Home » Posts tagged 'mises institute' (Page 4)
Tag Archives: mises institute
Money: How Its Past Predicts Its Future
Money: How Its Past Predicts Its Future
What is money, where does it come from and more importantly where does it go?
At first glance, it might appear inexplicable and bizarre that our governments and our rulers have managed to keep their stronghold over the monetary system for 2000 years, especially when one thinks about the countless ways in which they abused that power and used their monopoly to the detriment of their own citizens. It was a mass delusion that facilitated this, a blind belief that they, and they alone, can be trusted with this vital task while looking out for our best interests as well. However, now, as mistrust against our rulers is justifiably deepening, it is becoming increasingly clear that only we as individuals can ensure our best interests and it is only a matter of time before the entire ill-founded edifice comes crumbling down.
To answer all these questions about money, we need to first understand its history — keeping in mind that those who don’t know history are condemned to repeat it. Everything started when people settled down and instead of living off nature they started adding value to it; this was the beginning of private property rights. In addition, men started to realize that some people are better at performing specific duties than others and thus set into motion what we today understand as the division of labor. This increased economic output and in general terms, everyone became better off. This transition in how work was performed in an economy made trade between individuals a necessity. Thus barter, or the exchange of real goods and services against other real goods and services, became commonplace. Barter also had its disadvantages, because it required what is known as a “double coincidence of wants” in order to function.
…click on the above link to read the rest of the article…
The Eurozone Is in a Danger Zone
The Eurozone Is in a Danger Zone
It is easy to conclude the EU, and the Eurozone in particular, is a financial and systemic time-bomb waiting to happen. Most commentary has focused on problems that are routinely patched over, such as Greece, Italy, or the impending rescue of Deutsche Bank. This is a mistake. The European Central Bank and the EU machine are adept in dealing with issues of this sort, mostly by brazening them out, while buying everything off. As Mario Draghi famously said, “whatever it takes.”
There is a precondition for this legerdemain to work. Money must continue to flow into the financial system faster than the demand for it expands, because the maintenance of asset values is the key. And the ECB has done just that, with negative deposit rates and its €2.5 trillion asset purchase program. But that program ends this month, making it the likely turning point, whereby it all starts to go wrong.
Most of the ECB’s money has been spent on government bonds for a secondary reason, and that is to ensure Eurozone governments remain in the euro system. Profligate politicians in the Mediterranean nations are soon disabused of their desires to return to their old currencies. Just imagine the interest rates the Italians would have to pay in lira on their €2.85 trillion of government debt, given a private sector GDP tax base of only €840 billion, just one third of that government debt.
It never takes newly-elected Italian politicians long to understand why they must remain in the euro system, and that the ECB will guarantee to keep interest rates significantly lower than they would otherwise be. Yet the ECB is now giving up its asset purchases, so won’t be buying Italian debt or any other for that matter. The rigging of the Eurozone’s sovereign debt market is at a turning point.
…click on the above link to read the rest of the article…
The Depression of 2019-2021?
The Depression of 2019-2021?
The profound question which transcends all this day-to-day market drama over the holidays is the nature of the economic slowdown now occurring globally. This slowdown can be seen both inside and outside the US. In reviewing the laboratory of history — especially those experiments featuring severe asset inflation, unaccompanied by high official estimates of consumer price inflation — three possible “echoes” deserve attention in coming weeks and months. (History echoes rather than repeats!)
Will We Learn from History — And What Will Soon Be History?
The behavioral finance theorists tell us that which echo sounds and which outcome occurs is more obvious in hindsight than to anyone in real time. As Daniel Kahneman writes (in Thinking Fast and Slow):
The core of hindsight bias is that we believe we understand the past, which implies the future should also be knowable; but in fact we understand the past less than we believe we do – compelling narratives foster an illusion of inevitability; but no such story can include the myriad of events that would have caused a different outcome .
Whichever historical echo turns out to be loudest as the Great Monetary Inflation of 2011-18 enters its late dangerous phase. Whether we’re looking at 1927-9, 1930-3, or 1937-8, the story will seem obvious in retrospect, at least according to skilled narrators. There may be competing narratives about these events — even decades into the future, just as there still are today about each of the above mentioned episodes. Even today, the Austrian School, the Keynesians, and the monetarists, all tell very different historical narratives and the weight of evidence has not knocked out any of these competitors in the popular imagination.
The Stories We Tell Ourselves Are Important
And while on the subject of behavioral finance’s perspectives on potential historical echoes and actual market outcomes, we should consider Robert Shiller’s insights into story-telling (in “Irrational Exuberance”):
…click on the above link to read the rest of the article…
Did Baby Boomers Ruin America?
Did Baby Boomers Ruin America?
Referring to someone as a sociopath is strong language. After all, just between 3 and 5 percent of Americans are really sociopaths , people who initially seem charming, but, due to bad neurological wiring, lack a conscience and are unable to feel remorse. They are exceptional liars and cheats, and have no capacity to feel guilt.
But according to author and multi-millionaire tech hedge fund manager, Bruce Cannon Gibney, anyone born between 1946 and 1964 (baby boomers) that are still living are sociopaths.
“There is something wrong with the Boomers and there has been for a long time,” writes Gibney in the forward to A Generation of Sociopaths: How the Baby Boomers Betrayed America and the author’s beatings continue for 400-plus pages.
He doesn’t let any of us Boomers off the hook, but really focuses on “generational representatives like Bill Clinton, Newt Gingrich, George W. Bush, Donald Trump, and Dennis Hastert–a stew of philanderers, draft dodgers, tax avoiders, incompetents, hypocrites, holders of high office censured for ethics violations, a sociopathic sundae whose squalid cherry was provided in 2016 by Hastert’s admission of child molestation, itself a grotesque metaphor for Boomer policies.”
Gibney’s point being us Boomers are molesting younger generations because Social Security and Medicare might remain solvent just long enough for Boomers, but no one else, to collect. And, the author preaches from the environmentalist good book every chance he gets. Any skepticism about climate change is viewed as having “negative feelings about reality and science” because, for Boomers, sacrifices for the environment are, “incompatible with sociopathic desires.”
Boomers didn’t have a chance because their moms read Dr. Spock, were too easy on their kids, and parked us in front of the television. “TV’s essential characteristics make it the perfect education for sociopaths, facilitating deceit, acquisitiveness, intransigence, and validating a worldview only loosely tethered to reality,” the author opines.
…click on the above link to read the rest of the article…
How Social Media Is Becoming an Arm of the State
How Social Media Is Becoming an Arm of the State
Say the wrong things and you might get kicked off of your favorite social media platform.
Tech titans Apple, Facebook, and YouTube have wiped out talk-show host Alex Jones’s social media presence on the Internet. But the social media crusades weren’t over.
Facebook recently took down popular pages like Liberty Memes and hundreds of other prominent libertarian-leaning pages . In the wake of the Pittsburgh synagogue shooting, social media network Gab was on the receiving end of suspensions from payment processors like PayPal and Stripe and cloud hosting company Joyent. Although these companies did not provide clear explanations for their dissociation with Gab, the media had a field day when they learned that the synagogue shooter, Robert Bowers, had an account with the social media network.
Should libertarians fear social media de-platforming? Or is this a case of private actors exercising their legitimate property rights by excluding those they wish to no longer do business with?
The Blurring Lines of the Public & Private Sector
Since the question of de-platforming has popped up, some conservatives have proposed state-based solutionsto solve this problem. In a role reversal, conservative commentator Ann Coulter suggested that the government pass anti-discrimination laws to prevent social media platforms from de-platforming conservatives. Ideological consistency is a lot to ask for from seasoned veterans of Conservative Inc these days.
Nevertheless, Coulter expanded on why the 1st Amendment protections must be extended to social media:
We need to apply the First Amendment to social media companies like Twitter, Facebook, and Google, because it is a public square, and there is precedent for that and it’s gotta be done, because this is really terrifying, and talk about chilling speech when they’re just throwing people off right and left.
…click on the above link to read the rest of the article…
How a Fragile Euro May Not Survive the Next Crisis
How a Fragile Euro May Not Survive the Next Crisis
A big US monetary inflation bang brought the euro into existence. Here’s a prediction: It’s death will occur in response to a different type of US monetary bang — the sudden emergence of a “deflationary interlude.” And this could come sooner than many expect.
The explanation of this sphynx-like puzzle starts with Paul Volcker’s abandonment of the road to sound money in 1985/6. The defining moment came when the then Fed Chief joined with President Reagan’s new Treasury Secretary, James Baker, in a campaign to devalue the dollar. The so-called “Plaza Accord” of 1985 launched the offensive.
Volcker, the once notorious devaluation warrior of the Nixon Administration (as its Treasury under-secretary), never changed his spots, seeing large US trade deficits as dangerous. The alternative diagnosis — that in the early mid-1980s these were a transitory counterpart to increased US economic dynamism and a resurgent global demand for a now apparently hard dollar — just did not register with this top official.
Hence the opportunity to restore sound money. But this comes very rarely in history — only in fact, where high inflation has induced general political revulsion (as for example after the Civil War) — was inflation snuffed out. In the European context this meant the end of the brief hard-Deutsche-mark (DM) era and the birth of the soft euro.
The run-up of the DM in 1985-7 against other European currencies, as provoked by the US re-launch of monetary inflation, tipped the balance of political power inside Germany in favor of the European Monetary Union (EMU) project. The big exporting companies, the backbone of the ruling Christian Democrat Union (CDU) under Chancellor Kohl, won the day. The hard DM, an evident threat to their profits, had to go. The monetarist regime in Germany tottered towards a final collapse.
…click on the above link to read the rest of the article…
Ten Reasons Why Governments Fail
Ten Reasons Why Governments Fail
When politicians and bureaucrats fail to deliver what they promise — which happens a lot — we’re often told that the problem can be solved if only we get the right people to run the government instead. We’re told that the old crop of government agents were trying hard enough. Or that they didn’t have the right intentions. While it’s true that there are plenty of incompetent and ill-intentioned people in government, we can’t always blame the people involved. Often, the likelihood of failure is simply built in to the institution of government itself. In other words, politicians and bureaucrats don’t succeed because they can’tsucceed. The very nature of government administration is weighted against success.
Here are ten reasons why:
I. Knowledge
Government policies suffer from the pretense of knowledge . In order to perform a successful market intervention, politicians need to know more than they can. Market knowledge is not centralized, systematic, organized and general, but dispersed, heterogeneous, specific, and individual. Different from a market economy where there are many operators and a constant process of trial and error, the correction of government errors is limited because the government is a monopoly. For the politician, to admit an error is often worse than sticking with a wrong decision – even against own insight.
II. Information Asymmetries
While there are also information asymmetries in the market, for example between the insurer and the insured, or between the seller of a used car and its buyer, the information asymmetry is more profound in the public sector than in the private economy. While there are, for example, several insurance companies and many car dealers, there is only one government.
…click on the above link to read the rest of the article…
Does China Have Enough Gold to Move Toward Hard Currency?
Does China Have Enough Gold to Move Toward Hard Currency?
Are the Chinese Keynesian?
We can be reasonably certain that Chinese government officials approaching middle age have been heavily westernised through their education. Nowhere is this likely to matter more than in the fields of finance and economics. In these disciplines there is perhaps a division between them and the old guard, exemplified and fronted by President Xi. The grey-beards who guide the National Peoples Congress are aging, and the brightest and best of their successors understand economic analysis differently, having been tutored in Western universities.
It has not yet been a noticeable problem in the current, relatively stable economic and financial environment. Quiet evolution is rarely disruptive of the status quo, and so long as it reflects the changes in society generally, the machinery of government will chug on. But when (it is never “if”) the next global credit crisis develops, China’s ability to handle it could be badly compromised.
This article thinks through the next credit crisis from China’s point of view. Given early signals from the state of the credit cycle in America and from growing instability in global financial markets, the timing could be suddenly relevant. China must embrace sound money as her escape route from a disintegrating global fiat-money system, but to do so she will have to discard the neo-Keynesian economics of the West, which she has adopted as the mainspring of her own economic advancement.
With Western-educated economists imbedded in China’s administration, has China retained the collective nous to understand the flaws, limitations and dangers of the West’s fiat money system? Can she build on the benefits of the sound-money approach which led her to accumulate gold, and to encourage her citizens to do so as well?
…click on the above link to read the rest of the article…
No, Voting Doesn’t Mean You “Support the System”
No, Voting Doesn’t Mean You “Support the System”
Listen to Ryan McMaken’s commentary on the Radio Rothbard podcast.
I admit it. I voted
In my home state of Colorado, all voting is by mailed paper ballots. That means, if you’re a registered voter, the county clerk sends you a ballot every election.
And then — at least in my case — it sits there on a table near my desk.
One is supposed to fill it out and then mail it back. Or drop it off in one of the mailbox-like boxes scattered around the city.
Sometimes I do it.
This time around, as the ballot sat there on the table, I kept thinking about the proposed tax increases I could vote “yes” or “no” on.
Like many states in the Western half of the United States, this state makes frequent use of ballot initiatives and referenda in elections. Voters are asked to vote up or down any number of regulations and taxes which the policymakers will be more than happy to implement if they can muster a “yes” from the majority of voters.
I’m certainly not willing to stand in line at a polling place, and I don’t care about getting an “I Voted!” sticker. But I had to admit the opportunity cost of sending in the ballot was really quite low. So, as I am not a big fan of new taxes, I filled out the ballot according to my whims, and sent it in.
Does Voting Mean You Support the Regime?
Nothing about this little anecdote would strike most people as remarkable in any way.
Since at least the nineteenth century, though, there has been a debate over whether or not voting somehow means the voter has agreed to submit to — or even support — whatever the state does.
…click on the above link to read the rest of the article…
No Matter How You Vote, Politicians Don’t Represent You
No Matter How You Vote, Politicians Don’t Represent You
One of the most foundational assumptions behind modern democracy is that the elected officials somehow represent the interests of those who elected them.
Advocates for the political status quo flog this position repeatedly, claiming that taxation and the regulatory state are all morally legitimate because the voters are “represented.” Even conservatives, who often claim to be for “small government” often oppose radicalism of any kind — such as secession — on the grounds that political resistance movements such as the American Revolution are only acceptable when there is “taxation without representation.”The implication being that since the United States holds elections every now and then, no political action outside of voting — and maybe a little sign waving — is allowed.
This, position, however, rests on the idea that elected officials are truly representative. If taxation with representation makes government legitimate — as some argue — then we must first establish that the government’s claims of representation are believable.
On a theoretical level, Gerard Casey has already cast serious doubt on these claims. Casey draws on the work of Hanna Pitkin, who admits it is plausible that:
Perhaps representation in politics is only a fiction, a myth forming part of the folklore of our society. Or perhaps representation must be redefined to fit our politics; perhaps we must simply accept the fact that what we have been calling representative government is in reality just party competition for office.
After all, as Casey points out, representation in the private sector usually means there is an agent-principal relationship in which the agent is legally bound to attempt to represent the material interests of a clearly defined person or group of people.
…click on the above link to read the rest of the article…
Why Bad Economics Makes Such Good Politics
Why Bad Economics Makes Such Good Politics
As the election nears, politicians will more and more frantically point out what wonderful favors they’ve done for the voters — or what favors they will do for the voters, if elected.
Of course, they never mean all the voters. They mean groups or individuals within the voting population who believe they benefit from laws, taxes, regulations, and spending programs supported by the politician in question.
Two such examples of these sorts of favors are tariffs and minimum wage laws. Both impose costs on both producers and consumers overall, while benefiting a small sliver of the population that is able to take advantage of the government mandate.
The economics of each of these, or taxation and business regulation in general, have already been addressed numerous times in these pages.
It must suffice to point out that these policies, for which politicians think they deserve accolades, potentially benefit only very specific interest groups. Nevertheless, these policies can prove to be politically popular, and may help a politician get elected.
But why should policies that help so few — and impose many costs on even those they purport to help — be politically popular?
Hazlitt and Mises on the Popularity of Bad Economics
Answering this question was one of the main reasons that Henry Hazlitt wrote his perennially popular bookEconomics in One Lesson.
In the very first chapter, Hazlitt notes that economic science is prone to so many errors because people are motivated to believe an incorrect version of economics that supports their own economic interests. Or as Hazlitt put it, economic errors “are multiplied a thousandfold … by the special pleading of selfish interests.”
Sometimes, these attempts to throw good economics in the garbage are spectacularly successful. After all, for decades, no insignificant number of Americans believed the claim that “what’s good for General Motors is good for America.”1
…click on the above link to read the rest of the article…
Hitler’s Economics
Hitler’s Economics
For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.
The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”
The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.
In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that “Hitler found a cure against unemployment before Keynes was finished explaining it.”
What were those economic policies?
…click on the above link to read the rest of the article…
The Fed’s Easy-Money Policies Aren’t Helping Income Growth
The Fed’s Easy-Money Policies Aren’t Helping Income Growth
Back in August, Bloomberg interviewed Karen Petrou about her research on quantitative easing and the Fed’s policies since the 2008 financial crisis. What she has discovered has not been encouraging for people who aren’t already high-income, and in recent research presented to the New York Fed, she concluded “Post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic impact on the income and wealth divides.”
This assessment is based on her own work, but also on a 2018 report released by the Minneapolis Fed.1 The report showed that both income and wealth growth in the US have been much better for higher-income households in recent decades
Notably, when indexed to 1971 (the year Nixon ended the last link between gold and the dollar) we can see the disparity between the top wealth groups and other groups:
Petrou continues:
What did we learn [from the Minneapolis Fed report]? This new dataset shows clearly that U.S. wealth inequality is the worst it has been throughout the entire U.S. post-war period. We also know now that the U.S. middle class is even more “hollowed out” than we thought in terms of income, with any gains made by the lower-middle class sharply reversed after 2007.
Indeed, the report concludes: “…half of all American households have less wealth today in real terms than the median household had in 1970.”
A closer look at income data also suggests that income growth has been especially anemic since 2007. Using data from the Census Bureau’s 2017 report on income and poverty, we find that incomes for the 90th percentile are increasingly pulling away from both the median (50th percentile) income and from the 20th-percentile income.2
The household income for the 20th percentile increased 70 percent since 1971, while it has only increased 20 percent at the 20th percentile.
…click on the above link to read the rest of the article…
