You are browsing the archive for 2013 August 29.

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New Joseph Salerno Shirt in the Store

August 29, 2013 in Economics

By Mises Updates

M320

Whether he’s testifying in Congress, editing the Quarterly Journal of Austrian Economics, or heading up the Mises Institute’s many academic programs, Joseph Salerno is there to supply some intellectual heavy lifting when you need it most.

With this handsome gray t-shirt, now available  in the Mises store, you can signal that you’re a serious student of Austrian economics, and that you know the purchase of this shirt will be no malinvestment.

…read more

Source: MISES INSTITUTE

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DOJ Takes an Important Step on Marijuana

August 29, 2013 in Economics

The Dept. of Justice finally announced its first official response to the dramatic changes underway at the state level with respect to legalizing marijuana. As a matter of law, a direct legal challenge to the state initiatives approved by voters in Colorado and Washington would have failed. As a matter of policy, if the Obama administration is not yet ready to admit that the drug war is a failed policy, it should at least respect the prerogatives of the states that are choosing to legalize marijuana in their respective jurisdictions. This announcement is an important step in that direction.

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Source: CATO HEADLINES

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White House Will Allow Marijuana Legalization Laws to Proceed in Colorado and Washington

August 29, 2013 in PERSONAL LIBERTY

By mfarrington

Historic Breakthrough in Struggle to End Marijuana Prohibition

Attorney General Eric Holder informed the governors of Washington and Colorado today that the Department of Justice will allow the states to implement their ballot initiatives that legalized the production, distribution, and sale of marijuana for adults. Deputy Attorney General James Cole also issued a memo to U.S. attorneys across the country outlining priorities for federal prosecutors enforcing marijuana laws.
The directive will also apply to the 20 states that have legalized marijuana for medical purposes.
August 29, 2013

Drug Policy Alliance

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Source: DRUG POLICY

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Lying Americans into War (Again)

August 29, 2013 in Economics

By Thomas DiLorenzo

In my article entitled “The Liefare-Warfare State” on LewRockwell.com today I survey literature that shows that America’s wars have been wars of imperialism with the lone exception of the American Revolution.  The War of 1812 was an attempt to conquer Canada; the Mexican-American War was conducted to steal California and New Mexico from Mexico; Abe Lincoln announced in his first inaugural address that the “Civil War” was to be waged over tax collection to fund the Republican Party’s dream of a continental empire; the Spanish-American War was another war of conquest primarily so that American sugar and tobacco companies could run Cuba; and on and on.

To study the history, economics, and politics of imperialism and anti-imperialism more intensely consider taking my new Mises Academy course on the subject beginning on the evening of September 9.

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Source: MISES INSTITUTE

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Creative Destruction—The Best Game in Town

August 29, 2013 in Economics

By Robert Higgs

In his justly famous 1942 book Capitalism, Socialism and Democracy, Joseph A. Schumpeter described the dynamics of a market economy as a process of “creative destruction.” In his view, innovation—“the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates”—drives this process. Its most important result is that for the first time in history, the mass of the population in developed countries enjoys a standard of living that even the aristocrats of past ages could scarcely have imagined, much less have actually had.

Yet, as Schumpeter sought to express by his pithy term, the process is not merely creative, but also destructive. As a market economy develops, it necessarily brings about an immense variety of changes in particular demands and supplies, and hence it results in losses as well as profits. For those who rely on selling goods or services in declining or disappearing demand, for those whose locations no longer fit well into emerging spatial patterns of production, for those whose techniques of production no longer represent a means of maximizing net revenues, for those whose skills and experience no longer attract eager buyers in the labor markets—for them and countless others, the process of economic development brings anxiety, disappointment, loss, and in some cases ruin.

The losers take little solace in the thought that their economic displacement or demotion by more competitive workers and producers constitutes the heart and soul of a process by which the entire society, on average, becomes richer. And their plight has always attracted legions of critics who correctly blame the market system for the wreckage. It is simply impossible for the process of economic development to operate without losers. A market economy is a profit-and-loss system. Profits signal the desirability (to consumers) of moving resources to new employments; losses signal the desirability (to consumers) of removing resources from current employments. On the one hand, people are drawn by the prospect of heightened economic pleasure; on the other hand, they are repelled by the onset of persistent economic pain. In this way the overall system continually reshapes itself to comport more effectively with the prevailing patterns of demand and supply.

For the losers, the perceived remedy of their plight has often been not to make the necessary personal adjustments as well as possible, but to use force, especially state force, to burden or …read more

Source: MISES INSTITUTE

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Rothbard and Menger on Private Money in ‘TAC’

August 29, 2013 in Economics

By Mises Updates

Writes Brian LaSorsa in The American Conservative, on whiskey and Bitcoins:

It really isn’t until we reach the Misesian ideals of minimal government that we begin to see worthwhile considerations of private currencies. Austrian economist Murray Rothbard explains, “Many people—many economists—usually devoted to the free market stop short at money… . They never think of state control of money as interference in the free market; a free market in money is unthinkable to them… . So it is high time that we turn fundamental attention to the life-blood of our economy.”

Westerners began to use the whiskey as a medium of exchange, allowing them to trade with and travel to the east more frequently. Everyone from bartenders to surgeons needed alcohol, and its use as an intermediary became custom, verifying Austrian School founder Carl Menger’s analysis of the development of natural currencies: “The exchange of less easily saleable commodities for commodities of greater marketability is in the economic interest of every economizing individual… . Money is not an invention of the state. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence.”

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Source: MISES INSTITUTE

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Summer 2013 Edition of QJAE Now Online

August 29, 2013 in Economics

By Mises Updates

qjaecover

The Quarterly Journal of Austrian Economics, Volume 16, No. 2, a scholarly refereed journal published by the Mises Institute, is now available online.

Summer 2013′s articles:

From Monetary Nationalism to Monetary Imperialism: Fractional Reserve Banking and Inter-Government Cooperation by Nikolay Gertchev

Monetary Nationalism and International Economic Stability by Andreas Hoffman and Gunther Schnabl

Dynamic Monetary Theory and the Phillips Curve with a Positive Slope by Adrián O. Ravier

Free-Banking and Financial Stability in Peru by Luis Felipe Zegarra

Central Planning’s Computation Problem by Lucas Engelhardt

Review of The Economics of Edwin Chadwick: Incentives Matter by Robert B. Ekelund, Jr. and Edward O. Price III

…read more

Source: MISES INSTITUTE

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Another Failed Gun Control Experiment

August 29, 2013 in Economics

By Daniel J. Mitchell

Daniel J. Mitchell

It sounds strange, but my two favorite columns on gun control were authored by self-identified leftists. But they didn’t let ideology trump common sense.

Justin Cronin, for instance, explained that restrictions on gun ownership undermined his ability to protect his family. And Jeffrey Goldberg looked at the evidence and concluded that guns make people safer.

This doesn’t mean I don’t appreciate gun control columns by non-leftists. This Larry Correia piece, for instance, is must reading if you want to understand about magazine limits and so-called assault weapons.

And if you like real-world evidence, Jeff Jacoby of the Boston Globe examines what happened after Massachusetts adopted onerous gun control legislation. He starts by explaining the law and what supporters promised.

In 1998, Massachusetts passed what was hailed as the toughest gun-control legislation in the country. Among other stringencies, it banned semiautomatic “assault” weapons, imposed strict new licensing rules, prohibited anyone convicted of a violent crime or drug trafficking from ever carrying or owning a gun, and enacted severe penalties for storing guns unlocked. …One of the state’s leading anti-gun activists, John Rosenthal of Stop Handgun Violence, joined the applause. “The new gun law,” he predicted, “will certainly prevent future gun violence and countless grief.” It didn’t.

Legal gun ownership plummeted.

The 1998 legislation did cut down, quite sharply, on the legal use of guns in Massachusetts. Within four years, the number of active gun licenses in the state had plummeted. “There were nearly 1.5 million active gun licenses in Massachusetts in 1998,” the AP reported. “In June [2002], that number was down to just 200,000.”

Jacoby then explains, however, that the advocates of gun control were not very successful in restraining the behavior of criminals.

But the law that was so tough on law-abiding gun owners had quite a different impact on criminals. Since 1998, gun crime in Massachusetts has gotten worse, not better. In 2011, Massachusetts recorded 122 murders committed with firearms, the Globe reported this month — “a striking increase from the 65 in 1998.” Other crimes rose too. Between 1998 and 2011, robbery with firearms climbed 20.7 percent. Aggravated assaults jumped 26.7 percent.

Gee, what a surprise. The bad guys responded to incentives and committed more crimes once they knew that victims were less likely to be in a position to defend themselves.

To be fair, the statists do have a response.

Don’t hold your breath waiting for gun-control activists to admit they were …read more

Source: OP-EDS

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Work Can Pay Less than Welfare in R.I.

August 29, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

Most decisions in life are the result of a cost-benefit analysis. When residents in Rhode Island consider getting a job, they assume they would be better off having a job than not. They’d be wrong. Because in Rhode Island, it pays not to work.

Last week, the Cato Institute released a new study looking at the state-by-state value of welfare. Nationwide, the study found that the value of benefits for a typical recipient family ranged from a high of $49,175 in Hawaii to a low of $16,984 in Mississippi.

In Rhode Island, a mother with two children participating in seven major welfare programs (Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, housing assistance, utility assistance and free commodities) could receive a package of benefits worth $38,632, the sixth highest in the nation. Only Hawaii, Massachusetts, Connecticut, New Jersey and the District of Columbia provided more generous benefits.

When it comes to gauging the value of welfare benefits, it is important to remember that they are not taxed, while wages are. In fact, in some ways, the highest marginal tax rates anywhere are not for millionaires, but for someone leaving welfare and taking a job.

Therefore, a mother with two children in Rhode Island would have to earn $20.83 per hour for her family to be better off than they would be on welfare. That’s more than the average entry-level salary for a teacher or secretary. In fact, it is almost 118 percent of Rhode Island’s median salary.

Let’s not forget the additional costs that come with going to work, such as child care, transportation and clothing. Even if the final income level remains unchanged, an individual moving from welfare to work will perceive some form of loss: a reduction in leisure as opposed to work.

That’s not to say welfare recipients in Rhode Island are lazy — they aren’t. But they’re not stupid, either. Surveys of welfare recipients consistently show their desire for a job. There is also evidence, however, that many are reluctant to accept available employment opportunities. Despite the work requirements included in the 1996 welfare reform, only 18 percent of adult welfare recipients in Rhode Island are working in unsubsidized jobs, while roughly 29 percent are involved in the broader definition of work participation, which includes activities such as job search and training.

We shouldn’t blame welfare recipients. By not working, they are simply responding rationally to the incentive systems our …read more

Source: OP-EDS

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Another Asian Financial Crisis to Hit in Next 12-18 Months, There's No Way FM Can Stop It Now

August 29, 2013 in Economics

By Swaminathan S. Anklesaria Aiyar

Swaminathan S. Anklesaria Aiyar

Make no mistake, a second Asian Financial Crisis is on its way. This storm will not blow over soon. It originated in the US, when the Fed proposed to taper and end quantitative easing.

The frightening thing is that this will happen in stages over the next 12-18 months, and each turn of the liquidity screw can cause a fresh financial storm. Nothing Chidambaram or Raghuram Rajan says can avert the storm.

Learning from the 1997-99 experience, all Asian countries (including India) have built up large forex reserves, reduced leverage compared with 1997, and shifted to floating exchange rates. This makes them far more resilient, so they should not collapse as in 1997-99. But they will suffer severe damage regardless.

Depreciation raises the price of all items that can be exported or imported. Estimates differ, but a 10% depreciation probably sucks out 1-1.2% of purchasing power through inflation.

At Rs 68 to the dollar, currency depreciation is around 25% since May, implying a loss of purchasing power of 2.5-3% of GDP. That is hugely recessionary. It will be reflected in much higher prices of petroleum products, fertilizers, most commodities, and knock-on transport and material costs.

Chidambaram wants people to invest, but the coming recession will induce every corporate to postpone investment. A falling rupee keeps making Indian assets cheaper in dollar terms, so foreigners thinking India has good long-run prospects will wait till the Fed’s storm ends.

The fall in purchasing power created by a falling rupee cannot be offset by a huge fiscal and monetary stimulus, as in 2008.

Storm will Continue

Chidambaram has sworn to hold fiscal deficit at 4.8% of GDP. With slowing revenues and rising subsidies, only slashing Plan spending can check fiscal deficit.

Money must be kept tight to check inflation. So, the crashing rupee will generate pro-recessionary fiscal and monetary forces. This in turn means corporate earnings will crash, a good reason to dump shares.

Corporate’s with large unhedged dollar borrowings will suffer huge balance sheet losses, jeopardizing banks that have financed them. International rating agencies will have good reasons to downgrade India, worsening the climate further.

Rohini Malkani of the finance ministry wrote in this newspaper on Tuesday that using a model based on relative inflation with trading partners, India’s equilibrium exchange rate should be the July level of Rs 58-60 to the dollar.

Many experts say the rupee has overshot and will come back. Really? Remember the same thing was said about the Indonesian rupiah when it depreciated from 2,500 to …read more

Source: OP-EDS