresult depends on the incentives in place to promote prosocial behaviour. And what political system puts the best incentives in place? Well that's a matter for debate, what do you think?

Tue, 07/10/2012 - 23:02 | 2604645 LetThemEatRand
LetThemEatRand's picture

"The most capable" are often not sociopaths.  The most aggressive are generally the sociopaths, and they claim to be the most capable.  Checks and balances.

Tue, 07/10/2012 - 23:21 | 2604697's picture


Checks and balances.


What checks and balances can we employ right now in order to stop Mr. Obama from killing more innocent people with drone attacks? How long do people have to continue to die while they wait for your checks and balances to come into effect?

Tue, 07/10/2012 - 23:34 | 2604748 LetThemEatRand
LetThemEatRand's picture

I agree.  The problem is government and MSM capture.  Not sure of the answer, but it is not handing the keys to the oligarchs.  

Tue, 07/10/2012 - 23:54 | 2604806's picture

Recognizing and respecting each individual's right to live free of violent compulsion is not handing the keys to the oligarchs. People can voluntarily organize in protection against the oligarchs. Giving virtually unlimited power to an elite class in an attempt to protect society from the power of an elite class is handing the keys to the oligarchs in the most obvious manner possible.

Wed, 07/11/2012 - 00:03 | 2604831 LetThemEatRand
LetThemEatRand's picture

Remind me please of when this great system existed in the entire history of humanity.  Ever.  Surely such a perfect system would persist.

Wed, 07/11/2012 - 00:11 | 2604858's picture

So you believe that progress is impossible and that man should not endeavor to improve his lot?

Tue, 07/10/2012 - 23:38 | 2604758 Ookspay
Ookspay's picture

What in the fuck are you talking about? Just because I am your boss and I tell you what to do does not make me a sociopath, but it does make me more valuable than you. Are you one of those morons who believe we are all equal? 

Tue, 07/10/2012 - 23:41 | 2604773 LetThemEatRand
LetThemEatRand's picture

Funny that you jumped on this one, douche.

Tue, 07/10/2012 - 23:57 | 2604811 prole
prole's picture

You are so stupid, that I literally weep for the stupid, that you are among them

Wed, 07/11/2012 - 00:04 | 2604833 LetThemEatRand
LetThemEatRand's picture

How completely fake of you.

Tue, 07/10/2012 - 23:46 | 2604784 James_Cole
James_Cole's picture

Just because I am your boss and I tell you what to do does not make me a sociopath, but it does make me more valuable than you. 

And another simpleton enters the fray!

Tue, 07/10/2012 - 22:59 | 2604638 Bohm Squad
Bohm Squad's picture


You're absolutely right.  I've long argued Austrian economics is the best there is...but it must operate within a moral framework.  I generally don't agree with your comments, but this time you're right.  People must want to change and have the knowledge with which they can.  Maybe if we taught Austrian economics to the young, we could kill two birds at one time, per se.

Tue, 07/10/2012 - 23:02 | 2604648 LetThemEatRand
LetThemEatRand's picture

The Founding Fathers of this country believed in a lot of what the Austrians believe.  Teach that.  

Wed, 07/11/2012 - 02:13 | 2605064 NidStyles
NidStyles's picture

You must have been reading writings of different founding fathers than me. Ole' Bennie was the only one that came even close to what Mises, Hayek, and Rothbard were chatting about. 

Tue, 07/10/2012 - 23:09 | 2604665 jwoop66
jwoop66's picture

kinda like politicians?

Tue, 07/10/2012 - 22:46 | 2604587 Atomizer
Atomizer's picture



Whack a Mole… 

Spin the hand of time back to the crisis

Paulson Changes The Rules -2008

Treasury Secretary Geithner Announces Financial Stability Plan -2009

Spin the hand of time back to the crisis

Pop goes the weasel -1948

Spin the clock forward to the new crisis

The IMF invited Italians to share their biggest worries about Italy’s economy. The IMF’s top economist on Italy, Kenneth Kang, takes questions about unemployment, taxes, and growth as part of the IMF’s annual economic evaluation of Italy’s economy. 


Spin the hand of time back to the crisis

Impact of the crisis on local money and debt markets in emerging market economies – Bank of International Settlements 

BIS Quick View Link


Follow the money!

Tue, 07/10/2012 - 22:46 | 2604588 Marley
Marley's picture

On no, someone farted in church!

Wed, 07/11/2012 - 00:21 | 2604881 FeralSerf
FeralSerf's picture

Not to worry -- should be OK by Sunday.

Tue, 07/10/2012 - 22:46 | 2604590 catch edge ghost
catch edge ghost's picture

They are freaking out up at the top of the Progressive food chain. They are losing their younglings to the Austrians.

Once the Austrians have him, the liberal is converted into a liberal-tarian and he stops demanding 'solutions' that only cause more of the problems he's trying to solve.

There is a network dedicated to recaptuiring the escapees called Russia Today.

Tue, 07/10/2012 - 23:08 | 2604656 Dr. Richard Head
Dr. Richard Head's picture

We actually tend to withdrawal from feeding ye theft. Math starvation occurs at a quickened pace while credibility of these insane theories is the result Austrian predict. It is that whole loss of confidence based on reality.

Tue, 07/10/2012 - 22:46 | 2604591 Darth Silver
Darth Silver's picture

i dont think david frum has any intellectual relevance.  but you would think he could do little research before penning a diatribe.

the phrase "they have put their embarrassingly ignorant understandings of Austrian economics on full display for all to see" hit the nail right on the head. 

Tue, 07/10/2012 - 23:19 | 2604695 sumo
sumo's picture

Research, accuracy, and reality-checking are for people who don't matter. People Who Matter are above such pedestrian concerns.

E.g. when Paul Krugman attacks Steven Keen over an argument that Keen didn't even make. Because Krugman couldn't be bothered reading what Keen actually wrote.

When you're someone like Summers and Greenspan, and some upstart IMF economist warns you to your face that the housing market will likely collapse due to the shadow banking system, well, as a Person Who Matters, you can just laugh.

Tue, 07/10/2012 - 22:49 | 2604602 Fake Jim Quinn
Fake Jim Quinn's picture

That would be per se not "per say"

Tue, 07/10/2012 - 22:50 | 2604607 proLiberty
proLiberty's picture

Austrian economics starts with the realization that property rights are fundamental and cannot be ignored or dimished.   Keynesian economics starts with the presumption that government has the power to alter the time value and quantity of money.  Indeed, Keynesians presume to own all private wealth and future income to boot.   

Moreover, Keynes proposed his theory in order to bring a secular Utopia to earth.  He propsed that people were poor because they could not borrow enough money due to high interest rates.  The solution?  Print enough money to suppress rates so that all borrowng needs could be satisfied.

Modern Keynesians are addicted to the theory because it presents a way to finance the Leviathan welfare-warfare State.


Tue, 07/10/2012 - 22:53 | 2604619 ghenny
ghenny's picture

You mean the credit card financed corporate welfare crony capitalist defense contractor warfare state courtesy of the supply sider Republicans.

Tue, 07/10/2012 - 23:02 | 2604641 ghenny
ghenny's picture

So lets talk about property rights.  From what you say you maintain because someone was born ahead of someone else and locks up a bunch of property rights they get priority even though they may do nothing with those rights and the other person born later would add value?  You also maintain I can make a Trillion and pass it on to my heirs in perpetuity thus guaranteeing my heirs a superior starting position and a superior hand in the free market game.  I guess you like loaded dice at the casino.  No!!! Property rights can never be sacrosanct they have to be context dependent otherwise you get oligarchy, aristocracy and the crowding out of true free exchange by people with their thumbs on the scale. 

Tue, 07/10/2012 - 23:09 | 2604669 A Lunatic
A Lunatic's picture

Spoken like a true indigent..........

Tue, 07/10/2012 - 23:12 | 2604677 Bohm Squad
Bohm Squad's picture

I believe you are laboring under the current system which is weighted to favor the wealthy.  Austrian views on property rights assume there is a level playing field and that taxes and lost opportunity costs would erode one's desire to hold onto an unproductive property.  They would sell it.

If someone had a trillion dollars, and a free market truly existed with low barriers to entry (etc), then they would fear competition and therefore be required to use those resources for the public good (or what the public perceived is good for them) or lose out to competition.  Again, the trillion dollars would erode away.

I submit you have the cause and effect backwards.

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