Tom Woods recently responded to a post by Business Insider's Joe Weisenthal which attacked Ron Paul's budget plan. Weisenthal is back with a rebuttal to Woods' argument, sort of.
Weisenthal's response consists of pretty much of telling us what is wrong with the economy and how to fix it. The problem with this is that based on the numbers Weisenthal watches the economy is in the early stages of recovery, in a month or two Weisenthal may even realize this himself.
As Jamie Dimon might say, "Hey you fools, the economy is improving." So the first problem Weisenthal faces is that he has misdiagnosed the current state of the economy. I hasten to add that the recovery will be a Federal Reserve manipulated recovery, that will only make matters worse down the road. It will cause such an increase in price-inflation that Weisenthal will have to figure a way to coax another pay raise out of Henry Blodget (Not an easy task, I hear.)
Of course, once you have misdiagnosed a situation, it's all down hill from there. Weisenthal does not disappoint on the down hill slope. He calls for more government spending, but fails to look back to see where the money is coming from to create the spending. This is like draining blood for one person to give to another and never looking back to see how the person you drained the blood for is doing. No, make that, you don't even acknowledge you are draining blood from anyone. It's more like, "Hey, this guy needs blood" and thinking somehow the blood just appears. If you are pumping money into the government, it's coming from somewhere else, either through taxation, borrowing or inflation. That means someone's buying power is cut back. Furthermore, the money is being pumped into the most crooked, inefficent, bureaucratic, warmongering sector of the economy, the government sector.
Hell of a plan Weisenthal has there, take from the efficient and productive and give it to politicians to spend.
There'a a bunch of nonsense charts that Weisenthal runs that "prove" that households aren't borrowing enough, as if that worked well for households the last time they did it. There's plenty more nonsense, but Tom Woods, I'm sure will respond, and I'm sure will do a point by point takedown of the piece, so I'll stop here..
TIP: More from that Angry Rand Paul guy. This time on Education.
ReplyDeletehttp://www.youtube.com/watch?feature=player_embedded&v=k2GODbp-ils
He says "The way to create private sector savings is to spend public sector money."
ReplyDeleteWell, since the public sector money has to come from the private sector, he is saying that the way to create private sector savings is to spend private sector money.
Hmm, usually when I spend money, my savings goes down, not up. Anyone else have a different experience? What happened with all the spending that the government has done? Has it improved anything?
This is the same old line they have been giving since 2008 and as a explanation to the Great Depression....
"We need to spend MORE money. The problem is we didn't spend ENOUGH."
Then, when that doesn't work, they pull out another set of graphs that "prove" they are right but what they don't realize is
Correlation does not mean causation.
I have seen graphs published relating to price inflation and unemployment. They say that since price inflation goes up when unemployment goes down, all we need to do is cause price inflation to increase in order to increase jobs. This is faulty logic and a misunderstanding of cause and effect. Which is the cause? The unemployment, not the price inflation.
When you have more people chasing the same number of goods which happens when unemployment goes down, prices go up. When there are less employed people, there are more goods than people seeking them so prices go down. Employment is the cause, prices is the effect.
If a car running into a brick wall causes a damaged wall, damaging a wall with a sledge hammer does not cause a car to run into it.
We Austrians should celebrate (seriously). Mr. Weisenthal expressly and affirmatively stated:
ReplyDeleteHow The Government Could Save The Economy By Constructing A $2 Trillion Pyramid To The Sky
We’ve won the debate. Our opponents have nothing ever.
We only to need point out to average people that the government experts running (and ruining) their lives actually believe this stuff and have been acting upon it.
Keep blabbing what you really think, you Keynesians.
Why does Wenzel consistently say the "money comes from either taxing, borrowing, or inflation". Doesnt it ultimately ALL come from taxing, eventually?
ReplyDeleteDon't get too excited. Joe Weaselthal is just another surfer pseudo-journalist creep trying to ride the waves of financial discord all the way to the beach.When the real gale hits he will be out of the water in no time.
ReplyDeleteI think Weisenthal is too stupid to understand that giving money to a government is funding terrorism. Maybe he is smart and a terrorist(?)
ReplyDeleteIt's like the world's biggest experiment to prove the conservation of energy.
ReplyDeleteBob - we see that statement ($2T pyramid) as an absolute boondoggle, but how many voters actually hear that and say "yeah, we DO need a greatest pyramid"?
ReplyDeleteAfter all, it would require TONS of labor to complete, it would generate tourist income, and it would give people a cause to rally around (increasing "confidence").
Anyone that doesn't support the pyramid is a nut that wants the economy to fail and hates America!
"This chart, via PragCap, shows something important: Public sector deficits are the mirror image basically of private sector surpluses.
ReplyDelete...
The way to create private sector savings is to spend public sector money."
Besides committing numerous logical errors, isn't it clear he's an MMTer?
Any regular clusterstock readers know that Weisenthal is a joke. Nobody takes him seriously. He isn't a journalist. Instead he just writes pathetic articles making outrageous claims or attacking things in order to create controversy. He may be a fool, but I think it is more likely that he plays the fool because controversy excites people and gets their site traffic.
ReplyDelete"Why does Wenzel consistently say the "money comes from either taxing, borrowing, or inflation". Doesnt it ultimately ALL come from taxing, eventually?"
ReplyDeleteThe immediate allocation of funds comes from either revenue (direct taxes) or loans. Ultimately, the loans are paid from taxes, but it sneakily pushes the tax increases down the road.
Inflation of course is used as a tool to diminish the value of the loan without having to directly tax anyone, the most sneaky of them all.
Bob English,
ReplyDeleteI thought the same exact thing (MMT) when I read that line...
I thought about writing a post about it, but I would hate to give Joe Weasel the attention, which it looks like that's all he cares about.
ReplyDeleteMost of these MMTers are extremely intellectually dishonest. They claim they're simply describing a system, and then use the bogus conclusions to justify nihilistic Keynesian spending policies.
I'm gearing up with popcorn and a soda to see Tom Woods video blog on this :)
ReplyDeleteMaybe Obama can egg us on and say that our pyramid will be bigger than any China has built.
ReplyDelete"The way to create private sector savings is to spend public sector money."
This statement and the three paragraphs following it absolutely boggle the mind. How anyone can follow this macro-game of 3 card monty, I don't know.
Does private savings increase because more people are getting government money? How many more people can work for the government? If this isn't his argument, I think he's going too far into that estoeric Keynesianism that the common man can't wrap his around.
Wasn't the housing boom basically a 2 trillion dollar pyramid, just spread out all over the country? What would more empty houses do?
Keynesians unable to understand that if everything they're saying is true, Greece would be the Superman, not the sickman, of Europe.
@Anon 10:34 am: It's all about the definitions. Read Bob "Babyface" Murphy's post here:
ReplyDeletehttp://mises.org/daily/5260
MMTers define "savings" in a way that makes the "theory" internally consistent, but has little connection to reality (savings as represented by real wealth).
It's really just neo-Keynesianism. And fraudsters like John Mauldin have the audacity to claim it is Austrian economics.
Reality imitates art. In this case literature. Atlas Shrugged is becoming true right before our eyes, and Keynesians are all Wesley Mouches.
ReplyDelete