The a priori method in economics – In defence of Ludwig von Mises (essay)

Ludwig von MIses

I gave a speech on this topic at the Libertarian Alliance in March. A link to the video recording of that speech is here. The following essay covers similar ground but is not identical with the speech. I develop the argument differently here. My hope is that this text is a better articulation of my views and hopefully a good basis for further debate. The topic of this essay is broadly the method of economics: What phenomena does economics deal with? How do economists develop and test economic theories? What type of … [Read more...]

Roubini attacks the gold bugs

Nouriel Roubini

Earlier this month, in an article for “Project Syndicate” famous American economist Nouriel Roubini joined the chorus of those who declare that the multi-year run up in the gold price was just an almighty bubble, that that bubble has now popped and that it will continue to deflate. Gold is now in a bear market, a multi-year bear market, and Roubini gives six reasons (he himself helpfully counts them down for us) for why gold is a bad investment. Roubini does not quite go so far as to tell his readers that there is no role … [Read more...]

Book review: David A. Stockman – “The Great Deformation – The Corruption of Capitalism in America”

Cover of David A. Stockman's The Great Deformation

David Stockman’s new book “The Great Deformation” is a brilliant, penetrating analysis of the present state of the US economy and the US political system, and a detailed account of how the nation got into this mess. The book will upset Democrats and Republicans alike, and quite a few other constituencies as well, which can, in this case, be safely accepted as proof that Stockman’s narrative is spot on. Stockman is an angry man and he admits so himself early in his 719-page tome. That anger adds bite and verve to his writing … [Read more...]

The true significance of the $1 trillion coin

dollar sign sinking in sea

Under President Obama the debt of the United States government has grown by about 50%, and now stands at close to $16 trillion. Every year, the US government spends between $1.2 and $1.5 trillion more than it takes in. Every day that financial markets are open the US government has to borrow an additional $4 billion. The pathetic fiscal cliff ‘compromise’ of last week has proved the most cynical students of the political elite correct in that there is not a snowball’s chance in hell that Washington will ever get this under … [Read more...]

It’s a mad mad mad mad world

"Pioneer of guidance" Mark Carney

Shinzo Abe, Japan’s new prime minister, has some exciting new ideas about how to make Japan’s economy grow. How about the government borrows a lot of money and spends it on building bridges and roads all over the country? If that doesn’t sound so new, it is because it isn’t. It is what Japan has been doing for 20 years, and it is the main reason why Japan is now the most heavily indebted nation on the planet – and still not growing a lot. Its debt-to-GDP ratio stands at an eye-watering, world-record 230 percent, which … [Read more...]

Prozac-craving markets

dollar notes falling from sky

In my view, there is no escaping the fact that things are not getting better. If anything, they are getting worse. Following the large swings in financial markets this past week and reading the commentary in the press, it strikes me that there is still a surprisingly strong belief out there that our fate is in the hands of the policymakers, who presumably still have it in their power to make things better for the economy. How can they do this?  Well, expect nothing new here: Mainly by the time-worn strategy of lowering … [Read more...]

By abandoning the gold standard we embraced monetary central planning, chaos

Ben Bernanke

With this essay I will try to reconcile two apparently conflicting perceptions of the key problems with our present monetary system. I will start by characterizing these two positions first: As readers of this website and my book know, it is my conviction that the central problem with the present system is the high degree of elasticity of the money supply. A system of constant fiat money expansion, of ongoing injections of new money into the economy via financial markets - sometimes slow, sometimes fast - must … [Read more...]

Europe’s voters say ‘No’ to economic reality

Balls of euro banknotes

"Europe fights back against austerity" was how The Daily Telegraph headlined its weekend election coverage. "Anti-austerity movements are gathering pace across Europe following political earthquakes in France and Greece. A total of 12 European governments have now been dismissed in three years." As the European welfare state is officially in its death-throes none of us should be surprised if political strife gets cranked up to eleven. I firmly expect that we will see much more of this in the future. While I can understand … [Read more...]

How to debate Paul Krugman

Ron Paul vs. Paul Krugman debate

Paul Krugman is the high priest of Keynesianism and modern interventionism, of economic improvement through inflation and budget deficits. As such he is bête noir among us libertarians and Austrian School economists. What makes him so annoying is his unquestioning, reflexive and almost childlike enthusiasm for state intervention, even in the face of its obvious failure, and his apparent unwillingness to probe any deeper into the real causes of our present economic problems or to show any willingness to investigate the … [Read more...]

Infinite stupidity

dollar notes falling from sky

"The unlimited resources" of the European Central Bank (ECB) is quickly becoming the new magic mantra in political commentary and financial market analysis, now that the bigger euro-dominos are beginning to wobble and everybody realizes that nobody has the firepower to bailout Italy, or to 'recapitalize' (i.e. bailout again) all the banks that lent to the country. So the chorus that demands that the printing press finally be put to good use is getting louder by the day. Robert Peston, the BBC economics expert, last week … [Read more...]