TGIF: Destroying Value

In case anyone missed it, here's a link to last week's TGIF: "Destroying Value."

Op-Ed: "Stimulus II Won't Work, Either"

President Obama won’t use the “stimulus” label to describe his nearly half-trillion-dollar jobs bill, but that refusal can’t hide the fact that he has no idea how economies recover from recessions. “Stimulus” is a tainted label because his $800 billion bill in 2009 was a failure. His economic team promised that passing that bill would keep unemployment from exceeding 8 percent. The bill passed, and unemployment climbed to more than 9 percent and has stayed there ever since.

With election day only 14 months off, one can readily see Obama’s desperation for a job program.

Read the full op-ed, "Stimulus II Won't Work, Either," here.

Op-Ed: Politicians in a Panic

You can almost see the panic on their faces. The politicians, central bankers, and court economists seem to be thrashing around like bad swimmers caught in a riptide. Despite all attempts — stimulus spending, increased borrowing, the Fed Reserve’s low-interest-rate policy, presidential jaw-boning — the economy refuses to recover. Unemployment remains over 9 percent, investment is stagnant, and even the previous paltry growth is fading. People increasingly see the government as impotent.

If it weren’t for the innocent victims, this would be satisfyingly entertaining. After all, these are the reputed best and brightest, who assured us they know how to fix and run an economy. Now they are at wits’ end, and they’re running out of time.

Read the full op-ed, "Politicians in a Panic," here.

TGIF: Snow Job Summit

What are the odds that yesterday’s White House jobs summit will lead to the creation of any real jobs? The summit was based on the magic theory of government: Say the right incantations and reality will be reshaped according to one’s desires. There are no economic laws. There is only will. If we all think good thoughts and exude the spirit of cooperation, we’ll end these hard times and get the economy moving again.

This is the sign of a primitive mentality. In reality economic laws exist, reality sets limits, and good feelings can’t create prosperity out of nothing, especially when government stubbornly stands in the way.

The rest of this week's TGIF is here.

Government Spending Is No Cure for Recession

Mario Rizzo debunks the claim that government spending is as good economically as private spending here. Definitely worth reading.

What Is to Be Done?

From FEE on Vimeo. Western New England College, March 2009

The G(rasping)-20

We expected little of sense to come out of the G-20 summit, and it met our expectations with flying colors.

The rest of TGIF is here.

Appearance on Arkansas Public TV

I appeared on AETN's Unconventional Wisdom, hosted by David Sanders, on March 27, 2009. The topic of discussion was the banking crisis.

Obama's Uninformed Optimism

President Obama is optimistic that “We will rebuild, we will recover, and the United States of America will emerge stronger than before.” That and $5 will get you coffee at Starbucks — until inflation kicks in.

In his appearance before Congress, Obama demonstrated he can give a speech. Big deal. We already knew that. Theatrics aside, why does it matter that the president is optimistic? He shows no sign of understanding economics. He’s the one, after all, who proposes to borrow $800 billion in the credit market so he can “inject” it into the economy where he found it. That doesn’t show much understanding. So on what does he base his optimism?

The rest of my latest op-ed, "Obama's Uninformed Optimism," is at The Future of Freedom Foundation website.

All About Greed

It comes down to greed. That’s what the economic turmoil is all about for many people. Too many of us were greedy, and now everyone is paying the price. Luckily this belief is wrong, because if it were right we’d be up the creek.

The rest of this week's TGIF, "All About Greed," is here.

Mr. Obama, What About Tomorrow?

The Obama administration’s $275 billion bailout for mortgage lenders and troubled borrowers once again shows that “tomorrow-be-damned” thinking still rules the White House. President Obama has clearly dumped the Clinton administration’s theme song, “Don’t Stop Thinking about Tomorrow.” (Not that Clinton or his successor took the lyric to heart.)

The rest of this week's op-ed, "Mr. Obama, What about Tomorrow?" is at The Future of Freedom Foundation website.

Less than Nothing

The story is told that Ludwig von Mises was once asked, "Do you mean to say that the government should have done nothing during the Great Depression?" Mises responded, "I mean to say it should have started doing nothing long before that." I hope the story is not apocryphal, because it perfectly sums up the government’s proper role in managing the economy: none.

The rest of this week's TGIF, "Less than Nothing," is here.

Cross-posted at Anything Peaceful.

The Perverse Genius of Politics

Barack Obama held another town meeting today, this one in Fort Myers, Fla. People in the audience stood up and directly told the President of the United States they are hurting because of the recession. Obama listened sympathetically and explained how he will help them. It was all captured on television.

It takes some understanding of economics — which most people lack — to comprehend what’s wrong with that picture. Those people are victims of the state’s misguided interventionist economic policies — after all, the central government has been the steward of the U.S. economy for generations. Yet Obama, the latest chief executive of this economy-wrecking organization, stood before them as their salvation. The news media reinforced that narrative at every step.

This is why it is so difficult for economic sense to make headway.

Bottom Line

[T]here is no way for government macroeconomic policy to correct an incorrect perception of how [savings/consumption] plans have changed. There is no way for government to acquire the knowledge necessary to be able to coordinate individual plans. Such information simply does not exist. If it is going to ever exist it will be generated by the market process as the results of plan changes and the individual responses they provoke unfold. Any attempt by government to manipulate things will almost certainly make them worse because it is based on woefully incomplete information. It is not that the market prevents any disappointment or even crises. The market is not Utopia. The market works through feedbacks from mistakes as well as feedback from successes. it is just that the market is the best mechanism we have for resolving conflicting or miscommunicated plans. Keynes asked the right questions, but he gave the wrong answers and in the process sent economics off on a very costly detour.

–Peter Lewin, “Commentary,” Austrian Economics: Perspectives on the Past and Prospects for the Future (1991, Richard M. Ebeling, ed.)

Cross-posted at Anything Peaceful.

Boon or Doggle?

Even if government spending in theory could “stimulate the economy” in a genuine, sustainable way, it would not follow that politicians and bureaucrats would know how to spend the money intelligently. The pressures to do something now and the perverse incentives facing those in charge of the money guarantee there would be more doggle than boon.

The rest of this week's TGIF, "Boon or Doggle," is at the Foundation for Economic Education website.

Stimulating Consumption Won't Help the Economy

Ask yourself: can you consume your way to prosperity? Of course not. So how can a society do so? Greater consumption is the effect not the cause of economic growth, yet this is so contrary to conventional wisdom that you can read newspapers and watch news programs for months without seeing this truth expressed.

To say the recession was caused by diminished demand is to say that the recession was caused by the recession. The fact is, people are holding on to their cash because the economy is in recession and they are uncertain about the future. As we’ll see, it is exactly under these circumstances that people should be saving.

The rest of this week's op-ed, "Stimulating Consumption Won't Help the Economy," is at The Future of Freedom Foundation website.

Inflation as Income Distribution

The Federal Reserve has been pumping hundreds of billions of newly created dollars into “the economy.” Much of that money has been sent to Wall Street to bailout large, struggling firms. But that’s just the beginning. President-elect Obama says that since he needs to “stimulate the economy” we can look forward to trillion-dollar budget deficits for years to come. Even before the financial turmoil began, the deficit had approached $500 billion. (Not to worry, though–Obama says deficit spending will impose “fiscal discipline” in the future.) Of course, when the federal government spends more than it taxes, it has to get the extra money somewhere. Therein lies the treachery.

The rest of this week's TGIF, "Inflation as Income Distribution," is at the Foundation for Economic Education website.