<blockquote>'What’s more, both instances are basically the same statement. Namely that
“America’s economic strategy defaulted to trusting that the Federal Reserve could solve our problems through monetary stimulus.”Sadly, there’s no analysis or discussion of the economic destruction the Fed’s monetary policies have wrought. What gives?'
-
Harvard Report Whiffs on Fed Price Fixing Scheme, September 23, 2016</blockquote>
'..There was an intensive debate over the socialist calculation problem that lasted well into the 1940s, which the socialist falsely claimed to have won .. In reality, Mises’ contentions have never been refuted. It is to be suspected that some failed to really understand them, which would certainly make refuting them rather difficult .. The actions of modern-day central banks certainly represent a vivid illustration of this process.'<blockquote>'The world’s central planners are in a trap of their own making. Their policies have done so much damage that even the pretend prosperity of capital-consuming artificial booms can no longer be summoned – apart from the creation of ever greater and ever more dangerous asset price bubbles.
It has been obvious for some time that the world’s politicians and central planners are either too obtuse or simply unwilling to admit that economic growth cannot be conjured into being by top-down interventionism in the form of monetary pumping and deficit spending. The absurd pronouncements made at G-20 meetings confirm that magical thinking prevails among policymakers everywhere (see:
We Can All Relax Now – G20 Politicians Will Produce “Growth” and
The Gasbag Gabfest for some color on this collective elitist hallucination).
Japan is at the forefront of the race toward the cliff, mainly because its bubble economy bit the dust in 1990 already and its bureaucrats have been busy trying to “rescue” the economy for a decade longer than those elsewhere. Japan is a rich country; its people have accumulated a lot of capital back when its economy was much less hampered than it is today, and it is still home to a highly productive and creative private sector. This has allowed it to muddle along for a very long time now, but time may be beginning to run short.
Similar to other Western-style regulatory democracies, the political-bureaucratic class of the country – in an effort to justify its existence and to create income and sinecures for its cronies – has first regulated and taxed said private sector to death, and then tried to subsidize it back to life. The BoJ’s and Shinzo Abe’s policies are essentially nothing but this subsidization writ large (
very large).
What does the “race toward the cliff” actually entail? The core problem as we see it is that the technocratic elites, in a mixture of desperation and misguided faith in false economic doctrines, are crushing the market economy. The so-called “third way” between free market capitalism and socialism is failing, and from the perspective of the planners, the logical solution is a flight forward in exactly the wrong direction, toward a centralized command economy and total control (after all, they would have little to do and enjoy no political power in a truly free society).
The Western intelligentsia, with prominent Keynesian economists in the forefront, believed until the very last moment that the Soviet Bloc’s economy was not only viable, but would actually
overtake the capitalist economies. Mises had shown in 1920 already that this type of economy was literally impossible – and he had done so on the basis of sound economic theory. There was an intensive debate over the socialist calculation problem that lasted well into the 1940s, which the socialist falsely claimed to have won (their arguments had gone through endless contortions until they ended up proposing “market socialism”, essentially the crowning absurdity. “OK, we have no market, so we will
play market”).
In reality, Mises’ contentions have never been refuted. It is to be suspected that some failed to really understand them, which would certainly make refuting them rather difficult. Those in the socialist camp were ultimately reduced to pointing to the fact that the Soviet Bloc did exist, hence a socialist economy had to be possible (they overlooked a few crucial details, such as e.g. the fact that market prices existed elsewhere in the world). And yet, even though Mises’ theoretical disquisition has in the meantime been confirmed by incontrovertible empirical evidence as well, the belief in the efficacy of central economic planning and interventionism continues to fester in nominally capitalist countries.
Ludwig von Mises has made quite a few remarkable predictions, and there is one major forecast that has yet to come to pass (although one could probably argue that it already has in places like Greece and Cyprus). It concerns precisely this issue – he considered the “third way system” to be just as non-viable as socialism, since it would inevitably drift ever further away from a free market system (see also our most recent missives on this topic: “
How the Welfare State Dies” and “
The Coming End of the “Third Way” System”).
Mises argued that every failing intervention would beget fresh interventions to “fix” these failures. Eventually, everything would come under bureaucratic command and we would no longer be in a “third way” system, but in some type of
Zwangswirtschaft (literally translated, a “coerced economy”). The actions of modern-day central banks certainly represent a vivid illustration of this process.'
- Acting Man,
Japan’s Planners Ratchet up Monetary Experimentation, September 24, 2016</blockquote>
Context<blockquote>
Entrepreneurship - '..the calculation problem is much more general than has usually been realized.' - Dr. Peter G. Klein(Monetary) bureaucracy - '..our organizations are .. hostages to an ideology that is, in a real sense, inhuman.''..I’ve lost all respect for monetary economists..''..social, political and geopolitical risks associated with economic stagnation..((Hapto)praxeology) - '..Mises’s warning to the world .. not to suppress the market rate of interest in the name of creating prosperity.' '..saving, wise investment and production are what creates wealth, not spending and consumption..'(Ideapreneurs - Legitimize Daydreaming) - '..the world’s largest grassroots ideapreneurship..' - '..entrepreneurial activity...'</blockquote>