Three questions for Andrew Haldane, chief economist for the Bank of England

Re: From ZIRP TO NIRP by Alasdair Macleod

1. What exactly is wrong with price deflation?

2. In a world of increasing productivity, are not lower prices inevitable?

3. Are not lower prices beneficial, in that all society enjoys an increasing standard of living on the same money income?

The problem with the "real bills" doctrine

Re: Free banking vs.the real bills doctrine

I wrote the letter below to Don Boudreaux of Cafe Hayek. Under the real bills doctrine, banks would be allowed to create demand deposits backed by promissory notes and not reserves. Those who adhere to this doctrine, such as Mr. White, author of the above essay, believe that money backed by "real bills" is superior to money backed only fractionally by reserves. I make the point that both fractional reserve banking and real bills adherents are advocates of the same fraud: i.e., that bankers' demand deposits are NOT backed by reserves but by debt that may or may not be collectible. PB

Dear Don,

What free banking advocates such as Mr. White are really saying is that a free banker operating under the real-bills doctrine must be careful not to perpetrate too much fraud and catch the attention of the public, who will make a run upon his bank. The point is not what the banker wants but what the recipient of the banker's supposedly demand note believes that he has. A banker's demand note promises the holder that it may be exchanged for real reserves that constitute a final claim upon money; i.e., gold, silver, or even Federal Reserve Notes. This is my main problem with those who claim that they would not be alarmed if their banker engaged modestly in fractional reserve banking. The account holder is passing a check to someone who has no way of knowing that he is receiving a check that is backed only fractionally by reserves. In other words, he is the victim of fraud. Under Rothbard's two bank system--the Deposit Bank and the Loan Bank--only the Loan banker would purchase commercial credits, because there is the possibility that the commercial credit may fail.

Respectfully,

Patrick Barron

My letter to the Philadelphia Inquirer re: the crude oil export ban

Re: Debate swirls over lifting crude-oil export ban

Dear Sirs:

The answer to your headline question on the front of Sunday's business section is self-evident. The crude oil export ban cannot be justified on any economic or moral basis. It is an economic myth that there can be rational economic calculation under socialism and that private property may be violated to achieve a more important common good. First the economic calculation myth. Over one hundred years ago in Economic Calculation in the Socialist Commonwealth, Ludwig von Mises proved that private property is required for rational economic decision-making. Only owners of private property can hold rational preferences of how best to manage resources. One hardly needs to point out that appointed bureaucrats and elected officials are NOT owners of the property that they presumptuously deign to control for some more altruist purpose. Without true preferences derived from ownership, the titular managers of resources would  not know what to produce, how much to produce, what quality to produce, or what factors to use in the production process. As for the moral basis, in section 27 of his Second Treatise of Civil Government, John Locke explained that property accrues legally to "he who hath mixed his labor with, and joined to it something that is his own, and therefore makes it his property." Austrian economists have labelled this the homesteading principle. Thereafter homesteaded property may be transferred only via social cooperation under the free market. All else is theft.

The owners, workers, and paid lobbyists of those American refineries who wish to maintain the crude oil export ban seek to employ the police power of the state to prevent consumers from improving their standard of living by purchasing similar goods from foreigners at lower prices. The weakness and vapidity of their argument is evident in their admission that American oil can be transported to foreign refineries, repatriated in the form of refined products, and still sold at lower prices on the US  market. Why must Americans be held hostage to inefficient, high cost domestic producers?

My letter to the NY Times re: New icebreakers to the Arctic for what purpose?

Re: Obama Calls for More Coast Guard Icebreakers to Gain Foothold in Arctic

Dear Sirs:

President Obama's call for Congress to fund new icebreakers for the Arctic is troubling. Whereas, most nations of the world see the receding icecap as an opportunity to gain cheaper access to previously inaccessible natural resources and/or a shorter path to markets, President Obama worries about endangering the environment. In other words, most of nations want to build a better world for mankind, whereas President Obama wants to prevent anyone from doing so. A true statesman would see that the real threat to the Arctic comes from the lack of an international agreement over who may claim what resources. The Austrian economists have long had the answer. Property rights attach to those who "mix their labor" with the previously unused resource. It does not matter to the people of the world whether an American, a Russian, or an international consortium obtains title to resources that they secure as long as these resources are brought to market.