A Difficult Identity

Arab Citizens of Israel

by PETER BERGER

As a social scientist with broad cross-national interests, I subscribe to a number of periodicals that provide reasonably reliable information on what goes on in different parts of the world. But every couple of weeks or so I go to Harvard Square and browse for what looks interesting in the kiosk that sits in the middle there. Last week I picked up the international edition of The Jerusalem Post, the major English-language newspaper in Israel. Newspapers provide a flavor of everyday life that is often missed in the publications I normally read. In this instance I was intrigued by an advertisement in the real estate section for an apartment whose attractions include a health club and an automatic elevator running on the Sabbath, as well, under “Matchmaking”, an ad by a “wealthy, attractive and cultured widow” in her seventies who is willing to consider an offer from America. Much of this newspaper contains more or less ominous stories about the political upheaval in Egypt. It is somehow reassuring that, in the midst of all this, there may be an elderly religious lady about to use the automatic elevator to meet her American date in the health club.

There is one story in the newspaper that I found humanly intriguing in a somewhat similar way. Entitled “Love thy neighbor?”, it deals with young Arab citizens of Israel moving to Tel Aviv. Apparently this is an increasing phenomenon. Not only is Tel Aviv a good place to find a rewarding job, but it is the most cosmopolitan city in the country where young people, Jewish or Arab, can have a more exciting life than in the often provincial communities from which they come. The key character in the story is Areen Shahbari, a 28-year old woman from a “secular Muslim family” in Nazareth (the town with the highest Arab population in Israel). Ever since her teens she aspired to work as a television presenter. So she went to study communications at Tel Aviv University, in her third year there landed a job with the largest television production company, and worked herself up to heading a talk show devoted to women’s issues.

Plus ça Change—in the French Economy

If some things don’t change, everything will

Hollande has to do more than restore France's economy; he must recover its spirit of dynamism.

By NEIL ROGACHEVSKY

This year’s Bastille Day promises to be a very sombre affair.  In a move being billed variously as a “disaster”, “bloodbath” and “earthquake”, car marker PSA Peugeot-Citröen announced on July 12 that it would be laying off 8,000 workers throughout France and stopping auto production at one of its flagship plants at Aulnay-sous-Bois, not far from Paris in Seine-St Denis.

The subject of long speculation, the move prompted an outpouring of outrage amongst PSA employees, with many stating their intention to use the union to fight the decision. “This will be a war,” declared one employee. The socialist mayor of Aulnay-sous-Bois spoke in tones of emotional disbelief. “The government had done so much to make the area hospitable. Transportation links to Paris, including a stop just outside the factory,” he told French Radio. “This sends the wrong message.”

On the same day, Bloomberg reported that General Electric’s France division has been trying frantically to hire welders and cutters for an oil and nuclear valve factory in Western France but can’t find qualified employees. The head of the French Federation of Mechanical Industries Jerome Frantz said he expected a shortfall of about 15,000 workers for manufacturing positions over the next five years.  Pierre Berger CEO of one of France’s largest construction companies, Eiffage SA, also reported difficulty in recruitment. “Working with one’s hands in this country isn’t recognized,” he told Bloomberg, “except in luxury goods and for arty Parisian craftsmen.”

Just Wait Until It’s Free

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

J. R. Clark and Dwight R. Lee

The quip “If you think it’s expensive now, just wait until it is free” is funny because of the unfortunate truth it contains. The truth is unfortunate less because it’s impossible to provide benefits without costs than because politicians constantly try to convince voters otherwise. To paraphrase Thomas Sowell: 

"The first law of economics is that there’s no such thing as a free lunch; the first law of politics is to disregard the first law of economics."

Politicians convince only the naive that government can provide free benefits, but the political process creates a lot of naivety. This naivety in turn allows politicians to enact policies that make it rational for consumers to act as if they believe government has lowered the cost (often to zero) of goods even when they know better. As the joke suggests, however, the more the “as if” cost of a good is reduced, the more its real cost is increased. This can be explained by making use of the important distinction between the total cost consumers pay for a good and the marginal cost they pay—that is the additional amount they pay to buy one more unit of the good.

The most obvious way the government can make people act as if the cost of a good has been reduced is to lower its price. The most direct way to do that is by imposing a price ceiling below the market price. We mention a price ceiling briefly only to explain why we do not consider it in detail. When the price of a good is legally lowered, the amount supplied will decrease, so consumers cannot act as if the cost has been lowered by purchasing more, despite their desire to do so. Also, it quickly becomes clear to consumers, once the aggravation of longer lines, poorer service, and declining quality is considered, that the cost of the good has become higher, not lower.

A more lasting way for politicians to give the impression they have lowered the cost of a good is to subsidize its supply. This can be done by transferring an amount covering all or part of the cost to suppliers for every unit of a good sold to consumers. This per-unit subsidy would cause a corresponding drop in the cost of production and thus in the price of each unit of the good. We assume the supply curve is horizontal—that is, prices won’t rise to offset increased consumer purchases in response to the price subsidy.

The Global Economy

It's All About Increasing Leverage

If the global State/finance Empire can't increase systemic leverage, it will implode.

by Charles Hugh Smith

If we look at the global economy with unclouded eyes, we reach this conclusion: "This whole thing is about leverage." If leverage doesn't increase, the system implodes. But since collateral is disappearing from the global economy like sand castles in a rising tide, and disposable income has stagnated, there is no foundation for more leverage.

As a result, the State/finance cartel has only one choice: increase leverage by whatever means are left. There are only two:

1. Allow banks to claim phantom assets as capital/reserves

2. Lower interest rates so stagnant income can leverage ever greater quantities of debt

The State/finance Empire and its army of academic toadies (economists) must cloak this reliance on leverage from the citizenry, lest they grasp the precariousness of the entire financial system. As the economic Establishment is discredited by reality (that their sputtering reflation policies have come at an unbearable cost is now undeniable), their attempts to discredit their critics become increasingly comic: only PhD economists in the employ of the Empire are qualified to comment on the Empire's policies, etc.

Most discussions of leverage focus on the role of capital or reserves as the basis for leverage. This is the basis of the fractional reserve banking system: $1 in capital (cash, reserves) can be leveraged into $15 of debt.

The easiest way to "grow" is to increase leverage so more money/debt can be created. If a bank was constrained to only loaning the cash it held in deposits, that would severely limit the amount of money available in the system for purchasing villas in Spain, BMW autos manufactured in Germany, etc.

If we magically enable 25-to-1 leverage, then every euro supports 25 euros in debt (mortgages, auto loans, etc.)

The danger is obvious: if 1 of the 25 euros of debt goes bad, the lender has zero reserve. If 2 euros of debt go bad, the lender is insolvent.

The only way to "save" an over-leveraged system is to increase leverage and lower interest rates. If we claim phantom assets as real and increase leverage from 25-to-1 to 50-to-1, we have enabled a doubling of loans. All that wondferful new money will flow into the economy as spending, fueling "growth."

The Race for Energy Resources Just Got Hotter

Τhings are getting serious

by Marin Katusa

Malaysia's state-owned oil and gas company just made a multibillion-dollar bet that Canada will choose to export its shale gas riches. Even though the odds of securing permission to export liquefied natural gas (LNG) from the Canadian west coast are still pretty poor, the costs of such an endeavor immense, and the timeline in question very long, Petronas is putting $5.5 billion on the table – far more than it has ever spent on an acquisition before – to secure a large foothold in the British Columbia shale gas scene.

It's yet another sign that things are getting serious in the global race for resources.

The race for resources drives much of our thinking within the Casey Research energy group. It's more than a common theme – we believe that it is one of the strongest forces at work in our world today, and that it plays a role in determining the tone of many international relationships and domestic policies. Countries that have resources, from Russia to Australia, are altering fiscal structures and ownership rules so as to glean as much benefit as possible from their riches, while still reserving sufficient supplies to fuel their futures. Countries that lack natural-resource wealth, such as Japan and South Korea, are racing to lock up projects and partnerships abroad that can supply their future resource needs.

Standing Keynesianism on Its Head

As Employment Increases in Response to a Fall in Wage Rates, the Rate of Profit Rises, Not Falls

by George Reisman

With his usual astuteness, Mises observed that it is common for one and the same doctrine to circulate in more than one version, typically, in its original, scholarly version and then also in a greatly simplified version designed for popular consumption. He illustrated how this applied to doctrines as diverse as Catholicism, Darwinism, and Freudianism (Money, Method, and the Market Process, pp. 301f).

Not surprisingly, his observation also applies to Keynesianism and its claim that a free economy is incapable of eliminating unemployment, because its method of doing so, namely, a fall in wage rates, is allegedly unable to increase the quantity of labor demanded.

Popular Keynesianism

The popular version of the Keynesian doctrine, which is championed above all by the labor unions, is simply that a fall in wage rates, in reducing the incomes of wage earners, causes a fall in consumer spending, which allegedly serves to worsen the problem of unemployment. This doctrine can be disposed of fairly simply, before proceeding to the scholarly version of Keynesianism, which is known as the IS-LM doctrine.

First of all, it overlooks the fact that at lower wage rates more workers will be employed. The effect of this is to enable total wage payments and consumer spending in the economic system to remain the same or even increase while the wages of the individual worker decline. For example, 10 workers each employed at 90 percent of the wages earn the same total wages and can spend just as much in buying consumers' goods as could 9 workers each earning the original wage. (It's as simple as the fact that 10 times .9 equals 9 times 1.) And, of course, more than 10 workers employed at 90 percent of the wage per worker would earn more collectively and spend more for consumers' goods collectively than was possible before.

The Many Collapses of Keynesianism

Keynesianism is, after all, the economics of state power

by Llewellyn H. Rockwell Jr.

It should be obvious to everyone but the most dedicated adherent of Keynesianism that the stimulus did not accomplish its end. The combination of outright spending by Congress, the desperate schemes to reflate the housing market, the attempt to transfuse bleeding firms with other people's money, and the creation of trillions in artificial money, has not done a thing to lift the US economy.

Actually, the reverse has been true. All these efforts have prevented the adjustment of economic forces to the postboom world. And all the resources that the stimulus consumed were extracted from the private sector, for we must always remember that government has no resources of its own. Everything it does must come from the hides of private producers and the citizenry in general, in the future if not immediately.

The Collectivist War Against Cultural Heritage

Trading Freedom for Utopia

Naturally, every age thinks that all ages before it were prejudiced, and today we think this more than ever and are just as wrong as all previous ages that thought so. How often have we not seen the truth condemned! It is sad but unfortunately true that man learns nothing from history.

                                                               -Carl Jung

by Brandon Smith

Two things make man what he is; his soul, and his memory.  Lose one, or both, and he ceases to exist.  He might as well buzz over his own garbage like an insect.  When a society is drawn into the repugnant shadow of totalitarianism and collectivism, it is usually because the masses have abandoned (or been enticed to abandon) a piece of their inner and outer heritage, something which kept the darkness at bay, a lesson from the past, or a principle long honored.  In the wretched and psychotic quest for the “perfect” establishment system, we are even often encouraged by the elitist ilk to slough off the warm remnants of our cultural inheritance like so much skin and “look forward” to a bright and more promising tomorrow, where everything will be different, and certainly, better than today.    

Between a Rock and a Hard Place

The Tragic Decline of Gibraltar's Spanish Neighbor

By Walter Mayr

The residents of La Línea de la Concepción are leaving, like rats deserting a sinking ship.

They've been crossing the border by the thousands since early morning, first the cleaning women, nannies and construction workers, and then the smugglers. They all want to get out of Spain, if only for a few hours. There is work across the border, in the British overseas territory of Gibraltar, and work spells hope for a better life.

By around 11 a.m. on what promises to be a hot early summer's day, the traffic jam on the Spanish side already stretches from the border, across the coastal road and back to the town hall, where Mayor Gemma Araujo is holding down the fort in her office on the second floor, which has a view of the caravan of commuters. Araujo is 33, a Socialist and the first woman in her position. It's not exactly the most rewarding job in Spain. A "crisis tsunami" has reached La Línea, says Araujo, and the situation is more serious than ever before. "Our city isn't bankrupt, but it's close."

Α Night At The Opera

Those expecting Prime Rib for dinner are about to be disappointed

by Mark Grant

Some days it seems like an eternity. Other days it passes in the glimpse of a blinking eye. Most days it ekes out like a sore oozing infection and so the tragedy of Europe continues and lengthens and stretches as moments come and pass and as many await the defining moment where some kind of curtain descends and ends the Act or perhaps the play. This has been the way of it for the past two years but the muddling has become bumbling and the depth of the sorrow deepens and the possibility of escape is now all but impossible.

“One can't judge Wagner's opera Lohengrin after a first hearing, and I certainly don't intend to hear it a second time.”     

                                                                 -Gioachino Rossini

The Road to Totalitarianism

Total control over the economy must, in the end, mean total control over what people do, say, and think

by Henry Hazlitt, this article appears as chapter 6, "The Road to Totalitarianism," in On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (1956)

In spite of the obvious ultimate objective of the masters of Russia to communize and conquer the world, and in spite of the frightful power which such weapons as guided missiles and atomic and hydrogen bombs may put in their hands, the greatest threat to American liberty today comes from within. It is the threat of a growing and spreading totalitarian ideology.
Totalitarianism in its final form is the doctrine that the government, the state, must exercise total control over the individual. The American College Dictionary, closely following Webster's Collegiate, defines totalitarianism as "pertaining to a centralized form of government in which those in control grant neither recognition nor tolerance to parties of different opinion."
Now I should describe this failure to grant tolerance to other parties not as the essence of totalitarianism, but rather as one of its consequences or corollaries. The essence of totalitarianism is that the group in power must exercise total control. Its original purpose (as in communism) may be merely to exercise total control over "the economy." But "the state" (the imposing name for the clique in power) can exercise total control over the economy only if it exercises complete control over imports and exports, over prices and interest rates and wages, over production and consumption, over buying and selling, over the earning and spending of income, over jobs, over occupations, over workers — over what they do and what they get and where they go — and finally, over what they say and even what they think.

Austerity’s Prophets

How Friedrich Hayek eclipsed J.M. Keynes and Milton Friedman

By MARK SKOUSEN

“Austerity” has become the watchword of the year. Governors, prime ministers, and presidents around the world are talking about cutting welfare benefits, curtailing public union power, and reducing deficits. We’ve over-promised at the public trough, and now we must pay the price. Whoever is elected president in November is going to face the need to retrench.

Yet only one school of economic thought, that of Friedrich Hayek and Ludwig von Mises, predicted and prescribed austerity before the Great Recession. More prominent branches of free-market economics, no less than the spendthrift left, have been slow to realize that neither fiscal nor monetary stimulus can cure what ails the West. As the psalmist says, “The rejected stone has become the chief cornerstone.”

Nobody in power was talking austerity in 2008, when the financial crisis hit. Big government and its patron saint, John Maynard Keynes, were in the saddle, with Republicans and Democrats falling over each other to run up deficits and pass the Troubled Asset Relief Program. Keynes’s biographer, Robert Skidelsky, came out with a bestseller, The Return of the Master.

The Divided Map of Europe

Europe remains a truly ambitious work in progress

By Robert Kaplan

The idea of Europe, in the minds of Westerners today, is an intellectual concept—liberal humanism with a geographical basis—that emerged through centuries of material and intellectual advancement, as well as a reaction to devastating military conflicts in previous historical ages. The last such conflict was World War II, which spawned a resolve to merge elements of sovereignty among democratic states in order to set in motion a pacifying trend.

Alas, this grand narrative now is under assault by underlying forces of history and geography. The economic divisions seen today in the European Union, manifest in the Continent’s debt crisis and pressures on the euro, have their roots, at least partially, in contradictions that stretch far back into Europe’s past and its existential struggle to grapple with the realities of its immutable geographical structure. It is this legacy—somewhat deterministic and rarely acknowledged—that Europe still must overcome and that therefore requires a detailed description.

In the years immediately before and after the collapse of the Berlin Wall, intellectuals celebrated the ideal of Central Europe—Mitteleuropa—as a beacon of relative multiethnic tolerance and liberalism within the Hapsburg Empire to which the contiguous Balkans could and should aspire. But while the Continent’s spiritual heart lies in Mitteleuropa, the political heart now lies slightly to the northwest, in what we might call Charlemagne’s Europe. Charlemagne’s Europe starts with the Benelux states, then meanders south along the Franco-German frontier to the approaches of the Alps. To wit, there is the European Commission and its civil service in Brussels, the European Court in the Hague, the treaty town of Maastricht, the European Parliament in Strasbourg and so on. All these places lie athwart a line running southward from the North Sea “that formed the centerpiece and primary communications route of the Carolingian monarchy,” observes the late scholar of modern Europe Tony Judt.¹ The fact that this budding European superstate of our own era is concentrated in Europe’s medieval core, with Charlemagne’s capital city of Aachen (Aix-la-Chapelle) still at its very center, is no accident. For nowhere on the Continent is Europe’s sea and land interface quite as rich and profound as along this spinal column of Old World civilization.

Central banks: Running out of ideas and road

This will end badly

by DETLEV SCHLICHTER

On page two of today’s Wall Street Journal Europe you will find the result of a readers’ poll from last Friday: Question: Will the ECB’s rate cut help restore confidence in the bloc’s economy? Answer: 81 percent of readers say no, 19 percent yes.

Last week’s round of global monetary easing – another ECB rate cut, another round of debt monetization from the BoE, another rate cut from the People’s Printing Press of China – is, of course, more of the same old same old. It has a discernible touch of desperation about it and this is not lost on the public. Monetary policy is ineffective. Or, to be precise, it is only effective in delaying a bit further the much-needed liquidation of the massive imbalances that previous monetary policy helped create, and thereby is contributing, on the margin, towards making the inevitable endgame even more painful. It is counterproductive and destructive. It is certainly not restoring confidence.

Yet, many commentators and many of the establishment economists out there are not giving up. If only the ECB had cut by 0.5 percent instead of 0.25 percent, the equity market could have responded more optimistically. Maybe this would then have restored confidence? — Really? We are now below 1 percent in official interest rates, having cut by a full 400 basis points since the crisis started. How realistic is it to assume that another 0.25 percent is the difference between confidence-enhancing monetary stimulus and dread-inducing disappointment?

The Folly of Nation Building

Imperial Illusions

By AMITAI ETZIONI

THERE IS a growing consensus that the United States can’t afford another war, or even a major armed humanitarian intervention. But in reality, the cost of war itself is not the critical issue. It is the nation building following many wars that drives up the costs.

For every war of the kind we are waging in Afghanistan, we could afford five hundred interventions of the type America carried out in Libya in 2011. The war in Libya cost the United States roughly $1 billion, according to the Department of Defense, and the war in Afghanistan so far has cost over $500 billion, according to the National Priorities Project.

If costs are measured in blood and not just money, the disparity is even greater, both in terms of our losses and the losses of all others involved. Particularly important in this context is the fact that nation building, foreign aid, imported democratization, Marshall Plans and counterinsurgency (COIN) with a major element of nation building are not only very costly but also highly prone to failure. Thus, they are best avoided.

On Attacking Austrian Economics

Josh Barro’s and David Frum’s Pathetic Attack on Austrian Economics

by James Miller

Josh Barro of Bloomberg has an interesting theory.  According to him, conservatives in modern day America have become so infatuated with the school of Austrian economics that they no longer listen to reason.  It is because of this diehard obsession that they reject all empirical evidence and refuse to change their favorable views of laissez faire capitalism following the financial crisis.  Basically, because the conservative movement is so smitten with the works of Ludwig von Mises and F.A. Hayek, they see no need to pose any intellectual challenge to the idea that the economy desperately needs to be guided along by an “always knows best” government; much like a parent to a child.  CNN and Newsweek contributor David Frum has jumped on board with Barro and levels the same critique of conservatives while complaining that not enough of them follow Milton Friedman anymore.

To put this as nicely as possible, Barro and Frum aren’t just incorrect; they have put their embarrassingly ignorant understandings of Austrian economics on full display for all to see.

The Ugly Truth about Algeria

One big murder mystery

By John R. Schindler

Despite not really being in the news, Algeria still appears in the Western media intermittently. As the Maghreb’s last dictatorship, the recent wave of regime change and democratization has passed this important country by, at least so far. Algeria is the key state in Northwest Africa—by virtue of its size, position, natural wealth and regional influence—yet has missed out on the trend that has overtaken so much of the Arab world for the past two years. It remains notable that Algeria’s bloody civil war, which began twenty years ago, never really ended. And now with the help of Al Qaeda, the conflict may be spreading across the Sahel region.

Events in Algeria have long been underreported in the U.S. and Western media (with the exception of France), and there is a general lack of understanding of what ails the country. Certainly the terrible fratricide there in the 1990s got little coverage in Western media, despite the fact that it probably claimed twice as many lives as the Bosnian conflict, which ran concurrently and received nonstop Western attention.

Why victim culture is running riot

The vulnerable arsonists

Last year's English riots weren't down to government cuts but to a vast culture of self-pity and entitlement among the young.

by Neil Davenport 

A new Church of England report into last August’s riots in England ‘sounds a clear warning note’ about the ‘social consequences’ of austerity measures, senior cleric Reverend Peter Price said on Sunday. After the LSE/Guardian Reading the Riots reports, the Children’s Society’s Behind the Riots, and the government’s own independent panel report, the Church of England is the latest, and probably not the last, institution to blame the riots on cutbacks in social services. Written by the church’s mission and public affairs (MPA) council, the Testing the Bridges report is made up of interviews with clergy around the country who witnessed the riots breaking out.

A mixture of poverty and welfare cutbacks has, according to the church, had a negative impact on ‘already vulnerable people’. This has contributed to a ‘feeling of hopelessness which may sometimes emerge in destructive and anti-social actions’. The idea of the looters and arsonists being seen as ‘vulnerable people’ may surprise those who were attacked or had their livelihoods destroyed. But in recent years, being ‘vulnerable’ essentially means anyone who is not under the direct control of state agencies. These individuals, who clearly can’t cope when left to their own devices, must be nurtured, flattered and mollycoddled by nice, caring professionals.

Repudiating the National Debt

Α horse of a very different color

by Murray N. Rothbard

In the spring of 1981, conservative Republicans in the House of Representatives cried. They cried because, in the first flush of the Reagan Revolution that was supposed to bring drastic cuts in taxes and government spending, as well as a balanced budget, they were being asked by the White House and their own leadership to vote for an increase in the statutory limit on the federal public debt, which was then scraping the legal ceiling of $1 trillion. They cried because all of their lives they had voted against an increase in public debt, and now they were being asked, by their own party and their own movement, to violate their lifelong principles. The White House and its leadership assured them that this breach in principle would be their last: that it was necessary for one last increase in the debt limit to give President Reagan a chance to bring about a balanced budget and to begin to reduce the debt. Many of these Republicans tearfully announced that they were taking this fateful step because they deeply trusted their president, who would not let them down.

Famous last words. In a sense, the Reagan handlers were right: there were no more tears, no more complaints, because the principles themselves were quickly forgotten, swept into the dustbin of history. Deficits and the public debt have piled up mountainously since then, and few people care, least of all conservative Republicans. Every few years, the legal limit is raised automatically. By the end of the Reagan reign the federal debt was $2.6 trillion; now it is $3.5 trillion and rising rapidly. And this is the rosy side of the picture, because if you add in "off-budget" loan guarantees and contingencies, the grand total federal debt is $20 trillion.

Politicians’ Dreams

Falling prey to charlatans and quacks

By Walter E. Williams

Several aspects of human behavior, besides a misunderstanding of reality, are critical to the survival of political scoundrels. Let’s look at a few.

Tariffs and import quotas raise sugar prices. Michael Wohlgenant and Vincent H. Smith, in their article “Bitter Sweet: How Big Sugar Robs You” (The American, February 2012), say sugar restrictions cost the economy an average of over $3 billion a year in higher food prices. That’s the cost side. Roughly 40,000 Americans in the sugar industry benefit from import restrictions because they raise sugar prices and deliver higher profits and wages. One might reasonably ask, “How is it possible for the few to impose huge costs on the 312 million of the rest of us?”

The Myth of Wartime Prosperity

World War II didn't improve the average American's standard of living

By ROBERT P. MURPHY

When pressed for a “success story” of their policies, Keynesians point with pride to World War II. They claim that it is the perfect illustration of the ability of massive government spending to lift an economy out of the doldrums.

In the effort to battle this myth, Steve Horwitz and Michael J. McPhillips offer an interesting new article that analyzes diaries, newspapers, and other primary source documents from the wartime era. They show that average Americans on the home front certainly did not think they were living amidst a great economic recovery. Yet as I’ll show in this article—relying on the pioneering efforts of Robert Higgs—we can use even the official statistics to turn the conventional Keynesian account on its head.

Our Money Is Dying

Spinning in the water

by Chris Martenson

As every effort to re-inflate and perpetuate the credit bubble is made, the words of Austrian economist Ludwig Von Mises lurk ominously nearby:

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved." (Source)

Because every effort is being made to avoid abandoning the credit expansion process -- with central banks and governments lending and borrowing furiously to make up for private shortfalls -- we are left with the growing prospect that the outcome will involve some form of "final catastrophe of the currency system"(s).

The $800 Trillion Scandal

How Banks' LIBOR Lies Affected You

By Christopher Barker, The Motley Fool

Banking scandals have grown so common that perhaps folks have simply run out of outrage. Or maybe the numbers are just too huge to wrap our mortal heads around.

Whatever it is that's behind the relatively light news coverage and lack of public debate on this incredible LIBOR rate-rigging scandal thus far, the story is not going away. In fact, it's bound to grow substantially in scope, as many of the world's largest banks have already been implicated in manipulating interest rates that are tied to some $800 trillion in loans and securities.Λ


LIBOR -- the London Interbank Offered Rate -- is supposed to reflect the average interest rate at which banks are willing to loan funds to each other. Banks submit their daily estimates of borrowing costs for various loan durations in 10 different currencies, and after tossing out the top 25% and bottom 25% of those estimates, the LIBOR rates are calculated as an average of the remaining 50% of submissions. A separate benchmark called EURIBOR tracks borrowing costs among eurozone banks.

The Fallacy of the "Public Sector"

Why not give the free market a county or even a state or two, and see what it can accomplish?

by Murray N. Rothbard

We have heard a great deal in recent years of the "public sector," and solemn discussions abound through the land on whether or not the public sector should be increased vis-à-vis the "private sector." The very terminology is redolent of pure science, and indeed it emerges from the supposedly scientific, if rather grubby, world of "national-income statistics." But the concept is hardly wertfrei; in fact, it is fraught with grave, and questionable, implications.

In the first place, we may ask, "public sector" of what? Of something called the "national product." But note the hidden assumptions: that the national product is something like a pie, consisting of several "sectors," and that these sectors, public and private alike, are added to make the product of the economy as a whole. In this way, the assumption is smuggled into the analysis that the public and private sectors are equally productive, equally important, and on an equal footing altogether, and that "our" deciding on the proportions of public to private sector is about as innocuous as any individual's decision on whether to eat cake or ice cream. The State is considered to be an amiable service agency, somewhat akin to the corner grocer, or rather to the neighborhood lodge, in which "we" get together to decide how much "our government" should do for (or to) us. Even those neoclassical economists who tend to favor the free market and free society often regard the State as a generally inefficient, but still amiable, organ of social service, mechanically registering "our" values and decisions.

The Twilight of Casino Capitalism

The Libor scandal tells us time is running out for America's crony capitalists

By PATRICK J. BUCHANAN

Comes now news from across the pond that executives at one of the world’s most respected banks, Barclays, rigged Libor. Even the venerable Bank of England is apparently being investigated.

For sports fans, this is like fixing the Super Bowl or doping a horse in the Derby. But it is rather more serious. For the London Interbank Offered Rate is the benchmark interest rate for trillions in loans around the world.

Manipulate Libor a small fraction of a point, and lenders reap millions more in interest income on hundreds of billions in loans. How many more such blows to their credibility can the financial elites sustain before people turn on the capitalist system itself?

Why Economic Policy is Paralyzed

The blunder of the Sixties has had a long afterlife

By Robert Samuelson

Wondering why government can't restart the sluggish economy? Well, one reason is that we are still paying the price for the greatest blunder in domestic policy since World War II. This occurred a half-century ago and helps explain today's policy paralysis. The story -- largely unrecognized -- is worth understanding.

Until the 1960s, Americans generally believed in low inflation and balanced budgets. President John Kennedy shared the consensus but was persuaded to change his mind. His economic advisers argued that, through deficit spending and modest increases in inflation, government could raise economic growth, lower unemployment and smooth business cycles.

None of this proved true; all of it led to grief.

The House of Lords doesn’t need reforming, it needs abolishing

We don’t need to be lorded over by experts

Nick Clegg’s proposed reform of the Lords will achieve the feat of making these ‘remains of aristocratical tyranny’ even more tyrannical.

by Tim Black 

The excitement is difficult to miss. There’s a buzz, a democratic fizz in the air. In pubs and bars, community ‘hubs’ and shopping centres, people just can’t stop talking about it. That ‘it’ is, of course, the very real possibility that the UK will have a mainly elected House of Lords. I feel electrified just typing those words, ‘mainly elected’. After over a hundred years since Herbert Asquith’s Liberal government first promised it, we the people are finally getting the power we have been demanding, a second chamber ‘constituted on a popular instead of a hereditary basis’, as Lloyd George put it back in those heady pre-World War days.