Friday, April 22, 2011

My Letter to the NY Times re: Temp Workers in Germany

Re: Temp Workers in Germany Dismay Unions
Dear Sirs:
The issue of lower paid, less secure work in Germany comes down to this statement in your article--"At the heart of the debate is the question of whether a temporary, lower-wage job is better than no job at all." Who can answer that question other than the worker himself? Higher unemployment is the cost to be paid for raising the cost of labor above the natural rate. There is no way to avoid it. But it does not stop there. The higher cost of labor makes German companies less competitive, further reducing employment. Furthermore, those unemployed workers must be supported by the production of those still working. They must pay higher taxes, which reduces their standard of living and incentives to work. Then there is the social disintegration that follows from a demoralized unemployed population. Those who advocate labor market intervention have much for which they must answer.

Patrick Barron

Tuesday, April 19, 2011

My Letter to National Review re: Not Enough Money

Monday, April 18, 2011

National Review:

Dear Sirs:
Catching up on my NR reading. Ah, a couple hours in the airplane, so I start on the April 4th edition. Another excellent article by Kevin D. Williamson—this one about Texas Governor Rick Perry, my kind of guy! I turn the page and…What!…”Not Enough Money”, by Ramesh Ponnuru! This must be some kind of April Fool’s joke! But, no. Now Ramesh is a great guy. I was privileged to sit next to him at the annual banquet of the Conservative Caucus of Delaware last fall and then introduce him to the group. He certainly knows a lot about the things of which he knows a lot…but monetary policy is not one of them. My copy of his essay in the April 4th edition is full of my pen and ink notations, which are too numerous to mention. Suffice it to say that Ramesh recites the mainstream economic opinion that equates prosperity with GNP growth. But this is a HUGE mistake, even if it is the opinion of the vast majority of economists. Modern day Monetarist School policy, with Milton Friedman as its champion, and Keynesian School policy, with just about everybody in government and the Fed as its champion, completely ignore capital theory. Both schools of thought want “flexible” money that can be managed by so-called experts to keep the economy on an even keel and growing nicely. (Tell me, how has that worked out?) Austrian School monetary policy emphasizes that sound money is as much a part of the free market as any other product. If you want more money, go dig some up and mint it. That is the only way that REAL money can grow…and that is a good thing! Ramesh relies upon the old MV=PY formula and then enhances it by adding the money multiplier. Just because someone writes a formula does not necessary mean that the formula represents reality…and this one does NOT. It is true that an increase in the demand for money will cause prices to drop, but it does not cause production to drop. And the reverse is true. If the velocity of money increases (the demand for money falls), prices will rise but nothing happens to production. But increasing the money supply causes all manner of evils, the worst being the temporal dislocation of the stages of the structure of production, which simply means that we make too much of the wrong stuff that no one wants to buy at a price that will turn a profit.

There’s much, much more to this than a short letter can elucidate. I’d love to have Ramesh in my Introduction to Austrian Economics class at the University of Iowa next semester. I especially like to educate my friends.

So, I turn the page and, lo and behold!, an excellent essay about one of my favorite economists: Walter Williams. John J. Miller even mentions that Walter was influenced by Ludwig von Mises and Friedrich Hayek. Ah, all is once again right with the world.

Warmest regards,

Patrick Barron

Friday, April 15, 2011

My letter to the Wall Street Journal re: Neither Political Overlords Nor Monetary Mandarins

Re: Political Overlords Shackle China's Monetary Mandarins Dear Sirs: China needs neither political overlords nor monetary mandarins to straighten out its economy and prevent inflation. All it needs is sound money and free markets. In his masterful essay delivered to the Foundation for Economic Freedom on May 18th, 1970 titled "Can We Still Avoid Inflation?", Nobel Laureate Friedrich A. Hayek has this to say about using monetary stimulus to spur economic growth: "Those who counsel underdeveloped countries to speed up the rate of growth by inflation seem to me wholly irresponsible to an almost criminal degree." The crime to which Hayek referred is robbing the many via inflation, which is difficult to quantify, for the benefit of the few, which can be quantified. Undoubtedly this is the process that will continue in China whether the monetary system is controlled by politicians or bankers. The only difference is which set of elite will benefit at the expense of the masses. Patrick Barron

Thursday, April 14, 2011

Surprise, Surprise! In the Face of Disaster Japan's Prime Minister Recommends Spending

The Japanese government is fully committed to Keynesian spending as the antidote to every ill, including the recent natural disaster. Below is an excerpt from Prime Minister Kan's blog, which he sends out periodically and always is interesting reading. "At yesterday's press conference, I called on the public to refrain from a mood of excessive self-restraint while maintaining a spirit of thoughtful compassion towards the disaster-stricken areas. A mood of excessive self-restraint could reduce consumption and dampen the business activity of Japan as a whole. Conversely, purchasing products from disaster-stricken areas and enjoying them would help support the affected areas." So, the Japanese are being told to fiddle while Rome burns. It's the patriotic thing to do.

Monday, April 11, 2011

My Letter to the NY Times: Earth Friendly and People Hostile

Re: Rush to Use Crops as Fuel Raises Food Prices and Hunger Fears Dear Sirs: There should be a special place in Purgatory for the environmentalists and the politicians who pander to them. Both camps oppose the extraction of oil from Mother Earth on Alaska's North Slope (just one example) and provide tax breaks, subsidies, and mandates for using food in its place, with the result that millions will starve. This is just one example of the blindness and callousness of the environmental activists to the consequences of their actions. Every economic intervention means that people are prevented from using their own resources to meet those needs most urgently desired. The free market with money prices is the road to prosperity, which includes both food and fuel. Any and all interventions which disrupt the free market will result in lower prosperity and, as this article so aptly illustrates, occasionally disaster. Patrick Barron