Monday, January 16, 2017

David Ricardo on Wealth, Inflation and Freedom

Richard Ebeling emails:

Dear Bob,

I have a new article on the website of the Future of Freedom Foundation on, “Economic Ideas: David Ricardo on Wealth, Inflation and Freedom.”

David Ricardo (1772-1823) was one of the most famous of the early nineteenth century British economists on such themes the harm from paper money inflation, the benefits from free trade, and the value of civil liberty and private property for a free society.

Disinherited by his father at an early age because of his marital choice, Ricardo went on to make a fortune in financial dealings, and he explained how he made his investment decisions to become wealthy.

His business successes enabled him to retire in his 40s and turn his attention to the new subject of “political economy.” He first made his reputation as a critic of the creation of irredeemable paper money as the means of funding the British government’s war expenditures against France, and how this caused price inflation at home and a falling value of the British pound on the foreign exchange markets. He insisted that the only way to assure a sound and stable currency was to require the Bank of England to redeem its banknotes for a fixed quantity of gold, that is, a functioning gold standard.

He also served for four years as a Member of Parliament in the House of Commons. In this capacity he not only called for economic reforms in the direction of free trade, but also insisted upon the essentialness of a vibrant free press and the protected institutions of private property and free enterprise is a free society was to be maintained and prosper.

http://www.fff.org/explore-freedom/article/economic-ideas-david-ricardo-wealth-making-paper-money-inflation-free-society/


Best,
Richard

Donald Trump Will Never Use Any of These Words...

...especially the last one featured which takes over three hours to pronounce---nor will almost most of the rest of us.

Saudi Arabia's Water Supply Is Drying Up

Partly because of a Trump-style anti-trade mentality.

They launched an idiotic agriculture industry in the desert as opposed to agriculture trade!

Stratfor Science and Technology Analyst Rebecca Keller explains:



  -RW

German Finance Minister Warns Trump Administration on Trade

German Finance Minister Wolfgang Schäuble said in an interview with The Wall Street Journal that he intended to work “as constructively as possible” with the Trump administration. But he said it would be a mistake to pursue nationalist economic policies.

“Whoever wants growth—and I trust this administration will be a growth-friendly one—must be in favor of open markets,” Schäuble said.

Is the U.S. headed toward a trade war with Germany?

The Journal noted:
Mr. Schäuble, 74, spoke before the publication of Mr. Trump’s interview with a German and a British newspaper, in which he threatened German car makers with a 35% tariff on cars imported to the U.S. and hinted he was open to loosening sanctions on Moscow. The comments from Mr. Schäuble and Mr. Trump highlighted the possibility of a looming clash between the U.S. and Germany over trade policy.
  -RW

Globalists to Hold Emergency Meeting in Washington DC on Trump

Matthew Boyle reports for Breitbart:

The World Economic Forum’s annual gathering of globalist political, financial and cultural elitists is underway in Davos, Switzerland, but the organization’s founder is planning an emergency Washington, D.C., meeting in 2017 for worried elites worldwide to discuss how to deal with President-elect Donald J. Trump.

“The World Economic Forum is listening to Donald Trump,” Bloomberg’s Stephen Morris and Erik Schatzker wrote on Sunday. “The organization will convene a special meeting in Washington this year to discuss issues raised during the president-elect’s campaign and the populist wave that swept him to victory, WEF founder Klaus Schwab told Bloomberg Television on Sunday. The gathering will explore U.S. investment and job-creation opportunities for companies that participate in the forum, he said.”

Klaus Schwab, who in 1971 founded the group that eventually became the World Economic Forum which hosts the annual retreat for business, political and cultural elites in the Swiss Alps, told Bloomberg that the event in Washington, D.C.—which was previously not planned—is going to be meant to address globalist concerns with the rise of populism as evidenced by the election of Trump to the presidency.

“It’s very natural that with the new administration we plan a major event in the U.S. to see what are the implications of the new president and how the business community could engage,” Schwab said, adding that in Davos in 2017 there are populists present who the globalists plan to hear from to try to assuage a “silent fear” of the masses.

“People have become very emotionalized, this silent fear of what the new world will bring,” Schwab added. “We have populists here and we want to listen. We have to respond to these individuals’ fears and to offer solutions. It’s not just enough to listen; we have to provide answers and that’s what we’re here for in Davos.”

Trump Threatens BMW With 35% Tax on Cars Built in Mexico...

...what an economic ignoramus.

 President-elect Donald Trump has warned the United States will impose a border tax of 35 percent on cars that German carmaker BMW plans to build at a new plant in Mexico and export to the U.S. market.

Trump gave the warning in an interview with German newspaper Bild.

A BMW spokeswoman said a BMW Group plant in San Luis Potosi would build the BMW 3 Series starting from 2019, with the output intended for the world market. The plant in Mexico would be an addition to existing 3 Series production facilities in Germany and China.

Trump said BMW should build its new car factory in the United States because this would be "much better" for the company.

 -RW

(via Yahoo)

Brace Yourselves: It's Going to Be Trumpcare

We are will not be getting a free market in healthcare. Apparently, we will just be getting a different form of government intrusion into the healthcare system under Donald J. Trump.

According to the Washington Post, Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid.

Notes The Post:
Trump’s plan is likely to face questions from the right, following years of GOP opposition to further expansion of government involvement in the health-care system...The objectives of broadening access to insurance and lowering health-care costs have always been in conflict, and it remains unclear how the plan that the incoming administration is designing — or ones that will emerge on Capitol Hill — will address that tension...

Trump said his plan for replacing most aspects of Obama’s health-care law is all but finished. Although he was coy about its details — “lower numbers, much lower deductibles” — he said he is ready to unveil it alongside Ryan and Senate Majority Leader Mitch McConnell (R-Ky.).

“It’s very much formulated down to the final strokes. We haven’t put it in quite yet but we’re going to be doing it soon,” Trump said. He noted that he is waiting for his nominee for secretary of health and human services, Rep. Tom Price (R-Ga.), to be confirmed. That confirmation rests with the Senate Finance Committee, which has not yet scheduled a hearing.

Much lower deductibles?  So is Trump setting the rules on this rather than market forces? And how does he intend to pay for the lower deductibles for those "who can't pay for insurance themseleves"?

Sounds like horrific central planning to me.

 -RW

Sunday, January 15, 2017

A 3,000-Word Logorrheic Bouillabaisse of Misunderstandings, Non Sequiturs, Half-Truths, and False Presumptions

James Kwak has written a bizarre pro-minimum wage piece in The Atlantic, The Curse of Econ 101.

His attack on Econ 101 begins by outlining the theory that correctly explains the theoretical problems with minimum wage laws:
The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case. According to economism, a pair of supply and demand curves proves that a minimum wage increases unemployment and hurts exactly the low-wage workers it is supposed to help. The argument goes like this: Low-skilled labor is bought and sold in a market, just like any good or service, and its price should be set by supply and demand. A minimum wage, however, upsets this happy equilibrium because it sets a price floor in the market for labor. If it is below the natural wage rate, then nothing changes. But if the minimum (say, $7.25 an hour) is above the natural wage (say, $6 per hour), it distorts the market. More people want jobs at $7.25 than at $6, but companies want to hire fewer employees. The result: more unemployment. The people who are still employed are better off, because they are being paid more for the same work; their gain is exactly balanced by their employers’ loss. But society as a whole is worse off, as transactions that would have benefited both buyers and suppliers of labor will not occur because of the minimum wage. These are jobs that someone would have been willing to do for less than $6 per hour and for which some company would have been willing to pay more than $6 per hour. Now those jobs are gone, as well as the goods and services that they would have produced.

The minimum wage has been a hobgoblin of economism since its origins. Henry Hazlitt wrote in Economics in One Lesson, “For a low wage you substitute unemployment. You do harm all around, with no comparable compensation.” In Capitalism and Freedom, Milton Friedman patronizingly described the minimum wage as “about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by the men of good will who support it.” Because employers will not pay people more money than their work is worth, he continued, “insofar as minimum-wage laws have any effect at all, their effect is clearly to increase poverty.” Jude Wanniski similarly concluded in The Way the World Works, “Every increase in the minimum wage induces a decline in real output and a decline in employment.”
But he then goes on to deny the logic of the theory:
 Looking at historical experience, there is no obvious relationship between the minimum wage and unemployment...
Mark Perry correctly comments on Kwak's quackiness:
Writing in The Atlantic, law professor James Kwak makes a very ill-advised case for ignoring economic theory, logic, laws and reasoning and supporting higher government-mandated minimum wages for unskilled workers in an essay (“The Curse of Econ 101“) that I would characterize as a 3,000-word logorrheic bouillabaisse of  misunderstandings, non sequiturs, half-truths, and false presumptions (to channel Don Boudreaux). It ranks right up there along with articles by John Komlos (“Why a $15 minimum wage shouldn’t scare us“) and “America’s Worst Minimum Wage Pundit” Nick Hanauer (“The claim that if wages go up, jobs will go down is not a theory — it’s a scam“) as one of the most misinformed, flawed and misguided articles ever written about the minimum wage.

I took on the deniers of minimum wage theory directly in an October 2013 talk before a lefty anarchist group in Oakland, California :




 -RW

Which States Rely Most On Federal Aid?


Janet Yellen To Do San Francisco

On Wednesday, January 18, Federal Reserve Chair Janet Yellen will speak at the Commonwealth Club, San Francisco (3:00 ET). The title of her speech is The Goals of Monetary Policy and How We Pursue Them.

On Thursday, January 19, Yellen will speak at the Stanford Institute for Economic Policy Research (8:00 PM ET). The title of the speech she will deliver is The Economic Outlook and the Conduct of Monetary Policy.

-RW

The Time I Only Had Two Million Dollars Left

By James Altucher

One time I had two million dollars left. You have to be pretty damn smart to make two million dollars, I thought.

And then I had an idea. Or rather, an opportunity presented itself.

I needed to make a lot more than two million dollars. There were people running around (idiots!) with ten million, or even one hundred million dollars.

I was smarter than them!

So I put the two million dollars in a single company. They made “wireless devices for deaf people”. If you ask me now what that meant I would not be able to tell you.

The company went public. For about a day, my two million dollars was worth $2,200,000. In one day I was $200,000 up! This will keep going and I’ll be RICH!

Then it went down. Suddenly it was $1,900,000.

I better hold on. I need to get my $100,000 back.

The next day it was at $1,800,00. Then it kept sinking. My two million was worth $1,000,000. Then $800,000.

I had a huge mortgage. Plus two babies. $400,000.

I put my house for sale. At three in the morning I’d sit in this big couch looking at my two story book case and thinking about how it was all over. I never slept. I sweated all the time. $300,000.

The real estate agent begged me to lower the price of the apartment. I did. Then he begged again. I did. Then he didn’t have to beg anymore. I kept lowering the price of the apartment. Nobody was buying.

“I can’t understand,” I told him. “This house is worth more.”

Now he was cocky with me because he could be. He no longer had to win over the deal. He just wanted to get it off his plate. He said, “This house is only worth what someone is going to pay for it, and it’s a lot lower than what you have it at now.”

I said to my wife, “let’s see if we can borrow more money off of it and then we’ll jut stop paying and keep the money.” We dressed up the babies and went to the bank. They laughed at us. “We don’t do that KIND of loan.”

So I lowered it to less than what I had paid for it. Then I had to lower it to less than what I owed the bank.

Even though I had put in all sorts of construction. I couldn’t afford the mortgage anymore so I stopped paying it. I ignored all the calls from the bank. I ignored all the calls about the housing taxes. The true owners. I’d pay these people after I sold the house.

Finally we got an offer. And we went back and forth and paperwork was signed and the house was going to be sold but I’d get no money out of it.

I went to the movies to celebrate. I forgot what I saw. But I remember going to the ATM machine to check and see how much money I had left.

$143.

I called my parents. “I need to borrow just a thousand dollars,” I said. “I’ll return it in a few days.”

They said “No” and I hung up the phone. It was the last time I ever spoke to my dad, who had a stroke a few months later that left him paralyzed and looking at the ceiling for two straight years.

“He has no brain left,” the doctors all said but I think he was just locked in there.

I put myself in exile. We moved 80 miles north to a broken down house 1/4 the size in the middle of nowhere. There was a constant blizzard happening. I couldn’t leave the house. I gained 30 pounds. I spoke to nobody. I was trying to think of even smaller places we could live.

Nobody returned any calls at all. Everyone wants to be your friend when you have money. “I always knew about that guy” when your name would come up later and you were long gone.

But then I slowly got out of depression. I started waking up early and playing basketball with myself at a court right next to the Hudson River while the sun rose over the mountains. A train would pass at 5:05 every morning and I’d see the faces blinking at me.

I lost the thirty pounds. I started to sleep better.

Then I’d read for two hours. I read every day from one fiction book, one non-fiction book, one self-help book, and one book about games. I love games.

Then I’d take out a waiter’s pad. To remind me of humility. And because they were cheap. And because for thousands of years waiter’s pads were used to make lists.

And I’d make my own list. The list might be “10 businesses I can start”. Or…”10 books I can write”. Or…”10 ways XYZ company could be better”. Or…”10 articles I could write.” And on and on.

Some ideas would bubble to the top and I’d come up with deeper ideas about those. And some ideas would disappear. Some ideas I’d try for a short time and either give or pursue further. Some ideas I did nothing. It was all practice. It was all experiments. It was all about getting more creative so I could get myself out of the swamp of regret.

I did pray to God a lot. But mostly because I wanted the stock market to go up. I’d go to the church across the street and pray to Jesus. But I was Jewish and I don’t think He listened to me.

So I can really that at first it boiled down to three things:

- Get exercise and eat well.

- read A LOT. I’ve read 2–3 books a week for the past 15 years. I remember maybe 1–2% of what I read. And it doesn’t add up. It multiplies. Because when I learn one new thing, I connect it backwards to all the things I learned before. So every one new thing is like 1500 new things.

- Be creative every day. Because the more you know, the more ingredients you know, the more recipes you can make. Writing down ten ideas a day is like a recipe. I noticed within six months my recipes took on a different flavor. They started to have elements of good in them.

I’d surprise myself: “This is a good idea!” And I’d try it for awhile. Some I’d try for more than awhile. Some would change my life.

And every six months, the ideas would get better and better. It was like I was graduating through classes and grades and schools and getting the graduate degrees I had never gotten.

I was constantly connecting more and more ideas backwards and forwards to each other. Songs, books, people, companies, ideas would connect more and more like this thick matrix.

Connections and connections. It was (and is) like my brain was on fire constantly.

This was the secret for me. I don’t know if it would work for anyone else. Every day I have to do this or I think I’m going to die.

I just did it today. I did it yesterday. I’ll do it tomorrow. I’ll do it a year from now.

Since that time I’ve started about 20 different businesses. 17 of them have failed. That’s ok. I’ll always have new ideas.

I’ve written 18 books. Some of them were horrible. Maybe most of them. That’s ok. I’ll write more.

I’ve started a podcast and some of my all time heroes have agreed to talk to me. I have a new idea for the podcast that I’m going to do this year The recipe of new always tastes a little better than the old if done right.

I don’t think I’m a genius. But I know the important thing is not the destination but the direction.

I’m going in the right direction.

After my dad had his stroke I had an idea. Both my dad and I are master-ranked chess players. He was when he was young. I am now.

He was only able to lie in bed on his back and stare at the ceiling. He couldn’t talk or move. He’d stare at the ceiling for 10 hours a day and sleep for 14.

I found a fun chess position. White to move and win in two moves. It involved a queen sacrifice. He once told me, “take the most powerful piece on the board and try to give it away. Do the unexpected and you’ll win.”

So I took that position and I went to the local printer and printed it up three feet by three feet. Then I went to his room in the medical facility and got on a chair and taped it to the ceiling right above his eyes so he could look at it.

He knew ten languages. He was a chess master. He could play every musical instrument. He had read every book. And when I was a kid he knew every answer.

He would stare at the position. I could see his lips trying to move. I knew he knew the answer but the doctors would shake their heads and walk away.

Then he died.

Some day you and I will too.

Ok, Josie my daughter, get a good night’s sleep.


James Altucher writes at Altucher Confidential . His newest book is Reinvent Yourself


Saturday, January 14, 2017

The Bill Gates Role in India's War on Cash

Michael S. Rozeff writes:
Economist Norbert Haering has written a second article on how India’s war on cash was brought into being and what interests it served.
“The hypothesis that the main driver or a main driver behind the demonetization were US interests, does not at all imply that the Indian prime minister and other Indian constituents did not have their own interests associated with it. It is hardly possible to get the elite of a country to do something that goes against their own interests, but it is fairly easy to get them to do something that helps (significant fractions of) them, but hurts the majority of the people.”
Hurting the majority or the general public or the people is what states and politicians do as a matter of course. The power of states awaits being turned against the people on behalf of special interests seeking privileges. The powers of states await expansion from enterprising parties in and out of government. States do not exist for the betterment of the people.
 More from the Haering piece:
 When Prime minister Narendra Modi took the bulk of Indian cash out of circulation, he caused great hardship for many Indians, while a disruption-loving tech elite and political establishment asked for optimism and patience. In an earlier piece I have provided some indications for US involvement in that scheme...

To fully understand the following, it is important to be aware of the Better Than Cash Alliance (BTCA), formed in 2012 to push back the use of cash globally. Founding members are US-institutions who stand to gain most. Those are notably the Bill and Melinda Gates Foundation (Microsoft), Visa, Mastercard, Citigroup and Omidyar Network (eBay). Funding members are also the notorious Ford Foundation and the US government’s development agency USAID.

LePen Would Reintroduce the French Franc

The Economist reports:
Marine Le Pen, leader of France’s far-right National Front, has indicated that she hopes to reintroduce a national currency if she is elected president in May. In a recent speech, she suggested that government bonds would be redenominated in francs instead of euros.

The proposal was dressed up in technicalities. The franc would be revived as a “parallel” currency for official transactions and used alongside the euro in a version of the systems (the snake and the exchange-rate mechanism) that existed in the 1970s and 1980s. Such schemes tied European currencies together but were subject to regular crises, with France periodically devaluing the franc.
But, of course, she wants to do it for dastardly reasons. The Economist again:
Investors would pretty quickly see through the façade. There is not much point in bringing back a national currency unless you want the right to devalue it. And there is not much point in redenominating government bonds in francs unless you want to pay creditors back less than they expected. (This might technically count as a default, according to Moody’s, a rating agency; it depends on the exact circumstances.)
What fun. Screwing the holders of French government debt by paying them with drole d'argent.

-RW

Will This Be the Extent of Trump's Infrastructure Expansion?

The New York Times lefty Paul Krugman writes with derision:
 Trump has no policy shop, nor does he show any intention of creating one; he’s too busy tweeting about perceived insults from celebrities, and he’s creating a cabinet of people who know nothing about their responsibilities...
So investors betting on a big infrastructure push are almost surely deluding themselves. We may see some conspicuous privatizations, especially if they come with naming opportunities: maybe putting in new light fixtures will let him rename Hoover Dam as Trump Dam? But little or no real investment is coming.
As David Stockman has written (See: Donald Trump and The Perennial Myth Of Crumbling Infrastructure) there is no infrastructure crisis in the United States.

Let's hope that Krugman is correct and that Team Trump incompetence will lead to no infrastructure projects. However, I suspect the Goldman Sachs members of Team Trump will find a way to spend trillions. They are very competent in cronyism.

-RW

Good Economics Is "Bizarre" for Minimum Wage Supporters

By Carmen Elena Dorobăț

The BBC is running a story titled “Bizarre excuses for failing to pay the minimum wage”. The article follows an investigation by HM Revenues and Customs in the UK, which is organizing a government awareness campaign for underpaid workers. Some of the excuses are indeed hilarious and evidently made up on the go, such as “My accountant and I speak a different language—he doesn’t understand me and that’s why he doesn’t pay my workers the correct wages.
But the majority are correct economic arguments for why a wage floor, imposed by law, goes against the natural workings of the market. For example, as one employer puts it bluntly: “She doesn’t deserve the national minimum wage because she only makes the teas and sweeps the floors.” Another explained that a staff member was underpaid who “wasn’t a good worker,” and another claimed that employees had to “prove their worth”.  Indeed, what these ‘excuses’ point at is that the marginal productivity of those hired workers is lower than the salary the employer would be forced by law to pay them. This, combined with the fact that their opportunity cost and bargaining power are low—given their limited or non-existent alternative employments—means that those workers are earning the most that they are able to given present conditions.
These employers are not heartless. On the contrary: they hired those workers on a voluntary basis, and more importantly, risked a fine by paying them a lower amount than the minimum wage. The alternative option was not to pay them the wage the government dictates, but not to hire them at all. For workers, then—and we can be sure they were aware of this—, the only other option was unemployment, the leading effect of any rise in minimum wage requirements.
The market is harsh, that is true. Its unyielding law of consumer sovereignty does not compensate entrepreneurs—or workers, by extension—for past merit or vested interests. At the same time, for workers, having a low-paying job is better than having none at all. It is a dignified way of earning one’s living, and more importantly, it gives one the opportunity to become ‘a good worker’ and to ‘prove their worth’. This is much more than can be said for living on government welfare.
Moreover, give the market breathing space and it will lift the same people it allegedly underpays out of poverty. Over the past few centuries, only capital accumulation and the division of labor have allowed people to move up to better employments and higher wealth levels. In this sense, we could even go as far as to call the market the ‘best operating charitable organization’. As the division of labor intensifies and extends, it embraces more and more of the (world’s) population, while strengthening social ties between individuals of varying physical or intellectual abilities.  

The above originally appeared at Mises.org.

Ron Kirk: Border Adjustment Tax Does Not Make Economic Sense

Kirk is very good here.

Trump: I Got a Holiday Greeting Card From China’s Leader, Xi Jinping

President-elect Donald Trump said in an interview with the Wall Street Journal he would keep intact sanctions against Russia "at least for a period of time," and also said he wouldn't commit to the "one China" policy until he sees progress from Beijing in its currency and trade practices.

 Trump said: "If you get along and if Russia is really helping us, why would anybody have sanctions if somebody's doing some really great things?"

Asked if he supported the "One China" policy on Taiwan that has underpinned U.S. relations with Beijing for decades, Trump said: "Everything is under negotiation including One China," the Journal reported.

Though he has long been critical of China, Mr. Trump also made a point of showing a holiday greeting card he received from China’s leader, Xi Jinping, the paper reported.

“I have a beautiful card from the chairman,” he said.

But he made plain his displeasure with China’s currency practices. “Instead of saying, ‘We’re devaluating our currency,’ they say, “Oh, our currency is dropping.’ It’s not dropping. They’re doing it on purpose.

“Our companies can’t compete with them now because our currency is strong and it’s killing us.”

-RW