Power & Market
Pope Francis Endorses Slower Growth, More Poverty
I almost feel guilty when I criticize the garbled economic thoughts of Pope Francis. After all, he was influenced by Peronist ideology as a youngster, so he was probably a lost cause from the beginning.
Moreover, Walter Williams and Thomas Sowell have already dissected his irrational ramblings on economics and explained that free markets are better for the poor. Especially when compared to government dependency.
But since Pope Francis just attacked tax havens, and I consider myself the world’s foremost defender of these low-tax jurisdictions, I can’t resist adding my two cents. Here’s what the Wall Street Journal just reported about the Pope’s ideological opposition to market-friendly tax systems.
The Vatican denounced the use of offshore tax havens… The document, which was released jointly by the Vatican’s offices for Catholic doctrine and social justice, echoed past warnings by Pope Francis over the dangers of unbridled capitalism. …The teaching document, which was personally approved by the pope, suggested that greater regulation of the world’s financial markets was necessary to contain “predatory and speculative” practices and economic inequality.
He even embraced global regulation, not understanding that this increases systemic risk.
The supranational dimension of the economic system makes it easy to bypass the regulations established by individual countries,” the Vatican said. “The current globalization of the financial system requires a stable, clear and effective coordination among various national regulatory authorities.
And he said that governments should have more money to spend.
A section of the document was dedicated to criticizing offshore tax havens, which it said contribute to the “creation of economic systems founded on inequality,” by depriving nations of legitimate revenue.
Wow, it’s like the Pope is applying for a job at the IMF or OECD. Or even with the scam charity Oxfam.
In any event, he’s definitely wrong on how to generate more prosperity. Maybe he should watch this video.
Or read Marian Tupy.
Or see what Nobel Prize winners have to say.
P.S. And if the all that doesn’t work, methinks Pope Francis should have a conversation with Libertarian Jesus. He could start here, here, and here.
Originally published at Dan Mitchell's blog International Liberty
Federal Reserve Nominee Wants To Take Your Cash And Track How You Spend
Central banks are shrouded in secrecy and few understand how they operate. These institutions handle economic matters that we’re told are far too complex for average people to understand.
The Federal Reserve’s secrecy originated from its inception, when created by a group of elite men using secret code names at a place named Jekyll Island a century ago. No doubt at least one mustache was twirled mischievously. Of course the day to day of monetary policy is far less thrilling, but that doesn’t mean the consequences of these bankers’ actions are any less dramatic.
A decade after the latest financial crisis — fueled by the cheap money policies of former Fed chairman Alan Greenspan — low interest rates and “quantitative easing” have continued to inflate what Donald Trump once rightly called a “big, fat, ugly bubble.” The monetary policies that the Fed imposes bring significant harm to many Americans who are impacted by the whims of bureaucratic economists with unchecked egos.
For all the secrecy afforded to the Fed and other central banks, most of these decisions are made in plain view of the public, enjoying the protection that comes with dreadfully dull technical language of modern economics. For an example, look no further than the nomination battle going on right now over Marvin Goodfriend to the board of governors.
Read the full article at The Federalist
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Ron Paul, Populism, and the Fed
I've been really enjoying David Beckworth's Macro Musings podcast - a nice, conveniently way of hearing some good econ discussions outside of my own personal bubble.
There was an interesting interview with Neel Kashkari who talks about why there has been very little movement within the Fed to really explore NGDP Targeting or pushing up the inflation target, in spite of the large amount of chatter about those topics among academics. He explains that it's because when Fed officials actually talk to real people in communities, in particularly community bankers, any discussion of playing around with inflation is instantly rejected - in part because the public as a whole has so much inherent skepticism and mistrust of the Fed as it stands now. (I'll also note that while I obviously don't like Kashkari's views on monetary policy, his candor and transparency in his Fed role has been great.)
I think this plays back to the success of Ron Paul's libertarian populist campaign, and a good push back to the argument that he never accomplished anything while in office. While it's certainly true that there aren't many legislative achievements to his CV, he effectively used his platform to push the Fed and money into public discourse and effectively won the argument. The impact isn't limited to simply the "public" either. Fed skepticism has become status quo GOP orthodox - to the point where some Republicans on the Hill have been frustrated with Trump's status quo Fed picks. We've also seen legislation advanced by House Republicans to reform the Fed (even though I don't think that highly of them) and Dr. Paul's Audit the Fed Bill has received the support of the majority Republican legislators when it has come up to vote.
In fact, when you consider that Bitcoin was built on explicitly Austrian origins, it's possible that Ron Paul's impact didn't only help restrain the Fed, but actually inspired very real solutions to government-controlled fiat currency. The grassroots movements to legalize gold and silver at state levels obviously plays into this as well. All in all, by effectively using a populist appeal to engage and educate the public - rather than focus on trying to impose top-down reforms through legislation - Dr. Paul was able to have as large an impact on American monetary policy as perhaps any single legislator since the creation of the Fed.
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DeLong is Wrong on Trump's Tax Cuts
Bradford DeLong posted a vicious rant on his blog recently accusing the signatories of a letter in support of President Trump’s economic policies of being “both 100% cynical and 100% deluded” as well as "moronic and easily grifted." However, it turns out that Delong himself suffers from the delusion that a president gets to write and pass legislation exactly as he sees fit. In reality, the Washington swamp is under almost complete control of lobbyists and special interest groups. We would wager that very few of our fellow signatories are completely satisfied with these pieces of economic legislation as they were passed. However, Delong claims the signatories are:
1. Cynical and delusional to think the 2017 tax reform legislation is a middle-class tax cut.
Well first you have to understand that nearly half of American taxpayers pays no federal income tax at all while the top 10% of income recipients pay over 70%. The middle class will receive a 1-4% cut in their federal income taxes. That’s not much but it’s a step in the right direction. The corporate income tax represents double taxation of profits, which are taxed again as dividends at the personal level. Most economists recognize that the corporate tax is a counterproductive tax that stifles economic growth and needs to be changed, if not abolished.
2. Cynical and delusional to claim that Trump’s regulatory relief is anything but “Berlusconi-like corrupt advantaging of favored clients.”
It is regulation itself that is corrupt because the regulators are invariably “captured” by the regulated industry. The result is that regulated industries gain protection from competition and government largess and bailouts at the expense of consumers. Thus regulation did not prevent Bernie Madoff's scam or the financial crisis, nor does it protect the American consumers from skyrocketing health care costs. Even a moderate dose of regulatory relief will produce lower prices, more jobs, and economic growth.
Washington has always been a swamp where the political elites and their connected financial and business cronies enrich themselves at the expense of the American people. Unlike the delusional Delong, we fully recognize that Trump's legislative accomplishments fall far short of the ideal but they do represent a step in the right direction.
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Spare Me Claims Gina Haspel Will 'Speak Truth to Power,' Real Truth-Tellers Go to Jail
In the Senate Intelligence Committee secret vote today on whether to confirm Trump nominee Gina Haspel as chief of the CIA, she will likely again be praised for promising to “speak truth to power.” This has recently become one of the favorite accolades in the least trusted city in America. But will Americans be as gullible this time around?
When 7-term congressman and dutiful Republican functionary Porter Goss was nominated in 2004 to become CIA chief, Sen. Barbara Mikulski (D-MD) endorsed him after he promised to “always speak truth to power.” Fat chance: after he was confirmed, Goss speedily sent a memo to CIA employees muzzling them, declaring that their job was to "support the administration and its policies in our work.” Goss bungled the CIA so badly that the Bush administration heaved him out after less than two years on the job; Goss later became a lobbyist for the Turkish government.
“Speaks truth to power” had a starring role in the 2005 Senate coronation of John Negroponte, America’s first Director of National Intelligence. While working as Reagan’s ambassador to Honduras, Negroponte perennially denied that the Honduran regime was committing vast atrocities, despite its killing of tens of thousands of its own citizens. (Honduras was aiding the Nicaraguan Contras at the time.) But that did not deter Sen. Jay Rockefeller, D-W.Va., Sen. Jon Corzine, D-N.J., and Sen. Mikulski from recycling the “truth to power” phrase in speeches endorsing Negroponte.
When Michael Hayden was nominated as CIA chief in 2006, Sen. Carl Levin (D-MI) vouched that Hayden would “speak truth to power.” But Hayden profoundly misled Congress regarding the CIA’s torture program and his credibility was demolished in the 2014 Senate Intelligence Committee report on the enhanced interrogation program.
Read the rest at USA Today
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Money-Supply Growth Slowed in April
Last month, we reported that money-supply growth accelerated for the first time after a year-long period of falling growth rates, at the end of which money-supply growth fell to a near-ten-year low of 2.6 percent, year over year.
In March of this year growth rates had headed upward, rising to a year-over-year growth rate of 5.1 percent.
In April, however, growth rates lessened again, coming in at a rate of 4.3 percent, year over year.
(The money-supply metric used here — an "Austrian money supply" measure — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.)
Meanwhile, the more commonly used measure of money supply, M2, continued to experience falling growth rates through the first part of this year. In April, M2 increased 3.7 percent, year over year, making it the smallest increase in M2 since 2011.
Part of what has pushed the Austrian measure of money supply above growth rates from last year was an increase in treasury deposits at the Fed.
The inclusion of deposits at the Fed is a key difference between M2 and the Austrian measure of the money supply, and growth in these deposits has added to the differences seen in growth between M2 and the Austrian measure.
In April, treasury deposits at the Fed hit a 16-month high, rising to $324 billion. The highest level for treasury deposits ever reported occurred in November of 2016, at a total of $394 billion.
What does the trend in money supply indicate?
Historically, a sizable drop in money supply growth rates suggests that a recession is on the horizon — but not on the immediate horizon.
In this graph, provided by RealForecasts.com, we see how dips in the money supply growth rate often precede recessions, but with a lag period of a year or so. In many cases, money supply growth is trending upward again by the time the recession officially begins.
Moreover, if we look at TMS totals (in terms of dollar amounts) we can see that flattening in the money supply has occurred to varying degrees on three occassions over the past 20 years. There was a slight flattening leading up to the 2001 recession, and then another in the lead up to the 2008 financial crisis. And we are experiencing some flattening now — although to a lesser extent. It's unknown if this trend will continue or if growth will pick up again.
So does the recent downturn and subsequent uptick indicate a recession?
It's difficult to say how long the current boom period will last. Home prices continue to sail upward for now, although we do see volatility in the stock market. Unemployment data doesn't point to anything catastrophic at this time.
Some indicators suggest problems, however. Delinquencies in auto-loan debt continue to trend upward, household formation is stagnating, and growth in commercial loans — a factor in expanding the money supply — remains near multi-year lows:
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Russia First: Putin Continues to Pull Back on Military Spending
Last year I noted that America would benefit from Trump acting more like Putin - at least in terms of military spending. After all, while Trump and Republicans were pushing for a $80 billion increase in the defense war budget, Putin's government had reduced their's to a total of around $50 billion.
As Frank Weir notes at the Christian Science Monitor, Putin appears prepared to continue that trend:
It may sound contrary to Western perceptions of Russia's global intentions. But the priorities listed in the new Kremlin strategic program suggest that Mr. Putin has decided to use what seems likely to be his final term in office to cement his already substantial legacy as a nation-builder.
The projected surge in spending on roads, education, and health care will have to be paid for. A key source of that funding will be the military budget, which had been growing by around 10 percent annually for much of the Putin era.
“The times when the external threat was used to make cuts in social expenditures palatable has passed. We can't go on like that any longer,” says Pavel Zolotaryov, deputy director of the Institute of USA-Canada Studies (ISKRAN), which is part of the Russian Academy of Sciences. “A lot of the goals of military modernization have already been accomplished, so we can afford to slow it down, make selective cuts to fund social goals, while continuing the basic path.”
Weir goes on to note that along with a desire to focus more on their domestic economy, Putin's actions may be influenced by Russians growing tired from war:
Recent opinion polls suggest that Putin's priority shift coincides with a war weariness on the part of Russians, who have indulged their president as he shored up Russia’s great power status in the face of Western hostility and sanctions, by annexing Crimea and intervening in Syria. A survey last month by the independent Levada Center found that at least half of Russians appreciate their country’s return to great power status. But 45 percent fault Putin for “failing to ensure an equitable distribution of income in the interests of ordinary people,” up from 39 percent in March 2015 when the last survey was conducted.
It's also worth noting that the Kremlin's strategic plan also includes a desire to "speed up the introduction of digital technologies in the economy and the social sphere."
For the past year the Russian government has continued to show interest in blockchain technology, including Putin sitting down with Ethereum founder Vitalik Buterin last June. Others in the Russian government have made it clear that they see blockchain technology as a sphere important to Russia's long term economic interests.
This does not mean, however, that Russia will follow the lead of countries like Japan and Estonia in liberating cryptomarkets, which they view as distinct from blockchain itself. While Russia sees the potential for a crypto-ruble to help them navigate past international sanctions, they are unlikely to embrace the freedom true monetary competition would allow its citizens. If Russia does indeed launch their own digital currency, don't be surprised to see it escalate their crackdown of private cryptocurrencies.
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Jeff Deist on the Tom Woods Show: Is the Term “Libertarian” Still Useful?
Jeff Deist joined the Tom Woods Show yesterday to discuss whether the term "Libertarian" is still useful.
To quote Tom Woods, "This one’s a doozy, my friends."
Listen here.
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Trump’s Plan for Iran: Put Terrorists in Charge
Back in the 2008 presidential race, I explained to then-candidate Rudy Giuliani the concept of “blowback.” Years of US meddling and military occupation of parts of the Middle East motivated a group of terrorists to carry out attacks against the United States on 9/11. They didn’t do it because we are so rich and so free, as the neocons would have us believe. They came over here because we had been killing Muslims “over there” for decades.
How do we know this? Well, they told us. Osama bin Laden made it clear why al-Qaeda sought to attack the US. They didn’t like the US taking sides in the Israel-Palestine conflict and they didn’t like US troops on their holy land.
Why believe a terrorist, some responded. As I explained to Giuliani ten years ago, the concept of “blowback” is well-known in the US intelligence community and particularly by the CIA.
Unfortunately, it is clear that Giuliani never really understood what I was trying to tell him. Like the rest of the neocons, he either doesn’t get it or doesn’t want to get it. In a recent speech to the MeK – a violent Islamist-Marxist cult that spent two decades on the US terror watch list – Giuliani promised that the Trump Administration had made “regime change” a priority for Iran. He even told the members of that organization – an organization that has killed dozens of Americans – that Trump would put them in charge of Iran!
Giuliani shares with numerous other neocons like John Bolton a strong relationship with this group. In fact, both Giuliani and Bolton have been on the payroll of the MeK and have received tens of thousands of dollars to speak to their followers. This is another example of how foreign lobbies and special interest groups maintain an iron grip on our foreign policy.
Does anyone really think Iran will be better off if Trump puts a bunch of “former” terrorists in charge of the country? How did that work in Libya?
It’s easy to dismiss the bombastic Giuliani as he speaks to his financial benefactors in the MeK. Unfortunately, however, Giuliani’s claims were confirmed late last week, when the Washington Free Beacon published a three-page policy paper being circulated among National Security Council officials containing plans to spark regime change in Iran.
The paper suggests that the US focus on Iran’s many ethnic minority groups to spark unrest and an eventual overthrow of the government. This is virtually the same road map that the US has followed in Iraq, Libya, Syria, and so on. The results have been unmitigated disaster after disaster.
Unleashing terrorists on Iran to overthrow its government is not only illegal and immoral: it’s also incredibly stupid. We know from 9/11 that blowback is real, even if Giuliani and the neocons refuse to understand it. Iran does not threaten the United States. Unlike Washington’s Arab allies in the region, Iran actually holds reasonably democratic elections and has a Western-oriented, educated, and very young population.
Why not open up to Iran with massive amounts of trade and other contacts? Does anyone (except for the neocons) really believe it is better to unleash terrorists on a population than to engage them in trade and travel? We need to worry about blowback from President Trump’s fully-neoconized Middle East policy! That’s the real threat!
Originally posted at the Ron Paul Institute
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Sports Fans Win Big from Legalizing Gambling, Now Keep Congress Out of It
Very rarely do I have a reason to praise Chris Christie, but he delivered one today by winning his Supreme Court case granting states the power to legalize online gambling.
This move is a major win for sports fans, even those who don't prefer to gamble. Why? Just as marijuana legalization has led to all sorts of entrepreneurial innovations in cannabis markets, the growth of legal sports gambling will lead to all sorts of new products to give gamblers a better edge - which will include better sports analysis. We have already seen this develop in the fantasy football industry. A great article on The Ringer chronicle the rise of a new generation online draft gurus who have challenged celebrity sports analysts like Mel Kiper Jr. for fan attention. What is only briefly alluded to in the piece is that this industry is largely driven by money invested in for-profit fantasy football players. Some of the most respected modern draft analysts explicitly make money from selling fantasy football products, including Rotoworld's Josh Norris and Evan Silva (this year's most accurate NFL draft projector), and FootballGuy's Matt Waldman.
A desire for a gambling edge has led to all sorts of fascinating research in fantasy strategy itself. For example, Shawn Siegele of Rotoviz applied Nassim Taleb's work on antifragility in his analysis on what deemed a "zero-running back strategy." Another fantasy entrepreneur, JJ Zachariason, applied economic analysis to position value to argue against selecting an early round quarterbacks in his popular e-book "The Late Round Quarterback." Again, money invested into the industry allowed others to create a career analyzing the subject in ways that have enhanced the understanding of millions of football fans. The division of labor at work.
Legalization of online sports gambling comes at a particularly interesting time for sports. The recent struggles of ESPN may in large part be due to increased politicalization of its analysis, but it's also a reflection of changing media trends as a whole. Podcasts, YouTube, social media (particularly Twitter), and an endless supply of online blogs have allowed sports fanatics of all sorts of new ways to consume serious sports analysis. As outlets such as the long successful Rivals.com have shown, the particularly devoted sports fan is willing to pay for high quality, niche-specific content. (A similar strategy is being embraced by The Athletic, which has invested tens of millions in a pay-for-content online model.) ESPN is trying to tap into this market with its new ESPN+ service, and it will be interesting to see what sort of gambling-specific products emerge on the platform.
Unfortunately, while sports fans should benefit from today's decision, there still remains the question of how the Federal government will respond.
As Lawrence Vance has recently noted, Republicans in Congress have already begun to work on legislation aimed at killing states' newly won gambling freedom:
So, is online sports betting in your future? Not if some Republican senators have their way.
Back in 2015, Senator Lindsey Graham (R-SC), with eight cosponsors, including Republican senators Tom Cotton, Mike Lee, and Marco Rubio (and one Democratic senator, Dianne Feinstein), introduced the Restoration of America’s Wire Act (S.1668) to “restore long-standing United States policy that the Wire Act prohibits all forms of Internet gambling, and for other purposes.” The bill would amend
provisions of the federal criminal code, commonly known as the Wire Act, to provide that the prohibition against using a wire communication facility for the transmission of bets or wagers, wagering information, or wagering proceeds shall: (1) apply to any bet or wager (currently, to bets or wagers on any sporting event or contest); and (2) include any transmission over the Internet carried interstate or in foreign commerce.
The bill was referred to the Senate Committee on the Judiciary, where it could still come up for a vote.
A new bill to effectively ban online gambling on a federal level, with a stated purpose almost as long as its text, was introduced in the Senate in September by Tom Cotton. Co-sponsored by Senators Mike Lee and Lindsey Graham, the bill (S.3376) is a “reaffirmation of the prohibition on funding of unlawful internet gambling.” It is designed to “ensure the integrity of laws enacted to prevent the use of financial instruments for funding or operating online casinos are not undermined by legal opinions not carrying the force of law issued by Federal Government lawyers.” The complete text of the bill reads:
The Memorandum Opinion for the Assistant Attorney General of the Criminal Division of the Department of Justice, dated September 20, 2011, shall have no force or effect for the purposes of interpreting section 5362(10) of title 31, United States Code.
That’s it. A one-sentence bill. Too bad all bills introduced in Congress aren’t this short. Perhaps then members of Congress would actually read them. The “Memorandum Opinion” in question concluded that “interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.” You can read a legal analysis here. This bill was likewise referred to the Senate Committee on the Judiciary.
But whether these bills pass, are voted on, or even make it out of committee is immaterial. The fact remains that certain members of Congress think it is their duty to keep Americans from gambling; that is, spending their own money as they so choose.
In totally unrelated news, Las Vegas casino mogul Sheldon Adelson recently donated $30 million to the Republican Party's Congressional efforts.
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