Policy Choices Determine Prosperity or Poverty

While there are many competing explanations for widespread & persistent poverty (e.g., lack of education, absence of democracy, overpopulation, etc), none of them strikes at the heart of what keeps people from improving their own lives. As it is, no poor person awakes each day with the desire to remain poor. Presumably, if given the chance, they will do what they can to improve their own lives & that of their families.

People are poor because they do not have jobs (or cannot engage in income-earning trades, usually due to regulations).

There are not enough jobs because there are too few new businesses being created to employ more people.

There are too few businesses being created because there is insufficient capital accumulation (or the taxation/regulation regime is too burdensome).

There is insufficient capital accumulation due to government policies.

And so, people are poor because governments make the wrong choices.

I have developed an instinct that whenever there are persistent economic or political or social imbalances, I look for a government policy that stops people from solving problems.

Zero-Interest Rate Policy (ZIRP) & Quantitative Easing (QE) Support Increased Deficits & Debts to Fund America’s Wars

The American government is fighting multiple wars that are both endless & costly. Any sort of government spending tends to provide incenctives for thos groups that prosper from that spending to engage in strong lobbying pressure to maintain or increase spending levels, even if there is evidence that that few, if any, of the objectives are met.

Consider the “War on Poverty”:
America spent $22T on “War on Poverty” (in constant 2012 dollars), when adjusted for inflation, the amount is 3 times more than spent on all wars after 1776
More than 100 million Americans, about 1/3 of the US population, received aid at an average cost of $9,000 per recipient in 2013.

US Census data indicate that 14% of Americans remain poor, i.e., the present poverty rate is about same as in 1967 just after the beginning of the “War on Poverty”.

Global spending for drug law enforcement, i.e., the “War on Drugs”, exceeds $100 billion each year. Drug use continues unabated & has increased over the entire time in the USA.

From FY 2001 – FY 2014, spending on the Overseas Contingency Operations, i.e., the “War on Terror”, to pay for wars in Iraq and Afghanistan was $1.492T

Much of this spending depends on the capacity of the US Federal government to borrow funds at near-zero interest rates to support fiscal deficits that continue to add to a massive amount of public-sector debt.

If you hate wars, military or otherwise, something must be done to rein in monetary mischief undertaken by the US & other central banks.

AbeNomics: More of the Same & Continued Failures of Mainstream Economics

Japan’s central bank (BOJ) has been fighting a Quixotic battle against an imaginary nemesis: price deflation (data suggests stable prices, NOT a trend for falling prices!!!).

As part of ultra-loose monetary policy, BOJs policy interest rate has not been above 1% for nearly 18 years.

During the 1990s, there were 10 fiscal stimulus packages worth more than 100T yen that aimed to cure recession & fight “deflation” (note to USA: most of the spending was on “shovel-ready” public works!) … .

Stimulus packages (i.e., fiscal deficits) have remained the policy du jour in Japan until now … .

AbeNomics is more of the same old tired Keynesian recipes, including a dose of yen devaluation that did not achieve its desired effect. What happened was that there was no rise in exports while Japan’s trade & current account surplus have decreased … !

Meanwhile, Japan’s economic growth remains far BELOW trend since 1989 … all of the above are consistent with the playbook of conventional, mainstream economic policies … this suggests a fundamental failure of economic models to grasp the nature of recession, bubbles, etc

Hayek on Friedman’s View of Central Banks

Central bankers like to invoke Milton Friedman’s views as an excuse for their own monetary mischief.

F.A. Hayek saw that there were problems with Friedman’s claims of the superiority of a fixed rate of growth in the money stock as the basis of macroeconomic stability.

“I wish I could share the confidence of my friend Milton Friedman who thinks that one could deprive the monetary authorities, in order to prevent the abuse of their powers for political purposes, of all discretionary powers by prescribing the amount of money they may & should add to circulation in any one year. It seems to me that he regards this as practicable because he has become used for statistical purposes to draw a sharp distinction between what is to be regarded as money & what is not. This distinction does not exist in the real world. I believe that, to ensure the convertibility of all kinds of near-money into real money, which is necessary if we are to avoid severe liquidity crises or panics, the monetary authorities must be given some discretion. But I agree with Friedman that we will have to try and get back to a more or less automatic system for regulating the quantity of money in ordinary times.”

~F.A. Hayek~ “Full Empoyment at Any Price”


Armistice & Amnesty for the Drug War, NOW … !!!

The failures of the Drug War to meet its ends & the massive “collateral damage” to civil rights & good governance provide ample evidence that ending this internicine war waged by governments against citizens must end, NOW!

Students for Liberty have begun to focus on resolving the injustices, inefficiencies & stupidities associated with the Drug War. This coincides with the development of a broad & growoing consensus that drug use should not be treated as a criminalized.

When it comes to addiction, drug usage should be viewed as a medical issue NOT a criminal issue. Imagine that the law demanded that alcoholics be jailed because of their consumption. Portugal took the brave step of decriminalizing ALL drugs in 2001.

While medical marijuana use has been approved in at least 23 states of the USA with Washington & Colorado allowing markets to form for recreational use, tragically & amazingly, there has NOT been blanket amnesty in Washington or Colorado for those jailed under Drug War! This is an unjustice that must be remedied!!!

Even some law enforcement officials are part of the movement to decriminalize drugs.

Among the many egregious problems associated with the Drug War:

Rather than allow the emergence of peaceful, open markets for drugs, black markets arose based on violence and force.

Violent cartels or gangs replaced innovative entrepreneurial offerings in transparent markets that were accountable to open competition.

Instead of government agents defending citizens, governments have jailed many nonviolent drug offenders.

The War On Drugs led to an expanding domestic police force within the US that has become increasingly militarized with SWAT teams used on drug raids.

Evidence shows that the War on Drugs failed in its primary purpose & all related purposes. While drug usage has remained at least constant, drug prices have dropped.

Prison populations are higher & about 1 in every 4 prisoners are nonviolent drug offenders that possessed or consumed an arbitrarily illegal substance. Among these, minorities are heavily over-represented relative to their percentage of total population.

End the War on Drugs, NOW!!!