Power & Market

Kashkari Said What?

06/08/2021Robert Aro

Right now there’s a big debate happening in economic circles about, is the economy overheating with all of this fiscal stimulus, are these higher inflation readings here to stay or not.

Followed by:

I don’t think they are here to stay because I believe we are going to bring women back into the labor force and workers who have been displaced, but if we fail to do that, then these high inflation readings would become a lot more concerning because then it would signal we are overheating the economy.

This is the exact phrasing Minneapolis Federal Reserve President Neel Kashkari said, according to Reuters. To Kashkari, the “big debate” happening in economic circles centers around an “economy overheating,” and how long prices of goods and services will continue to rise. In one sentence, the President illustrates numerous problems with the mainstream economic narrative.

For something so technical, mathematical, and statistical in nature, complex economic ideas are reduced to the vaguest of terms. The idea of an “overheating” economy due to fiscal stimulus attributes nothing to the Fed and its role in the money creation process. As for the notion of overheating, it requires some sort of arbitrary barometer, or other indicator allowing economists to know when an economy is “too hot” or “too cold.”

The question of higher (price) inflation readings and whether they are temporary continues to play out for the public while still making little sense. This idea of a transient period was hardly, if ever, mentioned even a few months ago. Now that it’s here, supposedly these price increases are okay, as the increases to follow won’t be as high. This negates the fact that prices are still rising, inflation compounds, and year over year life will continually become less affordable than the year previous.

In his second quote President Kashkari says price increases are not here to stay because women will soon re-enter the labor force…

He does not explicitly blame the lack of women in the labor force for an increase in prices, but presumably, once more women start working again, prices will decrease. Indirectly, this places a burden on women to help resolve rising prices.

In the two quotes above, Kashkari fails to mention central banking, the effects of the Fed or the money supply. The part about women going back to work offers little substance and seems contrived, rather than citing any economic theory or quantifiable data. Hence, he manages to say nothing of merit; yet he says a lot, namely that our central planners seem to be in the habit of making things up as they go.

He ends by claiming these high prices are indicative of an overheating economy. Whether it’s due to fiscal stimulus or the lack of women in the workforce, one thing is certain: any failure in the economy, and especially price increases, are caused by everyone else, except the Fed.

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Kenosha Kyle, the McCloskeys, and Standing against Barbarism

08/31/2020Tho Bishop

Listen to the Audio Mises Wire version of this article.

Last week we once again saw far too common sights of small businesses being burned to the ground and unarmed civilians being beat in the street. The epicenter this time was Kenosha, Wisconsin, where rioters and looters from around the area joined protesters in the city outraged by the police shooting of Jacob Blake. Kenosha was by no means the only terrorized community in recent days, however, as Twitter timelines have become filled with scenes such as renewed looting in Minneapolis, mobs threatening restaurant patrons in Washington, DC, and businesses destroyed in Denver, Colorado.

While the destruction of the American downtown is nothing new to 2020, the sense of escalating violence—coupled with rising concerns about the impact the unrest is having on Joe Biden’s polling numbers—is starting to change the way the media is framing these incidents.

As is usually the case with the corporate press, the framing is fundamentally dishonest.

For example, after an aggressive campaign by Democratic politicians, the media and even corporate giants trying to demonize Kyle Rittenhouse, the seventeen-year-old who shot three individuals attacking him in Kenosha last week, the shooting of a Trump counterprotester in Portland over the weekend has the media focused on equating the two events. The underlying theme: the street violence is Trump’s fault. Joe Biden, who once equated members of the Tea Party movement as "terrorists," is now very concerned about inflammatory political rhetoric.

Of course, the two incidents are similar only in the fact that both ended with a death. Thanks to the widespread dispersal of cameras in the form of smartphones, we have footage of both incidents.

In the case of Kyle Rittenhouse, we know from photos, interviews, and footage that he was in Kenosha to assist in cleaning up graffiti and protecting businesses that had been victimized in prior nights. At a time when government police had largely abandoned their duty to protect taxpayers, instead focusing on the preservation of state buildings, it is inevitable to see the mobilization of armed private individuals filling the role of property defenders.

It is unfortunate that while assisting in this role Rittenhouse ended up taking the lives of others. However, we can vividly see two of his victims aggressively attempt to attack him while on the ground after being chased. The first victim can be seen chasing him and throwing objects, followed by another who fires a handgun, though the shooting itself does not appear to be captured on camera. Witnesses claim the victim attempted to grab Rittenhouse’s gun, while video before the incident shows a heated confrontation between the first victim and a group of militia-styled individuals who were apparently asked to defend one of the many businesses that had been attacked in the prior nights. What’s truly remarkable is that Rittenhouse was able to avoid wounding any bystanders while defending himself during this incident.

The case in Portland, on the other hand, appears to be quite different. The counterprotests by Trump-supporting groups appeared aimed to simply antagonize and attack those in the city who have been confronting local authorities for the last several months. According to those on the scene, and supported by video, the victim appeared to fire mace at the shooter before his death. This street violence was perhaps inevitable given the months of disorder in a hyperpoliticized environment. Whether it leads to any changes in the city is yet to be seen.

These, however, are not comparable incidents. The attempt to conflate the defense of property with tribal street violence reflects the anticapitalist bias of the modern zeitgeist.

As Ludwig von Mises explained throughout his life, property rights are the foundational bedrock of not simply a liberal society, but civilization itself.

If history could teach us anything, it would be that private property is inextricably linked with civilization. (Omnipotent Government, p. 58)

Mises also noted how easy it is to whip up mobs against the property-owning classes.

Politically there is nothing more advantageous…than an attack on property rights, for it is always an easy matter to incite the masses against the owners of land and capital. (Liberalism, p. 69)

While Mises was writing in the context of government-created scapegoats, in the modern world the assault on property extends out to the ranks of academics and the corporate press. The timing of the attack on Kyle Rittenhouse made this particularly vivid, as he was instantly attached to two other media-created villains, Mark and Patricia McCloskey.

As with Rittenhouse, the McCloskeys' sin—in the eyes of the media—was their willingness to use deadly force in the defense of property rights. Their high-profile appearance at last week’s Republican National Convention made it easy for the Left to argue that the celebration of the McCloskeys' armed stand against trespassers emboldened individuals like Rittenhouse to use deadly force against rioters.

As a leading Democrat state senator tweeted:

While it’s unclear what, if any, impact the McCloskeys had in inspiring Rittenhouse and others to organize in Wisconsin, if the Left’s narrative is correct, it would make this year’s Republican Convention the very rare political event that is a net positive for the country.

The normalization of normal people standing up and protecting their property and their communities should be celebrated by those who want a free and liberal society. The widespread example of government institutions failing to fulfill this vital role in communities confronted with mob violence highlights the necessity of parallel private defense institutions to fill that void. Be it in the form of volunteer militias or professional private security, a healthy civilization cannot allow looting and rioting to go unchecked in the name of “justice.” No matter what NPR guests may tell you.

Those hostile to property rights in America today should be seen as modern-day barbarians, wanting to justify destruction under the insidious faux banner of justice. While political polling may be forcing a rhetorical pivot on this destruction from the likes of CNN and anti-Trump politicians, their sympathetic tone to this antisocial behavior should not be forgotten, nor should their desire to destroy those willing to stand in their way.  

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Kamala Harris Is Basically Obama-Clinton 2.0, but Worse

08/11/2020Ryan McMaken

Listen to the Radio Rothbard version of this article.

Presidential candidate and former vice president Joseph Biden announced Kamala Harris as his running mate today. Harris is currently a US senator from California and the former attorney general for the state. Biden's choice brings her back to the fore of the 2020 race after having dropped out as a presidential candidate in early December. 

In many ways, Harris dropped out because she had trouble setting herself apart from other candidates such as Biden, representing the mainstream of the Democratic Party. While Elizabeth Warren and Bernie Sanders represented in many respects the far left of the Democratic coalition, Harris was just one of several establishment Democrats in the race, and competed for many of the same fundraising dollars as Biden and Amy Klobuchar. 

By picking Harris, Biden—or whoever is making these decisions for Biden—will likely placate the Obama-Clinton power brokers in the party who privately oppose lawmakers like Warren and Alexandria Ocasio-Cortez, who are viewed by establishment Democrats as candidates who often alienate middle-class Middle American voters. At the same time, Harris is likely to satisfy—or at least silence—critics on the party's left wing, who have long called for a black woman on the presidential ticket. 

In 2020, the choice of a vice-presidential candidate is especially high-stakes, because many believe Biden will be either unwilling or unable to run for president in 2024. This sets Harris up as the heir-apparent leader of the party. Because Biden will be the oldest man to ever enter the presidency, and because he is clearly not in excellent health, it is known that Harris has a good chance of succeeding him directly in case he dies or becomes seriously ill. 

But although Harris is "demographically correct" for the party's left wing, she remains basically a social climber who is very well ensconced in the mainstream of the party—although the party's mainstream has itself moved considerably to the left in recent years.

On foreign policy, for instance, Harris is not significantly different from Hillary Clinton, Barack Obama, Susan Rice, Joseph Biden, or other high-ranking US officials who have been happy to perpetuate endless wars across the globe in recent decades. According to her official campaign site, no region of the globe is off-limits to US intervention so long as the US intervenes multilaterally. It's just the Clinton-Obama doctrine yet again. In usual Washington doublespeak fashion, she says she is in favor of ending the war in Afghanistan but insists that the US must maintain a presence there to prop up the Afghani regime. She has advocated continued military intervention in Syria. 

Harris is very much an advocate of the conspiracy theory that Russians "hacked" the 2016 election and remain a major threat to US security.

On the environment, she supports a "Green New Deal," which we would today expect from any Democrat running for the White House. This means immense amounts of new subsidies for "green energy," paid for with new taxes and a host of new regulations on private businesses. It means global management of carbon emissions in line with international agreements like the Paris accords.

On economic policy, it's the usual interventionist slate of policies. She wants to "empower" labor unions, more heavily regulate employers, and aggressively prosecute businesses for a variety of "crimes" that run afoul of the intricate labyrinth of federal laws managing the financial sector. Fiscal policy is sure to be what we've come to expect from both Republicans and Democrats: endless deficit spending.

Harris has lauded federally imposed mandates like "forced busing," in which federal courts dictate public schools' enrollment policies in the name of racially desegregating schools.

In all of this, we don't find very much at all that differs from the eight years of the Obama administration. It's the usual center-left policy agenda we've seen since at least the 2008 election. 

What is especially dangerous now, however, is that the political context has changed considerably. Both major US parties have adopted far more interventionist stances in terms of fiscal policy, monetary policy, and in terms of domestic police power. What's more, the presidency has slowly been moving toward a rule-by-decree model for decades, in which the president essentially rules through executive orders and Congress only intervenes on occasion. The Trump administration has only accelerated this trend.

This is likely music to Kamala Harris's ears. Harris, after all, as a former prosecutor and as a presidential candidate has never shied away from aggressive use of executive power.

As Tyler Curtis has noted

Over the course of her campaign, she has repeatedly promised to bypass Congress and take unilateral action on a whole host of intensely divisive issues. On immigration, she has vowed to issue an executive order granting citizenship to “Dreamers” (migrants brought to America illegally by their parents). On the environment, she says she will declare a “state of water emergency” and force the country to re-join the Paris Climate agreement. She also wants to ban the use of fracking.

Many observers have noted how dictatorial these statements sound, and rightly so. To follow through on any one of these proposals would be deeply suspect, but the sheer number of them, coupled with Harris’ brazenly peremptory attitude, must leave no doubt as to her authoritarian ambitions.

For Harris, Congress is at best merely an advisory body. As a kindly gesture, the President may ask Congress for permission to do something, but he or she does not really require their assent.

Harris has even said she would do an end run around Congress on gun control:

upon being elected, I will give the United States Congress 100 days to get their act together and have the courage to pass gun safety laws. And if they fail to do it, then I will take executive action. And specifically what I’ll do is put in place a requirement that for anyone who sells more than five guns a year, they are required to do background checks when they sell those guns.

These are the words of a politician who views the role of the president as an elected dictator. Many presidents, of course—including Donald Trump—have likely viewed things this way, but it's now easier than ever for a president to carry out these "promises" in which presidents don't wait for Congress to pass duly enacted laws. That's the old way of doing things. The new way is to follow Barack Obama's strategy of using "a pen and a phone" to issue diktats without the inconvenience of involving an elected legislature. 

No doubt, many of Harris's detractors will call her radical or a tool of the far left. The reality is actually far more alarming. Radicals have a tendency to lose political battles, because they often stand on principle. Harris is unlikely to have that problem. She is very much a savvy player who fits in well within the party's mainstream and who will carry on the center-left political program as we've come to expect it from the likes of Hillary Clinton or Barack Obama. There's not much here that's new. What has changed, however, is that we live in a country where presidents are ever more rapidly becoming unrestrained in taking unilateral action to do what they want. In ages past it might have been reasonable to assume the Congress might effectively intervene to restrain a president's less popular and more radical proposals. That vision of the US regime is looking more unrealistic than ever.

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Keep Those Federal Troops out of American Cities

07/30/2020Ryan McMaken

Listen to the Audio Mises Wire version of this article.

The violence and the utter disregard for basic human rights displayed by the Left in recent years—combined with its support for war crimes when a Democrat is president—have made me inclined to play nice with conservatives these days. At least conservatives aren't planning to torch my neighborhood any time soon, and at the moment they're no worse than the Left on foreign policy.

On the other hand, sometimes even the relatively less bad guys (for now) come to some very dangerous conclusions.

[RELATED: "About Those Spooky Federal Cops in Portland" by Jeff Deist]

Specifically, some authors at conservative publications are now demanding that the president send in federal agents and troops to make arrests and intervene in local law enforcement to pacify rioters in Portland and other American cities. These pundits are claiming that since local officials allegedly aren't responding with sufficient alacrity to rioters, it's time to send in federal troops.

It is questionable that the president has the legal authority to do this. But even if he does have this power—legally speaking—basic commonsense principles of subsidiarity and decentralization inveigh against federal intervention. In other words, a basic respect for the principles behind the Bill of Rights and the Declaration of Independence ought to cause one to reject the notion that it's a good idea to send in federal troops to "solve" the crime problems experienced in American cities.

Here's one example: in an article titled "It's Time to Crush the New Rebellion against Constitution" at Real Clear Politics, author Frank Miele claims "the president is designated as the commander in chief" and therefore "shall be expected to act during a crisis of 'rebellion or invasion' to restore public safety."

Miele addresses two legal questions. The first is whether or not federal troops or agents can act independently when protecting federal property—such as a federal courthouse. The second question is whether or not federal troops can intervene even when no federal property is under threat.

Arguably, in the former case federal agents would be well within their prerogatives to protect federal property as a security guard might do. This, however, does not necessarily empower them to make arrests or assault citizens outside the federal property itself, on the streets of a city well outside the federal compound. The so-called constitutional sheriffs movement—which the Left hates—has it right on this. Local law enforcement ought to be the final authority when it comes to making arrests.

Clearly, however, Miele will not brook such limitations, and he supports the idea that federal troops can intervene "where no federal property is involved."

And what are the limitations on this federal power? Basically, there are none, in Miele's view. So long as we define our adversaries as people fomenting a "rebellion" nothing is off the table. Not surprisingly, Miele strikes a worshipful pose toward Abraham Lincoln's scorched-earth campaign against the Southern states of the US in the 1860s. Those people were "rebels," you see, so the president was right to "tak[e] bold action" even if it meant "skirting the Constitution." Because "there was never any doubt where [Lincoln's] allegiance lay," it was perfectly fine when he abolished the basic legal rights of Americans, such as the right of habeas corpus.

The use of the word "rebellion" is central to understanding the profederal position here. Authors like Miele (and Andrew McCarthy at National Review) have routinely used words like "insurrection" or "rebellion" in order to support their claim the current unrest requires a Lincoln-like response, including a Lincolnesque abolition of half the Bill of Rights.

The Moral Case for Local Control, Made by American Revolutionaries

As a legal matter, of course, I have no doubt that federal judges and supporters of federal meddling could find a way to slice and dice the Constitution so as to make it say whatever they want. As a moral and historical question, however, it is clear that sending in federal troops without an invitation from local leaders is blatantly contrary to the provisions of the Declaration of Independence and is contrary to the Tenth Amendment.

As I explained here, the Declaration lists that the misuse of the executive's (i.e., the king's) troops was a reason for the American rebellion of 1776. These troops must receive the permission of local lawmakers:

The American revolutionaries and those who ratified the US constitution…thought they were creating a political system in which the bulk of land-based military power would rest in the hands of the state governments. Standing armies were to be strenuously opposed, and the Declaration of Independence specifically condemned the king's use of military deployments to enforce English law in the colonies and "to render the Military independent of and superior to the Civil Power." These principles go back at least as far as the English Civil War (1642–51), when opposition to standing armies became widespread.

Thus, any attempt to send in British troops without the approval of the colonial legislatures was an abuse. This same principle was later applied to the state legislatures in relation to federal power.

Sending in federal troops to override local officials is in direct opposition to the moral underpinnings of the American Revolution. But this doesn't stop Miele, who then insists that Article IV of the Constitution authorizes federal invasions because the text says "The United States shall guarantee to every State in this Union a Republican Form of Government." According to Miele, the "republican form of government" here "means government of the people, by the people and for the people—not the mob."

This definition of a republic is something Miele apparently just made up. This is hardly a standard definition of "republic," especially in the eighteenth century—the context most relevant for our purposes here. In those days, "republic" mostly meant "not a monarchy" and something like a decentralized state ruled by a commercial elite.

The idea that the president can send in troops anywhere whenever we decide that a local government is not guaranteeing a "republic"—based on whatever idiosyncratic definition of "republic" we might choose—is dangerous indeed.

In another example, we find authors "Because state and local Democrat officials refuse to restore order, the federal government must….Enough is enough. Those responsible for this new wave of insurrection must face the full force of federal law. "

Note the language about "insurrection"—as if a minuscule clash between some left-wing and right-wing demonstrators in Denver—an example the authors use to justify their position—requires a federal invasion.

Presumably governments are expected to intervene to prevent this sort of thing from happening.

But which government shall do that? It's a safe bet that the authors of the Declaration of Independence would say that a scuffle in Denver clearly lies within the authority of the government in Colorado. After all, the American patriots fought a war—and many died in it—to ensure local control outside the hands of a powerful executive in command of a standing army thousands of miles away.

It is indeed true that the rights of those who wished to see Malkin speak were violated. But here's the thing: the rights of Americans are violated every single day in every city of America. Murders, rapes, thefts, and even gang warfare are not unheard of across this nation, year in and year out. Moreover, the data is clear that police agencies are really quite bad at bringing these criminals to justice.

So, should we call in the feds to solve these problems? There were more than fifty homicides just in the city of Denver last year. There were many more assaults and attempted murders. Doesn't this level of bloodshed constitute a sort of "insurrection" against the decent people of the city? Certainly if we're going to be free and loose with terms like these, as is now apparently the MO of advocates for federal intervention, our conclusion could easily be yes. We might conclude the local police are unwilling to do what it takes to "establish order" and do something about these terrorists and thugs. Will sending in the FBI or the Department of Homeland Security solve this problem?

Fortunately, cooler heads have somehow prevailed, and "sending in the feds" is not a run-of-the-mill policy option. This makes even more sense when we remember that there is zero reason to assume federal cops are better at bringing peace to a city than the state or local officials. These feds are the same people and organizations that have been running a failed and disastrous war on drugs for decades. These are the people who daily spy on law-abiding Americans, in blatant violation of the Bill of Rights. These are the people who were blindsided by 9/11 in spite of decades of receiving fat paychecks to "keep us safe." These are the people (i.e., especially the FBI) who have conspired against Americans in order to unseat a democratically elected president.

Unfortunately, old habits die hard and the myth prevails on both the left and the right that if we're not getting the result we want from politicians, then the answer lies in calling in other politicians from somewhere else to "solve" the problem. But just as it would be contrary to basic notions of self-government and self-determination to call in the UN or the Chinese government to "protect rights" in the United States, the same is true of calling in federal bureaucrats to "fix" the shortcomings and incompetence of state and local bureaucrats. The American revolutionaries created a decentralized, locally controlled polity for a reason. Abolishing federalism to achieve short-term political ends is a reckless way to go.

Image source:
Getty
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Keynesian Fake News in the Wall Street Journal

Given the repeated failures of Keynesian economic policy, both in America and around the world, you would think the theory would be discredited.

Or at least be treated with considerable skepticism by anyone with a rudimentary knowledge of economic affairs.

Apparently financial journalists aren’t very familiar with real-world evidence.

Here are some excerpts from a news report in the Wall Street Journal.

The economy was supposed to get a lift this year from higher government spending enacted in 2018, but so far much of that stimulus hasn’t shown up, puzzling economists. Federal dollars contributed significantly less to gross domestic product in early 2019 than what economic forecasters had predicted after Congress reached a two-year budget deal to boost government spending. …Spending by consumers and businesses are the most important drivers of economic growth, but in recent years, government outlays have played a bigger role in supporting the economy.

The lack of “stimulus” wasn’t puzzling to all economists, just the ones who still believe in the perpetual motion machine of Keynesian economics.

Maybe the reporter, Kate Davidson, should have made a few more phone calls. Especially, for instance, to the people who correctly analyzed the failure of Obama’s so-called stimulus.

With any luck, she would have learned not to put the cart before the horse. Spending by consumers and businesses is a consequence of a strong economy, not a “driver.”

Another problem with the article is that she also falls for the fallacy of GDP statistics.

Economists are now wondering whether government spending will catch up to boost the economy later in the year… If government spending were to catch up in the second quarter, it would add 1.6 percentage points to GDP growth that quarter. …The 2018 bipartisan budget deal provided nearly $300 billion more for federal spending in fiscal years 2018 and 2019 above spending limits set in 2011.

The government’s numbers for gross domestic product are a measure of how national income is allocated.

If more of our income is diverted to Washington, that doesn’t mean there’s more of it. It simply means that less of our income is available for private uses.

That’s why gross domestic income is a preferable number. It shows the ways – wages and salaries, small business income, corporate profits, etc – that we earn our national income.

Last but not least, I can’t resist commenting on these two additional sentences, both of which cry out for correction.

Most economists expect separate stimulus provided by the 2017 tax cuts to continue fading this year. …And they must raise the federal borrowing limit this fall to avoid defaulting on the government’s debt.

Sigh.

Ms. Davidson applied misguided Keynesian analysis to the 2017 tax cut.

The accurate way to analyze changes in tax policy is to measure changes in marginal tax rates on productive behavior. Using that correct approach, the pro-growth impact grows over time rather than dissipating.

And she also applied misguided analysis to the upcoming vote over the debt limit.

If the limit isn’t increased, the government is forced to immediately operate on a money-in/money-out basis (i.e. a balanced budget requirement). But since revenues are far greater than interest payments on the debt, there would be plenty of revenue available to fulfill obligations to bondholders. A default would only occur if the Treasury Department deliberately made that choice.

Needless to say, that ain’t gonna happen.

The bottom line is that – at best – Keynesian spending can temporarily boost a nation’s level of consumption, but economic policy should instead focus on increasing production and income.

P.S. If you want to enjoy some Keynesian-themed humor, click here.

P.P.S. If you’re a glutton for punishment, you can watch my 11-year old video on Keynesian economics.

P.P.P.S. Sadly, the article was completely correct about the huge spending increases that Trump and Congress approved when the spending caps were busted (again) in 2018.

Originally published at International Liberty
Image source:
Flickr
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Korean Libertarians Express Cautious Optimism Over Peace Talks

04/30/2018Tho Bishop

This weekend's historic meeting between the leaders of North and South Korea offered hope for a peaceful resolution to a conflict that has gone on for over 60 years. Of course peaceful rhetoric and photo-ops can only go so far, and numerous commentators with experience in North Korea - including our Michael Malice - have expressed skepticism at the notion that a true diplomatic solution can ever be reached with Kim Jong-un.

I was curious to hear from Korean friends who not only grew up under the cloud of potential North Korean aggression, but are highly skeptical of their own government. How much faith did they place in recent developments?

William Park, an economics PhD student at the University of Missouri, Mises U alumnus, and Senior Advisor at Students for Liberty:

Personally, it was a good starting point to make a permanent peace in the Korean peninsula. I don’t know whether the dictator, Kim Jong-un would keep his promise, but at least, starting communication and interaction is good for each country. When the interaction is enlarged and North Korea opens their border and market, then mutual benefits will get rid of the possibility of war.

When I talked to some Korean libertarians about this issues, some people look positive about the treaty, but other people were very suspicious about the action between the dictator and Korean president, Moon Jae-in because the former liberal president, Kim Dae-jung used a meeting as a political tool. After the meeting with the former North Korean dictator, Kim Jong-il in 2000, he became very popular among Koreans and won the Nobel Peace Prize. However, he aided to the North Korean government, and it means that he used taxpayer money. Also, he failed to make North Korea open their borders. People think that it failed to make North Koreans know what capitalism is and freedom is, but just help the North Korean government survive by providing money and resources.

However, almost all libertarians (except fake libertarians) agree that the direction of foreign policy of South Korean government is a right way and hope that it would make a permanent peace. Plus, it’s just a beginning period, so we think we need to wait until the North Korean dictator do a credible action such as no provocation.

In other words, we think we need to wait to discern whether it is just a political action to increase popularity in both countries or a genuine treaty.

As another student noted, peace in Korea requires more than just a political agreement, it also requires trade between the 38 parrallel north. 

Allen Jeon, President of Students for Liberty Korea

This is very encouraging because they made “end of war” and “removal nuclear weapon” declaration. However, there are also concerns. In the past, the North Korean regime has destroyed the agreements and declarations eight times. So there is still a possibility that they can override the declaration at any time. But I don't think it's necessary to be overly pessimistic and necessary to be overly optimistic Because no one can predict the future...

What I personally wonder is what kind of transactions have been made between Trump and Kim Jong-un....We live in an unhappy world where we have to rely on the decisions of a few people.

...To maintain peace on the Korean Peninsula, the government must carry out its non-interventionist foreign policy And we must reduce the possibility of war through free trade and free market. Mises and Kant said free trade brings “peace” and reduces “the possibility of war.”

Another member of Students for Liberty Korea student is optimistic that a diplomatic agreement reduces the hope for a larger, unified Korean government, but hopes to see a peace agreement bring an end to South Korea's mandated military service:

Seojun Lee:

I welcome peace treaty with North Korea. The peace treaty will remove opportunities for Korean Reunification. I don't want our government reunify with North Korea and become bigger.

But I also think if conscription in South Korea stays, the peace treaty is meaningless.

Hopefully we will see the peace process continue on the Korean peninsula.

We're also very excited for the growing Austro-libertarian movement in the South, with Korean translations being provided by the great team at Mises.Kr

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Krugman's Magic Bank Recapitalization

01/24/2018Jeff Deist

Paul Krugman's latest missive in the New York Times is a nice example of his two recurrent themes, namely self-regard and world-weariness.

Ostensibly, the piece is about economists who in Krugman's view incorrectly predicted hyperinflation would result from the Fed's aggressive actions following the 2008 Crash. His primary target is Marvin Goodfriend, nominated by Trump to serve on the Fed board and guilty of what Krugman calls "inflation derp." But all "right-wing" economists earn his ire, and even some non-economists like Glen Beck, Ron Paul— whom he labels "frothing at the mouth Austrian types predicting hyperinflation."

Why this durability of unrepentant, unprofessional derp? Surely at least part of it is political: predicting doom from money-printing appeals to powerful forces on the right, is indeed a sort of credential that guarantees favor, no matter how wrong the prediction. And let’s face it: the economics profession is essentially craven on such matters. There are no costs to unprofessional behavior that serves right-wing ideology; you’ll still get invited to all the meetings, get treated with respect, even get letters from liberal and moderate colleagues supporting your nomination to high office.

It strains credibility to imagine that being openly "right-wing" benefits economists professionally, particularly academic economists. But I suppose his point is that Trump by his very nature can't help but nominate know-nothings to the central bank, people lacking Krugman's foresight that creating trillions in new bank reserves would create no problems whatsoever for the US economy (and that we can know this, definitively, after just a decade even though most of those reserves remained parked at commercial bank accounts at the Fed). And it's fair to call out the strong tendency of presidential administrations to appoint central bankers who are politically aligned (so much for Fed independence). 

But in the case of hyperinflation derp, those know-nothings even include seemingly unassailable luminaries from the world of central banking and academia:

But there were also the seemingly respectable monetary “experts,” from Alan Greenspan to Allan Meltzer to John Taylor, who kept predicting high inflation from deficits and/or quantitative easing.

So do the scare quotes indicate Krugman thinks Alan Greenspan is not a monetary expert? That seems a remarkable stretch, even if one disagrees with Greenspan's policies or actions as Fed Chair. But Krugman undoubtedly hates Greenspan's connection to Ayn Rand and  his free-market attitudes on gold, taxes, and the like. 

Krugman takes pains to point out his own prediction that a few trillions dollars of new bank reserves, decided by Fed and Treasury Department fiat, would not create inflation:

Of course, quite a few economists did understand all that: Ben Bernanke, Olivier Blanchard, and yours truly, among others. And we correctly predicted that the massive rise in the monetary base would have no discernible effect on inflation...

OK, so some economists got it wrong. That happens to everyone, unless you’re too cowardly to make any testable predictions at all. But what you’re supposed to do when things don’t play out as you predicted is (a) acknowledge the mistake (b) try to understand what went wrong (c) revise your framework in an attempt to avoid making the same mistake again. I think I can fairly claim to have followed these rules.

There are some remarkable claims embedded in these few sentences.

First, that Krugman was right about inflation. While there clearly has not been hyperinflation, there is damaging price inflation in the US today— especially in food (including restaurant meals), health care, and housing. And of course we might argue there is dramatic inflation in equity prices, where stock market indices have risen radically faster than any real gains in productivity across the economy. Perhaps most importantly, the US dollar lost a whopping 12% of its value against a weighted basket of other currencies just in 2017. Combine these red flags with the aforementioned comment that we are only a decade into this radical monetary experiment, and it becomes possible that Mr. Krugman toots his own horn prematurely.

But he also strongly suggests that he, along with a few other nobles, is virtually alone in testing his hypotheses and having the courage to admit mistakes. He "revises his framework" based on facts, damnit, not ideology or animal spirits. Except that Krugman doesn't always do this, as Bob Murphy has explained ad nauseam. Did he apologize or revise anything after being utterly wrong about the Crash of 2008, the biggest economic event of his career? And isn't this constant revising the whole basis of "new economics," discarding old rules and creating new models that must be updated endlessly to reflect new and unforeseen developments? In other words, what virtually all mainstream economists purport to do? Krugman seems to be picking a fight where scarcely none exists, unless he thinks a bunch of a priori Austrians without a single spreadsheet control his profession.

Finally, it's important to understand the extent to which Krugman believes the Fed could simply recapitalize insolvent commercial banks with trillions of newly-created dollars to no ill effect (with his proviso that interest rates stay near zero). That those dollars mostly remain un-deployed in the economy, earning interest from the Fed no less, speaks more to a lack of creditworthy borrowers and real growth than it does to Krugman's insistence that inflation is not a threat. The Fed's balance sheet can unwind, however slowly, although we'll believe it when we see it. But increasing commercial bank reserves gives banks the ability to create more credit and loans. i.e. an increase in the monetary base creates the conditions for banks to increase the money supply. This is inflationary when/if it happens. And yes, the Fed really did simply monetize US debt in the process. Consider this howler from St. Louis Fed President James Bullard in 2010:

Krugman's belief that QE and the staggering run-up in the Fed's balance sheet was salutary rather than harmful is no more proven than his other (endless) claims and predictions. Before this is over it may rank up there with Greenspan's promise of endless growth and Fukuyama's claims that history had ended. 

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