Blogroll Category: Current Affairs

I read blogs, as well as write one. The 'blogroll' on this site reproduces some posts from some of the people I enjoy reading. There are currently 551 posts from the category 'Current Affairs.'

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If you tax everyone, send all the money through a bureaucracy, then....

Adam Smith Institute - 5 hours 34 min ago

…then you seem to get less of the output that you were originally trying to engineer in the first place. Leading to the conclusion that perhaps government and bureaucracy aren’t the answer to every problem:

Apprenticeships are falling despite the Government’s introduction of a new levy, the Public Accounts Committee has found. The number of apprenticeship starts dropped by 26 per cent after the apprenticeship levy was introduced, the report said.

In the 2017/18 academic year, there were 375,800 apprenticeship starts, compared to 509,400 in 2015/16, the last full year before the apprenticeship levy was introduced.

The apprenticeship levy forces companies with a wage bill of more than £3 billion to pay 0.5 per cent of it to the Education and Skills Funding Agency (ESFA), which is part of the Department for Education (DfE).

The companies have until April 2019 to draw down the funding, which they must use to take on new apprentices, or train existing staff.

The DfE has failed to make the progress it predicted when it reformed the apprenticeships programme two years ago, according to the PAC report.

It didn’t work under the first set of bureaucratic rules, it didn’t work under the second set of bureaucratic rules as reformed. Perhaps the problem is with bureaucracy and tax as a solution?

Which is to ask Thomas Sowell’s question again. “Compared to what?”

Perhaps it is true that there are insufficient apprenticeships in the country. This might be the manner in which all the Technical Colleges, which used to do the day release schemes, are now universities doing full time grievance studies courses. It is, theoretically at least, possible that the helping hand of government has been giving insufficient bureaucratic support to the endeavour to train Britain’s young.

Once you’ve stopped laughing at the back there we might just try observing reality. More government here has led to a worse outcome. The solution therefore is to have less of that government.

We’re often accused of having a slash and burn approach to government itself which is fair enough for we do have a distaste for it as an institution. Sometimes it’s necessary and we’ll put up with that. But we do also insist that the other side of the idea be given more of a hearing. Sometimes - often - government just isn’t the manner of gaining the end goal. Assuming that the goal isn’t just more government. Thus there are myriad tasks and problems we shouldn’t apply the government solution to. This apparently including how to teach the young of the nation to do something useful.

That is, the Telegraph article should read “Apprenticeships are falling because of the Government’s introduction…”

Categories: Current Affairs

Money Supply Growth Inches up From March's 12-Year Low

Mises Institute - 11 hours 40 min ago

Money supply growth inched up in April, rising slightly above the March growth level, which was at a 12-year (145-month) low.

In April, year-over-year growth in the money supply was at 1.99 percent. That was up slightly from March's growth rate of 1.92 percent, but was well down from April 2018's rate of 4.32 percent.


The money-supply metric used here — the "true" or Rothbard-Salerno money supply measure (TMS) — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth.

This measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short-time deposits, traveler's checks, and retail money funds).

M2 growth rose slightly April, growing 3.84 percent, compared to March's growth rate of 3.77 percent. M2 grew 3.72 percent in April of last year. The M2 growth rate has fallen considerably since late 2016, but has varied little in recent months.

Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of slow-downs in rates of money-supply growth.

Moreover, periods preceding recessions often show a growing gap between M2 growth and TMS growth. We saw this in 2006-7 and in 2000-1. The gap between M2 and TMS narrowed considerably from 2011 through 2015, but has grown in recent years.


The overall M2 total money supply in April was $14.6 trillion, and the TMS total was $13.4 trillion.

Categories: Current Affairs

Envy, Inc.

Mises Institute - Wed, 22/05/2019 - 21:45

Presidential aspirant Kamala Harris promises to compel private companies with more than 100 employees to disclose what they pay employees to the Equal Opportunity Employment Commission. Companies that don't pay women "enough" will pay fines until they demonstrate an acceptable level of gender parity. South Bend, Indiana's "Mayor Pete" Buttigieg thinks America needs a federal "Equality Act" to make up for past racism, sexism, and homophobia. Senator Elizabeth Warren champions direct cash payments to black Americans as reparations for slavery. And all of the 2020 hopefuls take great pains to characterize income and wealth disparity as the defining issue of our time.

The ostensible thread connecting all of these public policy ideas is equality. Millions of Americans firmly believe the proper role of government is to make us more equal, and thereby make society more just. Old-fashioned liberal ideas about private property and natural rights barely register in this worldview. And it won't be changed by an election or politician; egalitarianism as an animating political, economic, and social principle is firmly entrenched across the West today. 

Are these proposals rooted in justice, or hatred and envy? Are they presented as an appeal for restitutionary justice, however far-fetched and far-removed? Or do they represent a gross display of cynical politics, an appeal meant to divide? We hate to play amateur psychologist. But after more than a century of progressive claims of good intentions, the results speak for themselves: capitalism and markets increase freedom and prosperity, while political engineering is zero-sum and antagonistic. 

Ludwig von Mises explained so much of what still plagues us today in his underrated classic The Anti-Capitalistic Mentality. Written in the early 1950s, toward the end of Mises's long career, this short book exhibits easier language and faster pace than his earlier works. Having been in the US for more than a decade at this point, one senses a change in Mises's written English. He's more comfortable in his diction and syntax, and utterly unconcerned with staying in his lane as an economist. The surprising result is a normative book about psychology and envy, from a man known for his utilitarian, causal-realist economics.

For Mises, capitalism is private property and markets. It is the engine of civilization, and the hallmark of any society with a natural and healthy "urge for economic betterment." It is the only way to organize society that comports with human nature, promotes peace and social cohesion, and advances material well-being.

So what accounts its constant vilification? Capitalism's critics, no less self-interested than anyone else, must be explainable by their unease and dissatisfaction with life. And envy, no less than a biblical sin, is the source of that unease and dissatisfaction. So while Mises much earlier advanced the concept of "felt uneasiness" in his explanations of praxeology, he goes much further here into an outright examination of the psychological source of that uneasiness.

Why do intellectuals, particularly university professors, resent capitalism? Simple, Mises explains: they resent the higher incomes and prestige of the risk-taking, entrepreneurial widget makers they look down upon.

Why do working class voters resent capitalism? Capitalism provides freedom, Mises tells us, but also imposes responsibility for one's lot in life (a suggestion for which Jordan Peterson is deeply resented on the Left). A more successful sibling or neighbor serves as a reminder of one's failings, and every day presents an opportunity to advance or fall back. This is hardly comforting.

Why do literary and artistic elites, including Hollywood and Broadway, resent capitalism? The consuming public's taste is fickle and fleeting. The sensitive artist's work may go completely unappreciated by middlebrow mass audiences, and even the successful actor may become forgotten after a poorly received film or two.

Capitalism produces bad art? Who is to say, Mises asks, how the tired working class spend their leisure time and money? And with the plenitude capitalism provides, every taste is satisfied. Over time, particular genius like Shakespeare tends to emerge and prevail—albeit not always in time for wealth and fame in the artist's lifetime.

But doesn't capitalism result in other kinds of impoverishment, by making us less happy, more unequal, and crassly materialistic? Again, Mises unapologetically stands his ground: materialism is worthy of celebration; as today's luxuries are tomorrow's affordable middle class necessities. Inequality is meaningless until we grapple with scarcity, the starting point for any economic analysis. Capital accumulation is the only way to alleviate the scarcity that defines our natural world. Happiness is perhaps undefinable and un-measurable, but who among us should have the right to deny an automobile or refrigerator to satisfy a consumer's wish? Why do the anti-capitalists want to forbid the common man his "daily plebiscite"?   

Of course Mises's account of the anti-capitalist mindset did not go unchallenged by critics. The infamous former Soviet spy Whittaker Chambers took to the pages of National Review for a denunciation of the book's "know-nothing conservatism." The Economist magazine (was it ever good?) lambasted Mises's "sad little book" and its caricature of liberalism by a debater of "Hyde Park standard."

But in the intervening 65 years, has Mises's identification of "envy, conceit, ignorance, and dishonesty" among western anti-capitalists proved correct? Did events in the second half of the 20th century, particularly the collapse of Soviet communism, tend to vindicate him? 

Certain sentences like "Under capitalism...everybody's station in life depends on his own doing," and "Under capitalism, material success depends on the appreciation of a man's achievements on the part of the sovereign consumers" will strike some readers as depicting an overly rosy view of American meritocracy. But again, Mises's conception of capitalism is unfettered, not the mixed system of political patronage in the US then and now. His larger point stands: markets and property present the individual with opportunities never before known in human history, while state planning makes us all cogs in a wheel. 

Ultimately, The Anti-Capitalistic Mentality is a defense of dynamic capitalism against the doctrines of both progressives and conservatives. The former would deny average people that most unique and cherished American opportunity, the chance for upward class mobility. The latter seek to protect their own status against the nouveau riche the market disruptors. Both seek to keep people in their place, whereas unbridled capitalism—warts and all—gives them hope with responsibility. 

Mises understood this. Politicians should read him.

Categories: Current Affairs

Central Banks' Forecasts Are Basically Garbage

Mises Institute - Wed, 22/05/2019 - 18:35

Animals are a curious topic in finance, and we find them all over the place. We describe upward, downward or side-ways moving markets as bull, bear or deer markets. We have investment strategies ( "Dogs of the Dow") and trading behavior ( 'dead cat bouncing ') named after pets. We have "pigs" and "wolves" and "ostriches" and Nassim Taleb’s "black swans,"  all of which reflect this tendency to name stock market phenomena after wildlife.

Most people are also aware of central bank language wrapped in similarly zoological terms: hawks and doves refer to central bankers preferring higher and lower interest rates, respectively. In the rest of the economics profession, this animalistic naming trend has been associated with certain iconic graphs, most famously through Branko Milanovic's 'Elephant Graph ' that aims to show how economic growth has been distributed among global income deciles.

Recently, another animal has been called up to serve: the Hedgehog. Over the last decade – or even longer – central bankers have exaggerated their benign impacts on the economy and their forecasts have consistently misjudged its future path. The central bank projections of the most important variables for monetary policy – GDP growth, unemployment and the Fed’s favored inflation metric, the PCE – have been rosier than reality later revealed, over and over and over again.

When graphed, as those projections occasionally are, the erroneous forecasts stick out from the observed reality like the spiky outer armor of hedgehogs. The projection errors of various central banks have thereby given rise to an entirely new derisive class of graphs – I give you the Hedgehog graphs of the Fed, The ECB and the Swedish Riksbank.

The Federal Reserve:

Gaeto & Mazumder’s (2019: p. 22) recent survey of Fed officials’ public predictions show that

When we examine the forecast accuracy scores of the Fed chairs over time, we see that their mean forecast score has been declining over time from about 2 in 1997 (specifically correct forecasts within approximately 2 standard deviations) to about 1 in 2015 (generally correct predictions)

Fed projections of GDP growth repeatedly overestimated the speed of the recovery after the 2008 financial crisis, and the overly rosy trend in growth forecasts has continued:

ook1.png For inflation forecasts , it seems, the hedgehog has turned its spikes sideways, much in contrast to the Riksbank and the ECB that we’ll see below: ook2.jpg

The bottom line in the literature that analyzes Fed prediction behavior seems to suggest that the quality and accuracy of their forecasts have both gotten worse and less specific.

Admittedly, Fed researchers (judged by Summary of Economic Projections data, despite all their technical flaws) are not the only ones whose projections are noticeably off. The Survey of Professional Forecasters , published by the Philadelphia Fed, show a much clearer hedgehog – one that systematically overestimates the Fed’s willingness to hike interest rates, up until the time of the first hike in 2015, at which point SPFs estimations have underestimated the speed of hikes:


Regardless, it is remarkable how the forecasting errors are so uniformly wrong in one direction at a time. But they make for pretty hedgehogs.

The Riksbank

The Riksbank’s projection for where its future short-term interest rate will be has suffered from a similar upward bias for close to a decade:


Indeed, the Swedish financial press has taken to ridicule the Riksbank for its excessively optimistic projections, both regarding price inflation and its own future interest rate. Surveying projections made between 2013 and 2017 for 11 major Swedish institutions (the Riksbank, the 4 largest banks, 3 government departments, 2 major labor market organizations and a retail consultancy), Sweden’s National Institute of Economic Research showed that the Riksbank’s forecasting errors, ironically, are larger for inflation than for other variables. Relative to its forecasting peers, the Riksbank’s accuracy in forecasting GDP is much better than its ability to forecast inflation (the same seems true for the Fed). And surprisingly, it is unbeaten in its forecasts for unemployment. Note, however, that the Riksbank does not have the Fed’s “dual mandate” , and its sole task is to keep inflation at 2% – the very thing it is comparatively worst at forecasting.

The ECB:

The European central bank does not fare any better. According to Zsolt Darvas , senior fellow at the European think-tank Bruegel, the ECB’s “forecasts since [2013] have proven to be systematically incorrect”. Surveying the bank’s Eurozone inflation projections, we again find the optimistic forecasts making up the hedgehog graph’s spikes:


Indeed, the ECB staffers’ overly optimistic view of inflation is strangely enough coupled with an overly pessimistic view when it comes to unemployment , where measured unemployment has continually fallen faster than projections for more than five years. Given a basic Phillips curve assumption, this is of course inconsistent, Darvas notes :


The tendency for many different central banks to systematically fail at forecasting does call into question their future credibility. Indeed, if every single forecast of the past decade has been utterly mistaken, what makes you think that your current forecasts ought to fare any better? And why should the rest of us pay you any attention?

If hedgehogging is unintentional, as Jonathan Newman observed on a few years ago, "their models are junk." If the tendency is intentional, they are just trying to project unwarranted optimism – which is indeed the suggested explanation among those who’ve studied the Fed’s forecasting failures. There is some evidence that private sector actors revise up their growth forecasts when the Fed raises interest rates – concluding, effectively, that the Fed has superior non-public information about the (future) state of the economy. The hedgehog graphs would suggest otherwise.

Finally, a projection track record that consistently errs in the same direction could in principle be amended – adjusted downward or upward by the median of previous' forecasting errors. Indeed, that's what successful forecasters do . Why the three central banks here considered don’t update their consistently inaccurate “junk models” remains a puzzle.

Categories: Current Affairs

The Unseen Costs of "Medicare for All"

Mises Institute - Wed, 22/05/2019 - 18:35

Many of the worst costs that will come with "Medicare for All" won't be calculated in dollars. They'll come in the form of doctor shortages, long wait times, and less access to care.

Original Article: "The Unseen Costs of "Medicare for All"".

Categories: Current Affairs

Tucker Carlson and AOC Are Wrong About Christianity and Usury

Mises Institute - Wed, 22/05/2019 - 18:35

Alexandria Ocasio-Cortez thinks Christian theology supports her bill on excessive interest. Her position ignores the actual history of Christian views of usury.

Original Article: "Tucker Carlson and AOC Are Wrong About Christianity and Usury".

Categories: Current Affairs

Intellectals and Property - a non-rivalrous rivalry?

Adam Smith Institute - Wed, 22/05/2019 - 15:25

While property is often a defining topic in the centre right, in some cases, it also divides free marketeers and libertarians. This is most clearly manifested by the rivalrous debates on (the non-rivalrous) intellectual property. The Adam Smith Institute’s contribution is the paper ‘Patently Good’ which astutely outlines the liberal case for intellectual property.

The most ardent anti-intellectual property regulation ideologues are often driven by the premise that ownership derives from ‘mixing one’s labour’ with the land (homesteading). The argument goes, 'ideas are in essence free goods and, therefore, common property', in this context common property is equated not with collective ownership but with unrestricted access.

Thus if intellectual property is given the same protection under the law as tangible property (at least in principle) it binds all third parties thereby, preventing others from using their property. So, it is a violation of property rights based on the idea that one cannot have a right to the value of one’s property, only its physical integrity.

The issue with this line of reasoning is that the premise of this kind of ownership sounds awfully like the labour theory of value. Which means it sounds awfully wrong. Ownership does not and ought not to arise from one’s material relation to a good or the labour they put into its creation. If it was, we’d be having workers co-operatives left, right and centre. Did someone say proletariat revolution?

Property ownership arises from intersubjective claims on a good such as land. This is evident by the history behind English common law which was shaped by the feudal system of property where all land theoretically belonged to the monarch. Ultimately, property was indivisible in theory but it had several owners and could be bought and sold without altering the property itself. This led to a system which allowed intangible entities such as copyrights and patents to be recognised as forms of property today.

While the idea of ‘property’ is not malleable or an empty vessel it is the end purpose that matters. Its sole purpose is to make lives more prosperous by excluding others rather than being a static bundle of incidents of ownership, thus politics based on ‘public interest’ is not entirely vacuous. This is supported by the consensus that as long as property rights are ‘exclusive, universal, and transferable, they will form the basis of free markets leading to ‘socially optimal outcomes in the aggregate’.

When this purpose of property rights (which works pretty well) becomes blurred, it becomes open to slippery slopes by the political class.

Nonetheless, how do we know what is ‘socially optimal’? First, it is important to note, new ideas are usually great; the total benefit to society of an extra pound of research and development is four or more times the benefit to the firm. But how do we know how much patent strength is most conducive for innovation?

Let me present, your new sick obsession, the Tabarokk curve:

ip graph.png

Here, it is important to distinguish between barriers to entry and costs to entry. The former generally discourages innovation while the latter allows economic rents to be reaped. Patents are not strictly a barrier to entry, for a number of reasons.

In medical research, patents provide an incentive to create and trial drugs which usually take an extended period of time. However, paradoxically, such laws often lead to a ‘tragedy of the anticommmons’ as discovered in biomedical research ‘more intellectual property rights may lead to paradoxically fewer useful products for improving human health’.

This is why the Tabarokk curve is a curve and not a straight line. Whilst restricting patents would cause firms to lose some of their monopoly rights, they would also gain the opportunity to use the innovations of others. Furthermore, without patents or copyrights, firms would have an incentive to be secretive and keep crucial information from the scientific and research community, inhibiting further research.

Why not use prizes to incentivise innovation? Well, empirical evidence reveals that they are unsystematic and unpredictable and since they are ex ante rewards, they did not correlate with how useful or popular an invention or innovation was. This proposal seems more motivated by dogma than evidence.

Property, for economists, is too normative and for politicians, it sullies their election victory. It isn’t the sexiest of topics. Nonetheless, it is not a black and white issue. Intellectual property laws, like all laws, exist to be conducive to a prosperous society and they should not be shunned under the pretense of some arbitrary libertarian creed.

Categories: Current Affairs

Elizabeth Warren Shows Us Why Government Must Get Out of the Student Loan Business

Mises Institute - Wed, 22/05/2019 - 15:25

As candidates in the 2020 Democrat primary race try to outbid each other with grandiose promises to voters, the rising level of student loan debt makes for attractive campaign fodder. Making headlines with a plan aimed at addressing the student loan problem is Elizabeth Warren, whose loan forgiveness plan already enjoys the support of more than half the voting population, even among those who do not have student loans .

It’s no mystery why the policy is popular. With government-guaranteed access to loans, combined with a culture that inundates young people with the idea that success depends on a college degree—any college degree—there has been little restraint on borrowing, creating a cycle of rising tuition that necessitates ever-larger loans. Making the situation worse, the consequent increase in university education has effectively eliminated any potential financial return on non-STEM degrees. The problem has begun to reach a tipping point, with “strategic default” becoming a cultural norm .

Libertarians and conservatives are more likely to politically oppose student loan forgiveness. Opposition generally comes from two angles: personal responsibility and economic freedom. On the first point, it is hard to deny the importance of taking responsibility for bad financial decisions, and learning to borrow wisely (or not at all) and repay debts is a vital part of functioning as an adult. Nobody is holding a gun to anybody’s head and forcing them to go to college.

But this does little to solve the very real problem of the millions of young people entering adulthood with $100,000 in debt and an unmarketable degree. And when our reaction to their situation essentially amounts to telling them that they should have had the wisdom to reject a lifetime of cultural and political indoctrination at an age when their brains had not yet fully developed, we shouldn’t be shocked to find them unreceptive to the message.

The matter of economic freedom relates both to the ethics and consequences of a government interceding on voluntarily contracted loans. If Congress gets into the business of wiping out personal debts, the ramifications of such a policy aren’t difficult to imagine. Borrowers are likely to take out larger and riskier loans, and creditors are unlikely to continue lending with the looming possibility of politicians erasing their balance sheet. Alternatively, if the State pays off the loans, the financial burden would in practice translate to borrowers simply paying debts indirectly with taxes high enough to both service the loan and fund whatever inefficient bureaucracy serves as the middle-man.

Less commonly acknowledged, though, is that the United States government currently owns virtually all of the $1.5 trillion in student loan debt. With the passage of the Affordable Care Act, the government effectively nationalized the student loan industry. Today, the government not only guarantees loans, but it also generates substantial revenues from payments. In fact, the profit that the government earns from the student loan industry is roughly double the average profit margin that private companies enjoy.

In effect, student loans have been turned into another form of taxation. True, young people can still choose not to take out loans, but the perverse incentives attached to a nationalized student loan industry make it unlikely that the government is going to end its decades-long practice of indoctrinating elementary school children with why they simply must go to college. And the revenue provided by student loan payments, while negligible in the scope of the national budget, still funds some undoubtedly destructive policy or another.

Given this, we may almost be inclined to believe that Elizabeth Warren has accidentally adopted a libertarian position on student loans. There is no ethical dilemma with the government forgiving debts it owns—that issue only applies to the government forgiving the debt held by private creditors. And there’s always reason to laud reductions in government revenues in any form. At worst, student loan forgiveness fails to teach young people the value of financial responsibility. But even while people can be reckless with credit cards and auto loans, we can at least rest easy knowing that no other loan market has government guarantees compelling credit approval; markets have natural regulations deterring destructive lending (though fewer than would exist without expansionary monetary policy, but that’s a topic for another day).

So what’s the problem with Warren’s plan?

There may be a libertarian case for student loan forgiveness — at least for debts held by the State — but this argument comes with one giant asterisk that Warren and few other politicians would be willing to accept. The government has to get out of the student loan industry entirely. As long as the State continues to hold a monopoly on student lending—and especially while it continues to guarantee loan acceptance—loan forgiveness is merely a recipe for socialized higher education. This, unsurprisingly, is exactly what Warren wants.

Free college—which is really to say, taxpayer financed college—seems to face largely the same problems as the current system of nationalized student lending. Universities would still require funding, creating a tax burden that shouldered by the very people the policy seeks to help. It seems naive to assume that universal college education will see trends different from public schools, which have enjoyed skyrocketing administrative costs with no accompanying gains in student performance . And if young people are going to pay for it whether they go to school or not, bachelor’s degrees will predictably become even more common, and therefore worthless, than they already are.

The only functional difference between Warren’s proposal and the existing system is that currently, for all its moral problems and economic consequences, it is still an option to skip college and avoid the loans, and an increasing number of parents are giving their children this advice. The culture of sanctifying college degrees survives in public bureaucracies, but it’s dying a slow death among private citizens. If college becomes universal, this cultural change will be rendered meaningless. Warren won’t make you go to college, but she’ll still make you pay for it.

We should be sympathetic to the young people who were hoodwinked into entering adulthood with debt that averages a reasonable down payment on a house and a degree that lands them a job as a janitor. But this system, terrible as it is, is still preferable to reforms that would demand other young people to finance the bad decisions of their peers through taxation. Student loan forgiveness combined with universal college simply spreads the consequences of a broken higher education system to the few people smart enough to avoid it. Libertarians can make a case for the forgiveness of government-owned loans, but if forgiveness is couple with the complete privatization of the student loan industry—and that reform is unlikely to win Elizabeth Warren many votes.

Categories: Current Affairs

Why Turkey's Debt Crisis is a Bigger Risk to the Eurozone than the PIGS

Mises Institute - Wed, 22/05/2019 - 15:25

Turkey has been almost constantly in the news over the past year, as troubling headlines about its economy and political situation continue to pile up. In a currency meltdown that escalated last summer, the Turkish lira has plunged by nearly 40%, threatening the Turkish economy as a whole. In January, inflation topped 20%, with skyrocketing food prices having an especially severe impact on the population. At the same time, unemployment hit 14.7%, its highest level in a decade, and a figure that’s only expected to rise further, as the Turkish economy is projected to contract by 2% in 2019. Politically, the country’s intense friction with the US, as well as its internal upheaval, have also provided plenty of reasons for concern and clouded its outlook going forward.

Grass_KW_17_1-600x429.png An Artificial Boom and a Very Real Bust

After the hotly contested and high-stake local elections at the end of March delivered severe blows to the Erdogan regime, the prospects of further instability were soon solidified. Erdogan, already in power for 18 years, is now pushing for a rerun of Istanbul mayoral election, following his party’s narrow defeat. It is precisely this timing, of a political inflection point combined with a recession, that makes the situation in Turkey all the more precarious.

For the last two decades, the country’s economy has been instrumental to the expansion and consolidation of power for Turkey’s president. However, the adoption of populist monetary policies and the artificial, debt-fueled growth has become increasingly unsustainable, as is usually the case. As the cracks are now apparent in the country’s economy, support is also at critical lows for the ruling party. In the midst of a recession, with further political friction on the horizon and a potential rerun in Istanbul, investors are justifiably concerned that political goals will overshadow the urgent need to resolve the economic woes of the country. The tough measures needed to stop the lira’s death spiral and to control the toxic debt ticking bomb, are unlikely to be winning electoral arguments.

The Turkish president is, after all, known for his interference in the economy and the private sector, while the central bank itself has lost credibility, as its independence has come under widespread doubt. Just before this last election, for example, it used its reserves to prop up the lira, with the relevant published data revealing that its foreign exchange reserves declined more than $2 billion in the week prior to the vote. According to rating agency Moody’s, gross and net reserves were “already at very low levels.”


Apart from shaking investors’ trust and encouraging suspicions over the politicization of the central bank, the move also failed to support the currency, as the lira has continued to plummet anyway, under the pressure of the extensive concerns over the country’s dwindling reserves. Further pressure is exerted on the weakened currency, and on Erdogan’s credibility for that matter, by the increasingly dominant dollarization trend domestically. More and more Turkish citizens are turning to the USD and the Euro to protect their purchasing power, and even use them in their everyday transactions. According to recent reports by the Financial Times, foreign currency deposits by residents jumped by $2.1 billion in the last week of March, bringing the total to $167 billion.

The Turkish government has nevertheless been persistent in ignoring the flashing danger signs. Instead, the Erdogan regime remains focused on the political aspects of the current crisis, blaming all problems on foreign conspiracies and insisting on policies that would only serve to paper over the core weaknesses of the economy. Despite their efforts to control inflation and to pull the economy out of the recession, the fundamentals are still dire and investor sentiment remains very low. A new reform program unveiled in mid-April also failed to convince market participants of an improved outlook, with a J.P. Morgan survey showing that more than 80% of investors did not have confidence in the government’s ability to revive the economy. The plan merely included a $5 billion injection to struggling state banks, with no references to spending cuts or to any other realistic fiscal steps that would concretely help rein in the spiraling debt problem.

Spillover Effects

Turkey’s debt problem, coupled with the plummeting lira, is arguably the most important risk factor for the nation’s economy. To make matters worse, far from it posing a threat just to Turkey itself, it also has the potential to inflict significant damage elsewhere too, starting with key economies in the Eurozone.

At first glance, the situation in Turkey might resemble many past similar scenarios of a heavily indebted nation with a plummeting currency that descends into a severe recession and eventually gets bailed out, like Greece. However, there is one key difference that makes Turkey’s debt problem much more complicated and potentially dangerous. Unlike Greece, Italy or other seriously debt-laden economies, it’s not just government borrowing that’s the main risk here. Instead, it’s the unsustainable and increasingly unfinanceable corporate debt that makes Turkey a ticking time bomb and renders an IMF-rescue option problematic.

Private debt to GDP stands at a staggering 170%, while, overall, over half of the borrowing is denominated in foreign currencies. Thus, the collapse of the lira has made it extremely challenging for businesses to pay off or even service their debt, while the default risk has surged. Around $179 billion in external debt is due to mature until July 2019, which amounts to almost a quarter of the country’s annual economic output, according to JPMorgan estimates. Most of that, $146 billion, is owed by the private sector and banks in particular.

However dire the current debt predicament might seem for Turkey’s businesses and economic outlook, it is important to also consider the implications for its debtholders, especially since European banks feature prominently among them. In fact, the level of exposure in some cases is so worrying that it justifiably raises concerns that what happens in Turkey won’t just stay in Turkey.


Spain’s banking sector is one of very few in the European bloc that was so far considered not to be problematic; especially in comparison to Italian or Greek banks. However, the exposure of Spanish banks to Turkish debt means that the currency and debt woes of Europe’s neighbor have decisively challenged these assumptions. Spain’s second-biggest bank, BBVA, controls 49.9% of Turkish bank Garanti, which has already reported a rise in non-performing loans. Spanish banks also led the lending spree to Turkish businesses over the past years, rendering them vulnerable to the spiking default risk.

Although Spanish banks were by far the greatest lenders for Turkey, French, Italian and German banks also have significant exposure to Turkish debt. This already became problematic from the onset of the Turkish woes this past summer, when investors dumped Eurozone bank shares and prices suffered significant blows. Among the worst hit were BBVA, Unicredit, and PNB Paribas. Yet still, a blow to the stock price is nothing compared to the damage that a sustained currency crisis and rising default risk can inflict to the already vulnerable European banking sector.

Key Lessons

Overall, Turkey’s woes are yet another important and timely reminder of the frailty of the current monetary system and of the banking sector, as well as of the systemic weaknesses and inevitable unsustainability of a centrally planned economy and of fiat money.

After all, the lira’s value, as that of any other fiat currency, depends on the trust the people place in its issuer. Once that is lost or even shaken, no measures and no force applied by the central planners can stabilize it. We saw that play out over the last months in Turkey, with the government trying a wide variety of approaches to control the currency’s fall, to no avail. That clearly demonstrated the flimsy and fickle nature of the entire system.

As the Turkish currency collapsed, demand for gold more than doubled in the country, while gold priced in lira reached all-time highs, as is to be expected in times of crisis. Erdogan’s public calls for citizens to sell the “gold under their pillows” and buy lira to help defend the country against the “economic attacks” from the outside were clearly ignored. Consumers flocked to the precious metal in response to the deteriorating fiat currency and gold imports to Turkey increased eightfold last December, while the Turkish central bank itself also dramatically increased its official reserves over the last two years.


As the country now joins the long list of nations that came to regret reckless interventionism and aggressive monetary manipulation, it also sends a strong message to those investors who are wise enough to heed it.

Excerpted From a Two-Part Series at
Categories: Current Affairs

CJay Engel on the Entrepreneurial Life

Mises Institute - Wed, 22/05/2019 - 15:25

The entrepreneurial life is good for the individual, the family, society and civilization. Whether your entrepreneurial undertaking is something small or something huge, or somewhere in between, doing something entrepreneurial, utilizing your own resources, benefits others and is therefore heroic.

Show Notes

Successful entrepreneurs should not be called upon to “give back” to society. The entrepreneurs’ role itself is socially beneficial. They make money by producing goods and services that consumers value more than the money they pay to acquire them. Society — in the form of the market — has its own feedback loop to tell the entrepreneur whether or not value is being created for others: profit is the signal that society is experiencing value, and loss is the signal that the entrepreneur got it wrong and is not creating value. There is no need for a bureaucrat to tell us.

But you don’t need a social purpose or a change-the-world idea, or even a monetary goal to be an entrepreneur. Just get started. C Jay Engel started straight out of school. Entrepreneurship was stability; bread and butter. He had skills in project management and found that people needed those skills, and he developed a consulting business. He was able to try to expand in other areas, which took him into technology; successes and failures were part of the recipe, as was fun. He enjoyed himself and was able to develop as a person.

The pursuit of higher values can come later, when your entrepreneurial business matures and stabilizes. Initially, C Jay focused on what was immediately in front of him. Plans shift quickly and new directions open up, and agility is required. You can’t plan your entire entrepreneurial life at the outset. Now — still in his thirties — he is able to reflect on what he calls “grander things”, like the legacy he will leave to his kids. Not the financial one, but the kind of world he can contribute to, that they will live in. He likes to think that there are hundreds and thousands of entrepreneurs all over the world doing the same thing to help bring about that good world. It’s an exciting and inspiring spontaneous order: entrepreneurs making a better world by helping individuals.

Is entrepreneurship especially arduous? It can be. Think of Elon Musk. The task of getting people to Mars to establish a colony is pretty arduous. It’s less so if you’re setting up a consulting shop. But there is uncertainty to grapple with, and doing so requires a certain mindset. It’s a learning process, and trying different ways to handle uncertainty in the multiple different ways you’ll encounter it makes you a better, more developed person. Constant self-awareness helps you realize what you need to do to handle conditions of uncertainty.

Does that mean that a special set of personal attributes is required to be an entrepreneur? Is there a personality test? We’ve had a number of guests talk about elements of entrepreneurship, like a bias for action, risk mitigation, and brutal determination. But these are patterns of behavior more than they are personality traits. C Jay’s advice is: just do it. Examine yourself along the way and you’ll find out your strengths. And when you find that there are places where you can strengthen yourself (or your team), that’s what other people are for. You can’t be highly successful without engaging other people, so focus on that rather than on any so-called “weaknesses” you may be told you have.

Technology helps you assemble not only your team, but also a full set of entrepreneurial resources. The entrepreneurial economy is highly collaborative. Whether it is Upwork or LinkedIn or Alibaba or Amazon, technology can help you assemble a team, a full set of resources and a supply chain. You can find marketers and accountants and engineers and interconnect them all over the globe or locally, in a team. Team building and team motivation are core skills (and can be a limiting factor). Self-reliance does not mean the same thing as it did in the past. The rugged individual is not the driver of the market economy. In fact, the entrepreneurial economy is highly collaborative — self-supporting rather than self-reliant. Any capital you acquire depends on the entrepreneurs in the earlier stage who produced it for you, in anticipation of your needs. Price signals from other entrepreneurs guide you. No entrepreneur is alone. The invisible hand is actually visible — it’s the price mechanism connecting you to all the people and all the resources in the world.

How do we communicate this narrative to the world? The socialists are better at marketing than the entrepreneurs. Such harsh words are used about profit, and yet it is the social signal of approval. People who are benefiting from capitalism, like Hollywood celebrities and Silicon Valley billionaires, do not understand capitalism and decry it. What should entrepreneurs do? Just keep working at entrepreneurship. Keep making life better for customers and everyone else. It’s also healthy to reflect on how you are benefiting people around you. If you have a chance to say something or write something and share an idea then take it. Doing so is itself an act of entrepreneurship. Our message will emerge from the communication efforts of individuals.

C Jay Engel himself has started Austro Libertarian magazine. It’s a new publication located somewhere between the academic rigor of QJAE and the shorter articles of Mises Daily. Original content in longer form articles, in your choice of digital or a beautifully designed and printed physical magazine. For C Jay, starting a magazine is another example of economic action rather than political action.

Categories: Current Affairs

Piracy and smuggling helped spark Britain's Industrial Revolution

Adam Smith Institute - Wed, 22/05/2019 - 14:09

Why did the Industrial Revolution begin in Britain and not elsewhere? Was it because Britain was an empire with resource-rich colonies? The economic liberalism of the British? Or factors “at home” like institutions, property rights, private property and abundance of coal mines in the North?

All of these factors contributed some extent. But if we think of other places or times with similar underlying features, such as Florence during the 16th century or Holland during the 17th century, we can see that the Industrial Revolution did not develop for these reasons alone. So, there must be more to the story, something that - together with the other factors - produced the Industrial Revolution.

A crucial, underappreciated factor was American demand from the Spanish territories and the associated piracy and smuggling in that part of the world. Without smuggling, the Industrial Revolution may never have happened.

Despite their historical reputation, most pirates did not live off hunting and pillaging ships. Pirates were largely dependent on attacking ports and settlements and facilitating illegal trade. Piracy was very profitable during the 16th and 17th centuries. But, once the British colonies flourished, piracy started being prosecuted more systematically. Traditional piracy declined by the end of the 17th century, leading the pirates to refocus their efforts on the booming smuggling industry. This lead to the Golden age of smuggling.

After the Treaty of Utrecht (1713), Britain was issued an Asiento licence by the Spanish Crown, allowing them to trade with Spanish territories through the South Sea Company - with 4,800 slaves annually for 30 years, and one cargo ship per year. Jamaica was the principal base for operations. This English company was quite profitable, even more so when it was done illegally. It was thought to control as much as one-third of the contraband in the Americas.

Precisely measuring the amount of smuggling is impossible - but historians have estimated that illegal trade by the South Sea Company reached at least 5.5 million pounds between 1730 and 1739. Additionally, there are the unknown figures of what was smuggled by third parties (directly or indirectly related to the South Sea Company), which would increase the total numbers. This is an extraordinarily high amount of money: 5.5 million pounds in 1713 is equivalent of 150 billion pounds today. So we can see the huge impact on the Spanish/American economy as a direct consequence of the contraband of a company like the SSC.

But let’s also consider the economic impact for Great Britain.

What happened when the SSC lost its right to trade in the Spanish territories? Well… the smuggling continued. The area between the Campeche Bay and Costa Rica became a home for illicit trade. It was in the region of Mosquito: 50 to 60 vessels annually sailed from Jamaica towards Belize and during 1762, the year when La Habana was occupied by the British, 96 merchant ships docked there instead of the 3 as was usual. Additionally, the Río de la Plata and the route of Buenos Aires were identified as an ideal way to introduce English manufactures, that would easily reach Peru and Chile.

So while Spain based the commerce between the peninsula and the American provinces in a monopoly system that benefited the monarchy, Sevilla and Cádiz but not much more, Great Britain looked to satisfy the American demand through legal trade, but also more profitably through smuggling.

Between 1740 and 1760, we already find the beginnings of the Industrial Revolution. But in the same time frame, there were other contributing factors:

  • The Seven Years War (1756-1763), that meant Great Britain annexed Canada from France, and the decline of the French presence in the Caribbean.

  • The opening of four free British ports in Jamaica in 1765.

  • The American War of Independence (1776-1783), which meant for GB the loss of the colonies.

  • The publication of An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith in 1776 and the spread of economic liberalism.

Taking into account this context, if the Industrial Revolution was already ongoing when commerce started being “liberalized” with America opening ports, and when the colonies took their independence, then it doesn’t appear that the Industrial Revolution was caused by economic liberalism alone (even if, for sure, the ideas contributed to its acceleration). Nor is it accurate to say that the Industrial Revolution was caused by the circumstances of the colonies in the north.

So, then, why did the Industrial Revolution happen in Great Britain? Of course, contributing factors as already mentioned as well as money from America used to invest in industries/machinery are to be taken into account. But, above all, it was because Great Britain was the nation that answered most effectively to the existing American demand.

Great Britain detected the growing unmet demand and responded, and it was through regular smuggling that the demand could be fulfilled. This commercial opportunity, provided by the market and the smuggling, led Britain to develop production capabilities and capacity that was essential for the Industrial Revolution.

Dr Lorena Carrasco is at the Universidad Francisco Marroquín (UFM) in Guatemala. She has a PhD in Medieval History and is a member of London Royal Historical Society and Asociación Española de Amigos de los Castillos.

Categories: Current Affairs

The Great Society

Adam Smith Institute - Wed, 22/05/2019 - 12:01

Fifty-five years ago, on May 22nd, 1964, President Lyndon Johnson announced his Great Society program at Ann Arbor, Michigan. Its scope was breathtaking, aiming at nothing less than the total elimination of poverty and racial injustice in the United States.

Fundamentally, it came down to a series of spending programmes that aimed to tackle shortcomings in education, healthcare, transport, and the problems faced by people in cities and rural areas. Johnson had small working parties of about half a dozen people, working in secret so their initiatives would not be “derailed by criticism.” This meant that shortcomings, which might have been recognized and addressed as the programmes were being planned, were not identified and rectified.

In practice this involved vast spending schemes. The “war on poverty” started with a $1 billion appropriation in 1964 and then another $2 billion in the following two years. It involved dozens of programs such as the Job Corps, to help disadvantaged youths develop marketable skills, the Neighborhood Youth Corps, to give poor urban youths work experience, and the Economic Opportunity Act of 1964, designed to help young people from poor homes gain access to job training and higher education.

Its well-meaning, but ill-thought-out, idea was but to help the poor better themselves through education, job training, and community development, and to have them participate in the development of the programmes designed to help them.

It did food stamps, Medicare and Medicaid, and granted billions of dollars for states to spend on everything from educational research to library books and school buses. It provided money for slum clearance and urban regeneration. It tackled every perceived problem by providing vast sums of money to address it. While it undoubtedly achieved some positive results, critics pointed out that its biggest achievement was the creation of a giant bureaucracy that attempted to step into every aspect of American life, and to guide and steer it. They further claimed that the results it achieved were tiny compared to the input of effort and resources. Milton Friedman famously described such state welfare progammes as akin to throwing silver dollars at a barn door in the hope that some would slip though the knot-holes.

Critics from the Left suggested that its shortcomings were down to not enough money being spent, and blamed its failures on the Vietnam War sucking up the funds it needed. In retrospect it was a much-hyped failure, big in intentions, but poor in its outcomes. The monies diverted to fund it could almost certainly have achieved more in terms of economic growth and the opportunities this brings for advancement of poorer and underprivileged people, including ethnic and racial minorities.

The lessons are perhaps that big often doesn’t work, and that small-scale, carefully targetted efforts involving voluntary and private sector participation can be more efficacious. The legacy of the Great Society is with America still, in the form of costly entitlements that cannot be funded in the future, and which all politicians kick down the road for the next generation to solve.

Categories: Current Affairs

The Greenpeace protestors rather misunderstand the purpose of a company like BP

Adam Smith Institute - Wed, 22/05/2019 - 07:01

There’s always an amusement to watching those who have no clue trying to discuss a technical subject. It’s that old joke about the typist trying to use tippex on the screen come to life. So it is with the Greenpeace activist trying to tell us all what should be done with BP. Or what BP should do perhaps:

So what should BP do? It should go 100% renewable, starting with abandoning all of its fossil fuel exploration plans, today, and become part of the solution to the catastrophic problem it has caused.

This is to entirely fail to understand Coase on the existence of the firm - as well as other bits and bobs of economics.

The firm exists to perform a task. The form of that firm will depend upon the task to be undertaken and the technology and structure of the economy around it. Whether a firm even exists - instead of a shifting network of contractors - depends upon those things.

All of which means that if we change the task then that current firm becomes an irrelevance.

We can approach the same point from the other way. BPs varied assets are optimised to the extraction of, transport, refining and marketing, of fossil fuel products. These are all done in markedly different manners than anything to do with renewables. We shouldn’t, wouldn’t and can’t repurpose them to building, say, solar panels. To think that “energy provider” equals “energy provider” is to think that the toy scooter maker should be building jumbo jets - they’re both transport, right?

Further, all that implicit and explicit knowledge within the company is about those fossil fuels. BP actually sold off the division that knew anything about polycrystalline silicon decades back.

If we have some new task that needs to be done then we need that new organisation, in whatever different form, to do that new task. The idea that oil companies should up and build windmills is absurd.

Categories: Current Affairs

Verdict against Christians convicted for discussing Christian doctrine upheld on appeal

Anglican Ink - Tue, 21/05/2019 - 21:50

An Iranian court has upheld a verdict issued against Iranian Christians Saheb Fadaie and Fatemeh Bakhteri, four months after their final appeal hearing on 15 January in Tehran.

Mr Fadaie and Ms Bakhteri were sentenced to  18 and 12 months in prison respectively on 22 September 2018. Mr Fadaie also received an additional two years in internal exile in Nehbandan, a remote area close to the border with Afghanistan. Both were found guilty of “spreading propaganda against the regime.” Local sources reported that the verdict confirming the sentences claimed that discussions of Christian doctrine held in house churches were considered attacks on Islam.

During their final appeal hearing in January, Mr Fadaie and Ms Bakhteri were asked by presiding judges Hassan Babaee and Ahmad Zargar to renounce their faith, but had refused to do so. They were subsequently told to expect a verdict within the next few days. On Saturday 18 May they were both notified that their sentences had been upheld.

Saheb Fadaie is already serving a 10 year sentence in Tehran’s Evin prison, following his arrest along with fellow members of the Church of Iran denomination, Pastor Yousef Nadarkhani, Mr Mohammadreza Omidi and Mr Yasser Mossayebzadeh on 13 May 2016, during a series of raids by security agents on Christian homes in the city of Rasht.  In July 2017, all four received 10 year sentences ‘for acting against national security’ by ‘promoting Zionist Christianity.’ Their sentences were upheld in May 2018, again by judges Hassan Babaee and Ahmad Zargar.

For over a year prior to her sentencing, Fatemeh Bakhteri, 37, had been subjected to harassment by security agents and was summoned for interrogation on at least one occasion. On 25 May 2017, several people were arrested during a police raid on her home.

CSW’s Chief Executive Mervyn Thomas said: “These sentences constitute a grave violation of Iran’s constitutional and international legal obligations, and are illustrative of the heightened campaign of repression that has seen Christians receiving excessive charges and sentences merely for manifesting their religion in private and in community with others. Many more are being punished for adopting a religion of their choice, which is protected under Article 18 of the International Covenant on Civil and Political Rights, to which Iran is party. Moreover, the effective designation of Christian doctrine as an attack on Islam amounts to the criminalisation of the Christian faith. CSW urges the Iranian authorities to ensure the immediate and unconditional release of Saheb Fadaie, Fatemeh Bakhteri, and all who have been arrested or imprisoned unjustly, and to end the harassment of peaceable religious communities.”

The post Verdict against Christians convicted for discussing Christian doctrine upheld on appeal appeared first on Anglican Ink © 2019.

Diocese of Colombia assisting refugees fleeing Venezuela

Anglican Ink - Tue, 21/05/2019 - 21:30

Episcopal Relief & Development is supporting the Episcopal Diocese of Colombia in providing assistance to migrants displaced by the ongoing political crisis in Venezuela.

According to the UN, over 94% of the population of Venezuela is now living in poverty. More than 1 million Venezuelans have sought refuge over the border in Colombia. Half of these refugees are between the ages of 19 and 29.

With the support of Episcopal Relief & Development and the diocese, Christ Nativity Church is developing a ministry to support Venezuelan migrants and others in vulnerable situations due to the political climate. Church volunteers distribute food weekly to Venezuelans living in the areas surrounding Bogota, feeding over 150 families to date. They have also provided clothing, food and medical supplies to over 900 refugees passing through en route to other areas of Venezuela. Additionally, the church is using the parish property and other resources to provide shelter to migrants in need.

“Episcopal Relief & Development is working with our partners to provide tangible aid for the Venezuelans who have sought refuge over the border in Colombia,” said Nagulan Nesiah, Senior Programme Officer for Episcopal Relief & Development. “By providing humanitarian services and supplies such as food, medicine and clothing, we are demonstrating God’s love to them. We continue to pray for all those impacted by this crisis.”

Please pray for all those affected by the ongoing crisis in Venezuela. Donations to the International Disaster Response Fund will help Episcopal Relief & Development continue to support a response.

The post Diocese of Colombia assisting refugees fleeing Venezuela appeared first on Anglican Ink © 2019.

Bishops participating in the Council of Anglican Provinces of Africa’s orientation commit to leadership towards malaria elimination

Anglican Ink - Tue, 21/05/2019 - 18:40

The Council of Anglican Provinces of Africa (CAPA) has included the role of clergy in malaria elimination within its orientation for new bishops, which is taking place from 13-21 May 2019 in Embu, Nairobi.

Recognizing that accountable and selfless leadership are keys to Africa’s flourishing, CAPA’s orientation of new bishops and their spouses revolves around the theme “Transformational Leadership” and addresses topics such as enabling leadership in an ever-changing context, nurturing a healthy church, managing transitions, resource mobilization, and malaria elimination.

Representatives from the J.C. Flowers Foundation trained the participants about malaria transmission and strategies for prevention, treatment, and community mobilization. Constance Njovu, J.C. Flowers Foundation Regional Coordinator, noted that “these bishops come from across the African continent and all have very significant leadership roles. They have caught the vision of malaria elimination, and as they begin working with the Ministries of Health on malaria elimination, the priests in their dioceses will follow their lead. As a result, many people will be saved from malaria and from malaria deaths.”

Chris Flowers, Founder of the J.C. Flowers Foundation and Co-Founder of the Isdell: Flowers Cross Border Malaria Initiative, commenting on the critical role of the church, noted “I am delighted that these CAPA bishops have prioritized malaria, which still kills a child every two minutes. I visited a village in Zambia, and in this very remote place, the only organized institution was an Anglican Church. There was an expected, trusted pastor. These are essential. You can have fantastic science, you can have fantastic medicine, you can have nets delivered, but unless they are deployed correctly and people are trained on how to use them and to recognize when to go for treatment, it’s all in vain. The church provides a unique, trusted network to get that last mile.”

CAPA bishops recognized the church’s strategic role in helping families protect themselves from malaria. The Right Reverend Moses Deng Bol from the Diocese of Wau, South Sudan, noted that “In South Sudan, if you want to share any information with a big number of the population, use the church. Few people have radios because people need food more than a radio. Who interacts with the most people on a weekly basis? It’s not the chief. It’s the pastor. Maybe through media the President of the country can reach people, but it’s the pastors who reach the most people.”

The gathered bishops also recognized the opportunity that they have as trusted leaders, working in areas with significant malaria burdens. The Right Reverend Vicente Msosa from the Diocese of Niassa, Mozambique, expressed his conviction by noting, “the fact that our communities still have malaria means that we as faith leaders have failed. We didn’t realize malaria elimination was possible.   But we can mobilize communities to eliminate malaria, and that is our task. We can do it, and we must do it.”

Like Bishop Msosa, the Right Reverend Erick Ruwona from the Diocese of Manicaland, Zimbabwe, serves in a country that is part of the SADC Elimination 8. He immediately began thinking practically about his own role: “Just as the rainy season begins and malaria increases, I can gather my clergy and help them understand why using nets and accepting spraying is so important. They can teach their congregations.”

The Rev. Canon Grace Kaiso, General Secretary of CAPA, closed by encouraging the bishops: “As a church, we are concerned about issues that affect the quality of life of people in our communities. I’m looking forward to hearing who of you begins putting a malaria-free diocese on your agenda.”

The orientation included bishops from seven Anglican Provinces within the Anglican Communion.

The post Bishops participating in the Council of Anglican Provinces of Africa’s orientation commit to leadership towards malaria elimination appeared first on Anglican Ink © 2019.

The Unseen Costs of "Medicare for All"

Mises Institute - Tue, 21/05/2019 - 17:35

Most of the attention on Bernie Sanders’ proposed “Medicare for All” plan has focused on the financial costs of its implementation.

This is understandable, given that some estimates project costs to exceed $32 trillion over its first ten years, and that Medicare is already suffering massive losses – more than $130 billion since 2008 – along with facing unfunded liabilities in excess of $30 trillion.

But what about the non-financial costs like doctor shortages, foregone treatment due to lack of access to care and tens of thousands of deaths due to overly aggressive care?

Will Supply Meet Demand?

Basic economics, and common sense, tells us that when the marginal cost to the consumer for a good or service at the point of sale is reduced to zero, demand will increase significantly.

Under Sanders’ Medicare for All plan, there will be no payment made by patients when they receive treatment. Medical care consumers will no doubt make more frequent visits to doctors, specialists and emergencies rooms – often times for unnecessary treatments – because, after all, it won’t cost them anything.

[RELATED: "Single-Payer Healthcare Is the Worst Kind of Universal Healthcare" by Ryan McMaken]

Moreover, because people will be taxed to help finance the plan and pay the same amount of tax regardless of their usage, people will feel obligated to “get their money’s worth” and flood doctors’ offices with more frequent check-ups and testing.

The question then becomes: will there be sufficient supply to meet this spike in demand?

Most indicators say no.

According to the American Association of Medical Colleges, the U.S. can expect a doctor shortage of up to 120,000 physicians by 2030, thanks in no small part to our nation’s rapidly growing senior citizen population – and this is without factoring in accelerated demand by Medicare for All.

Doctors are already struggling to keep up with current demand. According to this 2018 survey by the Physicians Foundation, a stunning 80 percent of physicians claim to be “at capacity or overextended.”

The future doesn’t look bright, either. A 2016 Physicians Foundation survey found 48 percent of physicians planning to cut back hours, retire, or take other steps toward limiting patient access to their practices.

Burnt out and semi-retired doctors is not a reliable pool of providers upon which to throw a sizeable spike in demand for services that Medicare for All would usher in.

Pay Cuts Would Make the Shortages Worse

Medicare reimbursement rates fall well below the costs of providing care. In 2017, payment shortfalls to hospitals for Medicare services totaled a whopping $54 billion.

In treating Medicare patients, hospitals only receive about 87 cents in reimbursement for every dollar they spend in care.

If all patients become Medicare patients, how will medical providers stay in business?

Indeed, Medicare reimbursements have been estimated to be 40 percent lower than private insurance payments.

If you think the doctor shortage is bad now, what will happen when doctors are forced to take a 40 percent pay cut on all their former private insurance patients?

Lack of Access Will Bring Unhealthy Results

With greater demand straining a system with dwindling supply, a new cost to patients will emerge: time.

Wait times will inevitably increase substantially, bringing with it a human toll in the form of prolonged suffering of symptoms as well as the mental anguish over the uncertainty that comes with a lack of regular access to care.

And an inability to schedule check ups and other preventative services on a regular basis will cause patients to delay seeking care and treatment, resulting in greater suffering and preventable deaths.

Moreover, like underage college kids who binge drink on the unpredictable occasions they are able to score beer, when patients finally do see a doctor they will be more likely to seek overly aggressive care and excessive testing and treatment. After all, there’s no telling when they’ll get another appointment, and it’s free.

Excessive testing and treatment is already a significant problem in our current system which features a majority of medical services being paid for by a third party. According to this Health Care Finance News article, “Some experts estimate that at least $200 billion is wasted annually on excessive testing and treatment.” Compare this to the roughly $30 billion in charity care for the uninsured we hear so much about as supposedly being a major driver of rising healthcare costs.

Even more significant is the harm caused by overly aggressive and excessive treatment, which generated “mistakes and injuries believed to cause 30,000 deaths each year.”

Imagine the added financial and human toll of excessive care if we transitioned to a Medicare for All system.

Black Markets Will Cause Unequal Treatment

One of the purported benefits of a Medicare for All plan is that it would make access to quality care more equitable. When everyone is covered, the poor will have the same level of care as the rich, goes the argument.

But doctor shortages and long lines under Medicare for All will make access to care exceedingly rare, and in high demand. Such conditions would create a black market in which the rich would pay under the table for quicker service and to avoid the Medicare line.

The rich would have timely access to quality care, while the poor would be left to compete against each other for what little facetime they can get with a doctor. The goal of equity will be unfulfilled.

Myth of Administrative Cost Savings

Advocates of Medicare for All claim that big administrative savings will allow more generous payments to doctors, and thus help avoid shortages. No worries about long wait times and a lack of access to care, they assure us.

But such hopes are fool’s gold.

Most of the projected administrative cost savings are based on faulty interpretations of data. Medicare for All supporters point to data showing that Medicare administrative costs are lower than those of private insurance companies – as a percentage of total costs per beneficiary.

But Medicare patients tend to be older and sicker, and Medicare spends nearly two and a half times more per beneficiary compared to private insurance plans. Calculating administrative costs as a percentage of costs of care paints a highly misleading picture.

Indeed, according to this Heritage Foundation analysis, administrative costs per person are about 12 percent higher in Medicare compared to private insurance.

Switching millions of people from private insurance onto Medicare will drastically increase administrative costs, making it even less likely for Medicare to adequately reimburse doctors and hospitals.

Moreover, when scarce resources are allocated by government bureaucracy rather than the market price mechanism, rationing by administration tends to take over.

As shown in the chart below, thanks primarily to the federal government’s increasing intervention into the healthcare market, the number of healthcare administrators has exploded by more than 3,000 percent since 1970, compared to a growth of physicians of less than 200 percent.

hysicians.jpg Conclusion

The well-reported price tag for Bernie Sanders’ Medicare for All plan is eye-popping. But of greater concern is the unseen price that will be paid in the form of human suffering and even death as a result of doctor shortages, lack of access to care, and overly aggressive “binge” treatment and testing.

Questions about how to pay for this single-payer plan can be easily answered in the minds of many with the old mantra “tax the rich.”

But how to answer for the human toll of Medicare for All is a far more difficult chore for advocates. Opponents would be wise to make these unseen costs far more visible.

Categories: Current Affairs

Tucker Carlson and AOC Are Wrong About Christianity and Usury

Mises Institute - Tue, 21/05/2019 - 14:25

Recently the nominally conservative, but increasingly populist firebrand Tucker Carlson joined self-proclaimed socialists Representative Alexandria Ocasio-Cortez and Senator Bernie Sanders in calling for a federally-imposed 15 percent cap on interest rates. In a livestream video introducing their new bill, the Loan Shark Prevention Act , the two legislators lashed out against credit card companies and the payday loan industry for engaging in “predatory” behavior.

“[T]hey are absolutely, indisputably right,” Carlson declared on his Fox News show. But the measure is not a uniquely progressive idea, Carlson was quick to note. Bans on “excessive” interest rates, otherwise known as “usury,” have been in place throughout human history. “There’s a reason why the world’s great religions condemn usury...High interest rates exploit the weak,” Carlson asserted.

Congresswoman Ocasio-Cortez joined Carlson in citing religious admonitions against lending at interest. She naively and bizarrely attempted to catch Christians in their alleged hypocrisy, tweeting, “Usury - aka high interest - happens to be explicitly denounced in the Bible...Looking forward to having the religious right uphold their principles + sign onto my bill.”

While Carlson and Ocasio-Cortez are technically correct when they claim that Christians have condemned usury in the past, they have left out the other half of the story. It was primarily Christian thinkers, working within new market-based paradigms, who demonstrated that the collection of interest was not actually sinful and, what’s more, that its prohibition was economically irrational.

The “Sin” of Usury

The first thing to note is that, contra AOC’s claim, the Bible does not define usury simply as “high interest.” In reality, up until the Late Medieval Period, usury was understood as charging any interest whatsoever and did not come to be widely defined as “excessive interest” until much later.

Christians inherited their suspicion of usury from Judaism. The Torah makes multiple injunctions against the collection of interest (see Exodus 22:24, Leviticus 25:36-37, Deuteronomy 23:19, among others). Though most of these passages forbid charging interest to fellow Jews, it was permitted to lend at interest to foreigners.

Christians, however, made no such exception. Medieval philosophers were almost universally agreed that the mere collection of interest, at any rate and to any person, constituted a serious sin. Scripture seemed clear in its denunciation of the practice: the Psalmist praised the just man who “does not put out his money at interest” (15:5). This verse was a favorite amongst Church officials and theologians who argued vehemently in favor of usury prohibitions. No serious attempt was made, however, to reconcile a strict prohibition on usury with Christ’s seemingly implicit acceptance of the practice in His “Parable of the Talents” (Matthew 25:14-30).

For the first few centuries of Christian rule in Europe, usury was regarded as a sin of avarice and was forbidden in all cases. Only a greedy and uncharitable soul would demand to be paid interest on a loan given to the needy. Christ Himself asked that His followers lend to their neighbors, asking nothing at all in return (Luke 6:35). Several early Church councils thus condemned clerics for lending at interest; laymen too were castigated for this “shameful gain.” In time, secular authorities would ban usury as well.

It’s easy to understand why usury was so despised. In the subsistence economies of the Ancient and Medieval eras, loans for the majority of people were often only necessary in times of great need or distress. Under these circumstances, the moral response was not to seek profit from the poor, but to offer charity. To expect repayment for what ought to be charity was one thing, but it was a grave sin “when more is asked than is given,” as one Medieval text put it.

Defending Usury

Changing economic conditions during the 13th and 14th centuries, however, induced Medieval authors to rethink the issue of usury. New commercial enterprises increased the demand for credit while raising significant questions about the morality of profits. Loans were no longer predominantly given in times of emergency or to the poor, but also to middle-class merchants. It was now difficult to argue that charging interest was always “uncharitable.”

Contemporary opinions differed as to when usury was morally acceptable. While some exceptions were allowed, most theologians and philosophers still considered charging interest to be an unnatural and exploitative transaction. Profits on the sale of goods and services, meanwhile, were not condemned. Farmers, manufacturers, and merchants created real value and were thus entitled to the fruits of their labor. Moneylenders, on the other hand, reaped profits off of their “idle money.” St. Albert the Great (1193-1280) expressed the commonly-held view that “the usurer without labor, suffering or fear gathers riches from the labor, suffering and vicissitudes of his neighbor.”

Other Medieval thinkers, however, disagreed with this premise. It was simply not true that lenders suffered no “fear” when they extended loans, some argued. In his 1499 treatise, German theologian Conrad Summenhart (1465-1511) pointed out that lenders always had to fear that they would lose money if the borrower defaulted. This observation was made more forcefully by the Spanish Franciscan monk Juan de Medina (1490-1546) who reasoned that exposing one’s property “to the risk of being lost, is sellable, and purchasable at a price, nor is it among those things which are to be done gratuitously.”

It took many decades, but the assumption of risk slowly became recognized as a legitimate justification for charging interest. Despite this, most writers, not wanting to abandon traditional Church teaching, still held that lending at interest was immoral for so-called “risk-less” loans. But even if such a loan existed (and it almost certainly does not), risk is not the only consideration a lender has when loaning money.

Near the end of the 13th century, the distinguished canonist Cardinal Hostiensis recognized that there is a clear opportunity-cost to lending money. Charging interest would allow the creditor to be compensated for any profit he could have made if he had invested his money elsewhere, a doctrine known as lucrum cessans (profit ceasing). Hostiensis strangely did not apply the doctrine to professional moneylenders, but only to those who make loans as charity. Cardinal Cajetan (1468-1534), on the other hand, taught that lucrum cessans justified any loan made to businessmen, though not to consumers.

It would not be until the early 17th century before a Christian thinker would eliminate all restrictions on lucrum cessans. In 1603, Flemish-born theologian Leonard Lessius (1554-1623) wrote that the burden of compensating the lender for his forgone profit may be assigned to the debtor in the form of interest. As economist Murray Rothbard noted , “this meant that Leonard Lessius justified not only businessmen or investors planning to invest their money, but also any people with liquid funds, including professional money-lenders.” Cardinal Juan de Lugo (1583-1660) declared that the doctrine of lucrum cessans is “the general title for purging usury.” After centuries of intellectual scrutiny, many were beginning to realize that the traditional Christian ban on usury, while still officially in force, was nothing more than a “hollow shell.”

So, What is the Christian Perspective on Usury?

Few if any modern Christians would oppose lending at interest. In spite of her direct (and disingenuous) appeal to Scripture, most Christians recognize that AOC’s strictly literalist interpretation of Biblical teachings on usury is sorely lacking. A more nuanced perspective would reveal that these passages condemn lending at interest only to the destitute. Loans were made to people who were likely well-acquainted with each other. The Old Testament authors did not and could not anticipate the complicated and multifarious financial services which have developed over the past several centuries. And what they could not know about, they could not denounce. As Albert R. Jonsen and Stephen Toulmin write , the Biblical admonitions against usury “had lost their force because the general terms in which they were expressed could hardly cover the multiple kinds of transactions that passed for ‘loans.’”

Even then, not every Biblical passage on usury denounces the practice. In the aforementioned “Parable of the Talents,” Christ likens the judgment of God to a man who goes on a journey and entrusts his property to his three servants. Two of his servants increase their shares, earning a profit for their master. The third, however, buries his share in the ground. The master is furious and tells the unproductive servant: “Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury.” Jesus was, of course, not giving an economics lesson here; but it would be strange indeed if He were to compare God to a man who profits on usury if it were an immoral activity.

That being said, many Christians would probably agree that unusually high-priced loans to those in severe financial distress should still be considered morally suspect, and arguably evil if one consciously took advantage of the poor by charging an exorbitant amount of interest, especially to a friend, relative, or coworker. But if there is a uniform rate, applied to any debtor under any and all circumstances, above which all accrued interest is “excessive?” Is it 15 percent, as Ocasio-Cortez, Sanders, and Carlson believe? Even those who generally support price ceilings would admit that it would be ridiculous to apply the same maximum price to a diverse set of goods and services, so why should we expect financial products to all be similarly priced? Are all loans priced above 15 percent automatically “exploitative”?

At the Council of Trent in 1554, Father Juan Polanco recognized the complexity of the issue: “[I]t is extremely difficult to detect when...injustice takes place in commercial dealings…[T]he matter, being a question of morals, only admits of probability, because its nature is such that the least change of circumstances renders it necessary to revise one’s judgment of the whole affair.”

To impose a cap on interest rates, without any reference to the complex and varied financial arrangements individuals find themselves operating within, is consistent with neither Scriptural teachings nor with the past three-hundred years of Christian theology.

Categories: Current Affairs

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