Potpourri
==> Carlos and I discuss the mechanics of whole life insurance policy loans, and in particular some of the intricacies in how Nelson Nash describes being an “honest banker” with your IBC system.
==> In 1958 Mises gave lectures in Argentina. This one concerns migration barriers and the flow of capital. Very relevant.
==> I can’t even remember what led me to this, but check out my tips for activism in the age of the Internet, a piece that I wrote for LewRockwell.com back in the day. This was a stage in my life where I still tried to be eloquent, as well as educational.
==> Joe Salerno corrects today’s Keynesians who try to use Wicksell for their nefarious projects. For shame!
==> Bernanke is against Brexit (duh), but he adopts an interesting way of doing the costs and benefits: He says UK will be poorer because of trade barriers, and then says they won’t gain from reduced regulations since EU will insist on retaining the regs in order to get access to markets. Well, OK, it *could* turn out like that, but he gives us no argument why it should be so. Especially when you factor in that trade barriers make EU countries poorer, it’s not obvious why UK would lose that bargain.
(Make sure you get what I’m saying: Bernanke is saying Brexit is going to hurt, since EU will retaliate with high trade barriers. But then he throws out the one possible economic benefit–namely, freedom to ignore EU regulations on business–by saying UK will have no choice but to accept those regulations, in order to maintain access to EU markets. See the balancing act for that stance?)
==> Speaking of Brexit, here’s me speaking of Brexit (radio interview last Friday).
==> Von Pepe sent this ZeroHedge article which charts the S&P index against the Fed’s balance sheet. Hmm that sounds vaguely familiar…
==> Sumner responds to my review of his book. If you first read my review, then Scott’s reply, is there anything left for me to discuss? I’m happy to continue the discussion but only if you think it’s worthwhile.
==> I know some of you like it when I brawl with random people in the comments at other blogs, kinda like Jordan walking by an outdoor basketball court and being challenged by some punk. Well, here ya go. And if you want an example of what I meant when I said Scott has been nodding and winking thatTrump was Hitler, here’s an example. (However Scott tells me that was a joke, and I believe him. So Scott’s nuanced position is that Trump has traits like the German dictator, but is not by himself that kind of a threat because–Scott says–Trump is not competent enough to do that much damage.)
Sumner conceded the Gold Standard didn’t cause the Depression. Game, set, match.
Is Bernanke saying that
1. UK will now have to pay tariffs to trade with EU
2. UK will have still to comply with costly regulations to trade with EU anyway ?
If so: why is that a balancing act , rather than a net loss not being cancelled out with any gain ?
Its quite within the realms of possibility that EUrocrats will enforce such an scenario even though it makes EU countries worse off too.
Transformer-He’s saying they won’t have free trade with the EU, but the free trade they won’t be having will be regulated anyway. Heads I win, tails you lose.
I think he may rather be saying that they won’t have free trade with the EU anymore, and that the reduced trade that does take place will still have to abide by the EU regulations that Brexit supporters were hoping to bypass.
“(Make sure you get what I’m saying: Bernanke is saying Brexit is going to hurt, since EU will retaliate with high trade barriers. But then he throws out the one possible economic benefit–namely, freedom to ignore EU regulations on business–by saying UK will have no choice but to accept those regulations, in order to maintain access to EU markets. See the balancing act for that stance?)”
Sounds more like “complete nonsense” than a “balancing act” to me.
The Salerno article is very good. I assume Bob would disagree with this statement though:
‘The natural rate is a real and observable market phenomenon that is ultimately determined by the consumption/saving preferences of households and effected by entrepreneurial decisions about the allocation of resources among consumer goods’ and capital goods’ industries based on anticipations of these preferences’
There’s only one word objectionable in that entire part so which part were you thinking it was?
I think Bob agrees with Straffa that the concept of a single natural rate is incoherent.
You guessed poorly.
The existence of multiple interest rates doesn’t nullify the value in abstracting from them when using the natural rate concept.
(The objectionable word was “observable”)
To quote Bob’s thesis
“One cannot explain the trade cycle as a deviation of the money rate of interest from ‘the’ natural rate of interest if the rate calculated in terms of steel is different from the natural rate calculated in terms of copper.”.
How do you reconcile that with the statement “The natural rate is a real and observable market phenomenon”?
It’s very easy, Transformer, there’s this wonderful little letter that comes right after ‘r’ and makes things plural.
I’m surprised that Hayek and Straffa bothered having their debate on the natural rate. They should just have decided that as the difference between ‘natural rate’ and ‘natural rates’ was only 1 letter it wasn’t worth arguing about 🙂
But did Sraffa think in Italian, and Hayek in German?
That assumes Sraffa was arguing in good faith.
Natürliche Zinssatz v tasso naturale di interesse
Hardly surprising they fell out.then.
“Especially when you factor in that trade barriers make EU countries poorer, it’s not obvious why UK would lose that bargain.”
Agree with your analysis. It depends on the baseline, which would be a counterfactual.
“Sumner responds to my review of his book. If you first read my review, then Scott’s reply, is there anything left for me to discuss? I’m happy to continue the discussion but only if you think it’s worthwhile.”
I have a couple of points that I propose you could continue to emphasize and explicate. Sumner wrote:
The argument that the length of the slump 1929-1933 proves that the monetary shock was “worse” begs the question. The textbook Austrian position is that the slump lasted longer post 1929 in part because the government did not allow a “steep” decline, unlike in 1921z and in part because the inflation prior to 1929 was just so much more pronounced as compared to the run up to 1921.
Sumner interprets the length of the slump as evidence of failure of the Fed to inflate. Austrians interpret it as evidence of the government in general to allow free market pricing, both prior and after the “crisis” moments. Sumner should at some point recognize the substantial inflation of the money supply during the 1920s, regardless of whether or not the Fed was consciously measuring that metric at the time.
Second point: Sumner claimed
“without ANY government interference, wages would be sticky in the short run.”
This is an extremely important belief that must by history be a completely theoretical proposition. Sumner is saying that even if there was a pure anarcho-capitalist society starting 1921, he believes that the praxeological fact of the temporal nature of the process of price discovery and adjustment (obviously not his terms, but you get it), somehow STILL serves as a truth that recessions and crises can only be the failure of the government to force inflation. In other words, he seems to believe that because prices and wage rates do not adjust instantly, this constitutes a failure of the free market, and so government is almost a cosmic necessity and that the goal is to prevent ANY periods of downward price discovery and adjustment. Prices must adjust in a world of inflation, period. But do I really have to prove to Sumner that I will INSTANTLY reduce my wage ask price before he advocates for violence against me to coerce me into the centralized dollar counterfeiting operation? I can try to earn only gold, but the IRS will still tax me in dollars, or else it is to jail I go. Where is there any opportunity to debate this point when I’m debating someone who wants guns rather than reason?
Both Sumner and the Keynesians insinuate that the market fails and requires their violence-based “cures”. But neither can point to that magical episode in history where the market failed on its own. In fact, if you push them on the topic, you can generally induce them to pitch a fit. “Our Own” Daniel Kuehn has demonstrated that the 1920 depression was precipitated by government war spending and Fed shenanigans. The problem was not caused by any failure of “the free market”. However, the market was able to quickly fix the very serious price distortions.
The austerity depression of 1920–21 During WorldWar I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war(Strong, 1930) [emphasis added}
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After the war, such policy was “sharply curtailed” as was government spending leading to the predictable bust:
However, after the war ended the deficit spending of the Wilson administration and the expansionary policy of the Federal Reserve were sharply curtailed to bring a halt to the inflation. By November 1919 the Wilson administration balanced the federal budget, slashing monthly expenditures by almost 75% in a matter of months.4 The New York Federal Reserve Bank raised the discount rate by 244 basis points over the course of eight months, with other Reserve System banks following suit. Shortly after these austerity measures were taken, the 1920–21 depression was under way. Postwar industrial production in the USA peaked in January 1920 as the economy moved into a major depression, with production levels dropping by 32.5% by March 1921.5 This loss in output is second only to the Great Depression in American economic history (Romer, 1999), although its duration was considerably shorter. Declines in output were matched by precipitous drops in employment and the price level. The proximate cause of the 1920–21 depression was a deliberate fiscal and monetary retrenchment following World War I.
http://bobroddis.blogspot.com/2012/08/daniel-kuehn-provides-factual-basis-for.html
Unless the market fails, there is no need for government intervention to cure a problem that does not exist. There is no factual or theoretical basis for either “market monetarism” or Keynesianism.
Despite Tom Woods and the Woodrow Wilson “Stroke of Luck”, Krugman vouches for the above analysis of “Our Own” Daniel Kuehn:
Yesterday I mentioned that they’re still flogging the old line that Warren Harding proved that austerity works. I linked to my old demonstration that the 1921 economy was nowhere near the liquidity trap, and that there was substantial monetary easing, making comparisons to the current situation nonsense.
Daniel Kuehn has more. It turns out that the Austrians/Austerians have their timing all wrong:
http://krugman.blogs.nytimes.com/2012/01/23/more-than-you-want-to-know-about-warren-harding/?_r=0
At least a part of what Bernanke says makes sense. Switzerland managed to negociate a bilateral trade deal with the EU, but had to accept EU regulations to get access to its market. And the UK will indeed get hurt if it fails to negociate such a deal. Bernanke simply avoids mentioning the benefits, but he isn’t inaccurate in his analysis of the risks.