90 Years Ago: The End of German Hyperinflation

Unbacked paper money is political money and as such it is a disruptive element in a system of free markets

by Thorsten Polleit

On 15 November 1923 decisive steps were taken to end the nightmare of hyperinflation in the Weimar Republic: The Reichsbank, the German central bank, stopped monetizing government debt, and a new means of exchange, the Rentenmark, was issued next to the Papermark (in German: Papiermark). These measures succeeded in halting hyperinflation, but the purchasing power of the Papermark was completely ruined. To understand how and why this could happen, one has to take a look at the time shortly before the outbreak of World War I.

Since 1871, the mark had been the official money in the Deutsches Reich. With the outbreak of World War I, the gold redeemability of the Reichsmark was suspended on 4 August 1914. The gold-backed Reichsmark (or “Goldmark,” as it was referred to from 1914) became the unbacked Papermark. Initially, the Reich financed its war outlays in large part through issuing debt. Total public debt rose from 5.2bn Papermark in 1914 to 105.3bn in 1918.[1] In 1914, the quantity of Papermark was 5.9 billion, in 1918 it stood at 32.9 billion. From August 1914 to November 1918, wholesale prices in the Reich had risen 115 percent, and the purchasing power of the Papermark had fallen by more than half. In the same period, the exchange rate of the Papermark depreciated 84 percent against the US dollar.

The new Weimar Republic faced tremendous economic and political challenges. In 1920, industrial production was 61 percent of the level seen in 1913, and in 1923 it had fallen further to 54 percent. The land losses following the Versailles Treaty had weakened the Reich’s productive capacity substantially: the Reich lost around 13 percent of its former land mass, and around 10 percent of the German population was now living outside its borders. In addition, Germany had to make reparation payments. Most important, however, the new and fledgling democratic governments wanted to cater as best as possible to the wishes of their voters. As tax revenues were insufficient to finance these outlays, the Reichsbank started running the printing press.

From April 1920 to March 1921, the ratio of tax revenues to spending amounted to just 37 percent. Thereafter, the situation improved somewhat and in June 1922, taxes relative to total spending even reached 75 percent. Then things turned ugly. Toward the end of 1922, Germany was accused of having failed to deliver its reparation payments on time. To back their claim, French and Belgian troops invaded and occupied the Ruhrgebiet, the Reich’s industrial heartland, at the beginning of January 1923. The German government under chancellor Wilhelm Kuno called upon Ruhrgebiet workers to resist any orders from the invaders, promising the Reich would keep paying their wages. The Reichsbank began printing up new money by monetizing debt to keep the government liquid for making up tax-shortfalls and paying wages, social transfers, and subsidies.

Which bubbles will burst the worst?

It is only a question of time

  

By Martin Hutchinson 
Last week the hedge fund SAC was fined US$1.8 billion and will revert to running Steve Cohen's family money only - still a big job, since he's worth some $8-9 billion. This raises the question of which forms of investment will be exploded by the next market downturn, just as were subprime mortgages and complex securitizations by the 2008 unpleasantness. 

Guessing what the next downturn will look like and which forms of wealth will suffer permanent rather than temporary diminution in value is the most important task facing investors as we approach the top of the current bubble. 

After the 2000 bubble burst, the value downturn was almost entirely in equities, and a tiny subset of equities at that. While the main share indexes declined less than 50%, and were above their previous peaks within six years, the Nasdaq is still 13 years later more than 20% below its 2000 peak of 5,048, a loss of more than 40% when inflation is taken into account. 

For individual companies, the decline was more comprehensive. Microsoft (Nasdaq:MSFT) and Cisco (Nasdaq:CSCO) are both more than a third below their 2000 highs, even though their assets and profits are much greater than they were in 2000. Some companies have had much steeper falls; the switchgear specialist JDS Uniphase (Nasdaq:JDSU), valued well over $100 billion in 2000, now has a stock price of little more than 1% of its high, even though the company's operations remain solidly profitable and its P/E ratio is still elevated at 45 times earnings. Finally, a few companies that had taken excessive advantage of easy money and easy ethics went outright bankrupt, the most prominent being Enron, WorldCom and Global Crossing. 

Other types of asset saw only a modest downturn after 2000. Emerging market stocks had already been beaten down in 1997-98, so the 2000 crash saw only a hiccup in the beginnings of recovery. The hedge fund that had sold all its tech holdings in March 2000 and reinvested in Russia and Indonesia would have truly deserved its management's exorbitant fees. Gold and silver too were close to their bottom in 2000, and would prove an excellent investment over the next decade. 

JFK, Warmonger

His foreign policy was worse than George W. Bush’s

By JUSTIN RAIMONDO

Fifty years is long enough to mold history into mythology, but in the case of John Fitzgerald Kennedy it only took a decade or so. Indeed, long before Lyndon Johnson slunk off into the sunset, driven out of office by antiwar protestors and a rebellion inside his own party, Americans were already nostalgic for the supposedly halcyon days of Camelot. Yet the graceless LBJ merely followed in the footsteps of his glamorous predecessor: the difference, especially in foreign policy, was only in the packaging.

While Kennedy didn’t live long enough to have much of an impact domestically, except in introducing glitz to an office that had previously disdained the appurtenances of Hollywood, in terms of America’s stance on the world stage—where a chief executive can do real damage quickly—his recklessness is nearly unmatched.

As a congressman, Kennedy was a Cold War hardliner, albeit with a “smart” twist. After a 1951 trip to Southeast Asia he said the methods of the colonial French relied too much on naked force: it was necessary, he insisted, to build a political resistance to Communism that relied on the nationalistic sentiment then arising everywhere in what we used to call the Third World. Yet he was no softie. While the Eisenhower administration refused to intervene actively in Southeast Asia, key Democrats in Congress were critical of Republican hesitancy and Kennedy was in the forefront of the push to up the Cold War ante: “Vietnam represents the cornerstone of the Free World in Southeast Asia,” he declared in 1956, “the keystone to the arch, the finger in the dike.”

As Eisenhower neared the end of his second term, Democrats portrayed him as an old man asleep at the wheel. This narrative was given added force by the sudden appearance of a heretofore unheralded “missile gap”—the mistaken belief that the Soviets were out-running and out-gunning us with their ability to strike the United States with intercontinental ballistic missiles.

This storyline was advanced by two signal events: the 1957 launching of Sputnik, the first artificial satellite to go into orbit around the earth, and the equally successful testing of a Soviet ICBM earlier that summer. That November, a secret report commissioned by Eisenhower warned that the Soviets were ahead of us in the nuclear-weapons field. The report was leaked, and the media went into a frenzy, with the Washington Post averring the U.S. was in dire danger of becoming “a second class power.” America, the Post declared, stood “exposed to an almost immediate threat from the missile-bristling Soviets.” The nation faced “cataclysmic peril in the face of rocketing Soviet military might.”

The ugly misery of Bernanke's demagogy

Bernanke has locked the US into zero-interest rates and unlimited money growth

By Noureddine Krichene 
Only a government can destroy an economy. Only unrestrained demagogues in charge of key policy making can spread agony and misery. Back in the 1950s, professor Milton Friedman feared that a mad chairman could be in charge with the Federal Reserve (Fed) and play havoc with the United States economy. 

Although the US Constitution Article I, section 8, clause 5 provides: "The Congress shall have power ... to coin money, regulate the value thereof, and of foreign coin, and fix the standards of weights and measures ... [and clause 6:] to provide for the punishment of counterfeiting the securities and current coin of the United States", he urged constitutional laws that would restrain the discretionary power of a Fed chair and subject money supply to a fixed rule. 

Friedman along other economists such as Ludwig von Mises, Maurice Allais, and Lionel Robbins rejected any central bank intervention in the labor markets, fixing of interest rates, or stabilizing prices. While famous writers (eg, Mises, Ron Paul, and Murray Rothbard) strongly called for abolishing the Federal Reserve, others, including Friedman, called for restraining money supply to a fixed growth rate of 2%-4% regardless of the state of the economy. 

The prophecies and fear of Friedman have been fulfilled by the economic and money chaos of present Fed chairman Ben Bernanke's policies. 

With an unorthodox and inflexible mind, Bernanke forced inflationism as a key policy maker of the George W Bush administration. His cheap-money policy caused the worst financial crisis in post-war period and undermined the US and other key economies. Years of disorders and misery followed two decades of prosperity. In the United States, millions are unemployed; more than 50 million live on food stamps. Europe, Japan, and the US are all forced into reciprocal money destruction: the fight of the Kilkenny cats. 
Bernanke is not the first stubborn leftist who never renounces his ideology no matter how destructive his actions turn out to be. Recent history is full of leftist leaders who relentlessly devastated economies without renouncing their policies as long as they have the power to do so. It took decades of devastation before populations start to realize the false promises of statists. 

France Flirts with Fiscal Asphyxiation

Fiscal tinkering and dismal economic news appear to have a long life ahead in France

by Fabio Rafael Fiallo

To search for efficacy and coherence in the economic policy conducted by France's President Francois Hollande and Prime Minister Jean-Marc Ayrault has become an arduous if not fruitless task. Welcome to 21st century France, where daily headlines detailing dismal employment numbers, factory closures and redundancy plans are edged out only by cases of government muddling and backpedaling.

President Hollande's woes stem, to a large extent, from the difficulty in reconciling his commitment to reduce by 2015 the public deficit to three percent of GDP with the pressure exerted by his political base to maintain France's profligate welfare state -- and an overall public spending that absorbs 57 percent of GDP (the highest ratio, along with Denmark, in the Eurozone).

Constrained by these political parameters, President Hollande and his prime minister have tried to shave France's public deficit by lavishly raising taxes and creating all kinds of new levies.

But then, confronted with the massive discontent that such measures have provoked among firms, farmers and households, the government has been obliged to backpedal and even capitulate on multiple occasions.

President Hollande recently gave the impression that he understood the malaise France is stuck in when, in August of this year, he announced a "fiscal pause" (a standstill on taxes) for 2014. In September, he went further and promised that there would be "no more tax increases" apart from those already in the pipeline.

The commitment proved to be short-lived. Prime Minister Jean-Marc Ayrault corrected the president by stating that, in fact, the "fiscal pause" would have to wait until 2015. What's more, a new tax hike -- retroactive to 1997 -- was imposed on household savings, while a pro-environment levy on road transportation (ecotax) was programed to be collected as of January 1, 2014.

These new measures gave rise to large-scale protests that forced the government to backpedal in both cases.

The cocktail of tax increases and policy climbdowns has brought about an environment characterized by fiscal instability and economic uncertainty. Not surprisingly, firms are reluctant to invest and hire as they fret the arrival at any moment of a new fiscal blow that would damage their profitability.

Venezuela’s Maduro Channels Hitler with New Powers, Anti-Capitalist Propaganda

A new law to make Maduro the undisputed dictator of Venezuela very likely to pass 

BY SOBER LOOK

Today we start with a bit of history discussing the one key event which allowed Adolf Hitler to become the absolute dictator of Germany in 1933. It was a piece of legislation called The Enabling Act.

Wikipedia: — The Enabling Act (German: Ermächtigungsgesetz) was a 1933 amendment to the Weimar Constitution that gave the German Cabinet — in effect, Chancellor Adolf Hitler — the power to enact laws without the involvement of the Reichstag [the Parliament]…

The Enabling Act allowed the cabinet to enact legislation, including laws deviating from or altering the constitution, without the consent of the Reichstag.

The law was supposed to allow the cabinet to "cleanse" Germany from some corrupt and unwanted element and was meant to be temporary and used only on occasion. Here are some quotes from Hitler in reference to The Enabling Act:

By its decision to carry out the political and moral cleansing of our public life, the Government is creating and securing the conditions for a really deep and inner religious life…

The struggle against the materialistic ideology and for the erection of a true people's community (Volksgemeinschaft) serves as much the interests of the German nation as of our Christian faith…

The government will make use of these powers only insofar as they are essential for carrying out vitally necessary measures… The number of cases in which an internal necessity exists for having recourse to such a law is in itself a limited one…

[Hear More: Adam Fergusson — When Money Dies: A Comparison Between 1920's Weimar Germany and Today]

Of course as soon as The Enabling Act was passed, Reichstag effectively gave up all its powers.

Britain’s crazy prostitution laws

The UK’s array of prostitution laws only make things worse for sex workers

By LUKE GITTOS

Society seems to have a confused and ambivalent relationship with prostitutes. On the one hand, some argue that prostitution is the last vestige of employment for women who have been entirely subjugated beneath the will of a patriarchal society. For these people, mostly contemporary feminists, prostitutes are a ‘symptom’ of some deep patriarchal disease; they’re women who have placed themselves at the mercy of the sexual marketplace because they have no other option.

On the other hand, prostitution is celebrated as a trendy new sexuality, a symbol of feminine empowerment. At a time when being intimate is variously seen as uncool, dangerous, or emotionally ‘too much’, the fact that people sell sex like they would sell a television is seen as a funky and positive approach to modern sexual interactions. The popularity of TV dramas like Secret Diary of a Call Girl, in which Billie Piper plays a high-class prostitute getting into all sorts of scrapes in the process of prostituting herself, shows that many are happy to embrace prostitution as part of a new era of contemporary sexuality.

Of course, prostitution attracts both the ambitious and the desperate alike. But in England, the law which currently governs prostitution, resting on the idea that all prostitutes are vulnerable ‘sex workers’ in need of the state’s protection, is entirely harmful, and dangerously misrepresents a complex reality.

Prostitution itself is not illegal. However, the Sexual Offences Act of 2003 introduced an offence of ‘controlling’ prostitution. What does ‘controlling’ mean? According to the Court of Appeal it does not require the exercise of force or compulsion. In fact, a woman can be ‘controlled’ in prostitution even if she is ‘exercising free will’ when she chooses to prostitute herself.

In short, the offence punishes anyone who exerts any degree of ‘control’ whatsoever over a prostitute, even if that prostitute is choosing with absolute freedom to prostitute themselves. How is it that English law has moved to punish those who exercise even nominal ‘control’ over a person’s activities, without punishing the activity itself?

A Major Problem with State Schools

John Major wasn't posh-bashing - he was rightly critiquing state schools

by TIM BLACK

How on earth has ex-Tory prime minister John Major, a man hitherto associated with a back-of-the-throat monotone, rumours of grey pants, and a political vision encapsulated by the cones hotline, suddenly become the talk of the Westminster town? Simple: he made a speech that seemed to chime with the mainstream commentariat prejudices about politicians, particularly Conservative ones.

That wasn’t all he did last Friday, when confronted by the amassed ranks of the Norfolk Conservative Association. He also had a go at greedy bankers, and their collapsing banks; he even had a go at those who have spent more than they earn, and stored up debt for future generations, calling it ‘immoral’. But none of this quite hit the mark. After all, which mainstream politician today doesn’t spruce up his tired attacks on the opposition with naughty-banker sentiments, and a bit of ‘won’t someone think of the children’ grandstanding. He needed to say something with the taint of controversy. And then it happened. ‘In every single sphere of British influence’, he monotoned, ‘the upper echelons of power in 2013 are held overwhelmingly by the privately educated or the affluent middle class. To me from my background, I find that truly shocking.’

By Sunday, when the speech had been taken up by the media, its meaning was assumed. Major was attacking today’s government of the posh, with prime minister David Cameron and chancellor George Osborne firmly in his sights; he was waging war on the privately educated cabal running the country and keeping the poor and impoverished in their place; and, for many broadsheet commentators, this now made him ‘one of us’.

There has been no shortage of class warriors willing to join Major at the barricades. ‘Private schools… are symbolic of the wider link in this country between how much money your parents have and how much opportunity you’re given’, noted one commentator. ‘The problem is clear’, she concluded, ‘the question is whether we want to do anything about it’. Another pundit at the 

How Obamacare Accomplishes The Unthinkable

The enrollment figures and poll numbers show reform has backfired

By Ben Domenech

President Obama’s signature domestic policy may have accomplished something previously unthinkable: taking an issue where one party had a dominant hold on public opinion, and reversing it in favor of the opposing party.

If the latest poll numbers and enrollment figures are to be believed, we could be witnessing a political achievement unequaled in modern political history: the complete demolition of one party’s long-term dominance on an issue area – the Democrats’ ownership of the health care issue – in the space of a few months. Quinnipiac finds that young people trust Republicans in Congress more on health policy than the president; that a plurality of Hispanics, long the most pro-Obamacare faction, are now opposed to the law; and that overwhelming majorities (70+ percent) of Democrats, Republicans, and Independents are in favor of delaying the law. And that’s not all:

Only 19 percent of American voters say the quality of care they and their families receive will improve in the next year because of the Affordable Care Act (ACA), while 43 percent say it will get worse and 33 percent say ACA won't affect their health care. Voters oppose the ACA 55 - 39 percent, with men opposed 59 - 37 percent and women opposed 51 - 41 percent. American voters are divided 46 - 47 percent on whether Obama "knowingly deceived" the public when he said people could keep their existing health insurance plans if they wished. Voters also support 73 - 20 percent extending the March 31, 2014 deadline for signing up for coverage without facing a penalty.

No wonder we’re seeing these kinds of numbers, when even die-hard supporters of the law are getting hit hard by its ramifications. And for what? The enrollment figures released today illustrate that the administration has failed thoroughly in managing Obamacare’s launch, with just 26,794 people having enrolled via Healthcare.gov (and even that definition is dubious, given that the federal site reportedly is unable to process payments at this time). Comparison to the four million or so people who have lost their existing plans is laughable.

 All told, the federal exchange enrollment figures work out to just 23 people per day per state signing up via the site. The whole project now looks like the creation of a tiny high risk pool and a Medicaid expansion in half the states. 

As the American Action Forum outlines in this chart, the project is so far behind the expected and hoped-for pace, it seems unthinkable that it would ever approach estimates in the near future:

All this has led Ezra Klein to publicly voice the concerns that smart progressives have been whispering about for weeks now:

The Affordable Care Act's political position has deteriorated dramatically over the last week. President Bill Clinton's statement that the law should be reopened to ensure everyone who likes their health plans can keep them was a signal event. It gives congressional Democrats cover to begin breaking with the Obama administration. 

All Options on Table

Central Bank Could Adopt Negative Deposit Rate, Asset Purchases If Needed

By BRIAN BLACKSTONE

The European Central Bank could adopt negative interest rates or purchase assets from banks if needed to lift inflation closer to its target, a top ECB official said, rebutting concerns that the central bank is running out of tools or is unwilling to use them.

"If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal," ECB executive board member Peter Praet said in an interview Tuesday with The Wall Street Journal.

Annual inflation in the euro zone slowed to 0.7% in October, far below the central bank's target of just below 2% over the medium term. The euro dipped briefly after the comments appeared on the Journal's website.

Mr. Praet didn't rule out what some analysts see as the strongest, and most controversial, option: purchases of assets from banks to reduce borrowing costs in the private sector.

"The balance-sheet capacity of the central bank can also be used," said Mr. Praet, whose views carry added weight as he also heads the ECB's powerful economics division. "This includes outright purchases that any central bank can do."

Additional stimulus from the ECB isn't needed right now, Mr. Praet signaled, noting that inflation risks for the euro zone as a whole are balanced after last week's unexpected ECB interest-rate cut.

On Thursday the central bank reduced its key lending rate to 0.25%, a record low.

The move came days after the October inflation report fanned fears that the euro zone may slip into a period of excessively low inflation or, in some places, persistent declines in consumer prices, known as deflation. This cripples economic activity by holding wages and profits down and hampering efforts by the private sector and governments to reduce debt.

Obama Translated

Sadly, only in our new normal world is this funny...

On this day let us commemorate…

It was a straight road from Revolutionary France to Soviet Russia

By Natalie Solent

"… the victims of the French Revolution. Today is 20th Brumaire in the year CCXXII. On this day in in Year Two, 10th November 1793 in the former calendar, the Festival of Reason was inaugurated in the Temple of Reason, before and afterwards known as the Cathedral of Notre Dame."

When reading his description of the first Festival modern readers may find it difficult to share the outrage expressed by the highly partisan nineteenth century politician and historian of the French Revolution, denounced alike by Carlyle and Marx, Adolphe Thiers. The Catholic Church under the ancien régime was oppressive and parasitical, and the Festival can seem to modern eyes like nothing much worse than an embarrassingly amateur charity pageant run by the Women’s Institute:

The first festival of Reason was held with pomp on the 20th of Brumaire (10th of November) It was attended by all the sections, together with the constituted authorities. A young woman represented the goddess of Reason. She was the wife of Momoro, the printer, one of the friends of Vincent, Bonsin, Chaumette, Hebert, and the like. She was dressed in a white drapery; a mantle of azure blue hung from her shoulders ; her flowing hair was covered with the cap of liberty. She sat upon an antique seat, intwined with ivy and borne by four citizens. Young girls dressed in white, and crowned with roses, preceded and followed the goddess. Then came the busts of Lepelletier and Marat, musicians, troops, and all the armed sections. Speeches were delivered, and hymns sung in the Temple of Reason ; they then proceeded to the Convention, and Chaumette spoke in these terms :

“Legislators ! Fanaticism has given way to reason. Its bleared eyes could not endure the brilliancy of the light. This day an immense concourse has assembled beneath those Grothic vaults, which, for the first time, re-echoed the truth. There the French have celebrated the only true worship, that of liberty, that of reason. There we have formed wishes for the prosperity of the arms of the republic. There we have abandoned inanimate idols for reason, for that animated image, the masterpiece of Nature.” As he uttered these words, Chaumette pointed to the living goddess of Reason.

Kristallnacht: Anti-Semitism Then and Now

75 years on, are Jews once again being treated as ‘different’?

BY FRANK FUREDI

It’s the seventy-fifth anniversary of Kristallnacht, the name given to the violent wave of destruction against German Jews on 9/10 November 1938 which unleashed a chain of events that would eventually culminate in the Final Solution of the Nazi regime.

Across Europe, rituals of remembrance have been organised, all highlighting the tragic consequences of the xenophobia embodied in Kristallnacht. At the time of those events, a writer for The Times said the ‘systematic plunder and destruction’ was on a scale that ‘seldom had [its] equal in a civilised country since the Middle Ages’.

Actually, what was really remarkable about Kristallnacht was not so much the scale of the destruction as the almost casual manner in which the pogrom was carried out. Some Germans were shocked by the sight of teenage members of the Hitler Youth attacking Jewish women and elderly men in the streets, but most people didn’t seem particularly bothered. Why?

Kristallnacht is, understandably, treated as a symbol of politically organised mob violence. What is often overlooked is how much this event, and the way it was justified by Nazi propaganda, expressed a very clear statement about the nature of the Jew. The pretext for the pogrom was the assassination of Ernst vom Rath, a minor German diplomat, by a German-born Polish Jew, Herschel Grynszpan. A few days after the assassination and the eruption of Kristallnacht, Joseph Goebbels, Nazi minister for propaganda, spoke of the ‘justified and understandable indignation of the German people at the cowardly assassination of a German diplomat’. In other words, it was ‘justified and understandable’ that punishment for the act of one individual should be inflicted on any individual of Jewish heritage.

Still Feel Confident About Collecting Your Pension After This?

The Party is Over

By Raoul Ilargi Meijer

If your answer to that question is affirmative, I suggest you take a good hard look at what's coming out of Detroit these days. Why don't we just call it a bail-in model, not unlike Cyprus, where the waters are tested for forcing parties who historically thought they were safe from cuts, find they no longer are.

And if you think Detroit is the only American city that has these kinds of problems, think again. It's merely the first, count on it. It's not just an American issue either, of course, and although retirements plans are set up in myriad different ways, they have one thing in common: they are in essence pyramid schemes, eat your heart out Charles Ponzi, and it's just a matter of time before the walls start crumbling.

But it's not just that. The game is stacked and fixed in favor of certain parties at the cost of others. We can all grasp how, without even knowing any details, because we should know how America, and the world at large, works these days. All games are fixed.

If you still have trouble understanding what is going on here, please do read Nicole Foss'Promises, Promises ... Detroit, Pensions, Bondholders And Super-Priority Derivatives from early September. Here's one quote from that article:

Promises that cannot be kept will not be kept. It is as simple as that. To complicate matters, however, the architecture of the financial system prioritizes promises, in a perhaps counter-intuitive, and certainly self-serving, manner. This will make the task of allocating extremely scarce resources to stakeholders lower down the financial food chain very much more difficult. It is time for a good look at the range of promises made, the competing needs of the recipients, the leverage enjoyed by powerful players in shoring up their own position, and the real world implications for municipalities far beyond Detroit.

And here's another one:

Maduro's Price Police

Price inflation will cause his demise

By Alvaro Vargas Llosa  

The Venezuelan government’s war on price inflation is not a metaphorical one—last weekend President Maduro, who owes his title to April’s rigged election, ordered the military takeover of Daka, a chain of electronic stores, and the arrest of several managers from that and other retail companies. The rhetoric employed by Maduro was inevitably interpreted by the masses as an encouragement to loot—which is what they did in the city of Valencia.

Besides the images sent out by citizen-reporters in Valencia, the picture that best captures the essence of what is happening is the one tweeted by a government minister who tried to justify the measures. The photo shows a washer/dryer that, in the words of the minister, “cost 39,000 VEF on November 1 and today costs 59,000 VEF, a nearly 100 percent rise in a week...”

Yes, minister, that is precisely what happens when you are on the verge of hyperinflation! The inflation rate is now nearing 60 percent and, as anyone who has lived under those conditions (including yours truly) knows, going from 60 percent to 1,000 percent is a lot easier than going from 3 percent to 40 or 50 percent.

For many years Venezuela has produced nothing but oil (in decreasing quantities) and has therefore had to import pretty much everything the population consumes. The artificial level at which the government has kept the bolivar in spite of the massive outflow of hard currency required to meet those import needs has, of course, caused a severe drop in foreign-exchange reserves. Government controls and the militarization of the economy have not prevented the black market from taking the real exchange rate to a level ten times higher than the official one. No wonder people who have to obtain US dollars to import even the most basic stuff sell it at much higher prices than the government Wonderland economy dictates.

What Made the Nazi Holocaust Possible?

Tyranny and Gun Control 

By Stephen P. Halbrook

This week marks the 75th anniversary of Kristallnacht, or the Night of the Broken Glass, the Nazi pogrom against Germany’s Jews on Nov. 9-10, 1938. Historians have documented most everything about it except what made it so easy to attack the defenseless Jews without fear of resistance. Their guns were registered and thus easily confiscated.

To illustrate, turn the clock back further and focus on just one victim, a renowned German athlete. Alfred Flatow won first place in gymnastics at the 1896 Olympics. In 1932, he dutifully registered three handguns, as required by a decree of the liberal Weimar Republic. The decree also provided that in times of unrest, the guns could be confiscated. The government gullibly neglected to consider that only law-abiding citizens would register, while political extremists and criminals would not. However, it did warn that the gun-registration records must be carefully stored so they would not fall into the hands of extremists.

The ultimate extremist group, led by Adolf Hitler, seized power just a year later, in 1933. The Nazis immediately used the firearms-registration records to identify, disarm and attack “enemies of the state,” a euphemism for Social Democrats and other political opponents of all types. Police conducted search-and-seizure operations for guns and “subversive” literature in Jewish communities and working-class neighborhoods.

Jews were increasingly deprived of more and more rights of citizenship in the coming years. The Gestapo cautioned the police that it would endanger public safety to issue gun permits to Jews. Hitler faked a show of tolerance for the 1936 Olympics in Berlin, but Flatow refused to attend the reunion there of former champions. He was Jewish and would not endorse the farce.

By fall of 1938, the Nazis were ratcheting up measures to expropriate the assets of Jews. To ensure that they had no means of resistance, the Jews were ordered to surrender their firearms.

The Economics of Disagreement

True conformity is possible only in the cemetery

BY JR NYQUIST

Disagreement is a fundamental part of life. It is essential to the economy. Just as a certain kind of agreement is necessary to life, so is a certain kind of disagreement. It is when our interests coincide that we can agree. It is when our interests and beliefs do not coincide that we disagree. When a company is formed there is an agreement, when something is paid for there is an agreed price. Is disagreement, therefore, an economic negative?

We should not be so simple as to assume that agreement is good and disagreement bad. Although we might say that all wars are about disagreement and peace is about agreement, and we might say that wealth destruction occurs in the context of disagreement while wealth creation occurs on account of agreement, there is more to this story. It is possible to imagine a destructive agreement and a constructive disagreement. A country that agrees to the wrong trade policy, for instance, may give serious strategic advantages to a competitor; domestic industries may go under, manufacturing capacity may decline with implications for military security and domestic employment (e.g., as in the trade relationship between China and the United States). A constructive disagreement may result in a parliamentary debate over a new law from which new understandings and practices emerge.

Peter Barron Stark offers 8 Steps to Constructive Disagreement. According to Stark, “Disagreements are a positive, normal and necessary part of building a great relationship or a team.” People tend to disagree on many points, and we often find this troublesome; but we must not imagine that disagreements are something to be set aside in search of perpetual agreement. Such has often proved a dangerous course to follow. Every investor and business leader would profit by reading Irving L. Janis’s Victims of Groupthink: A Psychological Study of Foreign Policy Decisions and Fiascos. As Janis points out, the desire for agreement and consensus can result in people suppressing important objections and contrary observations that prevent disaster from overtaking those who are swept along with others by the desire to fit in. In seeking agreement, and through the suppression of unpopular views, people can do incredibly stupid things. A CEO or government leader is bound to have blind spots. If there is no way to disagree or challenge his views, then disaster is bound to occur. These are especially shown in the history of powerful or charismatic leaders.

Stark tells us that 

“Good business decisions are brought about by respecting each other’s opinion, and having the ability to have a constructive dialogue where each team member has the opportunity to learn from each other, rather than purely liking each other.” 

Obamacare - Blinding You With Science

Science is glorious. But government is not science, and society cannot be managed scientifically from the center.

by Jeffrey Tucker

It is such a kick to read the transcripts from the White House’s health care “war room” in the first days of release. What a meltdown, and you get to watch it all in real-time.

I’m not trying to be cruel to the kindly despots who have wrecked so much of what worked in the existing system, only to replace it with an unworkable central plan that’s robbing people all over the country.

But still, there is justice in this humiliation.

Somehow, the Republicans forced the Obama administration to cough up the details, and it is from these transcripts that we discovered the truth about HealthCare.gov’s mysterious first day. Only six people enrolled. That’s six of 7 million people eligible for the great new dawn for “affordable” health care.

It’s no wonder the Obama administration tried to hide the numbers from you. But in a digital age, even the White House can’t keep this stuff secret anymore. Every aspect of reality is logged in real-time.

It’s a double-edged sword. True enough, they are still logging our lives, which is tremendously annoying. But at the same time, they are also logging their own failures. In real-time, nonetheless. And this provides unprecedented insight into many great disasters of our time.

Here is a screenshot I pulled from one such transcript:

If you’re critical of the government, this is a beautiful failure.

Supporters of the president and the health care law in his name see this as a small hiccup. To be sure, people say that all of these problems will be fixed. That the problems with creating an account are mere technical issues. Top technicians from the best companies have all been hired by the government to make it right.

A government that would rape, torture a man to find a fistful of drugs is not worthy of our allegiance, obedience or respect

The government will continue to act like that until we say “enough.”

Some excellent and insightful comments from Ken White, writing at the Popehat blog, writing about the anal rape of an innocent 62-year old man by law enforcement officials and medical professionals that took place in New Mexico earlier this year:

What’s terrifying is that though the warrant is extraordinarily flimsy, there’s a decent chance a judge might find it sufficient. That’s because the judiciary has been steadily ground down by decades of law-and-order thin-blue-line rhetoric and by the purported imperatives of the Great War on Drugs, and judges routinely shrug and accept transparently bogus police speculation and awful warrants.

What’s terrifying is that a judge who has bought the government’s narrative may decide that the amount of drugs that can be hidden in a man’s rectum justifies detaining him, X-raying him, repeatedly digitally probing him, and despite a total lack of indication he is carrying drugs, sedating him and subjecting him to a colonoscopy.

What’s terrifying is that the Fourth Amendment to the United States Constitution is only as strong as judges allow it to be — and, by extension, only as strong as We the People insist that it must be. We the People are easily frightened into agreeing that the promise of safety outweighs the Fourth Amendment.

I’m not afraid because police officers violated David Eckert’s constitutional rights by raping and torturing him because they thought he might have a trivial amount of drugs. I’m afraid that they might not have violated his rights as defined by the courts, because we have allowed those rights to wither away out of fear and indifference.

The government will continue to act like that until we decide, collectively, that a government that would rape and torture a man to find a fistful of drugs is not worthy of our allegiance, obedience, or respect. The government will continue to act like that until we say “enough.” 

A Quick Fix Courtesy of Karl Marx

Privatize Social Security and the economy will roar back

by NATHAN SMITH

It is always a good time to privatize Social Security. In the long run, it is better for people to save for retirement, via portfolios of stocks and bonds, than to be dependent in old age on government handouts. The long-run case for Social Security privatization has been discussed before, especially in 2005, when George W. Bush had just been elected on a platform featuring Social Security reform. But doing it now has short-run benefits. Privatizing Social Security is the best way to get us out of this economic slump. Here’s why.

In broad terms, a pay-as-you-go system of public pensions, such as America’s Social Security program, reduces the overall savings rate, and therefore the growth of the capital stock and the economy. It corrupts the political system, turning it into a tug-of-war for society’s resources, as older generations demand payback for years of forced contributions—but get it from younger generations’ current production, via public tax-and-transfer systems. The government gets more current income, which it spends, and long-term obligations, burdening future taxpayers. Pay-as-you-go systems cheat the future, but the government can’t save without partially nationalizing private banks and corporations.

As for the current recession, economists and other pundits have a number of explanations. Keynesians like Paul Krugman and Matt Yglesias blame a “liquidity trap,” in which further injections of liquidity don’t stimulate the economy; they just get hoarded. In their own way, “market monetarists” like Scott Sumner (who blogs at www.themoneyillusion.com) believe this as well. 

On the other side, Tyler Cowen sees the 2008 financial crisis and the slump that followed as a symptom of a “Great Stagnation” that has been decades in the making, while Casey Mulligan argues that we are suffering a “redistribution recession” because minimum wages, more generous unemployment insurance, and other policy changes have made people less willing to work.

Escaping the Liquidity Trap

All of them are right. But it is the liquidity trap that Social Security privatization could solve. Two charts will help to illustrate what the liquidity trap means. First, business investment (using Bureau of Economic Analysis data):