Tuesday, 3 February 2009

Quote of the day ...

"When the productive have to ask permission from the unproductive in order to produce, then you may know your culture is doomed."
- Ayn Rand

‘Apologies’ we’d like to see: #27, Michael Phelps

A letter I'd like to see (but won't):

Dear America,

I take it back. I don’t apologize…

Michael Phelps

Full letter here [hat tip Lance].

RMA – what “shake-up”? [update 3]

Radical changes in RMA shake-up”?  Who is the DomPost kidding?

A shake-up of the Resource Management Act is intended to help push-start new businesses and fast-track big infrastructure projects under changes to be unveiled today.

How much of that do you believe?  I have no doubt the changes will allow the government to “fast-track” its own billion-dollar babies – but how does that help property-owners stymied by planners’ rules and regulations? As former Federated Farmers president Charlie Pederson once said, "it's little, not large, that suffers most RMA pain."  How much RMA pain, if any, do you think will be removed from you and me?

What would you like to see announced today?  And, by contrast, what do you expect to see?

UPDATE 1: What I'd like to see is somewhere between this --a network of Small Consents Tribunal for smaller private projects -- and this: a stake through the heart [pdf].  Both are possible.  Both would be practical.  Either would be sensible.

But all I expect to see is this: a chocolate-coated turd, exactly as promised, that will promote easier theft of property rights by this government.

“Key elements” of the latest package are said to be:

  • Removing frivolous, vexatious and anti-competitive objections
        which will include making to more difficult to object to planners’ policies for one’s own
  • Streamlining processes for projects of national significance
        ie., streamlining things to make life easier for ThinkBig 2.0
  • Creating an Environmental Protection Authority
        ie., creating yet another bureaucracy to have even more power over property owners
  • Improving plan development and plan change processes – “for example removing the ability to make general challenges or ones that seek the withdrawal of entire proposed plans”
        ie., streamlining things to make life easier for planners
  • Improving resource consent processes
        ie., streamlining things to make life easier for ThinkBig2.0
  • Streamlining decision making
        ie., streamlining things to make life easier for planners
  • Improving workability and compliance
        ie., streamlining things to make life easier for ThinkBig2.0
  • Improving national policy instruments “such as limiting appeals on changes to district plans and to regional and national policy statements”
        ie., streamlining things to make life easier for planners and ThinkBig2.0

Are you seeing a pattern here?

The key thing to note is that when the Resource Management Act was introduced by National in 1991, in all its 456 pages property rights were not mentioned even once. Not once.  And in review after review after review, nothing has been done to change that.

““The Government is taking an innovative approach to major projects,” says the Government.  That is, it is taking an innovative approach to removing the hurdles to its own fouled-up infrastructure spend-up.  It is doing nothing for you and I, nothing at all except to raise the penalty on “offences” under the Resource Management – ie., acting in a way that a planner objects to -– from several hundred thousand dollars and the prospect of jail time, to several million dollars and even more jail time.

This is what you voted for. This is what you’ve got.


UPDATE 3:  Download the 9-page PDF here for full details;  Scoop has a summary of reactions; and listen in to National Radio this afternoon about 4:20pm, when I’ll be talking to Jim Mora about my own.

LIBERTARIAN SUS: Talking ourselves into depression? [updated]

She’s back! Susan Ryder addresses a frequently asked question: aren’t we doing this to ourselves?  (Originally published in the Franklin E-Local.)

When Wall Street crashed in October 1929, my maternal grandmother was 16 years old. Like many of her generation in New Zealand, she had been working since she was 13, having left school after completing Standard 6, (Year 8).

By 1932 she was 19, the misery of the Great Depression was well underway, and Nana was working as a nurse/housekeeper for the local doctor in a small Taranaki town. In order to be able to keep her job, her weekly wage was slashed by 25% from 10 shillings to ‘7 and 6d’ and stayed that way until she finished work to marry my grandfather in 1938.

I blanched at the drastic cut. “How did you manage?” I asked. “Well, it wasn’t easy”, she replied, “but you learned to make do. You learned to live within your means. The easy part was making the decision to accept it. It was either accept it, or no job. And 75% of something was a damn site better than 100% of nothing.”

There is a lot of wisdom in those few sentences. It has been only a few months since the global credit crunch started to bite and much has been written by economists, politicians and journalists of all persuasion, all largely quoting each other and all largely saying the same. In reality, though, there is little wisdom to be found in much of it.

What happened? One day, the developed world seemed to be chugging along quite nicely and then we awoke to find the fiscal sky starting to fall, just as Chicken Little said it would. It started in the US with major financial corporations exhibiting various stages of collapse, which spread quickly to major corporations within all industries -- of note the parlous American auto industry. Treasury Secretary Henry Paulson and Federal Reserve Chairman Bernard Bernanke leapt into action throwing money – and lots of it – at everything that looked like it might have stopped moving. It wasn’t even their money, but the US taxpayers’.

Well, it would have been, had it existed, but it didn’t. It was created out of thin air via the Federal Reserve’s printing presses -- which have been running red hot ever since. The US taxpayer has now been landed with the additional debt – on top of the mountain of debt that already existed – which has further served to diminish the dollar in the process - while the US economy remains as critical as ever.

So will all this intervention help? Well, it hasn’t to date in spite of all the cash. Personally, I think it is only going to make matters worse, to ultimately extend the life of the upcoming hardship. For proof, we should look back to the last recession on this scale, known as the Great Depression of the 1930s.

There is an old saying that warns of those ignoring the lessons of history being doomed to repeat them. Talk of doom could be frighteningly prophetic in that the prescriptions recommended for the current crisis are looking alarmingly like those adopted 75 years ago. US President Franklin Roosevelt (popularly known as FDR) followed his predecessor Herbert Hoover’s policy of increased government intervention in the marketplace and increased public expenditure, all of which served to stretch out the misery of the Great Depression for a long, dark decade.

There are some things that cannot be denied.  One is that what goes up must come down – especially if the ‘up’ is created artificially.  Drug takers know this stuff, and the ‘users’ of Alan Greenspan’s easy credit now know it too.  Economic cycles fuelled by easy credit ensure a bust will always follow a boom, particularly if that boom has been artificially fuelled by a ‘bubble’ such as the “Tulip Mania” of the 17th century or the Dot-com bubble of the 1990s . . .  or the housing bubble of the 2000s.

The housing bubble blew up all over the developed world. (In New Zealand and elsewhere, it was exacerbated by restrictions to the residential land supply and ever-increasing local council compliance costs, which helped to inflate the bubble.) Credit was cheap and easy to get, attracting both market speculators and buyers. Tradesmen were kept busy with the demand, as were their suppliers and so on.

But what goes up artificially, must come down in reality.  When prices become too high for the market, the latter will adjust, resulting in a drop in prices.

If only it were that simple.

What goes up too highly would come down, if only politicians didn’t interfere so. The truth is that there is a better chance of winning Lotto than of politicians keeping their hands to themselves. US Congressman Ron Paul tells the story of FDR’s meddling with the market.  FDR was determined he would not run the risk of losing the large agricultural vote by letting prices fall naturally to the levels that market conditions demanded, a fall which would have helped the recovery but reduced farmers’ returns. So instead he propped prices up.  Unfortunately, the poor people struggling financially could not afford the artificially high prices and went hungry, even as the growers were ploughing their unsold produce back into the land.

Welcome to the Law of Unintended Consequences.

Everybody is always screaming for affordable housing and houses certainly would be affordable if only prices were allowed to meet the existing market. The same applies for all commodities. But there are also other factors at work. If the market was left to sort itself out, a fall in prices would go hand in hand with a fall in costs. However, trade unions will almost certainly resist all efforts to see government interference such as the minimum wage laws that keep wages at inflated levels, abolished. And it is a safe bet that they will strenuously oppose any general reduction in wages, no matter how necessary it is, all of which means that both prices and wages are kept artificially high.

US businessman Peter Schiff has been an outspoken advocate of letting the market work instead of chaining it up and burdening it with regulation, and then screaming when it goes wrong. He predicted the current crisis more than two years ago and was roundly ridiculed. His many detractors are not laughing now. He is the author of several books including Crash Proof: How to Profit from the Coming Economic Collapse. Schiff opposes the concept of a ‘government-led’ recovery, believing that the problem with recovery lies chiefly in what governments are doing to hinder it. He points for example to the brokerage/banking industry being one of the most highly regulated -- and bankrupt as a result. Like his ideological twin in academia George Reisman, Professor Emeritus of Economics from Pepperdine University, Schiff refutes the concept of increased consumer spending being the solution to the crisis, in that spending per se does not create economic growth. The truth is the converse: it is real economic growth via increased productivity that makes spending possible.

To that end, Schiff, Reisman and Ron Paul all believe that a recession is the natural adjustment by which to prune the poor performers, re-establish real values (ie., let prices fall) and then start again as quickly as possible.

A recession is not pleasant and only a fool would suggest otherwise. No decent person likes to see anyone go out of business or lose a job. But the sooner a recession is allowed to evolve, the sooner it can pass – and the fewer bankruptcies and job losses we will have.

The alternative is to continue to interfere and to subsidise what doesn’t deserve to be propped up. Subsidisation creates too much of what is not wanted. Anytime that government subsidises industry, for any reason, it gets expensive. The longer the recession, the more likely it will bleed into an outright depression.

In this global age it is too much to hope that a small economy like New Zealand will dodge the coming crisis, but with the application of sound economic principles we can prepare ourselves to face what comes and to could emerge from it as quickly as we can.

Living within one’s means is common sense, surely. It means the application of that dirty word ‘discipline’ in both the home and the Beehive.  It means letting wages and prices to fall, instead of propping them up.

In plain speech, I guess it also comes back to my grandmother’s viewpoint of 75% of something being preferable to 100% of nothing.

* * Read Susan Ryder every Tuesday here at NOT PC * *

UPDATE:  Read ‘How Government Prolonged the US Depression,’ summarised at Anti Dismal.

Careful with that axe, you genius

To paraphrase PJ O’Rourke, only God can make a tree: but only man can cut them down in the time it takes to read this post.  See:

What a wonder!  As a steam shovel is to a spade, this device is to an axe. [Hat tip Noodle Food]

It’s devices like this that increase living standards and raise real wages.  Yes, it’s true.

Whangarei House – Claude Megson


I was inspired over the weekend both by two spectacular tennis matches – both involving the brilliant young Rafael Nadal – and by a visit to this small Megson unit in Remuera I posted the other day. Claude used to talk about the “big-souled” feeling that architecture should inspire. His small unit certainly delivered – its 95 square metres feel immense, as does one’s spirit when sitting in its light-filled spaces.

It’s being sold by its owners now their circumstances have changed. They’d love to move to a larger Megson, they say, now they’ve outgrown their little beauty.

As it happens, a larger Megson house is also on the market … up at Whangarei. A reader visited over the weekend and sent me the news, along with this short report:

“I just went to the open home for the Megson designed home at 152 Cemetary Road, Maunu, Whangarei, MIND BLOWING! Very very original and totally delightful. I want it.”

No wonder. It’s another delight.

MAUNU_Cemetery_Road_152_5327959_640xFrom the Allens Realty’s site, from whence you can get details and Open Home times:

An Internationally known - Claude Megson Design - A Residence that Symbolises Individuality.
If you want to rebel against the 'status quo' and satisfy your drive for distinction, you need to inspect this property and appreciate the opportunity this fascinating home has to offer.
Almost the country equivalent of a modern day Don Quixote and nestled privately amongst native bush this unique 3 level 374m² Megson designed home features 2 lounges, 2 snugs, 2 dining rooms, 3 fireplaces and a large courtyard and swimming pool.
To be sold as a going concern with approximately 120 mature avocado trees in full production, including a large implement shed and orchard equipment. There is a stable and horse truck complex plus 2 small grazing paddocks.
A highly individual property that is everything but ordinary.

You can read all the sale details here.MAUNU_Cemetery_Road_152_5327935_640x

(Cross-posted to NOT PC)

Monday, 2 February 2009

Ministerial bullying? It’s not OK. [updated]

Judith Collins wants to show how “tough” she is by crushing youngsters’ cars.  On that, I agree with Blair:

I honestly fail to see how confiscating and crushing someone's car represents a proportionate punishment for the offence of Dangerous Driving.  Lots of people drive dangerously, and it seems odd that our response to that as a society differs depending on how old they are or the [number of] modifications made to their vehicles. 

True enough.

Principles are principles, and property rights apply to everyone, whether a middle-aged developer, or a seventeen year old dickhead with small penis syndrome.

Also  true.  The absence of recognition of the former offers no excuse for ignoring the latter. Bullying by Ministers? It’s not okay.

UPDATE:  Police, ministers, commentators and even commenters here wish to treat every youngster with a modified car the same -- as if the number of modifications to your car made you a criminal -- or a boy racer.  Commenters talk about "their" behaviour, "these louts," "the boy racers," "these irresponsible little arseholes."
But this just demonstrates a complete failure to distinguish.
As Donal Corbett, Clunking Fist and The Tomahawk Kid point out in the comments,treating every young driver as if they were every other young driver is an unforgiveable collectivisation of criminal law.  As they point out, there are already sufficient laws out there to convict specific individual lawbreakers for specific initiations of force. There's no need for more laws, just judicious application of existing laws on those actual individuals breaking them.  
What's needed, to say it again, is simply to identify the specific individuals committing the specific criminal acts, distinguish them from innocent bystanders or non-perpetrators, and then take the necessary action.
You'd have to ask Howard Broad why his police aren't doing that, and why -- to reward their failure -- they want new, authoritarian powers instead.

Blog pops

News just in (which means I’ve only just noticed) that NOT PC is either the third or the sixth most popular political blog in the country, depending how you measure these things.

Thanks to everyone who rewards my blogging with your reading.

Deep cover [update 2]

Mr Lineberry reckons the Labour Party has a mole right there in the Key Cabinet.  A mole who’s been in deep cover for years.

The evidence for the thesis mounts up.  (For those who don’t understand the point made at the latter link, ask yourself what it means when a politician “urges” businesses to perform in a certain way … )

UPDATE 1: There may be other Labour moles Mr Lineberry has overlooked.  David Farrar talks up National’s pathetic proposed reforms to National’s Resource Management Act, calling “positive” somevery  minor proposals that will expand planners’ power, make National’s ThinkBig2.0 projects easier, and raise fines on those who offend the planners’ whims to several million dollars.

I won’t repeat what I’ve already said about the perpetrator of this pathetic reformist charade.

UPDATE 2:  Okay, since people are interested maybe I will repeat some of what I said just before the election about National's RMA confidence trick:

There's been a whole lot of bullshit written about National's policy on the Resource Management Act, released this week -- "National plans big changes to RMA" -- "National's National's RMA reforms will get business moving again" -- "Nat's RMA reforms endanger environment" -- but this morning for the first time I see some sensible commentary on their risible policy prescription: National's RMA Buzzword Bullshit.  From myself.
National's Resource Management Act policy, released this week, is more than just a missed opportunity to help a parlous economic outlook: it almost amounts to a confidence trick. 
    While the world economy reels on the back of central-bank bungling and serious problems in the American housing sector, and as local building activity takes a nose-dive -- building consent numbers are already down by a third -- a political party truly 'ambitious' for New Zealand might have grasped the opportunity to help an ailing economy and a struggling housing sector by releasing a bold new Resource Management Act policy that would take the weight of the RMA from the shoulders of struggling builders, home-buyers and property-owners.  
    But that is not what National's Nick Smith has served up.   Smith's policy overflows instead with buzzwords like 'fix', 'streamline', and 'get business moving', but closer scrutiny demonstrates Smith's large print giveth, but his small print taketh away."

Read on here for details.

Idiot chic

As Tim Blair records, “Friends of Hamas can’t decide if they’re for Nazis or against them.” Never mind the theories about why this is so.  As Tim says, “the easiest explanation is probably that these people are stupid.”

Pretty much explains the knob-heads with the Che T-shirts too, doesn’t it –- you know who I mean: those dimwits who say they’re “against violence” and then walk around with a murderer on their chest.

It’s cold out there … [update 2]

With the UK enduring its coldest winter for thirteen years, looks like another ten inches of global warming is on the way.

    It is the first time that such extensive snowfall has been forecast in one night across Britain since the night of Feb 7 1991, when almost the entire country was blanketed in white.
    The last time the south east saw similar depths of snow was in December 1996…

It’s cold out there.  Colder than a ticket-taker’s smile at a Super 14 game. Colder than charity.  Colder than a politician’s heart.  A hell of a lot colder than the warmists ever said it would be.

UPDATE 1:  The facts continue to debunk global warming alarmism says Professor Bob Carter in The Australian [hat tip Climate Science Coalition]:

    THE National Oceanic and Atmospheric Administration reported that October in the US was marked by 63 record snowfalls and 115 lowest-ever temperatures.
    Over the past few years, similar signs of colder than usual weather have been recorded all over the world, causing many people to question the still fashionable, but now long outdated, global warming alarmism…
    The present global financial crisis should be inducing politicians not to squander money on non-solutions to non-problems. Yet to support their plans for emissions taxation Western governments, including ours, are still propagating scientifically juvenile greenhouse propaganda underpinned only by circumstantial evidence and GCM computer gamesmanship." 

UPDATE 2: Crampton points out “you can still go to iPredict and short sell real-money stocks that pay off at $1 if 2009 is the warmest year on record. Those stocks currently trade at $0.17 (17% chance of it being the warmest year on record); my best analysis suggests the real probability is about 5%.... Easy money, if you think that it's fairly unlikely that 2009 will be the warmest year on record...”

Good on you, Dr Brash [updated]

Former central banker Don Brash hands out a history lesson in this morning’s Herald to some of the country’s biggest big-government cheerleaders.

[Former UK Labour Party leadership hopeful] Bryan Gould argues that the world must learn many lessons from the current international economic crisis ("Global crisis shows need for revision of economics"). Alas, most of the "lessons" he proposes we learn are absolutely the wrong lessons…
    Gould implies that the crisis was caused by "free" and unregulated markets, especially in the financial sector. This is quite simply nonsense. Banks may be relatively lightly regulated in New Zealand (where there is no banking crisis), but they have been highly regulated in the United States and Europe for many years…

Sure have.

    Gould seems not to have noticed that the crisis emerged not in the essentially unregulated hedge fund industry, or even among private equity funds, but in the most highly regulated part of the financial sector, namely banking.

Gould doesn’t notice very much.  Never has.  This is a man, after all, who thought Welsh windbag Neil Kinnock was a statesman, and the insane Michael Foot a genius.

    Gould argues that "Government involvement in the management of the economy is essential", implying that that has not been the case in recent decades. Again, that could hardly be further from the truth.
    Government taxation and spending make up some 40 per cent of total economic activity in most developed countries, and in all developed countries regulations of one kind or another tightly control what businesses can do.
    Even in monetary policy - where Gould seems to imagine that central banks are a law unto themselves, operated by bankers primarily for the benefit of other banks - Governments ultimately hold the whip hand

Brash, naturally, still defends the ridiculous central bank efforts to maintain “price stability,” which both in the 1920s and the 2000s led directly to economic disaster. 

With the benefit of hindsight, monetary policy was probably too loose in recent years...

Sure as hell was – but it wasn’t just hindsight that revealed that news.

And one of the primary reasons they were “too loose” was the ridiculous attempt to fix prices by use of inflating the money supply.  But that aside, his conclusion is correct.

    We also know that, in the nineties, the United States Government started putting pressure on American banks to lend to borrowers of quite marginal creditworthiness to prove that they were not discriminating on the basis of race.
    And driving the housing bubble in many markets, in the English-speaking world at least, were the highly restrictive zoning policies of local governments - policies which sharply increased the price of residential land and led both borrowers and lenders to assume that the price of housing would increase forever.
    They were clearly wrong, but they were hardly operating in the "free and unregulated" markets which Gould imagines.

Sure as hell weren’t.  What sort of “free and unregulated” market is it in which the government’s banker gets to set the price of loanable funds?

Still, great to see the likes of Don Brash telling it like it is.  Would that more of those who know better would speak out against the pervasive nonsense peddled by the world’s big-government cheerleaders.

UPDATE:  Full credit to those who are speaking out.  Forbes magazine argues that while politicians are going left, even leftist economists are going back to basics. Writing on the Davos talkfest in Forbes,  Brian Easterley says,

    The conventional view at Davos is that a previous consensus in favor of free enterprise has taken a huge beating from the Great Crash of 2008-2009. What is much less known is that many economists are not willing to play along.
    Instead, the crisis seems to have scared many economists of all kinds--including some previously heterodox--to reassert the orthodox recommendations of Econ 101.

And even some of the biggest big-government cheerleaders are heading back to basics.  Paul Walker has the report at Anti Dismal.

Yet another reason to dislike Team New Zealand

  • 789332 STUFF: Peter Montgomery, the voice of New Zealand yachting, was dropped from covering the current Louis Vuitton Pacific series at the request of Team New Zealand boss Grant Dalton…

A few years back when we were seeking support from local businesses for our Walk For Capitalism, we approached Team New Zealand and were told to go away.  “We’re pretty much all socialists here,” we were told – which was certainly consistent with the amount of taxpayers’ money they were spending.  It was no surprise then when they started that year’s regatta by taking out on the water a boat whose main feature seemed that it needed to be bailed out to stay afloat.

Seems now that nothing’s changed.  They now seem to think they should be able to wield the big stick over who gets to commentate on them -– and Government TV has acquiesced by agreeing to replace the competent, plain-speaking and entertaining Peter Montcommentary with back-scratching place-holders Tasker and Lester.

Loyal?  You have to be kidding, Mr Dalton.

UPDATE:  Good on Radio Sport for telling the Muldoonist Mr Dalton to go piss up a stick.

Friday, 30 January 2009

"Stimulus": economists from across the political spectrum DO NOT agree on the need for massive spending [update 5]

New President Obama says that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy. In fact, many economists don't agree. They don't agree at all.

In fact, Mr President, hundreds of them, including Nobel laureates and other prominent scholars, have signed a statement that the Cato Institute placed in major newspapers across the United States confirming that they don't agree.

Click the pic to read a PDF of the whole document. You won't believe some the names, most of them over and above those Greg Mankiw has documented on his blog in recent weeks, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingalesl, [hat tip Anti Dismal], and in addition too to the fine people at both the Mises Institute and the Ayn Rand Institute.

They don't agree at all that your "recovery" plan will "jumpstart" the economy. In fact, most of them think the "jumpstart" is the very last thing that is needed.

So to say that "economists from across the political spectrum agree" on the need for massive government spending to stimulate the economy would suggest you're either aware of the dissent but lying about the agreement, or unaware of the dissent -- which is to say, ignorant of the cogent arguments against the foolishness of you profligacy.

In fact, not even the textbooks support the antediluvian idea of such a response. As Ike Brannon and Chris Edwards point out[pdf], macroeconomics has long consigned such foolish Keynesianism to the dustbin of history:

It is difficult to find a macroeconomics textbook these days that discusses Keynesian fiscal stimulus as a policy tool without serious flaws, which is why the current $800 billion proposal has taken many macroeconomists by surprise.6 John Cochrane of the University of Chicago recently noted that the idea of fiscal stimulus is “taught only for its fallacies” in university courses these days.7 Thomas Sargent of New York University noted that “the calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research."
In other words, this $850 billion of spending won't work, can't work, and will do nothing except drag out the time it takes for a real recovery to happen. The one thing economists without a political axe to grind do agree on is that "We Can't Spend Our Way out of This Quagmire" - as Lawrence White and David Rose point out, that's precisely what got us in this problem in the first place.
Current attempts to solve our crisis by increasing spending is exactly the wrong thing to do. No one wants to bear the political cost for appearing to be uncaring by favoring a policy of "doing nothing." Out of political cowardice, the federal government is attempting to produce a solution that is penny-wise and pound foolish. You can't solve an excessive spending problem by spending more. We are making the crisis worse.
We have been down this road before. Most recessions start with the bursting of bubbles that grew large because of excessive money growth. But again and again, we presume a Keynesian cause and a Keynesian cure.
Our recent stock market and housing market crashes can prove to be the start of a sound and rapid recovery — if we will have the courage to let it be so.

UPDATE 1: Here's more beautifully cutting commentary from two masters at the game:

UPDATE 2: Thomas Jefferson vs. Obama:
"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

UPDATE 3: Link from pic is fixed.

UPDATE 4:  The entertaining Fred Thompson on the Spend-Your-Way-To-Prosperity-Plan [hat tip Foundation for Economic Growth

UPDATE 5:  "Arm yourself against the growing Keynesian counter-revolution," says the Hayek Center.  "The time is now for executives and college students and small business owners and journalists and the general public to intellectually arm up — and participate in the beating back of the Cargo Cult science of the new Keynesians."  And in this post the Center provides a mountain of intellectual ammo.  What are you waiting for?

Quote(s) of the day, on the minimum wage

While the Key Government considers their reaction to this year’s “minimum wage review,” due Monday – and people say that the days of price-fixing are dead! -- so-called economists are all a-twitter about what they might do, Nobel Laureate James Buchanan has some thoughts about most of that advice:

“Anyone who says minimum wage laws decrease unemployment disavows the law of demand and is therefore unqualified to speak as an economist.”

True enough. Are you listening Helen Kelly?  Are you listening Matt McCarten?  Increasing the minimum wage in the teeth of a coming depression doesn’t “help boost spending” –- except, in the short run, to union reps -- it simply raises costs at a time producers can least afford them, and to the extent the “price floor” pushes wages above  the market rates for particular jobs, it ensures those  jobs will soon be gone, to the detriment of employees and employers, and what was once productive spending. 

Prices don’t need to be fixed – and at the present time they urgently need to fall.  One man’s price is another man’s costs.  As the likes of Pigou and Haberler and Patinkin argue, “falling wages and prices would increase the real value of money holdings, and the spending out of those real cash balances would restore the economy to full employment.”  But only if the politicians and the union reps get out of the way first.

I liked Roger Garrison’s answers to so-called “armchair economist” Stephen Landsburg a few years back. 

Landsburgh writes concerning an increase in the minimum wage: "Sure, you've lost your job. But don't forget, this was a minimum-wage job in the first place."
Garrison replies: “Your being retained or released may be a marginal matter to the employer, but it may be an all-or-nothing matter to you.”
Landsburgh again: "In fact, the power of the minimum wage to kill jobs has been greatly overestimated. Nowadays, most labor economists will tell you that that minimum wages have at most a tiny impact on employment."
Garrison, in response: “It may have a small impact on total employment, but only because primarily minimum wage legislation redistributes employment--from the (would-be) working poor to the entry-level worker in a middle-income household and from the unskilled to the skilled. Ditch diggers lose their jobs. Trenchers with union operators get more jobs. The "tiny" effect is the net effect. But, of course, to focus [only] on this net effect is to miss the perversity of the legislation.”

Final point again, from Garrison: “Measured unemployment captures so-called "frictional unemployment" and not much else. To be counted as unemployed, you have to be actively looking for a job. People who are excluded from the labor force by the minimum wage do not continue to look. They may be unskilled, but they're not stupid.”

'House for an Art Lover' - Charles Rennie Mackintosh

Mackintosh's 'House for an Art Lover' was designed in 1901, but not completed until one-hundred years later. Therein, naturally, lies a story.  And now, we see the mark of his genius on work still superior to most produced today.  

Glasgow has never looked so sunlit, or so alive.

Pictures are from the Armin Grew Homepage.  Check out the house's homepage for more details.

Thursday, 29 January 2009

Warmist-in-Chief “an embarrassment” says Boss

The man who kicked off the global warming charade was NASA’s James Hansen.*  Hansen is global warming’s prime mover, Warmist Number One –- a  chap who told the US Senate that oil company executives need to be locked up for "crimes to humanity"-- the man who  likened the construction of a new coal-based power plant as equivalent to the holocaust -- who said that trains bringing coal to a new power plants are like the "death trains" moving Jews to extermination camps.  A chap who never ever lets truth get in the way of his good story.  Without Hansen to kick things off, Al Gore would still be just another man who used to be the next President of the US.

Today James Hansen’s former boss says Hansen is a bust.  “His former supervisor at NASA, Dr. John S. Theon, now publicly disagrees with Hansen's work. In … correspondence … from earlier this month, Theon dismisses the validity of Hansen's work, charges that some scientists manipulated climate change data,” and formally joins the ranks of the skeptics.  He says Hansen "embarrassed NASA" with his alarming climate claims & "never muzzled even though he violated NASA's official agency position on climate forecasting (i.e., we did not know enough to forecast climate change or mankind's effect on it)."

Details here:  James Hansen’s Former NASA Supervisor Declares Himself a Skeptic. [Hat tip Leighton Smith]

UPDATE:  Note that Hansen’s former colleague Joanne Simpson, the author of over 190 studies and who has been called “among the most preeminent scientists of the last 100 years”, has now left NASA’s employ, and now, like Theon, she finally feels free to speak out [hat tip Climate Debate Daily].

“Since I am no longer affiliated with any organization nor receiving any funding, I can speak quite frankly….As a scientist I remain skeptical...The main basis of the claim that man’s release of greenhouse gases is the cause of the warming is based almost entirely upon climate models. We all know the frailty of models concerning the air-surface system.”

Why did she have to wait until she left to speak the truth?  One wonders how many other scientists really are being muzzled.  Says Tim Ball, who’s received more than his own share of career-threatening attacks,

“Undoubtedly, there are positions and times when people are muzzled; national security is a good example. I sympathize with young people starting out on careers. I understand the pressure of maintaining a family and paying mortgages. But none of this should apply to science. It’s a measure of the degree to which climate change has become political. It’s also a measure of the degree of bullying that has occurred. Why would a scientist in an organization directly involved in climate science not feel free to speak out?”

Good question, don’t you think?  Simpson didn’t feel free to tell the truth, but her colleague, Hansen, had no problem speaking out with sexed-up lies.
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* When Hansen first sounded the alarm in Congress 20 years ago, says Steven Milloy at Junk Science, "he predicted that rising concentrations of atmospheric carbon dioxide, or CO2, would drive global temperatures higher by 0.34 degrees Celsius during the 1990s. But surface temperatures increased during that decade by only 0.11 degrees Celsius and lower atmosphere temperatures actually decreased. "  And that was the high point of his science.

NOT PJ: “Will you be my friend?”

BernardDarnton Bernard Darnton goes looking for friends and finds a plate of deep fried stuffed mushrooms and a spicy Szechuan fish. . .

I spent Saturday night with my face gently illuminated by the liquid crystal glow of a Facebook page, amazed at how much the website had improved my social life. “Look at how many friends I've got,” I said to myself in the semi-darkness.

Mrs Darnton claims to be baffled that I've got twice as many friends as she does, seeing as she's “way cooler” than I am. (The quote marks are because this claim is obviously bollocks.)

I've now got so many friends that the little thingy down the side of the page that suggests new friends doesn't work. It used to suggest people I know. Now it suggests friends of friends that I've never met. Would I like to be friends with Paula Bennett? I dunno. She'd be good in a scrap I guess.

I don't know Paula. I try and avoid shopping malls and scrapping teenage girls and I've only ever seen Waitakere from an aeroplane window. Facebook must have matched us up because I know a few people involved in the National Party – primarily from Electoral Finance Act days. Just a reminder to them: We were promised a repeal in February, which starts in three days, so get busy.

This somewhat tenuous link is still better than the reasons Facebook comes up with for some of its suggestions. “You both went to Otago.” Along with twenty thousand other people each year. “You both live in Wellington.” First, so do half a million other people and, second, don't keep reminding me.

Clipboard01There are still people out there without Facebook pages. I was having dinner with some old friends from the Dunedin days recently and one of them admitted to not having a Facebook page, saying that it's not something people over forty did. Even the restaurant we were in had its own Facebook page and it's been around forever.

My over-forty friend probably thinks that social networks are a complete waste of time. And he's almost certainly right. Any employer would much rather you were doing some boring crap with a spreadsheet that chattering away on the fan page of a Chinese restaurant you used to go to as a student.

If you do get fired for wasting time on the Internet you're doubly screwed because prospective employers can look you up and see the photos your alleged friends have tagged you in. All that time fiddling with the fonts in your CV is worth nothing if the person reading it has seen the pictures of you cross-dressed up in a hula skirt and coconut bra getting touched up by a pissed bloke disguised as a nun.

Career-building it may not be. Social life-enhancing it would be hard to make the case for. But as entertainment it's more compelling than anything on TV. I'm not remotely interested in watching the most cataclysmic episode ever of America's Next Biggest Pop Tart -- but once somebody promises to reveal the true identity of the implausibly translated menu item number 58 at The Asian, then I'm hooked.

* * Read Bernard Darnton’s NOT PJ column every week here at NOT PC * *

Unsound banks, unsound money -- a very unsound idea

Banks are in the money business.  It’s not just the Reserve Bank who prints money: government banking laws allow them to “print” money electronically -– in the words of Charles Holt Carroll, “organising debt into currency,” on the back of reserves they don’t actually have.

Banks create this currency electronically, backed only by lender’s promises to pay, at a ratio of up to twenty, forty, even fifty times the actual reserves that are held by the bank.  Among bankers and professional economists, this is called “fractional reserve banking.” It is a system that allows the bankers to grow very rich very quickly, and the economists to inflate the economy beyond what is sustainable.  From boom to bust at the behest of those who’ve been allowed to pretend they can create something out of nothing.

You can see the problem with banks lending out much, much more than they actually have. In fact, you’ve seen one primary problem in the news for most of the last year. 

Which is this: What happens if every depositor wants their money out all at once.  If you want to know whether your friendly local bank is "sound," then just ask yourself what happens when queues of depositors start forming outside, for whatever reason, insisting they be given their money back. What happens isn’t difficult to predict, especially since you’ve seen it happen with increasing frequency.  Once you identify that modern banks are inherently bankrupt, and it is on the back of this inherent bankruptcy that our money supply system is based, then you realise that the whole system is as far from sound as it’s possible to be – and it’s no wonder that modern economies are racked by such violent booms and busts.

And you can see the problem too with a huge component of the money supply being backed only be debt that’s been organised into currency – and in fact, you’ve seen that in the news for most of the last year as well.

Which is this: when the value of loans drop, as they have precipitously over the last year, then so too does the amount of “currency” in the system.  So too does the amount of “credit” available in the system. So when the value of existing loans takes a big dive, so too does the money supply.

Which means this system of supplying money is as far from sound money as it’s possible to be. 

And you can assess how far from sound it is -– and how big a dive the money supply and the credit available for the loan markets has taken -– from the picture below showing the market caps of some of the world’s biggest banks, and how big a dive they’ve taken over the last year. 

It’s not just a big dive, it’s a swallow dive off a cliff. 

If you want to get a visual idea of how big the world’s economic problem is, then here it is right here, courtesy of the Financial Times (click to enlarge):


Today’s price-fixing by the central bank [update 4]

Over the last few days, every bullfrog and his legrope has been debating the interest rate that Alan Bollard should announce this morning.

At nine o'clock this morning Alan Bollard, government appointee, will stare into the cameras and tell you what he’s decided interest rates should be in this economy for the next quarter, and all everyone wants to talk about is is he going to make history?  Will he fix ‘em at their lowest rate ever?

Doesn't the whole situation strike you as odd?

Everyone's been debating what the government's flunkie is going to do.  Better they'd been debating why we stand for a government flunkie to be setting the most important price in the economy: the price of loanable funds.

Better they'd been debating whether an economy in which the most important price is fixed by a bureaucrat can truly be called a free market.

Better they begin to realise that it was price-fixing of precisely this sort by the world's central bankers that was the primary cause of the whole bloody financial crisis.

Try debating that, while you work out what you're going to with your savings now there's no longer any interest to be earned on them.

UPDATE 1: NEWSFLASH, 9am: The “saviour” of the New Zealand economy licked his finger, stuck it in the wind, and decided to slash the economy’s interest rate by 1.5 percentage points.  Which means the basic nominal interest rate a negative real interest rate. 
    Expect would-be savers, especially those who rely on interest income, to be very concerned about their future.  Expect the pool of real savings to diminish.  Expect the essential liquidation of shaky positions to be postponed, and the malinvestments they represent to continue on consuming real capital, like zombies sucking up the resources needed for recovery. 
    Understand that it is these liquidations and this pool of real savings that are both needed for recovery to happen.  And ask yourself what this latest bout of price fixing will do to assist, or postpone, that recovery. . .

ocrjan09UPDATE 2:  Did someone say “sound money”?  How about we start debating that, especially since it’s so clearly and desperately needed?

UPDATE 3:  Pictured at right is the record of the Reserve Bank’s price-fixing over the last decade, including the latest precipitous fall (pic pinched from Kiwiblog):

UPDATE 4 (11am):  Hmmm, wonder what this does to the NZ dollar?
Wow.  Who would have thunk it.  Real money is leaving the country, to be made up (no doubt) by the stuff that comes out of the Reserve Bank’s basement.

Monaco in Riva al Mare - Caspar David Friedrich (1810)


Wednesday, 28 January 2009

Save the earth: Exploit a greenie

From the chaps who brought you Stuff White People Like comes Stuff Environmentalists Like, “the beginner's guide to befriending and exploiting green people,” in five parts.  See Part one, Part two, Part three, Part four, Part five.   [Hat tip Lance.]

On Stimularithmetic, and Team Obama's 'Old Left' Stimulunacy

It's not just Robert Barro who's questioning the proposed economic effect of Team Obama's "stimulus" package, which promises to shower Americans with new doles, new bridges to nowhere, "green jobs," "renewable energy" projects, and failing car companies producing even shittier cars that even fewer people will want (and remember the working definition of "renewable energy.")

Team Obama, remember, reckons their "stimulus" package will have a "multiplier effect" on the US economy of 1.5; Barro reckons they've got their sums wrong. ("A much more plausible starting point is a multiplier of zero. In this case, the GDP is given, and a rise in government purchases requires an equal fall in the total of other parts of GDP -- consumption, investment and net exports. In other words, the social cost of one unit of additional government purchases is one.")

And, naturally, other economists are joining the fray, and Arnold Kling has summarised the differences between two proponents on either side of the debate, one who predicts that with every $100 of government spending we'll see $87 worth of benefits, and another who predicts we'll lose $80 (see Paul Walker's summary here), suggesting nothing so much, perhaps, as that there is nothing so pointless as expecting results from economists doing algrebra.

Fact is, a pump primed is a recovery delayed.

So it's more instructive not just to notice that there are Republicans who are now growing spines that were nowhere in evidence over the last eight years -- and certainly not over the last eight months while their own bosses set about nationalising the banking industry -- but to appreciate the analysis of those like Robert Tracinski who leave their algebra in their brief case, and engage instead in pure logic.

Obama, says Tracinski bluntly, has no idea what he's doing.
Obama begins his administration by declaring that he will run the government
while rejecting any overarching ideas and principles regarding the proper role
and scope of government action. He starts by telling us, in effect, that he has
no idea what he is doing.
As we've noted here before. And wasn't there another US president of similar mien? Oh yes, there was:
Decades ago, we had another president who came into power during an economic
crisis, who also had no idea what he was doing and engaged instead in "bold,
persistent experimentation"--with his only absolute being that he would not let
the free market work. That was FDR. The result? The economic crisis lasted
another decade and actually deepened under his leadership. If Obama's speech is
what a cipher sounds like, the Great Depression is the kind of result that is
produced when an ambitious cipher attempts to offer vigorous leadership.
The "stimulus" package is just further evidence that Obama really doesn't know what he's doing any more than Roosevelt ever did, and that the results of what he does try to do will be as destructive as his most natural historical predecessor. Evidence too that it's when politicians are most ignorant of what the hell they're doing that they reach most vigorously for the interventionist levers -- since to them that most represents "vigorous leadership."

As Tracinski points out in his TIA Daily newsletter, it's entirely logical then that Team Obama's first moves represents a systematic "leftist onslaught" against automobiles, power plants, banks, trade, guns, and the war on terrorism, since his reign offers nothing so much as the chance for the resurgence of the Old Left. Thus:
He is pushing for global warming regulations and for heavy new regulatory restriction on the financial industry—and he is now considering outright nationalization of the banks. He's threatening to reverse the trend toward free international trade, openly inviting Congress to impose new gun bans, and removing the US government from a war footing in its fight against terrorism.
He's also doing a few things to reverse the agenda of the religious right—but on a small scale compared to his assault on the values held dear by those of us on the secular right: free markets and vigorous national defense.
Let's take the main points of this onslaught in turn:
Let's start with environmentalism. Despite speculation that the new president would shelve global warming regulations because of the economic crisis, he has put up on his new White House website a promise to "implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050."
Since "renewable energy" will not be able to replace fossil fuels [remember the definition], that means roughly an 80% reduction in our energy use over the next four decades, which in turns means roughly an 80% reduction in our standard of living. It is a plan to make economic depression a permanent fact of life.
Consistent with this is his attack on automobiles, "ordering the EPA to allow California and a cabal of other states to impose new fuel-efficiency regulations on automakers, in the name of stopping global warming. The irony, of course, is that this is another devastating blow to the very same Detroit automakers that the Obama Administration has insisted on bailing out." (Be still: This won't be the only irony of this Administration.)

It continues. As Tracinski points out, Team Obama is consistent: they're against both the internal combustion engine and coal-fired power plants -- the two power sources of America's industrial power -- firing the first shot in this battle against coal and real energy in its sponsoring of the EPA's spiking of the 580 MWe Big Stone II coal power plant in South Dakota. (See here and here and here.)

And meanwhile, in the midst of financial disaster, he's looking to throttle the banking industry, and showing signs he wants to complete the nationalisation of banks begun under his immediate predecessor, back when Republican spines had atrophied from under-use.

And he's already fired the first shots against trade -- something every New Zealander needs to be concerned about. Says Tracinski:
The resurgence of the Old Left brings the revival of bad ideas by the dozen. So not only do we get a resurrection of nationalization and central planning; we also get a resurrection of protectionism.
Thus, President Obama's incoming Treasury secretary has indicated the new administration's willingness to start a trade war with China. That's just what we need to complete the current replay of the Great Depression: a new Smoot-Hawley tariff to shut down global trade.
This is what the resurgence of the left means: an attempt to make us forget all of the lessons that we learned, at great cost, during the economic disasters and cataclysmic wars of the 20th century.
And on top of all this, he's moved against the Supreme Court's 2008 decision recognizing a constitutional right to own guns (despite his campaign statement approving of the ruling and pledging his loyalty to the Second Amendment), and with the closing down of the terrorist prisoner-of-war camp at Guantanamo Bay and the appointment of appeaser George Mitchell as Middle Eastern envoy, indicating that the US War Against Terrorists is effectively over.

So, yes, the Obamessiah is moving fast, but not quite so benevolently as some commentators might have been hoping for.

Was Peter Schiff wrong?

Mike "Mish" Shedlock thinks all of you excited by Peter Schiff's outstanding criticisms of the Fed, his explanations of how the US Government wrecked their economy, and his predictions-in-advance of the coming crash should remember that he hasn't, and isn't, getting eveything right.
Schiff's overall thesis has four legs, reminds Mish, only the first of which has so far come to pass:
  1. US Equity Markets Will Crash.
  2. US Dollar Will Go To Zero (Hyperinflation).
  3. Decoupling (The rest of the world would be immune to a US slowdown.
  4. Buy foreign equities and commodities and hold them with no exit strategy.
It's worth reading his criticism, since it looks in some detail at the issues of decoupling, and specifically of what might be happening in China. [Read it here: Peter Schiff Was Wrong].
Robert Murphy, who amusingly calls this The Mish-Schiff Tiff, points to two dissenting opinions, from the Economic Policy Journal and Tim Swanson, who have rushed to Schiff's defence.
If these are issues that concern you, then it might be worth following the debate as it develops.

All things dull and ugly …

In the year that marks two centuries since Darwin’s birth, well-known BBC nature presenter David Attenborough is receiving hate mail from religionists [hat tip LM]. "They tell me to burn in Hell and good riddance", he says.

Nice people these Christians. The hatred apparently comes his way for “not crediting God in his nature programmes.”

    Speaking in the Radio Times, Sir David said that he was also asked why he did not give "credit" to the Lord, Sir David continued: "They always mean beautiful things like hummingbirds.
    "I always reply by saying that I think of a little child in East Africa with a worm burrowing through his eyeball.  The worm cannot live in any other way, except by burrowing through eyeballs. I find that hard to reconcile with the notion of a divine and benevolent creator."

Rather reminds me of a point made in this Monty Python song…

3/64 Hapua St, Remuera – Claude Megson

This small Megson townhouse is on the market - one that came on the market a year or so back, and was bought and 'renovated' unsympathetically, fortunately only on a small scale, by a graduate architect who had no idea what she was working with.

By craftily making the most of view shafts and ‘shared spaces,’ Megson made this small, contained location feel like a large estate.

Now that it’s back on the market, a sympathetic buyer would be able to easily rehabilitate it. Sale details are here. Agent's blurb reads:

Remuera - Writers, Artists, Architects.
3/64 Hapua St

Open Homes: Sat 31 Jan 12:00 pm - 12:30 pm Sun 01 Feb 12:00 pm - 12:30 pm
Auction at L4, 50 Kitchener St, City on 25/02/2009 at 11:00am Unless sold prior
Architect Claude Megson created this sublime artistic retreat in the 1960s. Fitting like a glove into the Remuera hillside just below Arney Crescent, it's within easy walking distance of Parnell & Newmarket. Despite a compact floorplan, you'll be amazed how light & airy it feels. You'll discover several private spots perfect for reading & relaxing. Although every house-hunting single or couple should see this, the next owner is more likely to be someone who appreciates the architectural significance of a Megson.
  Cross-posted at The Claude Megson Blog.

Tuesday, 27 January 2009

Barack blogs! [update 3: The stimulus edition]

President Franklin Roosevelt used his “fireside chats” to sell his perfidy to the American public.  President Obama is using a new blog – and according to reports “the blogosphere is abuzz” about it.  Do the powers of the Obamessiah never end?  He heals the sick; he heals the planet; he stops the waters rising; he meets the media … and now in his spare time, he blogs! Phew.  Even his namesake rested on the seventh day.

But if you think that’s Barack on the blog and not just a panoply of press releases, then you probably also think he’s going to “lead” the US out of recession – in which case, I have a stimulus package right here that I see you’re already buying.

UPDATE 1:  Speaking of stimulus packages, it seems Obama's economic advisers have been reading The Onion, which has several "ideas" for stimulus packages to reignite the US's bubble economy...

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."
    ...According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.
    "Perhaps the new bubble could have something to do with watching movies on cell phones," said investment banker Greg Carlisle of the New York firm Carlisle, Shaloe & Graves. "Or, say, medicine, or shipping. Or clouds. The manner of bubble isn't important—just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."
    ... "The U.S. economy cannot survive on sound investments alone," Carlisle added.

Have the advisers been reading The Onion, or has The Onion just been reading Keynes?

UPDATE 2: Robert Barro and Robert Lucas might come from the same school of economics, but it looks at present like they're firing at different targets, and getting shot for it -- one deservedly, one not so.

Robert Murphy gives Lucas a well-earned going over for his strange faith in Ben Bernanke -- specifically Bernanke's flawed notion that too much paper isn't enough.

Meanwhile, Tyler Cowen takes on those who are dumping on Robert Barro for pointing out that any expectation of a positive multiple from government stimulus packages is wholly mistaken, and points out in passing that uber-Keynesian Paul Krugman appears to have finally admitted that WWII is not a good example of the success of Keynesian deficit spending.

UPDATE 3: In recent weeks Greg Mankiw [hat tip Anti Dismal] has documented many  skeptics about the efficacy of a spending stimulus,
a list that includes quite a few well-known economists, such as (in alphabetical order)Alberto AlesinaRobert BarroGary BeckerJohn Cochrane,Eugene FamaRobert LucasGreg MankiwKevin MurphyThomas SargentHarald Uhlig, and Luigi Zingales--and I am sure there many others as well. [Follow the links to see Mankiw's evidence.]
    Regardless of whether one agrees with them on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the 
standard objective criteria by which economists evaluate one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.