August 2016

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For a good many years, Tony Lawson has been urging economists to pay attention to their ontological presuppositions. Economists have not paid much attention, perhaps because few of us know what “ontology” means. This branch of philosophy stresses the need to “grasp the nature of the reality” that is the object of study – and to adapt one’s methods of inquiry to it.
5112X+PoJkLEconomics, it might be argued, has gotten this backwards. We have imposed our pre-conceived methods on economic reality in such manner as to distort our understanding of it. We start from optimal choice and fashion an image of reality to fit it. We transmit this distorted picture of what the world is like to our students by insisting that they learn to perceive the subject matter trough the lenses of our method.

The central message of Lawson’s critique of modern economics is that an economy is an “open system” but economists insist on dealing with it as if it were “closed.” Controlled experiments in the natural sciences create closure and in so doing make possible the unambiguous association of “cause” and “effects”. Macroeconomists, in particular, never have the privilege of dealing with systems that are closed in this controlled experiment sense.

Our mathematical representations of both individual and system behaviour require the assumption of closure for the models to have determinate solutions. Lawson, consequently, is critical of mathematical economics and, more generally, of the role of deductivism in our field. Even those of us untutored in ontology may reflect that it is not necessarily a reasonable ambition to try to deduce the properties of very large complex systems from a small set of axioms. Our axioms are, after all, a good deal shakier than Euclid’s.

The impetus to “closure” in modern macroeconomics stems from the commitment to optimising behaviour as the “microfoundations” of the enterprise. Models of “optimal choice” render agents as automatons lacking “free will” and thus deprived of choice in any genuine sense. Macrosystems composed of such automatons exclude the possibility of solutions that could be “disequilibria” in any meaningful sense. Whatever happens, they are always in equilibrium.

Axel Leijonhufvud

The whole basis of Austrian economics is deductivism. The axiom that is relied upon is ‘human action’. That ‘human action’ unarguably is an axiom should be beyond debate.

The Austrian method also uses the ‘open system’ in that acting man is employed to illustrate the economic phenomena being investigated.

Ultimately all economic systems are comprised of individuals. Therefore it is the individual that must be accounted for in any theoretical investigation of economic systems.



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Unless you’re a high-ranking government official, it’s hard to get a meeting with any secretary of state. But during Hillary Clinton’s tenure, there was another way: pay up.

A staggering 85 of the 154 private citizens who managed to meet or speak with her by phone donated money to the Clinton Foundation. That looks improper — as if the secretary used her position to raise money for her family foundation.

Of course, appearances alone don’t prove anything. The proof of her illicit intent is in what she told the Senate Foreign Relations Committee during her January 2009 confirmation hearing. She rejected any attempts by the senators to prevent her from turning the State Department into a cash machine for the foundation.

The senators suggested that money pouring into the foundation while Clinton was secretary of state would look like US policy was up for sale. Too bad, she shrugged. She said she had worked out an agreement with President-elect Obama’s transition team, and she refused to change it.

The agreement imposed no restrictions on who could give — including foreign governments — or how much.

In response to every request from senators to limit fundraising or disclose the size and timing of gifts to the foundation, she said no. She stonewalled them.

Clinton said that if the State Department or the White House ever had concerns about a proposed gift, the foundation would be willing to hear them out. But under the agreement, the Clinton Foundation, not the White House or State Department ethics officers, would have the final say. Amazing.

The agreement protected the foundation from government oversight, but it didn’t protect the country.

Then-Sen. Richard Lugar (R-Ind.) persistently questioned Clinton, warning that her foundation would be “a temptation for any foreign entity or government that believes it could curry favor through a donation.”

Even foreign companies and individuals pose a risk, he explained, urging that the agreement be tightened.

Clinton refused: “The agreement as written already goes far beyond what any spouse of a Cabinet official has ever done.”

No kidding! No other Cabinet nominee in American history was the wife of a former president — and with a high-profile, big family foundation looking for cash.

Lugar then asked if the agreement could be amended to disclose the timing of gifts and the dollar figure for past and future pledges, not just donors’ names. Clinton used her stock answer: “The agreement already goes far beyond what any spouse of a Cabinet official has ever done.”

She disclosed that if any concerns were raised by the Obama White House or the State Department about foundation fund-raising, the foundation would be the arbiter of what’s “appropriate,” not the US government. Her jaw-dropping reassurance: “In many, if not most cases, it is likely that the foundation or President [Bill] Clinton would not pursue an opportunity that presents a conflict.”

Translation: It’ll depend on the amount of money being dangled in front of the ex-president. Sen. David Vitter (R-La.) cited a foundation donor who appeared to have connections to Iranian terrorism. Clinton dodged the question: “Well again, this is an agreement that has been worked out between all of the parties,” she blathered, noting the concerns “were thoroughly discussed.” But not remedied.

Clinton gave the senators the run-around in 2009 because she knew what she intended to do as secretary of state: sell her influence to raise money for the Clinton Foundation.

Sadly, all but one senator on the committee fawned over Clinton, despite her lack of cooperation, and voted to confirm her. Only Vitter stuck to his principles.

Recently released e-mails between foundation staff and Clinton’s State Department aides confirm that Vitter was right. People who couldn’t get a meeting with the secretary through official channels managed to get it with foundation help once they were donors. They paid, in other words, and they played.

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Two months ago, the world’s wise men were warning that if UK voters decided to “Brexit” from the European Union, they’d rain down economic crisis. Guess what? Today, Britain is fine — and has even seen a boost from its “Leave” vote.

The International Monetary Fund, central bank chiefs, academic economists — you know, the people who study the economy for a living — said Brexit would be a disaster.

Then-Prime Minister David Cameron warned that Britons who voted to leave would risk their Social Security-style pensions. President Obama said Britons would have to “go to the back of the queue” to ink trade deals with the United States.

Now, though, Britain is showing how real free-market economics can correct political mistakes — if, indeed, Brexit was a mistake.

After the vote, the British pound plummeted. Financial traders believed their government’s warnings and ditched the currency.

Before Brexit, one British pound was worth $1.48. Today, it’s worth $1.32. The pound has fallen against other currencies, too. That has meant record visitors to Britain this summer — and tourists spending record amounts of money, too.

In the month before Brexit, airline reservations to Britain were down compared to the previous year, the Guardian reported. After the Brexit vote, they jumped 4.3 percent — and wealthier tourists bought more jewelry and watches.

Other parts of the economy haven’t suffered, either. Consumer confidence and domestic spending are both up. “Retail sales smashed expectations in August,” the Daily Mail noted on Friday. Manufacturing and home-sales reports are well and good.

Of course, Britain hasn’t officially Brexited yet. Whatever trade and immigration agreements Britain eventually signs with Europe and the rest of the world will matter.

But Britain has an advantage: It is a huge buyer of other countries’ goods. Germany sells more stuff to Britain every year than to any other country except one (us).

Were Germany to stop doing business with Britain, it would lose $50 billion of its annual trade surplus — including $18 billion in car sales. The United States, too, is a huge British trade partner. We sell Britain $56 billion in goods and services a year, and buy $58 billion.

Despite Obama’s warning, America isn’t going to cut off trade.

What about migration? Anti-Brexiters are still warning that Britain has harmed its ability to attract top scientists, bankers and the like.

But there’s nothing stopping the United Kingdom from designing a migration policy to attract lots of skilled workers, and as few or as many lower-wage laborers as it likes.

Europe isn’t going to force Britain to take all the low-wage Eastern European workers who apply. France and Germany have too much to lose on trade to stick up quite that much for poorer EU countries’ voters.

Anti-Brexiters also warned of spending cuts, as the country loses EU subsidies on everything from farming to university research. But it’s an indisputable fact that Britain gives more money — $12 billion — than it gets back from the European Union each year.

After Brexit, Britain will be free to spend that money as it likes, including to replace farm and research subsidies.

Voters noticed, too, that being in Europe didn’t save people from Cameron’s illogical budget cuts of the past six years. Despite record-low interest rates, Britain cut back on libraries and raised taxes on consumer goods, adding pain to people who were suffering job and income losses.

Yes, Britain still has problems. Like the United States, it still depends on cheap credit to get people to buy houses and spend money. This — not Brexit — will cause another recession someday.

And workers’ retirement income is at risk — not because of Brexit, as Cameron said, but because private companies and the government have avoided making “required” contributions to pension funds for decades, leaving a $1 trillion-plus gap.

Britain needs better infrastructure. Its commuter trains are a mess — and more expensive — compared to Europe’s.

But these problems have nothing to do with Brexit.

Britain may be dropping out of Europe, but it didn’t drop out of the world. The world still needs Britain, and the airplane parts, pharmaceutical products and theatrical productions it creates.

And Britain still needs the world for the stuff it can’t make or do itself.

The shock of Brexit is that it won’t change much at all — except providing a warning to pols around the world that the voters are at, well, the brexiting point.

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The most definitive study on fascism written in these years was As We Go Marching by John T. Flynn. Flynn was a journalist and scholar of a liberal spirit who had written a number of best-selling books in the 1920s. It was the New Deal that changed him. His colleagues all followed FDR into fascism, while Flynn himself kept the old faith. That meant that he fought FDR every step of the way, and not only his domestic plans. Flynn was a leader of the America First movement that saw FDR’s drive to war as nothing but an extension of the New Deal, which it certainly was.

As We Go Marching came out in 1944, just at the tail end of the war, and right in the midst of wartime economic controls the world over. It is a wonder that it ever got past the censors. It is a full-scale study of fascist theory and practice, and Flynn saw precisely where fascism ends: in militarism and war as the fulfillment of the stimulus spending agenda. When you run out of everything else to spend money on, you can always depend on nationalist fervor to back more military spending.

Flynn, like other members of the Old Right, was disgusted by the irony that what he saw, almost everyone else chose to ignore. After reviewing this long history, Flynn proceeds to sum up with a list of eight points he considers to be the main marks of the fascist state.

As I present them, I will also offer comments on the modern American central state.

Point 1. The government is totalitarian because it acknowledges no restraint on its powers.

If you become directly ensnared in the state’s web, you will quickly discover that there are indeed no limits to what the state can do. This can happen boarding a flight, driving around in your hometown, or having your business run afoul of some government agency. In the end, you must obey or be caged like an animal or killed. In this way, no matter how much you may believe that you are free, all of us today are but one step away from Guantanamo.

No aspect of life is untouched by government intervention, and often it takes forms we do not readily see. All of healthcare is regulated, but so is every bit of our food, transportation, clothing, household products, and even private relationships. Mussolini himself put his principle this way: “All within the State, nothing outside the State, nothing against the State.” I submit to you that this is the prevailing ideology in the United States today. This nation, conceived in liberty, has been kidnapped by the fascist state.

Point 2. Government is a de facto dictatorship based on the leadership principle.

I wouldn’t say that we truly have a dictatorship of one man in this country, but we do have a form of dictatorship of one sector of government over the entire country. The executive branch has spread so dramatically over the last century that it has become a joke to speak of checks and balances.

The executive state is the state as we know it, all flowing from the White House down. The role of the courts is to enforce the will of the executive. The role of the legislature is to ratify the policy of the executive. This executive is not really about the person who seems to be in charge. The president is only the veneer, and the elections are only the tribal rituals we undergo to confer some legitimacy on the institution. In reality, the nation-state lives and thrives outside any “democratic mandate.” Here we find the power to regulate all aspects of life and the wicked power to create the money necessary to fund this executive rule.

Point 3. Government administers a capitalist system with an immense bureaucracy.

The reality of bureaucratic administration has been with us at least since the New Deal, which was modeled on the planning bureaucracy that lived in World War I. The planned economy— whether in Mussolini’s time or ours— requires bureaucracy. Bureaucracy is the heart, lungs, and veins of the planning state. And yet to regulate an economy as thoroughly as this one is today is to kill prosperity with a billion tiny cuts.

So where is our growth? Where is the peace dividend that was supposed to come after the end of the Cold War? Where are the fruits of the amazing gains in efficiency that technology has afforded? It has been eaten by the bureaucracy that manages our every move on this earth. The voracious and insatiable monster here is called the Federal Code that calls on thousands of agencies to exercise the police power to prevent us from living free lives.

It is as Bastiat said: the real cost of the state is the prosperity we do not see, the jobs that don’t exist, the technologies to which we do not have access, the businesses that do not come into existence, and the bright future that is stolen from us. The state has looted us just as surely as a robber who enters our home at night and steals all that we love.

Point 4. Producers are organized into cartels in the way of syndicalism.

Syndicalist is not usually how we think of our current economic structure. But remember that syndicalism means economic control by the producers. Capitalism is different. It places by virtue of market structures all control in the hands of the consumers. The only question for syndicalists, then, is which producers are going to enjoy political privilege. It might be the workers, but it can also be the largest corporations.

In the case of the United States, in the last three years, we’ve seen giant banks, pharmaceutical firms, insurers, car companies, Wall Street banks and brokerage houses, and quasi-private mortgage companies enjoying vast privileges at our expense. They have all joined with the state in living a parasitical existence at our expense.

Point 5. Economic planning is based on the principle of autarky.

Autarky is the name given to the idea of economic self-sufficiency. Mostly this refers to the economic self determination of the nation-state. The nation-state must be geographically huge in order to support rapid economic growth for a large and growing population.

Look at the wars in Iraq, Afghanistan, and Libya. We would be supremely naive to believe that these wars were not motivated in part by the producer interests of the oil industry. It is true of the American empire generally, which supports dollar hegemony. It is the reason for the North American Union.

Point 6. Government sustains economic life through spending and borrowing.

This point requires no elaboration because it is no longer hidden. In the latest round, and with a prime-time speech, Obama mused about how is it that people are unemployed at a time when schools, bridges, and infrastructure need repairing. He ordered that supply and demand come together to match up needed work with jobs.

Hello? The schools, bridges, and infrastructure that Obama refers to are all built and maintained by the state. That’s why they are falling apart. And the reason that people don’t have jobs is because the state has made it too expensive to hire them. It’s not complicated. To sit around and dream of other scenarios is no different from wishing that water flowed uphill or that rocks would float in the air. It amounts to a denial of reality.

As for the rest of this speech, Obama promised yet another long list of spending projects. But no government in the history of the world has spent as much, borrowed as much, and created as much fake money as the United States, all thanks to the power of the Fed to create money at will. If the United States doesn’t qualify as a fascist state in this sense, no government ever has.

Point 7. Militarism is a mainstay of government spending.

Have you ever noticed that the military budget is never seriously discussed in policy debates? The United States spends more than most of the rest of the world combined. And yet to hear our leaders talk, the United States is just a tiny commercial republic that wants peace but is constantly under threat from the world. Where is the debate about this policy? Where is the discussion? It is not going on. It is just assumed by both parties that it is essential for the US way of life that the United States be the most deadly country on the planet, threatening everyone with nuclear extinction unless they obey.

Point 8. Military spending has imperialist aims.

We’ve had one war after another, wars waged by the United States against noncompliant countries, and the creation of even more client states and colonies. US military strength has led not to peace but the opposite. It has caused most people in the world to regard the United States as a threat, and it has led to unconscionable wars on many countries. Wars of aggression were defined at Nuremberg as crimes against humanity.

Obama was supposed to end this. He never promised to do so, but his supporters all believed that he would. Instead, he has done the opposite. He has increased troop levels, entrenched wars, and started new ones. In reality, he has presided over a warfare state just as vicious as any in history. The difference this time is that the Left is no longer criticizing the US role in the world. In that sense, Obama is the best thing ever to happen to the warmongers and the military-industrial complex.

The Future

I can think of no greater priority today than a serious and effective antifascist alliance. In many ways, one is already forming. It is not a formal alliance. It is made up of those who protest the Fed, those who refuse to go along with mainstream fascist politics, those who seek decentralization, those who demand lower taxes and free trade, those who seek the right to associate with anyone they want and buy and sell on terms of their own choosing, those who insist they can educate their children on their own, the investors and savers who make economic growth possible, those who do not want to be felt up at airports, and those who have become expatriates.

It is also made of the millions of independent entrepreneurs who are discovering that the number one threat to their ability to serve others through the commercial marketplace is the institution that claims to be our biggest benefactor: the government.

How many people fall into this category? It is more than we know. The movement is intellectual. It is political. It is cultural. It is technological. They come from all classes, races, countries, and professions. This is no longer a national movement. It is truly global.

And what does this movement want? Nothing more or less than sweet liberty. It does not ask that the liberty be granted or given. It only asks for the liberty that is promised by life itself and would otherwise exist were it not for the Leviathan state that robs us, badgers us, jails us, kills us.

This movement is not departing. We are daily surrounded by evidence that it is right and true. Every day, it is more and more obvious that the state contributes absolutely nothing to our wellbeing; it massively subtracts from it.

Back in the 1930s, and even up through the 1980s, the partisans of the state were overflowing with ideas. This is no longer true. Fascism has no new ideas, no big projects—and not even its partisans really believe it can accomplish what it sets out to do. The world created by the private sector is so much more useful and beautiful than anything the state has done that the fascists have themselves become demoralized and aware that their agenda has no real intellectual foundation.

It is ever more widely known that statism does not and cannot work. Statism is the great lie. Statism gives us the exact opposite of its promise. It promised security, prosperity, and peace; it has given us fear, poverty, war, and death. If we want a future, it is one that we have to build ourselves. The fascist state will not give it to us. On the contrary, it stands in the way.

In the end, this is the choice we face: the total state or total freedom. Which will we choose? If we choose the state, we will continue to sink further and further and eventually lose all that we treasure as a civilization. If we choose freedom, we can harness that remarkable power of human cooperation that will enable us to continue to make a better world.

In the fight against fascism, there is no reason to be despairing. We must continue to fight with every bit of confidence that the future belongs to us and not them.

Their world is falling apart. Ours is just being built.Their world is based on bankrupt ideologies. Ours is rooted in the truth about freedom and reality. Their world can only look back to the glory days. Ours looks forward to the future we are building for ourselves.

Their world is rooted in the corpse of the nation-state. Our world draws on the energies and creativity of all peoples in the world, united in the great and noble project of creating a prospering civilization through peaceful human cooperation. We possess the only weapon that is truly immortal: the right idea. It is this that will lead to victory.

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Both original posts from here

Currently in Civil Litigation we are currently undertaking a reconstruction of a real case that had at its heart, a claim for ‘misleading and deceptive’ conduct.

These two examples are quite illustrative of some of the legal tests applied to the alleged misleading or deceptive conduct, where the facts lend themselves more easily to a legal analysis.

The class action lawsuit in New York’s Supreme Court accuses the doughnut maker of false advertising, fraud, and unjust enrichment. It calls Dunkin’s jelly doughnuts “defective and deficient due to their skimpy, scanty, paltry, pitiful, meager and otherwise insufficient quantities of jelly within each said doughnut unit.”

In my follow-up post, I’d written how easy it is to “have it your way” and simply ask for less ice.

And now, as expected, the iced coffee lawsuit has been tossed out. (Decision – Forouzesh v. StarbucksFor the same reason that I wrote. And for that matter, the same reason that countless others no doubt had written. Even a child knows you can ask for less ice:

But as young children learn, they can increase the amount of beverage they receive if they order “no ice.” If children have figured out that including ice in a cold beverage decreases the amount of liquid they will receive, the Court has no difficulty concluding that a reasonable consumer would not be deceived into thinking that when they order an iced tea, that the drink they receive will include both ice and tea and that for a given size cup, some portion of the drink will be ice rather than whatever liquid beverage the consumer ordered.

This conclusion is supported by the fact that the cups Starbucks uses for its Cold Drinks, as shown in the Complaint, are clear, and therefore make it easy to see that the drink consists of a combination of liquid and ice.

As I (and countless others) had indicated, an iced drink contains ice as an obvious ingredient. The court (shocker!) concurs on the obviousness of it all:

When a reasonable consumer walks into a Starbucks and orders a Grande iced tea, that consumer knows the size of the cup that drink will be served in and that a portion of the drink will consist of ice.

Case dismissed.

The problem with bad suits is that they form public opinion based on anecdotes, not empirical evidence. Empirical evidence can be boring. But an idiotic suit — even if it is one in ten thousand — sells papers.


With the health of the two presidential candidates, aged 68 and 70,  in the news, it’s worth revisiting the statement given out by Donald Trump’s gastroenterologist, Dr.Harold Bornstein. You may remember this from last December for its comical and very Trumpian statement:

“If elected, Mr. Trump, I can state unequivocally, will be the healthiest individual ever elected to the presidency”  (Full letter)

Yeah, that Harold Bornstein. Dr. Jen Gunter did a full, line-by-line, deconstruction of the letter at the Huffington PostI’m A Doctor. Here’s What I Find Most Concerning About Trump’s Medical Letter.

Well, it turns out the letter was even worse than Dr. Gunter thought. And that is because of the signature block, where Dr. Bornstein signs his name with “F.A.C.G.”

Bornstein Signature block

That stands for Fellow of the American College of Gastroenterologists. In order to be a Fellow, one must be board certified and pay your dues to the organization. And being board certified is a very big thing for doctors, since it entails taking a grueling test to show that you have the knowledge to be an expert in your field.

The gastroenterology boards are a subspecialty of internal medicine.

But as Rachel Madow learned, after being tipped by one of her viewers, that membership in ACG actually lapsed in 1995 — 21 years ago. And according to the American College of Gastroenterologists, he shouldn’t be claiming he is a member of the organization if he is no longer a dues paying member of the organization.

Yet Dr. Bornstein continues to use those initials after his name.

Dr. Bornstein, incredibly, responded to Madow’s request for comment and said that:

F.A.C.G. is a title that they sell for a fee; in reality it has no value.

He then went on to explain to Madow that he would continue to use this title that “has no value.”

Now that I have given you the past, let me stand on the shoulders of Gunter and Madow to go further with some facts and opinion: What he is doing is fraud.

The website for the New York State Department of Health, gives examples of medical fraud:

Examples of Medical Fraud

  • False and intentionally misleading statements to patients.
  • Submitting false bills or claims for service.
  • Falsifying medical records or reports.
  • Lying about credentials or qualifications.
  • Unnecessary medical treatment or drug prescription.

You can see the one that I highlighted. I posted all of the ones listed so that you can see the significance of the infraction. Not significant to me as someone tossing around opinions, but to the Department of Health.

Is this something that the Department’s Office of Professional Medical Conduct (OPMC) should be investigating? Maybe.

I called Douglas M. Nadjari for an opinion, he being an attorney who represents physicians primarily involving matters of professional misconduct before the Office of Professional Medical Conduct and the Office of Professional Discipline.

While not discussing Bornstein/Trump in particular, since he doesn’t have knowledge of the facts, he said that investigation and charges of professional misconduct could theoretically be pursued regarding a physician with a false credential for:

  • False advertising; and
  • Practicing the profession fraudulently
  • Lack of moral fitness

If the doctor were indeed board certified, OPMC would not pursue discipline unless it received a complaint or if a patient was injured.  If one of those two things happened, he would likely be asked to consent to an interview and be asked to change his ways.

The kicker for me, though is that he apparently already knows what he is doing is wrong. And has refused to change it.

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“Money, as money, satisfies no want; it’s worth to any one, consists in its being a convenient shape in which to receive his incomings of all sorts.” – John Stuart Mill, Principles of Political Economy

Daily Telegraph columnist Jeremy Warner has concluded that the euro has “destroyed” Europe. It’s when journalists write about currencies that one wishes Adam Smith, David Ricardo and John Stuart Mill (to name three) were still around to relieve them of their confusion.
Currencies don’t “destroy” a country or continent simply because currencies quite simply are. They’re a measure. Nothing else. As Mill long ago put it, they materialized thanks to “the want of a common measure for values of different sorts.” I’ve got bread, but I want the vintner’s wine. The problem is that the vintner has no interest in my bread, though he lusts for the butcher’s meat. Money is the “common language” that allows those three producers of different goods to trade with one another despite wants that are the opposite of coincident. We produce so that we can get money, but in truth, we produce so that we can get all that we don’t have.

Thinking about so-called “money supply,” it’s logically abundant where there’s lots of production, and scarce where there’s very little economic activity. Money is the proverbial “ticket” that can be exchanged for everything else, so it makes sense that tickets are in copious supply wherever the rich and economically productive are, and then it similarly makes sense that there’s always a “shortage” of tickets wherever the unproductive hang their hats. Applied to Warner’s London, Chelsea, South Kensington and Belgravia rarely have a “Pound supply” problem, but Brixton, Hackney and Peckham nearly always do.

What needs to be stressed here is that “money supply” is merely an effect of productive economic activity, not a driver of it. To see why, Warner need only consider a theoretical attempt by the Bank of England to stimulate lending in Dagenham, a relatively poor (by London standards at least…) part of city. The central bank would buy bonds from banks there, suddenly banks in Dagenham would have lots of Pounds to lend, but they would exit the downtrodden area between breakfast and lunch. Banks don’t long stay in business by making loans to people and business who lack the means to pay them back. In that case, a Pound supply “increase” in Dagenham in the morning would be in Mayfair by the afternoon.

The Dagenham example is a reminder that when central banks naively seek to stimulate economic growth, they do no such thing. Money always and everywhere goes to where it’s treated well. Central banks can’t alter this reality despite the wishes of a discredited economics profession. Attempts to boost money supply in economically weak areas will always fail, while at the same time well-to-areas don’t need central bank “ease” to begin with. Savers are lined up trying to direct their wealth toward those with the means to pay monies borrowed back. The economically productive quite simply don’t need the very central banks that similarly can’t help those who aren’t productive.

That’s what’s so comical about Warner’s assertion that what little European growth there is exists thanks to “the drip feed of central bank money printing.” Really? How? Economic growth springs from talent being matched with capital on the way to production. If we then accept Warner’s gross oversimplification of ECB policy as “money printing,” why on earth would the latter drive economic growth?

Implicit in “money printing” is a devaluation of the euro that would logically slow investment. Investors buy future currency income streams when they invest, which tells us that printing (usually an explicit attempt by monetary authorities to devalue a currency) would be an investment deterrent. Warner might reply that the printing would stimulate buying, but the latter isn’t growth. If buying or consumption were the same as growth, policy for the Pound, dollar and euro would be heavily accented toward constant devaluation to reduce any incentive to save. We would all be very poor since wealth always and everywhere results from saving. Devaluation mocks the saver while rewarding the prodigal at which point growth capital is scarce. Somehow Warner thinks devaluation powers growth.

Of course, all this speaks to the obvious problem with Warner’s rather confused argument. A currency on its own could never “destroy” anything, and certainly not a continent. At the same time, bad currency policy can weaken a country or a continent. When money floats in value it’s less reliable as a measure meant to foster trade and investment. To blame a currency itself for a country or continent’s problems is the equivalent of a short person blaming a foot ruler for his diminutive stature. Money’s not the problem, but floating money whereby the measure deprives an economy of a common language can surely cause problems. Warner doesn’t touch on this.

Instead, he blames the euro for creating a situation in which “economies were growing apart, not together.” Warner believes the lack of harmonic growth indicts the euro since the European states that utilize the currency have not been growing “richer together.” Yet that was never the purpose of the euro, at least not to the mildly sentient.

England has a common currency in the Pound, but has this equalized growth in England? No, and it’s obvious why it hasn’t. Money is once again an effect of economic growth, not a driver of it. It’s only a measure. Pounds are once again plentiful in England where economic activity is frenzied, and scarce where it isn’t. Implicit in Warner’s argument is that money is wealth. No. Money, per Adam Smith has one purpose only: to help circulate “consumable goods.” Wealth is what we create. Money is what we use to facilitate the exchange of the wealth we create. Nothing more.

Applied to the U.S., we have a common dollar across 50 different states with very different tax and fiscal policies. But has the dollar lifted West Virginia, Mississippi and Louisiana up to the economic level of California, Texas and New York? Obviously not. Money is not magic. Neither is currency union. All a currency can do – and this is a good thing – is facilitate trade and investment among producers, consumers, savers and entrepreneurs.

Warner’s belief that the euro has “destroyed” Europe simply speaks to his confusion about what money is. It’s the equivalent of a basketball coach fingering foot-rulers that unceasingly measure 12 inches as the reason his team of 5’7″ players consistently lose. But the foot ruler is merely a measure confirming reality. So is money. Where production is abundant, so is money, where production is light, money is once again scarce.

If the euro has a weakness, it has to do with the fact that it floats. This deprives it of its sole purpose as a measure. Worse, all global currencies still maintain at least a vague peg to the dollar. Since 2001 the dollar has weakened substantially, and while the euro is up on the dollar since ’01, the latter masks the bigger truth that both currencies have lost a lot of value since in the 21st century. The much higher price of gold measured in both currencies since 2001 represents the clearest evidence of broad currency weakness. This has predictably reduced investment in both the U.S. and Europe with predictably sluggish consequences.

So yes, Europe has a problem, but it’s not the euro itself. The problem is euro policy, along with all manner of government barriers to growth in Europe more broadly. For Warner to blame the euro itself for Europe’s woes is the equivalent of a portly person yelling at the scale.

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Inflation isn’t dead; it just might not be where you think it is.

To find significant price increases, you need only look in the right places. There are many goods and services with rising prices, as well as those without. Together, they tell a fascinating tale about the modern global economy. Understanding the forces driving prices higher — or not — is crucial to investors and policy makers alike.

Given that the Federal Reserve has been trying to generate inflation for much of the past decade, the significance of the distribution is both important and telling. Why some prices are rising at twice the median rate of general inflation is worth delving into.

Look at the chart below: it show specific categories of goods and services versus the entire basket of goods and services that makes up the consumer price index.

*see below

Source: American Enterprise Institute

Let’s look a little more deeply at each category.

Textbooks:  The industry operates as a quasi-monopoly. A student assigned a given text book doesn’t have much choice. The rise of used-book exchanges provided some competition, but the publishers merely issue revised editions that are neither new nor improved. Inflation here is a function of rentier capitalism. Note that other kinds of books have fallen in price during the same period.

College Tuition: Blame demographics, guaranteed student loans and administrative bloat. The baby boomers’ kids created many more potential college students than there were seats, leading to an imbalance in demand and supply. Responses varied from adding more professors to expanding class sizes to opening new schools.

But most schools responded by raising tuition.

And students paid. The Federal Reserve Bank of New York and theNational Bureau of Economic Research looked at increases in student borrowing, funded largely through federal student-loan programs. There is a good argument to be made that this is what has drivenmuch of the increase in college tuition.

Medical Care: The bottom line in the relentless rise in health-care costs is that market forces don’t work very well in this industry. This is why every modern industrialized country, except the U.S., has a single-payer government option or something like it. Even worse, the drug industry has persuaded Congress to bar government-run health programs from negotiating lower prices.

Food and Beverages: Prices for milk, beef and most other foodstuffs soared in the 2000s, as the U.S. dollar lost 41 percent of its value (many commodities are priced in dollars) and commodity prices soared.

Housing: During the 2000s housing boom, when lending standards evaporated, home prices went up two and three times their normal rates. But the Bureau of Labor Statistics had the cost of housing as falling. Why? The BLS uses something called owner’s equivalent rent, and it tends to give false reads on housing prices.

When more people are buying and driving up home prices, it means less demand for rental units, leading to lower prices. During the housing bust circa 2006-2011, they showed the opposite. Fewer buyers meant more renters, and so rental price gains were robust.  I don’t know the best way to gauge real estate prices, but tracking owners’ equivalent rent creates a distortion.

Toys: Manufacturing has been outsourced to lowest cost parts of world, hence prices have plummeted.

Wireless Services, Software, TVs: Technology prices benefit from two key factors: the technology adoption lifecycle and manufacturing economies of scale. The long and short of it is that as new products enter the mass market  they move down the unit-cost scale, from quirky one-off devices to cheap commodity goods. Think about the first flat screen televisions at more than $10,000 plus; versions that are as good or better than those now cost $500.

So what might we conclude from looking at the chart’s component parts? Maybe only that it’s a little easier to see why the Fed has been having a hard time getting inflation to rise. While some prices are indeed up, many powerful forces have driven other prices lower — and these are forces that the Fed can’t easily influence. Until there is a substantial and sustained increase in wages (or a huge drop in the dollar), inflation may very well remain below the Fed’s 2 percent target for a long time to come.

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