You are browsing the archive for 2013 October 15.

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“We All Know Who Janet Yellen Is . . .”

October 15, 2013 in Economics

By Joseph Salerno

“. . . and That’s Terrifying,” writes Brendan Brown in the title of his recent Forbes op ed. According to Brown, Yellen is simply another in the line of deflationphobes and monetary authoritarians who have run the Fed in the last 20 years and are eager to please their political masters. Yellen’s choice as Fed chair thus presages an agonizing era of asset bubbles and crashes, stagnant recoveries, and an age of 1970s-style galloping inflation. Brown eloquently makes the case:

A doctrine of monetary authoritarianism has emerged through the past two decades which features the targeting of inflation (at 2% p.a.), a deep phobia of deflation, the systematic denial of asset price inflation and its monetary origins, an embracing of regulation as a key tool of macro-economic management and so-called prudential control, and the legitimization of currency warfare (by the US).

The doctrine is deeply flawed.  Its pursuance has produced violent cycles of asset price inflation and deflation including the greatest financial panic and greatest recession in modern times and now the weakest economic recovery ever from great recession.  Ahead looms the probability of a 1937-style crash and recession.  And beyond that there is the specter of another age of high inflation. . . .

And so it is with the doctrine of monetary authoritarianism which pervades the Federal Reserve and is fully endorsed by its present political master, the Obama Administration.  There are no grounds at all to imagine that the new nominated chief, Professor Yellen, will demonstrate any flexibility in applying the doctrine let alone experiencing a “road to Damascus” moment in which she doubts its validity.

So what drama can we expect in the theatre of the Yellen Fed?

Most likely it will open with some economic disappointment.  The US economy may well enter one of its frequent growth cycle lulls (indeed it may already have done so).  She will postpone QE tapering – indeed postponement could become indefinite.  No doubt one element in the decision of the White House to nominate her was the belief that she could engineer a powerful growth cycle upturn ahead of the crucial mid-term Congressional elections (November 2014).

…read more

Source: MISES INSTITUTE

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Debt Limit Talks in Limbo After Senate Deal Collapses

October 15, 2013 in Blogs

By Dan Roberts, Paul Lewis, The Guardian

Democrats accuse hardline Republicans of sabotaging bipartisan deal after negotiations to raise debt ceiling left in limbo.


 

A fragile deal to end the US budget crisis collapsed on Tuesday when Democrats accused conservative Republicans of sabotaging the bipartisan proposals less than two days before the country's borrowing authority expires.

A proposal by a group of Democrats and moderate Republicans in the Senate fizzled when GOP leaders in the House of Representatives failed to get their rank-and-file members to back a revised version.

But just as the embattled House GOP leadership attempted to muster support for a deal by adding new clauses picking away at Barack Obama's healthcare reforms, it was rejected by Democrats. “It can't pass the Senate and won't pass the Senate,” said Harry Reid, the majority leader.

The latest tussle began when House Republicans met at 9am to consider a deal reached on Monday between Senate leaders that would have extended the debt limit and authorised government spending with only one token concession over healthcare.

Speaker John Boehner floated an alternative that, in addition, would delay a new tax on medical devices designed to help pay for Obamacare and deprive lawmakers of any personal health insurance subsidies.

That succeeded only in inflaming conservatives in his own party, who regard both House and Senate compromises as surrender, and Democrats, who accused Boehner of introducing unacceptable new “ransom demands”.

House Republican leaders emerged from their bruising encounter with conservatives without announcing whether they would even try to stage a vote on their new proposal. “There is no decision about what exactly we will do,” Boehner told reporters. “We are talking with our members and both sides of aisle to try to find a way forward today.”

It was not clear if Boehner's proposals, which were strongly opposed by the White House and Senate Democrats, even carried the support of conservative members of his own party. The Republican House meeting began with a rendition of the Christian hymn Amazing Grace, but quickly descended into lively, and at times fiery, debates, according to …read more

Source: ALTERNET

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Bruce Bartlett’s Nutty Government Default Hysteria: Here’s Another Economist for His Hit List

October 15, 2013 in Economics

By Joseph Salerno

In a remarkably rambling article, minor Beltway pundit and dabbler in economics, Bruce Bartlett (M.A. History, Rutgers University) has taken to listing and trying to smear real scholars in economics who do not share his hysterical government default-phobia. Well, I have another eminent economist who may be a candidate for his hit list.

Ohio State economist J. Huston McCulloch actually challenges the conventional wisdom that the U.S. government has never, ever defaulted on its debts. McCulloch points out that the U.S. did indeed default on its debt in 1861 and again in 1933.  In 1861, the U.S. Treasury issued “United States Notes” to aid in financing the Civil War. These Treasury notes, known colloquially as “Greenbacks,” promised to pay the  bearer in “lawful money,” gold or silver at the government ‘s discretion, on demand. At the end of 1861, however, the government renounced its promise and suspended redemption as of January 1, 1862, putting it technically in default until 1879 when the notes were again made redeemable in gold. In 1933, President Roosevelt reneged on the promise to pay the interest and principal on Treasury bonds in gold at the rate of $20.67 per ounce, which once again put the government in technical default. In 1935, the right to redeem the bonds in gold was restored to foreign bondholders only, but at the depreciated rate of $35.00 per ounce, an option which was never offered to U.S. bondholders.

More important, the whole notion that an honest and explicit debt default by the U.S. government is an unprecedented event and the worst possible outcome in the current situation is ludicrous given that the U.S. has been continually and surreptitiously defaulting on its debt since World War 2 via inflationary finance. As McCulloch argues:

Governments often effectively default on their debts through inflation. Under a fiat money regime, they can always print enough legal tender money to pay off their debts. The only catch is that the money will not be worth as much as it was before. If it tries to cover too much deficit spending in this manner, more than a few percent of GDP, the inevitable result is hyperinflation in which money quickly becomes virtually worthless.

Disastrous though an explicit Treasury default would be, bringing down the entire economy with a hyperinflation or even a partial inflationary default would be even worse. But if we keep charging current deficits to future taxpayers at our current …read more

Source: MISES INSTITUTE

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Foreign Policy Op-Ed: Peace Through Strength

October 15, 2013 in Politics & Elections

Peace through strength. It’s a philosophy that guided the United States to victory in the Cold War and a policy that protected us from the calamity of nuclear war. But in the heated debate over Syria, our commitment to this approach has wavered — and it’s time we reasserted its prominence.
Some say that America’s credibility was threatened when President Barack Obama drew a red line on the use of chemical weapons and then allowed the Syrians to cross it without repercussions. We couldn’t disagree more — that would be a profound misreading of Obama’s response to the Syrian civil war. Our nation’s democratic principles give priority to the voice of individual liberties and freedoms. We will defend them with all of our nation’s might. We will not allow any nation or group to terrorize the free world — now or ever.
But foreign policy can often be a jumble of contradictions. Global enemies of the last decade can be our allies in today’s conflicts. Our friends could be our enemies tomorrow. As a result, we need to evaluate each foreign policy situation on its own merits and be open to new ideas — new approaches to resolve old conflicts.
The world is changing quickly. Americans are now targets in Kenya. The great civilizations of the last millennium are descending into chaos. Christians are being attacked in Syria and Pakistan. Jews are being attacked in European cities, and Israelis now don gas masks in preparation of the regionalization of the Syrian conflict.
As the same time, we’ve also seen rapid diplomatic developments in the war in Syria that show the power of blending our military might with aggressive diplomacy. We should seek to repeat this elsewhere — and it should start with Iran.
As Western nations sit down with Iran this week in Geneva, we should vigorously support efforts to negotiate a diplomatic solution that ensures Iran has no nuclear weapon capability and that it does not share its technology with other nations. We should also maintain — and even strengthen — the sanctions that have helped to bring Iran back to the negotiation table. And yes, we should keep all options on the table to ensure that Iran is not just stalling for time, but truly being transparent about its technology and its intentions.
The world should be on notice: the United States will act with overwhelming force if it is attacked — or …read more

Source: RAND PAUL

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The Religious Right Is a Fraud — There's Nothing Christian About Michele Bachmann’s Values

October 15, 2013 in Blogs

By Elizabeth Stoker, Matt Bruenig, Salon

The American right obsesses over abortion and birth control, not helping people. It's different around the globe.


 

Last week, the nation’s capital was host to Value Voters 2013 Summit, a three-day political conference for predominantly religious conservatives. Among the smattering of social and economic issues at hand, the overall tenor of the Summit focused on eliminating Obamacare, expanding the tangible presence of Christianity through the public arena and military and preventing the proliferation of easily available birth control and abortion. In speeches, lunches and breakout sessions, American’s Christian Right worked out strategies to bring the values of the federal government in line with their preferred Christian ethical dictates, using democracy as their chief tool.

It isn’t unusual for Christians living in democracies to use the vote to express their ethics, and to shape government to do the same. That the moral and ethical preferences of a given society should inform government is a foundational principle of democracy, after all. And American values voters are far from the first Christians to undertake the project of bringing their government’s policies in line with Christian ethics: European Christian parties have aimed to do the same for decades. But between American Christian voters and their European counterparts, a curious departure opens up: while European Christians generally see the anti-poverty mission of Christianity as worthy of political action, the American Christian Right inexplicably cordons off economics from the realm of Christian influence.

By all means, the American Christian Right is willing to leverage government authority to carry out a variety of Christian ethical projects, especially within the arena of family life. Michele Bachmann would make abortion illegal, and Rick Santorum has stated on multiple occasions that he supports laws against homosexual intercourse. But Christian politicians in the United States curtail their interest in making the gospel actionable when it comes to welfare. While the government should see to the moral uprightness of marriage, sex and family, the Value Voters 2013 Summit was notably bereft of talks on living wages, labor rights or basic incomes.

The notable exclusion of poverty from the Christian agenda would doubtlessly …read more

Source: ALTERNET

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A Mises Institute Guide to Nobel Winners Fama and Shiller

October 15, 2013 in Economics

By Mises Updates

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Not surprisingly, the work of this week’s new Nobel prize winners have been the subject of several critiques here at the Mises Institute:

Today’s Mises Daily article on Robert Shiller’s pro-government enthusiasm is a simplified version of Howden’s book review from The Quarterly Journal of Austrian Economics.

Howden’s new summary and critique of the work of Fama and Shiller is now here in Circle Bastiat.

Mark Thornton’s new Mises View video from yesterday briefly discusses the economics of the new laureates.

In 2010, Robert Murphy examined Eugene Fama in detail here.

In 2009, Howden wrote a full-length academic article on Fama’s Efficient Market Hypothesis here. 

Also in 2009, Philipp Bagus and David Howden reviewed Shiller’s book The Subprime Solution. 

 Photo credit. 

…read more

Source: MISES INSTITUTE

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Will Regulations Sink EU-U.S. Free Trade?

October 15, 2013 in Economics

By Simon Lester, Inu Barbee

Simon Lester and Inu Barbee

Trade negotiations are not what they used to be. The advent of ‘twenty-first century’ or ‘comprehensive’ trade agreements, whose scope reaches far beyond the traditional topics of tariff reductions and market access, have opened up discussions in a number of areas that used to be the exclusive realm of domestic policy. One area in which trade agreements have expanded is in addressing so-called ‘beyond the border’ issues such as regulatory trade barriers. In the Transatlantic Trade and Investment Partnership (TTIP) talks, the trade effects of domestic regulation have been emphasized as an area of great potential economic growth, with large figures being thrown around—some citing a 2.5 to 3 percent increase in GDP from the total elimination of regulatory trade barriers. But this early enthusiasm for resolving these long-standing barriers to trade masks a fundamental problem that is emerging: The United States and the European Union are at odds over the nature of regulatory trade barriers and how to address them.

For the United States, the focus seems to be on applying its domestic regulatory reform efforts on a global basis. On his latest trip to Europe, U.S. Trade Representative Michael Froman extolled the virtues of the U.S. approach to regulating, and urged the EU to take into account the principles of “transparency,” “participation,” and “accountability.” He noted that the U.S. process promotes these principles by providing: “advance notice of specific regulatory measures” (transparency); “meaningful opportunities for input from a broad range of stakeholders” (participation); and “responses to that input” (accountability).

The United States and the European Union are at odds over the nature of regulatory trade barriers and how to address them.”

His emphasis on these features reflects U.S. criticism of the EU regulatory process, in particular the EU’s system of issuing general papers for comment prior to proposing actual rules, without allowing comments on the text of the regulation itself. The clear implication of Froman’s remarks, made in Brussels before an audience of trade officials, is that, from the U.S. perspective, the EU should reform its regulatory process to take these principles into account.

The EU, by contrast, does not see domestic regulatory reform as the central issue in the elimination of transatlantic regulatory trade barriers. Furthermore, the EU does not view national discrepancies in the rulemaking process as a problem for cooperation more generally, and has also argued that the EU …read more

Source: OP-EDS

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Cops Plotting Bizarre Gay Sex Sting Terrorize Disabled Child and Brutalize His Caretaker

October 15, 2013 in Blogs

By Alex Kane, AlterNet

A sex sting goes terribly awry.


A sex sting went terribly wrong in Southern California, and now the victims of zealous police are suing, the Courthouse News Service’s Matt Reynolds reports. The suit concerns an incident where Manhattan Beach police arrested a disabled child’s caregiver while they were cracking down on gay sex in public rest rooms.

Charles Couch has filed a lawsuit in federal court against the police and the city of Manhattan Beach, and his photo was plastered over the Internet in news reports about the sting, which netted 18 people.

On March 9, 2012, Couch was caring for a disabled child. The child has a genetic disorder– Prader-Willi Syndrome–whose symptoms include mental retardation and arrested sexual development. He took the child to the bathroom at a beach restroom.

It takes longer than usual for people with the genetic disorder to go to the bathroom, Couch said, and so he waited for the child to finish. Then, a detective named John Nasori entered the stall and frightened the child. “A few minutes later the child bolted from the stall, rushed up to plaintiff and whispered, 'There is a man looking at me in the stall!'” the lawsuit states.

Nasori allegedly chased them out of the bathroom, and then Couch was met by four other plainclothes detectives. Couch was afraid they wanted to kidnap the child. But the detectives went for Couch, and allegedly tackled, choked and handcuffed him. The cops accused him of “being sexually interested in other men, and asked if he would take his own little brother to a party to get 'laid.’” The police also allegedly went through his car and took his laptop to see if there was child porn on there. Couch was released without being charged after the child’s parents called and said that the child had a disorder.

But that wasn’t the end of Couch’s woes. A month later, his photo was published on a news website stating that he was one of the men arrested in the sex sting. And …read more

Source: ALTERNET

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3 Ways Regular Americans Will Be Hurt by a Debt Ceiling Default

October 15, 2013 in Blogs

By Adam Levin, Huffington Post

From credit cards to mortgages, pain will be felt across the country.


Many Americans this week may be asking themselves: Why should I care about the debt ceiling, or the — barring Congressional action — coming default? You've heard about it in the news but, much like the sequester or the shutdown, you're not quite sure how it'll affect your daily life.

Put simply, unlike corporate tax cuts, a debt ceiling default will have a trickle-down effect that will affect your wallet in one way or another.

The debt ceiling is a limit, set by Congress, for how much the U.S. Treasury is allowed to borrow to pay our country's bills — which are racked up by Congress. In your household, if you want to buy something for which you don't have the money on hand, you might ask a bank to loan you the money or use a credit card and pay the debt off later. Banks and credit card companies decide how much credit to extend to their customers — but, on the global market, countries, banks and individual and institutional investors decide how much money to lend a country by buying bonds.

One of the current stalemates in Congress is whether to allow the government to borrow more to pay the bills for which Congress already spent the money. And while you can stick a microphone in front of any one of a number of conservative Republicans — from Rep. Steve King (R-IA) to Rep. Ted Yoho (R-FL) to Rep. Dave Schweikert (R-AZ) to Rep. Mo Brooks — and have them reassure Americans (some of whom are already missing paychecks or veterans benefits because of the shutdown) that the debt ceiling default will have no effect, the truth of the matter is that economists all know this is a bad thing for the country and for regular Americans.

So while you might only be inconvenienced by the government shutdown, the debt default could have a serious impact on your personal bottom line, just in time for the holidays. Obviously, any account on which …read more

Source: ALTERNET

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The National Security Agency is Sweeping Up Your E-Mail Address Books

October 15, 2013 in Blogs

By Alex Kane, AlterNet

The latest documents from Edward Snowden reveal that the NSA is harvesting hundreds of millions of e-mail and instant messaging contacts.


The National Security Agency (NSA) isn’t limiting itself to the bulk collection of Americans’ phone metadata. The latest information from documents leaked by Edward Snowden reveal that the secretive intelligence agency is collecting and holding hundreds of millions of e-mail and instant messaging contacts, the Washington Post reports.

The NSA is doing this with no oversight, and no approval from the Foreign Intelligence Surveillance Court. Foreign intelligence collection is done under executive authority, meaning that the Congressional intelligence committees know little about the program. Data from Americans’ e-mail address books are being swept up in the dragnet, but the federal surveillance court does not need to approve the collection because the access points are all over the world, instead of U.S.-based. Data from instant messaging “buddy lists” is also being swept up.

The number of e-mail address books and instant messaging contacts being harvested is staggering. “During a single day last year, the NSA’s Special Source Operations branch collected 444,743 e-mail address books from Yahoo, 105,068 from Hotmail, 82,857 from Facebook, 33,697 from Gmail and 22,881 from unspecified other providers, according to an internal NSA PowerPoint presentation,” the Post’s Barton Gellman and Ashkan Soltani report. “Those figures, described as a typical daily intake in the document, correspond to a rate of more than 250 million a year. The agency is able to do so because of arrangements with foreign telecommunications companies and allied intelligence agencies.

This NSA program can reveal a lot about Americans. Address books can include telephone numbers, street addresses and family and business information. And the program can also collect the first few lines of the content of e-mails in inboxes. The Post reports that, “the data would enable the NSA, if permitted, to draw detailed maps of a person’s life, as told by personal, professional, political and religious connections.” But that information could also be misleading by “creating false ‘associations’ with ex-spouses …read more

Source: ALTERNET