Comments on: Inflation as Income Distribution

By: Stephen Grossman

Stephen Grossman — Thu, 15 Jan 2009 15:58:15 +0000

>[White]Austrian school…assumptions have not been revised in light of advances in anthropology and neurology.

Reality is independent of consciousness regardless of modern philosophy and its anti-conceptual disintegration of the special sciences. Production for a market has properties independent of psychology. Someone who faces, eg, an increased supply of fiat currency must respond to it regardless of how his psychology allegedly determines his response. Both Mises and Keynes will pay increased prices.

By: William White

William White — Thu, 15 Jan 2009 02:38:01 +0000

Sorry if my lack of elaboration misled you. My problem with the Austrian school is that its assumptions have not been revised in light of advances in anthropology and neurology. The basic assumption that command economics creates an endless positive feedback loop leading to failure is extremely sound. In fact this critique of positive feedback loops is true for all systems simple enough to analyze. However going from reduced flucuations to no fluctuation by means of market driven negative feedback would require zero output.

By: Stephen Grossman

Stephen Grossman — Wed, 14 Jan 2009 23:27:06 +0000

Scott Martin:
The fallacy of ignorance is a logical error in reasoning, not a personal attack. It equates knowledge with the lack of knowledge.

By: Stephen Grossman

Stephen Grossman — Wed, 14 Jan 2009 23:22:51 +0000

William White:
My error. I thought you made a claim. But you questioned someone else’s claim.

By: William White

William White — Wed, 14 Jan 2009 23:12:14 +0000

Totally agree with that response Mr. Richman by the by myself are there studies out there detailing the cumulative damage to the poor of the intermittent inflation since 1913 and the continuous price rises since 1958? I am particularly interested in the inadequate inflation allowance for replacement costs of plant and equipment of net national investment and its effects on job creation.

thank you

By: Sheldon Richman

Sheldon Richman — Wed, 14 Jan 2009 21:08:35 +0000

Scott, the “by the way” is to show that it is an aside, but nonetheless noteworthy. Considering that allegedly compassionate “progressives” are all in favor of the current inflation and, if anything, fear it is too moderate, I thought it was worth pointing out that their policy transfers wealth upwards, contrary to their pose as champions of the downtrodden. What’s your problem with that? Libertarians, thinking of themselves as people of the right, are often oblivious to upward transfers while being awfully sensitive to any downward transfers. I don’t understand that attitude. The corporate state mostly transfers wealth up (not necessarily in overt cash subsidies) and does most the damage to society. You don’t like the poor? I don’t like the rich who live parasitically off the rest of us. (The rich who don’t are fine with me.) Maybe if we removed all the state barriers to individual prosperity, we’d have fewer poor and you’d have fewer people to dislike.

By: Scott Martin

Scott Martin — Wed, 14 Jan 2009 19:53:03 +0000

Good response, William.

Mr. Grossman seems so wrapped up in making an argument that he fails to think. Also one of the most arrogantly condescending comments I’ve ever read.

Good article. I had a problem with this from the end, however:

And by the way, the distribution is not from rich to poor. If anything, the distribution is upwards.

The explanation following does not support that. The distribution could easily go from rich to poor. What difference does it make? Am I supposed to feel better about it if it benefits the poor? I really don’t like the poor. The use of bogus sentimentality and class warfare in your argument is as unnecessary as it is deceitful. Stick with the facts, you were winning there.

By: William White

William White — Wed, 14 Jan 2009 19:20:03 +0000

By ignorance do you mean your incredible anti-assumption that government intervention causes fear and greed? It either does or it doesn’t. Can you cite any neurologists who would not laugh at your excursion into the limbic system?

By: Stephen Grossman

Stephen Grossman — Wed, 14 Jan 2009 03:34:46 +0000

William White:
>the assumption that fear and greed does not operate in the absence of government stupidity is at best unproven.

fallacy of ignorance. Youve not provided evidence for anyone to prove or refute. Eg, prove you did not murder
someone.

>the Tulip Craze didn\’t need government intervention nor did the initial railroad booms.

“There had been attempts to introduce an irredeemable fiat currency. But these fiat money experiments, associated in particular with the Bank of Amsterdam, the Bank of England, and John Law and the Banque Royale of France, had been regional curiosities which ended quickly in financial disasters, such as the collapse of the Dutch “Tulip Mania” in 1637 and the “Mississippi Bubble” and the “South Sea Bubble” in 1720.” [Hans-Hermann Hoppe, The Political Economy of Monarchy and Democracy]

I’m unsure which railroad booms you mean. However, in “Notes…” (in _Capitalism…_, Ayn Rand details govt subsidies to 19th century US railroads. She cites various sources.

In “What is Capitalism” (op cit), Rand says that there is no systematic study of what part of US economic history is capitalist and what part is not. My advice: if there is an economic problem, look for an indirect govt cause. Austrians should favor this. Rand lists several Mises books in the bibliography.

In “The Ayn Rand Letter (#17-21),” a 1970s periodical (Ayn Rand Bookstore), Rand powerfully and clearly describes the destructiveness of inflation’s effect on producers’goods in terms of the evasion of long-range thinking. She describes the much and properly abused Keynes as an epistemological savage. _Human Action_ and _Theory of Money and Credit_ are in the bibliography. She has obviously been influenced by Mises concern with time.

By: William White

William White — Mon, 12 Jan 2009 04:54:19 +0000

Cyclical expansion of negotiable instruments: stocks, bonds, mortgages and less common things; do not seem to be money yet they are easily either used as money or converted to money. The mortgage meltdown happened, in part, because mortgages cease to be counted as money as soon as they are tranched out of the banking system. But did they spend like cash? For all intents and purposes yes. Drug deals paid for with bearer bonds led to the decline of bearer bonds. Registered securities require the sale and the recording of the sale of bonds making it easier for the government to stick its nose in the business of citizens but AAA insured and treasuries are still cash for all intents and purposes and are treated as such by financial planners. Stocks, even preferred shares, are money to a much lesser degree but they are used to buy companies. While government intervention amplifies and lengthens upturns and downturns the assumption that fear and greed does not operate in the absence of government stupidity is at best unproven. What can be expected in a free market are shorter and, usually, shallower downturns but also slower build ups to booms that become catastrophic bubbles less often. However the Tulip Craze didn\’t need government intervention nor did the initial railroad booms.

By: TerriK

TerriK — Sun, 11 Jan 2009 23:21:17 +0000

Sheldon, thank you for this article. Well done!

By: Sheldon Richman

Sheldon Richman — Sun, 11 Jan 2009 16:03:06 +0000

William, if unsustainable booms are the result of government expansion of the money supply, why would they be necessary? This implies that monetary expansion is necessary, but why would that be so?

By: Joe

Joe — Sat, 10 Jan 2009 18:49:34 +0000

yeah but Judas was a presumed apostle and certainly didnt end up acting like one. that doesn’t debunk the rest of them.

By: William White

William White — Sat, 10 Jan 2009 01:25:29 +0000

Actually I would be much more confident if no one, not thrown up by the free market, were in any position of power. Read the works of Greenspan in particular his contributions to \"Capitalism: The Unknown Ideal\". He was appointed fed chairman as a presumed Austrian.

By: Dennis Bowland

Dennis Bowland — Fri, 09 Jan 2009 23:32:17 +0000

This was an excellent piece from Mr. Richman. By the way, in my studies of Mises & Hayek (particularly Mises) I believe that they were not fans of the cycle theories of either Juglar or Kondratieff.

Mises’ world of economics was black and white. He was the anti-Keynes. Wouldn’t it make you feel a lot more confident if somebody like him were in some position of power today.

By: William White

William White — Fri, 09 Jan 2009 21:11:31 +0000

My one problem with the Austrian school are the assumptions (not necessarily by von Mises or Hayek but rather their disciples) that:

Juglar and Kondratiev were wrong in proposing that even severe booms and busts were necessary. I consider the separation of fools and their money a necessary part of non-lethal selection of traits and that is also the read of demographers derived from the PRIZM and TAPESTRY models.

That the creation and destruction of money through the exchange of negotiable notes can and should be controlled.

Otherwise great article.

By: Frans Verloop

Frans Verloop — Fri, 09 Jan 2009 14:10:25 +0000

Two groups of people who are particularly hard hit by this type of robbery, because they are often no longer in a position to do anything about it, are those who live on a fixed pension and those who depend on the interest income of their investment