Bob Murphy vs Fed Economist: Did the Fed Avert a Second Great Depression?

[BlackSwanHunter]

the problem with keynesian economics is that when you explain it out loud and in plain english, it just sounds fucking dumb.

[jrbocane]

2nd great depression? unemployment only reached slightly above 10.4%. The great depression is an example of the failure of the fed to act. with many bank failures, money dropped by around 25%, there was a 2-3 year period of deflation which caused real interest rate to skyrocket, crowding out investment. The fed should have increased the money supply sooner. When they finally did around '34 - '35, inflation went to 2%ish, unemployment began to decrease and real interest rates dropped.

[appledapathy]

@jrbocane You have your facts so wrong...

[debatefindstruth]

Sounds like a Milton Friedman argument.He was one of the greatest economist in the 20th century with his free market principles.But he did get it very wrong with his monetary policy.The boom in 27 was caused by the fed dropping interest rates and increasing the money supply. This led to the stock market bubble and crash.Then the regulations that only let banks have local branches which increased their exposer in a run. Without all the fractional reserve lending a run on the bank wouldn't matter

[jrbocane]

@debatefindstruth I mean, the federal reserves dropping the federal funds rate .5% DURING an expansion is just one of the reasons for the crash of '29. the real estate bubble of the twenties was mostly due to over speculation that real estate value will only continue to go up. Even when we on a gold standard, the US suffered deep depressions (go look it up) due to speculation and later deflation.

[rockandrock44]

Murphy did a good job, but I disagree with him on one point. Many Austrians agree with the Chicago School in their assessment of the deflationary monetary policy of the Fed in the 1930s, most notably the Free Banking School and the monetary equilibrium theorists. To me, they are more economically sound.

[lavedon]

@rockandrock44 I agree

[rockandrock44]

Fed economist got completely owned.

[mjbarrowful]

Maybe the austrians need to criticize the neokeynesians not our fathers keynesians

[dieyoung]

Oh. My. God. What is this man talking about? It's so hard to keep track...

[spamdude1]

Murphy at around 59:00 says that the Fed raising interest on reserves would only exacerbate the problem by increasing the growth of reserves. I don't see how that follows. The Fed could still control the amount of reserves, higher rates would just make them less likely to be loaned out. If lending took off, couldn't the Fed be contractionary without crashing the economy? (I'm not suggesting they could successfully fine-tune the economy, I am actually sympathetic to the Austrian view.)

[ntn1987]

Bernanke = that Fed economist x 1000

[HudsonKnowsEconomics]

I wish Murphy would explain things better. He makes statements that you can't understand unless you already know what he is talking about.

[AFRIKTODAY]

@HudsonKnowsEconomics Read economics in one lesson.

[david121090]

@HudsonKnowsEconomics did you see what Murphy said in the beginning, he doesn't have time to get into all the details, he says if you want more info go to his blog or go to mises.org. it'll answer all your questions

[michaelpshipley1]

The reason the fed has to prevent deflation is not because its inherently bad, its because they got every business so hopped up on counterfeit credit, if prices went down they'd all go bankrupt. what a bunch of disgusting liars.

[Panpiper]

@michaelpshipley1 I've worked as a manager and lead buyer for a very successful business for ten years. I can assure you that any business that went bankrupt because prices started to slowly deflate instead of inflate, desperately 'needs' to go bankrupt, as they are utterly incompetent.

[worldnewsbbc1]

@Panpiper Your assurance means nothing.  The successful business you "managed" must have been a McDonalds because anyone who has actually run a business knows that deflation is a disaster. Plain and simply stated, shut up stupid. Thanks in advance.

[jrbocane]

@michaelpshipley1 deflation is a problem for investment not because of "counterfeit credit" but because of an equation that Irving Fisher discovered, which is r = i - pi^e. That is the REAL interest rate is the nominal rate, the rate the bank chargers less expected inflation. So what happens to the real interest rate if there is deflation? It increases. In the depression, real rates went up to 15% and Investment dropped considerably, until the FED expanded the money supply.

[evangrogers]

it's amazing to see the FED guys just simply assume that "central banks exist, and thus they have absolute control of money production" as a given.

It's like modern economics couldn't even EXIST without a central bank. ... it's almost like... Modern economics was created BECAUSE a central bank exists...

...

... it's almost like, modern economics was created to JUSTIFY the EXISTENCE of a central bank.

... imagine that...

[Benzjammin10]

The constant banging of the podium into the mic is extremely distracting, but I try watching every Murphy video i can. He never disappoints to inject pure logic and dispel prevailing myths!

[b5thomas7]

no need to audit the fed, just end the fed or replace Bernanke with Ron Paul

[BigGunsBates]

An audit would not bring the Fed under Congressional control. Keep lying as if the poepl will believe you. END THE FED!!!

[BigGunsBates]

END THE FED!!!

[dreamz771]

Ravenously devouring Murphy's Book: Politically Incorrect Guide to the Great Depression. Easy to read, funny and worth every penny. Can't put it down. If you pick it up do so at BN so their computerized inventory system "realizes" the demand for this book and the PIG series of books as a whole. :P

[europa]

Keynesian use a lot of words ....but say nothing

I love Bob! Him and Tom Woods need to be the mouth pieces for campaign for liberty

Keynesian use a lot of words ....but say nothing

[christo930]

Why didn't the Austrian rep point out the fact that the real UE rate is way over 10%, more like 20%, if you count unemployment the same way you did in the 1930's. Even the U6 is over 17%! To say that since the gov manipulated statistic isn't as high as it was before it was manipulated is ridiculous. With the way the gov counts it now, the EU rate probably can't go above 11% since people fall off of the back end (that is why they aren't renewing the extension, so the UE number will drop).

[Nintendomanwill]

From that Fed 'economist' there were so many deceptive pyramids of ad-hoc reasoning to list but I can't help but comment on the most stupid thing he said-'low inflation is more benign than any deflation and the facts prove this'!

When do prices tend to fall rapidly in real terms? After relative prices are distorted by inflation. So falling money supply='downturn' ONLY by its FOLLOWING inflationary booms-the 'Great Deflation' occurring without boom/bust was the greatest period of real growth.

[Nintendomanwill]

So deflation is good-appreciating savings and speeding sustainable roundabout investment, when it occurs for prolonged periods of time and its performance is NOT judged by the problems preceding the fall in money supply ie inflation, malinvestment booms and banking/fiat money-supply collapse. To judge deflation on the downturn with which it is associated is to say A (def) followed B (inf) and B produced a bust therefore A was the cause of that bad result! Fallin prices r an effect of correction!

[Nintendomanwill]

But falling prices are an effect not a cause unto themselves. Thus there is a confusion of definition of 'deflation,' useful in masking their post-hoc-ergo-propter-hoc fallacies of blaming falling money supply for economic collapse caused by inflation producing malinvestment and unfinishable capital structures, restructuring of malinvestment and clearing of goods that were overproduced that results in bankruptcies. Deflation is a symptom of collapsed credit bubbles not a cause of collapse.

[selfrealizedexile]

1:06:30 Priceless.

[selfrealizedexile]

Bob Murphy has a great argumentative style.

[MisterLibertarian]

Is Matthew Lillard really the best guy the Fed could come up with to oppose Bob Murphy?

[WeThinkWereFree]

It is difficult to see things clearly when your salary depends on not seeing things clearly.

[strongbadXCP]

I love Federalist Society.  It is a great organization.

[pretorious700]

Bob blows that fed jackass out of the water

[imre1000]

The bit that scares me most is how much damage these people have caused and how clueless they still are about it.

They're not evil, not malicious - just clueless

[trekkerperson]

Hmmm. central banking or free banking....hmmm central planning or free markets...

Murphy takes it away hands down. Austrians for the win!

[dbram32]

Why not ask this fella what the purpose of GDP is to the Citizen Taxpayer?

He seems to know the real answer and seems almost willing to Blow the Whistle on this whole charade...anyone else get that feeling?

[constablekohler]

The fed economist is, towards the end of the video, making an argument AGAINST fractional reserve banking.

[8Paul7]

"Things are gonna be awful for the next 5 years. Have a nice day." Classic ! Bob Murphy kicks ass and people need to realize how conned they actually are by all of the world's governments. Of course, that will never happen and most will choose to remain in ignorance, even when their standard of living drops more and more.

[josda1000]

wait, NEW Keynesian economics?!  Keynesian is bad enough!

[t3hsauce]

All FED economists are terrible speakers. Even if this idiot had any actual intellectual ammunition against Murphy, he would still lose the debate. Whenever he speaks I feel my eyelids becoming heavy.

[Pingvinsvans]

@t3hsauce I agree he is not perfect but neither is he trying to degrade murphy, he seems honest and willing to debate, stop beefing with someone who gives austrians a chance to be heard!

[enotdetcelfer]

Nice... Thanks for posting.

[limitedgovt999]

Bob Murphy and the Austrian school win again!

[JessicaBelle81]

I swear my head was about to explode hearing that Fedster explain his rationale for counterfeiting and theft.

[Nintendomanwill]

Murphy could and should have done a lot better in this debate because half the stuff the Fed idiot said was economically and historically bankrupt. On a less important matter than theory, when he was pointedly asked whether he agrees with a rule-based Fed, he should have said:

1. That would be great if the target was 0 inflation

2. Historically and by its current actions there are obviously no rules, as even Friedman noticed, it's absolutely ad-hoc and does what it needs to allow banker theft.

[JessicaBelle81]

I swear my head was about to explode hearing that Fedster explain his rationale for counterfeiting and theft.

[GovWillKillU]

@JessicaBelle81 creating fake money and fake laws to the benefit of a few...and those they pay off with bribes...

[centervilletn]

yes they did...we went from recession right into collapse...skipped the depression..