Oh my, once every 38 years, the stars align such that three hard-hitting articles debut on the same day. Today is such a day.
(1) In this EconLib piece I dissect the paradox of thrift, using Steve Fazzari’s EconTalk podcast as a springboard. If you have the time (and haven’t already listened to it), I strongly suggest you first listen to the podcast before reading my critique.
(2) In this Mises Daily Article I make the elementary–yet crucial–point that money and interest are different things. In particular, if we are in a situation where the market needs more money and higher interest rates, then central banks will necessarily aggravate one of the problems. On a purely free market, there would be no automatic association of “more money growth” with “lower interest rates” the way there is today. (NOTE: Some readers may suspect that I’m either taking jabs at, or cowardly siding with, Robert Wenzel in this article. But in fact I have been wanting to write this piece for months. If anything, it just made his critique of another piece that much funnier to me, since he was criticizing me for ignoring the difference between money and interest rates.)
(3) Finally, in this Freeman article I tackle the issue of whether deregulated derivatives are responsible for the crisis. In particular, I discuss the role of credit default swaps. Here is a good excerpt:
In situations such as the present crisis, there is a temptation for libertarian economists to look for specific government interventions that “caused” the problems. This is understandable, and indeed we have listed some of these factors. Yet we should also remember that failure is a normal part of the market process. Investors and entrepreneurs are not omniscient. Bankruptcies do not signal the inefficiency of the market any more than the overthrow of Newtonian physics proved the weakness of the scientific method—let alone that government should take charge of all scientific research.
But even if the critics were right and the present crisis was largely caused by faulty forecasts made in the private sector, it would not prove a crushing defeat for free markets. After all, there are plenty of examples of horrible business decisions made by private individuals. The Edsel and “New Coke” flops, Decca Records’ 1962 rejection of the Beatles because “guitar music is on the way out,” and the rejection by a dozen publishers of the initial Harry Potter manuscript are all examples of stupendous entrepreneurial error. Given the advantage of hindsight, it is easy enough for us to laugh at the businesspeople who made such boneheaded calls, and critics of the marketplace could easily enough infer that the free market can’t be trusted with the task of innovation.
This bit of important advice regarding banks is based on personal experience from this morning:
If your laundry situation is dire and you consequently are wearing your “Freakin Sweet!” Peter Griffin boxers, and you are wearing rather tight jeans that already have a tiny rip in back, and you are walking out of the bank and notice that the carpet in front of the main entrance is a little bunched up and might cause an old lady to trip…
…then even so it might be wisest just to keep walking out of the bank. All I can say is, I hope the tellers at my bank are fans of Family Guy.
Just when you think you’ve got the Old Testament God all figured out, He throws a curveball at you. Now He literally is laying down the law throughout Leviticus, and it’s not exactly summer camp.
But then in chapter 25, He explains the “Year of Jubilee” which is quite fascinating:
8 ‘And you shall count seven sabbaths of years for yourself, seven times seven years; and the time of the seven sabbaths of years shall be to you forty-nine years. 9 Then you shall cause the trumpet of the Jubilee to sound on the tenth day of the seventh month; on the Day of Atonement you shall make the trumpet to sound throughout all your land. 10 And you shall consecrate the fiftieth year, and proclaim liberty throughout all the land to all its inhabitants. It shall be a Jubilee for you; and each of you shall return to his possession, and each of you shall return to his family. 11 That fiftieth year shall be a Jubilee to you; in it you shall neither sow nor reap what grows of its own accord, nor gather the grapes of your untended vine. 12 For it is the Jubilee; it shall be holy to you; you shall eat its produce from the field.
13 ‘In this Year of Jubilee, each of you shall return to his possession. 14 And if you sell anything to your neighbor or buy from your neighbor’s hand, you shall not oppress one another. 15 According to the number of years after the Jubilee you shall buy from your neighbor, and according to the number of years of crops he shall sell to you. 16 According to the multitude of years you shall increase its price, and according to the fewer number of years you shall diminish its price; for he sells to you according to the number of the years of the crops. 17 Therefore you shall not oppress one another, but you shall fear your God; for I am the LORD your God.
Now by all means, if I am missing something here, those of you with more training please correct me. But it seems what is happening here is that the LORD is making the land inalienable. So if someone screws up and gets deep into debt, he might sell off part of his “inheritance,” but really all he is doing is renting it out for (at most) 50 years. And notice in the part I put in bold that the parcels of land are to be capitalized (presumably at a zero interest rate) according to the number of harvests remaining. This struck me as really cool, inasmuch as it is the foundation of my critique of the one-good model in capital & interest theory.
Now before you atheist libertarians go nuts, remember:
23 ‘The land shall not be sold permanently, for the land is Mine; for you are strangers and sojourners with Me.
So of course, if God doesn’t exist, then yes these rules are silly; that goes without saying. But if there really is a conscious Creator of the universe, then under standard libertarian law He clearly owns everything. And it’s perfectly within His rights to say, “I’m going to give you guys this property, but only on condition that…”
I guess I really don’t have too much to add, except to reiterate that this is a very surprising twist to the image of the big meanie God of the Old Testament. One might have expected He would say, “And if any man falls into debt, let him be cut off from his people even unto the fifth generation. He is a spendthrift.” But nope, He basically lets everyone start the game over every 50 years.
Last point: There are some clauses about permanently selling houses, later in the chapter. I.e. if you sell somebody a house, then a year later you lose the right to “redeem” it (and the land on which it stands), except for certain houses related to the priestly class. So the Year of Jubilee really seems to concentrate on the land as a source of permanent income.
This is a wonderful clip passed along by Robert K. I saw Louis CK live and he was really good. As the clip below demonstrates, he has a pretty cool moral code as far as comics go. (Notice how Conan can’t even proceed because he realizes Louis CK is on a roll and that his prepared remarks are much better than whatever “spontaneous” joke would come up from following the notes.)
Robert K also passes along this from Louis CK’s bio:
“Louis Szekely was born in Washington, D.C. to an economist father of Mexican Catholic and Hungarian-Jewish descent.” Wiki
“His father did not find a great deal of work in the United States as a Mexican economist.”
Folks, I see tons of these videos; I only pass along the most outrageous. And let’s get something straight: The point isn’t so much, “Whoa, there are some bad apples in the police industry!” because yeah, there are violent thugs in most lines of work. Out of a million cops, surely some will occasionally be caught on tape doing horrible things.
But that’s not the point; the point is the typical police department response to these “bad apples.” Whether it’s a cop drawing his gun and blowing away an incapacitated guy in front of a hundred witnesses, or a cop punching a guy handcuffed to a wheelchair, invariably the other officers either ignore it or help, and then their superiors completely minimize what happened when reporters ask them about it.
In contrast, imagine if, say, a road construction worker suddenly grabbed a pedestrian and started jackhammering the guy’s foot. Do you think (a) the other workers would rush to stop him and (b) his boss would fire him immediately and apologize profusely to the public? It’s even more obvious that those things would happen if it were a non-union crew working on a privately owned parking lot.
Anyway, here’s the rather depressing video, followed by commentary from William Grigg to give more of the story. (But watch the video first.)
In his official report, Schene did what police almost always do in such circumstances: He lied, in the serene (albeit misplaced) confidence that nobody would review the video from the holding cell, or at least take it seriously.
Schene claimed that the girl “provided resistance and failure to comply with instructions”; in fact, it was her compliance with instructions that precipitated the beating. The deputy wrote that his response was merely to “place” her in handcuffs, while omitting mention of kicking her in the stomach, beating her head against the wall, hitting her twice while she was prone and pinned down by two men twice her size, and then dragging her out by her hair.
He also reported that the shoe hurled by the detainee injured him so severely that he — fragile, delicate creature that he is — had to be treated at a nearby hospital. If that injury occurred, it was entirely self-inflicted: The video shows him banging his shin against the toilet as he attacked the terrified girl.
The video record documents that after the assault the girl, who understandably had difficulty breathing, required medical treatment. Schene described the treatment as necessary to deal with a “panic attack,” a dishonest way of describing the reaction of a traumatized teenage girl to being gang-beaten by two adult males.
The video was discovered weeks later by a detective assigned to investigate the auto theft. Schene has been charged with fourth-degree assault, a gross misdemeanor with a maximum penalty of one year in jail.
Several years ago, Schene shot and killed an unarmed, mentally disturbed man following a traffic stop that degenerated into a “knock-down, drag-out” fight. The shooting was ruled “justifiable.” Shortly after that incident, he was stopped for driving under the influence (apparently of prescription medication). He was given a deferred sentence and placed on probation, so that he could continue to bless the people of King County with his singular professionalism.
* Here’s a great Wenzel analysis of censorship (perhaps self-imposed) in financial reporting. At a New York conference recently Luo Ping, a director-general at the China Banking Regulatory Commission, said, “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.” It’s amazing to see what the major US media did with the original story.
* Another great post by Mario Rizzo, further proving that Keynes would not have been a (modern) Keynesian. By the 1940s, Keynes realized that massive bursts of government deficit spending wouldn’t fix the problem if the economy were still plagued by massive uncertainty about the future.
* Here Brad DeLong lends his support to the “Employee Free Choice Act.” Now far be it from me to oppose employees’ freedom–I guess the Republicans should introduce a “Was Slavery Really So Bad?” act–but if we’re trying to fight unemployment, I don’t see how, say, tripling the fines on employers (for infractions of labor laws regarding voting for unionization) is a move in the right direction. Incidentally, I speak from some (limited) experience: I was a member of the United Auto Workers for a few years. “What?!?!” you ask. You see, the UAW came in and unionized the graduate students at NYU, who were close to death from their onerous tasks of grading exams and such, while being paid to get PhDs. I’ll explain the hijinx that ensued during the UAW campaign in a future post.
I noted two weeks ago that the monetary base had dropped significantly in the new year, and wondered whether Bernanke had come to his senses. Looks like that’s a big fat negatory:
Wow, I can’t believe Ron Paul wrung it out of him. But at around 4:45, Bernanke says that if price inflation really heats up, he will concede that his approach to the financial crisis was wrong. I suggest watching the whole video to see the exact context of his daring statement. (HT2LRC)