Economics & Finance

The Coming Debt Repudiation

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In-Cog-Nito sent me a pair of links, to an article entitled Why Default on U.S. Treasuries is Likely, and a shorter summary of the article. Troubling reading indeed, but still, RTWT.

It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government’s money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.

Zimbabwe option, anyone? Or the alternative of tax rates exceeding the peak from World War II — forever.

Have a nice day.

Kennedy the Catholic

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A brief, charitable, fair yet accurate assessment of Sen. Kennedy. RTWT.

Many will speak and write of the legacy of Ted Kennedy in the days ahead. For me, as an East Coast “ethnic” grandchild of immigrants, Kennedy’s death symbolizes several cogent moments in Catholic America.
 
It marks the passing of a generation that thought that being Catholic, Democratic, and proNew Deal were synonymous. We now live in an age where many Catholic Americans are very happy to be described as pro-market and are suspicious of New Deallike solutions — as, of course, they are entitled to be in a way that they are not on, for example, life issues. Senator Kennedy had it exactly the wrong way around.

The author, Fr. Robert A. Sirico, of the Acton Institute, is a prolific writer and activist on behalf economic freedom: “The Mission of the Acton Institute is to promote a free and virtuous society characterized by individual liberty and sustained by religious principles.”

UPDATE: Here is an excellent article by Carl Cannon, about Sen. Kennedy, entitled “Mary Jo Kopechne and Chappaquiddick: America’s Selective Memory”. It is fair and fact-based.

In similar fashion, the editors of National Review do justice to the man, and end on a charitable note I will also end on: “May he encounter the divine mercy that both the greatest and the least of us will require at the end.” Amen.

How Most Economists Make Their Reputations

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psychic

From xkcd

Economics is not a predictive science, i.e., economists do not make better predictions than mere chance. Yet most economists build their careers based on selling the idea that they can predict the consequences of different economic decisions under real-world conditions. Just like the character in the cartoon, economists build their reputations by advertising the few times they got lucky and guessed right, while convincing people to ignore their many, many failed predictions.

As one wag said of  Paul Krugman,”He has successfully predicted 9 of the last one recessions.”

He’s far from alone in that.

The only economists whose works stand the test of time are those who explain why economics isn’t a predictive science and that we shouldn’t make decisions based on the belief that it is a predictive science. This is why Adam Smith is still studied 230 years later while all his contemporaries who argued that they did have predictive powers have been forgotten or discredited.

Rose Friedman, “Advocate of Freedom”

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rose-friedman

Jay already had a post up. But I decided a picture, and a link to the University of Chicago obituary were in order.

Her most important contribution was the 1980 book Free to Choose, which she co-wrote with her husband, and the accompanying 10-part PBS series. Both were highly successful— the book topped the best-seller list for five weeks — and had a profound impact on public discussions of freedom. At a time when the nation’s confidence was at an all-time low, Free to Choose helped restore America’s faith in liberty[.]

One reason these times are as bad as they are is that even good people are terribly ignorant about freedom, including economic freedom, and what it means, and how it works, and what it means to lose it. Revisiting the popular work of Milton and Rose Friedman, and introducing other people to it who were not even born when Free to Choose was on television, could do a lot of good.

Eric Holder wants the American people, a nation of cowards, as he calls us, to have a national conversation about race.

I propose instead that the American people have a national conversation about freedom.

Amazingly, the entire Free to Choose TV show, all ten episodes, is available for free, here.

You can get a used paperback copy of the book for a penny (+ postage).

I am going to re-read it before the turn of the year.