Jeffrey Tucker points out that the Austrian economists Hayek and von Mises explained long ago in the 1930s why the Keynesian policies of credit expansion being used today to try to bring about recovery would not be effective in restoring prosperity then or now.
Did you ever have the feeling that we’ve been through this before?
Think of it. Those in charge have only recently sworn — yet again! — that if we keep interest rates at zero, keep battling the symptoms of recession and unemployment with spending and jobs programs, clobber the speculators with regulations, and otherwise keep trying to revive moribund industries, all will be well. Just don’t cut government spending or let interest rates rise!
So where have we heard it all before? It was the 1930s, when the battle between F.A. Hayek and J.M. Keynes raged in the English-speaking world, not only in the academic journals but in the newspapers in London and the United States.
Hayek gave a series of lectures based on his previous works in German that tried to explain that the ruling elite and their theoretical apparatus had it all wrong.
In a thousand different ways he said the same thing: “To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about.”
Further, “because we are suffering from a misdirection of production, we want to create further misdirection — a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end.”…
Ludwig von Mises wrote in 1931:
Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later it must become apparent that this economic situation is built on sand.
If anyone had any doubts that Chronic Fatigue Syndrome is essentially just a medical term for a confirmed habit of whining and malingering, this news item from Britain’s Guardian describing activists’ attacks on doctors questioning or investigating CFS demonstrates the existence of the sort of political constituency which genuine illnesses just do not have.
The full extent of the campaign of intimidation, attacks and death threats made against scientists by activists who claim researchers are suppressing the real cause of chronic fatigue syndrome is revealed today by the Observer. According to the police, the militants are now considered to be as dangerous and uncompromising as animal rights extremists.
One researcher told the Observer that a woman protester who had turned up at one of his lectures was found to be carrying a knife. Another scientist had to abandon a collaboration with American doctors after being told she risked being shot, while another was punched in the street. All said they had received death threats and vitriolic abuse.
In addition, activists – who attack scientists who suggest the syndrome has any kind of psychological association – have bombarded researchers with freedom of information requests, made rounds of complaints to university ethical committees about scientists’ behaviour, and sent letters falsely alleging that individual scientists are in the pay of drug and insurance companies.
“I published a study which these extremists did not like and was subjected to a staggering volley of horrible abuse,” said Professor Myra McClure, head of infectious diseases at Imperial College London. “One man wrote he was having pleasure imagining that he was watching me drown. He sent that every day for months.”
Chronic fatigue syndrome – also known as myalgic encephalomyelitis (ME) – is common and debilitating. A recent BMJ (formerly the British Medical Journal) feature suggested that as many as one in 250 people in the UK suffers from it. Patients are sometimes unable to move and become bedridden, occasionally having to be fed through a tube. For more than 20 years, scientists have struggled to find the cause, with some pointing to physiological reasons, in particular viral infections, while others have argued that psychological problems are involved.
It is the latter group that has become the subject of extremists’ attacks. The antagonists hate any suggestion of a psychological component and insist it is due to external causes, in particular viruses. In the case of McClure, her “crime” was to publish a paper indicating that early studies linking the syndrome to the virus XMRV were wrong and the result of laboratory contamination. So furious was the reaction that she had to withdraw from a US collaboration because she was warned she might be shot.
A similar hate campaign was triggered by a study published in the Lancet earlier this year. It suggested that a psychological technique known as cognitive behavioural therapy could help some sufferers. This produced furious attacks on the scientists involved, including Michael Sharpe, professor of psychological medicine at Oxford University. He had already been stalked by one woman who was subsequently found to be carrying a knife at one of his lectures.
“The tragedy is that this tiny group of activists are driving young scientists from working in the field,” said Sharpe. “In the end, these campaigns are only going to harm patients.”
Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.
By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.
Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.
“These are all whopping numbers,†said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.â€
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Doctor Housing Bubble today looks at a home in the Bel-Air section of LA, whose declining price he describes as “chasing the market into the bottom.”
Why is this poor house’s market value tanking so horrifically? Doctor HB notes that the same trillions of federal loans to “a very familiar list of lenders… WaMu, IndyMac, JP Morgan, Wells Fargo, and Bank of America” have allowed a shadow market of 56 homes in the unprocessed foreclosure pipeline to loom over the 23 homes actually offered for sale on the local MLS. Your tax dollars at work.
Last week the California unemployment rate shot back up to 12 percent. Couple this with the underperformance of revenue for the state and we have heavy headwinds ahead. It will be a herculean effort for home prices to remain inflated in bubble markets as the economy and incomes slump. Part of what has held up the housing market in many areas is the building up of shadow inventory to control supply and try to increase home prices. This has been a dramatic failure and has cost the U.S. taxpayer trillions of dollars simply to keep the too big to fail banks afloat with financial swindles. There is no reason for this policy to continue unless we want to have another lost decade for our economy (this seems to be the path we are embarking on). Even prime locations are having a tougher time in this market. Today we will take a look at a home in the Bel-Air neighborhood of Los Angeles that is chasing the market into the bottom. …
Of the 23 homes listed on the MLS for Bel-Air 3 are short sales and one home is listed as a foreclosure. Yet this does not tell us the entire story and this is the continuing saga of problems that we will be facing for years to come.
56 homes are in the shadow inventory for Bel-Air yet only 1 foreclosure has made it to the MLS! What is even more disturbing is that many of these homes in the shadow inventory were purchased right at the peak.
Ah yes, a very familiar list of lenders we see here. WaMu, IndyMac, JP Morgan, Wells Fargo, and Bank of America. Look at when the loan was recorded. Many of these shadow inventory properties were purchased during the mania in 2006 and 2007. This is only a sample of the 56 homes in the foreclosure pipeline. The shadow inventory is a big issue although the media wants to make it seem that it is only occurring in poor neighborhoods. Of course they don’t want to focus on neighborhoods where many of their executives live.
Why is the recession continuing? A large part of the answer is that failed mortgage loans have not been liquidated and resolved, the real estate market has been artificially kept in an unconstructive state of stasis by federal assistance. The large lenders received massive federal loan subsidies, allowing both them and their unfortunate insolvent borrowers to continue to reside in a financially comatose condition essentially on federal life support.
But the housing market and the economy cannot recover until the loans destined to die are really dead, the houses destined to be foreclosed are really foreclosed and resold, until the bad inventory is all sold at distress prices and the whole mess cleared off the national books.
Aaron Miller passes along a joke making the electronic rounds.
President Obama walks into the Bank of America to cash a check. As he approaches the cashier he says “Good morning, Ma’am. Could you please cash this check for me?”
Cashier: “It would be my pleasure sir. Could you please show me your ID?”
Obama: “Truthfully, I did not bring my ID with me as I didn’t think there was any need to. I am President Barack Obama, the president of the United States of America!”
Cashier: “Yes sir, I know who you are. But with all the regulations, monitoring, of the banks because of impostors and forgers, etc, I must insist on seeing ID.”
Obama: “Just ask anyone here at the bank who I am and they will tell you. Everybody knows who I am.”
Cashier: “I am sorry Mr. President, but these are the bank rules and I must follow them.”
Obama: “I am urging you please to cash this check.”
Cashier: “Look Mr. President, this is what we can do: One day Tiger Woods came into the bank without ID. To prove he was Tiger Woods he pulled out his putting iron and made a beautiful shot across the bank into a cup. With that shot we knew him to be Tiger Woods and cashed his check. Another time, Andre Agassi came in without ID. He pulled out his tennis racquet and made a fabulous shot whereas the tennis ball landed in my cup. With that shot we cashed his check. So, Mr. President, what can you do to prove that it is you, and only you, as the President of the United States?”
Obama stood there thinking, and thinking and finally says: “Honestly, there is nothing that comes to my mind. I can’t think of a single thing.”
Cashier: “Will that be large or small bills, Mr. President?”
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John Kass, in the Chicago Tribune, warns that Barack Obama is in imminent danger of reaching the classic watershed moment of failed presidencies.
All the signs suggest that Obama is in immediate danger of a rabbit attack. It would ruin what’s left of his presidency. And it would horrify Democrats by ushering in, say, a President Bachmann.
It might happen while he’s on that ridiculous vacation of his. Obama is chilling at some exclusive multimillion-dollar estate on Martha’s Vineyard, even as thousands more Americans hit the unemployment lines, and as Republicans like Michele Bachmann make wild-eyed, crazed claims about bringing back $2 per gallon gas.
“I think it’s a little too early yet for the president to be attacked by a rabbit,” cautioned a veteran Chicago Democrat wise in the ways of Obama. “But it’s close. Real close.”
Anyone who thinks Obama is safe from a rabbit attack has forgotten what happened to President Jimmy Carter.
John Hinderaker shrewdly diagnoses the source of recent liberal paralysis of will in Washington.
Many liberals believe that government policies have little impact on the economy. A number have expressed that view to me privately. They think that the private sector will produce wealth regardless of what happens in Washington, and the only question is how to split it up. I think that is what President Obama and his advisers believed when he took office. The country was in economic turmoil from which it inevitably would recover, as it always does. When it did, Obama would get the credit.
In the meantime, the administration’s mantra was “never let a crisis go to waste.†Obama saw economic decline as an opportunity to pave the way for socialized medicine, to enact a near-trillion-dollar payoff to public sector unions in the guise of “stimulus,†and to extend the government’s control over various sectors of industry.
I think Obama and his advisers were genuinely surprised, not that their policies didn’t bring about economic recovery–they couldn’t have expected that–but that recovery didn’t happen of its own accord. That is why they are so nonplussed today.
I think John is perfectly correct.
Barack Obama and the democrats in general thought the Panic of 2008 was just a bump in the economic highway, contrived by smiling liberal Fates intending to deliver them into power. A panicked public would accept the leadership of the left during a momentary crisis and find themselves soon after living in a European-style welfare state. The New Deal’s march in the direction of socialism would be completed. President Obama would join the pantheon of progressive builders of grand collective entitlements, going down in history beside Franklin Roosevelt and Lyndon Johnson. The economy would fix itself; it always does. And President Obama would receive the credit for both the recovery and for Obamacare.
But, then, the economy did not heal itself.
There comes a point in Ayn Rand’s Atlas Shrugged, after the announcement of Directive 10-289, when the efforts of capitalist heroes Dagny Taggart and Hank Rearden to keep the railway system operating and steel mills in production begin to fail.
Somebody like James Taggart, one of the leftist supporters of the regime, begs Dagny or Hank to keep the failing system afloat. The hero assures the collectivist that the burden of regulations and redistribution has made it impossible. But we want it, insists the second-hander looting collectivist. It’s your responsibility to make it work for us.
Barack Obama is no more able to understand than James Taggart the incompatibility of limitless liberal demands and a viable economy.
The Guardian (with only mild jocundity) reports the latest warning of untoward consequences associated with Anthropogenic Global Warming from NASA scientists. Warmlist is going to love this one.
[R]educing our emissions might just save humanity from a pre-emptive alien attack, scientists claim.
Watching from afar, extraterrestrial beings might view changes in Earth’s atmosphere as symptomatic of a civilisation growing out of control – and take drastic action to keep us from becoming a more serious threat, the researchers explain.
This highly speculative scenario is one of several described by a Nasa-affiliated scientist and colleagues at Pennsylvania State University that, while considered unlikely, they say could play out were humans and alien life to make contact at some point in the future.
ETI [Extraterrestrial Intelligence] could seek our harm if they believe that we are a threat to other civilizations.
The thought of humanity being a threat to other civilizations may seem implausible given the likelihood of our technological inferiority relative to other civilizations. However, this inferiority may be a temporary phenomenon. Perhaps ETI observe our rapid and destructive
expansion on Earth and become concerned of our civilizational trajectory. … [P]erhaps ETI believe that rapid expansion is threatening on a galactic scale. Rapidly (maximally) expansive civilizations may have a tendency to destroy other civilizations in the process, just as humanity has already destroyed many species on Earth. ETI that place intrinsic value on civilizations may ideally wish that our civilization changes its ways, so we can survive along with all the other civilizations. But if ETI doubt that our course can be changed, then they may seek to preemptively destroy our civilization in order to protect other civilizations from us. A preemptive strike would be particularly likely in the early phases of our expansion because a civilization may become increasingly difficult to destroy as it continues to expand. Humanity may just now be entering the period in which its rapid civilizational expansion could be detected by an ETI because our expansion is changing the composition of Earth’s atmosphere (e.g. via greenhouse gas emissions), which therefore changes the spectral signature of Earth. While it is difficult to estimate the likelihood of this scenario, it should at a minimum give us pause as we evaluate our expansive tendencies.
It is worth noting that there is some precedent for harmful universalism within humanity. This precedent is most apparent within universalist ethics that place intrinsic value on ecosystems. Human civilization affects ecosystems so strongly that some ecologists now often refer to this epoch of Earth’s history as the anthropocene. If one’s goal is to maximize ecosystem flourishing, then perhaps it would be better if humanity did not exist, or at least if it existed in significantly reduced form. Indeed, there are some humans who have advanced precisely this argument. If it is possible for at least some humans to advocate harm to their owncivilization by drawing upon universalist ethical principles, then it is at a minimum plausible that ETI could advocate harm to humanity following similar principles.
Eric Hansen, in Outside magazine, profiles the fungus growing out of the head of deceased caterpillars, used in Chinese medicine and prized in Asia as an aphrodisiac, which has become in recent years the primary cash-producing export of the Tibetan plateau.
Yarchagumba looks like a shriveled brown chile pepper and is coveted as an aphrodisiac and medicinal cure-all. Literally translated as “summer grass, winter worm,†it forms when a parasitic fungus invades the burrowing larva of a ghost moth, transforms the Âvital Âorgans into a cobweb-like mess, and then sends up a wispy sprout through the dead Âinsect’s head. The grisly process plays out across the Himalayas and the ÂTibetan Plateau but only at the beginning of the monsoon and only on reclining slopes of grasses, shrubs, and milk vetch at the dizzying altitude of 10,000 to 16,500 feet. Thanks to a spike in global demand, mostly by Asian men looking to enhance their virility, a pound of yarchaÂgumba now sells for as much as $50,000, more than the price of gold. ÂProfits from the fungus have transformed entire Âvillages, vexed government regulators, and even helped bankroll a communist insurgency. Nepal’s former Maoist rebels admit that taxing (read: Âextorting) yarchagumba pickers was their main source of income in their decade-long war against the country’s monarchy. …
While Himalayan herders have snacked on the mummified larvae for centuries, the Âmodern yarchagumba craze can be traced back to 1993, when three peasant girls from northeast China stunned spectators at the World Championships in Athletics, in Stuttgart, Germany, shattering numerous long-distance-running records. Asked how he could explain what Sports Illustrated would later call “the most astonishing breakthrough in the history of track and field,†the girls’ coach, Ma Junren, attributed it to a tonic of turtle blood and yarchagumba. Even though many of his athletes would later fail some of the world’s first tests for performance-Âenhancing drugs like EPO, the astounding feats put yarchagumba on the world map.
In the beginning, the major consumers were Japanese, Hong Kongers, and Singaporeans, who would pay $100 at high-end restaurants for a vegetable soup with three yarchaÂÂgumba floating turd-like on top. Now China is the largest market. Believing that the effects are cumulative, consumers ingest it daily. Nouveau riche Chinese have their cooks roast the mummified caterpillars with duck, or infuse them with rice wine, or simply pulverize them and sprinkle the dust atop breakfast cereal. At high-class dinner parties in Beijing, yarchagumba has reportedly replaced champagne as the preferred gift. In Tibet, the flavorless delicacy is the bribe of choice. As China’s GDP has risen, so has the price of yarchaÂgumba, including a ninefold increase in the past decade alone. As with rhino horn or bear gall bladder, yarchaÂgumba’s outrageous price tag carries its own appeal. “For most Chinese consumers, it’s all about status and impressing people,†says ÂSeattle mycologist Daniel Winkler, the world’s foremost yarchagumba expert.
Now Westerners are growing curious. A 2003 article in Nutritional Wellness, a quarterly for licensed chiropractors, suggests that the Cordyceps sinensis Âfungus, which some believe is the key component in yarchaÂgumba, contains a host of compounds that “stimulate the human immune system,†among other Âeffects. Capitalizing on this belief is a Cordyceps-infused energy drink called ÂSteven ÂSeagal’s Lightning Bolt and a company called Aloha Medicinals, in Carson City, ÂNevada, which sells CordyÂceps grown in near-freezing, oxygen-Âdepleted greenhouses intended to replicate growing conditions in the mountains. (One bottle of 90 capsules: $19.95.)
In the actual Himalayas, all that demand has spurred a gold rush. Villagers in Tibet, ÂIndia, Bhutan, and Nepal can now afford to send their children to proper schools, pay down debts, and even start businesses with the Âso-called spore money. In Tibet, where the vast majority of yarchagumba is Âharvested, yartsa gunbu, as it’s called there, now Âaccounts for 40 percent of annual cash income in rural areas, or $225 milÂlion. The Nepali harvest only a fraction as much, mostly in western districts, but the effects are just as dramatic: during the six-week harvesting season, a Nepali can earn upwards of $1,500, more than his parents could have expected to make in a lifetime.
While the yarchagumba trade is now legal and only lightly taxed in Nepal, early regulations discouraged compliance. In 2001, the government implemented a per-piece levy that was higher than the actual market price. A few months later, it required that yarchaÂgumba be steamed before export, which Âeffectively turned valuable dry yarchaÂgumba into worthless mush. Now villagers might pay local taxes, but few bother with the second tariff imposed by the federal government. According to Ramesh Kharel, a former chief of Kathmandu’s metropolitan police, only 20 percent of all Nepalese yarchaÂgumba is sold legally.
Smuggling routes are well established. Tibetan brokers hike over the border, buy directly from villagers, and return with mule trains of semilegal yarchagumba. After dodging the few manned border checkpoints, they sell their crops to brokers in Lhasa, who in turn sell to larger middlemen in the bustling markets of the central Chinese city of Xining, who sell to retailers in Beijing. The biggest black-market deals go down in Kathmandu, the main smuggling hub for Southeast Asia, where powerful dealers consolidate enormous quantities, forge permits and tax Âreceipts, and sell directly to Chinese dealers. “We have very few entry points into Kathmandu, and we manually inspect trucks and shipments,†says Kharel, “but we don’t have sophisticated equipment such as you have in the U.S.â€
If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas.
What do you do when you’re supporting a duck as lame as Barack Obama, a failed president with the ugliest record of economic failure and executive maladministration since American voters gave Jimmy Carter the heave-ho back in 1980, and along comes a truly frightening challenger, a good-looking, outspoken Republican governor with a record of creating roughly 40% of all jobs created in the country recently in his one state?
If you are a sanctimonious and mendacious leftist like Andrew Sullivan, you squeal in outrage, lift your skirts in the manner of a 1950s housewife frightened by a mouse, jump to the top of your highest portable moral pedestal, and make a Hail Mary! try at persuading readers that flavorful regional rhetoric is really the same thing as a promise of actual violence, and a metaphorical reference to “ugly treatment” really means lynching.
No one can be altogether surprised when the school of political commentary that proceeds toward the keyboard after rising from its knees on the mens’ room floor stoops to combining grand moral dudgeon with opportunistic melodrama, but when Republicans like Karl Rove and Tony Fratto, motivated by spite stemming from past feuds in Texas politics, are willing to join the left’s attack Chihuahuas in biting at the ankles of the probable next Republican nominee, that is surprising and causes some of us to begin reevaluating our positive opinion of Mr. Rove in particular.
Joining the phony baloney left-wing chorus of “Oh, my gracious! What he said.” is just plain despicable, and it is a grave and serious disservice to the country and to the political process to assist in the emasculation of political speech demanded by the left’s PC inquisitors.
