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Source link: http://archive.mises.org/9011/neanderthal-economics/

“Neanderthal” Economics

November 25, 2008 by

It seems the Austrian economist possesses more truth in his pinky finger than Paul Krugman in his entire Nobel Prize-winning body. writes Chris Brown. What other explanation can there be for Krugman’s consistent policy “solutions” to the current economic crisis, which would actually exacerbate the problem and lead to a deepening and prolonging of a recession? FULL ARTICLE

{ 31 comments }

Bruce Graeme November 25, 2008 at 8:59 am

“the [$700 billion economic] stimulus plan won’t come soon enough ”

The federal government, due to its many welfare programs, is nearly $9 trillion in debt. A gargantuan debt, to be funded by a vast future drainage of resources out of the private sector through taxation and inflation.

If the government persists in meeting these welfare state commitments the consequences will be disastrous. Only the repealing and total abrogation of all the legislation which erected the welfare state will suffice to remove the staggering burden of these liabilities which threaten to crush us beyond hope of recovery!

The dominant altruist-egalitarian influences in the government are, as usual, pursuing the opposite course from that needed for the restoration of economic health. The dominant altruist-egalitarian mentality has always taken the process of production and the creation of wealth for granted, and assumed that it could place an unlimited burden of redistributionist programs upon the process of production without adversely effecting it. But even the existing burden is far too great and is gradually leading to an economic collapse.

DD November 25, 2008 at 10:08 am

This is from CNN:

In selecting his economic team, Obama said he sought leaders who share his fundamental belief that “we cannot have a thriving Wall Street without a thriving Main Street.”

Did you get that? Sought leaders who share his fundamental belief ….

They will bleed us to death (or to socialism), but they will never take the blame for it. You’ll see, up until the last moment they will blame markets and individuals. They will never admit that their policies turned a recession into the wrost economic crisis in history. They will claim that they tried, or that it would have been worse off if they hadn’t intervened. They will say that this is the natural consequence of unreglutated capitalism. They will continure to take advice from this krugman up until the last moment.

greg November 25, 2008 at 1:14 pm

Half of AIG’s losses were due to writing down assets as required by the mark to market rules. Basically paper losses. And AIG is paying the government 10% interest on part of the money that was given to them for the Senior Perfered shares, a good rate but not below market.

Most of these write downs are due to mortgage backed securities. It is my belief that over the next 5 years these securities will be worth more than the original face value. My opinion is based on the fact that real estate will gain in value faster than the rate of inflation and as inflation picks up, real estate values will pick up more making those mortgage backed securities worth more.

I base this on the simple fact that real estate values since 1970 have grown faster than most commodities. All you have to do is track the price of gold vs the price of real estate.

On the auto industry, they must go bankrupt. The problem is that the big three are weighted down with legacy cost from the unions that must be removed. If the government gives them money, they cannot demand the removal of these union cost because the UAW helped get them elected. So these politicians will be better off if the courts do their dirty work.

Setting these businesses aside, the mounting debt is going to be a problem but it can be managed if they use future revenues from interest and principle payments to pay down the debt. That is the big if! Just like George Bush did when he took office, he too a buget surplus and gave tax breaks without cutting government spending. He took the Laffer Curve to heart and pushed for further cuts in the face of increased spending due to the wars in the Middle East.

But I am optimistic about the future as based on the past, we will have 6 up years and 1 down. This current downturn is close to reaching the bottom and will recover in spite of what the government does.

Dr J.A. Rambeau November 25, 2008 at 1:20 pm

This is from the Financial Times “The US Federal Reserve on Tuesday intensified its efforts to tackle the financial crisis, pledging up to $800bn to help homebuyers, small business and students to borrow. The measures, aimed at cementing the Fed’s role as the lender of last resort, underscore the extent to which policymakers are having to find new ways to help stabilise the financial system.”

The cabal is at it again. Just from a pure “common sense” perspective, but wasn’t it credit/debt/money (i.e., a claim to wealth that you do not own) inflated beyond normal production and capacitance that caused malinvestments and eroded savings that triggered the bubble and popped it? The policy makers are going to solve this problem by repeating the same mistake under the guise of a different form of propaganda. Einstein was right!!! Insanity is doing the same thing over and over again expecting a different result. I have concluded that the inmates are running the assylum. Run Forrest!!! Run!!!

(8?» November 25, 2008 at 1:49 pm

Greg, if the MBS’s are so valuable why doesn’t anyone want them, even at pennies on the dollar?

With housing inventories continuing to increase (latest being 10.2 months, I believe), I find it hard to believe that 2M empty houses are suddenly going to be in demand.

Unless fedgov starts a housing lottery, that is.

Dr J.A. Rambeau November 25, 2008 at 1:55 pm

Hello Greg. I am glad you are optimisitic. I’m not. The value of the dollar has been eroded to a mere 4 cents when compared to 1913 dollars. I do agree that the central planners should cut taxes and reduce spending; any revenue generated from the”bailout” should be used to pay down the excess debt. The caveat is that they must be willing to shut down their counterfeit opperation with the Fed. I firmly believe things will get horribly worse simply because people do not have money saved to purchase goods or securities. Now the Fed wants to entice the people into taking on more debt at a time when they are struggling just to make ends meet. It seems like a nefarious plot to strip away whatever value the dollar has left. This monetary system is fiat based and it will fail. It’s not a matter of if, but when.

Tielk November 25, 2008 at 2:04 pm

(8?» >Unless fedgov starts a housing lottery, that is.

We call it GovCo. here.

Maturin November 25, 2008 at 2:25 pm

Will someone please pass me that woolly mammoth thigh bone, so I can club Krugman over the head with it?

greg November 25, 2008 at 3:06 pm

Dr. J.A. Rambeau,
I just have one thing to ask, is the quality of life better off today vs 1913? I would say in spite of the dollar worth 4 cents, you have more of your wants and desires satisfied than those that lived in 1913. From where I sit, I know I am better off than my grandfather was.

The question is what has kept the monitary system from failing. The answer is productivity and innovation. It is this increase in productivity that has made our lives better today than any other time in history.

And yes, I am optimistic. As an active investor, I play the odds. The odds tell me that you cannot play the short position as a long term investment plan.

(8,

As far as mortgage backed securities, because of margin calls, their values are held down by forced selling due to cuts in their ratings. This is a short term event. What I am looking for is a market solution to the problem and not throwing up my hands and cite economic theory. Use your economic theory to come up with a solution within our current framework and you will have a winner.

For example, a bank is carrying mortgage backed securities on their books and they can manage them at their current level. Then the ratings firms come in and downgrade them causing the bank to increase their reserves which leds to forced liquidation. The government could have come in, charged a fee and insured these securities which would have protected their ratings and stopped the forced liquidation. Then with the assets stabilizied, these securities could be bought and sold on the open market and while the open bid may be pennies on the dollar, the bid – ask would rapidly move up as more buyers enter the market pushing up the values greater than the mark to market rate.

I know this solution requires government interference, but this is the system we must work within. So come up with a plan, explain the mechanics of it and project the cost/benefits so that you can get the required public support.

mitcjm November 25, 2008 at 5:15 pm

Greg,
You said:
“I just have one thing to ask, is the quality of life better off today vs 1913?”

Are you suggesting that we are better of today because of the Federal Reserve system? I’m skeptical. I could claim that we are better off in spite of that system. Since neither of us have backed up our claims with a theory of cause and effect or historical evidence both claims are equally worthless.

You also said:
“What I am looking for is a market solution to the problem and not throwing up my hands and cite economic theory. Use your economic theory to come up with a solution within our current framework and you will have a winner.”

Are you suggesting that a solution must be wrought within the current framework? What if economic theory tells us that this framework is the problem? It seems to me that those on this site are showing just that. And it’s not throwing hands up, it’s making a policy recommendation; abolish the fed (hint: there’s the market solution you are looking for). Just because these recommendations are not yet popular does not warrant a “can’t beat’em so join’em” approach.

It’s like my friend who says that Ron Paul will never “get anywhere” since he’s too principled. The point is not to merely “get somewhere”, the point is to get to the right place.

Sagar November 25, 2008 at 7:23 pm

Looked at closely, Krugman’s policy prescriptions are based on (a) cogent understanding that saving and investment are different processes and must not be clubbed; (b) there are incurable rigidities in markets; and (c) the crux of the matter is in the interface between Enterprise and Finance, not to be confused with the one between owners of firms and money.

Bruce Koerber November 25, 2008 at 8:21 pm

To emerge from the dark ages of economic science the high priests of superstitious orthodoxy have to lose their influence over a suffering and disease-ridden populace of latent human beings.

Ideology is mostly slow to change.

But change it must – because the era we are in and the era we are ushering in has no use for these serpents of economic mockery.

Are we too impatient with the slowness of ideological change? Of course, but we are also entrepreneurial enough to know that we are at a very important threshold.

Now is the time to expose the devious magic of the evil wizards as mere smoke and mirrors! Now is the time for the pure science of economics (that is anchored upon the subjectivist methodology) to illuminate the minds and hearts of the people of the world, transforming latency into discovery and expression.

danny November 25, 2008 at 8:32 pm

Greg “I just have one thing to ask, is the quality of life better off today vs 1913?”

The clear fall for the US (in my very humble opinion) seems to have accelerated since 1971 and the final decoupling from gold. And I could make a case that life is not really better since 1971. Where a household was able to make ends meet with one income provider, today it very often takes two.

Moreso is the problem of debt. It is easy to appear better off for quite awhile by borrowing and spending a small amount each year — for example, if we each borrowed and spent an amount equal to 5% of our income (in addition to spending our income, and amortized over 30 years), we could live much better for quite awhile — an annual vacation, a better car, etc. On top of this, if this annual borrowing (and compounding of debt) was financed with gradually decreasing interest rates, we could continue the good life for quite a long time, as we could take on more debt without an increase in debt service.

This appears to me what we have done — greatly accelerated by a drastic destruction of wealth driven by free money driven into poor investments. Clearly, the trillions of dollars lost is wealth destroyed (to the extent it was real in the first place). I always picture grain in place of money and try to figure out how we would survive if we would lose a year’s worth of grain to rats and mold.

This game is over, or if not over in this episode, then the next will come sooner and hit harder. I don’t believe the US economy can handle any more body blows, therefore I believe this episode will signal “game over”. Imagine, our continued “success” is dependant on Chinese workers who make $1 per day to agree to buy our debt to support our consumption society.

Do you really believe this is sustainable?

Glen November 25, 2008 at 9:15 pm

The appropriate economic solution has been presented here both directly and indirectly. The solution is similar to how you would deal with addiction. Detox the patient and put the patient in an environment where the negative influences that enables the addict are removed and, if you can, remove the source of those drugs.

Let the malinvestments clear the system (detox). Eliminate the limiting factors and bad incentives (environmental issues). Eliminate the money pump (drug source). Since power corrupts, eliminate or at least limit the power that is behind these things.

Inquisitor November 25, 2008 at 11:33 pm

I wish we had Krugman’s “cogent” understanding of the world. I really do.

Friedrich November 26, 2008 at 12:37 am

Unfortunatly it is not true we are not doing Neandertal economy. Or do you think there was something like “welfare” around? Or states? Or a federal reserve system?

We are way beyond that because we’re so “much smarter” :(

Mr.huh? November 26, 2008 at 3:23 am

Someone from the Mises Institute should write a book demolishing Paul Krugman’s arguments and economics throughout his whole career. You could call it something funny like “Paul Krugman Isn’t Wearing Any Clothes”. You know, like “The Emperor Isn’t Wearing Any Clothes”. Paul Krugman’s been asking for a book like that for years.

RDunn November 26, 2008 at 5:52 am

Krugman got the Nobel Prize?

I must have been asleep when that was announced. I didn’t know there was a category for cluelessness.

I have seen Krugman innumerable times as a commentator and he never mouthed anything but interventionist platitudes – neither insightful or inspiring.

As Charles Ives said when he received the Pulitzer Prize for his third symphony, “Prizes are the badges of mediocrity.”

Bruce Koerber November 26, 2008 at 8:46 am

I propose that the economics of the Neanderthal was natural. What I mean is that it was obedient to natural law. These early humans used the means at their disposal and the elementary spark of entrepreneurship did its job to cause advancement.

No, the economics of Krugman is not ‘Neanderthal’ because it is not natural, it is more correctly identified as satanic.

What I mean by satanic is that it is ego-driven. It is the same perversion of human character as exhibited in the deviant who hits another person over the head and steals from them. This is not human in the true sense, in the sense of humans being noble creatures. This is human only in the sense that the lower nature of humans can manifest a cruelty and a degradation far, far exceeding the lowest and most desperate of cornered animals.

This negative potential is what is being increasingly discarded as humans advance.

But Krugman is a mouthpiece for the ego-driven. He, what can I say, is the scum of the earth.

fundamentalist November 26, 2008 at 9:02 am

Greg: “I know this solution requires government interference, but this is the system we must work within.”

How do you know that the solution “requires government interference”? You must be depending upon some economic theory to support that statement. Austrian econ disagrees. Government intervention is the problem, not the solution.

Greg: “So come up with a plan, explain the mechanics of it and project the cost/benefits so that you can get the required public support.”

It’s not that simple. You also must decide if you want short-term or long-term results. They usually conflict. Short-term benefits usually have severe long-term costs. Do you want to fix the problem or smooth over the consequences? And which economic system will you follow? If it’s Keynesian, then the state is implementing your solution right now. If Austrian, then the state is making everything worse. Economic theory matters because it determines your understanding of the problem and specifies the tools you will use to fix it.

The Austrian solution to the current problem is for the state to do nothing. Let the market do its job of clearing out bad investments and rewarding wise investments. The short-term costs will be high because the malinvestment has been large, but the long-term benefits will be huge. If you try to stop the short term pain you sacrifice the future. If you allow the market to liquidate bad investments, you free up frozen assets and make them available for investment in new ventures and the economy starts growing again on its own.

The Keynesian solution, and the current one, which is now up to several trillion dollars in bail-outs and stimuli, says don’t worry about the future; in the long run we’re all dead. Stop the short term pain now regardless of the costs. Of course, Keynesians believe that short-term failure guarantees long term failure because the market cannot self-correct; if we allow short term failure, there is no future to save.

fundamentalist November 26, 2008 at 9:50 am

Sagar: “Looked at closely, Krugman’s policy prescriptions are based on (a) cogent understanding that saving and investment are different processes and must not be clubbed;”

Krugman is a brilliant Keynesian economist. If you think Keynesian economics is correct, then you’ll be very happy with Krugman’s solutions. Austrian economists happen to think that Keynesian economics is wrong and its prescriptions will kill the patient. Keynesians and Austrians view savings and investment in very different ways. For Keynesians, savings are evil. Keynes considered thrift to be one of the greatest evils of all time. Austrians see savings as the fount of growth and one of the highest virtues. Keynesians consider investment to be driven by consumer spending, so consumers must spend every dime they have and if that’s not enough the state should create money to spend. Austrian see investment as being driven by savings, so people need to save as much as possible.

Sagar: “(b) there are incurable rigidities in markets;”

Austrians see no incurable rigidities in the market. People make decisions, not markets. If people decide not to be flexible, it’s usually because the state has guaranteed them something, or implied a guarantee, and they’re waiting for the state to fulfill that guarantee. For example, the credit market froze not because of “rigidities”, but because no bank wanted to take a hit to its bottom line so they were waiting for the Feds to bail them out.

Sagar: “… and (c) the crux of the matter is in the interface between Enterprise and Finance, not to be confused with the one between owners of firms and money.”

I’m not certain what you mean by that, but I assume you mean the popular Wall Street/Main Street dichotomy and that what happens on Wall Street eventually effects Main Street. Keynesians have long believed that money is neutral and what happens on Wall Street doesn’t effect Main Street. That is, they believe that until something bad happens on Wall Street. Then they try to frighten everyone into bailing out Wall Street by claiming that if they don’t then Wall Street’s failure will destroy Main Street.

Austrian economists see it this way: Wall Street’s failure happened because of scarce resources on Main Street. Keynesians always assumed unlimited physical resources, so that if the state spent huge amounts of money nothing bad would happen on Main Street. But the fact is that resources are not unlimited and never have been. So when the state spends a lot, or encourages spending by consumers and greater investment through low interest rates, that spending runs into the brick wall of scarcity. More dollars chasing limited goods causes price inflation, severe distortions in the structure of production, and malinvestment, which is generally overinvestment in specific sectors, such as housing. The assumption of unlimited physical resources caused Wall Street to improperly price assets. When the economy hit the wall of limited resources and malinvestment, Wall Street has to re-price its assets.

fundamentalist November 26, 2008 at 9:52 am

Greg: “For example, a bank is carrying mortgage backed securities on their books and they can manage them at their current level.”

Banks are highly leveraged. They can carry the MBS’s only as long as nothing goes wrong. If anyone sneezes, the banks with the MBS’s will die of pneumonia because of their high leverage.

Greg: “Then the ratings firms come in and downgrade them causing the bank to increase their reserves which leds to forced liquidation.”

Were the ratings firms just being mean, or did they have a reason for downgrading the MBS’s? The market is a process of price discovery. The ratings agencies discovered that the assets backing the MBS’s weren’t worth what they originally thought. They discovered that because housing prices had collapsed. Banks made the mistake of thinking that housing prices would always rise. Had they instead assumed that at some point housing prices might decline, as they have many times in the past, they would have held larger reserves in order to protect themselves.

Greg: “The government could have come in, charged a fee and insured these securities which would have protected their ratings and stopped the forced liquidation. Then with the assets stabilizied, these securities could be bought and sold on the open market and while the open bid may be pennies on the dollar, the bid – ask would rapidly move up as more buyers enter the market pushing up the values greater than the mark to market rate.”

A state guarantee of MBS’s would have done nothing to reverse the collapse in housing prices or the default rate on mortgages, which determine the value of the MBS’s. The assets would not have been stabilized; the risk was simply transferred from the guilty parties, the banks, to the taxpayers. At some point the issuers of the MBS’s would have to default and the taxpayer would pick up the costs. Besides, such guarantees created the moral hazard that got us into this mess in the first place. Banks could have sold their MBS’s at any time for pennies on the dollar, but they didn’t want to take that hit to their equity; they wanted the taxpayer to take it for them and that’s what they’re getting. They don’t care that they are bankrupting the country.

Bob Layson November 26, 2008 at 10:41 am

How is the efficient working of the profit and loss system to be secured by taxing profits and subsidising losses?

Mike Linksvayer November 26, 2008 at 11:55 am

The term “neanderthal economics” should be reserved for anti-trade … delightfully some fairly recent research claims that one of the reasons humans outcompeted neanderthals is that the latter failed to trade.

Ned Netterville November 26, 2008 at 3:31 pm

Here’s a letter to the editor of The New York Times I wrote after Krugman’s article, which provoked Chris Brown’s delightful response. My letter wasn’t published.

Dear Editor,

Paul Krugman urges massive federal spending in this recession. Notably, Krugman’s Nobel prize was not for studies on recessions. His was for “analysis of trade patterns and location of economic activity.” Krugman’s op-ed recommendation echoes John Maynard Keynes’ theories and policies, which were later included in his “General Theory of Employment, Interest and Money.” Similar Keynesian spending policies were implemented first by Herbert Hoover and then by FDR, and they turned 1929′s recession into the decades-long Great Depression.

F.A. Hayek was also honored by Nobel for “pioneering work in the theory of money and economic fluctuations.” Hayek’s work refuted Keynes’. Times’ editorial-writer Henry Hazlitt, who wrote “The Failure of the New Economics, An Analysis of the Keynesian Fallacies” (1959). Regarding Keynes’ “General Theory,” Hazlitt quipped, “I could not find in it a single important doctrine that was both true and original. What is original in the book is not true, and what is true is not original.”

Sincerely,

A day or two after Krugman’s “Depression…” article, Thomas Friedman chimed in with a similar assessment of the economy and identical policy recommendations. I again wrote The Times. My letter wasn’t published:

Dear Editor,

Like Paul Krugman in yesterday’s Times, Thomas Friedman (“Gonna Need a Bigger Boat,” Op-ed 11/16) urges Obama to promulgate “overwhelming stimulus” to save the nation from its economic “meltdown.” Friedman believes Obama should emulate George Bush, who responded to a relatively mild financial recession following 9/11 by inanely advising Americans to go shopping while he stimulated the economy. Krugman and Friedman parrot advice John Maynard Keynes gave Herbert Hoover in 1929 and FDR in 1932. Both men followed Keynes’ advice, and thereby turned the recession of 1929 into a decades-long Great Depression. Bush’s Keynesian policies brought us the current mess.

Karl Marx and Keynes both fancied themselves economists, and both attracted adherents from the ranks of the intelligentsia. Both have had their economic theories logically exploded by real economists, but that doesn’t seem to stop their epigones for dispensing their mentors’ illogical advice.

Sincerely,

After another Krugman article, I wrote The Times. My letter wasn’t published:

Dear Editor,

Krugman urges Obama to “stimulate” the economy as FDR did, and warns, “[T]here’s a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse.”

The Ludwig von Mises Institute in Auburn, Alabama is the world center for the Austrian School of economics. It’s primary function is to publish the economic works of prominent “Austrians” such as von Mises, Carl Menger, Eugene von Bohm-Bawerk, Nobel laureate F.A. Hayek, Murray Rothbard, Henry Hazlit, who served on the editorial staff of The Times during the Depression, and many others. The Institute is neither right or left wing; it is libertarian, or, as Mises would say, (classical) liberal.

Legions of Austrian economists since the Depression have concluded that the monetary and fiscal policies pursued by Herbert Hoover and F.D.R. did indeed turn an otherwise ordinary recession into a decades-long depression.

Sincerely,

In the same article entitled, “Franklin Delano Obama” (NYT, Nov. 10), Krugman also said this:

“And F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion — he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections.

What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.”

One can only surmise that Mr. Krugman will urge Obama to engage the nation in another massive war as a legitimate means of recovery when the monetary and fiscal policies he endorses fail once more. Krugman’s economics as well as his morality are starkly revealed in his contention that war is a fiscal stimulus to economic recovery. He obviously never read Bastiat’s “What is Seen and What is Not Seen,” and even if he did, he probably would not be able understand the thinking of a man of such great integrity.”

Oil Shock November 26, 2008 at 3:35 pm

There is an obnoxious “libertarian” called Don Luskin, who is supposedly writing a book titled “Conspiracy to Keep You Poor and Stupid”. That work is supposed to expose Krugman, but I am not holding breath on it.

gene berman November 26, 2008 at 6:56 pm

Ned Netterville:

Your treatment is good but, still, I’m astounded. It must be recognized that, in requiring all Americans to turn in their holdings of gold except those of numismatic coins and jewelry and by the subsequent stroke in revaluing the domestic gold price to $35, FDR confiscated approximately 47% of the entirety of the money-wealth of the American people.

I’ve not described the extent of the damage quite exactly nor the full implications and ramifications for the American economy nor will I, except to say that FDR realized (correctly) that the act was absolutely vital to his plans to get the entire country to submit—more or less willingly—to a step-by-step program of increasing “socialization.” We are still living with the result, made acutely visible from time to time.

gene berman November 26, 2008 at 7:11 pm

One more thing, Ned.

I am in full agreement with you about the relative “morality” and “integrity” of Krugman as compared to various (named and unnamed) Austrian economic scholars. But these characteristics are not, per se, at the heart of the important distinctions between the “sides” here. All that matters are the correctness or speciousness of the various doctrines advanced and, to an almost equivalent extent, the polemic skill of the parties in presenting those doctrines. In the person of Krugman and a very great number of others, the “other side” has a monumental advantage of persuasive resources. We have far fewer and of far lesser public acclaim. The one advantage we do have, however, of which they can never deprive us (and which, most of us believe, is firm ground on which to base an expectation of eventual triumph) is TRUTH.

Bennet Cecil November 27, 2008 at 8:16 am

Americans will continue to choose a large, expensive and intrusive government until government spending collapses. Investors worldwide are rewarding the US government with record low interest rates with a “flight to safety.” Those interest rates will soar when the federal debt is $20 or $40 trillion and our credit rating is like a junk bond.

When the federal debt service requires 20% of national income, unemployment is 20% and inflation is 20%, Americans will select a different approach. If you remember the late 1970s and triple the pain, this is where we are heading. The idea of a small government getting off of our backs will become more popular than it is now. For now, Americans believe the government will solve their problems, money for nothing and America is an exceptional nation that does have to follow universal economic laws.

You can protect yourself and your family by paying off all debts and investing in real assets like businesses, real estate and gold. We are going to have deflation for awhile, but severe inflation is inevitable.

Bruce Koerber November 28, 2008 at 11:45 am

After perusing a recent article in National Geographic about the Neanderthals I rescind my reference in an earlier comment in this blog series that referred to them as ‘early humans.’

It is probable that the reason they went extinct whereas Homo sapiens continued has a lot to do with the weak entrepreneurial spirit and capacity of the Neanderthal.

The Neanderthals had no choice. It was part of natural law. It would be unjust to degrade the economics of the Neanderthal just as it would be to degrade the economics of a dog or other animal. They are not the recipients of this ‘human institution.’ Economics only exists in the human realm.

In contrast, Krugman and his type have perfect access to this great human reality but choose instead to go down the ego-driven, satanic path. Justice, in their case, necessitates the condemnation of their oppressive and tyranical interpretation and intervention.

Ned Netterville November 30, 2008 at 10:59 pm

gene berman, I cannot comprehend what was said or done to cause so many Americans to turn in their gold. Was it threats? Persuasion? Patriotism? How did a law so contrary to people’s self interest achieve such a remarkable degree of success?

I feel the economic measures adopted thus far by the federal government–plus those that are virtually certain to be piled atop in the near future–to save the nation from the financial/economic crisis, so called, may very well turn the current recession into a deep depression. However, I hesitate to predict that happening because economics is not a predictive science. Unlike economic theories, in the real world all other things never remain equal. There may be at this moment somewhere in America a brilliant scientist at work in his basement or in his company’s laboratory who is about to discovery something, something that proves to be like the computer in the second half of the 20th century or electricity in the first half, which will increase the productivity of American labor and businesses exponentially, thereby more than offsetting the damage to the economy wrought by all of the government’s interventionist policies. Of course if there is such a man or woman out there, I wish he or she would hurry up.

As was said thirty-three times too often during the recent election, putting lipstick on a pig won’t make it a lady, nor will Krugman’s fancy rhetoric make Keynesian economics work.

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