Tuesday, March 21, 2017

8 Tenets of Our Civic Religion (And Why They're Wrong)

My 13-year-old homeschooled sons just finished my labor economics class. I hope they take many more economics classes, but I’ll be perfectly satisfied with their grasp of economics as long as they internalize what they learned this semester.
Why? Because a good labor economics class contains everything you need to see through the central tenets of our society’s secular religion. Labor economics stands against the world. Once you grasp its lessons, you can never again be a normal citizen.
What are these “central tenets of our secular religion,” and what’s wrong with them?
Tenet #1: The main reason today’s workers have a decent standard of living is that government passed a bunch of laws protecting them.

Why WWhy War?ar?

“There never was a good war or a bad peace.”
—Benjamin Franklin in a letter to Josiah Quincy, September 11, 1773
At 7:55 A.M. Hawaii time on December 7, 1941, the first Japanese bombs fell on the U.S. Fleet at Pearl Harbor in Hawaii. At the time, the United States was officially neutral. Japan was attacking a peaceful country without warning. People in the United States were outraged. Their immediate response was anger; they were more than eager to avenge the attack and go to war against Japan. As Japan was allied by treaty with Germany, Germany soon declared war against the United States.
Within a few days, the United States found herself allied with Great Britain and the U.S.S.R., which had been attacked by Germany on June 22, 1941, and at war with both Japan and Germany. (France had been defeated earlier by Germany and was out of the war.) What had been a European war became almost overnight a world war. The United States would soon be fighting Germany in the Atlantic, Europe, and Africa, and Japan in the Pacific and southeast Asia.
Why did Hitler march into Poland if he knew England and France might declare war on him? Why did he attack the U.S.S.R despite knowing its vastness and harsh winters?

Yes, Humanity Is More Peaceful. No, It's Not Because of Government

Humans are getting more and more peaceful. Violent deaths from all causes (murder, war, etc.) have declined massively throughout human history.
But to what do we owe this increasing peace? Enlightenment philosophy? Commerce? Or the rise of governance by states?
Harvard social psychologist Steven Pinker’s book The Better Angels of Our Nature: Why Violence Has Declined provides a magisterial, comprehensive, and generally persuasive explanation of the peacefulness phenomena, yet the book contains a big omission.
While the state may reduce the rate of private violence, that leaves the question of whether it increases or reduces the rate of death from civil and external wars.
Pinker claims — but fails to prove — that early states significantly increased human welfare by reducing the rate of war death.

European Welfare States Are Frantic to Breed More Taxpayers

Recently I read a very peculiar news item reporting that the Spanish government has appointed what the media are calling a “Sex Tsar.” It is officially a “commissioner for the demographic challenge,” whose job is to persuade the people of Spain to have more sex, and, by extension, more children.
Are Europe's governments just being cute? Or do they have another reason?
The Spanish are not alone. In 2016, the Italian government ran a “Fertility Day” campaign to get people to have more babies. The Swedish government has initiated a study into the sex lives of its citizens, to find ways to increase the amount of sex Swedes have. If that was all there was to the story, we could chalk it up to politicians being their usual ridiculous selves and have a good laugh about it. But this nonsense has serious economic causes and potentially far-reaching consequences.

Only Markets Can Win the War on Poverty

“What about the poor?” 
An interviewer just asked me the question following my usual call for markets in everything. It’s probably the 100th time this has happened. The question amazes me because the implication behind it implies that markets serve primarily the rich. 
It’s hard to imagine a more profound confusion. The default state of the world is grueling poverty, universal insecurity, and short lives. When governments do come along, they nearly always serve themselves first. 
Capitalism made huge progress toward the conquest of poverty.

Andrew Jackson Is a Poor Presidential Role Model

Donald Trump added a portrait of Andrew Jackson to the White House Oval Office shortly after his inauguration. Why Jackson?
Well, Jackson’s defeat of incumbent John Quincy Adams in the 1828 election was the first great US political upset in which an anti-establishment candidate defeated an insider. This comparison no doubt pleases the man who kept Hillary Clinton from the White House.
Like Trump, Jackson also styled himself as a champion of the “common man,” and that’s a distinction that somehow follows him to this day. But does Jackson deserve to be remembered so fondly as the one who put power in the hands of the people? Let’s break down some of his greatest hits.

The Media and Trump Are Both to Blame for the Death of Truth

The Washington Post recently criticized President Trump’s Tweetstorm about being wiretapped, mocking his claims as baseless. They argue that he’s sowing dissent and making up facts to distract the media from important issues. The Post neglected to mention that the FBI and other agencies have been surveilling Trump’s advisors, or that in October the FBI obtained a warrant to wiretap Trump’s “associates.”
The media is commiting the same heresies against truth that Trump is.
While the wiretaps were directed at those in Trump’s orbit rather than Trump himself, his accusations have more merit than the Post admits. This is becoming a trend: the media is eroding its credibility both by publishing factually incorrect stories about Trump and by accusing him of lying even when he’s telling the truth. In short, they’re committing the same heresies against truth that Trump is.

Make Germany Miraculous Again

Nothing is really changing politically in Berlin. To begin with, Germany's socialists are currently in a coalition with the conservatives, forming an immense majority in parliament. The coalition has slowed down public spending cuts and reforms enacted by the previous government. The German Left is at risk of fading into irrelevance as its choices regarding coalitions are limited: it's either Merkel once again or going down the road of a three-party coalition.
Berlin should be concerned with how a freer economy can unleash the potential of hard-working Germans.

Monday, March 20, 2017

Better market-oriented proposals that reduce income inequality

I was initially excited to see that progressive Dean Baker has written a piece on “Eight Market-Oriented Proposals That Reduce Income Inequality” for AEI. It begins promisingly by criticizing overly strict occupational licensing for high-skilled workers.  But it then studiously avoids the really big wins.  Namely:
1. Immigration.  High-skilled immigration reduces conventionally measured inequality by making high-skilled workers more abundant relative to low-skilled workers.  And low-skilled immigration drastically reduces properly measured inequality by moving the absolutely poor to First World prosperity.  Estimates of the size of this effect are vast.

Democracy rewards those who lust for power.

“Greed is good.”  After a few years in economics, the goodness of greed seems like common sense.  But it’s not.  In a randomly selected social environment, greed is brutal.  If you’re carrying a bag of gold and meet a well-armed stranger in a remote jungle, you wouldn’t say, “As long as he’s greedy, I have nothing to worry about.”  The knowledge that Nigerian spammers are greedy doesn’t incline you to send them your money.  If you were looking for a caretaker for your elderly mother, discovering that a job candidate is “extremely greedy” would be a strong mark against him.  As Marge Gunderson sadly muses at the end of Fargo, “So that was Mrs. Lundegaard on the floor in there. And I guess that was your accomplice in the wood chipper. And those three people in Brainerd. And for what? For a little bit of money. There’s more to life than a little money, you know. Don’t you know that?”

$21,714 For Every Man, Woman And Child In The World – This Global Debt Bomb Is Ready To Explode

Debt Bomb Globe - Public Domain
According to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.  Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number.  If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.
So if you have a family of four, your family’s share of the global debt load would be $86,856.
Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe.  Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all.  So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher.

How The Federal Reserve Is Setting Up Trump For A Recession, A Housing Crisis And A Stock Market Crash

Janet Yellen - Public DomainMost Americans do not understand this, but the truth is that the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes Donald Trump.  Politicians tend to get the credit or the blame for how the economy is performing, but in reality it is an unelected, unaccountable panel of central bankers that is running the show, and until something is done about the Fed our long-term economic problems will never be fixed.  For an extended analysis of this point, please see this article.  In this piece, I am going to explain why the Federal Reserve is currently setting the stage for a recession, a new housing crisis and a stock market crash, and if those things happen unfortunately it will be Donald Trump that will primarily get the blame.
On Wednesday, the Federal Reserve is expected to hike interest rates, and there is even the possibility that they will call for an acceleration of future rate hikes

12 Reasons Why The Federal Reserve May Have Just Made The Biggest Economic Mistake Since The Last Financial Crisis

Wrong Way Signs - Public DomainHas the Federal Reserve gone completely insane?  On Wednesday, the Fed raised interest rates for the second time in three months, and it signaled that more rate hikes are coming in the months ahead.  When the Federal Reserve lowers interest rates, it becomes less expensive to borrow money and that tends to stimulate more economic activity.  But when the Federal Reserve raises rates , that makes it more expensive to borrow money and that tends to slow down economic activity.  So why in the world is the Fed raising rates when the U.S. economy is already showing signs of slowing down dramatically?  The following are 12 reasons why the Federal Reserve may have just made the biggest economic mistake since the last financial crisis…

The Debt Ceiling Deadline Has Passed, And Now The Biggest Test Of Donald Trump’s Presidency Begins…

By Michael Snyder,Trump First Weekly Address - Public DomainOn Wednesday, the temporary suspension of the debt ceiling ended, and so now the federal government is not going to be able to go into any more debt until the debt ceiling is raised.  For the moment, the Trump administration can implement “emergency measures” to stay under the debt limit, but it won’t be too long before we get to a major crisis point because the federal government is quickly running out of cash.  Already, the U.S. Treasury has less cash on hand than Apple or Google, and that cash balance is going to keep on dropping until the debt ceiling is finally lifted.
You may remember that the debt ceiling became a major issue a couple of times during the Obama years.  Last time around, Barack Obama and the Republicans in Congress agreed to a horrendous deal which suspended the debt ceiling until several months after the 2016 election

The Upcoming Trade War Between The U.S. And China Will Be The Biggest In The History Of The Planet

Globe At Night - Public DomainThe United States and China are the two largest economies in the world by far, and the upcoming trade war that is about to erupt will be cataclysmic for both sides.  The Trump administration and the Chinese government are both gearing up for a prolonged trade war, and this is going to have very severe implications for the entire global economy.  During the campaign, Donald Trump repeatedly stated that we “can’t continue to allow China to rape our country”, and he was quite correct about that.  Over the past ten years, the U.S. has run a trade deficit of over $2 trillion with China, and as a result of imbalanced trade we have lost tens of thousands of manufacturing businesses, millions of good paying jobs, and hundreds of billions of dollars of tax revenue.
So clearly something needs to be done to balance our trade with China and other countries.  But the situation must also be handled delicately, because trade disruptions could bring substantial short-term economic pain.

Countdown To Crisis

During the run-up to the election, the deep state bureaucrats at the Treasury built up what I described Friday as Hillary’s debt ceiling “war chest,” sending the cash balance to $425 billion shortly before election day.
By contrast, shortly after the election the Treasury stopped selling new debt, and began to actually pay down maturing bills and notes. The Treasury has burned over $338 billion of cash since then. That depleted Hillary’s war chest since she wouldn’t be around to benefit from it.
Or rather, it pumped a veritable tsunami of cash into the canyons of Wall Street.
In a word, the Treasury took its boot off the neck of the bond dealers, thereby enabling the 15% frolic higher in the stock market that has become known as the Trump Reflation Trade.
And that gets me to the countdown to crisis beginning March 15…

More Proof of Janet Yellen’s Idiocy

During the last 129 months, the Fed has held 86 meetings. On 83 of those occasions it either cut rates or left them unchanged.
So you can perhaps understand why Wednesday’s completely expected (for the last three weeks!) 25 bips left the day traders nonplussed. The Dow rallied over 100 points that day.
Traders understandably believe that this monetary farce can continue indefinitely, and that our Keynesian school marm’s post-meeting presser was evidence that the Fed is still their friend.
No it isn’t!
Janet Yellen’s sing-song gibberish was the equivalent of a monetary DEFCON 1, alerting all except the most addicted Kool-Aid drinkers to get out of the casino.
Our monetary politburo has expanded its balance sheet by a lunatic 22X during the last three decades and in the process has systematically falsified financial asset prices and birthed a mutant debt-fueled of simulacrum of prosperity.

Mosul, Paris, Jerusalem: Faith, Ideology, And Slaughter

Image credit: 
Poster Collection, PL 186, Hoover Institution Archives.
As you read this, a ragged alliance of rival forces fights to wrest Mosul’s western half from the grip of the Islamic State. The besiegers represent different ethnic and religious factions jockeying for power in the ruins. The defenders are religious fanatics of an apocalyptic faith. Hundreds of thousands of civilians are captive in their midst.
We of the human race have been here before and will come here again. Cities, the emblem and apogee of all civilizations, have been war’s great prizes since the days of myth. Sieges—nowadays the least-studied form of military operations—have stained history with vast amounts of blood, from Carthage to Constantinople. And they’re back.

Mob Censorship On Campus

In today’s political climate, there are sharp divisions of opinion over a range of issues, from health care and climate change to education and labor law. Ideally, a civil debate undertaken with mutual respect could ease tension and advance knowledge. Politics, however, often takes a very different turn.
One of the landmark decisions of the United States Supreme Court, New York Times v. Sullivan, was decided in 1964 at the height of civil rights movement. Writing for the majority, Justice William Brennan insisted that the First Amendment’s guarantee of freedom of speech rested on “a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.” He then concluded that the First Amendment offered extensive protection to the media from defamation suits brought by private individuals—a principle that was later extended to apply to public figures as well.  Defamation suits in his view could chill public debate.

You Say You Want A Revolution?

Image credit: 
Image credit: Poster Collection, CU 032, Hoover Institution Archives.
To paraphrase the Beatles: Well, you know, you’d better free your mind instead; you may want a revolution but ought to settle for some evolution.
It is an article of revealed religion among defense elites that “we live in a relentlessly changing and fiercely competitive world.” Those words were from former Defense Secretary Ashton Carter, once a physicist and someone deeply imbued with the idea that technological change and competition were the elements propelling change, and that those who failed to “innovate” were doomed to defeat: “Today’s era of military competition is characterized by the additional variables of speed and agility, such that leading the race now frequently depends on who can out-innovate faster than everyone else, and even change the game.”

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