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Mainstream Media’s War on Julian Assange

The Bill of Rights doesn’t mention that freedom of speech is restricted to a special class of establishment journalists. Freedom of speech is a universal property right, regardless of what the establishment-media gatekeepers say.

Original Article: “Yes, Julian Assange Is a Journalist — But That Shouldn’t Matter”.

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Socialists vs. Civil Society

The socialist regimes of the 20th century that succeeded in comprehensively imposing their designs and central plans on the societies over which they ruled attempted to abolish any and all of the preceding institutions of civil society. Edward Shils noted this in his 1991 essay “The Virtue of Civil Society,” explaining how such regimes went to great lengths to replace civil society with the omnipotence of the state in all things. Indeed, as Shils said, “Marxist-Leninists declared themselves to be enemies of civil society.”

Today’s democratic socialists insist that they have nothing to do with those others in the 20th century who also called themselves “socialists.” Those others were not real, or true, or the right kind of socialists. Therefore, the “new” democratic socialism should not have to carry any of the baggage of guilt by association through connection with those “bad” or mislabeled socialists of the recent past.

But listen to what our new democratic socialists want and propose. Ask yourself, If successful in bringing their plans to fruition, what would remain of the existing institutions of civil society in America? Government already monopolizes most of education from kindergarten through to the Ph.D. level. By calling for “free” schooling for all levels up to the doctoral degree, this means, in fact, that the federal government would pay for everyone’s education, at taxpayer’s expense, of course.

The money would now fully and completely pass through the conduit of political and bureaucratic hands. Curriculum, hiring and firing of faculty and administration, entrance requirements, standards for student retention and graduation would be even more effectively and comprehensively overseen, influenced, and finally controlled by those possessing government budgetary power than is the case today.

If higher education is already heavily politicized in our current climate of political correctness, identity politics, and ideological bias and manipulation, this trend would be merely accelerated if there is nothing outside of the orbit and oversight of the government since everyone would have their “right” to “free” government-paid higher education.

How would this be any different in matters of medical treatment and health care? The federal and state governments already have an intrusive and highly heavy hand in the health care industry and how and what it provides. “Single payer” means a single provider that determines what medical treatment and health care services for whom, of what type, and to what extent, since the socialist state must focus on what is claimed to be the good of all the members of society as a whole.

Your health care quality and duration of life, and that of your family, will be in the hands of the government bureaucratic managers of the medical profession, hospital facilities, and other caregiving facilities. If you sometimes feel yourself nothing but an ignored or depersonalized number for health care treatment under the current politicized system, just wait for full government-socialized medicine under the “single payer” euphemism, and when you then become an even-smaller decimal with four zeros after the dot. (See my article “For Healthcare, the Best Government Plan Is No Plan.” )

Centrally planned social and “identity” political justice? Forget about how you want to live, how and what you’d like to say, with whom you’d like to peacefully and voluntarily associate for mutually desired purposes, or the way you would like to honestly and non-violently go about earning a living and spending the money you’ve received through free exchange. Overcoming the injustices of the past — real and imagined — will require the progressives and democratic socialists to plan the redesigning of everyone’s place, status, opportunities, and outcomes throughout society. Every claimed unearned income, unjust social status, unfair employment, undeserved “privilege” will have to be reshaped according to the notions of the good society as seen inside the heads of those in charge of the political machinery of government.

Think of all the other corners and aspects of society, whether it is the physical environment, or culture, arts, and sciences, or investment patterns, or job locations, or the quantities and varieties of goods produced and supplied; each will have to be politically decided upon and imposed to make it compatible with “climate planning,” racial and gender fairness, and social egalitarianism. What corner of your part of society would not be under the determination and control of the state?

Democracy, Liberty, Socialism, and Civil Society

Analysts and advocates of the institutions of civil society have long emphasized what Shils pointed out, that they also serve as intermediaries, as buffers, between the state and the citizen. They are the societal associations, organizations, and arrangements outside and independent of the government so that the individual does not have to become a slave to the plans and purposes of those in political power. The individual person can live free of the state — a status that shrinks to nothing when that individual is dependent upon and receives virtually all the things needed and wanted for life from the government.

But it’s “democratic” socialism! It’s what the people want as shown by those they elect to political office with the campaign agenda that the citizen-voters have expressed their desire for. It is the “will of the people.” Who can be against that, other than enemies of freedom, and oppressors who do not want the victimized to be liberated from their lives of injustice and unfairness?

But democracy is not liberty. Democracy is a political institutional means to determine who holds political office and for what period of time through a peaceful voting procedure that makes violent means unnecessary to remove or substitute those in positions of political authority and decision-making. And it is usually based on some form of majority-determining procedure.

Democracy carries with it the high respect and deference that it normally holds in most people’s minds because in modern times it gained political prominence along with and more or less at the same time in the 18th and 19th centuries as the emergent classical liberal ideas and ideals of individual liberty, impartial rule of and equality before the law, economic freedom, and constitutionally limited government. Democracy, therefore, came to be considered as inseparable from and confused in many people’s minds with freedom. But it need not.

Democratic (classical) liberalism linked the two together because in the eyes of many of the liberals in those earlier centuries the role of democratic reform was to make those in political power more directly accountable to the people over whom they ruled. But simultaneously the liberal agenda was to restrain the responsibilities and prerogatives of the government because political control, planning, regulation, and redistribution were considered abridgements of the personal freedom of the individual to control, plan, and regulate his own life, partly through those voluntary associations and interconnecting relationships of the institutions of civil society.

Democratic socialism, on the other hand, remains socialism, a concept that insists and demands that the “political” is to replace the “social” as understood as meaning individual self-governing in conjunction with the voluntarism of the peaceful community of free human beings. In this understanding, socialism is inherently antisocial.

Democratic socialism coercively confines and constrains all those living within what a majority or a coalition of minorities making up a voting majority wish to have imposed on the entire society. Notice that come the political triumph of progressive, democratic socialism everyone will have to accept and be limited to a higher education funded by and therefore fully under the oversight of the federal government. No one will be able to break out of the government plan as the single payer or provider of medical and health care throughout the country. Each person’s income, wealth, position and status, and opportunities for personal betterment will be forcefully straitjacketed within what those in governmental power deem to be the politically correct, the identity politics right, and the socially just.

The pluralism and peaceful competitions of the institutions of civil society with the underlying individual freedom that it represents and helps to secure is replaced by political monopoly and coercion through the powers of government to insist upon one size fitting all for anything and everything that such a democratic socialist regime considers to be properly within its orbit and responsibility.

Democratic Despotism Comes in Many Varieties

Some authors in the past have referred to democratic despotism or totalitarian democracy. Once the antisocial agenda of socialism is in power and implemented, it can, at the end of the day, be nothing but despotic and totalitarian because it is either individuals making their own plans and coordinating their plans with those of others through the voluntary agreements of the market and those institutions of civil society, or it is the plans of some imposed on others through the use or threat of political compulsion. It comes down to freedom or tyranny, whether or not that tyranny has come to power through the use of bullets or votes dropped into a ballot box.

While I have focused on democratic socialism, the others that I referred to, nationalism, protectionism, and political paternalism, are all variations on the same theme. The Swiss classical liberal economist and political scientist William E. Rappard (1883-1958) long ago explained in an insightful essay, “Economic Nationalism,” (1938) that “nationalism, then, is the doctrine which places the nation at the top of the scale of political values, that is above the three rival values of the individual, of regional units and of the international community.… The individual subordinate to the state” is the hallmark of political and economic nationalism.

All that socialists argue about against nationalists and other forms of collectivism is for what purposes shall the coercive powers of the state be used in making all in society conform to some single or network of governmental plans that all are expected to obey and follow, if negative consequences are not to befall any individuals who attempt to act outside of the socialist scheme for that politically engineered bright and beautiful future.

Free market liberalism is the social system of a civil society based on and protective of personal liberty and human betterment. Socialism is the antisocial system of politics over people, governmental power instead of peaceful and free association, and a handful of imposed political plans instead of a pluralism of as many plans as there are people in the world.

Where is the freedom when one political plan replaces our many personal plans? What is liberating when the state becomes the political master and we are expected to be the obedient citizen-servants? Which one of these worlds — democratic market liberalism or democratic-planning socialism — do you want to live in?

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Scott Horton Discusses Who’s to Blame in Venezuela, and Explains the Carnage in the Middle East

Scott Horton returns to the podcast to share his wealth of knowledge on a variety of topics. Bob first gives Scott the opportunity to express his unhappiness with the recent episode on Ilhan Omar. Then, they discuss the economic crisis in Venezuela, the carnage in the Middle East, the Mueller Report, and finally answer questions from the BMS Secret Facebook Group.

For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.

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Confronting the Myths about “Arming Teachers”

There is a disproportionate buzz about the newly signed Florida legislation that allows its school districts (each at its own discretion) to authorize concealed carry of firearms by teachers in their schools.

Why disproportionate? Because the Marjory Stoneman Douglas High School Public Safety Act, signed into law in March 2018 soon after the Parkland mass shooting, had already established the “Coach Aaron Feis Guardian Program” named after the coach who gave his life attempting to shield students with his body during that shooting. That program gave school boards the option of allowing school staff members to carry firearms, excluding most classroom teachers who were not JROTC teachers, or current service members, or current or former law enforcement officers.

Last year’s bill established a tough training standard, and left the decision to local school boards, both very good things. And since school staff who are not classroom teachers often comprise as high as 50% of the total, this approach was rational, if overly cautious, as school boards would still have the authority to approve or disapprove any applicant, without the no-teacher provision imposed by law.

The only change with the new law is that now all classroom teachers are also eligible to volunteer for the Guardian program. Note “eligible” and “volunteer” and you will understand why so much of the near-hysterical opposition to this law is baseless.

Of course, no one is actually “arming” any teachers — there is no arms room where they will line up to be issued weapons before filing into the trenches — much less “all” teachers, which is how the opposition likes to frame its strawman argument. They will arm themselves, if their school board votes to implement the Guardian program, and if they individually volunteer, pass rigorous screening and selection, and complete the legally mandated 132 hours of training. No one is guaranteed approval, and the standards they must meet are high.

The Miami New Times, not known for smart or principled positions on any firearms issue, is one of the media outlets appalled that the legislature and governor, elected by citizens to legislate and govern, have not allowed themselves to be ruled by teachers’ unions, high school students, and some school boards and administrators. All those folks display their statist leanings by wanting to impose their own fears of positive protective measures on everyone. Under Florida law, if they (and, pointedly, the voters in their school districts) do not want to implement the Guardian program, they don’t have to. They can keep the Gun Free Zone signs over their doors and hope for the best. But that’s not enough for them; they think they know better than anyone else what is best for every school district in Florida.

Local control on this issue is a sound and sensible approach, in line with the rule of subsidiarity, the concept that decision-making should occur at the lowest level appropriate to its purpose. Local control is often preferable to decision making by officials far-removed from the affected population, less responsive to their local and regional preferences, and more likely to impose one-size-fits-all solutions. Voters can more easily influence or replace an unresponsive local elected official than his state or federal counterparts. Here it means what Florida and many other states have ruled: let the school districts decide for themselves.

Beyond that repugnant statist attitude, opponents of “arming” school staff try to bolster their argument with unsupportable claims and sloppy ‘research’ — textbook examples of confirmation bias, the tendency to only consider evidence that supports one’s preconceived notions. The Miami New Times cites an analysis by Gabrielle Giffords’ anti-gun organization that purports to show how dangerous introducing “more guns” to schools will be. It is such a sloppy piece of research and reasoning that I cannot let it go unanswered.

This long piece cites 67 “incidents of mishandled guns in schools” from all over America, from 2014 to the present, to support their opposition to concealed carry of firearms by school staff who meet the requirements of Florida’s Guardian program. But here’s the rub: only one of these 67 incidents involved a school staffer carrying a firearm under similar requirements. That one involved a Texas superintendent who left her authorized firearm locked in a district vehicle when she and her staff visited another district where she was not authorized to carry it – and then forgot to recover the weapon and left it in the van overnight, to be found in the morning.

Every other incident on this list actually supports the premises behind Florida’s Guardian program, and similar programs in the many other states with similar laws on the books. Not one carefully vetted armed staff member carrying a concealed firearm with knowledge and approval of their school board, in accordance with strict standards, in well over 1,000 schools around the country, was involved in any of the other 66 incidents cited.

Fifteen of the incidents on this list involved subjects who were not staff members at all; some of these were commissioned officers, while others were merely family members or or other visitors carrying firearms on school property in violation of the law. Another incident involved two coaches, but occurred off school property. Desperate to plump up the numbers, are we?

(For a tabulation of the incidents the Giffords piece cites, see here.)

What this list actually does is to demolish the assertion often made by opponents of armed school staff, that guns in school should be left to the “armed professionals.” While the Miami New Times quotes some who seem to believe that armed officers make schools safer, Giffords does not think so, and on this point at least, we can at least understand the sentiment. Fully 27 of the 67 incidents in the Giffords study involve “armed professionals” — commissioned police officers or deputies assigned to a school, officers responding to a call for assistance or visiting for other reasons, or other uniformed security guards or school resource officers employed on site. These “armed professionals” had unintentional discharges (several of which injured themselves or others), left their weapons in restrooms or elsewhere unattended, and in two egregious cases, failed to stop a child from pulling the trigger of their holstered weapon.

So much for “armed professionals” — we who are armed professionals know how little sustained, realistic, demanding training most officers undergo, and how easily complacency creeps in. Uniformed guards — commissioned or not — are not ten feet tall. They are unfortunately sometimes less dedicated and often less proficient than educators who understand their responsibilities “in loco parentis” and undergo rigorous and frequent training required by law and school district policy. Who has not heard educators saying, “we would sacrifice our lives to protect the kids in our care”? Give the tools and the skills to those who are willing, and they can do better than just sacrifice themselves like Coach Feis did at Parkland.

This is not to say that officers are all deficient in their skills and judgment — far from it — or that they cannot train to a high standard; but we who are trainers know without a shadow of a doubt that motivated civilians can do just as well, with the proper training. In the schools as on the streets, they are not volunteering to act as law enforcement officers, which is a very broad skill set indeed, but only to protect innocents against lethal threats — a very narrow skill set that comprises only a small slice of a police officer’s responsibilities.

In fact, what we do know is that responding police — even when do not have unintentional discharges like several in this list — do not protect schools against active shooters, because they almost always arrive too late; and that uniformed officers on site have a very spotty record. The uncertainty in a potential aggressor’s mind that is created by the prospect of an unknown number of trained staff members carrying concealed weapons at various but unpredictable locations throughout a school, appears to be a better deterrent than one uniformed officer, as evidenced by the complete absence of active shooter incidents in such schools. Arguably, if one is swayed by logic, they will prove to be a more effective and flexible defense as well, if that unprecedented day does arrive when a shooting happens in their school.

Again, with the exception of that Texas superintendent, none of these incidents involved an approved, trained, school staff member carrying a concealed weapon. The closest thing to it is the anomalous case of a teacher in Utah in 2014. State law there allows any resident with a concealed carry permit to carry in the schools. There is no requirement to even notify the school board or administration, much less be vetted or approved, or to be trained to any standard beyond the 8 hours of mostly classroom training required for a permit. This teacher dropped her weapon in a toilet stall (before school, with no students in the building); it discharged, shattering the bowl and cutting her calf with a flying shard. That’s not a laughing matter, or not only a laughing matter, but should be taken in context. Utah’s law has been in place for 20 years, and out of 700,000 citizens with concealed carry permits (14 million person-years?), this is the only reported occasion in which anyone has been injured by a legal concealed carrier’s firearm in a Utah school. And she doesn’t work there any more. It may also be significant that Utah has had no mass shootings in its schools, but we can only speculate. Pretty safe state, Utah, for all that their statute is far less prescriptive than Florida’s or many other states.

Gifford titles its piece “Every Incident of Mishandled Guns in Schools” and assures us that theirs is a “systematic analysis,” and that this list of 67 incidents is “comprehensive” for the date range of 2014-2014. But in reality, theirs is a list of those who violate the law and/or handle firearms incompetently — precisely the sort who are unlikely to volunteer in the first place, or to pass a careful vetting and selection process, or a demanding, standards-based training program, as required by statute in Florida and many other states that authorize concealed carry by school staff.

The actions of criminals and incompetents do not form a rational basis for criticizing or opposing these programs, which have been successful everywhere they are in place. Giffords has absolutely failed to make a case against armed school staff members in districts that opt in, under authorizing state law, with well-drafted programs and requirements.

Opponents of protecting our schools and children with armed staff on site will have to do better than this, to make a case worth listening to.

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Does the State Care More About Tax Evasion than Murder?

Rape and murder are violent acts. Ordinary citizens consider these to be far more serious offenses than acts of theft. Accordingly, as we allocate limited resources to solving all offenses, our expectation is that rape and murder will be given top priority.

However, the actions of politicians and bureaucrats appear to reflect a view that theft, or more precisely, theft from government, is considered a more heinous crime than the rape or murder of ordinary citizens. We see this in Canada where the government allocates more and more resources to the pursuit, prosecution, and conviction of tax evaders, while a majority of offenses which the public considers a higher priority go unsolved.

Government’s Performance Record

Statistics for various offenses in Canada (2008/09), extracted from a report compiled by the Fraser Institute, are shown in the following table1:


To facilitate our discussion, let’s define the solving of a crime as the capture and conviction of the perpetrator, regardless of sentence imposed. For example, on average, across the country, if there were 1,000 homicides, authoritarian law enforcement solves only 206 of these cases. Calculation: 1,000 x 66% (column 2) x 65% (column 3) x 48% (column 4) = 206. Then, 206 divided by 1,000 = 20.6%. Thus, 21% of homicides are solved and 79% are not solved.

Therefore, the performance record (2008-09) of authoritarian law enforcement in Canada is as follows:

79% of homicides are NOT solved

96% of attempted murders are NOT solved

90% of robberies are NOT solved

91% of sexual assaults are NOT solved

92% of other sexual offences are NOT solved

84% of major assaults are NOT solved

90% of common assaults are NOT solved

93% of uttering threats are NOT solved

92% of criminal harassment cases are NOT solved

97% of thefts are NOT solved

97% of break and enters are NOT solved

Note – these statistics reflect only those crimes which are known to the police.

This performance record justifies the public’s lack of confidence in the police and justice system, as evidenced by the dark blue segments of the lines in the following graph:


The abysmal performance of police and justice system bureaucracies, which gives rise to the public’s lack of confidence in them, explains why the majority of crimes committed against person and property are not reported to the police, thus remaining unknown to them. Statistics Canada conducts a General Social Survey every 5 years, in which it seeks to determine the extent to which people are victimized by various types of offences. The total number of crimes reported in the 2009 survey are a multiple of those known to police. For example, only 5% of sexual assaults and 26% of robberies were reported to police.2 Makes sense. Why expend time and effort reporting crimes to inefficient government bureaucracies which seldom produce justice?

Tax Evasion

In contrast, over the last four years, the government has increased the Canada Revenue Agency (CRA) budget by $1.6 billion to facilitate the investigation, prosecution, and conviction of tax evaders, and to make tax evasion more difficult.3

CRA assistant commissioner Ted Gallivan said “it’s [tax evasion] a serious criminal offence and it comes with serious criminal consequences. … some actors … have to be locked up in jail to get them to discontinue their activities.” Indeed, “from April 1, 2013, to March 31, 2018, the courts convicted 307 taxpayers for tax evasion of $134 million in federal tax. These convictions resulted in sentences totaling approximately $37 million in court fines and 2,949 months (246 years) in jail.”

Of course, we don’t know how often people actually try to evade taxes, or what percentage of them are prosecuted by governments. But given that governments are increasing tax-prosecution budgets while so much real crime goes unpunished suggests governments have a serious problem with getting their priorities in order. But, as the drug war has long shown us, governments are often more interested in padding their budgets than in solving crimes. 

Markets Versus Government

On the free market, when we shop for food, clothes, cars, haircuts, electronics etc., service is linked to payment. If we do not like the product or service which we expect to receive in return for our payment, we are not obligated to complete the transaction because all transactions are voluntary. We can shop elsewhere. Thus, businesses are incentivized to accommodate our preferences because that is the only way to persuade us to part with our money.

In contrast, within the realm of government, transactions are not voluntary because coercion replaces persuasion, which means service is severed from payment. The government arbitrarily decides the price to be charged for a particular service (in our case, crime solving) and coercively extracts this money (taxes) from citizens. The government then arbitrarily determines the level of service it will actually provide, and to whom it will be provided. As Bruce Benson wrote, “A person’s chances of police protection correspond closely to his position in the “geography of political power.” Much more attention is paid to the robbery of an important political figure than to the murder of an out-of-work, uneducated member of a racial minority.”4

Having already taken the money to fund massive police and judicial bureaucracies, the government has little incentive to solve violent crimes. Less money allocated to this task means more money is available for exorbitant bureaucratic salaries. But those evil tax evaders are different. The government has not yet succeeded in taking their money, so politicians extract more tax dollars to hire people to hunt down these hardened criminals.


The government considers tax-evaders to be thieves because they are not honouring their tax obligations – they are stealing from the government. Regarding taxation, we can argue over who is the actual thief, but that goes beyond the scope of this article. What is clear, beyond any doubt whatsoever, is that the government considers the pursuit of tax thieves to be a higher priority than providing justice for victims of rapists, murderers, and robbers. We know this is true because $1.6 billion allocated to the CRA to solve tax evasion crimes could instead have been allocated to municipalities for the purpose of solving violent crimes. It is appalling and contemptible that a majority of federal politicians shamelessly establish such priorities for crime solving.

The coercive nature of government creates perverse incentives. Professor Bruce L. Benson presents a compelling case that law making and law enforcement are best left to the free market, where service is linked to payment, thus creating the necessary incentives for achieving excellent performance and justice for victims.

  • 1. Stephen Easton, Hilary Furness, & Paul Brantingham The Cost of Crime in Canada: 2014 Report (Fraser Institute, 2014) p 84. As per the authors of this report, the figure in column 7 represents “the days of the imposed sentence multiplied by the probability that he will actually face that sentence since even facing the judge is anything but a certainty … Column [7] is the product of percent cleared by charge, percent of charges becoming court cases, the percent guilty, the percent of guilty sentenced to incarceration, and number of days of the sentence.” Column 8 “reflects the duration of the sentence for the crime, the probability that he will be captured, charged, convicted, sentenced to incarceration, and the reality that he is eligible for parole after only a fraction of his sentence is served … Column [8] equals expected time to serve multiplied by the fraction of sentence before eligibility for parole.” (see pp 84 – 85)
  • 2. Ibid., p 101
  • 3. See Canada’s federal budget for 2016 , 2017 , 2018 , and 2019 .
  • 4. Bruce L. Benson The Enterprise of Law (The Independent Institute, 2011) p 133 [additional source provided by Benson: Richard Neely, Why Courts Don’t Work (New York: McGraw-Hill, 1982) p 131
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Why it (sort of) makes sense for the US to impose tariffs

Nearly everyone wonders, “Why is Donald Trump crazy enough to impose tariffs on imports from other countries? How could this possibly make sense?”

As long as the world economy is growing rapidly, it makes sense for countries to cooperate with each other. With the use of cooperation, scarce resources can become part of supply lines that allow the production of complex goods, such as computers, requiring materials from around the world. The downsides of cooperation include:

(a) The use of more oil to transport goods around the world;

(b) The more rapid exhaustion of resources of all kinds around the world; and

(c) Growing wage disparity as workers from high-wage countries compete more directly with workers from low-wages countries.

These issues can be tolerated as long as the world economy is growing fast enough. As the saying goes, “A rising tide raises all boats.”

In this post, I will explain what is going wrong and how Donald Trump’s actions fit in with the situation we are facing. Strangely enough, there is a physics aspect to what is happening, even though it is likely that Donald Trump and the voters who elected him would probably not recognize this. In fact, the world economy seems to be on the cusp of a shrinking-back event, with or without the tariffs. Adding tariffs is an indirect way of allowing the US to obtain a better position in the new, shrunken economy, if this is really possible.

The upcoming shrinking-back event is the result of too little energy consumption in relation to total world population. Most researchers have completely missed the possibility that energy limits could manifest themselves as excessive wage disparity. In fact, they have tended to assume that energy limits would manifest themselves as high energy prices, especially for oil.

The world’s networked economy doesn’t work in the simple way that most researchers have assumed. Too much wage disparity tends to lead to low energy prices, rather than high, because of increasing affordability issues. The result is energy prices that are too low for producers, rather than too high for consumers. Producers (such as OPEC nations) willingly cut back on production in an attempt to get prices back up. The resulting shortage can be expected to more closely resemble financial collapse than high prices and a need for rationing. Trump’s tariffs may provide the US a better position, if the world economy should partially collapse.

Let me try to explain some pieces of this story.

1. Energy is needed to power the world economy. This fact has been missed by politicians and most economists. 

Economist Steven Keen recently developed a graphical explanation of the role energy plays in the world economy. In his graphic, he shows that workers need food (an energy product) just as machines need some sort of energy product to operate. In Steve Keen’s words, “Labor without energy is a corpse: capital without energy is a sculpture.”

Figure 1. Graphic by Steven Keen, depicting the role of energy in the economy. Energy in the form of food is necessary for human labor, just as energy (in one of its many forms) is needed for physical transformations that make the activities underlying GDP possible. These physical transformations necessarily lead to both the desired products and multiple types of waste.

In fact, there is a physics reason why energy consumption is needed in the economy. Energy “dissipation” is needed for the physical actions underlying GDP. For example, transportation requires a physical movement of people or objects. This can only happen with the use of energy. Even the use of heat or of electricity requires energy dissipation.

2. China’s huge growth in energy consumption since it joined the World Trade Organization (WTO) in December 2001 is truly amazing. It has changed the world order in a few years.

China’s energy consumption ramped up very quickly after joining the WTO in late 2001. At the same time, the energy consumption of the US and the EU stagnated, as manufacturing moved to China and other Emerging Markets.

Figure 2. Energy Consumption for the United States, China, and European Union, based on data from BP’s 2018 Statistical Review of World Energy.

As the shift in energy consumption occurred, jobs shifted elsewhere. Also, the competition with China and other low-wage countries tended to hold down wages of workers whose jobs could be shifted overseas. When we look at labor force participation rates for the US, we see that these seem to have turned down about the same time that China joined the WTO. This suggests that workers started leaving the workforce about the time competition with China ramped up.

Figure 3. US Labor Force Participation Rate, in chart prepared by the Federal Reserve of St. Louis.

3. China is now facing a problem with Peak Coal. Its level of coal production is barely sustainable because of depletion and low coal prices. 

Figure 4. China energy production by fuel, based on BP Statistical Review of World Energy 2018 data. “Other Ren” means Other Renewables. This includes wind, solar and other renewables, such as wood burned for fuel.

If China is to manufacture goods and services for the world economy as well as its own people, it needs a growing supply of cheap-to-produce energy. China’s largest source of energy is coal. China’s coal production hit a peak in 2013 and has been on a bumpy plateau, or falling, since. The problem has been a combination of (a) a higher cost of coal production, because existing mines are depleting, combined with (b) coal prices that do not rise high enough to make production from these mines profitable.

Of course, if coal prices were to rise higher, China would have a different, but equally serious problem: The cost of finished goods created for the world marketplace would be quite a bit higher, making it difficult to export them profitably. If customers’ wages rose at the same time coal prices rose, there would be no problem. The problem could be described in some sense as growing mining inefficiency because of coal depletion. Unfortunately, the world economy does not reward a shift toward inefficiency.

4. With Peak Coal occurring in China, it makes little sense for the United States, the European Union and others to depend as heavily on China as in the past.

The economy of every country today is built on debt. If the world economy is growing, this debt pile can rise higher and higher. If interest rates can be brought ever lower, this also helps the pile of debt rise higher and higher.

China’s economy also uses increasing debt to sustain its economic growth. If the economy of China should slow down or start shrinking because of energy limits, debt defaults could start overwhelming the system. Uprisings from laid-off workers might become difficult to quell. The situation could easily spiral out of control.

Economies around the world depend on China for many manufactured goods. In fact, for many minerals, China’s usage amounts to over half of the world’s consumption. This arrangement doesn’t really make sense because (a) China cannot really be depended on for the long term because of coal depletion, (b) jobs that pay well in Advanced Economies are being lost to China and other Emerging Markets, and (c) the level of concentration of manufacturing in China puts the world system at risk if China has any kind of adverse shift in its economy.

5. The whole idea of buying fuels from other countries only works as long as there is enough to go around. 

Many people are of the opinion that if there is not enough fuel of a particular kind, fuel prices will rise, and the market will continue to operate normally. There are at least two reasons why this doesn’t make sense:

Reason #1. The issue underlying rising costs of fossil fuels is nearly always depletion. For example, with coal mines, the coal closest to the surface in the thickest seams is extracted first. As this is depleted, deeper coal in thinner seams can also be extracted, but the cost tends to be higher. When depletion takes place, it is nearly always possible to extract more of the given fuel if some combination of more human labor and more technology (powered by energy) is used. Of course, adding labor and/or technology leads to a higher cost of production. 

But the prices of commodities are not determined based on the cost of production; prices are determined in the marketplace. They reflect the quantity of finished goods and services made with these commodities, that consumers (in the aggregate) can afford. Extracting coal or another fuel in what is essentially a less efficient manner doesn’t add to what consumers can afford. The combination of flat prices and higher costs leads to unprofitable producers–precisely China’s problem. Producers tend to cut back on production.

We can see that higher energy prices don’t lead to higher wages by looking at what happened when oil prices rose a few years ago in the US. We see that higher oil prices led to lower average wages because of recession.

Figure 5. Average wages in 2017$ compared to Brent oil price, also in 2017$. Oil prices in 2017 dollars are from BP Statistical Review of World Energy 2018. Average wages are total wages based on BEA data adjusted by the GDP price deflator, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

Reason #2. If we look back at the timing of Peak Coal in the UK and in Germany, it looks very much as if depleting coal supply was one of the causes of both World War I and World War II. Governments know that energy supplies are required to operate their economies. If they cannot get enough energy products internally or though trade, they will fight other countries for access to supplies.

Figure 6. Image by author.

Economists, sitting in their ivory towers, have not stopped to think through the obvious. Their standard supply and demand curve does not work for energy because an adequate supply of cheap energy is needed for both the demand for goods and services (coming from wages workers earn) and the supply of goods and services. Once affordability becomes a problem, because too many people have low wages, the prices of fuels stop rising. It is the fact that prices don’t rise high enough that causes the “peaking” of oil, natural gas, and coal production. Extraction stops, even though there seem to be plenty of resources still available with current technology.

6. A major energy issue today is the fact that China and India have run through their own energy supplies and now need to import energy from outside their countries to supplement domestic supplies.

As shown in Figure 4 (above), China’s coal production stopped rising in 2013, keeping the total amount of energy it produces close to flat. To compensate for this shortfall, China has started to import oil, coal and natural gas. The difference between the thick black line and the top of the “stack” of types of energy produced in China (in Future 7 below) represents the quantity of fuel that it has needed to import. Clearly, this quantity has been increasing.

Figure 7. China energy production by fuel plus its total energy consumption, based on BP 2018 Statistical Review of World Energy data.

India’s coal supply is not yet decreasing, but it is running into a similar problem. It needs to import more and more energy products from abroad, as its energy consumption (thick black line) rises above its energy production “stack.”

Figure 8. India’s total energy consumption compared to its energy production by type, based on BP 2018 Statistical Review of World Energy. “Other Ren” includes wind, solar, and other commercially traded renewable types of renewable energy, such as geothermal.

7. Worldwide, there is a growing need for imported fuels of many kinds.

Figure 9 shows the imports needed for five major areas of the world. In this analysis, the European Union is treated as a single unit. Thus, in this analysis, the imports it receives are only those from outside the European Union, taken as a whole.

Figure 9. Required energy imports for five major areas of the world, based on the difference of energy consumption and energy production shown in BP’s 2018 Statistical Review of World Energy.

We can see from Figure 9 that the European Union and Japan have been major importers of fuels for a very long time. India and China have only in recent years become energy importers. At the same time, the US is becoming more and more energy sufficient with its own fuel production.

Figure 10 shows the ratio of imported energy to total energy consumption for these five areas.

Figure 10. Percentage of energy imported in 2017 in Japan, India, the EU, China, and the US. Imports calculated as the difference between Total Energy Consumption and Total Energy Production based on data from BP 2018 Statistical Review of World Energy. The European Union is treated as a single unit. Thus, energy imports are those from outside the EU.

The US is clearly in a better position than other countries/groups shown, with a smaller share of energy imported in Figure 10 and a declining trend in imported energy in Figure 9. Japan, the EU and India are all subject to substantial risk if available imports should fall.

8. The ramp up of “clean energy” to date has proven to be a major disappointment. The quantities added are far below what the IEA believes is needed.

Partial confirmation of this statement can be seen by observing the tiny orange “Other Ren” bands on Figures 4, 7, and 8 for China and India, which include wind, solar, and other non-hydroelectric renewables. China is the largest user of wind and solar in the world, yet its use of these devices provides only a tiny portion of its total energy consumption.

We have known since the 1950s that fossil fuel supply would eventually become a problem. Academics, with their focus on making models, have been able to come up with hypotheses regarding what might act as substitutes. But these models tend to miss a lot of things, including the following:

  • Adverse events, such as Fukushima for nuclear.
  • The need for electricity storage and extra long distance transmission lines, as wind and solar usage are ramped up. The cost-benefit analysis is much less favorable with these added.
  • Issues that affect only some installations, such as workarounds to keep long-distance transmission lines from starting fires in dry areas, or the high cost of underground transmission lines.
  • The best sites are taken early.

It is not until the actual experience arrives that we see how these substitutes are working in practice. If we think back, the nuclear promise of producing electricity that was hoped to be “too cheap to meter” hasn’t really panned out. In fact, many Advanced Economies are cutting back on their use of nuclear.

With respect to “renewables,” (including hydroelectric, wind, solar, and others), the amount of new generation added each year seems to have hit a plateau. It may be that the additional need for storage and transmission lines are already slowing the growth of renewables.

Figure 11. IEA Renewable Net Capacity Additions as of May 2019. Source: Chart from India Times.

The IEA has started pointing out that far more energy investment is needed if sustainable development goals are to be met–about 300 GW per year, instead of the current 177 per year in additions, on average, between 2018 and 2030.

9. Donald Trump and his advisors have sensed that the current economic system is not working because of too much wage disparity. If the economic system is destined to break in one way or another, Trump can influence which way the break will occur by the imposition of tariffs.

Trump and his advisors no doubt recognize the importance of a cheap, available energy supply. They also realize that energy is an important enough factor of production to fight over. Furthermore, many past wars have been resource wars. Tariffs are, in some sense, a step toward a resource war.

One of the immediate problems at hand is too much wage disparity. Strange as it may seem, excessive wage disparity can be a sign of inadequate energy supply because in a networked economy, high prices of commodities and low wages of workers are almost “mirror images” of each other. High commodity prices tend to cut off consumption of commodities (such as oil or coal) by prices of finished goods that are too high for consumers.

Excessive wage disparity works in reverse: It sends prices of commodities (such as coal and oil) too low, cutting off production because prices fall too low for producers of these commodities. Production falls because producers cannot make a profit. When wage disparity is very high, a large share of workers have very low wages, leaving them unable to purchase more than a small amount of high-priced goods (such as cars and homes) made with commodities. It is this low “demand” that holds down commodity prices.

Figure 10 shows that wide income disparities were issues both at the time of the Great Depression and in recent years. Commodity prices have been relatively low each of these times. The problems didn’t look like shortages; they looked like gluts because of issues related to lack of affordability.

Figure 12. U. S. Income Shares of Top 1% and Top 0.1%, Wikipedia exhibit by Piketty and Saez.

The US has raised tariffs in the past. One time was immediately before the US Civil War. Tariffs were again raised in 1922 and 1930, when wage disparities were at a high level.

Unfortunately, there is a significant chance that major parts of the world economy will start collapsing, with or without Trump’s tariffs and the trade war, because energy supplies worldwide are not growing sufficiently. In fact, some of these energy supplies are purposely being removed by producers, such as Saudi Arabia, because prices are too low.

By putting tariffs on some goods, Trump is providing a substitute for the missing high oil prices needed to slow the growth of globalization, if the issue of ever-increasing wage disparity is to be solved. The tariffs tend to raise the value of the US dollar relative to other currencies, making the cost of commodities (including fossil fuels) cheaper for US consumers than for other consumers around the world. The tariffs tend to encourage new investment in US production of many types, at the same time that they make investment in other countries, such as China, less appealing.

All of these changes indirectly give the US an advantage if there should be a partial collapse of the world economy. With the benefit of the tariffs, perhaps the partial collapse would leave some combination of countries, including the US and Canada, mostly unaffected. There might be other groups remaining as well. Weak economies, such as Venezuela, Cuba, and Haiti, would likely be pushed aside. Even Europe and Japan would likely have major problems.


Most observers have missed the point that excessive wage and wealth disparity can be a sign of serious energy problems, just as high prices can be a sign of short supply. They have also missed the point that coal supply is very important, just as oil supply is very important.

In the real world, when there is not enough to go around, wars are a definite possibility. A trade war is a somewhat reduced version of a war. Trump and his advisors, whether or not they understand the real situation, seem to be trying to guide the US to as good an outcome as possible, in the current situation of excessive wage disparity.

The underlying issue is likely the Limits to Growth problem modeled in the 1972 book, The Limits to Growth, by Donella Meadows, et al.

Figure 13. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil,” with dotted line added corresponding to where I see the world economy to be in 2019.

As resources become depleted, it becomes increasingly difficult to maintain economic growth. Industrial output per capita (for example, the number of new cars or number of smart phones per 1000 people) starts falling. The 1972 computer simulations did not consider wages or prices, only physical quantities of various items.

Now, as we can see how the limits are playing out in the real world, it appears that the most prominent manifestation of the world’s low resource problem is excessive wage disparity–an issue most people have never considered as being related to shortages of resource supplies. Few people have stopped to think that goods made with energy products are equally unaffordable whether the problem is prices being too high, or wages of most people being too low.

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Envy, Inc.

Presidential aspirant Kamala Harris promises to compel private companies with more than 100 employees to disclose what they pay employees to the Equal Opportunity Employment Commission. Companies that don’t pay women “enough” will pay fines until they demonstrate an acceptable level of gender parity. South Bend, Indiana’s “Mayor Pete” Buttigieg thinks America needs a federal “Equality Act” to make up for past racism, sexism, and homophobia. Senator Elizabeth Warren champions direct cash payments to black Americans as reparations for slavery. And all of the 2020 hopefuls take great pains to characterize income and wealth disparity as the defining issue of our time.

The ostensible thread connecting all of these public policy ideas is equality. Millions of Americans firmly believe the proper role of government is to make us more equal, and thereby make society more just. Old-fashioned liberal ideas about private property and natural rights barely register in this worldview. And it won’t be changed by an election or politician; egalitarianism as an animating political, economic, and social principle is firmly entrenched across the West today. 

Are these proposals rooted in justice, or hatred and envy? Are they presented as an appeal for restitutionary justice, however far-fetched and far-removed? Or do they represent a gross display of cynical politics, an appeal meant to divide? We hate to play amateur psychologist. But after more than a century of progressive claims of good intentions, the results speak for themselves: capitalism and markets increase freedom and prosperity, while political engineering is zero-sum and antagonistic. 

Ludwig von Mises explained so much of what still plagues us today in his underrated classic The Anti-Capitalistic Mentality. Written in the early 1950s, toward the end of Mises’s long career, this short book exhibits easier language and faster pace than his earlier works. Having been in the US for more than a decade at this point, one senses a change in Mises’s written English. He’s more comfortable in his diction and syntax, and utterly unconcerned with staying in his lane as an economist. 

For Mises, capitalism is private property and markets. It is the engine of civilization, and the hallmark of any society with a natural and healthy “urge for economic betterment.” It is the only way to organize society that comports with human nature, promotes peace and social cohesion, and advances material well-being.

So what accounts for its constant vilification? Capitalism’s critics, no less self-interested than anyone else, must be explainable by their unease and dissatisfaction with life. And envy, no less than a biblical sin, is the source of that unease and dissatisfaction. So while Mises much earlier advanced the concept of “felt uneasiness” in his explanations of praxeology, he goes much further here into an outright examination of the psychological source of that uneasiness.

Why do intellectuals, particularly university professors, resent capitalism? Simple, Mises explains: they resent the higher incomes and prestige of the risk-taking, entrepreneurial widget makers they look down upon.

Why do working class voters resent capitalism? Capitalism provides freedom, Mises tells us, but also imposes responsibility for one’s lot in life (a suggestion for which Jordan Peterson is deeply resented on the Left). A more successful sibling or neighbor serves as a reminder of one’s failings, and every day presents an opportunity to advance or fall back. This is hardly comforting.

Why do literary and artistic elites, including Hollywood and Broadway, resent capitalism? The consuming public’s taste is fickle and fleeting. The sensitive artist’s work may go completely unappreciated by middlebrow mass audiences, and even the successful actor may become forgotten after a poorly received film or two.

Capitalism produces bad art? Who is to say, Mises asks, how the tired working class spend their leisure time and money? And with the plenitude capitalism provides, every taste is satisfied. Over time, particular genius like Shakespeare tends to emerge and prevail—albeit not always in time for wealth and fame in the artist’s lifetime.

But doesn’t capitalism result in other kinds of impoverishment, by making us less happy, more unequal, and crassly materialistic? Again, Mises unapologetically stands his ground: materialism is worthy of celebration; as today’s luxuries are tomorrow’s affordable middle class necessities. Inequality is meaningless until we grapple with scarcity, the starting point for any economic analysis. Capital accumulation is the only way to alleviate the scarcity that defines our natural world. Happiness is perhaps undefinable and un-measurable, but who among us should have the right to deny an automobile or refrigerator to satisfy a consumer’s wish? Why do the anti-capitalists want to forbid the common man his “daily plebiscite”?   

Of course Mises’s account of the anti-capitalist mindset did not go unchallenged by critics. The infamous former Soviet spy Whittaker Chambers took to the pages of National Review for a denunciation of the book’s “know-nothing conservatism.” The Economist magazine (was it ever good?) lambasted Mises’s “sad little book” and its caricature of liberalism by a debater of “Hyde Park standard.”

But in the intervening 65 years, has Mises’s identification of “envy, conceit, ignorance, and dishonesty” among western anti-capitalists proved correct? Did events in the second half of the 20th century, particularly the collapse of Soviet communism, tend to vindicate him? 

Certain sentences like “Under capitalism…everybody’s station in life depends on his own doing,” and “Under capitalism, material success depends on the appreciation of a man’s achievements on the part of the sovereign consumers” will strike some readers as depicting an overly rosy view of American meritocracy. But again, Mises’s conception of capitalism is unfettered, not the mixed system of political patronage in the US then and now. His larger point stands: markets and property present the individual with opportunities never before known in human history, while state planning makes us all cogs in a wheel. 

Ultimately, The Anti-Capitalistic Mentality is a defense of dynamic capitalism against the doctrines of both progressives and conservatives. The former would deny average people that most unique and cherished American opportunity, the chance for upward class mobility. The latter seek to protect their own status against the nouveau riche the market disruptors. Both seek to keep people in their place, whereas unbridled capitalism—warts and all—gives them hope with responsibility. 

Mises understood this. Politicians should read him.

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Central Banks’ Forecasts Are Basically Garbage

Animals are a curious topic in finance, and we find them all over the place. We describe upward, downward or side-ways moving markets as bull, bear or deer markets. We have investment strategies ( “Dogs of the Dow”) and trading behavior ( ‘dead cat bouncing ‘) named after pets. We have “pigs” and “wolves” and “ostriches” and Nassim Taleb’s “black swans,”  all of which reflect this tendency to name stock market phenomena after wildlife.

Most people are also aware of central bank language wrapped in similarly zoological terms: hawks and doves refer to central bankers preferring higher and lower interest rates, respectively. In the rest of the economics profession, this animalistic naming trend has been associated with certain iconic graphs, most famously through Branko Milanovic’s ‘Elephant Graph ‘ that aims to show how economic growth has been distributed among global income deciles.

Recently, another animal has been called up to serve: the Hedgehog. Over the last decade – or even longer – central bankers have exaggerated their benign impacts on the economy and their forecasts have consistently misjudged its future path. The central bank projections of the most important variables for monetary policy – GDP growth, unemployment and the Fed’s favored inflation metric, the PCE – have been rosier than reality later revealed, over and over and over again.

When graphed, as those projections occasionally are, the erroneous forecasts stick out from the observed reality like the spiky outer armor of hedgehogs. The projection errors of various central banks have thereby given rise to an entirely new derisive class of graphs – I give you the Hedgehog graphs of the Fed, The ECB and the Swedish Riksbank.

The Federal Reserve:

Gaeto & Mazumder’s (2019: p. 22) recent survey of Fed officials’ public predictions show that

When we examine the forecast accuracy scores of the Fed chairs over time, we see that their mean forecast score has been declining over time from about 2 in 1997 (specifically correct forecasts within approximately 2 standard deviations) to about 1 in 2015 (generally correct predictions)

Fed projections of GDP growth repeatedly overestimated the speed of the recovery after the 2008 financial crisis, and the overly rosy trend in growth forecasts has continued:


For inflation forecasts , it seems, the hedgehog has turned its spikes sideways, much in contrast to the Riksbank and the ECB that we’ll see below:


The bottom line in the literature that analyzes Fed prediction behavior seems to suggest that the quality and accuracy of their forecasts have both gotten worse and less specific.

Admittedly, Fed researchers (judged by Summary of Economic Projections data, despite all their technical flaws) are not the only ones whose projections are noticeably off. The Survey of Professional Forecasters , published by the Philadelphia Fed, show a much clearer hedgehog – one that systematically overestimates the Fed’s willingness to hike interest rates, up until the time of the first hike in 2015, at which point SPFs estimations have underestimated the speed of hikes:


Regardless, it is remarkable how the forecasting errors are so uniformly wrong in one direction at a time. But they make for pretty hedgehogs.

The Riksbank

The Riksbank’s projection for where its future short-term interest rate will be has suffered from a similar upward bias for close to a decade:


Indeed, the Swedish financial press has taken to ridicule the Riksbank for its excessively optimistic projections, both regarding price inflation and its own future interest rate. Surveying projections made between 2013 and 2017 for 11 major Swedish institutions (the Riksbank, the 4 largest banks, 3 government departments, 2 major labor market organizations and a retail consultancy), Sweden’s National Institute of Economic Research showed that the Riksbank’s forecasting errors, ironically, are larger for inflation than for other variables. Relative to its forecasting peers, the Riksbank’s accuracy in forecasting GDP is much better than its ability to forecast inflation (the same seems true for the Fed). And surprisingly, it is unbeaten in its forecasts for unemployment. Note, however, that the Riksbank does not have the Fed’s “dual mandate” , and its sole task is to keep inflation at 2% – the very thing it is comparatively worst at forecasting.

The ECB:

The European central bank does not fare any better. According to Zsolt Darvas , senior fellow at the European think-tank Bruegel, the ECB’s “forecasts since [2013] have proven to be systematically incorrect”. Surveying the bank’s Eurozone inflation projections, we again find the optimistic forecasts making up the hedgehog graph’s spikes:


Indeed, the ECB staffers’ overly optimistic view of inflation is strangely enough coupled with an overly pessimistic view when it comes to unemployment , where measured unemployment has continually fallen faster than projections for more than five years. Given a basic Phillips curve assumption, this is of course inconsistent, Darvas notes :


The tendency for many different central banks to systematically fail at forecasting does call into question their future credibility. Indeed, if every single forecast of the past decade has been utterly mistaken, what makes you think that your current forecasts ought to fare any better? And why should the rest of us pay you any attention?

If hedgehogging is unintentional, as Jonathan Newman observed on Mises.org a few years ago, “their models are junk.” If the tendency is intentional, they are just trying to project unwarranted optimism – which is indeed the suggested explanation among those who’ve studied the Fed’s forecasting failures. There is some evidence that private sector actors revise up their growth forecasts when the Fed raises interest rates – concluding, effectively, that the Fed has superior non-public information about the (future) state of the economy. The hedgehog graphs would suggest otherwise.

Finally, a projection track record that consistently errs in the same direction could in principle be amended – adjusted downward or upward by the median of previous’ forecasting errors. Indeed, that’s what successful forecasters do . Why the three central banks here considered don’t update their consistently inaccurate “junk models” remains a puzzle.

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The Unseen Costs of “Medicare for All”

Many of the worst costs that will come with “Medicare for All” won’t be calculated in dollars. They’ll come in the form of doctor shortages, long wait times, and less access to care.

Original Article: “The Unseen Costs of “Medicare for All””.

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Money Supply Growth Inches up From March’s 12-Year Low

Money supply growth inched up in April, rising slightly above the March growth level, which was at a 12-year (145-month) low.

In April, year-over-year growth in the money supply was at 1.99 percent. That was up slightly from March’s growth rate of 1.92 percent, but was well down from April 2018’s rate of 4.32 percent.


The money-supply metric used here — the “true” or Rothbard-Salerno money supply measure (TMS) — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth.

This measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short-time deposits, traveler’s checks, and retail money funds).

M2 growth rose slightly April, growing 3.84 percent, compared to March’s growth rate of 3.77 percent. M2 grew 3.72 percent in April of last year. The M2 growth rate has fallen considerably since late 2016, but has varied little in recent months.

Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of slow-downs in rates of money-supply growth.

Moreover, periods preceding recessions often show a growing gap between M2 growth and TMS growth. We saw this in 2006-7 and in 2000-1. The gap between M2 and TMS narrowed considerably from 2011 through 2015, but has grown in recent years.


The overall M2 total money supply in April was $14.6 trillion, and the TMS total was $13.4 trillion.

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