Friday, June 3, 2011

From the same DeLong blog post, he writes:

Friedrich Hayek and Andrew Mellon claimed--and Mellon dragged Herbert Hoover along into policies of austerity, of tax increases and spending cuts during the Great Depression--that as a result of lax monetary policy in the 1920s the economy in 1930s had too much plant and equipment and too many workers employed making capital goods, and had to suffer from a "prolonged liquidation" in order to productively redeploy resources into the consumer goods industries where they really should be.

In truth, Hoover cut taxes at first and vastly increased spending.

1930 $3.3 billion

1931 $3.6 billion

1932 $4.7 billion

1933 $4.6 billion

1934 $6.5 billion [FDR]

In 1931, the discount rate at the New York Fed was 1.5%. There was no "austerity" or policy of "liquidation", much less "prolonged liquidation". The entire establishment/liberal/Keynesian narrative has been and continues to be a complete hoax, like Keynesianism itself.

Further, there was no insistence that a liquidation must be a "prolonged liquidation".  The Great Depression was prolonged by interventionist policies, especially Hoover's insistence that prices and wages be maintained at high, unsustainable levels. Bob Murphy explains here.

The entirety of the inventionist economic program from which we suffer today is based upon falsehood and distortions of reality.

Thursday, June 2, 2011

Republicans hate the troops

What else can you say about people who send our soldiers around the world to spread Clintonista policies so they can get their legs and genitals blown off? 

Doctors and nurses treating soldiers injured in Afghanistan have begun speaking of a new "signature wound" - two legs blown off at the knee or higher, accompanied by damage to the genitals and pelvic injuries requiring at least a temporary colostomy.

DeLong misrepresents Austrian theory again

Austrian School theory must be irrefutable because no Austrian critique can ever manage to even state its basic assumptions.  DeLong manages yet another mangling of Austrian theory.  He writes:

"When you ask believers in "recalculation" what pattern of production and trade proved to be unsustainable in 2007, they answer: "building so many houses." When you ask believers why the market economy has been unable to sort out this problem in three years, they answer with nothing--silence. When you say that OK, there were $300 billion of excess houses at the start of 2007 but now construction has been so depressed for so long that there are $1 trillion fewer of houses than trend and why isn't the 2007 pattern of production and trade sustainable again, they answer once again with nothing--silence. That annoys me."

Please.  How can recalculation possibly take place without a market-based interest rate, the most important price of them all?  DeLong's beloved fiat-based super low rates will continue to impede economic calculation and thus "recalculation".  There is no silence on this issue.  Low rates have been catastrophic and will continue to be.  As Hayek said in a 1975 speech:

“The primary cause of the appearance of extensive unemployment, however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please: that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which we cannot know beforehand because the only way to discover it is to give the market free play; by definition, therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically measured."

We cannot and will not know the equilibrium interest rate because it will not be allowed to come into existence.  No one can conceivably know what houses are actually worth because the possibility of any informed long-term economic calculation has been completely distorted by low interest rates and regime uncertainty.  Keynesian policies have us by the throat.

(Jonathan Finegold Catalan gives a suburb Austrian view of why government spending further impoverishes us here.)

There is no silence. There is your answer, DeLong. Again, our problems are caused by the Keynesian policies which are presented as the cure. We're doomed.