You are browsing the archive for 2013 November 26.

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Is the Norwegian Housing Bubble Popping?

November 26, 2013 in Economics

By Mark Thornton

Norway's Housing Bubble 2012

I have been talking about the Housing Bubble in Norway for a while and about one year ago I wrote an article here. The story was picked up in by a variety of publications including here. It turns out that the bubble has spread over the entire Nortic region.

It caused quite a stir in Norway and was reported on in the leading business publications of Norway here.

It now appears that they have entered the denial phase and that the Bubble maybe coming to an end.

…read more

Source: MISES INSTITUTE

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VIDEO: A Thank You to Our Donors and Members

November 26, 2013 in Economics

By Mises Updates

Your support of the Mises Institute has helped create an intellectual powerhouse for liberty. Thanks to you, the Institute can use cutting-edge technology in reaching an ever-expanding audience across both traditional and new media channels. We are educating the young and providing new ideas to a world starved for an alternative to the failed economics of government.

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Source: MISES INSTITUTE

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Team Player: Robert Shiller on Finance as Panacea

November 26, 2013 in Economics

By Mises Updates

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Team Player: Robert Shiller on  Finance as Panacea

 Book Review by John Staddon

Shiller, Robert J. Finance and the Good Society. PrincetonUniversity Press. 2012. 304 pp. 

Yale professor Robert Shiller is one of the most influential economists in the world.  Co-inventor of the oft-cited Case-Shiller index, a measure of trends in house prices, he is author or co-author of several influential books about financial crises.  He shared the 2013 Economics Nobel with Eugene Fama and Lars Peter Hansen.

In 2012 Professor Shiller published a full-throttle apologia for plutocracy: Finance and the Good Society.  FATGS is a reaction to the hostility to finance provoked by the 2007+ crisis.  But rather than being an effective defense, FATGS just underlines what is wrong with present arrangements.

Shiller sees the solution to our still-unfolding problems not as less financial invention, but more: “Ironically, better financial instruments, not less activity in finance, is what we need to reduce the probability of financial crises in the future.”  He adds “There is a high level of public anger about the perceived unfairness of the amounts of money people in finance have been earning, and this anger inhibits innovation: anything new is viewed with suspicion. The political climate may well stifle innovation and prevent financial capitalism from progressing in ways that could benefit all citizens.”

Is he right?  Is financial innovation always good?  Have the American people turned into Luddites, eager to crush creativity and settle into a life of simplistic poverty, uncorrupted by the obscure and self-serving creations of financial engineering?

Yes and yes, says Professor Shiller, who applauds what others deplore in the rise of ‘financial capitalism’ which Shiller describes as “a system in which finance, once the handmaiden of industry, has taken the lead as the engine driving capitalism.”

Finance capitalism, a new name but an old idea, has been unpopular for years.  In the 1930s, especially, right after the Great Depression, the big finance houses, like J. P. Morgan were seen as conspirators against the public interest.  Goldman Sachs, the ‘great vampire squid’ of Rolling Stone’s Matt Taibbi, plays the same role these days.

Some of Shiller’s defense of the financiers is simply puzzling because it is pretty obvious nonsense.  This is what he has to say about securitization – the bundling of hundreds of mortgages into layered bonds that have been sold all over the world:

Securitized mortgages are, in the abstract, a way of solving an information asymmetry problem—more particularly the …read more

Source: MISES INSTITUTE

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Nobody Wins When You Go Nuclear on Filibusters

November 26, 2013 in Economics

By Gene Healy

Gene Healy

Man, I’m so old, I remember when conservatives used to call what Senate Majority Leader Harry Reid, D-Nev., just did the “constitutional option.” By a vote of 52 to 48, with only three Democrats defecting, on Thursday, the Senate, led by Reid, changed the rules to prevent filibusters of virtually all presidential nominees except Supreme Court justices.

By a simple majority vote — rather than the two-thirds that Senate rules require — Reid changed the rules mid-game, to prevent minority-party “obstruction” of the president’s nominees. Back in spring 2005, when President George W. Bush had just won re-election, and Karl Rove-ian triumphalism was in the air, Republicans came close to banning judicial filibusters. Though irate Democrats preferred the term “nuclear option,” the GOP called the majority-vote rule change “the constitutional option.” (Oddly, the Senate Republican Policy Committee report adopting that moniker seems to have vanished from the RPC’s website).

Nothing is permanent in politics save the drive for more federal power, and the weapons you forge may someday be detonated by the other side.”

This time around, the Democrats have adopted Republican messaging to gain support for the rule change, and there’s nothing but wailing and gnashing of teeth from Republicans who once considered “an up-or-down vote” on presidential nominees a matter of high principle.

There’s plenty of hypocrisy on both sides of the aisle here. But as the constitutional scholars John O. McGinnis and Michael B. Rappaport argued in a 2010 article, “In Praise of Supreme Court Filibusters,” to “avoid obvious partisanship,” we should look at confirmation rules as if behind “a veil of ignorance” about whether the Red Team or Blue Team currently holds the levers of power.

From that perspective, where the Senate drew the line on Thursday — eliminating the judicial filibuster for executive branch posts and lower federal courts, but preserving it for the Supreme Court — is nothing to celebrate, but it could be a lot worse.

Given life tenure and the Court’s de facto ability to “legislate from the bench,” it’s important to preserve the option to filibuster Supreme Court nominees. But as McGinnis and Rappaport point out, “inferior federal courts by themselves ordinarily cannot entrench new constitutional norms against the democratic process,” thus here the problem presented by unelected judges’ power to reshape the law “is far less acute.”

When it comes to executive-branch nominees, the argument that the president, with advice …read more

Source: OP-EDS

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Fewer Europeans Trust the EU

November 26, 2013 in Economics

By Dalibor Rohac

Dalibor Rohac

Aspecter of populism seems to be haunting Europe. While the trend is not winning elections yet, London Financial Times‘ Gideon Rachman fears that “anti-establishment radicals do not need to capture the position of president or prime minister to gum up the system. Even if traditional pro-EU centrists continue to lead most national governments in Europe, their room for maneuver at EU summits is greatly reduced if populist parties are making big gains back home.”

The growing disconnect between European electorates and political elites is not a rhetorical trope invoked by populists, it is depressingly real.”

It is certainly the case that a diverse bloc of anti-establishment political groups have been gaining momentum throughout the European continent since the beginning of the debt crisis in the eurozone’s periphery. In last month’s election in the Czech Republic, two new populist parties recorded striking successes, displacing the traditional incumbent parties — most notably the right-wing ODS, which once led the country’s transition from a planned economy to capitalism.

It is true that neither of the new Czech parties has an explicit anti-EU bent — perhaps because the Czechs have consciously saved themselves a lot of trouble by opting to stay out of the eurozone. However, it is difficult to find any other common trait among most of the emerging populist groups across Europe than the idea that something has gone wrong with European integration. Ranging from Marine Le Pen’s Front National and Geert Wilders’ Party for Freedom, through the United Kingdom Independence Party and similar organizations, to extreme leftists like Syriza in Greece, they differ widely in their policy platforms, membership demographics and their attitudes toward immigrants or multiculturalism.

To the extent the new euroskeptic populism is going hand in hand with xenophobic, anti-immigrant or nationalistic ideas — even in some of the parties that label themselves as “free market” — it is only natural to share Mr. Rachman’s concerns. However, regardless of what one thinks of the true nature of the new euroskeptic forces, the broad centrist consensus that is driving Europe’s journey toward a political union is under attack for very good reasons.

After all, it was the political mainstream across Europe that elevated the European integration project to the status of a new faith. More and deeper integration has been long seen as desirable by anyone claiming respectability in political circles on the Continent. Yet, while European economic integration has certainly had many merits, over time the lack of critical thinking about the EU led to hubris and …read more

Source: OP-EDS

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New Cato Policy Report Reviews the NSA Surveillance Machine

November 26, 2013 in Economics

This summer, Americans got the most comprehensive look at the government’s massive surveillance machinery since the Church Committee, by way of leaked documents provided to the press by former NSA contractor Edward Snowden — as well as the government’s own grudging disclosures. In the latest issue of Cato Policy Report, Cato scholar Julian Sanchez reviews the most significant government spying programs we’ve learned about to date. Together, they reveal a surveillance machine vastly more powerful than anything Hoover could have dreamed of.

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Source: CATO HEADLINES

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Congress Should Abolish the TSA — It's Time to Privatize Airport Screening

November 26, 2013 in Economics

By Chris Edwards

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Chris Edwards

A government study that finds a program doesn’t work and proposes to cut it is almost as rare as pigs that fly. But a new Government Accountability Office study on aviation does just that: it proposes chopping the Transportation Security Administration’s SPOT security program because it finds no evidence that it could stop airline terrorists.

The GAO routinely finds waste in programs, but it usually just proposes ways to fix them — so the Screening of Passengers by Observation Techniques program must be really lame. The GAO finds no “scientifically validated evidence” for the $200 million program, and it says that TSA deployed it before even doing a cost-benefit analysis.

Over a decade of experience has shown that the nationalization of airport screening was a mistake.”

That failure is one of many discussed in my new study on TSA, which proposes dismantling the agency.

TSA was created in a rush after 9/11, and today employs an army of 53,000 passenger and baggage screeners at airports. The agency has spent billions of dollars on programs that have few demonstrated benefits, including SPOT, the air marshal program, and the intrusive full-body scanning machines.

More importantly, TSA’s performance has been underwhelming. In the early years after 9/11, federal auditors found that the ability of TSA screeners to stop prohibited items from getting through security was no better than that of the previous private screeners.

In recent years, there have been head-to-head comparisons between federal and private screening because 16 U.S. airports are now allowed to use private contractors. 

Studies have found that TSA’s screening results have been no better, and possibly worse, than that of the private screeners. And a House report in 2011 found that private screeners at San Francisco International Airport were far more efficient than the federal screeners at the Los Angeles International Airport.

The government has an important oversight role to play in aviation security, but the TSA’s near-monopoly on screening has resulted in it getting “bogged down in managing its bloated federal workforce,” as one congressional report concluded. 

Another congressional report blasted TSA for having an “enormous, inflexible and distracted bureaucracy,” and even former TSA chief Kip Hawley noted last year that the agency is “hopelessly bureaucratic.”

The solution is to get rid of most of the bureaucracy by moving responsibility for screening from TSA to the nation’s airports. The airports would then be free to contract out screening to expert aviation security companies. As aviation scholar Robert Poole notes, that …read more

Source: OP-EDS