Category: economics

Categories
economics freedom

Reading again (political/economic stuff first)

After a protracted bout of not reading, I’m back to it. A friend gave me an iTunes card and instead of blowing it on music and TV shows (or show as it usually turns out) I bought some books. I feel very grown up… I got one new to me and an old favorite. I’m enjoying using iBooks on the iPad. I have been using an app called Stanza for most of my reading but I think I like the way iBooks looks better. There will be more purchases in the future. I am also finally getting around to a book I got for Christmas, one of the old fashioned kind.

So what am I reading? The recent ridiculousness in DC has me fuming and I have turned to a couple of books talking about politics, government and the decisions that come out of the process. First up is the old fashioned one, Hayek’s The Fatal Conceit. It is one of those books that I have always felt that I should read, but it is intimidating. Hayek wasn’t exactly the most scintillating of writers, but he was a very serious thinker. I’m only a few chapters into it, but he hasn’t disappointed so far. There are some really big ideas in there. A very short summary is that the book attempts to answer the question I’ve always had. Namely, why is socialism so attractive to so many people despite the obvious awful results that it brings about? So far, he has said that it comes down to the tension between small group dynamics, like the family, and large scale interactions that build societies. There is an inbuilt distrust of strangers and of more powerful tribes. That puts the worry about the tribe or the family in direct opposition to the things that lead to rising living standards. Hence, socialist ideas tend to sound attractive whereas allowing things to evolve without anyone’s control scares people. That’s his premise and it’s as good an explanation as I’ve ever heard. I’ll update as I go along.

 

I bought Murray Rothbard’s For a New Liberty because I had always heard that it was “the libertarian Bible” or some such like that. It was another book that I thought I should read. I have only read a couple of his essays, this is my first book by him. Everything I’ve read by him so far leaves me scratching my head about his “libertarian” label, he seems like a straight up anarchist. Anyway, he has some interesting things to say, especially when he puts things in a historical perspective. Libertarianism was the original “liberal.” The liberals back then were railing against the divine right of kings and the manipulations of people’s lives by him and his privileged merchants and guilds. Sometime in the 19th century the liberals joined with the powers that they had been fighting and we got the modern definition of liberal. Modern liberals invest rulers with lots of power and depend on politically connected merchants and guilds (corporations and unions) to help shape society the way they want it to be. Some things never change, and libertarianism is still as radical now as ever.

Rothbard uses some hand waving and conspiracy theories to explain why people have been following socialism in all it’s manifestations. I think Hayek has a much more nuanced and believable theory. To be fair, Rothbard glosses over that in a handful of paragraphs whereas Hayek dedicates an entire book to it. Anyway, I’m a little ways into it, I’ll see if there are any great revelations in it, his supporters would have you believe that it is the most amazing thing ever. We’ll see.

Categories
economics

Raise the Debt Ceiling!

I don’t know what it is about rap and economics, but here’s another one that works really well. No, it doesn’t talk about what might happen if the debt ceiling isn’t raised, but it does a good job putting what raising it actually means.

 

Nobody wants a default, but we should really take a look at what we’ve been doing for the past… 30 years?

Categories
economics financial

Greece and the metals

There has been more and more chatter about Greece and its debt. Greece now has to pay 25% interest on 2 year bonds. That means that investors think there is an excellent chance of Greece defaulting on the loan. Why this comes as a surprise baffles me. When Greece initially had issues, they were given a load of money, talk about perverse incintives…

 

So why care? If Greece defaults, it will shaft its creditors and give them nothing at all. That means all of the institutional investors that were stupid enough to invest in Greece will have essentially thrown that money away. It looks like Spain, and Portugal have significant exposure to Greek debt, and they were already on shaky ground. When Greece defaults, it is going to be very bad news for the Euro. In a worst case scenario, it could spell the end of the Eurozone, if not the EU in general.

Greece has become the poster child of a place where people think that wealth originates, and flows from the government. All of the protestors don’t seem to get that the money has to come from somewhere, and that somewhere is people’s labor. There isn’t enough to go around, at least there isn’t enough to cover the debt that has been wracked up on their behalf. Even if there is another bailout, it will only prolong the troubles. Greece is going to walk away from its debt, and there is every chance that Spain, Portugal, Italy, and Ireland will too once the Greek default overburdens their banks. That’s what might kill the Euro, at least in the short term.

Over the past I don’t know how many years, the US dollar and the Euro have been the go-to currencies for investors and savers. The US dollar is not worth a heck of a lot these days. The political climate in Washington only points to more devaluation to come. If the Euro devalues, what is left? The Yen is a mess and there aren’t a lot of Swiss Franks to go around. The Ruble? The Yuan? The Won? Are you kidding me? All that will be left is the Pound, and we’ll have to see how their economic changes play out to see if that will continue to be a good refuge. It looks like the fiat chickens are coming home to roost, it would be best not to have any currencies as your savings as this plays out.

I’ll say it again, the metals are worthwhile savings instrument at this point in time.  Both the Russian and the Chinese central banks are loading up on gold. All of my meager cash savings is in physical silver. Yes, silver recently took a tumble, but it is on the way back up again. It is still over twice as valuable as it was late last year. If you do a little reading, the various gold and silver ETFs are looking rather suspect. At least the ones that don’t claim to have physical gold. There is a lot of “paper” gold floating around, but it isn’t clear that those certificates could actually be redeemed. They may be making claims on deposits that others have made claims on too. If you buy metals, buy the physical item. Gold and silver do fluctuate in value, but at least that value isn’t at the whim of central banks and government largess. That means quite a bit to me.

 

 

Categories
economics politics

If you love America, you throw money in its hole.

Why is it that the Onion is what we rely on to uncover what’s really going on? This piece is amazing. They manage to skewer  most of the political spectrum with this bit. Even when you have someone on a discussion show try to argue in favor of personal choice, they are still as insane as everyone else on the show. The rest of them really are how I see Keynesian talking heads, they have never made any sense to me. Some of my favorite quotes include the title of this post and “… if I did (receive money) I would throw it in the hole, because I am a patriot!” And there’s the priceless “It’s like they say, you have to throw money in a hole and set it on fire if you want to make money.”

 

 

Categories
economics politics

Government funding

A friend on facebook was recently complaining that because of the looming government shutdown, he was facing no trash pickup, and the closure of the pool he practices in. He rightly criticizes the folks in DC over their political grandstanding and arguing over petty things, but I think he missed the real issue. I can’t help but point out that if things are funded by the government, they are subject to the whims of the political process. And that includes everything from park access to social security checks. Reasonable people can disagree over what the government needs to fund, but we should always keep in mind just how tenuous that funding actually is. Things that seem like a good idea to fund when your team is in power suddenly don’t seem like such a good idea or are in danger when the other team takes over. You can’t really depend on stability in the political sphere, so why would you count on stability of services from it?

When the government shuts down, there will be plenty of places where pools are open and trash is collected because they aren’t operated by the government. Sure, those can be interrupted too, but there are consequences for them if that happens. In the private sector, the pursuit of profits, fear of competition, and possible legal implications over broken contracts keep things going. Things tend to get done more often than not in the private sector. I keep hoping that at some point the discourse will shift over to the idea that perhaps we depend too much on the political process. I’m not holding my breath, especially around here.

Categories
economics

Who’s being greedy?

AT&T recently announced that they are going to start implementing bandwidth caps on their DSL subscribers. You would be allowed 150 GB of data per month, and then for each 50 gigs you go over, it would be another 10 bucks. Predictably, there is general outrage over this. People are threatening a mass exodus over this etc. . Personally, I can’t imagine going over 150 gigs a month on a personal internet connection, let alone 200.

The big thing that gets thrown around is that AT&T is just being greedy. After all, it doesn’t cost them any more to push one byte across their network than it does to push 200 gigs. The “pipe” costs them the same in any case. What people forget is that the more space that is taken up by one person in the pipe means there is less for other people, and it could potentially limit the number of customers that they could service. AT&T claims that something like 2% of their users consume 20% of their bandwidth.

So, on the one hand, we have a company that can pinpoint users that are using terrific amounts of their service and wants to charge them to make up for decreased customer capacity and possible impact on other users, on the other we have people that use tremendous amounts of bandwidth and scream bloody murder because they think they shouldn’t be charged any differently no matter what kind of impact they have on AT&T or other users. So who’s the greedy party again?

Categories
economics free market

NPR funding

My facebook feed is full of my friends gnashing their teeth over attempts to defund NPR. The general theme seems to be , “Those damn Republicans! How stupid are they? We need NPR, the government should keep funding it!” For the record, I have enjoyed some public radio from time to time. Having said that, I’m puzzled by the attitude that is implied. Surely, if NPR was super important, people would go ahead and support it directly. I’m not trying to be snarky, I’m really trying to understand why people feel that it is important that the US government has to be a middleman for this seemingly important thing. I am really looking for a reason other than “Everyone else should pay for things that I think are important.” That’s not it, is it?

 

Whether they realize it or not, the angst seems to boil down to being unhappy at not being able to force other people to pay for those things. I’m willing to give the benefit of the doubt to most people and say that they have bought into the “government funded” trap. There is a lot of confusion as to where the money comes from. The government doesn’t fund anything, tax payers do. The dream of a free market guy is that people that value something would actually be the people that pay for it.

It doesn’t matter that the percentage of our tax bill going to NPR is tiny isn’t important. Shaking you down for fifty cents or fifty dollars is bullying all the same. Granted, I am paying a lot less for NPR than the various wars we’ve been fighting. I don’t like those either and I’m under no illusion what is the more pressing concern. I wish both Democrats and Republicans would keep their eye on what’s more important. Nevertheless, I can’t help but think that “listener supported radio” would be best, you know, supported by listeners. If there aren’t enough people willing to pay for it, that should tell you something…. I say that NPR should beat congress and cut ties to the taxpayers money. Rely on your listeners, it’s the honest thing to do.

Categories
economics financial

Uh Oh

Following on from my last post, investors now see Estonia and the Czech Republic as safer investments than Japan. The financial markets are in disarray over there. Like I said before, this disaster is awful but they were in a precarious financial situation before. Some people will be tempted to call the financial meltdown an unfortunate consequence of the earthquake. The smart money says that they had made themselves pretty bad off before the earthquake, they were simply pushed over the edge. We’ll see how they handle this, we might need to take notes…

Categories
economics financial

Cautionary tale from Japan

The videos and pictures from Japan are unbelievable. Buildings and cars being tossed around, who knows how many people have been killed. The recovery is just starting and it could take a while to go back up and running again.

Japan has been in the economic doldrums for a decade and a half. They have continually tried to “stimulate” their way out of the mess only to find themselves with no economic progress and mounds of debt. They have been going along, just keeping a stagnant economy for a decade, and now this happened.

How often do we make a budget and tell ourselves that “This looks fine, as long as nothing comes up…” The thing is, something always comes up. The car breaks down, you need a new bed, you have to leave the country suddenly because of an insurrection outside of the city, you get diagnosed with MS, etc. A budget that is actually good will take into account the unexpected expenses. If you are just getting by and then something comes up, you could be in trouble.

Japan hasn’t been involved with any struggles against any “existential threat” that might endanger their country. They, like many states in the US, were simply going along doing what they thought was expedient to avoid certain short term pain. They had been up to their chins in debt, is the level going to rise over their nostrils now? This natural disaster has revealed just how shaky their economic situation has been.

We can learn a lot from Japan. The US economy is doing OK, not great, and there’s a lot of rot and underhandedness just under the surface. There will also be a lot of debts coming due in the near future that we are not prepared for. We’re skating by, but it wouldn’t take much to push us under. I doubt any, even large, natural disaster would do it, but maybe a big spike in oil prices could. The way things are going over in the middle east, it isn’t out of the realm of possibilities. The Saudi military is now in Bahrain, the US administration has had to go out of its way to claim that it isn’t really an invasion…. There could be any number of other things that happen, we’re in no shape to deal with them. This is why keeping debt down is so important on both a personal and national level. Having some surplus for just in case is just good sense. Spending everything you take in and then some leaves you vulnerable to any number of problems. We’ll see how Japan deals with this added burden, and I hope we never will be in their economic shoes.

Categories
economics

Japan and the broken window fallacy

If I hear one more “At least this disaster will spur japan’s economy” quip I’m going to scream. If massive destruction is so good for economies, why wait for natural disasters? We should go around blowing up houses and destroying infrastructure on a regular basis in order to keep the economy going…

 

Bastiat spelled out why this is silly way back in the 18th century. If a window is broken, the owner has to replace it. While the window guy benefits, the owner is only where he was before, but is now less well off after having paid for the window. Spending money just to get back where you were before will never be the way to prosperity. It is part of the “not seen” aspect of economics that is too easily overlooked and usually is.