05
Jan
2011
Ron Paul vs. NYT Guy on Colbert
HT2 Viresh Amin.
| The Colbert Report | Mon – Thurs 11:30pm / 10:30c | |||
| Gold Faithful – Ron Paul & David Leonhardt<a> | ||||
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The main argument from the NYT guy is that you can’t have a weak economy and rising prices at the same time.
BTW this clip beautifully demonstrates the power of Ron Paul. He obviously “gets” what is going on, but he takes the opportunity to get his message out. By the end the crowd is with him.
I think it’s right to assume the dummy economist in the video eats Federal Reserve Notes and possibly lives in a paper made house.
Exactly! LOL
Zing!
Just five years ago this topic would not have had a chance of being considered. We are making lots of progress!
What evidence do you see of progress that is not the result of an artificially inflated markets based on government infusion of our tax dollars, or a biased media? I don’t see this progress as either real or sustainable. Please elaborate. Thanks!
If I had some fiat currency from 1918 stuffed in a box, I could sell it for dozens of times their original value to collectors.
I wonder what the profit margin on gold coins from that same time period would be, priced in FRNs. Numismatic value + gold’s spot price probably beats numismatic value + price of putting some ink on government rag paper.
You think this reflects well on Paul? Ouch. I cringed for him.
We are experiencing hyperinflation?
Rises in relative prices of certain assets are inflation?
Money should be chosen on the basis of what you would keep in a box for twenty years?
Did Leonhardt only discuss a demand-push sort of inflation? Sure. And he could have described that in more detail. But in the same way Paul only discussed a monetary inflation. If I had to choose which oversimplification (the strictures of a lay audience during prime time on Comedy Central with wacky host require some oversimplification) does the best job of communicating what’s important to know about what’s going on, I would not choose Paul’s oversimplification over Leonhardt’s oversimplification.
I’m not the right person to blog on this, hoping Bob or someone else may be interested:
Latest release from the IRS is full of complaints about the enormous ‘tax breaks’ received. By large corporations you assume?
You’ll be surprised that the IRS thinks you get an $8k tax break currently. Scary stuff:
http://www.irs.gov/newsroom/article/0,,id=233959,00.html
I’m sorry, my above post is actually the National Taxpayer Advocate saying the poor in this country got an $8,000 tax break. The Advocate. For the Taxpayer. Said the poor. Should owe $8,000 per year more.
I don’t think Colbert was actually on the side of Ron Paul, but it is hard to tell. Dr. Paul did a reasonable job of redirecting stupid questions into meaningful questions, and doing that in his 70’s is fairly impressive.
Dr. Paul didn’t claim we were experiencing hyper-inflation.
Rises of relative prices of certain assets CAN BE where inflated money goes, called bubbles.
Money should be chosen on the basis of it being able to hold value over time — absolutely.
re: “Dr. Paul didn’t claim we were experiencing hyper-inflation”
How else would one interpret:
COLBERT: If we don’t have a gold standard for our money could it lead to hyperinflation?
PAUL: No, not could, it IS, it WILL
I’m not sure how else to interpret that, and I’m not sure what else to conclude than that Paul doesn’t understand hyperinflation or monetary theory.
How else would you propose we interpret “not could, it IS”? I feel a flashback to Clinton and Lewinsky coming on…
Also, I did not say that loose monetary policy could not cause asset bubbles. Leonhardt also agreed that it could cause bubbles. But that is not inflation. Again – a sign that Paul is confused about the very terms of the debat (this is not a new revelation, I should add).
As for being chosen on the basis of what holds value – given an inflation premium that is paid and relatively stable – not erratic – inflation I see no reason why money that loses value over time is inherently less desirable than, say, money with a fixed or relatively fixed supply that offers no prospect of independent monetary policy. They both introduce some downsides, but a stably expanding, elastic base money is perfectly reasonable to prefer to a gold standard.
Don’t mean to step on your toes here but it looks pretty obvious to me that he did not claim we’re currently experiencing hyper-inflation.
He was asked: “If we don’t have a gold standard for our money could it lead to hyperinflation?”
He responded: “No, not could – it is. It will.”
In the context of the question what does “is” and “will” mean?
“Is” what? ….Is LEADING to hyperinflation.
“Will” what?….will LEAD to hyperinflation.
You can call him wrong or crazy for that….fine…but do we really have to dive into the semantics of Ron Paul interview responses to debate whether a gold standard is preferable or not?
I enjoy some of your posts (here and elsewhere). But sometimes it seems like you hear only what you want to hear.
Could be.
I’d never call him crazy, I do call him wrong on occassion. You could be right on the reading.
Even if he means “is leading to hyperinflation”, doesn’t this seem like a severe lack of understanding to you?
But sometimes it seems like you hear only what you want to hear.
Usually when I get accused of that I think precisely the same thing about who I’m responding to. Not sure how to grapple with that. My response would be “read the plain English” but apparently that’s not as easy as it looks.
You may indeed be right on this one – this makes sense.
“Even if he means “is leading to hyperinflation”, doesn’t this seem like a severe lack of understanding to you?”
I suppose that depends on several factors, not the least of which is what one would officially consider to be a hyper-inflationary state. I suppose I’d be more comfortable with someone making a prediction of “excessive” inflation rather than a term I’d associate with trading wheelbarrows of fiat currency for loaves of bread. That being said, I can see why someone would be worried that our monetary policy can lead to excessive inflation and why that could be a bad thing. As to if Paul’s statements fall into that generalized category or if his predictions will be correct, that’s much harder for me to say.
For one, although I have an elementary grasp of basic economics, I’m certainly no economist. And secondarily, although more importantly, I think the economy is too complex for anyone to definitively test the veracity of his statement – that not being on such a standard causes excess inflation – even if we did experience high levels of inflation. That being said, I personally feel that our monetary policies have degraded the value of the dollar over time…and that’s bad enough for me to consider adopting a different system.
“Usually when I get accused of that I think precisely the same thing about who I’m responding to.”
That’s odd because when I accuse someone of something, my largest reservation is the worry that I’m identifying something I see in myself (as I often find is the case for other people). I’m sure that’s the case for me at least some of the time. But listening to and reading the actual words out of Paul’s mouth, I can’t help but see that you’d have to be taking his response out of context to read into it that we’re currently actually experiencing the general levels of inflation he’s warning about (sans separate comments made about inflation in specific markets: ie bubbles). But I could understand that representation if “will” and “is” wasn’t preceded by “will lead to” in the previous question.
crossofcrimson –
I genuinely did not see the reading that you bring up the first time, and I do think you have a point – I want to be clear. There was nothing disingenuous on my part originally, though. I don’t think it was entirely crazy for me to think the unelaborated “it is” referred to current hyperinflation, particularly given Paul’s obsession with the money supply and inability to think in terms of aggregate supply and demand when he talks about inflation as well. I don’t think that initial reading of mine was entirely off the wall, but I do think you may be right after all.
Anyway – ya, I think we always have to be on guard that we’re guilty of these things. I don’t want to profess my perfection. But, for example, when Bob accuses me of being overly generous with Krugman’s wording he may be right on occassion, but I respond precisely because I am legitimately baffled by his reading.
Dan, I think you might be confused as to the definition of inflation. Inflation is the artificial increasde in the supply of money. Bubbls and rising proces of assets and commodities are some of the negative consequence of inflation. We can all agree that loose monetary policy (inflation) casuses asset bubbles. So I think Dr. Paul was dead on there.
The reason inflation is bad is because it robs people of their savings. Stealing the value out from underneath money by artificially increasing its supply has the same effect as physically stealing the paper notes themselves from someone’s pockets. Money that loses value over time (from the deliberate artificial increase in its supply) is theft plain and simple. The value lost is transferred to the state and the people or favored businesses that get it first before prices rise. So if you can’t see why a money prone to theft is less desireable than a money that holds value, then you must advocate theft. If that works for you then great, but let the rest of us opt out the paper currency if we choose. Why should someone who wants their money to hold value over time be forced to use a money that doesnt?
I should be more charitable. Is your argument that he misspoke? That’s perfectly plausible and I won’t claim to know his mind. But those words are wrong if he intended them and they are wrong if he did not intend them.
I really want to watch this but I live outside the USA. If someone found another way to watch it, I would appreciate the information.
Whatever Ron Paul meant on hyperinflation, he still has the chance of being wrong. It is not guaranteed that we will have hyperinflation anytime soon. It is the same, broad erroneous statements people like Schiff were making; it’s time to be more careful about predictions.
you are right on the money. Dooms day prediction will be proven wrong more often than not. Doomsayers will never admit that they were wrong. They always have moving target. Ron Paul is very principled, which, to my mind, explains the charisma. He is not a good communicator of ideas. He probably understands monetary policy better than average congressman, but his prognostications are not based on that understanding, but on his biases.
Someone seriously needs to tell Ron Paul and Peter Schiff to stop screaming hyperinflation. Like it or not, Ron Paul and Peter Schiff are the faces of Austrian economics for the laymen. When they turn out to be wrong, people will naturally assume Austrian economics is bunk and shun it even more even there’s other more reasonable Austrians who aren’t predicting that type of doomsday scenario.
even if*
Sadly, Leonhard is correct. And as long as Austrians will foolishly beat the drum of hyperinflation when it remains non-existent, the more their credibility will be burnt. Bob you have not done the proper ritual “I WAS WRONG” post on your hyper inflation call. No Ifs, buts, caveats on govt measurement errors, or request to look beyond the numbers. Just a plain I WAS WRONG is needed, because you were wrong.
Now you and other Austrians are far more honest than the leftist blowhards swimming in Krugman’s muck, so I’d expect you to absorb and rework this information in your models – the fact that there is no inflation, much less hyperinflation (CPI haggling not withstanding).
So, say…at least revise your estimate of Scott Sumner being right upwards by…10%?
“you and other Austrians are far more honest than the leftist blowhards swimming in Krugman’s muck”
Was that really necessary, much less accurate?
I don’t think Paul was making any specific forecasts of near-term hyperinflation, but pointing out that in stark contrast to gold’s 6000 year track record of retained value, no paper currency has survived in the long term; this is due primarily to the ease with which paper currency can be expanded (inflated). With that view in mind, I don’t see any way Dr. Paul can be considered foolish or out of touch. He’s simply saying that we need to go back to gold, or else the dollar will eventually find itself in the exact same position as every other paper currency in history.
Given the nature of our current monetary system, fiat currency and fractional reserve banking, the natural path after a boom is a bust, where cash is raised, misallocations of capital are liquidated (such as housing), and prices for goods and wages go down. Given the views of the current Fed regime, it appears they will do anything to stop that process from occuring, i.e., they will inflate the money supply to no end in order to stave off what they see as the real problem – “deflation.”
What the Austrians fear is that Bernanke’s fear of deflation will lead him to expand the Fed’s balance sheet even further (create money). Already, he has created an inflationary powder keg, but an offsetting force has temporarily slowed down the effects of that money creation. The offsetting force is the natural path I just mentioned. That is, banks were not lending as much, consumers were paying down debt, businesses were going bankrupt, etc. In a fractional reserve system, this behavior actually destroys money. In other words, the private sector is deleveraging while the Fed is saying no, no, no, you must relever…In this kind of a battle, the Fed can always win because it can print as much money as it wants.
The other issue adding to the fear that the Fed will continue to create money is the outstanding federal deficit and the upcoming spending plans which will require even more deficit spending. When a country gets to the point, where the interest on the debt is a significant percentage of the deficit, it is game over. It is like an individual who keeps taking out credit cards to pay off past credit cards. At some point, it has to end. The fear is that the Fed will “monetize” this debt, i.e., it will create money lifrom nothing to buy the debt to prevent interest rates from skyrocketing. The anti-business policies only exacerbate the problem as the economy can’t recover.
It is the modern economist improper and superficial definitions of inflation and deflation as “rising prices” and “falling prices”, respectively, that lead them into this confusing terminology, as they conflate cause (increase of the money supply) with effect (price increases, boom-bust cycle).
Ron ended on — “it will”. You can read a transcript as if it were a written exchange, but that isn’t how these things happen.
Someone want to defend the concept that currency holding value over time isn’t a good way to evaluate it?
Come on. Paul had been predicting economic collapse since the 70s and he finally gets something like a twice in a century event and he’s deemed a prophet.
And why does he, and other Austrians continually talk about rising gold prices reflecting US inflation, when the supply’s been falling for ten years, while retail and industrial demand in China, India, and other developing nations has taken off? And would we really want the kind of deflation what would result from tying our money to gold?
If we have no much inflation, why aren’t forward-looking metrics telling us this and why aren’t we at least at full-capacity utilization?