24 May 2016

On the Record | Donald Trump addresses America’s Debt

Please see my latest post for the Quarterly Review, ‘Donald Trump addresses America’s Debt’:

‘The Open Conspiracy.’ That is what Henry Hazlitt, the renowned New York journalist, called the political effort to ‘monetise the debt’ by inflating the currency so that U.S. government debts incurred to-day will cost less to pay to-morrow; or, as is the case, years into the future — if ever.

But in an interview with CNBC on 5th May, Donald Trump, presumptive Republican presidential candidate, took a swing at the conspiracy by matter-of-factly stating that, as President, he would seek to restructure the payment of U.S. Treasury bonds at lower returns.

Trump then cracked the conspiracy wide open four days later, acknowledging America’s — and all countries with fiat money — dirty little secret: ‘you never have to default because you print the money’.

And, in the process, Trump unleashed yet more political opprobrium upon his head.

Read more…


My thanks to Dr Leslie Jones of the Quarterly Review; and my appreciation to Professor Steven Kates of RMIT University for guidance on calculating inflation.

04 May 2016

On the Record | Government Greed Axes the Golden Goose

Please see my latest post for the Quarterly Review, ‘Government Greed Axes the Golden Goose’:

President Barack Obama mounted the bully pulpit again last month, to decry the practice of ‘tax inversion’ and those corporations with the effrontery to believe in private property and the profit motive, thus escaping exorbitant tax bills by moving operations out of the United States for the welcoming low-tax jurisdictions of foreign lands.

According to an AP News report:

“Obama called it ‘one of the most insidious tax loopholes out there’ because it shortchanges the country. He said less tax revenue means the government can’t fully spend on schools, transportation networks and other things to keep the economy strong. He said the practice also hurts middle-class Americans because ‘that lost revenue has to be made up somewhere.’”

Oh, dear! Where does one begin to enumerate President Obama’s recurring penchant for economic (and constitutional) illiteracy?

Read more…


My thanks to Dr Leslie Jones of the Quarterly Review.

27 April 2016

Albany pranked New York in cruel April Fools’ Day joke

New Yorkers awoke on the first day of April with news that, among those budgetary items Governor Andrew Cuomo tentatively finalised with the legislature, was an increase in the hourly minimum wage (staggered across industries and jurisdictions over the next six years), from $9 to $15 — the cruellest of April Fools’ Day jokes, with consequences lasting more than a day and afflicting more than the targeted beneficiaries.

Governor Cuomo, speaking of the plan at a January rally, took aim at critics by a populist appeal. ‘We are going to do it for the State of New York, we are going to lead the way for this nation, we are going to restore honor and dignity and respect to the workers, we are going to say to this country, “You can do very well on the top level and you can also rise up the bottom level.”’

As Cuomo doubtless knows but heeds not, the arguments against the minimum wage are legion: that it hurts the working poor, that it penalises workers with low skills, and that it bars young job-seekers (particularly the marginalised) from gaining valuable experience and work-habits — criticisms that are all well-rehearsed, but no less true.

Yet in laying out the case for the minimum wage, Governor Cuomo raised issues that are further proof that state intervention into markets only compounds problems the political process purported to fix. He is not alone, for it must be a prerequisite of political office to misjudge the organic nature of market operations.

The market is a clearinghouse, with individuals offering each other what they have — be it goods and services — for what they need. Barter was the modus operandi at the beginning; with various media being introduced in time to facilitate transactions. But in its essence, exchange means exchange. You can only buy if you have something to sell and cannot sell if you price yourself out of the market.

But through its economic interventions, the State has priced the poor out of market, and in many cases (such as the minimum wage), have left them nothing to exchange (e.g., their labour). The only thing left they have to barter is their vote, and in this exchange, between the individual and the political process, the parties are unevenly matched.

‘The minimum wage doesn’t even work numerically in this State,’ bewailed the Governor. ‘This is below a subsistence level. You can’t make it on a minimum wage job. You need two, three, four minimum wage jobs to actually make it, and that’s not what the minimum wage was all about.’

However, if the market were allowed free scope, buyers and sellers would have to reach agreement, or else neither would be able to exchange. What impediments stand in their way?

At January’s announcement, Cuomo pointed the finger at businesses that ‘make money on the minimum wage’, noting that ‘McDonalds pays a minimum wage, but at the minimum wage in this State, you are still below the poverty level. So this State then, with tax dollars, gives you a welfare payment, food stamp payment, housing assistance. When you look at it at the end of the day, McDonalds pays the minimum wage [$18,000] and the people of the State of New York pay on average $6,800 more.’

With the availability of State aid and the get-out-of-purdah free pass of a legislated minimum wage, who can blame McDonalds or any other industry from maximising its profits, given the perverse government incentives?

‘I am getting out of the hamburger business,’ the Governor promised; but who put State officials into the free market exchange in the first place?

Moreover, as a result of this minimum wage legislation, the New York Post reported, ‘Wages will be hiked to the new minimum for 2.3 million workers in New York, a move Cuomo says will infuse $15.7 billion into the state economy’ — with nary a second thought about the origins of this bounty nor Albany’s ‘take’ thereof. Such an echt bureaucratic attitude from the State capital.

‘If you had taken the minimum wage in 1970,’ Cuomo observed nonchalantly at the rally, ‘and you had indexed it to inflation, you know what it would be today? Fifteen dollars an hour. That’s the fair wage for a minimum wage in the State of New York.’

But as American fiat greenbacks are nothing more than a medium of exchange, without any connexion to real worth — such as the gold standard — government-induced money inflation does not add to America’s net worth but only benefits those crony capitalists with government ties and hurts those of low incomes hit by inexorable price increases.

As negotiations had neared completion, Cuomo told waiting reporters, ‘I believe that this is the best plan the State has produced in decades.’ Nonsense. This April 1st budget is only the latest example of government having a good laugh at citizens’ expense.

04 April 2016

On the Record | Mill Power

Please see my latest post for the Quarterly Review, ‘Mill Power’:

On the campaign stump, Donald Trump’s visceral answer to manufacturing decline has been called a self-defeating return to the processes of primitive economics. But Trump’s route to powering America’s revival does lead through a mill — John Stuart Mill.

Trump’s economic prescription to ‘Make America Great Again’ by imposing tariff walls to foreign trade has been lampooned by mainstream economists as equating the Great Depression hysteria that gave rise to the Smoot-Hawley tariff act, which saw affected nations impose retaliatory trade restrictions.

Many of these same economists prefer their own Depression-era madness, in the form of Keynesian stimulus that argues that downturns are caused by a lack of aggregate demand, requiring government spending to prime the pump and restore consumerism.

Long before Lord Keynes, however, nineteenth-century classical economists had debunked this fallacy, notably J. S. Mill.

Read more…


My thanks to Dr Leslie Jones of the Quarterly Review and to Professor Steven Kates of RMIT University, who introduced me to the classical economics of J.B. Say and J.S. Mill, and to Ricardo’s succinct refutation of Malthus: ‘Men err in their productions, there is no deficiency of demand.’

31 December 2015

Year in Review

The year now passing began with sickness for yours truly — which more-or-less set the tone for the ensuing twelve months. Good grief!

Research and writing therefore proceeded haltingly and with many interruptions but, with the onset of winter, there was some resolution in selecting ideas to explore in the weeks ahead:

  1. Free markets, capital formation, entrepreneurship, and legal rules, as essential components of economic growth;
  2. American politics and fidelity to the U.S. Constitution, culminating with the presidential election in November;
  3. British conservatism, in theory and practice, especially from the historical perspective of Benjamin Disraeli and Margaret Thatcher; and
  4. Mediæval culture, particularly in relation to the Enlightenment, and the rise of capitalist economics and the pursuit of liberty. (My conceit is that a conservative appeal to the Middle Ages, rightly applied, can provide all the better aspects of the eighteenth century, without those ‘atomising’ elements eschewed by Tories.)

So, before sending 2015 on its way and welcoming with hopeful anticipation the new year, here is a round-up of essays posted throughout the year:

If any of these essays catch your fancy, please share them with your friends and colleagues. DMI needs encouragement to flourish and seek out new research and publishing opportunities!

As a special treat, the Institute was mentioned in a New York Sun column on America’s ‘Constitution Day’. Many thanks to the editor, Seth Lipsky.


It only remains to remind you to follow DMI on Twitter and on Facebook, and to wish all my readers good health and good fortune in 2016!