The economist who was right 33

One man, Peter Schiff, an Austrian School economist, stands alone against an onslaught by Keynesians.

They sneer, they mock, they try to laugh him out of court.

But, as we all know now, HE WAS RIGHT.

Will those who mocked and derided Peter Schiff ever admit they were wrong? Apologize? Will any of them “sign a letter saying he/she was wrong”? Could they change their minds as to which school of economic thought – the Keynesian or the Austrian – has proved to be right in the real world?

Almost certainly, no.

Ben Bernanke, current Chairman of the Federal Reserve, hasn’t changed his mind, although (in the video) he claims open-mindedness when Ron Paul asks him what it would take to persuade him he was wrong.

 

(Hat tip Don L for the video link)

Posted under Uncategorized by Jillian Becker on Tuesday, November 15, 2011

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  • Question to Don:
    I know we have discussed the FairTax here before.  I have read a decent amount about it and have become a big fan.  Does that jive with Austrian economics?  Or are they opposed to each other?  Or are they two totally different contexts?  How do Austrian economists view the FairTax?

    • Don L

      Hi PareshK, Time…It isn’t the time it takes…it’s that you are willing to make time …your schedule. Fairtax and the Cain 999: Against.  Fair tax is not Fair.  It is the expansion of the tax base…Austrians are against taxes in the first place; excepting that which is truly necessary to operate the government within the role of gov’t as specified in the , original intent, of the Constitution.

      A consumption tax hits the lowest income folks the hardest (pre-bate my a__) as a percent of income. Previous consumption taxes have destroyed industries.  (Cain’s example) 9% on a 2 million yacht…buy from Taiwan.  It is gov’t, in effect, interferring with market determined prices…always a failure. Unintended consequences. Then, consider, that upon its imposition, every dollar in existence is now (Cain’s) 9% less valuable.  Nobody earns (produces) money in order to hoard it.  Savings, investments…sooner or later it will be spent (incidentally it is this ‘time choice’, of when consumers spend, that no other school of economics can mathematically model!).  So, the duplictous politicians (both parties)/government can now say there is 25 trillion (?) dollars in play (the FED merely prints more to take more) and 9% is the gov’ts… so 9% times 24 trillion can be carried on the books as an asset and spent…Fair tax is a fraud…a trick. Progressive income tax lends itself to the nonsense of 75000 pages of cronyism. Speaking only for myself…I prefer a flat income tax…and hard to allow deductions…why collect it to deduct it…keep it low.  The idea that the budget is set to some percentof a contrived index…GDP…is insane. Define the role of gov’t…including covering the promises that can’t be kept (as they are closed out)…and KNOW what it costs…Every business in the world does this.

      Enough…hope it helped. 

      • Thanks Don.
        I totally agree with: “Progressive income tax lends itself to the nonsense of 75000 pages of cronyism.”
        This is why I have always thought the FairTax was a good thing (with the prebate).  I absolutely HATE how politicians f__k with the tax code to hook up their cronies.

        But, isn’t the flat tax even more burdensome (than FairTax) on the lowest income folks?  And why do you think the prebate is a farse?

        • Don L

          One of the booklets in the 10-Pack (maybe one of the bonus booklets) is ‘Bureaucracy’ by Ludwig von Mises.  Why has every program, every operation…everything undertaken by government (any government anywhere) FAILED.  It is becuase of bureaus and bureaucrats.  It is impossible, lacking profit & loss impacts and consumer-orientation, for any efficiency to work.  This, like the IRS under the current stupidy, be doomed to absurdity from the getgo.  The flat tax is to simple to be messed with.

          The prebate assumes, the lowest earners, can wait for the rebate…like going to the Costco…yes, per ounce the million ounce jar of dill slices is the cheapest per unit cost…they can’t pay the price…they have enough for the 4 oz jar at a gazillion times more expensive per unit.  And, here again, you have gov’t out measuring what is and isn’t the poverty level…gov’t can’t measure…one size fits all mentality screws everybody!  There’s juast too much gov’t will get it right expectations in this scheme. Has gov’t/political actors – influenced by lobbiest — ever been honest? 

          Have you ever voted for a candidate that said they intended to ignore the Constitution, bankrupt the nation and burden your kids with enslaving debt?  No…well. both parties…they did.  Do Not believe anything being pushed this hard.  Learn the Austrian stuff on your time schedule…you will be amazed just how different you’ll be seeing the BS pushed on us.  You will never be fooled by the Pols or their favorite “leading Economists Agree” deception tactic again. 

        • Don, I had to reply to my own post since I can’t reply to yours.

          I am excited to get more insight into the Austrian economic principles.  I will do what I can to read bits of it when I can fit it in.

          I do need to correct you on one detail regarding the fairtax though.  The prebate is for everyone, not just those the gov determines are at the poverty level.  It is specifically structured that way for 2 reasons: 1) gov cannot invoke its bureaucracy to determine who is “worthy” of a prebate (i.e. no more Obama “millionaires and billionaires” class warfare bullshiit) and 2) neccessities for ALL citizens will be tax free.

          The government WILL have to determine the prebate amount, however.  But, again, this applies to all citizens so the concept of lobbying by certain interests will not (should not) occur.

          Also, the prebate is determined by a reasonable prediction of how much the taxes on necessities will be.  I think the last literature I read was that the prebate would be around $2600.  For a family of four, I think it is reasonable to say that $125/ week on groceries is average.  125*52 weeks*0.32 taxes = $2080.  That leaves about $500 to cover the taxes on clothes and other neccessities.  This sounds reasonable to me.

          I do not understand your Costco analogy.  You mention that the poor can’t wait for the prebate payment.  Remember, its intention is to cover the cost of the TAXES on necessities, not the necessities themselves.  With this in mind, when the prebate checks go out is arbitrary isn’t it?

        • Don L

          Yeah…analagy not best…up front money was the idea I was trying to convey.  This is from a site I’m looking at about prebate calculations…more schedules just like what we got…think it won’t get even more progressive.

          While everyone pays the same tax rate at the cash register, the prebate results in effective tax rates (annual taxes paid divided by annual spending) that increase as the level of spending increases – a progressive tax rate structure. For example, a person spending at the poverty level has a 0 percent effective tax rate, whereas someone spending at twice the poverty level has an effective tax rate of 11.5 percent, and so on. The table below shows the prebate calculations for 2009 by household type and family size. you’re saying “sounds reasonable” … one size fits all determined by some gov’t number guy.  What is reasonable…only the individuals can determine that.  It is gov’t now telling you what  their choice for you to spend your money on is…a flat tax at least allows you to decide what you’ll spend, what they didn’t take, on what you want.  There is just this I’ll gladly reimburse you for today’s  hamburg on tuesday…made sense to me…LOL.  Bureaucrats will be determining what is resonable…per their political masters.  Anyway…I’d recommend the papers and articles at mises.org on the Fair tax…they have all kinds of why nots and analysis from the heavy hitters…I’m just an old fat retired cab driver…just read a few books!  LOLOh…this PDF is excellent about gov’t and ‘calculation’  8 pages: http://www.mmisi.org/ir/46_02/veryser.pdf

        • Don L

          Sorry…looks like the quote and my stuff ran together.  GRRR!

    • Don L

      Sorry…besides my site…check out mises.org.  This is home to the Ludwig von Mises Institute…Ludwig being one of the Austrians from which the school of thought gey=ts its name.  Be advised however…there are a bunch of Austrians that are off the chart anarchistic libertarians…like Ron Paul.  As I have advised before…separate economics from politcal ideology.  Now done.  LOL

      • Bill Martin

        Hey I resemble that remark

        • Don L

          Hey Bill Martin. The economist Thomas Sowell’s book “Intellectuals and Society” does an excellent job describing the consequences of isolationism and peace at all costs.  Long-to-short, it tends to invite aggression and, like Bastiat warns, consequences from “that which is not seen”. Sowell also does a great job describing “experts” and the level of incompetence…like Ron Paul. 

          Maybe it was in the Austrian & Libertarian Jeff Tucker’s book “Bourbon for Breakfast” (a compliation of his articles & essays) wherein he strongly presents the idea that we should have allowed the Soviets to occupy us.  After all, he argues, their economic sytem was so bad it was going to break and they’d collapse anyway.  Gee & gosh by golly…soviet occupation of the US of A…a death free take over for sure for exactly how many years, decades ( a whole new source of slave labor). Ah…it could also have been in Kel Kelley’s “The Case For Legalizing Capitalism”.  Both, by the way, are great reads…just filter out the libertarian nutty parts.

          Certainly, the warnings of the Founders as to “foreign entanglements” have gone unheeded.  The piper is looking for his due.  Ron Paul states Iran is our fault…I won’t argue the point.  So, his solution is to walk away and allow this theocratic regime to develop a nuke.  He says they would be rational.  If you saw the video of the muslim kid being taught to saw the man’s head off (taught hell…do)  there is nothing rational about these people.  You can’t bomb them back to the stone age…they look foward to it in the name of Crapallah. Paul also argues, “well the Soviets had a lot more nukes and they were more dangerous”. Not so.  The Soviets were rational and that’s why MAD worked. The Iranians have every intention of using a nuke if they get it.  Paul recently stated he would seek frienship with Iran if elected. Incredulous and it doesn’t deserve digital ink to respond.

          No, Paul assumes too much based on a political ideology.  He is outside economics…in his level of incompetence.  As far as Afghanistan and Iraq…too much PC worry and not enough was sent in to do the job…tip toe through the tulips will end with a trip into the briar patch brer rabbit!

          Anyway, I’d love nothing more to get an Austrian economic adherent into the top job…but I truly believe Paul would get us killed.  Here we are again…lousy choices…the objective is anybody but Obama.  If any of our “gov’t” had ethics (including the bulk of the Nov 2010 crowd)  Obama oughta be behind bars as the domestic enemy he is.

          All we can do, atleast I’m giving it the shot, is promote and educate about the Austrian school of thought and hope the libertarians don’t ruin it with their , sometimes, idioacy.

          Take care Bill Martin…END THE FED

    • Don L

      Hi Again…

      Candidly, I have not studied either the fair or flat tax.  I hadn’t even looked at Mises site until you asked about Austrian response…glad to see they agreed with me…Phew!  LOL 

      In the video with Schiff…Art Laffer was the guy with the penny bet.  He was Reagan’s Laffer curve guy. He is a central planning tax and spend guy.  His Laffer curve didn’t help consumers or tax payers…it was to maximize revenue government.  He’s a loser.  He supports the Fair tax.

      In the former soviet satellites…many have adopted Austrian thinking and adopted a flat tax and they are thriving.  Even Mother Russia started out with a flat tax and was off and running until Putin took over.  Steve Forbes has sided with no low taxes and has been pudshing the flat tax for more than a decade.  Anyway, therein lies my my initial considerations.

      Later!

    • Bill Martin

      The United States got along fine without any income tax or national sales tax for most of its first 140 years. It enacted a ten year income tax on the wealthy during the Civil War but repealed it because Congress followed the intent of its taxation power – useful and used in times of emergencies only. The US has had a 98 year emergency since the 1913 addition of the income tax to the constitution. Coincidentally tariffs decreased and the level of government control and government spending increased. Likewise, the first year of the tax, the income tax rate was about 1% and effective on incomes above $65,000 that year. Now the normal US adult pays 20% in federal income tax. The income tax should be abolished and above all NOT REPLACED BY ANY OTHER TAX. Spending needs to be cut. Taxation is unamerican. Don’t get sucked into the propaganda that the US must have the income tax or a national sales tax. Question the role of the government instead: Should the US government be a nanny state? Should it be the world cop? Or should it provide a framework upon which we can enjoy our individual rights to life, liberty, and property?

  • This video was amazing.  I especially liked how, back in 2005/6, Schiff was trying to explain that he didn’t specifically say the collapse would happen “next year.”  I think he said whether it happens in 6 months or 2 years, that is irrellevant.  The main problem was that the fundamentals propping up the economy were all bad, which is why the impending recession would be serious and prolonged.

    I also loved how one lady in opposition stated how people don’t overvalue stocks.  Schiff’s reply brought up the tech bubble.  Slam-dunk!

    I am really glad you all brought this guy to my attention.  I wish I had noticed him before.  I am off to go check out the other videos listed here…

    • Deladyn

      PareshK,
       
      Feel free to checkout my site teapartyeconomics.com  You’ll find a free Econ 10-Pack that includes a couple of pamphlets and 8 booklets.  The material will not make you an economist…like Shiff…It’ll make you right!   Many who have acquired the 10-Pack say their ability to “see”/comprhend economics is radically changed.  What will get you is that Austrian economics has been around forever.  It was purposefully set aside/ignored/denegrated )never refuted) because it disproved central planning and socialism.

      Anyway…welcome to the adventure of  knowing.

      • Don, I will try to pick away at some of those pamphlets and booklets, but time is one thing I am real short on these days (two young kids).  I do intend to become more knowledgeable about economics in the future.

    • Don L

      Ah…

      The Austrians developed the theory, proven, of the trade cycle.  It is this concept that Schiff applied to KNOW the bubble existed and that it would burst.  What can’t be known is just how insane the FED would be in trying to keep the bubble inflated.  The longer it does…the greater the fall and more severe the  disaster.  The booklet on the topic is 4 essays – only 129 pages:

      teapartyeconomics.com/Free PDFs/The Austrian Theory of the Trade Cycle and Other Essays – Richard M Ebeling.zip

  • Liz

    Another interesting clip that showed up after that one was Hazlett interviewing Hayek, who said of Keynes that he would never have approved of what his followers had made of his doctrines.

  • Peter Schiff for Treasury…or Fed Chairman…or anywhere he can make a difference.

    • Liz

      That would really be sweet revenge, if he became Fed Chairman. Apparently his father is in prison now for opposing the Fed! (That was mentioned in Schiffs book recommended by DonL – thanks, Don!)

      • Don L

        Schiff is dedicated, as Austrians are…The FED causes all this economic adversity…so FED chair would be a VERY temporary assignment…Secy Treasury would be good.  And, you are welcome Liz…thanks!

        • Don L

          I have to thinkt to proof read:  END THE FED!  Duh!

  • Don L

    Thanks Jillian.  I find this to be one of the most instructive videos about our economic sytem I’ve ever seen.  You do not need to be an economist to recognize just how incredibly useless mainstream economics is.
     
    Peter Schiff knew he was right because he knew Austrian economics…that was his courage to stand up.  Free Market Capitalism is not the dreaded, turn the other way, “utils”: BS foisted throughout the compulsory schooling system (K- Grad school).
     
    Free Market Capitalism is in your face common sense, logical.  It took a hundred years of thought by incredibly brialliant men to scope it out and the finding was:
     
    People left alone to make their own choices — no gov’t interfernce — makes for the most prosperous society one can imagine. 
     
    The hitch…people become complacent and then they allow the Harolds in: 
    “…without Government it is difficult to ensure compliance.”  –  redistribution.
     
    If you buy and read Peter Schiff’s new book…you will be smarter on the economy and economics than 99.99% of the media talking heads, the politicians and the “leading economists”…guaranteed:
     
    http://www.amazon.com/dp/047052670X?tag=teapartyecono-20&camp=213381&creative=390973&linkCode=as4&creativeASIN=047052670X&adid=1FP6JJW90HCQWC9Z4NDG&

  • Don L

    If you liked that one…here’s the follow up 2 years later.  Art Laffer on Bill Maher show.

    • Don L

      This one is a scream!

  • The “austrian school” are libertarian kooks. It is not a group taken seriously by any professional economists. They are are basically a radical group of kooks.

    Cheers! RichGriese.NET

    • Liz

      Of course – “professional economists” like Bernanke, the tax cheat Geitner, etc., etc…  It really shows independent thinking there, to dismiss anyone who isn’t taken seriously by “professionals”.  They are professionals at screwing the public, so painlessly that some of us don’t even notice it! 

    • Jillian Becker

      Rich Griese, you do talk a lot of nonsense!

      Friedrich von Hayek. one of the greatest thinkers of the Austrian School, was awarded the Nobel Prize for Economics. His judges were fellow professional economists. 
      The Austrian School is taken extremely seriously, notably by its opponents. 

      The Austrian School explains why the free market  – or “capitalism” – is the only system which can and does produce prosperity. 

      Check it out. If you can, read Von Mises, Hayek, and the rest of them. They’re great educators. Go on. Take a first step and you might get to enjoy learning.     

      • Keith

        I also like Walter Williams and Thomas Sowell. Great economists and conservatives. They both makes economics easy to understand or at least less difficult.

        • Don L

          Sowell’s book “Intellectuals aand Society” ,IMO, is perhaps the best analysis & explanation of the “we know best” progressive idiocy written/published.  The presentation of the “peace movement” between WWI & II is excellent…Ron Paul seems to be locked into this “blind” mindset.

    • Andrew M

      Trusting citizens to make their own economic decisions? How dare we permit this! What an unspeakable horror to let people risk their livelihood on investments, make strategic business partnerships, and generally be all free and prosperous and stuff like that!

      No no no no, it is imperative that the central government exert some influence over these unscrupulous, exploitative, and most of all evil capitalists so that they don’t steal the scarce resources that rightfully belong to the 99%. It doesn’t need to be a full-on centrally regulated socialist economy, but we must remember people that some businessmen are more equal than others.

    • Don L

      Disconnect Austrian economics from Libertarianism.  Economics is economics…water is wet and rocks are hard…that’s the way it is.

      Austrian economics proves how destructive war is to an economy when it is foisted deceptively.  Austrian economics does not say disregard Iranians with bio, chem and vnuiclear weapons…jerks do that.  Not even sure all the Libertarians believe tha,  That said…you are still pretty much a kook yourself.
       

    • Bill Martin

      Huh? While I respected Milton Friedman’s Monetarism, it is based on a house of cards: Monetary policy, which is based on fiat currency. Kooks? How humble of you to call a serious alternative economic theorists (whose teachings are permeating some of the top universities (NYU, George Mason University, Walsh College, Auburn University, to name a few. Kooks? Good grief. You are not a traditional conservative, but a neo conservative. Sorry to say.