Wednesday, November 9, 2011

CNN Flunks Ron Paul in Econ 101

Ron Paul should carry this around like a badge of honor. The CIA infiltrated CNN has flunked Ron Paul on economics. CNN is pretty tough on all the Republican candidates, but saves its deepest attack for Dr. Paul. From CNN:
Every 2012 contender attended college. They all graduated. They went to schools like the University of Pennsylvania, Columbia, Texas A&M, Morehouse, Penn State and Emory.

But decades have passed since these Presidential candidates first stepped onto campus as freshmen. Is it time for an Econ 101 refresher course?..[A].professor who teaches at the University of North Carolina at Chapel Hill, Michael Salemi, was able to identify statements from six candidates that "would earn failing grades in my Econ 101 class."
Salemi called Ron Paul's rationale for returning to the gold standard "one of the most dangerous ideas put forward by a politician in recent years."
Amazingly, Salemi wrote his dissertation under the German hyperinflation of 1920-23.

Here's what Salemi wrote about hyperinflation for The Concise Encyclopedia of Economics---and this is going to blow your mind, given that he calls Ron Paul's call for a return to a gold standard a dangerous idea ((Note:Technically Dr. Paul is calling for competing currencies, but, for the sake of understanding Salemi's bizarre position on Dr Paul, let's just go along with Salemi's take):
Inflation is a sustained increase in the aggregate price level. Hyperinflation is very high inflation. Although the threshold is arbitrary, economists generally reserve the term “hyperinflation” to describe episodes when the monthly inflation rate is greater than 50 percent. At a monthly rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of the following year.

Hyperinflation is largely a twentieth-century phenomenon. The most widely studied hyperinflation occurred in Germany after World War I. The ratio of the German price index in November 1923 to the price index in August 1922—just fifteen months earlier—was 1.02 × 1010. This huge number amounts to a monthly inflation rate of 322 percent. On average, prices quadrupled each month during the sixteen months of hyperinflation.

While the German hyperinflation is better known, a much larger hyperinflation occurred in Hungary after World War II. Between August 1945 and July 1946 the general level of prices rose at the astounding rate of more than 19,000 percent per month, or 19 percent per day.

Even these very large numbers understate the rates of inflation experienced during the worst days of the hyperinflations. In October 1923, German prices rose at the rate of 41 percent per day. And in July 1946, Hungarian prices more than tripled each day...

Hyperinflations are caused by extremely rapid growth in the supply of “paper” money. They occur when the monetary and fiscal authorities of a nation regularly issue large quantities of money to pay for a large stream of government expenditures. In effect, inflation is a form of taxation in which the government gains at the expense of those who hold money while its value is declining. Hyperinflations are very large taxation schemes.

During the German hyperinflation the number of German marks in circulation increased by a factor of 7.32 × 109. In Hungary, the comparable increase in the money supply was 1.19 × 1025....

Hyperinflations tend to be self-perpetuating. Suppose a government is committed to financing its expenditures by issuing money and begins by raising the money stock by 10 percent per month. Soon the rate of inflation will increase, say, to 10 percent per month. The government will observe that it can no longer buy as much with the money it is issuing and is likely to respond by raising money growth even further. The hyperinflation cycle has begun. During the hyperinflation there will be a continuing tug-of-war between the public and the government. The public is trying to spend the money it receives quickly in order to avoid the inflation tax; the government responds to higher inflation with even higher rates of money issue.

Most economists agree that inflation lowers economic welfare even when allowing for revenue from the inflation tax and the distortion that would be created by alternative taxes that raise the same revenue...

How do hyperinflations end? The standard answer is that governments have to make a credible commitment to halting the rapid growth in the stock of money. Proponents of this view consider the end of the German hyperinflation to be a case in point. In late 1923, Germany undertook a monetary reform, creating a new unit of currency called the rentenmark. The German government\ promised that the new currency could be converted on demand into a bond having a certain value in gold. Proponents of the standard answer argue that the guarantee of convertibility is properly viewed as a promise to cease the rapid issue of money.
Got that? This man completely understands the dangers of inflation. He clearly understands that a link to gold puts a limit to money printing, yet he calls Ron Paul dangerous for promoting a gold standard. Is the CIA waterboarding this guy, or what?

(Thanks2SeanLawrence)

19 comments:

  1. He was waterboarded right next to Bruce Bartlett.

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  2. The guy has Greenspan Syndrome.

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  3. Well, you see, "decades have passed" since Salemi did his dissertation. He obviously needs a "Hyperinflation 101" refresher!

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  4. Unfortunately this hurts his chances in the election.

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  5. Hilarious! This is why I love this blog so much and read it every day.

    That CNN keynesian shill = OWNED

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  6. There seems to be an endless stream of opportunistic crumb catchers vying to please the almighty crumb throwers.
    Ron Paul is not advocating the rigid gold standard of the past, but more flexible solution of precious metals backed sound money.
    There is no doubt that gold,as always will win at the end,the stink is about controlling it.

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  7. I am shaking with anger. The establishment is... I will save my rage for later.

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  8. Ron Paul flunks statist socialist communist economics. He's ignorant of the theories that say that giving more money to the gov't and increasing red tape and military intervention makes society richer.

    Good for him!

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  9. In the words of Mr T "I pity the fool'

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  10. What's the old cliche' about an artist being able to hold two completely opposing views and still function??

    I guess this clown is a TRUE artist. Of the B.S. sort, that is.

    Weird.

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  11. The good Doctor Salemi apparently has not read about the French Hyperinflation that led to the rise of Napolean

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  12. Great job hoisting him by his own petard, sir.

    Amazing juxtaposition, his explanation of how to cure (prevent) (hyper)inflation and his conclusion about Ron Paul's position on sound money.

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  13. Mr.salemi is quite right,this is a very dangerous idea for a politician to hold as it will overturn the system. At least that's the way he can spin it.

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  14. Econ 101 thinks that you can solve the problem of too much debt with more debt. Econ 101 thought stagflation was impossible . . . until it happened. Reality flunks Econ 101.

    Honestly, though, I'd rather them make absurd claims economic theory that just going on an on about all the "racism."

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  15. Does anybody else get the feeling that this should have been titled, "CNN Flunks in Ron Paul Econ 101"? Haha! See what I did there? Same words, different order. I Like it!

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  16. I posted the link to this article last night, but CNN wouldn't approve it. They did approve some idiotic comments about the gold standard though.

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  17. I am sure this clown is teaching the Phillips Curve and other keynesian stuff that was disproven by the 1970s, too.

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  18. Maybe we should cut Salemi some slack. No doubt that CNN has been infiltrated by the CIA. It's possible that Salemi is a double agent on the side of free markets and not yet ready to blow his cover! As pointed out above, he obviously understands the link between monetary inflation and price inflation. He also understands that backing a currency with gold makes inflation impossible.

    It's true that Ron Paul would fail Econ 101 as it is taught today. So would anyone else with an understanding of Austrian Economics. That's a reflection on modern Econ 101, not on Austrian Economics. And of course Ron Paul's ideas are dangerous - dangerous to the power elites who have for almost a century been enriched by central banking.

    So, if we read between the lines, Salemi is speaking the truth.

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  19. It's only dangerous to the Keynesian economists who want to keep this giant ponzi scheme going...

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