central banks and bubbles

Monetary Lessons from America's Past

another money speech

Other People's Money speech by Danny DeVito

doing it for the children

Thomas Sowell : What Are They Buying? - Townhall.com

To this day, we are still subsidizing millionaires in agriculture because farmers were having a tough time in the 1930s. We have the Federal National Mortgage Association ("Fannie Mae") taking reckless chances in the housing market that have blown up in our faces today, because FDR decided to create a new federal housing agency in 1938.

Who knows what bright ideas this administration will turn into permanent institutions for our children and grandchildren to try to cope with?

From horse to horsepower

Horse manure:

In 1898, delegates from across the globe gathered in New York City for the world's first international urban planning conference. One topic dominated the discussion. It was not housing, land use, economic development, or infrastructure. The delegates were driven to desperation by horse manure.

The horse was no newcomer on the urban scene. But by the late 1800s, the problem of horse pollution had reached unprecedented heights. The growth in the horse population was outstripping even the rapid rise in the number of human city dwellers. American cities were drowning in horse manure and well as other unpleasant biproducts of the era's predominant mode of transportation: urine, flies, congestion, carcasses, and traffic accidents. Widespread cruelty to horses was a form of environmental degradation as well.

The situation seemed dire. In 1894, the Times of London estimated that by 1950 every street in the city would be buried nine feet deep in horse manure. One New York prognosticator of the 1890s concluded that by 1930 the horse droppings would rise to Manhattan's third-story windows. A public health and sanitation crisis of almost unimaginable dimensions loomed.

And no possible solution could be devised. After all, the horse had been the dominant mode of transportation for thousands of years. Horses were absolutely essential for the functioning of the 19th century city - for personal transportation, freight haulage and even mechanical power. Without horses, cities would quite literally starve.

All efforts to mitigate the problem were proving woefully inadequate. Stumped by the crisis, the urban planning conference declared its work fruitless and broke up in three days instead of the scheduled ten.

synchronized global recession

Myth: path dependence: busted

"Typing Errors":

Stanford University economist Paul Krugman offered the central claim of this literature boldly and with admirable simplicity: "In QWERTY worlds, markets can't be trusted." The reason that he uses "QWERTY worlds," and not DOS worlds, or VHS worlds, is that the DOS and VHS examples are not very compelling. Almost no one uses DOS anymore, and many video recorder purchasers thought VHS was better than Beta (as it was, in terms of recording time, as we have discussed at length elsewhere).

The typewriter keyboard is central to this literature because it appears to be the single best example where luck caused an inferior product to defeat a demonstrably superior product. It is an often repeated story that is generally believed to be true. Interestingly, the typewriter story, though charming, is also false.

printing inflation

Zimbabwe to print first $100 trillion note:

The new 100 trillion dollar bill would be worth about $300 in U.S. currency. A loaf of bread in Zimbabwe now costs about 300 billion Zimbabwean dollars -- and like most commodities, the price increases every day.

The Price of Change

Competitive Enterprise Institute

Surveillance Society Running Rampant

Report: U.S. Surveillance Society Running Rampant (Wired)

"Violent incidents do not decline in areas near the cameras relative to areas further away," .... "We observe no decline in violent crimes occurring in public places."

The link between ’fiat money’ and boom-and-bust cycles

The link between ‘fiat money’ and boom-and-bust cycles (IEA):

.... interest rates ought to reflect society’s ‘time preference’, the degree to which people are willing to forego consumption today in exchange for (greater) consumption tomorrow.

This rate determines the ‘time structure’ of an economy - the allocation of resources between consumption and investment purposes. It also affects the distribution of investment funds between projects that pay off after a short time and those that require a longer period.

In the Austrian interpretation, the interest rate is the key parameter in the coordination of economic activities. Manipulating it can upset the whole balance of the economy.

If the central bank injects more money into the economy by pushing interest rates below the ‘natural rate’, market actors are lured into believing that people have become more ‘patient’. Hence, additional investment projects are started, especially ones with a long-term horizon.

But these projects are castles built in the sky, because no additional funds for investment have been made available. People’s time preference has not changed. Eventually, the shortage of capital must come to light, interest rates must rise again, and a lot of projects fail. In the Austrian view, the ‘bust’ really means that the time structure of the economy is brought back into line with society’s preferences.

Start the printing presses! but quietly!

Monetary irresponsibility a la carte:

Reform plan raises fears of Bank secrecy (Telegraph):

The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.

poking fun at Europe

Czech Republic chooses a bit of provocation to herald its EU presidency (IHT):

When some of Europe's artists were asked to portray their countries and how they see the European Union, organizers hoped for a provocative exhibition. But the results - due to be unveiled here Monday - may have officials choking on their morning croissants.

When they arrive at work, diplomats will be exposed to a satirical portrayal of Poland's Roman Catholic Church and an image of the Netherlands, submerged in seawater, with just minarets still visible. Italy is represented by a display illustrating its "autoerotic" obsession with soccer.

Organizers hope that it will stimulate something rather rare: public interest in the EU.

Hope for Europe

Do not tie the markets – free them by Vaclav Klaus

Aggregate demand needs strengthening. One traditional way to do this is to increase government expenditures, probably in public infrastructure projects, on condition these are available. It would be much more helpful, however, to have a great reduction in all kinds of restrictions on private initiatives introduced in the last half a century during the era of the brave new world of the “social and ecological market economy”. The best thing to do now would be temporarily to weaken, if not repeal, various labour, environmental, social, health and other “standards”, because they block rational human activity more than anything else.

Savings socialism

[AA: How stupid can you get - why not criminalize the time value of money instead? ]

Punish savers and make them spend money:

The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

Spending ourselves rich

Fred Thompson