27 Dec 2014

Four Mises CA Posts

Shameless Self-Promotion 45 Comments

Because my blog was in migration, I held up on posting these. But catching up now:

==> In this post I discuss Barkley Rosser’s attempt to (partially) explain the 1921 recovery on the fiscal stimulus pushed through by Commerce Secretary Herbert Hoover.

==> Randians versus Rothbardians. I assume that’s all the click-bait you need.

==> The banking system as a whole can’t lend out reserves, but an individual bank sure can.

==> Preston Manning is frank about carbon taxes and politicians.

45 Responses to “Four Mises CA Posts”

  1. Enopoletus Harding says:

    1920-21 recession was, as LK pointed out, not really “short”; it was as long as the previous recession, which was the longest U.S. recession since the Great Depression.

    • Major.Freedom says:


      “1920-21 recession was, as LK pointed out, not really “short”; it was as long as the previous recession, which was the longest U.S. recession since the Great Depression.”

      It was short, if we compare it to the Great Depression, or the Great Recession.

      • E. Harding says:

        It was exactly as long as the Great Recession.

        • Major.Freedom says:

          It was shorter.

          Unemployment started to rise beginning 2007 and started to fall beginning 2010. Significantly longer than 1920-1921 unemployment trend.

  2. Enopoletus Harding says:

    I could use the exact same argument to “prove” that we need a monopoly State to provide the services of hunting, building demolition, administering of antibiotics (the very term means “anti-life,” something that should alarm Randians), and boxing. All of these activities intrinsically involve acts of force and/or destruction.

    -No you couldn’t; Bob, you know what the Rothbardian definition of force/coercion/violence is, and building demolition and antibiotic administration aren’t it.

    • Major.Freedom says:


      “No you couldn’t; Bob, you know what the Rothbardian definition of force/coercion/violence is, and building demolition and antibiotic administration aren’t it.”

      Bob was referring to the Randian definition of force there, not the Rothbardian definition. Any use of physical force the Randians claim must be monopolized territorially.

      • Tel says:

        I hardly think that applies to sports like boxing, under any stretch.

        • Major.Freedom says:

          Right, which is Bob’s main point on the flaws of Randian morality.

          • Tel says:

            It’s only a problem when ignoring common sense; which is just as much an issue for any morality, or any contractual agreement for that matter.

            • Major.Freedom says:

              I prefer strict rules of logic than the oft-abused reference to “common sense”.

              • Joseph Fetz says:

                Bob was correctly attacking the primary argument, which was against “force” per se.

                The guy literally said that “force” is outside the realm of economics. That’s clearly wrong.

                But then, he’s also wrong about what libertarians are arguing. It isn’t “force” that is at issue, but rather initiatory aggression.

                So yes, the definition of terms becomes ever so important (which is sort of ironic considering the subject).

              • Major.Freedom says:

                Well said.

  3. Enopoletus Harding says:

    I like Bob’s point on the lack of political incentives for an “ideal” carbon tax.

    • Major.Freedom says:

      Committing risks them losing power.

  4. Enopoletus Harding says:

    Here’s a monthly graph of Federal expenditures and revenues:

  5. Enopoletus Harding says:

    Also, wouldn’t paying higher IOR improve banks’ capital positions, making them more willing to lend out money above the IOR rate?

    • Major.Freedom says:

      In this rigged market?

  6. Tel says:

    In terms of the minarchist / anarchist thing, we can all agree that the State is too big and too invasive. Thus, to improve matters the State must get smaller (unless you believe in some revolutionary event where the State just vanishes overnight, which seems highly unlikely to happen).

    However, no one has yet come up with a single workable methodology for shrinking the State at all. Not even a little bit. We have a situation where someone like Elizabeth Warren and “You didn’t build that” is a plausible candidate for President, and Gary Johnson got about 10% of the vote.

    I figure there will be plenty of time while the State is shrinking to figure out how much of it is still useful.

    • Major.Freedom says:


      “However, no one has yet come up with a single workable methodology for shrinking the State at all.”

      Yes, they have.

      Just because the state is growing, it does not mean nobody has any ideas on how to shrink it.

      You insinuate that the march towards full socialism is inevitable.

      • Tel says:

        Ideas are fine, but obviously they can’t be considered to be working until something measurable comes out of them.

        • Major.Freedom says:

          Working, or workable? I thought you were talking about an absence of workable ideas.

          Yes, if there exists a non-shrinking state, then by definition shrink the state ideas are not being acted upon.

          I do not hold socialists wanting to grow the state, or their actions, as the standard from which shrink the state ideas are measured as workable or not. Free market ideas are not designed for psychopaths who are not interested in peaceful coexistence. Ideas and violence are incompatible. For psychopaths who want to initiate violence, the only required response is defensive force that allows peaceful cooperation to resume.

          • Tel says:

            I’m an empiricist, so demonstrably workable, not theoretically might be workable.

            I accept that someone has to start with the idea, before it can be put into practice. Nothing wrong with ideas, we have plenty to go around.

            • Major.Freedom says:

              As an empiricist then, you can never conclusively rule out any moral theory as absolutely unworkable, because it is always possible for it to be workable at some point in the future even if it has heretofore failed, and that the reason it didn’t work in the past was because of a myriad of other factors that prevented the expected observation from taking place.

              A person who is relentless in trying to get universal respect for private property rights despite constant and repeated past failure, is acting perfectly within the technical bounds of empiricism.

              • Tel says:

                Let’s just say, I’ll believe it when I see it.

  7. E. Harding says:

    Bob, it’s strange. Commenting with my previous email still doesn’t work, though the commenting system recognizes that both E. Hardings are the same, as it pops a duplicate comment warning for duplicate comments under the email I’m using now that don’t appear under my previous email. I’m sure my previous email is blacklisted somehow.

  8. LK says:

    “The economy had clearly bottomed out and was recovering before the Fed loosened up the monetary spigots, looking at various criteria. (I should admit that the argument for monetary stimulus does have some support if we look at interest rates, rather than monetary growth. I will elaborate on this in a future blog post.)”

    A concession that puts the lie to the idea that the recovery was not significantly influenced by monetary policy.

    Not to mention that the big open market operations between November 1921 to June 1922 that tripled Fed holdings of US treasuries.

    On this, Rothbard stated: “[i]nflation seemed justified as a means of promoting recovery from the 1920–1921 slump, to increase production and relieve unemployment” (Rothbard 2000: 133). Strange how modern libertarians seem to have forgotten this.

    • Major.Freedom says:


      “A concession that puts the lie to the idea that the recovery was not significantly influenced by monetary policy.”

      George Selgin has shown that there was little to no stimulative effect from the lowered rates. See the link to his article in Murphy’s Mises post.

    • Tel says:

      Every time we get new and different definitions of “austerity” and “stimulus”. Sometimes government deficit, sometimes the first derivative of government deficit, perhaps debt to GDP ratio, or sometimes expanding Fed balance sheet, sometimes not, sometimes nominal interest rates, or real interest rates, or the unmeasurable natural interest rates; could be 2% inflation is the magic stimulus formula, and deflation might imply austerity; finally we get a retrospective definition: stimulus is whatever happened just before the economy grew (all purpose but not very helpful for deciding future policy).

      Whatever it takes. Think of the children. Have a heart. Think of the future. Think of anything at all other than how ridiculous it all is.

    • Anonymous says:

      “Not to mention that the big open market operations between November 1921 to June 1922 that tripled Fed holdings of US treasuries.”

      Whoa, really?

    • Joseph Fetz says:

      “Not to mention that the big open market operations between November 1921 to June 1922 that tripled Fed holdings of US treasuries.”

      Whoa, really? You don’t say

    • RIchard Moss says:

      LK wrote:

      “Not to mention that the big open market operations between November 1921 to June 1922 that tripled Fed holdings of US treasuries.
      On this, Rothbard stated:… ”

      The 1920-21 recession ended in July 1921 according to the NBER – well before the Fed started increasing its holdings of treasuries.

      And I think you are selectively quoting Rothbard. He is writing about what he believed the Fed was thinking, not what he thought;

      “If the Reserve authorities had been innocent of the consequences of their inflationary policy in 1922, they were not innocent of intent. For there is every evidence that the inflationary result was most welcome to the Federal Reserve. Inflation seemed justified as a means of promoting recovery from the 1920–1921 slump, to increase production and relieve unemployment.”

      America’s Great Depression. p. 134

      Furthermore he can be referring to promoting a recovery that was already underway, rather than promoting a recovery from a still existent slump.

  9. Raja says:

    Does anyone have an answer for the paradox of the Keynesian multiplier?

    How does taking money from people by selling bonds and giving that same amount of money back to people through fiscal spending create stimulus?


    • guest says:

      “How does taking money from people … and giving that .. to [other] people through fiscal spending create stimulus?”

      You define successful stimulus as that which makes SPECIFIC companies profitable; Which is why these companies get bailed out with printed money when bubbles crash.

      All that’s happening with printing (in excess of specie*) is a fraudulent transfer of purchasing power.

      *If no specie specified, then all the worse.

    • Major.Freedom says:


      The multiplier theory is one that contains the assumption that the government can use force to bring about more “spending” than would otherwise be the case if they used only peaceful means. In terms of budget deficits, the theory contains the assumption that taking from some who have a lower propensity to spend, and giving to those who have a higher propensity to spend, can result in more spending out of the same total money supply.

      How is it determined who has a lower propensity to spend and who has a higher propensity? By every other governmental method: crude and crass generalizations. Ergo, the government should borrow more out of the total savings pool that would otherwise be controlled mostly by the relatively wealthier who have a lower propensity to spend, and on the other side of the coin, the government should spend money not on corporate bailouts, which would just give the money back to those with a lower propensity to spend, but on the holy “public works” programs that give money to those with a higher propensity to spend.

      Now, as soon as those with a higher propensity to spend go out and engage in that first multiplier round of spending, which should take no more than a couple weeks once the paychecks are issued, the money ends up under the control of the relatively wealthier with the lower propensity to spend anyway. So it would appear that the stimulus would be temporary. But thankfully if you can think in terms of a parasite, after dealing with them for so many years, you will not able to understand their intention to mislead. What we’re supposed to believe is that the initial increased round of spending will psychologically convince producers not to hoard money, that a recovery has taken place, so that they will invest more and take back control of savings management.

      That is why the Keynesian parasites hate with a passion the bugbears, pessimists and inflation scaremongers when the government engages in its deficits. The whole point of it is to psychologically manipulate investors into believing that the additional initial spending is sufficient enough reason to start investing continually as per normal.

      But if they do not succeed in the psychological warfare, and it is warfare because it is brought about by threats of violence if anyone disobeys, then there is a need for continuous government deficits until the psyops succeeds. Here is where the belief originates that if the government pulls back before the people are sufficiently brainwashed, then “the economy is worse than we thought!”. Get it?

      The other absurd belief we’re supposed to accept is that the transfer of money from the hoarders to the spenders, that everyone would be better off as the producers of wealth produced more goods because of the higher nominal spending on their products that the government budget deficits are supposed to bring about so as to reverse the effects of money hoarding.

      It is here that the Keynesians make the biggest mistake. They do not understand that it is not spending per se that increases wealth, but the right kind of spending that does it. They also do not understand that in the aggregate, all types of spending compete with one another and compete for wealth distribution. If a government budget deficit succeeds in raising total spending as it reverses what otherwise would be money hoarded by rich people, so to speak, it is quite likely to result in real wealth getting transferred from more productive lines, to less productive lines. This is why a need developed in Keynesian theory to convince people that the problem is one of unused, idle resources. We’re supposed to believe that it is better for unspent money to be spent, and unused resources to be used. We’re supposed to ignore questioning whether or not using a resource in accordance with its prior use is the best use going forward. We’re supposed to believe that investors taking time reallocating resources to new uses is something to be avoided, as doing so would lead to temporary idle labor until investors figure out what to do. We’re supposed to rile ourselves up in an orgy of hostility and dispair while investors take their time to make new plans. We’re supposed to worry about wage stickiness. We are supposed to ignore the structure of production and just do everything we can with government spending to “get things moving again”.

      We are supposed to value output for the sake of output, and we are supposed to value employment for the sake of employment, not to satisfy empirical human individual ends. For if empirical individual ends were the standard, we may for a period of time require more planning and less reckless spending that was caused by prior psychological warfare.

      We are supposed to value planning for better uses of resources as worse than using resources for any purpose now in the present. This is why the Keynesians are in the awkward position of having to then conclude that it is better if resources and labor were used now in the present making weapons of war to then be destroyed in a bloody battle that leads to the deaths of millions, than for time to be spent by civilian investors figuring out ways to make better use of resources for civilian goods and services available in the future. After all, we’re all dead in the long run, right?

      • Tel says:


        The BoJ will have to mop up the entire issuance of public debt for years to come, covering the budget deficit with printed money. Officials admit privately that this is the purpose. Mr Kuroda will not stop when the 2pc inflation target is reached. There will another long phase when the BoJ says it must be sure. “There is room for interpretation,” said one insider.

        Mr Abe has never disguised his aim, telling a Mansion House audience in London that his policies were inspired by Takahashi Korekiyo, who lifted Japan out of deflation in the early 1930s by reducing the central bank to an arm of the Treasury. “His example has emboldened me. It is impossible to get rid of ingrained deflationary psychology unless you clear it out all at once,” he said.

        The US Treasury and the Federal Reserve played the same dirty pool in the late 1940s, whittling away war-time debt by stoking inflation while keeping debt-holders captive by repression. Such a policy amounts to a haircut for creditors, often the elderly. It is harsh. Yet Japan is picking the lesser of poisons. The pre-Abe paralysis was leading ineluctably to bankruptcy.

        I have noted before that AEP is an inflationist, but also a good way to keep track of where current establishment thinking is at in Europe and the USA, and he writes clearly.

      • Tel says:

        Slightly old now, but explains the background and what they were planning:


        A hundred days have passed since the start of Prime Minister Abe Shinzō’s administration, and he seems to have made a good start with his economic policies, dubbed “Abenomics.” At this early stage we have not yet seen major changes in the real economy, but the overvalued yen has fallen sharply, the stock market has surged, and the March report from the Bank of Japan on short-term business sentiment showed improvement among major corporations for the first time in three quarters.

        What accounts for these positive phenomena? I believe the key lies in what we call keiki (景気) in Japanese. This is a compound of two Chinese characters, the first meaning “scenery” or “aspect” and the second meaning “spirit,” “atmosphere,” or “mood.” In modern Japanese the word is used primarily to refer to the state of the economy. I understand that it is difficult to translate into other languages because the second character gives it a psychological element, but it typifies the Japanese people’s view of economic conditions. A major factor behind the good start of Abenomics is the effect that it has had on people’s mood (economic psychology, behavioral economics), especially the proclamation of a 2% inflation target. This has made people reconsider their long-standing deflationary mind-set, that is to say, the assumption that prices will continue their prolonged decline.

        • Major.Freedom says:

          Thanks for the links. Interesting reads.

  10. Transformer says:

    “Now for legal theorists who think that the legal code is an arbitrary thing, which merely rewards whatever interest group wields the most political power, it would be understandable if they rejected the idea that a competitive system of judicial rulings could work”

    I would say I come close to being in this camp – how would you address this point of view ?

    I can see that once you have an agreed set of rules in a territory then free-market competition may optimize the implementation of these rules, but I am struggling to see how the rules themselves could come to be agreed upon without something that looks at least a bit like a state existing in the territory to provide a structure for these rules to be agreed and defined. The reason it would look a bit like a state is that it would define rules that are binding even on those who don’t consent (for example allowing force to be used against those who violate whatever kind of property rights are defined in that territory).

    • guest says:

      You have inadvertently moved the goal post from the obligation to defend the view that a legal code is an arbitrary thing, to the obligation to defend how the right one would be agreed upon.

      If half of the people disagreed upon what the right set of rules should be, that would have no bearing on whether or not the code was arbitrary.

      Some will disagree, but the correct legal system is logically derived from individual rights, since there’s nothing to stop any individual from making the mere claim to be an authority over others.

  11. Andrew_FL says:

    I found this passage:

    “Second and more striking: There are several areas of human intellect where a monopoly agency would clearly be detrimental. For example, consider mathematics. This is clearly a body of objective truth, ascertainable by reason, if ever there were one. So if we want mathematicians around the world to subscribe to “one supreme body of mathematical laws,” do we need a worldwide State to tell everybody what’s mathematical and what isn’t?

    Of course not; such a procedure would actually be one of the few ways to prevent humans from producing a coherent and consistent body of mathematics. And we could make similar remarks about the natural sciences, or spoken languages. There are clearly experts and “authorities” in these fields, but their “definitive” publications merely codify what the broader community knows to be true. The Oxford English Dictionary can’t really change the meaning of English words.”

    Because we do in fact have one area where a world wide quasi-State tells everybody what’s scientific and what isn’t, don’t we? And such a procedure has indeed proven to be one of the few ways to prevent humans from producing a coherent body of…that particular science. We all know what I’m talking about.

  12. Bala says:

    I found something quite objectionable as well in Harry Binswanger’s argument. He says

    ” “Anarcho-capitalists” claim that acts of force can be capitalistic. ”

    As I understand it, the non-contradictory anarcho-capitalist position is that the service sought is not the use of force at all. Rather, it is the defence of person and property from aggression, failure to provide which entails suitable recompense from the person/entity paid for provision of the service. This is by no means “acts of force being capitalistic”. To say otherwise is to assume that the only way to address aggression on person and/or property is the use of force in retaliation. The very fact that there are other ways shows this position up as a straw man.

  13. khodge says:

    On the 1920-21 depression: I never see it noted that communications in the 1920s were not the communications of the 1960s or 80s or 2014s. In Landsburg’s Armchair Economist, he begins by pointing out that changing the number of downs in football from 4 to 3 does not reduce the total number of punts in a football game. The point is that there is a feedback loop and participating parties respond accordingly.

    The value of increased speed of communications is that in the 1920’s it may have taken months, perhaps years, for changes brought about by legislation to be disseminated through the economy and the response to those changes to be reflected through the rest of the economy. With communications now measured in seconds or less, arbitration causes the action and reaction to be completed in minutes, negating any real benefit of the government changing the rules.

    The stimulus in the early 70s worked because the downstream effects were only measured after the fact. After the fact, unions built COLAs into their contracts, thus negating future attempts at manipulating the economy through stimulus packages.

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