On Tuesday the Federalist Society at Campbell Law in Raleigh, NC hosted a debate between a Federal Reserve economist and me. The topic was, “Did the Fed avert a second Great Depression?” Here is the video.
Source link: http://archive.mises.org/12298/murphy-debates-fed-economist/
Murphy Debates Fed Economist
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I’ve noticed a lot of Austrians saying “I think” a lot when speaking to crowds unfamiliar with AE. It really eats away at the logic of any points they assert and makes the responses seem like nothing more than a personal opinion.
Also, Austrians ought to really practice speaking about recessions before the Fed. It always seems as if they’re grasping at straws when that question is asked. Have some good two-sentence explanations for several of the earlier ones in your pocket to throw at them.
Dr Murphy, your response to what the money ought to be wasn’t convincing at all. Everyone reading this right now knows you of course know the praxeological market explanation. The time was ridiculously short, so you didn’t have time to guide them through it a priori. But maybe work on developing to the best of your ability a solid response for the future.
Austrians really have a disadvantage when it comes to debates and appearances. Nothing can be explained in seconds.
It’s a little slow/choppy to stream online. Here’s a tip for the other viewers, right click and select “save as”. This will let you download the mp4 file and then simply watch it on your desktop
Enjoy (I’m just queuing it up now)
I put it on YouTube for easier viewing:
http://www.youtube.com/watch?v=P-gl0E9bRa4
Well I have to say, Robert’s performance was totally, uterly and unconditionally great. Every twenty seconds I felt like screaming “Bam – in your face Fed fools!”
))
Thanks Minnesota Chris! Not just for putting this video online but all the others as well.
Yeah, it was a great talk. Both sides had valid arguments. I tried to see it from a statist viewpoint like I had in my youth, I still want free market currency instead. End the Fed!
You’re quite welcome Henri
There have been instances in the past where advocates of the Austrian position do a lackluster job at explicating key points and ideas. This is not one of those instances. Dr. Murphy was the perfect mix of wit, class and humor. Keep it up!
Dr. Murphy, my apologies for nitpicking but I think the only weakness in your arguments is that there needs to a be better explanations of busts pre-Fed. That’s the only place the guy seemed to go after.
I realize there was a time limit, but if possible in future debates, say something about the structure of production and its relation to interest rates. Explain it is credit expansion which causes the problems. /end armchair quarterbacking
Overall, very good job. I enjoyed the debate and I felt you presented a better case. (I especially liked your reference to Ben Bernanke was wrong on Youtube.) Your explanations were clearer, plus I felt like you established a better rapport with the audience than your opponent. Is there any chance they’ll be more of these kinds of debates?
J Cortez, the problem is that I don’t know enough about pre-Fed business cycles!
I would have used my life-line to call Tom Woods had there been more time.
I had planned on doing the structure of production in the first 15-minute bloc, but I was still cracking jokes when the guy signaled that I had 5 minutes left. So that was just poor time management on my part.
I’m with Landon and J Cortez.
In debates, pointing to pre-Fed recessions is a Fed-eralist’s most powerful weapon in his arsenal. A good rebuttal is crucial.
“I’m with Landon and J Cortez.
In debates, pointing to pre-Fed recessions is a Fed-eralist’s most powerful weapon in his arsenal. A good rebuttal is crucial.”
I have to agree with that.
BUT the problem is, we need a good, readable book on the pre-Fed recessions. And I just don’t see it. Yeah, I know some of the good AE intro type books cover this a little (and Meltdown apparently has a chapter on this), but not enough to really help.
You really need some that goes like this:
There was this panic, it was caused by X. then this panic, caused by Y. Then we had the BUS#1, which caused these problems. Then this panic and this panic, cause by these things, etc.
“BUT the problem is, we need a good, readable book on the pre-Fed recessions.”
Hey guys, be the change you want to see in the world.
The Fed guy’s comments on transparency was telling about the nature of legal privilege and the status of government organizations in general. He basically said that making public the list of penalty loan receivers, although considered institutions in good shape, may spark a run. Given that there is a Fed this kind of secrecy is necessary, the Fed guy concluded.
But isn’t this always the argument? Once government is excepted as a means then certain other privileges must follow.
Should read “Once government is accepted as a means…” not “excepted”. Oops. Late at night.
Dr. Murphy, you rocked the house.
As for pre-Fed busts, there are only 4 main ones worth discussing – 1819, 1837, 1873, and 1907. I believe Rothbard does a decent job of covering all of these in his book on the history of banking in the United States.
Rothbard wrote an entire book on 1819 (I think it was an expansion of his thesis?). Basically, the War of 1812 spurred Jefferson to create the 2nd National Bank and to suspend specie redemption for banks to fund the war. This ended up causing a boom in credit and subsequently in land prices. These policies were reversed after the Napoleonic Wars ended and foreign demand for US goods dried up, and foreigners demanded specie repayment for loans. The National Bank had to reverse its policies and call in loans to stay solvent. Suddenly, the land speculators found themselves unable to pay their debts. It’s not terribly different from today’s bust – speculators became accustomed to ever-expanding credit and prices due to gov’t interventions that allowed banks to extend credit far greater than they otherwise would have.
1837 follows a similar path. Bi-metallism drove gold out of circulation during an extreme influx of Mexican silver, which also helped fuel the boom in addition to the 2nd National Bank. The bust occurred a few years after the 2nd National Bank lost its privilege of receiving deposits from the Federal Government (where it made most of its money) in 1833. It lost its charter a year before the crash. Both events prevented it from acting as a lender of last resort. Again, land speculators bought massive amounts of land on credit. The Specie Circular of 1836 stopped this, requiring specie to buy gov’t land, which banks couldn’t create. Thus, the end of the real-estate boom also caused a banking panic, and the National Bank could not serve as any kind of backstop.
Rothbard said that despite the extreme volatility in credit and investments, the bust period was not really that bad for the average consumer – his living standard actually continued to rise throughout the bust.
As for 1873, you have to read Rothbard about the way the National Banking System worked after its reforms during and after the Civil War. Essentially, it created tiers of banks, each of which could use higher level tier’s bank notes as reserves to issue its own. The highest tiers would have to use gold (or gov’t debt?). Thus, it was little different from the Federal Reserve System – it created the pyramiding of debt. Post-war credit boomed. In addition to gov’t subsidies and land grants to railroads, this created an investment boom. When silver was demonetized in 1873, credit needed to contract, and this quickly revealed the malinvestment.
While many dubbed the period of 1873 – 1896 a Great Depression, such is truly ridiculous. The average man again became richer during this “depression”. Yes, capital goods industries furthest from consumption experienced a severe decline, particularly railroads and its related industries. However, productivity fell very little. Prices fell, but wages did not – so real wages actually rose strongly. It is ironic that some consider this period to be a depression while others consider it the most prosperous period in American history besides the 1920′s.
1907 was the rich man’s panic. It’s only relevance is that it paved the way for the Federal Reserve. And it appears as though J.P. Morgan, and others who planned to create the Fed, may have actually engineered this panic…then “saved” the banking system.
Dr. Murphy, You don’t know me from Dick, so please take this as you find it useful. I have the greatest respect for you and what you and many others here are doing.
From a presentation and talking points perspective, the whole session was very weak. It is clear that you both knew a lot, and I agree that you were more my “personality style” than Mr. Fed, but that is a minor point.
The main issue is that it was undecipherable. They only reason I could follow you at all is because I already knew something about what is behind your comments. This was a room full of future lawyers. I am sure they were not following the arcane points being made at the margins.
I really don’t know what your purpose was in holding this meeting. If it was to build your chops as a public spokesperson for AE, then here is my feedback in that regard:
Pick a single point that you think is relevant to your audience. In this case, it might have been fractional reserve banking, how that relates to property law debasement, and how it leads to the credit expansion theory of the business cycle.
Whatever single point you make, stick to it, and try to demonstrate how that one single point plays with everything offered by Mr. Fed. You cannot possibly give a general overview of AE in a setting like this. So don’t try. Just make the single point that the fundamental theory behind Fed policy is wrong and that there is a very well developed alternative that leads you to a completely different set of policies. If you generate sufficient curiosity on that issue, people will visit the site and learn more, and then want more. I think that is how it works.
In the most general sense, I would observe this. It is not so important to show why something is wrong. It is most important to show why something is right. That is when the interesting debate can occur, and not before. By attacking the fallacies of Keynesianism, you just bring everyone into the weeds. Take us to the top of the mountain first. Honestly, AE is not that hard to grasp. It makes common sense. People really do have a good deal of common sense; play to that.
The other general point I would make is on presentation style. With all due respect, you are not a polished presenter. It is a skill, like anything else. Enough said, but if you are interested in becoming a successful and effective public advocate for AE, you might want to invest a little on that.
One more time…I am offering constructive criticism and mean nothing to diminish the outstanding work you have done. Please take this in that vein.
Best Regards,
Sorry, did anyone catch that “Mr. Fed” said something along the lines of having had no notice of this type of near overnight bankruptcy, and that the Fed was forced into making an immediate decision to bailout or not to bailout?
Seems like he’s implying that Fed economists have no recollection of Long Term Capital Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management
It was the prototype for exactly what he said they were approached with “last minute”. I’d say an entire decade is plenty of time to think of what you’d like to do if this ever happens again.
Great work Dr. Murphy! I thought you did a great job of communicating your arguments and I especially enjoyed your point that if the Fed is eventually going to have to let a “big” company fall to demonstrate that we’re back to normal, then they simply delayed the inevitable when they kicked off the bailouts to begin with. (I’m paraphrasing heavily throughout this post.)
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