Top Five Monetary Policy Issues To Watch In 2017With a new year come new opportunities as well as new issues to take into consideration. Here are the five most important issues to keep an eye on in 2017.
1. Trump PresidencyThe most important issue facing monetary policy, at least in the United States, will be the incoming Trump Administration. The Federal Reserve Board of Governors is currently operating with two vacancies and has been for quite a while. With majorities in both the House and Senate, it is highly likely that President Trump will be able to successfully nominate two candidates to the Board. Depending on who he picks, that could put additional pressure on Chairman Janet Yellen to continue to raise the federal funds target rate throughout 2017.
Did Ludwig von Mises Create Today's Crony Capitalism?George Monbiot of Britain’s Guardian newspaper seems to think that Mises is indeed the progenitor of today's crony capitalism and more.
It is not Mises alone, however, who by this account is the cause of just about every imaginable contemporary scourge, from the Crash of 2008 to loneliness to obesity. It is all the “neoliberals” who schemed together from the 1930’s on, principally through the Mont Pelerin Society, to take over the world and who, we are told, succeeded beyond their wildest dreams.
Who knew, for example, that Big Money and Big Business got behind the Mont Pelerin program and used it to rationalize their exploitation of the common folk? Apparently they did this without Mises, Hayek, or Rothbard even having a clue it was happening, since the three got by on such very modest means.
Let Businesses Decide for Themselves Where to Make Their ProductsOn Monday night, Dirty Jobs host Mike Rowe joined Tucker Carlson on Fox News to discuss Ford’s and Chrysler’s respective plans to reinvest in US manufacturing. Rowe, who is a proponent of technical and skilled jobs, told Carlson, “Get a skill that’s in demand, that’s really in demand, that can’t be outsourced. Plumbers, steamfitters, pipefitters, carpenters, mechanics, those men and women right now … can pretty much write their own ticket.” Rowe is right about skilled jobs. According to the Manhattan Institute, there are around a half-million US skilled jobs that aren’t being filled. Millennials are spending their time in the college safe spaces instead of doing the “dirty jobs” which can pay well.
Mexicans Are Blaming "Neoliberalism" for Socialism's Failures
Rising gas prices come in the wake of sizable reforms to the petroleum industry in Mexico where, for decades, Petroleos Mexiocanos (Pemex) has enjoyed a monopoly on Petroleum extraction and the Mexican government has subsidized gasoline prices.
Pemex will continue to exist as a state-owned oil company, but the end of the Pemex monopoly comes at a time when the Mexican government is attempting to deal with fiscal pressures by inviting foreign investors to invest in the oil industry in Mexico. Those same fiscal pressures have also led the Mexican state to lower subsidies that have long existed to offset Mexican oil prices kept high by an inefficient and corrupt state monopoly on oil.
The Fed Needs Competition, Not RulesIn December the Federal Reserve raised interest rates for the first time in 2016, once again failing to meet its own expectations it set the year prior. Unfortunately forecasting failures at the Fed is nothing new, for years it has routinely missed on both rate hikes and GDP projections. While it’s unfair to expect Fed economists to be fortune tellers, crying wolf does have consequences. The markets have learned to take the Fed’s projections with a grain of salt, with Chairwoman Janet Yellen herself having to admit that “forward guidance”, a tool championed by her predecessor Ben Bernanke, has lost its potency.
Janet Yellen’s Bland 2017 Forecast
Conceived in Liberty: The Medieval Communes of Europe
The Omnipresent Law of Escalating Power: As True as the Law of GravityFrom the dawn of the earliest civilizations to our present days political power has shown, everywhere, a centralizing tendency. Power, in fact, tends toward perpetual expansion defeating or absorbing all weaker subjects that it encounters on the way. By feeding itself with its own victories, the strongest power always becomes stronger. This is the reason why historically, within the realm of politics, concentration of power has been the rule, while the dispersion of power the exception. During antiquity this self-feeding logic of power has nearly always prevailed. If one excludes those who have remained at a primitive stage of development, for thousands of years the great majority of people lived within vast centralized reigns, which were politically despotic and economically stagnant. The first empires arose in the land of Mesopotamia more than 6,000 years ago, and then extended to every other continent: The Sumerian, Assyrian-Babylonian, Egyptian, Persian, Macedonian, Roman, Byzantine, Russian, Arabian, Ottoman, Indian, Chinese, Mongol, Incas and Aztec. Among the few luminous exceptions that the ancient world provided were the mercantile cities of Phoenicia and the Polis of ancient Greece.
Steve Mnuchin Defends the Myth of Fed IndependenceOne of the biggest surprises during Donald Trump’s unconventional presidential campaign was his frequent criticism of the Federal Reserve. Though he was highly inconsistent on what he thought the Fed should do, coming out as both a critic and advocate of the current low interest rate policy, he was steadier in his dismissal of the Fed as an independent institution. During one of the debates, he went as far as to accuse Fed Chairwoman Janet Yellen of “being…more political than Hillary Clinton.”
While it is possible Donald Trump may still believe this, it is clear his Treasury Secretary does not.
Responding in writing to questions from Senator Bill Nelson, Steve Mnuchin described the Fed as “organized with sufficient independence to conduct monetary policy and open market operations.” He also praised “the increased transparency we have seen from the Federal Reserve Board over recent years.”
Trump Cuts Subsidy to Real Estate Industry, Opponents Call It a "Tax Increase"
Earlier in January, the Obama administration announced it would cut the FHA's insurance premium by a quarter of a percentage point to 0.60 percent, effective on Jan. 27.
The fact that this all seems like a tiny technical issue is perhaps part of the reason why the media has paid so little attention to it. However, the Trump administration's move suggests the Administration may actually be willing to go against the grain on the Federal-government's long-term — but failed — commitment to subsidizing home-buying and blowing up housing asset bubbles.
Then all the world would be upside down."
-- Old English ballad
Legend has it that the British played "The World Turned Upside Down" after their unforeseen and disastrous defeat at the Battle of Yorktown.
Such topsy-turvy upheaval characterizes the start of Donald Trump's presidency.
Everything is in flux in a way not seen since the election of 1932, in which Franklin D. Roosevelt defeated Herbert Hoover. Mainstream Democrats are infuriated. Even Republicans are vexed over the outsider Trump.
Now, normal people would typically react with alarm and disgust at this kind of bizarre pageant, assuming they cared enough to pay attention to it. In the off chance they happened to encounter it while flipping channels, they would likely lunge for the remote so as not to poison innocent ears with puffy former starlet Ashely Judd’s anatomically incorrect slam poetry. Never have so many hotness-challenged crones so vehemently rejected being grabbed while simultaneously being at so little risk of it.
"Where there is a Mexican migrant at risk that requires our support, your country should be there," Peña Nieto said in a brief address to his nation, which he said was a response to Trump's actions earlier in the day.
"Our communities are not alone," Peña Nieto said. "The Mexican Government will provide them with the legal advice, which guarantees the protection they require.
Wednesday, January 25, 2017
ONCE UPON A TIME, when my twin brother and I were tots, our father convinced us that he could make a traffic light change from red to green whenever he wanted it to. Raising his hand to the light as we sat at an intersection, he would say, “I command you to change to green….now!” cocking his finger at the light for emphasis. Sure enough, the light would change precisely on cue, while two little boys shouted, “Papa, how do you do that!?”
I share this little anecdote because I’m convinced that, if more people had been fooled the way my brother and I were, fewer would be so gullible today as to believe that the Fed has been firmly in control of interest rates these past eight years, and that it is only owing to that control that rates have remained low for so long.
A mere 200 years ago, in 1820, the world population numbered only around 1.1 billion people. Out of that 1.1 billion people, it estimated that about 95 percent lived in poverty, with 85 percent existing in “extreme poverty.” By 2015, the world population had increased to over 7 billion, but less than 10 percent of this 7 billion people lived in poverty. Indeed, over the last quarter of a century, demographers calculate that every day there are 137,000 fewer people around the world living in extreme poverty.
George F. Will highlights two important principles on productivity and protectionism, in A plan to make America 1953 again – The Washington Post:
1. Productivity Improvements Mean Less Workers Are Necessary
Since 1900, the portion of the U.S. workforce in agriculture has declined from 41 percent to less than 2 percent. Output per remaining farmer and per acre has soared since millions of agricultural workers made the modernization trek from farms to more productive employment in city factories. Was this trek regrettable?