Posts tagged Economics

The Sad State of the Economics Profession

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The Sad State of the Economics Profession

 

6726It is not an exaggeration to say the current reputation of economists is probably just below that of a used car salesman. The recent failures of economic policies to boost growth or employment have tarnished this image even more. This, however, is in sharp contrast to the past when economists were seen as the intellectual roadblock to popular misconceptions, bad ideas, or more importantly, government policies sold to the public on false assumptions. Popular slogans such as “protecting American jobs” play on nationalism, but in reality only serve special interests. The economist of the past would never have hesitated to highlight the fallacies in such reasoning.

Most economists today, however, have sold themselves to the enemy. They work for government agencies such as the IMF, OECD, World Bank, central banks, or academic institutions where their research is heavily subsidized by government agencies. To succeed they have to “toe the line.” You don’t bite the hand that feeds you.

Today, these economists and bought-and-paid-for journalists inform us of the dangers of deflation and the risks of “ low-flation,” and how the printing press will protect us from this catastrophe. Yet there is no theoretical or empirical justification for this fear. On the contrary, a stable money supply would allow prices to better serve the critical function of allocating resources to where they are most needed. The growth resulting from stable money would normally be associated with rapidly falling prices as was the case during most of the nineteenth century.

When President Obama first talked about raising the minimum wage, Paul Krugman, a Nobel Laureate in economics, quickly published an article supporting such an increase. Yet, even a first-year student in economics knows price controls distort the resource allocation function of prices, thus benefiting one group or special interests at the expense of the rest of society. Although some will receive a higher minimum wage, many others will simply be thrown under the bus. A political pundit should not be masquerading as an economist.

Economists also have “physics envy” and are enamored with empiricism and mathematical models. To work in a central bank you have to be familiar with, if not a quasi-expert on, DSGE models. The problem with these models, or any economic model, is that the parameters are not constant, most of the variables are interrelated with constantly changing interrelationships and omitted variables, like expectations, some of which being immeasurable, are conveniently assumed away as unimportant. That is like taking a road map of shipping lanes and omitting the islands.

Economics is a social science and techniques borrowed from the physical sciences are simply inappropriate. Since we do not have a laboratory to conduct economic experiments, it is difficult to distinguish between association and causation or correctly determining the direction of causation. Economic activity is based on human actions, with very little empirical regularity. It may be a sunny day, and you have skied for three days. This does not mean you will go skiing on the fourth day. Your actions simply cannot be modeled like the reactions of lab rats in a biology experiment. Unlike the reaction to noise from the zombies in the walking dead, humans do not react necessarily to the same events in the same way. Economists at the Fed must be scratching their heads as to why businesses did not react to lower interest rates as it did after the dot-com bubble. It’s the old adage of “fool me once, shame on you; fool me twice, shame on me.”

When one attains a Ph.D. in physics or medicine, he does not spend time understanding theories from 200 years ago. The profession is always moving forward, right? In economics, we wrongly take the same attitude. Macroeconomics as a profession has not advanced but has regressed. We had a better understanding of macroeconomics 80 years ago. Politicians put Keynes on a pedestal because he gave them the theoretical foundation to justify policies that had been justifiably ridiculed in the past by the classical economists.

These economists such as Smith, Say, Ricardo, and Mill fought hard to dispel the popular misconception that the problem was overproduction and a lack of money. Today, the leading economists are telling us everything will be fine if we can boost demand (hence, too much production) or have more money through quantitative easing. These are the same popular misconceptions promulgated by mercantilists 250 years ago. The difference, today, is that economists are the mercantilists’s ally instead of their enemies.

The role of the economist should be to explain not only the direct effects, but also the indirect effects of economic policies. The economists should not only tell us what is seen, but what is not seen, and more importantly what should be foreseen. Economists in unison should have informed the public that the massive government spending after the crash of 2008 would have created more growth and employment if the money had been left in private hands. To fund “cash for clunkers,” the government borrowed money that would normally have been used to build plants and equipment or capital goods, the real source of growth in an economy. As Murray Rothbard eloquently said, this is a transfer of “resources from the productive [private sector] to the parasitic, counterproductive public sector.”

We live on a planet with a constraint called gravity. We can adapt to the law of gravity by creating innovations such as airplanes, but we cannot defy the law of gravity by jumping off a building without a parachute. The same is true in economics and of the law of scarcity. We falsely believe that somehow if government legally counterfeits intrinsically worthless paper or spends someone else’s money we will be able to upend the law of scarcity.

J.B. Say once said that economists should be “passive spectators” who do not give advice. He could have added, “and do not sleep with the enemy.”


About the Author

Frank Hollenbeck

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. 

 

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Advanced Cell Technology (ACT), a privately funded biotech corporation, has reported a successful cloning of male human cells from samples from a 35 year old and 75 year old; and now have used DNA from infants to drive home the point that humans can be easily cloned . – See more at: http://www.occupycorporatism.com/home/clone-clone-scientists-create-human-stem-cells/#sthash.FGYriRkK.dpuf
Robert Lanza, lead author and senior chief scientist at the ACT said: “There are many diseases, whether it’s diabetes, Alzheimer’s or Parkinson’s disease, that usually increase with age.” – See more at: http://www.occupycorporatism.com/home/clone-clone-scientists-create-human-stem-cells/#sthash.FGYriRkK.dpuf

America Needs A Better Measure Of Unemployment

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Source: http://www.againstcronycapitalism.org

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America Needs A Better Measure Of Unemployment

 

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Indeed we do. With the Fed coming out and saying (essentially) that it has abandoned the 6.5% unemployment target for raising rates, it is high time we start using a real number. As we said last week, the unemployment rate as currently calculated is little more than a propaganda tool at this point, and not even a good one.

 

Policy makers and the public need to know what is really going on with the employment situation. The old, garbage in, garbage out axiom applies here. If the employment data is manipulated for political reasons, how can anyone trust the data. How can anyone make a business decision in confidence?

(From IBD.com)
 
The current measure of the labor force includes those who are employed, in addition to unemployed individuals who are currently available and actively looking for work.
 
To maintain unemployed status, individuals must contact employers directly, have an interview, ask friends or professional organizations about job opportunities, send out a resume or fill out an application each month.
 
Given the historically high number of long-term joblessness, it’s no surprise that the share of out-of-work people who aren’t considered active enough in their search has surged since the Great Recession.
 
This — not rising employment — is the main cause of a drop in the unemployment rate since the end of the recession.

Click here for the article.

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Ben Bernanke Gets His Reward

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Source: https://mises.org

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Ben Bernanke Gets His Reward

 

6700“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.”

Well, yes, it’s just supply and demand and all that. No big deal and if you don’t like it, you must have something against markets. Still, it would be nice (and a bigger deal) if these reporters would quote someone outside of the accepted intellectual class of the Boswash corridor so compromised by being among the primary beneficiaries of all the new money Chairman Ben and his comrades created, ex nihilo, when he wasn’t shooting baskets in the Marriner Eccles building. If they did, they might hear some healthy skepticism about these events in which top officials cash in on their “public service” via contacts with the very industries they benefited while in office.

George Stigler explained such paybacks in his capture theory of regulation for which he received (rightly) the Nobel Prize in Economics, although I’d say they are better explained by the phrase, “quid pro and here-you-go!”

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Figure 1: Speech honoraria immediately upon leaving term of office. From CNBC.

Less-beholden observers might pause during Bernanke’s victory lap and note that the dollar has lost almost 30 percent of its value since he joined the Fed in 2002, and that’s only if you accept the lowball metrics used in official CPI statistics. It is likely twice that amount if price inflation is measured in more traditional ways, including forgotten factors such as the full inflation for out-of-pocket expenses or the cost to maintain a constant cost of living. Americans of 1977 may have had to suffer through bad hair and disco music, but at least they didn’t suffer discrepancies between (a) what they experienced the value of the dollars in their pockets to be and (b) what the government said it was. We do.

Yet, today, the Establishment celebrates Bernanke for keeping the funds flowing to those parties it needs to remain in power. But while Paul Krugman wonders where the inflation is, I did some back-of-the-envelope calculations of Bernanke’s speech honorarium. Again using the CPI’s numbers, $250,000 today buys roughly what $193,000 bought in 2002, which would have purchased 603 ounces of gold at the time. Today, those 603 ounces of gold would be worth over $805,000.

The point isn’t that all Fed chairs should contract their post-retirement speeches in gold at the beginning of their term of service, although maybe they should. It’s that payoffs such as this reflect about what you’d expect when a currency receives monopoly protection and legal tender status, neither of which has anything to do with the free market. And notwithstanding the opinions of DC lobbyists, neither does Bernanke’s speech.

It followed the most reckless term of service of any central banker in U.S. history. He printed trillions of dollars to rescue a portion of Wall Street that could have internalized its post-crash losses and financed budget deficits that served to transfer capital to the fringes of military empire and out of reach of domestic workers. He “depression-mongered” the U.S. economy in September 2008 even though that market meltdown paled in comparison to those of 1987 and 2000-2001, thus setting the stage for Depression 2.0, and many billions in stimulus spending, bailouts, and other malinvestments.

Was all this simply an effort to test his faulty academic research of the 1930s? Perhaps partly. But remember that cartelizing factions on Wall Street created the Federal Reserve itself in 1913 for the cartelizing factions on Wall Street. Since those who receive the new money first benefit the most, it stands to reason that those interested parties would shower accolades and a share of the loot on Bernanke in the form of $6,250 per speech minute — and assume Mrs. Yellen is paying attention.

An amusing backdrop to the speech news is the continuing crises affecting Bitcoin and Mt. Gox, the fraudulent and now bankrupt Bitcoin exchange that appears to have lost deposits while itself engaged in fractional reserve banking, something only the protected class of modern banks are allowed to do. Understanding the uncertain future of both the dollar and the country’s power elite in the post 9/11 United States is key to understanding the rise of competing digital currencies (of which Bitcoin is just one). Their demand would never have been as strong had the dollar been inflated relatively less, and had market corrections been allowed relatively more, during the years of the so-called Great Moderation. It is safe to assume that establishment bankers are trying hard to use the Mt.Gox fiasco to demonize any movement toward peer-to-peer banking, which could easily have the effect of making banking as we know it go the way of the buggy whip industry in the nineteenth century.

If it does, one casualty just might be Bernanke’s future honoraria.

In a rational world, being paid $250,000 for this speech would cause many to wonder what is really going on. But such a world has not existed in banking since, perhaps, the 1830s. Until another one comes about, appreciate the irony that Bernanke is being paid in a fiat currency he himself helped devalue, and since his own successor at the Fed promises to continue operating in a Bernankean tradition, he will pay someone to diversify it, quickly, into real assets to protect its purchasing power.

Bernanke’s speech has little to do with supply and demand. It has more to do with being rewarded for extending the road down which we have been kicking the economy can. It’s a road that will eventually dead end.

 


 

About the Author

Christopher_WestleyChristopher Westley

Christopher Westley is an associated scholar at the Mises Institute. He teaches in the College of Commerce and Business Administration at Jacksonville State University. Send him mail. Twitter @DrChrisWestley 

 

 

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More High Stakes Appointments to the Federal Reserve

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Source: http://www.againstcronycapitalism.org

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More High Stakes Appointments to the Federal Reserve

 

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It will still be the Obama Fed long after this president has gone.

 

The Obama administration has repeatedly complained about Republican blocking tactics in the Senate. In this context, it is worth remembering that the Democrats blocked President’s Bush’s last three nominees to the Federal Reserve Board. The Democrats calculated that a member of their party might win the White House in 2008 and why not wait in the hopes that a Democrat could shape the Federal Reserve for a generation to come.

This bet paid off, in that the seven member board is now comprised entirely of Obama appointees. Moreover Fed member terms are for 14 years, so a president’s choices may influence monetary policy long after he has left office.

Does any of this matter? Yes, the Federal Reserve has more power over the economy than the president himself. But isn’t monetary policy a non-partisan affair? Surely Fed members don’t operate with R’s or D’s on their backs.

Actually the idea of appointing non-partisan Fed members is even more of a fairy tale than the similar idea of appointing non-partisan judges. No one doubts anymore that the appointment of a Supreme Court Justice is about politics. The illusion has persisted a little longer that we just need “good people” at the Fed, regardless of political and economic orientation, but illusion it is. As in the rest of politics, the Fed represents a battle between ideas and special interests.

The pretense of non-partisanship lasted longer at the Fed because until recently both Republicans and Democrats largely agreed about what they wanted from it. With the exception of Ronald Reagan, they were Keynesians who wanted more dollars printed and lower interest rates, because that was seen as the route to getting elected or re-elected, and why worry about the long run consequences, since as Keynes pointed out “in the long run we are all dead.”

This is now changing. Republicans succeeded in blocking Obama’s nomination of radical economist Peter Diamond to the Fed in 2011. After Democrats invoked the “nuclear option” of restricting the filibuster, Republicans could no longer repeat this performance. But 28 of them voted against Obama’s nomination of Janet Yellen to be the new Fed chairman. Only 11 of them voted to confirm: Flake (Ariz.); Kirk (Ill.); Corker (Tenn.); Coburn (Okla.); Collins (Maine); Coats (In.); Chambliss (Ga.); Burr (N.C.); Alexander (Tenn.); Ayotte (N.H.); and Murkowski (Alaska).

Bob Corker (R-Tenn.) exemplifies the confused Republican of today. He grasps that current monetary policy favors endless expansion of government control over the economy, with huge pay-offs to Wall Street and other special interests along the way, but falls for the circular argument that Fed members are “well qualified” precisely because they come from Keynesian university economics departments, government, or Wall Street.

In retrospect, there was something notable about George W. Bush’s last three appointees to the Fed board—the ones that were blocked by the Democrats. None of them had advanced degrees in economics. This was a throw-back to the old days when Fed appointees were rarely academic economists, but a sharp departure from current practice, when most are.

Respected financial writer Jim Grant jokes that today’s Fed has replaced the gold standard with the “Phd standard.” The problem, of course, is not Phds, but the economics departments they are coming from, and the lack of common sense in those departments. The Phd standard has given us the likes of the last Fed chairman, Ben Bernanke, who bet the future of the US and indeed the world on a completely unproven and untested economic theory while literally smirking at those few unintimidated souls who, like Congressman Ron Paul, dared question him.

President Obama has now given us three more nominees to the Fed and the Senate has had a chance to interview them. The first and most important is Stanley Fischer, aged 70, nominee for vice chairman as well as a regular member.

The most curious thing about Fischer’s resume is that, having been born in Zambia, and naturalized as an American in 1976, he accepted Israeli citizenship in 2005 in order to become head of Israel’s central bank. Today he holds dual citizenship. Prior to living in Israel, he worked as a vice chairman of Citigroup from 2002-5, the years leading to the bank’s bail-out, and prior to that was deputy director of the International Monetary Fund, chief economist of the World Bank, and professor at MIT, where he taught Ben Bernanke among others. Somewhere along the way, he acquired a personal fortune of between $14 and $56mm.

We are thus to understand that President Obama, having searched the entire length and breadth of our land, could find nobody better than a 70 year old with Wall St. and International Monetary Fund baggage who had most recently worked for a foreign government.

The second nominee after Fischer is Lael Brainard, who has recently worked at the Treasury as an undersecretary. Ms. Brainard told senators that the Fed should protect “the savings of retirees.” She did not bother to explain how refusing to allow interest to be paid on savings, or seeking to foster inflation higher than interest would do so.

The final nominee, Jerome Powell, would be a reappointment. Although not a Phd economist and nominally a Republican from the George H. W. Bush administration, he fits the Obama mold in other ways, notably by being from Wall Street, and by being willing to keep quiet and go along. His most daring moment came when he called the Fed’s money creation machine under Bernanke and now under Janet Yellen “innovative and unconventional” and added that “likely benefits may be accompanied by costs and risks.” He has been a reliable vote for Bernanke and likely will be for the Yellen/Fischer regime as well.

Senator Corker waxed enthusiastic about this group of three, saying “I’m impressed,” and leading bond manager Mohamed El-Erian describes them as a “dream team” together with Yellen.

This does indeed seem to be a “dream team” for Wall Street, for corporations boosting profits to record levels with the help of government deficits, for other special interests feeding off the stimulus trough, and for government employees. For everyone else, it just promises more and eventually even worse economic misery.

 

Most recent book by Hunter Lewis:

Image credit: http://www.againstcronycapitalism.org

 


Hunter Lewis
About Hunter Lewis

Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 8 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times) He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as Breitbart.com, Forbes.com, Fox.com, and RealClearMarkets.com. His most recent books are Crony Capitalism in America: 2008–2012, Free Prices Now! Fixing the Economy by Abolishing the Fed, and Where Keynes Went Wrong: And Why Governments Keep Creating Inflation, Bubbles, and Busts. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, and cultural and global development organizations, as well as the World Bank.

 

China warns investors to prepare for “wave of bankruptcies”

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Source: http://www.againstcronycapitalism.org

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China warns investors to prepare for “wave of bankruptcies”

 

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Things as we have said for nearly 2 years are not good in the Ultimate Crony Capitalist State. In fact they are quite bad.

It is textbook Austrian economics on an almost unimaginable scale.

 

Central banks poured “stimulus” into the system in 2008-2009 (I am almost sure the Fed leaned on them to do this.) Then as things started to slow a couple years later the Chinese poured more funny money into the system in an effort to keep the real estate boom in China going. They sort of succeeded – for a little bit.

But now there is nowhere to run.

There is also the outside possibility that the Chinese learned something from Japan and the United States. If they let the fat melt off now and then regather there is a very real possibility that they could emerge as a first class rival to the USA. But it would have to melt a lot of fat and I doubt the Communist Party would be able to handle it. But that’s interesting too.

(From CNBC.com)
 
Premier Li Keqiang told lenders to China’s private sector factories they should expect debt defaults as the world’s second largest economy encounters “serious challenges” in the year ahead.
 
Speaking after the annual session of the national people’s congress, Li Keqiang said: “We are going to confront serious challenges this year and some challenges may be even more complex.” He told lenders to China’s private sector factories they should expect debt defaults.

Click here for the article.

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Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

Your new landlord lives on Wall Street

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Your new landlord lives on Wall Street

 

Probably not Wall Street renting this one.

Probably not Wall Street renting this one.

 

In the wake of the housing crash, wide swathes of the desert Southwest, Florida, Atlanta, parts of California, and other places were littered with relatively new homes which were empty. The pre-seeded lawn turf often hadn’t even taken root before the foreclosures began.

Each vacant home represented a personal economic disaster for someone. Families moved in with grandparents. Pets were left in shelters which were filled far beyond capacity. It was only a couple of years ago. For many the memory is still very fresh.

But at about the same time parts of Tuscon started to be reclaimed by tumbleweeds a few hedge funds (and banks) figured that there was yield to be made from renting the homes which were now unused back to the people who could no longer afford to own them. If the homes could be pooled along with the rents, perhaps the investments could even be sold as derivatives.

Market solution right?

Wrong.

Why did the Crash of 2008 happen?

The version we hear now is that Wall Street created all these bizarre instruments for investing, got greedy, and then it all toppled on itself. That’s the version one will hear from outlets like The Washington Post or Time.

Then there’s another version which is liked by the more conservative folks which holds that the Community Reinvestment Act  signed by Clinton encouraged home ownership in places where people really had no business taking on a mortgage. Then the poor risks imploded the market.

Both narratives have a lot of truth to them. Yes Wall Street got greedy. Yes it did create overly complex instruments which went haywire. And yes the Community Reinvestment Act, an insane act of social engineering if there ever was one helped to collapse the market.

But these things are only a part, and not the main part of the story.

The Crash of 2008 occurred because Allan Greenspan panicked in the wake of the 2000 recession and the 2001 attacks on the World Trade Center and Pentagon. He cut interest rates to low and kept them there for too long.

After folks had gotten hammered in the tech bubble collapse of the late 1990s they looked around for a new way to grow money. Baby boomers were staring right at retirement. Suddenly they discovered residential property which could be financed at next to nothing thanks to the Fed keeping rates lower than they should have. Plus many people rationalized, real estate was tangible, unlike tech stocks. Baby boomers, and then their children, piled in because of all the cheap money from the Fed. Before Greenspan knew it he had ignighted a worldwide fire fueled by easy money. The crash was only a matter of time.

But when the carnage came most of the banks (especially the megabanks) emerged. Some, like Goldman Sachs, stronger than ever.  First they were bailed out by the US taxpayer directly to the tune of probably more than a $trillion (we don’t really know.) Then after the acute phase – you know the time when families across the country were waiting in in humiliation for the banks to kick them out of their homes (remember that?)- the Fed began the quantitative easing infusion of monetary junk into the arm of the financial sector.

With time the banks were recapitalized (even if they were now easy money junkies) and fat bonuses were had by many courtesy of the taxpayer.

The former homeowners were not recapitalized however, and found that they had just rejoined the rental market – if they were lucky enough to have a stream of income. 2010- 2011 were especially hard years for many Americans. They were record years for a few of the megabanks.

Now a few years on the recapitalized banks, the insiders, the friends of the Fed, have picked up the homes which were in distress to rent them back to great unwashed. How nice of them. Especially having been bailed out by the great unwashed.

But that is life in a crony capitalist economy. If one has friends in the government one gets hooked up. If one doesn’t one gets to rent one’s house from a faceless PO Box in downtown Manhattan.

And make sure the rent is on time. You wouldn’t want to have us kick you out of your home again would you?

Click here for the article.

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Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

Glenn “Kane” Jacobs: Selling Liberty

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Glenn “Kane” Jacobs: Selling Liberty

 

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Published by Journalistic Revolution

A speech in Orlando for the Orange County Campaign for Liberty chapter on 2/1/14 by Glenn “Kane” Jacobs titled; “We Gotta Market Liberty: Stop Educating, Stop Debating, and Start Selling Liberty”

You can read Glenn’s articles here:
http://dailycaller.com/author/gjacobs/
http://www.lewrockwell.com/author/gle…
http://jacobsreport.com/

 

Minnesota cops don’t want to legalize medical marijuana for fear they could lose millions

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Source: http://www.againstcronycapitalism.org

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Minnesota cops don’t want to legalize medical marijuana for fear they could lose millions

 

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Pot is by far the most widely used illicit drug used in the United States. It is also bulky, odoriferous, and therefore relatively easy to detect. Much of our national law enforcement budget goes to enforcing the prohibition of cannabis. If marijuana became legal much of this budget would go away. If budgets go away, power goes away. Bureaucracies do not like to lose power. As such some in law enforcement are fighting the liberalization of cannabis laws.

Add in a testing industry and the prison industry which rely on a steady stream of pot busts and it is easy to see why it is that cannabis has remained illegal for as long as it has.

Most illicit drug use in the US is marijuana use. With legalization big time money is lost by established industries.

At ACC we do not condone drug use but we also don’t condone wasting taxpayer money (not to mention intruding into people’s lives) for profit (or for any other reason.) *

(From Rare)

The Minnesota Law Enforcement Coalition’s opposition to marijuana legalization is another case of the drug war run amok.

The coalition, which includes Minnesota Police and Peace Officers Association, Minnesota Chiefs of Police Association, Minnesota Sheriffs Association, Minnesota County Attorneys Association, and Minnesota State Association of Narcotics Investigators, have been as unhelpful as possible with efforts to legalize medical marijuana.

Should the drug become legal, law enforcement stands to lose millions of dollars.

Click here for the article.

* It should be noted that Rare is one of the leading conservative websites on the Net.

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Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

 

New Farm Bill Forbids Disclosure of Which Companies Receive Federal Crop Insurance

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Source: http://www.againstcronycapitalism.org

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New Farm Bill Forbids Disclosure of Which Companies Receive Federal Crop Insurance

 

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We want taxpayer money but we DON”T want the taxpayers to know who got their money. Better to leave that secret Mr/ and Ms. Congressperson (who we gave money to.) We wouldn’t want consumers to get upset. They might just boycott our products if they knew how much they were giving to us through the farm bill. I mean, many of the people buying our products don’t even get any subsidies of their own. We can’t expect them to pay twice for our stuff…Oh wait, I guess we do.

Another jack.

(From AllGov.com)
 
The new law was heavily supported by large agricultural businesses, many of which will benefit from the extension of the federal crop insurance program.
 
But the media and ordinary Americans won’t know who will receive these subsidies because the legislation keeps this information hidden away.
 
While the bill was working its way through Congress, a bipartisan provision in it would have required lawmakers and the Obama administration to disclose crop-insurance recipients.
 
But the agriculture lobby convinced members of Congress to do away with this section of the law.
 
Lawmakers were inclined to listen to the agricultural services industry since it gave nearly $42 million in campaign contributions at the federal and state level and poured more than $62 million into lobbying Washington, according to Nancy Watzman at the Sunlight Foundation.

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

 

Should The Minimum Wage Be Raised?

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Source: http://www.paulcraigroberts.org

By Dr. Paul Craig Roberts

Should The Minimum Wage Be Raised?

 

Some years ago when I was Business Week’s columnist an up-and-coming academic economist published his conclusions that raising the minimum wage did not cause unemployment. An implication was that labor unions did not cause unemployment by forcing up wages.

These conclusions flew in the face of economic theory. Theory held that employees were paid the value of their marginal product. The value of the marginal product of labor is a measure of labor’s contribution to the firm’s revenues. As a factory, for example, increases its work force, after initially rising the contribution of each additional employee to output falls. Think of it in this way. As the work force expands, the fixed size of the factory means that additional workers have less technology and capital per capita with which to work.

Thus after some point the marginal product of additional workers falls. The value of the worker’s marginal product is his output times the price of the product.

Translated that means that employers expand the work force to the point that the last person hired adds as much value to the firm’s output as the cost of his wage.

Therefore, arbitrarily raising wages beyond this point by legislation or strikes would mean that the last employees hired cost more than they contribute to the value of the company’s output. (The wage rises, but not the marginal product of labor). In other words, the work force would be downsized to the point that the value of the marginal product of the last unit of labor hired equaled the higher wage. Think of it this way. As the number of employees shrink, the capital and technology of the firm is spread among fewer workers making them more productive.

I pounded the up-and-coming economist pretty hard for his conclusions. Having grown with age more skeptical of all explanations, today I probably would report his views, commend him for his courage in taking on established wisdom, and say that his findings should be examined for their correctness.

Like physics or chemistry or law or history or literature or whatever, there are far too many areas of economics for one economist to be informed about and to keep up with. I don’t know whether the economist I took to the woodshed prevailed and changed the theory of wage determination or whether some fault was found in his work.

California entrepreneur Ron Unz has reopened the case for raising the minimum wage. Unz advocates for a $12 per hour minimum wage. Allowing for an eight hour five day work week with two weeks vacation, this would produce an annual income of $24,000 the poverty level income for a family.

Unz has received more favorable attention than I gave the academic economist back in the 1980s or 1990s.

Unz makes a good case (see, for example, http://www.unz.com/article/the-conservative-case-for-a-higher-minimum-wage/ ). If Americans were paid a living wage for the jobs that Mexicans manage to do by living 10 to a trailer, illegal immigration would decline. Unz can convincingly argue that a higher minimum wage would actually increase the employment of American citizens as they would be able to scrape by on the wages from the higher minimum wage.

I endorse Unz’s proposal with reservations. My doubts about a healthy rise in the minimum wage are not based on the economic theory that the value of the marginal product curve of labor is the firm’s demand curve for labor. Nor am I opposed to a reduction of illegal immigration or to paying people a living wage. If the working poor made enough to live on, the social welfare budget could be cut.

From my standpoint, the problem with raising the minimum wage to a survivable level is that it pacifies the millions of Americans who are being oppressed by the greed of the one percent and the public officials who serve them. Making the survival of the oppressed easier keeps them from being in the streets protesting the rising inequality of income and wealth that jobs offshoring, financial deregulation, and cuts in social welfare programs such as food stamps have produced in America.

The ladders of upward mobility that made America an opportunity society have been dismantled by the movement abroad of America’s high value-added, high productivity jobs, leaving displaced Americans with only lowly paid domestic service jobs, such as retail clerks, waitresses, bartenders, and hospital orderlies. Making low pay jobs more livable makes the dismantling of the opportunity society more acceptable.

I think that Unz is correct that a significant rise in the minimum wage would both reduce illegal immigration by making it possible for Americans to survive on minimum wage jobs and provide a poverty level income for millions of Americans who currently live below the poverty line. But this amelioration of hardship suppresses protests and rebellion.

To recover justice, a reasonable distribution of income, the accountability of government, corporations, and banksters to the rule of law, and to revive the growth of consumer demand on which the success of the US economy depends, the existing order that serves the one percent needs to be altered. The ladders of upward mobility must be restored.

What is more imperative, a rise in the minimum wage that pacifies the work force and the downtrodden by making their survival easier, or a rising swell of disaffection that ultimately reforms or overthrows a government that is unaccountable both to law and to the people?

What I learned as a Washington insider for a quarter of a century is that Washington buys compliance. By purchasing compliance Washington can continue to masquerade the US as “the indispensable people, a light unto the world,” while Washington murders people in half a dozen countries and destroys the infrastructure, housing, and environment of those countries, simultaneously dispossessing the American middle class, destroying civil liberty, and locking the poor into an underclass.

Until the government is brought back into compliance with the rule of law and the will of the people, ameliorating hardships sustains the evil empire.

Unz is a genuine reformer. But reforms can have unintended consequences, and that is what worries me about raising the minimum wage.

Reprinted with permission from www.paulcraigroberts.org


 

About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

 

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