You are browsing the archive for 2013 September 21.

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Fractional-Reserve Bitcoin Banks?

September 21, 2013 in Economics

By Mises Updates

Writes John Carney at CNBC:

One of the odder claims made aboutBitcoins that you hear from time to time is that there can’t be fractional reserve banking in the electronic currency.

This is supposedly one of the appealing features of Bitcoin because, well, because some libertarian types think that fractional reserve lending is a form of fraud. Murray Rothbard, the great libertarian economist, was probably the most notable proponent of this view.

…read more

Source: MISES INSTITUTE

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Irish President: ‘Neoliberals’ like Ludwig von Mises are out to get you

September 21, 2013 in Economics

By Ryan McMaken

It’s always interesting to see who is invoking the name of Ludwig von Mises to make a political point. A few weeks ago, Peter Beinart was claiming, rather unconvincingly, that Senator Ted Cruz is some kind of devout anti-interventionist because he allegedly read books by Ludwig von Mises as a teenager.

This week, it was the President of Ireland, in a speech claiming that the “neoliberal” bogeyman is lurking in the shadows to convert the world into a playground for plutocrats. “Neoliberal” is a term used internationally, primarily by leftists in the political sphere, and it generally seems to mean: “evil free-market ideology,” although the real-life economic systems that these leftists describe as “neoliberal” are characterized more by corporatism and crony capitalism than by  anything resembling free markets.

For this reason it’s a little odd that the Irish President, Michael Higgins, would say this:

“Neoliberalism has, from the first meetings of Ludwig Von Mises, Hayek and Milton Friedman, been a conscious ideological project” he said, adding that it “does make assumptions about human nature and the good society. Yet these are rarely stated”.

Higgins isn’t trying to speak well of neoliberalism here.

Mises of course wasn’t a “neoliberal” at all. He was simply a liberal in the nineteenth-century tradition. International leftist activists also speak of Bill Clinton and George W. Bush as neoliberals. But if Mises, Bush, and Clinton are all neoliberals, then the word as used by people like Higgins, must not have any precise meaning whatsoever.

…read more

Source: MISES INSTITUTE

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More Peter Klein on the Universities’ War on MOOCs.

September 21, 2013 in Economics

By Mises Updates

Expanding on his Circle Bastiat post from earlier this week, Peter Klein writes at LewRockwell.com:

Universities to MOOCs: We Will Assimilate You

Universities haven’t changed much since the Middle Ages. There is the campus with its lecture halls, dormitories, libraries, and laboratories surrounded by leafy quadrangles. Well, they’ve added giant sports complexes, gyms and swimming pools, and gourmet restaurants, but the basic layout is the same. And the production process hasn’t changed since around 1200. Professors give lectures, students read books and take notes, there are examinations and grades, along with the occasional tutoring session, and a great deal of hanky panky. The professors wear tweed jackets instead of gowns, and the students wear – well, just about anything, including pajamas – but otherwise the university remains one of society’s most conservative institutions.

This has all been challenged, quite radically, in the last decade, as students, parents, taxpayers, and donors have begun to grasp the potential of the internet for revolutionizing the education industry. Distance-learning has been around for a long time (what used to be called “correspondence courses”), but the internet has made it possible for people to educate themselves, independently or in groups large and small, on an unprecedented scale. Startup companies, sometimes unaccredited, are entering the education space as never before. Alternative providers and platforms such as Khan Academy, TED, and the Mises Academy are offering modular, flexible, and specialized alternatives to the medieval model that continues to dominate the establishment universities. And everyone is talking about MOOCs, “Massively Online Open Courses,” offered by standalone firms or in partnerships with established universities.

The early — and predictable — reaction of the traditional universities was to denounce the entrants as cheap, inferior, fly-by-night operations. “They don’t offer real degrees!” “They don’t provide a high-quality education like we do!” Actually, some of the startups offer extremely high-quality products. Others don’t, but so what? Why should “higher education” correspond exactly to a four-year degree from Yale? Why can’t it be better, or worse? A Hyundai isn’t a Mercedes, but that doesn’t mean everybody has to drive a luxury car. And in many cases a shorter, more specialized – not to mention cheaper – curriculum is vastly superior to the bloated, politically correct, and increasingly irrelevant program offered by many of the prestige institutions.

Lately some traditional universities have …read more

Source: MISES INSTITUTE

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Financial Crisis Reforms Missed the Mark

September 21, 2013 in Economics

By Mark A. Calabria

Mark A. Calabria

The events of September 2008, including the government rescue of Fannie Mae, Freddie Mac and AIG, along with the failure of Lehman Brothers, will go down as some of the most important in American economic history. Unfortunately, the five years since have been a wasted window of opportunity to address the structural flaws in our financial system.

Don’t get me wrong, a lot has been done. Sadly, most of it has been useless or outright harmful. The hours put into financial reform should not be our measure of success, but rather the effectiveness of those reforms and their actual relationship to the causes of the financial crisis. By this measure, it is clear that the Dodd-Frank Act went off track. The Act’s 16 titles and hundreds of pages bear little resemblance to the actual drivers of the crisis.

The narrative behind Dodd-Frank goes like this: predatory mortgage lending drove defaults, which crashed house prices (undermining the value of mortgage- backed securities), which ultimately triggered a run outside the commercial banking system (in entities like Lehman or the money market mutual funds), which caused panic because regulators lacked the tools to resolve these non-banks in the same fashion as banks.

The problem is that this narrative has more holes than Swiss cheese. First, the change in house prices preceded defaults. So unless mortgage defaults caused some Star Trek-style backward ripple in time, it should be clear that the driver of defaults was the decline in house prices.

This decline followed the inevitable increase in interest rates by the Federal Reserve in reaction to a heating economy. Rate changes directly impact housing prices by impacting both affordability and the discounting applied to valuing any asset.

So what did tip America’s economy into crisis? A property bubble. The bubble was driven by loose credit, which burst when credit tightened, and resulted in a market finally out of buyers willing to believe that house prices only go up.

If the problem was a bubble, what has been done to avoid another one? Essentially nothing. In fact, watching the Federal Reserve, it would be easy to conclude it is trying to create new bubbles.

Bubbles rarely occur in markets without some restrictions on supply. That is why the housing boom was concentrated in California, which had significant regulatory barriers to quickly increasing new housing supply. Florida, Arizona and Nevada had similar regulatory obstacles. These regulatory wedges between demand and supply …read more

Source: OP-EDS