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    The Will to Create

    Entries in depression of 1920 (1)


    The emptiness of Ron Paul's critics

    Critics of Ron Paul such as Noah Millman and David Frum make general claims denigrating Paul's "radical"  proposals, but they don't have any substantive criticisms. Anyone who thinks that protecting the status quo is reasonable after years of statist/interventionist decline which have brought us to the edge of collapse is not qualified to analyze the current political conflicts.

    Politically motivated monetary policies inflicted on us by the Fed have kept afloat a corrupt system which has finally stagnated the economy and created such uncertainty among entrepreneurs and investors that the very middle class with which the likes of Millman and Frum are concerned have been shut down and shut out. You don't have to be an economist to understand which side of the current battle between Keynesian and libertarian economics operates in reality, but it helps to have read Krugman and Thomas E. Woods, and to possess the ability to reason - Millman and Frum have obviously not compared the two, or, if they have, lack the ability to honestly reason. Anyone of average economic intelligence who isn't a hopeless partisan who reads Krugman and Woods in light of our current economic problems can only come to the conclusion that vulgar Keynesian has crippled economic growth.

    In his book Rollback, Thomas E. Woods addresses the housing boom and bust:

    During a boom, labor and physical resources are attracted to sectors where, it will later be discovered, they did not belong. During the housing boom some 40 percent of all new jobs were in the housing sector. That could not continue.

    Failing firms need to be allowed to go bankrupt. The structure of production undergoes considerable change during the recession period, and the sustainable pattern of consumption and production that results will not permit all firms to continue as before. Bankruptcy permits new owners to take over the assets of failing firms, and either conduct those firms according to a different business model, or simply sell off assets and compensate as many of the creditors as can be accomodated.

    The government's predation on the economy, in the form of spending and taxation, should be reduced. Resources are thereby released that entrpreneurs can use to realign the capital structure in light of the changed conditions that the bust brought to light.

    This strategy was followed in the depression of 1920-21, which saw unemployment shoot up to 12.4 percent and production decline by 17 percent. Wholesale prices fell by 56 percent. The political class today would be screaming for all kinds of "stimulus" to reverse this death spiral. But the federal government at the time cut its budget in half from 1920 to 1922 and cut the national debt by one third over the course of the 1920s. Income tax rates were lowered for all income groups throughout the decade, but these lower taxes took effect after the recovery was already in progress. The Federal Reserve, for its part, did not engage in open-market operations ( in which the Fed purchases assets with money it creates in order to increase the amount of money in circulation) to increase the money supply. The economy was allowed to adjust without the so-called countercyclical government policies that we are told are essential. Signs of recovery were evident by the late summer of 1921, which is when the National Bureau of Economic Research says the depression ended. Joseph Schumpeter, one of the eminent economists of the twentieth century, believed that the 1920-21 case "shows better than any theory could how the system pulls itself out of the troughs under its own steam."

    This is what Frum and Millman call radical ideas proposed by Paul -- they would likely say that things are different in the 2000s. What we're talking about, though, are economic principles, and this is what makes Paul different -- he adheres to time tested principles, whereas the Frums and Millmans praise pragmatic tweaks and ignorant government interventions which fail over and over.

    Also, anyone who's read the history of American interventionism overseas, especially in the mideast, can only praise Paul's non-interventionist position as the right course for America in the 20th century. Neocons and progressive hawks have led foreign policy astray, and the sad situations of Iraq, Afghanistan and Libya reveal the failures of foreign policy. A strong defense and appropriate responses to terrorist attacks are one thing, but the attempts to remake the mideast are doomed to failure -- history has confirmed this.

    If Paul's critics have any substantive reasons why Paul is wrong, then they ought to explain their reasons rather than continue the empty attacks and smears.