Tuesday, 6 September 2011

The one fact about 9/11 you still need to know

Nearly one decade on from that day when an organised gang of barbarians hijacked civilian airliners and flew themselves and scores of innocents into two of the world’s most famous symbols of capitalism, one wonders what could be said about that outrage that hasn’t already?
Midst all the words of pseudo-sophistication and “complexity,”  Christopher Hitchens repeats boldly the one point that still bears repeating:
Simply evil. A decade after 9/11, it remains the best description and most essential fact about al-Qaida … a particularly odious group (a secretive and homicidal gang: part multinational corporation, part crime family) that was sworn to a medieval cult of death, a racist hatred of Jews, a religious frenzy against Hindus, Christians, Shia Muslims, and "unbelievers," and the restoration of a long-vanished and despotic empire.
    To me, this remains the main point about al-Qaida and its surrogates. I do not believe, by stipulating it as the main point, that I try to oversimplify matters. I feel no need to show off or to think of something novel to say. Moreover, many of the attempts to introduce "complexity" into the picture strike me as half-baked obfuscations or distractions. These range from the irredeemably paranoid and contemptible efforts to pin responsibility for the attacks onto the Bush administration or the Jews, to the sometimes wearisome but not necessarily untrue insistence that Islamic peoples have suffered oppression. (Even when formally true, the latter must simply not be used as nonsequitur special pleading for the use of random violence by self-appointed Muslims.)
    Underlying these and other attempts to change the subject there was, and still is, a perverse desire to say that the 9/11 atrocities were in some way deserved, or made historically more explicable, by the many crimes of past American foreign policy… That this was an assault upon our society, whatever its ostensible capitalist and militarist "targets," was again thought too obvious a point for a clever person to make. It became increasingly obvious, though, with every successive nihilistic attack on London, Madrid, Istanbul, Baghdad, and Bali. There was always some "intellectual," however, to argue in each case that the policy of Tony Blair, or George Bush, or the Spanish government, was the "root cause" of the broad-daylight slaughter of civilians. Responsibility, somehow, never lay squarely with the perpetrators.
   … Al-Qaida demands the impossible—worldwide application of the most fanatical interpretation of sharia—and to forward the demand employs the most hysterically irrational means…
    Contrary to the peddlers of shallow anti-Western self-hatred [however], the Muslim world did not adopt Bin-Ladenism as its shield against reality. Very much to the contrary, there turned out to be many millions of Arabs who have heretically and robustly preferred life over death. In many societies, al-Qaida defeated itself as well as underwent defeat…
    Against the tendencies of euphemism and evasion, some stout simplicities deservedly remain. Among them: Holocaust denial is in fact a surreptitious form of Holocaust affirmation. The fatwa against Salman Rushdie was a direct and lethal challenge to free expression, not a clash between traditional faith and "free speech fundamentalism." The mass murder in Bosnia-Herzegovina was not the random product of "ancient hatreds" but a deliberate plan to erase the Muslim population. The regimes of Saddam Hussein and Kim Jong Il and Mahmoud Ahmadinejad fully deserve to be called "evil." And, 10 years ago in Manhattan and Washington and Shanksville, Pa., there was a direct confrontation with the totalitarian idea, expressed in its most vicious and unvarnished form. Let this and other struggles temper and strengthen us for future battles where it will be necessary to repudiate the big lie.

DOWN TO THE DOCTOR'S: How to stop MPs and immigrants from gouging NZ taxpayers

_richardmcgrathYour weekly prescription of good hard sense from Libertarianz leader Dr Richard McGrath.
This week, how to stop MPs and immigrants from gouging NZ taxpayers.

  • NZ HERALD: “Wong's Taxpayer Spending 'Not Pattern'” - The Auditor-General says National MP Pansy Wong helping herself to taxpayer funds so that her husband could go on a private business trip was not part of a pattern of wrongdoing…
    THE DOCTOR SAYS:  Either the Auditor-General or this piece’s headline writer needs a boot up the arse. The problem is not whether Pansy Wong's troughing for her husband was part of a pattern of such troughing, it's the fact that she was able to trough in the first place.
        It's obvious from this that parliamentarians just can't help themselves—they feel entitled top lap from the trough they see all around them. And who can blame them for indulging in a bit of “self-improvement” at the expense of others when wads of taxpayer money is sloshing around within easy reach?
    THE SOLUTION: Have MPs' remuneration and perks paid for by the political parties to which they belong, and not by the taxpayer. See if the members of political parties are happy to have their donations diverted into the pockets of MPs for their own private gain.
        I think you would find said party members delivering slightly more forceful feedback than the flogging-by-wet-bus-ticket administered by Auditor-General Lyn Provost. Said MPs might find themselves strung up by their own entrails if they tried stealing from their own. Which is how it should be.
  • NZ HERALD: “Call To Sack Academic Over 'Racism'” - Auckland professor of Maori studies Margaret Mutu called on the government to restrict the number of white immigrants to this country…
    THE DOCTOR SAYS:  Hold on to your seats, readers, because I happen to agree with Professor Mutu on this one. With a wrinkle or two.
        I agree with her that the number of white immigrants should be restricted if such immigrants expect to jump aboard the welfare gravy train once they clear Customs. And here’s the first wrinkle: that the same should go for people with darker skin pigmentation.  Or any skin pigmentation.
        The issue is not their skin colour or ethnicity, but their parasitism.
        No-one who immigrates here should expect to receive public welfare payments, including taxpayer-funded superannuation, at any time.  Part of the deal should be that they are self-supporting for the duration. They should, however, be allowed to apply for private assistance and welfare if someone is willing to sponsor them. And you could bet they wouldn't be staying on hand-outs for very long under such a system.
        Nothing wrong with Prof Mutu's utterances then, just as long as they apply equally to people of colour. And to residents as well as immigrants.
        One possible further improvement could be that any New Zealand citizen who received a benefit funded by tax slaves would be ineligible to vote, but those who received private welfare would be eligible. That would encourage people to get off the taxpayer's back, and ask private welfare agencies nicely for help.   
        It's rather telling that Ngapuhi boss David Rankin acknowledges that white immigrants are "most likely to bring employment opportunities for our communities." But this true of all immigrants: to the extent they stand on their own feet, their production provides demand for others’ goods and services.
        And if it was a condition that immigrants remain self-supporting for life, only the most able and talented would come here—and those intend to stand on others’ feet instead of their own would have to look for some other nation of suckers willing to accommodate their blood-sucking tendencies.
    And, as history has shown, the able and talented come in all shades.   

See you next week!
Doc McGrath

ECONOMICS FOR REAL PEOPLE: “Your Grandfather’s Economics”

Here’s your update on tonight’s meeting at the UoA Economics Group:

Tonight at the UoA Economics Group, we’ll be looking at a lecture provocatively titled ‘Why Your Grandfather’s Economics Was Better Than Yours’ – that is, if your grandfather had grown up and learned his economics before the 1930s.


Today it is commonly said that recessions are always caused by a deficiency of aggregate demand (including, somehow, the present global meltdown, which featured at its inception exploding consumption). Prior to Keynes however, recessions were understood not in terms of the level of demand but of the structure of demand. The difference could not be more profound.

Keynes wrote that Say’s Law meant that  “supply creates its own demand”—suggesting  (in his interpretation of this important classical proposition) that everything produced would automatically get a buyer. But what was it that Say actually said? Isn't it true that he actually asserted that demand springs from production? The difference could not be more important.

The Keynesian model makes the engine of growth appear to be expenditure—especially government expenditure. In contrast, however, your grandfather considered that growth and recovery relies on new production—which explicitly means production by (and recovery of) the private sector. The difference could not be more germane.

The Keynesian medicine has been tried many times such as in Japan, and also in the U.S. in the Great Depression. Did it work? How did the medicine of classical economics fare in their time? Did it succeed in lifting these economies out of recession and back into productivity? The difference was real.

In other words, what can we learn from the economics of your grandfather (or, more accurately, your great-great-grandfather)?

        Time: 6:00pm
        Date:  6 September
        Location: Case Room 1, Level 0, Owen G Glenn Building, University of Auckland Business School

See you tonight

Monday, 5 September 2011

Frank Furness, on video!

The HowToArchitect briefly presents one of the architects influential on both Louis Sullivan and Frank LLoyd Wright.

Christchurch one year on

It’s sadly all too appropriate really that we have to commemorate the anniversary of the first Christchurch earthquake last year accompanied by news that land around Christchurch on which Cantabrians might begin rebuilding is still being held up by council planners—not one of whom has had the brain power to realise that (especially) when land is in short supply, they should get their dirty paws off it.

Instead, their District Plans are still making it impossible to build.

Never mind all pseudo sympathy and hand wringing from Christchurch’s dictatoriat. Never mind the fine words.  If results had been as forthcoming as tea, sympathy and ill-founded “visions,” Cantabrians might already have been able to begin putting the disaster behind them. Instead, rather than helping Cantabrians to recover, the authorities have been doing everything they can to hinder them.

Let’s make it simple. Let’s start with a simple goal. Let’s look at one concrete goal they can work towards: Forget the grand plans and the top-down great visions: their first goal for recovery should be allowing the production of $50,000 serviced lots. As Hugh Pavletich has been saying ever since the quake:

The Christchurch earthquake recovery will be ALLOWED to start, when CERA / Central Government sorts out the lunatic land supply situation.
How much longer does this political / regulatory lunacy have to be tolerated? Isn’t in excess of 12 months of dithering enough?
There should have been $50,000 serviced lots available for displaced residents well before now.

He’s absolutely right. Christchurch’s recovery won’t even be able to begin until would-be home owners are able to build on serviced lots costing them no more than $50,000. It’s the only way their finances are going to work—which is to say, the only way the city is going to begin rebuilding: by the people of the city rebuilding.

This is only the bare minimum of first steps. That we are one year down the track and not even on that path at all is killing. I suspect the only way it will ever happen is for town planners to feel Roger Sutton’s boot up their arse, so that land owners can get on with producing the supply to meet the urgent demand unencumbered by ridiculous, anachronistic ideas of town planning that never suited the city when they were first written, and they sure as hell don’t suit it now that city has disappeared.

Get the hell out of their way.

The Point of Maximum Pessimism

_Kris_SayceGuest Post by Kris Sayce of Money Morning Australia

Phew! What an exhausting month.

On the last day of July, the S&P/ASX 200 index closed at 4,424 points.

On 9 August the index reached an intra-day low of 3,765 points.

At the close of trade on Wednesday the index closed at 4,296.

As you can see on the logarithmic chart below, the stock market action this month has been the most volatile this year:

stock market chartSource: CMC Markets Stockbroking

In fact, for a similar sized percentage move you have to go back to April last year. Funnily enough, that too marked the approximate end of a period of U.S. Federal Reserve money-printing.

And now the market is waiting for the next central bank move.

Not surprisingly, the market has gone all topsy-turvy.

What’s good is bad, and bad is good

Economic news that’s normally seen as positive is now seen as negative. Why? Because the market fears it may stop the Fed from printing money.

Not only that, but bad economic news is cheered… because it increases the chances of money-printing… and that’s seen as a good sign for the markets and the economy.

For example, this from Bloomberg News:

The dollar rallied, Treasuries rose and U.S. stocks swung between gains and losses, as the manufacturing report bolstered optimism in the economy while dimming prospects for more monetary stimulus from the Federal Reserve.

It’s crazy. Positive news should be positive for stocks. But these days, that ain’t always the case.

The only explanation we can come up with is this…

A genuinely self-sufficient market will take months and possibly years to recover and grow. But – and here’s the key – it will be sustainable growth.

By contrast, a central-bank-induced “recovery” will hit the markets right now, like a big shot of coffee. But – and here’s another key – it’s not sustainable. Just as the effects of previous stimulus soon wear off, so will this one.

And traders who have gotten into the market on the basis of more stimulus know this. That’s why they’re getting out on any signs of positive economic news.

However, they needn’t be so nervous. Because we’ve got some news for them…

Fed meddling is certain

Action by the U.S. Federal Reserve is almost guaranteed. Meddling is what these guys live for. But we understand traders’ nervousness. When they’re punting with huge leveraged bets the last thing they want is to be in the market while other traders are selling out.

That’s what’s making the market hyper-volatile.

And if you’re in any doubt about the impact of stimulus on the real economy, it’s worth noting the following quote from the Financial Times. Because not everyone is happy about the outlook for the economy:

In many countries, the surveys of purchasing managers produced the lowest readings of manufacturing activity, orders and jobs since mid-2009, when the world economy was crawling out of recession.

To us, the situation is clear: for as long as policymakers continue to meddle and try to boost the economy, the longer the economy will stay depressed.

Yes, it may help the stock market in the short term by artificially inflating prices. But long term, it will do no more than disappoint investors.

And eventually investors will get so used to the post-stimulus disappointment they’ll forget to get excited about the stimulus beforehand. That’s when you’ll know the market is at the depths of the depression.

And that’s when the market will be at a genuine bargain price. Famous investor John Templeton only bought stocks when the market reached “the point of maximum pessimism”.

In 1939 it reached that point. He bought stocks. He made a fortune. But not straight away. It took time. Central bankers aren’t interested in taking time. They’re trying to bag a quick fix.

And that’s what’s creating the volatility and distortions in the market.

So right now, some individual stocks are at “maximum pessimism” prices and are worth buying. But the market as a whole isn’t.

That will only come when investors are no longer fooled by the magic charms of central bankers.

Until then, the action you’re seeing now is nothing more than a trading market. That’s great for traders. And great for punters. But it’s not so good for the conservative investor who’s just trying to save for retirement.

And by our estimates, it seems the market is set to stay this way for a while yet.

Money Morning Australia

Gibson Guitars attacked

What do Chet Atkins, Duane Allman, Jerry Garcia, Chuck Berry, Charlie Christian, Sheryl Crow, Bob Dylan, Al di Meola, The Edge, the Everly Brothers, Billy Gibbons,Dave Grohl, George Harrison, Lightnin’ Hopkins, Joan Jett, John Lennon, Alex Lifeson, Lenny Kravitz, Bob Marley, Albert Collins, John McLaughlin, Pat Metheny, Wes Montgomery, Carl Perkins, Mick Ronson, Keith Richards, Brian Jones, Carlos Santana, Eddie van Halen, Neil Young, Frank Zappa and AC/DC’s Angus Young have in common?

Les Paul 2010Answer: They all play (or played) a Gibson guitar. A beautiful thing. The quintessence of Americana.

So how appropriate then that from the United Police States of today’s America, we hear of a “bizarre and disturbing story of a US government witch hunt that threatens to to drive them either out of business, or out of the US.” [Hat tip Jazz on the Tube]

Last week, heavily armed federal agents raided two guitar manufacturing facilities in Tennessee owned by Gibson — one in Nashville, another in Memphis. The feds were not acting on a tip that an al Qaeda cell was holed up in the buildings; or that Mexican drug cartel gangs were lurking inside. It was actually something far more serious; far more serious, that is, to a bunch of federal bureaucrats with nothing better to do.
    The raids were carried out because the Department of Justice and the U.S. Fish and Wildlife Service claim that parts of the iconic guitars manufactured in the plants contained the wrong kind of imported wood…

Fortunately, the boss of Gibson Guitars is no pussy.

In recent days, Gibson’s CEO has gone on a counterattack, telling various talk radio and TV news programs that the raids are an “outrageous abuse of federal power” that have unfairly singled out his company, perhaps for political reasons.
    “There’s no doubt we’re being persecuted,” Juszkiewicz said. “But while I was sitting in my conference room, while agents blocked the door to my office, I decided two things. One, we were going to try and fight this in court. Secondly, we were going to give this issue visibility.”

Keep watching.

Meanwhile, a guitar gently weeps.

Friday, 2 September 2011

Peter Schiff: 'Quantitative Easing is the reason for recession'

“It’s good for Washington, it’s good for Wall Street, but … ”

Nickey Hager’s written another book

So what?

Back when the Sunday Star Slime and Hicky Nager collaborated on the "revelation" of of the SIS bugging Tariana Turia, Justice Neazor descibed it after a lengthy investigation as “a work of fiction." Like so much of his work before and since, really.

So where should this latest tome be filed then?  Under “receiving stolen property”--his other speciality?

Or under “fiction”?

Or both?

Or just straight into the circular filing basket?

Either way, when Murdoch journos do either it’s considered reprehensible. So how come this weasel gets a free pass?

Thursday, 1 September 2011

QE3: Hard to stop. Wrong to start.

_BenYou might have noticed US Federal Reserve Chairman Ben Bernanke clearing his throat recently ready for the release of another monetary tsunami—a flood of counterfeit capital created out of thin air that will create no real resources, create no real savings, but which will stimulate a falling economy the falling stock market.

It’s just a matter of time. They will call it Quantitative Easing 3. We might call it the ‘Bernanke Put’—an expression of his on-going commitment to protect bankers and share traders from making losses.

Isn’t that nice of Mr Bernanke?

But have you noticed how more rapidly these injections of several trillion-weight of counterfeit capital have been coming?

No surprise, really, because once you’ve let the genie of monetary inflationary out of the bottle, every new injection of the genie’s monetary narcotic needs to keep coming faster and faster. Just like a real narcotic, really.

Every period of monetary inflation has been the same. (For a good account of one such period, the inflationary period that helped to bring on the French Revolution, check out the short book Fiat Money Inflation in France. And for the explanation of why accelerating monetary inflation is necessary once started, despite the dismal prognosis from its repeated application, read Hayek’s short book Tiger by the Tail.)

The present monetary system—a system of fiat money based on the organisation of debt into currency—is collapsing in both Europe and the US. No wonder even mainstream magazines like Forbes are starting to talk about the gold standard—the system maimed by Franklin Roosevelt, brutalised by John Maynard Keynes, and finally taken out the back and shot by ichard Nixon. The writers at Forbes don’t understand the system perfectly, but the system of monetary stability that underpinned the prosperity nineteenth is starting to be talked about again respectfully.

Perhaps in the long term that’s something we will thank Ben’s blundering for.


Steve Jobs: Genius

SORKIN-tmagSFGenius has often been described as the ability to enter an existing field and, by your contribution alone, change it utterly.

Louis Armstrong did that for jazz. Newton and Einstein did it for physics. And Steve Jobs of Apple? Virtually single-handedly he revolutionised telecommunications, personal computing, the music business, publishing and Hollywood. Not to mention what he did to the computer itself.

Most geniuses only revolutionise one field. Jobs has revolutionised at least three.

But it’s not enough for some folk that his genius has improved the lives of millions. That he’s a genius who’s earned his money. He’ll only get respect at places like the New York Times if he gives it all away.

Never mind that the focus of his wealth and productive genius on production does more for every single person on the planet than if he spent his time and energy giving his money away. He understands this:

Mr. Jobs [told friends] he could do more good focusing his energy on continuing to expand Apple than on philanthropy, especially since his illness. “He has been focused on two things — building the team at Apple and his family,” another friend said. “That’s his legacy. Everything else is a distraction.”

In an interview with the Wall Street Journal in 1993 , Jobs said, “Going  to bed at night saying we’ve done something wonderful … that’s what matters to me.”

Good for him.

Wednesday, 31 August 2011

Fran O’Sullivan jumps Bernard Hickey’s shark

Every taxi driver, barber and newspaper columnist is the same.

They know how the world works. They know what needs to be done to fix things.  They know, uniquely, what has to happen, and all they need is is big bossy gummint to give them the big stick!

Fran O’Sullivan is no different.

Staring at Christchurch and seeing only months of inactivity brought about by government meddling both central and local (waiting for EQC to sign off houses, builders and buildings; waiting for CERA o demolish what’s left of people’s property in the central city; waiting for council to release its “strategy” for what property owners in the city might be allowed to do;  waiting for government to decide what regulations it might issue mandating how they might be allowed to do it;  waiting (vainly, I might add) to see if council’s District Plan might be relaxed to allow businesses to relocate to new office buildings in different parts of the city, and new housing to be built in places the planners never contemplated) Fran doesn’t draw the obvious conclusion that making the country’s second-largest city a ward of the state is neither sustainable nor affordable.

Instead, she leaps for the same big stick beloved of blowhards everywhere: the gummint must do something! (As if it weren’t already doing enough!)

_osullivan_fran1602091Fran has a plan. It’s not very complicated, or even very well thought out. Specifically, Fran demands the government:

  • nationalise all the private land on the outskirts of Christchurch (i.e,, completing the job CERA have already largely done in the CBD);
  • build houses on it (because the government does this so well); and
  • raid the pocketbooks of everyone in the country able to afford a Rugby World Cup ticket to pay for it.

Simple as that. A plan that every barber, every taxi driver--every blowhard and Bernard Hickey in the country--could agree with and call their own.

Fran O’Sullivan is a business columnist.

But she has no idea, apparently, how business works. She doesn’t realise that regime uncertainty and a loss of property rights between them have barred businesses from doing what they do best.

Fran O’Sullivan writes about politics.

But she has no idea, apparently, that making the city a ward of the state has caused the very malaise she decries.

It can be undone, but not by making the state’s interference even bigger. It can be done very simply: by letting businessmen themselves rebuild the city businessmen created.

Tell business owners they can relocate wherever in Christchurch they want, and that zoning will be relaxed to accommodate that, and watch businesses start to take off again.

Tell owners of stable land that they can build as many houses on their land as they can provide services for, with neither costs to nor charges from council, and watch a festival of house-building take off.

Let those who own their own property determine between them and their insurance company what they wish their building standards to be. Such a system can be set up very quickly as it already exists in government reports. And then watch the festival start producing innovative affordable homes.

Bus Bob Parker, Gerry Brownlee, Roger Sutton and all the town planners--and Fran O’Sullivan--out of Christchurch permanently, get the hell out of the way, and allow the city and the people within it to reinvent itself spontaneously. This would be a wonder to see.  Call it spontaneous order, if you will, since that’s what you’re trying to kick off. Call it crowd-sourcing, if you like, since that’s what markets and entrepreneurial activity like this are really made of.

In fact, call it an Enterprise Zone and allow some enterprise to happen in the city for the first time in nearly a year.

Make it an Enterprise Zone instead of a Ward of the State, get government out of the way (and provide land-owners and businesses some certainty they’ll stay there), and can I assure you you’ll be surprised what might happen. 

Even Fran might be.

Because Fran O’Sullivan is a business columnist. Or was.

Tuesday, 30 August 2011

UoA Economics Group: Postponement

If you’re wondering, just like I was, what was happening tonight with the group, I’ve just had this message from the organisers:

Hello all. Due to the mid-semester holiday the university economics group will take a break from our regular seminar tonight. But we will be back next week and looking at a lecture titled "Why Your Grandfather’s Economics Was Better Than Yours." We look forward to seeing you next week.

UoA Economics Group

John Boy channels Marx [update 2]

“The ideas of economists and political philosophers, both when they are right and when they
are wrong, are more powerful than is commonly understood. Indeed the world is ruled
by little else. Practical men, who believe themselves to be quite exempt from any
intellectual influence, are usually the slaves of some defunct economist…”

-John Maynard Keynes

I’ve never quite understood why the Prime Minister, John Boy Key, is considered some sort of economic guru.  I’ve seen no evidence of it, despite his obvious predilection to meddle as if he knows what’s going on.

He’s certainly got no handle at all on what to do in the present crisis—allowing his deputy to keep borrowing and spending as the economy collapses and NZ’s second-largest city is allowed to die. (He was happy for example to boast about how flush EQC was straight after the quakes, $15 billion of good assets he said; turns out it only has $6 billion, and most of those in the form of IOUs from the government.)

Even in his supposed area of expertise for example, currency trading, I can remember him telling a business journo a while back that the New Zealand dollar would soon decline and “have a four in front of it” in relation to the US dollar—whereupon almost it began its climb to where it now has double that number against the American.

_JohnBoyAnd yesterday he reinforced his credentials as a chap with about as few economic clues as that last big-time economic meddler, Robert Muldoon. Speaking to Newstalk ZB’s Mike Hosking about the minimum wage—the existence of which has driven an explosion in youth unemployment all round the world, not least in NZ—Smile and Wave told Hosking “cutting the minimum wage rate to what the market can bear would lead to some very low wage rates in New Zealand.”

"It's the classic neo-liberal [sic] economic theory that you pay what the market can bear, and I think you would see very low wage rates on that basis," Key said on Newstalk ZB when asked about his view on the ACT Policy.
"You would definitely see some companies that would say, well ok, I'll hire you at two bucks an hour," Key said.

This is ignorant on at least three fronts.

First, this is not “neo-liberal” economic theory, whatever that actually means. (I’ve only ever heard the term used by people forced to study under Jane Kelsey.) It is economic theory reinforced (as all good theory must be) by economic fact: Price things above what people are willing and able to pay for them, and you won’t sell as many as if you lower your price; and when you have a whole lot of things left on your shelf that you simply can’t sell, only a moron (or a Prime Minister) would raise the price.

Second, does he really think that NZ labour is so bad that two dollars per hour is all they’re worth? And if he does, how does he think producers manage to make any profit at all when they have to pay them six times that amount? [What an idiot!]

Third, and most fundamentally, this just flat-out Marxist nonsense. Yes, Marxist. The idea that in the absence of legislation saying otherwise, employers can gleefully exploit workers by paying them whatever they feel like, right down to the level they need to just stay barely alive—i.e., the Exploitation Theory of Wages—was widely promoted by Marx and his followers, even as it was being soundly debunked before that century was even out by that great economist Eugen von Bohm-Bawerk and his [see here and here].

Since the exploitation theory “is one of the most powerful factors that have been operating to lead the world down The Road to Serfdom” it is worse than disappointing to see a Prime Minister lauded (for some reason) for his economic intelligence peddling this particular poison pill.

Especially so since it is so easily debunked, as George Reisman does here in explaining the irrelevance of both worker need and employer greed in setting wages: essentially “the payment of higher wages in the face of a labor shortage is to the self-interest of employers because it is the necessary means of gaining and keeping the labor they want to employ.”

The Marxian doctrine of the alleged arbitrary power of employers over wages appears plausible because there are two obvious facts that it relies on, facts which do not actually support it, but which appear to support it. These facts can be described as “worker need” and “employer greed.” The average worker must work in order to live, and he must find work fairly quickly, because his savings cannot sustain him for long. And if necessary—if he had no alternative—he would be willing to work for as little as minimum physical subsistence. At the same time, self-interest makes employers, like any other buyers, prefer to pay less rather than more—to pay lower wages rather than higher wages.
    People put these two facts together and conclude that if employers were free, wages would be driven down by the force of the employers’ self-interest—as though by a giant plunger pushing down in an empty cylinder—and that no resistance to the fall in wages would be encountered until the point of minimum subsistence was reached. At that point, it is held, workers would refuse to work because starvation without the strain of labor would be preferable to starvation with the strain of labor.
    What must be realized is that while it is true that workers would be willing to work for minimum subsistence if necessary, and that self-interest makes employers prefer to pay less rather than more, both of these facts are irrelevant to the wages the workers actually have to accept in the labor market…

Read on here for the economic lesson that Smile and Wave never got. And then, in the name of every young person out of work and struggling to gain employment at the rates that have been set for them by the ignorance of this Prime Minister, send him a copy.

UPDATE: Eric Crampton runs the rule here and here over the economic facts regarding youngsters being priced out of work—and says:

While we're talking youth unemployment, I'm going to be charitable and interpret John Key's assertion that, in the absence of minimum wages, youth pay rates would drop to a couple of dollars an hour as his just opening up room on the right for ACT. Employers do have to compete with each other for employees.


UPDATE 2: Since we’re talking about morons and the minimum wage, check out the shill for big government Obama’s just appointed as Chairman of his Council of Economics Advisor—a man who made his name faking minimum wage research.

No wonder the union bloggers at the Sub-Standard here in NZ like him.

Warmism jumps the shark [updated]

So what does it mean when the religion of global warming goes from insane to batshit insane?

Amy Peikoff reckons it means they’ve jumped the shark.

If an idea’s proponents grasping at ever more implausible straws is an indication of how badly that idea is faring in the court of public opinion, it seems that global warming alarmism is not doing so well. Set aside the predictable, feeble speculations about the existence or severity of Hurricane Irene being due to global warming. I have seen, in about one week’s time, three more examples of how desperate the global warming alarmists are becoming.

Read on, oh wise ones.

UPDATE: Here’s one warmist doing a Fonzie over carbon (dioxide) and water, the root of many a tasty beverage. [Courtesy of cartoonist Blunt]:


Hurricanes, broken windows, and the EQC

We have it reconfirmed this morning, as if we needed reconfirmation, that earthquakes, hurricanes, tsunamis and other natural disasters are not good for economies, or for people.

First of all, we’re now told (nearly a year after the fist quake, that’s how “fast” these people move) that the liability of the Earthquake Commissionalone after the Christchurch Earthquakes has now more than doubled to $7.1 billion.  Not bad when the EQC has only around $1.5 billion of real assets to call on. The rest of the bill rests on you and me and every other taxpayer—calling into question the reason for this blundering bureaucracy to even exist.

And second, after the damage caused by Hurricane Irene we’re starting to see the realisation spread that destruction really isn’t good at all. Jeff Jacoby, for example, writes in the Boston Globe that Disaster isn't a stimulus package, even though mainstream economics still teaches that it is:

Consider the massive earthquake and tsunami that devastated Japan earlier this year -- a catastrophe that killed more than 22,000 people, caused the worst nuclear crisis since Chernobyl, and pitched the already sagging Japanese economy into recession. Three days after disaster struck, the Huffington Post published California intellectual Nathan Gardels's essay celebrating "The Silver Lining of Japan's Quake." Urging his readers to "look past the devastation," he rejoiced that "the need to rebuild a large swath of Japan will create huge opportunities for domestic economic growth" and observed that "Mother Nature has accomplished what fiscal policy and the central bank could not." …     "The result of all the new wealth creation," Gardels concluded, "will be money in the pockets of Japanese."
    Japanese who survived, that is. The tens of thousands who died won't be pocketing any new wealth… True, trillions of yen will be spent to repair, rebuild, and restore. But equally true is that all those trillions will no longer be available for everything they would have otherwise been spent on…
    Yet the conviction that devastation is really a boon never seems to go out of fashion.
    "It seems almost in bad taste to talk about dollars and cents after an act of mass murder,"
wrote Paul Krugman in The New York Times less than 72 hours after the atrocities of 9/11, but the terrorist attacks could "do some economic good." …    The same was said of Hurricane Katrina, one of the severest calamities in US history. Barely had the storm subsided when J.P. Morgan economist Anthony Chan was assuring CNN/Money that hurricanes tend to stimulate growth
    In 2007, immense wildfires in southern California consumed more than 1,600 homes, burned 500,000 acres, and forced the largest evacuation in state history. A senseless tragedy? No, a blessing! "This will probably be a stimulus," University of San Diego economist Alan Gin
told the Los Angeles Times [hat tip Jeff Perren]

You can see lots more examples of this rank insanity after the Christchurch earthquakes, including from a Prime Minister who said the destruction would create “tremendous stimulus.”

Where’s that stimulus now, Prime Minister?

But as Jacoby points out to these numb nuts, the money and resources spent on fixing the destruction has to come from somewhere.  From capital. Or from savings. And this money he money spent to repair destruction is not bein g used for now the purposes its owners had previously planned. “This  represents a loss of wealth, not an economic gain.”

Astute readers will notice that this is just our old friend the Broken Window Fallacy again. As Jacoby writes,

More than 160 years ago, the French political economist Frederic Bastiat skewered such attitudes in a now-famous parable:

A boy breaks a shopkeeper's window, and everyone who sees it deplores the pointless destruction. Then someone insists that the damage is actually for the good: The six francs it will cost the shopkeeper to replace his window will benefit the glazier, who will consequently have more money to spend on something else. Those six francs will circulate, and the economy will grow.
  The fatal flaw in that thinking,
Bastiat wrote, is that it concentrates only on "what is seen" -- the glazier being paid to make a new window. What it ignores is "what is not seen" -- that the shopkeeper, forced to spend six francs repairing damage, has lost the opportunity to spend them on better shoes, a new book, or some other addition to his standard of living. The glazier may be better off, but the shopkeeper isn't -- and neither is society as a whole.
Broken windows aren't economic stimulus. Hurricanes aren't either. There is no silver lining in useless destruction. Not even if "experts" say otherwise.

UPDATE: Oh, by the way, the government’s deficit is now “expected” to be around 18 billion dollarsEighteen billion large ones.  And that’s at present exchange rates, which can change very quickly. And for a country with just one million taxpayers.

Just thought you’d like to know what this “responsible government” is loading onto your shoulders without your say so.

And speaking of economic fallacies, here’s another one on display in Bill English’s announcement of EQC’s increased liability:

The increased liability will have a one-off impact on the Government's books this year. But English said he still expects a return to surplus by 2014-15.

Remember, that expectation is based wholly and solely on a Treasury forecast making some rather heroic (not to say “imaginary”) assumptions about “growth” between now and then. And you know now what shysters economic forecasters are.

If we had a decent opposition, this guy would be being battered about now.

Unfortunately, however, we have an opposition wants to borrow and spend even more…

Friday, 26 August 2011

Time for a stiff drink—and a one-fingered salute to the wowsers

Parliament's Committee for Wankers, Wowsers and Bluestockings has finally returned its verdict on the Law Commission's proposal to hinder access to alcohol-fuelled fun and enjoyment for you and I and your dozen closest friends.

Want a good night out that goes on as long as the craic does? Want to fill your cocktail cabinet from the store down the street? Want to load up on beer as you load up on groceries?

To all these things, the Wowsers say “No!”

Like puritans everywhere, they’re agitated at the idea that someone, somewhere, might be having fun in a way for which they haven’t got a license. So in order to push back pleasure on all fronts, they've predictably tapped into existing competitive pressures to claim some kind of public support for their lemon-sucking.

They know that supermarkets would like to shut down local liquor sales, so they’ve joined supermarkets in trying to squash local liquor stores; they know that pub owners object to both, so they've joined with the Hospitality Association in trying to squash supermarket sales and local liquor shops; and they've joined with wowsers, bluestockings and the lemon-sucking lawyers at the Law Commission in trying to shut down drinking at any place at any time that’s after Geoffrey Palmer’s bedtime.

It's a rat's nest of self-interest harnessed for political effect, with no-one of sufficient volume to speak up for you and I who just want the freedom to enjoy ourselves—and virtually no-one at all to speak up for the owners of small local liquor shops who, since one of their number was murdered, have been taking it on the chin by virtually every political pressure group around, starting with the Prime Minister.

Neighbourhood liquor store owners selling to willing buyers appear to be the chief and easy scapegoat for every alleged social harm dreamed up by the writers of fiction researchers, from bad driving to burglary to broken families to the failure of Hosea Gear to make the final All Black squad.

The quality of the arguments against them can be seen from their argument against small neighbourhood liquor stores—the opening, closing and distribution of which, say Parliamentarians,  “should be up to communities to decide.” But local communities are already deciding those matters every single day.  What these numb nuts appear never to have understood is how markets work, since in every important sense the opening, closing and distribution of every single retailer is already decided by the members of their communities, in their capacity as consumers.

The quality of other argument is no better, climaxing in the abortion of a so-called “economic report” commissioned by the Law lords on which the figures on the so-called social costs of alcohol are pulled out of the researchers’ arses derived.

But neither facts nor sound reasoning are wanted here. Political self-interest is on the prowl, and when that’s allied to the puritanism of the lemon-suckers, we’ll all end up as losers.

I think I need a stiff drink, while I can still get one.

“Architecture is … “

From the howtoarchitect

Thursday, 25 August 2011

Why we don’t need Kahunas or compulsory saving—or the c***s who promote them

Here’s a thought for those of you contemplating the self-serving proposals peddled by suits wanting more welfare for suits. (Come in Gareth Bloody Morgan and Sam “I’m Just Another Self-Serving Suit” Stubbs.)

You’ll have noticed by now that prices have been rising every year since the Reserve Bank of New Zealand was born. (This compared to a half-century of prosperity and gently falling prices in the period before  modern central banking was born.) You’ll have noticed too that they’ve been rising even in the period that “inflation” is supposed to have been tamed, rising this year at least five percent on last year’s prices, and about four percent the year before that.

If you think about it however not so much as prices rising, but as the value of money falling, you’d actually be more accurate—more accurate, since that is what is a actually happening.  Every dollar the Reserve Bank prints (or allows to be created out of thin air by the banking system) dilutes every existing dollar in your pocket or your savings account. That, in short, is the reason both for rising prices and for your dollar buying less and less every year.

Your dollar buys less every decade than it did before.  According to the CPI (which famously understates inflation) since the beginning of 2002, every dollar has lost over 20% of its purchasing power, a precipitous decline in less than 10 years—and if your savings were invested at less than the CPI rate (or less than the real rate of money dilution), you’d have lost the value of your savings each and every year.

The loss is significant. Especially when you consider that the value of your dollar is around ninety-five times less than it was just ten decades ago, when the First World War blew apart the period of peace and prosperity backed by the gold standard.

You want to know why people don’t save as much as they used to? Because they noticed that their goddamn money after they’d finished saving wasn’t worth as much as it was when they started! They noticed that the grey ones were stealing from them by inflation! People aren’t stupid. Not as stupid as the pollies and the central bankers think they are. You keep diluting their money, and they’ll keep trying to get rid of it while it’s still worth something. And you keep interest rates below the rate at which their cost of living is rising, and they’ll borrow like hell—and know they’ll still come out on top.

Inflation is a killer, even at the so-called tepid rate of five percent that it’s at now. (But note that in 1971 five-percent inflation was enough to get Richard Nixon so worried his “brains trust” called for wage and price controls.)

So, instead of fatuous schemes by fatheads who lose you money (like the rum old Captain Morgan), or compulsory saving called for by the recipients of that compulsion (like the suit called Sam Stubbs), or shop talk about letting inflation fix things from Prime Ministers more interested in smiling and waving than effecting real repairs, why not just leave people’s money alone; why not stop the inflation altogether; why not stop diluting the currency, full stop, so that people’s savings actually start to mean something again.

They might even thank you for it.

The failure of forecasting, part XVII [updated]

I've posted before on the failure of economic forecasters to do what they purport to do best, i.e., forecasting the future (see here, here and here, for example.)

For all their high-tech mathematical models however, when it comes to it these alleged forecasters are as blind as an English referee.  Why? Because all their models do is spit out information that extrapolates existing trends, and suggests that things will always tend back to the mean.

Which is not only fatuous, it doesn’t work. Especially at times like these.

Just look at recent evidence gathered by Orewa-based commentator Rodney Dickens using NZIER research [Reviewing the Consensus Forecasts for economic growth - pdf], which compares predictions-against-performance for the so-called “top-ten” economists surveyed each quarter by the NZ Institute of Economic Research—the sort of chaps you see on the news each night being asked by newsreaders to comment sagely on what’s going to happen next. The average predictions by these chumps are called the 'consensus forecasts.'  And they’re decidedly below average.

They all got it wrong predicting GDP.  They all got it wrong predicting residential building activity. They all got it wrong predicting interest rates. They all got it wrong predicting bond yields. And most got it wrong predicting the TWI (but even a monkey on a typewriter could get it right once, right?). So in sum, they were all as wrong as Gareth Morgan’s investment advice—and the fact is they’re always this wrong, almost very time.

Why? Because the future is inherently uncertain, and econometric analysis can’t change that one whit. All it does is provide mathematical justification for going wrong with confidence.

imageNow, it’s true as economist Ludwig Von Mises say that “historians and statisticians content themselves with prices of the past,” while “practical man looks at the prices of the future”--and that econometricians pretend to use the prices of the past to predict the prices and conditions of the future.  But the fact they can’t, and never can, just reinforces the crucial role of entrepreneurs in driving economic activity: in taking risks on the future with their own money based on their own individual estimations of the future.

It’s not blind crystal-ball readers who move the world, it’s entrepreneurs. And most econometricians wouldn’t even know how to spell the word.

UPDATE: Kudos to Matt Nolan at the Visible Hand blog for taking on the challenge of defending forecasting.  His defence, really, rests on two things. He says:

  • “Entrepreneurs  … make the choices, and … they will value this type of service insofar as it helps give them information that allow them to make better informed choices”; and
  • “If it was possible to forecast the sharp rise in fuel prices, the impact of new banking regulations (with no relevant history), the global droughts, the earthquakes in Canterbury, the snow storms during lambing in the South Island, and government policy changes they would have been less wrong.”

Now it’s true that lots of things went wrong last year.  But forecasters’ failures can be seen every year, not just last year.  See what I mean. (Not to mention their signal failure to spot either the Crash of 2008 or the slide that started this latest Depression within a Depression Recession within a Recession.

And while it’s certainly true just as Matt says that entrepreneurs take advice from all over, including from forecasters (as Ludwig Von Mises also observed* in the link I posted above) that doesn’t mean they should listen to every charlatan that comes through their inbox. 

Frankly, what’s the point if they’re consistently and abjectly wrong?

* * * * *

* Ludwig Von Mises on “The Place of Economics in Learning”:

“In fact reasonable businessmen are fully aware of the uncertainty of the future. They realize that the economists do not dispense any reliable information about things to come and that all that they provide is interpretation of statistical data referring to the past. For the capitalists and entrepreneurs the economists' opinions about the future count only as questionable conjectures. They are skeptical and not easily fooled. But as they quite correctly believe that it is useful to know all the data which could possibly have any relevance for their affairs, they subscribe to the newspapers and periodicals publishing the forecasts. Anxious not to neglect any source of information available, big business employs staffs of economists and statisticians".”
”It is obvious [however] that men are fallible, and businessmen are certainly not free from this human weakness. But one should not forget that on the market a process of selection is in continual operation. There prevails an unceasing tendency to weed out the less efficient entrepreneurs, that is, those who fail in their endeavors to anticipate correctly the future demands of the consumers.”

“…just like shallow self-promoting tools” [updated]

After reading pathetic self-serving pronouncements this week by Sam Stubbs*, Sam** & Gareth Morgan***, Rod Drury**, Mark Weldon** and the like, I can only agree with Cactus Kate:

There are a new breed of weasel word corporate-welfared CEO's and Directors in NZ. They promote themselves as anti-Business Roundtable establishment, hip and new age.
They like to be liked by the public.
They are starting to look however just like shallow self-promoting tools.

No wonder we have a government happy to keep borrowing billions as the bubble is about to burst again--when there is no political opposition, and so-called “business leaders” are this bad.

* * * * *

* Kiwisaver provider calls for compulsory Kiwisaver.
** Do as I say, not as I do.
*** Rot at the centre of Gareth Morgan’s brain.

UPDATE:  Rod Drury wrote to Cactus defending himself. He shouldn’t have bothered: she ripped the bludger a new one.

DOWN TO THE DOCTOR'S: Sack the buggers

_richardmcgrathYour weekly prescription of good hard sense from Libertarianz leader Dr Richard McGrath.

At the 2011 Libertarianz Party conference, Wellington Central candidate-to-be Regan Cutting made a brief speech in which he highlighted this pie chart of government spending.


If you look past the three usual suspects, note if you will which branch of government presently has the fourth-highest budget…

As Regan pointed out, more than Police, Justice and Corrections combined - yes, it's the Department of Legalised Theft, the department with the power to go through your bank account, empty your pockets, and to bankrupt more New Zealanders every year than start new businesses.

It is this department of bloodsuckers that accounts for nearly 8% of government spending. Even if you add spending on the NZ Defence Force and Ministry of Defence to that for Police, Justice and Corrections (which collectively comprise almost all the legitimate functions of government) their total still only comes to 8.01% of spending.

Meaning, of course, that virtually all the other 92% should be returned to those from whom it was stolen.
Now, none of this namby-pamby “110 positions based in the capital are to be axed” after-one-Ministry-is-“folded-back” into-the-other nonsense. Libertarianz says any responsible government would immediately get to work on reducing the government's runaway spending by trimming all  the easy stuff, getting rid of all the non-essential departments, starting with a month-long wind down of the following useless state entities:

Department                                               Current Percentage of Govt Spending
Statistics NZ                                                                     0.17
Land Information                                                          0.20
Te Puni Kokiri                                                                  0.26
Ministry for Culture & Heritage                                0.45
Ministry for Science & Innovation                          0.94
Dept of Building & Housing                                         1.22
Ministry for the Environment                                   1.33
Dept of Labour                                                                 1.75
Ministry of Economic Development                      1.94
Total                                                                                    8.09

There you go, 8% of spending - $6.6 billion - gone in the space of one month. Easy. (And to stop the buggers therein whimpering, give them a year-long holiday if you have to; no-one will mourn their absence, and it will still save us money even in the short run with all of them out of our hair.)

And parenthetically, this is what responsible governments do in a recession—and did do, successfully, in every recession until Mr Keynes came along.

And those other government departments listed in the pie chart above? Well, they could literally abolished overnight—gone by lunchtime. Or if any were doing anything at all commercial (fat chance) privatised within four weeks.

This would, of course just be the start of massive tax cuts, a freeing up of the economy and an end to the rampant and out-of-control spending made fashionable most recently by those partners in fiscal recklessness Bill English and Michael Cullen.

We haven't even started on the Ministries/Departments/Offices of 'Yoof' Development,  Ethnic Affairs, Archives, National Library, Tourism, Pacific Island Affairs, Women's Affairs, Consumer Affairs,etc. I'm guessing these could be wound down or denationalised over 3 months, to give them some time to sort out their own affairs.

The Result? Billions of dollars back in taxpayers' pockets, thousands back in your own pocket—and businesses free to run their own affairs without a bullying paper-shuffler hanging around their neck.

Because your “refund” actually belongs to you anyway, and you should have a choice about the destination of your dollars. Politicians shouldn't be able to bully you and tell you where it must be spent. You have the right to make that choice, because it's your goddamn money, right?

Only one political party respects that right, and Regan Cutting will be representing it in the coming election, in the Wellington Central electorate. Good on you, Regan.

And, on an unrelated topic, a salute to my elder son Andrew 'Bloodbath' McGrath (as he was promoted on the event programme) who retained his undefeated status over five rounds of full-rules kickboxing at the Lower Hutt Town Hall last Saturday night. Way to go, Andrew!

See you next week!
Doc McGrath

Tuesday, 23 August 2011

ECONOMICS FOR REAL PEOPLE: Great Myths of the FIRST Great Depression [updated]

276464_137539366339987_1226509_nHere’s what’s being presented at tonight’s UoA Economics Group meeting. It could hardly be more topical:

Hello all,
The history of The Great Depression grows more relevant by the day, yet very little is known about it today--at least, very little that is true.
Tonight, we look at a few of the many myths around the Great Depression: was the Depression a Crisis of Capitalism; did margin trading bring on the Crash; did the Fed do too little to help; did Herbert Hoover sit back and do nothing; did Franklin Roosevelt and Michael Savage set everything on the right track; did World War II bring on the Recovery?
Join us tonight as we examine these stories and many more about The FIRST Great Depression.
Date: Tonight, Tuesday, August 23
Venue: Case Room One, Level Zero, University of Auckland Business School
Time: 6pm

UPDATE: For those who are interested, who couldn’t make it last night, here are the Recommended Readings—all of them (relatively) short and pithy. Since there were six phase to the (First) Great Depression, there is at least one reading on each:

And here, hopefully, is a copy of the Lecture Guide:

LECTURE-Great Myths of the First Great Depression