Another Adverse Consequence of Welfare-On-Demand

From today's Open Europe news summary:

Commission threatens to sue UK over benefits test
The European Commission has threatened to take legal action against Britain arguing that the UK’s “right to reside” test for determining benefit entitlements indirectly discriminates against non-UK nationals. The Government fears the move could leave taxpayers facing a bill of up to £2.5bn to pay for EU nationals, including “benefit tourists”, a new cost that could ruin the Coalition’s plans for welfare reform. In the Telegraph, Work and Pensions Secretary Iain Duncan Smith writes, “This kind of land grab from the EU has the potential to cause mayhem to nation states, and we will fight it.”
Open Europe’s Stephen Booth is quoted in the Mail saying, “Freedom of movement within the EU has largely been positive for the UK but issues surrounding benefits and social security are understandably very sensitive. For the freedom of movement within the EU to work, governments have to be able to assure their citizens that welfare systems won’t be abused.”
Meanwhile, in the Netherlands, Elsevier reports that a parliamentary enquiry has found that that the Dutch government underestimated and was underprepared for the number of migrants from Eastern Europe after EU enlargement.
Times Telegraph Telegraph: Duncan Smith Conservative Home Sun Express Express: Leader Mail Mail 2 Elsevier NOS

Here in the U.S. the states have known for a long time that generous welfare benefits attract "welfare benefit shoppers", from both within the U.S. and without. But the EU is going further than even the U.S. in mandating that their members--who, after all, are SOVEREIGN countries--establish NO criteria that would discriminate against such welfare benefit shoppers. It is welfare-on-demand and other socialist enterprises such as taxpayer education for non-citizens that is the primary cause of the backlash against the economically beneficial free movement of labor across political borders.

A Tactic of the Euro Elitists

From today's Open Europe news summary:

Meanwhile, the Guardian reports on Deputy Prime Minister Nick Clegg’s speech in Warsaw today, in which he is expected to argue, “Any change to governance structures must not lead to a weaker and divisive Europe where the aims of ‘Euro ins’ are set against those of ‘Euro outs’. There can be no inhibiting of trade, for example, and no obstructing the single market. Any decision that affects the 27 must always be taken by the 27.”
Open Europe blog Spectator Coffee House blog FT Mail Guardian Times

One of the tactics of the Euro elitists is to equate support for the Euro as support for free markets and opposition to the Euro as opposition to free markets. This is a logical fallacy. Many countries engage in free trade with one another even though they do not use a common currency. Nevertheless, if Nick Clegg's desire is to expand trade while minimizing currency conversion costs, he should support a return to the classical nineteenth century gold standard in which each country's currency was merely an expression of a certain weight of gold. He should reflect upon these words of Ludwig von Mises in Human Action:

"The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the fact that it was an international standard as required by international trade and the transactions of the international money and capital market. It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization into the remotest parts of the earth’s surface, everywhere destroying the fetters of age-old prejudices an superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another."

The ECB as a Fed Clone?

From today's Open Europe news summary:

Mats Persson: Topping up bailout fund through ECB could prove to be “non-starter”
In an opinion piece in today’s CityAM, Open Europe’s Director Mats Persson writes that despite the positive news that eurozone leaders are now acknowledging that a Greek default might be necessary and the importance of recapitalising Europe’s banks, the alleged proposal for a new eurozone rescue package, based on leveraging the European Financial Stability Facility (EFSF) through the balance sheet of the European Central Bank (ECB), is a non-starter. He argues that: “the plan would require a radical reworking of the EFSF framework, since it is not designed to be leveraged or be subordinate to the ECB in terms of covering losses [and] using the ECB’s balance sheet to top up the EFSF would further expose the former to even more risky debt”. He notes that under the proposals “the ECB would fully enter the domain of fiscal policy”, which would be unacceptable to Germans. He argues that “a growing number of Germans now view the ECB with growing suspicion, as was seen in the dramatic resignation last month of Juergen Stark, the German representative on the ECB’s executive board, allegedly over the bank’s decision to start buying Italian and Spanish government bonds. One step further, and German support for the entire euro project could start to diminish.”


German finance minister Wolfgang Schäuble denied that a fivefold increase in the EFSF was imminent saying, “No, that is clear... We do not intend to increase it,” reports CityAM. Schäuble’s comments were echoed by a number of German politicians. Carsten Schneider, the SDP’s Finance spokesman said: "A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable."

The "programme..being cooked up in Washington and Brussels" is to turn the European Central Bank into a clone of the Federal Reserve Bank, a last-resort purchaser of worthless sovereign debt. Those who control the money control everything; thusly, turning the ECB into a European Fed would constitute a vast transfer of real power to Brussels.

Put Your Own House in Order

From today's Open Europe blog, quoting British Deputy PM Nick Clegg (my emphasis):

On his part, Nick Clegg said last month

"Countries like the UK should not see ourselves as spectators, watching from the wings, triumphalist, complacent, as if Europe's economic woes are a eurozone problem, rather than a problem for all of us - as if it is enough to put your own house in order, but then stand by and let the neighbourhood crumble."


Why "yes", Nick, it IS enough to put one's own house in order. In fact, that is the most important job of any politician. It is mere hubris to believe that a political leader has any kind of mandate, let alone effective control, over the internal affairs of any other nation. Put your own house in order and set a good example for others to follow. That will have more positive and lasting impact on world affairs than pompous pronouncements of international agreements that everyone knows will be broken. Oh, and by the way, this goes double for President Obama.

Germany's FDP May Reinvent Themselves as Eurosceptics

From today's Open Europe news summary:

In the FT, Quentin Peel notes that the “Free Democratic party, the junior member of [Chancellor Angela Merkel’s] coalition that has seen its support collapse in a series of state elections, is flirting with the temptation of walking out and reinventing itself as a eurosceptic champion.”

This is GOOD news! The FDP needs to represent free markets and free people in Germany and forge links to UKIP in England and the True Finns in Finland. Each new poll shows that a majority of the German populace want out of the EU and back on the DM. There is nothing threatening in any of this (in contrast to to the Polish prime minister's comments that a breakup of the EU would mean the possibility of war in Europe within ten years. This is tantamount to claiming that free markets and free people cause war, when the opposite is the case).

Retrying the Discredited Policies of Hoover and FDR

I just finished re-reading America's Great Depression by Murray N. Rothbard. I read the book very carefully, because I needed to design a supervised reading course of the book for some students at the U. of Iowa. As I read the book, I was amazed that the same harmful policies pursued by Presidents Hoover and Roosevelt are being repeated today and justified by the same discredited economic theories.

Today's Open Europe news summary illustrates three harmful policies contemplated by the EU that were tried and found to be failures by Hoover and Roosevelt: (1) a proposed tax increases in the form of an EU-wide financial transaction tax; (2) a possible--and probable--rate cut by the ECB; and (3) the implied use of force to prevent a member from exiting the EU in order to avoid policies it deems harmful.

Hoover signed the largest tax increase in the history of the country at the bottom of the Great Depression, which destroyed purchasing power and incentives to produce. The Fed lowered interest rates, which made it impossible for banks to loan funds at a rate sufficiently high to compensate them for risk. The states were not allowed to opt out of the federal make work programs and new regulatory burdens.

I recommend that you read Rothbard's excellent book. You can download the book in PDF form for free: http://mises.org/resources/694