Friday, 30 March 2012

FRIDAY MORNING RAMBLE: The ‘Who will crush whom?’ edition

There are many people with things to say and most of them want you to listen. Time then for a Friday morning ramble around what they’ve got to say.

  • The allegedly thick-skinned Judith Collins shows the thickness is only paper thin—at least when it comes to her skin—by going where few politicians have gone before in suing her political opponents for defamation. (But if opponents aren’t defaming NoCrush Collins they’re surely not doing their job properly, no?)
    Political theatre watch, best defense is a good offense edition -  D I M   P O S T
    Collins Lawsuit: What On Earth Is She Thinking? -  I M P E R A T O R   F I S H
  • You mean you don’t think it’s odd that the Greens think when Australian Intelligence says “jump” we should ask how high? Or that their xenophobia apparently now trumps even common sense?
    The Huawei Question – Russell Brown,  H A R D  N E W S
  • Go on, take a guess how many people went on benefits ever working day last year. Hint: it’s more than the opposite of what Minister Paula Bennett would lead you to believe.
    One person a minute -  L I N D S A Y  M I T C H E L L
  • It’s often said you could almost fit New Zealand’s entire mainstream political spectrum—from conservatives to so-called liberals—inside the U.S. Democratic Party. But is that correct?
    Antipodean Dreaming  - Eric Crampton, O F F S E T T I N G   B E H A V I O U R
  • It’s also said that Americans should learn from New Zealand’s much-vaunted egalitarianism. But guess what:
    Nobody Deserves Egalitarianism -  Josh Windham, T H E   UN D E R C U R R E N T
  • Case Study of the Austrian Business Cycle: New Zealand’s whole structure of production was buggered by the latest boom-bust business cycle.
    Firm demographics and capital theory: Case study using New Zealand business data 
    – Jake Matthews, C O B D E N   C E N T R E
    Boom & Bust Economic Cycles: An Austrian Business Cycle Theory Overview – Z E R  O   H E D G E
  • Another myth exploded about the tolerant left.
    Pew Research reveals liberals most intolerant online. – H O T   A I R
  • A photographer has been documenting the sad deconstruction of Christchurch.
    Architectural demise -  A D R I E N N E   R E W I
  • What the Chris Cairns verdict teaches us about the special place of social media in today’s litigation.
    What the Cairns verdict teaches us about the special place of social media  - Chris Keall, NBR
  • Christchurch property activist Hugh Pavletich from Performance Urban Planning blasts Non-Recovery Czar Gerry Brownlee and his Government for the woeful job they’ve done allowing Christchurch to re-house. Says Hugh: “What part of ‘allow’ don’t you understand Gerry? Just listen to Brownlee’s appalling responses to the points I made.
    His only interest is to protect the interests of ‘investors’ interests – Gerry-speak for land bankers and speculators, i.e., cronies of the National Party, and to hell with those desperate for affordable housing in Christchurch.”
  • What makes it even more infuriating, says Hugh, is the ignorance of Hon Annette King, Local Government Spokesthing for Labour—the party of economic Neanderthals—allowing the all-but-absent Housing Minister Heatley such an easy ride. “Labour should have learnt by now how it ‘stuffed’ this country with the unnecessary inflating housing bubble 2002 - 2007 - as this Christchurch City Council Quick Facts Graph illustrates. Christchurch was on its knees at the time of the 4 September 2010 earthquakes some 18 months ago:
  • Come on, confess: you’ve always wanted to know what goes on inside a condom factory, haven’t you:

  • “One of the points that economists have a really hard time getting over, probably because it is so counter-intuitive, is that we human beings don’t really consume resources, we create them…”
    We Don't Consume Resources, We Create Them –Tim Worstall,  F O R B E S
  • “In campaign speech after campaign speech, Obama has said that oil is the energy of the past. This is another example of his dedication to making fallacious arguments.”
    Obama: Oil is the Energy of the Past - Utterly Fallacious 
    -  A N  O B J E C T I V I S T   I N D I V I D U A L I S T
  • American conservatives are great ones for following the Founding Fathers, or so they say. Want to guess what the Founding Father policy on immigration was? “Passed in the first Congress, the Naturalization Act of 1790 had zero restrictions on immigration. You read that right, the first immigration law passed in the United States, by the Founders themselves, supported open immigration… Combining the Founder's openness for immigration with the 14th Amendment race-neutral grant of birth-right citizenship--with proper checks for criminals, terrorists, and the seriously ill--would legalize almost all immigration…”
    The Founders’ Immigration Policy  
    -  H U F F I N G T O N   P O S T
  • Economic Dictator Ben Bernanke got the job because he’s supposedly the best in the world at knowing what the fuck is going on economically speaking. Here’s 30 examples of his alleged wisdom, such as, in Jan. 10, 2008: “The Federal Reserve is not currently forecasting a recession.”
    30 Bernanke Quotes That Are So Absurd You Won’t Know Whether To Laugh Or Cry 
    – B U S I N E S S   I N S I D E R
  • You might have noticed that Chief Fed Reserve Spinmeister Ben Bernanke has been out on the trail trying to win the hearts and minds of impressionable youngsters.  He starts bad and he gets worse. “Bernanke’s discussion of the gold standard is perhaps the low point of a generally poor performance,” reports George Selgin.
    Anti-Bernanke – F R E E   B A N K I N G . O R G
  • “Americans will spend $46 billion a year to obey just the new regulations the Obama administration imposed. Think of the money diverted to lawyers, accountants and ‘compliance officers’—money that might have created jobs and financed products that could make lives better. Big businesses often have no problem with this…”
    Job killers: Advocates of regulations don’t acknowledge the law of unintended consequences 
    – John Stossel, R E A S O N
  • …which leads to the obvious question:
    Is Anything Actually Legal Anymore? -  G U S  V A N   H O R N
  • Why is the UK economy failing? “Do not heed those who paint with a limited palette and speak only of [non-existent] fiscal austerity.”  It’s failing because it’s fundamentals are rooted.
    Why is the UK economy failing? – M A R G I N A L  R E V O L U T I O N
  • Speaking of non-austerity, Britain wasted the opportunity to escape some of their suicidal enviro-stupidity on climate change that push up energy bills for millions of households. The laws have been spared George Osborne’s cull.
     Silly buggers: Climate law survives red tape cull  - Steven Milloy, J U N K   S C I E N C E
  • You can never be told too many times to read this book!
    Henry Hazlitt: Economics in One Lesson – Andy Duncan,  C O B D E N   C E N T R E
  • And for ten more, which I can thoroughly endorse:
    10 Must-Read Books on Economics – Don Watkins,  L A I S S E Z   F A I R E
  • Someone is waxing poetical about Austrian economics.  I give you a Shakespearean sonnet in iambic pentameter by Alex Entz, who says “spurred on by the rash of ‘Fed Valentines,’ thought I’d take a decidedly Austrian approach.”
    Dream On, Valiant Austrian! An Economics Sonnet – F R E A K O N O M I C S

    Dream On, Valiant Austrian!

    I fell asleep quite late last night, adrift

    In books of Hayek’s thoughts. And dreaming was

    An oddity—dollars and gold, a swift

    Exchange; velocity ran flat because

    It stayed constant, our friend. Inflation sat

    A toothless beast by Milton’s sage theory;

    There was no need for Twist, or worse, a fat

    Sad QE3—of which I was leery.

    There were no bubbles to be popped, no price

    Distortions there, and property was ruled

    By Coase—so simple and so fair. A piece

    By JM Keynes no longer had us fooled.

                I woke to a report about the Fed;

                Sometimes the world runs better in my head.

  • Islam is like … ?  In response to the murders of a rabbi and three children in Toulouse, France, and to the murders of the French paratroopers by Mohamed Mera, Ed Cline likens Islam to “an ideological Black Death that must be faced up to by politicians and intellectuals. There's no such thing as a ‘benign’ Islam. It is a death-worshipping ideology from top to bottom. And the only way to emasculate it is to repudiate it in its entirety."
     Islamic Jihad: Hurry Up or Wait? - Edward Cline, R U L E   O F  R E A S O N 
  • So having a Muslim as the counterterrorism chief of the CIA while countering Islamist terrorists means [insert appropriate word here].
    CIA's counterterrorism chief is convert to Islam -  J I H A D  W A T C H
  • Here’s a fascinating discussion thread between Australian Objectivist Prodos and a (chat) room fool of anarcho-capitalists.
    Discussion thread with Anarcho-capitalists – T H E   P R O D O S   B L O G
  • Unfortunately, the Wall Street Journal is as ignorant about patent protections as your average anarcho-capitalist…
    Wall Street Journal Proves its Patent Ignorance – Dale Halling, S T A T E   O F   I N N O V A T I O N
  • …and just as ignorant about the dangers of radiation.
    Radiation Hormesis - T H R U T C H
  • “A big error has haunted humanity for centuries: it’s the equivocation between generosity and altruism.The former is a virtue any decent human being will practice: it asks of one to reach out to deserving others in times of dire need. The latter is a policy of devoting oneself to benefiting others above all. The former is admirable, the latter is suicidal.”
    Altruism Isn’t Generosity – Tibor Machan, B AS T I A T I N S T I T U T E
  • And on a completely related topic…
    How Not To Cut Government – Don Watkins, L A I S S E Z   F A I R E
  • Turns out it’s not just New Zealand, Canadian, American, Russian, Chinese and British temperature records that are shaky.
    Australian temperature records shoddy, inaccurate, unreliable. Surprise!  – J O    N O V A
  • Mythbusters’ Adam Savage tells the Reason Rally why he’s for reason over superstition.
    My talk from the Reason Rally – T E S T E D    N E W S
  • Why study history?  Historian Scott Powell gives you the answers in five ‘Is’:
      1. Instruction
      2. Inspiration
      3. Insight
      4. Integration
      5. Iteration
  • Included in his five ‘I’s is this great example of “the difference between a purely journalistic outlook and a historical one was demonstrated in the exchange between MSNBC anchors and Harvard historian Niall Fergusson.” For the historian, the outcome of the Egyptian overthrow of Hosni Mubarak “could never have been in doubt for those who benefit from the insight that history provides.”

Putting any adjective in front of "justice" makes it the opposite of justice.
- David Burge, Iowahawk

  • Fast forward to four minutes in to hear what beautiful natural singing really sounds like: these are two untrained singers in their local village choir in Havelu, Tonga, but with more beauty in their voices than many so-called stars:

  • And for those who recently saw Wagner’s Gotterdammerung at a cinema near you in the Met’s ‘Live in HD’ series, here’s how it went down in the most memorable production at Bayreuth. This is the climactic ending where the gods perish, leaving mankind to cope without them.  In other words, an actual happy ending. But naturally, the fat lady has to sing first.

  • Here’s the great saxophonist they called ‘The Brute,’ a man with immense power who could still play the sweetest ballad without bruising it…

  • And finally, how cool is this: “The Seikilos epitaph is the oldest surviving example of a complete musical composition, including musical notation, from anywhere in the world. The song, the melody of which is recorded, alongside its lyrics, in the ancient Greek musical notation, was found engraved on a tombstone, near Aidin, Turkey (not far from Ephesus). The find has been dated variously from around 200 BC to around AD 100.”

[Hat tip Marginal Revolution, Geek Press, Noodle Food, The Daily Capitalist, Bastiat Institute, Junk Science, Small Dead Animals, Bosch Fawstin, Falafulu Fisi]

That’s all for this week.
Thanks for reading and commenting.

Thursday, 29 March 2012

Housing absolutism limited by Prime Ministerial corruption

It was said of King Louis’s pre-Revolutionary France that it was history’s greatest example of absolutism limited only by corruption—that is, absolute rule limited only by the favours serfs could extract from the petty chisellers around Louis’s court—the absolutism chaining up and emasculating the people; the corruption being the only thing allowing them to breathe.

imageA story involving a Prime Minister, a series of developers, some local town planners and several large paper bags full of money suggests modern Ireland could well provide one of history’s second great examples—and a model lesson from which our own students of central planning could learn.

You see, in the “boom” period of the former Irish Tiger, the boom was largely based on gobs of borrowing being poured into great gobs of house buying—raising house prices in the few places town planners allowed houses to be built until those houses eventually became unaffordable.  This situation was the same virtually all around the world, but in Ireland (for many reasons both good and very, very bad) it was taken to extremes. So much so that

the country's real estate market…, prior to the Recession, was among the fastest growing in the world.  Here is a graph showing what happened to real estate prices in Ireland over the past 20 years:

Here we thought that America's housing market readjustment was bad!  Ireland experienced the largest property price increase among Europe and North American countries with values quadrupling over the period between 1997 and the peak in 2007.

Now, naturally, this being Ireland, former Taioseach (Prime Minister) Bertie Ahern (who was at this time the darling of his party but who now faces expulsion from it) wanted in on this deluge of apparent riches—so he adopted the time-honoured method of mayors, councillors, town planners and politicians through the ages:  in simple terms he had land around the tightly zoned city of Dublin held off the market by his town planners by having it zoned for anything other than housing, land which he released only after those paper bags full of cash came his way from developers.*

The payments, which are rumoured to be in the hundreds-of-thousands, finally came to light during a 15-year inquiry concluding Ahern “failed to truthfully account” for all the money washing through his bank account when he was Prime Minister. “Much of the explanation provided by Mr Ahern,” drily concluded the Tribunal, “was deemed by the tribunal to be untrue.”

Perhaps the moral of this story is not the obvious one. Sure, the former Taioseach is a lying, thieving toe-rag—but which politician isn’t?   The fact is that politicians should not be in any position to grant favours like this, because they should not have the power to withdraw the rights of land-owners in the first place.

And even more: since Dublin is still ranked by Demographia as being Seriously Unaffordable, fully four years after Ireland’s boom has turned to bust—and since this is almost wholly attributable to mostly due to the unnecessary, politically inflated constraints put on land supply by planners and politicians—it’s just a bloody shame the amount Ahern was taking wasn’t in the millions. Because only then might enough land have been rezoned to help make housing in Dublin affordable again.**

Such is the way things work in a system of absolutism limited only by corruption.

* * * * *

* Don’t think NZ is immune to corruption like this. Ask yourself how town planners decide how fringe land around our major cities eventually gets rezoned—or how the land on which so many of Henderson’s car yards were first built were first re-zoned to allow it. And if you answered “by a rational analysis taking into account the interests of all stakeholders” then it seems you’ve learned nothing at all by being a regular reader of this blog.

** And if you don’t see lessons here for our local situation, then you really haven’t learned anything at all from being a regular reader here.

ECONOMIC HARMONIES, II: What Steve Jobs gained from his cleaning lady

ECONOMICS FOR REAL PEOPLE: Here’s the update on tonight’s discussion with our friends at the Auckland Uni Economics Group. Why not come along?

Hi all,

Last week we began talking about the biggest lesson economics has to teach, i.e., the “Economic Harmonies” that arise when people act in their legitimate self-interest, and the greatest example of that, i.e., Division of Labour.

This coming Thursday, at 6pm in Case Room 3 of the Auckland Uni Business School, we will continue looking at these Harmonies. Specifically, we will discuss some of the leading implications of the Division of Labour that help us confirm our general point. And as always, it will be done in an interesting and unique way.

ECONOMIC HARMONIES, II: What Steve Jobs gained from his cleaning lady, or: The General Gain from the Existence of Others

  • Why, in a division-of-labour society, prosperity is open to everyone;
  • What Thomas Edison 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, Russel Norman and the Chinese government are all wrong, i.e., why greater population is a blessing not a curse; and
  • How it is that in a division-of-labour society each of us gains from the existence of each other.

Where: Business School “Case Room 3,”
                  Level 0, Owen G. Glenn Building,
                  12 Grafton Rd,
                  Auckland University [Map here]
When:   Thursday 29 March, 6:00pm

All welcome!

And do check us out on the web at &

Road rule changes for Westies

On 25 March 2012 the Give Way Rules changed. Since so few drivers understand them, especially out West where we hear they’ve been having fearsome problems, we offer this simple guide to assist the average Westie to understand who gives way to whom. [“Whom”? Who says “whom” in Henderson?]


The red Mk IV Cortina gives way to the green Mk IV Cortina.


Whereas the Purple Holden Ute used to have right of way over the Blue Holden Ute.


Real cars will continue to have right of way over Japanese cars.


Holden will never give way to Ford, and vice versa, leading to collisions whenever they meet.


Trucks will continue to have right of “weigh” because they weigh more.


With some exceptions. Here above the rubbish truck is heavier, but must be overtaken or it will hold up traffic which is a crime against God and nature.


Buses weigh a lot, but, being a form of public transport of course never get right of way.

Note how all these drivers cooperate to ensure there is no gap the bus can push into.


Classic cars have right of way, so the Holden gives way to the Jag XK120.


Ford Capri claims classic status but Holden Ute gains right of way because the Capri has been painted pink….and it’s a Ford.


Holden HZ gains right of way over Holden SS V not because it is a classic but because the SS driver is more worried about scratching his paint work.


Citroen DS claims right of way as a classic, but no one ever gives way to the French.


Real classics claim right of way over not really classics like this 1980s Rover 3500


Time machine gets right of way over everything, except…


Magnum PI, because nothing holds up that moustache [See Ferrari refutes the Decline of the West, in Republican Party Reptile, P J O'Rourke].


Ordinary cars give way to a police car.


Traffic police will continue to give way to real police trying to catch Sheryl West.


Police cars still give way to ambulances.


I guess if two ambulances meet they both have right of way and collide. Cool…


Then you’d have to send a really BIG ambulance!


So in summary the green piece of tinfoil and glad wrap origami on the left gives way to the green Japanese piece of tinf…oh who cares, Westies never admit to driving Japanese.

[Hat tip Susan R.]

Wednesday, 28 March 2012

And the answer is …

She’s either a great actress, or this guy should reconsider his marriage vows.

Or maybe sue her factory school for spewing out someone this innumerate?

What do you think, is she sufficiently pretty to compensate?

[Hat tip Noodle Food]

Hunger Games

imageWhy would you want to see a film in which teenagers are forced to fight to the death for a live TV audience? Sounds monstrous, doesn’t it.

Perhaps we want to see it however for the same reasons we want to see art and drama in which people are persecuted for their beliefs (Quo Vadis); decide to give themselves to their besiegers to save their city (Monna Vanna, Burghers of Calais); die for an impossible love (Romeo & Juliet, Tristan & Isolde) are forced to endure totalitarian punishment for either their vices or virtues (Clockwork Orange, 1984, Darkness at Noon, We, Anthem).

If the drama is good enough, i.e, if the theme is sufficiently powerful and told masterfully, with the barbarity integrated with the story and not used solely for titillation, then the dramatisation tells us something important about humanity in extremity. Who wouldn’t want to see that!

imageSo I’m persuaded by people whose advice I consider seriously that I should break my self-imposed exile from the watching much-hyped new releases at the cinema, wherein so much garbage untouched by human minds has been vomited out in recent years, to see the film The Hunger Games.  Reviewer Ari Armstrong reckons the book on which it is based “is a worthy addition to the dystopian corpus”:

Although Collins’s novel does not offer the philosophic depth of certain other dystopian works (including, most notably, Ayn Rand’s Anthem), it does skilfully portray believable and heroic characters trying to live and defy their oppressors. For that reason, The Hunger Games is a worthy addition to the corpus of dystopian works.

And about the film reviewer and film buff Scott Holleran says, “It isn’t fast and flashy like most of what we consume in today’s similarly-oriented movies. It is slow and subtle. As a dramatization of the individual against the state, it is a work of art.”

It is not pumped up blood porn like 300. The Hunger Games is based on reality, not fantasy. There are no speeches with lines about fighting for reason. There are no massive assaults on the senses. There are no excessively graphic scenes… It is also not laced with sex porn like The Girl With the Dragon Tattoo. There are no lingering shots of graphic human degradation, no fundamentally, deeply damaged souls at the center, and no scene exists without a purpose that serves the plot…”

Sounds good, doesn’t it. Almost

too clever and subtle for its own good, …part of a rich history in dystopian-themed filmmaking about the classic theme of the individual against the government – 1984, V for Vendetta, The Mortal Storm,Agora, Doctor Zhivago,The Lives of Others, Sophie Scholl, We the Living (all of which should be seen, especially now) – and it earns a place with every sound of the death cannon that hits you hard and makes you feel hollow below your chest. As any story against government control should.

I see a trip to the cinema in my near future.

How about you?

Bringing back Smokey the Car

imageIt’s the Law of Unintended Consequences all over again.

NZers rely on a sophisticated second-hand market for imported, used, inexpensive Japanese cars. Government introduced new exhaust emission rules on all cars from January, 2012, requiring any new imported second-hand cars to have a much higher emission quality than previously.

The intention: to improve the quality of our air—and the quality of NZ cars in aggregate.

The result however has been very different.

Since the rules have come into force, many fewer cars have been imported than before, slowing down the refreshing of “the fleet.”  Prices of second-hand imported Japanese cars have already started to go stratospheric. And many car importers have either already withdrawn or are contemplating withdrawing altogether from the market, raising the prospect that the market for imported second-hand Japanese cars might either cease altogether or just dwindle to a trickle.

The result is predictable to everyone but the politicians: that impecunious car owners will be forced out of the market and will have to keep their own banger longer instead of trading up; that most car-owners able to stay in the market will keep their old cars longer before they do trade up; that new buyers will certainly have to buy much older cars than they would have otherwise*, at much higher prices than before; and the overall result of the new law is that NZ cars in aggregate will be older, more expensive, and with much worse overall emission standards than before.

And the easy to find, cheap but sturdy Japanese import that has transformed the lives of so many people could soon be a thing of the past.

It’s the Law of Unintended Consequences all over again.

* * * * *

* In recent years up to 150,000 used Japanese cars with an average age of 8-years-old have been imported. Meanwhile,  around 145,000 cars per year with an average age 18 years have been scrapped, with most of their components recycled.
Industry predictions are that only around 50,000 cars are likely to be imported in coming years, meaning many of those cars that would otherwise have been scrapped—perhaps up to 100,000 of them per year--will now have to remain on the road.
Great work from government, eh.

[Cartoon by Eldon Doty at Pat Hackett]

Tuesday, 27 March 2012

Now, how about that debt?

In case you hadn’t noticed, the world’s largest economy is having its lifeblood sucked out of it. Between now and 2014 the US Federal government will have taken $20 trillion out of the US economy and poured it down a black hole—transferring real resources that could have grown real businesses to the sort of bottomless pit favoured by John Maynard Keynes: you know, “wars, earthquakes, pyramid building…,” and the modern equivalent of these: “green jobs.”

Austerity? There’s no frickin’ austerity out there. All the world’s “statesmen” look more like this bozo:

And don’t think anything will change once the political season finishes in November.

A second-term Obama would roar full throttle to the cliff edge [notes Mark Steyn], while a President Romney would be unlikely to do much more than ease off to third gear. At this point, it's traditional for pundits to warn that if we don't change course we're going to wind up like Greece. Presumably they mean that, right now, our national debt, which crossed the Rubicon of 100 percent of GDP just before Christmas, is not as bad as that of Athens, although it's worse than Britain, Canada, Australia, Sweden, Denmark, and every other European nation except Portugal, Ireland, and Italy. Or perhaps they mean that America's current deficit-to-GDP ratio is not quite as bad as Greece's, although it's worse than that of Britain, Canada, France, Germany, Italy, Spain, Belgium, and every other European nation except Ireland.

But these comparisons tend to understate the insolvency of America, failing as they do to take into account state and municipal debts and public pension liabilities. When Morgan Stanley ran those numbers in 2009, the debt-to-revenue ratio in Greece was 312 percent; in the United States it was 358 percent [and climbing!].

If Greece has been knocking back the ouzo, we're face down in the vat. Michael Tanner of the Cato Institute calculates that, if you take into account unfunded liabilities of Social Security and Medicare versus their European equivalents, Greece owes 875 percent of GDP; the United States owes 911 percent - or getting on for twice as much as the second-most-insolvent Continental: France at 549 percent.

And if you're thinking, Wow, all these percentages are making my head hurt, forget 'em: When you're spending on the scale Washington does, what matters is the hard dollar numbers. Greece's total debt is a few rinky-dink billions, a rounding error in the average Obama budget. Only America is spending trillions.

The 2011 budget deficit, for example, is about the size of the entire Russian economy. By 2010, the Obama administration was issuing about a hundred billion dollars of treasury bonds every month - or, to put it another way, Washington is dependent on the bond markets being willing to absorb an increase of U.S. debt equivalent to the GDP of Canada or India - every year. And those numbers don't take into account the huge levels of personal debt run up by Americans. College-debt alone is over a trillion dollars, or the equivalent of the entire South Korean economy - tied up just in one small boutique niche market of debt which barely exists in most other developed nations.

You think think things are bad now, just wait until the monetisation of debt gets into fourth gear! Central bank paper is already being taken like crack cocaine by the markets, causing morons to talk about “recovery” when it’s more like the last rally of a dying tubercular patient.

Data has been improving lately in the United States, if at a snail’s pace [observes a jaded Detlev Schlicter]. The ‘interventionists’ assign a lot of importance to these developments. Being interventionists, they pay little attention to the reasons for why we were in a recession in the first place. There is never much focus on the root causes of the crisis or any debate about if those have been removed. Recessions just seem to happen, so do asset bubbles and excessive leverage. All that matters is that the government creates some growth, then, with a bit of luck, this growth may just lead to more growth, and sooner or later we may just grow ourselves out of this mess. Simples.

I think the chances of that happening are pretty close to zero. And I do not care much about what present data is supposed to tell us. It does not make much of a difference.

Take the drop in official US unemployment. Could it be attributed to a decline in labour market participation as many long-term unemployed – their numbers have been growing markedly in this recession – drop out of the official labour market altogether? Or, could it be the result of the mild weather recently? Or, as the optimists will say, is it the result of additional hiring? Frankly, I don’t know and I don’t think it matters much.

We know what the problems have been and still are: misallocated capital and misdirected economic activity on a gigantic scale as a result decades of artificially cheap money. The policies of the interventionists – first and foremost zero interest rates and quantitative easing – were aimed at sustaining these imbalances, sabotaging their liquidation, discouraging deleveraging and postponing the – admittedly painful – cleansing of the economy of the accumulated dislocations. This policy has to a large degree succeeded, maybe with the exception of parts of the US housing market, which has indeed been correcting from bubble-levels. Other than that, I believe policy has so far managed to sustain the unsustainable a bit longer and thus project a false image of stability. Congratulations.

Of course, we can never exclude that this policy may also generate some additional activity here and there. Super-cheap money may not only stop the much needed deleveraging and cleansing but it may even encourage additional borrowing and additional investment. Who is to say that the trillions of new currency units will not cause some more balance sheets to get extended a bit further?

Fact is that none of what we see right now can be taken at face value. Not the equity rally, not yield levels, not headline economic data. Everything has to be taken with a sizable pinch of salt given the distortions from an outright surreal monetary policy stance.

But we can be sure about one thing: None of this should be taken as an indication of improving health. The patient is still sick but made to run laps around the track with the help of steroids, amphetamines and massive amounts of caffeine. The economy will not get fundamentally better until the underlying imbalances have been addressed and that is only possible if money printing stops and the market is again allowed to set interest rates and other prices.

I am not sure if the mainstream economists do really take a lot of encouragement from the manufactured asset price rally and the occasional green shoots in an economy that remains freakishly unbalanced and fundamentally sick. I don’t know what the economic data will tell us over coming months or quarters. I am confident that we are far from closing the book on the present depression.

In the meantime, the debasement of paper money continues.

Listen here to Don Boudreaux talking to Russ Roberts about the debt problem, answering the question: “is it so bad if we owe the debt to ourselves?”

How close are we?

You now how excited NZers have got over being told that after many years of division we’re now “close allies” of the US who “punch above our weight”?

Turns out Obama is an easy lay. Turns out all countries are close allies! And you should hear what he says about their punching.

What could inflation look like in 2014?

Guest post by Jeff Clark of the Casey Daily Dispatch 

Most economists, especially those from the mainstream, will tell you that price inflation is widely expected to remain benign for the foreseeable future. And for those who think it could climb higher, it's usually because they think it should be higher. History has a message for them: be careful what you wish for.

There are plenty of examples in history showing that once price inflation takes hold, it can quickly spiral out of control. That's the danger we face now. Here's what I mean...

A recent article about sudden inflation by Amity Shlaes, a senior fellow of economic history at the Council on Foreign Relations and a best-selling author, provides some examples from the past century of US price inflation that was at first subdued but then abruptly rocketed to alarming levels. I put them into a chart so you could see how quickly price inflation rose within just two years from "benign" levels. I then made some projections for us today based on these historical examples.

According to Shlaes, US price inflation was 1% in 1915 (based on an earlier version of the CPI-U). Over just two years, it hit 17%. As she states, it happened because the Treasury "spent like crazy on the war, creating money to pay for it..."

Given the fact that our spending and money-printing is now out of control, I projected what our rate of price inflation would be if we matched the rates of these time periods. The first striped bar to the right represents what the CPI would register if we matched the 1940s rise. It would hit 19% by 2014. (Yes, the CPI has been tinkered with many times, but this is at least what "unofficial" or "authentic" inflation would register.)

In 1945, the official inflation rate was 2%. It accelerated to 14% in 24 months. If we matched this percent rise, we'd hit 15% by 2014 (middle striped bar)..

And the example that kicked off the greatest bull market in gold and silver, the early 1970s. The CPI stood at 3.2% in 1972, a level close to ours today. It soared to 11% just two years later. Mimicking this rise, the third striped bar shows we'd also be at 11% in 2014. (Shadow Stats says we're already at 10% based on 1980 methodology, so from this level we'd hit 17% in 24 months.)

Could we really have price inflation that high within two years? Consider the following:

  • Fox Business reported on March 7 that "wages grew much more quickly at the end of last year than originally estimated..." This is an important data point because most economists believe you can't have higher inflation without rising wages.
  • Commercial and industrial loans have risen 14% year over year, and business and consumer spending are in an uptrend.
  • Home-building permits are at their highest point since October 2008. Existing home sales fell 0.9% last month, but that's after January sales were up 4.6%.
  • Jobless claims are coming down, retail sales gained the most in five months, and auto sales were up 16% last month. One report I read stated that we've had 24 consecutive weeks of stronger US data.

If the economy continues to improve and more money is sloshing through the system, it's easy to see how inflation could grab hold. Yet, if you understand Austrian economics, you'll look beyond how the mainstream views inflation and to its root cause: monetary debasement.

  • The US monetary base stands at $2.72 trillion, a 168% increase since October 2008.
  • The national debt in the US has risen by a whopping $4.9 trillion just since Obama took office. It now stands at $15.5 trillion.
  • The US budget deficit this year is projected to be over $1.3 trillion, an obscene amount that exceeds the entire annual budget of just 20 years ago.
  • According to ISI Group, there have been an incredible 122 "stimulative policy initiatives" from central banks around the world over the past seven months.

Remember, in these historical examples, price inflation was initially low and therefore off everyone's radar. But government tinkering with the monetary system lit the spark that led to a sudden and rapid rise in price inflation. It caught many off guard, just like I suspect it would now. Don't think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.

Given the abuse most fiat currencies are undergoing around the world today, coupled with obscene amounts of deficit spending, I think gold should be viewed not just as a potential moneymaker but as protection against the rabid price inflation that will invariably damage our economy and dilute our pocketbooks. If you think price deflation is next, I'll accept that argument - for a time - if you accept mine, that the Fed would almost certainly panic at another “deflationary” event and print to the max. This is why we're convinced that inflation, à la currency dilution, is inevitable...

To those of you who say gold hasn't always kept up with price inflation, don't kid yourself about what it would do in a highly inflationary environment: it would surely climb like it did in the 1970s. And those "productive assets" Warren Buffett prefers over gold? They would have a difficult time raising the prices of their products quickly enough to keep up with a rapidly escalating CPI. Gold may not perfectly track price inflation when it's low, but it is precisely a high-inflation environment where it serves one of its core purposes.

You may think high price inflation is further away than 2014, but don't dismiss the fact that it can happen suddenly. And keep in mind the possibility that a sudden shift in price inflation - especially expectations of price inflation - could be the spark for a mania in precious metals...

If we match the inflation rates seen several times in the recent past, what will your savings be worth in a few years? We'll have lots to worry about in a high-inflation climate, but our purchasing power can be protected by owning gold.

Jeff Clark is a Senior Precious Metals Analyst for Casey Research 


Monday, 26 March 2012

Unpaid linky love

If you like reading NOT PC, then you’ll love reading The Objective Standard: either at their blog, which is free, or by subscribing to the magazine—which is worth every penny. Or both!

Here, for instance, is what you would have read over the last two weeks at the Objective Standard blog:

It shits all over what you’re going to find over at Kiwiblog, doesn’t it.

It’s The Eden Park Home of Mediocrity all over again

I had the lacklustre experience on Friday night of attending the “Super” 15 game at Eden Park, an underwhelming experience rescued only by the joy of seeing Auckland lose in the 79th minute.

After the thrill of the World Cup, it’s sad to see Eden Park and the local crowd back to supine normal. Like Russell Brown, I lament “the ease with which Eden Park has fallen back into mediocrity.”

The reality is that in the midst of the year's key professional tournament, Eden Park is hosting games without a clock or a scoreboard… The ground announcements are little better. A ground announcer's key role is to keep the crowd up to date with what's happening during a match. Yet players came and went without announcement during Friday night's Blues and Hurricanes match. I think at least one try-scorer went unacknowledged.

Yes, it was easier to see ads for the ground’s non-food than it was to see the score. And while the child-like ground announcer had nothing to say when he needed to, he did repeatedly find time to patronisingly demand “his” supporters “show some noise.”  “Where are my Hurricanes supporters? Let me hear you. Where are my Blues supporters…”

There’s nothing like grown adults being treated like children to put you off your cheering game, is there. 

The amateur-hour administration Russell documents is well complemented however by a crowd more interested in texting, talking and crowd watching than helping create an atmosphere; so focussed on the sideshows were the crowd that anyone lacking the power of sight would never have known by crowd noise alone the teams had even begun the second half, let alone that teams’ lines were occasionally threatened. Mind you, Russell again: “It's easy to feel detached from the spectacle when there's so little to connect you with it.”

imageIt’s not what live top-level sport is supposed to be like, is it.

Luckily however, I joined with friends Saturday night to watch on a big screen the launch of the AFL season, launched this year with a Sydney derby between old stalwarts the Sydney Swans and the AFL’s newest team, local rivals Greater Western Sydney Giants “starring” league convert Israel Folau (right).  The game, and the viewing experience, had everything the live game at Eden Park didn’t.

imageEven discounting my preference for the world’s most libertarian sport over the game with the world’s most complicated rulebook, it shouldn’t be that way.

Because there’s really nothing else in the world like live sport.

Except, sadly, when it’s at the Eden Park Home of Mediocrity.

The drug lords are holding a party on the US Government

Every time a politician pledges to go hard on the War on Drugs, the drug lords hold a party.

We’ve said this for years.

And here’s one now to back me up, a Mexican Drug Lord officially thanking American lawmakers for keeping drugs illegal.

Joaquin "El Chapo" Guzman Loera reported head of the Sinaloa cartel in Mexico, ranked 701st on Forbes' yearly report of the wealthiest men alive and worth an estimated $1 billion, today officially thanked United States politicians for making sure that drugs remain illegal. According to one of his closest confidants, he said, "I couldn't have gotten so stinking rich without George Bush, George Bush Jr., Ronald Reagan, even El Presidente Obama, none of them have the cajones to stand up to all the big money that wants to keep this stuff illegal. From the bottom of my heart, I want to say, Gracias amigos, I owe my whole empire to you…
As an epidemic of murderous violence rages on the Mexican-US border, and the American government wastes boatloads of badly needed money on the illegal drug business which results from the Prohibition laws, El Chapo is laughing all the way to the bank. "Whoever came up with this whole War on Drugs," one of his lieutenants reports he said, "I would like to kiss him on the lips and shake his hand and buy him dinner with caviar and champagne. The War on Drugs is the greatest thing that ever happened to me, and the day they decide to end that war, will be a sad one for me and all of my closest friends.

You think our local gang leaders don’t feel the same way? Fortunately, Mexican president Calderon does not. He knows what prohibition has done to Mexico. He just can’t get any politician in the States to give a shit.

According to sources in the Mexican government, President Calderon is begging American officials to, in the words of reggae great Peter Tosh, legalize it. "Oh yeah," said an official close to the Mexican president, "Felipe is going crazy. He's screaming at everybody who comes in, 'Why don't they make this sh*t legal already! You're killing me here!' Look, everyone knows, when you have Prohibition, you create gangsters. And the more you prohibit, the more gangsters you make. El Chapo is hero now to all those slumdogs who want to be millionaires. Kids in the street, when they play games, they all want to be El Chapo, the baddest man in the whole damn town."
Meanwhile, many speculate that rich and prominent Mexican families are in cahoots with American businessmen in the alcohol industry, wealthy industrialists who launder the unprecedented profits from the drug business with their legitimate enterprises, and lawmakers who get gigantic kickbacks and payoffs to make sure that these drugs remain illegal, so they can remain rich, fat and happy. According to sources on both sides of the border, tens of millions of dollars in payoffs and kickbacks are stashed in Swiss banks every year, blood money from the brutal business made possible by a corrupt system supported by laws that don't, and have never, worked.

You think that has ever bothered politicians?


Careful on the roads, there’s a new spontaneous order out there

You start in the morning by turning right, and turning right again. It’s your way to work every morning, your favourite shortcut, your way to avoid the major snarl ups on other routes.

But this morning it was different, wasn’t it. All of a sudden after one small rule change, the best way to work you’ve known about for years is not the best way any more. You’ve got to rediscover your shortcut. You’ve got to find a new way—and so too does everybody else on the road.

And all of a sudden the way the roads work—the usual shortcuts, the usual snarl-ups—are just every so slightly different then the way they were last week. That formerly quiet road there will now become a well-used rat run; and the former rat run over there will now host only stalks of tumbleweed.

And thus does a new Spontaneous Order arise on the roads—a new organically developed order based on individual decision making and individual advantage—an unpredictable order “the result of human action but not of human design.” It’s great to watch it develop. It’s the same way in microcosm that order spontaneously arises in all voluntary human interaction.

And the same way spontaneous order can be brought into temporary disorder by even a small change in the context supporting that order.

It’s an interesting way of learning the development of Spontaneous Order. And perhaps the start of understanding the Law of Unintended Consequences.

Friday, 23 March 2012

CUE CARD ECONOMICS: Economic Harmonies, and The Miracle of Breakfast

FRENCH EXISTENTIALIST PHILOSOPHER Jean Paul Sartre famously stated “Hell is other people,” and he wrote many books to prove it. 

Unfortunately, all he proved to most readers was that Hell is reading Jean Paul Sartre books.

A century earlier his countryman Frederic Bastiat discovered, argued and helped to prove something very different; that other people are the very opposite of hell. Said Bastiat in his own magnum opus Economic Harmonies:

“All men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.”

This is the big lesson that economics can give to philosophers: that the world is not made up of the “fundamental antagonisms” between people that some philosophers find everywhere,

    Between the property owner and the worker.
    Between capital and labour.
    Between the common people and the bourgeoisie.
    Between agriculture and industry.
    Between the farmer and the city-dweller.
    Between the native-born and the foreigner.
    Between the producer and the consumer.
    Between civilization and the social order.

And, to sum it all up in a single phrase:

    Between personal liberty and a harmonious social order.

What economics can teach philosophers (and what Bastiat can still teach economists) is that other human beings need neither be a burden nor a threat, neither a hell nor a horror but a blessing.

This is the greatest lesson economics can teach: that in a society making peaceful cooperation possible we each gain from the existence of others.

What a great story to tell!

TO START TO TELL THIS long story, a story that all of economics really serves to show, let’s begin with a short story—an excerpt, from a short story by a great short story writer: O. Henry. As his characters sit down in their wilds to break their fast with something “composed of fried bacon and a yellowish edifice that proved up something between pound cake and flexible sandstone,” they begin to reflect on The Perfect Breakfast:


Such a breakfast, they sigh, might only be possible in New York. "It's a great town for epicures.” As is virtually every city.  We take for granted now that in virtually every cafe in every city in the country we can sit down to the perfect breakfast. We reach over to Brazil or Kenya for our coffee and down to Christchurch for our mushrooms and rolls; to Pokeno, or Vermont, for our bacon and head further down to the Waikato to dig a slice of butter out of a Te Rapa urn and then turn over a beehive near a manuka patch in Nelson for our honey.

This is the Miracle of Breakfast: that we can eat like the gods for the cost only of a few dollars thanks to the freedom to trade, the division of labour and the 'invisible hand' of the market. And we take this for granted.  We take it so much for granted rather than celebrate sharing the meal gods eat on Olympia, we complain if our eggs are too cold.

And we don’t need long arms to enjoy it: we need the arms and minds of other people who are free to produce, free to trade, free to enjoy the fruits of their own labour by trading those fruits with others.

This is the lesson integrated by all of economics:  when you remove force and fraud people are a blessing rather than a curse. Thanks be to the freedom to trade, the division of labour and the 'invisible hand' of the market that makes it possible.

This is the great lesson of Economic Harmonies hinted at by Adam Smith, made explicit by our friend Frederic Bastiat, and developed in specific areas by the likes of Friedrich Hayek and Ludwig Von Mises. Bastiat first noticed it in a visit to Paris. Paris gets fed, he observed, yet no-one celebrates the miracle:


A light we term self-interest. It is this, says Bastiat, that is at the root of all the Harmonies.

Think about it. On our own we can produce barely anything in a single day.  If we were to permanently endure self-sufficiency or life in the wilds not only would the meal of ambrosia perpetually elude us, our lives would be one long round of much labour for very little reward.  We need others to keep us supplied as we now take for granted—with food, with drink, with iPods, iPads and the very roofs over our head—but how to enlist those others in our aid? Simple: we rely on trade. On voluntary cooperation. In short, we offer them their own profit in return for ours. We appeal to their own self-interest, a point made by Adam Smith in the part of his famous book where he invokes his most famous metaphor:


And so we do. By pursuing our own self-interest, through our production, our trade, our enterprise, we ensure “Paris gets fed.”

But there is no central planner here. That is the second part of this miracle: the “resourceful and secret power that governs the amazing regularity of such complicated movements” is not the result of government planning but the opposite: it is a naturally developed “spontaneous order” regulated by this “inner light” of self-interest and the power of free exchange.  That power, that light,  “is so illuminating, so constant, and so penetrating, when it is left free of every hindrance” it produces the order we take so much for granted.


This, Bastiat’s great lesson of spontaneous order, was taken up by Friedrich Hayek, observing society relies on the spontaneous order arising out of our voluntary cooperation.


This great miracle can only happen when each of us is free to follow our own road, to make use of our unique knowledge and circumstances to pursue our self-interests,  so promoting that of the society more effectually than when we really intend to promote it.

imageSO WHAT EXPLAINS THIS Miracle of Breakfast then? Bastiat’s conclusion in three points:

  • Free exchange
  • Self-interest
  • Spontaneous order

Or in one idea:

“That the legitimate interests of mankind are essentially harmonious.”

This is the great lesson integrated by economics, if we are willing to hear it:

Mind you, it takes all of economics to prove the point. And most philosophers are unable to read, or integrate, that much. 

But so too are so many of today’s economists.