The Economic Effects of Pandemics: an Austrian Analysis

 

    The Economic Effects of a pandemic: An Austrian Analysis Our current status in the pandemic brings a lot of effects not only to the health of the people and most of all in our economic state. The possible impact of this pandemic on the economic structure arouse. Functioning of the spontaneous market order driven by dynamic efficiency of free and creative entrepreneurship. In this way, most of the entrepreneurs devote themselves in a decentralized manner, looking forward to the pandemic pushes' problems and challenges. 

    In doing so, we need to analyze the impossibility of economic calculation and of the efficient allocation of resources. Examining the specific case of massive interventions by government, central banks in monetary and financial markets so they can deal with the pandemic by seeking to lessen its effects.

See the following effects of pandemics on the real productive structure

1. The labor market

The current pandemic is not having a noticeable impact on the supply of labor and human talent in the labor market, since the death rate increase among the people working age is small. It becomes wartime to a peacetime economy and great credit expansion is in the process. Over the time of history, various pandemics have actually hit and exerted a much stronger impact on the labor market. The productive structure and capital goods Uncertainty and the demand for money

2. Pandemics: systematic government bureaucrat coercion versus spontaneous social coordination

The tragic outbreak of the Covid-19 pandemic has given us one real-life example--more closer and concrete which illustrates and confirms what the theory holds. The impact worldwide of this current pandemic affected all countries regardless of tradition, culture, wealth, or political system. But the thing is some other governments may have managed this crisis better than others difference is only the degree than of kind. We can see how this article deals with economic analysis of pandemic that implies that viewpoint of the contemporary reader, a current pandemic that closes to time and goes on to the personal impact. The intervention models are employed in other pandemics. Coordinate with the commands that need a huge volume of information and knowledge, countless specific and personal circumstances of time and place. The vitality of information or knowledge is essentially subjective and practical, thus it cannot be transmitted to the state central planning and decision-making agency. The eagerness to search for the solutions and the efforts made to detect and overcome problems as they arose would be dynamically efficient. As about to observe and analyze, problems would be handled in a manner exactly opposite to what we see with the state and the combined action of its politicians and bureaucrats, regardless of the good faith and work they put in their efforts. We can see how these people still obey both discipline and resignation the politicians and public authorities towards the inadequacies, insufficiencies, and contradictions inherent in state management.

3. The pandemic as a pretext for an increasing lack of fiscal and monetary control by governments and Central banks

We cannot deny the fact that the economy affected by the pandemic requires a variety of conditions, such as to permit the economy to adapt to the new circumstances at the lowest cost possible and if it is done, permit a healthy and sustainable recovery to begin. In regards to the labor market, we must avoid any sort of regulation which cause the decrease of supply, mobility, and full availability of labor to quickly and smoothly return to work on new investment projects.

Central banks have gone done. If they were trying to escape and even advance their policy of monetary expansion and monetization of an ever-increasing public deficit, they run the risk of provoking a grace crisis of public debt and inflation.

 

There is no shortcut to escape from the severe causes of the current pandemic. Even the authorities were trying to be “saviors” to save people from dying it will become harder. Everything will be forgotten.

MONETARY HISTORY: Gold, Peace and Prosperity (Cong. Ron Paul)

Inflation rates spiked to 4.7% in February 2021 highest since the 4.4% recorded in January 2019. It is also the 5^th straight monthly increase, and follows the 4.2% inflation rate in January 2021. A year ago, in February 2020, the rate of increase in the prices of goods was only at 2.6 %.

Inflation Rate:

2017      -              2.85 %

2018      -              5.21 %

2019      -              2.48 %

2020      -              2.44%

In the Philippines the volatility of inflation rate was been caused by factors such as disturbances in agricultural food supply or movements in international oil prices. Such knowledge is important in the formulation of economic policy, particularly monetary policy which respond mainly to broad-based pressure on prices. There is time to prepare for monetary form since we need to end the inflation.

Since if we observed the law of economics there is no indication that only gold can be used as money in a free society. But the matter shows that gold served as the principal medium of exchange.

Fiat currency standard

Dollar is now manage the fiat currency ushered in even greater inflation, economic turmoil and set the stage for total loss of confidence in the dollar. The task is not difficult, if we ignore –for once—the political pressure from the special interest whose demands are fulfilled through inflation of the money supply. Inflation whether for the benefit of big companies, bankers, monopoly wages, transfer payments or political careers must be ended.

Inflation often leads to prices and wage controls which destroy the pricing system, the planning mechanism of the free economy. The only reason they could promote inflation would be destroy freedom.

Beginning in 2010, central banks around the world turned from being net sellers of gold to net buyers of gold. In 2019, official sector activity declined 1 percent from the year prior, with central banks adding 650.3 tonnes. This is slightly lower than 2018 when banks purchased 656.2 tonnes – the second highest level this century, according to the World Gold Council (WGC).

The top 10 central banks with the largest gold reserves have remained mostly unchanged for the last few years. The United States holds the number one spot with over 8,000 tonnes of gold in its vaults – nearly as much as the next three countries combined.

Reference: https://www.usfunds.com/investor-library/frank-talk-a-ceo-blog-by-frank-holmes/top-10-countries-with-largest-gold-reserves/#.YG0WtegzZPY

15 central banks made net purchases of one tonne or more in 2019, highlighting the continued demand for bullion globally. Turkey was the number one buyer – adding 159 tonnes to reserves. Poland made the single largest purchase for the year when it bought 94.9 tonnes in June.

WGC notes that central banks bought 5,019 tonnes in the last decade, which more than offsets the 4,426 tonnes of net sales from 2000 to 2009. Gold reserves are now only 12 percent below the all-time high of 38,491 tonnes in 1966.

Everyone who believes in freedom must work diligently for sound money, fully redeemable. Nothing else is compatible with the humanitarian goals of peace and prosperity. –Cong. Ron Paul

Meltdown Thomas E. Woods Jr.

Capitalism is economic and political system in which country’s trade and industry are controlled by private owners for profit rather than by the state. Since crisis is been experienced by the whole world, capitalism is indeed they see as the culprit that caused such economic mess. The crisis was the fault of libertarianism, same thing as they considered the capitalism as well in 2008 were considered responsible for the 2008 economic trouble.

But behind of this let us look at the real culprit of this claimed. This book identified the culprits that led the economy suffer.

Federal Reserve the one who monitors ricks to the financial system and works to help ensure the system supports a healthy economy for US household. Borrowers can no longer sell any housed for their profit for price depreciation started. Greedy lenders and foolish borrowers were blamed, but not the government.

Fannie Mae and Freddie Mac, the government sponsored enterprises. The enjoyment of privileges which no private enterprises had. And in case if they were encounter trouble sure the government will be one of their back up in terms of financial burden to taxpayers.

The GSEs, the one who bought the mortgages from local banks, with funds in their hands, bankers returned to the mortgage making it easier for people to own houses, and thereby boosted the housing market.

The particular law which identify the Carter’s time and revived under the Clinton’s administration that is called the Community Reinvestment Act. This are the combination of the law coupled with political pressure from special interest groups, bankers that forced to lower lending requirements to provide easy access to housing loan for low-income borrowers.

Racial discrimination also arouse that makes the rallying cry during those years. Lenders were being afraid to go against a popular political tide and legal threat were forced to even conform to pressure and thereby loosened lending requirements.

The speculators multiplied, not only from low-income buyers same as to the higher-income borrowers. It becomes viral. The most notorious examples of this were house-flippers and market-timers. The price of houses artificially appreciated.

Private rating agencies also had their share of responsibility in the housing bubble. They failed to do their duty sue to SEC regulations. Like bankers, they were also afraid to go against popular political propaganda that caused them not to do their job.

In spite of all this how can we solve the economic crisis? Let see the US government solution from these matter.

Short-selling

The exact opposite of “buy low and sell high” strategy used by investors. By these traders return the borrowed stocks and keep the gain for themselves. Traders are doing service to investors by giving them important information about sound firms.

Increase of insurance

Another tool to aid the economy is this, increase the insurance of depositors’ money without even thinking the soundness of the bank’s finances. So if the banking crisis occurs, the probably solution to this is to return to the old trick of printing USD.

Foreclosure holidays

This result in lesser credit, depriving the common man to avail a mortgage loan, an unfortunate outcome that will be blamed on free market’s “inefficiency”.

More regulation

Regulation and deregulation is taking place, which is the act of transferring the risk of unsound companies to taxpayers. Deregulation is actually anomalous for how one can talk if it when the government allows firms to make riskier investments with the guarantee of taxpayers money.

Let’s have a concrete steps to recover from a free-market perspective.

1. Allow firms to declare bankruptcy. This avoid due to two baseless fears which related to perceived negative impact on the economy once firm disappeared and the second one is about the loss of credit.

2. Stop the bailouts and cut government spending. Stop giving subsidy. Excessive consumption and too much debt cause economic crisis.

3. Demand transparency from the Fed.

4. Keep the government away from the monopoly and manipulation of money.

REF 2: How Does Calvinism Help Protect Liberty?

 

Kuyper focuses on his lecture on the source of maintaining and protecting liberty from the threats of State tyranny and the concept of the popularity of liberty. In view of politics, it is basically grounded in religious or anti-religious ideas, as Calvinism as purely as an ecclesiastical and doctrinal movement. It’s good to know also that in view of Calvinism and Politics some country enjoy their political freedom such as the Netherlands, England, and America.

If we talk about the idea and fundamentals of Calvinism it’s all about the Sovereignty of the Triune God over the whole Cosmos, all its spheres and kingdoms, the visible and invisible. As part of these fundamentals, the threefold central concept comes up.

The Sovereignty in the state

Humanity comes from one race, one blood. And if we want to maintain the organic unity politically in the post-sin world, it is now impossible. Since sin enters into the world, something comes unnatural, people against each other, there is an abuse of power, battle of ages between authority and liberty arouse and these are all because of sin. Calvinism gives two basic ideas as the political faith, God alone is sovereign over all nations, and the nature of authority that the State possesses can be derived only by the hands of God. The high view of the State, the transcendent character of God and transferred to the State. Since now, we view the state as “god”. They made the separation of State which makes the most important instrument is the law and the concept of that is not engage and harmonize with the eternal principles.

The Sovereignty in Society

Family, business, science, art, etc. are all social spheres, who do not owe existence to the state and does not derive the law to the superiority of the state but only obey by the high authority within their states, rules by grace of God this how Calvinist understand sovereignty in society. As part of the analysis, state and society exist for the other serves as the mechanical in character, and the other one is organic. In regards to the mechanical states, the principal characteristic of government is the right to life and death, the sword best symbol represents power.

Everywhere one man is powerful than the other, by his personality, by his talent and by circumstances.

Dominion is exercised everywhere, but it is dominion which works organically; not by virtue of a State-investiture, but from life’s sovereignty itself.

The Sovereignty in the Church

The difficulty of the dilemma is all around. It lies to the restrictions of liberty of worship and civil disabilities under the dominant authorities.

So the end of all these is that state officials are perceived as servants of God. They are recognized God as Supreme Ruler, from Whom they derive power. Serving God is the primary goal by ruling the people under His ordinances.

The legitimate way and standpoint of the government in the existence of the variety of churches is to respect religious liberty and must not interfere in religious affairs.

God is the only sovereign in humanity.

 

 

 

 

Reference: Kuyper, Abraham. 1931. Lectures on Calvinism: Chapter 3: Calvinism and Politics. Grand Rapids, Michigan: Wm. B. Eerdmans Publishing Company, pp. 78- 109. 

Ref 1: The Reformed Tradition and the Transformation of Culture (D.G. Hart)

 

The authors explore the attitude of Machen towards the church and the relationship of culture. Though it can view the difficulty of modern culture poses by the Reformed tradition. There is a possibility of the inseparability of gospel proclamation, cultural transformation, and the idea of the priesthood of all believers.  The author points out the importance of reformed marks which tells that the idea that Christianity involves the transformation of culture as well as the proclamation of the gospel. In view of Machen, the vision of cultural transformation is both faithful to Reformed theology and sensitive to what we call the issue of time. 

Cultural diversity and religious freedom take a great challenge to the reformed tradition that cultural transformation takes seriously.

Machen presents his vision in regards to the Reformed tradition and the transformation of culture in the following parts. First is the consecration of culture, Machen was active in cultural engagement. It shows that working with liberal Christians and non-believers in numerous humanitarian and social causes. Though there is a big difference in terms of theological principles then there is also a numerous commonality to work with them. Second is the separateness of the church, Machen’s standpoint on culture affirms in cultural engagement and withdrawal are both affirming. In view of this reason, that’s why Machen becomes active in cultural transformation. Church itself primary task is to become the witness to Christ. Being a Christian is not only a religious experience but a life founded upon doctrine and primarily an account that happened such as a piece of good news or gospel.  The third one is the relationship between church and culture, Christians must and need to work their relationship with the culture around them, because culture changes over time but the church remains it is. Fourth, the modern predicament. As reformers, they come up with their own unique interpretation of cultural transformation. Machen argues that church institution has no means, nor does its ministry involve intervening in cultural or social affairs. The power and weapon of the church in other words are spiritual, not corporal. And the last one is the responsibility of the church in our time. Machen's emphasis on the witness of the church led him to distinguish between church and individual believer’s duties. He told people the matter that could not be expected to church. It is wrong to see the church cooperating and inappropriate to expect the church to give. So for the author Machen, the church's responsibility of the church in our times is the same as in every age.

It is a great reminder for us that Machen view of the cultural transformation of Christianity may obscure the weighty matters of the gospel and the church’s duty to proclaim it.