Not only is the capitalist system not responsible for the latest economic crisis, but all attempts to severely hamstring or regulate the market economy out of existence only succeeds in undermining the greatest engine of economic progress and prosperity known to mankind.
– Richard Ebeling
Uber has been hit with complaints that it’s running “an Objectivist LARP,” a live-action role playing of a capitalist utopia from an Ayn Rand novel. That’s pretty much what it is doing, and the results are awesome. And the benefits don’t stop with more drivers and lower rates. Uber is ploughing a fair portion of its profits into another wave of technological innovation — self-driving cars — that promises to offer even greater improvements in the future.
All of this should counter some of the despair about how to promote free markets, especially among urban elites who have been programmed by their college educations to embrace the rhetoric of the Left. Give them half a chance, and they will flock to capitalist innovations run according to the laws of the market.
The problem is that they don’t want to admit it. That’s where the euphemism “ride-sharing” comes in. To cover up the capitalistic nature of the activity, they tell themselves they’re “sharing” something that they are quite obviously paying for, and paying at market rates. Imagine what could be accomplished if they were just willing to drop the euphemisms and embrace the free market.
– Robert Tracinski
The ‘mining giant’ Glencore, a commodity trader/mining company formed in the heat of a commodity price boom a few years ago, appears to be encountering some difficulties, of the sort that you find when your debt exceeds the value of your assets. The current instar of this company formed as commodity prices ‘boomed’ (for no obvious reason it would seem, it was on the back of a rather well-noted ‘recession’), with a take-over of the Anglo-Swiss commodity trader/mining company Xstrata in May 2013. Now, however:
Hunter Hillcoat, an analyst at Investec, said: “Mining companies gorged themselves on cheap debt in a race to grow production following the Chinese stimulus that occurred in the wake of the great financial crisis.
“The consequences are only now coming home to roost, as mines take a long time to build.”
The CEO of Glencore, Mr Ivan Glasenberg, is certainly a very capable and impressive individual, and had, when younger, been a world-class race-walking athlete, barred from international competition by his South African citizenship. We were even fed stories of how, when he paid his income tax in the Swiss village he calls home, Rüschlikon, the locals got a rebate on their income tax (how distasteful, why not cut taxes for the man himself with a cap on total take, like the Isle of Man?)
Could it be perhaps that the monetary policy of the Federal Reserve, followed by others around the world, had created an illusion of value in the mining sector, that led to what (for now) might appear to be a prodigious mal-investment, as commodity prices fall?
Mr Glasenberg has followed the ‘price signals’ coming from the markets in building up the company that he manages. Now, however, the price signals may well have been a mirage. What if debt had not been ‘cheap’? Might this company now be in better shape? Wouldn’t almost any Austrian economist have said, back when this merger was being contemplated, that commodity prices were a bubble (and that they still are)? Would anyone involved, blessed with some foresight, economic knowledge and patience, have said ‘Let’s wait for the bust after the boom before deciding what to do next.‘.
(Of course, the boom in money hasn’t ended yet, it’s just that the prices have stopped moving up for now). Then again, why should those involved care?
Now consider that lesson right across the world, what might it look like if ‘cheap debt’ had never existed, but only debt that came, not from creating money from nothing in a fiat money system via Central Banks, but via borrowing others’ savings, which were not being spent elsewhere? Everything from the cost of a home’s rent or mortgage, to the cost of the metal in a nail on your wall, might be different. What might that world look and be like?
I came across this quote on Facebook by a person whom I won’t name – since it was on a closed group – and it was written in response to an item about tax as a cost. The idea that tax is a cost struck this person (who I don’t think was trolling, but just holding collectivist views) as bizarre:
“Taxes are redistributed throughout the economy. Taxes provide public services and government spending that consumes goods/services and pay public sector wages that fuel business success which in turn, creates further tax revenue. You’re mistaken – Tax is not a cost – It drives nigh on 50% of our entire economy! Right wingers continually fail to notice this incontrovertible economic fact.”
The idea that taxes cut into existing productive activity, and that as a cost, will be passed on to consumers (such as the financial transaction tax passing on costs to bank clients, shareholders, etc) doesn’t occur. No, taxes are part of that wonderful magic money tree. Why stop at a pathetic 50 per cent? Why not tax the lot? Give it all to the State, so those clever people can spray it around and make us richer, except of course the money has that odd way of disappearing from our paychecks……..Sorry, excuse me, time for my pills.
You do have to wonder what a century or more of compulsory education has wrought.
Today’s Sisyphus is China. More particularly, the Chinese authorities. They are determined to roll that boulder uphill. The path of least resistance for the boulder, however, is downward. Gravity, after all, is a bitch. The Chinese stock market is still comparatively young, and as stable as any toddler overwhelmed by parental expectations. With their boulder beset by the giant suck of gravity, China’s Sisyphus first cut rates, and trimmed banks’ reserve ratios.
The boulder continued to roll downhill.
– Tim Price
My mathematics teachers were far keener on us pupils showing our working than the final result of a calculation, to see if any error had intruded into our processes, and presumably because it was harder to cheat the working than a whispered or glanced answer. We now have, it seems, a rejection of paper money by ISIL or whatever it calls itself, the adoption of a gold dinar and silver, and a whole hour-long video explaining in English with arabic subtitles the thinking behind it, which is where the working starts to fall down, although I haven’t gone through the whole of it.
The problem of paper money is, of course, cited (wrongly) as the fault of capitalism and the Jews, but they do take a dig at the Federal Reserve, and what they term ‘America’s capitalist system of enslavement‘.
What a terrible prospect would be a fatwa on Keynes and his followers.
Seen today on Facebook:
In olden times, armies would lay siege to cities to cut them off from outside trade. The strategy forced the city to “buy local” until it was so prosperous that everyone was too rich and lazy to fight.
— Rocco Stanzione
In a matter of months, this word, blockchain, has gone viral on trading floors and in the executive suites of banks and brokerages on both sides of the Atlantic. You can’t attend a finance conference these days without hearing it mentioned on a panel or at a reception or even in the loo. At a recent blockchain confab in London’s hip East End, the host asked if there were any bankers in the room. More than half the audience members, all dressed in suits, raised their hands.
Okay, what the F**k is a blockchain (one word or two?), I hear you cry?
A block chain is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency’s block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history. (Wikipedia.)
Here is a book by Dominic Frisby, whom I have met and is known to Samizdata contributors such as Brian Micklethwait, about Bitcoin, and the blockchain system. There is now quite a literature about Bitcoin, some of it with a strong “hell with fiat money” sort of bent, others with a more agnostic approach. Here is one such example by Paul Vigna. Going onto Amazon or other search engines for such books brings up a lot of hits.
More broadly, the point of the article to which I linked at the top here is that very serious financial industry figures are now piling in; sure, some of them will have problems, and the history of how some people get carried away is instructive. But just as instructive is that, even after a period of difficulty, such as when the dotcom boom went sour, we were left not just with a lot of garish stories of excess, but some valuable business models that worked. And that, I suspect, will be the story around Bitcoin – not that this will be the one to succeed, but that the technology surrounding it will have a major change on how finance and other activity happens.
Seriously was anyone so credulous that they did not see this coming? To expect Cameron to stand his ground demanding the return of the opt out abandoned by Tony Blair, is like expecting a jellyfish to lift weights.
But at least the tech sector must be happy with Cameron, as he has promised to increase incentives for UK businesses to invest in more labour saving technologies, thereby increasing productivity and reducing total hours of employment needed, or to just automating certain jobs away entirely.
In fact, the only real value of Fischer’s pretentious bloviation was that it was a reminder that the financial system of the world is in thrall to a tiny, insuperably arrogant posse of Keynesian academics who have invented from whole cloth a monetary theory of plenary control. They have effectively ended free market capitalism in the financial system and beyond and made democratic fiscal governance essentially irrelevant.
– David Stockman
So the idea this letter represents mainstream economics must be challenged. When Sky is reporting it without an alternative viewpoint, it can mislead the public. But this also shows something interesting about the political left. People across the political spectrum like to appeal to the authority of “experts” to improve credibility. But for the left, this is crucial. Unlike supporters of markets, left-wing interventionists believe experts can direct economic activity for us. Building up the idea that “experts” support these interventions and believe they work is therefore of critical importance to obtaining public acceptance.
– Ryan Bourne, Institute of Economic Affairs.
It would be nice if the world as a whole was a less awful place. The average country is, after all, a democratically elected kleptocracy with a desperately poor population. (For evidence, see India or Haiti or Nigeria or Honduras.)
However, sustained progress worldwide, at least if we’re going to run legal systems based on popular votes instead of more rational methods, depends on most of the world understanding basic economics. The recent rise of Bernie Sanders and Donald Trump in U.S. polling demonstrates that even the bulk of people in the U.S. have no understanding of the barest rudiments of economics.
H. L. Mencken once said “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” However, the argument of most statists, on both the left and the right, is that we are our brother’s keepers, that the better off are obligated to run the lives of those who are not so well off, and this includes the more educated running the lives of the less educated.
If you don’t believe me, look around you: we are told that people cannot be trusted to figure out on their own if they should take intoxicating substances or if they should save for retirement or how they should educate their children — all those decisions must be made by the intellectual elite via the state. This is meant quite literally. Drugs must not be legalized because people can’t make their own judgements about taking them, or so we are told. People in the U.S. may not be allowed to privately manage the 14% of their income that goes to government “pensions” — savings would be an awful idea, since they’d just be duped out of their cash by investment firms, so the state must handle that money for them via Social Security. Voucher systems where children go to private schools selected by their parents are unacceptable, only a state run public education system run by the teaching elite is acceptable.
We could go down the list, everything from negotiating salaries to deciding if they want to eat raw milk cheeses. If people were allowed to run their own lives, they would make bad choices, and so it is not merely right but necessary that others, among the elite, should make their choices for them.
So, the smarter must, according to statism, run the lives of the less intelligent and educated, but at the same time it is obvious that even most of the educated in developed countries are incapable of even understanding comparative advantage or supply and demand curves. They are, when it comes to economic education, mere children, unable to help themselves.
The inevitable conclusion, therefore, is that statist morality is not compatible with democracy, but only with a dictatorship run by libertarians.
Note that this isn’t the conclusion I would come to myself, as I don’t share this moral belief system. I don’t personally want to be the dictator — I have no interest in running everyone’s life. However, it is the conclusion that believers in the state, and especially believers in programs like Social Security and public education, must logically come to — applying that morality, a reasonable outcome can only be expected if I and my colleagues are made absolute rulers. Indeed, according to those moral claims, this is not merely a superior solution but is actually morally required.
And yes, I’m trolling you, but at the same time I’m completely serious about what the statist belief system implies.