News & Analysis
CNN Defends the Fed – Calls Ron Paul Economically Illiterate
Every 2012 contender attended college. They all graduated. They went to schools like the University of Pennsylvania, Columbia, Texas A&M, Morehouse, Penn State and Emory. But decades have passed since these Presidential candidates first stepped onto campus as freshmen. Is it time for an Econ 101 refresher course? America's Econ 101 professors say yes. In their view, the candidates continue to offer ideas and policies that wouldn't pass muster in their classes – populated by 18 year-old college students. "There are so many economic 'misstatements' being made," said Jonathan Lanning, a professor at Bryn Mawr who is teaching two introductory economics classes this semester. "And it isn't confined to any one candidate." ... Another professor who teaches at the University of North Carolina at Chapel Hill, Michael Salemi, was able to identify statements from six candidates that "would earn failing grades in my Econ 101 class." Salemi called Ron Paul's rationale for returning to the gold standard "one of the most dangerous ideas put forward by a politician in recent years." – CNN Money
Dominant Social Theme: When it comes to economics, Ron Paul doesn't know what he's talking about.
Free-Market Analysis: So here comes Dr. Michael Salemi to defend central banking from Ron Paul. And where does his defense appear? On CNN, of course, the pre-eminent US media mouthpiece for the Anglosphere power elite.
The more CNN sinks in the ratings, the more support it gets. It's kind of the anti-news channel in this regard or perhaps the media's most prominent example of the Peter Principle (outside of AOL, another elite-controlled outfit). CNN is constantly failing upward, along with CIA-trained Anderson Cooper.
This statement by Salemi (see article excerpt above) is especially egregious. Ron Paul has written books on free-market economics and was a close friend of the great libertarian economist Murray Rothbard who along with Lew Rockwell founded the Mises Institute.
Today, the numbers of Ludwig von Mises Google cites rival those of the Fabian fraud, John Maynard Keynes. Free-market thinking has swept the world, magnified by the megaphone of communications technology and the Internet Reformation. What's Salemi ever done other than to offer up misinformation to overly-trusting students?
This is nothing but a big dominant social theme of the power elite. The meme is simple: Central banks are a natural progression of the money system and anyone who contradicts them is being foolish and economically illiterate.
This isn't true, of course. Central bankers FIX the supply of money by deciding on its volume and price. Price-fixing never works. It merely transfers wealth from those who produce it to those who have not and don't have any idea of how to deploy it efficiently. That's why lottery winners are always going broke and why the government itself – a price-fixing machine – can never get anything right.
Every regulation and law is a price fix, creating unpredictable and destructive results. Eventually, you get to the point where the economy is so distorted that no one knows what to invest in any more. The economy grinds to a halt. No one wants to build anything. Jobs wither and die. That's where we are now.
But the powers-that-be will do ANYTHING to defend central banking, which is the fount and source of all their power. Now they're heading toward SDRs and a world currency. In fact, the plan is becoming abundantly clear: Topple the global economy in order to make the Western middle classes (the enemy of the power elite) so miserable that they will willingly acquiesce to world government.
There is no need for central banks or central banking but they are all over the world now. It is a disease of the 20th century, transmitted to the 21st. The elites know quite well that central banking brings misery and destruction on all. But still they pursue it. The rewards are too great to do otherwise.
But at what cost? They've destroyed America's standard of living, are setting Europe on fire, and soon China may collapse as well. How can anyone deny the history of central banking – or its terrible results?
And this is the penultimate moment. "They" are striking now, putting into motion what seems to be a malicious and bloodthirsty plan that has deliberately degraded the living standards of billions in order to generate the intended result. Here's some more from the article:
Michele Bachmann promised to bring back $2 gas. Tim Pawlenty suggested sustained 5% GDP growth was a realistic target. Rick Perry would balance the budget with lower tax revenues. No dice, say the professors.
Stephen Golub, who is teaching Econ 101 at Swarthmore College this semester, said some of the ideas floated by Presidential candidates would earn a failing grade in his class. "I think it's grossly irresponsible what they are saying," Golub said. "It's not about economics. It's about getting elected. They are promising things that are impossible to deliver or make little sense."
The rhetoric sounds good on the campaign trail. Not in the classroom. The simple laws of supply and demand render Bachmann's $2 gas promise void, said Erik Nelson, an Econ 101 professor at Bowdoin College. Federal Reserve: GOP's whipping boy Rick Perry labeling Federal Reserve Chairman Ben Bernanke as treasonous? "Really over the top," said Golub ... Neither "side" has a "truly comprehensive understanding of even basic economics ... "
See the cleverness that CNN employs in propagating this pro-central banking meme? They lump together Congressman Ron Paul (a profound free-market scholar) with shambling Bilderberg-approved wannabees like Romney and Rick Perry (who can't even remember his own lines).
End the Fed. End the horror. End the economic depressions and their truly genocidal misery. And, hey ... don't bring back the gold standard! Let it arise naturally as the result of competing "money." A private gold and silver standard has been the hallmark of human prosperity for hundreds and even thousands of years. We have no doubt where a free society would end up, moneywise.
The ratio between gold and silver alerts "commoners" to times when the elites are attempting to manipulate gold, which has always been the money of the upper classes. That's why gold and silver have traditionally been paired within free-market environments.
Conclusion: All this is standard stuff but it has been purposefully obscured by the paid liars of the power elite who populate what we laughingly call the West's "university system." Ron Paul has more knowledge about the economy in one tiny finger than these sophists of monetary thuggery have in their entire collective body.
Posted by Michael P. Ivy on 11/14/11 11:37 PM
Central Bank Planning and Salemi's Social Welfare Function.
Michael Salemi's criticism of Ron Paul's monetary policy prescription as seen in 'CNN Defends the Fed - Calls Ron Paul Economically Illiterate', The Daily Bell (November 10, 2011), is a little unfair, given that Salemi's own work, "It's What They Do, Not What They Say: How to Infer the Stabilization Objectives of a Central Bank" (2008) leaves little in the way of meaningful policy answers to what is now understood as central bank induced chronic unemployment, price inflation, and unsustainable debt servicing obligations.
Salemi's optimal central bank policy modeling hinges on 2 key assumptions which he takes as given: (1) that central banks will maximize social welfare, and (2) central banks will minimize price inflation, or some combination of both. He uses maximum likelihood estimations to derive optimal policy parameters based on various iterations of past exogenous "shocks" to his 2 dimensional aggregate demand curve. In the end, Salemi argues that by employing a structural model of central bank objectives, it is possible to infer the values of optimal central bank policy objective parameters on (interest rates, unemployment, output, etc.); and that the "researcher should pay attention to what central banks say about their objectives and what they do" in the modeling process (p.10.), a modeling procedure he calls 'Inverse Control'. Missing from the paper was any modeling or any recognition of incentive distortions and the long term effects of permanent capital dislocation that arrives from arbitrage and/or price fixing of interest rates as a result of sustained central bank inflating as has been the case for the last 10 years. Ought this not to be his economic research problem? He could have, for example, heeded Lucas's (1976) insight that eventually expectations have a counter effect to both price and output goals imbedded in central bank policy modeling because firms and individuals adjust their expectations, taking into account that central bank initiatives will have no real effect on aggregate demand.
But, the larger intellectual problem in my opinion, and Ron Paul speaks to this constantly, is that the social welfare function, the objective that Salemi's model aims to maximize, cannot be known by any central bank at any given time. No one person can know (or infer as Salemi suggests) the optimal central bank policy prescription when all the variables governing inter-temporal capital deployment, production, and consumption preferences are never actually known. Samuelson (1951) even admits this as a methodological modeling impossibility without making assumptions about what the welfare maximization problem ought to constitute. So, my question to Salemi, then, is what might the Central bank's optimization problem look like now? What might those coefficients on price, interest, and unemployment actually explain? And as Lucas suggested, would it even matter? Even if everybody in the country demonstrated the same inter-temporal preferences on capital, consumption, and the marginal utility of money, as I, is it possible for Salemi's "Inverse Control" model and policy prescription to correctly define what the Central Bank's optimal monetary policy prescription might actually look like?
All I know is this. I am getting zero interest on my savings, so it is impossible for me to accumulate wealth without employing that capital to higher risk investment vehicles (not my preference). Furthermore, there is a more fundamental problem with price fixing a zero interest rate regime. A zero interest rate indicates that $100 today generates the same benefit to the holder as $100 at some future time. In other words, their rate of time preference is such that they are indifferent between having $100 today or, $100 in the future. But, we know that a zero interest rate is inconsistent with reality because people will always prefer not to wait. That is, we want things right now and expect to be compensated by the market if we wait. The point is, in the absence of central bank policy and planning, interest rates will always be greater than zero.
Ron Paul's argument has always been don't do anything at all. Let market forces and individual preferences determine interest rates, prices, social welfare, the optimum deployment of capital, the optimum level of labor, of consumption, and so on. And he is suspect of any central authority that seeks to control market place values under the pretence of possessing such knowledge. The Socialist Calculation debate dealt with this proposition years ago. Why is Salemi still beating this drum today?
Central bank planning always comes with deleterious and unintended adverse consequences. To this end, Paul argues that we have to be suspicious of any assertion that defines objectively the conditions for social welfare maximization; when the econmic impacts of central bank planning can never be known in advance, and where the planners themselves are not held accountable to those individuals who will invariably be adversely affected. Rather than charge Ron Paul with economic illiteracy, perhaps Salemi could have made a more valuable contribution by appraising the current FED policy prescription in light of the liquidity and solvency issues confronted by central planning authorities world wide.
Posted by tone-bone on 11/12/11 04:19 PM
Thanks, I needed a good laugh!
You are reciting chapter 9, pages 67-68 of the Keynesian brainwashing BS perfectly.
Good job, you will now be promoted to king of schmucks.
Posted by EconomicsMonkey on 11/12/11 01:44 PM
The argument against the Fed is based on a false premise: that the markets themselves are efficient and therefore any "price fixing" will reduce this efficiency. Mind you I agree that "price fixing" can (and sometimes does) exacerbate the problem but speculative bubbles/booms and busts and have been happening since well before central banks existed.
The free market/Mises/Hayek/Rand/Paul assumes that the market is some self-aware system which automatically allots resources where they are most needed. In fact, the market is a collection of separate sets of speculations on where the general populace will see value 3-4 months down the road and is subject to seemingly rational herding. It's just basic science. We evolved under "fight or flight" conditions where we make rapid decisions based on real or perceived threats and we tend to follow one another due to the perceived safety in numbers. A central bank can and does help mitigate this self-cannibalizing behavior.
Click to view link
Reply from The Daily Bell
Unfortunately you don't know what you are talking about. Every LARGE boom and bust that has taken place in the past, say, 300 years, can be effectively explained by government interference. Since you have not read enough and internalize accurate information, it's not very easy to have a reasonable discussion ...
Posted by taxesbyanyothername on 11/12/11 08:32 AM
Hillsdale and Christendom teach only Austrian and take no government money. George Mason does take government money but still teaches mainly Austrian. A pretty good econ. department there even though Haslitt (that is Thomas Hazlitt not Henry Haslet) has gone off the rails and still writes for Reason. Also Loyola in New Orleans. U. of Salamanca. There are a few others.
Posted by NAPpy on 11/11/11 07:05 PM
I would take a constitutional republic as a step in the right direction. The american experiment of extremely limited government did not stay small last time, and I have no faith that it would the next time. Evolutiion of government: rulers, choosing rulers, ruling oneself and no one else. It's about time we stick to ruling ourselves, and give up the naive belief that we can ever rule other people.
Posted by NAPpy on 11/11/11 07:01 PM
I'm not so arrogant as to believe I can predict the future. I know that initiating force against others is wrong. I won't personally condone it or do it, and by that example the world will be a little better. That's enough for me.
Posted by NAPpy on 11/11/11 06:27 PM
What? Try re-reading my post... slowly, with a dictionary to help you with the big words.
I'm an ancap/voluntarist. I believe we do not need any government at all. No government means no institution with a monopoly on the initiation of force. How is that sociopathic? Sounds peaceful to me.
Posted by mcfrandy on 11/11/11 03:19 PM
The mainstream media takes its orders from the CIA ("Operation Mockingbird": look it up) and the power elite.
Otherwise very little mainstream media would exist. For example, in my region of the US, the "foremost" newspaper is The San Francisco Chronicle, owned by the Hearst Corporation. The Chronicle has been losing a million dollars a week for about twenty years. Yet this propaganda-for-the-power-elite periodical keeps humming along, with no plan whatsoever for its own demise. How? Because taxpayer-funded CIA funds and other mysterious sources of financial support keep propping it up. And why not? American citizens just keep paying to be brainwashed by the profound forces of evil which rule over and destroy human society.
It's the same throughout the US and the industrial world. The Internet and other new technologies have made news corporations massive money losers, but everybody keeps paying for the lies and manipulations to continue. The New York Times, The Washington Post, Time, Newsweek, US News & World Report, CNN, MSNBC, ad nauseum: All massive losers in the free market, yet kept cheerfully alive so as to remain the arbiters of what constitutes the news.
Reply from The Daily Bell
Yes, we have commented on this! CNN, Newsweek, TIME, AOL - billions in losses ... And yet we are supposed to believe these franchises are so "valuable" that they keep getting recycled to billions in FURTHER losses. Notice that no major brands advertise on the Internet, not even on Drudge. Funny how that works ...
Posted by travis690 on 11/11/11 12:59 PM
Just because these fools teach Economics at a university level doesn't mean they are being honest in their teachings. Instead of Economics, it sounds like these boobs are teaching Philosophy. I have had to overcome several such "teachers" in my life, and sadly, they are still teaching. But the amazing thing is that when I went back to speak with several of them many years later, they are still spouting their nonsense and unable to justify it with real-life facts.
Posted by Mountainview on 11/11/11 12:20 PM
I wouldn't be this absolut! There is even in democracy one point when an Austrian economic framework could be adopted. This only event occurs after a (debt) restructuring. Adopting at such a point Austrian economics would mean, a constitutional interdiction of Keynesian deficit spending and an overview mechanism for financial institutions to limit credit creation above the level of desired economic growth. I firmly believe we will find such opportunities very soon in the US and Europe.
Posted by Thomas Molitor on 11/11/11 09:33 AM
"For the big banks to secure the influence over the Fed central bank, they must buy off academia. It starts with paying for university buildings and lecture halls, goes to funding chairs for professorships and to influencing academia with all kinds of stipends and subsidies."
Very true. Did you see Obama's plan for student debt relief? Essentially, it's government backstop to allow public colleges to continue hiking tuition and faculty salaries. Ingo, get your private education business accredited by the UC system. Then up your prices and give yourself a raise. How about this for a name to submit to the board of regents: University of California, Chancellor Hotel.
Posted by Thomas Molitor on 11/11/11 09:17 AM
During hyperinflation Argentina diners would pay for their meal in a restaurant before the meal; otherwise the cost of meal rose during their dining.
Posted by Thomas Molitor on 11/11/11 09:12 AM
How about implementing Austrian economics in a constitutional Republic not a democracy?
Posted by rossbcan on 11/11/11 08:41 AM
"So you implement it"
This is the crux of our paradigm disconnect. Nobody "implements it". As a consequence of widespread "non initiate aggression" moral values and unconditional respect for "right to life" EQUALS right to a proportional "self-defense" from aggressors (force / fraud) from ALL perps... THEN:
Austrian economics will again SPONTANEOUSLY EMERGE as the rational method of survival: mutually agreed (fully informed) trade for MUTUAL self interest, including with states should they CHOOSE to be FIT to exist within an environment of sovereign individuals. Otherwise, said sovereign individuals will (hopefully peacefully) CHOOSE not to associate with, nor support "organized force".
Like it, or not, this is what IS and MUST happen by natural law, as PROVEN by the grim reaper of "Mathematics of Rule":
Click to view link
People cannot and therefore WILL not submit to servitude. Servitude is a survival threat, contrary to the "non-negotiable" compulsion of "will to live" of life in general and, intelligent (able to discern and act consistent with reality) life in particular:
Click to view link
Posted by Frank on 11/11/11 07:52 AM
It's painful to watch this nation self destruct, but that is what's happening. Even our ivory tower economists & professors have no common sense. It's the blind leading the blind. Brainwashed teachers leading dumbed-down students in government run schools & their views broadcast nationwide. What happened to self enterprising, free market, self reliant America? I guess it died somewhere along the way. The only consolation is that a centrally planned economy doesn't work. It's not efficient and it misallocates resources. It doesn't progress or progresses very slowly, at best. It eventually collapses. And therein is our hope: that eventually the "Invisible Hand of the Free Market" will win out, no matter how bad things seem to get. But how long will it take for the average person to learn this lesson? I fear too long & perhaps not in my lifetime as I watch the once great USA collapse.
Posted by josejoe on 11/11/11 12:37 AM
right on nappy-good old common sense applied to the economic system will bring a better result in the market than most so-called gurus!!
Posted by Bischoff on 11/11/11 12:03 AM
"No government is required to implement Austrian economics." So you implement it, what happens then... ???
Posted by Charlie on 11/10/11 11:38 PM
How embarrassing for these prestigious colleges to be preaching such rubbish, apparently still counting on the lower level dumbing down and deference to "experts" for their lies to be unquestioned... ooooooo Columbia! aaahhhhhhh Penn State! sssiiiiigghhhh... Emory... such eminences daining to stoop to dismissing to that "fringe" and "dangerous", yet oddly prescient and logical Ron Paul. He is so ridiculous, so unelectable, so irrelevant that all of these important geniuses make time to explain to us how the only thing that will save us is CONTINUING the same disastrous Keynesian debt worship, central planning, nation destroying and rebuilding, and Fed "running" of the "economy" and certainly not the ideas of the silly Ron Paul. So much for higher education. If you must go to college, go to Grove City College. They teach Austrian economics and not these fairy tales... and they don't take Fed loot.
Posted by Tucci78 on 11/10/11 08:06 PM
Nah. The prohibition of the initiation of force (the non-aggression principle) means that the officers of government are not allowed to VIOLATE a person's rights.
Retaliatory deadly force? Not a big problem. The value of credible deterrence as a public health measure.
Just what do you conceive to be the ethical (or, hell, practical) basis for having government goons endowed with some kind of special sanctification permitting them to pillage and enslave and murder anybody they damn' well please?
If this is your conception of how humans should (or do) come together in society, voluntarily to truck and barter in a division-of-labor economy, then you're certifiably insane. Stupid, too. I'd even hazard the use of the term "sociopathic," and maybe posing a real risk to your own safety and that of other people around you.
Posted by DwightMann on 11/10/11 07:53 PM
Can always rely on the DB for unbiased truth telling!