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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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. 

Lol

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
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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. 

http://www.bloomberg.com/news/2012-07-10/living-cells-show-how-to-fix-th...

"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
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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:

 

hi·er·ar·chy  

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
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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:

2604542

 

???

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 Big.gov 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

Prole,

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!

http://www.miningstockvaluator.com

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
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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.

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