Saturday, March 17, 2018

Bitcoin's ‘Death Cross’ Looms

This won't mean much to Bitcoin buyers who seem to think investment and trading principles don't apply to Bitcoin, you see Bitcoin levitates and those who bought Bitcoin at $19,783 are just "down a bit," but, as Bloomberg notes, Bitcoin’s 50-day moving average has dropped to the closest proximity to its 200-day moving average in nine months. Crossing below that level -- something it hasn’t done since 2015 -- signals fresh weakness to come for technical traders who would dub such a move a "death cross."

Not all technical analysis is sound but analysis that measures buying momentum and exhaustion, such as the death cross, does tell us about current buying exhaustion, something I  warned about when Bitcoin was trading at $15,000, I wrote on December 21, 2017 in the EPJ Daily Alert:
Over the last two weeks, Bitcoin has climbed to near $20,000 and is now trading in the $15,500 range. This trading strikes me as significantly different from the trading in the period just before this.

Among the four potential factors that I have listed that could bring the price down was buying exhaustion.

Since e-currency buying is completely driven by new buying rather than any underlying fundamentals, once the buyers stop coming the price will collapse. Current trading suggests that this may be exhaustion price activity. There may be some added buying coming in over Christmas as "bitcoin geniuses" sit around the Christmas tree telling their friends and relatives how easy it is to make money in Bitcoin but that could be the last upward draft. But I am not waiting around. It is time to take profits.

I identified the new "American run" in Bitcoin at around $4,000 anyone who was aggressive enough to buy at that time has very huge profits. The same thing with my mention of ethereum at $250 and again at $400,  It is now trading at $790.

There may be more upside in the future but e-currency is a very high-risk investment in the first place and it is now getting riskier. I'm out.
The current exhaustion in Bitcoin buying is now even more serious than when I took profits just before Christmas.

One technical analyst,  Paul Day of Market Securities Dubai Ltd., says further downward action could take Bitcoin down another 76 percent to $2,800 and that could very well be the case.

But, further, underneath this technical action, there are weak fundamentals largely based on the likelihood that more government regulation is coming that will hamper Bitcoin.

Look out below.

-Robert Wenzel 

Friday, March 16, 2018

A Letter to the White House Trade Alchemist

Peter Navarro
By Don Boudreaux

Here’s another letter to White House trade alchemist Peter Navarro – an economist seemingly innocent not only of any understanding of economics, but also of the rules of logic and of the most basic of facts.
Dr. Navarro:
During your CNBC interview this morning you justified the Trump administration’s imposition of punitive taxes on American purchasers of imports by repeating the assertion that the U.S. trade deficit is being driven upward by foreigners “buying up our assets.”  I’ve a series of questions for you.
(1) Do foreign purchasers of assets from Americans force Americans to sell these assets?  If not, why do you assume that such purchases are harmful to Americans?  And do you believe that, if Trump’s effort to reduce the U.S. trade deficit succeeds, the resulting reduced foreign demand for assets currently owned by Americans will somehow not reduce the value of Americans’ asset holdings?  Can you name any other goods or services whose prices will not fall if government succeeds in artificially reducing the demand for them?
(2) You repeatedly implied that assets owned by Americans are “our assets” – as in, ours collectively.  You spoke of “American factories” and “American real estate.”  Do you therefore believe that the assets that you, personally, own belong not to you but to “America” or to ‘us’?  If you believe that your assets really belong to “America” or to ‘us’ rather than to you personally, do you therefore embrace the label “socialist”?  (For that is exactly what you are if you hold such a belief.)  If, in contrast, you believe that your assets belong to you rather than to “America” or to ‘us,’ can you tell me what right “America” – in the form of some set of U.S. government officials – has to so object to your freedom to sell your assets to foreigners that it should shrink the size of the market for your assets by artificially reducing foreigners’ demand for your assets?
(3) Do you believe that the amount of capital in the world or in the U.S. is fixed?  If so, how do you explain the past 200 years of economic growth?  If not, why do you care if foreigners buy from Americans some assets given that Americans might well use the proceeds from these sales to create other, more valuable assets – assets that they would be unable to create absent these sales?
(4) Are you aware that inflation-adjusted private nonresidential fixed investment in the U.S. has since the U.S. began running annual trade deficits rather steadily increased, thus increasing the U.S. capital stock and, with it, worker productivity?  And did you know that, while the U.S. population is today 48 percent higher than it was in 1977 (when the current U.S. run of annual trade deficits began), real U.S. household and nonprofit net worth is today 255 percent higher than it was in 1977?*  If you’re aware of these facts, how do you defend your insistence that a steady run of annual U.S. trade deficits transfers asset ownership from Americans to non-Americans?  If you’re unaware of these facts, what business have you making public pronouncements about trade policy?
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
* See these data.  The data at this link are, I think, in nominal dollars.  So I adjusted the fourth-quarter 1977 net-worth dollar figure at this link to 2017 dollars in order to come up with the calculation in the letter.  (In Q4 1977, total net worth was, in 2017 dollars, $27,850.98; in Q4 2017 it was $98,745.54.)
The above originally appeared at Cafe Hayek

Move Over, MES and Human Action!

Victor Ward emails:
Move over, MES and Human Action!

Well done, Bob.
From Amazon :

For the record: I don't consider Foundations of Private Property Society Theory: Anarchism for the Civilized Person to be anything close to MES or Human Action. It is just a tiny aside, but a damn radical aside..

Yes, Amazon is temporarily out of stock but you can still order from them now and they should have more copies in a couple of days.

Alternatively, I see Barnes & Noble still has copies in stock and at a discount!

The book is also available from Lulu.

And there are still copies of the hardcover limited edition available.

-Robert Wenzel 

Trump Beat Economists to This One: His Completely New Justification for Tariffs

Sad the neocon Bill Kristol gets to look sane next to Trump. He writes:
Speaking at a Republican fundraiser Wednesday in Missouri, President Donald Trump criticized Japan for unfair trade practices, and offered this example:

"It's called the bowling ball test; do you know what that is? That's where they take a bowling ball from 20 feet up in the air and they drop it on the hood of the car. And if the hood dents, then the car doesn't qualify. Well, guess what, the roof dented a little bit, and they said, nope, this car doesn't qualify. It's horrible, the way we're treated. It's horrible."

No one familiar with Japanese trade practices or the auto industry seemed to know what the president was talking about. My colleague Michael Warren found video of a David Letterman gag from a couple decades ago, which involved dropping a bowling ball onto a car from the roof of a building. Perhaps President Trump conflated an episode on a late night variety show with international economic policy?

-Robert Wenzel 

Why the Larry Kudlow Appointment as Trump's Top Economic Adviser May Mean Lower Taxes for Investors

By Robert Wenzel

President Trump’s appointment Wednesday of supply-side economist Larry Kudlow as head of the National Economic Council could result in a big tax break for investors. There is no more passionate advocate of having the president issue an executive order to index capital gains for inflation than Kudlow, reports John Fund.

Fund writes:
President Trump clearly wants to cut taxes again. He recently told an audience in the White House Rose Garden that “we’re going to do a phase two” tax cut. White House aides tell me he is considering taking matters into his own hands with a capital gains tax cut that wouldn’t require a tortuous months-long legislative process...
Kudlow laid out an example of what he meant in a CNBC column last August: “You invest $1,000 and, after ten years, you sell that investment for $1,200. But if inflation averaged 2.5 percent in that period, the $1,200 you receive will be worth less in real terms than the $1,000 you invested. And yet, under current law, you will pay a tax on your $200 capital gain.”
In other words, the capital gains tax paid on such investments can easily exceed 100 percent once inflation is factored in.
In his CNBC column, Kudlow noted that former Treasury Department economist Gary Robbins has calculated that about one-fourth of capital gains revenue stems from taxing inflationary gains. Indexing all parts of the tax code to inflation would end that disparity.
I'm all for tax cuts and indexation that lowers taxes but there is more to the tax cut equation and that is government spending. If you don't

Republicans Want an Internet Sales Tax

Many House Republicans are pressing GOP leaders to attach legislation to the omnibus spending bill that would let states collect sales tax from remote online retailers, reports The Wall Street Journal.

From a WSJ editorial:
The Supreme Court’s 1992 Quill decision forbids state and local governments from requiring businesses without a “physical nexus”—that is, property or employees—to collect sales tax. States complain that this restriction puts brick-and-mortar stores at a competitive disadvantage and reduces government revenues... 
The real reason some Republicans in Congress are now rushing to pass their kill Quill bill is that they want to get credit for axing the Court’s 1992 decision with retailers at home. But stuffing such an important policy change inside a huge spending bill with little debate would be a political scam. Raising taxes on small business and consumers won’t be a good look for Republicans in November, nor an inducement for investment and growth.
-Robert Wenzel 

Thursday, March 15, 2018

It's Out: "Foundations of Private Property Society Theory: Anarchism for the Civilized Person"

By Robert Wenzel

My new book, "Foundations of Private Property Society Theory: Anarchism for the Civilized Person" is out.

In the book, I consider ideas on how a civilized anarchist society is currently justified and how it is believed such a society could develop. I reject much of the current thinking on the topic.

In my book, I reject natural rights theory and also utilitarianism. I use as a guide Hayek's observation that subjectivism is at the root of every important advance in economic theory and apply this type of extreme subjectivism in an attempt to understand how a private property society could develop.

I consider how culture would work in a PPS and how rules and laws could be developed without an overriding ruling body or legal theme that everyone must abide by.

I consider punishment in a PPS and reject the necessity and possibility of general rule guided proportional punishment.

I also consider how police-type security and "national" defense might develop in a PPS in a manner that is different from the insurance model advanced by Morris and Linda Tannahill and adopted by many libertarians.

I also reject the necessity of the labor mixed with land rule of homesteading promoted by many libertarians.

In short, there is a lot here that is very different from current libertarian thinking about anarchy.

There are two editions of the book that are available.

There is a special hardcover limited edition of 500 copies.

There are available at the present time 100 copies of this limited edition for $60.00 each. I will personally sign these copies and number them 1/100, 2/100 etc. and I will personally inscribe the copies to buyers, just right in the instructions how you want your copy(ies) inscribed.

To order a copy of the limited edition, click here.

Also, a standard paperback edition is available for $17.55.

It available to order from local booksellers and also from Amazon.

To order from Amazon click here.


 Amazon is temporarily out of stock but you can still order from them now and they should have more copies in a couple of days.

Alternatively, I see Barnes & Noble still has copies in stock and at a discount!

The book is also available from Lulu.

And there are still copies of the hardcover limited edition available.

Russian Plane Loses 3 Tons Of Gold On Takeoff

A Russian plane with ten tons of gold, platinum and diamonds lost a significant part of its cargo upon taking off from an airport in the Russian region of Yakutsk, famous for its rich natural resources and diamond deposits.

The Nimbus Airlines AN-12 cargo plane hit problems during takeoff, resulting in a breach in the hull that allowed its cargo to fall all over the runway.

According to the Siberian Times, police sealed off the runway and a vast search is underway.

Local media reports that the bars seen in the photo are indeed gold, platinum and gems. TASS cited officials from the Interior Ministry as saying that some 172 gold bars weighing about 3.4 tons were recovered.

The technical engineers at the Yakutsk airport who prepared the plane for takeoff have been detained.

-Robert Wenzel 

(via ZeroHedge)

Stockman: Kudlow ‘Is Going To Help Trump Sleepwalk Right into a Tremendous Fiscal Collision’

David Stockman is absolutely correct here. The ine thing, though, is that the other names bandied about for NEC were much worse. Larry is Trumpian economic policy status quo if there is such a thing.

-Robert Wenzel 

Wilbur Ross' Ex-Wife Just Went Off the Deep End Defending Ross' Advocacy of Traiffs

Another Don Boudreaux letter to the New York Sun:
In one of the most astonishingly fallacious assertions in an essay teeming with astonishingly fallacious assertions, Betsy McCaughey writes “Critics claim tariffs will raise steel prices.  That’s questionable.  The opposite is more likely to happen, industry experts suggest.  Tariffs will shift demand to domestic steel, enabling plants here to operate closer to capacity.  That will bring down the unit price of American-made steel – not raise it.  That’s Economics 101” (“Case for Trump Tariffs Centers on the Danger Of a Genuine War,” March 13).
Ms. McCaughey – like her ex-husband, Wilbur Ross – must have failed Economics 101.  Here are relevant lessons that are really taught in Economics 101 (a class, by the way, that I teach every semester at George Mason University).  First, shielding producers from competition makes the outputs they produce more scarce, thus raising prices.  Second, if it is true (as Ms. McCaughey asserts) that untapped economies of scale are available by expanding outputs, and that such expansions will lower prices and enable (in this case) American steel and aluminum producers to profitably charge lower prices than they now charge, then American steel and aluminum producers will so expand their outputs without any government prodding.  So why have they not yet done so?
That is, if what Ms. McCaughey asserts about the current existence of untapped economies of scale is true, then the men and women who currently run American steel- and aluminum-producing firms should not be rewarded with protection from competition but, instead, fired for gross incompetence.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
P.S. Bureaucrats at the Commerce Department – cited by Ms. McCaughey as “industry experts” – are, well, not such experts.

Wednesday, March 14, 2018

Bitcoin Breaks Below $8,000

Bitcoin is trading down in the last 24 hours by more than 13% and has broken below $8,000 and is currently trading at $7975.00. In December it hit an all-time high of $19783.00. It is now down some 59.6% from its record high.

The latest decline began after Google announced it will ban all cryptocurrency-ads.

Further, Japan is expected to urge its G20 counterparts at a meeting next week to beef up efforts to prevent cryptocurrencies from being used for money laundering.

-Robert Wenzel 

BRUTAL: Extremely Vicious Attack on Larry Kudlow

Various news outlets are reporting that President Trump has chosen Larry Kudlow to replace Gary Cohn as head of the National Economic Council.

This is the response of UC Berkely Professor Brad DeLong:
Larry Kudlow has not been an economist in at least a generation. Rather, he plays an economist on TV. Whatever ability he once had to make or analyze or present coherent and data-based economic arguments is long gone—with a number of his old friends blaming long-term consequences of severe and prolonged drug addiction.
The right way to view this appointment is, I think, as if Donald Trump were to name William Shatner to command the Navy's 7th Fleet.
For the record, Kudlow is a very decent guy and he dealt with his demons decades ago.

-Robert Wenzel 

Theranos Chief Executive Elizabeth Holmes Charged with Massive Fraud; General Mattis Involvement

Elizabeth Holmes, founder and chief executive of the blood-testing company Theranos, has been charged by the Securities and Exchange Commission with an “elaborate, years-long fraud” in which she and former company president Ramesh “Sunny” Balwani “allegedly deceived investors into believing that its key product — a portable blood analyzer — could conduct comprehensive blood tests from finger drops of blood,” the SEC said Wednesday, reports The Washington Post.

Theranos and Holmes have agreed to resolve the charges against them but have not admitted or denied the allegations. Holmes is ceding her voting control of the company and reducing her equity stake in Theranos.

Get this, the SEC also alleges that Theranos, Holmes and Balwani falsely claimed that their products were being used by the Department of Defense on the battlefield in Afghanistan and on medevac helicopters. That technology was never used by the Department of Defense, even though Gen. Jim Mattis, who then led the U.S. Central Command, personally pushed for it to be used in the field. Regulatory officials in the military flagged problems with Theranos's blood-testing process. Mattis later joined Theranos's board. He resigned from that position when he became U.S. defense secretary.

I was on to her years ago (see: Major Theranos Scandal Brewing; Henry Kissinger Involvement)

-Robert Wenzel 

The Shallow, Illogical, and Pathetic Arguments that Protectionists Shamelessly Inflict on the Body Politic

A Don Boudreaux letter to the New York Sun:
Betsy McCaughey’s defense of Pres. Trump’s punitive taxes on Americans who buy steel and aluminum serves no purpose but to reveal just how shallow, illogical, and pathetic are the arguments that protectionists shamelessly inflict on the body politic (“Case for Trump Tariffs Centers on the Danger Of a Genuine War,” March 13).
Ms. McCaughey’s central claim is that these taxes are justified in order to maintain U.S. capacity to manufacture steel and aluminum in the event of war.  Forget that the U.S. has been at war now for 16 years with no sign that the Pentagon’s arsenal is weak because of a lack of steel and aluminum.  Forget that Defense secretary Mattis himself rejected the only evidence that Ms. McCaughey cites for her case, namely, the Commerce Department’s report that Trump’s tariffs are useful for purposes of national defense.  (Even the hawkish Wall Street Journal issued withering criticisms of this appallingly flimsy ‘study.’)  And forget that Ms. McCaughey makes no mention of the deleterious effects of these tariffs on the capacity of America’s many metals-using producers.  Ms. McCaughey apparently assumes that raw steel and aluminum miraculously turn themselves into weapons of war.
Instead ask: why does Ms. McCaughey spend about one-third of her column talking about the purported unfair trade practices of other countries and of the supposed positive effects of these tariffs on jobs?  If national defense were the true justification for these tariffs, other countries’ trade practices would be irrelevant.  Ditto for the effect of these tariffs on jobs.  Ask also this: Why does Ms. McCaughey cheer the fact that “Mr. Trump’s tariffs have brought countries to the negotiating table” resulting in Mexico and Canada winning “an exemption”?  As the Nobel laureate economist Vernon Smith astutely noted on Facebook, if these tariffs really are imposed for national-security reasons, “I don’t see justification for exemptions.”
The Wall Street Journal correctly describes the administration’s asserted national-security excuse for these punitive taxes as a “stunt.”  It’s a shame that Ms. McCaughey serves as one of the administration’s stunt-women.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek

Google to Ban Cryptocurrency Advertisements

Google will ban advertisements for cryptocurrencies and initial coin offerings as of June, reports the Financial Times.

Google said in a blog post that it had “updated several policies to address ads in unregulated or speculative financial products like binary options, cryptocurrency, foreign exchange markets and contracts for difference (or CFDs)”.

The company said it will ban advertisements for “cryptocurrencies and related content” including cryptocurrency exchanges, wallets and trading advice.

Hey, if they think it is a scam or extremely risky, nothing wrong with blocking these kinds of advertisements.

-Robert Wenzel 

The Silence About Trump's Mugging of Broadcom Is Deafening

By John Tamny

A strange thing happened during World War I.  As the western world set about trying to commit suicide in its pursuit of a needless war, U.S. exports to Scandinavian countries surged.

Why the sudden demand for U.S. products from that part of the world? The answer is that there wasn’t.  What happened is that the U.S. had slapped a trade embargo on Germany.  No big deal.  Germans continued to import and consume U.S. goods and services; albeit from countries the U.S. hadn’t embargoed.

The simple truth is that if you’re producing, you’re importing.  And to import, which is the sole purpose of production, you’re exporting.  The trade could be with a producer on the other side of town, or on the other side of the world.  This trade occurs among the productive, and without regard to wholly symbolic “embargoes.”

Which brings us to Donald Trump’s wholly inexcusable decision on Monday to block Broadcom’s attempted acquisition of Qualcomm.  The president excused the inexcusable with the always empty claim that our “national security” was put at risk by the combination.  Supposedly Singapore-domiciled Broadcom would favor Chinese telecom giant Huawei over U.S. players, and the latter would empower Huawei to somehow set the 5G wireless standard.  Ok, but so what? 

And while it dumbs down what is a ridiculous conversation to even mention this, the simple truth is that Broadcom is not a Singaporean company, nor is it Chinese.  It’s largely based in San Jose, CA.  Its executive team is 100% comprised of U.S. citizens.  Eight out of ten board members are U.S. citizens, not to mention that Broadcom employs 8,600 Americans in over twenty-five U.S. states.

Broadcom is Singapore based for a good, pro-shareholder reason.  It’s got a better tax environment.

Read the rest here.

Tuesday, March 13, 2018

It's Getting Worse: Trump to Unload on China

President Donald Trump is getting ready to crack down on China, reports Politico.

Trump told Cabinet secretaries and top advisers during a meeting at the White House last week that he wanted to soon hit China with steep tariffs and investment restrictions.

During the meeting, which hasn’t been previously been reported, U.S. Trade Representative Robert Lighthizer presented Trump with a package of tariffs that would target the equivalent of $30 billion a year in Chinese imports. In response, according to Politico, Trump urged Lighthizer to aim for an even bigger number.

Aides said the administration is considering tariffs on more than 100 Chinese products ranging from electronics and telecommunications equipment to furniture and toys.

Those tariffs are expected to be rolled out as soon as next week.

The Trump Administration is using the cover of alleged Chinese intellectual property theft as justification for the tariffs.

However, it is difficult to understand why you would punish American furniture and toy consumers because of Chinese IP theft that has nothing to do with furniture or toys. This all part of Trump's nationalist state vs state battle perspective.

I am all for respect for IP but if a company can't protect its IP in some foreign lands, it's that company's problem not the problem of toy buyers.

IP is sometimes difficult to protect and you just have to figure out ways around the theft.

-Robert Wenzel 

Hungary's Central Bank Wants Its Gold Back From London

Another one makes the move.

The Hungarian National Bank has announced plans to take delivery of the gold reserves it has stored in London.

One hundred ounces of Hungarian gold is stored in London.

They obviously don't trust London with their gold.  Austrian, German, and Dutch central banks have also repatriated gold.

-Robert Wenzel 

Trump Speaks with Larry Kudlow About Joining White House as Economic Adviser

President Trump has spoken twice in recent days with the longtime CNBC commentator Larry Kudlow about succeeding Gary Cohn as director of the White House’s National Economic Council, reports The Washington Post.

Beyond the phone calls with the president, Kudlow has also spoken with Treasury Secretary Steven Mnuchin and Jared Kushner, according to WaPo.

Kudlow is a decent guy and can best be described as a free market Keynesian. That is, there are a lot of other names being floated around for the position that are a lot worse.

I hope he gets it, he won't do any good in attempting to influence Trump in a free market direction but at least he won't make things worse.

-Robert Wenzel 

Monday, March 12, 2018

Stockman Slams the Notion of Larry Kudlow Being Trump's Top Economic Adviser

Stockman is right here Kudlow won't do much but everyone else under consideration is much worse.

-Robert Wenzel 

Why Not Private Provision of Many Government Services?

Richard Ebeling emails:

Dear Bob,

My latest article on the website of the Future of Freedom Foundation is on, “Why Not Private Provision of Many Government Services?”

In the on-going debates in modern society over the necessary or desired functions of government there are a number of tasks that many across the political spectrum presume and take for granted that only government can provide when, in fact, they could easily and more effectively be supplied by the private sector.

Ambiguities over the role of government arise due to the notion of “public goods,” that is, goods or services from which it is difficult to exclude a user and beneficiary even though he may not have paid a price or contributed a fee to help defray the cost of supplying it. National defense is often considered the classic example. Hence, the need for government provision through mandatory tax dollars.

This logic is, then, extended to a variety of areas that, whatever the validity of the national defense case may or may not be, represent misplaced applications. These include road, bridges, street lighting, common parks and community areas, and urban and city planning, in general.

It can be shown that many of these infrastructure and neighborhood facilities either can be made subject to payment of a price or fee for access and use with much better effect and efficiency than when left to government hands, or offer numerous instances, already seen in various activities of life, in which suppliers find it profitably advantageous to offer them “free of charge.”

This no less applies to the development and evolution of cities and towns in general that would better reflect the values, needs and likes of the people living and working in communities, if left free from the social engineering hands of urban and rural government planners and regulators.



Cramer: Larry Kudlow is Leading Contender to Replace Gary Cohn as Trump's Top Economic Advisor

Larry Kudlow is the leading contender to head President Donald Trump's National Economic Council and would take the job if offered it, CNBC's Jim Cramer is reporting.

Kudlow would be much better than the economic ignoramus Christopher Liddell but as Cramer reports in the above clip, the supposed free-trader Kudlow is slipping on his advocacy of free trade when it comes to China.

Larry knows better. This is Larry seeing the economic advisor position dangling in front of him. What else will he weaken on if he gets the position?

Often there are "free market" economists until they get close to power. It reminds me of Alan Greenspan. And who can forget Herbert Stein supporting Nixon's price controls when he was in the Nixon Administration.

He knew that price controls would only mess up the economy, but in his book, Presidential Economics, he attempted to justify his support for price controls when he wrote he was caught up in the "excitement" of the moment:
I had spent much of my career arguing against wage and price controls, even in World War II. And here I was, economic adviser to the President ...I was an active participant in the most exciting event in the record of economic policy...
-Robert Wenzel 

The Absurd National Security Defense Arguments for Tariffs on Steel and Aluminum

By Robert Wenzel

In my forthcoming book, Foundations of Private Property Theory: Anarchism for the Civilized Person, I argue that there is no need for "national" defense that such defense is best left to the private sector.

Putting this theme aside for the moment, it is particularly bizarre that justification for tariffs on steel and aluminum are being made by tariff supporters on national defense grounds.

Case in point. In today's New York Times  Daniel McCarthy, editor of Modern Age: A Conservative Review, writes:
Economic nationalism differs from free-trade ideology in having three distinct goals rather than one. The first isn’t discussed very often in a time of relative global peace: maintaining the industries necessary for prevailing in a large-scale war. The Civil War might have had a different outcome had the North not possessed an overwhelming advantage in industrial capacity over the Confederacy.
But, in the United States,

Trump Considering Free Market Hater for Top Economic Adviser Spot

Christopher Liddell
President Trump is strongly considering Christopher Liddell, a New Zealand-born US-citizen, to replace Gary Cohn as the top Administration economic adviser, reports The New York Times.

 Liddell is currently a White House official who is close to Jared Kushner.

He was previously the Vice Chairman and Chief Financial Officer of General Motors and CFO of Microsoft, Senior Vice President and CFO of International Paper, and CFO of William Morris Endeavor.

He holds a Bachelor of Engineering degree with honors from the University of Auckland in New Zealand, and a Master of Philosophy degree from Oxford University in England.

He is a member of the Council on Foreign Relations.

This guy is bad news.

 After Trump’s election in 2016, a New Zealand journalist asked Lidell whether he is worried about more protectionism under a Trump presidency. He replied, "the days of unbridled free trade and unbridled free markets are over."

“I worked in the private sector all my life, so I’m a believer in free markets, but not unbridled free markets,”  Liddell continued. “And we’ve had 30 years since the mid-’80s, both in New Zealand and here in the U.S. and globally, of basically free markets being driving the whole thinking, the whole rhetoric around governing. I think those days are over, personally. I think we’re going to go through a circular trend of a much more restrained free market.”

This alone tells you when it comes to economics, he is as dumb as Trump.

-Robert Wenzel 

Sunday, March 11, 2018

Why Populist Revolts That Overthrow the Establishment Can Be Very Bad

By Robert Wenzel

Many people cheer on populist revolts against the ruling class. But such revolts may not be a positive if the masses don't have some kind of appreciation for free markets and liberty.

The establishment can certainly be crony and not have the concerns of the masses at heart but, often in this day and age, they have some appreciation for free market rule, muddied with cronyism of course.

But revolts against them do not necessarily bring freer markets and fresh air.

In the United States, the populous uprising resulted in

Wenzel on 'Cotto/Gottfried': Will Trump's Tariffs help America?

Here's my recent discussion on tariffs with Joseph Ford Cotto and Paul Gottfried on the Cotto/Gottfried Show. Note: The audio is fine after the initial introduction.

 -Robert Wenzel 

The Role of Economists in the Trump Administration

Paul Krugman gets this right in his New York Times column:

What economic thinking went into the Trump tariffs announced last week? None at all. In fact, the economists (“economists”?) who currently have his ear seem to regard their job as being to confirm the wisdom of whatever he decides to do. Peter Navarro:
My function, really, as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters.
Translation: Navarro sees his role as that of a propagandist, not a source of independent advice.
But the rest of us don’t have to accept that Dear Leader is always right. And in fact, these tariffs are weirdly poorly considered even if all you want to do is create manufacturing jobs, leaving aside all the other ramifications.
Why? Because steel and aluminum aren’t final goods – nobody directly consumes steel. Instead, they’re intermediate goods, basically used as inputs to other U.S. manufacturing sectors. And while tariffs that raise primary metal prices may increase production of those metals, they make the rest of U.S. manufacturing less competitive.
Of course, Krugman plays this role in Democratic administrations, including supporting economic policies that don't make any sense.

-Robert Wenzel