Monthly Archives: November 2007
The Road To Recession
The American economy, fueled by the mortgage market, has soared over the last few years. What remains to be seen is whether there is a crash, as myself and others are predicting, or a “soft landing”, as many economists predict. Of course, The Economist magazine explains just what those predictions are usually worth:
IN 1929, days after the stockmarket crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability”. In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession’s pitiful forecasting record offers little comfort. Our latest assessment (see article) suggests that the United States may well be heading for recession.
So are we on the road to recession*? A lot of that depends on inflation (see the postscript at the end of this article), which means a lot of it depends on the dollar. I have contended that a lot of our inflation is being hidden by other countries hoarding dollars as a reserve currency, which acts as a sinkhole where those dollars are removed from the general economy. It’s possible, though, that this may be changing:
The enfeebled dollar—lately in sight of $1.50 to the euro—would be weaker still without enormous purchases by central banks in emerging economies. This support is now waning. China and others are putting a smaller share of increases in reserves into the American currency. And Asian and Middle Eastern countries with currencies linked to the dollar are facing rising inflation, but falling American interest rates make it harder to tighten their own monetary policy. They may have to let their currencies rise against the sickly greenback, meaning they will need to buy fewer dollars. More important, as international investors wake up to the relative weakening of America’s economic power, they will surely question why they hold the bulk of their wealth in dollars. The dollar’s decline already amounts to the biggest default in history, having wiped far more off the value of foreigners’ assets than any emerging market has ever done.
The vigour of emerging economies is good news for the world economy: for its growth, it has much less need of a strong America. The bad news for America is that this, in turn, may mean that the world also has less need of the dollar.
Good news for the world… From the emphasized portion of the excerpt above, our inflationary policies continually devalue the reserves of dollars that other nations hold. If they can find a reserve with more stable value than the dollar, they might escape from dollar hegemony. But that’s bad news for America, as we may have to earn our imports, instead of sending newly-printed bills overseas to obtain them.
Quotes Of The Day: James Madison Edition
Words of wisdom from the Father Of The Constitution:
“If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy.”
“It is a universal truth that the loss of liberty at home is to be charged to the provisions against danger, real or pretended, from abroad.”
“No nation could preserve its freedom in the midst of continual warfare.”
“The executive has no right, in any case, to decide the question, whether there is or is not cause for declaring war.”
“War should only be declared by the authority of the people, whose toils and treasures are to support its burdens, instead of the government which is to reap its fruits.”
“Each generation should be made to bear the burden of its own wars, instead of carrying them on, at the expense of other generations.”
H/T: Sully
Sunday Open Thread: Understanding The Bitterness
Mark at Publius Endures throws some questions to that sub-set of Ron Paul supporters who have reacted to any sign of disagreement as a personal afront — something we’ve seen here in comment threads like this one, this one, and this one:
As I and a number of other libertarian bloggers who question Ron Paul on some things have found out, there seems to be a mentality that if you don’t support every word that Ron Paul says, you are inherently anti-liberty and anti-freedom. Isn’t this exactly the kind of “you’re either with us or you’re against us” mentality that libertarianism seeks to avoid, and that would usually be defined as “collectivism”?
(…)
How does launching into ad hominems against any person who criticizes a Ron Paul position help the Ron Paul campaign? Shouldn’t your goal be to gain their support or at least encourage them to continue giving Ron Paul free publicity?
If your goal is to silence Ron Paul’s critics, then isn’t that quite the opposite of freedom? If your goal is to persuade them, then how does name-calling and baseless accusations about motive make a persuasive case?
I’ve often wondered the same thing myself. So, tell me, what do you think ?
The Awakening Libertarian Masses ?
Reason Magazine’s Nick Gillespie and David Weigel Matt Welch have a front-page piece in this week’s Washington Post Sunday Outlook section devoted to explaining to the Beltway glitterati just what this libertarian thing is all about:
When a fierce Republican foe of the wars on drugs and terrorism is able, without really trying, to pull in a record haul of campaign cash on a day dedicated to an attempted regicide, it’s clear that a new and potentially transformative force is growing in American politics.
That force is less about [Texas Congressman Ron] Paul than about the movement that has erupted around him — and the much larger subset of Americans who are increasingly disillusioned with the two major political parties’ soft consensus on making government ever more intrusive at all levels, whether it’s listening to phone calls without a warrant, imposing fines of half a million dollars for broadcast “obscenities” or jailing grandmothers for buying prescribed marijuana from legal dispensaries.
And while the media focuses on opposition to the Iraq War as the primary reason behind the phenomenon of people who have never been involved in politics before rallying behind a grandfather from Texas, Gillespie and Weigel Welch argue that there’s more to it than that, and more to it than just Ron Paul:
[I]f war were the only answer for his improbable run, why Ron Paul instead of the perennial peacenik Dennis Kucinich, the Democratic congressman from Ohio whose apparent belief in UFOs is only slightly less kooky than his belief in the efficacy of socialized health care?
Part of the reason is Republican muscle memory. Paul’s “freedom message” is the direct descendant of Barry Goldwater’s once-dominant GOP philosophy of libertarianism (which Ronald Reagan described in a 1975 Reason magazine interview as “the very heart and soul of conservatism”). But that tradition has been under a decade-long assault by religious-right moralists, neoconservative interventionists and a governing coalition that has learned to love Medicare expansion and appropriations pork.
So Paul’s challenge represents a not-so-lonely GOP revival of unabashed libertarianism. All his major Republican competitors want to double down on Bush’s wars; none is stressing any limited-government themes, apart from half-hearted promises to prune pork and tinker on the margins of Social Security.
The real test isn’t going to come from who wins in New Hampshire, or who wins the Republican nomination. The real test will be whether the events of 2007 and 2008 encourage others in the Republican Party (and I say Republican Party, because the prospect of the Democrats ever becoming a free-market party again are essentially nil) to turn take their party back from the authoritarians. Gillespie and Weigel Welch, at least think that it will:
Ron Paul may lose next year’s battle — though not without a memorable fight — but the laissez-faire agitators he has helped energize will find themselves at the leading edge of American politics and culture for years to come.
Let’s hope they’re right.
Update: Edited to note the fact that Matt Welch was the co-author of this Op-Ed piece, not David Weigel.
