Miscellany: 4/23/13

Quote of the Day
In religion and politics, 
people's beliefs and convictions are 
in almost every case 
gotten at second hand, 
and without examination.
Mark Twain

Obama Injury Rumor Causes Stock Market Plunge

Courtesy of ETF Bully

To be honest, I didn't notice at the time. My retirement accounts finished the day at new highs (biotech stocks have done well so far this year). But the AP Twitter account was hacked shortly around 1PM and a fake message was sent out, saying there were multiple explosions at the White House, wounding Obama. The market quickly plunged, no doubt worried about VP Joe Biden saying, "As of now, I am in control here in the White House."

This is not an investment blog, but I'm sure most readers are aware there has been a major correction in the gold and silver markets. Certainly some of that involves a stronger dollar as the yen and euro have struggled; other commodities from Australia, South America, and Africa have softened since China's seemingly endless appetite for internal projects seems to have moderated with recent slips year over year: one China ETF, FXI, is down about 5 per cent year-over-year. EMT, a popular emerging markets ETF, is also down year-over-year. With Europe bellwether Germany's economy also beginning to slip, I'm worried about where the growth is going to come from. And even more worried about a global recession triggered by currency wars and protectionist policies.

Speaking of the economically illiterate Obama Administration (the American people last fall made their bed and now must lie on it), Bryan Caplan has written an excellent post (not political) on "The Grave Evil of Unemployment". Let me excerpt some key thoughts:

Free-market economists rarely declare, "We have to do X about unemployment."  Why not?  Free-market economists' standard reply is just, "We expect X to fail."  Their critics, however, have a less favorable explanation: Free-market economists oppose X because free-market economists are cavalier and callous.  They cavalierly deny the reality of involuntary unemployment, and callously belittle the suffering of the unemployed. I know hundreds of free-market economists.  They're friends of mine.  Indeed, I'm a free-market economist myself. 

Instead of downplaying the grave evil of unemployment, we free-market economists should urge governments to redouble their efforts to fight it.  How can we do so and remain free-market economists?  First and foremost, by emphasizing the obvious: Every government imposes a vast array of employment-destroying regulations.  Minimum wages.  Licensing laws.  Pro-union laws.  Mandated benefits - especially mandated health insurance.  Anyone who appreciates the grave evil of unemployment should bitterly oppose these regulations - and vigorously reject the cavalier, callous view that a heavy-duty safety net is a good substitute for a job.  Government regulation is hardly the sole cause of nominal wage rigidity, but it definitely makes a bad situation worse.

At this point, good Keynesians will object, "Asking government to stop exacerbating nominal wage rigidity is a fine start.  But what about old-fashioned Aggregate Demand policies?"  There's no reason for free-market economists to fear this question.  Tax cuts - especially tax cuts on employers - increase Aggregate Demand and employment, and they're as free-market as Frederic Bastiat.  

Caplan also looks at monetary policy; although I prefer no Fed, I'm sympathetic to the point if you set a rule it should be economic growth, not the Fed's policy, most recently targeting unemployment. If you target growth, the jobs will come. Market monetarist Christensen comments

I would further add that free market economists tend to think of unemployment as a result of “government failure” – too high taxation, overly generous welfare benefits, minimum wages, rigid firing and hiring rules etc. I agree that unemployment both in the US and Europe is higher because of such failed regulation. However, the present unemployment problem in both the US and Europe is not a supply side problem, but rather a demand side problem and it is clear that many free market economists have a hard time dealing with demand side problems as they tend to think that if we have a demand side problem then it is a justification of Keynesian demand management policies (fiscal policy)....This drop has, however, not been caused by an inherent instability of free markets, but is a result of “government failure” or more precisely is a result of monetary policy failure.... I doubt for example that US minimum wages would have been increased to the extent we have seen had we the rise in unemployment been curbed by an NGDP targeting policy and fiscal policy would certainly not have been eased to the extent we have seen. Not to talk about that draconian financial market regulation being passed these days.

I think Christensen's point about "US minimum wages" is fuzzy, perhaps confounded with the European implementation; the free market point is that a wage floor does not let market clear due to an arbitrary politically motivated mark. I do think a smarter policy would be for Bernanke to say we'll add  whatever necessary liquidity to the system to restore our long-term growth and stop manipulating interest rates.

Obama, of course, doesn't understand monetary policy: he was responsible for giving Bernanke a second term.

Maryland Taxes Impervious Surfaced Property: Rain Tax: Thumbs DOWN!

Never underestimate the innovative tax-hiking, greedy Maryland legislature and Maser Legal Plunderer Martin O'Malley. The Chesapeake Bay is a third rail of Maryland politics. I miss Texas..... I still remember UTEP recruited me promising over 300 days of sunshine a year. (Of course, it rained during my campus visit..)



Colorado High Court Makes the Taxi Market More Competitive

Following a recent Milwaukee decision to open up the taxi market there, the Institute for Justice reports:

On Monday, April 22, 2013, the Colorado Supreme Court issued a unanimous ruling in favor of Mile High Cab, which has been fighting a years-long battle with the state’s Public Utilities Commission over the company’s efforts to provide low-cost, high-quality taxi service in Denver. The PUC refused to grant the company a “certificate of public convenience and necessity,”...because it was unsure whether additional taxi services were needed in the city.

Government bureaucrats have no business rigging markets, particularly on an arbitrary basis. The law of supply and demand works: increased competition should improve accessibility and/or prices for taxi service.

You Can Die For Your Country
But You Don't Get a Final Cigarette

I've never smoked--anything. My Dad used to, but he was in the military. (Cigarettes were part of rations until the 1970's.) My Dad kicked the habit before I left elementary school--thank God; a younger brother's mother-in-law didn't, and it did not end well. I remember  I stayed over one night in a basement guest room, and I caught her smoking (I think she was staying in the other guest room.) She begged me not to tell her daughter, although I suspect my sister-in-law knew she was doing it--and as I recall, she wasn't in the best of health at that point. One might think she would want to live long enough to see her grandchildren graduate and/or get married.

I know some young people think it's cool and perhaps are trying to impress their friends. I was a high school geek, not exactly part of the popular crowd. I was a teenager but never went through a rebellious phase; I remember while in high school I went on a CCD (Catholic) retreat with my younger first sister. Some of the other kids trashed where we were staying; I didn't know about it, but to the credit of the others, they quickly said that my sister and I weren't involved.

I had to deal with rebellion as a professor, of course; I was anal-retentive as a student; I sometimes disagreed with their decisions, but I was always polite, never complained or bad-mouthed them, and followed instructions to the letter. (I would have probably gotten them  a Starbucks coffee if the requirement was listed on the handout.) I was in for a rude awakening during my 8 years of college teaching, first as a half-time teaching fellow, then professor. No lie, I literally had a computer handout turned in with hardened tire mud tracks over it. On another occasion, I remember requiring a paper, maximum 2 pages, double-spaced, inch margins. One student turned in 5 pages, single-spaced, no margins--literally no white space on the pages. Always pushing the envelope. Perhaps if I handed out 3-weeks-due assignments in sealed envelopes, saying they couldn't peek until 2-3 days before the due date....

I hope I've made it clear smoking is a stupid idea, but it's not the State's function to replace Mom once we turn 18: what's next--ticketing us fior going outside without a sweater or jacket in cool weather? Elbows on the table? Not making the bed after we get up? Forgetting to brush our teeth? Our Moms still know how to function; I invariably end up in a military barbershop during my visits home... Moms work free, not at taxpayer expense.

I've seen the graphic ads on TV with voice boxes. Not sure, but I think most young people probably think they're immortal. Most people probably think it happens to other people, they can control the habit and stop in time, with all the reassurance of a sub-prime mortgage holder whom is sure that he'll be able to sell his house at a higher price before interest rates reset. Stopping is easier said than done.




Freeloaders



Musical Interlude: My Favorite Groups

The Temptations, "Papa was a Rolling Stone"