Tag: Mises Does Not Approve

The Cure to Inflation Must Be More Inflation

What happens when you give dictatorial powers to somebody who is entirely ignorant of economics? Socialism:

CARACAS (Reuters) – Venezuelan President Nicolas Maduro announced a 40 percent increase to the minimum wage as of January, a move that will foment what many economists already consider hyperinflation in the oil-rich but crisis-stricken nation.

Inflation is getting out of hand, what should we do? I know! We’ll increase the minimum wage! That’ll fix it!

Every proponent of a minimum wage is ignorant of the fact that mandating a minimum wage doesn’t actually increase anybody’s purchasing power. When you mandate a minimum wage you guarantee that any work that isn’t worth that minimum wage is eliminated. Teenagers bagging groceries may be worth $2.00 an hour but not $3.00. If the minimum wage is set to $3.00 an hour, those teenagers suddenly find themselves unemployed. The higher the minimum wage is set, the more jobs are eliminated.

In addition to eliminating jobs, minimum wage laws also increase inflation. Some jobs simply can’t be eliminated by a business, which is something many proponents of minimum wage bring up when the above point is brought to their attention. A restaurant can’t operate without cooks (At least not yet. But cost decreases in automation will make such restaurants feasible very soon). If a minimum wage is set to, say, $15.00 an hour but a cook is only worth $10.00, then the restaurant owner has to either close shop or increase their prices. Most restaurant owners will opt for the latter, which means the cost of a meal goes up. Suddenly an $8.00 mean becomes a $10.00 meal and everybody who eats out finds themselves with less purchasing power.

By increasing the minimum wage 40 percent, the Venezuelan government guaranteed the elimination of many jobs and major increases in prices. These two things will only cause the average Venezuelan more misery. But dictators are seldom concerned with the amount of pain the average person has to suffer. Dictators are concerned with enriching themselves.

The Rent Is too Damn High

Remember Jimmy McMillan, the founder of the Rent Is too Damn High Party?

He wasn’t wrong:

A recent survey by New York councilmember Helen Rosenthal found 12% of stores on one stretch of the Upper West Side is unoccupied and ‘for lease’. The picture is repeated nationally. In October, the US surpassed the previous record for store closings, set after the 2008 financial crisis.

[…]

“It’s not Amazon, it’s rent,” says Jeremiah Moss, author of the website and book Vanishing New York. “Over the decades, small businesses weathered the New York of the 70s with it near-bankruptcy and high crime. Businesses could survive the internet, but they need a reasonable rent to do that.”

Part of the problem is the changing make-up of New York landlords. Many are no longer mom-and-pop operations, but institutional investors and hedge funds that are unwilling to drop rents to match retail conditions. “They are running small businesses out of the city and replacing them with chain stores and temporary luxury businesses,” says Moss.

In addition, he says, banks will devalue a property if it’s occupied by a small business, and increase it for a chain store. “There’s benefit to waiting for chain stores. If you are a hedge fund manager running a portfolio you leave it empty and take a write-off.”

Fucking late stage capitalism!

I wrote that sarcastically but there are people who are saying it seriously. If one only possesses an infantile knowledge of capitalism, it would be easy for them to blame this predicament on capitalism instead of the real culprit, government. The economic system the United States operates under can best be described as government manipulated privately held businesses. While businesses in the United States are nominally private they are heavily manipulated by government. Wealthy businesses are able to hire lobbyists who can influence politicians into massaging the regulatory field. The lobbyists work to create a regulatory field that favors their employers while simultaneously hurting their employer’s competitors. For example, a lobbyist working for Comcast might influence city politicians to raise the cost of the permits required to bury fiberoptic cable. A large Internet Service Provider (ISP) like Comcast can easily soak up those additional permit costs whereas small local ISPs are not able to and thus are forced to go out of business.

This manipulated environment is also a feedback loop. As wealthy organizations are able to push out more and more competitors they are able to become more and more wealthy. As they become more and more wealthy they are able to afford more regulatory manipulation and so on. The inevitable end of this feedback loop is an economy controlled by a handful of wealthy politically-connected players and devoid of small businesses. Banks, as major players in the regulatory manipulation game, recognize this and thus acknowledge that properties occupied or owned by large corporations are far more valuable that properties occupied or owned by individually owned businesses. Property owners going off of the banks’ assessments will let their properties sit empty until a large corporation shows interest in buying or renting it.

Parts of the United States are already reaching the point where individually owned businesses can no longer succeed. Other parts of the United States will eventually reach the same point. The feedback loop will continue until small businesses can only exist in the black market.

Increasing the Forced Labor Pool

The Pentagon has begun pushing for a policy to require women to also register for the draft. Why would the United States even bother with continuing the draft now that it’s using mercenaries for so much of its fighting? Because mercenaries want to get paid and the Pentagon wants to have the option of free labor available to it:

Not surprisingly, the Pentagon, the report reminds us, wants the Service Program to continue indefinitely. No surprise there. But now, the Pentagon wants to expand draft registration so it can include millions of young people who had not previously been eligible.

This proposed change will be couched in a variety of irrelevant issues like “gender equality” and “women in combat.” At the heart of the matter, however, is the fact that the Pentagon wants an even larger list of potential forced laborers who can be paid below-market wages. In other words, draft registration offers — and has always offered — a list of people who can be forced to pay higher taxes in the form of mandatory “service”:

“Conscription is slavery,” Murray Rothbard wrote in 1973, and while temporary conscription is obviously much less bad — assuming one outlives the term of conscription — than many other forms of slavery, conscription is nevertheless a nearly-100-percent tax on the production of one’s mind and body. If one attempts to escape his confinement in his open-air military jail, he faces imprisonment or even execution in many cases.

When you stop paying a mercenary, they go home. When you enslave draft an individual and fail to pay them or pay them below the market rate, they can’t go home because they’ll be arrested for desertion. The other downside with mercenaries is that you can’t force them to do anything. They’re contracted for a specific type of work. Drafted individuals, on the other hand, can be forced to perform any task:

Should the American state decide that it’s necessary to finally make use of the Selective Service lists, the new draftees won’t be people sent to carry rifles on the front lines. The military doesn’t want poorly trained conscripts in combat, anyway. But this fact by no means precludes the potential usefulness of conscription to the federal government.

What the US state does want — especially in case of dropping revenues due to economic crisis — is cheap labor to build military bases, drive trucks, prepare food, load cargo, mop floors, and perform the countless non-combat tasks that are required to further expand military prerogatives both at home and abroad. Yes, the US government can pay people to do all those things now. But conscripts could be much cheaper.

The Pentagon can have its cake and eat it too. By paying mercenaries to fight its wars, the Pentagon can have access to professional soldiers. By drafting people into slavery, the Pentagon can save money by having the infrastructure required to fight the war built for less than the market going rate.

Requiring women to register for the draft would offer the Pentagon an even larger pool of potential slave laborers, which would give it the option to expand itself further than it currently could without having to invest a lot more money.

War is Good for Business

War is good for business. At least if you’re on the waging side. It’s probably not so good for those on the invaded side. But who can bring themselves to care about them when we’re talking about numbers like this:

BOSTON, Sept. 26, 2017 /PRNewswire/ — Force modernization will be one of the primary factors underpinning growth in global defense spending, driven by unprecedented developments in autonomous systems, missile, space and cyber-electronic warfare, and other technologies. Strategy Analytics: The Strategy Analytics Advanced Defense Systems (ADS) service report, “Global Defense Spending Outlook 2016-2026,” forecasts the global defense budget will grow to $2.41 trillion in 2026, with the opportunities available to industry growing at a CAGR of 3.5% to reach $771 billion.

Force modernization, if it follows in the footsteps of the F-35, will involve a great deal of money. However, there will be little to show for that money. The F-35, for example, still has problems reliably delivering oxygen to pilots even though it has cost over $1 trillion. Imagine the same thing happening with other military equipment. If we look at the raw numbers alone, it’ll be amazing economic growth!

Unfortunately, all of the resources invested in “force modernization” cannot be allocated to productive uses like new manufacturing plants, office buildings, and research and development for new consumer products.

Corporate Welfare Commission Decides Cheap Solar Panels Are Bad

Big corporations tend to be very friendly with big government because big government can help them monopolize their market. While this process of monopolization is bad for consumers, neither the government nor the corporations that have allied themselves with it give a damn. For example, solar power has become increasingly viable over the years thanks to cheap solar panels. However, these cheap panels are being produced overseas, where the lack of government restrictions makes it more viable to make cheap products. To compensate domestic solar panel manufacturers for the restrictions it put in place, the Corporate Welfare Commission, sometimes mistakenly referred to as the International Trade Commission (ITC), has ruled that overseas panels are a threat to domestic manufacturers:

On Friday, the International Trade Commission (ITC) sided with bankrupt solar panel manufacturer Suniva, voting 4-0 that cheap imported solar panels and modules have harmed domestic panel manufacturers.

The commission now has until November to send recommendations on remedies to President Trump, who will be responsible for either setting a tariff on imported solar materials or finding some other remedy. Given Trump’s promises to bolster American manufacturing, it’s likely that he’ll favor restrictions on solar panel imports.

I’m sure the ITC will settle on a tariff because the other remedy, removing government created restrictions from domestic manufacturers, is unthinkable. What does this mean for consumers? It means us consumers will be paying more for solar panels. This is a bit ironic since the government dumped so much money into encouraging manufacturers to make solar panels affordable in the first place. But what government giveth, government taketh away. It may favor cheap solar panels today and oppose them tomorrow.

All Hail Hurricane Harvey, Savior of Our Economy

A lot of people like to write off the Austrian school of economics as lunacy. Those same people usually cite mainstream economics as the right and true school of thought. However, I have a difficult time taking their opinions seriously when they believe shit like this:

Devastating Hurricane Harvey, unprecedented in its rainfall, could be a slight negative for U.S. growth in the third quarter, but economists say it may ultimately provide a tiny boost to the national economy because of the rebuilding in the Houston area.

Goldman Sachs economists estimate a very preliminary impact of the storm to be $30 billion in property damages, making it the ninth largest since World War II in terms of domestic property damage. Goldman economists say, in a note, the storm could take 0.2 points off of growth in third quarter because of the impact to the energy sector.

The problem with mainstream economics is its reliance on activity. So long as money is changing hands mainstream economists see a strong economy. If $30 billion of property is destroyed, they see $30 billion of activity and therefore a stronger activity. What totally flies over their head is the fact that that $30 billion isn’t producing new wealth, it’s merely replacing lost wealth. The Austrian school of economics is at least intelligent enough to address this fact.

What’s especially bad about the viewpoint that destruction is good for the economy is that it was refuted by Frédéric Bastiat way back in 1850:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation – “It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Resources spent on rebuilding lost wealth cannot be used on creating new wealth. The rate of creation of new wealth is a far better indicator of the strength of an economy that simple economic activity.

The Result of Relying on Coercion Instead of Market Forces

Minimum wage laws are seen by many as a mechanism to uplift the poor by ensuring every employee receives a “living wage.” For the economically ignorant that fairytale makes sense. For those with even a slight understanding of economics it’s a recipe for disaster.

The problem with minimum wage laws is the same problem with any government writ, they’re based on coercion instead of market forces. Market forces are based on wealth creation. When more wealth is created employees can be paid. Government writ doesn’t create new wealth so minimum wage laws rely on the current amount of wealth. Since the employers don’t have more wealth to draw from they’re forced to increase their prices to compensate, which often makes their product unaffordable to those who could previously afford it:

The U.S. restaurant industry is in a funk. Blame it on lunch.

Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business for restaurants, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.

[…]

Cost is another factor working against eating out for lunch. While restaurants have raised their tabs over the past few years to cope with rising labor costs, the price of food at supermarkets has continued to drop, widening the cost gap between bringing in lunch and eating out.

Statists often scoff at the idea that minimum wage laws hurt the poor. How could laws that are advertised as helping the poor possibly hurt the poor? By forcing employers to increase their prices and thus make their product that was previous affordable to poorer individuals unaffordable.

The best way to help uplift the poor is to create more wealth. Creating more wealth requires fulfilling the wants and needs of consumers. Commands from governments cannot accomplish that no matter how many people vote in favor of them.

Why Nobody Enjoys Dealing with Government

One of the biggest problems when dealing with government is the lack of consistency. This lack of consistency costs people a tremendous amount of money. Towards the end of his reign, Obama improved relations between the United States and Cuba by loosening the idiotic sanctions placed by the former on the latter. This reestablished the opportunity for market actors that previously had no access to the markets in Cuba to create some new wealth. But today is a different day and the country is being run by a different team:

President Donald Trump is set to announce a rollback of former President Barack Obama’s policies toward Cuba, The Daily Caller has learned.

Two sources told TheDC that the development is due to the behind-the-scenes efforts of Republican Florida Sen. Marco Rubio, Democratic New Jersey Sen. Bob Menendez and Republican Florida Rep. Mario Diaz-Balart.

This information coming from an anti-embargo group, which spoke on the condition of anonymity, was confirmed Sunday by John Kavulich of the nonpartisan U.S. – Cuba Trade and Economic Council. “The Trump Administration has been ‘ready’ since February 2017 to announce changes, but issues unrelated to Cuba have intervened,” Kavulich said.

If the Trump administration reverses Obama’s policies towards Cuba, it will be yet another incident of the market fronting unnecessary costs because the people in charge can’t make their minds up about anything. This is why every company in the United States is laser focused on short term profits. They take whatever they can get today because their business model may not be legal tomorrow.

Money Won’t Save Government Indoctrination Centers

How many times have you heard a statist claims that government indoctrination centers, or public education to use their euphemism, don’t receive enough money? If I had a nickel for every time I’ve heard that I’d have enough money to fund a government indoctrination center for 15 to 20 minutes!

Statists are predictable creatures. Whenever a government programs fails to deliver expected results they resort to claiming that the program simply didn’t receive enough funding. To them government programs are furnaces. If the program isn’t delivering expected results then you need to shovel more coal into it. But how much money is needed to make the furnace of government indoctrination centers produce some heat? Apparently a lot:

There’s also lots of waste and inefficiency when Uncle Sam gets involved. With great fanfare, President Obama spent buckets of money to supposedly boost government schools. The results were predictably bad.

[…]

The administration funneled $7 billion into the program between 2010 and 2015… Arne Duncan, Obama’s education secretary from 2009 to 2016, said his aim was to turn around 1,000 schools every year for five years. ..The school turnaround effort, he told The Washington Post days before he left office in 2016, was arguably the administration’s “biggest bet.”

It was a “bet,” but he used our money. And he lost. Or, to be more accurate, taxpayers lost. And children lost.

[…]

Indeed, I’ve seen this movie before. Many times. Bush’s no-bureaucrat-left-behind initiative flopped. Obama’s latest initiative flopped. Common Core also failed. Various schemes at the state level to dump more money into government schools also lead to failure. Local initiatives to spend more don’t lead to good results, either.

Throwing more money into government indoctrination centers is an exercise in doing the same thing over and over again and expecting different results. If shoveling money into the program was capable of fixing it then we’d have see at least some marginal improvement over the decades. But student performance continues to dwindle, the nation is becoming dumber.

Will statists listen to reason on this matter? Of course not. In their world all problems can only be solved by the State. If the State’s current initiatives aren’t working then it’s the fault of a hated political party, the free market, or a lack of funding. But the fault never lies with statism itself!

The Wonders of Socialism

Socialism ensure that everybody is equal..ly poor:

In a new sign that Venezuela’s financial crisis is morphing dangerously into a humanitarian one, a new nationwide survey shows that in the past year nearly 75 percent of the population lost an average of 19 pounds for lack of food.

The extreme poor said they dropped even more weight than that.

The 2016 Living Conditions Survey (Encovi, for its name in Spanish), conducted among 6,500 families, also found that as many as 32.5 percent eat only once or twice a day — the figure was 11.3 just a year ago.

How can the people of a nation with such plentiful resources end up starving? Through the wonders of socialism!

Venezuela is yet another example in a long, sad list of examples of centrally planned economics failing. As Ludwig von Mises explained so thoroughly, centrally planned economies are always doomed to fail. It’s not possible for a handful of individuals to accurate determine the wants and needs of millions of people. Especially when the wants and needs of every single one of those millions of people are constantly changing.

The only question here is whether or not the Venezuelan government will do the decent thing and disband itself or if the people will have to rise up and overthrow it.