You are browsing the archive for 2014 August 06.

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The Ethanol Industry: An Engine of Economic Destruction

August 6, 2014 in Economics

By Joseph Salerno

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In his recent Mises Daily, Dave Albin admirably elucidates the tangle of unseen, long-run consequences that has resulted from uncoordinated government subsidies to the sugar, corn and ethanol industries.   But if we narrow our focus to the ethanol industry itself, there is a more fundamental  point to be made.  For the ethanol industry  is a “fiat” industry created not by consumer demand but by the Federal Renewable Fuel Standard (RFS) program established by the Energy Policy Act of 2005 and expanded by the Energy Independence and Security Act of 2007.  The RFS mandates that all transportation fuel sold in the U.S. (gasoline, diesel fuel) contains a certain minimum percentage–currently 10%–of renewable fuels like ethanol.  This program is nothing but a massive scam run for the benefit of corn growers including gigantic agribusiness firms like Monsanto.  As one writer summed up the RFS program:

Federal crop subsidies and ethanol mandates shower tax and household dollars on corn growers and ethanol refiners to produce a product we are forced to purchase, that increases fuel prices, provides less energy for our money, adds water to our gas tanks, raises food prices, and degrades the environment.

The extent of economic distortion and wealth destruction that is caused by the very existence of the ethanol industry is substantial.  Indeed, the Renewable Fuels Association, the lobbying group for the ethanol industry, quantifies and publicizes the destructive and impoverishing effects of the ethanol industry as if they were benefits to the U.S. economy.  Here are some of the “Ethanol Facts” proudly touted by the organization:

  1. In 2013 there were 86,504 workers employed directly  in renewable fuel production and agriculture in the U.S. Another 300,277 people were employed in jobs indirectly related to ethanol production.  On a market free of government mandates, everyone of these workers would have been employed in alternative industries producing a variety of  goods  to meet the voluntary demands of consumers.  Thus, the 13,3 billion gallons of ethanol  that these workers in conjunction with capital goods produced in 2013  represented  a sheer waste of scarce resources.
  2. In 2013, the U.S. ethanol industry (allegedly)  added $44 billion to the nation’s Gross Domestic Product (GDP) and  helped raise  household income by $30.7 billion.  This is nonsense on stilts.  Since the production of  ethanol was utter waste from the point of view of consumers, the industry did not add a single dollar to GDP.  In fact the $36.1 billion …read more

    Source: MISES INSTITUTE

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Is Your Checking Account a Deposit Contract?

August 6, 2014 in Economics

By Jeff Deist

cash

The blogger Bionic Mosquito has a post relating to today’s Mises Daily article on fractional reserve.  Mosquito makes that point that modern deposit contracts are not bailments, with the depositor retaining ownership. Instead, the individual depositor in effect enters into a short term credit agreement with the bank.

Of course most depositors certainly do view their bank accounts as a form of bailment.  Hence they say “I’m going to the bank to get my money.”  There is still a widespread view of banks as safe holders of money deposits.  The average Joe doesn’t deposit his paycheck and think, “OK, I just entered into a short term credit arrangement.  I can call the loan at any time though.”

Hans-Hermann Hoppe makes this point in Chapter 6 of The Economics and Ethics of Private Property:

First off, as a matter of historical fact fractional reserve banks never informed their depositors that some or all of their deposits would actually be loaned out and hence could not possibly be ready for redemption at any time. (Even if the bank were to pay interest on deposit accounts, and hence it should have been clear that the bank must loan out deposits, this does not imply that any of the depositors actually understand this fact. Indeed, it is safe to say that few if any do, even among those who are not economic illiterates.) Nor did fractional reserve banks inform their borrowers that some or all of the credit granted to them had been created out of thin air and was subject to being recalled at any time.

Regardless of one’s view of fractional reserve, Hoppe’s observation is correct: banks don’t exactly advertise this fundamental aspect of how they do business.

The real problem is not fraud or fractional reserve banking per se. Eliminate cartelized money (the Fed) and the false security blanket (FDIC) and the market would sort through issues surrounding deposit banks and lending banks.

…read more

Source: MISES INSTITUTE

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Chambers of Commerce Try to Purge Non-Cronies (Again)

August 6, 2014 in Economics

By Ryan McMaken

VP Cheney: Photo Op and Remarks to the Cincinnati USA Regional Chamber.

[This is not an endorsement of any of the members discussed below.]

Dick Cheney hosted by the Cincinnati Chamber.

Congressman Justin Amash just beat his primary opponent in a race that would not have happened had it not been for campaign money poured into the anti-Amash camp by the US Chamber of Commerce, the Grand Rapids Chamber, and the Michigan Chamber. Amash, who, as a politician has committed his fair share of political crimes, at least has had the decency to oppose a variety of cronyist measures and refused to fund several bailouts and bills designed as special favors for business interests.  So, naturally, while claiming to be “pro-free-market,” the US Chamber of Commerce has gone after him for not spending enough government money. This is not surprising. Business groups like Chambers of Commerce are not free-market organizations at all, but are just rent-seeking lobbying groups looking for government favors.

There’s nothing new here. When Ron Paul was in Congress, the US Chamber ranked him as one of the worst members, giving him the lowest score of any Republican. In Chamber-speak, being “free-market” means voting for things like TARP and various bailouts and No Child Left Behind. Given the Chamber’s crusade against Amash (and this Chamber-funded political ad), being pro-business also apparently means being in favor of NSA spying.

Amash was just one of the Chamber’s targets in recent years. The Daily Caller notes:

Business won an under-the-radar victory in May when the Georgia Chamber of Commerce and companies such as Delta Airlines, Georgia Power, and AT&T suddenly set up a Georgia Coalition for Job Growth and managed to defeat a Republican legislator, Rep. Charles Gregory, who was just too libertarian for them.

Gregory, a big fan of former presidential candidate Ron Paul, wasn’t trying to legalize drugs or bring the troops home from Afghanistan. No, the ads and the special website that the Georgia Coalition set up accused him of voting against education spending and against an intrusive measure to require drug testing for food stamp applicants.

The real issue was probably that he wouldn’t go along with pork-barrel projects that benefit business, such as taxpayer funding to help the Atlanta Braves move to Cobb County.

One lobbyist involved in the business effort told the Atlanta Journal-Constitution, “We’re not going to let liberty Republicans throw business out of the Republican Party.”

It seems unlikely that a free-marketer like Gregory wanted to “throw business out.” But he did …read more

Source: MISES INSTITUTE

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Sen. Rand Paul Appears on Fox's On the Record with Greta Van Susteren – August 5, 2014

August 6, 2014 in Politics & Elections

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Source: RAND PAUL

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Justin Amash's Victory Is a Win for Free Markets, and a Blow to Chamber Cronyism

August 6, 2014 in Economics

By David Boaz

David Boaz

Big business’s campaign to purge libertarians from Congress and state legislatures stumbled again last night in Michigan, where Rep. Justin Amash soundly defeated his Chamber of Commerce-backed challenger in a Republican primary.

Amash defeated Brian Ellis with 57 percent of the vote.

Organized business interests don’t seem to like Republicans who take Republican values seriously. Most Republicans say they believe in fiscal conservatism and free enterprise. The self-proclaimed “liberty Republicans” actually vote that way, even when it comes to subsidies and other government help for established businesses.

Business won an under-the-radar victory in May when the Georgia Chamber of Commerce and companies such as Delta Airlines, Georgia Power, and AT&T suddenly set up a Georgia Coalition for Job Growth and managed to defeat a Republican legislator, Rep. Charles Gregory, who was just too libertarian for them.

Organized business interests don’t seem to like Republicans who take Republican values seriously.”

Gregory, a big fan of former presidential candidate Ron Paul, wasn’t trying to legalize drugs or bring the troops home from Afghanistan. No, the ads and the special website that the Georgia Coalition set up accused him of voting against education spending and against an intrusive measure to require drug testing for food stamp applicants.

The real issue was probably that he wouldn’t go along with pork-barrel projects that benefit business, such as taxpayer funding to help the Atlanta Braves move to Cobb County.

One lobbyist involved in the business effort told the Atlanta Journal-Constitution, “We’re not going to let liberty Republicans throw business out of the Republican Party.”

It seems unlikely that a free-marketer like Gregory wanted to “throw business out.” But he did want to persuade the GOP to stop supporting subsidies and sweetheart deals for $700 million businesses like the Braves.

Business operatives ran into trouble early on in Kentucky, where they lobbied hard though unsuccessfully to persuade the head of the Northern Kentucky Chamber of Commerce to run against Rep. Thomas Massie, a frequent ally of Amash. Massie, a businessman himself, is a strong fiscal conservative, but some local business leaders don’t like what they see as his stand-off approach.

And in California’s June primary Rep. Tom McClintock, a crusader against earmarks, turned back a challenge from Washington business consultant Art Moore, who “thinks representatives should deliver for folks back home,” in the words of a local reporter. McClintock got 56 percent in a three-way primary, but he’ll have to face …read more

Source: OP-EDS

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New Mexico Veteran Sues Employer for Wrongful Firing

August 6, 2014 in PERSONAL LIBERTY

By mfarrington

Physician’s Assistant Donna Smith Was Legally Enrolled in State’s Medical Cannabis Program
DPA: Presbyterian Health Services Ignoring State Law

ALBUQUERQUE, NM — Donna Smith, a veteran who served our country with distinction, and who is a licensed physician’s assistant was recently terminated from her position with Presbyterian Health Services due to her enrollment in the state’s medical marijuana program.
“As both a patient and a healthcare provider, I am deeply disappointed by Presbyterian Healthcare Systems’ decision to terminate me for nothing more than my enrollment in New Mexico's Medical Cannabis Program,” said Smith.
August 6, 2014

Drug Policy Alliance

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Source: DRUG POLICY

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Confusing Capitalism with Fractional Reserve Banking

August 6, 2014 in Economics

By Mises Updates

vault2

Mises Daily Wednesday by Frank Hollenbeck:

Low interest rates combined with high-risk fractional reserve banking creates a powder keg on which we’re sitting today. It’s a government- and central bank-created problem, but capitalism gets the blame.

…read more

Source: MISES INSTITUTE

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The Golden Rule vs. The Catholic Case Against Free Markets

August 6, 2014 in Economics

By Mises Updates

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Mises Daily Wednesday by Randy England:

It is now fashionable in some intellectual Catholic circles to disparage free markets at every turn, but this requires the critics to ignore the core of free-market philosophy: the Golden Rule.

…read more

Source: MISES INSTITUTE

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African Economic Reform

August 6, 2014 in Economics

By Michael D. Tanner

Michael D. Tanner

As representatives from 50 African countries gather in Washington this week for the U.S.–Africa Leaders Summit, there is no doubt that the continent is facing many serious challenges, including the threat of Islamic extremism from Nigeria to Somalia, ongoing civil wars in the Democratic Republic of the Congo and the Central African Republic, and the one most noticed in the West, the Ebola outbreak. As crucial as these issues are, however, an even more important one may lurk below the headlines: economic reform.

Many African countries have made progress on reforming and liberalizing their economies. Few any longer embrace the Soviet model that once dominated the continent. Over the last decade and a half, many African countries have taken steps to reduce or stabilize their annual budget deficits and their long-term debt. Foreign debt has dropped by a quarter on average, and budget deficits have fallen by two-thirds. Inflation is still too high, but it has moderated, falling from an average of 22 percent in the 1990s to just 8 percent. Property rights have become more secure, and the size of government has declined, although not nearly enough.

Islamic extremism, civil war, and Ebola get the headlines, but political economy matters too.”

Increased economic freedom contributed to reasonably strong GDP growth over the last decade, growth that continued even after the recession. Real GDP grew at an average annual rate of 4.9 percent between 2000 and 2008 — twice as fast as in the 1990s. Extreme poverty has diminished, as has child mortality.

But there remains much to do. As a recent report by my Cato colleagues Marian Tupy and Dalibor Rohac pointed out, “While Africa has seen tangible progress in recent years, it still is a far cry from the growth miracle that has been unfolding in China and India, or from the ones that brought the countries of Southeast Asia to their current levels of economic development.”

Only six African countries (Botswana, Gambia, Mauritius, Rwanda, Uganda, and Zambia) finished in the top half of countries in the Fraser Institute’s latest Economic Freedom of the World report. On the other hand African countries made up 17 of the bottom 25 (Algeria, Angola, Burkina Faso, Burundi, Cameroon, the Central African Republic, Chad, the Democratic Republic of the Congo, the Republic of the Congo, Côte d’Ivoire, Ethiopia, Gabon, Guinea-Bissau, Mozambique, Niger, Togo, and Zimbabwe).

Too many African countries responded to the worldwide recession by …read more

Source: OP-EDS

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Nigeria Grows in Spite of Its Government

August 6, 2014 in Economics

By Marian L. Tupy

Marian L. Tupy

On Tuesday, fifty African heads of state met with President Barack Obama to discuss everything from economic development to peace and security on the African continent. Among Africa’s leaders was Nigeria’s President Goodluck Jonathan, who heads a country that has grown in economic and political importance in recent years, all the while suffering from shambolic policies and lack of basic security. As the story of Nigeria shows, ordinary people’s determination to improve their lives succeeds—often in the face of a broken government.

Earlier this year, Nigeria’s finance ministry recalculated the size of the country’s economy. This was a badly needed exercise, since Nigeria’s national statistics have not been updated since 1990. The new estimates increased Nigeria’s gross domestic product by a remarkable 89 percent to $510 billion. As a result, Nigeria is now recognized as the world’s 26th largest economy and Africa’s largest, and the economic importance of Nigeria will surely increase in the future. By 2050, the United Nations predicts Nigeria’s population, which currently stands at 168 million, will surpass that of the United States. By 2100, every 12th person in the world will have been born in Nigeria.

Nigeria’s economic performance is all the more impressive considering that it is one of the world’s least economically free countries.”

Contrary to popular misperception, Nigeria’s economy is not primarily dependent on oil and gas exports, which account for a mere 14 percent of the gross domestic product. At 40 percent and 30 percent, respectively, the agriculture and service sectors are much more important. Analysts agree that expansion of finance, communications, and entertainment industries were instrumental to Nigeria’s remarkable growth rate of 8.9 percent between 2000 and 2010. As a result of a decade of growth, the World Bank estimates that the average income per person adjusted for purchasing power parity rose to $5,863—higher than India’s.

Nigeria’s economic performance is all the more impressive considering that it is one of the world’s least economically free countries. According to the Fraser Institute, a Canadian think-tank, Nigeria’s economic freedom was ranked 124th out of 152 countries surveyed in 2011. In terms of the ease of doing business, the World Banks found Nigeria was 131st out of 185 countries surveyed in 2013. Nigerian corruption is infamous worldwide. According to Transparency International, an American NGO, Nigeria was ranked 144th out of 177 countries surveyed.

The country’s political leadership has been condemned for a …read more

Source: OP-EDS