You are browsing the archive for 2013 August 21.

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Sen. Rand Paul on Fox News Sunday with John Roberts – 8/18/13

August 21, 2013 in Politics & Elections

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Source: RAND PAUL

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Planet Ponzi

August 21, 2013 in Economics

By Joseph Salerno

“The quantitative easing program is like a giant roach motel with a big welcome sign.”  So says fund manager Mark Feierstein, author of Planet Ponzi, in this short video interview. Although no Austrian, Feierstein has insightful things to say about the U.S. government’s lying statistics and the dire prospects for a world awash in Fed-generated debt. He also is not afraid to use the “D” word, as in Italy and Spain, with negative economic growth and 28% and 55% youth unemployment respectively, are in a depression.

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Source: MISES INSTITUTE

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Amar Bhidé on Reining in the Fed

August 21, 2013 in Economics

By Peter G. Klein

Here is a very good piece by Amar Bhidé, “Wanted: A Boring Leader for the Fed.” Bhidé, like the Austrians and sensible mainstream economists like John Taylor and Raghu Rajan, is deeply concerned about the principle that the “independent” Fed should assume, and exercise, vast discretionary powers. “Instead of casting about for a new maestro, we need to return the Fed to dullness and its chairman to obscurity.” In other words, we need a monetary system where the Fed plays such a small role, or such a carefully circumscribed role, that it doesn’t matter who runs it.

Counting on monetary policy to secure full employment is like attempting vascular surgery with a dull ax. Diversity and dynamism are vital features of our economy. As home building in Nevada collapsed, fracking in North Dakota boomed. Facebook and Apple surged while AOL and Yahoo stumbled. Across-the-board interest-rate suppression is just as likely to pump up already surging sectors as it is to revive slumping ones. Property prices have soared in Manhattan, while Detroit is in a death spiral.

Commanding the Fed to eliminate price fluctuations is also asking too much. The prices of bananas can fluctuate even across neighboring supermarkets. Each of us has our own consumption basket and inflation rate. The overall inflation rate is important — as Mr. Greenspan’s predecessor, Paul A. Volcker, demonstrated in the early 1980s when he crushed inflation at the cost of painful, back-to-back recessions — but only at the extremes.

I, too, would prefer a world in which we don’t know the Fed chair’s name — because there is no Fed chair, and no Fed. Bhidé doesn’t go that far — he favors a monopoly central bank, but one with strictly limited powers, stronger accountability, and under democratic control. Still, his arguments generally track my own on the microeconomics of central banking, namely that the Fed has far too much “independence” and, short of being scrapped entirely, should be bound and gagged as tightly as possible. Bhidé has previously advocated a more decentralized, participatory, open approach to monetary policy, which reminds me of Joe Salerno’s suggestion to put Congress in charge — not because Congress is competent to conduct monetary policy, but that Congressional oversight would open up and expose the process for the stumbling, fumbling, rent-seeking, cronyism that it has been since 1913.

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Source: MISES INSTITUTE

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The Impending Collapse of the Global “Bernanke Bubble”

August 21, 2013 in Economics

By Joseph Salerno

The flood of dollar-denominated debt has risen in Turkey, Brazil, India, and South Korea since Bernanke turned on the monetary spigot in 2009. Now it appears, according to a perceptive article by Landon Thomas, Jr. in the New York Times, that the end of the boom may be in sight as rumors swirl that the Fed will soon be tightening money. As Tim Lee of Pi Economics remarked: “What we are witnessing is a huge bubble, a Bernanke bubble if you will.” And he believes that it is nearing it bursting point.

In recent days nervous investors have begun to pull funds out of developing Asian economies in anticipation, jolting stock and currency markets in India, Indonesia, and Thailand. In the pst few months, the Turkish lira has depreciated by 4.5% against the dollar, while its dollar-denominated debt stands at $172 billion or 22% of its GDP. Goldman Sachs forecasts a further 15% fall in the Turkish lira, spurring a financial crisis as it becomes more and more expensive to buy dollars to service these loans, most of which are short term. Other previously fast-growing economies with large accumulations of dollar-denominated debt such as Brazil, India, and South Korea are also struggling right now and will likely be caught up in the impending financial crisis.

Furthermore — and not at all surprisingly — the real assets created by these loans were malinvestments that will not lead to sustainable growth and prosperity in the recipient economies and therefore will not generate a sufficient flow of income to service the loans. As Mr. Thomas points out,

Some of the biggest beneficiaries of the Fed’s largess were . . . among the politically connected elite in emerging nations like Turkey, where vanity towers, glitzy shopping malls and even grander projects to come — a third bridge across the Bosporus and a vast new airport — have become representative of the nation’s new dynamism, economic as well as geopolitical.

The silver lining in all this doom and gloom is that another global financial meltdown will deal a heavy, and possibly fatal, blow to both the Fed and the credibility of Ben Bernanke’s work on crises and depressions which has become the centerpiece of modern macroeconomic orthodoxy. This will clear the field for the return to prominence of the Austrian theory of the business cycle of Mises, Hayek and Rothbard.

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Source: MISES INSTITUTE

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Welfare: A Better Deal than Work

August 21, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

Suppose someone offered you the same amount of money that you currently make at your job on one condition — you don’t work. Might you be tempted? That is exactly the deal that our welfare system offers too many people today.

The federal government currently funds 126 separate anti-poverty programs at an annual cost of $688 billion. Of these, 72 provide cash or other benefits directly to poor families. State, county, and municipal governments often operate additional benefit programs. The combined benefits from those multiple overlapping programs can easily add up to the point where welfare simply pays better than work.

This week, the Cato Institute released a new study calculating the state-by-state value of this typical welfare package for a mother with two children participating in seven common welfare programs — Temporary Assistance for Needy Families (TANF), food stamps (SNAP), Medicaid, housing assistance, WIC, energy assistance (LIHEAP), and free commodities. We found that, in 2013, the value of those benefits varied widely across states, from a low of $16,984 in Mississippi to an astonishing high of $49,175 in Hawaii.

America’s public-assistance system pays many people better than the jobs they’d otherwise have.”

In nine states — Hawaii, Massachusetts, Connecticut, New Jersey, Rhode Island, New York, Vermont, New Hampshire, and Maryland — as well as Washington, D.C., annual benefits were worth more than $35,000 a year. The median value of the welfare package across the 50 states is $28,500.

But that doesn’t tell the whole story. Welfare benefits are not taxed, while wages are, so we calculated how much money a welfare recipient receiving these six benefits would have to earn in pretax income if she took a job and left the welfare rolls. We computed the federal income tax, the state income tax, and the FICA payroll taxes one would have to pay on wage income; we also took into account both federal and state versions of the Earned Income Tax Credit (EITC) as well as child tax credits where available (these helped increase the relative value of work but did not fully offset the taxes due).

We found that, just to break even, a person on welfare would often have to take a job that paid considerably more than the value of the forgone welfare benefits. In Hawaii, for example, a person leaving welfare for work would have to earn more than $60,590 a year to be …read more

Source: OP-EDS

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Odds Now Growing Our Constitution Will Pulverize Obama

August 21, 2013 in Economics

By Nat Hentoff

Nat Hentoff

I’d previously doubted that the deeply concerned bipartisan rebellion in and out of Congress against President Barack Obama’s contemptuous spying on all of us would have lasting impact on him or any of his successors who believe the president is the rule of law.

I spoke too soon, according to this headline in the Aug. 17 edition of the New York Daily News: “Pols rip NSA over privacy.”

The article highlighted the current revival of the personal liberty legacy of Tom Paine, Samuel Adams and the Sons of Liberty.

What ignited this political outrage was the previous day’s Washington Post, which reported on newly released National Security Agency documents from former agency contractor Edward Snowden. Obama has made Snowden a citizen without a country until he returns from his haven in Russia to be ultimately judged by our Supreme Court, some of whose recent decisions have been supportive of the president in denying us our personal privacy rights.

According to the American Civil Liberties Union, “the thousands of privacy violations cited by the Post were ‘jaw-dropping’ ” (“Pols rip NSA over privacy,” Larry McShane, New York Daily News, Aug. 17).

Besides The Washington Post and the Daily News, other members of the media are also awakening to Obama’s belittling of We The People. In last Saturday’s Wall Street Journal, Peggy Noonan quoted me at length: “There are particular constitutional liberty rights that (Americans) have that distinguish them from all other people, and one of them is privacy …

“The bad thing is you no longer have the one thing we’re supposed to have as Americans living in a self-governing republic” (“What We Lose if We Give Up Privacy,” Noonan, The Wall Street Journal, Aug. 17).

And in addition to the media, more Americans are awakening in anger — across party lines — at being betrayed by their un-American government.

The reporter who has been facilitating Snowden’s breaking news, thus disturbing Obama’s golf games, is The Guardian’s Glenn Greenwald. He’s made Edward Snowden into a household name. Last month, Greenwald reported on “major public opinion shifts in how NSA surveillance and privacy are viewed,” further troubling our leading-from-behind commander-in-chief. He spoke of “a new comprehensive poll released … by Pew Research (that) provides the most compelling evidence yet of how stark the shift is” (“Major opinion shifts, in the U.S. and Congress, on NSA surveillance and privacy,” Greenwald, The Guardian, July 29).

Dig this, Obama. According to …read more

Source: OP-EDS