Monday, June 13, 2016

My letter to the Philadelphia Inquirer in defense of Brexit

Dear Sirs:
Trudy Rubin claims that "Brexit would be a huge step backward", but she never explains why. Oh, she does correlate the growth of the EU regulatory state with the collapse of the Soviet Union, but this is not cause-and-effect. The Soviet Union collapsed because NATO stood guard over the Western democracies until the internal cancer of communism had destroyed the Russian economy. Even Ms. Rubin admits that Europeans resent its (the EU's) massive bureaucracy, myriad regulations, financial disasters, and open border policies. Furthermore, she admits that Brexit probably would lead to the dismantling of the EU. Is this not democracy in action? The Europeans, of all people, understand the dangers of large, undemocratic, centralized, bureaucratic states, of which the EU is just the latest incarnation.

Patrick Barron

Friday, June 10, 2016

Puerto Rico needs better advisors

Re: House passes bill to restructure Puerto Rico's $70 billion debt

The US House of Representatives has passed a bill to appoint a special commission to restructure and renegotiate Puerto Rico's unsustainable debt. The hubris of Congress that it and its appointed commissioners have superior knowledge regarding public finance is farcical. It is widely reported that Puerto Rico's debt is $70 billion. With a population of 3.7 million, Puerto Rico's per capital debt is around $19,000. US debt is widely reported to be $10 trillion. With a population of around 300 million, US per capita debt is around $33,000. I suggest that Puerto Rico hire better advisors, preferably German, since Germany is running a balanced budget.

Tuesday, June 7, 2016

Trade negotiations are not necessary

From today's Open Europe news summary:


WTO chief warns of “complex and drawn-out” trade negotiations after Brexit

Roberto Azev√™do, Director-General of the WTO, has warned that it could take Britain decades to disentangle its trading relations with the EU and negotiate new ties with the rest of the world after Brexit. He told The Times, “It seems that there is a great deal of confusion about the trade implications of a British exit from the EU. I think it’s important to provide the facts. The likelihood is that a British exit would lead to a sequence of complex negotiations – with the EU itself, with the 58 countries that have trade agreements with the EU, and also with all the other members of the WTO. These negotiations would be complex and drawn-out.”
Meanwhile, Prime Minister David Cameron said yesterday that leaving the EU would cause an immediate shock, then uncertainty, and negatively impact trade. Boris Johnson said the risks of remaining in the EU are “massive”, due to the Eurozone and migrant crises.
 
No so-called trade negotiations are needed. The idea that a nation must seek the approval and reciprocity in order to lower or completely eliminate barriers to trade is one of the most persistent myths in all of economics. It is akin to believing that one cannot start a diet until everyone else starts a diet. Lowering barriers to trade does not require the cooperation of any other nation. All a nation has to do is unilaterally eliminate all barriers to foreign products. Such an action will lower the cost of living for the citizens of the importing country. Of course, these imports will be paid with currency of the importing country. And what is the exporting country to do with this currency? It has a choice. It can spend the currency on imports from the country that issued the currency . It can invest in the country that issued the currency. Or it can hold the currency as foreign reserves, to be spent later. Now, how is any of this a problem for the country that eliminated barriers to trade?
 
Scrap all the trade agreements currently in force. Send the trade negotiators home. Declare unilateral free trade. This is the path to peace and prosperity.

Friday, May 20, 2016

Defending property rights cures the bathroom controversy


 

The current tempest in a teapot among the "rights" advocates is that no one should be restricted from using the gender specific bathroom of his choice. The "rights" advocates want to use the police power of the state to ensure this outcome. The federal government has come down on the side of the "rights" advocates, with regional and local governments sometimes taking the opposite side. Once again, Americans are being told that there are only two sides to this issue, and both sides claim to defend what is proper.

 

But are there only two sides? Perhaps we are looking at this issue in the wrong way. Instead of assuming that some level of government can make this decision for all of society, there is the alternative solution of defending the right of the property owner (of the bathroom in question) to make this decision. After all, someone actually paid for the bathroom in order to satisfy his preference. And there are precedents. We all have seen signs that tell us that bathrooms are reserved for customers only. There is no movement that I have seen that demands that any bathroom anywhere be accessible to whoever desires to answer the call of nature. We all accept that limiting bathroom facilities to customers is the right of the business owner. Why should not the business owner be allowed to decide which bathroom his patrons use? If his patrons are not happy with his decision, they are perfectly free to refrain doing further business there. And other business owners could adopt a different policy and reap the rewards that come from satisfying this subset of society.

 

Already there are unisex bathrooms everywhere. My wife and I patronize a very nice French restaurant in Philadelphia which provides only private stalls. Anyone can use whichever stall is available in complete privacy. Each stall is a little room unto itself, similar to a Porta-Potty. Outside the stalls are lines of sinks, towels, mirrors, etc. that are used by everyone. Seems to me that this common sense solution can be adopted by business owners who wish to avoid antagonizing any possible segment of their customer base, rather than be forced to comply with a government mandated solution. Some very small businesses provide only one bathroom, which is unisex. The toilet, sink, towel, and mirror are located inside the one private bathroom. Again, we see these just about everywhere in America and even more predominately in Europe.

 

Come on, America! Let's stop fighting among ourselves and then demanding that government set universal rules. Let's defend the property rights and business incentives of the owners of bathrooms to find solutions that we all can accept. It's already happening for those wishing to see.

Monday, May 16, 2016

Another reason to get rid of the euro

From today's Open Europe news summary:


European Commission considering new tools to prevent cash outflows from failing banks

According to a document seen by the Financial Times, the European Commission is considering proposing a new ‘moratorium tool’ that would give national regulators the power to freeze payments to bondholders and potentially halt depositor withdrawals in order to prevent huge cash outflows from failing banks before national authorities can intervene.
 
This is the typical answer from the elite running the EU and the ECB. When their policies lead to failure, the people's assets will be seized. In typical Orwellian New Speak fashion, such action will be hailed as the necessary and proper solution to the problem.
 

Wednesday, May 11, 2016

My response to an email blast by Roger Helmer, member of the European Parliament

Per your recent email:

"But the key point is that the UK is a massive importer (and net importer) of EU goods.  We will in fact be the EU's largest export customer.  Bar none.  This is undesirable from a balance-of-payments point of view, but it gives us enormous negotiating clout."


Dear Roger,
One of the greatest fallacies in all of economics is that buying more from one customer than he buys from you is a bad thing; i.e., a balance of payments/trade deficit. Unfortunately, you commit this error in your recent email blast, copied above. What are the EU countries to do with all those pounds that they accept in payment for vendible goods? They will buy something in Britain, maybe even British national debt. If they let the pounds stack up in their central banks as foreign reserves, all they have done is present a gift to the British people, similar to a merchant never cashing your check.

Warmest regards from an friend in the US,

Patrick Barron

Tuesday, May 10, 2016

Is an increase in German exports a good thing for Germany?

From today's Open Europe news summary:


German exports rise unexpectedly

German exports rose by 1.9% month-on-month in March 2016, according to new data released by the National Statistics Office (Destatis) yesterday. It was the largest monthly increase in half a year, and came as a surprise to analysts who did not expect any growth at all. Imports in March dropped by 2.3% to €80.9bn, leaving Germany with a trade surplus of €26bn.
 
 
A rise in German exports is seen as a positive development, but is it? What does Germany get in return for sending its products abroad, especially if it sends these products to other members of the Eurozone; i.e., that countries using the euro? It gets an increase in its euro-denominated credit at the European Central Bank, known as its TARGET2 balance. In other words, Germans work hard to produce real, vendible goods in exchange for a debased and depreciating currency.
 
Patrick Barron