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President Obama thinks he knows how to soothe everyone’s pain at the pump. The White House will unveil a $52 million proposal Tuesday at the White House, where he will be joined by Attorney General Eric Holder. According to the Associated Press,
the proposal said it aims to detect and deter illegal manipulation by energy speculators, the type of practices that many Democrats blame for the high cost of gasoline. The officials spoke on the condition of anonymity to discuss the plan ahead of Obama’s announcement.
The President’s $52 million proposal will reportedly “curtail the ability of speculators to take unlawful advantage of oil price volatility.”
The Obama plan will, again, according to the AP,
— Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.
— Increase spending on technology to provide better oversight and surveillance of energy markets.
— Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.
— Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.
And if all that isn’t enough, the President will turn the White House Council of Economic Advisers loose on the CFTC’s data.
Speculators are convenient scapegoats for all governments. In August 1971, President Nixon told the nation that he was “temporarily” closing the gold window. The amount of gold held in Fort Knox as a percentage of outstanding paper dollar claims against it — had declined from 55% to 22% — leaving the Treasury desperately close to default. So the Nixon Treasury either had to quit borrowing and quit printing money, or snip the dollar’s link to gold.
Of course, the conservative Nixon couldn’t admit that his big-spending policies were wrecking the dollar. No, it was those speculators, he claimed.
In the past seven years, there has been an average of one international monetary crisis every year. Now who gains from these crises? Not the workingman; not the investor; not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them.
In other speculator bashing news today, The Zimbabwe Mail reports that the Zimbabwe government is ordering 109 companies to make new applications for mineral titles.
The order follows the ministry of mines’ decision in January to hike pre-exploration fees for most minerals by as much as 8,000 percent in a move the ministry said was meant to curb the speculative holding of mine titles.
The Ministry of the Mines is requiring companies and individuals to use the titles or lose them, and a number of titles have been surrendered to the Ministry.
Despite the policy, Ministry officials believe there will be a nearly 16% growth in registering titles this year.
“The new mining fees are not meant to discourage indigenous players, rather they seek to do away with the speculative tendencies in the mining sector. Over the past few months, we have seen a number of claims being surrendered to the Ministry following the adoption of the policy as well as the implementation of the Use It or Lose It Policy,” said Dr Obert Mpofu, Mines and Mining Development Minister.
Despite the directive, it’s hard to imagine miners lining up to register for mining titles in Zimbabwe, and, as for Obama’s plan, Zero Hedge is “100% confident that just like every failed attempt at central planning, all Obama will achieve is another spike in crude prices, just in time for the next global reliquification cycle, just in time for 2012′s debt ceiling scandal, and just in time for the reelection.”
This was just found in the LvMI archives: Ludwig von Mises speaking on “The Problems of Inflation” at FEE in 1968.
At 41:34, Mises says, “What the individual American… has to realize is that the policy of inflation… makes it impossible for him to organize his working, earning, spending, and saving in such a way that he could provide for the future of his family. This is why inflationary policy is the most radical revolutionary institution in the world.”
At 1:02:03, Mises recommends reading Murray Rothbard’s America’s Great Depression to understand how credit expansion causes the business cycle.
UPDATE: Thanks to Nielsio for putting it on YouTube!
Join Walter Block on Friday, May 4 at 7pm Eastern for a private webinar on Free Market Environmentalism.
Dr. Block writes:
All too often free enterprise is blamed for environmental problems. I will demonstrate that the real problem is statist takeovers of private enterprise and violation of private property rights. Examples to be discussed: air pollution, species extinction, global warming, plastic bags, environmental racism, deforestation (emphasis on Brazilian rain forest disappearance), and, during the discussion period, any other environmental issue anyone wants to bring up.
Over at the Beacon blog, Misesian Robert Higgs has posted a delightful and poignant retrospective on the development of modern Austrian economics in the artfully modified lyrics of Don McLean’s pop classic, American Pie .
Germany’s Wirtschaftswoche just published a major story on Mises’s life and works, stressing his contributions to business cycle theory. The “intransigent visionary” provided the theoretical framework for analysing, understanding, and correcting our present financial quagmire.
Robert Wenzel reviews Ralph Raico’s new book, Classical Liberalism and the Austrian School, a a masterful summary and synthesis of Raico’s lifetime work. The book reflects not only Raico’s erudition and keen intellect, but also his wisdom and dry wit. Notes Wenzel: “in addition to the wit of Raico that keeps you turning the pages for more, I consider Raico a Grand Master quotesmith. He is a master at the demolition of incorrect ideas by placing a well selected quote at the exact spot where it will cause a bad idea to come crumbling down at freefall speed.”
How many eminent macroeconomists is one clear-thinking and literate economic journalist worth? Well if the journalist is Caroline Baum of Bloomberg.com, the answer is at least five. In a column this week, Ms. Baum, channeling Henry Hazlitt, demolishes the argument put forth by the IMF’s Olivier Blanchard, Ivy League Professors Ken Rogoff, Greg Mankiw, and Paul Krugman and Fed Chairman Bernanke that an acceleration of the inflation rate is the panacea for the still ailing U.S. economy. The gist of the argument of these luminaries of modern macroeconomics is that an increase in the inflation rate, say to 3 to 4 percent, will stimulate the economy in two ways. First, higher inflation will “help the process of deleveraging” by eroding the real value of debt, thereby reducing the burden of debt payments and encouraging spending. And second, an increase in the inflation rate will arouse expectations of future depreciation of the dollar and thus panic businesses and households into spending their hoarded cash. This argument is rooted in what might be called the “spending illusion,” the simplistic and deeply fallacious doctrine that the spending of money drives the economy. This doctrine originated in the writings of John Law, the notorious early eightenth century gambler, financial schemer–and central banker. Law’s doctrine inspired the monetary cranks of the nineteenth century as well as the founders of modern macroeconomics in the twentieth century, Irving Fisher and John Maynard Keynes. It remains deeply entrenched in the macroeconomic thought of the twenty-first century.
But Baum will have none of it. As she pointedly comments:
There is something fundamentally wrong when government prescribes the same policies that got us into this mess as the solution. The U.S. lives beyond its means. The federal government is running a trillion-dollar deficit for the fourth consecutive year, compounding its inability to make good on promises it has made to future retirees. Consumers binged on credit because home ownership was touted as a reliable piggy bank. All the postmortems on the financial crisis emphasized the need to save more, consume less. . . . If we need to save more, both individually and as a nation, the Fed shouldn’t encourage us to spend, spend, spend. And some economists want to introduce higher inflation into this toxic mix?
You would think that the increasingly evident failure of China’s inflationary monetary policy would give our own inflationists pause. China’s plan to promote consumption spending involved the building of spectacular new cities and shopping malls based on the belief that ”if you build them, they will come–and spend.” An arresting visual representation of this enormous malinvestment of capital and profligate waste of resources is captured in these eerie photos of completely empty Chinese shopping malls.
“Too low too long” Fed Policy; It’s back!
In a previous post, (http://bastiat.mises.org/2012/04/rules-discretion-or-no-central-bank/ ), I argued John Taylor would be better able to defend his criticism that the Fed kept rates too low for too long prior to the crisis if he used Mises-Hayek. Axel Leijonhufvud, in 2008 (“Keynes and the Crisis.” Center for Economic Policy Research Policy Insight No. 23, May ) made such an argument, “Operating an interest-targeting regime keying on the CPI, the FED was lured into keeping rates far too low far too long. The result was inflation of asset prices combined with a general deterioration of credit quality. This, of course, does not make a Keynesian story. It is rather a variation on the Austrian overinvestment theme.”
Leijonhufvud, with a nod to Mises and Hayek, makes the claim again with the additional argument, “We are now trying to cure the consequences by maintaining still lower interest rates for a lengthy period” supplemented with the note,”Ludwig Mises and Friedrich Hayek would have told us that this is not a good idea.”
HT to Greg Ransom at Taking Hayek Seriously. See: http://hayekcenter.org/?p=5299
Axel Leijonhufvud’s INET Berlin paper at “The Unstable Web of Contracts”.
Walter Block Mark Brandly Paul Cantor John Cochran Paul Cwik Thomas DiLorenzo Nicolai Foss David Gordon Jeffrey Herbener Robert Higgs Hans-Hermann Hoppe Jörg Guido Hülsmann Peter Klein Hunter Lewis Thorsten Polleit Ralph Raico Joseph Salerno Timothy Terrell Mark Thornton Christopher Westley Thomas Woods