Friday, 22 March 2013


Test Day? It’s the first day a cricket test has been played at Eden Park for … years! It won’t last long, so don’t hold back. Here’s some things to read in between watching wickets fall.

To say that the tensions within the European "Union" are getting unbearable would be an understatement.
Cyprus President To Rehn: "I Told You Tax Wouldn't Pass. Regards To Mrs Merkel" – Tyler Durden, ZERO HEDGE

Ever wondered what a one-million dollar bus shelter would look like? Me too.
How Much Is A Bus Shelter Worth? – THE AUCKLAND BANNER

Since everyone has become an instant expert…
Five Principles of Urban Economics: Things we know and things we don’t – CITY JOURNAL

And can we now stop talking bollocks about remake our cities with “creative clusters.” The so-called creative class of intellects and artists was supposed to remake cities and revive urban wastelands. Now the evidence is in—and the experiment appears to have failed.
Richard Florida Concedes the Limits of the Creative Class – DAILY BEAST

D’you remember a Prime Minister talking about us NOT being a world leader on this?
So who has an ETS? According to the World Bank – not many. – Sinclair Davidson, CATALLAXY FILES
Climate: Time to Shift Verb Tenses – POWER LINE

Ever wondered what a George Bush nude painting would look like … ?
The Recently Revealed, Nude Self-Portraits of George W. Bush: A Critique – VANITY FAIR
The four most interesting revelations from the hacked Bush emails – SALON

Speaking of hacked emails, another data dump reveals more sordid secrets of the world’s rock star climate scientists, signalling Climategate 3.0 …
Another hockey stick smashed – ANDREW BOLT
Climategate 3.0: Mann, Jones plot to eliminate Little Ice Age, Medieval Warming Era from IPCC report – JUNK SCIENCE
Too many links to post ... – GOOGLE

Riding Mass Transit Is Like Inviting 20 Random Hitchhikers Into Your Car. Discuss.
26 Things You'll See On Public Transportation – BuzzFeed

“The British Government … has passed a law that effectively censors the entire world’s media. And they’ve done this simply because they are ignorant of the very laws they’re trying to change. Which is, I think you’ll agree, a little disturbing, that politicians would casually negate press freedom just because they don’t know what they’re doing.”
The British Government Has Decided To Censor The Entire World's Press And Media – Tim Worstall, FORBES

UK politicians would be right at home in Asia and Australia.
The National Interest – TIM BLAIR

China’s richest man has a strong statement for those looking to invest there: “The capital markets in China suck.”
China's Wahaha Billionaire Says Capital Markets "Suck" – ZERO HEDGE

Federal Reserve Chairman Ben Bernanke is apparently “the adult in the room” when it comes to dealing with the current slow recovery from the Great Recession… with the exception of Obama’s 2009 stimulus, only Bernanke and the Fed have worked tirelessly to “keep the US economy afloat”—even as the Bernanke Fed has morphed from a  lender of last resort “into a central planning agency with a corporate welfare department.”
Bernanke: The Good Engineer? – John P. Cochran, MISES DAILY

By the way, there is an interesting paradox at work as central banks suppress interest rates: The only way central banks can keep interest rates low is to buy the bonds issued by their respective governments. But the more bonds they buy with new money, the more likely it is interest rates will go up in any case. And the more debt govts issue, the less able govts will be to every pay these debts back.
What Could Cause Interest Rates to Rise? – Charles Hugh-Smith – ZERO HEDGE

“As the title of the work suggests, Simmons believes that, most often, government creates far more problems in the economy than it solves.”
REVIEW: Beyond Politics: The Roots of Government Failure, by Randy Simmons – Ari Armstrong, OBJECTIVE STANDARD

Is Washington, D.C. the only place where you can “cut” spending while spending vastly more than you were in the past? I wish it were so.
Why the fiscal sequester scheme is actually bullshit – Richard Salsman, FORBES

Let’s stop celebrating Keynes and Krugman.
Not Keynes Or Kuznets Or Krugman But Cowperthwaite – Sean Corrigan, ZERO HEDGE

You want proof that Keynesian economics is insane. Well, here it is.
Keynesian insanity reaches a new peak – Steve Kates, CATALLAXY FILES

Keynesian economics in one graphic:

“Ever since John Locke developed the theory of natural individual human rights, there has been an ongoing attempt to change his idea to something very different… But instead of relying on people’s good will and generosity to help out those in need of various goods and services, the positive or welfare rights doctrine reintroduces the old regime that people in society aren’t free agents but serfs.”
Welfare Rights Are Wrong – Tibor Machan, TIBOR’s SPACE

If good government is like a guard dog, properly trained and tied up constitutionally to protect your rights instead of doing you over, then is this what governments look like now:

There was reason wartime Germans were called ‘Hitler’s Willing Executioners.’ Because as new evidence emerges, the story they couldn’t see the Holocaust just became much less convincing.
The Holocaust, Everywhere – NOODLE FOOD
Two millennia of European antisemitism explained -- and more! – NOT PC, 2007

Why I hate guns:



As we were saying, Twitter is now seven years old. Luck Twitter changed that original logo.
Twitpic - TWITTER
How We Covered Twitter: 7 Headlines for 7 Years – WALL STREET JOURNAL

More on the benefits of alcohol: wowsers suffer more from Fibromyalgia.
Alcohol, Fibromyalgia, and Quality of Life – SCIENCE DAILY

I’ve retired. Time to “give something back.” What a crock!
‘Give Back’ Is One Of The World’s Most Impoverishing Commands – Don Watkins, FORBES

“But puritans haven't vanished. They've merely changed the subject.”
The Tyranny of the Virtuous – BASTIAT INSTITUTE

A Frank Lloyd Wright house in Millstone, New Jersey, wants to move to Florence, Italy. True story.
Frank Lloyd Wrong? – MONOCLE


The simple band aid was invented in 1920. Two Taiwanese students just gave it an upgrade (click to enlarge):

Answering the important questions:
"How do farts behave in low gravity?" – QUORA

Anarchist arguments lose again.
A strange anarchist argument against HobbesGene Callahan, CRASH LANDING

imageAmity Shlaes provides a long-overdue assessment of an underrated and misunderstood president: Calvin Coolidge, aka Silent Cal.
Singular Cal – CITY JOURNAL

The Coolidge re-evaluation is also a good time to re-evaluate the lessons of the “Laffer Curve.”
Art Laffer and Calvin Coolidge – ON LIBERTY STREET

New maps of the cosmic microwave background are coming out today!
Coming soon: Planck unveils the cosmic microwave background  - EUROPEAN SPACE AGENCY

Where would NZ be without the underwater communications cables linking us to the rest of the world.  Ever wondered how they are built and protected?
Protecting the Submarine Cables That Wire Our World – POPULAR MECHANICS

Time to celebrate the greening of the planet, says Rational Optimist Matt Ridley.  It’s greening not despite, but because of our reliance on fossil fuels.

And, by the way…
Fracking is Wonderful – John Stossel, BASTIAT INSTITUTE

Not me.
Are You Good at Following Flowcharts? – COLLEGE HUMOUR

But this, from 1854, is fascinating.
The First Modern Organizational Chart – Peter Klein, ORGANIZATIONS & MARKETS

The answer to this question is "No", according to the Bible anyway.
Jesus H. Christ: Does anyone know his name? – DWINDLING IN UNBELIEF

Are Objectivists libertarians? The Ayn Rand Institute (now) says “yes.”
Are Objectivists Libertarians? – Robert Tracinski, TRACINSKI LETTER

The perfect online tool for travellers, especially skinflint fricking NZers. In two flavours:
How Much Should I Tip? (Vanilla Version)
How Much Should I F***ing Tip? (Hilariously Offensive Version)

Help for the helpless.
Where To Start When Creating A Home Color Scheme – APARTMENT THERAPY
How To Confidently Choose Paint Colors: Mark's Foolproof Methods – APARTMENT THERAPY

The life of a student opera-singer:

A note to other friends:

Whole Foods’s John Mackey on Whole Foods, Conscious Capitalism, and Life Beyond the Profit Motive:

Hat tip Capitalistm, Small Dead Animals, Chris Keall, Geek Press, Don Watkins, Melanie Tollemache, Kelly McNulty Valenzuela, Peter Smale, CoNZervative, Tarrynne, Small Dead Animals, Noodle Food,

Thanks for reading, and have a great weekend.

PS: Thanks to PSP for hospitality, and for handing me a tennis trophy yesterday at their Annual Architects Tennis Tournament. Very enjoyable.

PPS: Since I now only have DB’s alleged beer products to choose from at my local tennis club, could the answer be to try cider. What doest the jury think?
Cider: Made like Wine, Drunk like Beer – Neil Miller, MALTHOUSE

Thursday, 21 March 2013

No, Auckland is not the world’s most expensive city

Despite the horror stories on the news about Auckland’s insane and rapidly rising housing prices, and Nick Smith’s increasing pressure on Auckland’s mayor and council to fix this, Auckland is not the most expensive city in the world in which to buy a house.

The most expensive city in the world in which to buy a house—not even a house, just a shoebox—is Hong Kong*.  The median price for your shoebox in Hong Kong is HK$3,810,000, which with a median Hong Kong income of HK$282,000 makes that a multiple (what housing researchers call a “Median Multiple”) of 13.5.

In other words, it costs the fellow in Hong Kong 13.5 times the median HK income to buy his median HK shoebox.


That doesn’t leave much left over for nightclubbing and champagne.

There are some good reasons for this sort of (let’s face it) way-out Hong Kong price tag: challenging topography, huge mainland demand, and a govt housing department responsible for most of the house building being just three of those reasons.

(But compare this multiple of 13.5 to, for example, Atlanta, Georgia, whose residents luxuriate in a Median Multiple of just 2.0! Just twice the median income to buy the median house, and lots of your salary left over to enjoy what’s considered one of America’s most liveable cities.)

So Auckland is not the most expensive city in the world. But with a Median Multiple of nearly 7, it’s way more expensive than Atlanta. It’s more expensive than Los Angeles.  More expensive even than Greater New York.  More expensive, in these terms, than Washington DC and Boston. More expensive (to quote just a few of the world’s great English-speaking cities) than Montreal, Seattle, Toronto, San Diego, Miami, Dublin, Chicago, Portland, Perth, Brisbane, Adelaide,  Edinburgh, Houston, Las Vegas …

In fact, the only great English-speaking cities that are more expensive in which to buy a house (as measured by the Median Multiple) are Greater London (but with a Median Multiple of 7.8, only just!), Melbourne (7.5), San Francisco(7.8), Sydney (8.3), Vancouver (9.5) and our old friend Hong Kong.  And those places house far more people than we do.

So we’re doing something wrong. Something very, very wrong.

Auckland is not the world’s most unaffordable city, but it’s damned close.

And until Mayor Len Brown and his council realise that one of the chief means by which a city is made one of the world’s most truly liveable cities is that it’s affordable to actually live there, we (and by “we” I mean Aucklanders, would-be Aucklanders, and everyone else in the country whose savings are going into lending the money for Aucklanders to buy these houses) are all going to continue suffering.

It’s too  late for excuses. Until Brown and his crowd take up the call to begin making Auckland one of the world’s most affordable cities, and to do everything necessary to make that possible, we’ll all lose.

* All the Median Multiples quoted here come from the2013 Demographia International Housing Affordability Survey. And the measures for “most liveable cities” come from the 2012 Mercer Quality of Living Worldwide City Rankings Survey.

Just Like Cyprus: How the Australian Government Turned on its Citizens

Guest post by Nick Hubble

Yes, this is getting old, but this week a new Mediterranean country became the centre of the financial world’s attention.

It’s not even big enough to be one of the PIIGS, which used to make all the headlines.

But Cyprus is important for a whole new reason.

This time around, bank depositors will take a hit in the effort to bail out the banks.

And that’s causing panic across Europe

What you need to know about this isn’t in the details. They’re a complete mess and keep changing from one hour to the next. One moment all depositors will lose a few percent of their deposits, the next only some will.

What’s really important is the signal this sends. We’re entering into the next stage of the financial crisis. The stage where governments turn on their citizens.

This is exactly in keeping with Kris Sayce’s theme at Money Morning Australia. He’s written about this for over four years, including most recently Australian government’s attempts to take your wealth, like they’re going to do in Cyprus.

And it’s not just Cyprus, by the way.

In Japan, the government hopes to stimulate the economy by creating inflation. That will have a similar effect on the country’s savers as confiscating a proportion of their deposits would. In Italy, the German bank Commerzbank is expecting a wealth tax to be brought in. France’s ill fated 75% tax may not last, but it shows what’s making popular politics these days.

In Australia, the miners, polluters and ‘super profiteers’ are the target…for now. And on May 31st, the government will raid small superannuation accounts and unused bank accounts.

All around the world, governments are beginning to see their citizens as ATMs to pay for political promises. Whether its entitlements, bank bailouts, wars or insulation schemes. Sure, simply taking people’s deposits is particularly audacious. But you don’t even know if we’re referring to Australia or Cyprus in that sentence. Both are up to the same sort of confiscation.

By the way, if you’re thinking this is just a question of finding the right kind of politicians to solve the problem, you’re going to be disappointed. Remember Julia Gillard’s ‘there will be no Carbon Tax’ election promise? Well, the President of Cyprus was only elected three weeks ago, and promised deposit taxes wouldn’t be part of any plan to bail out the banks. You never know what you’ll get from a politician.

Reuters reports that Cyprus’ President initially stormed out of negotiations with the IMF, EU and ECB when they demanded a tax on depositors’ funds. But he quickly changed his tune when faced with the bankruptcy of Cyprus’ two largest banks by Tuesday, after Monday’s bank holiday.

Now the bank holiday has been extended to Thursday, which really means indefinitely, because the bailout plan wasn’t passed by Cyprus’ parliament.

If we wrote to you about deposit confiscation, bank holidays, bank runs, and all the rest of it a few years ago, would you have laughed it off? Would it have seemed absurd?

Well, suddenly stuffing cash under your mattress seems a whole lot less eccentric. Suddenly,owning physical gold outside the banking system looks smart.

Nickolai Hubble.
The Daily Reckoning Weekend Edition

Nick Hubble is feature Editor of The Daily Reckoning Australia Weekend edition, and editor of The Money for Life Letter.

Wednesday, 20 March 2013

QUOTE OF THE DAY: Hayek on Cyprus

With European ATMs shut down, accounts being frozen, stock markets tanking, and the Cypriot parliament (and people) almost in open revolt, the EU’s move to begin stripping Cypriots’ savings accounts in order to order to maintain “stability” has lead to anything but.

Russ Roberts at Cafe Hayek beautifully paraphrases Hayek’s view on the matter:

“The curious task of economics is to demonstrate to Cyprus and the EU how little they really know about what they imagine they can design.”

ECONOMICS FOR REAL PEOPLE: Desert Island Economics

Here’s the note on this week’s discussion from our friends at the Auckland Uni Economics Group:


What is this man missing that all of us enjoy every day without noticing?

What does a sixteenth-century Scotsman have to say to a modern-day Peruvian hill tribe?

What does that hill tribe have to teach today’s economists and epistemologists?

And how do the answers to these questions provide the foundation for the whole field of economics?

All these questions and more will be asked and answered tomorrow night at the Auckland Uni Economics Group weekly discussion….

WHEN: Thursday 21 March at 6pm
WHERE: Case Room 3, Level 0, University of Auckland Business School, Grafton Rd

All welcome!

The Illusion of Wealth: Ludwig von Mises on the Business Cycle

Just as the economic bust we’re now enduring is the inevitable flipside of the earlier (credit-induced) boom, so too is Cyprus-style bank theft the inevitable flipside of the debts built up by governments during and after the credit boom--inevitable because, as their spending continues to increase even while the bust refuses to go away, governments are increasingly desperate to find money (by any means necessary!) with which to pay back that debt.

Both bust and theft are inevitable results of the earlier boom, that illusion of wealth created by the unlimited credit expansion produced by banks licenced to turn debt into currency.

Can we stop this never-ending cycle? Are the boom and bust of the business cycle inevitable? Economist Ludwig Von Mises reckons not.  Here’s a quick “twelve-minute” summary of his argument as it appears in the new book The Illusion of Wealth: Ludwig von Mises on the Business Cycle, edited by Robert P. Murphy:

imageLudwig von Mises: Real vs. Paper Wealth
Ludwig von Mises (1881–1973) is the economic theorist who did more than
anyone to sweep away the mystical view that business cycles just happen
to us, like bad weather and aging. He brought scientific logic to bear on the
problem. He drew on the fields of money, interest, capital theory, and international
capital flows to map out a general theory of what causes business
cycles, the parameters of how they play out in the real world, and how they
might be ended.

With an economy addicted to credit expansion and absurdly low interest rates
(not even Mises could have foreseen zero or negative rates!), we all wonder
what is real and what is not. The book gives us the tools to make that discerning

Mises’s general idea is that cycles begin with loose credit provided by a banking
system that is protected from facing the economic consequences of unsound
lending by the existence of the central bank. The boom turns to bust when the
resources to sustain it go missing.

In a market, banks want to lend; they are restrained by risk. Government guarantees
encourage risky lending. Artificially low interest rates — always cheered
by indebted governments — signal to borrowers that there are more savings in
the system than really exist. Business in particular expands production in a way
that is unsustainable. This loose money policy creates a boom — the illusion of
wealth — that is not justified by economic fundamentals. The correction takes
place when the illusion of wealth is revealed in the course of time, kicked off by
tightening credit or when the boom times are tested by reality.

In the 1920s and the first half of the 1930s, Mises’s view came to be almost
commonplace in the English-speaking world, mentioned and discussed by
the mainstream as the top contender. After World War II, the theory ended up
being stamped out by the newfound faith in macroeconomic planning, with
John Maynard Keynes as its leading profit.

Today, that faith in macroeconomic management is now at another low point,
but the baseline assumption that business cycles have a psychological origin
is still with us. As Robert Murphy explains in the introduction, the goal of this
book is to provide the most coherent possible explanation of the entire theory
from its roots to its conclusions.

Mises begins with a discussion of money. It is not neutral to every transaction,
affecting all prices in all places the same way. Changes in purchasing power of
money are a feature of normal market activity. There is no such thing as perfect
stabilization. Prices changes as human valuations change. Money is nothing
but a medium of this interpersonal exchange. Prices are objective, but value is
subjective, an expression of people’s eagerness to acquire goods and services.

imageMoney makes possible economic calculation. This is the ability to assess and truly measure the economic merit and viability of anything. All the technology, all the discoveries, all the laboratories and manufacturing in the world are useless without the ability to calculate profit and loss. The capacity to calculate and assess the relative merits of various production paths is the key to unlocking every innovation and making it real. Without the ability to calculate, society itself would crash and burn. This is the social function of prices. Nothing can substitute for them (not central planning or engineering or intuition). Prices are building blocks
of civilization and require private property and markets for their emergence.

Increasing the amount of money in an economy does nothing to brush away the problem of economic scarcity. Money is merely a tool for calculation. Producing more of it only changes its purchasing power and distorts decision-making. It does nothing to make speculation or
entrepreneurship more or less successful.

Appearances to the contrary (“This whole generation is great at investing!”), the
seeming prosperity is illusory and indicates a false boom. New money only ends
up hiding incompetency and delaying the day that it is revealed. The only vehicle
for authentic economic progress is the accumulation of additional capital goods
through saving and improvement in technological methods of production.

In a market, entrepreneurs can profit or they can take losses. Errors result
in losses and success results in profits. There is, in a market economy, no
systematic tendency for one tendency to prevail over others. False prices
are checked by competition. Errors are never general and social. They are
specific and cleared away when discovered. “The market process is coherent
and indivisible,” writes Mises. “It is an indissoluble intertwinement of action
and reactions, of moves and countermoves.” But there is no such thing as a
general under-consumption in markets, as Keynesians like to believe.

Conventional economic modelling cannot capture the time horizons of millions
of capitalist investors and producers. The real-world structure of production
includes production plans of one day or 50 years or several generations. What
allows coordination between these many plans are markets with free-floating
prices and interest rates that respond to real savings and the actual plans of
entrepreneurs and capitalists. Interest rates themselves reflect the time horizons
of the public. They fall when people save and rise when people prefer
consumption over saving. The loan markets reflect these varying plans.

When the central bank lowers rates, it creates “forced saving” — the appearance,
but not the reality. Forced saving causes an inflow of resources to capital goods
industries, because investors make longer-term plans. It looks like capital expansion.
It is really what Mises calls “malinvestment” — meaning bad investment in
lines of production that would not otherwise take place.

The reality is that all credit expansion tends toward capital consumption. It falsifies
economic calculation. It produces imaginary or only apparent profits. People
begin to think they are lucky and start spending and enjoying life. They buy large
homes, build new mansions, and patronize the entertainment business. These
activities all amount to capital consumption.

imageCredit expansion also raises wage rates in a way that is not sustainable. Entrepreneurs become addicted to expansion in order to enlarge the scale of their production. This requires ever more infusions of credit. The boom can last only as long as the system expands credit at an ever-increasing pace. When this
ends, the plans stop too and business starts selling off inventory, wages fall, and the economy begins to fall into recession. Mises describes this as the collapse of an “airy castle” — something beautiful that has no substance.

Artificial credit expansion doesn’t always produce price inflation. When it does happen, inflationary expectations can cause a general tendency to buy as much as can be bought. That can lead to the crackup of the whole of the economy. At the same time, the effects of
inflation can be disguised as rising stock prices or increasing home values.
But it always leads to relative impoverishment.  It always makes people
poorer than they otherwise might be. But Mises specifies something very
important here. It doesn’t mean society will revert exactly to the state
it was in before the boom. The pace of capitalistic expansion is so great
that it has usually outstripped the “synchronous losses” caused by
malinvestment and overconsumption.

10 Takeaways

  1. Economic calculation is indispensable to the creation of society and civilization;
    it is what unlocks and applies all-over knowledge discoveries.
  2. Prices are true and functioning only in a market economy with private
    property and competitive markets.
  3. Production processes take place over time, with each capitalist forming
    a different time horizon and configuring plans based on that.
  4. Artificial increases in the money supply, released through the banking
    system, lower the rate of interest. This is akin to forced savings.
  5. Forced savings accelerate the pace of economic progress and the improvement
    in technology, but this is unsustainable.
  6. Credit expansion makes some people richer and some people poorer, but
    it can never raise the standard of living of the whole of society. It causes
    people overall to be poorer than they would otherwise be.
  7. There is nothing wrong with falling prices. That is the natural state of
    the market.
  8. The “wavelike movement” of the economy is the unavoidable
    outcome of the attempt to lower the market rate of interest by
    means of credit expansion.
  9. All present-day governments are fanatically committed to an easy
    money policy.
  10. The moral ravages of credit expansion are worse than the economic ones.
    It creates feelings of envy towards those who receive “first use” of the easy
    credit, despair and frustration among the victims of the crash, and discourages
    people who would otherwise be excellent inventors, workers, and investors.

Why does a good theory of the business cycle matter? Understanding the
process as it unfolds helps reveal the source of the problem, which is not in
our heads or hearts or in some other strange force of history, but more specifically
in the government-protected banking cartel. In short, it is not the market
that deserves the blame, but the interventions in the market. This theory helps
in assessing whether reforms are geared toward fixing the problem or making
more problems. For example, further regulation of the monetary and banking
systems is not likely to do much toward addressing the underlying cause of
the business cycle.

Mises’s theory predicts that a society addicted to artificial credit stimulus would
probably enjoy unusual amounts of technological progress, but relentlessly
declining real income. It would depend on increasing rates of technological
improvement, but this would never be enough to raise incomes and prosperity
over the long term. Mises was writing before the age of the fiat dollar, but
he foresaw precisely what we have today: advances in technology, declines in
standards of living, and endless waves of boom and bust with no increases in
the capital and savings that make long-term prosperity possible.

Ludwig von Mises (1881–1973) was an Austrian economist who enjoyed
enormous fame in Europe before the Great Depression. The rise of the Nazis forced
his emigration, first to Geneva in 1934 and then the U.S. in 1940. His first
decade in the U.S. was spent as an unemployed writer trying to restart
life. He ended up teaching a private seminar at New York University that
taught a new generation. Instead of being the last of a great line of economists,
he sparked a revival of free-market thought. Today, many hundreds
of thousands count themselves among his students and followers.

This summary is part of a new series of 12-Minute Executive Summaries produced for the Laissez Faire Book Club.

Tuesday, 19 March 2013

Death to those who say ‘death to patent trolls’ [updated]

David Farrar says “Death to Patent trolls.” David Farrar is an idiot.

Thomas Edison was a “patent troll.”

So was Nikola Tesla.

So was almost every great inventor in the last 200 years*.

So is any inventor who licenses their invention rather than produce it themselves.  Unlike the ignoramuses who attack them, these people aren’t trolls. They’re benefactors:

Adam Smith wrote that the division of labour is a critical way of increasing a nation’s wealth.  Only if inventors can be paid for inventing, can they specialize in their profession.  The only way inventors can be paid just for their inventing is if people respect their property rights.  Note that Edison almost never practiced his inventions.  He licensed almost all of his inventions and sued if people would not pay.  Edison was not paid even a small percentage of the value he created in this world.

Ignoramuses argue that the people suing businesses these days aren’t inventors, they are (quotes Farrar) “tech-world parasites that buy up troves of intellectual property, not so that they can make a product, but so that they can turn around and sue successful companies for patent infringement with the aim of nabbing a quick and profitable settlement.”

Well, no they’re not.  They’re folk who in buying the rights to inventors’ intellectual property allow them the wherewithal to practice their craft, and help improve our lives.

Patent trolls, suggests Farrar, have “infested the courts over the last decade.”

Well, no they haven’t

Judge Michel,  former head of the CAFC, the US court that hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based economy with over 300 million people and 1 million active patents this is trivial.

Farrar’s cut-and-past hit job “argues” these “trolls” target small start ups. Well, no they don’t.

The reality is that so-called “Trolls” sue large entities much more often than small businesses.

In short, the ignorance about patents and the attacks on them are based on little more than envy, bullshit, ignorance and emotion. 

Patents are property rights, and inventors are entitled both to protect their property, and to licence or sell their rights in it to whomever they choose.

As patent attorney Dale Halling argues, “The reality is the [manufactured] patent troll/ litigation crises is a very clever marketing ploy by large multinational companies that want to be able to steal inventors’ technology.

* * * *

* ‘“An astonishing two thirds of all America’s great inventors in the nineteenth century were actually NPEs” (Non-Practicing Entities).  But today’s modern Luddites would call these great inventors trolls.’
Quote from the excellent book Great Again by Henry R. Nothhaft with David Kline. Comment by Dale Halling.

UPDATE: David Farrar responds to this post, arguing “not every person who patents something they don’t produce is a patent troll.” [Emphasis mine.]

But patent trolls [says Farrar] don’t actually come up with inventive ideas. Their inventive idea is to just file a patent over anything they can think of, even if it is not a true invention. Once they get the patent, they’ll find victims who will pay them a fee rather than go to court to get the patent over-turned.

Now this is odd for several reasons. It’s odd because the answer to Farrar, whose copy-and-paste posts normally contain most of the post from which he copies, is in the paragraphs of the post he didn’t copy: that what he calls “patent trolls” are folk who provide the wherewithal for inventors to invent without needing to manufacture, market and sell the results of their inventions themselves—for “only if inventors can be paid for inventing, can they specialize in their profession… [and] in buying the rights to inventors’ intellectual property [these folk] allow them the wherewithal to practice their craft, and help improve our lives.”

Furthermore, if what is “dreamed up” is just “anything they can think of,” if it is not “a true invention,” then why has it been granted a patent,* and more importantly why is it the parasite’s wish to use it? If it is not in any way a “true invention,” then why do they find it so damned useful they wish to steal the idea?

It’s also odd because he earlier claimed the patent trolls weren’t themselves inventors. Now he claims they are, just not inventive inventors.

Even more odd, Farrar then goes on to object to Judge Michel’s fairly telling point, above, that “patent trolls” have not “infested the courts over the last decade”—as Farrar claimed in his earlier post that they had. But Farrar’s answer is to argue that we don’t see these cases because “they don’t go to trial.” In which case, it’s impossible to see how they can be infesting the courts.

So a lot of oddness in one short post.

There is certainly an infestation about however, an infestation about which to be on guard: it is the general animus against intellectual property by folk often only too keen to take from others what they have neither earned nor paid for.

The desire for the unearned is legion. The arguments against so called “patent trolls” is just one of its latest and less attractive manifestations.

* * * *

*Yes, there are foolish patents granted, but this is an argument for improving the Patent Office, not to demolish patents altogether.

Declaration of Equality

Sign this petition, the Declaration of Equality, to send a message to the Racist Party’s constitutional review:

PS: Send another message to them, by submitting to tell them what a constitution is for.

Your Money Isn't Safe Anymore

_Jeffrey TuckerGuest post by Jeffrey Tucker

The euro elites don't call it theft or robbery or even a tax, much less an outright default by the banks of Cyprus. They are calling it a "stability levy," a plan that could lead not to stability, but a domino-style collapse of the banking system in Europe.

True to the nature of government propaganda, the Cypriot head of state, Nicos Anastasiades, says this "stability levy" is necessary to forestall "a complete collapse of the banking sector." It's the same kind of language we heard in the fall of 2008 -- an intimidation tactic used to shove through TARP and unending bailouts.

More likely, the plan to tax all Cyprian bank deposits 6.75-10% will trigger one. Or maybe just the talk of it already has. We can't know for sure, because the government of Cyprus has declared a banking "holiday," a term that means that the robbers take a vacation from being held accountable for their actions.

What this plan signals is pretty clear: Your money is not in the bank. If you get there fast and withdraw what you can, you might survive. If you delay, all bets are off. That means an old-fashioned bank run -- the ultimate check on the soundness of banking.

Another way to look at it: It's a game of musical chairs, and the music has stopped. The purpose of the "holiday" is to tase people so they can't find their chair.

The tax is part of a $10 billion bailout arranged by Eurozone countries together with the IMF. So far during the long, slow, relentless, meltdown of the world's banking systems over the last few decades, the idea of outright confiscation has been something that governments have generally tried to avoid.

It turns out that people don't like to be robbed. They normally like to think that the money they put in the bank is accessible to them. So when Anastasiades demanded this, he got massive pushback from legislators and depositors.

Meanwhile, people were scrambling to get money from ATMs and trying to wire money out to safer havens. That's when the rude surprise came: Their accounts were locked and transfers have been stopped. ATMs are marked "out of order."

As I write, legislators have backed off the proposal to loot absolutely everyone equally, but instead will focus the most intense effects of the heist on only the very rich. [News this morning that the the Cyprus government now plans a vote to change the “levy” to 3% for deposits below 100,000 euros and 12.5% for above that sum.  And counting.]  This might make it more palatable for lawmakers, but no more so for the population at large. Politicians can promise all they want that this is a "one-off levy," but anyone who believes that is an utter fool. Citizens can be pretty dopey in believing political promises in general, but when it comes to their own money in their banks, their gullibility certainly has its limits.

Geographically-challenged Americans might be forgiven for having spent most of their weekend ignoring news out of Cyprus, a country they last heard about when studying ancient civilizations in high school. A friend of mine from Cyprus who lives in the U.S. gave up trying to explain where he is from long ago and is now satisfied to tell people he is from Greece.

Actually, Cyprus is one of the world's most prosperous countries, owing mainly to its status as a world financial hub. As Doug French put it to me, "This is a bank with a country attached."

Its population is mostly tourists and fluctuates based on season. But its prosperity for the last 20 years is due mostly to the deposits it receives from all over the region, especially from Russia. This is why Vladimir Putin has become involved in the current controversy, denouncing it as unfair and unwise.

The trouble is that Cyprus has to raise the money. It has to come from somewhere. The core problem is that this proposal, especially the idea of taxing deposits that fall below the deposit insurance ceiling, undermines that elusive but absolutely essential thing called confidence.

If people no longer believe in the system and run on the banks, the whole thing can unravel very quickly. In most countries today, there is depository insurance that provides the illusion that people's deposits are safe. The remarkable thing about the "security levy" is that it amounts to an open announcement that there is no assurance that the money must come from somewhere, so they might as well get from in the most obvious place.

There was a time when banks operated like normal businesses, performing a service in exchange for payment, while clearly delineating what part of people's deposits were at risk (and, therefore, paid a premium) and what part were security (and, therefore, a service to be paid for). But central banking and fiat paper money have confused the issue to the advantage of the financial system, but to the disadvantage of depositors, especially when faced with a crisis moment such as this.

Still, it is an unprecedented move, one that harkens back to the days of the early New Deal, when FDR closed the banks, suspended the gold standard, and outright changed the definition of the dollar in order to bail out the banking system. This kind of thing is not supposed to happen these days. The bankers are supposed to be wiser and more sophisticated, using fancy tools of monetary policy to continually shore up confidence in the system.

The suggestion that the banking system just outright steal people's money -- even if it doesn't end up getting through the legislature -- has dramatically changed the psychology of banking throughout the Eurozone. Over the coming weeks, Spaniards, Italians, Russians, and many others throughout the region are going to be quietly (or maybe not so quietly) testing the same, pulling deposits and finding other ways to secure their funds.

The word central bankers everywhere dread: contagion. It means the spreading of truth and actions based on that truth. Might Cyprus be the new bubble that breaks the world? It's a good time to revisit our friend Garet Garrett's 1932 classic that retains all of its explanatory power: A Bubble That Broke the World.

For banking regulators and politicians, this really amounts to an epic fail, even from their own point of view. They never want the veneer of stability and soundness stripped away. They want a population of depositors blissfully unaware of the vulnerability of the monetary and financial systems.

You might ask, "If you are so smart, what do you suggest?" That's easy: default and bankruptcy.

Contrary to the conventional wisdom, the Lehman Brothers case is not a model to avoid, but one to follow. Let the Cypriot banks that are under threat die a quick death, even if that means not paying those who believe they are owed. Under the conditions, there is accountability and there are permanent lessons learned.

This approach -- yes, it is far-flung and stands zero chance of actually happening -- might actually restore sound banking practices. Just imagine a world in which banks operate like honest, solvent, self-reliant businesses, not lying, not teetering on the brink, not depending on government and politicians and central authorities. Seems like a dream, but we can get there through a simple step: Allow the failure to happen.

But might that approach trigger a Euro-wide meltdown? Maybe. That seems to be something that is going to happen with or without this "one-time stability levy."

Meanwhile, the banks are closed. No one in the Eurozone is sleeping well at night. And it's going to be a wild week.

The Euro crisis alone might account for why Bitcoin has moved from $15 to $48 in three months. Is it possible that Russia's largest depositors saw this coming and have been slowly moving money out to the digital safe haven? We'll never know, because the transactions are anonymous (thank goodness). But ask yourself this question: Where would you rather have your money? In Bitcoin, or insured deposits in Cyprus? *

Jeffrey Tucker

* Or gold.


100 years of coming and going

Manhattan’s Grand Central Station, a classic of architecture, transport engineering and cinema—and the busiest train station in the States—is 100 years old.

Over the years, the terminal has appeared in many books and a host of movies:

It might look like the Paris Opera House from outside, but the inside was said to be the model for the Taggart Terminal in Ayn Rand’s Atlas Shrugged.

Every day more than 750,000 people come through its doors, where its main hall provides  the perfect model of spontaneous order: no cops, no ropes, no centralized direction, just order through individual liberty.

Monday, 18 March 2013

Beer is beneficial

Politicians and other busybodies obsess about the cost of drinking beer.  Too little analysis focuses on the benefits, so former NOT PC beer writer Neil Miller has undertaken the serious scientific research on the topic for you. Here are the top ten benefits of drinking beer.

1. Beer lessens the constant anxiety of watching the Black Caps bat.

2. After beer, Gareth Morgan's constant lectures become slightly less annoying.*

3. Beer enables people to hold strong opinions on every issue without resorting to research.**

4. Without beer, no one would date in the provinces.

5. Television beer ads employ all young Kiwi actors not talented enough to be on Shortland Street

6. The Government gets lots of money from beer through excise tax, GST and company tax on anyone who manages to make a profit.***

7. Frank Zappa said "You can't be a real country unless you have a beer and an airline. It helps if you have some kind of a football team or some nuclear weapons." Without beer, New Zealand would only be half a real country.

8. The late-night takeaway food industry depends on beer for patronage.

9. Beer production provides the main ingredient in Marmite.

10. Drinking a frosty beer annoys President Mahmoud Ahmadinejad and Professor Doug Sellman.

* There is not enough beer in the world however to make Gareth Morgan sound sane.
** And to voice them with greater eloquence.
*** This is not exactly a benefit.

It worked so well for Stalin…


Five year plans? Ten year plans? Twenty year plans? They worked so “well” for the Soviet Union, it’s no wonder today’s central planners wish to ignore their results—but ignore them they inevitably do.

Auckland’s central planners want to tell us where and how to live, regardless of how you and I feel about it. They have all the inbuilt chutzpah of the top-down planner, ignoring incentives and individual likes and dislikes as if they themselves know better.

But, in fact, top-down planners have a more limited capacity to “know” than those who are actually in the situation the planners seek to control. In small groups, people know by simple introspection about their own choices and values, and from day-to-day interaction they know much about others’ choices and values. But in large groups, of the size in which planners plan, knowledge about what others want requires vast expenditure of time and effort to even begin to approximate this “bottom up” knowledge—and even if the planners could properly approximate it, there is zero incentive for them to respond.  What we get instead is what the planners want, based on the latest planning fashions.

imageFolk argue that council’s District Plans give them certainty: that height limits, height-to-boundary restrictions, density rules and rules against knocking down your villa allow them to be comfortable that their backyard isn’t going to be bothered by boofheads knocking up a building so big it will block the sun and create a new gravitational field in their neighbourhood.

I wonder how they feel now they’ve seen the council’s proposed new “Unitary Plan,” in which the only certainty that exists is that rent-seekers will seek rents, council rates will explode in precisely those places the council’s planners have determined must have multi-storey, and go nuclear once we get the bill for the multi-billion dollar .

What’s my plan? My plan is choice.

Let people live where and how they want to live, either up or out or under or over, in any goddamn way they want to!

The argument over sprawl versus intensification, about whether the city should be growing up or growing out, is an over-inflated false dichotomy—the city, you and I and our neighbours, should be “allowed” to do both! Let builders build country houses; village hamlets; micro apartments; mews housing; courtyard, cluster and co-housing; and innovative medium-density housing such as Rotterdam's 'pole houses,' Frank Lloyd Wright's SuntopHomes and Crystal Heights apartments, San Francisco's Fulton Grove 'alley housing,' and Moshe Safdie's Habitat—all at least either illegal or discouraged under current plans—and at least allow the price system to signal the desires for these and other ways of living, unreservedly unencumbered by restrictions stopping developers from making them happen creatively and inexpensively.

It’s not just that we don’t need planners. These bastards actually make our lives worse.

City life requires that people coordinate their actions with the actions of many others, in a world in which each of us has very limited knowledge of how their own actions fit into the big picture.  Planners actually stop that coordination happening. Absent central planners, the price system (when it’s allowed to function) provides a vast and lightning-like integration of people’s choices and values; and absent central planners, property owners (when property rights are properly protected) are perfectly able to form voluntary “common law” agreements between each other, protecting what they value by means of covenants and easements and the like.  (You like my tree; I like the view over your house: let’s sign an agreement covenanting that tree in your favour and giving me an “easement” over your house for the view—and over time as these and other voluntary agreements are formed, a “network” of property relationships is formed reflecting everyone’s choices and values far more effectively than making a submission on a planner’s plan, and without any need for planners’ busy-bodying.)


I say allow everything from micro city apartments to co- and community-housing to village hamlets around the city’s outskirts (all of which are  either illegal or prohibitively expensive under current rules) and encourage (rather than stifle) the entrepreneurial ingenuity that will make them happen inexpensively.

I say give neighbours certainty by placing voluntary covenants on property based on existing “no bullshit” rules (height, height-to-boundary, density etc.), changes in which can be easily and voluntarily negotiated between neighbours without any need for planners. Let a network of these relationships and price signals grow up that truly reflects the values of those who live in the city.

I say sack the planners and dump their controls, and let people live where and how they want to live.

This is how it starts

Translation: “Cypriot bank robbery”

Imagine this: You wake up this morning to a note telling you you’re the victim of a bank robbery—but instead of the bank being robbed, the bank is robbing you.

Well, strictly speaking, the government is robbing you: every depositor in the country is having their bank account raided to help pay the government’s debt.

Nice, huh?

This is exactly what savers in Cyprus woke up to this morning—and it is exactly what can and undoubtedly will happen in every jurisdiction in the world.

Politics aside, the bottom line is that the Rubicon has been crossed, and deposits have now been forcefully confiscated in what Europe promises to be a standalone case. What is certain, is that nobody will wait to find out how long it takes before Europe's class of increasingly more desperate and ill-meaning despots is found to be have lied once more…

Let’s not laugh at the Europeans, because the same legislation allowing this theft exists here and everywhere else.

Clarkson likes us

We NZers like it when people like us. Jeremy Clarkson likes us.

John Cleese called Palmerston North the ''suicide capital of New Zealand'' because ''if you wish to kill yourself but lack the courage to, I think a visit to Palmerston North will do the trick.” Clarkson disagrees, I think. If God had got it right, he says, ''Jesus would have been from Palmerston North.'' Perhaps he means it could be a good place for crucifixion?

In any case, he seems to like the rest of the place:

"If you were God and you were all-powerful, you wouldn't select Bethlehem as a suitable birthplace for your only child because it's a horrible place. And you certainly wouldn't let him grow up anywhere in the Holy Land. What you'd actually do is choose New Zealand.
"New Zealand causes anyone to question the wisdom of God. Because if he really were all-knowing, children at Christmas time today would be singing 'Oh little town of Wellington' and people would not cease from mental fight until Jerusalem had been built in Auckland's green and pleasant land.
"Jesus would have been from Palmerston North.
"I'm in New Zealand right now and it really is absolutely stunning; bite-the-back-of-your-hand-to-stop-yourself-from-crying-out lovely."
Clarkson was vastly less complimentary about Australia, calling Sydney Harbour "a river"and local photographers "convicts"during a visit last week.