I’ve had several emails regarding unemployment rates during the Roosevelt administration. These readers were confused by some Keynesian sites asserting that the unemployment figures were inflated. One reader wrote that “the unemployment figures must have been greatly exaggerated because they excluded people on relief. If these people had been included then unemployment in 1938 would have been 12.5 percent and not be 19 percent.” I immediately recognised the figures as coming from Michael R. Darby’s 1975 paper1.
There is a sound reason why it is Keynesian votaries that tend to use Darby’s figures while the vast majority of economists and historians stick with the conventional figures. Putting the unemployed on relief and giving them a pay check is called working for the dole. It is an attempt to hide unemployment, not eliminate it. The old statisticians and economists understood that and were scrupulously honest in their estimates. It was called relief because it was understood that this ‘employment’ was a government-funded substitute for real employment. Better to be paid for doing something rather than be paid for doing nothing. Therefore, if these had been real jobs they would not, by definition, have been called relief. Taken to its logical conclusion all a government would have to do to eliminate unemployment is assign the jobless to various activities, no matter how pointless, and classify their dole payments as wages. Continue reading Australia’s recovery from the Great Depression compared with Roosevelt’s sorry unemployment record
Posting will resume next Monday.
The viciously rigged so-called CIA torture report that a vindictive group of Democrats lovingly constructed has been so effectively savaged for its outrageous bigotry, blatant dishonesty and calculated distortions that I didn’t think I could add anything worthwhile to the what the critics were saying, until a reader emailed me a link to Business Insider that had published a report called The CIA’s Post-Torture Problems Have Just Begun. Oddly enough this so-called reporter omitted any reference to the Democrats’ own torture problem: the fact that leading Democrats had been fully informed on the subject and that the Jay Rockefeller went so far as to urge the CIA to be even tougher on terrorists. Yep, it was all the fault of those nasty conservatives.
Continue reading Dianne Feinstein’s so-called torture report and media liars
A Muslim fanatic walked into Sydney café, pulled out a gun and took the customers and staff hostage. Two of the hostages were killed, one while heroically tackling the terrorist, and several wounded. The reaction of the terrorist-sympathising left was to go into protection mode for Muslims. The insufferable Age was able to produce a so-called report on the terrorist without mentioning the relevant fact that he is a Muslim. It did, however, call him a “self-described cleric”.
Now an Age reader would have to determine whether this cleric was a catholic, a Presbyterian, a Buddhist, a Sikh priest or maybe even one of those dastardly fanatical Quakers. Not only that, they would also assume that he was not a real cleric. What the Age did not report is that Manny Conditsis, who was the terrorist’s lawyer, definitely stated that his client “was a cleric in Iran… and that’s been established”. Terrific. A fanatical Iranian cleric was allowed into the country and now two Australians are dead. Only political correctness can explain this insanity. Continue reading Muslim terrorism, the left and the Sydney killings: What is to be done?
My Keynesian critic asserts that the “cut in nominal wages which was one of the reasons we got deflation…” This is nonsense. The deflation was triggered when the London funds started restricting credit in order to build up their reserves. The result was a massive contraction from March 1929 to September 1931 that saw M1 drop by 27.2 per cent and demand deposits by a whopping 33 per cent. This should not even have to be said but the cuts in nominal wages were in response to the deflation and in no way contributed to it. Moreover, it is ludicrous to even suggest that a fall in nominal wages could under any circumstances be deflationary. A deflation is a strictly monetary phenomenon1.
He is right, however, in stating that the appalling increase in the unemployment rate was largely due to the increase in real wages. However, his assertion that as other countries got inflation immediately after they devalued then the devaluation of the Australian pound in January 1931 must also have been followed by inflation is flat out wrong2. A picture, as they say, is worth a thousand words. Although Australia devalued in January 1931 chart 1 shows that retail prices continued their fall from 1929 and did not start rising again until 1934, three years from the devaluation. Continue reading Australia and the Great Depression: recovery was not driven by real wage cuts, devaluation or consumption
This is another response to a Keynesian critic.
My Keynesian critic says I “cannot compare the USA in 1938 and Australia in 1938 apart from both having stimulatory policy”. Well, I can and I did and justifiably so. It’s ludicrous to argue that comparisons are not justified. You also stated that in 1937 America “had the greatest change in fiscal policy under Roosevelt”. Complete baloney – and I have spent considerable time examining the data from official sources. I made my case in my post on the 1937-1938 crash. Prove me wrong and I will cheerfully (well, perhaps not cheerfully) publish it and graciously admit my error.
After that you returned to your GDP mantra even though GDP does not measure growth. In heavens name, how can an economy enjoy economic growth while at the same time consuming its capital? This is akin to a community getting rich by eating its seed corn. I pointed out in my post that it was estimated that net capital consumption dropped by minus 15.2 per cent1. Your response was to completely ignore that fact and keep on stressing Roosevelt’s grossly misleading super-duper GDP record. Continue reading The Great Depression: Australia’s record humiliates Roosevelt and refutes Keynesianism
This post is a response to a Keynesian reader.
If the 1931 spending cuts deepened Australia’s depression, as is alleged, then the rate at which unemployment had been rising would have accelerated. In fact, the reverse happened as shown by the chart below. In the year 1928-29 unemployment leapt by 74 per cent and 42 per cent in the following year. For the year ending 30 June 1931 Commonwealth spending peaked at £68,585,546, after which it fell and the Commonwealth began to accumulate surpluses until war broke out. According to Keynesianism this policy should have been an economic disaster. However, as we can clearly see from the chart, not only did the rate at which unemployment had been increasing slow down significantly, rising by only 5.8 per cent, it then began to quickly drop even though the Commonwealth increased its surplus by 277 per cent and cut spending even further. Continue reading Keynesian fallacies and the Great Depression: or how Australia left Roosevelt eating her dust
What is the real connection between inflation and unemployment? Then again, maybe that should be inflation and employment. That this has been raised several time on this site which got me thinking about a 1993 study called The Costs of Unemployment in Australia1 by Raja Junankar and Cezary Kapuscinski. The authors, both of whom are Keynesians, argued that a “fight inflation first” policy generally incurs more costs than benefits, a view that is held by most of the economics profession.
As I recall, this study elicited a favourable response from our media. The striking thing — in my view — is that though 22 years has passed it seems that not a single free market commentator made an effort to establish a link between inflation, booms and the consequent unemployment. What we do get is the likes of P. D Jonson, Peter Smith, Des Moore, Sinclair Davidson and Steve Kates2, etc., falsely asserting that the so-called boom-bust cycle is a natural part of the free market order and that we will just have to grin and bear it. (This attitude is music to the ears of the left and Keynesians because to them it justifies their own so-called solutions to the problem of recurring recessions). Continue reading Unemployment and reduced output is the cost of having inflation, not the cost of fighting it
I had several emails from greenies arguing that curbing CO2 emissions is good economics “because it will lead to more investment and this would mean more growth and jobs.” This is one of the nuttiest arguments for cutting CO2 emissions that the greens used in their war on cheap energy and it reveals a staggering ignorance of economics. Nevertheless, the “usual suspects” have mindlessly promoted it, one of them being Anatole Kaletsky, an economics writer for the Reuters and The International Herald Tribune and one of the crudest Keynesians in the media today. And that is really saying something.
I referred to Kaletsky in particular because these emails reminded me of an outrageous article he wrote for Rupert Murdoch’s Australian1 in which he seriously argued that severely restricting CO2 emissions would stimulate economic growth and employment because it would, and this comment is a real beauty, “have the effect on the world economy comparable to a large-scale war”. This is truly Orwellian: war and destruction bring prosperity, peace brings stagnation. Continue reading War, destruction and Keynesian madness
The view that “inflation is not only desirable in its own right. It’s the absolute foundation of sustained growth in the economy and of living standards”1 is the generally accepted one among the economic commentariat. We have basically two positions here: The first one is the nonsensical belief that a ‘modest’ rate of inflation is necessary to promote spending and investment. Therefore, without this rate of inflation prices would continually fall which in turn would curb spending and investment and so depress economic activity. (This argument is also used to promote the idea of a stable price level). But it is absurd to assume that any rate of inflation can fuel economic growth, unless one believes in the ‘beneficial effects’ of “forced saving”, which some people do.
Jeremy Bentham was, I believe, the first economist to outline the forced saving doctrine (the process of using inflation to restrict consumption in order to raise the rate of capital accumulation) which he called “Forced Frugality”2. Thomas Malthus, a contemporary, pointed out the dangers and injustice of “forced savings”3. Henry Thornton damned the process as an “injustice”4. John Stuart Mill described the process as one of “forced accumulation” and condemned it with the statement that accumulating capital by this means “is no palliation of its iniquity”5. Continue reading The idea that inflation can drive economic growth exposed as rubbish by economic history