Archive for Uncategorized – Page 2

Thornton: The ‘Irrational Policy’ That Is Cannabis Prohibition

5997920696_ecb224068e_bOriginally published at
The Case Against Repealing Marijuana Prohibition?

by Mark Thornton

The recent victories in favor of legalizing recreational marijuana consumption in Colorado and the state of Washington have given hope for the eventual repeal of national marijuana prohibition. Many states have reformed their marijuana laws, including provisions for legal medical marijuana consumption in more than 20 states.

Despite these positive developments, marijuana remains a Class 1 drug along with heroin and cocaine. There remains widespread misunderstand concerning marijuana consumption, its dangers, and the implications of legalizing marijuana. This lack of understanding is exemplified by a pamphlet published by the prestigious Heritage Foundation, “Legalizing Marijuana: Why Citizens Should Just Say No,” by Charles Stimson (September 13, 2010).

Here are the main “issues” raised by legalizers that the pamphlet tries to debunk:

“Marijuana is safe and non-addictive.” No one should argue that marijuana is completely safe as few things in life are perfectly safe. However, it is relatively safe compared to other recreational drugs. Most of the negative health consequences have been debunked. I examined several lists of “the most addictive drugs” and marijuana was either not on the list or was far down the list.

“Marijuana prohibition makes no more sense than alcohol prohibition did in the early 1900s.” There was no rational justification for marijuana prohibition in the first place, it was simply racially motivated propaganda. The medical community testified against the prohibition, not in support of it. At least supporters of alcohol prohibition could speak to genuine social problems and health concerns about alcohol. Therefore, marijuana prohibition actually makes even less sense than alcohol prohibition.

“The government’s efforts to combat illegal drugs have been a total failure.” Despite enormous fiscal and social costs, the war on drugs has done little to reduce access to drugs or to put a dent in the addiction rate. Meanwhile, crime, corruption, violence and crime associated with the War on Drugs, drug overdoses, and emergency room visits have all skyrocketed.

“The money spent on government efforts to combat the illegal drug trade can be better spent on substance abuse and treatment for the allegedly few marijuana users who abuse the drug.” The problems associated with drug use and addiction can never be solved by law enforcement. These are medical, social, and educational problems and have to be addressed in that manner.

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When Will the Bubble Burst?

Woolworth BuildingAs I exit Pace University in Lower Manhattan where I teach, I can look across City Hall Park to the west side of Broadway to see the terra-cotta Woolworth Building, an early skyscraper  built in 1913  If I gaze upward, there atop the building I can view the iconic green tower  containing the nine-story penthouse that is now on the market for $110 million.  But that is not the most expensive piece of residential  real estate currently on the booming Manhattan market.  That honor goes to the triplex penthouse condo at 520 Park Avenue on the toney Upper East Side, which is still under construction and lists for $130 million.  The 30 one- and two-floor condos in the same tower list for between $16.2 and $67 million.  And it is not just the very high end of the market that is a-bubbling.  It was reported that in the second quarter, the average amount of time that a property remained on the market was 96 days, down 46% from a year ago, despite the fact that the number of properties on the market was up 18% year over year.  The buyers were largely foreign, especially Chinese.

More evidence that the bubble is expanding can be found in the global art market.  In the year ending July 2014, sales of contemporary art at public auctions reached  $2.046 billion, a 40% increase over the previous year.  China surpassed the U.S. to take in 40% of the total sales proceeds.

Not surprisingly, the number of financial commentators issuing dire warnings of an imminent  collapse of the real estate and stock market bubbles increases every day.  Unfortunately, most are unable to articulate a coherent case for the their forecasts because they are unacquainted with the Austrian theory of the business cycle. A notable exception is  Michael Pollaro, who  bases his forecast  of an increased risk of economic collapse on the sharp deceleration of the TMS monetary aggregate (formulated by  Murray Rothbard and myself).  Pollaro points out that the year-over-year rate of growth of TMS–or what he labels TMS2–was 7.9% in August, which is down  780 basis points or 50%  from its August 2011 high.  According to Pollaro:

The data support what the Austrians teach – monetary inflations create booms which result in deflationary busts once the rate of monetary [growth] turns down in a significant and sustained manner. The 1995 to 1999 monetary surge, then subsequent monetary deceleration gave us the Technology Boom-Bust.  The 2000 to 2006 monetary surge then ensuing monetary deceleration gave us the Housing Boom-Bust turn Credit Bust turn Great Recession.

And what of the latest monetary extravaganza which began in earnest in August/September 2008, the one that has given us new all-time highs in the S&P 500. . . . Well, that monetary surge has in fact rolled over and is clearly heading down.

While arguing  that growth of the money supply is   “the foundational starting point to consider when determining the downside of a monetary induced boom-bust cycle,”  Pollaro recognizes that it is not the only factor one needs to consider.  Thus Pollaro concludes

Equally important (and often discussed) are things like the level of debt in the economy, the level of leverage in the financial markets and the amount of government intrusions in the economy and markets, not to mention the amount of as yet unresolved economic malinvestments caused by prior boom-bust cycles.  All of these things serve to increase the fragility of the economy and markets. Unfortunately (or fortunately depending on your bullish/bearish view of the economy and markets), all of these things are arguably worse than in previous two boom-bust cycles.  And that suggests a bust could very well ensue at a higher rate of monetary inflation.

How much higher?  No one really knows, not even the Austrians.

Regulate It First, Learn About It Never

Conference MeetingMises Daily Friday by Gary Galles:

Politicians and regulators usually don’t know what they don’t know about everything from health care to your small business, but that sort of compound ignorance won’t stop them from regulating the minutiae of everyday life and commerce.


Patrick Barron: Currency Wars and the Death of the Euro (mp3)

euro2Jeff Deist and Patrick Barron discuss what’s going on in the EU, how Germany in particular suffers from being yoked to the other Eurozone nations, and what the comeback of the Deutsche Mark might mean for Europe—and for America.

Patrick Barron is a private consultant in the banking industry. He teaches in the Graduate School of Banking at the University of Wisconsin, Madison, and teaches Austrian economics at the University of Iowa.

More New Taxes on the Way

7067732521_aaac69e754_bThe Canadian province of Ontario is a financial basket case. The provincial government pays nearly 10% of its tax revenue on interest to cover the $270bn. debt load (over $20,000 per Ontarian). To put this in perspective, the slow-motion train wreck state of California only pays out a little under 3% of its tax revenue on interest and the average Californian’s share of the state debt is around $3,000.

Never fear. Premier Kathleen Wynne is on the job and has promised to get the deficit under control and Ontario’s finances back on track.

Notwithstanding the fact that her original election platform was based on spending money the province didn’t have. When she realized this problem the solution was to get Ottawa to make cuts so that Ontario would not have to pay taxes to the federal government, and instead use that money for its own in-province expenses. That didn’t work out, so it’s on to plan “B” (or is it “C”?).

Wynne’s new plan to balance the budget is a Hail Mary. In a letter drafted to her Deputy Premier, Wynne charged her second in command to get the budget balanced.

You will…transform and modernize public sector service delivery while protecting vital public services… You will drive efficiencies and reduce costs to achieve our commitment to eliminate the deficit by 2017-18.

Pretty simple. Don’t cut vital services, and create enough new efficiencies to  eliminate a $35bn. deficit (a little more than 5% of the province’s GDP). That’s about $2,600 per Ontarian: man, woman, and child.

Expenditure reductions of this magnitude are almost certainly not going to happen. In fact, since the only two certainties of this world are death and taxes, let’s look at the more likely solution.

Although she doesn’t mention it, one problem is that the province’s economy is slowing down. And this means that taxes are falling. Rather than do what any reasonable individual or business would do when their income falls – cut some expenses – Wynne’s provincial government is responding by hitting people up for more cash. Buried in her budget cuts you might remember this little doozy.

In addition to chopping spending, the government has jacked up income taxes on people making over $150,000 per year.

Wynne ran on promises she can’t keep, and now that she holds the purse strings she’s going after the easier option. Ontario is already a financial disaster. Why not face up to the reality that the province has lived beyond its means for far too long?

(Cross posted at Mises Canada.)

Leonard Read’s Freedom Philosophy

Leonard E ReadLeonard Read is not a household name today.  That is unfortunate, because, according to biographer Mary Sennholtz, he was “one of the most notable social philosophers of our time. His name will forever be associated with the rebirth of the freedom philosophy.” In Gary North’s words, “The libertarian movement…can be traced to Read and Read’s vision.”

Read’s most formative moment came in a 1933 meeting with W.C. Mullendore, who taught Read his “best lesson ever” in liberty.  In response, Read wrote his first book—The Romance of Reality (1937)—to develop and clarify the belief in self-ownership and the solely voluntary arrangements it enabled, which he would hone for over four decades.

Read developed into a pro-freedom crusader, which led him to leave a lucrative career to create an organization promoting freedom in 1946, when its prospects in the world were bleak. The Foundation for Economic Education became “The granddaddy of all libertarian organizations,” according to Gary North, inspiring many others throughout the world.

As FEE’s founder and leader, Leonard Read wrote prolifically and traveled widely to advance individual liberty. Bettina Bien Greaves described his core message:

He reasoned that if it is moral to respect the life and property of individuals, then it is immoral to violate their rights to life and property; if it is moral to deal peacefully with others, then it is immoral to use force, fraud, or threat of force to impose one’s wishes on others; if voluntary transactions among private-property owners are moral, then to hinder or prevent voluntary transactions among willing traders is immoral. No one… should take property by force or coercion from one person for the benefit of another.

As Jacob Hornberger put it:

He argued that man’s purpose on earth, whatever it is, requires the widest possible ambit for human growth and maturation. Therefore, he believed, a person should be free to do whatever he wants in life as long as it is peaceful.

On his September 26 birthday, an excellent place to begin understanding Leonard Read’s wisdom is with “The Promotive Effects of a Good Government,” in The Romance of Reality.

[A] good government…is a servant of all the people. It takes no sides.

A government cannot be good when its officers and administrators feel that their interests are different from those of the people, any of the people, they represent.

A good government recognizes that the best interests of the people are served when government keeps itself to the very minimum compatible with actual necessities.

A good government will resist to the utmost the efforts of any groups to use the government as a vehicle to their own ends.

A good government will be a government of laws and not of men. A people must never be subjected to a “Do this. Do that” order, insured in a government of men, impossible in a government of laws.

A good government does not meddle in the legitimate affairs of any or all of its citizens. It merely keeps the arena in good shape for playing the game.

Certainly, no good government…would usurp any powers or prerogatives not specifically delegated to it by its citizens.

Government intervention into the fields of private enterprise would not be so much as entertained.

[In] good government…Everyone would have to engage…in the production and distribution of goods and services. These being the only elements of wealth, everyone would be engaged in producing and distributing wealth.

A good government…engages in no practices that either unjustly absorb or take away from the citizen that which he has earned for himself. Thus… man’s energies are released…

[E]conomic voluntarism, under which so many other factors absolutely essential to economic welfare are nestled, can exist at its fullest only under a good government

The United States, today, is the wealthiest nation all history has ever known, not because government created the wealth but because… several hundred millions of individuals, working competitively and cooperatively, have made contributions to a startling aggregate of wealth. They have left as their heritage to succeeding generations an amazing array of…essential instruments to future welfare.

[American] free spirits, protected against the ravages of criminal individuals and predacious governments, built our national edifice.

“[W]hat plan have you to offer in its stead?”…The answer is, “We do not want nor can the people prosper under any form of governmental planned economy.”…all we want in the way of a plan is…to release to the fullest the potential productive capacities, the energies, the enterprising attributes, the virtues and the genius of the individual.

Politicians today define good government as whatever they want to do. Leonard Read recognized good government as very different, doing only those things that made it “a servant of all the people,” with all else left to “economic voluntarism.” That would “release to the fullest the potential productive capacities, the energies, the enterprising attributes, the virtues and the genius of the individual.” There is no better time than Read’s birthday to adopt his wisdom.

Adapted from Gary Galles, The Apostle of Peace: The Radical Mind of Leonard Read, Laissez Faire Books, 2013

Old Health Insurance Policy Canceled? Your New One May Be Canceled Too.

John Goodman, the top health policy analyst, explains why Obamacare policies are also likely to be canceled. Just because they comply with Obamacare this year doesn’t mean that they will comply next year. The way the law is written  guarantees that many policies will not comply for long. In addition,  if your policy keeps changing, and the doctors you are allowed to see are restricted to that policy, you may have to keep getting a new doctor over and over again. That should be popular.

Here is another way in which the drafters of this bill shot themselves in the foot. When Obamacare was being constructed, it was feared that it would outlaw the high deductible policy. That was what the Democrats at first wanted to do. They didn’t want the consumer to have any control over health expenditures, but instead to depend entirely on government policies.  When this goal proved too expensive,  Obamacare ironically outlawed a no deductible policy, as Goodman also explains.

It is easy to deride the authors of this mad bill. But any such legislation was bound to make a mess. Only consumer choice can rationally organize medical services.

10089497055_69ba47b210_oImage credit. 


Is a Shift in the Austrian “True Money Supply” Pointing to a Contraction?

Michael Pollaro writes at Forbes that “deceleration” in the money supply is increasing the risk of an economic bust. Pollaro, of course is using not the standard Fed-approved measures of the money supply, but the Austrian “True Money Supply” (explained in detail here.)*

Pollaro writes:

The True “Austrian” Money Supply (TMS) as represented by TMS2, our broadest and preferred U.S. money supply aggregate, posted a year-over-year rate of growth of 7.9% in August, the last monthly reporting period, down from an 8.2% rate in July. Although still sitting near the twenty year average of 8%, the U.S. monetary inflation rate is now down 780 basis points (50%) from its most recent August 2011 high and 860 basis points (52%) from its November 2009 cyclical high.

He goes on:

We take the decline in TMS2 very seriously. To Austrian economists, its simple – monetary inflations always end in economic and financial busts. In short, once the economy is subjected to a bout of monetary inflation, whether that be via direct central bank money creation or through money (and credit) creation by the fractional reserve banking system, an unsustainable, artificial economic boom is born, whereby malinvestments are created that sooner or later must be liquidated. And whether that bust takes the form of a hyperinflationary bust or a deflationary, bust we will get. The form the bust takes will depend on the course of the inflation. If the central bank/banking system at large pursues an inflationary course, by throwing continual and importantly ever larger doses of money (and credit) into the economy, the bust will take the form of a hyperinflationary collapse. If instead the central bank voluntarily pulls back (and in increasing fashion) on its monetary largesse and/or free market forces force the central bank/banking system to pull back, the bust will take the form of a deflationary bust. [emphasis mine.Slide2-e1411414936442

So what is this deceleration in TMS2 telling us? The risks of a deflationary bust are rising.

To lend credence to the theory, let’s have a look at the Austrian boom-bust model in action using our TMS2 metric vs. the forward looking S&P 500, the embodiment of the health of the economy and financial markets…

The data supports what the Austrians teach – monetary inflations create booms which result in deflationary busts once the rate of monetary turns down in a significant and sustained manner. The 1995 to 1999 monetary surge, then subsequent monetary deceleration gave us the Technology Boom-Bust.  The 2000 to 2006 monetary surge then ensuing monetary deceleration gave us the Housing Boom-Bust turn Credit Bust turn Great Recession.

And what of the latest monetary extravaganza which began in earnest in August/September 2008, the one that has given us new all-time highs in the S&P 500 (the boom-bust-to-be cycle we have named the Bernanke Risk-On Boom-Bust-to-Be). Well, that monetary surge has in fact rolled over and is clearly heading down.

Read the full article. 

The TMS was developed by Murray Rothbard, Joeseph Salerno, and Frank Shostak. You can read Salerno’s early explanation here, plus Shostak’s take here.

Ron Paul to FSU

Lew Rockwell writes:

Ron will be speaking to students, faculty, and members of the public through the prestigeous Golden Tribe Lecture Series on Thursday, October 2nd, in Tallahassee, Florida. Here’s how to attend An Evening With Ron Paul, for free.

Manufacturing Consent, Then and Now

us_propaganda-31[When it comes to drumming up support for foreign wars in the US, little has fundamentally changed over the past century. Justin Raimondo on "Progressivism and the rise of the welfare-warfare state":]

Ticking at the heart of American society all through the 1920s was the mechanism of false prosperity, which was blowing great quantities of air into a bubble of gigantic proportions. The Federal Reserve system set up before the war made financing the war possible – but at what price? The price was setting up a financial oligarchy with near absolute power over the economy – and also setting up the country for the Great Crash of 1929.

The rise of the totalitarian ideologies as challengers to Western liberalism was made possible, first of all, by the Great War, and by the Crash, which was also caused by the very system that had made the prosecution of the war possible. National Socialism and militant Marxism were “blowback” from World War I just as the jihadists of today are blowback from the cold war era. And these two great enemies of liberty, abhorred by today’s liberals, were at first greeted with something approaching admiration by the progressives of the time. The subsuming of private interests to the collective good under the Italian system drew admiring glances from our liberal professors: Herbert Croly, first editor of The New Republic and champion of Teddy Roosevelt’s “New Nationalism,” touted Italian corporatism as the wave of the future and ended his days as the Duce’s chief apologist outside of Rome. No matter what else they disagreed about, ideologues of both the right and the left agreed on one thing: capitalism was doomed and some form of state-controlled economy was destined to succeed it. The only question was: would it be communism, or fascism?

The same factors that led to our fatal intervention in the first world war were brought to bear in order to have us enter the second. The messianic world-saving doctrines originating in the realm of theology had by this time thoroughly penetrated the secular mainstream and had become the default ideology of the political class and the intellectuals. The Kingdom of God on earth – without God, but with various substitute gods – and every ideological grouplet had their favored gods. The advocates of Technocracy, a group founded naturally enough by an American engineer, wanted to put the technocrats – scientists, and other “experts” – in charge of things. The Communists, the followers of Huey Long, the advocates of the so-called Townsend Plan, which called for a guaranteed annual income and ice cream for everyone, the various small fascist groups with their colored shirts and crude appeals to ethnic and religious prejudice – everyone had a Grand Plan that would defeat the Depression and lift the world out of the abyss into which it seemed to be falling deeper by the day.

Once again, the intellectuals were in the forefront of the war hysteria, the first to call for blood and the last to volunteer. While public opinion in general was opposed to US intervention right up until the bombing of Pearl Harbar, as usual our intellectuals were in the vanguard of the War Party – and, yes, The New Republic was back in action. As were the same financial interests whose fate was now even more closely aligned with British interests. To our Yankee Anglophile elite, snatching England’s chestnuts out of the fire amounted to a sacred duty.

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New ‘Mises Daily’ Translations from Europe

Some new ones in Polish:

Różnice nie zawsze oznaczają dyskryminację“ translated from “Differences Don’t Necessarily Equal Discrimination” by Andrew Syrios

Opieka społeczna, płace minimalne i bezrobocie” translated from “Welfare, Minimum Wages, and Unemployment” by Greg Morin.

Many more here.

And in German:

“Müssen die Anhänger der freien Marktwirtschaft den Klimawandel leugnen?” translated from ”Must Free-Marketers Reject Global Warming?” by Ryan McMaken

“Teilreserve-Banksystem ist mit einer freien Marktwirtschaft unvereinbar” translated from Confusing Capitalism with Fractional Reserve Banking” by Frank Hollenbeck

Mark Thornton at the Wisconsin Forum

Mark Thornton spoke on drug prohibition at the Wisconsin Forum yesterday.

Thanks to Peter Eggert for the photos:



Mark Thornton: How Skyscrapers Can Indicate Economic Contraction

In this podcast, Wall Street for Main Street recaps on Dr. Thornton’s article from 2004 predicting the housing bubble and the reaction from the public. Also, we discussed Dr. Thornton interesting theory on how Skyscrapers is a good indicator for economic contraction.

Mark Thornton Audio: The ‘Seasonal Adjustment’ Scam

Mark Thornton and Alan Butler have a lively conversation about seasonal adjustments to economic numbers and the FOMC’s latest. Thornton’s interview begins at 1:35:00.

Thornton: Some Trends Facing our Economy

New in the Mises Media section: Thornton discusses the seven mega-trends facing our economy and what it means looking forward. Dr. Thornton also talks about the great classes available at which will further improve your understanding of how our economic system functions.

[mp3, audio, 29 minutes]

Interview: Randall Holcombe Talks about Austrian Econ in Higher Ed

Dr. Randall Holcombe of Florida State University talks about his new book, Advanced Introduction to the Austrian School of Economics. Dr. Holcombe talks about the significant differences between Keynesian and Austrian economics.

Mises vs. the Austro-Marxists


Rudolf Hilferding

Paul Krugman isn’t the first economist to project his own faults onto opponents: adversaries of Austrian economics have been doing it since the early days. One lesser-known example is Rudolf Hilferding, a contemporary of Mises and member of the “Austro-Marxist” circle, which appeared in Vienna around the turn of the century.[1]

Hilferding was a student of medicine, but regularly attended Böhm-Bawerk’s seminar along with Mises, Schumpeter, and many of the best young social scientists of pre-WWI Austria.[2] Hilferding’s first foray into economics was a response to Böhm-Bawerk’s critique of Marx; it was discussed at length in the seminar, although Mises recalls that Otto Bauer, another leading Austro-Marxist, “openly admitted to me that Hilferding did not grasp the problems at hand” (Memoirs, 2009, p. 31).

In any case, in 1910 Hilferding published Finance Capital, an influential discussion of the decline and fall of capitalism. The book was intended to flesh out Marx’s thought on the subject, which had remained somewhat sketchy; however, Austrians will find a lot to chew on in Finance Capital, which offers an odd mixture of intriguing and flawed ideas (see here and here). In particular, Hilferding argued that in the last stage of capitalism, financial interests would grow to dominate the economy, and, facing economic crises of their own making, would rely on imperialism to maintain their eroding power base.

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Federal Reserve Policies Cause Booms and Busts

6896Richard Ebeling explains the basics of how central banks cause booms and busts.

Is Maleficent an Anarchist Fable?

6895Mises Daily Thursday by Julian Adorney:

It may be a simple tale, but the story of Sleeping Beauty, as retold in 2014’s film Maleficent, repeatedly makes the point that the evils of the world come from political power and those who seek it.

German Bundesbank awards Carl Menger Prize

Regardless of the merits or demerits of Mme Rey, Can you imagine the US Fed awarding a prize named for an Austrian economist?

DB prize


French economist Hélène Rey has received the Carl Menger Prize for Economics, which this year was awarded for the first time. Andreas Dombret, member of the Executive Board of the Deutsche Bundesbank, presented her with the award, which carries prize money of €20,000, at the annual meeting of the Verein für Socialpolitik in Hamburg. “Hélène Rey’s research has substantially advanced the academic discussion; it has also found its way into the concrete work of central banks,” Mr Dombret said during the award ceremony. The job of economics, he continued, is to explain economic interrelationships and to use these explanations as a basis for making economic policy designed to increase public welfare.