Investors respond to good economic news
The headline unemployment figure released by the Bureau of Labor Statistics (BLS) yesterday was 10.2%. However, the broader U.6 measure of unemployment, capturing short-term discouraged workers (those that have quit looking for a job within the last year) rose to 17.5%.
Shadowstats.com's SGS-Alternative Unemployment Measure rose to 22.1% in October. John Williams, shadowstats' proprietor, includes the long-term discouraged workers in his meaurement.
But now the unemployed can collect an additional 14 weeks of unemployment checks.
Meanwhile, Freddie Mac lost $6.3 billion in the 3rd Qtr. Fannie Mae has asked the government for another $15 billion to stay afloat, and five more banks were seized by the FDIC.
With all of this good news, the DJIA ended up 17.46 for the day at 10,023.42.
Some Video from ASSC
Just a taste of the presentations that you can find at ASSC:
Uncertainty and the Role of Bureaucratic Management within the Firm by
David Gernhard (Grove City College)
A Combinatorial and Praxeological Exploration of the Economic Calculation Problem by
Abhinandan Mallick (University of Birmingham)
Stateless Law in the Highlands of Guatemala by
Michelle Carrera (Universidad Francisco Marroquin)
All About Mises, from the Wall Street Journal
From last evening in the Wall Street Journal, a very good piece. Nothing new for readers of Mises.org but still very encouraging.
The Man Who Predicted the Depression
Ludwig von Mises explained how government-induced credit expansions led to imbalances in the economy.By MARK SPITZNAGEL
Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s. We ignore the great Austrian at our peril today.
Mises's ideas on business cycles were spelled out in his 1912 tome "Theorie des Geldes und der Umlaufsmittel" ("The Theory of Money and Credit"). Not surprisingly few people noticed, as it was published only in German and wasn't exactly a beach read at that.
Taking his cue from David Hume and David Ricardo, Mises explained how the banking system was endowed with the singular ability to expand credit and with it the money supply, and how this was magnified by government intervention. Left alone, interest rates would adjust such that only the amount of credit would be used as is voluntarily supplied and demanded. But when credit is force-fed beyond that (call it a credit gavage), grotesque things start to happen.
Government-imposed expansion of bank credit distorts our "time preferences," or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.
Ordinarily, any random spikes in credit would be quickly absorbed by the system--the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse....
All those trillions for a little white space
As a result of the statistical "growth" in the GDP, the St. Louis Fed can now mark a little white space on its graphs, but it looks a bit silly here:
New Mises Busts are in
We took a trip to the workshop where the Mises Busts are made and picked up some more to replenish our stock!
Burns and Heller on Rand
Here are the two authors who have taken on the subject of Ayn Rand and her influence.
The Market for Soda
A wonderful video recommended by Sean Malone
A Path To Runaway US Inflation
Housing prices have been propped up, banks and auto companies have been bailed out, regulations have been increased, debt covenants have been violated, unemployment insurance has been extended. FULL ARTICLE by - Ganesh Rathnam
Transformation of the American Right
The promise of laissez-faire performs the same function for the Right as the promise of unlimited abundance under communism did for Stalin: the promise of a future utopia to make current sacrifices worthwhile. FULL ARTICLE by Murray N. Rothbard
Freaking Out over Global Warming
Levitt and Dubner raise an interesting possibility that deserves careful scrutiny, not ridicule. An immediate and drastic reductions in carbon emissions is not the only way to address climate change. FULL ARTICLE by Robert Murphy
Nokia's infringement suit against Apple illustrates need to scrap US patent system
From a post on Jurist:
Nokia's infringement suit against Apple illustrates need to scrap US patent system
Stephan Kinsella [General Counsel for Applied Optoelectronics and Editor of Libertarian Papers]: "A recent lawsuit filed by Nokia against Apple alleges that the iPhone infringes 10 of Nokia's patents. Nokia is probably "seeking between $200 and $400 million in damages from Apple," which JURIST characterizes as "a relatively low amount to seek from a company that expects revenues...of over $11 billion this year." It doesn't seem trivial to me, given that $400 million is a good chunk - say, 5 to 10% or so - of Apple's profits. And Nokia's is not the only lawsuit Apple faces. Half a billion here, half a billion there, and pretty soon you're talking real money. For other examples, see here.
Continue reading "Nokia's infringement suit against Apple illustrates need to scrap US patent system" »
Expand the digital archive: volunteers needed
One of the most time-consuming tasks in digital publishing involves the conversion of legacy PDFs (whether scans or newly created) into clean, clear HTML output. We do this all the time at the Mises Institute but the workload is growing too intense for us to handle. Volunteers have been so helpful in the past, which is why we are hoping that this new volunteer group can help in the future.
The group is Mises Documents, hosted by Google. If you have the skill to turn a rough PDF text output into a clean and proofed .doc or html file, and you want to help expand the archive of liberty, please join. The group has file storage, where the deliverable can be posted or it can be sent to the group.
If you have these skills, please consider a time donation to the cause of liberty!
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Those "saved" jobs
President Barack Obama's economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council, an impressive success story for the stimulus plan. Trouble is, only 508 people work there.The Georgia nonprofit's inflated job count is among persisting errors in the government's latest effort to measure the effect of the $787 billion stimulus plan despite White House promises last week that the new data would undergo an "extensive review" to root out errors discovered in an earlier report.
About two-thirds of the 14,506 jobs claimed to be saved under one federal office, the Administration for Children and Families at Health and Human Services, actually weren't saved at all, according to a review of the latest data by The Associated Press. Instead, that figure includes more than 9,300 existing employees in hundreds of local agencies who received pay raises and benefits and whose jobs weren't saved.
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Blog speed
Comment time is down to 8-10 seconds, or less. The blog is really humming now.
Classical Natural Law and Libertarian Theory
Murray N. Rothbard, the most important exponent of the radical libertarian school, is right when he rejects the historicism and relativism of legal realism and when -- for the same reasons -- he criticizes Hayek and Leoni.FULL ARTICLE by - Carlo Lottieri
Cultivating Sound Ideas
Rockwell argues that one of the worst errors of free-market intellectuals is their discussion of liberty as just another policy option for politicians and bureaucrats to consider how, when, and where freedom is to be permitted. FULL ARTICLE by George Leef
The Fallacy of the (Super)Neutrality of Money
A rise or fall of the money supply does not confer a social benefit: it merely lowers or raises the exchange value of the money unit. And a change in the money supply also implies redistributive effects. FULL ARTICLE by Thorsten Polleit
"Man alone is an end unto himself."
November 7 marks the 1913 birth of Albert Camus, 1957 winner of the Nobel Prize in Literature for work that "illuminates the problems of the human conscience in our times." Those times were ones where the specter of tyranny loomed large during World War II and its aftermath, until his accidental death in 1960.
While best known as an existentialist and absurdist, his Nobel lecture highlighted why his insights are valuable to those devoted to liberty. Camus said the writer "cannot put himself today in the service of those who make history; he is at the service of those who suffer it." On their behalf, "the two tasks that constitute the greatness of [the writer's] craft [are]the service of truth and the service of liberty…rooted in two commitments, difficult to maintain: the refusal to lie about what one knows and the resistance to oppression." To commemorate his birthday this Saturday, his defense of liberty against tyranny merits remembering.
Continue reading ""Man alone is an end unto himself."" »
The ABC's of Bias: Puma, Crude Oil, and You
Attention airline passengers: Not only do you have to pay extra for your luggage, your meal, and your headphones, you now have a dress code on United Airlines. But that shouldn't surprise you. The airlines industry in general has been mismanaged for decades, including being overwhelmed with high labor costs and being laden with debt...just like the Big 3.
As far as I can see, the airlines have never been a good investment. Most of the publicly traded equities are under $10 save one or two. They're cheap for a reason: no one wants them.
On Monday, ABC News ran an article on increasing energy costs and tried to tie it in with guesses of impending CFTC rules and position limits. They quoted a few sources: a family-owned heating oil company executive, the head of an airline, and a spokesman for the ATA.
As a Commodity instructor and trader, I was quoted for my opinion on the reasons for the increase in prices across the board. I gave them 2 pretty good quotes, one they ran, but the most telling one was edited out:
"Stable prices and cheap fuel are not our birthright," argues the L.A. trader/instructor Martin. "This recent run up has everything to do with U.S. monetary policy and nothing to do with Wall Street speculators" was how the article was to have ended, but it was
edited out. Instead, they went with a syrupy, Michael Moore sob story to pull on your heartstrings.
The weakness of the US dollar can cause crude oil and heating oil prices to rise. Jet Fuel A, heating oil, and gasoline are derived from crude oil. Lower crude production has caused a decrease in supply, as shown in this graphic from Gregor Macdonald.
I'm generally not a conspiracy theorist, but not mentioning that there could be just one other reason why heating oil is going higher, looks like ABC News has an agenda or are pandering to their readership. To worsen the matter, since the article was published, ABC has linked an archived video from July of 2009 that features an equity hedge fund manager who's testimony was thoroughly refuted by both Jim Rogers and Nobel Economist Paul Krugman, among others.
Heating oil is derived from crude oil through a process known as cracking and producers make sure they have enough supply to sell to consumers for the colder fall and winter weather. As you might expect, the demand for heading oil is higher in the colder weather than warmer and this creates a seasonal tendency.
The chart below is based on 26 years of data and shows that heating oil prices (aka Fuel Oil #2) bottom out in the summer and rise to peak prices in late September and October. (Chart courtesy of Jerry Toepke @ Moore Research Center Inc.)
The fact is, we've been spoiled with cheap fuel costs, at least I have, for most of my adult life. America's policy toward drilling for new oil will guarantee you skyrocketing fuel costs and alternative fuels are, although intriguing, years and years away from being practical and affordable for the majority of Americans.
US Airways Chairman and CEO Doug Parker was quoted as saying, "we believe unchecked speculative trading of oil futures is distorting the normal market dynamics of supply and demand."
I think what Mr. Parker meant to say was, "we know we can pass higher fuel costs on to Americans if we don't hedge, and ultimately blame speculators for the higher costs."
Then David A. Castelveter, a spokesman for the Air Transport Association (ATA), said that "speculators have been causing such volatility in the market that it is hard for airlines or other oil users to make appropriate business decisions."
Really? Scott Topping over at Southwest had crude locked in at $51 / barrel when oil prices were high by utilizing several hedging techniques.
Effective hedging is an ongoing process and needs to cover many years into the future.
Castelveter attests that "every $1 increase in the price of oil adds about $430 million to airlines' annual operating costs." An effective hedging program that will offset EVERY $1 increase in the price of oil will run you but a few percentage points of the $430 million number quoted. (Note to Mssrs. Parker and Castelveter and ATA members: Read all the Nassim Taleb you can get your hands on. He can also help you with some hedging techniques.)
American CEOs, including those in the airline industry and ATA, are focused on one thing: hitting their quarterly earnings number...a chicken shit way to run a company. No one is taking any good risks these days: they've lost their balls. They don't hedge b/c they will pass the costs onto Americans.
I think they don't hedge fuel costs because it costs money and that affects their quarterly earnings which in turn affects their share prices and the CEOs' collective net worth.
Tie airline CEO compensation to how effectively they hedge higher fuel costs I say and we might be on the right track to a higher fiduciary standard in that industry...I don't think we are anywhere near that now. And if they do a good job and ensure we can travel for a reasonable fare while they can be profitable entities, pay them twice what they're getting now. They will deserve it.
Americans and everyone in the ATA need financial literacy and education, not the blame game and lazy corporate attitudes, nor further regulation. There are already some very stringent position limit rules for commodity futures traders. Any large trader will tell you it's easy to get into a position, but hard to get out of one.
As commodity expert Barry Siler said, "Being unhedged is the ultimate short position," he says. "You're betting every day that the price of fuel won't go up."
I think the CEO's of America's airline companies are the real gamblers in the energy markets. They're betting that world is continually stable and there will be no shocks to the global energy markets. This scenario has the potential outcome of leaving (Puma-clad) Americans stranded at the airports around key travel days while absorbing higher costs for less service.
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Five Governors, No Waiting
In a footnote to this year's elections, New Jersey voter chose their first-ever lieutenant governor, Kim Guadagno, who was elected on a ticket with Republican governor-elect Chris Christie. Voters approved a constitutional amendment in 2005 creating the lieutenant governor's office; according to the revised constitution, the governor can appoint the lieutenant governor to head a state department in addition to her regular duties - which consist of, well, nothing aside from waiting for the governor to resign or die.
Continue reading "Five Governors, No Waiting" »
Something small but big to me
The previous and next buttons at the top of the Mises Daily now work, thanks to some fancy coding by David Veksler.
The Fall of the Berlin Wall, and the Continuing Threats to Liberty
Next Monday, November 9th, marks the 20th anniversary of the fall of the Berlin Wall. For 28 years, from 1961 to 1989, it stood as a symbol of the tyranny of the totalitarian state under which the individual was viewed as the property of the state, with no right to leave the "workers' paradise" without the permission of that state. And if you tried, you ran the risk of being killed by the armed guards of the East German communist government.
In a new piece that I've written, "The Fall of the Berlin Wall and the Tyranny of the State," I explain the history and human tragedy of the Berlin Wall, in terms of the dozens of people who lost their lives trying to escape to freedom over the Wall.
We need to emphasize the threat that Big Government represents to all our freedom -- including the right of freedom of movement -- and which should be remembered on this 20-year celebration of the fall of the Berlin Wall.
Unfortunately, the Collectivist mentality did not end with either the fall of the Berlin Wall or the collapse of communism in the former Soviet Union. It remains alive and well in America and around the world, with its insistance that the individual lives for and is to be sacrificed to "interests" of the state.
We still have our work cut out for us, to demolish the numerous political "walls" with which the government continues to enslave us through its police power in the growing interventionist-welfare state and the threatening economic fascist order.
Richard Ebeling
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Ron Paul in Forbes
It's great to see Ron Paul writing for Forbes.
By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
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Jacob Maged and the New Deal
Thomas DiLorenzo retells the story made famous by John T. Flynn of the tailor named Jack Magid, arrested for pressing a pair of pants for 35 cents. The Tailors' Code fixed the price at 40 cents. He went to jail for 30 days. Amazing.
We received a note this morning about the spelling of his name, which the correspondent said is Jacob Maged. BK Marcus did some quick research to find that it can be either. It is a Polish name from the Hebrew which can be transliterated in several ways. The word MGD means storyteller or preacher and can be rendered Maged, Magid, or Maggid.
What was really great about the email we received was its inclusion of all of these press stories about the case.
- Laredo Times
- NYT: Tailor Imprisoned
- Sheboygan Press
- Dunkirk Observer
- Tailor Released (a very chilling story of how he repented)
- Tailor celebrates the end of the NRA
- NYT obituary
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Salamanca Live Blog