Government waste and the economics profession

Government waste is the greatest scourge every economy must face. The Chinese economy is trying to reverse the effects of its Keynesian stimulus, whose diabolical effects can no longer be denied. The projects of 2009-10 are showing up dead and the debts created cannot be repaid. Fixing what has gone wrong first requires you to understand what has gone wrong. The following “analysis” is mesmerising for its inanity:

China’s economic and financial market management credentials are drawing international criticism after a weak inflation result raised the prospect Beijing will be forced to slash interest rates to boost growth. . . .

Beijing reported at the weekend that China’s consumer price index rose by just 1.4 per cent over the year compared to the 3 per cent objective the government had put in place for the economy in order for it to achieve its annual growth target.

It’s real growth we are looking for, right? The inflation rate is just the difference between the nominal growth rate and the real growth rate. How inflation is supposed to give an economy faster real growth is the great conundrum. Perhaps they mean that higher inflation would be a sign of higher demand. But if that is the way it is being thought about, Keynesian economics has reached even lower depths than I had thought possible.

Still, that’s not all there is on the economic inanity front. There is also this: Turnbull needs community of believers for northern growth which begins as follows.

The Turnbull government has announced plans to boost growth and development across northern Australia, including the possible use of commonwealth loan guarantees for infrastructure projects.

As soon as this was hinted it was decried in certain corners as yet another example of misguided “industry assistance” — just an attempt by government to pick winners. I have been as critical as anyone about the perils of government winner-picking. It’s a fool’s errand at best, and a colossal waste of taxpayer money at worst.

If after years of pink batts and BER, never mind the NBN, doesn’t convince economists that governments have NO role in guiding our resources productively, then who will do it? There are many reasons for government spending, including some limited levels of infrastructure outlays. But grand visionary projects that absorb billions are idiocy of the highest order. They will make us poor. The Chinese have at least recognised that Keynesian-type expenditures are a menace to public finances and economic prosperity. Would Malcolm only do the same. Apparently, such expenditures on developing the North “is supported by very modern and very sound economics.” Modern it may well be. Sound, I’m afraid not. I will restrict myself to merely the first of the points made.

Australia is suffering from “secular stagnation”, a phenomenon recently popularised by former US Treasury Secretary Larry Summers.

Summers postulates, and unfortunately the evidence supports his view, that the potential rate of growth of advanced economies has fallen so that GDP growth in the 2 per cent range is the new normal. The economic speed limit of advanced economies has almost halved.

This is because there is a huge surplus of global savings chasing too few productive investment opportunities. Just think about sovereign wealth funds along with all those billionaires looking for something to do with their money.

No doubt Malcolm is thinking about nothing other than our sovereign wealth funds, so if you are worried about your financial future, this is the time to make it clear that the government is to keep its hands off our money. Loan guarantees – that is, a promise of making good every losing market bet – will bring Solydnra-like projects out of the woodwork in such vast numbers that it will make you dizzy to watch.

But to believe that there is a massive pool of saving available that no one is tapping into is the very essence of Keynes. Our problem is an absence of saving. We do not have enough. I cringe when I see such arguments, but if you start with Y=C+I+G, you have no explanation for recession and stagnation other than deficient demand caused by over-saving. And as long as you believe that, you will never understand what to do to make an economy grow.

Economics for Infants

IMG_1982

My granddaughter had her first birthday today. I therefore wrote for her an instructional on all things economic, which I have titled Economics for Infants. There will be a new one every year and one for all siblings and cousins as they arrive. But so far, there is only she. Although really quick on the uptake, I didn’t wish to make it too complicated. But while she will never hear from me on the existence or otherwise of Santa, this is part of what I wrote since it is never too young to find these things out.

Most importantly, you must never think of the government as the same as your parents.

The government is not there to give you things although they might pretend that they do.

You cannot look to the government to feed you, to give you clothes, to keep you warm, to give you presents.

The government doesn’t even care about you, not even a tiny bit.

It may be a bit early to say to someone who cannot even walk that a satisfying life comes only if you are able to stand on your own two feet.

My son thought that I should have written something more story-like, along the lines of Animal Farm. And so I shall, but not until she is two when she will be more able to follow the analogy and see the ironies of life. In the meantime, I thought I would set the early scene for more to come.

Women and Muslim migration

What are the advantages Muslim societies have in dealing with others? This is how it is explained by John O’Sullivan: Europeans Studiously Ignore Muslim Mobs, but most importantly, what he shows is the effect of Islam on the subjection of women and the state of mind it creates. His final para, though, is the one that matters. It is the one that everyone migrates to if they are thinking about the preservation of our Western way of life.

Which brings me finally to Donald Trump. His policy of simply halting Muslim immigration has been denounced all around. It is, of course, discriminatory and thus a mortal sin in today’s politics. Fine. Let’s rule it out. But if his critics don’t want a blanket moratorium on all immigration — which I assume they don’t — and if they don’t want to repeat the experiences of France and Germany in 30 years’ time — which I also assume they don’t — shouldn’t they tell us what they will do?

He, of course, does not mean let us rule it out. He means, if you are serious about an end, you must be serious about finding the means. And to understand either, you have to have some idea of what you are up against. This is what we are up against.

If we exclude divine favor as an explanation of this long advance, as Christians and post-Christian secularists presumably should, the rules that explain it include capital punishment for leaving Islam (a.k.a. apostasy), which is presumably a disincentive to doing so; strict rules for regular public prayer, which strengthen group solidarity; a privileged position for men over women, amounting in practice to ownership of them as either wives or concubines; a hierarchical structure within Islamic society that places Muslims in a position above non-Muslims in law, government, and social life; and a religious orthodoxy that endows Muslims with a general superiority (and sense of superiority) over others in non-Islamic societies.

Taken together, these rules help to shape a Muslim community that is cohesive, conscious of its separation from the rest of society, resistant to influences likely to undermine its cohesion, self-policing through its male members, and — because its sense of superiority is not reflected in its actual status either locally or globally — prey to resentment and hostility toward those whom it blames for its unjust subordination. . . .

The minority that supports aggressive jihadism (or is simply contemptuous of non-Muslim society) is not just larger but, as opinion polls show, far larger than similar tendencies in other religions and ideologies. That minority seeks to impose its rules both on fellow Muslims and on the wider society. And it has had remarkable success in areas where Muslims predominate locally, making U.K. state schools conform to Islamic teaching and practices, including the separation of the sexes; establishing “no-go areas” of European cities where police go only by agreement and where in their absence Muslim rules on alcohol and modest female dress are enforced by violence; and turning local governments into reliable Muslim fiefdoms through levels of voter fraud not known in England since the mid-19th century. But the most disturbing effects occur when the Muslim sense of superiority over non-Muslims combines with the Muslim males’ sense of superiority over women.

This is why Jamie Briggs and Chris Gayle stories are such evasions of the genuine issue that confronts us. The left is full of excuses and refuses to recognise a problem. So does much of the right. This is where Donald Trump comes in. There may be a million problems that come with him as president, but if he is the only one that gets the one big thing right, then he will be president and everything else will just have to take care of itself.

UPDATE: This is Roger Simon on the same subject: In Your Heart, You Know He’s Right: Trump and Muslim Immigration. This is the conclusion:

The doctrines of Islam are virtually entirely inconsistent with the founding principles of our county. And yet, per Pew, we are not-so-gradually being inundated with its adherents. Unchecked, the character of the USA will change, possibly to the extent of being unrecognizable, I doubt this is what the majority of Americans want. But it is happening nevertheless — and we have a living, breathing illustration of the results just across the Pond. (Illustrative of how self-immolating European elites have become was the advice the female mayor of Cologne gave women of her city for dealing with the sexual assaults — they should stand further away.)

And then, from National Review, Is the Left Even on America’s Side Any More? where we find:

Leftists and Democrats have also joined the Islamist propaganda campaign to represent Muslims — whose co-religionists have killed hundreds of thousands of innocents since 9/11 in the name of their religion — as victims of anti-Muslim prejudice, denouncing critics of Islamist terror and proponents of security measures as “Islamophobes” and bigots. But in truth, 60 percent of religious hate crimes are directed at Jews, with a small minority directed a Muslims.

Exploiting the myth of Muslim persecution, progressives oppose scrutiny of the Muslim community, including terror-promoting imams and mosques. They immediately denounce proposals to screen Muslim immigrants as religious bigotry, and thus close off any rational discussion of the problem. Led by Hillary Clinton and Barack Obama, Democrats have enabled the Islamist assault on free speech, which is a central component of the Islamist campaign to create a worldwide religious theocracy.

Most notoriously the president and his operatives cynically spread the lie that an obscure Internet video about Mohammed was behind the Benghazi terror attack. Speaking like an ayatollah before the U.N. General Assembly, shortly after the attack, Obama declared: “The future must not belong to those who slander the prophet of Islam.” What an American president should have said is: “The future must not belong to those who murder in the name of Islam.”

FURTHER UPDATE: This thing seems to be catching on: To Save Europe, Stop All ‘Migrants,’ Says Hungary’s Orban.

The weak horse

Mark Steyn on The Ghosts of Charlie Hebdo – One Year On.

What happened on January 7th 2015 was terrible. But our response to it made it more terrible, and emboldened civilization’s enemies. With respect to the late Charb, the choice is not between dying standing up or living on our knees – for those who choose to live on their knees will die there, too, cringing and craven. As I said a year ago:

The weepy passive candlelight vigils – the maudlin faux tears and the Smug Moral Preening overdose – aren’t enough. If you don’t want to put out the fire, it will burn your world to the ground.

We are very brave when it comes to junior ministers and international cricketers. About everything else, not so much.

You want crazy, I’ll give you crazy

Trump’s protectionist beliefs are old news but this has shown up on Instapundit today: Trump wants a 45 percent tax on Chinese imports.

“I would tax China on products coming in,” the Republican presidential front-runner told the New York Times. “And the tax, let me tell you what the tax should be … the tax should be 45 percent.”

The savvy [!!!] New York businessman released a policy paper on U.S.-China trade reform in early November that detailed his plans, as president, to take action against China’s currency manipulation and intellectual property theft, and to strengthen America’s negotiating position with the potential U.S. adversary.

Until now, however, none of Trump’s rhetoric on U.S.-Chinese relations has included any mention of a 45 percent tariff on Chinese exports to the U.S.

I know history is bunk and all that, but do we really want to bring back Herbert Hoover and the Great Depression? The story inserts the mildest, virtually non-existent criticism of such an idea, that makes you worry that this may well be an idea whose time has come, even if it will be a idea whose time will have gone a year after it would be put in:

According to David Dollar, a senior fellow in the Brookings Institution’s China Center, Trump’s suggested tariff could open the door to negative implications for both countries, if instituted.

“Negative implications” – that’s really nailing it. On top of everything going on already, to stop international trade in its tracks would be a policy as devastating as it is possible to have. Even the comment at Instapundit – “As Tom Nichols tweets, ‘I bet this sounds awesome to people who have no idea how much stuff they buy from China.’” – gives the impression that they have little idea what the effect would be. In so many ways, this is the 1930s all over again.

The miracle of human existence

It’s not possible that we arrived by random selection. The evidence has been stacked up so clearly that it requires a major effort of wilful ignorance to avoid it. The video is convincing since I already believe it. Why it is not obvious on its face that we are here by design is unknown to me. In my childhood home there was no religion. But even so, what has always mattered to me is my own weighing up the facts as I am able to understand them. What does in particular amaze me is the resistance to the idea that it may be true, that it is obviously true. Beyond, it is all mystery and no answers. An amazing video.

Ted Cruz on border control

This is a Ted Cruz ad which his polling must show will be effective in the constituency he wishes to reach. You can make your own judgement.

But let me add this. Trump has started down the path of doubting Cruz’s eligibility for the presidency since he was born in Canada of an American mother and a Cuban refugee dad, similar to Obama having been born of an American mother and a Kenyan dad, even though within America. Whatever else may have made Obama unfit to be president, it was not where he was born or who his parents were that mattered. John McCain, so far as that goes, was born in the Canal Zone of an American mother and father which also would not have disqualified him. Trump is already a loose cannon without obvious impulse control and not everyone’s first choice for President, even in a post-Obama era. If he wins on policy, that’s one thing, but if he tries this kind of shoddy nonsense, then he will have difficulty holding his constituency together since he will have alienated a substantial proportion of those whose support he will need.

I am now interested to see that Obama has joined in: Team Obama Joins Donald Trump’s Attack On Ted Cruz’s Citizenship. Is there now an Obama-Trump axis trying to defeat Ted Cruz? It’s getting as hard to follow as the battle lines in Syria.

Turnbull, Bishop have seen the error of their ways

The actual headline to the story is Jamie Briggs, Peter Dutton see error of their ways: Julie Bishop but that is not the real point. It is the PM and his Deputy who have seen the error of their own ways. The opening para:

Deputy Liberal leader Julie Bishop says fallen junior minister Jamie Briggs and Immigration Minister Peter Dutton have “recognised the error of their ways” over a late-night bar incident and accidental text, insisting it’s time to “move on”.

After creating quite an unnecessary tempest over an “incident” that has still not been detailed, they have decided to “move on”. Good, and I hope they have learned some useful political lessons in the process about how to manage a party supposedly on the right side of the divide. Hopefully, they will also now move on to doing something useful, like getting public spending under control or trade union reform, the kinds of things that may not run so well on the ABC.

North Korea has exploded its first hydrogen bomb

An atomic bomb is a tactical nuclear device for use in a wartime environment. A hydrogen bomb, which uses an atomic bomb as a trigger, is near enough a doomsday device which offers no battlefield or tactical advantage to its possessor. It’s only use is to comprehensively destroy. This is just in, except you will hardly see it mentioned anywhere at all: North Korea Says It Conducted Successful Hydrogen Bomb Test. And to give their statement evidential support, there is this:

North Korea said it successfully tested a hydrogen bomb, the fourth time it has detonated a nuclear device and a move that dramatically escalates tensions on the peninsula with neighbors South Korea and Japan.

The regime in Pyongyang detonated a hydrogen device for the first time at 10 a.m. local time, its official Korean Central News Agency said. The explosion was initially detected as a magnitude 5.1 earthquake by the U.S. Geological Survey.

But in case you are worried that this will merely pass by without some sort of response from the West, the story does conclude with this:

The Korean won declined as much as 0.8 percent to 1,197.85 per dollar, the weakest level since September. The Kospi index of shares dropped 0.6 percent as makers of defense products such as Speco Co. surged. Ten-year bonds advanced, pushing their yield down one basis point to 2.05 percent.

We are in Act I of what has all the makings of being the most destructive era in human history.

Is he all there?

President Barack Obama wipes away tears from his eyes as he speaks in the East Room of the White House in Washington, Tuesday, Jan. 5, 2016, about steps his administration is taking to reduce gun violence. Also on stage are stakeholders, and individuals whose lives have been impacted by the gun violence. (AP Photo/Carolyn Kaster)

President Barack Obama wipes away tears from his eyes as he speaks in the East Room of the White House in Washington, Tuesday, Jan. 5, 2016, about steps his administration is taking to reduce gun violence.(AP Photo/Carolyn Kaster)

This is a disturbing picture where we find the President of the United States has teared up over some policy issue. I cannot recall a single instance of a major politician ever being brought to tears except when attending a funeral. I think he is coming apart at the seams. Meanwhile, compare and contrast. Make sure you watch it all.

As was once rightly said, it is not the colour of one’s skin that matters but the content of one’s character.