>> ^gtjwkq:
Wow Nithern, your reply is a mess. I guess I should have explained to you that I'm not an anarchist, since that's what you understood by "free society", my fault for using such a loose term.
I meant a society free from government intervention in the economy, free market, preferably with a small government. Being mostly a libertarian, I don't like to be confused with an anarchist, the same way a social liberal might feel offended when called a socialist.
Well, one could argue that government of any sort is government intervention in the economy. That's why anarchists and libertarians so often get confused. Think about it. There's a market for murder. There's a market for "protection". There's a market for "waste disposal". So really, the question always boils down to 'what specific government interventions into the marketplace are you for?'

The problems with that line of reasoning are all those pesky externalities. Exploiting the commons for personal gain is the oldest trick in the book. It's also, unfortunately, the reason we need to regulate the marketplace. In our most recent episode, we removed long standing regulation on securities trading. They existed because in the 20's people had already figured out how to privatize gains and socialize losses. Without a government to overcome the transaction costs of collective bargaining, it would never be possible for people to prevent this sort of exploitation. To me, while anarchy seems like the end result of libertarian ideals... really it's rule by corporate oligarchy, with rampant exploitation of the commons. At least anarchy often does away with currency, and with it the power structure.


Ah I feel better already. Bureaucracies sure seem very efficient when you explain it like that.

How about like this: Medicare operates with 3% overhead, non-profit insurance 16% overhead, and private (for-profit) insurance 26% overhead. Source: Journal of American Medicine 2007

We're currently in a financial crisis because our government is broke, the world has been lending us money, but that will end when other countries realize we're never going to pay them back. Our government is currently spending money it doesn't even have.

I would disagree. We are currently in a financial crisis because an unbridled, short-term incentive laden banking industry leveraged itself into oblivion. Afterwards, they put a gun to our head and handed us the tab. In other words, print the dough, or the pitchforks and torches tear the whole joint down. The only reason their hustle didn't work indefinitely is because too many of US were spending money we didn't have. Changing that is going to take a cultural shift that is already beginning.

As for China, whom I presume you're referring to. I don't think they want to start selling their position. Ever hear of buy low, sell high? No, I think China is more likely to just borrow against it, and start picking up their part of the consumption. They're already pulling the world out of this recession.


Socialized healthcare as an option , doesn't make the idea any better, because it's still wasting money and it's unfair competition that will further distort the healthcare insurance market. Any reform in healthcare should involve reducing government intervention not increasing it.
I disagree. Also, can we call it a "public option" please? Our good friends in the public relations office spent a while coming up with that one. Listen, the bottom line is we already pay for everyone's health insurance. It's just that it's cheaper to pay for antibiotics than it is to pay for abscess removals on ER beds.


If people are having trouble understanding the rationale behind the Tea Party movement against socialized healthcare, it's mostly about excessive government spending and taxation. Was that too hard?

Yes. Define excessive.


I don't think social liberals will ever take the issue of spending seriously, even after the value of the dollar is destroyed and our economy collapses.

Spending is serious business, it's inflation you all gotta relax about. Is it worth having the "why inflation is good for the economy" argument with you? Or would you rather go back to your non-mathematical Austrian school BS, and we can just agree to disagree?

I think you need to educate yourself out of lies about the insurance business, on the government's major role in causing the housing bubble and subprime mortgage crisis, and on the utter uselessness and injustice of anti-trust laws.

I agree, it's difficult to write laws without unintended consequences. That is, you can always game the rules. One should not conclude from this, however, that you shouldn't try and write rules. Instead, you should just write them faster than the douche bags can game them. You always need more rules. Every time there is an advance in technology, you need more rules. Why? Technology makes it easier to game the rules, and exploit the commons, just like it makes it easier to do everything else.

Rather medicore old austrian tv show called Tohuwabohu..

Meh... you know what? F*ck it. Maybe we should get socialized/whatever government healthcare. Socialize as many things as Obama wants.

Austrian economists are predicting that the US economy is on the verge of another major collapse/depression anyway, I wouldn't want to see free markets anywhere near this colossal mess.

Otherwise, they'll get the blame for it, as usual.

Mr. Chomsky is making a slight error. When he says "libertarianism," he means "liberalism," and seems to be referring to Enlightenment liberalism typified by John Locke etc. Europeans don't use the term libertarian particularly. In any case, in its American usage, libertarian nearly always refers to a more exaggerated form of liberalism than Adam Smith would have envisioned. Liberalism contained checks on personal freedom for the common good. Libertarianism as theorized by Robert Nozick or Austrian economists such as Hayek contains no such checks. This is a quibble, really.

Some of them are not New Jersey Douches but Austrian Douches who call themselves Krocha. Some of the pics also can be seen in famous Krocha videos. Unfortunately I didn't find any english material about Krocha, a shame because it's quite funny IMHO.

^ I'm quite certain my economic knowledge is of pretty limited practical use, especially since I've mostly been learning about macroeconomics, in order to become a better judge of the truthfulness of what the various political players have to say about macroeconomic policy.

You two berate me all the time about Austrian economics, so I spent some time learning what the key differences are between it, Keynesianism, and Chicago-style Monetarism, and what each schools' critiques are of each other, as well as some of the economic history of how those theories came to be what they are today.

I also prefer not to rely on "Democrats say X so X is probably right because I agree with them on other things." So when we start talking about bailing out banks, radically expanding the money supply, and fiscal stimulus, I feel like I should make an effort to understand what that means, what the economists have to say about it, and hear their arguments for and against, and come to my own conclusion.

As a result, I can say I mostly agree with what's been done in broad form, I can now point out that Republicans will switch between Keynesian, Monetarist, and Austrian theories, depending on which political outcome they're looking to get, and that most people who hold up "Austrian economics" as a magic talisman for why they're privy to special, deeper knowledge of the economy probably can't identify how it's different from other theories, or respond to the critiques of it that keep it outside of the mainstream of economic thought (present company excepted).

So, back to this loaf of bread. Is there something about the argument I'm making that's factually inaccurate? How much would that loaf of bread cost the next morning?

Is there some reason that the Fed can't contract the monetary base if they see signs of inflation?

I mean, I get that Austrians will say that the Fed will inevitably get that wrong somehow, but certainly they could do it well enough to keep the dollar from collapsing entirely, right?

>> ^blankfist:
What. The. Fuck. The currency's value is driven specifically by its supply. Never in history has it not. In any economy! Stop spreading your partisan misinformation, please!

Okay, deep breaths. Reread what I said that followed the portion you quoted. Read (or reread) the article marinara linked.

Back? Awesome. Now, say I can buy a loaf of bread for $1 today. Let's say after the store closes, the Fed "prints" enough money to double the money supply, gives it to banks, and the banks say "just put it on our account and keep it in your vault, we don't wanna lend that out right now". So the Fed just carts it from the printers to their vault.

Will a loaf of bread cost $2 when the store opens the next day?

Bonus question: Will a euro cost me twice as much that next morning, as soon as the exchange hears about what the Fed's done?

Because Austrian economics is just libertarianism? Well, in that case, I'm glad you recognize people like Thomas Jefferson to be Libertarian in nature. Though, I doubt you could consider Andrew Jackson, the racist father of your Democratic party, to be Libertarian. Obviously neither studied Austrian Economics, but both were adamantly against a centralized bank system. What does that do for your bullshit hypothesis that Austrian Economics is thinly veiled Libertarianism? Probably nothing good, right? Yeah, what I figured.

Okay, let me walk through your reasoning here. You're saying Thomas Jefferson and Andrew Jackson are neither libertarians, nor Austrians, but were anti-central bank. This disproves my theory that Austrians based their theories on axioms designed to support libertarian ideology how?

Here's how you'd go about proving me wrong: name one government policy that Austrian Economic theory recommends that libertarians and anarcho-capitalists would disagree with.

Actually, being against an elitist, big money, powerful central bank is not an idea solely indicative of Austrian Economics. It's a universal idea most agree with... except those who tow their Democratic party lines so blindly and carefully.

There are plenty of people who might disagree with something the Fed's done, or give a negative job rating for the Fed at any given time, but that's different (as in the difference between saying "I hate what Obama's doing" and "I want to eliminate the Presidency entirely"). I think a far more accurate statement would be that most people have no clue what the Federal Reserve is or does -- I'd be shocked if even 20% could accurately tie it to money supply or interest rates.

I want to see some polling backing up your overtly partisan claims. I'd say the number of people who actively want the Fed abolished utterly is pretty small, and tightly linked to the number of people who're blind followers of fans of Ron Paul.

>> ^NetRunner:
^ A currency's value is determined by what it can buy, not based on how much of it there is in existence.

What. The. Fuck. The currency's value is driven specifically by its supply. Never in history has it not. In any economy! Stop spreading your partisan misinformation, please!



>> ^NetRunner:
^ ...and Bernanke is one of the top minds on that subject.

For that statement, you should be punched in the dangles while QM sucks you left and right, holmes.



>> ^NetRunner:
^...Austrian economists like Schiff believe a different story. Mostly the theory is that what I said is quackery, and that any meddling by a central bank will cause more problems than it solves. Why? In my opinion, that's because Austrian economics is just libertarianism dressed up to look like an economic theory, and they don't like that both mainstream schools believe that central banks perform an important role in the economy.

Because Austrian economics is just libertarianism? Well, in that case, I'm glad you recognize people like Thomas Jefferson to be Libertarian in nature. Though, I doubt you could consider Andrew Jackson, the racist father of your Democratic party, to be Libertarian. Obviously neither studied Austrian Economics, but both were adamantly against a centralized bank system. What does that do for your bullshit hypothesis that Austrian Economics is thinly veiled Libertarianism? Probably nothing good, right? Yeah, what I figured.

Actually, being against an elitist, big money, powerful central bank is not an idea solely indicative of Austrian Economics. It's a universal idea most agree with... except those who tow their Democratic party lines so blindly and carefully.

^ A currency's value is determined by what it can buy, not based on how much of it there is in existence.

The two are related of course, but the way you devalue the dollar is to see prices increase because there's enough "extra" money circulating in the economy to drive prices up.

Generally speaking when you have companies slacking off production, and laying off workers "extra money" won't increase prices, instead it's likely to drive demand back up, and get those idle resources to be employed again.

Eventually you will need to worry about the extra money causing inflation, but only once the economy has gotten into a solid recovery. At that stage you want to start contracting money supply again, and get things back into a general equilibrium.

Most modern economic theory is geared towards trying to find accurate tools for judging when and at what speed the Fed should do such a thing, and Bernanke is one of the top minds on that subject.

I suppose I should add the caveat that that's just what mainstream economists believe, Austrian economists like Schiff believe a different story. Mostly the theory is that what I said is quackery, and that any meddling by a central bank will cause more problems than it solves. Why? In my opinion, that's because Austrian economics is just libertarianism dressed up to look like an economic theory, and they don't like that both mainstream schools believe that central banks perform an important role in the economy.

>> ^HaricotVert:
I involuntarily dry heaved at the frostbitten penis.


As opposed to voluntarily?

I heard about this when they were filming it (The Inuit intelligence network is nothing if not efficient).

I found it interesting they imported a white woman to run the dog team, which would've involved flying her and her team into Resolute Bay, at a cost of thousands, when they could have just hired a local Inuk. I'm crazy like that.

Also, cold-weather training in the Austrian Alps is just not smart for preparing for the Arctic. All jokes aside, we are taught to have complete and sullen respect for the Arctic winters - it can kill you for the slightest of mistakes.

And finally, I found it fitting that they all wore Gore-tex, and complained about the cold. A snuggly caribou parka, and they would have been sweating all the way to the pole and back.

Yall are really something else. The amount of trust you place in people you don't know is really quite amazing.

THIS HAS HAPPENED BEFORE. Or were these historical events "conspiracies" as well:

Baxter Pharmaceutical Mixed Deadly Avian Flu H5N1 with a Flu Vaccine about to be shipped to 180,000 people!
http://www.torontosun.com/news/canada/2009/02/27/8560781.html
"The contaminated product, a mix of H3N2 seasonal flu viruses and unlabelled H5N1 viruses, was supplied to an Austrian research company. The Austrian firm, Avir Green Hills Biotechnology, then sent portions of it to sub-contractors in the Czech Republic, Slovenia and Germany.

The contamination incident, which is being investigated by the four European countries, came to light when the subcontractor in the Czech Republic inoculated ferrets with the product and they died. Ferrets shouldn’t die from exposure to human H3N2 flu viruses. "

Bayer knowingly sold HIV-contaminated vaccines!
http://www.naturalnews.com/News_000647_Bayer_vaccines_HIV.html
"In 2006, it was discovered that Bayer found out a vaccine it was selling in the United States was accidentally contaminated with HIV.

In order to cover its tracks, say the journalists in this video (below), Bayer pulled the vaccines off the market and sold them to consumers in Japan, France, Spain and other countries, where hemophiliacs were then contaminated with HIV due to the vaccine."

Mandatory Polio vaccines contaminated with SV40, causes Cancer!
http://www.healthy.net/scr/Article.asp?Id=2703
"The sudden rise in the number of deaths from non-Hodgkin’s lymphoma may be linked to the polio vaccine given to children in the USA until 1963.

Researchers have found the polyomavirus known as simian virus 40 (SV40) in a large number of lymphoma sufferers - the same virus that was in the contaminated batch of polio vaccines.

The vaccine was prepared in rhesus monkey kidney cells, but some of the animals were infected with the SV40, which was then passed on to the vaccinated children. In all, millions of children from all 50 states were exposed to the virus from 1955 until 1963, when the vaccine was finally withdrawn.

Latent viruses were such a problem with primary monkey kidney cells that a worldwide moratorium on the licensing of all polio virus vaccines was called in 1967 because of death and illnesses that occurred in monkey kidney workers and vaccine manufacturing facilities"

Doc_M,

You wanna do the world a favor? Buy some off-the-shelf vaccines and do a complete chemical and biological analysis on them, and report your findings publicly. Unless you are giving us a technical lecture, or presenting experimental data, your opinion is really not worth any more than any of us non-virologists.

How can he be "damn sure" that he will outlive his children? Obviously most father's would desire to see their children live beyond them. How does this somehow invalidate the Christian understanding of an eternal God. Is the argument that only a true loving Father would euthanize himself before seeing one of his children die? What if the child dies unjustly (i.e. is ruthlessly murdered for no reason)? Would the loving father's obligation be to end his own life? Or would a loving father seek justice for his son's meaningless death? If I have misunderstood Hitchens' point here, please explain.

On the matter of the Austrian incestuous and deplorable father, I believe Hitchens' appraisal of the actual crime and situation is well put and accurate. It is nothing short of a heinous and grotesque injustice. Words fail to grasp the depravity. Hitchens' goes on to seem to suggest that Christianity would overlook the injustice of the crime, and that a Christian's response is "that's alright." I believe this reveals a grave misunderstanding by Hitchens of Christianity. Christianity takes justice very seriously, an understanding of the Biblical teaching on evil and sacrifice cannot deny that. The Bible also does not encourage inactivity to injustice. In this lifetime Christians are required to "promote justice" (Micah 6:8). I honestly cannot understand how one can criticize the Bible for taking evil of this nature (or any nature for that matter) lightly. And yet that is exactly what Hitchens appears to be doing.

Tyranny (a tyrannical God) is a logical conclusion to a perception of the Gospel message that is absent of righteousness (to make something right; to right a wrong; to seek justice).

>> ^gtjwkq:
Banks are given money voluntarily , that means they'll tend to receive less money if they're careless with it (reputation?). You might ask, "So why would banks be careless with money given by govt? Don't they know that govt might not give them more money if they're careless too?".

It's not really about the usual libertarian focus on voluntary vs. authority, it's about accountability. No one in government gets their job without either being elected, or being employed by someone who was elected. If tax money is misspent, you can elect someone else.

But I also think there are plenty of people who excel at their profession because they like to be good at what they do, not because they think their ass is on the line if they screw up.

I also question whether people who're primarily motivated by bonuses given for high short-term investment returns have the right kind of incentives.

But I have no control over that at a bank.

Well, just look at the bailouts. Govt gave these banks billions even after they lost copious amounts of it. Either these banks are evil geniuses or, at the risk of sounding like a conspiracy theorist, I'd say there is some collusion between govt and big investment banks, wouldn't you agree?

I'd say a little of both. I doubt the big asset bubble was a plan that the banks and government colluded on. I think the banks screwed up, and I think the strength of their lobbying arm made sure government gave them money with no strings attached, rather than following a more progressive path (temporarily nationalizing them FDIC-style, or folding the same volume of money into the social safety net and letting them fail, or just giving the money to single-home homeowners to bail them out, and by proxy bail out their banks).

I'm in a wait-and-see mode with the bank bailout. Government spent it all to get stock in these banks, which it will later sell. It may wind up being that the way they did it will actually bring more money in than it spent initially, like what happened with the S&L crisis.

Profit is not something strictly selfish (well, actually it is, but profit is usually obtained by providing services to others, which is where the "selfless" magic behind profit lies), a growing economy eventually allows itself to have longer and longer-term goals while still being bound by a profit-seeking mentality, even if we're talking highways or space exploration.

I understand the free market theory, and I actually see that kind of virtuous business cycle as being a goal I share. I just don't think it's possible to have a market that is both unregulated and beneficent to ordinary people.

I also don't think we can count on charities to take on the problems of the poor adequately, especially not in economic downturns that's tightening everyone's budget. People are too selfish to really worry about it.

You said, regarding the Fed's expansion of the money supply:

Austrians say it will cause hyperinflation, keynesians will either say "yay, it worked!" or "hyperinflation only happened because the Fed didn't expand the money supply enough and didn't save enough failing banks".

Actually, unless something drastic changes, Keynesians will say "holy shit, how did we get inflation?"

I'll be writing off Keynesians as being quacks if we wind up in a situation with high unemployment and high inflation, unless we have some sort of supply shock (e.g. OPEC decides to stop selling oil to us), or we wind up scaring the world into dumping the dollar before we recover.

Supply shocks aren't really predictable, but there are ways to measure the international community's confidence in the dollar, and there aren't any warning signs at this point.

If employment comes roaring back, and GDP reverts to trend, then we'll be calling for the Fed to contract the money supply to stave off inflation.

Inflation produces easy money for the govt at the expense of everyone's wealth denominated in that currency. It's the ultimate stealth taxing tool: The govt/Fed just prints money and we all get poorer, and they get to give that money to those who are politically connected.
It's like an upside-down redistribution of wealth, everyone gets slowly robbed (the poor getting hit the hardest for having less resources) and usually the ones at the top get the most benefit first, specially if they're in bed with govt.

I agree with this assessment of the issues that can and do crop up. I disagree that the Fed intentionally causes periods of high inflation in order to explicitly to benefit their well-connected friends.

Govt, as always, gets a free pass and points its finger at capitalism, business owners, the market, banks, foreign lenders, ANYTHING and people will buy it if they're keynesian, statist or stupid enough.

Slurs against people like myself aside, I think you misunderstand our position. It's not that government gets a free pass, it's that a corrupt government happens because of businesses influence.

Peter Schiff has used the analogy that the crisis was like a teacher leaving kids alone with a bunch of candy, and then later comes back and finds the kids have made themselves sick. I agree with the analogy -- business is like a bunch of misbehaved kids, and the government, like the teacher, is supposed to be the responsible adult who keeps them in check. The cure isn't to fire the teacher and let the kids have the keys to the candy supply, the cure is to fire the teacher and hire a responsible one.

I guess what I don't understand is why you would trust government with nuclear missiles, police, courts, etc. but not control of currency.

I want to end fraud, corruption, and abuse, but I don't think big business is somehow immune to it, and I don't see how telling government to generally take a hike would cure it.

I think it's a symptom of human nature itself that people are always going to be seeking advantage, fair or not, by any means necessary. I want to empower altruistic people who represent the people's interests, and aren't afraid to push back against corporate interests to make sure people are treated fairly.

I cringe at the entire conservative "we must make policy about maximizing business growth, period" philosophy of governance. Mine is "we must make business growth beneficial to society".

This recession has been long in the making, but the housing bubble, in a nutshell, was caused by the moral hazards generated by federal institutions taking an interest in the real estate market and the Fed keeping artificially low interest rates for so long. Everything else you mentioned is mostly a consequence.

I hear this a lot from Austro-libertarians. If this were true, banks should never work right, either. The people making the investment choices, and choices about loans are not the people who own the banks.

I can't tell whether you're terrible at making analogies or very good at making terrible analogies.

Banks are given money *voluntarily*, that means they'll tend to receive less money if they're careless with it (reputation?). You might ask, "So why would banks be careless with money given by govt? Don't they know that govt might not give them more money if they're careless too?".

Well, just look at the bailouts. Govt gave these banks billions even after they lost copious amounts of it. Either these banks are evil geniuses or, at the risk of sounding like a conspiracy theorist, I'd say there is some collusion between govt and big investment banks, wouldn't you agree?

The most risk they have to bear is getting fired, and often they get lavish severance packages even when they are fired, and are almost immediately rehired by another bank.

I agree, your accusations about the banking sector being inefficient are very plausible. Like I said, they're in bed together, govt and banks, it's probably the most highly regulated sector of the economy. The more regulated a sector of the economy is, the higher its costs, the bigger its potential for corruption and the worse its services are going to be.

I also think government spending is best directed at things that are unlikely to turn a direct profit, but are useful for humanitarian purposes, or a general positive impact on the economy (e.g. infrastructure).

I understand where you're coming from, but I still think govt should mostly stay out of that too. Most people are led to consider profit a bad thing, when concern with profit is what's actually more humanitarian than pursuing anything with alleged "humanitarian" goals and taxpayer money. Profit is not something strictly selfish (well, actually it is, but profit is usually obtained by providing services to others, which is where the "selfless" magic behind profit lies), a growing economy eventually allows itself to have longer and longer-term goals while still being bound by a profit-seeking mentality, even if we're talking highways or space exploration.

What Bernanke believes is that the Fed should have known better and reacted by massively expanding the money supply to stave off deflation, and rescuing the failing banks.

I know. Even though he acknowledged that the Fed helped cause it, he gathered the wrong conclusion: That the Fed didn't do enough. Well, he's been putting those beliefs in action so we'll all get to see how that works out real soon.

Austrians say it will cause hyperinflation, keynesians will either say "yay, it worked!" or "hyperinflation only happened because the Fed didn't expand the money supply enough and didn't save enough failing banks".

We won't solve the Austrian-keynesian blame game over the Great Depression here, specially if you're saying Austrians caused it, so I'd like to move on.

What if we bring inflation into this discussion, because it best illustrates a basic disagreement we probably have. Keynesians embrace inflation as a tool, which is why I consider keynesianism an ideological tool of the state. The govt loves inflation and it will never openly admit to that love, or admit to using it A LOT, because people obviously don't like inflation.

Inflation can only be effectively used when the govt has a monopoly over the currency, which, to me, explains why you're so in favor of central banks and opposed to parallel currencies: So people can't flee from inflation.

Inflation produces easy money for the govt at the expense of everyone's wealth denominated in that currency. It's the ultimate stealth taxing tool: The govt/Fed just prints money and we all get poorer, and they get to give that money to those who are politically connected.

It's like an upside-down redistribution of wealth, everyone gets slowly robbed (the poor getting hit the hardest for having less resources) and usually the ones at the top get the most benefit first, specially if they're in bed with govt.

Govt, as always, gets a free pass and points its finger at capitalism, business owners, the market, banks, foreign lenders, ANYTHING and people will buy it if they're keynesian, statist or stupid enough.

The wage conversation is a bit of a tangent, but from my point of view the right answer is to expand unemployment benefits and welfare, rather than reduce the minimum wage. I might be convinced that yes, people in certain situations should be able to work for less, but I'd rather the market just adjust to knowing that projects that rely on cheaper labor can't be done here.

As for your assertion that the entire housing asset bubble was caused by Fannie and Freddie and the 1977 Community Reinvestment Act...I'm disappointed. I'd thought you were more well-read than to believe that story.

Here's the most basic, simplistic response -- if it was all Fannie and Freddie's fault (two formerly privately-owned and operated companies, BTW), why are other banks in trouble? Why is AIG in trouble?

I agree that the problem here was moral hazard, but I disagree that it was government that created that situation. It seems that the market's own mechanisms for accurately gauging risk failed utterly.

>> ^gtjwkq:
Money spent by govt is, in principle, rarely spent as wisely as money spent by people, because people work to earn and therefore value their money, they usually have to be productive to earn it (which isn't easy), while govt is just politicians and bureaucrats deciding over money they easily appropriate from productive people. I don't know how I can put this in simpler terms.

I hear this a lot from Austro-libertarians. If this were true, banks should never work right, either. The people making the investment choices, and choices about loans are not the people who own the banks. The most risk they have to bear is getting fired, and often they get lavish severance packages even when they are fired, and are almost immediately rehired by another bank.

I agree that having some skin in the game helps motivate people to be more wise with their money, but I don't think there are any people in government who're casually disinterested in how taxpayer money is spent -- on the contrary, I think they're highly interested in either spending it on altruistic things (like unemployment, healthcare, green technology incentives) or spending it on selfish things (tax cuts/subsidies for industries that donated to you, aid in skewing regulation to benefit donors). I like to vote for the former, and call for the latter to be jailed (though it seems they're all guilty of both in varying ratios).

I also think government spending is best directed at things that are unlikely to turn a direct profit, but are useful for humanitarian purposes, or a general positive impact on the economy (e.g. infrastructure).

I would like to see less military spending, but I think that will be politically difficult when there are two wars going on, and a recession. I like the way Obama/Gates have shuffled the military budget in terms of reallocating money between different military projects, but I'm annoyed that the budget did still get an increase for next year.

As for the bank bailouts, I feel like they were a necessary evil. I would rather they'd asked more in the way of concessions from the bank in return, but I do think letting them fail would have just made things worse.

When I give you money, the money is now yours, what you do with it is your own business. But when I'm the govt, and I give you money, I'm giving you money that IS NOT MINE and that I SHOULDN'T BE GIVING TO YOU (at least that's what I'm arguing, a keynesian might think differently). So there lies the root of the problem: govt is to blame for handing out free money, not what people did with it, because it's expected that people will be careless about money that is freely handed to them, as opposed to money that is earned.
People with guns don't inevitably commit murder. About the bus driver, it's expected that he'll drive poorly and crash when drunk (maybe not though if he's lucky), even though I said he was force-fed the alcohol, which is not accurate since I'm not sure investment banks were legally obligated to accept govt money, but it's easy to imagine how a bank might be strongly influenced to accept money if it has no strings attached and it's also offered to its competitors.

This, I think is a crucial part of our disagreement. Say you're a well-known investor who's made ridiculous profits through shrewdly investing in successful business. I walk up to you, give you a million dollars, no strings attached. Are you going to necessarily be reckless and wasteful with that money, simply because it was a gift? What if the money had come from some investment that simply performed better than your expectations? Does that make you unwise?

Would it make any difference how I got the money I gave you? Even if I conned it out of a bunch of nice old ladies, wouldn't you still invest it correctly? That's why I think the Austrian theory doesn't make sense, especially on this topic.

It would make sense if the government, before the economy went haywire, said "do whatever ya like, we'll absorb all your losses" -- but it didn't do that, implicitly or explicitly.

All that said, I disagree with your characterization of there being a qualitative difference between money given to companies being theirs, but that money given to government to pay taxes still somehow remains yours. It's this whole idea that government is operating as a giant racketeering organization (which seems utterly incorrect). It's like the managing corporation of a condominium. By living here, you agree to a contract with the government, and you have to abide by the obligations in the contract, like obeying the laws, and paying taxes.

Regardless of how you think government got the money to give away, I don't see why money government gives to banks somehow will automatically be frittered away, especially if they say "this is yours, no strings attached".

Even though I think Ben Bernanke is an idiot, he's smart enough to be the current chairman of the Fed and even he thinks the Fed helped cause the Great Depression. The conclusions one can take about what happened in the 20's and 30's are not as clear cut as you'd think. What is important to understand are the motivations behind those that acted and those who interpret what happened.

I think you should perhaps read that speech of his more carefully -- I find what Bernanke says about the Great Depression persuasive. He's mostly talking about how much he loves Milton Friedman, but the key paragraph is:

Friedman's emphasis on avoiding monetary disruptions arose, like many of his other ideas, from his study of U.S. monetary history. He had observed that, in many episodes, the actions of the monetary authorities, despite possibly good intentions, actively destabilized the economy. The leading case, of course, was the Great Depression, or as Friedman and Schwartz called it, the Great Contraction, in which the Fed's tightening in the late 1920s and (most importantly) its failure to prevent the bank failures of the early 1930s were a major cause of the massive decline in money, prices, and output. It is likely that Friedman's study of the Depression led him to look for means, such as his proposal for constant money growth, to ensure that the monetary machine did not get out of order. I hope, though of course I cannot be certain, that two decades of relative monetary stability have not led contemporary central bankers to forget the basic Hippocratic principle.

He doesn't go into why the Fed thought what it was doing was the right idea here, but it should sound refreshingly Austrian -- they were worried about deviating from the gold standard too much, and weren't concerned about bank failures because they figured, as you do now, that banks failing is a blessing in disguise: ownership just moves from incompetent managers to competent ones, no muss, no fuss (liquidationism, it's called these days).

What Bernanke believes is that the Fed should have known better and reacted by massively expanding the money supply to stave off deflation, and rescuing the failing banks. What it actually did was contract the monetary supply and let them fail, and that was pouring gasoline on the fire (or as one economist said of Austrian advice at the time, it was "to cry, 'Fire! Fire!' in Noah's flood.")

I don't contest that the Fed has a lot of power, and that if wielded incorrectly it can cause a lot of damage. But I think the period of time between the Great Depression and now is a testament to the stability a central bank can create. There were recessions, but no Depressions, or Panics. There's already a debate about whether Greenspan could have prevented this one, but so far that debate is leaning towards the relaxation of banking regulation being at fault, rather than a FRB monetary policy error.

I don't really think debate on the history of the Great Depression is over; Keynesians and Monetarists are still fighting about aspects of it. But Austrian economics fell out of the mainstream in the aftermath of the Great Depression, largely because their policy prescriptions were carried out, to disastrous results. Present-day Austrians don't even deny that a contractionary monetary policy in the late 20's was a bad idea, they just deny it was their idea, even though it's what people like Hayek and Schumpeter were calling for at the time, and what they're calling for now.

That's why I can be perhaps a bit over the top when trying to quash Austrians as quacks; in my opinion their policies caused both Depressions.