Wilhelm Kuhlmann
2011-12-17 20:05:51 UTC
One of the fundamental problems in this country is the existence of
right-wing ideologues who persist in espousing exploded economic
theories, while ignoring empirical data showing these theories are
flat out wrong. The most extreme example is Ron Paul and others who
don't understand that the Austrian economists have been proven wrong
about everything.
Paul Krugman bitchslaps the fuck out of Ron Paul and the exploded
theories of Austrian economists --
http://www.nytimes.com/2011/12/16/opinion/gop-monetary-madness.html
December 15, 2011
G.O.P. Monetary Madness
By PAUL KRUGMAN
Apparently the desperate search of Republicans for someone they can
nominate not named Willard M. Romney continues. New polls suggest that
in Iowa, at least, we have already passed peak Gingrich. Next up:
Representative Ron Paul.
In a way, that makes sense. Mr. Romney isn’t trusted because he’s seen
as someone who cynically takes whatever positions he thinks will
advance his career — a charge that sticks because it’s true. Mr. Paul,
by contrast, has been highly consistent. I bet you won’t find video
clips from a few years back in which he says the opposite of what he’s
saying now.
Unfortunately, Mr. Paul has maintained his consistency by ignoring
reality, clinging to his ideology even as the facts have demonstrated
that ideology’s wrongness. And, even more unfortunately, Paulist
ideology now dominates a Republican Party that used to know better.
I’m not talking here about Mr. Paul’s antiwar views or his less well-
known views on civil and reproductive rights, which would horrify
liberals who think of him as a good guy. I’m talking, instead, about
his views on economics.
Mr. Paul identifies himself as a believer in “Austrian” economics — a
doctrine that it goes without saying rejects John Maynard Keynes but
is almost equally vehement in rejecting the ideas of Milton Friedman.
For Austrians see “fiat money,” money that is just printed without
being backed by gold, as the root of all economic evil, which means
that they fiercely oppose the kind of monetary expansion Friedman
claimed could have prevented the Great Depression — and which was
actually carried out by Ben Bernanke this time around.
O.K., a brief digression: the Federal Reserve doesn’t actually print
money (the Treasury does that). But the Fed does control the “monetary
base,” the sum of bank reserves and currency in circulation. So when
people talk about Mr. Bernanke printing money, what they really mean
is that the Fed expanded the monetary base.
And there has, indeed, been a huge expansion of the monetary base.
After Lehman Brothers fell, the Fed began lending large sums to banks
as well as buying a wide range of other assets, in a (successful)
attempt to stabilize financial markets, in the process adding large
amounts to bank reserves. In the fall of 2010, the Fed began another
round of purchases, in a less successful attempt to boost economic
growth. The combined effect of these actions was that the monetary
base more than tripled in size.
Austrians, and for that matter many right-leaning economists, were
sure about what would happen as a result: There would be devastating
inflation. One popular Austrian commentator who has advised Mr. Paul,
Peter Schiff, even warned (on Glenn Beck’s TV show) of the possibility
of Zimbabwe-style hyperinflation in the near future.
So here we are, three years later. How’s it going? Inflation has
fluctuated, but, at the end of the day, consumer prices have risen
just 4.5 percent, meaning an average annual inflation rate of only 1.5
percent. Who could have predicted that printing so much money would
cause so little inflation? Well, I could. And did. And so did others
who understood the Keynesian economics Mr. Paul reviles. But Mr.
Paul’s supporters continue to claim, somehow, that he has been right
about everything.
Still, while the original proponents of the doctrine won’t ever admit
that they were wrong — my experience is that nobody in the political
world ever admits to having been wrong about anything — you might
think that having been so completely off-base about something so
central to their belief system would have caused the Austrians to lose
popularity, even within the G.O.P. After all, as recently as the Bush
years, many Republicans were all for printing money when the economy
slumps. “Aggressive monetary policy can reduce the depth of a
recession,” declared the 2004 Economic Report of the President.
What has happened instead, however, is that hard-money doctrine and
paranoia about inflation have taken over the party, even as the
predicted inflation keeps failing to materialize. For example, in
February, Representative Paul Ryan, who is somewhat inexplicably
regarded as the party’s deep thinker on matters economic, harangued
Mr. Bernanke on how terrible it is to “debase” a currency and pointed
to a rise in commodity prices in late 2010 and early 2011 as evidence
that inflation was finally coming. Commodity prices have plunged since
then, but there is no sign that Mr. Ryan or anyone else is having
second thoughts.
Now, it’s still very unlikely that Ron Paul will become president.
But, as I said, his economic doctrine has, in effect, become the
official G.O.P. line, despite having been proved utterly wrong by
events. And what will happen if that doctrine actually ends up being
put into action? Great Depression, here we come.
William Coleman (ramashiva)
right-wing ideologues who persist in espousing exploded economic
theories, while ignoring empirical data showing these theories are
flat out wrong. The most extreme example is Ron Paul and others who
don't understand that the Austrian economists have been proven wrong
about everything.
Paul Krugman bitchslaps the fuck out of Ron Paul and the exploded
theories of Austrian economists --
http://www.nytimes.com/2011/12/16/opinion/gop-monetary-madness.html
December 15, 2011
G.O.P. Monetary Madness
By PAUL KRUGMAN
Apparently the desperate search of Republicans for someone they can
nominate not named Willard M. Romney continues. New polls suggest that
in Iowa, at least, we have already passed peak Gingrich. Next up:
Representative Ron Paul.
In a way, that makes sense. Mr. Romney isn’t trusted because he’s seen
as someone who cynically takes whatever positions he thinks will
advance his career — a charge that sticks because it’s true. Mr. Paul,
by contrast, has been highly consistent. I bet you won’t find video
clips from a few years back in which he says the opposite of what he’s
saying now.
Unfortunately, Mr. Paul has maintained his consistency by ignoring
reality, clinging to his ideology even as the facts have demonstrated
that ideology’s wrongness. And, even more unfortunately, Paulist
ideology now dominates a Republican Party that used to know better.
I’m not talking here about Mr. Paul’s antiwar views or his less well-
known views on civil and reproductive rights, which would horrify
liberals who think of him as a good guy. I’m talking, instead, about
his views on economics.
Mr. Paul identifies himself as a believer in “Austrian” economics — a
doctrine that it goes without saying rejects John Maynard Keynes but
is almost equally vehement in rejecting the ideas of Milton Friedman.
For Austrians see “fiat money,” money that is just printed without
being backed by gold, as the root of all economic evil, which means
that they fiercely oppose the kind of monetary expansion Friedman
claimed could have prevented the Great Depression — and which was
actually carried out by Ben Bernanke this time around.
O.K., a brief digression: the Federal Reserve doesn’t actually print
money (the Treasury does that). But the Fed does control the “monetary
base,” the sum of bank reserves and currency in circulation. So when
people talk about Mr. Bernanke printing money, what they really mean
is that the Fed expanded the monetary base.
And there has, indeed, been a huge expansion of the monetary base.
After Lehman Brothers fell, the Fed began lending large sums to banks
as well as buying a wide range of other assets, in a (successful)
attempt to stabilize financial markets, in the process adding large
amounts to bank reserves. In the fall of 2010, the Fed began another
round of purchases, in a less successful attempt to boost economic
growth. The combined effect of these actions was that the monetary
base more than tripled in size.
Austrians, and for that matter many right-leaning economists, were
sure about what would happen as a result: There would be devastating
inflation. One popular Austrian commentator who has advised Mr. Paul,
Peter Schiff, even warned (on Glenn Beck’s TV show) of the possibility
of Zimbabwe-style hyperinflation in the near future.
So here we are, three years later. How’s it going? Inflation has
fluctuated, but, at the end of the day, consumer prices have risen
just 4.5 percent, meaning an average annual inflation rate of only 1.5
percent. Who could have predicted that printing so much money would
cause so little inflation? Well, I could. And did. And so did others
who understood the Keynesian economics Mr. Paul reviles. But Mr.
Paul’s supporters continue to claim, somehow, that he has been right
about everything.
Still, while the original proponents of the doctrine won’t ever admit
that they were wrong — my experience is that nobody in the political
world ever admits to having been wrong about anything — you might
think that having been so completely off-base about something so
central to their belief system would have caused the Austrians to lose
popularity, even within the G.O.P. After all, as recently as the Bush
years, many Republicans were all for printing money when the economy
slumps. “Aggressive monetary policy can reduce the depth of a
recession,” declared the 2004 Economic Report of the President.
What has happened instead, however, is that hard-money doctrine and
paranoia about inflation have taken over the party, even as the
predicted inflation keeps failing to materialize. For example, in
February, Representative Paul Ryan, who is somewhat inexplicably
regarded as the party’s deep thinker on matters economic, harangued
Mr. Bernanke on how terrible it is to “debase” a currency and pointed
to a rise in commodity prices in late 2010 and early 2011 as evidence
that inflation was finally coming. Commodity prices have plunged since
then, but there is no sign that Mr. Ryan or anyone else is having
second thoughts.
Now, it’s still very unlikely that Ron Paul will become president.
But, as I said, his economic doctrine has, in effect, become the
official G.O.P. line, despite having been proved utterly wrong by
events. And what will happen if that doctrine actually ends up being
put into action? Great Depression, here we come.
William Coleman (ramashiva)