'Austrian Economics is Nuts ', says Abdul Turay.
He was a child during the 70's in London when the unions were at war with the government and so there was loads of strikes. Dustbins (trashcans) weren't being emptied, there was power cuts all the time, and even the grave diggers went on strike so bodies weren't getting buried. Abdul Turay came to the conclusion that socialism was rubbish and so became a conservative.
He then says how Milton Friedman was really a Keynesian at heart who believed the government should pump money into the economy when there was a recession and take money out of it when it was overheating. Friedman even believed in helicopter money. Turay says that monetarism was very scientific and full of maths, but Friedman also wanted everything to be privatised.
Abdul Turay then moved to Estonia five years ago as a journalist but he has recently become a politician. He says that because of their experience of communism the Estonians are the most anti-socialist county in Europe and hate any government hand-outs - and even if they were starving they would just grow potatoes in the fields.
But as Estonia has the Euro it can't pump the money supply as Friedman would suggest, but also, Estonians are so individualistic that they would not let the government spend any money on them anyway.
Abdul Turay then mentions the Austrian school of economics which uses no maths, he says, but relies instead in 18th century logic. They did work out how the economy will always crash every 9 to 10 years, but they believe the government should spend nothing during a recession which they say would only make things worse. Let everything crash and then it will pick up again, the Austrians say.
Well, with Estonia unable to print its own money and with the Estonians dead against any state spending, the government had no choice but to implement austerity and so it became an experiment in Austrian economics. But it failed terribly wrecking its economy and so Abdul Turay moved to the left to became a social democrat who now believes in the mixed economy.
Austrian economics is nuts, says Tulsay.
He then shows a slide of Paul Krugman, who he says is a very clever economist who showed with very sophisticated maths how countries can trade together to their mutual benefit, but Estonia had proved him wrong, says Tulsay, and so Krugman lost his temper.
So, the best way to do economics is by trail and error to see what works, says Abdul Tulsay.
“Abdul Turay then mentions the Austrian school of economics which uses no maths, he says, but relies instead in 18th century logic. They did work out how the economy will always crash every 9 to 10 years, but they believe the government should spend nothing during a recession which they say would only make things worse. Let everything crash and then it will pick up again, the Austrians say.”
ReplyDeleteMaybe the Austrians have a point. Rather than bail out the big banks, the US government should have let them fail in 2008. Then millions of people might have gotten some debt relief. Millions might not have been thrown out of their homes.
Speaking of big banks, last Tuesday (6 Nov 2018) Los Angeles voters rejected Proposition B, which would have opened the door for the City of Los Angeles to create a publicly owned bank. It is not clear if the big banks manipulated the vote, or if Los Angeles voters were simply that stupid.
The City of Los Angeles keeps its money in Wall Street banks. Each year the city must pay $170 million in fees for the banks to hold the city’s money. Plus, Wall Street banks purchase the city’s bonds, so in addition to that $170 million per year, Los Angeles pays about $3 billion a year in interest to Wall Street banks. In public works projects, 50% of the budget goes to paying Wall Street banks.
Banking as a public utility is a proven model worldwide. Public banks keep money local and cut costs by eliminating middlemen, shareholders, and high-paid executives. During the 2008-09 Recession, the Bank of North Dakota safeguarded taxpayers’ money and helped finance a statewide economic boom, while Wall Street banks got billions in federal bailouts. The Bank of North Dakota, the only existing publicly-owned bank in the U.S., is more profitable than Goldman Sachs, has a better credit rating than JPMorgan Chase, and was the only state not deep in debt as a result of the 2008 financial crash. The Bank turned a profit for every one of the past 14 years, a claim Wall Street’s giants can’t make.
The people of Los Angeles could have enjoyed all this, but voters turned it down. And they wonder why the sea of homeless people keeps expanding exponentially.
Maybe the Austrians have a point. Rather than bail out the big banks, the US government should have let them fail in 2008. Konrad
ReplyDeleteThe Austrians would make fiat too expensive (i.e. via precious metals) for the entire economy to use and thus condemn us to the eternal use of bank deposits instead.
The Austrians are thus enemies of true reform.
As for public banks, the public's credit should only be used for the good of public, not private, interests.
“During the 2008-09 Recession, the Bank of North Dakota safeguarded taxpayers’ money and helped finance a statewide economic boom, while Wall Street banks got billions in federal bailouts.”
ReplyDeleteThe bank of North Dakota is not a member of the Federal Reserve system so accordingly they wouldn’t have had the problems that the member banks had in 2008/09.
It is more like a credit union ...