Here is my letter to the editor concerning Bob McTeer’s piece, June 4, 2003. By the way, I had already critiqued him in Monetary Hawks and Doves (Mises.org, Sept 30, 2002)
Dear Editor, Wall Street Journal:
When the great 19th century economist Frederic Bastiat is quoted in the Journal it is encouraging. When John Maynard Keynes is endorsed it is frightening. President of the Dallas Federal Reserve Bob McTeer did both in the same article (”The Dismal Science? Hardly!”).
McTeer’s endorsement of Keynes’s concept of the Paradox of Thrift is most troubling and a setback to economic education. Economy wide saving is not bad for the economy; it is the engine of economic growth. Saving does not cause recessions, it is a cure-all for economic ills.
The economic problem is that Americans have not saved enough, largely because the Fed has kept rates too low, driving savers into the stock market where they were clobbered. Some have tried to refill their savings and to protect themselves from the recession, but by and large Americans continue to spend like a drunken Congress.
President McTeer implores us to avoid the Luddite fallacy of keeping jobs for jobs sake—a good point. However, he has long advocated the Fed driving interest rates down to keep consumers buying more than they can afford, businesses investing in sub-marginal projects, and the propping up of businesses and investments that need to be liquidated before a real recovery can begin.
Dr. McTeer would do well to eschew Keynes and Parade magazine columnists for economic advice and return to Bastiat who showed that increasing the money supply hurts the economy and that savings is the seed corn of true, lasting, and sustainable growth.
Michael Dell and Bill Gates prove that you don’t need a college degree to work hard, save and invest responsibly—benefiting millions and millions of people around the world, as well as themselves. Professor McTeer (and supposedly Professor Keynes) regret that they did not get their college degrees, but Bastiat and the American people should no doubt count it as a great economic blessing.
