Ron Paul vs Paul Krugman

[Teddoman]

I took a brief look at his Wikipedia biography. I didn't notice any significant changes in position, so I'm not sure which sides he switched from.

Also, not to put to fine a point on it, it seems somewhat gratuitous to assume that people change their positions--especially public figures--because facts demand it. Or to assume that one's opponents are too blinded to be able to change theirs. There are ex-Austrians and ex-Keynesians and ex-Marxists and ex-Christians and ex-everything. Without knowing their reasons, I can't imagine how a change in position alone is evidence of trustworthiness. Greenspan, for example, went from being an Ayn Rand acolyte to policy maker for no apparent reason, except that he enjoyed politics.

It's no secret about Spanish youth unemployment. I don't know how that would make Krugman's position in any way more correct.

The switching sides thing was in his intellectual history of macro theory (that post on Bernanke) that I shared with you earlier.

I'm just saying I like seeing people who are flexible on their positions based on what they think is right. Knowledge is rarely ever a 100% kind of thing. It's usually just a best guess, and the best guess based on current knowledge rarely always stays 100% fixed through time, unless one is overly ideological and not inclined to look at new evidence with an open mind. Chances are that at some point, the opposing side will have 51% of the currently available evidence on their side at some point in time. So for me, "switching sides" is often evidence of intellectual flexibility. Or more aptly, never switching sides is often a sign of intellectual rigidity. Unless you really are 100% right. I know I'm not ever that right, not even close.

From what I read, Greenspan never stopped being a Randian. He did allow quite a bit of deregulation without much protest.

[Teddoman]

A central bank + restrictions on gold ownership + unilateral authority to renege on promises just doesn't add up to a gold standard. This is something that the Austrians were writing about a long time ago. A gold peg--which is what we actually had--is not a gold standard. I am not sure they put in these terms, but I think they argued that there had to be absolute convertibility, which we didn't have.

Yeah, this is getting way beyond my depth here, which was pretty much nonexistent on this topic in the first place

Have you read the Murray Rothbard history of central banking? I think he's also a libertarian. I think I read somewhere it's a libertarian "classic". Austrian economics and economic history is on my to do list, along with a lot of other stuff

[GuyInTaiwan]

Alibiades: To be honest, I really don't know enough about economic history to comment much on this. I'm fairly sympathetic to your point. I think the ultimate problem in all of this is that governments think they're going to be able to regulate problems out of existence that are driven by the fundamental human trait of irrationality. Whatever they do may improve some things, but will almost certainly have unintended consequences. Perhaps it's a matter of accepting that bad things will come with the good. I don't know. I'm just always wary of people who provide seemingly similar utopian responses to the pro-Fed camp thinking that if only we do/did X (return to some "golden age" prior to the Fed), things will be fine/much better. Maybe, maybe not. As I wrote, I don't know enough about economic history to say.

I hardly think it will be a golden age. It is just my hunch, but I suspect that a transition back to a gold standard would be socially traumatic. If the welfare/warfare state is founded on fiat currency, we have all become very accustomed to it. We expect the gov't to defend us from illness, poverty, bullying, terrorists, and our own stupidity.

We had a gold standard before based on its functionality. It is central banking that promised to eliminate booms and busts. Again, though, these have only been amplified. My argument is that assertions about central banks and economic management making things more stable is a groundless assertion. What fact supports this? There are far fewer bank runs. That is the only one. Instead, we have runs on whole currencies.

But, let's look at the future. Is there anything like a fiscal golden age on the horizon? How on earth did we acquire these immense liabilities? Never mind golden ages. How about an age without debt burdens approaching multiples of GDP? Or an age without zero percent financing on homes? Or an age where asset prices that move multiple standard deviations?

What is really shocking is that we are constantly told that we are living in a golden age of managed money now and that if we did away with it, we would end up in the regressive and backward 19th century. Well, it certainly looks backwards to us, because it was the past. But, it was actually strikingly progressive and liberal. I have no desire to go back to the 19th century at all, but am I to believe that if the Fed no longer sets interest rates, we will have to do away with oil and iPads and start using coal and telegraphs again?

What is utopian is treating something as unstable and potent as credit as if it were as plentiful and benign as water.

The ultimate point is not that we should go back to a gold standard. It is that neither government nor academia have the ability to set the monetary standard, because there is no scientific measure for these things. We have no knowledge. And no evidence that the actions that have been taken have produced the promised results. My personal opinion is that gold still serves a shadow monetary function and is still the best suited instrument for a monetary standard, but I am glad I don't have the power to have to make that kind of decision.

These are good points. I do worry about the extent of sovereign debt now (including unfunded liabilities). I'm opposed to the welfare state. My concern is that people won't voluntarily abolish the welfare state. Indeed, as we're seeing in Europe right now, they're actively resisting abolishing it. Of course, that doesn't make the problems go away. The day of reckoning comes eventually, and the longer it takes to come, the worse it is. However, the solution to the day of reckoning always seems to be something along the lines of stockpiling gold, food, water, candles and ammunition, and possibly buying farmland. I wonder to what extent that could end up being an overreaction though. There are going to be painful corrections in the future, I think there's no doubt about that. I'm just not entirely sure what form they will take (or rather, what form their flow on effects will take), to what extent, or when, and how I should react to them.

[Teddoman]

Paul Krugman just wrote a post on the cost of panics prior to central banking

[Alkibiades]

A central bank + restrictions on gold ownership + unilateral authority to renege on promises just doesn't add up to a gold standard. This is something that the Austrians were writing about a long time ago. A gold peg--which is what we actually had--is not a gold standard. I am not sure they put in these terms, but I think they argued that there had to be absolute convertibility, which we didn't have.

Yeah, this is getting way beyond my depth here, which was pretty much nonexistent on this topic in the first place

Have you read the Murray Rothbard history of central banking? I think he's also a libertarian. I think I read somewhere it's a libertarian "classic". Austrian economics and economic history is on my to do list, along with a lot of other stuff

No, I haven't read Rothbard. I read von Mises's Theory of Money and Credit by sheer force of will. I didn't understand much of it. Lots of references to central European banking issues of the 19th century. I was introduced to Austrian theory through the largely forgotten Wilhelm Roepke who was not as ideological as the others, for better and worse.

My understanding is that Rothbard is the "gold standard" of Austrianism now. Hahaha. I don't know, but my impression is that Rothbard was a libertarian first and his Austrian viewpoint followed that whereas with von Mises, he was an economist (a socialist, I believe?) who was gradually persuaded by Austrian school ideas, and then extended that to libertarianism.

I think it might have been Rothbard who finally pushed Paul from vague constitutional/gold standard curmudgeon to libertarian/Austrian/constitutional curmudgeon. I'm too lazy to fact-check the things I write anymore, though.

[Alkibiades]

These are good points. I do worry about the extent of sovereign debt now (including unfunded liabilities). I'm opposed to the welfare state. My concern is that people won't voluntarily abolish the welfare state. Indeed, as we're seeing in Europe right now, they're actively resisting abolishing it. Of course, that doesn't make the problems go away. The day of reckoning comes eventually, and the longer it takes to come, the worse it is. However, the solution to the day of reckoning always seems to be something along the lines of stockpiling gold, food, water, candles and ammunition, and possibly buying farmland. I wonder to what extent that could end up being an overreaction though. There are going to be painful corrections in the future, I think there's no doubt about that. I'm just not entirely sure what form they will take (or rather, what form their flow on effects will take), to what extent, or when, and how I should react to them.

I agree. How much of what we hear about gold and guns, as you describe it, could have been said in 1979, say? But, by then, the worst was almost over.

I think that the gold-and-guns crowd will probably be proven right in the long run, but I wouldn't set my watch by them, and we (or I, at least) have no idea about how it will happen. When I try to visualize what such a world would look like, I come up with Kevin Costner's "Postman" or whatever that movie was called.

What you say reminds me of Wealth, War & Wisdom, which is a fairly entertaining and informative read about markets during WW II. In some instances, such as in parts of France (as I recall), the economy had broken down so much that gold would not have done you much good. It was much more useful to get your hands on things like clothing and other fungible(?) goods.

If our economy goes to hell in a hand-basket, it will have massive social and political consequences. There is a large chance that some sort of ideological terror would try to fill the void, and how much good would gold and guns do then? Again, the same arguments being made now could be applied to Weimar Germany. The best solution was probably to get out, not stock up on gold and guns. If I could do any single thing to give myself a little insurance against the promised chaos, it would probably be to acquire Swiss citizenship.

[Alkibiades]

Paul Krugman just wrote a post on the cost of panics prior to central banking

I suspect Krugman's been catching a little flack since his debate with Paul and is having to respond to it.

In his prior post, he attacks the "Right's" obsession with gold, although most of the Right has not bought into the Paul argument at all.
http://krugman.blogs.nytimes.com/2012/0 ... cs-happen/

It's another straw man. He says, even Walter Bagehot understood financial crises. First, how many people left, right, or libertarian know who Bagehot is, never mind quote him? As some of the commenters mentioned, Rothbard wrote extensively about US banking history, so it is no secret to anyone on the Austrian side that banking crises are as old as banking.

Either he underestimates the intelligence of his opponents or of his friends, I cannot tell which, although I'd bet on both.

Anyway, I thought the following was an interesting summary of Paul vs Krugman. Interesting, especially, that Krugman was intentionally talking up the glories of a housing bubble while Paul was warning of the dire consequences.
http://www.zerohedge.com/news/paul-vs-paul-round-2