Posts Tagged ‘Economics’

Dr. Ron Paul schools Fed Chairman Ben Bernake on how the U.S. government monetary system is a house of cards.

September 25, 2008

Ron Paul discusses how the U.S. government has learned nothing since the Great Depression.

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HotAir.com writes a simple, yet wonderful little piece explaining why Democrats need to take a basic economics class

July 15, 2008

Supply and demand have a relationship?  What is this nonsense?  Errr…uhh….jobs….environment…rich people suck.  (Lest anyone think I’m a big GOP fan, I’d suggest a similar article for the GOP, but perhaps having them attend a civil liberties course)

HotAir.com

The New Hampshire Union-Leader has a novel approach to solving the energy crisis: send Democrats to economics classes.  In an editorial yesterday, the U-L flunks Congressional Democrats for their work so far on addressing a supply shortage by blaming those reacting to it.  Instead of demonizing “speculators” who can only foresee more shortages as America refuses to produce its own resources, perhaps Congress should unshackle domestic production instead:

MAYBE THE quickest way to lower oil and gas prices would be this: Immediately enroll every Democratic member of Congress in an entry-level economics class.

The lack of even a basic grasp of economic concepts has led Democrats to oppose sensible policies that would begin to lower oil and gas prices. Instead, they push hair-brained ideas that make no sense.

That should be hare-brained, but let’s not split hares.  Er, hairs.   On speculators and their effect on oil prices, the U-L has it exactly correct:

Any step Congress takes to produce a large increase in future supply — opening the outer continental shelf to drilling, for example — will reduce current prices. If there will be a lot more oil 10 years from now, a barrel of oil today loses some of its investment value, and its price falls.

As Harvard economics professor Martin Feldstein wrote in The Wall Street Journal on July 1, “Increasing the expected future supply of oil would also reduce today’s price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories.”

This is pretty basic stuff. And yet Democrats are oblivious. They adamantly oppose more domestic drilling, claiming that it won’t affect prices for decades. Clearly, they have yet to grasp the basic concepts of supply and demand.

Democrats clearly don’t understand the mechanisms of pricing.  Their rhetoric on speculators demonstrates this, as it misses the point.  Speculators matter only in shortage economies, as the future value of any commodity becomes more relevant in inverse proportion to its availability.  Even apart from that, speculators want to make money just as in any other commodity trading.  If they foresaw a glut of oil, they’d bet short on it just as quickly as they’re going long on oil now.

All of this is Econ 101, as the U-L notes.  That may be a bit below King Banaian’s focus as chair of economics at St. Cloud State University, but I’m pretty certain that King would be gracious enough to schedule a lecture series for Congressional Democrats who want to learn how markets work rather than continually work from ignorance to the detriment of the nation.  (via Let Freedom Ring)

Cuba to abandon salary “equality”

June 12, 2008

Somewhere, a bunch of middle and upper class people who have no concept of the poverty most Cubans live in, are wailing. Cuban officials are apparently catching on to what free-market advocates have known for decades. Marxism has been berry, berry bad. Good for Cuba.

Cuba to abandon salary equality

Cuba is to abolish its system of equal pay for all and allow workers and managers to earn performance bonuses, a senior official has announced.

Vice-Minister for Labour Carlos Mateu said the current system – in place since the communist revolution in 1959 – was no longer “convenient”. He said wage differentiation should improve production and services. President Raul Castro has introduced a series of reforms since succeeding his ailing brother Fidel in February.

Writing in the communist party newspaper Granma Mr Mateu said workers would receive a minimum 5% bonus for meeting targets but with no ceiling on salaries. Managers could earn a 30% bonus if the team working under them increased production, he said.

The minister pointed out that the current wage system sapped employees’ incentives to excel since everyone earned the same regardless of performance.

“It’s harmful to give a worker less than he deserves, it’s also harmful to give him what he doesn’t deserve,” the newspaper article said.

But the impact in terms of purchasing power will be limited, the BBC’s Michael Voss in Havana says.

The average wage in Cuba for everyone – from doctors to farm labourers – is about $20 (£10) a month. Even before the recent sharp rise in oil and food prices Cuba was spending billions of dollars on imports, and that bill is likely to rise sharply, our correspondent says.

So far most of the reforms announced since Raul Castro took over the presidency have involved lifting restrictions such as the bans on mobile phones and computers.

The latest change is a more fundamental challenge to Marxist economic orthodoxy, our correspondent adds.