Saturday, December 31, 2016
Major European Countries Ranked By Standard of Living
Glass Door analysis via World Economic Forum.
Standard of living determination using account income, the cost of living, and purchasing power.
Standard of living determination using account income, the cost of living, and purchasing power.
13. Spain — The country languishes near the bottom of the overall ranking due to the average wage being near the lowest in Europe.
12. Belgium — Glassdoor says the average wage for people in Belgium is at €41,000 (£31,800, $46,380) but the large amount of their salary being spent on rent pulls it down the charts.
11. France — Annual wages in France are relatively modest and are ranked 6th from the bottom of the average nominal annual wages index provided by Glassdoor.
10. Britain — Glassdoor says the average annual wage in the UK is also at €41,000 (£31,800, $46,380) but it has some of the highest costs to live out of the entire index. London is the third city in the index for having the highest cost of living.
9. Austria — The country scores average for income and living costs but a lower proportion of rent is spent, when compared to Britain, so it just about pulls ahead of the UK.
8. Ireland — The country's wages are highly competitive compared to its European peers and Purchasing Power Parity (PPP) adjusted wages, are almost as high in Ireland as in Switzerland.
7. Norway — "Countries with a high cost of living in their major cities do not necessarily offer the highest standard of living, as can be seen in the case of Norway," says Glassdoor. Basically pay is high at €61,000 but a lot of it goes on rent and local goods.
6. Finland — The Finnish rank near the top because although their income is pretty high, the amount they spend on groceries, restaurants, transportation, utilities, and rent, still leaves them with decent disposable income.
5. Netherlands — Glassdoor says that the average European has lower living costs than those living in New York City.
4. Sweden — The cost of local goods and services (including food, transportation, and rent) is relatively modest when you compare it to take home pay.
3. Germany — Glassdoor says "interestingly, Germany comes in third, despite average nominal wages in the country being relatively low compared to the other countries in the study. This suggests that purchasing power for average earners is high in Germany."
2. Denmark — "What matters ultimately for standard of living is the gap between take-home pay and price levels," says Glassdoor. Despite Denmark being middle-tier for income, the cost of living is a lot lower than some of its European peers, meaning citizens are able to have more disposal income.
1. Switzerland — The Swiss earn a lot but can also afford a lot too. Glassdoor says "in Switzerland, the average city-based worker can afford to buy around twice as much as his or her equivalent in New York City."
Alan Blinder's Bad Article
By David Henderson
Princeton economist Alan Blinder, who has often written very good work--I'm a fan, with qualifications, of his book Hard Heads, Soft Hearts and he has two excellent entries, here and here, in The Concise Encyclopedia of Economics--has written a bad article. In it, he essentially takes off his economist hat and becomes a pundit--and not a good one.
Blinder is one of the most articulate and clear defenders of free trade. So when I saw that he had written an article critical of Trump, who is awful on trade, I hoped that he would do a good job of taking apart Trump's weak case. He doesn't. He does point out that Trump's trade policies would have bad effects, but he gives no reason for why. Instead, he spends most of the piece talking about how Trump's views are at odds with those of the American public. Even if that's true--and I'm not as convinced as Blinder is about that--so what? What if the American public is wrong on many of these issues? Blinder thinks they're wrong on trade. What else might they be wrong on?
But instead of doing any real economic analysis--and Blinder has shown in the past that he can do so beautifully in a short article--he writes as if he's not even an economist. Here's one of the items that stood out:
Read the rest here.
Friday, December 30, 2016
DESPERATION This is What Happens When Socialism, Runaway Inflation and Price Controls Meet
The Venezuelan situation: hunger, violence, a reversion to the primitive.
Parents are starting to give away their children.
Jay Nordlinger recently interviewed Hannah Dreier, the AP correspondent in Venezuela.
Dreier's report will turn your stomach.
I urge you to listen to this podcast to understand what a combination of socialism, hyperinflation and price controls really does. You have never heard a report like this before. Click here.
-RW
Parents are starting to give away their children.
Jay Nordlinger recently interviewed Hannah Dreier, the AP correspondent in Venezuela.
Dreier's report will turn your stomach.
I urge you to listen to this podcast to understand what a combination of socialism, hyperinflation and price controls really does. You have never heard a report like this before. Click here.
-RW
HORRIFIC Minimum Wages Will Increase in 20 States at the Start of the Year
Is your state about to increase unemployment at the start of the New Year by raising the minimum wage?
It's pretty basic economics, raise the price of something and you get less quantity demanded. Forcibly raise wages by law and you will get less quantity demanded for labor.
It's pretty basic economics, raise the price of something and you get less quantity demanded. Forcibly raise wages by law and you will get less quantity demanded for labor.
-RW
China's Yuan Suffers Biggest One-Year Loss Since 1994
The yuan , which has reached an 8-1/2 year low, was on course to shed nearly 7 percent against the dollar in 2016.
That's what Chine gets for all the money supply printing they have done.
-RW
(via Reuters)
Fantastical Delusions Suffered By Voters
A Don Boudreaux letter to the Washington Post:
Catherine Rampell argues that (as the title of her essay explains) “Americans – especially but not exclusively Trump voters – believe crazy, wrong things” (Dec. 29). Indeed we Americans do believe many crazy, wrong things. But non-Trump voters are just as likely as are Trump voters to believe such things.
Here are some fantastical delusions suffered by voters from all across the political spectrum:
– When Uncle Sam restricts foreign producers’ abilities to compete to serve ordinary American consumers he makes ordinary Americans richer rather than poorer;
– Americans are enriched the greater are the numbers of the fruits of our sweat, toil, and resources that we export to foreigners, and the fewer are the numbers of goods and services that we receive from foreigners in exchange;
– A growing U.S. trade deficit (which represents increasing foreign investment in America) not only is evidence of U.S. economic decline, but also hastens this decline;
– Immigrants who come to America to work – and, hence, who by working increase the total output of the American economy – weaken the American economy;
– When government imposes mandates such as minimum wages and paid family leave that artificially raise firms’ costs of employing workers, firms never attempt to reduce these costs by employing fewer workers who are covered by these mandates;
– We Americans are too irresponsible to save for our own retirements (that is, too many of us, being undisciplined, spend excessively now and, hence, save too little for the future) and, therefore, we must have sizeable chunks of our incomes taxed from us and transferred to the responsible and prudent stewardship of the U.S. Congress, which would never dream of spending these funds now.
– Ordinary Americans’ material standard of living is no higher today than it was 35 or 40 years ago.
Wacky notions all.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The above originally appeared at Cafe Hayek.
Catherine Rampell argues that (as the title of her essay explains) “Americans – especially but not exclusively Trump voters – believe crazy, wrong things” (Dec. 29). Indeed we Americans do believe many crazy, wrong things. But non-Trump voters are just as likely as are Trump voters to believe such things.
Here are some fantastical delusions suffered by voters from all across the political spectrum:
– When Uncle Sam restricts foreign producers’ abilities to compete to serve ordinary American consumers he makes ordinary Americans richer rather than poorer;
– Americans are enriched the greater are the numbers of the fruits of our sweat, toil, and resources that we export to foreigners, and the fewer are the numbers of goods and services that we receive from foreigners in exchange;
– A growing U.S. trade deficit (which represents increasing foreign investment in America) not only is evidence of U.S. economic decline, but also hastens this decline;
– Immigrants who come to America to work – and, hence, who by working increase the total output of the American economy – weaken the American economy;
– When government imposes mandates such as minimum wages and paid family leave that artificially raise firms’ costs of employing workers, firms never attempt to reduce these costs by employing fewer workers who are covered by these mandates;
– We Americans are too irresponsible to save for our own retirements (that is, too many of us, being undisciplined, spend excessively now and, hence, save too little for the future) and, therefore, we must have sizeable chunks of our incomes taxed from us and transferred to the responsible and prudent stewardship of the U.S. Congress, which would never dream of spending these funds now.
– Ordinary Americans’ material standard of living is no higher today than it was 35 or 40 years ago.
Wacky notions all.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The above originally appeared at Cafe Hayek.
Thursday, December 29, 2016
A Bad Year for Austrian-Lite Forecasters
The year 2016 was a bad year for Austrian-lite forecasters who expected the Federal Reserve to reverse the December 2015 Fed interest hike and possibly take rates negative.
The Fed did no such thing, in fact, they raised rates once more at the end of 2016.
Austrian-lites, who hold the odd view that the "Fed can run out of power" and that the business cycle is not a cycle but a permanent downtrend, also expected a new recession to hit, the stock market to crash and the Fed to launch a new round of quantitative easing.
None of these things occurred. There is no recession. The stock market is hitting record highs and quite possibly the next major step by the Fed in 2017 will be draining reserves rather than adding via a QE operation.
A Wall Street Journal headline today highlights the wrong direction thinking in 2016 that Austrian-lites were in the thick of:
Note well: I am not saying that there will never be recessions or that the Fed knows what it is doing, My point is that the economy is complex, that it is wrong to turn a hate the Fed mentality into thinking there can't be periods of upside activity in the stock market.
Fed money manipulations are a nightmare, partly because they cause erratic activity in the economy and stock market. But that erratic activity can include long periods of upside action in the stock market and generally tracked economic indicators.
I expect more erratic activity in 2017 with a combination of erratic Fed manipulations and erratic economic policies from the incoming Trump Administration.
There is no way to know long in advance how this will all play out, It depends too much on specific actions by the Fed and by the Trump Administration that will occur over the year.
Once such steps are made, it will be easier to determine trends, but it is a mistake to think that the business cycle is just a downtrend. The cycle has ups and downs.
-RW
The Fed did no such thing, in fact, they raised rates once more at the end of 2016.
Austrian-lites, who hold the odd view that the "Fed can run out of power" and that the business cycle is not a cycle but a permanent downtrend, also expected a new recession to hit, the stock market to crash and the Fed to launch a new round of quantitative easing.
None of these things occurred. There is no recession. The stock market is hitting record highs and quite possibly the next major step by the Fed in 2017 will be draining reserves rather than adding via a QE operation.
A Wall Street Journal headline today highlights the wrong direction thinking in 2016 that Austrian-lites were in the thick of:
Note well: I am not saying that there will never be recessions or that the Fed knows what it is doing, My point is that the economy is complex, that it is wrong to turn a hate the Fed mentality into thinking there can't be periods of upside activity in the stock market.
Fed money manipulations are a nightmare, partly because they cause erratic activity in the economy and stock market. But that erratic activity can include long periods of upside action in the stock market and generally tracked economic indicators.
I expect more erratic activity in 2017 with a combination of erratic Fed manipulations and erratic economic policies from the incoming Trump Administration.
There is no way to know long in advance how this will all play out, It depends too much on specific actions by the Fed and by the Trump Administration that will occur over the year.
Once such steps are made, it will be easier to determine trends, but it is a mistake to think that the business cycle is just a downtrend. The cycle has ups and downs.
-RW
What It Means If Trump Names China A Currency Manipulator
An explainer via The Washington Post:
President-elect Donald Trump has vowed to name China a currency manipulator on his first day in the White House....
If Treasury designates China a currency manipulator under a 2015 law, it is supposed to spend a year trying to resolve the problem through negotiations.
Should those talks fail, the U.S. can take a number of small steps in retaliation, including stopping the U.S. Overseas Private Investment Corp., a government development agency, from financing any programs in China. Trouble is, the United States already suspended OPIC operations in China years ago — to punish Beijing in the aftermath of the bloody 1989 crackdown in Tiananmen Square.
So naming China a currency manipulator is mostly “just a jaw-boning exercise,” said Amanda DeBusk, chair of the international trade department at the law firm of Hughes Hubbard & Reed and a former Commerce Department official. “There’s no immediate consequence.”...
Gary Hufbauer, an expert on trade law at the Peterson Institute for International Economics, notes that as president, Trump could nonetheless escalate any dispute over the currency on his own. Over the years, Congress has ceded the president broad authority to impose trade sanctions. Trump has threatened to slap a 45 percent tax, or tariff, on Chinese imports to punish it for unfair trade practices, including alleged currency manipulation
[David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and U.S. Treasury Department] said China likely would bring a case to the World Trade Organization “against any protectionist measures that are a violation of U.S. commitments to the WTO,” which oversees the rules of global commerce and rules on trade disputes....
Whatever the U.S. motive, China has a consistent record of retaliating against trade sanctions. When the Obama administration slapped tariffs on Chinese tire imports in 2009, for instance, China lashed back by imposing a tax on U.S. chicken parts...
China’s Global Times newspaper, published by the ruling Communist Party’s People’s Daily, has already speculated that “China will take a tit-for-tat approach” if Trump’s tariffs are enacted. The paper suggested that Beijing might limit sales of Apple iPhones and Boeing jetliners in China.
“The Chinese are predictable and reliable,”[ Amanda DeBusk, chair of the international trade department at the law firm of Hughes Hubbard & Reed and a former Commerce Department official. ] said. “If they get punched, they punch back.”
What You Need to Know About Trump and the Economy...
...was written nearly 15 years ago by one of my favorite Keynesian-lite/conservative economists, Pierre Rinfret (1924-2006):
-RW
AMATEURS IN OFFICE OR WHY EVERY PRESIDENT HAS TROUBLE KNOWING WHAT IS GOING ON IN THE AMERICAN ECONOMY!
December 8, 2002
I acted as an economic consultant to Jack Kennedy, Lyndon Baines Johnson, Richard Nixon, Gerald Ford (hardly long enough to count) and turned down Ronald Reagan.
Two years ago I warned a major Republican Senator I had been very close to for more than a decade of the economic problems ahead. I never heard from him. No acknowledgment, no nothing.
I warned a well know cabinet officer in this administration (he's still there) more than 15 months ago that we were in economic trouble. I asked him to take that to the President. I got the old brush off even though the Cabinet officer was a client of mine for many years! Thank you Pierre and that was it!
August 18, 2001
The Honorable
Washington, D.C., 20301-1000
Dear:
We are in a recession and it is going to get worse. The recovery will be weak
when it comes. It is a global recession.
The chances of a world depression are increasing.
If you would like to discuss it my addresses are above.
Regards as always,
Pierre A. Rinfret
"How severe? For a combination of reasons I think that the recession will not be so much severe as it will be prolonged. We will not go into as depression but we have a great deal of financial nonsense to get rid of and to clean up. That includes the instant 30 year old millionaires and ridiculous housing prices (my house, in nine years, has gone from a value of $2XXXXXX to a value of $6XXXXXX! Why "prolonged" because the world is in an "iffy" condition with Japan (the 2nd largest economy in the world) in bad shape along with most of Europe not doing great (not bad but not great either).
In other words George Bush has a full plate ahead of him."
It is almost impossible for any President (that I knew or had access to) to get the truth on what is happening to the American economy for a veritable complex of reasons.
I cannot put the reasons in any semblance of order so the list may be bulleted but it is not sequential in any way!
The reasons are interwoven and interrelated and as complex as an atom! As the scientists have learned, deep down it is chaos!
Politics is the reason the President is in office and politics is what he does, day in and day out.
The President himself is probably the most ignorant about economics of his entire entourage.
The advisors around him (excluding the so-called economists) are just as dumb as he is.
The so-called economists are, by and large, academics with no practical or ongoing experience of forecasting or analyzing. Arthur Burns was the most notable exception and he was a master, probably the best business cycle analyst in the world in his time. Alan Greenspan was a lousy private economist (you know what they say about high levels of incompetence) so he doesn't count.
In my experience the President hardly ever talked to the economists or read their reports.
Economic advisors are always good time Charlies and only tell the President the good news. Staff are always but always good time charlies!
They are terrified of being called extreme. In my experience they never dared to tell him the bad news! Halderman and Ehrlichman not only misinformed Richard Nixon about the state of the economy but they never allowed the bad news truth to get to him if they could stop it! Al Haig, as Chief of Staff for Gerald Ford, was a good time Charlie.
There is not one Bush cabinet officer capable of understanding and analyzing economic affairs.
A Wall street type is not an economist but something else on which I won't elaborate (you know what I think of the vast majority of them).
Presidents are bored to tears by economics. Richard Nixon used to say about Paul McCracken "MEDGO" which stood for "My eyes doth glaze over."McCracken was a master bore and a lousy economist.
No Secretary of the Treasury has had, in my lifetime, any detailed knowledge or experience as an economic analyst. John B. Connally was a politician, Bill Simon was Wall street, George Shultz was a labor economist, Bob Rubin was Wall street, Paul O'Neill was industry.
There is an incredible difference between academic economists and economic forecasters. The academics always but always end up in government as advisors to the President since they have the academic credentials! But they know nothing about forecasting!
No President ever knew that he didn't need academic analysts but economic forecasters! Nixon used me for forecasting and nothing else! Johnson and all his academics ignored all my forecasts (they couldn't stomach my dire forecasts about the economic impact of the Vietnam war).
The Kennedy academics (Walter Heller & Arthur Okun; the best of the bunch) used me mainly for forecasting since they didn't even try to do it!
I do not know of one administration in my entire lifetime (78 years) that foresaw a recession and certainly Hoover and his light weight academics did not foresee the depression.
And history records in spades that when a President gets into economic trouble the first thing he does is to chop heads! It is always but always someone else's fault! The President is never wrong, ask him!
BUT even if the President had been warned of economic troubles ahead he wouldn't have believed or accepted the analysis and forecasts! Boy do I know that!
Some quotes from Presidents I knew about the American economy about which I vouch 100%:
"I don't see why a tax cut and a defense spending increase will result in a larger Federal deficit."
"I can cut taxes, raise defense spending and lower the deficit."
"I don't need economic studies, my gut tells me."
"I don't care what economists think, I know better."
"What does the Secretary of Commerce do? He adds up the GNP or something like that; I think."
"What is annual rate and why do you multiply the monthly figure by 12?"
"Stop giving me that 'seasonally adjusted' bit. All you are doing is f------ up the numbers"
"I don't want to see those figures ever again."
"I never heard of 'lead indicators', what do they lead?"
"You mean we produce XXX billion a year! I find that hard to believe or accept."
"I thought the Japs were number one."
"Why is unemployment increasing and what does the GNP have to do with that?"
"He controls the money supply, doesn't he?"
"Tell him to get off his duff and push up the economy."
"I can't believe we have 13 percent inflation. My people say it is only 0.9%."
"What will be the unemployment rate in November, 1972?
It doesn't matter Mr. President.
What do you think Dr. Stein?
I haven't done the figures, Mr. President.
Pierre, what do you think?
Mr. President it is now about 6 percent, by November,1972 it will above 9 percent.Your re-election is in jeopardy.
CONCLUSION
No President knows beans about the American economic outlook and the people around him know less.
Talk big they do, understand they don't.
Now you know that another one of the reasons I constantly remind you to follow your own instincts is that you have your ear to the ground. You are out trying to make a living day in and day out. You can't afford to be wrong.
They are dedicated to listening to themselves.
The dummies believe their own propaganda.
Arthur Burns warned Richard Nixon and Eisenhower in 1960 (the Presidential election campaign of Nixon against Kennedy) that a recession was underway. Eisenhower ignored Burns, Nixon could do nothing, Burns was right and Kennedy won the election. Burns, as a result of that warning, was dearly loved, admired and rewarded by Richard Nixon.
Annotation of Saturday, December 14, 2002. (Annotated with a story I should have included that says it all!)Rinfret on Firing Line:
Ida and I had gone to the Westchester Country Club for the week-end. On Sunday morning at 08:00 the telephone rang and the club operator said to me "The White House is on the phone.". To this day I do not know how they found me since we had not told anyone where we were going to be over the week end except my two children who had not talked to the white House.
It was Gerald Ford on the phone. It was only a few days after his ascendency to the Presidency. He said that he was calling me because President Nixon had told him I would always give him the blunt truth about the economy. He wanted to personally invite me to be the keynote speaker at a planned and upcoming White House conference on the subject of how to solve inflation.
I told him I would be honored but the problem facing the administration was not inflation but an economic recession. I explained to him that the economy was softening rapidly and we faced the possibility of a recession at election time. He said he had not heard that from anyone.
HE THEN SAID, "NO MATTER, I STILL WANT YOU AS MY KEYNOTE SPEAKER AND IT DOESN'T MATTER TO ME WHETHER YOU TALK ABOUT INFLATION OR A RECESSION. After a few more words he said to me "It's close to 9 o'clock and I have to get to church." We then signed off .
The conversation lasted about 40 minutes FROM 08:00 TO 08:40 (I checked him in and I checked him out).
Late Monday afternoon following I got a call from someone named Ambassador Rush and he hemmed and hawed and then disinvited me to the meeting with the nonsensical remark that there were too many Eastern economists in attendance!
"Besides which no economist in the country thinks the economy is weakening and the White House economists certainly do not think so!"
I called Al Haig as Chief of Staff and complained that I had been personally invited by the President of the United States and how could Rush disinvite me stepping on the personal invitation and request of the President?
Haig said he would get back to me.
On the Thursday following Haig called me and said to forget the entire subject ("Pierre, leave it alone.") since Rush was in charge. I asked Haig how could a staff member contradict the invitation of the President. Of course I didn't get an answer.
I didn't go, the conference was a failure. The President was never told that the economy was weakening and his own staff both lied to him and did him a total disservice. They kept the truth about the American economy away from him. Ambassador Rush made sure that the President heard nothing about a recession.
"Now we are faced with the first postwar world recession.The odds of a recession in the United States are steadily shifting in favor of one. For the past ten months we have taken the position that the odds of a recession in the United States were 50/50. We would now increase those odds to 60/40 unless we are capable of massive efficiencies in the use of energy."Rinfret-Boston Associates, November 27, 1973; The Political Economy, page one.
As a result of my disinvitation I predicted to my clients that Ford would lose to Carter since he was a wimp, run by his staff who could contradict him and uninformed to boot! That is a lethal combination ripe for defeat.
Unfortunately or fortunately, depending on your point of view, I was right and a recession occcured in the middle of the short Ford years! Jimmy Carter made enormous capital out of it and, of course, won the election.
-RW
Where I Really Learned My Economics
By Shane Kastler
As a business major in college, I studied economics. But I didn’t really learn anything about economics. Like many of my classes, my econ classes felt like a waste of time. All I can remember was a dizzying array of mathematical formulas, chart, graphs, and equations. It seemed more like algebra, which I hated. I eventually came to the conclusion that economics was just “over my head.” Then I encountered Thomas Sowell and all of that changed.
Sowell’s book Basic Economics did as much as any book to teach me what economics was really all about. Things like “supply and demand” and “free market capitalism” made sense when Sowell explained it. Just as governmental intervention and manipulation seemed destructive, as Sowell explained it. In addition to Sowell I read Walter Williams and Ron Paul; which lead to Murray Rothbard, Ludwig von Mises, Henry Hazlitt, Robert Wenzel, and others. After spending a few years immersing myself in these writings, I not only understood economics better; I also understood why some people (the government for example) would rather most people not understand the subject. It’s much easier to manipulate the ignorant than it is the informed. My Bachelor’s degree kept me in the dark. But Sowell helped me kick down the door to knowledge. For this, I am eternally grateful to him.
Sowell has announced that he is retiring from his regular newspaper column. For decades he has written on political and cultural issues from the unique perspective of a black, libertarian-leaning, economist who backed up his strong opinions with pertinent facts and statistics. Some of the greatest YouTube videos available are old “Crossfire” clips of Sowell taking on uppity liberals and intellectually mopping the floor with their “group think” politically-correct ideas. Sowell was a genius in these discussions. Just as he was in later years as well. Whether it was him exposing Charlie Rose’s “diversity flaws” or being interviewed by Hoover Institute fellow Peter Robinson on the program “Uncommon Knowledge” – Sowell never disappointed.
Conservative columnist Michelle Malkin recently wrote a tribute to Sowell and spoke of how she studied his writings in college, even though her professors were not recommending him. I experienced the same thing. And Sowell’s knowledge spread far beyond economics. He wrote on race, education, global warming, war, and just about any other topic that was newsworthy. But rather than burying the reader with jargon, Sowell had the gift of common sense. He was a rare jewel in the cesspool of American intellectualism. Even when you disagreed with his conclusions, you came away understanding his perspective. Even if you thought he was wrong, you came away re-thinking your position. Few columnists have this ability. Sowell did.
If you truly desire to understand economics, read Sowell. Read Henry Hazlitt’s Economics in One Lesson. And read all you can from the aforementioned authors. Go to Mises.org, and the Economic Policy Journal (a website I’ve contributed several articles to), and the Ron Paul Institute for Peace and Prosperity. Through these writings you’ll learn what economics is truly all about. You’ll learn why the free market is the best decider of winners and losers. And you’ll learn why the government messes up everything they touch, economically speaking.
I’m sorry to hear that Sowell is retiring; but he has earned the right. He’s fought many a political battle and taught many of us in the process. At the age of 86, he’s decided to slow down and jump out of the fray. Best wishes to you Dr. Sowell. And thanks for all you did to teach economics to a man who wasn’t your student, but saw you as one of his greatest teachers.
Shane Kastler is Pastor at the Heritage Baptist Church, Lake Charles, LA and Co-Host; "Church & State" KELB Radio, 100.5 FM. He blogs at The Narrow Road.
The Policies of Individualism and of Capitalism Do Not Need Any Apologists or Propagandists
By Ludwig von Mises
The distinctive principle of Western social philosophy is individualism. It aims at the creation of a sphere in which the individual is free to think, to choose, and to act without being restrained by the interference of the social apparatus of coercion and oppression, the State. All the spiritual and material achievements of Western civilization were the result of the operation of this idea of liberty.
This doctrine and the policies of individualism and of capitalism, its application to economic matters, do not need any apologists or propagandists. The achievements speak for themselves.
The case for capitalism and private property rests, apart from other considerations, also upon the incomparable efficiency of its productive effort. It is this efficiency that makes it possible for capitalistic business to support a rapidly increasing population at a continually improving standard of living. The resulting progressive prosperity of the masses creates a social environment in which the exceptionally gifted individuals are free to give to their fellow-citizens all they are able to give. The social system of private property and limited government is the only system that tends to debarbarize all those who have the innate capacity to acquire personal culture.
It is a gratuitous pastime to belittle the material achievements of capitalism by observing that there are things that are more essential for mankind than bigger and speedier motorcars, and homes equipped with central heating, air conditioning, refrigerators, washing machines, and television sets. There certainly are such higher and nobler pursuits. But they are higher and nobler precisely because they cannot be aspired to by any external effort, but require the individual’s personal determination and exertion. Those levelling this reproach against capitalism display a rather crude and materialistic view in assuming that moral and spiritual culture could be built either by the government or by the organization of production activities. All that these external factors can achieve in this regard is to bring about an environment and a competence which offers the individuals the opportunity to work at their own personal perfection and edification. It is not the fault of capitalism that the masses prefer a boxing match to a performance of Sophocles’s Antigone, jazz music to Beethoven symphonies, and comics to poetry. But it is certain that while pre-capitalistic conditions as they still prevail in the much greater part of the world makes these good things accessible only to a small minority of people, capitalism gives to the many a favorable chance of striving after them.
From whatever angle one may look at capitalism there is no reason to lament the passing of the allegedly good old days. Still less is it justified to long for the totalitarian utopias, whether of the Nazi or of the Soviet type.
We are inaugurating tonight the ninth meeting of the Mont Pelerin Society. It is fitting to remember on this occasion that meetings of this kind in which opinions opposed to those of the majority of our contemporaries and to those of their governments are advanced and are possible only in the climate of liberty and freedom that is the most precious mark of Western civilization. Let us hope that this right to dissent will never disappear.
Originally published as Liberty and Property, Featured in The Mises Reader (via Mises.org).
Wednesday, December 28, 2016
Predictions for Trump’s First Year
By John Crudele
What’s going to happen in 2017?
I made a very bold call last year in predicting that Donald Trump would win the presidency — or, more precisely, that Hillary Clinton would lose. I’m not feeling quite that daring or lucky when it comes to my outlook for the coming year.
But I’ll still dip my little toe into the shallow end of the forecasting pool. So, here goes nothin’.
I think President-elect Trump will start off smoothly in his relations with other Republicans — pomp and ceremony and all that. But unless Trump calms down both his rhetoric and his policies, there will be friction within just a few months.
Trump’s comments on nuclear weapons proliferation will be only one major issue of contention. Even if other politicians agree with his view that the US can out-nuke anyone else in the world, that won’t be an issue Trump is likely to get much public backing on.
That’s not really a germane topic for this column. But there’s another bombshell issue — that is, the economy.
Trump has called for a massive spending program — mainly for infrastructure improvements throughout the US — that he says will get the economy moving again.
Great idea, if the new president has found a magic way to pay for all this spending that nobody else has thought of.
If he hasn’t, then any big spending bills are likely to be blocked in Congress. Republicans like House Speaker Paul Ryan simply aren’t going to bend on this issue and Trump is going to come up with an empty wallet for his big plans.
Still, the very fact that Trump is talking about adding to the US’ already massive $20 trillion debt load is likely to eventually spook the financial markets and cause interest rates to continue rising.
Just when will that happen? Your guess is as good as mine.
Read the rest here.
What’s going to happen in 2017?
I made a very bold call last year in predicting that Donald Trump would win the presidency — or, more precisely, that Hillary Clinton would lose. I’m not feeling quite that daring or lucky when it comes to my outlook for the coming year.
But I’ll still dip my little toe into the shallow end of the forecasting pool. So, here goes nothin’.
I think President-elect Trump will start off smoothly in his relations with other Republicans — pomp and ceremony and all that. But unless Trump calms down both his rhetoric and his policies, there will be friction within just a few months.
Trump’s comments on nuclear weapons proliferation will be only one major issue of contention. Even if other politicians agree with his view that the US can out-nuke anyone else in the world, that won’t be an issue Trump is likely to get much public backing on.
That’s not really a germane topic for this column. But there’s another bombshell issue — that is, the economy.
Trump has called for a massive spending program — mainly for infrastructure improvements throughout the US — that he says will get the economy moving again.
Great idea, if the new president has found a magic way to pay for all this spending that nobody else has thought of.
If he hasn’t, then any big spending bills are likely to be blocked in Congress. Republicans like House Speaker Paul Ryan simply aren’t going to bend on this issue and Trump is going to come up with an empty wallet for his big plans.
Still, the very fact that Trump is talking about adding to the US’ already massive $20 trillion debt load is likely to eventually spook the financial markets and cause interest rates to continue rising.
Just when will that happen? Your guess is as good as mine.
Read the rest here.
Carlyle Group Co-Founder Meeting With Trump
The Least Affordable Housing in the U.S.
The least affordable housing in the U.S. falls into two categories: places that you would expect (San Francisco, New York City) and counties that may be off your radar, such as a few in Massachusetts, Washington, or Wyoming.
The Bay Area, not surprisingly, has some of the least affordable housing in the country – both in absolute terms, and in terms relative to income. There is no shortage of anecdotes for the madness occurring in San Francisco and the surrounding area, and the data reflects that.
In San Francisco proper, the median home value is $800,000 with a median income of $81,000, giving a price-to-income ratio of 9.8. Meanwhile, in Silicon Valley, housing is nearly as pricey, but many people are able to make up for it with higher incomes: San Mateo County has a ratio of 8.3, and Santa Clara County has a ratio of 7.3.
New York City, with its five boroughs, is also interesting to look at. Here they are ranked by price-to-income:
Kings County (Brooklyn): 11.8 (House value: $570,000, Income: $48,000)
New York County (Manhattan): 11.7 (House value: $849,000, Income: $73,000)
Bronx County (The Bronx): 10.6 (House value: $363,000, Income: $34,000)
Queens County (Queens): 7.8 (House value: $450,000, Income: $58,000)
Richmond County (Staten Island): 6.0 (House value: $440,000, Income: $73,000)
Brooklyn is the most expensive borough based on price-to-income, just nudging out Manhattan. The Bronx also has some of the least affordable housing in the country, mainly due to lower income levels than the rest of the city.
PRICEY ENCLAVES
As mentioned before, states like Wyoming, Massachusetts, Colorado, and Washington also have counties that are quite expensive in terms of price-to-income.
Teton County, Wyoming: 9.1 (House value: $689,000, Income: $75,000)
Pitkin County, Colorado: 8.7 (House value: $621,000, Income: $71,000)
San Miguel County, Colorado: 9.1 (House value: $513,000, Income: $56,000)
Nantucket County, Massachusetts: 10.7 (House value: $903,000, Income: $84,000)
Dukes County, Massachusetts: 10.3 (House value: $661,000, Income: $64,000)
San Juan County, Washington: 8.3 (House value: $466,000, Income: $56,000)
Many of these, such as Teton County or Pitkin County, are located in the mountains.
Others, like the San Juans or Nantucket are made up of beautiful islands that are relatively close to major cities – in this case, Seattle and Providence/Boston respectively.
(via The Visual Capitalist)
The Bay Area, not surprisingly, has some of the least affordable housing in the country – both in absolute terms, and in terms relative to income. There is no shortage of anecdotes for the madness occurring in San Francisco and the surrounding area, and the data reflects that.
In San Francisco proper, the median home value is $800,000 with a median income of $81,000, giving a price-to-income ratio of 9.8. Meanwhile, in Silicon Valley, housing is nearly as pricey, but many people are able to make up for it with higher incomes: San Mateo County has a ratio of 8.3, and Santa Clara County has a ratio of 7.3.
New York City, with its five boroughs, is also interesting to look at. Here they are ranked by price-to-income:
Kings County (Brooklyn): 11.8 (House value: $570,000, Income: $48,000)
New York County (Manhattan): 11.7 (House value: $849,000, Income: $73,000)
Bronx County (The Bronx): 10.6 (House value: $363,000, Income: $34,000)
Queens County (Queens): 7.8 (House value: $450,000, Income: $58,000)
Richmond County (Staten Island): 6.0 (House value: $440,000, Income: $73,000)
Brooklyn is the most expensive borough based on price-to-income, just nudging out Manhattan. The Bronx also has some of the least affordable housing in the country, mainly due to lower income levels than the rest of the city.
PRICEY ENCLAVES
As mentioned before, states like Wyoming, Massachusetts, Colorado, and Washington also have counties that are quite expensive in terms of price-to-income.
Teton County, Wyoming: 9.1 (House value: $689,000, Income: $75,000)
Pitkin County, Colorado: 8.7 (House value: $621,000, Income: $71,000)
San Miguel County, Colorado: 9.1 (House value: $513,000, Income: $56,000)
Nantucket County, Massachusetts: 10.7 (House value: $903,000, Income: $84,000)
Dukes County, Massachusetts: 10.3 (House value: $661,000, Income: $64,000)
San Juan County, Washington: 8.3 (House value: $466,000, Income: $56,000)
Many of these, such as Teton County or Pitkin County, are located in the mountains.
Others, like the San Juans or Nantucket are made up of beautiful islands that are relatively close to major cities – in this case, Seattle and Providence/Boston respectively.
(via The Visual Capitalist)
Trump vs. Weisenthal on Current Consumer Confidence Levels
The U.S. Consumer Confidence Index for December surged nearly four points to 113.7, THE HIGHEST LEVEL IN MORE THAN 15 YEARS! Thanks Donald!— Donald J. Trump (@realDonaldTrump) December 28, 2016
vs.
Here's your chart of the day: Consumer Confidence for young people dives, while Consumer Confidence for old people surges pic.twitter.com/arONYqyOY1— Joe Weisenthal (@TheStalwart) December 27, 2016
The Insane Anti-Trade Song Written by Trump's Trade Adviser
The music and lyrics for the below anti-trade song were written by Donald Trump's new trade adviser, Peter Navarro.
It was written for Navarro's terrible film.
Navarro's trade theory, which ignores the fundamentals of comparative advantage and basic supply and demand theory, is actually worse than this song and this song is very bad.
THE LYRICS
Look around and tell me what you see
Everyday more people in the street
Said I used to work in a factory
Right now I don’t work for anything
It's not me but my family I wish to feed
Not much we got simple needs
Too bad they sent our jobs away
As the CEOs get richer
And our jobs all move offshore.
FIRST CHORUS
We go to the store and spend our money
Send all our dollars overseas
This ain’t the land of milk and honey
This is the land of trade and greed
My brother, he got his college degree
He dreamed of running a factory
Now he’s back home, living with Mom again
Because there’s no bright future for a workingman like him. SECOND CHORUS
We go to the store and spend our money
Send all our dollars overseas
And this ain’t the land of milk and honey
This is the land of trade and greed
We go to the store and spend our money
Send all our dollars overseas
This was the land of milk and honey
And now its the land of trade and greed
Music and Lyrics by: Peter Navarro
Produced by: Ken Calliat
All Rights Reserved: DBC Productions
It was written for Navarro's terrible film.
Navarro's trade theory, which ignores the fundamentals of comparative advantage and basic supply and demand theory, is actually worse than this song and this song is very bad.
THE LYRICS
Look around and tell me what you see
Everyday more people in the street
Said I used to work in a factory
Right now I don’t work for anything
It's not me but my family I wish to feed
Not much we got simple needs
Too bad they sent our jobs away
As the CEOs get richer
And our jobs all move offshore.
FIRST CHORUS
We go to the store and spend our money
Send all our dollars overseas
This ain’t the land of milk and honey
This is the land of trade and greed
My brother, he got his college degree
He dreamed of running a factory
Now he’s back home, living with Mom again
Because there’s no bright future for a workingman like him. SECOND CHORUS
We go to the store and spend our money
Send all our dollars overseas
And this ain’t the land of milk and honey
This is the land of trade and greed
We go to the store and spend our money
Send all our dollars overseas
This was the land of milk and honey
And now its the land of trade and greed
Music and Lyrics by: Peter Navarro
Produced by: Ken Calliat
All Rights Reserved: DBC Productions
Trump's Trade Adviser Is a Terrible Filmmaker
Scott Meslow reports:
So who is [Peter] Navarro,[Trump's trade advisor], and what can we actually expect from him? The simplest, most digestible, and most revealing answer comes in an unlikely form: a low-budget and nominally nonpartisan documentary called Death By China, written, directed and produced by Navarro himself. As a film critic, I found it an appalling cinematic experience. But it’s a brutally effective, if unsubtle, 79 minutes of propaganda -- which might explain why Trump liked it so much.
Navarro adapted Death By China from his 2011 book of the same name, which argues that China — through a combination of unfair trade practices and low-quality, globally exported products — is becoming "the planet’s most efficient assassin." The film was technically released in theaters (three, to be exact), and grossed a little under $40,000. From there, Navarro took it on the festival circuit, holding screenings and Q&As in cities like Chicago, Cincinnati and Birmingham. The critics who bothered to review it were largely underwhelmed: The Hollywood Reporter deemed it "astonishingly-heavy handed," the Village Voice criticized the "hysterical rhetoric," and The A.V. Club called it "the documentary equivalent of a raving street-corner derelict."
On its official YouTube channel, Death By China is described as "one of the most popular documentaries on Netflix" for the past three years (though it’s unclear how that conclusion was reached, since Netflix doesn’t release its viewership figures). The documentary isn’t available on Netflix anymore, but back in April, the entire film was uploaded to YouTube, alongside a plea to "please share this film far and wide."
Within its first five minutes, Death By China lays out the stakes: 57,000 American factories closed, 25 million Americans can’t find "a decent job," and the United States owes $3 trillion to China. The roots of our alleged economic woes, Navarro argues, can be traced back to 2001, when the United States enthusiastically endorsed Beijing’s entry into the World Trade Organization.
Navarro attempts to prove this point with an array of cherry-picked talking heads, a series of unenlightening man-on-the-street interviews, and — most strikingly — some computer-animated sequences designed to dramatize Navarro’s argument. In one, a knife bearing the label "Made in China" is plunged into the center of the United States, covering the lower half of the country in a sea of blood. In another, missiles of "currency manipulation" and "illegal export subsidies" are fired from cannons and dropped from planes, leaving American cities in rubble. Navarro structures his film around China’s "Weapons of Job Destruction." Everything is cast in the violent, overheated rhetoric of a war with China — a war Navarro argues we’re losing.
These are all standard tactics in the agitprop documentary playbook: Present one side of a political argument with a dizzying array of semi-credentialed talking heads, leaving dissenting voices on the floor of the editing bay. When your logic is lacking, appeal to emotion instead, depicting derelict factories or unhappy-looking American workers
Tuesday, December 27, 2016
The Real Story Behind Why Marx Never Finished the Final Volumes of His Treatise
By Carmen Elena Dorobăț
Every once in a while, even The Economist gets it right. In a review of an intellectual biography of Marx (Karl Marx: Greatness and Illusion), published this past fall, they argue that “the myth is more impressive than the reality”. Echoing, in fact, several arguments from the book—written, surprisingly enough, by a scholar with Marxist leanings—, they point out how out of step Marx was with the theoretical developments of 19th century economics, and how dense and often nonsensical his writings were.
As refreshing as it may be, this perspective on Marx is hardly a new one. We know that throughout his work, Ludwig von Mises has exploded many of the fallacies of the Marxist school of thought, particularly those concerning the workings of a socialist system and the idea of class struggle. But Mises had, in several of his publications, also criticized the myth of Marx, pointing out inconsistencies and errors in his research, as well as criticizing his writing style.
In Human Action (p. 78), Mises explained that Marx’s unfinished work on Das Kapital was not due to illness, but due to the inability of its author to solve the problems of his theoretical system:
“[Marx’s] own economic ideas are hardly more than a garbled version of Ricardianism. When Jevons and Menger inaugurated a new era of economic thought, his career as an author of economic writings had already come to an end; the first volume of Das Kapital had already been published several years previously. Marx's only reaction to the marginal theory of value was that he postponed the publication of the later volumes of his main treatise.”
In Socialism, Mises launched a more extensive critique of the scholar Karl Marx:
“Ecstatic enthusiasts see in Marx one of the heroic figures of world history, and class him among the great economists and sociologists, even among the most eminent philosophers. The unbiased observer looks on Karl Marx's work with different eyes. […] the later volumes of Das Kapital, from the day they were published, were quite out of touch with modern science. […] As a scientific writer Marx was dry, pedantic, and heavy. The gift of expressing himself intelligibly had been denied him. In his political writings alone does he produce powerful effects, and these only by means of dazzling antitheses and of phrases which are easy to remember, sentences which by play of words hide their own vacuity.”
That Mises was the better writer of the two is hardly a question for debate. But perhaps the more prominent difference between the two authors is in their (economic) world view: where Marx envisioned classes of people locked in a struggle, Mises described comparative advantage. What Marx viewed as exploitation, Mises saw a flourishing network of mutually beneficial exchanges and ever more productive capital accumulation. Where Marx saw conflict, Mises saw cooperation. Again in Socialism, Mises wrote:
“Marx preaches a doctrine of salvation which rationalizes [people’s] resentment and transfigures their envy and desire for revenge into a mission ordained by world history. He inspires them with consciousness of their mission by greeting them as those who carry in themselves the future of the human race. […] it always pays to rouse what is evil in the human heart. Yet Marx has done more: he has decked out the resentment of the common man with the nimbus of science, and has thus made it attractive to those who live on a higher intellectual and ethical plane. Every socialist movement has borrowed in this respect from Marx, adapting the doctrine slightly for its special needs.”
Even if it will take a long time to dismantle the Marxist myth, I’d like to think that it will be Mises’s view of the world that will prevail.
The above originally appeared at Mises.org
Thomas Sowell Ends His Column
The free market economist Thomas Sowell has announced, appropriately enough in his column, that he will no longer be producing his syndicated pieces.
He writes in his column today:
Even the best things come to an end. After enjoying a quarter of a century of writing this column for Creators Syndicate, I have decided to stop. Age 86 is well past the usual retirement age, so the question is not why I am quitting, but why I kept at it so long.-RW
It was very fulfilling to be able to share my thoughts on the events unfolding around us, and to receive feedback from readers across the country — even if it was impossible to answer them all.
Being old-fashioned, I liked to know what the facts were before writing. That required not only a lot of research, it also required keeping up with what was being said in the media.
During a stay in Yosemite National Park last May, taking photos with a couple of my buddies, there were four consecutive days without seeing a newspaper or a television news program — and it felt wonderful. With the political news being so awful this year, it felt especially wonderful.
This made me decide to spend less time following politics and more time on my photography, adding more pictures to my website (www.tsowell.com).
But Will He Take Responsibility for When the Trade War Crash Occurs?
Filed away for future reference:
The world was gloomy before I won - there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!— Donald J. Trump (@realDonaldTrump) December 26, 2016
Monday, December 26, 2016
Davos Staff May Sleep In Shipping Containers As Billionaires Swarm
The annual World Economic Forum junket has become so popular for the world’s elite that the Swiss ski resort is running out of accommodations, reports The Daily Mail.
The 2017 event sold out within days, and for 2018 it is thought there just won’t be enough hotel rooms to go round.
Around 11,000 visitors are expected in 2017, including 2,500 official guests along with their retinues, the media and other hangers-on.
The Forum was unable to find rooms for its 500 employees by the end of November, and although it has now secured beds for all of them, it is looking for another solution for future years.
As a result, the organizers are considering desperate measures by putting people up in shipping containers in car parks in 2018.
Spokesman Yann Zopf said: ‘We are facing more and more people every year.
‘We’ll manage for 2017, but we need to think longer term.’
(via Zero Hedge)
The 2017 event sold out within days, and for 2018 it is thought there just won’t be enough hotel rooms to go round.
Around 11,000 visitors are expected in 2017, including 2,500 official guests along with their retinues, the media and other hangers-on.
The Forum was unable to find rooms for its 500 employees by the end of November, and although it has now secured beds for all of them, it is looking for another solution for future years.
As a result, the organizers are considering desperate measures by putting people up in shipping containers in car parks in 2018.
Spokesman Yann Zopf said: ‘We are facing more and more people every year.
‘We’ll manage for 2017, but we need to think longer term.’
(via Zero Hedge)
What Will Happen When the Trump Tariffs Come?
Paul Krugman justifiably warns:
There will be retaliation, big time. When it comes to trade, America is not that much of a superpower — China is also a huge player, and the European Union is bigger still. They will respond in kind, targeting vulnerable U.S. sectors like aircraft and agriculture..
And retaliation isn’t the whole story; there’s also emulation. Once America decides that the rules don’t apply, world trade will become a free-for-all.
Will this cause a global recession? Probably not — those risks are, I think, exaggerated. No, protectionism didn’t cause the Great Depression.
What the coming trade war will do, however, is cause a lot of disruption. Today’s world economy is built around “value chains” that spread across borders: your car or your smartphone contain components manufactured in many countries, then assembled or modified in many more. A trade war would force a drastic shortening of those chains, and quite a few U.S. manufacturing operations would end up being big losers, just as happened when global trade surged in the past.
An old joke tells of a motorist who runs over a pedestrian, then tries to fix the damage by backing up — and runs over the victim a second time. Well, the effects of the Trumpist trade war on U.S. workers will be a lot like that.
Given these prospects, you might think that someone will persuade the incoming administration to rethink its commercial belligerence. That is, you might think that if you have paid no attention to the record and character of the protectionist in chief. Someone who won’t take briefings on national security because he’s “like, a smart person” and doesn’t need them isn’t likely to sit still for lessons on international economics.
No, the best bet is that the trade war is coming. Buckle your seatbelts
Behind the Crazed Demonetization in India and What Is Next
This is an object lesson on why revolution, in this case economic revolution, not grounded on principles of liberty can be worse than the pre-revolutionary period.
The Financial Times reports:
Under these conditions expect a larger black market to emerge with its own new medium of exchange. Black markets are always less efficient than free markets. It would be a major decline in the standard of line for those in India.
Notes FT:
The Financial Times reports:
[W]ith India now reeling from the acute cash crunch triggered by the decision to cancel its old Rs500 and Rs1,000 notes, many economists and observers are debating what other unorthodox economic policy experiments may lie ahead.
Mr Modi is expected to intensify his campaign against black money, with his next target likely to be property purchased with illicit wealth and not registered in the true owners’ names. Speculation is rife that he is also seriously considering other dramatic and unusual reform measures — including possibly abolishing income tax and replacing it with a banking transaction tax....
Mr Modi has said nothing publicly about the origin of the idea of demonetisation — a measure virtually without parallel in contemporary economic history — but few believe New Delhi’s official narrative that it was simply acting on the central bank’s advice.
Instead, the measure appears to be the brainchild of a little known Pune-based organisation, called Arthakranti, which loosely translates as economic revolution.
This group is seeking radical changes to India’s revenue-collecting mechanism...
Arthakranti advocates restricting cash use and replacing all of India’s taxes with a single, banking transaction tax of 2 per cent on every transaction through the financial system.
The recent removal of vast amounts of cash from the economy could, some analysts think, be the start of a sustained effort to realise Arthakranti’s vision. “It seems to appeal to a lot of very radical thinkers,” says Saurabh Mukherjea, chief executive of Ambit Capital. “By reducing cash, you force everybody into the banking system, and every transaction gets taxed. If you don’t spend, and don’t transact, you don’t pay tax.”...the idea has already won influential supporters from the politically-powerful yoga guru Baba Ramdev to the former editor of Forbes India, R. Jaganathan.
Under these conditions expect a larger black market to emerge with its own new medium of exchange. Black markets are always less efficient than free markets. It would be a major decline in the standard of line for those in India.
Notes FT:
Brazil imposed a banking transaction tax for a decade from the late 1990s. Yet later assessments concluded the taxes tended to drive transactions from the banking system, reducing efficiency and leading to higher interest rates.-RW
The Hospitality of a Multi-Billionaire Oil Sheikh
Sheikh Hamad bin Hamdan al Nahyan is a member of the ruling royal family of the United Arab Emirates.
Based in Abu Dhabi, he is affectionately known as The Rainbow Sheikh because of his passion for the colors of the rainbow.
His family has ruled Abu Dhabi for more than three centuries now. He is said to be worth over $20 billion.
Jeremy Clarkson, co-host of Amazon’s ‘The Grand Tour,’ had the opportunity to meet him and he considers it the greatest hospitality he has ever experienced.
Via The Wall Street Journal:
Based in Abu Dhabi, he is affectionately known as The Rainbow Sheikh because of his passion for the colors of the rainbow.
His family has ruled Abu Dhabi for more than three centuries now. He is said to be worth over $20 billion.
Jeremy Clarkson, co-host of Amazon’s ‘The Grand Tour,’ had the opportunity to meet him and he considers it the greatest hospitality he has ever experienced.
Via The Wall Street Journal:
I took my children to meet [The Rainbow Sheik] for lunch. He had laid out every conceivable foodstuff—from Kentucky Fried Chicken and McDonald’s to an entire goat, with everything in between. “I did not know what your children would want” he said. And then, after lunch, he said: “Would you like to go skiing? We’ll go skiing on the sand dunes.” He said to my daughter, “Do you drive?” and she’s only about 12 years old. And I was drawing breath to say, “No, she can’t” but before I could, she said, “Yes, I can.” And he gave her a pink Jeep Wrangler so that she could go skiing in the desert. Now, that’s hospitality.-RW
"No Government Vouchers for the Ron Paul Curriculum"
Gary North writes:
If you take the government's nickel, you also take its noose.and
The voucher system necessarily requires the licensing of schools.... Vouchers will create a second, pseudo-free market school system, using "free" in both senses: independent and without cost to the users. The state-operated schools will then compete with the state-licensed schools. Almost no third alternative will be economically possible...
The Ron Paul Curriculum costs $250 a year per family, plus $50 per course. "No vouchers accepted." The RPC will not accept vouchers as currency because it will not submit to the supervision of any civil government.
Parents do not need vouchers. They need liberty. Government funding for education in any form is a denial of liberty.
I hope that Mrs. DeVos is blocked [as Secretary of Education] if she proposes vouchers in any form.Read North's full essay here.
Sunday, December 25, 2016
They Probably Printed Even More Money to Pay For This Graphic
— San Francisco Fed (@sffed) December 25, 2016
The Coming Trump Trade Shock
Paul Krugman puts a lump of coal in our Christmas stockings via an analysis that I believe is all too correct:
In Friday's EPJ Daily Alert, I actually put out some very aggressive recommendations to position investments defensively on the possibility that Trump is going to launch a trade war right out of the gate when he takes over as President.
There was a specific development, identified in the ALERT, that prompted me to act so quickly.
The Fed is not likely to end the boom in the stock market anytime soon, but The Donald could with a trade war.
-RW
Yes, it’s Christmas Day. Bah Humbug. Also, the family won’t get here for a few hours, and I wanted to put something out as background for tomorrow’s column.
So, I’m thinking about the Trump trade war, which is looking increasingly likely — especially because U.S. trade law gives the White House remarkable leeway to go protectionist without legislative action. That wasn’t the law’s intent; but do you think this guy will care?
What happens if the protectionist-in-chief goes ahead and does it, as I suspect he will?
Claims that there would be huge net job losses are extremely dubious. But what would happen would be a global trade war, which would disrupt the existing economic structure, which is built on elaborate international supply chains.
In the long run, a new structure with shorter chains would be built. But in the meantime, some industries, some factories, would end up becoming sudden losers — in the US as well as in developing countries...
That is, I’d argue, the way to think about the coming Trump shock. You can’t really turn the clock back a quarter-century; but even trying can produce exactly the kind of rapid, disruptive shifts in production that fed blue-collar anger going into this election.
In Friday's EPJ Daily Alert, I actually put out some very aggressive recommendations to position investments defensively on the possibility that Trump is going to launch a trade war right out of the gate when he takes over as President.
There was a specific development, identified in the ALERT, that prompted me to act so quickly.
The Fed is not likely to end the boom in the stock market anytime soon, but The Donald could with a trade war.
-RW
The Sponsors of the Coming Corporate Elitist Meeting in Switzerland
In 2017, the World Economic Forum will hold its annual Davos-Klosters, Switzerland meeting between January 17th and the 20th.
It is a gathering of corporate elitists. According to the Forum, below is the list of sponsoring partners of the event. I have highlighted what can be considered new economy partners that join the likes of The Rockefeller Foundation, Goldman Sachs and Saudi Aramco at the meeting.
ABB
Accenture
Adecco Group
African Rainbow Minerals
Agility
Arconic
Alibaba Group
Allianz
ArcelorMittal
A.T. Kearney
AUDI AG
Bahrain Economic Development Board
Bain & Company
Banco Bradesco
Bank of America
Barclays
Basic Element
Bill & Melinda Gates Foundation
BlackRock
BP
Bridgewater Associates
BT
Burda Media
CA Technologies
Centene Corporation
Centrica
Chevron
Cisco
Citi
Clayton, Dubilier & Rice
Credit Suisse
Dalian Wanda Group
Dangote Group
Deloitte
Dentsu Group
Deutsche Bank
Deutsche Post DHL
Dogus Group
Ernst & Young
Facebook
Flex
Fluor Corporation
GE
General Motors
Google
Hanwha Energy Corporation
HCL Technologies
Heidrick & Struggles
Hewlett Packard Enterprise
Hitachi
HSBC
Huawei Technologies
IBM Corporation
IHS Markit
Infosys
Itaú Unibanco
JLL
Johnson Controls
JPMorgan Chase & Co.
VTB Bank
Koç Holding
KPMG
Kudelski Group
Lazard
LIXIL Group
LUKOIL
ManpowerGroup
Marsh & McLennan Companies
Mastercard
McKinsey & Company
Microsoft Corporation
Mitsubishi Corporation
Mitsubishi Heavy Industries
Morgan Stanley
MSD
Nestlé
Novartis
Old Mutual Group
Omnicom Group
PepsiCo
Pfizer
PwC
Procter & Gamble
Publicis Groupe
Qualcomm
Reliance Industries
Renault-Nissan Alliance
Royal DSM
Royal Philips
Salesforce
Saudi Aramco
Saudi Basic Industries Corporation (SABIC)
Sberbank
Schneider Electric
Siemens
SK Group
SOCAR
Standard Chartered Bank
Swiss Re
Takeda Pharmaceutical
Tata Consultancy Services
Tech Mahindra
Ericsson
The Abraaj Group
Boston Consulting Group
The Coca-Cola Company
The Dow Chemical Company
Goldman Sachs
The Rockefeller Foundation
Wellcome Trust
Thomson Reuters
UBS
Unilever
UPS
USM Holdings
VimpelCom
Visa
Volkswagen
Wipro
WPP
Yahoo
Zurich Insurance Group
It is a gathering of corporate elitists. According to the Forum, below is the list of sponsoring partners of the event. I have highlighted what can be considered new economy partners that join the likes of The Rockefeller Foundation, Goldman Sachs and Saudi Aramco at the meeting.
ABB
Accenture
Adecco Group
African Rainbow Minerals
Agility
Arconic
Alibaba Group
Allianz
ArcelorMittal
A.T. Kearney
AUDI AG
Bahrain Economic Development Board
Bain & Company
Banco Bradesco
Bank of America
Barclays
Basic Element
Bill & Melinda Gates Foundation
BlackRock
BP
Bridgewater Associates
BT
Burda Media
CA Technologies
Centene Corporation
Centrica
Chevron
Cisco
Citi
Clayton, Dubilier & Rice
Credit Suisse
Dalian Wanda Group
Dangote Group
Deloitte
Dentsu Group
Deutsche Bank
Deutsche Post DHL
Dogus Group
Ernst & Young
Flex
Fluor Corporation
GE
General Motors
Hanwha Energy Corporation
HCL Technologies
Heidrick & Struggles
Hewlett Packard Enterprise
Hitachi
HSBC
Huawei Technologies
IBM Corporation
IHS Markit
Infosys
Itaú Unibanco
JLL
Johnson Controls
JPMorgan Chase & Co.
VTB Bank
Koç Holding
KPMG
Kudelski Group
Lazard
LIXIL Group
LUKOIL
ManpowerGroup
Marsh & McLennan Companies
Mastercard
McKinsey & Company
Microsoft Corporation
Mitsubishi Corporation
Mitsubishi Heavy Industries
Morgan Stanley
MSD
Nestlé
Novartis
Old Mutual Group
Omnicom Group
PepsiCo
Pfizer
PwC
Procter & Gamble
Publicis Groupe
Qualcomm
Reliance Industries
Renault-Nissan Alliance
Royal DSM
Royal Philips
Salesforce
Saudi Aramco
Saudi Basic Industries Corporation (SABIC)
Sberbank
Schneider Electric
Siemens
SK Group
SOCAR
Standard Chartered Bank
Swiss Re
Takeda Pharmaceutical
Tata Consultancy Services
Tech Mahindra
Ericsson
The Abraaj Group
Boston Consulting Group
The Coca-Cola Company
The Dow Chemical Company
Goldman Sachs
The Rockefeller Foundation
Wellcome Trust
Thomson Reuters
UBS
Unilever
UPS
USM Holdings
VimpelCom
Visa
Volkswagen
Wipro
WPP
Yahoo
Zurich Insurance Group
Saturday, December 24, 2016
A Krugman Point on Trump's Coming Trade War
An interesting observation.
(Please note, these are not absolute dollar surpluses but net import/export balance percentages as a part of the GDPs of the respective countries.)
The first attack on trade will probably be aimed at specific countries, e.g. China, but more broad-based tariffs are likely to follow.
-RW
Something to remember when Trump starts his trade war pic.twitter.com/z4MmZghC3Q— Paul Krugman (@paulkrugman) December 24, 2016
(Please note, these are not absolute dollar surpluses but net import/export balance percentages as a part of the GDPs of the respective countries.)
The first attack on trade will probably be aimed at specific countries, e.g. China, but more broad-based tariffs are likely to follow.
-RW
Something to Think About Going Into the New Year: Trump Could Get Seven Appointments To The Fed
There are two vacant seats Donald Trump can fill as soon as he takes office and gets the Senate to confirm them, but that is only for starters.
There could be four or five more in the next two years.
Fed Chair Janet Yellen four-year ends on February 3, 2018. The same date is when Stanley Fischer's vice-chairmanship ends. It is unlikely, but technically, Yellen can stay on the Board as non-chair until January 31, 2024, after her chairmanship ends.
The same is true for Vice Chair Stanley Fischer. His board term technically lasts after his vice-chairmanship until January 31, 2020. It is unlikley he will stay. So 2018 is the big year for the Fed board with both Yellen and Fischer leaving leadership positions that Trump will have to fill.
Beyond that the other three serving Board of Governors members are Daniel Tarullo, whose term does not end until January 31, 2022; Jerome Powell, whose term isn’t over until January 31, 2028; and Lael Brainard, whose term ends on January 31, 2026.
But John Mauldin at Forbes says they may leave early.
Brainard wants to leave says Mauldin, so does Tarullo.
Of Governor Powell, he writes:
Since Trump does not appear to have any anchor to his economic thinking, its anyone's guess as to who will fill the various vacancies, though unfortunately, I do not expect Ron Paul, Joe Salerno por Murray Sabrin to be among Trump's picks.
-RW
There could be four or five more in the next two years.
Fed Chair Janet Yellen four-year ends on February 3, 2018. The same date is when Stanley Fischer's vice-chairmanship ends. It is unlikely, but technically, Yellen can stay on the Board as non-chair until January 31, 2024, after her chairmanship ends.
The same is true for Vice Chair Stanley Fischer. His board term technically lasts after his vice-chairmanship until January 31, 2020. It is unlikley he will stay. So 2018 is the big year for the Fed board with both Yellen and Fischer leaving leadership positions that Trump will have to fill.
Beyond that the other three serving Board of Governors members are Daniel Tarullo, whose term does not end until January 31, 2022; Jerome Powell, whose term isn’t over until January 31, 2028; and Lael Brainard, whose term ends on January 31, 2026.
But John Mauldin at Forbes says they may leave early.
Brainard wants to leave says Mauldin, so does Tarullo.
Of Governor Powell, he writes:
Jerome Powell’s background is impressive, but I wonder if he would want to be the last man standing of the current governors. I have heard nothing either way, and no one seems to really know—other than Governor Powell.So, it’s possible, according to Mauldin, that Trump gets at least six and maybe seven appointments to the Board of Governors of the Federal Reserve within his first two years.
Since Trump does not appear to have any anchor to his economic thinking, its anyone's guess as to who will fill the various vacancies, though unfortunately, I do not expect Ron Paul, Joe Salerno por Murray Sabrin to be among Trump's picks.
-RW
Top Citibank Economist Admits India Currency Change Was to Destroy Black Markets
The following exchange took place between Willem H Buiter, Global Chief Economist of Citi, during an interview with MoneyControl:
Q: Your student Urjit Patel is the governor of the Reserve Bank of India (RBI) I assume therefore you are following India closely what do you make of this massive currency change that India has undertaken? How will that impact growth?
A: Two things were confused by whoever initiated the currency exchange. One is going after the black market tax evasion, the underground economy by having the currency slop, the currency reform. The Netherlands, my own home country did it after World War II to catch black marketers. You do it immediately, unexpectedly, but you have to have all the new cash, the large denominations ready. That is one. Second, you want to basically get rid of cash and move to an e-money economy. There you give years’ notice and say two years from now, we go into eliminate the Rs 1,000 notes, three years the Rs 500, etc. And somehow, they got the two mixed up. So, they did it immediately and unexpectedly, but it did not have to the new cash ready. So, that was a bit of a mess, but in principle, this way of going after the black economy can be very effective. It just means you have to have the new cash ready rather than have people hope and wait for it and panic.
Friday, December 23, 2016
Colombia Joins Argentina and Venezuela in Adopting Backward Economic Policies
By Abigail R. Hall Blanco
The Colombian government recently “persuaded” food producers to agree to have the prices of some of their goods “frozen.” Soon the prices of products like red meat, fish, dairy, eggs, grains, and processed foods will be set by the Colombian government. Once imposed, producers of these goods will be unable to raise their prices.
According to Colombia’s Agricultural Minister, Aurelio Iragorri, the measure is intended to achieve food security following price fluctuations over the past several months.
On this blog I’ve discussed how the price system is fundamentally important. Only via the mechanisms of private property rights, prices, and profit and loss can resources be allocated to their highest valued use.
But these facts of economics don’t always make people happy. As I explain to my principles students, sometimes everyday citizens and government officials look at the prices of particular items and don’t like what they see. They think some prices are either “too high” or “too low.” As a result, government will attempt to “fix” these “wrong” prices by imposing a price control. In the case that a price is deemed to be “too low,” governments will impose what’s called a price floor, setting the minimum price that consumers must pay for a particular good or service. The most common example of this type of price control is the minimum wage.
The price manipulation being imposed in Colombia is an example of another type of price control—a price ceiling. In this case, government believes prices are “too high.” So, officials set prices below what would be seen out in the marketplace.
The fact of the matter is that, whenever we manipulate the prices set out in the marketplace, negative unintended consequences are quick to follow. I’ve written repeatedly, for example, how those looking to assist the poor by raising the minimum wage actually harm the very workers they intend to help! I’ve discussed how ignoring the true prices of labor, goods, and other services led to the demise of a “progressive” vegan eatery in Grand Rapids, Michigan. Other examples are easy to find.
Alas, the price controls on food in Colombia will also have serious perverse consequences. By setting the prices of food products below what they would be out in the market, two important things will happen. First, consumers will see that the prices of food products are lower. Economics teaches us that when prices fall, consumers will buy more. Second, producers will see that, regardless of what happens to their costs, profits, or to the demands of consumers, their ability to raise prices is restricted. Since the price set by government is lower than the market price, producers will be willing to produce less than they were before and some may drop out of the market all together.
Taken together, this increase in consumer demand and decrease in supply lead to one thing–shortages. Serious shortages.
Ultimately, this doesn’t just harm producers. Consumers will have difficulty finding the products they want.
Apparently, Colombia has failed to learn lessons from its neighbors fellow South American neighbors, Argentina and Venezuela. While Argentina’s price controls are relatively recent, Venezuela has a long history of trying to manipulate market prices (and finding out that Adam Smith’s invisible hand packs quite the punch when you ignore it).
As a result of price controls in Venezuela, for example, consumers are forced to wait in unfathomably long lines to get the few basic necessities suppliers are willing to produce.
The shortages consumers face aren’t minor. In Venezuela, people can’t find enough toilet paper. In July, the price of tampons and other sanitary supplies jumped 1,800%. This price increase meant that the average Venezuelan woman would need to spend a third of her monthly wages on feminine care products.
The shortages caused by these types of price controls also lead to increases in crime as a result of black market operations. Since goods and services can’t be exchanged freely at market prices, black markets appear in order to provide a variety of goods to desperate customers. According to one source reporting on Venezuela, the difference between the market price and the “official” price set by the government is more than 560% for many goods. If someone wants to buy meat or poultry, they better be prepared to pay 1000% more than what they would have to pay in a free market.
When discussing the implementation of policies, it’s critically important for average citizens and government to understand the implication of their policy proposals. When it comes to the recent price controls in Colombia, we already know what the result will be—shortages, long lines, and black markets. We also know that the losers of this policy will, unfortunately, be the people of Colombia.
Abigail R. Hall Blanco is a Research Fellow at the Independent Institute and an Assistant Professor of Economics at the University of Tampa.
The above originally appeared at the Independent Institute.
The Colombian government recently “persuaded” food producers to agree to have the prices of some of their goods “frozen.” Soon the prices of products like red meat, fish, dairy, eggs, grains, and processed foods will be set by the Colombian government. Once imposed, producers of these goods will be unable to raise their prices.
According to Colombia’s Agricultural Minister, Aurelio Iragorri, the measure is intended to achieve food security following price fluctuations over the past several months.
On this blog I’ve discussed how the price system is fundamentally important. Only via the mechanisms of private property rights, prices, and profit and loss can resources be allocated to their highest valued use.
But these facts of economics don’t always make people happy. As I explain to my principles students, sometimes everyday citizens and government officials look at the prices of particular items and don’t like what they see. They think some prices are either “too high” or “too low.” As a result, government will attempt to “fix” these “wrong” prices by imposing a price control. In the case that a price is deemed to be “too low,” governments will impose what’s called a price floor, setting the minimum price that consumers must pay for a particular good or service. The most common example of this type of price control is the minimum wage.
The price manipulation being imposed in Colombia is an example of another type of price control—a price ceiling. In this case, government believes prices are “too high.” So, officials set prices below what would be seen out in the marketplace.
The fact of the matter is that, whenever we manipulate the prices set out in the marketplace, negative unintended consequences are quick to follow. I’ve written repeatedly, for example, how those looking to assist the poor by raising the minimum wage actually harm the very workers they intend to help! I’ve discussed how ignoring the true prices of labor, goods, and other services led to the demise of a “progressive” vegan eatery in Grand Rapids, Michigan. Other examples are easy to find.
Alas, the price controls on food in Colombia will also have serious perverse consequences. By setting the prices of food products below what they would be out in the market, two important things will happen. First, consumers will see that the prices of food products are lower. Economics teaches us that when prices fall, consumers will buy more. Second, producers will see that, regardless of what happens to their costs, profits, or to the demands of consumers, their ability to raise prices is restricted. Since the price set by government is lower than the market price, producers will be willing to produce less than they were before and some may drop out of the market all together.
Taken together, this increase in consumer demand and decrease in supply lead to one thing–shortages. Serious shortages.
Ultimately, this doesn’t just harm producers. Consumers will have difficulty finding the products they want.
Apparently, Colombia has failed to learn lessons from its neighbors fellow South American neighbors, Argentina and Venezuela. While Argentina’s price controls are relatively recent, Venezuela has a long history of trying to manipulate market prices (and finding out that Adam Smith’s invisible hand packs quite the punch when you ignore it).
As a result of price controls in Venezuela, for example, consumers are forced to wait in unfathomably long lines to get the few basic necessities suppliers are willing to produce.
The shortages consumers face aren’t minor. In Venezuela, people can’t find enough toilet paper. In July, the price of tampons and other sanitary supplies jumped 1,800%. This price increase meant that the average Venezuelan woman would need to spend a third of her monthly wages on feminine care products.
The shortages caused by these types of price controls also lead to increases in crime as a result of black market operations. Since goods and services can’t be exchanged freely at market prices, black markets appear in order to provide a variety of goods to desperate customers. According to one source reporting on Venezuela, the difference between the market price and the “official” price set by the government is more than 560% for many goods. If someone wants to buy meat or poultry, they better be prepared to pay 1000% more than what they would have to pay in a free market.
When discussing the implementation of policies, it’s critically important for average citizens and government to understand the implication of their policy proposals. When it comes to the recent price controls in Colombia, we already know what the result will be—shortages, long lines, and black markets. We also know that the losers of this policy will, unfortunately, be the people of Colombia.
The above originally appeared at the Independent Institute.
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