Monday, August 31, 2009

Oprah's "national service" propaganda hour

Oprah just a ran a celebrity love-fest for president Obama. It was pure, unadulterated, gushing praise for a president who hasn't done anything yet.
Highlights include

  • Renowned scholars, Ashton Kutcher and Demi Moore, explain their devotion to the Obama campaign and presidency.
  • A 2 minute video clip of various celebritiess, many from the "Yes We Can" video, saying that America is now one united family.
  • Oprah hosting Joe Biden and wife, and talking repeatedly about "national service"
This last point made me shudder..."National service" should scare the hell out of us - I'm sure quite a few dictatorships have used that exact expression in the darkest moments of the 20th century.

- I guess Oprah hasn't read Robert Heinlein or seen the movie Starship Troopers :)

Sunday, August 23, 2009

Quote of the day

The Daily Reckoning has a great little prediction of what lies ahead for us all in this world of big government and high taxes:

--And so we begin the inevitable path toward capital controls in America. This first step is to crack down on tax evaders. The next is to prevent capital and currency from leaving the country. When the government is starved for revenue and refuses to cut spending, they have to prevent people from switching out of dollars and into other currencies or assets.
Its never been a better time to get your guns and your gold.

Friday, August 07, 2009

Filthy Lucre: Economics for those who hate capitalism

I've just finished reading this book by Joseph Heath, and the title alone should be enough to send alarm bells ringing.

Surely, we don't want to empower the fools who hate capitalism with some unjustified ideas that there are rational economic reasons to oppose capitalism.

And the first half of the book is quite a disappointment. The author says the 1st half is dedicated to dispelling right wing economic fallacies, and the 2nd half attacks left wing ideas and fallacies.

The first half seems to think that a libertarian "night watchman state" as described by Nozick has been proven unfeasable, that minimum wages do a lot more than create unemployment and that the real world has all kinds of prisoner's dillemas - situations where the individual parties do not act in the optimal sense and should be regulated by the state.

In each one of these chapters, Joseph Heath simply remarks that it is "more complicated than free market economists suggest" without really justifying why regulations, social welfare and taxes are all justified and beneficial.

The 2nd half of the book is much more agreeable, although it can be a bit long winded in making its point. One chapter that attacks the idea of "fair prices" takes aim at the Fair Trade campaigns, and shows how Oxfam asked for African coffee farmers to be paid double the market price, predictably resulting in a huge coffee glut, and then Oxfam reacted by asking the US gov't to destroy 5 million bags of coffee to keep the prices high.

Similarly, the Body Shop launched its "trade not aid" campaign in the early 90s, where they agreed to buy 6.3 tonnes of shea butter from cooperative producers in northern Ghana, at a price 50% above the local rate. The company decided to add an additional bonus to the price, which was to be invested in local schools or development projects.

What resulted should be obvious to any rational person. of the Body Shop's order created a "shea nut rush", followed by an entirely predictable glut. Farmers stopped growing all sorts of crops in order ot get a slice of the shea-nut action: In the first season, the northern villages, which normally produced about 2 tonnes of shea butter a year, churned out twenty tonnes, nearly four times what The Body Shop wanted... Making matters worse, The Body Shop, after discovering it had overestimated the international market for shea-related products, quickly scaled back its orders for the next season.

In the end, the author managed to attack other bad ideas such as "profits are bad", "capitalism is doomed", "equal pay for all" and "sharing the wealth". Joseph Heath positioned himself as somebody who supports the status quo.

He should double check his blind spots - government spending is wasteful, minimum wages do create unemployment, social security creates moral hazards, and regulation is ineffective.

Sunday, August 02, 2009

The Broken Window fallacy

You don't need to be an economist to have enough common sense to realise that pointless destruction of valuable goods and materials is pointless destruction.

In fact, only a special class of pseudo-economists and intellectuals would argue otherwise. They are fans of the broken window fallacy, which revolves around the idea that you can generate prosperity by breaking a window and paying somebody to fix it (because it keeps them employed and keeps money in circulation).

So many people have used reason, logic and sense to dispel this old myth, but it still lives on and has infected the halls of power in Washington and Canberra alike. Obama and Rudd believe in all kinds of pointless make work schemes.

Rudd believe in replacing existing school halls and playgrounds with new ones - even though the existing ones are only a year or two old, or in some cases, belong to a school with a handful of students.

A classic example of a make work program (which Keynes, Krugman, Rudd and Obama would love) involves paying thousands of people to dig holes, and thousands more to fill them in.

Pres. Obama gave the rubber stamp to the idiotic Cash for Clunkers scheme - where older cars are traded in for newer cars and the government chips in with a fat subsidy - up to $4500 per car. The older and the bigger the used engine, the bigger the subsidy.

This scheme is idiotic on so many levels, and the basic sentiment behind it is a make work / circulate money type of scheme to "stimulate" economic activity.

Failure #1 - $1 billion was allocated to Cash for Clunkers and US government forecasted it would last till November, but the funding ran out in just 6 days as thousands of car owners rushed to take advantage of this scheme.

Failure #2 - one condition for the dealership who buys the used cars, is to destroy the existing engine so it cannot be resold or recycled. Watch the following video and imagine this destructive process being repeated thousands of times across America: