Author Archives: lawofmarkets

A supply-side take on the PM’s package

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I have to say that I have been charmed by the approach taken by the Government to bring us out of the lockdown. I find this especially extraordinary:

“Value created by establishing successful products and services, the ability to be able to sell them at a competitive and profitable price and into growing and sustainable markets. It’s economics 101.“

Here’s the thing. It is not Economics 101 and has not been for two generations. It ought to be, but isn’t. Because this is an entirely supply-side statement. There is not an ounce of C+I+G anywhere to be seen. It is entirely about Value Adding as the absolutely necessary core for regenerating growth.

Keynesian economics may really be dead, and not a moment too soon.

Vote to leave these fools behind

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https://twitter.com/darrengrimes_/status/1264669957230649348

Here’s the story from the first link above.

Boris Johnson’s under-fire chief adviser Dominic Cummings squashed a plan to delay Britain’s true Brexit day which was “all but agreed” while he and the Prime Minister were “laid out on their sickbeds”.

Cummings, resented by much of the media establishment and the “deep state” for his role in the Vote Leave campaign and open disdain for journalists and bureaucrats, is currently the subject of a media circus over allegations he broke lockdown rules by travelling from London to Durham so his family could look after his young child if he and his wife were incapacitated by their coronavirus infections.

Much to journalists’ chagrin, Boris Johnson has elected to stand by Cummings, saying he acted “responsibly, legally, and with integrity” — causing anti-Cummings commentators such as Piers Morgan of Good Morning Britain to demand that state officials scour his personal data for evidence of potential wrongdoing.

Less extensively reported is the fact that, on recovering from the Chinese virus, one of Cummings’ first was to squash a plan “concocted by underlings” while he and the Prime Minister were laid low to delay Britain’s true Brexit day.

Technically, the United Kingdom has already left the European Union, but it remains in a so-called “transition period” in which it remains subject to the bloc’s laws, trade policy, judges, and migration regime — effectively EU membership in all but name, but minus representation in EU institutions such as the Commission and the Court of Justice.

Remainers had seen the coronavirus as an opportunity to extend this “transition”, currently due to expire in December 2020, and apparently a plan to do so had been “all but agreed at official level” while Johnson and his adviser were out of action.

“A deal to extend the transition in light of the [pandemic] had been all but agreed at official level,” reported Jeremy Warner, the Remain-voting assistant editor of The Daily Telegraph, in an article published earlier in May.

“The EU was to have spared the UK’s blushes by proposing it, rather than the other way around. This would have allowed the UK government to present the concession as a favour to the EU, rather than a climbdown,” he explained.

“But then Dominic Cummings, the Prime Minister’s chief adviser, returned and the plan, concocted by underlings while he and Boris Johnson were laid out on their sickbeds, was scuppered,” he lamented.

The ongoing efforts to oust the Brexiteer by elements of the press on both the liberal left and the liberal “right” have been criticised by some viewers as partisan and motivated by his perceived failure to play ball with lobby correspondents who have hitherto relied on “access” to government ministers for much of their work.

For example, social media users have observed that reporters hounding him for the alleged dangerousness of his journey to Durham were crowding him and each other in large numbers while making no effort to observe social distancing and not even wearing masks outside his house.

A sign with an electronic billboard playing official “stay at home” messaging driven to Cummings’ home by the anti-Brexit activist group Led by Donkeys may also have been flouting the lockdown rules the adviser is alleged to have broken.

WITH A BIT OF AN UPDATE:

The stupidest most ignorant people, lacking in judgement and sense, are the ones now reporting the news. But remember, they are not the ones who will be taken down by the havoc they cause. In their own generation it will be the ones who are at the fringes, and after they pass on, they will not care.

Adam Smith and the Free Market

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A friend sent this along for comment.

Have Adam Smith and his writings been hijacked by free market economics?

Yes. Smith was deeply suspicious of the business class. When I was teaching, I used to give quotes without attribution for students to comment on, and they regularly treated Smith quotes as being from Marx. Smith knew nothing of capitalism, which barely existed in his day, and would be appalled by the idea of an economy based on a class of workers without property. His insight that people’s selfishness might produce collectively beneficial results (“the invisible hand”) has been taken over by so-called free market economics, and debased into a “greed is good” mantra that is totally antithetical to Smith’s teaching.

Smith complemented The Wealth of Nations with The Theory of Moral Sentiments, which explained that the moral sentiments of trust and compassion were required, among other things, to make a market economy operate at all. This idea has no role in “free market economics,” which imagines that economic actors are soulless egoists. Smith also maintained the first modern version of the labor theory of value, on which the exchange value of a commodity is the labor embodied in it. “Free market” economics rejects this in favor of a subjective theory of value on which price is determined entirely by supply and effective demand, what people with money will pay for it, because labor value is deemed “Marxist,” because Marx developed the most sophisticated version of value theory. A theory without labor value is not Smithian.

The problem here begins with knowing what is meant by “Adam Smith and his writings” and following that what is meant by “free market economics”. And then with making sense of “economic actors are soulless egoists” and “a ‘greed is good’ mantra”. Then beyond all of that, there is this which makes his argument utterly vacuous: “Marx developed the most sophisticated version of value theory” which he rounds us to “a theory without labor value is not Smithian” which means in his hands that only Marxists with their labour theory of value can truly state that they are following in the genuine tradition of Adam Smith.

Adam Smith is best understood via the invisible hand, that an economy is driven by individual decision making through entrepreneurial activity. The quotation is attempting to argue that Karl Marx is the true descendent of Adam Smith. Every aspect of this argument is false, an attempt to appropriate Smith, who advocated free markets, on behalf of Marx, who advocated a centralised tyranny in which markets play no role in directing resources towards their highest valued uses.

Lost and gone forever

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Clementine Ford

Oh my darling, oh my darling
Oh my darling, Clementine
You are lost and gone forever

Not sure if there are any souls more wayward than those who have been caught up in the latest intellectual fad that disappears into the mists of time even while they live. Which brings me to this from Andrew Bolt: CLEMENTINE FORD AND THE BETRAYAL OF FEMINISM.

Clementine Ford is called “Australia’s most prominent contemporary feminist”. What stunning proof that feminism has betrayed itself.

This movement once demanded women receive equal treatment. Now it demands women receive special protection, as if they’re as fragile as sexists always claimed.

Take Ford. She’s the kind of feminist who’s tweeted “kill all men”, and on Saturday complained that “coronavirus isn’t killing men fast enough”.

This brand of feminism now attracts official support. Ford last year got a gig on the ABC, and Melbourne City Council this month gave her a grant to write another book.

But check out the double standards.

Last year, Ford joined another public lynching by the Left of Alan Jones, after he said he was sick of the global warming idiocy of New Zealand Prime Minister Jacinda Ardern and wanted a sock stuffed “down her throat”. This was too much for the suddenly delicate sensibilities of Ford, who said she deplored such “verbal assaults” which were “sexist” and an affront to “human dignity”

So let me say it right here: there is no greater possibility for contentment and life satisfaction than from a happy marriage, especially if it is blessed with children. There are no longer any rules that inhibit women from achieving whatever they are capable of. But there are many traps for the unwary that will derail many from finding where their true happiness will lie. It is so unfashionable to say this, but this is for almost everyone – male of female – the absolute truth.

The left is depraved and sickening to its very core

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There is no higher level of disgust I can conjure that might arise from something else. If this is how the left sees the world, their personal misery and self-hatred are so all-consuming of their inner being that they are oblivious to everything that surrounds them. It’s from The Guardian.

For the full sense of how out of their tree these people are, you should go to this link and read through the entire cartoon, if you can stomach it. They are filled with hate and venom. This is entirely beyond ignorance since it takes very little to understand the rudiments of how an entrepreneurially-driven economy works. You eat because someone runs a farm, other people transport farm produce to where it can be sold by retailers, with plenty of other steps along the way. And why do individuals run farms, transport companies, retail outlets? Because that is how they earn their living. Yet there are people all over Australia, all over the Western world, who are so filled with such forms of madness that they do not care if the entire structure of the world crashes down upon our heads, which includes themselves, because they want vengeance on a world that is not how they would have liked it to be.

And following the cartoon there is this:

News is under threat …

… just when we need it the most. Millions of readers around the world are flocking to the Guardian in search of honest, authoritative, fact-based reporting that can help them understand the biggest challenge we have faced in our lifetime. But at this crucial moment, news organisations are facing an unprecedented existential challenge. As businesses everywhere feel the pinch, the advertising revenue that has long helped sustain our journalism continues to plummet. We need your help to fill the gap.

You’ve read 37 articles in the last six months. We believe every one of us deserves equal access to quality news and measured explanation. So, unlike many others, we made a different choice: to keep Guardian journalism open for all, regardless of where they live or what they can afford to pay. This would not be possible without financial contributions from our readers, who now support our work from 180 countries around the world.

Aside from the heading about news being under threat, about which I could not agree more, the lack of self-awareness in their insane attack on business owners who depend on revenues exceeding costs if they are to continue, adds to the general repulsiveness of the people who can write such things. They see themselves as a business in need of revenue to cover their costs in producing screeds such as this to attack profit-earning businesses, such as themselves. It is a form of mental illness. I wonder if they despise their readers as much as I do.

Reaping the whirlwind

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The video is on the simplistic side but is accurate enough. The point is that spending of itself doesn’t make your economy grow and more especially, able to repay a loan. Only value adding investment does that, investments where every dollar spent leads to output whose value is greater than a dollar. virtually no government ever does that, and when occasionally some government does, that government is not run by Daniel Andrews, nor, unfortunately, by Scott Morrison.

Let me continue along the same line of thought with this from Mises.org: Central Banks Are Destroying What Was Left of Free Markets. It is a more sophisticated version of what I wrote about earlier: “The best way to destroy the capitalist system is to debauch the currency”. The author here is Alasdair Macleod, “the Head of Research at Goldmoney”.

Those receiving subsidies and loan guarantees are no doubt grateful, though they probably see it as the government’s duty and their right. But someone has to pay for it. In the past, the redistribution of wealth through taxes meant that the haves were taxed to give financial support to the have-nots, at least that was the story. Today, through monetary debasement nearly everyone benefits from monetary redistribution.

This is not a costless exercise. Governments are no longer robbing Peter to pay Paul. They are robbing Peter to pay Peter as well. You would think this is widely understood, but the Peters are so distracted by the apparent benefits they might or might not get that they don’t see the cost. They fail to appreciate that printing money is not just the marginal source of financing for excess government spending, but that it has now become mainstream.

I will take you to the final para which ought to make you think very hard about where we are heading, but you may have to read the part in between, and perhaps also my own previous article to make sense of it. No one can know for sure, but why would you trust a central bank?

Earlier in the descent into the socialization of money, nations had opportunities to change course. Unfortunately, they had neither the knowledge nor the guts to divine and implement a return to free markets and sound money. Those opportunities no longer exist, and there can be only one outcome: the total destruction of fiat currencies, accompanied by all the hardships that go with it.

And while you are considering all this, let me bring this up as well: The Worldwide Lockdown May Be the Greatest Mistake in History.

The forcible prevention of Americans from doing anything except what politicians deem “essential” has led to the worst economy in American history since the Great Depression of the 1930s. It is panic and hysteria, not the coronavirus, that created this catastrophe. And the consequences in much of the world will be more horrible than in America.

Oh, really? How so?

The lockdown is “possibly even more catastrophic (than the virus) in its outcome: the collapse of global food-supply systems and widespread human starvation” (italics added). That was published in the left-wing The Nation, which, nevertheless, enthusiastically supports lockdowns. But the American left cares as much about the millions of non-Americans reduced to hunger and starvation because of the lockdown as it does about the people of upstate New York who have no incomes, despite the minuscule number of coronavirus deaths there. Or about the citizens of Oregon, whose governor has just announced the state will remain locked down until July 6. As of this writing, a total of 109 people have died of the coronavirus in Oregon….

Michael Levitt, professor of structural biology at Stanford Medical School and winner of the 2013 Nobel Prize in chemistry, recently stated, “There is no doubt in my mind that when we come to look back on this, the damage done by lockdown will exceed any saving of lives by a huge factor.”

To the left, anyone who questions the lockdown is driven by preference for money over lives. Typical of the left’s moral shallowness is this headline on Salon this week:

“It’s Time To Reject the Gods of Commerce: America Is a Society, Not an ‘Economy,’” with the subhead reading, “America Is About People, Not Profit Margins.”

And, of course, to smug editors and writers of The Atlantic, in article after repetitive article, the fault lies not with the lockdown but with President Donald Trump. The most popular article in The Atlantic this week is titled “The Rest of the World Is Laughing at Trump.” The elites can afford to laugh at whatever they want. Meanwhile, the less fortunate — that is, most people — are crying.

Maybe a year from now we will be looking back at all this and laughing. Or maybe not.

Remember the rule: only pay heed to those who you agree with

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I got the rule from my friend Peter Smith. Everyone follows that rule, unconsciously or not. For us conservatives, it means that anyone who seems to side with the left on key issues can no longer be trusted in discussing other issues.

For those of us on the right, the rule does not mean that we never get to hear what the left believes and what its latest delusions are. Not only do we know what these beliefs are, it’s essential to understand pretty well all of what they believe if for no other reason than just as a means to protect ourselves from whatever forms of madness is their latest fad belief.

For the left, that is all they know and are never allowed to hear what their critics say. Living in a world populated by conservatives seldom harms the lives of anyone on the left. In fact, it is all that protects them from their own idiocies and beliefs. Living in a world as they conjure it would plunge them, along with everyone else, into deep pockets of misery and destitution, as has happened often enough.

Here is the basic truth: everyone is conservatives about things they know something about, especially about things which will affect their lives and livelihoods. It is actual personal knowledge about some subject that makes one a conservative, but for those without a conservative disposition, only about that particular subject, tending to limit wild flights of unrealistic conjecturing about things they know from personal experience. I think this quote expresses the same sentiment quite well:

Like Aristotle, conservatives generally accept the world as it is; they distrust the politics of abstract reason – that is, reason divorced from experience.

And more fully, there is a quote from John Stuart Mill that was first stated during a Parliamentary debate in 1866, which given the re-branding of various political inclinations in today’s world, is now best stated in this way:

I did not mean that people on the left are generally stupid; I meant, that stupid persons are generally on the left.

Anyone who genuinely tries to think about the problems of society and how to solve them cannot base their solutions on more than a handful of people ever acting other than in their own interests, with the subtext being that people acting in their own interests are not likely, when acting in a social setting, to lead a community into chaos and ruin, political leaders aside. They may wish to do good but all to often do not. But even without doing good being their intention, they usually cannot go too far because in the end everyone else will stop. Or at least they usually will, but unfortunately not always.

Suppose I hadn’t left Canada and moved to Australia

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This is one of my potential alter-egos. It is Bob Bossin, who I remember from my days at the University of Toronto and in whose wider – much wider – circles I travelled. An enchanting fellow but the gravitational pull of all of my then associates would have made my own political migration much more difficult if not actually impossible. This is his Wikipedia page. A genuine banjo player who made a career of it. His warmth and charm comes across in the vid. I wish him well personally, but not politically.

What is also interesting to contemplate is that had he come to Australia as I did, he might have ended up a supporter of Donald Trump. Life is funny like that.

Might add that the Greens won the by-election.

“The best way to destroy the capitalist system is to debauch the currency”

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Can you guess who said that?

Something that I have focused on in my Classical Economic Theory and the Modern Economy, but which is an otherwise unknown consequence of the Keynesian Revolution, was the shift in emphasis from the real side of the economy to the monetary side. If one is to understand the operation of an economy it is essential firstly to look at the actual real level of activity and only then look at the monetary side that lies above it and largely outside of it. Every classical economist understood the point. Virtually no modern economist does, and certainly no one without a serious study of economics ever does, which really does mean that near enough no one at all any longer understands this even slightly. Which leads me to this: Pandemic moves Modern Monetary Theory from the fringes to actual US policy.

[Modern Monetary Theory (MMT)] has received increased publicity over the past three years as politicians realized there was not a plausible plan to raise the funds necessary to fund “Healthcare for All,” the “Green New Deal,” free college and other initiatives through taxes alone.

The core principle of MMT is that sovereign governments with sovereign currencies can “print” or “coin” money to support full employment or essentially any government program that would benefit society in the here and now. Critics have labeled it the “Magic Money Tree Theory.” Those detractors include Keynesian and Monetarist economists, who cite Hungary in the 1840′s, Brazil in the 80′s, Mexico in the 90′s as examples of where easy money policies led to hyperinflation.

Warren Mosler was one of the founders of MMT, and what is known as `Mosler’s law’ states: “No financial crisis is so deep that a sufficiently large increase in public spending cannot deal with it.” These words fundamentally represent the actions our policy makers have taken in response to the virus. This pandemic has moved MMT from the fringes to the dead center as the actual monetary policy of the United States.

These are people with PhDs in economics who will comprehensively ruin us, and on this let me quote Keynes with absolute approval:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth….

As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

It was Lenin who said it, but quoted by Keynes as a warning to us all. Are you that one in a million who sees the point? Well if you are, there are then the other 999,999 who do not, which includes every single political leader heading every single government across the Western world today, each one of whom is engaging “all the hidden forces of economic law on the side of destruction”.