Pat Buchanan’s take on the current financial crisis. See Day of Reckoning.
Tag: Economics
Free market economists weigh in on Paulson’s plan
Reason Magazine asks free-market economists their opinion of the proposed bailout plan, and collects their results. Click here to read this excellent article.
The Bailout Reader
The Ludwig von Mises Institute has compiled The Bailout Reader, a collection of articles relevant to the current situation.
Not all these articles are from the past few weeks, as Austrian economists have long understood the dangers of government interventionism, the fruits of which we see today.
The events taking place in the financial market offer an illustration of the soundness of the Austrian theory of money, banking, and credit cycles, and Mises.org is your source not only for analysis of these events but also the economic theory that helps explain what is happening and what to do about it.
Click here to access The Bailout Reader.
Ron Paul’s Wisdom on the Current Financial Crisis
Ron Paul writes My Answer to the President, noting that the “financial meltdown the economists of the Austrian School predicted has arrived.” He introduces a quotation from Hayek this way:
F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day — and which are being proposed, just as destructively, in our own.
In my opinion, a great danger we face is that just as the Great Depression lead to Roosevelt’s huge expansion of government, so too this current situation will lead to similar expansion of government power. This has already happened with the Federal Reserve system.
I urge you to read My Answer to the President by Ron Paul.
Laissez faire in Washington? On what planet?
Sheldon Richman of the Foundation for Economic Education contributes analysis of the current economic situation in the article Government Failure. A few quotes:
Laissez faire in Washington? On what planet? Governments at all levels have regulated the financial industry from the time of the founding. …
At the Division of Labour blog, economist Lawrence H. White asks: “What deregulation have we had in the last decade? Please tell me.” …
What about greed? Here White also has something important to say: “If an unusually large number of airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual.” Likewise, greed (however you define this essentially useless concept) can’t explain the current economic troubles. Why didn’t these troubles occur earlier? Were people less greedy then? …
What about irresponsibility? Now we are getting to the crux of the matter. There was irresponsibility — but only because the government for decades has pursued a policy of relieving big companies of the responsibility that otherwise would have been imposed by market discipline and competition. …
Good intentions count for nothing in this context. The laws of human action (praxeology) can’t be repealed or got around.
Praxeology. Ludwig von Mises has an explanation for everything, it seems.
Wind Power: Why Special Tax Treatment?
A recent article in USA Today (Renewable energy firms clamor for tax breaks) reports on the uncertainty of whether the U.S. Congress will extend the tax credits that subsidize solar and wind power investment. From the article:
Some $500 million in investment and production tax credits will expire Dec. 31 unless Congress renews them. Without that help, solar and wind power companies say they will reverse planned expansions and, in many cases, cut payrolls and capital investment.
Commenting on this article, The Foundation for Economic Education wondered “If they need special tax treatment to survive, what does that tell you?”
It tells me that wind and solar power are not economically viable at the moment. The only way to induce people to invest in these forms of power generation is to give them money.
To learn more about the economics of wind and other forms of power generation, I suggest these articles: Wind Production Tax Credits Aren’t Free of Cost, Mandating Renewable Energy: It’s Not Easy Being Green, Hot Air and Wind, and Energy Independence Isn’t Very Green.
Kansas Climate Change Mitigation Will Be Costly
A recent presentation in Kansas revealed that fighting global warming in Kansas will be quite costly, and will harm lower-income families most.
The Wichita Eagle article Business leaders hear climate talk reports that The National Association of Manufacturers calculated that cap-and-trade proposals before Congress would cost the average Kansas family $304 per month in the form of higher prices for energy. That’s a very large penalty for Kansas families, especially low-income families, to pay to mitigate something that not all scientists agree is a problem.
Then, even if you agree that global warming is a problem, there’s very little that Kansans can do in light of global factors outside our control. As reported in KEEP’s Goal is Predetermined and Ineffectual, the rate of growth of carbon emissions in China and other countries is so large that it overwhelms any attempt by Kansans to reduce their emissions. Even a complete cessation of carbon emissions by Kansans would quickly be negated by China’s growth. And, China is not willing to take steps to mitigate their output.
$304 per month, or $3,648 per year, would be a crushing blow to the budgets of many Kansas families. This burden would be on top of many thousands of jobs lost. As reported in Kansas companies put out of business by high fuel costs, the high cost of diesel fuel has caused some trucking companies in Kansas to close, and others have reduced the number of trucks they operate. Those who think that these extra fuel and energy costs can be absorbed by families and the economy with no adverse effects are not being realistic.
For more information, view the slide presentation here. The Lieberman-Warner Cap and Trade Bill: Quick Summary and Analysis is an easy-to-read analysis of the cap-and-trade proposal.
Pickens’s Slim Economics
An article from the Foundation for Economic Education warns us to be cautious when considering the plans of oilman T. Boone Pickens:
Pickens’s commercial no doubt causes FEE readers’ classical-liberal antennae to stand at attention. The word “plan” alone rightly provokes worries of coercive schemes. The notion of being independent of energy or any other commodity from foreign countries goes against the teachings of Smith, Bastiat, and others who recognize the gains from specialization and division of labor. Nor will readers knowledgeable about rent-seeking be surprised that media reports describe Pickens as “heavily invested in natural gas and wind power.” And when Pickens states in his commercials that “this plan will work but it needs your help,” readers familiar with Public Choice rightly suspect that the sort of help Pickens has in mind is tax dollars.
The full article is Pickens’s Slim Economics.
Efforts to Regulate ‘Wild West’ Markets are Long Overdue
A Christian Science Monitor article Efforts to regulate ‘Wild West’ markets are long overdue contains a number of misstatements.
For one thing, characterization of the American West as “wild” in the sense that mayhem prevailed, and that life and property were not safe, is not correct. An article in the Journal of Libertarian Studies titled An American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West tell us this:
The West during this time often is perceived as a place of great chaos, with little respect for property or life. Our research indicates that this was not the case; property rights were protected and civil order prevailed. Private agencies provided the necessary basis for an orderly society in which property was protected and conflicts were resolved. These agencies often did not qualify as governments because they did not have a legal monopoly on “keeping order.” They soon discovered that “warfare” was a costly way of resolving disputes and lower cost methods of settlement (arbitration, courts, etc.) resulted. In summary, this paper argues that a characterization of the American West as chaotic would appear to be incorrect.
The article quotes E.J. Dionne as saying “A well-functioning capitalist system relies on clear rules.” Very true, but there are two rules that anyone can understand that are in danger of being overturned. First, if you borrow money, make sure you understand the terms of the loan and are prepared to repay the loan as required. Second, if an institution such as a pension fund buys repackaged securities (like subprime loans) without understanding the risks, they shouldn’t expect others to make good their losses. These two clear principles or rules are in danger of being overturned.
If they are overturned, then we might ask Mr. Dionne just what rules can be trusted to be clear?
This article also states: “The oddity of today is that a Republican administration is pushing an expansion of government regulation.” If the author of this article did a little research, he would learn that regulation has increased rapidly in recent years. According to the Heritage Foundation” “Despite the claims of critics — and some supporters — of the Bush Administration, net regulatory burdens have increased in the years since George W. Bush assumed the presidency. Since 2001, the federal government has imposed almost $30 billion in new regulatory costs on Americans. About $11 billion was imposed in fiscal year (FY) 2007 alone.”
If we look at the root causes of this crises, we would understand that excessive government control in the form of the Federal Reserve is largely responsible for this crisis, such that it is. Now government calls for even more power to solve the problem that it created. These extra powers, pitched to the public as necessary to deal with some current emergency, rarely disappear after the emergency has passed. Instead, they live on as a permanent part of expanded government.