Wednesday, 24 December 2014

What I've learned from self-publishing...

It won't make you rich, it might not even earn you any pennies at all. But at the end of the day, it motivates you to keep writing. It teaches you how to deal with unrealistic expectations, how to remain defiant in the face of adversity, how to pull yourself from negativity and anxiety. The more you write, the more you dream the scenes, the more you contemplate upon the story, character motivations, character actions - and a better storyteller you become. I can tell you this from the bottom of my cold fiendish heart, downloads are not important, sales are not important, what is important is for you to bring your story or stories to completion. What is important is to never give up, but learn from your mistakes and strive to become a better writer, a better storyteller.
Like JFK said, an error becomes a mistake only when you refuse to correct it.
You don't have an editor? Don't despair, neither do I; and probably never will. Just read it again, and again, and again if you have to; edit it as much as you can - but don't be discouraged when you find typos and grammar errors even after several reads. It's natural, our eyes miss them. Our brain knows the lines, our tongue knows what's coming next, and our eyes simply miss them... So don't fret. Just fix the errors and then click on upload new version.
Everyone makes mistakes, you find typos even in the traditional medium, even at academic level. And always remember that as an indie you're not charging the sea and its salt for your ebooks. And you ebook readers out there remember that unlike physical books, the state perceives VAT on ebooks. So the author's cut, after retailer and aggregator take theirs, after income tax, and after VAT, we are left with crumbs - especially us who only have a handful of sales. There's no shame for us that there are children in 3rd world countries who make more money than we do from self-publishing. ^_^
If you love writing, if you have stories to tell and characters to flesh out, then you won't care about commercial success. Aspire first and foremost to conquer yourselves, after that the rewards will come. Happy holidays and good health. Peace out.

Tuesday, 23 December 2014

OPEC leader vows not to cut oil output even if price hits $20

“It is not in the interest of Opec producers to cut their production, whatever the price is,” he told the Middle East Economic Survey.
“Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
In the MEES interview, Mr Naimi said Saudi Arabia and other Gulf oil producers would be able to withstand a long period of low crude prices, largely because their production costs were so low — at only about $4-$5 a barrel.
But he said the pain will be much greater for other oil regions, such as offshore Brazil, west Africa and the Arctic, whose costs are much higher.
“So sooner or later, however much they hold out, in the end, their financial affairs will limit their production,” he said.
“We want to tell the world that high efficiency producing countries are the ones that deserve market share,” said Mr Naimi added. “If the price falls, it falls . . . Others will be harmed greatly before we feel any pain.”
The bluntness of Mr Naimi’s message took even seasoned Opec observers by surprise. “I’m more bearish than most people looking at the oil price, but even I am stunned how aggressive his comments are about this radical departure from policy,” said Yasser Elguindi of Medley Global Advisors.
Like Warren Mosler states below:
The Saudis never ‘cut production’. They just set price and let the world buy what it wants at their price. No one seems to know that. As no one ever asks if they are going to raise price. 

Monday, 22 December 2014

Putin's administration doesn't know how the defend the ruble

The fundamental element behind money value is taxation. Fiat money is tax-driven money. Thus, once you levy a tax upon something (goods, labor, property etc) and demand payment only in a specific currency - you create permanent demand for that specific currency.

So when you have trade partners who are dependent on one or more of your exports - it is unsound (geopolitically and economically) to demand payment of your exports in foreign currency, especially when there's weak demand for your own currency (the ruble) to the outside (non-domestic) market. By changing accepted payment from foreign currency to rubles, you increase the demand for your currency. By lowering the supply of rubles for the outside market, you again, make your currency more valuable. Thus, you force your trade partners to increase their exports to you - in order that they may obtain the necessary rubles to pay for the seminal goods and resources that they can only buy from you.

Thus, Russia would be able to secure its adequate supply of imports and keep the value of the ruble from depreciating too much too rapidly (have healthy inflation).

Thursday, 4 December 2014

#Cameronmustgo 1.3 trillion in debt

More like 1.3 trillion in private sector savings, of which I (the rich guy) own the most; and keep you (the poor) permanently and involuntarily unemployed because I want to put downward pressure on wages and scare the middle class by making them look at the poor. Because I don't want my firms to compete for people; I want people to compete for firms. And I'm cutting spending on you and increasing taxes on you just to enlarge the wealth-gap.

Saturday, 22 November 2014

Updated! Been trying to talk some accounting sense to UKIP guys

I don't know if they managed to, at least, check my arguments before dismissing them out of hand based simply on orthodox economic notions that they've been indoctrinated with.
But I sure as hell kept going with presenting FACTS.
You can see the conversation here. Scroll down a bit until you find my replies:

After all what I debated and argued, this is what the UKIP advocate had to conclude:
"So you want me to continue to pay for your welfare?"

I argued further that his taxes don't pay for anything; but hell, the guy cannot comprehend a simple fact that the fiscal deficit has a correspondent surplus in the economy, surplus owned by the private sector. Neither did he understand that the money for his pension comes from the public debt.
What's worse is that they don't even bother to respond with facts, if they have any. All they do is keep saying the same bullshit as the caviar rightists and caviar leftists.
In conclusion, UKIP supporters are part of the same problem. They are nothing new.
Sometimes, blocking mindless drones is the best thing one can do.

Tuesday, 18 November 2014

Banking proposals for the EZ a la Warren Mosler and Yanis Varoufakis

1. The ECB to provide unlimited guarantee for euro deposits.

2. The ECB to lend unsecured to member banks, and in unlimited quantities at its target funds rate, by simply trading in the funds market.

3. Make a zero interest rate policy permanent. This minimizes cost pressures on output, including investment, and thereby helps to stabilize prices. It also minimizes rentier incomes, thereby encouraging higher labor force participation and increased real output. Additionally, because the non government sectors are net savers of financial assets, this policy hurts savers more than it aids borrowers, so a fiscal adjustment such as a tax cut or spending increase would be appropriate to sustain output and employment.

4. Banks should not be allowed to have subsidiaries of any kind. No public purpose is served by allowing banks to hold any assets ‘off balance sheet.’

5. Banks should not be allowed to accept financial assets as collateral for loans. No public purpose is served by financial leverage.

6. EZ banks should not be allowed to lend off shore. No public purpose is served by allowing EZ banks to lend for foreign purposes.

7. Banks should not be allowed to engage in proprietary trading or any profit making ventures beyond basic lending. If the public sector wants to venture out of banking for some presumed public purpose it can be done through other outlets.

8. Use ECB approved credit models for evaluation of bank assets. I would not allow mark to market of bank assets. In fact, if there is a valid argument to marking a particular bank asset to market prices, that likely means that asset should not be a permissible bank asset in the first place. The public purpose of banking is to facilitate loans based on credit analysis, rather than market valuation.

9. Banks should not be allowed to buy (or sell) credit default insurance. The public purpose of banking as a public/private partnership is to allow the private sector to price risk, rather than have the public sector pricing risk through publicly owned banks. If a bank instead relies on credit default insurance it is transferring that pricing of risk to a third party, which is counter to the public purpose of the current public/private banking system.

10. EZ banks should not be allowed to contract in an interest rate set in a foreign country, with a large, subjective component that is out of the hands of the EZ member state governments.

11. Banks should only be allowed to lend directly to borrowers, and then service and keep those loans on their own balance sheets. There is no further public purpose served by selling loans or other financial assets to third parties, but there are substantial real costs to governments regarding the regulation and supervision of those activities.

12. The ECB should buy EIB (European Investment Bank) bonds, financing thus projects of public interest in and among member states - without there being a need for further deficit spending for member state governments. The later have the liberty to focus on fiscal policy (deficit spending included) for their own domestic purposes.

PS: The bulk of the proposals belongs to Warren Mosler. Number 12 belongs to Yanis Varoufakis, and not just to him but to S. Holland and J.K. Galbraith.

Saturday, 15 November 2014

Check out my Gumroad page

Gumroad, Gumroad... it sounds so friendly, doesn't it? ^_^
Well, as of now, you can download my Of Hate And Laughter ebooks from Gumroad too.
Here's the link:

Monday, 10 November 2014

Fiscal deficit funds are liability-free money for the private sector

A promise made and unfulfilled we call a debt. The US dollar, the japanese yen, the british pound, they are just government issued liabilities, they are a tax-credits, they are government IOUs. All money is debt. The two of us can create our own IOUs, but we'll have a hard time finding others to accept them in transactions, that's why private IOUs are not the same as public IOUs. The government levies a money tax or fee upon its citizens, not to finance spending, but to determine the citizens to accept the government's money in exchange for their labor, goods, and services. Government taxation creates unemployment of money paying jobs and public spending employs the unemployed previously created by taxation. Naturally, the government doesn't wish to hire all the labor force. In order to allow the private sector to hire everyone else, it needs to run an adequate fiscal deficit. Ergo, the government needs to spend more than it taxes, it needs to leave more money into the private nongovernment sector via spending than it takes away/destroys via taxation. The correct size of the fiscal deficit is that which achieves and maintains full employment and price stability. Private banks can do what they do now because the legal framework allows it; all of them operate under the CB's charter, and the CB itself is a creature of parliament.
Problem with the banking system today is that they're fully covered on the liabilities side by gov deposit insurance, but they're not regulated on the asset side. Overall, modern money is endogenous - the money supply grows and shrinks according to private sector behavior. The MS grows when private debt is contracted, and it shrinks when those private debts are paid off or are defaulted upon. But money creation within the banking system does not create NEW NET financial assets, nor does it destroy them. Only the government can do this via fiscal policy.
The government fiscal deficit equals the net financial savings or net financial surplus of the nongovernment sector to the penny in a given fiscal year.
The government is supposed to run the deficit, so we, the people, can run the corresponding surplus. Why do you think the institution with the biggest negative capital in the USA is the US treasury? Where do you think the money for the pension funds come from? It comes from the government debt. Government spending finances government taxation; vice-versa is not only illogical, it is operationally impossible.
One of the main reasons the americans decided to rebel against the british was that they were tired of paying their taxes to the crown in gold.

Thursday, 6 November 2014


Stop supporting companies that make crappy games and that treat their customers like crap.
Like a certain user left a comment on this vid, EA stands for Electronic Assholes.

Wednesday, 5 November 2014

Manley ASMR - ASMR for Men

Put your head-phones on and listen to Ephemeral Rift's brilliant video.
It's funny and relaxing at the same time.

If you enjoy ASMR in general, don't forget to give a like and/or subscribe to his channel.

Saturday, 1 November 2014

Creationism and racism can't decide on evolutionism...

Indeed, when white people see white people act weird or do stupid things, they never say - "fucking cracker" or "fucking white trash", "honkey" or just plain old "huh, white guys/boy" et all. And a thing I find ironic is that the many racists who use "monkey" when referring to black folk; one frequently finds these people to be creationists who don't believe at all in evolution. LoL. Stupidity and malice go well together.

Thursday, 30 October 2014

Self-imposed corporate regulations control workers but choke productivity

Two new industries have emerged in this neo-liberal era. The first is what I call the ‘unemployment’ industry, which operates to case manage the unemployed that poorly crafted fiscal policy has deliberately created and entrenched into our modern societies. A whole parasitic array of private providers get paid by the government to coerce and threaten the unemployed under the guise of retraining them for jobs. I wrote about this scandal in this blog – Why we should close the ‘unemployment industry’. In the last few days, a new industry has been identified which employs over a million people in Australia, making it one of the largest sectors, although no official data is published on it. This sector has been labelled in the press this week – the ‘red tape’ industry or the ‘compliance sector’. It is growing faster than any other industry in Australia and probably elsewhere, although there is no data available that can tell us that. It is largely unproductive because it undermines the productivity of other workers. Red tape, compliance, must be the public sector once again imposing its heavy hand on private endeavour, right? Wrong, the neo-liberals not only created and expanded a moribund and dysfunctional financial sector but has also created the red tape industry as it seeks to control workers down to the smallest degree. Hilarious really if it wasn’t so wasteful and hypocritical.

You can read Bill Mitchell's blog post here:
Also, I want to add Neil Wilson's reply to the aforementioned blog post:

“There hasn’t been much reaction today from the moocher class in Australia to the report.”

Isn’t it the case though that this is exactly what is to be expected when you have a system that requires the private sector to create *all* the jobs, yet the private sector only improves productivity and output if it is optimised towards *eliminating* jobs by automating them away.

I’ve spent a lot of time in the past on business systems and the inefficiency of operation isn’t a public/private sector divide at all. It is a large/long lived operations vs. young/short lived operations – with the latter having the most efficient structure.

In the former you get a build up of entropy over time that eats away at efficiency. If we want optimal output, then perversely we need to have a system where operations are destroyed and reconstructed on a regular basis.

Unfortunately that requirement bangs right up against the natural human loss aversion problem. We don’t like to see firms fail and operations change.

Wednesday, 22 October 2014

Some particulars of my characters: part 1, Drakanes

Heterochromia iridis.
Her right eye is a pale grey. Her left eye is brown.
This oddity of hers makes people uneasy. In her youth, Drakanes had endured the mockery of others. The name fiendish eyes, a name of ridicule, had been a common choice amongst the sisters of the Matriarchal order.

An Empire Of Traitors

A Heretical Divide

Saturday, 18 October 2014

Non-orthodox views of money

Turning to the “nature” and “origins” of money, institutionalists reject the orthodox notion that money is essentially a commodity that functions primarily as a medium of exchange, invented to reduce transactions costs. Institutionalists and other heterodox economists insist that money is “social” in its nature. As Ingham puts it “money necessarily consists in social relations between economic agents and between them and a monetary ‘authority’….” (Ingham 2000, p. 19) Or, as Neale argues: “all monies are parts of larger systems of economic and social relationships.” (Neale 1976, p. 4). Further, Neale warns that “Despite the fact that many a text on money says that money originated in the inconvencies of barter, that money was invented as a medium of exchange….neither historical evidence nor argument by analogy from contemporary nonliterate societies lends support to this speculative history.” (Neale 1976, pp. 8-9) Admittedly, any story of the origins of money is necessarily speculative for two reasons. First, we must decide what “social relation” from the past qualifies as something we are willing to label “money”. Neale argues that it is best to think of “monies” rather than “money” because those social relations vary widely by society. He emphasizes that in most precapitalist societies the range of social relations associated with use of a "special purpose money". For example, we would now likely include medium of exchange, unit of account, means of debt settlement, and store of value as functions that are served today by general purpose money. However, in previous societies (and in nonliterate societies today) there have been "special purpose monies" that served only one or two of these functions but not the others. The second problem is that it is possible and even likely that the origins of money lie in a very distant past for which we have no easily interpretable records; indeed, many believe that money predates writing. (It has long been believed that writing was invented to keep track of nominal debts, although the history of writing is probably as complex as the history of money. See Schmandt-Besserat 1989.) hence we will probably never have a completely satisfying story of the origins of money.
Still, it is tempting to speculate on money's origins. There are three plausible alternatives to the orthodox story. Heinsohn and Steiger (1983) argue that money developed not out of a barter economy but when private property and loans developed. Following Keynes, they emphasize that early monetary units were based on a specific number of grains of what or barley. (Keynes 1982, pp. 233-36) Later, metals (such as iron, copper, silver, or gold) were used as money, with the value denominated in those grain units of measurement. According to their argument, the first money was created when private property (so many units of grain) was loaned with the expectation of payment of a great sum of grain in the future. Eventually, grains of wheat or barley would be used as a universal equivalent to measure value of all types of alienable private property to reduce transactions costs, acting as a unit of account in all creditor-debtor relations. Gradually, representative money, in the form of metal but still denominated in these grain weight units, could be loaned, used as a medium of exchange, and used to settle debts. Hence, Heinsohn and Steiger focus on money as a unit of account developed in these early loan agreements, and the "thing" used as money is important primarily because it represents the loan agreement that is denominated in the unit of account.
A second approach has been advanced by Hudson (2001), who has developed an alternative thesis for the origins of money of account in Babylonia. He argues that money originated within the temple and palace communities for internal accounting purposes. Like Heinsohn and Steiger, his story also emphasizes the importance of loans, however, he argues that early loans were made by the temple and palace communities to the "external" sector. Thus, rather than focusing on private property and loans between individuals that gradually become standardized in a grain unit of account, Hudson believes the unit of account was created within the early bureaucracies. Clearly, his argument focuses more on the social nature of the origins of money and hence is probably more appealing to institutionalists.
A third approach has been developed by the great numismatist, Grierson, and elaborated in Goodhart (1989, 1998) and Wray (1998). According to this view, money evolved out of the pre-civilized practice of wergeld; or to put it more simply, money originated not from a pre-money market system but rather from the penal system. (Grierson 1977, 1979; Goodhart 1998) An elaborate system of fines for transgressions was developed in tribal society. Over time, authorities transformed this system of pines paid to victims for crimes to a system that generated a variety of payments to the state. (Innes 1932) Until recently, fines made up a large part of the revenues of all states. (Maddox 1769) Gradually, fees and taxes as well as rents and interest were added to the list of payments that had to be made to authority. To be clear, this authority should be seen as a gradually evolving institution - from early temples to palace communities to feudal kings and finally to democratically elected representative governments - with varying degrees of sovereign power. All that was required was some sort of authority able to levy obligations on a population - anything from fines or tithes to fees and taxes. While wergeld payments did not require a unit of account (the fines were assessed in the form of particular items or services to be delivered to victims), payments to the authority were gradually standardized, measured in a money of account.
This approach has been called the "Chartalist" or "taxes-drive-money" approach. It is also closely related to Knapp's "state money" approach. Briefly, this view emphasizes the important role played by "government" in the origins and evolution of money. More specifically, it is believed that the state (or any other authority able to impose an obligation - whether that authority is autocratic, democratic, or divine) imposes an obligation in the form of a generalized, social unit of account - a money - used for measuring the obligation. The next important step consists of movement from a specific obligation - say, an hour of labor or a spring lamb that must be delivered - to a generalized, money, obligation. This does not require the pre-existence of markets, and, indeed, almost certainly predates them. Once the authorities can levy such an obligation, they can then name exactly what can be delivered to fulfill this obligation. They do this by denominating those things that can be delivered, in other words, by pricing them. To do this, they must first "define" or "name" the unit of account. This resolves the conundrum faced by methodological individualists and emphasizes the social nature of money and markets.
Note that the state can choose anything it likes to function as the "money thing" denominated in the money of account, and, as Knapp emphasized, can change "the thing" any time it likes: "Validity by proclamation is not bound to any material" and the material can be changed to any other so long as the state announces a convertion rate (say, so many grains of gold for so many ounces of silver). (Knapp 1924, p. 30) What Knapp called the State money stage begins when the state chooses the unit of account and names the thing that it accepts in payment of obligations to itself - at the nominal value it assigns to the thing. The final step occurs when the state actually issues the money-thing it accepts. In (almost) all modern developed nations, the state accepts the currency issued by the treasury (in the US, coins), plus notes issued by the central bank (Federal Reserves notes - green paper - in the US), plus bank reserves (again, liabilities of the central bank) - that is, the monetary base or high powered money (HPM). The material from which the money thing issued by the state is produced is not important (whether it is a gold coin, a bse metal coin, paper notes, or even numbers on a computer tape at the central bank). No matter what it is made of, the state must announce the nominal value of the money thing it has issued (that is to say, the value at which the money-thing is accepted in meeting obligations to the state).

Manually copied by myself letter with letter from this paper by Randall Wray:

Friday, 17 October 2014

Atheists can be annoying too, but they're a peach compared to religious folk

Atheists can be annoying too, but they're a peach compared to religious folk... It's not just that they might be wrong; but they think that ONLY they are right - and everyone else is just condemned to perdition because they choose to believe differently or not at all. To me, religion has always been the greatest affront to God - to the idea of a Creative or Creator principle which subsumes the universe. Religion is nothing more than institutionalized faith; it's political, it receives fiscal privileges, it judges everyone and everything but doesn't like to be judged back or criticized for that matter - and it has always used falsehood and violence to impose its views upon the willing and unwilling - and to silence all dissent. Religious dogma is nothing more than endless revisioning. And since the transempirical cannot be proved nor disproved; they enjoy the profits that their uncritical followers give to the them - directly and indirectly.

John Maynard Keynes’s Private Letter to Franklin Delano Roosevelt of February 1, 1938

To Franklin Delano Roosevelt, 1 February 1938
Private and personal

Dear Mr. President,
You received me kindly when I visited you some three years ago that I make bold to send you some bird’s eye impressions which I have formed as to the business position in the United States. You will appreciate that I write from a distance, that I have not revisited the United States since you saw me, and that I have access to few more sources of information than those publicly available. But sometimes in some respects there may be advantages in these limitations! At any rate, those things which I think I see, I see very clearly.
(1) I should agree that the present recession is partly due to an ‘error of optimism’ which led to an overestimation of future demand, when orders were being placed in the first half of this year. If this were all, there would not be too much to worry about. It would only need time to effect a readjustment;—though, even so, the recovery would only be up to the point required to take care of the revised estimate of current demand, which might fall appreciably short of the prosperity reached last spring.
(2) But I am quite sure that this is not all. The recovery was mainly due to the following factors:—
(i) the solution of the credit and insolvency problems, and the establishment of easy short-term money;
(ii)the creation of an adequate system of relief for the unemployed;
(iii) the public works and other investments aided by Government funds or guarantees;
(iv) investment in the instrumental goods required to supply the increased demand for consumption goods;
(v)the momentum of the recovery thus initiated.
Now of these (i) was a prior condition of recovery, since it is no use creating a demand for credit, if there is no supply. But an increased supply will not of itself generate an adequate demand. The influence of (ii) evaporates as employment increases, so that there is a dead point beyond which this factor cannot carry the economic system. Recourse to (iii) has been greatly curtailed in the past year. (iv) and (v) are functions of the upward movement and cease—indeed (v) is reversed—as soon as the position fails to improve further. The benefit from the momentum of recovery as such is at the same time the most important and the most dangerous factor in the upward movement. It requires for its continuance, not merely the maintenance of recovery, but always further recovery. Thus it always flatters the early stages and steps from under just when support is most needed. It was largely, I think, a failure to allow for this which caused the ‘error of optimism’ last year.
Unless, therefore, the above factors were supplemented by others in due course, the present slump could have been predicted with absolute certainty. It is true that the existing policies will prevent the slump from proceeding to such a disastrous degree as last time. But they will not by themselves—at any rate, not without a large-scale recourse to (iii)—maintain prosperity at a reasonable level.
(3) Now one had hoped that the needed supplementary factors would be organized in time. It was obvious what these were—namely increased investment in durable goods such as housing, public utilities, and transport. One was optimistic about this because in the United States at the present time the opportunities, indeed the necessities, for such developments were unexampled. Can your Administration escape criticism for the failure of these factors to mature?
Take housing. When I was with you three and a half years ago the necessity for effective new measures was evident. I remember vividly my conversations with Riefler at that time. But what happened? Next to nothing. The handling of the housing problem has been really wicked. I hope that the new measures recently taken will be more successful. I have not the knowledge to say. But they will take time, and I would urge the great importance of expediting and yet further aiding them. Housing is by far the best aid to recovery because of the large and continuing scale of potential demand; because of the wide geographical distribution of this demand; and because the sources of its finance are largely independent of the stock exchanges. I should advise putting most of your eggs in this basket, caring about this more than about anything, and making absolutely sure that they are being hatched without delay. In this country we partly depended for many years on direct subsidies. There are few more proper objects for such than working-class houses. If a direct subsidy is required to get a move on (we gave our subsidies through the local authorities), it should be given without delay or hesitation.
Next utilities. There seems to be a deadlock. Neither your policy nor anybody else’s is able to take effect. I think that the litigation by the utilities is senseless and ill-advised. But a great deal of what is alleged against the wickedness of holding companies is surely wide of the mark. It does not draw the right line of division between what should be kept and what discarded. It arises too much out of what is dead and gone. The real criminals have cleared out long ago. I should doubt if the controls existing today are of much personal value to anyone. No one has suggested a procedure by which the eggs can be unscrambled. Why not tackle the problem by insisting that the voting power should belong to the real owners of the equity, and leave the existing organizations undisturbed, so long as the voting power is so rearranged (e.g. by bringing in preferred stockholders) that it cannot be controlled by the holders of a minority of the equity?
Is it not for you to decide either to make a real peace or to be much more drastic the other way? Personally I think there is a great deal to be said for the ownership of all the utilities by publicly owned boards. But if public opinion is not yet ripe for this, what is the object of chasing the utilities around the lot every other week? If I was in your place, I should buy out the utilities at a fair price in every district where the situation was ripe for doing so, and announce that the ultimate ideal was to make this policy nation-wide. But elsewhere I would make peace on liberal terms, guaranteeing fair earnings on new investments and a fair basis of valuation in the event of the public taking them over hereafter. The process of evolution will take at least a generation. Meantime a policy of competing plants with losses all round is ramshackle notion.
Finally, the railroads. The position there seems to be exactly what it was three or four years ago. They remain, as they were then, potential sources of substantial demand for new capital expenditure, Whether hereafter they are publicly owned or remain in private hands, it is a matter of national importance that they should be made solvent. Nationalise them if the time is ripe. If not, take pity on the overwhelming problems of the present managements, And here too let the dead bury their dead. (To an Englishman, you Americans, like the Irish, are so terribly historically minded!)
I am afraid I am going beyond my province. But the upshot is this. A convincing policy, whatever its details may be, for promoting large-scale investment under the above heads is an urgent necessity. These things take time. Far too much precious time has passed.
(4) I must not encumber this letter with technical suggestions for reviving the capital market. This is important. But not so important as the revival of sources of demand. If demand and confidence reappear, the problems of the capital market will not seem so difficult as they do today. Moreover it is a highly technical problem.
(5) Businessmen have a different set of delusions from politicians, and need, therefore, different handling. They are, however, much milder than politicians, at the same time allured and terrified by the glare of publicity, easily persuaded to be ‘patriots’, perplexed, bemused, indeed terrified, yet only too anxious to take a cheerful view, vain perhaps but very unsure of themselves, pathetically responsive to a kind word. You cold do anything you liked with them, if you would treat them (even the big ones), not as wolves or tigers, but as domestic animals by nature, even though they have been badly brought up and not trained as you would wish. It is a mistake to think that they are more immoral than politicians. If you work them into the surly, obstinate, terrified mood, of which domestic animals, wrongly handled, are so capable, the nation’s burdens will not get carried to market; and in the end public opinion will veer their way. Perhaps you will rejoin that I have got quite a wrong idea of what all the back-chat amounts to. Nevertheless I record accurately how it strikes observers here.
(6) Forgive the candour of these remarks. They come from an enthusiastic well-wisher of you and your policies. I accept the view that durable investment must come increasingly under state direction. I sympathise with Mr Wallace’s agricultural policies. I believe that the SEC is doing splendid work. I regard the growth of collective bargaining as essential. I approve minimum wage and hours regulation. I was altogether on your side the other day, when you deprecated a policy of general wage reductions as useless in present circumstances. But I am terrified lest progressive causes in all the democratic countries should suffer injury, because you have taken too lightly the risk to their prestige which would result from a failure measured in terms of immediate prosperity. There need be no failure. But the maintenance of prosperity in the modern world is extremely difficult; and it is so easy to lose precious time
I am, Mr President
Yours with great respect and faithfulness,
J.M. Keynes
John Maynard Keynes (1938), “Letter of February 1 to Franklin Delano Roosevelt,” in Collected Works XXI: Activities 1931-1939 (London: Macmillan).

Wednesday, 15 October 2014

Warren Mosler kills some myths, as usual

I reject the belief that the economy is strong and operating anywhere near full employment. I also reject the belief that a zero-rate policy is inflationary, supports aggregate demand, or weakens the currency, or that higher rates slow the economy and reduce inflation. Additionally, I reject the mainstream view that employment is materially improving, the output gap is closing, and inflation is rising and returning to the Fed’s targets.

There is no right time for the Fed to raise rates! Click to read Warren's article in full.

Saturday, 4 October 2014

My feeble "social-media promotion" until the new year

Fact 1:
I live in Romania and my standard of living is not the average "western" standard. Compared to that yardstick, I'm poor. I don't have money to spend on 30-50 dollar 10 day promotion sites to run ads.
Fact 2:
Outside of the genre I write in (fiction, epic fantasy), my other interests revolve around domestic and foreign politics, the struggle of heterodox thought against the corrupt and entrenched orthodox establishment, ASMR vids, and watching Let's plays on youtube - (seeing who gives objective criticism and who's just being a mindless fanboy).
So outside thing related to Post-Keynesianism, Modern Monetary Theory, religion, LGBQT news, foreign conflicts, and overall things concerning human rights... I really don't write about anything else. Being self-published is a bitch because one has to tackle the marketing side of things directly and many a time without resources. Hell, if I had money to pour in advertising and what not, I wouldn't have priced my stories to begin with. If money were not a problem, I'd make An Empire Of Traitors and A Heretical Divide perma-free in a heartbeat - just like Talking Crows.

I'm going to focus on what meager buzz I can create via my blog and twitter; and that's about it. Next year I don't want to waste time (and yes, that's the psychological perception) looking at the daily sales charts and tweeting stuff related to my ebooks. In 2015, I have my work cut out for me; the third installment to the Of Hate And Laughter (OHAL) series, A Dance With Fools And Devils, is going to have around 200K words; almost twice as long as book 1 and 2 combined.
I have no fantasy of becoming rich over night or ever, for that matter. As an indie writer with no financial resources, but with a love for the world I've created and for the souls I've given birth to - I take the long road.

Cameron's Conference Rap iz da truth

It's so brilliant, I'm just lost for words...

Tuesday, 30 September 2014

QE (quantitative easing) in short

On the QE side, it's just a monetarist tactic that is aimed at increasing lending. The thing is, monetarists (like the neolibs and the neocons) ignore private debt, money, and bank loans. Reserves have always been pretty much inconsequential with regard to lending. All that matters is the actual demand for loans, not the bank's reserve position. No banker is going to turn away a customer if the bank's reserve requirement is below the minim. It's simply gonna go on the interbank market and obtain them or go at the CB's discount window.

QE is basically the Central bank buying up bank bonds and treasuries with reserves. So, it's a swap operation. Each time the CB creates, say 100 billion in reserves, it takes away 100 billion in private sector assets (typically split 50/50 between mortgage-backed securities and treasuries). This, in turn, drives interest rates to 0 in the market. And it also sparks an asset price bubble. The value of these assets go up, because the central bank is buying them (with treasuries).

QE helps out the financial sector only; it doesn't help nonfinancial firms and labor. QE practically limits government interest payments to the private economy. Reserves earn around a quarter of a percentage point on interest, whilst treasuries earn more. So in practice, QE does not increase economic growth - because it doesn't increase lending - because the private sector is trying to deleverage and it doesn't want to contract more debt, no matter how attractive the interest rate is. Japan wasted more than a decade on QE and lost 10 years of economic growth - simply because they failed to increase the fiscal deficit accordingly to shorten the deleverage phase by as much as possible.

An Empire Of Traitors, broader description that will hook you or not ^_^

An Empire Of Traitors follows several principal storylines simultaneously. It's been eight years since the end of the civil war between the Inquisition and emperor Zygar Ferus, worshiper of blood gods. Eight years into the aftermath, a new emperor sits the Sun Throne, and the Inquisition is no more.

In the Westlands, Drakanes, a sister of the temple finds herself in the role of witness and proctor, of passing judgement on a man accused of murder, who claims to have been possessed. The trial's proceedings enlighten her as to the truth of it all, and the good sister is willing to, out of pure stubbornness, risk death for justice.

Emperor Hagyai Rovines Mero fears for the continuation of his line, and sends Sycarus on an errand to the Desertlands, to bring back an Aharo maiden for his son and heir. It was said that the wombs of the Aharo savage women always gave birth to healthy babes. Hagyai Rovines desires a betrothal between the prince heir and the savage girl - trying to emulate a long dead custom of the Sunborn emperors. Such a move is most unpopular, and the whispers of another civil war are once again in the air. And these whispers come from Harpool, from the exiled Amarius Mero.

The imperial chancellor warns Birus Mandon, lord of Rivermark and warden of the Streamlands, of an evil plot against the emperor. Birus Mandon tries to gather information in regard to the schemes of potential oathbreakers, but his trade is not that of a spy. When he hires the Mounted Arrows Company of Narak al Zull, Birus learns more than mere outlandish tactics; he finds a new source of strength in the sellsword's foreign warrior god.

Kalafar Sodomis, lord of Weiyenor and warden of the Northlands, has seen his brother get married, and he himself is tried by notions of passion toward a certain lady of a southern house. But as the conflict breaks out, Kalafar needs to act as a proper lord. He summons his bannermen for a council at Devil Mound, to decide if their realm will go to war or no; and there to also perform a certain ritual to honor the dead of Fengard and Wyrm. Find out how it all unfolds by reading An Empire Of Traitors.

Sample the book at your favorite online store to see if it hooks you or not.

-At Scribd

-At Amazon

-At Itunes

-At Smashwords

-At Barnes & Noble

-At txtr

-At Google Play

-At Google Books

Saturday, 27 September 2014

Asimov and Carlin on libertarianism

'He always pictured himself a libertarian, which to my way of thinking means "I want the liberty to grow rich and you can have the liberty to starve". It's easy to believe that no one should depend on society for help when you yourself happen not to need such help.' -- Isaac Asimov, in I. Asimov : A Memoir (1994), p. 308

'One of the more pretentious political self-descriptions is "Libertarian." People think it puts them above the fray. It sounds fashionable, and to the uninitiated, faintly dangerous. Actually, it's just one more bullshit political philosophy.' -- George Carlin, in Napalm and Silly Putty (2002), p. 261

Friday, 19 September 2014

Like all indies, I require help; and that means reviews!

Ok, so for anyone interested in my writing, please get in touch with me if you want copies of my ebooks in exchange for reviews. I've built and am still creating something awesome here with my OHAL universe - and I've the memory of an elephant. I'll remember those who helped me out, and in turn I will help them any way that I can.
An Empire Of Traitors and A Heretical divide; these are the first two books in my Of Hate And Laughter (OHAL) series. I will email the ebook files to anyone willing to lend me a hand by reading my work and posting their honest opinions (be they good or bad) on sites like Amazon, Goodreads, B&N, Apple iBook store, their own personal blogs et all.
You guys and gals help me, and you'll have access to the following 3 books in the series. That's a promise.

Game Theory Intro - The Prisoner's Dilemma as a Model for Oligopoly Behavior

Check out Jason Welker's youtube channel and make sure to subscribe; he's got more awesome videos with easy diagrams and explanations.

Sunday, 14 September 2014

Debunking austrian/libertarian bullshit

This is a very long reply of mine to a Rothbardian on youtube:

Government spending is not limited by borrowing. All the money that goes to paying taxes, all the money that goes to buying government debt - it all comes from government spending. Government spending finances government taxation. Vice-versa is not only illogical, it is operationally impossible.

1. Austrian belief that Gold standard was awesome. It's a myth, it wasn't awesome.
First of all, a Gold standard is a GOVERNMENT PRICE SETTING. It's not a "creature born out of the free market".

The reasons nations have gone off the gold standard isn’t because it was working so well and their economies were doing well. The reason they go off, like the US did in 1934, was because it was a disaster.

Historically nations suspend their gold standards in times of war, when they need their economies to function to the max. If a gold standard was so good for an economy, why suspend it when you need max economic performance? Obviously because it is not conducive of maximum real output.

The ideological issue is whether the primary function of the currency is to be an investment/savings vehicle, or a tool for provisioning government and optimizing real economic performance. In a market economy you can’t fix the price of two things without a relative value shift causing you to be buying one of them and running out of the other. Likewise, you can’t sustain full employment and a stable gold price if there is a shift in relative value between the two.

A gold standard is a fixed exchange rate policy, where the govt continuously offers to buy or sell gold at a fixed price.

This means the holder of a dollar, for example, has the option of ‘cashing it in’ for a fixed amount of gold from the govt, and a holder of gold has the option of selling it at a fixed price to the govt.

Therefore a new gold discovery which causes gold to be sold to the govt is inflationary and tends to increase output and employment, and a gold ship sinking in transit or a sudden desire to hoard gold is deflationary and tends to decrease output and employment. And there’s nothing that can be done about these relative value shifts, except to ride them out. The only public purpose served (by definition) is the stable nominal price of gold set by Congress.

With a gold standard, like any fixed fx regime, interest rates are necessarily set by market forces. With the govt’s spending being convertible currency, it is limited to spending only to the extent it has sufficient gold reserves backing the currency it spends. With gold reserves generally pretty much constant and not expandable in the short run, this means govt spending is limited to what it can tax and/or borrow. So when the govt wants to deficit spend, doing so by ‘printing’ new convertible dollars risks those dollars being ‘cashed in’ for gold. Govt borrowing, therefore, functions to remove that risk by delaying conversion privileges until the borrowings mature. This means the govt is competing with the right to convert when the govt borrows. In other words, the holder of the gold certificates has the option of either converting to gold or buying the treasury securities. The interest rate the treasury must pay therefore represents the indifference rate of holders of the convertible currency between cashing in the currency for gold now or earning the interest rate and not being able to convert until maturity. Note that it’s in fixed exchange rate environments that govt borrowing costs have soared to triple digits as govts have competed with their conversion features, and that govts generally lose those fights as the curve goes vertical expressing the fact that at that point there is no interest rate that can keep holders of the currency from wanting to convert.

Note that this also means the nations gold reserves are the net financial equity that supports the entire dollar credit structure, a source of continuous financial fragility and instability.

Being on the gold standard doesn’t prevent a financial crisis, but it makes the consequences far more severe.

We were on a gold standard when the roaring 20′s private sector debt boom lead to the crash of 1929 and the depression that followed. 4,000 banks closed before we went off gold in 1934, and it was only getting worse which is why we went off of it.

Gold would not have prevented the pre 2008 sub-prime boom, but it would have made the consequences far more severe. Including no Fed liquidity provision to offset a system wide shortage due to hoarding and banks bidding ever higher for funds that didn’t exist, most all firms losing inventory financing and being forced to liquidate inventories as rates spiked competing for funds that didn’t exist, and no deficit spending for unemployment comp as federal revenues fell from the collapse. In other words, the automatic fiscal stabilizers we rely on can’t be there. Instead it’s a deflationary disaster that only ends when prices fall sufficiently to reflect changes in relative value between gold and everything else.

Note that the recent decade of gold going from under $600 to over $1,600 is viewed as a sign ‘inflationary’ and a 250% ‘dollar devaluation’ as it takes 2.5x as many dollars to buy the same amount of gold. But if we were on a gold standard, and all else equal, and gold had been fixed at $600 back then, the same relative value shift would be manifested as the general price level falling that much in an unthinkable deflationary nightmare.

1.1 The austrian belief that fraction reserve banking is fraud. (false)

Example of voluntary FRB:
(1) We set up our fractional reserve bank;

(2) our clients hand over money to us and explicitly agree that the ownership of their money passes to the bank;

(3) the bank gives the client a bank account, which is a credit/debt instrument or an IOU redeemable on demand to return to them money up to the amount in his or her account from (a) the bank’s reserves, (b) from sale of financial assets, or (3) loans.

(4) it is understood by all parties that most of the original money has been loaned out (except for that portion held as reserves), and only a tantundem from the bank’s reserves, money from sale of financial assets, or loans is provided;

(5) the bank’s private notes are negotiable, so that they can be used by anyone who accepts them as a means of payment/medium of exchange. It is in our contact that our clients must explain to anyone who accepts our private notes the terms as stipulated to them. The private notes are widely accepted in the community. People are happy to accept them as a means of payment, and redeem them when they wish to.

(6) if the bank becomes insolvent, the clients holding accounts or unredeemed bank notes can sue to regain their debt from the liquidation of the bank’s assets. Everyone understands this and accepts the risk.
Where is the fraud here? Risk is part of any venture.

2. The concept of debt monetisation is a non sequitur. Once the overnight rate target is set, the central bank should only trade government securities if liquidity changes are required to support this target. Given the central bank cannot control the reserves then debt monetisation is strictly impossible. Imagine that the central bank traded government securities with the treasury, which then increased government spending. The excess reserves would force the central bank to sell the same amount of government securities to the private market or allow the overnight rate to fall to the support level. This is not monetisation but rather the central bank simply acting as broker in the context of the logic of the interest rate setting monetary policy.

Ultimately, private agents may refuse to hold any further stocks of cash or bonds. With no debt issuance, the interest rates will fall to the central bank support limit (which may be zero). It is then also clear that the private sector at the micro level can only dispense with unwanted cash balances in the absence of government paper by increasing their consumption levels. Given the current tax structure, this reduced desire to net save would generate a private expansion and reduce the deficit, eventually restoring the portfolio balance at higher private employment levels and lower the required budget deficit as long as savings desires remain low. Clearly, there would be no desire for the government to expand the economy beyond its real limit. Whether this generates inflation depends on the ability of the economy to expand real output to meet rising nominal demand. That is not compromised by the size of the budget deficit.

3. More austrian myths: hyperinflation due to uncritical adoption of more money

A careful study of historical cases of hyperinflation shows the following causes: the collapse of production, brazen corruption, political instability, war or defeat, finally collapsing fixed exchange rate with a strong currency (Argentina). The over-production of money is always the result and never the cause of a crisis of hyperinflation.

“The quantity theory of money is based on two propositions. First, in the long run, there is proportionality between money growth and inflation, i.e., when money growth increases by x% inflation also rises by x% .... We subjected these statements to empirical tests using a sample which covers most countries in the world during the last 30 years. Our findings can be summarised as follows. First, when analysing the full sample of countries, we find a strong positive relation between the long-run growth rate of money and inflation. However, this relation is not proportional. Our second finding is that this strong link between inflation and money growth is almost wholly due to the presence of high-inflation or hyperinflation countries in the sample. The relation between inflation and money growth for low-inflation countries (on average less than 10% per year over 30 years) is weak, if not absent” (De Grauwe and Polan 2005: 256).

First, for countries with inflation rates less than 10% (which is most of the developed world), the empirical evidence for the quantity theory of money is either very weak or just non-existent. This is a serious blow to the quantity theory.

Secondly, although countries with high-inflation or hyperinflation show a correlation between the growth rate of money supply and inflation, contrary to the quantity theory, that relation is not proportional. A further blow to the quantity theory is that, in very high inflation countries, inflation rates exceed the growth rates of the money supply, because the velocity of circulation of money increases with high inflation rates (De Grauwe and Polan 2005: 257). This instability in the velocity of circulation is contrary to the quantity theory, which posits a stable velocity of circulation, as we will see below. Finally, De Grauwe and Polan reach the conclusion:

“Our results have some implications for the question regarding the use of the money stock as an intermediate target in monetary policy …. The ECB bases this strategy on the view that ‘‘inflation is always and everywhere a monetary phenomenon.’’ This may be true for high-inflation countries. Our results, however, indicate that there is no evidence for this statement in relatively low-inflation environments … In these environments, money growth is not a useful signal of inflationary conditions, because it is dominated by ‘‘noise’’ originating from velocity shocks. It also follows that the use of the money stock as a guide for steering policies towards price stability is not likely to be useful for countries with a history of low inflation” (De Grauwe and Polan 2005: 258).

4. A classical libertarian myth: Hyperinflation brought Hitler to power
The hyperinflation of the early 1920s hit brutally German society. Not yet brought Hitler into government. As Germany rode the waves of hyperinflation, the percentage of Nazis ranged below 4% (see the 1928 elections). In 1930 hyperinflation was tamed now. When the new Finance Minister Kurt von Brouningk imposed harsh austerity in the early 1930s, increasing unemployment, gave the Nazis their first success (18.3% in September 1930). Two years later, under the ever harsher austerity Brouningk, unemployment and poverty drove Hitler to 37.2% in the 1932 elections.

5. Another myth, austrians understand endogenous money:
Show me an article from an austrian economist pre 2007-2008 that mentions the line "loans create deposits."

6. Another myth, Austrian economists understand that QE is not money printing/helicopter drop. Murphy still doesn't get it.

7. The "innocence" of Mises and Hayek vis-a-vis totalitarism and fascism.
Fascism is NEVER an alternative to Stalinism, nor was it ever. The fact that Mises took a job within a government that was authoritarian and corporatist shows just how much integrity the man DIDN'T have. To agree to apply socialist policies for the corporates but not for labor is clear as light that the man was a huge ass hypocrite. You don't stop the revolutionaries by giving more power to the reactionaries.

Also, Hayek and Mises are not some organic free-thinkers. Their work was backed by big money interests and this is fact!
Friedrich Hayek’s ‘the road to Serfdom’ was published the same year. With its defense of ‘laissez-faire’ capitalism and claim that any attempt at regulation would inevitably lead to totalitarianism, it was exactly what the Volker Fund had been looking for. It was only then that the Volker fund started to have a real impact. It arranged for a reprint of Hayek’s book with the University of Chicago and made sure the book ended up in every library in the United States.

The Volker Fund would finance all the leading Austrian Economists and would have a substantial impact on the ‘Chicago School of Economics’, including Milton Friedman.

Von Mises, who throughout his career never held a paid job at any University, was maintained first by David Rockefeller and then for decades received money from the Volker fund and related business men, like Lawrence Fertig.
Von Mises’ biographer, Richard M. Ebeling:
“Many readers may be surprised to learn the extent to which the Graduate Institute and then Mises himself in the years immediately after he came to United States were kept afloat financially through generous grants from the Rockefeller Foundation. In fact, for the first years of Mises’s life in the United States, before his appointment as a visiting professor in the Graduate School of Business Administration at New York University (NYU) in 1945, he was almost totally dependent on annual research grants from the Rockefeller Foundation.”

David Rockefeller himself was quoted as saying: “Finally, in his most surprising statement, he revealed he considers himself a follower of the Austrian school of economics. Friedrich Hayek had been his tutor at the London School of Economics in the 1930s.“

Rothbard too was financed by the Volker Fund:
“Rothbard began his consulting work for the Volker Fund in 1951. This relationship lasted until 1962, when the VF was dissolved. A major part of Rothbard’s work for the VF consisted of reading and evaluating books, journal articles, and other materials. On the basis of written reports by Rothbard and another reader – Rose Wilder Lane – the VF’s directors would decide whether to undertake massive distribution of particular works to public libraries.

Rothbard later called his work with the Volker Fund, “the best job I’ve ever had in my life.”

The Volker Fund also explored a tactic that was to find wider application later: it spawned an enormous number of organizations, loosely organized to suggest mutual independence and a ‘Libertarian Movement’. Among these was the Foundation for Economic Education, which in turn would create the Mont Pelerin Society.

The Mont Pelerin Society
The Mont Pelerin Society was named after the Swiss Alp where the first conference was held. It was founded by Hayek with the financial support of the Volker fund, which paidfor the expenses of all American participants. Key co-founders were von Mises, Milton Friedman and Karl Popper.

No less than eight Noble prizes for Economics were to be won by Mont Pelerin members in the decades ahead. Not bad, for a ‘fringe movement, ignored by the Mainstream’.

The Mont Pelerin, in turn, oversaw the creation of many influential institutions. One of them was the Institute of Economic Affairs in London, 1955. This organization reinvented the Conservative Party, of which Margeret Thatcher was to say: “You created the atmosphere which made our victory possible… May I say how thankful we are to those who joined your great endeavor. They were the few, but they were right, and they saved Britain.“

The Heritage Foundation was also a result of the Mont Pelerin Society, as were the Manhattan Institute for Policy Research and the Atlas Economic Research Foundation, which in turn birthed a plethora of think tanks, including the Fraser Institute.

The amount of money that was invested in all this was tremendous:
“John Blundell, the head of the IEA, in a speech to the Heritage Foundation, and Atlas in 1990, would identify a rare failure in the Society’s efforts. Shaking his head at the abortive attempt to subsidize academic “Chairs of Free Enterprise” in dozens of countries throughout the world, Blundell complained about wasting, “hundreds of millions, perhaps one billion dollars”. This was just one initiative among many.”

The Koch Family.
The Volker fund was disbanded in 1962. It still had $7 million in assets, which it donated to the Hoover society.

But in the mean time another very wealthy Jewish family, the Koch family had taken over the organization of Libertarianism and Austrian Economics.

Fred Koch founded the John Birch Society in 1958. Ed Griffin was educated there. He later wrote a famous book, “the Creature of Jekyll Island”. This was a rehash of Eustace Mullins’ brilliant ‘Secrets of the Federal Reserve’, with one exception: it left out all Mullins’ analysis of the Gold Standard as a Banker operation and how Britain’s demand for taxes paid in Gold were the cause of the war of Independence. Instead it called for the reinstatement of a Gold Standard. This is a key part of the story how Austrian Economics managed to take over the ‘Truth Movement’.

Koch’s son Charles Koch founded the CATO Institute, together with Murray Rothbard. The CATO Institute remains to this day a leading Libertarian outlet.

8. The love between Hayek and Pinochet

Hayek, interview to a Chilean newspaper:
“[A]s long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.”
So there we have it: when the chips are down, Hayek presumably preferred dictatorship to a state with the rule of law and a social democratic or democratic socialist economics.

One wonders whether, if in his day when pressed, he would have expressed preference for Pinochet’s Chile (where people where regularly “disappeared”) to social democratic Sweden?

By contrast, a fair point that Hayek makes is that a dictator can pursue “liberal” or laissez faire policies. This is perfectly true: Mussolini originally pursued standard free market, neoclassical policies:
“From 1922 to 1925, Mussolini’s regime pursued a laissez-faire economic policy under the liberal finance minister Alberto De Stefani. De Stefani reduced taxes, regulations, and trade restrictions and allowed businesses to compete with one another. But his opposition to protectionism and business subsidies alienated some industrial leaders, and De Stefani was eventually forced to resign.”
Sheldon Richman, “Fascism,” Concise Encyclopedia of Economics
It is perhaps with this in mind that we must view the remark by Mises on Mussolini’s fascism:
“It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”
Mises, 1978 [1927]. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 51.
All in all, you don’t see the Austrians commenting much on these disgraceful remarks by either Hayek and Mises.

9. Hayek the Ethnic Bigot and the Perils of the Ad Hominem Fallacy

Hayek (1899–1992) was once asked what kind of people he disliked, and his response is not a pretty sight:
CHITESTER: …. Going back to the question I asked you about people you dislike or can’t deal with, can you make any additional comments in that regard, in terms of the characteristics of people that trouble you?

HAYEK: I don’t have many strong dislikes. I admit that as a teacher—I have no racial prejudices in general—but there were certain types, and conspicuous among them the Near Eastern populations, which I still dislike because they are fundamentally dishonest. And I must say dishonesty is a thing I intensely dislike. It was a type which, in my childhood in Austria, was described as Levantine, typical of the people of the eastern Mediterranean. But I encountered it later, and I have a profound dislike for the typical Indian students at the London School of Economics, which I admit are all one type—Bengali moneylender sons. They are to me a detestable type, I admit, but not with any racial feeling. I have found a little of the same amongst the Egyptians —basically a lack of honesty in them. (Nobel Prize-Winning Economist: Friedrich A. von Hayek, Regents of the University of California, 1983. p. 490).
So here we have Hayek asserting:
(1) Although he protested that he had no racial prejudices, Hayek admitted a dislike for a certain type of persons conspicuous among “Near Eastern populations” whom he found fundamentally dishonest, and who in the Austria of his youth could be described as “Levantine, typical of the people of the eastern Mediterranean.”

There is something shocking in these statements. Who on earth was Hayek talking about here? Some have charged that Hayek was showing latent anti-Semitism (Reder 2002: 263), and I find it difficult not to agree. Any person ranting about fundamentally “dishonest” Levantine people sounds like a cowardly anti-Semite to me. If not, who was the target? I don’t think there were many Syrians or Lebanese in the Austria of Hayek’s childhood and youth (which is the period from 1899–1918). Nor will the charge of ethnic slander and bigotry be dismissed if one chooses to deny that Hayek had in mind here human beings who happen to be of Jewish ethnicity: for now Hayek is open to the charge of even greater bigotry against Levantine people in general. Who seriously thinks that whole nations of people are all fundamentally “dishonest”? Anyone who thinks this is a bigot and an idiot.

(2) Hayek held a profound dislike for “the typical Indian students at the London School of Economics” supposedly of a particular detestable type, “Bengali moneylender sons.” Hayek showed himself guilty of a contemptible ethnic slur here, one which Anand Chandavarkar has described as Hayek’s “bizarre notion of Bengali students as sons of moneylenders, the one profession which the versatile Bengali has always scorned. The few postgraduate Indian pupils of Hayek – S. R. Sen, Said Ahmad Meenai and B. R. Shenoy – were all ‘honest’ high achievers who certainly did not answer to his image of Indian students” (Chandavarkar 2002: 224). I might add that I find it ridiculous and paradoxical that an inveterate apologist for Classical liberal, laissez faire capitalism like Hayek would have a prejudice against money-lenders’ sons. Isn’t money lending or banking a fundamentally important profession in modern capitalism?

(3) If this wasn’t enough, Hayek found time to use a similar ethnic slur of dishonesty (if not quite as pronounced) against Egyptians as well.
Now, to be fair to Hayek, I don’t see evidence of the kind of vile and shameful 19th-century racism in these opinions that holds that certain groups of human beings are inferior in terms of intelligence, morality or honesty owing to genetic or hereditary causes. But Hayek’s contemptible, irrational and disgraceful ethnic slurs and bigotry cannot be denied either.

If any apologist for Hayek contends that Hayek was kind and generous to his students and friends who happened to be Jewish or Indian, then the very same defence can be made of Keynes: just like Hayek, Keynes had Jewish friends and displayed great kindness toward them.

The lesson here is that Hayek, like Keynes, was also guilty of despicable ethnic slanders and prejudices (see Chandavarkar 2000 for Keynes’s anti-Semitism). Moreover, do these bigoted remarks provide us with any reason to reject the economic theories of Hayek?

Of course not. To do so would be to invoke the ad hominem fallacy. The shameful anti-Semitism of Keynes is irrelevant to the question of the truth of the economic theories in the General Theory and Keynes’s later work. The shameful (and arguably) latent anti-Semitism of Hayek is strictly irrelevant to the truth of Hayek’s economic theories.

Any modern Keynesian can condemn the bigotry of Keynes as an utterly disgraceful and immoral part of Keynes’s personality and character, while asserting the fundamental truth of many of the economic theories in the General Theory. The modern Austrian can condemn the bigotry of Hayek as an utterly disgraceful and immoral part of Hayek’s personality and character, while asserting the truth of the ideas in Hayek’s economics. The ad hominem fallacy and name calling abuse have no part in the debates on economic theory.

10. Hayek didn't accept Mises' Apriorism

It is now well known that Hayek disagreed with Mises on the role of empirical evidence. In a letter that Hayek wrote to Terence W. Hutchison dated 15 May, 1983, Hayek stated:
“I had never accepted Mises’ a priorism .... Certainly 1936 was the time when I first saw my distinctive approach in full clarity – but at the time I felt it that I was merely at last able to say clearly what I had always believed – and to explain gently to Mises why I could not ACCEPT HIS A PRIORISM” (quoted in Caldwell 2009: 323–324).

In fact, in 1937 Hayek had published an article called “Economics and Knowledge” where he criticised Mises’ apriorism, and appears to have moved closer to Popperian ideas on methodology in later years:
“I became one of the early readers [sc. of Karl Popper’s Logik der Forschung, 1934]. It had just come out a few weeks before …. And to me it was so satisfactory because it confirmed this certain view I had already formed due to an experience very similar to Karl Popper’s. Karl Popper is four or five years my junior; so we did not belong to the same academic generation. But our environment in which we formed our ideas was very much the same. It was very largely dominated by discussion, on the one hand, with Marxists and, on the other hand, with Freudians. Both these groups had one very irritating attribute: they insisted that their theories were, in principle, irrefutable. Their system was so built up that there was no possibility – I remember particularly one occasion when I suddenly began to see how ridiculous it all was when I was arguing with Freudians, and they explained, “Oh, well, this is due to the death instinct.” And I said, “But this can’t be due to the [death instinct].” “Oh, then this is due to the life instinct.” … Well, if you have these two alternatives, of course there’s no way of checking whether the theory is true or not. And that led me, already, to the understanding of what became Popper’s main systematic point: that the test of empirical science was that it could be refuted, and that any system which claimed that it was irrefutable was by definition not scientific. I was not a trained philosopher; I didn’t elaborate this. It was sufficient for me to have recognized this, but when I found this thing explicitly argued and justified in Popper, I just accepted the Popperian philosophy for spelling out what I had always felt. Ever since, I have been moving with Popper” (Nobel Prize-Winning Economist: Friedrich A. von Hayek, pp. 18–19).

One wonders what Hayek would have thought about the hordes of ignorant and “pop” Austrians on the internet today, claiming that the inferences of praxeology are irrefutable and praxeology has no need for empirical evidence (which is a distortion of what even Mises believed). If Hayek were alive today and gave an honest answer to this, he would have to class such vulgar Misesians as talking nonsense on a par with Marxism and Freudian psychology.

11. Your precious Rothbard defends monopoly and cartel prices:

Rothbard has a curious attitude to monopoly and cartel prices. Rothbard admits the possibility of monopolies and cartels arising on the completely free market, and defends their existence in these circumstances:
“So far we have established that there is nothing ‘wrong’ with monopoly price, either when instituted by one firm or by cartel; that, in fact, whatever price the free market (unhampered by violence or the threat of violence) establishes will be the ‘best’ price.”
(Rothbard 2009: 661).
Yet, since a monopoly or cartel will be a price setter, it is nonsense to talk about the monopoly price being the price the “free market establishes.” The charge that Rothbard exhibits a double standard on monopoly was also made by L. E. Hill (1963).

Rothbard’s views must be set within the framework of broader Austrian ideas on monopoly:
“Since Rothbard’s economic theories are generally within the Austrian economic tradition, it might be useful to compare his position on monopoly with those of Ludwig von Mises and Israel M. Kirzner. Mises held that monopoly could exist in a free market whenever the entire supply of a commodity was controlled by one seller or a group of sellers acting in concert. Such a situation was not necessarily harmful unless the demand curve for the commodity was inelastic. Then, according to Mises, the monopolist would have a perverse incentive to restrict production and create a monopoly price, and that price would be ‘an infringement of the supremacy of the consumers and the democracy of market.’ Kirzner has suggested that the monopoly ownership of some resource could have ‘harmful effects’ since it would create an incentive on the part of the resource owner to not employ the resource to ‘the fullest extent compatible with the pattern of consumer tastes’ in the market.” (Armentano 1988: 7).
Rothbard rejects the definition of monopoly as the control of the supply of a commodity, and thinks that there is no distinction between competitive and monopoly prices on a completely free market.

On pp. 662ff. of Man, Economy, and State, Rothbard engages in a tortuous and utterly unconvincing attempt to deny any difference between a small producer in a competitive market and a larger corporation with a large share of production. Rothbard’s eventual definition of monopoly only as a right of exclusive production granted by the state to some entity is a piece of legerdemain that allows him to argue that “monopoly can never arise on a free market” (Rothbard 2009: 670).

Moreover, Rothbard’s view is inconsistent, since elsewhere his view is that free markets are superior precisely because consumers set prices:
“On the free market, consumers can dictate the pricing and thereby assure the best allocation of productive resources to supply their wants. In a government enterprise, this cannot be done.”
(Rothbard 2009: 1261).
But, if on the unhampered market, cartels, oligopolies and monopolies could develop in product markets, and the prices of commodities were then set by price setters/price administrators, and not by the dynamics of supply and demand curves, then it is obvious that consumers are not dictating pricing. According to Rothbard’s argument here, unhampered free markets would not assure the best allocation of productive resources, with cartel and monopoly prices being present.

Of course, anyone who has read the specialist literature from modern marketing departments, which studies the empirical reality of how prices are set, knows that business prefers stable prices to the instability of fluctuating ones and disastrous price wars. In the real world, modern corporations are often prices setters, not price takers. Price setting has benefits overlooked by libertarian and free market ideologues.

There is another criticism that can be made. Rothbard thought free markets have a tendency to equilibrium, if not to reach an equilibrium state:
“Rothbard presumed that in individual markets, the law of one price dominated, and that market clearing happened rapidly and smoothly (124). Just as in conventional neoclassical economics, general equilibrium, the evenly rotating economy (ERE), was the direction in which the economy was headed. The pervasiveness of change made it unlikely that an economy would ever achieve the ERE, but nevertheless, like a dog chasing a mechanical rabbit, it at least could explain the direction of change (274). Although Rothbard warned against taking equilibrium too seriously given the world of constant change in which we live (277), it was nevertheless his underlying assumption that markets adjust quickly to new equilibrium positions. Indeed, his justification for the basic efficiency of markets was that ‘entrepreneurs will be very quick to leave the losing industry’ (466) when mistakes are made.” (Vaughn 1994: 97).
One of the elements that supposedly cause the basic efficiency of markets is the flexibility of prices. But with Rothbard’s recognition that cartels and monopolies could arise on a free market and set prices, there is actually less likelihood of price flexibility and market clearing.

Rothbard does not explain how an anarcho-capitalist society would deal with coercive monopolies arising on free markets.

A perfect example of how a competitive market in an anarcho-capitalist system could collapse into a coercive monopoly is protection and policing. Private protection firms would in fact have an incentive to victimise potential customers to increase market share. Violence of the type that already happens between private mafia groups might occur. A natural monopoly would probably develop as the most powerful firm drove its competitors out of business (or a cartel might become dominant), and one would be left with a de facto state, the very thing anarcho-capitalism sought to abolish.

12. No. Rothbard's writing is DEFINITELY not the one size fits all for anyone with a "decent level of intelligence" to learn all there is to know about economics. Neither is Keynes, neither is Marx, neither is any contemporary or dead economist. In order to understand political economy, one has to get familiar with anthropology, with universal human history, and with everything else in between. Audi Alteram Partem.

13. More austrians myths, inflation and the fall of Rome:

The myth that the Roman empire fell because of economic problems caused by inflation dies hard, and you can find it used by Austrians and free market libertarians:
Peden, Joseph R. 2009. “Inflation and the Fall of the Roman Empire,” Mises Daily, September 7.

Bartlett, B. 1994. “How Excessive Government Killed Ancient Rome,” Cato Journal 14.2 (Fall): 287–303.

There are a number of points to make in response to these attempts to blame government intervention and inflation for Rome’s fall:
(1) What do we mean by the “fall of the Roman empire”? In fact, the Roman empire split into two by the fourth century AD, with one emperor in the West and one in the East. The expression the “fall of the Roman empire” actually refers to the collapse of the western Roman empire: the Eastern Roman empire (or the “Byzantine” empire) continued, with its fortunes waxing and waning, until 1453 AD. The “fall of the Roman empire” describes the loss of territory the Western empire experienced from about 400 AD onwards.

(2) While the Roman empire was hit by severe monetary inflation from the late third century to the early fourth century AD, the economic crisis largely abated by the mid-fourth century (Whittaker 1980). The Eastern Roman empire had been hit by the same inflationary crisis, but it never fell. Moreover, while the inflation had bad social effects, the full effects are not clear to us. The majority of the population of the Roman empire were peasants, but they were largely self-sufficient:
“modern scholars seem agreed that inflation only hurt a small section of the population; maybe ‘craftmen’, or possibly only ‘the small creditor class and urban professional (a teacher for instance)’, but neither the peasant nor the magnate suffered. Whatever stratum of society suffered, it did not do so across the whole empire. The Roman empire was never a unified economy; each province followed its own trajectory” (Sidebottom 1998: 2800–2801).
Since the vast majority of the population was rural and engaged in farming (the most important productive activity in the empire), the inflationary crisis of the late empire probably had no great effect on them.

(3) The Western empire persisted for nearly 50 years after the end of the inflation before it began to gradually lose its territory, and as late as 357 the Roman Caesar Julian the Apostate (emperor from 355 to 363) was able to inflict a crushing defeat on the Germans (the Alamanni and Franks) at the Battle of Argentoratum, when they were attempting to invade the empire. The devastating defeat the Romans later experienced at the battle of Adrianople (378 AD) when the eastern Roman Emperor Valens fought a Gothic army was clearly caused by strategic and tactical errors, and not because of the empire’s fiscal problems or inability to field an army.

(4) The West lost most of its empire owing to barbarian invasions from 400–450, and there is an obvious explanation for this: military and strategic errors by generals and emperors. The Western empire ended in 476 AD because of a simple internal rebellion when the last Roman emperor (Romulus Augustulus) was deposed by Odoacer, the barbarian leader of mercenaries in Italy who had been proclaimed king of Italy.

(5) The economic problems that the Roman empire faced after the third century AD were of course real, but not the result of the simple morality tale about inflation spun by apologists for free market economics:
“According to the monetarist view, what buried Rome was inflation stemming from government spending and adulteration of the coinage, coupled with what Mikhail Rostovtzoff deemed to be over-taxation of the middle class. But what actually led to fiscal and monetary breakdown in the every major society from Babylonia through the Roman and Byzantine empires to more modern times was the ability of large property owners to break free of taxes. The Roman treasury was bankrupted by wealthy landowners using their control of the senate to shift the fiscal burden onto classes below them. Lacking the means to pay, these classes were driven below the break-even point. As debt deflation drained the economy of money, barter arrangements ensued. Trade collapsed and the economy shrunk into local self-sufficient manor units” (Hudson 2003: 53).
In other words, it was the super rich and propertied classes who evaded taxation and forced a highly regressive tax system on the middle classes and poor. The economic problems can be related to the structure and unfair burden of taxation, not taxation per se.

(6) The effects of deflation and debt deflation are ignored by Austrian economists and others. The Roman Republic (which existed before the empire) in fact faced excessive debt and deflationary periods in the first century BC, especially in the 90s and 80s BC, which caused serious social and economic problems (for deflation in the Republic, see Barlow 1980; Nicolet 1971; cf. Verboven 1997). Thus it was not just inflation that had undesirable effects, but also deflation.

14. More austrian myths, free banking and gold standard was a good combo:

The issue I want to raise here is this: what is the empirical evidence about systems that approximate the free banking ideal? I use the word “approximate” because obviously there is no real world example of a system that is a perfect example of the free bankers’ utopia. There are some approximations, and Australia in the late 19th century is one of them.

Although Australian banking supervision was originally done by the British Treasury, from 1846 all the Australian colonies (except Western Australia) received banking autonomy, and then from 1862 the British Treasury no longer exercised this responsibility, which passed to each colonial government. These colonial governments (or state governments as they are called in Australia) did very little to regulate banks. Under the Colonial Bank Regulations of 1840, Australian banks already had limited liability. But, unless one wants to argue that limited liability is anti-market, this was no anti-market measure.

And even the basic earlier regulations were not even followed to any great degree: the restriction on banks with regard to advances on real estate was circumvented by the 1850s by legal tricks, and in Victoria the regulation was abolished in 1888 (Hickson and Turner 2002: 154).

By the 1860s, the Australian banking system had these characteristics:
(1) a gold standard (usually dated from 1852 [Bordo 1999: 327] with a branch of the British mint established in Sydney in 1855);
(2) no central bank;
(3) no capital controls;
(4) few legal barriers to entry;
(5) no branching restrictions;
(6) no credible restrictions on assets, liabilities or bank capital;
(7) no legally established price controls;
(8) no government-provided deposit guarantees.
What happened?

One obvious factor that a free banking system will never control is the speculative inflows and outflows of capital that any country experiences: by this factor alone there will always be the possibility of rapid inflation of the commodity money base, which will allow a surge in credit. This happened in Australia’s case: there was a surge of capital inflows in 1881–1885 and a flood in 1886–1890 (Hickson and Turner 2002: 149).

There is a real paradox here: the free bankers, much like the Austrians, make a fetish of free markets. For them only unrestricted capital movements are consistent with economic freedom, but it is this very trait that means that any free banking system will be subject to exogenous factors that cause its capital inflows and outflows to fluctuate. This is the Achilles’s heel, so to speak.

There is no reason in theory why a free banking system overflowing with foreign capital could not experience a credit boom.

Secondly, with no prudential regulation there is nothing to stop banks from
(1) lowering lending standards (leaving the bank with loans that default), and
(2) buying the latest trendy, poor quality assets which will be held on their books, only to collapse in value later.
And why would a free banking system not get caught up in the speculative frenzies when people and banks think they can make money quickly on rising asset prices?

This is precisely what happened in the case of Australia: banks started directing credit to property speculators and to those purchasing what were called “pastoral securities” (Hickson and Turner 2002: 159). A new class of companies appeared that specialised in property and stock market speculation, as well as building societies and land development companies, and they obtained credit from the banks for this purpose (Hickson and Turner 2002: 159).

The speculative boom in the prices of real estate and stocks of land, land finance and mining companies reached its apogee in 1888, but terminated in October of that year (Hickson and Turner 2002: 148).

From 1891 to March 1892, 41 deposit-taking building or land finance companies failed in Melbourne and Sydney (Hickson and Turner 2002: 148). The full force of the banking crisis did not hit until after 30 January 1893 when the Federal Bank failed. From April, when the Commercial Bank of Australia was hit by the crisis, there was a major panic, and by 17 May some 11 commercial banks had been suspended, with runs on many others (Hickson and Turner 2002: 149).

There existed an organisation of private banks called “The Associated Banks of Victoria” that supposedly existed partly to co-ordinate the activities of banks. Free bankers think such associations will engage in self-regulation and provide a lender of last resort function in times of panic.

This is not what happened in the Australian case: in January 1893 the Federal Bank failed and it was a member of the Associated Banks association, and then the Commercial Bank of Australia failed without any help forthcoming.

What is ridiculous here are the excuses offered by free market apologists: they contend that the Victorian Treasurer’s attempts to force the Associated Banks to provide assistance to smaller bankers and the bank holiday introduced by the Victorian government in early 1893 exacerbated the crisis. Yet the full scale panic had already begun in April 1893, before these actions. None of these actions had anything to do with the creation of the asset bubbles in the first place, which had occurred in the previous decade of the 1880s. There had already been a credit boom in the decade before 1893.

From April 1893, there were a number of limited interventions some colonial governments undertook: some banks that suspended were allowed to engage in reconstruction (conversion of deposits into preference shares, changing short-term deposits into long-term fixed deposits and the issuing of new shares to obtain capital).

In Victoria, the state government declared a 5 day bank holiday on Monday, 1 May 1893, which is adduced by some as a move that made matters worse. However, what is not said is that history ran an experiment for us in 1893: the Victorian government did very little to stop the crisis in the way of interventions to save the financial system in addition to its bank holiday. In contrast, the New South Wales government took quite different action.

In New South Wales, the government made the bank notes of the major banks – the Bank of Australasia, Bank of New South Wales, City Bank of Sydney and Union Bank – legal tender, and announced that it was willing to act as a lender of last resort (on 21 April 1893). This restored confidence to the financial sector in New South Wales to such an extent that the crisis ended in a couple of days here (Hickson and Turner 2002: 165).

The government of Victoria failed to intervene in the way the New South Wales government did, and the result was clear: in Victoria there was a deep crisis and in New South Wales the crisis was largely avoided.

Victoria was a large part of the Australian economy, so it was only natural that the financial crisis exacerbated a recession in these years. In fact, the familiar pattern of debt deflationary disaster had already hit the Australian economy in 1890, after the asset bubble collapse and deleveraging of the over-indebted private sector:
“In Australia, GDP fell for four years running, from 1890 through 1893 ... Unemployment rose sharply. Immigration slowed and tentatively reversed direction. Social disorder spread, led by protesting sheep shearers, dock workers, and miners. Post-1893 recovery, if it may be called that, was slow and uneven” (Adalet and Eichengreen 2007: 233).
As always, when we are dealing with 19th century GDP, we can only ever have estimates.

One estimate is that real GDP fell by around 10% in 1892 (Kent 2011), and by 7% in 1893, and deflation occurred from 1891 to 1897. Angus Maddison has made the following estimates:
Year | GDP
1888 | $14,685
1889 | $15,953 | 8.64%
1890 | $15,402 | -3.45%
1891 | $16,586 | 7.69%
1892 | $14,547 | -12.29%
1893 | $13,748 | -5.49%
(Maddison 2006: 452).
On these figures, a moderate recession began in 1890, a recovery occurred in 1891, but this did not last and a real, technical depression (that is, a period of real GNP/GDP contraction of 10% or more) hit Australia in 1892, which continued into 1893.

After 1893, there was uneven growth, with actual recessions in 1895 and 1897, and the economy was mired in what we can call a chronic underemployment disequilibrium, just as many countries were in the 1930s.

15. A logical and empirical truth that libertarians/austrians refuse to admit: Coercion is the Basis of all Market Societies

This is a simple point, but important. All capitalist systems or systems based on markets – or indeed human society of any sort – require law and order and ultimately force and coercion to back up the law and the enforcement of the law. That is why a “pure” laissez faire society or economy in the strict sense is impossible, because it would reduce to a system without law, rules or the enforcement of law. It would be a literal anarchy with no rules. At a minimum, there needs to be respect for the law, property rights and the enforcement of non-fraudulent contracts when one party violates the contract or breaches a contract.

Even Rothbardianism, the most extreme laissez faire system dreamed up by libertarians, has as its foundation a private law code and private justice system, which would still ultimately require coercion and force to enforce and maintain that order. The only difference between a state-based system and a Rothbardian system is that in the latter the coercion and force is done by competing private protection agencies and a private justice system.

Obviously to decide what institutions (such as government) and practices are necessary, defensible and moral in any society in a prescriptive sense requires an ethical theory. At that point, debates about the ultimate basis of how a society enforces its laws and how and what laws it passes collapse into debates about philosophy of ethics.

16. I will quote here the words of Lachmann on the Austrian School:

“For Austrian economists the third quarter of the … [sc. 20th century] was a bad time. To those who lived through them these were years in the wilderness. It is often thought that this eclipse of Austrian fortunes was brought about by the ‘Keynesian revolution’, but in fact this was only one of the misfortunes that befell Austrian economics in the 1930s, a decade of calamity. The promise of an Austrian theory of the trade cycle, which might also serve to explain the severity of the Great Depression, a feature of the early 1930s that provided the background for Hayek’s successful appearance on the London scene, soon proved deceptive. Three giants – Keynes, Knight and Sraffa – turned against the hapless Austrians who, in the middle of that black decade, thus had to do battle on three fronts. Naturally it proved a task beyond their strength.”The Market as an Economic Process (Oxford, 1986), p. ix of his preface.

Lachmann held that the promise of the Austrian business cycle theory was “deceptive.” Also, that Austrians in the 1930s failed to meet the challenge of Keynes, Sraffa and Frank Knight.

Also, Lachmann’s view that there is no tendency to general equilibrium in market systems, he appears to be endorsing the Post Keynesian theory of markup pricing (or what he calls “fixprice” [Lachmann 1986: 132]) in certain markets:
“... in our world the flexprice type prevails in financial asset markets and those for raw materials, industrial and agricultural, while in modern industry, except in secondhand markets, the fixprice type predominates.” (Lachmann 1986: 132).
Lachmann is even willing to say that the concept of “market clearing prices” does not really apply to many markets where fixprices are set for other reasons (p. 134), and finds Austrian economics wanting for its failure to study markup prices or fixprices (Lachmann 1986: 130-131).

17. As an end to my long post, I would like to return to the roots of Austrian economics, to its founder who had to say this about government in his Lectures to Crown Prince Rudolf of Austria, p. 121.

“Government thus has to intervene in economic life for the benefit of all not only to redress grievances, but also to establish enterprises that promote economic efforts but, because of their size, are beyond the means of individuals and even private corporations. These are not paternalistic measures to restrain the citizens’ activities; on the contrary, they furnish the means for promoting such activities; furthermore, they are of some importance for those great ends of the whole state that make it appear civilized and cultured.

Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state.

The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts.” ~Carl Menger, founder of austrian economics.
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