Feb 25, 2014

John Adams on debt

There are two ways to conquer and enslave a country. One is by the sword. The other is by debt.

~ John Adams (1735-1826)

Feb 23, 2014

Nassim Taleb on Platonicity

Medieval man was a cog in a wheel he did not understand; modern man is a cog in a complicated system he thinks he understands.

~ Nassim Taleb, The Bed of Procrustes, p. 57

Nassim Taleb on error's relationship to fragility and robustness

For the robust, an error is information; for the fragile, an error is an error.

~ Nassim Taleb, The Bed of Procrustes, p. 72

Feb 21, 2014

Gustave de Molinari on defense

Political economy has disapproved equally of monopoly and communism in the various branches of human activity, wherever it has found them. Is it not then strange and unreasonable that it accepts them in the industry of security?

~ Gustave de Molinari (1849)

Feb 20, 2014

Friedrich Hayek on the role of official myths in totalitarian systems

[I]n the disciplines dealing directly with human affairs and therefore most immediately affecting political views, such as history, law, or economics, the disinterested search for truth cannot be allowed In a totalitarian system, and the vindication of the official views becomes the sole object...  These disciplines have, indeed, in all totalitarian countries become the most fertile factories of the official myths  which the rulers use to guide the minds and wills of their subjects.  It is not surprising that in these spheres even the pretense that they search for truth is abandoned...

~ "The Road to Serfdom," Chapter 11, “The End of Truth,” p. 161

Feb 17, 2014

Paul Volcker on Harvard University and Great Society elitism

INTERVIEWER: You said Keynesianism was almost a religion at Harvard when you were there?

PAUL VOLCKER: They did have other people there, you know. John Williams was the other macroeconomist there, certainly financial-side, and he was a very skeptical practitioner. He didn't spend all his time professing, and he advised the Federal Reserve back in New York at great lengths. I can't say everybody was Keynesian, but the younger school certainly was. It was Paul Samuelson, Jim Tobin, and all of them had grown up in the Keynesian climate. I didn't know them all, but they were all circulating. They were the bright young stars of Harvard at the time.

INTERVIEWER: When did you begin to have doubts? How early did you begin to become skeptical about things?

PAUL VOLCKER: I was already skeptical. I guess I'm skeptical about everything. I've gotten worse in my old age, but I was a little bit turned off by the precision and certainty that these people attached to the doctrine. The analytic framework was very convincing, but this feeling they had, that they could press the right buttons and manage the economy pretty exactly, for some reason it turned me off. I was very skeptical that they were not overselling the precision of this theory and the precision [with] which they could run policy.

INTERVIEWER: Was that a gut instinct, or was that something you picked up?

PAUL VOLCKER: It must have been a gut instinct. I don't know why, but I was just a little bit turned off by the sense of certainty that they had.

INTERVIEWER: You actually talked about the administrations of Kennedy and Johnson, and you used the word "hubris" in that context. Would you say that that kind of attitude reached a peak?

PAUL VOLCKER: Yes,. There's no question in terms of its policy application that that approach reached its peak in the Kennedy-Johnson years, when in the Harvard years it was still intellectual concept. It really hadn't permeated fully the political decision-making [process]. It hadn't reached its apogee, which it certainly reached in the Kennedy-Johnson days, and they felt they'd solved the problem in the business cycle. They'd solved a problem with macroeconomics; it was time to turn to other microeconomic things, [and] it was time to turn to welfare questions, because they'd solved the problem. I'm not exaggerating very much when I say that. They had a very long period of economic advancement, and things were going pretty smoothly. Productivity was high, and unemployment was low.

~ Paul Volcker, Commanding Heights interview (PBS), September 26, 2000

Paul Volcker on changing political winds on inflation

I was in the Federal Reserve, Treasury, a conservative guy who's always against inflation. The general tenor of the times was inflation was the least of evils, if it's an evil at all. What changed drastically in the 1980s and running through today is the presumption that inflation is bad [and that] the primary job of a central bank is to prevent inflation. That's taken for granted. The great ideology these days is that the central banks ought to be independent; they ought to have an inflation target, and an inflation target ought to be close to zero. That's a very different environment then the '50s and '60s and into the '70s.

~ Paul Volcker, Commanding Heights interview (PBS), September 26, 2000

Feb 3, 2014

Paul Richards: "Trust the Fed"

Yeah, the markets did not get off to the kind of start we wanted.  But trust the Fed.  They would not be tapering if the economy was weakening. They know how to run the economy.  When we get to Fridays employment report, things will look a lot better.

~ Paul Richards, UBS Managing Director, as appeared on CNBC, February 3, 2014

(This quote is a paraphrase.)