Recession Will Turn Debt Into Junk

Recession Will Turn Debt Into Junk

03/15/2019Doug French

Diane Swonk says the 20,000 payroll number for February was a head fake. She blamed bad weather, the government shutdown, and other gobbledygook to explain away the 160,000 job miss for the year’s shortest month.

According to Michael Snyder, in a piece posted on Zerohedge.com,

The U.S. economy is growing at a 0.3 percent annualized rate in the first quarter , based on data on domestic construction spending in December released on Monday, the Atlanta Federal Reserve’s GDPNow forecast model showed.

Mr. Snyder lists 18 data points on his blog “ The Economic Collapse ” supporting the idea that an economic winter is coming.


#1 Farm loan delinquencies just hit the highest level that we have seen in 9 years .

#2 We just learned that U.S. exports declined by 4 billion dollars during the month of December.

#3 J.C. Penney just announced that they will be closing another 24 stores .

#4 Victoria’s Secret has just announced plans to close 53 stores .

#5 On Thursday, Gap announced that it will be closing 230 stores over the next two years.

#6 Payless ShoeSource has declared bankruptcy and is closing all 2,100 stores .

#7 Tesla is also closing all of their physical sales locations and will now only sell vehicles online.

#8 PepsiCo has started laying off workers and has committed to “millions of dollars in severance pay” .

#9 The Baltic Dry Index has dropped to the lowest level in more than two years .

#10 This is the worst slump for core U.S. factory orders in three years .

#11 We just witnessed the largest decline in the Philly Fed Business Index in more than 7 years .

#12 In January, sales of existing homes fell 8.9 percent from a year earlier. That was the third month in a row that we have seen a decline of at least 8 percent. This is an absolutely catastrophic trend for the real estate industry.

#13 U.S. housing starts were down 11.2 percent in December compared to the previous month.

#14 Compared to a year earlier, home sales in southern California were down 17 percent in January.

#15 In December, home sales in Sacramento County fell a whopping 22.5 percent compared to a year earlier.

#16 Pending home sales in the United States have now fallen on a year over year basis for 13 months in a row .

#17 More than 166 billion dollars in student loan debt is now “seriously delinquent” . That is an all-time record.

#18 More than 7 million Americans are behind on their auto loan payments. That is also a new all-time record, and it is far higher than anything that we witnessed during the last recession.

None of this has kept individuals, companies and governments from ramping up debt levels. Leverage abounds, everywhere. Grant’s Interest rate Observer writes, “companies are tapping credit lines to compensate for shortfalls in cash flow.”

Defining a zombie company as one failing to generate cash flow to cover interest expense for three consecutive years, Grant’s points out that 128 companies in the S&P 1500, fit the description. The percentage of living dead has increased over the past 12 months, ending January 31st, from 12.4 percent of the broad index to 13.6 per cent.

Money manager Jeff Gundlach told Grant Williams on Real Vision ,

the economic data continues to deteriorate. And we're starting to see reversals and unemployment claims now rising on a four week moving average basis. We're starting to see earnings estimates collapsing, margin estimates collapsing, sales dropping. You see housing is negative, Surprise indices-- confidence is deteriorating. None of these things are at the alarm-bell recession, but they're getting fairly close.


Gundlach and Williams spoke about the 800 pound elephant in the room, the U.S. government’s off balance sheet obligations. “123 Trillion, six times GDP. If we wanted to fund our liabilities, the 123 trillion-- over the next 60 years, we'd have to put 10% of our GDP aside, from negative 7 today to plus 10,” Gundlach quipped.

After reflecting on investors buying AAA-rated mortgage-backed bonds back in 2005, believing they were playing it safe, Gundlach said,

Well, we have similar-- maybe not as egregious-- but it's an echo of a rating problem in the bond market right now, in the corporate bond market, where the corporate bond market has exploded in size. It's more than double where it was 10 or 12 years ago, and a lot of it is, I think, overrated. There was a report by Morgan Stanley Research that suggested that fully, fully 45% of parts of the corporate bond market would be rated junk right now, if you use leverage ratios alone. Now, they use more than leverage ratios.


There's other variables that go into rating. But the leverage ratio seems to be really important.

Right now the ratings agencies are buying what debt issuers are selling —a rosy future. But with recession clouds gathering, Gundlach figures,

there's not going to be any working towards a better place. And so all of those bonds potentially could be downgraded into a junk status. And as we all know, when a triple-B-rated corporate bond crosses the line into junk status, the price goes down. It doesn't go up. So you can find people that have poured into corporate bonds-- that includes corporate pension plans-- which thought that they had a clever idea of matching up their liabilities, which are discounted by the single-A long corporate rate, and so let's match them with assets that are corporate bonds, so they move together.

As I wrote a couple weeks ago, when debt turns to junk, ETFs and institutional holders will desperately be looking to sell at any price. “So will they sell?” Gundlach wonders rhetorically. “I think the answer is yes. And so if you have a misrated market, and it goes into a downgrade problem, you get tremendous forced selling. And that's what happened in '08 with the securitized market, and this time, I think it's the corporate bond market's turn.”

MacroMavens Stephanie Pomboy echos Gundlach’s view,

In 2007, the lie was that you could take a cornucopia of crap, package it together, & somehow make it AAA. This time, the lie is that you can take a bunch of bonds that trade by appointment, lump them together in an ETF, & magically make them liquid.

So, with this storm brewing, the Fed’s committee to save the world has started its roadshow.

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The CDC Slashed the COVID-19 Fatality Rate to a Fraction of Earlier Estimate Used to Justify Lockdowns

7 hours agoRyan McMaken

Governments throughout the world and across the US justified extreme, draconian, undemocratic, and unconstitutional (in most US states) "lockdown" and stay-at-home orders on the grounds that the COVID-19 virus was exceptionally fatal.

In March, the World Health Organization (WHO) was claiming the fatality rate was a a very high 3.4 percent.

Yet as time went on, it became increasingly clear such high estimates were essentially meaningless because researchers had no idea how many people were actually infected with the disease. Tests were largely being conducted only on those with symptoms serious enough to end up in emergency rooms or doctor's offices.

[RELATED: "The Experts Have No Idea How Many COVID-19 Cases There Are" by Ryan McMaken]

By late April, many researchers were publishing new studies showing that the number of people with the disease was actually much higher than was previously thought. Thus, it became clear the percentage of people with the disease who died from it suddenly became much smaller.

Now, the CDC has released new estimates suggesting the real fatality rate is around 0.26 percent.

Specifically, the report concludes the "symptomatic case fatality ratio" is 0.4 percent. But that's just symptomatic cases. In the same report, the CDC also claims 35 percent of all cases are asymptomatic.

Or, as the Washington Post reported this week:

The agency offered a "current best estimate" of 0.4 percent. The agency also gave a best estimate that 35 percent of people infected never develop symptoms. Those numbers when put together would product and infection fatality rate of 0.26, which is lower than many of the estimates produced by scientists and modelers to date. "

Of course, not all scientists have been wrong on this. Back in March, Stanford scientist John Ioannidis was much, much closer to the CDC's estimate than the WHO. The Wall Street Journal noted in April:

In a March article for Stat News, Dr. Ioannidis argued that Covid-19 is far less deadly than modelers were assuming. He considered the experience of the Diamond Princess cruise ship, which was quarantined Feb. 4 in Japan. Nine of 700 infected passengers and crew died. Based on the demographics of the ship’s population, Dr. Ioannidis estimated that the U.S. fatality rate could be as low as 0.025% to 0.625% and put the upper bound at 0.05% to 1%—comparable to that of seasonal flu.

Not that this will settle the matter. Proponents of destroying human rights and the rule of law in order to carry out lockdowns will continue to insist that "we didn't know" what the fatality rate was back in March. The lack of evidence, however, didn't stop proponents of lockdowns from implementing policies that destroying the ability of families to earn a living, and which also created social conditions that caused child abuse and suicides to spike.

But for more sane people, extraordinary claims require extraordinary evidence. Those who have claimed lockdowns are "the only option" had virtually no evidence at all to support their position. Indeed, such extreme over-the-top measures such as the general lockdowns required an extreme level of high-quality, nearly irrefutable evidence that lockdowns would work and were necessary in the face of a disease with an extremely high fatality rate. But the only "data" the pro-lockdown people could offer was speculation and hyperbolic predictions of bodies piling up in the streets.  But that became politically unimportant. The people who wanted lockdowns had gained the obeisance  of powerful people in government institutions and in the media. So actual data, science, or respect for human rights suddenly became meaningless. All that mattered was getting those lockdowns. So the lockdown crowd destroyed the lives of millions in the developed world — and more than a hundred million in the developing world — to satisfy the hunches of a tiny handful of politicians and technocrats.

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New Donation to the Mises Institute Archives: The Voluntaryist Collection

05/22/2020Mises Institute

We received a new donation from Mr. Carl Watner entitled The Voluntaryist Collection. The highlight of the donation includes the six-volume set: The Collected Works of Lysander Spooner. Within the collection is a series of personal inscriptions that Mr. Watner collected at libertarian conferences over the years, including by Murray Rothbard, George Smith, Leonard Liggio, Joe Peden, Mike Coughlin, Charles Shively (editor of the six volumes), Daniel Siegel (publisher), Wendy McElroy, Chuck Hamilton, John Mueller (cofounder of Laissez Faire Books), and Robert LeFevre.

Mr. Watner's generous gift will be included in the Mises Institute archives, alongside the donations of great libertarian thinkers such as Rothbard, Dr. Robert Higgs, Dr. Ralph Raico, Mr. LeFevre and the Freedom School, and more.

The Mises Institute archives remain one of the world's leading research centers for Austrian economics and libertarian thought, providing a unique resource for research fellows who continue to make their own contributions to the ideas of liberty.

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Oliver E. Williamson (1932–2020)

05/22/2020Peter G. Klein

Oliver E. Williamson, 2009 Nobel laureate and founder of "transaction cost economics," has died at age 87.

As I wrote in 2009,

Oliver Williamson's Nobel Prize, shared with Elinor Ostrom, is great news for Austrians. Williamson's pathbreaking analysis of how alternative organizational forms — markets, hierarchies, and hybrids, as he calls them — emerge, perform, and adapt has defined the modern field of organizational economics.

Williamson is no Austrian, but he is sympathetic to Austrian themes (particularly the Hayekian understanding of tacit knowledge and market competition). His concept of asset specificity enhances and extends the Austrian theory of capital and his theory of firm boundaries has almost single-handedly displaced the benchmark model of perfect competition from important parts of industrial organization and antitrust economics.

He is also a pragmatic, careful, and practical economist who is concerned, first and foremost, with real-world economic phenomena, choosing clarity and relevance over formal mathematical elegance. For these and many other reasons, his work deserves careful study by Austrians.

Read the full article here.

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The School Shutdowns Remind Us Private Schools Really Are Better

05/22/2020Atilla Sulker

The present COVID-19 pandemic has left public schools scrambling to find ways to dampen the impact on students. Some public schools have switched to virtual instruction, while others have simply sent students home with passing grades.

For many public schools, the transition to virtual instruction—if ever initiated—took weeks. Others have been lukewarm in their implementation of virtual instruction. In April, the New York City Department of Education made a sudden default on its initiative to have instructors use Zoom remotely, leaving many teachers with no efficient alternative.

Fairfax County public schools continuously failed at delivering stable virtual instruction. The list could go on and on. What do all these cases have in common?

They demonstrate a lack of accountability from public school policymakers—both county and state superintendents, and city and state-level executives.

Compare the previous examples to how charter and private schools, such as Thales Academy, are handling the transition. Thales’s campus in Franklin, Tennessee is offering free virtual instruction for local K–5 students. No prior or future commitments are required for families to receive remote instruction. According to Thales administrator Rachael Bradley, all other Thales campuses transitioned such that “students did not miss a day of learning.” Additionally, Bradley notes that students and teachers were already used to the technology used in virtual instruction.

Thales is not the only example of school choice and private sector solutions remedying public school policy failures. In San Diego County, charter schools, equipped with virtual instruction far in advance, transitioned to virtual learning in days, as opposed to weeks. In Tallahassee, Florida, one private school started virtual instruction right at the end of spring break.

There is a sharp contrast between how private and charter schools have handled the pandemic compared to public schools. Overall, the former has been far more effective. The burden put on parents by schools simply handing out worksheet packets is great, as parents must take time out of their work schedules to play the role of teachers. Insufficient instruction is particularly detrimental to primary students, who are in the foundational stage of their academic careers.

The crisis underscores lack of accountability from policymakers in nonpandemic times as well. Why would it be unreasonable to foresee the prospect of needing to switch to virtual learning for other reasons, e.g., natural disasters?

With a similar degree of unaccountability, public schools have gotten so used to churning out graduates, regardless of merit, that the decision to “pass” everyone, as aforementioned, becomes easy.

Imagine if private or charter schools waited for weeks to transition to virtual instruction. Imagine if they sent students off with “passing” grades. They would be severely reprimanded by parents. Why are we not holding public schools to this same standard?

Policymakers can exempt themselves from responsibility with hubris like, “What we do is not easy,” or “We’re under a lot of pressure.” But this certainly wouldn’t fly for private school administrators. If crises are the ultimate test of effective leadership, then this pandemic has much to tell us.

Even more telling is how policymakers respond to parents’ search for alternatives. In Kentucky, for example, the GOP-dominated general assembly blocked the possibility of tax-credit scholarships for low-income families. Why are parents looking for alternatives greeted with such hostility from public servants?

Truthfully, teachers and students like engagement. They don’t like being given vague promises like “online instruction will be available in the coming days ” Public schools have become so factory-esque, that they lack the capacity to come up with creative solutions in times like these. But the root of this goes back far before the pandemic.

Public schools have made the metric, i.e., graduation rates, the target. It is a classic case of Goodhart’s Law. Hence the reason it is easier to “pass” students than to implement real learning. The time to rethink the place of the colorless public school is imminent.

Reprinted from the Epoch Times.

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The "New Normal" May Not Be What the Lockdown Supporters Want It To Be

05/21/2020Ryan McMaken

Donald Trump today announced that "we are not closing our country" if a second wave of COVID-19 hits the country later this year.

Given that Trump is not the one who decides whether or not state governments attempt to impose forced social-distancing measures, we can nonetheless interpret his statement as an announcement that he plans to use his position to oppose efforts to impose lockdowns in the in the future.

But this raises a larger question: how tolerant will the public be toward additional lockdowns in the future as the economy sinks and the effects of unemployment and economic deprivations sink in?

In some places, the answer might be "very tolerant." But in many states and areas, politicians may find that the answer is "no way in hell."

The First Lockdown Was a Sucker Punch

It's understandable why so many Americans were tolerant of the first wave of shutdowns. Fed a steady diet of panicky declarations of an impending viral apocalypse through social media and mainstream media, a majority of Americans—possibly a lopsided majority—became frightened. It is likely that even those who are disinclined to believe lurid media stories of death and destruction took a "wait and see" attitude. People simply didn't know what was going to happen.

Technocrats and politicians were quick to take advantage of this temporary paralysis. Lifelong power-obsessed government bureaucrats like Anthony Fauci and his state-level counterparts demanded that the government suspend the rule of law and impose emergency measures unparalleled in scope in American history. Businesses were forcibly closed. Governors, mayors, and police threatened arrest, imprisonment, fines, and revocation of business licenses for those who remained "disobedient."

Employment collapsed. Livelihoods were destroyed. Since hospitals and medical facilities were largely closed to all but suspected COVID-19 patients, many went without medical care and diagnoses for deadly conditions.

One might say that the enthusiasm and speed with which the government abolished human rights could be described as a "sucker punch." The voters and taxpayers didn't know what hit them.

And for a period of two to four weeks, there was barely any resistance at all. Many were still unsure if half their neighborhood would die of the new disease. Or maybe there really would be corpses piled up in the streets nationwide, since Americans were told that what had happened in Iran or Wuhan would soon happen in the US.

But then it didn't happen. This isn't to say that there wasn't an increase in total mortality. There was, and much of it—but certainly not all of it—was due to COVID-19.

But it soon became clear that human society was not going to descend into plague-induced wreckage. Outside of a few hard-hit cities, hospitals never got even close to the dystopian people-dying-in-the-halls scenario that people were assured would happen. Now, of course, as some states begin to scale back their lockdowns, there's still no sign of corpses piling up in the streets. Yes, death by disease continues, just as it does every day of every year. And there is more death now than there was last year. This includes the "lockdown" states, after all, since there is no evidence that lockdowns actually work.

But this is what always happens with pandemics. It happened in 1958. It happened in 1969. But back then, Americans didn't destroy wholesale the rule of law and human rights out of fear.

The "New Normal" May Just Be a World with Higher Mortality

But for many that fear may be wearing off. After all, people come to terms with risk fairly quickly. There was once a time, after all, that human beings found the speed of a locomotive or a motorcar terrifying. Yet, within a matter of years, many Americans were happy to ride trains and drive cars. And cars didn't even usually have seat belts until the 1960s!

The "new normal" became a world of widespread auto accidents, and auto deaths per million in the early days of automobiles were double what they are today.

And many Americans may soon decide that the "new normal" is a world with more risk of dying of COVID-19. But for many it's a risk that they have decided must be faced, especially when there are many other risks to balance against. After all, It is now becoming clear that efforts to "fight" COVID-19 through lockdowns will lead to more deaths from cancer, from suicide, and from drug overdoses. Just as many Americans decided to face the risk of a deadly car crash for the sake of avoiding the inconvenience of a horse and buggy, so many Americans will decide to "risk it" in a world with COVID-19.

Moreover, the longer lockdowns remain relaxed, the more routine it will become to have lunch with a friend at a restaurant, go to the dentist, or get a haircut. Once people do it a few times without becoming deathly ill, they'll want to keep doing it.

Certainly, there will be no shortage of lockdown advocates who will demand more government coercion, more shutdowns, and more state violence to enforce them, complete with arrests, fines, and more. Many—including people who have no problem with death in the form of abortion and euthanasia—will wrap themselves in the claim "all life is precious" and attempt to shout down and shame those who advocate for human rights and and end to government by decree.

But will that be enough? In some places it may not be enough to gain obedience to a second lockdown.

So the question comes down to this: will Americans fall for the sucker punch twice? Patrick Buchanan doesn't know, although he asks the question, and suggests:

If there is a sudden resurgence of the coronavirus, a second wave, and the media elite and blue state governors demand a new shutdown, a new closure of beaches, parks, shops, restaurants and churches, will the people of this republic comply with those demands or defy them?

Will the nation answer back to the elites: We did that. We sheltered in place. We wore the masks. We socially distanced. We stayed in our homes. We stayed home from work. We have done all we were told to do to contain the virus. But, now, with the shutdown having put 36 million Americans on unemployment and sunk our GDP to Depression-era levels, we're going back to work.

The political divide has already begun to appear.

Indeed, looking at the issue through "the political divide" may be the most instructive. Americans are choosing sides. And passions run high. Asking your neighbor or colleague about his views on COVID-19 is now about as likely to lead to an argument as asking your neighbor for his views on slavery in 1859.

Attempts at another round of lockdowns will only make things worse.

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Paul Cantor on Zombies, Pop Culture, and the CDC

05/21/2020Ryan McMaken

Paul Cantor, longtime Mises Institute scholar and author of Pop Culture and the Dark Side of the American Dream, recently was featured in an Arizona State University miniroundtable "The Walking Dead, the Post-Zombie Apocalypse, and the American Capacity for Resilience." Cantor discusses how popular culture has partly formed our views of pandemics. Among the evidence is the portrayal of the CDC as an organization that is either evil or incompetent. Or both. The Walking Dead, for example, implies the CDC may have caused the zombie pandemic. Cantor points out some eerie parallels between the world of The Walking Dead and the world of the 2020 pandemic. Here is the video:

Cantor also mentions the bizarre comic book put out several years ago by the CDC called Zombie Pandemic. It can be read here.

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The Fed Does 60 Minutes

05/21/2020Robert Aro

One of the most powerful men in the world, Chairman of the Federal Reserve Jerome Powell, appeared on 60 Minutes over the weekend. The interview did not mention Austrian economics, a return to the gold standard, or a new laissez-faire stance by the Fed. But there are some thought-provoking sound bites.

When asked if the Fed had simply flooded the system with money, Powell responded, “Yes. We did.” When asked where the money came from, he replied:

We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury bills or bonds for other government-guaranteed securities. And that actually increases the money supply.

Although true (and completely ludicrous) it’s nothing new, as central bankers seem to have no problem supporting inflationism. However, his follow-up sentence was patently false:

We also print actual currency and we distribute that through the Federal Reserve banks.

It is in fact the US Treasury that prints every Federal Reserve note and gives it to the Fed, which then distributes to banks. Why does the world even need the Federal Reserve? And why doesn’t the US Treasury cut out the middleman and print its own currency? The interview continued with the usual fawning over central bankers. Scott Pelley couldn’t help mention how:

Some of the best economic analysts in the world report to you.

One can only wonder how many Austrian economists work at the Fed and what types of analysis could be provided when analyzing trillions of dollars of “stimulus” required to fight a “liquidity crisis.”

Assurances to the market and hopes for future debtors to the Fed were also included:

I will say that we're not out of ammunition by a long shot. No, there's really no limit to what we can do with these lending programs.

Is this not the most alluring trait of money created out of thin air and backed by nothing? Having no limit on the amount which can be generated? Most of the Fed facilities haven’t even opened up yet, and Congress is already cooking up another trillion-dollar spending bill. We can only guess how much money will be “printed” by the time the crisis is over. If the Fed’s balance sheet doubled by this time next year, would anyone really be surprised?

Oddly enough, the chairman mentioned something that was entirely honest:

We don't have oversight over Congress. Quite the reverse, actually. We're a creature of Congress. And they have oversight over us.

Congress created the Fed. Contrary to what we’ve been told, the it cannot save the world by creating more money. It hasn’t worked before, and it won’t work now. In terms of oversight, if Congress wants more transparency, it can simply demand it, repealing any privacy that the Fed has. America survives not because of the Fed, but despite it. Just as an act of Congress created it, an act of Congress can end the Fed.

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CDC: Excess Deaths for Week Ending April 18 Were up 24 Percent

05/19/2020Ryan McMaken

In recent weeks, we've been keeping an eye on weekly total deaths as they are reported by the Centers for Disease Control and Prevention (CDC). Weekly deaths—as opposed to COVID-19 death totals—provide some needed context. This is important, since we now know that doctors and health administrators are encouraged to be—in the words of Deborah Birx—"liberal" with counting COVID-19 deaths.

This week I'm looking at week 16 (the week ending April 18). The CDC says that week 17 data is "100% complete" but experience suggests that it will still be a week or two before we have 90 percent or so of the total.

Even week 16 will continue to adjust upward, but further large adjustments are unlikely at this point. These numbers are CDC estimates.

Looking at the data we do have, there were 67,059 total deaths in the US during the week ending April 18 (week 16). That's up 24 percent (or 13,206 deaths) over the week 16 average (53,852) for 2017–19. Using the average for 2017–19 as the baseline, "excess deaths" number about 13,000 or 0.004 percent of the US population. Interestingly, so far this year, only week 15 (the week ending April 11) has exceeded the total mortality for week 2 of 2018, which was 67,295. The 2017–18 season was a very bad flu year according to the CDC (week 1 is on the left in blue and week 16 is on the right in yellow for each year):

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A large portion of this continues to come from New York State. In New York, the week 16 total was 4,056 deaths, which was 2,083 above the 2017–19 average of 1,972. So, about one-sixth of all excess death in week 16 came from New York. Deaths were up 105 percent over the average for week 16, with excess deaths at more than 2,000 for week 16:

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Week 15 (the week ending April 11) may have been the peak week, if we assume COVID-19 was the driving factor in total deaths that week. Worldometer data suggests that COVID-19 deaths peaked the week ending April 11 and have fallen since then.

To offer an example of another large state, we can also look at Florida. Florida has not seen nearly the surge in total deaths that we've seen in New York or nationwide.

For week 16, total deaths in Florida were only up 8.4 percent (or 331 deaths) over the 2017–19 average for the week.

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Was Eugen von Böhm-Bawerk the GOAT?

Murray Rothbard once stunned me by saying that he thought the greatest economist in history was Eugen von Böhm-Bawerk. The reason he gave, to the best of my recollection, was: “Böhm-Bawerk created a mighty system of economic theory and then successfully defended it against all comers.”  Noticing that I was startled, he asked who I thought was the greatest economist. I replied, “Ludwig von Mises,” Rothbard’s revered mentor, whom I thought would have been his choice. Rothbard acknowledged that an excellent case could also be made for Mises. 

It was only many years later that I came to understand why Rothbard gave Böhm-Bawerk an edge over Mises. Böhm-Bawerk’s magnum opusThe Positive Theory of Capital, published in 1889, almost immediately began to elicit comments and critiques from the greatest economists of his age throughout Europe and the United States. The stream of commentary on his work continued unabated for twenty-five years until his death in 1914. During this controversy, Böhm-Bawerk defended and further developed his theoretical system with acute insight and superb dialectical and expositional skills that far outclassed those of all but a few of his critics. In contrast, Mises was never able to engage the greatest economic minds of his age. His brilliant magnum opus, Human Action, published in 1949, barely caused a ripple of acknowledgement in the increasingly positivistic postwar economics profession, which was rushing headlong into macroeconomics, econometrics, and mathematical economics.

Whether or not one agrees with Rothbard about the ranking of Mises and his mentor, Böhm-Bawerk certainly merits a place in the pantheon of the greatest economic theorists.

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Uncovered Audio of Eugen von Böhm-Bawerk from 1905

05/18/2020Tho Bishop

The Österreichische Mediathek, an Austrian archive for sound recordings and videos on cultural and contemporary history, has published a very short clip titled "Vienna Economics" featuring the voice of Eugen von Böhm-Bawerk. The 26-second clip, dated 1905, is in German, but it allows listeners the rare treat of listening to one of the greatest economists of the twentieth century.

A translation of the page offers this description of the clip:

Unfortunately, the great economist, Professor Eugen von Böhm-Bawerk (1851 to 1914), does not speak about his subject in this sound recording, which was recorded in the Vienna Phonogram Archive on December 20, 1905, but rather mentally talks about the then quite new recording machine, the phonograph. - Böhm-Bawerk, who was also twice Minister of Finance (in the Gautsch and Koerber cabinets), along with Carl Menger, Eugen von Philippovich and Friedrich von Wieser, is one of the main representatives of the Viennese School of Economics, which extends well beyond Austria and beyond.

Transcript: I don't know what future ages would like to learn from us. I would know what I would like to learn from future ages. Unfortunately, the phonogram post, to which I could entrust my curious questions, does not provide a response.

As Guido Hülsmann notes in the magnificent Mises: The Last Knight of Liberalism, 1905 was the year Böhm-Bawerk was the year he obtained a full chair as a professor at the University of Vienna, a victory of profound importance for the history of the Austrian school.

[Carl] Menger was successful not only in developing the continental  tradition  of  economic  science,  but  also  in  establishing  a network of like-minded young thinkers within the confines of Austria-Hungary. He only failed to get Böhm-Bawerk a chair at the University of Vienna. His favorite disciple applied twice,in  1887  and  1889,  but  each  time  the  Ministry  of  Education chose  a  different  candidate.  They  argued  that  Böhm-Bawerk represented the same abstract and purely theoretical school as the  other  chairholder  (Menger)  and  that  it  was  necessary  to also  have  a  representative  of  the  new  historical  school  fromGermany. Even this did not prove to be a decisive obstacle. In the fall of 1889, Böhm-Bawerk went to Vienna to join the Ministry  of  Finance  and  became  an  adjunct  professor  at  the  University  of  Vienna;  in  1905  he  obtained  a  full  chair.  Hence,  in distinct  contrast  to  all  other  modern  (marginalist)  schools  of economic thought, the Austrian School quickly reached a position of power, protected by intellectual tradition and political patronage.  Under  the  leadership  of  the  next  generation,  it would obtain a position of unparalleled influence.

Böhm-Bawerk would end up being publishing important works advancing the Austrian theory of capital and interest, as well one of the most potent takedowns of Karl Marx ever written. His students at the University of Vienna included Ludwig von Mises and Joseph Schumpeter.

In a 2002 Quarterly Journal of Austrian Economics article, George Reisman, a student of Mises himself, noted that it's "entirely conceivable to me that Mises might have described Böhm Bawerk as the most important Austrian economist."

For readers who are excited to find this neat historical gem, consider checking out the Ludwig von Mises (Audio) Archives available here on the site.

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