Self-evident Economy

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Real World Example of Malinvestment

Here is a perfect real world example of malinvestment due to government stimulus. From this Bloomberg article:

China, the world’s biggest steel producer, is exporting at the highest level in two years, exacerbating a global glut…

…Chinese steel mills, set for a record production in 2012, are ramping up overseas sales to avoid a softer domestic market, where prices for the commodity have dropped to a two-year low.

China is producing so much steel, that it must export the excess to keep prices from falling. In a world not dominated by Keynesian economics, this drop in price would signal that too much steel is being produced, prompting steel companies to cut back on production. Instead…

Chinese Premier Wen Jiabao is overseeing a $23 billion investment in new mills to stimulate automaking and housing to reignite growth that fell in the second quarter to the slowest in three years. The strategy already is sparking unfair-trade charges by Western rivals.

First, it’s a stupid strategy. They are producing an excess amount of steel and thus lowering prices in the process, making it likely unprofitable were it not for the government’s money. This is a perfect example of malinvestment - resources poorly allocated (the money could be used somewhere else) due to cheap credit or in this case government stimulus.

Second, although difficult for steel mill employees and owners to see, it is actually beneficial to the markets the steel is being exported too. By overproducing and exporting the steel at a subsidized price to the United States market, U.S. consumers are likely to see the price of anything built with steel to go down. This allows U.S. consumers to either save, invest, or spend this extra money elsewhere. Savings and investment are the lifeblood to an economy.

Filed under austrian economics malinvestment economics

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Intelligence vs. Wisdom

What is intelligence and what is wisdom? I like to think of it like this:

"Paul Krugman is smart as a whip, but he doesn’t know shit."

That may be giving too much credit to his intelligence, but you get the idea.

Filed under Paul Krugman

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President Obama, the Arbiture of Fairness

“When you’re president, as opposed to the head of a private-equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot,” Obama said in Chicago at a NATO press conference.

Cory Booker comments: How badly have they hurt President Obama?

The President has it wrong. As President, your job is NOT to figure out how to give everybody in the country a fair shot. Fairness and freedom are completely different concepts. One does not necessarily complement the other. What is fair to one person, may not be fair to another. So to make things fair for one person most likely means taking something from the other.

No, as President your job is to figure out how to give everybody the FREEDOM to pursue whatever make them happy. This means the freedom to succeed as well as the freedom to fail. And their success or failure should not be any of your concern.

And if “fairness” is a job requirement, then the President is doing a terrible job. It is not “fair” that a bank or car company get significant help from the government in order to stay in business, while a local floral shop or other small business does not. It is not “fair” that the president can talk about using drugs on Jimmy Fallon while others languish in prison for doing the same thing as a result of the “war on drugs” as pursued under President Obama.

Filed under politics Obama Fairness

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On Ron Paul & Fences Keeping Us In

Does anyone remember in the GOP debates when Ron Paul said something about walls built to keep people in?

“Every time you think about this toughness on the border and ID cards and REAL IDs, think it’s a penalty against the American people too. I think this fence business is designed and may well be used against us and keep us in. In economic turmoil, the people want to leave with their capital and there’s capital controls and there’s people controls. Every time you think about the fence, think about the fences being used against us, keeping us in.”

Everyone thought, “who is this crazy old man who thinks the government is going to try and keep people from leaving the country?”

Is Ron Paul really that crazy? It seems to me that Senator Schumer and Casey’s Ex-PATRIOT Act is doing what Ron Paul predicted.

Two senators want to stop Facebook’s Saverin from dodging taxes

"This is a great American success story gone wrong," Schumer said. "Mr. Saverin wants to de-friend the United States just to avoid paying taxes, and we’re not going to let him get away with it."

[…]

Schumer and Casey’s bill is called the Expatriation Prevention by Abolishing the Tax-Related Incentives for Offshore Tenancy Act, a name designed to produce the acronym Ex-PATRIOT Act.

Anyone who renounces U.S. citizenship and has a net worth of at least $2 million or an average income-tax liability of at least $148,000 over the previous five years would be presumed by the Internal Revenue Service to have done so to avoid paying taxes.

People who could not prove another reason for renouncing citizenship would face a 30% tax on future capital gains on U.S. investments — twice the current 15% rate — and be barred from receiving a visa to enter the country.

"Under current law, Mr. Saverin would get away for free. But Sen. Casey and I have a status upgrade for him — Pay your taxes in full or don’t ever try to visit the U.S. again," Schumer said. "The despicable trend that Saverin exhibits must be stopped dead in its tracks."

Only in a society where the people serve the government, instead of the government serving the people, does the government have a claim on an individuals wealth. And I’m not just talking about taxes. Saverin is in fact paying all of the taxes required of him by law. I am talking about Schumer and Casey’s greed and their insatiable demand for more.

If man is born free, if it is a Right given by his Creator as our Declaration of Independence so eloquently surmises, then what claim does government have on anything that is his?

Filed under politics Ron Paul Eduardo Saverin Taxes

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HA! Like the GOP wants to balance the budget. Good one Horsey. And excellent point about subsidies to farmers.
disobey:

This cartoon is terribly distracting from the real issue. Our federal government pays out an incredible amount of money each year in subsidies to american farmers, which pays them not to produce food - in order to keep food prices high. What kind of backwards, idiotic, power-hungry organization spends billions paying food producers not to produce food so food prices will stay artificially high, at the same time that it spends billions on programs to feed those who cannot afford to feed their families? Let that one stew over in your noggin.

HA! Like the GOP wants to balance the budget. Good one Horsey. And excellent point about subsidies to farmers.

disobey:

This cartoon is terribly distracting from the real issue. Our federal government pays out an incredible amount of money each year in subsidies to american farmers, which pays them not to produce food - in order to keep food prices high. What kind of backwards, idiotic, power-hungry organization spends billions paying food producers not to produce food so food prices will stay artificially high, at the same time that it spends billions on programs to feed those who cannot afford to feed their families? Let that one stew over in your noggin.

(Source: cartoonpolitics, via unapologeticallylibertarian)

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Drones Kill More Than Terrorists

A good article in Rolling Stone this month about drone strikes and the Obama administration’s use (abuse) of them.

The Rise of the Killer Drones: How America Goes to War in Secret

In his first three years, Obama has unleashed 268 covert drone strikes, five times the total George W. Bush ordered during his eight years in office. All told, drones have been used to kill more than 3,000 people designated as terrorists, including at least four U.S. citizens. In the process, according to human rights groups, they have also claimed the lives of more than 800 civilians. Obama’s drone program, in fact, amounts to the largest unmanned aerial offensive ever conducted in military history; never have so few killed so many by remote control.

Many of the civilians, including at least one of the U.S. Citizens killed, have been children. But what is SOO frustrating to me is that all those people who were so fired up and angry about George W. Bush, could give a shit that Obama does the exact same things, if not worse. Where did the anti-war movement go?

Here is the end of the article which pretty much sums up the Obama Presidency for me.

Many who oversee the drone program, in fact, seem to have little but contempt for those who worry about the poten­tial dangers presented by drones. At a human rights seminar at Columbia University last summer, John Radsan, a former attorney for the CIA, admitted that the agency has no interest in debating the legal niceties of drone strikes. “The CIA is laughing at you guys,” he told the assembled human rights lawyers. “You’re worried about international law, and the CIA is laughing.” A White House official I spoke with is even more dismissive. “If Anwar al-Awlaki is your poster boy for why we shouldn’t do drone strikes,” the official tells me, “good fucking luck.”

If the targeted killing of al-­Awlaki doesn’t inspire sympathy, given his alleged connections to Al Qaeda, then consider the case of Tariq Aziz, a 16-year-old boy from Pakistan. In April 2010, one of Tariq’s cousins was killed in a drone strike. Believing that his cousin was innocent, and not involved in any insurgent activities, Tariq joined a group of tribal elders last October at a meeting in Islamabad organized by Reprieve, the human rights group. Neil Williams, a volunteer for Reprieve, spent an hour speaking with Tariq at the meeting.

"We started talking about soccer," Williams recalls. "He told me he played for New Zealand. The teams they played with from the village had all taken names from football clubs, like Brazil or Manchester United."

Tariq and other teenagers at the meeting told Williams how they lived in fear of drones. They could hear them at night over their homes in Waziristan, buzzing for hours like aerial lawn mowers. An explosion could strike at any moment, anywhere, without warning. “Tariq really didn’t want to be going back home,” Williams says. “He’d hear the drones three or four times a day.”

Three days after the conference, Williams received an e-mail. Tariq had been killed in a drone strike while he was on his way to pick up his aunt. It appears that he wasn’t the intended target of the strike: Those who met Tariq suspect he was simply in the wrong place at the wrong time, especially since his 12-year-old cousin was also killed in the blast.

The Obama administration has no comment on the killing of Tariq Aziz, even though his death raises the most significant question of all. Drones offer the government an advanced and precise technology in its War on Terror – yet many of those killed by drones don’t appear to be terrorists at all. In fact, according to a detailed study of drone victims compiled by the Bureau for Investigative Journalism, at least 174 of those executed by drones were under the age of 18 – in other words, children. Estimates by human rights groups that include adults who were likely civilians put the toll of innocent victims at more than 800. U.S. officials hotly dismiss such figures – “bullshit,” one senior administration official told me. Brennan, one of Obama’s top counterterrorism advisers, absurdly insisted last June that there hadn’t been “a single civilian” killed by drones in the previous year.

For Nasser al-Awlaki, who lost his teenage grandson to a predator drone, such denials are almost as shocking as the administration’s deliberate decision to wage a remote-control war that would inevitably result in the deaths of innocent civilians. "I could not believe America could do this – especially President Obama, who I liked very much," he says. "When he was elected, I thought he would solve all the problems of the world."

You’re not alone. Most American’s refuse to believe it as well.

Filed under Obama Drones Politics Terrorism

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Subsidies and Solar’s Decline

What happens when you flood a market with government loans and subsidies - both to consumers and manufacturers? You distort the market. People take risks they normally would not because it’s not their money. Good money starts to follow bad. You create bubbles that will eventually burst. This is what is happening in solar right now.

First Solar Latest Casualty in Renewable Energy Shakeout

Solar manufacturers, which expanded rapidly to meet double- digit demand growth in the past decade, are struggling with subsidy cuts in Europe and plunging natural-gas prices that make renewable energy less competitive. The largest producers in China say their profits will slump this year as shipments grow.

“Oversupply has become a problem for the entire industry,” said Ben Schuman, an analyst at Pacific Crest Securities LLC in Portland, Oregon. “China’s manufacturers have not demonstrated rational behavior.”

The best way to create green jobs, or any other kind of job, is to let the markets handle it. Politicians can not see the future. A politician - even the President - knows less about the solar market and the potential risks involved than investors who are willing to risk their own money. If they could tell the future, they would be starting their own solar companies and would be rich.

Filed under economics subsidies First Solar politics