The historian must be more than a chronicler, a mere lister of events. For his real task is discovering and setting forth the causal connections between events in human history, the complex chain of human purposes, choices, and consequences over time that have shaped the fate of mankind. Investigating the causes of such a portentous event as the American Revolution is more than a mere listing of preceding occurrences; for the historian must weigh the causal significance of these factors, and select those of overriding importance.
The Federal Reserve has been increasing the money supply at an explosive rate. The federal budget, deficits, and the trade deficit are record levels. Governments, both foreign and domestic, have locked down people, restricting production and consumption. How should this be viewed by an economist?
George Reisman My purpose today is to make just two main points: (1) To show why Nazi Germany was a socialist state, not a capitalist one. And (2) to show why socialism, understood as an economic system based on government ownership of the means of production, positively requires a totalitarian dictatorship.
The state strives for power, and what grants power is fear and dependence. The state is making people dependent on it, both as means for control and as an outcome of many policies intended to provide relief.
It was a bloodless coup d’état against an unresisting Confederation Congress. The original structure of the new Constitution was now complete. The Federalists, by use of propaganda, chicanery, fraud, malapportionment of delegates, blackmail threats of secession, and even coercive laws, had managed to sustain enough delegates to defy the wishes of the majority of the American people and create a new Constitution. The drive was managed by a corps of brilliant members and representatives of the financial and landed oligarchy. These wealthy merchants and large landowners were joined by the urban artisans of the large cities in their drive to create a strong overriding central government—a supreme government with its own absolute power to tax, regulate commerce, and raise armies. These powers were sought eagerly as a method of handing out special privileges to commercial groups: navigation acts to subsidize shipping, tariffs to protect inefficient artisans stampeded by national depression from foreign manufactured goods, and a strong army and navy to pursue an aggressive foreign policy designed to force the opening of West Indies ports, the Mississippi River, and the Northwest. And, to pay for all of these bounties, a central taxing power would be harnessed that could also assume and pay the public debt held by wealthy speculators. But government, by its nature, cannot supply bounties and privileges without taking them from others, and these others were to be largely the hapless bulk of the nation’s citizens, the inland subsistence farmers. In western Massachusetts, taxes to pay a heavy public debt owned by wealthy men in the East had produced Shays’ Rebellion. Now, a new super government was emerging and carrying out on a national scale the mercantilist principle of taxation, regulation, and special privilege for the benefit of favored groups (“the few”) at the expense of the bulk of producers and consumers in the country (“the many”). And while to acquire sufficient support they had to purchase allies among the mass of the people (e.g., urban artisans), the major concentration of benefits and privileges would undoubtedly accrue to America’s aristocracy.
Last week, Ned Davis Research published a note titled “Turns Out, Growth Looks like It Was Transitory—Inflation Is More Sticky.” There are many factors that show us that consumers and salaries are being eaten away by inflation, leading to an abrupt halt in the recovery. Autos and new home sales plunged, real disposable personal income has plummeted, and real median wage growth is lower than inflation.
I hate to be the bearer of bad news, Ben Shapiro, but feelings trump facts when it comes to covid-19. This is thanks entirely to the love triangle forged between the corporate press, government officials, and tech giants whose sinister and divisive campaign of fear and censorship spawned a reaction so virulent that society was upended in a matter of weeks for a virus with a 99 percent plus survival rate.
Lamentations that the waves of innovation are receding have engulfed policy circles. Distinguished economist Robert Gordon avers that the days of transformative innovations are over. Like Peter Thiel, he is disappointed at the incremental nature of modern-day inventions. The declinist thesis is predicated on the assumption that groundbreaking innovations like the steam engine, electricity, and the telephone are becoming exceedingly rare. Educing evidence to prove this observation has been quite easy, but we are less astute at understanding why innovation is declining.
I was a young lad of thirteen when the first Transformers film directed by Michael Bay premiered in theaters. I do not recall much about it other than Megan Fox working on Shia Labeouf’s car, but apparently, this sultry façade was hiding a darker secret: the film was actually government-supported propaganda produced with extensive involvement from the military. This is just one of the many surprising and sometimes shocking things I learned from Christopher J. Coyne and Abigail R. Hall’s new book, Manufacturing Militarism: U.S. Government Propaganda in the War on Terror, which should be read by everyone who seeks to more fully understand the extent to which militaristic propaganda has pervaded seemingly every aspect of our society.
The official line on vaccines is that they are extremely effective at protecting against serious illness. And yet, these same people are also claiming that the unvaccinated are a major threat to the vaccinated.
The Biden administration on Thursday announced sweeping new mandates. The new mandates require that all employers with more than one hundred workers require workers to be vaccinated or to test for the virus weekly. The mandates also require covid vaccinations for the 17 million workers at health facilities that receive federal Medicare or Medicaid. Moreover, vaccines are mandated for all employees of the federal government’s executive branch, and for all contractors who do business with the federal government. There is no option to test out in these cases.
We oppose President Biden’s lawless and authoritarian new mandates announced yesterday. We also denounce his divisive rhetoric toward unvaccinated Americans, his reckless antipathy for federalism, and his threats to usurp state governors.
Life in American changed twenty years ago after the 9/11 attacks. Many Americans became enraged at anyone who did not swear allegiance to President George W. Bush’s anti terrorism crusade. Anyone who denied “they hate us for our freedoms” automatically became an enemy of freedom.
It struck me recently just how frequently we use the word “law” in our conversations. I read or hear, “That’s against the law” when someone wants someone else not to do something, and “There ought to be a law” when someone wants to further restrict others. I read arguments about what it really means to say that the Constitution is the highest law of the land. But few people seem to be thinking more than a millimeter deep about law—is there any law beyond civil law? What do we mean when we say “law” in a particular context? What are the current limitations on law? What should the limits on law be?
Since the 1800s, surly Americans have derided politicians for spending tax dollars “like drunken sailors.” Until recently, that was considered a grave character fault. But Joe Biden’s American Rescue Plan Act shows that inebriated spending is now the path to national salvation.
The term “the state” is a term that gets thrown around a lot with various meanings. Even excluding the confusing American terminology in which the United States is composed of “states,” we’re still left with many other meanings. For example, in the international relations literature, most independent countries are generally referred to as states. Historically, governments and polities of all types have been referred to as states.
Central banks should know by now that you cannot have negative interest rates with low bond yields and strong growth. One or the other.
Central banks have chosen low bond yields at any cost, despite all the evidence of stagnation ahead. This creates enormous problems
It is not a surprise that markets have bounced aggressively, driven by the tech sector, after a slump based on concerns about the pace of economic growth. Stimulus package effects are increasingly short, and this was pretty evident in the poor figures of industrial production and the ZEW survey gauge of expectations. The same can be said about a weakening ISM index in the United States. United States ISM Services PMI came in at 60.1, below expectations (63.5) in June, precisely in the sector where the recovery should be strongest.
Interestingly, European markets declined sharply after the European Central Bank sent the ultimate dovish message, a change in its inflation target that would allow the central bank to exceed its 2 percent limit without change of policy. What does it all tell us?
First, that the placebo effect of stimulus packages shows a shorter impact. Trillions of dollars spent create a small positive effect that lasts for less than three months but leaves a massive trail of debt behind.
Second, central banks are increasingly hostage to governments that simply will not curb deficit spending and will not implement structural reforms. The independence of the monetary authorities has long been questioned, but now it has become clear that governments are using loose policies as a tool to abandon structural reforms, not to buy time. No developed economy can tolerate a slight increase in government bond yields, and with sticky inflation in nonreplicable goods and services, this means stagnation with higher prices ahead, a bad omen for the overall economy.
Third, and more concerning, market participants know this and take incremental levels of risk knowing that central banks will not taper, which leads to a more fragile environment and extreme levels of complacency.
So-called value sectors have retraced in equity markets, which shows that the recovery has been priced and that the risk ahead is weakening margins and poor growth, while the traditional beneficiaries of “low rates forever” have soared to new highs.
Despite rating agencies’ concerns about the rising figure of fallen angel debt, there is extreme complacency among investors looking for yield, and they are buying junk bonds at the fastest pace in years despite a rising number of bankruptcies.
Central banks justify these actions based on the view that inflation is transitory but ignore the risks of elevated prices even if the pace of increase in those prices slows down. If food and energy prices rise 30 percent, then fall 5 percent, that is not “transitory” to consumers who are suffering the above-headline increase in the prices of the things they purchase every day, a problem that occurred already in 2020 and 2019. The most negatively affected are the middle-low and poor classes, as they do not see a wealth effect from the rise in asset prices.
Sticky inflation and misguided loose fiscal and monetary policies are not tools for growth, but for stagnation and debt.
So far, central banks believe their policies are working, because equity and bond markets remain strong. That is like giving more vodka to an alcoholic because he has not died of cirrhosis yet. Low bond yields and high levels of negative-yielding debt are not signaling monetary success but are evidence of a deep disconnection between markets and the real economy.
Central banks have already stated that they will continue with ultraloose policies no matter what happens to inflation in at least a year and a half. For consumers that is a lot of time for weakening purchasing power of salaries and savings. Markets may continue to reward excess and high risk, but that is not something that should be ignored, let alone celebrated. Extreme risk will be blamed for the next crisis, as always, but the cause of that extreme risk -perennial loose monetary policy- will not stop. In fact, it will be used as the solution if there is a market collapse.
Central banks should be tapering already, and if they believe that low sovereign yields are justified by fundamentals, let markets prove it. If negative nominal and real yields are justified by the issuers’ solvency, why is there any need for monetary authorities to purchase 100 percent of net issuances? Reality is much scarier. If central banks started tapering, sovereign yields would soar to levels that would make many deficit-spending governments quake. Therefore, by keeping yields artificially low, central banks are also sowing the seeds of higher debt, lower productivity, and weaker growth—the recipe for crowding out, overcapacity, and stagnation.
Author: Daniel Lacalle
Daniel Lacalle, PhD, economist and fund manager, is the author of the bestselling books Freedom or Equality (2020), Escape from the Central Bank Trap (2017), The Energy World Is Flat (2015), and Life in the Financial Markets (2014).
He is a professor of global economy at IE Business School in Madrid.
Plato, in his Republic, tells us that tyranny arises, as a rule, from democracy. Historically, this process has occurred in three quite different ways. Before describing these several patterns of social change, let us state precisely what we mean by “democracy.”
In order to gain insight into the current and future state of an economy, many economists hold that it is helpful to get the view on this from consumers and businesspersons. Randomly selected consumers and businesspersons are asked to provide their views about the current and the future state of the economy.
In many minds, “capitalism” has come to be a bad word, nor does “free enterprise” sound much better. I remember seeing posters in Russia in the early nineteen-thirties depicting capitalists as Frankenstein monsters, as men with yellow-green faces, crocodile teeth, dressed in cutaways and adorned by top hats. What is the reason for this widespread hatred for capitalists and capitalism despite the overwhelming evidence that the system has truly “delivered the goods”? In its mature stage it indeed is providing, not just for a select few but for the masses, a standard of living cordially envied by those bound under other politico-economic arrangements. There are historic, psychological and moral reasons for this state of affairs. Once we recognize them, we might come to better understanding the largely irrational resentment and desire to kill the goose that lays the golden eggs.