Archive for November 2008
George Bush, speaking at the APEC conference in Peru argued that the free-market could resolve the current economic crisis while global protectionism could only worsen the situation.
Mr Bush spoke passionately about his belief in the free market despite the recent world economic downturn.
He called for an Asia-Pacific region of “free markets, free trade and free people”.
“It is also essential that governments resist the temptation to overcorrect by imposing regulations that would stifle innovation and strangle growth.
Considering the intensely anti-free market policies recently implemented in the USA, the UK, the EU, Ireland, as well as on a global level, one wonders what other so-called “free market” solutions we have in store.
When governments of the world agreed to collectively counteract the global turndown, they did not agree to a global “stimulus package”. This however will not stop the industrialised nations attempting such a stimulus packages individually. The UK government, for instance have already bowed to Keynesian depression economics. The idea behind these packages is that George Bush and co. can “jumpstart” the global economy by getting people to start spending again.
This plan is justified by the following paragraph I read on a message board:
If you tax and spend using progressive tax you take 1 euro from a rich man (who would otherwise spend it on imports) and give it to a teacher or other worker who has a higher marginal propensity to consume. That teacher then spends it and it goes into someone elses hands and so on indefinitely. This multiplier effect means that government spending can get us out of a recession. In fact if the marginal propensity to consume is 0.9 (a person who gets a euro spends 90c) then the output effect of the government spending 1 euro is 1/(1-0.9)=10!
So the more we spend, the more the economy grows.
The above is a horrible misrepresentation of how the economy works. In order for any consumption to occur there must first be production. This is summarised by Say’s Law: supply creates it’s own demand.
It doesn’t matter how many green pieces of paper are in your wallet; you can’t “demand” a TV set unless the store has an actual unit on the shelf. Pushing it back one step, no matter how many customers are lining up outside his store, the manager of Best Buy can’t stockpile his shelves with TVs unless the manufacturer has previously assembled them. And of course, the manufacturer can’t do so—regardless of how much money he is offered by the Best Buy manager—unless he can find enough workers, and enough of the relevant parts, to actually make the TVs.
In the Keynesian model of the economy, it is as if the economy is entirely composed of retailers, whereas manufacturers produce consumer goods by snapping their fingers. The multiplier only exists if this is true. However it is obviously not. The economy is made up of various stages of production, which must work to produce the goods that are finally purchased and consumed.
A lot of the “paradoxes” of Keynesian economics would be solved if the “circular flow diagram” of the economy were replaced with the Hayekian Triangle model; a more accurate depiction of the world in which we live.
The unfortunate leaking of the British National Party membership lists has caused a flurry on many political forums. Sadly, many consider this to be a breach of ‘the right to privacy’. This mythical right does not exist in reality, only tangible property rights do.
The members of the BNP gave their names to the Party under the conditions that they would not be publicly revealed. This is a contract, and a contract represents a transfer of property rights.
More simply, if I found your diary lying in a hallway and took the time to peruse it carefully, I would not be violating any rights at all. In contrast, if I obtained your diary by braking into your home and rummaging though your drawers, this would be a violation of your rights.
As Murray Rothbard often pointed out: All Rights are Property Rights.
When someone says “I have a right to free healthcare”, what they are really saying is “I have a property right to have a slave give me medical advice” or alternatively “I have a claim to someone else’s property to pay for my medical care”.
When I say “I have a right to privacy” I really mean is “I am asserting my property right which allows me to decide who sees my personal information”.
Try converting other statements like these into property rights statements yourself and you’ll find Rothbard was right all along.
Karen DeCoster posted an extract from an article entitled “America the Illiterate” written by Chris Hedges on LewRockwell.com. I thought I would leave the extract here too:
We live in two Americas. One America, now the minority, functions in a print-based, literate world. It can cope with complexity and has the intellectual tools to separate illusion from truth. The other America, which constitutes the majority, exists in a non-reality-based belief system. This America, dependent on skillfully manipulated images for information, has severed itself from the literate, print-based culture. It cannot differentiate between lies and truth. It is informed by simplistic, childish narratives and clichés. It is thrown into confusion by ambiguity, nuance and self-reflection. This divide, more than race, class or gender, more than rural or urban, believer or nonbeliever, red state or blue state, has split the country into radically distinct, unbridgeable and antagonistic entities.
There are over 42 million American adults, 20 percent of whom hold high school diplomas, who cannot read, as well as the 50 million who read at a fourth- or fifth-grade level. Nearly a third of the nation’s population is illiterate or barely literate. And their numbers are growing by an estimated 2 million a year. But even those who are supposedly literate retreat in huge numbers into this image-based existence. A third of high school graduates, along with 42 percent of college graduates, never read a book after they finish school. Eighty percent of the families in the United States last year did not buy a book.
I can’t help but feel that what we are really witnessing is a glimpse into our own future, that it is only a matter of time before accusations of disgusting ignorance can be equally waged against the Irish. For me, it is a close tie between central banking and ‘free and compulsory education’ for what would be abolished first in a libertarian society. Keep in mind, free education came 60yrs before central banking in the US. The chicken and the egg?
This marks another major milestone along the bankruptcy of the US economy. The widely predicted collapse of the Federal Reserve dollar grows ever closer now as US creditor nations have finally had enough.
Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves “in a big way,” the source said.
China’s fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson’s US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.
The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.
The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.
Beijing’s reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.
Iran is quoted as having also just begun the process of converting its financial reserves (tip: Max Keiser).
The papers did not specify how much of Iran’s estimated $120 billion in reserves would actually be converted into gold.
This is happening precisely as Peter Schiff predicted.
The Daily Mail reports on the new scheme implemented by the British government to be trialed in the north of England:
Fat people will be paid to walk their children to school under a controversial new Government scheme to tackle the obesity epidemic.
A new supermarket-style loyalty card will allow people to gain points if they attend a keep fit class, go running in their local park or take part in any activity which could help them to lose weight.
The points could then be used to buy healthy food, sports equipment or sessions at the gym.
The most commonly cited arguments for a system of taxing fatty foods or subsidising exercise is that the poor health of the obese will impact negatively on others, that is, we all have to pay for their treatment. This however is a sham reason, and is not a genuine “externality”. If the nationalised healthcare system currently in place in the UK were removed the “externality” disappears, along with the moral hazard.
The new scheme provides an incentive for fat people to lose weight, however few of us realise such incentives already exist in the free market. The government can only supress them.
It’s worthy to note that it was Ludwig von Mises who first realised that government interventions in the economy do not solve market distortions, but rather distort the market further. The government can either repeal its policy or try to intervene more. It most often chooses the latter.
This is no different.