The Austrians Were Right, Yet Again
 

Thursday, August 04, 2011 by Jeffrey A. Tucker
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After three-plus years of floundering around, a consensus has finally arrived that we are back in recession. Growth is not happening. The meager statistical growth of the past few years ? no one dared claim it amounted to full recovery ? was probably illusory.

There is real growth, and there are government statistics. The statistics have misled every gullible person, but now the truth is obvious to everyone. Not only that: we face an impossible debt calamity, the banking industry is zombied, labor markets are static, the system is flooded with mispriced resources, housing is still a mess, and there is nowhere to go but down, down, down.

QE1 and QE2, plus incredible efforts at regulatory stimulus, plus oceans of fake money created by Ben Bernanke, plus sea-level interest rates haven't done anything but damage. Economic opportunities are being shut down for an entire generation. Free enterprise ? and therefore all prosperity ? is struggling for its very life.

This is all due to the one thing that Bush, Obama, the Republicans, the Democrats, and every existing major media mogul agrees was the right thing to do: correct market trends, stabilize and then stimulate the macroeconomy. One word: fail.

Surprised? You shouldn't be. The Austrians had it right all along. This was no magic trick. The Austrians knew that all these efforts were dangerous and destructive. After all, this Keynesian nonsense has had many trial runs, and it has failed every single time. And there are specific reasons: government spending drains reserve capital, nationalizations prop up inefficiencies, and money creation distorts reality and forestalls recovery.

It doesn't take a fortune-teller to discern that this hokum will not work to accomplish its stated aims. All it does is prop up the state and its friends at our expense. I mean, I want to be sympathetic to those who were deceived ? and grant the best of intentions to those who favor stupid policy ? but it is really hard.

Maybe it was possible to be fooled in 1932, but, really, most every attentive observer should have wised up by 1936. But to then go through round after round after round of failed stimulus and still not get it? Incredible. As Bob Higgs has demonstrated, we didn't get out of the Great Depression until the government stopped trying to stimulate the economy.

Now we have yet another opportunity to say it. Listen and learn: the Austrians were the only people who seem to have anticipated not only the bust but also the failure of the stimulus. I can only give a small sampling from the first five months of the crisis in 2008.

There is Frank Shostak's "Is Deleveraging Bad for the Economy?" from August 20, 2008:
There is Scott Kjar's "Henry Hazlitt on the Bailout" from October 15, 2008:
Kevin Duffy was bang on with his "Looting the Responsible" from October 8, 2008:
Consider Christopher Westley's "Bailout Blame Game" from October 7, 2008:
Poignant comments from Frank Shostak's "The Rescue Package Will Delay Recovery" from September 29, 2008:
From Doug French we have "History Is Clear," published on November 13, 2008:
Robert Murphy's "Consumers Don't Cause Recessions" slashed through Krugman's theory on November 11, 2008:
And Murphy again from "Markets Need Time, Not More Poison" from November 6, 2008:
Thorstein Polleit has been unrelenting throughout this crisis, as the example of "Confidence Is Leaving the Fiat Money System," published on October 10, 2008 shows.

Llewellyn H. Rockwell's "Don't Bail Them Out" from September 10, 2008:
Art Carden's "Should the Crisis Shake Our Faith in the Market?" from December 29, 2008:
There are hundreds, even thousands, of such articles and statements from 2008 to the present. They appear every few days, and the message is the same: This stuff is not going to work. Their green shoots are an illusion. There will be no stimulus. Let the market liquidate. Government should stop looting the private economy. The Fed should stop the money creation. No more bailouts. Let interest rates rise. Let bad banks fail. Above all: stop fighting the market! Only at that point can we have solid recovery.

And so here we are all this time later, poorer than we were, with no hope in sight for the real-world economy.

Why does anyone continue to take Krugman and company seriously? In fact, why does anyone take seriously those who warned that unless we tried the Keynesian plan, the world would end and we would miss an opportunity for a glorious recovery? It's not just the New York Times; it's also the Wall Street Journal and the entire financial press that continues to be enthralled with the absurdities of Keynesian theory.

Let's rub it in a bit more: The Austrians were also correct that the boom before 2008 was unsustainable. See "The Bailout Reader." There is no joy in being right here. It is pathetic really that any informed observer of events would not be correct in light of experience and the common-sense observation that government can't make prosperity appear no matter how many kabuki dances Treasury officials do.

On the winning team are those who understand sound economics. On the losing team are those who keep thinking that poison can cure the patient. So we say again: the stasis and depression will continue until the system is allowed to correct itself.

People seem to think that this is something that is easy to fix. It's not. It's a ten year problem.

It's like a little boy wanting to be taller so he doesn't get teased.

He puts on a pair of shoes with thick soles and raises two inches. He gets to brag to his buddies that he is taller than them. At the end of the day he slips off his shoes and loses the recently gained two inches. He was taller for a bit, but only due to artificial measures.

For the little boy to truly grow, he needs to eat well, be patient, and ignore his friends teasing him for being short.

Exactly. People seem to think that the government can just push some magic button and everything will be fine.

It doesn't work like that. If you want something you have to work for it. If you want to make money you have to sell products or services other people value and are willing to pay for.

But no, we've got an ever growing part of the population that thinks they don't have to work for things and that instead the government should steal from those who are productive and distribute the loot amongst those who don't produce anything. There's those who think they're not personally responsible for their own actions (including their mistakes) and expect the government to bail them out with other people's money when things go wrong.

Personally I'm a big Mises fan. You and I completely agree on this issue. It's always been bizarre to me when people say that government spending "puts money into the economy" When I explain to them that the government doesn't create any wealth, it simply takes if from people that do, (in the form of taxes, or devaluation of the currency by printing more), or borrowing it by selling bonds, which it must pay interest on, people STILL don't seem to get it. It's along the same lines of saying that tax cuts "cost the government", as if the wealth was created by the government, and it was giving it out to someone....

Borrowing in the form of bonds and investing in infrastructure that yields better returns is a legitimate use of government funds.

Borrowing to fund annual budget is not.

not those Austrians :)

Austrians as in economists of the Austrian School.

In the field of economics there are 4 major schools of thought:
- The Marxists. (100% gov intervention)
- The Keynesians (and neo-Keynesians and New Keynesians) ( a lot of gov intervention)
- The Chicago School (friedmanites, monetarists,...) (pseudo-free-market types. just a little bit of gov intervention)
- The Austrian School (the real free market. no gov intervention. 100% voluntary association)

Yeah, there's no shortage of economic fallacies. :(

When the earthquake hit Japan, those Keynesians said that that was actually a good thing because now there would be a demand for workers to build new houses. In other words: they claimed that the eartquake was actually good for the economy. :1orglaugh and :( and :disgust at the same time.
You could hear Bastiat, Say, Mises, Rothbard, Menger etc role over in their graves.

All this talk about jobs for example is just absurd. Jobs are a means to an end, not an end in itself.

People don't get a job just to have a job.

People get a job to earn money. Money they can use to buy a house, buy food, buy clothes, buy products and services they personally value, to save money for a rainy day etc. People work to acquire wealth.

Government intervention actually destroys wealth and prevents people from getting productive jobs.

When the government taxes a business owner and gives the money (minus a handling fee that goes to the government) to unemployed people, they reduce his capital and reduce his ability to improve his business, they reduce his ability to hire people, they reduce his ability to adapt to changing customer preferences, they increase the chance that he will go bankrupt.

When the government passes minimum wage laws they actually prevent people from hiring people without experience.

When the government uses money (taxes) it took from productive companies and uses it to subsidize or bailout failing businesses, it actually destroys wealth and creates a lot of waste.

When the government requires licenses for just about anything it actually prevents people from taking initiative and becoming their own boss.

When the government prevents employers from easily firing employees when things get though, they actually cost the company money and they make employers more reluctant to hire new workers when things get better.


In a pure free market people can only make money if they produce products or services other people actually want. In a pure free market, irresponsible behavior gets punished, not rewarded. In a pure free market those who come up with new products or services that better serve the needs and wants of the public make more money. In a pure free market, those that sell crappy products lose clients.

Hear! Hear!


+1


QFT


:thumbsup:thumbsup


The thing that's funny is that this is not just a "school of thought". It is the way that human interactions actually work in a free society. When you interfere with it, through the use of force (government), things invariably do not go as well. The problem is that the people who get into positions of power always want more. Their motivation is more about power than money, (although the two often go together), and so they always seek to expand that power, to the detriment of the proper smooth functioning of the free interactions and co-operation of human beings.




It's a shame, really.


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I'm not surprised at all, everyone knew the bailouts in 2008 were bad, would bust, and would cause a problem, hell kids even knew it, every economist under the sun knew it, the only ones saying otherwise were paid by the people that took the money.

Now it is funny that these Austrian folks think they predicted this, just like it's funny they ignore history on gov intervention-investments that have worked, which isn't really doing them any good on getting out the theory books.

such as? :)

Damn! Beat me to it! LOL



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LOL.... No way you're both this fucking stupid.

+1 for the Austrian School of Economics. I'm a big proponent of the fact that the market is too random and large to try and control. You have to let the market decide on prices. This whole government controlled boom and bust cycle is complete crap. All it does is ensure Keynesian economists keep their jobs...

this wasn't a secret at all, everybody with a brain knew it, and most economists knew it as well, but, the only ways to get out of the situation require some kind of hope or light at the end of the tunnel. It would be very irresponsible to tell the truth to everybody, quite honestly I think everybody would be 10x worse.

But the real problem is (and it was detected at beginning of the 80s) that THE WHOLE VALUE of every single asset that exists is now around 1/8 to 1/12 (depending on measuring system you use) of the circulating money in the world. In other words: If you have a 10 dollars bill, its real MAXIMUM value is $2.

This situation could be supported by accounting tricks as it was until now, but sooner or later governments would need to pay its obligations, and... oh surprise, now that the time has came, there's no money in the world that can pay that. btw, most mid 80s and earlier 90s Nobel prizes referred to this situation, so it's not that those Austrians were THAT clever, as long as you read a book and avoid FOX and CNN you would knew that :2 cents:

Roosevelt's New Deal, German reconstruction program, Chilean post-Pinochet reconstruction, Japan, China, Brazil, the whole Scandinavian countries, Spain resurrection post-Franco, Italy, France are the first that come to mind, there are more for sure. As a matter of fact, the only parts of US economy that really, really, REALLY worked alog the years are those with most control of the government (agriculture, farming, oil, mineral). And this across the years and across the different US governments, both republican and democratic. It would be a suicide not to do that, as you can see what happens with the so called "free market".

sorry about your small penis and the teasing in the shower at school...

i like how you interchanged height with penis size..

it makes for a much better read..

i was truly engaged and could feel your inner pains in your carefully crafted words..

have you tried extenze?






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everyone's right... until they're wrong. its all about the timing ;)

The New Deal?

Who here has heard of the Depression of 1920? I bet almost no one. Why? Because the government did almost nothing at the time so that Depression (that was btw caused by the government intervention in the economy during the first world war) ended in about 18 months.

Who here has heard of the Depression of 1929, everyone. Why? Because government intervention turned it into the Great Depression.

To help the farmers the government wanted to raise the price of pork. So their solution was to lower the supply of pork so the price would go up and farmers would get more money for their pork. How did they accomplish that? They paid farmers to kill and destroy thousands of young piglets.

While people were starving the government was using tax dollars to pay farmers to destroy food.

To help the farmers the government wanted to raise the price of wheat. So their solution was again to lower the supply. They actually paid farmers to not grow wheat. Some farmers and even some corporations ended up buying more land so they could get tax dollars for every acre they hadn't worked. Then they would use the money to buy more land and then get even more tax dollars for every acre they hadn't worked, for every bushels they hadn't produced.

There's tons of examples like this. FDR (and his advisors) believed that the Depression was caused by low prices, so high prices (enforced by threats of violence, coercion...) would be the "solution". (btw: it is hardly a secret that if less production takes place, fewer workers will be needed by employers and unemployment will be higher.)

FDR increased taxes and regulated every type of business imaginable. The NIRA codes established minimum wages. Employers were told that they must bargain collectively with unions, which were given advantages in the bargaining process. All of these policies made labor more expensive. The inevitable result was: less employment.
During a period of weak or declining derived demand for labor, government policy pushed up the price of labor very significantly, causing employers to purchase less and less of it.

The New deal didn't end the Great depression, it made it worse. It was the (relative) 'neutering' of New Deal rules, regulations, policies and the reduction of the Federal budget in 1945 that allowed the economy to recover. In 1946 alone, private sector production went up with 1/3.

It was a (more) free market that ended the Great depression, not FDR's cartelization, unionization, price-increasing, wage-increasing, wealth-destructing, welfare state expanding policies.

This practice never stopped. They still do it.

It's a bit limited to look at the time 'after' a depression started, as a problem, rather than the problem that caused the depression or the other recurring cycles of depression years, such as: 1819, 1837, 1857, 1873, 1893, and 1907, 1920 and even 1929.

Those are patterns of depressions BEFORE intervention was put into place. Saying some ended quickly because they didn't have intervention is silly, when they were a repeating problem, killing jobs, the economy, etc, over and over again.

Intervention is what stopped this repeating pattern.

What followed the great depression, with all that intervention you're against? Well, 50+ years of major economic growth.... and not another repeating cycle of depressions.

It's all in how you look at the history...

The Government isn't the solution. Want proof? Look at the Philippines. People here think the Government is an institutional wet dream come true promising all sorts of sh!t cradle to grave. Results? There are none. Monopolized industries that suck out jobs. Very uncompetitive business environment. Corrupt bureaucracy ready to ding foreign companies for regulations they don't enforce on locals, etc etc. Tons of fake nationalists that just end up being unwitting tools of rent seekers. We could use more Von Mises here. :)

*) Look, people aren't psychic so they can't predict he future. The same goes for entrepreneurs.

An entrepreneur who is in the widget selling business can't predict with a 100% certainty and accuracy how much widgets he'll be able to sell next week or next month or next year...

If he doesn't have enough widgets in store, he won't be able to make as much money as he would have been if he had enough in store.

If he has too many widgets in store, he'll have a surplus that he wasted money on and that is now just sitting there gathering dust.

Entrepreneurial error is just a fact of life. It is possible that an employer hires new people and later finds out that the extra capacity isn't needed and needs to fire people.

*) Customer preferences change. Widget X, that used to be popular 2 years ago, is almost impossible to sell these days. People used to buy horse carts, these days they buy cars...

*) People are creative and come up with new ways to solve problems. New production methods and processes get developed and people are able to produce more widgets using less resources or using other resources.

*) Time. Different widgets take different amounts of time to produce. When a certain type of car becomes popular, it is not possible for the manufacturer to instantly produce more cars. Those things take time. Especially if for example a new factory has to be built first to expand capacity.

The market constantly changes. The market is organic. And yes, mistakes happen. Unhindered recessions are the market process which corrects these mistakes. When you start building 10 new factories because you expect a huge rise in demand of the widget that you produce and your 'guess' turns out to be wrong then you'll have to sell those wasted resources. Liquidation is necessary to correct your mistake.

The real problems start when governments start intervening. When governments start using tax payer money (money they took from people who produced something other people wanted and paid for) to bail out or subsidize failing businesses. When governments start using tax payer money to buy up excess widgets that would otherwise never have been produced because there was no demand for them. When government prevent employers from firing people they can no longer afford to employ. When governments start forcing people to sell goods below market prices (resulting in a lack of supply) or above market prices (resulting in an increase of unnecessary supply). When governments prevent employers from hiring people for a wage that employees agree to and allows employers to make a profit. ....

So, small adjustments happen all the time in a free market. It's government intervention that turns small adjustments into major depressions.

It's the wartime measures and forced cartelization that caused the 1920 depression. It's the easy money policies of the mid 1920s that caused the 1929 depression. It's the New Deal and related measures that made the 1929 depression 'Great'. It's the inflationary policies of the Republican party in 1890 that caused the panic and the resulting 2 year crisis and 6 year depression. The crisis of 1873 was also a result of credit expansion. The schemes to pay the rising cost of the civil war initiated it. Jay Cook's (who had a government granted monopoly on underwriting the US gov bonds) unsustainable phantom growth eventually burst and that was 'the first domino'. btw: France was one of the few countries that escaped the crisis and the depression because it hadn't taken part in the credit expansion. etc

So yes there's a pattern BEFORE intervention: government intervention.

As I've shown, intervention didn't stop the Great Depression. Things only got better when the amount of intervention decreased. Those 50+ years of economic growth aren't "pure real growth". We have had tons of different kinds of intervention that all lead up to the situation we are facing right now. For the most part of those 50+ years, government intervention has been causing bubbles and sustaining them to a point that what once would have been a small period of adjustment will now turn into a major depression the kind the world has never seen before.

Government advisors have already gone all Zimbabwe style and started contemplating the coinage of trillion-dollar coins. if that isn't a huge red flag, i don't know what is.

is the austrian school of thought completely laissez-faire or do they embrace some gov intervention?

The former. They love the idea of a classical free market economy.

I have pointed out to people that whenever we attempt to "fix" a problem in a natural ecosystem there are invariably unforeseen consequences that emerge from that intervention, and then further intervention is required to fix the problems created by the first intervention, and usually things only then get better once the scientists recognize the cycle and simply back away, allowing nature to run it's course. Despite the best intentions and the most highly trained specialists attempting to control an ecosystem, things tend to go badly wrong, to the point where now it is considered a VERY bad idea to do things like introduce new species in an area in order to control another, etc, etc...

By the same token, the myriad of factors influencing the economics of human interaction are so complex and ever-changing, that some committee of politicians somewhere, no matter how well intentioned, has NO HOPE of successfully intervening to "fix" things. All that happens is that they create unintended consequences that they then have to interfere more, in order to try and repair, and so on... This, without even considering the fact that power tends to corrupt, and that the more power you give a government over your lives and basic interactions with others, the more that government will take it.



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completely laissez-faire.

- The free market is the whole of all voluntary transactions that take place.
- People act.
- People act because they want to accomplish certain goals.
- These goals are different for every individual (some people prefer wine, other prefer beer, other prefer water. Some like to travel, others like to stay at home. Some like to watch reality shows, others like to watch sports...)
- To accomplish those goals, people use scarce resources (there isn't an infinite supply of gold, iron, oil, wood etc).
- All people are different so everyone is good at different things.
- People can increase the amount of goals they are able to reach by 'working together' instead of doing everything themselves.
- 'working together' = the free market. People specialize in what they do best or like doing most and then trade with each other. This allows for a much higher output then when everyone would do everything themselves. (Law of comparative advantage)
- Money is just an intermediary medium of exchange.
- The process that coordinates the market is the price mechanism. The price people are willing to pay for a product or service gives you information about how badly people want that product and about how scarce that product is.
- The factor that drives the market is entrepreneurship. Entrepreneurship = "finding 'new combinations' of labor, natural resources or capital goods for the purpose of making a profit." The entrepreneur is able to make a profit by finding out what people want (for example: if the price of widgets goes up because more people are now willing to pay a higher price for those widgets, that tells the entrepreneur that there are people who want widgets) and by offering people what they want or by finding a new product that performs the same function (or more) than the product people originally wanted.

What causes problems: Aggression. When some entity (like the government) forces people to buy products at a price they are not willing to pay for it. Or when that entity forces people to sell products at a price that they don't want to sell their products. Or when that entity forces people to buy products they don't want to buy. etc

thats too much to read

I have much love for the Austrian School.

in a related story, it is proven that hindsight is in fact 20/20

The whole point is that this isn't hindsight. This isn't some "oh, everyone knew about it but kept their mouths shut". The Austrians have had the courage and intellectual integrity to speak up every inch of the way.

appreciated.

What you've shown is gov intervention slowly solved the problem(s) of a completely unstable, unpredictable, economy. As you pointed out, mistakes, did happen, but what you failed to explained was they did solve issues.


I never said intervention stopped the great depression.... what I said was, intervention gave us 50+ years of stable economy to work with, rather than a full on depression every 10 years or so. Screw how long it takes to get out of one, every 50 years... having 1 every 10 years is far worse, even if they end quickly.

Intervention hasn't decreased...it has gone up every year, non stop... the 40's and 50's are loaded with business regs, we've been doing bailouts for almost 40 years. You would be hard pressed to find a single year over the last 100 that didn't have gov intervention in some way, economically.


Again though, we don't need any Austrian eco guys to tell us trillion dollar bailouts are bad... but at the same time, ignoring that gov intervention hasn't helped grow us in many ways, then you're hate for the gov blinds you so much that you ignore the facts around you.... as you type on the Internet, the gov paid for, funded, and forced to expand.....

Dirty ass intervention.

I know you guys put full faith in the free market, but fact is, the free market is limited more by greed than any gov in the world, greed is why gov's play the game, greed is why regulations are here, greed... driven by people, not governments.

how does the austrian school account for china?

A 100% free market (something that never existed in American history) is a self regulating system. It punishes (and thus discourages) irresponsible behavior.

Yes, the economy is unpredictable. That is because the economy exists out of individuals with different 'wants', goals, desires. Individuals with different abilities. Individuals that change their minds.

"The Economy" is not some engine you can tinker with. It is not some mechanical thing you can alter to make it run smooth. The economy is organic. The economy constantly changes as the individual transactions that make up the economy are completed, as individuals reach certain goals and set out to reach others, as people come up with new ideas and techniques, as the available resources change, as problems occur and people find ways to solve those problems...

Government intervention never solved anything. It only hides problems and causes others. It is government intervention that causes the bubble and the depression. It is government intervention that reward irresponsible behavior (for example: banks giving out loans to people that won't be able to pay them back).


We haven't had "a stable economy" in those 50+ years. The government has been covering up the problems all that time. And that is what is becoming more and more obvious these days. Government intervention (such as the manipulation of the interest rates) caused systematic malinvestments. When the problem became obvious (think dot com bubble, think housing bubble), the government intervened to cover up the problems.

You can only keep sweeping stuff under the carpet for so long. Eventually people are going to notice. This time, they'll probably come up with another crazy scheme to hide the mess under the carpet, but sooner or later they'll run out of carpet.

If you compare the New Deal and the period of the second world war to the period directly after the war than there was less intervention after the war than during and before. It's less intervention that allowed for real growth.

If you look at the last 200 years as a whole, you see a steady increase in intervention and it has all culminated to our current situation.


ah, the internet :) Did bureaucrats build firefox, chrome, apache, perl, php, facebook, twitter, gfy, thunderbird, youtube, tevs, smarttube, media player classic home cinema edition, virtualdub, flash, vbulletin, bind, openssh, flashfxp, mysql,...?

Gov built a network using resources it took from others. The free market turned the internet into what it is today.


and governments are made up out of what? Altruistic angels who don't make mistakes and don't want anything?

The free market: everyone has the right to plan for himself while respecting other people's property rights. everyone is free to voluntarily trade with others, to help others,... Your mistakes affect your bottom line.

Government intervention: a small group of people planning for all others. Their mistakes affect everyone.

What exactly about China are your referring to? The censorship? The forced abortions? The executions of political prisoners so they can sell their organs to rich Westerners? The arrests of people who don't agree with the system? Their overreporting/exaggerating of GDP by +- 40%? Their extremely low per capita GDP? The fact that about 1/3 of their population lives on less than 1 USD a day?

What's funny is that the ONLY economic growth in China happened because there was a VERY small amount of LOOSENING of government controls on business.... Using China as an example of government control actually working is pretty darn funny!


.:winkwink::1orglaugh


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oh come on, it's an honest question. not sure why you have to be obtuse about the fact that china's economy is leading the world. i was simply inquiring what the austrian school of thought has to say about that.


and yes, including all of the shit you mention, how does china maintain such a robust economy while subjugating the majority of its people AND completely manipulating not only its own economy but every other economy on the planet.

well, it's all cool and dandy... in la-la-land. In real world, one guy makes, wine, one makes beer, one makes cheese, and there are one or more guys who will wait until they produce all those delicious things and come with a big stick, steal all the production, rape their daughters and enslave everybody to continue producing. It's called story of the world since Lucy (the Australopithecus afarensis not Lucille Ball!) until now (and the millenniums to come). In order to avoid that, you need some kind of protection, whether it's from some kind of government or private. In La-la-land, private could be an option because they're oh so good and heartfelt no problem would arise, but in real world the guy who produces wine will try to destroy the guy who produces beer so they will eat only cheese and wine. It's called capitalism 101, but it really came from ancient times with different names and political systems.

On top of that, not a single DECENT economist would defend an absolute free trade market. And besides reality, there's a technical explanation: absolute free trade is only possible when the products are scarce and mensurable (like you said). However, when you add the variable of services, there's a loss of balance since... how do you value work time in terms of cheese, beer and wine? There's a solution to this, though: as long as the services demand doesn't surpass what the whole market produces and the market stays on a limited size, the system will be stable. In general, that should work, specially when you have adjust mechanisms based on sustainability and future production.

But... then we get the intangibles. Let's say that in your system there were 5 producers of each product, so each producer decides to "add value" with a nice packaging, branding, advertising, etc. The product is EXACTLY the same, only that now it costs 3 or 4 times more. So... where is that 75% of "ghost" value?

Let me explain it with another easy to understand example: The value of the Internet business amounts to trillions of dollars. Now, let's say someone pulls the plug of the Internet tomorrow and Internet is shut down. There would be entire countries collapsing and the biggest crisis ever seen in history, right? The funny thing is that, in reality, if you look around, you didn't lose anything. The cows are there, the grapes are there, teh barley is there. In real value terms, you are not richer or poorer. Yet you're facing a crisis that may end your society, the world as you knew it and even your life.

The point is that there wasn't a single time or place in history where absolutely free market existed other than isolated villages in ancient times. At most, there were some RELATIVELY FREE markets. Nowadays it is BEYOND an utopia. For a single reason: who do you think will protect you, regulate laws, build infrastructure, look out for development, etc. The guy that makes beer? Will he build roads? will he build a dam? will he look for the cheese guy not taking out the winery? Unrealistic, huh? And so... how do you think all this "superior entity" is maintained? With good wishes? The cheese, wine and beer guys will abandon their production to build a dam which they don't have a fucking idea how to build?

Seriously, I know these ideas may sound like original or cool but they aren't new at all, if you know a little of Malatesta, Gramsci, Bakunin or even Saint Simon you would have seen them in one shape or another. Plus, I've noticed how you did concentrate on the New Deal I mentioned (twisting it) but you avoided everything else. And it's for a simple reason: what you're saying, as good, bad, wrong or right as it might be, is an absolute impossible in real world and in this times (or any time to come). In fact, more or less what you're proposing is called Anarcho-Primitivism: not by theory itself, but for the only possible results to this model: A "Waldenesque" lifestyle :2 cents:

An entire economy as a free market, not only hasn't ever existed, it never will.... not in America, not anywhere in the world. Now you can have a free market, within a market... that can be found all over the place.

But... they are not bigger, better, or more productive than those without regulations/control/intervention.

The economy CAN be tinkered with, and HAS been tinkered with for hundreds of years, and it has worked and it has solved problems.

Gov intervention isn't here to solve problems... it's here to help, and it has helped, many times over, many ways.




Aye, it's a bit longer than 50 years.. that's the biggest cover up in history then. Hahaha, dot com bubble was 100% corporate greed...




You need to study your Internet history... Gov created it, built it, funded it, expanded it, forced it to expand, forced it into high speed.... so the corps could make firefox, etc, etc, etc... without the Gov, none of that would be in use.

Without all this intervention, funding, pushing... you wouldn't be doing what you are today. You hate, what they provided to you... and you think a free market would have built it, when it wasn't... funny.


The free market is fake, bullshit, not real, never has been, never will be... a hand ALWAYS plays the market, if not the gov, then super corps.

We wouldn't need regs/intervention IF people did respect others, didn't commit fraud, didn't scam, didn't create new ways to screw people over for money, etc...

If greed wasn't a factor, the world would be heaven, and most crashes wouldn't have happened.


Could you list, 1 time in history, where the Gov regulated/intervened, on something, out of the blue-thin air, for no reason? IE: It's what they do, so they just do it..... Most if not all of what we have, is a result of corporate greed.... you're hating the wrong group of people. The Gov will ALWAYS regulate where it sees problems, that is it's actual job, to protect us, not only from others, but from ourselves as well - that IS the job of the Gov.....

I agree that it hasn't. There have been periods in history that came close. There was the Icelandic Free State. There was a period in Irish history that came close to Anarcho-capitalism. During the bronze age there were cities in the Indus valley that were extremely advanced for their time and had drainage systems, multistory brick buildings etc and operated without what we would now call a government or taxes.

I am however curious about how you are so certain that "it never will". If you look at things from a purely utilitarian point then a pure free market system is the most efficient way to run things. The work of for example David Friedman is very interesting to read in that regard.
If you look at things from an ethical point of view than it is the only fair way to run things. For more info: Hans-Hermann Hoppe (argumentation ethics), Walter Block, Murray Rothbard (natural rights based theory), Frank Van Dun (argumentation ethics), Stephan Kinsella (estoppel),...

Like sperbonzo already pointed out; you always have unintended consequences. You may fix one problem, but you end up creating tons of new ones.

Intentions don't matter. Intervening in the economy, e ven with good intentions, will still cause unforeseeable problems.

Mises himself in 'Socialism' about central planned economies:
The impracticability of Socialism is the result of intellectual, not moral, incapacity. . . . Even angels, if they were endowed only with human reason, could not form a socialistic community.

There's no conspiracy-theory-type 'coverup'. Let me illustrate what I was saying with another example:

2 years ago, the people living in the EU were told they had to show some solidarity with Ireland. A couple of months ago they were told to show solidarity with Greece or Greece would default.

The Greek state has been borrowing money for a very long time (just like all modern states do). Greece borrowed money to cover its expenses. Greece than borrowed more money to pay back its previous loans (including interest). As their accumulated debt is over 170% of their GDP, it's impossible for them to pay back that money with tax euros.

Who gave out loans to the Greek state? Banks, all kinds of different funds etc. They even kept giving Greece loans when it was obvious to them that Greece would be unable to repay those loans. Eventually the situation became that bad that no one wanted to give Greece anymore loans.

At that point politicians and bankers screamed: "The market failed! No one wants to buy Greek bonds! no one wants to give Greece any new loans!".

Did the market fail? Of course not. The market reacted the way it should. If no one is willing to pay to buy Greek bonds, that is the market giving you information that those bonds are worthless. If no one is willing to give out new loans to Greece, that is the market giving you information that Greece is unlikely to pay back its loans.

What happened? The EU decide to set up a special emergency fund. All other EU countries now borrow money (at an interest rate based on their own rating) from the same banks that gave out loans to Greece when it was already obvious that Greece would not be able to pay them back. Those countries then lend that money to Greece (at a different interest rate). Greece then uses that money to pay off the banks. All those EU countries now have to use taxpayer money to pay back its loans to those banks (+ interest).

So in essence what happened is that a couple of banks acted irresponsibly and gave out loans that it would not have been able to give out in a free market (because that would have meant the end of those banks). When the borrower was unable to pay back its loans, the EU then essentially made every member country borrow money from those same banks so Greece could pay back tot he same banks.

The EU emergency fund didn't put "new money into the markets". It took money out of the financial system and then put it back into the same financial system, but with the promise to pay back a little extra. Where will that little extra come from? Taxation.

And now that it has become obvious that 2 other member states (Spain and Italy) will not be able to repay their debts, they are doing basically the same thing all over, but this time its the ECB that will be giving out the new loans. The ECB announced that it will start printing extra euros to buy Italian and Spanish bonds (effectively inflating the money supply).


We don't have the technology we have today thanks to the gov, but despite of the gov.


Ah, the invisible hand. Yes, that would be that 'price mechanism' I described.

If you define 'greed' as wanting more than you have now than every human being is driven by greed.

People have bread to eat because the baker is driven by 'greed'. The baker doesn't get up early in the morning to bake bread out of the goodness of his heart. No, he bakes bread, so he can sell it and use that money to buy goods and services he desires.

And yes, crimes exist and will always exist. Where there a need for security services, the market will provide it.

Yes, there are people and groups of people who want to steal, loot, pillage. Yes, there are corporation that want to wipe out there competition. Yes, there are scammers etc...

But who does the gov call when they want to regulate the banking business? Bankers. Who does the gov call on when they want to regulate industry x? Experts from that industry.

I urge you to take a look at the work of for example Butler Shaffer. In his "In Restraint of Trade: The Business Campaign Against Competition" (I'll see if I can dig up a pdf) he does a great job of exposing tons of government regulations that were lobbied for by existing member of certain industries with the aim of restricting access to the market and wiping out new competitors.

- Most of that stellar growth has already proven to be false. Most economists estimate that the GDB statistics provided by the Chinese gov are off by 50%. The World Bank published a report saying that the Chinese numbers were exaggerated by at least 40%.
- If your per capita GDB is very low than any small increase will look like a huge increase in GDB percentage wise.
- There have been modest reforms in China and those would account for the real growth.

If the case of China tells us anything, then it's that its reforms did not go far enough.

Of course crime exists. Protection is a service like any others so the market would provide it. Check "Enterprise of Law" by Bruce Benson, "the Boundaries Of Order" by Buttler Shafer, "The Private Production of Defense" by Hans Hoppe or David Friedman's articles on "the machinery Of Freedom" for an example of competing protection agencies in the icelandic Freestate.

ad hominem argument :)

1. As Say's Law shows there can never be a systematic overproduction in the economy.
2. Labor is a scarce resource just like any other and the Law of supply and demand therefor applies to it.

Value is subjective. It's the buyer that decides what value a product has. If a product is priced at $50 and a potential customer decides not to buy that product then that customer valued his $50 more than that product.

If a customer can chose between a normal toothbrush and a pink toothbrush that is more expensive and the customer picks the pink one than the customer obviously valued the pink toothbrush higher than the normal one even though they both can be used to perform the exact same function.

Value is subjective not objective so there's no such thing a "Ghost value".

The fact that certain things are digital or stored digitally doesn't make them less real. When someone pays money to watch a video over the internet, he is paying for a real service.

When people pay money to take part in a webinar, then they are paying for a real service.

When people use the internet to communicate, they actually communicate with other people in the real world.

When 2 people in "the real world (where cows live and grapes grow)" use the internet to do business, then they affect each other in the real world.

If you'd "pull the plug" you wouldn't shut of some virtual world that isn't part of the real world. You'd be destroying a tool that people in "the real world" use... jsut like telephones, smoke signals, handwritten letters etc.

How do you think that "superior entity" called that state is maintained? How do you think that "superior entity" called that state is run?

I've read some of those, but not all. The problem is that most of their ideas are based on flawaed economic theory.

I focussed on the New Deal because that was a good example to show how gov intervention causes problems. I also picked it because these days a lot of people still believe that the New Deal somehow ended the great Depression, even though most of them are unable to explain what exactly the New Deal was (other than 'it was something FDR did'). and because these days some people are calling for a new New Deal.

Absolutely not. Of all the economists and philosophers I've mentioned in this thread, none can be classified within that school of thought.

If you want to find out where my personal preferences lie... start within the Rothbardian tradition :)

Greed will make it keep from happening... as long as greed is part of humanity, it will never happen. And if we had no greed, most of the systems, rules, regs, govs, etc we have in place wouldn't be needed.


And as I pointed out, history has proven many times over that not tinkering, regulating, etc that greed will continue to control things and screw everyone much worse.



I don't see how this relates to our economic growth after the depression, ie: intervention.

Sometimes when they yell the sky is falling, they act... other times they don't, in both cases sometimes it's good and other times is bad, ignoring things though - has never solved problems, it only grows them.


Or you could say, we wouldn't have the technology today if we didn't have the gov.


And not always done by governments...


Then why try to redefine the word greed to something it isn't?

Greed is when 1/3 of your Countries wealth is stolen, because of pure corp greed, backed by a lack of intervention.


Well, I would hope they turn to industry experts and ask questions... doing it blindly, as if they should know the workings of every industry, is pure silly.


I think we've drifted off here.... I don't disagree that intervention causes problems, however I equally don't ignore the fact that sometimes it does work, very well at that - and I also understand that ignoring problems, creates more of them, which has proof all over.

It is not an absolute, thinking or even attempting to prove that it is, is why Austrian Economics is flawed.

i hear ya, and agree. it's common knowledge that the west does not have hard #s on china and china does cook the books.

nevertheless. :winkwink: your comment reinforces my curiousity, i wonder what most austrian economists have to say about china

while there's no denying china is an economic powerhouse and it is verified they have 3 trillion cash reserves, i happen to think it is all teetering on the brink of either an uprising (which are currently sweeping the globe) and/or a huge economic dump due to all the manhandling of their economy in a communist society. china can't be the only economy on the planet that is not unhealthy.

triple negative sentence at the end there, ftw

enjoy it!

just snoopin abit, came across this-----------------


"I discovered Austrian economics and LvMI in 1989. Here my impressions of the forecasting record of the Austro-Misesian camp since:

"Late 1980s ? Japan?s property and equity bubbles were classic ABCT, yet Austrians were notably silent. Some of this can be attributed to the small number of Austrians at the time. Joe Salerno gave a speech about the Japan bubble at a LvMI conference in Toronto in 1999 (see here). Unfortunately this was well after the fact.

"Late 1990s, early 2000s ? Austrians were mostly quiet about the tech/dot-com bubble. There were exceptions among academics (Christopher Mayer, George Reisman, Guido Hulsmann, Sean Corrigan) as well as practitioners (Jim Grant, Tony Deden). I remember discussions with David Tice during the early 2000s about how Austrians were missing a golden opportunity to stick their necks out on the forecasting block regarding the tech bubble.

"2002?2007 ? Austrians hit a monster home run with regard to the Greenspan response to the tech bust, the GSEs, housing bubble, credit bubble, and gold. This is when LRC took off, amplifying any credibility by getting it right. Btw, the Fed-lite GMU/Koch/Cato camp largely missed these bubbles, a major forecasting black eye.

"Today ? We have more "Austrian" forecasters than ever. Is China a bubble? The supposedly Austrian-leaning Jim Rogers, Peter Schiff, Jim Puplava, and Adrian Day say "no." Left-leaning Jim Chanos says "yes." I tend to agree with Chanos. So what happens to the credibility of Austrian economics if the China bubble bursts? Will the fault lie in the theory or those applying it?
http://www.campaignforliberty.com/article.php?view=1257