Don’t Let These Guys Anywhere Near Monetary Policy

22 Oct

Don’t Let These Guys Anywhere Near Monetary Policy

The disastrous economists are a signal to buy gold!

Like other disasters, hurricanes are bad for the economy.  So are most Washington economists.  The destructive effects of both are frightful and when these “disastrous economists” are making monetary policy, it is a very good time to own gold!

Year in and year out, statist economists and their followers are like an echo chamber with this nonsense touting the economic stimulus to be had from natural disasters and wars, and the benefits of rebuilding.  Some examples:

  • Let’s start with former Federal Reserve Vice Chairman and New York Fed President William Dudley who explained on CNBC a few years ago that Hurricanes Harvey and Irma actually would lead to increased economic activity over the long run: 

“The long-run effect of these disasters unfortunately is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms.”

“I would expect that by the time we get to the end of the year and early 2018, the transitory negative effects of this storm I think will be over and we actually will start to see some of the benefits of the rebuilding efforts in terms of boosting the economy,” Dudley said.

  • No one can illustrate this class of reasoning more effectively than Larry Summers, himself a former World Bank chief economist, U.S. Treasury secretary, Harvard president, and Kennedy School professor. After the 2011 Japanese earthquake and tsunami, Summers went on display:

“This is clearly going to add complexity to Japan’s challenge of economic recovery. It may lead to some temporary increments ironically to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength.”

  • Every disaster brings these no-nothings out.  Bush administration Labor Secretary Elaine Chao gave voice to the same view in the aftermath of Hurricane Katrina:

“There is a bright spot in that new jobs do get created. And in the rebuilding.  New Orleans, for example, is going to see one of the biggest construction booms that they have ever seen. So in the aftermath and the rebuilding of a devastated area, there will be a tremendous array of new jobs that are being created. And that is going to help the economic development.”

  • President George Bush expressed the belief that spending on his elective Iraq war was good for the economy, saying, “I think actually the spending in the war might help with jobs . . . because we’re buying equipment, and people are working.” 

Who are these people?  These disastrous economists pop up every time there is a natural disaster to proclaim how wonderful its impact in stimulating economic growth will be.

When government economists, Fed economists, academic economists are disastrous economists, when they are in charge of monetary policy, it is time to run, not walk, to stock up on gold!  Because they are out of their minds. 

It stems from a childish misconception as Frédéric Bastiat, the French economist and statesman, explained in an essay written more than 150 years ago.  Bastiat wrote that destruction is not profit in an easy to understand a piece known as The Broken Window.  

Bastiat’s reasoning, applied to the above situations, is this.  Before the hurricanes, the homes, the bridges, the power lines, and the roads were intact.  The money that will be used to rebuild them could have been used for new things, for additional wealth in the form of additional homes bridges, power lines, and roads.  But now it is used merely to restore what already existed.

Before the earthquakes and the tsunami in Japan, the places destroyed by them already existed.  The capital that went to rebuild those places was no longer available for additional infrastructure.  

After New Orleans was devastated by the floods, the money that went to rebuild New Orleans was no longer available to be used for new projects.  Before the flood there were both the intact city and the capital.  After the floods, the city was rebuilt, but the capital was spent on replacement bricks and mortar, on replacement lumber and asphalt, on replacement bridges and sewers, on replacement schools and homes that were in existence but were destroyed in the floods.  That capital merely restored the status ante quo, the prior state of affairs.

Before Bush’s elective war in Iraq, the schools, homes, hospitals, roads, sanitation facilities, and other infrastructure that were ultimately destroyed were in existence.  Making the US taxpayers rebuild what the war destroyed – schools, homes, hospitals, roads, sanitation facilities, and other infrastructure – left Americans with a mushrooming national debt.  

That burden of that debt doesn’t simply disappear because the disastrous economists don’t notice it.

When these people are in charge – and they dominate in both Republican and Democrat circles and administrations – you can be sure that the money system will be fraudulent, and the currency will be on a trajectory to zero.  People who think destruction creates wealth are the same people who think they can create wealth by printing more dollars.

Buy gold and silver to protect yourself from disastrous economists!