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.


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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.

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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.

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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…

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Monday, 29 August 2011

DOWN TO THE DOCTOR’S: “Welcome to the party!”

The Doctor speaks …

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