Monetary Policy Hearing Today, or: Ron Paul Versus the Kochtopus.

Ron Paul is holding one of his first monetary policy hearings today, and he hasn’t sold out.  Ron Paul is from the school of libertarians that hates D.C. libertarians, which is weird since Ron Paul is one of the most well-known libertarians in D.C.  How does that work?

The term Kochtopus was originally used as a slur by some libertarians to describe the Koch brothers funded wing of the libertarian movement (Cato, Reason, etc.).  There’s a lot of fighting over ideology, purity, funding and intellectual legacies between two groups of libertarians that splintered in the late 1970s/early 1980s, and Paul is on the other side of that divide. Here’s a representative explanation by Lew Rockwell:

This is yet another example of how the Koch Brothers operate. While their ideological institutions on public campuses or Capitol Hill operate under a veneer of libertarianism or even Austrian economics, the actual policies they push expand the State: massive money printing (for the big banks and big companies), school vouchers (to deliver private schools into the hands of government), the Ownership Society (every person a homeowner through Greenspan’s housing bubble), Social Security Privatization (a new layer of forced savings on top of the present SS taxes, to benefit Wall Street), etc. Is it any wonder that the Kochs have never, in 28 years, invited Ron Paul — the only public official for honest money — to their annual monetary conference, but instead invite and hail the central bankers who can do the plutocrats so much good?

Chris Hayes had a short history of the two, where he described the paleolibertarians, centered around the Mises Institute, and cosmopolitan libertarians of the Cato Institute. Cosmopolitan libertarians is too nice a gloss on it. We know how they roll – they’ll criticize QEII for pushing inflation expectations, but not state that any activity of the Federal Reserve is legalized government counterfeiting.  They’ll make clever historical arguments about Hayek having a lot to say about the welfare state instead of the more important argument that Abraham Lincoln was modernity first great dictator.  They’ll talk about coco bonds and ratings agencies when it comes to financial reform, without making the argument that 1870 was the last time we had a free and functioning banking system.  Pushed into a corner, they’ll probably even mumble some argument about how there could be situations for defending deposit insurance, fractional reserve banking and not having a gold standard, instead of proudly stating that these are all boots stamping on a human face forever. They’re the ones that like all the pretty songs, and they like to sing along, and they like to shoot their guns, but they don’t know what it means.

So Ron Paul is holding a monetary policy hearing today. Is he going to keep it real, or is he going to go to cosmopolitan libertarians for experts? Scheduled to testify at the hearing:

Can Monetary Policy Really Create Jobs?
· Thomas J. DiLorenzo, professor of economics, Sellinger School of Business, Loyola University, Baltimore, Maryland
· Dr. Richard Vedder, professor of economics, Ohio University
· Dr. Josh Bivens of the Economic Policy Institute, Washington, D.C.

I like the title: does monetary policy ever really work? As for the witnesses, Thomas J. DiLorenzo is a senior fellow at the Ludwig von Mises Institute. He’s got the Lincoln stuff down pat.  He appears to be best known as an author of Lincoln Unmasked: What You’re Not Supposed to Know About Dishonest Abe (example, see this interview:“I saw it as my duty to spread the truth about what a horrific tyrant Lincoln was…. I think secession is not only possible but necessary if any part of America is every to be considered “the land of the free” in any meaningful sense…Lincoln was almost exclusively devoted to Hamiltonian mercantilism — high protectionist tariffs, other forms of corporate welfare, a central bank modeled after the Bank of England to pay for it all, and political patronage and matching politics….The entire agenda of Hamiltonian mercantilism was put into place during the Lincoln administration — along with the first income tax, the first military conscription law, and the creation of the internal revenue bureaucracy, among other monstrosities”).

He writes less about the Federal Reserve and monetary policy. He writes about central banking policy at the founding of our country as a debate between Hamilton and Jefferson, but post WWII central banking gets mentioned only as “the Fed and its legalized counterfeiting operations” and that TARP was just like “appointing the US Treasury secretary as the nation’s first financial dictator.”   This should make for an interesting conversation on monetary policy.

I’m not trying to cherry-pick. You can read his articles at Mises or Lew Rockwell. He has his opinions and arguments. What I’m interested in is the dialectical relationship between what Ron Paul is doing and what other people on the Right are doing. By moving the goalposts and the dialogue so far to the Right, and by properly harnessing the people’s mass discontent with the financial system, the crisis and the Federal Reserve, Paul’s activities are going to make the idea of stripping Maximum Employment from the Federal Reserve’s mandate seem downright sensible. He’s going to clear the space for the idea that the regional banks chiefs, instead of being ultra-conservative people who think unemployment is fine and who want a monetary policy that benefits business interests, are “regular folks” who “get it” outside the failed navel-gazing bureaucrats of the Federal Reserve.

He’s also going to make Paul Ryan look reasonable instead of someone who is both uninformed and terrible on monetary policy. In each case he’s building on problems people are experiencing and pushing them further to the right. Do liberals have any type of counter-narrative rather than relying on discredited technocrat expertise?

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74 Responses to Monetary Policy Hearing Today, or: Ron Paul Versus the Kochtopus.

  1. Guillaume says:

    Couldn’t modern monetary theory be the “far-left” answer to the goldbugs? Jamie Galbraith could do the job.

    Perhaps somebody like Michael Hudson, but no Democrat in his right mind would invite him. Joe Stiglitz perhaps?

    • Benedict@Large says:

      Michael Hudson, in spite of being from UMKC, is not MMT, and neither is Joe Stiglitz. Jamie Galbraith is, but seems averse to presenting ideas as having been derived from MMT. Perhaps this is because one’s career seems to get lost unless one is willing to speak like monetarism is the 11th Commandment.

      As far as MMT being the “answer to the goldbugs”, no. It is simply THE answer.

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  3. Chris Dornan says:

    A cracking post. What nihilistic times we live in eh.

  4. Tom says:

    Yes QEIi CAN create jobs but unfortunately they will be in other countries. Corporations aren’t stupid. Their objectives are to make money – not employ people.

  5. chrismealy says:

    Another vote for Jamie Galbraith. His books “Created Unequal: The Crisis in American Pay” and “The Predator State” shook me out of my neoliberal technocratic doldrums. He should have been running Treasury.

    MMT is definitely my vote for the countervailing force. I still can’t tell if they’re crackpots or not (maybe Mike can decide for me) but I love them for their focus on full employment. At least they’re trying.

    It pisses me off the Matt Yglesias is completely in love with Scott Sumner and doesn’t give the MMT crowd the time of day. That and his affection for that racist are why I finally gave up on him.

    • Benedict@Large says:

      Matt is a Harvard boy, and to go by Bill Mitchell’s recommendations, Harvard is not a place you want to go to understand macroeconomics. Harvard is perhaps only second to Chicago in that regard, and Harvard does leave one with a big ego.

    • studentee says:

      there’s nothing inheritantly left or right about mmt. it just tries to model exactly how the monetary institutions of non-controvertible currency states work. i think it does it much better than any alternative. thus it leaves us with a set of policy options that are different than the ones the neoclassical paradigm offers. some of these options should be very attractive to progressives…

    • studentee says:

      yeah, scott sumner is just terrible. what’s the explanation for all this fawning blogosphere attention?

  6. dajo9 says:

    Best Nirvana / monetary theory metaphor EVER. Also the only one EVER.

  7. ComradeAnon says:

    We can rely on that “Liberal Media” to be the counter narrative.

    • lee bronock says:

      Dear Comrade;
      You haven’t been hanging out at the “Festung Annenberg” lately, have you? I get the sarcastic irony of “Liberal Media,” but isn’t the term Media a self contained oxymoron? See you at the barricades.

  8. rootless_e says:

    But how many times does someone from EPI get to testify on the Hill?

    And on a related note

  9. Aidan says:

    Did that guy call Scott Sumner racist? Am I missing something here?

    • chrismealy says:

      No, not Scott Sumner. I’m talking about a notorious racist troll that MY links to. I’d tell you his name but then the creep would start lurking here too.

  10. Matt D. says:

    You might take note that DiLorenzo predicted the housing bubble before there was a bubble, way back in 1999. Take a look at his article Regulatory Sneak Attack.

    “The CRA is a welfare program financed by (legal) regulatory extortion. It is bound to have a negative effect on the capital values and stock prices of banks in particular and and on the entire economy in general, because it socializes a portion of the capital markets. The major negative effect on the economy is the diversion of capital from economically sound to politically popular but economically dubious uses. A moral hazard problem is also created, in that a signal is sent to lower-income people that one does not necessarily need to become creditworthy (by working regularly, paying one’s bills, and saving part of one’s earnings, for example) to have access to credit, but to become politically connected instead.
    “The Clinton administration has been budgeting over $100 million per year in federal subsidies for “community development banks,” which are another (similar) way of politicizing lending. This, along with the expansion of the CRA, possibly into credit unions and the insurance industry, is a recipe for another savings-and-loan-type financial disaster in the future.”

    This was prescient, I think.

    • Allan L says:

      Matt, I’m sorry that you have fallen for the false idea that the CRA had anything to do with the housing bubble. It was an international housing bubble, so clearly a piece of American legislation had nothing to do with house prices in Spain, for example. Banks covered by the CRA were less likely to get into trouble than those in the shadow banking system. The CRA is over thirty years old and it’s odd that it would only have started to cause trouble now. The CRA didn’t cover commercial real estate, where there was also a bubble, so it wasn’t the cause there.

      I could go on, but the whole idea has been debunked so many times that you can find a good debunking with a quick Google search. As for being prescient, even a stopped clock is right twice a day, and predicting a savings and loan type disaster sometime in the future isn’t that impressive if the future can be 9 years away and the definition of savings and loan crisis type of disaster is broad enough to encompass a credit freeze caused by financial tomfoolery that wasn’t even invented in 1999! But, apart from being wrong about the cause and being almost a decade too early, very prescient.

      For the record, I predict a financial crisis-like crisis in the future based on the utter failure to reregulate the system properly as the legislators were bought off by the big banks, who are the true moral hazards out there (not the poor, who get blamed for everything because, as we all know, people with no money are the real puppet masters of the financial system).

      • Mary says:

        I agree that CRA had nothing to do with the crisis. What has been at the root of all the RE bubbles has been the adjustable mortgage and its abuse. It was created in the early 80’ies and has caused nothing but housing inflation since its introduction. With no regulations on the mortgage industry it blossomed into the toxic bomb of the last few years.

        And I agree that any time someone starts to blame F&F or CRA I know they are ignorant of the facts.

      • Artisan says:

        Allan, sure you can find any kind of debunking on google that you want… but is that really an argument that tells us anything else than to just ” buzz off” because you’re in a bad mood?
        Di Lorenzo stated that credit policy cause many years ago, but all the other ones too (Greenspan policies – money printing through credit in general – inflation) in other papers, as you would know if you ‘d just care to google.

        Of course, you seem to dismiss all consequences of policies that stand apart more than 10 years from the events. I see, than you must be one of those evil “Global warming deniers”…, not?

    • Andrew says:

      Or not. I’m sorry, but people like Nouriel Roubini, Robert Shiller and Dean Baker have all pointed out that if one looks at the Great Recession in international perspective, one sees funny things like how countries with no counterpart to CRA, Freddie or Fannie had huge housing bubbles and/or financial crises.

      So no, I’m sorry, DiLorenzo reveals himself, with that “prescient” observation, to be another Peter Schiff, one who yells “socialism” and “inflation” in place of economic analysis.

    • rootless_e says:

      “Mendacious” is the word you need there instead of “prescient”. Love these Glibertarians who fall into apoplexy when a nickel of public money goes towards helping a poor person afford a meal but who are utterly blind to massive subsidies of the rich and powerful. It almost makes you think of Glibertarians as the kind of hypocritical moral cripples who would go to Pinochet’s Chile and exchange toasts with Generals on the subject of “economic liberty” while the General’s police were ripping eyeballs out of screaming prisoners.

      • INDYGUY77 says:

        And this betrays your massive ignorance. Point to where DiLorzenzo is fine with “massive subsidies to rich and powerful” or shut up about it.

        I’ll save you the time: You cannot do so because no regular on supports taxing the poor to give to the rich.

        But I know the truth is just too terrible to bear: folks should be left alone to live their own lives. The idea! Why…. that would leave no room for condescending jerks like you to run other folks’ lives!

      • rootless_e says:

        The man is a moral cripple indeed. Consider this atrocious and typical bit:
        I quote Senator Toombs from Georgia in my book, complaining that, even before the War, there was a federal government program that paid Boston cod fishermen a bounty on each codfish they caught. We were already seeing the beginnings of pork barrel politics. The Southerners saw that the North had the upper hand in allocating the money. They were at the point where they knew they were going to be out-voted in Congress for a long time because of the way the population was shaping up. That’s why the tariff was important.

        The way it really harmed the South was perfectly understood by Calhoun in the 1820s. The tariff primarily benefited the Northern manufacturers. They’re the ones that had less competition because of the tariff, aside from the effect on consumers.

        Well, to hell with that. You want to talk about the government interfering with the free economy of the South where the government was in charge of torturing enslaved human beings and murdering them when they rebelled and you are confessing to being a twisted creep. The peak of despotic government in the USA was when the South sent its slave hunters north to seize men and women who had escaped the depraved system of violent murdering slavers and drag them back to captivity. Typical of Glibertarian’s who make hypocritical lying into an art form. How dare that jackass whine about the effects of – OMG – “tariffs” on the psychopathic slave economy of the Confederate serial murdering states?

  11. acontra says:

    Mike, why you always gotta be such a downer.

    Seriously though, thank you for keeping it real.

  12. lester says:

    The author clearly isn’t familiar with very commonly held beliefs many libertarians have on presidents like Lincoln, Wilson , and FDR. We hate them, basically. We have a different narrative of history, one that values leaving people alone instead of killing them. 600,000 people, almost none of whom had anything to do with the slave trade, died in the civil war. That’s insane. All so black people could be treated ABOUT as badly as they had been for another hundred years. Lincoln himself was a horrible racist. He was the first to invite blacks to the white house, but when they came he urged them to go back to Africa!!

    As for making this person look bad or good or moderate who cares? Is this American Idol or America period? Who cares how things look.

    • andrew says:

      “Lincoln himself was a horrible racist.”

      Way to oversimplify a complicated story. That might be acceptable on a Mises discussion board, but not in the waking world.,1

      The Great Emancipator was far more complicated than the mythical hero we have come to revere.
      Henry Louis Gates Jr.
      February 12, 2009

      “…Even as he was writing the Emancipation Proclamation during the summer of 1862, Lincoln was working feverishly to ship all those slaves he was about to free out of the United States. So taken was he with the concept of colonization that he invited five black men to the White House and offered them funding to found a black republic in Panama, for the slaves he was about to free. Earlier, he had advocated that the slaves be freed and shipped to Liberia or Haiti. And just one month before the Emancipation became the law of the land, in his Annual Message to Congress on Dec. 1, 1862, Lincoln proposed a constitutional amendment that would “appropriate money, and otherwise provide, for colonizing free colored persons with their own consent, at any place or places without the United States.”

      Two things dramatically changed Lincoln’s attitudes toward black people. First, in the early years, the North was losing the Civil War, and Lincoln quickly realized that the margin of difference between a Southern victory and a Northern victory would be black men. So, despite severe reservations that he had expressed about the courage of black troops (“If we were to arm them, I fear that in a few weeks the arms would be in the hands of the rebels…”), Lincoln included in the Emancipation Proclamation a provision authorizing black men to fight for the Union.

      The other factor that began to affect his attitudes about blacks was meeting Frederick Douglass. Lincoln met with Douglass at the White House three times. He was the first black person Lincoln treated as an intellectual equal, and he grew to admire him and value his opinion.

      Three days before he was shot, Lincoln stood on the second floor of the White House and made a speech to a crowd assembled outside celebrating the recent Union victory over the Confederacy. With his troops and Frederick Douglass very much in mind, Lincoln told the cheering crowd, which had demanded that he come to the window to address them, that he had decided to recommend that his 200,000 black troops and “the very intelligent Negroes” be given the right to vote.

      Standing in the crowd was John Wilkes Booth. Hearing those words, Booth turned to a man next to him and said, “That means nigger citizenship. Now, by God! I’ll put him through. That is the last speech he will ever make.” Three days later, during the third act of Our American Cousin, Booth followed through with his promise…

      So, was Lincoln a racist? He certainly embraced anti-black attitudes and phobias in his early years and throughout his debates with Douglas in the 1858 Senate race (the seat that would become Barack Obama’s), which he lost. By the end of the Civil War, Lincoln was on an upward arc, perhaps heading toward becoming the man he has since been mythologized as being: the Great Emancipator, the man who freed—and loved—the slaves. But his journey was certainly not complete on the day that he died. Abraham Lincoln wrestled with race until the end. And, as Du Bois pointed out, his struggle ultimately made him a more interesting and noble man than the mythical hero we have come to revere.”

      • Andrew says:


      • Adam Sharp says:

        “Two things dramatically changed Lincoln’s attitudes toward black people. First, in the early years, the North was losing the Civil War, and Lincoln quickly realized that the margin of difference between a Southern victory and a Northern victory would be black men.”

        Truly? This is part of your argument for why he’s a good guy? Lincoln came to love them because he had need of cannon fodder?

        I don’t know enough about Lincoln, or DiLorenzo to comment further. But using ones’ decade-old views of history to judge their character is questionable, for me personally at least. I was an a$$hole 10 years ago. Not today, surely.

    • Djur says:

      I’ve heard that one before, and I’ve always wondered why self-proclaimed “libertarians” would dismiss the importance of ending the practice of human beings being held as literal property. I get it, now, though: to those libertarians, property is as important as human beings, so it’s a distinction without meaning.

      Good to know!

      • thecrackshotcrackpot says:

        I think you are confusing (intentionally or otherwise) the concept of secession and the concept of slavery. Find me something that links libertarianism to promoting slavery and I will retract my low opinion of you, an ignorant slut with no zeal for research.

        There are many ways to skin a cat, my sexy online sparing partner, and you would do well to keep that in mind when you begin to research the social, economic, and political climate of the United States right before the Civil War.

        Holla back when you’ve done some research on both secession in the U.S. and slavery’s role in the Civil War

      • Tim Furey says:

        Why not ask the southerners what they thought of the link between slavery and secession, then? It isn’t hard to find, unless you’re avoiding it.

    • rootless_e says:

      There are also people who have the sincere belief that Adolf Hitler was a nice guy maligned by the Jews. That people have such opinions is evidence of the moral limitations of human beings, but it’s not commendable. The war against Confederate Treason was not a complete victory, but the efforts of despicable people to excuse the empire of whips and chains is a complete moral failure.

  13. Thanks the heavens for Ron Paul. I realize that Paul Krugman has went off the deep end, but it’s nice to have someone up there that is sensible that actually understands how economics work.

    • Andrew says:

      Ron Paul understands economics? is that why he had Peter Schiff as his economic adviser, a guy who answered to the claim that American workers are being shafted (based on the evidence that productivity per worker is rising while pay is stagnant or declining) by saying that American workers’ productivity is in fact NOT rising but is rather declining, and then uses as evidence the fact that “we have such a huge trade deficit with China. If American workers are so productive, why do we have a trade deficit with China?”

      Apparently, Peter Schiff hasn’t heard of monetary policy, i.e. China is inflating the value of the dollar by buying T-bonds to keep its exports cheap for American consumers.

      Oh, and Ron Paul thinks that if we got rid of the Federal Reserve and all other government regulation, the economy would just be happy-daisy. Lets not listen to what Milton Friedman had to say about the need for monetary policy.

    • John says:

      Actually Krug didn’t “went off the deep end”…he just had little fun with the bizarre opinions of one of Paul’s “Experts.”

  14. Guillaume says:

    What dajo9 said.

    Perhaps some lunatic congressman from Vermont could bring in some real Marxists like Robert Brenner or David Harvey, but then that’s supposing somebody would want to trigger the “enemy at the gates: impending Armageddon” button in the Fox News control center. But I would certainly pay to see the show.

    • lee bronock says:

      Dear Guillaume;
      Shouldn’t that be “Fox News control bunker?” BTW, the way things are set up we are already paying for this “show.”

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  17. mp says:

    Counter-narrative? How about showing some spine?

    How about telling them to STFU until they sober up and have something sensible to say?

    • thecrackshotcrackpot says:

      Atta boy. Way to show your true colors. When it comes to getting down and dirty, you left-wing types would just rather have dissidents, or even people with other opinions, “STFU”.

  18. Adam Sharp says:


    Did Andrew Leonard of Salon totally abuse the context of your post, or is it just me?

    I was at the hearing today, and am a Paul supporter. Leonard utterly misrepresented, and politicized the hearing as a whole. As did Dana M-something from WaPo.

    After reading Leonard’s piece, I came here expecting to see an attack piece, which wasn’t how I remember your stuff… Was assured after reading the post.

    Thank you for addressing the respectable voices, like Lew Rockwell, from the (different?) side. Most people would rather attack strawman libertarians like Glenn Beck.

  19. stearm74 says:

    A counter-narrative:

    there is nothing wrong with having a Central Bank, problems starts when an Austrian economist in disguise and admirer of Ayn Rand is its Chairman.

  20. John says:

    All part of the third great anti intellectual assault. First the communists, then the fascists (in their various guises), and now the Republican party. The first two failed, will this one?

  21. Jose Padilla says:

    The Democrats should use this to their advantage, they should hold up DiLorenzo and all his kooky ideas as typical Republican. Imagine what would happen if the Chairman of the Senate Armed Services Committee called Noam Chomsky to testify regarding US military strategy.

  22. lester says:

    Jose padilla- that would be great. He would give them alot better viewpoint than the think tankers and PAC guys that usually testify up there.

    stearm- You’re making his point. The central bank is great…till it’s not. If you allow someone you think is wonderful that much power what happens whan a horrible central banker like Greenspan gets the reigns? and he was not an Austrian economist and he had long since lost faith in stuff like the gold standard by the time he got to DC, to out current detriment.

    ^ for anyones perusal.

    Look, being antiwar is not racist or unamerican. Don’t smear opponents of war the way the neocons did.

    • stearm74 says:

      Well, my friend Lester,

      first of all, all institutions if run badly will make a lot of damages -this is a matter of fact, it is not intellectual property of a single theory. And Greenspan was an Austrian economist, that’s the whole problem. He was only able to hide his real ideology and not because of the Gold Standard because the Gold Standard is anachronistic in the information technology global economy. He did all Austrian he had the power to do and I am pretty sure he tried to convince W. to pass to the Gold Standard, if only W. understood what Greenspan was talking about. “The market are right, it’s not me” is what an Austrian economist would say always once Chairman of a Central Bank. Price signals can be wrong by definition because “I haven’t done anything in order to influence them, I am the Chiarman, I would know”. It’s the best example of Austrian ideological nightmare ever -well, also Schumpeter, with all due respect for a great economist-, led Creditanstalt to bankruptcy and was screaming “price signals were right” even 20 years later!

      There is something rotten in our democratic process. You may well think this is a debate about keynesians and non-keynesians, but I am not forced to agree on.

      Look at the Supreme Court, there is something going on here. It is not about the short-term effect of fiscal and monetary policies. Otherwise, why raise deficit and keep interest rates low from 2001 till 2009. Why give corporations the right of free speech?

      We are talking about individuals which sit on mountains of accumulated wealth far above any immagination and above any previous comparison in the history of capitalism -and this is not limited to the US.

      In the late ’20s, it was still possible for the common people to relate to a Rockfeller, at least they both share a common language, Rockfeller sold oil, small farmers oranges. They were both fighting about relative scarcity. In 2011, it is like facing an alien invasion. And by the way, extra-terrestrial wealthiests all over the world maximize their utility, but we cannot even imagine how their utility function looks like -it is probably composed of immaterial, non-quantifiable variables.

      As an economist, it doesn’t make sense to negate the evidence: we are in a post-bubble environment because of Greenspan’s expansionary monetary policies and drive towards deregulation iof financial markets, because of US banks helping China to manipulate exchange rate in exchange of shipping dolars back to their vaults, and because of a shift in the distribution of income caused by almost 30 years of pro-wealthy expansionary tax cutting.

      And if, after reading all these evidence, you think “this is what Austrian economists predicted”, well, it is the other way around: this is what Austrian economists dreamed of in order to destroy democracy. They are the torturers, not the victims.

      And my post is the only change of narrative I have read in this blog. It may be the wrong one, too radical, but at least it’s a change. We’d better all wake up before it’s too late.

      • lester says:

        I don’t think Greenspan claimed to be a proponent of austrian economics and the de regulation would have had pretty minor consequences without the monetary expansion and the governments bailing out those who rolled the dice and lost in the less regulated environment. it would have been like Bernie Madoff, a bunch of rich people would have to lick their wounds for sure but it would not have involved the entire economoy being thrown into a tailspin were it not for the money printing and bailouts.

      • stearm74 says:

        Facts are facts.

        From 2003 to 2008, Greenspan and his successor kept interest rates at historically lower levels. Asked in 2006 about a possible bubble in the real estate sector, Greenspan answered: “Almost impossible”. Asked about the possible perverse effects of deregulation: “Deregulation helps asset prices to move without interferences, no negative effects”. In the meanwhile, Bush was cutting taxes for the wealthy, while, at the same time, increasing spending. Greenspan said repetitely that deficits were not a problem.

        2008: global financial crisis of epich proportion.

        Never claimed to be, but acted consistently like an Austrian economist, while the Republican Administration was expanding government spending with no strings attached.

        Not interfering with the market prices of financial assets, deregulate financial markets, cutting taxes to the wealthy. These factors explain the global financial crisis. I mean GLOBAL.

        We don’t know what would have happened without post-crisis monetary and fiscal policies. But, first, there is strong evidence about what went wrong before the crisis.

        I cited Schumpeter before. Let me add something. In Capitalism, Socialism and democracy, Schumpeter produced the most compelling case against government intervention and, I should add, against democracy.

        But, at one point, he identifies the only case where government and monetary authorities should intervene in order to avoid an economic breakdown. It is a wonderful piece of pure, non-ideological, economic analysis.

        “Whenever there is a danger, either from causes inherent to the business-cycle mechanism or from any other, of a “downward cumulative process”, that is to say, whenever a situation threatens to emrge in which A’s restriction of production induces B to restrict production and so on throughtout the economy, in which price fall because they have fallen, in which unemployment feeds itself, government spending will stop this “vicious spiral” and, therefore, if we choose to neglect all other considerations, may be justly called an efficient remedy”.

        But here is the strongest passage which tends to discount your analysis of the post-crisis macroeconomic management and, at the same time, the loudest condemnation of Greenspan’s Austrian credo and of the dumbest expansionary fiscal policy ever enacted in the U.S. by the dumbest President of all times:

        “The true objection is not against income-generating government expenditures in emergencies once they have risen ut to policies that create the emergencies in which such expenditure imposes itself”.

        Schumpeter probably despised Keynes on many grounds, but Schumpeter was an economist of value.

        Greesnpan was only a mild Austrian moralist at the head of the Federal Reserve.

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  24. lee bronock says:

    I,m reminded of Dr. Johnsons famous quip concerning patriotism. You might ask; How does this concern Rep. Paul? I would aver that the good Doctor meant a slavish adherence to any doctrine was morally and intellectually dishonest. Someone wiser than me once said that purity in belief leads to good arguement, but poor governance.
    Lest we forget; it was for times like this that the Founding Fathers devised the institution of divided government.

  25. lee bronock says:

    Dear Friends;
    Am I being over sensitive, or is that Kochtopus attacking a Chineese Junk?
    Wheels within wheels.

  26. teageegeepea says:

    The term “Kochtopus” (along with “partyarch”) was actually invented by the left-libertarian Samuel Edward Konklin III. At the time Murray Rothbard (leader of what would become the paleolibertarian faction) was involved in the creation of both the Cato Institute and Libertarian Party. He later decided the critic to his left was critic and started using his rhetoric.

    rootless_e, the charger of Hitler-philia is a pretty serious one, and a person should have some evidence before making that accusation. But of course you don’t. The Austrians take pride in their hero Mises being driven out by the Nazis and having his writings burned by them. Mises (the namesake of the Ludwig von Mises Institute) and Rothbard (his disciple who actually founded it) both being Jews.

    My own critique of the LvMI faction is that many of them are cultish as Objectivists. And they spend way too much time attacking imaginary enemies, even including Radley Balko. As a quasi-monetarist, I hope Paul is successful in shining a light on the Fed and holding them responsible for another great recession, although for different reasons than he might think.

  27. thecrackshotcrackpot says:

    Great article! I myself am a bit curious as to why Congressman Paul (who I trust more so than most politicians in D.C.) chose to have Prof. DiLorenzo give his testimony on monetary policy. Of all the …

    Oh, and I liked the Nirvana thingy!

  28. anxiousapopheniac says:

    Sincere though his convictions may be, Ron Paul probably owes his current status to the fact he makes such an excellent lightning rod, honeypot, and general purpose “useful idiot” in diverting attention away from some larger forces that have been at play in US politics (and elsewhere) over the last few decades. The idea of inviting national devolution/pro-secession advocates to testify before Congress about monetary policy may seem quirky to the point of absurdity today. However, now that juridical persons have at last secured “their” full First Amendment rights under the Constitution, it’ll only be a matter of time before “they” (or rather the proxy agents of their publicity-averse owner-beneficiaries) start lobbying for “their” Second Amendment rights to bear arms and form private militias. Of course corporations may not be able to secede in the geographical sense, but all of the bugaboos that eternally vex them (e.g., taxes, regulations, labor laws, international trade and investment restrictions, transparency and disclosure requirements, redistribution/social welfare, etc.) will be rendered permanently moot — along with the notion of national (governmental) sovereignty itself — once the corporate right of “direct physical redress” is legitimized.

    Considering how very useful that freedom would be (to them) if it could be exercised today — no more foreclosure crisis! no more consumer credit risk! — it’s a wonder that the public campaign for corporate emancipation hasn’t already begun…

  29. lester says:

    starm – low interest rates isn’t austrian. they favor the gold standard. printing more money to paper over problems in the economy is the total opposite of what they stand for.

  30. LIBERterryAN says:

    Ron Paul is a shameless, people-eating liquidationist. True fact: You and I both will never live to see the day that Ron Paul tells anybody about how the PRIVATE
    banking system works! …Ron Paul wants “competing” banks wich would do the
    SAME EXACT THING that banks do now: (1) Create most money (2) from nothing at
    all (3) destroy the money that they create out of nothing AS THEY GET PAID BACK
    (4) But keep the interest (5) “an extremely profitable business”. (Hayak)
    Translation: We need to take the system that we already got…and change over to
    the system that we already got. But at even higher rates of interest—the very thing
    that destroys us.
    And Ron Paul, the self-appointed monetary guru, doesn’t even know this?
    I like money as debt. The problem is the interest.

  31. I simply do not understand how any sane person can be for the gold Standard.

    There are two and only two possibilities. (1) The government will allow the price of gold (and thus, under a gold standard, the price of value or value of its currency) to be set by free supply and demand. WHICH IS THE SYSTEM WE ALREADY HAVE. The value of the US currency versus other currencies is set by supply and demand on the currency markets.

    Or (2) The various government will establish a fixed price for gold in terms of dollars, euros, pounds, zloty, or what ever. This is essentially the system in use before 1932. It was and is absolutely unworkable. For obvious reasons. If you think the Fed is not capable of managing QEII, then why do you think they are capable of managing the price of gold.

    Going on the gold standard means either keeping what we already have or attempting a system which demands more skill than any group of central bankers ever has demonstrated.

    PS The various groups of libertarians remind me of religious conflicts. Let’s take Egypt, since it’s in the news. In the 600s, the Orthodox and Monotheist Christians were so busy fighting over the most subtle points concerning the inner workings of Jesus’s mind and soul that they totally ignored the Muslims, who don’t believe that Jesus is God at all. Thus, they allowed the Muslims to conquer Egypt without any resistance at all from the Christian (“Coptic”) Egyptians.

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  33. LIBERterryAN says:

    There are two utterly different types of a Gold Standard (Goldbuggary).
    (1) “honest money”, which is 100% debt-free (permanent money). So there is no creating money out of nothing and then destroying (“extinguishing”) the money as it is repayed. And since there is never enough money in circulation to pay the interest,
    the system suffers debt-collapses all the time.
    (2) A Gold Standard which allows for fractional lending—debt-based (temporary) money. This is modern Goldbuggary. Since the banks have borrowers by the balls,
    they charge much higher rates of interest then now. So the whole thing ends in
    a debt-collapse. And quickly so.
    This is exactly why Gold Bugs are liquidationist lunatics.

  34. Peter Principle says:

    “Do liberals have any type of counter-narrative rather than relying on discredited technocrat expertise?”

    Well, they could always try singing the old Phil Ochs song: “Love me, love me, love me – I’m a liberal”

  35. David Gregory says:

    sorry if this isn’t the best place to ask this, but I had read the post and most of the comments so came back to it…

    wondered if anyone could address this statement from Charles G. Koch in WSJ: (source below)

    “Federal data indicate how urgently we need reform: The unfunded liabilities of Social Security, Medicare and Medicaid already exceed $106 trillion. That’s well over $300,000 for every man, woman and child in America (and exceeds the combined value of every U.S. bank account, stock certificate, building and piece of personal or public property).”

    This seems a completely ridiculous statement in two ways:
    1. What time frame do these liabilities cover? If my portion is $300,000 but I will have to pay it over the next 30 years (my expected remaining working life), it’s only $10,000 a year…and anyway, that’s still the wrong way to calculate it, since funding doesn’t only come from individuals, but other taxes (including on corporations / billionaires like Koch).
    2. How in the world can $300,000 per person be more than the combined value of (essentially) everything? One source says total US assets ~$188T; wikipedia has a similar if you add ‘domestic financial assets’ and (additional) ‘tangible assets’.

    Is it me, or is C. Koch blowing smoke???

    Thanks. Have been enjoying this blog, which (for now) I can thankfully access in my current country of residence…


    quote source: (

    • Ted K says:

      Isn’t your name the same as that dude hosts “Meet the Press”?? but can’t be, ‘cuz that dimwit wouldn’t live overseas….

      In answer to your question, the Koch brothers try to do nearly everything under a cloak, or in stealth mode. So it’s amazing you could get a direct quote from one of the two. But both men are born liars and deceivers, whose recent efforts are to crush labor unions once and for all. And their new knob-polisher in Wisconsin is going through his coronation process just now. Only unfortunately for Walker, he doesn’t have the brains of a Reagan Chief-of-Staff in the Reagan post Alzheimer’s period….. assuming there was a post Alzheimer’s period anywhere in those 8 years.

      That’s what you get for reading the WSJ man. Rags are for cleaning the bathroom, not for reading.

      • Ted K says:

        I guess I should have said “assuming there was a pre- Alzheimer’s period in those eight years.” Darn, that sounded so good at first typing.

    • David Gregory says:

      @Ted K – Yes, same name; no, not same guy. I have never called Imus when drunk…or at all, for that matter.

      Unfortunately, your response didn’t clarify things, so my ignorance is going to be put on display once again…

      here’s what I’ve found, for anyone interested (probably most here knew this already; but hope to spark more explanation from the more knowledgeable types):

      The ‘Unfunded Liabilities’ figure is the discounted net present value of the liabilities in perpetuity, i.e., the amount you’d have to have in the bank now, earning interest, to cover your future obligations.

      At what rate? Dunno. Perhaps OMB has a standard figure (5%?), and I assume the discounting has taken into account reasonable inflation rates, reasonable growth of the economy, etc. But still, to frame it this way seems fishy…more like an analogy/metaphor/heuristic…? After all, the ‘fund’ is just standing in for the US economy, current proceeds of which (i.e., taxes) are the ‘interest’, right? Which may be why one writer (1; old, I know, it’s what I’ve got so far) claimed we’d need to start paying 81% more in income taxes starting immediately…which, again, seems bogus and unnecessarily, since, among other reasons, government revenues aren’t only from income taxes…

      Interestingly, the SS Trustees report he refers to has both ‘infinite horizon’ (I assume discounted to 0) and ‘2083’ figures, showing ‘UFL’s’ being only 1.2 / .7% of GDP respectively… in comparison, our current wars are something like ~1-2% of GDP?

      Anyway, I’ll do some more digging and see what I can learn for myself; if others have dug and want to post their findings, that’d be grand. I’m just curious as to whether there is more proof of my sense that this ‘UFL’ question is just another red herring meant to scare us into accepting ideologically driven austerity measures (eliminating Big Bird, etc.)


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  37. Raymond Voigt says:

    Grace points for the Nirvana reference. Made me smile, since it fit in so well with the flow of the article. I also agree that Ron Paul often possesses a consistent integrity. Although his insistence on government control of women’s wombs is antithetical to a small government libertarian view. At times, though, his broken clock can be in sync with my anti-imperialist wars view.

    Economically, his idealism would take us far from any practical solutions for our economy. I would fear allowing corporations to have further control over our environment and public life. I don’t see where libertarianism will preserve democracy in the face of corporatist fascism.

  38. Evil Capitalist says:

    @Lester: “600,000 people, almost none of whom had anything to do with the slave trade, died in the civil war.” And that’s entirely the fault of interfering liberals in the Union? The Southern states were innocent, and bravely defending themselves during the Civil War? That’s your narrative? So were they “forced” to secede, or was it their choice?

    Was the war not principally about slavery (which was actually increasing right up until the war, which makes it difficult to justify the prediction that it would have just died away naturally, and those who benefited from it would just peacefully give it up)?

    And was the slavery issue not already causing innocent people to die (including slaves themselves) before the big bad federal government abolished it and then fought states who seceded to keep it? And if all blacks in former slave states (and elsewhere) were treated “ABOUT” as bad for 100 years after, are you arguing that no real progress has been made for black people (I wonder if they’d like to live in slave state now)?

    Yes, I’m sure had the southern states receded, and slavery continued, blacks there would now have the ability to own property, vote, marry whom they chose (including white women) and not still be constitutionally ruled 3/5 of a citizen. And perhaps those black soldiers fighting for the Union (let alone the huge numbers of slaves escaping north during the war) didn’t think they were doing it to get more freedom?

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