Key Price Indexes Don’t Understate Inflation
A close look at the key U.S. inflation indexes, and their composition, suggest that both track price changes with reasonable accuracy.
By Gene Epstein
The flat performance of the CPI brought unwelcome news last month to the nearly 60 million folks on the rolls of the Social Security Administration. The index is used to determine annual hikes in the SSA’s monthly payouts, and recipients were informed that they will get no cost-of-living adjustment in 2016. The CPI also governs, among other things, escalator clauses in divorce settlements, union contracts, and tax exemptions and brackets on the personal income tax.
The PCE price index adjusts nominal consumer spending over time into real consumer spending. Similarly, a high-paying bank certificate of deposit bought five years ago had an annual yield of 2.8%, and the CPI rose 1.8% a year in the same period. Thus, the inflation-adjusted, or real return, was just 1%.
Enlargement and the euro are two big mistakes that ruined Europe
The single currency is a trap and eastern expansion forced the EU to take its eye off the ball
I was among those who supported monetary union at the time of its introduction. Advocates of the euro at the time came from two different groups, who struck a Faustian Pact.
Members of the first group believed the euro as constructed would fail, and hoped it would somehow be fixed. The others thought the system would stay rigid, and bend the economies of its members into a new shape. This latter group knew that, to withstand the rigours of a fixed-exchange system that resembles nothing so much as the gold standard, countries would have to adjust to economic shocks through shifts in wages and prices — a course, they believed, that the euro’s members would be forced to take.
The admission that the euro was a mistake should not be confused with a desire to dissolve it. That would be even more catastrophic. It is merely a recognition that we are trapped in a dysfunctional monetary system.
The crisis thus rudely interrupted the EU’s time-honoured, step-by-step approach to integration.
An optimist might interject at this point that it is worth hanging in there. Crises come and go.
The EU will still be there. Perhaps so, but then ask yourself: why was the period from the 1950s to the late 1990s more stable compared with the period since?
In the first years of the then European Economic Community, the external security risks were taken care of by Nato. There were almost no risks to financial stability because regulation was extremely stringent by today’s standards. While the economic shocks, such as the oil and inflation crises of the 1970s, were no less severe than today, EU members had the ability to absorb them through flexible exchange rates.
Today Brussels suddenly has to look after its own foreign policy interests and run the world’s second-largest economy. The EU is not institutionally ready for either job. And its leaders are intellectually not ready either.
We should expect to see more crises, more unilateral action by member states, greater willingness to explore opt-outs, invocation of exceptional circumstances to suspend EU-level action, more rule breaking and the like.
Catalonia and the Move Against Empires
by Jeff Thomas
Recently, the people of Catalonia voted in favour of seceding from Spain.
In the recent election, secessionist parties secured 72 out of the 135 seats, confirming that the majority of voters want secession. Artur Mas, region president of Catalonia and the leader of the Junts pel Sí movement, is seeking independence from Spain in 18 months.
This is great news for libertarians the world over, as, to our minds, this is a clear step forward for the Catalan people and for those who seek greater freedom from governments worldwide.
And, of course, any blow against the present trend toward empires is a step in the right direction.
But, this is not the whole picture and, if we’re going to look at the greater truth instead of the truth that we’d like to see, things get a bit more complicated.
Can They Pull it Off?
First off, the mere fact that a majority of Catalans have, at this point, voted for independence is not sufficient to assure separation from Spain. Although Catalonia became a province of Spain through a rather arbitrary occurrence (a royal marriage in 1469) and Catalans have for centuries repeatedly behaved more as a conquered people than as loyal Spanish subjects, the territory has remained under Spanish rule for the most obvious of reasons: Spain has the greater power and is able to dominate.
Although many Catalans seek a legally-recognised referendum from Madrid, Spanish Prime Minister Mariano Rajoy has called the separatist plan “a nonsense” and has stated that he will block it through the courts.
It is perennially true that, once a given politician in any country feels he “owns” a piece of geography and its population, he will almost invariably hold onto it regardless of the will of the people, using force if necessary.
And then, there are the practical benefits to being the ruler of a territory. In the case of Catalonia, Madrid has historically exacted more tax from Catalonia than it has paid out in benefits. Catalonia is a cash cow for the Madrid government. Surveys demonstrate that the majority of Catalans would choose to remain within Spain if they could be granted a more favourable tax regime.
And so, what appears at first glance to be a victory in the quest for independence may not be quite so significant.
Out of the Pan and into the Fire?
But, let’s say that the secessionists prevail, that they achieve their goal. What then? Would Catalonia become a beacon of freedom for all the world to see? Well, possibly not. Artur Mas has already planned a central bank, tax authority, and even a Catalonian armed forces. In so doing, he is hoping to begin his reign in much the same way that the vast majority of politicians do, seeking to create controls that will assure his own power and wealth. (Cue The Who, singing “Meet the new boss; same as the old boss.”)
And let’s not forget that all Catalans are not unified on the subject of independence. Polls over the years have flipped back and forth between a majority in favour of independence and a majority opposed to independence. As American independence visionary, Thomas Jefferson said:
Democracy is nothing more than mob rule, where 51% of the people may take away the rights of the other 49%.
In any move for independence, there are always those who unwillingly must pay for the new “freedom”, whether it be real or only imagined.
This is not to say that the secessionists are wrong. It is only to say that, when considering change, it’s wise to step back and assess the overall situation, not merely the immediate goals of the movement.
The Way of the Future?
Finally, there is the world view. Internationally, the vote in Catalonia is being covered in the media, especially in Europe, where there are literally scores of secessionist movements, some of them with considerable support. Catalonia gives these efforts renewed vigour and, surely, with the EU shaking to its flimsy foundations, every successful move toward secession by any territory brings an end of the EU ever closer.
And, to a lesser extent, there are secessionist movements around the globe. In the U.S., (which became a country as a result of independence from the UK), all 50 states have received secession petitions filed by their citizens. These have been signed by as few as 2,656 people (Vermont) to as many as 125,000 (Texas).
It’s important to note that these numbers are not large and the state and federal governments of the U.S. can easily claim that secessionists are merely a crackpot fringe. However, when the empire, be it the EU, the U.S., or any other, past or present, reaches the point at which the government has become overlarge, overly domineering, and overly rapacious as to taxation and other forms of confiscation, secession movements will arise. (To be sure, the 1861 American secession of the southern states was not undertaken over the slavery issue, but over the increased power and economic dominance of the northern states over the southern states.)
And this is to be expected. It’s the primary business of any government to grow its own power and wealth at the expense of its people. It’s therefore in the best interests of the people to do all they can to limit the size (and therefore the power) of their government.
Even under the best forms of Government, those entrusted with power have, in time, and by slow operations, perverted it into tyranny. - Thomas Jefferson
A government big enough to give you everything you want is strong enough to take everything you have. - Thomas Jefferson
Small countries are more free and prosperous than large nation-states. - Ron Holland
All of the above bear remembering. But a word on that last one, by Ron Holland. My own country, the Cayman Islands, is quite small (population 58,000); small enough that each of us who takes an interest can access our political leaders in a personal way. We find that this level of direct contract not only keeps them accessible to us, but places a lid on their ability to expand their ambitions to “rule”, rather than to “serve.”
And, indeed, the Cayman Islands are decidedly freer and more prosperous than any of the world’s current empires.
A long-held belief by the Amish, the Hutterites, and some sociologists is that the ideal population is a mere 150 people, the greatest number that an individual can relate to in a very personal and inter-dependent way. Certainly these communities are far more peaceful and rarely produce dictatorial leaders.
The concept of secession is an admirable one and a move to secession will often arise whenever a government overreaches to the point of intolerance. In the case of empires, secession has served to increase freedom from the days of the fall of the Roman Empire on. Political leaders will always seek to create empires, whether large or small. The alternative to the ability to secede is the acceptance of tyranny and, therefore, secession, whilst not a panacea, is an essential tool of liberty.
Editor’s Note: It’s not all doom and gloom; the world is your oyster, and there are very attractive jurisdictions that are cause for optimism. Some are ideal places to reside. Others are great places to park some savings or to invest in. Others are optimal for conducting business.
Yet others are perfect for obtaining a second passport.
The Return of Geopolitics to Europe
Greater than the sum of its parts
It is rare for a new animal species to emerge in front of scientists’ eyes. But this seems to be happening in eastern North America
LIKE some people who might rather not admit it, wolves faced with a scarcity of potential sexual partners are not beneath lowering their standards. It was desperation of this sort, biologists reckon, that led dwindling wolf populations in southern Ontario to begin, a century or two ago, breeding widely with dogs and coyotes. The clearance of forests for farming, together with the deliberate persecution which wolves often suffer at the hand of man, had made life tough for the species. That same forest clearance, though, both permitted coyotes to spread from their prairie homeland into areas hitherto exclusively lupine, and brought the dogs that accompanied the farmers into the mix.
Interbreeding between animal species usually leads to offspring less vigorous than either parent—if they survive at all. But the combination of wolf, coyote and dog DNA that resulted from this reproductive necessity generated an exception. The consequence has been booming numbers of an extraordinarily fit new animal (see picture) spreading through the eastern part of North America.
Some call this creature the eastern coyote. Others, though, have dubbed it the “coywolf”.
Whatever name it goes by, Roland Kays of North Carolina State University, in Raleigh, reckons it now numbers in the millions.
The mixing of genes that has created the coywolf has been more rapid, pervasive and transformational than many once thought. Javier Monzón, who worked until recently at Stony Brook University in New York state (he is now at Pepperdine University, in California) studied the genetic make-up of 437 of the animals, in ten north-eastern states plus Ontario. He worked out that, though coyote DNA dominates, a tenth of the average coywolf’s genetic material is dog and a quarter is wolf.
The DNA from both wolves and dogs (the latter mostly large breeds, like Doberman Pinschers and German Shepherds), brings big advantages, says Dr Kays. At 25kg or more, many coywolves have twice the heft of purebred coyotes. With larger jaws, more muscle and faster legs, individual coywolves can take down small deer. A pack of them can even kill a moose.
Coyotes dislike hunting in forests. Wolves prefer it. Interbreeding has produced an animal skilled at catching prey in both open terrain and densely wooded areas, says Dr Kays. And even their cries blend those of their ancestors. The first part of a howl resembles a wolf’s (with a deep pitch), but this then turns into a higher-pitched, coyote-like yipping.
The animal’s range has encompassed America’s entire north-east, urban areas included, for at least a decade, and is continuing to expand in the south-east following coywolves’ arrival there half a century ago. This is astonishing. Purebred coyotes never managed to establish themselves east of the prairies. Wolves were killed off in eastern forests long ago. But by combining their DNA, the two have given rise to an animal that is able to spread into a vast and otherwise uninhabitable territory.
Indeed, coywolves are now living even in large cities, like Boston, Washington and New York.
According to Chris Nagy of the Gotham Coyote Project, which studies them in New York, the Big Apple already has about 20, and numbers are rising.
Thanks to this bounty, an urban coywolf need occupy only half the territory it would require in the countryside. And getting into town is easy. Railways provide corridors that make the trip simple for animals as well as people.
Surviving once there, though, requires a low profile. As well as having small territories, coywolves have adjusted to city life by becoming nocturnal. They have also learned the Highway Code, looking both ways before they cross a road. Dr Kays marvels at this “amazing contemporary evolution story that’s happening right underneath our nose”.
Whether the coywolf actually has evolved into a distinct species is debated. Jonathan Way, who works in Massachusetts for the National Park Service, claims in a forthcoming paper that it has. He thinks its morphological and genetic divergence from its ancestors is sufficient to qualify. But many disagree. One common definition of a species is a population that will not interbreed with outsiders.
Since coywolves continue to mate with dogs and wolves, the argument goes, they are therefore not a species. But, given the way coywolves came into existence, that definition would mean wolves and coyotes should not be considered different species either—and that does not even begin to address whether domestic dogs are a species, or just an aberrant form of wolf.
In reality, “species” is a concept invented by human beings. And, as this argument shows, that concept is not clear-cut. What the example of the coywolf does demonstrate, though, is that evolution is not the simple process of one species branching into many that the textbooks might have you believe.
Indeed, recent genetic research has discovered that even Homo sapiens is partly a product of hybridisation. Modern Europeans carry Neanderthal genes, and modern East Asians the genes of a newly recognised type of early man called the Denisovans. Exactly how this happened is unclear. But maybe, as with the wolves of southern Ontario, it was the only way that some of the early settlers of those areas could get a date.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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