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Mises Explains the Drug War

October 21, 2013 in Economics

By Mises Updates


Mises Daily Monday: Laurence Vance explores Ludwig von Mises’s views on drug use, its illegality, and the problem of regulating what we eat, drink, and smoke.

When it comes to bad habits, vices, and immoral behavior of others, in contrast to the state, which does everything by “compulsion and the application of force,” Mises considered tolerance and persuasion to be the rules.

“A free man must be able to endure it when his fellow men act and live otherwise than he considers proper,” Mises explains. “He must free himself from the habit, just as soon as something does not please him, of calling for the police.”

…read more


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Five Lessons from the Shutdown

October 21, 2013 in Economics

By Daniel J. Mitchell

Daniel J. Mitchell

Greece is now suffering through a very deep recession, with record unemployment and unimaginably harsh economic conditions. To make matters worse, there’s not much light at the end of the tunnel.

The debt burden is larger today than when the crisis started, notwithstanding years of austerity. Or, since politicians have imposed enormous tax hikes, perhaps it would be more accurate to say that the crisis has deepened in part because of the wrong kind of austerity. Regardless, what matters now is that Greece is on life support by international aid and with little hope for the future.

Now ask yourself a rhetorical question. Wouldn’t it have been preferable if there was some sort of mechanism, say, fifteen years ago that would have enabled some lawmakers to throw sand in the gears so that the government couldn’t issue any more debt?

The small-government advocates need to sit down over the next month or so and agree on a common strategy.”

With our keen powers of hindsight, don’t we wish that there was something akin to a Greek Tea Party that might have forced a reevaluation of entitlement programs and imposed some sort of cap on spending?

Yes, there would have been some budgetary turmoil at the time, but it would have been trivial compared to the misery the Greek people currently are enduring. The IMF and European Commission doubtlessly would have been aghast at the “hard-hearted” and “draconian” approach of the budget cutters, but nothing could be more hard-hearted and draconian than Greece’s current recession.

That, in a nutshell, explains why some reformers in Washington launched an uphill battle in hopes of at least temporarily delaying or defunding Obamacare.

Budget wonks know that America faces a very grim fiscal future because of poorly designed entitlement programs combined with unfavorable demographic changes. Unfortunately, recent presidents have worsened this problem. President George W. Bush saddled the nation with a new prescription-drug entitlement and President Obama imposed the so-called Affordable Care Act.

But the Tea Party-oriented lawmakers who wanted to block Obamacare before people began to get hooked on subsidies were unable to prevail: we have a deal and the wailing and hysteria in Washington is over. The politicians now have the authority to borrow more money and the bureaucrats are all back at work (rested and refreshed after their paid vacation, so they’ll probably tax, spend and regulate with extra fervor).

So what can …read more

Source: OP-EDS

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Four Ways to Defund Obamacare

October 21, 2013 in Economics

The focus for many Obamacare opponents has shifted to the website glitches plaguing, prompting President Obama to speak Monday on the steps his administration has taken to fix those glitches. However, Cato scholar Michael F. Cannon has suggested that there are additional steps that opponents should be taking to defund the ACA.

…read more


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Terrorism Insurance: The Time Has Passed on This Idea

October 21, 2013 in Economics

By Mark A. Calabria

Mark A. Calabria

In the wake of the Sept. 11, 2001, attacks, Congress enacted the Terrorism Risk Insurance Act in 2002. I remember both well, having served as staff on the Senate Banking Committee during that time. I also remember the industry promise that TRIA would be a temporary program, not another endless piece of corporate welfare.

It’s time for that promise to be honored and for TRIA to be allowed to expire.

TRIA does nothing to lower the costs of terrorism. It simply shifts the cost from property owners and insurance companies to the taxpayer. Given the fiscal mess our federal government is in, it should be abundantly clear that the private sector can far better manage this risk than could the taxpayer.

It shouldn’t be the role of government to favor one industry over another. ”

At worst, TRIA may actually increase the costs of a terrorist attack. By making available under-priced insurance, property owners and developers have a reduced incentive to construct and rehabilitate structures to better withstand a terrorist attack.

The Congressional Budget Office found that the existence of TRIA appears “to dampen the inclination of firms to relocate their operations away from high-risk areas.” These increased potential property losses, due to TRIA’s perverse incentives, do not account for the increased potential for loss of life from encouraging individuals to remain working or living in high-risk areas.

Insurance is fundamentally about the pooling and sharing of risk. It is not, however, the only vehicle for doing so. This is especially true in the commercial real estate market, the sector most affected by TRIA.

The most likely physical targets of TRIA will be either public buildings or trophy commercial properties. In the case of public buildings, it would be cheaper for the public to directly backstop those properties, rather than rely on insurance. In the case of private commercial properties, a Real Estate Investment Trust structure provides a ready avenue for spreading the risk of losses that may result from terrorism.

And of course, most trophy commercial properties are owned by publicly traded corporations who by their very nature spread the risk to their shareholders.

The existence of TRIA does little more than privilege some forms of risk-pooling over others. It shouldn’t be the role of government to favor one industry over another.

It’s occasionally argued that we need TRIA because terrorism risk is “special” in that it’s often geographically concentrated, rare …read more

Source: OP-EDS

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Obama's Dangerous South China Sea Strategy

October 21, 2013 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

The Obama administration can’t seem to resist the temptation to meddle in the territorial disputes between China and its neighbors over islands (and probable underlying oil and gas riches) in the South China Sea. The latest incident began earlier this year when the Philippines filed an unprecedented arbitration case—over Beijing’s strenuous objections—regarding the issue with the United Nations’ Convention on the Law of the Sea. Instead of remaining quiet on the matter, as prudence would dictate, Secretary of State John Kerry ostentatiously weighed in at the East Asia Summit on October 10 in Brunei.

In remarks to leaders at the gathering, including Chinese Premier Li Keqiang, Kerry tacitly backed Manila’s arbitration ploy and its underlying territorial claim. “All claimants have a responsibility to clarify and align their claims with international law. They can engage in arbitration and other means of peaceful negotiations.” In a passage implicitly rebuking Beijing’s extraordinarily broad assertions of sovereign rights in the South China Sea, Kerry added that “freedom of navigation and overflight is a linchpin of security in the Pacific.”

Washington’s imprudent support for a weak treaty ally could ultimately embroil the United States in a nasty confrontation with an increasingly powerful China.”

This was hardly the first time that Washington has taken a stance that seemingly embodies an “anyone but China” attitude regarding the South China Sea controversy. During President Obama’s first term, Secretary of Defense Leon Panetta made remarks during a high-profile visit to Vietnam that appeared sympathetic to that country’s claims as well as a bid for bilateral strategic cooperation.

But it is the Obama administration’s support for Manila and its claims that is the most provocative. During a November 2011 East Asian economic summit in Bali, President Obama went out of his way to emphasize the importance of the long-standing U.S. military alliance with the Philippines and pledged to strengthen those ties. Just a day earlier, Secretary of State Hillary Clinton struck the same theme during remarks in Manila, asserting that “the United States will always be in the corner of the Philippines and we will stand and fight with you.” That comment was combative enough in the abstract, but it became even more so when she juxtaposed it with comments about the South China Sea dispute elsewhere in her speech. “Any nation with a claim has the right to assert it,” Clinton stated, “but they …read more

Source: OP-EDS

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Instead of Confirming Jeh Johnson, Senate Should Abolish Homeland Security

October 21, 2013 in Economics

By Gene Healy

Gene Healy

More than three months after Department of Homeland Security Secretary Janet Napolitano announced her departure, President Obama finally nominated her replacement, former top Pentagon lawyer Jeh Johnson.

The Guardian’s Spencer Ackerman is cautiously optimistic about the nominee because the former DoD general counsel was often a voice of restraint in the administration’s national security debates.

Ackerman says Johnson’s selection “may signal a shift for an agency whose value is questioned by many in the U.S.” Johnson “could be an agent of change.”

The problems at DHS are far too deep to be solved with a dollop of restraint and better management practices.”

Meh. It’s true that Johnson has made some agreeable noises about the dangers of perpetual war; but he’s also a key legal architect of the administration’s drone wars and a defender of targeting American citizens abroad.

It’s unclear — at best he’d be a moderating influence at a department with an unhealthy interest in domestic drones.

More to the point, the problems at DHS are far too deep to be solved with a dollop of restraint and better management practices.

From its inception, the agency has operated as something akin to a federal Department of Dystopia, encouraging the proliferation of surveillance cameras, armed personnel carriers and police drones across Main Street America with some $35 billion in Homeland Security grants.

All of which suggests some possible questions for Johnson at his confirmation hearing:

Mr. Johnson, in a 2011 speech at the Heritage Foundation, you worried about “expecting the U.S. military to extend its powerful reach into areas traditionally reserved for civilian law enforcement in this country.”

Isn’t it equally troubling that with DHS’s help, local police departments “are arming themselves with military assets often reserved for war zones”?

That’s from a report by Sen. Tom Coburn last December, which notes that Fargo, N.D., a city that’s “averaged fewer than two homicides per year since 2005,” got a “new $256,643 armored truck, complete with a rotating [gun] turret,” while Montgomery County in Texas became the proud owner of a new $300,000 Vanguard ShadowHawk drone, courtesy of DHS.

Do you think such expenditures are wise or necessary — and if not, will you put an end to them?

Last year, Wired reported DHS’s interest in a drone-ready “Panopticamera” capable of total surveillance over up to four square miles and “automated, real-time, motion detection capability that cues a spotter Imager for target identification.”

If, as you told Heritage, we …read more

Source: OP-EDS

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Yellen, the Hawk?

October 21, 2013 in Economics

By Steve H. Hanke


Steve H. Hanke

Well, it’s official. President Obama has picked Janet Yellen as his nominee to be the next Federal Reserve Chairman. In the months leading up to this announcement, the press unanimously dubbed Yellen the Queen of the Doves, pointing to her reluctance to roll back the Fed’s Quantitative Easing program. As it turns out, however, Yellen is hardly the dove she is made out to be. Indeed, when it comes to money supply, Dr. Yellen seems, well, downright hawkish.

Traditionally, the dove label has referred to an emphasis on the Fed’s mandate to pursue full employment (even at the expense of slightly higher inflation), while the hawk label has referred to a focus on the Fed’s price stability mandate. In practice, however, the dove-hawk distinction typically comes down to a question of the money supply: to increase, or not to increase?

The United States, with Yellen’s blessing, has employed a loose state money/tight bank money monetary policy mix.”

First, we must define what measure of the money supply we are talking about. While it is true that the Fed has turned on the money pumps in the wake of the 2008 crisis, the Fed only directly controls what is known as state money, also known as the monetary base, which includes currency in circulation and bank reserves with the Fed. The vast majority of the money supply, properly measured, using a broad metric, is what is known as bank money. This is money produced by the private banking sector via deposit creation, and it includes liquid, money-like assets such as demand deposit and savings deposits.

The Fed has indeed been quite loose when it comes to state money, with the state money proportion of the total money supply increasing from 5% of the total before the crisis, to 20%today (see the accompanying chart).

Given Yellen’s support for continuing the Fed’s interest rate and easing policies, it would appear that, when it comes to state money, Yellen is indeed a dove. But, where does Yellen stand on the other 80% of the money supply? To answer this question, we must look not to her stance on monetary policy, per se, but rather on financial regulation.

For some time, I have warned that higher bank capital requirements, when imposed in the middle of an economics lump, are wrong-headed because they put a squeeze on the money supply and stifle economic growth. …read more

Source: OP-EDS