Monday, October 13, 2008

Al Gore Won a Nobel too!

So Paul Krugman won a Nobel prize.

Mr. Krugman subscribes to the Keynesian notion that consumption determines output. He posits that classical and Austrian Economics, which essentially state that capital investment determines output, are flawed in that they cannot explain why there would be unemployment as a result of malinvestment. He argues that it should not matter whether income is spent on consumption goods or capital goods, that a dollar spent is a dollar earned.

Now I'm obviously no Nobel Laureate, but here's my explanation:

1) Consumption goods are created with factors of production. Namely, labor and capital stock (factories, equipment and infrastructure).
2) Creating capital requires foregoing consumption, otherwise known as "saving".
3) Capital depreciates, and therefore must be replaced with an investment of savings.
4) If incomes are diverted from savings to consumption or speculative activities, capital investment will not replace the capital stock and the capital stock will shrink.
5) Shrinking capital stock must, at some point, cause falling output.
6) Falling output must manifest itself in one of two ways: 1) falling real wages or 2) unemployment.

Krugman seems to believe that either a) capital does not depreciate or b) consumption need not equate to output. Are either of these assumptions realistic? I suppose if you relaxe the notion of diminishing marginal returns and infinite inventories.

Is there another explanation?

Saturday, October 4, 2008

Capitalism is Dead

Congress is a group of criminal thieves. Pelosi, Reid and Boehner, along with Bernanke and Paulson are Sovietizing our financial sector.

We have learned nothing about economics in the last 95 years.

Prices are trying to fall. Bad assets need to be liquidated. Reckless and in competent investors need to be wiped out. A crash is a healing, cathartic process. None of this will be allowed to happen. The cancer will live on, fed and nurtured by "easy money" from the Fed's digital printing press. Instead, real wealth will be siphoned off from the middle class and redistributed by congressional gangsters to their criminal donors on Wall Street. And the sheeple stand by and do nothing.

The lesson of the Great Depression was cronyism and price fixing will not solve the crisis- it only deepens and prolongs it. No serious economist disputes that.

This bailout forestalls the inevitable price correction. It will not stop it It will merely change it's form into something more sinister. Political thievery has now supplanted the honesty of economic Darwinism and the elegance of spontaneous order. Welcome to National Socialism! Where are my jack boots?

In the words of George Carlin, "They won't stop until they take it all!".

Blog Response to Robert Samuelson's Column

Mr. Samuelson should be advised that there is one economic school of thought that has been consistently sounding the alarm on the credit bubble for quite some time- The Austrian School.
See: Mises, Hayek, Rothbard, and even, yes, Ron Paul.

What we don't need is a bailout that attempts to create value using a government redistribution scheme where there is no value. This bailout is a welfare giveaway that will divert real wealth from the middle class into the bank accounts of reckless and incompetent institutions. And it will PROLONG the recession. NO BAILOUT!