Dealing with Recession

For all the talk by the Federal Reserve about “inflation targeting,” we now see that responding to short-run problems is paramount for the Fed. Holding the line on inflation is something the Fed does when it is convenient. Resorting to inflating the money supply when times are tough is predictable, as is a continuing loss of purchasing power of the US dollar. The only uncertainty is how fast the dollar will lose purchasing power. Will it be at a creeping rate, or at a galloping rate, or at a hyperinflationary rate? You might think that we learned our lesson about inflation during the 1970s, when we moved first from a creeping to a galloping rate, and then risked a further move to hyperinflation. The double-dip recession we then went through starting in 1979 fell in the second tier of economic downturns (below only the Great Depression). There is currently no indication that a severe downturn is on the horizon. But, if we work hard enough at it, with fiscal and monetary policy pumping up the economy and delaying and exacerbating the inevitable, we can make such a severe recession possible in the future.

Last Knight Live Blog 23 - Kraus

As economic crisis deepened and the social situation and civil order in Austria deteriorated accordingly, Mises was happy to receive an invitation from Geneva-based Graduate Institute of International Studies to become a visiting professor of international economic relationships. The Institute Mises was to join was established to produce a next generation of bureaucrats equipped with necessary scientific knowledge to run administrational affairs of politically increasingly integrated world order.

Economics Teaches Us Not To Fret

In a world of scarcity, every choice requires that something else of value must be given up, and the highest-valued alternative given up is the opportunity cost. That opportunity-cost emphasis focuses on the question of what is actually being given up when a choice is made. Its purpose is to ensure that we don’t mislead ourselves with basic errors, because if we misunderstand the relevant costs, our understanding can well be incorrect even if our theory from that point on is correct (following the maxim that logic only means making no more mistakes than you are already committed to).Equally important, it helps ensure that others can’t mislead us with their confused understanding, as so often happens when people try to sell government “solutions” to perceived problems (e.g., ignoring the cost to society of the taxation required to fund some spending program).

Europe’s Internet Troubles: The History Continues

According to Mises, in the final stage of the interventionist process, the government “must fix the prices of raw materials and semi-manufactured products, and eventually also wage rates, and force businessmen and workers to produce and labor at these prices.” By which proposed means will the government lead the telecommunications market into this last stage of the theory, central planning? It turns out the answer is at hand, less than a thousand miles north of Spain, in Great Britain. The creation of BT Openreach was greeted as a great success of regulation — an example for other countries. With it, Great Britain had become the land of equal opportunity, at least, for telecom providers. There are, however, hurdles on the way to utopia.

A Personal Note on Lew

I just heard from Lew Rockwell and he made it out of surgery just fine. He had serious surgery done on the back of his eye, not super dangerous but quite harrowing. It took a good part of the day yesterday. Apparently it will be a month or so before we know how much good it did and what the prospects are. But the important thing is that he is feeling fine and recovering. Thank you for all your thoughts and prayers.

The Myth of the Independent Fed

Bernanke is said to support stimulus (NYT): “If Mr. Bernanke opposed Congressional action on the ground that spending increases and tax cuts would increase the budget deficit, the Fed might restrain its own effort to stimulate the economy with lower interest rates. Mr. Bernanke wants to keep the Fed out of political jockeying, but he is also wary of endorsing measures that could aggravate the government’s long-term fiscal problems....

Last Knight Live Blog 22 Kraus

One reviewer of the second edition of Socialism commented: “In some circles Mises is called the last representative of a liberal economic order. He is certainly not the last, but after many years the first who has dared to think through all the consequences of such an order [liberal economic order], and to erect and demonstrate a doctrine with unshakable logic.”

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