A lot to catch up on, so I’ll be back to blogging by next week (though I may wind up blogging sooner, since I often can’t help it). Major deadlines are closing in on me fast, so I need to be extra efficient over the next few months.
Meanwhile, although my wife has the vacation pictures, I have some of the posed shots, which I just scanned in. These three don’t have me in them — but you can see plenty of me via YouTube if you like.
Much has been made of Tesla’s repayment of its DOE loan. There has been much crowing. Finally a DOE loan which didn’t implode into a black hole. And we are very happy that the loan has been paid back, and ahead of schedule.
At $62,000 I am actually of the opinion that given the competition the Tesla Model S, which I’ve examined first hand, is pretty competitive. (The Porsche Panamera is about $100,00 well equipped and the Maserati Quattroporte another 4 seat rocket starts at $135,000.) It’s a neat car – so long as it doesn’t get too cold outside and one need not drive longer than 200 miles at a time.
But let’s not pretend that Tesla isn’t still supported by the American taxpayer.
(From The Daily Beast)
In addition, government regulations require the production of a certain number of alternative vehicles per year. Rather than build green cars themselves to meet mandates, some manufacturers simply purchase credits from companies that make zero-emission vehicles—like Tesla. In fact, as I noted recently, Tesla has a nice side business selling those tax credits. In the first quarter Tesla said sales of such credits amounted to $68 million, or 12 percent of revenue. Without the sale of those credits, Tesla would not have been profitable.
If we can’t end it tomorrow, at the very least it should be audited completely.
May 24th, 2013 will remain in the annals of the Circle Bastiat as an infamous day of self-promotion. There is indeed a second publication which yours truly is most happy to announce: the Russian edition of the Last Knight of Liberalism: Последний рыцарь либерализма: Биография Людвига фон Мизеса (Chelyabinsk: Социум, 2013), 893 pp. Translated by Alexander Kuryaeva, Tatiana Danilova, Elena Vasilyeva, Marina Oborina, Yuri Nurmeev, Vasily Koshkin, and Natalia Avtonomova.
My Bielorussian doctoral student, Olga Peniaz, sent me the picture of the book-cover, which seems to be identical with the Amercian edition except for the Cyrillic letters. How truly astonishing that the first translation of this book (and possibly the only one ever) has been made for those very people who arguably suffered most under the ideas of statism and socialism, which the great Ludwig von Mises opposed so fiercely during all his life. My special thanks go to the wonderful persons who have made this edition possible, especially to the sponsors, and to the translator team coordinated by Alexander Kuryaeva, who also made a book presentation on May 18th (watch the video as from about 1h30). God bless you, and I hope to meet you all in person one day.
Yours truly is happy to announce a new book publication : Krise der Inflationskultur (Munich: Finanzbuch-Verlag, 2013), 320 pp.
The strongest criticisms of fiat money and central banking have been based on monetary considerations and on the theory of capital. By contrast, the repercussions of an inflationary monetary system on financial markets and on the use of wealth has been somewhat neglected. The present essay on the political economy of finance fills this gap. The central thesis is that, in a fiat money system, financial markets tend to turn into engines of destruction; they absorb excessive amounts of savings, facilitate the consumption of savings, and reinforce a culture of inflation that saps and undermines the economic foundations of civilisation.
The publisher wished to announce the title early for marketing purposes, thus we had to make up a title (Crisis of the inflation culture) that approximately covered the essence of the book. But writing it was very much a work in progress, and it turned into something much more fundamental than I had planned. Initially the project was to publish a collection of some of my German-language articles and op-eds that had been published in the previous five years, in which I had commented on the never-ending financial crisis and highlighted various implications of capital theory. But once I sat down to put this material into a meaningful order I realised that the result would be very unsatisfactory both for the readers and myself. Thus I started to invest much more into the project, first filling gaps, then adding ever more new material, and taking out more and more of the material that was initially supposed to be in the book. When the manuscript was completed it had turned into an entirely new book, definitely a result of my studies and teaching as from about 2006, but nothing that I had imagined or planned quite in that way. The invisible hand, once again.
The only negative externality was that the title no more quite reflected the essence of the book. If I had to give it a new title now it would be Fiat Money and the Wealth of Nations or Political Economy of Finance or maybe The Finance of Nations. One of these shall be the title of the American edition, forthcoming from the Mises Institute in 2014.
Table of contents
PART ONE: On Growth
I Savings and growth
II The role of financial markets
III Scarecrow deflation
IV Money illusions
V On the appropriate use of statistics
PART TWO: On Inflation
VI Inflation and price inflation
VII The Misesian critique of inflation
VIII The bubble economy
IX The nationalisation of wealth
X Inflation culture
PART THREE: Dealing with the crisis
XI Billy-goat the gardener
XII Fewer crises through smaller government
Arguments developed in the first part (more in the other two parts)
(1) The uses of savings in a free society. Virtually any proportion of income can be saved (short of 100%). As the savings rate increases, investment increases as well, but less than savings, because the return on investment diminishes. This means that in a flourishing and free economy more and more savings tend to fund non-commercial projects: arts, science, philanthropy, environment, and the embellishment of public space.
(2) Financial markets are not necessary for the “financial division of labour” between savers and the final users of savings. The same function is fulfilled by the traditional form of savings through money hoarding. This point is completely neglected in today’s academic literature on financial markets. Due to Fritz Machlup’s very negative influence, Austrian economists too did not sufficiently stress this point. The implication is that all forms of savings are conducive to economic growth, and ultimately for the same reasons.
(3) The political dimension of the transition from money hoarding to financial saving-investment is a greater dependence on financial intermediaries and, especially, much lower costs for governments bent on expropriating the wealth of the citizens.
(4) The true reason why financial markets can be instrumental in fostering growth is that, as a tendency, they stimulate savings (that is, they provide incentives to reduce spending on consumers’ goods). This point too is completely brushed under the carpet in the conventional financial literature. According to the prevailing opinion, financial markets help collecting money that would otherwise lay dormant in money hoards without diminishing consumer spending whatsoever. Thus they stimulate aggregate spending respectively aggregate demand. Therefore (and not because they encourage savings) they allegedly tend to promote growth.
(5) Financial markets tend to promote growth only in a competitive environment. If they are hampered by government regulations (“financial repression”) they become prone to inefficiency and corruption. If they are subsidised, they suffer from moral hazard, absorb excessive amounts of savings; this entails wasteful uses of capital and it also facilitates political abuses. Today financial markets are massively regulated and they are also massively subsidised through the printing press. This two-fold damage is usually overlooked. In particular, the conventional theory has no place for the notion that financial markets absorb excessive amounts of savings. Its motto is: the more, the better. We present data to show that, today, in all major countries, a large part of financial savings (40-60%) are used to finance public and private consumption, rather than non-financial firms.
(6) Price-deflation and the deflation of the money supply, respectively the risk thereof, are essential features of a free economy. They impose limits on the development of the credit market and preserve the practice of equity finance and of high liquidity.
(7) National accounting fully confirms the Austrian analysis. Savings-investments are the main source of revenue in developed countries. I demonstrate this with data from the US (BEA) and from Germany. I also have corresponding data for France, Japan, and the UK.
(8) Austrian economists draw attention on the fact that capital consumption embellishes nominal and real GDP figures in the short run. I analyse the case of fixed capital of German non-financial firms to illustrate this point, highlighting the significance of GDP and inflation-rate figures, and how they are calculated.
Don’t forget young college graduates to put money away for retirement. What’s that you say? You won’t have any chance of saving anything until you are 50 years old because you owe $250,000 in law school bills? Wow, that really stinks. But at least you paid the salary of your law professor for a year. It takes a village after all. That should make you feel good. When you’re 47 and still in debt just remember that.
Take this from someone who lives in the leafy suburbs of Washington DC. It is virtually IMPOSSIBLE to fire a civil servant. Basically they would have to kill someone on the job, with 3 witnesses, to get relieved of duty. Even then they’d probably get to keep their pension.
You think I’m joking.
(From The Atlantic)
It’s an urgent question for anyone whose preferred policies presume a well-functioning bureaucracy staffed with capable civil servants to oversee and implement them. It behooves us to remember that the IRS and federal, state and local government encompass a lot of honest, hard-working people whose contributions are unsung and who hate scandal and incompetence as much as anyone. But having observed government at all levels for the last decade, I can’t help but conclude that the majority of proficient public employees are seeing their agencies and reputations suffer because it is excessively difficult to terminate the worst of the worst.
I wish I could have posted this in October when we did it but better late than never.
It opens with Bill Shireman, the CEO of The Future 500, a client of mine. He is then followed by a keynote from David Stockman discussing the book he was then writing, which has since become an instant classic The Great Deformation. Lastly is your editor and a great collection of guests talking about crony capitalism right before the 2012 election.
On the panel was Luigi Zingales, professor at the University of Chicago and author of A Capitalism for the People, Peter Schweizer the head of the Government Accountability Institute and author of Throw Them All Out, Susan Ochs writer for American Banker and one of the architects of TARP, Ed Haldeman the Former CEO of Freddie Mac and former President of Putnam Investments, and Anna Burger former Treasurer of the SEIU. It was a diverse panel and pretty darn entertaining if I do say so myself.
Everyone is great but Ed Haldeman was remarkably frank about the housing implosion. At one point a member of the audience tries to dismiss the idea that at least some corporate leaders had nasty intentions as they employed crony capitalism. Haldeman doesn’t split hairs. He calls the audience member naive.
It was a fun panel.
- Stockman starts at 7:53
- The panel starts at 38:28
Speech (transcript) by Murray Rothbard: The Six Stages of the Libertarian Movement.
Texas wants its gold back from the New York Federal Reserve Bank. Now they are about to abolish the sales tax on gold and silver. The state still has huge amounts of oil. It has a thriving high tech sector and plenty of open space. The climate is generally good, though a bit hot in the summer. Ron Paul lives there. Overall Texas has got a lot of things going for it and if it’s an early (re)adopter of sound money* it will only make the Lone Star State that much more attractive.
Why would anyone live in New Jersey?
*To the degree possible.
Looks like under Obamacare many lower skilled workers will end up with “skinny” or “band aid” health insurance plans which may cover a few doctors visits and some prescriptions but may leave the insured exposed to catastrophic loss. This is exactly what we don’t need.
(From Real Clear Politics)
But larger employers, they write, “need only cover preventive service, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.” Low-benefit plans may cost an employer only $40 to $100 a month per employee. That’s less than the $2,000-per-employee penalty for providing no insurance.
“We wouldn’t have anticipated that there’d be demand for these type of Band-Aid plans in 2014,” the Journal quotes former White House health adviser Robert Kocher. “Our expectation was that employers would offer high-quality insurance.”
Oops. It turns out that Friedrich Hayek may have been right when he wrote that central planners would never have enough information to micromanage the economy.
Boy, being head of the IMF puts a real target on one’s back.
This is how tenuous the markets really are. The slightest breeze from the Federal Reserve, the mere hint that the flow of money will slow, sends one of the world’s major stock markets pinwheeling.
At this moment US market futures aren’t looking very good.
Crony capitalism, as we often say, is a bi-partisan endeavor. So long as there is cash to hand out, so long as government is big enough to pick winners and losers, abuse is going to happen. And despite what many in the GOP say, it’s not a party of small government, or at least hasn’t been for a long time.
Below, a dispatch from the unabashedly statist Daily Kos. Hey, if they want to highlight corruption, we’re happy to help.
The world needs more of this kind of activism. It clearly defines the fight for liberty and shines a stark light on the inconsistencies which are often found in the traditional American “Right” and “Left.”
…posters are appearing linking gay rights and gun rights in ways that are just freaking out the usual control-freaky suspects. Some of the posters suggest that disliking guns is just like disliking homosexuality: a personal foible that ought not be turned into legislation.
This is Chuck Todd, NBC’s political news director saying this.
When MSNBC is hammering the president things have got to be pretty darn bad. I think a lot of journalists who long thought that they were on the “good list” now recognize that even they, even the guilded messengers who delivered Obama the White House, can be tossed aside in the name of consolidating presidential power.
Commerce Sec. nominee Pritzker, blew up a bank using subprime lending in 2001, left depositors in the cold.
The Penny Pritzker’s father bought Superior bank for his daughter after she graduated from Stanford. Ms. Pritzker expanded the bank into subprime lending, becoming a leader in risky home loans. The bank would die an ugly death however, with serious accounting violations and customers losing $10 million in deposits even though Penny Pritzker was worth over $1.5 billion.
Given that Ms. Pritzker is the heir to the Hyatt fortune and has had her business path laid out for her by wealthy and powerful allies, but still managed to kill a bank using the tools of destruction which brought much of the economy to its knees over the last 5 years. And given that she left depositors out in the cold even though she is vastly wealthy and could have recapitalized the losses with a check. One has to wonder. Is it that she is particularly qualified for the Commerce job or is it because she raised millions for Obama?
I’m on vacation this week, but here’s a nice resource page I put together on the subject of war and the state. This was a blind spot of mine when I was a young college student. I hope you’ll bookmark the page; I think you’ll find some useful links there.