Power & Market
Dr. Mark Thornton joined Glenn Beck for an interview on how Austrian economists have predicted every major crisis of the last century.
The Skyscraper Curse is available now as a hardback, paperback, e-book, and audiobook at the Mises Store.
The book and audiobook are also available for free in the Mises Library.
I’m starting to wonder whether President Trump has any power over US foreign policy at all. Many people believe that the US president is just a figurehead, with actual foreign policy firmly in the hands of the deep state. Trump’s latest dramatic U-turn on pulling troops from Syria certainly feeds such theories.
When President Trump announced just a couple of weeks ago that the US was removing its troops from Syria and possibly reducing troops from Afghanistan, the neocons, the media, the military-industrial complex, and the left-wing “never-Trump” people were livid. They were silent when President Obama made the horrible decision to overthrow Assad in Syria and sent weapons to jihadists to do so. They never said a word when billions of dollars were committed to this immoral and dangerous “regime change” policy. They weren’t interested in the rule of law when President Obama thumbed his nose at Congress and sent troops into Syria.
But when President Trump declared the obvious – that ISIS was effectively defeated and that we had no business being in Syria – these above groups in unison declared that actually bringing US troops home was a “gift to Russia.” They said bringing US troops home would create instability in the regions they left. Well, is there any proof that occupation by US troops actually brings stability?
No sooner did President Trump announce our departure than his neocon advisors began walking his words back. First he had to endure a lunch with Sen. Lindsey Graham reading him the riot act, where, according to the Senator, Trump agreed to no timetables for departure. Then his National Security Advisor, John Bolton, and his Secretary of State, Mike Pompeo, began to tell the world that President Trump’s statements on troop pullout were just empty words, not US policy.
While Syrian Christians newly liberated from the rule of US-backed extremists celebrated Christmas for the first time in years, John Bolton dusted off the old warning to Assad that the US would attack if he “again” gassed his people. With the Syrian president personally taking part in some of the Christmas celebrations, does anybody really believe he’d go back to his office and order a gas attack?
Bolton then claimed that the US would shift troops from Syria to Iraq to continue fighting ISIS and that the US fully backs Israeli airstrikes on Syrian territory. Did President Trump even agree to any of this?
Even worse, Secretary of State Pompeo is embarking on a Middle East tour where he will essentially tell leaders in the region that the US president is a liar. According to one State Department official quoted in a report on Sunday, Pompeo’s message to the Middle East will be, “Despite reports to the contrary and false narratives surrounding the Syria decision, we are not going anywhere. The secretary will reinforce that commitment to the region and our partners.”
Calling the US president’s actual words on Syria “false narratives”? How is this not insubordination?
Will President Trump stand by and watch this coup taking place under his nose? Does he realize how his credibility suffers when he boldly announces a US withdrawal and the does a U-turn days later? Has he noticed recent polls showing that the majority of the American people agree with him? Why is he so intimidated by the neocons?
That didn't take long. Now that the Democrats hold a majority in the House of Representatives, Democratic Rep. Steve Cohen (Tenn.) introduced a constitutional amendment to abolish the electoral college.
Cohen surely doesn't expect the legislation to pass. But now that the Democrats have the Speakers' chair and committee chairmanships, Cohen can now get more political mileage out of the bill rather than have it immediately "disappeared" by a Republican House leadership.
The bill does little more than revive the longstanding claim among leftwing populists that the US presidency ought to go to whichever candidate wins a majority of all the votes from all the states added together.
The effect would be to lopsidedly favor heavily urbanized coastal regions over other regions of the US. Without an electoral college, it becomes far more economical for candidates to focus their views and election efforts on a small number of highly-populated regions, while ignoring the rest of the country.
In an age when politicians continually decry how the US is so "divided," abolishing the electoral college would only serve to further drive apart politically distinct regions of the US by eliminating a political institution that encourages candidates to take positions more likely to appease voters outside the areas with the most heavily-concentrated populations.
Moreover, in an age when we're told to decry populism, and embrace a politics of "compromise," a rejection of the electoral college seems rather odd indeed.
After all, the purpose of the electoral college is to ensure that a successful presidential candidate appeals to a broader base of voters than would be the case under a simple majoritarian popular vote.
This, by the way, is a big reason that Hillary Clinton lost, and why the Democrats are convinced the electoral college is stacked against them.
The electoral college makes it harder to win by doing what Clinton did during the 2016 campaign: focus on a thin sliver of rich Hollywood and business elites, coupled with urban ethnics.It's true that those two groups can offer a lot of votes and a lot of campaign dollars. But they also tend to be limited to very specific regions, states, and metro areas.
The groups Clinton ignored: the suburban middle class and working class make up a much larger, more geographically diverse coalition. This can be seen in the fact that Trump won such diverse states as Alabama, Pennsylvania, and Wisconsin.
In 2016, the electoral college worked exactly as it's supposed to — it forces candidates to broaden their appeal. Or as a cynic like myself might say: it forces politicians to pander to a broader base.
There's Nothing "Undemocratic" About the Electoral College
The party-line on the electoral college, of course, has long been that it's undemocratic. In its coverage on Cohen's bill, the Huffington Post editorialized:
Another bill would get rid of the Electoral College, an archaic system of electing presidents that allowed Trump to win the presidency despite his rival, Hilary Clinton, receiving millions more votes.
The conclusion you are supposed to draw here, of course, is that the electoral college works against what we can all see is common sense: that the candidate with the most votes ought to win.
Unfortunately, many supporters of the electoral college adopt this line of thinking as well, and many think the primary benefit of the electoral college is that it's undemocratic. These claims are often accompanied by tiresome bromides about how the United States is allegedly "a republic not a democracy."
The truth, however, is not that the electoral college is undemocratic. It is, in fact, more democratic.
It's true that the electoral college prevents Clinton-style demagoguery. But 50 separate presidential elections (plus DC and the territories) is not somehow less democratic than holding one big national election. It's simply a democratic method designed to ensure more buy in from a larger range of voters, not less. Other similar tactics include "double majorities" as used in Switzerland. And for all these reasons, as I note here, the electoral college should be expanded:
Double-majority and multiple-majority systems mandate more widespread support for a candidate or measure than would be needed under an ordinary majority vote.
Unfortunately, in the United States, it is possible to pass tax increases and other types of sweeping and costly legislation with nothing more than bare majorities from Congress which is itself largely a collection of millionaires with similar educations, backgrounds, and economic status. Even this low standard is not required in cases where the president rules via executive order with " a pen and ... a phone ."
In response to this centralization of political power, the electoral college should be expanded to function as a veto on legislation, executive orders, and Supreme Court rulings.
For example, if Congress seeks to pass a tax increase, their legislation should be null and void without also obtaining a majority of electoral college votes in a manner similar to that of presidential elections. Under such a scheme, the federal government would be forced to submit new legal changes to the voters for approval. The same could be applied to executive orders and treaties. It would be even better to require both a popular-vote majority in addition to the electoral-vote majority. And while we're at it, let's require that at least 25 states approve the measures as well.
These sorts of measures mean more voting, more debate, and more public buy-in. It prevents knee-jerk policies designed to attack unpopular minority groups. Eliminating the electoral college, on the other hand, moves in exactly the opposite direction.
On January 1 this year, a new law in the Flemish region of Belgium went into effect, effectively banning kosher slaughter of animals "after regional parliaments introduced prohibitions for animals that have not been pre-stunned."1
According to The Jewish Chronicle:
Shechita is banned in Flanders as of January 1, while similar restrictions will be in place in the French-speaking Walloon region from September 2019.
Local rabbis said it was in direct contradiction to Jewish law, which requires that an animal be uninjured and in optimal health before slaughter.
One added that the Belgian measures were putting Jewish lives “at risk.”
The motivation behind the new laws comes in part from concerns over animal welfare. Thus, Belgian lawmakers had to choose between religious freedom for Jews and animal welfare. They chose the animals.
Clearly, there is a fundamental conflict of values here between those motivated by animal welfare, and those motivated by religious freedom.
We see similar conflicts between advocates for religious freedom and those who oppose male circumcision, and between the two sides in the abortion debate. We see it in debates over bans on Muslim head coverings. In democratic political systems — including those with strong constitutional protections for minorities — the majority opinion eventually wins out. Constitutions can be changed, and what the majority considers to be "right" will eventually become the position of all institutions.
Moreover, in cases like kosher slaughter, the activities being targeted are no mere preferences. They touch on fundamental values, and they present a clear conflict with other value systems. In cases such as these, where there is no apparent room for compromise. And if there is no "middle ground," whose values ought to prevail?
Democracy Doesn't Always Work
Throughout most of the West, of course, we're all taught from an early age that "democracy" will allow everything to work itself out. The parties in conflict will enter into "dialogue," will arrive at a "compromise" and then everyone will be happy and at peace in the end.
But, that's not how it works in real life. While there are some areas for compromise that can be found around the edges of issues such as moral values and ethnic identity, the fact is that in the end, kosher meats are either legal or they're not. Circumcision is either legal or it's not. Abortion is either legal or it's not. Muslim head coverings are either legal or they're not.
After all, if one group of people believes that a 3-month-old fetus is a parasite that has trespassed against the mother, those people are going to find little room for compromise with a group of people who think the same fetus is a person deserving legal protection.
Indeed, we see the shortcomings of democracy at work every time this latter issue comes up. One side calls the other killers who are complicit in the killing of babies. The other side calls their opponents rubes and barbarians, probably motivated by little more than crazed misogyny. Similar dynamics, of course, are present in cases involving animal rights, circumcision, and headscarves. One side thinks that their side is the only acceptable option for virtuous people. "Virtue," of course, can be defined any number of ways. Some are so blinded by their cultural biases, in fact, that they even conclude that no "civilized" person could possibly believe that, say, circumcision is anything other than a barbaric practice.Those who continue to believe in such things must therefore be forced "into the 21st century" by the coercive power of the state. Their religious beliefs, as Hillary Clinton demanded in 2015, "have to be changed."
These problems also exist under authoritarian, non-democratic regimes. But anti-democrats usually admit that the state is using force to support one side over the other. Democrats, on the other hand, often prefer to indulge in comforting fictions. What many supporters of democracy refuse to admit is that there is no peaceful debate that will solve this conflict. The conflict is philosophical and moral in nature. And, so long as both sides are forced to live under a single legal system, any "compromise" will take the shape of one side imposing its position on the other by force. In the end, the losing side will be taxed to support the regime that disregards its views and forces compliance with laws made by the winning side.
Those on the winning side, of course, don't see any problem here. What the minority thinks of as "oppression" is really — according to the winners — just "modernization," "progress," "decency," "common sense," or simply "the will of the majority." The fact that the enforcement of that will of the majority is founded on state violence is of little concern.
The Solution: Secession and Decentralization
Ludwig von Mises, who was himself a democrat, offered a solution to the problem of democratic majorities: self-determination through secession and decentralization.
For Mises, populations must not be forced perpetually into states where they will never be able to exercise self-determination due to the presence of a more powerful majority. On a practical level then, populations in regions, cities, and villages within existing states must be free to form their own states, join other states with friendlier majorities, or at least exercise greater self-government via decentralization.
Moreover, in order to accommodate the realities of constantly-changing populations, demographics, and cultures, borders and boundaries must change over time in order to minimize the number of people as members of minority populations with little to no say in national governments controlled by hostile majorities.
In Mises's vision, there is no perfect solution. There will always be some minority groups that are at odds with the ruling majority. But, by making states smaller, more numerous, and more diverse, communities and individuals stand a better chance of finding a state in which their values match up with the majority. Large unitary states, however, offer exactly the opposite: less choice, less diversity, and fewer changes to exercise self-determination.
The Option of Decentralized Confederations
Nor do all political jurisdictions need to be totally independent states. Mises himself advocated for the use of confederation as a solution to problems of cultural and linguistic minorities. Confederations might be formed for purposes of national defense and diplomacy, Mises noted. But in any country with a diverse population, in order to maintain internal peace, self-government of domestic affairs must be kept localized and so as to minimize the ability of a majority group to dominate a minority group.
Mises didn't invent this idea, of course. This sort of confederation was justified on similar grounds by the founders of the Swiss Confederation and the United States. Moreover, while not planned out ahead of time, the government of Austria-Hungary was by necessity decentralized to minimize internal conflict. In cases such as these, matters of language, religion, education, and even economic policy must be handled by the local majority, independent of any nationwide majorities. Or else democracy becomes little more than a tool for the winning coalition to bludgeon the losing coalition.
For decades, this worked at various times in the United States. On the matter of abortion, for instance, Americans agreed prior to Roe v Wade to allow abortion laws to be determined at a local level and be kept out of the hands of the national government. Public schools — and what was taught in them — were governed almost exclusively by local school boards and state governments. Even immigration policies and linguistic issues were decided by local majorities, and not by national ones. So long as these matters remained local matters they were irrelevant to national politics. Under these conditions, a victory for one party or another at the national level has little impact on the daily practice of one's religion, moral values, or schooling.
As localized democracy turns into mass democracy, however, majorities exercise increasing power over minority groups. Each election becomes a nationwide referendum on how the majority shall use its power to crush those who pose a threat to the prevailing value system. Even worse, when there is one nationwide "law of the land" there is no escape from its effects, save to relocate hundreds of miles away to a foreign land where the emigrant must learn a new language and a new way of life far from friends and family.
Needless to say, as this sort of democratic centralization increases, the stakes become higher and higher. The potential for violence becomes greater, and the disenfranchisement of minority groups becomes ever more palpable.
Mises understood well what the end game to this process is. It's political and social unrest — followed by political repression to "restore" order. War may even follow. For Mises, the need to guarantee localized self-determination was no mere intellectual exercise for political scientists. It was a matter essential to the preservation of peace and freedom. We would do well to take the matter as seriously as he did.
- 1. The law also bans "halal" slaughter, which is basically the Muslim version of kosher slaughter, and is extremely similar. Not surprisingly, the law's passage was motivated in part by anti-Muslim sentiment in Belgium, although antimale welfare was the most-often used justification for the legislation.
While Congress and the president fight over funding a border wall, they continue to ignore the coming economic tsunami caused by the approximately 22 trillion dollars (and rapidly increasing) federal debt. President Trump may not be troubled by the debt’s effect on the economy because he believes he will be out of office before it becomes a major problem. However, the crisis may come sooner than he, or most people in DC, expects.
The constituency for limited government, while growing, is still far outnumbered by those wanting government to provide economic and personal security. From lower-income Americans who rely on food stamps, public housing, and other government programs, to middle-class Americans who live in homes they could not afford without assistance from federal agencies like Fannies Mae and Freddie Mac, to college students reliant on government-subsidized student loans, to senior citizens reliant on Social Security and Medicare, to billionaire CEOs whose companies rely on bailouts, subsidies, laws and regulations written to benefit politically-powerful businesses, and government contracts, most Americans are reliant on at least one federal program. Many programs are designed to force individuals to accept government aid. For example, it is almost impossible for a senior citizen to obtain health insurance outside of Medicare.
The welfare state is fueled by the Federal Reserve’s easy money policies, which are also responsible for the boom-and-bust cycle that plagues our economy. The Federal Reserve’s policies do not just distort our economy, they also distort our values, as the Fed’s dollar depreciation causes individuals to forgo savings and hard work in favor of immediate gratification. This has helped create an explosion of business and individual debt. There has been a proliferation of bubbles, including in credit card debt, auto loans, and student loans. There is even a new housing bubble.
An economy built on fiat currency and public and private debt is unsustainable. Eventually the bubbles will burst. The most likely outcome will be the rejection of the dollar’s world reserve currency status due to government debt and the Federal Reserve’s monetization of debt. When the bubbles pop, the result will be an economic crisis that will likely dwarf the Great Depression.
The fall of the dollar and the accompanying economic downturn will make it impossible for the government to continue running up huge debts to finance a massive welfare-warfare state. Thus, Congress will be forced to raise taxes and cut benefits. Cowardly politicians will likely outsource the job of raising taxes and cutting benefits to the Federal Reserve. This will cause a dramatic increase in the most insidious of taxes: the inflation tax.
As the Federal Reserve erodes the value of the dollar, thus reducing the value of both earned paychecks and government-provided welfare benefits, a large number of Americans who believe they are entitled to economic security will react by engaging in acts of violence. Politicians will use this violence to further crack down on civil liberties. The resulting economic and civil unrest will further the growth of authoritarian political movements.
Fortunately, the liberty movement continues to grow. This movement counters the authoritarian lies with the truths of Austrian economics and the non-aggression principle. While the years ahead may be tough, if those of us who know the truth work hard to educate others, the cause of liberty can prevail.
For the third year in a row, Dan Mitchell offers his list of things he "Hopes and Fears" from the new year. Topics include Trump, Latin America, and the resolution of Brexit.
We’ll start with things I hope will happen in the coming year.
- Hard Brexit – There is a very strong long-run argument for the United Kingdom to have a full break with the European Union. Unfortunately, the political establishment in both London and Brussels is conspiring to keep that from happening. But the silver lining to that dark cloud is that the deal they put together is so awful that Parliament may vote no. Under current law, that hopefully will lead to a no-deal Brexit that gives the U.K. the freedom to become more free and prosperous.
- Supreme Court imposes limits of Washington’s power – I didn’t write about the fight over Brett Kavanaugh’s nomination to the Supreme Court because I don’t know if he believes in the limits on centralized power in Article 1, Section 8. But I’m semi-hopeful that his vote might make the difference in curtailing the power of the administrative state. And my fingers are crossed that he might vote with the Justices who want to restore the Constitution’s protection of economic liberty.
- Gridlock – Some people think gridlock is a bad thing, but it is explicitly what our Founders wanted when they created America’s separation-of-powers system. And if the alternative to gridlock is politicians agreeing to bad policy, I will cheer for stalemate and division with great gusto. I will be perfectly content if Trump and House Democrats spend the next two years fighting with each other.
- Maduro’s ouster – For the sake of the long-suffering people of Venezuela, I’m going to keep listing this item until it eventually happens.
- Limits on the executive branch’s power to impose protectionism – Trade laws give a lot of unilateral power to the president. Ideally, the law should be changed so that any protectionist policies proposed by an administration don’t go into effect unless also approved by Congress.
- Chilean-style reform in Brazil – Brazil recently elected a president who is viewed as the Trump of Latin America. But he might be the good kind of populist who uses his power to copy Chile’s hugely successful pro-market reforms.
Here are the things that worry me for 2019.
- Trump – The President does not believe in small government, so I’m concerned we may get the opposite of gridlock. In my nightmare scenario, I can see him rolling over to Democrat plans for a higher minimum wage, infrastructure pork, wage subsidies, and busting (again) the spending caps.
- Recession-induced statism – If there’s an economic downturn this year, then I fear we might get an Obama-style Keynesian spending orgyin addition to all the things I just mentioned.
- More protectionism – Until and unless there are limits on the president’s unilateral power, there is a very real dangers that Trump could do further damage to global trade. I’m particularly concerned that he might pull the U.S. our of the very useful World Trade Organization and/or impose very punitive tariffs on auto imports.
- Fake Brexit – This is the flip side of my hope for a hard Brexit. Regardless of the country, it’s not easy to prevail when big business and the political elite are lined up on the wrong side of an issue.
Sadly, I think my fears for 2019 are more likely than my hopes.
And I didn’t even mention some additional concerns, such as what happens if China’s economy suffers a significant downturn. I fear that is likely because there hasn’t been much progress on policy since the liberalization of the 1980s and 1990s.
Or the potential implications of anti-market populism in important European nations such as Germany, Sweden, and Italy.
Last but not least, we have a demographic sword of Damocles hovering over the neck of almost every nation.
That was a problem last year, it’s a bigger problem this year, and it will become an even-bigger problem in future years.
Words are funny. Strung together, they can have multiple meanings depending on the perceived context and reader’s viewpoint. I can make a statement with the intent to convey argument A, but the reader interprets my statement as not-A.
An example: Trotsky, in “What Next? Vital Question for the German Proletariat” (published as “How Mussolini Triumphed,” in Fascism: What it is and how to fight it, 1944), disparaged the Italian socialist, Turati, for saying, regarding the political battle with Mussolini’s fascist movement, “One must have manhood to be a coward.”
Given the context, it appears Turati spoke with a sense of irony, defending his political strategy. Trotsky subjected those same words to close reading in order to bolster his argument that the Italian socialist was retreating before the fascists. Turati claimed he had manhood, while Trotsky insinuated Turati was a coward.
During my high school years , “Jimmy Carter signed Proclamation (Registration Under the Military Selective Service Act) in response to the Soviet invasion of Afghanistan in the previous year of 1979, retroactively re-establishing the Selective Service registration requirement for all 18- to 26-year-old male citizens born on or after January t, 1960.” This made me eligible for the draft upon turning 18.
But who was I going to fight – who was I supposed to slaughter, burn, maim, etc.? In 1981, as my eighteenth birthday approached, it looked like a hot war in Nicaragua or elsewhere was possible – actually, likely. That meant I could have ended up in uniform shooting peasant farmers whose political worldview disagreed with the then-current policies of the US government – policies that changed with elections. Today’s enemy could be tomorrow’s ally.
Regardless of the side, I could have been required to do the bidding of those in power, to bloody my hands and taint my soul. As a quasi-radical, or what went for a quasi-radical in middle class, suburban Pittsburgh in the early 1980’s, I would have none of it.
In those days, I was a Deadhead – a fan of the rock group, the Grateful Dead. Each Sunday evening, a true public radio station (i.e. non-government funded) had a show that replayed recordings of the band’s concerts. Either before that show or after it (l no longer remember) was another show where antiwar activists discussed the evils of US interventions overseas – this is back when there was a strong antiwar left. That program greatly influenced me. And when there was talk about conscientious objection to war, I listened.
Initially, upon turning 18, I refused to register. However, based on information from the radio show, as well as consultations with my church minister and the antiwar mother of a friend, I learned my best chance to not being forced to point a gun – ironically, at the point of a government bayonet – was to register, but register as a conscientious objector.
However, I did not write this article as a guide to registering as a conscientious objector today – there are many resources on the internet. Instead, I wrote it to discuss the Turati-Trotsky rhetorical divide and answer the question of whether it takes manhood to be a coward. My article is also meant to encourage today’s youth to stand for peace and not war.
To answer the coward question in the context of this article, I revised Turati’s statement to read, “One must have manhood to object to war.” Sadly, that is a true statement, with an unwillingness to fight perceived by many as a sign of cowardice. This is especially so given the lack of any antiwar movement outside of libertarianism.
If the government institutes the draft and your number comes up, are you prepared? If you believe war is wrong, you need to begin documenting those beliefs well in advance of a draft. That documentation will be the primary evidence on your side as you stand before the draft board.
Nevertheless, if your number comes up, you will be called to “serve.” And you may not get that deferral. You may end up being forced to fight. lf you choose not to, you will likely end up in prison, which is not a coward’s path. Additionally, where you would have probably been placed in a non-frontline position (most soldiers are not even near the frontlines, never coming face to face with a person in a different uniform), your objection may put you on the line as an unarmed medic. Again, not a coward’s path.
Nevertheless, folks will call you a coward. But it also takes manhood to hold your ground in face of social pressure.
Luckily, there was no draft in the 1980’s and I never had to find out whether I would have held true to my ideals – whether I truly had manhood. But you, youth of today, may not be so lucky. Plan ahead. Political positions change. War may be nearer than thought. These words, spoken by former Prime Minister Henry Palmerstone in the British Parliament in 1848, are as true in the US today, “We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.”
And those interests may indeed lead to war.
Ask yourself whether you are willing to kill in an unjust war, whether decrees from the US government can provide sufficient moral justification for you to slaughter folks in Afghanistan or Nicaragua (in my day), or anywhere, and whether being called a coward is more frightening than selling your soul, so to speak.
For me the answer is no, but I am long past the draft age. What is your answer?
Think, consider, and act today!
Las Vegas survives on visitors and immigrants. The housing market depends upon those escaping California taxes and regulation with thousands in home equity to bid up home prices in Nevada, in general, and Las Vegas, specifically.
The actual numbers, provided by WolfeStreet.com, are; 47,500 Californians moved to Nevada in 2017, while 23,800 Nevadans moved to the golden state. That’s a net 23,700 inflow from California or roughly 2,000 per month last year.
Why this matters is, as builder Toll Brothers indicated in a recent earnings call,
“California has seen the biggest decline. Significant price appreciation over the past few years, fewer foreign buyers in certain communities, and the impact of rising interest rates all contributed to this slowdown.”
In California’s case, foreign migration is largely from Asia. These people come for jobs, particularly tech jobs, education, and opportunity, or to get themselves and some of their assets away from the long arm of their government.
And now the greatest fear of the housing industry in California is that this inflow from Asia is going to slow down. Even a small slowdown, with domestic out-migration as large as it is, could create massive demand problems for the housing market.
With California being Nevada’s primary feeder market, what happens in California won't stay there, but migrate to Nevada.
In fact, it already has. Eli Segall writes in the LVRJ ,
A total of 7,003 single-family houses were listed without offers at the end of November, up 1.2 percent from October and 54.3 percent from November 2017, according to a new report from the Greater Las Vegas Association of Realtors (emphasis added)
Andrew and Dennis Smith write in their latest Homebuilder’s Research Market Letter,
Resale listing inventory has sharply increased since August of this year. After sitting under two months worth of listings for roughly 17 straight months, our friends at Residential Resources are currently reporting 3.0 months worth of supply in the resale market. While historically a figure of six months has always been considered “normal,” some analysts now say we might need to put that number closer to four months with the efficiencies technology has injected into the home buying process. So, perhaps some might say that Southern Nevada is closer to a “normal” market than previously thought, at least in terms of supply.
Smith and Son also address the topic of builder cancellations,
This topic came back to mind a few weeks ago when we reported a cancellation rate of 29.5 percent across a sampling of 235 active new home communities. This was the highest weekly figure going back to at least 2015. A few days later a large scale builder told us they had their worst month for cancellations in memory, prompting a call from their corporate office.
Nevada went California blue in last month’s election. The Silver state has adopted the Golden state’s housing blues as well.
Jeff Deist recently published an editorial in the Washington Times challenging various proposals—popular among DC think tanks—to create monetary policy "rules" or targets based on statistical data related to inflation or GDP.
One hopes Mr. Powell sticks to his guns and his earlier commitment to tightening in the face of bad economic news. He certainly will face pressure, and not only from President Trump and Congress. Nearly the entire think-tank chorus sounds alike when it comes to monetary policy: The Brookings Institution, the American Enterprise Institute, the Heritage Foundation, the Mercatus Center, and the Cato Institute all offer up some version of rules-based policy.
Rules are meant to be broken. Rules-based proposals are relatively complex and not particularly suited to winning over Congress. It’s one thing to legislate a broad dual mandate for the Fed and hope for the best. It’s another to reach bipartisan agreement on the Taylor Rule and mandate its execution by law. Rules-based proposals are likely to become internalized Fed policies at most, not laws.
But as we’ve seen, policy rules tend to go out the window in times of economic crisis. Fed chairs do not serve in a vacuum; politics and current events often lay waste to the Fed’s vaunted independence. Only Paul Volcker and William McChesney Martin seemed to have resisted the bidding of unhappy presidents.
Monetary rules don’t truly get at the heart of things. Technical analysis and mathematical formulas only obscure the complexity and human fallibility of the real world. Mr. Powell and company are tasked with determining the “best” monetary policy for 320 million Americans with widely diverse interests.
The answer to our coming economic woes lies in recognizing that no monetary policy tinkering can replace the fundamental corrections that must take place: bankruptcy, liquidation and restructuring of firms to clear out bad debt; higher interest rates to encourage capital formation and discourage more malinvestment; an end to direct bailouts by Congress and roundabout bailouts by the Fed; and a serious program of spending and debt reduction in Washington that spares neither entitlements nor defense.
As the article makes clear, statistical or mathematical analysis of economic data cannot save Fed officials from their insurmountable task: determining the supply and price of money in a vast economy. As Ludwig von Mises explained more than a century ago in The Theory of Money and Credit, money is a marketplace phenomenon; as such it cannot be engineered through any amount of technical monetary or fiscal policies:
All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfills its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit.
We can't "reform" the Federal Reserve Bank any more than we can reform the FDA or IRS or TSA. Politics and the economic calculation problem cannot be overcome by tinkering.
When crafting Obamacare, the top priority for policy writers was not identifying the best ways for patients to receive the medical care they needed, but instead to identify ways to reduce the costs of care. Rather than working to undo the labyrinth of regulation and government programs that directly contribute to the high costs of American healthcare, the policy wonks within the Obama Administration worked to identify ways government could save money by reforming existing programs and changing the operations of hospitals.
One such initiative was the Hospital Readmissions Reduction Program, designed by the government agency in charge of Medicare and Medicaid. The purpose of the plan was simple, studies showed that 20% of Medicare patients discharged from hospitals ended up returning within 30 days – often for preventable causes. The aim of this new program was to incentivize hospitals to take proactive measures to treat such patients by penalizing them for high readmission rates.
The program was initially hailed as one of the most successful parts of the Affordable Care Act. Readmission rates went down, resulting in savings for the Medicare program. Some even called for expanding the program.
While the program did manage to save the government money, new studies now show that the savings may have contributed to thousands of preventable deaths.
In their words:
[A] deeper look at the Hospital Readmissions Reduction Program reveals a few troubling trends. First, since the policy has been in place, patients returning to a hospital are more likely to be cared for in emergency rooms and observation units. This has raised concern that some hospitals may be avoiding readmissions, even for patients who would benefit most from inpatient care.
Second, safety-net hospitals with limited resources have been disproportionately penalized by the program because they tend to care for more low-income patients who are at much higher risk of readmission. Financially penalizing these resource-poor hospitals may impede their ability to deliver good care.
Finally, and most concerning, there is growing evidence that while readmission rates are falling, death rates may be rising.... If we assume that the program was directly responsible for these increases in mortality and that prior trends would have continued unabated, the program may have resulted in 10,000 more deaths among patients with heart failure and pneumonia.
The authors of the article conclude by asking the question “Why are policies that profoundly influence patient care not rigorously studied before widespread rollout?”
The better one is, “why should government policy makers be influencing the general practices of hospitals in the first place?”
Unfortunately this is simply the latest example of the dangers of government managed healthcare in America. From government insurance plans with payment schedules, to medical coding, to top-down government programs waged in the name of “costs control,” Washington politicians have continued to place government bureaucrats and insurance companies between a patient and their medical professional.
In the words of Dr. Michel Accad:
Of all economic sectors, health care should clearly rank among those most dependent on local knowledge. After all, how to best treat a patient is decidedly circumscribed in the here and now. Yet, lured by the idea that medicine is a scientific enterprise, we persevere in our attempt to manage health care with the same methods that would fail to optimize the construction and distribution of even a simple pencil.
While this new study should give pause to all federal policymakers striving for even greater government control over healthcare, we know that it won’t. Already the drumbeats are growing for the Democratic-controlled House to force a vote on the misnamed Medicare for All bill championed by Bernie Sanders and his fellow democratic socialists.
They will continue to say their program will “save money.” Those familiar with history will know it will simply cost lives.