Friday morning ramble: The ‘Bleeding Obvious’ edition

Once again, while the world burns and economic fortunes tumble, the local politicians and their commentariat are more interested in a race-based by-election and a bloke who had the temerity to point out the bleeding obvious. So let’s look at more important things, shall we?

Don Brash appears to understand the RMA “is the biggest single obstacle to economic growth in New Zealand.” He just doesn’t know how to replace it—or doesn’t care to. But it’s not difficult…
RMA impeding economic growth: Brash -  N Z   F A R M E R ‘ S   W E E K L Y
What would 'Party X' do about the environment? - PART 3: Replacing the RMA -  N O T  P C , 2007
New Zealand's Persecuted Minority: Property Owners  - S C O O P , 2002

There are two ways to tackle the mounting welfare crisis. Confront it head on, or lie about it. Which method do you think this govt (helped by an asinine media) have adopted?
DPB - more going on than leaving – L I N D S A Y   M I T C H E L L

Sections in a beleagured Christchuirch are still on the maret $200,000 when they should be around $50,000, if not for the absurd ring fenvcing of New Zealand’s most tragic city. Never has cheap land been so essential, and finally, after years for pressure, we have what High Pavletich calls “ a belated step in the right direction”: The “planners” have released one small part of the ring fence to allow around 5000 plots to be built on.
Environment Canterbury looks to release land on Christchurch fringes for up to 5,000 homes; up to Environment Court 
– I N T E R E S T . C O . N Z

By the way, here’s something to ponder if you think little old NZ is going to continue weathering the world’s storms while racking up new debt at the rate of more than a billion dollars per month…

Here's a thought on the Greek/euro crisis brought to you by Austrian
economic thinking. As you know, bond yields in the peripheral countries
are spiking. Greek 10-year bonds are nearly 17 per cent, Irish and
Portuguese 10-year yields are around 11.5 per cent. Conventional
thinking says these high yields reflect concerns about default.
While that's true, they also tell you something far more important.
That is, there is very little real savings left in the banking systems
of these economies. Rising market interest rates is
an indication of scarce savings. Therefore, the price of money
must rise to encourage saving and discourage consumption.
When savings are plentiful, the price of money falls to encourage
consumption and discourage saving. This process doesn't occur
in a market distorted by central banks and currency unions.
It only reasserts itself when the money fiddlers
lose control, as they now have...
- Greg Canavan, Daily Reckoning Australia

This week marks the 40th Anniversary of the "War on Drugs.” Begun by Richard Nixon, everyone’s favourite President. his war has resulted only in failure, misery, violence and death. Isn’t it time to review?
40 Years of Protecting Us from Ourselves – Valery Publius,  U N D E R C U R R E N T
War on drugs produced swollen prisons and little else – Zachary Goelman,  R E U T E R S
Another Admission 'War on Drugs' Has Failed 
- Charlene Muhammad,  N E W  A M E R I C A N   M E D I A
Tough birthday for War on Drugs  - C H I C A G O   N E W S
The Drug War: What is It Good For? – Art Carden,  F O R B E S

Warmists constantly claim skeptic scientists make a fortune from their skepticism. They don’t … but warmist James Hansen (who just toured NZ)  does.
 NASA Scientist Accused of Using Celeb Status Among Environmental Groups to Enrich Himself 
– F O X  N E W S

By contrast, here’s a good example of  “principled climate science scepticism.”
Prof Kelly shows the middle way- Prof. Mike Kelly,  C L I M A T E   C O N V E R S A T I O N

Germany shoots itself in the foot (the one they didn’t shoot by joining the European Monetary Union).
 Germany Finds Going Green is Tough Going – N C P A

You have one minute on the over-population myth, starting now:

Human productivity allows mankind to escape the Malthusian population trap—and with freedom and a greater population, even greater productivity was possible. So why are the anti-industrialists against this? “Today, environmental groups call for a reduction in carbon on scales that would require a gigantic decline in our population numbers: we are told we must self-sacrifice and surrender our standard of living for the general good of a much lower population.  The most extreme voices would send us spinning back to the dark ages and the more moderate would see us stagnating in development.” Why?
Global Warming: The New Malthusian Scare – Toby Baxendale,  C O B D E N   C E N T R E

Just one example of how ingenuity and productivity combined open up whole new areas of the environment in which to live—making even greater population possible: the air conditioner. Hurray for Mr Carrier!
The Heat Is On! – Mark Thornton,  M I S E S   D A I L Y

Shit cars. Cool doors. [HT Tomahawk Kid]

“If we pursue another economic stimulus of similar size to the previous one, we may as well condemn the economy to another 10-20 years of recession.”
"Stimulus is like using morphine to fix a broken arm"
-  Veronique de Rugy, N A T I O N A L  R E V I E W

‎"It's almost as if Washington envisions the economy not as a complex network of billions of voluntary, mutually beneficial relationships, but as a lawn mower which could be forced to run smoothly if only they'd yank hard enough on the starter cord...
”Lawmakers should face the facts: Intervention is hurting, not helping, the economy."
The One Stimulus Government Hasn't Tried – Jonathan Hoenig, S M A R T   M O N E Y
[Hat tip Keith W.]

Is the US economy worse than Greece? The world’s biggest bond buyer says “Yes!” But is he right? And what does it mean for future interest rates? [No, Bernard Hickey won’t  understand any of this.]
Is the U.S. Economy Actually in Worse Shape Than the Greek Economy? – P J T V

So, ah, just how are those risk signals looking in the European Zone? I know, let’s ask the European Central Bank governor…
Trichet Admits the Obvious "Risk Signals Are Flashing Red"
– M I S H ‘ S   G L O B A L    E C O N O M I C   T R E N D     A N A L Y S I S

Price controls always raise prices. Latest example: U.S. healthcare.
Confessions of a Price Controller -  T H E  A M E R I C A N

Santiago CalatravA’s Chicago Spire was going to be one of the world's tallest buildIngs. But the financial downturn torpedoed its funding, and now it is all but dead. With other major projects on hold or cancelled, some critics say this is the end of North America's love affair with skyscrapers. Robert Bruegmann, of the University of Illinois, considers the fate of super-tall buildings in the US, and explains why he believes the spire may yet be built. And it’s a beautiful slideshow…
Audio slideshow: Chicago's doomed spire – Robert Bruegmann,  B B C

A poor interviewer takes on the world’s best apologist for his own mistakes, and fails. Watch the man who brought down the world explain over thirty minutes that it was all someone else’s fault, that he and his friends always knew what they were doing, that basically their shit doesn’t stink—helped by an interviewer who never knows how to ask the right question at the right time.
Charlie Rose interviews Alan Greenspan – C H A R L I E   R O S E

“Alan Greenspan has always cared about one — and only one — thing. Every nerve ending in his body at every moment in his life has been devoted to the promotion of Alan Greenspan.”
Chairman Greenspan: A Fiat Mind for a Fiat Age
-  Fred Sheehan,  M I S E S  D A I L Y

More broken economic theory coming right up: The Phillips’ Curve is really just a load of old junk.
The Phillips’ Jumble – C A F E    H A Y E K

Wealth in a market economy is not a static quantity of stuff, never an inexhaustible fund that pays out goodies to lucky passive owners; wealth has constantly to be created and re-created; it’s never fixed. But the market “distributes” stuff unequally, you say? Baloney. The market is constantly redistributing wealth far more productively and fairly than any government efforts.
Ludwig Lachmann on Income ‘Inequality’ -  C A F E    H A Y E K

Want a bigger slice of the pie? Then bake your own.

“When It Comes to Wealth Creation, There Is No Pie”

• Don’t worryabout (former) All Black Stephen Donald. Stephen Donald is holed up at Peka Peka Beach. Just him, a penguin, and a werewolf. [Note: Parts of this may be satire.]
  Stephen Donald resting up on Kapiti Coast beach – S P O R T   R E V I E W
• Wow!
  Turning The iPad Into A Weapon  - S T R A T E G Y  P A G E
  [Hat tip Geek Press]
• The ten best things about smartphones (and you doubted there was even one!)
   Why I Love & Hate Having a Smartphone –  T H E   O A T M E A L
• Turns out you really can make a silk urse out of a sow’s ear.
   Can Do  -  F U T I L I T Y   C L O S E T
• In March 1974, Ayn Rand faced the improbable task of lecturing on the crucial importance of philosophy—to the graduating class of West Point. She succeeded magnificently: she attracted three times the expected attendance, she elicited an enthusiastic ovation, and her lecture was reprinted in a new philosophy textbook published by the U.S. Military Academy. Set aside a spare hour to relive this memorable occasion and insightful speech, and (re)discover the irresistible intellectual power of Ayn Rand.
  Philosophy: Who Needs It  - A Y N   R A N D
• Parents, teachers, anyone interested in education … listen up! Here’s the ideal weekend workshop for you: a Montessori weekend in Matakana no less. What could be a better way to learn about the best philosophy in which to raise your children?
  A Montessori Workshop in NZ – A  M O N T E S S O R I   H O M E
• Should the state waste time and resources tracking down “deadbeat dads”? Or recognise instead that just as there should be no involuntary servitude, there should be no involuntary parentitude (to coin a phrase).
  Video: Fatherhood Should Be Voluntary –  N O O D L E  F O O D
  
  

• Here’s Paul Kelly’s tribute to a favourite place. You know, he’d give you all of Sydney Harbour, all that land and all that water, for that one sweet promenade.

• Here’s Billy Strayhorn’s impressionistic masterpiece, inspired by the sight of London’s Chelsea Bridge through the fog, played by the masterful Ben Webster. [HT Jazz on the Tube]
  

• And this, a few final moments from another of my current obsessions, takes up where Ben & Billy leave off.

Final moments of Bruckner’s 4th Symphony, with paintings by Caspar David Friedrich

Enjoy your weekend!
PC

PS: Thanks to all those who deserve a hat tip, and my apologies for not remembering who was responsible for which link. My thanks, and my fault.

Storm, by Tim Minchin

A nine-minute beat poem about idiocy, by Tim Minchin.

My favourite line:

“Alternative Medicine
Has either not been proved to work,
Or been proved not to work.
You know what they call ‘alternative medicine’
That’s been proved to work?
Medicine.”

Disappearing in a cloud of Athenian tear gas

They’re rioting in Greece because decades of welfarism has proved unaffordable.

They thought the post-war experiment with the welfare state guaranteed every Greek a living at every other Greek’s expense. Now they’re learning otherwise.

They thought their membership in the EU’s monetary union guaranteed Greece a living at Germany’s expense. Now they’re learning that was never possible.

They thought that a policy of borrow and spend would work forever—spending based not on necessities of production but on the siren-song of “need,” and borrowing based on an ever-expanding pyramid plan of debt.

It won’t. It can’t. It isn’t.  The bill is finally being presented, and the post-war welfare-state experiment that supposedly guaranteed everyone a living at everyone else’s expense is revealed for what it is: as unaffordable as cancer, and as destructive. For Greece as for every other welfare state.

“The state,” as Bastiat once said, “is that great fiction by which everyone tries to live at everyone else’s expense.” The fiction is now disappearing in a cloud of Athenian tear gas.

The biggest clusterfuck in modern European history was as unavoidable as the collapse of welfarism will be in every other place—and a first taste of what it will be like when the reality hits home in every place, either with or without riots, that the welfare state experiment is unaffordable. That borrow and spend is over. That mortgaging your grandchildren’s future to pay for your welfare state today will impoverish their generation, and eventually bankrupt this one too.

And that lesson goes for us as well.

How long do you think we can continue borrowing a third-of-a-billion a week to fund middle-class welfare, especially when bond yields start turning—as they can do overnight.

DOWN TO THE DOCTOR’S: Welfare for the Rich

Libertarianz leader Dr Richard McGrath invites you down to his clinic for an inoculation against this week’s stories and headlines on issues affecting our freedom.

This  week: Welfare for the Rich …

• NZ HERALD: “Taxpayer money promotes Ladyhawke” – Former Masterton singer-songwriter Pip Brown is given a $59,000 grant from the Music Commission…

THE DOCTOR SAYS: Doesn’t it give you a warm fuzzy to know your taxes are being used to make more wealthy someone who I would pick as already doing very nicely thank you, given her first album sold a third of a million copies internationally.
    Isn’t there something wrong with a system that gouges low-earning New Zealanders and hands this loot over to a wealthy singer whose sales indicate she is already well-established on the music scene?
    But I guess that after dragging the iPod/mobile phone middle class into the welfare trap with Welfare for Working Families (an election bribe introduced by Hard Labour and now managed by the National Socialists) there’s only the rich left to mop up--at which point then everyone will be sucking at the teat and willing to vote for more of it.
    But wait, there’s more: another recipient of taxpayer largesse is none other than Annabel Fay, daughter of local knight Sir Michael, who could surely afford to subsidise his daughter rather than have the rest of us do it.
    Have you no shame, Sir Michael, at your daughter’s parasitical exploitation of low-income New Zealanders?
    Have you no conscience, Miss Fay?
    Apparently not. Instead, parasitism like this is considered to be just the way things are.
    The Music Commission is a disgrace to the country and should be disbanded immediately, with its funds returned to the people from whom they were stolen. Ditto Creative NZ who is funding a couple of NZ acts to attend the Glastonbury Music Festival.
    Why should taxpayers have to put up with this sort of nonsense? Answer: because they voted for it. Because both National and Labour believe hand-outs are a better way for a musician to make money than having to sell concert tickets and CDs.
    Unless of course you’re a musician who engages in victimless non-crime, in which case you should be locked up. 

"If Congress can employ money indefinite­ly to the general welfare …  it
would subvert the very foundation­, and transmute the very nature of the
limited Government establishe­d by the people of America."
- James Madison, future U.S. president

EDITOR’S NOTE: For those who don’t know the musician to whom Doc McGrath refers in the last paragraph above, that’s him in cartoon form on the cover of John Dix’s classic history of NZ rock ‘n’ roll (pic below)—chosen by Dix because “there are a great many characters in New Zealand rock ‘n’ roll, but Rick Bryant stands unique… As much as anybody, Rick Bryant represents the spirit of New Zealand rock ‘n’ roll. That’s why he’s on the cover.”
And now, he’s in prison.
One of his early bands was called Rough Justice. A suitable moniker, you might think.

How’s that global warming working out for you? [updated]

Just thought you’d appreciate an update on global mean surface temperatures over the last decade, as measured by NASA’s Goddard Institute of Space Studies in the US, and the Hadley Centre for Climate Research in the UK.

Source: Steven Goddard’s Real Science, Wood For Trees.

See all that “dangerous” warming, huh. See the out-of-control trend.

Is it any wonder the likes of Australia’s Julia Gillard is being savaged for using the global warming bugaboo to introduce a new tax?

UPDATE: Thanks to Blunt for the cartoon, and John Boy & Julia for the fiction-based shakedown:

Nozick left? [update 3]

A few of you  have sent me a piece by Steven Metcalf in Slate, trumpeting the alleged fact that “philosophical father of libertarianism,” Robert Nozick, “gave up on the movement he inspired.”

It’s all very entertaining, except for two things:

Nozick didn't start libertarianism.

And he didn't leave it. [Don’t just believe me, here’s what he said himself about it in one of his last interviews.]

So, the article is a bust. But so too is Nozick himself. Sure, he’s taught in political studies departments as a (if not the) libertarian with whom to get to grips. Indeed, as the “philosophical father of libertarianism” (to cut and paste a phrase). That’s for three simple reasons:

1. Academics are dumb.
2. Nozick was one himself.
3. Nozick’s ideas were easy to knock over.

Nozick’s ideas slipped inside the academic tent because Nozick was an academic at Harvard—and when you’re an academic at Harvard it’s hard to be ignored. (He got the gig because he was originally a socialist, an ideology he renounced on the way to his chair). But being an academic from Harvard, his ideas had to be taught. And fortunately for those who taught them, his ideas were easy to knock down.

This suited political science professors right down their mouldy, Marxist jumpsuits. Just imagine: teaching ideas that make you uncomfortable by teaching the weakest version of those ideas you can find. A version with the academic imprimatur of Harvard no less. What could be more ingenious! Or more useful—if you’re a politicised pol-sci professor with a penchant for collectivism, and a knack of persuading your more pliable students.

As Sean Kimpton pointed out in 'The Free Radical' a few years back, when it comes to defending liberty, Robert Nozick has long been “doing more harm than good..."

[Nozick] is considered by academics to be the leading advocate for libertarianism and freedom amongst modern political philosophers, but his weak arguments are too easily trumped by self-serving intellectuals who only feel obliged to answer Nozick, rather than more substantial political thinkers like Rand....
    But perhaps it is the very weakness of his arguments that add to his attraction, he is the ideal libertarian straw man - easy to knock down, and to burn while he's down.
    But Nozick does have value. He shows us that if your arguments lack foundations you will undo your conclusions, no matter how true they might be.

Nonetheless, a few fellows at Cato have still been trying to defend the poor, late libertarian against the slings and arrows of Mr Metcalf’s outrageous verbiage. If you wish defence against Mr Metcalf, then here it is (nice title on that first piece, by the way:

• Capitalist Acts between Consenting Adults
• Misunderstanding Nozick, Again
• Robert Nozick and the Value of Liberty

UPDATE 1: Matt Welch from Reason magazine weighs in with a slate of further replies, rejoinders and rebuttals to Metcalf’s monstering of the dead professor:

• Some Factual Errors in the Latest Slate Attack on Libertarianism

And someone just emailed me to ask why I’ve bothered posting a defence of someone whom I hold in such little respect. Two reasons, really:

1. Mr Metcalf’s shotgun blast against Nozick is intended to be a take-down of the political philosophy Nozick was supposed to represent, using him as the target and taking out sundry others in the scattergun
2. Because tender young pol-sci students who have been taught that I must subscribe to the Nozick wisdom and who tune in here daily (and eagerly) for my gems of insight and political wisdom need to know that all is not as it appears be Nozick-wise—just not in the way that Mr Metcalf thinks.
   So now you know. Both of you.

UPDATE 2: Nozick admirer Julian Sanchez reckons the very central contention of Metcalf’s is frankly wrong, and the piece proves little beyond “ that there’s nothing too fundamentally confused to be published on Slate as long as it gets in a few good jabs at libertarians.”

• Nozick, Libertarianism, and Thought Experiments

UPDATE 3: So why, you might wonder, have baseless attacks on the godfathers of libertarianism—or even the alleged godfathers of libertarianism—increased in recent times? Well, maybe it’s because they’re getting traction. Hell, even the New York Times thinks they are:

• Poll Finds a Shift Toward More Libertarian Views

Legal plunder

As Frederic Bastiat observed long ago, there are only two means by which people can gain values from one another: Either by trade or free exchange, or by plunder.

The real problem begins once parties realise they can legalise plunder, and then live off it…

“Legal Plunder” by the Foundation for a Free Society

More people fleeing Key than were fleeing Muldoon [updated]

Looks like whatever the polls are saying, New Zealanders are voting with their feet.

Record Kiwi exodus to Oz
The Kiwi exodus across the Tasman has hit a 32-year-high… Statistics NZ figures show 3300 New Zealanders  left for Australia last month, topping the record of 2900 set in 1979.

That’s more people fleeing Key than were fleeing Muldoon.

Makes you think, huh?

And no fear saying it’s all due to earthquakes.

"The number of New Zealanders leaving permanently, particularly to Australia, had been high prior to the February earthquake, reflecting the challenging New Zealand economic environment and the attraction of the strong Australian labour market," ASB economist Jane Turner said.

Um, didn’t this government promise to “fix” this problem? Didn’t John Boy stand in the middle of Eden Park at some point before he was elected saying he’d arrest the departure of one football-stadium of NZers per year who were leaving to follow a better dream. I seem to recall there was even a rather mediocre billboard campaign along those lines.

Turns out it was a lie.

Turns out that that even the “real tax cuts” were a lie—especially since the tax cuts promised were vaporised, and GST and borrowing went up to fund the derisory “cuts” finally acceded to.

Turns out then that while a smile and wave might do wonders for your poll ratings, it does nothing at all to fix the problems John Boy was elected to address.

Turns out perhaps that all John Boy is truly “ambitious” about is sitting at the desk with the title “Prime Minister” next to his name.

UPDATE: The figure includes “carpenters, plumbers and other building trade professionals [who] left for Australia last month at a rate of 20 a day.”

Twenty a day!

A legacy, among many things, of the utter mismanagement of the leaky homes fiasco—absolving BRANZ, DBH and Hardies while loading blame onto responsible tradesmen—and the complete, blind, dictatorial ineptitude now going on in Christchurch, where these tradesmen are urgently needed but have been (like many Cantabrians) locked out.

Folsom on U.S. National Debt In History

Guest post by Jeff Perren

Dr. Burt Folsom (author of New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America) provides an historical overview of how different eras and Presidents have dealt with national debt.

As always, Prof. Folsom leads with facts and perfectly sums up the lessons to be learned. It's even more interesting in view of the fact that it was written almost five years ago and is more relevant (and horrifying) than it was. He points out that “during the last 75 years the United States has failed to balance its annual budget over 90 percent of the time. What’s worse, the government has spent money so recklessly that we now owe over $8.2 trillion, and Congress recently raised the debt ceiling to $9 trillion..”

That’s almost touching, isn’t it, when now—just five years later--they’re bickering about smashing through a $14.3 trillion ceiling!

The short essay is so well-written I couldn't find a money quote that stood out, so this will have to do:

Interestingly, in the 50 years after the Civil War, from 1866 to 1916, the presidents were committed to restoring American credit, and the national debt was slashed from $2.7 billion to $1.2 billion. But World War I sent the debt spiraling again, this time to $24 billion by 1920. World War II added another digit to the nation’s debt, which leaped from $43 billion to $259 billion from 1940 to 1945.

The whole short piece offers excellent data and a clear moral view. Highly recommended:

• Our Presidents and the National Debt – Burton Folsom

Here’s a graph:

Source: Wikipedia

The Depression You Better Hope We Have… [update 2]

Guest post by by KRIS SAYCE from Money Morning Australia 

We’re often asked why hasn’t the U.S. suffered hyper-inflation… what with the trillions of dollars printed by the U.S. Federal Reserve.

The answer is quite simple.  Although we’ll admit we overlooked it at first…

With a gold standard, a nation owed money (creditor nation) by another nation (debtor nation) can demand payment in gold.

But without a gold standard, the creditor nation can only receive paper or electronic money… money created by the flick of a switch.

That’s when inflation troubles begin.

But still, it doesn’t explain why Weimar Germany and Zimbabwe had hyper-inflation whereas today the Western world doesn’t.

Here’s the key: hyper-inflation only takes hold if a nation expands the money supply much faster than other nations… and if creditors have real alternatives to the inflated money.

That’s why Weimar Germany and Zimbabwe had hyper-inflation.  And why the Western world doesn’t today.

Let me sum it up for you…

Why hyper-inflation happens

Following World War I, Germany had to pay compensation to the victors in gold or foreign currency.

But because Germany didn’t hold enough gold or foreign currency, it had to print new money to swap it for gold and foreign currency.

Clearly when your intention is to devalue the currency, working fast is critical.

Because as soon as the market gets wind of the plan, holders of the money will look to get rid of it as quickly as possible in exchange for something else.

That explains the speed of Weimar Germany’s inflation:

Source: Wikipedia

In a matter of months, one gold Mark (money convertible into gold) had increased in value from 1,000 “paper” Marks to one trillion “paper” Marks.

The story is similar for Zimbabwe.  Once the central bank began printing money, creditors stopped accepting Zimbabwe dollars – because they knew they were being devalued.

They preferred a better store of wealth – such as the U.S. dollar!

But while hyper-inflation is bad, what the Western world is experiencing is much worse.  Because there isn’t a fixed conversion for paper money into gold for any currency, all central banks and governments know they can inflate the money supply.

As long as they don’t go too crazy.

That’s the main reason many central banks publish an inflation target.

They don’t do it for information purposes.  And it isn’t to try and cap inflation.  It’s there as a form of price-signalling… showing other central banks how much they can increase their money supply without causing a run on the currency.

As long as every central bank knows the limits, they can engineer a globally co-ordinated period of inflation… without fear of causing hyper-inflation.

And boy, has it worked.

How the misery is spread far and wide

Trouble is, it punishes the whole world – not just one nation.

And because gold is demonised as a “barbarous relic”, and even blamed for past depressions, most people – even pro investors – don’t realise the value of their money is being eroded.

That’s the “good” thing about hyper-inflation.  You’re in no doubt what’s happening.  You can see your wealth destroyed right before your eyes.

But with slow burning inflation caused by central bankers, the effects are near impossible to notice at the time.  It’s only years later you wonder how you can earn three times as much as you used to, yet you’re still no better off.

You can see the difference clearly in these two charts.  First, this chart from the Bank of England showing the annual inflation rate since 1790:

Source: Bank of England

And second this chart showing the U.S. inflation rate from 1914:

Source: Wikipedia

When gold was considered as money, you can see inflationary periods followed by deflationary periods.

Wealth erosion didn’t happen over the long run.  And purchasing power was broadly constant.

But once the monetary system removed gold and silver, there have been no periods of deflation.

Even during economic downturns, there hasn’t been deflation… only more inflation.

Why the worst is yet to come

During the past two years the U.S. Federal Reserve has created almost $2 trillion of extra money to keep the U.S. from collapsing.

And what has it achieved?  According to Bloomberg News:

“The US economy will grow 2.5 per cent this year, down from 2.8 per cent projected in April, the IMF said today, citing higher commodity prices and bad weather in the first quarter and a weak housing market.”

The U.S. economy got a temporary inflation boost.  And now the impact has gone.

If central banks want to postpone the overdue depression, it can only do one thing: and that’s print more money.  Given a choice between that and allowing the global economy to collapse on their watch we know which they’ll choose.

The fact is, as strange as it sounds, the world needs a depression.

It needs to purge the economy of all the past mistakes.  Sure, you can sit there and hope it doesn’t happen.  But that’s just accepting you’re happy for your wealth to be destroyed by slow-burning inflation…

This is much worse than the quick shock of hyper-inflation.  But the slow-burn can’t and won’t last.

Our guess is that time is fast approaching.  And that means inflation – even though it may not be hyper-inflation – is set to soar.

Cheers.
Kris Sayce
Money Morning Australia

RELATED POSTS at NOT PC:

• Why you should stop worrying, and learn to love depressions
• The global financial/economic crisis: causes & solutions
• Nothing to fear about falling prices
•  The 2 biggest obstacles to economic recovery . . .

UPDATE 1: A contrary opinion on the coming calamit(ies) here:

• Permanent Gold Backwardation:The Crack Up Boom – Keith Weiner,  Z E R O   H E D G E
  ”I agree that one way or the other we will get a depression, and the sooner the less severe. But for the rest, well I published this paper on a different theory of hyperinflation…”

And … “Anyone who thinks ‘inflation’ is about rising prices, and hyperinflation is about hyper rising prices needs to read this article [as well]. It is about the increasing tensions around insolvency and what happens when a debtor cannot pay. Picture this happening to country after country, bank after bank.”

• SocGen Tries To Make Sense Of The Complete Chaos That Is Europe Ahead Of The Greek Vote Of ConfidenCE -  Z E R O   H E D G E

UPDATE 2: The latest Casey Daily Dispatch links to a relevant wee video.

“It's a 1933 propaganda piece promising to bring the United States out of the Great Depression with inflation. Most of our readers will find this funny - especially the part about higher commodity prices. However, this video also reminds me of propaganda's changing face. The message is essentially still the same today, but Washington has become more subtle in presenting its views.”
1933 Inflation Propaganda Video (YouTube)

US Government Inflation Propaganda - 1933

The Telecom litmus test works again [update]

Politicians’ attitude to and handling of Telecom has always offered a litmus test of their attitude to (big) business, never more so than in recent times, by the two most recent governments.

Their handling of Telecom offers an eloquent demonstration of the difference between these two governments in their attitude to business: where the Clark Government did its best to nationalise and dismember Telecom  (scratch today’s Labour MPs, and you’ll still find a Marxist underneath), the Key Government is now doing all it can to turn it into a government department.

Such is the way the Key Government apparently sees business: as part of his corporate state, kept onside by subsidies and state-guaranteed monopolies.

A monopoly we would always have been better off without.

And, sad to say, instead of attacking Key’s crony capitalism Don Brash has shown he still doesn’t understand how politics works.  In accusing the Labour opposition of “sabotage” and “wanton economic thuggery” because it says it would repeal Telecom’s sweetheart fibre contract,  he is opposing precisely the position National should have taken over Kiwisaver when it was in opposition—back when it claimed to be opposed.

As I said at the time, for all their flatulent opposition at its introduction, John Key could have extinguished Kiwisaver before it was even born by one simple statement that, if elected in 2008, he would deal to this scheme as Muldoon did to the last Labour compulsory savings scheme -- by scrapping it.

That would not have been sabotage. That would have been a kindness. It would have shown balls.

No wonder he didn’t try it.

UPDATE: In Australia, opposition leader Tony Abbott has pledged to scrap Julia Gillard’s carbon tax if his Coalition wins the next election. Presumably Brash would call that, too, “economic sabotage.”

Which shows how absurd his mis-directed mini-tantrum really is.

Don Boudreaux's Open Letter to Paul Krugman

Guest post by Jeff Perren

Don Boudreaux of Cafe Hayek gives an excellent smackdown of Paul Krugman (albeit far more polite than he deserves). Krugman writes:

if you ask a liberal or a ‘saltwater’ economist, “What would somebody on the other side of this divide say here? What would their version of it be?” A liberal can do that. A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at.

The reverse is not true. You try to get someone who is fiercely anti-Keynesian to even explain what a Keynesian economic argument is, they can’t do it. They can’t get it remotely right.

Or if you ask a conservative,”What do liberals want?” you get this bizarre stuff – for example, that liberals want everybody to ride trains, because it makes people more susceptible to collectivism. You just have to look at the realities of the way each side talks and what they know. One side of the picture is open-minded and sceptical. We have views that are different, but they’re arrived at through paying attention. The other side has dogmatic views.

To which Dr. Boudreaux replies, in part:

Let’s overlook your failure to distinguish conservatives from libertarians – a failure that, for the point I’m about to make, is unimportant.

You’re able to conclude that “liberals” are open-minded thinkers while “conservatives” are dumb-as-dung dogmatists only because you compare the works of “liberal” scholars to the pronouncements of conservative popular pundits [like] Glenn Beck and Rush Limbaugh ...

Because, as you claim, you study carefully the works of non-”liberal” scholars, you surely know that the late Frank Knight, Ludwig von Mises, F.A. Hayek, and Milton Friedman – influential economists whom you would classify as “conservative” – were all steeped in and treated seriously the writings of Keynes, Marx, Veblen, Galbraith, and other “liberal” thinkers.

The same is true for still-living influential non-”liberal” scholars.

 I’d be obliged to conclude that you in fact, contrary your claim, do not carefully engage the works of non-”liberal” scholars if you insist that “liberal” scholarship is ignored by conservative and libertarian thinkers such as James Buchanan, Gordon Tullock, Ronald Coase, Armen Alchian, Harold Demsetz, Anna Schwartz, Gary Becker, Vernon Smith, Leland Yeager, Henry Manne, Deirdre McCloskey, Allan Meltzer, Richard Epstein, Tyler Cowen, Arnold Kling, George Selgin, Lawrence H. White, and James Q. Wilson, to name only a few…

In short, Krugman once again has been caught peddling intellectual porkies.

The whole thing, while short, is well worth reading in its entirety, as are many of the comments.

The Odious Dr. Liu

Guest post by Jeff Perren

I'm late commenting on it (for reasons I'll explain soon) but we here in the U.S. really dodged a bullet when Republicans blocked the nomination of Dr. Gordon Liu for the Ninth Circuit of Appeals.

Apart from the damage he would have done there, that job is often considered a stepping stone to the Supreme Court. If you wonder just how big the bullet was, this 2006 quote of his from the Yale Law Journal is enough:

On my account of the Constitution’s citizenship guarantee, federal responsibility logically extends to areas beyond education. Importantly, however, the duty of government cannot be reduced to simply providing the basic necessities of life…
    Beyond a minimal safety net, the legislative agenda of equal citizenship should extend to systems of support and opportunity that, like education, provide a foundation for political and economic autonomy and participation. The main pillars of the agenda would include basic employment supports such as expanded health insurance, child care, transportation subsidies, job training, and a robust earned income tax credit.

It's a pity, actually, that Dr. Liu is allowed to return to his teaching position at U.C. Berkeley's law school, where he may be doing more long-term damage than if he were on the Ninth Circuit. But that isn't in our control at the moment.

If we're to reclaim the United States from Progressives two things must happen:

1. the State-sponsored factory-school system must be privatized and returned to reason, and
2. all Progressive judges must be expunged from the courts.

We're still in considerable danger from both those influences, but at least we can claim this one (temporary) victory.

Go the F#ck to Sleep

One of the most popular children’s-books-for-adults this month has a title you can’t use on a family blog. So here’s Samuel L. Jackson to read it for you.

IPCC sexing up more “science” [updated]

The UN’s IPCC climate panel relies only on reliable, well-researched, peer-reviewed science. Oh, and wish-fulfilment fantasies from Greenpeace.

Yes, that’s right. Turns out the UN’s favourite climate lobbying organisation (that’s the IPCC, not Greenpeace) has once again been caught fudging its figures, drawing up dodgy data, and trying to hide its decline as a serious scientific clearing house.

This time, the IPCC has been caught with its pants down “bigging up renewable energy as the power source of the future” in a report that “turns out to have been lead-authored by an activist from Greenpeace .”

That’s virtually the leitmotif of scientific credibility wouldn’t you say?

And remember “renewable energy”? That’s the kind of apologetic energy production whose working definition is that it is “energy produced by means that would be uneconomic without govt. tax breaks and subsidies”—energy that is not so much renewable as it is unreliable.

No wonder it’s so popular with the anti-industrialists.

Picture from Jo Nova's blog.

UPDATE: There is No Conflict of Interest Policy for the IPCC’s next scare-story official report, out soon. And no conflicts of interest at all. Honest, guv. Physicist Lubos Motl summarises the laughable situation:

It turns out that [disgraced IPCC head Rajenda] Pachauri also wrote a preface for the Greenpeace document that was renamed as the IPCC document. Pachauri rejected any kind of policy against the conflict of interests for the 5th report: no surprise, the whole work of the IPCC and Pachauri himself is all about the conflict of interests.

Or as Steve McIntyre puts it in accusing the IPCC of playing "Greenpeace Karaoke",

The IPCC Press Release on renewables [claims] “close to 80 percent of the world‘s energy supply could be met by renewables by mid-century …” The basis for this claim is a Greenpeace scenario. The Lead Author of the IPCC assessment of the Greenpeace scenario was the same Greenpeace employee who had prepared the Greenpeace scenarios, the introduction to which was written by IPCC chair Pachauri.

Nice.