Economist Brad DeLong has come out swinging against Austrian economics again, and once again he’s punched himself in the face. But he’s too numb to realize it. There’s a great response on the Mises Economics Blog by Jonathan Catalán, and I take a stab on my site, Wirkman Netizen.
It’s interesting that neither Catalán nor I attack, in our respective longer efforts, the worst calumny of DeLong’s, his insinuation that the Austrian distrust of fiat money comes down to anti-Semitism: “[I]n its scarier moments this train of thought slides over to: ‘good German engineers (and workers); bad Jewish financiers.’”
Since Mises was a Jew, and was treated badly for anti-Semitic reasons at times — why does DeLong think Mises left Austria? — and that Mises never, ever supported anti-Semitism (nor did Hayek, for that matter), this is especially vile. It’s just another example of those leaning left (which means: technocrats who mislabel themselves as “liberals” and “progressives”) playing the racism/anti-semitism card when they lack a good hand.
DeLong should be ashamed of himself. But, then, one of the perks of being in the managerial class of the technocratic state means never having to say you are sorry.
Federal prosecutors have alleged in their amended complaint against Full Tilt Poker that the gambling interest was a “Ponzi scheme,” apparently in part because of the company’s level of cash reserves.
FTP owed approximately $390 million to players around the world, with $150 million owed to U.S. players. FTP only had $60 million on deposit in its bank accounts, however, meaning over $300 million is owed to players worldwide.
This was the result of FTP’s payment processing channels becoming so disrupted that “the company faced increasing difficulty attempting to collect funds from players in the United States. Rather than disclose this fact, Full Tilt Poker simply credited players’ online gambling accounts with money that had never actually been collected from the players’ bank accounts. Full Tilt Poker allowed players to gamble with — and lose to other players — this phantom money that Full Tilt Poker never actually collected or possessed.”
$390 million in liabilities and only $60 million in the bank? That means that FTP had a little more than 15% in cash reserves. According to Wikipedia,
A depository institution’s reserve requirements vary by the dollar amount of net transaction accounts held at that institution. Effective December 30, 2010, institutions with net transactions accounts:
- Of less than $10.7 million have no minimum reserve requirement;
- Between $10.7 million and $58.8 million must have a liquidity ratio of 3%;
- Exceeding $58.8 million must have a liquidity ratio of 10%
So because FTP had 15% in cash reserves, the whole operation is a Ponzi scheme. If only the proprietors had started a bank of the same size, they would have only needed 10% reserves!
Arnold Kling, at EconLog, relates Scott Sumner’s simple query as to why the 2008 financial crisis has caused such low or negative growth down even unto the present day, and offers four possible answers. I will comment only on one of them:
Because the Fed made forecasting errors. Right-wingers are fond of brandishing charts showing that the unemployment rate with the stimulus is on a worse trajectory than what was forecast without the stimulus. That may or may not be evidence that the stimulus failed, but it is evidence that standard forecasts were not sufficiently pessimistic about the economy. Assuming the Fed used standard forecasts, that would explain the inadequate monetary expansion back then. It doesn’t explain their reluctance to expand now, though.
There are several places where this answer (which Kling does not favor) goes wrong. Most noticeable, to me, regards the possibility that the forecasts “were not sufficiently pessimistic about the economy.” This is not the only possibility. It is not even the most likely possibility.
The problem was that the forecasts were too negative [Keep reading…]
Her Majesty’s Revenue and Customs, stressing “the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid”, has proposed to modernize the UK’s income tax system. Once employers provide payroll information in real-time, “it further proposes that employers hand over employee salaries to the government first.”
I’m sure that subjects of the Crown have nothing to fear. The state can be trusted to process their paychecks promptly, correctly, and efficiently. Only a crank would object to this modernization plan. After all, everyone fondly remembers the Star Chamber that evolved out of a similar medieval program for keeping tabs on the Jews. Since it worked out so well last time, how could anyone expect things to go wrong now?