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Daily Bell review: on banking, the nature of money, and dubious affiliations

November 9, 2012

Today, we introduce what may become a semi-regular feature here at the Daily Knell: the Daily Bell review, where we comment on the Austro-libertarian propaganda peddled by this well-known “alternative” website.

For our first “Daily Bell review”, we focus on a couple of articles posted in the last week on the Daily Bell, and especially on Detlev Schlichter’s interview and the ensuing comments and discussion that this interview generated.

 

Bank of England Reports Whitewash Central Bank Reality

‘In fact, what the modern system does is create huge flows of fiat money that end up building an entirely artificial system beholden to central bank facilities.’

Actually, 97% of our money supply is created as credit by commercial banks, but that won’t stop the Daily Bell and others from focusing exclusively on “central bank facilities”. In fact, the Daily Bell is rehashing the typical Austro-libertarian cliché: central banks are evil statist institutions creating untold amounts of money, while private banks are simply wonderful financial institutions that would function perfectly in a utopian “free market”, but whose operations are distorted by central banks. Basically, the Daily Bell and their friends forget, or rather do not want to admit, that the banking system is one.

 

Now Central Bankers Directly Boost Occupy Movement

‘A funny thing happened on a way to a “movement.” It was exposed. The alternative media, including The Daily Bell, pointed out the various contradictions, suspicious funding and general nonsensical nature of this manufactured effort. And that has helped sink it, or at least diminish it.’

Similarly, we at the Daily Knell have pointed out the “suspicious funding” and elite connections of most of the Austro-libertarian alternative media, including the Daily Bell. We have also demonstrated that the so-called “Ron Paul revolution” was a manufactured effort for the most part, even though it was branded as a “grassroots movement”.

 

Detlev Schlichter on the Nature of Money and the Evolution of an Inflationary Depression

Schlichter: “The Cobden Centre is an educational charity that promotes honest money, free trade and peace. […]There is no political agenda or political affiliation, which I like.”

No “political agenda”? Are you sure, Mr. Schlichter? Maybe you forgot to mention that the Cobden Centre is part of the Atlas Network, a family of inter-related neoliberal think-tanks that are all ultimately controlled by the Mont Pèlerin Society (see our analysis of the Mont Pèlerin Society). In fact, the Cobden Centre would fit perfectly in the left-hand lower corner of our Libertarian network chart.

Schlichter: “The supply of gold is relatively inelastic, largely outside political control (or anybody else’s control), and gold has a long global tradition as money.”

According to Schlichter, the supply of gold is “largely outside political control or anybody else’s control”.

However, here is what the Daily Bell elves themselves replied to a feedbacker elsewhere:

‘But this is a statement otherwise of absolute lunacy: “Commodity (or quasi-commodity) money has a predetermined supply, that cannot be altered arbitrarily by anyone.” As Rothbard as pointed out, the circulating supply of gold (and silver) – the only supply that counts within the context of monetary utility – can be affected by hoarding and dis-hoarding deponent to value. Others have made the same argument regarding the price sensitivity of mining.’

So who is right, Schlichter or the Bell elves? This is a crucial issue, as one of the purported advantages of commodity money, according to some Austrians, is that its supply cannot be controlled arbitrarily. Austrians can’t have it both ways and suggest that gold is outside political control when it suits them, and then elsewhere claim that this is a statement “of absolute lunacy”.

It is also important to ask ourselves if it is better to have the money supply controlled by gold miners and entities hoarding large quantities of gold (including elite familial dynasties and, in spite of the Bell’s claims, central bank vaults) rather than, wait for it… central banks controlled by the same elite familial dynasties? Granted, it may not be a pure monopoly in the first case, but it would not take long for the Money Power to have a complete corner on gold. Does this sound like a true alternative or more like another phony elite dialectic?

Although the Bell recognizes that Rothschild, Rockefeller, and their allies control the central banks, it disputes the claim that the Rothschild dynasty controls the world’s gold. But the Bell elves, who collaborated with Rothschild associate Lord Rees-Mogg, should know that Rothschild fixed the gold price until 2004 and is likely still in charge behind the scenes.

Schlichter: ‘Injections of new money are always disruptive.

Schlichter (in response to another question): ‘A growing economy that uses an unchanging quantity of a monetary asset (let’s say a fixed supply of gold) as money will probably experience moderate secular deflation, that’s all, and it is no problem.’

This is the typical Austrian position: a fixed money supply is preferable, even with an expanding population and growing economy. What this means is that Austrians are in favor of a currency whose purchasing power is increasing or at best stable, but never decreasing. This is very favorable to rentiers, moneylenders, and those sitting on large amounts of gold, but not for debtors or for the majority of the workers.

In fact, Austrianism is the perfect economic school for lenders: 1) they want a hard, commodity-based currency (which is why they would prefer the “means of exchange” to be an “asset”), 2) they accept and justify usury and reject as “cranks” all theorists and schools that denounce interest, and 3) they don’t mind deflation at all (Schlichter is quite explicit about this) but they hate inflation as if it’s the worst possible thing that could happen to mankind.

Schlichter: ‘This whole excitement about the anthropologist David Graeber and the idea that he dethroned Adam Smith and, one assumes, by extension all of modern monetary theory is not only nonsense, it provides a classic example of how, without proper theory you misinterpret historical facts. I may not be an anthropologist but David Graeber is certainly no economist. […]So even if the state invented money, the benefits of money accrue directly to everybody who uses it – to this day.’

Clearly, Schlichter is quite uncomfortable with the research of David Graeber and other advocates of the “Credit theory of money”. Some readers may find this puzzling: after all, why should a contemporary Austrian economist worry about some historical findings?

There is an interesting subtext here: Austrians rely heavily on their claims that money evolved out of barter, and that commodity-based forms of money were chosen by the “free market”. Now that Graeber and others have debunked this theory and shown that money likely appeared as a statist (gasp!) institution, Austrians are deeply troubled as the historical credibility of their narrative is thrown into question.

As an aside, given that Ludwig von Mises got his degree in law, Schlichter’s dismissal of Graeber’s economic theories on the basis of his training as an anthropologist implies a dubious double standard. More importantly, since Austrian economists reject the empirical reductionist methodology, as well as any attempts to use mathematical models to quantify economic phenomena, an anthropological approach does not seem so difficult to reconcile with praxeology, catallactics, and other concepts developed by the author of Human Action.

The Schlichter interview also generated a vigorous discussion. We will address some interesting comments by the Daily Bell elves:

Daily Bell (in reply to a feedbacker): ‘We are simply applying an Austrian analysis to Ms. Kennedy’s critique. As she and her husband are long-term UN affiliates and deeply green we tend to distrust her anyway. And Austrian economics tells us it is very difficult if not impossible to quantify an economy with exactitude.

Margrit Kennedy’s conclusions regarding interest as a primary wealth transfer mechanism are based on the work of German economist Helmut Creutz, whose book The Money Syndrome is now available in English. Now, Mr. Creutz is also “green”, so that is probably enough for the Bell to “distrust” him. However, we believe that, “green” or not, Creutz’s work should be judged on its own merits. In any case, if affiliations are a sufficient criterion to “distrust” someone, one would be well-advised to “distrust” most of the Austro-libertarian propaganda, as our regular readers surely know (see below).

Daily Bell (in reply to a feedbacker): ‘If you can find ANY active, FORMAL modern endorsement of the power elite of a legitimate Austrian anarcho-capitalist, provide it on these pages and we’ll treat it with the seriousness it deserves.

Oooh, that’s a difficult one… How about the Rockefeller Foundation being Mises’s main sponsor for nineteen years (1926 to 1945)? How about elite member Lord William Rees-Mogg founding the libertarian propaganda behemoth Agora? How about Council on Foreign Relations co-founder Walter Lippmann establishing the neoliberal agenda in 1937 together with Mises, Friedrich von Hayek, and the director of the Bank of International Settlements? Or how about well-connected Jesuit James Sadowsky, the teacher of future “Black Pope” Peter-Hans Kolvenbach and a member of the Mont Pèlerin Society, the grey eminence behind Murray Rothbard and Thomas Woods?

Finally, the discussion included a somewhat surprising analysis of the Gesell-inspired “Wörgl experiment” by blogger (and Austrian sympathizer) bionic mosquito. But given that bionic mosquito has now written two articles on the Wörgl experiment, we will comment on his efforts in a separate article.

 

Conclusion

Schlichter is basically regurgitating the archetypal nonsense of Austrianism. He can be forgiven: he does not believe in “conspiratorial history”, meaning he’s completely in the dark and using economics as a nice mindgame, instead of a tool to understand reality. Hence his blindness to the obvious benefits of deflation to the monied classes. Like many Austro-libertarians, Schlichter and the Daily Bell focus almost exclusively on the public/private dichotomy, with the State being the source of all evil. They essentially ignore class differences and the fact that the aims and goals of the monied classes, comprising the rentiers, moneylenders, and “old money” families, are often in direct opposition to those of the working population.

Let us be clear: Austrianism, with its insistence on commodity money, its justification of usury, its praise of deflation, and its connection to globalist and transnational interests, is the economic theory of choice of the wealthy. No wonder that David Rockefeller considers himself “a follower of Austrian economics”. But by ignoring “conspirational history” or by reducing everything to the public/private dichotomy, Austro-libertarian propagandists try to pull the wool over our eyes and convince us that their ideology is one of “freedom” and “liberty”. It is no coincidence that the Daily Bell is becoming quicker than ever in dismissing competing viewpoints solely on the basis of their affiliations, while trying to sweep under the carpet the obvious elite connections of many, if not most, Austro-libertarian writers.

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19 Comments leave one →
  1. Abu Aardvark permalink
    November 10, 2012 11:12 am

    Mises made two big breakthroughs in his life. One was that the business cycle was sparked by central bank monopoly money printing. In fact, in the US, the Fed has a quasi-monopoly over money thanks in part to “legal tender laws.” It doesn’t matter how much money private sector banks produce – they haven’t been given the franchise to print money.

    [So the fact that interest-bearing loans created out of thin air by private banks constitute the majority of our money supply doesn’t matter? Can you explain on what basis you are making this statement?]

    The problem is the monopoly granted to central banks by government authorities. That’s what ultimately distorts the money supply. Also, it’s been admitted that Ben Bernanke printed up to US$16 trillion in short term loans in 2008-2009 and sent the money around the world. A lot of it was apparently never paid back. You think this sum was only five percent of the world’s money supply in 2009? Ten percent of 1 trillion would be 32 trillion. Now multiply that by ten. That’s how much money you think the private sector printed in 2009? Your figures seem a bit “off.”

    http://www.thomhartmann.com/forum/2011/07/16-trillion-lent-bernanke

    [The 97% is a global figure, not referring specifically to the money supply in 2009. Granted, the number may vary by a few percent, but you can find similar values for different countries, and for earlier decades, on the Internet. If you want to deny that most of the money supply actually corresponds to interest-bearing loans created out of thin air by private banks, you will have to do better than that. Also, we are not denying that central banks distort the money supply, in part because of their role as “backstops”. We simply note that Austro-libertarian outlets, including the Daily Bell, tend to focus exclusively on central banks. Finally, why would gold injections (from mining or dishoarding) be less of a “distortion” to the existing money supply?]

    The second breakthrough was human action. This invalidates central planning by pointing out that no matter what government projects or what laws its passes, people will always act out of their own self-preservation. Human action is a profound observation that economics is not a science and monetary economies therefore cannot be “mathematically perfected.”

    Until you can refute these observations in a meaningful way all the rest of what you claim is just wind. These are profound freedom-oriented observations that are reshaping the world. Rockefeller certainly never publicized them, nor did the rest of the mainstream economic establishment. The mainstream STILL doesn’t acknowledge them. It is strange you don’t acknowledge them; even stranger that you continue to attack them – by ommission or commission.

    [The point is that Austrian economics are part of an elite dialectic and ultimately serve elite interests. Keynes and Marx also had some valuable insights, and the mainstream rarely acknowledges Marx’s insights, but that does not prevent us from seeing the critical flaws in their theories and from identifying them as being part and parcel of a larger elite dialectic. You would probably agree with us regarding Keynes and Marx. The situation is similar with Mises and Austrian economics. It is strange that you are unable to understand that and finally rise above the elite dialectic.

    Finally, we refute the claim that mathematical reasoning cannot be applied to study human behavior (including economics), at least in a probabilistic fashion (i.e., not trying to predict the behavior of a particular individual but predicting general tendencies). There are hundreds, if not thousands, of empirically-based peer-reviewed studies by eminent scientists that contradict this claim.]

    • Tao Jonesing permalink
      November 11, 2012 6:08 pm

      @Abu Aardvark,

      Mises’ “business cycle,” including booms and busts, existed in the U.S. when there was no central bank. So, Mises first “big breakthrough” seems to have been that ignoring inconvenient historical facts and asserting a reality that does not exist are necessary predicates to advocating the rentier propaganda that is the Austrian school of economics.

      And Mises’ observation of “human action” was neither profound nor a breakthrough for anybody other than Mises personally. Plato and Aristotle both recognized that the nature of the individual made it difficult for a state to scale beyond a certain size. Political science (including economics, aka political economy) since Aristotle has been concerned with creating a state that can scale to infinity. The modern corporation is an example of such a state, by the way, and all corporations are centrally planned.

      The only difference between Austrian neoliberalism and communism is who nominally does the central planning, which never goes away.

    • The Daily Knell permalink*
      November 11, 2012 6:43 pm

      The only difference between Austrian neoliberalism and communism is who nominally does the central planning, which never goes away.

      Good point. As Kees van der Pijl noted in Transnational classes and international relations (1998):

      (Hayek’s claim in The Road to Serfdom (1985) that large-scale economies cannot be
      planned at all due to lack of knowledge implies that, even within a single firm or
      state institution, internal exchanges should be of a market type.)

    • Abu Aardvark permalink
      November 12, 2012 12:45 pm

      Memehunter, this is your blog. So, of course you may deal with it as you wish. However, the fact alone that you’re apparently unable/unwilling to let a feedback stand as it is and answer it BELOW the actual post, is particularly telling. This rather unique modus operandi reveals a lot more about you than you’d wish for.

      [Inserting replies directly below your comments makes it easier to follow the discussion. This is made necessary by your style of posting.]

      Now, to your inserted remarks:

      MH: “So the fact that interest-bearing loans created out of thin air by private banks constitute the majority of our money supply doesn’t matter? Can you explain on what basis you are making this statement?”

      AA: Simple. Commercial banks are merely “required” distributors and multipliers of the central banking ponzi scheme. Why “required”? If central banks would simply hand out the money, people would realize the overall fraud much easier. And bring it to a halt.

      [This is simply not true. See Tao Jonesing’s comment and my reply to Turtle. Have you read the Kydland and Prescott paper? Would you like to seriously attempt to “debunk” their conclusions?]

      Free-market capitalism on the other hand means: no central banks, no legal tender laws, no fiat-money monopoly, no lender of last resort, no government/central bank bail-outs of overleveraged commercial banks. It means that a commercial bank, no matter how big, has to file for bankruptcy when it lent too much. It goes out of business instead of getting BIGGER and even more hazardous due to even more central bank money printing.

      MH: “We simply note that Austro-libertarian outlets, including the Daily Bell, tend to focus exclusively on central banks”

      AA: Another lie. Neither Austrians nor the Daily Bell tend to “focus exclusively on central banks”. It’s simply not true. Look, I understand that it’s quite a job to sugarcoat your money-from-nothing-schemes. However, you do a real disservice to your operation by blatantly making things up. Everyone even remotely familiar with “Austro-libertarian outlets, including the Daily Bell” will know that your claims bear no close examination. Those who still don’t may want to follow a simple google search to see – in a matter of minutes – that you make things up as you go:

      commercial+banks+site:thedailybell.com

      [The Daily Bell almost exclusively blames central banks for the current financial situation. The fact that you can find the words “commercial banks” on the Daily Bell doesn’t disprove our point. In fact, clicking on the results of the Google search you suggested tends to prove our point.]

      MH: “The point is that Austrian economics are part of an elite dialectic and ultimately serve elite interests.”

      AA: Ah, yes. That’s probably why for decades not one in a thousand had even heard of Austrian Economics and their tiny group of scholars, who, in many cases, had trouble to put food on the table. Some elite minions, some elite “dialectic”, eh?

      [See our Libertarian network chart and the articles listed under the chart. You might as well watch once more this video: Video: A street conversation between a Ron Paul fan and the Daily Knell]

      MH: “Keynes and Marx also had some valuable insights, and the mainstream rarely acknowledges Marx’s insights, but that does not prevent us from seeing the critical flaws in their theories and from identifying them as being part and parcel of a larger elite dialectic.”

      AA: Keynes’ and Marx’ “valuable insights”? Like what?

      “We will not have any more crashes in our time” (John Maynard Keynes, 1927)

      “The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory.”

      (John Maynard Keynes, foreword to the German edition of his “General Theory”)

      As to Marx and the “mainstream rarely acknowledging” him: The “mainstream” of entire continents “acknowledged” Marx’s “insights” for the most part of the 20th century. In fact, there was no other “stream”. More than 100 million people perished in the process of applying Marx’ “valuable insights”. You may want to reconsider your outlandish stance.

      MH: “You would probably agree with us regarding Keynes and Marx. The situation is similar with Mises and Austrian economics. It is strange that you are unable to understand that and finally rise above the elite dialectic.”

      AA: No, I don’t agree with you. Not one bit. Look, you’ve admitted – on the record – to not having read Austrians at all. [Obviously, this is not true anymore, as evidenced by this blog. By the way, how much of Gesell, Lietaer, Soddy, Kennedy, or Creutz have you read? More to the point, can you “debunk” the main points that we have presented on the Daily Knell? This is the important question for truthseekers, not how many pages of Mises one can cite from memory.]

      And yet you devote entire blogs to supposedly write about them – which, in reality, you don’t. If you bothered to actually read the works of Austrian economists (and/or Marx and Keynes, for that matter) – which you still didn’t, as evidenced by your assertions – you’d probably shy away from making nonsensical claims that do not stand even cursory examination.

      [Can you give an example of a nonsensical claim on the Daily Knell? Can you actually debunk anything we have shown about the Daily Bell or about Austrianism or Libertarianism? Speaking of nonsensical claims, what about your claim that commercial banks are only “distributors”?]

      For our regular readers: It is important to understand that Abu Aardvark is almost certainly a Daily Bell agent, paid or not. The three authors of this blog (Memehunter, Anthony Migchels, and Faux Capitalist) are unanimous on that point, and we have several months of experience with Abu’s comments. He quickly comments on any blog or website that mentions anything critical of the Daily Bell, and immediately spots and attacks commentators on the Daily Bell who disagree with the Austro-libertarian doctrine, or with anything the Daily Bell wrote.

  2. turtle permalink
    November 11, 2012 4:07 am

    I question the ability of commercial banks to create money in the same way central banks are able. My understanding (which may be outdated) is that every dollar that a bank loans out on credit comes from one of the following:

    1. Initial capital base (long term debt or equity holders) … limited potential

    2. Current and term deposits of the bank’s “saver” customers. This is for the vast majority of loans and is where the fractional reserve system and money multiplier come into effect as loaned money, once it has been spent, comes back into the banking system as new deposits to be loaned out again with a small fraction (5-10%) being put aside as a cash reserve to meet the needs of any withdrawals by depositors.

    3. Short term money markets. Where banks can borrow from and lend funds to each other so that point 2 above operates on a system wide basis rather than just on an individual bank basis. The central banks also operate in these wholesale money markets as the “lender of last resort” but also as a short term savings institution for any banks holding excess reserves which are not on lent to other banks for whatever reason.

    It is this last point which requires central banks to either withdraw or inject base money into the system to affect liquidity levels and enables them to control the short term official cash rate. When keeping liquidity high (and interest rates low) which is the current situation, these central banks are required to create NEW base money (either printing or digitally) as is evidenced by the increasing size of their balance sheets.

    In summary then, commercial banks’ ability to create money is limited by the existing money base and the level of reserves they are required to hold, but it is only the central banks who can create the new base money.

    I admit there may be a problem when there is no required reserve so the rate is effectively 0%. Under the Basel Capital Accord the focus has moved away from liability management (having adequate reserves to meet withdrawal of deposits) to asset management which requires having “adequate capital” to cover potential losses on risky assets such as loan portfolios.

    • The Daily Knell permalink*
      November 11, 2012 6:19 am

      Thanks for your comment, Turtle.

      Regarding point 2 (and also addressing your summary), several economists (including two Nobel-Prize winning neoclassical economists) have shown that “credit money” is created before “government money” (I am using their terms here).

      Here is a passage from Steve Keen’s blog:

      http://www.debtdeflation.com/blogs/2009/09/19/it%E2%80%99s-hard-being-a-bear-part-five-rescued/

      [T]he model of money creation that Obama’s economic advisers have sold him was shown to be empirically false over three decades ago.

      The first economist to establish this was the American Post Keynesian economist Basil Moore, but similar results were found by two of the staunchest neoclassical economists, Nobel Prize winners Kydland and Prescott in a 1990 paper Real Facts and a Monetary Myth.

      Looking at the timing of economic variables, they found that credit money was created about 4 periods before government money. However, the “money multiplier” model argues that government money is created first to bolster bank reserves, and then credit money is created afterwards by the process of banks lending out their increased reserves.

      Kydland and Prescott observed at the end of their paper that:

      “Introducing money and credit into growth theory in a way that accounts for the cyclical behavior of monetary as well as real aggregates is an important open problem in economics.”

      Here is a quote from the description of “Where does money come from?” :

      http://www.neweconomics.org/publications/where-does-money-come-from

      We find that the most accurate description is that banks create new money whenever they extend credit, buy existing assets or make payments on their own account, which mostly involves expanding their assets, and that their ability to do this is only very weakly linked to the amount of reserves they hold at the central bank. At the time of the financial crisis, for example, banks held just £1.25 in reserves for every £100 issued as credit. Banks operate within an electronic clearing system that nets out multilateral payments at the end of each day, requiring them to hold only a tiny proportion of central bank money to meet their payment requirements.

      The power of commercial banks to create new money has many important implications for economic prosperity and financial stability. We highlight four that are relevant to the reforms of the banking system under discussion at the time of writing:

      1. Although useful in other ways, capital adequacy requirements have not and do not constrain money creation, and therefore do not necessarily serve to restrict the expansion of banks’ balance sheets in aggregate. In other words, they are mainly ineffective in preventing credit booms and their associated asset price bubbles.
      2. Credit is rationed by banks, and the primary determinant of how much they lend is not interest rates, but confidence that the loan will be repaid and confidence in the liquidity and solvency of other banks and the system as a whole.
      3. Banks decide where to allocate credit in the economy. The incentives that they face often lead them to favour lending against collateral, or assets, rather than lending for investment in production. As a result, new money is often more likely to be channelled into property and financial speculation than to small businesses and manufacturing, with profound economic consequences for society.
      4. Fiscal policy does not in itself result in an expansion of the money supply. Indeed, the government has in practice no direct involvement in the money creation and allocation process. This is little known, but has an important impact on the effectiveness of fiscal policy and the role of the government in the economy.

      Washington’s blog also offers a nice recap:

      http://www.washingtonsblog.com/2010/03/7-questions-about-public-banking.html

    • Tao Jonesing permalink
      November 11, 2012 6:36 pm

      @Turtle,

      First, here is a link to the Kydland and Prescott paper referred to in the Keen excerpt:

      http://www.minneapolisfed.org/research/qr/qr1421.pdf

      “I question the ability of commercial banks to create money in the same way central banks are able.”

      The issue is not whether commercial banks create money in the same way as central banks, the issue is whether commercial banks create money. The fact is that commercial banks create money by lending it into existence. The Kydland and Prescott paper show that money is lent first, then reserves are deposited.

      But you don’t have to take my word on it when we have Milton Friedman online to confirm (the relevant discussion is at the very beginning):

      Mises argued that endogenous money is not possible when you have a central bank but admits that endogenous money exists in the absence of one. Mises was a crank, and his assertion that the central bank swamps the commercial banks’ ability to create money was demolished by the Kydland and Prescott paper above.

      Do commercial banks create base money, i.e., M0? No. But they do create M2 money, and the central banks increase the amount of base money to account for that. The commercial bank tail wags the central bank dog, indicating that the commercial banks are really the dog, not the central bank.

  3. November 11, 2012 6:56 pm

    Reblogged this on Recovering Austrians.

  4. Abu Aardvark permalink
    November 12, 2012 10:58 am

    Tao Jonesing wrote:

    “Mises’ “business cycle,” including booms and busts, existed in the U.S. when there was no central bank. So, Mises first “big breakthrough” seems to have been that ignoring inconvenient historical facts and asserting a reality that does not exist are necessary predicates to advocating the rentier propaganda that is the Austrian school of economics.”

    ———————————

    In fact, quite the reverse is true. YOU are the one who is “ignoring inconvenient historical facts and asserting a reality that does not exist”. Please get your facts straight when you want to engage in a serious discussion:

    “The Feds Before the Fed”

    http://mises.org/freemarket_detail.aspx?control=478

    “Financial crisis”

    http://wiki.mises.org/wiki/Financial_crisis

    “The Panic of 1819 – Reactions and Policies” – by Murray Rothbard

    http://mises.org/rothbard/panic1819.pdf

    “Pre-Fed Booms, Busts and Panics – Part 1″

    http://www.southernbread.org/pre-fed-booms-busts-and-panics-part-1/

    “Pre-Fed Booms and Busts – Part 2: The Panic of 1819″

    http://www.southernbread.org/pre-fed-part-2-the-panic-of-1819/

    “Pre-Fed Booms and Busts – Part 3: The Panic of 1837″

    http://www.southernbread.org/pre-fed-booms-and-busts-part-3-the-panic-of-1837/

    “A History of Money and Banking in the United States” – by Murray N. Rothbard

    http://mises.org/books/historyofmoney.pdf

  5. Abu Aardvark permalink
    November 12, 2012 4:37 pm

    Tao Jonesing wrote: “Do commercial banks create base money, i.e., M0? No. But they do create M2 money, and the central banks increase the amount of base money to account for that. The commercial bank tail wags the central bank dog, indicating that the commercial banks are really the dog, not the central bank.”

    ————————-

    OK, now I am enlightened ‘Tao Jonesing.’ I didn’t realize that the US$16 trillion (and counting) issued out by Ben Bernanke in 2008-2009 was nothing more than the tail! I’d hate to see the dog. Do you have figures, btw, for how much say Citicorp, issued out to other banks around the world during this (still ongoing) crisis. Surely Citi must have issued even more to bail out the world if indeed your argument is correct and Mises is just a “crank.” Love the state, hate the Invisible Hand, eh Tao? :-)

    PS: Using Fed issued academic propaganda to counter the idea that central banks are the primary force behind modern, elongated and deeply destructive business cycles is especially inspired, btw. Hats off, Tao!

    • The Daily Knell permalink*
      November 12, 2012 8:04 pm

      PS: Using Fed issued academic propaganda to counter the idea that central banks are the primary force behind modern, elongated and deeply destructive business cycles is especially inspired, btw. Hats off, Tao!

      Can you seriously debunk the conclusions of Kydland and Prescott’s paper?

      For our regular readers: It is important to understand that Abu Aardvark is almost certainly a Daily Bell agent, paid or not. The three authors of this blog (Memehunter, Anthony Migchels, and Faux Capitalist) are unanimous on that point, and we have several months of experience with Abu’s comments. He quickly comments on any blog or website that mentions anything critical of the Daily Bell, and immediately spots and attacks commentators on the Daily Bell who disagree with the Austro-libertarian doctrine, or with anything the Daily Bell wrote.

  6. Abu Aardvark permalink
    November 12, 2012 11:52 pm

    Predictable, Memehunter. It took you all of two posts to start making it personal. I was commenting at DB long before you tried to take over their threads.

    [Memehunter began commenting on the Daily Bell in October 2010, whereas “Abu Aardvark” appeared on the Daily Bell only in July 2011. Once again, Abu is debunked…

    Memehunter was in fact an esteemed commenter at the Daily Bell and enjoyed a cordial relationship with the elves for most of 2011, before he slowly realized over the course of a few months (beginning in November 2011) that the Bell was basically an elite propaganda operation, and played a role that could be equated to gatekeeping or “controlled opposition”. This led him to analyze the role played by Austro-libertarianism in the elite dialectic.

    Finally, we have seen several comments by Abu Aardvark, not only on the Daily Knell, but also on Real Currencies and on Faux Capitalist (not to mention those on the Daily Bell), so our assessment is based on extensive “experience” with Abu’s comments, dating back to mid-2011.]

    They never banned you so far as I know and they usually countered you with facts, even if you stretched their patience a good deal. Now you call me an “agent, paid or not” of the Daily Bell. I am not paid by DB. What I do, I do of my own volition and because I believe in it.

    [Paid or not, all three authors of this blog are unanimous in their assessment that you are almost certainly a Daily Bell agent. Once again, your posts on the Daily Knell, on Real Currencies, and on Faux Capitalist (not to mention those on the Daily Bell) would tend to confirm our assessment.]

    Perhaps you’ll surprise me by debating the issues instead of calling me names. Or does the “cemetary of Libertarian lies” really mean you intend to bury all discussion that is not supportive of your economic arguments. We’ll see …

    [Issues related to Austrian economics have been debated over the course of several detailed articles, both on the Daily Knell and on Real Currencies. Can you debunk any of the main points made on the Daily Knell? Can you dismiss the conclusions of Kydland and Prescott’s paper, which invalidate the Austrian dogma about the role of central banking?]

  7. Abu Aardvark permalink
    November 13, 2012 4:23 pm

    Memehunter, I wrote “I was commenting at DB long before you tried to take over their threads.” According to you, I began commenting in July of 2011. You began to take over threads around Nov. 2011 when you came to a “realization” about DB. This is according to YOUR dates! It is good to read before responding …

    Your analysis of me as an “agent” of the Daily Bell is equally inaccurate. I’ve never received a dime from DB. DB is your fixation. I do what I do because I believe in it. I believe your recently adopted “ideas” are intended to confuse and are trying to lead people back to big government solutions. I don’t know why this is your agenda but it sure seems to be. Obviously you are not confident of your arguments if you have to resort immediately to name calling. I guess we’ll soon see if it is your intention to bury libertarianism or just to bury discussion of it …

    • The Daily Knell permalink*
      November 13, 2012 5:51 pm

      Just out of curiosity, what has defending the Bell’s obviously inaccurate numbers regarding their monthly hits or page views (to give just one example) got to do with the ideas you believe in? Speaking of “fixation”, why the need to comment, generally negatively, on practically every article anywhere on the ‘Net that says something critical about the Daily Bell (and not only on this blog)?

      As explained many times on this blog, realizing that Austro-libertarianism is just another elite meme does not necessarily mean that one is in favor of “big government solutions”. This way of thinking (e.g., “if you are not in favor of Austro-libertarianism, then you are obviously for “big government”) is unfortunately typical of Libertarians who are still stuck in the elite dialectic. Please watch once more Video: A street conversation between a Ron Paul fan and the Daily Knell to try to understand this.

  8. turtle permalink
    November 16, 2012 4:00 am

    Seems things have gotten a little out of hand since my last visit. Interesting debate. I think both central banks and commercial banks together are to blame. I agree the Daily Bell tends to focus its criticism on central banks and I pointed out to them shortly before I stopped visiting (about the same time as MH) that their own sponsors came from private bankers and fund managers. But I would also hope that MH’s criticism of DB and AA’s defense of DB is not construed as a defense of central banks themselves.

    Interestingly the “Our Sponsors” link from the DB homepage is no longer available on their “newlook” website but I did find some guest editors under the “Free Subscription” link. Of course, the bankers and fund managers names have been removed and replaced with academics who would hopefully know more about how to edit and be in much less of a financial position to sponsor. I did learn through the copyright note though that the company is actually based in Liechtenstein and not Switzerland as I had previously mistakenly assumed.

    Thanks for those links. I am still working through them and will hopefully comment on them another time.

    • The Daily Knell permalink*
      November 16, 2012 6:43 am

      Thanks for your visit, Turtle.

      Well, let’s just say that Abu Aardvark sometimes tests our patience (again, this is not only Memehunter speaking). But we still welcome his contributions, when he makes an attempt to write constructive comments.

      No one on this blog (including other commentators such as Tao Jonesing) was defending central banking. Rather, the issue is about the importance of the role of central banks. As Tao said, it would seem that “the commercial bank tail wags the central bank dog, indicating that the commercial banks are really the dog, not the central bank.” This is very different from the usual Austro-libertarian dogma.

      The Daily Bell was based in Switzerland (so this was not a mistake on your part) but they are now based in Liechtenstein as you noted, although it seems that they still have strong connections to Switzerland (Anthony Wile recently announced that he is moving back to Switzerland).

  9. turtle permalink
    November 16, 2012 4:14 am

    Questions to ponder.

    If commercial banks can create money (without needing to source it from somewhere), why don’t they do this and lend it to themselves or to eachother? Why would they need bailouts from a central bank at all.

    I am working on an incredibley boring answer which involves the repeal of Glass/Steagal to “No reserve” banking, the Basel Capital Accord, risk weighted capital & risk adjusted loan portfolios.

    A final point of interest is the IMF solutuion to this revisiting FDRoosevelts “Program for Monetary Reform’ (“Chicago Plan” ) which proposes 100% reserve banking and the return of money creation power directly to governments.

    • The Daily Knell permalink*
      November 16, 2012 6:46 am

      Hi Turtle,

      For a discussion of the “Chicago Plan”, you might want to read the following article on Real Currencies:

      Full Reserve Banking revisited

Trackbacks

  1. Daily Bell review: on Wörgl, Gesell, the Fabian society, and the “alternative” media « The Daily Knell

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