Combs Spouts Off

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Posts Tagged ‘economics’

Purchasing power of dollar vs. gold

Posted by Richard on March 31, 2011

MineFund has a couple of graphs that every American needs to look at. The first shows the change in purchasing power for the US dollar from 1792 to today. The second shows the same for gold.

The relentless and near-precipitous decline in the value of the dollar after it was "unfettered" from gold is sobering. With the Federal Reserve creating new dollars ("monetizing the debt") hand over fist, what do you suppose that graph will look like a few years from now?

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Michael Moore vs. Abraham Lincoln

Posted by Richard on March 4, 2011

Fat cat (no pun intended) movie mogul Michael Moore, interviewed on something called Grit TV, has declared that the money of wealthy Americans isn't theirs, it's a "natural resource" that the government should seize and redistribute. I can't help but wonder why the interviewer didn't ask what Moore has done to redistribute the tens of millions of dollars of this "natural resource" that reside in his bank accounts.


[YouTube link]

Moore and those like him are guilty of two egregious errors. The first is an error of ignorance (willful ignorance, I'm tempted to say). They seem to believe that wealth (or money, which they seem to think is the same thing) is just a fixed pile of stuff that somehow, magically, exists — and that all that's necessary is deciding how it should be distributed. 

The second error is even more egregious, and it rests on the first — because it requires one to be ignorant of (or indifferent to) how and why wealth is created and even of the fact that there are those who create wealth. It's the moral error of believing that it's OK to take wealth from those who've created it to give it to someone else. As I noted, people like Moore can believe and justify this because they don't view those who've created the wealth as its creators, and thus don't view them as its rightful owners. Wealth just exists, or appears magically like manna falling from heaven, so it's a "natural resource" that we all collectively own.

Peter Wehner contrasted Moore's perspective with that of Abraham Lincoln, and quoted Lincoln: 

I don’t believe in a law to prevent a man from getting rich; it would do more harm than good. So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else. …. I want every man to have the chance — and I believe a black man is entitled to it — in which he can better his condition — when he may look forward and hope to be a hired laborer this year and the next, work for himself afterward, and finally to hire men to work for him! That is the true system.

Allowing individuals the chance to better their condition is a legitimate moral claim that citizens demand of government. Government’s goal should be to ensure equality of opportunity instead of equality of outcome; to work toward a society where everyone has a fair shot rather than one where government enforces equality.

This issue — equality of opportunity vs. equality of outcome — is one of the great dividing lines between modern conservatism and liberalism. If given the choice between the philosophy of Michael Moore and the philosophy of Abraham Lincoln, my hunch is that the public will side with Lincoln.

I think the public sided with Lincoln in last November's elections. I think — I hope — enough people understand that increasing the total wealth of our society depends on ensuring that people have the opportunity to create wealth. And that the redistributionist philosophy of Moore and those like him destroys that opportunity. And thus makes us all poorer in the long run. 

Besides, it's not just that it would do more harm than good — it's just plain wrong. The person who creates something that didn't exist before is the rightful owner of that creation. Calling it a "natural resource" and redistributing it is theft, plain and simple. 

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Don’t worry, it’s just a little quantitative easing

Posted by Richard on January 16, 2011

Wholesale prices surged 1.1% in December, but the experts assured us it was nothing to worry about. Most of the increase was just due to rapidly rising prices for things like food, gasoline, and home heating oil. And who needs those?

This might be a good time to review the experts' plan to "fix" our economy: more quantitative easing. 


[YouTube link]

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Broken window fallacy

Posted by Richard on August 9, 2010

Eyeblast.tv has a nice little video explaining Bastiat's broken window fallacy, the seen and the unseen, and why stimulus bills are a crock. Check it out.

If that motivates you to learn more, you can read the essay from which the broken window parable is taken, "That Which Is Seen, and That Which Is Not Seen," at WikiSource. You can learn more about the great Frédéric Bastiat (1801-1850), and find links to Bastiat's writings on the web, biographical material, etc., at Bastiat.org

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LeBronomics

Posted by Richard on July 9, 2010

Mark J. Perry thinks he knows at least one reason why LeBron chose to go to the Miami Heat:

Based on a $96 million, five-year contract, here's an estimate of what LeBron James would pay in state income taxes:

New York: $12.34 million

New Jersey: $10.32 million

Ohio: $5.69 million

Florida: $0.00

In an update, Perry acknowledged that that's an oversimplification. For away games, players owe taxes to the state they're visiting. But still … 

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Defending the rich

Posted by Richard on July 3, 2010

On the way home Thursday, I caught the tail end of Hugh Hewitt's interview of Ziad K. Abdelnour, President and CEO of Blackhawk Partners, a venture capital firm. I was impressed and made a note to look up the post by Abdelnour that they were discussing. Tonight, I finally got around to it. If you're only going to read one thing on the Internet this weekend, I urge you to read "Why we need the rich: A message to Americans – and our leaders in Washington DC – on wealth creation by a wealth creator." It begins thus:

It has an often repeated axiom that a person can learn a whole lot about a society by how it treats its poor. But just as much can be learned by looking at how that society treats its rich. Indeed, the economic future of the poor – and our nation – will be determined in the coming decades by how we treat the people in this country who create great wealth. It will be determined by our understanding of the so-called rich. And our ability to protect this minority. 

Please, please, please go read the whole thing. But if you won't, at least think about this: 

Socialist regimes try to guarantee the value of things rather than the ownership of them. Thus socialism tends to destroy the value, which depends on dedicated ownership. In the United States, on the other hand, the government normally guarantees only the right to property, not the worth of it. The belief that wealth consists not in ideas, attitudes, moral codes, and mental disciplines but in definable and static things that can be seized and redistributed is the materialist superstition.

It stultified the works of Marx and other prophets of violence and envy. It betrays every person who seeks to redistribute wealth by coercion. It balks every socialist revolutionary who imagines that by seizing the so-called means of production he can capture the crucial capital of an economy. It baffles nearly all conglomerateurs, who believe they can safely enter new industries by buying rather than by learning them. Capitalist means of production are not land, labor, or capital but minds and hearts.

The wealth of America isn't an inventory of goods; it's an organic, living entity, a fragile, pulsing fabric of ideas, expectations, loyalties, moral commitments, visions, and people. To vivisect it for redistribution would eventually kill it.

I'm reminded of Francisco D'Anconia's "Money Speech" from Atlas Shrugged. You should really read that, too. Please!

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Shattering the myth of the New Deal

Posted by Richard on June 18, 2010

Dr. Thomas Sowell:

Sometimes you can read a book that will change your mind on some fundamental issue.

Rarely, however, is there just one page that can undermine or destroy a widely held belief. But there is such a page — Page 77 of the book "Out of Work" by Richard Vedder and Lowell Gallaway.

The widespread belief is that government intervention is the key to getting the country out of a serious economic downturn.

Read. The. Whole. Thing. The page to which Sowell refers contains a table of month-by-month unemployment rates for the 1930s. As Sowell explains, that table irrefutably demonstrates that it was massive government intervention in the market, first under Hoover and then under Roosevelt, that aborted the recovery after the 1929 market crash and led to a decade of double-digit unemployment. 

"Those who cannot remember the past are condemned to repeat it."
— George Santayana, The Life of Reason

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Sowell and Williams on the health care vote

Posted by Richard on March 23, 2010

Two of my favorite living economists have slightly different takes on the House vote for government-controlled health care. Dr. Thomas Sowell, as I would have guessed, has a somewhat pessimistic take:

With the passage of the legislation letting the federal government take control of the country's medical care system, a major turning point has been reached in the dismantling of America's values and institutions.

Even the massive transfer of crucial decisions from millions of doctors and patients to Washington bureaucrats and advisory panels — as momentous as that is — does not measure the full impact of this largely unread and certainly unscrutinized legislation.

With politicians now having access to our most confidential records and having the power of granting or withholding medical care needed to sustain ourselves or our loved ones, how many people will be bold enough to criticize our public servants, who will in fact have become our public masters?

The corrupt manner in which this massive legislation was rammed through Congress, without any of the committee hearings or extended debates that most landmark legislation has had, has provided a road map for pushing through more such sweeping legislation in utter defiance of what the public wants.

Too many critics of the Obama administration have assumed that its arrogant disregard of the voting public will spell political suicide for congressional Democrats and for the president himself. But that is far from certain.

Dr. Walter Williams, predictably, is somewhat more optimistic: 

If there is anything good to say about Democrat control of the White House, Senate and House of Representatives, it's that their extraordinarily brazen, heavy-handed acts have aroused a level of constitutional interest among the American people that has been dormant for far too long.

Part of this heightened interest is seen in the strength of the Tea Party movement around the nation. Another is the angry reception that many congressmen received at their district town hall meetings.

Yet another is seen by the exchanges on the nation's most popular radio talk shows such as Rush Limbaugh, Sean Hannity, Mark Levin and others. Then there's the rising popularity of conservative/libertarian television shows such as Glenn Beck, John Stossel and Fox News.

 Read both columns, please. I think both make valuable points. I agree with Sowell that this is a terrible turning point, and one that could usher in a new era in which this country permanently abandons the ideals and principles that have made it unique among nations.

I also agree with Williams that there are reasons for optimism — that the brazen and outrageous nature of this bill's passage and the contempt Democrats have shown for the will of the people will serve to awaken the populace and lead to a wide-spread public reaction and "Constitutional reawakening." 

Of course, I hope Dr. Williams is right. But I won't just hope. I'll do what I can to help make it come to pass. 

I hope you will, too. 

And keep an eye out for that new Reagan or Thatcher, too. We could really use one. 

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Boudreaux bitch-slaps Obama on “rationing”

Posted by Richard on March 10, 2010

George Mason University Economics Professor Don Boudreaux wrote an open letter to the President on Monday, and it's a doozy. Enjoy:

CBS radio news this morning ran a clip of one of your recent speeches.  In it, you criticize insurance companies because they “ration coverage … according to who can pay and who can’t.”

My first thought was “not exactly; coverage is rationed according to who pays and who doesn’t.”  Ability to pay isn’t the same thing as actually paying, and what insurers care about is the latter.  Many folks – especially young adults – have the ability to pay but choose not to do so.  They get no coverage.

But further pondering of your point leads me to look beyond such nit-picking to see fascinating possibilities.  Not only insurers, but all producers who greedily refuse to supply persons who don’t pay should be set aright.  Now I’m sure that you don’t ration the supply of the books you write according to any criteria as sordid as requiring people actually to pay for them.  But our society is full of people less enlightened than you.

For example, the typical worker rations his labor services according to who pays and who doesn’t.  That must stop.  Oh, and supermarkets!  Every single one rations groceries according to who pays.  Likewise with restaurants, clothing stores, home-builders, furniture makers, even lawyers!  You name it, rationing is done according to who pays.  Indeed, my own county government has been corrupted by this greedy attitude: if I don’t pay my taxes, the sheriff takes my house – effectively booting me out of the county merely because I didn’t pay for its services.

Preposterous!

I look forward to your changing this selfish and unfair system of rationing that for too long now has kept Americans impoverished.

Of course! It's so simple! We could all be wealthy and happy and have every desire fulfilled if only the producers didn't insist on making us pay! I look forward to our enlightened socialist President putting Boudreaux's modest proposal into practice. "From each according to his ability, to each according to his need!"

What could possibly go wrong?

(HT: Carpe Diem)

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How to live like a millionaire

Posted by Richard on March 8, 2010

So you want to live like a millionaire? OK, but if you're living the typical upper-middle-class lifestyle, you'll have to give up some things. Like that big house and fancy car.

Thomas J. Stanley, Ph.D., is a former business professor who's been researching the wealthy for 30 years and has written numerous articles and best-selling books on the subject. He's conducted studies, surveys, and focus groups of millionaires. His latest book, Stop Acting Rich: And Start Living like a Real Millionaire, contains some interesting findings about millionaires (which he defines as people with investments worth at least $1 million, not including their home, personal property, etc.):

  • Three times as many millionaires live in a home worth less than $300,000 than one worth $1 million or more.
  • The most popular car brand among millionaires is Toyota. Almost 9 out of 10 owners of luxury cars aren't millionaires.
  • Almost two-thirds of millionaires have never owned a second (vacation) home. Even more have never owned a boat. Among those who at some point bought a boat, most sold it and never bought another one.
  • Millionaires are much more likely to wear a Seiko watch than a Rolex. If they're wearing a Rolex, they probably got it as a gift.
  • A millionaire's clothes typically come from J.C. Penney and the like. If it's from Saks or Brooks Brothers, it was probably purchased at 60% off. One exception: millionaires buy good-quality shoes (Cole Hahn, Allen Edmonds, etc.) and then have them resoled when needed.
  • The median price that millionaires pay for a bottle of wine is $13.

None of this should be shocking or surprising. The way to accumulate wealth is to accumulate — that means spend much less than you earn. But the people who think that the rich are the "winners of life's lottery" don't get it. They spend all they can. And then they buy a bunch of lottery tickets and hope for the best. 

It's not just a problem of the poor (although it's especially a problem of the poor, in particular the lottery tickets). That's why the country's full of people with $80,000 incomes facing foreclosure on their $500,000 homes.

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Through the Looking Glass

Posted by Richard on February 26, 2010

At The Corner, Veronique de Rugy asked the question, "Is That Really What Free-Market Means?"

This morning, the New York Times reported that the president "defended his spending, tax and regulatory initiatives as the natural response to a historic economic crisis," and declared himself an "ardent believer in the free market," challenging "a line of criticism that has fueled discontent with his presidency." Obama said "the policies of his first year in office . . . 'were about saving the economy from collapse, not about expanding government's reach into the economy.'"

If the president's policies are the policies of a free-market president, then I will never call myself free market again. I have to say, I've felt this way often in the last eight years, especially when President Bush declared "I've abandoned free market principles to save the free market system."

Also, according to Bloomberg News:

President Barack Obama said he and his administration have pursued a “fundamentally business-friendly” agenda and are “fierce advocates” for the free market, rejecting corporate criticism of his policies.

Why yes, this is what free-market means. At least when it's used by Barack "Humpty-Dumpty" Obama.

`I don't know what you mean by "glory",' Alice said.

Humpty Dumpty smiled contemptuously. `Of course you don't — till I tell you. I meant "there's a nice knock-down argument for you!"'

`But "glory" doesn't mean "a nice knock-down argument",' Alice objected.

`When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean — neither more nor less.'

`The question is,' said Alice, `whether you can make words mean so many different things.'

`The question is,' said Humpty Dumpty, `which is to be master — that's all.'

Alice was too much puzzled to say anything; so after a minute Humpty Dumpty began again. `They've a temper, some of them — particularly verbs: they're the proudest — adjectives you can do anything with, but not verbs — however, I can manage the whole lot of them! Impenetrability! That's what I say!'

Impenetrability, indeed.

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Global cooling forecast, Phil Jones considered suicide

Posted by Richard on February 11, 2010

I don't know that there's any connection between these two bits of news, but they're both from the same Daily Express story, and for some reason the juxtaposition gave me a chuckle:

Professor Michael Beenstock said theories of climate change are wrong.

He warned climatologists have misused statistics, leading them to the mistaken conclusion global warming is ­evidence of the greenhouse effect.

The economics professor from The Hebrew University of Jerusalem said that just because greenhouse gases and temperatures have risen together does not mean they are linked.

He claims that the real cause of ­rising temperatures is the sun, which he says is at its hottest for over 1,000 years but is “beginning to stabilise”.

Professor Beenstock said: “If the sun’s heat continues to remain stable, and if carbon emissions continue to grow with the rate of growth of the world economy, global temperatures will fall by about 0.5C by 2050.”

Citing predictions by climatologists in the 1970s of a new Ice Age, Professor Beenstock said: “I predict that ­climatologists will look equally foolish in the years to come. Indeed, it may be already happening.”

Some of the commenters quickly seized on the fact that Beenstock is an economist, not a climatologist, claimed he was from a "right-wing think tank" (Hebrew University?), and said the Express had no business presenting him as an expert on climate.

I disagree. The "evidence" for global warming consists of statistical output data from complex computer models analyzing statistical input data (carefully chosen and adjusted to "normalize" it — or to arrive at the desired conclusion, depending on whom you believe). An econ professor is typically quite expert in statistics, mathematics, and computer modeling, and is thus quite qualified to comment on the manipulation of data relating to climate change. Certainly more so than the IPCC honcho who is a sociologist, or a flamenco dancer, or something. 

Later in the story, we learn that the fallout from the first ClimateGate scandal (how many have there been now, four?) has taken its toll on the chief perp:

Meanwhile, Professor Phil Jones from the University of East Anglia’s Climate Research Unit – the expert at the ­centre of the Climategate scandal – said he had considered suicide and had death threats over leaked emails which appeared to show ­scientists rigging the data.

The story ends with this, apparently presented with a straight face: 

MPs have called on the Government to consider a carbon tax of £100 a ton “or higher” to force down greenhouse gases. But there are fears it could push up fuel and food prices.

Gee, higher fuel and food prices from a carbon tax — ya think? Really?

 

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A Hayek vs. Keynes rap

Posted by Richard on January 26, 2010

This is probably the coolest economics lesson you'll ever see:

Your focus on spending is pushing on thread
In the long run, my friend, it’s your theory that’s dead
So sorry there, buddy, if that sounds like invective
Prepare to get schooled in my Austrian perspective 

Brought to you by the wacky folks at Econstories.tv, where you can watch while following along with the lyrics, download a free MP3 or AAC of the song, learn more about Keynes and Hayek, and contribute to help them with future projects.

Full disclosure: I'm a long-time supporter of the Mercatus Center at George Mason University, which is behind this project, and thus helped fund it.

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Stimulus spending necessarily costs jobs

Posted by Richard on January 25, 2010

Veronique de Rugy graphed employment and labor force changes against the government's "stimulus" spending, and the results aren't pretty:

Using data from the administration’s website Recovery.gov and from the Bureau of Labor Statistics, this accompanying chart shows the monthly increase in the number of unemployed workers and the shrinkage of the civilian labor force in tandem with the administration’s stimulus spending. In other words, it shows how not only that many workers have lost their jobs since the administration started spending stimulus funds, but also that many more workers have exited the labor market. The civilian labor force shrinks when individuals who were looking for work or were employed decide that their labor market prospects are not good enough to keep looking for a job or to stay employed. For instance, some people might decide to go to grad school instead of keeping a poorly paid job, while others might decide to not seek a job and instead stay home with their kids. One reason for the shrinkage could be that the current economic state is so bad that workers feel it is not worth their time and energy to keep looking for a job when there is no hope in sight.

Two things are sure. First, if it weren’t for workers’ mass exit from the labor force (600,000 workers exited in December alone), the unemployment numbers would look even worse that they already do. Second, government spending cannot create jobs.

(HT: Instapundit)

This shouldn't surprise anyone with a modicum of economics education. In fact, it's an utterly predictable result. A study released last March by researchers at Madrid's Juan Carlos University determined that each "green" job created by Spain's rush to embrace "alternative" energy (at a cost of $750,000 apiece in subsidies) cost the Spanish economy 2.2 jobs elsewhere in the economy.

The problem isn't specific to "green" energy, and it doesn't matter whether you're talking about direct government hiring, government contracts, government mandates on private activities, or government subsidies.

When government takes resources out of the economy (by increased taxing or borrowing) to fund any of these activities, it redirects resources from a more productive use to a less productive use. If that weren't the case, the heavy hand of government wouldn't have to forcibly redirect of those resources.

Ipso facto, these activities make us as a society poorer — although they certainly enrich the special interests who benefit from the redirection of those resources.

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A couple of gift ideas for liberty lovers

Posted by Richard on December 16, 2009

If you're looking for a last-minute gift for a liberty lover (maybe yourself?), the Independence Institute, Colorado's free-market think tank, offers a couple of interesting options.

For someone in this area, there's the upcoming winter seminar, Free People, Free Markets: The Foundations of Liberty. It's two Saturdays (Jan. 30 and Feb. 13) at the Independence Institute offices in Golden, eight hours each, and costs $75 (non-credit; college credit is available at a higher cost). Previous attendees of this seminar have lavished praise on it. 

For that potentially special someone anywhere (hopefully with a sense of humor), there's the "Noble" Prize for their future accomplishments, a lovely medallion that will set you back only $25. But hurry on that one — "Quantities are EXTREMELY limited!"

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