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 […]
We live in parallel universes. Federal Reserve Chairman Ben Bernanke is said to have a healthy concern about deflation. McDonald’s franchisees, on the other hand, not so much.
The chain of Golden Arches fame will give up its Dollar Menu after 11 years, renaming it “The Dollar Menu & More” next month. It turns out you simply can’t make a buck selling burgers for a buck. It must be hard to give up on such an amazing marketing gimmick, generating one-seventh of all sales since its inception. But as Derek Thompson describes in The Atlantic, the Dollar Menu is an anchor “enraging franchisees who can’t make any money selling 2013 processed cow meat at 2002 prices.”
If Ben Bernanke is paying attention, he is no doubt thrilled to hear about rising price pressures.
Franchisees were surveyed earlier this year, and one verbalized the unhappiness with the ongoing promotion: “Every item introduced comes with unlimited coupons for FREE and a ‘suggested price point’ that is ridiculous and does not meet franchisees’ needs for profitability. It does meet the corporation’s need to keep the appearance of customer transaction counts high, pushing the stock.”
While the corporate office kept adding items to the menu, franchisees were expected to serve the new items right away. Operators lamented that they had to “do it consistently and with a smile on our face.” Adding, however, that “there’s little to smile about.”
While franchisees grinned and bore it, competitors copied the idea. In 2009, Burger King instituted a dollar-burger promotion, prompting a lawsuit from franchisees who claimed the cost of a double cheeseburger was $1.10. Burger King required all locations to take part in the promotion.
Wendy’s changed its 99-cent menu to a “Right Price Right Size” menu. The Jr. Cheeseburger Deluxe went from 99 cents to $1.19. And customers got four chicken nuggets, instead of five, for 99 cents.
In his piece for The Atlantic, Thompson commented that beef prices have done anything but lag behind other items. He writes, “the price of beef and other staples has been turbulent.” What’s angered franchisees is the price of the double cheeseburger over the cost of its ingredients.
Meanwhile in the Fed’s ivory tower, Fed economists don’t have to worry about staying in business selling burgers below cost or tinkering with portion sizes. They theorize there is an absence of aggregate demand and low interest rates and more money will solve the problem. Their friends generating numbers down the street at the Bureau of Labor Statistics claim prices have increased only 1.5% over the past 12 months. They see no inflation and don’t want to hear about it.
In The San Diego Union-Tribune, Dan McSwain articulates the Fed’s fears that “falling inflation would give way to deflation, a spiral in which generally falling prices cause consumers to delay purchases in hopes of even lower prices, which depresses prices — and wages — further.”
This theoretical downward spiral does not generate an increase in demand, but instead causes sales to dry up. Despite goods and services being more affordable, Keynesians like Bernanke believe people will stop spending money, workers will then be laid off, real estate prices will fall, foreclosures will ensue, and banks will fail. In other words, it will be 1933 all over again.
Bernanke was asked earlier this year about the Bureau of Labor Statistics’ low inflation numbers. “Does this sort of inflation performance suggest that you should be pushing harder on the accelerator?” The Fed chair answered that low inflation was bad because it “It increases the risk of deflation. It raises real interest rates. It means that debt deleveraging takes place more slowly.”
He went on to say:
“There are a number of transitory factors that may be contributing to the very low inflation rate: For example, the effects of the sequester on medical payments, the fact that nonmarket prices are extraordinarily low right now. So these are some things that we expect to reverse, and we expect to see inflation come up a bit.”
In his world, he hasn’t seen inflation yet, so the Fed will continue to buy $85 billion in securities each month for the foreseeable future. Vancouver favorite Marc Faber, editor of The Gloom Boom & Doom Report, told a CNBC crowd it’s not a matter of when the Fed tapers, but when they start increasing their purchases. He was likely only half kidding when he predicted purchases of a trillion dollars a month.
The problem for McDonald’s franchisees is they don’t buy stuff to make burgers from the BLS. John Williams over at ShawdowStats.com figures consumer inflation to be either somewhere around 5% using the methodology used in 1990 or just short of 10% using the way CPI was figured in 1980.
And if things weren’t tough enough under the Golden Arches, franchisees say Obamacare threatens their already thin bottom lines. “Obamacare is going to destroy already low profits,” one franchisee said. “McDonald’s Corp. does not seem to care. The corporation is frantically trying to increase the number of 24-hour stores regardless of lack of profitability. Add rising commodity and insurance costs and McDonald’s drive to get operators to rebuild or remodel and the future looks bleak.”
In the real world of burgers and fries, costs are increasing. In the models generated in government offices, bureaucrats worry prices are teetering precariously on the edge of a cliff.
Famed American country musician Charley Pride sang a long time ago, “It was burgers and fries and cherry pies. It was simple and good back then.”
In the world of central bank central planning, it’s anything but simple, and “QE forever” certainly isn’t good.