Quote of the Day: Private Sector Infrastructure Investment and the Industrial Age

Any growth theory where government investment plays a crucial role in stimulating growth immediately runs afoul of the historical record, however.  The first countries to industrialize did not require extensive government involvement to make these investments.  In England, it was apparent that neither early capital accumulation nor social overhead investment depended heavily on the public sector, as Phyllis Deane (1979) notes when commenting on traditional explanations of growth that rely on government involvement to overcome lumpiness and externalities:

“The consequence is that social overhead capital generally has to be provided collectively, by governments or international financial institutions rather than individuals, and the mobilization of the large chunks of capital required is most easily achieved through taxation or borrowing.  The interesting thing about the British experience, however, is that it was almost entirely native private enterprise that found both the initiative and the capital to lay down the system of communications which was essential to the British industrial revolution.” [p. 73]

Private returns were, apparently, sufficiently high in the late eighteenth and early nineteenth century to induce the private sector to make the necessary infrastructure investment required by the Industrial Revolution.

(bold mine)

This excerpt is from John Wallis’s Chapter 13 of the 1994 essay “Government Growth, Income Growth, and Economic Growth,” of Capitalism in Context: Essays on Economic Development and Cultural Change in Honor of R. M. Hartwell (John A. James & Mark Thomas, eds., 1994) (link added) as quoted by Professor Don Boudreaux at the Café Hayek.

The above dispels the popular myth that only governments can provide the required infrastructure investment (e.g. roads, bridges, and etc…) for a society.

And an even more important point is that such initiative from the private sector came about when the world had been less economically prosperous.

In other words, the miraculous economic development, or the rags to riches story, or the magnificent transformation of human society from the medieval age--through the industrial age--to today’s information age, during the last 200 years as depicted by Hans Rosling in this video has been rooted from private sector’s infrastructure investments.

Costs are not benefits. Contrary to another popular misperception, capital does NOT just emerge out of nowhere. They are accumulated by the private sector through savings and investments. And that the resources that government has always accrue from, or have been coercively taken from, the private sector.

This means that outside the ambit of regulatory and political obstacles or interference, the private sector could have used these resources to finance and build the required infrastructure ala the industrial age.

The problem is that politicization of infrastructure investments emerges from its capacity to deliver votes.

It’s also a mistake to see the world as operating in a vacuum, such that only governments can make the “right” decision based on presumed "superiority" of knowledge, for infrastructure spending.

After all, the government is comprised of people too.

This means that politicians and bureaucrats have similar limitations like anyone else except that they have the privilege of using guns and badges against their constituents to meet their goal.

Yet any erroneous actions from centralized institutions will have far greater “externalities” or impact to the society than from the decentralized private sectors.

The entrenched belief that governments “know better” accounts for as one of the greatest myths of our time.

The Untold Story of the Cuban Missile Crisis

Popular accounts of major historical events have mostly been inaccurate as they have either been incomplete or have been twisted to suit the biases of the author (for whatever purposes).

Historian Eric Margolis narrates of untold story of the Cuban Missile Crisis where covert horse trading between the governments of the US and the USSR led to its resolution thereby averting a nuclear holocaust.

Writes Mr. Margolis at the LewRockwell.com 

HAVANA – The black, sinister-looking Soviet SS-4 intermediate-ranged missile on display at Havana’s La Cabana fortress looks old, roughly finished, and rather primitive.

But this missile, and 41 others (including some longer-ranged SS-5’s) terrified the United States during the October 1962 missile crisis – 13 days that shook the world. Each of them could have delivered a one megaton warhead onto America’s East Coast cities, starting with Washington DC. One megaton is a city-buster.

When the Cuban missile crisis erupted 50 years ago this month, I was a student at Washington’s Georgetown University Foreign Service School. Cuba was headline news. The Cold War was at its peak.

A CIA-operation to invade Cuba and overthrow Fidel Castro’s Marxist government had spectacularly failed at the Bay of Pigs. The new, inexperienced US president, John Kennedy, got cold feet on the last minute and called off vital air cover for an invasion by Cuban exiles. Deprived of air cover, most were killed or captured. Kennedy should have either call off the amphibious operation or provided it air cover.

The Pentagon then urged a full-scale US invasion of Cuba, backed by massive naval and air power. The Kennedy administration wavered.

Soviet Chairman Nikita Khrushchev seized the moment by sneaking 42 medium-ranged missiles and smaller tactical nukes into Cuba, right under the nose of the Americans. He gambled the Soviet nuclear-armed missiles would forestall a US invasion of Cuba, which Moscow intended to use as a base to expand its influence in Latin America.

When US U-2 spy planes finally spotted the Soviet missile bases all hell broke loose.

US forces went to DEFCON 3, then DEFCON 2 – the highest readiness stage before all-out war. Six US army and Marine divisions moved to South Florida and Georgia. Nearly 600 US warplanes were poised to attack.

On 25 Oct. nuclear weapons were loaded onto US B-47 and B-52 bombers. Seventy five percent of the Strategic Air Command’s bombers were airborne or poised to attack the USSR. Curiously, the Soviets did not go to maximum readiness.

In an act of madness, Fidel Castro furiously demanded Khrushchev launch a pre-emptive nuclear strike on the US. Decades later, Castro admitted this was a terrible mistake. Fortunately, the Soviet leadership said "nyet!" A nuclear exchange in 1962 between the US and USSR would have killed an estimated 100 million people on each side.

As Soviet freighters steamed towards Cuba, the Kennedy White House imposed a naval and air blockade on Cuba. But it was called a "quarantine" since under international law, a blockade is an act of war. Today, in Washington’s undeclared war against Iran, the favored term is "sanctions."

Read the rest here

US Federal Reserve Policies Re-Inflate US Property Bubble

Team Ben Bernanke’s policies designed to provide support on asset prices, via money printing or digital inputs and through negative real rates, appears to have re-inflated the US property bubble.

Video from Bloomberg (hat tip Zero Hedge)

The property sector has been exhibiting a broad based recovery

Housing starts, building permits, existing home sales and new home sales have all been rising significantly (From Northern Trust)

Builder confidence has also been sharply recovering 

This goes hand in hand with the dramatic recovery in the annual % change in median sales (both charts from AEI’s Carpe Diem by Professor Mark Perry).

The supply side of “Shadow inventory” has been declining. Notes the Daily Beast (hat tip Bob Wenzel) 

The chart shows that the number of delinquent mortgages is finally down to pre-2008 levels. The number of foreclosed real-estate units has also shrunk dramatically in the last couple of quarters. And the number of foreclosed homes repossessed by lenders (REO) is also down. As that colorful mountain of housing pain levels off, housing faces far fewer headwinds.

Finally loans to the real estate sector appears to have reached an inflection point. This could further provide a significant push on the above dynamics.

Annual % change of real estate loans from all commercial banks

Same data but based on nominal value or billions of dollars. Both charts from the US Federal Reserve Bank of St. Louis.

Bubbles account for as artificial recoveries. Eventually all these steroid based booms end up in a bust

Quote of the Day: The Real Forgotten Man

The existence of government power sets man against man. It sets those who would achieve and create against those who would steal through elections and laws and taxes. In the end, the burden of government falls on that Forgotten Man, that real Forgotten Man. It is he who has worked and saved and done the right things to take care of himself and his family. Yet now he is told he must pay again for others who have not worked and saved as he.

This incisive excerpt is from investment analyst Chris Mayer in a book review of American educator and proto-libertarian William Graham Sumner’s It Is Not Wicked to Be Rich at the Laissez Faire Books

Mexico’s Government Declares War on Cash

The war on cash transactions has been gaining traction among governments. Crisis stricken European countries as Italy, Spain and Greece have earlier initiated the curtailment in the use of cash. 

The Mexican government has joined this bandwagon by announcing a ban on “large” cash transactions supposedly to stem money laundering, most likely emanating from the drug war.

From the Washington Post 

Mexican President Felipe Calderon has signed into law a ban on large cash transactions as part of an effort to fight money laundering that experts estimate may amount to around $10 billion per year in Mexico.

The bill forbids buyers and sellers from giving or accepting cash payments of more than a half million pesos ($38,750) for real-estate purchases. It also forbids cash purchases of more than 200,000 pesos ($15,500) for automobiles or items like jewelry and lottery tickets.

It is kindda odd for governments to pin the blame on the public in the knowledge that for the top 10 lists of most corrupt government officials, many of them have been known to launder pelf acquired during their morally tainted regimes. 

In the financial world they are known as Politically Exposed Person (PEP), which according to Wikipedia.org, “describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person” 

The Wikipedia.org also notes of the relationship between corruption and money laundering… (bold mine)

By virtue of their position and the influence that they may hold, a PEP generally presents a higher risk for potential involvement in bribery and corruption. Most financial institutions view such clients as potential compliance risks and perform enhanced monitoring of accounts that fall within this category….

PEP-specific compliance legislation underlines the link between corrupt politicians, money laundering and the financing of terrorism. Since September 11, 2001, more than 100 countries have changed their laws related to financial services regulation, with the fight against political corruption playing a fundamental role. Despite attempts at regulation, certain political leaders like Muammar Gaddafi and Hosni Mubarak have made news for having frozen assets located in US banks that did not follow these processes for these individuals.

So by virtue of the connection of corruption and laundering then Mexico cash ban should also implicate politicians. But this isn’t likely the real score.

In the understanding the politicians typically use noble sounding justifications to camouflage the genuine design to impose social controls, cash bans have mostly been about governments wanting to take control of the public’s savings in order to finance their profligacy.

Except for the quirk this 2012 in terms of government budget as % of GDP—perhaps due to initial reporting, but as of September Mexico’s debt will equal to 42.9% of GDP—generally speaking, Mexico’s fiscal position (mostly supported by oil revenues) has been in marked deterioration. (chart from tradingeconomics.com) 

With oil production falling from declining reserves, and where oil revenues account for 40% of Mexico's national budget…

…we now get a better picture or understanding of the seeming desperation exhibited by the Mexican government which impels them to corral public’s savings through currency restrictions.

Of course ban on cash would do little to control supposed “money laundering” which in reality represents an offshoot to corrupt arbitrary laws.

In the US, the war on drugs, for instance, has prompted drug trades to migrate to other marketable commodities as the Tide liquid detergents as means of payment. Instead of dealing with failure of the war on drugs, governments typically resort to attacking symptoms. This has been no less than political showmanship or the pretense of doing something. 

Economic and financial restrictions or blockade against Iran by the US has prompted Iran to use gold as money. So essentially, the US government has taken steps to underwrite the decline of the US dollar standard by incentivizing emerging markets to trade using other mediums as gold. 

As I previously wrote, 

As governments stifle people’s social and commercial activities through tyrannical laws, expect the use of more cash, local currencies or commodities (such as Tide) as alternative medium of exchanges, as the informal or shadow economies grow. 

Most importantly, real assets will become more valuable and may become an integral part of money, as sustained policies of inflationism, as Voltaire once said, will bring fiat money back to its intrinsic value—zero. 

The Mexican government’s war on cash will do little to help what truly has been the problem of political greed.

Chart of the Day: Education and Medical Care Inflation in the US

Speaking of the US education bubble, the chart below demonstrates of the runaway inflation in tuition and education related fees.

Another area where price inflation has been surging is in Medical care

Explains Dr. Ed Yardeni at his blog

If you are looking for out-of-control inflation in the US, look no further than the college and hospital next door.The CPI data show that college tuition and fees have increased 1,036% since January 1979 vs. 546% for Medical Care Goods & Services vs. 238% for the overall CPI. In other words, college costs have more than quadrupled relative to the CPI over this period, while Medical Care has more than doubled relative to the CPI.

Quote of the Day: Wealth Drives Evertything

Wealth drives everything. Military might, scientific achievement, medical breakthroughs, and technological advancement are all possible in wealthy societies. 

Of course, nations don’t just become wealthy by accident. National prosperity is built on a foundation of savings, economic freedom, ingenuity, and hard work… all factors that are in terminal decline in the west today.

(bold original) 

This quote is from Sovereign Man's Simon Black discussing the economic power renascence of Asia. 

Infographic: Tale of Tape United States vs. China

I posted this due to the dainty looking infographic. (hat tip Zero Hedge). 

The main objective of this has been to emphasize on the educational difference (see lowest portion), where the US is seen as losing the edge. No comment on that, except that the education in US seems like an inflating bubble.

Just avoid the impression that this is about populist politics of "us against them", as both countries are joined to hip in many ways.

 

Source: Master of Finance Degrees

‘Equality’ in Education: France Mulls Banning Homework

Below is an example of policy absurdity employed by politicians in order to attain the charade of “equality”.

From Washington Post Blog (bold mine)

French President François Hollande has said he will end homework as part of a series of reforms to overhaul the country’s education system.

And the reason he wants to ban homework? 

He doesn’t think it is fair that some kids get help from their parents at home while children who come from disadvantaged families don’t. It’s an issue that goes well beyond France, and has been part of the reason that some Americans oppose homework too.

Hollande’s reform plans include increasing the number of teachers, moving the school week from four days to 4 1/2 days, overhauling the curriculum and taking steps to cut down on absenteeism.

“Education is priority,” Hollande was quoted as saying by France24.com at Paris’s Sorbonne University last week. “An education program is, by definition, a societal program. Work should be done at school, rather than at home,” as a way to ensure that students who have no help at home are not disadvantaged.

This is yet a neat example of the pretentious wisdom by politicians, on what for them is good for society, from which the interests of individuals are subordinated.

In reality, this represents a war on education in the guise of equality. Politicians clearly want to limit people's learning.

 

Yet there is one sure outcome from such daft measures: equality in ignorance. Yes, keeping people ignorant seems a great way to control them.

As French Jurist, Dalloy warned

When ignorance reigns in society and disorder in the minds of men, laws are multiplied, legislation is expected to do everything, and each fresh law being a fresh miscalculation, men are continually led to demand from it what can proceed only from themselves, from their own education and their own morality.

Doug Casey: Five Reasons Not to Vote

In Doug Casey’s weekly interview with Louis James (meant for the  consumption of regular readers and subscribers of Casey Research), the philosopher, anarchist and investing guru cites five reasons not to vote

First reason: Unethical Act

voting is an unethical act, in and of itself. That's because the state is pure, institutionalized coercion. If you believe that coercion is an improper way for people to relate to one another, then you shouldn't engage in a process that formalizes and guarantees the use of coercion.

Second reason: Compromised Privacy

Privacy. It compromises your privacy to vote. It gets your name added to a list government busybodies can make use of, like court clerks putting together lists of conscripts for jury duty. Unfortunately, this is not as important a reason as it used to be, because of the great proliferation of lists people are on anyway. Still, while it's true there's less privacy in our world today, in general, the less any government knows about you, the better off you are. This is, of course, why I've successfully refused to complete a census form for the last 40 years…

Third reason: Degrading Experience, lost productive time  

That would be because it's a degrading experience. The reason I say that is because registering to vote, and voting itself, usually involves taking productive time out of your day to go stand around in lines in government offices. You have to fill out forms and deal with petty bureaucrats. I know I can find much more enjoyable and productive things to do with my time, and I'm sure anyone reading this can as well.

Fourth reason: Voting Against Fear, two wrongs don't make a right

I'm convinced that most people don't vote for candidates they believe in, but against candidates they fear. But that's not how the guy who wins sees it; the more votes he gets, the more he thinks he's got a mandate to rule – even if all his votes are really just votes against his opponent. Some people justify this, saying it minimizes harm to vote for the lesser of two evils. That's nonsense, because it still leaves you voting for evil. The lesser of two evils is still evil.

Fifth reason: Your vote doesn’t count, the delusion of self worth

Your vote doesn't count. If I'd gotten to say that to the Donahue audience, they probably would have stoned me. People really like to believe that their individual votes count. Politicians like to say that every vote counts, because it gets everyone into busybody mode, makes voters complicit in their crimes. But statistically, any person's vote makes no more difference than a single grain of sand on a beach. Thinking their vote counts seems to give people who need it an inflated sense of self-worth.

Read the rest of the interview here

Has the Foiled Bombing of the New York Fed Been a Prank or False Flag?

A supposed attempt to "terrorize" Americans by "bombing" the New York Federal Reserve has been reported foiled.

From LA Times (bold mine) 

A 21-year-old Bangladeshi man who wanted to "destroy America" tried to detonate what he thought was a 1,000-pound bomb in front of the Federal Reserve Bank in Manhattan on Wednesday, but the explosive was a dud provided by agents as part of an FBI sting, authorities said. 

The FBI and New York police said Quazi Mohammad Rezwanul Ahsan Nafis, whom they described as an Al Qaeda loyalist, was arrested in a hotel room after several futile attempts to detonate the fake bomb by remote control. He was arraigned in federal court hours later on charges of attempting to use a weapon of mass destruction and attempting to provide material support to Al Qaeda.

"Attempting to destroy a landmark building and kill or maim untold numbers of innocent bystanders is about as serious as the imagination can conjure," said Mary Galligan, acting assistant director of the FBI in New York. She said there was no danger to the public because two "accomplices" were working with the FBI and because the purported bomb contained no explosives. 

Officials said that did not reduce the seriousness of the threat. 

 "He was arrested, but he clearly had the intent of creating mayhem," New York's police commissioner, Raymond Kelly, told reporters. Kelly said the alleged plot — one of more than a dozen thwarted in New York since the Sept. 11, 2001, terrorist attacks — showed that the city remains "very much a coveted target" of terrorists. "We see this threat as being with us for a long time to come," he said. 

A 21-page complaint details months of alleged planning by Nafis, who entered the United States on a student visa in January but who allegedly told an informant that his true reason for coming to the country was to wage jihad, or holy war. Nafis settled into an apartment in the New York City borough of Queens and allegedly began trying to recruit militants, one of whom was an informant. 

Eventually, authorities say, Nafis also made contact with a second man, whom he believed to be a member of Al Qaeda. In reality, the man was an undercover FBI agent.  

"Bombing" of the NY FED with a dud or a fake bomb seems more like a prank than an act of terror. 

On the other hand, fingerprints of official involvement may even suggest of another possible false flag similar to the recent CIA double agent underwear bomber. The fugitive not only had relations with an FBI undercover agent but has been on the watchlist for months. 

One can't help draw the involvement of public officials in the understanding that many of the terror plots have been faked.

As Judge Andrew Napolitano explained in this video

 

In today's highly politicized world, one can't really know if events are for real, staged or that people have become paranoids.

Video: Global Entrepreneurship Week

The Kauffman Foundation of Entrepreneurship celebrates the "Global Entrepreneurship Week" with the following sketchbook video (unleashingideas.org)

Notable quote from Jonathan Ortmans:

Entrepreneurs might be the force for change in the country, to think beyond just economic change that they can actually make the world a better place.

Globalization of start up communities actually gives the world a much better chance at solving intractable challenges of the decades past…

The world needs more entrepreneurs

The capitalists-entrepreneurs represent as the sine qua non forces of progress of any society 

As the great Professor Ludwig von Mises wrote, 

The economic foundation of this bourgeois system is the market economy in which the consumer is sovereign. The consumer, i.e., everybody, determines by his buying or abstention from buying what should be produced, in what quantity and of what quality. The businessmen are forced by the instrumentality of profit and loss to obey the orders of the consumers. Only those enterprises can flourish that supply in the best possible and cheapest way those commodities and services which the buyers are most anxious to acquire. Those who fail to satisfy the public suffer losses and are finally forced to go out of business.

Unfortunately, the capitalists-entrepreneurs whom are the genuine heroes, has largely unappreciated by the politically brainwashed public, whom have been oriented or trained to see politics as saviors.  

Yet the deepening of the information age may change this, that's because this era will usher in the political economy of entrepreneurship.

Quote of the Day: Every Tax Reform is a Push for Higher Taxes

Every tax reform in my lifetime has actually been a push for higher taxes in one form or another. And there are still other ways to raise taxes besides raising taxes, reducing deductions, capping deductions, and closing loopholes. You can raise tariffs, increase user fees, enact quotas, inflate the money supply, or outright confiscate people’s property through police state tactics. All these methods suck resources from the private economy into the government.

The goal of every tax reform is to do this in the sneakiest way possible.

The media are no help in clarifying language. When a politician proposes a cut in taxes, the reporter imagines that he or she is a clever and hard-hitting journalist by shooting back: “How are you go to pay for that?” Nonsense. If the thief decides not to take your wallet, he shouldn’t be asked how he is going to pay for his failure to steal.

Of course, all of this is beside the point, really. The core problem is spending. If the government didn’t spend money, it wouldn’t need to tax anyone. The only real way to lower taxes over the long run is to cut spending, but again, this is not going to happen. Even those who talk about spending cuts are really talking about cutting the rate of increase in spending over five or 10 years in budget projections that have never panned out even one time in the history of the universe.

This is from Jeffrey Tucker publisher and executive editor at the Laissez Faire Books.

Let me add another 'sneaky' or furtive way to impose taxes has been to use pseudo-righteousness or moral uprightness as cover for government spending (e.g. Sin Taxes) 

And another thing, politicians often mistake treating tax revenues as a constant function of tax rates, i.e. increasing tax rates equals increase in tax revenues. They forget that people respond to incentives, such that higher tax rates may drive economic activities underground. This means political goals will not be met because of the unintended consequences from ignoring human action and pretentious wisdom.

Bastiat on the Pretentious Moralism of Mercantilism

Mercantilists operate on the dulcet sound bites that hardly stands on economic laws.

The great French classical liberal Frédéric Bastiat does another splendid demolition job on the supposed moral high grounds supposedly assumed by the mercantilists.

In reality free trade, and not protectionism, advances general social cooperation in society or what we may call as civilization.

Quoting Bastiat: [Mises Institute] (bold mine)

Among the arguments we hear adduced in favor of the restrictive regime we must not forget that which is founded on national independence.

"What should we do in case of war," it is said, "if we are placed at the mercy of England for iron and coal?"

English monopolists do not fail to cry out in their turn:

"What would become of Great Britain in case of war if she is dependent on France for provisions?"

One thing is overlooked, which is this: That the kind of dependence that results from exchange, from commercial transactions, is a reciprocal dependence. We cannot be dependent on the foreigner without the foreigner being dependent on us. Now, this is the very essence of society. To break up natural relations is not to place ourselves in a state of independence, but in a state of isolation.

Note this: A nation isolates itself looking forward to the possibility of war; but is not this very act of isolating itself the beginning of war? It renders war more easy, less burdensome, and, it may be, less unpopular. Let countries be permanent markets for each other's produce; let their reciprocal relations be such that they cannot be broken without inflicting on each other the double suffering of privation and a glut of commodities; and they will no longer stand in need of naval armaments, which ruin them, and overgrown armies, which crush them; the peace of the world will not then be compromised by the caprice of a Thiers or of a Palmerston; and war will disappear for want of what supports it, for want of resources, inducements, pretexts, and popular sympathy.

The short of this is that “when goods don’t cross borders armies will”. Promoting economic isolation is equivalent to promoting poverty and war.

So how can the advocacy of war be considered as moral?

Next mercantilists appeal to the emotion of the public, particularly to morality of material abstinence so as to justify political control over people’s economic activities.

Again Bastiat:

I am quite aware that I shall be reproached (it is the fashion of the day) with basing the fraternity of nations on men's personal interest — vile, prosaic self-interest. Better far, it may be thought, that it should have had its basis in charity, in love, even in a little self-abnegation, and that, interfering somewhat with men's material comforts, it should have had the merit of a generous sacrifice.

When shall we be done with these puerile declamations? When will hypocrisy be finally banished from science? When shall we cease to exhibit this nauseous contradiction between our professions and our practice? We hoot at and execrate personal interest; in other words, we denounce what is useful and good (for to say that all men are interested in anything is to say that the thing is good in itself), as if personal interest were not the necessary, eternal, and indestructible mainspring to which Providence has confided human perfectibility. Are we not represented as being all angels of disinterestedness? And does the thought never occur to those who say so that the public begins to see with disgust that this affected language disfigures the pages of those very writers who are most successful in filling their own pockets at the public expense? Oh! Affectation! Affectation! Thou are verily the besetting sin of our times!

What! Because material prosperity and peace are things correlative, because it has pleased God to establish this beautiful harmony in the moral world, am I not to admire, am I not to adore His ordinances, am I not to accept with gratitude laws that make justice the condition of happiness? You desire peace only in so far as it runs counter to material prosperity; and liberty is rejected because it does not impose sacrifices. If abnegation has indeed so many charms for you, why do you fail to practice it in private life? Society will be grateful to you, for someone, at least, will reap the fruit; but to desire to impose it upon mankind as a principle is the very height of absurdity, for the abnegation of all is the sacrifice of all, which is evil erected into a theory.

But, thank heaven, one can write or read many of these declamations without the world ceasing on that account to obey the social motive force, which leads us to shun evil and seek after good, and which, whether they like it or not, we must denominate personal interest.

After all, it is ironic enough to see sentiments of the most sublime self-denial invoked in support of spoliation itself. See to what this boasted disinterestedness tends! These men who are so fantastically delicate as not to desire peace itself, if it is founded on the vile interest of mankind, put their hand into the pockets of others, and especially of the poor.

For what article of the tariff protects the poor? Be pleased, gentlemen, to dispose of what belongs to yourselves as you think proper, but leave us the disposal of the fruit of our own toil, to use it or exchange it as we see best. Declaim on self-sacrifice as much as you choose, it is all very fine and very beautiful, but be at least consistent.

In reality, advocates of mercantilism hardly practice on what they preach. Since mercantilists believes that they have superior knowledge and the moral ascendancy over the rest, they feel that they are exempt from the rules they prefer or opt to impose on their constituency. They believe that if others ought to sacrifice or embrace abstemiousness, they are exempt.

Of course, alternatively, mercantilism is about political inequality and about special economic privileges accorded by the political class to a favored few (the network of friends and relatives and political allies).

In short, the obverse side of mercantilism is crony-state capitalism.

How then can the protection of the few, through political edicts, at the expense of society (where the populace are subjected to coercive restrictions on economic activities) be considered moral? 

Foreign Meddling, Not ‘War in the name of Islam’, Breeds Terror Redux

Back in May of 2011,  I pointed out of the ‘fallacy of composition’ used against Muslims, whom has been associated with 'terrorism', as justifications to advance imperialist-military agenda known as the “war on terror”.

In other words, the so-called religious war only serves as camouflage to advance US imperialist interests.

In the name of War on Terror, more innocent people are being slaughtered every year than the combined activities of the Al Qaeda.

 At the Lew Rockwell Blog, retired Professor Michael S. Rozeff has an expanded view on this. (bold mine)

I read that 23 percent of the world's population is Muslim, or 1.6 billion people. Whatever the number is, it's large. How many are terrorists out to terrorize westerners and push them out of areas they consider to be Muslim areas? How many are terrorists who attack other Muslims? How many are terrorists who attack people of other religions? One source says that Muslim attacks worldwide and against all targets, failed and successful, add up to 18,000 since 2001. This number is bound to be controversial and subject to error. If this involved 18,000 Muslims, that's a little over one-thousandth of one percent of Muslims who engaged in a terrorist or violent attempted attack or attack anywhere in the world.

How many Muslims have American forces killed since 2001? I've found a low-end estimate for 1990 to 2009, and it's 288,000. How many of these were Muslim terrorists? I can't find a tally so far. The number is very, very small relative to 288,000. The tally for drone strikes is 2-3,000 with a high proportion being innocent people. Drone strikes produce more terrorists than they kill, according to a former CIA official. 

What's my point? Same as always. The entire war on terror, or whatever name it now carries, should be stopped, abandoned, shut down, ended. By and large, it has done nothing but kill hundreds of thousands of innocent Muslims. Drones are relatively less destructive than ouright armed force attacks as in Iraq, but they too are killing innocents and alienating whole populations. Plus Obama has extended their use into all kinds of countries, thereby entangling the U.S. in future difficulties. Plus they are being run by the unaccountable and rogue CIA. 

Terrorism should be handled in a very different way. It should be handled more or less as something akin to crime but a few notches above that when it involves groups. Such groups are more like a Mafia, if they combine, or otherwise like street gangs, but gangs that have turned to intentional mayhem and destruction. Fighting terrorism does take some inter-state cooperation of domestic agencies tasked with identifying and apprehending terrorists.

Bottom line: Foreign meddling, and not religious conflict, has been the root cause of terrorism

Nobel Prize of Economics and the Penchant for Math Constants

The announcement of latest winners of the Nobel Prize in economics, particularly Alvin Roth and Lloyd Shapley seems a yawner.

Critiques Andrew Coulson at the Cato Institute Blog (bold mine)

As the Nobel organization’s website explains, the original algorithm was developed by Shapley and David Gale to optimally match pairs of individuals who could only each be matched with one other person. For instance, optimally marrying-off 10 men and 10 women based on their relative levels of interest in one another. Over the past decade, it has come to be used to match students to places in local public schools (by Roth).

The problem is that this approach to “school choice” correctly assumes that the better public schools have a fixed number of places and cannot expand to meet increased demand. So it’s about finding the least-awful allocation of students to a static set of schools—a process that does nothing to improve school quality.

Meanwhile, there is something called a “market” which not only allows consumers and producers to connect, it creates the freedoms and incentives necessary for the best providers to grow in response to rising demand and crowd-out the inferior ones. It also provides incentives for innovation and efficiency. But instead of advocating the use of market freedoms and incentives to improve education, some of our top economists are spending their skill and energy tinkering with the increasingly inefficient, pedagogically stagnant status quo.

Forehead… meet desk.

I am reminded of the great Professor Ludwig von Mises who rebuked mainstream economic practitioners for their penchant to falsely model human action into a subset of natural science.

Professor Mises (From Theory and History): (bold mine)

But it is not permissible to argue in an analogous way with regard to the quantities we observe in the field of human action. These quantities are manifestly variable. Changes occurring in them plainly affect the result of our actions. Every quantity that we can observe is a historical event, a fact which cannot be fully described without specifying the time and geographical point.

The econometrician is unable to disprove this fact, which cuts the ground from under his reasoning. He cannot help admitting that there are no "behavior constants." Nonetheless he wants to introduce some numbers, arbitrarily chosen on the basis of a historical fact, as "unknown behavior constants." The sole excuse he advances is that his hypotheses are "saying only that these unknown numbers remain reasonably constant through a period of years."  Now whether such a period of supposed constancy of a definite number is still lasting or whether a change in the number has already occurred can only be established later on. In retrospect it may be possible, although in rare cases only, to declare that over a (probably rather short) period an approximately stable ratio--which the econometrician chooses to call a "reasonably" constant ratio-prevailed between the numerical values of two factors. But this is something fundamentally different from the constants of physics. It is the assertion of a historical fact, not of a constant that can be resorted to in attempts to predict future events.

Well such so called ‘prestigious’ recognitions have seemingly been directed to the ideas and symbolisms (e.g. European Union as awardee for Peace) which promotes the interests of the establishment.

Survey: China a Marxist Country with Blossoming Capitalist Sentiment

It appears that the average Chinese has been more accommodative to capitalism than Americans.

From Bloomberg, (bold mine)

Survey respondents in the officially Marxist country were slightly more supportive of capitalism than people polled in the U.S. Seventy-four percent of Chinese surveyed said they either completely or mostly agreed with the statement that most people are better off in a free-market economy, compared with 67 percent of Americans.

More proof that the ongoing political struggle in China has been about the emergence of the politics of entrepreneurship or economic freedom.

US Debt at Record $16.19 Trillion!

US debt levels continues with its record streak.

Notes the Zero Hedge: (bold original) 

The number in question:$16,190,979,268,766.67, which is the closing number for total US public debt outstanding, which also happens to be a record closing all time high and an increase of $33 billion from yesterday courtesy of the settlement of last week's bond auctions. There is now $242 billion in debt left under the debt ceiling, which at the current recently slowed down pace of debt issuance, which is posed to pick up substantially again, will be exhausted in well under 2 months.

Remember: there is never such a thing as a free lunch. The benefit of this unrepayable debt and ruinous fiscal policy is precisely what the administration is taking benefit for, namely the soaring stock market. The offset, of course, is that as Reinhart and Rogoff never tire of showing, piling up well over 100% in public debt/GDP means that there is only one way out for the host country: either a hard default, or inflating the debt away.

As per economist Herb Stein’s Law: "If something cannot go on forever, it will stop”

Quote of the Day: The Right of the Individual’s Happiness

Now let me point out to you that we have not arrived simply at an abstract result, but that this question of liberty as against force will be found to enter into all the great questions of the day. It is the only one real and permanent dividing line between opinions. Whatever party names we may give ourselves, this is the question always waiting for an answer, Do you believe in force and authority, or do you believe in liberty? Hesitations, inconsistencies there may be—men shading off from each side into that third party which in critical and decisive times has become a proverb of weakness—but the two great masses of the thinking world are ever ranged on the one side or the other, supporters of authority, believers in liberty.

What, then, is the creed of liberty, and to what, in accepting it, are we committed? We have seen that there exists a great primary right that as men are placed here for happiness (we need not dispute as to the meaning of the term), so each man must be held to be the judge of his own happiness. No man, or body of men, has the right to wrest this judgment away from their fellow man. It is impossible to deny this, for no man can have rights over another man unless he first have rights over himself. He cannot possess the right to direct the happiness of another man, unless he possess rights to direct his own happiness: and if we grant him the latter right, this is at once fatal to the former right. Indeed to deny this right, or to abridge anything from it, is to reduce the moral world to complete disorder. Deny this right and you have no foundation left for rights of any kind—for justice, political freedom, or political equality—you have established the reign of force, and whatever gloss of civilization you may place over it, you have brought men once more to the “good old plan” on which our fathers stood.

(bold emphasis added) 

This excellent quote is from philosopher and individualist Auberon Edward Herbert in The Widest Possible Liberty written in January 1, 1885

China’s Online Gaming Revolution

I pointed out that the online gaming industry is a sunshine industry.

The recent milestone record of online players in mainland China seems to be confirming such trend.

From Shanghai Daily:

THE number of Chinese online game players has surged to a new high after the upgrading of China's broadband speed and Internet service, the world's major game maker said yesterday.

More younger players, especially students, are taking part in online games in China, Alex Tai, managing director of Blizzard China, said at the sideline of the world championship series of "StarCraft II" in Shanghai.

"China has developed a good environment for online games as many foreign games are introduced and also due to the fast development of broadband service," Tai said.

There are 120 million online game players in the country, up 4.6 percent from last year. The mainland has 538 million Internet users. The value of online games has hit 55.7 billion yuan (US$8.89 billion) on the mainland, up 20 percent annually, Analysys International said.