Saturday, December 12, 2009
Friday, December 11, 2009
What Becker and Posner do not discuss is an alternative far superior to keeping the Fed as it is or relying on Congress to make monetary policy. That alternative is to adopt a monetary rule and stick to it. In other words, let us have monetary policy by rule of law, not by rule of men.
Rather novice economics students understand that inflation is everywhere and always a monetary phenomenon, just as Milton Friedman taught us so long ago. Talented economics students also understand that it is the Fed and the banking system that cause credit booms and the inevitable recessions that follow --- all in the name of "stability." What a farce. History is full of empirical evidence about this phenomenon, and Austrian economic theory explains how and why the Fed does it.
If you want to hear more about climate debt, just listen to the tripe coming out of Copenhagen daily for the next 10 days or so --- if you have the stomach for it. The proposition is that western countries, and the United States in particular, must turn over hundreds of billions per year to the leaders of third-world countries. These payments would not be a gift, nor would the payments be a loan, but repayment of the climate debt.
Sound preposterous? Lots of people originally thought that the prospect of BHO getting elected president was at least as preposterous. I must confess that I was one of them, yet it happened. So, I don't rule out any absurdity as impossible anymore.
Here, Charles Krauthammer writes about the "new socialism," and its proponents' attempts for a stealthy revival in the guise of "green." Will it work? Of course not. Here's why.
Suppose the United States and other western countries did pay hundreds of billions of dollars per year to the moronic, despotic, dysfunctional leaders of third-world nations. And suppose at the same time the United States and other western countries did exactly what the morons at Copenhagen are calling for --- namely, quit using carbon-based energy to produce real stuff.
You can't eat money. If the United States quits producing real stuff, all those hundreds of billions of dollars paid to third-world countries would be utterly worthless. Real income is production of real goods and services. Production of real goods and services requires the use the earth's resources, including carbon-based sources of energy, at least for the time being. I personally have no doubt whatsoever that science and technological advance will one day render fossil fuel energy completely obsolete. But that one day is not yet here.
The morons at Copenhagen evidently don't understand that the hundreds of billions of dollars per year they say the West "owes" third-world countries is nothing more than a bunch of digital zeros and ones on a bunch of servers somewhere. Take away the production of real goods and services and what do you have left? The zeros and ones.
I do believe that at least half my ECON 101 students understand the basic truth that income and wealth are the same thing as production of real stuff. They also understand why the third-world countries are so piteously poor. They don't produce much of anything.
My ECON 101 students also understand why the third-world countries don't produce much of anything. It is because they have gone down the roads of socialism, dictatorship, and compulsion with their political economies, instead of adopting the only system that works and is moral; voluntary exchange (a.k.a. free-market capitalism, to use what is a four-letter word to the "greens").
Will socialism be revived disguised as "green"? A rose by any other name. As I have repeated in this space so many times before, voluntary exchange is the only road to economic prosperity for humans. It is also the only moral way for humans to behave. All of history is abundantly clear about both propositions.
Do you think the morons in Copenhagen who are so deliriously high on their prescriptions of central governments' control of scarce resources, and high on their ridiculous notions of some world authority (the U.N.?) forcing everyone to abandon carbon-based energy --- do you think those morons understand that he who is willing to wield the sword is granting his foe the same right?
The western world can do without third-world countries, but third-world countries cannot do without the western world --- a fact that third-world countries have so amply demonstrated. Consequently, it is not just stupid of them, it is dangerous for them to call for some sort of "new world order" in the form of a centralized world authority that will control the use of scarce resources. See if you can guess who will get the short end of the stick on that deal.
Tuesday, December 8, 2009
It really does take a clown to believe that carbon --- the building block of life on earth --- is a pollutant. Go figure.
But health-care coverage is not a benefit. It's a wage deduction. When premium costs go up, wages go down. When premium costs go down, wages go up. Yet workers don't know that. In fact, the information is hidden from them.Uh, duhh.
But my daily routine has a fundamental flaw; before I start on the highest priority task on my list, I "run my traps." That is, I read parts of the WSJ and check a set of blogs I follow. I really shouldn't do that if I want to get my own tasks done. Almost without fail, I read something that sets my mind to whirling and my fingers itching to write something in EconoBlast about what I've read, even though I've sworn I will not do so this day.
Well, I've failed again. I simply cannot ignore the self-serving, dissembling remarks of Ben Bernanke as he wrote here on Sunday, Nov. 29, 2009, in the Washington Post, where he writes,
I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions. Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States. The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.After I quit sputtering and muttering under my breath (well, actually, not under my breath; more like talking to myself in a loud voice), the most succinct, descriptive thing I can think of to rejoin Mr. Bernanke's statement is "pig manure." I will hold it to that, since there may be children around somewhere.
Yes, I can easily imagine that Mr. Bernanke is concerned that some members of Congress are insisting on doing the job of the Congress to provided oversight of the Fed. What a thought.
Anyone who reads this blog more than a few times already knows what I think of the Fed and its "independence." Of course the Fed wants to be independent. Why would the Fed want to share any of the vast power it abuses daily?
What Mr. Bernanke leaves out of his statement above --- and assumes we the people will not notice --- is that the Fed bears the largest single identifiable responsibility for causing the financial market debacle we're still working through. The Fed has had bank supervisory authority for a long time. Were was the Fed when the seeds of financial disaster were being sown by the banking system and the shadow banking system? It was serving itself, that's where.
I think Mr. Bernanke is a really smart guy. That's why I say he's dissembling. He's way too smart to actually believe the tripe he wrote in the Washington Post. No, Mr. Bernanke made it to the top of the high priesthood inside the temple itself. He's not about to pull aside the curtain of secrecy for the commoners to see what really goes on inside the temple.
Here, Vincent Reinhart throws down a gauntlet to Mr. Bernanke and the Fed, so intent on keeping the Fed's secrecy and power intact. Reinhart writes
As a result of legislative convenience, bureaucratic imperative and historical happenstance, a variety of responsibilities have accreted to the Fed over the years. In addition to conducting monetary policy, the Fed also distributes currency, runs the system through which banks transfer funds, supervises financial holding companies and some banks, and writes rules to protect consumers in financial transactions. Mr. Bernanke argues that preserving this mélange is not only efficient but crucial to protecting the Fed's independence.Pick up the gauntlet, Mr. Bernanke.
There is an easily verifiable test. The arm of the Fed that sets monetary policy, the Federal Open Market Committee (FOMC), has scrupulously kept transcripts of its meetings over the decades. (I should know, as I was the FOMC secretary for a time.) After a lag of five years, this record is released to the public. If the FOMC made materially better decisions because of the Fed's role in supervision, there should be instances of informed discussion of the linkages. Anyone making the case for beneficial spillovers should be asked to produce numerous relevant excerpts from that historical resource. I don't think they will be able to do so.
The Fed serves itself first, which means it serves its member banks. The Fed insists that it must have autonomy and secrecy to do its job. Milton Friedman, a Nobel Laurette and 10 times the economist Mr. Bernanke will ever be, explained why neither autonomy nor secrecy were in the interests of a strong, stable economy.
Do you really believe that an institution with the power granted the Fed could or should be free of political influence? I certainly do not. And if I'm right, then the Fed should be utterly transparent. We the People have a right --- and a responsibility --- to know what's going on in the Federal Open Market Committee (FOMC) and Board of Governors of the Federal Reserve.
Representative Ron Paul has it right; we should kill the Fed. We should dismantle the Fed and replace it with a simple currency board that enforces a simple monetary rule, just as Milton Friedman argued many years ago. Professor Friedman explained why. Neither the Fed nor any of its economist apologists ever explained why not convincingly.
Why do you suppose that Wall Street tycoons ride around in expensive cars, float around in expensive boats, and are seen around in expensive clothes? How is it they can afford mansions situated on some of the most expensive real estate in the world. Where are their clients' expensive furnishings?
No, it isn't because Wall Street financial wizards are so brilliant. In fact, we have very recent evidence to the contrary. You need look no farther than the Fed for the answer.
Monday, December 7, 2009
By the way, never doubt that we are compelled by our government at the end of a gun. Try not paying your taxes. Then when the police come to arrest you, tell them you refuse to go along. That's when the guns will come out.
Congress uses the federal tax code to punish foes and reward friends. That fact explains why most politicians will never willingly get rid of the federal income tax and payroll withholding taxes. Each and every year Congress further complicates the tax code by writing laws that punish some and reward others. The ObamaCare bills now moving through the House and the Senate are excellent examples.
Each year, billions of dollars are spent on lobbyists sent by their sponsors to Washington to lobby Congress for tax advantages that will be implemented through the horrific federal tax code. More dollars are paid to tax lobbyists each year than any other flavor of lobbyist.
Each year the IRS violates the rights of American citizens by ignoring the 4th Amendment and the 14th Amendment. And each year, we the people go along with it. Adopting the Fair Tax is not a panacea, but it is a strong start toward reclaiming our Constitutional liberty and natural rights.
The best way to start is to email your district member of Congress and your state Senators to tell them that you will not vote for them until they sign on as a co-sponsor of the Fair Tax. Here's a link that makes that really easy. Be sure to write in a personal note about no longer voting for politicians who do not support the Fair Tax.
More than any other element of our political system, the federal income tax and payroll withholding taxes violate the constitutionally enshrined principle of government of the people, by the people, and for the people. Automatic payroll withholding through your employer robs you of the right to control your own income.
How much did you pay in federal income tax and payroll withholding last year? How much will you pay this year? If you don't know, then you are a willing accomplice to your own enslavement by the 545. Let's all leave the herd of "we the sheeple" to become once again "we the people." Click this link and make a run for it.
Wednesday, December 2, 2009
James D. Hamilton, writing at Econbrowser.com, Nov. 25:
$1 trillion is approximately the total personal income tax receipts collected by the U.S. federal government in 2006. So, to calculate what another trillion in deficits means for me personally, I take the amount I paid in federal income taxes that year and double it; $10 trillion in new debt will require 10 years at that higher rate to pay off. It's going to be a real problem for any politician who tries to service the growing debt burden by raising taxes. That's why I see troubles ahead for managing the federal cash flow.
. . . at the moment, we're observing an amazing willingness of investors and foreign central banks to lend to the U.S. Treasury. . . . [but] what will the situation be another two years down the road, when the government will need to go back to bond markets to roll over the . . . several trillion added to the federal debt between now and then? . . . Is it possible that some time within the next five years, the U.S. Treasury will run an auction in which there are not enough bids to roll over the debt? My answer is yes.
Mostly, physicists and chemists don't have this problem, because the science they deal with doesn't usually have policy implications for politicians. Economic science almost always has policy implications for the people who want to "set policy" for the rest of us (translation: coerce the rest of us to do what they say).
Ms. Romer states
The vast majority of professional forecasters attribute much of this dramatic turnaround to the fiscal stimulus.Really? I really don't know what she thinks the word "vast" means, or who these "professional forecasters" are, or why anyone is supposed to believe that economists or any other "professional forecaster" can forecast the economic future. For a different take on what a vast majority thinks, try this link from Nobel Laurette Gary Becker. Or try this link from Michael Boskin. Or try this link from John Cochran
Ms. Romer knows full well that not even a bare majority of economists who study such things think there has been a "dramatic turnaround" just yet (never mind a "vast" majority). It's equally not clear that even a bare majority of economists who study such things think the pork barrel .... er, fiscal stimulus bill will have or has had much to do with the economy moving out of recession.
Ms Romer knows full well that we won't really know whether GDP has begun growing again for at least another few quarters, after the NIPA data catches up with current events. She also knows full well that whatever gains in nominal GDP that may have occurred so far are due to federal government spending (which is part of measured GDP), not spending by consumers or businesses that will likely be sustained in the future. Ms. Romer has to be talking about nominal GDP, not real GDP, since we can't know what real GDP has done for at least another couple of years, really.
Ms. Romer also knows that the federal spending that may be causing nominal GDP to move in a positive direction right now cannot be sustained without continuing production of real goods and services. She knows that small businesses and large businesses alike must be willing and able to step up production for sustained growth in GDP. And because she is smart, she knows that businesses won't begin growing their production unless they can see a predictable, reasonably stable future for selling what they produce.
The cause of the recession in the first place was the inability of businesses and consumers to see a predictable, reasonably stable future. Congress, banks, near banks, and their buddy the Fed stirred the economic pot so violently that businesses and consumers alike couldn't count on the future. That's what causes recessions.
Given that Ms. Romer knows all these things (and as I say, she's way too smart not to know), wouldn't it be refreshing if she told us what she knows, instead of what BHO wants her to say?
Ms. Romer goes on to say
the Recovery Act helped stem the decline in spending caused by consumers and businesses reeling from the fall in asset prices and the drying up of credit.Businesses and consumers were not reeling from the fall in asset prices and drying up of credit. Calling the sub-prime mortgage debacle a "fall in asset prices" is really euphemistic, don't you think? As for the "drying up of credit," read this. Why is Ms. Romer saying these things?
First, it was banks and near banks that were reeling from their amazingly poor decisions about sub-prime mortgage investments. Second, credit did not dry up (here's the data). The problem was too much credit in the first place, a la the Fed. Third, the so-called Recovery Act did nothing to stem the decline in prices for the toxic assets given birth by really bad housing policy from Congress and really bad lending practices supported by the Fed --- the main regulator of the banks and near banks that caused the problem.
Ms. Romer is an official apologist for BHO (she's on his payroll, after all). For the sake of the economic profession, one wishes economists didn't forget all the economics they've learned when they start working for a politician.
Tuesday, December 1, 2009
As professor Lindzen notes, the science of climate change, global warming, and the role of man-made CO2 is not all in; not even close. But Lindzen's logic about whether we should be alarmed or not is all in.
The bottom line is crystal clear; even if the IPCC models were correct (and they are demonstrably not even close), the specter of global warming is a huge fraud perpetrated by the unholy alliance of pseudo scientists and politicians jockeying for economic advantage and power. That's because there is real money to be had in touting global warming; real money to be made in cap-and-trade (just ask Al Gore). Real money always has takers.
Socialists lost their ideological battle with capitalism (a.k.a., voluntary exchange). They lost it big time, and they knew there really was no way to go back. Those irritating gangs of brutal facts simply slayed all their elegant egg-head socialist theories.
But the socialist, big government crowd were not to be deterred. If you could get people to believe that the gas they exhale every few seconds was going to cause catastrophe, why you could once again assail free enterprise and the arch enemy capitalism, since industry and commerce use energy, and burning fossil fuels releases carbon. Game on.
Now, it turns out that the IPCC "scientists" over reached. They were not content to let the data inform the theory, or to let the data falsify their false theories. They have been caught.
Will we all now turn away from the fraud? Don't hold your breath. Remember the money to be made? That's more powerful than scientific results --- at least for a while.
I am amazed and even stupefied that so many of my academic colleagues continue to trumpet the dangers of climate change in general and CO2 in particular. I take them to be sincere, intellectually honest people, which is why I am stupefied at their continued advocacy of the IPCC dogma.
And make no mistake, it is dogma. A good friend of mine made the observation recently that the climate change crowd has been lumped together with all other environmentalist groups at this point, to the great diminution of the message of rational environmentalists. The climate change crowd is giving legitimate environmental messages a black eye.
We are all environmentalists, really. That's because humans are part of the environment. We are not separate from the environment, nor are we merely caretakers of the environment. I really don't know anyone who argues that we should foul our nest. But I know plenty of mistaken folks who think we should all be told what to do, when to do it, and how to go about it. These folks are in love with government, for whatever reason.
The climate change crowd enlisted politicians as willing allies in their diatribe about CO2 and global warming. Now it turns out they rigged the science. They got caught. Good.
Science will prevail in the end. It has since we discovered how to use it, and it will continue to do so for centuries to come. They burned witches for 300 years in Europe, but science finally got by that. Climate change? Just another witch.
By the way, let's all lighten up; this is really a hoot.