Blogroll Category: Current Affairs

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Behind the Scenes at the Central Banks that Created our Modern Monetary System

Mises Institute - 2 hours 43 min ago

[From the Summer 2018 Quarterly Journal of Austrian Economics. A review of How Global Currencies Work: Past, Present, and Future by Barry Eichengreen, Arnaud Mehl, and Livia Chitu, Princeton, N.J.: Princeton University Press, 2018, 250 pp.]

The present volume is an engaging and intriguing account of how global currencies, such as British sterling and the U.S. dollar, have risen to global dominance in the international monetary arena, and how currencies such as the Chinese renminbi, for example, could follow in their footsteps. Divided into twelve chapters, the work focuses primarily on the international monetary history of the 20th century, complemented by a comparatively brief account of the 19th and 21st centuries. The narrower focus of the discussion in these chapters—and most of the data supplied in each chapter’s appendices—concerns the composition of foreign reserves, i.e. the balance between holdings of pounds and dollars, and later of yen, euro, and renminbi.

From this, the authors propose to tease out a few new factual discoveries and some implications for the future of the international monetary system. More precisely, they disavow the traditional theoretical view which argues that international currency status resembles a natural monopoly that arises organically from the benefits of using the currency of the most economically (commercially and financially) powerful country in international economic transactions, i.e. a monopoly due to network returns (p. 4), and winner-takes-all and lock-in effects.

Because, argue the authors, this ‘old’ model is not supported by much of the data from the 20th century, they propose a ‘new’ view arguing that multiple currencies can be used concomitantly on an international scale, such as the pound sterling and the dollar during the 1920s. These currencies played “consequential international roles” (p. 11) demonstrating that inertia and persistence due to network effects in international transactions are not as strong as previously thought. Their updated theoretical framework is borrowed from the process of technological development, where new technologies are adopted gradually by users and grow exponentially, thus using an analogy between the workings of international currencies and those of computer operating systems.

Eichengreen, Mehl and Chitu’s discussion also seems to revolve around the interplay between the political sphere and national monetary policies on an international scale, but this insight remains latent throughout their analysis. The authors focus rather on the technical aspects of international currency status and deliberately treat political and monetary matters as separate—in parts dismissing political matters completely.

Chapters 2, 3, and 4 contain a factually rich historical narrative of the origin and development of the holding of foreign reserves, particularly before and after the First World War. Scattered throughout are little gems useful to any scholar of monetary theory, like the fact that “foreign exchange reserves had accounted for less than 10 percent of total reserves in 1880, [but] accounted for nearly 15 percent in 1913” (p. 17).

In Chapter 4 the authors provide evidence of the currency composition of foreign exchange reserves in the 1920s and 1930s that best underpin their ‘new’ view: they find that the dollar overtook sterling as the international reserve currency in the mid-1920s, and not in the 1930s to 1940s as previously thought by monetary scholars. This proves that the sterling and the dollar shared, at the same time, the status of international currency. Contrary to the traditional view, then, international currency status is not subject to a natural monopoly.

To further explain how this came about, the authors show in subsequent chapters the great intervention efforts of the U.S. Federal Reserve to ‘support the market between 1917 and 1937’ (p. 69). The Fed’s heavy-handed approach to trade credit (chapter 5) and international bond markets (chapter 6) propelled the dollar to international currency status over a short period before its collapse during the Great Depression. However—and again disproving the theoretical model—the dollar recovered its status around the time of the Second World War and completely surpassed the British sterling, showing that the status of international currency is, once lost, not lost forever. Rather, it can be regained through the coordinated efforts of a powerful central bank, which can heavily benefit from engineering this rise to global currency status. Moreover, the authors argue, other countries benefit as well from not relying on one global lender of last resort, but rather on a network of lenders. Chapters 9, 10, and 11 discuss along the very same lines the rise and fall of the yen and the euro (with the euro crisis), and the future prospects of the Chinese renminbi, respectively.

Despite the great amount of historical information contained in this book, and the ample new data available to the authors, the volume falls short of the promise in its title. The narrative does not actually show how global currencies work in a comprehensive manner, but only how the global ascension of a currency can be traced back to the behind-the-scenes machinations of a central bank. As such, the subject could have been—and was—satisfactorily treated in a half dozen journal articles published by the authors between 2009 and 2016 (p. xv).

Nevertheless, it is still interesting to note that the geopolitical history of the world can be read through the history of monetary policy, or perhaps, that the history of monetary policy is mirrored in the history of geopolitics. As the authors themselves explain, the dominance of one country’s currency in international exchanges can indicate the “singular leverage” (p. 3) of that country’s central bank over international financial relations and international politics. More importantly, the reverse is also true: the dominance of one country in international politics is a good indicator of the international status of its currency throughout history.

However, because the authors choose to separate the political causes and implications of monetary policies from their economic aspects, the book ultimately provides a rather hesitant and unassuming analysis that makes it feel lackluster. Two questions arise that remain unanswered: Why do central banks benefit from their currency becoming global, if not by preventing domestic inflation from reflecting in their exchange rate and foreign reserves? And why do other countries benefit from having multiple lenders of last resort (multiple reserve currencies), if not by accomplishing the same disguise? Without an answer to these questions, or even an acknowledgment of their existence, the book appears to be a collection of great insights whose potential remains unrealized.

Let me briefly illustrate this by contrasting Eichengreen, Mehl, and Chitu’s analysis of the momentous change in international monetary relations at the Genoa Conference in 1922 with the one put forward by Mises and Rothbard.

The authors discuss in chapter 3 (From Jekyll Island to Genoa) the leading countries’ efforts to restore the gold standard in the 1920s whilst avoiding the deflationary repercussions following the period of great inflation during the First World War. According to the report of the financial commission,

the Genoa resolutions called for negotiating a convention based on the gold-exchange standard with a view to “preventing undue fluctuations in the purchasing power of gold”… The idea was to create an environment in which ‘credit will be regulated… with a view to maintaining the currencies at par with one another (pp. 38–39).

Eichengreen, Mehl and Chitu view this solely as an open effort of Great Britain to recover the lost dominance of the pound sterling, and the otherwise innocent desire to renounce the golden fetters of the pre-WWI gold standard. While discussing monetary competition between London and New York, they fail to pinpoint the nature of this competition, and avoid answering the question whether the new reserve system was “badly designed or badly managed” (p. 41).

In the system’s design lurked a fateful goal: the continued inflation of money supplies. Coordination efforts among central monetary authorities in reaching this goal was a first step toward abandoning the commodity money system. While the authors only seem to skirt around the issue, Rothbard (2010, pp. 94–95) explicitly argued that Great Britain wanted to establish

a new international monetary order which would induce or coerce other governments into inflating or into going back to gold at overvalued pars for their own currencies, thus crippling their own exports and subsidizing imports from Britain. This is precisely what Britain did, as it led the way, at the Genoa Conference of 1922, in creating a new international monetary order, the gold-exchange standard.

Mises had explained this need for policy coordination in a similar way:

Various governments went off the gold standard because they were eager to make domestic prices and wages rise above the world market level, and because they wanted to stimulate exports and to hinder imports. Stability of foreign exchange rates was in their eyes a mischief, not a blessing (2010a, p. 252).

If the various governments and central banks do not all act in the same way, if some banks or governments go a little farther than the others… those who expand [the money supply] more are forced to return to the market rate of interest in order to preserve their solvency through liquidity; they want to prevent funds from being withdrawn from their country; they do not want to see their reserves in… foreign money dwindling (Mises, 2010b, p. 77).

The crucial issue here, therefore, is not the prominence of one currency or another, but that this prominence was engineered to speed up the renunciation of the gold standard, and greatly enlarge the freedom of all central banks to inflate money supplies. The Genoa Conference had thus paved the way for the next steps: the Bretton-Woods conference of 1944 and the “closing of the gold window” in 1971. This process did not unfold without problems, but it created the auspicious environment for inter-governmental monetary agreements, and allowed the U.S. and other powerful nations to employ a “policy of benign neglect toward the international monetary consequences of [their] actions” (Rothbard, 2010, p. 101). This further removed many obstacles to creating “the ideal condition for unlimited inflation” (Rothbard, 2009, p. 1018)—a system mimicking a global fiat currency as closely as possible.

In this light, the desire to engineer global currency status for one nation’s currency is open to another, more somber interpretation, which highlights the pressing dangers of international fiat money. According to Mises (2010b, p. 254):

Under a system of world inflation or world credit expansion every nation will be eager to belong to the class of gainers and not to that of the losers. It will ask for as much as possible of the additional quantity of paper money or credit for its own country.

It is not usual in a book review to criticize the authors for failing to achieve something they did not explicitly set out to accomplish. And yet, How Global Currencies Work: Past, Present, and Future is wanting in both its depth and breadth of analysis. Nonetheless, the abundance of data on the composition of foreign exchange reserves the authors make available is impressive, and their accomplishment in this regard must be commended. The book is easy to read, even though largely technical in nature and much too narrow in its focus.

I remain hopeful that this project will be followed by another, more extensive investigation into the workings of global currencies. An alternative analysis of this data, focused on the differences in kind between commodity and paper money, would provide a much deeper and richer illustration of how global fiat currencies are made to work to serve the political purposes of one powerful nation or another. This would indeed illuminate much of the dark history of monetary policy over the last three centuries.

Categories: Current Affairs

How Gun Control Became an Instrument of Tyranny in Venezuela

Mises Institute - 2 hours 43 min ago

Is Venezuela paying the price for adopting gun control?

The shocking nature of Venezuela’s economic collapse has been covered ad nauseam. However, one aspect of the Venezuelan crisis that does not receive much coverage is the country’s gun control regime.

Fox News recently published an excellent article highlighting Venezuelan citizens’ regret over the gun control policies the Venezuelan government has implemented since 2012. Naturally, this regret is warranted. The Venezuelan government is among the most tyrannical in the world, with a proven track record of violating basic civil liberties such as free speech, debasing its national currency, confiscating private property, and creating economic controls that destroy the country’s productivity.

Elections have proven to be useless, as they’ve been mired with corruption and charges of government tampering. For many, taking up arms is the only option left for the country to shake off its tyrannical government. However, the Venezuelan government has done well to prevent an uprising by passing draconian gun control which will be detailed below.

Venezuela’s Lack of a Second Amendment Tradition

Historically speaking, Venezuela has never had a robust history of private gun ownership like that of the United States. The absence of a Second Amendment or check on the federal government’s monopoly on firearm usage is a vestige of its colonial legacy. Its Spanish colonial overlords did not possess a political culture of civilian firearms ownership. It was mostly the military and the landed nobility that held firearms throughout the colonial era. This tradition has persisted even after Latin American countries broke away from Spain in the 1820s.

Fast forward to the 20th century, Venezuela began its first attempts to modernize its gun policy. In 1939, the Venezuelan government enacted the Law on Arms and Explosives (Ley de Armas y Explosivos) which established the Venezuelan state’s monopoly on firearm usage. The state was the only entity that could possess “weapons of war” which include: canons, rifles, mortars, machine guns, sub-machine guns, carbines, pistols, and revolvers. Civilians could only possess .22 rifles and shotguns, and in certain circumstances could possess handguns provided that they obtained a license.

Progressive Ideas Role in Consolidating Venezuelan Statism

Ideas matter.

It’s no surprise that Venezuela embarked on this gun control escapade during the late 1930s. This was a period where statism was in vogue throughout the world as witnessed with the rise of Fascism and Communism in Europe. Even during the New Deal era, the US initiated its first foray into federal gun control with the passage of the National Firearms Act (NFA) of 1934. Despite its anti-gun policies, Venezuela at least maintained some semblance of limited government in economic affairs up until the 1970s.

However, the nationalization of its oil industry in the 1970s and the subsequent economic downturns of the 1980s and 1990s shook up Venezuela’s institutional foundations. The country was then ripe for a demagogic takeover.

Hugo Chavez’s Anti-Gun Agenda

When socialist strongman Hugo Chávez took power, not only was Venezuela’s previous gun control order kept intact, but it was also expanded upon. Article 324 of Venezuela’s current Constitution (the 26th in its history) maintained the State’s previous monopoly on firearms and placed the National Armed Forces of Venezuela as the entity in charge of regulating all firearms in Venezuela.

In 2002, the Venezuelan government passed the first version of the Control of Arms, Munitions and Disarmament Law, reinforcing the state’s iron grip on firearms in Venezuela. A decade later, the law was modified to enhance the scope of gun control and gave the Venezuelan Armed Forces exclusive power to control, register, and potentially confiscate firearms.

Under the banner of fighting crime, Venezuela implemented a ban on the sale of firearms and ammo in 2012. Like other gun bans, this proved futile in fighting crime. According to the Venezuelan Violence Observatory’s statistics, Venezuela’s murder rate increased from 73 murders per 100,000 people in 2012 to 91.8 murders per 100,000 people in 2016.

Gun Control: Turning Citizens into Disarmed Subjects

Venezuelans are now defenseless against a government that runs roughshod over their civil liberties, while also destroying their economic livelihood. As if it weren’t enough, everyday Venezuelans must put up with rampant crime and the constant threat of colectivos, Venezuela’s infamous pro-government paramilitary units.

Although gun control in and of itself does not automatically lead to tyranny, historical events remind us that well-intentioned interventions from previous governments can be used by the next round of political operatives for nefarious purposes. Firearms bans, confiscation, and registration give the state a virtual monopoly on violence, thus turning its citizens into defenseless subjects. When the rubber meets the road, a disarmed populace has no chance against a well-armed Leviathan.

Foreigners may scoff at the US’s Second Amendment, but it is one of the most far-reaching rights the framers of the Constitution made sure to protect. Political turmoil can emerge at any time and citizens must have a final means of protecting themselves in the case that all institutional options have been exhausted. 

Categories: Current Affairs

Privatise your Personality?

Adam Smith Institute - 3 hours 8 min ago

You may be reading this on your way to lunch at the Ritz, on the way to school or even in your parent’s basement like the true libertarian you are (and secretly wished everyone else was too). Whichever caricature you empathise with, there are some curiosities which unite us all. If you have ever wondered why vegans always look like vegans and why it’s always people on the centre-right that like double breasted jackets this blog post is for you.

Only kidding; I am not quite yet qualified to answer these great enigmas. Nonetheless, this blog post aims to explore why such manifestations of personality are so crucial and how they became possible. There are debts we owe to the free market for the idiosyncrasies and interests which culminate in ‘personality’ as we understand it today. Your ‘usual’ at Costa, cheeky Netflix binges and new sick obsession with the Adam Smith Institute’s Twitter page are dispositions impossible without the material wealth and choices available to us at present.

Perhaps there exists a universe where - like ants - humans are content with intrinsic values, goals and biological imperatives governing their lives. Apparently some would even like for this to be the case today, but humans in the real world live their lives in a system of trial and error which goes hand in hand with economic and personal freedom. Whilst it is often claimed that it is the Humanities and Arts, rather than the Sciences, which make the human condition their sole purpose of study, human action often operates through experiment in an intriguingly scientific way. The difference being that unlike ‘hard sciences’ such as physics we are both the subject of study and the executors of the experiment.

Just as how a good scientist would test as many independent variables as possible to examine how different factors affect the dependent variable, most people live best when they have as many choices as possible; this is the point of the system of trial and error which leads to progress. It results in choices being made either for us or us making choices we don’t fully endorse because there is little to choose from. Whilst there is not objective truth regarding human action as there is with any hard science, the element of choice allows for an almost scientific method of hypothesising, testing, and concluding; The end result is learning how to better oneself and our decisions each time. Thus it is only through increasing choices - freedom - can man fully express his personality how he wishes.

The freedom to make such choices, develop interests, and adopt attitudes stems from the abundant and (hopefully) ever-increasing time and resources available today.  Nobody can become an art history enthusiast in a primitive society where much of everyone's time is spent harvesting (not even running through) fields of wheat. Specialisation allows us to develop interests and the free time to rolick aimlessly around Christmas markets without worrying that the next harvest leaves us with no orange for the yule log. What’s more, being able to pick up the ‘Vikings’ box set at less than a day’s work at minimum wage (despite how nauseating the historical inaccuracies are) is testament to how well economic and social development correspond with each other.

Personalities are often shaped by relationships to the people around us, not just interests and material possessions. Capitalism’s ‘great enrichment’ was the catalyst to urbanisation, leading to communities in which individuals may have greater choice in their company rather than the all-too-familiar primary school situation where you realise your friends were only friends out of proximity. The theory of Dunbar’s number may still apply to cities with populations outnumbering countries, such as London. Nonetheless, a greater pool of people means it is more likely that one would find those that make them tick, those they love, and  - if they’re really lucky - those they loathe. Though in a city, of course, you can get away from those you loathe: it is much harder to do so in a primitive society where you are bound by mundane endless tasks just to maintain yourself.  

In Scandinavia, countries lauded for their levels of equality and wealth, individuals are better able to make choices they want, and the outcomes are often surprising. This has been dubbed the ‘Nordic paradox’ whereby countries such as Albania and Algeria have a greater percentage of women amongst their STEM graduates than more egalitarian societies such as Finland, Norway and Sweden. When individuals are not constrained by the need to choose a relatively high-paid STEM career, they are able to study and develop interests in fields they genuinely find more attractive.

This is merely a microcosm of the way wealth creation has created a developed society in which man is able to flourish through specialisation, and most importantly choice.

Finally, probably the best answer (fit for civilised discourse) you will get on why vegans always look like vegans and why it’s always people on the centre-right that like double breasted jackets is this: because they choose to.

Categories: Current Affairs

The establishment will have its slice of economic activity

Adam Smith Institute - 4 hours 7 min ago

Facebook is to “invest” $300 million in local journalism. There are a number of possible ways of looking at this. One might be to applaud a rich corporation’s investment in such necessary infrastructure of a good society. Another might be - and rather closer to our own opinion - that this is the feasance that is being extracted by the current establishment. There’s lots of economic activity there after all, so why shouldn’t they have some of it?

Facebook is investing $300m (£233m) in local journalism projects amid mounting criticism over fake news on its platform and its role in the demise of regional newspapers.

The company said it would be investing in local reporters and newsrooms as well as helping media organisations to create sustainable business models.

It said the three-year project would be part of its efforts to "fight fake news, misinformation, and low quality news on Facebook", and said there was an "opportunity and a responsibility, to help local news organisations grow and thrive".

News of the investment comes just days after Facebook unveiled a new fact-checking service in the UK to deal with disinformation on its site, as it struggles to cope with the onslaught of accounts posting such content. The announcement is among the first initiatives since Sir Nick Clegg, Britain's former deputy prime minister, joined Facebook as head of global affairs and communications tasked with repairing the company's reputation.

One could imagine - and of course this is just an imagining - that political process looking at the irruption onto the stage of this new technology, social media, and there being a certain amount of muttering of nice business you’ve got there, shame if something happened to it. And thus a rent is extracted from that activity to be spent upon what that political process thinks should be spent upon.

The actual merit of the activity is an irrelevance here. Politics is, after all, the scramble to be able to command the resources and efforts of others without consideration of that pesky merit.

Yes, of course, this is all much too cynical. Couldn’t possibly be true that a company threatened with regulation by all sides hires an ex-politician to devise the pay off. Just unthinkable, the very idea. Such a pity that there are some so debased as to think ill of all concerned here.

Categories: Current Affairs

Cape Town archbishop’s statement on Zululand resignation

Anglican Ink - Wed, 16/01/2019 - 18:41

Archbishop Thabo Makgoba will seek the input of the next meeting of the Synod of Bishops in response to the recent resignation of the Right Rev Monument Makhanya, the Bishop of Zululand.

He said this in a statement issued after the Johannesburg Sunday Times published a report revealing that Bishop Makhanya had resigned after a former deacon in his Diocese had laid a complaint of sexual misconduct against him.

The Archbishop’s statement said:

“I very much regret that someone appears to have relayed the content of Bishop Monument’s ad clerum (a letter to his clergy) to the press.

“As I explained to the newspaper concerned, as soon as the complainant in this matter was willing to lodge a written statement, we followed our Province’s guidelines for dealing with such allegations.

“Bishop Makhanya resigned during the process which followed, which is still ongoing. I have consulted with the Province’s Safe Church Network and legal advisers and will seek the input of the next meeting of the Synod of Bishops on the way forward.”

The post Cape Town archbishop’s statement on Zululand resignation appeared first on Anglican Ink © 2019.

The Battle of the Ironclads, Part 3: Inventing the <i>Monitor</i>

Mises Institute - Wed, 16/01/2019 - 15:15
Season 3, Episode 40 

The Union’s response to the Confederate ironclad was an iron warship of its own. Unlike the Merrimack, the USS Monitor was a tremendous technological innovation, nearly single-handedly designed by a Swedish engineer named John Ericsson. This episode details his incredible life and the many failures that would culminate in the successful Monitor that would make him famous.

Chris Calton recounts the controversial history of the Civil War. You may support this podcast financially at Subscribe today at Spotify, Google PlayiTunes, SoundCloud, Stitcher, or via RSS.

Categories: Current Affairs

The Crisis of Argentina and How to Reduce Country Risk

Mises Institute - Wed, 16/01/2019 - 15:15

Argentina maintains a high country risk. In fact,  it is currently the second highest in Latin America and the third of the emerging countries if we include Turkey.

What is the country risk? It is the spread between the yield of the sovereign bond of a nation compared with the United States Treasury bonds, the lowest risk asset. Investors demand higher-yielding bonds due to the risk of the issuer’s economy, to compensate for the currency and solvency risk.

Argentina’s country risk increased by 130% in 2018 due to delayed reforms, constant devaluation and loss of foreign exchange reserves. The country risk has fallen significantly from its high of 817 basis points to the current 706. However, it remains the second highest in the region after Venezuela.

The reasons why a rich and high-potential country like Argentina has a higher country risk than allegedly weaker developing countries are easy to explain:

  • The countries with the highest country risk are also those that have abused most of the financing of public spending by the central bank through the printing of currency.
  • Argentina has a higher country risk than apparently more fragile economies due to the constant refusal on the part of the successive governments to adopt a prudent monetary policy and to defend the purchasing power of the currency. When inflation rises and the currency is devalued due to this misguided monetary policy, the purchasing power of that currency is destroyed, and the country’s investor security erodes.

Risk increases because investors perceive that no relevant structural reforms are being carried out, and this limits potential growth and increases the risk of inflation and default. The default probability increases with the downward spiral of printing money to finance increasing public and extractive spending, triggering inflation and raising taxes, which leads to lower growth, less investment and more displacement of the private sector.

That is the reason why countries with a relatively low debt to GDP ratio but huge monetary imbalances fail before countries with high debt to GDP but a prudent monetary policy that does not directly finance public spending. It is not the same to create a transmission mechanism of monetary policy such as quantitative easing — with all its flaws — which curbs inflationary risk by generating firewalls in the transmission process because it is done through credit, unlike directly prints money to finance current spending. The second destroys the economy, it is a direct transfer of wealth from the savers and salaries to the government and makes confidence in the currency disappear. Argentine citizens know this well.

Country risk must be contained not only because it leads the state to finance itself at a higher cost and with less demand, but because it drags the financing capacity of the real economy, companies, and families.

It is not just bad for public finances. If yield soars in the asset that supposedly has less risk of the nation, the sovereign bond, it leads to a whole chain of negative impacts on the financing of the real economy, the cost of financing of companies and families rises much more and credit dries up.

The only way that Argentina will erase its unnecessarily high country risk is by cutting bloated public spending, lowering taxes, attracting investment and improving ease of doing business. But more importantly, it needs to stop financing public spending by printing pesos once and for all.

In 2018 Argentina was among the four countries in the world with the highest inflation, below Venezuela, South Sudan, and Iran, according to the International Monetary Fund.

Argentina is also among the countries with the highest tax wedge, in fact, the highest total tax burden in the world, according to the World Economic Forum. The total tax rate absorbs all corporate profits.

In the index of economic freedom published by the Heritage Foundation, Argentina has improved; but it continues to appear in one of the worst positions, number 144 of a total of 180 countries. We must emphasize that the Nordic countries, which are used constantly in television debates in Argentina as an example, are among the countries with the greatest economic freedom, ranking between 12 (Denmark) and 26 (Finland). It is worth remembering this factor when talking about prosperity and redistribution. There is no social policy if economic liberty and prosperity are not the primary objectives.

Similarly, in the Doing Business index — which measures the ease of creating jobs and companies — Argentina appears in a slightly improved position with respect to 2017, but far below where it should be. Argentina occupies a very poor position, 117 of 190 countries. Again, the Nordic countries rank between number 3 and 13, at the head of the table.

High inflation, high taxes, low economic freedom and very high burdens on investment. Four factors that worsened significantly in the Cristina Fernández de Kirchner tenure and that the Macri administration has not done enough to improve.

Only eliminating the unbridled printing of pesos from the Central Bank and the useless political spending financed with the rising money supply, Argentina would climb at least twenty positions in these indexes. If the tax and bureaucratic burden were reduced to levels similar to those of the surrounding countries and the OECD average, Argentina would be — as it deserves — an international center of capital attraction and global investment and one of the countries with more solid growth. Only by cutting the impoverishing inflation, the crazy printing of pesos and reducing taxation and bureaucracy, Argentina would climb to the Top 50 in the aforementioned rankings, quickly approaching Chile and Costa Rica, and shortening the enormous distance with France, the United Kingdom or the Netherlands. This would reduce the country risk to at least region average levels.

A public expenditure that already reaches more than 45% of GDP; and denying the devastating effect of the predatory monetary policy lead Argentina to constant and uninterrupted currency crises, unbridled inflation and to discourage long-term investment and prudent saving. The imprudent use of the national currency as a subterfuge to cover enormous internal imbalances has only led to the fact that, again, it has lost 51% of its value in 2018 and that inflation continues to undermine the country’s potential.

Argentina has all the ingredients to be a global leading economy. But the erroneous monetary policy, the unbridled political spending and the extractive bureaucracy and taxation make the country a promise that always seems to be a disappointment because of internal factors.

Originally published at

Categories: Current Affairs

The historical background to the John Shepherd controversy over the physical resurrection of Christ

Anglican Ink - Wed, 16/01/2019 - 14:45

Archbishop Justin Welby has appointed as his “ambassador” to the Vatican a priest who denies the bodily resurrection and empty tomb of Christ. The Rev Dr John Shepherd, interim director of the Anglican Centre in Rome, said in an Easter message that the resurrection of Jesus “ought not to be seen in physical terms but as a new spiritual reality”.

This YouTube offers an historical background to this controvercy by reflecting on previous debates surrounding the resurrection of Jesus in the Church of England. Discussion includes: 1. Bishop Hensley Henson (1912) 2. Archbishop William Temple (1910) 3. Bishop Ernest Barnes (1947) 4. Canon Geoffrey Lampe (1966) 5. Bishop Hugh Montefiore (1954) 6. The Myth of God Incarnate Debate (1977) 7. Bishop David Jenkins (1984) 8. Dr. John Shepherd (2019).

Presentation delivered by Dr. Frederik Mulder

The post The historical background to the John Shepherd controversy over the physical resurrection of Christ appeared first on Anglican Ink © 2019.


Anglican Ink - Wed, 16/01/2019 - 14:14

The Empty Tomb stands at the head of the Easter season as a remembrance that the Resurrection life – Jesus’ and ours – can be entered only by the gate of the body’s death.

Jesus did not just “enter into the larger life.” No, at 3pm Friday, Jesus’ body was limp and lifeless, and it lay in the tomb all weekend long. His spirit did not fly away into heaven but descended into hell, entering into the twilight world of powers from whose bourne no traveller has ever returned.

If Jesus Christ is truly risen from the dead, He entered back into life through the gate of the Empty Tomb, body and all. It was the Creator God, the Mind behind Matter, who worked a new creative act in raising His Son. The American author John Updike captures the radicality of this event when he writes:

Make no mistake: if He rose at all
it was His body;
if the cells’ dissolution did not reverse, the molecules
reknit, the amino acids rekindle,
the Church will fall.

The Risen Jesus was fully human and more. His Easter body was raised to the umpteenth power, the power of deity. It had first taken form in the Virgin’s womb when the Word became flesh. Now the Word was perfected in Joseph’s tomb, from whence He emerged first-born from the dead, in whom the fullness of the Godhead dwells bodily (Colossians 1:18; 2:9).

At the end of the movie Titanic, the now-aged heroine and survivor of the wreck falls asleep and dreams she meets her teenage lover Jack and all the other lost passengers in the grand ballroom of the ship. Is she dreaming, or has she died and gone to heaven?

The hope we Christians have for our bodies is not a dream, nor is it made of celluloid. We look for the resurrection of our bodies, “weighty with Max Planck’s quanta,” as Updike puts it. If this is not true, then Christ is not risen, and the Church will fall. Deservedly.

But Christ is risen, the Tomb was empty, the sacrament of the material Body of our Saviour and our sure and certain hope of life to come.

The post THE EMPTY TOMB: SACRAMENT OF THE MATERIAL GOD appeared first on Anglican Ink © 2019.

Isn't the taxpayer doing well out of Capita's Army contract

Adam Smith Institute - Wed, 16/01/2019 - 07:01

We’re told that Capita’s contract with the Army to provide recruitment services will never make the company a profit. They were chasing revenue, not that profit, so they underbid. This, although few to none will care to note this, means that the taxpayer is doing very well out of the arrangement.

Note what we’re not saying, that Capita is performing well, or that all is ticketty boo. Our point is a much simpler and more basic one. If Capita is being paid less than it costs to provide the service - those costs obviously including the cost of capital - then that’s a transfer from the company to taxpayers. For us taxpayers are getting those services at less than they cost to produce:

Capita will never make money on the troubled £495m contract it signed to recruit soldiers for the British Army, MPs have been told.

The boss of the outsourcing company admitted Capita was “chasing revenue” when it took on the programme in 2012, and which has failed to provide enough soldiers, leaving the Army dangerously under strength.

Again, we’re not saying that it’s a good contract being performed well. We’re only on about that one financial aspect. If the private sector is so competitive that profits are competed away then that’s a benefit to taxpayers, not a problem for us all. For any loss, any price less than covering full economic costs, is a transfer from the capitalist owners of the providers to said taxpayers. That’s a bargain.

Categories: Current Affairs

Socialism: A Doctrine of the Aristocrats

Mises Institute - Wed, 16/01/2019 - 03:45
[Omnipotent Government (1944)]

Among the infinity of fallacious statements and factual errors that go to form the structure of Marxian philosophy there are two that are especially objectionable. Marx asserts that capitalism causes increasing pauperization of the masses, and blithely contends that the proletarians are intellectually and morally superior to the narrow-minded, corrupt, and selfish bourgeoisie. It is not worthwhile to waste time in a refutation of these fables.

The champions of a return to oligarchic government see things from a quite different angle. It is a fact, they say, that capitalism has poured a horn of plenty for the masses, who do not know why they become more prosperous from day to day. The proletarians have done everything they could to hinder or slow down the pace of technical innovations — they have even destroyed newly invented machines. Their unions today still oppose every improvement in methods of production. The entrepreneurs and capitalists have had to push the reluctant and unwilling masses toward a system of production that renders their lives more comfortable.

Within an unhampered market society, these advocates of aristocracy go on to say, there prevails a tendency toward a diminution of the inequality of incomes. While the average citizen becomes wealthier, the successful entrepreneurs seldom attain wealth that raises them far above the average level. There is but a small group of high incomes, and the total consumption of this group is too insignificant to play any role in the market. The members of the upper middle class enjoy a higher standard of living than the masses but their demands also are unimportant in the market. They live more comfortably than the majority of their fellow citizens but they are not rich enough to afford a style of life substantially different. Their dress is more expensive than that of the lower strata but it is of the same pattern and is adjusted to the same fashions. Their bathrooms and their cars are more elegant but the service they render is substantially the same. The old discrepancies in standards have shrunk to differences that are mostly but a matter of ornament. The private life of a modern entrepreneur or executive differs much less from that of his employees than, centuries ago, the life of a feudal landlord differed from that of his serfs.

It is, in the eyes of these pro-aristocratic critics, a deplorable consequence of this trend toward equalization and a rise in mass standards that the masses take a more active part in the nation's mental and political activities. They not only set artistic and literary standards; they are supreme in politics also. They now have comfort and leisure enough to play a decisive role in communal matters. But they are too narrow-minded to grasp the sense in sound policies. They judge all economic problems from the point of view of their own position in the process of production. For them the entrepreneurs and capitalists, indeed most of the executives, are simply idle people whose services could easily be rendered by "anyone able to read and write."1 The masses are full of envy and resentment; they want to expropriate the capitalists and entrepreneurs whose fault is to have served them too well. They are absolutely unfit to conceive the remoter consequences of the measures they are advocating.

Thus they are bent on destroying the sources from which their prosperity stems. The policy of democracies is suicidal. Turbulent mobs demand acts that are contrary to society's and their own best interests. They return to Parliament corrupt demagogues, adventurers, and quacks who praise patent medicines and idiotic remedies. Democracy has resulted in an upheaval of the domestic barbarians against reason, sound policies, and civilization. The masses have firmly established the dictators in many European countries. They may succeed very soon in America too. The great experiment of liberalism and democracy has proved to be self-liquidating. It has brought about the worst of all tyrannies.

"If the supremacy of these modern doctrines is a proof of intellectual decay, it does not demonstrate that the lower strata have conquered the upper ones. It demonstrates rather the decay of the intellectuals and of the bourgeoisie."

Not for the sake of the elite but for the salvation of civilization and for the benefit of the masses a radical reform is needed. The incomes of the proletarians, say the advocates of an aristocratic revolution, have to be cut down; their work must be made harder and more tedious. The laborer should be so tired after his daily task is fulfilled that he cannot find leisure for dangerous thoughts and activities. He must be deprived of the franchise. All political power must be vested in the upper classes. Then the populace will be rendered harmless. They will be serfs, but as such happy, grateful, and subservient. What the masses need is to be held under tight control. If they are left free they will fall an easy prey to the dictatorial aspirations of scoundrels. Save them by establishing in time the oligarchic paternal rule of the best, of the elite, of the aristocracy.

These are the ideas that many of our contemporaries have derived from the writings of Burke, Dostoievsky, Nietzsche, Pareto, and Michels, and from the historical experience of the last decades. You have the choice, they say, between the tyranny of men from the scum and the benevolent rule of wise kings and aristocracies. There has never been in history a lasting democratic system. The ancient and medieval republics were not genuine democracies; the masses — slaves and metics — never took part in government. Anyway, these republics too ended in demagogy and decay. If the rule of a Grand Inquisitor is inevitable, let him rather be a Roman cardinal, a Bourbon prince, or a British lord than a sadistic adventurer of low breeding.

The main shortcoming of this reasoning is that it greatly exaggerates the role played by the lower strata of society in the evolution toward the detrimental present-day policies. It is paradoxical to assume that the masses whom the friends of oligarchy describe as riffraff should have been able to overpower the upper classes, the elite of entrepreneurs, capitalists, and intellectuals, and to impose on them their own mentality.

Who is responsible for the deplorable events of the last decades? Did perhaps the lower classes, the proletarians, evolve the new doctrines? Not at all. No proletarian contributed anything to the construction of antiliberal teachings. At the root of the genealogical tree of modern socialism we meet the name of the depraved scion of one of the most eminent aristocratic families of royal France. Almost all the fathers of socialism were members of the upper middle class or of the professions. The Belgian Henri de Man, once a radical left-wing socialist, today a no less radical pro-Nazi socialist, was quite right in asserting, "If one accepted the misleading Marxist expression which attaches every social ideology to a definite class, one would have to say that socialism as a doctrine, even Marxism, is of bourgeois origin."2 Neither did interventionism and nationalism come from the "scum." They also are products of the well-to-do.

The overwhelming success of these doctrines that have proved so detrimental to peaceful social cooperation and now shake the foundations of our civilization is not an outcome of lower-class activities. The proletarians, the workers, and the farmers are certainly not guilty. Members of the upper classes were the authors of these destructive ideas. The intellectuals converted the masses to this ideology; they did not get it from them. If the supremacy of these modern doctrines is a proof of intellectual decay, it does not demonstrate that the lower strata have conquered the upper ones. It demonstrates rather the decay of the intellectuals and of the bourgeoisie. The masses, precisely because they are dull and mentally inert, have never created new ideologies. This has always been the prerogative of the elite.

The truth is that we face a degeneration of a whole society and not an evil limited to some parts of it.

When liberals recommend democratic government as the only means of safeguarding permanent peace both at home and in international relations, they do not advocate the rule of the mean, of the lowbred, of the stupid, and of the domestic barbarians, as some critics of democracy believe. They are liberals and democrats precisely because they desire government by the men best fitted for the task. They maintain that those best qualified to rule must prove their abilities by convincing their fellow citizens, so that they will voluntarily entrust them with office. They do not cling to the militarist doctrine, common to all revolutionaries, that the proof of qualification is the seizure of office by acts of violence or fraud. No ruler who lacks the gift of persuasion can stay in office long; it is the indispensable condition of government. It would be an idle illusion to assume that any government, no matter how good, could lastingly do without public consent. If our community does not beget men who have the power to make sound social principles generally acceptable, civilization is lost, whatever the system of government may be.

It is not true that the dangers to the maintenance of peace, democracy, freedom, and capitalism are a result of a "revolt of the masses." They are an achievement of scholars and intellectuals, of sons of the well-to-do, of writers and artists pampered by the best society. In every country of the world dynasties and aristocrats have worked with the socialists and interventionists against freedom. Virtually all the Christian churches and sects have espoused the principles of socialism and interventionism. In almost every country the clergy favor nationalism. In spite of the fact that Catholicism is world embracing, even the Roman Church offers no exception. The nationalism of the Irish, the Poles, and the Slovaks is to a great extent an achievement of the clergy. French nationalism found most effective support in the Church.

It would be vain to attempt to cure this evil by a return to the rule of autocrats and noblemen. The autocracy of the czars in Russia or that of the Bourbons in France, Spain, and Naples was not an assurance of sound administration. The Hohenzollerns and the Prussian Junkers in Germany and the British ruling groups have clearly proved their unfitness to run a country.

If worthless and ignoble men control the governments of many countries, it is because eminent intellectuals have recommended their rule; the principles according to which they exercise their powers have been framed by upper-class doctrinaires and meet with the approval of intellectuals. What the world needs is not constitutional reform but sound ideologies. It is obvious that every constitutional system can be made to work satisfactorily when the rulers are equal to their task. The problem is to find the men fit for office.

Neither a priori reasoning nor historical experience has disproved the basic idea of liberalism and democracy that the consent of those ruled is the main requisite of government. Neither benevolent kings nor enlightened aristocracies nor unselfish priests or philosophers can succeed when lacking this consent. Whoever wants lastingly to establish good government must start by trying to persuade his fellow citizens and offering them sound ideologies. He is only demonstrating his own incapacity when he resorts to violence, coercion, and compulsion instead of persuasion. In the long run force and threat cannot be successfully applied against majorities. There is no hope left for a civilization when the masses favor harmful policies. The elite should be supreme by virtue of persuasion, not by the assistance of firing squads.

This article is excerpted from Omnipotent Government, part 2, chapter five, section 3, "Aristocratic Doctrine" (1944).

  • 1. See the characteristic ideas of Lenin about the problems of entrepreneurship and management in his pamphlet State and Revolution (New York, 1917), pp. 83–84.
  • 2. De Man, Die Psychologie des Sozialismus (rev. ed. Jena, 1927), pp. 16–17. Man wrote this at a time when he was a favorite of German left-wing socialism.
Categories: Current Affairs

AU 477 – Shepherd’s Resurrection

Anglican Ink - Wed, 16/01/2019 - 02:51
A video comes back to haunt the new interim CofE ambassador to the Vatican. Anglican Unscripted is the only video newscast in the Anglican Communion. Each Episode Kevin, Canon George, Allan, and Bishop Gavin bring you news and perspective from around the globe. Please Donate –

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Toronto Bishop Asbil installed in inclusive service

Anglican Ink - Wed, 16/01/2019 - 01:58

With three knocks on the door of St. James Cathedral with his crozier, Bishop Andrew Asbil ushered in a new era in the Diocese of Toronto.

Admitted into the cathedral by the assembled clergy and laity, Bishop Asbil was then installed as the 12thBishop of Toronto, making him the chief pastor of Canada’s most populous Anglican diocese.

The cathedral was filled to capacity for the two-hour service, held on Jan. 13. It was streamed live on the internet and watched by people across the diocese and around the world.

During the investiture, held near the beginning of the service, Bishop Asbil received the diocesan crozier. He then placed his hand on a Bible and made a solemn promise and declaration to fulfill the responsibilities and obligations of the office of the Bishop of Toronto and to be a faithful shepherd to the flock of Christ.

He was then escorted to the cathedra, the seat of the bishop, and installed there. Afterwards, he was presented to the congregation, which responded with sustained applause.

Archbishop Anne Germond, the metropolitan of the Ecclesiastical Province of Ontario and the Bishop of Algoma, was the presiding celebrant. Archbishop Colin Johnson, the 11th Bishop of Toronto who retired on Dec. 31, participated in the service, as did the diocese’s four suffragan bishops. Archbishop Fred Hiltz, the Primate of the Anglican Church of Canada, and other bishops also took part.

After Bishop Asbil’s investiture and installation, the service continued with readings, prayers and the celebration of the Eucharist. At the end of the service, Bishop Asbil returned to the cathedral’s doors to bless the City of Toronto and the diocese.

One of the themes of the service was inclusion. The acknowledgment of Indigenous territory was said in Cree by the Rev. Canon Andrew Wesley, and prayers were offered in Cantonese, French, Swahili and Spanish.

Bishop Asbil spoke about inclusion in his sermon. “In a time of transition, you’re probably thinking will there be room for me, will there be a place for me, if I am part of the LGBTQ2 community, if I’m progressive, if I’m evangelical or conservative, if I’m an Anglo-Catholic, if English is not my first tongue? Yes. Yes. Yes. Yes. Yes. My pledge as your bishop is to walk with you, not some of you but all of you… We need all to be a part of this journey.”

Bishop Asbil and the diocese’s suffragan bishops gather at the font for the renewal of baptismal vows.

He ended his sermon by speaking about baptism, transformation and change, encouraging churches to “knock on doors” and be present in their neighbourhoods, trusting that God will provide. “My brothers and sisters, walk with me and I will walk with you. And let us together walk with the one who created us, redeemed us and sets us free.”

After the sermon, liturgical dancers and four people brought water from the traditional four directions and the diocese’s four episcopal areas to the baptismal font for the asperges, the rite of sprinkling the congregation with holy water in the renewal of their baptismal covenant.

The asperges was accompanied by “Wade in the Water,” a moving spiritual song. The music during the service ranged from traditional to spiritual to rock. The music was provided by the cathedral’s choirs, musicians from Church of the Redeemer, Bloor St., and the Nathaniel Dett Chorale of Toronto.

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Paul Krugman's Conversion to a 70-Percent Income Tax

Mises Institute - Tue, 15/01/2019 - 21:55

Paul Krugman was the featured speaker at a special session of the 2004 Southern Economic Association meetings, held the weekend before Thanksgiving, and a number of economists listened intently as the most famous man at the conference spoke religiously about the glories of Keynesian economics. Professor Joseph Salerno and I were in the audience sitting next to each other, and we kept our disagreements with Krugman’s points to ourselves.

When the Q&A began, I raised my hand immediately and was able to ask the first question, and so I asked Krugman the following: “You have been very critical of the Bush tax cuts. Do you favor going back to the 70 percent rates that existed before 1981?”

Krugman answered emphatically, “Oh, no! Those rates were insane.”

To be honest, I felt some relief. Krugman had not gone off the deep end, I thought. Despite his politically-partisan rhetoric and his semi-weekly tirades against the tax policy of the Bush II administration, Krugman seemed to understand that taxes really were an economic drag and that jacking up the marginal rates would create havoc on the economy.

That was then. In the intervening years Krugman has received a Nobel Memorial Prize in economics (something I “celebrated” with this snarky piece on the Forbes website), and left his prestigious post at Princeton University for a professorship at the less-prestigious Graduate Center if the City University of New York. While he was decidedly on the left when I saw him in 2004, his journey to being a hard leftist has accelerated, and he has become a “woke,” born-again “Democratic Socialist” since then.

Lest anyone still believes that any vestige of a real economist remains in Krugman, think again. In his recent New York Times column, Krugman not only offers effusive praise for Rep. Alexandria Occasio-Cortez’s “Green New Deal” in which she calls for a return to the 70-percent marginal tax rates (thus endorsing what he once labeled as “insane”), but he also gives readers a lesson in faulty utility theory that should have earned him an “F” in any legitimate doctoral program in economics.

Krugman’s column is loaded with economic fallacies, the first employing the informal fallacy of argumentum ad verecundiam, or the “appeal from authority” to qualify his point. Krugman writes:

The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.)

Of course, there are other famous economists such as Emmanuel Saez, and Christina Romer, Barack Obama’s chief economic adviser that Krugman points out that favor top rates from 73 to 80 percent, with Krugman’s implication being that since Krugman has declared them to be experts, they have to be correct. End of argument.

Krugman doesn’t stop with the argumentum ad verecundiam fallacy, however, as he presses on in turning economic analysis into a socialist caricature. Pushing Saez’s arguments, Krugman turns utility theory upside down:

Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

While Krugman’s analysis might seem to be “common sense,” it actually employs what economists call “interpersonal utility comparisons,” which any first-term graduate student knows not to use in economic analysis. Marginal utility is ordinal, not cardinal in scope – and there is a very good reason for making that point.

I use the following example: Assume I wish to exchange the ring I am wearing for your watch. In order for the voluntary exchange to take place, I have to value your watch more than I value my ring, and, at the same time, you must value my ring more than you value your watch. Note that we are not in a state of affairs in which I value your watch more than you do, and you value my right more than do I. While cardinal measurements of utility might seem to be “common sense,” they actually are nonsensical, and economists do not use them.

To put it another way, we have no way of knowing if an extra $1,000 obtained by a wealthy person provides less “utility” than an extra $1,000 obtained by someone who makes $20,000 a year. The only thing we can know is that $1,000 as a percentage of income is less for the billionaire than it is for the person with the lesser income, but we have no way of measuring the personal satisfaction that each person receives from the additional income, much less compare them.

This is not a trivial point (although I suspect Krugman would claim otherwise). First, and most important, the whole point of raising tax rates as one’s income increases is based upon cardinal utility measurements. So the theory goes, as one’s income goes up, one’s purchases continually bring less satisfaction than did purchases made at a lesser income. Thus, since satisfaction levels are declining as income increases, the so-called punitive effects of income confiscation become less harmful.

Krugman justifies confiscatory levels of taxation by claiming that the policy would create overall net positive levels of utility for society, a positive social welfare function. His logical chain goes as follows: (1) there are only a small number of people with very high incomes and taxing their upper levels of income at high rates results in a small loss of social utility; (2) the income confiscated from wealthy people then is distributed to lower-income people, and the utility that they gain from the extra income is greater than the social utility lost by the highly-taxed rich; (3) therefore, society overall gains by such a tax policy.

However, if one (correctly) rejects measures of cardinal utility, the only other choice would be employing Pareto Criteria in which a move that makes anyone worse off is not welfare-enhancing. (Not surprisingly, Murray Rothbard strongly stood behind Pareto Optimality.)

Krugman does not stop at using faulty utility theory; he also mangles production theory with his very crabbed and mechanistic view of competition and monopoly. He writes:

But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions — which is the kind of economy conservatives want us to believe we have — everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.

He goes on to explain that high marginal tax rates on the wealthy in a perfectly-competitive economy would be extra welfare-enhancing:

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does — because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort — and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

In other words, if all workers are making their marginal revenue product (or, more accurately, their discounted marginal revenue product), then if a wealthy person earns $1,000, that is a $1,000 addition of created wealth, which increases social welfare. Taking $700 of that money in taxes and giving it to lower income earners thus enhances the welfare of that group but, simultaneously, does not result in an actual $700 loss to the wealthy person, since diminishing marginal utility limits the actual damage to, say, $400, creating net benefits of $300 to the state and, thus, to society. Thus, the overall gain in a perfectly-competitive economy of having a wealthy person earn $1,000 and levying a 70 percent tax enhances society by $1,300.

Alas, Krugman sadly notes, the U.S. economy is not competitive and is full of monopolies. He writes:

What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

Time for some Krugman math. Krugman argues that since the American economy really is not competitive, or, to be more direct, because (1) all firms are price takers in which demand for their products always is perfectly elastic; (2) not all products in various markets are exactly like one another (homogeneous products); (3) not everyone in the market operates with perfect information that is obtained with no opportunity cost; and (4) the markets do not have costless entry and exit, then rates really should be above 70 percent so that the government can confiscate the monopoly rents that so-called free markets regularly provide to producers. Confiscatory tax levels, he argues, somehow would magically transform the economy from one dominated by rapacious monopolies to one that would closely resemble the imaginary ideal of perfect competition.

(Murray Rothbard demolishes the dichotomy between monopoly and competition in a free market in Chapter 10 of Man, Economy, and State, arguing that so-called perfect competition neither is perfect nor competitive nor is not the “ideal” state of affairs.)

Krugman’s reasoning goes as such: Because almost all private enterprise enjoys vast monopoly rents (since private enterprise is uncompetitive), and since monopolies are economically harmful, confiscating money from wealthy monopolists is welfare maximizing because after society gets the benefit of the new wealth created by the monopoly (yes, monopolies do create at least some wealth), there is the net benefit of the added tax dollars and the confiscation of the monopoly rent which government will spend more wisely than would have been the case had the individual been permitted to hold onto it.

To put it mildly, there are major problems in Krugman’s line of reasoning. I have alluded to his insistence on employing cardinal utility measures and his belief that confiscatory levels of taxation will result in an imaginary “maximization” of an imaginary “social utility function.” While Rothbard was very critical of such welfare schemes in economic analysis, he hardly is the only one. Kenneth Arrow, also a Nobel winner (to use Krugman’s own fallacies against him), laid out his impossibility theorem in which he points out that any voter-based social welfare scheme is going to require a form of dictatorship, which violates the terms of Pareto Optimality.

Economist David Henderson notes that utility only can be ordinal, not cardinal, and he also quotes Robert Murphy (familiar to readers of this page), who emphasizes the same point. There are no cardinal measures of “utils” that one gains from consumption or in improving one’s place in the world. Likewise, as Henderson notes here, one cannot

measure difference s in the marginal utility of money across people. Why? …Utility is ordinal, not cardinal. So there’s no such thing as a “difference” to measure.

Henderson and Rothbard are not making capricious statements. Legitimate cardinal measurements of utility would require that there be standard measurements of satisfaction (utility) that are not arbitrarily constructed to fit the personal preferences of certain people who have coercive power over others and, thus, wish to force others to act in a certain manner contrary to their own desires, or even to have contrary thoughts to those who are the so-called standard setters of utility. Krugman may say that such cardinal measurements are based upon “common sense,” but it is impossible to impose such measures without coercing others against their will.

The second issue with Krugman’s ex cathedra declarations is that he assumes the state always will find better uses for the money confiscated from wealthy people than those individuals would use themselves. He bases his beliefs on two points: the first is the application of cardinal utility, which is not legitimate in economic analysis. The second is that entrepreneurship and capital development at best are irrelevant in the economy, or even that state-sponsored “development” is superior to whatever private individuals would do.

Discussion of that second point will take more space than can be allotted to this particular article. However, suffice it to say that Krugman consistently employs the same methodology as before: he and like-minded people should have the power to decide what is good for everyone else.

There are many reasons why to oppose 70+ percent marginal tax rates, and if one believes that the growth of private enterprise is a good thing for people, then Krugman’s original statement that confiscatory taxes are “insane” makes sense. In repudiating his own earlier-held beliefs, however, Krugman not only embraces viewpoints that he once rejected, but he also employs what only can be called intellectually-illegitimate means to accomplish this dubious feat.

Categories: Current Affairs

Anglican Centre appointee denies he is a non-believer

Anglican Ink - Tue, 15/01/2019 - 18:57

A retired Anglican priest from Australia who has been chosen to lead the Anglican Centre in Rome on an interim basis has sought to rebuff criticism about his beliefs in the resurrection. The former Dean of St George’s Cathedral in Perth, Western Australia, Dr John Shepherd, was appointed as interim director last week following the resignation of Archbishop Bernard Ntahoturi.

“Christ is Risen!”, Dr Shepherd said in response to widely reported criticism about his appointment. “There has been speculation in the press and on social media about my views on the resurrection of Jesus from the dead. Part of this is based on a sermon I preached in 2008.

“It is my faith that Jesus rose from the dead and I have never denied the reality of the empty tomb. The risen Christ was not a ghost – he ate and could be touched – but at the same time he appeared in a locked room (John 20. 26) and vanished from sight (Luke 24.31) and he was often not immediately recognised.

“As the Catechism of the Catholic Church states (para 646) ‘In his risen body he passes from the state of death to another life beyond time and space.’ In my Easter sermon in 2010 I said ‘We believe in the resurrection of Jesus after three days, and in this faith we come to know God who raises us from despair to life, day after day.’

“This remains my faith – that Christ is risen indeed.”

The Governors of the Anglican Centre in Rome – the charity’s trustees – will review recent events before seeking a permanent replacement to Archbishop Bernard Ntahoturi, who had been suspended prior to his resignation, following an allegation of sexual misconduct.

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Jeff Deist in Mexico City

Mises Institute - Tue, 15/01/2019 - 17:45
Categories: Current Affairs

Saudi Arabian Lobbyists Have Many Friends in DC

Mises Institute - Tue, 15/01/2019 - 17:45

Most libertarians are familiar with Dwight Eisenhower’s warning about the military-industrial complex and its nefarious influence on US foreign policy. Many have read Major General Smedley Butler’s short book War is a Racket, in which he lays out the ways in which war is in the economic interests of certain groups, while other groups pay the cost. Some may even have read Robert Nisbet’s warning about the way in which the military-industrial complex has expanded to universities, as researchers seek out government funding from the vast military-industrial blob. While all of these warnings are indeed correct, they neglect another equally nefarious influence on American foreign policy; foreign governments.

Every year foreign governments spend hundreds of millions of dollars lobbying the US government for everything from foreign aid and trade deals, to trying to influence US military policy. This lobbying is generally ignored, but after the recent gruesome murder of journalist Jamal Khashoggi by the Saudi Arabian government, there has been increased scrutiny on the cozy relationship between the Saudi regime and US politicians — a relationship maintained through the Saudi’s vast entourage of over two dozen DC-area lobbying firms.

According to a recently released Center for International Policy (CIP) report — one based entirely on publicly available information — the Saudi government spent approximately $27 million on US lobbying firms in 2017. So there is no doubt that there’s plenty of good money in pestering politicians on behalf of the Saudis. Not only the lobbyists but for the politicians as well. CIP found that Saudi lobbying firms donated nearly $400,000 to the campaigns of members of Congress they “had contacted on behalf of Saudi interests.” And if this weren’t blatant enough, CIP identified “twelve instances in which that contact and contribution occurred on the exact same day.”

What has Saudi Arabia gotten in return? The CIP report notes that “the timing of many of these political contributions coincides closely with key Congressional events, involving the Justice Against State Sponsors of Terrorism Act (JASTA) votes and votes to block arms sales to Saudi Arabia.” Let’s also not forget the US support, in the form of mid-air refueling and intelligence, for the Saudi-led coalition into Yemen that has led to a humanitarian disaster — complete with the threat of mass starvation and a widespread cholera outbreak .

This mid-air refueling has been stopped for now as a result of the Khashoggi affair, but, according to CNN ’s Sam Kiley, “it's an opportunity to appear a little bit cross over the alleged murder of Jamal Khashoggi while making sure that the Kingdom's strategic trajectory stays on course.”

It is even possible that all of this lobbying might manage to save Saudi Arabia from the ongoing Khashoggi murder fiasco. NBC reports that the Trump administration has weighed expelling Fethullah Gulen, an exiled Turkish cleric and enemy of the Erdogan regime, “in order to placate Turkey over the murder of journalist Jamal Khashoggi.” The Trump administration denies this, but the fact that such action is even in the realm of possibility speaks to the success of Saudi lobbying efforts.

The outrageous abuses by the Saudi regime — both domestically and abroad — are nearly endless. But, unfortunately, they are not the only foreign power pouring lobbying money into DC to influence US military policy. In 2017, according to the Center for Responsive Politics (CRP), the UAE spent over $21 million on US lobbying. The UAE has a large ground presence in Yemen as part of the Saudi-led coalition and has been accused of running secret prisons where Yemenis are tortured. Former US Army Colonel Stephen Toumajan is currently the head of the UAE Joint Aviation Command, where, by his own admission to BuzzFeed News, Toumajan claimed that he was “instrumental in the modernization of the UAE fleet with investing over $10 billion in American aircraft and services.”

But US entanglement with the UAE’s sordid business in Yemen doesn’t even stop there. An in-depth investigative report from BuzzFeed News found that former US special forces had been serving as an assassination hit-squad in Yemen for the UAE. In a stunning report, a former Navy Seal recounted to BuzzFeed News how he, along with a former French Foreign Legionnaire, ran a hit squad made up of former US special forces in Yemen — whose targets included not only armed terrorists but politicians as well.

As of 2008, it took over $350,000 to train a Navy SEAL, and then an additional $1 million to deploy him overseas. As Ryan McMaken points out, this means that the US taxpayer is effectively subsidizing the training of “what are essentially death squads designed to eliminate the regimes' enemies” for the UAE.

The Saudis and the UAE obviously feel it is necessary to grease US palms with tens of millions of dollars in order to ensure that arms sales get approved, US assistance in the Yemeni war continues, and the Pentagon continues to turn a blind eye to misconduct from former US service members. This leads to the question, what would US policy toward these two onerous regimes be without millions of dollars in lobbying money?

With such blatant bribery of US officials, it seems impossible to trust US foreign policymakers to judge American national interests in an unbiased and levelheaded way. Factor in the even larger amount of influence wielded domestically by the military-industrial complex and it seems hopeless to expect American foreign policymakers to actually be acting in the American national interest. It is little wonder that American foreign policy has been a complete disaster for decades.

Categories: Current Affairs

Prayer alert: please pray for MPs as they vote on Brexit

Christian Concern - Tue, 15/01/2019 - 16:31
This evening, MPs are due to vote on the Prime Minister's deal for leaving the European Union. Please pray that whatever MPs decide would be what is best for God’s kingdom.

At around 7pm tonight (15th January), MPs are due to vote on the deal that Prime Minister Theresa May has agreed with EU negotiators. Most commentators expect the government to lose the vote. Whether her deal is accepted, amended or rejected by MPs, there are likely to be significant implications for the future of the United Kingdom. The UK's relationship with other countries in Europe and around the world may change. And it could lead to different political leadership, a referendum or an election.

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Royal College of Physicians decides to be undecided about assisted dying

Christian Concern - Tue, 15/01/2019 - 14:23
The Royal College of Physicians has decided to adopt a neutral position on changing laws on assisted dying – without consulting its members. Tim Dieppe discusses how this change in position seems unconstitutional, and why the law should not change. He concludes that the strong laws this country has are needed to protect the vulnerable.

The Royal College of Physicians has decided to adopt a neutral position on changing laws on assisted dying – without consulting its members. Tim Dieppe discusses how this change in position seems unconstitutional, and why the law should not change. He concludes that the strong laws this country has are needed to protect the vulnerable.

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Coca-Cola: A symbol of capitalism

Adam Smith Institute - Tue, 15/01/2019 - 12:01

There are several significant dates on the early history of Coca-Cola, but a generally accepted one is January 15th 1889, 130 years ago, which was when the franchised distribution system that became its hallmark was introduced. Today the company is reckoned to have the third most popular brand name, recognized by 94 percent of the world's population, and the company's $35.1 billion in revenue makes it the 84th largest economy in the world, just ahead of Costa Rica. It has 500 brands sold in more than 200 countries.

Coca-Cola has become a symbol of entrepreneurial capitalism. Originally Colonel Pemberton was looking for a way to wean himself off the morphine addiction he'd picked up after the American Civil War. He developed a medication containing carbonated water, coca leaves (a source of cocaine), and kola nuts (a source of caffeine). It was sold in soda fountains, but it was the business model of providing syrup to franchised bottlers that provided the basis of its success.

Its status as a symbol of capitalism, and indeed of America, is helped by the fact that it has made mistakes along the way and corrected them. To counter the popularity of its sweeter tasting rival, Pepsi, the company introduced New Coke in 1985. It was a PR disaster that yielded a huge backlash. The company quickly responded with Coke Classic to recapture its popularity. It succeeded, and it quietly dropped the Classic tag in 2011.

It has responded to criticism, adding sugar-free versions such as Diet Coke and Coke Zero alongside its original product (from which the cocaine was removed long ago).

What does Coke do? It provides a product that millions of people all over the world willingly pay to consume every day. Coke spends more on advertising than Apple and Microsoft combined, recognizing that people drink it to be part of a culture as well as having their thirst quenched. Their 1971 ad featured teenage children of embassy staff on a hillside in Rome singing "I'd like to teach the world to sing," promoting Coke as a symbol of internationalism and harmony between different peoples. The song became a chart topper, albeit with the specific pitch for Coke removed.

Today Coke ranks among the world's top ten private employers with over 600,000 employees. It is a huge success, and a testament to what entrepreneurial capitalism can achieve with good ideas, determination and drive. Happy birthday, Coca-Cola.

Categories: Current Affairs


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