Greece’s Problems Explained in Six Charts (and one movie clip)

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See, now that we know what the problems are, getting the whole Greek economic crisis thing under control should be pretty easy.


Mohamed El-Erian says the Greek “no” vote is like this scene from the classic movie Network.

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Nancy Pelosi’s Life in the 0.1 Percent

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Ms. Pelosi has played the crony capitalism game well. The way she sees it – I promise you this is how she sees it – she’s just doing well, while doing good.

It’s the tune of many a crony.

“See, it’s OK that I live like this, even though I rail against the ‘rich,’ because I am one of the good guys. I’m for more money for welfare, and all sorts of other government programs to help the peasantry…er…the American people. I’m not like those terrible small government people with their tacky attachment to bourgeois values.”

But the enlightened, alas, must suffer such imbeciles. Sigh.

Now where is that lovely 1999 pinot? Just thinking about those teabaggers makes me want to drink.”

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James Grant Sets Stick of Dynamite to Bush/Obamanomics

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In his new book, The Forgotten Depression, economic writer James Grant, editor of the prestigious Grant’s Interest Rate Observer, gives us the history of the depression of 1920-21.

It was a very deep depression, as deep as the one that succeeded in 1929. But in this case, the government did not intervene, and it was over in less than two years. Was this a coincidence? Grant does not think it was. He believes, as this writer does, that present government interventions have deepened our current economic malaise and are retarding a full recovery.

Economic orthodoxy, which is eagerly embraced by virtually all governments today, says that the remedy for economic slumps is for government to print more money, enable more debt, and directly spend more money. This is right out of the playbook of British economist John Maynard Keynes, who died 69 years ago.

The curious thing about Keynes’s ideas is that there is nothing even remotely scientific about them. There isn’t even logic or fact to support them.

One of Keynes’s assertions was that a slump without government intervention would just keep getting worse and worse. Yet a brilliant Keynesian disciple, Franco Modigliani, refuted that idea even before the master’s death in 1946.

In 1962, economist Milton Friedman said about Keynesian remedies: “I know of no… coherent or organized body of evidence justifying them…. [They] cannot be demonstrated to be true by logical considerations alone, [and] have never been documented by empirical evidence….” This statement remains as valid today as it was 53 years ago.

The usual argument contemporary Keynesians fall back on is that as bad as things are, they would be worse without their interventions. And surely, in the face of an economic crash, you wouldn’t suggest that the government do nothing, would you?

This kind of fact-free non-argument can be hard to rebut, but James Grant’s book is a powerful and fully documented rebuttal. In the case of the 1920 depression, the government did nothing, or if anything the opposite of what Keynesians would advise, for example by cutting its expenditure, and the patient revived quickly. In 1929 and again in 2008, the government did the opposite, and the patient either did not recover for more than a decade or has yet to recover.

Yes, the government did the opposite in 1929, despite what you were taught in school. The myth that President Hoover refused to intervene is just that: a myth. His interventions were not essentially different from those that followed from the Roosevelt administration. Popular British historian Paul Johnson explains this in his history of America, and the full record may be found in economist Murray Rothbard’s book on the Great Depression.

To understand why it is better not to intervene, one has to realize that most slumps are caused in the first place by two problems. First the government long ago intervened in the economy to create a financial system (the so-called fractional reserve system) which is inherently unstable. It then compounds the problem by creating far too much money, which enters the economy as debt, and which leads first to economic bubble and then to bust.

It should be obvious that a problem caused by too much government money creation, debt, and reckless spending cannot be solved by more of the same. These policies may make the patient feel better temporarily, just as another dose of heroin will stop withdrawal, but withdrawal is actually what the patient needs.

In the same way, when an economy crashes, it is because something is very wrong. The ensuing recession is not the problem; it is the cure. Bad debts and bad investments are liquidated so that a real recovery can follow. Assets do not disappear. Reckless investors lose them but prudent investors acquire them and make better use of them.

If the recession following the dot com crash of 2000 had not been stopped by the Greenspan Federal Reserve and the Bush administration, we would not have had the housing bubble and crash, and if that recession had not been stopped with massive stimulus, we might by now have a flourishing economy.

Recessions are indeed painful. But, like a fever, they are part of the cure. The cure, if left to run its own course, need not take a long time, as Grant’s history of the 1920 Depression shows.

This book is not only indispensable economic and American history. It is also, like all of Grant’s books, very pleasurable reading, full of colorful characters, wit, and the telling detail.

Germany and France huddle to figure out what to do in wake of Greek “NO” vote.

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Armageddon? Probably not. End of the euro? Probably not. End of the United States of Europe? Probably not. A moment of reality for world markets which have existed for too long in a fairy land? Very possible.

If nothing else this vote is refreshing. (Easy for us to use such terms.)

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What Is an American?


On this Independence Day eve it’s a good question to ponder. I believe being “American” means that one adheres generally to the values and spirit embodied in the Declaration of Independence and in the Constitution. We embrace personal liberty, tolerance, respect for property rights, rule of law, and equality under the law.

Ed Hudgins has some more thoughts on the subject.

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The Grateful Dead were innovators in technology and in business, fundamentally friends of liberty

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After 50 years the Grateful Dead, what is left of the Dead, is calling it quits officially. The music will stop at Soldier Field on July 5th. It’s a sad moment for me as there is no other band I have enjoyed as much over the years. Really no band comes close.

One of the main reasons for this is because there is so much material to discover. There are only so many Beatles albums to appreciate. With the Dead, the albums aren’t even the most important part.

The Dead openly allowed fans – deadheads – to record their shows from the audience. This stood in contrast to most music artists at the time. (And even now.) This openness resulted in a fascinating documentation of the band through the decades. For instance I can tell you within a few seconds if a particular song was preformed in the early 70s, late 70s, 80s etc. and I am no where near the connoisseur that some are.

The band gave the music to the audience for a fee and the audience in turn took the product and spread the word. In time the Grateful Dead, a band which never had a number one song, would become the top earning act on tour for years. (Or close to it.) The Dead encouraged sharing. Really it deployed a kind of “freemium” business model – though they probably didn’t do it on purpose.  The band was (is) a trailblazer in what would become today’s sharing economy. They were 25 years ahead of the curve.

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Jerry and the boys were pioneering capitalists. (Though they might balk at the term – but maybe not.) And it’s one of the reasons, in addition to the music, that the Grateful Dead hold a special place in my heart.

Fare thee well guys.

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Obamacare Bonzanza: Fat times in the health insurance industry

The more complicated a government program, the more crony it is.

The more complicated a government program, the more crony it is.

So let’s see…Obamacare has infused the health insurance companies with heaps and heaps of taxpayer dollars. Big Pharma has done almost equally as well under the cronycare regime. Premiums for terrible policies – which as I see it could largely be bought for the same or lower prices before Obamacare – are going up.

Yup, this thing worked out great.

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AFL-CIO leader tries to quell pro-Sanders revolt

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All of a sudden things have gotten very interesting in the race for the Democratic presidential nomination. Hillary looks vulnerable. Soros is calling in the money cavalry for Ms. Clinton. The AFL-CIO is even afraid that local chapters are going to go rogue and start endorsing Bernie Sanders. Inevitability has given way to concern if not panic in the Ready for Hillary camp.

The debates should be fun.

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