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IPCC AR5 WG1: preemptive indoctrination

Alarmist journalists already know how everyone will react and should react to an unknown report

The almost final draft of the IPCC AR5 WG1 [physical basis] report will be handed to politicians tomorrow in Stockholm. It's my understanding that minor details may still change in the text, under the political pressure. Their summary for policymakers will be out on Friday and the whole report will be out on the immediately following Monday.

TV, off-topic: Sheldon Cooper won his third Emmy for the best lead comedy actor. He gave this speech. ;-)
These documents have leaked – I don't have the final copies! – so many journalists already know what's inside. Despite claims that the document will acknowledge that the climate models have failed miserably (using a more diplomatic language, however), the warming trends for the previous 20 years were overstated by more than a factor of two or three, sensitivity by more than 50%, and that natural variability was neglected and shouldn't have been neglected in previous reports, it seems that the main point – screaming that a dangerous climate change is underway or around the corner – will be preserved or even strengthened, despite all the evidence to the contrary.

So they left-wing media act as if the report were already released. For example, the Guardian wrote an article on Saturday,
Climate change: IPCC issues stark warning over global warming
which tells us that the hysteria should be stronger than ever before and we should do everything we can to quickly dismantle the industrial civilization, and so on. You may read kilobytes of this junk but you won't learn anything because you have already seen and heard thousands of similar dishonest, vacuous, ideological, hysterical articles.

But another British article from Saturday, Will Hutton's rant in the Observer,
To fight climate change, we must trust scientific truth and collective action
has a new, quite incredible twist so I decided to share a few more words with you about that.

To fight climate change, we must trust the scientific truth and the collective action, the title says. Well, even if there were a "climate threat we should wrestle with", it would be far from clear whether a collective action would be the "right" solution (only an ideologically biased person could be sure from the beginning). But a more important question is whether we should "fight climate change" i.e. whether the assumption of that verbal construction is satisfied. It's not. We shouldn't "fight climate change" because climate change is a law of Nature and fighting laws of Nature is... well, unwise.

But what I find amazing about Hutton's tirade is that he isn't even trying to hide that what he writes is pure propaganda – things readers are obliged to believe even though it is spectacularly clear that there isn't and there can't be any evidence to support it. The very subtitle says
Sceptics will rubbish a new report on climate change, dismissing calls for governmental action. Don't be swayed.
Nice. I understand that the documents have leaked so he may already know what will be inside (although I do think that changes may still be made for a few days). But how can he know what skeptics will say about the report? I don't know what I will say because I haven't really seen the report. When I was asked to write a summary, I insisted that my text just can't be released before the IPCC report is officially released (or at least its summary, for a shorter article) simply because I don't have the final text and all the knowledge from the previous drafts may turn out to be inaccurate.

Mr Hutton clearly faces no such hurdles. He doesn't need to see the final report or the skeptics' reactions to that report if and when he wants to write a long newspaper article about these so-far-non-existent texts.

Many other skeptics don't possess the final document, either. And even the skeptics who have the (almost) final document haven't really reacted to everything that is inside. So others simply can't know whether they will find themselves partially agreeing with the document, view it as a confirmation of some of the conclusions they have made themselves, or another step for the IPCC in the direction away from the science. We just don't know.

For this simple reason, the subtitle isn't trying to "disprove" any particular claim. What the subtitle – and most of the article, in fact – is saying is simply
Dear reader-sheep, you just mustn't listen to anything that would reduce your belief in the climate alarmism, whatever it is.
Mr Hutton is saying that he doesn't want the people to listen to the opinions or evidence whose impact on the ideology has a "wrong sign". It doesn't matter to him at all whether the evidence is right or wrong. It can't possibly matter because he can't know in advance what the skeptics' observations are actually going to be. So he wants the readers to be exactly as biased and prejudiced – to be stubborn about scientifically indefensible misconceptions about a dangerous climate change – as he is.

He knows in advance that some evidence must remain taboo and shouldn't ever get to the people's middle ears, or at least not into their brains. But rational people in a free society aren't closing their eyes in front of the evidence of any kind, according to the ideological convenience of the evidence. They are evaluating the evidence according to its intellectual strength and compatibility with the known facts and the laws of Nature.

The fact that Hutton doesn't want to listen to certain evidence whatever it is isn't just an artifact of a wrong formulation or a typo written in the subtitle. Indeed, the whole article he wrote is all about this thesis – the claim that the readers of the Observer should prepare themselves for closing their eyes if they're offered evidence that could change their opinions about the "big climate questions" (or, perhaps, any climatological questions) in the inconvenient direction.

Will the report be a better piece of work than the previous one, for example? Hutton writes:
It is global science's best assessment – hedged with probabilities and acknowledging uncertainties – of where we are.
A reader with IQ above 80 must be able to notice that because the final full report isn't out yet and hasn't really been looked at by unbiased folks – non-members of the team of writers – it just can't be possible to truly evaluate whether it is a better done piece of work than other pieces of work. So Hutton's claim that it's the "science's best assessment" is demonstrably just a prejudice that can't possibly have any rational justification. It's demonstrably a dogma for Mr Hutton that he must treat the work of these hacks in this inferior discipline that used to belong to the physical sciences as a pile of gems. And he wants this totally silly assumption to be a dogma for the readers, too. They don't need to see the report. They don't even need to hear any scientist's opinions about the report. They must believe that it is the "best assessment in all of science" without seeing a single paragraph of that or any reaction to that whatsoever. The readers of the Observer are obliged to believe all these insanities because the climate alarmists are the prophets in a new religion so under all circumstances, it would be a blasphemy to point out that their work isn't the best work or isn't better than the previous work or isn't more alarming than the previous work – or that they are dishonest, deluded, and corrupt crackpots. These suggestions should be banned, right? One isn't even allowed to think about these propositions, is he? The IPCC authors are nearly omniscient gods (who are, unlike the ordinary God, increasingly omniscient, whether or not this sequence of words is an oxymoron) and one shouldn't need any evidence for that at all, we learn.

The following sentence by Hutton says:
We should be desperately concerned.
You should be under the supervision of experts in a psychiatric asylum if you are "desperately concerned" about climate change because this kind of despair is incompatible with the basic psychiatric health.
However, it will be met by a barrage of criticism from the new "sceptical" environmental movement – almost entirely on the political right – which, while conceding that global temperatures are rising, insists that there is still insufficient scientific proof to make alarmist predictions.
Mr Hutton has a crystal ball so he may apparently predict how strong the reaction will be. Of course that he can't know it in advance. It is totally plausible that the skeptics won't react much and will treat another IPCC report, a report by an organization that has already lost most of its credibility, as a non-event. But he's saying these things because in the case that the skeptics will point out lots of mistakes etc. in the report, the readers of the Observer mustn't listen. They must close their eyes and place ear plugs into their ears.

It's not true that the opposition to the climate hysteria is "almost entirely on the political right". For example, in the Czech Republic, all parliamentary parties are mostly against the hysteria and especially policies proposed through this hysteria, and the nominally left-wing president is a climate skeptic pretty much just like his predecessor, although a much less educated and articulate one about the issue.

But it's not surprising that the degree of understanding that the climate panic is a scam is lower among the left-wingers because left-wingers are sometimes expected to take e.g. left-wing newspapers like the Observer seriously and the Observer constantly serves this utterly low-brow indoctrination to its readers. You must believe that the IPCC reports are the best things in science at least since the times of Newton (and they probably beat Newton, too) before you have any chance to see what the reports look like (or even what others who have seen the report think about it). You mustn't listen to the skeptics although it's not known what they will say. You have to be a well-behaved brainwashed citizen, the readers in the Observer are explicitly told.

Some of them will recognize – regardless of their opinions about other political questions – that this proves that the climate alarmists' position is based on a profound suppression of basic ethical values and folks like Mr Hutton are Mr Goebbels wannabes. But some of them simply don't get it. There are tons of readers of the Observer who just want to trust that the newspapers on "their political side" simply have to be right (even though they're clearly left, not right). They allow the newspapers to "educate" them even though it is spectacularly clear that this is nothing else than a case of indoctrination that has nothing to do with the evidence – and can't have anything to do with the evidence because the evidence hasn't even been released yet.

And some of these brainwashed readers live in predominantly left-wing communities where they keep on brainwashing each other, too. So it's not surprising that this social dynamics ends with a high correlation between politics and belief in AGW – especially if the likes of Mr Hutton directly say that the goal of all these insights is that there should be a "collective" action. How could possibly left-wingers and right-wingers react equally to similar purely political pronouncements? And this "collective" action is the real core of the AGW orthodoxy; detailed values for the sensitivity or any other scientific quantities never matter (AGW alarmists explicitly admit this point whenever some numbers change, even if they change by 50 or 100 percent). If the true heart of the movement is political, how could the people's reaction to the movement be uncorrelated to their politics?

There are long paragraphs in Hutton's article that exactly say what the skeptics will say about the report's being a retreat, a result of Marxism, and so on, and so on. Again, he can't know whether any of these things will be actually said by any skeptic or most skeptics. Concerning the sensitivity, he writes:
A further increase in temperatures is certain: what is uncertain is by how much. It could be as little as 0.3C by 2100, the lowest boundary of one of four scenarios. Or it could be as high as 4.5C, the upper boundary of the highest scenario.
He says those things are terrifying. But they're not. 0.3 °C per century is completely undetectable in the noise of the other sources of the temperature change. But even 4.5 °C which would surely make the temperature change detectable isn't terrifying. Just add 4.5 °C to the temperature outside that you see on the thermometer and you might get a feeling what the day could be like in September 2100 under this super-exaggerated scenario.

In 2100, Pilsen would see 15 °C instead of 10.5 °C. It wouldn't be terrifying. It would be a pleasant beginning of the autumn, unlike this rather cold weather we have today. But it's not too different, anyway.

Moreover, it's spectacularly clear that 4.5 °C is an overestimate. The graph above shows the 21st century temperatures recorded so far (blue curve). The diagonal wiggly grey line shows what the blue curve should look like if the sensitivity were close to 4.5 °C. Are they similar? Can you spot the difference? A 4.5 °C is visibly incompatible with the data. The noise just isn't high enough to hide a loophole. The probability that noise of this magnitude centered around zero (with any color but no long-term trend) would "correct" the diagonal increasing grey curve to the blue one is nearly zero.

In the previous report, they deliberately didn't say anything about the "climate sensitivity's being smaller than something". This has apparently changed in the new report and the new report says that it is very or extremely likely that the sensitivity is below those 5 °C. The uncertainty is huge and the "central value" or "most likely value" was reduced from 3 °C to 2 °C simply because the scenarios with 3 °C have already become pretty much indefensible from a comparison with the data. The skeptics typically say that the sensitivity is even lower, probably close to 1 °C (which is surely compatible with all the empirical data and implies some extra half-degree of warming by 2100), and the IPCC reports did move in the skeptics' way whether someone likes it or not. They had to move because the continuously arriving numbers from the observations showed that the skeptics were, to say the least, much closer to the truth than the "truly concerned alarmists". Even many skeptics' estimates may have been overestimates; yes, even this "blasphemous" possibility could have been easily realized in the real world, Mr Hutton.
The weather will become ever more volatile. Ocean currents will be disturbed and dwindle. There will be mass movements of people trying to escape the consequences; no country will be untouched. We should act to minimise the risk.
Even relatively to the already-distorted IPCC report, Mr Hutton is just making these things up. We will see that those claims about the volatility and ocean currents won't really be predicted by the report. "Mass movements" of people won't be discussed in the WG1 at all because they belong to the research of WG2 (impacts, March 2014) – and these claims about the mass movements are absurd, too. And similarly, "we should act to minimize the risk" won't be in the WG1 report at all because this is not a topic that this working group is addressing and to decide about similar matters, the IPCC has the third working group (mitigation) which will release the fifth report in April 2014.

So we can't know whether it will recommend to fight against climate change. I sincerely hope that the IPCC AR5 WG3 report in April 2014 will finally agree that it is utterly irrational to fight against climate change and all such efforts should be stopped. This conclusion would be spectacularly clear even if the climate sensitivity were near the top of the IPCC AR5 WG1's range, comparable to 5 °C, simply because the costs to "fight climate change" exceed any conceivable benefits at least by two orders of magnitude (and I think it's more like 4-6 orders of magnitude when counted inclusively and accurately enough). The actual sensitivity is by a factor of 5 smaller which reduces the "possible damages" by AGW by a factor greater than 5 and makes the benefits of the "action against climate change" even smaller (negative, in fact).

Another amazing, ideological claim by Hutton is this one:
Yet the highly ideological rightwing mind does not think in this way. Any call for collective action is to be instinctively distrusted, along with those who make it. Their motives must be suspect and the evidence on which they make their appeal necessarily flawed.
The right-wing people are just a majority among those who have noticed that the "fight against climate change" movement itself is an ideological one. Moreover, climate skeptics are manifestly much more focused on the scientific and economic "beef". It's clearly primarily people like Mr Hutton whose opinions are created purely according to the ideological template. After this article he wrote, there can't be a slightest doubt in his particular case.

In fact, the idea that the fight against climate change should be "collective" assuming that there should be a fight at all is something that intelligent left-wingers will have doubts about, too. A technologically sophisticated action by a single special company or institution could be more efficient than "collective action", couldn't it? Hutton's claims to the contrary are self-evidently ideologically prejudiced.

Several following paragraphs in Hutton's tirade are dedicated to various conspiracy theories involving e.g. Lord Nigel Lawson and postmodernists (does he really believe that Nigel Lawson has teamed up with postmodernists to make any truth look relative? Postmodernists are really left-wingers who should be nearly absent among the skeptics, shouldn't they?). Despite the "bad weather" in the whole world that has conspired against his pet pseudoscientific theory (whose four main enemies are spring, summer, autumn, and winter), Hutton ends on an "optimistic" tone. The collective action will win and the climate socialism will overtake Great Britain and the world, too.

It's time for your pills, Mr Hutton.

You know, we in Czechoslovakia probably react more strongly to primitive types of propaganda such as Mr Hutton's text because we've been exposed to propaganda for "a slight majority" of the 20th century. Because of this experience, even rather ordinary people became pretty skillful in detecting propaganda, detecting what is a lie, what is a speculation, what is a signal that the powerful are blackmailing us, what threats we should be actually afraid of and what threats may be ignored, and so on. Because the people got better in identifying a primitive enough mode of propaganda, the propaganda had to get more subtle, too.

The British left-wing readers have probably not gone through this training so their skills are still very limited. That's why a highly primitive type of propaganda – and Mr Hutton's propaganda is much more primitive and transparent than any propaganda that the communists would offer the Czechoslovak citizens in the 1980s – is still publishable in British newspapers because those newspapers still find many (although the number of the readers of the Observer is shrinking every year) people who are ready to take this junk seriously.

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snail feedback (23) :

reader Eugene S said...

The diagonal wiggly grey line shows what the blue curve should look like if the sensitivity were close to 4.5 °C.

*cough* Boss, I believe the thin straight grey line is the trend line for CO2 and the wiggly thin grey line oscillates probably because the readings are from the Mauna Loa observatory in the Northern Hemisphere only.

reader Gene Day said...

Yes. The seasonal ups and downs seen in the Mauna Loa data are surely due to local phenomena.

reader Luboš Motl said...

Dear Eugene, right, exactly, but the CO2 theory of the climate says that for small enough changes of CO2, the temperature is simply a linear function of CO2.

Only the slope matters, it is given by the sensitivity, and when read in the temperature graph, the wiggly increasing curve is exactly what is expected from CO2 given the sensitivity around 5 deg C. Look at it again, think about it, and you will see that what we write is compatible and what I wrote is completely right.

reader Eugene S said...

Thank you, especially for telling me about the dominance of the Northern Hemisphere in CO2 concentration, which I had not known about.

My comment was more in the nature of a question than an objection, perhaps I should have put a question mark at the end. I still have a question, though, about lag. Unless I misunderstand you, you are saying that climate theory presumes no lag whatsoever in the effect of a rise in CO2 concentration on global mean temperature? Because that would be the only way that the temperature graph would exactly track the CO2 graph?

Sorry to bother you with such elementary questions. I'm sure that anna v or Gene Day or any of a dozen other TRF readers are capable of setting me straight, so please don't feel obliged to waste your time replying.

reader Gordon said...

Hmmm, I am insulted that Hutton says that the "sceptics" are right wingers. I am not exactly right wing, as Lubos will attest to--maybe to the right of Cynthia :) Hutton uses the syllogism, "If you are a climate sceptic, you are a right wing loonie. You are a sceptic, therefore..."
This is pure demagogic fear-mongering. Also, when people trot out the precautionary principle that all risk has to be minimized at all times, we all might as well live in caves and never get out of bed.

reader Eugene S said...

Whence this obsession with "hard money" and gold? Why do you insist that your dollar buy you no less than your great-great-grandpa's dollar bought? (Though what one would do with a buggy whip and a bolt of crinoline today I have no idea.) Is it a fear of abstraction? Are you happy only if you can bite down on your money and feel its metallic taste in your mouth, wrap it in your pillowcase?

Are you 96 percent poorer than g-g-gramps because the dollar has "lost 96 percent of its value"? Get real!

I already mentioned that deflation throws a spanner into the works of the economy because it makes people hold onto their cash and hold off on purchases. This is not a matter of controversy. Purchases are influenced by expectations of how much more or less something will cost at point x in the future.

Entirely separate from this is the matter of falling prices due to productivity improvements and technological innovation. We're not talking about that here.

Another danger of deflation is what happens to the debt that people carry. (Private gross debt in the U.S. is large, much more than the country's gross domestic product.)

Already since the 1930s we know about the phenomenon of "debt deflation" -- if businesses and consumers must pay off existing debt with reduced income from sales and wages, they are in trouble. Insolvencies will increase, demand will fall, and deflation then accelerate still faster.

But wages and salaries don't decline smoothly. There will be disruptions because of massive resistance leading to increased unemployment.

That is why deflation is a bad idea and controlled, predictable, modest inflation is by far the better alternative.

reader Sparafucile said...

Not only did you grossly mis-read what I wrote, you didn't even address the crux of my point in your reply. The points you try to make are quixotic and irrelevant.

reader Luboš Motl said...

Jesus Christ, I am among the least likely 1% of the mankind who would promote inflation. I think that inflation is wrong and even 2% of inflation is too much and it's better to reduce it.

But deflation is also wrong. The effect of "postponing purchases" undoubtedly works when prices drop because of the technological progress, too. But at some moment, people just decide that they need a new gadget, anyway. So the number of gadgets that are sold per unit time ultimately returns to the original value.

But if the price drops are due to deflation and not genuine technological progress, this has a price. The salaries aren't being deflated in sync with the dropping prices and the profitability and competitiveness of the producers is somewhat unpredictably disappearing.

Moreover, because the large deflation tends to have large oscillations as well, the delay of consumption in combination with the oscillating deflation leads to oscillating consumption. This creates irregularity in the sales and all these things reduce the efficiency of the economy.

No sensible modern economist would claim that a large deflation is good.

For superlarge deflation, people know that storing their wealth in the money is by far the best investment and the money stops circulating. They still need to buy food etc. but they will tend to switch to barter and other things to pay with because it's stupid to spend the currency that is getting so much more valuable.

Just to be sure, this is really not the case of gold whose price relatively to the inflation-adjusted money is more or less constant in the long run - at least, it's not predictable what will happen in the next 10 years with the price.

reader Luboš Motl said...

Right, I couldn't believe my eyes, either. It's a straight confession that there is nothing rational or science-based about these policies.

reader Luboš Motl said...

Dear Justin, in my perspective, the police and enforcement of law are the main thing about a "state" that I am really paying for and I just think that it's desirable if police behaves in this way to protect my home. Others may have a different opinion but all these things are regulated by laws. In certain circumstances, the policy may just do such things because it decides that it may prevent a crime in this way. Such decisions, when indefensible, have their consequences. It's not that police may and is breaking into people's houses all the time and without a reason or punishment, is it?

If police couldn't act at all - in a way that precedes some lengthy trials in front of the judges - you should abolish police completely! I think it would be really stupid because to a large extent, police is more important than the courts themselves. It's what gives muscles to the courts etc.

At any rate, these comments describe the status quo which *is* enforced by police etc. You may disagree but that's the last thing you may do against it. A professor should know that fighting with cops may have consequences, otherwise he is a moron. You can't change these things by references to some fictitious world where police is never allowed to act. I am not really interested in similar fictitious worlds.

reader Casper said...

Perhaps when Mr Zeman said 'great mice' in reference to Euro leaders, he meant rats?

reader TomVonk said...

You know, we in Czechoslovakia probably react more strongly to primitive types of propaganda such as Mr Hutton's text because we've been exposed to propaganda for "a slight majority" of the 20th century. Because of this experience, even rather ordinary people became pretty skillful in detecting propaganda, detecting what is a lie, what is a speculation, what is a signal that the powerful are blackmailing us, what threats we should be actually afraid of and what threats may be ignored, and so on. Because the people got better in identifying a primitive enough mode of propaganda, the propaganda had to get more subtle, too.
This is a brilliant observation and something that I have been wondering too.
The propaganda of Mr Hutton is so unbelievably primitive and transparent that any standard Czech during the 70ies in a pub even after his 4th Plzen would in an eyeblick recognize this for the s...t it is and explode with laughter.
My grandfather, would read Rude Pravo and then tell us all what was happening in reality.
And we were not surprised at all that what he was telling was contained only to 10% or less in the newspaper.
If he read a news that the safety of the national railroad company was dramatically increasing and that the Comrade Director X has been awarded a red star of socialist work, he would tell us that there had surely been a huge train crash and with a smile proposed bets that he would be able to find out where this crash took place.
He would also find a powerful signal and predict that Comrade X (unknown by everybody) would surely enter the Central Comitee of the Party soon due to his ability to find a suitable scapegoat for the crash what was making him a very dangerous person indeed.
I am sure that almost every Czech (or Slovak or Pole or etc) could routinely tell similar anecdotes - distinguishing hidden signals and sophisticated lies simply belonged to skills necessary for survival. Untill mid 60ies the survival was litteraly physical.
So seeing how even a 12 year child would have been able to read and understand correctly Mr Hutton's rant and conclude that this guy was too dumb to become dangerous, I can't understand how adult british readers can't see the same thing.
Now the same is of course true for Americans, French or Italians.
German with reservations - their training had been similar and for some who had bad luck, it covered even 60 years when they transited seamlessly from national socialism to communism.
Angela (btw warm congrats for an unprecedented victory on Sunday) must surely possess this skill to a high degree.

reader Vangel said...

People cannot be averaged. And it does matter what the government does. Surely you of all people knows that there is little difference between East and West Germans or North and South Koreans. Yet, the performance of individuals was very different because of the way government treated capital and the amount of freedom that was given to individuals.

Africa is not a sh**hole because its people are stupid. Its problem are kleptocratic governments and no tradition of property rights. The best outcomes come from societies where property rights are respected the most. That means no government monopolies on the creation of money, no bailouts of failed businesses, and no barriers to protect producers from competition.

reader Vangel said...

"It's untrue, however, that the price drop occurs predictably every week. The weekly changes are mostly random. "

I think that you are missing the point. Price decreases have little to do with deflation most of the time. It used to be that when the language was a bit less ambiguous the terms inflation and deflation were applied to the change in money supply, not the price of a particular good or service or even of a basket of goods and services.

That changed after the era of central banking took off because the bankers wanted to hide the fact that they were in the business of creating inflation. That way the banks could pretend that they had nothing to do with artificial booms that they created by injecting liquidity into the system and sending false signals to decision makers who had to figure out how to allocate capital.

A good example of this type of inflation was seen in the second half of the 1920s in the US. The Fed kept injecting money and credit into the system to protect the pound, which was linked to gold at too high a price. As a result consumers did not get the benefit of the massive improvement of productivity during the 1920s but saw flat prices. The prices of most goods should have fallen sharply but the Fed was happy to inject just enough to keep prices level. So instead of cutting back their investments industrialists added to the capital producing those goods. When the trend could not be sustained a massive liquidation was required to reset the economy. Sadly, Hoover and FDR did not permit that to happen and turned what should have been a sharp but short contraction into a Great Depression.

It is clear that you get your economic education from people who concentrate on what happened after the crash came in 1929. They conveniently forget to look at the artificial boom that was created by the central banks before the crisis and choose to blame the central banks for not doing the things that created the boom in the first place. Until you read what the Austrian School has to say about money or business cycle you will never be able to see the bigger picture and make the right decision.

In the very short Youtube clip below you can see the difference between the analysis that comes from those that understand Austrian economics and those that use the mathematical models favoured by Keynesians and Monetarists.

And let me point out to you that both the tech bubble and housing bubble were spotted early by economists from the Austrian school and they pointed out that once the Fed was no longer capable of supporting the trend a massive crisis would destroy many investors and wipe out trillions of paper wealth. They have said the same thing about the sovereign bond market and consider it to be the greatest threat yet. Yet, even though they were correct and explained the mechanism and the pattern that we would see most of what you hear in the media still comes from the charlatans who were saying that there couldn't be a bubble because if there were they would see it.

Before I end this I suggest that you look to the Fed minutes around the same time that Schiff was fighting with the CNBC anchors and guests and talking about the bubble. While the contraction in housing already began and was reflected in the markets the Fed governors could not spot the problems. That was not because they were stupid or corrupt. It was because their economic theories are no more sound than the theories that the alarmists use to promote AGW.

reader Vangel said...

"Whence this obsession with "hard money" and gold? Why do you insist that your dollar buy you no less than your great-great-grandpa's dollar bought?"

I am just pointing out that you cannot justify theft. And when you give the right to a private corporation to print money and create credit out of thin air that is what you have. This is why we have never seen in history a time when markets chosen a fiat system. A fiat system was always imposed from the top down just as it is imposed today with the legal tender laws.

reader Vangel said...

"But deflation is also wrong. The effect of "postponing purchases" undoubtedly works when prices drop because of the technological progress, too."

The price of electronics keep falling. Are you postponing buying iPhones, laptops, or mp3 players? I know that I am not and that most of the people that I know are not.

And why shouldn't productivity increases lead to price deflation? What was harmful about the steady increase in purchasing power during the 19th century? The consumers were certainly better off. And so were producers. Was Rockefeller a bad man because he lowered the price of kerosene by more than two thirds as he drove the whalers out of business? Was James Hill evil when he kept lowering his freight prices even as many of his government subsidized competitors were going bankrupt across the country?

As I said before, it is obvious that you have a considerable intellect. But from what I see that intellect is not of much use when you start with the wrong premises.

reader Sparafucile said...

So now you're talking about "large deflation" and (ha!) "superlarge deflation" as the only alternatives to sustained INflation? And by that basis, you conclude that a 98.5% currency deflation (price inflation) is not only acceptable, but desirable??? And then, you further justify this theorem on some hypothetical suggestion that "superlarge deflation" creates abnormally high volatility?

Thank you for your straw man argument. But nobody's talking about "superlarge deflation" being the only alternative to long-term inflation.

reader Luboš Motl said...

I think that the healthiest inflation for the economy is zero or a small rate like 1 percent per year.

Fiat money controlled by central banking with policies targeting the inflation are getting this result by design.

You could imagine that you could get a similar price stability with non-fiat money, like gold, but it is very unlikely. Price fluctuations in both directions would be much more common.

Otherwise you clearly expose the misconception of some of the gold standard advocates who believe that if they have gold, they're guaranteed to be equally rich and lose nothing over the eternity.

But this is complete nonsense. The value of something may be measured only relatively to something else. And the volume of oil, work, electronics, human work etc. that you may buy for 1 ounce of gold may go up or down much more frantically than what one may get for one dollar.

If the mass of the gold doesn't change, it doesn't mean that its value - in any sense useful for a human life - isn't changing.

reader Vangel said...

"I think that the healthiest inflation for the economy is zero or a small rate like 1 percent per year."

But there is no basis for this faith-based statement. Why is it better for prices of goods to rise by 1 percent instead of falling by 1 percent? Shouldn't increased productivity mean more purchasing power for your savings? And why is it ethical for a private institution like the Fed to create purchasing power out of thin air when nobody else is allowed to do the same?

"Fiat money controlled by central banking with policies targeting the inflation are getting this result by design."

Where is the evidence of this? Most fiat currencies collapse in value within a generation or two and are replaced by a new fiat currency. The savers are wiped out and pensioners are left at the mercy of the state's welfare programs. That means even more power for politicians to redistribute earnings and buy votes.

For a guy who claims not to support central planning and big government you certainly use arguments that support central planning and big government.

"You could imagine that you could get a similar price stability with non-fiat money, like gold, but it is very unlikely. Price fluctuations in both directions would be much more common."

This is not true if you have a relatively free market. The supply of gold exploded during the 19th century as the Yukon, California, and Australian gold discoveries led to a mining boom. Yet, inflation in the United States was lower during the period when gold mining exploded than it has been since the US went off the gold standard. Purchasing power for savings in both Europe and North America went up as currency retained its value. This does not mean that there were no booms and busts. When the government subsidized railway and canal building there was a land boom that led to a huge bust. When the first two American central banks were ended there was a bust as the contraction of credit creation no longer supported asset prices on the East coast. The biggest bout of inflation came when the gold standard was abandoned to fund the War against Southern Secession. When the gold standard was allowed again prices stabilized and there was a private investment boom that did not cause any appreciable inflation.

reader Eugene S said...

Yet more pie-in-the sky fantasizing about how things were so much better in the past and all we need to bring back the good times is to reintroduce the gold standard... or allow anyone to issue legal tender... or both? Hard to make it out.

I've asked this before but received no answer so I'll ask it again.

Which of the famous economists in the "Austrian Schools" has put forward something resembling your proposals? Exact quotes please, footnoted to the page number (online edition preferred). If such quotes exist, please show that they were representative of that economist's thinking throughout their career, for example by quoting from a respected mainstream biographer.


reader Vangel said...

'Things' were not better in the past because scientific progress and the availability of cheap energy have clearly made our lives much better. But the monetary system was much better when governments did not have the power to force people to accept fiat currencies that were on their way to reducing purchasing power by 90% or more within a generation or two.

Since you asked for references on why sound money is better I will be more than happy to provide you with them. Below are links to a number of free eBooks written by prominent Austrians.

Ludwig von Mises, The Theory of Money and Credit (ePub)

Robert P. Murphy, Study Guide to the Theory of Money and Credit (ePub)

Jesus Huerta de Soto, Money, Bank Credit, and Economic Cycles

Murray Rothbard, What Has Government Done to Our Money? (ePub) (Kindle)

Murray N. Rothbard, Man, Economy, and State, with Power and Market

(See Chapter 3 and 4) (ePub)

Murray N. Rothbard, The Case for a 100 Percent Gold Dollar, (PDF)

Murray N. Rothbard, The Case Against the Fed


Murray N. Rothbard, Rothbard, The Origins of the Federal Reserve (ePub)

Roger W. Garrison, "Central Banking, Free Banking, and Financial Crises" (PDF)

Jeffrey M. Herbener, "Ludwig von Mises on the Gold Standard and Free Banking" (PDF)

That should be enough for now but if you are interested you can find hundreds more books and papers on the topic.

reader Eugene S said...

Thank you for your reply but it still does not answer my question.

Exact quotes, please (referenced, preferably available online at no cost). And some corroboration that they are representative of that economist's thinking.

I surely am not going to spend the next month plowing through your bibliography.

I notice Hayek is missing from your list, did he have nothing good to say about the gold standard?

reader Halfamonkey said...

Rats in mice's clothing, maybe? Either way, the problem is that there are so many of them. A new caste system is beginning to emerge consisting of petty bureaucrats and minor officials, spread diffusely and unaccountably over a wide range of governmental and quasi-governmental positions. Every new regulation corresponds to the creation of jobs for more of such nibbling rodents.