Month: May 2019

Authored by Jorge Besada via The Mises Institute,

Socialism will always encounter two big problems when regimes attempt to implement it:

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

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

The following simple example helps to illustrate the impossibility of economic calculation without market prices: a Cuban restaurant in Miami Beach sells a picadillo dish (ground beef, plantains, rice) for $8. Prices in general and thus the $8 price provide vital information. Perhaps $1, might be profit, and $7 will be spent in costs, in other words, in the necessary consumption of wealth needed to produce the meal/wealth, things like equipment/electricity/food/supplies, and everything employees and their families will consume at home (food, energy) thanks to their paychecks that came from the $7/meal. The businessman discovered two things that are impossible for a central planning body to discover regardless of the good intentions of its members or their intelligence, 1) that there are enough customers nearby willing to patronize the restaurant at the $8/meal price thus making their lives better, and 2) how to reorder $7 worth of stuff(labor/supplies/etc.) to profitably produce the meal.

If he sets prices too high, customers will choose other superior competing options. If he sets prices too low, He won’t be able to cover costs and will go out of business. In other words, if he can’t entice consumers to buy at a profitable price, the entrepreneur is failing to reorder the world in a way desired by the hundreds/thousands of people nearby who each value things differently. Therefore, Socialism/Communism can’t work because only businessmen dispersed throughout society are at the right time and place needed to discover people’s desires(1) and (2) how to properly set prices and thus create a profitable and competitive order ( i.e., one that produces more than it consumes while also providing a superior alternative to customers/society).

Nikita Khrushchev, who followed Stalin as head of the centrally planned (Socialist/Communist) Soviet Union, is credited with saying “When all the world is socialist, Switzerland will have to remain capitalist, so that it can tell us the price of everything.” Unfortunately for Khrushchev, and the billions who suffered economic chaos and an inevitable decline in production under Socialist/Communist regimes all over the world, prices in Switzerland (or anywhere else) embody information about the costs/consumption of those particular places at specific times and are no good elsewhere.

With the Internet, pricing information all over the world can help customers find/nourish cheaper/better products/orders/companies and also help producers likewise thus greatly accelerating competitive knowledge/order-spreading but it will NEVER lead to the success of central economy-wide planning because no computers/system can get in the brains of entrepreneurs to predict what products/businesses they will create and thus alter society, and similarly, no computers can get in the minds of consumers and predict how they will choose to spend their money/wealth thus once again altering the social order’s numerous cycles of production and consumption. As Mises so eloquently explains:

The consumers, by their buying or abstention from buying, ultimately determine what should be produced and in what quantity and quality. They render profitable the affairs of those businessmen who best comply with their wishes and unprofitable the affairs of those who do not produce what they are asking for most urgently. Profits convey control of the factors of production into the hands of those who are employing them for the best possible satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient businessmen. In a market economy not sabotaged by the government the owners of property are mandataries of the consumers as it were. On the market a daily repeated plebiscite determines who should own what and how much. It is the consumers who make some people rich and other people penniless.

But who is in a position to determine what it is the consumers want and need? Only private entrepreneurs who daily are either rewarded or punished by the needs of consumers in the marketplace. Socialism, lacking a price system has no means of knowing the needs of consumers.

Incentives

Socialist regimes in general also face an “incentive problem.” In free societies, or the private sector in general, each entrepreneur is incentivized to be as productive as possible and keep inefficiencies to a minimum since he owns/keeps the additional wealth or losses. On the other hand, the government employee or bureaucrat gets the same pay (ability to then consume) whether his department did a good job (produced a lot) or not, and is also not risking his own wealth since that comes from the taxpayers. In other words, regimes are national monopolies that lack the innovative/competitive incentives in competitive systems.

Inefficiency Requires Coercion

Central plans, of course, can’t work if people are free to not go along with them — so they inevitably require compulsion/slavery. For example, it is a criminal act in Communist countries to start a business. It is also a criminal act everywhere to not pay taxes that sustain public sector bureaucracies like “public education.” So there is little incentive or wealth to sustain other, more desirable competitors when taxpayers are forced to sustain certain government “enterprises.” For example, the NYC public(monopolistic) school bureaucracy consumes over 24,000 per year to “educate” a K-12 student. Refusing to pay a single dollar that goes to this bureaucracy comes with heavy sanctions from the state itself.

In his essay “Overlegislation” Herbert Spencer beautifully comments on the differences between governmental(law-made) orders and private/competitive ones:

How invariably officialism becomes corrupt every one knows. Exposed to no such antiseptic as free competition — not dependent for existence, as private unendowed organizations are, upon the maintenance of a vigorous vitality; all law-made agencies fall into an inert, over-fed state, from which to disease is a short step. Salaries flow in irrespective of the activity with which duty is performed; continue after duty wholly ceases; becomes rich prizes for the idle well born; and prompt to perjury, to bribery, to simony. … Officialism is habitually slow. When non-governmental agencies are dilatory, the public has its remedy: it ceases to employ them, and soon finds quicker ones. Under this discipline all private bodies are taught promptness. But for delays in State-departments there is no such easy cure. …

Consider first how immediately every private enterprise is dependent upon the need for it; and how impossible it is for it to continue if there be no need. Daily are new trades and new companies established. If they subserve some existing public want, they take root and grow. If they do not, they die of inanition. It needs no act of Parliament, to put them down. As with all natural organizations, if there is no function to them, no nutrient comes to them, and they dwindle away. Moreover, not only do the new agencies disappear if they are superfluous, but the old ones cease to be when they have done their work. Unlike law-made instrumentalities…these private instrumentalities dissolve when they become needless. …

Again, officialism is stupid. Under the natural course of things each citizen tends towards his fittest function. Those who are competent to the kind of work they undertake, succeed, and, in the average of cases, are advanced in proportion to their efficiency; while the incompetent, society soon finds out, ceases to employ, forces to try something easier, and eventually turns to use. But it is quite otherwise in State-organizations. Here, as everyone knows, birth, age, back-stairs intrigue, and sycophancy, determine the selections, rather than merit. The “fool of the family” readily finds a place in the Church, if “the family” have good connections. A youth, too ill-educated for any active profession, does very well for an officer in the Army. Gray hair or a title, is a far better guarantee of naval promotion than genius is. Nay, indeed, the man of capacity often finds that, in government offices, superiority is a hindrance — that his chiefs hate to be pestered with his proposed improvements, and are offended by his implied criticism. Not only, therefore, is legislative machinery complex, but it is made of inferior materials.

via ZeroHedge News http://bit.ly/30Y1vDq Tyler Durden

The Obama-Netflix deal may pale in comparison to the media powerhouse Hillary Clinton and her daughter Chelsea have cooked up; a new production company focusing on stories by and about women. 

With Bill Clinton seemingly uninvolved for obvious reasons, Hillary and Chelsea have reportedly been speaking with studios about financing a slew of surely riveting programming, according to Bloomberg, citing people familiar with the matter who said that the discussions are still in their infancy. 

The Clintons plan “to use film and television to influence culture and society now that Hillary Clinton is out of politics,” according to the report.

Hillary Clinton previously signed on to help produce a TV show with Steven Spielberg. That series, “The Woman’s Hour,” is an adaptation of a book about activists who fought to earn women the right to vote.

The Clintons are following in the footsteps of the Obamas. Former President Barack Obama and his wife Michelle created a production company, Higher Ground Productions, and have a deal at Netflix Inc. Their first slate of shows includes an adaptation of Michael Lewis’s book about federal bureaucracy, as well as a drama series about the world of fashion. –Bloomberg

Perhaps she’ll develop a series on how empowered women can rise to such power in America that they can circumvent laws regarding classified information, ignore Congressional subpoenas, use “bleachbit” and physical hammers to destroy evidence in a criminal investigation, and participate in highly unethical regime change – while getting away scot free! 

In more recent Clinton news, Hillary Clinton will serve as a keynote speaker at the 2019 Cyber Defense Summit hosted by cybersecurity company FireEye, where she is very likely to recount how the 2016 election was “stolen” from her. 

“I think it’s also critical to understand that, as I’ve been telling candidates who have come to see me, you can run the best campaign, you can even become the nominee, and you can have the election stolen from you,” said Clinton during an event in May. 

via ZeroHedge News http://bit.ly/2XbYgpM Tyler Durden

Back in 2017, Mayor Bill de Blasio declared war on rats demanding “more rat corpses.”

The city council mobilized and minted $32 million for the war.

So, what are the results? After a small drop, rat sightings are again on the upswing.

This is my “why I’m leaving NYC” story pic.twitter.com/UT0tHLlA5T

— Rachelle D’nae (@heyydnae) May 29, 2019

OpenTheBooks’ CEO and founder Adam Andrzejewski,  and The New York Times published an analysis of the city’s 311 non-emergency reports of “rat sightings.”

From the Times:

Rat sightings reported to the city’s 311 hotline have soared nearly 38 percent, to 17,353 last year from 12,617 in 2014, according to an analysis of city data by OpenTheBooks.com, a nonprofit watchdog group, and The New York Times. In the same period, the number of times that city health inspections found active signs of rats nearly doubled.

The Times reporter Winnie Hu concluded, “so far the city is losing.”

After dropping about 9 percent last year, rat sightings are again on the upswing. In the first four months of 2019 (4,612), rat sightings are up again versus the same period 2018 (4,508).

Our auditors at OpenTheBooks.com plotted all reports of rat sightings since 2018 by address as reported to New York City’s 311 non-emergency hotline.

Using our interactive map, just click a pin and scroll down to review the results (all reports by address) rendered in the chart beneath the map. Available data is the result of resident reporting to the city’s 311 dispatchers since 2018.

New York faces an unprecedented rat challenge. Just last year, cases were reported in all five city boroughs, 187 ZIP codes, and at 11,500 city addresses.

Since 2010, the worst borough for rat sightings was Brooklyn with 44,850 or roughly 1 in every 3 cases. Staten Island reported the fewest sightings (5,983). The other boroughs reported rat sightings: Manhattan (33,553), Bronx (25,754), and Queens (18,783).

Last year, 187 ZIP codes in the city were affected. However, the top ten locations – with the highest concentration of rat 311 reports – registered roughly one in five rat sightings citywide.

ZIP Code 10025:

The rats are running wild in this fancy area on the Upper West side of Manhattan. With the Hudson River and Central Park as borders, the area is home to the fraternities at Columbia University and many millionaires. In fact, the median home value is $934,000.

Rats love it too. It ranked number three for rat sightings by ZIP code. There were 3,096 instances of rats reported in the public way since 2010.

Plotting the case reports of rat sightings in ZIP 10025 since 2018. Click here to review the interactive map.

OPENTHEBOOKS.COM

ZIP Code’s 11221, 11216, and 11238:

Brooklyn is gentrifying and with the destruction of their burrows and homes – rats are popping up all over. The most rat sightings occurred in the Brooklyn borough.

Here are some of the leading areas within Brooklyn:

Since 2010, more than 3,800 rat sightings were reported in ZIP code 11221. There are nearly 80,000 people living in this area and the median home value is $543,800.

Rat sightings were reported 3,145 times within ZIP code 11216 – an area that borders ZIP code 11221. There are 54,000 people living in this area and the median home value is nearly $623,000.

There were 2,948 rat sightings within ZIP code 11238. There are approximately 49,000 people living in this area and the median home value is $656,800.

Even after a $32 million taxpayer-funded assault, the rodents don’t seem to be too concerned. The rat population levels look to be about 70 percent higher today than in 2010.

Graph showing year-over-year increases in the rat sightings challenge in New York City.

OPENTHEBOOKS.COM

Combating rodent populations in developing urban areas is no easy task. Other cities may want to study the New York invasion before throwing taxpayer money down rat holes in their locales.
 

via ZeroHedge News http://bit.ly/2Mh6Gv5 Tyler Durden

New York University has dumped a journalism class taught by a former ‘fact checker’ for Media Matters and the New Yorker, after just two students signed up. 

Talia Lavin – who famously screwed up when she accused a disabled combat Marine veteran and Immigration and Customs Enforcement (ICE) officer of sporting an “Iron Cross” tattoo associated with white nationalism, when in fact it was his platoon’s symbol from when he fought in Afghanistan. 

Justin Gaertner is a combat wounded U.S. Marine who continues to serve his country as an ICE computer forensics analyst, helping solve criminal cases & rescue abused children. The tattoo shown here is the symbol for his platoon while he fought in Afghanistan. pic.twitter.com/BaOBxaAMHS

— ICE (@ICEgov) June 18, 2018

Lavin deleted her tweet, offering a lame excuse in the process – before resigning as a fact checker from the New Yorker. She then got a job with Media Matters as an “extremism researcher” which lasted less than six months, as she was fired in January. 

In March, Lavin once again landed on her feet when NYU picked her up to teach the course “Reporting on the Far Right,” in the school’s Arthur L. Carter Journalism Institute, which promised to give students “a thorough grounding in far-right and white-supremacist movements in the United States, briefly examining their history and delving into their sprawling present incarnations.”

And two students signed up. 

According to NYT’s Adam Penenberg, the class was canceled due to lack of interest, which “had nothing to do with Talia’s writings, tweets, or anything else.” Perenberg also told The Wrap that she won’t be invited back to teach another course, while her bio has been ‘scrubbed’ from NYU’s website. 

“It would make no sense to try it again, given how few students expressed interest,” he said. “We have no plans to offer Talia another course, simply because her main focus (and the focus of her upcoming book) is the far-right.”

Other notable gaffes include making fun of disabled Navy SEAL Rep. Dan Crenshaw, who she called “captain shithead” in an inspired tweet (that’s two disabled people this ‘social justice warrior’ has targeted, for those keeping track). 

via ZeroHedge News http://bit.ly/2KdHAdL Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

That nothing is truly “free” will be another lesson of the S-Curve.

I often refer to the S-Curve because Nature so often tracks this curve of ignition, rapid expansion, stagnation and decline.

One lesson of the S-Curve is that the human bias to keep doing more of what worked so well in the past leads to doing more of what failed even as results turn negative.

The dynamic in play is diminishing returns: the yield on the policy that worked so splendidly at first diminishes with time.

Credit offers a cogent real-world example. When credit becomes available in a credit-starved economy, it generates a rapid, sustained expansion as credit-worthy borrowers borrow and spend on new productive capacity, consumer goods, housing, etc., all of which further drives expansion.

But once credit has saturated the entire economy, the only pool of borrowers left are uncreditworthy (i.e. at risk of default), and the only projects left unfunded by credit are laden with risk.

Either way, credit expansion stops: either lenders prudently refuse to issue credit to risky borrowers and ventures, and credit expansion grinds to a halt, or they foolishly lend money to borrowers and ventures which predictably default, triggering a credit crisis that brings imprudent lenders to their knees and triggers cascading defaults as declining asset prices push marginal borrowers into bankruptcy.

Doing more of what was successful in the boost phase of the S-Curve–expanding credit– is now doing more of what’s failed. Expanding credit in a credit-saturated economy only sets up cascading defaults.

The human response to the failure of what worked so well is disbelief: the problem, we reckon, is we didn’t do enough the first time. So the answer to the failure of extending more credit is to extend even more credit and lower lending standards so anyone who can fog a mirror can get a loan.

At this point, diminishing returns become negative returns: doing more of what’s failed is now not just unhelpful–it’s actively destructive. Cramming more credit down the throats of risky borrowers and ventures guarantees a full-blown credit crisis when the defaults start taking down lenders and crushing asset prices that were dependent on credit expanding into eternity.

We are at the juncture where doing more of what’s failed will push the economy into profound recession. Now that the economy is totally dependent on ever-expanding credit, there is no alternative (TINA) to expanding credit, no matter how destructive this expansion of bad credit will be in the near future.

It’s no surprise that calls for free money (Universal Basic Income, UBI) are rising: the only real “solution” to soaring defaults is to give the borrowers free money to service their debt, or print trillions of dollars to pay off the soon-to-default debts.

That nothing is truly “free” will be another lesson of the S-Curve. The initial wave of free money will work wonders. Then diminishing returns will set in, and the response will be to jack up the printing and distribution of free money, i.e. do more of what’s failed until the free money printing and distribution destroys the currency and the economy.

Thanks to the S-Curve, all this is clearly visible in the crystal ball.

*  *  *

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via ZeroHedge News http://bit.ly/2W2rxlg Tyler Durden