‘The School of Dimwits and Jackasses’

'The School of Dimwits and Jackasses'
Posted by Thomas DiLorenzo on February 10, 2011 03:30 PM

That's how Vedran Vuk, editor of Casey's Daily Dispatch, describes the economic views of Congressman William Lacy Clay and other Democrats on Ron Paul's House Financial Services Committee Subcommittee on Monetary Policy. Based on their remarks at yesterday's hearing he's perfectly accurate, of course.

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The Creature from Jekyll Island Doesn't Play Nice

Dear Reader,

The Federal Reserve always portrays itself as a distinguished institution. The Fed's supporters are always so "scientific" and disinterested. But yesterday, in Ron Paul's subcommittee on monetary policy, we found out exactly how supporters of the Federal Reserve react when challenged. 

Dr. DiLorenzo, an Austrian economist, testified before the subcommittee. (For the video of the whole two-hour-long committee hearing, click here.) But did the media report on his statement? No. They instead focused on his other economic works and attacked his credentials.

For those readers unfamiliar with Tom DiLorenzo's research, he takes a critical view of often glorified political leaders from the past and reexamines their actions with the help of economics. His books include Hamilton's Curse, which takes a look at Alexander Hamilton's huge role in pushing for a national bank. Essentially, today's Federal Reserve is a fulfillment of Hamilton's vision. Dr. DiLorenzo is best known for his notable book on Abraham Lincoln , The Real Lincoln. 

I've read both books and found them extremely interesting. And though Lincoln has many admirers, his administration did close opposition newspapers and did deport an unfriendly congressman, among other wrong-doings. Those actions aren't very democratic, to say the least. Furthermore, the book questions Lincoln's views toward slavery and African-Americans. Lincoln supported the colonization of freed slaves back to Africa and even defended a slave owner in court over the issue of an escaped slave. In his book, DiLorenzo also questions the necessity of the bloodshed in the Civil War that resulted in the loss of 600,000 lives.

We can all have different opinions on Lincoln, but we can probably agree that no one deserves a public witch trial for academically criticizing a past presidency. After all, scholarly work is best when it challenges commonly held beliefs.

Now, what does this have to do with monetary policy? Absolutely nothing. But this is what the supporters of the Fed would rather discuss than the Austrian arguments against the Fed. Hmm… I wonder why?

On the New York Times blog, Paul Krugman mentions DiLorenzo's testimony. He notes, "Mike Konczal has a post about Ron Paul's first hearing on monetary policy, in which he points out that the lead witness is a big Lincoln-hater and defender of the Southern secession. And it's true!"

Thank you for this highly educated response, Dr. Krugman. DiLorenzo testifies with an Austrian economics argument, and Krugman, an economics Nobel Laureate, responds with a character smear and no mention of anything said at the hearing. Bravo. 

Liberal blogger Matt Yglesias went after DiLorenzo for his criticisms of Abraham Lincoln as well, but at least he actually made some short commentary on economics. Since backgrounds seem to be important to Yglesias, let's point out his highly qualified credentials on the topic, a degree in philosophy and no financial industry experience. 

In the committee, Congressman Lacy Clay accused Tom DiLorenzo of working for a neo-confederate group. He attacked his character but ultimately had no monetary-policy questions for him. Once again, while on the topic of character assassination, let me quote Mr. Clay, a holder of a political science degree, in his opening statement:

"The Republican assertion that the Fed's actions to diffuse the money supply in order to hold down interest rates and lower unemployment will somehow harm our currency is absolutely wrong."

His comment doesn't place him in the Austrian school of thought or the Keynesian school. It places him in the school of dimwits and jackasses. There is no PhD economist alive that would agree with his incredibly ignorant statement. It is absolutely frightening that a man who lacks an understanding of even the most basic macroeconomic principles sits on the subcommittee for monetary policy.

Congressman Al Green also had a choice quote, but it wasn't as bad as Mr. Clay's:

"I believe that the chairman [Bernanke] has embarked upon a path that is going to help us have a soft, softer landing than we would have but for the QEI and the QEII. Without them, it's counterfactual, but there are economists that tell us that we would have a landing that may have been a crash and it may have been devastating for the economy much more so than where we are now. "

Strange, fall 2008 sure felt like a crash, but it's a good thing that the economy wasn't devastated. The recession has only been the second longest recession in U.S. history. On a side note, remember yesterday's intro on "soft landings"? They are often promised but rarely seen.  

When the Fed really gets threatened, the veil of a distinguished institution falls apart and the creature from Jekyll Island shows its ugly face. It's not about theory, logic or facts. The Fed will do anything to keep itself in power.

I have many more thoughts on this subcommittee hearing, but I'll have to turn it over to Alena Mikhan and Andrey Dashkov who will report on the growing demand for gold from China and India. Then, Alex Daley's article will touch on Nokia's future and the CEO's recently leaked company memo. This CEO isn't a bad writer – I wish that I had used the burning oil platform analogy for an article. I could think of a few instances where that would work well in a Daily Dispatch piece. Anyway, let's get started…


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