Fed Chairman Jerome Powell held a press conference at the annual Jackson Hole economic conference today, and he all but said that a September cut to the federal funds rate is a done deal: “The time has come for policy to adjust. The direction of travel is clear.”

Naturally he threw in the usual propaganda phrases about how the Fed is data driven. He continues: “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Remember, with its official statements, the Fed is always careful to try and give the impression that it is not a political organization and responds only to economic data.

But, for whatever reason, Powell and the Fed have now decided official CPI inflation is low enough for the central bank get away with NEW infusions of easy money, even as stocks, rents, home prices, and food prices are all at record high.

On price inflation, Powell all but declares “mission accomplished”: “With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to two percent inflation while maintaining a strong labor market.”

So, in addition declaring victory over rising prices – even though last month’s official CPI growth was still nearly 3 percent— Powell is again pushing the myth of the “soft landing” even though there is absolutely no reason to believe the Fed can engineer such a thing.

In fact, if anything, the fact that the Fed now plans to start cutting rates is one of the strongest recession signals we can get.

If we look back at the relationship between rate cuts and recessions, we see that in almost every case that recessions begin shortly after the Fed starts a cycle of rate cuts. The fed started cutting the Fed funds rate in 1989. Then we got the recession of the early 90s. In late 2000, the fed started the rate cuts again. We got a recession in 2001. The Fed did it again in late 2007. The recession began in December 2007, followed by a financial crisis several months later. This relationship even holds for the 2020 recession because even without covid there would have been a recession in late 2020. The Fed had begun to ease the target rate in summer 2019.

There was no soft landing in any of these cases, even though it has been routine for the Fed to promise a soft landing at least as early as 2001.

Fed rate cuts don’t cause recessions, of course. The boom-bust cycle is caused by reckless Fed-driven money creation.

But it makes sense that the Fed hits the panic button and starts cutting rates when it does because the Fed is reacting to fears about impending recessions. The same is true this time around. The Fed has no special prediction skills, so it sees what the rest of us see: a weakening economy and a much less rosy employment picture than what was sold to us by the administration over the past year. July’s weak jobs report with rising unemployment, combined with this week’s massive downward revision in 2023-2024 jobs numbers, gives us good reason to figure that the Fed is now trying to prevent a recession by flooding the economy with more easy money.

This is what the Fed has been doing over and over for decades.

Unfortunately, if the Fed steps on the money-creation accelerator now, that’s only going to guarantee that today’s high prices stay high, and all during a period of rising unemployment.

This is especially alarming right now because price growth isn’t nearly as sedate as Powell and the Fed would have you believe.

After all, since 2020, the Case-Shiller home price index is up 48 percent, so good luck affording a house if you’re a first time homebuyer. Food prices are up 26 percent in the official CPI data. And that’s the official data which conveniently ignores how you’ve had to switch from eating steak to eating the cheapest ground meat you can find.

None of this should be surprising given how monetary inflation—that is, growth in the money supply—has risen rapidly in recent years.

Since 2009, the money supply is now up by more than 185 percent. Out of the current money supply of $18.8 trillion, $4.6 trillion—or 24 percent—of that has been created since January 2020.

Since 2009, more than $12 trillion of the current money supply has been created. That is, nearly two-thirds of the total existing money supply have been created just in the past fourteen years.

So why has the Fed concluded now is a great time to abandon what small amount of monetary restraint it has shown in the last 18 months?  The answer is politics. Maybe the fed wants to give a shot in the arm to markets right before an election, or maybe the Fed is caving to pressure to force back down interest rates on the massive federal debt.

In any case, we can be sure the Fed’s decision definitely isn’t based on any sort of sound economic theory, and regular people should probably be prepared for either rising prices or rising unemployment. Or maybe even both.

Watch a video summary of this article.

Originally Posted at https://mises.org/

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“Having to manage a complex home produces a deadweight loss to both society and the individual.” – John Tamny and Jack Ryan (2024)

A man’s home is his castle, says the old adage, but John Tamny and Jack Ryan thumb their nose at the sacred “American Dream” of home ownership in their new book Bringing Adam Smith into the American Home. They are not the first to do so—the great Florence King derided it often and with pleasure—yet, to still do so, makes this book a rare breed. In this telling, one of the holiest of America’s cows is gored by pointing out that the housing emperor has no economic clothes.

“The book isn’t so much a polemic against housing as it’s a call for reason,” the authors announce straight off. They don’t pull any punches, mocking “the emotional and almost patriotic call to own a home” and the “housing jingoism” that fuels it. They do a fine job of pointing out that home ownership, in the long run, trails equity returns and that owning a stock portfolio doesn’t require you to waste time wandering a Home Depot looking for that perfect wood fastener.

Their argument is based upon Adam Smith’s observation that, in the authors’ words, “what limits our movement, restrains our progress,” and therefore they urge the removal of all impediments to mobility—and this leads them to question the very idea of home ownership itself: “ownership of property quite simply makes us less mobile.” Besides the lost opportunity of being able to pull up stakes and go, they ask if the average American buyer bothers to factor into their calculations all the maintenance, labor, opportunity cost, and loss of leisure they will pay, in addition to the mortgage and taxes. And here, in terms of dollars and cents, they are on solid ground.

However, a house is far more than just an investment; it’s the place where we lay our heads and make our memories with family and friends. It is, in other words, priceless. It cannot be measured on a spreadsheet because you can’t put a number on it. The safety, security, and pleasure from putting your family into a home in an area full of other family and friends can easily outweigh all the negatives that home ownership undoubtedly brings, but they are given too little weight in the reckoning here. The authors offer instead a cold, calculated “having to manage a complex home produces a deadweight loss to both society and the individual,” and that just seems a bit harsh.

Most importantly, the authors leave out the answer to the great question raised by this book: what’s so great about “progress”? I harp on it because that is the foundation of their argument, this idea of evermore for everyone. Right off, in the book’s introduction they promise to show “why home ownership may not be the best answer if the goal is progress” (emphasis mine). So why should progress, however defined, be the goal? What are the dangers to a greater mobility that sends families and friends flying apart, abandoning each other to chase the highest paycheck? How is that good for society? What about the enervating effects of wealth on both individuals and societies? Is the road to perdition not paved with the Sears catalogue and Amazon.com? Is this endless pursuit of economic growth a dangerous decline from republican simplicity?

The authors display both fine minds and writing talent; they exhibit economic good sense, offered in portions both large and small. It was a pleasure to swim among “what suffocates market signals blinds us,” “consumption doesn’t boost economic growth; rather, it’s the consequence of it,” and “falling prices…signal economic progress.” The book successfully pushes its ideas on how to make housing cheaper, Americans wealthier, and everyone more mobile, but it takes the foundation of its argument, the religion of “progress,” for granted.

Yes, there’s a cost to one’s mobility, ease, and wealth from owning a home, just as there is a cost to one’s mobility, ease, and wealth from getting married and having children. He who travels alone travels fastest is an old truism, but it can be taken too far. And building upon the authors’ call for reason and restraint when it comes to how much we value housing, my takeaway from this book is that the value which modern man puts upon progress could also use some reason and restraint.

Originally Posted at https://mises.org/

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No American politician running for office wants to talk about taxes—unless, of course, it’s to promise a tax cut. No Misesian views taxes with anything but suspicion, and Mises himself held some principled views on taxes:

Taxes are necessary. But the system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation of the successful capitalists and entrepreneurs.

It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend.

And America’s favorite quotable statesman Benjamin Franklin so aptly said in 1787, “….in this world nothing can be said to be certain, except death and taxes.”

The Diversity of U.S. Taxes

Americans currently pay a wide variety of federal taxes on earned income, investment income, estates, gifts, alcohol, tobacco, and tariffs on numerous imports. Americans also pay state and local taxes on real property, personal property, retail sales, alcohol and tobacco.

No matter who becomes president in January 2025, Americans must be prepared for a great deal of heat—and perhaps some light—on taxes over the next year. At the top of the list will be former president Trump’s 2017 Tax Cut and Jobs Act (TCJA), the provisions of which expire in December 2025. Congress must grapple with calls to extend many of the law’s provisions as the country faces continuing large federal budget deficits. It is unclear how the new 119th Congress may deal with TCJA expiration, and what the U.S. tax code may look like after 2025.

Proposals for Other Kinds of Taxes or Credits

As if existing taxes were not enough, there is no shortage of other proposals, some of which could be considered marginally serious and some of which are outright fantasies unlikely ever to enter the American tax lexicon. Here are a few of these, in no particular order of sensibility versus fantasy:

• Former president Trump, if re-elected this year, has proposed significantly higher import tariffs, including 10% across-the-board tariff on all imports into the U.S. He has alluded to tariffs high enough to replace the revenue generated by the federal income tax, citing William McKinley for his reliance on tariffs at a time when income taxes were unconstitutional. Whether the McKinley era (1897-1901) is comparable to today’s environment of much larger government is another matter.
• The former president has also proposed eliminating tax on tip income, based on his conversation with a restaurant waitress in Las Vegas during his current campaign. While this idea may be a catchy populist campaign strategy, it is unclear what the federal tax revenue impact might be, or how many industries other than restaurants might shift their employee compensation from wages to tips if the latter are untaxed. Perhaps doctors and lawyers will begin to receive some of their income as voluntary tips. Despite these doubts, bills to exempt tip income from taxation were recently introduced in the U.S. House and Senate.
• And his vice presidential running mate Vance suggests higher taxes for childless taxpayers, which is effectively already the case with the Child Tax Credit for those with qualifying children. This credit has been available since 1997, and fifteen states also offer variants of it. Eligibility for the credits has changed over the years, and these credits will almost certainly be under discussion again this year.
• The Fair Tax was first introduced in Congress in 1999, revived again most recently in January 2023 as HR 25, and remains in the House Ways and Means Committee. This legislation would replace the federal individual income tax, corporate income tax, payroll taxes, and the estate and gift tax with a national retail sale tax levied at the point of final sale on all goods and services, including those provided by government itself. The legislation would also abolish the IRS because all tax would be collected by state governments and forwarded to the federal government. The initial sales tax rate would be 30%, taxing $30 on a $100 purchase for a final tax-inclusive price of $130. As the bill proposes, however, the net tax rate is only 23%, calculated as $30 divided by $130. Traditional state sales taxes are applied to the shelf price of a good or service on a tax-exclusive basis, rendering tax rate comparisons deceptive.
• The Flat Tax was first proposed in 1981 by two economists writing on the editorial page of the Wall Street Journal. The original plan would give each family a large exemption, would tax all wage income above that level at a single low rate and exempt investment income from all household-level taxes. Proponents assert that this plan would increase saving and economic growth by raising the after-tax return on saving, although skeptics are doubtful. The concept inspired some U.S. states and foreign governments to adopt flat-tax systems, though it never reached the U.S. Congress for discussion or a vote.
• Wealth taxes appeal to those on the left end of the political spectrum for their presumed ability to extract taxes from Americans with higher levels of income and wealth. Questions arise, however, as to how these taxes might be administered, whether they would in fact raise much tax revenue, and if they may encourage wealthy individuals to leave the U.S. Some countries that have implemented wealth taxes have later repealed them for these reasons.

Looking Ahead on the Tax and Spending Front

Despite the consensus that the U.S. has a spending problem, not a taxing problem, the federal government will continue to search for revenue in the face of continuing federal budget deficits and increasing debt. Interest on the federal debt annually totals about $1 trillion, consuming 39% of individual income taxes paid.

Other tax proposals sit on the horizon. Global warming virtue signalers advocate carbon taxes. Others on the left end of the political spectrum lobby for more progressive taxes in order to fund their favored income and wealth redistribution schemes. Costly new programs such as Universal Basic Income (UBI) and reparations, two novel forms of entitlements, would greatly increase the need for additional tax revenue and/or require significantly larger amounts of federal debt. The same is true of calls from the populist right for increased middle-class benefits such as increased child tax credits and earned income credits.

Though the two major political parties offer very different policy prescriptions in the upcoming presidential election, both appear to result in increased Treasury debt issuance and federal budget deficits, which could exacerbate inflation and threaten bond markets.

Thus, one can predict continuing voter inability to face large continuing federal budget deficits and accumulating debt that now runs at about 100% of GDP; to face insolvency in the Social Security, Medicare, and highway trust funds; and to face the lack of consensus on measures to reduce spending and increase tax revenues.

The obvious question then becomes how tolerant Americans are of additional tax and debt burdens on current and future generations before responding with a change in political and economic trajectory. Such an inflection point has, however, not yet appeared on the horizon.

Originally Posted at https://mises.org/

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Homeschooling has never been an experiment. Parents teaching their children the individual and unique things which they believe they should know has not only been the way of life before the public school experiment, but is the most libertarian way to address the total governmental failure and inefficient model of so-called education.

Public schools have long since been incapable of keeping up with the trajectory of our Information Age, unable to keep students safe from both ideology and violence, and representing an all-around outdated model of an ineptly-run government daycare system. Homeschooling not only represents a fundamental exercise of parental autonomy and responsibility but offers a chance of relief from a failing model.

Though Trump’s “Agenda 47” makes him seem like a champion of homeschoolers, it’s another bait-and-switch, laying the groundwork for total government oversight, and has potential for demanding arcane metrics from the same establishment from which homeschoolers are escaping. One of the upsides to homeschooling, among the many, is that it allows parents to take charge of their children’s education, free from government intervention and bureaucratic red tape. This perspective is rooted in the principles of individual liberty and limited government.

Trump pledged to allow homeschool parents to use 529 education savings accounts to contribute up to $10,000 a year per child, completely tax-free, in order to spend on costs associated with homeschool education. What are the stipulations behind taking this money from the government? Well, of course, he doesn’t say. Am I wrong to be wary? Of course not. It wasn’t long ago that a simple “15 days to slow the spread” turned into the largest government overreach and set of tyrannical orders that the United States has ever seen. No matter how tasty the dangling carrot, it always comes at a price.

Parents, not the state, have the primary responsibility for their children’s education and upbringing. Homeschooling enables parents to make decisions about their children’s education without interference from government agencies or public schools. As soon as the bait has been taken, the switch begins. What will that switch entail? That’s anyone’s guess, but the looming consideration that the requirements of standardized testing, curriculum mandates, and other forms of government oversight are around the corner isn’t too far fetched.

Trump also noted that he will work to ensure that every homeschool family is entitled to benefits available to non-homeschooled students including participating in athletic programs, clubs, after-school activities, educational trips, and more. In most areas, these are already available to homeschoolers, though many happily decline as the enrichment opportunities for those who homeschool are incredibly varied and enriching as is.

Homeschooling offers self-reliance, allowing parents and children to tailor their education individually, rather than being limited to a one-size-fits-all public school system. When offered a one-size-fits-all incentive, one has to wonder if the scope of homeschooling will become narrower.

Is this policy a positive or negative? Trump is largely a media machine, saying the right words, dangling the right carrot, and playing a character who checks the right boxes for a certain sect of his base. However, “Bumpstock Trump” is either fully aware of the way he sets the stage for the intrusion of big government or completely inept regarding the spaces he leaves open, exploiting the vulnerable in the process.

In conclusion, the libertarian perspective sees homeschooling as a fundamental exercise of parental autonomy and responsibility, allowing parents to make choices about their children’s education without government interference. While for many, offering government funds would allow for families who struggle as is to continue to teach their family the way they see fit, the potential for severe consequences looms.

One of the most basic principles of economics comes in handy here: “There is no such thing as a free lunch,” and the downside is, once we take a bite, homeschoolers everywhere could be footing the bill.

Originally Posted at https://mises.org/

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The Libertarian Party was assembled in 1971 and has proven throughout its history to be a resoundingly-unsuccessful third-party venture in American politics. While libertarians are outspoken in their advocacy for individual liberties, limited government, and free markets, their presidential candidates have proven largely unsuccessful throughout history.

Why have they not experienced greater success in the face of confronting what has become two ideological extremes? Further, if a “protest vote” for the libertarian candidate isn’t sitting well with you, which party is more aligned to libertarian policies?

Libertarians face an eternal uphill battle in the face of American politics. As it stands, third party campaigns are almost entirely funded by grass-root donations, which pale in comparison to the millions of dollars that special interest groups and corporate donors pour into Democratic and Republican campaigns.

Mainstream media tends to focus on the two major parties; hence, very little exposure and airtime is given to third party candidates.

Even though libertarianism primarily focuses on individual freedoms of its citizens, most voters have associated the party with the “socially liberal, fiscally conservative” views. This allows for common ground to alienate voters on both sides of the perceived party lines.

No matter the reasoning, it’s undeniable that a Libertarian candidate for president is a pipe dream. As a libertarian who considers the reality we face, which party is most aligned with our shared values?

The Republican leans more towards libertarianism than the Democratic party. Here’s how:

Republicans have traditionally garnered the mantle of limited government spending and limited levels of taxation. The most were during the Reagan era and, therefore, it appealed to libertarians. Though this line is blurred more and more as each day passes, Republicans still hold the torch in this arena.

Free market economics is another plane where traditional Republicans have shown their affinity with libertarians, though this interventionism has been tempered in the cases of healthcare, education, monetary policy, and the military.

In many cases, Republicans oppose excesses of regulation by the government—a general reflection of the libertarian disdain of a creeping bureaucracy.

Caveats apply, though: Republicans are more socially conservative than libertarians, and the agendas inherently clash with each other. Republicans have also frequently supported military intervention and “national security” over the libertarian principle of non-interventionism.

In the end, the winning combination of libertarian candidates is to rise above both structural and ideological obstacles. While the Republican Party is part libertarian when it comes to economic and fiscal issues—having manifested itself in this way—its social conservatism and an interventionist attitude in some aspects create a dichotomous relationship between the two ideologies.

Ultimately, however, libertarians will have to moderate their message and otherwise change stratagems to capture more mainstream voters, or else find places to build coalitions with other, like-minded organizations interested in making their policy preferences a reality.

Originally Posted at https://mises.org/

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Watch the video version of this article on X/Twitter. 

The latest monthly report on taxes and spending from the Treasury Department shows that in July, the federal deficit was $244 billion, or nearly one quarter of a trillion dollars.

In spite of the fact that the US government managed to collect $330 billion in taxes in July, they also managed to spend $574 billion.

Through the end of July this fiscal year, the feds racked up a deficit of a little over 1.5 trillion dollars. Last year, for the same period, the total deficit was a bit over $1.6 trillion.

By the time the current fiscal year ends, however, we can expect this year’s total to be even larger than last year’s. that is, the Congressional Budget Office in June estimated that the total deficit for 2024’s fiscal year will be 1.9 trillion. Last year’s full-year deficit was $1.7 trillion. That 1.9 trillion estimate assumes no big increases in spending over the next two months, and it also assumes that revenues will continue to be stable.

Those are potentially some big ifs. If the employment data continues to worsen, as it has in recent months, that will lead to falling tax revenues. So, we may looking at a full-year total deficit of over two trillion dollars.

But even if it does come in at a “mere” $1.9 trillion, that will be the worst deficit since 2021 when the Federal government was still spending wildly on a variety of covid-related programs.

With all these deficits year after year, we should not be shocked to find out that the total national debt continues to skyrocket.

As of today, the national debt is now at $35.2 trillion. That’s up $12 trillion from the first quarter of 2020, before the Covid Panic. So, during this fiscal year, the federal debt has grown by about $150 billion per month, or roughly a trillion dollars every six months.

And, by the way, lest you think these numbers aren’t that big in inflation-adjusted terms, we need only look at the fact that total debt as a percentage of GDP is now higher than 120 percent. That’s higher than what it was in 1946 at the end of a major global war.

Of course, at the end of that war, the US began big reductions in overall spending. That’s not happening in the United States today. There are no plans whatsoever to cut spending of any kind. The current runaway spending in welfare and various wars looks to continue indefinitely. And, certainly no presidential candidate is talking about any real cuts.

Meanwhile, paying interest on that huge debt is also demanding more and more tax revenue. For example, the US is now on track to spend more than a trillion dollars on interest payments for the 2024 fiscal year. That makes it the largest single category of expenditure outside of social security.

Image Source: The Peter G. Peterson Foundation.

More and more of your tax dollars are going to pay for nothing at all except to pay off old debts for lost wars and failed welfare programs.

It will only get worse. As old Treasurys mature, and as new higher-interest Treasurys come online, interest costs will only go higher. The only trick the feds have up their sleeve is for the central bank to force down interest rates by buying up more federal debt. But where will the central bank get the money to do that? They’ll have to print it. And that will trigger more price inflation.

Unfortunately, there’s no easy way out of this.

Originally Posted at https://mises.org/

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The New Deal has been a key driver behind how the Democratic Party justified its hold on political power in the United States. The precursor to the New Deal was the Great Depression, which, in the minds of many Americans, was triggered by the stock market crash in late 1929.

However, is the Democratic memory of the crash and Depression thereafter accurate? Did those events justify the policies Democrats pursued through the New Deal? One way to explore these questions is to look at how Left-liberal pundits themselves answered them. And one of the key intellectual leaders behind justifying the New Deal, wrote a book that tried to do just that.

John Kenneth Galbraith was a popular intellectual during and after World War II, at a time when Keynesianism had become the ascendant school of economics in the United States. He served as editor of Fortune magazine during the 1940s, became an economics professor at Harvard in 1948, served as Kennedy’s ambassador to India in the early 1960s, and was involved in policymaking for the Democratic party in the late 1960s. Meanwhile, during this period he wrote several books, including The Great Crash 1929 in 1954.

In this book, Galbraith sought to describe the speculative excesses seen in American financial markets in the late 1920s, the resulting stock market crash in October 1929, and the depression that occurred thereafter. Galbraith argued that while it had become increasingly clear to many investors and policymakers that the stock market had become wildly overvalued by the late 1920s, and the federal government had several blunt policy tools in place to puncture the bubble, government actors weren’t incentivized to act before the crash took place.

In January 1929, when the Federal Reserve finally began raising the rediscount rate – the rate at which the Fed lends money to member banks – initially to 5%, that did little to cool down markets. After all, brokers and other investors were lending to stock market speculators at six to twelve percent annual rates. Such loans made sense as long as the stock market kept going higher. The creation and promotion of leveraged investment trusts – companies that bought the stocks of other companies – helped to do just that.

By the fall of 1929, overall economic activity began turning down. By October, the leverage many investors accrued had become true liabilities, as selling began accumulating while investors who bought stocks and investment trusts on margin began receiving margin calls. As the month drew to a close, the panic among investors and the general public became palpable as buyers refused to forcefully enter into a market that was in freefall.

Herbert Hoover was President when the Great Crash occurred. While Galbraith praised Hoover for cutting taxes in a manner Keynes himself would have approved, Galbraith generally portrayed him as conducting “organized reassurance on a really grand scale.” Beyond that, Galbraith saw him as being “clearly averse to any large-scale government action to counter the developing depression.”

While Galbraith felt comfortable explaining how the crash occurred, he was less comfortable explaining why the Depression itself took place, let alone why it lasted as long as it did. While he conceded that by the late 1920s industrial production had outrun consumer demand for finished goods, he explored other possible reasons to explain the Depression. For example, he considered factors such as poor distribution of income, the poor state of economic intelligence, and the dubious state of the foreign balance. Notwithstanding these unresolved explorations, Galbraith expressed confidence that the new government measures and controls the government implemented during the New Deal reduced the impact of a recession on the American public should a similar stock market collapse took place.

While Galbraith couldn’t explain why the Great Depression lasted so long, that didn’t stop him from seeing the increase in government involvement in the American economy as an antidote to prevent future depressions. It doesn’t make sense to praise a solution to a problem when one doesn’t understand how the problem arose in the first place.

In fact, the very policies that Galbraith championed – increased taxation, government spending (including the introduction of Social Security), and government regulation of the economy – contributed to the Depression lasting as long as it did. While Keynesians see these policies as countercyclical tools to manage the business cycle, President Roosevelt implemented them while a depression was still occurring.

In many ways the New Deal was an extension, albeit on a much grander scale, of policies Hoover himself implemented after the Great Crash. Murray Rothbard, in America’s Great Depression, documented how Hoover championed greater government involvement in the American economy. Some of the actions Hoover took included:

• Working with business executives to prevent them from laying off workers and lowering their wages;
• Working with states to increase public works spending;
• Increasing tariffs through the Smoot-Hawley Act; and
• Increasing taxes across the board, including previously removed excise taxes, sales taxes on a wide variety of goods, postal rates, personal income taxes, and corporate income taxes.

Hoover’s interventionist policies prevented market participants from clearing their debts, reducing the prices of goods and labor, and allowing entrepreneurs to offer goods and services to hurting consumers at cheaper prices. They were also contrary to Galbraith’s depiction of Hoover being hesitant to “counter the developing depression.” In fact, Hoover increased taxes; he did not decrease them, as Galbraith wrote. If anything, Hoover’s actions were similar to what Roosevelt did once he was elected.

Galbraith’s explanation as to why the Great Crash occurred is as satisfying as his exploration of Hoover’s record. He rejects the “long accepted explanation” that easy credit caused the crash. In fact, Galbraith argued that money “was tight in the late twenties.” Rather, the speculation that led to the crash requires a mood of “confidence and optimism” that is supported by unsubstantiated faith in the good intentions of others and plentiful savings.

Early in the book, Galbraith confronted the “long accepted doctrine” that the cause of the Great Crash and resulting Depression was a deal in 1927 between key central banks, whereby the Federal Reserve agreed to keep interest rates low to prevent gold leaving England to go to the United States. According to Galbraith, this doctrine stated that the resulting low rates were responsible for the speculation and collapse in 1929.

Galbraith claimed to see why such an explanation would be attractive because “it exonerates both the American people and their economic system from…blame,” and insinuated that Montagu Norman, representing the Bank of England, and Hjalmar Schacht, representing the Reichsbank, “had some special reputation for sinister motives.”

Galbraith’s criticism of those who argue this “doctrine” is fallacious because it questions the motives of those who make it. Even if Americans believed that Norman and Schacht had sinister motives, that doesn’t mean the argument itself is invalid.

Moreover, Galbraith’s belief that low interest rates aren’t enough to lead to a speculative frenzy confuses effects with the causes. Those who believe that the 1927 central bank agreement led to the crash and Depression that began in 1929, including Murray Rothbard and other Austrian economists, focus on how economic business cycles take place, rather than examining possible side effects of such booms like speculative frenzies in the stock market.

Austrian business cycle theory explains why entrepreneurs make the same capital allocation mistakes at the same time. When government policies – such as laws allowing for fractional-reserve and central banking – lead to lower interest rates than the marketplace would otherwise allow, entrepreneurs are incentivized to invest in longer, more capital-intensive projects at the expense of consumption goods. Not only does this lead to monetary price inflation but, at some point, it becomes clear that the income received from these capital goods investments are not sufficient to justify their continuation. Without government interference, such malinvestments are liquidated, poorly deployed workers are laid off, and entrepreneurs deploy capital and labor to provide final consumers goods and services that they need and want at acceptable prices.

Galbraith’s book, which focused on how the crash of October 1929 took place, dealt with a symptom of inflationary policies in the United States and Europe in the 1920s. While he was a champion of the New Deal, he cannot explain how the New Deal policies allegedly helped get the economy out of depression, let alone prevent future depressions from occurring.

If a leading intellectual can’t explain why and how the policies he espouses address the challenges a country has faced in the past, it’s very difficult to take seriously what he and his later adherents may have to say.

Originally Posted at https://mises.org/

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The Bureau of Labor Statistics (BLS) today issued a major downward revision in total employment, telling us what more savvy observers of the federal jobs data already knew. Namely, that the employment situation isn’t nearly as strong as the federal establishment survey says it is.

The establishment survey is the employment survey that looks at total jobs—whether full time or part time—and not at total employed people. 

So, that’s the report that’s being revised here, and it’s the biggest downward revision since 2009 when the economy was in bad shape during the Great Recession. It’s the second largest downward revision on record.

This is for the year ending in March 2024, and specifically, the BLS has reduced the total jobs numbers for the period by 818,000 jobs. For context for this number, we can keep in mind, that since late 2022, total monthly jobs growth numbers ranged from about 150,000 up to about 300,000.

So, by cutting 818,000 off the top, what the BLS is saying is that about four months of job growth as reported in 2023 and early 2024, never actually happened.

That is, through that period, as the media repeatedly told us about “blowout” jobs reports, those were phantom jobs that didn’t exist.

Or put another way, the average monthly jobs increase over the past year was revised downward from 218,000 to 150,000. That’s a decline of more than 31 percent.

Of course, we already knew recent jobs reports—as far as the establishment survey is concerned, was based largely on made up numbers.

For one, a lot of the alleged job growth was based on the fiction of the so-called birth-death model. This is a model used by the number crunchers at the BLS to simply make up estimates for how many jobs are being created at imagined new businesses. These numbers are not based on any actual surveys at all. In some months, that made-up number of new jobs totaled up to hundreds of thousands of jobs. In May 2024, for example, the BLS added 231,000 hypothetical jobs to the total through this model.

So, it’s no shock that on subsequent revisions, it turns out a lot of the job growth in those blowout jobs reports was imaginary.

Some jobs totals were actually revised upward in this report, though. Government jobs, it turns out, were underreported during the period. So the BLs has revised those taxpayer funded jobs up by 1,000 while cutting private sector job growth.

These revisions are only surprising, though, if we never bothered to look beyond the establishment survey. But, for anyone who takes the trouble to look beyond the establishment survey. For months now, it’s been apparent in other jobs data that the employment situation is in trouble. The household survey, for example, tells us more about employed persons than simply total jobs. And what that report has shown us since September of last year is that total growth in employed persons has flatlined. There has NOT been any growth in employed workers in 11 months. Moreover, most of that has been in part-time employment. That is, it stands to reason that workers who do have jobs are increasingly making ends meet by working two or more jobs.

Year over year, full time employment is down, and that usually points to recession.

Temp jobs are down, and that also points to recession.

And, of course, the unemployment rate for July moved upward enough to trigger the Sahm rule, which is a reliable indicator of recession.

So, it turns out the amazingly strong economy of Bidenomics was greatly overstated, and there is likely more bad news on the horizon.

A video verison of this article can be found on Twitter/X”

The bigtime downward revision in jobs isn’t surprising for those who are actually paying attention. pic.twitter.com/7t2BHvBAqJ

— Ryan McMaken (@ryanmcmaken) August 21, 2024

Originally Posted at https://mises.org/

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