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Economics

QotD: Sowell on the Negative Wage

Dr. Sowell:

Someone who is trying to climb out of poverty by working their way up can easily reach a point where a $10,000 increase [ in pay]* can cost them $15,000 in lost benefits they no longer qualify for. That amounts to a marginal tax rate of 150 percent—far more than millionaires pay.

–Quoted by Hunter Lewis in his piece “50th Anniversary of Federal Government’s Failed War on Poverty.”

*Parenthetical not mine. –J.

Hunter Lewis: Negative Interest Rates– Only The Start?

In the article, only the first bit of which is below, you will find several delightful ideas on how to stimulate consumer spending and thus to revive the economy. And anyone who invents the phrase ‘the zombification of the economy’ has my applause.

Personally, I am thinking of taking a strong position in cockle shells.


Negative Interest Rates: Only The Start?

By Hunter Lewis
Saturday, June 7th, 2014

As Ryan McMaken noted on June 5, the European Central Bank has instituted negative interest rates for member banks. This could soon spread to the US and also to consumer accounts. If so, you would find money taken out of your bank account each quarter unless you spend it. Some observers think that in the US at least it will start with higher account fees, which will be stealth negative interest rates, and then move to overtly negative rates.

The idea is that if low rates are not yet persuading you to spend, then why not punish you even more for saving. To make this more effective, there would also be a push for all electronic money, to keep you from stashing any away from the confiscation agents. Ken Rogoff, leading Harvard (and Republican) economist has just recommended this to facilitate negative interest rates and in general to increase government control over cash.

….

This is far from the only “innovation” that could be coming our way. In a speech on June 4, San Francisco Fed Chairman John Williams suggested that the Fed should at least take a look at “nominal income targeting.”

[SNIP]

Prof. David Bernstein discusses the 1905 Supreme Court case “Lochner vs. New York”

Prof. David Bernstein of George Mason Univ. published in 2011 his book Rehabilitating Lochner. So vass ist ziss case Lochner, anyvay?

The Foot of All Knowledge explains:

Lochner v. New York, 198 U.S. 45 (1905), was a landmark United States Supreme Court case that held that “liberty of contract” was implicit in the Due Process Clause of the Fourteenth Amendment. The case involved a New York law that limited the number of hours that a baker could work each day to ten, and limited the number of hours that a baker could work each week to 60. By a 5–4 vote, the Supreme Court rejected the argument that the law was necessary to protect the health of bakers, deciding it was a labor law attempting to regulate the terms of employment, and calling it an “unreasonable, unnecessary and arbitrary interference with the right and liberty of the individual to contract.”

Lochner is one of the most controversial decisions in the Supreme Court’s history….[SNIP]

…and has until recently enjoyed a lousy reputation among the right-thinking (that is, the librul-Progressive, which is to say, not at all right-thinking) legal professoriate.

Professor Bernstein, along with Profs. Randy Barnett and Richard Epstein (as we inferred from his remarks in his last appearance on CCiZ) disagree on that, stout fellows that they are. They talk about legal esoterica such as Freedom of Contract and other stuff that is not for the tender and innocent ears of the Elite (or of various Union leaders or members and their legbreakers and enforcers).

David Bernstein is one of the contributors to Prof. Eugene Volokh’s law weblog The Volokh Conspiracy. (The Volokh Archives going back to 2002 are now found here.) Interviewer Josh Blackman is also an attorney and an Assistant Law Professor at the U. of South Texas. You can read his short summary of the interview at his website. You can also download the interview as a podcast there, watch the video there, click on over to Vimeo and watch it or download it as an mp4 there, or stay here and listen to the audio.

Epstein Thrashes Rubenfeld on Natural Law; Panel on Redistribution of Wealth

I would swear that I saw, for the first time ever, outright anger in Prof. Epstein’s face the first time I watched this clip. Never mind, you can hear it in his voice as he gives Yale Law School’s Prof. Jed Rubenfeld a concise and pithy jolly what-for for a**-hattery.

This is the final 5:48 of a panel discussion described as below. The whole thing is quite interesting. Steve Forbes also seems to have some understanding of what’s what. Andy Stern of the infamous SEIU brings along his flag and his violin. And the odious Prof Rubenfeld is…well, odious. Although his question in Part 11 is one we all get asked a lot, and I’m glad to have Prof. E.’s response.

Best part first. The series begins with Part 1, below Part 11 here. I think you can just click through the segments from there.

–J.

Uploaded on Nov 17, 2009

The Federalist Society presented this panel discussion on Redistribution of Wealth at the 2009 National Lawyers Convention on Thursday, November 12, 2009. Panelists included Prof. Richard A. Epstein of New York University Law School; Mr. Steve Forbes, Chairman and CEO of Forbes Inc. and Editor of Forbes Magazine; Prof. Jed Rubenfeld of Yale Law School; Mr. Andrew L. Stern, President of the Service Employees International Union; and Judge J. Harvie Wilkinson III of the U.S. Court of Appeals for the Fourth Circuit as the moderator. Part 11 of 11

The whole thing is very much worth seeing, highly recommended, and be sure you have your kidney basin at the ready for Prof. Rubenfeld’s first appearance:

Quids…

The Daily Fail just has to say this. OK, it’s bimetallic but that is it. It doesn’t really look like the Euro. More to the point if we are introducing a new coin design does that not imply a commitment to Sterling? I don’t want the Euro. Guess why? Euro notes are OK. Euro Coins are very difficult to distinguish and God alone knows what they make ‘em from but after a couple of years they look tatty as Hell. Look, I can get myself around say US coinage, or Czech or Polish or British but Euros don’t float my boat. OK, so like the Euro coin it’s bimetallic but so is the GBP2 coin which I rather like. “Standing on the shoulders of giants” and all that caper. But dear me! The Euro cents I handled in Amsterdam recently just looked rough – like they came from one of those toy tills. They looked like they had been through a Belgian. Or an Alsation. Something of that kidney. They all look the bloody same yet different. Having different national images is a pain because whereas we have instantly identifiable symbols whereas having a variety of national symbols on the reverse you don’t bloody know – I mean you know if it is German* or French but it isn’t obvious if it is 10c or 20c. It identifies where the coin came from but not what it is worth. Having them all the same colour is a hyper-pain too. The notes work. The coinage doesn’t. And it looks shonky. It doesn’t look like the Euro my dear Fail. It looks nothing like it. I think it looks quite nice. Although by 2017 I bet it won’t buy a Coke but that is another matter. And there is also too many. I like the US system (I know they have other coins) but largely it’s 1,5,10,25 and that is your small onion. Works. OK, the fact that the nickel is bigger than the dime always annoyed me but nothing to the Euro. I also liked the dollar bill. I, being a Brit, am just not used to holding a wad of foldable. I felt like a movie star though in truth I had about enough to go to Wendy’s for a burger. The smallest paper you get here is a fiver which is worth roughly USD8.30**.

But, let’s get back to the score. The pound coin is not being scrapped. The Fail is mongering the scares. It is being replaced. Fair enough. It still has her Britannic Majesty’s head on it. It looks fuck all like a Euro. I quite like it.

*The German one has Norman Foster’s “Friendly Eagle” on it. You know the one that doesn’t invade Poland. And let us all be grateful for that. Because the last time that happened…

**So I say to my wife. “That’s good – can we go to the USA”. Problemo. Myt wife is a translator and is often paid in USD so that isn’t good. Swings and bloody roundabouts. You simply can’t win. You can run but if you do so you’ll only die tired.

Speaking of the Minimum Wage …

Minimum Wage

Thanks to Mark Alexander’s Patriot Post.

How Not to Be a Libertarian

I put the money quote in boldface ….

‘Anyone advocating government officials or anyone else coercively taxing some people against their will and giving that money to others [is] guilty of advocating coercion and intimidation. Such people are not libertarians based on the ZAP criteria.

Such people are also guilty of fraud if they claim to be “libertarians.”’

–Commenter Garry Reed | December 7, 2013, 9:36 pm

…in response to the posting ‘U.S. “Libertarians” Debate Basic Income,’ which links to several pieces, pro- and not-so, on the topic by various Shining and Less-Shining Lights. These include a podcast interview by somebody at Cato of our pal Zwolinski, whose allegedly libertarian heart regularly bleeds, though not for people who think charity and justice are two different things, and also a piece by somebody at Reason, who tells us how much less demeaning such a program would be. (I guess people are still, underneath it all, not proud of being unable to look after themselves — not even in the face of catastrophe.)

I thought this last article might be a satirical debunking of the idea, but no such luck.

Richard A. Epstein: When, How Should Courts Override Legislatures?

Please, do not miss this 1:26:33 of Prof. Epstein’s inimitable and marvellous discourse. Indescribably educational, and, of course, fascinating; and this one is particularly wide-ranging. My quibble-quotient here is tiny and is swamped by the education effect. The UT description:

Published on May 21, 2012

Richard A. Epstein, legal scholar and author, visits the Dole Institute to discuss courts grounds to invalidate the constitution.

Filmed on October 19, 2006 at the Dole Institute of Politics.

The Affordable Cell Phone Care Act

I do not apologize for withholding from you dear feline Zanzibarians the treat of beholding yet again His Face, even though for once it bears a relatively pleasant expression. You will see it anyway if, as I recommend, you follow the link to the whole column. :)

The Affordable Cell Phone Care Act
by EDWARD CLINE February 4, 2014

Groucho Marx had many great monologues and spiels, but this is one of his finest:

“The nickel today is not what it was fifteen years ago. Do you know what this country needs today?…A seven-cent nickel. Yessiree, we’ve been using the five-cent nickel in this country since 1492. Now that’s pretty near a hundred years’ daylight saving. Now, why not give the seven-cent nickel a chance? If that works out, next year we could have an eight-cent nickel. Think what that would mean. You could go to a newsstand, buy a three-cent newspaper and get the same nickel back again. One nickel carefully used would last a family a lifetime.”

Note the absurd application of a Keynesian Money Multiplier effect, where inflation allows a carefully spent nickel to last a lifetime. Of course, the gentleman falls for the muddled logic and obfuscation, responding, “Captain Spaulding, I think that is a wonderful idea.”

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Compete to cooperate

Professor Sinclair Davidson at Catallaxy Files highlights excellent points made today in the WSJ:

Consider the most basic economic unit, the transaction. A transaction is cooperative because both parties gain from a voluntary exchange. There is competition in markets, but it’s actually competition for the right to cooperate. Firms must compete for the privilege of selling to consumers—for the right to cooperate with consumers. Workers compete for the right to cooperate with employers. Competition matters because it ensures that the most efficient players will gain the right to cooperate on the best terms available. But competition plays a supporting role, while cooperation makes markets thrive.

(more…)

A Christmas Gift

For all the sad tragics you may know:

Bitcoins: Money of the Future, or Ponzi Scheme?

Bitcoins: The Second Biggest Ponzi Scheme in History

Gary North – November 29, 2013

I hereby make a prediction: Bitcoins will go down in history as the most spectacular private Ponzi scheme in history. It will dwarf anything dreamed of by Bernard Madoff. (It will never rival Social Security, however.)

To explain my position, I must do two things. First, I will describe the economics of every Ponzi scheme. Second, I will explain the Austrian school of economics’ theory of the origin of money. My analysis is strictly economic. As far as I know, it is a legal scheme — and should be.

PONZI ECONOMICS

First, someone who no one has ever heard of before announces that he has discovered a way to make money. In the case of Bitcoins, the claim is literal. The creator literally made what he says is money, or will be money. He made this money out of digits. He made it out of nothing. Think “Federal Reserve wanna-be.”

Second, the individual claims that a particular market provides unexploited arbitrage opportunities. Something is selling too low. If you buy into the program now, the person running the scheme will be able to sell it high on your behalf. So, you will take advantage of the arbitrage opportunity.

Today, with high-speed trading, arbitrage opportunities last only for a few milliseconds seconds in widely traded markets. Arbitrage opportunities in the commodity futures market last for very short periods. But in the most leveraged and sophisticated of all the futures markets, namely, the currency futures markets, arbitrage opportunities last for so brief a period of time that only high-speed computer programs can take advantage of them.

The individual who sells the Ponzi scheme makes money by siphoning off a large share of the money coming in. In other words, he does not make the investment. But Bitcoins are unique. The money was siphoned off from the beginning. Somebody owned a good percentage of the original digits. Then, by telling his story, this individual created demand for all of the digits. The dollar-value of his share of the Bitcoins appreciates with the other digits.

This strategy was described a generation ago by George Goodman, who wrote under the pseudonym of Adam Smith. You can find it in his book, Supermoney. This is done with financial corporations when individuals create a new business, retain a large share of the shares, and then sell the stock to the public. In this sense, Bitcoins is not a Ponzi scheme. It is simply a supermoney scheme.

The Ponzi aspect of it comes when we look at the justification for Bitcoins. They were sold on the basis that Bitcoins will be an alternative currency. In other words, this will be the money of the future.

The coins will never be the money of the future. This is my main argument.

THE AUSTRIAN SCHOOL’S THEORY OF MONEY’S ORIGINS

The best definition of money was first offered by Austrian economist Carl Menger in 1892. He said that money is the most marketable commodity. This definition was picked up by his disciple, Ludwig von Mises, who presented it in his book, The Theory of Money and Credit, published in 1912.

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Analysis continues. In sum, he thinks the buyers of bitcoins are in thrall of the Greater Fool Theory; but is Mr. North correct?

Bitcoin

Can anyone explain it to me? Particularly the idea of “mining” them.

Optimism – short term and long term.

I am sometimes (and quite rightly) accused of being gloomy – “reading a post from Paul is often like reading a suicide note”. So I have decided to write a very brief optimistic post.

Short term optimism….

Next year will see less of an obsession in music with Wagner, Verdi and Benjamin Britton – yes they all have great merit, but then have been done to death this year (anniversaries). So I am very much looking forward to 2014 (and less of them).

Also, in the United States, the midterm 2014 elections will go very well indeed and so will the 2016 elections – errr I will not go into the reasons why (this is supposed to be a non gloomy post).

The long term…….

The latter part of the 21st century will (I believe) be very good indeed.

The Welfare States will have gone bankrupt – which YES will lead to terrible suffering, but that suffering will be long over by the later part of the 21st century (it will just be a terrible memory – and for the young not even that). The same is true of the credit bubble financial system – yes it will have gone bankrupt, but in 50 years that will also be just a memory (and for the young – again not even that).

Technology will have come into its own in the latter part of the 21st century (it really will) the problems with such things as solar cells and nuclear FUSION (beyond fission) will have been solved and cheap electrical power will be available.

Also the technology of making things (including some materials) from common materials will be worked out by the late 21st century (yes nanotechnology – but not just that) – so people will no longer be so dependent on scarce raw materials. Also transport will have advanced to the stage where to travel anywhere in the world will only take a few hours – and power will be available to travel to the Moon or even the planet Mars.

Yes the supply of things will NOT be unlimited – but things will be a lot cheaper than they are now.

For those of you still alive in 50 years life will be good – very good. The coming collapse will NOT be like the fall of the Roman Empire – because the Romans did not produce a revolution in technology, our civilisation (in spite of its flaws) has done, and the technology WILL REMAIN and it WILL CONTINUE TO DEVELOPED by free people in various parts of the world (oh yes the plans for “World Governance”,  world slavery, will fail – “international cooperation” between the elites of statists will, in fact, break down). Indeed the development in technology in the late 21st century will be astonishing – it truly will.

Now do your best to get there. To get to the late 21st century.

The stupid viciousness of stateism – at the local level.

There is a hole in the pavement near where I live – some workmen are doing something or other. The hole is not very big – it would be easy to put a fence round the hole whilst still giving people room to walk round it, but no…….

Instead of just having a fence round the whole, the entire pavement is blocked. Of course people could walk on the pavement on the other side of the road (as is the case with some other work in the town…. actually forcing people to walk on the other side of the road is pointless in this case – but that would be another story), but the powers-that-be have another idea……

Instead of people walking on the other side of the road, there is a fencing along the middle of the main road,,. allowing people to walk in the road (rather that walk on the pavement on the other side of this narrow road). The fencing is right at a CHOKE POINT where the narrow main road crosses on a bridge into the town. Reducing a two lane busy road to a one lane road.

Yes. you guessed it gentle reader, there are terrible nightmare traffic jams.

I do not claim that this is sabotage – that the officials who gave the orders have a deliberate plan to cause chaos. The regulations (“health and safety” or whatever) are just stupid – and they are applied with a lack of concern for the harm they do, that does indeed amount to viciousness.

Complain? There is no point – no point at all.

Complain to a local councillor? I am one – I know we have no power. Complain to a County Councillor? They have no power either. Complain to officials (of the “Highways Agency” or whatever) “we are just following policy” would be the response.

The road has no private owner, no one who really cares whether the people who try to use the road can use it or not.

It is all hopeless.

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