The Shotgun Blog
Monday, December 22, 2008
Steve Chapman: Inflation will save the economy
Published in reason magazine, Steve Chapman insists that what the U.S. economy needs now is some "modest" inflation:
...Most of our problems stem from the bursting of the housing bubble. That sent home prices plunging, which reduced the value of mortgages and mortgage-backed securities, which caused losses at banks, which forced a cutback in lending, which squelched consumer spending, which brought the economy to a halt. Which started the whole miserable cycle over again.
But if the crisis stems from declining real estate values, why not stop them from declining? A spell of inflation would arrest the slide by pushing up the price of everything. As home prices stabilize, mortgage-backed securities would regain value, banks would get financially stronger, and loan officers would stop hiding in the vault.
Anthony Gregory, over on the Lew Rockwell blog, takes issue with Chapman's analysis. Writes Gregory:
"Here we see the classic Keynesian argument that monetary policy is a balancing game between inflation and recession. But of course, we will have both, just like in the 1970s when the Keynesians were astonished to see that rising prices and rising unemployment are not mutually exclusive."
I happen to agree with Gregory and, in general, the Lew Rockwell crowd when it comes to economic policy.
But what I don't like is the manner in which the Lew Rockwell crowd has decided to deal with reason magazine. In particular, it's a lack of manners (and a bit of dishonesty). For example, the blog post criticizing Chapman is entitled "Reason: Inflation will save the economy, liberty" implying that it is the position of reason magazine, rather than Steven Chapman, that inflation would be a good idea right now. Of course, we can't conclude that from the article. All we can conclude is that reason saw fit to publish the piece in the magazine, possibly just for the sake of conversation and debate.
This is part of a broader trend on the Lew Rockwell blog that I'm not happy with -- a trend of purging reasonoids in particular, and Catoites and "beltway libertarians" (a pejorative expression for the libertarians in Washington D.C.) more generally, from the broader libertarian movement for publishing certain articles, or holding certain opinions, that don't mesh with the preferred libertarian doctrine (PLD).
Apostasy from PLD will not be tolerated, and all deviations from PLD will be chronicled (for example, take a look at this). I tend to think that this is unfair.
Posted by P.M. Jaworski on December 22, 2008 | Permalink
I saw this as well and was going to post it. Its crazy how great of a paradigm shift we have had since October. Last year nobody would be thinking of saying this kind of stuff except the far left.
Posted by: Omar Abu Hatem | 2008-12-22 2:31:13 PM
Published in reason magazine, Steve Chapman insists that what the U.S. economy needs now is some "modest" inflation:
Posted by P.M. Jaworski on December 22, 2008
Deflation is now becoming a major concern. I'll have more to say on this subject later.
Posted by: The Stig | 2008-12-22 2:49:57 PM
"This is part of a broader trend on the Lew Rockwell blog that I'm not happy with -- a trend of purging reasonoids in particular, and Catoites and "beltway libertarians" (a pejorative expression for the libertarians in Washington D.C.) more generally, from the broader libertarian movement for publishing certain articles, or holding certain opinions, that don't mesh with the preferred libertarian doctrine (PLD).
Apostasy from PLD will not be tolerated, and all deviations from PLD will be chronicled (for example, take a look at this). I tend to think that this is unfair."
I agree that it is not fair to paint the one column of Steve Chapman's as belonging to reason, but I still disagree with much of your characterization.
I don't think Gregory or anyone in the LRC sphere is trying to "purge" people from the movement. At the LRC blog, there's plenty of mockery of the practice of "purging" still continued by many Objectivists. What I do think is going on is that some of them are trying to identify those who support non or anti-libertarian positions under the colour of libertarianism.
They do not hold to a one-true doctrine. People in the Mises Institute/LRC sphere disagree on issues including abortion, immigration, and anarchism. Recently there has been plenty of debate about limited-liability and other issues; though there has been vigorous disagreement (and perhaps even some unfair barbs) none of them have written Roderick Long out of the libertarian movement for disagreeing with Kinsella and Block on this issue. As another example, a few years ago, most people in that sphere took the same position on intellectual property as Murray Rothbard, but since Stephan Kinsella's work on the subject, many have changed their position.
I share the concerns of the LRC crowd about non-libertarian positions being presented as libertarian. I was dismayed to see that individuals associated with the Cato Institute, for example, were split on the issue of liquidity injections during the debate on the Wall Street bailout. I was disgusted whenever I read media reports saying something like "even X from the libertarian Cato Institute thinks the government needs to act". It reminded me of the trumpeting by the government and their propagandists of Hank Reardon's voluntary signing of the Gift Certificate in compliance with Directive 10-289, which killed economic freedom in Atlas Shrugged.
Posted by: Kalim Kassam | 2008-12-22 5:21:57 PM
"Steve Chapman: Inflation will save the economy"
That, and 7.90 (+tax), will get you a cup of coffee almost anywhere.
Posted by: JC | 2008-12-22 6:00:54 PM
I am a much happier libertarian now that I have stopped reading some of the more paranoid lewrockwell commentators. There are some nicer but still solid commentators there(like Block or Higgs), but I can get my Higgs from http://www.independent.org/ and luckily, Walter is in Vancouver and easy to talk with. I'd rather be picking fights with real enemies than having to worry about some of the weird cultural connotations that come with Rockwell.
I've also had what I consider to be weird run ins with a couple of the rockwellians who seemed to want to spout sayings from their god rather than argue the particular merits on an issue. The worst was a note I received from Lew Rockwell himself who dismissed a Corcoran column from the Financial Post, not because of what Corcoran said (which I thought was more libertarian than Ron Paul on that particular topic) but just because the Post was started by Conrad Black.
It really is too bad that that institute deningrates the Mises name by its very existence....
Posted by: Paul Geddes | 2008-12-22 8:55:15 PM
I agree with Kalim.
There are legitimate political questions, and there are clear cases of aggression. When a libertarian supports Federal intervention in the economy or Federal occupation of a non-threatening state (Iraq), s/he is abandoning justice for the unwilling participants in that plan. These are clear cases of aggression, and that is why LRC highlights and takes issue with them.
I'm glad Koch-supported outlets exist (Reason, Cato, IHS) but there are some peculiarities in his and their positions. For example, I have read that Koch Industries is a big polluter. That is a violation of others' rights to life and property. Also, IHS was founded at George Mason University – a government school. I may never understand why Koch didn't choose to endow any of the myriad private colleges/universities across this federation.
His money is his to spend as he likes, and LRC has posted eloquent articles to that effect, but there is a grave risk worth addressing. When people call their aggressive positions 'libertarian,' they pollute the word itself. Not only were 'liberal,' 'freedom', 'rights', and 'republic' stolen from us and warped in meaning, but we are now associated with failed Conservative policies because they hide behind libertarian rhetoric. Bush is sounding a lot like Jefferson when he gives a speech nowadays. He does this because freedom is popular and his agenda is not. That's why they (communitarians of all stripes) colonize our words and not vice versa.
Freedom is a pretty straightforward thing. I think we must be born knowing its basic tenets. After generations of Communism, Eastern Europeans still knew they wanted to be free. I find it hard to believe that Koch's foundations aren't willfully perverting the notion of freedom on certain issues. And I don't fault Lew Rockwell for calling them out.
Posted by: Mike Vine | 2008-12-23 12:41:27 AM
I've thought about it, and I'm still convinced that the LRC crowd is a touch too doctrinaire.
Usually, my anger is directed at people who immediately assume bad intentions, rather than obvious pressures and/or other explanations. Politicians aren't *evil*, they're merely responding to political incentives in the way ordinary people do (which is why we need to shift most of what we do from the political arena to the market arena, but that's a separate issue). And the same is true of libertarians "in good standing" who, say, advocate state intervention during this crisis. Sure, they are advocating for a non-libertarian position, but they are not doing it for some evil reason. Probably they're doing it because they actually believe that it will help. And actually endorsing a policy that you think will actually help people is not evil, that's what makes someone a decent person.
But the Lew Rockwell crowd has, for some inexplicable reason, decided to mimic the rhetoric and manners of the "official" Objectivists at the Ayn Rand Institute (at least, that's a tendency that I'm seeing). Instead of adopting the principle of charity, they are busy eviscerating deviants and trying to, incorrectly and, frankly, ludicrously, diminish the libertarian street cred of reason magazine. And that's unacceptable. They can go ahead and level legitimate criticism, but identifying every author with reason magazine is too much. reason occasionally publishes non-libertarian articles and authors, which is fine. And they'll publish libertarians who have some non-libertarian view about some subject. Which is also fine.
The "Kochtopus" is what? A gentle, descriptive noun? No, it's another example of a pejorative term hurled to "out" a group of libertarians funded by Koch Industries from the inner circle. IHS, Cato, and reason are all amazing and fantastic (so is lewrockwell.com and the Mises Institute). They do far more good than, say, the American Enterprise Institute.
And isn't that bad? Shouldn't we criticize the LRC gang for how harsh, uncharitable, and bizarrely uncouth their criticism is?
Posted by: P.M. Jaworski | 2008-12-23 1:53:05 AM
"Sure, they are advocating for a non-libertarian position, but they are not doing it for some evil reason. Probably they're doing it because they actually believe that it will help."
With all due respect, the point is that it's not their decision to make. What separates a libertarian from any other schmo is that he thinks not about which policy decision is 'best' but rather questions whether he has a right to make decisions for others.
Iraq war aside, this bailout thing is a true litmus test of one's understanding of liberty. I won't renew my Economist subscription because of it. If you believe that the US Federal Government didn't cause this bastard and you believe only the US Federal Government can fix it, then you obviously haven't studied liberty and history extensively enough.
Fuck the bailout and the inflationary surge. If the gubment wanted to help, they would bring back Free Banking. Anything short of that is morally reprehensible and economically ludicrous.
Posted by: Mike Vine | 2008-12-23 4:27:34 AM
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