moralanarchism:

the-altar:

Free-market economists have triumphantly cited the broken-window fallacy whenever someone opines that a destructive act, whether a natural disaster or man-made catastrophe, is paradoxically “good for the economy.” The reference is to a classic lesson given by the economist Frédéric Bastiat in 1850.

Especially after Paul Krugman went on CNN and discussed the virtues of faking an alien invasion, libertarians were having a field day with the “broken-window” charge. The so-called progressive Left have been pushing back, claiming that Krugman’s critics don’t really understand what Bastiat was saying.

In the present article, we’ll review Bastiat’s original lesson and apply it to modern-day disputes over the possible benefits of destructive events.

Always reblog

I think I’m going to dub this ThinkRegress week and just blog about how asinine ThinkProgress is. 

moralanarchism:

rknjl:

moralanarchism:

rknjl:

moralanarchism:

Is he really this dumb?  Or is he just a paid agent of the state trying to propagandise the general population?  I’m starting to think the latter. 

This needs to be filed away to throw in Paul Krugman’s face. He writes:

It’s very hard to come up with any reason why either the US or the UK might default, since they can simply print money if they need cash. And given the absence of real default risk, long-term interest rates should be more or less equal to an average of expected future short-term rates (not exactly, because of maturity risk, but that’s a fairly minor detail). 

So if you expect the US and UK economies to be depressed for a long time, with the central bank keeping rates low, long rates will be low too — end of story. 

But won’t that money printing cause inflation? Not as long as the economy remains depressed. Budget deficits could lead people to expect higher inflation down the road, once the slump finally ends — but that would be a good thing for the economy in the short run, discouraging people from sitting on cash and weakening the exchange rate, thereby making exports more competitive.

Krugman is correct that the US and UK can print up money to buy government debt, but after that he is clueless. He has no idea where in the business cycle we are and has no idea of the developing price inflation.

Bernanke’s aggressive money printing is creating a new manipulated boom, so the economy won’t be “depressed for a long time”—-so there is no reason Krugman should be discussing such at the present time. But more important, it appears that the demand to hold cash is shrinking which will put upward pressure on prices along with upward pressure from the new money Bernanke is adding to the system. On top of this, from the supply side, meat will be less plentiful next year because of this year’s drought which caused farmers to send cattle to market early. Bottom line: We have the potential for a perfect storm of events that could send prices soaring in 2013. The last thing that is required at this time is further encouragement of Bernanke money printing from an NYT economist.

What do libertarians do when their arguments don’t hold up on account of the lack of inflation?  Insist that there is inflation anyway.

Inflation is the increase of the money supply.  Which, thanks to Bernanke and the Federal Reserve, inflation has gone through the rough.  Which people, libertarians included, confuse with price inflation, which is the rising costs of goods.  Increased production can make prices of goods stay steady or even decline during periods of inflation.

When you have a prolonged recession/depression/economic slow down combined with high inflation it sets the table for hyperinflation.  The United States doesn’t really produce anything anymore.  We are dependent on importing goods from mostly 3rd world nations who produce them with cheap and sometimes child labor. 

If Bernanke continues to print like it is going out of style the value of the dollar will continue to drop.  Just like if iPads were just lying around and you had to kick through a pile of them to get to your car you wouldn’t pay 500 bucks for one.  If money “grew on trees” it would take a lot more of said money to purchase a good since it would be more abundant.  That along with the continued depression is a recipe for disaster.  As production becomes less and less PRICE inflation will start to be WAY more noticeable.  More so than it is now.  If we get into a period of hyperinflation all Hell is going to break lose. 

So please tell me how the argument for inflation doesn’t hold up? 

That’s very wrong actually.  You should probably read an economics textbook sometime.  Quantity theory of money - look it up.  You are actively confusing monetary increase and price inflation (which is the only kind of inflation because that’s what inflation means) in order to make your uninformed point.  You seem to have a loose grasp on the concept of the business cycle but insist that rather than fix the problem of the current cycle (which will likely be overcompensated for per most models of monetary and fiscal lag effects), we should instead allow it to continue unabated as we prepare for a future whose existence we have yet create.  That we should allow high unemployment and depressed consumption to continue by cutting back the services (because hey, deficit spending => debt => money creation) offered to the unemployed in order to consume FURTHER depressing the economy and FURTHER decreasing the number of necessary workers in production.

So yeah…read a book.

We are in the problem we are in now because the government intervened in the market.  We aren’t in the problem because we left the market alone.  When the Fed creates artificial credit through the printing press, which in turns lowers interest rates, it gives signals to businesses that it is time to invest.  But because the credit is artificial it creates malnvestments.  Once those malinvestments (bubbles) pop the economy goes into a down turn.  Because all the malinvestments now have to be liquidated.  That’s how the business cycle works. 

What Bernanke is trying to do is to create another housing bubble.  Problem with that is we haven’t come out of the last recession.  We are still in it.  So when another bubble pops before the last one is cured it isn’t going to be pretty. 

The recession is the cure.  The longer we wait the worse off it is going to be. 

Sure you might solve drug addicts pain by giving him more drugs but in the end it will just be worse when he finally tries to become sober. 

I’m going to interject myself here. rknjl has a point, that money supply will eventually (key word here) determine the price of goods. Quantity theory of money says that prices are determined by money supply, but this assumes that the change of price levels is instantaneous, it is not. Prices lag behind monetary inflation. 

This is where the Fed and its Private Bank constituents and the few limited corporations and individuals that have access to the new, cheap liquidity get to profit. They receive the money and put it to use before prices react to the new supply of money. Essentially they get cheap money to use and then prices react and they get to inflate prices and the last step is where people demand for wages to change to meet the new price levels of goods. In the mean time, profits are had. 

The Quantity theory of money works, in the long run, I think both Austrians and Keynesian and others believe this, the dispute is over short-term fluctuations caused by an increased money supply. 

I guess it all comes down to whether or not you believe prices are sticky.  

Oh, by the way, trying to pass off as matter-of-fact an idea that’s no more than a theory (it says it right in the name!!!) is a bit naive. Quantity Theory Of Money makes sense in the long run, but not in the short run. This is why not everyone agrees that it’s true and why it’s still a theory.