Jobless Claims Tumble?

According to the headlines at CNN Money, there was a great decline in the number of jobless claims last week, supposedly indicating a pick-up in the economy after the Katrina shock. Yet if you look at the actual Department of Labor statistics, you can see that the insured unemployment rate rose 0.1%:point, to 2.2%, from 2.1% (It was 2.0% before Katrina).

The reason for this discrepancy is that the CNN Money writer was referring to the initial claims, while the insured unemployment rates also includes continued claims. But surely the total must be more important as the employment situation isn't better if there are fewer fired but even fewer hired at the same time. One would think that someone hired by a mayor news organization to write about economics would grasp such a basic truth, but apparently not.

Useless "Competitiveness Report"

Today the "World Economic Forum" issued a report on "competitiveness". It ranks the United States as well as the Nordic countries as the most competitive. But what the heck do they mean by "competitive". After looking through the report I see that they define it as "that collection of factors, policies and institutions which determine the level of productivity of a country and that, therefore, determine the level of prosperity that can be attained by an economy". Which is to say, the factors that determine growth.

But what evidence do they have that the factors and their weighting of them does determine growth? None, as far as I can see. In fact their ranking just shows how useless their index is. Any index which puts slow-growing countries like the Nordic countries, Switzerland, Japan, Britain, Holland and Germany high on the ranking while ranking the world's fastest growing country, China, as only the 49th most competitive can really be dismissed out of hand. India, Vietnam, Latvia and other fast growing countries are also ranked very low, further undermining the credibility of this report. Why anyone takes such a obviously useless report seriously is a great mystery to me. A dart-throwing monkey would almost certainly achieve a better correlation between "competitiveness" and growth than the World Economic Forum.

Higher Housing Prices is Higher Prices

See my LRC article refuting the arguments of those who deny the obvious truth that increases in house prices should be considered price increases.

Euro-zone money supply growth accelarates even further

The latest money supply statistics for the Euro-zone show that money supply- and credit growth accelarating even further. M3 rose 8.1% and private sector credit growth increased to 8.4%. Remember that the ECB is supposed to keep M3 growth at 4.5%. Together with a consumer price inflation rate that is 1%: point above the supposed ceiling of 2%, it is clear that the ECB:s monetary policy is far to lose, not just according to misesian standards, but also according to its own standards. Interest rates should therefore be raised, not cut.

The Global Inflationary Trend

New blog post at the Mises blog.

Russia facing population crisis

Russia's population is expected to continue to fall as birth rates stay low (even if they have recovered somewhat from their lows) and the mortality rate stays high, as reported by The London Times.

That's just too bad, given how attractive Russian women are....

Fake "racial discrimination"

Thomas Sowell shows how Mainstream media and leftist race-baiters misleads about the cause of racial differences in mortgage loan interest and approval rates.

"Free World" to "Communist" China: Become More Socialist

New article at LRC.

Both main parties loses in German election-and rightly so

The latest German elections looks as if they are going to mean a election loss for both the Social Democrats and the Christian Democrats, which is likely to produce a "hung parliament" and political uncertainty. While there is a left-wing majority in Germany, Schröder have ruled out any talks with the crypto-communist Left Party which got 8%, so there will have to be some coalition that crosses the traditional left-wight divide.

Whatever will happen, two things are clear. First, this result is not good for Germany as the necessary reforms will be stalled (not that they would have been implemented if one of the two major parties won) Second the two major parties both lost and both deserved to do so as neither took the task of reforming the German economy seriously. The Social Democrats have proven themselves under their 7 year rule to be incapable of implementing the necessary reforms. The Christian Democrats did seem somewhat better if one were to believ their promises, but they screwed everything up by calling for an increase in the value added tax (consumption tax) to pay for their payroll tax cuts. As people knew they were not likely to be the beneficiaries of the payroll tax cuts, they knew this would likely result in their real wages would be further reduced.

Raising taxes is and should be a election losing position, so for the next time they should drop that idea and instead push for tax cuts financed by spending cuts.

President Bush says: No new taxes!

Yeah, we read it clearly on your lips.....

Seriously, though, I think that he will keep that promise unlike his father. Why raise taxes when you can just increase the deficit?Despite presiding over a tax increase this year in the form of the expiration of depreciation incentives, Bush's style haven't generally been "tax and spend" but rather "borrow and spend". That way, Bush can continue with his policy of expanding big government without upsetting the conservative base too much. And that this will lead to costs later in the form of inflation and/or higher interest expenses is something which is not seen by all too many now.

Alan Reynolds misses the point about inflation

Alan Reynolds' latest townhall.com column starts out pretty good. First he attacks the broken-window fallacy of some journalists and economists. He even starts out good on the issue of inflation by pointing out that a autonomous increase in oil prices will have a deflationary and not inflationary effect on other prices, the same point I made in my LRC article on core inflation, although he neglects to mention the purely statistical effect of lowering "equivalent rent" of home owners.

But he seem to miss the point of this fact completely by saying that this makes the energy price increase less worrisome since this means that "core" inflation wont rise as a result of this. The point I made was that this shows that "core" inflation will not reflect "underlying" inflation.

Alan Reynolds' obsession on "core" inflation again reflects the typical supply-side economist attempt to deny price inflation at all costs in order to justify more monetary inflation, as was discussed by me in the above linked "core inflation"-article.

Affirmative action drives Chinese from Malaysia

Earlier this year, I posted a blog post on the Mises blog commenting on a BBC News story about how affirmative action in Malaysia have created a entitlement culture among the ethnic Malay majority of Malaysia. Malaysia's business community, like that of nearly all East Asian countries except Japan and Korea, is dominated by ethnic Chinese and this have created envy and ethnic tensions in the countries where the Chinese are a minority of the population yet is a majority of business leaders. In some countries like Indonesia this have provoced occassional anti-Chinese pogroms while in Malaysia the Malay majority have given themselves preferences in various ways. Including quotas in universities and companies and even a requirement that companies must distribute a certain proportion of their shares to Malays.

In a letter to The Economist, Ron Davidson, Fulbright scholar in Singapore, now reports how this have aside from making Malays lazier also created strong discontent among the Chinese. Many are now trying to emigrate to majority-Chinese Singapore and other places where they wont be discriminated. This braindrain will of course hurt Malaysia's economy.

Good Column About "Greedy Oil Companies"

Jeff Jacoby have a good column at townhall.com about the hypocricy of those who attack oil companies for their profits.

Why Is Inflation So Popular?

See my answer to that question in my latest LRC article.

Swedish central bank sells gold

Riksbanken, the Swedish central bank, announces[Text is in Swedish], that it will sell 10,000 kilograms of gold, valued at approximately 1 billion Swedish Kronor ($133 million). The pretext is that they want a higher and more even yield. So they plan to invest it in foreign government bonds.

That is however most likely a smokescreen. While the gold price is volatile over a year to year basis, it is over a longer period of time a safe investment and given today's low bond yields likely to give at least as high a return. More likely is that this like other central bank gold sales is intended to keep down the price of gold, something which will give the many people who regard gold as a inflation indicator the impression that there is no inflation problem, particularly since the lower bond yields that will follow the reinvestment in gold will give some people the false impression of falling inflation expectations.

Australia-the lucky economy

They don't call Australia "The Lucky Country" for nothing. At least so far it seems that the Australian economy could escape the negative repercussions of its economic mismanagement.

In a article last year in the Australian misesian web publication Brookes News, I pointed out how the Australian economic boom was driven by two factors, neither of which were likely to be sustainable: rising commodity prices (Unlike most rich countries Australia is a large net exporter of commodities and thus benefits from it) and a housing bubble.

I also predicted that just how bad the overall economy will come out from this depended on whether or not the two factors would end simultaneously or not. If they did, then Australia would suffer a severe recession. If however, they deflated at separate occassions then Australia might escape this without a recession.

Well, we have now seen how the housing market have started to decline, but as commodity prices have risen sharply, Australia have continued to have higher growth then nearly all other rich countries except Hong Kong and Singapore. According to the latest GDP numbers, the volume measure of GDP rose 1.3% over the latest quarter and 2.6% over the latest year and the more relevant terms of trade adjusted measure Real net national disposable income rose 3.1% over the latest quarter and 4.3% over the latest year.

This despite the fact that residential construction have fallen 5% over the latest year. Because of the incredible Australian luck though, this have been more than compensated by the fact that the continued boom in China and other Asian countries have raised commodity prices so much that this have more than compensated for the weak housing sector.

Of course, this doesn't mean that Australia will necessarily escape without any future recession. Despite the weak housing sector, many imbalances including the large current account deficit and the negative household savings rate is still there and if these are not corrected before the economies of China and the rest of Asia cools significantly and in the process drags down commodity prices, then Australia might still suffer a sharp recession. But so far, Australia have been very lucky to see commodity prices rise while the housing bubble have been partially deflated.

Fact-checking at NRO

New blog post at the Mises blog.