Turning the Proper Role of Government Upside Down

Re: End cruel delusion of cheap money and reckless spending
http://www.cityam.com/article/1386034054/it-s-time-end-cruel-delusion-cheap-money-and-reckless-spending


Many thanksto Michael jose of UKIP for forwarding the above link in his daily blog: http://euroskept.blogspot.be

Steve Baker makes excellent points. But I take exception with one of his statements. First of all he notes this amazing statistic:

"Two thirds of spending was expected on health, education and welfare, mostly pensions."

Good Lord, that is quite a revelation! But he goes on to say this:

"The sick and disabled, families, children and pensioners are reliant on these crucial services."

This is the problem; i.e., that people have come to rely upon government to tax their neighbors to pay for things for which they should be responsible themselves. It makes no sense from an economic or ethical perspective NOT to be responsible for saving for one's own retirement. It is as if we are all in a giant circle, picking the pocket of the person in front of us. Let's just stop picking the other guy's pocket, which will mean that our pocket doesn't get picked and we are able to take care of ourselves.

I apologize if what I say next sounds cruel, but by what right does anyone have in transferring the costs of his medical problems onto his fellow man through the coercive power of the state? Without the state to pick up the tab, would we not take better care of ourselves and buy appropriate medical insurance? Again, I apologize if this sounds cruel, but even people born with disabilities have no right to the wealth of their more fortunate fellows. And don't people know that having children is a costly business? Does it come as a surprise that their children must be clothed, housed, fed, educated, etc.? Are not these sacrifices more than compensated by the wonderful benefits from having children, especially in one's older years? Why must the costs of raising children be transferred onto the backs of one's fellow man, all transfers conducted coercively by the state, of course. All this socialization of the normal trials of life have not made us healthier, happier, or more generous with our fellows. It has done the opposite.

We have placed the proper role of government upside down. Baker states this at the beginning:

"Defence, criminal justice, local government and the Foreign Office have been squeezed."

Incredible! These services ARE the proper role of government. Don't listen to me. Just read John Locke, Thomas Jefferson, and Frederic Bastiat. We are abandoning the most important and ethically justifiable roles of government to fund so-call services that government does badly and without ethical justification.

The modern welfare state has failed. And just as importantly, it has crowded out the true role of government.

My letter to the Philadelphia Inquirer re: youth unemployment

Dear Sirs:
Mr. Mark Zandi says the following in his latest OpEd titled Ways to help a generation in economic distress: "Most obviously, we need to focus on raising educational attainment."

He goes on to say that tax money should be redirected in ways that will not boost tuition, although it is far from clear how his spending choices would not cause the same problems that he wishes to alleviate.

Aside from the observation that "businesses could have more input into college curricula", Mr. Zandi offers nothing that would make hiring young people a more attractive option for businesses. What about reducing the regulatory costs of employment, from minimum wages to mandatory insurance to mandatory family leave, not to mention the minefield of discrimination and environmental laws?

Here's a little known truism--there is always more work to be done than people to do it. Labor is the only truly limiting factor in the ability of an economy to progress, because only increased specialization of labor can bring about a lower cost of living. (Think how a family living in a wilderness cannot become prosperous, because its members must be jacks of all trades and masters of none.) Fewer workers mean less specialization, lower productivity, and a lower standard of living.

Our very large country has so much unemployment, because government interferes in the natural cooperation between labor and capital. Let them come together to produce increased standards of living for all.

Why only Europe? Why not the entire world?

Re: This is the Common Market Europe Needs, by Iain Martin

Dan Hannan will present the draft statement of a proposed "pan-European Free Trade area open to all states on the European continent."

Wonderful! But why limit the free trade area to European states? Why not expand it to the entire world? Just declare unilateral free trade and go home. You cannot force anyone to trade with you, and those who refuse to trade harm only themselves. This is so simple only politicians cannot see it.

ECB report damns its own policies

From today's Open Europe news summary:

In its latest financial stability report, released yesterday, the ECB warned of potential volatility and stress on global financial markets from the US Federal Reserve’s decision to taper. The ECB also warned that banks’ provisioning against potential losses has “barely kept pace with the deterioration in asset quality” and further “additional reserves” will likely be needed.FT City AM

With this report the European Central Bank as much as admits that its own policies have failed. Bailouts, monetary stimulus, Long Term Repurchasing Operations (LTRO), etc. have done nothing to prevent the further deterioration of bank assets. The increased capital injections amount to nothing more than money down the proverbial rat hole. This will continue to be the case, even if Basel III is implemented, because the ECB and the Basel regulators do not understand the source of the problem; i.e.,the socialization of money and banking in the EU. All socialist enterprises, which perfectly describes the European Monetary Union, end in capital destruction, poverty, and social chaos. Further political and economic integration will merely ensure that this process continues...but at a faster pace. Angela Merkel foolishly believes that her so-called "contracts" with deficit nations will work. But the deficit nations are sovereign entities answerable only to their own citizens. If they try to implement Merkel's policies, the Germans will be blamed for the necessary hardships that must accompany the restructuring of their economies. At that point the deficit nations will dishonor their so-called "contracts". New governments will disown the actions of previous governments, and the EU will have done nothing to cure its inherently unsustainable, unworkable, and unjust continent-wide social experiment.

A bad deal all around

From today's Open Europe news summary:

 Merkel’s CDU/CSU and SPD seal Grand Coalition agreement Following two months of negotiations, the CDU/CSU and SPD signed off on a coalition agreement early this morning. The Europe chapter of the agreement has not changed from the draft agreement of which Open Europe was the first to provide an English translation on its blog and in yesterday’s press summary.

European Parliament President Martin Schulz, part of the SPD’s negotiating team, confirmed that the parties had agreed that the ESM bailout fund could be used to directly recapitalise struggling eurozone banks if other measures such as bail-ins and state guarantees are not sufficient. The deal also includes introducing a national statutory minimum wage of €8.50 per hour from 2015 – a major victory for the SPD. The coalition has also committed to implementing the controversial EU Data Retention Directive, which had been blocked by the FDP.

Open Europe’s Nina Schick appeared on CNBC this morning discussing the coalition agreement. Open Europe’s blog translating the draft German coalition agreement has been cited by Gazeta Wyborcza, Forex Live and Central Banking.
Open Europe blog Handelsblatt EUobserver El País El Mundo Le Monde FAZ FAZ 2 Süddeutsche Süddeutsche 2 Süddeutsche 3 Süddeutsche: Denkler FT WSJ Euractiv Telegraph Central Banking Gazeta Wyborcza Forex Live

The deal to seal the Grand Coalition between Germany's Christian Democrats and Social Democrats is a bad deal for Germany, a bad deal for Europe, and a bad deal for the world. Germany gets a minimum wage of over $11, ensuring higher unemployment among its young and less skilled citizens. The German taxpayer gets to pay higher social welfare costs to support the increase in unemployed workers and to fund the European Stability Mechanism (ESM), which WILL be tapped by the banks in deficit countries. Nothing could be more certain, for the political class in these countries will oppose bail-ins and will have no budgetary room for bailouts. All Europe will suffer from more socialization of banking, which will postpone even further the necessary restructuring of the European economies. Even the citizens of the countries receiving ESM funds will suffer, as they need real jobs not more welfare. Only their own politicians can solve their problems by being forced to face the reality that no one will lend them more money. And the world will suffer as German capital is wasted on more international welfare. The only beneficiaries will be the predatory German political class, led by the Christian Democrats' Angela Merckel and the Social Democrats' Martin Schulz, who will bask in the false glow of being good European neighbors for sacrificing the wealth and future of the common German citizen.

Germany deserves better. Europe deserves better. And the world deserves better.

How to end the "feedback loop" between sovereigns and banks

 Re: Today's Open Europe news summary:

On Monday 2 December, Open Europe will host an event entitled, “Greece after the ‘double crisis’ – Can the feedback loop between sovereigns and banks be broken and can the economy return to sustainable economic growth?” Speakers will include Professor John Mourmouras, Chief Economic Adviser to the Prime Minister of Greece, and Hugo Dixon, Editor-at-large at Reuters. Spaces are limited but if you would like to attend please send an e-mail to sophie@openeurope.org.uk.
Open Europe events

There really never can be an end to the "feedback loop" of capital destruction as long as government controls money and banking. End bailouts. End depositor guarantees. Return money and banking to the private sector, where market forces are all that are needed. Then weak banks will find their funding drying up without causing systemic problems that must be placed on the backs of taxpayers. Market forces will cause funding costs to rise when the public believes that a bank is overextended. It will be up to the individual banks to reassure their customers that its funds are safe. If it hides bad news from the public, its officers and directors should be subject to both civil and criminal sanctions.

I imagine that this event will attract lots of ideas that really are nothing but band-aids or calls for more government regulations and/or coercive measures that just will not work, because they do not address the real problem: moral hazard.

ECB's Draghi fights the bogus "dangerous deflationary trend"

Re: Draghi says ECB needs "safety net" against deflation, by Ambrose Evans-Pritchard

Ambrose Evans-Pritchard is worth reading not because he understands economics but because he does a good job of parroting the misinformed opinions of Europe's monetary authorities. AEP's latest column contains all the old, discredited worries about "deflation"; i.e., falling prices. Supposedly, once the monetary authorities have inflated a giant credit bubble, market forces to deflate the bubble in order to restore equilibrium must be fought with every coercive monetary tool available. Yes, countries that went on a borrowing spree, funded by the ECB's interventions to drive down the interest rate, will find it difficult to pay back their debts in money of equal purchasing power. But their policy errors should not be justification for robbing all citizens using the euro via monetary debasement. This reminds me of the old Brezhnev Doctrine, that any country could become communist and fall under the orbit of the Soviet Union, but no country could throw off the communist yoke. Any attempt to do so would result in an invasion by Russia. Gee, I wonder what happened to that doctrine?