Peter Schiff, the well known loudmouth tries to refute the idea behind Paul Krugman’s baby sitting co-op article. (Hat tip to Stefan Karlsson.)
Schiff begins with about twenty or thirty insults before getting to the crux of the argument. That together with Schiff’s loud and excitable voice makes me suspect that Schiff’s real skill is getting drunk and picking fights with fellow drinkers, rather than economics.
Schiff then claims the babysitting coop failed because too many coupons were issued: complete nonsense! At least there is nothing in Krugman’s article about the co-op failing for this reason. (Although the average mentally retarded six year old has doubtless worked out that if excess amounts of money/coupons are issued, there will be a problem, i.e. inflation.)
Schiff then claims that a fundamental flaw in the baby sitting co-op is that baby-sitting hours are priced the same regardless of whether it’s a weekday, weekend, New Year’s Day, etc etc. Perhaps Schiff or anyone else can explain why this “same price regardless” system applies to millions of products in every economy round the world, and without any big problems.
Of course “price discrimination” as economists call it, and as is explained in introductory economics text books, makes sense and is profitable for vendors as long as the administration costs are not too high. But this discrimination is not essential for an economy to function.
The one area where Schiff is half right is his claim that escaping recessions that result from bubbles simply by printing money will lead (if history is any guide) to another bubble sooner or later. Problem with that argument is that most of the human race have worked that one out, and no thanks to Schiff: that’s why we are busy tightening up bank regulations! Doh!
To spell that out in detail for the benefit of people with Schiff’s non-existent knowledge of economics, it was excessive and irresponsible borrowing that contributed to (or were the basic cause of) the credit crunch. Hence the need for tighter bank regulation.
But then it is precisely right wingers, like Schiff who tend to oppose more regulation, and left wingers like Krugman who tend to back tighter regulation.
The irony will be way above the head of Schiff the loudmouth.
Correction, 18th Dec: Krugman’s Slate article DID SAY that the co-op issued too many tokens, but DIDN’T SAY that the co-op collapsed for this reason.