True Economics Applied in the Real World
So there we were, celebrating my BFF David’s 50th birthday in Los Angeles. As we headed back home, we had to pass by the Simon Wiesenthal Center’s so called “Museum of Tolerance”, an institution that contributes to historical ignorance like none other in the country.
Watch David’s rant:
Watch South Park lambaste this fraud:
Ron Paul debates Paul Krugman on monetary policy and economic history:
The most instructive point in this discussion, in my opinion, is where Krugman flat out exposes his ignorance about the essence of the concept of fiat money:
At 8:55:
Ron Paul: “People today, if they use gold and silver, you can go to jail.”
Paul Krugman (chuckles): “That’s not what I’ve … that’s not MY understanding of the law.”
Well, then it might behoove him to be a bit more open and curious about cases like that of Bernard von NotHaus:
Bernard von NotHaus, 67, was convicted today by a federal jury of making, possessing, and selling his own coins, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. Following an eight-day trial and less than two hours of deliberation, von NotHaus, the founder and monetary architect of a currency known as the Liberty Dollar, was found guilty by a jury in Statesville, North Carolina, of making coins resembling and similar to United States coins; of issuing, passing, selling, and possessing Liberty Dollar coins; of issuing and passing Liberty Dollar coins intended for use as current money; and of conspiracy against the United States.
I can can already guess what Krugman is going to proclaim in his defense: That of course he’s well aware of the case and that said individual was only sent to jail because he was ripping of the “Dollar” brand or that he was committing acts of conspiracy or something along those lines.
At 6:23 Ron Paul talks about the policies that laid the foundation for an end to the Depression and the post WW2 era boom which Krugman himself admits he wants to go back to:
“… we cut spending by some 60 percent, we slashed taxes, finally the Depression ended. It was the liquidation of debt that made it available that we could go back to work again.”
Here are some charts for the period in question:
Government spending 1945 – 1950 in pct of GDP:
Government debt 1945 – 1950 in pct of GDP:
Taxes from 1945 – 1950 in pct of GDP:
It is, then, a pretty arrogant, self centered, narcissistic, and most importantly false way of debating when all you can respond to someone confronting you with such historical facts is “That’s not my version of history”.
It’s actually quite irrelevant what “my” or “your” version of history is, as much as it is indeed relevant what the correct version of history is. But it takes a certain level of humility to subjugate your own opinion to this annoying thing called reality.
Tenured economics professors are unfortunately a so tied up with internal he-said-she-said gossip and with debating the inconsequentialities of whether the target inflation should be 2 or 3 percent and whether rich should be taxed more or less, that they really seem to have no time to delve into a comprehensive, detailed, and honest analysis of historical and economic facts.
It is thus up to you, dear reader, to tune out when you hear such clowns spout out irresponsible, boring, and oft-repeated and refuted nonsense, and to seek out those who take the pursuit of truth more serious than childish ad-hominem attacks, gossip, and prestige amongst the influential and well connected.
Lenin’s NEP was an instructive chapter in economic history:
Allowing some private ventures, the NEP allowed small animal businesses or smoke shops, for instance, to reopen for private profit.
(…)
Rather than repossess all goods produced, the Soviet government took only a small percentage of goods. This left the peasants with a marketable surplus which could be sold privately
(…)
The state, after starting to use the NEP, migrated away from Communist ideals and started the modernizing of the economy, but this time, with a more free-minded way of doing things. The Soviet Union stopped upholding the idea of nationalizing certain parts of industries. Some kinds of foreign investments were expected by the Soviet Union under the NEP, in order to fund industrial and developmental projects with foreign exchange or technology requirements.
The results:
Agricultural production increased greatly. Instead of the government taking all agricultural surpluses with no compensation, the farmers now had the option to sell their surplus yields, and therefore had an incentive to produce more grain. This incentive coupled with the breakup of the quasi-feudal landed estates not only brought agricultural production to pre-Revolution levels but surpassed them.
The only problem with the policy was that the state still maintained control over significant other aspects of the economy, leading to the usual problems of interventionism:
While the agricultural sector became increasingly reliant on small family farms, the heavy industries, banks and financial institutions remained owned and run by the state. Since the Soviet government did not yet pursue any policy of industrialization, and did not allow it to be facilitated by the same private incentives that were increasing agricultural production, this created an imbalance in the economy where the agricultural sector was growing much faster than heavy industry. To keep their income high, the factories began to sell their products at higher prices. Due to the rising cost of manufactured goods, peasants had to produce much more wheat to purchase these consumer goods. This fall in prices of agricultural goods and sharp rise in prices of industrial products was known as the Scissor crisis (from the shape of the graph of relative prices to a reference date). Peasants began withholding their surpluses to wait for higher prices, or sold them to “NEPmen” (traders and middle-men) who then sold them on at high prices, which was opposed by many members of the Communist Party who considered it an exploitation of urban consumers.
And when government intervention in free markets creates problems, what do bureaucrats always inevitably pursue as panacea? Right, more government intervention:
To combat the price of consumer goods the state took measures to decrease inflation and enact reforms on the internal practices of the factories. The government also fixed prices to halt the scissor effect.
Naturally, a policy that increases the wealth of the common man is a thorn in the side of tyrannical sociopaths, thus Josef Stalin ended the NEP in 1928 with the Soviets’ first 5 year plan.