Obvious FalsehoodsUnlike athletes, intellectuals seldom seem to recognize when they are done. This is as true of scientists and economists as novelists; while there are the occasional rare exceptions, for the most part very few intellectuals have anything coherent or substantive to say beyond the age of 65. I suspect this has as much to do with a lack of energy as it does with an inability to focus or the mental ossification of age. It's always alarming, whether one is reading a novel or a polemic, to realize that while the writer may not have lost the plot entirely, the intellectual equivalent of his fifth gear, his burst, his vertical, or his fastball, is gone.
Gary North does not speak for any deflationist, nor does he speak for all the inflationists. He acts as if he does. Sustained price deflation is certainly not inevitable, nor is price deflation inevitable in the short-term either. Since I am a staunch deflationist, and since Gary North is aware of my writing, it appears he is purposely making preposterous straw-man arguments just to be able to shoot them down....
People really get into serious trouble using phrases like "no inflationist" and "every deflationist" when they clearly do not speak for everyone, especially when they also need a lecture about changing attitudes and time-preference as well. Finally, it's easy to setup a straw-man debate that you can win. It's also easy to lose credibility doing just that.
One can be sympathetic, to an extent, in understanding why North is so skeptical about deflation. After all, he's been hearing warnings about it for some 40 years now and it simply hasn't ever arrived. But - and here is where his age appears to have become a handicap - the fact that something hasn't happened in 40 years is totally irrelevant when viewed from the perspective of recorded history rather than one's own lifetime. Every central bank has eventually failed. Every currency has eventually gone out of circulation. The future failure of the Fed and the collapse in the value of its notes, paper or digital, is not a question of if, but when. At 99 years and counting, the Fed has actually had a pretty good run by historical standards.
Even with more than 20 years of potential intellectual activity in front of me by my own rough metric, I've noticed an increasing inclination to take a "been there done that" approach to challenges based on my own experience and familiarity with the same old failed arguments presented time and time again. It is both amazing and irritating how often people continue to keep presenting the same futile arguments again and again and again. But it is important to resist the urge to dismiss challenges without first at least glancing over them and determining whether or not one's previously successful rebuttals necessarily apply to them. After complacent laziness comes intellectual torpor and then complete stagnation.
But if we can understand Gary North's failure to rise to the challenge posed by the following generation of right-wing economists, we cannot excuse it. No one is forcing him to remain in the ring contesting these issues, after all. Mish and I would be similarly to blame if we simply ignored the challenges to conventional and Austrian economic theory posed by the likes of Ian Fletcher and Steve Keen. I am perfectly aware that the more ideological Austrians are deeply affronted by my willingness to go off the reservation, but as I have noted in the past, I am not a joiner. Lacking all the benefits of the various intellectual establishments, even the lesser ones, I also lack the ideological restrictions that come with them and so I am free to follow the logic and the evidence wherever it goes. Mises was brilliant, but keep in mind that he did some of his best work nearly 90 years ago. Even if I lack his exceptional brilliance, I have the benefit of considerably more information at my disposal.
To a certain extent, my decision to begin writing the monster epic series on which I'm currently working was partly the result of realizing that if I don't tackle these sorts of projects now, I am far less likely to do so in the future as I grow older. This realization has also influenced my next non-fiction project, which is going to be even more ambitious in its way than a mere one million word epic fantasy series.
The failure of North's attempt to rebut the current deflationist arguments does not mean that Mish and I are necessarily correct in predicting the eventual failure of the Federal Reserve to continue its 99-year program of methodically expanding the money supplies through the continuous increase of debt. I freely admit that I didn't expect The Helicopter to be able to maintain the substitution of federal debt for household and financial sector debt for four solid years. But can the Fed maintain this indefinitely? The history of socialized economies strongly suggests otherwise. Can they maintain it long enough to relaunch the private debt sectors? The inability of the current generation of college graduates, already saddled with heavy student loan debt, to find jobs or finance cars and homes, also suggests the likely failure of this strategy.