You are browsing the archive for 2014 June 27.

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Seattle’s $15 Minimum Wage

June 27, 2014 in Economics

By Mark Thornton

The City government of Seattle has voted unanimously to raise the minimum wage in the city to $15/hour to be done is a number of stages over the next few years. College students seem to realize that such increases could be a threat to current and longer term job prospects. According to the College Fix:

OPINION: Students and recent grads will take the back of the employment line under a steep wage increase

One of my professor’s favorite pieces of advice in “Intro to Politics,” designed for freshmen political science majors and those looking for a quick social science credit, is ominously relevant: “If you’re about to graduate, you had better take that job offer at that GAP back home.”

While no fresh graduate wants to end up back at home working at the GAP in the strip mall near the local elementary school, that’s the trajectory that the current job market is headed.

Given that the Seattle economy is highly dependent on large consumer product companies and Boeing, this could make an interesting case study of the effects of the minimum wage, especially if there is a large setback for those companies in the years ahead.

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Source: MISES INSTITUTE

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Germany Reneges on Request for its Gold

June 27, 2014 in Economics

By Mark Thornton

Germany has now decided that its gold is safe in the hands of the Federal Reserve after all. The budget spokesman for Angela Merkel’s Christian Democratic Union party, Norbert Barthle, said “The Americans are taking good care of our gold.” Germany initially made the request in January of 2013 after attempts to inventory the gold in 2012 were rebuffed. Juergen Hardt, also from the Christian Democratic Union party told reporters in May that there was no concern that German gold in the New York Fed has been tampered with. “It’s my view that the gold reserves should be stored wherever they might be needed in an emergency.” Of course Germany has never seen or possessed its gold. It obtained the gold in exchange for its surplus dollars in international trade prior to the breakdown of the Bretton Woods system. So I guess there really is no cause for concern.

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Source: MISES INSTITUTE

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No, Mr. President, You Can't Do Whatever You Want

June 27, 2014 in Economics

By Ilya Shapiro

Ilya Shapiro

Much as it might frustrate Barack Obama, there’s no “if Congress won’t act, the president gets extra powers” clause in the Constitution. The latest confirmation of that truism comes in the unanimous Supreme Court ruling in National Labor Relations Board v. Noel Canning, which invalidated the appointments our constitutional-scholar-in-chief made to the NLRB in January 2012. It turns out, the unanimous Court ruled, that the presidential power to make recess appointments — to avoid getting the Senate’s “advice and consent” on federal offices — is only triggered when the Senate is actually in recess.

And so, for the 13th time since those ill-fated NLRB nominations, the Obama Justice Department has lost unanimously at the Supreme Court. In each of those cases, the government argued for a radically expansive federal — and especially executive — power and in each case not a single justice agreed. In areas of law ranging from criminal procedure (as in Wednesday’s cell-phone-search ruling) to securities regulation, immigration to religious liberty, President Obama couldn’t even get the votes of the justices he himself appointed, Sonia Sotomayor and Elena Kagan.

As Miguel Estrada commented when summarizing the solicitor general’s abysmal performance last term — a win rate of 40 percent, against a historical norm of about 70 percent — “when you have a crazy client who insists you make crazy arguments, you’re gonna lose some cases.”

For the 13th time since those ill-fated NLRB nominations, the Obama Justice Department has lost unanimously at the Supreme Court.”

In Noel Canning, all the justices agreed that the Senate gets to determine when it’s in session and when it’s not. (That’s an argument that Miguel Estrada made on behalf of all 45 Republican senators — you’ll recall that Estrada himself declined a recess appointment to the D.C. Circuit after Democrats filibustered him for being Hispanic — and it’s also what Cato argued in the brief we filed). And that’s no surprise: based on oral argument, everyone was expecting the government to lose here, and lose big.

Unfortunately, the conventional wisdom (which I shared) about a narrow ruling was also proven correct. The only “rule” that emerges from Justice Breyer’s controlling opinion is that a three-day recess, the longest the Senate can adjourn without the House’s consent, isn’t long enough to enable recess appointments. And that a recess of between three and ten days is also “presumptively” too short. That’s a pragmatic …read more

Source: OP-EDS

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The Path to Digital Privacy Reform

June 27, 2014 in Economics

A unanimous Supreme Court recently declared that that our networked mobile devices merit the highest level of Fourth Amendment protection against government searches. Yet increasingly, the vast troves of personal data they contain are synched to “the cloud,” where the outdated Electronic Communications Privacy Act of 1986 allows many types of information to be accessed without a warrant. On July 8, Cato will be hosting a lively discussion on how and why to drag federal privacy law into the 21st century.

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Source: CATO HEADLINES

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Justice Breyer's Dowsing Rod Finds a Limit to the Recess Appointments Clause

June 27, 2014 in Economics

By Trevor Burrus

Trevor Burrus

As many people predicted, the Supreme Court unanimously struck down President Obama’s recess appointments to the National Labor Relations Board (NLRB). By declaring that he has the power to determine when the Senate is in session, President Obama demonstrated a degree of executive overreach that could not garner a single vote of support from the Justices.

This is a welcome victory for good governance and a partial victory for the Constitution. While Justice Stephen Breyer was correct to hold that the president cannot determine when and if the Senate is in session, he incorrectly ignored the original public meaning of the Constitution, as well as a common-sense reading of the text, in order to endorse an ad hoc and baseless theory of recess appointments.

This is a welcome victory for good governance and a partial victory for the Constitution.”

In one way this is just another scathing rebuke of the administration by the Court. From property rights (e.g.Sackett v. EPA) to religious freedoms (e.g.Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC), the Obama administration has a surprisingly bad record before the Court. Although President Obama’s tenure in office has been just the latest iteration in the time-honored American tradition of executive overreach, his attempts to push three members onto the NLRB were far more than a slight stretching of existing executive practices. Had the Court upheld the appointments, the result would have been a categorical change in relations between the Senate and the president in the matter of appointments.

It’s not surprising that the administration failed to convince a single Justice. The justifications for the appointments offered first by the OLC and then later by the Solicitor General were breathtaking in the level of discretion they gave the president. Even looking at the array of amicus briefs on each side, we see that only three amici supported of the government — the Constitutional Accountability Center, the Brennan Center, and Professor Victor Williams of Catholic University — as compared to twenty-five in support of respondent Noel Canning. In short, it was clear to most people, and eventually to nine Justices, that the administration’s case was quite weak.

This was obvious from the moment the OLC memo was released, which purported to justify the president’s recess appointments. Not only does the memo laughably say that the Senate’s best option to block presidential recess appointments is to be “continuously in session,” but the …read more

Source: OP-EDS

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Mises Weekends: Jeff Deist Talks With Mark Thornton About Wikipedia, Drug Prohibition, and More

June 27, 2014 in Economics

By Mises Updates

Jeff Deist and Mark Thornton discuss Mark’s recent experience as an opponent of the drug war at the Oxford Union debating society, his influence on Wikipedia founder Jimmy Wales, and how Wikipedia demonstrates a kind of stateless spontaneous order, complete with private dispute resolution.

Stitcher: http://www.stitcher.com/podcast/mises-institute/mises-weekends
Mises.org: http://mises.org/media/8590/Dr-Mark-Thornton-Wikipedia-and-Spontaneous-Order

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Source: MISES INSTITUTE

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From Stalwarts to Scapegoats: America's Foreign Clients

June 27, 2014 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

As forces of the Islamic State of Iraq and Syria (ISIS) conquer major chunks of Sunni-inhabited areas in Iraq and advance on Baghdad, it has become fashionable among U.S. politicians and pundits to place the blame for the latest debacle at the feet of Prime Minister Nouri al-Maliki. Just a few years ago, though, those same opinion leaders hailed him as the symbol of a new, democratic Iraq. Maliki’s journey from Washington-backed national savior to scapegoat is a familiar one.

Time and time again, U.S. leaders and their media allies have anointed a Third World political figure as the latest Great Pro-Western Democratic Hope, only to become disillusioned when that leader fails to live up to Washington’s unrealistic expectations. Then, that leader becomes the cause of everything that has gone wrong in his country, combined with the implicit assumption that a change of leadership would make the troubling developments go away. It is a lazy, naïve style of foreign policy that ignores far deeper causes of instability in many of Washington’s client states.

We must stop portraying foreign political figures in heroic terms, only to repudiate those same figures when they predictably fail to live up to our fantasies.[/pullquote[

The transformation of Maliki’s image from one of a democratic statesman to a divisive and inept sectarian political hack is similar to what has occurred in Afghanistan, another arena of dashed U.S. nation-building aspirations. In the years immediately following Washington’s ouster of the Taliban regime in Kabul, U.S. officials portrayed Hamid Karzai as someone who was committed to forging a modern, democratic Afghanistan. A few critics in the United States derided him as little more than the mayor of greater Kabul, and argued that his ability to stay in power at all was heavily dependent on the continued backing of U.S. occupation forces. American enthusiasts of Karzai’s rule, however, summarily dismissed such cynical observations.

Evidence gradually mounted, though, about the growing corruption (both financial scandals and indications of stolen elections) surrounding Karzai and his cohorts. Washington’s criticism of Karzai’s performance in office spiked, and calls for new leadership to save Afghanistan from sliding back into chaos have steadily grown. But placing the blame for Afghanistan’s woes solely, or even primarily, on Karzai ignores the deep political and ethnic fissures in that country. Examining those factors would require admitting that perhaps America’s nation-building hopes there were unrealistic from the outset, …read more

Source: OP-EDS

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The Fed's Stimulus Is a Chimera

June 27, 2014 in Economics

By James A. Dorn

James A. Dorn

The U.S. Federal Reserve Bank’s three rounds of quantitative easing and near-zero target for the federal funds rate have not provided the promised stimulus. The idea that dramatically expanding the Fed’s balance sheet and rapidly increasing the monetary base would revitalize the real economy is a fantasy. Printing fiat money does not lead to economic growth.

By keeping short-run interest rates near zero and using large-scale asset purchases to suppress longer rates, the Fed has increased risk taking, depressed saving and investment, allowed monetary policy to grease the wheels of big government, and misallocated capital.

Low rates have reduced the velocity of money, and the Fed’s policy of paying interest on excess reserves, along with stiffer banking regulations, have substantially lowered the impact of base money on the overall money supply. Consequently, even with the so-called stimulus, nominal income has been growing below trend.

The Fed has been consistently wrong in its economic forecasts, typically being overly optimistic about what its monetary fine-tuning can achieve. The U.S. economy is simply too complex to accurately forecast. Basing the path of monetary policy on pure discretion runs the risk of destabilizing markets, in contrast to a rule-based regime that reduces uncertainty.

With the mushrooming of the monetary base but little inflation, some pundits are arguing that the pressing issue is to avoid deflation and achieve higher inflation. The Fed’s target is 2 percent inflation, but economists like Kenneth Rogoff at Harvard have advocated pushing inflation to 4 percent, with the hope that higher inflation will lower the rate of unemployment and increase spending and growth. Have they forgotten the stagflation of the late 1970s?

The vast majority of policymakers advocate keeping interest rates near zero for “a considerable time.” Many admit there is a risk of creating asset bubbles, but they downplay that risk and largely ignore the negative impact on savings. One exception is Kansas City Federal Reserve President Esther George who recently stated: “My concern is that keeping rates very low into late 2016 will continue to incentivize financial markets and investors to reach for yield.”

The U.S. central bank should start to normalize rates, but that would cut off the government from its source of cheap financing.”

David Wessel, director of the newly established Hutchins Center at the Brookings Institution, which focuses on monetary policy, argues that “too much inflation is definitely bad for an economy, but so is …read more

Source: OP-EDS

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Walter Block: Libertarianism from A to Z

June 27, 2014 in Economics

By Mises Updates

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Walter Block’s new book Toward a Libertarian Society covers a wide variety of topics from the death penalty to secession, and from war to macroeconomics. Dr. Block recently spoke with the Mises Institute about just a few of these.

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Source: MISES INSTITUTE

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Bank Deposits are Not “Idle”

June 27, 2014 in Economics

By David Howden

Over at Mises Canada, my daily from earlier in the week addresses whether bank deposits are idle, as many fractional-reserve banking apologists claim.

Advocates of fractional-reserve banking err in claiming that deposits are “idle”. The prevailing belief amongst this group is that depositors don’t have any present need for their funds, and so they give them to the bank to care for them (or invest) until that point in time when they do need money.

Austrian economists are in a privileged position to address this claim, as they are amongst the few who understand money’s role in the economy.

Money is that unique good that serves as our uncertainty hedge. We don’t know when we’ll need to cover expenditures in the future, nor do we know how much they might cost. Uncertainty as to the future poses a problem to the individual. We know, in some vague way, that there are certain contingencies that can arise in the future that will demand that we spend money. It’s a toss up as to when or what these will cost.

The depositor doesn’t even know when he will need his deposit back. How is the bank supposed to estimate this?

Examples of bank runs are good examples of this disconnect. The depositor wants his money which he believes to be his for the taking. (Indeed, this is enshrined in law as the depositor is permitted to claim his deposit whenever he wants.) The bank, under the presumption of the “idleness” of this deposit has made use of it. If the depositor wants his money back he’ll have to wait for the bank’s investment to mature.

Of course, one can always resort to external help to make sure these deposit claims are always paid out in a timely manner: deposit insurance and a central bank lender of last resort are the two time tested methods. But neither of these “solutions” solves the initial problem of the lack of knowledge surrounding when the deposit will be needed. And both of those solutions come with their own set of problems.

Read more here.

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Source: MISES INSTITUTE