Category Archives: Economy

Austrian Analysis Seeping In To Mainstream

Debt, Economy, Federal Reserve Bank, Media, Reason

You know the country’s commentariat has traveled some distance when PBS’s Paul Solman concedes that, given the role of the Federal Reserve (and, presumably, Fractional Reserve Banking) in the economy, it is “not a zero probability event here in America” that “the US could go the hyperinflation route of a Zimbabwe or Germany, freeze, face increasingly punitive interest rates and eventually require drastic overhauls.”

Solman, who still invests in Treasury, and is optimistic against all odds, also admits that “Since the Federal Reserve was created and got into the act in 1913, the U.S. dollar has lost somewhere between 94 percent and 99.7 percent of its value. (See MeasuringWorth.com for a range of conversion options: constant basket of goods, unskilled wage, etc.)”

But because Solman thinks that the debasing of the coin by the Fed also coincided with America’s becoming “the world’s dominant global economy,” he is not that concerned. That’s what happens when correlation is confused with causation.

The Republic has managed to thrive despite the Fed, not because of it.

Jobs Report

Barack Obama, Debt, Economy, Labor, Political Economy

Barack Obama’s boasting to the contrary, “New jobs [announced by the Bureau of Labor Statistics (BLS)] did not exceed 150,000,” reports Paul Craig Roberts. This “figure … would merely keep even with population growth and thus not reduce the rate of unemployment, which, consistent with this deduction, remained constant.”

The BLS’s error Roberts puts down to “the bureau’s ‘birth-death model,’ which works better during normal times, but delivers erroneous results during troubled times such as the economy has been experiencing during the past four years.”

Moreover, “the vast majority of the new jobs are low paying jobs, except for a few truck drivers”:

Of the new jobs reported by BLS, 92% are in services. Of this 92%, only 7% could possibly relate to exportable services–architectural, engineering, and computer systems services.
Of the reported new service jobs, 29% are in health care and social services. The categories that account for the health services jobs are ambulatory health care services and hospitals. Waitresses and bartenders account for 20% of the reported new jobs.
Employment services account for 29% of the new reported jobs. Transportation and warehousing accounted for 5% of the reported new jobs, despite a loss of 60,000 jobs in general merchandise and department stores.

Concludes Roberts:

The US has nothing to export to reduce its massive trade deficit, which has, sooner or later, disastrous implications for the US dollar.
Middle class income jobs are declining, with polarization at the two extremes.
US economic policy continues to focus on the mega-rich at the expense of 99% of the population. US interest rates are kept at, or near to, zero in order to maximize mega-bank earnings, while depriving tens of millions of retired Americans of interest income on their lifetime savings, forcing them to spend their capital in order to live, thus depriving their heavily indebted children of inheritance.

PBS’s Makign Sense is reporting a U-7 (“more inclusive unemployment statistics”)—“which includes everyone who told the government that they want a job but don’t have one plus the part-time employed who are looking for full-time work”—to be 16.85 percent. That probably means it’s much higher.

The reason the official, underestimating unemployment number held at 8.3 percent is that, “Almost half a million more Americans joined the labor force in February. That means nearly 500,000 more people were actively looking for work than in January.”

The other index I find telling is debt. “Consumer credit jumped 8.6 percent,” according to CNBC, “or $17.7 billion, in January to $2.54 trillion … It was the fifth straight month that borrowing increased and the largest gain since 2004. … raising doubts about whether the report signals economic growth.”

Rid Us of Regulation

Constitution, Economy, Labor, Regulation

When BHO or any other politician utters trite promises about creating jobs for the little people, we, their Lilliputian subjects, should be able to pipe-up about the regulatory barriers to entering the workforce erected by the very same people.

• A license to speak to tourists without which you go to jail for 90 days
• A test to “practice” flower-arranging
• $30,000 mandatory outlay for an embalming room, if you want to open a funeral parlor

“How are these laws able to get enacted?” asks RT? “Lobbyists and special interest groups infiltrate politics on the federal and local level. They urge lawmakers to pass regulations that benefit them, and keep the competition out. The result: an America growing increasingly regulated. According to the Institute of Justice, in the 1950’s 1 in 20 occupations required a government permit. Today it’s one in three. And all this red tape is costing taxpayers billions.”

Lewd licensure is not a function of BHO’s administration alone, although he has increased the number of billions transferred from the private economy to the blood-sucking bureaucracy.

I would, however, counter that the culprits here are not the lobbyists, who have not taken an oath to uphold the Constitution and work to benefit not factions, but all folks. Politicians have the power to refuse to enact these laws. However, as always, it seems that, psychologically, it is easier for news agencies and the people to blame corporations, Wall Street and K Street, instead of the bums who capitulate to these special interests.

UPDATED: Talking Truth Until You’re Blue In the Face

Debt, Economy, Education, Political Economy, Propaganda, War

Freedom’s real warriors labor with little support (and by “true” warriors I do not mean the Republican TV circus animals and tele-tarts who get face time and popular love in excess of their worth). Economist Robert Higgs laments “the bitter disappointment of seeing the [invaluable] research and writing [he has] carried out over more than forty years prove to have been completely in vain.” He wonders whether perhaps his mother ought to have strangled him in the crib, to spare him the bitter disappointment:

For all of the good I’ve done in correcting people’s understanding of what happened to the U.S. economy during World War and what lessons one might justifiably draw from that experience about, say, the scientific validity of the Keynesian model or its related fiscal-policy implications, I might just as well have held my breath and turned blue. Here we are in June 2011, and millions of Americans are being presented with the purest potion of economic misinformation one can imagine, an account in no way superior to those the young Keynesians were peddling so confidently in 1944, when I was born. …
When I began to teach U.S. economic history at the University of Washington in the late 1960s, I quickly realized that this tale of the wartime “Keynesian miracle” could not withstand critical scrutiny once one went beyond the barest account of it in terms of the elementary Keynesian model and the standard government macro measures, such as GDP, the consumer price index, and the rate of civilian unemployment. Almost immediately I saw that unemployment had disappeared during the war not because of the beautiful workings of a Keynesian multiplier, but entirely because about 20 percent of the labor force was forced, directly or indirectly, into the armed forces and a comparable number of employees set to work in factories, shipyards, and other facilities turning out war-related “goods” the government purchased only after forcing the public to pay for them sooner (via wartime taxes and inflation) or later (via repayment of wartime borrowing). Thus, the great wartime “boom” consisted entirely of (1) some people’s mass engagement in wreaking death and destruction and (2) other people’s employment in producing supplies for these warriors after the government’s military labor drain, turning out ”goods” never valued by consumers or private producers in voluntary transactions, but rather ordered by government functionaries and priced completely arbitrarily in a command-and-control economy. In no sense was the alleged ”wartime prosperity” comparable to real, normal prosperity. The pervasive regimentation, rationing, price controls, direct government resource allocations, and forbidden forms of production (e.g., civilian automobiles) should have served as a tip-off.

READ “World War II: Still Being Touted as the Quintessential Keynesian Miracle.”

UPDATE (March 5): “WARTIME SOCIALISM”: “… what politician would not warmly welcome an economist who, with the aid of indecipherable econometrics, legitimizes immoral power and property grabs? This is why the anti-free market central planning advocated by the late John Maynard Keynes has been embraced with renewed verve…”