An Economist Loonier, Even, than Krugman?

[We used to think Nobelist Paul Krugman was the Looniest Economist in America, but Rutgers professor James Livingston recently emerged as a solid contender with an absolutely dumbfounding op-ed piece in the New York Times that said, essentially, that America’s wealth has come mainly from Government spending and consumption, not from savings and investment.  In the essay below, we give our friend Edward Furst, a member of Young Americans for Liberty, a rebuttal opportunity. RA]

We all know that the New York Times isn’t exactly a bastion of free-market thinking. But a recent op-ed by Rutgers Professor James Livingston, a guy who makes Paul Krugman look like Milton Friedman, went beyond the pale of economic sanity.  His basic contention is that economic growth comes, not from private investment, but from “consumer debt and government spending.”  Livingston points to the increase in per capita GDP over the last century despite the relative atrophy of private investment as a percentage of GDP, the growth in government spending, and the general increase in consumer debt. Here we encounter the age-old conundrum of historians unschooled in economic thought (Dr. Livingston has a bachelor’s degree in British and American literature, a masters degree in Russian history, and a doctorate in American History).

In a rebuttal to this op-ed, George Mason University Ph.D. economics professor Don Boudreaux aptly noted that “Because each dollar successfully invested raises GDP by multiple dollars, net-investment’s decline as a share of rising GDP… is evidence of the impressive success of private investment…”  But even this analysis seems to take for granted the efficacy of Gross Domestic Product as a viable metric of economic performance.

Building Keynes Monument

Imagine for a moment that the Federal Government had embarked on a “stimulus” program to erect a giant obelisk commemorating the life’s work of John Maynard Keynes. Thousands of previously unemployed people would be given “jobs” and GDP would rise accordingly. But would the economy really improve? Would consumers get the benefits of cheaper products and higher living standards?  Of course not. The project would eventually be finished, and the government (i.e., the taxpayers)  would simply owe that much more to its lenders.

In a way, that is what happened to the economy. Government tried to approximate value, but instead created a glut of debt and malinvestments. Through the use of monetary policy, regulations, tax incentives, subsidies, GSEs, and implicit bailout guarantees, the government engineered a machine doomed to implode. While GDP and consumer spending  are at nearly all-time highs, American productive capacity has been greatly dismantled and no amount of borrowing and consumption can fix it.

Bad Advice Always Available

Livingston does not seem to understand that debt eventually needs to be paid back nor the problems inherent to growing trade deficits. In this man’s mind, countries subsidizing American consumption will continue at their own expense without gripe.  Indeed, he says “we should bank on consumer culture… we consumers need to save less and spend more in the name of a better future.” But this catabolic prescription is the exactly the opposite of what we need. Contrary to the Livingstonian delusion,  savings, capital formation and investment are the foundations of real economic growth and productivity.

Unfortunately, people like James Livingston and Paul Krugman are always around to give bad advice that is all too often heeded by politicians.  In 2002, Krugman advised that “Alan Greenspan needs to create a housing bubble to replace the  Nasdaq bubble.” Now we’re being advised to go further into debt to buy consumer goods from China. At this point, if we continue to believe these guys, we deserve whatever we get.


(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • david November 26, 2011, 7:50 pm

    One last shot–I’ve got to get this one out of my system :-). It may be that if we get the country back to a sound economic footing, there’ll be jobs for former public sector employees in the private sector. Don’t think, though, that those pub-s employees are in any hurry to switch over. Why would they want to give up their sinecures for jobs in the competitive marketplace? I speak as one who knows, having been employed on both sides. There is a huge difference between the two, believe me.

  • david November 26, 2011, 7:22 pm

    Oh–and don’t forget the legions employed at all levels of government–local, state, and federal, including public school teachers and administrators. I guarantee that none of the above will vote to have their jobs and/or benefits eliminated. Ron Paul, if elected, can embark on his spending-cuts course, but he’ll have the whole country screaming at him. Richard Nixon, in 1971, famously observed that “we’re all Keynesians now”. Well, in 2011, we’re all Greeks now.

  • david November 26, 2011, 7:15 pm

    Here’s another bottom line to this controversy: Politicians want to get reelected. A vote of a net consumer of taxes counts just as much as a vote of a net contributor. And the ranks of the former grow by the day. This, of course, is a little simplistic. “Consumers” can be those on welfare (think Democrats), social security, medicare, medicaid, (think both parties), defense contractors and others benefiting from government contracts, industrialists relying on political clout to raise barriers to entry and favor large corporations (think Republicans), farmers (think both parties), etc., etc. It’s getting so that someone who doesn’t fit into any of the above categories is becoming an increasingly rare bird. Bill Bonner is right.

  • david November 26, 2011, 6:51 pm

    The bottom line, and the core of the controversy, is that Keynesians contend that macro-economics differs fundamentally from micro-economics, that is, that what seems to be good and prudent from and individual perspective is actually bad for the economy as a whole, and vice-versa. Austrians contend there is really no difference, just an enormous increase in complexity such that causes are often far removed from their effects. Who’s right? I’m siding with the Austrians. The bankers and the government, of course, side with the Keynesians, since that’s the side their bread is buttered on.

  • Mojine November 26, 2011, 2:58 pm

    Dear Roger Erickson,
    Please tell me more about these “public servants”.
    Your ideas intrigue me and I wish to subscribe to your newsletter.

  • Larry D November 22, 2011, 1:52 am

    *way-way-way-way dead dog alert*

    You asked why the Russians never went to the moon. Boosting a heavy load out of earth orbit takes a tremendous amount of rocket power over that of achieving low-earth orbit. It also takes a tremendous amount of money. The Russians beat ht US into space in 1961, put the Salyut space station into orbit in 1971 two years ahead of NASA’s Skylab, to be certain. Now, why would NASA not best the Russians for the honor of having the first space station? Because they were preoccupied with Apollo 12-17 at the time.

    The Russian program focuses on simpler, sturdier rockets, while we played with more expensive finicky shuttles, sold as a cheaper way into space. *not*

    Putting an astronaut into earth orbit is relatively easy – it’s been done for exactly 50 years now. At any time they are 1/2 an hour from home, provided the engine starts. Truly difficult things, beyond zero-g toilets, consist of guiding a working probe to Pluto or Titan and LANDING it intact.

    Astronaut Jack Swigert did die of cancer within a few years of his flight, and Alan Shepard died of leukemia at the age of 74.

    *Over and Out*

  • John Jay November 22, 2011, 12:45 am

    Well, now there is shock and awe that the “Super Committee” will not come up with a solution to the Federal budget problem.
    Duh! That is because the problem is insoluble.
    If they listen to us and shut down the Federal government, end the dole, and let the market set interest rates with fair and open Treasury auctions it all collapses.
    If they ignore us (more likely) and keep printing and expanding the dole, it all collapses.
    The only unknowns in both equations are “When”, and “How Bad”
    It is that simple, nothing more complex than the two function math used to balance your checkbook.

  • Seawolf November 21, 2011, 10:38 pm

    I just googled Professor James Livingston. He does have sense of humor. I still don’t know if his op-ed is serious or satire. Probably serious.

    This is him on rate your professor.

  • Rich November 21, 2011, 8:28 pm

    Looks like a Bear Raid during the holiday week.
    Just sold FAZ, QID, SDS and VXX and bought PMs AGQ, GORO, PAL, SLV for CNBC Million Dollar Portfolio Challenge on rumours of bank runs and capital flight.
    Still holding EUD/USD short.
    (Can change these positions at any time, so click on name to see)…

    • Robert November 21, 2011, 8:53 pm

      When Jubilee Rich is buying AGQ, I’m calling my coin dealer…

    • Seawolf November 21, 2011, 8:53 pm

      Isn’t it amazing what JPM et al can do when about 30% of the comex players get taken out.

    • Rich November 21, 2011, 9:59 pm

      Enjoy the ride, LOL…

  • Seawolf November 21, 2011, 7:46 pm

    I haven’t read Mr. Steyn’s book but do not agree the can do spirit has been lost. People have not changed and that spirit could be recovered. I lived those times (I was up close and personal with both the space race and the cold war for a short time) and what has been lost is the connection between Washington and the people. In the late 50’s and 60’s up to Nam the cold war was not killing people and the space race was exciting. After Nam the disconnect between Washington and the people just kept getting wider until we have today. No matter how far away it is war creates a feeling of malaise. Unlike a computer game the death is real and it is felt.

    Today Washington loves their little hot wars and that is not something which brings people together with the leadership. Give people something they can identify with and the can do spirit will come back.

    Would the bureaucracy stifle a new maned space program? Probably. Space exploration is not as exciting as it was then.

    • mava November 21, 2011, 10:11 pm

      I don’t know enough details to decide one way or another. For instance, in 9/11 event, the physics was displayed for all to see, and it is an easily seen that the official story is a fake. With moon mission, all the evidence, negative and positive, is hearsay. So, I don’t know.

      However, to answer the argument that it is hard to believe that a conspiracy on such a grand scale was successfully executed, I’d say this:

      – If 9/11 was obviously a government conspiracy on a huge scale, and yet, it was planned and executed, then why couldn’t the moon landing be a conspiracy as well?

      – If the lie is so big that it is hard to doubt, then if you’re unlikely to be doubted it makes all that more easy to lie, I mean logically, wouldn’t you agree?

      If this wasn’t true, then the foreign spies would look like alcoholic bums, and not as diplomats in suits!

      And as for our capability to set a challenge and achieve it… A challenge to do evil things? Look at the results of NASA programs. Where is the benefit to me, the tax-payer? There is absolutely no return on investment, and there is a clear and huge loss. The only benefit was to the government. The government advanced their capability to spy on the people, and to destroy them. They now have better spy sattelites and weapons. What do you have? A picture of Mars?

      NASA is evil.

    • Seawolf November 21, 2011, 10:49 pm

      Mava, have you seen the video of the newscaster reporting the destruction building with the building still standing in the background.

    • Seawolf November 21, 2011, 10:50 pm

      that is building 7 still standing

    • mava November 22, 2011, 12:08 am

      Yes, I’ve seen it all. Including that one, – quite amazing.

      The relatively new video on wtc7 ( ), focuses on the “squibbs”, in my opinion a weak argument. Instead, look at the corner column of building 7, being desintegrated with perfect timing in advance of oncoming falling floors. The structure of WTC7 prescribed that the corner should be destroyed as shown, and for this reason, all official videos of WTC7 were shot from different angle, where the corner destruction is obscured from view by the white building.

    • Buster November 22, 2011, 12:26 am

      That 9/11 was a false flag event is a no brainer to anyone with an open mind who dares to look at the evidence.
      I can understand the difficulty some people have with this possibility, though. It’s can be dificult to grasp how ruthlessly TPTB pursue their global plans.

    • mava November 22, 2011, 7:15 am

      Exactly. It is hard to drop the childish belief that there is such a thing as “your country” that cares for you, that there is truth, that government wouldn’t do certain things… I think this is the reason number one that 9/11 is still believed, in the face of unbelievable clear evidence to the opposite.

      Funny, remember how the “coincidence theory” supporters were loudly claiming right after 9/11 that if there was any way to suspect the foul play, then where are “the engineers”, the experts that support that?

      Well, now there is more than a thousand (closing on two actually) of engineers, architects, experts who deal with buildings all their careers, who say that 9/11 was a demolition, and where is the acknowledgment of that?

      I’ve worked with some of these people. They are not cooks.

    • mava November 22, 2011, 7:17 am

      BTW, for an interesting perspective on what exactly the government wouldn’t do, I suggest watching “Unthinkable”, the movie, where Samuel L. Jackson blows a huge hole through all that.

  • Robert November 21, 2011, 7:06 pm


    I’d rather find out that it WAS faked, but I can’t come to grips with the numbers of ethical scientists (Sagan most notably) who would have to be complicit.

    A conspiracy of grand enough scale to pull the wool over the eyes of some of the best minds humanity has produced?

    Such an event- the ability to demonstrate that a lie of such monument can be feasible, would PROVE (to me at least) the existence of God by simultaneously validating the existence of Satan- because only Lucifer could be genius enough to convince the whole of humanity that the power of a lie exceeds the power of humanity.

    • Carol November 21, 2011, 7:26 pm

      Robert go to that link and read the story. The author shows not only THAT it was done but HOW it was done without most knowing that it was all faked. Most inside NASA and inside the contractors thought they were really going to the moon. That is why the whole hoax worked for it that many had to stay silent it could not have ever worked.

    • Larry D November 21, 2011, 8:04 pm

      ( Carol- I saw that horrid “Capricorn One” movie with OJ Simpson too.)

      Way-way-way back in the 1980s, a friend worked for Target stores. On day while he was stocking shelves, a gentleman asked for assistance. My friend turned around and lo and behold, there stood Pete Conrad.

      A lively conversation ensued, and after a time my friend asked him point blank about the Apollo moon landing hoax. “Well,” said Pete, “they sure fooled me, because I was there!”

      Did your work at NASA lead you to believe that the Pioneer, Voyager, Mariner, Viking, Cassini-Huygens, Chandrasekar and Hubble missions were also hoaxes? I mean, really, how the hell can you launch something that can thread Saturn’s rings, or land on on of its moons?

      Human science and industrial capability have developed weapons of such awesome destructive power that an entire city can be wiped out with a bomb on top of a missile. Motion pictures exist that show coral atolls being vaporized during tests of these bombs. Is this all a hoax, or is it real?

    • Seawolf November 21, 2011, 9:16 pm

      Carol, I visited the link you provided and truthfully I wasn’t that impressed. My take is the trip was real. Knowing that in Washington perception and the story take precedence over reality, I can accept that the photos may have been enhanced in the lab and that some may have been recomposed in a studio. I can also accept the use of props. Anything to make a good story and to appear better than the Russians even if we weren’t. The surfers mentioned were in all likely hood JPL engineers.

    • Carol November 21, 2011, 9:53 pm

      Ok all you scientist please explain to me HOW we got through the Van Allen radiation belts that TODAY are too difficult for the Space Station to safety get near????? Oh lol we did it back in the 60s with tin foil vehicles – lol

    • Carol November 21, 2011, 9:55 pm

      Also for all you science types tell me why NASA has said that it would take them 30 years (now a days) to get “back” to the moon IF they had to do it “again”.

      Also Larry D, do you think those astronauts would just give it up to anyone who asked, really?

    • Carol November 21, 2011, 10:00 pm

      Also all you doubters tell me why Russia NEVER made it to the moon?? Never!!!

      Oh I guess that after we got there first they just decided it wasn’t a worthy goal anymore. Really?? You buy that??? Hey if you do I got some waterfront property for sale in Arizona for you.

      If you doubt anything WITHOUT looking into the evidence then you are just suffering from cognitive dissonance and I can’t help you there.

    • Carol November 21, 2011, 10:50 pm

      Ok not to beat a dead dog but here is a small excerpt from the above link to give my points above a little credence:

      “On June 24, 2005, NASA made this rather remarkable admission: “NASA’s Vision for Space Exploration calls for a return to the Moon as preparation for even longer journeys to Mars and beyond. But there’s a potential showstopper: radiation. Space beyond low-Earth orbit is awash with intense radiation from the Sun and from deep galactic sources such as supernovas … Finding a good shield is important.” (

      As NASA notes, “the most common way to deal with radiation is simply to physically block it, as the thick concrete around a nuclear reactor does. But making spaceships from concrete is not an option.” Lead, which is considerably denser than concrete, is actually the preferred material to use for radiation shielding, but lead also isn’t very popular with spaceship designers. In fact, word on the street is that one of the main reasons the Soviets never made it to the Moon was because their scientists calculated that four feet of lead shielding would be required to protect their astronauts, and those same scientists apparently felt that spaceships wouldn’t fly all that well when clad in four feet of lead.”

      Lol I guess that about sums up why we can’t easily go “back” or why the russkies never made it there.

    • Buster November 22, 2011, 12:04 am

      Yhe moon landings is one of the few subjects I can’t come to a conclusion on. I’m only certain that something stinks about the whole thing. It may have been a complete propaganda stunt or just a bit of poorly done film work just to make it look better, or something else entirely, but there is sure something wrong.
      ….no doubt the long list of astronauts who have died suspiciously over the years could have told us something.
      Or maybe we should ask these guys if we did it…..they’ve clearly got advanced spiral vortex energy all worked out!

    • Larry D November 22, 2011, 12:20 am

      *dead dog alert*

      Carol, didn’t they explain all that stuff to you when you worked for NASA? The Russkies never made it to the moon because they never had an F-1 rocket engine equivalent, or LOR or EOR capabilities. To be more precise, they didn’t have the money.

      After the Apollo 12, public interest in lunar exploration evaporated. The NASA budget was immense, and Kennedy’s mandate had been met. Apollo missions after 17 were scrubbed. I vividly remember the editorials in the newspaper deploring the spending: “Now that we’ve been to the moon, why keep returning…” etc, etc. It was exactly at that time you started hearing the catch-all bromide: “If we can put a man on the moon, why can’t we do (____).”

      Skylab was made from one of the Saturn rockets (and NASA was worried about radiation on Skylab missions.) The two other gobsmackingly expensive flight-ready Saturns are on their sides at museums, for future generations of Hoaxers to glower at.

      The Van Allen belts were a concern, no different a concern than placing live human beings inside a capsule on top of a rocket with the explosive power of a small nuclear bomb. It was a risk. It was the Cold War.

      I asked if you thought the other NASA missions were faked. I mean really, they landed a probe on TITAN? They sent ONE solitary spacecraft that went to Jupiter, then to Saturn, then Uranus, then Neptune, and 34 years later they are STILL communicating with it?

      Provided your Arizona waterfront property is on Lake Havasu, I’m all in. 🙂

    • mava November 22, 2011, 12:24 am


      “The Russkies” would not give a damn about astronauts health problems. That is not something that would worry anyone in Soviet Union.

      But, Russians do not even need to employ their usual brutality. There are way too many of young men who want to take that risk to achieve the status of hero.

      Weak arguments only make the case weaker. Only “armor-piercing bullets” reach their targets. Abstain from weak arguments. Use “armor-piercing” arguments.

      Speaking of Russian space program, don’t we currently hitch our rides on their rockets?

    • Carol November 22, 2011, 12:38 am

      Larry D >> “I asked if you thought the other NASA missions were faked. I mean really, they landed a probe on TITAN? They sent ONE solitary spacecraft that went to Jupiter, then to Saturn, then Uranus, then Neptune, and 34 years later they are STILL communicating with it?”

      I have no doubt that NASA has some good scientist and that they have done some incredible things. BUT none of those missions that you mention have anything to do with PEOPLE! My initial post stated that we (USA) never put a “Man’s foot on the moon”. You don’t seem to understand the complexities of putting man in space. Totally different than sending robots, probes, or any non living thing into space. Huge difference.

      Also if Russia is so far behind us in space technology then why did they have the first space station??? Also why did they have to provision our astronauts on the space station recently because we could NO LONGER afford the run our incredible inefficient space shuttle program any longer?????

      Larry D >> “The Van Allen belts were a concern, no different a concern than placing live human beings inside a capsule on top of a rocket with the explosive power of a small nuclear bomb. It was a risk. It was the Cold War.”

      lol it was more than a risk, if we had ACTUALLY sent astronauts into the Van Allen belt and into all that radiation they would have FRIED! So how come the returned to earth NOT Fried? How did they live beyond a couple years (had they really experienced that much radiation unprotected and not have been fried they would most certainly all have died of cancer within a couple years).

      Your rebuttal lacks any substance and is clearly off base.

    • Carol November 22, 2011, 12:42 am

      Mava >>”“The Russkies” would not give a damn about astronauts health problems. That is not something that would worry anyone in Soviet Union. ”

      But they might have given a damn if their astronauts returned fried to a crisp don’t ya think?? Any such “stunt” would have shown the world that the USA could do it but they could NOT.

    • mava November 22, 2011, 7:08 am


      What makes you so certain that the human being would have been fried by the outer space radiation, and not just die of leukemia years later?

      I am not claiming either outcome, but logically, since you claim that no one did experience it, then you can’t know how harmful it is….right?

  • Daniel November 21, 2011, 5:28 pm

    Does anyone know if Roger Erickson is just a pen name for Dr. Livingston? Let’s see now: debt is wealth; money has no utility; going to the moon was a productive enterprise; storing vital commodities for future need is wasteful “hoarding.” I suppose that world war qualifies as man’s greatest productive achievement. I rest my case for the DEVOLUTION of homo sapiens.

    • Seawolf November 21, 2011, 5:46 pm

      Could the part of the name “homo sapiens” that means wise be a misnomer?

    • Robert November 21, 2011, 6:08 pm

      “going to the moon was a productive enterprise”

      -Crap, you mean it wasn’t… ?

      All that fuel, copper, intellectual capital, steel, white and black paint, and gold foil that we shot into space (never to see again) wasn’t worth the 841 pounds of iron, magnesium, and silicon we brought back?

      I mean, we spent 28,500 dollars per pound for that rock. I’d hate to find out that we could have found it locally for less.

      What about the lives of the 3 Apollo 1 astronauts? Weren’t they worth 841 pounds of rock and some really killer national pride?

      Surely the social distraction factor was worth SOMETHING, right?

      “Pay no attention to the war going on behind that curtain, The big green head is telling you to dream of travelling to big rocks in space- these rocks are certainly worth the lives of your older brothers and uncles in Southeast Asia”

      c’mon, surely the grainy black and white video was worth something?

      Please read Carl Sagan’s “Demon Haunted World”… It is an awesome book that puts our space endeavors in the proper perspective.

    • Seawolf November 21, 2011, 6:36 pm

      Robert, of course going to the moon and bringing back 841 lbs of rock was a productive enterprise. We now now beyond a shadow of doubt that the moon is not made of green cheese.

    • Carol November 21, 2011, 6:45 pm

      I know I am going to get a rath of crap for saying this but oh well …. I did some work for NASA in the 90s and I can tell you this for fact …. there is no way in hell that we (USA) ever put a man’s foot onto the moon. Call me a conspiracy theorist or worst I don’t call I know this to be true and the evidence is everywhere should on care to look. Start here – — and read the 14 part series called “wagging the moondoggie” great /fun read!

    • Seawolf November 21, 2011, 7:04 pm

      Carol, I was in the industry well before you, even before the first man was put into orbit. I tend to accept that it was done even though the follow up was weak to non-existent. The spirit of those times with the cold war and the space race was like the whole country was on a mild adrenaline rush, a little like a skydive but not nearly as intense. there was actually a general feeling of optimism.


      In his superb new book, “After America,” Mark Steyn says he doubts we could put a man on the moon nowadays. He says the can-do spirit of the 1960s has been lost and that the project itself would bog down in the regulatory minutia that has tied us in knots politically, socially and scientifically.

  • ken horn November 21, 2011, 5:17 pm

    I have often wondered about what I call the “jewish paradox” (voting democratic in lock-step) & now backing a very obvious anti-Israel president (3 official trips to the Mideast & not stepping foot in Israel, our only real ally in that region?). Also, the so-called economists that study the same data & come to laughable conclusions. And how about discussing real problems with committed lefties? They just go off in tangents of global possibilities & outcomes that can’t possibly be proven or disproven. I now know the reason for all of this. Listen up all you conservative, logical, level-headed people. For hard-left thinkers, IDEOLOGY trumps EVERYTHING!!! All the illogical pieces of their argument must fit the narrative no matter how ridiculous it sounds. So, the next time you’re being put to sleep by those brilliant words & how our entire planet will be better served, think about my theory.

    • Seawolf November 21, 2011, 11:10 pm

      For any true believer Ideology not only trumps everything, it is everything. Right, left, religious, enviromentalist or whatever, ideology is always primary.

  • Larry D November 21, 2011, 5:11 pm

    Back in the US
    Back in the US
    Back in the USSR

    *I like it when the NYT becomes indistinguishable from The Onion.

    • Seawolf November 21, 2011, 5:17 pm

      Thank you for the good laugh. NYT compared to The Onion. I love it.

  • Seawolf November 21, 2011, 4:56 pm

    Second thoughts on Dr. Livingston. Does anyone have a clue as to this man’s sense of humor. As I read his op-ed piece I’m thinking no one could believe what he is writing.

    What if this is satire and it is all a big joke on the New York Times. Just a what if, you know, like “Report from Iron Mountain”.


    A possibility I hadn’t considered, Seawolf. But what would Livingston have to gain from hoodwinking the Gray Lady? And it’s not as though his colleagues would have gotten the joke and made him their court jester. My guess is that the essay was serious stuff.

    • Seawolf November 21, 2011, 9:43 pm

      For some joksters just pulling off such a joke would be enough reward. It all depends on his sense of humor. His colleagues are history professors and probably either would not know or would be in on the joke. I agree that it is probably serious but Iron Mountain wasn’t revealed as satire for about 10 years as I recall.

    • Darren November 22, 2011, 2:58 pm

      Yes, Livingston was on CNN last night. He said he meant to submit the article to The Onion but sent it to the NYT by mistake. 🙂

  • fallingman November 21, 2011, 3:39 pm

    “Catabolic prescription” indeed. Well said.

  • Seawolf November 21, 2011, 2:43 pm

    Would someone please help Dr. Livingston back to his Ivory Tower. If he were correct Zimbabwe would have the highest standard of living on the planet.

    “In 2002, Krugman advised that “Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.””
    So he did and we all know how that ended.

  • roger erickson November 21, 2011, 2:00 pm

    Don’t think that CB’ers are any smarter than the average Joe. Multiple CBs are currently buying up gold.

    These complete idiots are going to destroy whole economies, in order to hoard a tangible commodity? Where are today’s alchemists? Knowing how to make or use something is always more important than the stuff itself.

    There’s always a better way, and a complete unwind to every irrational mania.

    I wouldn’t want to be in the way when CBs quit buying gold, and start selling again. Same thing that happened to Tulips & Whale Oil – just another mania that will be forgotten in history – same as copper, tin & Bronze.

    First rule of evolution & social organization is that coordination wins. Those who can organize, can go anywhere & take anything – on demand. We didn’t win WWII, or go to the moon, or invent the internet by hoarding gold.

    If we don’t figure out a way to select more rational public servants, we’re toast.

    • JimK November 21, 2011, 3:02 pm

      “These complete idiots are going to destroy whole economies, in order to hoard a tangible commodity?”

      Roger, Should these Central Banks be buying each other’s fiat currency based debt instead? Tulips wither, whale oil is probably better, but it rancidifies – at least it is a good machine lubricant. Were the CB’s ‘idiots’ when they sold the gold off in the first place, or were they ‘geniuses’ for getting rid of a ‘barbarous relic’?

      Note that gold has had utility as a medium of exchange for thousands of years – continuously. BTW, copper and tin are still very, very precious and useful – what’s in YOUR light switch and computer? “Hoarding” is a derogatory name for saving, used by those who waste and don’t save.

      What ‘ruins whole economies’ is central planners committing labor and resources on things that should not be planned centrally or publicly propped up, i.e., subsidizing corporate greed, crooked banks, doomed technologies, Federal Housing, Regulating Drugs, Drug War, rigging the currency and interest…

      I can tend my farm and feed myself and others far better, healthier and cheaper than if it becomes regulated by the FDA and USDA, or God Forbid, by Homeland Security or some other heavy handed agency…

    • JimK November 21, 2011, 3:08 pm

      “Where are today’s alchemists?”

      Roger, I love your question – maybe you should pursue a career in alchemy! You can wear a nice monk’s robe and try to convert lead into silver…

    • tompaine November 21, 2011, 3:20 pm

      Wrong. Silver and gold have properties that suite them for use as money. One property they have over paper, or even moreso electronic chits, is that they cannot be created at will by banksters.

      I could probably put together a pretty good argument myself why gold is a barbarous relic and that gold and gold mining are just the ultimate malinvestment, but that will do nothing to stop its bull market.

      The fact is that fiat currencies in the hands of irresponsible, pandering politicians is a prescription for malinvestment. Now as we approach the end game for fiat and the malinvestment it produces, for better or worse, the ultimate malinvestment has become the best performing asset class. Try and outsmart the market if you like, but that is not the way to build wealth.

    • Seawolf November 21, 2011, 3:23 pm

      You don’t go to the moon by hoarding paper dollars either, oh but wait you do, because those paper dollars were savings and you decided to dis-hoard them to go to the moon. Gold is simply savings which you can either leave to your heirs or dis-hoard and spend.

    • Buster November 21, 2011, 3:45 pm

      Of course storing gold is a waste of time & resources in its true sense. Just as having to put a fence around your livestock to keep the wolves out is. But still, for the want of a non-predatory government not run by & for the benefit of the wolves it is still a waste of time that may be worth doing, unfortunately.

    • mava November 21, 2011, 5:28 pm

      Gold is a world. A world that any man can afford, exactly proportionate to what he gives back to society.

      And the world of gold has one uniques property to it: – In its world, all of Roger’s friends can sit all they want and issue decree after decree, and print paper from sunup to sundown, and still, they will not be able to command any of my wealth, until I say so.

      Outside of world of gold, I am always at risk. These days, they (thieves) don’t even hold you up anymore, they just put together few idiots, make their collective decision, and start siphoning your wealth whether you agree with them or not. It’s a dictate of majority, or a dictate of minority if you’re a felon and work in the congress.

      But, yes, Roger. Gold is barbarous. “Hoarding” is bad. Go get yourself some paper money, nothing can be more modern since they print new notes every day.

    • Robert November 21, 2011, 5:51 pm

      “These complete idiots are going to destroy whole economies, in order to hoard a tangible commodity? Where are today’s alchemists? Knowing how to make or use something is always more important than the stuff itself. ”


      So by your premise, the US Federal Reserve is the most competant enterprise on Earth because they have figured out how to take cotton linen, ink, time, labor, and electricity, and turn it into…. what?

      Computer data.

      Roger, rather than declare people idiots for buying Gold, better you consider the question of WHY they are buying. Could it be that there are simply too many dollars in the hands of people with nothing better to do with them?

      Since 1792, this is about 10th time Wall Street, in collusion with Washington DC, has brought America to financial reckoning. Why? Because there are people (“Coordinators”) who believe it is morally acceptable to deprive someone else of their right to be productive.

      Return on coordination is a complete fallacy.

      Exactly who are the “coordinators”…?

      I’m awesome at what I do (not to toot my own horn, but I am. ) I am a leader, and yet every day I have to live within a framework of conflict between doing more work than I can possible complete, versus spending my energy trying to develop my more junior partners so that they can increase our team’s capacity to respond to new challenges and opportunities.

      This conflict is unresolvable- Just as the best football player on the team can not simultaneously be the coach on the sidelines, and the quarterback on the field.

      So what is corporate America’s answer to this? They hire administrators (coordinators, if you will) and they grant them fancy titles (Project Manager, Program Manager, Technical Business Analyst) and (in my opinion) excessive salaries, and these “coordinators” come in and do the exact opposite of helping me out.

      What ends up happening is that not only do I and my team still have way more work to do than we can get done, but now we have leaches sucking on us to get estimates, task lists, capital sizings, forecasts, and every other piece of information that THEY need in order to come back to me to “approve” that what I am doing (and what I already know to be right and worthwhile) is indeed “ok” to proceed with.

      And why do they need to do this? This is the most laughable part- these idiots think that printed government currency is a scarce resource that needs to be oh-so-carefully allocated so as not to generate wasteful activity…

      That’s right, the leeches decide whether or not the host is strong enough to continue feeding the leeches, and when the host gets too weak, the leaches bail and look for a stronger host.

      What you claim as the Nirvana to Social Engineering (return on coordination) I already know to be the very essence of fundamentally destructive psychology.

      When the day comes that everyone is fighting over how to coordinate, and nobody is lifting a finger to do anything productive, our return on coordination is going to be zero…

      I’ll tell you the same thing I tell these Project Managers, Program Managers, and Technical Bussiness Analysts every time one of them thumps their chest at me:

      I don’t work for you. I work for me, and I create the products that our company sells in order to pay your salary so you can continue to get in my face and force me to continue educating you on how real value is generated via the creative process.


      Stick that that in your coordination pipe and smoke it.

    • Robert November 21, 2011, 6:41 pm

      “First rule of evolution & social organization is that coordination wins”

      -Utter and complete Bull$hit….

      Evolution occurs when MINOR mutation yields exorbitant competitive advantage.

      By your coordination premise Roger, the winning team will always have the best coach (clearly invalid logic). If that were the case, then the need to compete would be lost.

      Collaboration (the inputs of self minded, self motivated, and willing contributors) yields ENDLESSLY more advantage than coordination.

      Coordination is anathema to productivity. You might as well spend the rest of your life debating with yourself as to who was the better General- Eisenhower or Patton. We all know who society elevated to the highest post, but who won more battles? Who killed more enemy soldiers?

      In other worlds, who was more PRODUCTIVE (or more correctly, who was more DE-structive)?

      I will now use your own arguments to demonstrate that your own two theses violate each other:

      1) Coordination is what yields competitive advantage
      2) Gold is not money.

      Right now, the Earth’s two largest population centers (China and India) understand what money is. When you combine their understanding with the understanding of the Arabs, and the uber-few in the West/Europe that our society derides as “Gold Bugs” you come to more than half of the world’s population who believe more in Aristotle’s money versus Banking credit.

      So, if these people are “coordinating” with each other, then they may yet obviate the fact (for about the 100’th time over the past 5000 years) that Gold is indeed money, yes…?

      Which of your contradictory arguments should resonate most loudly if this is true?

      If the majority of humanity decide that Gold is money due to common use (coordination) and they should become more competitive than credit money advocates, then will you come into Rick’s forum and finally declare yourself a hypocrite?

    • Robert November 21, 2011, 6:56 pm

      “If we don’t figure out a way to select more rational public servants, we’re toast.”

      Rational public servants- Oh boy, don’t even nudge me down that path.

  • roger erickson November 21, 2011, 1:55 pm

    What’s the fuss? All he’s reiterating is the history of social species.

    There’s always a cost to coordinating on a larger scale – and our current euphemism for that is “public spending.” Only thing that outruns the scaling cost of coordination is the return on coordination – which we now call the “private financial assets” denominated as currency left over after taxes are clawed back.
    Don’t forget that the supposed national “debt” is just private savings, to the penny.

    • Seawolf November 21, 2011, 2:57 pm

      Did George Orwell just enter the room? National debt equals private savings? Which bank do I go to to make a withdrawal from that savings account?

    • Darren November 21, 2011, 3:32 pm


      Nice fantasy, but it founders on the shoals of the balance sheet. The knuckle heads in the govt wouldn’t be able to engage in effective & honest “coordinating on a larger scale” if they wanted to. They can’t know enough to make the right decisions. That knowledge is dispersed around the world in the heads of all the consumers & producers that make decisions every day. This overwhelming amount of info can only be coordinated by a free market.

      So not only are the govt maroons flying blind, they don’t have profits & losses to tell them what’s working & what’s not. They get their funding by theft & force (taxes). Sometimes they run deficits, it’s true. These are enabled by the central bank which was created by the force of law. Once again an immoral taking of our wealth.

      Hey, I know what we should do. Lets bring in some of the grand scale coordinators from North Korea or Cuba. They have a lot of experience with that. 😉

  • mava November 21, 2011, 7:18 am

    Just goes to show you how deep we had fallen, when people like James Livingston and Paul Krugman are held in such a high esteem.

    But, thanks to the genius of Greenspan, their world has been put in the overdrive, from which I hope, it wouldn’t be able to recover. Greenspan, being a defender of gold, correctly understood that the paper money can not be stopped by explanations, it has to be driven off a cliff, and he quietly did just that.

    • Benjamin November 21, 2011, 9:25 am

      “Greenspan correctly understood that the paper money has to be driven off a cliff, and he quietly did just that.”

      Make of that what you will. But frankly, as far as I’m concerned, Greenspan is just as guilty as the rest. Why? For one, past fiat currencies didn’t need a superman and their side-kick superprograms, in order to come to an end.

    • Robert November 21, 2011, 5:18 pm

      More and more, I’m determined (if not yet convinced) that Greenspan understood fully understood the menetary consequences of every dollar he authorized during his tenure.

      Facts are always subject to interpretation of their real meaning, but they are inescapable nonetheless:

      1) It was Greenspan who wrote in 1966 of gold as the protector of the masses from the insidious process of government sponsored wealth confiscation through inflation.

      2) It has been widely rumored (although still factually unsubstantiated to the best of my knowledge) that Greenspan was the creative force behind the Fed’s “Wishes and Rainbows” comic books. (Please go read the story on – it is a trip down Alice’s Rabbit Hole, and you will have to force yourself to remember that it is the US Federal Reserve that published the work.)

      3) Most notably- it was Greenspan who created more dollar currency during his tenure than every Fed Chairman prior to him in aggregate.

      Think about that last point. Greenspan has been vilified by hard-money supporters as a “turncoat” to his own 1966 thesis, but it is also possible that he was the ultimate contrarian- That old cat hammer interest rates and printed fiat money every time he was presented with ANY reason to do so.

      Whether Greenspan’s policy of debasement was intentional and deliberately opposite to his 1966 philosophy, or whether it was coincidentally opposite, will probably never be known, but in spite of that, his actions may end up being regarded by history as the lesson that taught humanity that truth is rarely what “government officials” say it is, and if this history actually comes to pass, I will not be afraid to applaud Mr. Greenspan for his efforts, regardless of what his actual intentions were.


      On the evidence, Robert, it seems easier to believe that, economically speaking, Greenspan was simply an imbecile. He did, after all, refer to the inflated value of homes as “wealth,” and he spoke of an “investment boom” at a time when household savings growth was negative. He also believed the U.S. was experiencing a productivity growth miracle even though real wages had been stagnant for a generation.

    • Robert November 21, 2011, 6:51 pm

      Oh c’mon Rick…

      Here I am trying to demonstrate that I am a person of faith by giving Greenspan some semblance of the benefit of doubt, and you have to bring the overwhelming volume of contradictory evidence to the bench?

      Ok, then you leave me no choice but to agree with you.

    • fredco November 21, 2011, 11:52 pm

      Robert’s summation of Greenspan’s history is just another classic example of the Hegelian Dialectic and it’s accompanying Cognitive Dissonance (and resultant widespread public apathy) at work. Constantly seeing that in play throughout the public arenas sure makes the seeming dichotomies (i.e., thesis + antithesis = synthesis; wash, rinse, repeat) easier to understand.

  • Steve November 21, 2011, 6:09 am

    As long as there is debt money, as long as there is the Emergency Banking Act, and as long as there is the Trading with the Enemy Act there will be hope for Keynes’ theory. In fact the theory is quite correct in today’s corruption, as it calculates the tally on the tally stick and defines the greatest amount of tally debt as wealth. Good is evil, and evil is good.

    • Benjamin November 21, 2011, 9:11 am

      Yep. And of course… The costs of the government not doing something are always (supposedly) far, far greater than the costs of any and all interventions Big Gov has in mind.