California Lieutenant Governor concerned about “job-killing robots”

The beauty about being a liberal politician in a liberal state is one gets countless opportunities to be concerned about the negative consequences of previously-implemented policies.

For example, an inevitable outcome of California’s minimum wage law, under which the wage will rise to $15 and hour by 2022, is businesses dependent on manual labor will seek to automate those tasks as much as possible. However, because the memories of liberals are those of gnats, politicians can point to the symptom and call for ACTION against such a pernicious trend.

In the case of the minimum wage, Brietbart points to a Guardian article that reports Lieutenant Governor Gavin Newsom’s concern that the increased use of technology is killing jobs:

The graduating computer science students at the University of California at Berkeley had just finished chuckling at a joke about fleets of “Google buses, Facebook shuttles and Uber-copters” lining up to whisk them them to elite jobs in Silicon Valley. The commencement ceremony for a cohort of students who, one professor confided, were worth around $25bn was a feel-good affair.

Until, that is, Gavin Newsom took to the lectern and burst the bubble.

The smooth-talking Democrat, and frontrunner to win California’s gubernatorial race next year, warned the students that the “plumbing of the world is radically changing”. The tech industry that would make them rich, Newsom declared, was also rendering millions of other people’s jobs obsolete and fueling enormous disparities in wealth. “Your job is to exercise your moral authority,” he said. “It is to do the kinds of things in life that can’t be downloaded.”

No, Lieutenant Governor, their job is not to exercise moral authority; their job is to find a job.

Honestly, it takes a tremendous amount of guile for a grown man to whine to a bunch of smart kids that their career paths may lead to the next political crisis. That is especially the case because his party’s policies have created the very conditions for their future success!

Don’t believe me? One of the companies that irritates Newsom to no end designs robots … for the fast food industry.

[Newsom] frequently complains about Momentum Machines, a secretive San Francisco startup promising to transform the fast-food industry with robotic technology. The ambition, according to the company’s founder, is to “completely obviate” human workers.

“There’s an empathy gap,” Newsom said. “I really feel intensely that the tech community needs to begin not just to solve these business problems but to begin to solve societal problems with the same kind of disruptive energy that they put behind developing the latest app.”

So let me get this straight. Out of empathy, California passes a law that keeps more and more low-skilled people out of the work force. Businesses look to automating previously affordable manual work just to stay in business. So businesses lack empathy because they are trying to solve a problem government policy created.

If this is what it means to show empathy, keep it far, far, away from me!

So what is Newsom’s “solution” to the “empathy gap”?

Serious thinker that he is, he doesn’t know. However, one possibility is what socialists call “universal basic income”.

He is “not opposed” to universal basic income, an idea popular among Silicon Valley utopians that would see all citizens receive some kind of regular and unconditional payment, and is interested in a proposal from Bill Gates to tax companies when they replace humans with robots.

But Newsom said he was not ready to endorse either policy. Adopting politician-speak, he said his team was “starting to lean in to create the tenor of a policy approach” that will involve rethinking the education system and massive investment in apprenticeships.

Then he reverted to a more frank response. “I’m struggling to figure it out,” he said. “So I don’t have the damn answer.

May I offer a suggestion, Lieutenant Governor?

Perhaps you can look at the state’s minimum wage law for a clue about what to do next?

Homelessness in Los Angeles County skyrockets

Mac Slavo reports through ZeroHedge that the number of homeless people in Los Angeles County has exploded:

The number of homeless people in Los Angeles is skyrocketing. In just one year, the figures revealed that the homeless population in the city grew 20% while the numbers for the wider Los Angeles County were even higher at 23%.

Given the fact that Democrats run the county, the solution they have provided is to throw money at the problem:

The county needs to build more than 550,000 affordable rental homes for low-income households, the [Los Angeles Homeless Services Authority] says. Los Angeles recently approved new measures to raise $1.2 billion in bonds to build 10,000 new units of housing for homeless people. There are also plans to raise about $3.5 billion over 10 years to pay for other homelessness projects.

This is in addition to the $100 million the Los Angeles City Council has pledged to tackle homelessness.

Unfortunately, none of these measures will alleviate homelessness in the county, primarily because they don’t address the the high cost of living in LA.

One primary reason living in LA is so expensive is because lots of people live here. However, another reason is all of the tax and regulatory burdens that exist in the county.

The county’s sales tax is 8.75%. Between the high taxes, the increasing minimum wage, and onerous zoning and building restrictions, it is becoming more challenging for poor people to find jobs and affordable housing, let alone keep them.

U.S. monetary policy is also a key factor why living in LA keeps getting more expensive over time. The Federal Reserve system expands the money supply by printing money (albeit electronically nowadays) out of thin air. Those closest to the monetary spigot benefit the most from money creation. Those farthest away from it, such as the working poor, suffer the most: as prices keep going up, their low and fixed incomes pay for less and less.

If county Democrats were truly concerned about the poor in general and the homeless in particular, they would reduce taxes and regulatory burdens to create a more vibrant job market, and make it more attractive for investors to build housing that people could afford. They would also learn how monetary policy hurts the poor and work to stop unnecessary money creation.

Unfortunately, none of this is happening. Unless and until county leaders recognize the errors of their ways, and understand how monetary policy is hurting the poor, all one can expect regarding homelessness in Los Angeles County is more of the same.

The Praxeology of Coercion

In the Winter 2016 issue of The Quarterly Journal of Austrian Economics, Rahim Taghizadegan and Marc-Felix Otto discuss how a “violence cycle theory” can be built upon the study of how people obtain goods through coercion.

ABSTRACT: As the first application of the praxeological discipline of “Cratics” (Taghizadegan and Otto, 2015), a theory of the supply and demand of bads is developed. On this foundation, a violence cycle theory will be introduced in analogy to the praxeological business cycle theory (according to Ludwig von Mises). Central to this approach are the subjective perceptions of threats and possible bluffs regarding the backing of those threats. Such a violence cycle theory can explain the stability of structures of violence and reveal new interpretations of the “long peace” hypothesis.

Comparing violence cycle theory to business cycle theory

Taghizadegan and Otto make an interesting parallel Austrian business cycle theory and their violence cycle theory.

Austrian business cyle theory

According to Austrian economics, an economy is best coordinated when its participants are able to freely buy and sell goods to whomever they want. That way, the goods that are available, and the prices at which they’re offered, meet the most urgently-felt needs of consumers. That includes the availability of money, the price of which is the interest rate. When market participants are unencumbered, there is sound coordination not only between buyers and sellers, but also between present consumption and anticipated future consumption.

However, according to ABCT, when interest rates are brought down (through whatever means) to encourage lending, a tension arises between present consumption and anticipated future consumption. Capital projects that create the business cycle boom are built on the assumption that future consumption will support its financing, when that isn’t the case. When it becomes clear that those projects will not become profitable, the bust occurs, resulting in a recession, which is necessary to bring the economy back into proper alignment.

Violence cycle theory

In an earlier paper, Taghizadegan and Otto developed the praxeological discipline of “cratics”, which is a theory of the supply and demand of “bads”. A bad is a negative outcome that a person would experience if it occured. Person X would threaten person Y with bad outcome B unless Y provides X with good G instead. Rather than an economic exchange, through which both parties would benefit, it would be a “cratic” (or in Franz Oppenheimer’s framework, political) exchange, though which the negative utility of giving up good G is less than the negative utility of experiencing bad B.

One consequence of the political “transaction”, should Y believe that X is willing to carry out the threat, is that person Y feels aggreived because of the harm X inflicted upon him. However, if X continues to feel comfortable threatening Y to receive more goods from him, that sense of feeling persecuted will grow.

Absent such persecution, if people were able to interact with other on a voluntary basis, there wouldn’t be a developed sense of injustice among a certain group of people. While one person may have a claim against another person because of a particular wrong, freely developed dispute resolution procedures should allow those specific people to address that issue.

However, if a class of people were capable of extracting resources from the rest of the population by invoking a constant threat of punishment for noncompliance, this provides the conditions for developing a “violence cycle”. On the surface, there is very little overt violence in the community. However, as time passes, the population’s trust in its overlords diminishes. Once it evaporates, there is a significant risk of a violent backlash.

Today’s cratic “booms”

If we applied this line of reasoning to today’s political environment, one can see at least two cratic “booms”: the pervasive leftism in Western governments, and American foreign policy.

We can also see the beginnings of backlashes against both booms. With regard to Western leftism, Brexit, the election of Trump, and central Europe’s pushback against Europe receiving enormous waves of migrants are the early, crude reactions to an ideology that seeks that subsume people into an increasingly centralized, government-coordinated society. Similarly, Russia, China, and militant Islam are reacting against an American foreign policy that assumes that the planet is a mere object with which to manipulate.

A promising theoretical development

Taghizadegan’s and Otto’s development of a violence cycle theory is, indeed, a promising one. Among other things, it bolsters my thought that Rene Girard’s Mimetic Theory, which studies how people develop their desires through identifying the desires of their models, can both inform and reinforce praxeology. By further exploring praxeology in general, and cratics in particular, hopefully there can arise a scientific language that will reinforce the urgent need for people to interact peacefully with one another so that everyone may prosper and flourish.

Inevitable consequences of the minimum wage

In one of my first blog posts, I drew this picture:

Minimum wage graph

It’s a simple supply and demand chart that shows what happens when the minimum wage is raised. A gap occurrs between the number of workers willing to work at, and that will be hired at, that wage. The end result will be fewer workers working at that wage.

This is what happens when California doesn’t listen to such common sense:

A burger-flipping robot has just completed its first day on the job at a restaurant in California, replacing humans at the grill.

Flippy has mastered the art of cooking the perfect burger and has just started work at CaliBurger, a fast-food chain.

The robotic kitchen assistant, which its makers say can be installed in just five minutes, is the brainchild of Miso Robotics.

A California fast food joint wants to automate flipping burgers?

Go figure.

h/t Instapundit

Cultural artifacts and property rights

In the November/December 2016 issue of Biblical Archeological Review (which is available only to subscribers), Huntington University Professor Mark Fairchild published an article entitled “Turkey’s Treasures in Trouble”. While the article meanders, it ultimately focuses on the conflict between scholars and local inhabitants on how cultural artifacts should be excavated and treated.

Dr. Fairchild concludes his article by presenting the conflict in a manner that clearly puts scholars in a far better light.

Simply put, Turkey has vast treasure buried undergound. In the past, Turkey scarcely realized the value of its hidden treasures and was ill-prepared to excavate them. Today, however, Turkey’s universities are training the next generation of historians and archeologists who are eager to explore Turkey’s past. In recent years, a few new digs have begun at some sites around the country. But Turkey’s resources are limited. Meanwhile, scores of ancient sites are left unprotected and are being ravaged by locals who are hoping to hit the jackpot.

Given this blog’s love/hate relationship with memes, his position can be summed up thusly.

it-belongs-in-a-museum-indiana-jones-1435014709

A professor walks into a tea house…

To put Dr. Fairchild’s characterization of locals seeking to “hit the jackpot” into context, perhaps it helps to read a particular encounter he had with locals:

On one trip I came to Balkis, a small village in northwest Turkey in search of the ruins of the ancient city of Kyzikos. As I turned off the road and pulled into the lot of a small cafe, the eyes of a dozen men stared at me. In Turkey men commonly gather at the village cafe and sip çay (tea) at tables outside. I was a stranger, and they don’t typically see many strankers in Balkis. After a few customary greeting, I was invited to sit offered çay. I don’t like çay, but I drank it anyway, knowing that I was making a connection with the villagers.

How magnanimous of him to sit down with the common folk.

He continues:

Whatever discussions the men were having prior to my arrival were now suspended, and I was the focus of their attention. In short order, the questions came: “Where are you from?” and “What are you doing here?” I explained that I was a professor at an American university, and I was interested in examining the ancient ruins of Kyzikos. Most of the men were not familiar with the name Kyzikos, but I explained that I was looking for an ancient city located in the woods and surrounding countryside. Most of the men knew of ruins that existed out in the brush, but they didn’t know anything about them. After a bit of discussion, the men determined that Ahmet (not his real name), one of the men, should accompany me to the ruins.

At the end of the day, Ahmet insisted that I have dinner with him and his family. Ahmet actually lives within the Roman baths of Kyzikos. Before dinner Ahmet introduced me to his neighbor, who had returned from prison about a year previously. His neighbor had been caught trying to sell antiquities on the black market. He explained to me that he had dug up a frieze with a beautiful relief of winged charioteers. He broke up the relief panel to smuggle the pieces out of the country, but he was caught and jailed. As we were talking, it dawned on me that I had just seen a frieze similar to this at the Bandirma Museum the day before. I was puzzled when I viewed the objects because the frieze appeared to have fresh breaks, and the separate pieces had newly exposed surfaces. I pulled out my camera and flipped back to the shots I had taken a day earlier. As I showed the photos to Ahmet and his neighbo, they affirmed that this was the frieze that Ahmet’s neighbor had uncovered. Undeterred, Ahmet’s neighbor continued his clandestine activities. To him, the rewards far outweighed the risks.

The curse of cultural patrimony

Dr. Fairchild’s day in northwest Turkey is an excellent illustration of Steven Vincent calls “cultural patrimony,” or deciding “who has the right to own and exhibit mankind’s aesthetic and archaeological treasures.” In essence, countries such as Turkey that have extensive, but yet-to-be excavated, cultural artifacts have proclaimed all such objects as state-owned. They do so primarily to protect a nation’s identity and sense of self-determination. Governments then issue excavation permits to archeologists, who are restricted in how found artifacts can be examined and displayed.

Unfortunately, such restrictions merely create black markets for valuable goods such as cultural artifacts. They create unnecessary tension between scholars who want to increase knowledge about a particular culture, locals who want to earn a living finding and selling artifacts, and collectors who want to preserve them.

Currently, antiquities laws favor scholars who develop close ties to governments handing out excavation permits. One can call it crony archeology.

However, these laws prevent collectors who cherish these artifacts from lawfully purchasing and preserving them. As one antiquities dealer put it to Vincent, “A strong market assures a free flow of antiquities and acts in the best interests of everyone–archaeologists, collectors, and the people in source and market nations.” In fact, governments who restrict the excavation of cultural artifacts frequently value them far less than scholars and collectors. For example, a 5,000-year-old burial site in central Anatolia (Turkey) was “covered over with concrete and turned into a recreational area.”

How property rights can protect cultural artifacts

If governments truly want to protect cultural artifacts in their borders, they would allow people to not only buy and sell them freely, but also buy and sell the real estate in which these artifacts are currently buried. Everyone, except for cultural warriors, would benefit. Locals would be able to buy property they believe holds artifacts that are valuable to scholars and collectors. Scholars would be able to interact more freely with locals and collectors alike, each of whom are incentivized to know where antiquities may be and why they are significant. (They might even be able to avoid drinking çay in the process.) Collectors would have a far greater selection of artifacts from which to choose. Finally, the public would benefit from the increased selection, distribution, and knowledge of these artifacts.

Given the current state of affairs, governments are not going to privatize the collection of artifacts anytime soon. However, that does not mean that such a privitization would not be of great benefit to everyone.

Why Say’s law is always true

Alasdair Macleod has written an elegant essay on why Say’s law is always true.

In essense, Say’s law states that an economy comprises equally of buyers and sellers. On the surface, this may seem obvious. Unfortunately, John Maynard Keynes, in his influential work The General Theory of Employment, Interest and Money  mischaracterized Say’s law so as to imply that the law assumes the economy operates at full employment. By knocking down that strawman, Keynes uses the rest of The General Theory  to argue that government should stimulate demand by increasing spending. As Macleod shows, however, Keynes built his policies on a fundamental fallacy. Current government and central bank policies will fail for no other reason than they deny the validity of Say’s law.

It would be worthwhile to take your time to read this essay.

Negative interest rates: presenting absurd ideas as normal is the new normal

Since the dawn of time, human beings have come up with clever ways to justify foolish ideas they hold. Nevertheless, it is sometimes stunning to see the depths to which otherwise intelligent people will go in order to hold onto ridiculous ideas. An example of this can be found in the never-ending quest by policymakers to implement negative interest rates.

Showing the unintended consequences of negative interest rates

On August 8th, The Wall Street Journal published a very good article about the unintended consequences of negative interest rates. Central banks impose negative interest rates to encourage people to spend or invest their money, rather than keep it in the bank. However, the article highlighted two people who, for different reasons, decided not to act in a manner policymakers wanted. For example, Heike Hofmann, who runs a fruits and vegetable stand in Germany, reduced her spending to buy gold. Tatsuro Takahashi, who operates a food truck in Tokyo, has no desire to borrow money to expand his business, because he thinks it would be risky.

However, the most fascinating part of the story was at the end. According to the article, University of Michigan economist Miles Kimball thinks that rates should be lowered even further:

If people are getting scared by negative rates, he says, it is the fault of central banks’ inability to communicate effectively, not the policy itself.

“They should say that this is a normal tool of policy,” he says, “and then people wouldn’t freak out.”

In other words, the experts should try to convince you and me that imposing a negative interest rate is a “normal tool of policy”. In his mind, people aren’t freaking out because the policy is flawed, but because the central banks don’t know how to talk to us.

The problem with his position is simple: it’s not connected to reality.

Negative interest rates are impossible without outside interference

In a recent presentation, James Grant noted (h/t zerohedge) that Sidney Homer and Richard Sylla, the authors of A History of Interest Rates , found no instance of negative rates in 5,000 years. The reason for positive interest rates is, once again, simple. Because people value present goods more than future goods, borrowers pay lenders interest to compensate them for not being able to use that money over the period of time of the loan. There are no reasonable circumstances under which a lender would accept a negative interest rate. Why would I lend someone $100 today so I would get $98 back a year from now? The only reason negative rates would arise is if a third party, such as a central bank, manipulated the capital markets to such an extent that the resulting “interest rate” is below zero.

Central banks impose negative rates because they expect people to increase spending, rather than keeping their money in a bank. However, they don’t always think through all of the consequences:

Though savers are yet to hoard cash in their mattresses, negative rates could have other consequences. Negative funds rates squeeze banks’ profit margins. Low enough rates could cause many to become unprofitable. Pension funds depend on bond yields to meet their payment requirements. Grant says it is now impossible for them to hit 7% return targets. Insurance companies invest their premiums in fixed income, and are “dying on the vine” according to Grant.

Implementing the impossible

There is nothing normal, or natural, about negative interest rates. Nevertheless, there is at least one economist who wants them characterized as a “normal tool of policy.” Rather conceding their impossibility, Dr. Kimball thinks that if central banks could somehow talk about negative rates the right way, the public will respond properly.

The public, however, is not one giant blob that responds solely to external stimuli. Society consists of individuals who interact with one another. Individuals will do what’s in their best interest, as they define it, regardless of attempts by policymakers to force them to take particular actions.

Unfortunately, such observations will not prevent central banks from attempting to implement the impossible. In fact, according to his blog, Dr. Kimball has been spending quite a bit of time with central banks to talk to them about negative rates. He believes that “[u]nder the surface, there is a much bigger consensus [about negative rates] than what you would assume.” (Grant agrees.)

Attempting to normalize the absurd

For at least the past 100 years, the dominant ideology in American, and increasingly global, politics has been progressivism. James Ostrowski, in his book Progressivism, defines it as a “mindset that favors the use of aggressive government force to solve social problems.” Under progressivism, only those within government have the power to decide what the social problems are and how they are to be solved. Everyone else is part of the blob that exhibit symptoms that needs to be solved.

The fact that central bankers are even contemplating negative interest rates underscores the desperate circumstances in which they find themselves. They present themselves as the global economy’s problem solvers. However, the more they impose their will on the economy, the more glaring the economy’s problems are displayed. Nothing that central banks and governments have done over the past ten years have worked.

And yet with all of this, Dr. Kimball wants central banks to implement the absurd. In many ways, he is like far too many progressive elites, who think that problem X will be solved if we just doubled down on the previous horrible policy. While “experts” continue implementing ideas with passionate intensity that do nothing but destroy, everyone else bears the cost.

I have no idea how this will be resolved. However, as central banks continue negative rates, more people will act like Heike Hofmann and Tatsuro Takahashi. At some point, enough people recognize the absurd for what it is. Until then, we need to find a way to remember what normal looks like, and be patient in the meantime.

Donald Trump’s America First speech, and Vox Day’s interesting reaction to it

Donald Trump gave a speech this morning in New York City. In that speech, Trump articulated his America First protectionist trade policies, citing Washington and Lincoln as support:

Our country will be better off when we start making our own products again, bringing our once great manufacturing capabilities back to our shores.

Our Founders understood this.

One of the first major bills signed by George Washington called for “the encouragement and protection of manufactur[ing]” in America.

Our first Republican President, Abraham Lincoln, warned us by saying:

“The abandonment of the protective policy by the American government will produce want and ruin among our people.”

After criticizing Clinton (nay, throwing haymakers at her) for her involvement with NAFTA and TPP, Trump articulated what he would do as President:

Come this November, we can bring America back – bigger and better, and stronger than ever.

We will build the greatest infrastructure on the planet earth – the roads and railways and airports of tomorrow.

Our military will have the best technology and finest equipment – we will bring it back all the way.

Massive new factories will come roaring into our country – breathing life and hope into our communities.

Inner cities, which have been horribly abused by Hillary Clinton and the Democrat Party, will finally be rebuilt.

Construction is what I know — nobody knows it better.

The real wages for our workers have not been raised for 18 years — but these wages will start going up, along with the new jobs. Hillary’s massive taxation, regulation and open borders will destroy jobs and drive down wages for everyone.

We are also going to be supporting our police and law enforcement — we can never forget the great job they do.

I am also going to appoint great Supreme Court Justices.

Our country is going to start working again.

People are going to start working again.

Vox Day, an Alt-Right commentator, loved the speech, and ended a post by writing:

He’s got both economics and history on his side, regardless of what the corrupt globalist economists and historians will tell you.

I have to say, Trump the Candidate is saying far more of the right things than I would have even expected to hear from Ron Paul.

I have two reactions to his comments.

First, while  I don’t doubt that some of those who criticize Trump are “corrupt globalist economists and historians”, not everyone who does falls into this category. That would include Tom Woods and Bob Murphy, two libertarian intellectuals who are neither globalist nor corrupt. I would think Vox knows this, given that he participated in a debate on free trade with them. Then again, given his recent interactions with them, maybe he knows something I don’t.

Second, I’m surprised that Vox expected to hear Ron Paul call for protectionist trade policies. Dr. Paul is no fan of Alexander Hamilton, whose work formed the basis of Washington’s call to protect domestic industry. Lincoln carried on Hamilton’s protectionist tradition, both as a congressman and President. Indeed, Dr. Paul is a clear advocate for free trade; he criticized the WTO and NAFTA because they were “managed trade” deals, not free trade ones. He also focused, rightly in my opinion, on the corrosive role fiat money and fractional reserve banking had on the declining purchasing power of the dollar. For Vox to expect otherwise is puzzling.

 

How fiat money creates tyranny

The Anonymous Conservative highlights an article by Jörg Guido Hülsmann that discusses how fiat money creates tyranny:

It may seem unusual that an economist would talk about culture…

A number of economists have observed that fiat money is a prerequisite for tyrannical government, and the idea that monetary interventionism paves the way for tyrannical government is very old and goes back to Nicolas Oresme in the fourteenth century…

Mises said that when it comes to limiting government power, it is essential that the government is financially dependent on the citizens…

Mises believed that those who paid the taxes would then need to specifically limit the size of the government budget…

Now, if we abandon a strict connection between what the citizens pay and what government spends, then we find that we move away from rule by the citizens who are being taxed, and toward greater rule by the elites.

The first way this shift can happen is by the government going into debt… it… allows the government to spend more money than would have been possible with taxation alone.

Now of course fiat money allows government to take out loans to an unlimited extent…

Now we come to the many ways through which a fiat money system affects the behavior of ordinary citizens.

…it has long been an idea among government planners and ideologues of all sorts, even before Keynes, that ordinary people should be prevented from “hoarding” money at their homes.

In a free economy with a natural monetary system, there is a strong incentive to save money in the form of cash held under one’s immediate control…

By contrast, when there is constant price inflation, as in a fiat-money system, cash hoarding becomes suicidal. Other financial strategies now become more advisable. It becomes advisable to exchange one’s cash for “financial products,” thus offsetting the loss of purchasing power of money through the return on that financial investment. It also becomes advisable to go into debt and leverage one’s investments…

But in a fiat money system, as price inflation diminishes the value of one’s monetary savings, we are encouraged to adopt a short-term perspective…

It needs to be stressed that this tendency has no natural stopping point.

Hülsmann expands on the cultural implications of fiat money in The Ethics of Money Production. The book a fantastic integration of Austrian economics and Catholic moral teachings as it relates to the production of money. I would strongly suggest it to anyone who wishes to learn more about how fiat money impacts culture.

The Economist’s dishonest dismissal of central banking critics

The intellectual framework of The Economist, as far as economics is concerned, has been Keynesian for as long as I can remember. (You may be asking yourself how old I am, which is an excellent question.) Be that as it may, the manner in which it discusses critics of the Federal Reserve in an opinion piece in its May 21, 2016 issue, is at best uncharitable, and at worst dishonest. The first paragraph of the piece begins thus:

Perhaps it was inevitable in the aftermath of the worst financial crisis in almost a century, but America is boiling over with schemes to remake the Federal Reserve. Some Republicans want the central bank’s monetary-policy decisions to be “audited” by the Government Accountability Office, an arm of Congress. Others wish to use a formula to put monetary policy on autopilot and to haul the chairman in front of Congress every time the Fed steps in. The most extreme sceptics peddle conspiracy theories about how the Fed “debases” the dollar. They propose abolishing the central bank entirely.

Conspiracy theories??? Well, if that’s the case, there’s no point in dealing with them.

So what’s so conspiratorial, if that’s a word, about the thought the Fed may be debasing the dollar? To answer that question, let us see how The Economist itself discusses how quantitative easing works in a March 2015 blogpost:

To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence “quantitative” easing. Like lowering interest rates, QE is supposed to stimulate the economy by encouraging banks to make more loans. The idea is that banks take the new money and buy assets to replace the ones they have sold to the central bank. That raises stock prices and lowers interest rates, which in turn boosts investment. Today, interest rates on everything from government bonds to mortgages to corporate debt are probably lower than they would have been without QE. If QE convinces markets that the central bank is serious about fighting deflation or high unemployment, then it can also boost economic activity by raising confidence. Several rounds of QE in America have increased the size of the Federal Reserve’s balance sheet—the value of the assets it holds—from less than $1 trillion in 2007 to more than $4 trillion now.

Let me ask a simple question. If a central bank seeks to expand its currency’s money supply by expanding the monetary base and bank credit, wouldn’t it be reasonable to assume that that currency will be weaker compared to other currencies? So how on earth is acknowledging this simple implication a conspiracy theory?

It’s bad enough to deal with horrible thinking when looking at Facebook memes. Part of me is willing to accept the possibility that the creator of a bad meme may not know any better.

That is not the case with The Economist. It’s called The Economist for crying out loud! If anyone ought to know how supply and demand curves work, it’s them. However, to see them equate straightforward economic analysis with conspiracy theories, especially on such an important subject as monetary policy,  is shocking.