How to respond to Paul Krugman | Hans-Hermann Hoppe

From: Day 2 Question & Answer Session, PFS 2012

Follow up material

[casraa]

By printing money you're decreasing the value of the money. Basic. Economics.

[gergenheimer]

As I said, it was other "scientists" of Galileo's day who used complicated, arbitrary theories and meaningless equations to support the Church's false claim that the earth was the center of the universe - just as mainstream economists use meaningless equations to reinforce economic superstition and blind faith in the State. I don't reject math and science, I respect it - that's why I criticize those who claim to be practicing science while they ignore science's most basic rigors.

[vitaovlog]

The world is sick today, not only for coronavirus, but to the infinite printing of money.

[Dz]

Wonderful. Short, clear, correct, right down to the core of the matter.

[gergenheimer]

Yes, if you do your homework, you'll learn Austrians have written in great historical and theoretical depth about money - try "Theory of Money and Credit" by Mises; "A History of Money and Banking in the United States" by Rothbard; "Principles of Economics" by Menger; "The Ethics of Money Production" by Hulsmann; "What has Government Done to Our Money" by Rothbard; "Money, Bank Credit and Economic Cycles" by Huerta de Soto; "What you Should Know About Inflation" by Hazlitt; and on and on . . .

[anarhistul]

I'm starting to see more super short videos like this (not about the economy or stuff like this) I would say a big change is comming. Get ready for the storm!

[gergenheimer]

If we agree that the act of printing money out of thin air causes a dilution of wealth for society as a whole, this effect must also be happening when government prints the money. The idea that society can be made happier, healthier and wealthier by giving monopoly counterfeiting privileges to government can be discredited based on the 20th century alone, when we had more and bloodier wars, bigger and longer economic crises, and built massive, unsustainable entitlement programs.

[Wesker]

You don't need money to create wealth. On a deserted island you could create wealth. Money makes wealth *easier* to create since helps with the exchange of goods and services. Productivity rises when voluntary exchanges are made easier.

[gergenheimer]

As I said, money plays a crucial role in facilitating economic exchange, but it has no direct causal connection with the creation of wealth - because wealth rests in the subjective values of human beings, and the satisfaction of our subjective wants and needs ultimately comes from goods and services. Wealth was also created in barter economies, it was just slower-growing because exchange and specialization were more difficult.

[gergenheimer]

If printing new money boosts the economy and is a net benefit to society during a recession, would you be in favor of suspending laws against counterfeiting during times of "reduced aggregate demand"? If not, please explain how new money printed in my basement would be harmful, yet new money printed by the government would be beneficial. If the mechanistic process is to boost the economy by printing more money, why does it matter who prints it?

[Wesker]

You should check out Robert Murphy's response to this. Austrians do answer your question. I wish youtube allowed more characters. By Robert Murphy, google: The Gnome Thought Experiment, The Importance of Capital Theory, Spending Isn't Production. Also google The Fallacy of Demand by Frank Shostak. Also, see his debate with Karl Smith (a Keynesian professor), youtube: Debate: Government Spending Can Play an Important Role in Boosting Economic Growth

[gergenheimer]

The pertinent question is "why are these people unemployed?", but to Keynesians, the causes of unemployment don't matter - people don't even matter to Keynesians - the only thing that matters is the mechanical process of spending money. It's important to grasp that employing people and paying them for doing arbitrary, unproductive work is a net wealth destroyer for society, regardless of the flow of nominal spending it generates.

[Zimnyification]

Hoppe is the bomb. He should debate Chomsky just for the fun of it.

[neil]

So you are saying that money is needed to allow wealth to be created. But money does not itself create the wealth.
I would agree with that.

[JesseForgione]

All real capital is the product of saving. Someone had to produce more than he consumed in order to provide any investment in future production, i.e., in capital goods.

Printing new money and spending it does not change this essential fact. Central banks cannot "print" wealth. All they can print are _claims_ to wealth, which redirect the existing saved capital.

[gergenheimer]

Example: In the 1990’s in the Fed began flooding the market with credit to avoid the bursting of the dot-com bubble. Then, politicians began pushing for every American to own a home. The flood of cheap money was channeled into the housing market, causing a bubble. Once it was revealed that too many homes had been built, govt. tried to prop-up the politically-connected housing industry. Keeping people employed building homes that aren't needed is a net waste of labor and resources for society.

[danieltaylor]

"because i say it can. we're stepping into a brave new world where value can be whatever we want."

[gergenheimer]

The crucial thing to understand is that wealth originates in the exchange of goods and services, not the movement of money. Wealth is created when we exchange our product or services for products or services we value more. Money is a powerful technology to facilitate this process, but money itself is not wealth-creating. If I print money in my basement, I have created a claim to goods and services, having created nothing of value in return - I am silently stealing wealth from society as a whole.

[Wesker]

You said money is needed to create wealth. This is not true. Money allows economic calculation. Printing money alone does not provide more capital goods, scarce materials, etc. It facilitates trade but does not create new resources. I will link some articles in the description box. At the very least, you should check out the Austrian's responses to this stuff.. Even if you disagree, I feel like the Austrians are much more familiar with the opposing positions.

[gergenheimer]

I'm still waiting for you to explain the scientifically-valid methodology of how you objectively measure "value" - what are your units of measure, what device measures them for you, what testable hypotheses are you able to come up with. Nothing? That's what I thought. Mainstream economists are the modern version of the court scientists in Galileo's day, who used complex math to "prove" that the observed movements of the stars were consistent with an earth-centric universe. Rank sophistry.