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Month: June 2015

Let’s Hope Machines Take Our Jobs: We Want Wealth, Not Jobs – Article by Peter St. Onge

Let’s Hope Machines Take Our Jobs: We Want Wealth, Not Jobs – Article by Peter St. Onge

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The New Renaissance Hat
Peter St. Onge
June 11, 2015
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The job-threatening rise of the machines is an economically illiterate meme that refuses to die. We’re actually probably in the early stages of it, a bull-market in neo-luddism, if you will. Bastiat’s “Candlemakers’ Petititon” answered this one long ago, but today I’ll run a little thought experiment that owes it all to good old Bastiat.

Let’s say Weird Al Yankovic invents a machine capable of making everything with a single push of a button. The first thing he does is print up a bunch of machines and sell them for a ton. Weird Al is now a billionaire, and there are thousands of make-everything machines.

This diffusion of Weird Al’s new technology replicates the market process, where new tech spreads in proportion to its usefulness. If you doubt this, because of patents, for example, check out Brazil’s experience with AIDS drugs, where they tore up the patents on humanitarian grounds.

Weird Al’s machines will, at a minimum, be mass produced in Brazil. Or China. Or Mozambique.

So, one way or another, we get a bunch of make-everything machines.

What happens to the jobs? We’re getting everything for near-free now. So all the production jobs disappear. There are still lots of jobs, of course — child care, gardeners, musicians. But all the production jobs have vanished — something like 20 percent of jobs, maybe up to 50 percent when you include knock-on replacement of people by capital (truck drivers, robot bartenders). Heck, let’s go crazy and say 90 percent of the jobs vanished. Nobody’s got a job outside of preschool or performing on a stage. It’s the end of the world, right?

Well, the key is that, now that everything is made with the push of a button, everything’s extremely cheap. For example, a sixteen-bedroom house or a Lamborghini costs almost nothing. Let’s say they now cost ten cents.

The main expense in such a world is probably surface space. All those dime-a-dozen cars have to park somewhere. It’d take a while to “run out” of space, though — divide the world by the people and you get about twenty acres (eight hectares) for a family of four — about 100 large surburban yards. Add in the oceans — floating islands cost nothing, remember — and triple that. We end up with about 300 homes’ worth of space per family.

What about those unemployed people? Well, when a house or a year’s food costs a dime, they’ll be willing to work really cheap. We’ll work for a penny a day. After all, that’s a new house or a year’s food every two weeks.

Who would hire these workers for a penny? Plenty of people. Heck, if workers cost a penny a day I’d hire several for each of my children, just to keep the kids from getting bored. I’d hire another to cook, one to clean, one to run errands. One to keep track of my mail. One to check Facebook for me. At a penny a day I’d personally hire 100 people, easy. You would too — a buck a day’s nothing.

So the remaining 10 percent of workers who didn’t lose their jobs — babysitters, baristas, musicians — would want 100 workers each. Even at a penny, they’d take them all, and they’d be paying an outrageous rate — a tenth-house per day! That’s a daily rate of $15,000 in today’s terms.

Now, those who kept their jobs would, of course, see dropping wages. A barista who made $12 an hour in the old days would have to compete with the hordes of unemployed workers. Maybe her wage would drop to a penny, too. But, remember, a penny now buys $15,000 worth of stuff.

When the smoke clears, most people would make some extremely low wages — a penny a day. And that extremely low wage would be worth an awful lot — $15,000 a day, implying an annual income north of several million dollars in today’s values. Some lucky few would make a dollar a day — probably the people who are good at things machines cannot do: entertainment, child care, being a good listener, strumming the guitar at the retirement home, and laughing at jokes. At a dollar a day, this super-rich elite that excels at human skills — such as making us laugh — would be billionaires in today’s values.

Either way, there would be nothing we think of even remotely as “poverty.” Sure, there’ll be inequality, but it’ll be relative: “Sarah’s got 200 Lamborghinis and I’ve only got 40.”

The upshot is that wages plunge, but production costs plunge even more. Of course, this is based on the ridiculous Weird Al machine. Why do this? To illustrate the absolute worst-case scenario, when machines make everything for near-nothing.

What about going one step further: That the machine destroys all jobs in the whole world — it makes every single thing for us free, and it even keeps the folks entertained and the warm fuzzies flowing at the old folks’ home.

Well, we’ve already got a case study there — the sun. It gives us warmth and mangos for free. And how do we respond? We sit around and lazily enjoy it. So a machine that truly replaced all jobs would simply mean nobody works anymore — life’s somewhere between a non-stop party and a non-stop pleasant walk in the woods followed by a nice bonfire with friends and chardonnay.

We should all be so lucky that the machines do actually take every last job there is.

Peter St. Onge is an assistant professor at Taiwan’s Fengjia University College of Business. He blogs at Profits of Chaos.
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This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.
Variations on a Theme by WolframTones, Op. 80 (2015) – G. Stolyarov II

Variations on a Theme by WolframTones, Op. 80 (2015) – G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
June 10, 2015
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This experimental composition showcases the combined creative potential of man and machine. Mr. Stolyarov takes an algorithmically generated theme by WolframTones –  one of inexhaustibly many possibilities – and gives it a human touch with ten distinct orchestral variations that draw out orderly, harmonious melodies from the motifs present in the WolframTones theme.

This composition is written for a string section, three harps, and two pianos. It is played using the Finale 2011 software and the Steinway Grand Piano, Harp KS, and Full Strings Arco instruments.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download, here.

Art References:
– Fractal Art Swirl by Ralph Langendam (Public Domain)
– Abstract Orderism Fractal 63 by G. Stolyarov II – Available here and here.
– Abstract Orderism Fractal 64 by G. Stolyarov II – Available here and here.
– Abstract Orderism Fractal 65 by G. Stolyarov II – Available here and here.

This composition and video may be freely reproduced using the Creative Commons Attribution Share-Alike International 4.0 License.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

Fact-Checking Paul Krugman’s Claim To Be “Right About Everything” – Article by Andrew Syrios

Fact-Checking Paul Krugman’s Claim To Be “Right About Everything” – Article by Andrew Syrios

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Andrew Syrios
June 10, 2015
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But can the debate really be as one-sided as I portray it? Well, look at the results: again and again, people on the opposite side prove to have used bad logic, bad data, the wrong historical analogies, or all of the above. I’m Krugtron the Invincible!

Thus wrote the great Paul Krugman. A man so modest as to proclaim that “I think I can say without false modesty, a huge win; I (and those of like mind) have been right about everything.”

Quite a claim. Indeed, predictions are extraordinarily difficult. Even to an expert in a subject who has dedicated his life to a field of study, predicting the future proves elusive. Daniel Kahneman referenced a study of 284 political and economic “experts” and their predictions and found that “The results were devastating. The experts performed worse than they would have if they had simply assigned equal probabilities to each of three potential outcomes.”

A whole book of such wildly inaccurate predictions by experts was compiled into the very humorous The Experts Speak with such prescient predictions as Dr. Alfred Velpeau’s “The abolishment of pain in surgery is a chimera. It is absurd to go on seeking it” and Arthur Reynolds belief that “This crash [of 1929] is not going to have much effect on business.” Indeed, a foundational block of Austrian economics (that some Austrians unfortunately forgot regarding premature predictions of hyperinflation) is that the sheer number of variables in the world at large makes accurate forecasting extraordinarily difficult.

So it must be a rare man indeed that can be right about everything. And this man, Paul Krugman is not.

Predicting a Bubble He Recommended

Paul Krugman likes to reference the fact that he predicted the housing bubble. Of course, he also sort of recommended it. From a 2002 column of his,

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

In 2009, when this came out, he denied its obvious implication and wrote, “It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.” So that doesn’t count as a recommendation? It certainly sounded like he was agreeing with Paul McCulley on inflating a housing bubble. And he verified that that’s exactly what he meant in a 2006 interview where he said,

As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. But by late 2004 he should have seen the danger signs and warned against what was happening; such a warning could have taken the place of rising interest rates. He didn’t, and he left a terrible mess for Ben Bernanke.

The best Krugman can possibly say is that he thought Greenspan went too far with the housing bubble he recommended.

Deflation is Around the Corner

While running victory laps because the United States hasn’t seen massive price inflation, Krugman seems to have forgotten what his prediction actually was. In 2010 he wrote, “And what these measures show is an ongoing process of disinflation that could, in not too long, turn into outright deflation … Japan, here we come.”

Robert Murphy called him on this and noted Krugman’s response,

… Krugman himself … said of his 2010 analysis: “(In that post, I worried about deflation, which hasn’t happened; I’ve written a lot since about why).”

Note the parenthetical aside, and the timing: Krugman in April 2013 is mentioning in parentheses to his reader that oh yes, as of February 2010 he was “worried about deflation, which hasn’t happened.” In other words, Krugman entered this crisis with a model that predicted how prices would move in response to the economic situation, and chose his policies of government stimulus accordingly. He was wrong, and yet maintains the same policy recommendations.

But of course to Krugman, anyone who predicted price inflation can’t explain why that hasn’t happened. Such people are just those “… who take a position and refuse to alter that position no matter how strongly the evidence refutes it.” Krugman is different.

Europe Will Do Better Than the United States

In 2008, Krugman wrote:

… tales of a moribund Europe are greatly exaggerated. … The fact is that Europe’s economy looks a lot better now — both in absolute terms and compared with our economy.”

Later he noted that “Americans will face increasingly strong incentives to start living like Europeans” and that “he has seen the future and it works.” (I should probably note that that is a quote he borrowed from Lincoln Steffens about the Soviet Union.)

Then Greece went bankrupt and the international consensus is unquestionably that the crisis hit Europe harder.

The Euro Will Collapse

Niall Ferguson counted eleven different times between April of 2010 and July 2012 that Krugman wrote about the imminent breakup of the euro. For example, on May 17th, 2012, Krugman wrote,

Apocalypse Fairly Soon. … Suddenly, it has become easy to see how the euro — that grand, flawed experiment in monetary union without political union — could come apart at the seams. We’re not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years. And the costs — both economic and, arguably even more important, political — could be huge.

Most of these predictions are laced with weasel words such as “might,” “probably,” and “could” (more on that shortly). Still, while I’m no fan of the euro, and it might still collapse, as of today, three years later, it has not. If the word “imminent” means anything at all, Krugman was wrong.

The Sequester Will Doom Us All

Paul Krugman at least admitted the sequester was “relatively small potatoes.” But for “relatively small potatoes” he makes a big deal about it, referring to it as “one of the worst policy ideas in our nation’s history.” And it “will probably cost ‘only’ around 700,000 jobs.” (Note the word “probably” again.)

Then later, he decided that these were actually quite large potatoes, stating,

And, somehow, both sides decided that the way to buy time was to create a fiscal doomsday machine that would inflict gratuitous damage on the nation through spending cuts unless a grand bargain was reached. Sure enough, there is no bargain, and the doomsday machine will go off at the end of next week.

The economy has done quite well since then actually. Indeed, how $85.4 billion dollars in “cuts” (from the next year’s budget not the previous year’s spending) could affect anything in a $17 trillion dollar economy is simply beyond me. And of course, it didn’t.

Interest Rates Can’t Go Below Zero

In March of this year, Krugman wrote in regard to some European bonds with negative nominal yields,

We now know that interest rates can, in fact, go negative; those of us who dismissed the possibility by saying that people could simply hold currency were clearly too casual about it.”

But as Robert Murphy points out, “The foundation for the Keynesian case for fiscal stimulus rests on an assumption that interest rates can’t go negative.” Murphy also points out that Krugman should admit he was wrong again because back in 2009, Krugman wrote,

And the reason we’re all turning to fiscal policy is that the standard rule, which is that monetary policy plus automatic stabilizers should do the work of smoothing the business cycle, can’t be applied when we’re hard up against the zero lower bound. [i.e. zero percent interest]

“Inflation Will be Back”

In 1998, Paul Krugman predicted “Inflation will be back.”

Nope.

“The Rate of Technological Change in Computing Slows”

Same article as the last one, “… the number of jobs for IT specialists will decelerate, then actually turn down.”

Aside from a short dip after the 2001 recession, the answer would be nope again.

Weasel Words and “Accurate Predictions”

Let’s take a look at Paul Krugman’s “accurate prediction” of the financial crisis. On March 2nd, 2007, he predicted the following explanation would be given a year from then for the financial crisis he was sort of predicting,

The great market meltdown of 2007 began exactly a year ago, with a 9 percent fall in the Shanghai market, followed by a 416-point slide in the Dow. But as in the previous global financial crisis, which began with the devaluation of Thailand’s currency in the summer of 1997, it took many months before people realized how far the damage would spread.

So the crisis would begin in China? Almost.

He concluded that column by saying, “I’m not saying that things will actually play out this way. But if we’re going to have a crisis, here’s how.”

That’s a good hedge, just like with the euro. He can say he got the financial crisis right (albeit happening in a different way than he expected), but then say he didn’t get the euro wrong because he added “probably” before any prediction about it.

Normally, there would be nothing wrong with these weasel words. Given the nature of predictions, any prediction that is made should have a qualifier in front of it. It’s simply an admission that you aren’t omniscient. But you can’t eat your cake and have it too. Either Krugman was right about the crisis (sort of) and wrong about the euro (and many other things) or neither should count at all.

Or course, this doesn’t refute Krugman’s theories. But then again, Krugman may want to slow down on his victory laps.

Andrew Syrios is a partner in the real estate investment firm Stewardship Properties. He graduated from the University of Oregon with a degree in Business Administration and a Minor in History.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Socialism Is War and War Is Socialism – Both Forms of Central Planning Are Reactionary, Not Progressive – Article by Steven Horwitz

Socialism Is War and War Is Socialism – Both Forms of Central Planning Are Reactionary, Not Progressive – Article by Steven Horwitz

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The New Renaissance Hat
Steven Horwitz
June 10, 2015
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“[Economic] planning does not accidentally deteriorate into the militarization of the economy; it is the militarization of the economy.… When the story of the Left is seen in this light, the idea of economic planning begins to appear not only accidentally but inherently reactionary. The theory of planning was, from its inception, modeled after feudal and militaristic organizations. Elements of the Left tried to transform it into a radical program, to fit into a progressive revolutionary vision. But it doesn’t fit. Attempts to implement this theory invariably reveal its true nature. The practice of planning is nothing but the militarization of the economy.”

—Don Lavoie, National Economic Planning: What Is Left?

Libertarians have long confounded our liberal and conservative friends by being both strongly in favor of free markets and strongly opposed to militarism and foreign intervention. In the conventional world of “right” and “left,” this combination makes no sense. Libertarians are often quick to point out the ways in which free trade, both within and across national borders, creates cooperative interdependencies among those who trade, thereby reducing the likelihood of war. The long classical liberal tradition is full of those who saw the connection between free trade and peace.

But there’s another side to the story, which is that socialism and economic planning have a long and close connection with war and militarization.

As Don Lavoie argues at length in his wonderful and underappreciated 1985 book National Economic Planning: What Is Left?, any attempt to substitute economic planning (whether comprehensive and central or piecemeal and decentralized) for markets inevitably ends up militarizing and regimenting the society. Lavoie points out that this outcome was not an accident. Much of the literature defending economic planning worked from a militaristic model. The “success” of economic planning associated with World War I provided early 20th century planners with a specific historical model from which to operate.

This connection should not surprise those who understand the idea of the market as a spontaneous order. As good economists from Adam Smith to F.A. Hayek and beyond have appreciated, markets are the products of human action but not human design. No one can consciously direct an economy. In fact, Hayek in particular argued that this is true not just of the economy, but of society in general: advanced commercial societies are spontaneous orders along many dimensions.

Market economies have no purpose of their own, or as Hayek put it, they are “ends-independent.” Markets are simply means by which people come together to pursue the various ends that each person or group has. You and I don’t have to agree on which goals are more or less important in order to participate in the market.

The same is true of other spontaneous orders. Consider language. We can both use English to construct sentences even if we wish to communicate different, or contradictory, things with the language.

One implication of seeing the economy as a spontaneous order is that it lacks a “collective purpose.” There is no single scale of values that guides us as a whole, and there is no process by which resources, including human resources, can be marshaled toward those collective purposes.

The absence of such a collective purpose or common scale of values is one factor that explains the connection between war and socialism. They share a desire to remake the spontaneous order of society into an organization with a single scale of values, or a specific purpose. In a war, the overarching goal of defeating the enemy obliterates the ends-independence of the market and requires that hierarchical control be exercised in order to direct resources toward the collective purpose of winning the war.

In socialism, the same holds true. To substitute economic planning for the market is to reorganize the economy to have a single set of ends that guides the planners as they allocate resources. Rather than being connected with each other by a shared set of means, as in private property, contracts, and market exchange, planning connects people by a shared set of ends. Inevitably, this will lead to hierarchy and militarization, because those ends require trying to force people to behave in ways that contribute to the ends’ realization. And as Hayek noted in The Road to Serfdom, it will also lead to government using propaganda to convince the public to share a set of values associated with some ends. We see this tactic in both war and socialism.

As Hayek also pointed out, this is an atavistic desire. It is a way for us to try to recapture the world of our evolutionary past, where we existed in small, homogeneous groups in which hierarchical organization with a common purpose was possible. Deep in our moral instincts is a desire to have the solidarity of a common purpose and to organize resources in a way that enables us to achieve it.

Socialism and war appeal to so many because they tap into an evolved desire to be part of a social order that looks like an extended family: the clan or tribe. Soldiers are not called “bands of brothers” and socialists don’t speak of “a brotherhood of man” by accident. Both groups use the same metaphor because it works. We are susceptible to it because most of our history as human beings was in bands of kin that were largely organized in this way.

Our desire for solidarity is also why calls for central planning on a smaller scale have often tried to claim their cause as the moral equivalent of war. This is true on both the left and right. We have had the War on Poverty, the War on Drugs, and the War on Terror, among others. And we are “fighting,” “combating,” and otherwise at war with our supposedly changing climate — not to mention those thought to be responsible for that change. The war metaphor is the siren song of those who would substitute hierarchy and militarism for decentralized power and peaceful interaction.

Both socialism and war are reactionary, not progressive. They are longings for an evolutionary past long gone, and one in which humans lived lives that were far worse than those we live today. Truly progressive thinking recognizes the limits of humanity’s ability to consciously construct and control the social world. It is humble in seeing how social norms, rules, and institutions that we did not consciously construct enable us to coordinate the actions of billions of anonymous actors in ways that enable them to create incredible complexity, prosperity, and peace.

The right and left do not realize that they are both making the same error. Libertarians understand that the shared processes of spontaneous orders like language and the market can enable all of us to achieve many of our individual desires without any of us dictating those values for others. By contrast, the right and left share a desire to impose their own sets of values on all of us and thereby fashion the world in their own images.

No wonder they don’t understand us.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Future Life – Article by Kyrel Zantonavitch

Future Life – Article by Kyrel Zantonavitch

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The New Renaissance Hat
Kyrel Zantonavitch
June 9, 2015
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It wouldn’t completely surprise me to learn that Socrates, Democritus, Aristotle, Epicurus, Zeno the Stoic, Cicero, Lucretius, Horace, Rabelais, Montaigne, Bacon, Locke, Smith, Voltaire, Jefferson, von Mises, Hayek, Rand, and Branden were all still alive in some real sense. Nor would it entirely shock me to find myself in conversation with these greats at some point.

If it happens, I don’t know whether they’ll treat me with a decent amount of respect and honor, or rather regard me with fairly acute criticism and even scathing contempt. But almost certainly their behavior will be based upon merit and justice, and be a remarkable and fascinating experience. I just hope they haven’t totally evolved beyond the desire and need for discussion and debate.

Life is beautiful. Almost certainly any afterlife will be also!

The catalyst and base to these wondrous events, if they occur, very likely won’t be “God”, who quite probably doesn’t exist, but rather some demi-gods or superior space aliens, who fairly likely do. If such creatures are indeed around and active, they may well take an interest in human endeavors, and further utilize their immense abilities to preserve the life spark and cognitive psycho-spiritual essence of the various worthy human individuals they run across, such as those above. In fact, such marvelous ETs might even grant a type of immortality to a few meritorious and distinguished apes and whales, if not cats and dogs.

Of course, such demi-gods may not exist in the universe, or they may not be found in our area. Even if they do, and assuming they easily possess the capacity to save us, they still may well choose to let us insect-like creatures perish forever, hardly caring a jot about all of us combined.

But this last dolorous possibility seems somewhat unlikely. In my judgment, we human beings — at our best — are rather magnificent! We’re decently worth saving, it would seem.

I would speculate that the consequent afterlife will be on a considerably higher plane than our current one, but it will likely be such that the unique individuality of the various persons rescued is still initially preserved. This ultralife will very possibly be ten times as hard and challenging, but perhaps a hundred times as fun and worthwhile.

By necessity we will existentially and spiritually ascend. But eventually, and even fairly quickly, the aboriginal human individual will probably be unrecognizable, even to himself. But this initial human living spark and psycho-spiritual essence is as good a place as any from which to build and create future demi-gods.

Those who truly love life, and accomplish something during it, and make an immense, noble, heroic effort, may well live on and on! I think the post-mortem result and reward will be strictly based on personal merit, justice, virtue, and greatness. Humans who live well in this life, and who are good and great, may eventually achieve wonders and a magnificence beyond description!

Kyrel Zantonavitch is the founder of The Liberal Institute  (http://www.liberalinstitute.com/) and author of Pure Liberal Fire: Brief Essays on the New, General, and Perfected Philosophy of Western Liberalism.

Technology Needs Capital To Produce Economic Growth – Article by Frank Shostak

Technology Needs Capital To Produce Economic Growth – Article by Frank Shostak

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Frank Shostak
June 8, 2015
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In his article “The Big Meh” Paul Krugman complains that despite all the information technology advances the effect so far has been negligible as far as economic growth is concerned.

Krugman writes “That the whole digital era, spanning more than four decades, is looking like a disappointment. New technologies have yielded great headlines but modest economic results. Why? … The answer is that I don’t know — but neither does anyone else.”

Indeed if one looks at the real gross domestic product to the potential real gross domestic product ratio the economy does appear to be hovering below potential with the ratio of 0.977 registered in Q1 this year.

shostak_june 8 300_1

Contrary to Krugman, we suggest that economists such as Ludwig von Mises and Murray Rothbard have provided a clear answer to the issue of technology and economic growth.

In Man, Economy, and State, Rothbard says that technology, while important, must always work through the investment of capital in order to generate economic growth.

On this issue, Rothbard quotes Mises who says,

What is lacking in (underdeveloped counties) is not knowledge of Western technological methods (“know how”); that is learned easily enough. The service of imparting knowledge, in person or in book form, can be paid for readily. What is lacking is the supply of saved capital needed to put the advanced methods into effect.

Most modern theories that emphasize the importance of new ideas and new technologies give the impression that these ideas and technologies have a “life of their own.” Many experts hold that because of the limited amounts of capital and labor, without technological progress, the opportunities for growth will eventually run out.

We Need Funding To Implement New Ideas

Ideas, unlike material inputs, are not themselves scarce. Consequently, it is argued, new ideas for more efficient processes and new products can make continuous growth possible.

We suggest that regardless of how many ideas people have, what matters is whether these ideas can be implemented. What always limits the implementation of various new techniques is the availability of funding. While ideas and new techniques can result in a better use of scarce resources, they can however, do very little without the pool of real savings.

So regardless of how clever we are and regardless of various technological ideas, without an adequate pool of funding nothing will emerge. It is through the expansion in the pool of real savings that an increase in the stock of capital goods is possible. And it is the increase in the capital goods per worker that permits economic growth to emerge.

To Get More Funding, We Need Savings

Obviously, new ideas and new technology can be introduced during the production of new capital goods (i.e., new technology) and will be imbedded in the capital goods stock. The crux of the matter however, is that capital goods cannot emerge without a prior increase in the pool of funding or pool of real savings.

Take, for instance, a baker John who produced ten loaves of bread. He consumes two loaves of bread whilst the other two loaves — his real savings — he employs to purchase a new part to improve his oven. With a better oven he can now raise the output of bread to twenty loaves. If he still consumes only two loaves, then with a larger savings (now stands at eighteen loaves) he can enhance further his oven by introducing new parts, which will enable the introduction of new technology. Note that all this is made possible on account of real savings.

We suggest that despite new technologies, a major impediment to economic growth has been the relentless central bank tampering with financial markets.

Since 2008 this tampering was made manifest in the extremely loose monetary policy of the Fed that resulted in the massive monetary expansion of the Fed’s balance sheet and the lowering of interest rates to almost nil.

These policies have been responsible for a severe erosion of the pool of real savings and thus a weakening of the process of capital formation. This in turn has undermined real economic growth notwithstanding new information technology.

For Krugman and his followers savings is bad news — it is seen as less demand — hence one shouldn’t be surprised that Krugman is puzzled as to why new ideas haven’t manifested in a more robust economic growth. Contrary to Krugman, boosting so-called aggregate demand whilst undermining the capital formation process, and hence the ability to produce goods and services, cannot strengthen economic growth over time. In fact this way of thinking results in the notion that something can be generated out of nothing.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies.

This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.

Soros Pushes US Bailouts and Weapons for Ukraine – Article by Ron Paul

Soros Pushes US Bailouts and Weapons for Ukraine – Article by Ron Paul

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Ron Paul
June 8, 2015
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If you look at the track record of the interventionists you might think they would pause before taking on more projects. Each of their past projects has ended in disaster yet still they press on. Last week the website Zero Hedge posted a report about hacked emails between billionaire George Soros and Ukrainian President Poroshenko.

Soros is very close to the Ukrainian president, who was put in power after a US-backed coup deposed the elected leader of Ukraine last year. In the email correspondence, Soros tells the Ukrainian leadership that the US should provide Ukraine “with same level of sophistication in defense weapons to match the level of opposing force.” In other words, despite the February ceasefire, Soros is pushing behind the scenes to make sure Ukraine receives top-of-the-line lethal weapons from the United States. Of course it will be up to us to pay the bill because Ukraine is broke.

But Soros seems to have the money part covered as well. In an email to Ukrainian leaders, he wrote that Ukraine’s “first priority must be to regain control of financial markets.” Soros told Poroshenko that the IMF would need to come through with a $15 billion package, which was confident would lead the Fed to also come through with more money. He wrote: “the Federal Reserve could be asked to extend a $15 billion three months swap arrangement with the National Bank of Ukraine. That would reassure the markets and avoid a panic.”

How would the Fed be convinced to do that? Soros assured Poroshenko: “I am ready to call Jack Lew of the US Treasury to sound him out about the swap agreement.”

So George Soros will use his influence in the US government to put the American people on the hook for a bankrupt Ukraine — forcing us to pay for weapons, more military training, and Ukraine’s crippling debt.

Who is thrilled with Soros’ drawing the US government into more intervention in the region? The military-industrial complex for one is happy at the prospect of big weapons “sales” to Ukraine. The bankers are thrilled. Washington power-brokers are thrilled. There is something in this for everyone who is politically well-connected. The only losers are the people who will be forced to pay for it, the American taxpayers.

No one seems to ask why we are involved in Ukraine at all. Is it really any of our business if the east wants to break away from the west? Is it a vital US interest which flag the people wish to hang in Donetsk?

One thing we should be sure of is that Ukraine’s debt will not be paid. As in other bailouts, much of it will be transferred to the US taxpayer through the IMF and the Federal Reserve. All of this is only possible because of the perception that the dollar is still the world’s reserve currency. But this too is coming to an end. US military and financial interventionism worldwide are only speeding up the process.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Ex-Im Bank is Welfare for the One Percent – Article by Ron Paul

Ex-Im Bank is Welfare for the One Percent – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
June 1, 2015
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This month Congress will consider whether to renew the charter of the Export-Import Bank (Ex-Im Bank). Ex-Im Bank is a New Deal-era federal program that uses taxpayer funds to subsidize the exports of American businesses. Foreign businesses, including state-owned corporations, also benefit from Ex-Im Bank. One country that has benefited from $1.5 billion of Ex-Im Bank loans is Russia. Venezuela, Pakistan, and China have also benefited from Ex-Im Bank loans.With Ex-Im Bank’s track record of supporting countries that supposedly represent a threat to the US, one might expect neoconservatives, hawkish liberals, and other supporters of foreign intervention to be leading the effort to kill Ex-Im Bank. Yet, in an act of hypocrisy remarkable even by DC standards, many hawkish politicians, journalists, and foreign policy experts oppose ending Ex-Im Bank.

This seeming contradiction may be explained by the fact that Ex-Im Bank’s primary beneficiaries include some of America’s biggest and most politically powerful corporations. Many of Ex-Im Bank’s beneficiaries are also part of the industrial half of the military-industrial complex. These corporations are also major funders of think tanks and publications promoting an interventionist foreign policy.

Ex-Im Bank apologists claim that the bank primarily benefits small business. A look at the facts tells a different story. For example, in fiscal year 2014, 70 percent of the loans guaranteed by Ex-Im Bank’s largest program went to Caterpillar, which is hardly a small business.

Boeing, which is also no one’s idea of a small business, is the leading recipient of Ex-Im Bank aid. In fiscal year 2014 alone, Ex-Im Bank devoted 40 percent of its budget — $8.1 billion — to projects aiding Boeing. No wonder Ex-Im Bank is often called “Boeing’s bank.”

Taking money from working Americans, small businesses, and entrepreneurs to subsidize the exports of large corporations is the most indefensible form of redistribution. Yet many who criticize welfare for the poor on moral and constitutional grounds do not raise any objections to welfare for the rich.

Ex-Im Bank’s supporters claim that ending Ex-Im Bank would deprive Americans of all the jobs and economic growth created by the recipients of Ex-Im Bank aid. This claim is a version of the economic fallacy of that which is not seen. The products exported and the people employed by businesses benefiting from Ex-Im Bank are visible to all. But what is not seen are the products that would have been manufactured, the businesses that would have been started, and the jobs that would have been created had the funds given to Ex-Im Bank been left in the hands of consumers.

Another flawed justification for Ex-Im Bank is that it funds projects that could not attract private sector funding. This is true, but it is actually an argument for shutting down Ex-Im Bank. By funding projects that cannot obtain funding from private investors, Ex-Im Bank causes an inefficient allocation of scarce resources. These inefficiencies distort the market and reduce the average American’s standard of living.

Some Ex-Im Bank supporters claim that Ex-Im Bank promotes free trade. Like all other defenses of Ex-Im Bank, this claim is rooted in economic fallacy. True free trade involves the peaceful, voluntary exchange of goods across borders — not forcing taxpayers to subsidize the exports of politically powerful companies.

Ex-Im Bank distorts the market and reduces the average American’s standard of living in order to increase the power of the federal government and enrich politically powerful corporations. Congress should resist pressure from the crony capitalist lobby and allow Ex-Im Bank’s charter to expire at the end of the month. Shutting down Ex-Im Bank would improve our economy and benefit most Americans. It is time to kick Boeing and all other corporate welfare queens off the dole.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.