Tuesday, May 31, 2016

Kevin O'Leary Rips Canadian Prime Minister Justin Trudeau

Shark Tank "reality" entrepreneur  Kevin O'Leary rips Canadian Prime Minister Justin Trudeau.

He calls Trudeau a giant meat grinder of taxpayer money. Good. Unfortunately, he does not appear to be grounded in solid economics either. He is pro house inflation and pro "wage inflation," suggesting no clue as to productivity gains over inflation.

O'Leary officially joined the Conservative Party last week and is deciding whether or not he will challenge Prime Minister Trudeau.




-RW

(ht Max Schmidt)

PAY ATTENTION: THe Federal Debt Is Getting Worse

 Charles Blahous writes:

The tenor of much recent coverage is that the federal debt is a fading problem, even though by any objective measure it is a serious one in the process of getting rapidly worse.

That the federal debt situation is worsening is easily seen by looking (see Figure 1) at the latest projections from the Congressional Budget Office (CBO).  Throughout the whole time CBO has made estimates, federal debt held by the public never exceeded 50% of GDP until 2009 when it began to rise dramatically, eventually reaching roughly 75% of GDP this year.  CBO now projects that we will continue to accumulate debt at unsustainable rates, exceeding 85% of GDP by 2026 and continuing to grow to eventually exceed our entire domestic economic output. Viewed objectively, our debt situation has grown much worse in recent years and is projected to grow still worse in the future.

Strangely, levels of concern over the national debt do not reflect this reality...
 Not only are things a little worse than we recently thought they’d be, they’re a lot worse than we expected several years ago.  For example, in January 2010 the baseline debt projection for FY2016 was 65.5% of GDP, substantially less than current levels.  In January 2009 the FY2016 projection was only 46.4% of GDP.  In January 2008 the FY2016 projection was a mere 26.4% of GDP. 
In other words, federal indebtedness is now nearly three times as serious a problem as CBO predicted in January 2008 that it would now be, while warning that “a substantial reduction in the growth of spending, a significant increase in tax revenues relative to the size of the economy, or some combination of the two will be necessary to maintain the nation’s long-term fiscal stability.” 
So no, the fiscal situation is not getting better.  It’s worse than it was before, and it’s worse now than previously projected.

I Don't Know Who This Guy Is, But...

...when his SUV pulled up to San Francisco's Palace Hotel, what appeared to be three senior executives from the hotel were at the curb waiting to greet him.

They profusely bowed and shook his hand when he stepped out of the vehicle. One even took his luggage into the hotel, not waiting for the bellman to do so.


  -RW

U.S. Single-Family Home Prices Soar in March

The S&P/Case Shiller composite index of single-family home prices in 20 metropolitan areas rose 5.4 percent in March on a year-over-year basis. All 20 metro areas experienced  gains.

"The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates," said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

Home prices in three U.S. cities, Portland, Oregon (12.3%), Seattle (10.8%) and Denver (10.0%, showed the highest year-over-year gains, the survey showed.

Have I mentioned that the idea  the 25 basis point hike by the Federal Reserve in December would crash the economy is appearing to be an increasingly absurd belief?

  -RW

U.S. Consumer Spending Recorded Its Biggest Increase in More Than Six Years

U.S. consumer spending recorded its biggest increase in more than six years in April.

Spending, which accounts for more than two-thirds of U.S. economic activity, surged at an annualized rate of 12% percent last month. It was the largest monthly increase since August 2009.

This is not what a recession looks like, especially since this number includes durable goods such as automobiles, refrigerators and furniture which I consider capital goods.

The idea that the economy was going to collapse after the minuscule 25 basis point Fed rate hike in December appears more and more absurd with each passing day.

  -RW

The Keys to Human Prosperity: Individual Liberty and Rule of Law

Richard Ebeling emails:

Dear Bob,

I have a new article on the Future of Freedom Foundation website on, “The Keys to Human Prosperity: Individual Liberty and Rule of Law.”

We live in a society of arbitrary and discretionary government over personal freedom, private enterprises and human association. The price of such things is a loss of individual liberty and less market-based prosperity and opportunity that otherwise could be ours.

Human prosperity has been inescapably entwined with individual rights, private property and the rule of law. The rule of law refers to the idea that all are subject to the same impartial rules governing human association, including those who administer the enforcement of those rules in government. But they also are rules of a particular type in a free society: end-independent rules that establish the procedures under which and through which people will associate and interact, but which do not command or control the ends for which individuals live their lives in the pursuit of their own self-interested happiness.

Private property has been considered inseparable from individual rights and liberty for two reasons: that each should be respected and protected in that which they have produced or honestly acquired in voluntary and peaceful exchange; and, when property rights are secure individuals have the motives and incentives to use their talents and abilities in productive ways that benefit not only themselves others in society with whom they interact in the market system of division of labor.

But if the purpose and practice of the rule of law and property rights are understood in this way, we must conclude that we live in an increasingly lawless society in which governments use regulations, interventions, commands and prohibitions in arbitrary and discretionary ways that serve those in political office and those special interest groups closely tied to politicians and bureaucrats manning the offices of State power.

http://fff.org/explore-freedom/article/keys-human-prosperity-individual-liberty-rule-law/ 

Best,

Richard

The Very Doubtful Construct Called the European Union

The following speech was delivered at Geopolitical Symposium, Tel Aviv University 16th Anniversary 2016 Board of Governors Meeting, Tel Aviv, May 20, 2016, by the economist and former president of  the Czech Republic, Václav Klaus.
Many thanks for the invitation to participate in today´s symposium. When I, as someone from a small Central European, ex-Communist, now EU member state country, looked at its title, I didn´t feel I was the right person to speak here, to speak about both Israel and global geopolitics.
My knowledge of Israel is rather limited. I have visited this country only on official state visits – as prime minister and later as president – which isn´t the most productive way to see and understand a country. Similarly, to discuss geopolitics is meaningful only for someone who comes from a country (or a coherent grouping of countries) which is an active player in geopolitics. Not just an observer.
I have to admit that the Czech Republic has never been a significant participant in geopolitical games. Perhaps as a kingdom in the 13th and 14th century. My country, as a voluntary but more often involuntary part of empires and alliances – such as the Austro-Hungarian Empire, the Soviet block and now the European Union – has always had the feeling that it is underrepresented, that its voice is weak and insignificant, that we have to follow the lead of bigger neighbours. To some respect, it was our fault, caused by our lack of courage, by our lack of strong views, by our lack of powerful leaders. Some of them were internationally praised but, mostly, for expressing views that were in the interest of important world or continental powers.
The Czech Republic is a part of a specific and very doubtful construct called the European Union. Not many foreign observers and scholars look at it seriously enough. Most of them see only what the EU propaganda wants them to see. A real scholarly analysis is missing. Most of the world seemingly believes that the EU is

Bankster Evil Intensifies: Now They Want to Look Inside Your Safety Deposit Boxes (And Throw Out What They Don't Like)

According to a letter sent to clients last month, a copy of which was obtained by the South China Morning Post, the bank said that under new conditions of its leases for safety deposit boxes it had the right to dispose of any items it considered illegal, of an “offensive” nature or likely to be a “nuisance”, in any way it saw fit and without prior notice or consent.

The letter did not clarify what HSBC meant by “offensive” or “nuisance”, and did not explain under what circumstances bank staff would be able to inspect the boxes.

It asked clients to sign and return the letter within one month to confirm their acceptance of the updated conditions, so “we [HSBC] can continue providing you with the Safe Deposit Locker services”.

“This is a ridiculous and grossly invasive power which makes a nonsense of the whole purpose of a safety deposit box,” the Post quotes  Barrister Neville Sarony, SC as saying. “Granting HSBC the unlimited right to snoop in your box and dispose of its contents without prior warning makes a total nonsense of the word ‘safe’.”

“HSBC has a clear commitment to defend the integrity of the financial system against activities such as money laundering,” a spokesman told the Post. “We want to reassure … these changes to the terms and conditions will not in any way reduce the security and privacy of our safe deposit locker service.”

This appears to be an escalation in the direction of harassing those who prefer to keep their funds in the form of, say, cash or gold.

Last April,  JPMoragnChase sent a letter to safety deposit customers announcing that cash would be prohibited from being stored in the bank's safety deposit boxes.

  -RW

Trump and Hillary Are Both Terrible When It Comes to Economic Policy

By Justin Murray

Recently, Hillary Clinton was taped ridiculing Donald Trump for lacking a detailed plan for the American economy. The message, so it goes, is that Trump is not suited for the presidency because he doesn’t have a plan on how to turn the American economy around.
But is it really more dangerous to elect a president who makes up economic policy on the fly than one who proclaims to have a detailed plan for us?
The answer to this is no, it is not more dangerous to elect someone who makes up economic policy by the seat of his pants — as Donald Trump is prone to do — than it is to elect someone who thinks she can have the future of the economy neatly mapped out. However, this does not imply that seat-of-the-pants method is less dangerous either. The underlying problem is we have two competing people who think they can manage the American economy.
The core of why both philosophies are equally dangerous is best summarized by F.A. Hayek and the pretense of knowledge. Hayek notes in his speech in 1974:
Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones … in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process … will hardly ever be fully known or measurable.
We are incapable of knowing what the future will bring. No president can come up with a detailed or air tight plan or can accumulate a sufficient stable of experts to be able to guide the behavior, wants, and needs of 320 million people.
For example, if we were to have asked George Bush and his economic experts in 2002 to develop a five year plan for cell phones, we would have built up a massive production capacity and R&D structure around miniaturizing phones as that was all the rage. If someone said in 2002 that people in the future would give up physical buttons and want larger screens, they would have been looked upon as mad. People are buying smaller and smaller phones, there’s no way they could touch the screen and get anything done! But come 2007, Apple introduces the iPhone and the older-style button phone has nearly vanished from the marketplace. Had the government decided it needed to plan the economy around smaller phones, we wouldn’t be enjoying a mobility revolution.
This extends well beyond cellular phones and into all walks of our lives. We don’t need central planning on how we consume our energy, what cars we can buy, what we charge people for borrowing money, and so forth.
All behavior is risky. Even if central planners could somehow canvass all of our wants and needs, figured outwhen exactly we want to satisfy those needs, and determined who gets what in a world of scarcity, the planners would still fail. This is because even we have no idea what we’ll want in the future. If we were to ask someone to write down exactly what they would buy on August 14, 2017 and put it in an envelope then open it up and compare it to what was bought on that day, there is little doubt the results would be wildly different.
The planner is going to do no better. Instead of a single individual failing to predict his own habits in a fun exercise, we’ll be malinvesting untold amounts of money into unwanted industries and imposing counterproductive and dangerous rules on businesses — the effects of which are impossible to predict. Furthermore, central planning shuts down innovation and the entrepreneurial process because it assumes to know today what is wanted tomorrow. Most innovation arises when someone produces a product we had no idea we wanted and couldn’t fathom existing.
Does Hillary Clinton’s plan for the economy make her a more qualified president than Donald Trump, who will likely create plans spontaneously? No, it makes them equally dangerous as both assume they have the ability to do what countless officials over the centuries have never managed to do — predict the future.
The above originally appeared at Mises.org

Monday, May 30, 2016

The Great Walter Block-Walter Williams Confusion


Walter Block
Walter Williams
The following exchange took place between Dr. Walter Block and Girard Newkirk:


From: Girard Newkirk [mailto:xxxxxxx]
Sent: Mon 5/30/2016 12:36 PM
To: wblock@loyno.edu<mailto:wblock@loyno.edu>
Subject: Intellectual Giant

Thank you  Dr. Williams for being my intellectual hero.  Words aren't a tractable medium to express your inspiration to me.  Thank you Sir!

Girard Newkirk
Vice President-Store Manager
Macy's Eastridge San Jose, California
---
From: Walter Block [mailto:walterblock@business.loyno.edu]
Sent: Monday, May 30, 2016 11:49 AM
To: Girard Newkirk
Subject: RE: Intellectual Giant

Dear Girard:

Walter Williams and I are often confused with each other. We look alike (:)) and have similar views on most issues.

He and I are also coauthors. I am honored that I am his coauthor on this publication:

Block, Walter E. and Walter E. Williams. 1981. "Male-Female Earnings Differentials: A Critical Reappraisal," The Journal of Labor Research, Vol. II, No. 2, Fall, pp. 385-388;http://www.walterblock.com/wp-content/uploads/publications/mfearningdifferentials.pdf

Did you mean to send this letter to him, not me? Shall I forward this to him?

Best regards,

Walter

Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Joseph A. Butt, S.J. College of Business
Loyola University New Orleans


---'

From: Girard Newkirk [mailto:Girard.Newkirk@macys.com]
Sent: Mon 5/30/2016 1:54 PM
To: Walter Block
Subject: RE: Intellectual Giant

I'm so sorry Dr. Block although Walter Williams is inspirational to me as well I intended this for you minus the Walter Williams reference.  I normally start my day off by reading both of your columns and my brain crossed.

My most sincere apology.


Girard Newkirk
----

RW note: Both Walter Block and Walter Williams are great economists.

NYC 'Trophy Apartment': $250 Million



A $250 million mansion in the Manhattan sky is the prize property in a 70-story building that is still under construction at 220 Central Park South. Monthly common charges will be more than $45,000, with annual taxes of about $675,000, documents show.

Floor plans show 16 bedrooms, 17 bathrooms, five balconies and a massive terrace in a  23,000-square-foot, four-story apartment.



-RW

(via AP)

Murray Rothbard on Why Keynes Was More Attracted to Fascism Than Communism

How Capitalism Saved America

With the government propaganda machine operating at full speed today, honoring dead government-trained killers, it is valuable to think about what really has made America great, here.

Obamacare Insurance Premiums Are Going to Soar in 2017

Just look at these proposed increases.


(ht Steve Hanke)

Sunday, May 29, 2016

Friedrich Hayek Explains the Business Cycle

The discussion is specifically about unemployment but Hayek analyzes the Keynesian solution to unemployment in terms of Austrian school business cycle theory and how Keynesian solutions distort the capital-consumption structure of the economy.



For a detailed discussion of the Austrian business cycle theory, see Austrian School Business Cycle Theory.



-RW

One of the Most Dishonest Things Minimum Wage Advocates Say

People who make the federal minimum wage of $7.25 an hour can’t find an affordable place to live anywhere in the country, says a new report from the National Low Income Housing Coalition.

Think about this for a minute.

Does this mean everyone who has a minimum wage job is homeless, since there is no place to rent on a minimum wage?

Obviously, the Coalition report is leaving out some factors, since nearly everyone working at the minimum wage has a place to live.

That is, they are young people living with their parents, they are sharing space with others, etc.

The scare report about the minimum wage and affordable space is dishonest. It implies a situation that is almost totally non-existent. The report takes factors, the minimum wage and rents, and blends them in a manner that real actors in the real world are obviously not, since real minimum wage earners are not in the homeless predicament that the Coalition raises as a great horror.

 -RW

America's Worst Minimum Wage Advocate

By Adam Ozimek

Nick Hanauer made billions of dollars as a tech investor, and for this reason he is invited to write his thoughts on the minimum wage in various publications. It’s unfortunate, because he is exceptionally wrong and uninformed.
So where to begin? To start with, despite pontificating confidently about the minimum wage for years, he seems to have no understanding of why many liberal economists are worried about setting the minimum wage too high. In a piece arguing that it’s “nonsense” to think there is any risk to raising the minimum wage to $15 an hour, he writes:
But minimum-wage opponents are not haggling over a number. They are not making a nuanced argument that the minimum wage might be bad for some people if it’s too high or phased in too fast or if the economy is too weak to absorb the change.
This is interesting because a lot of critics are making exactly this argument, and the only way to not know that is to be totally ignorant of the actual debate about the minimum wage. For example,here is Alan Krueger, one of the most influential minimum wage scholars in the world, making a nuanced argument that the minimum wage might be bad for some people if it’s too high or phased in too fast. But I guess you might not be familiar with Alan Krueger if you are profoundly ignorant of the actual debate about the minimum wage.

Too harsh you are saying? Well in a tweet earlier this year Hanauer said this...
Read the rest here.

Long Term Investment Opportunity: 9 Things You Probably Don't Know About Africa



Lots of opportunities, especially for an adventurous young person.

-RW

China Loses World No. 2 Creditor Rank to Germany

Germany has edged out China as the world’s second-largest supplier of external credit for the first time in at least a decade.

China’s net foreign assets fell to US$1.6 trillion at the end of last year, while Germany’s rose to US$1.62 trillion, according to Bloomberg.

The shift underscores the global implications of last year’s turbulence in China, where almost US$1 trillion of capital is estimated to have fled with the central bank burning through US$513 billion of its foreign reserves to prop up its currency.

China's reserves  peaked at US$4 trillion in 2014.

Japan is the world's number one external creditor nation. Japan’s net overseas assets grew 13 percent to $3 trillion in 2014, according to the latest data.

-RW

Chris Christie Approves Bailout of Atlantic City Government (In Part by Shaking Down the Casinos)

Gov. Chris Christie of New Jersey signed legislation on Friday that will allow Atlantic City to avoid bankruptcy, for the time being.

Atlantic City will receive both a loan from the state and regular payments from casinos to help stabilize its finances. The money from casinos would amount to $120 million in the first year and increase by at least 2 percent each year for the next nine years, according to NYT.

If the City government does not prove capable of getting its finances in order with a balanced budget in the next 150 days after this funding, the legislation calls for the state of New Jersey to take over management of the city.

It appears that declaring bankruptcy, and forcing those who financed Atlantic City's profligate spending to take a hit, never entered the mind of Christie. The banksters and their accounts must be protected!

(The entire statement from the Governor's office is here)

-RW

Krugman Gets Something Right

I had to work hard at this but I found a sliver of truth in Paul Krugman's latest propaganda piece.
[V]oters see Mr. Trump as a hugely successful businessman, and they believe that business success translates into economic expertise. They are, however, probably wrong about the first, and definitely wrong about the second: Even genuinely brilliant businesspeople are often clueless about economic policy....
But leave questions about whether Mr. Trump is the business genius he claims to be on one side. Does business success carry with it the knowledge and instincts needed to make good economic policy? No, it doesn’t...
But while we haven’t had many business leaders in the White House, we do know what kind of advice prominent businessmen give on economic policy. And it’s often startlingly bad...
  -RW

Saturday, May 28, 2016

Roger Stone: I'd Like to See Gold in the Republican Platform

In a new interview, top "unofficial" Donald Trump adviser, Roger Stone, told Lew Rockwell that he is comfortable that Donald Trump's people are in charge of the Republican platform committee.

He said that the platform will be very conservative, in line with previous Republican platforms. He told Rockwell that he would "like to see gold in the platform." But, alas, he said he doesn't think it will make it into the platform.

He also said that Trump risks his life every time he goes out in public, that he has good personal security but is not completely comfortable with the Secret Service protection.

 -RW


Maybe Trump Is Like Reagan?

And that's not good.

Here's one of the best mainstream takes on Donald Trump/Ronald Reagan from Paul Rosenberg at the left-leaning Salon:
Trump is notorious for his lack of conservative orthodoxy, but people forget how badly Reagan himself would have failed any such test, had more recent powerful gatekeepers been around to check his credentials. He raised taxes 11 times after his initial tax cuts caused the deficit to explode; he struck a deal to save Social Security, which he had previously wanted to undermine by making it voluntary...

This Is Scary: Is Paul Krugman Testing Out a National Economic Warning System?

Welcome to Crony America: Hedge Fund with $146 Billion in Assets Gets $22 Million Government Subsidy

The world’s biggest hedge fund has secured $22 million of financial assistance from the government of Connecticut, reports FT. The hedge fund, Ray Dalio’s Bridgewater Associates,has $146bn of assets under management.

A meeting of Connecticut’s bond commission on Friday approved $5 million in grants for Bridgewater and a $17 million  loan that will be forgiven if fund creates 750 jobs in the state.

Connecticut is charging Bridgewater an interest rate of 1 per cent.

Dalio, personally, made $1.4 billion last year, according to Institutional Investor’s Alpha magazine, and has a net worth of more than $15 billion, according to Forbes.

Dalio’s firm originally asked the state for $130 million to build new offices in Stamford, but those plans were scrapped after a local backlash. Instead, it will expand and update its existing headquarters.

Note well; All this talk about "adding jobs" ignores the fact that markets clear and there never is a jobs creation problem (other than that caused by government regulations  such as minimum wage laws).

Further, there is never any discussion about the losses created for those the money was taking from to be handed over to the crony capitalists.

 -RW

Thomas Sowell versus Paul Krugman on Commencement Speeches

Thomas Sowell recently wrote a column about commencement speeches.

The wisdom in the article has already caused it to be cited many times in its short life.

In part it says:
[M]any Commencement speakers, besides flattering themselves that they are in morally superior careers, is to flatter the graduates that they are now equipped to go out into the world as “leaders” who can prescribe how other people should live.... 
It might never occur to many Commencement speakers, or to their audiences, that what the speakers are suggesting is that inexperienced young graduates are to prescribe, or help to dictate, to vast numbers of other people who have the real world experience that the graduates themselves lack.
It just so happens that Paul Krugman gave a commencement speech in the Berkshires recently/. This is what Krugman advised that the "inexperienced young graduates" do that he spoke to:
 So go out there, be citizens, and make the world a better place.
 -RW

Thomas Sowell: Formal Education Isn't for Everyone

Definitely worth a listen.

Friday, May 27, 2016

Go East Young College Grads; But Stay Away From Miami

Millennials are moving to Miami in large numbers, but a new report by online real-estate company Trulia and LinkedIn suggests that it is probably not a good move for those hunting for good jobs.

The study analyzed 40 of the county’s strongest job markets for recent college graduate-friendly factors such as housing affordability and the number of entry-level jobs.

Miami ranked last.

The cities were compared based on three criteria: the share of job openings suitable for recent college grads; the share of rental units considered affordable (less than 30 percent of monthly income) compared with the median income of graduates ages 22 to 30; and the share of the total population in that age range that has a college degree.

Miami was at the bottom of the list, just behind Los Angeles, Sacramento and Orange County, California, and Portland, Oregon.

San Francisco is also near the bottom of the list at 31.

Notes the report:
Graduates Lured by high wages in San Francisco and San Jose might want to think twice. While incomes for recent college grads in these areas are among the highest in the country, high rents will eat up much of it. Fewer than a third of homes would rent at an affordable price point, and the median rent in both of these markets come close to consuming an entire month’s paycheck 


 Cities on the west coast generally scored lower than cities on the east coast.

Topping the list as the best job markets for recent grads are Pittsburgh; Indianapolis; Kansas City, Missouri; Minneapolis-St. Paul, and Columbus, Ohio, in that order.

(via Miami Herald)

Two Interventionists in a Bathtub: What a Donald Trump-Bernie Sanders Debate Would Really Look Like

By Ryan McMaken

It looks like Donald Trump and Bernie Sanders are planning to debate each other. Drudge today is calling it "the debate of the century." 
Color me skeptical. If it happens, the debate will provide some entertainment for political junkies, but the areas of disagreement between the two are actually quite small, and the debate is likely to focus on "soft" issues like being polite to women. Don't look for much debate on issues that get to the heart of the economic system. 
The debate's primary significance is in how it marginalizes Hillary Clinton, but as an actual "debate" this event will be almost totally about slogans and style since the candidates already agree on many key issues. 

Taxes and Spending 

For example, part of Trump's popularity is that he has never suggested he'll do anything to significantly cut social benefits. Trump rarely mentions programs like Social Security, Medicaid, and Medicare, which comprise the majority of federal spending each year. Trump is, at the very least, a status quo candidate on these issues. Sanders, of course, wants to spend much more. 
Health care may be one of the few topics on which there could be real debate, however, Sanders wants to expand government health care beyond Obamacare. Trump's position is to replace Obamacare with "Donaldcare" which will be "absolutely great." What we do know is that Trump on his own website has called for the expansion of Medicaid "to ensure that those who want healthcare coverage can have it." This in itself will drive up health care costs for everyone else, just as student loans increase tuition. On the other hand, Trump has called for some additional tax deductions for private spending on health care. 
In general, if the topic comes up, the disagreement will be over how much more to increase social spending. Trump will want less, and Bernie will want more. In other words, Trump will position himself as "Bernie Lite." 
The single largest disaster looming over the American economy — the massive debt and immense social spending (i.e., non-discretionary spending) obligations — will only be debated at the margins. Trump will say he'll somehow "renegotiate" the debt, but neither candidate has any idea of how to actually deal with the issue. And neither will support any actual cuts to spending. 
Both men, of course, support raising taxes. Trump has a long history of calling for tax increases, and has repeatedly talked out of both sides of his mouth on this one. Trump says he may need to support increased taxes on the rich in order to get a middle-class tax cut. In saying this, he follows in a long line of candidates promising middle-class tax cuts, including Bill Clinton and Barack Obama. Promising a middle class tax cut has become something of a ritual in presidential elections. Unfortunately, actually cutting taxes isn't much of a ritual at all. Even worse, if tax rates are cut without matching spending cuts, effective taxes are simply increased in the form of deficit spending
In this case also, Trump is likely to want to increase taxes a bit less than Sanders. So, once again, it's a debate between Sanders and Sanders Lite.

Opposition to Trade

Both Trump and Sanders oppose free trade. In some ways, this has accidentally led to good positions for both men, such as their opposition to the Trans-Pacific Partnership and NAFTA. But both candidates oppose trade agreements for the wrong reasons. They oppose trade agreements because they oppose increasing trade. Both Sanders and Trump drank the protectionist Kool-Aid and thus believe that trade with China (and other trading partners) has "destroyed jobs." 
Obviously, this position benefits them both politically, because it allows them to pander to union workers and related groups who are too ignorant or too self-interested to understand or care that anti-trade policy leads to a higher cost of living for everyone. Trump claims to be against burdensome government regulations, but he has no problem with regulating what Americans can buy and sell, or where they can send their money
So what will they debate on this issue? Will Trump just spend his time demonizing foreigners who provide low-cost desirable goods to Americans? Bernie may instead focus on the need to punish and impoverish rural Asian workers (i.e. shut down "sweat shops") or impose greater environmental requirement on foreign nations. In either case, it will just be a debate over how much to increase government regulation. Again, we're left with Bernie and Bernie Lite. Or perhaps in this case, it will be Trump and Trump Lite.

Foreign Policy 

Both Sanders and Trump are relatively good on foreign policy compared to Hillary Clinton, who is clearly the candidate most likely to start World War III. The problem here — for the purposes of debate — is that Trump has already disavowed Bushian foreign policy. Were Trump any other candidate, Sanders would lay into him for his support of the "disastrous" Iraq War. But Trump has already come out against the war. He even ran on the issue in South Carolina, which is possibly the most pro-military state in the Union. 
In other words, Among the Republican rank and file, the Iraq War is regarded as a disaster, and no one is running as a defender of the Bush foreign policy legacy. So where will the foreign policy debate be? Trump may criticize Sanders's partisan support for the 2011 bombing of Libya, but Sanders will recall his tepid opposition to that move and explain how he didn't really support it. 
But don't expect any talk of demobilization, closing foreign bases, or any significant cuts to military spending. Sanders has called for more "accountability," but even Sanders has refused to take a meaningful position against drone strikes, and continued spending that puts US military spending at a higher level than the next seven largest countries combined. Donald Trump's rhetoric on the need to "rebuild" the military, is alarming. 
Worst of all, Trump declared his love of the police-state measure known as the "Patriot Act" when he announced he would attempt to stop private citizens from sending cash remittances to Mexico by using provisions in the Patriot Act. In other words, Trump is perfectly comfortable with using the cry of "anti-terrorism" to carry out domestic policy and further regulate private property. 
Both candidates appear to favor fewer foreign invasions and large-scale military operations. That's certainly progress, and better than Clinton's foreign policy. But, again, it's hard to see what will be meaningfully debated on this issue. 

Central Banking and Monetary Policy 

Of course, the issue on where both candidates are especially ignorant is on the issue of central banking. Both Sanders and Trump have signaled their support for continued ultra-accomodative monetary policy, with Trumpdeclaring that the Fed should not allow the dollar to get too strong or raise interest rates very much. Sanders has criticized the fed for not lowering interest rates enough. 
You won't hear anything in this debate about reforming the federal reserve, ending the dual mandate, or returning to the more normal interest rate policies of the pre-2008 world. 

Focus on Your Feelings

What you will hear in this debate is a lot of talk about immigrants and diversity and religion (i.e., Islam) and what our feelings are about those things. Trump will score points with his followers by wrapping himself in the American flag (hopefully just figuratively), and Sanders will harp on the "social justice!" line for his followers. But, again, much of the dichotomy will be a matter of style
Thus, there will be some disagreements about how we should feel about foreigners and the wealthy, but there will be precious little debate of matters that have have much to do with the ability of Americans to earn a living, start a business, or save for the future.What will be debated will have little to do with the massive inflation tax being imposed every day on holders of US currency which results from low-interest rate policies beloved by both Sanders and Trump. The contentious issues will have little to do with the need to de-mobilize the US military and bring the troops home. 
So, if it's entertainment you crave, the "debate of the century" may have some amusing zingers. But it won't have much more than that. 
The above originally appeared at Mises.org

Stump the Socialist: Bernie Would Rather Not Talk about Venezuela

Socialist Bernie Sanders refused to talk about the collapsing economies of South American socialist countries, when confronted by the heroic Leon Krauze of Univision.

Why aren't U.S. reporters asking Bernie questions like this?



(ht Hot Air)

The Poverty of GDP: It's a BS Number

By Carmen Elena Dorobăț


The Economist recently ran a piece criticizing the suitability of GDP as a measure of economic development and material progress. In the past, the publication has touched on various other weaknesses of this aggregate measure—including the fact that it is not a timely and reliable indicator that can guide economic policy—as well as suggesting new measures for prosperity.
As expected, none of these articles discuss one main drawback of the GDP aggregate—the inclusion of government spending. In America’s Great Depression, Rothbard removed the G component to suggest the Gross Private Product (or the netted version, the Private Product Remaining) as a better gauge of the material progress of a nation. Professor Herberner has also pointed out various important economic aspects that GDP, as a rough aggregate measure, leaves out. Moreover, professor Salerno has also shown that a reduction in the GDP—as it is calculated today—via a reduction in government budgets and taxation would in fact be underlined by an increase in the capital stock, a rise in the economic welfare of producers, and a higher real standard of living for the entire population.
Nevertheless, the most recent Economist article does draw attention to a fundamental problem of using such aggregate measures to estimate economic development over time. The author explains the difficulty of comparing “hand-held e-mail with fax machine, self-driving cars with jalopy, vinyl records with music-streaming services and custom-made prosthesis with health-service crutches” in order to capture average gains in living standards. But this problem is not restricted to the use of GDP. It extends to capturing the evolution of economic inequality over time, and most importantly, the evolution of price inflation, both of which are currently at the center of fiscal and monetary policies. As Mises explained in relation to index numbers used to depict average price variations of a basket of goods over time,
The farther we went back in history, the more we should have to eliminate [from the basket]; ultimately it seems that only those portions of real income would remain that serve to satisfy the most fundamental needs of existence. Even within this limited scope, comparisons would be impossible, as, say, between the clothing of the twentieth century and that of the tenth century… But even if we were to ignore all these considerations …changes in ways of living, in tastes, in opinions concerning the objective use-value of individual economic goods, evoke quite extraordinarily large fluctuations here, even in short periods.
Ultimately, Mises argued, the choice between various ways of ‘measuring’ such economic variations (and gauging their causes from these measurements) is arbitrary from an economic point of view, and becomes a largely political endeavor:
There are many ways of calculating purchasing power by means of index numbers, and every single one of them is right, from certain tenable points of view; but every single one of them is also wrong, from just as many equally tenable points of view. Since each method of calculation will yield results that are different from those of every other method, and since each result, if it is made the basis of practical measures, will further certain interests and injure others, it is obvious that each group of persons will declare for those methods that will best serve its own interests.
This underscores the important fact that, while they may be useful in discussion, figures cannot be the core of our practical and policy considerations—and that the search for better measures of economic development is, in a sense, fruitless. The focus should rather be on the institutions that underlie our economic system, such as property rights and the price system, and on how changes to these institutions profoundly affect human welfare.
Ultimately, the phone in your hand—created by entrepreneurs and bought voluntarily by a consumer—says far more about growth and progress than any report on the latest GDP figures.
The above originally appeared at Mises.org.

Donald Trump's Idiotic Energy Policy Views And What It Indicates For Overall Trump Economic Policy

By Robert Wenzel

On Thursday, Donald Trump delivered an energy policy speech at The Williston Basin Petroleum Conference in Bismarck, North Dakota.

The speech continued to show Trump's lack of respect for free markets. His view seems to be that there are various economic matters that must be directed by government and that he is the best "deal maker" to ensure that the government makes the best deals in these situations. He clearly holds a view best described as an American Führer Principle perspective.

In his speech, Trump stated:
Under my presidency, we will accomplish complete American energy independence.
This, of course, is a declaration made by most presidential candidates ever since the Arab Oil Embargo of 1973. It is total confusion and Trump joins the pack in this confusion.

What does this declaration mean? It means a perspective that advocates for taking the evaluation of the risk of another Middle East oil crisis out of the hands of independent risk takers and putting it in the hands of the government.

It ignores the fact that entrepreneurs are quite capable of evaluating the risks and opportunities on thousands of commodities on a daily basis. If the threat escalated with regard to a disruption of oil supplies out of the Middle East, oil prices would skyrocket, causing market-created conservation of supplies and entrepreneurs, in anticipation of a real threat, would stockpile supplies. No Führer needed.

Further, if there really is a threat that Middle East oil will be cut off at some point in the future, the U.S. should be eagerly using as much Middle East oil as possible now and husbanding domestic supplies.

"American energy independence" flies in face of the way to deal with a real threat of a cutoff in Middle East oil. If there really is such a threat, you absorb all the Middle East oil you can now, so that when the threat develops you have not used up the easiest to produce domestic oil.

Things got worse as Trump went on in his speech. He said:
American energy dominance will be declared a strategic economic and foreign policy goal of the United States.
This suggests once again that Trump is thinking in terms of a horrific government created  national industrial policy. It is Trump thinking again as the master leader and negotiator of the economy, seeming unaware of economic teachings that show it is impossible to successfully centrally plan an economy. (For more indications that Trump would implement various national industrial policies see: The Most Under-Reported Sentence in Donald Trump's Foreign Policy Speech).

Trump then reemphasized his desire to become independent of OPEC oil and also what he deemed "nations hostile to our interests."
We will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.
If a country is willing to sell us cheap oil, how can that possibly be hostile to out interests? As Mises and Rothbard have taught, it is trade that reduces tensions between countries.

Trump went on with an even more horrific step, indicating that the revenue generated from his "American energy independence" plan will, to some degree, belong to the federal government:
We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure.
This is, of course, on top of Trump's declaration that he will allow the Keystone Pipeline project to continue as long as the government participates in the profits (See: Fascist Economics Squared? Trump Will Approve Keystone Pipeline for a Cut of Profit).

As Rob Garver notes:
First of all, the federal government isn’t in the business of shaking down private businesses for a share of their profits in exchange for favorable treatment. There’s another entity with that business model, but its leaders don’t announce their plans in press conferences.

Additionally, suggesting that the government share in the profits of a business it would also be in charge of regulating for safety and compliance with environmental regulations creates some pretty dubious incentives.

Finally, the idea that the government should target a specific project as a source of extra cash, either through some sort of unprecedented profit-sharing arrangement or through another targeted assessment, which would amount to a company-specific tax, has got to be pretty terrifying to free-market Republicans in general.

Many libertarian supporters of Trump seem to hold the view that Trump will be less willing to get the United States involved in military actions overseas. This I doubt. I expect a new Trump Administration to act quickly to send US troops to the Middle East to fight ISIS and to employ some kind of military operations in Libya. And that is for starters.

But putting aside what Trump will do on the global military front, I believe the authoritarian, central planning efforts that a Trump presidency would bring domestically to the United States would be extremely oppressive and, yes, in many ways move the U.S. economy to look much more like that of a Third World economy.

Libertarian supporters of Trump fail to take into consideration Adam Smith's important observation with regard to empathy and location that he outlined in The Theory of Moral Sentiments.  In other words, if Trump is only a domestic horror, and not a militaristic global adventurer, that is a very serious problem in and of itself.

Trump's energy policy speech provides every indication that he has the instincts of a central planner and completely subscribes to the Führer Principle perspective. Not good, not good at all.

 Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics. His linked page is here. His San Francisco Review of Books essays are here.

Gold-Hater Nouriel Roubini Has Sold His Consulting Firm

Fin-Ex, a private investment firm, has announced the acquisition of Roubini Global Economics’ core subscription business, which will be merged with 4CAST to create 4CAST-RGE.

"I am committed to support the transition of the business into 4CAST-RGE," Roubini said in a statement. He  said he will continue to personally service a select number of consulting clients while the subscription business continues at 4CAST-RGE.

-RW

China Thinks the US Will Default via Inflation

Geopolitical expert Pippa Malmgren says the Fed's 2% inflation target is effectively a promise to default, reports Mauldin Economics.

The rest of the world sees it coming and wants to get out of the way--meaning they want to get out of dollars.

Speaking at the Mauldin Economics Strategic Investment Conference in Dallas, Malmgren said geopolitics begins with monetary policy.

Malmgren correctly observes that the US government is so deep in debt that even if it taxed 100% of the population 100% of its income for years, it wouldn’t be enough. Malmgren believes the government has a different stealth plan: default via inflation.

To those outside the US who own Treasury debt, the Fed's 2% inflation target is effectively the promise of a 2% haircut. Worse, they don't think the US will stop at 2%. Inflation has been below target for so long, they assume we will overshoot the target for years.

Bottom line: Emerging-market nations and especially China are exiting the US Treasury market.

-RW

(via Business Insider)

MORE HORRORS Donald Trump Met With Arthur Laffer

Here's another reason to fear Donal Trump economic policy,

Earlier this year, Arthur Laffer, of Laffer Curve fame, made a trip to speak with Trump at Trump Tower in New York, according to NewsMax. Laffer said the talk went well and that Trump strikes him as "presidential."

Laffer is a foundational thinker of supply-side economics of which the Laffer curve is a subcategory.

Years ago, Murray Rothbard exposed the phoniness of supply-side economics and the Laffer curve:




Larry Kudlow and Stephen Moore are even closer advisers to Trump.

According to NewsMax, Kudlow and Moore have been working with the campaign on its tax plan, advising Trump to cut some deductions for high-income Americans and "raise money by broadening the tax base," said Moore.

 "Raise money by broadening the tax base"? WTF? 

This is very scary stuff, it is an early signal that as I suspected, when all is said and done, Trump is going to raise taxes. 

 -RW