Crapflooding and "experts"

One of the things that Party ideologues are fond of saying is that there's lots of experts, so why should we listen to one set of experts over another? The Party commissars then flood the airwaves with their own pet experts, who contradict everything that non-Party experts say.

This is, once again, crapflooding, where truth is crowded out underneath a sea of lying liars. Far be it for me to contradict the Party commissars, but there is a clear answer to figuring out which experts are worth listening to vs. what experts are not worth listening to: Look at their past history. If they have been right in the past, listen to them. Not uncritically, but listen to them, examine whether there is a factual basis for what they are saying or whether they are merely reciting Party doctrine handed down to them by their Party commissars. You may or may not find that they have a point. If they have been largely wrong in the past, ignore them like a steaming pile of dog dung. So I will listen to Paul Krugman, because he was right. I will ignore the Party commissars' pet "experts", because they were wrong -- they said that the economy was fine, peachy keen, needed no help but tax cuts, neener neener! Uhm, right. Which is why 8 years of tax cuts resulted in today's fine prosperity (sarcasm intended, since we lost 1.2 million jobs in the last two months alone).

As for the folks who whine about the magic of markets and such, markets work perfectly when everybody has perfect information and when the value of the dollar stays stable. Unfortunately, when the economy is threatening to enter into a deflationary spiral a' la' 1932, something has to be done to stabilize the value of the currency or the economy slams to a halt because goods and services quit flowing because money disappears into mattresses waiting for deflation to make it more valuable, rather than going into investment in the economy or buying goods or services. This isn't theory. This is fact. We have historical data proving this.

Which brings up the most important role of government in an economy, which is *not* to control the economy, but, rather, to make sure that money has a consistent value. You can't simply print money (whether via tax cuts or simply doing helicopter drops of hundred dollar bills over major cities) when you see the economy entering a deflationary spiral. When there are deflationary expectations, newly-printed money simply disappears under mattresses, where it does nothing to cause goods and services to flow in the economy and might as well be pretty pieces of toilet paper for all the good it does in the economy (remember, wealth is not pretty pieces of toilet paper with pictures of dead white men on it, wealth is goods and services, the toilet paper is merely an exchange token). You have to attach strings to it to make sure it gets spent and therefore causes goods and services to flow in the economy. Like food stamps, where you can't put it under your mattress and hold on to it, you have to spend it on food. Or construction contracts, where you can't put it under a mattress (if you're a construction company), you have to actually spend it on the steel and concrete and workers necessary to build the bridge. Otherwise you're just dumping money into the Marinas trench rather than getting it out into the economy.

Now, does the government control the economy when it's doing this, Soviet-style? No. The government is only controlling the money supply, something which even Thomas Jefferson acknowledged was necessary to do, though ole' Tom didn't know anything about economics (he had absolutely no conception of how the multiplier effect of fractional reserve lending works to expand and contract the money supply, for example) so he didn't have any idea how to do it. When the money supply starts growing again because money is moving out from under mattresses back into the economy, the government can then sell all the securities it bought during the downturn and suck that mattress money back out of the economy as it gets pulled out and dumped into the money supply, and the unit of exchange for goods and services, the dollar, is saved from runaway inflation. But if you don't have a stable unit of exchange -- a currency with a constant value -- markets simply don't work because the unit of exchange either becomes worthless due to inflation or becomes so valuable due to deflation that it disappears under mattresses rather than being available to use to buy goods and services and invest in production.

In short, the proper role of government in a capitalist society is to a) insure the free flow of information so that people sold AAA-rated bonds are being sold real AAA bonds, not trash backed by liar loans, and b) maintain a monetary unit of exchange that has a consistent value despite the normal fluctuations caused by market-based activities (specifically, fractional reserve lending) that ordinarily print and destroy money during the normal operation of economic cycles. And that is all I have seen thus far from Washington D.C.... folks who start screaming about "socialism!" etc. need to adjust their tin foil hats, because what is largely being done (aside from some pork here and there) is entirely adjustments of the money supply via either monetary or fiscal policy.

Note that none of this is particularly controversial by any economist willing to look at facts rather than blinded by Party ideology. Even Milton Friedman admitted that the above was true. Economists can argue about the best way to pump money into the economy during downturns in order to keep the value of the monetary unit stable as money is un-printed due to reserves increasing (fractional reserve lending, remember?), but none of them will argue that it's necessary to keep it stable. Heck, even Thomas Jefferson knew that.

-- Badtux the Economics Penguin