Saturday, October 9, 2010

Washington's Big Lie

I'm at the Mises Institute in Auburn, Alabama.

Lew Rockwell was kind enough to invite me to the Mises Institute Sponsors Summit: The Economic Recovery: Washington's Big Lie.

Although I have been following the Mises Institute since its inception when Lew ran the operation, literally, from his kitchen table. This is my first visit to the Institute here in Alabama. It is truly magnificent to observe the success the Institute has had. The facilities in Auburn are first rate and inspiring. Every turn in the facility is special and tells a story. There's either a plaque recognizing a donor who was responsible for making a given room possible, or recognition of some particular written work of such great economists as Ludwig von Mises, Murray Rothbard or Henry Hazlitt.

Yesterday's speeches at the Summit are already on line here.

Doug French, a former banker, went through an analysis of why there are not more bank closures by the FDIC. He explains the absurdity of the FDIC system and his final conclusion is that the most important reason that the FDIC is not closing more banks is that the FDIC has run out of money to close them.

Mark Thornton did a complete takedown of Ben Bernanke. Thornton was thorough going through the elitist education that Bernanke has, his career and the theories that Bernanke holds that account for the steps he has taken as Fed chairman. Best of all, Thornton has dug up all the old Bernanke quotes where he made statements that showed he did not understand the housing bubble and the coming financial crisis that was right in front of him.

Bob Murphy then spoke on the current status of banks and made the very important point that the percentage of assets they are holding in terms of Treasury securities is skyrocketing. This explains why fewer business loans are being made, as the banks through a combination of wanting to avoid risks, and regulations nudging them toward government securities purchases, end up holding the government securities as opposed to making business loans.

Jeffrey Tucker, with whom I have had some disagreement over IP, discussed the evolution of ideas and in particular how with the development of the internet has helped the Mises Institute grow. In a particularly important part of his speech, Tucker explained why the Mises Institute puts up on the internet so many old and relatively unknown texts. I completely concur that these texts are sure to contain some important insights that may have generally been forgotten or not recognized at the time the books were published.

John Denson spoke on the Fed, gold and troubled times and how why the Fed can never match the stability that gold can bring.

Gary North closed out yesterday's session the way only North can do. He told us that Keynesianism is unfortunately stronger than ever and that the Keynesian message since 1936 can be summarized in four words: Federal deficits overcome recessions.

He charged that there has been a total capitulation to Keynesianism by academia, the financial world and the political world. He went on to explain that Bernanke's massive money printing (doubling of the monetary base in one month) has no theory to justify it and that Keynesians have taken "credit" for it, although it is not technically Keynesian.

North then warned that the unprecedented monetary manipulations have put the economy in grave danger. He did see some hope in that the population while not understanding the deep theoretical underpinnings knows something is wrong. He concluded that we are economically on the Titanic and those who understand Austrian economics have all the lifeboats.

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