Friday, April 08, 2011

Musical ramble

Sorry I’ve had no time to post my regular Friday Ramble this week—or last week. Normal transmission will resume just as soon as … well, just as soon as I’m able to resume it.

So instead of a full ramble, let me just post a little music for the weekend following the exciting news [hat tip Arthur Streeb-Greebling]that The Stone Roses have announced plans to reform—not to say resurrected…

… which for some strange reason made me think of the best piece of music Mozart ever wrote …

… and the beautiful ‘in memoriam’ Duke Ellington played for his late friend and collaborator Billy Strayhorn…

…and how’s this for an outstanding piece of super-leviathonic, rhythmaturgicaly, syncopated,  tapstematicianismusness—Bunny Briggs dancing before Duke Ellington with all his might!

Enjoy your weekend—and enjoy an organic and kosher brew if you can!

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GUEST POST: What is inflation—and why Matt Nolan should care. [Updated]

Guest post by Phil Scott of NZ’s Foundation for Economic Growth. (If you’re not a subscriber to their regular newsletters, then kindly remedy that now!)

Last weekend I read an article in the Saturday's DomPost entitled, "What is inflation and why should people care?" by Matt Nolan from Infometrics and the Visible Hand blog.
    After a couple of introductory paragraphs Matt states, "By definition, inflation is an increase in the general level of prices, independent of economic fundamentals."
    At no stage did he mention the money supply which I thought might be an "economic fundamental". It is quite obvious that prices cannot rise across the board unless the money supply is rising. If the money supply is static then when people pay more for some items they are automatically forced to buy less of other items which will cause the sellers of those items to reduce the price to meet the reduced demand. So changes in the money available effect changes in the price of goods. So prices will change up and down if the money supply is static but there can be no general increase in all goods unless the money supply increases.
    Therefore increased money supply must come first followed by a general price rise.
    Increasing the money supply CAUSES price inflation in goods and services.
    Sounds fundamental to me.
    But never mind, Matt is in good company. In Thursday's DomPost Ben Bernanke is quoted on page 2 as saying, "an increase in US inflation had been driven primarily by rising commodity prices globally, and was unlikely to persist."
    So Ben Bernanke tells us that rising commodity prices causes inflation. Perhaps he didn't notice the 2 or 3 Trillion dollars he produced from thin air recently.
    I wonder if Matt and Ben are using the same definition of inflation? It is difficult to construct a logical line of thought when one defines effects rather than the cause of those effects. But, then Keynes was not known for his logic either.
    Saying that inflation causes inflation doesn't seem particularly helpful in educating the public.
    My very good friend Hugh Templeton who was recently honoured by the Australian government for his work in starting up Closer Economic Relations (CER) recently borrowed my book, Human Action  by Ludwig von Mises. He informed me that this book is the best book on economics he has ever read. [He’s right you know – Ed.]
    Ludwig thinks that changing the money supply causes changes in prices of goods. In fact he starts at the logical place - the cause - and defines inflation as an increase in the money supply.
    This allows him to construct a logical and true framework for economics which clearly demonstrates cause and effect and explains economics so there are none of the current logical inconsistencies which so plague current "Keynesian" thinking.
    I have tried to describe how Austrian economic thinking describes reality in the section of our web site called REAL Economics. Perhaps Ben should have a look!

Phil Scott is the Chief Executive of NZ’s Foundation for Economic Growth. Send him mail at phil@feg.org.nz

UPDATEKeith Weiner points out, correctly, that

_Quote It's not an increase in money supply per se. For example, in a gold standard gold miners do not create inflation (or rising prices).
It is an increase in
counterfeit credit.

But that might be going one concept too far for most mainstreamers to get their heads around!

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Thursday, April 07, 2011

Happy birthday, Billie Holliday

It’s April 7th. Billie Holliday’s birthday. [Hat tip Jazz on the Tube]

Happy birthday Billie.

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‘Perigo!’ #3 tonight [updated]

PERIGO!-show-eDM---Newman-F

Perigo! is the new interview show featuring New Zealand’s most experienced political interviewer, Lindsay Perigo.

“Perigo” means danger in Portuguese—and Perigo! promises danger to bossyboots and busybodies everywhere!

Tonight, on the third show in this series, Perigo interviews Muriel Newman, Principal of New Zealand Centre for Political Research, and a former Deputy Leader of the ACT Party. (Count them, there’s been something of a revolving door for ACT’s deputies.)

Tune in to see her and Lindsay discuss Liberty vs Democracy, and the current state of the ACT Party and the nation.

PERIGO!  Stratos on Thursday at 7.30 pm, Freeview 21 & Sky 89.

Here’s what episode #2 looked like…

UPDATEPerigo!  #3 is already up on YouTube [thanks Ron], and here it is:

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Broken AMI [update 3]

AMI The AMI insurance company and every one of its policy holders now lies shattered by the Christchurch earthquake.

If you still needed convincing that there is no economic silver lining from the black cloud of Christchurch’s destruction—if you thought the Broken Window Fallacy was refuted by all those fabulously rich insurance companies who would sprinkle economic largesse from some unspecified financial heaven across the plains of Canterbury at no cost to ourselves—if you remained unpersuaded by Kris Sayce’s explanation of how there is no free lunch from insurance companies after a natural disaster—then perhaps today’s public announcement of AMI’s meltdown might bring the message home.

There is no free lunch from insurance companies.

There is nothing good about destruction.

It is rubbish to say the earthquake was good for the economy because the money for rebuilding comes into New Zealand from insurance companies, and won’t be taken from elsewhere in the economy.

To borrow from the title of Bastiat’s essay (just as Kris Sayce did) this only considers that which is seen but not that which is not seen.

All the money AMI had invested in New Zealand is now gone. It won’t be replaced. We will now never see what it would have bought.

Instead we see only another $500 million of your money heading AMI’s way to help bail it out, sent there by a Finance Minister as generous with corporate welfare as he is with his own housing supplements.

And we’ll never see what that half-a-billon might have bought either.

The earthquake was an unmitigated disaster.

And so, it should now be clear, is this government—who knows only how to compound it.

UPDATE 1: Felix Marwick: “National-led Government owns a rail company, a finance company, and about to pick up an insurance company. We're all socialists now.”

UPDATE 2: Felix Marwick again: “Probably they could pick up the Chch casino pretty cheap right now…”

UPDATE 3: Matt Nolan on AMI and moral hazard:

_Quote So when a disaster hits, the government is willing to bail out domestic insurance companies to “provide certainty for claimants” …
    As a result, insurance firms will discount these large-scale low-probability events – and take on more risk when providing loans.  Their willingness to take on more risk than is socially optimal [sic] will be paid for by tax payers…

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Auckland Bloggers Drinks tonight

If you’ve always wanted to bail up bloggers and either give them a piece of your mind or buy them a beer, then join us tonight at Galbraith’s, top of Mt Eden Rd, for our regular first-Thursday-of-the-month Bloggers Drinks.

We’ll be all ears—and open throats.

Who’s the Wastemaster General now, Bill? [update 2]

TeWaka Bill English has been opening his mouth again and letting the wind blow his tongue around.

He says there is an “economic case” for a $2 million giant plastic waka that will be planted down at Queen’s Wharf for a month later this year.

Saying you have an economic case for X has a very specific meaning. It means you envisage specific economic benefits to specific economic players from X.

Does anyone really believe there is any economic benefit to be derived from this beyond the direct $1.8n million benefit to Ngati Whatua themselves? If there is an economic case for the waka, then I say let those who think they stand to benefit economically take the entrepreneurial risk themselves.

How dare Bill English and Pita Sharples and Ngati Whatua big cheese Ngarimu Blair load that entrepreneurial risk onto taxpayers instead of taking it themselves.

This is a very good example of why entrepreneurial risk should always be borne by the owners of capital—not by taxpayers at the behest of politicians playing political games.

There is little enough capital in this country anyway, most of it still malinvested. Should taxpayers bear the risk with their capital of Bill English's/Pita Sharples’s/Ngarimu Blair’s entrepreneurial acumen? Or lack thereof?

Hell no.

This is why taxpayers should not bear the burden of paying for a big plastic waka. If there are economic benefits to be had from it, then let those who stand to benefit stump up and risk their own capital.

Same argument for Team New Zealand, frankly. If there are economic benefits to be had from yachts with New Zealand logos floating around the world's pleasure spots, then let those who stand to benefit stump up and risk their own capital.

Same argument for the Rugby World Cup itself, frankly. If there are economic benefits to be had from "showcasing New Zealand," of from building “slugs” on Queen’s Wharf to “showcase New Zealand businesses,” then let those who stand to benefit from that showcasing stump up and risk their own bloody capital without dipping into other people's pockets.

And same argument for an inner-city rail loop round central Auckland. If there are economic benefits to be had from a rail line under central Auckland, then let those who stand to benefit economically from that rail line take the economic risk themselves.

These are many, many, many things that are "nice to have"--and those who find them nice should be the ones that have to find the money.  Why the hell should people who might think it's nice just to afford their rent be forced to take food out of their own mouths to pay for someone else's idea of "nice."

There are many other things that others might think it "nice to have" but will never ever have any economic benefit at all. That are just Waste with a capital ‘F.’ Boondoggles that Bill English should recant on now. And if he doesn’t recant on them now when his Government confronts the most economically destructive natural disaster the country has ever see combined with the biggest government deficit this country has ever seen then one has to wonder when he will.

  • A bailout for South Canterbury Finance debenture holders. Nice for some. Not nice for NZ taxpayers.
  • A bailout for AMI Insurance policy holders. Nice for some. Not nice for NZ taxpayers.
  • Welfare for Working Families. Nice for the middle class families getting the welfare. Not so nice for the taxpayers paying for it.
  • Interest-free loans for students. Nice for the students getting the interest-free loans. Unaffordable for for the taxpayers Bill English still forces to pay for it.
  • Michael Cullen’s train set. Nice for the few people who use it. Not nice for those taxpayers Michael and Bill taxed to pay for it.
  • Nick Smith’s Emissions Tax Scam. Nice for the bureaucrats administering it. Nice for those who think it makes NZ look “nice” to the rest of the world. Nice for Nick Smith who gets to strut around looking “nice” before his friends at the world’s climate conferences. Not nice at all for all you hard-pressed producers and consumers who have to pay for it.
  • Continuing to pay for Ministries of Women’s Affairs, Ethnic Affairs, Maori Affairs, Pacific Island Affairs and Consumer Affairs (let all these pressure groups handle their own bleeding affairs); for Ministries of Youth Development, Economic Development and most of the Ministry of Social Development (have you seen them doing any developing to speak of?); for Commissions for Commerce, Children, Electricity and Race Relations; and Councils for Alcohol Advice, Fish and Game, Gambling and “Human Rights”—not to mention the whole litany of other government millstones hanging round the neck of producers.
  • And of course “Party Central” itself and its giant plastic waka—which as everyone really knows has no economic case whatsoever.  It is simply nice for Pita Sharples and the Ngati Whatua Browntable, and very nice for John Key and Bill English—who get to buy the Maori Party’s votes in Parliament with money out of your pocket.

Before the last election, when National’s luminaries were swallowing dead rats while pretending they didn’t know there was an economic crash coming, they were busy calling Michael Cullen the Wastemaster General.

Who’s the Wastemaster General now, Bill?

Who’s the Wastemaster General now, John?

UPDATE 1: Eric Crampton: “Oh, the dangers when the government starts picking winners.”

UPDATE 2: Please take this 3 News poll: “Should the taxpayer or businesses pay for World Cup projects - eg Cloud or the Waka... ? “

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Wednesday, April 06, 2011

Freedom, when we have it … and when we don’t

Here’s two book-ends on the same basic subject: freedom, in both application and obliteration.

First:

Eric Daniels gives a “dangerous” talk at the North Carolina TED on "The Moral Case for the Free Market.”

Second:

Alan Charles Kors delivers a talk at the Clemson Institution for the Study of Capitalism titled “Socialism's Legacy: Lest We Forget”
Ayn Rand observed that "instead of prosperity, socialism has brought economic paralysis and/or collapse to every country that tried it." Following the collapse of the Soviet Union, many optimists claimed that the world was now somehow "after socialism." There are reasons, however—structural, political, moral, and intellectual—why the collapse of Communism did not entail the end of socialism. This talk will explain why there can be no "after socialism" until the West comes to ultimate terms with the catastrophic legacy of international communism.

[Hat tip Bradley Thompson]

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Pseudo-economics and earthquakes

Reading Dim Post this morning, I see that Danyl McLauchlan still believes that money can be plucked from the trees—that it would be “economic stupidity” to cut taxes and government spending to help New Zealanders faltering finances recover from the earthquake.

_Quote_Idiot The reality is [says Danyl] that government spending flows into the economy, so if you cut it you’re going to have basically the same impact as raising taxes.

In other words, it’s not important where money comes from to “subsidise” recovery, just as long as a stream of purchasing power emerges from somewhere. Anywhere. Even if that purchasing power must first be taken out of taxpayers’ pockets.

As if having folk in their role as taxpayers subsidise themselves as consumers somehow provides some sort of stimulus.

What Danyl forgets is is that subsidies are paid for by someone, and that no method has yet been discovered by which the community gets something for nothing.

And if  you think there has been, then I have a plastic waka to sell you.

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“Green energy” is economically senseless

Following on from yesterday’s post, Jerry Taylor and Peter Van Doren give five reasons why “green energy” is economically senseless:

  • “First, green energy is diffuse, and it takes a tremendous amount of land and material to harness even a little bit of energy…”
  • “Second, it is extremely costly…”
  • “Third, it is unreliable…”
  • “Fourth, it is scarce….”
  • Finally, … electricity produced by sun or wind cannot be stored because battery technology is not currently up to the task.

In short,

_Quote The fundamental question that green energy proponents must answer is this: if green energy is so inevitable and such a great investment, why do we need to subsidize it? If and when renewable energy makes economic sense, profit-hungry investors will build all that we need for us without government needing to lift a finger. But if it doesn't make economic sense, all of the subsidies in the world won't change that fact.

Hence our working definition of Renewable Energy = “unreliable energy produced by means that would be uneconomic without tax breaks and subsidies.”

Read The Green Energy Economy Reconsidered.

[Hat tip TOS Week in Review]

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Tuesday, April 05, 2011

New green technologies …

This is the first and probably only time I’ll be posting a ‘Dilbert’ cartoon here. But this is unusually good:

Dilbert

And unusually topical, given the leaking of the Government’s Energy Strategy, the first three of twelve “areas of focus” of which are these:

image Just for the record, the working definition of Renewable Energy is “unreliable energy produced by means that would be uneconomic without tax breaks and subsidies.”

Discuss, with reference to this Government’s (leaked) Energy Strategy.

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Monday, April 04, 2011

ECONOMICS FOR REAL PEOPLE: Economic Harmonies, III - The Price System & Economic Coordination

174890_113543235391042_4579644_n This week at the UoA Economic Group we continue our discussion of the fundamental Economic Harmonies.

Tomorrow night, Tuesday, guest lecturer Sean Kimpton explains how price signals and the daily decisions of entrepreneurs between them coordinate the worldwide Division of Labour.

  • How the various branches of business are kept in proper balance;
  • the impetus to economic progress;
  • how 'Paris Gets Fed';
  • the effect of price controls;
  • how consumer advocates harm consumers;
  • how speculators help them.

All this and much more!
Join us tomorrow night, Tuesday, 6pm, at the Auckland University Business School (note the room change from our usual).

data=XCVihWRtq4WsaAaVG7VezksrTNzDcIEE_YWd04ht9zkDZSpIOEWoVOQcm6ijrNG-RJHfajJgcjB4DR3sumbBl1J9R-Uy_B7Qm4inb8sWhere: Business School OGGB 223,
                  Level 2, Owen G. Glenn Building,
                  12 Grafton Rd,
                  Auckland University [Map here]
When:   Tuesday 5 April, 6:00pm

Summary of last week’s discussion: This last Tuesday we talked about the leading implications of the Division of Labour, which can be summed up as The General Gain from the Existence of Others

  • Why, in a division-of-labour society, prosperity is open to everyone;
  • What Steve Jobs gained from his cleaning lady (and what she gained from him);
  • Why Lady Gaga should spend more time caterwauling and John Grisham more time writing books;
  • Why Malthus was wrong, i.e., why greater population is a blessing not a curse
  • How it is exactly that in a division-of-labour society each of us gains from the existence of each other.

Remember to visit - and join - us on Facebook to keep up-to-date with our programme for the year:
http://www.facebook.com/home.php?sk=group_191580464208836

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Perigo, 1

Lindsay Perigo’s new TV show is broadcast weekly on Stratos Thursday night at 7.30pm. It can be seen on Sky 89 and Freeview.

But for those, like me, who can’t get any of the above—or who are out on Thursday nights—it’s good to know that it does appear eventually on YouTube, and his Peritorial’s will always go up at SOLO.

So it sure as hell gives me great pleasure to present the very first Perigo show, with his very first guest Dr. Ron Smith from Waikato University (first broadcast Thursday March 24th).

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Why business leaders should care about intellectual property

Property rights and the concept of intellectual property have been under attack right from their very inception.

You’d expect attacks from the Marxist left and the downloading ignorati, who between them are are always on the lookout for more excuses to loot and plunder.

But today, the attacks come just as often from the know-nothing right—from National’s Nick Smith and his Resource Management Act, from National’s Gerry Brownlee and his Earthquake Requisitioning Authority, and from National-lapdog Rodney Hide and his creation of a super-sized bureaucracy for Auckland’s “city planners.”

But even more virulent than any attack that lot can provide are the attacks on intellectual property  from know-nothings at the Cato Institute and the Mises Institute—from know-nothings in both who have used the reputation gained and once upheld by these institutions to argue against the very ideas their namesakes once upheld.

In this 8-part presentation (originally presented in Chicago back in November) George Mason University professor Adam Mossoff blasts the very flawed philosophical framework from which the tattered arguments of the likes of Cato’s Tom Palmer and Mises Institute’s Steven Kinsella are launched, demonstrating that if either know anything, it is certainly not the ideas that underpin their field: specifically, the ideas of monopoly, coercion, scarcity, value, and even property itself.

The likely result is that to the extent either has any following at all, the result will only be to undermine the notion and knowledge of of property rights itself among those followers.

Yes, the full presentation is a long one. But if you purport to hold a position on the subject, particularly if you rely on the unstated assumptions of the likes of Palmer and Kinsella, I would strongly commend digestion of it to your attention.  Here’s part 1 of 8 …

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