The Trouble With Rick Santelli

by Mark R. Crovelli

Recently by Mark R. Crovelli: Monetary Revolt: The Silver Bullet To Kill a Despised Regime

In the world of financial "journalism," CNBC’s Rick Santelli stands out as a refreshing and intelligent antidote to the hoards of perma-bulls, fed apologists, and chart sorcerers that otherwise pollute the financial airwaves. Apart from his wonderfully energetic and quirky manner of speaking, and apart from his fantastic last name, Santelli is never afraid to challenge economists, Fed officials, and other mainstream talking heads. Talking points that are taken for granted or left unchallenged by Santelli’s mind-numbing colleagues are passionately attacked by the bond-tracking Italian dervish.

Just as important, Santelli stands virtually alone among his colleagues as someone who knows and emphasizes that interest rates, monetary policy and the international currency markets are always centrally important to future economic conditions. Whereas his colleagues feel at home making asinine prognostications about companies or economic conditions that ignore these vital factors, Santelli never shies from shoving them to the forefront where they can’t be ignored.

The trouble with Santelli, however, is that his political and economic philosophy is inconsistent and incomplete, and does not offer a viable alternative to that being peddled by his Keynesian opponents. His attacks on smug Keynesian hacks like Steve Liesman, Frederic Mishkin and Larry Meyer strike a chord with audiences who can sense that there is something seriously wrong with the medicine the Keynesians are peddling, but attacking the medicine alone is no cure for the disease.

Moreover, without a consistent political and economic philosophy to guide his attacks, Santelli lacks the weaponry to attack Keynesianism in a way that his opponents can’t dodge or turn back on him. Steve Liesman, for example, is keenly aware that Santelli lacks consistent alternatives to the statistics Keynesians worship (especially inflation statistics), and he takes obvious pleasure in forcing Santelli to try to come up with alternative measures. Without a consistent political and economic philosophy to guide him, Santelli can’t help stumbling in the face of such a challenge.

What Santelli needs in order to beat arrogant Keynesians like Liesman, Meyer, and Mishkin to a pulp is a consistent and complete political and economic philosophy to guide his attacks. Armed with such a weapon, he would be able to go beyond pointing out what should be obvious to everyone in the wake of the Great Recession (namely, that men like Liesman, Mishkin and Meyer are backward-looking pseudo-scientists), and offer a viable alternative to Keynesianism. What he needs, in other words, is to arm himself with the formidable philosophical weaponry of Austrian economics, and use it to smash the Keynesians to bits.

Here are just a few of the powerful arguments underlying Austrian economics that Santelli could bludgeon men like Liesman with:

1) Statistics are completely irrelevant in the realm of economic theory. This is so because human beings, unlike rocks and trees, act based upon ideas and can thus choose to act differently tomorrow from the way they are acting today. Just because Liesman’s statistics show that inflation expectations or corporate hiring was X yesterday by no means proves that it will be X tomorrow, or that such relationships can be accurately modeled in any realistic way. Instead of focusing on statistics that are irrelevant to future human action, economic theory must be deductive; which means that we start with propositions we know to be irrefutably true and deduce all of their logical implications. For example, if we start with the apodictically true proposition "human action is purposeful" we can deduce that every conceivable trade in the free market is anticipated to be beneficial by both parties to the trade ex ante, otherwise the trade would not occur. The entire corpus of economic science can be deduced in this way. For more on the powerful Austrian criticism of empiricism, the most powerful potential weapon against Liesman’s statistics, Rick Santelli should read these important books and articles:

Economic Science and the Austrian Method, By Hans-Hermann Hoppe

The Epistemological Problems of Economics, By Ludwig von Mises

Theory and History, By Ludwig von Mises

Toward a Reconstruction of Utility and Welfare Economics, By Murray Rothbard

The Mantle of Science, By Murray Rothbard

Human Action, By Ludwig von Mises

Man, Economy and State, By Murray Rothbard

2) Interest rate fixing by the Federal Reserve is always misguided, not just when interest rates are artificially lowered. Unlike his empty-headed colleagues, Santelli seems to be largely aware that artificially lowered rates are a recipe for economic disaster, but he does not seem to be aware that interest rate manipulation is always misguided. Interest rates are prices; specifically, they are prices to borrow saved capital, and when credit is created or destroyed out of thin air by a central bank in order to either lower or raise interest rates, this distorts the entire structure of production, and indeed creates the business cycle. So, while Santelli is justified in complaining about artificially low interest rates around the world today, he should follow this through to its logical conclusion; namely, that price-fixing rates at any level other than the market-established level is simply idiotic. What is needed is a purely free market for credit that is not manipulated in any way by any government body. Here are a few books for Santelli to read on this topic:

America's Great Depression, By Murray Rothbard

The Austrian Theory of the Trade Cycle, Edited by Richard Ebeling

The Case Against the Fed, By Murray Rothbard

The Theory of Money and Credit, By Ludwig von Mises

3) Like interest rates, money should be completely freed from the manipulating grip of government and allowed to be completely determined by free markets. At times, Santelli appears to be almost on-board with this proposition, but he has yet to come out explicitly against government paper and for market-determined currencies. If he did, he could absolutely smash Keynesians like Liesman who would be forced to defend not only Fed manipulation of the credit markets, but also the monopolization of currencies. In other words, instead of trying to fight Keynesians like Liesman, Mishkin and Meyers on their own turf, by assuming that such men have either the right or the ability to determine the "proper" amount of money in the economy, Santelli would drag them into the unfriendly and unfamiliar position of having to defend monetary socialism. He would also be in a position to consistently and powerfully attack deficit spending by governments that simply borrow newly-printed money from central banks. Here are some books on that topic for Santelli to peruse, in addition to those already mentioned:

What has Government Done to Our Money? By Murray Rothbard

A History of Money and Banking in the United States, By Murray Rothbard

4) Socialism is economic insanity. Santelli seems to be very much on board with this proposition as well, but he does not seem aware of the sheer logical power of the proposition. It is not, as Reaganites and supply-siders like Larry Kudlow would have us believe, solely applicable to command economies like the former Soviet Union. Instead, it means that the government provision of any good or service, from the post office to fire departments, is economic lunacy. If socialism is an economic disaster for the provision of bread and tires, it is for that very same reason a disaster for the provision of anything else. If Santelli would internalize this truism and use it against men like Liesman, he would again take the fight to the Keynesians and not allow them to relax on their own turf. If you concede to a Keynesian like Liesman that government is economically justifiable in one area, you can rest assured that he will rub your face in it if you, for example, inconsistently argue against government entities like Fannie and Freddie. Instead, be intellectually consistent in your criticism of all socialism, and you will strike a blow they will not soon forget. Here are a few books and articles on the topic of socialism that Santelli should consult:

Middle-of-the-Road-Policy Leads to Socialism, By Ludwig von Mises

A Theory of Socialism and Capitalism, By Hans-Hermann Hoppe

Socialism, By Ludwig von Mises

Economic Calculation in the Soviet Commonwealth, By Ludwig von Mises

The Economics and Ethics of Private Property, By Hans-Hermann Hoppe

Were Rick Santelli to internalize these simple ideas, he would become a formidable foe to Keynesians like Steve Liesman, Larry Meyer, and the insufferable Frederic Mishkin. He would be in a position to make not only more persuasive arguments against Keynesianism, but he would also be in a position to offer a positive economic system to replace it; namely, unbridled and unadulterated capitalism. One only hopes that Santelli will eventually make use of this philosophical weapon to give Steve Liesman the intellectual whipping he so richly deserves.

March 7, 2011

Mark R. Crovelli [send him mail] writes from Denver, Colorado.

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