March 1, 2011

Monetary Economics in One Lesson

Posted by Dr. Roy Cordato at 5:02 PM

If you are curious about what is going on with monetary policy and how, despite what Bernanke is telling us, it is causing inflation that will get worse, see this article at the Foundation for Economic Education by the Cato Institute's Gerald O'Driscoll. What O'Driscoll points out is that where inflation is really hitting, for now, is not in the US but overseas. This is because most other currencies are, in one way or another, tied to the dollar. As he points out:

The currencies of many countries are pegged to the dollar. Their exchange rates are either a constant or change only slowly. The Hong Kong dollar is an example of the former, the Chinese yuan, of the latter. Even so-called floating currencies are not really floating. Central banks intervene to prevent their value from rising rapidly against a flagging U.S. dollar. The only important central bank that seems to be letting its currency float freely against the U.S. dollar is the Swiss, and the Swiss franc is appreciating against the dollar fairly steadily. Thus, as a practical matter, when the Fed creates dollars it results in an increased money supply in other countries. It is not necessarily one for one, but it is proportional. The Fed’s low-interest policy has fueled not only a commodities boom, but a real-estate bubble in Asian countries and elsewhere. 

As O'Driscoll further notes:

global food production and prices have been rising. Rising prices and output reflect rising demand relative to supply. Second, nearly all commodities, not just agricultural commodities, have been caught in a monetary updraft. Along with food prices, we have seen rising prices of oil (even before the Middle East turmoil), gold, silver, copper, and a whole range of other commodities used in production. 

An important point here is do not be misled by people pointing to absurd Keynesian concepts such as "cost push" or "demand pull" inflation. As Milton Friedman has always pointed out "inflation is always and everywhere a monetary phenomenon." Responsibility for the stagflation that is likely to come will rest squarely in the lap of the Obama/Bush appointee, Ben Bernanke.

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The feds keep wasting taxpayer money

Posted by George Leef at 4:30 PM

In this sharp essay on Minding the Campus, history professor KC Johnson writes about a recent conference funded by a National Science Foundation grant of $50,000 addressing the critical subject of how "underrepresented minority" professors in political science can best go about getting tenure.

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JLF, Cato, Goldwater experts rebut A.G. Cooper's arguments about House Bill 2

Posted by Mitch Kokai at 2:33 PM

Experts from the John Locke Foundation, the libertarian Cato Institute, and the Goldwater Institute's Center for Constitutional Litigation have written letters to Gov. Bev Perdue to counter a memo the governor received last week from Attorney General Roy Cooper.

Cooper argued that House Bill 2, the North Carolina Health Care Protection Act, is unconstitutional and could threaten the state's Medicaid funding.

Learn here why the JLF, Cato, and Goldwater experts believe Cooper's analysis is "incomplete" and his concerns are "unfounded." Daren Bakst also shares his responses to the attorney general's arguments in the video clip below.

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Borders cites Milton Friedman on unions

Posted by Mitch Kokai at 12:36 AM

Max Borders' latest Ideas Matter update includes an item focusing on Milton Friedman's stance on unions:

What would Milton Friedman have said about all this business in Wisconsin? Well, this classic narration from Free To Choose gives us a clue. Friedman says unions operate at the expense of competing workers and consumers. He also says government employees operate at the expense of taxpayers. What about unionized government employees? We can only surmise they operate at the expense of everyone.

Elsewhere, I write about how the market determines the price of labor. How should it be determined in the public sector?

According to the unions of Wisconsin and other states, the price of your labor should be determined by a mixture of political maneuvering and legal extortion. That’s sad. And the citizens of Wisconsin have to pay for that false idea with the fruits of their own labors.

Perhaps I'm biased because I'm southern. The New South was not built on union labor. But I also make a fraction of what the average Wisconsin teacher makes, even though I work about 60 more days a year. The relative value of my labor and a teacher's labor should be up to the market to decide. But until that day, I reserve the right to be bitter about public salaries determined by crude, venal politics.

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Charles Koch speaks out

Posted by George Leef at 10:21 AM

Today's Wall Street Journal features this op-ed by Charles Koch. In it, he explains why he and his family support the movement to depoliticize the US, to eliminate the corrupt and wasteful crony capitalism that infects us, and to restore economic liberty that has been lost steadily under both Democrats and Republicans.

Koch makes a strong and principled argument. Alas, that won't cause a moment's pause in the ferocious Two Minute Hate (I'm referring to Orwell's 1984) that the partisans of the mega-state have whipped up against him and his brother David. Debating whether the US is better off with a constantly expanding government -- one that claims the right to force people to buy particular products for the supposed common good -- is the last thing Obama, Rich Trumka and their ilk want to do. Depicting their adversaries as demons is much easier and more effective

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N.C. Court of Appeals rules against Revenue Department in $7.3 million tax dispute

Posted by Mitch Kokai at 10:00 AM

A unanimous three-judge panel of the N.C. Court of Appeals has affirmed a lower-court ruling forcing the N.C. Department of Revenue to refund $7.3 million — plus interest — for sales and franchise taxes wrongly assessed to the Cape Hatteras Electric Membership Corporation since 2000.

In other opinions released this morning:

• A three-judge panel unanimously ruled against Charlotte in a condemnation dispute.
  
• A three-judge panel unanimously dismissed an appeal against Durham's City-County Board of Adjustment.
• A three-judge panel unanimously affirmed a ruling favoring Food Lion in a negligence suit involving a customer who slipped on spilled soda while shopping,
  
• A three-judge panel unanimously dimissed an appeal from Hendrick Automotive Group in a worker's compensation dispute.
  
• A three-judge panel unanimously affirmed a ruling from the N.C. Industrial Commission favoring Goodyear Tire in a worker's compensation dispute.
  

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If congestion pricing is so great...

Posted by Joseph Coletti at 09:38 AM

Megan McArdle asks, If Congestion Pricing is So Great, Why Don't Businesses Do It?

McArdle recognizes that airlines use peak pricing, but quotes Timothy Lee to say that grocery stores don't. But Lee's focus is too narrow in both channel and pricing.

Grocery stores have self-serve lanes that act like congestion pricing, though using customer labor to reduce costs in the store instead of taking customer dollars to pay for the higher costs.

Many stores, such as Harris Teeter, also allow people to purchase groceries online and pick them up at the store. Amazon.com continues to refine its grocery delivery business, too.

Also, congestion pricing happens through different channels. Convenience stores have higher prices than grocery stores, and warehouse clubs work like HOV lanes.

So businesses use congestion pricing, you just have to recognize it.

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School lunch program and husky kids

Posted by Dr. Terry Stoops at 08:23 AM

From the Washington Examiner's Daily Outrage feature.

The Daily Outrage: Fat kids from a fat government

Who: U.S. Department of Agriculture

What: The USDA's National School Lunch Program provides funding for school lunches and its nutritional guidelines in a joint effort with first lady Michelle Obama to fight childhood obesity.

Why it's an outrage: USDA research found that the 30 million children who eat these lunches are actually more likely to become overweight.

Where to vent: Call the USDA inspector general at 202-720-8001.

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Walter Williams on public employee unions

Posted by George Leef at 07:54 AM

Professor Williams brings his usual acute analysis to the question of public employee unions, explaining why they are such a bad idea here. Bad idea, that is, if you are a taxpayer. On the other hand, for politicians looking for powerful, militant allies who will help keep you in office as long as you succor them, they're a splendid idea.

One phrase that recurs throughout the debate over public sector unions is "collective bargaining rights." Sorry, but there is no such "right." For any contract to be valid, it requires voluntary agreement in full, and that includes the matter of how the negotiations are conducted. If one party, whether an individual, a company, or a governmental unit says that it will negotiate with other individuals but not en masse or through an intermediary (an agent, such as a union), the other side has no right to compel it to bargain otherwise. Under the law of contracts, either party may say "no" to any aspect of a proposed deal, include how it will be negotiated. The fact that we so often hear about "collective bargaining rights" is a reflection of how far the coercion that organized labor champions has seeped into our thinking.

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A must-read for A.G. Cooper

Posted by Mitch Kokai at 06:53 AM

The first blow: the 2010 election. Blow No. 2? The House’s vote to repeal the health care legislation. Blow No. 3? A pair of judicial rulings against the law.

The first decision by Judge Henry Hudson in response to a suit filed by the state of Virginia said that the so-called “individual mandate — the requirement that every American be required by law to purchase health insurance — was unconstitutional.” But Hudson stopped there — while he struck down the mandate, he ruled that the rest of the law should remain in place.

Liberals were unhappy with the decision, to be sure, and were quick to point out it was only one decision and that Hudson was a Republican appointee. Even so, they were relatively restrained in their objections, perhaps because they understood that Hudson’s decision itself was relatively restrained. Liberal blogger Ezra Klein, for example, said he found it “a far cry from a world in which the Supreme Court strikes down the whole of the health-care law.”

If this were Shakespeare, Klein’s comment would have been followed by the stage direction “Enter Vinson.” On January 31, Judge Roger Vinson issued a 78-page judicial avalanche of a decision in a separate case brought by 26 states acting in concert, citing The Federalist Papers, Madison, Hamilton, and the Constitution as part of his reasoning. In his opinion, Judge Vinson agreed with Judge Hudson and with the states “that Congress exceeded the bounds of its authority in passing the Act with the individual mandate.”

But he went further, overturning not just the mandate but the entire bill. Using the metaphor of a finely crafted watch, he determined that ObamaCare “has approximately 450 separate pieces, but one essential piece (the individual mandate) is defective and must be removed.” He made the point even sharper by noting that it was the Obama administration that had argued — “at least 14 times in its motion” — how crucial the mandate was to the working of the law. He also made clear that “this case is not about whether the Act is wise or unwise legislation. It is about the Constitutional role of the federal government.”

Before Cooper took his public stance against enforcing House Bill 2, the General Assembly’s effort to exempt North Carolinians from ObamaCare’s individual health insurance mandate, John Hood discussed the implications of the Vinson ruling with Donna Martinez for Carolina Journal Radio.

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Lefty law schools

Posted by Mitch Kokai at 06:51 AM

Among its most interesting passages is one responding to Yale Law School dean Harold Koh’s 2005 speech to incoming students, during which Koh welcomed the new class as “citizens of the republic of conscience.”

If the modern elite law school really counts as a republic of conscience, it is very nearly a one-party republic: Democrats at last count outnumbered Republicans 28 to 1 on the Stanford faculty, 23 to 1 at Columbia, while Harvard is said to have gone 30 years without hiring a single Republican (even as it formed a panel to fret about the need for more faculty diversity of other kinds). In 2008, law professors donated somewhere between 10 to 20 times as much to Democratic as to GOP White House contenders.

Olson’s musings about law school bring to mind Donna Martinez’s recent interview with George Leef, which focused on the extent to which law schools oversell the value of their degrees.

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Overlooking international threats

Posted by Mitch Kokai at 06:50 AM

Among them is the notion that “winning” the Cold War led to some finality in the competition with Russia:

[F]or their part, conservatives have been basking in the glow of “winning the Cold War.” But in what sense was it won, it might be asked, given that we neither disarmed Russia of its nuclear arsenal nor put a stop to its active measures to undermine us. The transformation of some of the former captive nations into liberal democracies is certainly worth celebrating, but given the Russian government’s brutally repressive domestic policies and strengthened alliances with America’s enemies abroad over the past 20 years, conservatives have overdone it.

Perhaps it is not surprising, then, that our policy toward Russia has been exceedingly foolish. For the past two decades we have paid the Russians to dismantle nuclear warheads they would have dismantled anyway, while they have used those resources to modernize their ballistic missiles. On our part, we have not even tested a nuclear warhead since 1992—which is to say that we aren’t certain they work anymore. Nor have we maintained any tactical nuclear weapons. Nor, to repeat, have we built the missile defense system first proposed by President Reagan.

Just last month, with bipartisan backing from members of the foreign policy establishment, the Senate ratified the New Start Treaty, which will further reduce our nuclear arsenal and will almost certainly cause further delays in building missile defenses—and this with a nation that engages in massive deception against us, supports our enemies, and builds ever more advanced nuclear weapons.

Kennedy also outlines concerns about Islamic extremists and Chinese military developments. If you’re looking for a bright side, you might want to revisit Victor David Hanson’s recent observations about “American decline.”

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New Carolina Journal Online features

Posted by Mitch Kokai at 06:43 AM

Anthony Greco's latest Carolina Journal Online exclusive focuses on a bill to require North Carolina voters to show photo identification when they head to the polls. 

John Hood's Daily Journal explains why North Carolina officials must pay attention to other states and nations when setting government policies.

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