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Wednesday, July 29, 2009

News Alert: Stephen Harper Has a Hidden Agenda

Fresh and original thinking from the Left:

The book lands at the conclusion that Harper has a hidden agenda, said Joseph, adding he lays out the evidence supporting his claim. 

He also said that anybody that considers themselves progressive, whether it be Liberal, NDP or progressive conservative, should be concerned. 

The prime minster’s intent, his political ideology, leads him to believe that many of the social programs, many of the economic policies that have been developed since the Great Depression of the 1930s are wrong," Joseph said.

He goes on to accuse Harper of looking at more so-called neo-conservative policies like those of Ronald Regan or Margaret Thatcher, which helped bring on the economic crisis the world is currently struggling with. 

As a Charter Member of the Canadian Vast-Right Wing Conspiracy, Toronto Chapter, let me express my shock and horror at being discovered. Yes, me and the PM go way back. Oh, how we used to laugh away the nights, with talk of throwing widows and orphans into the cold winter night. That's Social Darwinism, baby! Then we used to slap some waitresses around, because that's what us right wing guys do. I used to sell bumpstickers that said "Scrooge was Right!" My winter coat is made of adorable puppy fur. The Prime Minister has a matching coat I gave him for Christmas. 

Everytime Stephen Harper slashes a social program he laughs manically. I've seen him do it. He signs the Orders in Council with the blood of orphans. He says orphan blood flows more smoothly than that of children who are loved. Laureen Harper is not a real blond, it's a wig. Part of an elaborate disguise to hide her actual Cruella de Vil looks. There is a hidden agenda and you clever folks have figured it all out. 

The typical voter is just too dumb to understand the vast and subtle complexity of our plot. It's rather clever. You see Stephie - as his friends call him - has for the last three years tried to lull Canadians to sleep, except you vigilant chaps. Way back in 2004-5 the federal government's expenditures stood at $210.5 billion. Under two years of brilliant neo-con rule the expenditures reached $232.8 billion for 2007-8. By 2009-10 expenditures are projected to reach $258.6 billion. Hold on, you say, those are substantial increases? Exactly! By increasing government spending the Conservatives have convinced Canadians they are nice and friendly quasi-socialists. But just wait for that majority government! They'll start cutting like there is no tomorrow, and for you Left-wing chaps that's about right.

Posted by Richard Anderson on July 29, 2009 | Permalink

Comments

Here is the basic Problem I still do have with too many of the elected politicians, besides the fact they tend to lie like the so many of rest of us, commit tax evasions, steal as well, the main problem is that they do not tend to do the job they were hired for, rather they take their offices and positions, resources and use it for something else, like instead of looking after all of the citizens good welfare they are working hard instead trying to build up the Conservative political party instead... undeniably using their constituent office now falsely for that as well. And don't any lie to me and say that our PM Stephen Harper is different now as well. Now if I hired gardener to cut the grass and he cut the neighbor's grass instead I would have rightfully fired him immediately and that is now what we should do with any of the politicians who abuse our resources, clearly do fail to do their jobs.

Until something changes, the road to majority is blocked

Posted by: ex CONSERVATIVE | 2009-07-29 8:24:32 AM


"The prime minster’s intent, his political ideology, leads him to believe that many of the social programs, many of the economic policies that have been developed since the Great Depression of the 1930s are wrong."

What? Decentralizing unemployment insurance, doing away with the ponzi scheme known as "social security", debunking Keynesianism? Eeeeevil ...

Then again, deregulation can only be accomplished once we dismantle the laws that have cartelized our economy. Or else we simply will end up with deregulated cartels.

Posted by: Charles | 2009-07-29 8:37:53 AM


Every politician, especially activist ones (and let's face it; most activist politicians are "progressive"), has a hidden agenda. But apparently it's only bad if you're a Tory. Conservatives have always had to do it cleaner and better to achieve the same level of respect in this country; like Americans, they are held to a higher standard.

Posted by: Shane Matthews | 2009-07-29 8:52:33 AM


Charles, cartels are a feature of lawless lands, not those with stable and uncorrupt enforcement. Plutocracy = kleptocracy = failed state run by warlords, drug lords, crime lords, all manner of lords. And lords are, by definition, not accountable.

Posted by: Shane Matthews | 2009-07-29 8:53:51 AM


"As a Charter Member of the Canadian Vast-Right Wing Conspiracy"

Hahahaha, you reek of crypto-Trotskyism, Pub, you're not fooling anyone.

"Hold on, you say, those are substantial increases?"

Not when you factor in the massive and unprecedented immigration rates and therefore population increase, and an aging society, and one time payments such as the Residential Schools payment and the Pay Equity payment, and other factors.

Unless you are willing to speak out against the Indian lobby, greedy feminists, and militant public service unions, among other crypto-leftist shibboleths - and neither you nor your fellow bloggers here are willing to pay that price - you are merely a Liberal who wants a tax cut and don't have any standing in criticizing Harper's record, given your implicit support of the left's agenda.

Get that? You give the left and their expensive demands a free pass, therefore you don't get to criticize Harper when he implements their idiocy.

This has been explained countless times on this blog, and it still doesn't seem to be sinking in. You're willfully misrepresenting Harper's record, while claiming to be right wing. His three year record fiscally is a net surplus of around $18.5 billion, better than Chretien or Mulroney or Trudeau, and, I believe, only marginally less average annual surplus than the Martin regime. Yes, the wheels have fallen off in his fourth year, but you and your kind were criticizing him well before that, leading to questions about your motives and sincerity.

Maybe if open immigration supporters/feminist/unionists such as you smartened up about immigration and feminism and public service unions and every other left wing cause under the sun we could get actual spending cuts, but you're not willing to abandon your left wing agenda so why should he, when even so-called rightists demand more expensive socialist spending?

Harper's relatively low increases in spending, ceteris paribus, are more palatable than things would have been under Paul "Kelowna Accord" Martin and Stephane "Green Shift" Dion, and that is an undeniable fact.

Posted by: Hardline Analyst | 2009-07-29 9:04:38 AM


"Hardline Analyst"

You'd be rather more convincing if you didn't keep changing your name every few days. The "crypto-Trotskyism" was amusing.

Posted by: Publius | 2009-07-29 9:19:59 AM


Formlessness is fundamental to The Art Of War, Pub. Thanks for letting the above comment stand, for a change.

Posted by: Hardline Analyst | 2009-07-29 9:26:59 AM


All racist comments will be deleted.

Posted by: Publius | 2009-07-29 9:40:23 AM


"Charles, cartels are a feature of lawless lands, not those with stable and uncorrupt enforcement."

Your statement does not make any sense and you provide no theory or evidence to support it. If you are saying we need government to support negative rights, then I would tend to agree with you. If you are saying that regulation is required to restrain peaceful individuals from conducting their business, then you are mistaken.

Cartels are almost always government created. When governments regulate, or limit supply through licences, they create artificial barriers to entry, i.e. cartels. This results is higher prices and inferior services which are born by consumers. Examples of government created cartels include: health care, banking, our entire money supply, utilities, media, etc.

Take a look at industries with limited government involvement (technology for example) compared to those with high government involvement. Those with limited government involvement tend to have more competition and lower prices. Again, look at the massive price deflation that occurs in most technology industries (with a few exceptions of course).

"Plutocracy = kleptocracy = failed state run by warlords, drug lords, crime lords, all manner of lords. And lords are, by definition, not accountable."

Exactly. Cartels are the result of government.

Posted by: Charles | 2009-07-29 9:40:49 AM


Shane, you seem to think I'm advocating that all laws should be removed. I'm not. I firmly believe we need laws to punish criminals. What I am saying is that regulations that attempt to control industry create cartels. The laws that allow central banks and the FDA to exist, for example, should be repealed. Not the laws that put thieves in jail.

Posted by: Charles | 2009-07-29 9:50:23 AM


"Your statement does not make any sense and you provide no theory or evidence to support it."

Wake up, Charles. The statement is the theory, and it's not mine, although I do agree with it. I suggest you Google "plutocracy."

"Cartels are almost always government created. When governments regulate, or limit supply through licences, they create artificial barriers to entry, i.e. cartels."

Regulation also prevents one or two monolithic entities from gaining a complete monopoly on a given market. Licenses are usually not difficult to obtain, provided you meet minimum qualifications. Licensing is more about keeping track of practitioners than in restricting access to that practice.

"This results is higher prices and inferior services which are born by consumers."

No, what creates high prices and inferior service is a lack of competition. Antitrust legislation is intended to prevent cartels from forming, and as the Microsoft antitrust trials worldwide prove, governments are also prepared to break up existing ones.

"Examples of government created cartels include: health care, banking, our entire money supply, utilities, media, etc."

The fact that you require a license to do something does not make it a cartel. You need a license to fly a plane, drive a car, fish for trout, or buy a gun. Yet practically every adult Canadian does at least one these things.

"Take a look at industries with limited government involvement (technology for example) compared to those with high government involvement. Those with limited government involvement tend to have more competition and lower prices."

Then explain Microsoft.

"Again, look at the massive price deflation that occurs in most technology industries (with a few exceptions of course)."

What sort of price deflation are you talking about? Do you mean depreciation?

"Cartels are the result of government."

No, cartels are the result of a lack of government. Cartels are like unions or trade guilds, a group of producers banding together to manipulate prices through controlling supply. A classic example is the deBeers diamond cartel. And they can do this with or without government help.

Posted by: Shane Matthews | 2009-07-29 10:02:49 AM


"Shane, you seem to think I'm advocating that all laws should be removed."

Not quite true; I believe you support one law: the law outlawing all other law.

"I firmly believe we need laws to punish criminals."

But you have a very limited and simplistic view as to what should constitute a crime. Under your system, there would be almost no criminals, because practically nothing would be illegal.

"What I am saying is that regulations that attempt to control industry create cartels."

And attempts to completely deregulate create chaos. If anything ever worked in this world, it's because one of us took charge. Even the animals have this one figured out, Charles. And what are men but animals who know how to make beer?

"The laws that allow central banks and the FDA to exist, for example, should be repealed."

And if someone dies from substandard drugs or loses their life savings when the next Depression hits: stiff cheddar? No thanks. I don't like your dog-eat-dog world, and I don't expect most of the electorate would, either.

Posted by: Shane Matthews | 2009-07-29 10:07:43 AM


Taking a look at the author of those "fresh and original thoughts", I thought an appropriate caption should read, "Big Labour responsible for 25% of Canadians Deemed Brain-dead".

Posted by: John Chittick | 2009-07-29 10:16:31 AM


If only it were true that Harper had such an agenda, we should be so lucky. However to date the majority of his actions remain left of centre. I would replace him with a Margaret Thatcher in the blink of an eye, were that possible.

Posted by: Alain | 2009-07-29 10:42:34 AM


"Then explain Microsoft."

Microsoft is the exception, not the rule. I knew you'd bring up Microsoft and ignore every other software company and market.

"What sort of price deflation are you talking about? Do you mean depreciation?"

No. Depreciation is a meaningless accounting concept. I'm talking about prices of new technologies. How much do you pay for a new flatscreen or laptop compared to 5 years ago?

"No, what creates high prices and inferior service is a lack of competition."

Do you have reading comprehension issues? I've clearly stated that regulations and licences created artificial barriers to entry, which reduce competition, which end up causing prices to rise.

"No, cartels are the result of a lack of government. Cartels are like unions or trade guilds, a group of producers banding together to manipulate prices through controlling supply."

Explain clearly how this happens. Telling me to look it up is not good enough Shane. Do you even understand what you are saying or are you simply repeating what you've heard? Unions gain their power because the government has created laws that encourage them and violate employers' rights (I can detail every law). In a free market, when groups get together to raise prices, profits become very attractive and hence competitors enter the market and drive prices down. Most cartels exist because laws are passed that raise the cost for potential competitors. The regulations in health care is a classic example. Please take a finance class or read a book. It's called NPV. When the initial cost outlay is too high, it discourages competitors from entering because they won't earn their cost of capital.

"And if someone dies from substandard drugs or loses their life savings when the next Depression hits: stiff cheddar?"

Ah the irony. Vioxx anyone? Phen-fen? Loses their life savings? People lose their life savings paying for the regulations that supposedly protect them from drugs right now. The next depression will hit and will be entirely the central bankers faults, again. I'm afraid you have no idea what austrian economics is. Go read a book and when you get a clue, perhaps we can have a meaningful discussion.

Posted by: Charles | 2009-07-29 12:24:09 PM


"Microsoft is the exception, not the rule. I knew you'd bring up Microsoft and ignore every other software company and market."

Such as?

"I'm talking about prices of new technologies. How much do you pay for a new flatscreen or laptop compared to 5 years ago?"

That is simple supply and demand. At first, when the technology is new, it is scarce, and therefore expensive.

"Do you have reading comprehension issues? I've clearly stated that regulations and licences created artificial barriers to entry, which reduce competition, which end up causing prices to rise."

Do you have a cause-and-effect logic problem? That you state something does not make it so. To be an effective debater, you should emphasize your points and de-emphasize yourself.

"Explain clearly how this happens. Telling me to look it up is not good enough Shane."

Yes, it is, when I tell you where to look.

"Unions gain their power because the government has created laws that encourage them and violate employers' rights (I can detail every law)."

Unions have had power since the Luddites, although much of it was illegitimate. I agree labour law needs to change.

"In a free market, when groups get together to raise prices, profits become very attractive and hence competitors enter the market and drive prices down."

Unless the established groups take either legal or extralegal measures to prevent it.

"Most cartels exist because laws are passed that raise the cost for potential competitors. The regulations in health care is a classic example."

Can you prove this? This is the whole germ of your argument, but you haven't quoted a single law, only made some vague references to whole industries.

"Please take a finance class or read a book. It's called NPV. When the initial cost outlay is too high, it discourages competitors from entering because they won't earn their cost of capital."

You can retire the "I know so much more about finances than you" shtick now, Charles, after getting slaughtered in the "printing money equals hyperinflation" debate. You still haven't responded to my invitation to examine the Brazilian hyperinflation more closely.

NPV, by the way, means "net present value," and is an investment term. I fail to see how it represents a barrier to startups.

"Ah the irony. Vioxx anyone? Phen-fen? Loses their life savings? People lose their life savings paying for the regulations that supposedly protect them from drugs right now. The next depression will hit and will be entirely the central bankers faults, again. I'm afraid you have no idea what austrian economics is."

I see. So because the system is not perfect, that means it is useless? And before encouraging me to read a book and become more educated, perhaps you should learn to capitalize proper nouns like "Austrian." Then you can set to work on why all functioning economies must be based on Austrian economics. Now who's telling who to look things up, hmm?

Posted by: Shane Matthews | 2009-07-29 12:39:25 PM


"All racist comments will be deleted."

Fine, and any anti-teutonic asshattery will be responded to proportionately.

Now if you'll excuse me, I have to go comment on Shane's neo-apartheid thread where a Nisgaa elder is telling me to embrace WHITE PRIDE and some other clown is telling me that I think like a typical white man; hopefully Epsi will show up to tell us we're all pathetic beta males who smell bad, and maybe Watson can interject how conservatives want to bash gays with the fist of God.

I salute the Standard's steadfast, evenhanded commitment to fighting racism and prejudice of all kinds.

Posted by: Hardline Analyst | 2009-07-29 1:47:10 PM


@Shane""Most cartels exist because laws are passed that raise the cost for potential competitors. The regulations in health care is a classic example."

Can you prove this? This is the whole germ of your argument, but you haven't quoted a single law, only made some vague references to whole industries."

Arguing with Dr. Matthews is pointless. The only opinion that is valid in his fantasy world is his.

@Shane""Do you have reading comprehension issues? I've clearly stated that regulations and licences created artificial barriers to entry, which reduce competition, which end up causing prices to rise."

Do you have a cause-and-effect logic problem? That you state something does not make it so. To be an effective debater, you should emphasize your points and de-emphasize yourself."

What does this have do with the argument. Sounds like Dr. Matthews is getting defensive again.

@Shane""Do you have reading comprehension issues? I've clearly stated that regulations and licences created artificial barriers to entry, which reduce competition, which end up causing prices to rise."

Do you have a cause-and-effect logic problem? That you state something does not make it so. To be an effective debater, you should emphasize your points and de-emphasize yourself."

Dr. Matthews has no time to read. He is too busy editing everyone else's spelling and grammar.


Posted by: Doug Gilchrist | 2009-07-29 1:52:12 PM


"Yes, it is, when I tell you where to look."

I already know the theory that leftists trot out to explain how free markets lead to monopolies. Why don't you put out some arguments to explain it yourself and perhaps I can then throw nasty invective around and pretend I'm presenting arguments?

"Unless the established groups take either legal or extralegal measures to prevent it."

And that's what regulations are. It's lobbying. In a state that is completely divorced from the economy, no lobbying would be possible and hence no legal mesures to prevent competition.

"Can you prove this?"

Easily. Take the FDA for example The cost of bringing a drug to market is 1B today in the US. Pharmaceutical companies need to recoup their costs (from all approved and non-approved drugs) so raise prices. The FDA, is a disaster. Presidents change every two years. They change their minds about the makeup of drug trials every time there's a change in leadership, forcing firms to start over from scratch. Furthermore, drugs take much longer to approve than before, but patent lives have not been extended, resulting in more increased prices to recoup costs. Faced with these types of barriers, very few small companies can survive on their own without partnering with big pharma.

"after getting slaughtered in the "printing money equals hyperinflation" debate."

Got slaughtered. What are you blathering about now? When you inflate the money supply at a faster rate than the economy is capable of growing in real terms, then prices go up. The Brazilians increased the money supply at a much faster rate than the economy was able to increase the amount of goods and services it produced and hence prices rose. Gee. And how fast is M3 or MZM rising in the US right now?

"NPV, by the way, means "net present value," and is an investment term. I fail to see how it represents a barrier to startups."

When you raise the costs of entry by legislating, these costs need to be recouperated (discounted to take account of risk and inflation). When costs are raised, NPV's turn negative and businesses decide not to undertake a project. This leads to less competition and hence barriers to entry are higher.

"Now who's telling who to look things up, hmm?"

Wow. You caught a typo. Congrats. Now explain Austrian economics.

Posted by: Charles | 2009-07-29 2:00:43 PM


"What does this have do with the argument. Sounds like Dr. Matthews is getting defensive again."

I'm glad I'm not the only who noticed.

I'm actually very interested in how our financial expert thinks inflation occurs. I'm thinking cost-push. Or perhaps it's the tax cuts.

Posted by: Charles | 2009-07-29 3:33:59 PM


Charles, whatever it is, it can't possibly be government printing more money.

Posted by: Doug Gilchrist | 2009-07-29 5:36:57 PM


"Now if you'll excuse me, I have to go comment on Shane's neo-apartheid thread..."

That is Scott's thread--although you wouldn't know it from his dearth of commentary.

Posted by: Shane Matthews | 2009-07-29 6:46:28 PM


"Arguing with Dr. Matthews is pointless. The only opinion that is valid in his fantasy world is his."

So the cum laude man is reduced to trolling and hectoring? How the mighty have fallen.

"What does this have do with the argument. Sounds like Dr. Matthews is getting defensive again."

Nothing, which was my point.

"Dr. Matthews has no time to read. He is too busy editing everyone else's spelling and grammar."

And lambasting a college man's inability to count. You posted that last quote twice.

Posted by: Shane Matthews | 2009-07-29 6:50:06 PM


"I already know the theory that leftists trot out to explain how free markets lead to monopolies. Why don't you put out some arguments to explain it yourself and perhaps I can then throw nasty invective around and pretend I'm presenting arguments?"

Because my role in this exchange is to defend my arguments, not provide fodder for your cane-cutting machine. If you think you know better than the encyclopedia (Wikipedia, granted, but even so), congrats on the rep you have with yourself.

"And that's what regulations are. It's lobbying. In a state that is completely divorced from the economy, no lobbying would be possible and hence no legal mesures to prevent competition."

No state in history has ever been completely divorced from the economy, and in a global economy like today's, with international relationships on the line, it is simply infeasible.

"Easily. Take the FDA for example The cost of bringing a drug to market is 1B today in the US. Pharmaceutical companies need to recoup their costs (from all approved and non-approved drugs) so raise prices."

The quoted figure is $802 million, not $1 billion, and since that figure was calculated from confidential data, it is impossible to verify. Moreover, well over half of that money is spent on the clinical trials required for FDA approval, and these have been growing in size and complexity, largely to prevent the marathon of class-action suits that can respond when a handful of deaths are linked, however tenuously, to a new drug. America has 5 percent of the world's population and 35 percent of the lawyers. So if you really want to remove some of the barriers to cost-effective medicine, I suggest you reform tort law.

"The Brazilians increased the money supply at a much faster rate than the economy was able to increase the amount of goods and services it produced and hence prices rose."

Why did they increase it?

"When you raise the costs of entry by legislating, these costs need to be recouperated (discounted to take account of risk and inflation). When costs are raised, NPV's turn negative and businesses decide not to undertake a project. This leads to less competition and hence barriers to entry are higher."

And yet the great majority of business in the United States are classified as small business. They are also hiring in greater numbers than the mega-corporations, too. So in spite of all your doom and gloom, business in America seems to be doing quite well, thank you.

"Wow. You caught a typo. Congrats."

No, I caught your hypocrisy. You get all bent out of shape when I provide you with a reference, but somehow figure you can get away with sending me to some unspecified "book."

"Now explain Austrian economics."

You're the one shilling for it. You explain it to us. Right after you tell us why the Brazilians increased the money supply.

Posted by: Shane Matthews | 2009-07-29 7:05:23 PM


"Charles, whatever it is, it can't possibly be government printing more money."

Currency is not the same as money. It was only one form of money. Although "money" is an elastic term, there is general agreement on the following classifications:

M0: Banknotes and coins; in a word, currency. As of 2007, there is just under $1 trillion in US currency.

M1: Funds on the books as available for spending but not represented by currency per-se. Includes demand deposits, money outside the US Treasury, and others. Amounts to about $1.5 trillion.

M2: M1 plus savings deposits, individual money market funds, and time deposits of $100,000 or less. M2 is most often used when calculating the total money supply. Amounts to about $7 trillion.

M3: M2 plus institutional money-market funds, large time deposits, and other large liquid assets. M3 statistics are no published by the US Central Bank, but as of 2007 was estimated at around $10 trillion.

P.S. The currency component of the money supply has been on a geometric climb since about 1960, but the rate of increase actually slackened somewhat during Bush's second term. Nominal, but a definite drop. This climb persisted throughout good and bad economic times for five decades. So it's a little simplistic to lay the blame for the current recession at the supply of currency, when it is now accepted fact that the current economic crisis was caused by excessive deregulation of the credit industry.

Posted by: Shane Matthews | 2009-07-29 7:22:45 PM


@Shane"Currency is not the same as money. It was only one form of money. Although "money" is an elastic term, there is general agreement on the following classifications:"

Everyone who understands economics knows this you nincompoop.

@Shane"P.S. The currency component of the money supply has been on a geometric climb since about 1960, but the rate of increase actually slackened somewhat during Bush's second term. Nominal, but a definite drop. This climb persisted throughout good and bad economic times for five decades. So it's a little simplistic to lay the blame for the current recession at the supply of currency, when it is now accepted fact that the current economic crisis was caused by excessive deregulation of the credit industry."

According to theoretical pysics time is not an absolute but relative. See I can add pointless facts to an argument too.

Posted by: Doug Gilchrist | 2009-07-29 10:03:51 PM


"Right after you tell us why the Brazilians increased the money supply."

This is getting very annoying. Depending on who you read, the answer will vary. Do you think I'm a mind reader? I have absolutely no idea why YOU think they increased the money supply. Please share.

I believe they raised the money supply on the misguided belief that providing extra liquidity will support wages and spur economic activity.

As for the rest of your post, since you keep on shifting the goalposts and refuse to actually deal with what I've said, I've decided further debate is simply not worth it.

Posted by: Charles | 2009-07-30 5:43:53 AM


"Everyone who understands economics knows this you nincompoop."

Well, that must mean that Doug doesn't know economics, then, because he specifically mentioned printed money, which means currency.

"According to theoretical pysics time is not an absolute but relative. See I can add pointless facts to an argument too."

The fact that there has been no sudden, significant change in the amount of currency in circulation and that the economy has surged and ebbed while it continued to increase is not pointless. Here you go again with the world according to Charles. You should retire that act, by the way; it's played out, and you never did it convincingly to start with.

"This is getting very annoying. Depending on who you read, the answer will vary. Do you think I'm a mind reader? I have absolutely no idea why YOU think they increased the money supply. Please share."

They increased the money supply to help finance the massive debts they incurred by building a new capital city, Brasilia. All of which merely proves my original point: Runaway printing of currency is not a cause of hyperinflation. Rather, it is a symptom of hyperinflation already in progress.

"As for the rest of your post, since you keep on shifting the goalposts and refuse to actually deal with what I've said..."

Name one instance where I moved the goalposts or refused to answer what you said. Your non-answer to my point about the increasing supply of currency not being a significant factor in the 2008 recession, on the other hand...

Posted by: Shane Matthews | 2009-07-30 6:08:00 AM


Shane,

I'm going to treat the subject in two posts. Sorry, Publius, for going way off topic, but understanding inflation is extremely important (at least in my opinion).

"They increased the money supply to help finance the massive debts they incurred by building a new capital city, Brasilia."

I'm going to assume that you think that inflation is caused by deficits. Not necessarily. Obviously, governments run deficits because they spend more than they earn. Most do not want to raise taxes to balance the budget, so they try to obtain their financing from the public markets. None of this is necessarily inflationary. If there is enough real savings out there and people are willing to use those savings to buy government debt, then no inflation occurs. This is because individuals have earned a salary from producing real goods and services and have saved.

Unfortunately, this hardly ever occurs. What usually happens is that there are not enough individuals who are willing to use their savings to purchase government debt, so the government resorts to increasing the money supply. Central bankers end up buying the government securities, and creating money out of thin air to do it. It's called open market operations. Banks buy government securities, and central banks, in turn, buy these securities from the banks.

In the end, there is a strong correlation between inflation and deficits, but it is a spurious one. The real causation is the increase of the money supply.

And Shane, if you think that deficits create inflation, you're going to have to explain why. Asserting it is not sufficient.

Posted by: Charles | 2009-07-30 6:56:12 AM


Please Charles, carry on. I very much like your comments and find Shane's responses, er, interesting.....

Brasilia was completed in 1960, hyperinflation peaked in 1990. I also note in passing that the Fed kept its overnight rate very low in 2001-2003. Yes the monetary base keeps expanding, but it does so at different rates of increase.

No mention of the Community Reinvestment Act? Or Fannie Mae and Freddie Mac? All major underlying factors of the crisis, a perfect storm set off by the Fed's policies post 9/11.

Pointing to "excessive" deregulation as the cause of the financial crisis is something I've heard from quite a few statists. It's not by any means a universal opinion.

Posted by: Publius | 2009-07-30 7:19:53 AM


The central bank, through its open market operations, essentially caused the bubbles, and subsequent crash and recession/depression that we are currently experiencing. Here’s why:

First some theory. Interest rates are merely prices. They are influenced by the forces of supply and demand. When savings increases, supply of loans increases, and interest rates fall. This signals to entrepreneurs and business people that people are saving (future consumption), and they undertake long term projects requiring materials, personnel, equipment, etc.

When central banks lower interest rates below the natural rate, these entrepreneurs and businesspeople are fooled into thinking that there is more savings than there really is and overproduce. When it becomes apparent (when rates go up) that those savings do not exist, producers are forced to curtail and reorient their operations (recession/depression). This is what happened in 2008.

When the central bank lowers interest rates by creating money out of thin air, it discourages savings and encourages consumption. It also forces savers to speculate because interest rates are too low. In the investment business, we called it "chasing yield". Of course, Wall Street was only too eager to sell people crap in order to satisfy their need for yield.

Finally, when the central banks create money out of thin air, they buy government bonds and hand money over to the banks. The banks lend out the money. The excess money will drive prices up when the economy can’t increase its output of goods and services fast enough. In this case, you see the effects in the commodities markets. You saw the effect in Eastern Europe and Ireland. You also saw the effects in housing, where the US gov’t (through F&F, CRA, etc.) essentially socialized the housing market and encouraged the excess liquidity to go into that market. The banks were more than willing to make riskless profit in this manner. But eventually, the FED’s money printing brought about generalized inflation and it had to raise rates (as opposed to targeted inflation, bubbles, which it ignores). This spelled the end as the FED sold some of the government debt back to the banks. They in turn called their customers and informed them they needed their money back. Their customers were forced to sell and we had a massive recession.

There are plenty of books that lay it all out Shane. I’d start with “Meltdown” by Tom Woods. It’s the simplest version.

Posted by: Charles | 2009-07-30 8:15:04 AM


Instead of making assumptions and then launching into long dissertations based on those assumptions, Charles, ask a few questions first. You will save yourself many words and some needless embarrassment. You won't get false answers. Despite what many here see as my numberless flaws, I do not lie.

I did not say that deficits, per se, caused Brazil's hyperinflation, but that DEBT caused it. That is an important distinction. It's true that debt results from past deficits, but a crushing debt load can remain after decades of balanced budgets, accruing interest all the while.

If you're saying that governments can create inflation and hyperinflation by indiscriminately increasing the supply of M1, M2, and M3 money, then yes, I agree; I never contested that. What I said was that hyperinflation is not created by the simple act of printing more currency. Currency is economic petty cash. This is a distinction that few people seem able to make, and Doug is apparently no exception.

Posted by: Shane Matthews | 2009-07-30 8:54:05 AM


Publius, for the lowdown on the Brazilian economic crisis from start to finish, and the role Brasilia played, check this link. Very comprehensive.

Posted by: Shane Matthews | 2009-07-30 8:56:03 AM


P.S. And I am not a statist. A statist supports central control and planning of the economy by the state. I support mere regulation by the state; i.e., do what you want, provided you don't break these basic rules. That's a very important distinction.

Seriously, you guys come off as lawless rebels. You're going to have to learn to accept that the market for such beliefs is limited.

Posted by: Shane Matthews | 2009-07-30 9:03:51 AM


"then dealt with the skyrocketing debt by revving up the inflation engine."

This is from your article. Again. Debt does not cause inflation Shane. There are many ways of paying down debt. There's the honest way (i.e. balacing the budget and paying off the debt with real savings), which will not cause inflation. And there's the dishonest way (i.e. expanding the money supply and inflating your way out of it). You keep making these errors of causation. You're not being logical. It's entirely possible to repay your debt without causing inflation (as any financially literate person understands). And btw, stating that inflating the money supply faster than the economy is growing does not cause prices to rise is very embarrassing, but not for me.

You've been arguing that inflating the money supply does not cause inflation. You are wrong. High debt levels may lead to inflation, but that's because our government chooses to pay down its debts the dishonest way.

Posted by: Charles | 2009-07-30 9:20:46 AM


@Shane"Seriously, you guys come off as lawless rebels. You're going to have to learn to accept that the market for such beliefs is limited."

Just prove you have credentials that make you an expert on the market. So what if you have three years of med school. It just shows that you are a failure since you spend your days playing critic of other people's opinion rather than working in the medical field.

@Shane"P.S. And I am not a statist. A statist supports central control and planning of the economy by the state. I support mere regulation by the state; i.e., do what you want, provided you don't break these basic rules. That's a very important distinction.

However you are a socialist and can't keep your nose out of the business of other people.

Posted by: Doug Gilchrist | 2009-07-30 9:20:52 AM


"Brazil’s leaders deferred the political and economic sacrifices necessary to pay down the national debt and in doing so they set the stage for the way successive governments would deal with inflation for the next 30 years."

I just caught this from your article as well. This quote actually completely supports my position. Had they paid down the debt honestly, there would have been no inflation. But they didn't, they increased the money supply and therefore prices went through the roof.

You know how to correlate things. Congrats. But you never bothered to establish causation with a theory. Debt does not cause inflation. Increasing the money supply to repay it does however. Thanks for playing. Perhaps you'll tone down the arrogance next time around.

Posted by: Charles | 2009-07-30 2:46:31 PM


"And btw, stating that inflating the money supply faster than the economy is growing does not cause prices to rise is very embarrassing, but not for me."

Ummm...when exactly did I say that?

"Debt does not cause inflation Shane. There are many ways of paying down debt. There's the honest way (i.e. balacing the budget and paying off the debt with real savings), which will not cause inflation. And there's the dishonest way (i.e. expanding the money supply and inflating your way out of it)."

Brazil had no honest way of paying down its debt, though, did it? Those who borrowed knew that from the outset. The more you owe, the more attractive the short-term solution of inflation becomes. Any way you slice it, the root cause of hyperinflation is too much debt backed by too few assets.

"You've been arguing that inflating the money supply does not cause inflation."

No, I've been arguing that printing more currency does not cause inflation. In fact I think I actually came right out and stated that.

Posted by: Shane Matthews | 2009-07-30 3:01:06 PM


"Just prove you have credentials that make you an expert on the market."

You're posting here as well. Prove that you do. You supposedly have credentials that make you an expert at writing and journalism, and look at you now. Reduced to giving out e-wedgies.

"So what if you have three years of med school. It just shows that you are a failure since you spend your days playing critic of other people's opinion rather than working in the medical field."

Or that I changed specialties because I discovered I had more talent for computers and graphics than I did for medicine.

"However you are a socialist and can't keep your nose out of the business of other people."

Socialists are typically only interested in planning the economy...many of the most socialist countries are also the most socially liberal. Look at Sweden and Belgium and France. If you're looking for an insult, Doug, dig deeper. Better yet, stick to topics you know something about.

Posted by: Shane Matthews | 2009-07-30 3:05:41 PM


All politicians have hidden agendas. If they didn't when they were elected they soon have them after being shown "how it is" in the real world.
The real world of politics being run by International Bankers that is. Our politicians are actually quite irrelevant.

Posted by: The original JC | 2009-07-30 3:25:17 PM


Shane,

The point is that it is possible to repay debt without running inflation. Canada did it in the 1990's and the US did it several times before going off the gold standard. The statement that debt causes hyperinflation is clearly false. It almost always leads to government increasing the money supply. But not always. On the other hand, it is very possible to create hyperinflation without having any debt.

"Runaway printing of currency is not a cause of hyperinflation. Rather, it is a symptom of hyperinflation already in progress."

And this statement here is patently false. The only way to create hyperinflation is to increase the money supply. But hey. Explain to me how hyperinflation can occur before the increase of the money supply. You can't because it simply does not make any sense.

Anyway, I really shouldn't be spending my day off debating with you ...

Posted by: Charles | 2009-07-30 3:29:53 PM


I think what Shane is trying to say is that increases in M0 (physical currency) do not cause inflation. That inflation is cause by increases in the higher Ms? Even if this is so the higher Ms derived from M0. Increases in M0 have a multiplier effective on M1, M2 and M3.

Posted by: Publius | 2009-07-30 4:07:58 PM


Precisely, Publius. Currency is economic petty cash. The government prints as much as people want. Where governments get into trouble is not in printing more currency but in increasing the higher Ms without proper security. Take that too far and people will lose faith in that money, resulting in devaluation, resulting in inflation. The government then prints more currency because people need more currency to buy the things they've always bought because prices go up.

Fascinating stuff, no doubt. And even today only imperfectly understood. If economics was as easy as 1-2-3, countries wouldn't be going bankrupt.

Posted by: Shane Matthews | 2009-07-30 4:53:16 PM


Are you being intentionally dense, Charles? I KNOW there are ways to repay debt besides inflation. A classic method is to transfer that debt to someone else, which is what Canada did in the 1990s by offloading expenses to the provinces, and what Ontario did by downloading expenses to municipalities. I never said there weren't better ways. All I said was that printing more currency does not cause hyperinflation. That's it. That's all. And printing more currency does not appreciably increase the money supply, because currency represents only a small percentage of the total actual money.

Posted by: Shane Matthews | 2009-07-30 4:56:39 PM


Shane,

For the love of ...

"Runaway printing of currency is not a cause of hyperinflation. Rather, it is a symptom of hyperinflation already in progress."

You're either logically challenged or you got caught in a mistake and are now not willing to admit it. At this point, that's the only conclusion I can come to. This is the statement you've been using since the beginning. It's false. Let's recap. Government runs up debt. Gov't increases money supply by creating money out of thin air and handing it to banks. Banks lend money out. Inflation ensues. How in the bloody hell can you then conclude that hyperinflation occurs before the increase in the money supply???

Furthermore, you're statement that debt is the cause of hyperinflation is also logically false. The US repaid their debts many times (before Hoover and FDR) without incurring hyperinflation. It is also theoretically possible to have hyperinflation without any debt (you can just hand currency directly to your citizens or run the old scam of reducing the hard asset content of your currency). The only constant variable to hyperinflation is the increase in the money supply. At this point, all I can suggest to you is to try and think logically about your statements. They are very often full of errors.

Posted by: Charles | 2009-07-31 6:18:04 AM


"You're either logically challenged or you got caught in a mistake and are now not willing to admit it. At this point, that's the only conclusion I can come to...How in the bloody hell can you then conclude that hyperinflation occurs before the increase in the money supply???"

Actually, Charles, the problem is your complete and utter failure to understand the difference between currency and money. You said that anyone who understands basic economics understands the differences between M0, M1, M2, and M3. Since you apparently don't, that must mean you don't understand basic economics. I'll spell it out for you.

1. First, runaway debt.

2. Then government using inflation to increase money supply (M1, M2, M3) to stave off debt.

3. Then prices rise.

4. Then government prints more currency (M0) so people have enough to buy goods at inflated prices.

Clear?

"Furthermore, you're statement that debt is the cause of hyperinflation is also logically false. The US repaid their debts many times (before Hoover and FDR) without incurring hyperinflation. It is also theoretically possible to have hyperinflation without any debt (you can just hand currency directly to your citizens or run the old scam of reducing the hard asset content of your currency)."

Debt is not the cause of hyperinflation; bad management of it is. It is a necessary precondition, however, in most cases, and in fact I can't think of a single case of hyperinflation that didn't have heavy debts, along with the inability or unwillingness to repay them in the proper manner, as proximate causes.

Posted by: Shane Matthews | 2009-07-31 6:35:46 PM



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