Why We Got Out of WWII, Ron Paul's Stock Portfolio, and the Benefits of Space Exploration

Mish has an interesting post today highlighting some Bank of England idiocy and F.D.R. revisionism.  While Mish is right that banks in England would be dumb to start lending in such risky economic conditions and that massive New Deal spending didn't get us out of the Depression, I have a slight issue with this claim:

It was war that started the recovery, not the policies of Roosevelt. That statement may sound contrary to Austrian economics but it's not.

Destruction of productive capacity and assets is always a net loss. War is never a good thing in this regard. To believe otherwise is to believe in the Broken Window Fallacy.

However, the US was the only major country that did not suffer major losses in production capacity. Following WWII, the US became the growth engine of the world, further fueled by war-weary soldiers who returned home and started families, kicking off the "baby boom" and all of its ramifications.

Europe followed eventually, but no one in their right mind could suggest that WWII or wars in general are a good thing for stimulating economies.

While Mish is right that its lunacy to think wars are good for economic growth, he is missing a crucial element on why the U.S. experienced such post war boom following WWII.  The Austrian school, and Say's law for that matter, states that savings and capital accumulation are the keys for sustainable growth.  For conditions of civilian life during WWII, please refer to this great post by Mary Theroux of the Independent Institute:

As Dr. Robert Higgs has more than ably shown, the Great Depression continued, and deepened, throughout the New Deal and throughout World War II. The World War II years were a time of shared privation, with virtually every item that we take for granted today either rationed: e.g., meat, gasoline, sugar, clothing; or not available at any cost: e.g., new cars, appliances, etc. The American standard of living throughout World War II remained at an excruciatingly low level that no 21st century American would accept. Meanwhile, unemployment disappeared simply because 16 million able-bodied people were sent to war, paid below-market rates and subject to danger, death, and maiming they may not have preferred to unemployment.

I have always theorized that government rationing and wage/price controls during WWII practically forced the U.S. population to increase their savings (same with military personnel who were too busy being shot at to buy anything).  Also, during my labor relations class last fall, my union loving professor talked about the huge profits many big corporations made during the War due to such government regulations.  All of this, I believe, laid the groundwork for the post war boom.  Eventually I hope to find data to back up this theory.  While Mish is right in some sense that literally destroying your competitors is good for bolstering your market share, he falls for the broken window fallacy himself.  Even if England, France, Germany, etc. industrial infrastructure miraculously stayed in tact, the capital accumulation and savings achieved in the U.S. would have still ushered in a boom.

It still sickens me to think that the likes of Paul Krugman are practically dying for another war (without explicitly saying it of course) just to show off the great benefits of massive government spending.
Speaking of sickening pro-government quotes, check out this one Bob Wenzel dug up from Mr. Stimulus himself:

Keynes stated:

…the new system is now sufficiently crystallised to be reviewed. The result is impressive. The Russian innovators have passed, not only from the revolutionary stage, but also from the doctrinaire stage….They are engaged in the vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully over a territory so extensive that it covers one sixth of the land surface of the world….Methods are still changing rapidly in response to experience. The largest scale empiricism and experimentalism which has ever been attempted by disinterested administrators is in operation. Meanwhile, the Webbs have enabled us to see the direction in which things appear to be moving and how far they have got.

This is even more damming than his infamous introduction to the Germany edition of The General Theory.

Barry Ritholtz, quoting of a Barron's column by Jim McTague, has a great post today on Ron Paul's stock portfolio:

He looks at the financial holdings of Ron Paul via congressional financial disclosures:

“Gold-mining stocks, where Paul has the bulk of his money, have also hit pay dirt, albeit rising at a slower pace. Gold is up about 28% this year, through Thursday, to $1,823.80 a troy ounce, and 106.8% since 2009. In the same periods, the NYSE ARCA Gold Miners Index is down 2.9% and up 78.6%. The S&P 500 is down 9.3% and up 26.3%.
In his most recent financial disclosure, which covers the year 2010, Paul had $1.6 million to $3.5 million in gold- mining stocks. He also has a stake in three bear-market funds—and has for many years.
In all, Ron Paul’s portfolio amounts to a super bearish bet against the U.S. economy. If the country had defaulted on its debt earlier this month, he likely would have made a bundle. The congressman voted against House Speaker John Boehner’s plan to lift the nation’s $14.3 trillion spending cap.”

Pot of Gold: Ron Paul’s Top 10 Holdings

	Return*	Return*	Size of
Company/Ticker	1-Yr	3-Yr	Holding
Goldcorp / GG	19.13%	17.00%	$500,001 – $1,000,000
Barrick Gold / ABX	12.24	15.49	$250,001 – $500,000
Newmont Mining C Stock / NEM	1.12	12.02	$250,001 – $500,000
Agnico Eagle Mines / AEM	1.13	5.88	$100,001 – $250,000
AngloGold Ashanti / AU	2.02	19.33	$100,001 – $250,000
IAM Gold / IAG	3.69	52.07	$100,001 – $250,000
Mag Silver / MVG	39.97	9.75	$50,001 – $100,000
Pan American Silver / PAAS	22.72	4.71	$50,001 – $100,000
Silver Wheaton / SLW	74.51	49.54	$50,001 – $100,000
Virginia Mines / VGMNF.OTC	28.05	31.11	$15,001 – $50,000
Gold	48.34	31.61
S&P 500	6.04	-1.25
*All returns are as of 8/18/11; three-year returns are annualized.

How the hell The Big Picture qualifies as the 5th most visited libertarian site is beyond me.  Ritholtz, as much as I like him, can be just as Keynesian as Krugman sometimes.  Judging by the comments on the Ron Paul post, many of the readers are as well.  Some accuse Paul of voting the way he does in order to increase his financial profit.  Too bad Ron Paul has consistently voted against the kind of policies that drive up the price of gold!  That fact seems to be lost on those who actually think the U.S. defaulting on its debt would cause economic calamity.

Since I am talking about Ron Paul, I should wish him happy 76th birthday!  As for his birthday money bomb, so far he has raised almost $1,200,000 so far.  Here is a pretty good McLaughlin Group discussion on Paul's growing influence:

Pretty good discussion besides Eleanor Clift's swipe at capitalism toward the end.

I will end with pointing out this intriguing excerpt from a new Doug Casey interview on the potential benefits of space exploration:

L: Let’s talk about that for a moment. You and I see eye to eye on this, but some of our readers may not. At a time when people are worried about basic things like having a job tomorrow and food the week after, why should anyone care about exploring space? Why on earth – or off it – would anyone want to move out there? And how would one make money off it, justifying the R&D expenses?
Doug: Well, on the most fundamental level, getting out there makes the pie bigger for everyone. If it’s done economically, and for economic gain, we’re talking about whole new worlds to develop – that’s valuable real estate. There are vast new resources to make use of, ranging from metals in the asteroid belt to all that solar energy that’s just being radiated off into space right now. There’s the ability to manufacture in zero gravity, which has enormous efficiency implications, as well as other technical advantages. Space access is extremely valuable, and those who get there first are going to make fortunes. Mobilizing that wealth could and would create far more work than there are people to do it – not just in America, but even for the hungry masses in Africa and Asia. Simply put, adding to the net wealth in the world is good for everyone.

And in true Doug Casey fashion, he takes rips apart NASA:

L: Perhaps an ethically superior idea might be to auction the assets and distribute the proceeds to taxpayers who were plundered to pay for NASA in the first place. A sort of delayed restitution. But that would never happen. Getting the government out of space is so important, I’d be willing to encourage them to disband NASA and sell the parts to pay down the national debt. That idea might actually gain some traction in D.C., and the proceeds wouldn’t be enough to really help the government much.
Doug: Yes. But I fear NASA will never be abolished simply because it’s effectively an arm of the military. Anyway, you can never really reduce bureaucracy by trimming it back. It just grows again in subsequent appropriations rounds. The only way is to totally abolish the bureaucracy, cut it out by the roots, and ban the state from getting involved in its former functions.


That would create the space for a phoenix to rise from the ashes. That’s important, because a lot of people who should know better are still sympathetic to NASA. When it was a brand-new bureaucracy with a clearly defined and powerful mission, full of young, idealistic hotshots, it actually was an organization that got things done. That was before it became corrupt, stodgy, concrete-bound, and constipated. People remember the glory days and don’t see that NASA is just another bureaucracy today. It’s not quite like the post office playing with rockets, but it is unfocused and inefficient. I wonder if NASA even could put a man on the moon today, if it were given the green light to do so. It’s not a certainty, even though the technology has taken quantum leaps forward since 1969. Do you realize it’s been 39 years since a man last walked on the moon?
L: Yes – and if the government hadn’t been left in charge of space exploration, I think we’d be able to vacation there as easily as Argentina these days. The technology exists.

Not to long ago, I heard a report on how even if we tried going to the moon again, we wouldn't be able to.  That should strike everyone as incredibly absurd.  How do we now have the internet, iPads, and cell phones, yet we don't have the ability to replicate something we did almost 40 years ago?  The answer is obvious from the interview.