I speak of course of my recent visit to the U.S. House of Representatives to testify at Congressman Ron Paul's first hearing on the Fed as chairman of the House Financial Services Committee. The Rayburn House Office Building, like most government office buildings in Washington, D.C., is a very creepy place. Knowing that the majority of the congress critters who reside in those offices support the unnecessary wars in Iraq and Afghanistan (and worse), and all the senseless death they have been responsible for, should send chills up any decent person's spine.
As for the liars and bigots, one of the bigger ones, William Lacy Clay, a congressman from St. Louis who is (unfortunately) a member of the House Financial Services Committee, was in fine form. When he got his turn to question me he first denounced Austrian economics as some kind of fraud because it does not utilize the same positivistic methodology that, say, the Fed economists do. You know, the ones who were completely clueless about both the existence of the housing bubble and what to do once it burst. As Congressman Paul pointed out in the hearing, as late as 2008 Fed Chairman Ben Bernanke was still forecasting an increased pace of economic growth. As seen in a YouTube video entitled "Ben Bernanke was Wrong," as late as mid 2007 Bernanke was assuring the public on CNBC that there was no sub-prime mortgage problem, and that the world economy was in fine shape. "He had no idea what he was talking about," Congressman Paul correctly stated.
It was Austrian economists like Mark Thornton, on the other hand, who were warning of a housing bubble years before it burst. The Nobel Prize committee would be shocked indeed to learn that Austrian economics is fraudulent, having awarded the best-known Austrian of the twentieth century, F.A. Hayek, the Nobel Prize in Economic Science in 1974. But hey, what does a hack politician from St. Louis know about economics anyway?
Fed apologists are apparently in a state of panic over the first sighting of two economists — Richard Vedder and myself — appearing before their committee to (horrors!) criticize the Fed. Rather than ask me a single question, Congressman Clay decided to lie about my background with a libelous smear. First, some background information: About thirteen years ago three fellow academics from Emory University, the University of South Carolina, and the University of Alabama asked me if I would deliver a few lectures on the economics of the "Civil War" to a group of about twenty students at a week-long summer seminar. Two of them were historians and one was a philosopher, and they wanted to add some economics to the curriculum. They had just started something called "The League of the South Institute." Since I lecture to students all over the country, and these were three fellow professors who I respected, I enthusiastically agreed. I recall it being a very enjoyable experience, as it always is when I get to teach students who attend a summer seminar for no college credit, just for the sake of learning. Such students are always among the very best that I encounter. That is the only connection I have ever had with the League of the South, which apparently still lists the titles of those old lectures somewhere on its Web site.
Clay lied through his teeth by stating that I "work for" the League of the South, and further stating that, consequently, I must endorse everything everyone associated with that organization has said in the succeeding thirteen years since I spoke to those students about the economics of the Civil War. This makes as much sense as saying that I endorse everything Congress says and does because I gave a presentation there on February 9.
Nor am I bigoted toward the people at the League of the South either, as is Congressman Clay. The oh-so-easily-offended Congressman Clay once told a white member of Congress whose Memphis, Tennessee district is 60% black that he could not collaborate with the Congressional Black Caucus for the benefit of his black constituents "until your skin turns black." He's apparently an Obama-style "racial healer."
Having lied about my non-existent working relationship with the League of the South, making it sound like I pack my lunch and go to work there every day, Clay then declared that the Southern Poverty Law Center (SPLC) apparently disapproves of the League of the South. What a shocker! This is the same SPLC that accused the American Enterprise Institute in Washington, D.C. of "mainstreaming hate" by sponsoring a public debate on immigration policy. Their modus operandi is to label any individual or group that effectively criticizes their far-left, socialistic agenda as a "hater." Apparently, associating with anyone south of the Mason-Dixon line in any way qualifies one as a "hater" and potential KKK recruit in the warped minds of the hateful and libelous SPLC.
Congressman Clay was not yet finished with his lies. I sent the committee 100 copies of my testimony along with a short one-page bio, as they requested. The bio listed several of my latest books, including Hamilton's Curse and How Capitalism Saved America. The former discusses such economic topics as the origins and evolution of central banking in America, how America became a corporate welfare state, the economics of public debt, the founding of the Fed, the economic consequences of adopting the income tax, and more. How Capitalism Saved America covers such topics as the meaning of capitalism, anti-capitalism, the superiority of private versus government-operated transportation systems, the benefits to "the working class" of capitalism, the "robber barons," the history and economics of antitrust, the role of the Fed in igniting the Great Depression, how the New Deal made the Great Depression worse, and the economics of the energy crisis of the u201870s, among other things. And of course The Real Lincoln tells the story of the seventy-year political war over the "American System" of protectionism, corporate welfare, and a nationalized banking system that was finally cemented into place during the Lincoln administration.
The sleazy Congressman Clay, however, claimed that his crackerjack staff informed him that I have written nothing about economics in the past 15 years. My writings are all about history, he said, oblivious to the fact that economic history is a very relevant field to the question of the performance of the Fed over the past century. Indeed, Ben Bernanke himself claims to be an economic historian, having published numerous academic journal articles on the Great Depression. Several of my books discuss the origins of the first central bank, the Bank of the United States; its (abysmal) performance; its destruction by President Andrew Jackson; its replacement by the Independent Sub-Treasury System, Abraham Lincoln's critiques of that system; the adoption of the National Currency Acts and Legal Tender Acts by the Lincoln administration; how that system performed over the next fifty years; the creation of the Fed; and its performance. Clay claims that, according to his crackerjack staff, there was nothing in all of this that would be relevant to a hearing on monetary policy.
Congressman Clay slithered out of the hearing room (shortly after the notorious Barney Frank vacated the premises) while a couple of his equally odious, far-left compatriots threw softballs at "their" witness, whose main argument was that the so-called Great Recession was caused by the bursting of the housing bubble, which in turn caused consumers to begin acting more responsibly by spending less and saving more. He didn't put it that way, of course, but instead made the age-old (and thoroughly discredited) Keynesian argument that spending, and not savings, investment, production and work, is what causes economic growth and job creation. He made no mention at all in his prepared statement of any possible cause of the housing bubble in the first place. That would have been dangerous, for everyone in the room would have pegged the Fed as the Prime Suspect. But at the very end of the hearing he did offer his theory of the boom-and-bust cycle: Prosperity comes about whenever the government hires more bureaucrats and/or gives them more responsibilities; recessions occur whenever government cuts back on the number of bureaucrats and/or their meddling in the private sector. Bursts of regulation, he said, are the cause of prosperity, whereas deregulation is the cause of recessions and depressions. The Democrats on the committee sat there smiling and nodding their heads in approval. Do I really have to comment about such an asinine theory?
Thomas J. DiLorenzo [send him mail] is professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You're Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book is Hamilton's Curse: How Jefferson's Archenemy Betrayed the American Revolution — And What It Means for America Today.