Sunday, July 31, 2016

What Should the United States Do If Other Countries Impose Tariffs and Use Other Methods to Distort Trade

I have occasionally seen here in the comments at EPJ the argument made that free trade is all well and good but that other countries are manipulating their trade practices and we must battle these countries back.

This thinking needs to be examined.

Bilateral free trade is good, but if the U.S. must move ahead with unilateral free trade there is nothing negative about this for the U.S.

To the degree that U.S. citizens are buying foreign goods (even if foreigners prevent U.S. operators from selling foreign goods in those countries), it is a net gain for the U.S. since no one is going to give up dollars unless they believe they are gaining by the trade.

If in the U.S. we can buy Russian caviar, French champagne and Italian suits, We gain regardless of whether Russia, France and Italy allow U.S. products into their countries.

Further, this has nothing to do with climbing unemployment in the U.S. As long as we do not end up back in the Garden of Eden, there will always be demand for workers somewhere in the economy.

Free trade is always good.

Here's Milton Friedman take from a slightly different angle on the same topic.

Friedman was terrible on monetary theory and methodology but generally solid on general free market theory.


Another Sign of the Serious Fed Money Pump in the San Francisco/Silicon Valley

The famed jeweler Harry Winston is opening a major new store in downtown San Francisco.


Barney Frank and a Trump Adviser Debate Tax Reform Tonight

The Common Ground Committee of Nantucket, Massachusetts will hold a debate on tax reform, featuring Barney Frank and Donald Trump economic adviser Larry Kudlow.

Organizers promise a “passionate but respectful, informed exploration of important questions shaping the debate over federal tax policy in this presidential election year.” A question and answer period will be part of the evening.

Expect left versus right proposals for keeping taxes high, couched around claims of tax breaks for favored groups.

No serious, consequential tax cuts will be advanced.


Top Economist at D.C. Lefty Think Tank Murdered

For the record.

Dr. Molly Macauley was stabbed to death July 8 near her home in the Roland Park section of Baltimore while walking her dogs, reports WSJ.

Macauley’s murder was the first in Roland Park since 1998. A Baltimore police spokesman said no arrests have been made in the case.

She worked as a vice president at the Washington D.C. think tank Resources for the Future.

Included among the directors of the institute are former chief economist of the World Bank Joseph. Stiglitz, Sally Katzen, senior advisor,Podesta Group, Linda J. Fisher, Vice Chair
Vice President and Chief Sustainability Officer, DuPont Environment and Sustainable Growth Center (Retired), Elaine Dorward-King, Executive Vice President of Sustainability and External Relations,
Newmont Mining Corporation, Wilhelm Merck, Managing Member, Essex Timber Company;
Trustee and Treasurer, Merck Family Fund, and Chair Emeritus, W. Bowman Cutter,Senior Fellow and Director, Economic Policy Initiative, The Roosevelt Institute.

 Macauley's research interests included space economics and policy, the economics of new technologies for research and understanding of the interactions between people and natural resources, the use of economic incentives in environmental regulation, climate and earth science, and recycling and solid waste management. She served on numerous special committees of the National Academy of Sciences and federal agencies.


Up and Comming Economic Hit Woman Gets Kerala, India Assignment

On July 21 of this year, Kerala, India Chief Minister Pinarayi Vijayan appointed Harvard economist Gita Gopinath as his economic advisor.

Not good for Kerla.

She is an advocate of what is known as “fiscal devaluation,”  that is she favors payroll tax cuts but is in favor of an increase in the VAT as part of the overall “fiscal devaluation”  plan. A "tax swap" she calls it.

What we have here is an economic mechanic sent in to create an environment that squeezes the masses for the benefit of the banksters.

Some in Kerala get this--to a limited degree. The columnist G Pramod Kumar writes:
[S]he herself has clarified, her role is “confined” to advising the chief minster and connecting various departments to knowledge leaders. This is classic international development speak that donor agencies and multi-laterals indulge in.
The premise is that the country that they advise, on whatever issues, are inadequate in their knowledge and capacity and it’s incumbent upon the internationalists to help them. For donor agencies, it’s an ideal route to influence national policies because they also give financial aid, while for multi-laterals such as the UN, it’s an opportunity to both help the countries, say in times of disasters and constitutional crises, as well as make them compliant to a certain rights-sensitive and social-democratic world order. 
If you want details on how the squeeze works, see Confessions of an Economic Hit Man by John Perkins.

Kerala is quite the place for Gopinath to be operating in. There is a significant number of Marxists in the government, including the prime minister. Kumar reports:
Interestingly, the attack on Gita, or rather Vijayan, comes from two quarters: one, the opposition and the CPM-critics who find the decision - a Marxist-Leninist party appointing a “neo-liberal” economist as its advisor - the epitome of CPM’s double standards; and two, the hardliners within the CPM, who find her economic philosophy highly objectionable.
Despite their criticism, the Congress doesn’t have a problem with her because it’s during their rule that Gita made her first public appearance in the state - at a global investment meet - but doesn't want to lose the opportunity to ridicule the Marxists for their alleged duplicity.
Thus, Gopinath may actually advocate some moves toward free markets. Banksters don't like Marxism. They prefer limited free markets that will produce income that they can grab.

Gopinath (44) first came on my radar about 6 years ago, when she was still in her 30s. At the time she was profiled by The Harvard Gazette, by WSJ and Bloomberg. That much focus doesn't happen by accident. She has serious sponsorship. In 2015, she spoke at the Jackson Hole, Wyoming annual central bankers' symposium. Bernanke has spoken at the event, so hasGreenspan. Yellen will be speaking there at this year's conference. It's obvious. the key backroom players trust Gopinath. Now, they have given her a geographic region for her to play with. It won't be her last.

Gopinath holds a B.A. from Lady Shriram College, University of Delhi (1992), an M.A. from the Delhi School of Economics (1994). She completed her M.A. from the University of Washington (1996). In 2001, she completed her Ph.D from Princeton University, under former Fed chair Ben Bernanke

She is a professor of economics at Harvard University, a visiting scholar at the Federal Reserve Bank of Boston and a research associate with the National Bureau of Economic Research.


More on Gopinath here.

Saturday, July 30, 2016

How Mises Destroyed the Case for Central Planning

This is excellent.

A very important lecture by Professor Joseph Salerno including a brief history of socialist economic thought and, most important, the Mises critique of socialism.

Larry Summers in Puffed Profile at The Crimson

I just came across this 2014 puff piece ion Larry Summers in The Crimson.

It appears yet another effort to clean up the Summers' image--possibly to make him eligible for future "public service." Perhaps Summers will end up in a Hillary Administration if she wins in November?

Of note, there is no mention of the insane Summers instigated derivates' positions taken by the Harvard endowment that resulted in billions in losses. Or the fact that Iris Mack warned him about the positions before they blew up and she was fired,

The left, by the way, hates this guy. He has elitist establishment protection only.

The evidence of this lefty venom comes in the first comment to the piece by one "Nancy Morris."
The most interesting aspects of this article are things it does not mention at all. Were those topics explicitly disallowed by the ground rules to this absurd puff piece (er, I mean, "interview")?

When Professor Summers is ridin' round the world and he's doin' this and he's signing that and he's tryin' to make some flight, how many of those efforts are directed at raising funds for his "home," Harvard, the World's Wealthiest University®? When The President became again The Professor (pacem Gilligan), he said he would continue to assist in ongoing fundraising efforts, but there appears to be no evidence he has done so. Fundraising for Obama? Yes. For "'home?" No evidence. Was all of that "not for attribution?"

What, if any, responsibility does Professor Summers accept for meddling in the management of the endowment during his term as president, including the notorious "Summers Collar," which cost Harvard, the World's Wealthiest University®, well north of a billion dollars to unwind? The Professor has in the past absurdly waved away such things, claiming that when his Allston dream collapsed its financing structure should have been promptly unwound. Others have answered his claim, and there is not room in this comment to rehearse the whole thing. But there was plenty of room in this interminable article to do so.

And who except The Mindless Ones at the Crimson and The Professor himself could forget his insistence that the liquidity fund be folded into the huge illiquid general endowment, nearly resulting in the need for his "home" to file in Chapter 11 as it discovered its looming inability to pay its debts as they came due in the aftermath of the bankruptcy of Lehman, another institution whose financial failure was unthinkable. Those debts were only satisfied with the proceeds of desperate loans taken out on confiscatory terms, resulting in many more hundreds of millions in losses by that "home." How about all those numerous, huge and wildly risky currency bets The Professor (then, The President) called Mr. Meyer to have the endowment place on a regular basis? The international currency markets are the casinos of the very rich, and Harvard, the World's Wealthiest University® bet (and paid!) it's rent money there just as surely as any woman with hair curlers and a brown lunch bag is doing the same in Atlantic City right now. On a properly risk-adjusted basis, the endowment returns became paltry long before the financial crisis, and The Professor had much to do with that.

We get some consoling, partisan words from Benedict Gross, a "close friend" who The Professor elevated to Dean of the College. But there is no mention that this "friendship" was born and existed almost entirely on the tennis courts both men enjoy so regularly. Gross is a number theorist who at the time he was appointed to his Deanship had not one iota of administrative experience beyond having been Chair of the mathematics department (a rotating position every professor in the department eventually assumes). In other words: A personal crony. Was it not worth a question of The Professor regarding why he saw fit to place the College in the tender mercies of such a man? How about an assessment of Gross' own term in office?

But Larry chose well, from Larry's perspective! Dick exhibits his lasting loyalty to Larry by recalling the nasty attitudes and bearings of those determined to oust Summers. Somehow the far nastier and more questionable behavior of Summers and many of his supporters seems to have just dropped down the Summers/Gross memory hole. For example, there was the extensive whisper campaign insinuating that hostility to Summers was bottomed on antisemitism. When asked about this effort made on his behalf, "Larry" offered only the wan response that he was not personally aware of such discrimination. But he did not denounce the effort or make any serious effort to discredit it, and the whisper campaign remains a factor to this day. And how about asking The Professor of his regular manipulation of his many contacts in the media to assail his critics at "home?" Summers may deny it, but surely Professors West and Gates haven't forgot the sudden uptick in media interest in their textbook publishing deals that occurred after they chose to do battle with Summers. Did anyone bother to talk to them?

Also missing from this article is any hint that Professor Lawrence Summers has in any way forgiven his critics or made the slightest effort at reconciliation with any of them. Has there been a single call to his successor offering to work with her to help Harvard, the World's Wealthiest University® patch up the damage and move on?

Apparently not. Or was all that also ruled out by the interview ground rules? The word is: small. Larry Summers is small.

Note to The Professor: When your employer unceremoniously tosses you from office in a huge cloud of acrimony, it's generally better for all concerned just to leave "home," go out on your own, try to patch things up from a safe distance and save what you can. This article is mostly evidence that you haven't mastered the basics.
I hope "Nancy" teaches creeative writing at Harvard, she's good.


Trump Continues to Think Like a Damn Central Planner Who Will Destroy the Economy

Donald Trump tweets:

Has Trump missed something? Wasn't the government craze to increase home ownership a significant factor in the massive housing bubble?

James Altucher has made a compelling argument as to why owning a house doesn't make any sense.

The only advantage to owning a home, and this is what has created all the "real estate geniuses" out there, including Trump, is that real estate is a great inflation hedge.

You can load up on debt when buying a house and pay back the debt in devalued dollars later on. That is the only advantage.

But as we have seen, the timing has to be correct on this crazed manuever or the next recession will result in your losing your home.

If Trump understood anything about the economy, he would focus on preventing the Federal Reserve from manipulating the money supply and interest rates---which has in the past cost millions of people their homes.

Horrifically, however, he has stated that he is in favor of low interest rates, which, of course, is just setting up the eventual bust phase in the boom-bust cycle.

Trump's suggestion that he wants to increase homeownership and keep interest low shows he has learned nothing from the 2008 financial crisis. He really wants to bring that boom-bust cycle back again.

He is nothing but a two-bit central planner, spouting his plans with more flair but typical central planner insanity.


Fighting the Minimum Wage: Fresh Baked Vending Machine Baguettes

In San Francisco, Le Bread Xpress serves fresh-baked baguettes on demand via a new vending machine.

Compare and Contrast: Mao's China and Venezuela's Socialism

Things are very bad in socialist Venezuela and getting worse by the day, see Socialism Taken to the Next Level: Venezuela's New Decree Forces Farm Work On Citizens.

But it doesn't come close to what occurred on Mao's communist China.

From Frank Dikötter’s short note at History Today:
In the People’s Republic of China, archives do not belong to the people, they belong to the Communist Party. They are often housed in a special building on the local party committee premises, which are generally set among lush and lovingly manicured grounds guarded by military personnel. Access would have been unthinkable until a decade or so ago, but over the past few years a quiet revolution has been taking place, as increasing quantities of documents older than 30 years have become available for consultation to professional historians armed with a letter of recommendation. The extent and quality of the material varies from place to place, but there is enough to transform our understanding of the Maoist era.

…What comes out of this massive and detailed dossier is a tale of horror in which Mao emerges as one of the greatest mass murderers in history, responsible for the deaths of at least 45 million people between 1958 and 1962. It is not merely the extent of the catastrophe that dwarfs earlier estimates, but also the manner in which many people died: between two and three million victims were tortured to death or summarily killed, often for the slightest infraction. When a boy stole a handful of grain in a Hunan village, local boss Xiong Dechang forced his father to bury him alive. The father died of grief a few days later. The case of Wang Ziyou was reported to the central leadership: one of his ears was chopped off, his legs were tied with iron wire, a ten kilogram stone was dropped on his back and then he was branded with a sizzling tool – punishment for digging up a potato.

…Fresh evidence is also being unearthed on the land reform that transformed the countryside in the early 1950s. In many villages there were no ‘landlords’ set against ‘poor peasants’ but, rather, closely knit communities that jealously protected their land from the prying eyes of outsiders – the state in particular. By implicating everybody in ‘accusation meetings’ – during which village leaders were humiliated, tortured and executed while their land and other assets were redistributed to party activists recruited from local thugs and paupers – the communists turned the power structure upside down. Liu Shaoqi, the party’s second-in-command, had a hard time reining in the violence, as a missive from the Hebei archives shows: ‘When it comes to the ways in which people are killed, some are buried alive, some are executed, some are cut to pieces, and among those who are strangled or mangled to death, some of the bodies are hung from trees or doors.

( Dikötter’s via Tyler Cowen)

The Important Difference Between Private Entrepreneurship and Political Entrepreneurship

More great stuff from this past week's Mises University.

Want more DiLorenzo? Buy his new book: The Problem of Socialism 

Friday, July 29, 2016

Socialism Taken to the Next Level: Venezuela's New Decree Forces Farm Work On Citizens

A new decree by Venezuela's government could make its citizens work on farms because of the country's severe food shortages, reports CNN.

In a vaguely-worded decree, Venezuelan officials indicated that public and private sector employees could be forced to work in the country's fields for at least 60-day periods, which may be extended "if circumstances merit."
"Trying to tackle Venezuela's severe food shortages by forcing people to work the fields is like trying to fix a broken leg with a band aid," Erika Guevara Rosas, Americas' Director at Amnesty International, said in a statement.
President Nicolas Maduro is using his executive powers to declare a state of economic emergency. By using a decree, he can legally circumvent Venezuela's opposition-led National Assembly -- the Congress -- which is staunchly against all of Maduro's actions, notes CNN.
This is what happens when you mix socialism. high price inflation, price controls and an authoritarian leader.

The Real Cancer Is Historical and Economic Ignorance

By Don Boudreaux

Here’s a comment, in full, from one “Bob” on this Marginal Revolution post by Tyler Cowen on Tyler’s receipt of Joel Mokyr’s new book, A Culture of Growth:
Growth for the sake of growth is the ideology of the cancer cell.
Bob likely believes that, with this single pointed sentence, he makes a profound point – a point that causes all but the most philistine of readers to pause and say“Omigosh!  Bob is so insightful!  Economic growth is cancerous.  We mindlessly bow to it – accept it – demand it even! – unaware that it will eventually destroy us.”
In fact, Bob is painfully sophomoric.  The reason is that the case for economic growth is not and never has been “growth for the sake of growth” (although misinformed best-selling authors such as Douglas Rushkoff continue to insist otherwise).  Instead, the case for growth is this: growth for the sake of human betterment.  The case for economic growth is founded on the fact that it improves human lives, and especially the lives of those who are currently worse off.
Economic growth extends life-expectancies; the wealthier we are the less likely are parents to suffer the tragedy of having to bury children – the wealthier we are the less likely are children to grow up with no memories of their fathers or of their mothers or of some of their siblings.  Economic growth protects ordinary people from the real risks of starvation that haunted nearly everyone until the modern age.
Economic growth supplies the material wherewithal for ordinary people to have the leisure to become literate, to read for pleasure, to travel for enlightenment and amusement, and to retire in the autumn of life with the expectation of having upwards of two decades of good health remaining to enjoy with grandchildren, neighbors, and friends.  Economic growth supplies ordinary people with the means of traversing the globe comfortably and safely and at speeds and at such ease that would cause a 17th-century pasha to fall to his knees, quivering, in astonishment.  Economic growth gives us antibiotics, antidepressants, statins, anesthesia, vision correction, and that miracle drug called aspirin.
Economic growth allows us to drink water without fear of dying from dysentery.
Economic growth gives us toothbrushes and dental floss and antibacterial soap.
Economic growth gives ordinary people that miracle of fast, individualized surface transportation called the automobile.
Economic growth is not merely about the accumulation of material trinkets and baubles.  It is, far more, about the possibility of living longer, healthier, better lives – lives more varied in experiences, more rich in enjoyments, more immersed in learning, and more free of worries and tragedies.
And economic growth is about giving the “Bob”s of the world the leisure, literacy, and computer capacity to make on blogs housed in cyberspace sophomoric comments about the alleged dangers of economic growth.
The above originally appeared at Cafe Hayek

The Entitlement State Nobody Mentioned

Richard Ebeling emails:

Dear Bob,

I have a new article out on “The Entitlement State Nobody Mentioned.”

 The Republican and Democrat Party conventions are over and, noticeably, one crucial government policy issue not faced by any of the speakers is the crisis of the American “entitlement” state.

The recently released Congressional Budget Office’s long-term budgetary projection covering 2016 to 2046 makes it clear that the major redistributive programs – Social Security and government health care spending of various types – are pushing the federal government’s deficit spending back to the $1 trillion-a-year range very soon, with the national debt reaching stratospheric heights.

But Democrats merely wish to push harder on the government-spending accelerator, and the Republicans have no principled or pragmatic intention of challenging the rationale or pervasiveness of the welfare state.

 All of this stands in stark contrast and opposition to the guiding ideas and ideals upon which the American experiment in self-government was originally built. Instead, cloaked in the mysticism of democratic will of “the people,” America has been heading back to the ancient notions of collectivist obligation and sacrifice to which the individual must conform.

 Lost in “progressive” rhetoric and rewriting of history is the truly revolutionary and radical world that the individualist creed of liberty and peaceful, voluntary association and exchange help make for humanity reborn in the pursuit of freedom and prosperity rather than tyranny and poverty.

 There is needed a political-philosophical transformation in America and other parts of the world to defeat the continuing descent into a loss of personal freedom, economic stagnation, and the growing burden of governmental fiscal chaos.



Hedge-Fund Money: $48.5 Million for Hillary Clinton, $19,000 for Donald Trump

Owners and employees of hedge funds have made $122.7 million in campaign contributions this election cycle, according to the nonpartisan Center for Responsive Politics—more than twice what they gave in the entire 2012 cycle and nearly 14% of total money donated from all sources so far, reports WSJ.

At the presidential campaign level, between the two remaining candidates, almost all of it went to Hillary Clinton. She got $48.5 million. Donald Trump got $19,000.

The investment firms with the biggest donations by owners or employees in support of each candidate. (Figures include donations to campaigns as well as to outside groups backing the candidate.)

Hillary Clinton

Saban Capital Group: $10,036,238
Renaissance Technologies: $9,518,800
Pritzker Group: $7,873,257
Soros Fund Management: $7,873,257
Paloma Partners: $8,108,400

Donald Trump

Argyle Investment: $2,700
Teakwood Capital: $1,500
Tall Ship Capital: $1,000
Vann Investments: $1,000
James River Capital: $1,000

Source: Center for Responsive Politic via WSJ.

Trump Advisers Mystified Over His New Endorsement of $10/hr Federal Minimum Wage

Hot Air has the blow-by-blow:

At one point in the campaign, Donald Trump argued that America had lost its competitive edge in part because wages got too high. In fact, not only did he make that declaration during a November debate, he doubled down the next day on the argument, as Allahpundit noted at the time. Note well that the debate statement came as a direct answer about whether Trump would support raising the current minimum wage of $7.25 an hour, and Trump insisted he opposed it...

On Tuesday, Trump reversed himself and told Bill O’Reilly that he’d push it to $10 an hour, along with an eyebrow-raising shot at (supposedly) fellow Republicans not wanting to help people out. Yesterday, Trump confirmed that position at a press conference:

So … what prompted this change now, and what will Trump propose to effect it? The Hill’s Peter Schroeder reports that even his campaign advisers aren’t really sure:
Trump’s latest position puts him at odds with conservative thinkers and most of the business community, which argues that a government-mandated wage hike would just mean fewer workers as businesses cut costs to meet the new requirement.
Even Trump’s own economic brain trust could not explain how the GOP nominee decided $10 per hour should be the new standard.
“I saw the statement that he made on TV, but I haven’t had the chance to talk to him in the last couple weeks about this,” Stephen Moore, an economist at the Heritage Foundation who is advising the Trump campaign on economic issues, told The Hill on Wednesday.
“I don’t know exactly what he was endorsing. The $10 minimum wage, that was the first I’d heard of that …Sometimes he says one thing, and sometimes he says another about this, so I’m not exactly sure where he’s at on this.”

Bitcoin Buyer Robbed of $28,000 at Knifepoint; Goes Crying to Government

Crypto Coin News reports:
32-year-old Steve Manos of Lake Worth, Florida was robbed at knifepoint as he attempted to buy $28,000 in bitcoin earlier this week.

On a late Sunday night this week, Steve Manos thought he was partaking in a routine bitcoin sale with two men he had done business with in the past. Manos was looking to buy bitcoin from the two individuals for $28,000 in cash and met with the two individuals in his car. It all went wrong after....

Manos was looking to exchange cash for bitcoin and had $28,000 in his car. The two men reportedly entered the vehicle according to the Palm Beach Sheriff’s arrest report, one of whom got into the front passenger seat beside Manos, while the other took the seat behind Manos.

Manos handed over a gift bag, which contained 28 bundles of $1,000. The other end of the exchange saw the front passenger take out a laptop in order to finish the exchange. However, the man also pulled out a knife and pressed it against Manos’ chest.

Although Manos told the men to just leave with the money without any further consequence, a struggle followed after the backseat passenger attempted to grab Manos’ gun from the driver’s door compartment, where Manos was seated.

It ended with Manos unable to keep up with...the [fleeing] robbers...
Manos, who probably believes that Bitcoin is a good method to work outside the government, after the incident, called the government in the form of local coppers:
That night, Manos provided Palm Beach Sherriff deputies a phone number that he had previously used to contact one of the two individuals during past dealings.
It turns out the robbers were not exactly rocket scientists:
That number was subsequently linked to Andre Allen of West Boynton who was picked out of a photo lineup by Manos.
The next day, Allen was arrested. He faces charges of armed robbery, burglary, and battery and is being held in a Palm Beach County Jail on a $31,000 bond.
And, by the way, never agree to meet in a car in a parking lot to exchange a large sum of cash with people you don't know well, do it in a public place with lots of people around, even inside a bank with a large lobby and an armed security guard or better yet at an NRA convention or gun show.


FASCINATING: How Drones and Supercomputers are Transforming the Mining Industry

These are the things that create super gains in productivity and result in more product and downward pressure on prices---even as the Fed prints mounds of new money.


Watch Out Minimum Wage Supporters: First Robot Store

The first robot store opened on Thursday in central China's Hunan province in Changsha, the capital city of the province, reports.

Aiming to build an industrial ecosystem of robot services and entertainment, the store offers customers sale service, maintenance, and secondhand trading of robots

The store manager is a robot named Bingbing,

Last year, the owner of the store, a Shanghai-based robotics company, opened the first restaurant staffed by robots in Hunan. Now, the robots have been upgraded and will begin service in other industries.


(via People's Daily Online)

Gary North on Ludwig von Mises

This is a great lecture delivered by one of my favorite Austrian school economists, Gary North.

North touches on the contacts and influence of Ludwig von Mises, including his intellectual battles against Lenin's Bolsheviks, the NAZIs, Milner's Kindergarten, the Progressive movement and Irving Fisher.

Find the time to watch this one.


Thursday, July 28, 2016

"Why we encouraged our son to major in math in college"

Liz Ann Sonders, Chief Investment Strategist, Charles Schwab & Co, points to this chart,



Relative of Chairman Mao Becomes Largest Single Shareholder in Sotheby’s

Cheng Dongshen,
A Chinese life insurer, Taikang Life, headed by a relative of Mao Zedong has become the largest single shareholder in the auction house, Sotheby’s, taking a 13.5 per cent stake.

The life insurer was founded and is run by Cheng Dongshen, grandson-in-law of Chairman Mao.

So much for communism.

According to FT, Taikang Life cited a “positive view” of Sotheby’s business as the primary reason for the purchase in a filing with the US Securities and Exchange Commission.

It seems as though Hillary is the last man standing who still wears a Mao suit.


A Letter to “A Proud Trump Man”

A Don Boudreaux  letter to someone who describes himself as “a proud Trump man”:
Mr. Rocky Roberts

Mr. Roberts:

Thanks for your e-mail.

Objecting to a recent blog-post of mine, you – who describe yourself as “a proud Trump man” – write that you and others who support Donald Trump’s candidacy oppose only “increased international trade and immigration but not increased international investment in America’s economy.”  Indeed, praising the Mercedes factory near your home in Alabama, you claim that you “cheer” all such investment “which doesn’t harm national security.”

You’re wise not to object on economic grounds to foreign investments in America.  But there’s a deep inconsistency between your support for such investments and your support for Trump’s mercantilist assertions and policy proposals.  For Mercedes, Toyota, Michelin, Sony, Ikea, and other foreigners to build factories and facilities in, and to otherwise invest in, the American economy they must acquire American dollars.  Ultimately, the only way for foreigners to acquire American dollars for investment is to sell goods and services to Americans – that is, to export to America – and then to not spend all of their export-earned dollars on purchases of American exports.  The result of this foreign saving of American dollars is an American trade deficit.  This result, of course, is one that Trump frequently if ignorantly warns spells the ruination of America.

Your opposition to increased imports, therefore, is in fact, and unavoidably, opposition to some combination of increased American exports and increased foreign investment in America.  In short, another name for the so-called “U.S. trade deficit” about which Trump squawks so regularly is “U.S. capital-account surplus” – that is, increased foreign investment in America that you astutely recognize is an economic boon for Americans.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercator Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek.

Wiesenthal: "How Donald Trump Changed My Mind About Gold"

Joe Weisenthal says he has changed his mind about gold.

He writes:
If you poke around on the internet, you'll find a lot of people who have criticized me for being a "gold hater." Here are two different pieces that took me just a few seconds to find. There are plenty of tweets out there saying the same thing.
These people have been basically right. Over the years, I've said a lot of bad stuff about gold -- how it's a lousy currency, how it's just a rock that shouldn't have any value, how love of it is primitive and irrational, how it has no justifiable basis in the economy.
But I'm changing my mind, and it's all due to Donald Trump.
He goes on to make my head spin by saying that Trump has made him understand that gold is about power and that:
 [T]o get and hold gold, kings and empires had to build complex global supply chains and wield military might.
In other words, gold is a physical and visual manifestation of raw power. To have gold was to have power. It follows, then, that gold would make for a good basis for currency. If you knew that a kingdom had the ability to produce vast quantities of gold coins, then you could assume that it was a powerful and stable kingdom that had military might and wide influence.
Which means Weisenthal still does not understand how gold came to be a money---by way of free exchange---and he seems to not understand the significance of the fact that an individual can legitimately accumulate gold by providing goods and services that others want in exchange for gold.

It is only because gold has become a medium of exchange, outside of government, that governments coercively take it from their citizens and those they conquer---so that they can have such a globally recognized instrument of exchange.

Weisenthal isn't looking deep enough into the nature of gold. The militarily powerful desire gold because of its exchange value which, as Ludwig von Mises taught us, came about in non-coercive exchange.

Gold as a medium of exchange preceded government desire for it. It is not coercive government power that is at the fundamental core of gold as money. Gold came before government desire for it and it would survive, as a medium of exchange. even if there were no governments.


Is America Headed For Bankruptcy?

"Two recent pieces of budget news are a grim reminder of the perilous state of fiscal policy in the United States,” my favorite Keynesian economist, Martin Feldstein, professor of economics at Harvard University, says in a Project Syndicate essay.

President Barack Obama’s Office of Management and Budget announced that the federal government’s deficit this fiscal year will be about $600 billion, up by $162 billion from 2015, an increase of more than 35%. And the annual Long-Term Budget Outlook produced by the Congressional Budget Office predicts that, with no change in fiscal policy, federal government debt will rise from 75% of GDP to 86% a decade from now, and then to a record 141% in 2046, near levels in Italy, Portugal, and Greece, Feldstein pointed out.

And he notes:
The Federal Reserve’s unconventional monetary policy has driven down the cost of the net interest on the federal debt to just 1.4% of GDP, despite the increase in the volume of the debt. But as interest rates normalize and the volume of debt grows, the cost of servicing the interest on the national debt is projected to increase to 5.8% of GDP.
Keep in mind, this is a conservative estimate of how climbing interest rates will relate to GDP. The percentage could be much higher. As Feldstein correctly notes:
With a federal debt of 141% of GDP, that 5.8%-of-GDP interest cost implies an average nominal interest rate of just 4% and, given the CBO’s inflation forecast, a real interest rate of about 2% – similar to historic rates when the debt ratio was less than 40% of GDP. But investors in Treasury bonds might demand a much higher interest rate in exchange for loading up their portfolios with US debt. In that case, the interest cost and the debt would be much greater.

Feldstein says, " While the US government would never explicitly default, it could adopt policies such as deducting income tax on interest payments, which would disadvantage foreign holders and depress the value of the bonds. Moreover, foreign investors might fear that very high debt levels could lead to inflationary monetary policy, which would depreciate the value of the dollar and lower the real value of their bonds."

How bad could things get? Feldstein informs:
Here is an amazing and disturbing implication of the CBO’s forecast. By 2046, the projected outlays for the “mandatory” entitlement programs (Social Security and the major health programs), plus interest on the debt, would absorb more than all of the revenue that the government would collect with current tax rates. A small deficit (1.6% of GDP) would emerge even before spending on defense and other annually appropriated “discretionary” programs.
There is no way to offset the growth of the mandatory programs by slowing the growth of defense and other discretionary outlays. Total defense spending is now just 3.2% of GDP and is expected to decline to 2.6% over the next ten years and to remain at that level for the next 20 years. That would be the lowest defense share of GDP since before World War II. The same reduction is projected for all non-defense discretionary programs, also a record-low share of GDP.
So are Hillary Clinton or Donald Trump proposing anything that would move away from this developing crisis? Feldstein concludes:
Neither of the presidential candidates has indicated either a plan or an inclination to reverse the projected rise in the national debt. But it should be a top priority for whoever moves into the White House next year. Given the need to act quickly to avoid the worst-case scenario, there is no excuse for waiting.

The Janet Yellen Money Pump on Steroids: Silicon Valley Elites Get Home Loans With No Money Down

By Heather Perlberg and  Prashant Gopal

It turns out that even the well-off need help in a housing market as crazy as the one in the San Francisco Bay area, and lenders are elbowing each other in a rush to provide it.

They’re courting Silicon Valley workers with tailored loans, guaranteed 24-hour approval and financial-planning services. Social Finance Inc. has deals with Google and other top technology companies that allow it to market to new hires. First Republic Bank -- which gave Facebook Inc. billionaire Mark Zuckerberg a 1.05 percent interest-rate mortgage -- has opened branches in Facebook and Twitter Inc. headquarters. San Francisco Federal Credit Union will finance 100 percent of houses costing up to $2 million.

Michael Tannenbaum, senior vice president of SoFi’s mortgage group, calls it “white-glove service.” Lenders often give special treatment to the wealthy, of course, but the tech industry has created a particularly ripe crop of clients who are rich or on their way. It’s a smart bet to cater to a sector that’s created thousands of millionaires and dozens of billionaires, says Glenn Kelman, chief executive officer of the brokerage Redfin. The downside is that the most expensive U.S. housing region is becoming “a no-fly zone for anyone outside technology,” especially with so many people shut out altogether by tight credit standards imposed after the 2008 real estate crash.

What’s going on “might be good for the borrower and good for the lender,” he says, “but it’s not necessarily good for San Francisco.”

The city’s median home value is $1.13 million, up almost 67 percent since 2011, and the numbers are higher in some nearby towns -- $6.36 million in Atherton, according to Zillow, and $4.12 million in Hillsborough.

Read the rest here.

In Defense of Sweatshops

Benjamin Powell is great on sweatshops.

Judge: "The Bitcoin has a long way to go before it the equivalent of money"

I actually agree with this judge's ruling---and also agree with her view that her knowledge is limited, since money does not have to be "backed" by a government or bank.

The Miami Herald reports:
A Miami-Dade judge ruled Monday that Bitcoin is not actually money...

In a case closely watched in financial and tech circles, the judge threw out the felony charges against website designer Michell Espinoza, who had been charged with illegally transmitting and laundering $1,500 worth of Bitcoins. He sold them to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers.

But Miami-Dade Circuit Judge Teresa Mary Pooler ruled that Bitcoin was not backed by any government or bank, and was not “tangible wealth” and “cannot be hidden under a mattress like cash and gold bars.”

“The court is not an expert in economics; however, it is very clear, even to someone with limited knowledge in the area, the Bitcoin has a long way to go before it the equivalent of money,” Pooler wrote in an eight-page order.

(ht Lee Killough)

Tyler Cowen on His Book Reading Style

During an interview he conducted with the book reviewer Michael Orthofer, this exchange took place:
COWEN: What’s the best book that you never finished? 
ORTHOFER: That I never finished? I don’t know because I really finish almost everything. It takes a lot for me to give up on a book.
COWEN: See, I don’t finish most of my books. Maybe I finish 10 percent — I’m not sure — but a clear minority. Why finish books that are not as good as the next book you could be reading in respective value terms?
A snippet:


New Trump Ad Attacks Obama Economy

In reality, of course, the economy is "improving" but Obama has nothing to do with it.

It is a Federal Reserve manipulated boom that has a bust built into it (SEE:Austrian School Business Cycle Theory)


Wednesday, July 27, 2016

How Do Babies Learn So Much From So Little So Quickly?

A very fascinating speech but the a hint of dangerous advocacy of central planning of children at the end, when she mentions "investment in children."


Obamacare Medicaid Cost Explosion: 49% Above Projections

A new government report shows that the average ObamaCare Medicaid expansion enrollee cost the federal government $6,366 in 2015, 49% above the per-person cost of $4,281 projected a year ago, writes Jed Graham.

Brian Blase, a research fellow in Health Policy at the Mercatus Center, was first to highlight the cost explosion, notes Graham.

He said it likely stems from incentives built into the Medicaid expansion that, for now, is 100% paid for by the federal government.

"The rates are much higher than the amounts for previously eligible Medicaid adult enrollees and suggest that states are inappropriately funneling federal taxpayer money to insurers, hospitals and other health care interests through the (Affordable Care Act) Medicaid expansion," Blase has written.

The upshot, Blase says, is that federal Medicaid spending and budget deficit projections are likely to be revised upwards when the Congressional Budget Offices takes into account the higher cost trajectory for Medicaid expansion enrollees.


No Fed Rate Hike But Door Open to Move as Soon as September

In a statement today following a two-day meeting of the FOMC, the Federal Reserve upgraded its assessment of the economy’s recent performance and said near-term risks to the outlook have diminished, effectively leaving the door open to raise rates later this year, possibly as early as September, reports WSJ.

Nine of 10 members of the Fed’s policy-making committee voted to leave the benchmark federal-funds rate unchanged at between 0.25% and 0.5%, but they offered a more upbeat description of the labor market and other sectors of the economy.

The labor market has “strengthened,” the Federal Open Market Committee said after its two-day meeting. That was brighter than the FOMC’s assessment six weeks ago, when the central bank said the pace of improvement in jobs growth had “slowed.”

“Near-term risks to the economic outlook have diminished,” the FOMC said in is statement.

Federal Reserve Bank of Kansas City President Esther George voted against the committee’s action on Wednesday because she preferred to raise rates immediately. Ms. George dissented at the March and April meetings, too.

The full statement is here.


Sustainable Farmed Fish? Give Me a Break

By Don Boudreaux
Today on the radio I heard an ad for a DC-area supermarket chain that boasts that it now has on sale – as in, selling for a reduced price – “sustainably farmed fish.”
I really dislike the word “sustainable” (and all of its variations) as used today to signal holier-than-thou environmental ‘awareness.’  As Robert Solow said about this concept,
It is very hard to be against sustainability.  In fact, the less you know about it, the better it sounds.
But advertising “sustainably farmed fish” – implying, as it does (rather bizarrely), that unsustainably farmed fish are common – is especially annoying.  While the absence of property rights in oceans and other large bodies of water, and in uncaught fish, might well lead to overfishing (that is, to a genuinely unsustainable manner of acquiring fish for human consumption), the very essence of a fish farm implies property rights in the fish stocks.  And where there are property rights there is sustainability.  A fish farmer is no more likely to allow his stock of fish to be depleted than is the owner of Triple Crown winner American Pharaoh to allow his horse to be slaughtered for sport, or than are you to allow the cost of motor oil to prevent you from ever changing the oil in your car.
Private property rights give to each owner incentives to consider not only the current values of alternative uses of the things that he or she owns, but to consider also the future values of alternative uses.  In other words, private property rights internalize on each owner not only the immediate, current costs and benefits of the chosen use of the property, but also the more-distant, future costs and benefits of that use.  Your cost today of changing the oil in your car might well be greater than the benefit such an oil change would yield to you if you knew that, say, your car would be stolen and destroyed tomorrow.  But because you own the car and expect either to keep it for several more years or to sell it, you care about the car’s future.  Your ownership of the car makes you care about that asset’s future.  Ownership is very much like a pair of eyeglasses: it cures economic myopia.
It’s depressing that those people who today are most likely to worry about resources being “unsustainable” – people who are most likely to prattle publicly about “sustainability” – are those people who also are most likely to disparage private property rights and to argue for government policies that weaken and attenuate such rights.  Such people are those who are most likely to wish to further collectivize the provision not only of environmental amenities such as park space and animal conservation, but also of health care, of education, of housing, and of a host of other private goods and services.  Such people also are those who are most likely to protest prices made higher by market forces, and to applaud rent-control and other government-imposed price ceilings on a variety of consumer goods and services.
In short, the people who today howl most frequently and loudly for “sustainability” are those who most frequently and loudly oppose the legal and economic institutions – private property and market-determined prices – that alone reliably promote genuine sustainability.
The above originally appeared at Cafe Hayekk.

Trump: The Minimum Wage Has to Go Up

Donald Trump displays more economic ignorance.

Minimum wage laws are evil.

If Trump becomes president, I am going to have no problem finding material for EPJ.

Come to think of it, I won't have problems with material if Hillary is president either,

Donnie or Hillary as president won't be good for most of you, but it will be a gift to EPJ.


Bitcoin Tracking as Official EU Policy

 The European Commission is proposing the creation of a database that will hold information on users of virtual currencies, which will record data on the user's real world identity, along with all associated wallet addresses.

They are using the terrorist attacks as the cover:
This is the first proposal part of an action plan that the EU got rolling after the Paris November 2015 terror attacks and that it officially put forward in February 2016 and later approved at the start of July 2016.

There is nothing libertarian about e-currencies. They are very trackable. Governments are beginning to realize this.

(via Softpedia ht Mark Addleman)

Behavioral Economics: The Easy Way I Save $200 a Month Without Any Effort At All

By Kathleen Elkins

City life isn't cheap. It'll eat your paycheck up mercilessly if you let it.

I learned this pretty quickly upon moving to New York City a year ago.

After covering my necessities such as food, my fixed costs — rent, internet, and cell phone bill — and directing a chunk of my paycheck to my 401(k) plan, there wasn't much left over for spending on all that this glamorous city has to offer, let alone for savings.

Sure, I was saving for retirement in my 401(k), but there are bound to be bigger purchases down the road — a car, home, and potentially graduate school — that also require savings. Plus, it would be nice to have some extra cash set aside so I can travel at some point and splurge on the occasional vacation.

To force myself to start chipping away at these savings goals, I opened a high-yield online savings account, which will allow my money to grow 100 times more than it would in my traditional savings account. I chose Ally, which offers a generous 1% interest rate (compared to the 0.01% at most traditional "big banks"), but there are a bunch of online bank options out there.

Next, I set up a recurring automatic transfer from my checking account to my Ally savings account — the first day of every month, $200 is automatically sent to my Ally account.

All I had to do was link my Wells Fargo checking account to my Ally account online, then select an amount I wanted to transfer and how frequently I wanted the transfer to occur. Now, I never see that $200, meaning I don't even have the chance to spend it if I wanted to.

By making things automatic, I've essentially finagled my budget so that my savings goals are now a fixed cost. I treat this $200 like I would rent or utilities — I must set it aside every month — which keeps me from skimping on my savings goals.

David Bach, author of "The Automatic Millionaire," calls this "paying yourself first." When most people get their paychecks, they spend it on their necessities, fixed costs, and "wants," and then save whatever is left over. This is a faulty system, he notes, because oftentimes whatever money is left over is not enough.

And if you're wondering, it wasn't as hard as I imagined it would be to part with that $200. If you never see it, you learn to live without it pretty quickly.

The above originally appeared at Business Insider.