Liberty and Power

  • Reply to Selgin on the Velocity of Money

    by Liberty and Power

    George Selgin commented on my post, "Krugman and Macroeconomics," expressing reservations about my statement that his and Steve Horwitz's version of Austrian business cycle theory incorporates significant Keynesian elements. My belated reply, which follows, is long enough to warrant a separate post:

    George, thanks so much for your comment, with which I mostly agree. I admit that many pre-Keynesian economists, Hayek, and some Monetarists all saw negative velocity shocks as one important source of depressions or recessions. But I still think it is fair to describe that view as Keynesian. After all, a Keynesian attack of "animal spirits" is nothing more nor less than a velocity shock. Indeed, I would identify this as the central proposition of Keynesian business cycle theory, although the Keynesian insistence upon referring to changes in velocity (i.e., money demand) as changes in "autonomous spending," or even worse, as a divergence between "planned saving and planned investment," often obscured this simple fact.

  • Anarchy Not In the U.K.

    by Liberty and Power

    “Anarchism is a political philosophy which considers the state undesirable, unnecessary, and harmful, and instead promotes a stateless society, or anarchy. Any information relating to anarchists should be reported to your local police.”London Metropolitan Police (plagiarising Wikipedia for the first sentence)

  • Obama Likes Ike: Sort of

    by Liberty and Power

    In the afterglow of his 2008 victory, commentators portrayed Obama as the new FDR. Now, he is half-heartedly comparing himself to Ike. In his speech on the debt agreement, Obama made the astounding statement that it will reduce domestic spending to levels not seen since Eisenhower was in the oval office. Over at the American Thinker, Greg Richards finds no basis for this claim. 

  • Curzio Malaparte's "The Traitor"

    by Liberty and Power

    Walter Murch translates "The Traitor," a fine short story by Curzio Malaparte, in the most recent issue of the London Review of BooksMalaparte (1898-1957) was an Italian journalist, dramatist, short-story writer, novelist and diplomat, about whom you may read more here. He established his international fame with two war novels, Kaputt (1944) and The Skin (1949), both of which have been translated into English.  Kaputt is currently in print but it looks like it's time to reprint The Skin.  Today take time out to read "The Traitor."  You won't be disappointed.

  • FDR Redux: A Cartoon Guide to Cutting the National Debt by 40% with the Stroke of a Pen! (Part I)

    by Liberty and Power

    Robert Higgs noted here on July 6th that FDR defaulted on the national debt by “going off the gold standard.” Moreover, FDR was (and is) much praised for his courageous action in favor of the “little guy” and against “sound money” bankers. FDR did this with a stroke of the pen (Executive Order) and by later asking Congress to confirm that he had the power to devalue the debt by 41%. Even critics conceded that FDR had balls; they only questioned whether he had “brains.” (H.L.

  • Rating the Rating Agencies

    by Liberty and Power

    Marc Joffe, a former employee of Moody's, has just posted an outstanding explanation, entitled "US Debt Ceiling Crisis: Rating the Rating Agencies," of why the rating agencies have strong incentives NOT to accurately downgrade government issues.

    As Marc points out: "since rating agencies are regulated by the United States, European Union and other sovereign authorities, they may have reason to fear retaliation from their regulators. While such fears appear to have a basis in Europe where official criticism of the agencies has been frequent, we have yet to see a similar problem in the United States.

    "Second, sovereign rating changes may impact other ratings in ways that create commercial challenges for rating agencies and investors. Given the dependence of numerous bond-issuing entities on the US government, a Treasury downgrade may trigger a large number of municipal, corporate and structured finance issuer downgrades as well. This cascade of downgrades would impose challenges on a rating agency’s internal systems, staff research skills and relationships with affected issuers.

  • Inflation Hawks

    by Liberty and Power

    Over at the Forbes blog, Timothy Lee of the Cato Institute has a good post criticizing what he calls "libertarian inflation hawks." But as David Henderson points out in an EconLog post entitled "Timothy Lee's Blunder," Lee is quite incorrect to state that Scott Sumner is the "lonely exception" to libertarians predicting rising inflation. As evidence, David cites our own joint article defending Greenspan, published by the Cato Institute, along with two of his previous posts. He also could have mentioned our earlier defense of Greenspan, appearing in the March 28, 2008, issue of Investor's Business Daily.

  • Outstanding Exposé of Psychiatric Drugs

    by Liberty and Power

    The New York Review of Books has run an outstanding, two-part review by Marcia Angell of three new books highly critical of psychiatric drugs and medical psychiatry:  (1) Irving Kirsch, The Emperor's New Drugs: Exploding the Antidepressant Myth;  (2) Robert Whitaker, Anatomy of an Epidemic: Magic Bullets, Psychiatric Drugs, and the Astonishing Rise of Mental Illness in America; and (3) Daniel Carlat, Unhinged: The Trouble with Psychiatry--A Doctor's Revelations about a Profession in Crisis. The first part of the review, entitled "The Epidemic of Mental Illness: Why?", ran in the June 23, 2011, issue. The second part, entitled "The Illusions of Psychiatry," ran in the July 14 issue.

  • Krugman and Macroeconomics

    by Liberty and Power

    One of my former students asked me about Pete Boettke's post over at Coordination Problem on a recent Paul Krugman presentation, "Mr. Keynes and the Moderns." Pete does not agree with Krugman, but he likes this particular piece and thinks it must be addressed. Perhaps I'm missing something, but I'm not entirely clear why.

  • Selgin critiques Roubini

    by Liberty and Power

    The latest issue (Summer 2011) of The Independent Review has a wonderful review essay by George Selgin critical of Nouriel Roubini and Stephen Mihm's Crisis Economics: A Crash Course in the Future of Finance. Roubini is of course the famous "Dr. Doom" who in September 2006 predicted the recent financial crisis.

    But as Selgin points out, if "one devoted Roubini watcher is to be believed, 'Dr. Doom' actually predicted no fewer than '48 of the last 4 recessions.' . . . Roubini predicted a serious crash for 2004, then a severe slowdown for 2005, then a global reckoning for 2006, and finally a sharp recession for 2007. After the much-trumpeted crisis at last materialized (though not quite for the reasons Roubini had harped on), he declared that the S&P 500 would sink to 600, that oil would get stuck below $40 a barrel, and that a gold 'bubble' was about to do what the housing one had done. To be sure, these things have not yet come to pass, but tomorrow is another day, and to succeed prophets need only mark when they hit and never mark when they miss."

    Although Selgin's review is not entirely negative and there are sections I would take issue with, it scores many important points.

  • An Easy Solution to the Government’s Debt-Ceiling Impasse

    by Liberty and Power

    If we credit the reports coming to us from the mainstream news media–and I am certainly not suggesting that we should–the Democrats and the Republicans are locked in a fierce struggle over whether to increase the government’s statutory debt limit. The administration and its supporters in Congress insist that taxes be increased as part of the deal, whereas congressional Republicans insist that taxes not be increased and that substantial spending cuts be made to trim the future stream of budget deficits (i.e., additions to the federal debt). Negotiations have been tense, we are told; the president recently waxed petulant and stalked out of a meeting. Heavens!

    Despite the seeming impossibility of resolving this conflict, an easy solution lies at hand, and as a public service, I feel compelled to divulge it, so that the entire matter may be resolved at once and the acrimony put, as they say, “behind us” as we march stoutly toward the Brave New World that awaits us.

    First, however, permit me to digress for a moment.

  • If You Prick Us, Do We Not Burst?

    by Liberty and Power


    bubbles merging

    Jesse Walker’s latest column does a great of replying to internet critics like Eli Pariser, Andrew Shapiro, and Cass Sunstein, who think the internet is isolating us from viewpoints we disagree with.

    You can post a comment disagreeing with him, but I won’t read it.