Tuesday, April 2, 2013

Chavez and "Capital" Punishment

Daniel In Venezuela wrote a good post a few days back about the condition of his country after Hugo's merciful death.

The country that Chavez left us is a country that is financially ruined. True, we still have a lot of oil under our feet and good management can bring us back to a semi functional state in as little as half a decade. But the bonanza of the last decade will have been spent with very little to show for it. It has been swallowed by corruption, inefficiency and gifts because what Chavez has done is to distribute cash around, never establishing anything productive and sustainable over time. Nothing.

All of Chavez Misiones were designed for electoral purposes, to improve somewhat the everyday life of the masses without providing them with access to a real pay check, those that are given to people that actually produce something of value, any value, and which allows them true independence. We can argue ad infinitum as to the need to address poverty in Venezuela, but everyday it is clearer that Chavez social programs have not been the solution, a Band-Aid at best, with the nagging after thought of having made things actually worse in solidifying a “47%” mentality.

Chavez, like all government despots [in democratic countries as well as dictatorships] ignored capital maintenance in favor of using the money to buy votes. As a result, the once fairly well-developed capital structure of Venezuela has been left in close to third-world shambles.

It is capital investment that creates economic growth and Chavez not only ignored the country's infrastructure but those of the industries he nationalized, too. Venezuela's oil industry which is the country's main income provider has been brought to its competitive knees through lack of maintenance, modernization, and the wholesale politically-motivated firings of its best managers and engineers (many of whom found employment in Canada's oil-sands).

No matter who wins the elections to replace Chavez, he will be faced with a country that's been set back several decades during the one decade that Huguito was in power.

Wednesday, March 20, 2013

Those Cypriot "Expropriations"

All the wailing and gnashing of teeth in the international press about the EU's "expropriation" of citizens' money is misplaced. If you disagree with me, ask yourself what the alternatives are. The government could, of course, use everyone's taxpayer dollars Euros to bail out the Cypriot banks [and, by extension, its depositors]. Or it could, as Bernanke would almost certainly do, just print the money which would tax everyone in the long term as the purchasing power of their money deteriorated.

The last option is to let the banks fail and the let the depositors lose everything.

People aren't thinking this through.

Sunday, December 30, 2012

'Worst Business Projection Ever'

From Division of Labour:

From the Associated Press, Jan. 3, 1951:

Four of the nation's biggest athletic conferences will lead a fight against live television of football games at the NCAA convention in Dallas next week.

They are the Big 10, Eastern College Athletic Conference, Southwest, and Southeastern.

Ralph Furey of Columbia, chairman of a committee set up to study the effect of television on sports attendance, reported to the ECAC general meeting:

'Live television of sports events presents a threat to the institution of intercollegiate athletics.'

A special television committee or the powerful Big Ten reported: 'Live television has an adverse effect on athletic attendance, particularly football.'

The Big Ten banned live telecasts of conference games last year. … The Southeastern Conference voted unanimously to bar direct telecasting of its football games. … “

Well , that's one business that probably never made it.

Monday, January 30, 2012

We Are All Deadbeats Now

Newt Gingrich 2009 (h.t. Althouse):
We believe that there should be must carry – that is, everybody should either have health insurance or if you’re an absolute libertarian, we would allow you to post a bond, but we would not allow people to be free riders failing to insure themselves and then showing up at the emergency room with no means of payment.

The assumption behind every effort to socialize health care is that anyone who does not buy health insurance is planning on stiffing the hospital. It's a corrosive and false belief. For example, I don't carry comprehensive insurance on my 15 year old F-250. But is it to be assumed, were the truck damaged in an accident, that I'd skip out on paying the collision shop for fixing it? Of course not.

The problem is that feel-good politicians have made it law that hospitals must treat everybody without regard for their ability to pay and that the bills can then be discharged through bankruptcy. The first may make sense, the second is ridiculous and no excuse for government to force us to do something which may very well be opposed to our own economic self-interest.

Friday, January 20, 2012

"Dems propose 'Reasonable Profits Board' to regulate oil company profits"

The Hill.com:
Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a "Reasonable Profits Board" to control gas profits.

The Democrats, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding "a reasonable profit." It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members "shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board."

According to the bill, a windfall tax of 50 percent would be applied when the sale of oil or gas leads to a profit of between 100 percent and 102 percent of a reasonable profit. The windfall tax would jump to 75 percent when the profit is between 102 and 105 percent of a reasonable profit, and above that, the windfall tax would be 100 percent. The bill also specifies that the oil-and-gas companies, as the seller, would have to pay this tax.

Left out of the bill, of course, is any mention of "reasonable losses." When energy companies lose money (as they often do,) the Democrat peanut gallery goes silent. One could be forgiven for thinking that Kucinich, et al approve of that.

Wednesday, January 18, 2012

Obama: Unemployment Benefits Create More Jobs Than Pipeline

Yes, he really said it.
As Obama called for passage of those bills, he also responded to a recent Republican push to require him to approve the construction of the Keystone XL pipeline from Canada. "However many jobs might be generated by a Keystone pipeline," he said, "they're going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance."

He can get away with saying something so obviously wrong because Washington D.C. is in the thrall of the Keynesians: a bunch who mistakenly believe that consumer spending can create jobs. This is a fallacy that was debunked over a century ago by John Stuart Mill.

Demand for commodities is not demand for labor.In buying commodities, one does not receive wages. What one pays and receives in the purchase and sale of commodities is not wages but product sales revenues.

The payroll tax cut and the continued unemployment benefits will almost certainly result in the sale of consumer goods by the same amount. But that spending will not cause a single job to be created -- not one, zip, zero, nada, zilch. Labor is not hired by consumer spending but by capital and capital is formed only by a conscious decision by an entrepreneur to save some of his proceeds and spend it on the operation or expansion of his business.

Though his sales may rise appreciably, he may still, because of doubts about the future, fail to invest in expansion. He may take his profits and invest them elsewhere or spend them on consumer goods himself. The decision by consumers to increase their spending and the decision by entrepreneurs to hire more employees are two completely separate economic processes. Though hiring new employees, whether previously unemployed or whether lured away from another employer by higher wages, will increase consumer spending, it bears repeating that the opposite will not.

The pipeline, on the other hand, is an expenditure of capital. Its construction will undoubtedly create construction and engineering jobs for thousands upon thousands. And the spin-off benefits to suppliers of raw materials, machinery and other capital goods will be substantial. Now, it's transparently obvious that Obama is rejecting the pipeline to placate environmentalists, but that he can announce such foolishness about job creation with a straight face and no questioning from the press is a testament to the low level of economic thinking in the country today.

Sunday, January 15, 2012

Letter to the Editor

My letter published today in the Jamestown Post-Journal and the Dunkirk Observer.
Taxes To Spur Economy Bad Idea

Gov. Cuomo, to much fanfare, has announced a gift of $1 billion to the Buffalo area for the creation of jobs and the growth of the economy. Rubbish. Some 150 years ago, the British economist John Stuart Mill warned us of this policy.

"It is no longer supposed that you benefit the producer by taking his money, provided you give it to him again in exchange for his goods. There is nothing which impresses a person of reflection with a stronger sense of the shallowness of the political reasonings of the last two centuries, than the general reception so long given to a doctrine which, if it proves anything, proves that the more you take from the pockets of the people to spend on your own pleasures, the richer they grow; that the man who steals money out of a shop, provided he expends it all again from the same shop, is a benefactor to the tradesman whom he robs, and that the same operation repeated sufficiently often, would make the tradesman's fortune."

If the governor truly wanted to spur economic growth in New York, he would cut our taxes by that billion dollars and leave the money in our pockets to spend and invest as we think best for ourselves and for our families. The old New York ploy of taxing workers and businesses to create new workers and businesses hasn't worked in the half century it's been tried.

New York businesses continue to close and New Yorkers continue to move away. The taxes we pay to create our fortune are just too high.

Craig Howard

South Dayton