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The Euro: How a Common Currency Helped Europe Achieve Peace

December 28, 2018 in History

By Erin Blakemore

It could have been a disaster: runs on banks, uncashed checks, confusion at the counter. But by all accounts, the European Union’s switchover from a rainbow of different currencies to a single currency, the euro, was so orderly it was downright dull.

“The boring thing about the euro is that everything is working so well,” a German retailer told the New York Times in late January 2002, a few weeks after 8.1 billion euro notes flooded the market.

The transition may have been quick and quiet. But the road to a common European currency was a bumpy ride from economic confusion to eventual unity. Here’s a brief history of the money that has come to define the hopes of the European Union.

The currencies of the 15 EU-member countries over their flag and a 1 EURO coin.

A vision of peace led to the first economic union in Europe

It all began with the Treaty of Paris, a 1951 treaty negotiated in the aftermath of World War II. Officials at the time worried that hyperinflation and economic instability similar to that experienced by Germany after World War I might ensue. So European nations decided to band together not just to stabilize their economies, but minimize the chance of another devastating war.

In 1951, the treaty established the European Coal and Steel Community, which united steel and coal production in France, West Germany, Belgium, Luxembourg, and the Netherlands. Since France and Germany had long been enemies, it was thought that pooling the production of two materials essential to waging war would essentially make fighting one another impossible. It also created a common market for those commodities, kicking off the slow movement toward a common currency that would follow over the next half-century.

In 1957, the Treaty of Rome created the European Economic Community, a common market which gradually eliminated customs and other trade barriers between the six nations. In 1967, both groups merged with the European Atomic Energy Committee to form the Commission of the European Communities, which was joined by other European nations throughout the years.

Economic volatility made currency reform more important than ever

Europe was peaceful, and the currency of its various nations stable, for now. Common market countries grew more prosperous over the 1950s and early 1960. But the late 1960s threatened that newfound prosperity when international currency began to experience large swings in value. …read more


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Population Growth Leads to Abundant Resources

December 28, 2018 in Economics

By Gale L. Pooley, Marian L. Tupy

Gale L. Pooley and Marian L. Tupy

In recent weeks, oil has been moving below $50 a barrel — owing partly to concerns of oversupply and partly to concerns over a slowing global economy. Petroleum has helped to fuel the global economy for over a century, and its relative abundance today contradicts the doomsayers who feared “peak oil” in the past. Cheap oil is also a problem for the environmentalists, who fear that an oversupply of fossil fuels will undermine the global transition to green energy.

Yet petroleum is not special. Resources in general have become cheaper in inflation-adjusted terms — as well as relative to the cost of labor — over the last four decades. That’s all the more remarkable considering that the world’s population has massively expanded over the same time period.

Resource depletion has been a hotly debated topic since the publication of Paul Ehrlich’s The Population Bomb in 1968. The Stanford University biologist warned that population growth would result in the exhaustion of resources and a global catastrophe. “Since natural resources are finite,” he noted some years later, “consumption obviously must ‘inevitably lead to depletion and scarcity’ … Petroleum is a textbook example of such a resource.”

[pullquote]From petroleum to metals, commodities are cheaper than ever.[/pullquote]

The late University of Maryland economist Julian Simon disagreed. In his 1981 book The Ultimate Resource, Simon argued that humans were intelligent beings, capable of innovating their way out of shortages. And so we have. Fracking, to give just one example, has enabled us to tap previously inaccessible oil reserves, thus turning the United States into a fossil-fuel super-power.

Our findings in a recently published paper confirm Simon’s thesis. We revisited the debate by looking at 50 foundational commodities covering energy, food, materials, and metals. Between 1980 and 2017, the real price of commodities fell by 36 percent on average.

Also, due to productivity gains, the price of labor increases faster than inflation. Commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017. Put differently, the time-price of commodities fell by 64.7 percent.

We also measured the sensitivity of resource availability to population growth. Between 1980 and 2017, the world’s population increased by 69 percent and time-price of commodities fell by 64.7 percent. That means that the time-price of commodities declined by 0.934 percent for every 1 percent increase in the world’s population.

Moreover, we created the …read more

Source: OP-EDS

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Brexiteers Must Stop Bashing Economists If They Want to Defeat Corbyn

December 28, 2018 in Economics

By Ryan Bourne

Ryan Bourne

One of the things I’m most uncomfortable about as a supporter of Brexit is my fellow travellers dismissing economists’ pronouncements out of hand. On everything from the impact of potential GDP benefits of non-EU trade deals, to immigration, right through to the short-term impact of voting to leave, Brexiteers have downplayed economic reports that are politically inconvenient.

To be clear, many have been worthy of challenge and critical analysis. Professions can be prone to groupthink, and on Brexit economists have not covered themselves in glory.

They were right to state that the uncertainty of voting to leave would prove a drag on economic growth. But they were hopelessly wrong in implying the effect would be so large it would result in recession and rising unemployment.

They are correct that net additional trade barriers would make the economy less productive. Yet the most dire long-term scenario analysis is often predicated on assumptions that EU exit only has costs and no gross benefits. This an absurd proposition given what we know about certain EU regulations and tariffs, as well as future global growth patterns.

So, yes, highlighting poor assumptions, or suggesting revisions to modeling methods, is perfectly legitimate. Let’s have those debates. It is reasonable too to use historical examples — such as the fact that the majority of UK academic economists favored joining the euro — to dismiss pure appeals to the authority of the majority.

But rather than doing this, my pro-Brexit comrades sometimes slip into a lazy “wrong then, wrong now” meme. The implication being that all uncomfortable economic opinions can be disregarded on the basis that a majority of economists once called something else incorrectly.

This is obviously absurd as a matter of logic. Economists, including Her Majesty’s Treasury, are regularly accused of “crying wolf” about the short-term economic impact of voting leave on the labour market, for example. But the political lesson of Aesop’s “Boy Who Cried Wolf” fable is not just that those who lie or mistakenly warn of impending danger are less likely to be trusted. The moral of the story comes from the fact that in the end the wolf turns up when the villagers no longer have faith in the boy’s warnings. There’s no happy ending: the sheep are eaten.

The lessons to heed are two-fold. First, government institutions and professional economists have a duty not to fall prey to motivated reasoning, or to “sex up” the likely outcomes …read more

Source: OP-EDS

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Meet the Oldest Living U.S. Veteran

December 28, 2018 in History

By Jesse Greenspan

At age 112, World War II veteran Richard Overton still enjoyed his whiskey and cigars.

For his first 107 years, Richard Overton lived in relative anonymity. A World War II veteran who fought in the Pacific, he could usually be found post-retirement on the porch of his Austin, Texas, home, smoking cigars and chatting up his extensive circle of family and friends. Then, in 2013, he visited Washington, D.C., and was referred to in the media as the oldest living U.S. veteran. (In actuality, that would not become true until 2016.)

Suddenly, Overton was an in-demand celebrity. Texas Governor Rick Perry showed up at his door bearing whiskey. President Barack Obama invited him to the White House. The San Antonio Spurs gave him a number 110 jersey (his age at the time) and brought him onto the court for a standing ovation. And he became a staple at Austin civic events, such as the annual Veterans Day parade.

Meanwhile, strangers began sending him cigars in the mail, calling him on the phone, or coming by the house to thank him for his military service. “He’s very social,” says Volma Overton Jr., 69, his second cousin once removed, who visited Overton daily. “He’ll spend time talking to everybody and shaking everybody’s hand.”

Under doctor’s orders, his relatives limited his porch time so that he didn’t overextend himself. Yet they acknowledge he thrived on the fame. “He kind of lives off all that,” Volma Overton Jr. said in 2016. “He knows that he has this attention and status around the world.”

In addition to being the oldest U.S. veteran, Overton was also thought to be the oldest living male in the United States. Though dependent on 24-hour home care, friends and family say his mind remained sharp. At the age of 111, he still walked, and took no regular medication stronger than aspirin. Overton has credited “God and cigars” for his longevity, telling HISTORY in 2016 he still smoked about 12 a day, but that he never inhaled.

Richard Overton smoking a cigar with a few neighborhood friends Donna Shorts and Martin Wilford in Austin, Texas, 2015.

America’s oldest veteran had hardscrabble origins. Descended from slaves who toiled on the Nashville, Tennessee, plantation of Judge John Overton (a close friend to President Andrew Jackson), his newly freed ancestors moved en masse from Tennessee to Texas following the Civil War. Around four decades later, on …read more