Monthly Archives: November 2012
A really simple metaphor for Obamacare
Thanks, Ed.
You Can’t Vote to be Free
Schiff: Obama won b/c he promised to steal and give more stuff
The Post Hurricane Sandy Gas Crisis
But then came the unnatural disaster in the form of the government’s response. This is where the real catastrophe begins.
Check out the mess in New Jersey. The New York Times reports that “widespread gas shortages stirred fears among residents and disrupted some rescue and emergency services as the New York region struggled to return to a semblance of normalcy after being ravaged by Hurricane Sandy.”
. . . .
Gov. Christie himself has made it clear: “We will not hesitate to impose the strictest penalties on profiteers who, in direct violation of our consumer protection laws, seek to capitalize on the misfortune of others in the midst of a crisis and recovery period.”
Even more absurdly, “The state had set gas prices at $3.59 on the highways last week,” reports the Times.
It’s serious. Last year, merchants paid huge fines for raising prices more than 10% in an emergency. This means that they cannot respond to changes in supply and demand. A disabled price system means chaos. When the price is too low, producers drop out and consumers overutilize. Scarce resources are not being replenished, and those that exist are being irrationally squandered.
That’s why price ceilings mean shortages. Gas shortages cause social disasters. We are seeing this in real-time in New Jersey. It’s a man-made disaster caused by stupid government officials, elected officials, and bureaucrats.
(Read more)
Germany wants its gold
Despite the fall in the gold price this week, those thinking to buy gold bullion have been buoyed by talk of Germany auditing and repatriating their gold reserves held abroad. Below, Jan Skoyles looks at what this mean and says about the country.
This week few will have missed reports that Germany is getting closer to bringing its gold bullion reserves home. Following questions asked in Parliament earlier this year regarding the 3,396 tonnes of gold bullion, federal auditors have now instructed the Bundesbank to regularly inspect the gold bullion reserves held in the US Federal Reserve, Bank of England and Banque de France.
Der Speigel also report that the Bundesbank is planning to ship 150 tonnes of the gold reserves from the New York Federal Reserve back onto home soil, over the next three years. It is also only now becoming clear that the Bundesbank reduced 1,100 tonnes of gold holdings with the Bank of England to 500 tonnes between 2000 and 2001.
The mainstream media coverage of Germany’s actions regarding their gold reserves seems to have an underlying accusatory tone to it. It’s almost as if by the Bundesbank openly admitting it is looking out for its own finances, for its own country and its citizens, it is being unpatriotic to the global cause of pretending that a highly leveraged, fiat money, banker-centric, government-spending driven economy is exactly how things work best.
Germany isn’t the first country to ask questions about its gold, let alone repatriate it. Switzerland is also raising plenty of questions and Venezuela finished repatriating their gold earlier this year. So what does repatriating the country’s gold say about the sovereignty?
1. Changing geo-political landscape
There are two geopolitical reasons for a country taking custody of another’s gold; the first is for ease of transport for payment purposes, the second is to protect the gold from geopolitical risk.
The ease of transport for payment purposes can be argued to still be a relevant reason, particularly given moves by China, India, Russia and Iran to make gold payments for oil and wheat. However, the chances of the US, UK and France demanding payments in gold in the near future as they desperately try to prop up their own currencies is unlikely, particularly as Germany is a successful export nation to these countries. This was one of the reasons for Venezuela’s movement of gold into Brazilian and Chinese custody – they’re trading partners with useful exports and are more likely to accept gold.
Germany’s gold was primarily kept in the US on account of the physical threat from Russia. This seemed reasonable at the time; the US was the bigger and lesser of two evils. The big guy in the playground can be an allay, for a time.
Much of Germany’s gold held in the US has never made it to Germany; it started life as German gold reserves in a US vault somewhere. This was on account of the European country running trade surpluses between the 1950s and the end of the Bretton Woods. German gold reserves between 1950 and 1971 went from zero to 3,600 metric tonnes, in the same period US reserves fell by 11,000 tonnes.
But the threat no longer remains, so why hasn’t the gold been moved back to Germany?
2. Do not trust the custodian country to keep track of it when lending it out
Back in the mid-1920s, the head of the German Central Bank, Herr Hjalmar Schacht, went to New York to see Germany’s gold. However the NY Fed officials were unable to find the palette of Germany’s gold bullion. The Chairman of the Federal Reserve, Benjamin Strong was mortified, but to put him at ease Herr Schacht turned to him and said ‘Never mind, I believe you when you when you say the gold is there. Even if it weren’t you are good for its replacement.’
Both GATA and Bring Back Our Gold argue that central banks have either loaned or “sold short” the majority of the country’s gold. As GATA found out between 2008 and 2009 the Fed has gold-swap arrangements with foreign banks but keeps them secret. This practice of loaning out gold is not uncommon; it’s the worst kept secret ever.
. . . .
3. Do not trust the custodian country to protect the value of their own currency
As we said in the first point, much of the gold was originally stored abroad for safe keeping, particularly in regard to storing with the US Federal Reserve. However as two round of QE have shown and the third just beginning, the US aren’t even willing to protect their own assets in the long-term, so are they likely to look after those of another country’s when they realise the rest of the world doesn’t want to use their currency anymore.
. . . .
4. Foresee the need to protect the future of your own monetary system
Germany is the one country in the Eurozone which appears to be reminding everyone of how important it is to return to some resemblance of sound money. In the last few months we have listened to Jens Weidmann, President of the Bundesbank, compare the ECB’s plans to the ‘Faustian Pact’. However, thanks to the undemocratic nature of the Eurozone, fewseem to be listening.
. . . .
5. It’s yours, you want it where you can see it
As we work hard to show here at The Real Asset Company, when you buy allocated gold bullion, you own gold, only you can instruct what should happen to it. The Bundesbank, and Venezuela before it, has done nothing wrong. This is despite mainstream coverage which wants to imply that the Bundesbank’s decision to move 600 tonnes of gold from the Bank of England between 2000 and 2001 was a ‘shock’ and ‘mystery’. . . .
(Read more)
Filesharers buy more music than others
The American Assembly report suggests that peer-to-peer (P2P) users buy 30% more music than people who aren’t involved in online sharing.
And the non-partisan public policy forum adds that filesharing is a drop in the ocean compared to more traditional offline copying such as burning CDs.
Researchers carried out thousands of telephone interviews with people all over the USA and Germany.
Joe Karaganis of the American Assembly says: “P2P users have larger music collection than non-P2P users – roughly 37% more. Most of the difference comes from higher levels of downloading for free and copying from friends. (Read more)
Poland found explosives on wreckage of president’s plane-report
Polish investigators found traces of explosives on the wreckage of the government jet that crashed in Russia two years ago, killing Poland’s president and 95 others, daily Rzeczpospolita reported on Tuesday.
Without citing sources, the newspaper said prosecutors and explosive experts who examined the remains of the plane in Russia found signs of TNT and nitroglycerin on the wings and in the cabin, including on 30 seats.
Traces of explosives were also found in the area where the Tu-154 crashed during its approach to a small airport near the Russian city of Smolensk on April 10, 2010, the daily reported.
Poland’s military prosecutor’s office plans to respond to the report later on Tuesday, its spokesman said.
Russian investigators had blamed the Polish crew for trying to land in heavy fog, while their Polish counterparts also said the airport controllers should not have allowed the plane to attempt an approach.
Some rightist groups in Poland, including main opposition party Law and Justice, had rejected the findings and suggested the crash could have been an assassination of President Lech Kaczynski and political and military leaders who flew with him. (Read more)
Why do cars all look the same? (hint: G_____ment)
Ayn Rand on Johnny Carson
Pakistani couple kill daughter who talked to a boy (by pouring acid on her face!!!)
ISLAMABAD (Reuters) – A Pakistani couple killed their teenage daughter by pouring acid on her face and body after they caught her talking to a boy, police and a doctor said on Thursday.
The parents of the 16-year-old confessed to police in Kotli, a town in Pakistan-administered Kashmir, that they attacked their daughter after she had spoke to the boy outside their house, said Mohammad Jahangir, a local doctor at the hospital where she was brought.
“There were third-degree burns on her scalp, face, eyes, nostrils, both arms, chest foot and lower part of legs. Even her scalp bone was exposed,” he said, adding that the mother initially told the hospital their daughter tried to commit suicide. Police have arrested the parents. (Read more)
Storm Economics in One Lesson
In a natural disaster like Hurricane Sandy, the only thing people should fear more than the storm is the government’s response.
Let us count the ways.
Mandatory evacuations presume that politicians know the risks better than property owners themselves. That can’t possibly be true. In an information age, we all have access to the same data. Especially these days. We should be able to make our own risk assessments, coming and going from our property as we choose.
Where is the evidence that property owners systematically underrate risk whereas political elites are clear headed and know precisely what to do? The incentives for the government is to clear everyone out because doing so exempts city workers from liability for failing to do the job they exist to do, namely to protect and serve people in times of crisis.
There is also something extremely perverse about arresting people for failing to take government-mandated steps to protect themselves. When it is all over, government is in then in a position to control access to one’s own home and property. In every natural disaster with evacuations, people find themselves struggling against their own government to get back to their own property and assess the damage .
In this case, all across the Northeast region, even where storms only brought some wind and rain, it was the government workers who fled first. It makes sense because they tend to regard themselves as more valuable than the rest of us. A friend posted the following even before the storm hit:
So I call 911 for the downed power line in the alley way. I get fairfax county 911. They transfer me to alexandria city 911. They refer me to the storm damage emergency line. I get the voicemail for the city communications office.
So I call 911 again. They transfer me again. They refer me again. I tell them, but nobody is answering. They say that’s where I’m supposed to call. So I call again. The guy there does not know for sure whether he is supposed to take calls for downed power lines. (pause) He looks it up. (pause) He decides he is supposed to take my information and enter it into the computer.
I call my landlord. He comes right over.
Then there’s the anti-gouging mania that hits every government executive. They warn with great bravado that no private seller can raise prices more than 10% in the event of an emergency. This defies reality. Storms and impending storms send existing supply and demand matrices into total upheaval.
Prices change, and that’s a good thing. It should go without saying that when things and services are in shorter supply, the price of them goes up. This serves two purposes. It provides a signaling device and incentive for new sellers to jump into the market. It also signals the need for more and alerting consumers to conserve until more arrives. This is good for everyone. Would you rather pay $5 a gallon for water or have no water available for sale at all? That’s the choice.
When government threatens people not to profiteer, it discourages producers from entering the market. And yet this is what they do. One North Carolina paper even editorialized for people to rat out any gougers by turning them in. “It’s a good law, and is made better when the public reports profiteering incidents to authorities.”
Amazing: demonize the people who are providing solutions in time of crisis!
Short-circuiting the pricing process discourages gas stations, water sellers, restaurants, and everyone else in the commercial marketplace not even to bother showing up. Why take the risk when there is no reward? As for the goods and services that are available, they will be depleted more rapidly than they should be.
Lives are at stake here. Yet all the politicians seem to care about is their reputation and power, regardless of the consequences. Long experience tells us that it is not government that serves people well in emergencies, but places like Wal-Mart, Waffle House, and Lowe’s. Of course, these commercial establishments are the ones that the political class tries to shut down. It’s perverse even by government standards.
Given the torrent of criticism over the last disaster, FEMA did its best to spin opinion in its direction this time. They have the National Response Coordination Center, which, as the New York Times says, decides “where officials gather to decide where rescuers should go, where drinking water should be shipped, and how to assist hospitals that have to evacuate.”
In other words, they tell people what to do. But who is actually doing the thing itself? The Wall Street Journal reports that WalMart “staffed up an emergency operations center at its headquarters last Thursday and began routing shipments of goods to 10 disaster distribution centers along the storm’s projected path. As the storm clears, Wal-Mart will dispatch trucks from the disaster warehouses to stores in the areas hit by the storm.”
Sandy was a less deadly storm than it might have been because of such preparations. Can we get a round of applause for Home Depot, Wal-Mart, Lowes, and the thousands of other retailers who made a difference this time around?
As well, how about a respectful nod to new commercial technologies. Even when the power failed, the cell towers still functioned. 3G connections were going full blast while the lights were out. Youtube’s live streaming technology allowed anyone to watch live reports on their smart phones. Instagram permitted live documentation of the entire storm, with 10 images per second being posted. Reporters filed reports from their ipads even with massive power outages. This was the most documented storm in the history of the world, all thanks to the market economy.
Then there’s the aftermath in which government suddenly discovers millions and billions of dollars available to shovel onto the cleanup and rebuilding efforts. Decades of experience show that average people see little of this money. Instead, it goes to government contractors and real estate developers and other preferred groups who are closely connected to politics. The money is taken away from the private sector when it is needed most and transferred to people who waste it on projects that the market may or may not value.
The process to get approved for post-disaster largess causes city and state governments to even delay private cleanup efforts. The political class discovers that it has every reason to make the mess look as bad as possible as long as possible, all in the hope of getting ever more money sent from the capital city to the affected area.
Another tendency is for government to enforce licenses on all service professionals. Want someone to cut down the tree or fix your plumbing or rewire your home? You had better choose someone with a license to do business or you will be in big trouble. Of course, this only discourages an influx of new service providers just when they are needed most.
In general, government sees every emergency has a power-grab opportunity. I get shivers down my spine just reading about FEMA’s wonderful plans to nationalize just about everything should the need present itself. If anyone believes that martial law is out of the question under these conditions, he hasn’t been paying attention to the police-state trends over the past decade. Weapons confiscations? It’s going to happen if conditions get bad enough, as happened in New Orleans during the Katrina disaster.
Then there’s the role of economists. It is inevitable that some find an upside to the destruction in a natural disaster, same as they find an upside to stimulus and inflation and war. “While natural disasters take a large initial toll on the economy,” Moody’s Ryan Sweet said on economy.com, “they usually generate some extra activity afterward.”
Yahoo Finance ran the most notorious example this time around, asserting that every act of destruction contains a multiplier that causes even more creation later.
For the umpteeth time, there is no upside to wealth destruction. But try telling that to the folks who calculate GDP. It is very likely the Sandy will be given credit for any fourth quarter fake economic growth. After all, that’s how government affects the GDP. The more it spends, the higher economic growth appears to be.
You need only look at the third quarter 2012 GDP statistic that dominated the headlines last week. The government announced the thrilling news that the economy grew 2 percent. But Veronique de Rugy and Keith Hall of the Mercatus Center looked more carefully at the data to find that “all of the increase in GDP growth came from the biggest increase in federal government spending in over two years.”
It turns out that government spending rose 9.6% at an annual rate in the third quarter. Hence the seeming boost to productivity. Never mind that the government has nothing that it doesn’t take from somewhere else. Private sector growth rates actually fell in the third quarter compared with the second.
This is not economic growth. No matter how many economists tell us that the storm will inspire all kinds of new and wonderful things, the first impression will remain true. This storm has been a disaster and a serious blow to the economy when we least needed it.
At the same time, the storm should remind everyone who romanticizes about the wonders of nature that there is a more fundamental truth: the whole history of humanity has mostly consisted in finding ever more effective ways to diminish the nature’s threat. First came shelter, then came clothes, then came tools to kill animals for our own use, then came transportation to overcome the limits of nature so that we could travel fast on land and water.
It’s true with every advance: indoor heating, air conditioning, indoor plumbing, the washing machine, chemicals to kill pests, medical advances to keep killer bacteria at bay. To a very great extent, it is the struggle away from nature that defines the idea of progress. It is only once the elements have been mastered that we can afford to think of the environment around us as a friend.
These are things we can learn during times of natural disaster. They are the same things we should know before the natural disaster. Only people know what’s best for themselves. Only markets can deliver goods and services. Only property owners know how to assess risk. As for politicians and bureaucrats, they care only about themselves.
Governments do vast damage in normal times, and vastly more precisely when it is commonly believed that they really need to act. In all times and places, people who are determined to build and sustain a life for themselves are inhibited only by the actions of powerful governments.
The people who are suffering through the aftermath of this storm are all being reminded that the political elites are not very useful in times of crisis, and, in fact, are frequently worse than useless. Storm preparation and storm survival is our job, not theirs.
Sincerely,
Jeffery Tucker (Read more)