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Macri’s Kiss of Death: Argentina’s Peso and the IMF

August 20, 2019 in Economics

By Steve H. Hanke


Steve H. Hanke

Yesterday, the ticket of Alberto Fernandez and Christina
Kirchner crushed the hapless President of the Argentine Republic
Mauricio Macri in a primary election. Their victory virtually
guarantees that the Fernandez-Kirchner team will occupy the Casa
Rosada after the presidential election scheduled for October.

For many, including the pollsters, Sunday’s results were a
stunner. Not for me. I have been warning for over a year that
gradualism, which is Macri’s mantra, is a formula for political
disaster. If that wasn’t enough, the Argentine peso is another time
bomb that has sent many politicians in Argentina into early
retirement. And, to add insult to injury, Macri called in the
“firefighters” from the International Monetary Fund (IMF) to
salvage the peso. These three factors sealed Macri’s fate.

As it turns out, this movie has been played over-and-over again
in Argentina. Argentina has seen many political gradualists bite
the dust. What makes Macri unique is that he advertised gradualism
as a virtue. Macri and his advisers obviously never studied the
history of economic gradualism. When presidents are faced with a
mountain of economic problems, it’s the Big Bangers who

As for the venom that can be injected by a peso crisis, the
instances of the poison delivered by that snake bite are almost too
numerous to count. To list but a few of Argentina’s major peso
collapses: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985,
1989, 2001, and 2018.

It is noteworthy that the frequency of peso crises picked up
after the establishment of the Central Bank of Argentina (BCRA) in
1935. With that, serial monetary mismanagement ensued. The chart
below tells the BCRA story. Before the BCRA, Argentina (the peso)
held its own against the United States (the dollar), with the
respective per capita GDPs being roughly equal in 1935. But, after
the BCRA entered the picture, a great divergence began. Now, the
U.S. GDP per capita is roughly three times higher than that of

The BCRA’s most recent monetary mishap occurred last year, when
the poor peso lost 58% of its value against the greenback from the
start of 2018 until the end of May 2019. What was behind that
collapse? On Macri’s watch, no less, the BCRA had been
surreptitiously financing the government’s deficit spending. It did
this through the sterilization of increases in the net foreign
asset component of Argentina’s monetary base. This was done via the
sale of bonds issued by the BCRA (LEBACS). The sterilization (and
financing of the government’s deficit) was on a massive scale. In
the January 2017-May 2018 period, the BCRA sterilized 50% of the
total increase in the foreign asset component of …read more

Source: OP-EDS

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Offer More Visas to People Coming Across the Southern Border

August 20, 2019 in Economics

By Alex Nowrasteh

Alex Nowrasteh

While President Trump’s immigration rhetoric continues to focus
on the need to build a southern border wall, his administration is
quietly pursuing a policy that could provide a lasting solution to
the ongoing migrant surge.

The Department of Labor recently signed an agreement with Guatemala to increase bilateral
cooperation for the H-2A visa program for low-skilled Guatemalans.
By providing transparency and accountability measures, such as
ensuring that labor recruiters are bona fide and vetted, the
agreement paves the way for more Guatemalans to come legally.

The administration should sign similar agreements with the other
Northern Triangle countries, El Salvador and Honduras, which are
responsible for the overwhelming number of migrants, as well as
exempt them from H-2A seasonality requirements. Historical
experience suggests increasing legal immigration options would
reduce the number who come illegally.

The Trump administration
could end the Central American border surge by shelving unhelpful
border wall boasts in favor of doubling down on sound H-2A visa
policy initiatives.

The H-2A visa is for seasonal workers in agriculture. It offers
low-skilled migrants the best — and in many cases only
— opportunity to come work in the U.S., while also addressing
the acute labor shortage faced by American farmers. The Trump
administration seems to recognize that economic migration can be
channeled into this legal system.

That’s important, because the surge of Central American migrants
is not correlated with murder rates in their home countries and most arrivals aren’t referred to asylum interviews. Central
Americans are primarily being pushed out of their home countries by
a poor economy — exacerbated by the crash in coffee prices
— and drawn in by a booming labor market here.

Neither of these push nor pull migration factors are going to
change soon, so diverting the migrants onto legal H-2A worker visas
is key to meaningfully fixing the situation on the southern

For proof of the effectiveness of H-2A visas in stemming illegal
migration, the Trump administration can consult recent history.
Legal Mexican migration on expanded H-2A and H-2B (seasonal,
non-agricultural) visas dramatically reduced illegal Mexican
immigration over the last two decades. As the U.S. government
increased the annual number of H-2 visas for Mexicans from 56,090
in 2000 to 242,582 in 2018, Mexican illegal immigration fell from
over 1.6 million in 2000 to almost 137,000 in 2019 so far — a
91% drop.

During that time, a single additional H-2 visa for a Mexican
worker is associated with 2.6 fewer Mexicans apprehended —
controlling for border enforcement.

“Most of my friends go with visas or they don’t go
at all,” said Mexican …read more

Source: OP-EDS

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Save the Endangered Species Act with Common Sense

August 20, 2019 in Economics

By Randal O’Toole

Randal O’Toole

The Endangered Species Act has been called the strongest environmental law Congress has ever written because it gives the government almost unlimited power to regulate private landowners with the objective of saving wildlife, fish, and even insects. Environmental groups that relish seeing this law enforced are upset that the Trump administration is proposing to change how the law is administered.

The Fifth Amendment to the Constitution forbids the taking of private property for public use without compensation. The Endangered Species Act violates the spirit, if not the letter, of this amendment.

Under the law, if you have an endangered species on your land, or if the government thinks you might have an endangered species on your land, or if the government knows you don’t have an endangered species on your land but thinks that you might someday have that species on your land, then the government can so strictly regulate your land that you can’t get any economic use out of it. For example, the government told Louisiana landowners that they couldn’t develop their property because it was defined as “critical habitat” for a rare frog — even though the frog didn’t, and couldn’t, live on the land without completely removing existing trees and replacing them with other species.

Effectively, the government is requiring some private landowners to house and feed certain species of wildlife at the landowners’ expense. Moreover, the government can force this without providing any compensation at all. The law doesn’t require the government to consider the cost of its regulation, so government officials can write overly strict rules just in case it might help a species.

Yet there is little evidence that giving the government this power has done much to save species. The few species that have recovered from danger did so mostly for other reasons.

[pullquote]Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.[/pullquote]

For example, America’s symbol, the bald eagle, was once considered endangered. But scientists agree that it recovered primarily because the Environmental Protection Agency banned the use of the pesticide DDT a year before the Endangered Species Act was passed.

Moreover, the Endangered Species Act may actually do more harm than good to endangered species. To avoid regulation, the law gives private landowners incentives to do everything they can to keep endangered species …read more

Source: OP-EDS

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7 Events That Enraged Colonists and Led to the American Revolution

August 20, 2019 in History

By Patrick J. Kiger

Colonists didn’t just take up arms against the British out of the blue. A series of events escalated tensions that culminated in America’s war for independence.

The American colonists’ breakup with the British Empire in 1776 wasn’t a sudden, impetuous act. Instead, the banding together of the 13 colonies to fight and win a war of independence against the Crown was the culmination of a series of events, which had begun more than a decade earlier. Escalations began shortly after the end of the “They felt that they’d spent a lot of blood and treasure to protect the colonists from the Indians, and so they should pay their share.”

The colonists didn’t see it that way. They resented not only having to buy goods from the British but pay tax on them as well. “The tax never got collected, because there were riots all over the pace,” Randall says. Ultimately, Benjamin Franklin convinced the British to rescind it, but that only made things worse. “That made the Americans think they could push back against anything the British wanted,” Randall says.

READ MORE: The Stamp Act

2. The Townshend Acts (June-July 1767)

An American colonist reads with concern the royal proclamation of a tax on tea in the colonies as a British soldier stands nearby with rifle and bayonet, Boston, 1767. The tax on tea was one of the clauses of the Townshend Acts.

Parliament again tried to assert its authority by passing legislation to tax goods that the Americans imported from Great Britain. The Crown established a board of customs commissioners to stop smuggling and corruption among local officials in the colonies, who were often in on the illicit trade.

Americans struck back by organizing a boycott of the British goods that were subject to taxation, and began harassing the British customs commissioners. In an effort to quell the resistance, the British sent troops to occupy Boston, which only deepened the ill feeling.

READ MORE: The Townshend Acts

3. The Boston Massacre (March 1770)

A print of the Boston Massacre by Paul Revere, 1770.

Simmering tensions between the British occupiers and Boston residents boiled over one late afternoon, when a disagreement between an apprentice wigmaker and a British soldier led to a crowd of 200 colonists surrounding seven British troops. When the Americans began taunting the British and throwing things at them, the soldiers apparently lost their cool …read more


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Why Does This Remote Glacial Lake Contain Hundreds of Skeletons?

August 20, 2019 in History

By Sarah Pruitt

Ever since a British forest guide first stumbled on Roopkund Lake in northern India in 1942, experts have struggled to understand how hundreds of human skeletons ended up in this small, shallow glacial lake, which sits in a valley more than 16,000 feet above sea level.

Over the years, various theories have surfaced to explain who the skeletons might belong to, as well as when and how they made their way into “Skeleton Lake,” as Roopkund is known.

At first, , researchers linked 38 skeletons from the lake to three distinct groups of individuals, including 23 men and women of South Asian ancestry, 14 with genes associated with the eastern Mediterranean region and one individual with Southeast Asian-related DNA.

But DNA isn’t the only thing that separates the groups from each other. While the researchers dated the skeletons with South Asian ancestry to around 800 A.D., the remains of the eastern Mediterranean group and the Southeast Asian individual were much younger, from around 1800. These findings cast doubt on the idea that a single catastrophic event deposited all the skeletons of Roopkund Lake, suggesting they were instead placed there on different occasions, some 1,000 years apart.

Earlier DNA testing of another set of bones from Roopkund Lake indicated the presence of related members of a family or tribe, as well as another group that was smaller in stature. From similar head wounds found on the skeletons, which were all dated to A.D. 850, scientists concluded that a hailstorm had killed the entire group. This theory intriguingly mirrored a local legend, which held that the mountain goddess Nanda Devi had sent a fierce hailstorm to punish a group of pilgrims who had defiled her sacred ground by playing music and dancing.

Disarticulated skeletal elements scattered around the Roopkund Lake site.

Researchers in the new study believe a mass death during a religious pilgrimage might well explain the presence of at least some of the skeletons in the first group they identified, of South Asian ancestry. But they have more questions about the second group of individuals, whose DNA indicates they were from the eastern Mediterranean, where Hindu religious practices were not common.

“Whether they were participating in a pilgrimage, or were drawn to Roopkund Lake for other reasons, is a mystery,” the researchers write. Future investigation will focus on archival research, aimed at finding any potential reports of sizable …read more


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Maryland Case Reveals Religious Discrimination in Education

August 20, 2019 in Economics

By Neal McCluskey

Neal McCluskey

If government says that you are free to believe in something,
but not to act on it, you are not truly free. That reality lies at
the heart of a federal lawsuit filed by the Bethel Christian
Academy against the state of Maryland, which kicked the academy out
of a private school voucher program for having policies consistent
with the school’s religious values. Such unequal treatment is

Immediately at issue are the school’s policies requiring that
students and staff behave in ways consistent with the idea of
marriage being between a man and a woman, and an individual’s
proper gender being the one assigned at birth. The state maintains
that those policies are discriminatory against LGBTQ individuals
and that allowing public money – school vouchers from the state’s
BOOST program – to flow to Bethel Christian is unacceptable.

The state’s position is totally understandable: All people
should be treated equally when government is involved. The problem
is that the state government is not treating religious people
equally – a problem in the public education system not just in
Maryland, but in every state in the country.

It would be better if
Maryland had a scholarship tax credit program than a voucher. Then
taxpayers could choose to direct their education dollars to
religious institutions and get a credit for it, rather than all
taxpayers having some sliver go to religious institutions, like it
or not.

How does the current education system discriminate against
religious people? Everyone is forced to pay for public schools -
government run and funded schools – but those institutions cannot
be religious in nature. They can teach about religion, but even
that is very difficult because public schools must not be perceived
as even incidentally promoting any religious precepts, much less
being openly guided by them. In other words, non-religious people
can get the education they want from the government schools for
which they must pay, but religious people cannot.

There is an excellent reason for prohibiting the endorsement of
religion by public schools: In a diverse society, it would
inevitably end up with government favoring one person’s religion
over another’s. Indeed, for much of our history public schools did
exactly that, typically favoring Protestantism over Catholicism,
Judaism, atheism and so on. The current system no longer favors
Protestantism, instead favoring secularism over religion, a
violation of government’s mandate to be neutral with regard to
religion. Most famously, a public school can teach that the theory
of evolution is true, but not creationism, a religious

If government can neither favor nor disfavor religion, what is
it to do? As long as it is going to fund …read more

Source: OP-EDS

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Forget "Checkbook Diplomacy" and Bring the Troops Home

August 20, 2019 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

President Trump is once again beating the drums about the need
for greater burden-sharing by U.S. allies. The latest example is
his demand that South Koreans pay “substantially
” than the current $990 million a year for defraying the
costs of American troops defending their country from North

This is not a new refrain from the president. Most of Trump’s
spats with NATO members have focused on the financial aspects of
burden-sharing. Yet the nature of his complaints leads to the
inescapable conclusion that if allies were willing to spend more on
collective defense efforts, he would have no problem maintaining
Washington’s vast array of military deployments around the

Trump’s obsession with financial burden-sharing misses a far
more fundamental problem. Certainly, the tendency of U.S. allies to
skimp on their own defense spending and instead free ride on the
oversized American military budget is annoying and unhealthy. But
the more serious problem is that so many of Washington’s defense
commitments to allies no longer make sense-if they ever did. Not
only are such obligations a waste of tax dollars, they needlessly
put American lives at risk, and given the danger of nuclear war in
some cases, put America’s existence as a functioning nation in
jeopardy. American military personnel should not be mercenaries
defending the interests of allies and security clients when their
own country’s vital interests are not at stake. Even if treaty
allies offset more of the costs, as Trump demands, we should not
want our military to be modern-day Hessians. 

Donald Trump wants our
allies to pay more, but outdated overseas defense obligations are
the real problem.

Unfortunately, the current situation is not unprecedented.
During the Persian Gulf War, President George H.W. Bush expressed
satisfaction that allied financial contributions offset most of
Washington’s expenses. That was undoubtedly true. Indeed, according
to some calculations, the United States may have ended up with
. Kuwait and Saudi Arabia were especially willing to
contribute financially to support the U.S.-led military campaign to
expel Saddam Hussein’s forces from Kuwait. Japan, still agonizing
over the alleged limitations on military action that its “peace
constitution” imposed, asserted that while it could not send
troops, it would contribute funds to the war effort. All three
countries practiced rather blatant “checkbook

The Persian Gulf War was surprisingly short, and U.S. forces
incurred far fewer casualties than anticipated. However, the
immediate costs were merely the beginning of an expanded
American security role
 in the Middle East that has proven
to be disastrous. The checkbook diplomacy payments of 1990 and 1991
did not even begin to offset those horrendous, ongoing costs in
treasure and blood. 

Financial considerations …read more

Source: OP-EDS