US Monitoring 5 Countries for Currency Manipulation: China, Germany, Japan, Korea, and Taiwan

The U.S Treasury has created a “monitoring list” of five major countries—China, Germany, Japan, Korea, and Taiwan—that could be designated “manipulators” in the future, report C. Fred Bergsten and Joseph E. Gagnon of the Peterson Institute for International Economics.

This step by Treasury was required by the Trade Enforcement and Trade Facilitation Act (the “customs bill”), which became law in February 2016, state Bergsten and Gagnon.

The customs bill mandates that Treasury “shall  commence enhanced bilateral engagement” with each major trading partner of the United States that meets three objective criteria  The criteria, which are the focus of Treasury’s new report, would indict a country that meets three of the below four.:

• has $55 billion or more of annual trade with the United States (to count as a “major trading partner”);
• runs a significant bilateral trade surplus with the United States, which Treasury defines as exceeding $20 billion over the past 12 months;
• runs a material (global) current account surplus, which Treasury defines as exceeding 3 percent of the country’s GDP over the past 12 months; and
• engages in persistent one-sided intervention in the currency market, which Treasury defines as repeated net foreign exchange purchases exceeding 2 percent of the country’s GDP over the past 12 months.

Treasury found that no country calls for “enhanced engagement” at this time (although the criteria would have caught China in most of the past 15 years and other countries, including Korea and Malaysia, in several, notes Bergsten-Gagnon). However, it finds that five countries meet two of the criteria and are thus to be placed on a new “monitoring list."

This entire trade battle and currency manipulation concerns, of course, are old discredited mercantilist concerns.

A sound economist on learning a foreign country was trying to manipulate its currency lower would simply reply, "Great, our citizens will be able to buy foreign goods cheaper!"

-RW 

Milton Friedman Schools a Young David Brooks on Free College

Back in 1985, a young David Brooks, now a New York Times columnist, sat across from economist Milton Friedman and was schooled on why government-subsidized higher education is a bad idea.



(via TruthRevolt)

Warren Buffett on Dating

From Berkshire's annual meeting being held today in Omaha. Nebraska.

Buffett on dating "If you're choosing between two very rich guys, pick the one that's older" #BRKLiveStream #BRK2016 @YahooFinance

— justine underhill (@jj_under) April 30, 2016

Now, Venezuela is Running Out of Beer

Hyper-inflation combined with price controls  and foreign exchange controls  is wrecking Venezuela.

Empresas Polar, Venezuela's largest private company, has now shuttered its breweries, saying it is unable to pay for imported grains under the government's strict exchange controls, which govern access to dollars.

And, though, in the grand scheme of things, shutting down government work isn't all bad, it should be noted that this week the government cut public sector employees' work week to a mere two days in efforts to cut down electricity use.

-RW 

An FDIC Bank Account is Better Than a Money Market Account

Although, I don't think we are headed to negative interest rates in the U.S. anytime in the near future (Rates will be heading higher not lower). Below is pretty good long-term advice from Gary North.

My view, in sync with North, is that money should be kept with the crony bankster banks, e.g., Citibank, Chase, since the government will protect these banks and your money will be quite safe up to at least the $250,000 FDIC insurance.

Here's North:

Short-term T-bills are paying about .25%. This creates a problem for money
market funds: their costs are barely being funded by the interest they get on
short-term CD's.

They pay low rates to investors -- no better than a bank or credit union.

If we get to negative rates, where Europe is today, then money market funds
will suffer losses if they do not "break the buck." They will either impose
capital losses on investors or else go bankrupt.

New SEC rules go into effect in October. They will allow restrictions on
withdrawals. Read about this here:

http://www.garynorth.com/snip/1229.htm

Print it out. Read it. Forewarned is forearmed.

Some funds are rewriting their rules. They reserve the right to limit
redemptions. They are sending out new agreements.

If you have money in a money market fund, read the new fine print. You do not
want your money locked in.

An FDIC-insured account has no such restrictions.

A word to the wise is sufficient.

Gary "FDIC-Insured" North

Another point that needs to be kept in mind is that if money market funds are held through a stock brokerage firm account, the investments in the brokerage account, including money markets, are insured up to $500,000 by SIPIC (cash $250,000) but it may be many months before the investments are released to you if something goes wrong with your brokerage firm.

-RW 

Trump Launches "Job Killing Ted" Campaign Ad

Yes, damn free markets, what we need is a supreme deal maker to bring back mercantilism.



-RW 

This is What Ted Cruz Did When He Was Asked to Sign a Copy of the 'Communist Manifesto'

Someone showed up at a Ted Cruz event in Elkhart, Indiana yesterday with a copy of the Communist Manifesto. According to a reporter for the Texas Tribune, the kid, who looked like he could be a college student, asked Cruz to sign his “economic textbook.”

A young man asks Ted Cruz to sign his "economic textbook."

"That... would be the Communist Manifesto," Cruz says, realizing the prank.

— Patrick Svitek (@PatrickSvitek) April 28, 2016

Cruz paused and said, “You know what, I’ll sign it as well.” The college kid replied, “Ah, you have a good sense of humor.” Here is the note Cruz added to the book:

Here is a clip of the interaction:



Nice work from Ted, I wonder how he compares himself with his warmonger views and advocacy of a VAT.


(via HotAir)

The Great Debate: Capitalism v. Socialism

Michael Edelstein emails:

20-year-old John Hajek, smart and funny 3rd speaker (starts at 23:23).

Happy Anniversary! The Estate Tax Turns 100

Laura Saunders reports:

In 1916, as World War I raged in Europe, Congress wanted to boost U.S. revenues in case America joined the fighting, so lawmakers voted for a new tax on a person’s assets at death. This levy affected fewer than 1% of Americans who died and raised less than 1% of federal revenue in 1917.

In an editorial at the time, The Wall Street Journal called the tax “frankly a class discrimination.” But most lawmakers who voted in favor of the levy, which had a top rate of 10% and an exemption of $50,000 (about $1 million in current dollars), saw it as a reasonable way to raise revenue. Opponents thought such levies should be left to the states.

So began the modern U.S. estate tax. Today, the tax comes in the form of owing the government up to 40% of your assets at death, above an exemption of $5.45 million per person.

George Reisman explains why the estate tax should be abolished:

 I want to live in a society in which I am surrounded by the greatest possible number of very wealthy individuals who invest  their wealth in producing the products I buy and in employing the labor I sell. I want to be surrounded by giant firms like General Motors and Exxon, with tens of billions of dollars of capital invested in producing amazing products like automobiles and gasoline by the most modern, efficient methods, so that almost everyone, myself included, can afford to own and drive such a wonderful machine as the automobile. I want comparable sums of capital invested in everything I buy, so that I can afford to buy it and have money left over for all kinds of luxuries. I want all these giant firms to be out in the market competing for labor, so that the wages or salary I and everyone else can earn will be that much higher.

Repealing the inheritance tax means that substantial sums that would otherwise disappear into government spending programs will instead be used to make capital investments. Heirs will be able to keep their estates rather than have to sell off major portions to raise the money to pay estate taxes. As a result, the people who would have bought the estates will have to invest in new and additional capital rather than in the purchase of estates, from which their funds are passed on to the Treasury. That additional investment is what will serve my self-interest as a wage or salary earner. For it will be added to the capital that produces the goods I buy and that underlies the demand for the labor I sell.

I don’t benefit from government spending to pay people not to work or produce, for interfering with their ability to work and produce, for failed educational systems or a botched medical care system, or for ill-conceived military ventures all over the world. But I do benefit from additional capital investment—that will give me better and lower-priced goods and a higher wage or salary.

It may be true, as some have argued, that repealing the inheritance tax will open up new tax "loopholes" that enable wealthy individuals to reduce their income tax payments. If that is the case, then the result will be so much the better from the standpoint of my and every other wage or salary earner’s actual self-interest, because the additional taxes avoided will also be used mainly to add to capital investment and thus increase the supply of goods and the demand for labor. Consequently, I say, vive the "loopholes" and their enlargement.

It may also be true that the effect of repealing the inheritance tax will be to reduce support for various private charities. If so, loss of support for such valuable institutions  as  hospitals, schools, libraries, and opera companies could easily be prevented by donors deciding to continue support for them unabated and reduce their funding only of  organizations that work to undermine or destroy the capitalist economic system. Indeed, in the spirit of self-sacrifice that they champion, the leaders of such organizations should step forward and positively urge donors to make such a choice. (Of course, even they would ultimately benefit from such a choice, because everyone is better off in a capitalist society than in the kind of society that they are working to establish.)

Finally, no one should fear the establishment of any kind of hereditary aristocracy of wealth because of the repeal of the inheritance tax. It’s true that if two young men were equally talented in every respect but that one of them inherited a substantial sum of wealth while the other did not, the first would probably always be better off than the second. But so what? What is wealth for if not to make an individual better off than he would otherwise be? The important thing is that the wealth of the one would not be a threat of any kind to the other. On the contrary, it would work to his benefit, not only in the ways I have described but also, very possibly, in a more personal way.

For example, it could enable the two to form a partnership based both on their combined abilities and on the wealth of the one that was fortunate enough to be an heir. While the heir’s share in the partnership would be greater, the use of his capital would enable both to achieve greater success than if he did not possess it.

But in a capitalist society, free of governmentally imposed class distinctions, talented newcomers—self-made men—again and again rise from the ranks of the relatively poor and finish their lives as the richest members of society. Rockefeller, Carnegie, Ford, and in our day, men like Gates and Buffet, did not enter the world in possession of any vast fortune. They themselves created their fortunes. Heirs can retain their fortunes if they do not waste them, but only if they possess considerable talent can they maintain their fortunes in the first rank of wealth.

Some people may attempt to dismiss the essential points I have made as "the trickle-down theory." Such disparagement does not in any way refute any of those points. They all remain true. Invested capital is the foundation of the supply of products and of the demand for labor. To make them grow, and thus the standard of living of the average wage or salary earner rise, it must grow. That is what repeal of the inheritance tax will help to accomplish. The only alternative to this theory is the utterly nihilistic, loot-and-plunder theory, which is the theory of the critics of capitalism and private ownership of the means of production and of the freedom of inheritance.

How Much of a Keynesian is Donald Trump?

Narayana Kocherlakota, a hardcore Keynesian and former president of the Federal Reserve Bank of Minneapolis, has written an essay at Bloomberg titled:Trump Starts Making Economic Sense.

In the commentary, Kocherlakota correctly reports:

About a month ago, I urged the presidential candidates to explain what policies and leadership they would like to see at the Federal Reserve. So I was glad to see Trump address Fed-related issues in an interview with Fortune magazine last week.

His key comments: “We have to rebuild the infrastructure of our country. We have to rebuild our military, which is being decimated by bad decisions. We have to do a lot of things. We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.”

I read this as calling for two forms of fiscal stimulus. One is more spending, especially on the military and on infrastructure such as roads and bridges. The second is maintaining low taxes despite high levels of government debt (in other remarks, Trump has favored tax reduction).

This seems to be a pretty good read of Trump economic policy.

He wants government building of infrastructure, expanded military spending and tax cuts!

I am all for tax cuts, but mixed with expanded government spending this is Keynesian stimulus policy on steroids.

Kocherlakota has correctly spotted a fellow traveler in Trump.

-RW 

Why Trump’s Mexican Remittance Ban Scheme Won't Work (Not Even for 24 Hours)

Alex Nowrasteh says it is possible Trump's remittance ban scheme might even spur more illegal immigration into the U.S.

MAP: How Many People in Each State Make the Federal Minimum Wage

In other words, the number of people (percentagewise) in each state most vulnerable to getting laid off because of a hike in the minimum wage.

(chart via Business Insider)

The Most Under-Reported Sentence in Donald Trump's Foreign Policy Speech

Yesterdays foreign policy speech by Donald Trump has received extensive coverage.

However, one sentence in his policy speech is not receiving any coverage in mainstream media. The sentence deserves extensive coverage,

It is this sentence:

We need to think smarter about areas where our technological superiority gives us an edge. This includes 3-D printing, artificial intelligence and cyberwarfare.

In the paragraph above this, Trump said, "We are also going to have to change our trade, immigration and economic policies to make our economy strong again – and to put Americans first again. "

This suggests that Trump is thinking in terms of some sort of national industrial policy, perhaps infant industry protection.

A google search for news relating to "Trump industrial policy'" turned up my comment yesterday on the matter but there were no other links related to Trump's speech and industrial policy.

Murray Rothbard considered industrial policy to be a left-Keynesian policy (See: Making Economic Sense  chapter 32).

Specifically, with regard to infant industry protection, Rothbard wrote (See: The Rothbard Reader chapter 13):

The “infant-industry” argument has been considered as the only justifiable ground for a protective tariff by many “neoclassical” economists...

Protectionist economic historians are under pains to assert that no important infant industry can be established without substantial tariff protection against entrenched foreign competition. The high degree of tariff protection in the greater part of the history of the United States, has made this preeminent industrial country a favorite “proof” of the infant-industry argument.

Ironically, it is the United States that provides the most striking illustrations of the fallaciousness of the infant-industry doctrine. Within its vast borders, the United States offers an example of one of the world’s largest free-trade areas. The frequent regional shifts in American industries provide numerous examples of birth and growth of infant industries, and decline of old, established industries.

James E. Miller wrote when discussing Paul Krugman's book Pop Internationalism:

Krugman's basic premise throughout the book is that free and globalized trade is not something a wealthy country such as the United States should fear, but rather something it should embrace. Protectionist fears of free trade such as "massive unemployment" and "trade deficits" are unjustified according to Krugman, because what drives trade is comparative rather than absolute advantage....  

Krugman points out that the idea of a country adopting an industrial policy to help certain "high-value" industries to be competitive in the world economy is superfluous. "Why," Krugman asks, "weren't private markets already doing their job?"

He goes on to state that "the productivity of the average American worker is determined by a complex array of factors, most of them unreachable by any government policy."..To top off his embrace of market efficiency over government policy, he even goes on to acknowledge that government intervention to improve competitiveness can ultimately lead to "misallocations of resources."

It is extremely difficult to see how far down the  road of central planning Donald Trump would go as president. Though it is clear his own guiding principle is the Führer Principle, that is, the view that the economy needs a strong guiding leader. In his version of the Führer Principle, it is to "cut deals."

He talks of negotiating with China and Russia but from a free market perspective what is there to negotiate? They are not threatening us. Free trade is about open borders. This does not require negotiations with other countries. It requires only an order from the President to U.S. customs guards: "Allow goods and service to flow in and out."

But the industrial policy heavy sentence of Trump's implies, he thinks differently. He wants to manage trade. He wants to manage some industries This is indeed left-Keynesian talk, It is socialist talk.

Yes, Trump may shake-up the establishment but he may replace it with something much worse, new directions in a planned economy and society overall and everyone of those yahoos cheering at his rallies will be primed useful idiots to report to the government anyone that is not going along with the plan.

-RW 

Koch-Funded Economist Calls for ECB Money Printing to Bailout Greece

The Greek financial crisis is heating up again.

Tyler Cowen, professor at Koch-funded Geroge Mason University, tells a Greek newspaper, which identified him as  “America’s hottest economist,”what to expect:

[T]he [Greek] bailout programs were never going to work in the first place. The debt is too high and is more of a political weapon than anything which can be paid back. And the Greek economy requires very serious structural reform, more than the Greek people seem to wish to accept. That is two impossibilities in the situation right there, and then on top of that we have a dysfunctional EU, slow global growth across the board, and the refugee crisis. In that setting, can one expect anything other than failure?
---
It’s all a big bargaining game, and at the end of the day pulling the plug will have to be up to the Greeks. Everyone’s expectations are unrealistic, and everyone knows that, including the IMF and EU and many others too. But who will pull the plug? Tsipras almost did, and then backed away. In my view, sooner or later Greece will leave this arrangement because it simply isn’t workable. I don’t look forward to the resulting economic carnage.

But in a decidedly non-Austrian school, non-libertarian perspective, he argued for the European people to bail out  Greece via European Central Bank money printing:

I’d like to see the European Central bank monetize a big chunk of the Eurozone debt, though at this point that doesn’t seem so likely.

 -RW 

If You Are Homeless There is No Price Inflation...

U.S. Rent inflation:

(via ZeroHedge)

MarketWatch: The U.S. Is in the Midst of a Historic Bull Market

MarketWatch correctly notes:

A bull market that has been derided as fake, doomed and history’s most-hated just earned a new title: the second-longest ever.

Dodging and weaving through three 10 percent drops in the last 19 months while avoiding the 20 percent decline that denotes a bear market, the advance that began seven weeks after Barack Obama’s first inauguration in January 2009 has now lasted 2,607 days. That matches a rally from 1949 to 1956 which straddled the presidencies of Harry Truman and Dwight D. Eisenhower. Only the dot-com bubble of the 1990s lasted longer at 3,452 days.

The idea held by many, including Krugman-Keynesians and Austrian-lites, that the Fed can no longer creates the boom side of the boom-bust Fed created business cycle, is simply absurd.

And as far as the Austrian-lites go, reflects a complete failure to understand what the business cycle is in the first place.

-RW 

Is This the Future of America?

Unless the masses start to demand economic freedom (and they don't have a clue about it now), this is exactly what lies ahead for America .

(Photo from the cover of the 2011 book, United States of Banana, by Giannina Braschi. )

Obama's Economic Legacy

President Barrack Obama tells Andrew Ross Sorkin of NYT:

I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform.By that measure, we probably managed this better than any large economy on Earth in modern history.

This, of course, ignores a number of important factors. The president's early economic policy initiatives were responsible for extending the "wrenching financial" crisis. To the degree we can say we are in a recovery is not because of Obama policies but Federal Reserve money manipulations that have simply put us in the boom phase of another Fed-created boom-bust cycle.

If Obama leaves any significant economic legacy, it will be Obamacare, If not reversed in a Donald Trump presidency, Obama's healthcare plan will ultimately result in a health economic system that sees life expectancy crashing.

And for this reason, Obama should be considered just a few notches below Mao as a horrific leader.

-RW 

Alex Jones Talks with Leading Climate Expert Lord Christopher Monckton

After listening to Lord Christopher Monckton in this clip, it is clear the certainty of the climate fearmongers and their unwillingness to debate is very similar to the unwillingness of social justice warriors to debate.

They fear debate.



-RW 

What Really Went Down Before the Paris 2016 Climate Agreement

Via Der Chief Policy Advisor des Science and Public Policy Institute,Christopher Monckton.



(ht Chandra Duggirala MD)

Trump Economic Policy Madness

Donald Trump delivered what was billed as a foreign policy speech in Washington D.C. at the Mayflower Hotel (The venue was moved from the National Press Club because room for more attendees was needed).

For the most part, the speech did stick to his aggressive foreign policy, but there were plenty of hints as to the types of economic policies Trump would adopt as president.

The speech made it increasingly clear that Trump is not an advocate of free markets. He is anti-free market well beyond his absurd mercantilist trade views and seems to view the role of president as manager of the economy.

During his speech, he, of course, made the absurd claim that China was committing "theft of American jobs."

This was expected, though, it does show once again that Trump neither understands comparative advantage nor how jobs are fundamentally created.

And he appears far from a small government budget guy. He said:

"We will spend what we need to restore our military." (He wants a larger standing army, more planes and more ships)

How is he going to pay for this? Through cuts elsewhere?

Not quite. He said it will be paid for when he "makes the economy strong so that tax revenues will grow."

Most shocking, he appears to have hinted at a possible national industrial policy. He stated that 3d-printing and artificial intelligence were important growth areas for the country.

Donald Trump: Central planner.

-RW 

Saudi Prince Hits Manhattan Club Looking Like an Average Slob

 A portly and disheveled man in dad jeans and sandals with a cane, sipping soda through a bendy straw, who hit a Manhattan nightspot on Monday, turned out to be Saudi Prince Abdul Aziz bin Fahd, whose fortune likely eclipses $10 billion, reports NyPo.

The 43-year-old prince is the youngest, and believed to be favorite, son of the late King Fahd bin Abdul Aziz al-Saud, who died in 2005 at the age of 82 after a 23-year reign over Saudi Arabia.

According to NyPo, Bin Fahd rolled up to the swanky Chelsea hot spot Avenue an exclusive two-story club on 10th Avenue near West 17th Street with about 15 Mercedes-Benz sedans — most of which were only occupied by a driver,

The prince was surrounded by an entourage of private security guards.

 Bin Fahd in more traditional garb.

NyPo says Bin Fahd owns a $1 billion property portfolio in the United States alone.

-RW 

The Costs of Mad Regulations to Protect Against Environmental Catastrophe

By William O'Keefe

This year’s Earth Day celebrations, dating from 1972, followed a predictable script: they predicted environmental catastrophe unless developed countries change their profligate life styles and plunder of resources. As icing on the Earth Day cake, President Obama signed the Paris Agreement on climate change, which aims to keep the world below two degrees Celsius of warming.

In 1972, the major environmental concerns were air and water pollution and the apocalypse that would take place by the end of the 20th century from the exhaustion of the earth’s natural resources. The predictions of dread, whether they be the exhaustion of food supplies, the depletion of oil resources, a growing cancer epidemic, or deadly urban air pollution have all proven false. Since 1998, the ultimate threat to mankind has been sold as the threat of climate change.

Although these predictions were political contrivances, the cost to society in addressing them as if they were real has continued to grow and weakened our economic resiliency. Economic growth is stalled at 2 percent, productivity has declined to less than 1 percent, over $2 trillion in potential investment is held offshore, and labor participation is at 1970s levels.

The Code of Regulations, a proxy for the burdens imposed on industry, has grown from about 23,000 pages in 1960 to over 175,000 pages in 2014. And, it keeps growing, now measuring over 24 feet high. The effect of this complexity of regulation falls disproportionately on younger firms, which according to economists John Haltiwanger, Ron Jarmin, and Javier Miranda in a National Bureau of Economic Research paper, are the engines of new job creation.

Read the rest here.

A Conservative Tax-Cutting Keynesian vs. a Big Government Obama Keynesian

Fox Business host Stuart Varney versus Austan Goolsbee, a University of Chicago economics professor and former chairman of President Obama's Council of Economic Advisers, debate.

Both of them think there is no room for government spending cuts in the near term.

They are both wrong in believing in the necessity for big government spending, but Goolsbee is worse than Varney.



-RW 

S&P Strips ExxonMobil of Triple A Rating

ExxonMobil has been stripped of its long-held triple A rating by credit agency Standard & Poor’s.

According to S&P, the downgrade to double A plus reflected the ballooning of Exxon’s debt and analyst views that the largest US oil group and fourth-largest publicly traded American company would have to increase capital expenditure in the coming years to maintain production.

The downgrade from S&P leaves just two publicly traded US companies with triple A ratings: Microsoft and Johnson & Johnson.

Prior to the downgrade, Exxon had held its triple A status since 1930,

Exxon said in a statement: “Nothing has changed in terms of the company’s financial philosophy or prudent management of its balance sheet.”

It added that it “places a high value on its strong credit position” and was focused on creating long-term shareholder value “despite near-term market volatility”.

-RW 

35 Years of the Global Economy in One 20 Second Video

Howmuch.net has put together a Voronoi diagram showing the change in GDP of the world’s largest countries from 1980 to 2015.

The growth out of China is obvious, but Russia pops up out on nowhere in the early 1990s after the collapse of the Soviet Union.



-RW 

The Real Meaning of Competition

By Peter Klein

The aviation world has been all atwitter about the prospect that Virgin America, the US-based subsidiary of Richard Branson’s Virgin Empire is up for sale. Reportedly, Jet Blue — another smaller American carrier — is in the lead as a possible acquirer for Virgin America.[*] The big American carriers, Delta, United, and American Airlines supposedly are out of the running. This is because the US Justice Department, the Federal Trade Commission, Federal Aviation Administration, and other government agencies responsible for maintaining competition in the airline industry, would not allow them to acquire Virgin America.

Partly this is based on an incorrect understanding of what competition means. According to mainstream economists and government regulators, competition is determined by the number of firms in a particular industry. Because we have only three of the legacy carriers left, Delta, American, and United, each having acquired other former American carriers, it’s argued that that industry is not sufficiently competitive. We need other airlines like Southwest, Jet Blue, Virgin, and Alaska to remain in the industry so that we have an appropriate amount of competition. Allowing say Delta or American to acquire Virgin would lead to a reduction in competition in the airline industry.

Now, this idea is sort of understandable. The motive behind this understanding of competition or this approach to competition is to try to provide consumers with lower prices and better service. Moreover, many people believe — and certainly government agencies argue — that having just a few firms in the industry would mean higher prices and worse service for the customer. But, this is the wrong way to think about competition.

On the Nature of Poverty

Via Cafe Hayek:

[F]rom page 115 of Robert Higgs’s Summer 1998 Independent Review article, “Official Economic Statistics: The Emperor’s Clothes Are Dirty” as it is reprinted in the superb 2004 collection of some of Bob’s essays, Against Leviathan:

Above a certain absolute income level, “poverty” becomes less a definite condition than a staging area from which armies of redistributionists launch their attacks on higher-income people.

Government Begins: Four Hour Blackouts in Venezuela

File under: Mixing price inflation, price controls and general central planning.

AFP reports:

Fridges zapped off in kitchens across Venezuela as the government turned off the electricity supply to help ease a power shortage that is worsening the country's economic crisis.

It is the latest drastic measure by the government in a crisis that already has Venezuelans queuing for hours to buy scarce supplies in shops.

The government imposed a four-hour blackout in eight states starting Monday and said the measure will last 40 days. The states of Caracas and Vargas had also been on the list for blackouts but were spared at the last minute.

The timing of the switch-off caught Pedro Tarazona by surprise at his shop in the town of Santa Teresa del Tuy southeast of Caracas.

The fridge was full of meat when it suddenly stopped working. So did the electric fan.

The machine for processing bank card payments wouldn't work either without power, so at least two customers left without buying anything..

.Maduro blames the collapse on an "economic war" by capitalists.

10 Words Shakespeare Used That No One Can Work Out

A Murray Rothbard Gem

Via Peter Klein who wrote in July 2010:

I stumbled recently upon this passage from Murray Rothbard’s review of Unemployment in History by the distinguished historian John A. Garraty. Rothbard’s review, published in 1978, raised an issue that has come up in previous discussions of the Freakonomics phenomenon (1,2, 3, 4): Can a little theory, without accompanying real-world knowledge, be a dangerous thing?

After chiding Garraty for writing about unemployment without knowing the basics of business-cycle theory, Rothbard adds:

My strictures against history which lacks any sound theoretical base are not meant to be an act of intellectual imperialism on behalf of economics and against history or other disciplines. Quite the contrary; the economist who ventures into the historical arena armed only with a few equations and mathematical razzle-dazzle has wreaked far more damage than the uninspired and slightly bumbling historian. For the economist, particularly the latter-day “cliometrician,” aims to flaunt his arrogant “scientific” pretensions of encompassing and explaining all of world history by means of a few mathematical symbols. The economist who knows no history understands far less than his opposite number in the historical profession; but his claims are far greater. Therefore, he is much wider off the mark.

How to Find Two Million Dollars in the Morning

By James Altucher

“Oh! I forgot to tell you. I accidentally made two million dollars this morning,” Dave told me. We were standing in his kitchen. We had been hanging out for awhile when he suddenly realized he had this story to tell me. “How could you accidentally make $2mm?” “James, its really funny. This friend of mine who runs a hedge fund called me and told me he was closing down the fund.” “So I was like, ‘Ok, well…good luck on whatever you do next.’ I had no idea why he called to tell me he was shutting his fund. “Then he said, ‘Well…where do I wire your money?’ “And I was like, ‘What are you talking about?’ ” “And he said, ‘Dave, since 1998 you were the only investor who held on and stayed all the way through to the end no matter what was happening.’ “I tell you, James, I didn’t even remember putting money in in 1998. I didn’t have any money. I must have put in just a small amount. “That was 18 years ago. I had totally forgotten it.” I was sitting there listening. I was thinking about 1998.  I wish I had secretly put some money somewhere and then had completely forgotten about it. Like leaving a $20 in an old coat pocket. But then finding that coat at the bottom of a closet and now it has 100,000 20 dollar bills in it. “So I said to him, ‘How much are you wiring?’ ” “And he said, ‘Two million dollars.’ ” My friend let that sink in. Imagine waking up tomorrow and … well, just imagine. Dave laughed, “I totally had no clue. So I said to him, ‘Here’s my bank information. And he wired the money. I made two million dollars today.” I was telling this story to another friend of mine later that day.  Call him Ron. Ron said, “Man, how do you get into the flow like that. How can I make two million like that?” “Ron,” I said, “Think about it a second. He’s talking about an investment he made in 1998. We can deduce several things.” Ron and I were having a coffee at 3 in the afternoon and, against my sworn beliefs, we were sitting at a table outdoors, enjoying the first truly warm day.  I normally hate sitting outdoors. “We can deduce: In 1998 he already had enough money to invest in a hedge fund. Which means by that point he must have been worth a million at least to legally invest in a hedge fund. He was connected enough to know an investor that was good enough to return $2 million on a forgettable size investment 18 years later. “Ron, what were you doing in 1998? I was trying to do a TV show. Then I was writing novels. Then I was busy losing all of my money. Then I was going through a divorce and relationships and raising kids. “This guy, who is the same age as us, has been doing nothing but putting himself in the flow of money. He’s worked really hard at this. “You and I have been much more volatile. Sometimes in the flow, sometimes working against the flow. No judgment on it. We just made different choices.” “I guess that’s right,” Ron said. But still, we were quiet for a few moments. Because one thing that is kind of cool about the 2 million was the surprise of it for my friend. Money doesn’t solve all of your problems. But it solves your money problems. I was visiting Dave in his apartment when he was telling me this story. After he told the story he had to rush to his room and change his clothes into a suit. “Woah, where are you off to in a suit?” “This family I know [he names a famous wealthy real estate family in New York] is opening up a new building in South Street Seaport. You know the [he names a building that I had never heard of.]” “No,” I said, still wondering why he would have to be in a suit since I know he has nothing to do with real estate. Wondering why he is even mentioning this. “I told them I would show up at the building opening. I’ve got to go.” And he rushes out the door. I said I would close the door behind me. Then I went from that coffee at Dave’s place to coffee with Ron. Outdoors, watching the people go by. One person was very kind and stopped walking and said, “James Altucher! I love your podcast.” Dave went from making $2 million in the morning, to making sure he wasn’t late for the opening of a building by one of the richest families in New York. He spent the rest of the day at the opening. Maybe one day, that family would be involved in one of Dave’s deals. Maybe they were already in Dave’s deals. Every day we make the choice of who we are. And the choices today turn into your biography tomorrow. Ron and I watched the people walking back and forth. The sun was helping keep our coffee warm. After a little bit, we got up to go and I paid the bill and he left the tip. He went home to write. He has a deadline on a novel and he’s a bit nervous about it. I walked over to Union Square and played chess with the hustlers there until it was dark and cold and everyone was shivering. But we were all bantering and laughing and dropping the pieces while the day closed it’s curtain and turned into night. If I must say, it was a really great day. James Altucher is author of Choose Yourself! His website is here.

Thug Notes on 'The Fountainhead'

Not perfect and he buckles at the end, but overall pretty interesting.-RW 

Walter Block On the Intellectual War Path

Walter Block has posted over at LRC an email discussion he had with David Gordon over whether the use of the term "Civil War" is a term that is a name or descriptive.

I don't want to comment as much on that as I do on another point Dr. Block makes during his exchange:

A similar situation occurs with regard to the Public Choice notion about “rent seeking.” I have also been on the (intellectual) warpath in an attempt to change this to “loot seeking” or something of that sort. Maybe, “theft seeking.” Why? Because it is improper to characterize so inoffensive a concept as “rent” in this nefarious way. But, maybe, “rent seeking” is now a name? I have no idea if this is true, nor how to determine the truth of this claim. And, I don’t much care. We ought to substitute “loot seeking” for “rent seeking” because the former is not misleading while the latter is.

On that see this:

Block, Walter E. 2002. “All Government is Excessive: A Rejoinder to ‘In Defense of Excessive Government’ by Dwight Lee,” Journal of Libertarian Studies, Vol. 16, No. 3, pp. 35-82. http://www.mises.org/journals/jls/16_3/16_3_3.pdf; rent seeking, market failure

Block, Walter E. 2000. “Watch Your Language,” February 21; http://www.mises.org/fullarticle.asp?control=385&month=17&title=Watch+Your+Language&id=19; http://mises.org/daily/385

I am with Dr. Block here. "Rent seeking" is most certainly a name in the sense that Dr. Gordon is using the term, but it would certainly help the cause to align the name with a term that is more descriptive of what is going on. I hereby support Dr. Block's call to advance the term "loot seeking"and I have added the definition to the EPJ Research Room.

-RW 

Why Did the Industrial Revolution Occur in the United States and Not in China?

Here is something for the anti-IPers to contemplate.

William N. Goetzmann, the Edwin J. Beinecke Professor of Finance and Management Studies & Director of the International Center for Finance at the Yale School of Management, writes in his new book, Money Changes Everything: How Finance Made Civilization Possible:

The sheer volume and detail of Chinese scientific and technical knowledge from the centuries before direct contact with Europe makes it virtually impossible to argue that Western societies were the world's sole source of light and truth...Indeed, as evidence of Chinese scientific knowledge continued to grow with each published volume of the series [Science and Civilization in China], [Joseph] Needham himself began to wonder why the Industrial Revolution took place in Europe rather than China...

One simple answer is chance...Another is the sustained success of Chinese civilization...another particularly radical idea--geographical determinism...

What all these explanations ignore is the supporting role of finance in technological development. Technology requires genius, but it also requires capital. Railroads need financing to build tracks and rolling stock, However, if successful, these investments can pay for themselves. Entrepreneurs need motivation to keep experimenting when their peers are working at steady jobs--patents and legal protection allow the former to capitalize on their innovations. If an entrepreneur faces state expropriation of his or her innovation, it makes little sense to invest the human capital required. Capital markets and the protection of intellectual property rights can serve as cofactors in sustaining entrepreneurial motivation and capital investment. Whilt the centralized Chinese government had the capacity to reward individuals for creating new technologies, it typically did not simply allow the market financing for new ideas.

-RW 

NYT Reports on the State of the Streets in San Francisco

There is not one bit of a stretch in a new NYT story on the homeless element, criminal element and mentally ill element on the streets of San Francisco, every bit of what is recounted  is experienced on a daily basis by those living here in the city run in the fog by Regressives.

I lived in NYC in the late-1970s/early-1980s, and the homeless situation and, out and out, mental nutjobs on the streets did not come anywhere near what is going on now in SF.

From the NYT report:

From her apartment at the foot of the celebrated zigzags of Lombard Street, Judith Calson has twice peered out her window as thieves smashed their way into cars and snatched whatever they could. She has seen foreign tourists cry after cash and passports were stolen. She shudders when she recounts the story of the Thai tourist who was shot because he resisted thieves taking his camera.

And that is her tally from the last year alone.

“I never thought of this area as a high-crime neighborhood,” Ms. Calson, a retired photographer, said of this leafy part of the city, where tourists flock to view the steeply sloped, crooked street adorned with flower beds.

San Francisco, America’s boom town, is flooded with the cash of well-paid technology workers and record numbers of tourists. At the same time, the city has seen a sharp jump in property crime, up more than 60 percent since 2010, though the actual increase may be higher because many of the crimes go unreported.

Recent data from the F.B.I. show that San Francisco has the highest per-capita property crime rate of the nation’s top 50 cities. About half the cases here are thefts from vehicles, smash-and-grabs that scatter glittering broken glass onto the sidewalks.

The city, known for a political tradition of empathy for the downtrodden, is now divided over whether to respond with more muscular law enforcement or stick to its forgiving attitudes.

The Chamber of Commerce and the tourist board are calling for harsher measures to improve what is euphemistically called the “condition of the streets,” a term that encompasses the intractable homeless problem, public intravenous drug use, the large population of mentally ill people on the streets and aggressive panhandling. The chamber recently released the results of an opinion poll that showed that homelessness and “street behavior” were the primary concerns of residents here.

“We are the wealthiest big city in the wealthiest state in the wealthiest country in the world, and we have this situation on our streets,” said Joe D’Alessandro, the chief executive of San Francisco Travel, a tourism organization.

“People believe that everyone has the right to be on the streets. However, I think there is a tolerance limit to bad behavior.”

Visitors come to bask in the Mediterranean climate, stroll through the charming streets and marvel at the sweeping views of the bay and the Pacific. But alongside those views are tent encampments on sidewalks and rag-covered homeless people in front of some of the most expensive real estate in America.

There is remarkable wealth in this city and yet the streets contain thousands, who looked like they are from a third world country where there has been soap, water, and clothing for decades.

It is proof that Regressives can destroy and place, anytime, with their regulations.

 -RW