Archive for Uncategorized – Page 2

Record Skyscrapers Planned

Continental record high skyscrapers have occurred in Europe and more recently in China and North America. Such regional or continental records indicate looming economic crisis as did happen in Europe and seems to be unfolding in China and North America.

More recently we have learned that world record setting skyscrapers are planned for China and Saudi Arabia. World record setting skyscrapers are a indication of a looming world economic crisis. The Telegraph reports:

The Kingdom Tower in the coastal city of Jeddah will measure 3,280 feet (1km), some 568 feet (173 meters) taller than the current Guinness world record holder, Dubai’s Burj Khalifa, which stands at 2,716 feet (827 metres)

.

“Skyscrapers and Business Cycles” QJAE (2005)

See also: “Paging Mark Thornton: Saudi Arabia to Begin Building World’s Tallest Skyscraper Economic Policy Blog

The Man Who Coined “Anarcho-Capitalism”

Michael Oliver, the man who coined the term Anarcho-capitalism is interviewed on Jeff Berwick’s Anarchast. Oliver is now a market technician, but over 40 years ago he wrote a book: The New Libertarianism: Anarcho-Capitalism. In the book he shows that Ayn Rand’s objectivism needs the economics and political theory of Murray Rothbard. Oliver and Berwick talk about the history of the movement, the current state of the movement, the election of 2016 and optimistically conclude that it actually all began with Lew Rockwell!

Correction: It is probably Rothbard who coined the label.

The Hidden Motive Behind Quantitative Easing

220px-Marriner_S._Eccles_Federal_Reserve_Board_Building Foreign individuals and businesses long ago cut back on their purchases of U.S. bonds. Their place was taken by foreign central banks. The central banks simply created money in their own currency and used it to buy our bonds.

The Federal Reserve always knew that we couldn’t rely on foreign central banks to buy our bonds forever. This may be the main reason it began the program called quantitative easing, in which the Fed created money out of thin air specifically to buy back U.S. debt.

Quantitative easing may have been intended to be a kind of insurance policy. If foreign central bank buying of U.S. bonds collapsed, the Fed would already have a program in place to buy them back itself.

The Fed  said that quantitative easing was meant to create U.S. jobs, but this never made much sense. Even a hard core proponent of QE, Fed official William Dudley ( formerly of Goldman Sachs), admitted that the Fed’s own economic models could not explain how creating money out of thin air and using it to buy U.S. bonds would increase employment. Some link to rising stock prices could be demonstrated, if only through the cheap financing of corporate stock buy-backs, but then rising stock prices could not be shown to create jobs either.

One inference from this was that chairman Ben Bernanke, and now new chairman Janet Yellen, were just taking wild stabs in the dark. A more reasonable inference is that they had another reason for QE, one which they did not want to acknowledge.

Viewed in this way, the 2008 bail-out should be viewed not as a bail-out of Wall Street, but rather  as a bail-out of Washington. The Federal Reserve feared that the market for government bonds was about to collapse, which would lead to soaring interest rates, and a complete collapse of our bubble financed government.

The Fed did not have the option of creating money and buying debt directly from the Treasury. That would be illegal. The Treasury must first sell its bonds to Wall Street, after which the Fed can then use its newly created money to buy them back. Hence, in order to rescue the Treasury, the Fed felt it had to rescue Wall Street.

This is a simplification of what happened, and only part of the story, but it is the untold part of the story, and in all likelihood the most important part. The Fed was in a panic in 2008, but not primarily about what might happen to Wall Street, and certainly not about what might happen to Main Street. It was in a panic over what might happen to government finance.

This interpretation is strengthened by new information contained in former Treasury secretary Hank Paulson’s recent book. He revealed that Russia tried in 2008 to persuade China to join in a collaborative effort to dump U.S. bonds in order to bring down the U.S. financial system. Although China refused to do so at the time, its government would clearly like to end dollar dominance, and has  been paring U.S. bond purchases.

At the moment,  Janet Yellen’s worries about finding buyers of government bonds can only be getting worse. For much of last year, foreign central bank purchases of U.S. bonds in aggregate fell. As of October of 2013, they had been negative for three and six months. Then they turned up a smidge, only to fall again, so that the last three months show a decrease of just over 12%.

It is known that Russia withdrew its U.S. bonds from custody of the Fed after the Crimea invasion, and has either been selling or could sell at any time. It will no doubt try again to persuade other countries to join in undermining the U.S. bond market and replacing the dollar as the mainstay of world trade.

Under these circumstances, it should not be surprising that the Fed is today taking only baby steps to reduce its program of creating new money to buy U.S. bonds. This program is probably not just meant to revive the economy, which it has not done and cannot do. It is more likely designed as a desperate and in the long run counterproductive effort to finance the U.S. government and save today’s dollar dominated financial system.

Game of Thrones and the Politics of Fantasy

Game_of_Thrones_title_cardThe internet is filled with talk of the fourth season of HBO’s Game of Thrones. This is welcome news, as Game of Thrones probably offers economists more teachable moments than any show currently on the air (even House of Cards). Fans are probably familiar with its economic themes and strongly critical view of government, which have attracted the attention of many libertarians, including yours truly. But the show’s “politics without romance” approach has been catching on in other circles as well, and (shameless self-promotion) my own economic take has been featured by CNBC and NASDAQ.com.

But instead of using this post to explore themes from the show, I want to talk more generally about why I think it’s so effective in portraying the devastating reality of war, power, and government. The secret, in my opinion, is the fantasy setting. While it might seem counter-intuitive that an elaborate fictional world with so much supernatural activity could actually describe the real world, Game of Thrones works well because it seems so removed from our own experience.

There are many ways we could think about this, so I’ll stick to just a couple. First, fantasy worlds give us a place for our ideas to play. Maybe if we can’t yet make the real world more to our liking, we can create a fictional world to act as a kind of thought experiment in which to develop our ideas and share them. The possibility to create new worlds is one reason sci-fi and fantasy have long been home to ideas about liberty.

Read More→

Is Warren Buffett really an Austrian….

Who enriches himself while talking a Keynesian game?  Jeff Deist offers a hypothesis:

http://www.economicpolicyjournal.com/2014/04/does-warren-buffett-talk-like.html

Per Bylund on Obamacare in the ‘Wall Street Journal’

800px-Barack_Obama_reacts_to_the_passing_of_Healthcare_billPer Bylund’s column “What Sweden Can Teach Us About ObamaCare” is in today’s WSJ:

President Obama has declared the Affordable Care Act a success—a reform that is “here to stay.” The question remains, however: What should we expect to come out of it, and do we want the effects to stay? If the experiences of Sweden and other countries with universal health care are any indication, patients will soon start to see very long wait times and difficulty getting access to care.

Sweden is praised as a rare example of a socialist country that works. A closer look at its health-care system tells a different story.

The overall quality of medical services delivered by Sweden’s universal public health care consistently ranks among the world’s very best. That quality can be achieved by regulating treatments to follow specific diagnoses as well as by standardizing procedures. If ObamaCare regulations do this, the quality of American health care may not go down either.

Sweden’s problem is access to care. According to the Euro Health Consumer Index 2013, Swedish patients suffer from inordinately long wait times to get an appointment with a doctor, specialist treatment or even emergency care. Wait times are Europe’s longest, and Swedes dependent on the public-health system have to wait months or even years for certain procedures, or are denied treatment.

For example, Sweden’s National Board of Health and Welfare reports that as of 2013, the average wait time (from referral to start of treatment) for “intermediary and high risk” prostate cancer is 220 days. In the case of lung cancer, the wait between an appointment with a specialist and a treatment decision is 37 days.

This waiting is what economists call rationing—the delay or even failure to provide care due to government budgetary decisions. So the number of people seeking care far outweighs the capabilities of providers, translating into insurance in name but not in practice. This is likely to be a result of ObamaCare as well.

Rationing is an obvious effect of economic planning in place of free-market competition. Free markets allow companies and entrepreneurs to respond to demand by offering people what they want and need at a better price. Effective and affordable health care comes from decentralized innovation and risk-taking as well as freedom in pricing and product development. The Affordable Care Act does the opposite by centralizing health care, minimizing or prohibiting differentiation in pricing and offerings, and mandating consumers to purchase insurance. It effectively overrides the market and the signals it sends about supply and demand.

Continue reading at WSJ.

See also, Bylund’s Mises Daily articles on health care and Sweden’s economic system:

The Market is Taking Over Sweden’s Health Care

How Government Cutbacks Ended Sweden’s Great Depression

Scarcity, Monopoly, and Intellectual Property

6727David Gordon writes in today’s Mises Daily: 

Faced with a welter of arguments in conflict, what is the perplexed libertarian to do? Butler Shaffer’s superb monograph offers an easy way to unravel the IP puzzles. He starts from a fundamental principle basic to libertarianism and explains how the implications of this principle shed light on IP issues.

What is this principle? It is that rights stem from “the informal processes by which men and women accord to each other a respect for the inviolability of their lives — along with claims to external resources (e.g., land, food, water, etc.) necessary to sustain their lives.” (p.18) The “informal processes” that Shaffer mentions proceed without coercion. In particular, law and rights do not depend on the dictates of the state, an organization that claims a monopoly over the legitimate use of force in a territory.

Austrian Research at the University of Angers

PeterPhilippGuidoThe University of Angers, France has become an excellent place for doctoral work in Austrian economics, thanks to the leadership of Guido Hülsmann. Several top younger Austrian scholars such as Eduard Braun, Amadeus Gabriel, and Matt McCaffrey ‎– all former Mises Summer Fellows — received their PhDs under Professor Hülsmann’s supervision. Senior scholars such as Jeff Herbener, Shawn Ritenour, and myself are frequent visitors.

This week I was privileged to participate in a research seminar at the University’s GRANEM research center, along with Hülsmann and Philipp Bagus‎ of Rey Juan Carlos University in Madrid, on financial markets and institutions. Bagus presented a paper on the government bailout of the Spanish banks, and I presented a paper on the US private equity sector and it’s relationship to entrepreneurship, with Hülsmann as moderator and discussant.

Look for more exciting activities at Angers in the years to come.

Mises, Rothbard, and Others in French

650px-New-Map-Francophone_WorldKurt Schuler writes:

Nearly two years ago I mentioned the French economist Philippe Nataf and his small but active publishing house, Editions Charles Coquelin. Its namesake Charles Coquelin was a 19th-century French classical liberal who wrote on banking and business cycles, among other topics. The publishing house issues works by French and other thinkers in the classical liberal tradition to the present. I recently saw Philippe again, and he informed me that Editions Charles Coquelin has now published translations of Ludwig von Mises’sTheory of Money and Credit and part of Murray Rothbard’s Man, Economy and State, with more to come. Among the older works of the publishing house is a 2005 biography of Jean-Baptiste Say. Readers interested in ordering these works can do so through the site of Editions Charles Coquelin or, for at least some books, Amazon France.

‘Everything we are told about deflation is a lie’

By Tim Price

[The Cobden Centre]

“The European Central Bank has given its strongest signal yet that it is prepared to embrace quantitative easing to prevent the euro zone from sliding into deflation or even a prolonged period of low inflation.”

- ‘Draghi strengthens QE signal’, Financial Times, April 4, 2014.

Yes, heaven protect Europe’s embattled citizens and savers from a prolonged period of low inflation. How could they possibly survive it ?

If history is any guide, probably quite well. As Chris Casey points out in his essay “Deflating the Deflation Myth,” the American economy during the 19th Century twice experienced deflationary periods of roughly 50 percent:

Source: McCusker, John J. “How Much Is That in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States.” Proceedings of the American Antiquarian Society, Volume 101, Part 2, October 1991, pp. 297-373.

This during a period of “sustained and significant economic growth”. But just think of all those poor consumers, having to make the best of constantly falling everyday low prices.

In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934). We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

In his 2008 essay ‘Deflation and Liberty’, Jörg Guido Hülsmann writes as follows:

Read More→