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VIDEO: Napolitano, Higgs, Block, and More Discuss the Mises Institute

November 30, 2013 in Economics

By Mises Updates

Donate today at http://Mises.org/2014. More students need that “aha” moment, and your year-end gift to the Mises Institute can help deliver it. There are so many ways to help: a single gift, a convenient monthly credit-card charge, your company’s matching gift, a donation of appreciated securities, or including the Mises Institute in your Will. Even gold and Bitcoin! Your generosity now will lead to future generations of freedom leaders.

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Treasury Department’s Regulatory Overreach Expands

November 29, 2013 in Economics

By Louise C. Bennetts

Louise C. Bennetts

The Treasury Department’s Financial Stability Oversight Council (FSOC), having cast its regulatory shadow over the insurance industry, is now turning its sights on investment advisers.

At a time when we are trying to avoid creating the perception that certain large financial organizations are underwritten by the U.S. taxpayer, it seems foolhardy to label even more firms “systemic,” a euphemism for “too big to fail” (TBTF). Especially when there is no evidence that they operate in industries that are even remotely likely to create widespread problems for the financial system.

Insurance companies and investment firms now in their crosshairs.”

First, it is helpful to outline what makes banks “systemic,” and why other types of financial companies are different. In other words, why are banks prone to creating problems in the real economy if they fail en masse? The answer is: Banks borrow short and lend long, making them vulnerable to liquidity problems. Even a solvent bank can run into trouble if its depositors or other short-term creditors panic. This phenomenon is true of both traditional commercial and investment banks.

Commercial banks are largely deposit-funded and therefore prone to runs by retail depositors. Similarly, investment banks — which in the U.S. are not eligible to take or use insured deposits — fund themselves, using short-term sources such as overnight commercial paper or repurchase agreements.

Banks are the mechanism by which money flows through the economy, meaning that the failure of a large number of banks is likely to result in a sudden contraction in the money supply. Indeed, the problems in 2008 manifested initially through a run on the short-term funding used by investment banks and some commercial banks.

For this reason, banks are subject to special treatment by regulators. While it is not clear that this treatment has yielded better results, there is at least some logic to it.

But there is no logic in applying this regulatory attention to industries and firms that do not operate with a “maturity mismatch,” that is, borrowing short and lending long. Indeed, one of the most worrisome aspects of the Dodd-Frank Act has been the extension of bank-like supervision to other types of financial institutions.

As noted, Dodd-Frank gave the FSOC, an arm of the Treasury, the power to label nonbank financial companies — any company predominantly involved in finance — as “systemic.” But determining what makes a company a “systemically important financial institution” has turned out to be rather difficult.

Dodd-Frank …read more

Source: OP-EDS

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Ire Directed at Germany Is Not Just nitpicking

November 29, 2013 in Economics

By Steve H. Hanke

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Steve H. Hanke

Well, it’s official, the economic talking head establishment has declared war on Germany. The opening shots in this battle were fired by none other than the US Treasury Department, which had the audacity to blame Germany for a weak Eurozone recovery in its semi-annual foreign exchange report.

Despite Germany’s relatively strong recovery, the international economic establishment is none too happy about the country’s tight fiscal ship.”

The Treasury’s criticisms were echoed by IMF’s first deputy managing director David Lipton, in a recent speech in Berlin — a speech so incendiary that the IMF opted to post the “original draft” rather than his actual comments, on its website. Things were kicked into a full blitzkrieg when Paul Krugman penned his latest German-bashing New York Times column.

The claims being levelled against Germany revolve around nebulous terms like “imbalances” and “deflationary biases.” But, what’s really going on here?

The primary complaint being levelled is that Germany’s exports are too strong, and domestic consumption is too weak. In short, the country is producing more than it consumes. Critics argue that “excess” German exports are making it harder for other countries (including the US) to recover in the aftermath of the financial crisis.

While a review of international trade statistics is all well and good, the ire against Germany actually comes down to one thing: austerity. Despite Germany’s relatively strong recovery, the international economic establishment is none too happy about the country’s tight fiscal ship.

If only Germany would crank up government spending, then Germans would buy more goods, and all would be right in the Eurozone, and around the world — the argument goes.

Yes, the anti-austerity crowd has found a convenient way to both slam austerity and scapegoat one of the few countries to successfully rebound from the crisis. I would add that it is hardly a coincidence that this line of argument fits nicely into the fiscalist message of Germany’s Social Democratic party, with whom Chancellor Angela Merkel is currently trying to arrange a governing coalition.

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In recent years, the fiscalist crowd has advanced the one-dimensional argument that fiscal stimulus is the only way to save struggling economies in the wake of the crisis. This follows the standard Keynesian line: to stimulate the economy, expand the government’s deficit (or shrink its surplus); and to rein in an overheated economy, shrink the government’s deficit (or …read more

Source: OP-EDS

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The Capitalist Hero in Fiction and Film

November 28, 2013 in Economics

By Mises Updates

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Edward Younkins has recently published Exploring Capitalist fiction: Business Through Literature and Film

Younkins’ new book examines the themes, plots, and conflicts in more than 20 novels, films and plays, and discusses the role of capitalism within each. According to Younkins’ introduction:

The use of works of imaginative literature to portray and explain the behavior of individuals in business is arguably a method that is richer and more realistic than what is presented in journal articles, textbooks, and even cases. Literature and films allow the asking of more complex questions than case studies do. Business cases can be complex, but not to the same extent as multifaceted novels, plays, and films. People can learn as much, if not more, about the nature and culture of business and effective management as from lectures, books, case studies, and so on.

Fiction provides a powerful teaching tool to sensitize business students without business experience and to educate and train managers in real businesses. Studying business literature and films can prepare students for future situations that they have not encountered before when they enter the workplace. Many works of imaginative fiction present ethical dilemmas that Introduction 3 young professionals may potentially encounter at some point in their careers.

Literary works and movies can play a significant role both in college classrooms and in management development programs. Not only is business fiction interactive, it portrays a more complete and more human picture of the business world than what is communicated through traditional teaching materials. Fiction brings values to life and is also useful i bridging the gap between theory and practice.

The overall literary and cinematic treatment accorded capitalism, business, and businessmen has been unkind, hostile, and unflattering over the years. The commercial world has received bad press at the hands of many novelists, playwrights, and filmmakers. Fortunately, there are also a number of sympathetic business portraits that depict commerce in a more favorable, even heroic, image. Viable capitalist heroes have appeared in a number of works that emphasize the virtues, positive traits, and accomplishments of businessmen. Some feature brilliant, thoughtful, and dauntless business leaders and employees, including King Vidor’s 1944 film An American Romance, William Dea Howells’ The Rise of Silas Lapham, and Cameron Hawley’s Cash McCall.

Other examples include of course Garet Garrett’s The Driver, Ayn Rand’s Atlas Shrugged, and Henry Hazlitt’s Time Will Run Back.

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Source: MISES INSTITUTE

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Giving Thanks for the State’s Imperialistic Wars

November 28, 2013 in Economics

By Thomas DiLorenzo

That was the purpose of Lincoln’s nationalization of “Thanksgiving,” which started out as a celebration by the Pilgrims of productivity and life, and later as a proclamation by George Washington to celebrate the ratification of the Constitution.  That’s why we have such spectacles today as Jay Leno’s “all military audience” tonight, and what will surely be a grotesque display of warmongering and imperialism with gigantic flags, mass singing of the national war anthem, and fighter jet fly-overs during the Thanksgiving day and night NFL games.

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Source: MISES INSTITUTE

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China's Meager Typhoon Relief Aid: Is Beijing Sending a Geopolitical Message?

November 28, 2013 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

While nations in the international community, especially Japan, Australia, and the United States, rushed to provide generous relief aid to the Philippines in the aftermath of devastating Typhoon Haiyan, China’s response has been noticeably different. Beijing initially offered a paltry $100,000 in aid funds, and only with apparent reluctance eventually upped that total to a still very modest $1.6 million. That parsimonious conduct produced widespread condemnation, both in East Asia and around the world.

We may have underestimated just how seriously Chinese officials regard their country’s territorial claims.”

It also led to considerable speculation about why Chinese officials would risk such a public relations debacle. Some experts contended that the response underscored decision making and logistical deficiencies in China’s political system. They argued that China’s military, for example, was simply incapable of delivering aid quickly and efficiently the way the U.S. military was already doing in the Philippines—and had done in previous natural disasters, such as the tsunami that devastated Indonesia and other countries in 2010. Retired Admiral Timothy Keating, former head of the U.S. Pacific Command, told the Financial Times that “they just don’t have the hardware, the equipment, the training that the U.S., Australia, Japan and Thailand have.” Ian Storey, a regional expert at the Institute of Southeast Asian Studies in Singapore, offered a slightly more favorable assessment, noting that China has substantially increased its disaster relief logistical capability over the past decade. However, “at present it is not even close to matching the capabilities of the United States.”

Other experts, though, noted that such logistical limitations did not explain the failure to be far more generous with cash assistance. That behavior, they contended, indicated that the Chinese regime was utterly callous to the fate of other people. China, such critics concluded, cared only about itself and its narrow national interests. Writing in the National Interest Online, Walter Lohman, director of Asian Studies at the conservative Heritage Foundation in Washington, stated bluntly that China’s interest “is not in becoming a contributing stake holder, along with the U.S. and its allies, in maintaining a liberal, equitable, peaceful regional order.” Indeed, China’s version appears to leave “no room for basic human decency.”

Such explanations may have some partial validity, but there is another thesis that likely has greater explanatory power. Beijing’s relations with Manila have been quite tense in recent years, primarily because of competing territorial claims in the …read more

Source: OP-EDS

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Mises Explains The Santa Claus Principle

November 27, 2013 in Economics

By Mises Updates

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Beginning on Sunday, December 1, Thomas DiLorenzo will be teaching “Santa Claus Economics: An Austrian Analysis of the Welfare State” at Mises Academy. This four-week online lecture course will cover the origins, effects, and myths of the welfare state. Readings include works by Murray Rothbard, Ludwig von Mises, Robert Higgs, George Reisman, Charles Murray, Ludwig Erhard, and Per Bylund, among others.

The Exhaustion of the Reserve Fund

From Human Action, Chapter XXXVI

by Ludwig von Mises

The idea underlying all interventionist policies is that the higher income and wealth of the more affluent part of the population is a fund which can be freely used for the improvement of the conditions of the less prosperous. The essence of the interventionist policy is to take from one group to give to another. It is confiscation and distribution. Every measure is ultimately justified by declaring that it is fair to curb the rich for the benefit of the poor.

In the field of public finance progressive taxation of incomes and estates is the most characteristic manifestation of this doctrine. Tax the rich and spend the revenue for the improvement of the condition of the poor, is the principle of contemporary budgets. In the field of industrial relations shortening the hours of work, raising wages, and a thousand other measures are recommended under the assumption that they favor the employee and burden the employer. Every issue of government and community affairs is dealt with exclusively from the point of view of this principle.

An illustrative example is provided by the methods applied in the operation of nationalized and municipalized enterprises. These enterprises very often result in financial failure; their accounts regularly show losses burdening the state or the city treasury. It is of no use to investigate whether the deficits are due to the notorious inefficiency of the public conduct of business enterprises or, at least partly, to the inadequacy of the prices at which the commodities or services are sold to the customers. What matters more is the fact that the taxpayers must cover these deficits. The interventionists fully approve of this arrangement. They passionately reject the two other possible solutions: selling the enterprises to private entrepreneurs or raising the prices charged to the customers to such a height that no further deficit remains. The first of these proposals is in their eyes manifestly reactionary because the inevitable trend of history is toward more and more socialization. The …read more

Source: MISES INSTITUTE

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Daniel McAdams Examines the Prospects for Peace on Iran

November 27, 2013 in Economics

By Ryan McMaken

Daniel McAdams, executive director of the Ron Paul Institute, and author of this piece on the Libya War at Mises Daily, injects some sound analysis into the debate at RT TV.

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Source: MISES INSTITUTE

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Bitcoin over $1000

November 27, 2013 in Economics

By Mark Thornton

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I was interviewed today on RT TV about Bitcoin and the reasons it has soared in price to over $1000 per Bitcoin. It is both greater acceptance by vendors and governments as well as the world wide currency war and worry of war in the Middle East, especially in Iran which is in a hyperinflation that is driving the price higher.

The Mises Institute can take donations in Bitcoin and you can also make purchases in our bookstore with Bitcoin.

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Source: MISES INSTITUTE

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Save the Sequester

November 27, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

Don’t look now, but we are just 16 days away from the December 13 deadline for House and Senate budget negotiators to reach an agreement on a 2014 budget and avoid another potential government shutdown.

Okay, December 13 is less a deadline than a suggestion. The current continuing resolution (CR), the product of October’s government shutdown, doesn’t actually expire until January 15, giving Congress an additional month to come to an agreement. But the December 13 date is still important, because the House is scheduled to recess from the 13th until January 7, with the Senate getting back one day earlier, leaving little time for the expected last-minute maneuvering.

So far, the negotiations appear to be dominated by what won’t be considered. House Budget Committee chairman Paul Ryan had suggested a willingness to trade some loosening of the sequester’s short-term spending caps in exchange for long-term entitlement reforms. But Senate Majority Leader Harry Reid rejected that idea out of hand, calling it “a stupid trade.” Reid says he is not interested in taking up Medicare reform at this time, and he claims there is no need for Social Security reform. “The program is not about to go broke,” Reid says, “so take it easy on Social Security.”

Republicans, of course, are not willing to accept additional tax increases on top of the $620 billion included in last December’s fiscal-cliff deal and the more than $1 trillion included in Obamacare over the next ten years, although rumors persist that the GOP may accept some other revenue increases, such as a hike in airport security fees. More disappointingly, House Speaker John Boehner has reportedly rejected any cuts in agricultural subsidies as part of any budget deal.

In the absence of a larger agreement, House Republicans may push for another short-term CR, funding the government probably through April 15. If that CR holds spending to levels agreed to under the sequester, that would be a small but valuable step forward, reducing government discretionary spending by $21 billion from the funding level in 2013. Nondefense discretionary spending would remain largely untouched, and could actually increase slightly, from $468 billion to $469 billion, while defense spending would be cut from $518 billion to $498 billion, roughly the level of defense spending in 2008, not including spending for overseas operations such as the wars in Iraq and Afghanistan.

But as December 13 gets closer, expect to hear howls of anguish — and …read more

Source: OP-EDS