Austerity = Reduced Spending Hikes

Hysterity! Global Panic about "Austere" 9 Percent Spending Hike

By Tim Cavanaugh

America’s economic boom is the latest evidence for anti-austerity arguments.

Measured according to the strict two-quarters-of-GDP macroeconomic standard, the United Kingdom is now back in a recession. According to this same standard, the United States is not in a technical recession. 

At Business Insider, Joe Weisenthal cites the UK recession to continue a theme advanced by BI founder Henry Blodget yesterday.

"Basically we have a life test of a country that wants to do what conservatives in the US want to do: reduce national debt," Weisenthal writes. "Doing so is a growth disaster."

Sounds like the contrast between the judicious Keynesianism of President Barack Obama and the small-government extremism of Prime Minister David Cameron is pretty stark, right?

The European Union has finally hit a brick wall

Hollande Wins and Europe Descends Into No-Man's Land

By Paul Roderick Gregory,

Socialist candidate Francois Hollande has won the French election as expected. His high-tax, pro-stimulus, welfare-state-protection platform, in effect, scuttles the Eurozone rescue program engineered by Merkel and a reluctant Sarkozy.

Hollande’s election leaves the European Union with three stark choices, none of which are good: 1) Germany and the European Central Bank cave and bail out any and all debtor countries under the cover of some fictitious future fiscal discipline, or 2) The Eurozone countries muddle along from one band-aid fix to the next as the bond vigilantes breathe down their necks while they hope to catch a break, or 3) Germany and the Nordic states withdraw from the Eurozone to their own currency. The rest of the Eurozone can stay on the devalued Euro or revert to their own currencies.

Where Do Real Jobs Come From?

The pentagon goes rogue…
By Bill Boner

“Jobs engine sputters again in April,” reports the weekend Wall Street Journal.

What kind of humbug recovery is this? Bloomberg adds:

Estimates for the jobless rate, derived from a separate survey of households, ranged from 8.1 percent to 8.3 percent. Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.

Of course, it’s much worse than that. John Williams puts the real unemployment rate — the people who want jobs and can’t find them — at 22%…the same as the unemployment rate in Spain. And just 3% points lower than in the Great Depression.

The Serial Bubble Blowers

Borrowing to spend is everyone’s favorite game

By Addison Wiggin

The shrinking dollar is a modern problem. The U.S. dollar has been shrinking since the inception of the Federal Reserve — the very crew assigned the task of maintaining its value. Of late, the decline is accelerating at an alarming rate.

For many Americans, the suggestion that the dollar is losing value is unthinkable — even unpatriotic. The problem is not simply a lack of understanding about the nature of wealth and investment used to sustain it.

Our policy makers and economists make no distinction between wealth created through savings and investment in the real economy versus “wealth” created in the markets through asset bubbles brought about by credit policies.

The Pragmatic Republic of China

The Great Fall of China

By Peter Coy

Qi hu nan xia, goes a Chinese proverb: When one rides a tiger, it is difficult to dismount. For the leaders of China’s 1.3 billion people, the import is clear. Stay on the tiger’s back, issue commands, and hope like hell the beast doesn’t turn on you. Over the last quarter-century that approach has served the mandarins of the Communist Party well. China became an economic marvel and staked a claim as the world’s next superpower. Civil liberties, social development, environmental husbandry, and political transparency were subordinate to the imperatives of growth. Increasing complaints about the avarice and gangsterism of government officials could be dismissed as local problems as long as an enlightened elite was thought to be guiding the state with a steady hand. Even when under pressure to reform, China’s leaders could reassure themselves that their grip on power remained secure.

The end of home ownership

The End of An American Dream?

By Walter Russell Mead

The bursting of the housing bubble caused huge financial distress for people all over the United States, and the destruction continues. Millions of people still have negative equity, others have walked away from their homes, and millions of others are coming to terms with houses worth much less than they thought.

Over at the Wall Street Journal, Daniel Gross is asking an important question: is the age of home ownership in America coming to an end — and, if it is, is that good thing?

Looting, the ultimate stage of Socialism

Rogue Democrats Loot Detroit As Nation Sleeps

BY WALTER RUSSELL MEAD

Few readers will be surprised to learn that decades of incompetence and entrenched corruption in Detroit’s government have not only helped wreck the city; firms linked to former Democratic mayor Kwame Kilpatrick also looted the pension fund.

The latest scandal, which leaves even hardened observers of the abysmal Democratic machine that has run the city into the ground bemused, involves a real estate firm which gave the felonious mayor massages, golf outings, trips in chartered jets and other perks as this enemy of the people went about his hypocritical business of pretending to care about the poor while robbing them blind. The firm, apparently run by a sleazy low class crook named by the reprehensible Kilpatrick to be the Treasurer of what was left of Detroit’s finances, used Detroit pension funds to buy a couple of California strip malls. Title to the properties was never transferred to the pension funds, and they seem to be out $3.1 million.

Next, Freedom of Speech

Taking a scythe to the Bill of Rights
By George F. Will

Controversies can be wonderfully clarified when people follow the logic of illogical premises to perverse conclusions. For example, two academics recently wrote in the British Journal of Medical Ethics that “after-birth abortions” — killing newborn babies — are matters of moral indifference because newborns, like fetuses, “do not have the same moral status as actual persons” and “the fact that both are potential persons is morally irrelevant.” So killing them “should be permissible in all the cases where abortion is, including cases where the newborn is not disabled.” This helpfully validates the right-to-life contention that the pro-abortion argument, which already defends third-trimester abortions, contains no standard for why the killing should be stopped by arbitrarily assigning moral significance to the moment of birth.

The pig is no better looking because you paint it blue

Lies, Damned Lies And Statistics

“There are lies, damned lies and statistics.”

                                        -Mark Twain

By Mark Grant

It has often been said by me, over the last ten years, that if one cannot ascertain the truth then one should not put money in that enterprise. It seems like a relatively simple perscription that I have formulated. There is nothing false or complex in this equation. Probably a number approaching one hundred percent of all of the world’s financial institutions would agree with the general precept and yet; that is not how some behave on an ongoing basis which I find quite astonishing. It is surely a matter of human psychology and of accepting what we are told rather than making a realistic appraisal of the facts. It continues to amaze me that various groups continuously try to reorganize the truth to their own benefit, falsify the truth,  on the assumption that you will believe what they tell you without investigation.

“And oftentimes excusing of a fault doth make the fault the worse by the excuse.”

                                      -William Shakespeare

What I find particularly difficult is what they are doing in Europe and continue to do because they are formulating systemic lies and they are doing it knowingly, purposefully; with the single motivation being to fool people. It can no longer be said that it is not systemic as the European Union does not object, has not objected, so that even Germany and the Netherlands and Finland have become accomplices to the schemes. Because the State says it is so does not make it so and this is a history lesson that we all should have learned long ago!

Why Aren’t Banks Lending to Small Business?

 Ask Bernanke

Banks profit by making loans, not refusing them. So why are banks making fewer loans to small business these days?

By Scott Shane

On March 29, at a lecture at George Washington University, Federal Reserve Chairman Ben Bernanke innocuously remarked  that lately “small businesses have … found it difficult to get credit.” Too bad that none of the students at the lecture thought to ask him why. A case can be made that the Fed is partially responsible.

Bankers, small business owners, and policymakers all agree that small business lending has declined substantially since before the financial crisis and Great Recession. Business loans under $1 million fell 13 percent between June 2007 and June 2011, and the amount lent has declined 19 percent when measured in inflation-adjusted terms, Federal Deposit Insurance Corporation (FDIC) statistics reveal.

Disabling America

How more and more ‘disabled’ Americans affects the shrinking U.S. labor force

By James Pethokoukis

Now that the labor force participation rate is at its lowest level since 1981, it’s a good time to take another look at how the rising number of disabled Americans affects the official size of the workforce. Here are disturbing facts from Bloomberg:

– The number of workers receiving Social Security Disability Insurance jumped 22 percent to 8.7 million in April from 7.1 million in December 2007, Social Security data show.

– That helps explain as much as one quarter of the decline in the U.S. labor-force participation rate during the period, according to economists at JPMorgan Chase & Co. and Morgan Stanley.

When coercion and theft are considered moral, anything is possible, and none of it good

Is An Economic Deluge Nigh?

by David Galland

If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity. In this way mistakes are quickly resolved and progress assured.

Conversely, the deeper the muck of regulation, mandates, taxes, subsidies and other bureaucratic meddling, the slower we humans are in following our natural instincts until the point that progress is slowed or even stopped.

It is said that history doesn't repeat itself, but it often rhymes. In the current circumstances, it appears that enough time has passed that current generations have completely forgotten the critical connection between the ability of humans to freely pursue their aspirations and economic progress.

The Paucity Of Hope

By Monday there will have been a real shift in the political landscape in Europe

By Peter Tchir

In Greece, there is a real backlash against the alleged bailout.  The bailout was never about Greece.  In the end, with PSI, it wasn't even about the banks.  It is some convoluted concoction brought about by the arrogance of politicians to admit they were wrong, "legacy" preservation, hubris, a complete lack of understanding of credit markets, and an inexplicable aversion to contemplating and exploring all actual possibilities. This could become disruptive as stances taken by the ECB and IMF will likely be attacked, rightfully so.  The decision to accept so much debt in an effort to recapitalize four failed banks will also be questioned.  In the end, hopefully the people will win concessions and have a more optimistic future.  Hopefully the ECB will get off its high horse and accept losses on their decisions.  With a balance sheet as bloated as theirs, they have plenty of "carry" to pay for those losses.  Maybe the IMF will stop pretending Europe is different and treat European nations like other countries where they have actually helped - but that help almost always forced the nations to restructure rather than pretend somehow that all will get better with the existing debt burden. 

The Problem With Hollande

Growth can not be decreed

François Hollande and his Socialist friends are a particularly mendacious and destructive sort of demagogue: They are purporting to help us by increasing our minimum wages rather than liberating our energies; they will punish the rich rather than encourage all of us to engage in productive efforts; they say they will spend more to stimulate "growth"—effectively, to buy more consumers—instead of letting us choose the best uses for our own resources.

Socialism has never succeeded in its extreme form, communism. As the past several years in Europe have shown, it does not work in its milder form of social democracy either. If European history teaches us anything, it is that prosperity is closely correlated to economic freedom.

The new composite America

Fauxcahontas and the melting pot

Martin Luther King dreamed of a day when men would be judged not on the color of their skin but on the content of their great-great-great-grandmother’s wedding license application. And now it’s here!

By Mark Steyn

But being yourself is never going to be enough in the new composite America. Last week, in an election campaign ad, Barack revealed his latest composite girlfriend – "Julia." She's worse than the old New York girlfriend. She can't even be herself. In fact, she can't be anything without massive assistance from Barack every step of the way, from his "Head Start" program at age 3 through to his Social Security benefits at the age of 67. Everything good in her life she owes to him. When she writes her memoir, it will be thanks to a subvention from the Federal Publishing Assistance Program for Chronically Dependent Women but you'll love it:Sweet Dreams From My Sugar Daddy. She's what the lawyers would call "non composite mentis." She's not competent to do a single thing for herself – and, from Barack's point of view, that's exactly what he's looking for in a woman, if only for a one-night stand on a Tuesday in early November.

Shattering The American Dream

The US Government’s Ponzi Scheme

by Richard Evens, Larry Kotlikoff, and Kerk Phillips

Fiscal sustainability and generational equity are two of the most pressing policy issues of our times. Yet these two highly related concerns are difficult to clearly define, let alone measure.

The standard metric of long-term fiscal imbalance is official government debt (Reinhart and Rogoff 2009). But, as shown in Green and Kotlikoff (2009), official debt, like time and distance in physics, is not a well-defined economic concept.

It’s yours, and it depends on your ability, your effort, your tenacity

Cuba’s little capitalists are ready to rumba

Customers are entertained as they dine inside the newly licensed restaurant "El Bedouino" in Havana April 1, 2012.

By Jeff Franks

When Ojacy Curbello and her husband opened a restaurant at their home in Havana in late December, not a single customer showed up.

It was a disheartening debut for Bollywood, the first Indian restaurant in the Cuban capital. Curbello worried that their dream of cashing in on recent reforms in this Communist-run country would collapse.

People eat at a popular low-end, privately licensed
 restaurant, or "paladar," in Havana.

The next day customers began trickling in. As word spread, the trickle became a flood. Many nights the couple had to turn people away or serve them at the family dining table and call in extra help. Today they are planning to increase the 22-seat capacity by expanding their 1950s home and putting tables and a bar in what is now their bedroom.

“It has been amazing how quickly it has taken off,” said Curbello, still looking slightly stunned. She sat with her husband, Cedric Fernandez, a Londoner of Sri Lankan descent, in the main dining area, hung with prints of Indian figures.

Bollywood’s story is an example of how life is slowly changing in Cuba since President Raul Castro launched a string of limited economic reforms in 2010.

Voter Weeding

Curley Effect in California

David Henderson

"James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections."

This is from Edward L. Glaeser and Andrei Shleifer, "The Curley Effect," May 2002.

In their paper, Glaeser and Shleifer write:

Free Markets Vs The Dominion of Liars

"If I wanted America to fail"

Currency Debasement and Social Collapse

The decline of the empire and the decay of its civilization

by Ludwig von Mises

Knowledge of the effects of government interference with market prices makes us comprehend the economic causes of a momentous historical event, the decline of ancient civilization.

It may be left undecided whether or not it is correct to call the economic organization of the Roman Empire capitalism. At any rate it is certain that the Roman Empire in the 2nd century, the age of the Antonines, the "good" emperors, had reached a high stage of the social division of labor and of interregional commerce. Several metropolitan centers, a considerable number of middle-sized towns, and many small towns were the seats of a refined civilization.

Time to fasten your economic seat belts

The fiscal cliff cometh

By Mohamed A. El-Erian

Economists are rightly starting to warn that the United States faces a worrisome “fiscal cliff” at year’s end. The blunt spending cuts mandated by the 2011 compromise on the debt ceiling — and the failure of the “supercommittee” that followed — along with across-the-board tax increases would derail the U.S. recovery and undermine the well-being of the global economy. We should be avoiding the edge of this cliff — and politicians should not believe that they have until the end of this year to act.

Jon Will’s gift

The gift of serenity

By George F. Will

When Jonathan Frederick Will was born 40 years ago — on May 4, 1972, his father’s 31st birthday — the life expectancy for people with Down syndrome was about 20 years. 

That is understandable.

The day after Jon was born, a doctor told Jon’s parents that the first question for them was whether they intended to take Jon home from the hospital. Nonplussed, they said they thought that is what parents do with newborns. Not doing so was, however, still considered an acceptable choice for parents who might prefer to institutionalize or put up for adoption children thought to have necessarily bleak futures. Whether warehoused or just allowed to languish from lack of stimulation and attention, people with Down syndrome, not given early and continuing interventions, were generally thought to be incapable of living well, and hence usually did not live as long as they could have.

A Decade of War — for What?

U.S. and the dark cloud of war

By Patrick J. Buchanan

“My fellow Americans, we have traveled through more than a decade under the dark cloud of war,” said Barack Obama from Bagram Air Base.

“Here in the predawn darkness, we can see the light of a new day on the horizon. The Iraq War is over. The number of troops in harm’s way has been cut in half, and more will be coming home. … The time of war began in Afghanistan, and this is where it will end.”

Interesting comment, that last.

If “the time of war” is at an end, does that rule out U.S. military action in Syria or war on Iran?

Setting aside the 14,000-mile round trip to Afghanistan to do an end zone dance on the anniversary of Seal Team Six’s dispatch of Osama bin Laden, Obama seems to have boxed in his Republican rivals.

Too young to retire, too old to keep the job

The quirks of law mean that ageing workers are damned by the critics whatever they do.

By Theodore Dalrymple

Most people of a certain age, including me, like to think that they are irreplaceable. It’s a delusion that, like osteoarthritis, is almost inevitable after one has passed the meridian of one’s life.

How pushy all those young people are, how eager to take one’s place, when one knows perfectly well that they are not yet ready (from the point of view of skill and experience) to do so! They never will be ready, of course, because the world has gone steadily downhill ever since one’s childhood. Really, they all have unresolved Oedipus complexes, these youngsters. That’s why they are so eager to take over.

Anything the Government Gives You, the Government Can Take Away

Citizens looking for a free lunch or an easier world should be careful what they wish for

From the Guardian:

A majority of doctors support measures to deny treatment to smokers and the obese, according to a survey that has sparked a row over the NHS‘s growing use of “lifestyle rationing”.

Some 54% of doctors who took part said the NHS should have the right to withhold non-emergency treatment from patients who do not lose weight or stop smoking. Some medics believe unhealthy behaviour can make procedures less likely to work, and that the service is not obliged to devote scarce resources to them.

And that’s the trouble with services and institutions run from the taxpayer’s purse, administered by centralists and bureaucrats. It becomes a carrot or a stick for interventionists to intervene in your life. Its delivery depends on your compliance with the diktats and whims of the democracy, or of bureaucrats. Your standard of living becomes a bargaining chip. Don’t conform? You might be deemed unworthy of hospital treatment.

Money Demystified

Keynes's one man in a million

Central banks cannot create wealth but they can redistribute it. And the system confers a tremendous power upon those who exercise it. They are Keynes’s one man in a million

By John Phelan

I’ve found that if I write an article about taxes, whether its avoidance or the 50p band, it’s likely to generate angry replies. But when I write about monetary matters, interest rates or Quantitative Easing for example, there is often a silence. Perhaps this is because few people share my interest in it, perhaps it’s because they think it less important than I do. Or perhaps, to borrow from Keynes, it’s because monetary policy works “in a manner which not one man in a million is able to diagnose”?

The textbook functions of ‘money’ are familiar to anyone with a smattering of economics; a medium of exchange, a store of value, and a unit of account. But each of these functions is entirely dependent upon money maintaining its value. If the value of the pound fluctuates it is no more useful as a unit of account or measure than a twelve inch ruler which kept changing length. Money which declines in value is a poor store of value.

Anti-growth and the subjugation of the masses

And now the redistribution of consumption

Robbing Peter to pay Paul? The Royal Society's approach to growth

The Royal Society wants you to give up your lifestyle so developing countries can grow. But does it really work like that?

By Raheem Kassam

Edmund Burke’s prescience regarding the French Revolution and the inherent nature of ‘radicalism’ – that is to say the inevitability of spending, debt and tyranny inflicted by leftist ideals – is just as relevant in the 21^st century as it was at the time of his writing ‘Reflections on the Revolution in France’.

One of Burke’s most crucial points in my mind is the remarkable nature of populist rhetoric and how the ideas of ‘Liberté, égalité, fraternité’ would result in further subjugation of the masses at the hands of Robespierre and subsequently, Napoleon.

No alternative to austerity

Calls for Europe to spend its way out of debt are an illusion

By Gideon Rachman

Spanish unemployment is nearing 25 per cent. The suicide rate is climbing in Greece. Britain is in a double-dip recession. Amid all this pain, the cry is growing louder. Austerity policies in Europe are dangerous. Someone has to stop this madness.

Step forward, François Hollande, the likely winner of the French presidential election. He is campaigning as the man who will stand up to the austerity ayatollahs in Germany. His campaign is resonating – not just in Europe, but even in the US, where the grandees of the economics profession, from Larry Summers to Paul Krugman, are lining up to call for an end to Europe’s austerity policies. “Insane,” Mr Krugman calls them, with characteristic understatement.

Sowing the seeds for the next crisis

Our central bankers are intellectually bankrupt

By Ron Paul

The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.

Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.

Who, Science is for?

Sticking up for scientific research

The green plonkers intent on destroying research into aphid-resistant wheat crops view mankind as a blight on nature.

by Tim Black 

Aphids are not exactly man’s best friend. Whether you’re a gardener or a farmer, these little sap-sucking buggers can almost single-handedly destroy a plant or a crop. And if they don’t manage it by themselves, the fungal viruses their sugary ‘honeydew’ secretions invite can usually finish the job. We, as a species, have not taken this lying down, however. And over the years, we have had some success in developing insecticides that have helped to combat this literal blight on horticulture and agriculture.

But there might be another, more effective way to get rid of aphids. A group of scientists at Rothamsted Research in Hertfordshire is currently trying to genetically modify wheat so that - and this sounds incredible - it will produce a pheromone called E-beta-farnesene. For those, like me, who have gained their knowledge of pheromones almost entirely from Lynx deodorant adverts, this particular one is emitted by aphids when they are threatened. So, when they smell it, they fly away. Not only that, when the insects that like to eat aphids - ladybirds, for instance - get a whiff, they will head over to said crop in the hope of some lunch.

All of which sounds potentially fantastic. Farmers will no longer have to lay waste to infested or infected wheat crops, and we in turn will figuratively reap the benefits of a resilient, less costly agricultural product.

The cost of a fair-trade macchiato

The Descent of Man

By Mark Steyn

While Americans have over a trillion dollars in college debt and 50 percent of recent graduates can’t get jobs, Quebec students are demanding the right to get to the dole office a lot cheaper. They’re currently striking, and rioting, violently, to protest a proposed tuition increase of $1,625. Spread out over seven years. Or about 232 bucks per annum. Or about the cost of one fair-trade macchiato a week. Nevertheless, they’re not gonna swallow it:

Students in Quebec are like no others, we’re told. We need to understand that tuition fees are not the real issue. The real issue is social justice. The real issue is the promise made during the Quiet Revolution that universities would eventually be free. The real issue is the fight against the ruling class, the greedy corporations, the tar sands, and the entire capitalist, neo-liberal elite. Of course, since universities actually do cost money, somebody will have to pay. Who? The greedy corporations!

Assuming Away Reality

Often times the fix only makes things worse, because it was not the reality that needed fixing

By Predrag Rajsic

If you are taking or have taken some of the typical courses in economics, it is quite likely that you asked yourself questions like the following: If an economic model is not like the real world, why should I trust the results of that model? One of the answers I would often get when posing this question goes something like this: Of course the model is not like the real world; it is not supposed to be like the real world. If it were, then it would not be a model!

This response can leave one feeling intellectually inferior or incapable of abstract thinking. One may get the impression that there is something obvious that he or she is missing. Sometimes, the answer would go a bit further: models are simplified representations of reality that we use to better understand that reality. This answer is somewhat more polite, but it still does not tell us how we determined which features of reality were not important enough to be included in the model. Building a model in this way also seems to imply that we already understand the elements of reality and how they are interrelated.