Bob Murphy Destroys Krugman (and Keynes)

according to Krugman, the economy is stuck in a rut because (a) the federal government has been unwilling to run large enough budget deficits, while (b) the Federal Reserve has been unwilling to create enough new money...

Look again at the two charts above. Anyone with common sense will admit that the last two years have seen unprecedented budget deficits and monetary expansion. Krugman is correct; that hasn't been working at all. It's time to let the free market end this agony and bring us genuine recovery.

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The Meaning of Gold in the News

Bob Murphy writes:

Most people assume that since money is a very useful institution, and since it obviously is not "natural" but was developed by humans, therefore some wise king or group of experts must have deliberately invented money. But this is a classic fallacy that Friedrich Hayek spent much of his career attacking. There are many aspects of society -- including language and the market economy itself -- that were not consciously planned by a group of experts. Drawing on the Scottish thinker Adam Ferguson, Hayek said they are the products of human action but not of human design...

Nobody set out to consciously create a medium of exchange, yet that is what self-interested individuals ended up producing...

Try as they might, central bankers and politicians can't repeal the laws of economics. They can use various means to foist unbacked paper currencies on their subjects, but printing up more bills will still lead to rising prices.

The Fed's "bold" moves may have temporarily averted a crash in the US financial markets, and the European Central Bank's interventions may have postponed a string of defaults by indebted governments.

But more and more investors -- including the central bankers themselves -- know that these stopgap measures merely pushed back the day of reckoning. As the crisis looms, people are rushing back to gold.

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Social Security is Broke

The time of reckoning is already upon us: Social Security is right now in deficit, sucking funds out of the general pool. Americans should brace for further tax hikes — in the name of "saving Social Security" — and anyone under 40 should have no illusions about retirement benefits.

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Mises Institute Conference: Economics for High School Students

Tom Woods on "Applying Economics to American History"




Robert Murphy on "The Core of What Economics Teaches"




Doug French on "Money, Banking and the Current Mess"




Floy Lilley on "The Economics of Recycling"




Jeffrey Tucker on "Technology and Social Change"

Robert Murphy on the Bailout

Robert Murphy: The Great Bank Robbery of 2008

The Paulson Plan is a heist. It is a grand scheme in which the public will end up owing hundreds of billions of dollars to holders of new debt claims issued by the US Treasury. The plan won't "prop up" asset values and it won't provide any real stimulus to the economy.

Despite the dire warnings — coming from the same folks who brought you the Iraq invasion to remove WMD — there is no threat of a financial meltdown. If Goldman Sachs failed, the sun would still rise the next morning.

Far from providing stability and confidence, the Fed, Treasury, and SEC's recent moves have ensured that US capital markets will now function with the same efficiency as public education in this country. The Paulson Plan is one more step in the socialization of America, but it is also a great bank robbery.

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Robert Murphy on Corporate Welfare

Although they are just playing the hand that Alan Greenspan dealt them, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson have been working overtime to discredit the capitalist economy. The $700 billion bailout of Wall Street, as well as other measures such as a ban on short-selling financial stocks, are a repudiation of the free market principles which the Bush Administration claims to champion. Besides forcing taxpayers to fund a massive dose of corporate welfare, the latest measures will make the financial crisis worse...

More generally, the government’s bailout will perpetuate the very incentives that caused the problem in the first place. A free market system is based on profit and loss. If corporate executives know that the government is always ready to step in and prevent an absolute meltdown, then those executives will take on too much risk. If the aggressive bets pay off, the private companies keep the profits. And if the aggressive bets blow up in their faces, then no worries—the taxpayers will eat the loss...

The free market is a superior economic system to central planning. This superiority demonstrates itself during normal times but especially during an economic crisis, when resources must be rearranged before regular growth can resume. By embracing massive corporate handouts and other socialist measures, the Bush Administration discredits capitalism and delays economic recovery.

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Cap and Trade Pollution Controls

As the U.S. Senate debates climate change legislation this week, many have proclaimed the virtue of its “cap and trade” system as a “market solution” to reducing carbon emissions. Nothing could be further from the truth.

Unlike a direct tax, cap and trade is a European-style scheme that masks its negative consequences on the economy behind the rhetorical benefits of new government programs designed to help us. In truth, neither is good for consumers or the economy, but a closer look reveals why so many politicians find comfort in cap and trade.

The economic argument for penalizing carbon emissions is straightforward. If emissions from human activities are contributing to dangerous temperature increases as some scientists claim, then textbook theory says that the government should take steps to increase the private costs to those emitting carbon. Markets are efficient only when firms take all costs of their behavior into account…

Cap and trade is not a market-based solution. It relies on a political scheme to increase costs, and can therefore be justly viewed as a tax, stealthy or otherwise, on energy - the lifeblood of our economy. So here’s the real difference: cap and trade masks the causes of higher consumer prices much better than a straightforward tax. And that is precisely why so many politicians endorse it.

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