Quote of the Day: Is War What Makes a President 'Great'?

“War is seen as a great challenge,” Bueno de Mesquita reflects, “so people don’t really question how we got into it unless it fails. All people like winning. Winning is a good thing. Therefore presidents who defeated the ‘evil enemy’—always demonized—are seen as heroic, and so are known as great presidents. That a president avoided getting into a big war is quickly forgotten.” 

This is from Ms. Eileen Reynolds from the article, Is War What Makes a President 'Great'? Published by the New York University September 23, 2016

From the behavioral perspective, such would be called as the survivorship bias.

Quote of the Day:The Virtue of a Free System: The Consumer’s Plebiscite

The test of an economic system lies in the choices it offers, the alternatives that are open to the people living under it. When choices are limited by coercion of one sort or another, the system must fall short of meeting the test in greater or less degree. The virtue of a free system – i.e., competitive capitalism – is that it allows energy to flow uncoerced into a thousand-and-one different forms, expanding goods, services, and jobs in a myriad, unpredictable ways. Every day, under such a system, a consumer’s plebiscite (the phrase is [Ludwig] von Mises‘) is held, the vote being counted in whatever money unit is the handiest. With his votes the consumer directs production, forcing or luring energy, brains and capital to obey his will.

This excerpt is from John Chamberlain's1959 book, The Roots of Capitalism (page 221 of the 1976 Liberty Fund edition) (source Cafe Hayek)

Quote of the Day: 'Angry Votes' and Populism: Will History Rhyme?

A short breadth of the past political leadership: (bold mine)

With the demise of the Marcos regime, oligarchical democracy was quickly restored in the Philippines, with a new Constitution and congressional elections in 1987 returning established provincial landowning and business families and major Manila-based corporate interests to positions of control over both houses of Congress (and, after the 1988 local elections, mayoral and gubernatorial positions across the archipelago). A US backed counter-insurgency campaign, featuring aggressive military operations against the NPA and anti-communist vigilante mobilization against activist in urban and rural areas alike, helped to decimate the left, even as the restoration of electoral competition and turnover prompted a broader demobilization of extra-electoral political participation among the population at large. By 1992, when presidential elections were held, Aquino’s anointed candidate, (Ret.) General Fidel Ramos, won a narrow plurality, in large measure thanks to the advantages of the incumbent administration backing and business support. The elevation to the presidency of a long time senior military officer from Marcos years signaled strongly the enduring conservative constraints on democracy in the Philippines.

Yet the restoration of the oligarchical democracy in the Philippines has not gone unchallenged. The 1998 presidential elections saw the landslide victory of Joseph “Erap” Estrada, an action film star whose Partido ng Masa (Party of the Masses) campaign enjoyed tremendous popular support across the archipelago and was inflected by decidedly populist undertones. Once in office, Estrada proceeded to alienate the establishment business community, the conservative Catholic Church hierarchy, and “respectable” elements of the middle classes, with increasing media attention and growing street demonstrations focusing colorful stories of corruption and abuse of power, alcohol consumption and incoherent policymaking, philandering and favoritism in the allocation of the public posts, patronage and power. By late 2000, the House of Representatives voted to impeach Estrada, as Estrada’s allies in the Senate engaged in stalling and subterfuge to sabotage further judicial proceedings, “People Power” once again mobilized on the streets of Manila, with strong business and Catholic backing as in early 1986 (Hedman 2006). In January 2001, Estrada was forced out of the office, arrested, and imprisoned to face a range of corruption charges against him, even as his vice president, Gloria Macapagal Arroyo, was sworn in as his successor, winning a second, full year (six year) term in 2004 of office in the elections of 2004.

This is from the Routledge Handbook of Southeast Asian History p.124-125. There is a lot to comment from this insight but I’ll leave it as it is.

Quote of the Day: Enough is Enough. No Endorsement to State Plunder of People Through Elections

Austrian economist Robert Higgs posted at his Facebook page:

I realize that the suspense may become unbearable unless I make the following announcement, so here it is: I will not be endorsing any of the candidates seeking the Republican or Democratic Party nominations for president nor any of those seeking nomination by the minor parties. Indeed, I will not be endorsing the election itself. Finally, I will not be endorsing the continued existence of the nation-state over which these aspirants seek to preside. Enough is enough. I will not give my endorsement to politics as usual, a process by which competing parties seek to gain control the state's powers in order to plunder and bully the people at large for the sake of their principal supporters. Oh that all other people would join me in withdrawing their endorsement -- indeed, their acquiescence and blessings. Decent people ought to flee the whole diabolical process, leaving only the criminally inclined to go to war exclusively against one another without sacrificing the bodies, souls, and wealth of innocent parties.

Quote of the Day: Prohibition Is The Major Cause Of Crime

Austrian economist Mark Thornton in an interview with the Daily Bell

Prohibition is the major cause of crime. There are the crimes associated with buying and selling prohibited products like heroin and services like prostitution. Then there are crimes and violence associated with prohibition like those related to street gangs and organized crime, such as drive-by shootings, mafia "hits," racketeering, etc. Violence basically replaces the rule of law when markets are prohibited. Prohibition is the fountainhead of corruption. Without prohibition, corruption would be limited to things like elections and government contracts. With prohibition an enormous incentive (due to high prices) is created for black marketeers to offer bribes to law enforcement, the judicial system, bureaucrats and politicians to protect the bribe payer from being caught and punished. In addition, the bribe payer may offer government officials information about competitors, making law enforcement look competent and keeping prices high.

Quote of the Day: The Global Warming Theory has Failed. Money, Politics and Ideology have Replaced Science

In celebration of Earth Day, the Weather Channel founder John Coleman vented: (source USA Today/ht zero hedge)

The environmentalists, bureaucrats and politicians who make up the U.N.’s climate panel recruit scientists to research the climate issue. And they place only those who will produce the desired results. Money, politics and ideology have replaced science.

U.N. climate chief Christiana Figueres has called for a “centralized transformation” that is “going to make the life of everyone on the planet very different” to combat the alleged global warming threat. How many Americans are looking forward to the U.N. transforming their lives?

Another U.N. official has admitted that the U.N. seeks to “redistribute de facto the world’s wealth by climate policy.” The former head of the U.N. climate panel also recently declared that global warming “is my religion.”

When all the scare talk is pushed aside, it is the science that should be the basis for the debate. And the hard cold truth is that the basic theory has failed. Many notable scientists reject man-made global warming fears. And several of them, including a Nobel Prize winner, are in the new Climate Hustle movie. The film is an informative and even humorous new feature length movie that is the ultimate answer to Al Gore’s An Inconvenient Truth. It will be shown one day only in theaters nationwide on May 2.

As a skeptic of man-made global warming, I love our environment as much as anyone. I share the deepest commitment to protecting our planet for our children and grandchildren. However, I desperately want to get politics out of the climate debate. The Paris climate agreement is all about empowering the U.N. and has nothing to do with the climate.

Quote of the Day: Why Saudi Arabia May Become The Mideast’s Newest Hotspot

Writes historian Eric Margolis at the Lew Rockwell.com

Saudi Arabia and the Gulf states have been de facto US-British-French protectorates since the end of World War II. They sell the western powers oil at rock bottom prices and buy fabulous amounts of arms from these powers in exchange for the west protecting the ruling families.

As Libya’s late Muammar Kadaffi once told me, “the Saudis and Gulf emirates are very rich families paying the west for protection and living behind high walls.”

Kadaffi’s overthrow and murder were aided by the western powers, notably France, and the oil sheiks. Kadaffi constantly denounced the Saudis and their Gulf neighbors as robbers, traitors to the Arab cause, and puppets of the west.

Many Arabs and Iranians agreed with Kadaffi. While Islam commands all Muslims to share their wealth with the needy and aid fellow Muslims in distress, the Saudis spent untold billions on casinos, palaces, and European hookers while millions of Muslims starved. The Saudis spent even more billions for western high-tech arms they cannot use.

During the dreadful war in Bosnia, 1992-1995, the Saudis, who arrogate to themselves the title of ‘Defenders of Islam” and its holy places, averted their eyes as hundreds of thousands of Bosnians were massacred, raped, driven from their homes by Serbs, and mosques were blown up.

The Saudi dynasty has clung to power through lavish social spending and cutting off the heads of dissidents, who are routinely framed with charges of drug dealing. The Saudis have one of the world’s worst human rights records.

Saudi’s royals are afraid of their own military, so keep it feeble and inept aside from the air force. They rely on the National Guard, a Bedouin tribal forces also known as the White Army. In the past, Pakistan was paid to keep 40,000 troops in Saudi to protect the royal family. These soldiers are long gone, but the Saudis are pressing impoverished Pakistan to return its military contingent.

The US-backed and supplied Saudi war against dirt-poor Yemen has shown its military to be incompetent and heedless of civilian casualties. The Saudis run the risk of becoming stuck in a protracted guerilla war in Yemen’s wild mountains. The US, Britain, and France maintain discreet military bases in the kingdom and Gulf coast. The US Fifth Fleet is based in Bahrain, where a pro-democracy uprising was recently crushed by rented Pakistani police and troops. Reports say 30,000 Pakistani troops may be stationed in Kuwait, the United Arab Emirates, and Qatar.

Earlier this month, the Saudis and Egypt’s military junta announced they would build a bridge across the narrow Strait of Tiran (leading to the Red Sea) to Egypt’s Sinai Peninsula. The clear purpose of a large bridge in this remote, desolate region is to facilitate the passage of Egyptian troops and armor into Saudi Arabia to protect the Saudis. Egypt now relies on Saudi cash to stay afloat.

But Saudi Arabia’s seemingly endless supply of money is now threatened by the precipitous drop in world oil prices. Riyadh just announced it will seek $10 billion in loans from abroad to offset a budget shortfall. This is unprecedented and leads many to wonder if the days of free-spending Saudis are over. Add rumors of a bitter power-struggle in the 6,000-member royal family and growing internal dissent and uber-reactionary Saudi Arabia may become the Mideast’s newest hotspot.

Two things, if this becomes true, which could part of what I have been discussing, then what should happen to Philippine OFWs?

Next, as for Saudi's public arbitrary/summary execution of the political opposition under the cover of drug dealing, will this resonate with the political climate in the Philippines under a new potential populist 'strong man rule' regime?

Updated to add: there goes the bug which automatically shrinks font to the smallest--again! Sorry for this

Quote of the Day: What Goes Around Comes Around, Even Central Banks Suffer from Negative Rates

Spontaneous Finance Blog's Julien Noizet pointed out that the perceived "free lunch" from negative interest rates hasn't been free, not even for central banks which has implemented them:

Central banks are indeed big players on the market due to their OMO and related policies that involve purchasing and selling billions of assets in order to influence market prices, aggregate amount of high-powered money and interest rates. They also invest in other currencies and commodities and place cash with other central banks.

Unfortunately, a number of their placements are now generating negative returns and yields on their fixed income investments (often government bonds) are now very low, if not negative.

The irony of the whole situation is that central banks initiated their conventional and unconventional policies partly in order to help (i.e. force) the private sector to take more risks (‘search for yield’). What goes around comes around, and it is now central banks’ turn to follow the same route. In short, they are now turning into vulgar commercial banks that attempt to please their shareholders (i.e. budget-constrained governments who need this cash).

But in doing so, they also potentially endanger their capital base.

If something cannot go on forever, it will stop (quote attributed to the late economist Hebert Stein)

Quote of the Day: The Real Problem is Government

Libertarian, anarcho capitalist and savvy investor Doug Casey at the International Man expounds on the roots of society's malaise: the government (bold mine)

The essence of something is what makes the thing what it is. But surprisingly little study of government has been done by ontologists (who study the first principles of things) or epistemologists (those who study the nature of human knowledge). The study of government almost never concerns itself with whether government should be, but only with how and what it should be. The existence of government is accepted without question.

What is the essence of government? After you cut through the rhetoric, the doublethink, and the smokescreen of altruism that surround the subject, you find that the essence of government is force…and the belief it has the right to initiate the use of force whenever expedient. Government is an organization with a monopoly, albeit with some fringe competition, on the use of force within a given territory. As Mao Zedong said, "The power of government comes out of the barrel of a gun." There is no voluntarism about obeying laws. The consent of a majority of the governed may help a government put a nice face on things, but it is not essential and is, in fact, seldom given with any enthusiasm.

A person's attitude about government offers an excellent insight into his character. Political beliefs reflect how a person thinks men should relate to one another; they offer a practical insight into how he views humanity at large and himself in particular.

There are only two ways people can relate in any given situation: voluntarily or coercively. Almost everyone, except overt sociopaths, pays at least lip service to the idea of voluntarism, but government is viewed as somehow exempt. It's widely believed that a group has prerogatives and rights unavailable to individuals. But if that is true, then the Ku Klux Klan (KKK), the Irish Republican Army (IRA), the Palestine Liberation Organization (PLO) – or, for that matter, any group from a lynch mob to a government – all have rights that individuals do not. In fact, all these groups believe they have a right to initiate the use of force when they find it expedient. To the extent that they can get away with it, they all act like governments.

You might object that the important difference between the KKK, IRA, PLO, a simple mob and a government is that they aren't "official" or "legal."

Apart from common law concepts, legality is arbitrary. Once you leave the ken of common law, the only distinction between "laws" of governments and the "ad hoc" proceedings of an informal assemblage such as a mob, or of a more formal group like the KKK, boils down to the force the group can muster to impose its will on others. The laws of Nazi Germany and the U.S.S.R. are now widely recognized as criminal fantasies that gained reality on a grand scale. But at the time those regimes had power, they were treated with the respect granted to any legal system. Governments become legal or official by gaining power. The fact that every government was founded on gross illegalities – war or revolt – against its predecessor is rarely an issue.

Force is the essence of government. But the possession of a monopoly on force almost inevitably requires a territory, and maintaining control of territory is considered the test of a "successful" government. Would any "terrorist" organization be more "legitimate" if it had its own country? Absolutely. Would it be any less vicious or predatory by that fact? No, just as most governments today (the ex-communist countries and the kleptocracies of the Third World being the best examples) demonstrate. Governments can be much more dangerous than the mobs that give them birth. The Jacobin regime of the French Revolution is a prime example.

Quote of the Day: Why Drinking Water is Not a Public Good

A public good, according to Econ 101, has two specific characteristics: it is (1) non-excludable and (2) non-rivalrous in consumption. In lay-persons’ terms, this means that (1) if the good is supplied to Smith, no one – including the supplier – can, at reasonable cost, prevent Jones and Williams from also consuming the good even if Jones and Williams refuse to pay for their use of it; and (2) Smith’s consumption of the good does not diminish (that is, does not “rival”) Jones’s or Williams’s ability to consume the good.

Safe drinking water is emphatically not a public good as defined in Econ 101, for safe drinking water is both excludable (your water supply, and yours alone, can be cut off if you don’t pay your water bill) and rivalrous in consumption (every gallon of water that you use today is a gallon that your neighbors cannot use today).

To note that safe drinking water is not a public good as economists define public goods is not to say that it should not be supplied by the state; that’s a different question. 

This is from Professor and Blogger Donald J Boudreaux at the Cafe Hayek

Quote of the Day: Liberalism is No religion, No World View, No Party of Special Interests

Liberalism is no religion, no world view, no party of special interests. It is no religion because it demands neither faith nor devotion, because there is nothing mystical about it, and because it has no dogmas. It is no world view because it does not try to explain the cosmos and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing, the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: that is its aim.

No sect and no political party has believed that it could afford to forgo advancing its cause by appealing to men's senses. Rhetorical bombast, music and song resound, banners wave, flowers and colors serve as symbols, and the leaders seek to attach their followers to their own person. Liberalism has nothing to do with all this. It has no party flower and no party color, no party song and no party idols, no symbols and no slogans. It has the substance and the arguments. These must lead it to victory.

This is from the great Austrian Economist Ludwig von Mises, excerpted from Liberalism: In the Classical Tradition, published at the Mises Institute Wire

Quote of the Day: There is No Difference between Psychopaths and Politicians

At the Rutherford Institute, Attorney John W. Whitehead writes of the similarities between politicians and sociopaths:

There is no difference between psychopaths and politicians.

Nor is there much of a difference between the havoc wreaked on innocent lives by uncaring, unfeeling, selfish, irresponsible, parasitic criminals and elected officials who lie to their constituents, trade political favors for campaign contributions, turn a blind eye to the wishes of the electorate, cheat taxpayers out of hard-earned dollars, favor the corporate elite, entrench the military industrial complex, and spare little thought for the impact their thoughtless actions and hastily passed legislation might have on defenseless citizens.

Psychopaths and politicians both have a tendency to be selfish, callous, remorseless users of others, irresponsible, pathological liars, glib, con artists, lacking in remorse and shallow.

Charismatic politicians, like criminal psychopaths, exhibit a failure to accept responsibility for their actions, have a high sense of self-worth, are chronically unstable, have socially deviant lifestyle, need constant stimulation, have parasitic lifestyles and possess unrealistic goals.

It doesn’t matter whether you’re talking about Democrats or Republicans.

Political psychopaths are all largely cut from the same pathological cloth, brimming with seemingly easy charm and boasting calculating minds. Such leaders eventually create pathocracies—totalitarian societies bent on power, control, and destruction of both freedom in general and those who exercise their freedoms.

Once psychopaths gain power, the result is usually some form of totalitarian government or a pathocracy. “At that point, the government operates against the interests of its own people except for favoring certain groups,” author James G. Long notes. “We are currently witnessing deliberate polarizations of American citizens, illegal actions, and massive and needless acquisition of debt. This is typical of psychopathic systems, and very similar things happened in the Soviet Union as it overextended and collapsed.”

In other words, electing a psychopath to public office is tantamount to national hara-kiri, the ritualized act of self-annihilation, self-destruction and suicide. It signals the demise of democratic government and lays the groundwork for a totalitarian regime that is legalistic, militaristic, inflexible, intolerant and inhuman.

So why do we keep doing it over and over again?

There’s no shortage of dire warnings about the devastation that could be wrought if any one of the current crop of candidates running for the White House gets elected. Yet where the doomsayers go wrong is by ignoring the damage that has already been inflicted on our nation and its citizens by a psychopathic government.

According to investigative journalist Zack Beauchamp, “In 2012, a group of psychologists evaluated every President from Washington to Bush II using ‘psychopathy trait estimates derived from personality data completed by historical experts on each president.’ They found that presidents tended to have the psychopath’s characteristic fearlessness and low anxiety levels — traits that appear to help Presidents, but also might cause them to make reckless decisions that hurt other people’s lives.”

The willingness to prioritize power above all else, including the welfare of their fellow human beings, ruthlessness, callousness and an utter lack of conscience are among the defining traits of the sociopath.

When our own government no longer sees us as human beings with dignity and worth but as things to be manipulated, maneuvered, mined for data, manhandled by police, conned into believing it has our best interests at heart, mistreated, jailed if we dare step out of line, and then punished unjustly without remorse—all the while refusing to own up to its failings—we are no longer operating under a constitutional republic.

Quote of the Day: The Person Who is Best Qualified to Govern You is You

From self development and libertarian author Robert Ringer at his website: (italics original)

All this by way of saying that because of the way our political system operates, it makes it a certainty that the scum will always rise to the top. And why not? Getting into politics is the easiest and quickest way known to mankind to become rich and powerful. How can a larcenous person resist such an opportunity?

As early as the mid-nineteenth century, the great individual anarchist Lysander Spooner put it simply when he explained that when someone says that a certain type of government is best, that does not mean it’s a good government. It simply means that it’s the least bad of all other forms of government.

The challenge, then, is to find a way to educate the public so it understands that government, by its very nature, is inherently evil. Generations from now, if the United States starts to rise from the ashes of its criminally controlled bread-and-circus existence, perhaps some social genius who is a firm believer in liberty can come up with a much better system of government than a “republic” or democracy.

Whenever some slick-tongued politician says something “patriotic” like, “Ask not what your country can do for you, ask what you can do for your country,” it takes an enlightened mind to understand the truth in Samuel Johnson’s observation, “Patriotism is the last refuge of the scoundrel.” Which means that virtually all presidential candidates, this year or any other, are scoundrels.

No system will ever be perfect (even the Founding Fathers failed at that), but the only hope for a morally based society is one that is rooted in Thomas Jefferson’s words that “That government is best which governs least.”

If ever a majority of citizens come to believe this, we may finally find a way to invent a government that governs so little that it becomes almost invisible. The fact is that criminal politicians have no qualifications to govern you. As you labor through the next seven-plus months of political theater, always keep that in mind and remember that the person who is best qualified to govern you is you.

Quote of the Day: Why the Worst 'Politicians' Get on Top: The Comparative Advantage

Austrian economist and Senior fellow at The Independent Institute Robert Higgs discuss the modern day application of the great FA Hayek's “Why the Worst Get on Top” from his classic the Road to Serfdom.

The rise of reprehensible individuals to the top of the political heap is precisely what anyone with a realistic view of history and a bit of education in public choice theory would expect.

Consider first that politics is a competitive endeavor. In this realm, office seekers and program promoters strive to gain their objectives, each at the expense of others similarly striving to promote themselves, their programs, and their other governmental aims. What sort of person is most likely to succeed in this competition?

When prize fighters compete, they first learn how to avoid, ward off, or soften the opponent’s blows while landing the most and the strongest punches themselves. This form of competition is not for the weak or the timid. Besides having a natural fearlessness and training for personal combat in the ring, the prize fighter must possess a capacity for aggressive assault and battery on another human being. Beating a man senseless is all in a successful day’s work. Those incapable of or averse to such conduct cannot succeed in this line of work.

Likewise, given the institutional, psychological, ideological, and economic realities of the current electoral system in the United States (and many other countries), no one can succeed if he or she is too fastidious about violating a host of moral and legal strictures. Imagine a presidential aspirant who insisted on always telling the truth, speaking clearly without evasion or distortion of the issues; on proposing only feasible and rational policies to promote the public’s general interest, rather than the self-serving plans of powerful special interests; and on steering clear of unnecessary involvement in the affairs of other countries or engagement in quarrels abroad that do not jeopardize the security of Americans in their own territory. To imagine such a candidate is to imagine practically the exact opposite of the present candidates. These malodorous persons are so far from being morally upright, honest, and forthright—not to mention being simply decent by ordinary standards—that claiming they are basically good people seems only to evince how out of touch with reality one is.

Why is it, then, that the virtues and decencies that we generally expect people to have in their private life are so manifestly absent in the people who succeed best in politics and government? The answer lies in the nature of government itself—at least, government as we currently know it all over the world, a system of imposed, involuntary, monopoly rule whereby the system’s kingpins use military and police power along with ideological enchantment to plunder and bully innocent people—and to get away with doing so year after year. Just as only physically tough, fearless, aggressive persons succeed as prize fighters, so only dishonest, slick, evasive, power-hungry, unscrupulous, and vicious persons have what it takes to succeed in a system whose very foundations—violence, aggression, extortion, and misrepresentation—are completely at odds with private standards of just and virtuous conduct.

If someone like me—elderly, small, weak, timid, and untrained—were put in the ring to fight for the heavyweight boxing championship, you would not expect me to survive more than a few seconds. Likewise, if someone like me—someone who respects other persons’ natural rights to life, liberty, and property and who abhors dishonesty, extortion, aggression, and unnecessary violence—were thrown into the political or governmental arena, I would scarcely last much longer. There’s a reason why today’s leading campaigners are such morally ugly individuals: they have a comparative advantage in taking the kinds of actions one must take in order to reach the pinnacle of government power.

Quote of the Day: More Socialism Means Less Real Democracy

From economic professor Sandy Ikeda at the FEE.org:

The greater the degree of central planning, the less the authority can put up with deviation and individual dissent. I also realize that there is more than one dimension along which you can trade off self-direction for direction by others, and some of these dimensions do not involve physical coercion. For example, groups can use social or religious pressure to thwart a person’s plans or shrink her autonomy, without resorting to physical aggression.

But there is no denying that along the dimension of physical coercion, which is the dimension along which governments have traditionally operated, the more coercive control there is by an outside agency, the less self-direction there can be. Coercion and self-direction are mutually exclusive. And as government planning supplants personal planning, the sphere of personal autonomy weakens and shrinks and the sphere of governmental authority strengthens and grows. More socialism means less real democracy.

Democratic socialism, then, is not a doctrine designed to protect the liberal values of independence, autonomy, and self-direction that many on the left still value to some degree. It is, on the contrary, a doctrine that forces those of us who cherish those liberal values onto a slippery slope toward tyranny.

Quote of the Day: Paying people to borrow money is just crazy; No Money Down Loan Philippine Edition

Sovereign Man's Simon Black on a 2008 Déjà vu bubble but at a larger scale: 

This feeling was only reinforced when I whipped out my phone and saw that German bank Berlin Hyp had just issued 500 million euros worth of debt… at negative interest.

I wondered if I really did go through a time warp, because this is exactly the same madness we saw ten years ago during the housing bubble and the subsequent financial crisis.

To explain the deal, Berlin Hyp issued bonds that yield negative 0.162% and pay no coupon.

This means that if you buy €1,000 worth of bonds, you will receive €998.38 when they mature in three years.

Granted this is a fairly small loss, but it is still a loss. And a guaranteed one.

This is supposed to be an investment… an investment, by-the-way, with a bank that almost went under in the last financial crisis.

It took a €500 billion bail-out by the German government to save its banking system.

Eight years later, people are buying this “investment” that guarantees that they will lose money.

The bank is now effectively being paid to borrow money.

We saw the consequences of this back in 2008.

During the housing bubble, banking lending standards got completely out of control to the point that they were paying people to borrow money.

At the height of the housing bubble, you could not only get a no-money down loan, but many banks would actually finance 105% of the home’s purchase price.

They were effectively making sure that not only did you not have to invest a penny of your own money, but that you had a little bit of extra cash in your pocket after you bought the house.

Paying people to borrow money is just crazy, whether it’s homebuyers, bankrupt governments, or banks.

Global insurance giant Swiss Re calculated that roughly 20% of all government bonds worldwide now have negative yields. And over 35% of Eurozone government bonds have negative yields.

(They would know—along with pension funds and banks, insurance companies are some of the largest buyers of bonds.)

With this deal, Berlin Hyp becomes the first non-state owned company to issue euro-denominated debt at a negative yield.

They won’t be the last.

We’re repeating the same crazy thing that nearly brought down the system back in 2008—paying people to borrow money.

The primary difference is that, this time around, the bubble is much bigger.

Back then, the subprime bubble was “only” $1.3 trillion.

Today, conservative estimates show that there’s over $7 trillion in negative rate bonds.

What could possibly go wrong?

I recently received a text message...

...which indicated of an offer for Philippine properties (high end condos for sale) financed by NO money down loan. So people are being "paid" to borrow money to buy Philippine properties. And that's how Philippine corporate sales and profits are being generated. And most importantly, that's the essence of the real estate-shopping mall propelled domestic demand boom: a credit bubble

Ironically, Mr. Black warned of this in 2014.

Facebook Posts of the Day: Socialism Sounds Great in Speech Soundbites, US Populist Vote Against the Establishment

The first post on socialism comes from Russian Chess Grandmaster and former World Chess Champion Garry Kasparov (hat tip Cato's Dan Mitchell)

The next post comes from iconoclast author and risk analyst Nassim Taleb

By the way, due to time constraints I haven't opened my facebook account for a number of months now, but such has not been a hindrance from reading great posts like the above.

Quote of the Day: The Difference Between Minimum Wages and Free Markets on Unemployment

Professor Don Boudreaux at the Cafe Hayek provides an awesome explanation: (bold mine)

(1) The unemployment caused by a minimum wage is permanent, in the sense that even in theory it will always exist. Unlike the unemployment that arises when trade becomes freer, the unemployment that is caused by minimum-wage legislation is not the result of transaction costs and other frictions that prevent workers who lose their jobs from finding alternative employment immediately. Put differently, in principle if not in practice, no workers need be rendered even temporarily unemployed by freer trade. In contrast, the minimum wage necessarily (in the absence of genuine monopsony power) causes some workers to lose their jobs and causes these destroyed jobs to remain destroyed for as long as the minimum wage remains in place.

Put in yet another different way, unlike with free trade, the creation of unemployment is not a temporary or incidental consequence of minimum-wage legislation. Lasting job destruction is part of the essential logic of the minimum wage. While in principle, and over time also in practice, free trade does not lead to permanent job losses, job losses caused by the minimum wage, in addition to springing from the very logic of the minimum wage, are indeed permanent.

Second, unemployment caused by free trade is, in reality, simply a particular instance of unemployment caused by changes in the pattern of economic activities. In both principle and practice this unemployment differs not a whit from the unemployment caused by, say, consumers coming to prefer more chicken to beef, more outdoor recreation to indoor entertainment, more wine to whiskey, or living in Arizona to living in Michigan. That is, the unemployment caused by freer trade is inseparable from the very logic of a market economy driven by consumer sovereignty and competition. Far from free trade being an exception to the rules of a market economy, it is protectionism that is an exception. The minimum wage, in contrast to free trade, is emphatically not part of the logic of a market economy; like protectionism, the minimum wage is a suspension of, or an interference with, the logic and principles of a market economy and of consumer and worker freedom. If this fact means nothing else, it means that free trade (like any competition-driven change in the pattern of consumer spending) enjoys a presumption of legitimacy while the minimum wage, which is a restraint on the operation of the market and on voluntary contracting, operates under a presumption of illegitimacy.

Third, economic theory and empirical evidence strongly suggest that the ill consequences of the minimum wage are not randomly distributed. These ill consequences are suffered only by low-skilled workers and, even among low-skilled workers, disproportionately by those who are the least advantaged (for example, by inner-city blacks rather than by suburban whites). The downsides of free trade, in contrast – and in addition to being only temporary and part of the larger logic of the real-world market – are much more random. These ill consequences are not more likely to fall only on low-skilled workers, or on blacks rather than whites.

Quote of the Day: Whose Conspiracy?

From former economist, blogger and Assistant Secretary of the Treasury for Economic Policy Paul Craig Roberts at this website

What disturbs me is that no one in authority or in the mainstream media has any interest in checking the facts. Instead, those who raise awkward matters are dismissed as conspiracy theorists.

Why this is damning is puzzling. The government’s story of 9/11 is a story of a conspiracy as is the government’s story of the Boston Marathon Bombing. These things happen because of conspiracies. What is at issue is: whose conspiracy? We know from Operation Gladio and Operation Northwoods that governments do engage in murderous conspiracies against their own citizens. Therefore, it is a mistake to conclude that governments do not engage in conspiracies.

One often hears the objection that if 9/11 was a false flag attack, someone would have talked.

Why would they have talked? Only those who organized the conspiracy would know. Why would they undermine their own conspiracy?

Recall William Binney. He developed the surveillance system used by NSA. When he saw that it was being used against the American people, he talked. But he had taken no documents with which to prove his claims, which saved him from successful prosecution but gave him no evidence for his claims. This is why Edward Snowden took the documents and released them. Nevertheless, many see Snowden as a spy who stole national security secrets, not as a whistleblower warning us that the Constitution that protects us is being overthrown.

High level government officials have contradicted parts of the 9/11 official story and the official story that links the invasion of Iraq to 9/11 and to weapons of mass destruction. Transportation Secretary Norman Mineta contradicted Vice President Cheney and the official 9/11 story timeline. Treasury Secretary Paul O’Neill has said that overthrowing Saddam Hussein was the subject of the first cabinet meeting in the George W. Bush administration long before 9/11. He wrote it in a book and told it on CBS News’ 60 Minutes. CNN and other news stations reported it. But it had no effect.

Whistleblowers pay a high price. Many of them are in prison. Obama has prosecuted and imprisoned a record number. Once they are thrown in prison, the question becomes: “Who would believe a criminal?”

As for 9/11 all sorts of people have talked. Over 100 police, firemen and first responders have reported hearing and experiencing a large number of explosions in the Twin Towers. Maintanence personnel report experiencing massive explosions in the sub-basements prior to the building being hit by an airplane. None of this testimony has had any effect on the authorities behind the official story or on the presstitutes.

There are 2,300 architects and engineers who have written to Congress requesting a real investigation. Instead of the request being treated with the respect that 2,300 professionals deserve, the professionals are dismissed as “conspiracy theorists.”

An international panel of scientists have reported the presence of reacted and unreacted nanothermite in the dust of the World Trade Centers. They have offered their samples to government agencies and to scientists for confirmation. No one will touch it. The reason is clear. Today science funding is heavily dependent on the federal government and on private companies that have federal contracts. Scientists understand that speaking out about 9/11 means the termination of their career.

The government has us where it wants us—powerless and disinformed. Most Americans are too uneducated to be able to tell the difference between a building falling down from asymetrical damage and one blowing up. Mainstream journalists cannot question and investigate and keep their jobs. Scientists cannot speak out and continue to be funded. 

Truth telling has been shoved off into the alternative Internet media where I would wager the government runs sites that proclaim wild conspiracies, the purpose of which is to discredit all skeptics.

Quote of the Day: Why Global Defense Spending Will Be a Drag on the Global Economy

Australian author, financial analyst and former banker, Satyajit Das at the Marketwatch debunks the (Keynesian) myth of economic prosperity from the war economy (bold mine)

First, there is pressure to increase spending on defense and national security in the U.S., Europe and the U.K. Some economists have argued that this spending could boost economic activity. However, any rise will be artificial and short-lived — money expended on defense could otherwise have been put to more productive use, generating greater wealth. Moreover, defense spending will place additional stress on already fragile public finances in many countries.

Second, dislocations may affect normal trading and financial activities.

For example, between 2010 and 2014, Western investors invested over $300 billion in Russian stocks and bonds. Western sanctions on Russia now make it difficult for a number of heavily indebted companies to refinance existing foreign currency borrowing or raise new capital internationally. Western sanctions on Russia are also costly for European economies, especially Germany. Around 350,000 German jobs directly depend on German-Russian trade, with roughly 8%-10% threatened by sanctions.

Third, rising security concerns and political risk reduce the attractiveness of global supply chains and deter foreign investment. An uncertain geopolitical and global security environment may reinforce the trend to close economies, with capital controls and trade restrictions. For instance, China is moving to domestically source previously imported critical defense and infrastructure components to ensure self-sufficiency.

Fourth, actual conflict increases the cost dramatically. There is the direct cost of dealing with the issue. There is also the indirect cost by way of disruptions, restrictions on normal commercial and personal life, and the loss of confidence which impinges on economic activity. Even minor conflicts can disrupt critical resource supplies, such as oil or crucial minerals, and trade routes. It can displace large numbers of people, resulting in large numbers of refugees.

Fifth, even if the conflict is internal to a country or relatively small in scale, the collateral effects are significant. The Syrian civil war illustrates the tremendous humanitarian cost and the economic expense of dealing with the crisis. Germany has estimated the cost of integrating refugees fleeing the conflict may cost up to 900 billion euro over the long-term. The need to reintroduce border patrols within the EU may reduce GDP by 0.8% or around 100 billion euro, in direct costs as well as the effects on trade and tourism.

Combating and controlling failed states, resulting from conflict, such as those in the Middle East, Africa and central Asia, requires commitment of vast resources, by way of manpower and treasure.

Sixth, asymmetric warfare, cyber-attacks or isolated terrorist attacks, are costly to economies. Increased security measures designed to prevent or minimize the effects of such attacks are expensive. The large and rising homeland security costs in the U.S. and elsewhere is a large and unproductive expense.

In addition to the well-known economic problems of low growth, deflation, demographics, slowing productivity, and environmental issues, reversal of the peace dividend now weighs heavily on the prospects for the global economy.