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Jonathan Newman



Articles by Jonathan Newman

Robert Reich’s Blind Spots: The Elephant in the Progressive Left’s Room

16 days ago

Robert Reich is on his fifth myth, but so far, he has just been recycling the same progressive talking points in each one. The overall message is that big corporations and the super wealthy wield too much political power and that they shape the law in their own favor, contributing to terrible economic inequality. For Reich, the U.S. economy is a zero-sum game and the people at the top have rigged it so they win and everybody else loses.His solution is strong labor unions, high taxes on the rich, a high minimum wage, more trust-busting, and government wealth redistribution. He sees the economy through the lens of political power, and so the only solutions he can think of are ones that exploit the power of government to channel more of the fixed pie of wealth to a

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Debunking Robert Reich’s Debunking

29 days ago

What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

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Robert Reich’s Second Myth

June 7, 2024

Robert Reich’s second myth is “Government Obstructs the Free Market.” (See my response to his first myth here.) He says that what we call the “free market” can only exist with a government enforcing rules about property, monopoly, contracts, and bankruptcy. Reich makes the case that big corporations and the super-wealthy have steered the government’s rules and their enforcement for their own benefit.He’s right, except for the bit about government as a necessary condition for markets.The problem with Reich’s subsequent analysis is its superficiality. He focuses on political action committee (PAC) donations, lobbyist spending, and the way political parties have turned into “giant, Washington-based fundraising machines.” The big question Reich never addresses is Why?

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Tucker Carlson’s Guests Keep Bringing up the Mises Institute

June 3, 2024

Tucker Carlson is apparently warming up to Austrian economics and the work of the Mises Institute. In 2019, when he was still on Fox News, he made a quick dig at Austrian economics, and he was critical of “libertarian economics” as recently as December of last year.But Austrian economics and the Mises Institute have come up in his interviews with three different guests over the past few months, and instead of being critical or dismissive, Carlson was open to the ideas.He posts some of his interviews on Twitter, where the view counts are in the millions. Austrian economics came up in these episodes:March 19 – Ron Paul – 3.9 million views (15-minute clip – full interview behind paywall)May 16 – Dave Smith – 4.8 million viewsMay 21 – Erik Prince – 4.2 million

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MMT and Boiling Frogs

May 3, 2024

“Why do we borrow our own currency in the first place?”Stephanie Kelton posed this question in her new documentary, Finding the Money, and a clip of Jared Berstein’s fumbled response to the question has gone viral on social media. Bernstein is the Chair of the Council of Economic Advisers to Biden, and so we would expect that he would have an articulate answer to Kelton’s question, but he did not.Instead of trying to parse his response or explain why he fumbled, I want to provide an answer: the State borrows to expropriate real resources from the private, productive part of society. When I made this claim on Twitter, one MMTer responded (somewhat) approvingly: “We all agree on this part. The question is how they do it and what the effect is. MMT gets that part

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A Circus of Errors

March 7, 2024

When Nvidia reported high fourth quarter earnings for 2023 in February 2024, it sparked a general rally in stock markets. Stock markets in the United States, Japan, and Europe jumped to all-time highs after a few days of slight declines.It seems strange for one company’s earnings call to have such a widespread effect, but many are saying that this is all a part of a technological revolution, in which real productivity will increase dramatically due to artificial intelligence powered by chips and hardware developed and produced by companies like Nvidia.This is certainly possible, but it’s worth remembering that the entire global economy is still in the throes of covid interventions and their lagged effects, active geopolitical turmoil, and financial instability due

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Current PCE Inflation: 4.1%

February 29, 2024

The Bureau of Economic Analysis released January figures for Personal Consumption Expenditures (PCE) today, including the price index based on that data.News headlines report the year-over-year percent change in the PCE price index: 2.4%. This gives the impression that price inflation is heading towards the Federal Reserve’s supposed target of 2%.But the data is released monthly, and this way of calculating inflation is slightly misleading. As Joseph Salerno warned,This way of calculating the annual inflation rate is backward looking, because the most recent monthly rate is heavily outweighed by the previous eleven months’ rates.In contrast, calculating the annual inflation rate by compounding and annualizing the most recent monthly or quarterly

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Bank Crises and the Interventionist Spiral

February 12, 2024

Silvergate Bank, Silicon Valley Bank, Signature Bank, and First Republic Bank fell like dominos in March–April 2023. The United States Treasury, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) intervened in an unprecedented way to stall the domino effect. They waived the FDIC’s $250,000 cap on insured deposits at the failed banks, and the Fed instituted the Bank Term Funding Program to bail out any and all banks that run into trouble meeting depositors’ redemption demands.
The interventions saved the banking system, for a while. However, the inherent problem is rearing its ugly head once again.
When Signature Bank was liquidated and put into FDIC receivership, New York Community Bank bought $38.4 billion worth of Signature’s assets. Less than a

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Exposing the Price Level Myth

January 4, 2024

Price inflation statistics were a hot topic in 2023. Official measures, like the Personal Consumption Expenditures Price Index (PCE) and the Consumer Price Index (CPI), rose to levels not seen in over four decades.
These measures were under commentators’ microscopes as recently as last week. The FRED Blog (run by the St. Louis Fed) briefly discussed how these two measures are constructed and how they differ. Paul Krugman compared the change in the “core” versions of the PCE and CPI (which remove components like food and energy) over six- and twelve-month time intervals, respectively. The consensus view is that these measures have unique applications. According to Krugman, “which one you should choose depends on what question you’re trying to answer.”
But if you

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As the US Treasury Runs Out of Creditors, Its Options Dwindle

December 14, 2023

With US government debt skyrocketing past $33 trillion and possible recession looming, the Treasury faces the prospect of running out of suckers. Finding buyers for US debt will become much more difficult.
Original Article: As the US Treasury Runs Out of Creditors, Its Options Dwindle

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Paul Krugman Blames Economic Pessimism on Partisanship. He’s Wrong.

December 4, 2023

Paul Krugman can’t figure out why everybody is so bummed about the economy. From his perspective, we should all be jumping for joy, praising Joe Biden, and publicly signing fifty-year commitments to vote Democrat. Official statistics show that “unemployment is still near a 50-year low, yet inflation has been falling fast.” But the ignorant masses simply won’t get with the picture. Krugman admits “surveys of consumer sentiment and political polls continue to show that Americans have a very negative view of the Biden economy.”
He concludes that it is partisanship and media bias driving a wedge between consumer sentiment and economic reality. He found a study that shows that 30 percent of the disparity can be explained by Republicans who are doing fine economically

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Mises on the History of Warfare

November 14, 2023

As war rages in the Middle East, we are reminded of what Mises wrote in 1949 on warfare and its awful effects.
Original Article: Mises on the History of Warfare

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The Radical Uncertainty of a Polymorphic Fed

November 8, 2023

Recorded at the Mises Circle in Fort Myers, Florida, 4 November 2023. Includes audience question and answer period. 
Special thanks to Murray and Florence M. Sabrin for making this event possible.

The Radical Uncertainty of a Polymorphic Fed | Jonathan Newman

Video of The Radical Uncertainty of a Polymorphic Fed | Jonathan Newman

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Mises on the History of Warfare

October 27, 2023

“The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another.”
So Ludwig von Mises begins a short chapter in Human Action called “The Economics of War.”
While brief, the eleven pages (pages 817–28 in the scholar’s edition) are densely packed with Mises’s take on the history of warfare, what leads to total war, how wars are won, the costs of war, and the ideological conditions for war and peace. As is his modus operandi, Mises frequently contrasts war with the peaceful cooperation of the international division of labor.
The History of Warfare
In his short history of warfare, Mises describes the wars of primitive times as total wars, in which both

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Is the Money in Your Checking Account Yours or the Bank’s?

September 30, 2023

When Silicon Valley Bank and other banks failed earlier this year, the debate over the sustainability of fractional reserve banking resurfaced. Under fractional reserve banking, banks keep only a fraction of customers’ deposits in reserve. The difference is bank credit, such as government debt, mortgages, business loans, and many other kinds of loans. This practice leaves the bank open to a run, in which panicky depositors attempt to withdraw their funds from the bank en masse but the bank doesn’t have the cash on hand. The following FRED graph gives an idea of the extent of the mismatch between deposits and reserves.
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But we shouldn’t worry about bank runs because the government is here to help. In the US, the Federal Deposit Insurance

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Limitless Money and the Limitless Fed

September 27, 2023

Recorded in Nashville, Tennessee, on September 23, 2023.

Limitless Money and the Limitless Fed | Jonathan Newman

Video of Limitless Money and the Limitless Fed | Jonathan Newman

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Is the Monopoly Board Game Like Real Markets?

September 11, 2023

Many people believe that the board game Monopoly, developed during the Great Depression, mimics a real-world capitalist economy. Monopoly is a game, not real life.
Original Article: "Is the Monopoly Board Game Like Real Markets?"

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Why Stabilization Policy is Destabilizing

September 2, 2023

U.S. presidential candidate Vivek Ramaswamy took aim at the Federal Reserve recently:
The reality is, if the dollar is volatile, it’s as bad as if the number of minutes in an hour fluctuated. None of us would be here at the same time. […] When the number of dollars [in relation] to a unit of gold or an agricultural commodity is wildly fluctuating, money doesn’t go to the right projects. It’s just wild—it doesn’t make any sense. That’s been an impediment to economic growth…
So, what we need to do as the next-step—of course I’d like to end it [the Fed]—is at least get rid of the dual mandate. We’re done managing inflation and unemployment. It’s like trying to hit two targets with one arrow, dramatically missing on both. And restore a single mandate: stabilize the US

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CBDCs: The Ultimate Tool of Financial Intrusion

September 1, 2023

While the government promotes CBDCs as tools for "inclusion," it is more likely that they will be another vehicle for federal intrusion.

Original Article: "CBDCs: The Ultimate Tool of Financial Intrusion"

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What Is the Right Inflation Target for Central Banks?

August 5, 2023

Why have central banks settled on a 2 percent price inflation target? Project Syndicate asked four economists about this target and whether it is still appropriate. I’ll summarize their answers and then consider Mises’s position on “stabilization policy.”
Four Economists’ Answers to “Is 2 Percent Really the Right Inflation Target for Central Banks?”
Michael Boskin, Stanford University professor, Hoover Institution senior fellow, and former chair of the Council of Economic Advisers to George H.W. Bush, concludes that 2 percent is probably about right, mainly due to the negative consequences of a higher target. He considers whether a higher target could be maintained in a stable way as it comes with more variations in the returns to capital, less credibility

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Why Fractional Reserve Banking Is behind Bank Failures

April 1, 2023

Suppose an addict had the ability to magically create, ex nihilo, his own stimulating drug, as fractional reserve banks can do with money and credit. Would you expect moderation?

Original Article: "Why Fractional Reserve Banking Is behind Bank Failures"
This Audio Mises Wire is generously sponsored by Christopher Condon. 

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Why Fractional Reserve Banking Is behind Bank Failures

March 27, 2023

Drug addicts suffer major withdrawal symptoms when they go cold turkey. In the case of high-tech startups and their banks (like Silicon Valley Bank), the super-low-interest-rate stimulant has been taken away by the drug dealer (the Fed) via interest rate hikes. With cheap credit drying up, firms switched to pulling cash out of SVB, all while the same interest rate increases caused the value of SVB’s assets to fall. SVB’s balance sheet couldn’t handle the fast withdrawals, which became a classic, self-propagating, panicky bank run, and the simultaneous fall in value of its liquid assets.
When banks practice this kind of maturity mismatch—potentially immediate-term liabilities (deposits) backed by long-term assets (loans and Treasury securities), it is called

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How Monetary Expansion Creates Income and Wealth Inequality

May 19, 2021

“Every change in the money relation alters … the conditions of the individual members of society. Some become richer, some poorer.” – Mises, Human Action, p. 414.
New money enters the economy at a particular point. It does not enter in the form of a proportional and simultaneous increase in everybody’s incomes. This means that there are uneven effects of monetary expansion, including exacerbated income and wealth inequality. When we trace the consequences of monetary expansion, we notice that it creates winners and losers as resources are shifted toward the first receivers and spenders of new money.
This idea is an old one. It goes back to Richard Cantillon, who in the mid-eighteenth century outlined the step-by-step process that new money works its way into an

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