Articles in English 105
March 21, 2014
There seems to be a resurgence of nostalgia for the "good old days" among the citizens of countries that were once known under the common name of Socialist Federal Republic of Yugoslavia. This article is dedicated to all of us former Yugoslavs, especially those who think that the Yugoslav economy during Tito's rule was built on a stable foundation. If we look at and analyze economic indicators, we have to admit that the idea of the robustness of the Yugoslav economy was an illusion and that the "well-being" that many former Yugoslavs are recalling with nostalgia was borrowed at the expense of future generations. These generations are now paying the bill for the collapse of the unsustainable economic system of socialist Yugoslavia, along with paying the bill for the destructive wars of the 1990s, and the interventionist economic policies of former Yugoslavia's successor states.
March 24, 2014
"Bernanke Enjoys the 'Fruits of the Free Market,'" or so we're told in a Reuters headline from March 4 about the former Fed chairman's 40-minute speech in Abu Dhabi for which he received, ahem, $250,000. In the Reuters author's defense, he was only quoting a DC lobbyist who was defending the amount, and added, Bernanke "will personally experience supply and demand."
March 14, 2014
After the stock market collapse of 2008 and a decline of 3.4 percent for U.S. GDP in 2009, investors rushed to stash funds in emerging markets (EM) where economies were growing at a 3.1 percent annual rate. But the US stock market fell in January of this year largely due to financial trouble in emerging markets. The economies of EM nations, such as, Brazil, Russia, India, Turkey, Thailand, and China, have deteriorated in part because of the withdrawal of US dollar investments from them. Here is a chart from the Institute for International Finance (IIF) showing the capital flows to EM nations:
Joseph T. Salerno
March 05, 2014
[Editor's Note: This article is adapted from Joseph Salerno's foreword to the new third edition of Brendan Brown's book Euro Crash: How Asset Price Inflation Destroys the Wealth of Nations.]
Brendan Brown is a rara avis — a practicing financial economist and shrewd observer of financial markets, players, and policies, whose prolific writings are informed by profound theoretical insight. Dr. Brown writes in plain English yet can also turn a phrase with the best. "Monetary terror" vividly and succinctly characterizes the policy of the Fed and the ECB (European Central Bank) to deliberately create inflationary expectations in markets for goods and services as a cure for economic contraction; the "virus attack" of asset price inflation well describes the unforeseeable suddenness, timing, and point of origin of asset price increases caused by central bank manipulation of long-term interest rates and the unpredictable and erratic path the inflation takes through the various asset markets both domestically and abroad.
March 06, 2014
In the absence of prices, could a central planner efficiently run an economy? Before you answer, I'll drop the Hayekian proviso that the planner be vile. Instead, I'll only ask you to consider a planner who is a soccer mom wanting to maximize happiness among all. Would you still answer in the negative?
As a follow-up to my two earlier columns on falsehoods about the free market (here and here), I wanted to cover some more falsehoods that I've heard again recently. I'm sure I'll have plenty of opportunities to add to the list sometime down the road.
February 10, 2014
The value of life is determined not by the mere drawing of one breath after another, but by the freedom to make our own decisions.
There's nothing like the feeling of a motorcycle sliding out from beneath you on a busy thoroughfare to focus the mind beautifully on the value of life. As your ass bounces from the cushioned seat toward the hard tarmac with the screech of unseen cars slamming on their brakes to your rear, you have one glorious moment in which to ask yourself: "What the hell am I doing?"
February 01, 2014
The gap between the rich and poor continues to grow. The wealthiest 1 percent held 8 percent of the economic pie in 1975 but now hold over 20 percent. This is a striking change from the 1950s and 1960s when their share of all incomes was slightly over 10 percent. A study by Emmanuel Saez found that between 2009 and 2012 the real incomes of the top 1 percent jumped 31.4 percent. The richest 10 percent now receive 50.5 percent of all incomes, the largest share since data was first recorded in 1917. The wealthiest are becoming disproportionally wealthier at an ever increasing rate.
January 23, 2014
The first rule I teach my economics students is that when the economy fails, it's usually safe to blame the government. To paraphrase Winston Smith in 1984: If we accept that the state is the source of economic misery, "all else follows."
As a science, economics is really not that difficult because it encompasses decisions we make every day that impact our well-being and the well-being of those around us.
January 16, 2014
Of the various flavors of government interventionism in our lives, the minimum wage is perhaps the most welcomed. It appeals not only to our innate sense of “fairness” but also to our self-interest. Its allure may erroneously lead us to the conclusion that because “it is popular,” ergo “it is right.”
January 13, 2014
Hyperinflation leads to the complete breakdown in the demand for a currency, which means simply that no one wishes to hold it. Everyone wants to get rid of that kind of money as fast as possible. Prices, denominated in the hyper-inflated currency, suddenly and dramatically go through the roof. The most famous examples, although there are many others, are Germany in the early 1920s and Zimbabwe just a few years ago. German Reichsmarks and Zim dollars were printed in million and even trillion unit denominations.
Teaching and learning economics has become detached from human beings
December 17, 2013
One of the most common criticisms of economics is that it relies on unrealistic assumptions and abstract models of the economy. If only economists studied the real world they would know that people are not always rational, exchange is not always mutually beneficial, and that markets do not always clear. Instead the real world is full of mistakes, unequal power, and inefficiency.
December 13, 2013
A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this senario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.
December 5, 2013
Why do beliefs cluster the way they do?
If someone believes that only police and military should have guns, why is that person also likely to support socialized healthcare and a government-imposed minimum wage, and be unsupportive of school vouchers? In his 1987 book A Conflict of Visions: Ideological Origins of Political Struggles, economist Thomas Sowell put forth two conflicting visions of man that he believes explain many of the underlying reasons for the clustering of beliefs.
December 07, 2013
If one looks at the current paper money system and its negative social and social-political effects, the question must arise: where are the protests by the supporters and protectors of social justice? Why don’t we hear calls to protest from politicians and social commentators, from the heads of social welfare agencies and leading religious leaders, who all promote the general welfare as their mission?
Presumably, the answer is that many have only a weak understanding of the role of money in an economy with a division of labor, and for that reason, the consequences of today’s paper money system are being widely overlooked.
Matt McCaffrey, Carmen Dorobat
November 29, 2013
The economic turmoil in Venezuela has received increasing international media attention over the past few months. In September, the toilet paper shortage (which followed food shortages and electricity blackouts) resulted in the "temporary occupation" of the Paper Manufacturing Company, as armed troops were sent to ensure the "fair distribution" of available stocks. Similar action occurred a few days ago against electronics stores: President Nicolás Maduro accused electronics vendors of price-gouging, and jailed them with the warning that "this is just the start of what I'm going to do to protect the Venezuelan people."
November 22, 2013
"We paid our Social Security and Medicare taxes; we earned our benefits." It is that belief among senior citizens that President Obama was pandering to when, in his second inaugural address, he claimed that those programs "strengthen us. They do not make us a nation of takers."
If Social Security and Medicare both involved people voluntarily financing their own benefits, an argument could be made for seniors' "earned benefits" view. But they have not. They have redistributed tens of trillions of dollars of wealth to themselves from those younger.
Social Security and Medicare have transferred those trillions because they have been partial Ponzi schemes.
Editor's Note: The following is adapted from Hunter Lewis's new book Crony Capitalism in America, now available in the Mises Store.
Many companies hope to send an employee into a government agency to influence regulation. How much better if the employee can actually shape government regulation to promote and sell a specific product! Monsanto seems to have accomplished this — and much more.
Michael Taylor is among a number of people with Monsanto ties who have worked in government in recent years. He worked for the Nixon and Reagan Food and Drug Administration in the 1970s, then became a lawyer representing Monsanto. In 1991, he returned to the FDA as Deputy Commissioner for Policy under George H. W. Bush, and helped secure approval for Monsanto's genetically engineered bovine (cow) growth hormone, despite it being banned in Canada, Europe, Japan, Australia, and New Zealand.
Inflation serves the governing class and hurts honest, hardworking people.
One is Harvard economist Kenneth S. Rogoff, quoted in the Times: "Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about. It should be embraced." He favors an annual rate of 6 percent.
"I think higher inflation would help," economist Jared Bernstein of the progressive Center on Budget and Policy Priorities added.
The Federal Reserve is another place to find advocates of inflation. This includes President Obama's choice to succeed Ben Bernanke as Fed chair, Janet Yellen.
These people are saying, in effect, that you and I have too much purchasing power. Got that?Too much purchasing power.
Raise your hand if you think you have too much purchasing power. Anyone? I didn't think so.
Friedrich A. Hayek
Editor's Note: This selection is from F.A. Hayek's Individualism and Economic Order, now available as an ebook in the Mises Store. In this selection, Hayek contrasts two types of individualism: one that leads to freedom and spontaneous order, and the other that leads to collectivism and controlled economies.
Before I explain what I mean by true individualism, it may be useful if I give some indication of the intellectual tradition to which it belongs. The true individualism which I shall try to defend began its modern development with John Locke, and particularly with Bernard Mandeville and David Hume, and achieved full stature for the first time in the work of Josiah Tucker, Adam Ferguson, and Adam Smith and in that of their great contemporary, Edmund Burke — the man whom Smith described as the only person he ever knew who thought on economic subjects exactly as he did without any previous communication having passed between them.