Public Finance

What has happened to Venezuela?

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venzuela

Venezuela is in the news as the country cannot even buy paper to print money.

This all goes back to 1998 when Chavez was elected by the people.

He was an army officer and had previously attempted to overthrow the government, a coup that failed.

in the early 1980s. Chávez led the MBR-200 in an unsuccessful coup d’état against the Democratic Action government of President Carlos Andrés Pérez in 1992, for which he was imprisoned. Released from prison after two years, he founded a political party known as the Fifth Republic Movement and was elected president of Venezuela in 1998.

Venezuela is an example of The Curse of Natural Resources.

The idea that resources might be more of an economic curse than a blessing began to emerge in debates in the 1950s and 1960s about the economic problems of low and middle-income countries.[3] The term resource curse was first used by Richard Auty in 1993 to describe how countries rich in mineral resources were unable to use that wealth to boost their economies and how, counter-intuitively, these countries had lower economic growth than countries without an abundance of natural resources. An influential study by Jeffrey Sachs and Andrew Warner found a strong correlation between natural resource abundance and poor economic growth.

Venezuela is only the latest and worst example. The history is depressingly familiar.

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Government, the things we do together.

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cal

Barack Obama is fond of describing government this way.

As President Obama said the other day, those who start businesses succeed because of their individual initiative their drive, hard work, and creativity. But there are critical actions we must take to support businesses and encourage new ones that means we need the best infrastructure, a good education system, and affordable, domestic sources of clean energy. Those are investments we make not as individuals, but as Americans, and our nation benefits from them.

That was a reaction to Romney’s criticism of his silly comment.

I prefer the quote attributed to Washington.

“Government is not reason, it is not eloquence,—it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action.”

Now, we see a new imposition.

The Department of Labor says its so-called fiduciary rule will make financial advisers act in the best interests of clients. What Labor doesn’t say is that the rule carries such enormous potential legal liability and demands such a high standard of care that many advisers will shun non-affluent accounts. Middle-income investors may be forced to look elsewhere for financial advice even as Team Obama is enabling a raft of new government-run competitors for retirement savings. This is no coincidence.

Labor’s new rule will start biting in January as the President is leaving office. Under the rule, financial firms advising workers moving money out of company 401(k) plans into Individual Retirement Accounts will have to follow the new higher standards. But Labor has already proposed waivers from the federal Erisa law so new state-run retirement plans don’t have the same regulatory burden as private employers do.

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Who’s More Fascist: Presidential Candidate Donald Trump or Former Federal Reserve Chairman Ben Bernanke?

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How Economists Facilitated the Transition of Erstwhile “Market” Economies to Fascism

The Left calls Donald Trump a fascist invoking the memory of Hitler and Mussolini, to which Trump might reply: “they were losers; I’m no loser.” Fascism is in essence the political control of the private economy, historically justified by democratically elected leaders to defend against perceived or orchestrated external threats. Progressive war politicians from Presidents Wilson and FDR to Johnson and Obama and now candidate Clinton have pursued this same goal in the US as has the social democratic European Union.

At the recent meeting of the G20 leaders and central bankers political responsibility for and control over their respective economies was assumed, but their Alfred E. Newman “what, me worry” smiling faces belie the fragility of the current global economy. The political distortions to both the financial and real economy have arguably never been greater, to which politicians and their economist enablers prescribe more of the same mostly wasteful public spending financed by money printing, a cure reminiscent of medieval bloodletting.

Having never been of much use to business, economists mostly followed “Say’s Law” that supply creates its own demand (for academic economists). They got their first pervasive shot at political power when President Wilson – an academic who chafed at constitutional constraints – created the Federal Reserve which helped US bankers fund the Allies until he could mobilize a war economy, making the first WW “Great.” The unprecedented death and destruction of the Great War knocked the global economy off kilter and the massive international war debts made stabilization politically difficult. As the creditor and least damaged victor, the US economy boomed in the roaring ’20s, followed by a bust.

Purveyors of the “dismal science” had previously counseled that politicians had to own up to the cost of war until the private economy recovered. While the “arts” of manipulating the value of currency and public spending financed by coercive taxes and often uncollectable debt as well as coercive regulation were as old as politics and war itself, post WW I economists became noticeably less “dismal” and purportedly more “scientific,” believing that such “macroeconomic” interventions could be calibrated to “tame business cycles” in part by transferring or defaulting on war debts. This was complemented by “microeconomic science,” the recent objective of which has been to prove that individuals aren’t always perfectly rational (and by inference in need of paternalistic political protection and direction). Macroeconomists contend that this psychological defect is contagious, conjuring irrational mobs running on banks (or attending Trump rallies).

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In Defense of Wall Street A**holes

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Long time Democrat turned Republican Donald Trump, who as a business titan relied more than any of his opponents on “Wall Street” funding, decisively won the Republican primary. In sharp contrast, socialist Bernie Sanders decisively won the New Hampshire Democrat primary by attacking his opponent’s Wall Street ties. Trump supporters apparently believe that the way to deal with Wall Street a**holes is a bigger a**hole who will negotiate much better deals, whereas Sanders supporters believe that “Wall Street (a synonym for the entire US financial system) is a fraud” requiring major extractive surgery.

Most people within the NY financial community including the numerous mid-town asset management firms agree that many Wall Street players were a**holes during the sub-prime lending debacle leading to the 2008 financial crisis, but surely the Sanders pitchfork brigade wouldn’t travel uptown. This may explain why among the thousands of books and articles written in the aftermath of the financial crisis and the Occupy Wall Street movement, Wall Street hasn’t defended itself and has found few defenders willing to go public.

Truth be told, Wall Street has always attracted more than its share of greedy a**holes. But historically they discriminated against the less profitable investments in favor of those that had the highest return potential relative to risk. This represented the brains of a heartless US capitalist system. Defenders of capitalism correctly argue that it is the only economic system at the base of all human economic progress, however unequally distributed. Progressive critics argue for greater equality, the poor made poorer so long as the better off are equally so (although this is not the way it is typically represented).

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