Big Mac and the Dollar

Using McDonals’s Big Mac as the standard, the US Dollar looks relative firm compared to some other currencies. The chart below from The Economist looks at the purchasing power of currencies relative to the Big Mac in 2009 and 2014. A half dozen currencies have been relatively weak compared to the dollar and a half dozen have been in line with the dollar. Only the Norwegian Kroner and Swiss Franc have been relatively strong compared with the dollar over the time period. In a world currency war, most currencies, including the dollar could be losing purchasing power in an absolute sense.

Some central banks have helped their currencies slim down. The Swiss franc’s decline is thanks in part to the Swiss National Bank. It put a styrofoam lid on the franc’s value when capital began flowing in from panicked European investors, lest the rising cost of Swiss exports abroad drive Switzerland into recession. The Bank of Japan has also taken a bite out of the yen’s value. Its generous portion of quantitative easing has helped push the currency down from close to fair value to 24% below it.

The Chinese yuan, once the most undercooked currency in the index, is now only the 12th-most-undervalued, thanks to slow but steady appreciation in recent years. Yet because China’s economy has grown so quickly, it has piled on weight in the index, helping to push the average undervaluation even lower.

It is not on the whole surprising that currencies globally are looking a bit less supersized. A healthier American economy and reduced asset purchases by the Federal Reserve are a recipe for a stronger dollar. But American firms need to maintain their competitiveness. History suggests that even when Fed tightening is well done, it is rare that global credit conditions shift without a little scorching.

From the print edition: Finance and economics

Congratulations to All Who Passed the Mises U Exams

At the end of Mises University, many students chose to take the optional — and highly rigorous — Mises University examinations for cash awards.  64 students took the written exam, and 30 of those passed to go on and take the oral exam.

The first-place prize of $2,500, made possible by Douglas E. French, was awarded to Kyle Marchini.

The second-place prize of $1,500, made possible by Mrs. Joele Eddy and the late Dr. George Eddy, was awarded to Matei Apavaloaei.

The third-place prize of $750, made possible by Mrs. Joele Eddy and the late Dr. George Eddy, awarded to Edgar Duarte Aguilar.


Passed Oral Examination with Honors:

Read More→

Argentina Is Now In Default, But There Is Life After Default

1280px-Elecciones_en_Argentina_-_Cristina_y_Néstor_Kirchner_26102007_-_3The Wall Street Journal declares it a done deal.

Nicolás Cachanosky explains the road that got us here.

Forbes claims that “everyone lost” because of the default, but that’s debatable.

Chris Westley points out the advantages of an Argentinian default, while Peter Klein explains how default here in the USA may be a good thing as well.

For even more, see Joe Salerno’s “Myths and Lessons of the Argentine ‘Currency Crisis’” from February.

Austerity for Whom?

Steve Hanke points out that the anti-austerity faction in the EU led by Italy,  France, and Spain is hypocritical when it claims  that “there is nothing left to cut” in their budgets.  Senior civil servants in Italy get paid over 12 times the national average salary.  In France the ratio of senior civil service pay to the national average salary  is over 6 and in Spain about 4.

The Fed at One Hundred: A Critical View on the Federal Reserve System

fedbookSome great contributors. This might even be worth the high price:

Including contributions from David Howden, Guido Hulsmann, Thomas DiLorenzo, Thomas Woods, Robert Murphy, Shawn Ritenour, Jeffrey Herbener, Mark Thornton, William Barnett, Peter Klein, Lucas Engelhardt, and Douglas French.

The book was edited by David Howden and Joseph Salerno, and includes a forward by Hunter Lewis.

Joe Salerno discussed the book at the most recent Austrian Economics Research Conference.

Video with Timothy Terrell: Issues in the Economics of Medical Care

Archived from the live broadcast, this Mises University lecture was presented at the Mises Institute in Auburn, Alabama, on 25 July 2014.

Video: Tom DiLorenzo Discusses Anti-Market Mythology

Archived from the live broadcast, this Mises University lecture was presented at the Mises Institute in Auburn, Alabama, on 25 July 2014.

When High Taxes Lead to Revolution

6824Mises Daily Thursday by Peter St. Onge:

Sun-Tzu believed that societies are in deep trouble when wars and other government efforts exhaust the wealth of those who pay the bills. But the lack of revolutions, even in highly-taxed societies points to the possibility that many are willing to tolerate rather high taxation rates.

Jim Grant: “The Federal Reserve Has So Little Self-Awareness…”

…it un-ironically wonders aloud who’s been suppressing volatility and compressing yields. “Who could it be who’s been doing that?” Grant asks.

Grant notes there are some investment opportunities in Russia and then says “One form of investment that is almost as thoroughly hated as Russia is gold and gold mining shares.” He then explains that gold “is a sound inoculation against the harebrained doctrine of modern central bankers,” and important when dealing with “the likely crackup” of modern monetary arrangements.

Default, Argentina!

Flag_map_of_Argentina.svgRegarding Nicolás Cachanosky’s insightful article this morning on Argentina’s coming default, I would just add that it can’t come soon enough.  Although one can only imagine what kinds of behind-the-scenes pressure Argentine President Cristina Kirchner and central bank head Juan Carlos Fábrega are under right now to pay these bonds, Argentina should continue with its default. It’s the only moral choice. If it doesn’t default, it will (i) maintain its creditworthiness in the future, which only puts off for another day the inevitable end to the government’s tax-borrow-spend policies that only favor the political class and well-positioned cronies, and (ii) it imposes Greece-like austerity on the remaining productive sectors and other innocent parties when real austerity would imply vastly reducing the size and scope of the Argentine state. If it defaulted and the government was finally deemed a credit risk by the World Bank (and its cronies), then the government’s ability to intervene in the economy would be severely hampered and incentives for real savings and sustainable economic growth would finally reappear.

I wrote about the “upside of Argentina’s default” back in 2002 here.  The argument still stands.  A default today can only help to normalize them in other western countries, to the great benefit to future generations.  Make those establishment parties who bought Argentina’s bonds assume the risk themselves.  Using international courts to bail them out only harms the Argentine people who will have to pay for them through taxes and inflation in the future while it perpetuates moral hazards that exist well beyond the confines of Manhattan and Buenos Aires.

July’s ‘The Free Market’ Is Here!

fm_july_coverThe July issue of The Free Market is now available online, with a new essay on money from Joe Salerno and an interview with Randy Holcombe about his new economics textbook.

Salerno explores some misconceptions about money and the new “gold standard” proposed by Steve Forbes:

In other words Forbes’s “stable and flexible” gold standard would facilitate and camouflage an inflationary expansion of the money supply that would, according to Austrians, distort capital markets and lead to asset bubbles. The motto of our current gold-price fixers seems to be: “We want sound money—and plenty of it.”

And Holcombe discusses his new textbook on Austrian economics designed for mainstream economics classes:

Economics students, including undergraduates, are groups I am targeting with the book. The book is not an introductory economics text from an Austrian perspective, and assumes that the reader already knows some economics. But even a student who has only taken an introductory economics course will have enough background to understand what is in the book. The idea was to write a book for people who already know some economics, but are not familiar with the Austrian School. There are lots of people with some background in economics who have heard of the Austrian School, but don’t have a good idea about what distinguishes the Austrian School from mainstream economics, or from other schools of thought.

July’s issue will also give you the latest on our new series of audio interviews, Mark Thornton’s debate at Oxford, plus the latest from our alumni and scholars.


Mises University 2014

The faculty and students of Mises U 2014 (many more photos here and here and here):


Huerta de Soto on the Spanish Scholastics in Chinese

I earlier linked to this talk at the Segovia Cathedral by Jesús Huerta de Soto about the Spanish Scholastics. Now, it has been subtitled  in Chinese (presumably Mandarin) by Tyler Xiong Yue with the assistance of Mises Institute 2014 Summer Fellow Jingjing Wang. Click here for the video.  


The Demolition of Piketty-ism

By George Reisman who reveals Piketty’s shocking unawareness of even the basic economic theory related to his large, statistic-filled tome.

Understanding Argentina’s Coming Default

recession impact on young man and society in arentinaMises Daily Wednesday by Nicolás Cachanosky:

Argentina’s government is on the verge of default yet again. How could this happen three times in thirty years? Well, the Argentine government has a habit of spending without restraint and then trying to cheat its creditors. But this time, it’s run into a problem.

Timothy Terrell Examines Common Objections to Capitalism

Archived from the live broadcast, this Mises University lecture was presented at the Mises Institute in Auburn, Alabama, on 25 July 2014.

Will the State Save Us From Ebola?

ebolaThe Drudge Report and other media outlets have  done their best to create a panic over the spread of Ebola in western Africa. It’s a safe bet that, if it hasn’t happened already, some devoted interventionists will point to disease epidemics as proof of the indispensable role of states in halting the spread of the disease.  While television and movies have trained people to believe that one person on an airplane can start off a virulent epidemic, the reality appears to be rather different. Ebola is transmitted through direct contact with blood and bodily fluids. Moreover, debilitating Ebola symptoms show up quickly, before the infected can unknowingly  infect large numbers of others, and the conditions in western Africa, where Ebola is most successful, could hardly be more unlike those in Europe and North America where, thanks to relatively free markets, there is easy access to clean water and health care services.

Not surprisingly, we also find that the governments of region where Ebola thrives have paved the way themselves for the spread of the disease, with endless wars and the destruction of capital:

As Dionne notes, all three countries have poor health infrastructure, due in part to years of civil war in Liberia and Sierra Leone. Liberia has just .014 doctors per 1,000 people, and a common joke is that JFK Medical Center, Monrovia’s main hospital, has long had the unflattering nickname “Just For Killing.”

In addition, we can be sure that if any political stability is achieved in Liberia or Sierra Leone, that the local regime would loot any moderately successful private health-care operation. The lack of restrained political systems and private property all but ensure a lack of access to the very things that making disease prevention successful.

Global epidemics have occurred before and the track record of states have not been exemplary.

Perhaps the textbook illustration of this  is the influenza epidemic of 1918. Not only did the First World War generate conditions more favorable to the spread of the disease (by destroying the infrastructure of hygiene, quality food, and good health in general) but the governments of the time ensured worldwide transmission by crowding infected WWI troops with the uninfected, and then shipping them on boats to various cities.

Government incompetence is most certainly not confined to the days of yore, of course. In recent years, there’s been news of another flu epidemic every few years. Predictably, the federal plans for mass inoculations go awry, and the feds then intervene to hamper the production of resources for flu avoidance and treatment. Christopher Westley describes the usual scenario: Read More→

The War on Poverty and the War on Drugs

111031.ICE.HSI.OperationPipelineExpress.herb_08As an apparently war-minded people, Americans (or at least, our American political leaders) have been comfortable framing parts of the domestic policy agenda as wars for decades. Two of the most prominent have been the War on Poverty and the War on Drugs.

Despite the similarity in their names, there is an important difference between the two. The War on Poverty is not a real war. The War on Drugs is.

The War on Poverty is not a real war because there is no enemy that we are attacking to fight poverty. Quite the opposite. The War on Poverty identifies poor people and them gives them stuff. Sometimes it is income. Other times it is food, or health care, or education.

If some analogy to war is made, the War on Poverty is more like the Marshall Plan that provided aid to the victims of war regardless of any fault in causing the war. If people are victims of poverty, the War on Poverty gives them stuff, perhaps with the idea that the stuff can help them escape poverty.

The official poverty rate in the United States has not fallen since the late 1960s, so if the idea of the War on Poverty was to reduce poverty, then according to the government’s own statistics, it hasn’t worked. But that’s a different issue. The point here is that the War on Poverty is not actually a war.

The War on Drugs is a real war. It’s name obscures the people who are the combatants. It is actually a war on the buyers and sellers of drugs. The police are arming themselves with military-style weapons and using military tactics to attack the enemy—drug buyers and sellers—and the members of the declared enemy are also taking up arms to defend themselves and their property, partly against the police, but also partly against other citizens. Obviously, the police will not protect the people with whom they are at war, or their property.

Indeed, with civil forfeiture laws, the police will not only seize the property they have declared war against,but all property associated with those they treat as enemy combatants.

For the most part, laws in the United States are written and enforced to protect minorities of any type, whether defined by race, gender, age, sexual preferences, or religion, but the one big exception to protection of minorities is that the War on Drugs has singled out people for persecution based on substances they choose to buy and sell.

Not too long ago, the legal system went after people who engaged in homosexual activity, or interracial marriage, but we’ve moved beyond that and the laws now protect people’s choices they make in their private lives, even if many people don’t approve. (One exception is same-sex marriage, that is still subject to debate.) Freedom is meaningless if people are only granted the freedom to make choices that political leaders approve.

Despite progress in some areas protecting minorities, the War on Drugs is a glaring exception. I’m not talking about the fact that racial minorities are more likely to be targeted in the War on Drugs (although that is true). The minority I refer to is drug buyers and sellers, regardless of their other characteristics. Why do we persecute that minority as we extend legal protections to so many others?

The government is not content to merely attack actual drug buyers and sellers: it sets up stings to lure people into agreeing to drug transactions even when it has no other evidence against them.

A USA Today article describing these sting operations says, “The ATF’s stash-house investigations already face a legal backlash. Two federal judges in California ruled this year that agents violated the Constitution by setting people up for ‘fictitous crime’ they would not otherwise commit; a federal appeals court in Chicago is weighing whether an operation there amounted to entrapment.”

How are people targeted for sting operations? The article goes on to say, “In one case in San Diego, a government informant… testified that he sometimes approached people on the street to see if they wanted to commit a drug robbery. … In another case, a federal appeals court judge said the ATF dispatched an informant to randomly recruit bad guys in a bad part of town.”

“There’s something very wrong going on here,” said University of Chicago law professor Alison Siegler, part of a team of lawyers challenging the ATF’s tactics in an Illinois federal court. “The government is creating these crimes and then choosing who it’s going to target.”

Justifying its actions, in the same article the ATF says “…its agents rely on criminal records, police intelligence files and confidential information to identify people already responsible for violent robberies.”

Notwithstanding the contradictions in the preceding paragraphs, one reason people who are targeted in the War on Drugs have criminal records is that the government has declared war on them. Further, if they are really targeting people responsible for violent robberies, they should arrest them for robbery rather than try to entrap them in a drug sting operation.

The War on Drugs is a real war in which the government has singled out a minority population—drug buyers and sellers—for attack. It comes after them with military-style weapons and tactics so it can confiscate their property and incarcerate them.

The War on Poverty is not a war. It is a peace-keeping operation that provides goods, services, and money to the poor, much like the Marshall Plan did in Europe after World War II.

In neither case are these programs accomplishing their stated goals. The poverty rate is not declining, and people continue to buy and sell drugs. But then, you knew that before you started reading this.

Re: Mises University

David, I liked this Facebook post from another student, on opening night: “I had the opportunity to listen to a very insightful discussion between an Israeli journalist and a Muslim business owner. They were discussing the challenges of extremists in both their cultures and how government intervention only exacerbates those extreme views. Only at Mises. I love it here already!”

Video: Joseph Salerno Explains Gold Standards: True and False

Archived from the live broadcast, this Mises University lecture was presented at the Mises Institute in Auburn, Alabama, on 25 July 2014.