Saturday, November 10, 2012
Friday, November 09, 2012
NOT PJ: Dunedin Born and Brewed
This week, Bernard Darnton is drinking locally, and thinking globally.
Dunedin Born and Brewed
Emerson’s Brewery, a Dunedin icon, was sold to Lion on Tuesday and so is now part of Kirin Holdings, the Japanese brewer. (Kirin, in turn, is part of the Mitsubishi keiretsu, making it a sort of drinking-and-driving conglomerate.)
I drove down to Dunedin the day after the announcement to check that the beer was still OK. It was.
The brewery itself is still in a crappy little industrial building in North Dunedin. You can still take in your empty plastic Coke bottle and get the receptionist to fill it with Bookbinder or London Porter while you peer into the factory floor where the alcoholic alchemy takes place.
I was worried that international conglomeracy might have change the place but I didn’t see any MBAs, PowerPoint presentations, or anyone realigning the supply chain strategy going forward. Just a few people milling around while the malt and hops turned into bloody good beer.
So, is it bad that Emerson’s has been sold? Presumably Richard Emerson doesn’t think so, or he wouldn’t have done it. I can still get great beer at a mildly exorbitant price, so I’m happy too.
But economically? Every recession we’re urged to export our way back to wealth. If it’s good to export beer, surely it’s even better to export a beer-making company and get all the cash in at once.
“But all the profits will go overseas,” cry the opponents of foreign investments. Economists will come in here and compare the sale price to the net present value of the stream of future profits. But I have just one word: Crafar. If you think that the flow of profits overseas is what economic nationalists object to, then the kerfuffle over the bankrupt Crafar Farms is baffling. The objectors should have been overjoyed that some foreign mug was foolish enough to buy that dog. Think of all those lovely losses flowing in from Shanghai!
The first comment I heard about Emerson’s after it was sold was, “There goes that,” as if being part of a big corporate would somehow taint the beer. If they’re not insane, Lion will leave Emerson’s alone to do its thing. The reason corporate brewers want into the craft beer market is because rich, sophisticated drinkers like me refuse to drink the piss-weak lolly water that’s marketed at teenage boys. Why would I drink Tui “pale ale” when I could drink Emerson’s 1812?
A huge part of the purchase price for a respected brand is “goodwill”. They’re certainly not paying for the physical plant, which is not much more than an overgrown home-brew kit. When I see a beer bottle with the Emerson’s logo on it, I think happy thoughts. That’s gold. To imagine that the new owners will blandify the beer for the mass market is to imagine that big corporates know nothing about market segmentation and that they hate profits.
For many entrepreneurs, the thing they do well isn’t making products, it’s making companies. If New Zealand can get rich by making and selling butter, we can get doubly rich by making and selling companies.
The end result is that Richard Emerson has the capital to expand, Dunedin still has it’s brewery, and I still have my beer. I’ll drink to that.
Labels: NOT PJ
Thursday, November 08, 2012
‘Maxfield’s Star,’ by David Knowles
‘Maxfield’s Star’ by David Knowles, 40” x 40” (Buy it here)
David Knowles is a leading Contemporary Romantic Realist Artist who paints the bright, intense light of New Zealand.
When this delightful piece was chosen for the Inspirationz catalogue, it was rechristened “Imagination.” It’s that I can see here, a child finding that spark, that idea that, will challenge them and set their course for a lifetime.
No wonder it can make even hardened pedagogues cry.
“No society ever thrived because it had a large and
growing class of parasites living off those who produce.”
- Thomas Sowell
American commentators have been talking all morning about the reasons for Obama’s electoral success. It all comes down, most say, to his amazing ability to attract African-American voters, Asian-American voters, Latino voters …. In other words, it’s all about race.
This is nauseating.
The primary issue is not race. It’s outlook. You have basically two types of people, when considered in the context of electoral politics. One wants to do, and wants to be left alone to do it. The other wants to get, not in the traditional American sense of pursuing happiness...but to have goodies to which one is entitled, and provided for by others.
Since the welfare/entitlement state began in earnest, back in the 1930s, the trend has been consistent and steady… Before Obama [however], presidential elections were [still] usually decided by the state of the economy. This is because most people, before Obama, wanted a thriving economy above all else.
Things have changed.
The fact that Obama—an open redistributer of wealth—won the first time was an indication that perhaps something had changed in American society…
The electorate of America now cares more about being cared for than about having the freedom to care for themselves.
This is so not the America of 1776. There are still good and great people to be found in this society, and some of them will perhaps still manage to flourish, unless liberty perishes altogether and some kind of a dictatorship takes hold in coming decades. (It certainly can, on our current course, especially with continued debt, deficits and economic decline.)
One thing is for sure. Those of us who yearn to think, live self-responsibly and independently must share a society with a plurality of people who would rather force others to take care of them…
It’s not an “economic system” that most Americans feel is stacked against them. It’s reality. They want a shield from reality, and they think that politicians can provide it for them…
I often wonder what's next for this country. Now we know. Half the country is in some form committed to freedom and individual rights, and half committed to the "freedom" to have what they want, actually or potentially provided by others. It seems to me like this is a recipe if not for a civil war, for a steady disintegration of the society and political system we have up until now taken for granted. How much longer can we take it all for granted?
Obama has won, and it's twilight in America.
It's not twilight in America because Obama won. Obama won because it was, sadly, already twilight in America.
I read that again this morning and began to wonder: when did it become twilight here in NZ?
New Zealand never had the heroes of freedom America had. New Zealand was never the America of 1776, or anything anywhere like that. But values like independence, self-reliance, productivity have always been prized. Mooching, especially in small-town NZ, was sternly discouraged.
Mooching is now a local pastime. A valid lifestyle choice. Nothing to be embarrassed about.
When did that change?
If the 2012 US election was the time when the American twilight became most obvious, then perhaps here at home it was the 2005 ‘lolly-scramble’ election, when Michael Cullen and Helen Clark offered the middle class the opportunity—via Working for Families and Interest-Free Student Loans—which at the time John Key referred to as “socialism by stealth”—to become welfare beneficiaries.
This was an out-and-out election bribe, the election when the bung was taken well-and-truly out of the pork barrel, and the middle class all but took their arm off. So much so, it’s now apparently electorally unacceptable to get rid of either. Three-quarters of New Zealand families are now on the mooch,and they’ll never be voting again to become self-responsible.
It seems to me now in retrospect that was the milestone election here in NZ; our twilight.
Wednesday, November 07, 2012
QUOTE OF THE DAY: Twilight
“It's not twilight in America because Obama won. Obama
won because it was, sadly, already twilight in America… The
electorate of America now cares more about being cared for
than about having the freedom to care for themselves.”
- Michael Hurd, “It's Twilight in America”
“Don’t despair that so many Americans voted for Obama. Many of them voted for him because of the issues on which he’s right (or better), such as abortion rights, gay marriage, and immigration. So how about insisting on changes for the better in the GOP, rather than cursing people for not wanting to live in an insular, homophobic, repressive theocracy?”
What do people do all day?
A fascinating interactive graphic gives us a sort of glimpse into what people do all day? And by “people,” I mean a representative sample of Americans who were phoned up in 2008 and asked what they did the previous day—and by “all day” I mean typical, run-of-the-mill common garden days.
Not, in other words, election days like this one.
Nonetheless, here’s a screen shot of the much, much better interactive graphic over at the New York Times.
[Hat tip Stats Chat]
Interesting ‘Stuff’ front page
The headline and portrait accompanies a bizarre hit piece on Rand by Jennifer Burns, who claims Rand’s work “occupies a vaunted position in modern Republican thought”—and today's US election therefore “should go down as a referendum on the long conservative fascination with Ayn Rand.”
I can only say, “I wish!”
Jennifer Burns wrote a biography of Rand that eloquently demonstrates Oscar Wilde’s dictum for such things: “Formerly we used to canonise our heroes. The modern method is to vulgarise them.”
Her hit piece amounts to much the same.
[Hat tip Ashley C.]
This US election “is about the clash of symbols”
Harry Binswanger reckons this US election is the most important since the Goldwater-Johnson election of 1964, which, “had Goldwater won, the entire course of world history would have been different… no ‘War on Poverty,’ no Johnson-era expansion of government intervention, no Vietnam War, and, perhaps, no New Left.”
Not because the two candidates are as wildly different as Johnson and Goldwater were--“the candidates, as men, are ciphers,” reckons Binswanger. “The election is about the clash of symbols.”
Obama symbolizes collectivism, and its psychological corollary and breeding ground: second-handerism. Romney doesn't symbolize much of anything, except that he's the non-Obama. This mean he symbolizes non-collectivism and pre-post-modern America. To his definite credit, Romney has said several times that he will not apologize for his success (at Bain Capital).
I continue to predict a Romney victory, in fact a solid one. But I have to admit that I'm scared. Can it be that all the polls are so wrong? It can be—but that doesn't mean they are. Still, I have made my bets, based on factors I've discussed here before: Obama has only lost supporters since 2008, and the failure of his policies is pretty easy to discern. In 2008, Obama was the One, the Messiah, our Deliverer. Now he's just that grim graying dude who scolds us and blames everybody else.
By this time tomorrow night we should know if the American sense of life still exists. If it does, “You didn't build that” and “We're all in it together” will have been slapped down. If it does not, we'll survive for many years as a nation, but not as America.
Tuesday, November 06, 2012
Debate: Fossil Fuels - Good Or Bad? [updated]
Tune in live today at 1pm NZ time (that’s 4pm Pacific Time) to watch leading environmentalist Bill McKibben (left, above) debate Center for Industrial Progress founder Alex Epstein: WATCH LIVE AT 1PM!
[UPDATE: Here’s the YouTube recording of the event below, which unfortunately is missing the first two minutes of Alex’s opening. Broadcast-quality version “is in production.”]
Environmentalist icon Bill McKibben is organizing a movement to demonize and dismantle the fossil fuel industry--the industry that produces over 85% of the cheap, plentiful, reliable energy that makes modern life possible. McKibben believes that "we need to cut our fossil fuel use by a factor of twenty over the next few decades."
In the most influential energy article of the year, “Global Warming’s Terrifying New Math,” McKibben called the fossil fuel industry “Public Enemy Number One.”
Bill McKibben has been called “the nation’s most important environmentalist” for a reason. He is revered by liberal intellectuals and he is a master activist; in 2009, he organized 5200 simultaneous anti-fossil fuel protests--"the largest global coordinated rally of any kind."
Epstein challenged McKibben to debate to help promote the real truth about fossil fuels and our environment.
If McKibben’s new movement to turn the American public against fossil fuels is successful [says Epstein], it would be a death-blow to our already-teetering economy, and to environmental health around the world.
McKibben is dead wrong about fossil fuels and our environment. If we take an objective, scientific look at how fossil fuels have impacted the human environment, including our climate, the overall result is amazing--we live in the greatest environment in human history. The countries with the worst environments--with the most filth, disease, crop failures, low life expectancies--are the ones that use the least fossil fuels.
That’s why I challenged Bill McKibben to a public debate when no one else would--and that’s why we should all be so excited that he accepted. On November 5, at Duke University, McKibben will be arguing the widespread fallacy that “fossil fuels are a risk to the planet.” I will be arguing the truth--that “fossil fuels improve the planet.”
This debate is a game-changing challenge to the environmental establishment…
This is the first debate ever where a world-class environmentalist will be challenged by the powerful environmental case for fossil fuels.
The Fossil Fuel Debate is on! Watch live at 1 o’clock!
Here’s Alex warming up:
And here’s a preview of his case: Challenging Bill McKibben and the Green Establishment: The Environmental Case for Fossil Fuels
99.9% of discussion of fossil fuels and our environment ignores the single most important fact about fossil fuels and our environment:fossil fuels have made our environment amazingly good.
The difference between a healthy environment and an unhealthy environment can be summed up in one word, and it’s not “CO2” or “climate” or “temperature.” It’s “development” …
Consider Bill McKibben, “the nation’s leading environmentalist” according to The Boston Globe, who blames certain increases in malaria, dengue fever, cholera, and salmonella on “CO2-induced climate change.”
What about a lack of development, of proper sanitation, and, above all, of the wonderful synthetic malaria-killer that is DDT? More broadly, what about a lack of the cheap, reliable fossil fuel energy that has underlain all of Western industrial and technological development?
It doesn’t even get a mention–let alone the starring role it deserves in any discussion of improving our environment…
“Was It Global Warming When Stronger Hurricanes Hit the East Coast in the 1950s?” [updated]
Chief Meteorologist for Weatherbell Analytics Joe Bastardi is sick of ill-informed commentary linking weather, SuperStorm Sandy, with climate.
It is frustrating to be out in front of the hurricane threat on the U.S. Coast, and then have people who either have not looked, or have, and are simply ignoring the facts, come in after the fact and make their claims. I have referred to these people as weather "voyeurs." They only look when it suits their purpose. In the private sector, our fight is every day, and the knowledge of the past and the reasons for the weather and climate are the foundations for any success in the future. A good meteorologist has to know his weather and climate history or he will fall prey to the whims of the computer models. Perhaps you saw some of that with Hurricane Sandy. Until the middle of the week before the storm, the U.S. generated model was taking the storm out to sea and there was denial in some circles that Sandy was going to come back and hit the coast.
Of course, the usual suspects piled on the disaster train once it became obvious, to push their AGW agenda. They are nowhere to be found before the fact, but certainly come out of the woodwork after. I leave the reader to judge the tree by the fruit on it.
Yes, please do.
Here are a few reminders that will assure you that a storm like Sandy is well within the realm of what nature can, and in reality, should do, especially given the cycle we are in, which is very similar to the 1950s (cooling Pacific, with a still warm Atlantic)…
You will have seen the chart above many times, but it does not get old, nor does the fact change that the earth is no longer warming, but CO2 is still going up. That chart should be enough to debunk the AGW idea on hurricanes since if the earth is not warming, it can't be warming that is causing more hurricane hits.
The other problem is that there are not more hurricane hits -- the total global tropical activity is down! The Global ACE index (accumulated cyclonic energy) which gives us an objective way at looking at total global tropical cyclone activity, has tailed off to record low levels.
So we have two objective measurements saying that:
a.) The earth is no longer warming.
b.) Tropical activity is not getting worse.
Interestingly enough, as if to teach a lesson to the Nobel Committee, the tropical activity started tailing off most strongly after Al Gore was awarded a Nobel prize for his movie An Inconvenient Truth. The actual Truth however is the opposite (which is inconvenient, though apparently largely ignored by Al Gore).
But the irony grows even richer when one considers the fact that hurricane hits on the U.S. Coast were greatest when there was less CO2!
In the end, blaming Sandy on Global Warming or "Climate Change" is … shockingly ignorant or shockingly deceptive. The facts are clear on this and not hard to see, if one simply looks!
He’s right, you know.
KRIS SAYCE: Bad News from the “Asian Century”
Guest post by Kris Sayce from Money Morning Australia
Writing in Melbourne’s Age newspaper, Climate change adviser Ross Garnaut
has lambasted Australian executives for destroying shareholder funds in the blind belief China’s demand for Australia’s big three mining exports would continue to climb.’
Perhaps Mr Garnaut should ask why company executives are blowing up shareholder funds.
Maybe it’s because for 30 years, Australian governments have spouted off about the Asian economic boom.
And now the Aussie government has just released the Asian Century white paper. The gist of the white paper is that Asia will undergo an economic boom for another 100 years.
But before you trust everything the government says, just remember that they can’t even correctly forecast their budgets six months in advance. So we find it hard to take a 100-year forecast with anything more than a pinch of salt.
Our advice? Ignore the long-range forecast and look at history instead. That’s because history tends to offer useful lessons for the future…including a lesson Australia could learn from previous Asian booms and busts…
Take this report from the New York Times in 1996:
‘Are East Asia’s fiercely competitive tiger economies starting to lose their fangs?
‘Things probably have not gotten quite that bad. But if the teeth are still intact, they have lost some of their sharpness of late. Export growth for many countries in the region – including the original “Four Tigers” of Singapore, Taiwan, Hong Kong and South Korea, as well as a half-dozen other countries that are following the same fast-growth path – has slowed sharply this year. And China’s exports have actually declined.
‘The deceleration in part reflects a healthy cooling off of economies that were running the risk of overheating. But it also raises questions about the staying power of East Asia’s export-driven economic boom. In particular, it translates into a deterioration of the region’s trade balance.’
One year later, the Asian Economic Crisis was in full flow. The Asian Tiger economies collapsed and their currencies were devalued. To rub the salt in, the International Monetary Fund (IMF) handed out bailout money.
In simple terms, the cause of the Asian Economic Crisis was over-investment, over-borrowing, and over-enthusiasm…
Asian Tiger Slaughtered
It was a classic bubble. An investment or economy begins growing on its own fundamentals. This attracts attention. So more people invest. Things get even better…imagine if growth continued at this rate.
Then the snake-oil salesmen arrive. In this case they called it the ‘Asian Tiger’. Businesses expanded and new businesses appeared. But because they hadn’t saved enough, they had to borrow money.
The banks cautiously loaned money at first. But when they started seeing the returns, they imagined what they could have made if they had loaned twice or three-times as much.
You get the picture. In the end, like every investment bubble in the history of mankind, the world runs out of fools who are prepared to buy into the bubble.
The euphoria that sucked everyone in disappears. Replacing it is fright as everyone rushes for the exit.
They sell the investment at a loss. Businesses can’t sell enough goods to repay the loans. That means loans go unpaid. The currency falls as investors abandon it for safe haven currencies…and finally, the whole economy collapses in a heap.
That’s the (abridged) story of the Asian Financial Crisis. And it’s the story of every other asset or economic bubble…and it’s the story of the Chinese economic bubble.
‘Oh, but Kris, China is different, it doesn’t have a bunch of external debt. It owns other nations’ debts, so it will be fine.’
We often hear that excuse.
But, it’s worth paying attention to an article in Forbes earlier this year:
‘Here’s some terrific news about China’s economy: at the end of last year, the debt-to-GDP ratio of the Chinese government, the key measure of its fiscal sustainability, stood at 16.3%. That’s an improvement from the already impressive 17% at year-end 2010.
‘Based in large part on Beijing’s low debt load, the Economist’s “wiggle-room index,” which ranks economies on their ability to afford stimulative measures, assigns a great rating to China. Of 27 emerging nations, only petroleum-blessed Saudi Arabia and Indonesia look stronger…
‘All this sounds wonderful, but none of it correlates with the facts. The 16.3% calculation excludes Beijing’s “hidden liabilities.” Once you add them in, China’s debt-to-GDP ratio increases to somewhere between 90% and 160%. And if you believe Beijing has been overstating its GDP recently – it has, at least starting from the last quarter of last year – China’s ratio approximates Greece’s 164%.’
Greece is Nothing Compared to China
Wow! The European Union is on the verge of collapse, and asset markets have crashed due to Greece’s debt problems. Given the relative size of the Greek economy to the Chinese economy…
…can you imagine what will happen to asset prices when the Chinese economy implodes? It almost doesn’t bear thinking about. Only you have to think about it because the Australian economy is handcuffed to the Chinese economy.
Now, we’re not saying that China won’t be an economic force…to a large degree it already is. But what we are saying is something we’ve said for the past couple of years.
That is, regardless of a country’s strength, economic growth doesn’t go up non-stop forever. Booming economies will always have periods of bust.
If an economy sees excessive credit growth and an economic boom, as sure as night follows day, that economy will see credit contraction and an economic bust.
Bottom line: 100 years is a long time, and anything can happen. But don’t fall for the spin that Australia’s future wealth is safe.
The Chinese economy is following the same path as every other economic boom…and it will soon follow the same path as every other economic bust.
History will show that the Asian Financial Crisis was nothing compared to the coming fallout from the Chinese Financial Crisis.
It’s getting tasty in China.
Yesterday, the Financial Times noted:
‘Chinese listed companies have reported a sharp rise in unpaid bills during the third quarter, in one of the clearest signs yet of the toll that China’s economic slowdown is taking on corporate balance sheets.’
We wonder how that will fit in with the government’s plans for the so-called ‘Asian Century.’ Not very well we’ll wager…
Last weekend, Australian Prime Minister Julia Gillard released the long-awaited Australia in the Asian Century white paper.
The paper notes:
‘The Asian century is an Australian opportunity. As the global centre of gravity shifts to our region, the tyranny of distance is being replaced by the prospects of proximity. Australia is located in the right place at the right time – in the Asian region in the Asian century.
‘For several decades, Australian businesses, exporters and the community have grown their footprint across the region. Today, for Australia, the minerals and energy boom is the most visible, but not the only, aspect of Asia’s rise. As the century unfolds, the growth in our region will impact on almost all of our economy and society.’
It sounds impressive, right?
The argument is that Asia will become the global economic powerhouse. Therefore, because Australia is on Asia’s doorstep the Australian economy will benefit.
As impressive as it sounds, it’s also completely misguided, and we’re sorry to say, woefully wrong.
But we look at it like this: it’s like a fat man thinking he’ll lose weight if he stands next to a skinny man!
But we’re not the only one to criticise the white paper. Michael Pascoe wrote in Melbourne’s Age that ‘the PM has offered a statement of the obvious.’
While Clinton Dines, formerly of BHP China, told the Age, ‘With a slowdown and budget deficit looming, one suspects that Ken Henry’s efforts are doomed to go the way of his tax reforms.’
We’re happy when the mainstream criticizes government policy. Only this time, the mainstream is wrong too…
The “Asian Century” is Already History
The reality is when we look back at today from the future, the Asian century (in the way the government envisions it) will prove to be nothing more than an Asian decade…or two decades at the most.
If the government, businesses and investors have pinned their hopes on the Chinese Dragon and Asian Tiger, they’ll be sorely disappointed.
By attaching their hopes to Asia, they’re in danger of missing out on the real story of the next 100 years. It’s what we call the ‘Wired Century.’ (This is a theme we wrote about in the latest issue of Australian Small-Cap Investigator.)
The fact is, in some ways the era of backing one geographic location over another are over. So are the days of benefiting from being close to a booming nation.
Let’s be honest, Australia’s closeness to China hasn’t been as important to the Australian economy as most think. What’s more important is that Australia has the natural resources that China needs – copper, iron ore, and coal.
But Brazil has a bunch of this stuff too. So does Canada, Chile and Africa. And the last time we checked, Brazil is three times as far from China as Western Australia is from China…and that’s as the crow flies. In nautical miles the distance is even greater.
And if we’re not mistaken, the US has relied on Middle Eastern oil for years. You could hardly call them neighbours.
Distance doesn’t matter compared to having a resource in demand. The fact that Australia has a bunch of resources and is close to China is just a bonus.
In short, anyone hoping that Australia will cash in on the supposed ‘Asian Century’ is kidding themselves.
Australia Needs to Exploit the Wired Century
Yes, there are benefits of being close, but there’s something much more import. And that’s technological innovation and global trade.
This is the real benefit for Australia.
So if you’re after a clue about the future, we suggest you take in the two following excerpts. First this from the Age:
‘The rise of the internet has killed the newspaper business model, but demand for television remains enormous.
‘According to The Cross Platform Report by researcher Nielsen, United States viewers still spend around four hours a day watching TV, barely down from record highs.
‘Does this make the battered shares of Seven, Nine and Ten cheap buying for potentially-rich stocks? No.
‘Australian television broadcasters are at the very same tipping point newspapers reached a few years ago, just before their problems became near-terminal.’
And this from the London Times:
‘The world is “drowning in data” and computing companies are running out of space to store it, one of the technology sector’s best-known – and most controversial – figures has warned.
‘Mark Hurd, the president of Oracle, said that the amount of data being produced by the nine billion devices connected to the internet had grown eightfold over the past seven years, putting incredible strain on the companies that need to process and store it all.’
New technology, new business practices, and new consumer behaviour is having a big impact on the local and world economy. And that impact will only grow.
As we wrote in the latest issue of Australian Small-Cap Investigator, 16 years ago the Sayce household only had one device connected to the internet (a desktop computer).
Today, between this writer, the missus and two kids, we have 12 internet-enabled devices. And as far as we’re concerned, the world is barely 5% of the way through the technological revolution.
The Most Important Skills You Can Learn
Bottom line: forget the Asian century. Forget the nonsense about forcing kids to learn Mandarin, Japanese, Hindi and Indonesian.
Sure, those skills will be handy. But on the importance scale, they are far, far behind the most important skills any kid (or adult) could learn today. We’re talking about encouraging kids to learn more technological and web skills.
If Australia (or anywhere) has any chance of building a successful economy over the next hundred years it won’t be through foreign languages or as the mainstream economists seem to think, by building more houses, it will be by embracing and exploiting the Wired Century.
That’s the future for Australasia. But only if governments stops butting in and let schools and businesses get on with building those skills.
Kris Sayce is an Investment Director for Port Phillip Publishing and an editor for Money Morning Australia.
Monday, November 05, 2012
Gas Lines are Not Sandy's Fault
Guest post by Jeffrey Tucker of Laissez Faire Books
It's crazy in New York and New Jersey, and commentators are mystified. Hurricane Sandy was bad enough. That's a natural disaster, and we are dealing with it.
But then came the unnatural disaster in the form of the government's response. This is where the real catastrophe begins.
Check out the mess in New Jersey. The New York Times reports that "widespread gas shortages stirred fears among residents and disrupted some rescue and emergency services as the New York region struggled to return to a semblance of normalcy after being ravaged by Hurricane Sandy."
Fights, anger, lines, craziness everywhere. Emergency shipments of gasoline are pouring in. Mail trucks are stuck. Supply trucks are stuck. Ambulances need fuel and can't get it. The government is trying to get gas to the place, but is hampered by traffic jams and chaos all around.
New Jersey has these weird laws that require that gas stations pump the gas for you. Why? To save jobs? I don't know. But they are there. As a result, service station attendants are slaving, breathing in serious fumes for 18 hours a day and desperately trying to keep the peace.
The images show scenes right out of the 1970s. There are long gas lines as far as the eye can see. Tempers are inflamed. Meanwhile, generators and cars need gas. People's lives are at stake. Some have successfully found gas in Pennsylvania, but you have to have enough gas to get there.
Who can account for such bizarre things as these? Probably the greedy capitalists at work here, right? After all, the state is fielding thousands of complaints of price gouging.
Actually, gouging -- if by that you mean raising prices according to market conditions -- is exactly what will fix the problem. But producers are not allowed to do so. The price system has been abolished. Like socialism.
Gov. Christie himself has made it clear: "We will not hesitate to impose the strictest penalties on profiteers who, in direct violation of our consumer protection laws, seek to capitalize on the misfortune of others in the midst of a crisis and recovery period."
Even more absurdly, "The state had set gas prices at $3.59 on the highways last week," reports the Times.
It's serious. Last year, merchants paid huge fines for raising prices more than 10% in an emergency. This means that they cannot respond to changes in supply and demand. A disabled price system means chaos. When the price is too low, producers drop out and consumers over-utilize. Scarce resources are not being replenished, and those that exist are being irrationally squandered.
That's why price ceilings mean shortages. Gas shortages cause social disasters. We are seeing this in real-time in New Jersey. It's a man-made disaster caused by stupid government officials, elected officials, and bureaucrats.
Can it really be that observers of this situation have no clue about the cause? Can it be that fairly intelligent reporters and politicians are truly that stupid when it comes to basic economics? I fear that the answer is yes. We are dealing with a governor who either has a brain the size of a pea or is so craven toward popular opinion that he is willing to throw away all rationality just to suck up to the bourgeoisie that knows not the first point of economic logic.
Hence this lesson. There is no real distinction between responding to economic conditions and so-called gouging. A law against gouging is a law against economic behavior. Merchants need to raise prices -- not to reflect higher costs (though costs could rise), but to reflect changing conditions of supply and demand. A higher price would signal consumers to conserve. A higher price would also call forth greater supply -- without having to have the government intervene with special shipments. A higher price would also settle the crowds down a bit and stop the insane attempt to stockpile as much as possible at the low price.
Price controls are causing human suffering -- yet again. And this time, the toll is very high, even if it will always remain somewhat invisible.
I've been writing on price-gouging laws for at least a year, fully expecting something like this.
In my article called "The Day Your Life Fell Apart" from last July, I wrote:
So you hop in the car and set out for new gasoline. The storms have caused the usual anti-gouging mania. Station owners have been hauled before Congress in the past just for having raised prices in a storm -- a time when they should be raising prices. Stations fear bad PR and even laws against the practice, and so they can't properly ration supplies.
You drive and drive, but every gas station in a 10-mile radius of your house is out of gas. In fact, after all this driving, you are nearly out of gas. You creep home and beg the neighbor for some gas, but he has the same problems: bad can, and the stored gas doesn't work right.
How well I recall getting floods of email from people telling me that I was exaggerating, that price-gouging laws are not that awful. They certainly are nothing like national price controls that lead to mass shortages. They are mere agents of consumer protection. Did I really want to unleash greedy merchants to rob people in the middle of an emergency?
Well, I might as well say it: My article, if anything, underestimated the extent of the damage caused by anti-gouging laws. If you live in New Jersey, these laws are ruining your life. If you are running a business on a generator, need to get somewhere in your car, need fuel for your chain saw, or otherwise need some power to manage your life, these laws are your enemy.
Maybe next time you will store up some gasoline? Don't think of it. Ethanol mandates have made gas difficult to store for a long time. Also in this crisis, people are discovering that their gas cans don't work right. The culprit is again government regulations.
Economic liberty is crucial to life functioning. Even the smallest intervention can cause calamity. Enough small interventions can cause the collapse of what we call civilization under certain circumstances. Markets are never more important than in an emergency, and government is never more useless, threatening and counterproductive than during a crisis. The events following Hurricane Sandy make the point very clear: Our choice is between liberty and human suffering and death.
All these regulations are like knives at your throat. Some of them have workarounds. You can hack your gas can. You can shop for gas that is not ruined with corn additives. You can prepare by storing up water and food. But in the end, as Ludwig von Mises said, there is no escape for anyone when civilization is headed to destruction.
We are rarely presented with a case that so clearly illustrates the explanatory power of economics. It turns what would otherwise seem inexplicable into something entirely predictable. The lesson we must learn before it's too late: Let the price system work.
- Hurricane Sandy, And The Invisible Hand Of Disaster Recovery – Iain Murray, FORBES
Labels: Jeffrey Tucker
Presidential race too close to calls, polls say
Actually, the race to which I was referring occurred in 1980…
[Hat tip Diana Rae]
You’d be batshit crazy not to
Fine Art Sale, with Jasmine Kamante & Jesper Sundwall
“Seated Nude III,” by Jasmine Kamante, oil on panel 300 x 200mm
“Memento Mori II,” by Jesper Sundwall, oil on canvas, 450 x 350mm
Artists Jasmine Kamante and Jesper Sundwall have been invited to exhibit at the annual King’s College Fine Arts Sale, along with a wonderful line up of artists, proceeds from which are used to promote the development of art and culture, and the improvement of student facilities. These are just two of the paintings they will be exhibiting there.
They invite you to join them at the opening cocktail party on November 9th at 6.30pm. For more details and information on how to book your ticket, please click here.