There is nothing so comfortable as money,
but nothing so defiling if it be come by unworthily;
nothing so comfortable, but nothing so noxious
if the mind be allowed to dwell upon it constantly.
If a man have enough, let him spend it freely.
If he wants it,let him earn it honestly.
Anonymous
Revisiting Milton Friedman
I've recently embedded videos from learnliberty.org. Russ Roberts, another economics professor from George Mason University, heads a related pro-liberty economics site/weekly podcast, EconTalk. (You can subscribe at iTunes here.) Roberts had an interesting two-part interview with 93-year-old Milton Friedman back in 2006 (still available for download), focusing on a couple of his principal books.
In the first interview Roberts and Friedman are talking about a key chapter in his monetary history, discussing the Great Depression. Friedman has this to say (my edits):
If you read the annual reports of the Federal Reserve Board or its testimony before Congress, you will find that as late as 1933, at the very depths of the depression, it's talking about how much worse things would have been if the Fed hadn't behaved so well. But the evidence was so clear. You had a decline in the quantity of money by a third from 1929 to 1933 and that coincided with the decline in the economy by half or so.
The lesson people drew was that [the Depression] was a fault of business. It was a market failure. But the reason why the public and the intellectuals at large held to that perception was because that was what they were being told by the authorities.
Governments want to spend money and sooner or later, governments are going to want to spend money without taxing it and the only way to do that is to print money—to create inflation. Inflation is a form of taxation.
The central bank is treated as if it were the Supreme Court. That's why during the Depression, there was no effective controls on the central bank.
I think the real danger of this [the current monetary system] breaking down is there's no danger of it breaking down into a Great Depression. The real danger is it'll break up into an inflation. When I see in the Federal Reserve reports that the inflation anticipation for 10, 20 years is on the order of 2 percent a year, I find it very hard to believe it. Sooner or later, the government's going to get out of hand.Isn't it AMAZING how prescient Milton Friedman was: he was all but predicting the rise of the Deadbeat-in-Chief, Barack Obama, now looking on track to extend his world-record fourth consecutive trillion-plus deficit. And with all the polish of the snake oil salesman Obama naturally is, similarly claiming that he "saved" us from a Great Depression, selling the notion that somehow the federal government, already spending over $3.5T, by spending another $862B or so on the "magic beans" of the stimulus bill (pay no attention to that obscure political blogger whom keeps repeating MONEY IS FUNGIBLE!), "saved" the economy, over and beyond Ben Bernanke's resorting to double shifts at the Treasury printing presses, and not only that, but manipulating the bankruptcy proceedings of two auto companies to benefit his crony unionist allies at the expense of bondholders, "saved" the auto industry, no less! (Isn't intuitively obvious that bankruptcies in favor of one's special interests are "more equal"? The secret ingredient to "saving the economy" is clearly crony unionism.)
My God, Barack Obama has already won the Nobel Peace Prize before not even getting out of Iraq or Afghanistan ahead of Bush's schedule (not to mention breaking Bush's all-time record for drone bombing runs in Pakistan and Yemen, meddling in Libya, etc.); perhaps the Catholic Church will escalate its canonization process and have him declared a living saint before election day to mend his fences with American Catholics (never mind those pesky details like single-handedly stonewalling the born alive infant protection act in Illinois and now this vexatious birth control kerfuffle: I mean, who could have foreseen that? Obama clearly knew better than to take heed of Catholic VP Joe Biden and Defense Secretary Leon Panetta's early warnings...)
Now, to be fair, we can say certainly Greenspan and Bernanke made sure that the money supply did not shrink. But that's not the takeaway from this piece: it's the fact that the same Fed, which unwittingly contributed to three asset bubbles over the past 15 years or so (note that artificially low interest rates lower natural barriers to malinvestment in the economy), sidesteps any claim of responsibility. The same Bernanke who pooh-poohed the idea of the housing market tanking just several months before it happened suddenly got his act together just in time for the economic tsunami. (Yeah, right. If you believe that, there's a Bridge to Nowhere in Alaska I want to sell you. Just fair warning: guess what happened when Gov. Palin learned that Alaska would have to dig into its own pockets to match the hundreds of millions in federal funding to build the bridge because project costs had doubled?)
Let us recall that the public sector duties that the Fed performs are really constitutionally vested in the Congress and were delegated to the Fed. The Fed is very good at promoting itself, as Friedman noted, and self-righteously warns against monetary policy being unduly influenced by political factors (as if the Congress isn't ultimately held responsible for the Fed's deficient performance!)
Lewis v. United States, 680 F.2d 1239 (1982): "The critical factor [in the Fed being considered a federal agency under the Federal Tort Claims Act] is existence of federal government control over "detailed physical performance" and "day to day operation" of an entity.Federal reserve banks are not federal instrumentalities, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as "wholly owned" government corporations nor as "mixed ownership" corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names."
Of course, some people (like an obscure political blogger) might think that Fed Chief Bernanke, whom has been quoted recently as telegraphing artificially low interest rates past the election and has warned against "too large spending cuts" and uncertainty involving the status of worrisome anti-growth tax hikes due to take place early next year (after the election, of course), but at the same time "told lawmakers that a strong signal from the Obama administration and Congress that they understand the long term fiscal challenges facing the country and have a plan to tackle them would go a long way to alleviating any concern that exists in the financial markets", might be having his cake and eating it, too.
No kidding: Bernanke actually said that. You can't make this stuff up... I want to lose 50 pounds and yet eat all the pizza and ice cream I want, too. (By the way, I haven't had ice cream in my icebox for years, which explains all the obsessive references to Blue Bell ice cream in the blog, and pizza--very infrequently, mostly at work with colleagues, because pizza is a major food group for fellow geeks.)
First of all, there's the intellectually dishonest kaleidoscope accounting toxic brew of smoke and mirrors under ObamaCare, mismatching years of revenues and benefits, and double-counting Medicare cost reforms (which aren't really cost reforms--they are just cutting below-market fixed prices on services--which we know are not sustainable under Economics 101), etc.--Democrats are disingenuously claiming a deficit cut. Second, a four-time, four-time, four-time, four-time trillion dollar deficit President who has not, to the best of my knowledge, called for a single dime to be cut from the 60% of the budget which deals with senior entitlements and Medicaid--nor any major cut in the 20% going to defense spending, lacks any credibility in fiscal discipline. (The GOP, at least, is on the record for wanting to put social security and Medicare on the table to address tens of trillions in unfunded liabilities.) The only thing Obama has signaled is possible flexibility on retirement age--phased in well past his extended Presidency, of course. Let the next President deal with fiscal problems--that's leadership for you.
Moving on, there's an interesting discussion he has where Friedman basically says that you could automate the process of the Fed and do away with it (thumbs UP!); he looks at the money supply and then argues how you control the money supply. I believe that he means to say is if you find the supply of money growing too rapidly, you sell bonds: that should take money out of the system and also pushes down the price of bonds/raises the interest rate. If the supply of money falls below expectations, you should buy bonds, which increases the price of bonds/lowers the interest rate (think of the supply and demand of bonds) Greenspan and Bernanke have flipped the concept on its head, targeting short-term interest rates.
Sheldon Richmond/Reason.com,
"Insuring the Uninsurable":Thumbs UP!
It's something most of us learn at a fairly early age: there's no such thing as a free lunch. We all know examples from everyday life; for example, there may be ladies' night in a bar. Bar owners know that female customers attract profitable male customers. (They may also hope that periodic free or specially-priced drinks will result in profitable repeat business from the ladies.) When I was a kid there were S&H green stamps. There have been "free sandwich" cards to be punched each visit. Anyone who owns a cellphone has heard pitches for free or sharply discounted cellphones in exchange for multi-year contracts. There are first-customer specials at many websites.And, of course, there are the below-cost items (loss leaders) in weekly or seasonal grocery specials, e.g., frozen turkeys at 37 cents a pound before Thanksgiving. [My mom, the daughter of a mom-and-pop grocer, has argued with me on that one; in my grandfather's context, built on local repeat business, loss leaders would have been pushing on a string.] WalMart has usually shunned the practice of loss leaders, arguing their customers will offset the special item pricing over very competitive pricing on the balance of other purchase items.
When Nancy Pelosi and other progressive Democrats started crowing about "free preventive care" it was nonsense, of course. The provider may not explicitly charge you an additional cost, but you're paying a premium for services, and even in the case of subsidized care (e.g., Medicaid), either he or she makes it up on repeat business with other compensated marked-up services, and/or somebody (e.g., the taxpayer or other provider customers) is making up the difference. It's just intentionally misleading rhetoric from Pelosi et al. They want to get political brownie points, but it's all they're doing is little more than sophistic window-dressing.
Let us remember that the big moment for the current perverted concept of health insurance was the result of bad economics in the first place: the Democrats under FDR had implemented wage and price controls. In essence, making health insurance a nontaxable benefit was smoke and mirrors. Putting health care on the table was a face-saving way for the Democrats to maintain a facade of wage-price controls and deal with very low unemployment and inevitable wage pressures as the result of labor supply and demand during the latter years of WWII (since the government had taken tens of thousands of young men in the labor force to participate in war efforts). In fact, what you really earn is total compensation: salary and benefits (neither are "free"). For the most part benefits aren't taxed (like mortgage interest, this constitutes a major middle-class tax loophole). This provides a perverse incentive for workers to shove as much income as they could onto the benefit side of the ledger. It's no accident that labor unions had negotiated gold-plated health insurance coverage for their members, which became a big issue during ObamaCare deliberations. (If tax-free basis of health insurance was capped, at, say, the average price of health insurance, that meant that many, if not most of union members would be taxed above the cap, which they felt was "unfair".) Do you think it's an accident that public sector employees, whom have a disproportionately high percentage of their compensation in the form of tax-free benefits, are reacting in a similar manner?
Sheldon Richmond does a good job debunking a recent ill-considered letter from multiple female Senate Democrats seeking to justify the inclusion of birth control in that perverse house of cards called ObamaCare. (Don't you just love how the progressive Democrat marketeers came up with pretentious, lipstick-on-a-pig euphemisms like "the American Recovery and Reinvestment Act" or "the Patient Protection and Affordable Care Act" to name such megalomaniac legislative excrement like the tax-and-spend Stimulus Act and ObamaCare?) The senators want you to know that preventive care can sometimes save lives. (But, just to make a quick point here, doctors or technicians sometimes make costly mistakes, many tests can yield false positives (meaning unnecessary, possible risky treatment), and the costs of unnecessary tests (e.g., for counterproductive measures like annual breast exams for older women or defensive medicine) and/or treatment can more than offset the alleged benefits they discuss.)
But more to the point, there's a slippery slope argument here--where do you draw the line at potentially worthy healthcare? And why stop there? After all, isn't diet and exercise linked to good health? And what do you do about compliance? Are you going to arrest people whom don't show up for their medical appointments or are obese? Are we going to ban potentially dangerous sports like football, cheerleading or gymnastics? Or what about banning stupid dares that teenagers come up with on the fly, like diving into potentially shallow water? Or driving at night when a number of drivers under the influence are on the road? The point is, short of an oppressive police state, we cannot eliminate risk.
And, Ms. Senators (I know: you worked so hard to get that title), I'm sure you realized that just because a man bought a condom or a woman filled her birth control prescription doesn't mean that they'll actually use them in the heat of the moment...
That's the problem with positive rights and FDR's Second Bill of Rights: you never have enough resources. The only thing government achieves here is adding more costs on the system, all else being held constant.
Musical Interlude: My Favorite Groups
Paul McCartney & Wings, "Another Day". Technically this may be a 1971 solo hit, although it has been included on Wings collections.
