BREAKING Questions About Leak at Federal Reserve Escalate to Insider-Trading Probe

It sure looks to me like "they" want to get Federal Reserve chair Janey Yellen.

WSJ is now reporting:

A high-profile investigation into a leak of sensitive information from the Federal Reserve in 2012 has escalated to an insider-trading probe led by a key market surveillance agency and federal prosecutors in Manhattan, according to people familiar with the matter.

The firm at the center of the probe, Medley Global Advisors put out a report, in advance of a Federal Reserve statement, with such specifics that were included in the statement that a reeks of a tip off from inside the Fed.

Here'e where things get interesting. Yellen has admitted that she met with Medley some time before the leak. Bloomberg reported in May:

Yellen also said that in June 2012 she met with an analyst from Medley Global Advisors, which published a report on deliberations of a September 2012 closed-door meeting of the Federal Open Market Committee, one day before minutes of the meeting were made public.

The Fed chair said she met with Medley analyst Regina Schleiger on June 11, 2012, “to hear her perspectives on international developments.”

In addition, the Fed chief noted that she could not have known about the September events reported in the Medley letter and added that she “did not convey any confidential information.”

Medley, an investment  advisory firm, is not co-operating with the investigation. It claims it is a news organization.

However, WSJ notes:

Traditional media firms are largely immune from insider-trading prosecution because even if they acquire private information, they publish it to a broad section of the public. But the government has no clear definition of what constitutes a media organization, in part because it is wary of being accused of infringing on the First Amendment.

Medley’s website refers to recipients of its research notes as “clients,” not readers or subscribers. It says the firm serves “the world’s top hedge funds, institutional investors, and asset managers” by delivering “unbiased intelligence on macroeconomic and political events by cultivating relationships with senior policy makers around the globe.”

  -RW

MIT: The Troubles at Bitpay

Tom Simonite at MIT's Technology Review writes:

In 2014, a Bitcoin startup called BitPay raised $30 million from investors and was dubbed the “PayPal of Bitcoin” for helping companies such as Microsoft accept payments in the digital currency. But 2015 has been less kind. Last week BitPay made significant layoffs, and earlier in the month it admitted to having $1.8 million in Bitcoins stolen.

The company’s travails neatly demonstrate two problems with Bitcoin as a currency and payment mechanism.

First, no one much wants to pay with Bitcoin and there’s not currently good reason to think that will change. BitPay’s business model was to help merchants take Bitcoin payments—often converting them directly into dollars—and take a cut of transactions. The company has enabled Microsoft, retailer Newegg, and many other companies accept Bitcoin payments.

Unfortunately for BitPay, just about no one gets paid in bitcoins, and for most people there are not clear reasons to bother with the trouble of buying bitcoins just to spend them again. The people with the best incentive to buy stuff with the currency are those who bought it several years ago and are now cashing out their gains after Bitcoin’s rise in value.

BitPay’s CEO Stephen Pair admitted as much in June, when he told BusinessInsider that the company was trying to find another business model. “We keep adding merchants—we’re up to over 60,000 now—but they’re selling to the same pool of Bitcoin early adopters.”

Gavin Andresen, who in 2010 was picked by Bitcoin’s mysterious inventor to lead work on its code, recently told me that he didn’t see that changing soon (see “The Looming Problem That Could Kill Bitcoin”). “Until part of your paycheck is regularly paid in Bitcoin, I’m not sure how it would really go mainstream,” he said.

BitPay’s embarrassing loss of 5,000 Bitcoins worth $1.8 million, revealed in court documents this month, highlights another challenge facing both the company and the idea of Bitcoin as a currency. The thief was able to trick BitPay’s CEO into transferring the funds just by sending e-mails from the account of his CFO.

Like I said a long time ago, the enthusiasm for bitcoin was limited to some technology geeks and some libertarians who viewed  it as, somehow, as an alternative currnecy that would replace the dollar. It has not occurred.

 -RW

On Karl Marx and His Abandonment of Volume 3 of Capital

Professor Ralph Raico responds in an email to the commenters at the post Hayek on the Followers of Karl Marx, who raise the question on the evidence behind the reason why Marx abandoned further writing on Capital:

Marx abandoned volume three of Capital while attempting to write the chapter on "Classes." The reason was he had to face the total incoherence of his view on the subject. I deal with this in my article on "Classical-Liberal Exploitation Theory," published as "The Class that Exploits US," in my archive at LewRockwell.com.

 -RW

Newly Discovered Recording of Mises

In honor of Ludwig von Mises's 134th birthday on September 29, the Mises Institute has published, for the first time, a recording of the inaugural lecture in the American School of Economics series, delivered on April 25, 1962. by Mises, entitled The Economics of the Middle-of-the-Road Policy.

The recording was made available by Richard Ebeling from an original reel-to-reel recording.

Mises was 80 years old at the time he delivered this talk.




(ht Chris Rossini)

The Tax Foundation on Trump's Tax Plan

Individual Income Tax Brackets Under Donald Trump’s Tax Plan
Ordinary Income	Capital Gains and Dividends	Single Filers	Married Filers	Head of Household
0%	0%	$0 to $25,000	$0 to $50,000	$0 to $37,500
10%	0%	$25,000 to $50,000	$50,000 to $100,000	$37,500 to $75,000
20%	15%	$50,000 to $150,000	$100,000 to $300,000	$75,000 to $225,000
25%	20%	$150,000 and up	$300,000 and up	$225,000 and up

Key Findings:

• Trump’s tax plan would substantially lower individual income taxes and the corporate income tax and eliminate a number of complex features in the current tax code.
• Trump’s plan would cut taxes by $11.98 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $10.14 trillion over the next decade when accounting for economic growth from increases in the supply of labor and capital.
•  According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly reduce marginal tax rates and the cost of capital, which would lead to an 11 percent higher GDP over the long term provided that the tax cut could be appropriately financed.
• The plan would also lead to a 29 percent larger capital stock, 6.5 percent higher wages, and 5.3 million more full-time equivalent jobs.
• The plan would cut taxes and lead to higher after-tax incomes for taxpayers at all levels of income.

The full analysis is here.

Early Morning Battles and Observations

Early this morning, I was challenged at the gym, once again, for running water while shaving.

A man approached and said, "You must not be from around here." The gym is in a hotel, so there are often outsiders. Yesterday, Kevin Oleary was at the club.

I said to the man who approached me, "No, you must not understand basic economics."

And then I went to my permanent locker, where I now keep a stash of my booklet. Dear Fellow Health Club Member, Please Leave Me the Hell Alone: An economic analysis of the water "shortage."

I handed him a copy.

He nervously looked at it and said, "Good title."

"Read it, let me know what you think," I said.

Then onto breakfast. When leaving, after two eggs, bacon and real coffee, I passed two men in a booth. A well-dressed, well-spoken man with a gray ponytail. was saying to the other. "Oligopoly, I never heard of that word before. That's a cool word, oligopoly."

We have a lot of work to do, my friends.

-RW

Top Brookings Economist Forced Out By Elizabeth Warren

Here is a great example of why economists working for establishment organizations, left or right, don't speak truth to power in Washington D.C.

If you do, it wll get you tossed from your lucrative cushy job.

The Hill reports on the case of Brookings Institute affiliated economist Robert Litan:

The left-leaning Brookings Institution is forcing one of its top economists to resign, amid questions from Sen. Elizabeth Warren (D-Mass.) about an economic study funded by the business community.

Robert Litan, Brookings’ nonresident senior economics fellow, will formally submit his resignation Tuesday afternoon, according to three sources familiar with the issue.
Warren sent a letter to Brookings earlier Tuesday suggesting that Litan used his Brookings affiliation to peddle an industry-backed study that's critical of the administration's proposed regulations for financial advisers. Industry groups, congressional Republicans and roughly 100 congressional Democrats oppose the so-called fiduciary rule, which is championed by Warren and President Obama.

"I am concerned about financial conflicts of interest in a recent study authored by [Litan]," Warren wrote in the letter to Brookings President Strobe Talbott.

Litan, a former Clinton Office of Management and Budget (OMB) associate director, and Hal Singer, a senior fellow at the Progressive Policy Institute, published a study raising concerns about the proposal.

Economists, Inc., which is supported by the business community, commissioned the study, which is marketed as an Economists, Inc., study. Brookings is mentioned only as one of Litan's titles.

Litan's resignation has already ignited a firestorm within the financial services industry over what has become a contentious policy fight over Obama's proposal to tamp down on financial advisers.

"Senator Warren has chosen not to combat the facts and this sets a terrible precedent,” said one senior level financial services source who opposes the administration's proposal. “The message is clear: If you are an academic who challenges data supporting her ideas, you stand to put your job at risk.”

Donald Trump's Hot Air About Hedge Fund Mangers Not Paying Taxes

Trump, Clinton Lines on Hedge Fund Tax Payments Puzzle Experts
By Richard Rubin

Here’s something Donald Trump and Hillary Clinton actually agree on: hedge funders pay almost nothing in taxes.

But that election-season refrain, from Republicans and Democrats alike, puzzles many tax experts.
Sure, hedge funds, like big corporations, use myriad maneuvers to legally reduce their tax bills. But the political line focuses on a single aspect of the U.S. tax code -- the treatment of carried interest -- that actually benefits financial players like private-equity investors far more.

“The hedge fund guys don’t give a fig about the carried interest legislation,” said Mark Leeds, a tax lawyer who does work for hedge funds at Mayer Brown in New York. “The public dialogue that hedge-fund managers are enjoying this benefit is so untrue that it sort of just defies the imagination.”

It’s easy to understand why politicians of all stripes keep talking about carried interest, which is the cut of client profits that managers get to keep. For many, hedge funds have come to symbolize the 1 percent era of Wall Street hyper-wealth, as well growing economic inequality.

Some hedge funds assuredly benefit from the carried interest break. The treatment gives huge advantage to investors who hold assets for at least a year by enabling them to pay the long-term capital gains rate of 23.8 percent instead of the 43.4 percent rate on short-term gains. But many hedge funds don’t fall into that category, particularly those employing hyperkinetic, computer-driven trading strategies that involve buying and selling securities thousands of times a day.

Read the rest here.

Hayek on the Followers of Karl Marx

It deserves mention however that, as Joachim Reig has pointed out (in his Introduction to the Spanish translation of E. von Bohm-Bawerk's essay on Marx's theory of exploitation), it would seem that after learning of the works of Jevons and Menger, Karl Marx himself completely abandoned further work on capital. If so, his followers were evidently not so wise as he.

-Freidrich Hayek, The Fatal Conceit: The Errors of Socialism

On the New Investigation Into So-Called Gold Manipulation

I see where Swiss regulatory authorities have launched an investigation into so-called gold price "manipulation."

Bloomberg reports:

Switzerland’s competition regulator identified seven banks that are being investigated as part of a probe into whether companies in Europe, the U.S. and Japan colluded to manipulate the prices of gold, silver and other precious metals.

UBS Group AG, Deutsche Bank AG, HSBC Holdings Plc, Barclays Plc, Morgan Stanley, Julius Baer Group Ltd. and a unit of Tokyo-based trading company Mitsui & Co. Ltd. are part of the probe, which was opened in February, the Competition Commission said in a statement Monday.

It is hard for me to get around what this so-called manipulation is about. Any significant trader in any market realizes at some point that with sufficient buying/selling power he can create certain reactions from other traders, over a very short-term period---perhaps just minutes or seconds.

Should traders for some reason on a free market not be allowed to trade based on an understanding of these patterns? Should more than one trader not be allowed to team up on the free markets with other traders?

It strikes me that this is simply denial of a basic freedom to transact. Is anyone forcing anyone to trade with these people?

The only place there is real price manipulation is when a government is involved. When a central bank manipulates interest rates, when a regulatory body prevents, say, the entry of taxi cars in a region and regulates prices. That is manipulation. But a trader or a group of traders taking a position in a market does not prevent any trader or group of traders to take an opposite position and attempt to move the market in the opposite direction.

Furthermore, unless you are a central bank that can print money at will, it is impossible to force a market in a direction it doesn't want to go, for any significant period of time.

If you don't have the skill set to trade where other skilled short-term traders trade, then don't, just like you shouldn't be buying stocks long-term if you don't know how to evaluate stocks.

If you understand how these short-term traders think, then it is pretty easy to trade against them or use their trading strategies to your advantage, Further, this type trading is very short-term in nature. There is not a trader alive that can keep a market from going in the direction the buying/selling pressure is pushing it long term,

There is an impression that these so-called "manipulations" are keeping prices substantially different over the long term then where they would be without the manipulations, Not a chance.

There is no trader alive or investment bank that can "manipulate" a market opposite a massive wave of buying or selling.

  -RW

The Federal Reserve: Audit, Reform or Abolish?

Richard Ebeling emails:

Dear Bob,

I participated in the September 29, 2015 “Libertarian Angle,” webinar sponsored by the Future of Freedom Foundation, with the Foundation’s president, Jacob G. Hornberger, on the topic of “The Federal Reserve: Audit, Reform, or Abolish?”

Like any government or government-chartered agency, as is the Federal Reserve, it should be subject to a public audit for accountability to the citizenry. But the more fundamental issue is whether America’s central banking system should be reformed or abolished.

The main theme of this week’s “Libertarian Angle,” therefore, is why any attempted reform of the Federal Reserve falls short of two inescapable facts: First, the system will always be open to abuse and misused for the benefit of special interest groups and those in political power who can gain at other’s expense through the creation of money and the currency debasement that results.

Second, and even more fundamentally, it is impossible for monetary central planners of the Federal Reserve – or any central bank – to have the knowledge, ability or wisdom to manage the monetary and banking systems better than a fully market-based alternative.

Thus, the discussion turned to how and why a free, private, competitive banking system would be far superior to our current central banking system that brings in its wake the recurrence of the booms and busts of the business cycle.

The webinar runs for about 35 minutes.

http://fff.org/explore-freedom/article/the-libertarian-angle-the-federal-reserve-audit-reform-or-abolish/

Best,
Richard

Donald Trump's Mixed Healthcare Plan

It appears to be quite a bit free market oriented. But Trump doesn't get free market charity and so turns to statist healthcare for the destitute.

At Forbes, Avik Roy explains:

It suffices to say that Donald Trump has been all over the place on health care reform. Last month, at the first Republican presidential debate, Trump argued that socialized medicine in Scotland “works incredibly well.” At the same time, Trump has said that Obamacare has “gotta go” and that he would “repeal and replace [it] something terrific.” But Trump has been light on details. Last night, on 60 Minutes, Trump elaborated on what his plan would look like.

Trump: ‘I am going to take care of everybody’

CBS’ Scott Pelley conducted the interview. “What’s your plan for Obamacare?” Pelley asked Trump. “Obamacare’s going to be repealed and replaced,” said Trump. “Obamacare is a disaster if you look at what’s going on with premiums where they’re up 40, 50, 55 percent.” Pelley followed up:

Pelley: How do you fix it?

Trump: There’s many different ways, by the way. Everybody’s got to be covered. This is an un-Republican thing for me to say because a lot of times they say, “No, no, the lower 25 percent that can’t afford private. But–”

Pelley: Universal health care.

Trump: I am going to take care of everybody. I don’t care if it costs me votes or not. Everybody’s going to be taken care of much better than they’re taken care of now.

Pelley: The uninsured person is going to be taken care of. How? How?

Trump: They’re going to be taken care of. I would make a deal with existing hospitals to take care of people. And, you know what, if this is probably—

Pelley: Make a deal? Who pays for it?

Trump: —the government’s gonna pay for it. But we’re going to save so much money on the other side. But for the most it’s going to be a private plan and people are going to be able to go out and negotiate great plans with lots of different competition with lots of competitors with great companies and they can have their doctors, they can have plans, they can have everything.

Business Insider Is Now Under the Control of a Global Elitist Organization

So much for the days when I was able to work an Austrian school economist poster into the background at the Business Insider offices.

Axel Springer  AG has taken control of the US online financial news web site, Business Insider, in a deal valuing the news site at $442m, including cash and debt, marking one of the biggest bets yet on a digital media upstart, reports FT. That's a price tag of 9 time revenues.

The German publisher said on Tuesday that it bought 88 per cent of the shares in the US-based media company for $343m. Its total holding is 97 per cent, with the personal investment company of Jeff Bezos, founder of Amazon, owning the remaining shares.

Axel Springer SE is one of the largest digital publishing houses in Europe, with numerous multimedia news brands, such as BILD, WELT, and FAKT and nearly 14,000 employees. It generated total revenues of about €3 billion . The Axel Springer organizations have very clear global elitist ties,

Part of the articles of association of Axel Springer AG are  socio-political preambles that were written by Axel Springer in 1967, amended in 1990 following German reunification and supplemented in 2001, one day after 9/11. The five preambles are  (My highlights)

• To uphold liberty and law in Germany, a country belonging to the Western family of nations, and to further the unification of Europe.
• To promote reconciliation of Jews and Germans and support the vital rights of the State of Israel.
• To support the Transatlantic Alliance, and solidarity with the United States of America in the common values of free nations.
• To reject all forms of political extremism.
• To uphold the principles of a free social market economy.

Headquartered in Berlin, Germany, the company is active in more than 40 countries with subsidiaries, joint ventures, and licenses.

Mathias Döpfner  CEO  of Axel Springer SE attended this year's Bilderberg conference.

Philip Zelikow, who was the executive director of the 9/11 Commission,  currently serves as an Axel Springer Fellow at the American Academy.

Some suspect the globalist media conglomerate has strong ties to US intelligence agencies.

  -RW

Ludwig von Mises, Genius

By Bettina Bien Greaves

For decades, Ludwig von Mises (1881–1973) was the leading spokesman for the Austrian school of economics. An advocate of free markets and a critic of government interference, he stood for peaceful and voluntary cooperation. Whenever possible, he spoke out for individual freedom. Yet he grew up in Europe when socialism was on the rise and people wanted government to regulate “profiteering” capitalists who “exploited” workers. How did Mises, schooled in such an environment, acquire free market ideas?

Mises was born in pre-World War I Austria-Hungary and raised in Vienna. As a young man Ludwig surely had a healthy interest in fun and games, but he was also a conscientious student. At seven, he was already reading newspapers and collecting extra newspaper editions. His early interest was in history. But when he read Carl Menger’s Principles of Economics (1871) and encountered the subjective, marginal utility theory of value, he realized that economics was not history but a science of reason and logic. As Mises wrote later, reading Menger made him an economist.

While still at the Gymnasium, the equivalent of high school, young Ludwig adopted a motto from Virgil, “Do not yield to the bad, but always oppose it with courage.” Menger’s explanation that subjective values guide the actions of individuals enabled Mises to recognize that the “good,” for which he would strive “with courage,” was whatever promoted freedom from individuals to seek their subjective values. And anything that prevented individuals from pursing their personal subjectively-chosen goals was the “bad” to which he would refuse to yield. Thus an understanding of subjective value theory made Mises an advocate of individual freedom.

With the realization that everyone’s actions were always guided by his or her subjective values, permitted Mises to explain all economic phenomena as the results of what people do in the attempt, as Mises put, to “relieve some felt uneasiness.” Prices, wages, the division of labor, barter, media of exchange, trade, interest rates, even markets themselves, evolve as countless individuals, act, adapt, and readapt as he or she thinks best given the circumstances, each hoping to attain his or her various personal goals. Thus the economic phenomena we assume as “given and on which we base our actions are the unintended consequences of countless purposive actions of individuals.

I once asked Mises what original idea he had contributed. His reply: “Everything I have written and said I learned from someone else.” True, no doubt. But the genius of Mises, like that of an inventor or entrepreneur, rests on creating something new and original by further developing something already known. By adding something to earlier theories, he made at least three major contributions. First, he developed economics as a logical science and integrated it with all other knowledge. Second, he pointed out that a socialist society, without private property owners competing with one another, would not be able to discover where, when, and how best to use property in production. And third, by reasoning from Knut Wicksell’s theory that a “natural interest rate” prevails on the market among would-be borrowers and lenders, Mises explained the trade cycle as due to interest rates forced down artificially, distorting the “natural interest rate,” disturbing the loan market and causing widespread business ups and downs.

By recognizing that all individuals, everywhere and always, act on the basis of their subjective values Mises explained not only economic phenomena but also how individuals adapt and adjust when non-market forces disturb and distort market phenomena. Thus, Mises built on subjective value theory and added to knowledge. This was Mises’s genius!

WaPo Hates Trump's Tax Proposal

Apparently the cuts are too real!

From the WaPo editorial board:

 His tax plan, far from being a courageous departure from Republican orthodoxy, relies on many familiar Republican tricks to justify massive tax cuts in an age in which the government’s burdens are increasing, not shrinking — and with even less than usual honest arithmetic.

Mr. Trump would eliminate income taxes on married couples’ first $50,000 of income and consolidate the current seven tax brackets into four. He would cut the top income tax rate from 39.6 percent to 25 percent. Not even Jeb Bush proposed slashing the top rate that far. Mr. Trump would drop the corporate tax rate to 15 percent from 39.1 percent, again lower than where Mr. Bush would go. Like Mr. Bush, Mr. Trump would eliminate the estate tax, a move that would benefit only the wealthy, as the federal government taxes only high-value estates.

Mr. Trump claims his plan wouldn’t starve the treasury of any revenue. That seems impossible. He claims he would do more to phase out income tax deductions for the rich and super rich, but he doesn’t provide nearly enough specific details, and he exempts from reform the mortgage interest tax deduction — a $70-billion-per-year tax break that overwhelmingly benefits the wealthy. Similarly, he claims he would limit corporate deductions, but, with a couple of exceptions, he doesn’t say which ones or by how much.

This is the most real and aggressive tax cut plan I have ever seen proposed by a presidential candidate.

And the WaPo editorial board wouldn't be coming out against it so viciously, if it wasn't real and aggressive.

For those who advocate real tax cuts, this proposal by Trump is magnificent.

 -RW

THE BIG QUESTION: How Many Fewer Households Would Not Have to Pay Taxes Under Trump's Tax Plan?

The Answer:

According to WSJ, today, 36% of American households today pay no income taxes, and that number would grow to 50%.

That is 31 million households that have been paying some taxes would under the Trump plan not have have any tax liability. They would merely send the IRS a note: "I win."

Also, small business income is currently subject to rates of as much as 39.6%. Under Trump's plan, businesses taxes would be capped at 15%.

  -RW

Economist Peter Klein to Speak at Rampo College

Murray Sabrin emails:

Bob:

Economics professor Peter Klein will give this year's Raciti Memorial Lecture on entrepreneurship (October 21) at Ramapo College.  For you readers in the NY-NJ metro area who want to hear the lecture on campus, they can register at http://www.ramapo.edu/sabrincenter/entrepreneurship-in-a-market-economy/.

For your readers who want to watch the lecture live on the Internet, they can access the lecture at the same web page.  If there is any change in the live streaming web page, I will let you know.

Regards,
Murray

The Incredible Point at Which Janet Yellen's Brain Crashed Last Week

Federal Reserve Chair Janet Yellen's brain appeared to freeze up last week at the University of Massachusetts, Amherst, as she gave a speech on monetary policy,

What is now most fascinating to me about this brain malfunction is the precise point at which the Yeleln brain crash occurred, Keep in mind this was an hour long speech and the topic was Inflation Dynamics and Monetary Policy. She talked much theory and history during the speech, but her brain went on the fritz at the exact point when she discussed current Fed policy and why an interest rate hike was necessary in the very near future.

Pam and Russ Martens, of Wall Street on Parade, identify the time of the brain crash:

What Fed Chair Yellen is talking about just prior to her difficulties is enough to make anyone dizzy or provoke an anxiety attack. Yellen says:

“…continuing to hold short-term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability. For these reasons, the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data.”

I continue to hold the view that Yellen can't handle the pressure. She is completely unsure of how monetary policy should go. She is deeply concerned that a hike in interest rates might cause a crash (very unlikely), but also fears hiking rates too late could be a disaster. Whatever she does, some are likely to consider it a big mistake.

I will be very surprised if she serves out her entire term. which is scheduled to end on February 3, 2018.

  -RW

Crony Capitalism the Cause of Society’s Problems

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, “Crony Capitalism the Cause of Society’s Problems.”

Critics of capitalism constantly insist on the “failure” of the free market, from the news pundits to the leftist leaders of political parties. Yet, in fact, the asserted “failures” of capitalism are really the inevitable results of the interventionist-welfare state, and the close relationships between government and special interest groups popularly called “crony capitalism.”

On the one hand, the burden of government on business is indicated by the over 80,000 pages of Federal regulations and their estimated $2 trillion compliance costs on private enterprises.

But on the other hand, business and ideological interest groups spend billions of dollars on lobbying expenses to influence legislation in their respective preferred directions, and in 2014 this amounted to $3.25 billion. At the same time, during the 2013-2014 congressional election cycle, such special interest groups spent $1.6 billion on 1,671 Senate and House candidates.

The symbiotic relationship between business and government has also been shown in the recent Volkswagen scandal, under which Volkswagen aimed to expand sales and create “jobs” before all other goals – even if it required rigging emission standards -- under pressure from German politicians and labor unions determined to assure “full employment.”

As economists, such as Ludwig von Mises, have argued, such government interference with free market competition and profit seeking creates a system of corruption, inefficiency, and plundered use of other people’s money.

Only truly free market capitalism successfully separates government from competitive private enterprise and institutionally precludes the emergence and sustaining of the “crony capitalism” under which the world suffers.

http://www.epictimes.com/richardebeling/2015/09/crony-capitalism-the-cause-of-societys-problems/

Best,
Richard

Trump: You Get To Send the IRS an 'I Win' Letter

CNBC reports on Trumps remarkable tax cut proposal:

The plan calls for eliminating federal income taxes on individuals earning less than $25,000 and married couples earning less than $50,000. If you fall under the no tax bracket you'll get to send a one-page letter to the IRS that says "I Win," Trump said. But the plan would also benefit businesses and the rich.

Trump's Incredible Tax Proposal: Now This is What A Tax Cut Looks Like

I have often written that a key to tax cuts is not to reform the system, but to simply cut taxes from the current base, early indications are that this is just what Donald Trump has done in his new tax plan.

Josh Barro, at NYT, is up in arms about the proposal but provides a good early glimpse about what it is about (my emphasis)

You could call Mr. Trump’s plan a higher-energy version of the tax plan Jeb Bush announced earlier this month: similar in structure, but with lower rates and wider tax brackets, meaning individual taxpayers would pay even less than under Mr. Bush, and the government would lose even more tax revenue.

Currently, the top income tax rate for regular income is 39.6 percent. Mr. Trump would cut that rate to 25 percent, the lowest level since 1931. He’d cut maximum rates on capital gains and dividends to 20 percent from 23.8 percent. He’d cut the corporate tax rate to 15 percent, and also offer a special tax rate of 15 percent to business owners — less than half what they may pay under today’s rules. He’d abolish the estate tax entirely. 

Mr. Trump says he’d pay for those tax rate reductions by “reducing or eliminating most deductions and loopholes available to the very rich.” But in truth, rich people already pay tax on most of their income, so there’s less revenue available from cutting rich people’s tax breaks than Mr. Trump and many voters believe...

Even the hedge fund managers Mr. Trump has railed against on the stump would get a tax cut under his plan. The usual fee structure for a hedge fund is called “2-and-20”: a flat management fee (often 2 percent) on all assets, plus a performance fee (often 20 percent) on profits above a set threshold. Currently, the management fee is taxed at ordinary rates up to 39.6 percent, while the performance fee enjoys a preferential rate of 23.8 percent. Under Mr. Trump’s plan, all this income would be taxed at a maximum of 25 percent. The performance fee would be subject to a small tax increase, but that effect would be dwarfed by the large tax cut on ordinary management fees.

Another large, though less-noticed, tax cut in Mr. Trump’s plan is a reduction in the maximum tax rate on “pass-through income” to 15 percent; currently, this income is taxed at the same rates as wage income, up to 39.6 percent...

In addition to offering huge tax cuts to the rich and to business owners (including me!), Mr. Trump would offer huge tax cuts for the middle and upper-middle class. Married couples would pay no tax on their first $50,000 of income and just 10 percent on the next $50,000. A married couple with no children earning $100,000 and taking the standard deduction would pay $11,437 in income tax under today’s rules; under Mr. Trump’s plan, they would pay just $5,000, a tax cut of 56 percent. Many people with low-to-moderate incomes would see their income tax bills reduced to zero, increasing the share of the population that pays no income tax at all...

He’d also offer huge tax breaks to corporations, which would pay 15 percent, down from a current rate of 35 percent.

  -RW

If This is True, Trump Is Much Better Than Rand...

and Rand's insane call for a value added tax.

Shock and surprise all around https://t.co/phT08e3Xlw

— Noah Smith (@Noahpinion) September 28, 2015

Caffeine at Night Does More Than Keep You Up

Did Yellen Suffer a Transient Ischemic Attack (Mini-Stroke) During Her Speech at the University of Massachusetts?

Fed chair Janet Yellen caused many to sit up and take notice when she seemed to stumble over her words and became quite halting toward the end of her speech, when she spoke last week at the University of Massachusetts, Amherst..

A Fed spokesman passed it off as dehydration at the end of a long speech, but a medical friend who viewed the video of Yellen's odd behavior, at the request of EPJ, says he suspects it might have been a Transient Ischemic Attack.

He cautions that his suspicion may be off given that he did not personally observe Yellen and question her at the event and has not run any follow-up tests, but he said, from the video, it appears the actions of Yellen appear more consistent with TIA than dehydration.

Here's what WebMD has to say about TIA:

A transient ischemic attack (TIA) happens when blood flow to part of the brain is blocked or reduced often by a blood clot. After a short time, blood flows again and the symptoms go away. With a stroke, the blood flow stays blocked, and the brain has permanent damage. Some people call a TIA a mini-stroke, because the symptoms are those of a stroke but don't last long.

A TIA is a warning: it means you are likely to have a stroke in the future. If you think you are having a TIA, call 911 or other emergency services right away. Early treatment can help prevent a stroke. If you think you have had a TIA but your symptoms have gone away, you still need to call your doctor right away.

Symptoms of a TIA are the same as symptoms of a stroke. But symptoms of a TIA don't last very long. Most of the time, they go away in 10 to 20 minutes. They may include:

Sudden numbness, tingling, weakness, or loss of movement in your face, arm, or leg, especially on only one side of your body.
Sudden vision changes.
Sudden trouble speaking.
Sudden confusion or trouble understanding simple statements.
Sudden problems with walking or balance.

  -RW

Zuckerberg Went to Obama's China State Dinner

Zuckerberg and his pregnant wife at the White House Dinner

Mark Zuckerberg and his wife, Pricilla Chan, attended the State Dinner honoring Chinese President Xi Jinping and his wife Peng Liyuan.

Other Silicon Valley executives (crony wannabes) in attendance included Microsoft's Satya Nadella, Apple CEO Tim Cook and. most surprising, billionaire Mark Cuban.

 -RW

Trump Tax Plan Coming

Donald Trump is set to release a tax plan Monday that calls for major reductions in taxes on middle-income and poor payers, while increasing taxes on the wealthy, reports WSJ.

The plan will offer a “major tax reduction for almost all citizens,” the Republican candidate’s campaign said Sunday, according to WSJ.

Tax cuts are good, tax increases are not. I will reserve judgement until I see the plan in its entirety.

 -RW

Walter Block On the Book That Converted Him From Socialism

Dear Folks (I am sending this to my New Orleans-based mailing list of about 1200 people; if you want to be deleted fromt his list, just let me know):

Regarding tomorrow night’s book club meeting focusing on the Hazlitt book. I chose this book because I regard as the single best introduction to free market economics ever written. I first read this book when I was a senior in college, in 1963. Before reading it, I was a socialist, a bitter opponent of free enterprise. Afterward, for the first time I appreciated the great benefits of laissez faire capitalism.

It is a book club meeting, so, ideally, you should read this book. It is difficult to know exactly how many pages we will cover in our first meeting (Monday, 9/28, 6-8pm, 324 Miller Hall). My guess? About 35 pages. But who knows? Are you required to read any of this? No. C’mon by in any case; you’ll get the gist of it from our discusion. But, you will gain more if you do the readings beforehand, underline passages, come prepared with questions, objections, comments. The meeting is open to the public, not only to Loyola students. A free dinner will be offered either during the meeting (pizza) or immediately afterward (at Five Happiness, Chinese restaurant).

We shall be discussing this book:

Hazlitt, Henry. 1946. Economics in One Lesson.

Accessible here:

http://fee.org/resources/economics-in-one-lesson-2?gclid=CjwKEAjwhJmwBRDGsamBu8Pp7FwSJACKD1KHChxTbICCKpAH0LP_nEUgoqhUZJtxwU0DlCs7SFFt1RoCjo3w_wcB

or here:

www.economicsinonelesson.com, or www.economicsin1lesson.com

Best regards,

Walter

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

How Soon After the Wedding Can I Start Collecting Social Security Benefits?

Here  an intro youtube clip discussing how to get your money back from the government.

Larry Kotlikoff discusses Social Security benefits and some techniques on how to get more back.

Note: I am not sure waiting makes sense for everyone if they don't have enough hedge investments against price inflation outside of SS. If a person does, though, it may make sense for a person to employ these techniques and think of the eventual draw-down as the cash part of a portfolio.




BTW, Kotlikoff is very good on the overall debt crisis. I interviewed him about it in November 2013:





-RW

Krugman Admits the Phillips Curve Has Been a Bomb

Krugman writes at his blog:

One thing I do try is to concede that one piece of the conventional story hasn’t worked that well, namely the Phillips curve, where the “clockwise spirals” of previous protracted large output gaps haven’t materialized.

There is nothing to "materialize," Paul. Austrians have understood this for a very long time/

Murray Rothbard taught us the truth about the Phillips Curve decades ago and Joesph Salerno wrote in 1991:

Keynesian economists posited a stable “Phillips-curve tradeoff ” or
inverse relationship between inflation and unemployment.
Keynesians then advised that policymakers choose from this
“menu of policy choices” the attainable combination of unemployment
and inflation rates which would “optimize” society’s welfare.

During the 1970s and 1980s, however, it became painfully obvious
that the Phillips relationship was not stable, as inflation and unemployment
rates spiralled upward in tandem...

[There is no]room in modern Austrian monetary theory for the
neo-Keynesian postulate of a Phillips curve trade-off between inflation
and unemployment. Such a trade-off can only be alleged if one ignores
the price-coordinating feature of the social appraisement process by
which resource prices are derived from and adapted to entrepreneurial
forecasts of future output prices.

-RW

Most Common Jobs Held By Immigrants

And Trump wants tp throw these people out because they are stealing "our jobs"?

Is Trump going to take a job as a busboy in a restaurant?

-RW

Judge Napolitano: Pope Francis Doesn't Understand Economics

Is Oakland About to Explode?

With San Francisco rents, both office and residential, among the highest in the country, businesses and residents are looking across the bay.

Oakland residential rents climbed the fastest in the month of August of any city in the country, at an annualized clip of 20%.

The median rent for a one bedroom in the East Bay city is now $1,980, which, of course is very high, but nothing compared to the $3,500 per month median rent in "I lost my wallet" San Francisco.

On the corporate side, Pandora had located its global headquarters in the city, And Uber has just announced it is taking over an old Sears building, just a couple of blocks from Pandora.

Uber officials say that extensive renovations will be made to the seven-story building and that when completed the company will employ up to 3,000 people at the location.

Uber is also moving forward with plans for a two-building campus in San Francisco's Mission Bay.

Some say it's going to be the new Brooklyn and, indeed, a Brooklyn Deli has opened in the Pandoa-Uber area.

I happened to be in the area recently and stopped into the deli, which appears to be managed by Asians. Something you wouldn't see run by Asians in Brooklyn, NY.

Since I have something of a New York accent, I asked if I could get a discount, on the pastrami sandwich I was ordering, because my accent was adding authenticity to the place. No go on the discount. Typical deli owners.

-RW

Bill Bonner: Will the Next Crisis Result in the Banning of Cash?

The Pope and Soviet-Style Central Planning

By Thomas DiLorenzo

n his recent speech to the U.S. Congress Pope Francis declared that “the common good is the chief aim of all politics” and that “freedom requires love of the common good.”  Legislation is “always based on care for the public,” the pontiff pontificated.  Only a naïve child could believe such a thing.

The pope said these things in the context of imploring the Congress to adopt some kind of Soviet-style central planning of the economy in the name of “fighting global warming,” while simultaneously exploding American welfare state spending by extending welfare benefits to all welfare parasites from every Third World nation on the planet.  Thus, if “Catholic social teaching” stands for anything these days, it stands for international socialism and egalitarianism gone wild.

In the context of politics there is no such thing as “the common good,” for such a concept implies unanimity and politics is never unanimous, especially in a country of over 300 million people.  Moreover, if everyone agrees on a course of action, then there is no need for government to coerce us into doing it.  There is no need for government at all in such instances.

As Ludwig von Mises pointed out in his book, Liberalism, the only sense in which “the common good” or “the public interest” makes any sense is in the case were property rights are well protected.  Secure property rights, wrote Mises, is the shortest road to peace and prosperity.  All legislation, however, is an attack on property rights because it invariably involves the placement of widely-dispersed burden on the majority for the benefit of a well-organized minority or special interest.  All legislation is the result of rent- or plunder-seeking by special-interest groups or by the state itself in order to expand its powers and budgets.  As such, all politics is the mortal enemy of anything that can be construed as “the common good,” exactly the opposite of the pope’s declarations.

Politics is the ultimate “robbing Peter to pay Paul” scam.  Peter, the hapless taxpayer, is effectively blindfolded so that he can be robbed for the benefit of Paul, the greedy special interest who kicks back some of the loot to his political patrons in the form of votes and “campaign contributions.”  Peter is “blindfolded” by the tricks of deficit spending and money printing, which hide the true costs of government, as well as the concentrated benefits/dispersed costs gambit whereby a small tax is imposed on the many to finance large benefits for the few and well connected.

Politics is thus never based on “care for the public,” as the pope said.  It is based on the self-interest of politicians. Their “chief aim” is not “the common good,” but keeping their jobs and expanding their pay, perks, and powers, the public be damned.

The rhetoric of “the common good” began with the French philosopher Rousseau, the intellectual godfather of communism and hater of private property.  The common good, said Rousseau, is something that is known to an elite in society.  This special knowledge supposedly gives them the right to impose their will on all others.  The communists certainly took this idea to an extreme, slaughtering tens of millions of dissenters, but all statists, including Pope Francis, rely on the same rhetoric.  They rely on repetition, obfuscation, and rhetorical game playing instead of terror and mass murder to get the public to acquiesce in their plans for international socialism with themselves, the world elite, in charge.

Read the rest here.

Rothbard: Why Keynes Was More Attracted to Fascism Than Communism

Deutsche Bank On How to Fire People

Yes, the bank has a script written out to guide management in firing employees----over the phone.

Bloomberg reports:

Deutsche Bank AG traders should be wary of calls that start with a thank you.
“Thank you for making yourself available for this call today,” reads the first line of a two-page draft script obtained by Bloomberg News that was used to fire at least one trader caught up in the Libor scandal. 

The niceties quickly fall away.

“We have decided that your employment agreement should be terminated with immediate effect by reason of your gross misconduct, which in the opinion of the bank is serious enough to prejudice the business and reputation of the bank,” the speaker would continue. “Your dismissal will be effective immediately and you will not be entitled to any period of notice or payment in lieu of notice.”

The text -- part of a cache of documents showing internal discussions on how to handle the exits of high-profile traders such as Guillaume Adolph and Christian Bittar-- shows how executives reacted on one front as the London interbank offered rate scandal mushroomed in 2011...

The documents center on two traders, Adolph and Bittar. Bittar was paid a bonus of as much as 90 million pounds in 2008. Both men have been reviewed by U.K. investigators, but neither has been charged....

The scripts also include a list of suggested responses to a trader in the process of losing his job. The primer advises the speaker not to “become involved in a detailed discussion of the facts” surrounding the basis for the termination.

"You may just simply wish to say: ‘We appreciate the points that you are making but can assure you that the Bank has thoroughly reviewed the available evidence and has now reached a conclusion.”

And if the employee complains the bank hasn’t followed the “usual disciplinary process” -- there’s an answer for that too.

“In the light of your interviews and the documents which have been discovered, we have reached the conclusion that your conduct does amount to gross misconduct and thus the appropriate course of action is to dismiss you immediately,” the speaker should say. “We do not think that any further hearings would alter that conclusion.”

The First Airplane That Anyone Can Fly

This is what can happen when the government gets out of the way.

Free market innovation is awesome.





-RW

A Conversation with a Bartender

Yesterday, I walked into a bar when it was not busy. I struck up a conversation with the bartender, a 20-something female.

At one point during the conversation she said to me in a bit of a conspiratorial tone, "Actually, I am leaning toward socialism."

I asked her why. She said, things are bad and that the cost of education was too high, that she had tons  of college debt. And then she said, "Plus, social security is bankrupt and I will never see any of it."

I pointed out to her that her concerns really were about areas of the economy that were the most socialistic here in the US. I said that in the private sector no bank or brokerage house would just be allowed to take your savings give it out to someone else and hope new money came in to pay you. Bernie Madoff tried that, I said. Only governments, when they act like socialist planners, get to do that, and get away with it. Plus, they force you into the system, not even Madoff did that.

I pointed out that the education system was very heavily regulated and that the government was pumping money into the system with reckless abandon. Prices are getting out of control where there are the most socialist-type regulations and government funding,including in the healthcare and education sectors, I said. Where there is little regulation prices are falling, I went on,and mentioned cell phones, flat screen TVs and computer laptops.

She nodded, but she then said. I am not against all corporations. they just need to be regulated more. "That's fascism," I said, "Right out of the Mussolini book on how to run an economy."

At that point, the bar got quite a bit more crowded and she went to wait on other customers.

But, I think I will return sometime next week to see if she is still a socialist.

-RW

HARVARD: 8Tips for Buying Shoes that are Good to Your Feet

This is much better advice than they give about how an economy should operate.

From Harvard Medical School:

When you're ready to replace some of that uncomfortable footwear, these tips can help:

1. Wait until the afternoon to shop for shoes — your feet naturally expand with use during the day and may swell in hot weather.
2. Wear the same type of socks that you intend to wear with the shoes.
3. Have the salesperson measure both of your feet — and get measured every time you buy new shoes. If one foot is larger or wider than the other, buy a size that fits the larger foot.
4. Stand in the shoes. Make sure you have at least a quarter- to a half-inch of space between your longest toe and the end of the shoe.
5. Walk around in the shoes to determine how they feel. Is there enough room at the balls of the feet? Do the heels fit snugly, or do they pinch or slip off? Don't rationalize that the shoes just need to be "broken in" or that they'll stretch with time. Find shoes that fit from the start.
6. Trust your own comfort level rather than a shoe's size or description. Sizes vary from one manufacturer to another. And no matter how comfortable an advertisement claims those shoes are, you're the real judge.
7. Feel the inside of the shoes to see if they have any tags, seams, or other material that might irritate your feet or cause blisters.
8. Turn the shoes over and examine the soles. Are they sturdy enough to provide protection from sharp objects? Do they provide any cushioning? Also, take the sole test as you walk around the shoe store: do the soles cushion against impact? Try to walk on hard surfaces as well as carpet to see how the shoes feel.

-RW