Egypt Is Too Big to Save

The funds required to jumpstart the economy as is would be similar to those needed for the reconstruction of Iraq

By Mahmoud Salem

Two years after the popular revolt that toppled Hosni Mubarak, Egypt appears headed toward a "failed state" scenario. While Cairo has not yet defaulted on its debts -- an economic hallmark of nearly all erstwhile states -- it already meets many of the other political conditions associated with comprehensive failure. In Washington, the discussion is narrowly focused on the implications of the rapidly deteriorating economic situation, with little appreciation that the financial morass is inextricably linked to the government's increasingly authoritarian politics. If the ruling Islamist party does not change its approach, the economy will not improve, and the state will move closer to collapse.

THE POLITICAL CRISIS

Since the Muslim Brotherhood (MB) came to power, governance in Egypt has exhibited several classic characteristics of failed states:

Inconsistent and selective application of law. On March 27, an Egyptian court overturned President Muhammad Morsi's November 2012 decision to replace the sitting prosecutor-general with Talaat Abdullah, a crony who has since focused investigations solely on the MB's political opponents. The ruling renders all of Abdullah's investigations illegal. By ignoring the verdict and going after activists even more aggressively, the state -- personified in the president, his government, and the prosecutor-general -- has shown its willingness to undermine rule of law.

Deterioration of services. Basic public services such as electricity and gas are falling apart, with most Egyptians experiencing daily power cuts.

Unaccountable security apparatus. The interior minister, a Brotherhood loyalist, deploys the police to clash with opposition protesters while protecting the MB thugs who beat and torture demonstrators.

Delegitimization of the state. Due to a legally faulty election law issued by the Morsi-appointed upper house of parliament, the legislative elections originally slated for this month have been delayed until November. Meanwhile, the opposition is now refusing to participate in elections because Egyptian institutions cannot guarantee the fairness of the process. When Secretary of State John Kerry tried to mediate last month, the MB undercut his efforts by publicly calling for elections without any of the promised changes to the electoral law, which were the basis of his mediation. The situation is pushing Egypt toward failure, and the MB government shows no sign of seeking a solution.

The "Unseen" Genocide

What I saw at the Gosnell trial

Three rows of seats reserved for the media remained empty Thursday morning April 11, 2013 in courtroom 304 at the Justice Center in Philadelphia where abortionist Dr. Kermit Gosnell is on trial. Gosnell is charged with seven counts of murder for killing seven born-alive children, and also a patient. The man at the rear of the courtroom is David P. Williams, of Delaware Right to Life, who covered the trial for his pro-life blog.

By J.D. Mullane

It is hard to decide the most appalling images to emerge Thursday at the murder trial of Philadelphia abortion doctor Kermit Gosnell. What happened in his abortion clinic is beyond any morbid Hollywood horror.

Tiny severed feet and hands stored in jars over a sink in the “procedure” room.

Digitalis injected into the stomachs of pregnant women to stop the beating hearts of their unborn babies so that they would be born dead.

Survivor babies whose spinal cords were severed, whose brains were removed with suction, whose tiny bodies were placed in a waste bin for disposal.

Then there is commonwealth exhibit C-147, depicting a large baby balled in the fetal position, bloody, stuffed in a bin. “Big enough to walk me home,” joked Gosnell when he saw the child’s remains, testified Ashly Baldwin, a clinic employee.

Gosnell, 72, is charged with killing seven born-alive babies and causing the death of Karnamaya Mongar, 41, an immigrant from Nepal who had sought an abortion at his West Philadelphia clinic. The clinic was busy, doing brisk cash business, catering not only to local women in West Philadelphia, but also women from the affluent surrounding suburbs of Bucks and Montgomery counties. Gosnell’s reputation for no-wait abortions was so well known, women would fly in from other states.

The Gosnell silence

Murder, abortion and the media

In Philadelphia, a doctor is on trial for the gruesome murders of eight people inside his low-rent office. A former assistant testified that she personally witnessed the physician commit at least 30 murders. Most of the patients were "beheaded," another assistant said, adding that there was "blood all over the place." If you have not heard of this doctor's trial for committing a terrifying, decades-long string of serial killings, there is a reason. He is an abortionist.

His name is Kermit Gosnell. He was arrested after a 2010 FBI raid at his offices, which were described this way in the grand jury report: "There was blood on the floor. A stench of urine filled the air. A flea-infested cat was wandering through the facility, and there were cat feces on the stairs."

The sensational nature of this case alone justifies massive media coverage. The doctor ran a filthy, uninspected clinic for decades as state regulators looked the other way. He infected women with diseases by using unsterile equipment. Two of the women who came to him for abortions died. But Kermit Gosnell is not a household name for one reason: His crimes raise uncomfortable questions for supporters of unlimited abortion on demand.

Gosnell delivered babies who were more than 24 weeks old. He then severed their spines at the neck. He called this "ensured fetal demise." Really, he beheaded them. The world of the abortionist is governed by euphemisms. 

Gosnell's trial is about more than a blood-soaked house of horrors. That the media would cover. Its real news value lies in what it says about the artificial lines we draw in the name of protecting a woman's "right to privacy." It is OK to forcibly, brutally end one baby's life, but not another's. This trial provokes the obvious question: Why? For too many reporters, it is a question they don't want to think about.

Abortion, The Mainstream Media, And The Limits Of Shaming

House of Horrors

The "Women's Health Society" abortion clinic at 3801 Lancaster Avenue in Philadelphia was operated by Dr. Kermit Gosnell for 30 years. Gosnell is on trial for allegedly murdering viable babies whose mothers had come to him seeking abortions.

by Pete Spiliakos 

We seem to be in a moment when the national mainstream media either has, or is about to prominently cover the Gosnell horrors. The week-long prolife campaign to increase coverage seems to have finally broken down resistance to covering the Gosnell trial in the most prominent forums of the most popular outlets. The New York Times hasn’t put the trial on its front page yet, but that might well be coming.CNN led off with the story yesterday. Conor Friedersdorf (in a wonderful essay) is correct to wonder how the Gosnell story hasn’t become a prominent national story earlier given all the story’s many horrible news hooks. Megan McArdle admits that her own pro-choice sympathies might have inclined her to shy away from the story. I would like to think that most journalists at mainstream outlets are similarly rethinking their coverage of abortion, but I doubt it. Friedersdorf and McArdle are pro-choice on abortion, but they are also libertarians rather than liberals. While most mainstream media outlets will surrender to the pressure and cover this story more, I think that most of their liberal staff members will consider this a defeat at the hands of their enemies rather than a lesson on how to do their jobs better.

First let’s be clear what I mean by “mainstream” media. It isn’t MSNBC. Like many (but not all) programs on Fox News, MSNBC exists to make money by making its viewers feel better about being on either the conservative or liberal ideological team. MSNBC has a mutually beneficial relationship with Fox News and conservative talk radio in which each side trolls the other. Most people don’t get their news from either MSNBC, or Fox News or talk radio. The mainstream media like ABC, NBC, CBS, and the New York Times might be called culturally biased news. The vast majority of the journalistic and editorial staff for these outlets have left-of-center staffs, but they don’t think of themselves as partisans. They think of themselves as journalists first and think of advancing their policy preferences second or third or almost never.

The personal and collective biases that come from working in an overwhelmingly left-of-center environment blends into the work, but their self-understanding as journalists places some limits on the impact of those biases. They will write stories about the promised benefits of Obamacare, but if some unflattering information comes out, they will report that too. Bias still shapes the coverage. Positive stories will have a coherence that make the case for Obamacare in a the negative stories won’t make the case for Republican opposition. You can see the reverse on Fox News’s excellent Special Report With Bret Baier (which is an example of conservative culturally biased news.) On Special Report, the benefits of Obamacare are mentioned but not emphasized while the drawbacks of the law are spotlighted. The “mainstream” media won’t connect the anti-Obamacare dots for the reader or viewer, but they will eventually get around to reporting those dots – if only in a scattered and confusing way.

Market and Government failures and solutions

Is Market Failure a Sufficient Condition for Government Intervention?

By Art Carden and Steve Horwitz

1. Introduction

We are unapologetic defenders of the economic way of thinking, not merely because it helps us understand why—as economist Joseph Schumpeter explained—capitalism allows factory girls to buy more and better stockings for progressively decreasing amounts of effort, but because with good economic analysis, some of the great atrocities of human history could have been avoided. For example, the Progressive eugenics movement of the early twentieth century was offensively anti-economic, even though some who were called "economists" encouraged it.1 As Bryan Caplan has pointed out, the Holocaust found some of its roots in Malthusianism, the idea that population growth would outstrip the growth of agricultural output.2 The disasters of central planning in the USSR, China, and elsewhere speak for themselves. We don't exaggerate when we say that sound economic reasoning could have saved tens, if not hundreds, of millions of lives.

But economic knowledge incompletely applied can be dangerous. In introductory economics classes, students learn about several types of "market failure," which occurs when some attributes of the market prevent it from producing an efficient outcome. In the context of twentieth-century neoclassical economics, these represent failures of the actual market to reach the equilibrium of the perfectly competitive model. In this framework, market failures are possible when there are externalities (uncompensated costs or benefits that spill over onto people who are not party to a trade); public goods (goods that are non-rival in consumption and for which it is prohibitively costly to exclude non-payers); asymmetric information; and market power like monopoly (when there is one seller of a good or service), monopsony (when there is one buyer of a good or service), or natural monopoly (when the cost structure of the industry makes it more efficient for a single firm to produce the entire market's output).

Externalities, public goods, asymmetric information, and market power provide necessary—but insufficient—conditions for intervention to be justified. They certainly are not talismans that provide interventionists with carte blanche to tinker with the members of a society as if they were pieces on a chessboard. Too often, critics of markets think that merely invoking these terms destroys the case for free markets.3 Unfortunately, non-economists often do not understand these terms. Indeed, understanding these terms clearly is only a first step toward a clear understanding of social phenomena. Let's consider each of these concepts in turn.

2. Externalities

Critics of the market sometimes invoke externalities, which refer to costs or benefits of economic activity that fall upon people not party to the actions in question. A classic external cost (or "negative externality") is pollution. Suppose that steel firms produce in a way that sends chemicals into the air that dirty people's hanging laundry or cause them to feel ill, even though they did not purchase the steel. If someone who purchases steel bears these costs, we simply recognize it as part of what was purchased—i.e., the cost is "internal" to the exchange. Another classic example is the railroad that cuts through farmland and throws off sparks that occasionally cause fires on the property of nearby farmers. A classic external benefit (or "positive externality") is education. If we pay a university to educate us, some of the benefits of that exchange accrue to the rest of society by virtue of our higher productivity or more virtuous behavior.4 Just as the victim of pollution has borne a cost without a benefit, the rest of society gets a benefit from our education without bearing a cost.

Educational Freedom

The Role of Coercion in Education

By Arnold Kling

Most of us went to school when we were younger, and we cannot imagine otherwise. However, it may be worth contemplating radical alternatives to the notion of school. The conflict between schooling and libertarian principles appears to me to have widened in the age of the Internet.

On the one hand, the Internet greatly enhances the opportunities for independent learning. As Will Richardson points out in his e-book, Why School?,(1) learners now face an abundance of educational resources, rather than the scarcity that prevailed when schools became the norm. Moreover, new knowledge is being created at remarkable rates, making lifelong learning essential.

When we think of school, we think of learning that has coordinates in time and space. I took algebra in 8th grade in Clayton, Missouri. I attended college in Swarthmore, Pennsylvania from 1971 to 1975. However, outside of school, learning can take place anywhere, at any time. The Internet makes us keenly aware of this fact, and as Richardson points out, traditional classrooms can seem backward and stifling when compared to what we can learn by ourselves using the Web.

On the other hand, the political pressure to prop up the schooling model may be stronger than ever. President Obama, during his 2008 campaign, spoke of making sure that everyone could go to college. In his 2013 State of the Union address, he called for universal pre-school. Meanwhile, the watchword for many conservatives and Republicans is "accountability," which in practice appears to mean top-down control over schools using test scores as a metric.

Notwithstanding these political forces, I predict that within a decade or two, the idea that learning can be located in time and space will no longer seem natural. The essence of the revolution that I foresee will be our embrace of anywhere-anytime learning. It could be that schooling as an institution will adapt to this paradigm, but I would bet against it.

Deschooling Society

The keys to an educational freedom agenda were identified over forty years ago by Ivan Illich, in his book Deschooling Society.(2) The first key is what he calls disestablishment:

...the United States led the world in a movement to disestablish the monopoly of a single church. Now we need the constitutional disestablishment of the monopoly of the school.

However, a second key is also necessary:

To make this disestablishment effective, we need a law forbidding discrimination in hiring, voting, or admission to centers of learning based on previous attendance at some curriculum. This guarantee would not exclude performance tests of competence for a function or role, but would remove the present absurd discrimination in favor of the person who learns a given school with the largest expenditure of public funds or—what is equally likely—has been able to obtain a diploma which has no relation to any useful skill or job.

The Cyprus Case - Looting the wealth out of the banks and the government

The Gloriously Ballooning Bailout Bedlam Of Cyprus

BY WOLF RICHTER

Bailouts start out small. At first, Cyprus just had a funding crisis; the markets had gotten smart, after years of dousing the country with cheap euros. Not that the risks weren’t there before. But markets opened their eyes. So Cyprus went begging to Russia, and got €2.5 billion in November 2011. That money evaporated without a trace. Then last June, the two largest banks were deemed to need €2.3 billion – €500 million for the Bank of Cyprus and €1.8 billion for Laiki Bank – to fill a void in their regulatory capital, the story went. No big deal.

But the banks had been eviscerated by mismanagement and corruption, and their balance sheets were loaded with deteriorating Greek corporate debt; Greek government bonds that had received a 70% haircut; loans to developers extended during the real-estate bubble that had blown up; loans on developments that were never finished or were built so shoddily that they’ve been declared uninhabitable; loans to politicians that were written off as gifts; and mortgages extended to homeowners who were tangled up in a title-deed scandal that the banks themselves had aided and abetted, leaving 130,000 properties (in a country with 838,000 souls) without title deeds, with disputed ownership, and often worthless mortgages.

So by the end of June, as bailout talks with the Troika took off, “sources” mumbled something about €10 billion, including a government bailout, that hadn’t been on the table before. People gasped. But it was just the beginning. In August, Central Bank Governor Panicos Demetriades told parliament that the banks alone would need €12 billion! Plus a government bailout. Rumor consensus settled on €15 billion total. Then in September Russian Finance Minister Anton Siluanov upped the ante: Cyprus would indeed need €15 billion from the Troika, plus €5 billion from Russia, for a total of €20 billion.

Every time someone looked at the cesspool that these banks were, the bailout amount jumped. By March 25, the Troika’s number had risen to €17 billion. But it would be a new way of doing bank bailouts. The EU would contribute €9 billion, the IMF €1 billion, and €7 billion would be extracted from Cypriot uninsured depositors, bank bondholders, public sector workers, pensioners, corporate taxpayers, and others. Laiki Bank would be dismantled. The alternative would have been the collapse of the banks and the default of the government. It was an elegant, finely tuned instrument designed to keep the Eurozone intact – regardless of the price.

The havoc was immediate. So it was tweaked while banks were closed for over a week and draconian capital controls were imposed. The economy froze. But the deal stuck. Until late Wednesday.

The Aerodynamics of Nihilism

We live in a world now which may be described as, "Nothing Matters"
 

"Nothing matters until the day that it does and then everyone asks why it didn't matter before."

                                           -The Wizard

By Mark Grant

The money pours in each month from America, Europe and Japan and overrides anything and everything else. With pre-payments and calls the estimated amount of money provided by the Fed for the world's monetary supply is approximately $100 billion every month. It is not just the American banks that are the recipients of the hand-out but the foreign ones who ship it back to Europe or buy European sovereign debt courtesy of Mr. Bernanke. I suspect that if the American taxpayers were aware of the scheme that the citizens would not be pleased but then what the Fed is doing is not generally part of polite conversation in America and so it is not discussed.

Yields on European sovereign debt are at incredibly low levels given the underlying economies. Europe trumpets the cause as renewed faith in the European Union but that is a highly unlikely conclusion. Again, it is the "Central Banks Effect" that feeds that stove of consumption and lowers yields, raises the stock markets and has created a world-wide bubble in every asset class on earth. The economies in Cyprus, Greece, Spain, Slovenia, Portugal, Ireland and Italy are all in serious decline but; "Nothing Matters."

The "Stalin Axiom" has taken over the world. It is not the data but how the data is counted!

The unemployment rate in America is not 7.7% but 11.6% if all you do is add in the people that have supposedly left the workforce. Did you think these people had retired? Gotten rich in the stock market and were making plans for St. Tropez this summer? Moved to Costa Rico for the winter? No, they have left the workforce because they are now on the public dole and those that are working are picking up their tab.

In Europe sovereign debt ratios do not include guaranteed liabilities, contingent liabilities and every asset under the sun is marked, "Risk Free." The problem, of course, is that many of these liabilities, oft times called "investments" by the Europeans, are now coming around for payment and the "not counted" does not change the "not paid," I can assure you. 

From Harare to Buenos Aires...

The Great Money Migration

By by Bill Bonner

Back in the USA, stocks rose again yesterday. The Dow finished up 128 points. Gold fell $25 per ounce yesterday... and everybody seems to think it will be going down forever. (A word of caution: probably not.)

Last week, we went to São Paulo, Brazil. There, too, we found taxi drivers who knew a lot more about monetary crises than the typical US economist. Said one:

I remember. I was just a kid. But my father would call and tell us to run to the grocery store. He had just been paid. We'd dash for the grocery story, meet him there and buy everything we could. We spent every cent in just a few minutes.

Our friend was recalling what it was like in the late 1980s in Brazil. The government had caused inflation... then hyperinflation. Prices rose so fast that as soon as people got some cash they ran to the grocery store to spend it.

Later, there was no point. In 1990, hyperinflation in Brazil reached 30,000%. What cost 1 real (the Brazilian currency) in 1980 cost 1 trillion in 1997. The hyperinflation wiped out the middle class... and wiped the shelves clean.

"It's hard to run a business when you don't know what your money is going to be worth," said our friend. "Businesses tended to just stop."

And here in Argentina, there came an announcement this week. The government will freeze the price of gasoline for the next six months.

Price controls didn't work for the Romans. They didn't work for the Germans. They didn't work for the Zimbabweans... or any of the other hundreds of governments that have tried them. But who knows? Maybe they'll work for the Argentines...

Or gasoline will begin to disappear from the filling stations.

A magnificent but temporary interlude in a great nation's bizarre, remorseless self-dissolution

Thatcher thought Britain was worth fighting for

A generation on, the Thatcher era seems more and more like a magnificent but temporary interlude in a great nation’s bizarre, remorseless self-dissolution

By mark steyn

A few hours after Margaret Thatcher's death on Monday, the snarling deadbeats of the British underclass were gleefully rampaging through the streets of Brixton in South London, scaling the marquee of the local fleapit and hanging a banner announcing, "THE BITCH IS DEAD." Amazingly, they managed to spell all four words correctly. By Friday, "Ding Dong! The Witch Is Dead," from "The Wizard of Oz," was the No. 1 download at Amazon UK.

Mrs. Thatcher would have enjoyed all this. Her former speechwriter John O'Sullivan recalls how, some years after leaving office, she arrived to address a small group at an English seaside resort to be greeted by enraged lefties chanting "Thatcher Thatcher Thatcher! Fascist Fascist Fascist!" She turned to her aide and cooed, "Oh, doesn't it make you feel nostalgic?" She was said to be delighted to hear that a concession stand at last year's Trades Union Congress was doing a brisk business in "Thatcher Death Party Packs," almost a quarter-century after her departure from office.

Of course, it would have been asking too much of Britain's torpid Left to rouse themselves to do anything more than sing a few songs and smash a few windows. In "The Wizard of Oz," the witch is struck down at the height of her powers by Dorothy's shack descending from Kansas to relieve the Munchkins of their torments. By comparison, Britain's Moochkins were unable to bring the house down: Mrs. Thatcher died in her bed at the Ritz at a grand old age. Useless as they are, British Socialists were at one point capable of writing their own anti-Thatcher singalongs rather than lazily appropriating Judy Garland blockbusters from MGM's back catalogue. I recall, in the late Eighties, being at the National Theatre in London and watching the crowd go wild over Adrian Mitchell's showstopper, "F**k-Off Friday," a song about union workers getting their redundancy notices at the end of the week, culminating with the lines:

"I can't wait for

That great day when

F**k-Off Friday

Comes to Number Ten."

You should have heard the cheers.

Alas, when F**k-Off Friday did come to 10 Downing Street, it was not the Labour Party's tribunes of the masses who evicted her but the duplicitous scheming twerps of her own Cabinet, who rose up against her in an act of matricide from which the Tory Party has yet to recover. In the preferred euphemism of the American press, Mrs. Thatcher was a "divisive" figure, but that hardly does her justice. She was "divided" not only from the opposition party but from most of her own, and from almost the entire British establishment, including the publicly funded arts panjandrums who ran the likes of the National Theatre and cheerfully commissioned one anti-Thatcher diatribe after another at taxpayer expense. And she was profoundly "divided" from millions and millions of the British people, perhaps a majority.

Nevertheless, she won. In Britain in the Seventies, everything that could be nationalized had been nationalized, into a phalanx of lumpen government monopolies all flying the moth-eaten flag: British Steel, British Coal, British Airways, British Rail ... . The government owned every industry – or, if you prefer, "the British people" owned every industry. And, as a consequence, the unions owned the British people. The top income tax rate was 83 percent, and on investment income, 98 percent. No electorally viable politician now thinks the government should run airlines and car plants and that workers should live their entire lives in government housing. But what seems obvious to all in 2013 was the bipartisan consensus four decades ago, and it required an extraordinary political will for one woman to drag her own party, then the nation, and, subsequently, much of the rest of the world, back from the cliff edge.

The "It Can't Happen Here" Syndrome

Denial is an integral part of atrocity

by Patrice Lewis

Here is a short quiz for you. Ready?

• What’s the current situation with Lindsay Lohan’s rehab?

• Who won the latest “Dancing With the Stars”?

• Name five celebrities with “baby bumps.”

• Explain how the Cypriot banking crisis could impact the European economy.

If you answered the first three questions but are clueless on the fourth, you’re in good company. Estimates are that up to half the population in America is ignorant about the situation in Cyprus. Oh sure, they hear snippets on the evening news, but since it’s far away and happening to other people, they don’t worry about it.

These people are suffering from a Normalcy Bias.

Just what is a Normalcy Bias? Wikipedia defines it as a mental state that “causes people to underestimate both the possibility of a disaster occurring and its possible effects.” It’s sometimes called the “It can’t happen here” syndrome. The assumption is that since a particular disaster has never occurred before, it never will. Any disturbing indications that something bad may happen are dismissed or trivialized.

Originally, the Normalcy Bias referred solely to natural disasters. The scale of devastation and societal disruption from Hurricane Katrina can be attributed in part to a Normalcy Bias – the refusal of the people of New Orleans to believe their beloved city could ever receive a direct hit from a major hurricane, despite its physical vulnerabilities. I distinctly remember seeing a live news report from New Orleans on the evening of Aug. 28, 2005, that showed people partying in the street with a (then) Category 4 hurricane hours away from landfall. Disaster? Nah. It can’t happen here. Gimme another beer.

But the Normalcy Bias has been extended to include political and social disasters as well. The most extreme example is Jews (and to an extent, some Germans) during the reign of the Nazis. Despite all the warning signs, many people remained in denial. Concentration camps? Genocide? Nah. Too crazy. It can’t happen here.

When we hear the mainstream media assuring us in soothing, condescending tones that we’re in an economic “recovery” – despite all evidence to the contrary – we want desperately to believe them. We don’t want anything to disrupt our ordinary, comfortable lives. We genuinely believe that if we cling to our normal way of life and habitual methods of doing things – despite overwhelming proof that something dangerous is looming – then everything will be OK. It can’t happen here.

But the situation in Cyprus is potentially international in scope. North Korea is doing some serious saber-rattling. America’s debt is so out of control that an economic crash is a statistical certainty. Sweeping anti-gun legislation is being enacted in various states even as we speak. As Ayn Rand so memorably put it, “You can ignore reality, but you can’t ignore the consequences of ignoring reality.”

Why Money Printing Makes You Poorer

Except for the few insiders, speculators and sharpies who are first in line to get the EZ money, everyone else gets poorer

by Bill Bonner

We can barely catch our breath. We can't stop laughing.

Last week, Japan announced that it would undertake a bold and radical experiment. After 23 years of on-again, off-again deflation, the new government decided it had had enough of things getting cheaper.

The Bank of Japan will now obediently monetize debt until inflation reaches 2%. This, the country's central bankers believe, will encourage people to spend. The economy will take off.

Why is it better for people to spend more tomorrow than they want to spend today? Why is it better for prices to go up 2% than to go down 2%? Why is an economy that "takes off" better than one that sits calmly on the runway?

Those questions will have to wait for another day; no one bothers to ask today. Economists say the secret to prosperity is to stimulate demand. Anything that stimulates demand is thought to be a good thing.

It doesn't seem to matter that this proposition is transparent poppycock. People always want stuff. Demand is infinite. Government doesn't have to stimulate it.

What really matters is buying power. And buying power is limited. The authorities try to get around this problem by printing money. Then, with this new money in hand, it is almost as though people had real demand!

The Demand Delusion

But that's what is so breathtaking and so funny about this time we live in. Who really believes you can increase demand... and make people wealthier... by just printing up money? Who really believes you can give people more buying power by giving them more pieces of paper?

Apparently, just about everybody! Ha ha ha!

Real demand depends on real earnings, not more currency. People buy things by producing things. That's "Say's Law," named after Jean-Baptiste Say. Buying power -- or demand -- comes from production, not pieces of paper.

Economists and central bankers cannot increase real demand. But they can sure move it around!

Cyprus Bailout Swells to $30 Billion

An even bigger challenge for Cyprus

By Jeurgen Baetz

The cost of bailing out Cyprus has swollen to euro 23 billion ($30 billion), with the crisis-hit country having to take on the lion’s share of the measures needed to avoid bankruptcy, according to a draft document by the country’s international creditors.

The draft document, obtained by The Associated Press Thursday, says the country will have to find 13 billion euros ($17 billion) — an increase on the 7 billion euro contribution agreed during the country’s chaotic bailout talks last month. The money will be raised by imposing heavy losses on large bank deposits, levying additional taxes, privatizations and a part-sale of the central bank’s gold reserves.

“The sheer size of the increase has underlined the extent of the enormous challenges facing Cyprus itself,” Jonathan Loynes of Capital Economics said in an analyst note.

The so-called troika of international creditors — the European Commission, the European Central Bank and the International Monetary Fund — are set to grant the Mediterranean island nation a 10 billion euros ($13 billion) rescue loan package to recapitalize Cyprus’s shaky banking system and keep the government afloat. For its side of the deal, Cyprus was supposed to contribute 7 billion euros to the rescue.

In the latest draft document, however, the troika has revised the overall cost of bailing out Cyprus amid a gloomier economic outlook for the country, adding an extra 6 billion euros to the bill.

The Cypriot government blamed the gulf between the original total and the new 23 billion euro bill on the previous left wing administration and the time it took to properly negotiate a bailout — delays which pushed the cost of recapitalizing its banks much higher.

Government spokesman Christos Stylianides accused former President Dimitris Christofias of failing to “take responsibility and complete indecisiveness” in promptly negotiating a bailout.

As part of the original deal, Cyprus agreed to raise the 7 billion euros mostly by overhauling its bloated banking industry and tax increases. This would involve breaking up its second-largest bank, Laiki, and imposing losses on savers who have more than 100,000 euros there and in another lender, the Bank of Cyprus.

Classical Liberalism and the Austrian School

The Economics of Liberty

by Anthony Gregory

The Great Liberal Heritage

If any one word is responsible for more confusion in the United States than “liberalism,” I’d surely like to know what it is. To the average American, a liberal is someone who votes Democratic, favors redistribution of wealth from rich to poor, wants more government regulation of the market, probably champions gun regulations, loves public education, and generally stands on the opposite side of the spectrum, such as it is, from what passes as “conservative” these days.

Yet outside the United States, and for more than a century, “liberalism” has carried a different meaning, something quite distinct from, if not diametrically opposed to, the modern American definition. Liberalism is the tradition of Adam Smith and John Locke and the more radical of the Founding Fathers – the tradition of the British opponents of the Corn Laws, of French economists and legal theorists such as Frédéric Bastiat, and of Americans who questioned the very necessity of the state in the late 19th century. Liberalism is, in other words, the political creed of those who favored liberty above the state, believed peace was preferable to war, and saw free trade and free association as the very foundations of a just and equitable society; who saw the moral status of wealth accumulation as being determined not by how much was accumulated, but rather by how it was accumulated – whether by the peaceful and productive means of voluntary free exchange or the political means of plunder and government privilege.

Liberalism, in short, is the philosophical antecedent to modern libertarianism. And though many of today’s liberals claim the legacy of old liberalism for themselves, saying that economic realities and refinement of theory forced them into their more collectivist mold, it becomes clear from studying the liberal tradition that its core values of individual liberty, belief in the self-organizing effectiveness of society, and distrust in government have much more in common with today’s consistent opponents of tax-and-spend liberalism than with its proponents.

We libertarians are lucky to have a great historian in Ralph Raico, whose Classical Liberalism and the Austrian School contains nine fantastic essays that shed much needed light on these profound philosophical issues. Raico, our premier historian of classical liberalism, is fluent in the intellectual foundations of those ideals as well as in economics, particularly Austrian economics, rendering him uniquely qualified to discuss the intimate relationship between the most radical of free-market schools and the struggle for individual liberty.

Defining liberalism

Raico laments that “no serious effort has been made to provide an overall account of the history of liberalism” outside of the work of Guido de Ruggiero, which he considers “deeply flawed” and notes “was limited to … Britain, France, Germany, and Italy.” Another problem arises with the very definition of liberalism: “[A] survey of the literature on liberalism reveals a conceptual mayhem. One root cause of this is the frequent attempt to accommodate all important political groupings that have called themselves ‘liberal.’” That approach does not impress Raico, who points out the absurdity of defining liberalism so broadly:

If one holds that the meaning of liberal must be modified because of ideological shifts within the British Liberal Party (or the Democratic Party in the United States), then due consideration must also be given to the National Liberals of Imperial Germany. They – as well as David Lloyd George and John Maynard Keynes – would have a claim to be situated in the same ideological category as, say, Richard Cobden, John Bright, and Herbert Spencer. Yet the National Liberals supported, among other measures: the Kulturkampf against the Catholic Church and the anti-socialist laws; Bismarck’s abandonment of free trade and his introduction of the welfare state; the forcible Germanization of the Poles; colonial expansion and Weltpolitik; and the military and especially naval buildup under Wilhelm II.

About that ‘hydrocarbon bubble’ theory of the ‘peak oil’ enthusiasts

No more hope in Peak Oil Theory

By Mark J. Perry 

Despite a growing body of empirical evidence to the contrary, there is a small, fringe group of energy analysts who stubbornly promote the theory that America’s shale oil and natural gas revolution is somehow an unsustainable “hydrocarbon bubble” that is on the verge of bursting. Comparisons are frequently made to the housing and dot-com bubbles, although those comparisons have never seemed convincing, since those were bubbles in asset prices (houses and stocks), which doesn’t seem to necessarily apply to oil or gas prices, or the energy industry in general.

The announcement yesterday from the Potential Gas Committee that America’s supply of natural gas is actually 26% higher than previous estimates – and enough for the next 110 years at current consumption rates - can be added to the growing body of statistical evidence that runs counter to the ”hydrocarbon bubble” theory of the “peak oil” enthusiasts.

In a recent commentary, Forbes contributor David Blackmon, managing director of Strategic Communications for FTI Consulting, addressed the “hydrocarbon bubble” theory and two of its main proponents – David Hughes and Art Berman. Mr. Blackmon poses the following question in the title of article “Shale Oil and Natural Gas – Whose Bubble is Really About to Burst?“, and he starts out by pointing out that there are “thousands of practicing oil and gas geologists, engineers and other professionals in the industry itself who, based on hundreds of billions of dollars in investment in shale oil and natural gas resources by their companies, obviously disagree with Hughes and Berman.”

Here’s more:

One way to understand the utterly fallacious nature of the position of Hughes and Berman is to review how capital is allocated within the companies who are drilling most of the oil and natural gas shale wells in the U.S. today:

·         Most of these companies are large, multi-billion dollar corporations, whose portfolios of potential drilling projects include a variety of unconventional and conventional properties across the U.S. and internationally.

·         Investors and Wall Street analysts grade these companies’ performance based on how well the companies maximize their returns to shareholders.  These companies have every incentive to fund their most profitable projects first.

·         The main factor in determining capital allocation within each company is each project’s anticipated rate of return on capital expenditures, i.e., each project must compete with every other potential project in the company’s portfolio in order to receive funding to be drilled.

Why Canada Can Avoid Banking Crises and U.S. Can’t

In populist democracies, the regulation of banking is used as a political tool to favor some parties over others

Since 1790, the United States has suffered 16 banking crises. Canada has experienced zero — not even during the Great Depression

ByVictoria McGrane

It turns out Canada can thank the French for their stable system, according to a paper by Columbia University’s Charles Calomiris, presented at the Atlanta Fed’s 2013 Financial Markets Conference.

When it became a British colony, the majority of Canada’s population was of French origin — and the French inhabitants hated the British government.

So to keep the colony firmly within the Empire, British policymakers steered toward a government structure that would limit the power of the French-majority while also giving Canada more and more self-government. The eventual result was a highly-centralized federal government which controlled economic policy making and had built-in buffers for banker interests against populist forces, the paper argues.

That anti-populist political system — known in political science as liberal constitutionalism or liberal democracy — is a key ingredient in Canada’s stable banking track record, Mr. Calomiris contends in his paper, which is a summary of a much longer book he’s written with Stephen Haber due out in September. That’s because this kind of political system makes it difficult for political majorities to gain control of the banking system for their own purposes, the authors contend.

Populist democracies like the U.S., on the other hand, tend to create dysfunctional banking systems because a majority of citizens gain control over banking regulation that steers credit to themselves and to their friends at the expense of the citizens that are excluded from the banking system, he said.

The contrast between the U.S. and Canada was part of Mr. Calomiris broader argument that dysfunctional banking systems — which are by far the norm rather than the exception around the world — are the result of political factors.

“Whether societies have dysfunctional banking systems is really not a technical issue at all. It’s a political issue,” Mr. Calomiris said at the conference, introducing his premise as “we do know how to avoid dysfunctional banking but that we make political choices – you might even say consciously” not to have functional banking systems for most of the modern era in most countries of the world.

The history of the U.S. banking system is one in which the government forms partnerships with different interest groups at different points in history, and those coalitions jointly influenced the way the banking system was regulated, Mr. Calomiris argues.

“In populist democracies, such as the United States, the regulation of banking is used as a political tool to favor some parties over others. It is not that the dominant political coalition in charge of banking policy desires instability, per se, but rather, that it is willing to tolerate instability as the price for obtaining the benefits that it extracts from controlling banking regulation,” he writes in his paper.