I will now give you an insight into the BEW. Steve Randy Waldman recently wrote a post about the redistributive effects of inflation. It was pretty standard, Econ 101 stuff. Inflation redistributes wealth from nominal savers to nominal borrowers, etc. Nothing controversial, from the standpoint of any economics department or blog. I don't think even Marxists would argue.
But here is a forum thread from the "Market Ticket Forums" - which appears to be a finance forum - discussing Steve's post. I will excerpt some of the forum posts below.
User JStanley01, from San Antonio, Texas, writes:
Who is this jack wad?...That's one of the closest things to pure evil, masquerading as "economics," that I've ever read. The statists who rationalize the Nanny State nowadays, having been grafted onto the same Marxist roots, are way slicker than the Commies ever were in their heyday. And IMHCO in the long run, more dangerous. Much more...
Somehow the destruction of the country's capital base via such bullshit isn't factored into this f*****'s [(Waldman's)] computer model.
The thought that a few elite "brainiacs" can supplant the operation of the price mechanism by the free market, which is the product of the collective brainpower of EVERYONE who buys and sells is EVIL.Original poster Mayorquimby writes:
They are full of shit and their silence cannot come soon enough...
The benefit of hyperinflation is that these people are silenced for another 75 years.
The downside is that so is everyone else...
You guys should know that [Waldman] was invited to the Treasury to meet with Geithner along with Yves [Smith] and couple of other bloggers a few years ago.User Widgeon writes:
gov is trying to "pick winners" by keeping prices (and wages) high(er) some sectors while attacking prices & wages elsewhere. That does indeed set up a vicious dynamic; but the root cause is gov picking winners & losers.And user Mrbill writes:
Mindbogglingly stupid. Just have the government provide everything, then you don't even need prices!! Gimme a Nobel!!...
Never read [Waldman's] blog. He's into Nominal GDP like it's a god, not much different from MMT and their accounting identity worship."The destruction of the country's capital base"??? What does that even mean? Hyperinflation? Really? And how is NGDP targeting a form of "picking winners"??? Charitably speaking, these people do not seem to be informed by mainstream economics discourse. Uncharitably, they are nuttier than a Whole Foods trail mix bulk bin.
Now, if it were just a few fools on a forum, I would dismiss it. I'd even dismiss an entire forum full of fools (look at the rest of the threads on the site and you'll see what I mean). But I swear I've seen similar ideas popping up everywhere - in my facebook feed, in casual conversations, elsewhere on the net. And all of these people say the same things. Hyperinflation is just around the corner. Paper money is a Ponzi scheme. The Fed is evil, etc.
And the thing is, these Bizarro Economics Worlders seem to really like talking about economics. They have a lot of opinions and ideas on the matter. They are very convinced of the authoritativeness and correctness of these ideas. And they assert them incredibly strongly and frequently.
Who the heck are these people? I know some mainstream economists (Steve Williamson) who think that montetary policy basically can't stabilize the economy, and who worry about inflation. I know of people who say that we worry too much about unemployment and not enough about inflation (Narayana Kocherlakota, Charles Plosser). I know of models in which monetary policy only causes inflation (RBC).
But I don't know anyone who disagrees with the idea that unexpected inflation redistributes wealth from nominal savers to nominal borrowers. That is just obvious to any economist. But these Bizarro Economics World people seem to think that this assertion is somehow an endorsement of industrial policy, central planning, etc.
It is really bizarre. I have never seen anything like it. Not even Marxists are this weird.
Is there a secret cabal of Dark Economists out there, providing these people with their talking points? From what intellectual source do the Bizarro ideas emanate? Where is the pulsating pit of extra-dimensional energy that sends forth its tendrils into our reality, creating the Bizarro Economics World?
Help me, Normal Econ Blogosphere. I am really confused.
It's called "the Republican party". No, really. A lot of them ranted about the evils of inflation during the debates. One of them- I think it was Rick Perry?- basically said that Bernanke was a traitor to the US for printing money. Bachmann promised to make the dollar worth as much as it was 100 years ago.
ReplyDeleteI think Ron Paul emanates some kind of force that results in hordes of 20 year olds fervently espousing a weird combination of small-government paranoia, obsession with monetary policy, hard-money mania, free market worship, and total ignorance of actual economics. It's all part of the scary underbelly of the libertarian fringes.
ReplyDeleteThis is libertarian populism; it is Ayn Rand and Ron Paul combined with Tea Party resentment that festers and spreads on the Internet and infects the fevered imaginations of paranoid conspiracy theorists. These are people who prove what a dangerous thing a little bit of knowledge, absent real learning, can be.
ReplyDelete"But I don't know anyone who disagrees with the idea that unexpected inflation redistributes wealth from nominal savers to nominal borrowers. "
ReplyDelete1. actually i do. i agree that inflation redistributes wealth but i disagree that it always and everywhere redistributes weath from savers to borrowers, when you are looking at a product which includes a default option. The insight is that with default, redistribution happens, and inflation reduces the incentive to default.
you can read my comment #25 on the waldman post, no need to replicate it. there are a number of studies that show that (unexpected) increases in the price level actually *increase* the value of stocks and (corporate bonds) and indeed that is what is shown with Glasner's graph:
http://uneasymoney.com/2012/05/14/inflation-expectations-are-falling-run-for-cover/
2. depends on which crazy idea. yes, there is a large contingent of people who believe that Fed policy is a secret plan to improve bank income statements (that is false, poor growth hurts banks just as much). There there is Schiff and some others who think lower interest rates reduces overall income (well, for them that's true - thats because many of these people get 100% of their income from cap gains and interest/dividend) so we need to raise rates.
keep in mind, this is sort of analagous to the "keysnian coordination problem" in that people often only view their own slice of the world and generalize from that.
reading through the comment threads this looks to me as though its pretty "vanilla" for the Rothbard-Internet-Austrian crowd. Some of whom believe for example that 9/11 was a controlled demolition. ah well, if you spend too much time on the internet you will find a thread for many of kooky beliefs. The test is not whether you can find kooky beliefs, but whether they gain traction. and on that, unfortunately, the Haykeian-liquidationist zeitgeist does seem to have taken over the conservative economics mindset. Even Taylor sounds pretty liquidationist these days.
Deletei couldnt recall whoI recently read about interest rates going up being stimulative, but it was Einhorn. "Putting money back into the hands of savers would stimulate the economy and might be just the push that Maggie needs to go ahead with that business expansion."
Deleteyes, lots of conservative economists have Murray Rothbard and (early) Hayek all over them. hence the Bizarro World. Einhorn could never print the crap you happened onto , but...
http://www.huffingtonpost.com/david-einhorn/fed-interest-rates_b_1472509.html
Others have said it, but isn't this just Ron Paul and Rothbard as filtered through unsophisticated internet minds?
ReplyDeleteSo is that who is spreading these ideas?
DeleteThere is a guy named Von Mises you should look up on Wikipedia. ;) and an institute named after him.
DeleteBut I don't really know how it's getting to the masses, except maybe via the Ron Paul movement on the interwebs
I think Adam in on to something. I think the names you are looking for also include Llewellyn Rockwell and Thomas Woods. But really Ron Paul has been able to sell his ideas to a paranoid audience along with the Koch Foundation, Cato and the Heritage Foundation. Not trying to spred a web of conspiracy, but there are a lot of groups who spred the foundation for this kind of thinking. Let people have the freedom to say what they want on the internet in frustration and you have comments like those above.
DeleteThis stuff and these kind of people are not totally outside the mainstream popular thought. Many of them were regular guests on the Glenn Beck show and Judge Napolitano's show on Fox News.
What really bothers me is as a recently completing my bachelors in economics is that these guys (along with the classics of Rand, Rothbard and Mises for the more intellectual) are the heros to many of my fellow classmates.
Don't get me wrong I like pluralism in my economics, but there seems to be a growing discount with many young students between what is economic analysis and what is just dogmatic belief.
Also, a big new (old?) thing is just flatly stating that statistics and econometrics are useless and everything should be derived via theory.
TL;DR I am scared out of my mind for the future of the economics discipline as a recent graduate with a bachelors in economics because of the students that are graduating.
Tea Party types who fancy themselves economics experts.
ReplyDeleteYou can read a lot of that mind of thing at mises.org or in political forums (e.g. politico, hannity.com, etc).
Sorry you had to see that.
Noah,
ReplyDeleteA very bright man, with keen insights on human psychology, Vicent Bugliosi, tackles this issue broadly in the start of his book on the Kennedy assassination. Specifically, he says all the crazies came out along with all the conspiracy theories.
It is a book which I would higly suggest.
Reclaiming History: The Assassination of President John F. Kennedy
It's just the Paranoid Style in American Thought, reasserting itself yet again. Hatred of central banks and paper money is not new, it's as old as the Republic.
ReplyDeleteCue: 1790s Jeffersonians harranguing against Hamilton's "aristocratic" national bank
Cue: Andrew Jackson (who is pictured on our paper money!) letting the national bank's charter expire, and demanding payments in specie alone
Cue: Ulysses Grant vetoing the 1873 inflation bill, ignoring the advice of Henry Carey, and resuming the Gold Standard
Cue: 1860s Birchers denouncing the dastardly central planning and treachery of those known communists, Eisenhower and Kennedy
If you expect reason to prevail in the face of such deep-rooted sentiment, I fear you are barking up the wrong tree.
As for the current vectors of the notion that monetary policy is a satanic conspiracy, I've noticed:
Delete-Talk radio. Both Mark Levin and John Bachelor have that particular bee in their bonnet
-The libertarian blogosphere, centering around the Mises Institute
-The Ron Paul "Revolution", as other commenters have noted
-The widely read business blog zerohedge.com
In short, the goldbugs have a quite vigorous PR campaign running nonstop.
dont forgey Rush Limbaugh and Glen Beck. and the fairly imbalanced FOX news.
DeleteI'm trying to figure out why you think Marxists are weird. The belief strikes me as quite peculiar..
ReplyDeleteBecause they seem to talk in a dense jargon that (presumably) requires years of Marxist study to comprehend. Not weird, just obscurantist.
DeleteI like your blog Noah but I find your unwillingness to engage with marxism and anarchism frustrating. Perhaps if you put a little effort in (really, you don't have to read Capital or Property is Theft) you'd like what you saw.
DeleteThe problem a lot of people have with Marxism is they can't separate Marx's solid descriptive work from his prescriptive work. I studied Anthro in undergrad, and Marx's work on power relationships and hegemony (along with Gramsci) are incredibly useful in that field. And in a broad sense, I don't think anyone can argue with the observation that those who control capital also control society.
DeleteI don't want to get into this too much here, but I think the 'his prescriptions are utopian blah blah' meme is also flawed. I mean, would you say something similar to slaves of the past? My guess is reactionaries probably did at the time, and the argument remains spurious in a system where the majority of the globe are in poverty.
DeleteThe problem with socialism in practice is that any semi successful attempts were simply overthrown by the US (Chile, Guatemala, Indonesia) whilst many were strangled at birth (countless others, Italy being a notable example).
The USSR was oppressive and Stalin was a lunatic, but it must be placed in his historical context - Russia before the revolution was also awful and rife with civil war, there were various counter movements - some supported by the US - and so forth. It's also worth noting that from a purely economic perspective, Stalin effectively acted as a state capitalist in a world of global capitalism, which has little to do with Marx's prescriptions.
spurious is obviously the wrong word...
DeleteDWB is insightful in bringing up the 9/11 'controlled demolition' meme.
ReplyDeleteA lot of what you're reading is half-understood Rothbardianism coupled with selective use of evidence through ignorance, much like the controlled demolition "theorist's" careful selection of evidence and mangled use of physics.
In most cases, this type of thinking is remarkably "self sealing" in that outside evidence and arguments are excluded either by denial, misunderstanding, or simply accusing those who disagree of being "paid shills".
It is rants from people who are not educated nearly enough on the issue, yet insist on sharing their opinion. This sort of thing is all over the Internet. Oh well, it is their right to share their opinion. The more annoying thing is when someone comes along and shares the facts and they are thrown out because of a rejection of reason driven by anti-intellectualism. That tends to be an underlying support of this sort of thing too.
ReplyDeleteIronically though, everyone who comes out and says something like "this is Republicans for you" is to an extent doing the same thing. This sort of nonsense exists on both ends of the spectrum. It is just unfortunate when smart people let their political biases pull themselves into the madness.
So, you find evidence that vast numbers of people don't form their expectations rationally, as per micro-economics doctrine, and will exert their power in the economic sphere - and yet you think they are the bizzaro world, and not the economics theory that wishes them away? Now, that is the true bizarro world - one of omnipotent advantage maximizers. This is like reading a computer programer who complains that his program is being bizarre and stupid when he has designed it making many Boolean errors. Now, that I find bizarre.
ReplyDeleteWhat economics theory that wishes them away? What application of micro econ doctrine?
DeleteObserving and commenting on a bunch of folks ranting furiously about earth-flatness has nothing to do with any theory (as NS said). Bizzaro...
In any case, NS does not seem to be a neo-classicist in much of any sense. Bizzaro.2.
Well, here's a quote from a textbook, Chakravarty's Microeconomics, in which we the Muth explanation of a rational expectations equilibrium is explained according to "common knowledge": "The alternative model that Muth proposed is that market participants would correctly deduce the consequence of any predictive theory of the markets on the basis of their own observations of the market, and would incorporate all available information into the formation of their behavior patterns. This is Muth’s concept of a rational expectation model of market. Rational expectations anticipate future price changes.” Smith finds a considerable number of market participants do no such thing. Instead of considering, then, that rational expectations defines a limit case with little relevance for economics, he decides that instead there is this bizarro world - in other words, he finds evidence that Muth misrepresents market participants but dismisses the participants rather than the model. And yes, I call that bizarre - it turns the model into a cargo cult, and separates it from economic life.
DeleteAnd this is why the housing bubble was never seen by those members of bizarro world like Bernanke,in 2007.
DeleteReasoning in anger, and the willingness to reach conclusions too soon.
ReplyDeletethese guys sound like your typical internet austrians.
ReplyDeleteAlso see Lakoff: http://goo.gl/Hp1VL
ReplyDeleteAtmospheric scientist says: welcome to my world.
ReplyDeleteI could very easily overwhelm your links section with example after example of this, but here is one that was just suggested on Twitter to me, unrequested, of course. It appears to be a fine example of the thinking - as I understand it, at least - of the people you stumbled upon in crazy econ interwebz land... And also a partial source / explanation for the phenomena. These videos are watched, rewatched, passed around and remixed into a feverish cult-like phenomena of the "true knowers," "those with eyes to see," "the awakened ones," or what have you - I wish that were exaggeration - but only they know how our world has been subverted by, well, the true global conspirators vary - depending on your secret, top secret or above top secret clearance... It starts with Federal Reserve "history" and through a seemingly "logical" series of steps gets us to Rothschilds, Alien Mind Control & the Illuminati. http://www.youtube.com/watch?v=SMqb_WrnVTc&feature=youtu.be&a Whether the comments you stumbled upon go all the way to crazy, this is the wider force behind this kind of "distrust academic economics" and their Illuminati serving justifications for continued world domination, blah, blah...
ReplyDeleteMy take is simple, but nuanced; everybody "feels" that there is something wrong in the world. People of a mostly rational mindset / worldview seek rational explanations. People that skew towards a more "mythical" worldview seek out the handful of people, aliens or deities that are controlling all of our woes; presumably so we can embark on a hero's journey, slay the dragon, restore global harmony and shift off into inter-dimensional, golden monetary bliss or some such - details and results may vary.
Maybe if the economics profession could "certify" MMT over goldbuggerism & engage in a massive PR campaign, after-school-special-style, or somehow limit the corruption that keeps coming to light in the banking industry and/or the Federal Reserve itself, it would slow these conspiracies down. I tend to believe that people's perceptions aren't wrong, so much as they are limited. Corruption on a global scale - yes. Run by some secretive cabal - not likely in the way that they think it is. Expect crazy to ratchet up as economic outlooks continue to get worse - see, they were right all along! ;)
Wait a minute. Are you telling me there are crackpots on the internet talking about s*** they don't know?!
ReplyDeleteI don't see anything "nutty" about those comments. Pretty standard economics to me.
ReplyDeleteNoah, I didn't see any actual rebuttal on your part. You kind of just posted these comments, as if the mere posting of them somehow refutes them.
Some things are better left untouched.
DeleteBut I agree this is what is coming to pass as "standard economic thinking" by many people.
Because they're not making real arguments, you silly man. They're the ones asserting the inevitability of a rare event - hyperinflation - and it's up to them and presumably you to offer up some evidence.
DeleteMy God, inflation's going to destroy the capital stock! I can see it now - factories rusting away because of oxidizing inflation! Buildings collapsing in the face of inflation hail! Aside from making depreciation of assets a little more tricky, I don't see what on earth these people are talking about.
"Because they're not making real arguments, you silly man."
DeleteWhat the heck is a "real" argument, and why are those arguments not "real" ones?
"They're the ones asserting the inevitability of a rare event - hyperinflation - and it's up to them and presumably you to offer up some evidence."
What? There is just one quote cited, and it says:
"The benefit of hyperinflation is that these people are silenced for another 75 years."
----------
"My God, inflation's going to destroy the capital stock!"
Inflation does eat into capital formation. Inflation makes people think they're richer than they really are, and so they consume out of capital.
Also, inflation boosts profits, which are needed to at least replace worn out capital goods that also increase in price. But higher profits are still taxed at the same rate, so it means companies have a harder time replacing worn out and used up capital goods at the higher prices.
"I can see it now - factories rusting away because of oxidizing inflation!"
Have you not heard of the rust belt?
"Buildings collapsing in the face of inflation hail!"
Who claimed that?
"Aside from making depreciation of assets a little more tricky, I don't see what on earth these people are talking about."
Oh, so you're interpreting your ignorance as a problem of theirs? How surprising.
I think they are more commonly referred to as Austrians.
ReplyDeleteIt's the Austrian-Rand syndicate. Or, rather, stupid people on the internet who think they're the intellectual inheritors of Hayek and von Mises and ol' Alisa herself.
ReplyDeleteThis has been going on for years. It's popular as heck among (presumably unsuccessful) investors and websites they frequent. Most prominently, I think, would be ZeroHedge.
There are a lot of them. Everything's infected with goofball political theories, boiling down to, "Whenever anyone has to do something, that's bad. That's exercising power over them. You filthy statists want to give power to the government." Never mind "power" not being a fungible good or a legal concept - it makes no difference to them if it's the power to tax or the power to kill. It's all "power" being handed over to an Evil Other - the government.
They and monied interests who, unbelievably, identify with them probably constitute the greatest domestic threat to good governance in the United States today.
You sound mad.
DeleteAlmost...threatened in a way.
Noah, you have no idea how weird libertarians get in how many ways.
ReplyDeleteMight I recommend my page, Make Or Break Views Of Libertarianism?
[heard in Johnny Carson's audience]
Delete"How weird are they?"
I think humans are just inherently susceptible to conspiracy theories, which are just a step or two away from organized religion. The number of random people I have found around the world who believe in 9/11 conspiracies, the gold standard, etc. is astounding ... but probably not that far removed from those who used to believe in the Protocols of the Elders of Zion, Papist conspiracies, and the like. Just look at the popularity of The DaVinci Code.
ReplyDeleteThe Internet has just made it a lot easier for the looney tunes to come together and pool their crazy. Lew Rockwell is an especially egregious example, but he's not that far from the John Birch Society, which is close to Glenn Beck, and Ron Paul. (Or, for a non-economics/politics version, how about those anti-vaccine zealots).
We're all crazy, but most of us have the good manners to put our crazy into more benign afflictions.
Anyhow, long explanation made short, they're getting their ideas from the Internet.
Cheers, -James
Yes, because the LIBOR conspiracy didn't occur.
DeleteThere you have it. Some conspiracies occur, therefore conspiracy theories are true.
Delete