Socialist swallowing of truth

Capitalism has been as unmistakable a success as socialism has been a failure. Here is the part that's hard to swallow. It has been the Friedmans, Hayeks, and von Miseses who have maintained that capitalism would flourish and that socialism would develop incurable ailments. All three have regarded capitalism as the 'natural' system of free men; all have maintained that left to its own devices capitalism would achieve material growth more successfully than any other system. From [my samplings] I draw the following discomforting generalization: The farther to the right one looks, the more prescient has been the historical foresight; the farther to the left, the less so.

More here. Yes, its probably difficult to swallow ones own words, but great men acknowledge their failures, and earn my respect by doing so.

Skattmann (Icelandic)

In 1989, Icelanders had a Leftist government. Now, after the collapse of the international financial system, more and more Icelanders are beginning to long for another one. This video should deter at least some of them, I hope.

Who was right and who was wrong?

Peter Schiff is probably the hardest working preacher of sound economics in todays media. So what does he have to say about the future of the dollar? Look no further: http://www.youtube.com/watch?v=S8HRRQ6JkCw

Air pollution - the libertarian remedy

The remedy against air pollution is therefore crystal clear, and it has nothing to do with multibillion-dollar palliative government programs at the expense of the taxpayers which do not even meet the real issue. The remedy is simply for the courts to return to their function of defending person and property rights against invasion, and therefore to enjoin anyone from injecting pollutants into the air.

Quote taken from For A New Liberty - The Libertarian Manifesto, Chapter 13. The greens and leftists have NO solutions to the problems of pollution. Libertarians, on the other hand, do.

Solution suggestion: Do nothing!

When it was realized that many paper bank notes were just that, their values began to collapse, many to zero (the same amount of gold you could get for it), and the money supply contracted at a ferocious rate. From the fall of 1818 to the beginning of 1819, demand liabilities at the central bank fell from $22 million to $12 million (Dupre 2006, p. 272) and the total money supply fell about 28% (Rothbard 2007, p. 89).

Insolvent banks and overextended debtors alike collapsed, while prices, no longer pumped up by the bubble, raced downward to their equilibrium. As the money supply cleansed itself of the bad apples, time and effort had to be paid so that the flow of funds could adjust back to their best uses, following prices as their guideposts. It was a massive, countrywide downturn, and introduced a slowly industrializing America to a new experience — mass unemployment.

Compared to now however, the state and federal politicians did basically nothing to "help" the economy recover from the Panic of 1819, yet by 1821 the economy had begun to get back on its feet, which must seem a stunning outcome to anyone burdened with a degree in economics.

The quote above is taken from this article about the recession in USA in 1819. The political policy measures taken in this recession compared to the "action filled" recessions of 1929 and today's recession give a very strong indication of what politicians should do today to get us out of the recession: Nothing.

Well, repeal some laws, e.g. tender laws, but basically whatever it takes to fiddle as little as possible with the economy. A lesson that points the way forward? Yes. Lesson learned? No.

There Will Be (Hyper)Inflation

Commercial banks can be expected to put their excess reserves to use, because base-money balances do not yield any interest: banks need to generate income to be in a position to pay interest on their liabilities (demand, time and savings deposits, and debentures).

Extending loans is one option. However, in an economic environment of financially overstretched borrowers, banks might be hesitant to increase their loan exposure vis-à-vis households and firms. In fact, it might be increasingly difficult for banks to do so given that equity capital has become increasingly scarce and costly.

So commercial banks may wish to monetize government debt, as the latter does not require putting equity capital to use. The government then spends the additionally created money stock on politically expedient projects (unemployment benefits, infrastructure, defense, etc.), and the money stock in the hands of households and firms rises.

If, however, commercial banks decide to refrain from additional lending, and even call in loans falling due, the government may decide — as another drastic, but logically consequential step of interventionism — to nationalize the banking industry (or at least a great part of it). By doing so, it can make the banks increase the credit and money supply.

Alternatively, the central bank could print additional money, distributing it to households and firms as a transfer payment.

I can not recommend this article strong enough. It is a must read in today's monetary climate.