15-Year Old Wonderkid Dramatically Improves Pancreatic Cancer Tests

Talk about the magnificence of human capital.

From Make: (hat tip Professor Mark Perry) [bold mine]

Maryland young maker Jack Andraka isn’t old enough to drive yet, but he’s just pioneered a new, improved test for diagnosing pancreatic cancer that is 90% accurate, 400 times more sensitive, and 26,000 times less expensive than existing methods. Andraka had gotten interested in pancreatic cancer, and knew that early detection is a challenge. He gleaned information on the topic from his “good friend Google,” and began his research. Yes, he even got in trouble in his science class for reading articles on carbon nanotubes instead of doing his classwork. When Andraka had solidified ideas for his novel paper sensor, he wrote out his procedure, timeline, and budget, and emailed 200 professors at research institutes. He got 199 rejections and one acceptance from Johns Hopkins: “If you send out enough emails, someone’s going to say yes.” Andraka was recently awarded the grand prize at the Intel International Science and Engineering Fair for his groundbreaking discoveries.

Additional thoughts:

Access to technology has vastly been improving people’s capability to acquire knowledge, learn and pursue innovation: All it takes are the WILLPOWER or the PASSION to attain a goal, and importantly, the courage or having a constructive perspective of failure.

Youthful Andraka seems like another Steve Jobs in the making: focusing on matters of personal (or career) interests or “what you love” than of the traditionalism and conventionalism.

Talk about extreme determination and persistence: 199 REJECTIONS!!!

Mr. Andraka’s experience demonstrates how conventionalism abhors the unorthodox—where what works has not been reckoned as the priority, but of the conventional mindset, methodology and standards.

Nevertheless it took only ONE acceptance to prove that his theory has been viable and aptly got recognized for it.

What an accomplishment for a 15 year old! Jack’s parents must be so proud of him.

May Jack Andraka’s tribe increase.

Quote of the Day: Liberty is the Solution to Social Problems

It seems to me that this is theoretically right, for whatever the question under discussion -- whether religious, philosophical, political, or economic; whether it concerns prosperity, morality, equality, right, justice, progress, responsibility, cooperation, property, labor, trade, capital, wages, taxes, population, finance, or government -- at whatever point on the scientific horizon I begin my researches, I invariably reach this one conclusion: The solution to the problems of human relationships is to be found in liberty.

From the great Frédéric Bastiat (courtesy of the Bastiat Institute at Facebook)

Timeline of Mass Shooting Incidents during the Last Two Decades

Following the Colorado Denver massacre at the midnight showing of ‘Dark Knight”, here is a compilation or a list of mass shooting incidents as reported by Chicago Tribune/Reuters.com

Here is a timeline of some of the worst shooting incidents carried out by one or two gunmen around the world in the last 25 years:

March 13, 1996 - BRITAIN - Gunman Thomas Hamilton burst into a primary school in the Scottish town of Dunblane and shot dead 16 children and their teacher before killing himself.

April 28, 1996 - AUSTRALIA - Martin Bryant unleashed modern Australia's worst mass murder when he shot dead 35 people at the Port Arthur tourist site in the southern state of Tasmania.

April 1999 - UNITED STATES - Two heavily-armed teenagers went on a rampage at Columbine High School in Littleton, Denver, shooting 13 students and staff before taking their own lives.

July 1999 - UNITED STATES - A gunman killed nine people at two brokerages in Atlanta, after apparently killing his wife and two children. He committed suicide five hours later.

June 2001 - NEPAL - Eight members of the Nepalese Royal family were killed in a palace massacre by Crown Prince Dipendra who later turned a gun on himself and died few days later. His youngest brother also died later raising the death toll to 10.

April 26, 2002 - GERMANY - In Erfurt, eastern Germany, 19-year-old Robert Steinhauser opened fire after saying he was not going to take a math test. He killed 12 teachers, a secretary, two pupils and a policeman at the Gutenberg Gymnasium, before killing himself.

October 2002 - UNITED STATES - John Muhammad and Lee Malvo killed 10 people in sniper-style shooting deaths that terrorized the Washington, D.C., area.

April 16, 2007 - USA - Virginia Tech, a university in Blacksburg, Virginia, became the site of the deadliest rampage in U.S. history when a gunman killed 32 people and himself.

November 7, 2007 - FINLAND - Pekka-Eric Auvinen killed six fellow students, the school nurse, the principal and himself with a handgun at the Jokela High School near Helsinki.

September 23, 2008 - FINLAND - Student Matti Saari opened fire in a vocational school in Kauhajoki in northwest Finland, killing nine other students and one male staff member before killing himself.

March 11, 2009 - GERMANY - A 17-year-old gunman dressed in combat gear killed nine students and three teachers at a school near Stuttgart. He also killed one other person at a nearby clinic. He was later killed in a shoot-out with police. Two additional passers-by were killed and two policemen seriously injured, bringing the death toll to 16 including the gunman.

June 2, 2010 - BRITAIN - Gunman Derrick Bird opened fire on people in towns across the rural county of Cumbria. Twelve people were killed and 11 injured. Bird also killed himself.

April 9, 2011 - NETHERLANDS - Tristan van der Vlis opened fire in the Ridderhof mall in Alphen aan den Rijn, south of Amsterdam, killing six before turning the gun on himself.

July 22, 2011 - NORWAY - Police seize a gunman who killed 69 people at a youth summer camp of Norway's ruling political party, on the small, holiday island of Utoeya. Anders Behring Breivik is later charged with the killings, as well as with an earlier bombing in Oslo which killed eight people. The trial ended last month with Breivik saying that his bombing and shooting rampage was necessary to defend the country - prompting a walk-out by relatives of his victims.

December 13, 2011 - BELGIUM - Gunman Nordine Armani killed three people, including a 17-month-old toddler, wounding 121 in a central square in the eastern city of Liege, before shooting himself. The next day Belgian investigators found the body of a woman in warehouse used by the gunman raising the death toll, including the killer, to five.

July 20, 2012 - UNITED STATES - A masked gunman killed 14 people and wounded 50 others when he opened fire on moviegoers at a showing of new Batman film "The Dark Knight Rises" in the city of Denver.

Infographic: Dodd Frank-enstein

How burgeoning financial regulations will kill productive enterprises.

For a crispier view of the graphic proceed to Bob Wenzel's EPJ site here

From Amy Payne of the conservative Heritage Morning Bell

There’s a reason the financial regulation law has been called “Dodd-Frankenstein.” This monstrous creation will swell the ranks of regulators by 2,849 new positions, according to the Government Accountability Office. It created yet another new bureaucracy called the Consumer Financial Protection Bureau (CFPB) that has truly unparalleled powers.

This new bureau is supposed to regulate credit and debit cards, mortgages, student loans, savings and checking accounts, and most every other consumer financial product and service. And it’s not even subject to congressional oversight.

Frighteningly, the CFPB’s regulatory authority is just as vague as it is vast. More than half of the regulatory provisions in Dodd–Frank state that agencies “may” issue rules or shall issue rules as they “determine are necessary and appropriate.”…

The results of this haphazard regulation are dire, Katz says, because “consumers will experience tight credit, higher fees, and fewer service innovations. Job creation will suffer.” She adds that “financial firms of all sizes are shelling out hundreds of millions of dollars for regulatory compliance officers and attorneys rather than making loans for new homes and businesses.”

So the law that was supposed to fix the financial sector—and created something called the Consumer Financial Protection Bureau—is hurting consumers rather than “protecting” them. Congress should repeal Dodd-Frank before it can do any more damage.

Dodd Frank is an example of arbitrary statutes that leads to regime uncertainty which adds to the prevailing economic and financial uncertainty.

How Food Stamp (Welfare) Enriches Cronies

This is an example of how the welfare state is tied up with crony capitalism.

From Breitbart.com (hat tip Bob Wenzel)

The Farm Bill is reapproved every five years; in the 2007 bill, the biggest lobbyists included the agriculture biotech giant Monsanto, which spent $8.8 million. Other large corporate lobbyists included American Farm Bureau, Kraft Foods, PepsiCo Inc., American Beverage Association, Tyson Foods, Coca-Cola Co, Wal-Mart Stores, and the GMA (Grocery Manufacturer Association).

Big Agriculture lobbies Congress knowing hundreds of millions of dollars are on the line for their corporations.

Lobbying also takes place at the state level, where Big Agriculture has been fighting off further regulation of SNAP. State laws cannot strictly mandate that certain purchases be forbidden with the use of SNAP; the USDA (United States Department of Agriculture) has jurisdiction on how SNAP money is spent. State laws are required to seek a waiver from the USDA on certain products. Nine states proposed bills to alter SNAP to make it a more health-conscious program, but none of the proposed measures passed due to the pushback by Big Agriculture.

States contract with large banks in order to administer SNAP benefits; such banks charge fees, mostly to the states, for the use of electronic benefit transfers (EBT). The largest of such banks is J.P. Morgan Chase, which has EBT contracts in 24 states and makes a fortune from the Food Stamp Industrial Complex. J.P. Morgan Chase signed two contracts to administer EBT for the states of New York and Florida totaling $209 million. So much for liberals’ supposed disgust for the 1%.

Large retailers are also cashing in on SNAP benefits. Stocking the shelves with food stamp-approved foods, Wal-Mart made about half a billion dollars in SNAP purchases in two years just from the state of Oklahoma. That is a significant returns for Wal-Mart’s lobbying effort in the 2007 Farm Bill, where Wal-Mart lobbied for five provisions, all having to do with food stamps.

This is not an uncommon story; big business colludes with big government in the name of the public’s interests while they are making themselves rich with regulation, bailouts, corporate welfare, and government contracts. Americans don’t bother to get riled up about it because they expect it, because human nature reduces itself to whatever conditions the culture allows.

What is sold as ‘public good’ to get the approval of the gullible public, is in reality, political privilege.

Next time you hear political agents say that so and so programs are needed for interests of the public, behind the scene are snickering cronies waiting to grab your purse.

Why Macroeconomics as Policy Tool Shouldn’t be Trusted…

…especially of the Paul Krugman strain.

Writes author and University of Rochester professor Steven Landsburg, (bold original)

Supply and demand (and, especially, triangles of welfare loss, etc) are not entirely rigorous, but they’re good useful simplifications that actually give useful (though approximate) answers to important policy questions. Sort of like Ohm’s Law for electrical circuits.

But IS-LM is not like that at all, because IS-LM does not even address the key policy questions in macroecomics. IS-LM can tell you, perhaps, how to fight a recession, but it can’t tell you whether the recession is worth fighting — not even loosely, because the model contains no individual utility functions and no social welfare function. It therefore does not allow you even to formulate the question of whether a given policy is worth its costs, because it provides no framework for weighing costs against benefits.

Analyzing policy via supply and demand is like analyzing electrical circuits with Ohm’s Law. It answers questions, and over a fairly wide range of situations, it answers them with tolerable accuracy. But analyzing policy via IS-LM is like analyzing electrical circuits with a barometer.

Canadians Have Overtaken Americans in Wealth

From the USNews.com

For the first time in recent history, the average Canadian is richer than the average American, according to a report cited in Toronto's Globe and Mail.

And not just by a little. Currently, the average Canadian household is more than $40,000 richer than the average American household. The net worth of the average Canadian household in 2011 was $363,202, compared to around $320,000 for Americans.

If you're thinking the Canadian advantage must be due to exchange rates, think again. The Canadian dollar has actually caught up to the U.S. dollar in recent years.

"These are not 60-cent dollars, but Canadian dollars more or less at par with the U.S. greenback," Globe and Mail's Michael Adams writes.

To add insult to injury, not only are Canadians comparatively better-off than Americans, they're also more likely to be employed. The unemployment rate is 7.2 percent—and dropping—in Canada, while the U.S. is stuck with a stubbornly high rate of 8.2 percent.

Besides a strengthening currency and a better labor market, experts credit the particularly savage fallout from the financial crisis on the U.S. economy and housing market, which torpedoed home values and gutted household wealth. According to the report, real estate held by Canadians is worth more than $140,000 more on average and they have almost four times as much equity in their real estate investments.

In contrast to most of mainstream reporting, Canada’s strong currency has been imputed as manifestation of a relatively “superior” performing economy than the US.

Of course commodity exports have been partly responsible for the this but has barely been an indication of the resource course: the Dutch Disease.

Canada’s strength, according to the report, has been founded on two aspects: one relatively “better” labor market, and two, America’s boom bust cycles which has “torpedoed home values and gutted household wealth”.

While there are many other factors to consider for comparison, I would focus on three;

One, Canadian banks has outperformed the US. Like in the great depression, the US financial crisis of 2008 barely dinted on Canada’s banking system.

Two, Canada tops the US in Economic Freedom…

Canada ranks 6th in the Heritage Foundation’s world’s country ranking of economic freedom index compared to the US…

The economic freedom in the US has been in a steady descent.

Finally, Canada’s government has been relatively fiscal prudent than her neighbor.

As Cato’s Chris Edwards writes

The spending reforms of the 1990s allowed the Canadian federal government to balance its budget every year between 1998 and 2008. The government's debt plunged from 68 percent of GDP in 1995 to just 34 percent today. In the United States federal debt held by the public fell during the 1990s, reaching a low of 33 percent of GDP in 2001, but debt has soared since then to reach more than 70 percent today.

Bottom line: Economic freedom and fiscal prudence are once again depicted as key to economic prosperity.

Quote of the Day: Economics versus Social Darwinism

Economics doesn't point to people and say, "Look what they can't do." Economics instead asks, "Well, what can they do?" If the answer is "something productive," then the Law of the Comparative Advantage implies gains to trade. Economics, known for its hard-headed methods, culminates in an optimistic and humane conclusion: Regardless of their Darwinian "fitness," the existence of people - even those well below average - makes the world a better place.

This is from Professor Bryan Caplan at the Econolog.com [hat tip Prof Don Boudreaux]

US Stocks Markets: Earnings Trump Economic Data, Leading Economic Indicators Fall

The recent rally by US stock markets seems quite impressive but not convincing enough to suggest that treacherous days have been mitigated.

The S&P 500 has nearly broken out of the current resistance levels

Earnings, which the rally has mostly been attributed to, have fundamentally trumped economic data.

From the Bloomberg,

U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-month high, amid better- than-estimated earnings and bets that disappointing economic data will lead the Federal Reserve to add stimulus.

International Business Machines Corp. (IBM), the biggest computer-services provider, and EBay Inc. (EBAY), the largest Internet marketplace, gained at least 3.7 percent as profits beat forecasts. Walgreen Co. (WAG) soared 12 percent after renewing a contract with Express Scripts Inc. (ESRX) Morgan Stanley (MS) slid 5.3 percent after missing estimates as trading revenue plunged. Google Inc. (GOOG), owner of the most popular search engine, rose 3.1 percent at 5:34 p.m. New York time as revenue surged 35 percent.

The S&P 500 (SPX) advanced 0.3 percent to 1,376.51 at 4 p.m. New York time, the highest since May 3. The Dow Jones Industrial Average added 34.66 points, or 0.3 percent, to 12,943.36. The Nasdaq Composite Index gained 0.8 percent to 2,965.90. Volume for exchange-listed stocks in the U.S. was 7 billion shares today, up 4.8 percent from the three-month average…

Today’s advance extended a three-day rally in the S&P 500 to 1.7 percent. Earnings have exceeded analyst estimates at about 71 percent of the 108 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Analysts project a 2.1 percent decline in second- quarter profits, the data showed.

As one would note: aside from earnings, equity markets again, are being serenaded by the prospects of more steroids from the FED. The article devotes two more paragraphs on these.

Bad news is good news again.

Extreme bearish sentiments or the ‘crowded trade’, chart from Bespoke Invest, may have provided the fulcrum for the current bullish momentum.

But current economic figures does not seem to support the continuation of this rally.

From the same article,

Sales of existing U.S. homes unexpectedly dropped and manufacturing in the Philadelphia region contracted for a third month. Other reports today showed consumer confidence weakened, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.

Moreover, leading economic indicators fell more than expected.

From another Bloomberg article.

The index of U.S. leading economic indicators fell more than forecast in June, a sign the U.S. economic expansion is slowing.

The Conferences Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.4 percent increase in May, the New York-based group said today. Economists projected the gauge would drop by 0.1 percent, according to the median estimate in a Bloomberg News survey.

Retail sales unexpectedly declined in June for a third straight month, indicating that slow progress in job creation is holding back consumer spending, which accounts for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke said July 17 that progress in reducing unemployment is likely to be “frustratingly slow.”…

Six of the 10 indicators in the index contributed to the decrease, led by a drop in a gauge of manufacturing orders and consumers’ expectations for business conditions. Four indicators increased.

And worst, % annual change of M2 have been dropping steeply which should impact both the economy and the markets in the coming months.

Again, outside real actions from the FED, eventually US stock markets, which provides the leadership to world markets, will have to price in real events to sustain such momentum.

But don’t forget political deadlocks, as manifested by Bernanke’s recent warning on the fiscal cliff and taxmaggedon, and on other issues, such as the debt ceiling and or even the Barclay’s LIBOR scandal, can simply swell out of proportions that may trigger mayhem in an environment clouded by immense UNCERTAINTY.

Even external shocks as the worsening of the Euro debt crisis or of a China economic recession could also tilt the balance of risks in US stocks.

Eventually promises are not going to be enough.

Barclay’s LIBOR Scandal: Self Fulfilling Turmoil

The Barclay’s LIBOR scandal seems to be rippling across the world.

From the Bloomberg,

Regulators from Stockholm to Seoul are re-examining how benchmark borrowing costs are set amid concern they are just as vulnerable to manipulation as the London interbank offered rate.

Stibor, Sweden’s main interbank rate, and Tibor in Japan are among rates facing fresh scrutiny because, like Libor, they are based on banks’ estimated borrowing costs rather than real trades. In some cases they may be easier to rig than Libor as fewer banks contribute to their calculation, according to academics and analysts.

“Many of the ingredients which made it pretty easy to manipulate Libor and collude are common in other benchmarks,” said Rosa Abrantes-Metz, an economist with consulting firm Global Economics Group and an associate professor at New York University’s Stern School of Business. “Regulatory agencies are starting to take a look at those and there is a growing sense they need to change.”

Barclays Plc (BARC), the U.K.’s second-largest bank, was fined a record 290 million pounds ($450 million) last month for attempting to rig Libor and Euribor, its equivalent in euros, to appear more healthy during the financial crisis and boost earnings before it. At least 12 banks including Royal Bank of Scotland Group Plc (RBS) and Deutsche Bank AG are being investigated for manipulating Libor.

Regulators and industry groups are now turning their attention to whether other benchmark rates were manipulated in the same way. Sweden’s central bank, the Japanese Bankers Association, the Monetary Authority of Singapore and South Korea’s Fair Trade Commission have all announced probes into how their domestic rates are set.

Derivatives Traders

Libor is determined by a daily poll carried out on behalf of the British Bankers’ Association that asks banks to estimate how much it would cost to borrow from each other for different periods and in different currencies.

The issue is here is that interest rates have been manipulated thereby prompting speculations that there might have been large discrepancies in the pricing of interest rates that affects much of the world financial markets.

The so-called manipulations occurred at the peak of the crisis in 2008 and has reportedly even been warned by NY Fed’s then President Timothy Geithner and so as with the BIS.

Apparently NO one took LEGAL action or that authorities simply looked the other way.

Now this has become a big issue.

But the much of the agog (impact of price manipulations) out of the LIBOR scandal has barely been a fact.

In spite of the alleged Libor shenanigans, Professor Gary North shows here in numerous charts that interest rates had been determined by the markets.

Writes Professor North, (bold original)

There is no sign that these two gigantic and interlinked credit markets were different in any significant sense over the entire decade. In other words, Barclays bank had no influence over rates. The banks that were involved rigged the system from 2005 to 2009.

Then what is the scandal all about? Ignorance of basic economics. What about the banks that manipulated the LIBOR rate? They made money on the margin, but they did not have any significant effect on these rates. You can see this in the LIBOR charts.

The scandal is a tempest in a teapot. No one lost much money. The banks did not keep rates lower than the market for more than a few hours -- maybe days, but I want to see proof.

The rates were governed by market forces.

The idea that Barclays kept rates down for years is ludicrous. No commercial bank can keep rates down if investors are willing to pay for a different allocation of capital than what the banks want. The bankers can make money at the margin, paying a little less for loans. But after 2008, none of this mattered. Bankers did not want to borrow from each other.

The appalling ignorance of basic economic theory is why we see the headlines about Barclays and the manipulation of rates. Bankers probably made many millions of pounds extra, but this had no measurable effect on the direction of interest rates. We are not talking about hundreds of billions. We are not talking about the Bank of England.

Columnists like to get attention. There is nothing like a scandal to get attention. But to say that the commercial banks manipulated inter-bank rates is saying that (1) central banks and reserve requirements don't count for much; (2) market rates can be held down by a few commercial banks, thereby overcoming the market for capital: lenders and borrowers.

The people who cry "scandal" do not think through the implications of what they are saying. Making a lot of money is one thing. It is possible. Re-structuring the derivatives market totaling about a quadrillion dollars in assets/promises is something else.

The problem has little to do with rate-tinkering by Barclays and the others. The problem, then as now, is the misguided Keynesianism that undergirds the policy decisions of the West's central bankers.

In reality, the major manipulators of the markets has been the central bankers led by the US Federal Reserve, who seem to be looking to divert the public’s attention from the real causes of the present imbalances: central banking inflationism.

With allegations that banks has been culpable for the manipulations of the interest rates the reactions will likely be a tsunami of lawsuits, of course calls for tighter regulations (which may be the real intent of the scandal-mongerers)

From another Bloomberg article,

Wall Street, grappling with mounting regulatory probes and investor claims over alleged interest-rate manipulation, may face yet another formidable foe: Itself.

Goldman Sachs Group Inc. (GS) and Morgan Stanley are among financial firms that may bring lawsuits against their biggest rivals as regulators on three continents examine whether other banks manipulated the London interbank offered rate, known as Libor, said Bradley Hintz, an analyst with Sanford C. Bernstein & Co. Even if Goldman Sachs and Morgan Stanley forgo claims on their own behalf, they oversee money-market funds that may be required to pursue restitution for injured clients, he said.

Because Libor is based on submissions from only some of the world’s largest banks, the probes threaten to pit firms uninvolved in setting the rate against any implicated in its manipulation, Hintz said. Libor serves as a benchmark for at least $360 trillion in securities.

“This will be a feeding frenzy of sharks,” said Hintz, who has served as treasurer of Morgan Stanley (MS) and chief financial officer of Lehman Brothers Holdings Inc. “We’re going to have Wall Street suing Wall Street.”

It’s definitely going to be a feeding frenzy especially for politicians whom are likely to use the current sentiment against Wall Street (Occupy Wall Street) and the global financial industry as fodder for electoral mudslinging or as an opportunity to acquire votes with the US national elections fast approaching.

Wall Street rending each other apart will likely exacerbate the prevailing uncertainty.

The Fantasy of Forcing the Rich to Bail Out Europe

In the world of statism, everything operates in very simple terms. Just come up with the numbers (supplied by supposed experts), and expect every edict to deliver the targeted results.

Such insight can be gleaned from the blaring drumbeat of class warfare politics in the Eurozone where political authorities have been eyeing to tax the rich to solve the current crisis.

Writes the CNBC,

To many in Europe, the Continent has two big economic problems: Huge debt, and high inequality between the rich and the rest.

Now some politicians are advocating a plan to solve both.

The idea, first floated by a German economic policy group, calls for imposing a 10 percent tax on the wealth of the richest Europeans and forcing them to lend money to their governments.

The plan calls for placing a one-time 10 percent levy on the total assets for those with more than $309,000 in assets (or couples with more than $611,000). In addition, it calls for a “forced loan” program, in which the wealthy lend money to their governments that could be paid back over time.

Stefan Bach of the prestigious the German Institute for Economic Research (DIW) in Berlin, which floated the plan, said that: "In many countries the sovereign debt levels have increased considerably, and at the same time we also have very high amounts of private assets that, taken together, considerably exceed the total national debts of all [euro-zone] countries."

In other words, the wealth of the wealthy is more than enough to plug government budget holes.

The idea gaining popularity among European politicians. An Austrian member of the European Parliament, Jörg Leichtfried, favors the plan for forced loans, saying the rich could lend to the states at low interest rates. The loans, he said, would not be an “expropriation,” since they would be paid back. The head of Austria’s Social Democratic Group also backs the plan, saying states need to fix their budget troubles.

For statists: legalize the plunder of the wealthy, collect and the problem gets easily solved.

But there are two more problems to reckon with;

one, statists and politicians are dealing with human beings who will act to protect their own interests from political predations, and

second, if taxing has been that easy then what stops government from spending more? Having to confiscate everything else from the rich, these politicians would end up with no one else to tax. So we end up with a crisis again.

A good example of the first scenario is the recent incidents of “runaway luxury yachts”, as blogged by Dan Mitchell of the Cato Institute, where wealthy yacht owners flee Italian taxing authorities by sailing to and docking at foreign “friendlier ports”. These yacht owners would instead access their boats through “low-cost budget flights from Italy for a fraction of the tax bill they might otherwise face”.

In addition, the unexpected consequence from taxing yacht owners has been to penalize the industry which affects mostly the middle income people, who suffer from lost business opportunities.

So tax authorities essentially does an Aesop, kill two birds with one stone.

The moral of the tax story says Dan Mitchell is that

The politicians need to understand that taxpayers don’t meekly acquiesce, like lambs in a slaughterhouse.

• When tax rates increase, sometimes people engage in tax avoidance, lowering their tax liabilities legally.
• When tax rates change, sometimes people choose to alter their levels of work, saving, and investment.
• And when tax rates go up, sometimes people resort to illegal steps to protect themselves from the tax authority.

Heck, even the folks at the International Monetary Fund (a crowd not known for rabid free-market sympathies) have acknowledged that excessive taxation is the leading cause of the shadow economy.

Thus, the idea that forcing the rich to bailout Europe is just that…a statist fantasy.

Quote of the Day: Rule of Law

The Rule of Law is a three-legged stool on which freedom sits. The first leg requires that all laws be enacted in advance of the behavior they seek to regulate and be crafted and promulgated in public by a legitimate authority. The goal of all laws must be the preservation of individual freedom. A law is not legitimate if it is written by an evil genius in secret or if it punishes behavior that was lawful when the behavior took place or if its goal is to solidify the strength of those in power. It also is not legitimate if it is written by the president instead of Congress.

The second leg is that no one is above the law and no one is beneath it. Thus, the law's restraints on force and fraud need to restrain everyone equally, and the law's protections against force and fraud must protect everyone equally. This leg removes from the discretion of those who enforce the law the ability to enforce it or to afford its protections selectively. This principle also requires that the law enforcers enforce the law against themselves. Of course, this was not always the case. In 1628, the British Parliament spent days debating the question "Is the king above the Rule of Law, or is the Rule of Law above the king?" Thankfully, the king lost – but only by 10 votes out of several hundred cast.

The third leg of the Rule of Law requires that the structures that promulgate, enforce and interpret law be so fundamental – Congress writes the laws, the president enforces the laws, the courts interpret the laws – that they cannot be changed retroactively or overnight by the folks who administer them. Stated differently, this leg mandates that only a broad consensus can change the goals or values or structures used to implement the laws; they cannot be changed by atrophy or neglect or crisis.

[bold emphasis added]

This is from Judge Andrew P. Napolitano at the LewRockwell.com

Chart Porn: The US-Asia Arm Race

The conservative Heritage Foundation comes up with a deck of wonderful charts on Asia.

Writes the Zero Hedge,

Asia is a study in contrasts. It is home to economic freedom and political liberty; it is also home to political instability and tyranny. Some of Asia’s borders are unsettled and volatile. And military budgets and capabilities are expanding, sometimes faster than economic growth. The rise of China as a great power presents both sides of this equation. It is being watched carefully by all the countries of the region. It is the U.S. that is recognized as the catalyst in ensuring a prosperous peace over conflict. America is a Pacific power. That much is a matter of geography and history. But the facts – and America’s principles and interests – demand more than resignation to geography. They call for continued American leadership, commitment, and the predominant comprehensive power that has enabled Asia’s very welcomed, opportunity-laden rise."

Thus prefaces the Heritage Foundation its Asian 'Book of Charts', which summarizes most of the key economic, financial, trade, geopolitical, most importantly militaristic tensions both in Asia and, by dint of being the global marginal economic force, the world itself. And while we will present the complete deck shortly, of particular interest we find the summary in 7 easy charts how Asia is slowly but surely catching up on that accepted by conventional wisdom GloboCop - the United States.

We present it in its entirety below.

In my view, the current sensationalist brouhaha over territorial claims has been more of a political diversion (from domestic political and economic woes, e.g. in China and the US) and a complicit attempt by both US-China to promote the interests of the neo-conservative protected military industrial complex through an arms race and a resurgent build up of bases around the world in order to justify government expenditures on defense and inflationism.

[Perhaps the real reason is the encirclement and domestic infiltration strategy against Russia by the US, but indirectly implemented with China as the bogeyman or as the smoke screen].

Lastly these may have been part of the desperate attempts by welfare-warfare governments to curb civil liberties (through nationalism and financial repression) in face of growing forces of decentralization.

More great charts of Asia here.

Note: charts can mean different things or perspectives depending on the person’s interpretations and biases.

Video: Murray Rothbard on the Origin of the US Federal Reserve

[hat tip Bob Wenzel]

Philippine Resource Curse: The Mindanao Security Problem

Most of the people don’t realize that the abundance of natural resources can pose as an impediment rather than a blessing for a political economy.

Wikipedia.org defines one of the main adverse effects of the resource curse as provoking social conflicts: (bold highlights added)

Natural resources can, and often do, provoke conflicts within societies (Collier 2007), as different groups and factions fight for their share. Sometimes these emerge openly as separatist conflicts in regions where the resources are produced (such as in Angola's oil-rich Cabinda province) but often the conflicts occur in more hidden forms, such as fights between different government ministries or departments for access to budgetary allocations. This tends to erode governments' abilities to function effectively. There are several main types of relationships between natural resources and armed conflicts. First, resource curse effects can undermine the quality of governance and economic performances, thereby increasing the vulnerability of countries to conflicts (the 'resource curse' argument). Second, conflicts can occur over the control and exploitation of resources and the allocation of their revenues (the 'resource war' argument). Third, access to resource revenues by belligerents can prolong conflicts (the 'conflict resource' argument).

The continuing insurgency and violence in Mindanao has been a manifestation of such political pathology, although this can be argued as piggybacking on the religious schism brought upon by again the earlier political persecution of Muslims during the Marcos regime.

Today’s Bloomberg article has an apropos observation,

Mindanao is no stranger to murder, with a four-decade insurgency in which as many as 200,000 people have died, frustrating efforts by companies including Xstrata and Sumitomo Metal Mining Co. (5713) to tap an estimated $312 billion in mineral deposits. Death squads that human-rights groups have linked to police and the military, contract killings over land disputes, and al-Qaeda-affiliated terrorists add to the mix of violence.

While Philippine economic growth is accelerating, stocks are close to a record high and the country pursues its first investment-grade credit rating, failure to resolve the unrest and murders in Mindanao damages President Benigno Aquino’s efforts to further boost foreign investment, surveys show.

“There is no evidence of a strategic solution to the security problems in Mindanao,” said Steve Vickers, chief executive officer of Hong Kong-based Steve Vickers & Associates, a corporate-intelligence and security-consulting company. “Some of the activities are truly well-organized terrorism, but much of it is feudalism or out-and-out criminality, which needs to be stamped on hard.”

Business Cost

The Philippines ranked 130th of 142 countries in the World Economic Forum’s latest survey on the cost to business of terrorism; and 112th in terms of crime and violence -- the worst in Southeast Asia. Fifty-four percent of mining companies said issues such as attacks by terrorists, criminals and guerrilla groups are a strong deterrent for investors in the Philippines, the second highest among 93 jurisdictions in a Fraser Institute poll released in February.

The violence also exacerbates poverty, a Jan. 26 report by the foreign chambers of commerce in the country said. Sixty-five percent of respondents in Mindanao, home to about a quarter of the Philippines’ 100 million people, described themselves as poor, according to a May survey by Manila-based polling company Social Weather Stations. That was the highest among the three main regions in the country, and up from 39 percent in March 2010, before Aquino was elected.

I think that the causal link has been reversed; instead of violence exacerbating poverty, it is poverty through political distribution of resources (compounded by politically fueled religion based conflict) that has been exacerbating violence.

This represents another example of the failure of political solutions whose stealth objective has been to advance the interests of the political class and their favorite businesspeople through claims on these resources.

Yet violence, in truth, represents an attack against property, as the great professor Ludwig von Mises warned, (Socialism p.44-45)

All violence is aimed at the property of others. The person – life and health -is the object of attack only In so far as it hinders the acquisition of property. (Sadistic excesses, bloody deeds which are committed for the sake of cruelty and nothing else, are exceptional occurrences. To prevent them one does not require a whole legal system. To-day the doctor, not the judge, is regarded as their appropriate antagonist.) Thus it is no accident that it is precisely in the defence of property that Law reveals most clearly its character of peacemaker. In the two-fold system of protection accorded to having, in the distinction between ownership and possession, is seen most vividly the essence of the law as peacemaker - yes, peacemaker at any price. Possession is protected even though it is, as the jurists say, no title. Not only honest but dishonest possessors, even robbers and thieves, may cIaim protection for their possession.

This brings us to the most viable solution: protection of private property and the promotion of the division of labor, again Professor Mises, (Socialism page 374)

The desire for an increase of wealth can be satisfied through exchange, which is the only method possible in a capitalist economy, or by violence and petition as in a militarist society, where the strong acquire by force, the weak by petitioning. In the feudal society ownership of the strong endures only so long as they have the power to hold it; that of the weak is always precarious, for having been acquired by grace of the strong it is always dependent on them. The weak hold their property without legal protection. In a militarist society, therefore, there is nothing but power to hinder the strong from extending their wealth. They can go on enriching themselves as long as no stronger men oppose them.

Media, experts and politicians can fantasize about political solutions, when the market approach has barely been given a chance to succeed.

Who will be in Charge of the Martians?

What happens if NASA’s exploration—via the Curiosity—in Mars finds life (microbes) in the Gale Crater? How will politics on earth deal with this?

The profound thinker and author Matthew Ridley at the Wall Street Journal offers some ideas

Like the announcement of the Higgs boson last week, however magical the moment may be in historical terms, it will not affect most people's daily lives. We can celebrate, congratulate, revel in the detail and philosophize on the meaning, but earthly life will continue as if little had happened.

Pretty soon, though, a political angle will emerge. For one thing, politicians and journalists from countries other than America will start to grumble that this discovery must "belong" to all humankind and not just to NASA. The U.S. government, despite having forked out all the costs of exploring Mars so far, including the $2.5 billion cost of Curiosity, will probably agree. But who will end up making the key decisions?

The United Nations is almost bound to set up an agency to oversee what experiments are planned, but the U.S. may prefer a different body. Private consortia may conceivably start to plan how to go and retrieve a sample, dreaming of the riches to be garnered from displaying it on Earth. If so, nongovernmental organizations will quickly begin to worry about the safety of such a scheme and to champion the rights of Martian microbes to be conserved and respected in their lairs.

In other words, the discovery of extraterrestrial life would produce some predictably messy earthly responses.

As far as I can discern there has been very little public discussion of these issues. The Outer Space Treaty, opened for signature in 1967 by the U.S., U.K. and Soviet Union and ratified by 100 governments, says that no country can claim political sovereignty over land in outer space. The treaty does not forbid private ownership of land in space, however, and it would be up to terrestrial courts to decide if such claims were recognized. Also NASA has clear policies on how to prevent the contamination of one planet with the life of another.

If we hear a radio signal from an extraterrestrial intelligence, there's also a protocol in place, drawn up by the International Academy of Astronautics and invoking three principles: that the decision on whether to reply should be made by an international body; that it should be sent on behalf of all humankind; and that its content should reflect a broad consensus.

Maybe the preeminent Milton Friedman’s Sahara desert concept of politics may apply to extraterrestrial life: If you put the federal government in charge of the Sahara Desert Mars, in 5 years there'd be a shortage of sand microbes. :D

Cartoon of the Day: The Logic of Keynesian Economics

Circular reasoning plus the broken window fallacy.

Thanks to Cato’s Dan Mitchell.

The World First Genetically Modified Babies

Given that the technology has been existing then having the first genetically modified humans seems of no surprise to me.

From Daily Mail.com

The world's first genetically modified humans have been created, it was revealed last night.

The disclosure that 30 healthy babies were born after a series of experiments in the United States provoked another furious debate about ethics.

So far, two of the babies have been tested and have been found to contain genes from three 'parents'.

Fifteen of the children were born in the past three years as a result of one experimental programme at the Institute for Reproductive Medicine and Science of St Barnabas in New Jersey.

The babies were born to women who had problems conceiving. Extra genes from a female donor were inserted into their eggs before they were fertilised in an attempt to enable them to conceive.

Genetic fingerprint tests on two one-year- old children confirm that they have inherited DNA from three adults --two women and one man.

The fact that the children have inherited the extra genes and incorporated them into their 'germline' means that they will, in turn, be able to pass them on to their own offspring.

Altering the human germline - in effect tinkering with the very make-up of our species - is a technique shunned by the vast majority of the world's scientists.

Geneticists fear that one day this method could be used to create new races of humans with extra, desired characteristics such as strength or high intelligence.

One way or another people’s curiosity will lead to more experimentation, which is why we should expect human cloning to be next, in spite political opposition.

This reminds me of two “cloning is bad'” movies: Scarlett Johansson’s The Island and Arnold Arnold Schwarzenegger‘s the 6th Day

Expect the rapid changes in technology to challenge people’s ingrained beliefs and lifestyles.

Quote of the Day: Care about the Future? Reduce Capital Taxes

There are only three things you and I can do to make the future world a better place.

First, we can consume less, leaving more resources behind. Second, we can work harder, planting trees, building factories and writing poems that will live on after we’re gone. Third, we can innovate, advancing science and technology so that our children’s children’s children can make better use of the resources they inherit.

As it happens, there’s one key policy variable that drives all three of these things, and that’s the tax rate on capital income (which includes interest, dividends, corporate income and capital gains). Capital taxes are a disincentive to save, and when people don’t save they consume instead. Capital taxes are a disincentive to work and a disincentive to innovate.

This is not a plea for lowering taxes in general, and it’s not a plea for making the tax system either more or less progressive. (If you want to soak the rich, there are plenty of things to tax besides capital.) As a matter of fact, this isn’t even a plea for lowering taxes on capital. It’s simply an observation that if your goal is to leave a better world for our descendants, then your best bet is to support lower capital taxes.

This is from author and professor Steven Landsburg at the business.time.com.

Professor Landsburg is being coy or attempting to be apolitical at this. Let me improvise: ABOLISHI capital taxes, if your goal is to leave a better world for our descendants.

One more thing to make a better place, spread the truth or educate the public about the political economic inequality between the repressive state and the oppressed individuals.

Media’s Rationalization of the ASEAN Standout

Remember I spoke about the ASEAN standout here?

Well, mainstream finally sees this or this now is in the news.

From Bloomberg,

Southeast Asia (MXSO), the heart of the 1997 currency crisis, produced the best risk-adjusted returns for Asian stocks since global markets started to rebound three years ago, as investors sought a haven from Europe’s debt turmoil.

Benchmark indexes in the Philippines, Malaysia, Thailand, Indonesia and Singapore returned the most among Asia-Pacific markets worth more than $100 billion in the three years ended July 17, according to the BLOOMBERG RISKLESS RETURN RANKING. All five beat an index of developed markets by risk-adjusted returns, and four came out on top over five years.

“Investors have been focused on and rewarded in the smaller Asean markets because they have been more defensive and domestic-oriented,” said Timothy Moe, a Hong Kong-based strategist at Goldman Sachs Group Inc., referring to the Association of Southeast Asian Nations. “That’s been a better source of growth than what we see in the other more cyclical markets in North Asia. It probably will continue,” he said in a Bloomberg television interview in Hong Kong on June 26.

Southeast Asian governments have bolstered spending on infrastructure and stepped up efforts to spur domestic consumption in a bid to reduce their economies’ reliance on exports. That’s helping to shield the nations from Europe’s debt crisis and a global economic slowdown, which has fueled volatility in the northern Asian markets.

Asean countries shipped 32.9 percent of their exports to the U.S. and European Union in 2010, down from 72.4 percent in 2000, according to data from the organization’s website. China’s exports to the EU and U.S. accounted for a combined 38 percent of total overseas shipments in 2010, according to Bloomberg calculations based on data from the customs bureau.

Small and domestic seems now the flavor.

I don’t have any qualms of being small, but I do mind when media implies that financial markets today rewards cronyism and protectionism via “domestic-orientation”…scarcely a positive aspect to extol.

Of course, it is even ridiculous to say that ASEAN’s advantage has been about “bolstered spending on infrastructure and stepped up efforts to spur domestic consumption”.

Which economies have not been ‘spending’ to bolster consumption? Has not today’s crisis emerged from too much debt financed spending in order to uphold ‘consumption’?

It is also worth pointing out that despite the huge reduction in exports to the US and EU by ASEAN, they still make up a third of exports.

And it misleads to focus only on exports because there are other important external linkages as remittances, capital or investment flows and the banking system.

Yet a reduction in exports down to such level does not imply or guarantee of immunity from a global recession (that’s if a recession occurs)

More ASEAN hallelujahs…

Five Asean economies -- Indonesia, Thailand, Philippines, Malaysia and Vietnam -- along with China and India will outpace the rest of the world over the next two years, the International Monetary Fund said in an April report. In 2013, the Asean-5 will grow 6.2 percent, compared with 2.4 percent in the U.S., 0.9 percent in the euro area and 1.7 percent in Japan, it said.

Faster economic growth has fueled stock-market gains and valuations. The MSCI South East Asia Index has rallied 13 percent this year, including dividends, and more than doubled since 2008. The MSCI Asia Pacific Index has gained 3.8 percent in 2012 and returned 43 percent since the end of 2008.

The supposed ASEAN brilliance has really not about ‘faster economic growth’ but about three major unseen factors.

First is low debt as consequence of restructuring from the Asian crisis

As rightly pointed out by the article,

Southeast Asia “does not have debt problems like Europe,” Alan Richardson, a Singapore-based fund manager for Samsung Asset Management Co., who helps oversee $82 billion, said by phone on July 2. The region “hasn’t been through a strong investment up-cycle compared to the BRIC economies, so increasingly investors are seeing Asean has an alternative equity class.”

The second and most important which has been tightly correlated to the first is domestic negative interest rates.

Negative interest rates have been conducive or encourages debt take up in low debt economies.

So what has been deemed as relatively ‘faster’ economic growth is in reality an ongoing credit boom as discussed here. I mentioned that even Fitch rating has recently warned the Philippines on this.

The third interrelated factor has been the monetary easing policies by developed economies.

Many international investors have taken ASEAN as quasi-refuge justified as ‘investment’ based on growth when in reality (particularly the Japanese), they represent as yield searching dynamic or rampant speculation meant to preserve the purchasing power of their savings (euphemism for capital flight) against reckless monetary policies at home.

Be reminded that one major characteristic of a bubble is to broadcast a "new paradigm". This seems what we are seeing today in ASEAN

The BRICs has initially been thought to have been the 'new paradigm'; now this has been shattered.

Booms brought about by bubble policies will eventually be exposed for what they are, as they have always been.

Be careful out there.