lunes, 26 de diciembre de 2011

Queridos amigos,

Les deseo una muy Feliz Navidad y todo lo mejor para ustedes y sus familias.

Que el Niño Jesús los colme de bendiciones, de prosperidad, de felicidad, éxito en las altas metas que se tracen, y les traiga todo lo que le pidan.

Un fuerte abrazo y nos vemos en el 2012, Dios mediante.

sábado, 5 de noviembre de 2011

Is Debt Necessary for Recovery?

Tomado de
Mises Daily: Thursday, November 03, 2011 by Robert P. Murphy

Since the crisis began, one of the dominant themes in arguments over proper government policy has been the Keynesian view that it is crucial to prop up total spending. The added twist during this particular recession is the crushing burden of private-sector debt, which allegedly makes it all the more urgent for governments to run fiscal deficits.

In a previous article I dealt with so-called deleveraging and argued that it was a good thing, both for the indebted individual or firm, as well as the general economic recovery.

However, prompted by a recent scolding given by Paul Krugman, it's important to revisit the topic in a more elementary fashion. When Krugman, et al., casually claim that debt reduction would by sheer accounting cause total spending to fall, they are simply wrong. Thus their mistake is twofold: their faulty Keynesian economics leads them to worry needlessly about nominal spending, while their sloppy accounting leads them to champion debt as necessary for investment.

Krugman on Debt Reduction

In a post ironically entitled "Arithmetic Has a Well Known Keynesian Bias" — ironic because his Keynesian bias leads him to make an elementary accounting mistake — Krugman explains that an exasperated British pundit was reacting to Cameron's statement, semi-withdrawn but not really, that what Britain needs is for everyone to pay down debt, said in obvious obliviousness to the fact that if everyone cuts spending at the same time, income must fall.

But then, this kind of obliviousness is very widespread, and my experience is that if you try to point out the problem — if you try to explain that my spending is your income and vice versa — you get a belligerent response. Y=E is seen as a political statement, which in a way it is if one side of the political spectrum insists on believing things that can't be true. (emphasis added)

As I mentioned in the opening, this claim has been repeated ad nauseam during the last three years. Specifically, the opponents of government deficit spending have been beaten over the head with the alleged "fact" that as a matter of simple accounting, widespread debt reduction implies a reduction in spending and hence a reduction in income.

The second part of the claim is true, as far it goes. Every time someone spends a dollar in a transaction it is, at the same time, part of someone else's income. In my previous article, I argued that this tautology does not make the Keynesian case for government deficit spending.

Yet Krugman's quotation above contains an even worse mistake. He is taking it for granted that if people in Britain began paying down their debts, then that necessarily would lead to a reduction in total British spending. He is simply wrong here, as I'll show in the next section.

Debts and Spending: A Simple Fable

Imagine a simple world with three people: Cathy the Capitalist, Larry the Landowner, and Willy the Worker. Initially we are in a stable pattern where every period, the following transactions occur:

•Larry pays Willy $1,000 to work on his land and harvest food.

•Willy pays $100 in finance charges on his outstanding debt of $500 to Cathy, which is rolling over at the interest rate of 20 percent per period. (Willy each period just pays the finance charges, keeping the outstanding carried balance intact at $500.)

•Willy spends his remaining $900 on buying some of the food from Larry.

•Cathy spends her $100 in interest income on buying some of the food from Larry.

•Larry eats the remaining food that he hasn't sold to Cathy or Willy.

In this scenario, every period $1,000 is spent on food, the only finished good or service. As officially measured — notice that it misses Larry's "home consumption" — gross domestic product (GDP) for this simple economy is $1,000 per period.

Now suppose that Willy listens to Dave Ramsey and decides to become debt free. In this particular period, the following might happen:

•Larry pays Willy $1,000 to work on his land and harvest food.

•Willy pays $100 in finance charges on his outstanding debt of $500 to Cathy, which is rolling over at the interest rate of 20 percent per period.

•In addition, Willy pays another $500 to Cathy to extinguish his debt to her.

•Willy spends his remaining $400 on buying some of the food from Larry.

•Cathy spends her $100 in interest income, and her $500 in principal repayment, on buying some of the food from Larry.

•Larry eats the remaining food that he hasn't sold to Cathy or Willy.

Now in this scenario, total spending is still $1,000, and measured GDP is still $1,000. Larry the Landowner wouldn't see a drop in demand for his food. Willy reduced his consumption and saved much more out of his income this period, but this didn't affect even nominal income because Cathy's consumption filled the gap.

Maybe our scenario isn't likely, depending on various assumptions we can make concerning Cathy's spending habits, but it is certainly possible. So we see that an economy can start out with one person having a large debt, then becoming debt free, without necessarily altering total spending or total income, even when measured in nominal (i.e., dollar) terms.

Let me be fair to Krugman. He might concede that the above scenario is what someone like Cameron (or Dave Ramsey for that matter) has in mind when calling for people to "pay down their debts," but if we're technical about it — so Krugman might argue — there really wasn't net aggregate debt reduction in the above scenario. Yes, Willy paid down his debt by $500, but Cathy in a sense "dissaved" by letting her own financial assets fall by $500. If we like, we can say Cathy's debt started out at -$500, and then ended at $0, meaning her debt "increased" by $500.

Okay, I am happy to give Krugman that escape hatch. As we'll see, it doesn't rescue him. I can still show how Willy can pay off his debt without causing total money expenditures to fall, and without anyone in the community even suffering a drop in financial assets.

To see this, revert to our original scenario, where Willy owes Cathy $500. As before, Willy decides to pay off his debt, through much higher saving. But this time, imagine the following occurs:

•Larry pays Willy $1,000 to work on his land and harvest food.

•Willy pays $100 in finance charges on his outstanding debt of $500 to Cathy, which is rolling over at the interest rate of 20 percent per period.

•In addition, Willy pays another $500 to Cathy to extinguish his debt to her.

•Cathy spends her $100 in interest income on buying some of the food from Larry, as she always has done.

•Larry issues $500 in new stock shares for his landholding corporation, which Cathy buys.

•Larry pays Willy $500 to plow a parcel of his land that was previously uncultivated.

•Willy spends $400 + $500 = $900 on buying food from Larry.

•Larry eats the remaining food that he hasn't sold to Cathy or Willy.

In this final scenario, consumption spending is $1,000 while net investment spending is $500, meaning official GDP is $1,500 — it has actually risen 50 percent! At the same time, Willy paid off his debt, while Cathy swapped a $500 bond for $500 in stock shares, so that (considering just these two) there has been a net reduction in indebtedness in the community.

But what about Larry? Has he simply replaced Willy as the new debtor in our economy?

No, he hasn't. Although Larry took in $500 while raising funds for his corporation, he is not indebted to Cathy, and so we can't say that his financial decision during the period somehow offset Willy's debt repayment. Cathy doesn't have a debt claim on Larry; instead she owns equity in his corporation. There is a whole literature in finance on the important differences between debt and equity, including the fact that debt financing makes a firm leveraged, whereas equity financing does not.

It's not even the case that Larry will have to reduce his future consumption in order to make dividend payments to Cathy (to justify the initial valuation of her stock at $500). So long as Larry's $500 investment is sound, the new field will increase future harvests, possibly allowing Larry to maintain his original consumption of food even though Cathy now has an ownership stake in the net profits of the business.

Krugman's Biased Arithmetic

As our fanciful example illustrates, there is nothing in the raw GDP accounting that requires a period of deleveraging to yield smaller "total spending" and hence "total income," even if we measure those items in nominal money terms.

Of course, Krugman might object that I have loaded the deck, and chosen a completely irrelevant story. In our present real-world situation of depressed demand and excess capacity, Krugman might claim, why would Larry issue more stock and try to expand his operation?

Yet here we have left the realm of GDP accounting, and we enter the realm of economic models. That is why I said Krugman's post title — "Arithmetic Has a Well Known Keynesian Bias" — was so ironic. My fanciful example shows that the tautologous GDP accounting (or "arithmetic") is consistent with a story in which extra saving allows for more investment, which in turn provides an opportunity for underemployed workers to earn more income. (Notice that in the last scenario, Willy didn't reduce his food consumption. Instead, he paid off his debt by working more and earning a bigger paycheck for the whole period.)

Maybe the reader finds my story compelling, maybe not. But my point is, there is nothing wrong in the GDP accounting with my simplistic tale. The immediate objections to my story would rely on assumptions about how the economy works — assumptions that Keynesians typically make and that their critics typically reject.


The old-school, commonsense solution to an economy plagued by excessive debt is for people to work hard and save more. Keynesian economists have been saying throughout our current crisis that this folk wisdom overlooks basic accounting tautologies, but these pundits are smuggling in a Keynesian theory without realizing it.

Contrary to the assertions of these pundits, an economy does not need mountains of debt — whether government or private — in order to grow. Corporations can still raise needed financing through issuing equity. There are pros and cons to debt financing, but it isn't necessary for a strong economy.

Robert Murphy is an adjunct scholar of the Mises Institute, where he teaches at the Mises Academy. He runs the blog Free Advice and is the author of The Politically Incorrect Guide to Capitalism, the Study Guide to "Man, Economy, and State with Power and Market," the "Human Action" Study Guide, The Politically Incorrect Guide to the Great Depression and the New Deal, and his newest book, Lessons for the Young Economist.

The Value of Labor

Tomado de
Mises Daily: Friday, October 21, 2011 by Richard Cantillon

The Labor of the Plowman Is of Less Value than that of the Artisan

Abstract: The opportunity cost of becoming a skilled worker includes both the direct expenses as well as the foregone labor during the training period or apprenticeship. As a result, skilled workers must be paid higher wages than unskilled workers.

A laborer’s son, at 7 to 12 years of age, begins to help his father either in keeping the herds, digging the ground, or in other sorts of country labor that require no art or skill.

If his father has him taught a trade, he loses his assistance during the time of his apprenticeship and is obligated to clothe him and to pay the expenses of his apprenticeship for many years.[1] The son is thus dependent on his father and his labor brings in no advantage for several years. The [working] life of man is estimated at only 10 or 12 years, and as several are lost in learning a trade, most of which in England require seven years of apprenticeship, a plowman would never be willing to have a trade taught to his son if the artisans did not earn more than the plowmen.

Therefore, those who employ artisans or professionals must pay for their labor at a higher rate than for that of a plowman or common laborer. Their labor will necessarily be expensive in proportion to the time lost in learning the trade and the cost and risk incurred in becoming proficient.

The professionals themselves do not make all their children learn their own trade: there would be too many of them for the needs of a city or a state and many would not find enough work. However, the work is naturally better paid than that of plowmen.

Some Artisans Earn More, Others Less, According to the Different Cases and Circumstances

Abstract: In addition to training and the forces of supply and demand, workers with higher quality skills, risky jobs, or jobs that require trustworthy employees will receive higher wages. This is now known as the theory of compensating differentials that is often attributed to Adam Smith.

If two tailors make all the clothes of a village, one may have more customers than the other, whether from his way of attracting business, because his products are better or more durable than the other, or because he follows the fashions better in the style of his garments.

If one dies, the other, finding himself with more work, will be able to raise the price of his labor, expediting the work of some in preference to others, until the villagers find it to their advantage to have their clothes made in another village, town, or city, losing the time spent in going and returning, or until another tailor comes to live in their village and shares the business.

The jobs that require the most time in training or most ingenuity and industry must necessarily be the best paid. A skillful cabinetmaker must receive a higher price for his work than an ordinary carpenter, and a good clock- and watchmaker more than a blacksmith.

The arts and occupations, which are accompanied by risks and dangers, like those of foundry workers,sailors, silver miners, etc., ought to be paid in proportion to the risks. When skill is needed, over and above the dangers, they ought to be paid even more, such as ship pilots, divers, engineers, etc. When capacity and trustworthiness are needed, the labor is paid still more highly, as in the case of jewelers, bookkeepers, cashiers, and others.

By these examples, and a hundred others we could draw from ordinary experience, it is easily seen that the differences in the prices paid for labor is based upon natural and obvious reasons.

The Number of Laborers, Artisans, and Others, Who Work in a State, Is Naturally Proportioned to the Demand for Them

Abstract: The supply of workers adjusts itself to the demand for labor, across all professions, via wage rates, migration, and changes in population. Prosperity cannot be created by subsidizing job training.

If all the farm laborers in a village raise several sons to the same work, there will be too many farm laborers to cultivate the lands of the village, and the surplus adults will have to leave in order to seek a livelihood elsewhere, which they generally find in cities. If some remain with their fathers — as they will not all find sufficient employment — they will live in great poverty and will not marry for lack of means to raise children. If they do marry, their children will soon die of starvation, with their parents, as we see every day in France.

Therefore, if the village continues in the same employment pattern, and derives its living from cultivating the same area of land, its population will not increase in a thousand years.

It is true that the women and girls of this village can, when they are not working in the fields, occupy themselves in spinning, knitting, or other work that can be sold in the cities. However, this rarely suffices to support the extra children, who leave the village to seek their fortune elsewhere.

The same may be said of the artisans of a village. If a tailor makes all the clothes for the villagers and then raises three sons to the same job, there will only be enough work for one successor to him and the other two must seek their livelihood elsewhere. If they do not find employment in the neighboring town, they must move farther away or change their occupations and earn a living by becoming servants, soldiers, sailors, etc.

By the same process of reasoning, it is easy to conceive that the laborers, artisans, and others, who earn their living by working, must proportion themselves in number to the employment and demand for them in market towns and cities.

If four tailors are enough to make all the clothes for a town and a fifth arrives, he may find some work at the expense of the other four. Therefore, if the labor is divided between the five tailors, neither of them will have enough work, and each one will live more poorly.

It often happens that laborers and artisans do not have enough employment when there are too many of them to share the business. It also happens that they can be deprived of work by accidents and by variations in demand, or that they are overburdened with work, according to the circumstances. Be that as it may, when they have no work, they leave the villages, towns, or cities where they live in such numbers and those who remain are always proportioned to the employment that suffices to maintain them. When there is a continuous increase of work, there are gains to be made and others will move in to share the business.

From this, it is easy to understand that the charity schools in England, and the proposals in France to increase the number of artisans, are useless. If the king of France sent 100,000 of his subjects, at his expense, into Holland to learn seafaring, they would be of no use when they returned if no more vessels were sent to sea than before. It is true that it would be a great advantage for a state to teach its subjects to produce the manufactured goods that are customarily drawn from abroad, and all the other articles bought there, but I am, at present, only considering a state in relation to itself.[2]

As the artisans earn more than the laborers, they are better able to raise their children into professions, and there will never be a lack of artisans in a state when there is enough work for their constant employment.[3]

Richard Cantillon (1680–1734) was the father of modern economics. Murray Rothbard called him "one of the most fascinating characters in the history of social or economic thought" and described him as "a Gallicized Irish merchant, banker, and adventurer who wrote the first treatise on economics more than four decades before the publication of the Wealth of Nations." Cantillon became a millionaire by investing in John Law's "Mississippi Company" and predicting the popping of the now-infamous Mississippi bubble. He moved to England, where he died in a fire, allegedly set by his discharged cook.

This article is excerpted from "An Essay on Economic Theory", part I, chapters 7–9 (2010).

[1] This is where Cantillon explains the opportunity cost of an apprenticeship (similar to the opportunity cost of college) where the father has to pay for the apprenticeship (college tuition) and loses the child’s labor for several years (lost wages). Cantillon includes the cost of clothing (which would not apply in the case of college) because children who work on the farm help make their own clothing, but children in apprenticeships do not (See Part 1, Chapter 9, paragraph 3).

[2] It should be remembered that in Cantillon’s time, France was suffering under an economic policy of severe mercantilism where all manufacturing was highly restricted, monopolized, heavily taxed, and closely regulated. Therefore manufactured goods, primarily textiles, were sold at high prices and this encouraged imports. Cantillon found that subsidizing training was both expensive and unnecessary in a free economy because skilled labor would be supplied if there was a demand as he stated in the following paragraph.

[3] Cantillon will emphasize throughout the Essay that manufacturing should be allowed to grow to its largest natural extent because manufacturing labor earns higher wages (as he explained in Part 1 Chapter 7) and therefore has a higher standard of living.

I Don't Know

Tomado de Mises Daily (
Wednesday, November 02, 2011 by Leonard Read

Any individual who has become aware of the free market and its miraculous performances must realize that its opposite — socialism — is growing by leaps and bounds. This growth, at the moment, is not so much in formal takeover (nationalization of the modes of production) as in political control and the intellectual acceptance of control; socialism, ideologically, is now American doctrine. This is to say that socialism is not yet as thoroughly embedded in practice as it is in theory — but the acceptance of the theory is the preface to inevitable practice. Performance in the world of practical affairs follows on the heels of prevailing ideas.

In any event, socialistic ideas are becoming so popular that countless "free enterprisers" are either "getting on the band wagon" or "running for cover." But, whichever way — one as pitiful as the other — they are forsaking their role as spokesmen for freedom.

One of the major reasons for this apostasy is clear enough: all too few understand and can make the case for the free market — without which freedom of speech, of the press, of religion are utterly impossible.[1] In the absence of skilled spokesmen, freedom disappears in the United States as elsewhere.

Making the case for the free market requires a great deal of dedicated homework and learning, among other things, how not to give the case away. And unless "I" can everlastingly maintain an awareness of how little "I" know, the chances of becoming an effective expositor of the free market are nil. Here are two tricky and rarely suspected booby traps that victimize many an "I":

1.Attempting to explain how socialism, once installed, can be made to work better than at present.

2.Attempting to explain what would happen to a socialized activity were it desocialized, leaving the activity to the free market.

I shall try to demonstrate not only that each of these is impossible of realization but that the attempts themselves do the libertarian rationale a distinct disservice.

A FEE-seminar team was invited to Venezuela. We gathered with the participants at a plush hotel 60 miles from Caracas — one of a chain of 11 hostelries built, owned, and operated by the national government. The chain has always been deep in the red. A successful businessman (one of our hosts) had once been asked by the government to head this socialized operation. Thinking that socialism might be made to work were he in charge, he accepted the challenge. When he discovered that these hotels required 150 percent occupancy just to break even, he resigned. Had he known that socialism, by its very nature, can never be made to work, he would have been spared that waste of his energies.

Socialism Defined

Socialism may be defined as the state ownership and control of the means of production and exchange and/or the results of production and exchange; but what, really, is it in simple essence? It is a forcible intervention into exchange processes, a power wedge between the willingness of buyers and the willingness of sellers, a coercive interference with what some persons want that other persons are willing to grant. Socialism, in the final analysis, amounts to the frustration of willing exchange by people who are unaware of how little they know.

For example, an American desires to exchange his $20 for an Englishman's sweater — nothing involved but a willing swap, no one else's status one whit different after the exchange than before it was made. The know-it-alls, however, with their police force, insist that a social interest is involved, that the exchange cannot be made without a penalty of $5. To the extent that this transaction is socialized — in this case the penalty payment of $5 — to that degree is the will of two peaceful parties frustrated.

How can frustration be made to work? How can frustration be manipulated into harmony and increased production? Can any interference with peaceful, willing exchange, regardless of who does the interfering, do other than wreak havoc?

Many antisocialists, unhappy with the outcome of socialized activities, feel that these could be improved were they, rather than other know-it-alls, in charge. So they seek election or appointment to the government boards of such activities, under the impression that this is one way to strike a blow for freedom. This much I concede: they can, when in charge, do more of what they want done with other people's money than would be the case were other know-it-alls in charge. But this is no libertarian accomplishment; it's only a substitution of one group's know-it-all-ness for another's.

"Can any interference with peaceful, willing exchange, regardless of who does the interfering, do other than wreak havoc?"
Further, when those of a libertarian bent set out to make socialism work better, whether by managing the activity or by their endorsement of legislation which would modify the socialistic details, they tacitly approve the socialistic premise and thereby abandon their own case for the free market. They forswear all fundamental argument against the socialistic premise because by their actions they acknowledge that it could be improved were they themselves framing or administering it. "Socialism, were I its manager, wouldn't be so bad." That, I submit, is an emanation from the mind of a know-it-all in words loud and clear.

What am I saying? That a libertarian cannot consistently accept the postmaster generalship? Or membership on the municipal power-and-light board, or whatever? Unless he claims to know how to make socialism work, that is precisely what I am saying.[2] What more effective opposition is there than a polite "No, thank you!" And when asked, "Conceding that TVA is with us, how can it be made to work better than it now does?" what more truthful answer than "I don't know; I never will know; no one will ever know." There is no right way to implement a wrong premise!

The student of liberty, if he is not to get off the track, must hope and work for the restoration of the free market and a government restored to its principled role of keeping the peace.[3] Then let him peacefully keep in character by leaving socialistic activities to those who aren't yet aware of how little they know. Left to their own resources, the bungling of their schemes may become apparent even to themselves and, most certainly, to libertarians who have not fallen into this trap. Why should libertarians absolve the socialists by becoming a party to their unworkable measures?

So much for the first booby trap. But what about its twin, the attempt to explain what would happen were the market freed of state interventionism, that is, were the activities desocialized?

What Might Have Been?

Skeptics of the free market are forever asking, "Well, how would the free market attend to mail delivery? Education? Or, whatever?" Satisfactorily answer these questions, they imply, or the free-market case loses by default. And just as often, aspiring libertarians will stumble into the booby trap; they'll conjure up some sort of an answer.

Now these attempts to answer, regardless of how skilled and ingenious the authors, will have no less than three faults, the least of which is know-it-all-ness. Take the case of mail delivery. A person can no more explain how the free market would attend to mail delivery than his great-grandfather could have explained how television could ever emerge from free-market forces!

A more serious fault is that the listening skeptic will conclude that the know-it-all answer is the free-market answer and, if that's the best it has to offer, the free market has no valid case. These futile attempts to answer can accomplish no more than to confirm the skeptics in their socialism.

The greatest fault, of course, is that these students of liberty themselves have not yet learned to answer honestly, "I don't know; I never will know; no one will ever know." They have not wholly cured themselves of the offending psychosis.

This I-don't-know answer has the virtue of being intelligent, truthful, properly humble, and novel enough to intrigue any skeptic with a searching mind. Conceded, the answer — by itself — sheds no light. But if the skeptic wishes to learn (it is idle to talk to him if he doesn't) and if the aspiring libertarians have observed and can report on how miraculously the free market performs when not politically aborted, skepticism concerning the free market will lessen, faith in what man will accomplish when free to try will increase. In short, light will be shed, education will begin.

How would the free market attend to mail delivery were the postal service desocialized? I don't know! Nor could anyone have known 100 years ago how the free market would develop the means to deliver the human voice from city to city. But take note of these facts: we have maintained mail delivery as a socialized operation; its service is getting worse, not better; its costs and prices are increasing, not decreasing; since 1932 it has accumulated an acknowledged deficit of $10 billion, and the deficits increase annually.[4]

Voice delivery, on the other hand, has been improving. Just a century ago the human voice could be delivered at the speed of sound, but only the distance two people could understand each other's shouting. Today, the human voice is delivered at the speed of light; and as to distance, it's any place on earth — you name it! The service has improved enormously; and the cost has decreased steadily.

In human-voice delivery, free-market forces have been more or less operative. No one could have predicted in 1865 what form these forces would take during the next hundred years. Even more remarkable, no one can describe how the miracles were performed after the fact. Once we realize that we cannot explain what has happened, it becomes obvious that we can never explain what will happen.

Nature and Man

The miracles of the market are of a higher and more complex order than the miracles of nature: what emerges from the free market embraces the miracles of nature, plus the miracles of human creativity as well. May I repeat, all the artifacts by which we live are but the application of human creativity to the creativities manifest in nature.

Reflect on the simpler of these phenomena, the order of nature. Had you lived on earth before there were any trees, for instance, and been asked, "How can nature ever make a tree?" you would have answered, "I don't know." Today, were you asked, "How has Nature made a tree?" you would be forced to reply, "I don't know." Yet, you can, with considerable certainty, predict that nature will continue to produce these lovely miracles, provided conditions favorable to their growth are not aborted. You can derive from experience, not a how-to-do-it knowledge, but a soundly based faith in the dependability of the biological order.

Such confident expectation is as close as any man can come to knowing how the free market would attend to an activity, were it desocialized. All about him, in unimaginable profusion, are miracles of the free market, so commonplace that they are taken more for granted than noted and appreciated — like the air we breathe. These, properly apprehended, comprise his experience. But such experience does not give him a how-to-do-it knowledge; it serves only as the basis for a warranted and unshakable faith, a faith in what free men can accomplish — provided conditions favorable to free exchange are not aborted.

The poet who wrote, "Only God can make a tree," was merely acknowledging a common faith. Know-it-alls are never heard trying to refute this; everyone takes it for granted. Yet, if it be asserted that "only God can make a violin" — portions of nature with human creativity as an added ingredient — the person unaware of how little he knows will have no more hesitancy in subjecting violin production to his masterminding than he has in socializing the airlines, or power and light, or the postal service, or whatever.

Why will people concede that they are unable to mastermind atoms and molecules into the living manifestations of nature, while at the same time acknowledging no shortcomings at all in themselves when it comes to masterminding something we know far less about: human creativity? I don't know!

Gaining a Faith in Freedom

The aspiring libertarian, if he has made the first important step in progress, understands that he does not know how to mastermind the life of a single human being. He concedes that there is an order of creation over and beyond his own mind, that this order works in diverse and wondrous ways through billions of minds and that he should not in any way abort these miracles. This, however, does not make him a know-nothing. Even though, from his experience, he does not know what will happen, he gains a faith that miracles will happen if creative energies be free to flow.

The accomplished student of liberty acquires a faith that men, when free to try, will perform miracles, a faith extrapolated from experience. But when it comes to predicting the shape of miracles that will show forth from creativity, he takes his place with men, not with clairvoyant demigods. As an aware human being, he must answer, "I don't know!"

Leonard E. Read was the founder of the Foundation for Economic Education — the first modern libertarian think tank in the United States — and was largely responsible for the revival of the liberal tradition in post–World War II America. will be putting all of his books online for free.

Photo of Leonard    Read

This article is excerpted from The Free Market and Its Enemy (1965).

Notes[1] See "Freedom Follows the Free Market" by Dean Russell, the Freeman, January, 1963.

[2] Even accepting such assignments with a clear mandate to plan their undoing would, I believe, be futile. See "Unscrambling Socialism," Essays on Liberty, Volume XII (Irvington-on-Hudson, New York: Foundation for Economic Education, 1965), p. 433.

[3] Inhibiting and penalizing destructive actions such as fraud, violence, misrepresentation, predation — invoking a common justice, keeping the peace — call for a compulsive agency of society: government. The management of destructive activities cannot properly be left to the free market, the nature of which is voluntary and the scope of which is the productive and creative. See my Government: An Ideal Concept, op. cit.

[4] See "$48,000" by Paul Poirot, the Freeman, February, 1965.
"Once we realize that we cannot explain what has happened, it becomes obvious that we can never explain what will happen."

"Why should libertarians absolve the socialists by becoming a party to their unworkable measures?"

lunes, 24 de octubre de 2011

The State Is the 1 Percent

Monday, October 24, 2011 by Llewellyn H. Rockwell Jr.
"In fact, that 1 percent includes some of the smartest,
most innovative people in the country — the people who
invent, market, and distribute material blessings to the
whole population. But there is another 1 percent out

The "occupy" protest movement is thriving off the claim that the 99 percent are being exploited by the 1 percent, and there is truth in what they say. But they have the identities of the groups wrong. They imagine that it is the 1 percent of highest wealth holders who are the problem. In fact, that 1 percent includes some of the smartest, most innovative people in the country — the people who invent, market, and distribute material blessings to the whole population. They also own the capital that sustains productivity and growth.

But there is another 1 percent out there, those who do live parasitically off the population and exploit the 99 percent. Moreover, there is a long intellectual tradition, dating back to the late Middle Ages, that draws attention to the strange reality that a tiny minority lives off the productive labor of the overwhelming majority.

I'm speaking of the state, which even today is made up of a tiny sliver of the population but is the direct cause of all the impoverishing wars, inflation, taxes, regimentation, and social conflict. This 1 percent is the direct cause of the violence, the censorship, the unemployment, and vast amounts of poverty, too.

Look at the numbers, rounding from latest data. The US population is 307 million. There are about 20 million government employees at all levels, which makes 6.5 percent. But 6.2 million of these people are public-school teachers, whom I think we can say are not really the ruling elite. That takes us down to 4.4 percent.

We can knock of another half million who work for the post office, and probably the same who work for various service department bureaus. Probably another million do not work in any enforcement arm of the state, and there's also the amazing labor-pool fluff that comes with any government work. Local governments do not cause nationwide problems (usually), and the same might be said of the 50 states. The real problem is at the federal level (8.5 million), from which we can subtract fluff, drones, and service workers.

In the end, we end up with about 3 million people who constitute what is commonly called the state. For short, we can just call these people the 1 percent.

The 1 percent do not generate any wealth of their own. Everything they have they get by taking from others under the cover of law. They live at our expense. Without us, the state as an institution would die.
                                    "They do not comprehend that the real enemy is the institution that brainwashes them to think the way they do."

Here we come to the core of the issue. What is the state and what does it do? There is vast confusion about this issue, insofar as it is talked about at all. For hundreds of years, people have imagined that the state might be an organic institution that develops naturally out of some social contract. Or perhaps the state is our benefactor, because it provides services we could not otherwise provide for ourselves.

In classrooms and in political discussions, there is very little if any honest talk about what the state is and what it does. But in the libertarian tradition, matters are much clearer. From Bastiat to Rothbard, the answer has been before our eyes. The state is the only institution in society that is permitted by law to use aggressive force against person and property.

Let's understand through a simple example. Let's say you go into a restaurant and hate the wallpaper. You can complain and try to persuade the owner to change it. If he doesn't change it, you can decide not to go back. But if you break in, take money out of the cash register, buy paint, and cover the wallpaper yourself, you will be charged with criminal wrongdoing and perhaps go to jail. Everyone in society agrees that you did the wrong thing.

But the state is different. If it doesn't like the wallpaper, it can pass a law (or maybe not even that) and send a memo. It can mandate a change. It doesn't have to do the repainting: the state can make you repaint the place. If you refuse, you are guilty of criminal wrongdoing.

Same goals, different means, two very different sets of criminals. The state is the institution that essentially redefines criminal wrongdoing to make itself exempt from the law that governs everyone else.

It is the same with every tax, every regulation, every mandate, and every single word of the federal code. It all represents coercion. Even in the area of money and banking, it is the state that created and sustains the Fed and the dollar, because it forcibly limits competition in money and banking, preventing people from making gold or silver money, or innovating in other ways. And in some ways, this is the most dreadful intervention of all, because it allows the state to destroy our money on a whim.

The state is everybody's enemy. Why don't the protesters get this? Because they are victims of propaganda by the state, doled out in public schools, that attempts to blame all human suffering on private parties and free enterprise. They do not comprehend that the real enemy is the institution that brainwashes them to think the way they do.

They are right that society is rife with conflicts, and that the contest is wildly lopsided. It is indeed the 99 percent versus the 1 percent. They're just wrong about the identity of the enemy.

Llewellyn H. Rockwell Jr. is chairman of the Ludwig von Mises Institute in Auburn, Alabama, editor of, and author of The Left, the Right, and the State. Send him mail. See Llewellyn H. Rockwell Jr.'s article archives.

sábado, 15 de octubre de 2011

El País
por Moisés Naím

02 Octubre, 2011

Mientras el mundo sigue con gran ansiedad la crisis de Grecia (población: 11 millones), en China (población: 1.340 millones) están pasando cosas que no atraen tanta atención como lo que pasa en Grecia. Pero deberían. Si la locomotora de la economía mundial se desacelera, o se llegase a detener, las consecuencias serán mucho más graves de las que ha tenido la crisis griega, aun considerando el daño que esta le ha hecho al resto de Europa.

Aquí les doy algunos aburridos datos técnicos sobre lo que está pasando hoy en China: la actividad manufacturera ha caído por tercer mes consecutivo, la burbuja especulativa en la construcción (¿les suena?) está por estallar, los precios caen y a las grandes empresas de ese sector les cuesta conseguir financiación. La deuda de los Gobiernos locales ha alcanzado un volumen equivalente al 27% del total de la economía y, por si eso fuera poco, los analistas creen que en el 80% de los casos estas deudas serán incobrables. Los precios de las acciones de empresas Chinas cotizadas en la Bolsa de Nueva York cayeron al conocerse que los reguladores están encontrando graves fallas en su contabilidad.

Quizás la siguiente cita del Financial Times resulte menos aburrida: "El sector inmobiliario chino, que hasta hace poco era muy atractivo para los inversores, se ha convertido en un espectáculo de terror... cuyos efectos se sentirán en el mundo entero".

¿Quiere decir todo esto que viene un crash en China? No necesariamente. Pero... Hay una alta probabilidad de que en los próximos años China sufra un accidente que ralentizará su crecimiento económico. Este accidente podría ser financiero, ecológico, social o internacional. Tendría, además, que ser lo suficientemente grave y duradero como para afectar simultáneamente a varias regiones y sectores.

Un desplome de la Bolsa que elimine gran parte de los ahorros de la gente, la contaminación del agua de una gran ciudad o cualquier otra impredecible situación que produzca masivas protestas callejeras (y en China serían realmente masivas) pueden ser la chispa de una crisis que se difunda hasta afectar a toda la economía. De ahí, el impacto se diseminaría al resto del mundo a gran velocidad.

El acuerdo social y político que el actual régimen tiene con el pueblo chino es el siguiente: nosotros creamos millones de puestos de trabajo y la promesa de creciente prosperidad para todos y ustedes nos dejan gobernar sin exigir mayor participación en la toma de decisiones.

Si la tasa de creación de empleos disminuyese, la legitimidad del régimen menguaría, así como su capacidad de gobernar centralizadamente como lo ha hecho hasta ahora. Pero, además, están apareciendo otros factores que están socavando la estabilidad política: la inflación, la desigualdad y la corrupción.

En la década pasada, la inflación fue, en promedio, inferior al 2% anual. Ahora es de 6,2% al año, y en los alimentos, el capítulo más políticamente explosivo, los precios se han disparado aún más.

La desigualdad económica antes del boom era reducida e invisible para la mayoría de la gente. Ahora está a la par con las peores del mundo y es muy visible. Los trabajadores urbanos ganan tres veces más que los campesinos en las zonas rurales y el número de chinos que entran en la lista de los más ricos del mundo rompe récords cada año (los multimillonarios chinos son, como media, 15 años más jóvenes que sus pares en otros países).

La corrupción igualmente se ha hecho más visible y afecta a todos. Los esfuerzos del Gobierno por controlarla -que incluyen frecuentes encarcelamientos de funcionarios públicos y hasta la pena de muerte- no han tenido éxito.

Las crisis económicas suelen transformar a la corrupción de un hecho irritante largamente tolerado a una potente causa popular que, como en los casos de Egipto o Túnez, contribuye a la caída del Gobierno. China aún está lejos de esto, pero la corrupción es un factor que sin duda preocupa mucho al régimen.

Lo mismo pasa con los crecientes problemas ecológicos que, para muchos chinos, no son abstracciones: cuando se hace demasiado frecuente que al abrir el grifo para bañarse o cocinar sale agua marrón y maloliente, la pasividad de la población puede rápidamente tornarse en activismo estridente. Y esto está sucediendo.

Según Sun Liping, sociólogo de la Universidad de Tsinghua, en 2010 en China ocurrieron 180.000 protestas callejeras motivadas por un sinnúmero de causas.

Las calles en China se están calentando. Si esta tendencia llega a reducir el crecimiento del país, lo que suceda en las calles chinas nos afectará a todos. Mucho más que Grecia.

miércoles, 5 de octubre de 2011

¿Camina Europa hacia el mercado?

por Gary S. Becker

Gary S. Becker es Premio Nobel de Economía (1992), profesor de economía de la Universidad de Chicago, académico de Hoover Institution y miembro del consejo asesor del Proyecto de Privatización del Seguro Social del Cato Institute.

El asesinato del asesor de las reformas laborales del gobierno italiano por parte de un grupo terrorista de izquierda y la huelga general convocada por los sindicatos son prueba de que tales reformas provocan profundas emociones. Los sindicatos y el primer ministro Silvio Berlusconi luchan agriamente sobre si los mercados laborales deben o no ser menos rígidos. Los líderes sindicales y muchos de los trabajadores que tienen empleo se oponen a flexibilizarlos, lo cual haría sus puestos menos seguros.

Hasta hace poco, los políticos e intelectuales europeos despreciaban lo que en tono burlón llamaban el modelo anglosajón de competencia y precios flexibles. Pero un cambio grande y silencioso parece estar ocurriendo en la actitud europea hacia la competencia en los mercados laborales y demás mercados. Tal cambio se hizo evidente en la manera como el modelo basado en el mercado dominó la reciente reunión de los líderes de la Unión Europea en Barcelona. Primeros ministros con ideas políticas tan distintas como Tony Blair del Reino Unido, José María Aznar de España, Berlusconi y el canciller alemán Gerhard SchrѶder acordaron que Europa debe tratar de convertirse en la economía más competitiva del mundo en la próxima década. La mayor oposición contra el modelo anglosajón provino de Francia, donde tanto su presidente conservador, Jacques Chirac, como su primer ministro socialista, Lionel Jospin, objetaron muchos de los cambios propuestos.

Los reformistas reaccionaban a los malos resultados económicos de Europa durante los años 90. El desempleo promedió más del 9% entre los miembros continentales de la UE comparado con 5% en Estados Unidos y el Reino Unido. El empleo privado ha crecido mucho más lentamente en Europa, mientras que la productividad laboral ha aumentado el doble de rápido en Estados Unidos que en la Europa continental.

Pienso que los franceses van a unirse a sus vecinos con respecto a la competencia y a la flexibilidad de los mercados. Baso mi optimismo en un artículo que publiqué en 1996 en el periódico francés de izquierda Le Monde. El artículo argumentaba que los patrones de altas tasas de desempleo, larga duración del desempleo, temprana jubilación y muy lento crecimiento del empleo no son inevitables en las economías modernas. Son más bien el resultado de altos impuestos de seguridad social, altas pensiones y demás impuestos a las nóminas, leyes que dificultan los despidos, pagan generosamente a los desempleados y, en Francia, el muy alto salario mínimo. Yo recomendaba reducirle el costo a las empresas en la contratación y despido de personal, reduciendo los impuestos laborales, el salario mínimo y retrasando la jubilación.

El artículo causó réplicas de intelectuales y de economistas viejos que defendían el estatismo europeo en los mercados laborales. Pero después de cinco años de estancamiento en los mercados laborales, ha cambiado la opinión pública europea en apoyo de reformas laborales profundas. Los economistas jóvenes en Francia y en el resto de Europa están de acuerdo en la necesidad de instrumentar reformas drásticas.

Como respuesta a leyes laborales restrictivas, España aumentó mucho el número de trabajadores que se pueden contratar temporalmente. Holanda fomentó el trabajo a medio tiempo, permitiendo también mayor flexibilidad en los salarios y en las decisiones de contratar y despedir personal. La cumbre de Barcelona decidió liberar los mercados laborales a través de menores impuestos a la nómina y más bajos beneficios para los desempleados. También apoyó posponer en cinco años la edad promedio de jubilación, a los 63 años de edad.

En Barcelona se dieron pasos concretos para desregular otros mercados y promover mayor competencia en ellos. Para el año 2004, todas las empresas tendrán libertad de elegir sus suplidores de gas y de energía eléctrica y las familias podrán hacerlo a partir de 2005. En un par de años, los mercados de energía europeos serán más libres que los de Estados Unidos, a menos que nuestros gobiernos, tanto federal como estatales, avancen más rápido en la desregulación. Lamentablemente, el escándalo de Enron está frenando la desregulación eléctrica, mientras que Europa quiere aprovechar las nuevas tecnologías que permiten mayor competencia.

En Barcelona también se adoptaron medidas para aumentar la competencia en los mercados financieros, con el objetivo de lograr su integración dentro de la UE. Inclusive antes de esa reunión se había avanzado en aumentar la competencia a través de las fronteras entre bancos comerciales y de inversión.

Las políticas europeas suelen ser definidas por sus diferencias con las de Estados Unidos, pero sus nuevos líderes se han dado cuenta de la inflexibilidad imperante en sus economías y la presencia de regulaciones que dañan la competencia y el espíritu empresarial. Ellos quieren alcanzar y pasar a Estados Unidos, adoptando políticas que rechazaban y hasta ridiculizaban hace pocos años.

Artículo de la Agencia Interamericana de Prensa Económica (AIPE)
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España: La paradoja de los "indignados"

por Alberto Benegas Lynch (h)
Alberto Benegas Lynch (h) es académico asociado del Cato Institute y Presidente de la Sección Ciencias Económicas de la Academia Nacional de Ciencias de Argentina. 

El año pasado Stéphane Hessel publicó en Paris un panfleto dirigido principalmente a los jóvenes invitándolos a la rebelión no violenta, titulado Indignez-vous! que vendió un millón y medio de copias y se tradujo al español, portugués, alemán, japonés, italiano, inglés y griego. La versión española es la que primero prendió en sus lectores y como consecuencia de lo cual, a través de las redes sociales de Facebook y Twiter se congregaron primero en la Puerta del Sol en Madrid miles de jóvenes y luego lo hicieron en Granada, Valencia, Zaragoza y otras ciudades con la solidaridad expresada en otras capitales del mundo. Hessel es un sobreviviente de los campos de exterminio nazi (alemán de nacimiento pero desde hace mucho ciudadano francés), pero lamentablemente no ha comprendido las raíces del entrometimiento de los aparatos estatales en las vidas y haciendas ajenas puesto que es un acérrimo partidario de aquella contradicción en los términos denominada "Estado Benefactor" ya que el monopolio de la fuerza que llamamos gobierno no puede hacer filantropía ni caridad, una predisposición que requiere de actos voluntarios realizados con recursos propios y no succionando compulsivamente el fruto del trabajo de terceros.

Es increíblemente curioso y por cierto muy paradójico que la gente sea explotada miserablemente por intervencionismos estatales inmisericordes y, simultáneamente, las víctimas piden más de lo mismo. Las legislaciones sindicales compulsivas, los aberrantes sistemas de inseguridad social, los inauditos gastos gubernamentales, las astronómicas deudas públicas, las disposiciones laborales que bloquean las posibilidades de trabajar, pseudoempresarios en cópula con los gobiernos, controles directos o indirectos de precios, pesada burocracia que obstaculiza actividades lícitas, impuestos confiscatorios, regulaciones bancarias que permiten sistemas de reserva fraccionaria, ayudas a corporaciones industriales, comerciales y financieras con recursos detraídos de los contribuyentes, reglamentaciones contraproducentes para el comercio exterior, corrupciones alarmantes, burla grotesca a la democracia como mecanismo de respeto a los derechos de las minorías, y, en definitiva, promesas extravagantes y fantasiosas que solo se llevan a cabo para ganar elecciones.

A pesar de todo esto, los dirigentes de lo que en España se ha dado en llamar "la revolución de los indignados" o el movimiento 15-M (por el 15 de mayo en que comenzaron las manifestaciones callejeras), independientemente de las últimas elecciones comunales y municipales en las que el partido gobernante perdió por diez puntos pero con un record de votos en blanco, los revoltosos protestan contra un capitalismo inexistente y demandan más intromisión del aparato estatal en todos los niveles concebibles. A nuestro juicio esta notoria contradicción en gran medida se debe a lo que viene ocurriendo con la educación principalmente estatal (mal llamada pública, puesto que la privada es también para el público) con lo que se le debe otorgar la razón al marxista Antonio Gramsci en aquello de "tomen la cultura y la educación y el resto se dará por añadidura", y también se debe a las reiteradas promesas de imposible cumplimiento por parte de demagogos incrustados en los dos partidos políticos mayoritarios. En otros términos, las multitudinarias marchas de jóvenes hartos de tanta malaria política y con un desempleo del 21% que se eleva al 40% en la franja de los indignados, están sujetos a una operación tenaza que solo puede revertirse si se considerara seriamente lo que en verdad significa una sociedad abierta en lugar de pedir mucho más de lo mismo.

Veamos solo dos de los 16 puntos del Manifiesto de los Indignados (algunos lamentablemente ya plasmados en la Constitución española) que aunque se declara que "no es definitivo" y han producido ciertas grietas entre los participantes, es de interés consignarlas ya que estimamos representan el espíritu que flota en estas movilizaciones.

Estos reclamos se encabezan con la "protección al derecho de una vivienda digna" lo cual revela un desconocimiento palmario del significado del derecho que necesariamente tiene como contrapartida una obligación. Si una persona obtiene un salario de mil, existe la obligación universal de respetar ese ingreso pero si esa persona alega un derecho a dos mil aunque no obtenga esa retribución por su trabajo y el gobierno otorga semejante derecho quiere decir que otro estará obligado a proporcionar la diferencia con lo que ese verá afectado su derecho al fruto de su trabajo, lo cual, a su turno, se traduce en un pseudoderecho. Todos nuestros ancestros provienen de situaciones miserables (cuando no del mono), el progreso no se logra atacando la propiedad del vecino sino respetándola, esa es la única diferencia entre un país pobre y uno próspero, no se trata de latitudes geográficas, de recursos naturales ni de etnias sino de marcos institucionales civilizados. El respeto irrestricto a los derechos de quines obtienen legítimamente sus patrimonios permite optimizar las tasas de capitalización que constituyen el motor de la elevación de ingresos y salario en términos reales.

El segundo de los postulados es la "recuperación de las empresas privatizadas" sin percatarse que las ventajas del proceso de mercado significa que el cuadro de resultados mostrará quienes son capaces de servir a sus semejantes (en cuyo caso obtienen ganancias) y quienes no dan en la tecla (en cuyo caso incurren en quebrantos). Como los bienes y servicios no crecen en los árboles, la asignación de derechos de propiedad hace posible que se prioricen los usos más urgentes a criterio de los consumidores. Sin duda, esto no ocurre cuando los empresarios reciben privilegios, prebendas y subsidios de los gobiernos en cuyo caso se convierten en barones feudales, cazadores de privilegios y ladrones de guante blanco. Por su parte, la empresa estatal inexorablemente se traduce en la alteración las prioridades de la gente puesto que su sola instalación implica detraer los siempre escasos factores de producción a campos distintos de los que se demandan (si coincidieran con los que se requiere no habría necesidad de emplear la fuerza). Si, además, la empresa estatal es monopólica, deficitaria y presta malos servicios, estos son agravantes pero el elemento central es el problema de malasignación que acarrea la mera existencia de la empresa estatal (y dicho se de paso, la expresión "empresa estatal" es un contrasentido puesto que una empresa arriesga recursos propios de modo voluntario y no compulsivamente el fruto del trabajo ajeno).

Hay algunos de los reclamos que a primera vista parecen razonables, como el rechazo a las reiteradas propuestas del Fondo Monetario Internacional pero desafortunadamente es por los motivos equivocados puesto que los manifestantes de marras creen que se trata de una muestra cabal del capitalismo cuando en verdad se trata del más burdo intervencionismo estatal y, tal como han señalado economistas de la talla de Peter Bauer, Melvin Krauss, Anna Schwartz y Karl Brunner, el FMI es la entidad responsable de la existencia de los países del tercer mundo al prestar a bajas tasas de interés, con extensos períodos de gracia y waivers descomunales a gobiernos corruptos y estatistas que ayudan a consolidar en sus puestos y que, por esas razones, esos países, ven fugarse sus más destacados cerebros y cuantiosos capitales en busca de mejores horizontes. Ahora hay sorpresa al constatar que el número uno de la institución de referencia ha sido detenido por violación a una mucama de un hotel en Manhattan, pero es lo que venía haciendo junto a sus colegas con esmerada fruición a todos los contribuyentes a los que se les succiona recursos para financiar el FMI. No en vano ese personaje se postulaba como presidente francés en las próximas elecciones por el Partido Socialista.

Este cuadro de situación se ve agravado por lo que viene ocurriendo en Estados Unidos. Las presidencias de G. W. Bush significaron el crecimiento más alto de los últimos ochenta años en la relación del gasto federal con el producto bruto interno, convirtió en déficit la situación superavitaria que le había dejado su predecesor y solicitó cinco veces autorización al Congreso para elevar la deuda estatal. Decretó los "salvatajes" para empresas irresponsables, ineptas o ambas cosas a la vez. A través de empresas paraestatales, obligó a que se entregaran préstamos hipotecarios sin las garantías suficientes. Engrosó notablemente las regulaciones que incluyen trabas burocráticas para la operación de nuevas calificadoras. Y ahora Obama hace mucho más de lo mismo, con más entusiasmo y convicción que su antecesor, lo cual naturalmente no ofrece un buen ejemplo a los españoles ni al resto del mundo.

Este artículo fue publicado originalmente en La Nación (Argentina) el 26 de mayo de 2011.
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The U.S. economy needs to break its stimulus habit

August 2, 2011: 11:28 AM ET

Despite what various politicians and experts say, real productivity gains and real economic growth do not come from stimulus.
By Richard Rumelt, contributor

FORTUNE -- In response to the disappointing second quarter performance of the U.S. economy, Ben Bernanke has suggested that the Fed may have to initiate a third round of "quantitative easing" and told Congress that it should maintain fiscal stimulus

Does the U.S. economy need another round of stimulus? Before one decides on a policy or strategy, it is important to first identify the problem. In searching for a diagnosis of the present economic situation, I am reminded of "west coast turnarounds."

In the mid-1960s, when I was in college, one of my best friends dropped out. An indifferent student, Paul had a girlfriend and wanted to get on with life, so he went to a school for big-rig truckers. When I saw Paul again after two years, I was shocked. His eyes were sunken and shadowed and his body had gone to fat. Yet he smiled and proudly pointed out an award on his wall announcing that he was the "Driver of the Year."

"How did you get that?" I asked. Paul dug into his pocket and pulled out a clear envelope holding a number of large black torpedo-shaped pills.

"These are west coast turnarounds," he explained. "They let you drive from New York to San Francisco, turn around, and come back without stopping."

I spouted the usual cautions about what he was doing.

Six months later, Paul's girlfriend called me because she couldn't wake him up. I arrived at their apartment at the same time as Andy, one of Paul's truck driver colleagues. Paul sputtered awake when Andy poured water on his face. Then, Andy offered Paul some strong coffee because he "needed a stimulant."

A chemical stimulant provides a temporary speed up, a boost that must be paid for later. Notwithstanding Paul's award for "Driver of the Year," taking stimulants is not a path to long-term productivity. Andy's diagnosis that Paul needed "a stimulant" was dead wrong. Paul had been living on stimulants for so long that his body could no longer respond to them. Paul needed to recover and get back to normal.

Like its chemical analog, an economic stimulus is a temporary jolt aimed at helping the economy over a rough patch, with the cost of the jolt paid for out of normal-times incomes. Unfortunately, like Paul, the U.S. has been taking economic stimuli every quarter for a decade, pretending that a sequence of temporary jolts is the same thing as economic growth. But true per-capita economic growth is the outcome of productivity-increasing innovation. You cannot engineer true economic growth by fiddling with fiscal or monetary policy or by financing excess consumption with shaky loans.

To recount recent history, the U.S. federal government began stimulating the economy in 2001, at first in response to a recession and then in fear that 9/11 would dampen growth. During 2001-2004, the Bush administration pushed through tax cuts, offered $35 billion in tax rebates, and changed asset depreciation rules to front-load business cash flows, all presented as measures to stimulate the economy.

More important than these fiscal stimuli, the Federal Reserve began to loosen monetary policy, driving down interest rates. The economy climbed out of the 2001 recession later that year, but rates on three-month treasuries were nevertheless driven down from 4% to 3.5% by late 2002, then to 1.6% in late 2003, then to 1% in 2004, rising to a still-low 2% in 2005.

Despite a reasonably healthy economy, the Fed kept stimulating the economy with very low interest rates because there seemed to be no inflation. And there seemed to be no inflation because, down in the boiler room of the Fed, there was no meter labeled "soaring home prices."

The massive stimulus of very low interest rates from 2003-2005 helped power the housing bubble. When the artificial stimulus of 1% interest rates was removed, home prices slowed their ascent and, as we all know, began to crater in 2007-2008. This bursting of the housing bubble ignited a new round of stimuli. Interest rates were brought to the lowest levels in history -- essentially zero -- where they reside today.

In 2008-2009, the government provided $65 billion in tax rebates, offering cash for clunkers and tax rebates for first-time homebuyers, spending over $750 billion to stimulate the economy. During 2009-2010, the Fed embarked on a program called "quantitative easing" in which it purchased $1.3 trillion in bank debt, mortgage-backed securities, and Treasury notes with newly created money.

Then in 2010-2011, the Fed embarked on another round of "easing" during which it created an additional $1 trillion in new bank reserves by buying bonds on the open market. The apparent purpose of this last "stimulus" was to artificially inflate stock and asset prices to make people feel richer and more likely to borrow and spend.

A decade of constant stimuli has produced the same effect as Paul's west-coast turnarounds -- a series of highs and crashes followed by a comatose condition that no longer responds to stimuli. Despite what various politicians and experts tell you, real productivity gains and real economic growth do not come from taking stimulants.

Richard Rumelt is the Harry & Elsa Professor at the UCLA Anderson School of Management. He is the author of Good Strategy/Bad Strategy. Visit his blog at

jueves, 11 de agosto de 2011

¿Capitalismo salvaje o socialismo financiero?

por Luis Pazos
Luis Pazos es Profesor de Economía Política y autor de varios libros de temas económicos. 

La crisis de los Estados Unidos fue originada por excesos de algunas instituciones financieras que otorgaron hipotecas a quienes no tenían capacidad de enfrentarlas. Esa falla tuvo un efecto dominó, rompió frágiles equilibrios en otras instituciones financieras que trabajaban con altos niveles de riesgo.

Después de una burbuja o crecimiento exagerado de un sector vienen ajustes bruscos que perjudican a terceros que no crearon ni se beneficiaron con la burbuja. Para evitar peligrosos sobreajustes es necesaria una regulación que permita a los mercados funcionar en un entorno jurídico que garantice la propiedad, la libertad de intercambios y evite fraudes. Cada quien debe responder de los riesgos que toma, pero implica un fraude vender valores sin advertir al comprador los riesgos que conllevan.

La crisis los Estados Unidos es para los socialistas una muestra del fracaso del capitalismo y para los partidarios del mercado un ejemplo del fracaso del socialismo financiero en EE.UU. Las dos empresas hipotecarias que originaron la crisis, Fannie Mae y Freddy Mac, financiaron cuatro de cada cinco hipotecas el año pasado. Esas empresas fueron engendradas por el gobierno de EE.UU. Fannie Mae fue creada por el Presidente Franklin D. Roosevelt como parte del "welfare state" o estado benefactor. Freddy Mae, iniciada por el Congreso en 1970.

Algunos directivos de Wall Street ganaron dinero a corto plazo, enfrentando a riesgos no revelados a quienes les confiaron sus patrimonios. Los excesos que perjudiquen a terceros, ajenos a quienes crearon los riesgos, deben ser castigados en un sistema de libertades económicas.

La supervisión del Estado es importante para que funcionen los mecanismos de mercado, pero es peligroso que en aras de una mejor distribución del ingreso y de ayudar a tener una casa a los desposeídos, como pensó el ex presidente Roosevelt, se creen instituciones financieras en las que el gobierno se compromete a cubrir sus excesos.

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miércoles, 10 de agosto de 2011

We're all losers in the debt deal

August 3, 2011: 10:41 AM ET
Washington thinks it won a victory on the debt ceiling debate, but a victory for whom remains the question -- it will do very little to alleviate the bleak fiscal outlook of the United States.
By Daryl G. Jones, Hedgeye

The debt deal is done and, despite the best fear mongering by both parties and many of the talking heads on TV, the credit markets -- both Treasury yields and credit defaults swaps -- have been consistently signaling that a U.S. debt default was highly unlikely. The derivative impact of the fear mongering is that a deal is being pushed through, but it will not truly address deficit issues and continues to leave the door wide open for a potential ratings downgrade.

Keynesian economist and Nobel laureate Paul Krugman voiced his concern about this bill in the New York Times with his emphasis that "there will be big spending cuts." We are not sure whether Dr. Krugman has a calculator in either his Upper West Side apartment or hallowed Ivy League office, but nothing could be further from the truth.

In the short term, according to the most recent scoring by the Congressional Budget Office, the impact of this bill is minimal with a mere $21 billion in cuts in fiscal 2012 and $42 billion in cuts in 2013. Last week we called this a Congressional comb-over. That is, while the amount of cuts to the deficit and the amount that the debt ceiling will be extended are roughly equal, they are on two very different time frames. As noted, in the short term, the bill literally does nothing to alleviate the deficit and if the ratings agencies are being intellectually honest, this bill should not meaningfully change the creditworthiness of U.S. government debt.

Moreover, it is important to understand that the proposed spending cuts come off of the Congressional Budget Office baseline. Based on the current CBO baseline, as represented in "An Analysis of the President's Budget Proposal For Fiscal Year 2012," total debt held by the public will increase from ~ $10.4 trillion in 2011 to ~ $20.8 trillion in 2021. Therefore, the baseline projections will still add over $8 trillion in debt to the U.S. balance sheet over the next decade AFTER the proposed cuts. As Senator Rand Paul wrote in an open letter stating why he wouldn't vote for this deal:

"This deal, even if all targets are met and the Super Committee wields its mandate - results in a BEST case scenario of still adding more than $7 trillion more in debt over the next 10 years. That is sickening."

In the intermediate term, the more critical issue impacting the U.S. deficit is the domestic outlook for economic growth. Hedgeye has been on the low end of U.S. GDP estimates for the majority of the year, and consensus growth forecasts for the second half are still nearly twice that of ours. The actual reported numbers have supported our contrarian stance, coming in at 0.4% on a quarter-over-quarter basis in Q1 2011 and 1.3% in Q2 2011 (advance estimate – which may also wind up being ~80% too high after future revisions!). There are many issues with slow growth, but the key one that is not currently being contemplated is its impact on the federal deficit.

From a bigger picture perspective, the deficit projections provided by the CBO, which are the basis on which the spending cuts are predicated, are highly questionable based on a number of the embedded economic assumptions, in particular GDP growth. According to the CBO's January 2011 publication, "The Budget and Economic Outlook: Fiscal Years 2011 to 2021":

"All told, if growth of real GDP each year was 0.1 percentage point lower than is assumed in CBO's baseline, annual deficits would be larger by amounts that would climb to $68 billion in 2021. The cumulative deficit for 2011 through 2021 would rise by $310 billion."

In its economic projections, the CBO assumes 2.9% real annualized GDP growth from 2011 to 2021. Interestingly, that is a noted acceleration from the last ten years, which produced an average annual rate of 1.7% real GDP growth. If the next ten years produce comparable growth to the prior ten years, which is reasonable for an economy that is at 90%+ debt-to-GDP, the incremental deficit in that period over the CBO baseline would be $3.7 trillion, upping Rand Paul's $7 trillion figure to a whopping $10.7 trillion in additional deficits added to the U.S. balance sheet through 2021.

And that, my friends, is a lot of billions.

Tomado de la Revista Fortune

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