15 Economic and Political Myths that are Destroying America
November 09, 2012
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15 Economic and Political Myths That Are Destroying America
In no particular order. Comments welcome.
1. Deflation is bad for the economy
No less than Nobel Prize winning economist Paul Krugman lays out the case that deflation is bad for the economy. (I will try to avoid picking on Paul Krugman too much, but I can't promise anything.) Prices fall. People stop spending. Debtors are crushed. Businesses shutter their doors. Mass hysteria ensues.
Except there is no historical link between deflation and depression. None. So behind all of Krugman's rhetoric is zero scientific evidence. The theoretical case is even flimsier, resting on the notion that entrepreneurs are idiots that can't adjust to price changes (even though that's one of the primary reasons they became entrepreneurs) and that consumers are scared little chicklets who will never buy a product if they think it might fall in price tomorrow. This is exactly why computers sit on shelves for years. Everyone knows the price is going to fall. Rrrrriiiight....
This foolish myth is brought to you not just by Krugman and his uninformed followers. Nearly as many so-called free market conservatives believe this same nonsense.
In the end, this unscientific and logically flawed theory gives cover to a government that wants to print money for its cronies, devaluing your savings and robbing you of your rightufly earned productivity gains. Prices should fall. That's a how a market works. Society's productivity rewards all citizens by raising their standard of living. More goods available at falling prices.
Instead, we are stuck with endless money printing justified by charlatans with Nobel Prizes.
2. Voting is your civic duty
Here's how I spent election day. I worked. I watched some TV (but zero election coverage), and then I chatted on the phone and went to bed. I had a very productive day.
Everything I did was a voluntary and peaceful.
On the other hand, everyone who stood in line for hours to vote (seriously? Ha! The State can't even do something as simple as counting efficiently!) engaged in an act of violence. Whose day was more civil?
Here's a quick thought experiment I like, with a hat tip to Constitutional scholar Michael Badnarik. Imagine that everyone in your neighbor was convinced that no autombolie should get less than 40 mpg. (The arguments in favor of this new prohibition on gas guzzlers conveniently provided by the automobile industry, which lined up a group of economists with PhDs and little self respect to persuade you what a great thing this would be for the local economy. Mix in a self absorbed environmentalist and voila! Brainwashing complete.)
So everyone takes a vote. Democracy in action! Your neighbors put little “I voted” stickers on the back of their cars. Maybe tell their friends and family how important it is to do your civic duty. They swell with pride.
Now what? Oh yeah, someone with a gun has to find the offenders and force them to give up their gas guzzling cars.
Your vote only has authority if it is followed up by thugs who got all C's in high school terrorizing peaceful people.
Civic duty huh? There's nothing civil about engaging in violence, and there is nothing civil about voting.
If you want to claim that “hey it's better than a government that doesn't let you vote at all”, sure I buy that. It's still violence. And it's still not your best option, which is to live in peace with your neighbors.
3. Central banks provide more stability than the gold standard
There are just so many awful arguments against gold (among the worst yet most popular among economic illiterates: you can't eat it or there's not enough gold), but this one is the most damaging. Among those who have just enough economic knowledge to be dangerously uninformed, they like to trot out a chart from the NBER or this data set, showing how many recessions we have had on gold and on paper.
The NBER's data set is so easy to tear up that it's shooting fish in a barrel. Among the most egregious inclusions is 1873-1879, the so-called “Long Depression”. That's another myth. There was no Long Depression, and nearly every economist (mainstream or not) recognizes this. 1873 saw a brief recession, which was followed by a 23 year period of growth that marks as the largest and longest expansion of prosperity in human history. Under the gold standard, btw. Careful analysis on a case by case basis shows that our worst instability has been under a Federal Reserve system. And it isn't even close.
But there's another point that needs to be made. Why would gold cause instability? The causal link is never explained by those who remark on gold's supposed disastrous instability. And in fact, we know other countries that didn't have a central bank and used gold as money had no such panics like the United States did pre-Fed. Hmmmm... perhaps there was something about American law that intervened in the proper functioning of the market. And indeed we know that there were plenty of such laws: the creation of short lived central banks before the Fed, legal tender laws that privileged certain notes over others, inflationary wars, and a myriad of other interventions that helped create the booms and busts America experienced pre-Fed.
Just don't expect the surprisingly emotional and un-scientific gold haters to use logic on this one.
4. Democrats are anti-war
This might be the most dangerous myth in America. Even Republican loyalists believe it, as you learn when they inform you that Dems want to “gut the military” and similar nonsense. The big problem with this is that it gives liberals a moral authority they don't deserve. There is absolutely nothing moral about voting Democrat, especially if you think it's a vote for peace.
Truman dropped the only two nuclear bombs in history. JFK and LBJ brought us the Vietnam War. Clinton bombed the Serbs, Sudanese, and Iraqis. Obama has bombed at least 5 countries, covered up the murder of an American teenager, and tried to stay in Iraq (but was thankfully kicked out, except for our remaining mercernary presence.) Meanwhile, under a Democrat controlled Congress and Presidency from 2008-2010, defense spending rose. Yeah, some peaceniks you got there.
Democrats are not pro-peace. Nor are their voters – the American liberal. The liberal doesn't mind war at all, so long as one of our socialist allies in Europe approves, and especially as long as the victims are brown people (Muslims preferred, but just brown is ok.) In other words, not only are liberal voters pro-war, they're also just as racist as their Republican brethren. It's just a different flavor of racism. Moral authority, my butt.
Unfortunatly, this myth hides the fact that a truly peace-loving anti-war voter has no choice in political parties. It's one warmonger or the other. Yet, liberals can go on forever believing that they are making a difference. And nothing changes.
5. Minimum wage laws help the poor
Speaking of racism, that's the origin of minimum wage laws: white Northern union workers attempting to prevent migrating southern blacks from taking their jobs. The last time black male unemployment was lower than white male unemployment was the year before the minimum wage law passed.
The economic arguments for the minimum wage are just terrible, usually followed by the supposedly caring progressive vomiting something about strawberry pickers and how the rest of us are just so cold and insensitive. But what about inner city youth? Does the minimum wage law supporter not care about them, as they represent those who end up unemployed due to the high cost of their labor?
Price controls don't work, as Gov. Christie just learned.
I guess the progressive thinks Crony Capitalism is bad, but Crony Laborism is just fine. And that's all minimum wage laws are. They protect workers in exisitng jobs from competition that would benefit consumers. Just as Crony Capitalism privileges some businesses at the expense of thier competition and the consumer.
If Progressives have the moral high ground, we are all WAY below sea level.
6. The government, through the central bank, should strive for price stability
Again, unscientifically founded and logically flawed poppycock. There is no reason the general price level should be stable, except for a mythical belief that a stable economy is somehow driven by stable prices.
The formation of prices come from many factors, including the money supply. Ultimately however, all price formations are the result of subjective evaluations made by individuals acting in exchange. Any attempt to alter these prices in order to keep the general price level stable is like playing God with the economy. (By gunpoint, of course, since it takes an act of violence to establish a central bank in the first place.) It's the replacement of those subjective evaluations of market actors with subjective evaluations of non-market anti-free market technocrats.
And that would be bad enough, if stable prices actually created a stable economy. However, stable prices can actually mask a great deal of monetary inflation, and its subsequent bubble creation. The 1920's are marked by excessive speculation that was accompanied by a stable general price level and huge amounts of money printing. Since mainstream economists are nimrods, they actually don't believe the 1920s to be inflationary at all. Just greed run amock, they say. Never mind the massive amounts of money that had to be created by the Fed to keep prices stable, which was the first time we see this doctrine put into action.
In other words, this silly myth laid the groundwork for one of the most spectacular bubbles and crashes of all time. And still the mainstream econ profession doesn't get it. They are amazingly dense.
7. A little inflation is good for the economy
This is price stability 2.0, the modern doctrine that calls for a stable amount of price inflation, generally 2-3% per year. Why? Because your econ professor and a technocrat said so. So it must be true.
And just like #6, this is complete unscientifc baloney. Instead of stability, we get bigger bubbles (housing) and bigger crashes. Great job, guys. Can we get some people who aren't completely insane a few teaching gigs, just to shake things up? That would be nice.
8. The stock market's direction is an indicator of economic health
The total market capitalization of the stock market is driven entirely by money printing. It rises with money printing, then crashes when it rises too far (because the underlying economy has been completely disrupted by this monetary intervention that destroyed price signals), and then we have yet another round of printing to prop it back up.
Drug addicts always feel better after another hit. That doesn't mean their body is doing great.
9. GDP measures economic growth
We're beating a dead horse. GDP measures money printing, which in turn is driven by a government's desire to consume as many resources as it can get its greedy hands on.
A time preference shift that increases society's desire to save is reflected negatively in GDP. That's really all you need to know. Yeah there are wackos out there that believe savings hurts an economy, but judging by all the other myths they believe, I think you know what to do with that information.
10. The troops defend our freedom
I'm confused by thios. Do only our troops defend freedom? What about the Soviet troops? Were they defending Soviet freedom when they invaded Afghanistan? And what particular current military operation is defending my freedom? Drone bombing little kids in Pakistan? Oh yeah, I remember how freer I felt the day I learned a hospital full of woman and children was erased in Afghanistan.
But riddle me this, if troops are defending my freedom, why am I less free after every deployment? Hmm.... something's not right...
Oh yeah, now I remember. War is the Health of the State.
11. Watching the news keeps you informed
The more news you watch, the more brain cells you kill. The math on this is tough to pin down, but I'm pretty sure that's the general equation. “But how will I follow current events?” whines the sheep.
Try being just a bit more inquisitive and I suspect you'll do just fine. The mainstream news, whether it's Fox, Drudge, CNBC, MSNC, CNN, NYT, WaPo, or any other garbage you digest is purposely keeping you uninformed. Each fights for access to the Temple. It's that access they want, not any desire to enlighten you. That's how they all end up as government's typewriter. Whether it's cheerleading for the Left State or the Right State, they're all the same to me. Purposefully ignorant and occasionally deceitful spin masters.
Ask yourself this: are you more informed than I? Perhaps you can prove your case in the comment section. I suspect that if you're mainstream news junkie, you're not. But hey, since I haven't watched a single news program since 2007, I should be a cakewalk for you.
12. Capitalism, free markets, and free trade cause economic panics
I was in Washington, D.C. lately. Pity me, I know. It's filled with such disgusting people. One of the most amusing aspects of DC is the bookstores. They are straight out of a 1960's Berkely cartoon. Nothing but Marxism and Keynesianism through and through. I love perusing these stores, as each title yells that “Free Trade Doesn't Work” or “Capitalism is Evil!”
And then I open the book only to find the same old Left-Right talking points. It's always the same. Whatever the policy, be it a trade agreement managed by mountains of paperwork and an army of bureaucrats, it's a “free trade” arranagement that failed (because Republicans supported it, and you know, they're free trade guys... ahem..) Nor will these ideological pinheads ever distinguish between genuine market activity and crony capitalism. Such a dive beneath the surface is beyond the capability of their tiny brains and outside of their agenda.
So if you're wondering where these strawman arguments come from that our imaginary free market world causes all of our problems, they originate in DC bookstores.
13. Deregulation causes economic panics
Bill Clinton said so. It must be true. Democrats are religious about this one.
Allow me to be perfectly clear, so they get where I am coming from. At no point in human history has there been greater amounts of regulatory code, greater amounts of money spent enforcing regulations, greater amounts of regulators, than were in place during this most recent crash.
Deregulation means removing government interference from market activity, not shuffling the deck. It's another false dichotomy brought to you by the Left/Right State that enslaves you.
I already knew that Republicans engage in very little critical thinking. Heck, Sean Hannity didn't even know there were arguments in existence that placed the blame for the Great Depression's severity on FDR. Bill O'Reilly didn't know how to pronounce Keynes' name and had apparently never head of him. Ann Coulter once expressed disdian for economic discussion at a dinner party, claiming economics isn't important.
But now I'm convinced that Democrats are no better.
14. World War II ended the Great Depression
What would it say about humanity if it took the slaughter of tens of millions of people to get an economy going again?
Thankfully, this is only a myth. The Depression was still going strong in 1946. A giant slash in government expenditures, a relaxation on wage controls, and a little hard work helped America produce one if its biggest private output gains ever recorded from 1946-47.
Another related myth is that we only recovered because all other countries had the industrial base destroyed. That's also pretty stupid but widely believed. ...... So it helps your economy to have your trading partners decimated? People really need to start using their own brains.
And while we're on the subject, anytime someone tells you that slashing government budgets ruins an economy, familiarize yourself with 1946-47 and 1919-20, just to name a couple (there are lots more.)
15. We are the Government
In a nation-state, the government is simply the administration of the affairs of the State. We get all excited about voting for one guy, as if that makes a difference to the millions of unelected bureaucrats that really run this country.
We are not the government. We are not the State. We are the market. And we should be proud of it.
David in Liberty
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