Capitalists On Strike

Jun 15, 2011 | Politics

Both [Keynesianism and Monetarism] schools, while posing as academic rivals, in fact have far more in common than they admit. Both obsess about mere spending and consumption — the economy’s “demand-side” — to the neglect and harm of its all-important supply-side. What always drives a robust economy is not “consumers” per se but savers, investors, innovators and producers.

Whereas Keynesians claim a free economy is at risk of “over-producing” and under-consuming, Monetarists claim it is at risk of “deflation” due to insufficient money supplies. The Keynesians are always eager to boost what they call “insufficient aggregate demand,” typically by means of government deficit-spending, a policy they tout as “stimulus.”

Likewise, the Monetarists are ever-eager to counter imagined threats to demand allegedly posed by insufficient money-creation, and if necessary they’d resort to helicopters to dispense the needed money from above, a policy they call “quantitative easing.” Yet these demand-side schemes – Keynesian deficit-spending and Monetarist money-printing alike — only erode entrepreneurial and productive prowess. For example, today’s dangerously long duration of unemployment (39 weeks) reflects repeated extensions of jobless benefits, which Keynesians demand as a way to stoke more consumption, not extra jobs or output.

In truth, and contra-Keynesianism, mere consumption is the effect of production, not its cause; to consume is equivalent to using up or destroying wealth, not creating it anew. Likewise, and contra-Monetarism, the mere creation of fiat paper money (or bank reserves) by a monopoly central bank isn’t the same as creating real wealth; indeed, more often than not the effect — inflation — only undermines the wealth-production process, by distorting price signals, while simultaneously robbing unsuspecting money-holders of purchasing power.

Sadly, U.S. policymakers seem to be aping the crazy policies adopted by their Japanese counterparts starting two decades ago: gargantuan deficit-spending and money-printing. Keynesian and Monetarist policies can easily cross borders, much like viruses. Japan’s economy has stagnated during this time, not “in spite of” its demand-side schemes but because of them. Its government debt is now 200% of GDP, double what it was in 1996, and at the same time the Bank of Japan boosted the money supply by 158%. What good did any of this do? Japan’s NIKKEI today is half what it was in 1996, while its industrial output is higher by only 1%.

In this century so far America also has suffered a “lost decade” of sorts, due to the anti-prosperity schemes of both Keynesians and Monetarists; they’ve depressed the economic growth rate and saddled both current and future generations with massive and unparalleled deficit-spending and debt monetization. Together with a burgeoning mass of regulations, demand-side policies suffocate private-sector incentives to save, produce, invest and hire. Thus capitalists are on strike — and rightly so, since they face political assaults from both sides.

Bake More Pies

Jun 15, 2011 | Politics

One implication of the pie metaphor is that wealth is a zero-sum game: there is a fixed amount of houses, cars, medicines, etc. to go around, and the more Steve Jobs gets the less is left for the rest of us. That may have had some plausibility 250 years ago when most wealth was in the form of land. But today, when an iPhone 3G verges on outdated technology, it’s impossible to miss the fact that wealth grows. Roberts puts the point this way: “[T]he pie is not constant. So your well-being can grow even when your share of the pie falls if the pie is getting sufficiently larger.”

Wealth grows. True. But the pie metaphor carries with it another implication, which Roberts doesn’t challenge. It treats wealth as owned by society. We happen to find ourselves in possession of a pie. How did it get here? That’s never made too clear, but it’s here, and now we have to decide how to divide it up fairly.

In accepting the pie metaphor, we concede a moral point that should not be conceded. Wealth does not arise from an amorphous social process; “society” owns no pie.

Wealth is created by, and morally belongs to the individual creator. [...]

[...] As Rand observes, since “man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave.”

LA Times Writer Shows His Confusion About The Gold Standard

Jun 13, 2011 | Politics

The ultimate goal is to return the nation to the gold standard, in which every dollar would be backed by a fixed amount of the precious metal. Economists of all stripes say the plan would be ruinous, but that view is of scant concern to Pitts.

"Quite frankly, I think that economists from universities are thinking within the confines of their own little world," Pitts said. "They don't deal with the real issues." Proponents of the laws believe that returning America to the gold standard would force the government to live within its means, curtailing runaway spending and inflation.

[...]

The United States and most of the rest of the world operated on a full gold standard until the Great Depression. Economists generally agree that the policy helped cause the depression and earlier severe downturns by limiting the amount of money the government could create, constraining its ability to stimulate the economy. Scholars say moving to a gold standard now would be likely to slow the economy's already meager growth. [Gold Standard | U.S. monetary policy and gold standard: Pushing for a return to the gold standard - Los Angeles Times]

“The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.” [Capitalism: The Unknown Ideal]

Geert Wilders: “I am risking my life in defense of freedom in the Netherlands”

Jun 3, 2011 | Politics