Good Statistics, and Bad

Good Statistics, and Bad

04/12/2019Gary Galles

Suppose someone wanted to misrepresent a public policy to you. How could they do so most effectively? And who can help you resist?

It’s certainly a believable hypothetical. With two major parties who seem to disagree on everything, multiple intra-party fault-lines, and a plethora of interests who wish to turn laws and regulations in their favor, whipped together by a press in search of partisan scandal and ratings, it is hard to see how it could be otherwise. In fact, for almost every issue, it seems very likely that some, if not many, groups, will be tempted to promote their interests using techniques ranging along the spectrum from “putting one’s best foot forward” to bald-faced lies.

There are plenty of common political tricks that fall short of outright lying. For instance, one can bury desired changes in the paper avalanche of an omnibus bill, as in the Minnesota legislature’s recent attempt to sneak in enactment of the National Popular Vote project. Or one can pass vague legislation that passes the buck for what it will mean in practice to executive agencies and the courts. But such forms of subterfuge are not my interest here.

I wish to ask how people would misrepresent things in the open, rather than behind such political camouflage? As I warn my public policy students, the general principle is that people will lie to you in whatever areas you are most vulnerable.

If you are American, one of those weak spots is typically mathematics, and particularly statistics, which is why it earns its place of shame along with lies and damned lies. That is why the tricks for how to misrepresent statistics discussed in Darrell Huff’s How to Lie with Statistics still keep the book selling 65 years after its initial publication.

However, widespread ignorance goes deeper than the science of statistics itself. Very few people have a clear idea on what the data involved actually measures, under what assumptions and limitations, which can lead to careless and irresponsible usage. For instance, few people can articulate why both the employment and unemployment rates could go up at the same time, and which would be a more reliable economic indicator in such a case, when their names suggest it shouldn’t be possible.

Thomas Sowell , in his most recent book, Discrimination and Disparities, describes the problem as “overlooking simple but fundamental questions as to whether the numbers on which… analyses are based are in fact measuring what they seem to be measuring, or claim to be measuring,” which, in order to defend ourselves against misrepresentation, requires “much closer scrutiny at a fundamental level.” But far too few apply such careful, fundamental scrutiny.

However, there are a few people who do yeoman work in this area, providing valuable “insurance” against errors others would encourage us to make. They deserve our appreciation for toiling in that underserved area, and I would like to express thanks to several whose efforts I have particularly benefitted from.

Thomas Sowell is one such author who has provided a great deal of clarification over decades of prolific publication. For example, one common theme of his is the need to distinguish between what happens to a particular category of people (e.g., “the rich” or “the poor”), interpreted as a stable group, which lends itself to class-based conclusions, and the very different experiences of real people who move in an out of such categories over time, which upsets such analyses.

Discrimination and Disparities reiterates that theme from his earlier books. But my favorite illustration is his discussion of the famous Card and Krueger minimum wage study, which purported to overturn the conclusion that raising the minimum wage increases unemployment. It surveyed the same employers, asking how many employees they had before and after a minimum wage increase. The problem is that “you can only survey the survivors.” Anyone who went out of business, and the jobs that consequently disappeared, would not be included, so even if surveyed survivors did not reduce employment, many jobs invisible to their approach could still have been lost. To reinforce the image, he notes that a similar before-and-after survey of those who played Russian Roulette would show that no one was hurt, and cites a quip by George Stigler that if it had been used in a survey of American veterans in both 1940 and 1946, it would “prove” that “no solider was mortally wounded” during the war.

Another very prolific watchdog for statistical malfeasance is Mark J. Perry . He points out so many useful “red flags” in multiple outlets that I look forward to what is almost a one-a-day pleasure. A good example is his evisceration of “Equal Pay Day” discussions that attribute differences between median yearly incomes to unjustifiable discrimination against women “doing the same work as men.” He points out that the data fails to adjust for differences in “hours worked, marital status, number of children, education, occupation, number of years of continuous uninterrupted job experience, working conditions, work safety, workplace flexibility, family friendliness of the workplace, job security, and time spent commuting,” each of which would lead men to be paid more, on average.

Andrew Biggs is another stickler for statistical responsibility, particularly in areas connected to retirement security and retirement plans. For instance, in Forbes , he showed that a recent GAO report concluding that 48% of U.S. households aged 55 and over in 2016 “had no retirement savings” was far different from reality, as 72% of people had such savings plan, when those with traditional defined benefit pensions are counted, and 83% of married households had such savings when including those where only one had a retirement plan. Just those two changes massively changed the conclusions. And he pointed out other biases, as well.

These three people have each helped me understand measurement issues far better than before, enabling me to avoid errors that would have undermined my analyses of policy issues. I owe them thanks. But readers might also give them more attention, for similar “tutoring.” Many others have also been of use to me, and as I continue to learn, perhaps I can give a shout-out to others in the future, especially as this labor pool is still far too shallow. But mainly I wanted to put out a serious warning about ignorance not only of statistical applications and presentations, but also of the data that is often misused in reaching policy conclusions.

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After Draghi, Europe Needs a Hawk To Head the ECB

6 hours agoFabrizio Ferrari

On November 1, Mario Draghi’s tenure as governorof the European Central Bank (ECB) will expire, and the European Council will appoint a successor for the role. Moreover, it is now known that northern European countries are pushing for replacing Mr. Draghi — widely recognized as a “dove” — with a “hawk” — less accommodating toward the loose monetary policy being demanded by southern European states.  Most especially, Italy.

On the other hand, there are plenty of economic considerations — besides the historical and political ones blaming the alleged excessive (but totally sensible and legitimate) German fear of hyperinflation — which support the northern European preference for a less accommodating governor, and a tighter monetary-policy stance. Let’s look at three of them, which are the most prominent amongst several others:

One: From March 2015 onwards, the Quantitative Easing program (QE, officially known al the Asset Purchasing Programme, APP) implemented by the ECB has been distorting the relative prices of European private and public bonds, delivering a perfect textbook-case of how Cantillon-effects distort the economy. Indeed, for instance, the current difference between the yield of American 10-year government bonds and Italian ones is much lower than the same difference between German 10-year government bonds and American ones, in spite of the total absence of macroeconomic fundamentals to account for this fact. Moreover, as figure 1 and 2 show, the Asset Purchasing Programme has been highly biased towards its public-sector branch (PSPP, Public Sector Purchasing Programme, painted in blue). This also distorts the relative prices of private and public securities, and brings about a crowding-out effect damaging private investments;

ferr1.png

 

Two: From a historical and political perspective, Italy has been blatantly breaching the deals — i.e., the 1992 Maastricht treaty and the 1997 Amsterdam treaty — requiring limits of its public debt over a GDP ratio to the 60% level. In practice, this has reached a historical post-war peak of more than 132%. Hence, it is evident that Italy has been only reaping the benefits stemming from European integration. This includes lower public expenditure for debt-interests (from 12.2% in 1993 to 3.7% in 2018), monetary stability, low inflation, and commercial integration. Of course, northern states are no longer willing to let Italy have everything it wants, and are perfectly aware that Italy has been the country gaining the most in terms of lower interest on its public debt brought about by Mr. Draghi’s monetary policies;

ferr2.png

Three: The central bank has been claiming these inflations are “justified” by the alleged empirical evidence entailed by the Phillips-curve. The central bankers have been lamenting excessively low inflation within the Eurozone, and Mr. Draghi has expanded the Eurozone’s monetary base up to a level equal to 28% (3.217-trillion euros) of its GDP. Meanwhile, the American monetary base has been reduced to a level lower than 17% of American GDP. This, combined with a stable — even though low — growth in the Eurozone, with a macroeconomic outlook close to its full potential (even Italy, the weakest of all European economies, is predicted to have an output gap equal to -0.3% of GDP in 2019 and -0.1% of GDP in 2020, thus practically reaching its full potential output) and the fear of an economic slow-down caused by trade-wars, has convinced north-European politicians that the current monetary-policy stance is no longer what Eurozone — as a whole — needs. (Even Italy, the weakest of all European economies, is predicted to have an output gap equal to -0.3% of GDP in 2019 and -0.1% of GDP in 2020, thus practically reaching its full potential output.)

Lastly — and subsuming the three aforementioned bullet-points — a “hawkish” ECB-governor would be also in the interest of Italy itself. After all, Mr. Draghi’s monetary-policy stance has allowed Italian governments to keep implementing unsustainable fiscal policies without sustaining the associated economical and political costs, such as higher public expenditures for debt-interests and lower bank-lending. The latter is being caused by the huge exposure of Italian commercial banks to Italian sovereign risk.

Ultimately, northern-European savers, the stability of the monetary union and — especially — Italy itself do not need a lovely, charitable and “dovish” mother at the central bank. We need, rather, a stark, strict and “hawkish” tutor.

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Why Private Roads Would Have Fewer Traffic Jams

7 hours agoGor Mkrtchian

The regular occurrence of traffic jams in major cities is not an immutable fact of urban life. Private roads show us the path out.

A shortage occurs when the price of a scarce good is set below the market-clearing price.1 If the state monopolized milk production, produced a fixed quantity of milk every year, set the price of milk at zero, and distributed it on a first-come first-serve basis, the result would be an anarchic rush to attain as much milk as possible, without consideration for the milk needs of others. A shortage would occur.

The state, for almost all of the highways and streets it controls, has set the price of this essential, scarce good at zero. Traffic jams are a manifestation of shortages in the road supply. Treating a good of which there exists a finite supply as though it existed in infinite abundance (had a price of zero) is incongruent with reality, and we should expect it to cause problems.

Congestion Pricing

If prices were allowed to adjust to demand, the price of using a given highway would increase when more people want to use it and decrease when fewer people want to use it.2 The result would be that people would think twice before driving at a costly time. Those who needed most to use the highway at a time of high demand would be willing to pay the price,3 while those who were willing to wait would adjust their behavior on the margin. When demand and hence prices for roads are highest, more people would go to the close bowling alley instead of the far away movie theatre, the closer restaurant instead of the farther one, or do something at home instead of going for a drive. They would be more cautious to schedule their errands before or after peak hours, instead of during them. As a result, the number of cars driving during peak hours would be reduced, mitigating traffic jams.

Employers would also react to priced roads by altering their employees’ hours. Employers would seek to schedule their workers’ shifts such that their commutes are during cheaper, lower demand hours, lest the employer need to pay higher salaries to offset the inconvenience of more expensive, slower commutes to attract employees of the same quality. The result would be more staggered commute schedules, such that fewer people are driving to or from work at any given time, reducing traffic.

Some businesses like restaurants and movie theaters would not react much, because:

Most restaurants, for example, are busiest during breakfast, lunch, and dinner time, and perhaps, in some cases, after show closings, for late-night meals. In other words, restaurants suffer from congested traffic, a peak load problem, during these times. But, were a restaurant management seriously to propose that its customers stagger their meal times ‘in order to reduce and spread out the rush hour peaks,’ it would be laughed right out of business in a trice. Its competitors would have a field day.4

However, other businesses would be more capable of beginning their employees’ shifts a few hours earlier or later than the bulk of other employers:

. . . if a price reduction is offered for off-peak travel, all employers will be tempted to accede to the wishes of their employees for cheaper travel. The ones who actually give in and reschedule their work forces will tend to be the ones whose employees’ productivity is increased to the least degree by working the same hours as the general labor force.5

The result would be social coordination of road use. Those industries which least need their employees working at a particular time would most strongly react to road prices by scheduling shifts to provide the cheapest commutes. If omnipotent, caring Martians were to dictate to every industry when their employees’ shifts should begin to both maximize workplace productivity and minimize traffic, the result would be the same as under a system of private roads.

Not only would the currently existing roads be rationed according to prices instead of the current free-for-all, the ability to make money from providing roads would lead to the widening of existing roads and the creation of new roads altogether when demand points to new profits to capture, “Privately-owned roads and bridges would have tolls set by supply and demand, just like prices are set in any other market. Infrastructure in need of repair or expansion would get it, whereas wasteful boondoggles would be minimized with private money on the line.”6

Likewise, road owners hoping to lure potential customers to choose their routes instead of rival routes (intra-market competition) or to use their routes more often instead of staying at home and driving less altogether (inter-market competition) would wish to make their roads as safe, uncongested, and attractive as possible. This means wherever currently there is a stop-sign that should be a yield sign, a 45 MPH speed limit that should be a 65 MPH speed limit, a traditional intersection that should be a roundabout, or any other change in road design and rules, private road owners would be driven by self-interest to adjust in order to maximize safety and traffic flow.

Contrast this with the current system under which certain government run intersections are infamous for being dangerous and accident prone. Why do political actors allow these preventable series of tragedies to persist rather than adjusting the designs and/or rules of those intersections? The overseers of government run roads are chosen democratically, rather than by the market. Whereas the private owner of a road bears direct legal and financial responsibility for its safety, mayoral, gubernatorial, and presidential elections, occurring once every four years, seldom depend upon the candidates’ positions on individual intersections or roads:

The dollar vote occurs every day, the ballot box vote only every two or four years. The former may be applied narrowly, to a single product (e.g., the Edsel) while the latter is a ‘package deal,’ an all or none proposition for one candidate or the other. That is, there was no way to register approval of Bush’s policies in areas 1, 3, 5 and 7, and for Clinton in 2, 4, 6, and 8. People were limited to choosing one or the other in the last presidential election.7

Mayor Jones and Governor Smith may go through their entire election campaigns and reigns without giving a thought to death-trap intersections under their jurisdictions that could stop killing people if only some signs or speed-bumps were added. With privatization, each road would have a special caretaker, an owner, whose livelihood and freedom depended on the quality and safety of their product.

Road privatization launches a triple-attack on traffic. First, prices for road use allow coordination in when and how much travelers use particular roads. Second, the road supply is increased through construction of new roads and expansion of existing roads. Third, entrepreneurs seeking to improve their services would optimize the designs and rules of their roads. In severe traffic, how often have our thoughts turned to state-enforced population control, when we just needed to know that keeping the price of a scarce good at zero causes shortages?

  • 1. The market-clearing price is the price at which there is a willing and able buyer for every unit of a good produced, and visa-versa.
  • 2. Uber’s surge pricing works similarly.
  • 3. If roads were privately provided, the state would no longer need to collect taxes to finance roads, and so society could use the money saved in taxes to pay for tolls, or anything else.
  • 4. Walter Block, The Privatization of Roads and Highways, Ludwig von Mises Institute, 2009, p. 60.
  • 5. Ibid., pp. 60-61.
  • 6. Robert P. Murphy, “A Gas Tax Hike is the Wrong Way to Fund Highways,” Mises Wire, 2018.
  • 7. Walter Block, The Privatization of Roads and Highways, Ludwig von Mises Institute, 2009, p. 196.
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A New Interview with John V. Denson

06/17/2019Ryan McMaken

Be sure to check out this new interview with John Denson in C.Jay Engel's new physical print magazine Austro Libertarian. He covers everything from World War One, to 9/11 to Donald Trump.

If you're not familiar with Denson's work, he is the Distinguished Scholar in History and Law here at the Mises Institute. He is also a practicing attorney in Alabama and the editor of two books, The Costs of War and Reassessing the Presidency, and the author of A Century of War: Lincoln, Wilson and Roosevelt.

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In Our Hyper-Political World, Political Ideology Is More Important Than It Should Be

06/17/2019C.Jay Engel

The thesis here is that libertarianism as a political theory only carries the veneer of importance and centrality due to the strength and power of the democratic, administrative state in our time. Everywhere we look, we see the influence and effect of the state as an apparatus that guides and oversees the machinations of modern civilization. We speak not merely of the obvious libertarian issues like taxes and regulation but we see in the modern western state a cultural force. We so often push the idea that politics is downstream from culture, that we have lost the culture and therefore the state has followed the path of destruction.

But as was hinted on the AL editor’s blog, it is far more likely that Paul Gottfried has it right: the state has morphed into something much more sinister and it now leads the culture toward its own ends. The modern administrative state is the creator of culture and culture is now downstream from the state. Gottfried is especially succinct as to his meaning in his short excerpt:

Contrary to an older understanding of culture, what we are referring to is a process of moral and social radicalization. It is a process that didn’t come about unbidden but which powerful, pervasive administrative rule promoted. And the social engineering function of public administration here and elsewhere in the West has been particularly evident since the 1960s, with governmentally encouraged immigration and an accelerating war against discrimination. Presumably, when Hillary Clinton assured a gay rights group that she was addressing last year (October 5, 2015) that she would use the IRS to force recalcitrant religious institutions into endorsing gay marriage, she was not simply responding to a cultural condition. She was working to create one.

We have entered into a full politicization of society; there is nothing that the state-cultural complex does not touch. It guides the way we interact with others, the way we process and interpret events, and the way we think about social norms and basic social units and institutions.

Now then, to bring this back to the thesis: “libertarianism as a political theory only carries the veneer of importance and centrality due to the strength and power of the democratic, administrative, state in our time.” Since the state is everywhere we look, and libertarianism has a set of particular ethical critiques against the state, it seems to follow that libertarianism plays such an important place in our lives.

Stated differently, according to the libertarian doctrine, the initiation of aggression against the body or exterior property of others is a breach of ethically-laden rights; and the state is the most systematic, constant, and egregious violator of the principle. And as the state surrounds our every move, so we see libertarianism as a response to so much of our world.

This creates the illusion that libertarianism plays a fundamental role in society. That political theory itself is of primary importance for a people who wish for a better world, a world that is both more ethical and more free. And from this, we work to create a libertarian political strategy and a libertarian movement as well. And thus, the disease of modern administrative statism, which takes over our minds as the lens through which we find meaning, produces the impulse that one ought to dedicate himself to libertarianism as a path toward social preservation.

But it should be made clear that the only reason libertarianism as such seems to play such a fundamental role in the self-identity and life-meaning of so many in libertarian circles is due to the politicization of society. We live in the administrative state’s world and thus we even put our path toward social improvement strictly in terms of the political. It is not just that the state formally speaking is everywhere we look, it is that there is hardly any longer a culture that is distinct from the state. When Buck Johnson recently asked Paul Gottfried whether the Left or the State was the chief enemy in our time, Gottfried quickly responded: “what’s the difference?”

We Are Not the State

In times past libertarians correctly and properly held firm that “we” are not the state! Society and the state were separate and the state is an artificial entity as compared to society, which is natural. While importantly and profoundly still true, this does not take into account the extent to which the state has replaced natural and spontaneous society with its artificial one. It is true that the natural society is not born out of the state; the state is not the thing that naturally binds together peoples. But as the administrative, democratic state has come of age, it has created its own artificial society which is of course a society of Egalitarian Terror.

Under a free society that is not created by or bound up in the existence of the state, libertarianism plays much more the role of a legal theory, not a political theory. It’s important to remember that libertarianism chiefly speaks wisdom to scenarios of tension and strife between people who want to use scarce resources for their own ends. Libertarianism offers a standard by which we can determine who gets to use which good and in what way.

The role of libertarianism is to help us resolve disputes and arbitrate in situations of conflict. In other words, libertarianism is chiefly a legal theory that of course has political ramifications once society faces the creation of the state as an institutionalization of aggression (or as Murray Rothbard described it, “a band of robbers writ large.”).

Thus, the writer known as "Bionic Mosquito," offers:

I think we might want to stop thinking in such terms [as libertarian movement]. Not to give up on libertarian ideas, as these have a proper and meaningful place in any free society. Instead, to consider that libertarianism – properly defined – is so thin as to not allow any “libertarian” movement to form.

What this means to me is that men are not connected to other men on the basis of libertarianism. Marxist political movements, for instance, purport that classes are held together by their economic status: workers of the world unite. You are neither German nor Russian nor English. You are a worker, or you are a member of the bourgeois.

It is not the same with libertarianism, or at least a meaningful and realistic libertarianism over against the more universal libertarianism . Let me be clear here: libertarianism is only the thing that binds us is we presume the state’s politicized world! The Marxist worldview is at its root political so it makes sense that Marxism as an ideology binds them.

But libertarianism plays a different role in a free (non-politicized) society; it comes to the picture as a set of principles and guidelines by which we can judiciously determine what is criminal and what is legal, what should be responded to with coercion (such as murder or theft), and what should not be responded to with coercion (such as creating goods and services on the market).

In this case, those of us who are beginning to pay particular attention to the rapid and concerning leftist social revolution likely have more in common with each other, outside the bounds of libertarianism as a legal theory. And as the left-libertarians and mainstream libertarians in general either praise these developments as at the culmination of the “libertarian spirit” or at least just watch it all with neutral expressions and ambivalent reaction, they likely have more in common, generally speaking, with the progressive left.

The response to this is so often that “libertarians are connected not by their cultural preferences but by their anti-statism!” But this is only true under a politicized worldview. Putting aside the issue of politics, which presumably all libertarians would eventually want out of the way anyway, there is nothing else that binds us. And thus, our pretending that we are transcendentally bound by our libertarianism is exactly the sort of artificial connections that the state has aimed for!

Men form society not on the basis of a unifying legal theory, but the legal theory is adopted post-society. Libertarianism is a helpful tool in the development of peaceful civilization; it is neither the spring nor the engine from which society flows. Libertarianism as a unifying spirit is only conceivable because we operate in a world that has experienced the imposition of a political society. But perhaps, to presuppose this statist-world moving forward, and to subsequently work toward a bigger libertarian political movement, is to have already made the very mistake that continues to undermine our efforts toward a free society.

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Does the US Need a Rate Cut? No!

06/17/2019Daniel Lacalle

Consumer confidence is high, unemployment is low and Treasuries’ yield is at 2.1%, while credit to the economy and corporate financing are not suffering.

The weakness in core consumer prices in May, which increased by only 0.1 %, was entirely due to lower prices of used vehicles, and core CPI inflation remains within the Fed target, falling from 2.4% in mid-2018 to 2.0% in May. Headline CPI inflation fell to 1.8% in May due to lower energy prices, so there is absolutely no logic in a rate cut. With unemployment at 3.6%and annualized GDP growth expected to remain above 2.3%, demands for a rate cut are only an excuse to keep financial asset prices higher at any cost

There are some elements that point to a slight weakness in the economy but no need for a rate cut.

  • Industrial production rose 0.4% m/m in May while it stalled in other global economies.
  • A strong 0.5% rise in underlying retail sales in May, along with upward revisions to previous months’ gains which means consumption is likely to grow close to 4% annualized in the second quarter.
  • The headline confidence index declined marginally to 97.9 in June, from 100.0, but remains at very high levels.

A rate cut would only fuel the debt bubble further, and leave the Fed with fewer tools to address a slowdown. When so-called “High Yield” means 365 bps for junk bonds of companies close to bankruptcy and Treasuries yield 2.1% there is no reason at all to cut rates. Rather the opposite.

The debt bubble is dangerously inflated and lower rates would only make it worse. The ratio of US corporate debt to GDP, as well as the high-risk loan figure and securitized debt,  have risen to pre-crisis levels.  US deficit is rising because spending soars and the government finds debt cheap and abundant. Government spending rose to $440 billion in May 2019, up 21% from May of 2018. Yes, up 21% from May of 2018. All this despite record revenues. Receipts increased to $232 billion, up 7% from the same month last year.

A rate cut would only create a larger problem in the future. If the already dangerous corporate and sovereign debt bubble grow significantly more, no monetary policy will prevent a debt crisis.

Daniel Lacalle | Fed rate cut less likely than expected

Republished from DLacalle.com
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The Real Tragedy of the Tragic War Hero

06/15/2019Alan Mosley

If you take an hour drive down the I-65 corridor south from Nashville, Tennessee, you’ll find yourself in Columbia. My hometown isn’t quite as sleepy of a southern town as it used to be, much to my chagrin, but it’s still home nonetheless. The county seat of Maury, Columbia does have a handful of claims to fame to save itself from being a complete afterthought. If claiming a title means you get to keep it for all time, then I suppose it’s proper that Columbia still styles itself as the “Mule Capital of the World.” It’s been a century and change since the mule trade featured prominently in Columbia’s economy, but if a former president is still “Mr. President”, then I suppose Columbia is still “Mule Town”.

Don’t think for a second this isn’t an adequate cause for celebration. They’ll be putting on their 179th Annual Mule Day celebration, which is more appropriately titled Mule Days than Mule Day since it stretches nearly a week long, replete with fried foods, music, and even a parade down Main Street. While he wasn’t born there (Pineville, NC gets that honor), Columbia likes to pride itself as being the home of an American president. The James K Polk Home, the final residence of the nation’s 11th executive, sits a couple blocks down from the courthouse. It’s a museum now, among blocks of buildings that would make one think they had traveled back to the 19 th century were it not for a Dairy Queen.

Another notable Columbian is John Harlan Willis, whose name graces a Columbia bridge that crosses the Duck River. Nearly 40 of the 3,503 individuals who have been awarded the Congressional Medal of Honor are natives of Tennessee, and one of them is John Harlan Willis. Willis was born in Columbia in 1921. He graduated from my high school alma mater, Columbia Central, in 1940, only a short 64 years before myself. I remember walking every day by the display case, which contained his portrait. He was a baby-faced young man with a bit of a mischievous grin wearing his dark blue uniform. John wanted to become a doctor, as he was far more inclined to aid the ailing around him than to bring them to any harm. It was no surprise, then, that when the United States entered World War II, he found himself taking up the role of a Pharmacist’s Mate, First Class, in the U.S. Navy. Willis enlisted in 1940, receiving his naval recruit training at Naval Training Station in Norfolk, Virginia, before moving on to his hospital corpsman training at the Norfolk Naval Hospital in Portsmouth. By the onset of 1944, having spent most of the war learning the healing arts rather than combat, Willis was finally transferred to the 3 rd Battalion, 27th Marine Regiment, 5th Marine Division and sent to the Pacific theater. It was on Iwo Jima where, on the last day of February 1945, he would earn the Medal of Honor.

The official citation that accompanies Willis’s Medal of Honor reads like something straight from a Spielberg film. While in the process of aiding a number of his fallen comrades during the fierce fighting near the Japanese-held Hill 362, Willis was struck by shrapnel from a nearby grenade explosion and was ordered to abandon his charges back to the safety of an aid station. After receiving some bandaging for his wounds, but before being given leave to return to action, Willis made his way back to Hill 362 to resume treating marines who were suffering significant casualties. Then, while administering plasma to the wounded, Japanese forces began to litter his position with hand grenades. He picked up the first to land in close proximity and hurled it back at the foes atop the hill. He then grabbed another, and another, until he had returned eight grenades. It was the ninth grenade to come down upon him that he could not return in time; it exploded in his hand, killing him instantly. Inspired by the scene before them, Willis’s companions rallied from their entrenchment and, despite being outnumbered and charging uphill, they launched the attack that would ultimately repulse the enemy. The citation ends with the statement, “His exceptional fortitude and courage in the performance of duty reflect the highest credit upon Willis and the U.S. Naval Service. He gallantly gave his life for his country.”

While Willis was unquestionably selfless and heroic, I’m not so sure about that last assertion. Did John Harlan Willis really give his life for his country? Did he race back to the front, dodging fire and explosions, in order to please his country with his sacrifice, or rather that he could be the difference in his allies returning home safely? Perhaps we can find some answer in this photograph, which shows his widow Winfrey Willis holding her baby boy in one hand and taking her husband’s posthumous medal in the other from the Secretary of the Navy. Does Mrs. Willis look like a woman content to know her husband’s violent death somehow contributed to protecting America from an enemy it provoked in the first place, or rather a physically and emotionally exhausted single mother who would hand the medal right back if it meant little John could be hoisted in the air by his namesake? I tend to think if John were here today, he would tell you that, if indeed his life were destined to be extinguished on Iwo Jima that day, then he wasn’t giving his life for his country, but rather he was giving it to save his brothers in arms.

 John Harlan Willis was laid to rest at Rose Hill Cemetery, just a couple blocks north of the courthouse. He sits today among Civil War soldiers, a handful of congressmen, a senator, and even a NASCAR driver. The hallowed burial ground, the honors, the memorial halls at medical centers, and even the destroyer USS John Willis are a bad trade for a devoted husband and father. He wanted to become a doctor. It might be a stretch to hope that he would have cured cancer had he survived the war, though he would’ve been valued all the same. A man who would brave bullets and shrapnel time and again, practically defenseless, in order to give a wounded man some plasma sounds like someone who would’ve made for an excellent neighbor. But we’ll never know what sort of family the Willis’s could’ve produced, the kind of physician he could’ve become, nor the sort of compassionate presence he could’ve brought to the community. And so the real tragedy of the tragic war hero is not in what they managed to accomplish, but rather in what they were never afforded the chance to.

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Why Attacking Big Business Is Back In Vogue

06/12/2019Tom Chanter

"Progressive" politicians like Bernie Sanders, Alexandria Ocasio-Cortez, and Elizabeth Warren are becoming more fashionable, and it follows that attacking big business is back in vogue. “Political and academic progressives expand their frenzied attacks on ‘wealth’ and on the alleged transgressions of ‘big business,’” writes Dominick Armentano, Professor Emeritus in Economics at the University of Hartford.

What is it about human nature that drives these attacks? Perhaps we must look to Ludwig Von Mises for an answer. But first, we can get a general idea of how the anti-big-business impulse remains so popular by looking at the work of economist Tyler Cowen.

In April, Cowen published his latest book, Big Business: A Love Letter to an American Anti-Hero, documenting how “Most young Americans hold highly critical perspectives on capitalism.” Indeed, the Harvard Kennedy School produced a report on young adults, revealing 51 percent did not support capitalism. Furthermore, 33 percent endorsed socialism as an alternative.

Clearly, that 33 percent is ignorant to the Two Reasons Why Socialism Repeatedly Fails;

1) the impossibility of economic calculation without true market prices, and

2) the lack of an incentive to produce only what consumers actually want.

Nevertheless, support for socialism endures, and we don’t have to look further than our TV screens and Twitter to observe what may be the one of the key points of origin of this critical narrative against big business. Yet this negativity is driven by more than radical rhetoric from the left-wing media. The very nature of media coverage has an effect.

Cowen adds, “Virtually all media outlets have a significant bias toward negative news of all kinds, including news about business. So scandals, corruption, and abuse of workers all receive much more publicity than the normal, everyday massive successes of America’s major corporations. “Corporations had another stellar day producing things and keeping people employed,” just isn’t a great news headline.”

Furthermore, big business is blamed for the failings of big government. We need look no further than the Occupy Wall Street movement. As the angry masses protested on Wall Street, a more appropriate place to fight for freedom was a short walk away: three blocks north of Wall Street at 33 Liberty Street sits a brownstone building — the home of the Federal Reserve.

Yet, there was little interest in addressing the outsized role of the Federal Reserve in manipulating the global economy. This blind spot for the role of the central bank illustrates just how wrongheaded are many leftwing approaches to diagnosing the source of our economic problems. 

Protestors would do well to consult Austrian Business Cycle Theory which helps explain how the stock market crash and economic downturn were attributable not to "big business," but largely to a prior bank credit expansion by the Federal Reserve and the Fed-regulated banking sector.

Yet, anti-capitalist agitprop spreads through social-media like typhus through the Gulags, even though it is private capital and private business which has made social media possible.

This sort of thing is nothing new. As Ludwig Von Mises wrote, “All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out.”

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The War Crimes That Don't Get Punished

06/12/2019Ron Paul

Rep. Duncan Hunter (R-CA) found himself in hot water recently over comments he made in defense of Navy SEAL Edward Gallagher, who faces war crimes charges over his alleged conduct while serving in combat overseas. Gallagher is charged with stabbing a 15 year old ISIS member while in custody, of taking photos posing with the corpse of the teen, and with killing several civilians.

Defending Gallagher recently, Hunter put his own record up next to the SEAL to suggest that he’s an elected Congressman who has done worse things in battle than Gallagher.

That’s where Hunter’s defense earned him some perhaps unwanted attention. While participating in the first “Battle of Fallujah” in early 2007, by Hunter’s own account he and his fellow soldiers killed hundreds of innocent civilians, including women and children. They fired mortars into the city and killed at random.

In the sanitized world of US mainstream media reporting on US wars overseas, we do not hear about non-combatants being killed by Americans. How many times has there been any reporting on the birth defects that Iraqis continue to suffer in the aftermath of US attacks with horrific weapons like depleted uranium and white phosphorus?

Rep. Hunter described his philosophy when fighting in Iraq:

“You go in fast and hard, you kill people, you hit them in the face and then you get out…We’re going to hurt you and then we’re going to leave. And if you want to be nice to America, we’ll be nice to you. If you don’t want to be nice to us, we’re going to slap you again.”

This shows how much Duncan Hunter does not understand about war. When he speaks of hitting people in the face until they are nice to America, he doesn’t seem to realize that the people of Fallujah – and all of Iraq – never did a thing to the US to deserve that hit in the face. The war was launched on the basis of lies and cooked-up intelligence by many of the people who are serving in the current Administration.

And that brings us to the real war criminals. Rep. Duncan Hunter and his fellow soldiers may have killed hundreds of innocent civilians and even felt justified. Their superior officers, after all, established the rules of engagement. Above those superior officers, going up and beyond to the policymakers, the lie was sold to the American people to justify a war of choice against a country that could not have threatened us if it wanted to.

Vice President Dick Cheney knew what he was doing when he kept returning to the CIA headquarters, strong-arming analysts to make the intelligence fit the chosen policy. John Bolton and the other neocons knew what they were doing when they made claims about Iraq’s weapons of mass destruction they knew were false. The Pentagon’s Office of Special Plans played its role in selling the lie. So did the media.

Edward Gallagher will face trial and possibly jail for his actions. Rep. Duncan Hunter may even face punishment – though perhaps only at the ballot box – for his admitted crimes. But until those at the top who continue to lie and manipulate us into war for their own gain face justice, the real criminals will continue to go free and we will continue pursuing a suicidal neocon foreign policy.

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Judy Shelton's Remarkable Attack on the Fed

06/11/2019Jeff Deist

Judy Shelton's recent interview with the Financial Times is nothing short of remarkable. Her comments represent the most substantive attack on the Fed, and central banking generally, by any potential nominee to the Fed board in recent history. She not only challenges how Jerome Powell and Fed officials conduct monetary policy, but whether they can conduct it competently at all.  

Consider this salvo against the Fed's inescapable role as central planner:

How can a dozen, slightly less than a dozen, people meeting eight times a year, decide what the cost of capital should be versus some kind of organically, market supply determined rate? The Fed is not omniscient. They don’t know what the right rate should be. How could anyone?” Ms Shelton said. “If the success of capitalism depends on someone being smart enough to know what the rate should be on everything . . . we’re doomed. We might as well resurrect Gosplan,” she said, referring to the state committee that ran the Soviet Union’s planned economy.

And her attack on the Fed's outsized role in the economy:

She also said that the Fed should continue to reduce its balance sheet below the $3.5tn target set by Jay Powell, the chairman. “I would rather the Fed be less of an entity. When a central bank buys up government debt, that’s the beginning of compromised finances.”

She also recognizes malinvestment:

“It’s the distorting aspect of the Fed that is the worst aspect — it’s a wag-the-dog situation. People are fixated on the Fed and are making money by arbitraging, trillions of a second after the latest FOMC announcement,” she added.

And she isn't afraid to support a role for gold in monetary policy:

Ms Shelton has long been sympathetic to the gold standard, which the US fully abandoned in the early 1970s in favour of a flexible exchange rate for the dollar. “People call me a goldbug, and I think, well, what does that make them? A Fed bug,” she says.

"Fed Bugs"! Why didn't we think of this?

Shelton, who works as an economic adviser to Trump, is not an economist by training. Her PhD in business administration, from Utah State no less, is sure to draw jeers from the Ivy League central bank crowd. But it's Ivy League economists, after all, who created the last crisis in 2008. And needless to say they're sounding alarm bells about Mrs. Shelton. The worst offender is former Treasury official Larry Summers, who shamelessly calls Shelton "dangerous." 

Sorry, but a financial terrorist and chief architect of the weaponized derivatives market in the 2000s should have the simple decency to keep quiet and thank his lucky stars he's not in jail. 

Judy Shelton is not an Austrian. She appears mostly aligned with the supply-side camp of her longtime friend and mentor Larry Kudlow, who heads the Trump administration's (useless) National Economic Council. And her support for a modified gold standard rests on shaky ground, as she unfortunately favors a rules-based approach under which the Fed would target a dollar price for gold—what Joe Salerno refers to as "price-rule monetarism." 

So Shelton doesn't want to End the Fed. But in the parlance of woke America, she's an "ally." Recognizing the limits of central bank omniscience, and challenging its benevolence, are important first steps on the road to redeeming our money and our economy.   

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The Fed Has Lost Control

06/11/2019Doug French

The gold price shot up $50 in the last 30 days during a time of the year when the yellow metal typically lays down to begin its summer nap. At the same time, Bitcoin’s price has rose from its slumber. What’s up? Luke Gromen, founder of Forest for the Trees LLC , a macro/thematic research firm catering to institutions and individuals may have put his finger on it during his interview with Ed Harrison on Real Vision .

Gromen points out that something happened in the 4th quarter of last year and on March 20th of this year. Alarm bells have gone off at the Fed because for the first time in 70 years, government deficits matter. According to Gromen,

With Fed Funds went over interest on excess reserves, that was a sign that the United States government's deficits were getting so big and foreigners' interest in treasury bonds, because FX had yields, were so negative, though the interest from foreign private sector investors was so low, that we are crowding out our own banking system. And so, if the Fed does not inject a significant amount of dollar liquidity soon- be that via repo, be that via rate cuts, and I think you're going to be seeing QE probably in six to nine months at the latest.

From October through April , Uncle Sam’s outflow exceeded his inflow by $531 billion or 38% more than a year ago. Foreign central banks used to buy up US Treasuries like there is no tomorrow, but now, not so much. Late last year,

the hedging costs for foreign investors to buy US Treasuries went negative. In other words, for a Japanese or German private sector investor- and again, the US government's now critically reliant on foreign private sector investors to buy Treasuries, the yield FX hedged turn negative.

Last year the U.S. government issued $10 trillion worth of Treasuries, 70 percent of which have less than one-year maturities. This year it’ll be $11.5 trillion, again with 70 per cent maturing in less than 12 months.

The upshot of all this is

the Fed is losing control of [the] Fed Funds Rate at the short end because US deficits are growing as fast as they are. And because foreign official sector is not buying really at all on net. The foreign private sector is not buying enough, they are buying some unhedged but not nearly enough relative to the size of the deficits we're running.

The price of money is the Fed’s business and the gang at the Eccles Building has lost its grip according to Gromen, who believes, Powell has no choice but “to cede control over the quantity of money in order to control the price of money.”

A year ago, it was tighten, tighten, tighten, now three rate cuts are expected by the market by year-end. Gromen told Harrison that Trump’s tariffs matter some, but, it’s the deficits that really matter and are forcing the Fed’s hand.

And so, ultimately, what that suggests is that any rate cut you have because, again, the reason why all this is happening is US deficits are big and growing and structural. And they're crowding out the US private sector. And so, basically, the primary dealer of last resort, I think I saw someone say, or call it, the Fed is going to have to start bidding for these bonds again. So, I think it depends a lot on messaging on July- we were talking before, if they don't do what's expected, it's not going to be good for risk. But ultimately, they're going to have to unless they don't want to exist anymore.

We can be sure Chairman Powell will not want the Fed to vanish under his watch. He’ll be printing and bidding (for Treasuries). QE will return, along with a growing Fed balance sheet.

So what’s a person to do? Gromen sees more asset price inflation on the way and it will accelerate. In particular, he likes gold, both the barbaric version, and the electronic version, Bitcoin.

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