Power & Market

Cantillon Effects, Business Cycles and Market Bubbles

03/17/2022Leonel Regalado

Richard Cantillon was probably one of the first people to actually write about economic theory, and his findings are still relevant today. We’ll focus on one specific topic: the non-neutrality of money, “Cantillon Effect”. What is this? Mark Thornton brilliantly explains it in a recent article:

“The general form of a Cantillon effect is that there is increased money coming into an economy from somewhere. The first recipients benefit. They spend it according to their preferences, and this causes certain prices to go up. The sellers of those goods benefit from the new money, while others who only face higher prices are hurt.”

So basically, when prices go up in an economy, they don’t go up at the same time, or in the same proportion. Several cases have been made to indicate how CPI is problematic because of this, but that’s not our main point. In our modern society, this expansion of money comes from Central Banks, which expand the money supply either by printing money or by adding zeros to the accounts that commercial banks and entities have with them. This new money must enter the economy somewhere: the banking system. For years and years central banks have been expanding the money supply excessively, injecting money not only into the banking system, but the financial system as a whole.

This monetary expansion that goes right into the financial system tends to make the price of whatever asset most firms are investing in go up. A clear example are real estate prices right before the Great Recession: most financial firms were investing in mortgage-backed securities, which made getting a mortgage attractive, ultimately making prices go up. Cantillon effects may take months, or years to have their full effect: money can be poured into one market, without inflationary consequences in the rest of the economy for years.

Now, let’s talk about market bubbles and how they can delay these Cantillon Effects: let’s suppose the newly created money starts going into a stock market, making prices of certain stocks go up. This makes the prospect of investing in these stocks better, so as prices start going up, more people will be investing in these stocks. This delays the change of prices in the rest of the economy because more people are spending their money on these assets than buying any other goods.

It's not a surprise that most of the recessions in the last hundred years have come from these so-called bubbles. For Austrian Economists this is not a surprise, as credit expansion makes certain projects look profitable (which weren’t profitable before the credit expansion), people invest in these projects, leading to a boom, and then a bust when credit expansion halts. The main difference is that as time has passed, our financial markets have become deeper, and Cantillon Effects are delayed further and further as the new money very slowly exits the financial system into the consumer goods markets. But they can’t be delayed forever, which is why now, after a gigantic monetary expansion in the previous years, we’re seeing 21st century record-levels of inflation.

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Commodities Rising

03/07/2022Robert Aro

It must be a boom time for commodity traders. By any measure, whether in the news, on TV, or in stores, prices are increasing. Here’s some headlines, starting with Reuters on Sunday:

U.S. gasoline prices soar to highest since 2008 on Russia conflict -AAA

And today:

London nickel prices soared as much as 30.7% on Monday, their biggest daily percentage gain on record, as supply disruption fears gripped markets amid an escalating Russia-Ukraine conflict…

From the BBC also on Monday:

Oil jumped to $139 a barrel at one point, the highest level for almost 14 years…

And as the saying goes, make hay while the sun is shinning, certainly applies to wheat prices, per CNBC last week:

Wheat prices trade ‘limit up’ again, hit highest in nearly 14 years as Russia-Ukraine conflict continues

Imagine, prices went up so high in a day, that the regulator had to step in! As explained:

For a second consecutive day, wheat was at “limit up,” meaning it reached the highest amount the price of a commodity is allowed to increase in a single day.

These are just a few headlines, but it seems like everything is going up in price these days.

We’ve been told about stubbornly low (price) inflation for a few decades, often from central bankers who wanted the cost of living to increase for everyone. The Fed is notorious for claiming they control prices, which is true to a high degree because they can always debase the US dollar. But the Fed does not control all facets of prices.

In this instance of commodity prices, no one can say how much is attributed to Russia, US monetary policies, supply/demand, or countless other factors that determine prices.

Also keep in mind commodity prices didn’t just increase the past few weeks. There are many forces that brought commodities to new all-time highs, already in the works long before Russia ever crossed the border.

As for Powell, he appears committed to raising rates and reducing the balance sheet. He provided testimony to the House of US Representatives on Thursday, saying:

Reducing our balance sheet will commence after the process of raising interest rates has begun, and will proceed in a predictable manner primarily through adjustments to reinvestments.

So far, he’s still claiming everything is according to plan, speaking of the hardship due to price increases:

We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation.

But with an annual salary of around $200k and an estimated net worth between $20-55 million, is it fair to ask just how much of an understanding of financial hardships he can possibly have?

If it helps, he remains hopeful that inflation will subside this year:

We continue to expect inflation to decline over the course of the year as supply constraints ease and demand moderates…

Until then, we can only wonder if prices have more to climb, or if Powell’s call turns out right.

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Cut a Check to Treasury

01/25/2022Robert Aro

How many times has a famous billionaire, or politician, praised the virtues of raising taxes? Warren Buffet claims to have a lower tax rate than his secretary. CNN shares the anecdote dating back from 2013. In 2022, more ultra wealthy are asking governments of the world to unilaterally raise tax rates. Reuters broke news from the most recent Davos, Switzerland summit:

A group of more than 100 billionaires and millionaires has issued a plea to political and business leaders convening virtually for the World Economic Forum: make us pay more tax.

Seems strange. If 100 billionaires and millionaires actually believed that paying more taxes was a good idea, why don’t they lead by example and donate billions of dollars to their respective governments?

For an immediate impact, they could have written checks to their government’s treasury department to pay the debt directly. They call themselves the Patriotic Millionaires, and the sheer absurdity of their schemes should not be lost on anyone.

It seems the Patriots proved successful in some taxation areas, taking credit as they convinced:

…more than 130 countries to agree a deal to ensure big companies pay a global minimum tax rate of 15%...

More ideas out of Davos:

…a progressive wealth tax starting at 2% for those with more than $5 million and rising to 5% for billionaires could raise $2.52 trillion, enough globally to lift 2.3 billion people out of poverty and guarantee healthcare and social protection for individuals living in lower income countries.

It’s not the idea of lifting people out of poverty with which we take offence. Rather, their proposed poverty alleviation method is the problem. Specifically because it won’t work and will only lead to more poverty and capital destruction. The administrative tax, level of corruption, and dollars that will go missing are miniscule to the fact that we cannot shower dollars across the planet and expect poverty to disappear; there is a supply issue here that is completely overlooked.

Yet here we are, the ultra wealthy are asking for more involuntary intervention by way of public address, when they have the means to make their desired changes overnight.

Maybe they’re not aware but if they really cared they could make billionaire dollar contributions to pay down the nearly $30 trillion US debt. Courtesy the TreasuryDirect:

You can write a check payable to the Bureau of the Fiscal Service, and, in the memo section, notate that it's a gift to reduce the debt held by the public. Mail your check to:

Attn Dept G
Bureau of the Fiscal Service
P. O. Box 2188
Parkersburg, WV 26106-2188

Just think about how many people, whether rich or poor, talk about the need for taxes to somehow make society better. If tax is a public good that people value, then one would think writing checks to the treasury would be a popular task.

The data is available. Last year in 2021 a total of $1,268,950.35 was voluntarily sent to the U.S. Treasury. It could be that on the richest nation on Earth, home to countless billionaires, millionaires, and a large middle class compared to the rest of the world, not many people want to voluntarily pay taxes.

Or, like a mass vaccination program, it’s only a good idea if everyone is forced to comply?

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Coincidence. Coordination. Causation.

01/03/2022Robert Aro

Take a look at the Federal Funds Effective Rate chart (below) to see if you find a recurring pattern:

Federal Funds Effective Rate

Notice the ten official recessions (grey shaded areas) since 1955. From a purely visual perspective, it seems successive interest rate increases, leading to a rate spike, normally precede a recession. If true, how can this be explained?

It could be a coincidence. Even if rate hikes generally come before recessions, it could be nothing more than chance or fluke. Rates either increase, decrease, or stay the same. However, it would be quite the ongoing coincidence if there were no relationship between interest rates and recessions. It would mean interest rates don’t play a role in the boom/bust cycle and would also downplay the role the Fed has in influencing the economy.

If not a coincidence, it could be attributed to the Fed’s coordinated efforts to use their tools and expert forecasting abilities to anticipate the onset of economic downturn. Should this be true, the Federal Reserve executes its policies with nearly pin-point precision, increasing rates just before a recession. According to the chart, for the last 70 years they’ve been successfully predicting recessions, and have not been a contributing factor to them.

This would be absolutely incredible! It would mean the Fed’s rate hike to over 5% in 2006 to 2007 was made in anticipation of the recession and housing crisis that followed, while the Fed’s raise to over 2% during 2018 to 2019 was anticipatory of the 2020 recession attributed to COVID.

If central bank coordination sounds highly improbable, if not completely impossible, then causation could be the third explanation. Instead of inferring the Fed raises rates because they see trouble on the horizon, it could be said that the Fed’s rate increases help cause recessions. To believe the Fed saw a housing crisis looming is one thing, but to say they saw COVID coming as far back as 2018 is completely absurd. Of the three explanations mentioned, the idea that the Fed has been culpable in causing recessions would most closely align to Austrian Business Cycle Theory, which attributes credit expansion creating artificially low rates as the cause of the boom, with their reversals as the cause of the bust.

Expanding on changes to interest rates, consider the Fed’s holding of US Treasuries during the last two recessions. Notice how the reduction in treasuries began in 2018, and prior to that at the start of 2008, both corresponding to periods of recession.

US Treasury Securities

Use of the Fed’s charts is not an exact science, as the term recession for example is based on arbitrary analysis done by statisticians. But the point is to illustrate the various interventions and how these lead to economic booms and busts. And while the Fed is not the sole contributing factor since commercial bank’s play a significant role in credit expansion, the Fed’s intervention is easy to highlight as it’s been catalogued for a very long time.

If there was no economic impact from changing rates or the money supply then there would be no reason to change either of them. The problem is that some may rationalize that the Fed intervenes to help the economy, miraculously knowing when disaster strikes before everyone else, versus the idea that it’s the Fed’s intervention causing stock market and housing bubbles, and the bursting of those bubbles.

When the next recession hits or when the next bubble pops, it will be interesting to listen to the narrative which follows. Over a decade ago, evil bankers caused a housing crash, while the last recession was due to COVID. The next economic downturn may be due to another COVID outbreak, but it could be due to countless other narratives. The only certainty is that the Fed will have an explanation for it, never acknowledging the detrimental effect of their manipulation of interest rates or changes to the money supply.

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Clueless Journalists Report that the US Life Expectancy Is at Lowest Level "Since World War II"

12/27/2021Ryan McMaken

People who know anything at all about the demographic history of the US know that the life expectancy at birth in the United States was significantly lower in the 1940s than it is today.  In fact, this is somewhat common knowledge because most people know—or at least suspect—that if you got cancer or had a heart attack or stroke in the 1940s, you would probably die a short time later. Many also know that child mortality was also higher in the mid-twentieth century.

In fact, the life expectancy, according to the CDC, was 65.9 years in 1945, the year World War II ended. In 2020, life expectancy was 77 years. 

But you don't exactly have to read textbooks on this sort of thing to have a sense of it. Just talk to your grannie or abuelita who might mention her siblings who died as young children.  Yet this sort of common sense is apparently beyond the abilities or skill set of the journalists at The Daily Caller who recently ran a headline stating: "US Life Expectancy Drops To Lowest Level Since Second World War." And lest we think it was just the editor who hurriedly wrote a bad headline, the same mistake is repeated in the first paragraph which reads: 

The U.S. life expectancy dropped to its lowest level since World War II in 2020, multiple sources reported.

This "fact" is so obviously wrong it's a wonder that an editor let it go out the door. With a life expectancy of 77 years in 2020, that means US life expectancy did not come within even ten years of modern life expectancy until 1948. In 1948, the life expectancy at birth was 67.2 years. Moreover, this metric didn't crack 70 years until 1961. 

Here's what the actual life expectancy at birth has been historically in the United States: 

And here's how much life expectancy at birth has changed over the last 20 years. It's not much at all thanks to continued thanks continued issues of obesity, drug addiction, diabetes, and suicide:

But perhaps in the age of covid, reporters are willing to believe pretty much anything so long as it makes covid look like the bubonic plague of the 1340s. Indeed, had life expectancy actually fallen to WWII levels in 2020, that would have meant a decline of nearly ten years which would have been the worst since the flu of 1918, when life expectancy fell by 11 years. From 2019 to 2020, the decline was 1.8 years. 

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Covid and Life Expectancy

12/17/2021Mark Avis

How dangerous is Covid? Two recent articles (see here and here) on mises.org suggest that what we are witnessing is hysteria. Both articles examined age-standardized mortality statistics for the US and UK respectively. In the UK, the 2020 mortality rate was at a similar level to 2008, and for the US the mortality rate was at around the same rate as 2004. The obvious question to then ask is whether 2004 in the US or 2008 in the UK saw panic and extreme authoritarian measures to protect public health. We know the answer; none of this took place.

A recent study provides further evidence that the anti-Covid measures that are being taken by governments around the world are grossly disproportionate and are the result of hysteria in which all sense of proportion has been abandoned.1 The study in question examines the impact of Covid on life expectancy in 29 countries (Western Europe, US, Chile). As the authors describe, it is a measure of life expectancy from birth and they describe it as providing “a timely description of current mortality patterns.” The authors note that most countries in the West have seen consistent gains in life expectancy, with the UK and US sitting as outliers with barely any recent improvements. The following provides the big picture of their results:

“To contextualize, it took on average 5.6 years for these countries to achieve a 1-year increase in life expectancy recently: progress wiped out over the course of 2020 by COVID-19. For Western European countries such as Spain, England & Wales, Italy and Belgium, among others, the last time such large magnitudes of losses were observed in a single year was during World War II.”

Note here the reference to World War II, which I will return to. The actual outcomes of change in life expectancy varied from country to country. Denmark and Norway saw no drop in life expectancy, but the “biggest losses of 1.5 years or more of life expectancy at birth were documented among males in the USA, Lithuania, Bulgaria and Poland, and females in the USA and Spain.” As would be expected from what is already well-known about Covid, the majority of the reduction in life expectancy came from a higher mortality rate in the elderly population. Note that the US also had poor age-standardized mortality rates in comparison with the UK (see above) and also does poorly in the research on life expectancy.*

The authors provide a perspective for their findings by highlighting research on the 2014-15 influenza season.2 Again, there were different outcomes for different countries, but influenza reduced years of life expectancy, with the following some of the more severely impacted (given as loss of years of life expectancy): Italy 0.55, Germany 0.36, Belgium 0.36, Finland 0.34, UK 0.26 and the US 0.13. Some countries were barely impacted at all, with Denmark losing just 0.02 and Norway 0.05, reflecting similarly small impacts for influenza.

To give perspective to their perspective, 2014-15 was a bad flu season, but far from being the worst.3 There was the Spanish flu that followed World War I, but also serious flu pandemics in 1957, 1968, and 1977. The quote below, taken from a review of influenza pandemics, gives a sense of the potential severity of influenza4:

Similar to the Asian flu, the Hong Kong flu is estimated to have caused between 500,000 and two million deaths worldwide. Mortality rates were low, which may have been due to pre-existing immunity to the neuraminidase antigen (N2), the same as the previously circulating influenza strain. Still, during the two pandemic waves, the United States experienced a 47% increase in mortality related to pneumonia and influenza and a 6.6% increase in all-cause mortality; in Canada, these figures were somewhat lower at 43% and 3.6%, respectively. However, the pandemic burden was higher in other countries, with increases in excess all-cause mortality of 9.1% (Australia), 11.9% (France), and 13.0% (England and Wales) over the previous year’s baseline. These differences indicate the geographic heterogeneity of pandemic impact.

So the perspective of the 2014-15 flu is only based on the most recent bad flu season and thus provides a very, very limited perspective. As it is, in the worst case for the 2014-15 flu season, Italy lost just over half a year of life expectancy. Other countries lost a third. This is compared with the loss of about a year overall of life expectancy in the Covid pandemic. And 2014-15 was far from the worst flu season that the world has experienced.

With the perspective on the perspective now provided, how bad was the 2020 Covid pandemic? The first point to note is that the authors frame the pandemic as catastrophic throughout their paper, exemplified by the reference to World War II. However, their research suggests that their framing is another example of Covid hysteria. As they observe, the pandemic has, on average, wiped out a one-year increase in life expectancy, with an average of 5.6 years to achieve the one-year increase. Depending on the country, this means for most countries, life expectancy has dropped back to levels seen in the last decade (i.e. life expectancy for one country may have dropped back to 2013, another to 2012, and another to 2018. In the worst cases, their figures will show life expectancy dropping back to levels of the 2000s). However, in all cases, there was no extreme public health panic during these prior times, no lockdowns, or death count tickers on the nightly news.

Not even in Italy in 2014-15 when the flu season saw the loss of over half a year of life expectancy.

The figures for age-standardized mortality and life expectancy point in the same direction; mortality rates have worsened but not by any amount that can justify what is taking place. The response to Covid is entirely disproportionate and deserves to be called the Covid hysteria. The harms that have flowed from the Covid hysteria are so broad-ranging that they are nearly impossible to comprehend. The economic shock to the world is still playing out. The cost in terms of personal freedom and the expansion of government power is both extraordinary and may be hard to reverse. It may take years to see the full health costs of lockdowns (the 2021 statistics will likely start to capture some of these). There are also the harms that are often personal and which will never be quantified. The harms and costs flowing from the response to Covid will be with us all long after the panic is forgotten.

All of this harm is taking place based on hysteria. And the harms are ongoing and the costs continue to accrue.

Note:  The study on life expectancy did not, it appears, control for demographic change over the period studied.

  • 1. Aburto, J. M., Schöley, J., Kashnitsky, I., Zhang, L., Rahal, C., Missov, T. I., . . . Kashyap, R. (2021). Quantifying impacts of the COVID-19 pandemic through life-expectancy losses: a population-level study of 29 countries. International journal of epidemiology: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8500096/
  • 2. Ho, J. Y., & Hendi, A. S. (2018). Recent trends in life expectancy across high income countries: retrospective observational study. BMJ, 362: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6092679/
  • 3. Palese, P. (2004). Influenza: old and new threats. Nature medicine, 10(12), S82-S87: https://www.nature.com/articles/nm1141
  • 4. Saunders-Hastings, P. R., & Krewski, D. (2016). Reviewing the History of Pandemic Influenza: Understanding Patterns of Emergence and Transmission. Pathogens, 5(4), 66: https://www.mdpi.com/2076-0817/5/4/66
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Congress Just Abandoned Its Plan to Draft Women

12/08/2021Ryan McMaken

According to USA Today

The House passed the National Defense Authorization Acton Tuesday evening after stripping the draft amendment from the legislation. It would have required women ages 18 to 25 to register for the Selective Service, as men do under current law. 

The amendment to include women in the draft had robust bipartisan support in both the House and Senate, but was stripped out in the final days of closed-door negotiations amid fears it could imperil passage of the underlying legislation, according to an aide familiar with the negotiations who spoke to USA TODAY on the condition of anonymity. 

This is a good thing, but it doesn't go nearly far enough. Congress should be abolishing the Selective Service altogether, not debating whether or not to expand it. The selective service, of course, only exists to facilitate the US government's use of forced labor through a draft should the federal government decide that some "emergency" warrants the abolition of the most fundamental basic liberties. As I noted earlier this year:

“Conscription is slavery,” Murray Rothbard wrote in 1973, and while temporary conscription is obviously much less bad—assuming one outlives the term of conscription—than many other forms of slavery, conscription is nevertheless a nearly 100 percent tax on the production of one’s mind and body. If one attempts to escape his confinement in his open-air military jail, he faces imprisonment or even execution in many cases….

Conscription remains popular among states because it is an easy way to directly extract resources from the population. Just as regular taxes partially extract the savings, productivity, and labor of the general population, conscription extracts virtually all of the labor and effort of the conscripts.

For more on this here at mises.org, see

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Cuba’s Inflation Rate Runs Red Hot!

11/09/2021Robert Aro

Who should take the blame (or credit) for Cuba’s 6,900% inflation rate?

Before the answer is given, consider the history of fiat currencies, from Roman times to Kublai Khan, pre-war Germany, to recent popular hyperinflations such as Venezuela and Zimbabwe. The common denominator is always the same. In the case of hyperinflation, it is always the result of government intervention. Despite the history of currency debasement and collapse brought on through increases to the money supply, countries across the world still struggle with learning from the past.

According to Cuban news sources:

The Cuban government recognized that the economic reform known as Task of Reorganization has caused inflation of 60% in retail prices in shops and 6,900% in the informal market…

Pay attention whenever hyperinflation is mentioned in the news. Often the headline will discuss outcomes of the currency debasement, such as shortages being the cause, or other backwards ideas such as an inexplicable demand for all goods and services.

Earlier this year Reuters news inadvertently noted the beginning of Cuba’s problems, saying:

Many goods are simply no longer sold in peso shops despite billions more pesos now being in circulation.

There exists a lingering idea that the government's failure is due to the lack of printing enough currency which causes supply shortages and hyperinflation, rather than the excessive printing as the source.

Cuba’s reorganization, which began in January included:

…an increase in prices, wages and the reduction of subsidies, and a consequent devaluation of the Cuban peso (CUP)…

Along with a minimum wage increase “by around 450%,” the heart of a hyperinflation is always the same; money printing followed by a realization that the government will not abate in its inflationary stance, causing the masses to want to buy anything perceived of value rather than hold their local currency.

Few events cause a unilateral increase in the demand for all goods and services simultaneously. Yet when billions of pesos suddenly come into existence, everything except the increase in pesos is considered the culprit.

True, US imposed sanctions hurt Cuba's economy, since their trading is restricted. However, Cuba’s government could have mitigated this in many ways a long time ago. Making Cuba a free market economy and/or not debasing the nation’s currency would have done wonders for the island nation.

The world over, no one wants to stop money creation. All the while, everyone is surprised when currencies collapse. Consider what the Havana Times suggests:

In addition to all of this, US sanctions increased and the embargo became stricter, which has been hindering financial operations since 1962, and makes it impossible for Cuba to access credit from international financial bodies.

Why any nation would want access to credit from “international financial bodies” remains a mystery. The number of times a nation has defaulted on a loan from the International Monetary Fund (IMF) should be legend by now. A “new loan” from the IMF would increase Cuba’s money supply, add to their debt burden and carry the propensity to be defaulted, which could lead to austerity measures.

When the choice is between printing a local currency into oblivion, borrowing from clandestine supranational organizations or to refrain from doing either are compared, only one outcome emerges as a clear winner. A nation should always stop printing money because money printing has never led to a favorable outcome for any nation. Why the clearest path to success is always the path not taken remains anyone’s guess.

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Canada’s 2021 Election: Trudeau’s Miscalculation

10/11/2021Lee Friday

Justin Trudeau was widely criticized for calling an election during a pandemic, but he thought that his oppressive covid policies would play well with the voting public, which would then reward his minority Liberal government with enough additional seats to give them majority status. He was wrong. The Liberals won the election, but they did not achieve majority status. So much for reading the minds of the voters.

The Conservative (in name only) Party repeated their 2019 performance by winning the popular vote and finishing in second place. Which brings us to the surprise of the election: the People’s Party of Canada (PPC).

In 2017, Maxime Bernier narrowly lost the Conservative Party leadership convention—or it was stolen from him—because of his opposition to Canada’s socialistic supply management system that forces consumers to pay artificially high prices for eggs, dairy, and poultry products. In 2018, Bernier left the Conservative Party and founded the PPC because of his dissatisfaction with the Conservative Party platform, which he described as “intellectually and morally corrupt.”

In the 2019 election, the PPC, which has a distinct libertarian flavor, received 1.6 percent of the popular vote. In contrast, it took the Green Party twenty years and six elections to garner 1.6 percent of the popular vote. In the September 20, 2021, election, the PPC did not win any seats, but they increased their share of the popular vote to 5 percent (the Greens got 2.3 percent), which is a remarkable and unexpected achievement for a party that is barely three years old.

The PPC distinguished themselves with a platform that stood in stark contrast to the platforms of the Liberals and Conservatives. More importantly for this particular election, it is likely that the PPC’s opposition to authoritarian pandemic policies was the primary catalyst for their impressive performance.

So Trudeau’s decision to call an election backfired on him because he did not get the majority control that he wanted. But it also backfired on him because it gave many people an opportunity to express their dissatisfaction with his authoritarian pandemic policies by voting for the PPC. Thus, his failed attempt to secure a majority government has strengthened the profile of the PPC. Bernier should send Trudeau a thank-you note.

None of this is to suggest that the PPC is a white knight for freedom-loving Canadians. When it comes to politics, a healthy dose of skepticism is always advisable. Political parties come and go, and are often co-opted. Would Bernier keep his promises if he won an election? We don’t know.

What we do know is that Canada’s three main national political parties (Liberals, Conservatives, and the New Democratic Party [NDP]), all leftist, are concerned that the three-year-old PPC increased its share of the popular vote by more than threefold in just twenty-three months. They should be concerned. A rising PPC on the right may not bode well for Canada’s bipartisan leftist politics, because Bernier, who is not a rookie, is well versed in libertarianism.

In a recent interview with Jordan Peterson, Bernier provided a few examples of his libertarian leanings. He decries the woke culture. He opposes business subsidies and favors free market incentives. He acknowledges the contributions of Mises, Rothbard, and Hayek as he blames the central bank for the business cycle. He wants to reduce the Bank of Canada’s inflation target from 2 percent to 0 percent. He understands that consumers’ purchasing power is reduced by the inflation tax. Thus, he opposes fiat currency, and supports the gold standard. He likes cryptocurrency because he favors money competition. He favors radical decentralization at the federal level, thereby increasing the level of provincial autonomy, which brings government closer to the people in the various regions. This includes healthcare, where he wants to eliminate the federal government’s role.

Trudeau gift wrapped a higher public profile to the PPC, but it remains to be seen whether Bernier seizes this opportunity to explain the PPC’s libertarian ideas to many more Canadians before Trudeau—or his replacement—announces the next election. More to the point, if he wins an election, will Bernier stay true to his libertarian principles, or will his name be added to Canada’s long list of political sellouts? Only time will tell.

However, the Liberals and Conservatives—for whom integrity has no meaning—are worried that Bernier will actually stick to his principles, and use his extensive libertarian knowledge to explain to Canadians the myriad ways in which big brother government is detrimental to their well-being.

We don’t know if the PPC is the real deal, but for now, politicians on the left are rightfully nervous. At the very least, after a year and a half of pandemic lockdowns and restrictions, a healthy dose of entertainment is a welcome relief—and it’s always fun to watch politicians squirm.

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Change for a Trillion

10/07/2021Robert Aro

Could a $1 trillion platinum coin be the answer to our problems? Or is this just another bad idea on the never-ending list of bad economic takes?

If history is any indication of the past, then everyone knows how the debt ceiling debate ends. As the deadline approaches, government officials will come together, extend the ceiling, more money will be printed, and, as we’ve been told, calamity will be averted.

A trillion-dollar coin sounds absurd from the outset. But consider its implications first. Pass judgement after. ABC News explains:

Legislation enacted in 2001 allows the treasury to mint platinum coins of any value without congressional approval. Under that law, the coin's value could be anything, but it would have to be platinum, not gold or silver, nickel, bronze or copper, which are under Congress' control.

Per the Constitution, only Congress has the power to “coin money.” But should this money be backed by a platinum coin, it allows the president to bypass Congress. As for the Federal Reserve, they are not mentioned in the Constitution … 

Giving money creation powers to a president can be dangerous; however, the law can be amended to include congressional approval. And there’s a more important aspect here:

President Joe Biden could order Treasury Secretary Janet Yellen to have a coin with the value of $1 trillion be minted and deposited into the Treasury.

Money creation with an ironic twist may bode well for the free market. But think about the central bankers: Where does this leave the Federal Reserve? Have they not been cut out as the intermediary?

Understand, the Federal Reserve does not physically print money. That is the job of the US Treasury. Unintentionally, the very essence of the trillion-dollar coin calls into question the role of the Federal Reserve and should make people wonder why their bills are marked Federal Reserve Notes. Through bypassing the Fed and existing without debt creation, the trillion-dollar coin has the propensity to make the Fed obsolete.

Choose one of the two (simplified) scenarios, where $1 trillion is being physically printed:

The Treasury mints a platinum coin granting them the authority to print $1 trillion and deposit it in the USA’s bank account; this is money creation without a debt burden and without the Fed.

Or we maintain the status quo. The Treasury prints $1 trillion and gives it to the Federal Reserve. The Fed literally does nothing except send the money back to the Treasury, which then deposits it in the USA’s bank account; same money creation as the previous scenario, except now the money is owned by the Fed.

The difference is clear, as the Fed provides no value-added activity in the money creation process. Under free enterprise, there is no market for the Federal Reserve. It only exists due to a government-granted monopoly on the US dollar.

It leads us to consider whether money should even carry an unpayable debt. Gold, or bitcoin for example, carry no debt. But when the Fed is involved, our money is debt based and the benefit to society can scarcely be defended.

Watch carefully to see what inflationists and the debt-doesn’t-matter crowd have to say. Janet Yellen exposes many errors:

The platinum coin is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt, it compromises the independence of the Fed conflating monetary and fiscal policy, and instead of showing that Congress and the administration can be trusted to pay, to pay the country’s bills, it really does the opposite.

Someone should inform Yellen that the government's deficits are already covered by money printing. While Fed independence is a red herring, monetary/fiscal policy was compromised long ago.

More analysis is required. But with absolute certainty, $1 trillion will be printed by the Treasury in the not-too-distant future. This process does not require the Federal Reserve. The question for now is whether or not we want the Fed to get their cut. Or should we strive to live in a country not shackled down by central banking?

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