The myth of deflation and wisdom of economics professors

Tugwit-the-Terrible strikes again.
The fear of falling prices and thus the fear of a currency that could buy tomorrow, more than it bought yesterday (deflation), keeps government central bankers awake at night. Imagine borrowing a ton of money (like most countries already have), then having to repay it? Its much easier to repay the money if you could print some of it in your basement and scam the lenders. The sad truth is, that IS the job of central bankers like Ben Bernanke in the US (whoa to the Chinese). That's called inflation, and despite what Mr. Bernanke says, he LOVES inflation, he needs inflation, and will do anything to encourage it.
One of the first things central bankers do before they warm up the printing presses, is to hint to the media that deflation is possible, and that it is bad. I'm not sure why its bad, I like the fact that my computer today is faster, better, and CHEAPER, than my previous computer. I think that is deflationary, in fact my standard of living improves as prices deflate! Don't they? I'm confused, so I will let the people at the von Mises Institute explain.
After you have looked at that, watch this from Mr. Tugwit's Channel. Tugwit pulls no punches!    

Jack and Dave explain Quantitative Easing

The following video was created by Tugwit the Terrible and can be found on Mr. Tugwit's Channel. You may have to watch this more than once, I did.
Just imagine trying to explain this scenario on a news program to the general public. Imagine the news anchor or reporter trying to keep the audience's eyes from glazing over.

I was very pleased to hear that Rep. Ron Paul has been named to chair the House Domestic Monetary Policy Subcommittee when the Republican majority takes over the US Congress in the new year. This will give Rep. Paul oversight on the Fed and maybe shed some much needed light onto its actions. Last year Ron Paul authored a book titled End the Fed. We can hope.    

The freedom NOT to associate

Have you ever had a job where you were told that you will automatically "join" a union as well? I have. I was just happy to get the job, way back then. I was young, really needed the job and as a bonus I belonged to this large group of like-minded individuals all striving for the betterment of education, in this case. They didn't even call it a 'union', it was a 'federation' (OSSTF) so I felt better about belonging. They had lofty goals, some that I liked, some that I didn't like, but my dues were automatically removed from my paycheque, and I was too busy doing my job to really concern myself with the doings of the federation/union.
That's very likely the way it is for many Canadians who have jobs in a variety of businesses, not just government related fields like teaching.
The Charter guarantees the rights of individuals to associate freely. But do workers have the right NOT to join a union? That is the question that will be appealed in this interesting case described by Karen Selick of the Canadian Constitution Foundation.  

Shooting the messenger: A hit on Julian Assange

Private Space!

I've always been a "space junky" - outer space that is. I can vividly remember that day in October 1957 when Sputnik 1 was launched by the Soviets (yes I'm old - check out one of my favourite movies October Sky). Back then, and for some time afterward, I was brainwashed into thinking that only governments could "afford" to explore space. Space was to be explored by countries; and of course this was troubling to me because by the time I hit my late teens I was thinking that governments maybe should not be doing this with taxpayers money. In those pre-libertarian times, I had some problems rationalizing my love for space exploration and my political philosophy. I've written about this before, but today I'm pleased to say I feel better about the whole thing now, thanks to Elon Musk the CEO of SpaceX Corp.
SpaceX, a private corporation, announced this morning (Dec. 8, 2010) that they have launched the first large capsule into earth orbit, the Dragon spacecraft. Now Richard Branson's Virgin Galactic could have competition for tourists! Marvellous!

Hearts and Minds

Apparently the battle for hearts and minds in the Middle-East can be fought without bullets. To paraphrase Victor Hugo "there is one thing stronger than all the armies in the world, and that is an idea whose time has come." So listen-up NATO, ISAF, and all the military forces over there, protecting our freedom, and keeping us safe in the Great White Frigid North. Thanks to WikiLeaks (and published in the Guardian UK) we now know a better, cheaper way to bring freedom and tolerance to the Muslim masses. Just inundate them with American television programs, they watch, they listen, and most importantly they absorb (check out the link) US culture (such as it is). Bring the troops home and lets sell some popcorn!

Here is an excerpt from some US Embassy cables published in the Guardian:

//David Letterman, Agent of Influence//

11. (S) XXXXXXXXXXXX said the American programming on channels 4 and 5 were proving the most popular among Saudis. A look at the December 17 programming menu for MBC channel 4 reveals a 24-hour solid block of such programs as CBS and ABC Evening News, David Letterman, Desperate Housewives, Friends and similar fare, all uncensored and with Arabic subtitles. Channel 5 features US films of all categories, also with Arabic subtitles. XXXXXXXXXXXX told us that this programming is also very popular in remote, conservative corners of the country, where he said "you no longer see Bedouins, but kids in western dress" who are now interested in the outside world.

12. (S) Over coffee in a Jeddah Starbucks, XXXXXXXXXXXX, and XXXXXXXXXXXX elaborated on the changes in the Saudi media environment. "The government is pushing this new openness as a means of countering the extremists," XXXXXXXXXXXX told Riyadh press officer. "It's still all about the War of Ideas here, and the American programming on MBC and Rotana is winning over ordinary Saudis in a way that 'Al Hurra' and other US propaganda never could. Saudis are now very interested in the outside world, and everybody wants to study in the US if they can. They are fascinated by US culture in a way they never were before."

ENDLESS HOMELESSNESS - by Rod Rojas

Flipping through the newspaper this morning, as I do most mornings, its difficult to avoid headlines that remind me of ineffective and inefficient government spending programs. So today I read that "Canadians (are) waiting longer for surgery" or that "Canada (is) slipping in math, science and reading skills". A quick glance at the articles and I'm not surprised to read that things are a little worse than last year. I'll bet things will be a little worse next year, in fact I'll bet that prior to the next federal or provincial election the ruling party will promise to fix these problem areas by spending more money on them. I will also bet that is exactly what they promised prior to the last election. But my friends I don't think governments can fix anything, and today I have a specific case in point as illustrated by a guest writer.
Rod Rojas holds a Canadian Securities Course designation, is a member of the Ontario Libertarian Party, and has written articles for mises.org. Here is his take on how government deals with the perennial issue of homelessness.

During the recent mayoral campaign in Toronto, the issue of homelessness was addressed in the particular case of a 40 bed homeless shelter being built at a cost of $11.5 million, an outrageous $287,500 per bed. The original estimate for the entire project was $5.5 million. As a reference point, the average price for a condominium apartment in Toronto is $279,000.^[1]

The $287,500 per bed is the net price tag paid to the contractor only. We should not forget that any act of government carries with itself a huge handling cost. This includes the tax dollars that need to be collected, the civil servants and politicians that need to be paid, and the huge infrastructure of government that needs to be maintained BEFORE the money is disbursed. In most governments this amounts to several dollars of government overhead for every dollar spent, which implies that the real cost of each bed is in fact a multiple of the above mentioned figure. Once the facility is finished, we need to add the cost of running the entire project with generously paid civil servants.

The unseen costs of this, and any government expenditure, are the consequences incurred by the taxpayer. Let us not forget that every dollar consumed by government is a dollar not consumed, saved, nor invested by private citizens. Every –unproductive- government job is a productive job lost in the general economy.

In regards to the cost of this new shelter, Phil Brown, the General Manager of the Shelter, Support and Housing Administration for the city of Toronto said: "Is it worth $11.5 million to be able to serve the downtown homeless folks who are some of the most vulnerable in the city? I’d say yes."

As irrational as Mr. Brown’s declaration may seem, we must remember what the incentives a person in his position would have. To begin with, he is spending someone else’s money. Then, he runs the department in charge of the shelter, so the cost overrun is an embarrassment exposing his own ineptitude. We should also point out that increase in funding and responsibilities for his office increases his job security and power. Additionally, in the future, whenever the humanitarian issue of homelessness is raised, especially when something bad happens to a homeless person, he will look like a hero who fights for the rights of the “most vulnerable”. On the flip side, if he opposed the project due to its cost, and anything bad happed, he would be the bad guy of the story, having to defend himself while not saving a penny for himself or advancing his best interests.

Lastly, all types of welfare are open ended expenses, meaning, there is no end to how much money we can spend in better shelters, more nutritious meals, more counselling etc…this is the danger of unrestrained government, they use other people’s money for open ended expenses, so there is no rationing mechanism.

For 2007 the cost for each and every homeless person in Canada, not including government overhead, was conservatively estimated to be between $20,000 and $40,000 per annum and rising^[2], while the number of homeless persons keeps increasing. For example, in Toronto, the number of homeless persons rose by 21% from 1990 and 2003.^[3]  The explanation for this phenomenon is very simple: when the price of a good or service is lowered, its demand will increase. In other words, homeless help is actually a homeless subsidy, we are encouraging homelessness, and the demand for free accommodation and meals is virtually endless. We will have as many homeless as our politicians and civil servants want to pay for.

Rod Rojas

This work is licensed under the Creative Commons Attribution 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

Permission to reprint in whole or in part is gladly granted, provided full credit is given.

This article originally appeared in the Libertarian Bulletin Vol. 31 No. 2 Winter 2010, the Newsletter of the Ontario Libertarian Party.

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[1] Toronto Real Estate Board http://www.torontorealestateboard.com/consumer_info/market_news/mw2010/pdf/mw1009.pdf

[2]  Laird, Gordon (2007). "Shelter-Homelessness in a growth economy: Canada's 21st century paradox." A Report for the Sheldon Chumir Foundation for Ethics in Leadership as reported at the Teapots/OCAP Seminar on Homelessness

[3]  Gaetz, S., Tarasuk, V., Dackner, N., Kirkpatrick, S. (2006) "Managing" Homeless Youth in Toronto: Mismanaging Food Access & Nutritional Well-being. http://homeless.samhsa.gov/Resource/View.aspx?id=47376&AspxAutoDetectCookieSupport=1

WikiLeaks: A Cyber-Deep-throat?

The Watergate Scandal of the early 1970's ultimately led to the resignation of US President Richard M. Nixon in August of 1974. The whole thing began as a little noticed story; a break-in at the Democratic Party National Headquarters, followed by arrests, cover-ups, tapes, denials and finally presidential resignation. The whole process was fuelled to the end by enterprising journalists from the New York Times and especially Bob Woodward and Carl Bernstein of the Washington Post. Many of the details came from the Post's whistle-blower source nick-named 'Deep Throat' but now known to be former Associate Director of the FBI W. Mark Felt.
I'm not sure if the WikiLeaks data dump(s) from Julian Assange will have as much or even more impact than the Watergate story, but I'm hoping it does. I'm hoping its bigger.
The stories coming out of WikiLeaks have already had an impact as far as I'm concerned. Canada's new three year commitment to the Afghan debacle has been immediately spotlighted from the WikiLeaks releases. Now everyone here knows that Hamid Karzai and his gang of thugs is corrupt, if there were any doubts before.
Canada has lost 153 dead and thousands injured physically and mentally, with billions of dollars frittered away by spineless politicians and bureaucrats. What is our strategic gain from this mess? Are Canadians, Americans, anyone, safer today than they were a year ago? Five years ago? Will we ever leave Afghanistan?
We also know from WikiLeaks that Hilary Clinton thinks the Saudis, American allies, are the "most significant source of funding to Sunni terrorist groups worldwide." I'm sure glad all the terrorist funding sources have been plugged up almost a decade after 9/11.
Talking about 'plugging,' its good to know that American security is so tight, that a 23 year old soldier who can lip-sync Lady Gaga can steal thousands of classified documents and show that government incompetence is forever and everywhere.
In a strange way WikiLeaks is reassuring, how can anyone believe in government conspiracies after this? How can anyone believe in any kind of conspiracies? How can anyone believe in government/politicians announcements? WikiLeaks encourages skepticism, and that kind of disbelief is what will keep us all free.
To those who think Julian Assange should be prosecuted or worse, executed for treasonous acts, I think otherwise. I think he's done us all a great service, in fact I think we should remove the 2009 Nobel Peace Prize from its undeserving winner and hand it over to Assange. That would be a worthwhile tribute. By the way the 2007 Peace prize was also undeserved, but that's a story for later.

The last Gulag?

A column in the National Post today (Dec. 3/10) by Jonathan Kay made me just shake my head.
The column titled The Invisible Gulag describes conditions within North Korea through the eyes of a German doctor, Norbert Vollertsen, who was given unimpeded access throughout the North Korean countryside for his act of charity. Vollertsen, who worked with an international NGO, describes horrors in the article that reminded him of NAZI concentration camp prisoners he had learned about from the Second World War. Eventually his disgust with conditions in North Korea led him to a surreptitious protest and an eye-witness report that appeared in the Washington Post 10 years ago. For this he was expelled from the North and now lives in South Korea as a human-rights activist.
Vollertsen is dismayed that the media seem to focus on relatively small-scale Western and Middle-Eastern human rights abuses while ignoring what is a virtual concentration camp in North Korea in 2010.
  

From the Brights: Earth and Life: Changes over Time

It's a poster for classrooms, or as a gift, and according to The Brights' it is unique. They describe it this way:
"Earth and Life: changes over time" is a pictorial representation of evolution from the “Big Bang” to current times. The unique feature of this poster is that it combines physical science and life science events on the same time scale. The viewer will be able to see connections not seen in other timelines of evolution. Educators will be able to show students the impact of physical and geological events on the evolution of life, while others can enjoy the grandness of the presentation and gain a new perspective of the processes involved in our changing world.
Have a look here.

Econ 101: The Keynesians have it backwards

Its income and savings that drives an economy, not spending and consumption. Watch:

Ontario: Refurbishing its way to prosperity

"Ontario’s plan to pour colossal amounts of money into nuclear, wind and solar could bury the province", so says Lawrence Solomon in the Financial Post (Nov. 27). Ostensibly the McGuinty Liberals in Ontario want cleaner air and greener energy production. McGuinty has bought into the global warming alarmist's view that we must reduce our carbon emissions to save the planet and stop air pollution to eliminate the deaths of Ontarians with respiratory problems. The former is ridiculous and the latter well, lets just say a lot of our pollution comes across our southern border so we would have to persuade our American cousins to do likewise. The fact is our air quality is rather good most of the time, and certainly does not warrant mortgaging the future prosperity of Canada's once richest province.
Mr. Solomon's column describes how McGuinty has decided to refurbish the old and build new nuclear generation facilities even though our previous experience with nuclear power plants has shown them to be extraordinarily uneconomic. 
The temperamental and pricey nukes will be assisted by wind and solar energy "power-plants" (when they are working!). It boggles the mind, but Mr. Solomon offers hope. The final paragraph of the article states: "It isn’t too late to turn things around. Just bury the long-term plan, none of which passes muster, and resurrect the privatization of the power system. Power rates would drop and Ontario’s economy would soar." The emphasis on privatization is mine, and it cannot come soon enough.

Cooling on Warming

We are just days away from the next big global warming conference in Mexico. I'm missing the hype that preceded last years Copenhagen debacle. Things are a bit different now, as I predicted in several earlier postings, the economy is beginning to trump the environment. Some of the European countries that went headlong into Green overspending are now on the brink of bankruptcy, Spain most notably.
An opinion piece in today's National Post nicely sums up the recent changes in attitude and opinion regarding anthropogenic global warming. Its worth a read, because it puts the next conference in Cancun into focus, that is of course if you still think global warming is a problem.

Religion a force for good? Not so much.

As a followup to my Oct. 12th posting, the Munk Debate between Tony Blair and Christopher Hitchens took place last night (Nov. 26/10) in Toronto.
The online video of the debate is not available as yet, but the results are in.
Apparently two-thirds of those polled believe that religion is NOT a force for good in the world. The NOT group had a 35% lead pre-debate, and a 37% lead post-debate, so not a significant change I would say.
In a debate of this sort I would have expected the atheists to be more numerous attendees than the believers, and that is what the results indicate if I can be that simplistic about the issue.
The CBC calls this a win for Chris Hitchens, looking at the results I'd say that was a stretch.
At some point when the online version is released, I will post it.

The rights of smokers etc.....

The other day I was invited to do an interview by a local television broadcaster to be broadcast on their digital service. I was representing the Ontario Libertarian Party (OLP) and I was on together with the president of Smokers-Choice.org, a group that OLP had supported financially in a legal challenge.
In May 2006 the Smoke-Free Ontario Act (SFOA) came into effect which essentially prohibits smoking in all enclosed public areas except your home, your hotel room (if allowed), and your car (if there are no children present).
I have never smoked and I find it a repugnant habit so I don't like to be around smokers, nor does the OLP advocate smoking. That of course does not preclude my support (along with the OLP) of anyone else from smoking if they wish, as long as they do not offend those nearby. In fact my attitude is, that smoking is a voluntary choice as ill advised as it is, and it's a personal preference not an issue that needs to be regulated in law. Certainly enclosed areas, workplaces, public buildings, transit facilities and so on, can and should be designated as non-smoking areas and smokers (if they have any sense) should realize that their habit is obnoxious to many and they should seek permission before lighting up. Voluntary restraint is the best option and that is best done for each local situation. A smokers right to smoke stops where it threatens the right of another to breath clean air, at this point all smokers should be aware of that without the use of coercive force by law.

Unfortunately this law (SFOA) is quite draconian, with very broad implications, which is where the Smokers Choice group gets involved.

The group is centred in the Ottawa area, and they attempted to establish an exclusive smokers club, with signed membership who consented to be within an enclosed room for the purpose of socializing, smoking, whatever. The SFOA is written so broadly that forming such a club in any premises is prohibited. The point of law in question is: what constitutes a public place? Is a public place anywhere that members of the public gather? If that is true than even your home filled with invited guests, is considered a public place because once an individual leaves their home they become a member of the public. Your private party isn't private at all, because members of the public are invited.  That was the interpretation applied to the Smokers Choice case, and after one trial and one appeal, the next higher court refused to even hear the case with no reason given.  The broad implication is that police can come to your home if you are having guests over, when there is complaint or for whatever reason, enter without a warrant because they have probable cause, and charge guests for smoking in a public place (if indeed they are smoking, otherwise the police can be embarrassed).  
Canada has a Charter of Rights and Freedoms, and there are several parts of the Charter that could be used to defend Smokers Choice, but of course the process was halted when the case was refused to be heard.
As it stands that's the end of this issue until someone else raises a challenge.
The second century Roman Senator Tacitus said it best, when he pointed out that "....laws were most numerous when the commonwealth was most corrupt."  Simply put, the more numerous the laws, the more corrupt the state. In Ontario as laws that regulate behaviour have proliferated, those who are normally law abiding citizens are given more opportunity to break laws, making us all criminals and eventually undermining respect for ALL laws.