The Washington 1 Percent

By James E. Miller

The Associated Press recently reported that half of all new college graduates are either unemployed or underemployed. These fresh-faced bachelor-degree holders are finding themselves opting for waiting tables and serving coffee just to pay off a trillion dollars in student loans. They are coming to grips with a lie perpetuated by university professors, faculty unions, and politicians that deluded them into thinking college by itself was the golden ticket to success.

Meanwhile, the rest of America is still muddling through years of high unemployment. The jobs connected to Alan Greenspan's housing bubble are gone and will likely never return. Federal Reserve chairman Ben Bernanke met the financial crisis with an unprecedented amount of monetary-base expansion, which has failed to significantly affect the unemployment rate. President Obama and his allies in Congress threw $800 billion at the economy to no avail and have been running federal deficits to the tune of over $1 trillion for three years now. This orgy of money printing and spending has done little for the residents of Main Street but has done wonders for Wall Street and other politically connected interests.

Last fall's Occupy campaign was representative of a growing distrust of the American economic system. Although many occupiers were misled into believing capitalism is the culprit behind the sluggish economy, the protest's focus on income inequality was not wholly inaccurate. Of course the inequality in income that is a byproduct of an unhampered market economy is not something to demonize. As Ludwig von Mises wrote in Economic Freedom and Interventionism, “Inequality of wealth and incomes is an… (Read more)

Source: Mises.org

The Fiasco of Fiat Money

By Thorsten Polleit

I.

Today's worldwide paper-, or "fiat-," money regime is an economically and socially destructive scheme — with far-reaching and seriously harmful economic and societal consequences, effects that extend beyond what most people would imagine.

Fiat money is inflationary; it benefits a few at the expense of many others; it causes boom-and-bust cycles; it leads to overindebtedness; it corrupts society's morals; and it will ultimately end in a depression on a grand scale.

All these insights, however, which have been put forward by the scholars of the Austrian School of economics years ago, hardly play any role among the efforts of mainstream economists, central banks, politicians, or bureaucrats in identifying the root cause of the current financial and economic crisis and, against this backdrop, formulating proper remedies.

This should not come as a surprise, though. For the (intentional or unintentional) purpose of policy makers and their influential "experts" — who serve as opinion molders — is to keep the fiat-money regime going, whatever it takes.

II.

The fiat-money regime essentially rests on central banking — meaning that a government-sponsored central bank holds the money-production monopoly — and fractional-reserve banking, denoting banks issuing money created out of thin air, or ex nihilo.

In The Mystery of Banking, Murray N. Rothbard uncovers the fiat-money regime — with central banking and fractional-reserve banking — as a form of embezzlement, a scheme of thievery.

Rothbard's conclusion might need some explanation, given that mainstream economists consider the concept of fiat money as an economically and politically desirable, acceptable, and state-of-the-art institution.

An understanding of the nature and consequences of a fiat-money regime must start with… (Read more)

Source: Mises.org

Charting Fun with Krugman

By Robert P. Murphy

In a few recent blog posts, Paul Krugman used bar graphs and tables to (allegedly) prove the superiority of his views over those of the Austrians. Yet, as I'll show in this article, I can use Krugman's own data to demonstrate the exact opposite.

Krugman on the Fed and Banking Panics

Perhaps spurred by his Bloomberg debate with Ron Paul, Krugman posted the following regarding financial panics and the US central bank:

There's a very widespread belief on the right that banking crises only happen because either the Fed or Barney Frank cause them; go back to a gold standard, and there would be no need for financial regulation or anything like that.

This is, of course, nonsense; Walter Bagehot knew all about financial crises, which have been a constant feature of modern economies since at least the early 19th century. Just to drive the point home, I thought it might be worth posting Gary Gorton's chart of "panics" before the Fed went into operation:

Panics will happen; the question is how they are contained. (emphasis added)

Now although Krugman doesn't explicitly say "Ron Paul" or "Austrian economists," I think he has to have them in mind here. After all, before the Austrians rose in popularity, hardly anybody talked about the gold standard, let alone abolishing the central bank. It was the Austrians, and most notably Ron Paul, who put those ideas back into the limelight so that Paul Krugman feels the need to address the issue.

In that light, Krugman is simply making stuff up when he says such people think banking panics never happened before the Fed. Murray Rothbard's doctoral dissertation was The Panic of 1819, and Rothbard also wrote on the history of the Fed, so I'm pretty sure he wouldn't be shocked by Krugman's table.

But besides the cheap debating ploy — setting up his opponents as believing something obviously ridiculous — Krugman leaves open the door to his own demise in his final sentence, after the chart, when he writes, "Panics will happen; the question is how they are contained."

Fortunately, Krugman himself provides the answer in a… (Read more)

Source: Mises.org

Sara Margalit Aviel Confirmed as Alternate Executive Director at the World Bank

WASHINGTON – Sara Margalit Aviel was confirmed by the United States Senate yesterday to serve as the Alternate Executive Director to the International Bank for Reconstruction and Development (the World Bank).  In this capacity, Aviel will work with the Executive Director to represent the United States on the Board of Directors, which makes decisions about loan and investment proposals, reviews the policy issues that guide the general operations of the Bank, and provides broad oversight of, and guidance to, the Bank’s senior management.

Aviel has served as Director of International Economic Affairs at the National Security Council and the National Economic Council since 2011.  She has also served as a Senior Advisor to Treasury Secretary Tim Geithner.

“I have seen firsthand the depth of Sara’s personal dedication and drive in all she does. Sara’s rich experience in international development issues will be a valuable asset to the United States and the World Bank in this new role,” said Secretary Geithner.

Prior to joining Treasury, Aviel served on the leadership team of Root Capital, a social investment fund.  Aviel previously spent time at Mercy Corps, CARE Afghanistan, and as a lecturer at Yale University.

Aviel received a B.A. and M.A. in Political Science from Yale University and a Master’s in Business Administration from the Yale School of Management.

Breaking News on Audit the Fed

Dear friend of liberty,

This is it!

Earlier today, I received word that Audit the Fed (H.R. 459) is now scheduled for a vote this July in the U.S. House of Representatives!

This historic moment is only possible thanks to your relentless pressure.  Now we must turn up the heat to secure victory – first in the House and then in Harry Reid’s U.S. Senate.

That's why I hope you'll read this note from Senator Rand Paul and us and take immediate action.

In Liberty,

Matt Hawes

Vice President

Treasury Releases Semi-Annual Report to Congress on International Economic and Exchange Rate Policies

WASHINGTON – The U.S. Department of the Treasury today released the Semi-Annual Report to Congress on International Economic and Exchange Rate Policies that is required under Sections 3004 and 3005 of the Omnibus Trade and Competitiveness Act of 1988.  The Report covers international economic and foreign exchange developments in the second half of 2011.  Where pertinent and available, data and developments through mid-May 2012 are included.

The Report highlights that conditions in Europe continue to pose a risk to the U.S. recovery, that global growth has been hindered by insufficient demand rebalancing, and that greater exchange rate flexibility is needed – most notably in China.  Based on the appreciation of the RMB against the dollar since June 2010, the decline in China's current account surplus, and China's commitments in the G-20 and the U.S.-China Strategic & Economic Dialogue to move more rapidly to a more market-determined exchange rate system, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China.  Nonetheless, the available evidence suggest the RMB remains significantly undervalued, and we believe further appreciation of the RMB against the dollar and other major currencies is warranted. Treasury will continue to closely monitor the pace of RMB appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth.

The Report, along with past Reports, can be found at http://www.treasury.gov/resource-center/international/exchange-rate-policies/Pages/index.aspx.