Economics

[TrueLight]

yep and probably much higher in the future

i remember Peter Schiff saying it might go to 5000 gold if they keep doing what they're doing! if they keep undermining the free market and keep interest rates low... and i remember on the news today... the fed or someone said they will keep monetary policy loose for an extended period of time and stimulus going too...

so sad... like Ron Paul said all great nations if they live above their means will inevitably live beneath its means...

[TrueLight]

Ron Paul on monetary policy

talks about India buying gold etc... major shift from west to east of economic power - jobs, productivity, savings have gone east...west has got more indebted

gold will be "remonetized"  

"we devalue our money on a constant basis"

"to preserve our freedoms in this country we will also have to understand money and have monetary policy reform"

http://www.youtube.com/watch?v=Ts88VORUYKo

[TrueLight]

Ron Paul Rocks CNBC 13/11

A nice economic lesson

http://www.youtube.com/watch?v=L4JuprxIRfE

[TrueLight]

November 13, 2009

Job Losses Demystified
 

As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.

Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.

An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.

Don't expect the brain trust at the President's job summit to fret much about these details. That public relations stunt will likely ignore the root cause of the economic imbalances and instead stress the need for government spending on training and education, i.e. more public debt. The unemployed do not need government theatrics, they need actual jobs. But as long as the government props up failed companies, soaks up all available investment capital, discourages savings, punishes employers, and chases capital out of the country, jobs will continue to be lost.

To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.

However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.

If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated heath care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.

Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.

If the President's summit truly intends to find the root cause of unemployment, his advisers don't need Bureau of Labor statistics or complex modeling software, just the courage to drop their dogmatic belief in central planning and embrace the laws of economics.

Peter Schiff

[TrueLight]

Congressman Kevin Brady slams Tim Geithner

ah man the nerve of Geithner i swear....

http://www.youtube.com/watch?v=agf_FlmN-DM&feature=related


Peter Schiff comments about Geither's response

http://www.youtube.com/watch?v=wa7AT40sRHM

[TrueLight]

Ron Paul battles it out philosophically with Bernanke during the House Financial Services Committee

http://www.youtube.com/watch?v=qBa-V0xfg1Y

[TrueLight]

Ron Paul on the Federal Reserve

"the fed has clearly failed on its mandate to maintain full employment and price stability"

"What he (Ben Bernanke) does not recognize nor does want to admit, is that he is talking about symptoms while ignoring the source of the crisis, the Federal Reserve itself. More regulations will never compensate for all the distortion and excesses caused by monetary inflation and artificially low interest rates. Regulation distracts from the real cause, while further interfering with the market forces, thus guaranteeing that the recession will become much deeper and prolonged."

"...this belief is a dream that one day will become a nightmare for all Americans unless we come to our senses, stop our wild spending, runaway deficits, printing press money, massive bureaucratic regulations and our unnecessary world empire. A crucial step in fixing these problems will be transparancy of the Federal Reserve."

http://www.youtube.com/watch?v=jTo5F2Fy5w8

[TrueLight]

http://www.usdebtclock.org/

scary....

http://www.debtclock.com.au/

wtf... yay awesome!.....more debt and debt and debt

[Voltaire]

Ron Paul has no credibility anymore..he has been uncovered as a evolution deny, racist, etc
If the Fed hadn't intervened after the financial collapse, unemployment in the US would be far higher than it is now, clearly you don't understand the concept of price rigidities and credit deflation.
Ron Paul and co are free market 'fundamentalists', this is an outdated worldview, it was superseded by Keynes long ago with proper economics theory.
 I mean the guy is opposed to seat belt laws and disability pensions, it's vile.

[TrueLight]

i think you would find this informative

An Ideal Guide to Keynes's Dangerous and Destructive Economics
Mises Daily: Monday, December 07, 2009 by David Gordon

[Where Keynes Went Wrong And Why Governments Keep Creating Inflation, Bubbles, and Busts • By Hunter Lewis • Axios Press, 2009 • Vi + 384 pages]

 Defenders of Keynes, such as the recent convert Bruce Bartlett, often claim that he supported capitalism. (Bartlett's The New American Economy has this as a primary theme.) His interventionist measures had as their aim not the replacement of capitalism by socialism or fascism. Rather, it is alleged, Keynes aimed to save the existing order.

The unhampered market cannot by itself recover from a severe depression or at best can do so after long years of privation and unemployment. Keynes discovered a way by which the government, through an increase in spending, can restore the economy to prosperity. Only diehard purists could spurn Keynes's gift to capitalism. Without it, would not revolutionary pressure mount in a severe depression to overturn capitalism and replace it with socialism or fascism?

Hunter Lewis convincingly shows the error of this often-heard line of thought. Keynes, far from being the savior of capitalism, aimed to replace free enterprise with a state-controlled economy run by "experts" like him. His prescriptions for recovery from depression do not save capitalism: they derail the price system by which it functions. As one would expect, Keynes lacks sound arguments to support his revolutionary proposals. Quite the contrary, Keynes defied common sense and willfully resorted to paradox.

Indeed, as Lewis points out, the entire Keynesian edifice rests on a central paradox: impeding the central mechanism of the free market will restore prosperity. The free market works by price adjustments. If, e.g., consumers demand more of a product than is currently available, suppliers will raise their prices so that no imbalance exists. As consumers shift their demand from product to product, businesses must adjust their production schedules to meet changing preferences. If firms fail to do so, they face extinction.

If an economy is stumbling, and unemployment is high, it means that some prices are far out of balance with others…. Some companies, some industries may be doing well; others may be in desperate straits. What is needed is an adjustment of particular wages and particular prices within and between companies, within and between industries, within and between sectors. These adjustments are not a one-time event. They must be ongoing, as each such change leads to another in a vast feedback loop. (p. 232).

Keynes's "remedies" for depression paralyze this process of price adjustment. In a depression, obviously, many businesses fail. When they go under, resources shift into uses that enable the demands of consumers to be satisfied better. If increases in government spending prop these failures up, consumer preferences are thwarted. This is just what Keynes proposed.

"Keynes defied common sense and willfully resorted to paradox."Further, Keynes ignored the significance of a fundamental fact. The rate of interest is also a price. It reflects the preferences of consumers for present over future goods: the greater the time preference, the higher the rate of interest. Keynes's principal aim in economic policy, not only to combat depressions but more generally, was to keep the rate of interest low: ideally, it should be done away with entirely. To do so flies in the face of consumer preferences. If the rate of interest is forced below what it would have been on the unhampered market, then people are being compelled to invest more than they wish.

The point holds altogether apart from the Austrian theory of the business cycle, which Lewis fully accepts. That theory tells us that forcing the rate of interest below the natural rate may lead to an unsustainable boom. But even if this theory were mistaken, interference with interest rates would still distort the economic system.

Businesses depend on prices to give them the information with which to run the economy. If the price system for interest rates is broken, no part of the price system is unaffected. (p. 90)

To prevent the price system from functioning hardly seems the course of wisdom: why then did Keynes recommend it? He argued that, in a depression, government action is needed to stave off disaster. If businesses are allowed to collapse, then a wave of pessimism will be set off. Entrepreneurs will anticipate yet further declines, and the economy will spiral downward into total disaster.

Lewis has little difficulty in showing that this line of thought is mistaken. Why would not resources shift from collapsing businesses to others better suited to use them, without setting off a general conflagration? Keynes assumed without adequate basis that investors are driven by irrational "animal spirits." Keynes condemned what he called "casino capitalism." Investors, in his view, made irrational decisions based on what they guessed others would do. To the contrary, the free market weeds out businessmen who are unable accurately to forecast the wishes of consumers, in favor of those more skilled at this task. During a depression, there is what Rothbard calls a "cluster of entrepreneurial errors": precisely the task of an adequate business-cycle theory is to explain this phenomenon. Keynes did not do so. He appeals to a failure of his "animal spirits": investors lose confidence in massive proportions. But he does not account for the wave of pessimism.

But even if Keynes does not have an account to offer of why there are swings of optimism and pessimism, does this invalidate his remedy for depression? Keynes does, after all, give a reason for not allowing prices to fall in a depression: to do so would set off a wave of further reductions, leading to a worse situation. Once more, Lewis challenges Keynes: why should lowered prices induce businessmen to expect even further reductions, in a way that sends the economy spiraling to disaster? If the argument is that lower prices, along with lower wages, will lead to expectations of decreased spending, this rests on confusion.

What about the … claim that wage cuts will backfire by reducing workers' buying power, which in turn will reduce business revenue? As Henry Hazlitt noted, Keynes is confusing wage rates with wages earned … so long as prices fall faster than wages, real (price-adjusted) worker income may actually rise. (p. 228)

Lewis brings out fully that Keynes had much more in mind than a cure for depressions. He thought that boom conditions could be permanently maintained by lowering the rate of interest nearly to zero. In that way, the scarcity of capital could be ended. In The General Theory, Keynes said,

The remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus leaving us in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom. (pp. 20–21)

Is this not an incredible doctrine? The interest rate is to be lowered by an expansion of credit. But production can increase only through an increase in capital goods. Putting pieces of paper designated "money" into circulation will not by itself increase prosperity, even if all the new money is, as Keynes wished, spent and not hoarded. To think otherwise is to indulge in magical thinking.

"The entire Keynesian edifice rests on a central paradox: impeding the central mechanism of the free market will restore prosperity."Keynes was not satisfied, furthermore, with recommending inflation as the key to promote prosperity. He extended his view into a full-fledged inflationist theory of history. "That the world after several millennia of steady individual saving, is so poor," Keynes claimed, "is to be explained … [by] high rates of interest" (p. 17). (Incidentally, the French literary figure Georges Bataille developed a similar theory of history. See his The Accursed Share, Volume 1: Consumption.)

Keynes's program went far beyond monetary expansion. He wanted the government to take control of investment. Wise planners would do much better in guiding the economy than the speculators of "casino capitalism." He remarks in The General Theory that he favors "a somewhat comprehensive socialization of investment" (p. 56).

Does not this program pose a severe threat to liberty, in a way classically explained by Friedrich Hayek in The Road to Serfdom? How can one preserve civil liberties in a state-controlled economy? Of this danger Keynes was well aware, and he praised Hayek for having written "a grand book," with which he was "morally and philosophically" in agreement. But this did not lead him to abandon his penchant for planning. He thought that the dangers of planning could be averted if matters were left to wise experts – experts including him as a prime example. Keynes's egotism knew no bounds.

$19 $18
"Keynes assumed without adequate basis that investors are driven by irrational 'animal spirits'."Lewis has presented Keynes as an inflationist, but is not he vulnerable to an objection? Keynes recommended increased spending in bad conditions, but did he not also call for restraint once full employment was reached?

In that case, spending would drive up prices, to no good effect. In responding to this objection, Lewis makes one of his most valuable points. True enough, one can find in Keynes's writings warnings against inflation. But Keynes set such stringent conditions for inflation that it would almost never exist. Specifically, so long as there is some unemployment present, as there invariably is, there is no inflation.

Lewis has exposed with unmatched clarity the lineaments of Keynes's system and enabled us to see exactly its disabling defects. Keynes defied common sense, unable to sustain the brilliant paradoxes that his fertile intellect constantly devised. Lewis's book is an ideal guide to Keynes's dangerous and destructive economics.


http://mises.org/daily/3916

[Voltaire]

hahaha what a joke...the person who wrote that wall of rubbish obviously has no grasp of economic theory. I really pity you if your persuaded by such a blatant straw man, I mean, the whole point of Keynes's theory is that the price system fails in a free market, i.e. prices are 'rigid'.
What a horrible, and dishonest, analysis.

[TrueLight]

prices aren't rigid in a free market- they freely fluctuate in accordance to supply and demand  and real production etc...
its the government and central banks that interfere with that and keep the prices "rigid" through manipulation of interest rates and other regulations...

u do realise...keynes ideas is pretty new if you look at the whole history of time..... and as u can see the central economic planning that it entails causes the boom bust cycle and all the other problems...
so i think the keynes fantasy boom has rubbed off on you

[TrueLight]

Government Price Fixing

"By implication they put the blame for higher prices on the greed and rapacity of businessmen, instead of on the inflationary monetary policies of the officeholders themselves.

Let us first see what happens when the government tries to keep the price of a single commodity, or a small group of commodities, below the price that would be set in a free competitive market.

When the government tries to fix maximum prices for only a few items, it usually chooses certain basic necessities, on the ground that it is most essential that the poor be able to obtain these at a “reasonable” cost. Let us say that the items chosen for this purpose are bread, milk and meat.

The argument for holding down the price of these goods will run something like this: If we leave beef (let us say) to the mercies of the free market, the price will be pushed up by competitive bidding so that only the rich will get it. People will get beef not in proportion to their need, but only in proportion to their purchasing power. If we keep the price down, everyone will get his fair share.

The first thing to be noticed about this argument is that if it is valid the policy adopted is inconsistent and timorous. For if purchasing power rather than need determines the distribution of beef at a market price of $2.25 cents a pound, it would also determine it, though perhaps to a slightly smaller degree, at, say, a legal “ceiling” price of $1.50 cents a pound. The purchasing-power-rather-than-need argument, in fact, holds as long as we charge anything for beef whatever. It would cease to apply only if beef were given away.

But schemes for maximum price-fixing usually begin as efforts to “keep the cost of living from rising.” And so their sponsors unconsciously assume that there is something peculiarly “normal” or sacrosanct about the market price at the moment from which their control starts. That starting or previous price is regarded as “reasonable,” and any price above that as “unreasonable,” regardless of changes in the conditions of production or demand since that starting price was first established.

In discussing this subject, there is no point in assuming a price control that would fix prices exactly where a free market would place them in any case. That would be the same as having no price control at all. We must assume that the purchasing power in the hands of the public is greater than the supply of goods available, and that prices are being held down by the government below the levels to which a free market would put them.

Now we cannot hold the price of any commodity below its market level without in time bringing about two consequences. The first is to increase the demand for that commodity. Because the commodity is cheaper, people are both tempted to buy, and can afford to buy, more of it. The second consequence is to reduce the supply of that commodity. Because people buy more, the accumulated supply is more quickly taken from the shelves of merchants. But in addition to this, production of that commodity is discouraged. Profit margins are reduced or wiped out. The marginal producers are driven out of business. Even the most efficient producers may be called upon to turn out their product at a loss. This happened in World War II when slaughter houses were required by the Office of Price Administration to slaughter and process meat for less than the cost to them of cattle on the hoof and the labor of slaughter and processing.

If we did nothing else, therefore, the consequence of fixing a maximum price for a particular commodity would be to bring about a shortage of that commodity. But this is precisely the opposite of what the government regulators originally wanted to do. For it is the very commodities selected for maximum price-fixing that the regulators most want to keep in abundant supply. But when they limit the wages and the profits of those who make these commodities, without also limiting the wages and profits of those who make luxuries or semiluxuries, they discourage the production of the price-controlled necessities while they relatively stimulate the production of less essential goods.

Some of these consequences in time become apparent to the regulators, who then adopt various other devices and controls in an attempt to avert them. Among these devices are rationing, cost-control, subsidies, and universal price-fixing. Let us look at each of these in turn.

When it becomes obvious that a shortage of some commodity is developing as a result of a price fixed below the market, rich consumers are accused of taking “more than their fair share”; or, if it is a raw material that enters into manufacture, individual firms are accused of “hoarding” it. The government then adopts a set of rules concerning who shall have priority in buying that commodity, or to whom and in what quantities it shall be allocated, or how it shall be rationed. If a rationing system is adopted, it means that each consumer can have only a certain maximum supply, no matter how much he is willing to pay for more.

If a rationing system is adopted, in brief, it means that the government adopts a double price system, or a dual currency system, in which each consumer must have a certain number of coupons or “points” in addition to a given amount of ordinary money. In other words, the government tries to do through rationing part of the job that a free market would have done through prices. I say only part of the job, because rationing merely limits the demand without also stimulating the supply, as a higher price would have done.

The government may try to assure supply through extending its control over the costs of production of a commodity. To hold down the retail price of beef, for example, it may fix the wholesale price of beef, the slaughter-house price of beef, the price of live cattle, the price of feed, the wages of farmhands. To hold down the delivered price of milk, it may try to fix the wages of milk truck drivers, the price of containers, the farm price of milk, the price of feedstuffs. To fix the price of bread, it may fix the wages in bakeries, the price of flour, the profits of millers, the price of wheat, and so on.

But as the government extends this price-fixing backwards, it extends at the same time the consequences that originally drove it to this course. Assuming that it has the courage to fix these costs, and is able to enforce its decisions, then it merely, in turn, creates shortages of the various factors — labor, feedstuffs, wheat, or whatever—that enter into the production of the final commodities. Thus the government is driven to controls in ever-widening circles, and the final consequence will be the same as that of universal price-fixing.

The government may try to meet this difficulty through subsidies. It recognizes, for example, that when it keeps the price of milk or butter below the level of the market, or below the relative level at which it fixes other prices, a shortage may result because of lower wages or profit margins for the production of milk or butter as compared with other commodities. Therefore the government attempts to compensate for this by paying a subsidy to the milk and butter producers. Passing over the administrative difficulties involved in this, and assuming that the subsidy is just enough to assure the desired relative production of milk and butter, it is clear that, though the subsidy is paid to producers, those who are really being subsidized are the consumers. For the producers are on net balance getting no more for their milk and butter than if they had been allowed to charge the free market price in the first place; but the consumers are getting their milk and butter at a great deal below the free market price. They are being subsidized to the extent of the difference—that is, by the amount of subsidy paid ostensibly to the producers.

Now unless the subsidized commodity is also rationed, it is those with the most purchasing power that can buy most of it. This means that they are being subsidized more than those with less purchasing power. Who subsidizes the consumers will depend upon the incidence of taxation. But men in their role of taxpayers will be subsidizing themselves in their role of consumers. It becomes a little difficult to trace in this maze precisely who is subsidizing whom. What is forgotten is that subsidies are paid for by someone, and that no method has been discovered by which the community gets something for nothing.

Price-fixing may often appear for a short period to be successful. lt can seem to work well for a while, particularly in wartime, when it is supported by patriotism and a sense of crisis. But the longer it is in effect the more its difficulties increase. When prices are arbitrarily held down by government compulsion, demand is chronically in excess of supply. We have seen that if the government attempts to prevent a shortage of a commodity by reducing also the prices of the labor, raw materials and other factors that go into its cost of production, it creates a shortage of these in turn. But not only will the government, if it pursues this course, find it necessary to extend price control more and more downwards, or “vertically”; it will find it no less necessary to extend price control “horizontally.” If we ration one commodity, and the public cannot get enough of it, though it still has excess purchasing power, it will turn to some substitute. The rationing of each commodity as it grows scarce, in other words, must put more and more pressure on the unrationed commodities that remain. If we assume that the government is successful in its efforts to prevent black markets (or at least prevents them from developing on a sufficient scale to nullify its legal prices), continued price control must drive it to the rationing of more and more commodities. This rationing cannot stop with consumers. In World War II it did not stop with consumers. It was applied first of all, in fact, in the allocation of raw materials to producers.

The natural consequence of a thoroughgoing over-all price control which seeks to perpetuate a given historic price level, in brief, must ultimately be a completely regimented economy. Wages would have to be held down as rigidly as prices. Labor would have to be rationed as ruthlessly as raw materials. The end result would be that the government would not only tell each consumer precisely how much of each commodity he could have; it would tell each manufacturer precisely what quantity of each raw material he could have and what quantity of labor. Competitive bidding for workers could no more be tolerated than competitive bidding for materials. The result would be a petrified totalitarian economy, with every business firm and every worker at the mercy of the government, and with a final abandonment of all the traditional liberties we have known. For as Alexander Hamilton pointed out in the Federalist Papers nearly two centuries ago, “A power over a man’s subsistence amounts to a power over his will.”

These are the consequences of what might be described as perfect,” long-continued, and “nonpolitical” price control. As was so amply demonstrated in one country after another, particularly in Europe during and after World War II, some of the more fantastic errors of the bureaucrats were mitigated by the black market. In some countries the black market kept growing at the expense of the legally recognized fixed-price market until the former became, in effect, the market. By nominally keeping the price ceilings, however, the politicians in power tried to show that their hearts, if not their enforcement squads, were in the right place.

Because the black market, however, finally supplanted the legal price-ceiling market, it must not be supposed that no harm was done. The harm was both economic and moral. During the transition period the large, long-established firms, with a heavy capital investment and a great dependence upon the retention of public good-will, are forced to restrict or discontinue production. Their place is taken by fly-by-night concerns with little capital and little accumulated experience in production. These new firms are inefficient compared with those they displace; they turn out inferior and dishonest goods at much higher production costs than the older concerns would have required for continuing to turn out their former goods. A premium is put on dishonesty. The new firms owe their very existence or growth to the fact that they are willing to violate the law; their customers conspire with them; and as a natural consequence demoralization spreads into all business practices.

It is seldom, moreover, that any honest effort is made by the price-fixing authorities merely to preserve the level of prices existing when their efforts began. They declare that their intention is to “hold the line.” Soon, however, under the guise of “correcting inequities” or “social in justices,” they begin a discriminatory price-fixing which gives most to those groups that are politically powerful and least to other groups.

As political power today is most commonly measured by votes, the groups that the authorities most often attempt to favor are workers and farmers. At first it is contended that wages and living costs are not connected; that wages can easily be lifted without lifting prices. When it becomes obvious that wages can be raised only at the expense of profits, the bureaucrats begin to argue that profits were already too high anyway, and that lifting wages and holding prices will still permit a “fair profit.” As there is no such thing as a uniform rate of profit, as profits differ with each concern, the result of this policy is to drive the least profitable concerns out of business altogether, and to discourage or stop the production of certain items. This means unemployment, a shrinkage in production and a decline in living standards.

What lies at the base of the whole effort to fix maximum prices? There is first of all a misunderstanding of what it is that has been causing prices to rise. The real cause is either a scarcity of goods or a surplus of money. Legal price ceilings cannot cure either. In fact, as we have just seen, they merely intensify the shortage of goods. What to do about the surplus of money will be discussed in a later chapter. But one of the errors that lie behind the drive for price-fixing is the chief subject of this book. Just as the endless plans for raising prices of favored commodities are the result of thinking of the interests only of the producers immediately concerned, and forgetting the interests of consumers, so the plans for holding down prices by legal edict are the result of thinking of the short-run interests of people only as consumers and forgetting their interests as producers. And the political support for such policies springs from a similar confusion in the public mind. People do not want to pay more for milk, butter, shoes, furniture, rent, theater tickets or diamonds. Whenever any of these items rises above its previous level the consumer becomes indignant, and feels that he is being rooked.

The only exception is the item he makes himself: here he understands and appreciates the reason for the rise. But he is always likely to regard his own business as in some way an exception. “Now my own business,” he will say, “is peculiar, and the public does not understand it. Labor costs have gone up; raw material prices have gone up; this or that raw material is no longer being imported, and must be made at a higher cost at home. Moreover, the demand for the product has increased, and the business should be allowed to charge the prices necessary to encourage its expansion to supply this demand.” And so on. Everyone as consumer buys a hundred different products; as producer he makes, usually, only one. He can see the inequity in holding down the price of that. And just as each manufacturer wants a higher price for his particular product, so each worker wants a higher wage or salary. Each can see as producer that price control is restricting production in his line. But nearly everyone refuses to generalize this observation, for it means that he will have to pay more for the products of others.

Each one of us, in brief, has a multiple economic personality. Each one of us is producer, taxpayer, consumer. The policies he advocates depend upon the particular aspect under which he thinks of himself at the moment. For he is sometimes Dr. Jekyll and sometimes Mr. Hyde. As a producer he wants inflation (thinking chiefly of his own services or product); as a consumer he wants price ceilings (thinking chiefly of what he has to pay for the products of others). As a consumer he may advocate or acquiesce in subsidies; as a taxpayer he will resent paying them. Each person is likely to think that he can so manage the political forces that he can benefit from a rise for his own product (while his raw material costs are legally held down) and at the same time benefit as a consumer from price control. But the overwhelming majority will be deceiving themselves. For not only must there be at least as much loss as gain from this political manipulation of prices; there must be a great deal more loss than gain, because price-fixing discourages and disrupts employment and production."

Henry Hazlitt

[Voltaire]

haha if your denying prices are rigid then clearly you have some serious mental handicaps.
I suggest you enroll yourself in some proper macroeconomic classes rather than indulging that small mind of yours in these bizarre, and fatuous essays (that have clearly been churned out by right-wing 'liberty' nut jobs who most likely work in a meat-work factory).

[TrueLight]

haha if your denying prices are rigid then clearly you have some serious mental handicaps.
I suggest you enroll yourself in some proper macroeconomic classes rather than indulging that small mind of yours in these bizarre, and fatuous essays (that have clearly been churned out by right-wing 'liberty' nut jobs who most likely work in a meat-work factory).

you obviously haven't read anything i wrote
but you clearly define narrow mindedness since you cannot try to reason with proper justification anything i put forward and your obviously closed to any other economic thought other than keynesianism
and Austrian economics is still the one who predicted this crisis, explained how it occurs in a logical fashion and is in my opinion the one that makes the most sense.. and you do know F.A Hayek was an Austrian economist who won the Nobel prize in economics in 1974