Category: Uncategorized

Busted!

Paul Krugman has been writing about how he knew the stimulus package would be too small. But what size stimulus package did he actually recommend in November 2008?

I wrote this morning’s column partly because I had a hunch that the Obama people might be thinking too small on stimulus. Now I have more than a hunch – I’ve heard an unreliable rumor! So let’s talk about stimulus math, as I see it…. When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.

The stimulus package which Krugman is now saying he knew was too small was $787 billion. Needless to say, his response was completely predictable. Note also that he thought GDP was going to be $15 trillion in 2009… it was $14.2 trillion in the second quarter. That must be one hell of a jobless, but V-shaped recovery he’s anticipating, as it would require 11.3 percent economic growth over the third and fourth quarters.

Thanks to MM, who dug this one up from the NYT archives.

Mailvox: the government as economic actor

BT wants to know the difference between government stimulus and private investment:

I know you are vehemently opposed to the government intervention in free market. Now, I understand what can happen if Government dictates the prices and directly regulate demand and supply like the old communist countries. But what is wrong with government playing as yet another individual player in a free market? For example, can we not consider the stimulus package just like an investment from a private party? I believe that if a wealthy individual throws in 700 billion dollars into the market, that can indeed pull up a sinking economy. So, why not the Government act as such an individual? I guess the discussion should be more about the source of the Government funds. If the 700 billion is something that Government “saved” from the tax money, then it is “good money” that cannot devalue the currency and hence the stimulus is good. On the other hand, if Government prints these 700 billion, then currency gets devalued. But again, if this surplus 700 billion can create an economic activity that nullify the price devaluation, then printing money is also worth it, right?

The reason is two-fold. First, government money doesn’t come from nowhere, it is either taken out of the private economy or printed. Printing the money is bad because it directly reduces the value of money through inflation. It would have to generate at least $700 billion in new economic activity just to break even; since the calculated multiple of World War II government spending was 0.8, this means that inflation-based government spending is always a net loser even when it is considered to have been successful.

If the spending is tax-based, then this requires that the $700 billion in government-dictated economic activity be more effective than the $700 billion in private economic activity it replaces. Given that government spending tends to go to places like Goldman Sachs, ACORN, and various government bureaucracies, there can be no doubt that this is very seldom going to be the case. The government is an economic actor, it’s just a crude and extraordinarily inefficient one.

The essential problem is that very few people spend other people’s money with anything close to the same degree of care and efficiency that they spend their own. This is particularly true of the sort of narcissistic, superficial individuals who are drawn to careers in politics. In the immortal words of PJ O’Rourke, giving money and power to politicians is like giving car keys and whiskey to teenage boys.

George Will slaps around the Obamas

And he does so with all the deep contempt of a genuine wordsmith for a cheap charlatan:

In the Niagara of words spoken and written about the Obamas’ trip to Copenhagen, too few have been devoted to the words they spoke there. Their separate speeches to the International Olympic Committee were so dreadful, and in such a characteristic way, that they might be symptomatic of something that has serious implications for American governance.

Both Obamas gave heartfelt speeches about . . . themselves. Although the working of the committee’s mind is murky, it could reasonably have rejected Chicago’s bid for the 2016 Games on aesthetic grounds — unless narcissism has suddenly become an Olympic sport.

What is going to do Obama in is not the fact that his political ideology is evil, though it is, or that his economic ideology is hopeless, though it is too. It’s not the disinterest in all things martial. It’s not even the widespread doubts about his legitimacy that most threaten him. The reason that the American people who previously adored him are beginning to turn on him is that the man has repeatedly shown himself to be a very unpresidential pretentious ass.

I always thought the man was a lightweight laughingstock and very much appreciate the way in which his administration is actually managing to outperform its comedic potential. By the end of his first – and likely, only – term, I expect a majority of the American people will agree with me.

Mailvox: God detests you

Whereas I merely hold you in intellectual contempt. If I were a typical atheist whiner, I’d worry a lot more about the former than the latter. Bob writes:

I came here with the genuine wish to learn why people believe what they believe and find myself so terribly disappointed. Here is a blogger that instead of explaining himself prefers to sling insults at others. I do not understand his letters to the comprehensible Luke and so am branded unintelligent. I am not unintelligent. I put it to Mr Vox that an intelligent man would be able to explain himself in words that the average person can understand (and certainly me). I also put it to Mr Vox that it is his responsibility to explain himself in words that the average person can understand as he is a Christian and his words could very well save the idle reader. Alas instead he insults the idle reader who is now adding another name to the list of hateful Christians, increasing the size of the wedge between me and faith.

Bob appears to have missed the point that the unintelligence is relative, not absolute. And actually, Bob is learning quite a bit about the Bible, God’s attitude towards men like him, and the guidance it actually provides to Christians here. I must also point out that Bob is not only a whiner, but a proven liar, as I have explained numerous things in great detail in my two letters to Luke as well as in the associated comments. I deny that I have slung any insults that are not accurate and independently verifiable observations; a commenter may find it insulting when I point out that he has completely failed to understand something that is both logical and supported by the relevant documentation, but that does not change the observable fact that he failed to understand it. Those who don’t like it when I describe them as lacking in relative intelligence would be wiser to demonstrate the superior intelligence they claim to possess rather than its opposite.

In THE RULES OF THE BLOG I make it very clear that I will respond in the manner I am addressed. This includes passive-aggressiveness and snark, which will be treated in the same manner as more direct attacks. If you think any professional writer, let alone a Superintelligence, is incapable of detecting such faux-civility, let me assure you that you are delusional. As I also point out in the rules it is wise to ask if your assumptions are correct before you elect to launch a critical attack based on those assumptions. I have been writing controversial opinion commentary on a very public site for eight years, so the chances are reasonably high that I saw and successfully dealt with your argument long before you first formulated your thoughts on the subject, particularly if they are related to a subject as old as Christianity.

Let me give an example from the comments yesterday. Instead of simply asking the obvious question: “isn’t that a circular argument”, Silver Bullet first incorrectly asserts that my explanation for why I am a Christian involves circular reasoning. Then, after I and others explain that he has improperly summarized my explanation and correctly inform him that there is no circular reasoning involved, he improperly summarizes it again, then assumes a condescending posture, claims that my dissertation is “ridiculous” and that my response to his criticism is “ignorant.” At no time has he ever stopped to simply ask the obvious question: “why do you believe that your argument is not circular?” He’s not the least bit interested in being informed, he’s simply an unintelligent, illogical ankle-biter who merits nothing better than a brutal and contemptuous slapdown. It is very easy to demonstrate how he has been wrong about the logic of the explanation – note that it’s not even an argument – from the start. Also note that he substitutes “Why do you believe in the Christian God” for “Why are you a Christian” throughout his comments, which is incorrect but irrelevant as I can show his illogic even using his own rephrasing.

1) Why do you believe in the Christian God?
Why do you believe in the government.

2) Because I believe in the Christian definition of evil.
Because I believe in the government’s definition of crime.

3) What is the Christian definition of evil?
What is the government’s definition of crime?

4) That which is defined as evil in the Bible.
That which is defined as crime in the statutes.

Now, Silver Bullet’s logic claims that because “violation of the government’s laws” and “that which is defined as crime in the statutes” are interchangeable in meaning, the argument is intrinsically circular. He explains, as to an 8 year old, that a statute can’t confirm government-defined crime since government-defined crime is based on the statutes. Now, this would be true if it weren’t for the obvious fact that the actions which the government defines as crime can be confirmed to exist independently of the statutes.

Returning to the subject, it’s clear that Bob is more familiar with Sunday School theology than with the Bible, let alone any sophisticated Christian analyses. Not only is it not my responsibility to explain anything to anyone who willfully refuses to seriously entertain reasonable answers to questions he has asked, it is actually my duty to help other Christians avoid the dishonest snares that this sort of deceiver often makes a habit of laying. According to the Bible, God considers it righteous to detest the sort of dishonesty we see on a regular basis from a certain type of atheist. He also detests the thoughts of the wicked, His curse is on them, He discards them like dross, and promises to destroy all of them even as He laughs at them. One can even reasonably interpret His detestation of their sacrifices to indicate that He despises their good deeds. This message of Divine detestation for a certain kind of individual is consistent throughout both the Old and New Testaments.

So, who are the wicked? Those who detest the upright. Those who suppress the truth. Those who abuse those who correct them. Those who say: “No one sees me… I am, and there is none besides me.” (Isaiah 47:10)

Now, please note that I am not describing atheists such as Luke here, at least not on the basis of the evidence of his two letters to date. Ignorance and errors of logic are very different from dishonesty; anyone can be wrong but no one has to lie, misrepresent, or otherwise attempt to deceive. There are indisputably a number of atheist regulars here who I have found to be honest, intelligent, and even in some cases genuinely truth-seeking. They simply lack faith for a variety of reasons, some of them very understandable. For example, who can truly blame Charles Darwin for the shattering of his Christian faith after the death of his beloved daughter? After all, few have the fortitude of Job; every Christian should pray that his faith is never put to such a terrible test.

It’s worth noting that even the Bible distinguishes between godlessness and wickedness, although the two often coincide. But isn’t it amazing that a text more than two thousand years old can so perfectly describe the behavior of certain individuals today?

A fool’s lips bring him strife,
and his mouth invites a beating.
– Proverbs 18:6

Finally, brothers, pray for us that the message of the Lord may spread rapidly and be honored, just as it was with you. And pray that we may be delivered from wicked and evil men, for not everyone has faith.
– 2nd Thessalonians 3:1-2

They have become filled with every kind of wickedness, evil, greed and depravity. They are full of envy, murder, strife, deceit and malice. They are gossips, slanderers, God-haters, insolent, arrogant and boastful; they invent ways of doing evil; they disobey their parents;
– Romans 1:29-30

Fortunately, wickedness is a choice, as is repentance. And every mocker, every fool, every dishonest, godless, would-be critic here knows that they have consciously made that choice, even if they will never admit it to anyone. No doubt it would tear at the heart of a better man than me that some so firmly prefer wickedness to wisdom and deception to truth, but I have to confess that their self-destructive choice does not trouble me in the slightest.

Vikes-Pack round one

I like the Vikings tonight because I think Favre is more fired up about playing the Packers than the Packers are about playing Favre. Also, the banged-up Green Bay offensive line should give Jared Allen and the Williams twins a chance to beat up on Aaron Rodgers.

For the sake of the Meerkats, I’d like to see a shootout, though, since I’ve got Rodgers, Jennings, Harvin, and Shiancoe going tonight.

Rothbard anticipates Krugman… again

Which is really rather remarkable, when you consider that the man has been dead for some time now. The amusing thing is that Paul Krugman has no idea how utterly predictable both the failure of the Obama economic plan and his own reaction to it was:

[T]he worst of it is that it was more or less predictable. I went back to my first blog post — January 6, 2009 — worrying that the Obama economic plan was too cautious. I wrote:

This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats. I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.” Let’s hope I’ve got this wrong.

Alas, I didn’t have it wrong — except that unemployment will, if we’re lucky, peak around 10 percent, not 9.

Here’s a prediction: U-3 unemployment won’t peak around 10 percent and when it doesn’t, Krugman will come up with yet another excuse for his failed Keynesian theory that will relate to how the stimulus was either not implemented properly or was implemented too late on too small a scale… even if there is a third stimulus plan next year. It’s amusing to note that according to his recent column, he genuinely believes that the $1.2 trillion stimulus plan of Romer’s that he preferred to Obama’s $787 billion plan – which is right around the $1.18 trillion plan that he implicitly recommended at the time – would have magically made the vital difference.

None of this is any surprise, of course, which is why I was able to anticipate Krugman’s excuse-making two months before he began laying the foundation for it and ten months before he actually started making excuses. The reason it wasn’t a surprise is because, as Murray Rothbard explained in America’s Great Depression, this is the usual result when Keynesian theory fails in application, as it reliably does.

“Suppose a theory asserts that a certain policy will cure a depression. The government, obedient to the theory, puts the policy into effect. The depression is not cured. The critics and advocates of the theory now leap to the fore with interpretations. The critics say that failure proves the theory incorrect. The advocates say that the government erred in not pursuing the theory boldly enough, and that what is needed is stronger measures in the same direction.”
– Murray Rothbard, America’s Great Depression, 1963

But as bad as Krugman is when he’s ineptly trying to make forecasts using his own flawed Keynesian models, he’s utterly hopeless when trying to critique other theories that he quite clearly doesn’t know or understand. Here he unwisely attacks Arnold Kling, and, by extension, Joseph Schumpeter.

It’s all there: mass unemployment is necessary, because you have to shift resources away from sectors that got too big, stimulus is a bad thing because it slows the necessary adjustment. And now as then, the whole notion falls apart when you ask why, say, a housing boom — which requires shifting resources into housing — doesn’t produce the same kind of unemployment as a housing bust that shifts resources out of housing.

Sweet John Maynard but the man can really be astoundingly obtuse at times. He seriously can’t figure out why a boom doesn’t produce the same kind of unemployment that a bust does? It’s as if the Keynesian focus on the aggregate economy completely destroys an economist’s ability to focus on anything smaller than the entire economy, like an economic sector or an industry. He does have a point, though. It never made sense to go back to Schumpeter’s 1934 macroeconomics, since Mises already had this process nailed down in 1912 in his Theory of Money and Credit.

The housing boom, which was fueled by debt, causes resources to be shifted out of other sectors into housing. This doesn’t cause unemployment because the women who leave their office jobs to become real estate agents and the men who leave their auto manufacturing jobs to become construction workers aren’t unemployed. Once the creation of new debt subsides, whether it is because the central bank increased interest rates, banks stop lending, or consumers stop borrowing, the bust begins but the housing industry workers who lose their jobs can’t go back to their old jobs because those jobs don’t exist. It’s not as a decrease in demand for housing necessitates an increase in demand in some other sector of the economy. So, in this case, they become unemployed.

The reason stimulus is a bad thing is because it props up the malinvested industry at an artificial level of demand and pays for workers who would otherwise be unemployed to make things that no one is willing to pay for at current prices. (Or, as is more often the case these days, is unwilling to go into additional debt for in order to buy.) As the September plunge in car sales shows, the industry will collapse as soon as the government stops propping it up. And, to the extent it prevents capital resources and those otherwise unemployed people from going out and working in more productive industries, it harms the prospect of future economic growth.

24 days out

Here’s a bit more news about my forthcoming book. First, I’m pleased to be able to say that the publisher has agreed to make The Return of the Great Depression available for only $1.99 on Kindle and Scribd. Second, I sent pre-release galleys to a few writers and business executives with whom I am acquainted; you may recall that the Mogambo Guru thought rather well of the book. Here’s what an executive at a large European industrial concern had to say about it. I should probably mention that by “large”, I mean that its revenues would pass for national GDP in some parts of the world.

“The upward and downward excess we have been observing in the global economy for the last years suggested there was something wrong. It must be recognized that the system is addicted by false and questionable principles of monetary policy which finally brought many enterprises to unreliable business forecasts and disastrous, unsustainable capital expenditures. This book is an analytic and courageous accusation against those principles, and suggests disruptive, clear-cut, and practical solutions which are quite far from those recently adopted by governments and central banks. I strongly recommend it as vademecum to any business executive.”

It was interesting how this executive found RGD to be useful in articulating the reasons behind what he was already observing in his professional capacity, which spans four continents. The ominous synchronicity between book theory and business reality here is that two weekends ago, he told me that the moderate improvement his industry had seen since the spring appears to have been little more than inventory restocking, as the industry’s new orders are now looking worse than they were in January.

WND column

Ireland Surrenders Again

So, it was all for nothing. All the pain, bloodshed and sacrifice has gone for naught. The Rebellion of 1878, the Young Irelanders, the 1919 War of Independence, Sunday, bloody Sunday, the bombings in Belfast, the assassination of Lord Mountbatten, last year’s “No” vote and every other aspect of the long and bitter struggle for Irish independence was to no purpose. On Oct. 3, 2009, the voters of the Republic of Ireland threw away their hard-won sovereignty out of fear, naiveté and greed for nothing more than the deceitful promises of the Eurocrats.

Ambrose Evans-Pritchard has more on the debacle.

It’s already negative

As I’ve been saying has been the case for months now, the FDIC’s Deposit Insurance Fund is officially OUT. From the FDIC:

11. When is the DIF expected to go negative?

FDIC estimates that the DIF balance as of September 30, 2009 will be negative.

I have the negative balance now between -$4.8 billion (est. losses) and -$15.3 billion (est. losses x average historical multiple for actual bank losses). Of course, the FDIC claims this is “a non-event for depositors”, which would appear to indicate that the fund was never anything but a publicity stunt in order to keep depositors placid.

NFL Week 4

While the Border Battle will be even more heated than usual this week – which would appear to settle the ongoing question regarding whether the Bears or the Vikings are now Green Bay’s primary rivals – I’m quite curious to learn if the Jets are for real. Sportswriters love a swaggering, gambling defense, but as TMQ has repeatedly pointed out in the past, such defenses tend to crumble at inopportune times. I’m also a bit skeptical of Sanchez being all that he’s cracked up to be.

I think Baltimore looks like the most impressive team thus far and if they’re able to beat up on what looks like a less than invulnerable Patriots team, this will establish them as the early Super Bowl favorite. While last week’s game was incredibly exciting and San Francisco isn’t the complete pushover they were expected to be, the reality is that the Vikes haven’t looked at all dominating in beating three weak opponents they were expected to beat. On the other hand, an easy schedule and an absence of injuries are two of the primary factors underlying success in the NFL and you can only beat the teams you play. If they can beat Green Bay convincingly this week, they’ll merit being taken seriously as a potential contender. Otherwise, the jury will remain out.