Author: VD

The man who predicted the Great Depression

Mises finally gets his rightful due from the Wall Street Journal:

“Theorie des Geldes” did not become the playbook for policy makers. The 1920s were marked by the brave new era of the Federal Reserve system promoting inflationary credit expansion and with it permanent prosperity. The nerve of this Doubting-Thomas, perma-bear, crazy Kraut! Sadly, poor Ludwig was very nearly alone in warning of the collapse to come from this credit expansion. In mid-1929, he stubbornly turned down a lucrative job offer from the Viennese bank Kreditanstalt, much to the annoyance of his fiancée, proclaiming “A great crash is coming, and I don’t want my name in any way connected with it.”

We all know what happened next. Pretty much right out of Mises’s script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed.

This is why I’m pretty relaxed about RGD. As an economist, I’m not fit to replace the battery on Mises’s calculator. If he wasn’t afraid to be dismissed as a lunatic for standing against the socialist tide, I’m not afraid to risk the same for standing against the Neo-Keynesian one. The market and the GDP statistics are totally irrelevant in my opinion. The former looks terrible when measured in terms of gold or any foreign currency and the latter have been twisted and contorted so greatly that I suspect it will have to be trashed altogether by the time the Great Depression 2.0 comes to an end.

Remember that GDP comparisons to the Great Depression are intrinsically questionable because GDP didn’t exist until it was created in order to measure industrial output in World War II. Which, astute history buffs will recall took place after the economic events of 1929-1933.

Darwin’s killer disciples

The murderous children of evolution are a real problem, even if the Darwinists don’t like to admit it:

Darwin would no doubt have been horrified by all this, but it’s easy to see why some of his ideas might appeal to the disturbed adolescent mind. One conclusion implicit in evolutionary theory is that human existence has no ultimate purpose or special significance. Any psychologically well-adjusted person would regard this as regrettable, if true. But some people get a thrill from peering into the void and acknowledging that life is utterly meaningless.

Darwin also taught that morality has no essential authority, but is something that itself evolved — a set of sentiments or intuitions that developed from adaptive responses to environmental pressures tens of thousands of years ago. This does not merely explain the origin of morals, it totally explains them away. Whether an individual opts to obey a particular ethical precept, or to regard it as a redundant evolutionary carry-over, thus becomes a matter of personal choice. Cheerleaders celebrating Darwin’s 200th birthday in colleges across America last February sang “Randomness is good enough for me, If there’s no design it means I’m free” — lines from a song by the band Scientific Gospel. Clearly they see evolution as something that emancipates them from the strict sexual morality insisted upon by their parents. But wackos such as Harris and Auvinen can just as readily interpret it as a licence to kill.

The truth or untruth of natural selection, or evolution by natural selection, doesn’t depend upon their consequences. But the inability of biologists to recognize the obvious logical implications of the freedom from the limits of traditional morality that they celebrate only serves to demonstrate their complete incompetence as philosophers. If it’s no longer evil to freely fornicate or worship idols, it’s no longer evil to freely rape or murder either. And a description of a theorized process of historical moral development is no rational basis for subsequent cherry-picking between those developments you happen to believe are positive and those you happen to believe are negative.

On the radio

Here’s a link to yesterday’s interview on Morning Magazine. It was a relatively slow day… only four interviews. This one, however, was not about the book, but the wars and Veteran’s Day.

The Obama administration’s dithering over whether or not to accede to the theater commander’s request for more troops is a good example of the sort of thing Michael McSorley and I were discussing. If you can’t make up your mind about such a relatively minor decision, then you clearly have no idea what you’re doing in the strategic sense. If Obama doesn’t have enough confidence in General McChrystal to grant his request without hesitation, he should either replace McChrystal or end the occupation and bring the troops home.

Personally, I suspect the troop request was a political CYA on McChrystal’s part. He knows he can’t win there because the US lacks sufficient loyalty from the famously fractious locals and he also knows Obama has zero desire to send more troops to Afghanistan, so the request for 40,000 troops is essentially McChrystal washing his hands of responsibility while hoping Obama has the balls to withdraw U.S. forces. I think he’s miscalculated and that Obama will ultimately send the requested troops because, like most individuals with weak characters, Obama is terrified of being correctly perceived as weak. If the general is fortunate, Obama will send fewer troops and give him the ability to claim that he wasn’t given the necessary forces required to do the job.

Of course, none of this ritual dance between commander and commander-in-chief has anything to do with either the U.S. national interest or the interests of the individual American soldier.

Microsoft lameness

Lest you think that because I disagree with Apple’s philosophy, I am some sort of Microsoft fanboy:

Online reports suggest that as many as 600,000 gamers may have been affected. Microsoft confirmed that it had banned a “small percentage” of the 20 million Xbox Live users worldwide. Microsoft said that modifying an Xbox 360 console “violates” the service’s “terms of use” and would result in a player being disconnected.

I’m primarily a PC gamer when it comes to online play. But I’ve increasingly come to think the PS/3 is the much better option for online play even if the overall selection of games is somewhat reduced. In the past, I’d recommended an Xbox 360 due to its larger library, but at this point, if asked, I’d tell someone deciding between game systems to go for a PS/3.

Paglia on health care

The last of the open-minded liberals can see what’s coming:

That there are serious deficiencies and injustices in the U.S. healthcare system has been obvious for decades. To bring the poor and vulnerable into the fold has been a high ideal and an urgent goal for most Democrats. But this rigid, intrusive and grotesquely expensive bill is a nightmare. Holy Hygeia, why can’t my fellow Democrats see that the creation of another huge, inefficient federal bureaucracy would slow and disrupt the delivery of basic healthcare and subject us all to a labyrinthine mass of incompetent, unaccountable petty dictators? Massively expanding the number of healthcare consumers without making due provision for the production of more healthcare providers means that we’re hurtling toward a staggering logjam of de facto rationing. Steel yourself for the deafening screams from the careerist professional class of limousine liberals when they get stranded for hours in the jammed, jostling anterooms of doctors’ offices….

It’s as if liberals are starry-eyed dreamers lacking the elementary ability to project or predict the chaotic and destabilizing practical consequences of their utopian fantasies.

Well, yeah, that last description sums it up accurately enough. I haven’t written much about Obamacare for much the same reason that I don’t write about driving into trees. There’s simply not much to say beyond the fact that it’s a really bad idea, it’s expensive, destructive, and runs high risk of getting people killed. As I told one radio interviewer today, the health care act and the cap-and-trade carbon emissions program are both likely to have a more negative effect on the U.S. economy than the infamous Smoot-Hawley tariff ever did.

And, of course, I can’t disagree with La Paglia’s characterization of Richard Dawkins as an overrated psychotic. One certainly does wonder “what drives obsessive denigrators of religion”, especially in light of the indisputable evidence that it is not and has never been a primary source of human conflict.

Green shoots!

One of the economic measures I track actually showed signs of life! Total loans and leases at commercial banks increased by $12.4 billion the week of October 28th, the first weekly increase since May 27th. Of course, that little uptick was only a two-week rise of $15.7 billion and preceded a five-month, $451.4 billion decline, so I would be hesitant to put too much confidence into it. It will require an increase of at least $250 billion to be meaningful in any way, but it only seemed fair to point out that for at least one week, the credit contraction process appears to have reversed itself.

Of course, more debt can’t possibly solve any of the myriad economic and financial problems, but let’s not bicker and argue over esoteric theory. GDP is up! Debt is growing! And how about that Dow! It’s a bull market straight to 36,000! Unemployment? Lagging indicator. Now, wait a minute, this suddenly all sounds very familiar….

Slippery slope or cliff-jumping

Government goes vertical:

But what about the slippery slope? Well, it went totally vertical. On the very day that the government czar announced that he would cut the pay of companies that received taxpayer bailouts, the Federal Reserve announced that it would start regulating compensation at the thousands of banks that it regulates, as well as American subsidiaries of non-U.S. financial companies. Some state regulators said they planned to issue similar requirements for state-regulated banks not covered by the Fed plan.

All of this is being done without any legitimate power under the Constitution, and much of it without even the authorization of Congress. Congress refused to bail out the auto companies, so Bush did it on his own authority. Congress never authorized the Federal Reserve to regulate the pay of bank employees.

This is not a slippery slope. This is falling off a cliff. As one news story pointed out: “The restrictions were the latest in more than a year’s worth of government intervention in matters once considered inviolable aspects of the country’s free-market economy and represent a signal moment in the history of the American economic experiment.”

It’s amazing that the lesson so many Americans took from the fall of the Soviet Union appears to have been: “Well, if giant government worked for them….”

The tide flows out

Guess who’s naked now?

A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.

The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country…. Grappling with these blind spots, nearly all of the 80 experts at the conference, which was sponsored by the Upjohn Institute and the National Academy of Public Administration, agreed that the statistics now published tend to overstate the strength of the economy.

If you’re only watching GDP, you are getting an increasingly inaccurate picture of the economic situation. There is no way that economic activity is growing in a credit-based economy where credit is contracting. It’s like watching a football game where the team fails to get into the end zone, but somehow racks up 28 points on the scoreboard. As I’ve shown in RGD, the variance in reports for the same quarter is not infrequently larger than the average growth reported.

It’s interesting that they should finally admit these statistical problems now, just as the gap between reported growth and reported employment is becoming apparent to the casual observer.

WND column

Vibrancy at Fort Hood

I don’t mind admitting that I mindlessly accepted the diversity propaganda when I was younger. Granted, this was before it became so frantic and overbearing that you couldn’t walk onto a college campus without three very earnest people sitting down to lecture you upon the extreme importance of diversity at all times and in all places.

As a white 100-meter sprinter in high school whose primary competition was with black sprinters from the nearby inner city schools, I was a firm believer in the idea that all cultures were created essentially equal. Since I had friendly relations with the brothers from North, South and Roosevelt against whom I ran, I couldn’t understand how anyone could deny the obvious truth that people are simply people regardless of their color, culture or creed. So, why should it be that you and I should get along so awfully?