You are browsing the archive for 2014 May 12.

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Sen. Paul Plans to Hold Federal Reserve Nominations

May 12, 2014 in Politics & Elections

Sen. Rand Paul today issued the following letter to Senate Majority Leader Harry Reid announcing his intent to hold the pending nominations to the Federal Reserve System unless S. 209, the Federal Reserve Transparency Act, is also considered. Votes have yet to be scheduled on the pending nominations to the Federal Reserve System, Executive Calendar No. 767, 768, 769, and 771. The text of that letter can be found HERE or below:
LETTER TEXT Dear Senate Majority Leader Reid, I am writing to convey my objection to floor consideration of the pending nominations to the Federal Reserve System, Executive Calendar No. 767, 768, 769, and 771 without also considering legislation to bring much-needed transparency to the Fed. As the Senate debates the Federal Reserve Board nominees, there is no more appropriate time to provide Congress with additional oversight and scrutiny of the actions and decisions of the central banks. Therefore, I request that my bipartisan legislation, S. 209, the Federal Reserve Transparency Act, be scheduled for an up or down vote concurrently with nominees to the Federal Reserve Board of Governors. My bill calls to eliminate all restrictions placed on Government Accountability Office (GAO) audits of the Federal Reserve. The Fed’s credit facilities, securities purchases, and quantitative easing activities would also be subject to Congressional oversight. Similar legislation passed 327-98, with bipartisan support, in the House of Representatives on July 25, 2012. This same bill has been stalled in the Senate for more than three years. Accordingly, I will object to any unanimous consent agreement or the waiver of any rule with respect to these nominees without a vote on S. 209. I know you have been an outspoken proponent of Federal Reserve transparency in the past, and I hope we can work together to pass this important legislation. Sincerely, Rand Paul, M.D. ###
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Source: RAND PAUL

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Mainstream Macroeconomists Grapple with Hayek and Keynes

May 12, 2014 in Economics

By Peter G. Klein

hayek-vs-keynes

A new NBER Working Paper by Paul Beaudry, Dana Galizia, Franck Portier uses a contemporary modeling technique (a kind of decentralized trading model popularized by Robert Lucas) to compare “Hayekian” and “Keynesian” accounts of the business cycle. The authors have only a cursory understanding of the Austrian literature — despite the title, “Reconciling Hayek’s and Keynes Views of Recessions,” the paper contains no references to anything written by Hayek or Keynes — but is interesting nonetheless.

The authors apparently got their understanding of Hayek from Nicholas Wapshott’s wildly inaccurate book Keynes Hayek: The Clash that Defined Modern Economics, so they characterize malinvestment as overinvestment (“capital over-accumulation”), reduce Hayek’s complex and subtle views to “liquidationism,” and so on. Still, the authors are trying to get at the fundamental idea that capital structure matters, and that the bust is somehow related to actions taken during the preceding boom. In this sense they depart from most modern macroeconomic treatments. Also, before introducing their model, they include a section with “Some motivating facts,” pointing out that their measure of capital over-accumulation (cumulative investment over 10 years divided by total factor productivity and detrended) is positively correlated with recession depth and length of recovery for the US postwar period. Their model includes both consumption goods and durable investment goods and it is possible for agents to have “too much” of the durable good (so that “liquidation” can be beneficial). In other words, the authors recognize the drawbacks of conventional Keynesian models in output and employment are systematically (and simplistically) driven by aggregate demand, with no role for capital and production and no possibility of capital misallocation.

In other words, while the paper doesn’t particularly advance the Austrian understanding of the business cycle, the fact that the authors are thinking along these lines (and disseminating their thoughts through the NBER working paper series) tells us there may be some hope for modern macroeconomics.

Here is the abstract for those who want the gory details:

<a target=_blank href="EFG Recessions often happen after periods of rapid accumulation of houses, consumer durables and business capital. This observation has led some economists, most notably Friedrich Hayek, to conclude that recessions mainly reflect periods of needed liquidation resulting from past over-investment. According to the main proponents of this view, government spending should not be used to mitigate such a liquidation process, as doing so would simply result in a needed adjustment being postponed. In contrast, …read more

Source: MISES INSTITUTE

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Jeff Deist on the Robert Wenzel Show

May 12, 2014 in Economics

By Mises Updates

He discusses the Austrian movement, the Rothbard Legacy, and plans for the future of the Mises Institute.

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Source: MISES INSTITUTE

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Who Can Save "Our Girls" and Nigeria? Only the Nigerian People, Not Washington

May 12, 2014 in Economics

By Doug Bandow

Doug Bandow

The kidnapping of over 200 Nigerian school girls has captured international attention and sparked a twitter campaign. Yet few outside of Nigeria paid attention as the terrorist group responsible, Boko Haram, killed thousands of people in previous attacks on churches, schools, police stations, newspaper offices, beer halls, bus terminals, and more. When the organization assaulted a school with male students, it simply murdered them.

Americans understandably want to help, but Washington must avoid getting entangled in another interminable conflict, this one featuring relentless Islamic extremists battling brutal security forces. Only Nigerians can find a way to simultaneously defeat a terrorist organization which kills more indiscriminately than al-Qaeda and reform a political system which seems to guarantee failure.

Nigeria should be an African powerhouse. With a population of roughly 175 million, the continent’s largest economy, and abundant oil reserves, the country’s potential is obvious. Yet around 100 million people live in poverty and the state is incapable of keeping the lights on. Corruption is pervasive, with politics a popular means of self-enrichment. Rampant violence has turned Nigeria into a nation of armed guards, high walls, and checkpoints.

Getting involved in Nigeria may be emotionally satisfying, but it isn’t likely to help.”

Worse, Nigerians have endured civil war and extended military rule. Only recently has civilian rule taken root. Nevertheless, with the country evenly divided between Christians and Muslims, political machinations are often sectarian and always complex. Muslim northern states imposed sharia law over objections from Christian minorities; mob violence between Christians and Muslims cost many lives, especially in Nigeria’s so-called Middle Belt.

The Islamic extremist group Boko Haram began more than a decade ago and turned to escalating violence after its leader was killed in government custody in 2009. The name is loosely translated Western education is prohibited, or more accurately, non-Muslim education is prohibited. While BH has complained of corruption and human rights abuses, its principal cause today is radical Islam. Social problems have increased its appeal to disaffected young men, but BH’s penchant for slaughter transcends any political grievances.

The government’s response often has been ineffective, even counterproductive. Although the authorities pushed BH out of urban areas and frustrated the group’s hope of creating a territorial caliphate, unlawful killings, mass arrests, and other abuses help sustain support for the guerrillas. Boko Haram has responded with terrorism, killing ever more promiscuously.

BH operates with relative impunity in three northeastern states. From 2009 …read more

Source: OP-EDS

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The Obamacare "Tax" That Chief Justice Roberts Invented Is Still Unconstitutional

May 12, 2014 in Economics

By Ilya Shapiro

Ilya Shapiro

As we all know, two years ago, Chief Justice John Roberts changed the Affordable Care Act’s individual mandate into a tax and thus rescued President Obama’s signature legislation. What you may not know is that with this slight of hand—or flick of the wrist—he actually sent Obamacare flying from the constitutional frying pan into the constitutional fire.

That is, if you accept the Great Alchemist’s transmogrification of a penalty-enforced regulation into a mere tax on the condition of not owning health insurance—in other words, a “unicorn tax,” a creature of no known provenance that will never be seen again—if you accept that, you torque up the ACA’s constitutional tension vis-à-vis the Origination Clause.

To quote John Belushi, ‘Nothing’s over till we decide it is.’”

Article I, Section 7, Clause 1 says: “All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills.” This clause was put in to ensure that that most awesome federal power was lodged in the political body most sensitive to public opinion.

“The power to tax is the power to destroy,” John Marshall wrote in the foundational 1819 case of McCulloch v. Maryland, so the Framers wanted to ensure that any such destruction came from the people themselves.

Fast forward to December 2009, immediately before the ur-Tea Party state of Massachusetts expressed the nation’s displeasure with Obamacare by electing a Republican to the Senate. That’s when the Senate took a bill giving benefits to members of the military who were first-time homebuyers and, as George Will put it recently, “‘amended’ this bill by obliterating it.” Harry Reid renamed it and replaced its entire contents with the ACA.

While the Origination Clause doesn’t apply to situations where the Senate creates a government program and then institutes taxes to pay specifically for that program, the Obamacare tax isn’t earmarked to pay for anything in particular. Similarly, taxes that are “analogous to fines” are exempt from the clause’s requirements, in that they enforce compliance with a law passed under one of Congress’s other enumerated powers—not the taxing power—but John Roberts foreclosed that interpretive option here.

Of course, the Senate can amend House-passed revenue bills, but only if the amendment is “germane” to that bill’s subject matter. That loophole has turned out to be wide enough for the Kentucky Derby to be run through, but still …read more

Source: OP-EDS

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Is College Expensive?

May 12, 2014 in Economics

By David Howden

With the average college graduate, this time of year not only brings completion to their studies but also leaves them with about $30,000 of student debt to pay off. As students are wrapping up their studies and starting their professional lives with more and more debt, whether a degree is really “worth it” is coming under fire.

Over at Mises Canada, my daily article today  makes clear that while it´s “convenient to talk about the Bill Gates, Steve Jobs or Mark Zuckerbergs of the world, for the average student the cost of not completing University is high.”

This isn´t because the jobs that college graduates are getting are necessarily so great, but rather because the opportunities for the average student lacking a college degree are, shall we say, less than desirable. While the average college grad starts life with five figures of debt, over his lifetime he will still expect to earn roughly $20,000 more each year compared to his non-degreed counterparts. That´s not chump change, and for the finance graduates the net present value works out to about $800,000. Put that way, a degree looks pretty cheap (but that could just be the professor in me talking).

In short, if you think spending four (or more) years in college and graduating with debt is a bad deal, consider the alternative.

Read more here.

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Source: MISES INSTITUTE

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REAL ID: State-by-State Update

May 12, 2014 in Economics

Despite the fact that many states have passed bills banning the implementation of the 2005 REAL ID Act, the federal government continues to fund the program each year in the Department of Homeland Security appropriation bills. In a new paper, Cato scholar Jim Harper reviews state-by-state implementation of the United States’ national ID law. “Federally, REAL ID is moribund, if not dead,” says Harper. “However, the state-by-state status check reveals that it is by no means dead at the state level, and so opponents of a U.S. national ID system must remain vigilant.”

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Source: CATO HEADLINES