Like the rest of the world, I am deeply saddened and angered by the unfathomable mass killing of 20 children and six women at a school in Newtown, Conn., by a deranged gunman. My heart goes out to all of the victims and their families, as well as their friends. This tragedy already has led to bills in Congress to (1) ban “assault weapons” or (2) repeal the “Gun Free Zone Act of 1990” that keeps schools from beefing up security. I suspect that passing more laws isn’t going to end these killings until we address the deeper causes of social decline in America. See “Persuasion vs. Force” pamphlet by my wife and me at http://www.mskousen.com/persuasion-vs-force-by-mark-skousen/.
On Wall Street and on Main Street, the reaction has been swift. Although gun sales skyrocketed after the assault as citizens bought weapons to protect themselves and their families, gun manufacturers saw their stock prices collapse. Smith & Wesson (SWHC) and Sturm, Rugar & Co. (RGR) fell by more than 20% after the tragic shooting, although they since have recovered a bit. Investors know that legislatures will probably pass new laws curtailing the manufacturer of military-grade semi-automatic rifles and make handguns harder to get legally. Retail stories like Walmart and Dick’s Sporting Goods already have suspended sales of some rifles.
Vice President Joe Biden has been asked by the president to lead a task force on preventing gun violence and to look at the state of mental health in America. I hope the task force goes beyond the symptoms of the problem — the use of guns — and focuses on the deeper causes of disturbing mental illness in this country. Many mass murderers have been on Ritalin, Zoloft, Prozac, or other psychiatric drug. But the stock prices of those drug manufacturers keep going up.
You Blew It! Is Inflation Good?
“Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.”
— Paul Krugman, New York Times, December 15, 2012
For Paul Krugman, winner of the Swedish Riksbank Prize (mislabeled sometimes as the Nobel Prize in Economics), nothing is dangerous when it comes to government policy. Even though the national debt exceeds our annual final output, the Gross Domestic Product (GDP), of more than $17 trillion, he urges the Obama administration to triple the current deficit of $1.4 trillion to get the economy going. We can get away with it, he reasons, because interest rates are so low. (But what happens when rates rise sharply?)
Krugman is living up to his “crude” last name. He is the ultimate crude Keynesian who thinks that we are reliving the Great Depression.
Keynesian fiscal policy is extremely dangerous because it gives credence to the idea that government spending should be used at times (whenever there is a recession) to stimulate the economy. No longer is government limited to its useful purposes and legitimate functions. It must now serve as a stimulant. That situation opens Pandora’s Box.
Krugman is just as bad when it comes to monetary policy. He apparently favors rapid increases in the money supply and the monetary base to stimulate the economy. He says the only effect will be a fall in the dollar. It will cause the dollar to fall, but that’s not the only ill-effect. It will cause consumer and business prices to skyrocket in what Ludwig von Mises called the “crack up” boom, not unlike the real estate bubble created a few years ago.
I have a better quote, this one from Mises: “Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless.”
To read my e-letter from last week, please click here. I also invite you to comment about my columns in the section provided below.
Yours for peace, prosperity and liberty, AEIOU,
Mark Skousen
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