How Should Prices Be Determined?

by Henry Hazlitt

"How should prices be determined?" To this question we could make a short and simple answer: prices should be determined by the market.
The answer is correct enough, but some elaboration is necessary to answer the practical problem concerning the wisdom of government price control.
Let us begin on the elementary level and say that prices are determined by the supply and demand. If the relative demand for a product increases, consumers will be willing to pay more for it. Their competitive bids will both oblige them individually to pay more for it and enable producers to get more for it. This will raise the profit margins of the producers of that product.

Why the Greenbackers Are Wrong

by Thomas E. Woods, Jr.



One of Ron Paul’s great accomplishments is that the Federal Reserve faces more opposition today than ever before. Readers of this site will be familiar with the arguments: the Fed enjoys special government privileges; its interference with market interest rates gives rise to the boom-bust business cycle; it has undermined the value of the dollar; it creates moral hazard, since market participants know the money producer can bail them out; and it is unnecessary and at odds with a free market economy.

Regulating Banks the Austrian Way

by David Howden

Most people — from young to old and from all ends of the political spectrum — are united by a common bond. The idea that banks are deserving of taxpayer support is viewed as morally repugnant to them. Business owners see bank bailouts as an unfair advantage that is not extended to all businesses. Those typically on the political left see it as support for the establishment, and a slap in the faces of the little people. Those more at home on the political right see it as just another form of welfare: a wealth redistribution from the hard working segment of the population to the reckless gambling class of banksters.
Despite this common disdain for bankers, there is considerable disagreement on how to deal with them. One group sees less regulation as the solution — letting market forces work will allow the virtues of prudence and industry to prevail. This formulation sees these same market forces as limiting firm size naturally to evade the “too big to fail” issue, through many of the same incentives that foment competitive economic advancement.

Stable Prices, Unstable Markets

by Frank Shostak

 

According to European Central Bank Governing Council member Ewald Nowotny, Federal Reserve Chairman Ben Bernanke sees no risk of inflation in the United States. According to Nowotny, Bernanke had given a “very optimistic” portrayal of the US outlook.
“They see absolutely no danger of an expansion in inflation,” Nowotny said. Bernanke had said US inflation should be 1.3 percent this year.
Fed forecasts put inflation by the end of this year in a range of 1.3 to 1.7 percent. The yearly rate of growth of the consumer price index (CPI) stood at 1.5 percent in March against 2 percent in February and 2.7 percent in March last year.
Also the growth momentum of the core CPI (the CPI less food and energy) has eased in March from the month before. Year-on-year the rate of growth has softened to 1.9 percent from 2 percent in February and 2.3 percent in March last year.

The Truth About Economic Forecasting

 by Graeme B. Littler

Astrologers, palmists, and crystal-ball gazers are scorned while professional economists are heralded for their scientific achievements. Yet the academics are no less mystical in trying to predict the direction of interest rates, economic growth, and the stock market.
Forty years ago, Thomas Dewey was defeated by Harry Truman, stunning the political experts and journalists who were certain Dewey was going to win. While questions about “scientific” polling techniques naturally arose, one journalist focused on the heart of the matter. In his November 22, 1948, column in Newsweek, Henry Hazlitt said the “upset” reflected the pitfalls of forecasting man’s future. As Hazlitt explained:

The economic future, like the political future, will be determined by future human behavior and decisions. That is why it is uncertain. And in spite of the enormous and constantly growing literature on business cycles, business forecasting will never, any more than opinion polls, become an exact science.

We know how well economists forecasted the eighties: from the 1982 recession and the employment boom to the Crash of 1987, no major forecasting firm came close to predicting these turns in the market.

The Story Of Inequality In The US: Past, Present And Future

In this far-reaching documentary, we are first treated to a history lesson from the early 80s to the present day - a story of lust, debt, and largesse; from Reagan deficits to cell phones to day trading to real estate... and then 2008 is explained (as reality started to peek through). The clip projects the next few years - from failed bond auctions to QE9 and social unrest - "but it doesn't have to be this way," the narrator notes. Breaking Inequality is a documentary film about the corruption between Washington and Wall Street that has resulted in the largest inequality gap in the history of America.
It is a film that exposes the truth behind the single event that occurred back in the early 70's that set us off on this perilous journey that we are currently on. The inequality gap is presently the worst that it has ever been and there is no solution in place to repair this crippling problem.

Are We a 'Criminal Element'?

by Bill Bonner 

 















Back in the USA, stocks rose again yesterday. The Dow finished up 128 points. Gold fell $25 per ounce yesterday... and everybody seems to think it will be going down forever. (A word of caution: probably not.)
Last week, we went to São Paulo, Brazil. There, too, we found taxi drivers who knew a lot more about monetary crises than the typical US economist. Said one:

I remember. I was just a kid. But my father would call and tell us to run to the grocery store. He had just been paid. We'd dash for the grocery story, meet him there and buy everything we could. We spent every cent in just a few minutes.

Our friend was recalling what it was like in the late 1980s in Brazil. The government had caused inflation... then hyperinflation. Prices rose so fast that as soon as people got some cash they ran to the grocery store to spend it.
Later, there was no point. In 1990, hyperinflation in Brazil reached 30,000%. What cost 1 real (the Brazilian currency) in 1980 cost 1 trillion in 1997. The hyperinflation wiped out the middle class... and wiped the shelves clean.
"It's hard to run a business when you don't know what your money is going to be worth," said our friend. "Businesses tended to just stop."



From Harare to Buenos Aires...

And here in Argentina, there came an announcement this week. The government will freeze the price of gasoline for the next six months.

What Is a Gold Standard?

Before 1971, U.S. dollars were backed by gold. This meant that the federal government could not print more money than it could redeem for gold. While this constrained the federal government, it also provided citizens with a relatively stable purchasing power for goods and services. As Learn Liberty explains in this simple 4 minute clip, today's paper currency has no intrinsic value; it is not based on the value of gold or anything else. Under a gold standard, inflation was really limited. With floating value, or fiat, currency, however, some countries have seen inflation reach extremely high levels - sometimes enough to lead to economic collapse. Gold standards have historically provided more stable currencies with lower inflation than fiat currency. Of course, this leaves the question open of whether the United States return to a gold standard?

Cyprus Bailout Deal Is Pilot Program for Future Bank Deposit Confiscation

by goldsilver.com

A great deal of ink has been spilled recently about the economic meltdown in Cyprus. The latest domino in the slow collapse of the European monetary union, Cyprus introduced radical solutions to meet the demands of the EU (European Union) and International Monetary Fund (IMF). Now, Cypriot bank depositors have lost chunks of their savings, the Cyprus government has imposed currency controls, and the central bank may be forced to sell the majority of its gold reserves. In some ways, however, the Cypriots are receiving a better deal than citizens of the U.S., U.K., or Canada.

The Cyprus bank crisis is intimately tied to that of Greece. Due to rising unemployment and benefit payments, the volume of state debt – much of which is funded through Greek loans – steeply increased during the recession. In order to fund the loans, Cypriot banks bought Greek bonds. As a result of the Greek bailout settlement, the bonds suffered a 50% haircut, in turn threatening the collapse of the Cypriot banking sector.