Free Markets Myth

April 29, 2013

Carmen, Carmen…

By Don Kirk in Free Markets Myth, Keynesian Myth-Math, Prosperity vs. Poverty, Socialism's "intellectual suicide"

Spanish unemployment. Past 25%, and still rising, after five years of both Leftist and Rightist governments promising they knew how to end the economic debacle. Well, they created the problem so one would think they know how to solve the problem, but if a country is going to base its economic policies according to ideology, then we shouldn’t be surprised when they fail.

Currently, yields on Spanish bonds trade at 4.16%. Debt is at 110% of GDP (more than the entire economy), which means the cost of the debt has to be financed out of annual economic growth.

Oops. Spanish GDP growth is 1.5%, on a good day and after drinking plenty of Spanada wine. So, 4.16 – 1.5 = -3.66. Conclusion? Spain is being toilet-flushed by more than 3% per year by ideological economics of Leftists and Rightists, both of which are utopian and laden with myths. Watch for Spanish youth to be migrating to Latin American economies to escape the toilet-flushing at home.

[Email comments welcome: duoism(at)sbcglobal.net]

March 30, 2013

Oops. A Chart of Unintended Conclusion

By Don Kirk in Free Markets Myth, Philosophy of Freedom, Prosperity vs. Poverty

From the Mercatus Center at George Mason University, the relationship in the fifty United States between levels of freedom, both personal and economic, and the two major political parties. A better chart would include corresponding state income growth rates, tax levels, and unemployment relative to the two political parties. By this chart, two of the top three wealthiest States are the least free of all fifty, yielding a narrow conclusion that the least amount of freedom gives the greatest amount of prosperity.

[Email comments welcome: duoism(at)sbcglobal.net]

March 15, 2013

Sea of Red

By Don Kirk in Free Markets Myth, Keynesian Myth-Math, Socialism's "intellectual suicide"

The sea of red is angry government worker unionists in Brussels protesting the austerity program in Europe which is reducing their jobs. The unionists honestly believe in John Maynard Keynes’s Fabian socialism, where increased government spending, not reduced government spending, will restore Europe to a path of economic growth.

This intellectual battle has been fought for more than a century, and clearly from the above picture, the battle rages. Unfortunately, the battle is over two myths—the ‘free market’ versus ‘government stimulus’—and neither myth is capable of building or restoring economic growth.

What the socialist unionists fail to understand is that government expenditures, at all times, are a cost to the economy. Government ‘stimulus’ often actually worsens an economy, although the stimulus does wonders for the salaries and careers for government unionists. What ‘free marketers’ fail to understand is that there is no such thing as a free market, and likely there never will be. It is impossible to create economic growth by adopting policies based upon utopian myths.

The key is economic liberties, which include both labor and business freedoms. If Europe, and especially the United States, paid more attention to raising their rankings in economic liberties, they would find their economies growing as a result.

[Email comments welcome: duoism(at)sbcglobal.net]

March 6, 2013

Up, Up, and Away

By Don Kirk in Economics, Free Markets Myth

chart money base dow

Here’s a chart from Fox News, showing the four year rise of the stock market and the past four year growth of the nation’s money supply. The Fox argument is the same of many other observers: this record stock market is merely Fed-financed with cheap money.

But does this chart actually make that argument? The two graphs appear to show the market leading the Fed, not the Fed leading the market. Instead of sending the market higher, the massive Fed asset purchases seem to be acting as a rising floor below the market. If this accurate, then when the Fed finally slows down its purchase program around 2015, the market will plummet to find the new floor.

[Email comments welcome: duoism(at)sbcglobal.net]

January 21, 2013

What ‘Free’ Market?

By Don Kirk in Free Markets Myth

Southwest Airlines just announced a new optional $40 fare for people who want to board their planes early. What a gimmick, in the name of a ‘free market.’

The original problem is the boarding method used by the airline. The passengers are divided into groups, beginning with children and physically challenged, premium-paying passengers, the military, and then groups of people in 1, 2, 3, etc. Even though the airline allows time for each group to be seated before the next group enters the plane, the seating process results in crunched crowds in the aisle trying to put their carry-on luggage in overhead bins even as more passengers are trying to use the aisle to find their seat. It’s a cattle drive, a herding cats routine assuring gridlock and long waits. For this, the airline now will charge a premium?

Children and the handicapped first make sense. Then the military, the most physically fit people on the plane? Not so sensible. A much more efficient method of filling a plane would be to call the passengers by their seat locations. The A and F window seats in the last rows are first, window seats in the middle rows are next, and window seats in the front rows are next. Then all the B and E middle seats in the back of the plane, and then all the remaining middle seats in the forward part of the plane. And finally, all the C and D aisle seats, back to forward. This way, seating is completed in waves that do not result in already-seated passengers getting up and standing again in the crowded aisle to allow a window seated passenger to get by, and the plane fills back to front, alleviating the pockets of congestion which cram the aisle under the present process.

Maybe I should charge Southwest for the idea, and then they can cancel the special fees for boarding on time.

[Email comments welcome: duoism(at)sbcglobal.net]

December 12, 2012

Thoma’s Doubting Thomas

By Don Kirk in Economics, Ethics, Free Markets Myth, Ideological Monism, Keynesian Myth-Math

In the Fiscal Times, eminent economist Mark Thoma argued that supply side economic theory (to have fiscal stimulus by cutting taxes) failed in the Great Recession, bolstering his opposing Keynesian theory of fiscal stimulus by raising demand (increase government spending). Mr. Thoma’s argument has a fatal flaw: he had to leave out a critical fact for his argument to succeed. My reply to Dr. Thoma:

“We appear to have the too common fact-filtering by an ideologue in this post. Supply-side economics is a two-handed policy mix, while Mr. Thoma only mentions one policy, fiscal stimulus by cutting taxes. He never even mentions the complementary policy in supply side economics of monetary restraint, so how does he conclude that supply side economics failed so long as Fed policy since 9/11 has been massively expansionary?

My criticism is not an argument for supply side economics, but rather, the criticism is directed at the fact-filtering analysis. Why would an economist deliberately leave out known policy prescriptions in his debunking of an economic theory unless the total facts worked to vitiate his argument? By fact-filtering, this economist is either engaged in ‘confirmation bias’ or he has discredited his discrediting.”

[Email comments welcome: duoism(at)sbcglobal.net]

August 5, 2012

Oops. One Ideology is as Bad as the Other.

By Don Kirk in Free Markets Myth, Keynesian Myth-Math

Supply-side economist Arthur Laffer has an Op-Ed today in the Wall Street Journal with the above chart. He argues that the actual data from the nations which attempted to ‘stimulate’ their economies out of the 2007-2009 Great Recession with Keynesian counter-cyclical policies failed miserably, at a cost of mega-billions of taxpayers’ dollars lost. His analysis is drawing fierce criticisms from economists on both the Left and Right.

Keynesian economic policies are an attempt to implement Fabian socialism, popularly known as “democratic socialism.” Their counter-argument to Laffer’s is that without the hugely expensive ‘stimulus,’ the recession would have been even worse. Furthermore, several of the countries Laffer cites in the graph as being the most Keynesian did not ‘stimulate’ their economies into a deeper recession. Note, however, that the socialist counter-argument will never be able to offer actual data which supports their argument.

There are six U.S. Presidents who implemented Keynesian/Fabian policies during the past century; three were big-government Republicans and three were big-government Democrats. Lost in the contradictory theories is that not ever, not even once, have the Keynes/Fabian socialist policies ever worked to increase a ‘multiple’ of non-government employment, unless we ignore 400,000 dead and 1,000,000 crippled workers lost fighting in uniform during World War II.

We voters never learn. We continue to elect politicians who either believe in the myth-math of Keynesian/Fabian socialism, or in the myth of a ’free market.’ If Dr. Laffer presented more accurate, less biased data, his argument would be stronger.

[Email comments welcome: duoism(at)sbcglobal.net].

July 18, 2012

Saviors or Arrogance

By Don Kirk in Free Markets Myth, Keynesian Myth-Math, Politics

In a little more than 100 days the American people will vote for who will be their President during the next four years. If the last three elections are any guide, the American voters will pick a man who believes in the myth-math of Keynesian economics and who sees himself personally as a savior.

Both Republican George Bush and Democrat Barack Obama are Keynesians, believing that the sharp increase in government spending ‘stimulates’ aggregate demand, causing a ‘multiplier’ in employment. But if one actually reads Keynes and uses proven data to measure his theories on how to implement Fabian socialism as the counter-cyclical to capitalism’s business cycle, the ‘multiplier’ is a fraction, the increase in employment is only for government workers, and the stimulus merely increases the costs to the economy both faster and greater than the increase in benefits.

Both men have something of a Savior Complex. There is no such thing in the psychiatric profession, but there is a ‘savior complex’ or ‘god complex’ in pop psychology. To the professionals, there is megalomania, not a savior complex.

George Bush, in his own words to explain his imperial use of taxpayers’ money in the TARP bailout, “abandoned free market principles to save the free market system.” More than a little absurd, since there is no such thing as a ‘free market,’ and just how does one rationally save something by abandoning the principles which build it? Only if one is a god can such an enormous thing be accomplished.

In his words, Barack Obama “saved the American auto industry.” No, not even close to the truth. There are sixteen auto companies with factories in the United States, and Mr. Obama bailed out only two. Those two are unionized (13 of the other 14 are not unionized), and since labor unions form the backbone of Mr. Obama’s re-election efforts, he actually only bailed out his personal constituency using taxpayers’ money while claiming credit for bailing out the entire national industry. Only a god could accomplish such a monumental deception.

No one knows yet whether Mitt Romney, the Republican nominee, is Keynesian and has a savior complex. He is notably inept at explaining how his leadership at Bain Capital saved several troubled companies and he is reticent about his Mormon faith, so perhaps he lacks the god complex. If so, then he likely will lose in November, because we Americans like politicians who crush the economy and are self-delusional about their role in the crushing.

July 6, 2012

Ideology and Lies

By Don Kirk in Free Markets Myth, Keynesian Myth-Math

To the free-market ideology of Republicans and Libertarians, the prolonged stagnant employment, reported today by the U.S. government after the deepest recession in the country since the Great Depression, is the result of pro-government policies by Left-liberals. To the Keynesian Fabian socialist ideology of Democrats and Socialists, the employment grows every month for the past 27 months because of government stimulus, not because of the free-market.

They are both wrong as much as they are both right. The mind which has adopted an ideology as part of its identity is going to cherry-pick the data which proves it correct and studiously avoid the data which proves it wrong. The stagnating economy and stagnating employment are not due to any ideological explanation, because they both lie with statistics to confirm their own bias. As a specific example, the Left-liberal ideology which brags about the past 27 consecutive months of increased employment completely ignores the data showing zero net growth overall of employment during the full 43 months it has been in charge of the economy. The ideologues, Democrats and Republicans and Libertarians, tell only the half-truths which confirm their existing bias.

We stagnate because we have increased our costs of government faster than the increase of our incomes to pay for the added costs. So long as we continue to leverage our income at an interest rate greater than the rate of benefits derived from the leverage, we continue our “death spiral” economics. Stagnant employment reflects a stagnant economy, and a stagnant economy reflects stagnant incomes, and stagnating income reflects either stagnating rates of productivity or costs rising faster than returns. The two key measures to worry about are in the top graph: gaze in horror upon the Participation Rate and Employment/Population Rate. Both are steadily sinking regardless of rising or falling employment, and both sink during years of both free-market Republicans and Keynesian Fabian socialism Democrats in charge of the economy. We are going to continue to go broke so long as we continue to use the myths, superstitions, and cherry-picking bias of ideology in our economic policies. The graphs are from the excellent blog, Calculated Risk.

[Email comments welcome: duoism@sbcglobal.net]

May 16, 2012

Gold Buggery

By Don Kirk in Free Markets Myth, Ideo/theologies

Forbes on-line magazine, a conservative stalwart, today has another of its interminable essays on returning to a gold standard as the cure for all economic ills. Yesterday Republican former presidential candidate Herman Cain had an Op-Ed in the Wall Street Journal calling for the restoration of a gold standard. There is a plethora of options (read ‘schemes’) on how to institute a gold standard, so many in fact that if we ever did return to a gold standard and it failed to perform as promised, every gold bug would be able to claim we just did not implement the correct option. Socialists forever make that argument; socialism will work, but every failure is the result of not adopting true socialism. The conservative gold bug is as much a ‘true believer’ as is any Left-socialist.

One never reads in any call for a gold standard an analysis of how many millions–or tens of millions–of Americans would be thrown out of work within the first two years of returning to a gold backing of the dollar. The gold standard is deflationary, that is, the value of the metal-backed currency rises, making the currency harder to obtain and more expensive to use. Circulation of the more precious currency falls, and with it production, resulting in layoffs. Yet no gold bug ever tells the full story of the actual full deleterious impact of a gold standard; they only mention the admittedly many benefits from a more valuable–read ‘expensive’–currency. Again, this is just like the Left-socialists, who never ever explain that socialism always generates greater impoverity, not prosperity.

At the heart of the cherry-picking of historical data to make the gold standard argument is the belief that there is an “intrinsic” value in gold; that for thousands of years gold’s use as a medium of exchange is the result of an innate quality to the rare, shiny, malleable metal. The belief is nearly identical to the Socratic belief that every human has an innate soul, polished or soiled by our various behaviors. The gold standard is preached as ‘saving’ the economy from the ‘evil’ of fiat currency.

In the case of gold, the belief is nonsense. There is no ‘innate’ value to anything material. If there were no humans on the planet Earth, then how much would be the ‘innate’ value of gold? Zero, is the correct answer. Only humans make value, created by the interchange of opinions of something’s utility now or in the future. So, the entire argument for a gold standard is elaborate but essentially hollow, and the unknown numbers of newly unemployed from switching to a gold standard condemns the entire argument, like the argument for socialism, to being nothing better than ideo/theological belief in myth.

A final point. It is not necessary to back a currency with a hard metal to have it perform its desired function. It is certainly better for an economy to have a strong currency rather than a weak one, but no metal is required to strengthen a currency. The strength of currency, in an open market, rises or falls in value based upon whether millions of people have confidence or lack confidence in the currency they buy, hold, or sell. If we want a strong currency, and we do, it does not make pragmatic sense to throw millions of people out of work to get it. The currency’s actual value is a measure of how much wide-spread confidence there is in an economy which is growing, steadily putting more people to work. The gold bugs have it backwards. A strong economy creates a strong currency, not the gold buggers’ reverse.

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