Profits ARE Socially Responsible

Back in 1997 Gregory Bresiger penned a piece for the Free Market tearing apart the notion of "socially responsible investing" (SRI). Managers focused on social issues instead of profits will perform poorly as resources are diverted to unproductive uses. Bresiger looked to close the argument with this seemingly absurd proposition:

But SRI funds do point the way to solving a myriad of political debates in this country. Whenever a politician suggests a new tax, mandate, or regulation on business, let's first try it out on one of these "Socially Responsible" companies, purely on a voluntary basis. Let it pay higher taxes, insurance premiums, and wages, while adopting ever more rigid quotas and union rules. Then we can watch what happens to its stock price relative to everyone else's. Any takers?

More than a decade later there are takers. The Wall Street Journal reports that in seven states companies can register as benefit corporations, allowing the firms to pursue social and environmental goals without the worry of shareholders suing them for not maximizing shareholder value.

These corporate charters aren't tax exempt or nonprofit. Companies choosing to be benefit corporations pay Uncle Sam like any other for-profit company, but have… (Read on)

Source: Mises.org

Money and Freedom

By Joe Salerno

 

The historical embodiment of monetary freedom is the gold standard. The era of its greatest flourishing was not coincidentally the 19th century, the century in which classical liberal ideology reigned, a century of unprecedented material progress and peaceful relations between nations. Unfortunately, the monetary freedom represented by the gold standard, along with many other freedoms of the classical liberal era, was brought to a calamitous end by World War I.

 

Also, and not so coincidentally, this was the "War to Make the World Safe for Mass Democracy," a political system which we have all learned by now is the great enemy of freedom in all its social and economic manifestations.

 

Now, it is true that the gold standard did not disappear overnight, but limped along in weakened form into the early 1930s. But this was not the pre-1914 classical gold standard, in which the actions of private citizens operating on free markets ultimately controlled the supply and value of money and governments had very little influence.

 

Under this monetary system, if people in one nation demanded more money… (Read more)

 

Source: Mises.org

Money Makes the World Go Round

By Eugen-Maria Schulak

 

In his debut work, the Principles of Economics, Menger considered whether money developed "without any agreement, without legislative compulsion, and even without regard to the public interest" (Menger 1950/2007, p. 260; emphasis in the original). Accordingly, money had a "natural" origin and is not an "invention of the state." "Even the sanction of political authority is not necessary for its existence" (ibid., pp. 261–262). Menger did not move beyond this original explanation. Later economists ascertained that determining the value of money with the principle of marginal utility led to a circular argument, as the exchange value of money determines the demand for money; but the demand itself is in turn dependent on the value of money (cf. Wicksell 1898/2006, pp. 38, 50; and Helfferich 1903, pp. 487–488). A young Viennese economist is reminded of the "everlasting circle" in a Viennese song, in which gaiety comes from merriness and merriness is in turn derived from gaiety (cf. Weiss 1910, p. 515).

 

During his inaugural lecture in 1903 at the University of Vienna, Friedrich von Wieser tried to explain the phenomenon of rising prices using the theory of marginal utility for the first time. Wieser emphasized that growing incomes lead to decreasing marginal utility, to lower exchange values, and finally to increased prices. Because increases in income result from the steady expansion of monetary economy at the expense of the household economy, a rise in prices would thus be nothing but "a necessary, developmental syndrome of the spreading monetary economy" (cf. Wieser 1904/1929, p. 64). Wieser's income theory of money found few adherents and changed little in the way of the older Austrian School's abstinence from monetary theory. But things changed abruptly with the… (Read more)

 

Source: Mises.org

Computer Programmer Arrested for Stealing Proprietary Code from the Federal Reserve Bank of New York

Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”) announced today the unsealing of a complaint charging BO ZHANG, a computer programmer, with stealing proprietary software code from the Federal Reserve Bank of New York, where ZHANG worked as a contract employee. ZHANG was arrested this morning by agents of the FBI and the Department of the Treasury Office of Inspector General (“OIG”) and is expected to be presented in Manhattan federal court later today.

Manhattan U.S. Attorney Preet Bharara said: “As today’s case demonstrates, our cyber infrastructure is vulnerable not only to cybercriminals and hackers, but also alleged thieves like Bo Zhang who used his position as a contract employee to steal government intellectual property. Fighting cyber crime is one of the top priorities of this office and we will aggressively pursue anyone who puts our computer security at risk.”

FBI Assistant Director in Charge Janice K. Fedarcyk stated: “Zhang took advantage of the access that came with his trusted position to steal highly sensitive proprietary software. His intentions with regard to that software are immaterial. Stealing it and copying it threatened the security of vitally important source code.”

According to the complaint unsealed today in Manhattan federal court:

The Government-Wide Accounting and Reporting Program (“GWA”) is a software system that is owned by the United States Department of the Treasury (“DOT”). It is used principally to help keep track of the United States government’s finances. Among other things, the GWA handles ledger accounting for each appropriation, fund, and receipt within the DOT, and provides federal agencies with an account statement—similar to bank statements provided to bank customers—of the agencies’ account balances with the United States Treasury. The proprietary computer source code associated with the GWA is maintained by the Federal Reserve Board of New York (“FRBNY”) in an access-controlled electronic repository. The FRBNY is further developing the source code for the GWA.

As alleged in the complaint, between May 2011 and August 11, 2011, BO ZHANG was a contract employee assigned to the FRBNY to work on further developing a specific portion of the GWA’s source code (the “GWA Code”), which the United States has spent approximately $9.5 million to develop. In the summer of 2011, ZHANG allegedly stole the GWA Code. According to the complaint, ZHANG admitted that in July 2011, while working at the FRBNY, he checked out and copied the GWA Code onto his hard drive at the FRBNY; he subsequently copied the GWA Code onto an FRBNY-owned external hard drive; and he connected that external hard-drive to his private office computer, his home computer, and his laptop. ZHANG stated that he used the GWA Code in connection with a private business he ran training individuals in computer programming.

***

ZHANG, 32, of Queens, New York, faces a maximum term of 10 years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victims.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Department of the Treasury OIG and the FRBNY for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Niketh Velamoor and Nicholas Lewin are in charge of the prosecution.

The charge and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

The Value of Money

By Jeffrey M. Herbener

 

Although 1870 saw a breakthrough in price theory, the advances of the marginalist revolution had not yet penetrated to monetary theory by the early decades of the 20th century. Most economists were still content to work with the centuries-old quantity theory of money even though it took an aggregated approach while the key insight of the new price theory was the link between a good's price and the valuation of it made by individual consumers.

 

Benjamin Anderson was among a handful of economists, led by Ludwig von Mises in his pioneering work The Theory of Money and Credit in 1912, who set out to integrate monetary theory into a general theory of value.

 

Like Mises, Anderson devoted a major portion of his The Value of Money, published in 1917, to a refutation of the "mechanical" quantity theory of money. Many of Anderson's arguments will be familiar to any student of Mises: the causes and effects from which the data of the quantity equation are constructed are disaggregated and complex; whatever the correlation between the aggregate variables of the quantity equation, correlation is not causation; causation cannot be established in the equation because there are no quantitative constants in human action (in particular, velocity is not constant); the quantity theory ignores time; there is no unambiguous way to define the variables in the theory: the money stock, velocity, the quantity of goods, and the price level.

 

Additionally, Anderson holds that whatever true propositions the quantity theory offers can as well be deduced from a correct theory of value and that many true theories of modern economics… (Read on)

 

Source: Mises.org

Twin Deficits!

By Gary North

 

There are two deficits that we hear about most: the federal government's deficit and the balance of payments of the United States. They are linked, but they are very different in their effects.

 

The federal deficit is seen by Keynesians as mostly a benefit and by Austrians as mostly a liability, and for the same reason: higher government spending.

 

The balance-of-payments deficit is seen by virtually all economists as a benefit for Americans and their creditors. Otherwise, the exchanges would not take place.

 

At some point, the twin deficits will become unsustainable. Then the debtors will have a choice: either default or else adopt a systematic reversal of policies: debt repayment. This means a federal-budget surplus and a balance-of-payments surplus. Balanced budgets won't do it. There will have to be surpluses.

 

That day is coming. That will be the day of reckoning — of counting up.

 

The participants give no indications that they believe that day is coming.

 

Neither did Greece's politicians in early 2010… (Read more)

 

Source: Mises.org

International Bank of Commerce Robbery Lands Former Bank Teller in Federal Prison

HOUSTON—Estefany Danelia Martinez, a former bank teller convicted for bank robbery and embezzlement of bank funds arising from a robbery of the International Bank of Commerce (IBOC) has been sentenced to federal prison, United States Kenneth Magidson announced today. U.S. District Judge Keith Ellison handed down the sentences for Martinez, 18, as well as Arturo Solano, 22, in federal court this morning.

 

The two were indicted along with Ricky Gonzalez, 19, the boyfriend of Martinez, and Anna Margarita Rivera, 19, another former IBOC bank teller, on May 11, 2011. All four pleaded guilty to the charges earlier this year.

 

On March 23, 2011, two men wearing masks and hooded sweatshirts and who appeared to be armed with semi-automatic pistols entered the Eldridge Parkway branch of the IBOC. They robbed the bank by threatening the two bank tellers on duty, Martinez and Rivera. The tellers were allegedly forced to empty their teller drawers of cash as well as to fill bags provided by the robbers with cash from the vault. After the two men left the bank, the two tellers—who had remained in the vault, called 911. The tellers described the events and provided a false description of the two robbers to police.

 

Shortly after the robbery, an anonymous tip to Crimestoppers claimed that bank employees, Martinez and Rivera, had actually staged the bank robbery along with Gonzalez and another male and directed investigators to the Facebook pages of Martinez and Gonzalez. Through further investigation, investigating agents ultimately identified Gonzales and Solano as the two males who had robbed the IBOC bank with the assistance of former bank tellers Martinez and Rivera and recovered a portion of the money stolen from the bank.

 

Today, Judge Ellison sentenced Martinez to 15 months on each count to run concurrently, while Solano will serve 10 months in federal prison. Gonzalez and Rivera are pending sentencing on Jan. 5, 2012, and Dec. 8, 2011, respectively.

 

The investigation leading to the filing of federal charges against these four defendants was conducted by the FBI and the Houston Police Department and substantially assisted by a tip called into Houston Crimestoppers.

 

Assistant United States Attorney Suzanne Elmilady is prosecuting the case.