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North Korea Is Someone Else's Problem

April 4, 2013 in Economics

By Doug Bandow

Doug Bandow

When North Korea’s roly-poly Kim Jong Un threatens Americans with death and destruction, one is reminded of the Duchy of Grand Fenwick invading America in the Cold War novel “The Mouse That Roared.” If the North wasn’t a totalitarian dictatorship in which people starved to death, Pyongyang could be the set for a comedic farce.

There’s nothing unusual with the so-called Democratic People’s Republic of Korea pouring vitriol on its enemies. South Koreans have lost count of the number of times the DPRK has threatened to turn Seoul into a “lake of fire.” Pyongyang’s YouTube video of New York City going up in flames was a first, but the North has regularly proclaimed the armistice to be at an end.

North Korea’s latest bellicosity is unusually violent, but nothing suggests that this Kim, any more than his father or grandfather, is suicidal. DPRK elites have demonstrated that they want to enjoy their virgins in this life.

There are international problems only Washington can confront. North Korea is not one of them.”

The North’s bravado—and nuclear program—demonstrate that North Korean officials fear American power. When I visited the DPRK years ago, my hosts boasted that they had rebuilt the capital city of Pyongyang after the United States had leveled it during the Korean War. Their pride did not disguise their recognition that Washington could deploy overwhelming military force.

War still could start from mistake or miscalculation, but that always has been the case. Washington gains nothing from fixating on the intentions of a bankrupt and backward state which has little ability to strike Americans, except those Washington has voluntarily placed within range—the 28,500 military personnel stationed in South Korea.

Better would be to begin bringing them home, leaving North Korea’s neighbors to deal with Pyongyang.

The Cold War turned the Korean Peninsula into a battleground for America. But that ended when the Soviet Union dissolved.

The Republic of Korea has 40 times the GDP and twice the population of the North. Japan has the world’s third largest economy and a sophisticated military. China has interest in stability, if not democracy, on the peninsula. They have both the means and incentive to handle the DPRK.

There are international problems only Washington can confront. North Korea is not one of them.

Doug Bandow is a Senior Fellow at the Cato Institute.

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Source: OP-EDS

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Letter to the Editor: Iran's Annual Inflation Rate Is 82.5%

April 4, 2013 in Economics

By Steve H. Hanke

Steve H. Hanke

Dear Sir,

In Wednesday’s FT (“Iran warned on food security,” April 3), Najmeh Bozorgmehr reports Iran’s official annual inflation rate as 28.7 per cent. This statistic does not reflect the most recent official annual data — an inflation rate of 31.5 per cent. That said, this number is still well below Iran’s actual inflation rate. Indeed, it represents what I would call a “lying statistic.”

Since September 2012, I have been estimating Iran’s inflation rate using a standard, widely-accepted methodology. By measuring changes in the black-market (read: free-market) IRR/USD exchange rate, it is possible to calculate an implied inflation rate.

When we do so, a much different picture emerges. Iran’s inflation briefly peaked at hyperinflation levels, on 17 October 2012, with an annual inflation rate of 204.7 per cent. Currently, Iran’s annual inflation rate is actually 82.5 per cent — a rate more than double the official rate.

Steve H. Hanke is a professor at The Johns Hopkins University in Baltimore, MD, and a Senior Fellow at the Cato Institute.

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Source: OP-EDS

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The State—Crown Jewel of Human Social Organization

April 4, 2013 in Economics

By Robert Higgs

Since the earliest stage of human history (say, the time of Cain and Abel), human beings have been homicidal maniacs. Yet, for untold ages, something was missing, something with the capacity to raise their murderous mania to truly magnificent heights. Only very late in human history—perhaps 10,000 years ago or thereabouts—did the long-awaited breakthrough take place: men finally devised the state. By employing its powers of organization, command, violence, and plunder, rulers could finally bask in the glories of heretofore undreamed-of atrocities. No longer did men have to rest content with workaday violence and manslaughter. Now they could achieve vastly more monstrous enormities than the evilest village bully had been able to achieve or even to conceive of previously.

Now human beings could attain real glory for the first time. Now the rise of empires lay within the realm of realistic ambition. Killing by the ones, tens, or hundreds no longer defined the limits of human wrath, because now killing by the thousands and tens of thousands became possible, along with enough rape and pillage to satisfy all but the most twisted psychopath. No longer did a man have to settle for murdering his brother, his wife, or his fellows in the nearby village. Now even huge numbers of remote strangers became fair game. Indeed, thanks to the state’s amazing capabilities, a ruler might now conceive of utterly annihilating an entire society.

No wonder people have looked on the state with such reverence and lavished on it their highest adoration and deepest loyalty. Every thinking man must perceive that without the state, the constricting limits of a man’s malevolence put almost unbearable pressure on his natural desire to slaughter his fellow man and to destroy every speck of his enemy’s property that he cannot loot or hold hostage for the payment of tribute.

With the rise of the state, statesmen became possible—men whose vision embraced truly grand adventures and enterprises in exploitation, oppression, plunder, and mass mayhem. And from the greatest statesmen the greatest empires might spring. What sorrow we must feel as we contemplate the bleak counter-factual of history without the great Roman Empire: we cannot begin to imagine any stateless society able to put even a tenth as many severed heads on pikes along the roads or to nail even a tenth as many men on crosses to endure prolonged suffering before they gratefully expire. Likewise for the great Chinese, Persian, …read more
Source: MISES INSTITUTE

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The Green Rothbard

April 4, 2013 in Economics

By Mark Thornton

Here is another great lecture by Murray Rothbard: “Conservation and Property Right.” He covers virtually the entire spectrum of environmentalist concerns.

Has anyone ever investigated Herbert Hoover’s “infamous” Radio Act of 1926? Why was it passed?

…read more
Source: MISES INSTITUTE

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China's Military Spending: No Cause for Panic

April 4, 2013 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

When the Chinese government released its latest defense budget, there was once again considerable angst in the United States and its East Asian allies. The official budget showed an increase of 10.7% from the previous year, continuing a trend over more than a decade of annual double-digit growth. A budget that was only $22.3 billion in 2003 had grown to $60.1 billion in 2008 and $115.7 billion in 2013.

Such a trend suggests that improving the country’s military capabilities, primarily through modernization programs, is a high priority for China’s political elite.  Furthermore, virtually no knowledgeable person believes that the official budget accurately measures the extent of Beijing’s military spending. Several key items, including the costs of research on new weapons, are not included in that budget.

Independent estimates vary widely, though, and have done so throughout the past decade. At the time that Beijing said its defense spending was a mere $35.0 billion in 2006, the US Pentagon estimated the actual spending was between $70 billion and $105 billion. The prestigious International Institute for Strategic Studies concluded that the budget was $62.1 billion, and a separate estimate based on purchasing power parity put the figure at $128 billion. The Pentagon’s high-end estimate for 2011 (the last year when complete figures are available) was $180 billion, and the IISS’s purchasing power parity figure for that same year was $197.9 billion.

The modest increases in Beijing’s military capabilities are a far cry from China seeking to become a global military rival of the United States.”

Adding to the sense of unease in the US and China’s neighbors is the chronic lack of transparency about Beijing’s underlying security doctrine. US officials in both the Bush and Obama administrations expressed the view that China’s spending seemed excessive for the country’s legitimate defense needs.

But the surge in Beijing’s military outlays needs to be viewed in context. Even if one accepts the high-end estimates of the Pentagon and IISS (which are hardly indisputable), the United States still spends better than three times as much as China. Chinese officials have stressed that point in response to Washington’s criticism that the PRC’s budgets are excessive.

The gap is even more glaring when one considers that the United States is located in a placid region with no serious rivals or pressing security concerns. Conversely, China is located in a region with numerous rivals (actual and potential), …read more
Source: OP-EDS

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Protecting U.S. Consumers from 'Big Cattle'

April 4, 2013 in Economics

By K. William Watson

K. William Watson

More than eight months after losing a case at the World Trade Organization, the United States has finally begun changing its protectionist regulations for mandatory country-of-origin labels (COOL) on meat. Unfortunately, while the Obama administration claims that it is implementing the WTO’s recommendations, it is actually making the regulations more protectionist.

Congressional intervention now seems the only avenue left to defend consumer interests from the Big Cattle lobby and restore what’s left of America’s reputation in the global trading system.

Here is the back-story: Regulations now require meat from cattle or hogs slaughtered in the United States to carry labels with the country or countries involved in production. If the animal was born and raised in the United States, for example, the meat must be labeled “Product of the United States.” If the animal was born or raised outside the United States and then brought here for slaughter, the meat must carry a label revealing this and listing the countries.

The White House’s backhanded response to a legitimate trade dispute displays a dispiritingly cynical attitude.”

Supporters often argue that labels with such information empower consumers and improve food safety. But their efforts can also be viewed as protectionist.

If consumer demand for origin information were sufficient to justify the cost of those labels, they would not need to be mandated by law. The fact that retailers don’t voluntarily provide this information shows that consumers are not willing to pay a high enough premium to justify the expense. And those costs are significant. Compliance with the current COOL regulations has been estimated to cost the beef industry more than $1.2 billion.

Moreover, because the same safety standards apply to all meat sold in the United States, the label does nothing but tell consumers where the animal was standing as it grazed.

The labeling requirement’s real effect is the cost it imposes on meat-packers that purchase foreign-raised cattle. The law includes regulations mandating separation of livestock and meat based on the animal’s national origin. This segregation brings added costs, making Canadian livestock sales economically unfeasible. Instead, most packers now buy only U.S.-raised animals, which are already more abundant in the market.

Canada and Mexico have complained to the WTO, which ruled the current labeling regulations unlawfully discriminatory. The WTO found that providing origin information could be a legitimate policy goal, but the disparity between the amount of information processors had to gather …read more
Source: OP-EDS

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The Sorry State of Veterans' Health Care

April 4, 2013 in Economics

By Malou Innocent

Malou Innocent

Here is a sad lesson in government waste. Since 2008, the Departments of Defense (DoD) and Veterans Affairs (VA) have spent over $1 billion to create an integrated electronic health record (iEHR). Four years and $1 billion later, not a single line of code has been implemented.

As way of background, Defense and VA use separate medical databases that can neither translate nor communicate their data in a functional way. The National Defense Authorization Act of 2008 directed the departments to develop a single electronic health record system by 2009. They pushed that scheduled date of completion to 2017 after the plan hit a number of management, oversight, and planning snags, detailed in full here by the Government Accountability Office (GAO). The final cost estimate also exceeded initial expectations — from $4 billion to nearly $12 billion.

Notwithstanding the hundreds of millions of dollars devoted to electronic health records, journalist Aaron Glantz noted recently that 97 percent of benefit claims are still done on paper. An inspector general audit last summer found that a North Carolina VA office had so much paperwork it “appeared to have the potential to compromise the integrity of the building.”

How did government planners spend over $1,000,000,000 without anything to show for it?”

How did government planners spend over $1,000,000,000 without anything to show for it? Reliance on contractors certainly played a role. In a review of DoD service contracting and spending data, the Project on Government Oversight reported that contractor employees cost nearly three times more than an average DoD civilian employee performing the same functions. 

A 2008 GAO report, with figures that are still accurate, also found that at offices within TRICARE, the DoD’s heath care program, contractor employees outnumber DoD employees significantly, comprising 88 percent of the workforce. Even with one of the highest percentages of contractors anywhere in the federal government, money was spent with nothing produced.

In February, Defense and VA suggested that their plan might change directions, but leave some existing aspects of the project in place. That’s when things got interesting. In a segment that debuted in late March, political satirist/pundit Jon Stewart called out President Barack Obama for routinely promising to eliminate the backlog of veterans’ benefits but clearly failing to deliver:

The point is, if you’re making the case that government has a meaningful role to play …read more
Source: OP-EDS

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More Dollars to the IMF a Bad Idea

April 4, 2013 in Economics

By Dalibor Rohac

Dalibor Rohac

Pressure is mounting on the United States to ratify the reform of the International Monetary Fund, which the Obama administration unsuccessfully submitted for congressional approval last month. Congress should think twice before passing the reform — importantly because its thrust consists of doubling the amount the United States will owe the IMF — also known as the “quota.”

All of this comes two years after an agreement between the fund’s members to double the total amount of quotas — resources that member countries are obliged to contribute. Since the U.S. government holds a significant portion of votes within the fund, its approval is necessary for the change to take effect.The proposal would lead to a permanent and historically unprecedented increase in resources available to the IMF — and, indeed, to any international organization. The sheer magnitude is staggering. If approved, it would give the IMF access to roughly $734 billion for its lending purposes, in addition to sizable amounts its can access through other channels.

So far, most commentators have focused on how the new quotas, which also determine the voting power of countries within the organization, are going to be allocated among member countries, increasing the relative weight of emerging economies. Yet, that is just a distraction from a historically unique increase in funding for any international bureaucracy.

The Treasury Department argues that the increase will not cost the American taxpayer anything. Treasury says the $65 billion, which would go toward an increased American quota at the fund, is to be simply reallocated from another funding commitment, which the government made in 2009 at the crisis G-20 summit in London and which Congress approved shortly thereafter.

Too much lending is part of the problem.”

The depiction of the quota increase as fiscally neutral is not accurate. The commitment from 2009 was made under a scheme called “New Arrangements for Borrowing,” which enables the IMF to borrow money from its members, after gaining an 85 percent approval of member countries. In contrast, the quota contributions come to the fund with no strings attached.

Even if one believes that the International Monetary Fund has an important role to play in tackling financial crises around the world, it is not clear that there is a reason for a permanent increase in resources given to the fund. In 2009, the fund’s lending capacity was tripled, from $250 billion to $750 billion. This increase was approved narrowly by Congress in June 2009, amid fears of a global financial meltdown. Four years later, one wonders, how much of a difference IMF lending has made.

A significant part of the additional funding was directed at the ailing …read more
Source: OP-EDS