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Let us start with apologizing to our global readers. Our staff tries very hard to keep the news from being US centric. We have never apologized or intend to in the future for our unabased enthusiasm for free market capitalism. But with the elections coming in the US, a little more news from the worls'd economic superpower is instructive.
Start your reading with Victor Davis Hanson and his commentary from earlier in the week on the "enemies of reason." It should provide the context for the remaining articles. Now pleasure yourself with the insights of Walter Williams and Thomas Sowell, and finish with the articles on Nancy Pelosi. It is becoming apparent from watching the political scene in the United States that superstitution is about to overcome reason and once again let lose on the unwashed. Sure glad we are a global organization with assets outside the grasp of the mandarins.
The first Western Enlightenment of the Greek fifth-century B.C. sought to explain natural phenomena through reason rather than superstition alone. Ethics were to be discussed in the realm of logic as well as religion. Much of what Pythagoras, Socrates, Plato, and the Sophists thought may today seem self-evident, if not at times nonsensical. But that century was the beginning of the uniquely Western attempt to bring to the human experience empiricism, self-criticism, irony, and tolerance in thinking.
The second European Enlightenment of the late 18th century followed from the earlier spirit of the Renaissance. For all the excesses and arrogance in its thinking that pure reason might itself dethrone religion as if science could explain all the mysteries of the human condition the Enlightenment nevertheless established the Western blueprint for a humane and ordered society.
But now all that hard-won effort of some 2,500 years is at risk. The new enemies of Reason are not the enraged democrats who executed Socrates, the Christian zealots who persecuted philosophers of heliocentricity, or the Nazis who burned books. No, they are a pampered and scared Western public that caves to barbarism dwarves who sit on the shoulders of dead giants, and believe that their present exalted position is somehow related to their own cowardly sense of accommodation.
The U.S. is on track for a record capital surplus! Sounds great, right? Now consider this: The U.S. is on track for a record trade deficit! It doesn't sound so good, but the two mean pretty much the same thing. Whichever way you choose to say it, neither statement should be a cause for celebration or worry.
Newspapers around the country recently reported the Commerce Department's new trade numbers. In July, the U.S. recorded a record $68 billion trade deficit, so we're on track to surpass last year's total trade deficit of nearly $717 billion.
News stories attributed the rising trade deficit to increased prices for foreign oil and other imports. But they neglected to ask fundamental questions about what a trade deficit really means and whether it is necessarily harmful.
The balance of payments accounting system has two major accounts: the current account and the capital account. The current account mainly measures trade in goods and services. The capital account mainly measures trade in assets. A trade deficit refers only to the current account balance.
Balance of payments accounting is done with a double-entry system of debits and credits. Each transaction involves both a debit and a credit.
Put simply, if you buy something from a foreigner, you must pay him a debit is entered. Then the foreigner must somehow spend or save your payment a credit is entered. When all credits and debits are added up, the entire accounting system must balance: The current account balance plus the capital account balance must sum to zero. Hence, a current account (trade) deficit implies a capital account surplus.
Political Economy: Now that it's all scandal, all the time in Washington, the Democrats are letting their guard down a bit to tell us what they'll do with the economy after they win in November. Maybe we should listen.
House Minority Leader Nancy Pelosi has been all over the place talking about what Democrats will do after they win Nov. 7. But it's hard to take her seriously when she promises to "jump-start our economy and reform our economic policy . . . to address the needs of working families."
Huh?
"Jump-start the economy"? That's what President Bush did in 2003, when he pushed through bold, broad tax cuts to end a slump that began in 2000 under a Democratic administration.
Since the cuts took effect, the economy has added $1.26 trillion in real output, $14.4 trillion in net wealth and 5.8 million new jobs, while productivity has grown 10% and business investment 24%. Since 2000, total consumer spending has risen $1 trillion nearly $8,000 per household after adjusting for inflation. The Dow Jones industrial average is hitting new highs.
Then there's the budget deficit, which the Congressional Budget Office reckons will come in around $250 billion. By our calculations, that's about 1.9% of total output. In early 2004, when Bush vowed to halve the shortfall, it stood at 3.6% of GDP.
Bush-era tax cuts would have to be rolled back for those above "a certain level." She mentioned annual incomes of $250,000 or $300,000 a year and higher, and said tax rates for those individuals might revert to those of the Clinton era. Details will have to be worked out, she emphasized.
Friday was a bad day for the Republican outlook for the Senate. The GOP index fell by 0.253 seats. In the race by race outlook, the GOP is now down by 5 seats, with a sixth seat trading just a few cents above flipping to the Democrats. The trading appeared driven by a new set of Gallup polls that showed Democrats doing well in several races.
Strong GOP trading gains in Virginia and Missouri were offset by large losses in Tennessee, Maryland and New Jersey.
The index now shows the GOP with a projected 51.435 seats.
Here is the current race by race chart of the competitive seats.
Current trading shows the GOP with a 70.5% chance of keeping the Senate and a 43.8% chance at the House. Personally, I think the Senate trading is too high as coin flip races tend to be correlated even though they are in different states.
As of today's close, gold is down over 20% from its 26-year high of $732 an ounce back in May. That was around the time that Goldman Sachs was telling us that oil was going to $100. Yes commodities are in a free-fall. Everyone knows that. What's funny, however, are the ads you still hear, particularly on the radio, touting gold as an almost "sure thing" investment.
I listen to a variety of AM radio in my car and I've heard radio hosts from the far left to the far right telling me why I need to buy gold now. These ads are still running as far as I know. Of course, most of these ads began, to my knowledge, when gold was on it's march toward that 26-year high back in May. Everyone from Michael Savage to Randi Rhodes to Bill O'Reilly have been telling us why we need to buy gold.
I'm not a market timer -- I don't waste time trying to "call" market tops and bottoms. That said, when an historically out-of-favor investment like gold is suddenly touted as a great investment by a bunch of radio hosts who know nothing about gold or the history of gold as an investment, it's a good idea to proceed with caution.
The federal budget deficit estimate for the fiscal year just completed has dropped to $250 billion, congressional estimators said Friday, as the economy continued to fuel impressive tax revenues.
The Congressional Budget Office's latest estimate is $10 billion below CBO predictions issued in August and well below a July White House prediction of $296 billion.
The improving deficit picture - Bush predicted a $423 billion deficit in his February budget - has been driven by better-than-expected tax receipts, especially from corporate profits, CBO said.
...when measured against the size of the economy, which is the comparison economists think is most important, the deficit picture looks even better.
...The main cause of the deficit decline -- 90% of it, says White House budget director Rob Portman -- is a tidal wave of tax revenue. Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history. If you're surprised to hear that, it's probably because inside Washington this is treated as the only secret no one wants to print. On the few occasions when the media pay attention to the rise in tax collections, they scratch their heads and wonder where this "surprising" and "unexpected windfall" came from.
[This paper was prepared for the meeting of the Mont Pèlerin Society held in Beauvallon, France, September 9 to 16, 1951. It is included in Planning for Freedom (South Holland, Ill.: Libertarian Press, 1952).]
A. The Economic Nature of Profit and Loss
1. The Emergence of Profit and Loss
In the capitalist system of society's economic organization the entrepreneurs determine the course of production. In the performance of this function they are unconditionally and totally subject to the sovereignty of the buying public, the consumers. If they fail to produce in the cheapest and best possible way those commodities which the consumers are asking for most urgently, they suffer losses and are finally eliminated from their entrepreneurial position. Other men who know better how to serve the consumers replace them.
If all people were to anticipate correctly the future state of the market, the entrepreneurs would neither earn any profits nor suffer any losses. They would have to buy the complementary factors of production at prices which would, already at the instant of the purchase, fully reflect the future prices of the products. No room would be left either for profit or for loss. What makes profit emerge is the fact that the entrepreneur who judges the future prices of the products more correctly than other people do buys some or all of the factors of production at prices which, seen from the point of view of the future state of the market, are too low. Thus the total costs of production including interest on the capital invested lag behind the prices which the entrepreneur receives for the product. This difference is entrepreneurial profit.
The Minister of Information and Security (MOIS) has promised to deliver the severed head of Ayatollah Boroujerdi to the Supreme Leader after the renegade Ayatollah called for Irans government to be separated from the Clerics and become purely secular, according to reports by Iranian satellite broadcasts.
An excerpt: His followers resisted the efforts of the Security Agents sent during the afternoon to capture the Ayatollah and the on-going confrontation has resulted with multiple arrests, estimated by the Ayatollah himself in a live phone interview as being several thousand people. His people, who rushed to protect him also took several security agents hostage, finding bottles of acid in their pockets, intended to disfigure demonstrators.
Every revolution begins with the power of an idea and ends when clinging to power is the only idea left. The epitaph for the movement that started when Newt Gingrich and his forces rose from the back bench of the House chamber in 1994 may well have been written last week in the same medium that incubated it: talk radio. On conservative commentator Laura Ingraham's show, the longest-serving Republican House Speaker in history explained why he would not resign despite a sex scandal that has produced a hail of questions about his leadership and the failure to stop one of his members from cyberstalking teenage congressional pages. "If I fold up my tent and leave," Dennis Hastert told her, "then where does that leave us? If the Democrats sweep, then we'd have no ability to fight back and get our message out."
Last year, the U.S. Supreme Court, in its Kelo v. New London decision, ruled that the private property of one American could be taken and given to another American as long as it served a public purpose. The public purpose in that case was greater tax revenues for the fiscally strapped city of New London. The city figured that if it used its powers of eminent domain to force private homeowners out and then transferred their property to developers to build commercial property, there would be greater tax revenues.
Many Americans were angered by this violation of both the letter and spirit of the Fifth Amendment, which in part reads, ". . . nor shall private property be taken for public use, without just compensation." Public purpose is not the same as public use. Public use means property can be taken, with just compensation, to build a road, a highway, a fort or some other public project.
Paul Egan sits at his Fort Trumbull Marina in New London, Conn., Friday, June 23, 2006, as he talks about a tentative agreement reached between the final two property owners in the Fort Trumbull neighborhood, Susette Kelo and Pasquale Cristofaro, and the city. A year after a landmark U.S. Supreme Court ruling allowed New London to seize property to make way for private development, a city agency reached a tentative agreement Friday with the two residents who refused to leave their homes, Gov. M. Jodi Rell said. (AP Photo/Jack Sauer)
My response to the Kelo decision was, "See, I told you so." For decades, Americans have been willing to allow politicians to trample over private property rights, so why should we be surprised when politicians become more emboldened?
Here's a brief history. The U.S. Army Corps of Engineers fined one landowner $300,000 for "destroying" wetlands because he cleared a backed-up drainage ditch on his property. The Fish & Wildlife Service told one landowner he couldn't use 1,000 acres of his property so the endangered red-cockaded woodpecker could have a place to dwell. Another owner was prevented from clearing dry brush near his home to make a firebreak because it would disturb the Stephens kangaroo rat. Building a deck on his house brought one owner a $30,000 fine for casting a shadow on wetlands.
Although socialism has long claimed to be for the poor, it has probably done more damage, on net balance, to the poor than to the rich. After all, the rich have enough money to leave the country if they think the socialists are going to do them any serious harm.
Some of our own rich have already had their money leave the country, to be sheltered from the higher taxes that limousine liberals say we should all pay. Meanwhile, the liberal media give them kudos for their selfless advocacy of higher taxes on higher income people, forgetting that these are not taxes on wealth.
Most of the people in the upper income brackets are not rich and do not have wealth sheltered offshore. They are typically working people who have finally reached their peak earning years after many years of far more modest incomes -- and now see much of what they have worked for siphoned off by politicians, to the accompaniment of lofty rhetoric.
