Tuesday, December 20, 2016


Re: Free Money for the Jobless

Dear Sirs:

Sunday, December 4, 2016

The Chimera of Mandating Health and Safety Standards
























Wednesday, November 30, 2016

Germans favor self-destructive policy

From today's Open Europe news summary:

Majority of Germans want Merkel to take tough stance in Brexit negotiations



Tuesday, October 25, 2016

Raising taxes is "tax harmonization"; lowering taxes is "Brutal Brexit"

From today's Open Europe news summary:

European Commission plans corporate tax rule harmonisation

The European Commission will announce plans today to harmonise corporation tax policy across the EU. The plans would not mandate a single tax rate across Europe, but would instead seek to “eliminate the mismatches and loopholes between national tax systems, which companies can currently exploit,” as well as applying only to firms with an annual turnover above €750 million. An opinion piece for Expansión describes mooted reductions in UK corporation tax as ‘Brutal Brexit.’

"Doublespeak" is alive and well at the European Commission.

Sunday, October 16, 2016

The Global Financial Consequences of US Foreign Policy

Andy Duncan of Finlingo.com interviewed me last week from London.

Click on the link below for the 32 minute interview.

The Global Financial Consequences of US Foreign Policy

Friday, September 30, 2016

Should the Fed Raise Interest Rates

For some time now the Fed has been hinting that it will moderate its interventions--monetizing government debt by printing money to buy government bonds and now quantitative easing by printing money to buy corporate bonds--in order to drive down the interest rate to unprecedented low levels. The Keynesian theory behind these interventions is that lower interest rates will spur lending, which in turn will spur spending. In the Keynesian mindset spending is all important--not saving, not being frugal, not living within one's own means--no, spend, spend, spend. The Keynesians running all the world's banks firmly believe that it is their duty that spending not diminish one cent, even if this means going massively into debt. Keynes himself famously said that government should borrow money to pay people to dig holes in the ground and then pay them again to fill them back up.


To Austrian school economist like myself, this is childish, shallow, and ultimately dangerous thinking. Austrians understand that economic prosperity depends first of all upon savings, not spending. Savings is funneled by the capital markets into productive, wealth generating enterprises. Gratuitous spending is simply consumption. Now, there is nothing wrong with consumption...as long as one has actually produced something to be consumed. Printed money is not the same as capital accumulation. Or, as Austrian school economist Frank Shostak explains, goods and services are the "means" of exchange and money is merely the "medium" of exchange. Expanding the means of exchange through increased production--which requires increased capital, which itself requires increased savings--is a hallmark of a prosperous society. Increasing the medium of exchange out of thin air, as is current central bank policy, is the hallmark of a declining society that has decided to eat its seed corn.


Of course, the central bankers and their political friends are terrified of a recession that undoubtedly would follow an increase in interest rates. What our monetary and political masters do not understand is that the recession is both necessary and inevitable. It is necessary in order to end capital consumption and wealth destroying enterprises. Furthermore, it is inevitable in that the structure  of production has been so skewed toward capital consumption that production is threatened. We are living on both borrowed money (at home and abroad), and  the accumulated capital of previous generations. This one time spending spree WILL end. The longer we try to prop up spending with borrowed and printed money, the worse will be the reckoning when it does come.


So, how far should the Fed go in raising interest rates? There is no answer for this question. The Fed must end its monetary interventions and allow the free market to determine the interest rate that balances savings with loan demand. The last time the free market was allow to work, in the era of Fed Chairman Paul Volcker, the prime rate went to over 20%. This was very hard on both business and workers, but inflation was cured and the American economy shed itself of wealth destroying enterprises and became the economic powerhouse of the world once again. The same thing can happen, if only our monetary master get out of the way.

Tuesday, September 6, 2016

Italy wants other European nations to pay its unemployment bills

From today's Open Europe news summary:

Italy to propose Eurozone joint unemployment insurance scheme

La Repubblica reports that Italian Finance Minister Pier Carlo Padoan will later this month submit to his Eurozone counterparts a draft plan for a joint unemployment insurance scheme. Eurozone countries would contribute gradually to the tune of 0.5% of their GDP – meaning that the common pot would eventually amount to around €50bn. The scheme could be tapped by any Eurozone country experiencing a sudden increase in unemployment or a slowdown in employment growth compared to the bloc’s average.

The socialists running most governments in Europe (they are all socialists in policy if not in name) keep coming up with more schemes to make all of Europe pay for their destructive economic policies. What reason will Italy or any other Eurozone country have to make its economy more robust and allow its people to work cooperatively with others, if it can draw upon a Europe-wide unemployment fund? I can't see Germany or some other more economically successful European nations agreeing to this harebrained proposal.

Friday, September 2, 2016

There is no such thing as a negative interest rate


We Austrian economists are used to having terms corrupted, misused and redefined by statists and others who love and advocate strong central control of money and power. The term "inflation" is a prime example. We Austrians refer to "inflation" as creating new fiat money--as in inflation of the money supply. This is in sharp contrast to what we commonly hear in the mainstream media and from all Keynesian influenced economists, who use the term to describe a general increase in prices. Now nearly everyone thinks of inflation in this sense, so much so that we Austrians must always be careful to say "inflation of the money supply" whenever we use the term "inflation".


Those of us of a libertarian political persuasion, which includes many (but not all) Austrian economists, likewise bristle at how modern statists have hijacked and corrupted the term "liberal". Liberal is a term that is derived from the word "liberty". Ludwig von Mises even penned a book titled "Liberalism". Naturally, it contains not one reference to what today's so-called liberals advocate; i.e., erosion of property rights and statist intervention in almost all aspects of life.


However, now we Austrian economists are faced with a term that is new. It is NOT a term that has had a prior meaning and has been corrupted and re-defined.. It is a new, made up and wholly fabricated term-- "Negative Interest Rate".


Interest is founded on time preference


The rate of interest is founded on an innate trait of the human condition. All other things being equal, humans desire goods and services earlier rather than later. Austrian economists refer to this human trait as "time preference". Those who desire things sooner rather than later are said to have a high time preference. Likewise, those who desire things later rather than sooner are said to have a low time preference.


No two people have the same time preference. In fact, time preference changes within the same individual constantly. So someone with a higher time preference, but without the resources to own the good in the present, may be willing to pay others a higher overall price in the future for access to the good today; they may be willing to pay extra to use someone else's money in order to have it today. This "extra" is the interest rate that "someone else" will charge the person in order to allow the purchase to happen today.


Here you see a basic principle. There are TWO prices for something, a "have it now but can't afford it now price" and a "I'll save up to have it later price". The "have it now but can't afford it now price" means that the buyer must borrow--or we could call it "rent"--the money in order to buy it now. We call that "renting of money" interest.


The difference in price is the interest rate for that transaction at that place and time. One sees that there really is no single "interest rate". Like any market, what appears to be a price of a good--money, in the most common example--is constantly in flux due to the fact that it is derived from a human trait, time preference, that itself is constantly in flux.


Stop abusing our language and insulting everyone's intelligence


What the mainstream media and the public call a "negative interest rate" is an abuse of language. Time preference can never be negative, because that would require a total change in human nature. People will always want something sooner rather than later. It is HARD to save and delay consumption. People have to be disciplined to save and delay gratification. The idea of a "negative interest rate" is an attempt to turn reality on its head. It is another tactic in the Keynesian attempt to refute Say's Law; i.e., that production must precede consumption and that what one produces becomes the means by which he consumes. One can neither consume nor sell something that was never produced, which is the absurdity that is implied by a negative interest rate.




It is human nature that no one is willing to give up control of what he possesses now and accept less in the future. Since time preference can never be negative, the interest rate can never be negative. What is called a negative interest rate is merely a deposit charge that is difficult to avoid. Central banks throughout the world are exploiting their ability to charge for reserves held by their bank customers. By calling its charge a negative interest rate, central banks are trying to create the impression that what they are doing is a natural market phenomenon. It is no such thing. Because the central bank has a monopoly on the kind of money that may be used--its own!--and the quantity of money that people and businesses may use within a currency zone, it has the temporary power to force its member bank customers, and by extension its member banks' own customers, a fee for holding that which they cannot conveniently house anywhere else at the present time. This is nothing more than monetary repression, the purpose of which is to force the banks and their customers to loan, loan, loan, and spend, spend, spend respectively in order to re-inflate moribund economies.


The charade of central banking can come to an end. An important first step for all of us is to stop accepting the central controllers' corrupt definitions of terms that we use to describe reality. Economics is not an opinion; it is a science of reality. Definitions matter.

Monday, July 11, 2016

A wonderful new book about Austrian Economics for the layman


by Andreas Marquart and Philipp Bagus

Reviewed by Patrick Barron




Read this book! Pass it along! Donate copies to schools and libraries! Let's start the revolution!


Blind Robbery may be purchased here.


Or copy this link into your browser:





Thursday, July 7, 2016

The Real Lesson of Brexit


Following the surprise vote by the UK to leave the European Union, most commentators are trying to understand the rationale behind the British vote. Let me be a contrarian and ask, why does it matter? Undoubtedly there is no single reason that millions of British citizens voted the way they did. Furthermore, there is no objective way of determining whether or not leaving really is advantageous for Britain, although most mainstream media are wringing their hands that the British vote was "wrong".  The real lesson of Brexit is that the British citizenry exercised their sovereign right in a fair, democratic referendum and chose to change the way they are governed. This lesson is not being lost of the rest of Europe's citizenry, who now are energized to get binding referendums on the ballots of their own countries.


The fact is that the European Union is NOT a sovereign entity. In fact Britain itself--and by extension, all the rest of the EU's member states--are not ultimate sovereign entities either. The individual citizen is sovereign. THIS is the lesson of Brexit. THIS is the lesson that the British have given to the citizenry of Europe: i.e., that they CAN leave the EU after all, because they are the true sovereign entities.


Compared to the rest of Europe, the question of whether British citizens had a right to a Remain/Leave referendum was never very controversial. Through various venues the people were demanding a vote. To his credit Prime Minister David Cameron announced that he agreed, even though he desired that Britain stay in the EU and campaigned for this result. He even gave his cabinet members the freedom to campaign as their conscience demanded. When the Leave side won, he forthrightly stepped down. This example of statesmanship reminds me of what was said of the traitorous Thane of Cawdor in Shakespeare's Macbeth, that "Nothing in his life became him like the leaving it."


And what of the rest of Europe? Well, implicitly even the EU elite have accepted the British decision, although they are not above trying to modify it in ways to ensure that Britain still pays into the EU's coffers. The last time I checked there were no reports of EU invasion barges arriving at ports in Calais, preparing for a modern Norman or Nazi invasion. There have been no reports of British subjects being arrested, their assets confiscated, and being imprisoned or expelled from the Continent. The biggest threat seems to be that the EU will erect high tariffs against British goods and restrictions on British financial services. Oh, the Humanity! If the new British government were wise-- which is highly unlikely!-- it would declare unilateral free trade and ignore the threats. The EU may indeed take such action, but it would harm its own citizens to just as great an extent as British citizens. Trade restrictions harm both countries, whose individual citizens wish to trade in order to better their lives.


But, again, this is NOT the main point. It is impossible and irrelevant to tally gains and losses when one country bars trade with another. The main point of the Brexit referendum has always been that the British people have a right to change their form of government in a peaceful manner. I fully expect that the citizenry of other EU countries will do what is necessary to get their own Remain/Leave referendums on their respective national ballots. Their task will not be as easy as that of the British, but now that they have seen that it can be done there is little doubt that more such referendums will follow. Whether their citizens decide to Remain or Leave, the big winner will be the reaffirmation of the peoples' right to self government.



Wednesday, July 6, 2016

Wrong solution to a misunderstood problem

From today's Open Europe news summary:

Business Secretary says growth must take priority over deficit as Carney warns Brexit risks beginning to ‘crystallise’

Bank of England Governor Mark Carney yesterday warned that the financial risks of Brexit “have begun to crystallise” and relaxed rules on banking capital, with the aim of releasing as much as £150bn in possible loans. The heads of Barclays, Lloyds Banking Group, Royal Bank of Scotland, HSBC, Santander, Nationwide Building Society, Metro Bank and Virgin Money signed a joint statement that they would “make the extra capital available to support lending to UK businesses and households in this challenging time”. Carney said that the resilience of the UK financial system could be seen in the fact that “overall bank funding costs have not increased”.
Meanwhile, in an interview with The Financial Times, Business Secretary Sajid Javid said the focus now was on “more economic growth”, suggesting that the combination of a downturn and a new fiscal stimulus could cause the budget deficit to rise from 3% of GDP to 5%. He called for corporate and personal tax cuts. Three UK commercial property funds worth about £10 billion pounds suspended trading and redemptions yesterday as investors sought to remove their cash. The pound this morning dropped to 31-year low against the US dollar and its lowest level against the euro since 2013.
Bank of England Governor Mark Carney, the heads of major UK banks, and Business Secretary Sajid Javid propose more money printing and more debt for an economy already awash in both and which has led to no discernible benefit except to the pay packets for executives and government bureaucrats. Brexit is an opportunity to shirk off not only the discredited policies of Brussels but also the discredited Keynesian policies advocated by the London establishment. The UK DOES need to reduce its budget deficit. Like any household, government must live within its means and stop confiscating the nation's resources through the subterfuge of money printing. Only through sound money and honest borrowing will the electorate be able to decide if it wants to continue to pay for pie-in-the-sky welfare programs and military adventurism. It would be a cruel mistake to use Brexit as a pretense for even more money printing and more uncollectible debt. The path to prosperity is through hard work and savings, not the Bank of England's money printing press.

Monday, June 13, 2016

My letter to the Philadelphia Inquirer in defense of Brexit

Dear Sirs:
Trudy Rubin claims that "Brexit would be a huge step backward", but she never explains why. Oh, she does correlate the growth of the EU regulatory state with the collapse of the Soviet Union, but this is not cause-and-effect. The Soviet Union collapsed because NATO stood guard over the Western democracies until the internal cancer of communism had destroyed the Russian economy. Even Ms. Rubin admits that Europeans resent its (the EU's) massive bureaucracy, myriad regulations, financial disasters, and open border policies. Furthermore, she admits that Brexit probably would lead to the dismantling of the EU. Is this not democracy in action? The Europeans, of all people, understand the dangers of large, undemocratic, centralized, bureaucratic states, of which the EU is just the latest incarnation.

Patrick Barron

Friday, June 10, 2016

Puerto Rico needs better advisors

Re: House passes bill to restructure Puerto Rico's $70 billion debt

The US House of Representatives has passed a bill to appoint a special commission to restructure and renegotiate Puerto Rico's unsustainable debt. The hubris of Congress that it and its appointed commissioners have superior knowledge regarding public finance is farcical. It is widely reported that Puerto Rico's debt is $70 billion. With a population of 3.7 million, Puerto Rico's per capital debt is around $19,000. US debt is widely reported to be $10 trillion. With a population of around 300 million, US per capita debt is around $33,000. I suggest that Puerto Rico hire better advisors, preferably German, since Germany is running a balanced budget.

Tuesday, June 7, 2016

Trade negotiations are not necessary

From today's Open Europe news summary:

WTO chief warns of “complex and drawn-out” trade negotiations after Brexit

Roberto Azevêdo, Director-General of the WTO, has warned that it could take Britain decades to disentangle its trading relations with the EU and negotiate new ties with the rest of the world after Brexit. He told The Times, “It seems that there is a great deal of confusion about the trade implications of a British exit from the EU. I think it’s important to provide the facts. The likelihood is that a British exit would lead to a sequence of complex negotiations – with the EU itself, with the 58 countries that have trade agreements with the EU, and also with all the other members of the WTO. These negotiations would be complex and drawn-out.”
Meanwhile, Prime Minister David Cameron said yesterday that leaving the EU would cause an immediate shock, then uncertainty, and negatively impact trade. Boris Johnson said the risks of remaining in the EU are “massive”, due to the Eurozone and migrant crises.
No so-called trade negotiations are needed. The idea that a nation must seek the approval and reciprocity in order to lower or completely eliminate barriers to trade is one of the most persistent myths in all of economics. It is akin to believing that one cannot start a diet until everyone else starts a diet. Lowering barriers to trade does not require the cooperation of any other nation. All a nation has to do is unilaterally eliminate all barriers to foreign products. Such an action will lower the cost of living for the citizens of the importing country. Of course, these imports will be paid with currency of the importing country. And what is the exporting country to do with this currency? It has a choice. It can spend the currency on imports from the country that issued the currency . It can invest in the country that issued the currency. Or it can hold the currency as foreign reserves, to be spent later. Now, how is any of this a problem for the country that eliminated barriers to trade?
Scrap all the trade agreements currently in force. Send the trade negotiators home. Declare unilateral free trade. This is the path to peace and prosperity.

Friday, May 20, 2016

Defending property rights cures the bathroom controversy









Monday, May 16, 2016

Another reason to get rid of the euro

From today's Open Europe news summary:

European Commission considering new tools to prevent cash outflows from failing banks


Wednesday, May 11, 2016


Per your recent email:


Dear Roger,

Warmest regards from an friend in the US,

Patrick Barron

Tuesday, May 10, 2016

Is an increase in German exports a good thing for Germany?

From today's Open Europe news summary:

German exports rise unexpectedly

Patrick Barron

Thursday, May 5, 2016

Another step toward cash confiscation in Europe

From today's Open Europe news summary:



Tuesday, May 3, 2016

Can rules prevent money printing?


Two ways to increase money




The moment of money creation




Keynesians support fiat money creation




Even Fed icons printed money










No logical justification for unsound money







Draghi espouses the old "excess savings" nonsense

From today's Open Europe news summary:

Draghi rebukes ECB German critics


Sunday, April 17, 2016

A proper rejoinder to an empty threat

From yesterday's Open Europe news summary:



The proper response to M. Macron is "Why would the UK have to negotiate anything?" The UK--or any nation, for that matter--can freely open its borders to the imports of the entire world. It does not have to negotiate something that it can do unilaterally. Of course, the French Prime Minister is speaking about his own country's trade barriers to deny the importation of UK goods. No nation can control the self-defeating actions of others. If France wants to embargo goods from the UK, it certainly can do so and there is nothing that the UK can do about it. But so what? Who is harmed? The French! The French do not enjoy UK products that they would prefer over products from anywhere else, including France. Otherwise, what is the purpose of embargoing UK goods? When the French sell goods into the UK market, they take pounds in payment. What are the French to do with these pounds? Stack them in the vault of the Bank of France and never spend them? Fine. Now the French have given UK citizens free gifts of their goods.


Tuesday, April 12, 2016


Re: White House is seeking to share blame over Libya

Dear Sirs:
As described in the above report by Josh Lederman and Kathleen Hennessey, found on page A10 of yesterday's Inquirer, the White House is concerned primarily with seeking a better outcome from future military interventions based upon its past failures. The bigger and more important question for Americans is whether the Libyan intervention was legal. Muammar Gadhafi, whom NATO helped depose and who later was killed, asked the right question. Why was NATO attacking his country when his country had not attacked a NATO country? Is America is a nation of laws or of men? President Obama--and, I fear, most politicians-- believe the latter.

Patrick Barron

Friday, April 8, 2016

German and Dutch objections to ECB QE are ignored

From today's Open Europe news summary:

ECB Minutes show deep divisions over stimulus measures
Minutes of the March meeting of the ECB governing council, released on yesterday reveal deep divisions amongst its members over the latest round of ECB stimulus. The Dutch and German members were fiercely against, The Financial Times reports, with the minutes noting that some feared the measures could result in “market distortions,” and that “the costs and risks of engaging further in public sector asset purchases, particularly in the medium to long term, would outweigh their potential benefits.”
As usual, Germany's (now joined by the Dutch) objections to the ECB's quantitative easing program is ignored. It is a mystery why Germany continues to use the euro, since it is no one's interest, not even the rest of the Eurozone countries, that it do so. The euro is a mechanism for the rest of Europe to steal German capital in order to prop up unsustainable welfare programs. This process will not cease until Germany's economy is shattered. How can this be in the best interest of anyone, even the irresponsible countries of Europe? I believe the answer is that the rest of the Eurozone countries are led by opportunistic politicians who will line their pockets so that they themselves will not be affected by the coming collapse.

Tuesday, March 29, 2016

My letter to the Philadephia Inquirer re: The consumer always pays

Dear Sirs:
I have been following your reporting of Mayor Kenney's proposed tax on sugary drinks. Please keep one thing in mind--consumers pay every tax; corporations merely collect it. Coca Cola and Pepsi must pass on the cost of any tax to the consumer or go out of business. Do not be confused with supposed "research" that shows that not all previous taxes were passed on to consumers. ALL business expenses are borne by the consumer of the final product.

Patrick Barron

Do what I say or I'll shoot myself!

From today's Open Europe news summary:

Spain warns of consequences for Gibraltar if Britain votes for Brexit

The Times reports that Spain may end its agreements with Gibraltar, and could even close the border if Britain votes to leave the EU. A Spanish official told the paper that “We do not see Britain leaving the European Union as an opportunity but you have to understand that if Brexit happened it would change our obligations to Gibraltar… No longer would we have to respect the free movement of capital and goods which Brussels demands. We could even close the border if wanted to.”

This "Spanish official" should ask all the Spaniards who work in Gibraltar if they would support closing the border. No wonder Catalonia wants its independence.

Pat Barron

Saturday, March 26, 2016

Part 2 of my interview re: The end of dollar hegemony

Part 2. Thirty minutes.

Pat Barron

Show notes page: http://www.wakeupcallpodcast.com/dollar-hegemony-2/

iTunes link: https://itunes.apple.com/us/podcast/wake-up-call-podcast-foreign/id1089024518?mt=2&ls=1
Embed code (embed a player on your site):
YouTube link: https://www.youtube.com/watch?v=Mw1dmiwdCMk
In case you missed it, here is Part 1, also thirty minutes.
Pat Barron
Show notes page: http://www.wakeupcallpodcast.com/dollar-hegemony/

Embed code (embed a player on your site):
YouTube link: https://www.youtube.com/watch?v=z9PkT2m_vd4

Sunday, March 20, 2016

The history, meaning, and probable end of "dollar hegemony"

This thirty minute interview is part one of a two part series. Part two will be released next week.

In this interview I explain how the dollar became the world's leading reserve currency, what it means to be a reserve currency, how the US has benefited financially from this arrangement, and how delinking the dollar to gold has allowed our military empire to expand in an irresponsible manner.

Pat Barron


Wednesday, March 16, 2016


Re: Anglo Irish Bank executive appears in court after US extradition

Dear Sirs:

Thursday, March 10, 2016

ECB to stimulate Europe by taking its citizens' money

From today's Open Europe news summary:

Further ECB stimulus expected to aid flagging Eurozone economy

The European Central Bank is widely expected to announce further stimulus measures to aid the struggling Eurozone economy as it meets in Frankfurt today. Most analysts expected the deposit rate to be cut further into negative territory to between -0.4% and -0.5% and the quantitative easing programme to be expanded by between €10bn and €20bn as the ECB struggles to lift the Eurozone out of deflation.
One of the consequences of the demise of sound money is that government spending now is characterized as good for the economy. Imagine a society with sound money. What government would dare claim that taking the citizens' money and spending it was a good thing? The citizens are that much poorer by the amount of money taxed. Yet this is exactly what the Keynesian mindset claims. Now the ECB is so far down the Keynesian rabbit hole that it sees nothing bizarre in considering that it take more of the citizens' money in order to make them wealthier. Welcome to Nineteen Eighty-four.

Tuesday, March 1, 2016

My letter to the Philadelphia Inquirer re: mayor wants to impose a soda tax

(Philadelphia's mayor wants to impose a three cent PER OUNCE! tax on sodas.)

Re: Mayor Kenney: Soda tax would fund $400 million in projects

Dear Sir:
Philadelphia Mayor Kenney joins the too-long list of economically ignorant politicians. One begins to wonder whether ignorance of basic economics is a prerequisite for running for elected office. Gee, I didn't think I would ever say this, but I agree with the Teamsters; i.e., the three cent per ounce tax on sodas will destroy jobs. Has the mayor really not considered that money spent on a soda tax will NOT be spent elsewhere? Let's suppose that the people spend the same total dollars, including the new tax, to buy sodas as in the past. The revenue to the soda-providing industry will go down, because the tax comes off the top, and the number of units of sodas sold will be less.  Got that? So, the soda bottlers will produce fewer bottles of soda. Materials and manpower used by the soda bottlers will go down, both in gross revenue and number of units. Soda delivery workers, the Teamsters, will deliver fewer bottles, resulting in layoffs. The retail stores will sell fewer units, resulting in lower net revenue--the price of the soda less the tax--and earn lower profits. Everyone involved in any way with the soda retail selling industry, such as the store owners and their employees, will be negatively affected. In short, Mayor Kenney's soda tax will impoverish the people of Philadelphia in addition to depriving them of their right to consume a legal product, which apparently is the goal of the social engineers. How about this...the people of Philadelphia refuse to buy a soda anywhere in the city. Tax revenue from soda sales would be zero. The social engineers who are oh so concerned about the health of Philadelphians would have to seek another outlet for their busybody inclinations.

Patrick Barron

Monday, February 29, 2016

Former Bank of England Governor Says Eurozone Must Break Up

From today's Open Europe news summary:

Former Bank of England Governor warns Eurozone must break up if some members are ever to prosper again

In his new book, former Governor of the Bank of England Lord Mervyn King warns, “Put bluntly, monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other…This is extraordinarily dangerous.” He adds that the measures aimed to keep the Eurozone together, such as bail-outs, “Will lead to not only an economic but a political crisis.” Lord King argues that the Eurozone must “face up” to its problems and the fact that some countries can only prosper again outside. Lord King accepts that “the counter-argument – that exit from the euro area would lead to chaos, falls in living standards and continuing uncertainty about the survival of the currency union – has real weight”, but sees little alternative for the struggling states.
The fall in living standards would be temporay. A breakup of the euro will stop the consumption of capital that is made possible by the Eurozone's bailout policies. The profligate countries of Europe would no longer have "legal" access to other people's capital, namely Germany's. They would have to reform their economies and live within their own, and not someone else's, means. A breakup of the Eurozone would save Europe from its current socialist, capital-consuming structure.

Wednesday, February 24, 2016

My letter to the Philadelphia Inquirer re: Is Bernie the good socialist?

Re: What kind of socialist is Bernie Sanders? by Joseph Betz

Dear Sirs:
Professor emeritus Joseph Betz thinks that Bernie is a good socialist, similar to the myth of the "good dinosaur", a movie to which I took my three year old grandson. Professor Betz says that "Economically speaking, a government that guarantees social and economic rights is socialist; its opposite is capitalist." He further states that "...socialism does not mean Karl Marx's government ownership of the means of production,..." Sorry, professor, but that's exactly what socialism means. To support his views Professor Betz resorts to the least persuasive form of argument--a call to authority. Professor Betz is enamored with the United Nations' 1948 Universal Declaration of Human Rights and the Catholic bishops of the United States call for government programs to secure "Economic Justice for All". Bernie may not be a socialist; he may be simply another politician who is willing to use the police power of the state to regulate business and confiscate property in order to meet his vision of the just society. However, neither Bernie nor Professor Betz offer any logical support for their views. I suggest that both read Claude Frederic Bastiat's The Law for starters. They will learn that self-ownership is the basis of all law and the foundation of the sanctity of private property. Limited government was formed by self-owning citizens to secure their rights. Bernie and Professor Betz, like so many these days, turn the citizen/government relationship upside down in order to further their own self-interests. Both should be ashamed of themselves.

Patrick Barron

The ECB can buy my old bottle cap collection

From today's Open Europe news summary:

Market players warn ECB could run short of sovereign bonds to buy

Reuters reports that a number of banks have warned that the ECB may run out of sovereign bonds to buy, particularly if it ups the size of its monthly purchases. The ECB would either have to alter its 33% limit of bonds per sovereign issuer or expand its purchases to other forms of bonds. Meanwhile, ECB Supervisory Chief Danièle Nouy has said, “We do observe a trend towards higher risk-taking by banks…in its search for yield.”

The ECB doesn't have to buy sovereign bonds in order to stimulate demand. It can buy anything. I am willing to sell it my old bottle cap collection. I would not object if the ECB placed a very high value on it; I certainly did when I was seven or eight years old. A few million euros would certainly cause me to increase my demand for the many luxuries of life, which undoubtedly would stimulate demand in certain sectors. How about it, ECB?

Saturday, February 20, 2016

My letter to the WSJ re: Inflation is not indicative of an expanding economy

Re: US Consumer Prices Flat in January, but Offer Glimmer of Inflation

Dear Sirs:
This quote from Ms. Davidson's article perfectly illustrates the fallacy that higher prices are desirable:

”Broad-based price growth is signalling that the wage and price pressures are building, an indication that the economy is expanding at a solid pace and that recessionary concerns are overdone,” PNC economist Gus Faucher said.

Higher prices are the result of a combination of two factors, both of which are undesirable--lower output or an increase in the money supply which causes an increase in spending. The following simple formula of Professor George Reisman can be found on page 505 of his magnum opus Capitalism: A Treatise on Economics.

P = Dc/Sc

P is the general level of consumers' goods prices, in the sense of the weighted average of the prices at which consumers' goods are actually sold. Dc is the aggregate demand for consumers' goods. as manifested in a definite total expenditure of money to buy consumers' goods, and Sc is the aggregate supply of consumers' goods, as manifested in a definite quantity of consumers' goods produced and sold.

As further explained by Professor Reisman, "An expanding quantity of money operates to raise the general price level by virtue of raising aggregate demand relative to aggregate supply."

In other words, the Federal Reserve Bank's policy of printing more money causes aggregate demand to rise, but the rise in prices does not mean that more goods and services are being produced. It most probably means that more money is chasing the same or even smaller quantity of goods. In fact an increase in the quantity of money causes dislocations and disequilibrium in the structure of production, which causes the supply of consumers' goods to fall.

Therefore, an increase in prices, which is commonly called "inflation", is nothing to be desired by the general public.

Patrick Barron

The ECB will destroy the euro and all economies using it

From Open Europe news summary:

ECB accounts hint at further easing in March

The ECB yesterday released the accounts of its January monetary policy meeting, which showed unanimous support for the view that the bank’s policy “needed to be reviewed and possibly reconsidered” at the March meeting.  The accounts also mention that a view was put forward that the ECB could “consider a limited period of overshooting [its inflation target] in future.” The discussions also considered that downside risks were materialising and whether domestic demand could continue to offset weakness in external demand for the Eurozone.

It's all "demand", as if demanding a good or service will magically bring that good or service into existence. This is the classic Keynesian outlook on the world. It makes one wonder why pathetically poor Africans and Asians remain in such a state. Do they not "demand" more goods and services, too?

The ECB's inflationist policies will destroy the euro and the economies of Europe which use it. Time for Germany, especially, to get out of the Eurozone and reinstate the Deutsche Mark before the ECB manages to transfer all of its capital to the rest of Europe. Once Germany is dragged down to the level of Greece, etc., it's all over for Europe.

Wednesday, February 17, 2016

My letter to the WSJ re: Not too much production but too much of the wrong kind of production

Re: China's Economy Suffers From Hangover of Producing Too Much

Dear Sirs:
The focus of this otherwise excellent article should be that China has produced too much of the wrong goods. Easy credit causes disruption in the time structure of production, making longer term projects appear to be profitable in the future. But such will not be the case. Ludwig von Mises used the analogy of trying to build too large a house with too few bricks. The project appears to hum along nicely until the builder realizes that he does not have enough bricks--i.e., real goods--to finish the house. China's only rational option is to end the credit expansion that caused the current dislocation. More easy credit merely perpetuates and expands the destruction of capital.

Patrick Barron