Friday, July 31, 2015

The World's First Billionaire Author

J.K. Rowling, author of the "Harry Potter" series, turns 50 years old today.

Rowling had an estimated net worth of more than $1 billion in 2014, according to the Sunday Times' UK Rich List, the result of her book sales, films and related products.

In addition to publishing seven "Harry Potter" novels and three companion books, Rowling has written a standalone novel, "The Casual Vacancy" and three books under the pseudonym Robert Galbaith, the most recent of which is due out in October.


(via CNBC)

Thank You Janet Yellen: Uber Valued at Over $50 Billion

Uber has closed a new round of funding valuing the five-year-old company at close to $51 billion, WSJ reports.

Uber raised close to $1 billion in the round.

According to WSJ, investors in the latest round include Microsoft Corp. and the investment arm of Indian media conglomerate Bennett Coleman & Co.

Uber is a very interesting company, but no way does it get this type of valuation without newly printed Federal Reserve money floating all around.

Trump to Adviser: You're Fired (Over Facebook Remarks About Obama...)

Henry Blodget has the scoop:

Earlier today, Business Insider's senior politics correspondent, Hunter Walker, revealed that a senior adviser to GOP front-runner Donald Trump has published many racist and otherwise offensive Facebook posts.
Specifically, the adviser, Sam Nunberg, called President Barack Obama a "Socialist Marxist Islamo Fascist Nazi Appeaser" and "Farrakahn's Messiah." He referred to Al Sharpton's daughter as "N---!" And so on..
Within an hour after being alerted to Nunberg's Facebook's posts, a Trump campaign spokesman told Business Insider that Nunberg will be "terminated immediately" once the posts' authenticity is verified.

Uber Cars Attacked in Mexico City

Another visual example of how the masses appreciate free markets and innovation.

Of course, I suspect Mexican taxi unions led the attack, though they deny it.


Ron Paul Takes the Gloves Off: ‘I’m Sending a Message to Paul Krugman’

Last week Paul Krugman attempted to ridicule Ron Paul and Austrian economics with a nasty piece called, “The Old Man and the CPI.” Today on his Liberty Report, has his turn. The gloves are off!
-Daniel McAdams.

The Signs are Everywhere: The US Government is Going Broke

By Simon Black

On June 6, 1932, President Herbert Hoover imposed the first ever national gasoline tax in the United States, initially set at 1 cent per gallon.

It was a major success for the federal government; the tax on gasoline alone was responsible for over 15% of their 1933 tax revenue.

What’s curious is that the Senate Finance Committee issued a report the following year stating that the federal gasoline tax should be repealed. But that never happened.

Instead it went up.

Under President Eisenhower, the tax increased to 3 cents per gallon. Under Reagan, 9 cents.

It’s risen steadily through the years to a level of 18.4 cents for every gallon of unleaded fuel, and 24.4 cents per gallon of diesel.

All of this tax revenue is –supposed– to go to the Federal Highway Trust Fund, something established back in the 1950s to finance the care and maintenance of the nation’s highways.

And now it, too, is insolvent.

Earlier this week I told you about Social Security’s Disability Insurance Trust Fund (DI), which will become insolvent in a matter of months.

The Middle Class is Doing Just Fine

So says my favorite Keynesian economist, Martin Feldstein:

[T]he political debate is distorted by misleading statistics that grossly understate these gains.

For example, it is frequently said that the average household income has risen only slightly, or not at all, for the past few decades. Some U.S. Census figures seem to support that conclusion. But more accurate government statistics imply that the real incomes of those at the middle of the income distribution have increased about 50% since 1980. And a more appropriate adjustment for changes in the cost of living implies a substantially greater gain.

The Census Bureau estimates the money income that households receive from all sources and identifies the income level that divides the top and bottom halves of the distribution. This is the median household income. To compare median household incomes over time, the authorities divide these annual dollar values by the consumer price index to create annual real median household incomes.

The resulting numbers imply that the cumulative increase from 1984 through 2013 was less than 10%, equivalent to less than 0.3% per year.

Any adult who was alive in the U.S. during these three decades realizes that this number grossly understates the gains of the typical household. One indication that something is wrong with this figure is that the government also estimates that real hourly compensation of employees in the non-farm business sector rose 39% from 1985 to 2015.

The official Census estimate suffers from three important problems. For starters, it fails to recognize the changing composition of the population; the household of today is quite different from the household of 30 years ago.

Moreover, the Census Bureau’s estimate of income is too narrow, given that middle-income families have received increasing government transfers while benefiting from lower income-tax rates. Finally, the price index used by the Census Bureau fails to capture the important contributions of new products and product improvements to Americans’ standard of living.

Consider first the changing nature of households. From 1980 to 2010, the share of “households” that consisted of just a single man or woman rose from 26% to 33%, while the share that contained married couples declined from 60% to 50%.

When the nonpartisan Congressional Budget Office (CBO) conducted a detailed study of changes in household incomes from 1979 to 2011, it expanded the definition of income to include near-cash benefits like food stamps and in-kind benefits like health care. It also subtracted federal taxes, which fell from 19% of pretax income for middle-income households in 1980 to just 11.5% in 2010.

To convert annual incomes to real incomes, the CBO used the price deflator for consumer expenditures, which many believe is better for this purpose than the consumer price index. The CBO also presented a separate analysis that adjusted for household size.

With the traditional definition of money income, the CBO found that real median household income rose by just 15% from 1980 to 2010, similar to the Census Bureau’s estimate. But when they expanded the definition of income to include benefits and subtracted taxes, they found that the median household’s real income rose by 45%. Adjusting for household size boosted this gain to 53%.

And, again, even this more substantial rise probably represents a substantial underestimate of the increase in the real standard of living. The authorities arrive at their estimates by converting dollar incomes into a measure of real income by using a price index that reflects the changes in the prices of existing goods and services. But that price index does not reflect new products or improvements to existing goods and services.

Thus, if everyone’s money incomes rose by 2% from one year to the next, while the prices of all goods and services also rose by 2%, the official calculation would show no change in real incomes, even if new products and important quality improvements contributed to our well-being.

Indeed, the U.S. government does not count the value created by Internet services like Google and Facebook as income at all, because these services are not purchased.

No one knows how much such product innovations and improvements have added to our well-being. But if the gains have been worth just 1% a year, over the past 30 years that would cumulate to a gain of 35%. And combining that with the CBO estimate of a gain of about 50% would imply that the real income of the median household is up nearly 2.5% a year over the past 30 years.

So the middle class has been doing much better than the statistical pessimists assert.

Puerto Rico Expected to Default Tomorrow

Puerto Rico is expected to default on debt due Saturday.

Puerto Rico has indicated  that it will likely skip a $58 million payment due August 1 on its Public Finance Corporation debt.

. According to a 2014 bond offering statement, Puerto Rico has never defaulted on the payment of principal, or interest of debt, before.

The default is likely only the start of headaches for holders of Puerto Rican debt. The island government has $72 billion in debt outstanding.

PFC bonds due in 2031 are trading at 15.55 cents on the dollar.

Puerto Rico also faces a $169.6 million Government Development Bank (GDB) debt payment due Aug. 1.

Puerto Rico's chief of staff, Victor Suarez, has said the island will do "everything that is possible" to ensure that it is paid.

Suarez told reporters in San Juan on Wednesday that a missed PFC payment would not constitute default.

However, credit rating agency Standard & Poor's said it would view a non-payment on rated PFC bonds on their due date as a default. Moody's said it would also consider it a default.


(via Reuters)

Rents are so High in the SF Bay Area that People are Moving Into Used Containers

Luke Iseman and Heather Stewart were tired of paying San Francisco rents and had always dreaming of living in a shipping container so for less than one month’s rent they bought a used shipping container ($2,300 from the Port of Oakland) and began to convert it into a home.

They rented an abandoned lot near the port in West Oakland where they parked their new home and began renting out other containers to friends, while experimenting to create an ideal transportable home. Their 160-square-foot home cost less than the price of a car to fit out. For a total of $12,000 and about 3 weeks of labor, they had added bamboo floors, a lofted bed, a porch, photovoltaics, fast Internet, LED lights, a shower with on-demand hot water, a humanure toilet and a basic kitchen (a camping stove as oven and cooktop and “instead of a propane RV fridge”, they bought a $150 freezer from Home Depot and hacked it with $20 in parts (sensors and an Arduino) to run on a third of the energy of “Energy Star $2000 refrigerators”).

Iseman and Stewart call their tiny homes “Boxouses” and they plan to sell them fully-built for $29,000 a piece. They will also provide plans for those who want to convert their own container. One of the couple’s main goals is to set an example for container housing that can be compatible with life in one of the most expensive places to live in the country. Currently their homes are too small to be permitted in the area, San Francisco minimum size standard was recently lowered to 220 square feet, but Iseman and Stewart think the country needs more examples to inspire regulators/cities to allow for smaller and more portable structures.


There Goes the Labor Theory of Value

The iconic ‘Mission: Impossible’ theme song took just 3 minutes to write. reports NyPo.

It took Lalo Schifrin, now 83, all of three minutes to write his famed theme — set to an unusual 5/4 time signature — for the TV series “Mission: Impossible.”

“Orchestration’s not the problem for me,” he says. “It’s like writing a letter. When you write a letter, you don’t have to think what grammar or what syntaxes you’re going to use, you just write a letter. And that’s the way it came.”


Donald Trump's Helicopter


Thursday, July 30, 2015

An Economist Looks at Deflategate

The Data in the Wells Report
By Russell Roberts

I’m biased. I’m a Patriots fan. I wanted the Wells Report to exonerate the Patriots, their staff, and their quarterback. It did not. The question remains as to whether it’s accurate.

There are many damning facts in the Wells Report. Texts. Unexpected bathroom adventures. A reference to a needle and a reference to a deflator. Are there innocent explanations for those facts? Maybe.

But it wouldn’t surprise me in the least to discover that Brady encouraged Patriots employees to push the envelope on the low side of the legal psi limit. He apparently likes the ball softer than harder. Maybe they had an “understanding.” No smoking gun, no explicit texts, but winking and nodding. Very possible. Maybe “probable” or “likely” as the Wells report concludes. There’s circumstantial evidence pointing that way. (And if there was any evidence pointing in an opposite direction, the Wells Report chose not provide it.)

But as a data guy, I’m interested in the data the Wells Report provides and whether it reinforces the circumstantial evidence. What I’ve tried to do here is bring out some issues I have not seen discussed elsewhere related to the data. We’re going deep into the weeds.

Read the rest here.

Gold Miners, RIP…

By Bill Bonner

This is the worst I’ve seen in 30 years.” 

The scene was the recent Sprott-Stansberry Natural Resource Symposium in Vancouver. The subject was mining equities. And the opinion was becoming familiar… 

The price of gold is down by about 8% over the last five years. Precious metals miners, as measured by the Market Vectors Gold Miner's ETF, are down by about 70% over the same time. 

Mining execs say banks won’t return their calls. Promoters say they are thinking about taking their firms into cloud computing, video games, or Chapter 11. 

“What do you know about cloud computing?” we ask. 

“Nothing. But I know gold mining. And I know it’s no place to make money.” 

Jack Lew: Puerto Rico Needs to Go Bankrupt

"Drop dead Puerto Rico bond holders."

That essentially is the message Treasury Secretary Jack Lew is delivering.

In a letter to Senator Orrin Hatch (R-UT), Lew called for Congress to amend bankruptcy laws to help smooth the way to a restructuring of Pureto Rico's debts.

“A central element of any federal response should include a tested legal bankruptcy regime that enables Puerto Rico to manage its financial challenges in an orderly way,” Lew wrote  to Hatch, in response to a letter from Hatch. " An untested and potentially disruptive process with numerous creditor lawsuits and years of litigation would depress the local economy, increase costs and make long-term recovery harder to achieve.”

Lew also noted in the letter that a bankruptcy would cause problems for some US retirees:
The continued deterioration of Puerto Rico’s economic and financial conditions has the potential to further harm retiree investment portfolios across the country. A significant portion of Puerto Rico’s debt is still held directly by individual retail investors or indirectly through the municipal bond funds they own.
But, Lew made clear that there would be no bailout for Puerto Rico, the way Goldman Sachs, Morgan Stanley etc. were bailed out. When it comes to individual retirees, they will have to fend for themselves is the Lew implication. The focus is all on bankruptcy in the Lew letter:
 Allowing Puerto Rico to resolve its liabilities under the supervision of a bankruptcy court involves no federal financial assistance and is in no way a federal bailout. 

The government of Puerto Rico and related agencies have aprox. $72 billion in debt outstanding.


Did Janet Yellen Just Take Out a Dow Jones Reporter....

...for asking probing questions about the circumstances surrounding Yellen and the Fed and  leaked information about Fed policy thinking.

There appears to be a war going on between Fed chair Janet Yellen and unknown behind the scenes forces. Pedro da Costa may have just been taken out by Yellen as the battle rages.

Here's Zero Hedge on the Da Costa-Yellen back and forth, and takedown:

This is the Q&A that got Pedro in hot water with Janet Yellen during the March press conference:
PEDRO DA COSTA. Pedro da Costa with Dow Jones Newswires. I guess I have two follow-ups, one with regard to Craig’s question. So, before the IG’s investigation, according to Republican Congressman Hensarling’s letter to your office, he says that, “It is my understanding that although the Federal Reserve’s General Counsel was initially involved in this investigation, the inquiry was dropped at the request of several members of the FOMC.” Now, that predates the IG. I want to know if you could tell us who are these members of the FOMC who struck down this investigation? And doesn’t not revealing these facts kind of go directly against the sort of transparency and accountability that you’re trying to bring to the central bank?

CHAIR YELLEN. That is an allegation that I don’t believe has any basis in fact. I’m not going to go into the details, but I don’t know where that piece of information could possibly have come from.

PEDRO DA COSTA. If I could follow up on his question. I think when you get asked about financial crimes and the public hears you talk about compliance, you get a sense that there’s not enough enforcement involved in these actions, and that it’s merely a case of kind of trying to achieve settlements after the fact. Is there a sense in the regulatory community that financial crimes need to be punished sort of more forcefully in order for them to be—for there to be an actual deterrent against unethical behavior?

CHAIR YELLEN. So, the—you’re talking about within banking organizations? So, the focus of regulators—the banking regulators—is safety and soundness, and what we want to see is changes made as rapidly as possible that will eliminate practices that are unsafe and unsound.

We can’t—only the Justice Department can bring criminal action, and they have taken up cases where they think that that’s appropriate. In some situations, when we are able to identify individuals who were responsible for misdeeds, we can put in place prohibitions that bar them from participating in banking, and we have done so and will continue to do so.
The difficult question starts at around 45:30 - look at Yellen's face when asked the question for a clue as to her next move.

Shortly aftert this exchange we learned that indeed the Justice Department did launch a criminal probe for leaks at the Fed itself as was disclosed shortly after the above exchange, a probe which may very well implicate anyone, including Janet herself hence her eagerness to avoid any "touchy" questions.
Nonetheless, after "shutting down" Pedro, the result was a "chilling effect" on any actually probing questions, and the same day that Pedro announced he would not be present at the June Fed press conference, not a single other journalist dared to ask anything on the topic. 

I have reported several times here at EPJ about the ongoing investigation of the leak and the indication that Yellen is a target. This appears as though Yellen just took out a foot soldier used in the attack against her.  


“The Richest Man Who Ever Lived”

By Edward Chancellor

Modern German bankers have somewhat tarnished reputations. In the past decade, when they weren’t snapping up subprime securities on Wall Street, they busied themselves lending to the Greek government at rates only slightly above their own government’s matchless credit. It wasn’t always this way. Some 500 years ago, the bankers of southern Germany were the most powerful in Europe, models of prudence and ruthlessness, and a vital source of funds for the Continent’s warring dynasties.

A contemporary chronicler wrote of the greatest of their number— Jacob Fugger of Augsburg—that “emperors, kings, princes and lords have sent to treat with him, the Pope has greeted him as his well beloved son. . . . He is the glory of Germany.” Montaigne described the rooms in Fugger’s Augsburg palace as the most magnificent he had ever seen. Fugger died in 1525. His epitaph, probably dictated by the banker himself, claimed immodestly that he was “second to none in the acquisition of wealth . . . as he was comparable to none in life, so after death he is not to be numbered among the mortal.”

How Fugger attained this exalted position is the subject of Greg Steinmetz’s enjoyable and brashly titled biography, “The Richest Man Who Ever Lived.” Like all great fortunes, Fugger’s derived from a combination of luck and character. He was fortunate to be born into a prosperous family of merchants in a city whose position in European trade and finance was ascendant. Augsburg, in what is now Bavaria, was a “free city,” answering to no feudal overlord, well-positioned on the trade route between Italy and the Low Countries and close to the great silver and copper mines of the central Europe. The Fuggers, along with other Augsburg merchant-bankers, provided loans to local rulers secured with the produce of their mines. This was a very profitable business.

Jacob Fugger emerged as the pre-eminent financier to the house of Habsburg, the Austrian rulers who through a series of dynastic marriages came to control much of Europe—from Spain in the west to Hungary in the east, from Sicily in the south to the Netherlands in the north. The Habsburg Emperor Maximilian was chronically short of cash to fight wars, cement political alliances and pay for his family’s marriages. Machiavelli, a contemporary, said of him that “his easy nature causes him to be deceived. . . . Anyone could cheat him without his knowing it.” In other words, Fugger’s imperial client was something of a soft touch.

Read the rest here.

Amazon Dash Buttons are Here

The full list of Dash Buttons is here.

What Mark Zuckerberg Thought About the Prospects for Facebook 11 Years Ago

He told CNBC back then.

Wednesday, July 29, 2015

Where Does 'Fair Trade' Coffee Really Come From?


Murray Rothbard On the Minimum Wage

(via Mark Perry)

The War On Cash: Why Now?

By Charles Hugh Smith

You’ve probably read that there is a “war on cash” being waged on various fronts around the world. What exactly does a “war on cash” mean?
It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.
These limits are broadly called “capital controls.”

Why Now?

Former Greek Finance Minister Fights Back: "What's Behind the Calls for Treason Charges Against Me"

Bottom line: Former Greek Finance Minister Yanis Varoufakis fought the banksters and they are now squeezing.

Varoufakis explains today at his blog what was clearly a battle with the banksters, who actually prevented him from gaining access to financial data from other Greek ministries:

Total Collapse: Greece Reverts To Barter Economy For First Time Since Nazi Occupation

By Tyler Durden

Months ago, when Alexis Tsipras, Yanis Varoufakis, and their Syriza compatriots had just swept to power behind an ambitious anti-austerity platform and bold promises about a brighter future for the beleaguered Greek state, we warned that Greece was one or two vacuous threats away from being "digitally bombed back to barter status."
Subsequently, the Greek economy began to deteriorate in the face of increasingly fraught negotiations between Athens and creditors, with Brussels blaming the economic slide on Syriza’s unwillingness to implement reforms, while analysts and commentators noted that relentless deposit flight and the weakened state of the Greek banking sector was contributing to a liquidity crisis and severe credit contraction. 
 As of May, 60 businesses were closed and 613 jobs were lost for each business day that the crisis persisted without a resolution.

The Insane State: Pizza Parlor Owners Face Prison Time

By Savannah Saunders

Pizza makers could face fines and prison time under a new Food and Drug Administration rule for failing to provide calorie counts for their billions of combinations of pizza orders.

Under FDA regulations, chain restaurants, retail stores with 20 or more locations, movie theaters, and vending machines are required to provide calorie information for every menu item. Pizza parlors will be hit hardest because of the unfathomable combinations of pizza that customers can order.

FDA’s menu labeling rule will go into effect on December 1st, 2016, much to the chagrin of pizza lovers across the nation. If a company does not perfectly comply with the mandate, food may be rendered “misbranded” under the Federal Food, Drug, and Cosmetic Act, a violation that carries criminal penalties. Failure to comply with the regulation could lead to government seizure of food, a maximum $1,000 fine, and a one-year prison sentence. A second violation carries a penalty of $10,000 and up to three years in prison.

One of the first problems with the regulation is FDA’s definition of “menu.” A menu is defined as any piece of primary writing that is “used by a customer to make an order selection at the time the customer is viewing the writing.” Under the regulation, a menu could be anything from a physical display board, a web page, or even an advertisement for a $5 dollar meal special. The American Pizza Community, a coalition of the nation's largest pizza companies, says FDA’s definition of a menu is especially difficult for pizza parlors because a considerable amount of orders are made over the phone, so customers may gain their information from a variety of places. Ninety percent of pizza customers never see in-store menus, so APC says spending money to update menu boards is a waste of money.

Moreover, the pizza industry faces challenges with the regulation because pizza orders are highly customizable. Considering the different combinations of crusts, cheeses, meats, toppings, and sauces, there are literally billions of possible pizza orders. In an interview with the Washington Free Beacon on January 2015, Executive Vice President of Domino’s, Lynn Liddle said perfect compliance with the regulation is ludicrous because the company offers around 34 million possible pizzas. Last year, Pizza Hut unveiled their new menu and declared their company offers over 2 billion possible combinations. Those within the pizza industry believe that providing such a wide range of caloric possibilities is unfeasible, pointless, and far too expensive.

Read the rest here.

Warren Buffett And Elon Musk To Spark A Lithium Boom

By James Stafford

The age of electrification across the transportation sector, the solar panel revolution, and Tesla's battery gigafactory are igniting a battle for the cheapest battery. That will transform lithium into a boom-time mineral and the hottest commodity on the energy investor's radar. It has been easy to take lithium for granted. This wonder mineral is the backbone of our everyday lives, popping up in everything from the glass in our windows to our mountains of electronics. 

And while investors have long appreciated the steady rise in demand for this preferred mineral, the number of new applications continues to multiply. Smart phones, tablets, laptops, and other consumer electronics demand more lithium. But the largest driver for future lithium use will be in electric vehicles and home batteries for solar panels. That has lithium on the verge a boom for which supply can no longer be taken for granted. 

Tuesday, July 28, 2015

Your Rent's About to Get Even Higher

Victoria Stilwell writes:
If the monthly rent check is already painful to write, brace yourself. 
The Census Bureau's U.S. rental vacancy rate, which tracks the share of properties that are unoccupied, fell to 6.8 percent in the second quarter. That's the lowest level using comparable data since 1985.
The short supply of units means "rental inflation is not going away anytime soon," Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC, wrote in a note to clients.
Already rents have climbed 3.5 percent in the 12 months through June, matching the biggest jump since 2008, Labor Department data show. That far outstrips the increase in consumer prices excluding food and fuel, which gained 1.8 percent in the same period.

Former Greek Finance Minister: Something is Rotten in the Eurozone Kingdom

This is fascinating

Yanis Varoufakis let it rip in an op-ed that he just wrote for FT:
There is a hideous restriction of national sovereignty imposed by the “troika” of lenders on Greek ministers, who are denied access to departments of their ministries pivotal in implementing innovative policies.
When a loss of sovereignty, arising from unsustainable official debt, yields suboptimal policies in already stressed nations, one knows that there is something rotten in the euro’s kingdom.

 Varoufakis wrote this following leaked news that he hired, when he was finance minister, computer experts to hack into the data of other Greek ministries, so that he could create policy recommendations based on real data.

The Varoufakis comment in the FT column provides the explanation of why, despite being a minister, he had to hack into the data: Because the damn euro banksters had a lock on the data, so that he couldn't see it!

Caroline Baum Slams Paul Krugman

The best way to argue against the minimum wage is to explain that it is a jobs losing prospect based on deductive theory.

But Bloomberg columnist Caroline Baum has done a great job of taking Paul Krugman to task for his referencing an empirical study which uses very sloppy methodological technique. NYT did not print her letter but Scott Sumner did at his blog. - -RW 

To the Editor:

In his July 15 op-ed, “Liberals and Wages,” Paul Krugman states definitively: “There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America.” In support of his no-evidence conclusion, he cites a widely discredited 1994 study by economists David Card and Alan B. Krueger.

So flawed was the study – it relied on telephone surveys of fast food restaurants in neighboring counties in New Jersey and Pennsylvania after New Jersey raised its minimum wage – that Card and Krueger were forced to redo it. Using official employment data the second time around instead of a telephone survey, they re-published their findings in 2000, claiming similar results to the first study.

Economists who have reviewed the body of literature on the effect of an increase in the minimum wage have criticized both the methodology and the results of the second Card/Krueger study. David Neumark and William Wascher, both widely respected for their work in the field, cite the vastly different patterns of teenage employment in the two states that pre-dated the study, disqualifying Pennsylvania as a good “control” group. They also find that the depressing effect of a minimum wage hike on employment occurs with a lag, not within Card/Krueger’s short-term time frame. (Neumark and Wascher’s study can be found here:

What’s more, unlike a randomized controlled trial for a new drug, Card and Krueger have no way of measuring what would have happened to fast-food employment in New Jersey absent a minimum wage increase.

It is disingenuous for Mr. Krugman to ignore the wide body of evidence demonstrating that an increase in the minimum wage deprives entry-level workers of an opportunity to enter the workforce. Instead he relies on the findings of an outlier study that contradicts basic economic theory. An increase in the price of any good or service, including labor, results in a decrease in demand for it.

No one will argue with Mr. Krugman’s point that paying workers a higher wage and providing good benefits increases employee loyalty. Businesses choose to do it all the time. Henry Ford didn’t double his workers wages to $5 a day in 1914 because he wanted them to buy Model T’s. He paid his workers more because he wanted to reduce turnover on the assembly line, which proved to be a hard, unappealing line of work.

When the government mandates a floor on wages, many low-margin businesses can’t absorb the higher costs and raise their prices. Even high-margin businesses pass the cost along to their customers.

The New York Times does a disservice to its readers when it allows a Nobel prize winning economist to dissemble to make a political point. Progressive economists may argue in favor of a minimum wage on compassionate grounds, but they all understand the economics of supply and demand. The non-partisan Congressional Budget Office reported last year that raising the federal minimum wage to $10.10 an hour from the current $7.25 would eliminate 500,000 jobs nationwide. (Currently 29 states have minimum wages higher than $7.25.)

And yes, a higher minimum wage is great for those who keep their jobs. But it’s an impediment to those starting out in the workforce.

Mr. Krugman is entitled to his own opinion; after all he writes opinion pieces. But he is not entitled to his own facts. As an opinion writer myself for three decades, my work is always fact-checked for accuracy. Perhaps the Times should make accuracy in support of opinions a priority.

Caroline Baum

West Tisbury, Mass.

The Mike Tyson Bitcoin ATM

There's a new bitcoin fanboy.

Mike Tyson tweeted on Saturday the link to a website advertising the "Mike Tyson Bitcoin ATM" coming in August of this year.

 "I'm very proud to be a part of the Bitcoin revolution," Tyson said in a statement provided by his spokeswoman to CNBC. "Digital currency is the future and the more I learn about it the more intrigued I become. Digital currency is going to level the playing ground for those that want alternatives for financial freedom."

But CNBC reports:
[T]ech news site SiliconAngle reported that Tyson himself may have been "suckered into a deal by a fast talker who has promised him millions if he gets involved and lends his name to the enterprise." It cited's registration to a Peter Klamka, who is connected to Bitcoin Brands—a firm with a paltry $6,780 market cap according to Google Finance.
Speaking to CNBC over the phone, Klamka disputed that account, saying that Bitcoin Brands has nothing to do with his Tyson venture, which operates under the moniker Bitcoin Direct LLC.
This new firm (which Klamka says is a subsidiary of cattle companyConexus Cattle "for financing") seeks to create a whole suite of celebrity bitcoin-related products.
It is not clear if Tyson considers bitcoin part of a Hayekian revolution in competing currencies.


Hillary Saves Capitalism!

By Bill Bonner

What would the world do without well-intentioned, earnest, and intelligent public servants like Hillary Clinton? 

We don’t know. But we’d like to find out! 

If Spending Is Our Military Strategy, Our Strategy Is Bankrupt

By Mark Mateski

Even today, few deny the long arm of US military might. After all, the US military exhausted the Soviet Union, crushed Saddam Hussein, and drove Osama bin Laden’s al Qaeda into hiding.
To what should we attribute these triumphs? Some would say US planning and foresight. Others would mention the hard work and dedication of US soldiers, sailors, and airmen. Still others would point to the application of superior technology. All would be correct to some degree, but each of these explanations disregards the fact that for more than a lifetime, the United States has wildly outspent its military competitors.
For many years, the United States spent more on defense than the next ten big spenders combined. It turns out that’s no longer true, according to Jane’s and PPGF. But whether the current count is seven or nine, we must acknowledge that US dominance was purchased at a high cost.

The Real Impact of the Minimum Wage Hike in San Francisco

Aubrey Freedman, writes in the July issue of the Libertarian Party of San Francisco newsletter:
Government Magic Wand?

After our monthly LPSF meeting earlier this month, those of us who went out for dinner at a nearby restaurant (Ananda Fuara) got to witness the real-life consequences of what voters decide at the ballot box.  As we were preparing to pay the bill, one of our members noticed that one of the prices on the bill didn’t look quite right and questioned the waiter about it.  Our waiter told us that in fact the restaurant had recently raised all of its prices by $1 and laid off one of its employees in order to make ends meet after the minimum wage increase approved by the voters last November went into effect on May 1.  

A Free Counseling Session Courtesy of Obamacare

Cool, eEconomics landed a gig on Comedy Central.

(ht Nick Badalamenti)

Today's Anti-Capitalists Ignore the Fundamental Problems of Socialism

By Jonathan Newman

Anti-market and pro-socialist rhetoric is surging in headlines (see also herehere, and here) and popping up more and more on social media feeds. Much of the time, these opponents of markets can’t tell the difference between state-sponsored organizations like the International Monetary Fund and actual markets. But, that doesn’t matter because the articles and memes are often populist and vaguely worded — intentionally framed in such a way to easily deflect uninformed attacks and honest descriptions of what they are actually saying. In the end, they can all be boiled down to one message: socialism works and is better than capitalism.
While most of it comes from the Left, the Right is not innocent, since the Right appears to be primarily concerned with promoting its own version of populism, which apparently does not involve a defense of markets. “Build bigger walls at the border,” for example, is not a sufficient response to “All profits are evil!”

Monday, July 27, 2015

Donald Trump Sells Park Avenue Penthouse for $21 Million

Located on the 24th floor of the 32-story 502 Park Ave in New York City., this floor-through unit — which Trump never lived in — has five bedrooms and 7½ bathrooms.

WSJ  reports the sale, but the buyer is not immediately known.


Spending a Night in the Robot-Staffed Hotel

Watch out minimum wage workers.

(ht MarginalRevolution)

New "Male Privilege Tax"

The country is collapsing. The masses are totally brainwashed and have a totally absurd view of how the economy works.


(ht Zebram Zee)

The World Economy in One Visualization

The GDP of countries in relation to one another based on size.

What Would Paul Krugman Have Said Just Before the Wiemar Republic Hyper-Inflation Sent the Price of Gold Soaring in Terms of the German Mark?

Discussed today at the EPJ Daily Alert.

Greece Was Very Close to a "Currency Coup"

It should have been executed!

Here's Ambrose Evans-Pritchard with the details:

Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges
A secret cell at the Greek finance ministry hacked into government computers and drew up elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the "flick of a button".
The revelations have caused a political storm in Greece and confirm just how close the country came to drastic measures before premier Alexis Tsipras gave in to demands from Europe's creditor powers, acknowledging that his own cabinet would not support such a dangerous confrontation.
Yanis Varoufakis, the former finance minister, told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum.
The transcripts were leaked to the Greek newspaper Kathimerini. The telephone call took place a week after he stepped down as finance minister.
"The prime minister, before we won the election in January, had given me the green light to come up with a Plan B. And I assembled a very able team, a small team as it had to be because that had to be kept completely under wraps for obvious reasons," he said.
Mr Varoufakis recruited a technology specialist from Columbia University to help handle the logistics. Faced with a wall of obstacles, the expert broke into the software systems of the tax office - then under the control of the EU-IMF 'Troika' - in order to obtain the reserve accounts and file numbers of every taxpayer. "We decided to hack into my ministry’s own software programme," he said.
The revelations were made to a group of sovereign wealth funds, pension funds, and life insurers - many from Asia - hosted as part of a "Greek day" on July 16 by the Official Monetary and Financial Institutions Forum (OMFIF).
Mr Varoufakis told the Telegraph that the quotes were accurate but some reports in the Greek press had been twisted, making it look as if he had been plotting a return to the drachma from the start.
"The context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history," he said.
This is a stunning revelation. Though it was only prudent for Greek officials to consider an alternative to the euro, there was no indication this was going on. Why did Varoufakis have to be  secretive about this?  Greek officials should have been in the euro banksters' faces and announcing that they were considering an alternative to the bankster squeeze.

Further, Greek officials should have launched the plan and returned to the drachma and told the euro banksters to go to hell. That said, it is a radical left government that is in charge in Greece and they would have likely printed drachma at a rate that would have made Robert Mugabe wince.

Until there is sane economic guidance in Greece, the Greek economic tragedy will continue.


The Nuclear Deal is Mostly About Oil

By John Browne

The recent nuclear non-proliferation agreement between Iran and the U.S. has created a firestorm debate in the Middle East and both sides of the Atlantic. While the deal is supposedly all about nuclear power and nuclear bombs, its practical implications are all about oil. But the conclusions we should make about its impact on the energy sector are far from clear. A ratification of the deal would allow Iran to make lucrative long term production and distribution contracts with foreign energy firms. However, freely flowing oil from Iran would add significant new oil supply into the world markets, disrupt U.S. plans to become an energy exporter, and could potentially put further downward pressure on prices.

When a Goldman Sachs Flack Did PR for Geithner

By Timothy Carney

Maybe it's just a story of a crisis-era Treasury Department alumnus being loyal to his old boss. But it also looks like a Goldman Sachs honcho doing PR for an Obama appointee as a way of ingratiating himself to powerful government employees.

An open-records inquiry turned up this entertaining email exchange:

By January 2013, veteran Democratic operative Jake Siewert had aready passed through the revolving door, leaving Treasury to become Goldman's head of corporate communications. But as his old boss, Treasury Secretary Tim Geithner, was leaving, Siewert wrote in an email, "Still doing my old job."

He pitched Business Insider editor Henry Blodgett a clever idea for a little story:

"How about a Geithner chart of the day?" Siewert suggested.

"Dow Jones at 8000 when confirmed as Treasury Secretary[.] Dow Jones at 13825 as he begins his last day on the job."

Blodgett liked the idea, forwarded it to his deputy Joe Weisenthal, and by 9:33 am, BI's Lucas Kawa had the story online, currently headlined "Tim Geithner's Amazing Rally"

When Geithner took office, the markets were in free-fall and the Dow Jones briefly dipped below 7000. Under his steady leadership, the DJIA has more than doubled from its 2009 trough.
His vigorous defense of the banking system played a big role in ensuring a turnaround.

When the story was up, Blodget replied to Siewert with the URL...

Read the rest here.

CRASH CONTINUES Chinese Stocks Fall 8.5% in Biggest One-Day Drop Since 2007

Overnight, Chinese stocks have plunged more than 8 percent.

The CSI300 index the largest listed companies in Shanghai and Shenzhen fell 8.6 percent to 3,818.73 points, while the Shanghai Composite Index lost 8.5 percent to 3,725.56 points.

More than 1,500 shares listed in Shanghai and Shenzhen fell by more than the 10 percent daily limit, including China Unicom, Bank of Communications and PetroChina.

I have long held the view that China may be vulnerable to perhaps the greatest economic crash in history.

Although, there has been much genuine economic growth, since the abandonment of Mao's central planning economics, in China. China's central bank has manipulated and distorted the economy via massive money printing. It has resulted in ghost apartments, ghost stocks and ghost growth.

The Shanghai stock market over the last three months.


German Economics Minister Rushes to Exploit Business Opportunities in Iran

OMG, Germany wants to open up trade with Iran.

The World Socialist Web Site can't contain its outrage :
Rarely in recent years have the foreign travels of a leading German politician caused such a stir as the visit earlier this month to Iran by the German Vice Chancellor and Minister for Economic Affairs Sigmar Gabriel (Social Democratic Party, SPD). With the ink barely dry on the recently-negotiated nuclear program agreement with Iran, Gabriel was already bound for Tehran in the company of a high-level business delegation.
Berlin’s foray into one of the most strategically important and resource-rich countries in the Middle East—Iran has the fourth largest oil and second largest gas reserves in the world—is part of German imperialism’s return to the world stage. Significantly, the visit took place the same week as the federal government enforced a brutal austerity program on Greece and German Foreign Minister Frank-Walter Steinmeier visited Cuba with a delegation.
Gabriel’s trip to Iran was so sudden and his related objectives so obvious that even a number of media outlets, which otherwise regularly beat the drum for a more aggressive German participation in world affairs, felt compelled to comment critically on the expedition.
The Süddeutsche Zeitung newspaper called it “embarrassing” and warned: “Now the impression has been given that Germany is mainly concerned about its business interests.

Why Are More Top Wall Streeters Heading to California?

The short, and best answer, is that they are following the Federal Reserve money flow. The biggest Fed spigot is in Silicon Valley, now gushing so strong that money is flooding north into San Francisco.

Here's WSJ with a secondary answer:
More top Wall Streeters are California dreaming.

A technology-fueled gold rush is drawing seasoned financial executives with the promise of sunshine, fresh managerial challenges and compensation that can top even the seven-figure paychecks common in the investment world.

Blackstone Group LP said Friday that its chief financial officer, Laurence Tosi, is leaving the private-equity firm to become finance chief at Airbnb Inc., the booming home-rental service. He is just the latest Wall Street executive to move west to take advantage of massive investor interest in fast-growing companies seeking to upend entire swaths of the economy.

Mr. Tosi, 47 years old, has made a good living by any standard since he joined Blackstone following its 2007 initial public offering. He earned about $15 million last year, according to filings, and $33.8 million over the past three years, not including dividends and some other perks, such as proceeds from investments made in the firm’s funds.

Yet those sums will likely appear paltry next to his winnings should Airbnb pull off a successful IPO in coming years, as many analysts expect...

Beyond pay, joining fast-growing technology firms can offer other goodies. Away from the shadows of Wall Street, executives can find a higher profile and increased freedom.

Anthony Noto left Goldman Sachs Group Inc. a year ago and became finance chief at Twitter Inc., the messaging service that the stock market values at $23.7 billion. Ruth Porat traded Morgan Stanley for Google Inc. Vanessa Wittman, formerly of insurer Marsh & McLennan Cos., is at cloud-storage company Dropbox Inc., another business valued in the billions of dollars in private financings.

Ms. Porat was wooed by Google with a compensation package worth around $70 million, including a one-time bonus and new-hire stock grants. That was more than twice what she took home in total during her previous three years at Morgan Stanley, according to securities filings.

Roubini: France Has More Economic Problems Than Spain

Nouriel "Dr. Doom" Roubini tells FT:
In Europe, the pattern Mr Roubini has identified is a blurring of the lines between the core and the periphery. Traditionally the large, more industrialised economies such as France and Germany were perceived as less risky and more likely to achieve steady growth, with the unstable members in the periphery considered more likely to fall into depression.
Now, however, Mr Roubini’s analysis points to France as having greater challenges to surmount than Spain or Ireland. 
“The core versus the periphery is no longer a meaningful distinction,” says the professor, “because the eurozone periphery is improving faster.”

Roubini is very well connected. I think he is getting this from people very close to the situation.


Sunday, July 26, 2015

Paul Krugman Attacks Ron Paul (And What Krugman Got Right)

By Robert Wenzel

Sweaty and out of breath, Paul Krugman has written an attack piece on Ron Paul and gold. He smugly titled his piece, The Old Man and the CPI.

The post has the feel of Krugman writing while still in his gym shorts:
I don’t watch financial news, but CNBC was on in the gym, so I was treated to a long ad from Ron Paul, who wants you to buy his video explaining the coming crisis brought on by loose money. And I found myself thinking about the remarkable fact that there really are people who will buy that video.

After all, Ron Paul has been making the same prediction year after year — in fact, he’s been making this prediction at least since 1981! — and has been wrong year after year. It’s hard to think of a doctrine that has been as thoroughly refuted by events as goldbug economics.

Well, Krugman is right about one thing, gold has been a favorite investment of Dr. Paul's for a long time. Though, I suspect Dr. Paul was buying gold long before 1981. My guess is he tucked away quite a bit when it was $35.00 per ounce. But let's take the year 1981 that Krugman references. Gold traded as low as $390, 00 an ounce and pretty much stayed in a trading range around $400.00 for aprox. 15 years. So if Krugman is correct, and Dr. Paul has been making the "same prediction year after year,"  since 1981, let's see how things have turned out for Dr. Paul in the investment arena.

Did Dr. Paul's long term perspective pay off for him, by buying gold year after year without getting discouraged? I'll let you look at the chart yourself and determine if that was a good investment or not.

The problem with Krugman, or one of the problems, is that he holds a Keynesian, "We are all dead in the long run" perspective. If something doesn't move after a few minutes in a predicted direction, well then it is a bad prediction.

The truth of the matter is that when it comes to the social sciences like economics, we can't make exact detailed forecasts. We can only understand general trends. You need to be very disciplined and consistent to invest with such a long term view. That's what Dr. Paul does. He accumulates gold with the knowledge that it is the nature of central banks to eventually break into a massive price inflation creation mode. Krugman has no such long term discipline or perspective.

Which brings me back to Krugman at the gym. Yes, this guy is now going to the gym:

The picture was taken a few years back and he has slimmed down since then. In a blog post, he claims there was no medical reason for his slimming down that he just wanted to get healthy, but if you ask me it looks like the guy is on serious medications. Probably, at a minimum, a high blood pressure drug, perhaps a statin, maybe even some pre-diabetes medication. And can we seriously not include Viagra?

You just know he is slimming down on doctors orders. The doctor sat him down and told him his blood results were terrible and if he didn't want to die from a heart attack...soon, he needed to change his life style fast. So he has. He's through stuffing Twinkies into his stomach and modern medicine will allow him to cheat death for a little while longer

Contrast this with Dr. Paul. He has probably been eating correctly his entire life, certainly since medical school. And it shows. This picture was taken within the last 5 years, which means that Dr. Paul was at least 15 years older at the time than Krugman is now.

Dr. Paul turns 80 in August and I am willing to bet he could still beat Krugman in a bike race. even though Krugman is only 60.

Bottom line: Dr. Paul does things right. He tunes out the noise, looks at the long term and lives his life accordingly. whether it is investing or health choices. We should all be as wise, disciplined and consistent.

Take Krugman's latest attack for what it is, an attack from a person that in no way can match up to Dr. Paul, whether it comes to investing, health, biking or common decency. "The old man and the CPI" Pft! Krugman wouldn't dare bike race "the old man."

Venezuelan Price Inflation is Now Over 800%

Last month it was "just" 700%.


Selgin on Hayek on Free Banking

By Joseph T. Salerno

George Selgin has written an interesting post on Hayek and free banking. Unfortunately, his otherwise instructive  post is marred by a few lapses of scholarship.  In a nutshell, Selgin credits Hayek with inspiring him and others to create the "Modern Free Banking School."  Selgin argues that Hayek was a life-long opponent of free banking, but notes that two of Hayek's pamphlets on privatizing the money supply influenced him to consider free banking  on a commodity standard like gold or silver as a workable alternative to central banks.   The two pamphlets to which he refers are  Choice in Currency (1976) and the Denationalisation of Money (1978).
Selgin conflates the two very different arguments that Hayek presents in these two pamphlets.  In so doing he not only does a disservice to a great economist, but he also ignores an important proposal for restroing sound money.

Selgin characterizes Hayek's scheme of "choice in currency" as referring to
". . . competing firms issu[ing] irredeemable paper notes, with each brand representing a distinct monetary unit.  Far from resembling ordinary commercial banks, Hayek's 'banks' resemble so many modern central banks in that they issue a sort of 'fiat' money." 
But this is a fair description only of Hayek's later booklet, Denationalisation of Money.  In Choice in Currency, Hayek presents a very different, and much sounder, proposal for monetary reform--one that is still useful today as a plan for restoring the gold standard.    The crux of Hayek's proposal for free choice in currency is the abolition of legal tender for the currency issued by the domestic government and the restoration of the right of citizens to freely contract in foreign currencies or even ounces of gold or silver.  There would thus emerge competition among different currencies, with those depreciating relatively rapidly falling out of use.  Hayek does not foresee the establishment of private banks issuing private fiat currencies as a result of free choice in currency.  Far from it,  as he concludes:
It seems not unlikely that gold would reassert its place as 'the universal prize in all countries, in all cultures, in all ages'. . . if people were given complete freedom to decide what to use as their standard and general medium of exchange.
Selgin also claims that Vera Smith in her important book The Rationale of Central Banking,  written as a doctoral dissertation under Hayek's supervision, "discusses both the Canadian and the Scottish [free banking] episodes . . .  in unmistakably favorable terms."  While Smith does indeed discuss free banking in Scotland, a discussion of the Canadian experience does not appear in her book.  The only reference to Canada that I could find was a citation of the 1933 report of the Royal Commission on Banking and Currency in Canada. It appears that this lapse in scholarship may be due to Selgin's eagerness to deepen the mystery of Hayek's rejection of free banking and enhance a good narrative. To wit: "Had Hayek forgotten his own PhD student's work, if not some of his own early research?"
Finally, Selgin correctly points out that Mises favored free banking and cites a 1992 article by Larry White, "Mises on Free Banking and Fractional Reserves."  But he fails to take of account of the great deal of careful investigation of Mises's views on free banking that has occurred since then.  From this research it has become clear that Mises favored free banking precisely because he believed that it would lead to the complete suppression of additional issues of "fiduciary media,"  that is, unbacked notes and deposits.   Thus Mises was not a forerunner of the Modern Free Banking school as Selgin seemingly implies, but rather the founder of the Neo-Currency school that attributes business cycles to the issue of fiduciary media by fractional-reserve banks.  I  present an exhaustive review of Mises's  views on free banking  in my book chapter "Mises as Currency School Free Banker" published in 2013.

  Mises's belief that the issue of fiduciary media causes the business cycle and that free banking would eliminate or severely restrict such issue is summed up in one of the several  passages from Mises that I cite in my paper:
The notion of “normal” credit expansion is absurd. Issuance of additional fiduciary media, no matter what its quantity may be, always sets in motion those changes in the price structure the description of which is the task of the theory of the trade cycle. . . . Free banking is the only method available for the prevention of the dangers inherent in credit expansion. It would . . . not hinder a slow credit expansion, kept within very narrow limits . . . But under free banking it would have been impossible for credit expansion with all its inevitable consequences to have developed into a regular . . . feature of the economic system. 

The above originally appeared at