"malaise" speech

July 15th was the 32nd anniversary of President Jimmy Carters much maligned "malaise" speech. Funny how History repeats itself.

The Broken Window Fallacy and "Cash for Klunkers"

FT.com has a short article that quotes economist's advising that the "cash 4 Klunkers" program is having a nice impact on auto sales, but a very negative impact on retailers and service providers across the country. The money that would otherwise be naturally stimulative is being redirected away from the rest of the economy. This is a perfect example of the broken window fallacy, an economic parable that proponents of big government expansion and stimulus packages continue to ignore. It was true when President Bush was doing it, and it is especially true of the Titanically proportioned stimulus II produced by Prime Minister Pelosi at President Obama's request.

The figures came in the day after the White House's overly optimistic media base reported that the recession was showing signs of leveling out. They expected an increase in spending, with cash for klunkers leading the way, but according to Reuters:

A Commerce Department report on Thursday showed total retail sales edged down 0.1 percent after increasing 0.8 percent in June. Excluding motor vehicles and parts, sales fell 0.6 percent in July after rising 0.5 percent the prior month.

Analysts had expected a boost to retail sales from the government's "cash for clunkers" program and predicted a 0.7 percent advance in overall July sales.

They said the program -- which gives consumers discounts to swap aging gas-guzzling cars for new, more fuel efficient models -- had pulled spending away from other sectors.

Please let your Congressmen in on this information. Someone has to let them know what is really going on out here. Judging from these town hall meetings, they have no idea.

The experts laughed at Libertarian economic predictions but....

....no one is laughing now. The following video is very telling about how Libertarians who believe in laissez-faire economics via the Austrian School of economics are generally laughed at by so called money experts.
You see, it was people like Peter Schiff and Ron Paul who follow the Austrian approach who predicted exactly what happened with our economy while everyone around them actually laughed at them.
Furthermore, Austrian economists didn't just warn of the coming bust, they offered solutions and ways to avoid the credit disaster entirely, but no one would listen to them.

I am sad to report that they are still not listening, despite the evidence all around them. Instead, they are taking steps that will ensure our economy recovers as slow as possible, introducing corporatism and corporate welfare on a scale never seen before. They are trying to remove the penalty for poor economic policy in an effort to prop up that bad policy and keep it chugging along, draining this nations economic wealth. What they are doing is removing moral hazards from the scene, ensuring that this bad business model continues.
And if President Elect Obama is wise, he will hire Peter Schiff into his administration and listen to his advice.