Economics

ConservativeHome: It’s time for currency choice – and Douglas Carswell’s 10 minute rule Bill on currency reform

Over at ConservativeHome, I have promoted Douglas Carswell’s ten minute rule Bill on legal tender laws and currency choice:

People today have unprecedented choice.  They can shop around online.  They can tune into numerous television and radio channels.  They can even decide between different hospitals for medical treatment.

But why are people not allowed to decide for themselves in which currency to transact their business and store their own wealth?

Today, Douglas Carswell introduces a Bill designed to make a range of different currencies legal tender in the UK.  It would mean that, with the click of a mouse, people would be able to store wealth and pay taxes in a range of different currencies of their choice.

The BBC are covering it here. Read the full article.

Economics

The fight of the century redux: Murphy vs. Smith

Exciting news from Mises.org:

The great debate between Keynesians and Austrians enters the digital age with the Mises Academy’s first ever online formal debate, between economists Karl Smith and Robert P. Murphy.

Resolved: Government Spending Can Play an Important Role in Boosting Economic Growth

Smith will argue in favor of this resolution, and Murphy will argue against.

The debate will be held by Webex, and costs $20. It will take place Friday, September 2nd at 1pm UK time, but will be recorded for later viewing.

See here for more details.

Economics

The Jewish Chronicle publishes an article on MA

Via Honesty is best policy | The Jewish Chronicle, I set out MA, the Austrian measure of the money supply developed by Dr Anthony J Evans and Toby Baxendale:

Ask economists how much money there is and you will get many answers. You know money is what you can exchange for real goods and services, but economists often include things like time deposits, which cannot be spent because they have fixed terms. Money is one half of every transaction, so its supply really matters. According to my colleague Dr Anthony J Evans of Kaleidic Economics, the Bank of England’s preferred measures, “Narrow Money” and “Broad Money”, are either too narrow or too broad. From the perspective of the Austrian School of Economics, Anthony, together with entrepreneur Toby Baxendale, chairman of The Cobden Centre, has established and now publishes a different measure which they call “MA”. A chart (see above) of the growth of MA shows a pattern that is not visible in the Bank of England’s measures.

Given a good measure of the money supply, we shouldn’t be surprised that our economic and financial troubles continue.

Please see the full article for more and Kaleidic Economics for the data and explanation.

TCC Development

TCC media moves from second to third gear

Over recent months, TCC’s media profile has gone from strength to strength – with this list of media hits just scratching the surface.

Today, the organisation and its network of voices (board members, senior fellows and advisory board members) are increasingly to be found on the BBC or in such newspapers as the Wall Street Journal, the Financial Times and the Daily Telegraph. As TCC’s scholarly reputation grows so does its media profile and impact.

This is why I have no doubt that our voices will soon be heard not only in more specialised and esoteric outlets but importantly in ones with much greater mass appeal. If TCC’s media strategy was a motorcar then in recent months it has transitioned from second to third gear. If things go as planned next year will see us move into fourth. In this context, I say: BBC Newsnight, Daily Mail and the Mirror – bring it on!

Economics

Hayek vs Keynes debate rebroadcast

Back in the ’30s, at the time of the original Keynes-Hayek debate, Hayek had a solid methodological system that could explain the causes of the recession of the late ’20s and early ’30s, and it’s subsequent gyrations, up and down.

The root cause was excessive credit creation by the world’s main central banks, and their fractional reserve private sector mints, the banks. This bank credit was loaned out to businesses who bought extra kit to produce goods and services more efficiently. The boom in producer sectors bid up relative prices for their resources. Higher wages for labour meant more consumption, boosting consumer sectors. This in turn pushed up relative prices in those sectors. Competition for resources bid up prices until no one believed the prices were sustainable — pop goes the mega bubble, and boom turns to bust. This is called the Austrian Theory of the Business Cycle.

At the BBC LSE Hayek v Keynes debate, Lord Skidelsky told us that everyone knew it was excess credit that caused this boom, and that this was called the “Treasury View.”

This of course is not true; the noble Lord is misinformed. The Treasury View was advanced by members of the Chancellor’s department saying, in short, that for every increase in public expenditure advocated by Keynesian types to alleviate the Great Depression effects, there would be an equivalent reduction in private sector expenditure that would mean that the net effect in the economy is zero.

Whilst I hold that this is a valid view, it is not one that gives us the theoretical tools to understand why boom and bust happen in the first place. Mises and Hayek gave us these tools with the Austrian Theory of the Business Cycle.

Neither the Treasury View, as expounded by the likes of Ralph Hawtrey, nor the Keynesian view were based on a series of logical deductions from root causes. The best Keynes could offer as an explanation for boom and bust was “animal spirits”.  He is Theory Lite in this respect.

Unfazed by his shaky foundation, Keynes confidently prescribed how to correct an animal-spirit-induced bust.  We are told to spend when the private sector is not spending. Who does this? The government on our behalf.  The Treasury View makes clear that it’s futile to tax the private sector in order to spend, so we have the cries from modern day Keynesians to carry on borrowing and spending in order to force a correction . If you haven’t got the correction you desire, you have not borrowed enough! So say the likes of Krugman and Skidelsky, drunk on the intoxicating work of Keynes.

The faulty logic than runs underneath this way of thinking is called the “Circular Flow of Income.” This is now bread and butter in any economics text book. One person’s income, when spent on goods and services, becomes another person’s income. Cut one and you cut all. Therefore, a series of cuts or austerity measures is exactly what you should not be doing at a time of bust; you need to keep everyone’s income up.

Hayek held that relative prices and income where what mattered, not gross aggregates . If a man has an income of £100 and costs of £90, we can say he has a profit of £10. Then recession hits and he has an income of £85 and still costs of £90, so he is sunk by £5. Thus the aim of the man in question, with income of £85 is to get his costs down to under £75 and restore his profitability. As this is done, the foundations for recovery are laid. Even better, if he can get costs to £74, on lower income and a lower costs base, he is in fact more profitable than in the glorious boom times!

In the 5 mins each speaker had in this debate to present their case, some of this came across and some of it did not. Jamie Whyte and George Selgin did a fantastic job at putting forward the case for Hayek. Skidelsky sadly did not represent Keynes very truthfully, for the reasons I have outlined above. Selgin picked him up on various other errors and misrepresentations.

This debate is very relevant for today as no doubt we will be told the current market corrections are “Animal Spirits”, and that the answer is further government intervention.

The BBC tell us the debate had over 1 million listeners and was in their top 5 podcasts. In all my years studying at the LSE and as a donor to it, I have never seen three lecture theatres full of public and students alike. Not even for visiting Heads of State!

This is the debate of our times.

I am delighted to say that the program will be re-run, and they expect another 1.5 millions viewers.  Our friend at the Mises Institute, Stephan Kinsella, has blogged all the details here. If you want to educate yourself a little more on these matters, or even if you think you are very familiar with all of the issues, the debate is definitely worth a listen.  If you can’t wait for the next BBC broadcast, you can find it online as an MP3.

Since the original broadcast, the debate has continued online.  On the 3rd of August, PrimeEconomics published a list of eight alleged fallacies in the Keynes/Hayek debate, drawing a number of responses, including some from George Selgin.  On the same day, Selgin posted his own account of the debate at FreeBanking.org.  More recently, on the 18th of August, Selgin took up Skidelsky’s suggestion that “no government has ever achieved a speedy recovery from a recession by clamping down on its spending or reducing its indebtedness”, citing the US recovery from a deep recession in 1920.  The following day, Skidelsky published his account of the Keynes-Hayek rematch at Project Syndicate, declaring

Except to Hayekian fanatics, it seems obvious that the coordinated global stimulus of 2009 stopped the slide into another Great Depression.

You can read Selgin’s response at FreeBanking.org.

Personally, I look forward to the day when Paul Krugman will come and stand on that same stage where Hayek delivered his famous Prices and Production lectures, and engage in serious debate with Austrian economists. How many lecture theatres would that fill? What global TV audience would it draw?

For those at the BBC and for those at the LSE, I think my next Distinguished Hayek Fellowship Teaching Programme event the LSE should be just this debate, and I would be happy to support and fund whatever I can. I repeat, this is the debate of our times.  Only someone of the stature of Krugman can represent Keynes, we need to move this debate up and along now.

Related articles
  • Hayek vs Keynes at the LSE – John Phelan, 27 July 2011
Economics

TCC Senior Fellow in today’s Wall Street Journal Europe

Today is the fortieth anniversary of US President Richard Nixon closing the gold window and bringing in for the first time in history a global system of unconstrained paper money under the full control of the state. To mark this sorry episode TCC Senior Fellow, Detlev Schlichter, has published a superb article in today’s Wall Street Journal Europe headed ‘Forty years of paper money: fiat currencies always end with hyperinflation and economic collapse’.

The article is well worth a read and my prediction is that you are going to hear a lot more about Schlichter in the months and years ahead. Indeed, some years from now, people are going to realise that his forthcoming book, Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown, is one of the seminal economics works of the early part of the twentieth century. Out next month, why not reserve your copy here?

Economics

Steve Baker on BBC 2’s Daily Politics

I have just heard that TCC board member, Steve Baker MP, will appear as part of a recorded package on today’s lunchtime BBC TV programme – ‘Daily Politics’. Talking about simpler and flatter taxes the show will be on BBC2 at 12 noon.

Economics

Tonight: Britain’s Trillion Pound Horror Story

Film maker Martin Durkin explains the full extent of the financial mess we are inBritain’s Trillion Pound Horror Story will be transmitted on Channel 4, tonight Thursday, 11 Nov at 9pm:

Film maker Martin Durkin explains the full extent of the financial mess we are in: an estimated £4.8 trillion of national debt and counting. It’s so big that even if every home in the UK was sold it wouldn’t raise enough cash to pay it off.

Durkin argues that to put Britain back on track we need to radically rethink the role of the state, stop politicians spending money in our name and introduce, among other measures, flat taxes to make Britain’s economy boom again.

This is a polemical film presented by Martin Durkin. The film brings economic theory to life and makes it hit home. It includes interviews with academics, economic experts, entrepreneurs and four ex-Chancellors of the Exchequer.

A number of members of the team gave interviews and we look forward to seeing the final result.

Press

Antoine Clarke helps TCC with media outreach

Recently at a TCC board meeting everyone agreed that the organisation must now commence is media outreach program. It is therefore with some delight that from Monday we welcome Antoine Clarke, already a member of our Advisory Board, into an even closer and more proactive relationship. From here on in he will be preparing our media releases and helping us to reach out to a broad range of journalists and opinion formers.

A graduate in philosophy from London University, he is a former advisor in the early 1990s to the Slovak Finance Minister. Having subsequently written for a range of French national newspapers, until recently he was the international editor of a leading pharmaceutical trade industry magazine based in London. Currently studying for an MBA with the Open University, Antoine has long been an enthusiast for Austrian economics, honest money and all things free trade.

Already an occasional blogger and writer for the TCC, as a communications professional he is passionate about the transformative capabilities of social networking platforms. Active on Facebook and Twitter, my hope is that he will help us tweet our way to greater success. For given the perilous state of our economy, communicating TCC solutions is now a pressing priority.