Ask a D.C. insider what’s the best way to solve the debt crisis. Nine times out of ten, they’ll recommend taking on more debt. That’s how things operate in the Potomac swamp. Up is down, right is left, digging yourself into more debt is the best way to get out of it. But it wasn’t always like this. In fact, there used to be common sense when it came to the economy. So where did it all go wrong?
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
Its acceptance is as widespread as its justification is important, for it provides the rationale for the Federal Reserve’s unprecedented monetary expansion since 2008. While critics may dispute the wealth effect’s magnitude, few have challenged its conceptual soundness. Such is the purpose of this article. The wealth effect is but a mantra without merit.
Baron Rothschild, the famous French financier, was once heard to say that he knew of only two men who really understood money -- an obscure clerk in the Bank of France and one of the directors of the Bank of England. “Unfortunately,” he added, “they disagree.”
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
Economic theories don’t lend themselves to laboratory testing, so the work of a national appraisal firm is especially enlightening. A new study lends support to the Austrian business cycle theory, which says that the less government is involved, the faster a market will recover.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
World unemployment is on the verge of breaking new records. This trend will continue until 2017. That’s the news from the International Labour Organization (ILO) in their annual employment report.
Currently, 2009 is the record year for world joblessness, at 198 million. In its 2012 Global Employment Trends report (source), the ILO believes unemployment numbers will rise by over 5 million this year to reach 202 million, topping 2009′s record.
The report goes on to predict that unemployment will rise further in 2014, to reach 205 million. “Unemployment remains as dire as it was during the crisis in 2009,” Ekkehard Ernst, chief of the ILO’s employment trends unit, told CNBC.
But how could this be? More Keynesian monetary power has been thrown at the global meltdown than ever in history. And why? To bring down unemployment. That’s the problem that the Keynesian prescription is supposed to fix.
The U.S. central bank has increased its balance sheet from less than $900 billion pre-crash to a new record of $2.946 trillion on Jan. 16. The growth is expected to continue to $4 trillion with its latest plan to purchase $85 billion in Treasury and mortgage debt each and every month until the headline unemployment rate in the U.S. falls to 6.5%.
The Japanese government insists it’s a major change that the Bank of Japan agreed recently to launch an “open-ended” commitment to ending deflation through asset purchases and adopted, for the first time, a firm 2% inflation target in a document jointly issued with political leaders. Somehow, everyone forgets the Japanese central bank has been stimulating that economy for more than two decades to no avail.
ECB chairman Mario Draghi has become the leader of the European Union. He wasn’t elected by the people, but was elevated as such when he vowed to do “whatever it takes” to preserve the euro. He’s now the face of the ECU. The Daily Bell writes,
“Therein lies the evidence of Draghi’s divinity. He has vowed, like Beowulf pursuing Grendel, to slay the beast of European dissonance. His weapon is currency debasement, and his lair is the magnificence of the ECB headquarters.
He is, according to Reuters, a hero for the ages, at once modest and savvy, confident and yet inclusive. He is a leader of men and a wonderful wielder of the public purse.”
Draghi was the Financial Times person of the year last year, the same honor bestowed on Ben Bernanke by Time magazine in 2009. In fact, Time called Draghi the “savior of Europe” last year, while Bernanke’s picture graced the cover of The Atlantic above bold letters “THE HERO.”
Yes, Keynesians believe more money and lower rates equal less unemployment. Central bankers have been elevated to godlike status, but the BOJ’s, Bernanke’s, and Draghi’s not-so-secret sauce clearly hasn’t worked.
Sure, many of the newly unemployed live outside the developed world, but when Ben and Mario start printing, the effects are felt all over the world.
“The main transmission mechanism of global spillovers has been through international trade, but regions such as Latin America and the Caribbean have also suffered from increased volatility of international capital flows,” the CNBC report said.
The ILO also added, “The indecision of policymakers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends, rather than expand capacity and hire new workers.”
Indecisive? Hardly. Central bankers have one tool — money printing. They do it either fast or slow. They already collectively have the pedal to the metal and are on the verge of flipping the jet propulsion switch.
However, Christina Romer, former chairwoman of President Obama’s Council of Economic Advisers, writes in the Gray Lady that the Fed has moved slowly, and wonders, “Why are some policymakers threatening to undo the recent actions?” She’s referring to comments by presidents at two Midwestern Federal Reserve banks.
“It is a very aggressive policy, and it is making me a little bit nervous that we are overcommitting to the easy policy,” St. Louis Fed President James Bullard told reporters after a speech to the Wisconsin Bankers Association. “We are taking risk.”
Kansas City Federal Reserve President Esther George, sounding almost Austrian, said, “Monetary policy, by contributing to financial imbalances and instability, can just as easily aggravate unemployment as heal it.”
Romer and her husband, professor David Romer, believe pessimistic attitudes have hampered the central bank’s effectiveness. The Romers write in a paper titled “The Most Dangerous Idea in Federal Reserve History: Monetary Policy Doesn’t Matter” that pessimists at the Fed during the early 1930s led to “inaction in the face of the largest downturn in American history.”
That sounds good, except the Fed did all it could to expand the money supply. In his book America’s Great Depression, Murray Rothbard chronicles the Fed’s continued actions from after the stock market crash of 1929 to 1932. Jeffrey Tucker quoted Rothbard at length in a recent article.
Following the stock market crash, Rothbard writes that the government’s easy money program dropped rediscount rates 42%. Despite this move, the money supply remained constant while production and employment fell.
In 1931, the Fed did its best to inflate by raising controlled reserves. Citizens foiled this plan by converting their bank accounts to currency. Rothbard writes that “the will of the public caused bank reserves to decline by $400 million in the latter half of 1931, and the money supply, as a consequence, fell by over $4 billion in the same period.”
The next year, while the Fed stimulated, banks did not lend the money out, but instead piled up excess reserves. Just as banks have done in the current crisis. “Naturally,” Rothbard continues, “the banks, deeply worried by the bank failures that had been and were still taking place, were reluctant to expand their deposits further, and failed to do so.”
Rothbard, evidently, isn’t on the Romers’ reading list. Today, the Fed is peddling as fast as it can, but commercial bankers and their regulators have their feet on the brakes. Maybe borrowers want to borrow when rates are low, but lenders sure don’t want to lend, especially while they are still licking their wounds from the real estate crash.
It was the same in the early 1930s. As Rothbard summarized:
“In a time of depression and financial crisis, banks will be reluctant to lend or invest, (a) to avoid endangering the confidence of their customers, and (b) to avoid the risk of lending to or investing in ventures that might default. The artificial cheap money policy in 1932 greatly lowered interest rates all around, and, therefore, further discouraged the banks from making loans or investments.”
Businesses are storing cash, waiting for the smoke to clear. Hiring people is expensive, and the Fed has trampled the primary signaling mechanism to the market. Austrian economists would say that these low rates only serve to deceive entrepreneurs into believing that people have saved more than they really have and that money should be invested in higher-order goods, such as factories and equipment.
In that case, these low rates only prop up the prices of real estate and other capital assets that likely need more downward adjustment from the boom. A normalization of rates will hasten that process and get people back to work.
But don’t hold your breath. After all, Romer isn’t reading Rothbard, and central bankers aren’t perusing this space. They’ll keep printing money that goes only to Wall Street speculation, the press will call them heroes, and you’ll still be stuck trying to find your way out of their mess.
How do you navigate the topsy-turvy world created by these superhuman central banker heroes? Addison Wiggin has seen this train coming for years. Here are 47 ways you can protect yourself from a shrinking dollar.
More unemployment will mean more money printing, which will mean more unemployment, which will mean… surely you have it by now.