Tuesday, 5 June 2012

How one Labour blogger hopes to destroy production and slash real wages

Economic ignorance rears its head again at Labour blog Red Alert this morning.  Someone called David Clark* writes:

Our economy is stagnant under National… It doesn’t have to be this way…For starters, National passed over a huge opportunity to stimulate the economy.  The latest Treasury figures estimate the cost of income tax cuts made by the National Government in 2010 at around $11 or $12 Billion.

Leave aside for the moment both the numbers involved, the sad fact the GST hike fully balanced out the tax cut for most people, and the inanity of referring to people keeping some of their own money as a “cost.”

But this Mr Clark writes as a Keynesian, under whose theories a tax cut is recognised as one classic form of stimulus—especially when accompanied by hefty borrowing, which this “tax cut” was.  So why is he decrying this as not stimulus? Perhaps he just hasn’t read his Keynesian script properly himself, because he then waffles on for a while about how high-earners spend less of their income than low-earners—typical Keynesian claptrap—before using alleged economist Joseph Stiglitz to illustrate this point:

“Consider someone like Mitt Romney, whose income in 2010 was $21.7 million. Even if Romney chose to live a much more indulgent lifestyle, he would spend only a fraction of that sum in a typical year to support himself and his wife in their several homes. But take the same amount of money and divide it among 500 people—say, in the form of jobs paying $43,400 apiece—and you’ll find that almost all of the money gets spent.

So what does he think happens to the rest of that notional $21.7 million not spent supporting “someone like Romney and his wife” in their several homes? That it gets baked into pies? Or buried in the back garden? Or rolled into doobies and smoked? No, of course not (not by Mitt Romney, anyway). No, the remainder not spent on consumer goods also gets spent—only, as with all savings, it gets spent by someone other than “Romney and his wife,” and (mostly) on things other than consumer goods.

This is a process to which Keynesians are profoundly blind: both in what happens to saving, and in where those savings are actually spent--virtually the whole of which goes to the productive part of the economy.

You see, saving is not dis-spending—it is deferred spending. Savers defer a portion of their own spending power and direct it (or have it directed for them by their bank) into investment vehicles, where it then adds to the pool of real savings from which entrepreneurs and businesses can borrow to grow their businesses.

Which means all the $21.7 million is spent just as surely if it was taken and given away to voters low-income earners. But the chief difference is that, if saved, the overwhelming majority of that $21.7 million is spent not on destructive consumption and consumer goods but on productive consumption and capital goods, i.e., on the very part of the economy that grows the economy and from which the overwhelming proportion of  wages are actually paidand about which Keynesians like Mr Clark are virtually one-hundred percent blind

George Reisman illustrates this point:

The truth, which real economists, from Adam Smith to Mises, have elaborated, is that in a market economy, the wealth of the rich — of the capitalists — is overwhelmingly invested in means of production, that is, in factories, machinery and equipment, farms, mines, stores, and the like. This wealth, this capital, produces the goods which the average person buys, and as more of it is accumulated and raises the productivity of labor higher and higher, brings about a progressively larger and ever more improved supply of goods for the average person to buy.
    Thus, for example, because the automobile companies have numerous modern and efficient automobile factories, there is a production of automobiles sufficient for almost every family in the United States to own one. Because Exxon-Mobil and other oil companies own oil wells, pipelines, and refineries, there is gasoline and heating oil for the average American to buy. (And if the wealth of these companies were greater, and if its use in developing sources of supply were not blocked again and again by those who value the wildness of nature above the welfare of people, there would be a larger and more affordable supply of gasoline and heating oil to buy.)
    The capital of business firms is also the foundation of the demand for labor. The wealthier and more numerous are business firms, the greater is the demand for labor and the higher are wage rates. As illustration, just consider where it is more desirable to work: in an economy with few or no business firms or only small, impoverished business firms, or in an economy with large numbers of wealthy business firms. It is obvious whose competition for one's services will be more beneficial.
    Thus, in a market economy, people have a two-sided benefit from the capital owned by others. The capital of others is the source of the supply of the goods they buy and the source of the demand for the labor they sell. And the greater is that capital, the greater is this two-sided benefit to everyone. To the extent that the supply of goods produced is greater, prices are lower. And to the extent that the demand for labor is greater, wages are higher. Lower prices and higher wages: that is the effect of capital accumulation.
    An essential prerequisite of capital accumulation is saving.

Which is precisely what Mr Clark, whoever he is, decries.

Mind you, at least he’s arguing for tax cuts for some people, which on a Labour blog is sure going to have his head pulled in very quickly.

If the economic world really operated in accordance with the dreams of Messrs Clark, Stiglitz and Keynes, however, we would see even more penury than we do today, because if the greater part of spending was really to be spent on consumption rather than production—i.e., on consumer goods rather than capital goods—then production would fall, capital would diminish, the wage share of national income would fall, and real wages and real profits would plummet.

So be careful what you wish for, Mr Clark.

PS: You might argue that if consumers slowed their spending it wouldn’t matter how much businesses were producing because no-one would be buying what they’re selling—so that taxing business and “the rich” is “necessary” to give stimulus money to consumers.

This, too, would be profoundly blind to who actually purchases most of what businesses produce: which is other businesses, for whom savings is their primary source of spending.  Indeed, business in itself “generates a monetary demand that is fully sufficient for the profitable sale of its products.”

And to take money from businesses (or to reduce the pool of real savings, which amounts to the same thing) just in order to give to consumers the money with which to buy those same business’s products? This would be tantamount to businesses standing on the corner handing out hundred-dollar bills to passers-by in the hope they purchase eighty dollars worth of goods from them. In other words, it would be as insane as it would be destructive.

* * * *

* Oh, go on then, he’s Labour’s latest Dunedin North MP and adviser to someone called David Parker.

Queen's Birthday Dishonours List

The folk selected for honours on the Queen's Birthday Honours List don't usually interest me.

But I think it's high time for a Dishonours List.

And Douglas Graham, LOMBARD, is the ideal candidate to be first on that list to have his honours stripped.

So why isn't he? And who else would you nominate?

Monday, 4 June 2012

Re-designing Russel’s “green” economics [update 2]

"The whole aim of practical politics is to keep the populace
alarmed - and hence clamorous to be led to safety - by menacing
it with an endless series of hobgoblins, all of them imaginary."
-
H.L. Mencken

_RussellInteresting to see Greens’s co-leader Russel Norman getting back at his party’s weekend conference to talking about the impending demise of the environment”—the alleged reason for the party’s existence, and for them the ultimate imaginary hobgoblin.

Mind you, while he’s talked up by the usual useful idiots as if he’s saying something new (“New Zealand needs to redesign its economy to live within nature's limits”) he’s still peddling the same warmed-over nonsense we’ve been hearing since his first leader’s speech   the 1970s   the 186os   basically forever:

You must know that the world has grown old, and does not remain in its former vigour. It bears witness to its own decline. The rainfall and the sun’s warmth are both diminishing; the metals are nearly exhausted; the husbandman is failing in the fields, the sailor on the seas, the soldier in the camp, honesty in the market, justice in the courts, concord in friendships, skill in the arts, discipline in morals. This is the sentence passed upon the world, that everything which has a beginning should perish, that things which have reached maturity should grow old, the strong weak, the great small, and that after weakness and shrinkage should come dissolution.

No, that’s not Russel Norman on the weekend. That’s a quote from third century doom merchants, hoeing the same row then as the Ginger Whinger now.

sky-not-fallingThe fact is that ever since mankind starting putting one stone on top of another there’s been scare story after scare story about the so-called “limits to growth.”   But there are no natural limits to growth. The Stone Age for example didn’t end because it ran out of stones—it ended with the discovery of Bronze and Iron and agriculture and beer. 

Which is the way human beings survive: not by hunkering down in fear crying “Woe is me,” but realising “man must produce the goods on which his life depends; he must produce homes, automobiles, computers, electricity, and the like; he must seize nature and use it to his advantage.” Which is to say (and on this fact lies the fundamental refutation of Russel’s woe-betide-us environmentalism) man must create the very resources on which he depends.

The resources provided by nature, such as iron, aluminum, coal, petroleum and so on, are by no means automatically goods. Their goods-character must be created by man, by discovering knowledge of their respective properties that enable them to satisfy human needs and then by establishing command over them sufficient to direct them to the satisfaction of human needs.
    For example, iron, which has been present in the earth since the formation of the planet and throughout the entire presence of man on earth, did not become a good until well after the Stone Age had ended. Petroleum, which has been present in the ground for millions of years, did not become a good until the middle of the nineteenth century, when uses for it were discovered. Aluminum, radium, and uranium also became goods only within the last century or century and a half.

The ultimate creator of goods character is man’s mind. In fact,

nature’s contribution to natural resources is much less than what is usually assumed. What nature has provided…is the material stuff  and the physical properties of the deposits in these mines and wells, but it has not provided the goods-character of any of them. Indeed, there was a time when none of them were goods.
    The goods-character of natural resources… is created by man, when he discovers the properties they possess that render them capable of satisfying human needs and when he gains command over them sufficient to direct them to the satisfaction of human needs…
    And this brings me to what I consider to be a revolutionary view of natural resources... Namely, not only does man create the goods- character of natural resources—by obtaining knowledge of their useful properties and then creating their useability and accessibility by virtue of establishing the necessary command over them—but he also has the ability to go on indefinitely increasing the supply of natural resources possessing goods-character. He enlarges the supply of useable, accessible natural resources—that is, natural resources possessing goods-character—as he expands his knowledge of and physical power over nature.

Which means, when you think about it, that the ultimate resource is not what we find in the ground but the ideas we produce in our heads. Which means the only “limits to growth” that existed in the Stone Age, and exist  now, are either in the heads of human beings who refuse to think—or in the legislation dreamed up by the likes of Russel to stop the exploitation and creation of new and existing resources.

Russel however continues to talk about "a smart, green economy.” But the fact is, no such thing exists—at least not in the terms he means, with bans on power producers and subsidies for so-called “green tech.” The failure of any “green stimulus to get off the ground—in Spain, in Germany, in the US—even with huge motivation and billions of dollars in subsidies is just another clue that Russel is talking nonsense.

If any “smart, green economy” were to exist, it would be the result of improvements brought about by property-rights protections—which is the simplest, most principled and most successful means of protecting both individual rights and the environment yet devised.

And if Russel really does want some lessons from economics for his environmentalism, he might reflect that the whole of economic activity consists in creating new values and, new goods and new resources, and moving them and transforming them to the place(s) and the state in which they are most valued.  In other words,

all of economic activity has as its sole purpose the improvement of the environment—it aims exclusively at the improvement of the external, material conditions of human life. Production and economic activity are precisely the means by which man adapts his environment to himself and thereby improves it.

But this fact continues to elude Russel and his followers, who continue to cry wolf while remaining blind to the incredible results all around him.

Here we are. We enjoy an incredibly marvelous industrial civilization, whose nature is indicated by the fact that because of it vast numbers of human beings can travel at breathtaking speeds for hundreds of miles at a stretch in their own personal automobiles, listening to symphony orchestras as they go—indeed, can fly over whole continents in a matter of hours in jet planes, while watching movies and drinking martinis; can walk into darkened rooms and flood them with light by the flick of a switch; can open a refrigerator door and enjoy delicious, healthful food brought from all over the world; can do all this and so much more. This is what we have. This, and much, much more, is what people everywhere could have if they were intelligent enough to establish economic freedom and capitalism. 
But all this counts for virtually nothing as far as the environmentalists are concerned. They are ready to throw it all away because, they allege, it causes global warming and ozone depletion, i.e., bad weather. [Or because, they allege, there are “limits” to such pleasures.] And the best way, they say, for us to avoid such bad weather [or confronting such limits], and thus to control nature more to our advantage, is to abandon modern, industrial civilization and capitalism.

In other words, to stop our depletion of so-called “finite” resources, Russel would have us exploiting them altogether, and would shut down the system of (already-well-shackled) economic freedom that produced them all.

Russel et al refuse to see any of the benefits in the present of any of these wonderful achievements. And to the extent their sky-is-falling doom-saying is successful in creating sentiment and legislation banning or hindering new achievements, the future we face will be all the worse for it.

The great irony here really is that while Russel decries the running out of resources, it is his own brand of politics that has stopped resources being used and created—on the West Coast, in the Coromandel, in Northland. In fact, the truly great irony is that  the only way we would ever truly run out of resources would be if we ever did fully follow Russel down the path of abandoning our industrial civilisation.  Only then would he be proved right.

The fear that Russel rests on is a fear of the future.

But since he and his arguments are so widely accepted, it’s worth answering and understanding the questions: Why are so many so gosh-darned afraid of the future?

And why are there so many votes in pandering to this fear?

UPDATE 1:  Right on cue:

The Decline And Fall Of The Green Empire?

“It was interesting while it lasted. But it looks as if the ‘green revolution’ has entered the long slide into ‘What was all that about?’

“In January, the Spanish government ended absurdly lavish subsidies for its renewable-energy industry, and the renewable-energy industry all but imploded. You could say it was never a renewable-energy industry at all. It was a government-subsidy industry where in exchange for creating conscience-soothing but otherwise inefficient windmills and solar panels, the government gave the makers piles of cash consumers never would have.”

“At the beginning of his administration, President Obama insisted that if we didn’t follow their lead, we would surrender the hugely profitable renewable-energy sector to those sagacious Spaniards.”

"In 2009, researchers at King Juan Carlos University found that Spain had destroyed 2.2 jobs in other industries for every green job it had created. The researchers also calculated that the Spanish government had spent more than half a million euros for each green job created since 2000, and wind-industry jobs cost more than 1 million euros apiece."

“The reason the Spanish example is so important is that it demonstrates how the whole green-energy ‘revolution’ was really an ideologically driven green boondoggle from the start.

UPDATE 2: Russel bashes the increase in “dirty dairying.” Like virtually everything else he says, not true:

The number of convictions [for unlawful discharge] fell from 51 in 2008-09 to 18 in the year to date. Abatement notices and infringement notices have also decreased, from 537 to 329 and 500 to 330. 

Further, the number due to dairying is falling. The number due to council sewage treatment however is rising

Sunday, 3 June 2012

Where Jesus goes… [updated]

Mainstream reaction to Brian Tamaki’s church continues to amuse me. Stuff reports Brian Tamaki’s latest “revelation”:

Bishop Brian Tamaki has raised the stakes with his Destiny Church followers, exhorting them to leave behind houses, jobs – even family members – to join him at a "City of God" he is building in South Auckland.
    At the church's annual conference in Rotorua on Friday night, Tamaki spent his entire two-hour sermon talking about how God had told him to build the city and why his followers had to lose their "parochialism" towards their home areas, even if it meant leaving behind loved ones. 

Keeping Stock quotes “an expert in cults” who  sees this as sinister:

Cult expert Mark Vrankovich said the speech was designed to "soften up" Tamaki's followers and the real pressure to move to South Auckland would come with one-on-one sessions with local pastors.
"Saying that the church family is more important than your physical family, that you must go with the spiritual family, is a classic cult idea…”

With the help of the Skeptic’s Annotated Bible’s “family values” page, I feel obliged to point out that it is also classic Christianity. To whit:

  • Jesus says that his disciples must hate their families (mothers, fathers, brothers, sisters, husbands, wives, children) and themselves. Luke 14:26
  • Families will be torn apart because of Jesus. Matthew 10:21 Luke 12:52-53
  • Jesus says that he has come to destroy families by making family members hate each other. Matthew 10:34
  • If you want to be a disciple of Jesus, you must abandon everything, including your family. Luke 14:33
  • Jesus will reward men who abandon their wives and families. Matthew 19:29 Mark 10:29-30 Luke 18:29-30 Luke 21:16

It’s true that cults are destructive, dangerous and sometimes suicidal.

And it’s also true that the line between a “cult” and a religion is nothing more than the number of your supporters.

So the basic question is: why is it only Brian who is treated like a nut?

UPDATE: But there’s more:

[Cult expert Mark] Vrankovich was also concerned that Tamaki appeared to be encouraging people to sell their homes. “They’ll be pressured to give the money from the house sale to the church, and they’ll never see it again.”

Pressure!? I’ll bet they don’t experience anywhere near as much pressure as Ananias and his wife, both of whom the Bible says Peter and his god literally scared to death for not forking over all of the money they made when selling their land.  Acts 5:1-10

This sort of bloodthirsty, disgusting nonsense to which all christians subscribe, makes Brian look like a piker. Or a copycat.

Or is that christians don’t actually care to follow their own rules because they know they’re bollocks…

Friday, 1 June 2012

FRIDAY MORNING RAMBLE: ‘It’s the sizes of your classes’ edition

image

Message to those saying Hekia Parata and John Key don’t know what they’re doing: It’s really quite simple. If you don’t think government is qualified to micro-manage education, then don’t support it.
Class size – N O T   P C

Repeat after me: Smokers save the taxpayer money.
Smokers save the taxpayer money -  L I N D S A Y   M I T C H E L L

Q: Where do your taxes go?  A: Nowhere good.
Where's My Taxes

The Labour Party is considering expropriating the retirement savings of the internationally mobile. Yes, true story.
Labour's KiwiSaver plans – Eric Crampton,  O F F S E T T I N G   B E H A V I O U R

‘Fair Go’ puts a stake through the heart of ‘Fair Go.’ Thirty years too late.
A Kafkaesque story that should horrify you. And it’s set in New Zealand! 
– Brian Edwards,  B R I A N  E D W A RD S  M E D I A

Now, this is the sort of global warming protest I can get behind.
Underwear protest on Wellington trains -  S T U F F

Yes, were are mired in recession. Yes, things are getting worse. Yes, there are thousands and thousands unemployed. And yes, employers still struggle to fill vacancies.
NZ employers struggle to fill 50% of vacancies – N . B . R .

Meanwhile, back in the States: “The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession, according to federal statistics, reflecting the profound and lasting effects that the downturn has had on the nation’s economic prospects."
Job recovery is scant for Americans in prime working years – W A S H I N G T O N   P O S T

It’s the time of year everywhere for graduation speeches to yawn through. Here’s one in which you’d want to takes notes for a lifetime.
At Last, a Memorable Commencement Speech: "Markets & Morality" 
– Walter Williams, G R O V E   C I T Y  C O L L E G E

"Why a British exam question on Judaism is not racist, and what is revealed about the premises of the government officials who think it is."
Tories vs The Enlightenment – R O B E R T O   B .  S A R R I O N A N D I A

When nothing else but a Lion face-palm will do.
Lion Facepalm – N O O D L E F O O D
image

“As The New York Times would put it, when in 1996 “President Bill Clinton delivered on his pledge to ‘end welfare as we know it’…he signed into law a bill forcing recipients to work and imposing a five-year limit on cash assistance.” Um, actually he didn’t.
Did Clinton's ’96 Bill Force People to Work? - Tibor Machan, T I B O R ‘ S    S P A C E

“My job,” claims President Obama, “is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but 10 years from now, 20 years from now.” Um, actually, it’s not.
Wealth vs. Job Creation? – Tibor Machan, T I B O R ‘ S   S P A C E

“Not only is taxation a form of confiscation by coercion. It is
confiscation by groups who believe their values and priorities
are superior to other people’s—a breath-taking moral claim.”

- Eamonn Butler, UK Taxpayers’ Alliance

It now seems clear that the run-off in the Egyptian presidential election will be between the the deposed dictator’s last prime minister and the candidate from the Muslim Brotherhood, i.e. the former dictator’s puppet and a fellow representing the organisation that assassinated Anwar Sadat for being a backslider and from which Al Qaeda was born.
So much for the promise of Egyptian democracy, eh.
For Egypt in 2012, Read the United States in ’60s? -  H I S T O R Y  N E W S   N E T W O R K
Fouad Ajami: Egypt's Next Leader Won't Be A Creature of Tahrir Square 
-  H I S T O R Y   N E W S   N E T W O R K
Christians Should "Convert, Pay Tribute, or Leave," Says Muslim Brotherhood Presidential Candidate? – J I H A D  W A T C H
Sharia Supremacists Take First and Third Place in Egypt’s Presidential Elections 
– A N D R E W  B O S T O M

Put this on the biggest-mistakes-you-can-ever-make list.
Defecting to North Korea – P H I L O S O P H Y  I N   A C T I O N

"Sometimes if you want to see a change for the better,
you have to take things into your own hands."
- Clint Eastwood

On the reasons for tragic levels of unemployment in Spain:
The Systemic Siesta – Carolina Carmenes Cavia & David Howden,   M I S E S  D A I L Y

Question: What costs $1 trillion a year and completely fails to accomplish its main objective? Answer: America’s welfare state.
Examining the Means-tested Welfare State: 79 Programs and $927 Billion in Annual Spending 
– Robert Rector,  H E R I T A G E   B L O G

Oh, and that’s not the only big-time failure.
The American stimulus may have cost $4.1 million per job says Congressional Budget Office 
– Steve Kates, C A T A L L A X Y   F I L E S

“Over the last two years numerous commentators have predicted an imminent collapse of the Chinese
housing market bubble and a hard landing for the Chinese economy, which could threaten the fragile
international economy and financial system…Even after regularly reading a wide range of commentaries on the Chinese economic growth story it is still something of a mystery. So rather than have all the answers this Raving attempts to highlight a number of the relevant major issues that will impact on Chinese economic growth over the next few years.”
China – it is time to take the risk of a hard landing seriously 
– Rodney Dickens,  R O D N E Y ‘ S   R A V I N G S

Oops. Things are “not good” everywhere, huh.
Update on India’s gdp growth.  Not good, 5.3%. – S O B E R   L O O K

Ever wondered why Sweden’s welfare state hasn’t been touted much lately by the usual suspects?
Sweden's Reputation As A Welfare State Is In Trouble – I B D
The Swedish Reform Model, Believe It or Not -  W A L L  S T R E E T   J O U R N A L

Must View: The Importance of Staying Ahead of Price Inflation – E C O N   P O L I C Y   J O U R N A L

So Facebook keeps falling, and is now floating around the $27 mark.  We’re a third of the way down what it might be worth…
Facebook & the Bubble Mentality – John Aziz,  Z E R O  H E D G E

Print these out for the weekend, two topical papers: John Allison on “The Fed’s Fatal Conceit” (PDF) and Larry White on “Making the Transition to a New Gold Standard.”
The Fed’s Fatal Conceit – John Allison, C A T O   J O U R N A L
Making the Transition to a New Gold Standard – Larry White,  C A T O   J O U R N A L

imageAnd listen to Larry White talking to Russ Roberts about the economic ideas of the past one hundred years—and how those ideas have actually worked out in historical practice.
Larry White on the Clash of Economic Ideas – Russ Roberts,  E C O N   T A L K

Great news! In my opinion the single best, most-integrated economics book of the last few decades—but almost certainly the heaviest—is now available in a format you can read in bed. Fill your boots up.
Capitalism in Kindle Format – G E O R G E   R E I S M A N ‘ S   B L O G

"We can learn from Europe what not to do first to move toward capitalism."
The Immediate Important Lesson From Europe – K R A Z Y  E C O N O M Y

Drachmaggedon! Will Greece Drop the Euro? – L A I S S E Z   F A I R E

"After giving students advice on picking careers for many years, I have discovered there are three key things to picking one that captures your passions but is also profitable. Values, strengths, and opportunities. Read more..."
3 Keys to Picking a Career – John Drake,   T R Y  R E A S O N !

"To teach is to step into another man's thoughts…”
To teach – P R A C T I C E   G O O D  T H E O R Y

It’s a different way of organising the world in your head, demonstrated by what the Japanese use instead of street names:









The future for celebrity historians seems assured.
The Death of Celebrity Historians is Much Exaggerated – H I S T O R Y  N E W S  N E T W O R K

A German 16-year-old cracked a problem set by Isaac Newton and unsolvable for 300 years.
German teen solves 300-year-old mathematical riddle posed by Sir Isaac Newton -  F O X  N E W S
[UPDATE: A genius German 16-year-old offered “a pretty neat (implicit) solution to a differential equation for calculating the trajectory of a particle under certain conditions.” Awesome for a 16-year old high school student, but sadly sensationalised since.image]

“In June, World War II code breaker and founder of computer science Alan Turing (right) would have been 100 years old… Everywhere, writes Managing Editor Katherine Mangu-Ward, praise of Turing is tempered with anger over the harsh punishment he suffered at the hands of the British state, cutting short a fruitful life.”
Turing Turns 100: The father of computer science, honored too late 
– Katherine Mangu-Ward,  H I T  &  R U N

Is this is the first time Britain’s Daily Mail makes good sense?
Finally sense, humility and self-knowledge from The Daily Mail – S T E P H E N   F R Y

If handling snakes is “proof” of their faith in God, what is it when a West Virginia father and son team both get bitten and die?
Faith in God snake handling pastor dies after bite -  N Z   H E R A L D

These all sound like common sense to me.
8 New Ways To Make Your Home Look Bigger -  F O R B E S

Post-modernism is still toxic.
Romantic Nihilism: The Paul McCarthy Exhibition at L.A. MOCA, 2001 
– Michael Newberry,  N E W B E R R Y ‘ S   B L O G

“The aim of art is to represent not the outward appearance
of things, but their inward significance.” 
- Aristotle

Hemingway’s advice was"write drunk, edit sober.”  Great advice.
I really must try editing sober.
What Happens When You Try and Drink Like Hemingway – Eric Kuentz, F U E L   Y O U R   W R I T I N G

And so finally, to our beer of the week…
Galbraiths Resurrection -  B R E W  N A T I O N

image

…and since it’s June 1:

And just time for a Neapolitan song:

[Hat tips and thank yous to Geek Press, Virginia Murr, Laissez Faire, Philosophers’ quotes, Marginal Revolution, Thrutch, Cheryl Bernstein, Steve Baker MP, Robert Tracinski, Julian D.]

Thanks for reading,
Cheers,
Peter Cresswell

Thursday, 31 May 2012

NZ Music Month: ‘Closing Time’

For those who’ve been looking forward to it … it’s closing time.


Music by Brazier, photography by various esp. Murray Cammick, video by Clouso

More from Graham Brazier and friends:

Last one in my one-post-a-day music post for NZ Music Month, closing with the 1979 Hello Sailor playing ‘Blue Lady’ with The Doors’ Ray Manzarek. Just because I can.

Mind you, I’m not promising I’ve finished…

Class size

In the latest debate on government management of classrooms, I’m struck once by the number of teachers making the argument that they—the teachers--know better than the government how to manage a classroom; that teachers know about the efficacy of class size better than the Ministers of Finance and Education.

So why do those same teachers so strongly resist any suggestion government should be removed altogether from the job of classroom management by a firm separation of school and state?

If you don’t like the way governments manage schools, get governments out of schools.

Stimulunacy cost $4.1 million per job

StimulusII

All that stimulus money pouring out of the Federal Reserve, all that extra spending by the US Government over and above what they take in revenues, all that phony rhetoric from Paul Krugman and his dozy Krugman-lite acolytes about the necessity for “stimulus” … and you know what the result of it all has been?

According to the Congressional Budget Office (not exactly a hot-bed think tank of sound money and smaller govt) the American stimulus may have cost $4.1 million per job.*

Wow!  That’s $4.1 million per job with no sign of genuine recovery in sight.

To make that cost plain: realise first that any govt spending has to be paid for either through taxes, by borrowing or by inflation. In other words, it is paid for in real resources produced by private business.

So just imagine how many real jobs could have been created if the 1.9 million make-work jobs hadn’t been stimulated into existence at the cost of $4.1 million per job. And how much real recovery might have happened if nearly a trillion dollars worth of deficits had been put to real, productive use instead of pissed up against the wall in a gigantic political golden shower.

BrokenWindowsI

* * * * *

* Steve Kates: “Depending on how you do the calculation, the fall in unemployment may have been as low as 0.1 percentage point and the cost per job as high as $4.1 million. If, on the other hand, you take the best outcome, the fall in unemployment was 0.8 percentage points at a cost of $540,000 per job. And if you’d like to split the difference, it’s about $2.5 million for a fall in the unemployment rate of 0.4 percentage points.”

QUOTE OF THE DAY: Gillard edition

“We don’t cut spending, or shrink the real size of Government, in a lunchtime libertarian seminar.
We do it in long days of expenditure review
.”
              - Australian Prime Minister Julia Gillard,
                 in her speech to a parliamentary dinner in Canberra yesterday.

Observes Sinclair Davidson, “nice to know we’re getting under her skin.”

The US Dollar – The “Strongest of the Weak”

_Kris_SayceGuest Post by KRIS SAYCE

The idea of risk is a very personal thing.

What we see as risky, you may not.

And what you see as risky, we may see as completely safe.

One trick to successful investing isn’t to just figure out what you see as risky, but to also figure out whether other investors see it as risky too.

If you can pull off that trick it can help you stay one step ahead of the crowd. More below…

The following headline from Bloomberg News caught your editor’s eye this morning, ‘Dollar Scarce As Top-Quality Assets Shrink 42%’.

‘Dollar Scarce’?

It doesn’t seem possible.

After all, you’ve no doubt seen this chart from the Federal Reserve Bank of St. Louis:

Federal Reserve Bank of St. LouisSource: Federal Reserve Bank of St Louis

It shows the explosion of US dollars on issue since 2008.

How can US dollars be scarce when the monetary base has increased from USD$800 billion in 2008 to USD$2.7 trillion today?

The answer is risk.

The Bloomberg News story explains more:

‘International investors and financial institutions that are required to own only the highest quality assets to meet investment guidelines or new regulations are finding fewer options beyond dollar-denominated assets. The US is one of only five major economies with credit-default swaps on their debt trading at less than 100 basis points, meaning they are viewed as almost risk free. A year ago, eight Group-of-10 nations fit that category…’

For the past four years, most of the talk has focused on the US. And most of that talk has centred on the US budget deficit, government debt and the devaluation of the greenback due to money-printing.

To some degree the US dollar has taken a back seat as markets and commentators focus on the euro…and its inevitable demise.

Just as it looks like the euro crisis is over, another spanner gets jammed in the works. The latest problem is with Spanish bank, Bankia S.A.

The Weakest of the Weak

This week, the European Central Bank (ECB) rejected the Spanish government’s proposal to prop up Bankia. We’re not surprised. It was nothing more than an indirect way of Spain tapping the ECB for a bailout.

The Spanish government had proposed issuing a bunch of debt to Bankia, which it could then use as collateral with the ECB. The ECB saw through this snide plan and so it looks like the Spanish government will have to bailout Bankia directly…undoubtedly causing the Spanish government to go further into debt, with Spanish bond yields going higher.

As the chart below shows, Spanish government bond yields are now near the highs of last November:

Spanish government bond yields
Source: Bloomberg

So, why are Spanish bond yields going up? Because big investors see Spain as too risky. Only last week savers withdrew 10% of deposits at Bankia on fears it would collapse.

As Slipstream Trader Murray Dawes told us this morning, ‘Why would you believe what the other banks say? You’d sell now and ask questions later.’

But with European nations holding a single currency, grouping together basket-cases like Spain with non-basket-cases like Germany, it’s not just a case of selling Spain and buying Germany.

However, many investors are doing that, which is why German 10-year bond yields are at a record low of 1.36% (During the market crash of 2008, the 10-year bond yield barely dipped below 3%).

But when push comes to shove, investors are going where they’ve gone during every previous crisis – the US dollar and US bonds.

The Strongest of the Weak

At the end of March, foreign holdings of US government bonds totalled USD$5.1 trillion. That’s a 14% increase from the same time last year. 10-year U.S. government bonds are trading at 1.7% – a higher yield than German bonds.

As risky as the US dollar seems, investors are still willing to buy it.

So, what’s the takeaway from this?

Simply this: as expected you’re seeing investors migrate from the weakest of the weak and towards the strongest of the weak.

You could say it was the next logical step towards the end of paper currencies. If you’re worried about your Spanish savings, you sell them and buy German savings. You hold those until you’re worried about the safety of your German savings.

After that, it’s into the lap of the world’s reserve currency, the US dollar.

How can you tell when that’s started to happen? We can’t say for sure. But a likely sign is in the following chart:

Spanish government bond yields
Source: Bloomberg

The orange line is the US government bond yield. The green line is the German bond yield. German bond yields have fallen as investors seek the safety of German assets over other European assets, to the extent that yields are lower in Germany than in the US.

The signal that investors are genuinely fearful over the future of the euro (rather than just Greece leaving the euro) will be when the green line starts ticking up and perhaps even rises above US bonds.

That should tell you that one more paper currency is about to fail as money flows into the strongest of the weak – the US dollar.

This is a key chart to watch over the coming months.

Cheers,
Kris.
Reposted by permission from  Money Morning Australia

Wednesday, 30 May 2012

NZ Music Month: Hammond Gamble - Leaving The Country (live in 1984)

Happily, NZ’s premier bluesman Hammond Gamble is still playing.

Sadly however, his first big song is still topical.

More Hammond here.

Degas to Dali to elsewhere

imageYou now have only two-and-a-half weeks to see Auckland Art Gallery’s“Degas to Dali exhibition before it heads off elsewhere—and you must! As an exhibition of mostly minor works by major artists it is interesting, but as a survey of art from nineteenth century to late-twentieth it is virtually complete, and highly revealing.

The resuls of putting together in three rooms two centuries worth of artists who transformed the field is obvious even to the unlearned eye—and even to eyes who have learned to ignore the obvious, such as those of Listener art critic Edward Hanfling who confesses to having the scales fall from his:

The tradition we call “art” has steadily declined since the late 19th century. Did I really just write that? And why have I been studying and writing about modern and contemporary art all these years? But the proof of my assertion can be found at Auckland Art Gallery in Degas to DalĂ­...

And he’s right, you know.

Head along to Auckland Art Gallery and find out for yourself. And (something I never thought I’d say) listen to Hanfling:

Take my advice and spend as much time in the 19th century as you can.

Tuesday, 29 May 2012

NZ Music Month: “My Poetry,” by Shane Hollands & Freaky Meat

“My poetry would like to kick your poetry’s assonance…”

Freaky Meat, filmed, not too well, at the Titirangi Toolroom.

(Another one-NZ-music-post-per-day for NZ Music Month.)

Death sentence for a song and dance

H.L Mencken famously observed that a puritan is someone afflicted with the haunting fear that someone, somewhere might be having fun.

I doubt however that even Mencken, an unvarnished cynic, would ever have contemplated the type of puritan produced by Islam, wherein the “crime” of having fun can earn you a death sentence:

Sentenced to death for singing and dancing at wedding – AFP
Four women and two men have been sentenced to death in northern Pakistan for singing and dancing at a wedding, police say.
Clerics issued a decree after a mobile phone video emerged of the six enjoying themselves…

Argentina is the next to fall

Little has been or is being reported about this in what passes for our local news media, but it looks like the next economic domino to fall is Argentina, which government borrowing and printing has helped transform from emerging giant to incipient basket case.

In reaction to money fleeing the economic destruction of her government, President Cristina Kirchner has imposed controls against the movement of money that would have morons like Bernard Hickey dribbling with delight, freezing bank accounts, setting dogs loose at borders to sniff out and arrest any travellers foolish enough to try to take their own money across the border, and prohibiting the sale of the peso for US dollars at any price other than the government’s officially declared rate of 4.48 to the dollar—three-quarters of the black market rate of 6.05 to the dollar, which is the rate  at which people actually value the ever-diminishing peso today.

As the black-market value continues to reach new heights (reality refusing to be faked), the leader of the local libertarian party headed to Buenos Ares’ biggest public square, megaphone in hand, to protest the controls, offering dollars to the public at 5 pesos. [The report from La Nacion has been translated from Spanish]:

imageGonzalo Blousson, presidente del Partido Liberal Libertario, told La Nacion that the protest is against "corralito verde" [“corralito was the term for the 2001 bank freeze.] "This is a new corralito. We are doing what none of the opposition is saying. This government is not letting people make use of the fruits of their labor," said the leader, who sold one dollar per person, 5 pesos each, well above the official rate, although far from the 5.92 that was the so-called "blue" or parallel.
"What is happening is illegal and immoral. For 20 years it was not legal to get divorced and in the nineteenth century slavery was legal. We must rebel against the immorality of the law," said President of the Liberal Party Libertarian, while he called out to bystanders "dollars at 5 pesos."
Blousson began selling about $300 at 1pm and, after the first half hour, had handed over more than 150.
Before starting the sale, he said, "If Cristina is concerned that we save in dollars, she should stop printing colored paper or sell theirs."
When asked by La Nacion about the illegality of his action, he replied: "Never mind if it is legal because if the laws are immoral, you have to rebel."
Moments before the commencement of protest, the
Argentine Treasury began a strong control operation of the selling of dollars on the parallel market, which has grown since the heavy restrictions on the official market. But when attracted by the action of the Liberal Party Libertarian and the presence of television cameras, the officers retreated.
A few people tried to take advantage of the dollar at 5 pesos, but Blousson did not allow the sale of more than one or two dollars per person, as a symbolic stance.
The reaction of passersby was immediate: many expressed support while others described it as a "payadsada" (bunch a clowns). Meanwhile, a citizen called to Blousson as "traitors" and accused him of wanting to "go back to 2001."

A conclusive experiment with a crucial lesson for Christchurch [updated]

Occasionally a situation will appear in the sphere of the social sciences that has all the features of a laboratory experiment. One such “experiment” with direct relevance to Christchurch has just appeared—two American cities torn apart a year ago by tornadoes, one rebuilt by the pursuit of “selfish” profit and the other by planning experts who know what’s best for everyone.

The “experiment” and its results are described by Jerry Kirkpatrick with the help of the Wall Street Journal:

[The first] of these two cities is Tuscaloosa, a “showpiece,” as the city’s recovery plan states, of  “state-of-the-art urban planning,” with “unique neighborhoods that are healthy, safe, accessible, connected, and sustainable,” anchored by “village centers”… The Tuscaloosa plan however (as the WSJ notes) “never mentions protecting property rights.” It’s the monument that counts, the “state-of-the-art” plan.

Sounding familiar? This is exactly what we’ve been hearing from the “experts” in Christchurch, isn’t it—the monuments, the “state-of-the-art” plans, the telling of property owners to go to hell.

[The city of] Joplin, on the other hand, took the free market route by suspending licensing and zoning regulations and allowing home and business owners to make their own decisions as to when and how they were going to rebuild. No monuments were built in Joplin.

This too should be familiar---it’s the Enterprise Zone some of us have been crying out for in Christchurch ever since the first quake.

RESULTS: So with the experiment set up, how did it proceed?

Joplin is thriving, largely revived and rebuilt. Tuscaloosa, on the other hand, still has un-demolished ruins, vacant lots, and businesses awaiting permit approvals to rebuild.

CONCLUSION: The conclusion is dramatic, and is confirmed by the blundering dunderheadedness in Christchurch (which hasn’t even progressed as far as Tuscaloosa—handing a city over to self-declared experts is the best way to kill it. Whereas taking a city off welfare and making it an enterprise zone  allows it to rebuild. And fast.

This is an old story, of course: West vs. East Germany, South vs. North Korea, the US vs. the USSSR. So why is the lesson never learned that capitalism works and socialism—central planning of any kind, including urban planning—does not?

 Kirkpatrick has the answer here too.

UPDATE:  Daniel J. Smith, economics professor at Troy University, studied the rebuilding of Joplin, Missouri in the months following the tornado. Watch as Professor Smith discusses how economic freedom can help areas recover from natural disasters.
"I think one of the key factors in the recovery process in Joplin, from the tornado, is that the government officials allowed the community to start rebuilding itself." -- Daniel J. Smith

[Thanks to reader R.C. for the link]

Monday, 28 May 2012

NZ Music Month: The Adults - Nothing To Lose

Jon Toogood, Shayne Carter, Ladi6 et al making music for adults.  Which is no comment whatsoever on their day jobs.

(Another one-NZ-music-post-per-day for NZ Music Month.)

DOWN TO THE DOCTOR'S: Freedom gets a shake on state radio!

_McGrath001This week, Dr Richard McGrath is listening to state radio!

I'm recommending readers find fifty minutes to listen to this MP3 podcast from National Socialist Radio, a.k.a. Red Radio, broadcast yesterday on Chris Laidlaw's programme. It features interviews with two self-styled 'libertarians,' Colin Cross, a former candidate from Libertarianz and Sam Buchanan, an anarchist from Paekakariki.

This is followed there is an explanation a discussion of libertarianism between Laidlaw and Victoria University politics lecturer Javier Marquez, including the role that Marquez thinks luminaries such as Milton Friedman, Murray Rothbard, Friederich von Hayek and Ayn Rand played in the evolution of libertarian politics.

The discussion is not always accurate, but it reveals the way the mainstream sees libertarianism in NZ today.

Naturally, my own sympathies here are with the position of Colin Cross. Colin is a longstanding member of the Libertarianz Party and former electorate and list candidate. His musings comprise the first seventeen minutes of the audio programme, in which he acquitted himself well.  Most of that time was spent dealing with the usual questions and the host of straw men that are thrown up whenever someone suggests paring back the State  so people can have more of a say in their own lives, and the lives of their families, whanau, friends and communities. Questions such as:

  • What about the roads? (If we had a dollar for every time that question comes up…)
  • What would happen if the state welfare system was dismantled?
  • What guarantee is there that people in a libertarian society would act in a rational self-interested manner?
  • Has there ever been a libertarian society?
  • Is property theft, as Proudhon claimed—and Sam Buchanan still believes?

Colin answers these questions in such a calm and engaging manner he readily convinced me.

But then, I was already convinced.

Next interviewee Sam Buchanan was introduced as a left-wing or "socialist" libertarian. Frankly, juxtaposing the words "socialist" and "libertarian" is akin to mixing water and oil. The term is oxymoronic, because coercion lies at the very root of socialism. To his credit, Sam is cynical about the motives of the State and its capacity to violate the freedom of its citizens. But he also believes that private individuals, industrialists and corporations can pose as much a threat as an overbearing uncontrolled State. In particular he believes that an economic imbalance between individuals, such as often exists in the context of an employer/employee relationship, impinges on the freedom of the less economically able—which blurs or ignores the critical distinction between economic freedom and political freedom, which is the difference between the dollar and the gun.

To overcome these perceived problems, Sam proposes a “syndicalist” form of industrial ownership, which means “workers” basically seize and own the factories, ports and “commanding heights” of the economy. (If you want an image of what this would look like across whole economy, think of a country in the grip of a General Strike. That pretty much gives the picture.)

Pushed to answer this critique, and the challenge that only the already rich can succeed in the present system, Colin provides the example of TradeMe’s Sam Morgan, who did not come from old wealth but created immense riches for himself and his backers through his ideas and his entrepreneurial endeavours. The important thing to realise is that he and other similar entrepreneurial heroes (Graham Hart, Bob Jones, Peter Leitch) were not constrained in their success by their initial financial modesty.

On the other hand, anyone these days who wants to advance themselves and others does face immense hurdles put in their way by the state, which essentially does tend to calcify things in the form of the status quo. (Just imagine the many hurdles, for example, for an engineering entrepreneur wanting to harness the power of nature for the betterment of human life and profit by building a hydro-electric dam on his own property—the biggest hurdle being the Resource Management Act, an act of brute political force that stops a landowner being able to exercise his property rights. )

Buchanan likens the criminal actions of gangs to authoritarian government, which in many examples is sadly true. The IRD, for example, who hound people to death and impose arbitrary penalties for failure to pay one's tribute to them by the designated due date, frequently behave like a criminal gang.

Colin was more definite as to the role of the state: it should not protect against competition, but must be chained up to do its proper job of protecting  individual rights. This is the only legitimate function of the state. Sam Buchanan on the other hand seems a little less certain about the function of government, and appeared at one point to endorse an anarchistic system of non-government such as exists in parts of Somalia. He also doesn't believe people should be able to rent out houses they own. He is clearly anti-capitalist, and that's where he loses me. He seems to be mired in the misguided beliefs in the power of robber barons, Ebenezer Scrooge and the evil inherent in the profit motive, forgetting the profit motive and selfishness inherent in anyone that gets up in the morning and goes to work.

The question to ask a "left-libertarian" is whether they would allow an enclave of free-market capitalism in their state. A free-market libertarian would certainly allow a socialist enclave within a state run under their principles, as long as no force was initiated and entry and exit from such an enclave were permitted. (As Colin pointed out early in his discussion, a feature of libertarianism is tolerance for the (peaceful) views of others.) A socialist system on the other hand could not tolerate a free-market enclave within its walls. Socialism, unfortunately, by its very nature involves an intolerance of private property and promotes its redistribution into "social" ownership. And that, I'm afraid, is not very libertarian at all.

All in all, this radio show was chock full of ideas, a lot of them good. It even dug below the surface into the philosophies from which the political expression of freedom--laissez-faire capitalism—arose. Although it blurred the distinction between libertarianism and Objectivism, and libertarianism and anarchy, although it promulgated the oxymoron of "right" and "left" wing libertarianism, it was still a genuine effort to articulate some of the principles of libertarianism, and for that I salute Chris Laidlaw and his team.

Give the show a listen.

Top marks though must go to Colin Cross, who I now formally appoint as the go-to man for libertarian radio interviews and Sunday morning TV political shows. Bravo, Colin!

See you next week! 
Doc McGrath

ECONOMICS FOR REAL PEOPLE: Money–hero or villain?

image

Here’s the update on tonight’s programme with our friends at the Auckland Uni Economics Group:

Hi All,

What is money?
What are all these bits of paper we carry in our pockets, or (if we’re lucky) we find digitally in our bank accounts?
Why is the pursuit of money so universal, and when did it start?
How is money created?
And is the pursuit of money really the root of all evil? Or of good?
To answer these questions and many more like them, we need to examine how money developed historically,  how it has evolved since—and why it emerged in the first place.

Understanding the nature of money is crucial for every serious student of economics, especially since money forms one half of every transaction, appears in every price, and is implicated in every crash. And because money it is so widely misunderstood.
This week we discuss money, sound and unsound—and ask: money, hero or villain?

        Time: 6:00pm
        Date: Tonight, May 28, 2012
        Location: Case Room 4, Level 0, University of Auckland Business School

Look forward to seeing you there.
Riko Stevens
UoA Economics Groups-
Check us out on the web on
Facebook & at our blog.

Sunday, 27 May 2012

Should drugs be legal?

First, Yaron Brook answers:

Next, Penny Mackay on Radio New Zealand asks “Is it time to reform cannabis laws?” [28 min. AUDIO]

NZ Music Month–Rodger Fox

Musicians aplenty have come through R0dger Fox’s jazz bands over the years, but there’s bugger all evidence about on YouTube. Still, here’s Rodger Kox’s Wellington Jazz Orchestra swinging Bill Cunliffe’s tune ‘All’s Well in Wellington’ on what looks like a Telethon.

(Another one-NZ-music-post-per-day for NZ Music Month.)

Saturday, 26 May 2012

NZ Music Month: Nathan Haines–‘The Poet’s Embrace

image

NZ reeds man Nathan Haines is already a jazz legend—especially now he’s increasingly playing more jazz and less dance music.  But until recently he still didn’t feel ready to record a “real jazz record,” an “acoustic” album—one recorded live to tape and without digital trickery, just the way the masters of jazz did in the old days.

The result was ‘The Poet’s Embrace,’ for which this clip is a taster.

(Another one-NZ-music-post-per-day for NZ Music Month.)