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.
For centuries, people living in Western Civilization have been accumulating capital. They have not simply subsisted, and left the world the same as when they entered it. They have been creating more than they consume, passing on new wealth to their children. The Fed’s falling interest rate has slammed this process into reverse. It has put the entire economy into liquidation mode. It has forced people to consume their capital.
– Keith Weiner
Even so, with eight months of the fiscal year still to go and often large revisions to early borrowing estimates, it is too soon to conclude that the Chancellor is meeting his fiscal plans with room to spare and could therefore reduce the scale of the austerity measures set to hit the economy.
– Samuel Tombs, economist at Capital Economics, quote here.
Listen up you ‘tard, it would be a very good thing indeed if even more ‘austerity’ measures were “set to hit the economy”. ‘Austerity’, as you Keynesian fuckwits like to call the state spending slightly less of other people’s confiscated money, means the money in question gets used in the economy under private economic direction, rather than malinvested by the damn state.
Sometimes the Guardian surprises. This piece by David Crouch certainly came as an unwelcome surprise to some of the regular Guardian commentariat. Mr Crouch has written a very fair appraisal of the effects of rent control in Sweden: “Pitfalls of rent restraints: why Stockholm’s model has failed many.” He writes,
The result [of rent controls] is a thriving rental property black market, with bribes of as much as 100,000 kronor per room to obtain a direct contract, McCormac says. Many people sublet space in their rental apartments. When one tenant advertised a tiny closet last year for rent, there were many potential takers.
“It is almost impossible for immigrants and new arrivals to penetrate this market – it is all about who you know and how much money you have,” McCormac says. Students, young people and immigrants are consequently shut out, and ethnic and social segregation is increasing.
A commenter called “JohannesL” adds his own story:
When I moved to Helsinki in 1982, there was strict rent control in place and the tenant was well-protected, it was very difficult to get rid of even the tenant from hell. Because of this, there were no rental flats available at all, except the council flats, which were definitely not available for healthy non-addicted young men.
There were plenty of people living in tents and cardboard huts in the woods then. (I enrolled in the university just to get a room in a student dormitory).
In the early 90’s they got rid of the rent control which made renting a profitable business, with the result that suddenly there was an active and relatively abundant rental market, and has been ever since.
Sad but true. Rent control does not work. Also, it must be possible to get rid of your tenant in reasonable time. It breaks my bleeding lefty heart, but that’s just how it is.
Too good not to share. From the excellent Cafe Hayek blog.
Dear Mr. Trump:
You insist that we Americans are harmed whenever foreigners take actions that result in us getting more imports in exchange for our exports. I ask that you, with your own money, prove that you really believe the economic principle that lies at the root of your insistence.
If you’re correct that people are impoverished when they pay lower prices, and are enriched when they pay higher prices, then you can easily augment your personal fortune by demanding that the suppliers from whom you purchase the steel, cement, and other materials used to construct Trump buildings raise the prices they charge you for their merchandise. The higher they raise the prices they charge you to carry out your economic affairs, the wealthier you’ll become because you’ll be increasingly reluctant to purchase their offerings. In the limit they can charge you prices so high that you’ll buy nothing from them! How great would that be?! And the possibilities don’t end there! You can even further expand the Trump treasure by lowering the prices – even to $0 – that you charge your customers for hotel rooms and the other goods and services that you supply.
Just think of the additional wealth that will come your way by your being, as a buyer, dissuaded by high prices from purchasing goods and services from people not named ‘Donald Trump,’ and, as a seller, by the hordes of customers who will demand to consume almost limitless quantities of the wares that you make available at prices of $0.
Who knew that getting rich is so easy?!
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Russ Roberts’s EconTalk is a wonderful thing, I have been listening to it on and off for a few years now. One of the great things about it is that despite being a libertarian, Roberts is always happy to expose himself to new ideas and challenge his assumptions.
I have recently taken to listening to some of the earlier episodes and found myself listening to what happens when you have price gouging laws – or “anti-supply” laws as I prefer to call them.
His interviewee, Mike Munger, explained how there was a hurricane in Raleigh, North Carolina. The roads were blocked, there was no electricity and there was a shortage of ice.
Ice may not sound that important but it is. Not only does it help to preserve food but it also helps to preserve some medicines like, for instance, the insulin needed by diabetics.
Some “yahoos” – Munger’s term – saw an opportunity to make money. They got themselves a truck, loaded it with ice and some chainsaws and proceeded to drive towards the centre of Raleigh. If they found the road in front of them blocked they chopped up the fallen trees and carried on.
When they got to the centre of town they started selling the ice. Usually, ice sold for $2 a bag. They were selling it for $12. Very soon a queue appeared. Then the police arrived. Citing price-gouging laws they arrested the men and impounded the truck.
And here’s the kicker: as the truck was towed away the people in the queue applauded the police.
So, here we have an example where the gap between cause – the price gouging laws – and effect – the lack of supply – is instantaneous. And yet people still support the law.
Words fail me.