Posts
Re: Wall Street's New Housing Bonanza, by Michael Corkery
Dear Sirs:
If Representative Mark Takano (D, CA) is concerned that securitizing investment in rental properties will result in a new, unsustainable bubble, he is looking for answers in all the wrong places. Rather than restrict the free market's apparently successful efforts to redeploy vacant, foreclosed homes as rental properties, he should lobby the Fed to end its massive and unprecedented money printing schemes that can only result in malinvested resources somewhere in the economy.
Saturday, February 1, 2014
Thursday, January 30, 2014
My letter to the NY Times re: Reviving New Deal Fallacies
Re: Confronting an Old Problem May Require a New Deal, by Eduardo Porter
Dear Sirs:
Mr. Porter recently trotted out every discredited economic idea of the New Deal, from Keynes' fallacious idea of permanent, structural unemployment to the fallacious idea that technology permanently destroys jobs to the fallacious claim that raising the minimum wage is good for employment (the craziest one of all!) to the discredited claim that "the WWII production explosion" ended the Great Depression. In an unhampered free market economy with sound money prices there is no unwilling unemployment, because the only true limit on an economy's production capacity is the existing pool of labor. Technology makes workers more productive, expanding production and lowering prices. Make-work WPA projects drain resources from the private economy. The minimum wage eliminates from the legal workforce those whose marginal productivity falls below the all-in minimum wage, which, of course, is much, much higher than the new $10.10 minimum. Unemployment in WWII was solved by two factors--placing millions of men under arms, and sending them off to kill and be killed, and the elimination of the most onerous New Deal legislation that hobbled American war production. The Great Depression really didn't end until 1946 after the worst New Dealer, FDR himself, was gone and a Republican congress was able to end even more anti-business madness.
Dear Sirs:
Mr. Porter recently trotted out every discredited economic idea of the New Deal, from Keynes' fallacious idea of permanent, structural unemployment to the fallacious idea that technology permanently destroys jobs to the fallacious claim that raising the minimum wage is good for employment (the craziest one of all!) to the discredited claim that "the WWII production explosion" ended the Great Depression. In an unhampered free market economy with sound money prices there is no unwilling unemployment, because the only true limit on an economy's production capacity is the existing pool of labor. Technology makes workers more productive, expanding production and lowering prices. Make-work WPA projects drain resources from the private economy. The minimum wage eliminates from the legal workforce those whose marginal productivity falls below the all-in minimum wage, which, of course, is much, much higher than the new $10.10 minimum. Unemployment in WWII was solved by two factors--placing millions of men under arms, and sending them off to kill and be killed, and the elimination of the most onerous New Deal legislation that hobbled American war production. The Great Depression really didn't end until 1946 after the worst New Dealer, FDR himself, was gone and a Republican congress was able to end even more anti-business madness.
Wednesday, January 29, 2014
My letter to the NY Times re: Yellen's analysis won't help
Re: Don't expect job data to persuade Fed on rates
Dear Sirs:
Floyd Norris reports that Janet Yellen loves to study all those employment statistics in order to set Fed policy. And that is the problem. The Fed's new leader believes that monetary policy can be used to beneficial effects. But nothing could be further from the truth. By manipulating money and interest rates, the Fed confuses entrepreneurial activity, leading to what Ludwig von Mises called "malinvestments". The natural interest rate regulates savings with profitable investment. By manipulating interest rates the Fed causes malinvestment in the time structure of production by sending too many resources to stages of production that are far removed from the consumer. These malinvestments will be revealed when the Fed stops its interventions or when the value of the currency deteriorates. Once monetary intervention is set in motion nothing can prevent the inevitable recession.
Dear Sirs:
Floyd Norris reports that Janet Yellen loves to study all those employment statistics in order to set Fed policy. And that is the problem. The Fed's new leader believes that monetary policy can be used to beneficial effects. But nothing could be further from the truth. By manipulating money and interest rates, the Fed confuses entrepreneurial activity, leading to what Ludwig von Mises called "malinvestments". The natural interest rate regulates savings with profitable investment. By manipulating interest rates the Fed causes malinvestment in the time structure of production by sending too many resources to stages of production that are far removed from the consumer. These malinvestments will be revealed when the Fed stops its interventions or when the value of the currency deteriorates. Once monetary intervention is set in motion nothing can prevent the inevitable recession.
My letter to National Review Magazine re: The Nobility of All Work
Re: The Hard-Working Rich, by Kevin D. Williamson
Dear Sirs:
Mr. Williamson's presents some truly amazing facts about what separates the rich from the poor...and it's not just that the rich have more money, per Ernest Hemingway's famous quip to F. Scott Fitzgerald. Behind Mr. Williamson's statistics about the rich lie people who just plain are willing to work. A European immigrant friend of mine has told me many times that he is amazed that Americans will take jobs that would be beneath a person of his, shall we say, class or stature, and do so without embarrassment. Americans who are self-sufficient and take personal responsibility may not be rich but they certainly are not poor. Despite our government's best efforts to drive all of us to government dependency, the non-poor have a way of finding work and providing for themselves. Before the age of the welfare state, the poor had role models for pulling themselves up by their bootstraps. I fear that government welfare and the welfare state's cheerleaders have convinced many that there is menial work that is beneath them or simply does not pay them the salary that they are due; therefore, welfare has become if not an honorable choice at least it has become a choice that the rest of us are not allowed to criticize.
Dear Sirs:
Mr. Williamson's presents some truly amazing facts about what separates the rich from the poor...and it's not just that the rich have more money, per Ernest Hemingway's famous quip to F. Scott Fitzgerald. Behind Mr. Williamson's statistics about the rich lie people who just plain are willing to work. A European immigrant friend of mine has told me many times that he is amazed that Americans will take jobs that would be beneath a person of his, shall we say, class or stature, and do so without embarrassment. Americans who are self-sufficient and take personal responsibility may not be rich but they certainly are not poor. Despite our government's best efforts to drive all of us to government dependency, the non-poor have a way of finding work and providing for themselves. Before the age of the welfare state, the poor had role models for pulling themselves up by their bootstraps. I fear that government welfare and the welfare state's cheerleaders have convinced many that there is menial work that is beneath them or simply does not pay them the salary that they are due; therefore, welfare has become if not an honorable choice at least it has become a choice that the rest of us are not allowed to criticize.
Sunday, January 26, 2014
Keeping Greece on the EU Dole
Re: EU official assures the IMF that it will continue to support Greece
There was never any question that Greece would not get all the money that it wants from the EU and then even more from the IMF. After all, the money that the EU throws down the Greek rat hole isn't real money. Furthermore, the EU officials who decide to squander it are not sending THEIR own money and are not democratically elected anyway. The same is true of the IMF.
The EU and the IMF are putting entire nations of the dole. The EU is admitting even more basket case countries for membership with the promise that these countries do not need to pay their own welfare bills but can send them to the EU. After a suitable time and meaningless promises these countries will get more money too.
The EU is little more than a welfare plan on an international scale with the IMF as backup. As such, the results are the same as putting individuals on welfare. Personal responsibility, honesty, hard work...all the necessary elements of a truly civilized society...are abandoned.
There was never any question that Greece would not get all the money that it wants from the EU and then even more from the IMF. After all, the money that the EU throws down the Greek rat hole isn't real money. Furthermore, the EU officials who decide to squander it are not sending THEIR own money and are not democratically elected anyway. The same is true of the IMF.
The EU and the IMF are putting entire nations of the dole. The EU is admitting even more basket case countries for membership with the promise that these countries do not need to pay their own welfare bills but can send them to the EU. After a suitable time and meaningless promises these countries will get more money too.
The EU is little more than a welfare plan on an international scale with the IMF as backup. As such, the results are the same as putting individuals on welfare. Personal responsibility, honesty, hard work...all the necessary elements of a truly civilized society...are abandoned.
Thursday, January 23, 2014
My letter to the NY Times re: The Boston Fed as Community Organizer
Re: Boston Fed as Community Organizer
Dear Sirs:
This PR campaign by the Boston Fed is not authorized by its mandate. More importantly, the Fed has no idea what businesses to support. This is the role of the entrepreneur, who risks his own money and that of other capitalists. Without skin in the game, the Fed has no means to evaluate which projects to support. Ludwig von Mises destroyed this socialist dream almost a hundred years ago in Economic Calculation in the Socialist Commonwealth.
Dear Sirs:
This PR campaign by the Boston Fed is not authorized by its mandate. More importantly, the Fed has no idea what businesses to support. This is the role of the entrepreneur, who risks his own money and that of other capitalists. Without skin in the game, the Fed has no means to evaluate which projects to support. Ludwig von Mises destroyed this socialist dream almost a hundred years ago in Economic Calculation in the Socialist Commonwealth.
Tuesday, January 21, 2014
My letter to the Wall Street Journal re: Central bankers cannot "buy time" for politicians
Re: Euro Zone Must Defeat the Deflation Ogre, by Simon Nixon
Dear Sirs:
Simon Nixon does an admirable job of showing that "cronyism, corruption, and vested interests" are a greater threat to the Euro Zone nations that the so-called (by IMF chief Christine Lagarde) "deflation ogre". Yet the implication is that the ECB monetary inflation can "buy time for politicians" to get their houses in order. Such is not the case. If, in fact, central banks could postpone the day of reckoning, then why not keep printing more money and postpone it forever? Because the day of reckoning is inevitable and necessary. More money printing, even if tapered, as the Fed is attempting, masks the underlying additional dislocations to the time structure of production and makes the inevitable correction even that much worse. Sound money reveals all these dislocations in an economy that has undergone a credit induced boom, and sound money prevents the next boom--and the inevitable and necessary bust--from happening in the first place.
Dear Sirs:
Simon Nixon does an admirable job of showing that "cronyism, corruption, and vested interests" are a greater threat to the Euro Zone nations that the so-called (by IMF chief Christine Lagarde) "deflation ogre". Yet the implication is that the ECB monetary inflation can "buy time for politicians" to get their houses in order. Such is not the case. If, in fact, central banks could postpone the day of reckoning, then why not keep printing more money and postpone it forever? Because the day of reckoning is inevitable and necessary. More money printing, even if tapered, as the Fed is attempting, masks the underlying additional dislocations to the time structure of production and makes the inevitable correction even that much worse. Sound money reveals all these dislocations in an economy that has undergone a credit induced boom, and sound money prevents the next boom--and the inevitable and necessary bust--from happening in the first place.
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