You are browsing the archive for 2013 May 10.

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“Guess Who Is a Shocking Fan of Austrian Economics”

May 10, 2013 in Economics

By Joseph Salerno

. . . asked Tony Durden at Zero Hedge the other day. His answer: the Treasury Borrowing Advisory Committee to the US Treasury chaired by Matt Zames of J.P. Morgan. Durden discovered the following passage by Friedrich Hayek quoted in the TBAC’s quarterly refunding presentation made at the beginning of May. Here it is as found on p. 86 of the appendix of the slide show presentation:

“There can be no doubt that besides the regular types of the circulating
medium, such as coin, notes and bank deposits, which are generally
recognised to be money or currency, and the quantity of which is
regulated by some central authority or can at least be imagined to be so
regulated, there exist still other forms of media of exchange which
occasionally or permanently do the service of money.
Now while for certain practical purposes we are accustomed to
distinguish these forms of media of exchange from money proper as
being mere substitutes for money, it is clear that, other things equal, any
increase or decrease of these money substitutes will have exactly the
same effects as an increase or decrease of the quantity of money proper,
and should therefore, for the purposes of theoretical analysis, be counted
as money.”
Friedrich Hayek, Prices and Production 1931 – 1935.37

Durden concluded with the following ruminations:

That’s right: it would appear that the long hand of Austrian economics has penetrated deep into the narrative offered by the JPM and Goldman-chaired TBAC.

But… if that is the case, and if indeed the Treasury’s advisors are fundamentally at heart, Austrian, then that would diametrically change the entire ballgame. Simply because it would mean that whoever wrote the TBAC’s most recent slideshow understand perfectly well that the path the US has set off on is not only not going to have a happy ending . . . but will, naturally, end in tears.

So, one wonders: is that precisely what JPM and Goldman (the two heads of the TBAC) have had in mind all along?

And if so, one also wonders just how they really feel about gold…

…read more

Source: MISES INSTITUTE

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Sen. Paul Appears on CNN's OutFront with Erin Burnett- 5/9/2013

May 10, 2013 in Politics & Elections

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Source: RAND PAUL

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Murray Rothbard in The New Yorker

May 10, 2013 in Economics

By David Gordon

Kelefa Sanneh,  a music critic and journalist who writes for The New Yorker, has a brief discussion of Murray Rothbard in his article “Paint Bombs” http://www.newyorker.com/arts/critics/atlarge/2013/05/13/130513crat_atlarge_sanneh?currentPage=all He devotes most of the piece to the anthropologist David Graeber, an anarchist but no friend of the free market, and his influence on the Occupy Wall Street movement. James C. Scott, another anthropologist who sympathizes with anarchism, also comes in for attention. Sanneh says that the  Occupy movement is not influential in electoral politics, but he finds one anarchist “who could be considered influential in Washington.” This is none other than Murray Rothbard, who is identified as Ron Paul’s intellectual mentor. Sanneh doesn’t say much about Rothbard, but discussions of anarcho-capitalism are hardly a regular feature in The New Yorker. As Samuel Johnson said, “it is not done well, but you are surprised to find it done at all.”

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Source: MISES INSTITUTE

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Sen. Paul Introduces Emergency Transportation Safety Fund Act

May 10, 2013 in Politics & Elections

Yesterday, Sen. Rand Paul introduced legislation to establish the Emergency Transportation Safety Fund Act, which would provide funding for new construction, repair, and replacement of crumbling bridges and roads. The bill will make funding a priority to emergency infrastructure projects by directing revenues reaped from allowing overseas capital to be repatriated back to the United States at a low 5 percent rate into a special transportation fund. By reducing the existing repatriation rate, U.S. companies will have greater incentive to bring funds back to the United States for reinvestment.

‘While we are faced with a fiscal crisis, our nation also has critical infrastructure needs that demand immediate attention. The Emergency Transportation Safety Fund Act is a fiscally responsible approach by providing the necessary resources to rebuild and enhance America’s infrastructure. My plan will not only save our infrastructure from collapsing, but also encourage reinvestment here at home without increasing the debt,’ Sen. Paul said.

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Source: RAND PAUL

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Sweden’s War on Cash: News from the Frontlines

May 10, 2013 in Economics

By Joseph Salerno

Three of the four largest banks in Sweden continue to phase out the manual handling of cash at their branch offices at a rapid pace, according to recent data reported today in Naringsliv, a leading Swedish Money and Finance newspaper insert. Taken together, Swedbank, Nordea, and SEB, have stopped offering cash services at their branches at the rate of three branches per week since 2010. Thus during the period 2010-2012, cash disappeared from 465 Swedish bank branches. At Swedberg bank, only 75 of its 340 branches still handle cash.

Leif Faithful, Head of Financial Infrastructure at the Swedish Bankers’ Association, believes that eventually all Swedes will need a bank card and sees this development as beneficial to “both consumers and trade.” Odd that he does not mention the great benefit to the banks of revenues generated by the cards and the fact that with few bank branches paying out cash it makes fractional-reserve banks much more secure against bank runs during crises generated by the credit expansion of these same banks. Nor does he mention the obvious benefits from the spread of electronic transactions that will accrue to the Swedish government, which will have much greater ability to snoop into and monitor the private financial dealings of its citizens

Fortunately, one heroic Swedish bank among the largest four, Handelsbanken, has resisted this pernicious trend toward abolishing cash and empowering the government and the fractional-reserve banking cartel at the expense of the public. From early 2010, Handelsbanken has actually increased the number of its branches that handles cash and today all 461 branches do so, but with a limit of $15,000.

HT to Per Bylund.

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Source: MISES INSTITUTE

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Available: QJAE vol. 16, no. 1 (Armentano, McSherry and Wilson, Carden, Fisher, Méra, Thornton, Bagus)

May 10, 2013 in Economics

By Timothy Terrell

Volume 16, no. 1 of the Quarterly Journal of Austrian Economics is now available online. Articles are:

Dominick Armentano, 2013 AERC Ludwig von Mises Lecture, “Antitrust Myths: Speak Truth to Power,”

Bernard McSherry and Berry K. Wilson, “Overcertification and the NYCHA’s Clamor for a NYSE Clearinghouse,”

Art Carden, “Economic Calculation in the Environmentalist Commonwealth,”

Eloy A. Fisher, “Monetary Policy and Capital-Based Macroeconomics: An Empirical Examination for the United States (1963-2012),”

Xavier Méra, “Comparative Advantage and Uncertainty Bearing,”

Mark Thornton, Review of Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System by Barry Eichengreen,

Philipp Bagus, Review of Los Errores de la Vieja Economía by Juan Ramón Rallo

The Quarterly Journal of Austrian Economics was nominally founded in 1998, but, in terms of its mission and guiding spirit, it is a continuation, in an expanded and improved form, of the first ten volumes of the semi-annual Review of Austrian Economics, whose founding editor was the late Murray N. Rothbard.

The mission now, as it was when it was adopted from Rothbard, is “to promote the development and extension of Austrian economics and to promote the analysis of contemporary issues in the mainstream of economics from an Austrian perspective.”

Submissions and Editorial Board

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Source: MISES INSTITUTE

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Washington Times Op-Ed: The moment of responsibility for Hillary Clinton

May 10, 2013 in Politics & Elections

When I took Hillary Rodham Clinton to task in January for the mishandling of security in Benghazi, Libya, I told her that if I had been president at the time, I would have relieved her of her post. Some politicians and pundits took offense at my line of questioning.During those hearings, I reminded Mrs. Clinton that multiple requests were sent to the State Department asking for increased security measures. I asked if she had read the cables from Ambassador J. Christopher Stevens asking for increased security. She replied that she was busy and had not read them. I find that inexcusable.Four months later, we are hearing that Mrs. Clinton allegedly withheld information from a counterterrorism bureau during the response. We are hearing new allegations that Special Forces wanting to respond during the attacks were told, ‘You can’t go’ by superiors. Ambassador Stevens‘ deputy, Gregory Hicks, testified this week that he spoke with Mrs. Clinton on the night of the attack, when these orders were given. We are hearing that Mr. Hicks was initially told by the State Department not to meet with congressional investigators.We are, again, hearing allegations that contradict the White House’s story.Benghazi security was a life-and-death matter that resulted in the latter. The notion that high-ranking government officials are somehow beyond reproach, as some suggested during my criticism of Mrs. Clinton, is dangerous and wrong.The secretary of state’s responsibility is to protect our diplomats. Mrs. Clinton should have been relieved of her post for denying pleas for additional security. Almost 20 years ago, President Clinton’s secretary of defense was relieved of his post for a similarly bad decision.In early October 1993, a battle between U.S. forces and Somali militia in Mogadishu left 18 Americans soldiers dead, 80 wounded and two American helicopters shot down. Today, this is remembered as the Battle of Mogadishu or more popularly, ‘Black Hawk Down,’ thanks to a subsequent movie of the same name.A month earlier in September, then-Chairman of the Joints Chief of Staff Colin L. Powell requested soldiers, tanks and armor-plated vehicles to reinforce the mission in Somalia. Secretary of Defense Les Aspin denied these requests. The Associated Press reported the following on Oct. 8, 1993, just days after the Battle of Mogadishu: ‘Defense Secretary Les Aspin today brushed aside calls for his resignation as ‘the politics of Capitol Hill,’ but conceded that in light of recent casualties, he shouldn’t have rejected …read more

Source: RAND PAUL

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When We Began

May 10, 2013 in Economics

By Dalibor Rohac

Dalibor Rohac

Strange Rebels. 1979 and the Birth of the 21st Century
By: Christian Caryl
New York: Basic Books, hardcover; $28.99, 432 pages

The 1970s were not a glamorous period of human history. From today’s perspective, they were a decade of questionable taste in clothing, hairstyles, music, and architecture. There was a general sense of economic and political unease in the West. But there are good reasons to study the 1970s, argues Christian Caryl in his latest book, Strange Rebels. Most importantly, it was a decade in which the overall malaise prompted cataclysmic events that have irrevocably shaped the world in which we live today.

Christian Caryl is a journalist of the old school. A senior fellow at the Legatum Institute (full disclosure: I worked as an economist there until February 2013) and a contributing editor at Foreign Policy magazine, his book demonstrates the breadth of his experience in journalism (he served as bureau chief for Newsweek and US News in Tokyo and Moscow, respectively). A riveting read, it is interspersed with gripping anecdotes and an admirable attention to detail. Its main thesis—that our current world would be unimaginable without the unique concatenation of world events that occurred in a very short period of time in 1979—is both novel and compelling.

Even in 2013, many people are still in need of a healthy dose of skepticism about the ability of big, unchecked governments to deliver good outcomes.”

What exactly happened in 1979? Well, for one, Margaret Thatcher won Britain’s general election in May, ending a decade of economic stagnation, rampant inflation and excessive unionism. In the years that followed, she and her colleagues would fix the British economy, and turn an overregulated state in decline into an economic powerhouse. More importantly, she would change the conversation about economic policy in the West. Government ownership of industry, unionism and naïve Keynesian stabilization policies, which formed the basis of the post-war economic consensus in Western Europe, would be intellectually discredited for the years to come—though they would unfortunately resurface in the aftermath of the financial crisis of 2008.

Although not discussed explicitly in the book, Thatcher’s example inspired pro-market reformers around the world, including those in Eastern Europe. In 1989, for transitional economies for Eastern Europe, a rapid return to free markets was the only credible option and alternative to pipedream fantasies of seeking a “third way” between capitalism and communism.

Speaking of Eastern Europe, in …read more

Source: OP-EDS

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The Minimum Wage Is a Jobs and Freedom Killer

May 10, 2013 in Economics

By James A. Dorn

James A. Dorn

President Obama’s proposal to increase the minimum wage to $9 per hour and index it is misguided. It would reduce job opportunities for low-skilled workers (especially minorities), incentivize employers to switch to labor-saving methods of production, increase unemployment of low-productivity workers in low-income households and do nothing to address the underlying causes of poverty.

The legal minimum wage reduces both economic and individual freedom. It makes it illegal for workers to accept (or to keep) a job paying less than the minimum wage, and it prohibits employers from hiring anyone at less than the legal minimum — even if workers are willing to work.

If the prevailing market wage for low-skilled workers is $7.25 per hour and Congress mandates a minimum of $9 per hour, then workers who produce less than that will not be retained or hired. In the long run, as businesses shift to labor-saving methods of production, more low-skilled jobs will disappear than in the short run.

The best way to stimulate the economy is by expanding free markets.”

In anticipation of a $9-per-hour minimum wage, small businesses are already making plans to shift to automated equipment, self-service tablets and new software to save on higher-priced low-skilled workers. More jobs will be created for skilled workers but at the expense of destroying jobs for low-skilled workers.

Politicians promise workers $9 per hour, but that promise cannot be kept if employers fire (or don’t hire) workers who produce less than $9. Most important, if low-skilled workers lose their jobs or can’t find jobs at the legal minimum, their actual earnings will be zero.

Evidence shows that when the real (inflation-adjusted) minimum wage exceeds the prevailing market wage for unskilled workers, there will be fewer jobs and a higher unemployment rate — especially in the longer run. If a person with low productivity is prevented from getting a job by the minimum wage, she may go on welfare. Without a job, she will be handicapped and become dependent on government. Rather than develop good work habits and improve her opportunities to move up the income ladder, she will be at a dead end.

High unemployment rates for teenage workers, especially blacks, are a direct consequence of the legally mandated minimum wage. The minimum wage also leads to lower participation rates for low-skilled workers as they become discouraged and drop out of the workforce.

Proponents of the minimum wage focus …read more

Source: OP-EDS

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FBI's Latest Proposal for a Wiretap-Ready Internet Should Be Trashed

May 10, 2013 in Economics

By Julian Sanchez

Julian Sanchez

The FBI has some strange ideas about how to “update” federal surveillance laws: They’re calling for legislation to penalize online services that provide users with too much security.

I’m not kidding. The proposal was revealed in The Washington Post last week — and a couple days ago, a front-page story in The New York Times reported the Obama administration is preparing to back it.

Why? Federal law enforcement agencies like the FBI have long feared their wiretap capabilities would begin “going dark” as criminals and terrorists — along with ordinary citizens — shift from telephone networks, which are required to be wiretap-ready under the 1994 Communications Assistance for Law Enforcement Act (CALEA), to the dizzying array of online communications platforms available today.

While it’s not yet clear how dire the going-dark scenario really is, the statutory “cure” proposed by the FBI — with fines starting at $25,000 a day for companies that aren’t wiretap capable — would surely be worse than the disease.

Instead of being decided by what’s best for the vast majority of users, communications architectures would be determined by what makes things easiest for law enforcement to wiretap.”

The FBI’s misguided proposal would impose costly burdens on thousands of companies (and threaten to entirely kill those whose business model centers on providing highly secure encrypted communications), while making cloud solutions less attractive to businesses and users. It would aid totalitarian governments eager to spy on their citizens while distorting business decisions about software design. Perhaps worst of all, it would treat millions of law-abiding users with legitimate security needs as presumed criminals — while doing little to hamper actual criminals.

It Stifles Innovation

The FBI’s plan would effectively make an entire category of emerging secure platforms — such as the encrypted voice app Silent Circle or the Dropbox-like cloud storage service Spider Oak — illegal overnight. Such services protect user confidentiality by ensuring that not even the company’s employees can access sensitive data; only the end users retain the encryption keys needed to unlock their content.

This is hugely attractive for users who might otherwise be wary about relying on cloud services — whether they’re businesses negotiating multi-million dollar mergers, lawyers and therapists handling confidential documents, activists in authoritarian states, or just couples looking to back up their newborn photos.

But if the FBI gets its way, companies won’t be able to adopt that “end to end” encryption model, or offer their users the security …read more

Source: OP-EDS