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Slogans or Science? – Article by Sanford Ikeda

May 21, 2014 Sanford Ikeda Comments 0 Comment

Sanford Ikeda

May 20, 2014

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The debate over raising the legal minimum wage (LMW) to $10 an hour has people on both sides saying things they should know better than to say. For example, a friend recently posted the following meme (which isn’t the worst I’ve seen) on Facebook:

One year ago this week, San Jose decided to raise its minimum wage to $10/hour.

Any jobs disappear?

The number of minimum wage jobs has grown.

Any businesses collapse?

The number of businesses has grown.

Any questions?

Yes, several, but I’ll get to those in a bit.

Memes like these are just as silly and misleading as the simplistic arguments they’re probably attacking. In fact, the economic analysis of significantly raising the minimum wage says that, other things equal, it will reduce employment below the level where it would otherwise have been. It doesn’t say that that employment will fall absolutely or businesses will collapse.

A little thinking can go a long way

Have a look at this chart published in the Wall Street Journal. At first, it seems to support the simplistic slogans. But it’s important to compare similar periods, such as March–November 2012 (before the increase was passed) versus March–November 2013, (just after it went into effect). The LMW increase wasn’t a surprise, so in the months before it was passed, businesses would have been preparing for it, shaking things up. Comparing those two periods, which makes the strongest case for the meme’s assertions, the total percentage increase in employment (the area under the red line) looks pretty close, going just by my eyeballs and a calculator. In fact, the post-hike increase might actually be smaller, but you’d need more data to be sure. So if you compare similar periods, the rate of employment growth seems not to have been affected very much by the hike. So is the meme right?

According to that same chart and other sources, hiring in the rest of California and the country, where for the most part there was no dramatic increase in the LMW, was also on the rise at pretty much the same time. Why? Apparently, the growth rate of the U.S. economy jumped in 2012, especially in California. So the demand for inputs, including labor, probably also increased. I’m certainly not saying this correlation is conclusive, but you could infer that while hiring in San Jose was rising, it wasn’t rising as fast as it might have otherwise, given the generally improving economy.

That’s a more ambiguous result, and of course harder to flit into a meme.

You are stupid and evil and a liar!

Those strongly in favor of raising the LMW cast opponents as Republican apologists for big business. Take this post from DailyKos, which apparently is the source of the above meme. The author writes, “Empirically, there’s no clear negative effect that can be discerned. The concerns of Teahadists like Paul Ryan and Marco Rubio is [sic] rather unfounded in academic literature and in international assessments of natural experiments.”

Now, the overwhelming conclusion of years of economic research on the effects of a minimum wage on employment is that it tends to increase, not lower, unemployment. As this article from Forbes summarizes, “In a comprehensive, 182-page summary of the research on this subject from the last two decades, economists David Neumark (UC-Irvine) and William Wascher (Federal Reserve Board) determined that 85 percent of the best research points to a loss of jobs following a minimum wage increase.”

So, saying there is “no clear negative effect” is an outrageously ignorant claim. And there’s not one mention of the economic evidence that significantly raising the LMW will hurt the very people you wish to help: the relatively poor. But why address solid scientific research when there’s sloppy sloganeering by politicos to shoot down?

Attacking easy targets is understandable if you want to vilify your opponents or win an easy one for the cause. In that case, you take the dumbest statement by your rival as the basis of your attack. Such is the way of politics. In intellectual discourse, however, you may win the battle but you’ll lose the war. That is, if your goal is to learn from fruitful intellectual discussion, you must engage your opponent’s best arguments, not her weakest ones.

Let me use a counterexample. The sloganeering approach to attacking those who oppose raising the LMW is the equivalent of someone saying: “Well, this past winter was one of the coldest on record in the Midwest. So much then for global warming!” That may be “evidence” in a mud-slinging contest, but it’s not science.

What’s the theory?

While weather is complex and unpredictable, economic systems are even more so. Does that mean there are no principles of economics? Of course not. In fact, it’s because of such complexity that we need whatever help economic theory can offer to organize our thinking. And it doesn’t get any more basic than this: The demand curve for goods slopes downward.

That is, other things equal, the costlier something is, the less of it you’ll want to buy.

Note that the caveat—other things equal—is as important as the inverse relation between price and quantity demanded. That’s why my earlier back-of-the-envelope analysis had to be conditional on more data. Unfortunately, those data are often very hard to get. Does that mean we abandon the theory? Well, that would be like letting go of the rope you’re hanging on to for dear life because you’re afraid it might break.

So what exactly is the theory behind the idea that raising the LMW will increase hiring low-wage workers and boost business? If raising wages will actually increase employment and output, then why not also mandate a rise in interest rates, rents, electricity rates, oil prices, or the price of any of the other myriad factors of production that businesses ordinarily have to pay for? I would hope that this idea would give even the meme promoters pause.

As far as I know, the only situation in which forcing people to pay a higher wage rate will increase employment is when there is a dominant employer and there are barriers to competition. Economists term this “monopsony,” a situation that might occur in a so-called “factory town.” There, the dominant employer (of labor, capital, land, or whatever) can lower what she pays for inputs below the revenue that an additional unit of input earns the company. I would love to hear that argument and challenge it, because it’s the strongest one that standard economics can offer in favor of coercing businesses to raise wages. But so far I’ve not come across it, let alone any discussion of the economic literature on monopsony in the labor market, most of which questions its relevance. Some almost random examples are here and here.

Margins of analysis

Finally, economics teaches us that we can adjust to a particular change in different ways. In a thoughtful article on the effect of the LMW increase in San Jose that all sides of the debate should read, we get the following anecdote:

For his San Jose stores to make the same profit as before the wage increase, the same combo meal would be $6.75. “That would chase off a large percentage of my customers,” Mr. DeMayo said. He hasn’t laid off San Jose workers but has reduced their hours, along with some maintenance such as the drive-through lane’s daily hosing, and may close two unprofitable stores.

Employers can adjust to higher costs in one area by cutting back on spending in others. That might mean less unemployment than otherwise, but it doesn’t mean that raising the LMW has no negative employment effect at all. It means that the effects are harder to see. There’s that darn “other things being equal” again!

Slogans and memes are no substitute for science, or even clear thinking.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

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This article was originally published by The Foundation for Economic Education.

Motivated Time Prospectors – Article by Eric Schulke

May 17, 2014 Eric Schulke Comments 1 comment

Eric Schulke

May 16, 2014

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Think of all the people’s lots in life that you don’t have. You will regret not having more chances to stand here as you are now. It is said that if everybody put their worries into a pile and then took an equal share from the pile, then most people would be content to take back their own share of them. I was reading an article that said,

“To be sick and dying in Vegas has its own existential horror. Not only do you realize that you are going to die and that you don’t matter to the world, but you also realize that much of the world is awful and yet you still would do anything to live.”

Struggling to survive on this planet can be miserable, and yet we continue to stick with it. Why? Because we know that with life there is a chance to engage in more experience. It seems that a person can live, in part, on the desire for continued experience. That chance drives us to keep reaching for achievement and progress.

What does one want to experience in life? What does that honest-to-life list look like? If you had to draw up a complete list, could you do it, or describe the nature of it? The active wanting of experience, it seems, is a major cure to indifference toward death. It seems that it might be a life-or-death question.

We have become really good at being indifferent to the most widespread forms of death, in order to spare ourselves from stressing out on futilely trying to do something about it. Now that we have the tools and techniques, and the times have changed, we have to change that way of thinking from indifference back toward letting that horror affect us. Horror benefits us in that it is our cue to be driven to action to make sure that the horror can’t happen again. If a poltergeist starts ravaging your house, that’s your signal to get out of there, in the same way that the horror that general death, aging, and other diseases are your signal to get death, aging, and other diseases away from you and out of your cells.

Carl Sagan’s daughter once related his words that “there was nothing he would like more in the world than to see his mother and father again.” I was thinking about what an insult added to injury he must have felt in his final days, to have the paralyzing misery of impending death heaped on top of crushing pain. Let that kind of pain course through your mind, face it, bring it to a steaming rage, and let the energy power you to help execute any of the various assaults on aging and disease that are underway in laboratories in various places around the world.

In another article, I was reading about a guy whose daughter went missing in 1971, and was never found. He lived to be 102 and died in the fall of 2013. He had stated that one of the hardest burdens for him was never knowing what happened to his daughter. What misery, for all those years… Think of that… Then five days after he died, his daughter’s car was found upside down in a river; she was the apparent victim of a decades-old car crash.

I can’t fathom that life could inflict such a bitter spite upon somebody. That story stirs up the kind of despair and anguish that each death seems to deserve. It’s the kind of anguish you need to figure out how to allow in, in order to have the right kinds of drive to help pull the Movement for Indefinite Life Extension forward with us.

So once we get there, back to that place where we stand amidst realization of the horror of death, how do we face it? One good basic and natural way to do so, it seems, is to purposefully enjoy the good parts of life, and strategize and take action in helping to fix the worst of the broken things. It’s fun and fulfilling. Life isn’t bad, it’s an adventure. A tough challenge is like a choppy sea, like two armies clashing, or mountain climbers fighting the elements. The implementation of the solution of each challenge is like a Renaissance of scale, some miniature, some very large, like Caesar vs. Vercingetorix, or Charlemagne vs. the Vikings. It’s like the writings of Caesar, the writing-resurgence work of the Carolingians, Vercingetorix and the fate of an entire Celtic confederation, or the first times the Vikings set sail out beyond Greenland.

A few days ago I was thinking about a typical farm hand of Medieval times, walking outside to smell the heavy wet grass and earth of a cold wet spring day. How did they remember the great Lombard migrations, or Scandinavian raiders docking at Pisa? Who was Charlemagne to people before negationists took hold? What did they think might become of the future? Many of them must have felt lost at that kind of thought.

Focus on your heartbeat, feel it pulsing. Theirs pulsed like that. They thought of their hearts stopping and of how it couldn’t possibly be lost to the dust of history anytime soon. You think that, too. Their hearts are lost to the dust of history. Yours is next.

What does every year, and every moment mean to the history of everything? I read recently that if you throw a pebble, it could be offsetting the center of gravity of the universe. Every moment means everything, every moment is everything. Every moment is a world in itself, a great painting, a great work of art, a great burning torch, a water well built in inhospitable lands. Think of how many heartbeats have come to a stop, how many paintings have been burned… So many tangled groves in forests have had the wind blowing through them for all of these years, without one person, without one spoken word, in a place near a stream, where there was once a mighty, crackling stone fireplace that warmed multiple generations of families across the 6th through 8th centuries. It was a place that hosted countless memories which later tormented the souls of dying, now long-dead grandfathers.

They don’t deserve to be dead. They deserve what they earned: the world that is paying exponentially exciting, satiating, and fullfillingly valuable dividends today. This is an incredibly motivating and driving factor in what pushes me to pursue indefinite life extension. People take on a variety of diverse augmentations over time, becoming unique collections of intriguing insight – dynamic power tools for slicing and dicing the elements. We can’t afford for these wealths of rare and powerful abilities and resources to be pillaged and killed off. Sometimes it seems as if life-extensionists like me have to explain to people why it’s bad to let people be killed before we can get down to business in a worldwide effort to reach the goals that can get this done.

We are like the union for the people that make a profession out of being human. We are creating better and better pay, and we demand longer hours. I want every feasible remedy that can restore and maintain life to be a permanent fixture in this reality, for it to be harvested like air. There is no reason a heart has to give out. There is no reason we cannot prevent tangles from forming in the brain. Our organs and cells don’t have to degrade. We have tools, techniques, and brains. We will make it through these obstacles.

How long will it be before our times are old, before 2015 cars look like old classics, and thoughts of our times are most often associated with the smell of the pages of books that have been moved from their years of service on shelves, to boxes of outdated material in back rooms? Many experiences and voyages that could have happened, and could have been chronicled in those boxes, can never exist.

That’s the problem, it seems: There are experiences that could have existed, but that now never can. Thoughtful experience – there is no reason to forgo it or allow it to be lost – hence the basic, inherent reasoning for supporting indefinite life extension, it seems.

Every moment is the gold, the thing to be mined, the thing to be in awe of, to seek, pursue, and strategize toward, to work for, to feel victorious for possessing. Let’s mine more time: support the Movement for Indefinite Life Extension. Don’t be distracted by fool’s gold while the most valuable gold, time, slips through your fingers.

One of these days, we will put funeral homes across the world out of business, and it will be a great victory. We will celebrate, and the festivities will be grand. But we must get a move on now, because our chances are turning into sand.

Eric Schulke was a director at LongeCity during 2009-2013. He has also been an activist with the Movement for Indefinite Life Extension and other causes for over 13 years.

Fearless, Provocative, and Inescapably Thought-Provoking: Review of Kyrel Zantonavitch’s “Pure Liberal Fire” – Article by G. Stolyarov II

May 17, 2014 Gennady Stolyarov II Comments 1 comment

G. Stolyarov II

May 16, 2014

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Pure Liberal Fire by Kyrel Zantonavitch is available on Amazon in paperback and Kindle formats.

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There is perhaps not a single thinker in the world more fearless than Kyrel Zantonavitch. Pure Liberal Fire is the direct, provocative distillation of his thoughts on metaphysics, epistemology, ethics, politics, economics, culture, religion, and the history of philosophy – including Objectivism and Classical Liberalism. Zantonavitch seeks to evoke a pure, true liberalism, and he shows no mercy for ideologies and attitudes that constitute its antithesis. He certainly leaves no doubt in the reader’s mind about where he stands on the issues addressed – and each article within the book employs an abundance of superlative expressions – be they positive or negative. When Zantonavitch praises, he really praises – and the same goes for when he condemns.

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I give this book a rating of five stars because it invariably makes people think – no matter who they are or what their starting persuasions and assumptions might be. There are many areas in which I strongly agree with Zantonavitch – and quite a few where I strongly disagree as well. He articulates many valid points about the fundamentals of philosophy, the importance of liberty in political theory, atheism, the damage perpetrated by various political movements and policies, and the unfortunate tendencies among historical and current Objectivists toward dogmatism and conformism instead of independent thought and the honest pursuit of truth. Some of our areas of disagreement include war, areas of foreign policy, and, perhaps more generally, the desired mechanisms for achieving societal change.

Zantonavitch’s approach and style would entail achieving a fiery, dramatic, immediate deposition of everything (every person, every policy, every idea) he considers evil, dangerous, or damaging. My view of reform is more surgical, focused on getting the sequence of steps right so as to minimize the damage inflicted during the transition while ridding the world of the disease of bad policies (and, in a more long-term fashion, through persuasion and free-market education, also ridding it of bad thinking of the sort that motivates bad policies).

Zantonavitch combines his no-holds-barred treatment of his subject matters with a unique dialectical technique. There are several places in a book where he characterizes a particular set of ideas (or people) in a strongly negative way – but then later (or earlier) also portrays them as either highly praiseworthy, or at the very least understandable and characterized by redeeming attributes. Two examples that come to mind are (1) his discussions of Objectivism as a brainwashing cult in some places and as the most advanced, best-developed philosophy to date in others, and (2) his characterizations in some places of religious believers as not particularly bad as long as they do not take their belief too seriously – and in other places of anyone who believes in a god or teaches his/her children such beliefs as being guilty of evil and/or abuse. The reader can glimpse in this a deliberate juxtaposition of these opposing characterizations in a dialectical fashion – in an attempt to examine both the positive and the negative aspects of the ideas and behaviors Zantonavitch is writing about. (With regard to Objectivism, there is definitely merit in pointing out both the great strengths and the failures, as I have myself done, for instance.) This also creates a second layer of meaning in Zantonavitch’s work, as his uses of positive and negative superlatives with regard to the same subject are seldom immediately close to one another. While the rest of his writing endeavors to be extremely direct (indeed, provocative) with regard to its meaning, he seems to expect his readers to make their own connections in this respect without him deliberately pointing them out. As a result, with regard to Objectivism especially, Zantonavitch’s readers have the opportunity to acquire a more balanced, nuanced view after having been exposed to both his glorious praise and his scathing condemnation of the philosophy.

Ukraine’s “Territorial Integrity” is Not Worth a Single Human Life – Article by G. Stolyarov II

May 12, 2014 Gennady Stolyarov II Comments 5 comments

G. Stolyarov II

May 12, 2014

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“Who likes it when a nation shoots at its own people? We weren’t against being part of Ukraine, but after the latest events, we’ve changed our minds.” ~ Natalia Vasilieva, Retiree in Donetsk, Quoted by the Wall Street Journal

On May 11, 2014, residents of the Donetsk and Luhansk regions voted in favor of independence from Ukraine. Irrespective of questions regarding the legality of this referendum (which can similarly be raised regarding the legality of Ukraine’s current completely unelected interim government) and the possibly biased sample of voters who turned out as compared to the general population of the regions, two facts are undeniable: (1) the turnout was massive, as any glimpse at the many images and videos of the referendum would show, and (2) the voters were overwhelmingly peaceful civilians, merely seeking to express their points of view. A third fact must also confront any reasonable observer of these events in the West: while the voters behaved peacefully, the interim government of President Oleksandr Turchynov and Prime Minister Arseniy Yatseniuk sent troops who fired on crowds of civilians.

NBC News – no propaganda outlet of the Putin regime – reported that soldiers from the Ukrainian “national guard” fired on crowds of peaceful voters in Krasnoarmeisk, Ukraine, and at least two people were observed killed. Irrespective of whether or not a referendum has legitimacy, the act of voting is the act of marking a piece of paper with one’s choice. Casting a ballot, in a valid election or not, is purely an act of free speech. How could casting a vote even remotely be equated to aggression? How could it justify the taking of a human life in any sane, rational person’s mind? How is it that Western politicians fail to denounce the Turchynov/Yatseniuk government’s brazen use of force in reaction to a peaceful, civil action? Has the concept of free speech lost all sanctity for Western leaders as well?

Moreover, how is the attack on crowds of civilians by the Ukrainian “national guard” morally different from the Viktor Yanukovych regime’s attacks on peaceful protesters during its last days? The crowds in Krasnoarmeisk consisted entirely of unarmed civilians trying to cast their ballots. Irrespective of whether or not some of the separatists in the Donetsk and Luhansk region are agents of Vladimir Putin’s regime – as has been alleged – can gatherings of thousands of civilians be said to consist entirely or even largely of Russian special agents or their peons? Or is it likelier that Natalia Vasilieva is right and these crowds are made up of ordinary civilians who originally were not averse to remaining aligned with Ukraine – until the Ukrainian government sent troops, including recruited “civil activists” from known fascist and neo-Nazi groups such as Right Sector (some of whose high-ranking members are also officials in this interim government, as I have written earlier), to kill them and raze their homes? Indeed, as reported by the New York Times, it was a unit staffed by Right Sector “activists”, the Dnepr Brigade (or Dnieper Brigade or Dnieper Battalion), that opened fire on voters in Krasnoarmeisk.

It was also Right Sector “activists” who trapped tens of initially peaceful pro-Russian protesters in the House of Trade Unions in Odessa on May 2, 2014, and threw grenades and Molotov cocktails inside to set it on fire, burning 40 protesters alive – not the same protesters who initially attacked a Ukrainian unity march that day. The Turchynov/Yatseniuk government’s shameful subsequent report on the event blamed the victims, alleging that one of the building’s occupants had dropped a Molotov cocktail onto the roof, thereby setting off the blaze. Even if this happened, how does it remotely excuse the murderous intentions and behaviors of the Right Sector thugs who were caught on video, throwing fiery projectiles at the building? If an armed assailant repeatedly fires at and injures his intended victim, but fails to kill him because the victim dies of a slip and fall in the meantime, does this excuse the assailant from the charge of murder?

Turchynov and Yatseniuk are resorting to forming military units consisting of Right Sector thugs, because sane, reasonable people refuse to fight for them. This is also why the Turchynov/Yatseniuk regime undid Viktor Yanukovych’s sole good action and reinstituted military conscription for young men aged 18 to 25. As I wrote earlier, any government that treats its people as disposable cannon fodder against their will is an evil government that is not worth fighting for. Conscription is murder by lottery, and civilized people can only hope that Ukraine’s young men will engage in mass civil disobedience and dodge this draft in the hopes of preserving their lives and moral innocence. Those Ukrainians who do join the military would do well to follow the example of earlier armored columns that were sent to the Eastern regions and were stopped in their tracks by outraged civilians telling them to lay down their arms and go home. Many of these initial waves of soldiers – the ones sent before the Right Sector units were deployed – saw the folly of fighting their own people and relented.

To all Ukrainians who respect peace and civilization, I say: withdraw from all military operations, refuse to obey your criminal government, and pursue peaceful commerce and amicable daily interactions with your fellow humans – no matter what their language, ethnicity, or spoken political beliefs! No “territorial integrity” is worth the sacrifice of moral integrity, and certainly not the life of a single actual living human being. If a “united Ukraine” can only be preserved through conflagrations and rivers of blood, then it is not worth preserving! What is a set of boundaries drawn on a map ordained by the United Nations (which in many cases does not correspond to de facto political control in any event), compared to a conscious, reasoning being with a rich and irreplaceable internal universe? Borders have been drawn and redrawn time and again throughout history, but a life, once lost, can never be regained.

In the West, all too many leaders and pundits – even some libertarians! – would cast Vladimir Putin’s regime as the antagonist and the culprit for the entirety of the violence that is transpiring in Ukraine. While I have few kind words for Putin, and there is much to condemn about Putin’s own violations of the rights of Russian citizens, it does not appear that the blame placed on him for this crisis corresponds to his actual offenses. As Ron Paul points out, “The US demanded that Russian President Putin stop eastern Ukraine from voting on autonomy, and last week the Russian president did just that: he said that the vote should not be held as scheduled. The eastern Ukrainians ignored him and said they would hold the vote anyway. So much for the US claims that Russia controls the opposition in Ukraine.” And yet Western leaders continue to threaten Russia with escalating economic sanctions over the outcome of the referendum, even though Putin expressly urged delaying it! Even from a sheer pragmatic standpoint, this is an exceedingly unwise tactic; Putin might come to recognize that even his attempts at defusing the situation or disentangling Russia from it would not affect the West’s response, and he would see no reason not to escalate the crisis, if de-escalation does not alleviate any of the punishments that Western governments have in store for him.

Without the resounding endorsements and material support – economic bailouts and shipments of physical resources, paid for by Western taxpayers’ dollars – from the governments of the United States and the countries of the European Union, the Turchynov/Yatseniuk regime would not be able to sustain its crackdowns on its own people. Why do the United States and the European Union support this criminally negligent, civilian-killing government? While I was sympathetic to the deserved overthrow of Viktor Yanukovych, I am deeply ashamed of the US government for aiding the thugs who unfortunately replaced him. Turchynov and Yatseniuk are doing to the population of Eastern Ukraine exactly what Yanukovych did to the Euromaidan protesters who disagreed with his decision to abandon a proposed trade agreement with the European Union. This time, however, the Western governments have taken the side of the oppressors, just because they are perceived to be on “our” side rather than “their” side – “they” being the Russians in the eyes of all those who have not realized that the Cold War is long over and that Cold War thinking must be resolutely abandoned if we are to avoid a hot war that could engulf all of humankind and spoil our chances at achieving radical abundance and unparalleled health and prosperity through technological progress during the next several decades.

To ensure that the progress of human civilization continues without catastrophic setbacks, the crisis in Ukraine must remain localized. Only continued intervention by Western powers would allow it to spread beyond Ukraine’s current borders. It is true that, without American and EU support, the Turchynov/Yatseniuk regime will probably fall – but this will largely be achieved by Ukrainians themselves. Putin might sweep in later and occupy Eastern Ukraine – either annexing it as he did with Crimea (even though he has denied any intent to do so), or treating it much like the autonomous regions of South Ossetia, Abkhazia, and Transdniestria, which broke away from Georgia and Moldova and are currently occupied by Russian troops. If the aftermath of the Crimean annexation is an indicator, this might actually result in fewer civilian deaths than a continuation of the status quo. Also, it need not affect life in the West, or continued efforts by civilians in the West to innovate technologically and raise human standards of living, by one iota. Why does anyone need to lose sleep over the existence of quasi-independent republics named Donetsk, Luhansk, or even Novorossiya? Are they any more threatening to Americans – of whom five-sixths cannot point Ukraine out on a map anyway – than South Ossetia, Abkhazia, and Transdniestria are today? What is threatening to Americans is their own government’s foreign policy, intervening in Ukraine apparently just to oppose any potential expansion of Putin’s power and Russia’s sphere of influence, without any compelling argument for American “national security” to be made under any remotely credible interpretation of that nebulous concept.

A month ago, I wrote that the worst scenario in Ukraine would be an escalation of military conflict, which was unfortunately beginning to occur at the time as the “anti-terrorist” operation was being launched by the Turchynov/Yatseniuk government. At present we clearly see the bloody results of this ongoing operation, as more civilians perish by the day. Of course, unleashing the Ukrainian military and ultra-nationalists within the Donetsk and Luhansk region could not be confined to dislodging armed separatists, and it has turned into a war against the civilians of Eastern Ukraine. Perhaps Turchynov and Yatseniuk did not want this, but they are now desperate, just like Yanukovych was in February 2014, and they see no other way to remain in power. They know that, if they lose, their fates will be at least as unpleasant as that of Yanukovych, and so they are willing to sacrifice the entire country to protect their hold on power. The Western governments need to cut off the lifeline they have given to this criminal regime. While the result would not be optimal from the standpoint of any cosmic justice, any local “solution” to this crisis would certainly be no worse than any “solution” that could be achieved through Western intervention. Furthermore, the effect of complete non-intervention at confining the Ukrainian crisis to a local one would be incalculably beneficial in avoiding the risk of a broader war. Let us look upward to technology and human ingenuity as the path to solving humankind’s problems, and avoid getting bogged down in the sordid muck of Ukraine’s crisis. A bright future requires and demands peace today.

What Does The US Government Want in Ukraine? – Article by Ron Paul

May 11, 2014 Gennady Stolyarov II Comments 0 Comment

Ron Paul

May 11, 2014

Recommend this page.

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In several eastern Ukrainian towns over the past week, the military opened fire on its own citizens. Dozens may have been killed in the violence. Although the US government generally condemns a country’s use of military force against its own population, especially if they are unarmed protesters, this time the US administration blamed the victims. After as many as 20 unarmed protesters were killed on the May 9th holiday in Ukraine, the State Department spokesman said “we condemn the outbreak of violence caused by pro-Russia separatists.”

Why are people protesting in eastern Ukraine? Because they do not believe the government that came to power after the US-backed uprising in February is legitimate. They do not recognize the authority of an unelected president and prime minister. The US sees this as a Russian-sponsored destabilization effort, but is it so hard to understand that the people in Ukraine may be annoyed with the US and EU for their involvement in regime change in their country? Would we be so willing to accept an unelected government in Washington put in place with the backing of the Chinese and Iranians?

The US State Department provided much assistance earlier this year to those involved in the effort to overthrow the Ukrainian government. The US warned the Ukrainian government at the time not to take any action against those in the streets, even as they engaged in violence and occupied government buildings. But now that those former protesters have come to power, the US takes a different view of protest. Now they give full support to the bloody crackdown against protesters in the east. The State Department spokesperson said last week: “We continue to call for groups who have jeopardized public order by taking up arms and seizing public buildings in violation of Ukrainian law to disarm and leave the buildings they have seized.” This is the opposite of what they said in February. Do they think the rest of the world does not see this hypocrisy?

The residents of eastern Ukraine have long been closer to Russia than to the US and EU. In fact, that part of Ukraine had been a part of Russia. After February’s regime change, officials in the east announced that they would hold referenda to see whether the population wanted autonomy from the US-backed government in Kiev. The US demanded that Russian President Putin stop eastern Ukraine from voting on autonomy, and last week the Russian president did just that: he said that the vote should not be held as scheduled. The eastern Ukrainians ignored him and said they would hold the vote anyway. So much for the US claims that Russia controls the opposition in Ukraine.

Even though the Russian president followed US demands and urged the eastern Ukrainians to hold off on the vote, the US State Department announced that the US would apply additional sanctions on Russia if the vote is held! Does this make any sense?

The real question is why the US government is involved in Ukraine in the first place. We are broke. We cannot even afford to fix our own economy. Yet we want to run Ukraine? Does it really matter whom Ukrainians elect to represent them? Is it really a national-security matter worth risking a nuclear war with Russia whether Ukraine votes for more regional autonomy and a weaker central government? Isn’t that how the United States was originally conceived?

Has the arrogance of the US administration, thinking they should run the world, driven us to the brink of another major war in Europe? Let us hope they will stop this dangerous game and come to their senses. I say let’s have no war for Ukraine!

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.

Extending Life in Mice With Artificially Shortened Life Spans is Rarely Directly Relevant or Useful – Article by Reason

May 5, 2014 Reason Comments 0 Comment

Reason

May 4, 2014

Recommend this page.

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There are numerous examples of studies that use mice genetically engineered to suffer forms of shortened life span with the appearance of accelerated aging. One has to be very cautious in reading anything into this sort of work, however: it is rarely of any great relevance to normal aging, as it creates and then attempts to ameliorate an entirely artificial situation. The appearance of accelerated aging is not in fact accelerated aging, but is rather often caused by mechanisms that are of little importance in normal aging. Even when the mechanisms are relevant, the overall metabolic circumstances can render it impossible to determine whether or not a partial treatment will be of any use in normal aging. The gold standard for relevance when evaluating new methods is the extension of life in unmodified mice, but unfortunately this is expensive and slow.

The publicity materials quoted below are a good example of research in animals exhibiting shortened life spans. Here scientists are investigating a protein involved in the induction of cellular senescence. As is often the case, however, from the structure of the work it is impossible to tell whether or not their drug candidate will be of any use as a treatment to lower levels of cellular senescence in normal aging and thus produce benefits such as extended health and life span. Those tests will still have occur:

Quote:

When cells or tissue age – called senescence – they lose the ability to regenerate and secrete certain proteins, like a distinctive fingerprint. One of those proteins, PAI-1 (plasminogen activator inhibitor) has been [a focus of] research, originally as it relates to cardiovascular disease. “We made the intellectual leap between a marker of senescence and physiological aging. We asked is this marker for cell aging one of the drivers or mechanisms of rapid physiological aging?”

For the study, [researchers] used mice bred to be deficient in a gene (Klotho) that suppresses aging. These mice exhibit accelerated aging in the form of arteriosclerosis, neurodegeneration, osteoporosis and emphysema and have much shorter life spans than regular mice. [These] rapidly aging mice produce increased levels of PAI-1 in their blood and tissue.

Then scientists fed the rapidly aging mice TM5441 – the experimental drug – in their food every day. The result was a decrease in PAI-1 activity, which quadrupled the mice’s life span and kept their organs healthy and functioning. “This is a completely different target and different drug than anything else being investigated for potential effects in prolonging life. It makes sense that this might be one component of a cocktail of drugs or supplements that a person might take in the future to extend their healthy life.”

Link: http://www.northwestern.edu/newscenter/stories/2014/04/experimental-drug-prolongs-life

Reason is the founder of The Longevity Meme (now Fight Aging!). He saw the need for The Longevity Meme in late 2000, after spending a number of years searching for the most useful contribution he could make to the future of healthy life extension. When not advancing the Longevity Meme or Fight Aging!, Reason works as a technologist in a variety of industries.

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This work is reproduced here in accord with a Creative Commons Attribution license. It was originally published on FightAging.org.

The Methuselah Mouse Prize: Changing the Conversation about Aging – Article by Advocate of Negligible Senescence

May 4, 2014 Advocate of Negligible Senescence Comments 1 comment

Advocate of Negligible Senescence

May 3, 2014

Recommend this page.

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Methuselah Foundation created a stir in the research community by introducing the Methuselah Mouse Prize in 2003. The Mouse Prize was designed to directly accelerate the development of revolutionary new life extension therapies by awarding two cash prizes: one to the research team that broke the world record for the oldest-ever mouse; and one to the team that developed the most successful late-onset rejuvenation strategy.Unlike other engineering prizes (for example, the X Prize for lunar exploration), an award of the Methuselah Mouse Prize is not the end of the matter. The winner establishes a record that others have to break.

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Why mice? Mice are genetically similar to humans. They are small and inexpensive to maintain so studying large quantities is feasible. Their short lifespan, about three years, makes it possible to see if interventions result in longer, healthier lives—all in time to be of benefit to our own lives.

The Mouse Prize for longevity was first won by a team led by Dr. Andrzej Bartke of Southern Illinois University. The prize for rejuvenation first went to Dr. Stephen Spindler of the University of California.

Additionally, in 2009, the first Special Mprize Lifespan Achievement Award went to Dr. Z. Dave Sharp for the successful healthy life extension of already aged mice using a pharmaceutical, rapamycin.

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Through programs like the Methuselah Mouse Prize, Methuselah Foundation has helped change the conversation on aging and longevity, lending credibility and prestige to areas of research that once were openly frowned upon.

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Previous winners have already proven that healthy life can be extended; more wins are possible by researchers who can best previous winners’ performances, and each new winner pushes the outer limits of healthy life back even further.

How translatable the lesson of a Methuselah mouse will be to people is a matter of debate. The logic of disposable-soma theory applies to both species.

Private donations made since 2003 have bumped the prize value up to nearly $3.5 million, according to the latest update on the Methuselah Foundation website.

Don’t be misled by the size of the fund into thinking that a small donation will make no difference, because this is fundamentally a popular enterprise, a people’s prize, so the number of individual donors is really just as important as the total.

Searching for a cure for age-related ill health, a problem that kills more people than all other causes combined, is a moral imperative. The Advocate for Negligible Senescence publishes articles that discuss and educate the public about research to combat senescence. See the Advocate’s Facebook page.

Military Conscription Shows the Evil of Ukraine’s Government – Article by G. Stolyarov II

May 2, 2014 Gennady Stolyarov II Comments 2 comments

G. Stolyarov II

May 1, 2014

Recommend this page.

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I have, in the past, expressed ambivalence regarding the government of Oleksandr Turchynov and Arseniy Yatseniuk in Ukraine, but that government’s decision on May 1, 2014, to impose military conscription for men aged 18 to 25 clearly reveals it to be evil and unworthy of even verbal support, not to mention the material assistance and economic bailouts currently lavished on it by Western governments and the International Monetary Fund.

As I wrote in 2008 in “Why Freedom is Free and Rights Are Right: The Case Against Conscription, Compulsion, and Confiscation”, conscription is murder by lottery: “By fielding an army of conscripts, a government necessarily guarantees that some of those conscripts will be killed – although nobody knows in advance who will die. In effect, this is no different from selecting a large number of fit young men, assigning numbers to each of them, and picking a few of the numbers out of a hat – whereafter those whose numbers have been picked will be shot. Conscription is just such a murder by lottery – except that the picking of numbers is performed by the vicissitudes of the battlefield rather than the luck of a draw. The responsibility for the deaths of millions of young men from conscripted armies throughout world history lies solely on the shoulders of the governments who conscripted them. The enemy soldiers who killed them were mere instruments of murder; they were likely only following orders – and were likely themselves under compulsion to do so. The government officials who drafted the men, however, did so of their own free will and even with enthusiasm.”

It would be a complete contradiction of the principles of liberty and peace to support any government that conscripts its young men to become cannon fodder – disposable pawns in the power struggles of older, powerful leaders who will not themselves bear the physical costs of their desires to dominate over one group of people or another. Vladimir Putin’s regime is evil, too, and so are many of the militants aligned with it, as I have acknowledged previously. But supporting one evil just because it is arrayed against another is neither moral nor effective. American foreign policy engages in this support for the “enemy of the enemy” at almost every available opportunity, and this always comes back to hurt Americans in both the long and the not-so-long term.

Ironically, it was the overthrown Viktor Yanukovych who had abolished conscription in 2013 – perhaps the only good and liberty-friendly decision he made. Yanukovych deserved to be overthrown for instigating the killings of his own people, but this new government of thugs is no better. Indeed, it has managed to undo the one good legacy of Yanukovych’s reign! And yes, it is a government of thugs. This March 5 article from Channel 4 News in the United Kingdom – no Putin mouthpiece! – explains how many of the top posts in the Ukrainian government are occupied by leaders of Svoboda and Right Sector, two ultra-nationalist groups that grew out of explicitly fascist movements that use explicit Nazi symbols such as the Wolfsangel. Here are two images: at the top, Svoboda’s Oleh Tyahnybok delivers a Nazi salute; at the bottom, he poses with arch-interventionist and neoconservative warmonger John McCain. Right Sector’s leader Dmytro Yarosh is Ukraine’s Deputy Secretary of National Security – security, that is, for those who meet Yarosh’s standards of ethnic and linguistic “purity”.

Neither side in the conflict in Eastern Ukraine is just or right, or anything but destructive to the interests of the only innocent parties in the mix – civilians who seek to live and work in peace. No principle, no signal, no feverish nationalistic pride, no set of lines drawn on a map is worth the life of a single human being. As Voltaire poignantly and perceptively expressed it in his Philosophical Dictionary, “It needs twenty years to lead man from the plant state in which he is within his mother’s womb, and the pure animal state which is the lot of his early childhood, to the state when the maturity of the reason begins to appear. It has needed thirty centuries to learn a little about his structure. It would need eternity to learn something about his soul. It takes an instant to kill him.” No worthless, ephemeral power struggles and posturing can ever justify sacrificing the existence of the rich individual universe – the incomparably intricate and sophisticated mind and body – of any actual human being.

The Ukrainian government is forcing young men to kill their fellow Ukrainian and Russian young men, against whom they have no individual grievances. This is vile and reprehensible, and the Ukrainian government deserves to fall. It would be easy for it to fall and would not require active external intervention; the West would just need to withdraw its support and let the situation unfold as it would with only the involvement of local actors. If the West continues to prop it up with aid, this would only prolong the spree of destruction engaged in by people who should never have had a chance at high office in any civilized society, who should have been marginalized much like the Ku Klux Klan and various neo-Nazi parties are treated in the United States today. No government that uses its own people as cannon fodder against their will deserves to exist; no country whose “territorial integrity” must be maintained by a conscript army deserves for its territory to remain intact.

As to the young Ukrainian men about to suffer under the yoke of military conscription, my advice to them can be found in my poem “The Draft Dodger”, written in 2004 but still just as relevant ten years later. As one who proudly escaped Alexander Lukashenko’s Belrusian military conscription myself (I have subsequently become a US citizen – so I am thankfully safe from that particular tyranny), I wish these innocent young men all the best in finding peaceful, prosperous lives outside the heinous havoc which they did not create.

The Draft Dodger (2004)
G. Stolyarov II

I have been sentenced to a war.
And my offense? Naught but my age.
I’ll suffer pestilence and gore,
And die upon a foreign stage.
The verdict has been passed by those
Who wish to equal me to rags,
Plug sand into a breathing nose,
Borrow my life, return dog-tags.

They tell me, “Freedom is not free,”
And thus they seek mine to deprive.
But no! I’ll courage have to flee,
To choose to prosper and survive!
The right that mine was from the womb,
That I had bought with Reason’s gold,
I shall not lay before a tomb,
But will Self’s Shrine from robbers hold.

I claim no more than what is mine;
To rise each morning when I will,
To build, compose, create, refine,
And heed no Congressman’s dread bill,
Whose parasitic voting bloc
My soul as spoils of war would claim,
No noble war of awe and shock,
But rabble-rousers’ power game.

When nations seek me for their slave,
Their cause, their plight shall pass in vain.
Let no man give but what he gave,
Of his own will, for his own gain.
Freedom can’t stand on sacrifice;
With blood and bones I shan’t it craft.
I shall not offer prey to vice,
And, proudly, I shall dodge this draft!

Ron Paul, Richard Cobden, and the Risks of Opposing War – Article by Ryan McMaken

May 1, 2014 Ryan W. McMaken Comments 0 Comment

Ryan W. McMaken

May 1, 2014

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Since at least as early as the eighteen century, classical liberalism, and its modern variant libertarianism, have opposed warfare except in cases of obvious self-defense. We see this anti-war position clearly among the anti-federalists of eighteenth-century America (who opposed all standing armies) and more famously within George Washington’s Farewell Address. Thomas Jefferson frequently inveighed against war, although in moves typical for Jefferson, he acted against his own professed ideology on a number of occasions.

On the other side of the Atlantic, liberalism finally made significant gains in Britain with the rise of the Anti-Corn Law League in the late 1830s. The head of the league, a radical liberal named Richard Cobden, rose to prominence throughout the 1840s and is notable today for his active defense of laissez-faire capitalism as a member of the House of Commons, and also for his staunch anti-interventionism in foreign affairs.

For a time, his political star rose quickly, but by the time the Crimean War ended, Cobden, had been cast aside by both a ruling class and a public enthusiastic for both empire and war.

Prior to the war Cobden traveled Europe as an honored guest at international peace conferences while advocating for free markets, civil liberties, and libertarianism everywhere he traveled. But in the end, as has been so often the case, his political career was ended by his opposition to war, and his refusal to buy into nationalistic propaganda.

Like the Crimean crisis of today, the Crimean crises of the early 1850s were caused by little more than the efforts of various so-called great powers to tip the global balance of power in their favor. Foremost among those grasping for global power was the British Empire.

But even as early as the 1830s, the British were seized by a series of national hysterias whipped up by a variety of anti-Russian pundits who were obsessed with increasing British military spending and strength in the name of “defense” from the Russians.

As is so often the case in securing the case for war, the pro-militarist argument among the Brits rested on perpetuating and augmenting the public’s nationalistic feelings that the Russians were uncommonly aggressive and sinister. Cobden, obviously far better informed on the matter than the typical Brit, published a pamphlet on Russia in 1836 actually considering the facts of Russian foreign policy, which he often compared favorably to the hyper-aggressive foreign policy employed by the British Empire.

Cobden began by comparing Russian expansion to British expansion, noting that “during the last hundred years, England has, for every square league of territory annexed to Russia, by force, violence, or fraud, appropriated to herself three.” And that among the self-professed opponents of conquest, the British failed to recognize that “If the English writer calls down indignation upon the conquerors of the Ukraine, Finland, and the Crimea, may not Russian historians conjure up equally painful reminiscences upon the subjects of Gibraltar, the Cape, and Hindostan?”

In an interesting parallel to the modern Crimean crisis, much of the opposition to the Russian among British militarists was based on the assertion that the Russians had annexed portions of Poland in aggressive moves that were deemed by the British as completely unwarranted. Cobden, however, understanding the history of the region to be much more murky than the neat little scenarios painted by militarists, recognized that neither side was angelic and blameless and that many of the “annexed” territories were in fact populated by Russians that had earlier been conquered and annexed by the Poles.

The Russians, while themselves no doubt hostile toward neighbors, were surrounded by hostile neighbors themselves, with the origins of conflicts going back decades or even centuries. The puerile and simplistic arguments of the British militarists, who advocated for what would become a global, despotic, and racist British Empire, added little of value to any actual public knowledge of the realities in Eastern Europe.

For his efforts in gaining a true understanding of global conflicts, and for seeking a policy of negotiation and anti-nationalism, Cobden was declared to be un-patriotic and a friend to the great enemy Russia during the Crimean war. Cobden, who had perhaps done more to consistently advance the cause of liberty than anyone else in Europe of his day, was declared to be a friend of despots.

The similarities to today’s situation are of course striking. The Crimea, an area of highly ambiguous ethnic and national allegiance is declared by the West to be a perpetual territory of anti-Russian forces much like the Eastern Polish provinces of old, in spite of the presence of a population highly sympathetic to Russian rule.

Moreover, the successor to the British Empire, the United States, with its global system of client states and puppet dictatorships and occupied territories declares itself fit to rule on a Russian “invasion” that, quite unlike the American invasion of Iraq, resulted in exactly one reported casualty.

As was the case with Cobden in the nineteenth century, however, merely pointing out these facts today earns one the label of “anti-American” or “pro-Russian” as in the obvious case of Ron Paul.

Like Cobden, Paul spent decades denouncing oppressive regimes domestically and internationally, only to now be declared “pro-Putin,” “pacifist,” “unpatriotic,” and “anti-American” by a host of ideologues utterly uninterested in familiarizing themselves with Paul’s actual record, including his denunciations, while in Congress, of Communist regimes and his warnings about Putin’s desire to expand Russian influence in Afghanistan.

Of course, Russia has not been the only target. For those who can remember the lead up to the Iraq War in 2003, this should all feel like déjà vu since many at that time, including some libertarians, claimed that opponents of invasion were “pro-Saddam Hussein” for pointing out that Iraq clearly had no weapons of mass destruction, and that his secular regime was probably preferable to the murderous Islamist oligarchy that has replaced it.

Paul remains in good company with the likes of Cobden, H.L. Mencken, William Graham Sumner, and virtually the entire membership of the American Anti-Imperialist League, including Edward Atkinson who encouraged American soldiers in the Philippines to mutiny. These were radical principled opponents of militarism who opposed government violence at great risk to themselves and their reputations. Some modern American libertarians, on the other hand, well out of reach of the Russian state, would rather spend their time stating what everyone already knows: Russia is not a libertarian paradise.

Ryan W. McMaken is the editor of Mises Daily and The Free Market. Send him mail. See Ryan McMaken’s article archives.

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.

Europe and Deflation Paranoia – Article by Frank Hollenbeck

May 1, 2014 Frank Hollenbeck Comments 0 Comment

Frank Hollenbeck

April 30, 2014

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There is a current incessant flow of articles warning us of the certain economic calamity if deflation is allowed to show its nose for even the briefest period of time. This ogre of deflation, we are told, must be defeated with the printing presses at all costs. Of course, the real objective of this fear mongering is to enable continued national-government theft through debasement. Every dollar printed is a government tax on cash balances.

There are two main sources of deflation. The first comes from a general increase in the amount of goods and services available. In this type of deflation, a reduction in costs, in a competitive environment, leads to lower prices. The high technology sector has thrived in this type of deflation for decades as technical progress (e.g., the effect of Moore’s Law) has powered innovations and computing power at ever-decreasing costs. The same was true for most industries during much of the nineteenth century, as the living standard increased considerably. Every man benefited from the increase in real wages resulting from lower prices.

The second source of deflation is from a reduction in the money supply that comes from an increase in the desire of the public or banking sectors to hold cash (i.e., hoarding).[1] An uncomplicated example will make this point clearer. Suppose we have 10 pencils and $10. Only at an equilibrium price of $1 will there be no excess output or excess money.

Suppose the production cost of a pencil is 80 cents. The rate of return is 25 percent. Now suppose people hoard $5 and stuff money in their mattress instead of saving it. The price of a pencil will be cut in half, falling from $1 to 50 cents, since we now have a money supply of $5 chasing 10 pencils. If input prices also fall to 40 cents per pencil then there is no problem since the rate of return is still 25 percent. In this example, a drop in output prices forced an adjustment in input prices.

The Keynesian fear is that input prices will not adjust fast enough to a drop in output prices so that the economy will fall into a deflation-depression spiral. The Keynesian-monetarist solution is to have the government print $5 to avoid this deflation.

Yet, this money creation is distortive and will cause a misallocation of resources since the new money will not be spent in the same areas or proportions as the money that is now being “hoarded” (as defined by Keynesians). Furthermore, even if the government could find the right areas or proportions, it would still lead to misallocations, since the hoarding reflects a desire to realign relative prices closer to what society really wants to be produced. The printing of money may actually increase the desire to hold cash, as we see today. Holding cash may be the preferred choice over consumption or investment (savings) when relative and absolute prices have been distorted by the printing press.

Of course, no one is really asking the critical questions. Why does holding more cash change the money supply, and why did the public and banks decide to increase their cash holdings in the first place?[2] Without fractional reserve banking, neither the public nor the banks could significantly change the money supply by holding more cash, nor could banks extend credit faster than slow-moving savings. The boom and ensuing malinvestments would be a thing of the past and, thus, so would the desire to hold more cash during the bust phase of the business cycle. If central banks are really concerned about this type of deflation, they should be addressing the cause — fractional reserve banking — and not the result. Telling a drunk that he can avoid the hangover by drinking even more whiskey is simply making the situation worse.[3] The real solution is to have him stop drinking.

According to the European Central Bank’s Mario Draghi,

The second drawback of low inflation … is that it makes the adjustment of imbalances much more difficult. It is one thing to have to adjust relative prices with an inflation rate which is around 2%, another thing is to adjust relative prices with an inflation rate which is around 0.5%. That means that the change in certain prices, in order to readjust, will have to become negative. And you know that prices and wages have a certain nominal rigidity which makes these adjustments more complex.

Draghi is confusing the first source of deflation with the second. The recent low inflation in the Euro zone can be attributed primarily to a strengthening of the Euro, and a drop in food and energy prices.

Economists at the Bundesbank must be quietly seething. They are obviously not blind to the ECB’s excuses to indirectly monetize the southern bloc’s debt. Draghi’s “whatever it takes” comment gave southern bloc countries extra time. Yet, little has been done to reign in the size of bloated public sectors. Debt-to-GDP ratios continue to rise and higher taxes in southern bloc countries have caused an even greater contraction of the private sector. Many banks in southern Europe are technically bankrupt. Non-performing loans in Italy have gone from about 5.8 percent in 2007 to over 15 percent today. And, the situation is getting worse.

Greece recently placed a five-year bond at under 5 percent which was eight times oversubscribed. This highlights the degree to which the financial sector in Europe is now dependent on the “Draghi put.” As elsewhere in the world, interest rates in Europe are totally distorted and no longer serve the critical function of allocating resources according to society’s time preference of consumption, or even reflect any real risk of default.

The ECB will likely impose negative rates shortly but will discover, as the Fed and others did before it, that you can bring a horse to water but cannot make him drink. QE will then be on the table, but unlike the Fed, the ECB is limited in the choice of assets it can purchase since direct purchase of Euro government bonds violates the German constitution. One day, Germany and the southern bloc countries, including France, will clash on what is the appropriate role of monetary policy.

Germany would be wise to plan, today, for a possible Euro exit.

Notes

[1] Keynesians view holding cash, and even holding savings in banks as “hoarding,” but properly understood, only the equivalent of stuffing money in a mattress is hoarding.

[2] Fractional-reserve lending is inflationary, thus contributing to inflationary booms. In turn, banks hold more cash when they fear a confidence crisis, which is also a result of the boom.

[3] Since inflationary fractional-reserve lending is a source of the problem, additional lending of the same sort is not the solution.

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. See Frank Hollenbeck’s article archives.

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.