A Flea in the Fur of the Beast

“Death, fire, and burglary make all men equals.” —Dickens

Tag: ron paul

Top 10 reasons Peter Schiff is a clown

by pdxblake

Ten (plus or minus a few) gems that will entertain you if you like to make fun of gold bugs like Peter Schiff (via Bloomberg):

[Peter Schiff] shows off $50 gold chips, to be used when paper money becomes worthless, a prediction repeated on his daily two-hour radio show broadcast from his basement studio to 68 stations in 30 states and 50,000 listeners online.

…of course he broadcasts it from his basement…

“Before President Barack Obama leaves office in 2017 the U.S. will default, the dollar will collapse, hyperinflation will strike and gold will skyrocket, he says.”


“With inflation at or below the Fed’s 2 percent target for the past 11 months, the Standard & Poor’s 500 stock index reaching record levels and the dollar strengthening against major currencies in the past year, Schiff knows his forecasts make some people laugh. He’s used to it. “

…yeah, he’s used to being laughed at…that’s because he’s a CLOWN!

““They should take him seriously — he was right with a lot of other ones,” Ron Paul […] Schiff was an economic adviser to [Ron] Paul’s presidential campaign in 2007.”

…that explains so much…so, let’s bring in Austin Goolsbee for some explaining…

“They [gold bugs] have been saying that for literally four-plus years, and they have been egregiously wrong,” Goolsbee said by phone Oct. 30. “As a matter of mathematics, they’re just adding up the numbers incorrectly to say that they think there’s going to be 200 percent inflation.”

…I fear for the people who listen to him for advice…

“Thank God we got so many stupid people that don’t understand the value of gold because that means that people who do understand are able to buy it at a low price,” Schiff said into the microphone. “Don’t necessarily get mad, get in on it.”

…and these are the types of people who do…

“Schiff’s listeners call in wanting to know how to prepare. Mike from St. Lucia asked about a $1 trillion treasure allegedly hidden in a New Mexico mountain, that if found would make a dent in the national debt. “We don’t have that much time” to discuss such theories, Schiff said.”

…and yes, he does like to promote himself…

“In November 2011, Schiff visited Occupy Wall Street protesters in Manhattan’s Zuccotti Park to “represent the 1 percent [and] see if I can have a dialog with the other 99 percent.”

…but wait, there’s more (this sentence is a real gem):

“Schiff credited his father ‘‘whose influence and guidance concerning basic economic principles enabled me to see clearly what others could not.’’ Irwin Schiff has long advised people that they didn’t have to pay income tax, and is serving a 13-year sentence in the Federal Correctional Institution in Fort Worth, Texas, for tax evasion.”

And that pretty much made my day.  He also ran for Senate and lost to Linda McMahon.  Read the whole thing here.

Today In Libertarian Hagiography

by evanmcmurry

Pierce quickly and thoroughly dismantles Politico‘s theory that Rand Paul is leading a mainstream rebranding of libertarianism:

In this context, “libertarianism” is a marketing device, a way to keep young bond traders comfortable within a party whose base is still snake-handlers and still stock-piling arms against the inevitable Kenyan Muslim gun-grab…They’re basically Tea Party types who’d (pragmatically) still allow the government to bust you for selling an ounce of weed but not for selling millions of dollars in trash derivatives. 

One of the stranger parts of the 2012 GOP primary—a strange time all around, if you recall—was that Paul père‘s campaign was figured as an ideological resurgence despite performing abysmally. Paul was the second highest funded candidate of the race, vastly outspending anybody below him, yet never came close to winning a primary, and finished in most states in a distant fourth. Paul actually became less visible as the campaign wore on—his sole viral moment came when he suggested letting an uninsured man die on the curb of a hospital rather than spend public funds to save him, a moment notable solely for its sociopathy—and the only reason he was there at all in the end was thanks to the inmates who had taken over his asylum and were trying to rig the rules of the nomination process.

In short, Paul spent tens of millions of dollars more than anybody save Romney, and still had to cheat, and still didn’t even clear the threshold for the nomination process. All the Ron Paul Revolution stickers can’t put the surge in that resurgence.

Paul fils is a more limber salesman, and he seems far more willing than his intractable father to bend his position to suit the political moment. But reading a cause’s rise in his skill at realpoliticking is to see something that isn’t there. Twelve months ago, Ron Paul’s mix of Austrian economics and lawless social policy was losing elections—badly—to Rick Santorum, who just this morning voiced his determination to take the GOP to its grave before supporting gay marriage. When you can beat that guy, we’ll talk mainstream libertarianism.

Republicans, the Gold Standard, and Milton “the Red” Friedman

by pdxblake

The Republican Party is apparently adding a plank (a rotten one at that) to their platform that would set up a Gold Commission to consider returning the country to the Gold Standard, which the US and the rest of the world left in 1971.  This is a bad idea, and it was a bad enough idea that the last Gold Commission established in 1982 under Ronald Reagan determined (pdf) that the status quo was better than a return to the Gold Standard.

Paul Krugman highlights the easy response to the idea of a gold standard by pointing out that: ” incessant warnings of runaway inflation from the expansion of the Fed’s balance sheet have been wrong, wrong, wrong; and that exchange rate flexibility has been crucial to most of the success stories of this crisis, from Poland to Sweden to Iceland.”

This is the important point for why the Gold Standard would be a bad idea, and it is even acknowledged in the Gold Commission report in 1982 when they wrote: “Another attribute claimed for gold standards is that at the rate of increase of increase in the gold money supply would vary arithmatically with the profitability of producing gold, and hence assure a stable money supply and stable prices at least in the long run“.

As Krugman pointed out the reason why a gold standard is always touted is that it prevents the central bank from “printing money” and creating “runaway inflation”, and the link between the two, which is always help up, actually doesn’t always exist.  For example, consider the graph below of M1 (the money supply) and the inflation rate since 2001.

If “printing money” were the cause of inflation, then the inflation rate would be continuing to increase to the right of the grey strip (which denotes a recession).  That it doesn’t should by now have disproven the idea that the Fed’s actions are inflationary and if the entire reason to propose returning to the Gold Standard is to ensure stable prices, then you have to find another reason because the growth in the money supply (the red line) has not led to runaway inflation (the blue line, which is headed more towards deflation than inflation.

Where the Gold Commission report statement is clear is that a gold standard can only ensure stable prices “in the long run” is a very important point which is easy to overlook.  For example, what might have happened if the Fed had not added all that money to the economy during the recession?  Well, there’s a very good history of a time when the gold standard was the rule and central bankers promoting “hard money” were in charge.

The blue line is the money supply, the green line is the inflation rate and the red line is unemployment.  After the financial market crash (and a crash in the price of land in some of the more speculative markets like Florida) hit, the Fed, instead of expanding the money supply like today’s Fed did, stayed on the path of the Gold Standard and pushed the country further and further into Depression (a good description from Barry Eichengreen is available here (pdf), a more readable version is a book by Liaquat Ahamed, Lords of Finance: The Bankers Who Broker the World).

The pointless pain that the policy inflicted did nothing to stabilize the financial system, one of its stated goals, and even made things worse.  It wasn’t until FDR replaced Hoover that the policy changed after a banking holiday, which led to a recovery from the self-inflicted pain that Hoover imposed through his Liquidiationist policies, which bear striking similarity to the Ryan budget.

There’s a lot more that can and has been written on the flaws of the gold standard, particularly in the context of the Great Depression, but one of the reasons why pushing a gold standard indicates an extremist takeover of the Republican Party is that it ignores much of the work of conservative economist Milton Friedman, whose seminal work with the economist Anna Schwarz, A Monetary History of the United States, 1867-1960 presents a convincing case for why the “hard money” Fed policies pursued under Hoover not only failed in their goal, but pushed the US further into the Great Depression.

If the Republican Party is abandoning Friedman as “Milton the Red” (to use a tongue-in-cheek reference coined by Brad DeLong), than they have abandoned any sensible economic policy in favor of the conspiracy minded ramblings of Ron Paul, and should be reason enough to keep the party out of power until it abandons these types of fringe beliefs.

“Audit the Fed” is Just a Nicer Way to Say “Put Congress in Charge of the Fed”

by pdxblake

Ok, so any claim Romney might have to understanding economics based on his “business experience” (which I rated as dubious at best) is now gone (ht Business Insider):

“The answer is yes to that, very plain and simple,” Romney responded, when asked by a supporter at a New Hampshire town hall whether it was time to audit the Fed. “The Federal Reserve should be accountable. We should see what they’re doing.

The Fed is audited already.  The idiotic idea of ‘auditing the Fed’ made prominent by Ron Paul is not a conventional audit, it is a way to incorporate politics into Central Banking by allowing politicians to second-guess Fed decisionmaking.  (I addressed many of the issues that people don’t understand about how the Fed works in two other posts, part 1 and part 2).  As for whether the Fed is audited, they have a quite comprehensive list of oversight over the institution, which I will copy and paste at the bottom of the post because, really, how many people are going to click through to the Fed’s website?

One of the important issue of monetary policy particularly now in dealing with economic changes is that it can respond both quickly and in a way that has a relatively fast impact on the economy.  The need for speed was on display during the financial crisis when the Fed stepped in to stop a collapse in the financial system, while the other economic level, Congress, dithered about approving the TARP even as financial markets swooned, falling 777 points in a day.

Proposals to ‘audit’ the Fed would strip the Fed’s effectiveness because, even if it moves quickly, its moves could be subsequently reversed under political pressure, which strips the credibility from Fed moves (because the stock and bond markets react to the Fed’s moves as if they were inevitably going to be carried out).

Outside of crisis situations, there are other reasons for central bank independence.  Mostly that more independent central banks are associated with lower long-term inflation rates.

HT Mark Thoma, graph from “Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence,” by Alberto Alesina and Lawrence H. Summers, Journal of Money, Credit and Banking, Vol. 25, No. 2. (May, 1993), pp. 151-162

The theoretical explanation for this relationship at its simplest is that there is a benefit for each government to boost the economy before elections without recognizing fully the costs of the resulting rise in the price level (since it will tend to happen regardless of the state of the economy and whether or not it needs the stimulus).  This leads to a political business cycle of higher growth in the year before elections followed by a slowdown and then another boost near the next election.

The problem comes because the stimulative effect comes quickly, while the higher inflation (when the stimulus is pushed into an economy operating near its full capacity) comes later (after the election).  The higher inflation from each successive cycle of electioneering monetary stimulus is often not enough on its own to raise fears of higher inflation, but each successive cycle increases the inflation rate.  As a result, most countries have moved towards more central bank independence.

The idea of ‘auditing the Fed’ proposed by Ron Paul, and now Mitt Romney, would move in the opposite direction towards greater politicization of monetary policy which would harm its ability to fight crisis and, perversely for Romney and Paul’s stated goals, would likely lead to higher inflation rate.  It is an innocuous sounding way to propose a quite radical policy.


Does the Federal Reserve ever get audited?

Yes, the Board of Governors, the 12 Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review:

In addition, the Reserve Banks are subject to annual examination by the Board. The Board’s financial statements and the combined financial statements for the Reserve Banks are published in the Board’s Annual Report.

See our audit page for more information on all of the above audits and more information on the accounting, financial reporting, and internal controls of the Federal Reserve Board and Federal Reserve Banks.


Ron Paul Doesn’t Even Get A Participation Trophy

by evanmcmurry

I’ll admit that at one time I was secretly rooting for Ron Paul to mount enough of a primary effort that he got onto the ballot at the Republican National Convention. a) It might have forced the RNC into an actual debate over actual policy, as opposed to the Anti-Obama Greatest Hits Package it will now surely be; and b) the resulting chaos would have been the best political spectator sport of the entire race. The stills of William Kristol and Charles Krauthammer grimacing alone would have been worth it.

Alas, at some point after New Hampshire, Ron Paul stopped standing for anything besides getting his son a speaking spot at the convention, and his followers took over, implementing a strategy that sure looked, walked, and talked like backdoor disenfranchisement. So now that Ron Paul isn’t actually a substantive alternative to the GOP platform, I’m happy to hear he didn’t clear the delegate threshold to get on the ballot. No Ron Paul party this year, kids. You’ll have to wait until Rand runs.

Scott Lemieux with the close:

Paul’s strategy was to game the system in order to produce a nominee (or at least competitive campaign) whose political positions were dramatically at variance with the bulk of his party; this strategy was premised on the assumption that the Paul people were, in effect, the smartest people in the room. This is generally in accord with the “you just don’t get it, do you” feeling that accompanies any conversation with a Ron Paul fanatic, and it’s altogether satisfying to see that deflated.

“Ron Paul”

by evanmcmurry

My favorite part of this: Ron Paul claims he had nothing to do with the efforts of the organization that produced the newsletters–an organization called “Ron Paul & Associates.” So it wasn’t Ron Paul, it was “Ron Paul.” So much for the honest-candidate tag.

Libertarianism: A Still Life

by evanmcmurry

This seems reasonable to me, but then, I’m not a libertarian: “The biggest mistake that libertarians make is the way they view government and private sectors. Government is the root of all evil, and the private sector is the source of all good. Libertarians have never figured out that people are the same whether in the government or in the private sector. They will abuse their power regardless of where they perch. That is why government needs to be tied down by the Constitution and the private sector by regulation. Yes, regulation can go too far. Certainly, deregulation has gone too far.”

(This is no way an endorsement of the rest of the article, which is pretty florid).