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From today's Open Europe news summary (my highlight in red):
In an interview with Der Spiegel, ECB President Mario Draghi said that he was “fully in favour” of German Finance Minister Wolfgang Schäuble’s proposals for a eurozone currency commissioner. Draghi added, "I am certain, if we want to re-establish trust in the euro zone, countries must pass a part of their sovereignty to the European level."
Reuters
At least Draghi is being honest. But the people should ask themselves what benefit will be gained by passing some of their democratic sovereignty to a non-elected group of bureaucrats. They also should ask themselves how unelected EU bureaucrats would be any different from unelected Nazi or Soviet bureaucrats. I am not being facetious. Is this why we fought WWII and stood guard at the borders of freedom for decades during the Cold War?
Monday, October 29, 2012
Sunday, October 28, 2012
My letter to the NY Times re: Why Devaluation Is NOT the Answer to the Euro-Debt Crisis
Re: Euro Survives, But Future Is in Doubt, by Floyd Norris
Dear Sirs:
Mr. Norris makes many good points about the euro-debt crisis; however, like many other pundits he assumes that currency devaluation is a "normal prescription for countries in financial distress...exports surge and imports plunge.". As I explained in more detail in my essay titled "Value in Devaluation?", the benefits to exporters from devaluation are paid entirely by the citizens of the country using the now-devalued currency. Exports increase, but only because foreign importers get a subsidized bargain. The rest of society finds that necessary imports are more expensive, which, pari passu, means that the cost of living increases. Therefore, currency devaluation is an unjust transfer of wealth, engineered by the state. The Irish example of painful labor reform, which Mr. Norris reports as successful but too costly, is the only real, long term solution.
Patrick Barron
Thursday, October 25, 2012
My letter to the NY Times re: No, it's NOT a better way
Re: Better Ways to Deal with China
Dear Sirs:
Eduardo Porter's recommendations for "dealing with our trade deficit with China"--a multilateral approach using carrots and sticks--assumes that China's manipulation of its currency causes harm to its trading partners. It does not. The sole harm is to its own citizens, who pay for the manipulation in the form of higher prices. China's trading partners get bargains. Mr. Porter's mercantilist philosophy was disproven first by the classical economists and later by the Austrian school economists. Nevertheless, this upside down thinking--in which a weaker currency is deemed to be "better" than a stronger one--has been embraced by exporters, who lobby politicians to intervene to help them make more sales. Since inflation is a delayed phenomenon and its source is poorly understood, the gullible public buys into the fallacy that getting a bargain from an overseas supplier is bad for them.
Patrick Barron
Dear Sirs:
Eduardo Porter's recommendations for "dealing with our trade deficit with China"--a multilateral approach using carrots and sticks--assumes that China's manipulation of its currency causes harm to its trading partners. It does not. The sole harm is to its own citizens, who pay for the manipulation in the form of higher prices. China's trading partners get bargains. Mr. Porter's mercantilist philosophy was disproven first by the classical economists and later by the Austrian school economists. Nevertheless, this upside down thinking--in which a weaker currency is deemed to be "better" than a stronger one--has been embraced by exporters, who lobby politicians to intervene to help them make more sales. Since inflation is a delayed phenomenon and its source is poorly understood, the gullible public buys into the fallacy that getting a bargain from an overseas supplier is bad for them.
Patrick Barron
A Pox on Both Your Houses--my comments in the Daily Iowan
Re: Obama Criticizes Romney Plan
See my comments at the end of the Daily Iowan report. Unfortunately, neither candidate is discussing reality, which is that they have no way to make the economy do their bidding other than by restricting the freedom of others.
See my comments at the end of the Daily Iowan report. Unfortunately, neither candidate is discussing reality, which is that they have no way to make the economy do their bidding other than by restricting the freedom of others.
My letter to the NY Times re: Free Speech Under Attack Once Again
Re: Amid Barrage of Attack Ads, Considering Tighter Rules
Dear Sirs:
Free speech is constantly under attack by incumbents of all stripes. After all it was John McCain, a Republican, and Russ Feingold, a Democrat, whose names are synonymous with one of the worst pieces of legislation ever to restrict the common citizen's ability to speak his mind--the so-called "Bipartisan Campaign Reform Act of 2002". Now incumbent Republican Dan Lungren of California feels that his now sensitive feelings as a self-important elected official are being abused by so-called negative/attack ads; therefore, he is gathering support for further restrictions on free speech. If he can't stand the heat, get out of the kitchen, as President Harry Truman would admonish.
Patrick Barron
Dear Sirs:
Free speech is constantly under attack by incumbents of all stripes. After all it was John McCain, a Republican, and Russ Feingold, a Democrat, whose names are synonymous with one of the worst pieces of legislation ever to restrict the common citizen's ability to speak his mind--the so-called "Bipartisan Campaign Reform Act of 2002". Now incumbent Republican Dan Lungren of California feels that his now sensitive feelings as a self-important elected official are being abused by so-called negative/attack ads; therefore, he is gathering support for further restrictions on free speech. If he can't stand the heat, get out of the kitchen, as President Harry Truman would admonish.
Patrick Barron
Sunday, October 21, 2012
My letter to the NY Times re: the real lesson from the 1987 stock market crash
Re: A Lesson From 1987,Unlearned by Wall St.
Dear Sirs:
Mr. Norris' discussion of the role played by the then novice use of high speed computer trading in the 1987 stock market crash is merely a side show to the real unlearned lesson. The real unlearned lesson of the 1987 crash was the role played by the Greenspan Fed, which pumped massive amounts of liquidity into the market, short circuiting the cleansing process, and reigniting the inflationary bubble. This became the template of central bank policy everywhere--whenever the stock market gets jittery, lower the interest rate by any means possible to prevent stock prices from falling. The result has been ever shorter and more extreme boom/bust cycles, with higher and higher injections of fiat money producing less and less result. The U.S. and most of the world has built an unsustainable capital structure that is completely out of tune with the wishes of those who provide the financing--the savers. It is this mismatch of savings with investment that eventually will cause a collapse that no amount of fiat monetary injections can stop.
Dear Sirs:
Mr. Norris' discussion of the role played by the then novice use of high speed computer trading in the 1987 stock market crash is merely a side show to the real unlearned lesson. The real unlearned lesson of the 1987 crash was the role played by the Greenspan Fed, which pumped massive amounts of liquidity into the market, short circuiting the cleansing process, and reigniting the inflationary bubble. This became the template of central bank policy everywhere--whenever the stock market gets jittery, lower the interest rate by any means possible to prevent stock prices from falling. The result has been ever shorter and more extreme boom/bust cycles, with higher and higher injections of fiat money producing less and less result. The U.S. and most of the world has built an unsustainable capital structure that is completely out of tune with the wishes of those who provide the financing--the savers. It is this mismatch of savings with investment that eventually will cause a collapse that no amount of fiat monetary injections can stop.
Friday, October 19, 2012
More Pundits Are Thinking About Gold
Re: A Golden Solution for Europe's Sovereign-Debt Crisis
The author, Stephen Fidler, is off the mark, but the significance of his article is that he advises using gold as a solution. The over-indebted countries do not need to find ways to continue to borrow. They need to stop borrowing...period. A nation that put its gold as collateral in a well-respected third party depository might be able to borrow more and at lower cost...but that tactic would only get that country further into debt...and it could mean losing its gold reserves entirely. This solves nothing long term. The over-indebted countries need to slash their budgets, slash their onerous regulations on business and labor, and somehow institute sound money, even if it means leaving the eurozone and instituting their own gold-backed currency. Now THAT would be a good use for all that gold.
The author, Stephen Fidler, is off the mark, but the significance of his article is that he advises using gold as a solution. The over-indebted countries do not need to find ways to continue to borrow. They need to stop borrowing...period. A nation that put its gold as collateral in a well-respected third party depository might be able to borrow more and at lower cost...but that tactic would only get that country further into debt...and it could mean losing its gold reserves entirely. This solves nothing long term. The over-indebted countries need to slash their budgets, slash their onerous regulations on business and labor, and somehow institute sound money, even if it means leaving the eurozone and instituting their own gold-backed currency. Now THAT would be a good use for all that gold.
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