Krugman and the 1930s: One Step Forward, One Step Back
In his recent NYT op ed Krugman reaches a new low in his distortion of the 1930s:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy…
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets.
Often Krugman et al. have been misleading when they talk about central banks during the Great Depression, but that statement is flat out false. In response to the financial crisis, the Fed cut rates down to record lows. Now it’s true, when faced with an outflow of gold in the fall of 1931, the Fed finally reversed course and starting raising interest rates. But it is flatly false (I won’t say “lie” because Krugman may very well not realize it) to say that in the Great Depression, central banks responded to the initial crisis by hiking interest rates. (Look at the chart of the Fed’s actions in this article.)
Although he reached new lows in his discussion of interest rates, Krugman is marginally better when talking fiscal policy. For he now says:
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence.
To my knowledge, that is the first time Krugman has ever publicly volunteered the fact that Herbert Hoover raised taxes. (It’s true, you wouldn’t realize how MASSIVELY Hoover jacked up tax rates–e.g. raising the top income tax rate from 25 to 63 percent in one year!!) Several times Krugman has said that Hoover tried to balance the budget during the Great Depression, without (a) mentioning that this was only after letting the deficit explode, and (b) that Hoover didn’t focus exclusively on spending cuts.
So you win some, you lose some.
Road to Serfdom
I’m not naming names, but some people lately have been questioning whether we’re on the road to serfdom. Apropos of that, is this article right? Does this bill really give Obama the authority to shut down the Internet for 4 months? And even if so, what exactly does that mean?
I realize trusting Free Advice commentators to tell me the truth is almost as risky as trusting Alex Jones, but I’m a busy guy.
Nullify!
Here is my Amazon review of Tom Woods’ new book, which officially launches today:
Full disclosure: I am a personal friend of Tom Woods. Even so, I like some of his books more than others, but _Nullification_ is definitely one of his gems. Until I read this book, I had no idea that the concept of nullification was NOT invented in, say, 1858 by the legislatures of southern states.
On the contrary, Woods shows that this was an idea championed by Thomas Jefferson and James Madison, and flowed seamlessly from the “compact theory of the Union.” Nullification was not an ad hoc principle dreamed up in a particular battle over states’ rights, but instead was an integral part of Jefferson’s philosophy of a federation in which the central government only received enumerated (and strictly limited) powers from the states who constituted the Union.
This book is a great read for anyone who loves colonial and early US history. Woods sketches a vision of early America that we didn’t learn in grade school. For example, the handbill announcing the “Anti-Slave-Catchers’ Mass Convention” (p. 82) is amazing–outraged citizens in Wisconsin didn’t want to hand over an escaped slave as the feds dictated (under the Fugitive Slave Act). This episode is but one example that Woods provides, to prove that very often “states’ rights” were used to *protect* liberty. Is that really so hard to understand–that sometimes the *federal* government is the bad guy?
A surprise in this book is Chapter 4, “What Is (or Are) the United States, Anyway?” Here Woods makes a compelling argument for the compact theory of the Union, which is the view that the federal government was created by the individual States when they ratified the Constitution. (A nationalist view holds that “the people of the United States” collectively formed the central government, and that therefore the individual state governments are subordinate to it.)
Much of Woods’ evidence I had read before, but a new one was his focus on the Declaration of Independence itself, which says:
“…That these united Colonies are, and of Right ought to be Free and Independent States, that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do” (qtd p. 97).
Woods points out that if the individual States, upon their declaration of independence, retained the rights to *start wars and contract alliances*, then surely they were sovereign political entities, in the way that France and Great Britain were separate States. It is then an easy matter to show that at no point, whether with the Articles of Confederation or the Constitution (which after all was ratified NOT by the American public but by the individual states), did these initially sovereign states cede all of their powers to the U.S. government.
All in all, an excellent book that provides a new look at American history, but also draws lessons that are very relevant in today’s political battles.
Incidentally, if you know you will at some point buy Tom’s book, it’s better to do it within the next day or two, rather than at some indefinite point in the future. They do the NYT book rankings etc. based on sales in the first week, so it’s good to concentrate our firepower right now:
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Of course, if you want a signed copy of Tom’s book, you’ll have to come to Nashville on July 16.
Can Gold Cause the Boom-Bust Cycle?
This was a very popular topic during my online business cycle class (which has just wrapped up), so I thought I’d devote a Mises.org to it:
At the Mises Academy we are just wrapping up the inaugural class, on the Austrian theory of the business cycle. During the class, one issue that came up repeatedly was whether the Mises/Hayek story of the trade cycle could occur on a completely free market, using gold as money and a banking system that operated on 100 percent reserves.
As any good (and annoying) teacher would, I avoided giving a definitive answer one way or the other. Instead, I tried to give the best possible case for each answer, to prod the students to think it through for themselves. In this article, I summarize how even a Rothbardian could plausibly answer this question either in the affirmative or the negative.
The Way to Salvation
One of the watershed moments in my spiritual development occurred during the counseling sessions from the pastor who was going to marry my (then) fiancee and me. He was the pastor of the church I was attending while at NYU, and I had asked him if he would marry us. He said yes but always wanted to see the couple a few times before the ceremony to make sure he was comfortable with it and that we were prepared.
One of our “homework assignments” was a questionnaire to gauge our understanding of Christianity. One of the questions went like this: “When you die and stand before the gates of heaven, what will you say to gain entrance?”
I put down what I thought was a good answer at the time, something about how I always spoke the truth even when it was difficult.
Well, needless to say, my pastor informed me (almost in as many words) the next time we met that this was objectively wrong. This surprised me not so much because he disagreed with my answer, but because he acted as if there could be a correct answer that humans could know. I had somehow managed to go through years of religious schooling and several sacraments, and then even had much later accepted Jesus Christ as my personal savior, and yet I didn’t know that the Bible is quite specific on what you need to do for salvation. I had thought you tried to live the best life you could, and then it was “between you and God.”
In fact, if you believe that the Bible is literally the inspired word of God, then it is pretty straightforward. The most famous example comes from John 3:16, but I’ll give the wider context:
1Now there was a man of the Pharisees named Nicodemus, a member of the Jewish ruling council. 2He came to Jesus at night and said, “Rabbi, we know you are a teacher who has come from God. For no one could perform the miraculous signs you are doing if God were not with him.”
3In reply Jesus declared, “I tell you the truth, no one can see the kingdom of God unless he is born again.[a]”
4″How can a man be born when he is old?” Nicodemus asked. “Surely he cannot enter a second time into his mother’s womb to be born!”
5Jesus answered, “I tell you the truth, no one can enter the kingdom of God unless he is born of water and the Spirit. 6Flesh gives birth to flesh, but the Spirit[b] gives birth to spirit. 7You should not be surprised at my saying, ‘You[c] must be born again.’ 8The wind blows wherever it pleases. You hear its sound, but you cannot tell where it comes from or where it is going. So it is with everyone born of the Spirit.”
9″How can this be?” Nicodemus asked.
10″You are Israel’s teacher,” said Jesus, “and do you not understand these things? 11I tell you the truth, we speak of what we know, and we testify to what we have seen, but still you people do not accept our testimony. 12I have spoken to you of earthly things and you do not believe; how then will you believe if I speak of heavenly things? 13No one has ever gone into heaven except the one who came from heaven—the Son of Man.[d] 14Just as Moses lifted up the snake in the desert, so the Son of Man must be lifted up, 15that everyone who believes in him may have eternal life.[e]
16″For God so loved the world that he gave his one and only Son,[f] that whoever believes in him shall not perish but have eternal life. 17For God did not send his Son into the world to condemn the world, but to save the world through him. 18Whoever believes in him is not condemned, but whoever does not believe stands condemned already because he has not believed in the name of God’s one and only Son.[g] 19This is the verdict: Light has come into the world, but men loved darkness instead of light because their deeds were evil. 20Everyone who does evil hates the light, and will not come into the light for fear that his deeds will be exposed. 21But whoever lives by the truth comes into the light, so that it may be seen plainly that what he has done has been done through God.”[h]
And there you have it. If nothing else, now maybe some of you for the first time realize what the “John 3:16” signs at baseball games mean, and why so many of us refer to ourselves as “born-again Christians.” And you also can see why some Christians are so “dogmatic” and small-tenters. If we believe that the quoted words of Jesus Himself are correct in the gospels, then it’s hard to get around the above passage.
Now there is a connection in the above between a saved person and the performance of good deeds, but the connection is certainly NOT that, “If your actions get above a certain threshold of morality, then you’re in. Otherwise, it’s down the chute to Satan for you.”
No, quite clearly Jesus says that the way to eternal life is through belief in Him. Incidentally, I want to point out that this is an action. I realize that some Calvinists are going to bite my head off in the comments, but that’s OK–they were predestined to do so. Anyway, I am pointing out that the standard dichotomy between works and faith often neglects the fact that you have free will and can choose to accept Jesus.
Here’s a good passage from Paul on these matters (Ephesians 2:1-10):
1As for you, you were dead in your transgressions and sins, 2in which you used to live when you followed the ways of this world and of the ruler of the kingdom of the air, the spirit who is now at work in those who are disobedient. 3All of us also lived among them at one time, gratifying the cravings of our sinful nature[a] and following its desires and thoughts. Like the rest, we were by nature objects of wrath. 4But because of his great love for us, God, who is rich in mercy, 5made us alive with Christ even when we were dead in transgressions—it is by grace you have been saved. 6And God raised us up with Christ and seated us with him in the heavenly realms in Christ Jesus, 7in order that in the coming ages he might show the incomparable riches of his grace, expressed in his kindness to us in Christ Jesus. 8For it is by grace you have been saved, through faith—and this not from yourselves, it is the gift of God— 9not by works, so that no one can boast. 10For we are God’s workmanship, created in Christ Jesus to do good works, which God prepared in advance for us to do.
And consider what happened when Paul and Silas were in prison (Acts 16:25-34):
25About midnight Paul and Silas were praying and singing hymns to God, and the other prisoners were listening to them. 26Suddenly there was such a violent earthquake that the foundations of the prison were shaken. At once all the prison doors flew open, and everybody’s chains came loose. 27The jailer woke up, and when he saw the prison doors open, he drew his sword and was about to kill himself because he thought the prisoners had escaped. 28But Paul shouted, “Don’t harm yourself! We are all here!”
29The jailer called for lights, rushed in and fell trembling before Paul and Silas. 30He then brought them out and asked, “Sirs, what must I do to be saved?”
31They replied, “Believe in the Lord Jesus, and you will be saved—you and your household.” 32Then they spoke the word of the Lord to him and to all the others in his house. 33At that hour of the night the jailer took them and washed their wounds; then immediately he and all his family were baptized. 34The jailer brought them into his house and set a meal before them; he was filled with joy because he had come to believe in God—he and his whole family.
I like this last example the most, because it is quite clear-cut. A newcomer to the news of Jesus asks an expert what he needs to do to be saved, and the answer is, “Believe in the Lord Jesus.”
I am going over these passages because I had never had someone do the same for me, until I was sitting in that pre-marriage counseling session. I somehow had managed to go through my whole life up to that point–which included a decent bit of reading the Bible–without realizing that there is a simple answer to the path to salvation.
Incidentally, I know some Catholics get offended when I tell them I’m a Christian, because they think I’m implying that they’re not. But that’s not what I’m saying. It is true that when I was a believing Catholic, I was not a born-again Christian; not only had I not accepted Jesus as my personal savior–not only did I not “believe on” Him–but I wouldn’t have really known what those phrases even meant.
At the very least, I hope this blog post can render the behavior of “Bible thumpers” more understandable. Since we believe the Bible is literally the inspired word of God, our straightforward reading of the above passages tells us that you need to believe that Jesus is the Son of God in order to have eternal life.
Like pregnancy, this is not a fuzzy condition. You either believe in Jesus and know you are going to heaven, or you aren’t sure about all this stuff–which means you’re not. I’m not telling you this out of superiority; the whole point is that none of us earned God’s grace and forgiveness.
So when I feel confident that I am going to heaven, it’s not because I have lived a better life than that guy over there. No, I am disgusted with the way I have lived my life. But I have read (what I believe to be) the quoted words of the Son of God Himself, and He said quite clearly what we need to do: We need to accept the free gift of salvation that He is holding out for us.
God has given us free will. He will not force us to live with Him forever in paradise. We have to accept that gracious offer.
But you have to accept it.
This isn’t an insurance policy, or Pascal’s Wager. If you don’t really believe in this stuff, I’m not urging you to say out loud, “I accept Jesus” to hedge yourself. What I do urge you to do–especially if you agree with me that this Jesus fellow had some very wise teachings and clearly understood the human condition–is to read the gospels and learn more about what the Bible actually says. If you are already going to church every week and are quite comfortable with your routine, it doesn’t mean you have to give any of that up–I’m just asking you to read what Jesus Himself said about this stuff, and look at it with fresh eyes.
Also, in the comments on this post, please let’s be civil and patient with people who may throw bombs at us Christians. I can’t possibly harbor ill-will against atheists or non-Christian theists because I was a “devout atheist” myself in college, and tried very hard to “free” my Christian friends from their mental prison. In retrospect, I am astounded at how my initial premises led me to such horrible activities. (Fortunately I don’t think I “won” any souls for the Devil, even though I didn’t realize that’s what I was trying to do.)
Someone Stop Bernanke Before He Kills Again
(I think I may be stealing that title from an LRC description of one of my previous articles.)
Well Scott Sumner has found a scary Telegraph article explaining Bernanke’s plans for the economy. Of course, Sumner laments that Bernanke may not get his way. In any event, check this out:
Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.
Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.
“We’re heading towards a double-dip recession,” said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. “The party is over from fiscal support. These hard-money men are fighting the last war: they don’t recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again.”
Mr Bernanke is so worried about the chemistry of the Fed’s voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post. Mr Kohn has been a key architect of the Fed’s emergency policies. He was due to step down this week after 40 years at the institution, depriving Mr Bernanke of a formidable ally in policy circles.
OK, and then what happens when the Fed doubles its balance sheet again, and this doesn’t fix the economy (again)? Will Sumner, Bernanke, et al. be stunned that the economy is suddenly “worse than we realized”? Will the third time be a charm?
The Policeman Is Not Your Friend
This is so absurd, I didn’t link it at first. I thought I must be missing something. But now we have more of the details, and it seems this really happened…
I’m not going to bother summarizing. Just follow the link to Will Grigg’s blog post summarizing the elderly women–confined to their beds–that were tasered by police. (One was shot to death.)
Would It Have Gotten Him Lynched…
…if after this the speaker said, “Was there a question in there, sir?”
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