Nanny State 2008

(Reason TV)

Ponzi Schemes

Via Mark Perry,

The Importance of Capital Theory

"The Importance of Capital Theory" by Bob Murphy:

The elementary flaw in Krugman's objection is that he is ignoring the time structure of production. When workers get laid off in the industries that produce investment goods, they can't simply switch over to cranking out TVs and steak dinners. This is because the production of TVs and steak dinners relies on capital goods that must have already been produced. In our sushi economy, the unemployed islanders couldn't jump into sushi rolling, because there weren't yet enough fish being produced. And they couldn't jump into fish production, because there weren't enough boats and nets to make their efforts worthwhile. And finally, they couldn't jump into boat and net production, because there were already enough islanders working in that area to restore the fleet and collection of nets back to their long-run sustainable level.

People in grad school would sometimes ask me why I bothered with an "obsolete" school of thought. I didn't bother citing subjectivism, monetary theory, or even entrepreneurship, though those are all areas where the Austrian school is superior to the neoclassical mainstream. Nope, I would always say, "Their capital theory and business-cycle theory are the best I have found." Our current economic crisis — and the fact that Nobel laureates don't even understand what is happening — shows that I chose wisely.

Why Detroit Is Not Too Big to Fail

Why Detroit Is Not Too Big to Fail by Michael Schuman:

Take, for example, the 1999 collapse of South Korea's gargantuan Daewoo Group in the wake of the Asian financial crisis .... The Korean economy didn't fall into the Pacific after Daewoo's tumble as many had feared. Korea's GDP grew 9.5% the year Daewoo failed, and 8.5% the next.

Japan learned a similar lesson during the economy's Lost Decade after a stocks-and-real-estate bubble burst in the early 1990s. In a pathetic attempt to avoid losses, Japanese banks kept pumping fresh funds into debt-ridden, unprofitable firms to keep them afloat .... It was only after Japan began solving its zombie problem, rather than perpetuating it, that the country's financial crisis was finally resolved.

Flag flying Eurofascism

Nicolas Sarkozy attacks Czech refusal to fly EU flag:

"The manner in which Cohn-Bendit demanded that President Klaus fly the EU flag over his castle could easily have been done by a German official of over 70 years ago or a Soviet official of 20 years ago," he said.

"No doubt they think that Buckingham Palace should fly the EU flag to show its dominium."

What’s killing newspapers is the same thing that killed the slide rule

The Digital Slay-Ride by Jack Shafer:

The misery of a laid-off or bought-out journalist isn't greater than that of a sacked bond trader, a RIF-ed clerk, or a fired autoworker. The only reason we're so well-informed about journalists' suffering is they have easy access to a megaphone. The underlying cause of their grief can be traced to the same force that has destroyed other professions and industries: digital technology.

Nanny State Nonsense of the Day

The O word: The word 'obese' is banned from letters to parents of fat children in case it upsets them (MailOnline):

Ministers banned the word 'obese' on letters to the parents of fat children - because focus groups did not like it, England's chief medical officer said today.

Professor Liam Donaldson revealed that the term was replaced on letters to parents by 'very overweight' over fears it would upset and stigmatise fat children.

Henry Hazlitt in 1946 over the current crisis

Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to "buy" houses that they cannot really afford. They tend eventually to bring about a oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everyone (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in the long run they do not increase overall national production but encourage malinvestment.

Henry Hazlitt, Economics in One Lesson

Hayek in Meet the Press, 1975

Please check out the relevance of this 1975 recording by yourselves:

Hayek in Meet the Press (MP3)

In 1974, Hayek had won the Nobel Prize. In 1979, Margaret Thatcher became the Prime-Minister of the UK. According to the wikipedia,

Shortly after Thatcher became Leader of the party, she “reached into her briefcase and took out a book. It was Friedrich von Hayek's The Constitution of Liberty .... she held the book up for all of us to see. ‘This’, she said sternly, ‘is what we believe’, and banged Hayek down on the table.”

Analogies

Via Taki's Mag, Peter Schiff Analogies:

Social Pyramid Scheme

How I learned to stop worrying and love the demographic time bomb by Nick Silver (IEA):

Most Western countries have some form of unfunded or pay-as-you-go (PAYG) pension system. These are effectively pyramid selling schemes, where one generation sells on its pensions commitments to a new generation.

Pyramid selling relies on being able to find a new generation of suckers, which is what the argument for more people proposes - new babies and immigrants being the next generation of suckers. This is no long-term answer - it's just building a bigger pyramid.

New Deals are not good for individual rights

Nazi Economics by David Gordon:

In effect, Germany had embarked on a Keynesian policy: government spending became increasingly important in guiding the economy into the military channels that Hitler wanted. John T. Flynn noted that Franklin Roosevelt followed a parallel policy, after his programs of domestic spending failed to extricate America from the depression. "Here he [Roosevelt] was with a depression on his hands [with] the pressing necessity, as he put it himself, of spending two or three billion a year of deficit money, and most serious of all, as he told Jim Farley, no way to spend it. . . Here now was a gift from the gods. . . Here now was something the federal government could really spend money on: military and naval preparations." ....

Keynes himself viewed the Nazi efforts with favor. In his preface to the German edition of The General Theory, dated September 7, 1936, Keynes indicated that the ideas of his book could more readily be carried out under an authoritarian regime: "Nevertheless the theory of output as a whole, which is what the following book purports to provide, is more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output under conditions of free competition and a large measure of laissez-faire."

More about Central Planning

Four-year plans
Five-year plans

Obama's five-year plan

"From bridges to police: U.S. draws up stimulus plan":

WASHINGTON (Reuters) - Democratic congressional leaders were negotiating details Thursday of a huge plan to jolt the American economy, including $85 billion for road, water and other construction projects in a bill that could total at least $600 billion.

Recommended reading: Government Projects do not "Create Jobs" by Isaac M. Morehouse:

When government spends money, it simply takes that money from one place (taxpayers) and moves it to another (state employees, roads, etc.). When private individuals spend money, that money always has the potential to create wealth as they choose the best use between competing businesses or banks.

Whatever your feeling on the need to improve state roads, do not let the myth of "job creation" and a "boost to the economy" be the rationale.

Hosing money on the economy

"Taiwan government presents consumption vouchers" (Taiwan News):

Under a government plan to boost the economy by encouraging domestic spending, about 23 million Taiwanese citizens and foreign spouses will each receive NT$3,600 worth of vouchers beginning Jan. 18, just one week ahead of the Chinese Lunar New Year holiday.

The new Bailout

Cool it - an economist’s view

"Bjorn Lomborg says cool it!" (Reason.com)

Socialist Squaring the Circle Example of the Day

"Maxing Out on Oil Could Speed Up Climate Change (Discovery News)

.... new research has come to the ominous conclusion that slackening oil and gas supplies could actually accelerate the pace of global warming.

Envy

Envy is dangerous, destructive, divisive—and revealing. It exposes the falsity of Labour's great claim that they're the party of care and compassion. It is the worst possible emotion to inspire a political party supposedly dedicated to improving the lot of ordinary working people.

From there it is but a short step to the doctrine of class warfare. The Marxists in the Labour Party preach that this is not only just but necessary and inevitable.

But let me put this thought to you. If it is wrong to preach race hatred — and it is — why is it right to preach class hatred? If it's a crime to incite the public against a man simply because of the colour of his skin — and it is — why is it virtuous to do so just because of his position?

The political organisation of hatred is wrong—always and everywhere. Class warfare is immoral, a poisonous relic of the past.

Margaret Thatcher, Speech to Conservative Party Conference, 1978

El asesino Che

"Angry protests at "Che" premiere" (REuters):


el asesino che Guevara la realidad

Social Justice

The man who barely abstains from violating either the person, or the estate, or the reputation of his neighbours, has surely very little positive merit. He fulfils, however, all the rules of what is peculiarly called justice, and does every thing which his equals can with propriety force him to do, or which they can punish him for not doing. We may often fulfil all the rules of justice by sitting still and doing nothing.

Adam Smith, The Theory of Moral Sentiments

constant lying

This is what 'monetary management' really amounts to. In practice it's merely a high-sounding euphemism for continuous currency debasement. It consists in constant lying in order to support constant swindling. Instead of automatic currencies based on gold, people are forced to take 'managed' currencies based on guile. Instead of precious metal they hold paper promises whose value falls for every bureaucratic win. And they are suavely asured that only antiquated minds dream of returning to truth, and honesty, and solvency, in gold.

Henry hazlitt

Henry Ford on the bailouts

Let them fail; let everybody fail! I made my fortune when I had nothing to start with, by myself and my own ideas. Let other people do the same thing. If I lose everything in the collapse of our financial structure, I will start in at the beginning and build it up again.

Henry Ford - February 11, 1934

New Deal talk nonsense

Same Old New Deal? by George Will:

The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent.

"I say after eight years of this administration we have just as much unemployment as when we started," lamented Henry Morgenthau, FDR's Treasury secretary. Unemployment declined when America began selling materials to nations engaged in a war America would soon join.

The Krugman Recipe for Depression by Amity Shlaes:

What kept the picture so dark so long? Deflation for one, but also the notion that government could engineer economic recovery by favoring the public sector at the expense of the private sector. New Dealers raised taxes again and again to fund spending. The New Dealers also insisted on higher wages when businesses could ill afford them. Roosevelt, for example, signed into law first his National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage, and then the Wagner Act, which gave union workers more power.

The New Deal Didn’t Always Work, Either by Tyler Cowen:

In short, .... wartime orders from Europe, not the well-known policies of the New Deal, did the most to make the American economy climb out of the Depression. Our current downturn will end as well someday, and, as in the ’30s, the recovery will probably come for reasons that have little to do with most policy initiatives.

A Recipe for the Next Great Depression by Thomas J. DiLorenzo:

Lesson Number One is that "the basic problem with central banks is that like socialist economic planners, they can never have more than a fraction of the vast knowledge needed to make a society work, knowledge that is dispersed in the minds of millions of people. In addition, when central bankers make mistakes – as they inevitably will, since they’re human beings – these mistakes harm not just the economy in a city or a region but the entire country. The Fed’s response to the current economic crisis, which it created by creating the housing bubble, has been to declare more and more central planning powers for itself."
....

Myth: Government Spending ‘Stimulates’ the Economy by Daniel Mitchell:

If Keynesian spending doesn’t make sense from a theoretical perspective, and also fails every time it is tried in the real world, why do politicians keep trying the same approach? Your guess is as good as mine, but the answer probably has something to do with the fact that politicians love to spend other people’s money, and Keynesianism is a convenient rationale.

Tax misery index

The Forbes Tax Misery Index

Hohoho Mr. Klaus is coming to town

Free Marketeer Vaclav Klaus to Become President of European Union:

Just when it looked like statism was in an unchallenged political trajectory in the U.S. and Europe, the classical liberal President of the Czech Republic, Dr. Vaclav Klaus, stands to become the next President of the European Union, the world’s biggest trading bloc. Needless to say, those who F. A. Hayek dubbed “the socialists of all parties” (be they red, brown, or green) are none too pleased.

Privatize profits, socialize losses

from Cafe Press

Auto bail-out : readings

In Praise of the US Auto Industry by Peter Klein:

It’s an industry to be proud of. Its products are among the best in the world. Their names are Toyota, Honda, Nissan, BMW, Mercedes, Hyundai, Mazda, Mitsubishi, and Subaru.

The Chrysler Bailout by Ron Paul (1979):

Last year there were 200,000 bankruptcies in this country, according to U.S. News & World Report. Yet we have selected only the largest for our aid. This is discrimination of the crassest sort. We ignore the smaller victims of this government’s policies simply because they are small. Only the largest, those with the most clout, the most pull, get our attention. This aristocracy of pull is morally indefensible.

Yet Another GM Bailout by Briggs Armstrong
What's Good for GM?, Cato Podcast with David J. Ikenson
Should The U.S. Auto Industry Be Rescued? with Dave Mitchell
Bailouts: Where Will They End? by David Boaz
America’s Other Auto Industry, the Successful One (OpenMarket.org)

An Intimate Assault on Freedom of Association

eHarmony forced to offer same-sex dating services by Michelle Malkin:

So, this is “progress?” eHarmony, a Christian-targeted dating website, gets sued by a gay man demanding that the business match him up with a same-sex partner. The New Jersey Attorney General intervenes on behalf of the gay plaintiff and forces eHarmony to change its entire business model .... This case is akin to a meat-eater suing a vegetarian restaurant for not offering him a ribeye or a female patient suing a vasectomy doctor for not providing her hysterectomy services.

(title from Tom G. Palmer)

The Austrians Were Right

"The Austrians Were Right" by Ron Paul:

Over and above this are those who understand that political power is controlled by those who control the money supply. Liberals and conservatives, Republicans and Democrats came to believe, as they were taught in our universities, that deficits don’t matter and that Federal Reserve accommodation by monetizing debt is legitimate and never harmful. The truth is otherwise. Central economic planning is always harmful. Inflating the money supply and purposely devaluing the dollar is always painful and dangerous.

The basic problem is that proponents of big government require a central bank in order to surreptitiously pay bills without direct taxation. Printing needed money delays the payment. Raising taxes would reveal the true cost of big government, and the people would revolt. But the piper will be paid, and that’s what this crisis is all about.

Latin America tricks

Via Donald Luskin (The Conspiracy to keep you poor and stupid):

Politically Incorrect Post of the Day

Yes the pilgrims were socialists: from the Wikipedia - He who does not work, neither shall he eat:

He who does not work, neither shall he eat is Biblical aphrorism derived from II Thessalonians 3:10, which became a slogan for new colonies and socialist societies.

The slogan was used by Captain John Smith in setting up his colony in Jamestown, Virginia (1607-1609).

According to Soviet leader Vladimir Lenin, it is the first principle of socialism. The phrase is mentioned in his 1917 work, State and Revolution (chapter 5, section 3).

Recommended reading: The Politically Incorrect Guide to American History

Happy Thanksgiving

[AA: Dear IPE members - on Wednesday we were discussing The Pilgrims' Real Thanksgiving Lesson. Yesterday Pedro Videla beat us big time - check his post! The only link he failed to list is the following: ]

William Bradford & America's (First) Failed Flirtation with Socialism

Atlas Shrugged updated for the current Financial Crisis

Atlas Shrugged updated for the current Financial Crisis:

"Damn it, Dagny! I need the government to get out of the way and let me do my job!"

How relative poverty statistics can be manipulated

"How relative poverty statistics can be manipulated" by Kristian Niemietz:

To illustrate the problem, I have calculated a figure of relative poverty for a hypothetical re-united Austro-Hungary .....

.... a simple boundary change has apparently driven 3 million Hungarians into poverty. This demonstrates how easily relative poverty data can be manipulated. Clearly public policy should not be based on such flawed measures.

Peter Schiff telling the truth

Peter Schiff in the Lew Rockwell show

Visions and Frameworks in Macroeconomics (2)

Continuing "Visions and Frameworks in Macroeconomics", from the excellent Austrian Economics Seminar of the Foundation for Economic Education, Roger W. Garrison in The Continuing Relevance of Austrian Business Cycle Theory (MP3).

bailing out audience

Ghostbusters (1984) "Cats and Dogs" speech in Mayors Office

income tax revenues are highly inelastic to the top tax bracket rate

Via Division of Labour, "You Can't Soak the Rich" by David Ranson:

The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.

The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.

the Prospects for a Stimulus Package

Price Fishback: What Do the New Deal and World War II Tell Us About the Prospects for a Stimulus Package?:

If not Keynesian policy, what was the New Deal? It was a broad-ranging mix of spending, regulation, lending, taxation, and monetary policies that can best be described as “See a problem and try to fix it.” In many situations the fix for one problem exacerbated other problems. The programs to raise farm prices hurt work relief recipients, while attempts to raise wages and prices contributed to more unemployment, and thus a greater need for relief spending.

One sign that Keynesian budget deficits were not the key to bringing the U.S. out of the Great Depression is what happened after the war. Every Keynesian predicted that the private economy would go into a recession because the large government budget deficits would be eliminated and so many men would be returning from the war jobless. Instead, as government deficits receded, private consumption and investment boomed. Resources were no longer allocated to producing munitions and instead were devoted to production of typical consumer goods and services.

Obama 2.0

From the Sun-Times, via Foundation for Economic Education:

Transition officials call it Obama 2.0 — an ambitious effort to transform the president-elect’s vast Web operation and database of supporters into a modern new tool to accomplish his goals in the White House. If it works, the new president could have an unprecedented ability to appeal for help from millions of Americans who already favor his ideas, bypassing the news media to pressure Congress. ‘‘He’s built the largest network anyone has ever seen in politics, and congressional Republicans are clueless about the communications shift that has happened,’’ Democratic strategist Joe Trippi proclaims. The results, he says, ‘‘will be amazing to watch.’’

How FDR’s Economic Legacy Has Damaged America

Burton W. Folsom, Jr. on New Deal or Raw Deal: How FDR's Economic Legacy Has Damaged America:

Burton W. Folsom, Jr., author of New Deal or Raw Deal: How FDR's Economic Legacy Has Damaged America, tells John J. Miller, “Hardly anybody who writes on the New Deal mentions that Roosevelt rasied taxes to the top marginal rate in 1935 to 79%.”

download MP3

The world in figures

The world in figures from The Economist.

Let’s Have a Real Middle-Class Tax Cut

"Let's Have a Real Middle-Class Tax Cut — Obama's tax credits won't stimulate the economy" by Newt Gingrich and Peter Ferrara:

These tax credits will do little or nothing to promote economic growth because they do not reduce marginal tax rates -- the rate on the next dollar of income -- to provide powerful, meaningful incentives for productive activities such as investment, entrepreneurship and work. A tax credit is effectively a cash grant that can only affect incentives up to the amount of the grant. Indeed, such tax credits would likely reduce economic growth because the credits are phased out as income rises, and so effectively impose higher marginal tax rates over those income levels.

Subsidizing unemployment

"To Get More of Something (e.g., Unemployment), Subsidize It" by Robert Higgs:

Ronald Reagan was no economist, but his economic logic was impeccable when he declared, “If you want more of something, subsidize it; if you want less of something, tax it.”

So, as the current recession deepens and the rate of unemployment rises, we might have confidently predicted that Congress, in its infinite compassion for the little guy, would extend the period during which the unemployed may collect unemployment-insurance benefits. President Bush signed a bill today that will provide as many as 13 weeks of additional benefits, on top of the additional 13 weeks of benefits approved last June, which was on top of the 26 weeks the basic program provides.

In any event, we may expect unemployment to increase as the recession grows worse, and we may confidently understand that a portion of the unemployment that exists at any particular time will be attributable to the availability of unemployment-insurance benefits. Congress will blame the market for the unemployment and take credit for, in effect, helping to increase and extend it.

the origins of the financial crisis

IMD Professor Arturo Bris explains the origins of the financial crisis in a video presentation

Romney : Let Detroit go bankrupt

"Let Detroit go bankrupt" by Mitt Romney:

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for on Tuesday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

’affordable’ housing

"Can we afford 'affordable' housing?" by Richard Wellings:

Yesterday it was announced that the Greater London Authority (GLA) is to create 50,000 'affordable' homes. But do such schemes actually increase the affordability of housing?

When developers are forced to allocate a share of their dwellings (or land) to social housing or part-ownership it reduces their returns, since these properties will not be sold at full market value. Since the financial incentives to build are reduced, fewer homes are likely to be constructed. This reduction in supply will make housing in general less affordable - and it should be remembered that most people, even those on quite low incomes, have to find accommodation in the normal market.

Rent seeking

Slate Magazine

Politics as usual

Auto Bailout Compromise Reached by Key Senators (CNBC)

Which Senators Have Auto Plants in Their Districts? (CNBC)

So Now Saving Is Bad

"So Now Saving Is Bad" by Sheldon Richman:

Keynes is back! Unfortunately. If you want to make sense of most of the reporting and commentary on the econony these days, you have to realize that most reporters and commentators and politicians are working from the Keynesian position that, as Paul Krugman puts it, “[I]ndividual virtue can be public vice… attempts by consumers to do the right thing by saving more can leave everyone worse off.” This is Keynes’s so-called “Paradox of Thrift.”

From Economics in One Lesson from Henry Hazlitt:

The enemies of saving are not through. They begin by drawing a distinction, which is proper enough, between "savings" and "investment." But then they start to talk as if the two were independent variables and as if it were merely an accident that they should ever equal each other. These writers paint a portentous picture. On the one side are savers automatically, pointlessly, stupidly continuing to save; on the other side are limited "investment opportunities" that cannot absorb this saving. The result, alas, is stagnation. The only solution, they declare, is for the government to expropriate these stupid and harmful savings and to invent its own projects, even if these are only useless ditches or pyramids, to use up the money and provide employment.

Good reading: Visions and Frameworks in Macroeconomics

The Republican Dictatorship

The Republican Dictatorship by Glenn Greenwald, in the Future of Freedom Foundation’s conference Restoring the Republic 2008: Foreign Policy and Civil Liberties:


Part 1 | Part 2 | Part 3 | Part 4 | Part 5

It’s Already Here

'Socialism'? It's Already Here. by George Will:

The distribution of a trillion dollars by a political institution -- the federal government -- will be nonpolitical? How could it be? Either markets allocate resources, or government -- meaning politics -- allocates them. Now that distrust of markets is high, Americans are supposed to believe that the institution they trust least -- Congress -- will pony up $1 trillion and then passively recede, never putting its 10 thumbs, like a manic Jack Horner, into the pie? Surely Congress will direct the executive branch to show compassion for this, that and the other industry. And it will mandate "socially responsible" spending -- an infinitely elastic term -- by the favored companies.

Middle-of-the-Road Policy

From Middle-of-the-Road Policy Leads to Socialism by Ludwig von Mises:

Even in this country which owes to a century of "rugged individualism" the highest standard of living ever attained by any nation, public opinion condemns laissez-faire.

The impact of this state of affairs is that practically very little is done to preserve the system of private enterprise. There are only middle-of-the-roaders who think they have been successful when they have delayed for some time an especially ruinous measure. They are always in retreat. They put up today with measures which only ten or twenty years ago they would have considered as undiscussable. They will in a few years acquiesce in other measures which they today consider as simply out of the question. What can prevent the coming of totalitarian socialism is only a thorough change in ideologies. What we need is neither anti-socialism nor anti-communism but an open positive endorsement of that system to which we owe all the wealth that distinguishes our age from the comparatively straitened conditions of ages gone by.

Ron Paul on the G20 Meeting

Bob Murphy: Ron Paul on the G20 Meeting: Bretton Woods II or III?

Ron Paul is probably the best person in the world to comment on this stuff, because he understands the economics better than 95% of professional economists, and he of course understands politicians better than 100% of professional economists.

Here, Ron Paul on Neil Cavuto.

Don’t Let Barack Obama Break Your Heart

"Don't Let Barack Obama Break Your Heart" by Tom Engelhardt:

If, however .... Obama accepts a War on Terror framework, as he already seems to have, as well as those "residual" forces in Iraq, while pumping up the war in Afghanistan, he may quickly find himself playing by Rumsfeld rules, whether or not he revokes those specific orders. In fact, left alone in Washington, backed by the normal national security types, he may soon find himself locked into all sorts of unpalatable situations, as once happened to another Democratic president, Lyndon Baines Johnson, who opted to escalate an inherited war when what he most wanted to do was focus on domestic policy.

a long stream on not a single accomplishments

Following Pedro Videla's post on Jeffrey Sachs, one more evidence of the great economist man-crush on president elected Obama:

Link:

CO2 is increasing scientific fraud

"The world has never seen such freezing heat" by Christopher Booker

A surreal scientific blunder last week raised a huge question mark about the temperature records that underpin the worldwide alarm over global warming. On Monday, Nasa's Goddard Institute for Space Studies (GISS), which is run by Al Gore's chief scientific ally, Dr James Hansen, and is one of four bodies responsible for monitoring global temperatures, announced that last month was the hottest October on record.

This was startling. Across the world there were reports of unseasonal snow and plummeting temperatures last month ....

.... The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.

Creeping Smoot-Hawleyism

"Creeping Smoot-Hawleyism may deepen recession" By Martin Hutchinson:

Within three days of promising not to impose further tariffs, Russia and India raised them to protect domestic industries. Russia also tightened import quotas while the EU imposed anti-dumping duties. Creeping protectionism seriously threatens the global economy.

Summing up the economic thinking of many people

Spinal Tap, These Go To Eleven

Google funny quote of the day

This President is going to lead us out of this recovery.

Dan Quayle

Franco was a socialist

Aguirre: "Franco era socialista" (Libertad Digital)

la presidenta madrileña aseguró, cuando le preguntaron por el dictador Franco, que éste "era socialista". "Hacía políticas socialistas", agregó. En su opinión, el debate de ideas no está en "derechas e izquierdas" sino en "liberales y socialistas".

Living Within our Means

PBS Openmind - Living Within our Means with Milton Friedman (in color)

Is Fractional Reserve Banking Fraudulent?

"Is Fractional Reserve Banking Fraudulent?" by Walter Block:

Consider this: A deposits 10 ounces of gold in B's bank; B gives A a demand deposit for these 10 ounces. B turns around and lends C 9 of these ounces, giving C a demand deposit for these 9 ounces. Thus, A and C both own full rights to these 9 ounces.

.... there CANNOT be a conflict in rights. Any seeming conflict is due to a misspecification or one or the other right. Yet, here, with frb, we have a GENUINE conflict in rights.

"Is Fractional Reserve Banking Fraudulent?" by Walter Block:

Yes, I buy 10 widgets from you for delivery today, in consideration for my promise to pay you $10, tomorrow. A day passes, and I am unable to carry out my part of the bargain. But, it is not a LOGICAL CONTRADICTION to suppose I am unable to do so, as in the case of frb. There is all the difference in the world between being unable to fulfill a contract due to contingent circumstances, as in the widget example, and it being IMPOSSIBLE to do so, as in the case of frb. It is not merely "intervening events" that make it a violation of the laws of logic for B, the Bank, to uphold contracts with lender A and borrower C. It is IMPOSSIBLE for B to do so, given frb.

Bailout Blues

The White Stripes - The Big Three Killed My Baby (Live)

Most Presidents Ignore the Constitution

"Most Presidents Ignore the Constitution" by Andrew P. Napolitano on the Wall Street Journal:

There is no power in the Constitution for the federal government to enter the marketplace since, when it does, it will favor itself over its competition. The Contracts Clause (the states cannot interfere with private contracts, like mortgages), the Takings Clause (no government can take away property, like real estate or shares of stock, without paying a fair market value for it and putting it to a public use), and the Due Process Clause (no government can take away a right or obligation, like collecting or paying a debt, or enforcing a contract, without a fair trial) together mandate a free market, regulated only to keep it fair and competitive.

The $700 billion bailout of large banks that Congress recently enacted runs afoul of virtually all these constitutional principles ....

Austrian Theory of the Business Cycle

LewRockwell.com Podcast #17 - Austrian Theory of the Business Cycle

Obama for Santa

"Next Step: Obama for Santa '08" by Todd Steinberg:

The most important similarity between Barack Obama and Santa Claus is that people love them for the same reason: they both deliver free gifts for anyone who deserves them. Just as naïve children believe Santa creates Barbies, bicycles, Legos and lightsabers using elves and magic, people believe Barack Obama can create homes, jobs, stimulus checks, college tuition, and healthcare using similar techniques. However, die-hard Obama supporters aren't as keen as the children who awaken to the sobering fact that Santa's plan for economic prosperity is nice in theory but impossible in practice. They believe we have the right to certain goods and services and do not care where it comes from or how much it costs. All they want is to wake up in the morning and see their entitlements appear underneath their Christmas tree.

The Howard Roark Speech

The Fountainhead - Howard Roark Speech

Auto bail-out

"Would an Auto Bailout Lead to National Greatness?" by David Boaz:

.... protectionism couldn’t survive the analytical critique of Adam Smith in 1776, and yet it persists. So we can’t assume that members of Congress will .... drop the idea of handing a big pile of taxpayers’ money to corporate managers, stockholders, and unions who have dug themselves into a deep hole.

For those of us who opposed all the taxpayer bailouts, starting back with Bear Stearns–or with Chrysler in 1979–all these bad ideas may seem to run together .... the dangers of political allocation of resources, the benefits of bankruptcy and restructuring, the industry’s partially self-inflicted wounds, the desire of some Democrats for political power over corporate decisionmaking, the dangers of corporate capitalism.

A lemon of a bailout by Charles Krauthammer:

.... Where do you stop? Once you’ve gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no?

The criteria will inevitably be arbitrary and political. The money will flow preferentially to industries with lines to Capitol Hill and the White House. To the companies heavily concentrated in the districts of committee chairmen. To clout. ....

"Bailout to Nowhere" by David Brooks:

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations ....

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

"The Impotence of the Economists, Part II" by Peter Klein:

The financial-market bailout is one thing. While most economists, rightly in my view, strongly opposed the Paulson plan, one can at least imagine intelligent arguments for it. The proposed auto-industry bailout is something else entirely. Does any economically literate person support it? Industry bailouts are textbook examples of the fallacy of composition, taught in every Econ 101 class. When I teach it I use exactly this kind of example (bailing out Chrysler in 1980, bailing out the airline and insurance industries after 9/11, etc.). Saving the X industry simply harms the Y and Z industries, while substituting the political process for the market in determining the allocation of resrouces. And yet, here we go.

"Just Say No to Detroit" says David Yermack:

Over the past decade, the capital destruction by GM has been breathtaking .... a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges .... one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

EU Food Policy

Celebrity Chef Jamie Oliver condemns and denounces the EU

"Ugly Vegetables and Fruit Again to be Sold in Europe!" by Doug Bandow:

Amazing. The European Union actually responded to criticism. About one-fifth of European produce has to be dumped because it doesn’t mean minimum EU standards, which have nothing to do with health. Under criticism for conducting a jihad against ugly veggies, the EU appears to be backing down–though the vote will be close.

Are we socialists yet?

"Are We There Yet, Are We There Yet? - Let’s Check Marx and Engels’s List" by Robert Higgs:

So, here we stand, having come close enough to communism for government work. It is a mistake, however, to call it communism or socialism, because a major part of its genius is its preservation of the form of private property rights, even as the substance of such rights is progressively gutted. Properly speaking, our system is, and long has been, economic fascism ....

.... we can continue down this fascistic economic road only so long. Therefore, in the present distressing circumstances, we may be warranted in asking: is our politico-economic system finally going smash in a frenzy of monetary inflation, bailouts, and government takeovers? We’ll know the answer pretty soon.

a few demands

Via Reason,

The Grameen Myth

"The Grameen Myth" by Peter Klein:

The idea that the poor can best escape poverty through self-employment, rather than working for wages, goes against all historical experience. Rising living standards for the poor, in all other countries and historical episodes, has come from wage increases driven by increases in labor productivity.

Bangladesh consistently ranks near the bottom of the standard indexes of economic freedom. The main obstacles to development in Bangladesh are high trade barriers, a vast array of state-owned enterprises, high taxes, corruption, political violence, etc. The claim that microfinance, rather than fundamental institutional reform, is the key to growth strains credulity.

learn economics

Via BK Markus,

Can Friedman’s Money Rule Stabilize the Economy?

"Can Friedman's Money Rule Stabilize the Economy?" by Frank Shostak:

Contrary to Friedman however, we suggest that the boom is not just about an increase in the rate of growth of the money supply; it is also about various nonproductive activities that spring up on the back of the expanding money-supply rate of growth. Furthermore, we maintain that an economic bust is not about a fall in the rate of growth of the money supply; it is about the elimination of various nonproductive activities on account of the decline in the rate of growth of the money supply.

An increase in the money supply out of thin air sets in motion the so-called "counterfeit effect." It lays the foundation for nonproductive activities, which consume and add nothing to the pool of real funding or real wealth. These activities divert real funding from wealth generators, thus weakening their ability to grow the economy.

Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are

"Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are" (The Onion):

Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are

Progressives Should Audit the Fed

"Progressives Should Audit the Fed" by Joe Schembrie:

.... the Fed is a cartel of commercial banks consisting of the very crony-capitalist interests that Progressives normally oppose ....

With the ten-trillion dollar-plus money supply inflating prices at five percent annually, the Fed creates at least five hundred billion dollars a year in new money. The value diluted by those billions belongs to citizens but goes to cronies. There ought to be Progressive outrage. Where is it?

another explanation

Understanding The Financial Crisis--For Kids and Grownups

Consumers Don’t Cause Recessions

"Consumers Don't Cause Recessions" by Bob Murphy:

.... the circular-flow diagram above is a very misleading model of the economy. It leads us to think that output of finished consumer goods can immediately rise and fall with "spending." This framework would hold if there were no capital goods, meaning that all consumer goods and services were produced immediately, as workers took gifts of nature and produced the finished item on the spot.

Once we grasp the stunning complexity of the true "economic problem"—how all of this interlocking human activity is coordinated so that production flows smoothly and predictably—we see the absurdity of Keynesian pump-priming remedies....

In his discussion of the "paradox of thrift," Paul Krugman proves that he is not an economist—or at least, not a very good one. His policy recommendations are based on a Keynesian model bereft of time and the capital structure of production.

The Dark Bailout

The Dark Bailout

too much government

President Bush Discusses Financial Markets and World Economy:

History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market.

We saw this in the case of Fannie Mae and Freddie Mac. Because these firms were chartered by the United States Congress, many believed they were backed by the full faith and credit of the United States government. Investors put huge amounts of money into Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. And when the housing market declined, these securities, of course, plummeted in value. It took a taxpayer-funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system.

Peter Schiff Was Right

Peter Schiff Was Right

Gene Callahan:

Here we see a series of “esteemed” commentators, including Arthur Laffer and Ben Stein, basically laughing in Peter Schiff’s face even while he calls the coming downturn very accurately. The best moment may be Ben Stein insisting that Merrill Lynch was being “given away” at $76. (The stock today is at $14.)

Crisis Hits the Business Schools

"Crisis Hits the Business Schools" (Business Week):

Wherever they end up, those new applicants will find a B-school landscape in many ways transformed by the events of the past 18 months. While long-term curriculum shifts may take a few years, students can expect to encounter new classes, new case studies, and a new emphasis on risk. Much of this has already begun, with a growing number of business schools planning to add concentrations in risk management in coming years, ramping up the number of classes they offer and starting new risk management centers.

la crisis financera

Entrevista con Jesus Huerta de Soto

Why Do People Fail to Understand?

"Why Do People Fail to Understand?" from Peter Boettke:

Economics is a fascinating discipline. Teaching and research in economics is a "calling" I would argue. We want to continually engage the profession and raise the level of discourse. Blogs can help us "think aloud", but ultimately I think that exercise needs to be constrained against professional activities. Blogs, in short, cannot be seen as a substitute for more traditional publishing activity.

I would advice graduate students .... to focus their energies on learning the discipline inside and out, learning how to teach the subject to students ...., learning how to research, and learning how to write for professional audiences as well as the general public. Don't worry about being clever, focus instead on being clear. Don't worry about careerism, focus instead on tracking truth and being correct. If you have questions, ask them. If you have ideas, excellent but remember that "thinking without publishing is daydreaming." And who really want to hear your dreams beyond your friends, family and perhaps therapist?!

What proposals would you have to improve the level of economic discourse that we see on the blogosphere?

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

Environmentalism Is Racism

"Environmentalism Is Racism" by Eric Englund:

.... today’s environmentalists .... hate private property, they hate human liberty, they hate prosperity, they hate modern-day industry, and they hate the free market. They will always choose beavers, trees, and rock formations over people. Environmentalists are using .... legal constraints to slowly choke off capitalism and supplant it with socialism .... When you sum all of this up, Greenies simply detest the human race. Accordingly, environmentalism is the deepest and broadest form of racism known to mankind.

What You Should Know About Inflation

"What You Should Know About Inflation" by Henry Hazlitt:

Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because it depreciates the value of the monetary unit, raises everybody's cost of living, imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest, wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.

Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.

.... inflation must always end in a crisis and a slump, and that worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of "capitalism."

Improve Economic Performance

"What Steps Should the New Administration Take to Improve Economic Performance?" in the Economist's Views blog, with the contribution of several economist to the New York Times.

Understanding the financial crisis

Krugman’s prize (2)

Following the post "Krugman’s prize", the Robert Samuelson article on Real Clear Politics "Poor Aren't Poor Because Rich Are Rich":

By and large, the poor aren't poor because the rich are rich. They're usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck.

The presumption implicit in the criticism of growing economic inequality is that society's income is a given and, if the rich have less, others will have more.

The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be redistributed because it doesn't exist. Everyone's poorer.

Change you can believe in (2)

"Obama Appoints Foul-Mouthed Freddie Mac Crony Chief of Staff" (OpenMarket.org):

Obama has appointed as his chief of staff Rahm Emanuel, a former director of the failed government-backed mortgage giant Freddie Mac, which had to be bailed out by taxpayers. It’s perhaps not surprising, given that Obama was the second-largest recipient of campaign contributions from Fannie Mae and Freddie Mac, the government-sponsored mortgage giants that helped spawn the mortgage meltdown and financial crisis.

"Forget the Honeymoon" of Justin Raimondo of AntiWar.com:

He's mean, he's ultra-partisan, and he's a fully-paid up member in good standing of the War Party: ...

"What about Rahm Emanuel [for Vice President], the most powerful voice in the House of Representatives that agrees with Hillary Clinton on foreign affairs? He's a hawk. And although he's a rootin' tootin' liberal on domestic affairs, he is a hawk on foreign affairs .... here you have the hawkish side of the Democratic Party.

The road ahead

KAL's cartoon on The Economist

Change you can believe in

"Former Bear Stearns Risk Manager Turns Up at Fed" (The New York Times):

The former chief risk officer at investment bank Bear Stearns , which nearly collapsed in March, is now a senior official of the Federal Reserve division that supervises U.S. banks.

The Relevance of the Great Depression

"The Relevance of the Great Depression" by David Friedman:

It could happen again. One can imagine a future in which President Obama, supported by Democratic majorities in both houses, engages in massive interventions in the economy following the massive interventions already under way and the result is a serious economic downturn prolonged for years, perhaps for two terms. If that happens many people--most obviously, the same people who insist that the collapse of Fannie Mae and the associated difficulties are the fault of laissez-faire and deregulation--will conclude that only massive intervention preserved us from a still worse outcome.

Now, I’ve noticed a tendency for politics to get rather silly

Via The Beacon, following this article on the WSJ, "Plants Have Rights Too!":

For years, Swiss scientists have blithely created genetically modified rice, corn and apples. But did they ever stop to consider just how humiliating such experiments may be to plants?

That’s a question they must now ask. Last spring, this small Alpine nation began mandating that geneticists conduct their research without trampling on a plant’s dignity.

Here's the PDF: "The Dignity of Living Beings with Regard to Plants"

a sad reflection of the hyperspecialization among intellectuals

"Egalitarianism as a Revolt Against Nature" by Murray Rothbard:

I think it manifestly true that very few of even the most dedicated economic technicians began their interest in economics because they were fascinated by cost curves, indifference classes, and the rest of the paraphernalia of modern economic theory.

.... they became interested in economics because they were interested in social and political problems and because they realized that the really hard political problems cannot be solved without an understanding of economics.

Infortunately, what usually happens to these people is that .... they learn .... that prestige, rewards, and brownie points are garnered not by pondering the larger problems but by sticking to one's narrow last and becoming a leading expert on a picayune technical problem.

Economic and Climate Models

"Economic and Climate Models" by Robert P. Murphy:

The "rigorous," peer-reviewed Keynesian economic models reached the zenith of their professional success in the 1950s and 1960s, and yet, in retrospect, many economists would now admit that they were fundamentally flawed and provided horrible policy recommendations. Despite the obvious differences between the disciplines, this sorry episode from the field of economics should counsel caution before we hand over even more power to the politicians due to the results of mainstream climate models.

Let me be clear: I am not saying that the climate models are demonstrably wrong .... To go back to economics, it is not as if Paul Samuelson made a mistake in his arithmetic and that's why the United States experienced stagflation .... But if you suspected that perhaps the very approach of the model was flawed, you wouldn't expect Paul Samuelson — the very person responsible for the mainstream approach — to engineer a paradigm shift.

It is true that science must start somewhere, and a bad model is better than no model. But this truism does not mean governments should expand their powers whenever the "best guess" says it would be a good idea. A wise student of history should also be able to say, "We really don't understand this very well yet."

Open letter

An Open Letter to my Friends on the Left" by Stephen Horwitz:

Consider instead that the problems of this mess were caused by the very kinds of government regulation that you now propose. Consider instead that effects of the profit motive that you decry depend upon the incentives that institutions, regulations, and policies create, which in this case led profit-seekers to do great damage. Consider instead that the regulations that may have been the cause were supported by, as they have often been throughout US history, the very firms being regulated, mostly because they worked to said firms' benefit, even as they screwed the rest of us. Consider all of this as you ask for more of the same in the name of fixing the problem. And finally, consider why you would ever imagine that those with wealth and power wouldn't rig a new regulatory process in their favor.

Michael Crichton on Environmentalism

Michael Crichton (1942-2008), lecture at the Commonwealth Club on September 15, 2003 (full PDF at the Heartland Institute):

Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it's a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.

Michael Crichton on Environmentalism as a Religion


Michael Crichton on Global Warming, Part 1 of 3
Part 2 | Part 3

the value of a filibuster-proof Senate

"Senate Democrats don't need 60 seats to reach their magic number" by Bruce Reed (Slate)

But reaching 60 seats won't suspend the laws of political gravity for Senate Democrats, nor will keeping Democrats in the 50s do much to ease Senate Republicans' pain.

Regulation and laissez-faire

"Capitalism and the Financial Crisis" by Walter Williams:

It is incorrect to say that laissez-faire or free markets are unregulated. There is ruthless regulation, but it's not by government ....

When businesses make unwise decisions that lead to bankruptcy, their assets are sold off to someone else who might be able to put them to wiser use. Government bailouts give businesses a reprieve that the market wouldn't give them.

Jack Welch on Obama

"Obama Win Is Management Lesson to All: Welch" (CNBC):

"If you look at management skills as being execution, as one of the real issues, this guy demonstrated without question the best execution I've ever seen in a political campaign," Welch said.

"He came from a basement startup to build an organization that was flawless- demonstrated in the culmination in Chicago last night with one of the most impressive rallies, or celebrations, one could ever see. This is a manager. This is a real manager."

Obama’s first test

"Russia to station missiles near Poland" (Reuters)

[AA] Needless to say, this event will both test the president's resolve to lead a less interventionist American foreign policy, and strain his political capital within America and all over the world - whatever decision he takes. The vagueness of his campaign propositions was - electorally - an optimum situation. Now Obama cannot avoid upsetting those who'd like a more sheepish stance, as well as the ones who'd prefer a more muscled reaction. And the worst case scenario is making Russia the villain of the situation. Obama cannot not act. Prepare for cold war.

Unstoppable Solar Cycles

Unstoppable Solar Cycles

The Myth that Laissez Faire Is Responsible for Our Financial Crisis

"The Myth that Laissez Faire Is Responsible for Our Financial Crisis" by George Reisman:

.... the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state than to laissez-faire capitalism. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez-faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.

It seems that so long as anyone manages to move or even breathe without being under the control of the government, laissez faire allegedly continues to exist, which serves to make necessary yet still more government controls.

Obama's victory speech

property rights

Harold Demsetz:

The allegation is that even perfectly competetive markets fail to achieve efficiency. But, this reasoning generally fails to take account of the fact that the provision of a market (for the side effect) is itself a valuable and costly service.

In asking the implications of the nonexistence of some markets, we seem to have fogotten the cost of providing market services or their government equivalent.

America’s Financial Future

Via O Insurgente,



David M. Walker (former U.S. Comptroller General), America's Financial Future

The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else

Massachusetts Question 1: Repeal State Income Tax has failed to pass the popular vote.

This measure would cut the state personal income tax rate in half for 2009 and eliminate the state personal income tax starting in 2010. A similar measure was on the ballot in 2002 but failed.

Note: the title is a quote by Frédéric Bastiat.

It's A Wonderful Bank Run

On cue from Pedro Videla — notice "Own your own home".


It's A Wonderful Life bank run (full version)

The Worst of All Worlds

"The Worst of All Worlds by Bjørn Lomborg:

Have you noticed how environmental campaigners almost inevitably say that not only is global warming happening and bad, but also that what we are seeing is even worse than expected?

.... one can argue that if the models constantly get something wrong, it is probably because the models are wrong. And if we cannot trust our models, we cannot know what policy action to take if we want to make a difference.

Peter Schiff: Economic Impact Of Obama Victory

11/3/2008 -Peter Schiff On Squawk Box:Economic Impact Of Obama Victory

The Obamessiah

Is Barack Obama the Messiah?

Neutrality of money

From the wikipedia:

In economics, neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages and exchange rates, having no effect on real variables like GDP, employment, and consumption.

Paul Krugman:

The proposition known as the neutrality of money - the assertion that other things equal the price level is proportional to the money supply - is central to every monetary theory I know of.

Ludwig Von Mises (The Non-Neutrality of Money, 1934):

.... the essence of the fallacy of money's neutrality [is] that .... changes in purchasing power [are] brought about simultaneously in the whole market and that they [affect] all commodities to the same extent ....

To simplify and to shorten our analysis let us look at the case of inflation only. The additional quantity of money does not find its way at first into the pockets of all individuals; not every individual of those benefited first gets the same amount and not every individual reacts to the same additional quantity in the same way .... The result is that there is in the economic system a new dispersion of wealth and income and in this new social order the wants of individuals are satisfied to different relative degrees, than formerly. Prices in this new order can not simply be a multiple of the previous prices.

.... I wish to emphasize that in a living and changing world, in a world of action, there is no room left for a neutral money. Money is non-neutral or it does not exist.

SNL Takes Down Keith Obermann

Sickness

Glenn Reynolds:

SO PEOPLE ON THE LEFT AND RIGHT ARE BOTH worried sick about the election. Both seem more worried about the other guys controlling the White House than anxious to win themselves. (Some are very worried). They're right to be worried, of course, at least to a degree. The Presidency is an office of great power.

On the other hand, if the federal government were properly limited to its constitutional powers, there would be much less to fear, and elections would be less stressful for all concerned. Just a thought.

Dr. Doom

"Nouriel Roubini: I fear the worst is yet to come" (Times Online):

While the economic sun was shining, most other economists scoffed at Roubini and his predictions of imminent disaster. They dismissed his warnings that the sub-prime mortgage disaster would trigger a financial meltdown. They could not quite believe his view that the US mortgage giants Fannie Mae and Freddie Mac would collapse, and that the investment banks would be crushed as the world headed for a long recession.

Yet all these predictions and more came true. Few are laughing now.

- "The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster"
- "Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not."
- "Martin Wolf of the Financial Times on my "12 Steps to Financial Disaster""


20081022 Roubini CNBC 1

Gordon Tullock on voting

Please nevermind the immaturity of the narrator: "Voting Schmoting"

Accounting Basics & the Financial Crisis

Something the 1st-year people might find useful:

"Accounting Basics & the Financial Crisis" by Bob Murphy

Keynes’ wet dream coming true

Stiglitz calls for Global Currency

Professor Joseph Stiglitz says that a "global reserve currency" taking the place of the dollar would ease the financial crisis.

it is through exchange that difference becomes a blessing, not a curse

From the Quote of the Day of the Austrian Economists:

A primordial instinct going back to humanity's tribal past makes us see difference as a threat. That instinct is massively dysfunctional in an age in which our several destinies are interlinked. Oddly enough, it is the market -- the least overtly spiritual of concepts -- that delivers a profoundly spiritual message: that it is through exchange that difference becomes a blessing, not a curse. When difference leads to war, both sides lose. When it leads to mutual enrichment, both sides gain.

Steven Horwitz, "Comparative Advantage", in the Fraser Institute's website:

.... once one understands the concept of comparative advantage, one can see how economics helps us to reveal perhaps the most important benefit of diversity: when people are free to produce by comparative advantage and then trade what they produce, human diversity becomes a source of both increased material well-being and expanded peaceful human cooperation. The more freedom we give to people to engage in the market process, the more that diversity and difference really do become humanity’s blessing and not its curse.

Orwell, or Why We Need to Call a Pig a Pig

"Why We Need to Call a Pig a Pig" (Newsweek):

Since its publication in 1945, "Animal Farm" has sold more than 10 million copies worldwide, and become a standard text for schoolchildren, along with Orwell's other dystopian vision of the future, "1984." But it is the writer's essays on the importance of clear language and independent thought that make him relevant. Consider this, from "Politics and the English Language": "The word Fascism has now no meaning except insofar as it signifies 'something not desirable.' The words democracy, socialism, freedom, patriotic, realistic, justice, have each of them several different meanings which cannot be reconciled with one another … Words of this kind are often used in a consciously dishonest way."

Stranger than fiction

Via Marginal Revolution,

Does the free market corrode moral character?

Does the free market corrode moral character?, a discussion in the John Templeton Foundation website.

The answer of Ben Asa Rast:

Perhaps the best way to answer this question is to ask another: does an un-free market improve moral character? Or, to phrase it differently, can coercion improve moral character? I think the answer is found in history. Rare is the man who can exercise such power over others without eventually being corrupted by it. As C.S. Lewis said: Aristotle was right; some men are fit to be only slaves; but I oppose slavery because I do not believe any man is fit to be a master.

a crisis of distorted markets

"Franklin Delano Bush" by Don Boudreaux:

History will forget Bush's interventions just as it has forgotten Hoover's - as it has forgotten that Hoover signed the largest tariff hike in U.S. history; as it has forgotten that Hoover tried to create jobs by deporting hundreds of thousands of Mexicans; as it has forgotten that Hoover signed the Emergency Relief and Construction Act, the Federal Home Loan Bank Act, and created the Reconstruction Finance Corporation; as it has forgotten that, with the Revenue Act of 1932, Hoover raised the top marginal tax rate on personal incomes from 25 percent to 63 percent (in addition to raising the corporate-tax rate).

History will repeat itself, blaming capitalism for a problem caused and intensified by government interventions.

Furthermore, via O Insurgente, the editorial of the Washington Post(via Cafe Hayek):

Is this the end of American capitalism? As financial panic spread across the globe and governments scrambled to contain the damage, reality seemed to announce the doom of U.S.-style free markets and President Bush’s ideology. But this is wrong in two ways. The deregulation of U.S. financial markets did not reflect only the narrow ideology of a particular party or administration. And the problem with the U.S. economy, more than lack of regulation, has been government’s failure to control systemic risks that government itself helped to create. We are not witnessing a crisis of the free market but a crisis of distorted markets.