The free market had its chance; time for the government to finally act!

As sheep led to slaughter, so are we fools who perpetually adhere to fallacious economic dogma. In this instance, our shepherd is Robert Reich, writing in Salon, wherein he offers a supposedly innovative panacea that reveals itself as a static, predictable policy.

Mr. Reich identifies the fundamental issue that exacerbates America’s economic malaise and propels the recent debt ceiling debate: Two parallel universes exist in America. One universe, inhabited by normal Americans, has been caught by and cannot break a vicious economic cycle that perpetuates unemployment, declining wages, and sub-optimal spending levels. The other universe, inhabited by Washington politicians, hangs aloof, happily oblivious to structural issues and hellbent on reducing the federal budget deficit.

If only the politicians would realize that the government must become the Keynesian “spender of last resort” to repair the broken engine that is the American economy, he writes, the economic downturn can be overcome.

Far be it from my actual intention to suggest his insight of two parallel universes is wrong (inaccurate to a degree, perhaps, but not terribly wrong). However, Mr. Reich ignores a third universe: The one in which he lives. 

David Frum's Critique Is Far From Sound

In his weekly CNN column, David Frum argues that "Ron Paul's money plan is far from golden," but makes a lot of mistakes in his analysis.

He uses the same tired, old, and refuted Keynesian argument that a free monetary system based on gold currency is too inflexible. He argues the Great Depression happened because the gold standard prevented the government from being able to expand the monetary supply to get us out of the economic recession.

His prescription for avoiding the Great Depression is the Keynesian idea that the Federal Reserve should print up money out of nothing to extend credit to the government (by purchasing Treasury bonds), and that the government could then ramp up spending to stimulate the economy. Frum argues that this could not occur in 1929 because of the gold standard, and the economic contraction slipped into a full-blown depression without government stimulus.

Frum believes, like the defunct Keynes, that a government-sponsored central banking system can ease busts by expanding the money supply, and then take the excess money back out during booms when the growing economy can safely absorb the monetary contraction. This necessarily assumes that you won't have high inflation during an economic recession.

Hayek v. Keynes Rap

Ridiculously awesome, or just ridiculous?

(H/T to Tom G. Palmer)

Government Motors Fail

So General Motors' (now known by many as Government Motors) sales fell by 22 percent in the first quarter of 2009. Hmmm... looks like our taxpaying dollars went to a great cause right?

Read the details here.