Thursday, April 30, 2015

I Forgot How Much I Like This Place

By Simon Black

En route from Mexico City, Mexico

I’m certainly a proponent of taking advantage of everything the world has to offer.

This includes looking for nice places all over the world. I love spending time in Thailand, Italy, Chile, Croatia, Brazil… But sometimes we forget what’s in our own backyard.

It’s been a couple of years since I’d traveled to Mexico, and I’m embarrassed to say that I’d forgotten how much I like it here.

The food is great, the weather is warm, people are friendly, the culture is vibrant, and it’s in many cases shockingly cheap.

More importantly it’s a place where you can exist without mother government trying to regulate every last aspect of your life—from what you put in your body to how you raise your children.

How to Buy a Classic Suit that Will Last a Decade

By Effortless Gent

I imagine that if you’re not a daily suit wearer, you want the one or two suits you own to last a long time, and to be stylistically relevant for as long as possible.
The most versatile suit you can own would be a medium-weight wool suit (super 100s or 120s) in a medium grey, with a two-button, single-breasted, double-vented jacket.
Despite the detail of that description, there is still a lot open to interpretation.
  • Cuff or no cuff?
  • Can I have pattern and texture on grey fabric?
  • What is the ideal lapel width?
  • How much break should my trousers have?
While there are many little details to look out for—or adjust, if going custom—pay particular attention to these five areas when shopping for your next suit.
I want to help you avoid certain trends so you can land on the most timeless silhouette possible.
Something to note: You may very well end up with a boring suit. Let’s just be real here. It’s like going to an ice cream shop and ordering plain vanilla.
However, you will have a suit that transcends most, if not all, possible suiting trends for a very long time. I can’t say forever, but at least for a decade or two.
You could always inject it with a little personality by wearing an interesting shirt, tie, or pocket square.
Another thing: It’s not bad to have a “trendy” suit. In fact, I don’t have a 100% traditional, trend-free suit. And you may not want to either.

First, let’s define the spectrum.




City of Oakland Warns: Be Prepared Multiple May Day Protests

The City of Oakland just put out this alert. Looks like at a minimum there will likely be Paul Krugman pro-growth breaking window activity.


Also see: Protesters Plan To Block Google, Apple & Facebook Shuttle Buses In Oakland Friday.

-RW

The Crashing Texas Rig Count

Falling oil price have put enormous pressure on US oil producers. Rig counts are down across the country. A decline in oil production is soon to follow.


Rick Santelli on the War on Cash

He ends on a bit of a semi-sympathetic note in favor of ending the use of cash, but at least he gets the facts straight. -RW



Ludwig von Mises Books Sighting

At Forbes, a column by Bill Conerly on job opportunities for economists, contains a pic of a bookshelf of economics books.

On the shelf, there is some pretty mainstream stuff, including Samuelson and Keynes. but the shelf also contains the very important Ludwig von Mises works, Human Action and Epistemological Problems of Economics.


Protesters Plan To Block Google, Apple & Facebook Shuttle Buses In Oakland Friday



The free market haters will be out in force on Friday in Oakland.

Demonstrators plan to block tech shuttle buses leaving Oakland and taking employees to Silicon Valley. The blocking is part of a series of Bay Area protests planned for International Workers’ Day on May 1.

According to an announcement on IndyBay.org:
The rich have begun colonizing North Oakland, West Oakland, and Downtown. Their tech buses, their pricey cafes, and their luxury apartments have begun to appear with alarming frequency. This May Day, we will deliver a simple message to these colonizers during their morning commute.
Protesters will also be meeting in the platforms of the MacArthur BART station and in front of the BART gates on Friday.

There are also plans to shut down the Port of Oakland on Friday morning.

There is a large contingent of radical left-wing anarchists in the city, who believe that the current society must be destroyed, so that, phoenix-like, a socialist/anarchist society will emerge.

With this group plotting and lurking in the background, the potential for any protests to get way out of hand is a very strong possibility,

-RW

There is No Price Inflation (Housing Rent Edition)

With the Federal Reserve aiming at what it calls a 2% target inflation rate, the price of rental housing, the biggest monthly expense for most, shows an annualized growth of well above the target. Currently at 3.6%.


-RW

Piketty's Strategic Victory

By Mark Hendrickson

French economist Thomas Piketty’s book Capital in the Twenty-First Century reportedly has sold more than 1.5 million copies in its combined French and English translations. In his book, Piketty decries the unequal distribution of wealth that exists both within and between the world’s countries, and he calls for national governments to work together to reduce this inequality via increased taxation of income and accumulated wealth.

As attested by the gaudy sales figures, Piketty’s book struck a responsive chord among egalitarians, progressives, social justice advocates, etc. They believe that Capital proves that there is a maldistribution of wealth that government must correct. Piketty’s “proof,” though, is full of holes. First, the mounds of data in Capital were thoroughly debunked by multiple American economists. (Piketty publicly retracted them last year, supplying new data sets that also have been debunked). Second, his book is littered with flaws and fallacies, catalogued in my short book, Problems with Piketty. 

To give just one example of Piketty’s esoteric economic ideas, consider his views on capital: With his now famous formula, r > g (the rate of return on capital is greater than the rate of economic growth), he treats capital as a monolith endowed with mysterious powers to “reproduce” (p. 395) and “reconstitute itself” (pp. 41-2)—which would be news to the many owners of capital who have suffered losses.

He laments the prospect of capital becoming increasingly concentrated, even as evidence abounds that capital ownership is being democratized (more and more people have been able to accumulate savings and have capital to invest, and Piketty himself writes about the growing number of people receiving large inheritances on p. 420). Most mystifyingly of all, he alleges that capital “devours the future” (p. 571) as if capital causes economic ruin. If this were so, then the United States would have the world’s poorest people, because more capital has been deployed here than anywhere else.

In reality, capital multiplies the productivity of labor, thereby boosting wealth production, uplifting standards of living (albeit not for everyone equally and simultaneously) and enabling more people to accumulate savings. Capital is the driver of economic growth, not growth’s enemy, so Piketty’s proposal for government to increase taxes on capital is an anti-growth formula.

Despite the multiple economic errors in Capital, Piketty has achieved a strategic victory. He has succeeded in focusing the conversation on the question, “How equal or unequal is the distribution of wealth?” This quest for an empirical quantification of inequality is a red herring—a distraction from the policy debate that should be happening. The redistributionist, egalitarian left does not worry about how many holes are in Piketty’s arguments—to them, the redistribution of wealth is an article of faith. They will zealously pursue that goal in the name of “justice.” However, their premises and ethical presuppositions are in need of a challenge. It is important to discuss questions of justice such as, “When is an unequal distribution of wealth unjust?” and, “Is it just to favor policies that hurt the poor?”

All can agree with a desire to improve economic conditions for the poor and middle class rather than the rich minority. If the rich get richer while the non-rich prosper, so what?

Read the rest here.

Wednesday, April 29, 2015

WOW Scott Sumner on Paul Krugman

Scott Sumner lands some pretty decent punches against Dean Baker in a recent post.

But what really caught my eye is his closing swings against Krugman, in discussing Baker's referencing Krugman:
 As for his [Baker's] appeal to authority, the Paul Krugman that won the Nobel Price was the guy who wrote Pop Internationalism, and who would have supported the current trade deal being negotiated, not the guy who’s moved so far to the left that he’s praising the loony Marxist government in Greece that almost everyone else seems to think is a bunch of crackpots.

George Selgin Takes His Monetary Keynesianism Over to IBD

George Selgin,the Director of the Cato Institute's Center for Monetary and Financial Alternatives, continues promoting his focus on aggregates, specifically NGDP.This time at Investor's Business Daily:
Instead of trying to target either inflation or employment, the Fed ought to target the economy's overall level of spending or its statistical counterpart, NGDP, which stands for the dollar value of nominal gross domestic product.
The only Koch-affiliated DC  economist who seems to understand the folly in this approach is Peter Boettke. In Living Economics, he writes, in just a slightly different context:
[T]he focus on aggregates made it difficult to see how investment expenditures were or were not producing a structure of capital that was sustainable...
 --RW

The Bankster Women Operatives of Wall Street

Tomorrow the Treasury Department will convene its 5th Annual Corporate Women in Finance Symposium. The event will be a mix of senior Administration officials and private sector operators. The agenda will include remarks from Secretary Jacob J. Lew and Deputy Secretary Sarah Bloom Raskin.

Here is the full list of attendees:

Jacob J. Lew, Secretary of the U.S. Treasury Department
Sarah Bloom Raskin, Deputy Secretary of the U.S. Treasury Department
Valerie Jarrett, Senior Advisor to the President
Betsey Stevenson, White House Council of Economic Advisors
Megan Smith, U.S. Chief Technology Officer and Assistant to the President
Kara Stein, Commissioner, Securities and Exchange Commission
Rosie Rios, Treasurer of the United States
Karen Dynan, Assistant Secretary of Economic Policy, U.S. Treasury Department
Irene Chang Britt, Director, Dunkin’ Brands, Former President, Pepperidge Farm Inc.
Natalie Fair, Head of Finance, Pinterest
Deborah Gillis, CEO, Catalyst
Amy Millman, President, Springboard Enterprises
Sonya Penn, Business Development
James Turley, Former CEO and Chairman of Ernst and Young

Fed Sees Slowdown as ‘Transitory’

The Federal Reserve policy making arm, the Federal Reserve Open Market Committee, in a just released statement  attributed the economy’s sharp first-quarter slowdown to transitory factors, in effect signaling an increase in short-term interest rates remains on the table for the months ahead.:
Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady.
No surprise here to EPJ Daily Alert readers. A rate hike is coming this summer.


 --RW

Greek Finance Minister Attacked By Anarchists in Athens



During dinner last night, Greek Finance Minister Yanis Varoufakis and his wife were attacked by left-wing anarchists. The couple was dining at a restaurant in the Greek capital.

A statement released by the finance ministry, said that a group of left-wing activists threw “glass objects” at the couple’s table, and Danae Stratou, the minister’s wife, hugged Varoufakis to protect him from the attackers.

No injuries were reported, and the activists, who had their faces covered, reportedly told the group to leave “their area”.

According to Newsweek, The incident took place in the Exarchia district, a bohemian part of Athens which has been the site of numerous political riots, with protesters reportedly hurling petrol bombs at police cars as recently as 7th April.

Varoufakis has now issued the following statement:
Contrary to the conjecture that has been heard, it was not an organised attack or attempt at seriously injuring us, provocation or part of the much wider effort to politically “deconstruct” me in recent days.
I have the impression that their goal was not to hurt us, because if they had wanted to hurt us, they had the opportunity and ‘arithmetic’ supremacy to do so. I think their aim was to force me to flee with a few light humiliating swipes. This, however, will never be known because Danae [Varoufakis' wife], before the anti-establishment protestors [and before I could stop her], could get to us, stood up and hugged me hard, turning her back towards them so that they would have to hit her before me.”

--RW

Ben Bernanke's Wallet Just Exploded




Former Federal Reserve chairman Ben Bernanke has been hired by giant bond manager Pimco as a senior adviser. Pimco is known for being aggressive in surrounding itself with those who may have special insights into the economy and Fed activities .

As for Bernanke, only last week, he  announced he'd signed on to consult for the hedge fund Citadel. He said that he will be joining no other Wall Street firms.   "This is it," he told Reuters.  "There won't be anymore. They (Pimco and Citadel) prefer not having me consult too many firms and I personally think working with two firms will be plenty."

He also works at the Brookings Institution and commands $200,000 on the speaking circuit.

 Pimco, as of March 31, managed $1.59 trillion in assets.

 Bernanke's lawyers, Robert Barnett and Michael O'Connor of the inside the beltway powerhouse law firm,Williams & Connolly LLP, were the chief architects of the Pimco arrangement, reports Reuters.

 "We are honored to have Dr. Bernanke serve as an advisor to Pimco, and look forward to benefiting from his extraordinary knowledge and expertise to help us add value for our clients," Douglas Hodge, Pimco's chief executive officer said in a statement.


--RW

The Latest From Price Control Venezuela: Widespread Blackouts

Local media is reporting blackouts across Venezuela, as price controls distort market signals in the electricity sector in the midst of a heat wave.,

Vice-President Jorge Arreaza said there had been a surge in energy demand due to extremely hot weather.  He  said private companies would be asked to use their own generators to reduce pressure on the national grid.

On a typical government lie, last week the government claimed that energy problems were due to maintenance issues, BBC Venezuela correspondent Daniel Pardo reports.

Inflation came in at more than 60% in 2014.

--RW

Will Government Net Neutrality Regulations Turn the Internet Into a Railroad Wreck?

By Robert J. Samueslon

As a young reporter in the 1970s, I covered the Interstate Commerce Commission (ICC). Created in 1887, the ICC regulated the nation’s railroads and sought to protect the public against abusive freight rates. Congress deregulated the railroads in 1980 and ultimately abolished the ICC. The verdict was that the agency had so weakened the industry that a government takeover might be necessary. Deregulation was a desperate alternative to nationalization.

I mention all this because there are obvious parallels between the Internet today and the railroads in the late 19th century. Like the railroads then, the Internet today is the great enabling technology of the age. Like the railroads then, Internet companies inspire awe and dread. And now there’s another parallel: the resort to regulation.

Just recently, the Federal Communications Commission voted 3-2 to adopt a proposal to ensure “net neutrality.” The new rules will promote an Internet that’s “fast, fair and open,” said FCC chairman Tom Wheeler. As a slogan, net neutrality is swell. Who could oppose it? Speed is good, and hardly anyone wants an Internet that favors some users and penalizes others.

Be skeptical. The FCC’s new rules weaken — or reverse — decades of minimal regulation, during which the Internet flourished. As often as not, economic regulation has adverse, unintended side effects. That was true of the railroads, and it may be true of the Internet.

Read the rest here.

How the Yuan Could Win Reserve Currency Status Even if the U.S. Objects

Ian Talley reports at WSJ;
Washington’s veto-power at the International Monetary Fund may not apply when the executive board decides later this year whether to include the yuan in the elite basket of currencies that comprise the IMF’s emergency lending reserves.

China’s bid to get its currency included in the IMF’s Strategic Drawing Rights, or SDR, has recently gained support from key U.S. allies as Beijing increasingly flexes its muscle in the global economy.

The inclusion of the yuan in the SDR doesn’t mean the yuan will rival the dollar anytime soon. But it could accelerate the liberalization of China’s long-closed financial markets and boost demand for the yuan by the world’s central banks. It would also be a key step in projecting China’s growing economic power in the international economy.

IMF officials already appear to be backing the move. Managing Director Christine Lagarde said in Beijing earlier this month it’s more a matter of when than if the yuan should be included. And at the fund’s spring meetings, she said the IMF needs to “better integrate fast growing emerging markets,” including as it reviews the SDR currency basket.

No surprise here. US dollar dominance is going to erode, which will mean a reversal of current dollar strength. No major government trusts the Empire. They are all looking at ways to dilute the power of the dollar. Inclusion of the yuan as part of the SDR basket is just one step in this direction

-RW

Tuesday, April 28, 2015

Riots, Empire and the War on Drugs

By Michael S. Rozeff
Riots in Baltimore in April, and it isn’t even riot weather yet. Why?
The immediate cause is the brutal callousness of policemen in the American police state. Whatever has contributed to that police state mentality and activity provides the deeper reasons why the festering repression is breaking out into open hostilities and riot.
Pure racism based on skin color alone is not the direct cause of this rioting. Race is definitely involved but indirectly. Two important causes are at work. First, national policies of empire and war have afflicted poorer Americans more than the wealthier, and racial enclaves are poorer. Second, the war on drugs is a war on black people based upon the fears of the dominant white culture. These fears translate into votes for strong anti-drug measures. Pure racism based on color is not the basic variable in this war on black people. Therefore, blaming racism and looking for solutions to racism using standard liberal pap and remedies will not work.

The Economics at Ground Zero of Riot Central Baltimore

It's about kids educated in a rotten public school system, where minimum wages laws prevent youth from getting that all important first job and where government welfare payments rage on destroying the incentive to maintain the nuclear family..





-RW

(graphics via ThinkProgress)

The Banksters and Baltimore

By Simon Black

One of my favorite historians is a guy named Will Durant.

Durant is unfortunately no longer with us, but he and his wife Ariel made history more interesting than all the soap operas my mother used to watch when I was a kid.

I thought about something he wrote this morning when I glanced at the paper and saw a headline about the riots in Baltimore.

In Durant’s seminal work on Louis the XIV, he wrote that “the men who can manage men manage the men who can manage only things, and the men who can manage money manage all.”

Now if the quote is confusing, just focus on the last eight words.

And Durant was right. There are people out there on one side, and they’re angry. They’re looting, they’re rioting.

On the other side you have the state trying to stop them. Police and national guard units with their urban tactics and weapon systems.

They are the ultimate expression of men managing men managing things.

But it is the men who manage money, who are managing all.

Party On: Housing Prices Soar


Don't let anyone tell we are in the down phase of the boom-bust cycle. The Fed is pumping money aggressively (See The EPJ Daily Alert for more details on the printing) and price data is reflecting that. The S&P/Case-Shiller 20-city housing composite index data was released today. The overall gain in prices, year-over-year, was 5.0%.

Denver (up 10%) and San Francisco (up 9.8%) had the highest year-over-year gains. Prices in Denver and Dallas (up 8.6%) have pushed past housing boom peaks.

This will not end well, but for now party on!



-RW

Another Sign of the Federal Reserve Created Bubble and the Silicon Corridor as Its Epiceneter

A trader emails to point out:

CNBC opened new San Francisco office yesterday.


BREAKING Iran seizes U.S. ship, 34 sailors

Al Arabiya News is reporting that Iran has fired at a U.S. cargo ship and has directed it to Bandar Abbas port on the southern coast of Iran, Al Arabiya News Channel has reported on Tuesday.

Up to 34 American sailors are believed to be onboard the ship, according to Al Arabiya.

This is a developing story, return to this post for updates.

UPDATE 1

Via CNN:

Breaking: #Iran Rev. Guard seized Marshall Islands-flagged cargo ship, distress call answered by US Navy destroyer, US aircraft monitoring

UPDATE 2

Via CNBC

BREAKING: Iranian forces have boarded the Marshall Island- flagged Maersk Tigris, Pentagon says.
--
More: US Navy destroyer Farragut heading in direction of seized Maersk Tigris, Navy war planes in air monitoring ship

UPDATE 3

Pentagon: No US personnel onboard. Ship owned by Danish shipping firm. Not a US ship.

Greek Prime Minister Expects May Deal wIth Banksters

Greek Prime Minister Alexis Tsipras said he expects to reach an interim deal with international creditors by May 9. He also said that if an additional bailout agreement is not met he will hold a referendum.

Although there were “great possibilities for winning this negotiation”, Tsipras said, that he would go directly to the Greek people if the terms were unacceptable to Athens. “If the solution offered goes beyond our mandate, it will have to be endorsed by the people,” he said in a late night interview with Star Television.

Expressing his confidence a deal would be reached, Tsipras said: “We should not give in to panic moves. Whoever gets scared in this game loses.”

FT doesn't buy that a deal will be reached:
Greek officials have been predicting an imminent deal for weeks and many EU negotiators are sceptical an agreement can be reached before the next scheduled meeting of eurozone finance ministers in two weeks.
A referendum could lead to weeks of continued uncertainty about Greece’s solvency.
But in a sign the radical lefty government will cave to banksters,the finance ministry says it  will present a package of structural reforms to parliament this week that would accelerate a deal with creditors.

The plan would include boosting the independence of the revenue collection authority, which banksters want so that the Greek people can be squeezed of more of their money, in a country where tax evasion is a daily routine for many.

-RW


Swiss Bank Blocks Pension Fund From Withdrawing Its Cash---Will This Eventually Happen to You?

By Joseph T. Salerno

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.  (Lord Acton)
As reported on Zero Hedge over the weekend, a Swiss pension fund manager calculated that he could save his clients a substantial amount of money by withdrawing cash from his fund's bank account, which was yielding a negative interest return, and depositing the cash in an insured vault.  Exercising his fiduciary responsibility, he notified his bank of an impending large withdrawal of CHF.  The bank rebuffed the fund manager's request, informing him:
We are sorry, that within the time period specified, no solution corresponding to your expectations could be found.

One banking expert argues that the bank's action "is most definitely not legal" because the pension fund holds a "sight account,"  which gives the holder the right to withdraw cash on demand. The president of the pension funds association (ASIP), Hanspeter Konrad sees in this incident the hand of the Swiss National Bank, which wants to discourage the hoarding of cash as a means of circumventing negative interest rates.  Accordingly, "The National Bank has therefore recommended to the banks to approach withdrawal demands in a restrictive manner."
As Hans Giger, professor emeritus at the University of Zurich, points out, however, while the SNB may “issue directives to the banks in the collective interest of the Swiss economy,” it is not allowed to influence the contract between a bank and a pension fund.  The banks themselves are responsible for how they act on the directives.

That even a Swiss bank should, on its own hook, refuse cash payment to a holder of a demand deposit should not be surprising.  As Murray Rothbard has shown, fractional-reserve banks since their inception have continually connived to restrict cash payments to their depositors either by lobbying government for legal suspension of payment or by adopting quasi- or extra-legal methods of discouraging withdrawals.  Indeed, this was the modus operandi of both Scottish and U.S. banks during their respective eras of so-called "free banking."
The above originally appeared at Mises.org.

As Baltimore Burns, the Unemployment Rate Among Black Youth in the City is...




The first minute of the below video, created by someone who is not unsympathetic to government intervention, lays out the facts of unemployment among black youth in Baltimore.





What did the recent governor of Maryland, Martin O'Malley, do to relieve the situation? In 2014, he signed into law, legislation that will raise the minimum wage over time from the the level of $7.25, at the time of signing, to $10.10 an hour.

Yup, poorly trained black youth, who aren't productive enough to find jobs at $7.25, will eventually not be allowed to work unless they can find jobs paying them $10.10 per hour.

-RW

Also see: An Excellent Explanation of Minimum Wage Math




Monday, April 27, 2015

Comments on the Gold Standard at the Cato Institute

Commentators like the two below hold the kinds of views that are now featured at the Cato Institute.

The first to speak is David Wessel of the Brookings Institute, followed by David Walker, the former US Comptroller General from 1998 to 2008.

There is nothing wrong with featuring opposing views, but there is little value in bringing in guests who spout the bankster line that can be heard anywhere, including at Harvard and Princeton and on CNBC.

The below dismissive comments on the gold standard are as mainstream and as useless as you can get -RW



Paul Krugman’s Love Affair with France

By Louis Rouanet
In recent years, Paul Krugman has incessantly defended France and its welfare state, even going so far as to pretend that the French economy was in fact in better shape than the British economy.According to him, “To an important extent, what ails France in 2014 is hypochondria, belief that it has illnesses it doesn’t.” However, except for some Keynesian propagandists, nobody believes that the French economy is not deeply in crisis and it is now more and more obvious that Krugman is wrong.

Ron Paul: Current Policies Will Cause a Major Economic Downturn that May Even be Worse Than the Great Depression.

The Real War on the Middle Class

By Ron Paul

One of the great ironies of American politics is that most politicians who talk about helping the middle class support policies that, by expanding the welfare-warfare state, are harmful to middle-class Americans.  Eliminating the welfare-warfare state would benefit middle-class Americans by freeing them from exorbitant federal taxes, including the Federal Reserve’s inflation tax.

Politicians serious about helping middle-class Americans should allow individuals to opt out of Social Security and Medicare by not having to pay payroll taxes if they agree to never accept federal retirement or health care benefits.  Individuals are quite capable of meeting their own unique retirement and health care needs if the government stops forcing them into one-size-fits-all plans.

Greece Dumps Finance Minister Yanis Varoufakis From Negotiating Team

Greece has announced a reshuffling of  its bailout-negotiating team, reining in Finance Minister Yanis Varoufakis, after three months of talks with creditors failed to unlock aid and a meeting with his euro-area counterparts ended with finance ministers throughout the eurozone heaping abuse on Varoufakis .

The coordination of the day-to-day efforts to strike a deal with creditors was handed to Deputy Foreign Minister Euclid Tsakalotos, a Greek government official said in an e-mail to reporters..

Varoufakis will continue to supervise political negotiations with euro-area member states and the International Monetary Fund.

“This move squares the circle, because it doesn’t look like [Greek Prime Minister Alexis] Tsipras is surrendering by firing Varoufakis, but it to some extent has the same result,” said Michael Michaelides, a strategist at Royal Bank of Scotland Group Plc in London, reports Bloomberg.

Varoufakis is no true friend of free markets, but the banksters will not put up with even a tiny bit of  insolence from a servant.

No doubt a call was made to Tsipras to ditch Varoufakis.

 -RW

Where the Fed Manipulated Boom Is

Nine of the 10 large metropolitan areas with the highest rates of gross domestic product growth since 2008 are in the West or Southwest, led by Portland, Oregon, at 22.8 percent, according to the U.S. Bureau of Economic Analysis.

The Fed manipulated boom is across the country, but watch wage growth and housing prices to get a strong idea of where newly printed Fed money is flowing with intensity. -RW






(via Bloomberg)

The Myth of Global Gluts and the Reality of Market Change

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, “The Myth of Global Gluts and the Reality of Market Change.”

News reports claim that the world is suffering from economic gluts of resource commodities, and capital and labor, which are languishing unused because of insufficient “aggregate demand.”

There are few worse fallacies that the notion of general gluts due to a lack of demand. All of this was refuted by economists of a much earlier time under the heading of “Say’s Law.”

As long as there are unsatisfied wants of any kind, there is always more work to be done, and thus there cannot be too much of everything relative to people’s demands. There can be too much of some goods compared to the greater demand for other desired goods, at the prices at which various goods are offered on the market.

If we see “excess supplies” of a number of commodities and types of labor and capital it is more do with distortions and imbalances between supplies and demands, and the misuse and misallocation of capital and labor caused by government interventions, monetary manipulation and taxing policies that have been and are preventing competitive markets and the price system from setting things right through appropriate market-guided rebalancing of supplies and demands.

In our new and ever-increasingly interdependent global market system, change and needed adjustments are inevitable and inescapable. But these will be prevented or made more difficult and delayed for as long as government policies get in the way.

http://www.epictimes.com/richardebeling/2015/04/the-myth-of-global-gluts-and-the-reality-of-market-change/

Best,
Richard

Harvard’s Roland Fryer Wins John Bates Clark Medal

The American Economic Association has announced the awarding of the John Bates Clark Medal to Roland Fryer. The medal is given to who the AEA deems is the most promising American economist under 40 years old.

According to the AEA:
Fryer is the leading economist working on the economics of race and education, and he has produced the most important work in recent years on combating the racial divide, one of America’s most profound and long-lasting social problems.
I await the take of Thomas Sowell on this, author of:

Race And Culture: A World View
Inside American Education
Race and Economics
Black Education: Myths and Tragedies
Race, Culture, and Equality
Intellectuals and Race

who some might consider having a passing familiarity with the topics being investigated by this just revealed leading economist.

 -RW

Sunday, April 26, 2015

What Is Fascism?

Brad DeLong has a post up: Weekend Reading: Benito Mussolini (1932): What Is Fascism?, which quotes Mussolini on some of the elements of fascism.

The quote by Mussolini does not provide a full accounting of what fascism is, still it is instructive.

That said, one part of fascism that I think has not been focused on enough is the healthcare aspects of the doctrine. It appears that Obamacare is simply expanded Mussolini healthcare.

 From My Autobiography by Mussolini:
I have wanted the Fascist government, above all, to give great care to social legislation...I think that Italy is advanced beyond all European nations; in fact, it has ratified laws...for obligatory insurance against tuberculosis...All this shows how, in every detail in the field of labor, I stand by the working labor...from insurance against accidents to the indemnity against illness.
 -RW

A Keynesian Knockout Punch By Paul Krugman

Left-wing Keynesian Paul Krugman has just taken a swing at right-wing Keynesian Greg Mankiw. The ounch connected.

These two have been going at it for a long time, I think they truly hate each other, Mankiw usually dominates these battles, but this time I am awarding Krugman a first round TKO for this.

-RW


Greece Talks With Eurogroup Hit “Complete Breakdown”

Euro-Finnace Ministers are now hurling public abuse at Greek officials, especially Yanis Varoufakis.

 From the Guardian:
Eurozone finance ministers have blasted Greece for failing to make more progress towards a bailout deal, at an acrimonious eurogroup meeting in Riga today.
Ministers laid into Greek finance minister Yanis Varoufakis for not having reached agreement with creditors, two months after being given a four month extension to Greece’s loan programme…
Dijsselbloem also warned that it is very hard to consider a new programme for Greece to cover its funding needs beyond June, given the lack of progress recently. And he ruled out giving Greece a slice of the €7.2bn bailout cash that is being held back until reforms are agreed.
ECB president Mario Draghi also showed exasperation over the slow pace, and warned that the ECB could potentially impose tougher conditions in return for keeping Greek banks afloat
 From a Bloomberg report:
Euro-area finance ministers hurled abuse at Greek Finance Minister Yanis Varoufakis behind closed doors as they shut down his bid to find a shortcut to releasing financial aid….
The 19-nation bloc’s finance ministers were riled after Greek Prime Minister Alexis Tsipras tried to bypass their veto on financial aid with an appeal to Angela Merkel on Thursday. Tsipras sought to circumvent the finance ministers’ authority, pleading his case with the German Chancellor and French President Francois Hollande on the sidelines of a summit on immigration in Brussels.
Under euro-area procedures, it’s the finance ministers who have to sign off on any aid disbursement and Merkel said last month she’s not prepared to override those controls.
“I would describe today’s meeting as a complete breakdown in communication with Greece,” Maltese Finance Minister Edward Scicluna said.
I'm not so sure, but Yves Smith thinks its likely over for Greece:
 It is hard to see how Greece squeaks through and makes its two early May debt payments to the IMF. A default may be imminent.

I have not verified it independently but a comment on the Spiegel article (search for “spookk3) said that many local officials were deeply upset that the national government was demanding that they make their funds be deposited at the Greek central bank so the national government could borrow them to make debt payments:

Today’s papers in Greece report that the Tsipras government has received a grand total of 430 million or so in “confiscated” money from local governments to fill the state’s till. Huge sum indeed. Given that the IMF is to receive 750 million on May 7 or thereabouts. Plus a few billion due here and there. A bunch of mayors and other local office holders are going to demonstrate in Athens,refusing to hand over their money to the state unless they receive guarantees that it will be paid back.

Greece has engaged in a game of brinksmanship for months, but it looks as if the wheels are about to come off. It’s too easy to second-guess outcomes, but cooler heads had suggested that if a Grexit looked to be inevitable, the Eurozone could take measures to ameliorate the pain. The relations between the two sides are so sour that this sort of conscience-assuaging sop seems inconceivable, unless Merkel insists on it as a statesman-like gesture.
  -RW
.

Remember This The Next Time...

...a Keynesian argues that the thinking of Ludwig von Mises and Friedrich Hayek should be ignored because they are so 20th century, or even more to be ignored is the 19th century writing of Carl Menger.

Keynesian Nobel Prize winner Paul Krugman writes:
I’m pretty sure Roger Farmer is subtweeting me here, when he says
There are still a number of self-professed Keynesian bloggers out there who see the world through the lens of 1950s theory.

And it’s true! In fact, quite a lot of what I use is 1930s economic theory, via Hicks. And I should be deeply ashamed. I am, however, not the worst offender. After all, there are plenty of physicists who still use Newtonian dynamics, which means that they’re seeing the world through the lens of 17th-century theory. Fools!...

I’m all for new ideas, indeed for radical heterodoxy, if it solves some problem. Attacking ideas that seem to work pretty well simply because they’ve been around for a while, not so much.
Is this something Austrian school economists must be on guard against? Who would slyly imply that Austrian school economics has more to do with ancient history than current day America?

Here's Krugman in the debate he lost against Ron Paul:
You can’t leave the government out of monetary policy. If you think we’re going to let it set itself, it doesn’t happen. If you think you can avoid the government from setting monetary policy, you’re living in the world that was 150 years ago.... 
I’m not a defender of the economic policies of the Emperor Diocletion, let’s make that clear.
I’m a defender of the economic policies that we followed after World War II...
  -RW

Oh Yeah, Wladimir Klitschko Pounds Former Federal Reserve Employee


In a heavyweight title match at Madison Square Garden,  Ukrainian Wladimir Klitschko beat former Philadelphia Federal Reserve employee  Bryant Jennings.

 It was a unanimous decision. Two judges scored it 116-111, while the third judge saw it 118-109. Klitschko landed 92 punches in the fight, compared with just 16 for Jennings.

 -RW

There's No Recession in Sight

In the below column, Kudlow is correct in stating that the economy is in an uptrend. although he fails to emphasize that it is a Fed manipulated boom, and that it will end badly.He is dead wrong, though, that there is no inflation in sight. It is right around the corner. But what economic observers need to take away from this Kudlow column is the fact that it is a boom-bust cycle and that not every day is going to be a down day for the economy.  -RW

By Larry Kudlow

The economy has been in a tepid, soft, slow recovery for the past five-and-a-half years. It's the weakest rebound in generations. The Commerce Department's revision of fourth-quarter GDP shows that nothing much has changed. Over the past year, real economic growth registered 2.4 percent, slightly higher than the recovery average. It ain't much.

Meanwhile, winter economic reports for retail sales, manufacturing and capital investment point to a weaker first quarter, perhaps around 1 percent. And Wall Street is talking about a possible profits recession, with expectations of a 2 or 3 percent drop in corporate earnings for the first half of 2015. So the market bears are out in full force.

Now, let's acknowledge that coming off a deep recession, the rebound should have been 4 or 5 percent, not 2 percent. By some calculations, GDP is 10 percent — or nearly $2 trillion — below its long-term trend, and jobs may be lagging by 8 to 10 million.

Government entitlement transfers pay people not to work. Family breakdown has created a poverty trap for the lowest economic groups. Upward mobility is lagging. And the government has attacked the high-end movers and shakers with tax hikes and overregulation.

And unfortunately, a damaging business psychology prevails. It says that success must be punished and that redistribution is the way to solve inadequate growth, inequality and unhappiness.

But ... all this said ... it's possible to be too pessimistic.

Let's start with profits, the mother's milk of stocks and lifeblood of the economy. The recent GDP report shows a slight profits decline in 2014, the first in years. But this is misleading.

More important, the core measure of earnings, domestic nonfinancial profits, increased 1.4 percent in the fourth quarter and 7.8 percent for 2014. On an annual basis these profits increased $262 billion and were widespread across industries.

The big problem is not the U.S., but the rest of the world, which is mostly in recession and saw profits drop $36 billion in the fourth quarter. At roughly 18 percent, profits from the rest of the world account for the smallest share of corporate earnings since 2006.

By the way, GDP profits from the National Income Accounts are far larger, and therefore more telling, than S&P 500 profits. Initial quarterly estimates from GDP cover about 9,000 companies. Over time, annual revisions will cover roughly 4 million companies. And GDP profits are benchmarked to IRS tax filings, with no accounting shenanigans.

Another economic positive is the rise of the consumer. Rex Nutting of MarketWatch reminds us that consumers got a big windfall from plunging energy prices. So far they've saved it, but that may change. Real incomes adjusted for taxes and inflation jumped at a 7.7 percent annual rate over the past three months. This could set the stage for a big boost in consumer spending.

The terrible winter has taken its toll in Q1. But family spending may jump come spring and summer. Along with this, the basic core of the private economy (consumption plus investment), which rose over 4 percent in the fourth quarter and 3.3 percent for 2014, will continue to advance.

Did somebody say King Dollar? It's holding down consumer prices and business costs (including energy). Even with a lousy world economy, U.S. exports increased 4.5 percent annually in the fourth quarter, while imports jumped 10.4 percent. So U.S. businesses are very competitive regarding export sales, and the rise in American imports from overseas will bolster the international economy.

One last encouraging point: C&I business loans have increased over 15 percent annually in the last three months and about 12.5 percent in the past year. That's a good sign, especially for Main Street business activity, which has been lagging for years.

The Fed will probably raise its target rate later rather than sooner, smaller rather than larger. I'm betting on October and December for some quarter-point rate hikes. That's consistent with high dollar and low commodity prices. I doubt long-term rates will change much at all.

So moderate growth, rising core profits and a still-accommodative Fed set the stage for a better stock market as the year goes on. I'm still in the "buy the dip" camp. We're not going to get the kind of growth that America is capable of producing until we get tax and regulatory relief and a better attitude about free-market capitalism. But I wouldn't get too pessimistic.

There's no recession or inflation in sight, and America is a very resilient place.

Don't bet against it.

Larry Kudlow is CNBC's Senior Contributor and author of American Abundance: The New Economic & Moral Prosperity.

  

The Robert Wenzel Show: Sonja Trauss Battles San Francisco's Housing Bureaucracy





Today's Guest:

Sonja Trauss

Download an mp3 of this episode (right click and save)

Miss a show? Here's the archive.

**Thanks to John Daubert, Head of Editing and Mastering.**

Saturday, April 25, 2015

Joe Salerno: Austrian Economics and Crony Academia, Part 2

An Excellent Explanation of Minimum Wage Math

The Multinational Reach of Joesph Salerno

My copy of the Festschrift, The Next Generation of Austrian Economics: Essays in Honor of Joseph T. Salerno, just arrived in the mail.

I haven't had a chance to read it yet but one thing struck me in glancing over the essays. In a recent interview with Jeff Deist, Dr. Salerno stated that he would like to see Austrian economics simply become economics. He wants to see, what is now known as Austrian school economics, become the bedrock of economics in general. A very noble goal.

In a very important way, the Festschrift points to how Dr, Salerno has moved the economics world toward this goal. The Salerno students who contributed to the Festschrift, come from many corners of the globe:
*Philipp Bagus is professor of economics in the Department of Applied Economics I at
Universidad Rey Juan Carlos, Madrid, Spain.

*Simon Bilo is assistant professor of economics at Allegheny College, Meadville, Pennsylvania.

*David Howden is professor of economics and chair of the Department of Business and
Economics at St. Louis University, at their Madrid campus, Madrid Spain.

*Guillaume Vuillemey is a PhD student in economics at Sciences Po, Department of Economics,
Paris, France.

*Eduard Braun holds a postdoctoral position to the chair of economics at Clausthal University
of Technology, Clausthal-Zellerfeld, Germany.

*Per Bylund is John F. Baugh Center Research Professor in the Department of Entrepreneurship
at Baylor University in Waco, Texas.

*Marek Hudík is postdoctoral fellow at the Center for Th eoretical Study at Charles University
in Prague, Prague, Czech Republic.

*Xavier Méra holds a PhD in economics from the University of Angers and teaches at
IÉSEG School of Management in Paris, France.

*Mateusz Benedyk is a PhD Candidate at the Faculty of Social Sciences, University of
Wrocław.

*Amadeus Gabriel is assistant professor in the Department of Finance and Economics at
the La Rochelle Business School, France.

*Mateusz Machaj is assistant professor at the Institute of Economic Sciences at the University
of Wroclaw, Wroclaw, Poland.

*Matthew McCaff rey is an assistant professor of enterprise at the University of Manchester,
Manchester, United Kingdom.

*J. Patrick Rhamey is assistant professor in the Department of International Studies and
Political Science at Virginia Military Institute in Lexington, Virginia.
518 West Magnolia Avenue remains the epicenter of the present Austrian school, but is wonderful to see the multinational reach of Dr. Salerno, with academics in many parts of the world now teaching with an Austrian perspective.

  -RW

Why Raising the Minimum Wage Will Make the Path to Higher Wages More Difficult, Not Easier, for Young, Less-Educated and Inexperienced Workers

Mark Perry explains:

The Bureau of Labor Statistics just released its annual report on the “Characteristics of Minimum Wage Workers, 2014,” and here are some highlights:

Age. For workers ages 16 to 19 years old, only 15.3% made the minimum wage or less in 2014 (about 1 in every 6.5 workers in that age group) and almost 85% of those workers earned more than the federal minimum wage last year. For workers ages 25 and older, only 2.5% (1 in 40) earned the federal minimum wage or less last year. So even the vast majority of teenagers (more than 8 of every 10) earn more than then federal minimum wage.

Education. For workers with less than a high school diploma, 7.3% of those workers earned the minimum wage last year, compared to 3.5% (1 in 29) of high school graduates, 2.2% (1 in 45) of workers with an associate’s degree and fewer than 2% of workers (about 1 in 53) with a bachelor’s degree or higher who earned the minimum wage last year.

Marital Status. For never married workers, who tend to also be young, 6.7% of that cohort worked last year at the minimum wage, compared to only 1.9% (about 1 in 53) of married workers with a spouse present who worked at the minimum wage in 2014.

Hours Worked. Among full-time workers only 1.8% (1 in 56) earned the minimum wage or less, compared to 9.5% (1 in 11) of part-time workers.

Bottom Line: Four important factors that will help workers earn a wage above the federal minimum wage are: 1) age (experience), 2) education, 3) marital status and 4) hours worked. Only 1-in-40 workers age 25 and above make the minimum wage, only 1-in-45 workers with an associate’s degree or higher makes the minimum wage, only 1-in-53 married workers earns the minimum wage, and only 1-in-56 workers working full-time earns the minimum wage. The evidence seems clear that the minimum wage applies only to a very small group of young, inexperienced, single, part-time workers, with a lack of education. The path to higher wages includes staying in school, getting job experience, working full-time and getting married. Raising the minimum wage will make that path to higher wages more difficult, not easier, because it will price many younger, less-educated, less experienced workers out of the labor market — and will deny them the opportunity to work, gain experience, and gain the job skills they need that paves the path to higher wages.

The Worst Cities in the US for Renters

According to Forbes:

No. 1: San Francisco

Average monthly rent, Q4 2014: $2,802
Year-over-year % change in apartment rent: 12.8%
Median household income, Q4 2014: $85,087
Avg. rent as a share of household income: 40% Apartment vacancy rate, Q4 2014: 3.6%

No. 2: Oakland

Average monthly rent, Q4 2014: $1,815
Year-over-year % change in apartment rent: 10.5%
Median household income, Q4 2014: $76,493
Avg. rent as a share of household income: 28% Apartment vacancy rate, Q4 2014: 2.9%

No. 3: San Jose

Average monthly rent, Q4 2014: $2,291
Year-over-year % change in apartment rent: 11.3%
Median household income, Q4 2014: $93,902
Avg. rent as a share of household income: 29% Apartment vacancy rate, Q4 2014: 3.5%

TechCrunch on the New Samsung S6 and S6 Edge Cell Phones


The Yield Curve Spread as a Powerful Indicator of the State of the Economy

In the current issue of the EPJ Daily Alert, I discuss the yield curve spread and why it is one of the best indicators that will signal when a recession is developing.




Note: The current yield spread far in excess of + 100 basis points backs up my view that we are at present far from the next recession.

  -RW

Friday, April 24, 2015

AeroMobil — The Incredible Flying Car

Free Market innovation is awesome. Straight out of Slovakia (By a designer who originally dreamt of a flying car as a way to escape Soviet oppression.)

The AeroMobil is the world’s first fully transformable flying car. It drives along the road like a space-age roadster. It flies through the skies like a private jet. And if everything goes to plan, it could be in customers’ garages within two years, reports FT.

It is no longer or wider than a standard five-door Bentley. The two-seater has two wings that fold back behind its main cockpit, and a back-mounted propeller that tucks in between the retracted wings when driving on the road.








  -RW