1 vote

Disappointed in Austrian Economics

First some axioms:
1) Existence/continuity AND progress of humanity
2) well-being of individuals is less important than 1)

I was big fan of Peter Schiff and I still listen to his show but I don't consider myself austrian anymore, I think that Soros's reflexivity theory has better explanation of economics.
In my opinion both Austrian and Keynesian explanations of Great Depression are wrong. Austrians blame government and Keynesians blame free market. In reality only humans can be blamed for it. "Goal of economy is to eliminate all jobs" - Peter Schiff(I think he doesn't fully understand what he said) "I create nothing. I own" - Gordon Gekko. Capitalism means that people who own means of production can live without working, they can just collect dividends. More important is that means of production evolve much faster than humans. Human evolution is too slow. Sometime in the future working class will become extinct. Normally this extinction process would be carried out through savings and investing of workers and then capital will be transfered to their children. But it's not smooth process. Some people make mistakes when investing and some people(i believe they are majority) do not even realize that they should save and invest. if this happens they either starve to death, rob other people and go to jail, or charity helps them. Problems begin when too many people loose their jobs and don't have savings. That happened during Great Depression. Yes, federal reserve created bubble that popped in 1929. But what Murray Rothbard wrote about Hoover interventionism is wrong. Two examples of government intervention that austrians usually use are fixed wages and trade war. Fixed wages argument refuted here by dsglop http://www.youtube.com/watch?v=tBqjdbLFfGQ
Also Murphy says in that video that wages were fixed because Hoover called to businessmen and asked for it. However in this video http://www.youtube.com/watch?v=zPbaA3V41sc at 15:08 historian David Kennedy says that Hoover called to businesmen in 1921 and it is ended Depression of 1921 while austrians believe that lack of government intervention and free market help US economy get out of this depression. So either Hoover had magic powers and could stop depression of 1921 AND prevent businessmen from lowering wages or free market fixed itself in 1921 AND it fixed itself in first years of Great Depression except that according pure abstract economics those 25% of workers that were unemployed were unnecessary and should have been removed from economy.
2nd argument refuted here http://www.exponentialimprovement.com/cms/smoot.shtml
and here http://www.economics-charts.com/gdp/gdp-1929-2004.html
exports were only 5% of GDP, trade war couldn't impact US economy.
Government didn't cause Great Depression. Neither did free-maket. Humans caused Great Depression. Specifically working class. Market worked very well. Economy was completely restructured by 1933. But there was 25% unemployment. Real free-market solution would be to kill those workers(or let them starve to death). Because they can't adapt fast enough. Humans are obsolete. They can't keep up with progress. Even without minimum wage there was no place for them in economy. Free market economy ensures fastest economic growth. But humans are unnecessary for economy. Machines can completely replace human labor. therefore free market doesn't guarantee that there will always be demand for human workers. And because free market doesn't care about humans only about efficiency and gross output human capitalists will be eventually replaced too by uncontrollable AI(like in matrix, terminator, etc.) Economy simply doesn't need any humans.
Austrians believe that Roosevelt was evil, however he was forced to try to save those unnecessary 25% of workers otherwise they would probably destroy system. But Great Depression happened worldwide, many people couldn't find jobs, and capitalists didn't do enough to save them. I believe that's one of major reasons of WWII, technological advancements and capital accumulation lead to millions of workers that economy didn't need and those millions killed each other plus enough capital was destroyed so demand for previously unemployed workers was created again. Great Depression is very similar to what is happening these days. So i think it is possible that there will be WW3 in next 5-10 years if nothing will be done to deal with excessive human supply.

I also believe that markets are inherently unstable, usually they can fix themselves, but bubbles can also occur without government intervention. Problem with Soros's reflexivity theory is that while there were numerous market bubbles without government intervention there were very few(if any) that actually caused major damage to economy(2-way feedback mechanism - bubbles affect real economy). There was at least one such example in geopolitics - WWII. Germans and Japanese created bubble of national supremacy that badly damaged Allies and after it popped it caused even bigger damage to Axis. Even if Pearl Harbor was inside job it was necessary because otherwise Germany would get access to nuclear weapons and possibly destroy the world. Soros blames dotcom and housing bubbles on free market but he clearly lies because he said in several interviews that Greenspan is biggest market manipulator. Even Paul McCulley from PIMCO who is also believer in free market's tendency towards bubbles said in 2001 that Greenspan was responsible for both dotcom and future housing bubble. I think that Soros does it probably because he can't explain it to public in simple terms.

Possible solutions to these free market problems
1 NWO. There should be one world government that controls WMDs, ecology and things like that. Strongest countries should take responsibility of policing the world. If some governments refuse to comply they must be destroyed.
2 Not only FED should have responsible monetary policy but government should have instruments for suppressing bubbles.
3 People that can't find work and depend on government should have handouts/living wage as low as possible(just enough for food, cheap apartments, very basic medicine, tv, internet, prostitutes, i.e. "bread and circuses")
4 Strict population growth control(sterilization, vasectomy, etc.) is required for sustainability of economy, rich people can have as many children as they can support
5 no additional care for poor older people
6 legalization of euthanasia, smoking, alcholol, heavy drugs, abortion for people that depend on government
7 there probably should be some voting restrictions because people who depend on government will vote for greater share of income(which is normally reinvested to grow economy) and will slow progress while rich people would vote for less government and taxes which threatens stability and existence of humanity. However it's unclear how such system could be implemented since watchdogs are humans too, they are biased and fallible...

It's hard to accept but we libertarians indeed are cult members :) Rothbard, Schiff, Ron Paul, Jim Rogers are all wrong. However nobody can deny fact that free market capitalism ensures fastest economic growth. So government intervention is needed but only to prevent system from collapse, everything else should be left to free market.

PS Sorry for broken english, it's not my first language.

Important update:
Zbigniew Brzezinski has similar concept Tittytainment

20 percent of the working age population will be enough in the coming century to keep the world economy going. "More workers will not be needed", said magnate Washington SyCip. A fifth of all jobseekers will be enough to produce all the goods and perform all the top-flight services that the world society can afford....

from deleted wikipedia article

The word “tittytainment” was coined for the first time in 1995 by the neo-liberal ideologue Zbigniew Brzezinski, member of the Trilateral Commission and ex-national security adviser of United States President Jimmy Carter, during the conclusion of the first “State of the World Forum”, which was hosted at the Fairmont Hotel in the city of San Francisco. The objective of this meeting was to determine the state of the world, suggest desirable objectives and principal activities to achieve them, and to establish global politics to match them. The attendees to this meeting (Mikhail Gorbachev, George Bush, Margaret Thatcher, Václav Havel, Bill Gates, Ted Turner, etc.) arrived[citation needed] at the conclusion that a 20:80 society is inevitable. This means that the work provided by 20% of the world population would be sufficient to sustain the world economy, while the other 80% would be without work or opportunities, nourishing a growing frustration.

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You make some good points...but...

dimaniac wrote:

"In my opinion both Austrian and Keynesian explanations of Great Depression are wrong. Austrians blame government and Keynesians blame free market. In reality only humans can be blamed for it."

Fault and blame may be attributed to a number of things and people but the primary reason for the "great depression" was the result of our debt based money system.

All money is created as debt principal while the interest is not created which means there will always be more debt than money and the difference between the two will grow at a quadratic or exponential rate.

If you are establishing guilt and blame, you must first attribute the mathematical certainty of booms, bust and ultimately collapse of the privately owned debt based system.

Next, we must blame economic belief systems that trained economists to accept a bogus system. Next, we must our leaders and economists that have allowed this to happen.


END the FED before it ENDS US

I'm fairly sure you don't understand the question- and can't

(Q2) What is the source of Individual motivation? (Which I asked ten-thousand responses down this thread)

dimaniac: Are you asking me? (no... I'm asking your mama) instincts, emotions, beliefs? I'm not sure that I understand this question...

It's apparent that you do not. Can't even relate to it, can ya? Good dog.

Your mind, revealed by your positions, is that of an "efficient" Communist. You're not even aware of your own existence outside of the objectives of the collective, are ya? Can't even imagine being a free man. Sad. Disgusting within the context of being an American.

Kudos to Repubicae and Vanilla Gorilla for a more eloquent response.

Lucky me

I didn't have to read very far to see someone point out one of the elephants in the room.

Let this thread die.

I think its time to let this thread die. You know what they say, "Don't feed the trolls!"

"So this is how liberty dies... with thunderous applause."

* * * * * * * NEW R3VOLUTION HIP HOP TRACKS!! * * * * * * *

what dissapoints me is that

what dissapoints me is that someone who claims to be a Ron Paul supporter would believe such garbage.

It sounds like

you have a lot of misunderstandings about austro-libertarianism. Let's start at the beginning, if a farmer and a shoemaker want to trade shoes for a few apples and they use money(honest money) to aid their exchange, what gives a third party the right to steal value from the trade by inflation? What has this third party contributed to justify the theft and mis-allocation of wealth to a non producer? Never mind the millions of instances of theft that occur in a Keynesian/socialist economy, what justifies this equally evil single instance of theft?

"Endless money forms the sinews of war." - Cicero, www.freedomshift.blogspot.com

3 Things

1) You envision a need for central planners to respond to "natural bubbles." Yet, bubbles can't exist in a 100% precious metals standard (Eg, gold). bubbles are a function of a dishonest money policy from central planners called "fractional-reserve lending." I invite you to look it up.

2) You envision that technology will cause a void in employment and eventual end the demand for humans to do anything. This is a myth. Robots lack spirituality and inventiveness and self-awareness. Robots may be able to duplicate themselves, but will never be self-aware. The cotton gin did not slay the farmer. the car did not slay the horse. the airplane did not slay the train. the predator drone did not slay the soldier. and none of these inventions slayed the human who invented them in the first place. now, if we end up extinct, then that is another topic altogether -- but it won't be caused by the markets. who do you think is going to fix the cotton gin, the car, the airplane, the train, the predator drone? who is going to dream it up, draw up the plans, market it, build it, maintain it, fix it, and improve upon it? there is much more to society than mere "manual labor."

We live in a world of differing intelligence and skills, of changing market preferences, and of imperfect information, which can lead to temporary, market-generated unemployment. any void of employment caused by the efficiencies of the markets, will be filled by the autonomous ingenuity of people, of course, does not mean Utopia.

3) you envision an NWO that will take care of everything for everybody. government is made up of the same error-prone humans that enfeeble every institution. if you can't leave it up to a corporation, then you certainly can't leave it up to central planners to govern the planet.

Yet, bubbles can't exist in a

Yet, bubbles can't exist in a 100% precious metals standard (Eg, gold). bubbles are a function of a dishonest money policy from central planners called "fractional-reserve lending."
bubbles can exist with 100% reserve banking and gold standard.

This is a myth. Robots lack spirituality and inventiveness and self-awareness.
Machines can completely replace humans in economy. And AI can be as creative as humans.

you envision an NWO that will take care of everything for everybody.
NWO should take care of WMDs, most things can be left to market

Bubbles can exist but not on

Bubbles can exist but not on the scale of bubbles in a centrally-planned economy and artificially setting the interest rate.

Bubbles in a free market are generally isolated regionally - bubbles in a centrally-planned economy affect all regions influenced by the policies - which is the entire country.

Bubbles in a free market aren't as severe in their size, radius of influence, and recovery time.

"Bubbles can exist but not on

"Bubbles can exist but not on the scale of bubbles in a centrally-planned economy and artificially setting the interest rate."
Human nature is cyclical. Bubbles can exist in any type of economy. Government should address bubbles themselves not only monetary policy

so to summarize your point of view

you imagine bubbles inflated by fiat money can exist in a 100% gold standard

you imagine robots can be programmed to autonomously program themselves based on observation. (Self-awareness.)

you imagine a world where all the nations will decide to abdicate their soveriegnty to a third-party central planner by way of handing over anything defined as a "WMD."

interesting points of view.

do you care to explain how a bubble can inflate in a 100% gold standard?

do you care to explain how a

do you care to explain how a bubble can inflate in a 100% gold standard?
Markets always tend to move away from equilibrium. Usually they correct themselves but not always. Read Soros. Even Marc Faber believes that market bubbles can occur without government intervention.

Bubbles may occur but the

Bubbles may occur but the market can easily see and correct the misallocation of resources if sound money is used. Have you read "Human Action" by Ludwig Von Mises?

Know your stuff, learn real history and economics @LibertyClassroom.com

Have you read Soros? Markets

Have you read Soros? Markets usually correct themselves.

Soros is an idiot..

Soros is an idiot..

Soros is a one worlder, he supports keynesianism.

Keynes read Mises's critique of his work. Mises said, amongst other things, that it would lead to an elite and wipe out hte middle class leaving the hugest gap between the elite and the poor.

Keynes admitted to being deeply moved by Mises's analysis.

Keynesianism was designed to, and has led to, that rotten state of affairs.

There are all sorts of sources for all kinds of subjects. I would not read Soros partcularly, except some time to understand his methods (I already have a good idea of his motives) for his hand in suppressing his fellow man on such a grand scale for the purpose of undoing that. He is one of the 2.5% or so from which the world's misery eminates.

It's better to be Keynesian

It's better to be Keynesian than Austrian today. Free market can't solve problems of excessive human supply. Do you want WW3?

Freemarkets do not lead to wars

Currently we are rushing headlong toward WW III in a global Keynesian system.

And freemarkets are conducive to free thinking. Free thinking leads to solutions of more jobs, better use of resources to answer your disgusting (Hitlerian, Genghis Khanian, Rothschildian) concept of "excessive human supply". It is called the human races. It is us. It is that species that is inhabitated by spiritual beings and who finds a way.

Solutions based on reason rather than force are always avaialable. You create wars with your system rammed down throats with the forerunner of war, central planning enforced by police. All the while pretending to have free markets with the media the system owns -- and then blame the highly restricted free markets, again using the system-owned media.

Solutions based on reason

Solutions based on reason rather than force are always avaialable
They were not available during Great Depression.

they always are, except to the obtuse.

It is what sepearates the thinker form animals. And they did bring us out of the that lesser depression despite govt barriers.


I'm beginning to feel that you are either completely ignorant of history and reality or just a troll because you say such absurd and clearly untrue things. The Great Depression = caused by government intervention, NOT free markets and "excess human cattle supply" or whatever sociopathic nonsense you spout. Go read The Revolution Was like I suggested and stop spouting about economic idiots like George Soros. I do not believe that you are a Ron Paul supporter because he is 100% against everything you say!

I'm beginning to feel that

I'm beginning to feel that you are either completely ignorant of history
Austrians don't have sufficient explanation of Great Depression(neither monetarists or keynesians)
If you have non-austrian explanation that differs from mine i'm ready to listen.
The Great Depression = caused by government intervention, NOT free markets and "excess human cattle supply"
I didn't say that free markets caused great depression. They actually solved problems that were existing in american economy before 1929. One of such problems was excessive human supply. In abstract economics these humans would be simply removed from system. But humans are not machines, they are egoistic and violent and to prevent revolution Roosevelt had to destroy part of economy to create demand for unnecessary human workers.

Republicae's picture

Have you ever actually read

Have you ever actually read Keynes, or those who knew Keynes, do you know about his political leanings, that he was a Fabian Socialist? Do you know what the purpose of his theories were, the reasons behind those theories? Apparently you don't, for if you did there would be no possible way for you to make the statements you make. Thus, from all appearances you purpose for being here is far less than honorable, in fact, it appears that your purpose is intentional detraction, for your assertions lack any sort of coherence or provide even the remotest degree of economic logic.


"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

It doesn't matter. His

It doesn't matter. His policies destroy capital and create demand for human workers. Free market can't solve this problem without violence.

Republicae's picture

You do not make any sense,

You do not make any sense, you continue to repeat yourself as though such repetition makes your statement factual, it does not. You have yet to provide any adequate information to substantiate your statements therefore, you are just wasting time, mine and yours with the insistence that your statements are, in some very strange way, representative of the truth. If you propose a certain position you must be prepared to defend that position against all rebuttal, as of now you have utterly failed to provide such a defense. You must detail the reasons behind your statements or stop making such statements repeatedly as though such statements were meaningful.

You sound like yet another child we have here on the DP, one that cannot back his statements with economic facts, one that makes assertions but cannot provide proofs for such assertions. You are, in a word, a fraudulent failure making a feeble attempt at discourse.


"We are not a nation, but a union, a confederacy of equal and sovereign States" John C. Calhoun

excessive human

excessive human supply.......... that is funny.

Excessive human supply???

Excessive human supply??? There is no such thing as excessive human supply! Humans are not the means to some imaginary utopia to be conjoined with Keynesian animal spirits. They are an end in themselves because only individual humans act. Because resources are scarce, price controls restrict and allocate these resources to there desired place decided by the free market. Human beings reproduce according to the current abundance of resources which is the result of previous capital accumulation and the accompanying innovation and allocation of resources.

Know your stuff, learn real history and economics @LibertyClassroom.com

you don't understand what a bubble is

let me explain it to you

keynesian central banking fiat currency:

1) you put $1,000 in the bank.
2) bank takes that $1,000 and is allowed to lend $7,000 to a new startup company (bringing $6,000 of imaginary money into existence that, otherwise, didn't exist.)
3) this creates a $6,000 liability.
4) banks mark the $6,000 liability into the asset column, and use it to borrow $42,000. the cycle repeats itself until the world has billions of unfunded liabilities.
4) when the market corrects itself, the bubble bursts.

in a gold standard of no fractional reserve lending, then no liability can be put into existence because it doesn't exist in the first place. there is nothing to correct since nothing will be unfunded. if a bank takes a risk and loses, then they will be out the money and could go out of business.

another example:

fed artificially lowers interest rate below market demand. people buy houses that they couldn't normally afford under normal conditions. housing market goes berserk. prices go up. finally it crashes when the market attempts to correct itself slashing speculative prices back down to normal and families houseless.

in a gold standard, there is no central bank that controls the interest rate, thus, no bubble since the housing market is driven by supply/demand only. when the bank repos the house then they don't take it at a catastrophic loss since the value was never inflated in the first place.