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Robert J. Samuelson: Economists failed to heed the lessons of history

Omar | 2:37 a.m. July 6, 2009

Our economic crisis was handed to us as the only possible consequence of almost universal greed from the left! Not the greed that most liberals like to think of as the greed of the "rich" hording their money but the greed of those who did not earn, do not deserve, lusting after the property of other people who earned it by their hard work, diligence,discipline and self sacrifice. The greed of entitlements without work, something for nothing (read free health care) and the Democrats willingness to confiscate and re-distribute other people's property to buy votes got us where we are today! Obama's economic plans are doomed to fail because they are all nothing more than more of the same entitlement greed that got us where we are (only increased 4 fold). The American dream to achieve and to be rewarded for personal effort, discipline and self sacrifice has died and so has America's wealth. We are now borrowing from our grandchildren! Tell me how that is not entitlement greed in the worst form!

JMT | 6:37 a.m. July 6, 2009

I don't know about this Samuelson gentleman but there is one small subset of economists that called this crisis spot on. They are the Austrian School of Economists. Not named after a school in Austria but a group of economists from Austria from the 1930. They are in fact monetarists, meaning they focus on finance and currency and they have called this righ on the money at every turn, going back many years now.

If you want to know what happens next google them and read on. They are not fans of our current currency policies and the Federal Reserve, which is the single greatest money making adventure around - for the Rothchild's family that is.

I wish more people would read and study monetary policy. We would solve these problems much, much quicker.

This isn't a crisis of economics | 6:41 a.m. July 6, 2009

it is a crisis of politics. The collapse began with a change in U.S. housing policy in the 1990s, when government both enabled and encouraged lenders to make subprime loans. These policies continued in the 2000s and politicians protected Freddie Mac and Fannie Mae from the scrutiny that would have stopped these irresponsible lending practices.

Contrary to what many believe, Economics is not about predicting the future, it is about explaining and analyzing the present and the past. Nobody has a crystal ball. Even if economists has foreseen this, the politicians would still have pursued the same policies that got us to where we are today.

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Earl | 7:57 a.m. July 6, 2009

It is indeed a crisis of economists, and secondarily of politics. Politicians have a tendency to seek out the parade and jump in front of it as if they were leading it. The parade itself has been led by Keynesian economists who have convinced politicians that spending is everything, and that savings is the cause of recessions. History, as Samuelson points out, proves just the opposite. True wealth is built on savings, not on spending. If the world in general can be convinced that Keynesianism has failed, politicians will jump in front of the parade heading in the right direction this time.

RedShirt | 8:38 a.m. July 6, 2009

To "This isn't a crisis of economics | 6:41 a.m." actually it began in 1913 with the creation of the Federal Reserve and the government's idea that it could control the market sufficiently to prevent all future recessions.

Roland Kayser | 9:02 a.m. July 6, 2009

I know of one economist, Nouriel Roubini, who very accurately predicted our current crisis. He earned the nickname "Dr. Doom" for his predictions. He is generally supportive of the Obama administration's policies to combat it, with the caveat being that he thinks many more banks should be put into receivership. If there was an "Austrian School" economist who was as prescient, give us a name.

Earl | 9:53 a.m. July 6, 2009

Just one Austrian scholar? Ok: Peter Schiff. But the Austrian school in general predicted this situation, long before Roubini. The Austrian school explains that the expansion of the money supply (called inflation) creates an inevitable crisis by first initiating an economic boom, followed by a predictable bust. The greater the expansion of the money supply and the longer it continues, the greater the bust. They're predicting yet another bust because the money supply has become gargantuan. This bust will make the dot-com and real estate busts look like minor speed-bumps. Roubini is going to miss this one completely.

Roland Kayser | 11:05 a.m. July 6, 2009

To Earl: Peter Schiff is a stockbroker, not an economist. Clients who followed his recommendations on investments have not done particularly well. Although he predicted the bursting of the housing bubble, which many economists, both liberal and conservative also did, his predictions about what was to follow have so far not been accurate. Perhaps they will in the future.

Anonymous | 11:31 a.m. July 6, 2009

I agree w/ RedShirt about The Fed.

RK has rightly pointed out Roubini saw this coming but so did Robert Shiller who wrote the book Irrational Exuberance.

For the record, The Austrian school emphasizes a laissez faire approach to markets. The AS dismisses scientific methodology because of the human factor... simply put it was a precursor to the field of behavioral economics.

Ludwig von Mises & Frederich Hayek are the big names from this school. Libertarian ideals & the Austrian School are somewhat similar.

Earl | 11:39 a.m. July 6, 2009

You're right, Schiff is president of Euro Pacific stock brokerage. His investments have been mixed, not because his philosophy was wrong, but because the one thing you can't predict is what government will do next. That's why most people are having trouble investing. But the long-term predictions have been on target. The fact that he's a stock broker doesn't mean he can't be a scholar as well. Like I said, any Austrian scholar (take your pick at mises dot com) has predicted this meltdown. The entire Austrian school is pretty much unanimous on it. They predicted the dot-com bust as well. The problem is that most economists who predicted correctly, did so for the wrong reasons. The problem is systemic, not a product of recent legislation or programs. It doesn't require sophisticated models or equations. Nothing will be fixed by tinkering at the fringes. It all starts with central banking and a fractional banking system. As long as those exist, we will continue to have booms and busts. The only solution is to allow failing businesses to fail, to ultimately be rid of fractional banking and to establish a stable currency.

Red | 3:17 p.m. July 6, 2009

Kondratieff (long wave) economic theory predicted our current mess decades ago --

Anonymous | 3:44 p.m. July 6, 2009

Omar | 2:37 a.m The two percent spent of welfare did it. Liberals earn 6% more on average than conservatives earn. How do you have more income without working?

It was conservative would felt war was an entitlement program they could do on Chinese credit.

Your fantasy helps you escape personal accountability. I hope you feel comfort be being a victim of your own making.

to: omar | 3:46 p.m. July 6, 2009

more like stealing from our grandchildren. as for the crisis? how much longer are going to blame bush for the democrats mistakes? the dems have held a majority in both houses for two years, and that majority included barack hussein obama. did you ever hear anything from him before he started running for president? no. as far as i am concerned, the dems had two in congress to stop bush and seven months with thier "savior" in the white house. things have only gotten worse and it doesn't look like it's getting better.

Anonymous | 3:52 p.m. July 6, 2009

Great manta:{True wealth is built on savings, not on spending"True wealth is built on savings, not on spending."

The $267,000,000 spent on Glen canyon Dam created no wealth. In 1958 there was no Page Arizona, Hite or Bull Frog Marina's. The West didn't have the power from Lake Powell's generators.

If you took land values in Page in 1958 adjusted for inflation ans compare them to today's value you can prove government spending created wealth.

Does Holding customers to Snow Basin still use the road he got our government top buy for him? The 3.2 billion for you 2002 Winter Games created no wealth ether, nor has Pineveiw Dam a FDR WPA project.

Let's close Hill AFB and see if this closure effects Northern Utah. You don't want to. :-)

Anonymous | 4:12 p.m. July 6, 2009

America had a depression in:
1807
1837
1873
1893
1929
Before the Fed, America averaged a depression every thirty years.

Before conservatives modified the Community Reinvestment Act, passed the Commodities Futures Modernization Act and the Gramm-Leach-Bliley Act; American hadn't had a depression sine federal spending for WWII ended the Great Depression.

The facts prove American economic have been better since the Fed. Why fact check?

Anonymous | 4:27 p.m. July 6, 2009

Having your children leave school during a depression were jobs are few is better than my father had it when he returned to an America after the war where debt was a larger percentage of GDP than it is today?

The War debt ended the Great Depression and America had the largest period of economic growth in its history. This was paying down our national debt until Reagan became president.

Earl | 9:59 p.m. July 6, 2009

The response to all the things Anonymous charges can be given, but not in this forum. Each issue covers more ground that would be allowed here. He obviously does not understand the consequences of inflationary policies caused by the Federal Reserve, nor does he understand the causes of the recessions and panics (they were not called depressions then). If he did, he would have brought up the depression of 1920-21 that was quickly resolved by NOT invoking the help of the Federal Reserve or heavy borrowing. When you create money out of thin air, as the Federal Reserve does, it debases the value of money and creates the appearance of wealth. But money is not wealth. Wealth can only come through the process of saving. You only have to recall what happened in the Weimar Republic in the early 1920's or Zimbabwe recently to know that money does not result in wealth. Printing money will only result in currency destruction. The history of value debasement was relatively non-existant until the creation of the Federal Reserve. Since that time, one 1913 dollar is equivalent to $21.60 now (according to the BLS calculator), and accelerating.

Roland Kayser | 10:25 p.m. July 6, 2009

To Earl: Currency debasement has been going on much longer than there has been a central bank. Check out what the French and Spanish monarchies did to their currencies. Keeping the Fed insulated from politics was supposed to keep it focused on guarding the value of the currency irrespective of the political climate. I will admit that, with the notable exception of Paul Volcker, most Fed charimen have been reluctanct to pursue monetary policies that would be politically unpopular. I would also add that agree 100% with Peter Schiff that we can not consume more than we produce for the long term. Our trade deficits are simply unsustainable. Thank you for arguing with facts and logic and not with name calling.

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