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Amongst other things, inflation is a form of taxation. As prices rise the purchasing power of savings falls. As a consequence, savers are harmed while creditors gain by having to repay their debts with less valuable money than when they originally borrowed.

With this in mind it is troubling that so many within the central banking establishment are currently arguing that what the world needs is higher inflation.

Janet Yellen, President Obama’s nominee to become the new Chair at the Federal Reserve, has long argued that higher inflation is invaluable when the economy is weak. After all, as her reasoning goes, rising prices bring greater profits to businesses. Rising wages help borrowers repay their debts. And let’s not forget that inflation encourages people and businesses to borrow money to spend more than might otherwise be the case.

Harvard economist and co-author of the influential book This Time It’s Different, Kenneth Rogoff, wrote recently that inflation “should be embraced.” He goes on to explain that “moderate” inflation of 4-6% is helpful when “massively over-valued” assets, such as housing, are in danger of deflating. (I have reviewed Rogoff’s arguments in this book in the first issue of Mises Canada’s Journal of Prices and Markets.)

Such views are no longer in the minority. Indeed, a great number of commentators echo the sentiment that higher inflation is needed now more than ever to “save” the economy. Nothing could be further from the truth.

In formulating his business cycle theory that earned him his Nobel Prize in economics, Friedrich Hayek called the effects of inflation “forced savings.” Inflation induces producers to take on investments through capital expenditures that would be inherently less stable than those brought about by voluntary savings. The unsustainable nature of these investments comes from two facts.

First is that as inflation increases nominal profits, businesses are fooled into thinking that their investments are more profitable than in real (inflation-adjusted) terms. Indeed, cost-based accounting compounds this problem as depreciation allowances, for example, are based on the historical purchase price of an asset and not the higher replacement cost brought about by inflation. Consequently businesses take on investments that are less profitable on the margin than would be the case lacking inflation.

On the other hand, Hayek focused on the time structure of production. It is insufficient for a business to merely produce the amount of goods demanded by consumers. It must also structure its production processes so that its investment yields a profit at that time when consumers stop saving and start demanding goods. This is important as any production process relies on savings to sustain it until it reaches a point of payoff. This point is identified, in the terms of modern finance, as the moment that the net present value of a project turns from negative (e.g., during the initial investment stage) to positive (e.g., when the fruits of this process generate sales).

Inflation skews the structure of production and induces businesses to take on more time consuming, or roundabout, production techniques. This is so because the net present value of any investment project is interest-rate sensitive. As rates fall, as is the case in the short term in real terms as inflation rises, longer durations until payoff will be profitable compared to a lower interest rate environment.

The forced saving that Hayek focused on was the increased investment brought on by inflationary central bank policies. More to the point, his emphasis was on the fact that the investment would be of the incorrect type. Because it does not coincide with real saving preferences, longer-dated and less profitable investments will be made than would otherwise be the case.

These forced investments are not sustainable because they are inconsistent with underlying preferences. Resulting only from the illusion of profitability that low interest rates bring about, these investments will be liquidated when interest rates rise (as would be the case in the long run as higher inflation pushes up borrowing costs) or as their generally unprofitable nature is exposed.

The concerted effort to increase inflation is the same medicine that caused the current economic malaise. The world is rife with poor investments that were undertaken in the past because of inflation-induced forced saving. As central banks pursued inflationary monetary policies businesses were induced into making investments inconsistent with the sustainable needs of the economy.

Calls for further inflation are akin to demands for higher taxes. As inflation redistributes wealth of savers to investors it favours a spendthrift attitude. This has much in common with the idea that increased taxes to allow governments to continue spending will somehow miraculously cure the economy’s woes.

Unfortunately and similar to all redistribution schemes, the result is tenuous. Just as bloated public sectors are now increasingly seen as the causes of the current crisis in such basket-case countries as Greece, for example, so too should inflationary policies be seen in a similar light. By artificially altering savings preferences, inflationary policies breed the unsustainable situations that we call recessions. To the extent that they cause these problems, economists should not be advocating them as means to exit recessions as well.

David Howden is Chair of the Department of Business and Economics, and professor of economics at St. Louis University, at its Madrid Campus, Academic Vice President of the Ludwig von Mises Institute of Canada, and winner of the Mises Institute’s Douglas E. French Prize. Send him mail.

Permanence and the State – Ludwig von Mises Institute Canada

December 23, 2013 12:46 pm / Leave a comment

Permanence and the State – Ludwig von Mises Institute Canada.

Engraved outside the National Archives Building in Washington D.C. is the phrase: “This building holds in trust the records of our national life and symbolizes our faith in the permanency of our national institutions.” It’s an uplifting quote meant to channel the spirit of patriotism. It’s also one that is supposed to burn an imprint into the reader’s mind: the state and its behemoth bureaucracies are here to stay.

Monuments of grandeur serve a special purpose. H.L. Mencken once wrote “the average man, whatever his errors otherwise, at least sees clearly that government is something lying outside of him and outside the generality of his fellow men.” This is very much true, and large, menacing buildings such as J. Edgar Hoover Building or the Lincoln Memorial help establish this cognitive divide. By using architectural techniques dating back to ancient Rome, the designers meant to create an aura of endearing superiority for the plebes to drool over.

In a recent National Review piece, Kevin D. Williamson wrote the initial builders of Washington’s various monuments “wanted to show that this new country of free men could hold its head high in the world and stand beside the pomp of any empire.” That may very have been a driving force, but I have a different theory: government monuments are meant to be imposing. But even more than that, they are formed for the purposes of transcending the here and now. If a sense of permanence can be established in the citizenry, there is little standing in the way of perpetual domination. The use of the word “permanency” on the National Archives building is no coincidence. There is no better way to dispel resistance than to perpetuate the idea that it’s futile.

The state, as Rothbard noted, appears to many as “the supreme” and “the eternal.” But that perception is a farce. Very little makes an indelible mark on human history. People are born and die. Businesses start and end. Wealth comes and goes. And states are established and dismantled. None, except for the brightest and most convincing of thinkers, sticks around for very long.

Pulling off immortality would be a great feat for man. But alas, we are born with a set time in the material world. The state’s quest for permanency is nothing but extreme hubris displayed by the most imperialistic of empires. Governments rise and fall all the time. Currently, the regimes in both Syria and the Ukraine risk falling due to civil unrest. In Europe, governments are continually teetering on the brink. Just two decades ago, the Soviet Union collapsed, giving way for a new cronyist form of governance. It was no different from the crumbling of the empires of Rome, Ottoman, and Byzantine.

What truly achieves permanence is not lofty monuments built to worship some all-powerful dictator, but ideas. Mankind’s future is decided on mental battlefields. The very reason we have oppressive governments today is because enough have been fooled to believe that society couldn’t function without them. It’s why public schooling is mandatory in much of the Western world. Get ‘em young, pump ‘em full of tall tales of national glory, and watch ‘em recite the pledge of allegiance until they have one foot in the grave. That’s the tried-and-true formulate for institutionalizing subservience. It’s the Orwellian logic of, “he who controls the past controls the future. He who controls the present controls the past.”

By teaching that monopoly government is eternal, it becomes eternal. The lesson boxes in the thought process of impressionable fellows. It disallows them the ability to conceive of anything different from the status quo. And worse, it ingrains the idea of eternal residing in the heart of national government.

A sloppy understanding of what is really universal follows. No longer are principles seen as defining features for societal relations. Government becomes the focal point of all disputes. Order comes only from the starched-shirt bureaucrat – not from any logical precepts. Discovering the rational boundaries by which humans should live, organize, and govern their actions is the basis of natural law. It is meant to be timeless, applying universally to all humanity. The very notion of an all-encompassing order is a threat to state, which relies on unquestioned obedience. More so, it is threat to the Marxist/progressive theory of ever-evolving laws that replace and duplicate each other on a journey to the end of history.

Even some libertarians doubt the efficacy and truthfulness of permanence in teleological law. In a recent FEE.org debate, minarchist philosopher Tibor Machan wrote, “because none of us is going to live for eternity, none of us can establish anything as timelessly true.” This is the same mindset that decides slavery was once justified, state-enforced segregation was perfectly fine, and unions were a virtuous force in combating excess capitalism. In simpler words, it’s a superfluous understanding of history in relation to logic-based law. What it amounts to is a rationalization of crimes just because they happened in the past. Everything is nothing, and nothing is everything all at once.

Understanding the nature of permanence in relation to government provides insight into how fickle the state truly is. Societies have progressed from despotism to democracy to monarchy to republics. Opinions have changed, elections have occurred, and ruling bodies have been tossed out overnight. No matter how espoused, the sacredness of government eventually unravels. The people are then left staring at the truth: that their leaders are nothing but pompous tyrants.

This tenuous reality was present in the recent public execution of Jang Song-thaek in North Korea. Song-thaek, uncle to supreme dictator Kim Jong-un, was given the death treatment for angering his nephew. The Kim dynasty is supposed to be sacred. Their word is supposed to be God’s. Yet, here a second-hand man by marriage was offed like an injured race horse. In the most tyrannical country on earth, the aura of permanence saw a hole poked through it. In effect, the emperor was revealed to have no clothes, except for some rags of irrational tendencies.

The heads of the state would love nothing more than to wield the force of immortality. It’s a power-trip that pays off financially and mentally. Constructing the potemkin village of surreal authority makes for quick shock and awe. It aides in scaring the citizenry into compliance. But facades don’t last forever, no matter the marble symposiums erected as tribute.

James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail

Krugman: “Fiat Money…Backed By Men With Guns” – Ludwig von Mises Institute Canada

December 15, 2013 12:27 pm / 1 Comment on Krugman: “Fiat Money…Backed By Men With Guns” – Ludwig von Mises Institute Canada

Krugman: “Fiat Money…Backed By Men With Guns” – Ludwig von Mises Institute Canada.

Say what you will about Keynesian superstar Paul Krugman, he doesn’t mince words. In a recent interview with Business Insider’s Joe Weisenthal, Krugman gave his opinion that Bitcoin was in a bubble because it wasn’t backed by a tangible asset.

Perhaps sensing that this may have undercut the case for Krugman’s preferred monetary system, Krugman was quick to add thatgovernment-issued fiat money was “backed by men with guns.” (See the video for yourself.) Thus, Krugman thought that government currencies were not in a bubble, even if they weren’t backed by tangible assets, because people needed to obtain the currency in order to pay taxes.

Krugman’s analysis provides a good opportunity to explore the subtlety of Ludwig von Mises’ monetary economics. On the one hand, Mises was a “hard money” man who was a fierce opponent of government fiat money. It is also true that Mises was a classical liberal who would have opposed government coercion in the form of legal tender laws, capital gains taxes on gold and silver, and other ways that governments currently use their “guns” to solidify the present system where most people on Earth use government-issued notes as their primary form of money.

However, even though a libertarian and proponent of Misesian economics might object to government-issued fiat money because of the coercion–”men with guns”–involved, strictly speaking Mises would not agree that a currency can be backed by guns, in the way Krugman describes. To speak in this manner is a complete surrender in the face of the economist’s task of explaining money.

Mises’ grand work in this area is his The Theory of Money and Credit, for which my free study guide is available. As Mises conceived it, the central theoretical task when it comes to money is to explain why money has a particular purchasing power. Why should it be that people give up valuable goods and services for a particular item–the money commodity–according to definite exchange ratios?

Mises’ answer is that people form expectations about the future purchasing power of money, and that is what gives it purchasing power today. These expectations in turn are based on their observations of the money’s purchasing power in the past. Thus lays the groundwork for Mises’ famous “regression theorem,” in which people’s subjective valuations of money necessarily involves a historical component (unlike their subjective valuation of, say, pizza). Gold, silver, and other forms of commodity money could ultimately be traced back to the days of barter, in which they had definite exchange ratios with other goods because of their usefulness as regular commodities.

In the case of government-issued fiat currencies, Mises explained their purchasing power using the same theoretical apparatus. The only difference is that at some point in the past, the currencies (such as the dollar, pound, franc, etc.) had been explicitly linked to the precious metals, and that’s what grounded everyone’s valuations of them.

Thus, Krugman’s glib assertion that today’s government fiat monies derive their value from guns completely dodges the problem for the economist: to explain the magnitude of that value. Even if we conceded that the government could force everyone to use something–let’s say a particular type of sea shell–as money, by insisting on payment of taxes in the form of sea shells, that policy wouldn’t explain why an hour of labor should trade for 10 shells, rather than 100 or 1,000. This is especially true when we reflect that most government taxes are expressed in terms of percentages, rather than an absolute amount.

Furthermore, it’s obvious that Krugman’s “explanation” would have no way of accounting for changes in either variable. For example, in the 1970s in the United States, price inflation took off dramatically, meaning the purchasing power of the dollar fell sharply. Was this because of a reduction in taxes? Of course not. And in the 1920s, there were sharp cuts in marginal income tax rates at the federal level. Did this lead to severe price inflation, as people now didn’t need as many dollars to pay Uncle Sam? On the contrary, consumer prices were fairly stable in this period.

As these observations should demonstrate, Krugman really hasn’t offered a viable explanation for the purchasing power of money. One might be tempted to say that at best, governments can use their taxing power to dictate what the monetary unit is, even though they would still have little control over its purchasing power.

Yet even this concedes too much. Strictly speaking, if the only policy we are considering is that the government says every year, “Citizens must turn in such-and-such number of sea shells as tax payment,” that alone won’t even be sufficient to conclude that the sea shells will be the money in this society. People could still use some other commodity as the money, and then use the actual money to buy the sufficient number of sea shells each year right before paying their taxes.

UPDATE: After originally posting this, I realized there was a problem with one of my examples: In the 1920s amidst the marginal income tax rate cuts designed by Treasury Secretary Mellon, the U.S. was still on the gold standard. Thus this period is not a good refutation of Krugman’s explanation for fiat money’s exchange value. (Of course, we can simply look at other examples of governments that engaged in large-scale tax cuts even while using a fiat currency, and we don’t typically see a sharp rise in price inflation accompanying them.)

Robert P. Murphy is the author of The Politically Incorrect Guide to Capitalism, and has written for Mises.org, LewRockwell.com, and EconLib. He has taught at Hillsdale College and is currently a Senior Economist for the Institute for Energy Research. He lives in Nashville.

The Hunger Games and the Moral Imagination – Ludwig von Mises Institute Canada

November 29, 2013 9:28 am / Leave a comment

The Hunger Games and the Moral Imagination – Ludwig von Mises Institute Canada.

This past weekend I caught The Hunger Games: Catching Fire at my local theater. The movie is based on the second part of a dystopian trilogy written by Suzanne Collins. In Collins’s fictional world known as Panem, a despotic government rules over all with a violent iron fist. There is a strict separation between the political class and the rest of the populace, with the latter working in slave-like conditions to support the former. The story focuses on protagonist Katniss Everdeen and her struggle to protect her loved ones while surviving the tyranny of her brutal overlords.

Throughout Catching Fire, the subject of revolution is paramount. Since the first instalment of the series when Katniss bested her oppressive dictators in the highly-publicized, annual fight-to-the-death tournament, she has become a symbol of agitation to the people. They look to her as a chink in the government’s armor – a sign that tyranny is not immortal but can be damaged. The plebs and their desire for freedom results in riots in the streets with vicious crackdowns from Orwellian-named “peacekeepers” who maintain tranquility with the bloodied end of truncheons. At one point during Katniss’s victory tour, an older gentleman raises his hand in defiance of the regime and whistles the popularized tune of revolution. He is summarily executed on the spot while the crowd that attempts to protect him is beaten handily.

The act of violence drew a startled and winced response from the movie audience. It was a demonstration of the horribly destructive nature of tyranny. There was no question as to the evilness of Panem’s dictatorial government. The line between enemy and hero was straight and untainted.

Stories such as the Hunger Games are wonderful things because they spark what conservative statesman Edmund Burke called the “moral imagination.” In his famedReflections on the Revolution in France, Burke chided the Jacobin revolutionaries for endeavoring to paint “the decent drapery of life” and the “moral imagination” as “ridiculous, absurd, and antiquated.” Russell Kirk expanded on this phrase and defined it as the “power of ethical perception which strides beyond the barriers of private experience and momentary events.”

Whether viewers know it or not, the basic plot of the Hunger Games series is an appeal to the moral imagination that men should be free from working as servants to others. It’s not exactly a new theme when compared to other modern movies. There are a multitude of storylines where a strong-willed protagonist finds the courage within themselves to fight off an authoritarian power, not alone, but with the help of others. The narrative follows a familiar pattern: while outgunned and outmanned, good ultimately triumphs over evil not so much because of one person but rather the hope for a better life embodied within a symbol.

The engrossing message of liberty over tyranny in the Hunger Games is thought to be why the franchise is so popular. In some ways, that is correct. People tend to have the urge of rooting for the underdog. When the abuser receives his just deserts, it’s seen as a representation of justice fulfilled.

But as great as the moral imagination is, it ultimately means nothing if it does not translate into real-life behavior modification. It’s one thing to cheer on a character on screen who is risking their life for a freer world. It’s another to embody that risk yourself in a reality that is slipping towards despotism.

Anyone who claims the post-apocalyptic setting in Hunger Games bears an uncanny resemblance to state control in our time is liable to be marked as a black helicopter-type. The ridicule is the same that was aimed, and still is aimed, at Friedrich Hayek after his great work The Road to Serfdom was released. “No,” the critics say, “the existence of the large welfare-warfare state has not translated itself to one world authoritarianism.” That is certainly true for now. Still, the general public finds it fun to mock the government as an over-bearing and inefficient behemoth while relying on the beast for a bi-weekly allotment of tax subsidies.

We may not be living hand-to-mouth while being forced to labor for thuggish overlords but the modern trend is clear: the political class is consuming more and more wealth-generating capital for themselves. It can be seen in highly-unionized European countries and within the bubble of richness known as the District of Columbia. The police state is ratcheting up its already untamed authority. Economic regulation is becoming more varied and intrusive. In the West, the state as an institution has been growing by leaps and bounds for over a century. Only an imbecile would deny this mass centralization in government power.

Yet most viewers of the Hunger Games will not let that message sink into their consciousness. They will not make the connection between a story and their own lives. It’s far too discomforting. At the same time, they will revere characters in a tale who come off as heroes. These fictional thought constructs are viewed as perfectly noble persons who sacrifice for the greater good. One would think the same reverence would be shown to those individuals who engage in the same art of defiance against what is generally deemed an unjust situation. If characters in fiction can be seen as courageous, why not real-life persons who display the same type of behavior?

Edward Snowden, the now-infamous whistleblower of the National Security Agency, is still seen as a dirty, rotten traitor by much of the public. It’s a strange cognitive dissonance that while a majority are irate over their government’s spying, they see the man who clued them in as some type of mendacious plotter who hates Uncle Sam. It’s equally as strange that the same folks who hardly bat an eye when calling Snowden a scumbag will just as quickly latch on to the fighter of injustice in a movie.

Stories provide valuable insight into the limits of mankind and what constitutes good. But they are not reality in the end. There is little risk in admiring a character in fiction who stands up for the right thing. Doing so in real-life is apt to bring ridicule, and thus has a social stigma attached to it.

It takes no spine to be a warrior on paper. It also requires little brain power to bend your will with that of an author’s. The science of critical thinking demands a logical and coherent approach to viewing issues. Criticizing someone for doing the very same action that you praise in make-believe land is inconsistent and a sign of poor judgment. The borderline between the real and the imagination does not render ethics and morality capricious. A proper way to live is to be transcendent of observable examination alone.

Hunger Games contains a pertinent message to those living under big government. The heroes and villains of the story should not be unfamiliar to current events. Edward Snowden is a real life Katniss Everdeen. He defied the powers-that-be in order to do what he believed was right. But instead of receiving praise, he got condemnation from voices normally wary of statism. The irony remains that the same men and women who call Snowden a traitor should be cheering for the tyrannical government of Panem to squash the rebellion and restore its oppressive hold on society. Of course, that suggestion sounds crazy, but then so does the person who pays lip-service to freedom while cheering for the death of someone who risks their life for greater liberty. Their moral imagination is in great need of fine-tuning.

James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail

Tags: Edmund Burke, Edward Snowden, Hunger Games, moral imagination, NSA, Russell Kirk

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The Problem with Empiricism – Ludwig von Mises Institute Canada

November 25, 2013 9:10 pm / Leave a comment

The Problem with Empiricism – Ludwig von Mises Institute Canada.

Mark Twain’s coined phrase “there are lies, damn lies, and statistics” has the privilege of being used far too often and not nearly enough. The saying is invoked by people who see a genius in the mirror but are much too dense for their own good. They are the ones who feign skepticism while eagerly accepting whatever empirical evidence bolsters their own dogma.

These perpetrators of the crime against intellect are by and large statists, namely economists. They spend their days waiting to pounce on detractors on the first blip of data that justifies their collectivism. Unemployment inched up? Need more government stimulus! Unemployment falls slightly? Thank Heavens Washington is spending so much money to put people to work!

The key here is that any piece of data can be taken and spun into a web narrative to fit an agenda. Government-gathered statistics often provide a potpourri of easily-moldable fictions. And because the facts and figures come straight from the state’s mouth, they are often taken as Gospel. Anyone who thinks otherwise – that bureaucrats might have their own motives for possibly fudging information – is smeared as a tinfoil-chewing crank in need of immediate institutionalization.

The exception is when news breaks that some rogue public servant doctored stats for pure political purposes.

The New York Post, a paper not exactly known for its pride in accurate reporting, recentlyclaimed the Census Bureau was aware manipulation of the employment report was going on in the run-up to the 2012 election. Just a few months out from when America put Sugar Daddy Obama back in the Oval Office, the national unemployment rate happened to fall from 8.1% to 7.8%. It wasn’t all that significant of a drop, but the talking heads sure made it sound like the Second Coming. The Post – which is relying on an unknown but “reliable source” – claims the figure was intentionally faked.

It goes without saying that unfounded claims based on a mysterious origin aren’t the most credible of sources. Even the everyday man on the street is wary about unnamed sources of information. He wants some kind of supporting evidence that isn’t just hearsay.

The Post report may be all smoke and no gun, but it’s not far from the realm of possibilities. Public sector workers have every incentive to keep their layabout jobs. In 2010, Census Department employee Julius Buckmon was fired for fudging results. He claims to have been given orders from higher-ups.

It also doesn’t help that the method the government uses to measure unemployment is already lackluster enough. Workers at the Bureau of Labor Statistics simply call up households and inquire about the inhabitants’ working situation. They don’t hook respondents up to a polygraph machine. The whole thing is based on the trustworthiness of the average schmuck. And even when the data is gathered the least severe measure of total employment, known as U3, is used as the headline number in media reports. The measuredoes not account for discouraged workers, who are tossed into the U6 bracket along with part-time workers seeking full-time employment. So the biochemist washing dishes at his local diner while scouring the classifieds each morning for a new position is left out. Since the beginning of America’s economic doldrums five years ago, the U6 unemployment rate has failed to drop below double-digits. But by highlighting only the “headline” number, the President and his press apparatchiks shine a light onto an otherwise dark employment picture.

Government manipulation of data is nothing new historically. Stalin famously had Western economists fooled for decades with erroneous reports on economic growth in his communist paradise. In 1989, Paul Samuelson, arguably the most influential academic economist of the late twentieth century, wrote in his famed textbook the “Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” Two years later, the Union of Soviet Socialist Republics disintegrated. No mea culpa was ever issued.

Despite the philosophical shortcomings of pure empiricism, the great breadth of society has a fetish for data. The reason is simple. Numbers and statistics don’t just save us from having to make coherent arguments, they make it easy to not have to think very hard.

That’s the problem with radical scientism and empirics in general: the notion that logic is not needed to interpret information to fully understand the surrounding world. Stats and figures are malleable. They can be used to make the case for laissez faire, statism, interventionism, or whatever “ism” strikes your fancy.

Data is useless without a sound theory to interpret it. Otherwise, it may as well be a sheet of randomized numbers. Yet the empirical positivists are quick to dismiss the idea that things can be proved without observable evidence. As the late Murray Rothbard asked in his essay “In Defense of Extreme Apriorism”:

“what is the vaunted ‘evidence’ of the empiricists but the bringing of a hitherto obscure proposition into evident view?”

An evidence-only approach to the dismal science is destined to die on the mantle of popular methodology. Whatever the data may show, it can be easily explained away in empty pontificating and counterfactual hypothesizing. The adherents to scientism are left babbling in their own incoherent rationale. Basically, no amount of factual confirmation will convince the true believers of positive empiricism. They talk a good game of sensory verification, but have an excuse for their own canon under each sleeve.

It’s not paranoid gibberish to assume government bureaucrats would juice the numbers to make sure their preferred knight in shining armor stays in the White House. As much as Nancy Pelosi, Paul Krugman, and the New York Times editorial board would like to pretend, public servants are not boy scouts donned with merit badges as far as the eye can see. They are just as selfish and conniving as Wall Street traders.

Here is the most important lesson not taught in government 101: politicians and their over-paid henchmen lie. They’ll sell you lemon, break the warranty, set the bank loose on you, and then demand your undying loyalty. Everything they say should be taken with a grain of FDA-approved salt, including monthly data reports.

James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail