11 Myths About The Fed

Clueless Fed Dupes 

by Tom Woods and Bob Murphy

The other day the Huffington Post ran an article by a Bonnie Kavoussi called “11 Lies About the Federal Reserve.” And you’ll never guess: these aren’t lies or myths spread in the financial press by Fed apologists. These are “lies” being told by you and me, opponents of the Fed. Bonnie Kavoussi calls us “Fed-haters.” So she, a Fed-lover, is at pains to correct these alleged misconceptions. She must stop us stupid ingrates from poisoning our countrymen’s minds against this benevolent array of experts innocently pursuing economic stability.

Here are the 11 so-called lies (she calls them “myths” in the actual rendering), and my responses.

HuffPo’s Myth #1: “The Fed actually prints money.”

She leads off with this? As if this is some big discovery that will refute the end-the-Fed people? When we talk about Fed money-printing, we are speaking in shorthand. We’re pretty certain someone like Ron Paul knows the Fed doesn’t actually print money. But he, along with pretty much the whole financial world, speaks of the Fed as printing money. You know why? Because it’s a teensy bit more convenient than saying, “We need the Fed to credit some banks’ accounts with increased balances, which it does by means of a computer, though if these balances are lent out and the borrowers prefer to use some of this lent money as cash, the Treasury will go ahead and print the cash.”

The Toothless 'Euro' Tiger And The Issue Of Fiscal Compliance

The 'tragedy of the Euro commons'

by Pater Tenebrarum

A topic we have frequently discussed in this pages has now made it into the mainstream press: namely the question in what way the new 'fiscal compact' is actually different from the Maastricht treaty when it comes to enforcing compliance. It turns out, there really isn't any difference, and it is for the very same reasons that stood in the way of countries respecting the Maastrich treaty's limits.

Der Spiegel reports:

„The EU plans to enforce its rules by imposing tough penalties in the future. But experience suggests it won't be able to gets its way against major EU countries. Even the much-vaunted fiscal pact pushed through by Chancellor Angela Merkel to underpin the euro is at risk of being watered down. When it comes to publicly urging greater integration, most European leaders aren't to be outdone 

"We need more Europe, not less," says German Chancellor Angela Merkel. "We don't need less Europe, but rather more intelligent integration," contends Luxembourg Prime Minister Jean-Claude Juncker. And French President François Hollande says: "We realize that the euro zone must have a common economic policy."

Lunch lady slammed for food that is 'too good'

It's only fair

The Local, Swedish News in English

Annika Eriksson, a lunch lady at a school in Falun, was told that her cooking is just too good. 

Pupils at the school have become accustomed to feasting on newly baked bread and an assortment of 15 vegetables at lunchtime, but now the good times are over.

The municipality has ordered Eriksson to bring it down a notch since other schools do not receive the same calibre of food - and that is "unfair".

Moreover, the food on offer at the school doesn't comply with the directives of a local healthy diet scheme which was initiated in 2011, according to the municipality.

"A menu has been developed... It is about making a collective effort on quality, to improve school meals overall and to try and ensure everyone does the same," Katarina Lindberg, head of the unit responsible for the school diet scheme, told the local Falukuriren newspaper.

We are on the road to serfdom

A free society requires hard and apolitical money

by DETLEV SCHLICHTER

We are now five years into the Great Fiat Money Endgame and our freedom is increasingly under attack from the state, liberty’s eternal enemy. It is true that by any realistic measure most states today are heading for bankruptcy. But it would be wrong to assume that ‘austerity’ policies must now lead to a diminishing of government influence and a shrinking of state power. The opposite is true: The state asserts itself more forcefully in the economy, and the political class feels licensed by the crisis to abandon whatever restraint it may have adhered to in the past. Ever more prices in financial markets are manipulated by the central banks, either directly or indirectly; and through legislation, regulation, and taxation the state takes more control of the employment of scarce means. An anti-wealth rhetoric is seeping back into political discourse everywhere and is setting the stage for more confiscation of wealth and income in the future.

War is the health of the state, and so is financial crisis, ironically even a crisis in government finances. As the democratic masses sense that their living standards are threatened, they authorize their governments to do “whatever it takes” to arrest the collapse, prop up asset prices, and to enforce some form of stability. The state is a gigantic hammer, and at times of uncertainty the public wants nothing more than seeing everything nailed to the floor. Saving the status quo and spreading the pain are the dominant political postulates today, and they will shape policy for years to come.

The Enemy Within

Uncle Sam Prepares To Unleash Up To 30,000 Drones Over America For "Public Safety"

The Federal Aviation Administration is working towards putting the finishing touches on rules and regulations for widespread domestic drone use, and the agency expects as many as 30,000 UAVs will be in America’s airspace by the decade’s end. As Russia Today notes, given that the department has already addressed the issue of acquiring drones to give the DHS a better eye of domestic doings, though, those law enforcement operations in question could very well transcend away from legitimate uses and quickly cause civil liberty concerns from coast-to-coast. All drones will be equipped with Electro-Optical/Infra-Red sensors, as well as the technology to sniff out certain chemicals from thousands of feet above our heads. Have no fear though, since the "Robotic Aircraft for Public Safety" program is for your own protection, we are sure Janet Napolitano would suggest.

 Via RT.com:

Don’t be surprised if you catch a federal fleet of sneaky spy drones soaring over your head in the near future, but don’t be too terrified — it’s all in the name of public safety.

The benefits of GM crops

After 15 years, the ecological and economic dividends are big

By Matt Ridley

Generally, technologies are judged on their net benefits, not on the claim that they are harmless: The good effects of, say, the automobile and aspirin outweigh their dangers. Today, arguably, adopting certain new technologies is harder not just because of a policy of precaution but because of a bias in much of the media against reporting the benefits.

Shale gas is one example, genetically modified food another, where the good news is deemed less newsworthy than the bad. A recent French study claimed that both pesticides and GM corn fed to cancer-susceptible strains of rats produced an increase in tumors. The study has come in for withering criticism from mainstream scientists for its opaque data, small samples, unsatisfactory experimental design and unconventional statistical analysis, yet it has still gained headlines world-wide. (In published responses, the authors have stood by their results.)

Get the state off our dinner plates

The state is so disdainful of the public that feels the need to tell us what to eat and how to eat it

by Rob Lyons 

Food scares have become ubiquitous in recent years. Indeed, some scares been repeated so regularly that they are often accepted as common sense. Yet while some of these scares have a kernel of truth to them, they have also been exaggerated, with negative consequences for our personal liberty.

So, for example, we are regularly told that we are facing an ‘obesity timebomb’, which will result in a significant proportion of the population dying at an early age after years of ill health. Saturated fat is regarded as a major cause of heart disease, to such an extent that the traditional English breakfast is nicknamed the ‘heart attack on a plate’. We are frequently told to cut down on our salt intake, because salt raises blood pressure. Sugary drinks are regarded as a leading cause of obesity and diabetes. Today, one medical doctor blogged about the ‘genocide of our children’ caused by sugary foods.

Why Do Intellectuals Oppose Free Markets?

A puzzling phenomenon in need of an explanation

by Robert Nozick

It is surprising that intellectuals oppose free markets so. Other groups of comparable socio-economic status do not show the same degree of opposition in the same proportions. Statistically, then, intellectuals are an anomaly.

Not all intellectuals are on the "left." Like other groups, their opinions are spread along a curve. But in their case, the curve is shifted and skewed to the political left.

By intellectuals, I do not mean all people of intelligence or of a certain level of education, but those who, in their vocation, deal with ideas as expressed in words, shaping the word flow others receive. These wordsmiths include poets, novelists, literary critics, newspaper and magazine journalists, and many professors. It does not include those who primarily produce and transmit quantitatively or mathematically formulated information (the numbersmiths) or those working in visual media, painters, sculptors, cameramen. Unlike the wordsmiths, people in these occupations do not disproportionately oppose free markets. The wordsmiths are concentrated in certain occupational sites: academia, the media, government bureaucracy.

Bankrupt California

The Future is here and it doesn't work

By Victor Davis Hanson

I thought of my fellow Californian Energy Secretary Steven Chu last week, when I paid $4.89 a gallon in Gilroy for regular gas — and had to wait in line to get it. The customers were in near revolt, but I wondered against what and whom. I mentioned to one exasperated motorist that there are estimated to be over 20 billion barrels of oil a few miles away, in newly found reserves off the California coast. He thought I was from Mars.

California may face the nation’s largest budget deficit at $16 billion. It may struggle with the nation’s second-highest unemployment rate at 10.6 percent. It will soon vote whether to levy the nation’s highest income and sales taxes, as if to encourage others to join the 2,000-plus high earners who are leaving the state each week. The new taxes will be our way of saying, “Good riddance.” And if California is home to one-third of the nation’s welfare recipients and the largest number of illegal aliens, it is nonetheless apparently happy and thus solidly for Obama, by a +24 percent margin in the latest Field poll. The unemployment rate in my hometown is 16 percent, the per capita income is $16,000 — and I haven’t seen a Romney sticker yet.

Who Moved My Peak Oil?

Predicting is still hard—especially about the future

By James Picerno

The buzz about peak oil has peaked, and for a good reason: the peak remains MIA. That doesn’t mean that the global supply of crude oil is a non-issue. Far from it. But for the moment, at least, statistical evidence in favor of arguing that the world’s output of crude has hit a ceiling, or is in imminent danger of doing so, looks thin.

Global production of crude (defined as crude including lease condensate) hit an all-time high this past April: 75.872 million barrels per day, according to data from the U.S. Energy Information Administration. That wasn't supposed to happen, a number of peak-oil theorists warned over the past decade. In 2001, for example, geologist Ken Deffeyes wrote a widely cited book (Hubbert's Peak: The Impending World Oil Shortage) that predicted that “global oil production will probably reach a peak sometime during this decade.” Deffeyes wasn't alone in seeing trouble on the production horizon. But as the chart below reminds, higher peaks keep coming.

The peak-oil theorists haven't given up. Instead, they keep revising their peak forecasts, pushing the dates for production crests further out in time. Two years ago, for instance, Charles Maxwell—the "dean of oil analysts"—predicted that the peak will come sometime between 2015 and 2020.

The Virtue of Freedom

In the long run, only a population that strives for virtue will be able to maintain its freedom

by Theodore Dalrymple (April 2007)

Some years ago, before Anthony Blair became Prime Minister of the benighted islands from which I write this, a newspaper got wind of the fact that I had not had a television for nearly thirty years. Would I, it asked, watch television for a week and report to readers what I thought of it. The newspaper said it would provide me with the television.

I agreed, but on one condition: that at the end of the week, the newspaper took the television away again. The editor thought this an odd condition, but accepted it.

The television duly arrived and I plugged it in. The first programme I saw after a gap of thirty years was one of those American shows in which individuals and families expose their social pathology to the idle gaze of millions. A middle-aged, lower middle-class woman was complaining about the conduct of her three daughters, aged (if I remember right) 12, 13 and 14. They had left home, and were now - if the mother was to be believed - drug-taking prostitutes. 

Romney And Obama Are Both Committed To The Same Bad Policies

When voters elect the lesser of two evils, they legitimize evil with their votes

By Lawrence Hunter

The American electoral system is rigged to guarantee that voters can choose only between Tweedle Dum and Tweedle Dee, who both are owned by the big-money elites that created and sustain them.  This cozy arrangement is the American establishment’s operationalization of V.I. Lenin’s dictum, “The best way to control the opposition is to lead it ourselves.”

Such an arrangement ensures that candidates are acceptable to the military-industrial-government-financial establishment (MIGFE for short) that controls the country.  This corrupt system short-circuits democracy, leaving candidates that are unacceptable to MIGFE stranded without access to the ballot and forcing voters into the untenable position of having to choose between the lesser of two evils.

Scotland’s vitality was the envy of the world

The Scots were a nation of strivers, until the state promoted a toxic dependency culture

David Hume

By Allan Massie

In 1926 my father, aged 19, left an Aberdeenshire farm to be a rubber planter in Malaya. Apart from a year back home after enduring a Japanese prisoner-of-war camp, he didn’t return to live in Scotland until he was almost 70. He was dismayed by what he found. It seemed to him that the Scots were no longer the hard-working, energetic and self-reliant people they had been in his youth. Instead they were given to self-pity and the belief that the world owed them a living that the state should provide.

There were exceptions, of course. The oil-rich north-east was not short of people starting their own businesses. But in general he believed that the Scots were sunk in a dependency culture, and this depressed and irritated him. He was out of sympathy with modern Scotland, though he was quite typical of his own era, when the Protestant work ethic ruled and the judgment “he’s done well for himself” was an expression of approval.

There Could Be Weeks When Decades Happen

There are people in the streets and living on the sidewalks in Southern Europe

By Mark J. Grant

There are a variety of ways of making a point. I am not in the Armageddon crowd or the ranting and raving group. I find it to be irresponsible to call for the end of the world and personal aggrandizement is not what I am after in my commentary. What I write here has one distinct intention and that is to keep you out of trouble. After my very long tenure on Wall Street I know how the Great Game works; make money in eighths and quarters and loose it in points and scores of points. Grant’s Rules 1-10, “Preservation of Capital” is always uppermost in my mind and as Europe sinks into a great and wide gaping hole and as even the IMF projects a deepening recession the concerns that I have felt, the concerns that I have warned about so repeatedly are increasing right in step with the inabilities of Europe first to recognize and then to constructively deal with their problems.

President Houdini, The Employment Magician

Is Barack Obama really the new Ronald Reagan?

by Chriss Street

All great magicians employ misdirection to create miraculous illusions, leaving their audiences stunned and confused.  President “Houdini’s” miraculous creation of 873,000 jobs in the month of September magically drove down the national unemployment rate from 8.1% to 7.8%, just as absentee voting begins.  The trick left Republicans and economists equally befuddled, since the last time a similar monthly jobs increase appeared was June of 1983 when the economy was growing at an astronomical 9.3% annual rate.  But looking behind Barack the Great’s smoke and mirrors reveals that the President’s highly controversial July suspension of the “workfare” requirements that welfare recipients must actually do real work to be counted as employed seems to have dramatically reduced the U.S. Labor Department’s unemployment rate.

Germany Eyes Gold Standard

The world needs growth and is willing to go to extraordinary lengths to get it

Editorial of The New York Sun

It would be too much to say that the government of Free Germany, as we are still wont to call it, is taking steps toward the gold standard. After all, no committee beckons in the Bundestag. The government is entangled with Spain and Greece and the scrip known as the Euro. The newspapers are mum. It would not be too much, though, to say that the latest report from the Deutsche Bank, the country’s leading private bank, is a newsworthy document, even if it will slide past up the bien pensant salons of Europe.

Deutsche Bank’s report is “Gold: Adjusting for Zero.” It reckons we’re in a situation that is “Zero for growth, yield, velocity and confidence.” It says: “We believe there are nearly zero real options available to global policy-makers. The world needs growth and is willing to go to extraordinary lengths to get it.” It forecasts bluntly that the value of the dollar will plummet in the first half of 2013 to less than a 2,000th of an ounce of gold. It reckons “the growth in supply of fiat currencies such as the USD will remain an important driver.”

Why A Gold Standard, Alone, Is Not Enough

If the gold standard is adopted, it will be out of necessity and in desperation

...The Argentine case and the Dutch Golden Age suggest that the elimination of the credit multiplier (i.e. extinction of shadow banking) is more important than the asset backing a currency...

by Martin Sibileau

As we pointed in our last letter, we have lately noticed that there is an ongoing debate on whether (or not) the world can again embrace the gold standard. We join the debate today, with an historical as well as technical perspective. Today’s letter will deal with the historic part of the discussion. In the process, you will see that we side with some popular ideas, while we challenge others.

The gold standard will be the last option: If adopted, it will be out of necessity and in desperation

We are not historians. In our limited knowledge, we note however that historically, the experiment of adopting a gold standard –or a currency board system- was usually preceded by extremely trying moments, including the loss by a government of its legal tender amidst hyperinflation.

How Capitalism Can Save Art

Why a new generation has chosen iPhones and other glittering gadgets as its canvas

By CAMILLE PAGLIA

Does art have a future? Performance genres like opera, theater, music and dance are thriving all over the world, but the visual arts have been in slow decline for nearly 40 years. No major figure of profound influence has emerged in painting or sculpture since the waning of Pop Art and the birth of Minimalism in the early 1970s.

Yet work of bold originality and stunning beauty continues to be done in architecture, a frankly commercial field. Outstanding examples are Frank Gehry's Guggenheim Museum Bilbao in Spain, Rem Koolhaas's CCTV headquarters in Beijing and Zaha Hadid's London Aquatic Center for the 2012 Summer Olympics.

What has sapped artistic creativity and innovation in the arts? Two major causes can be identified, one relating to an expansion of form and the other to a contraction of ideology.

Painting was the prestige genre in the fine arts from the Renaissance on. But painting was dethroned by the brash multimedia revolution of the 1960s and '70s. Permanence faded as a goal of art-making.

But there is a larger question: What do contemporary artists have to say, and to whom are they saying it? Unfortunately, too many artists have lost touch with the general audience and have retreated to an airless echo chamber. The art world, like humanities faculties, suffers from a monolithic political orthodoxy—an upper-middle-class liberalism far from the fiery anti-establishment leftism of the 1960s. (I am speaking as a libertarian Democrat who voted for Barack Obama in 2008.)

Nine in ten Scots 'living off state's patronage'

Anyone who challenges the status quo is deemed an “enemy of the state”

Almost nine out of 10 Scottish households take more from the public purse than they contribute in taxes thanks to a “rotten system” of state patronage

By Simon Johnson,

Ruth Davidson, the Scottish Conservative leader, is to highlight official figures showing that only 283,080 households north of the border – 12 per cent of the total – pay more in tax than they receive in public services.

She will tell delegates that, because the public sector is seen as the key provider of everything from housing to employment, state spending now accounts for more than half Scotland’s wealth.

She will blame Alex Salmond, the SNP First Minister, and his Labour predecessors for nurturing a “corrosive sense of entitlement” among voters that has prevented her party making a comeback in Scotland.

Miss Davidson will argue this Left-wing “stranglehold” suits Labour and the SNP but has made it difficult for the Tories as so many voters are reliant on the public sector for their household income.

But the Nationalists described it as her “Mitt Romney moment”, in a reference to the Republican presidential candidate’s comments that 47 per cent of Americans pay no income tax and are dependent on the state.

Germany Should Return to the Deutsche Mark

Returning to the Deutsche mark will significantly increase the prosperity of German citizens

By Gilad Alper

German politicians are forcing their citizens to finance the wasteful lifestyles of other euro-member states. This fact is sometimes obfuscated by talk about European solidarity, maybe by invoking 70-year-old German guilt, or by some other demagoguery. But the fact remains that Germans, through their hard work and relatively frugal lifestyle, are financing Greece, Spain, Italy and France.

Indeed, forget about Greece or Spain. France is set to be the main recipient of Germany's largess. Extensive research, authored by Holger Schmieding of Berenberg Bank, found France was to be one of the most troubled economies in Europe in terms of its budget deficit, trade balance and other metrics.

What Germans might find particularly vexing is that the French have done almost nothing since 2008 to try and fix their problems. In fact, the new Socialist president, Francois Hollande, has raised the retirement age and is making it harder for companies to lay-off redundant employees.

But why should France behave any differently? The rational thing to do when someone is willing to finance your lavish lifestyle is to continue to enjoy life, and just make sure the sucker keeps on giving. A more interesting question is why German politicians continue to confiscate the fruit of the labor of their own citizenry and transfer it to other countries. Think about it - politicians taking money away from voters and giving it to non-voters! So why is Germany so adamant to keep the euro alive? The German establishment might be concerned with an economic meltdown of some of its EU trading partners. But a solution that involves sending money from Germany to these states so that they can use this money to buy German products makes no sense.