What Are Economists For?

Economics is extremely useful as a form of employment for economists

By Tim Price

Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. “One of my favourite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, “Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?” I responded something to the effect of, “Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century.” To which you replied, “But is he smart like us ?”

               - Satyajit Das.

Greece without the sunshine

Austerity in the U.K.

Britain discovers that shrinking government is a lot harder than expanding it.

BY THEODORE DALRYMPLE

In Britain, government spending is now so high, accounting for more than half of the economy, that it is increasingly difficult to distinguish the private sector from the public. Many supposedly private companies are as dependent on government largesse as welfare recipients are, and much of the money with which the government pays them is borrowed. The nation’s budget deficit in 2010, in the wake of the financial crisis, was 10.4 percent of GDP, after being 12.5 percent in 2009; even before the crisis, the country had managed to balance its budget for only three years out of the previous 30.

Deficits are like smoking: difficult to give up. They can be cut only at the cost of genuine hardship, for many people will have become dependent upon them for their livelihood. Hence withdrawal symptoms are likely to be severe; and hardship is always politically hazardous to inflict, even when it is a necessary corrective to previous excess. This is what Britain faces.

Animal care is too important to be left to the wiles of the free market

The Good News on Health Care

By Jeffrey Tucker

One sector, technology, is advancing at a pace never seen before. Customers have a range of services to choose from, and price competition is very intense. The doctor sees you whether you have insurance or not. Customers mostly pay directly for services. Overall spending is increasing, but that’s because there are more services to purchase. Competition between providers is very intense.

Sadly, for humans, all this is taking place within veterinary medicine, and the beneficiaries are animals, mostly pets. According to The New York Times,  the demand for advanced treatment is booming, and supply is responding. The paper cites the case of Tina, the 10-year-old chow that recently underwent chemotherapy and a bone marrow transplant at a clinic associated with the Mayo Clinic. The $15,000 spent on this may sound like a lot, but it is far cheaper than the same services provided to people.

The False Civil Rights Vision

Frederick Douglass’s suggestion

By Walter E. Williams

For all intents and purposes the civil rights struggle is over and won. At one time black Americans did not have the constitutional guarantees afforded other Americans; now we do.

I think it is fair to say that black Americans, as a group, have made the greatest gains, over some of the highest hurdles, in the shortest span of time of any racial group in history. If we were to think of black Americans as a nation and add up their spending power, they would be the 17th or 18th richest nation on earth. Black Americans have been chief executives of some of the world’s largest and richest cities. Black Americans rank among the world’s most famous personalities, and a few black Americans are among the world’s richest people.

Plato's take on next Greek elections

People who bite the hand that feeds them usually lick the boot that kicks them

By Ed Kaitz

It might be worth everyone's while in these troubled times to set aside an evening in order to carefully read Book VIII of Plato's Republic.  The dialogue is nothing less than chilling in its illustration of what happens in a popular government when corrupt politicians inflame the vices of undisciplined citizens in order to destroy the business class and establish a tyranny.

Here's a link to Book VIII.  Plato's objective is to show how highly self-disciplined regimes gradually devolve into more inferior and immoderate governments.  Socrates begins the discussion showing how Aristocracies (rule of the wisest) devolve into Timocracies (rule of the military) which then descend into Oligarchies (rule of the wealthy).  Oligarchies descend into Democracies (rule of the people) which in turn become Tyrannies.

The Population Boon

Progress? You ain’t seen nothin’ yet

By PHILIP E. AUERSWALD

As U.S. troops were massing in England for the Normandy invasion, the U.S. Congress engaged in a heated debate about how to avert mass unemployment when millions of servicemen came home at war’s end. Their concern followed precedent. Only a dozen years earlier, at the nadir of the Great Depression, World War I veterans had converged on Washington to demand early disbursement of congressionally mandated payments. The result was an ugly confrontation between the “Bonus Marchers” and U.S. Army units led by none other than the chief of staff, General Douglas MacArthur. Wishing to avoid a repetition of this disturbing scenario, Congress enacted the GI Bill, signed into law by President Roosevelt on June 22, 1944. 

Bureaucratic Gas

To lower prices at the pump, abolish the boutique fuel regime

By Steven F. Hayward

Quick: How many kinds of gasoline do we use in America? Most people would say three or six: regular unleaded, mid-grade, and premium, along with the ethanol blends of the same that have become nearly universal. The actual number is somewhere above 45, though hard to pin down exactly, according to the Government Accountability Office (GAO). It might even be closer to 70. Thirty-four states use specially blended gasoline, usually during the summer, which is one reason gasoline prices always rise during the “driving season.”

The Corzine Family officially in charge of US Justice Department

Corzine Steals Billions Sans Charges, Errant Whale Watcher Faces Prison

By Bill Frezza

Justice may be blind, but who works overtime to make it deaf, dumb, and stupid?

Which would you imagine might attract more aggressive enforcement from the Justice Department: the theft of $1.2 billion from supposedly segregated customer brokerage funds, or lying about an alleged incident of whistling to attract the attention of a whale so that whale watchers could get a better peep? If you said the latter, then you appreciate the extent to which federal law enforcement priorities have run off the rails.

End Game for Argentina

Argentina to Seek Controlling Stake in YPF

By MATT MOFFETT &TAOS TURNER

President Cristina Kirchner, in a move that marks a watershed in expanding the state's grip on the economy, said she will send a bill to Congress to nationalize Argentina's largest oil-and-gas company, YPF YPF -11.16% SA.

Under the proposal, which declares the petroleum industry of "national public interest," Argentina's federal and provincial governments would take 51% of the company, now majority owned by Repsol YPF SA of Spain. The move is sure to be approved in Argentina's Congress, where the leftist Mrs. Kirchner's governing Peronist party holds a majority.

The nationalization marks the culmination of a months-long battle between YPF and the Kirchner government. The administration blames YPF for low production that has forced Argentina to spend heavily for imported energy, at a time when it is enduring a scarcity of dollars due to capital flight.

Redefining human relations

This linguistic engineering invades our lives and loves

Officialdom’s frenetic replacement of words like son and wife with words like ‘carer’ and ‘partner’ diminishes our identities.

by Frank Furedi 

I have always been fascinated by the language we use to express our view of everyday life. But it wasn’t until the death of my mother three years ago that I realised how words could be used to diminish our identity and pressure us to adopt new values.

As soon as I heard that my mother had a stroke, I went to see her at our local hospital in Kent, England. On arrival, I introduced myself to the nurse with the words, ‘I’m Frank Furedi, I’m Clara’s son’. The woman looked up at me and said, ‘You mean you’re her carer’. ‘No, her son’, I responded. But she was insistent: ‘No, you are her carer.’

Later, one hospital administrator explained to me that they used the word carer because it included all; apparently not every patient has a close relative to look after them.

In Australia, the Department of Health and Ageing defines everyone who provides help to an ill or frail person as a carer. On its website it notes that ‘many carers don’t consider themselves to be carers - they see themselves as just family members’. Outwardly, this is a simple and uncontroversial statement of fact. But when you examine it closer, it offers a chilling reminder of who defines your identity. You may think you are family but, according to this administrative formula, you are ‘carers’.

The word carer may be inclusive, but if a special connection between mother and son is transformed into a bureaucratic typology, then something very important has been lost. The relationship between patients and their family, friends and paid help all involve care, but they convey fundamentally different meanings to the people concerned.

Concealing the mechanisms of change

Mr. Keynes’s Aggregates

By Steven Horwitz

One of F. A. Hayek’s most accurate, and oft-repeated, lines about John Maynard Keynes comes from a review of Keynes’s 1930 book, A Treatise on Money.  Hayek wrote: “Mr. Keynes’ aggregates conceal the most fundamental mechanisms of change.”  That Austrian macroeconomics rests firmly on the microeconomic “mechanisms of change” that ultimately comprise economic activity remains a crucial reason why that insight can better explain both the mistakes of the boom and the way out of the bust.

The Austrian insight is relevant to both capital and labor.  In standard Keynesian models (as well as most other macroeconomic models), capital is understood as an undifferentiated mass.  The Keynesian model also assumes that interest rates do not equilibrate the supply of savings and the demand for investment funds.  Thus when people save more, there’s no signal transmitted to investors that they should build more for the future.  As a result, the decline in consumption that accompanies the increase in savings causes firms to invest less as their inventories pile up without any offsetting increase in investment elsewhere due to the lower interest rate.

Small wars loom large on China's horizon

The "Malacca Dilemma"

By Jens Kastner

Broad hints have been coming out of China that the country might start small-scale military strikes over disputed waters that are believed to hold rich energy reserves. The consequences of such endeavors would be tolerable to Beijing, international experts say.

Bitter territorial disputes China has with neighbors in the East and South China Seas have long grabbed media headlines. Virtually all countries in the region are involved in spats with China, from South Korea and Japan to the Philippines and Vietnam. In March alone, Beijing had verbal clashes with Seoul over a submerged rock; with Manila over the Philippines' plan to build a ferry pier; and with Hanoi over China's biggest offshore oil explorer's moves to develop oil and gas fields.

Fighting fire with fire

Muslim Brotherhood chooses chaos

By Spengler 

Egypt's Muslim Brotherhood signaled its intent on Sunday to push the country into economic chaos. With liquid foreign exchange reserves barely equal to two months' imports and panic spreading through the Egyptian economy, the Brotherhood's presidential candidate Khairat al-Shater warned that it would block a US$3 billion emergency loan from the International Monetary Fund (IMF) unless the military government ceded power. 

"We told them [the government], you have two choices. Either postpone this issue of borrowing and come up with any other way of dealing with it without our approval, or speed up the formation of a government," Khairat al-Shater said in a Reuters interview. [1] 

The news service added that al-Shater "said he realized the country's finances were precarious and a severe crunch could come by early to mid-May as the end of the fiscal year approached, but that this was the government's problem to resolve". 

The End of the World as we know it

Pimco’s El-Erian Says U.S. Economic Setting ‘Terrifying’

By Cordell Eddings and Betty Liu

Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian said U.S. economic conditions are “terrifying” as the nation struggles to recover from recession.

The odds of the U.S. returning to recession are as much as 50 percent, El-Erian said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu. U.S. economic growth was worse than expected and congressional policy makers are gridlocked over what to do about the economy and the deficit, which risk exacerbating an already weak recovery, he said.

Iceland Exports Energy as Data

An arctic nation looks to large-scale computing for an economic boost

By LUCAS LAURSEN

Iceland's main exports are aluminum and fish. Now the isolated nation is hoping to offer the world a new commodity: a cheap, guiltless way to store its data.

In February, a startup called Verne Global opened a large server farm on an old NATO base near Iceland's main airport and began offering "100% renewable" computing services to the rest of the world. It's one of three data centers in Iceland and part of what Iceland's government hopes will be a new local industry.

The return of neo-Stalinism

The Politics of Nostalgia
By Robert Fulford

The Russian people suffer from a severe inferiority complex, if we can believe the editorial that appeared in Pravda last week. It took the form of a cry from the wounded heart of Mother Russia, a nation wronged by the malicious insults of foreigners.

In Pravda’s view, there are people everywhere, particularly East Europeans and Americans, who want “to make the Russians feel guilty for the past.” They accomplish this with reminders of Joseph Stalin’s cruel dictatorship and the decades when eastern Europe was under “Soviet occupation” — a phrase Pravda now prints with quotation marks, as if it were a figment of someone’s imagination.

Apparently, foreigners keep harping on these subjects because they “do not want to admit that the Soviet Union defeated both Hitler’s Nazi Germany and the whole of Europe.”

Gunter Grass is finally settling a very old score

Great author or big jerk?

A protester wearing a hat that reads, "Grass is right," takes part
 in traditional Easter anti-war demonstration in Frankfurt on Monday

By George Jonas

Last week, Germany’s respected Suddeutsche Zeitung newspaper published the poetic ruminations of a former member of the Waffen-SS, Hitler’s elite fighting force. The 84-year-old author called his poem something that “needed to be said.”

Plenty by Competition

Scarcity and Monopoly

by Frank Chodorov

The techniques of the market place evolve from man's unceasing drive toward a richer and fuller life. One technique that plays a most important part in this general purpose is competition, or the vying among the specialists for the favor of the community. Although the competitors are motivated by self-interest, each one seeking the custom of his fellow men, the effect of the rivalry is to bring an abundance into the market place, to the greater benefit of Society. To win favor for his offerings, as against the offerings of others in the same line, each competitor tries to improve his capacity for production, as to quantity or quality; each seeks to better his competence.

The Paper Aristocracy

Please don’t call this capitalism!

“The mild evils we know today (1976) are all the effect of a specific cause. For the past generation that cause has been operating in a mild form. But in 1971 a fundamental change was made (Nixon abolishing the Gold Standard), so that the cause is now operating in a most virulent form. Unless those decisions, made between late 1970 and late 1971, are reversed, we are going to see our society collapse about our heads.

What is happening in America today (1976) is that we are seeing the formation of an aristocratic class – a new power structure which will be to the America of the future (if indeed our descendants of the 21^st century live in a place called the United States of America) as the ancient king and feudal lords who ruled society at that time were to the Dark and Middle Ages.

An aristocracy is a small elite who, through control of the government, have obtained special privileges in law and are thus enabled to live as parasites on the labor of others; by means of this exploitation they amass large amounts of unearned wealth. By this definition there is already an aristocracy in existence in America. But it has not yet consolidated its power and does not yet dare to come out in the open.”

                   - Howard S. Katz from "The Paper Aristocracy"

by DETLEV SCHLICHTER

Surprise, surprise, the Euro Zone debt crisis is back. Or was it never gone?

As yields on Spanish and Italian government bonds are heading higher once again, I am reminded of the old saying, you can’t fool all of the people all of the time. Not even with a trillion euros.

The Afghan endgame has Pakistan shuddering

Pakistan's territorial integrity is on the line

By Brian M Downing 

The war in Afghanistan has been stalemated for several years now and eyes are turning to a negotiated settlement. In recent weeks, talks between the United States and the Taliban have come and gone, but they will almost assuredly return. 

As welcome as these bilateral talks are, they all but ignore the vital interests of regional actors such as Russia, China, India, Iran and perhaps most importantly, Pakistan. All of them will let their interests be known, directly or indirectly, cleverly or clumsily. 

Just Smart Enough To Be Stupid…

The Fuzzy Logic Of Useful Idiots

By Giordano Bruno

It hurts to be wrong. Not just emotionally, but physically, especially when it’s public, like swimming headfirst into a school of very ill-tempered jellyfish…..or maybe piranha. The horror of it is almost cinematic. The more artificially pumped your ego, or the more brainwashed with academic pretension, the more terrifying that moment of realization is, that moment when all your assumptions are dashed aside like a three-year-old’s alphabet blocks. To a certain point, it is understandable why so many people live in such violent denial, however, this does not detract from the perils of that denial…

Three European crises feeding each other

The European “crisis” is back

By Robert J. Samuelson

Actually, it never went away — and won’t for many years. The problems are so deep and pervasive that there is no easy or obvious solution. Government debt and deficits in many countries are not sustainable, but the usual remedies of cutting spending and raising taxes — a.k.a. “austerity” — may make matters worse by deepening already severe recessions. Europe is caught in a trap that promises more political and social unrest.

The wonder is that, for a few months, there was a sense of complacency. Interest rates on vulnerable debtor countries Spain and Italy declined. Fears about European banks eased. Some commentators said “the worst is over.”

The case against Bernanke on the Gold Standard

The Eternal Confusion of a Statist Mind

by Frank Shostak

In his lecture at George Washington University on March 20, 2012, Federal Reserve chairman Ben Bernanke said that under a gold standard the authorities' ability to address economic conditions is significantly curtailed. The Fed chairman holds that the gold standard prevents the central bank from engaging in policies aimed at stabilizing the economy after sudden shocks. This in turn, holds the Fed chairman, could lead to severe economic upheavals. According to Bernanke,

"Since the gold standard determines the money supply, there's not much scope for the central bank to use monetary policy to stabilize the economy.… Because you had a gold standard which tied the money supply to gold, there was no flexibility for the central bank to lower interest rates in recession or raise interest rates in an inflation."

Modernist architecture and aesthetic judgment

Architecture’s Ugly Ducklings May Not Get Time to Be Swans

By ROBIN POGREBIN

GOSHEN, N.Y. — As Modernist buildings reach middle age, many of the stark structures that once represented the architectural vanguard are showing signs of wear, setting off debates around the country between preservationists, who see them as historic landmarks, and the many people who just see them as eyesores.

The conflict has come in recent months to this quaint village 60 miles north of New York City — with its historic harness-racing track, picturesque Main Street and Greek Revival, Federal and Victorian houses — where the blocky concrete county government center designed by the celebrated Modernist architect Paul Rudolph has always been something of a misfit.

The Rise and Fall of Financial "Capitalism"

It never was the “end of history”, rather a path to the end of civilization.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

Each central bank… sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley (Bill Clinton’s mentor at Georgetown) from his 1964 book Tragedy and Hope

Remember that “financial capitalism” isn’t really capitalism at all. It is financial fraud and economic oppression of the average Joe, to benefit the politically connected.

Diocletian's Lessons In Central Planning

How medieval serfdom began

By Art Cashin

Historians, Will and Ariel Durant, quote on the decline of the Roman Empire:

“Rome had its socialist interlude under Diocletian. Faced with increasing poverty and restlessness among the masses, and with the imminent danger of barbarian invasion, he issued in A.D. 283 an edictum de pretiis, which denounced monopolists for keeping goods from the market to raise prices, and set maximum prices and wages for all important articles and services. Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor.

The Poverty of Equality

A society that puts equality ahead of freedom and prosperity in the end will have neither

"The year was 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General."

By Stephen Moore & Peter Ferrara

So began Kurt Vonnegut's 1961 short story "Harrison Bergeron." In that brave new world, the government forced each individual to wear "handicaps" to offset any advantage he had, so everyone could be truly and fully equal. Beautiful people had to wear ugly masks to hide their good looks. The strong had to wear compensating weights to slow them down. Graceful dancers were burdened with bags of bird shot. Those with above-average intelligence had to wear government transmitters in their ears that would emit sharp noises every 20 seconds, shattering their thoughts "to keep them…from taking unfair advantage of their brains."

Growing Out of Poverty

A World Bank report makes clear how free markets have led millions out of poverty

By Guy Sorman

The most significant events often escape media attention. How many would know from reading their daily newspaper or watching television that we live in an unprecedented economic period when the number of people living in extreme poverty is declining fast? According to a just-published World Bank report, the percentage of people living on less than $1.25 per day—or its local equivalent—has plummeted from 52 percent of the global population in 1981 to 22 percent in 2008. The World Bank doesn’t provide more recent data, but other indices show that the 2008 financial crisis did not interrupt this trend. For millions of households, crossing the symbolic $1.25 threshold means leaving destitution behind and moving toward a more dignified life—no trivial achievement. Moreover, this escape from poverty happens while the global population continues to grow. Doomsday prophets who warned about a ticking “population bomb” have not been vindicated, to say the least. Global warming messiahs, beware: human ingenuity proves able to cope with the predicaments of Mother Nature.

Has US Forgotten Lessons Of its First War With Iran?

Leap into the Void

By Bruce Riedel

In the late 1980s, President Ronald Reagan intervened in the Iran-Iraq war on the side of Saddam Hussein to tilt the conflict to an Iraqi victory. America engaged in a bloody if undeclared naval and air war against Iran, while Iraq fought a brutal land war. The lessons of our first war with Iran should be carefully considered before we embark on a second.

The Iran-Iraq War was devastating — one of the largest and longest conventional interstate wars since the Korean conflict ended in 1953. A half-million lives were lost, perhaps another million injured and the economic cost was over $1 trillion. Yet the battle lines at the end were almost exactly where they were at the beginning. It was also the only war in modern times in which chemical weapons were used on a massive scale.

Can Pigs Fly?

They may start flapping their baby wings pretty soon 

By 36 South Advisors

We understand that when building a house in Spain a substantial part of the cost now involves paying people “off-grid” or “under the table”. This seems endemic and we imagine is partially historic but IF it is increasing in extent as a result of the financial crisis it is an important trend. Extrapolating this trend out to the whole population, one suddenly realizes that the private sector could be slowly going “off-grid”, further starving governments of revenue and thus the means of the economy’s and therefore the government’s recovery.

As more and more private transactions go “off-grid”, which will inevitably happen as taxes go up or the cost of living goes up, less revenue will flow to the governments in question, which will force them in turn to borrow to make up the shortfall or make more bureaucrats redundant. The latter will further stress the economies in question which will make private investors even keener on moving their business “off-grid”.

Are We Heading For Another 2008?

Keep Doing More of What Has Failed Spectacularly

By Chris Martenson

We all know that central banks and governments have been actively intervening in markets since the 2007 subprime mortgage meltdown destabilized the leveraged-debt-dependent global economy. We also know that unprecedented intervention is now the de facto institutionalized policy of central banks and governments. In some cases, the financial authorities have explicitly stated their intention to “stabilize markets” (translation: reinflate credit-driven speculative bubbles) by whatever means are necessary, while in others the interventions are performed by proxies so the policy remains implicit. 

Liberté, égalité, austérité

Economically Inept France Crawls Toward An Election Disaster

By Kyle Smith

Liberté, égalité, austérité isn’t catching on as a campaign slogan in France, and the spring’s election season is becoming a mad scramble to the left at a moment when France’s battered bond rating, and the European project in general, can ill afford it.

Widely disliked center-right incumbent President Nicolas Sarkozy is losing in polls to his Socialist challenger François Hollande, whom he faces in a free-for-all election on April 22. The top two finishers in that race will then face off in the general election two weeks later. Sarkozy and Hollande are almost certain to be the finalists, but polls say Sarkozy is behind Hollande by a substantial margin. Meanwhile, Hollande, who has soared in popularity as he has made increasingly ludicrous promises to the French people about reversing austerity and opening the floodgates of government spending, is getting pressure from his left in the person of a comically retro figure named Jean-Luc Melenchon, who wants to party like it’s 1789. 

The Politics of Failure

Spain Is Headed For a Major Economic Crash

By Louis Woodhill

On June 1, 2009, Air France flight 447 crashed into the Atlantic Ocean, killing all 228 people aboard. The disaster was caused by human error. With the plane already in a stall, the pilots pointed the nose upward, which was the exact opposite of what the situation required. When recovered, the cockpit voice recorder revealed that, before they hit the water, the pilots knew that they were going to crash.

With Spain’s economy already in a stall, the conservative government that was elected on November 30, 2011 first raised the top personal income tax rate from 45% to 52%. Then, on March 30, 2012 it announced corporate tax increases. In other words, Spain pointed their tax rates up in a situation where they should have pointed them down. Thus far, the response from the financial markets amounts to, “She’s going in!”