Congress is hard at work on a stimulus bill. Doubtless their efforts will pay off. Does anyone stop to ask what it is about stimulus that stimulates? And what, exactly, does it stimulate? Start by spending a lot of money that the government does not have, borrow the difference, and the central bank prints the difference and buys up the debt. But does that increase the production of useful things? To answer this, we look at an unlikely friend, Keynes and his General Theory.
Article by Robert Blumen from Mises.
The British Austrian school economist William Harold Hutt penned a devastating critique of the new economics, The Keynesian Episode: A Reassessment. In this book, Hutt explained why Keynes’s views were able to gain a foothold in the Britain of 1937. The economy was stuck in an intransigent slump of many years’ duration. The cause of the problem? Many workers were priced out of the labor market by unrealistically high wage demands. A welfare system that enabled them to remain unemployed contributed to the problem. The wages that were too high had been negotiated by labor unions using the threat of strike, and the full awareness that the government would look the other way when unions employed coercive measures. Other workers were forced into underemployment, doing something less remunerative or a job they cared for less.
Say’s law is the observation that each supply of a good to the market constitutes a demand for some noncompeting good. As workers add to supply, they add to demand. In reverse, when workers withdraw their services, they cease their contributions to supply and in so doing withdraw their ability to demand to the same degree. The withdrawal of demand made conditions worse in other industries not constrained by labor union contracts, and made the more marginal workers in those industries unnecessary (or at best able to work only at a lower wage).
The solution—according to Hutt—was that statesmen and economists should have told the public the truth. Naming and shaming the antisocial behavior of the price-fixing labor unions and calling for cuts to the public benefits that encouraged nonparticipation were called for. Visionary leaders could have fought the good fight for free labor markets, participation in labor by all who wished, more production, and lower prices. A rising standard of living would have ensued.
However, bold moves were at the time considered “politically impossible.” The phrase was a way of saying that those who could have spoken out but did not would have sacrificed their political careers, even if they had moved public opinion toward the truth. The message would have required more than a bit of political skill to sell the idea to the public. On the same issue, Hayek wrote that Keynes assumed that “a direct lowering of money wages could be brought about only by a struggle so painful and prolonged that it could not be contemplated.”
No doubt the harsh message—that those on the dole would have been required to lift their sorry backsides off the couch and pull their own weight—would have been unpopular at first. But it would have been in service of the greater good.
Instead, the Keynesian policy of inflation won. Inflation can clear out markets in surplus. Sort of. Not very well. But if the prices of goods that businesses sell were to rise faster than wages, labor would become more affordable to business. This is a bit like a decline in nominal wages while the money supply remains unchanged. If the process worked exactly as intended, real wages would fall and surplus labor would be put back to work. One possible reason that things went as intended in Britain in 1936 is that the wages in the unionized parts of the labor market were set by long-duration agreements between industry and the unions. There were no such restrictions preventing consumer prices from rising or falling, so the inflation would tend to act on consumer prices and wages would lag, at least until the next round of contract negotiations.
And that is what happened the first time. When the labor unions figured it out, and demanded inflation indexing in their contracts, or annual cost-of-living adjustments, it stopped working. Hutt makes a distinction between unanticipated and anticipated inflation. In the latter case, market actors front run inflation by raising their asking prices before the money is created. Deliberate inflation from that time forward produced only what Hutt called “purposeless inflation”—an inflation that created many negative effects but did nothing to bring idle resources back into productive use.
Absent the special conditions present in Britain in 1936, Keynesian economics would not have been even plausible. If wages could keep up with prices, inflation would not bring idle resources back into employment. Today, in the United States, are we in the same situation as Britain in 1936? The US economy does have an excess of unemployed workers, empty storefronts, and idle resources of all kinds. Why not give it a go? A bit of stimulus could not hurt.
Not. So. Fast.
While the first part is true—we have a lot of idle resources—the problem is not a pricing problem. The problem is that businesses have been prohibited from operating. As The Onion explains, “Study Finds Most Restaurants Fail within First Year of It Becoming Illegal to Go to Them.” In a similar vein, the Babylon Bee published “California Ends Exploitation of Workers for Good by Banning All Jobs.” Resources are not priced out of the market. People and businesses are instead banned from producing. This is a problem that pricing cannot solve because the transactions are not allowed. Venues can legally operate only at a reduced capacity at which they are not profitable. We have a “making it illegal to produce things” problem. And stimulus can’t do anything about that even if you are stupid enough to be a Keynesian.
The inflation policy might have worked once, and only once, but even then not well. In Britain in 1937, due to a perfect constellation of factors, inflation had its fifteen minutes. The institutional arrangements of the time prevented wages from not only falling but also rising quickly; there was relatively unregulated markets for goods; and the public was not conditioned to expect inflation and had not prepared for it. The conditions for its success had been exploited. Fooled once, the public got smarter. Unions began to bargain for inflation indexing. Wall Street front runs the Fed. Financial markets now rise in anticipation of central bank asset purchases.
Yet the Keynesian revolution gave us stimulus as a permanent policy option. Stimulus is now untethered from its roots. At one time it was a cynical response to institutional conditions that prevented wages from keeping up with prices. Today, no longer a particular response to the unique conditions in one place and time, stimulus has become a universal solvent to heal all economic ills. Stimulus has become 1) wish for something, 2) print money, 3) profit.
New Conservative Network Seeks Crowdfunding Help
They say we have to go big or go home. We’re trying to go big and bring the patriotic truth the the nation, but we need help.
Readers may or may not realize that over the past year, we’ve been bringing more conservative news and opinion outlets under our wing. Don’t take our expansion as a sign of riches; all of the “acquisitions” have been through sweat and promises of greater things to come for all involved. As a result, we’ve been able to bring together several independent media sites under a unified vision of preventing America from succumbing to the progressive, “woke,” Neo-Marxist ideologies that are spreading like wildfire across America.
The slow and steady reopening of America is revealing there was a lot more economic hardship brought about from the Covd-19 lockdowns than most realize. While we continue to hope advertising dollars on the sites go up, it’s simply not enough to do things the right way. We are currently experiencing a gap between revenue and expenses that cannot be overcome by click-ads and MyPillow promos alone (promo code “NOQ” by the way).
To overcome our revenue gap and keep these sites running, our needs fluctuate between $3000-$7000 per month. In other words, we’re in the red and hemorrhaging.
The best way you can help us grow and continue to bring the truth to the people is by donating. We appreciate everything, whether a dollar or $10,000. Anything brings us closer to a point of stability when we can hire writers, editors, and support staff to make the America First message louder. Our Giving Fuel page makes it easy to donate one-time or monthly. Alternatively, you can donate through PayPal as well.
As the world spirals towards radical progressivism, the need for truthful journalism has never been greater. But in these times, we need as many conservative media voices as possible. Please help keep NOQ Report and the other sites in the network going.
Thank you and God Bless,
JD Rucker
Bitcoin: 32SeW2Ajn86g4dATWtWreABhEkiqxsKUGn
Why One Survival Food Company Shines Above the Rest
Let’s be real. “Prepper Food” or “Survival Food” is generally awful. The vast majority of companies that push their cans, bags, or buckets desperately hope that their customers never try them and stick them in the closet or pantry instead. Why? Because if the first time they try them is after the crap hits the fan, they’ll be too shaken to call and complain about the quality.
It’s true. Most long-term storage food is made with the cheapest possible ingredients with limited taste and even less nutritional value. This is why they tout calories so much. Sure, they provide calories but does anyone really want to go into the apocalypse with food their family can’t stand?
This is what prompted the Llewellyns to launch Heaven’s Harvest. They bought survival food from multiple companies and determined they couldn’t imagine being stuck in an extended emergency with such low-quality food. They quickly discovered that freeze drying food for long-term storage doesn’t have to mean sacrificing flavor, consistency, or nutrition.
Their ingredients are all-American. In fact, they’re locally sourced and all-natural! This allows their products to be the highest quality on the market, so good that their customers often break open a bag in a pinch to eat because they want to, not just because they have to due to an emergency.
At Heaven’s Harvest, their only focus is amazing food. They don’t sell bugout bags, solar chargers, or multitools. They have one mission – feeding Americans in times of crisis.
What they DO offer is the ability for people to thrive in times of greatest need. On top of long-term storage food, they offer seeds to help Americans for the truly long-term. They want them to grow their own food if possible which is why they offer only Heirloom, Non-GMO, Non-Hybrid, Open-Pollinated seeds so their customers can build permanent food security on their own property.
