You are browsing the archive for 2013 June 25.

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“Banish Fractional Reserve Banking for Real Reform”

June 25, 2013 in Economics

By Joseph Salerno

. . . says Thomas Mayer, a former IMF economist and former Chief Economist of Deutsche Bank Group and Head of DB Research, and now a Deutcshe Bank Senior Advisor. In a letter today to the Financial Times, Mayer writes:

But no reform can make banking really safe as long as the industry operates within a fractional reserve system, where banks create “inside” money (for example sight deposits) by extending credit and promise to exchange this against “outside” money at any time on demand.

Mayer goes on to cite Austrian monetary and business-cycle theorist Jesus Huerta de Soto on the causal connection between fractional reserves and banking crises throughout history. He points out: “Since there is no single state in the eurozone able to bail out banks in a systemic crisis, a banking regime without state backing is needed.” He concludes his letter with a four-step plan for “comprehensive” banking reform that would implement just such a regime:

First, define as safe an asset that can be converted any time and under any circumstances at face value into legal tender. Second, create safe (“insured”) deposits by requiring banks to back them fully with reserves at the central bank. Third, create a cascade of loss-absorbing bank liabilities, starting starting with bank equity and ending with investor deposits (not subject to the 100 percent reserve holding). Fourth, make banks treat eurozone government bonds as assets that can default and help them to reduce their holding of these bonds.

Mayer discusses his proposal for 100 percent reserves in more detail in a policy paper published by the Centre for European Policies Studies.

…read more

Source: MISES INSTITUTE

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Politico Op-Ed: Why I’m voting no on immigration reform

June 25, 2013 in Politics & Elections

I will be voting no on the Senate’s Gang of Eight immigration bill, because the legislation does not secure the border first.
I think we desperately need immigration reform. Unfortunately, this legislation does not give us serious reform.
Of paramount concern is what to do with the 12 million people currently residing in the U.S. who are in legal limbo: No one is seriously contemplating they leave, but conservatives believe normalizing their status should be dependent on border security first.
Any immigration reform must expand legal immigration and the work visa program, so we don’t find another 12 million undocumented workers here a decade from now. The Gang of Eight bill actually decreases the number of agricultural workers visas. If work visas are less than what the market demands, the workers will come illegally and we’re right back where we started.
Earlier this month, I introduced an amendment to the current legislation known as the ‘Trust But Verify Act,’ which would make immigration reform contingent upon Congress writing strong border security plan, Congressional votes on border security every year for five years, completion of a double-layered border fence, two new national security visa screening programs and protection against the Obama Administration forcing American citizens to carry around a biometric national identification card. My amendment ensured that Congress, and not the usual unaccountable government agencies, would verify that the border was secure.
My amendment was voted down 37-61 using a procedural vote, with seven Republicans joining Democrats to vote down the strongest border security amendment offered on the bill.
This week, the Senate is being asked to move forward on the current plan, which now includes the Hoeven-Corker complete substitute amendment. Over the weekend, the massive amendment consisted of an e-mail to my office containing five separate PDF files with five different titles. The final amendment has since been entered into the Congressional Record, a hard copy of which was delivered to Senate Members Monday morning.
The complete text of this legislation amounts to 1,100 pages, and the Senate was then asked to vote on an 1,100 page amendment the same day we received it!
So, the Senate was being asked to vote on a crucially flawed bill that no one had read and that no one has had time to read.
Welcome to Washington.
As for the parts that some have read, this legislation includes a $1.5 billion jobs bill. What, exactly, …read more

Source: RAND PAUL

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Jim Crow Is Dead. Long Live the Constitution

June 25, 2013 in Economics

By Ilya Shapiro

Ilya Shapiro

In striking down Section 4 of the Voting Rights Act, the U.S. Supreme Court has restored a measure of constitutional order. Based on 40-year-old voting data that doesn’t reflect current political conditions, this provision subjected a seemingly random assortment of states and localities to onerous burdens and unusual federal oversight.

In striking down Section 4 of the Voting Rights Act, the U.S. Supreme Court has restored a measure of constitutional order.”

To be clear, neither minority voting rights nor the ability of the federal government to enforce those rights were at stake in Shelby County v. Holder. Both of those were, are and will be secure regardless of this case and its consequences.

Instead, the court was considering whether the “exceptional conditions” and “unique circumstances” of the Jim Crow South still exist such that an “uncommon exercise of congressional power” is still constitutionally justified — to quote the 1966 ruling that approved Section 5 of the Voting Rights Act as an emergency measure.

As Chief Justice John Roberts wrote for the court in 2009, the last time it looked at this law, the “historic accomplishments of the Voting Rights Act are undeniable,” but the modern uses of Section 5 — which requires federal “pre-clearance” of any changes in election regulation in certain jurisdictions — “raises serious constitutional concerns.” The provision maintains antiquated assumptions and flies in the face of the 15th Amendment’s requirement that all voters be treated equally.

Yet Congress renewed Section 5 in 2006 without updating Section 4’s coverage formula, and it ignored the court’s warning that “the Act imposes current burdens and must be justified by current needs.”

Racial Gap

Accordingly, it should be no surprise that the chief justice, again writing for the court, began his opinion by noting that “the conditions that originally justified these measures no longer characterize voting in the covered jurisdictions.”

For example, the racial gap in voter registration and turnout is lower in states originally covered by Section 5 than it is nationwide. Blacks in some covered states have actually registered and voted at higher rates than whites. Facetious tests and sinister devices are now permanently banned; even individual violations are exceedingly rare, and no more likely to occur in jurisdictions that Section 4 sweeps in than in the rest of the country.

The list of “covered” jurisdictions is bizarre: six states of the old Confederacy, plus Alaska, Arizona and parts …read more

Source: OP-EDS

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A Historic Affirmation of Racial Progress

June 25, 2013 in Economics

By Trevor Burrus

Trevor Burrus

By ruling Section 4 of the Voting Rights Act unconstitutional, the Supreme Court validated an obvious fact: we now live in a changed world, no longer suffused with the same racial prejudice and bias that existed in 1965. The Court’s decision should be a cause for celebration, as should our national progress in curtailing pervasive and overt racial discrimination.

Of course racial prejudice still exists. Yet to say, as some do, that there is little difference between the racism of 1965 and the racism of 2013 is to ignore the obvious, to deny our laudable progress, and, frankly, to be stuck in the past.

By ruling Section 4 of the Voting Rights Act unconstitutional, the Supreme Court validated an obvious fact: we now live in a changed world, no longer suffused with the same racial prejudice and bias that existed in 1965.”

In 1965, Congress took the drastic step of allowing the federal government to oversee election law in certain states and districts with histories of racial discrimination in voting. In the face of recalcitrant and unyielding local governments, the act was a necessary step in overcoming our country’s shameful history of racial discrimination.

Section 2 of the act outlaws voter discrimination on the basis of race or color and allows both the federal government and individuals to sue for enforcement. That section remains on the books, and rightfully so. Another part of the act (Section 4), however, presumed that certain areas of America were racist, while others were not. Those areas, so-called “covered” jurisdictions, were required to prove to the satisfaction of the federal government that any change in voting laws did not infringe on the voting rights of minority groups. In other words, covered jurisdictions are guilty until proven innocent.

What parts of the country were essentially presumed racist? Manhattan, Brooklyn, and the Bronx, but not Queens; all of Alaska, along with most Southern states; as well as two counties in South Dakota and, until last year, some parts of New Hampshire, to name a few. This hodge-podge of jurisdictions has nothing in common except for their failure to satisfy a federal test devised over 40 years ago. This is the test that the Supreme Court struck down.

By using an antiquated test that has not been adjusted to the modern realities of diminished, yet still present, racism, Congress committed the constitutional sin of unjustified arbitrariness. Usually, …read more

Source: OP-EDS

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Sen. Paul Statement on Obama Administration’s War on Coal

June 25, 2013 in Politics & Elections

WASHINGTON, D.C. – Sen. Rand Paul today released the following statement regarding President Obama’s continued assault on the coal industry.
‘President Obama today declared a war on coal, and thus declared a war on Kentucky jobs and our economy. Whether it is through the retroactive denial of permits, onerous regulations on coal-fired power plants, or unreasonable environmental requirements, the policies of this Administration are threatening the very way of life that has sustained Kentucky communities for generations,’ Sen. Paul said. ‘As a defender of the free market and of coal, I will continue to fight back against the EPA and any other federal agency whose goal is to stifle coal production. I will continue to stand up for our miners in Washington as we continue to recognize the sacrifices they make to provide food for their families and energy for America.’

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…read more

Source: RAND PAUL

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Who Says the Market Cannot Supply Its Own Money?

June 25, 2013 in Economics

By Joseph Salerno

shire silver photo

I just arrived back from lecturing at the week-long Free State Project’s Tenth Annual Porcupine Freedom Festival, a huge gathering of libertarians of all stripes from all over the U.S. in the beautiful White Mountains of New Hampshire. As you can see by browsing the schedule, the festival was chock full of educational and social events as well as commercial activities of the “grey market” (and perhaps  darker) variety. Many of the vendors accepted an array of payments media. I was particularly struck by the sign on one stall which read: “Bitcoin, silver coins, Shire Silver, ammo and even Federal Reserve notes accepted.”

Speaking of alternative payments media, I was very impressed with the panel on Bitcoin’s Future featuring Darren Tapp, Jay Best, Josh Harvey,and Teresa Warmke. It was very informative and the panelists avoided the usual hysteria common among Bitcoin supporters in favor of a serious and sober discussion of the advantages and disadvantages of holding and using Bitcoin and the various technological and political  factors that may affect its future value and developments as an anonymous means of transferring money payments.

I was also delighted to discover that privately minted gold and silver money were circulating at the festival in the form of the aforementioned Shire Silver. This consisted of flat strips and wire strands of silver or gold of various weights embedded in plastic cards and denominated in various weight units from .05 grams to 1.0 grams. These were widely accepted as media of exchange by vendors and paid out in change. Pictured on the left are .5 grams of silver with a purchasing power of $1.00 and .05 grams of gold with a purchasing power of $4.00.

…read more

Source: MISES INSTITUTE

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Supreme Court Strikes Down Outdated Voting Rights Act Provision

June 25, 2013 in Economics

The Supreme Court on Tuesday struck down Section 4 of the Voting Rights Act, a provision that subjected a now-random assortment of states and localities to onerous burdens and unusual federal oversight. Cato scholar Ilya Shapiro notes, “Recognizing that the nation has changed, the Court aptly ended the extraordinary intrusion in state sovereignty that can no longer be justified by the facts on the ground. …Today’s ruling underlines, belatedly, that Jim Crow is dead.”

…read more

Source: CATO HEADLINES

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Evolutionary Anomalies in our Midst

June 25, 2013 in Economics

By Richard W. Rahn

Richard W. Rahn

It is odd to be on a small volcanic island on the equator in the Pacific Ocean, 600 miles west of Ecuador, for a meeting of economists and a few other academics and think-tank types. One of the lesser purposes of the meeting is to discuss what we can learn from natural selection and animal behavior that might have relevance for the world economy and modern societies. And no, this is not a government boondoggle. We are a bunch of limited-government, free-market types, here on our own tab — not burdening any taxpayer with our eccentricities.

When Charles Darwin first landed here back in 1835, he was struck by the many indigenous animal and plant species, and specialization of the animals in order to best prosper. The Galapagos is a cluster of 18 isolated islands, plus an assortment of islets and rocks, with different microclimates caused by elevation and mountains’ blocking effect of the trade winds. The variations in rainfall, from island to island and within an island, determine what plants grow where, which, in turn, determine which animals use them for food and shelter. Even the tortoises vary from one island to another, depending on the food source.

The animals have had hundreds, if not thousands, of generations to evolve and exploit the food and terrain available. Humans, more specifically Americans, have had only three generations to adapt to the Internal Revenue Service.

Even though many animals cooperate in order to help protect themselves, or hunt better and multiply — everything from schools of fish to wolf packs — the human animal is unique in its ability to communicate and build elaborate cooperative structures. Many of the animals in the Galapagos were gentle and passive because of the lack of land predators. Once humans arrived with dogs, cats and other foreign predators, many of the native species were greatly reduced in number or even made extinct.

Humans, on the other hand, have shown their ability to adapt to almost any environment and build elaborate shelters to protect themselves from weather and predators. Humans are able to do this, in part, because of an incredible range of skills and abilities within individuals that, when joined in cooperative relationships, can accomplish almost anything.

A human, having to rely solely on his own abilities and knowledge for survival without the aid of any other individual, would have a relatively short life expectancy (as is true with most animals). However, humans voluntarily and privately coming together, can create — with a huge …read more

Source: OP-EDS

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Court Punts but Affirmative Action on the Ropes

June 25, 2013 in Economics

By Ilya Shapiro

Ilya Shapiro

The Supreme Court, by a 7-1 vote, correctly slapped down the lower court for deferring to the University of Texas regarding the use of race in college admissions. It punted, however, on the larger question of whether that use of race is constitutional, instead instructing the U.S. Court of Appeals for the 5th Circuit to reconsider the issue under a less deferential standard of review.

That is, the lower court accepted the Supreme Court’s 2003 ruling that using race as one factor, but not if race is tied to a set number of points or quotas, could be justified in the name of diversity. But it erred, the Supreme Court said, in not subjecting UT-Austin’s admissions process to what lawyers call “strict scrutiny.”

The court provided a narrow victory for judicial engagement but avoided an opportunity to advance liberty without regard to race.”

“The university must prove,” Justice Kennedy wrote for the Court, “that the means chosen by the university to attain diversity are narrowly tailored.” Regardless of administrators’ experience in crafting admissions policies, it is up to judges to determine whether the use of race really is necessary (and therefore constitutional) to achieve the educational benefits of diversity.

Kennedy further explained that “strict scrutiny imposes on the university the ultimate burden of demonstrating, before turning to racial classifications, that available, workable, race-neutral alternatives do not suffice.”

The ruling thus emphasizes that courts shouldn’t assume good faith by state actors but instead evaluate the use of race in each particular case. A public university’s mere assertion of a diversity interest, irrespective of its circumstances or motivations, doesn’t trump an applicant’s right to be treated as an individual rather than a racial specimen.

While it’s gratifying that the Court recognized that the judiciary must exercise independent judgment on constitutional questions, it’s unfortunate that it even gave UT-Austin another chance to argue its claim. As Justice Thomas wrote in a concurring opinion, the use of racial classifications in college admissions is abhorrent to the idea of equal protection of the laws.

The court thus provided a narrow victory for judicial engagement — subjecting government action to judicial review — but avoided an opportunity to advance liberty without regard to race.

And so the case of Abigail Fisher, a white applicant to UT-Austin who was denied admission even though her academic credentials exceeded those of many admitted minority students, continues. The 5th …read more

Source: OP-EDS