Fact Check on Credit CARD Act
Believe it or not, there is some quality control on my op eds. I am working on something concerning Elizabeth Warren, and I want to know exactly what it means when the Credit CARD Act “bans arbitrary increases in credit card interest rates for consumers who haven’t missed payments.” (E.g. look here.)
What I want to know is, can credit card companies still raise interest rates in a non-arbitrary way, specifically, if LIBOR or some other benchmark rate goes up? E.g. let’s say I’m carrying a $5,000 balance, and I faithfully make my monthly payments. But then LIBOR and the prime rate go up 20 points because the dollar crashes. Can credit card companies jack up my APR on the next statement, if I’m not able to pay off the whole balance?
Pessimism
I think it’s safe to say that if the stock market crashes within the next 2 years or so, that both Austrians and Keynesians (as well as MMTers) are going to say, “We told you so.”
Now I know very well the reasons I think that may happen. Look at the chart of the S&P 500–to me it looks like we are in the midst of our third bubble in 12 years. Especially this time around, the resurgence in the stock market is clearly due to the Fed’s extraordinary interventions. So if you’re like me and think creating $1.6 trillion in new base money doesn’t really “help,” then it won’t be a surprise at all if things come crashing down. (I’ve written elsewhere that if just emerge slowly out of this without any major hiccups, it would make me re-think my worldview.)
It’s certainly true that Krugman and some other prominent Keynesians have personally been predicting bad times. But my question is: Does that actually follow from standard Keynesian models? I mean, is it the stimulus ending that is supposed to cause a double dip?
To take another example, what about the quasi-monetarists? If the problem is that there was a sudden surge in the demand to hold money, and wages are locked in to a certain growth rate, then that problem should ease over time, right?
Mosler in the House
BTW I realize I may have an advantage in monitoring incoming comments, so I point interested parties back to the MMT post, because Warren Mosler showed up and defended his honor against some of us in the comments.
Bob Murphy Tells “the Best Tom Woods Story Ever”
[UPDATE below.]
An oldie but goodie from the Campaign for Liberty’s Iowa regional conference in May 2010. My dad wanted to send this one to somebody so I had to dig it up, and it was a challenge for me to find it on YouTube. Lest it become lost to history forever, I am preserving it here. Who cares about the economics; the opening anecdote is what’s important.
Oh, when Tom introduced Dan McCarthy (the speaker before me), Tom said something like, “If I had to pick the ten people in the world I’d most like to have a conversation with, Dan would be on the list.”
UPDATE: Wow I had forgotten I used the George Constanza routine in that one too, but it was half-hearted. I guess that makes at least 3 times so I had better retire it. The crowd gets restless without new material.
O’Driscoll on Cheap-Money Policies
I spend so much time reading Krugman et al., that occasionally I need to come back up for air and breathe the sweet oxygen of Gerry O’Driscoll (HT2 von Pepe).
More Mises Mastery
On Sundays I quote Holy Scripture, on Mondays I quote from The Theory of Money and Credit:
The national capital is composed of the capital of the individual members of the State, and when the latter is consumed nothing remains of the former either. The individual who takes steps to invest his property in such a way that it cannot be eaten up by the depreciation of money does not injure the community; on the contrary, in taking steps to preserve his private property from destruction he also preserves some of the property of the community from destruction. If he surrendered it without opposition to the effects of the inflation all he would do would be to further the destruction of part of the national wealth and enrich those to whom the inflationary policy brings profit.
It is true that not inconsiderable sections of the best classes of the German people have given credit to the asseverations of the inflationists and their press. Many thought that they were doing a patriotic act when they did not get rid of their marks or kronen and mark or kronen securities, but retained them. By so doing, they did not serve the Fatherland. That they and their families have as a consequence sunk into poverty only means that some of the members of those classes of the German people from which the cultural reconstruction of the nation was to be expected are reduced to a condition in which they are able to help neither the community nor themselves.(pp. 256-257)
A Lesson in Subjective Value Theory
Today at Mises. You know how a lot of times, you bump into a guy with a bunch of barrels of fish, and he’s trading them for another guy’s horse? And you wish you had a theoretical framework to explain the price upon which they agree? Rest easy.
I Agree With Krugman and DeLong
Well it was bound to happen sooner or later. To set the context, Krugman recently wrote that if the dollar is ousted as the global reserve currency, it won’t be a big deal. (I think it would be, and I support such a shift, incidentally, since I think it would limit the American empire.) So when two guys write “Keynesians complacent about the dollar” in the FT, and the bio says one of them is a Hayek scholar or something (the pay wall is going up so I can’t refresh my memory), I am eager to give them the benefit of the doubt.
But alas, their argument against Krugman contained two whoppers: they say if the dollar loses reserve currency status, then the US would be shackled as in the days of the gold standard (if only!), and the US would have to start issuing debt in some other currency. I’ll let Brad DeLong take it away:
The euro is not the principal international reserve currency. Neither is the pound, Nor are Australian dollar, the Canadian dollar, the Swiss franc, or quite a number of other currencies. Yet the eurozone, Britain, Australia, Canada, and Switzerland are very able to issue their own debt in their own currencies. And they are in no wise “forced to operate under external constraints comparable with those imposed by the classical gold standard.” Not at all.
It’s just not true that if your currency is not the world’s principal reserve currency that you cannot issue debt in your own currency. Not true at all.
It’s just not the case that if your currency is not the world’s principal reserve currency that you are “forced to operate under external constraints comparable with those imposed by the classical gold standard.” It’s just not the case.
Why would anybody claim that these things are true?
Why would the Financial Times ever print any claims that these things are true?
I do not understand it…
I can’t even understand what the writers were thinking when they wrote that. As DeLong and Krugman point out, you would think three seconds of reflection would make them realize, “Wait a minute, what we’re saying isn’t true of other countries right now, and they certainly don’t have their currencies as the global reserve one. So….”
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