Governor of Bank of Canada Doesn't Know Canada's Own History

Any Brazilian libertarian gets the same questions: What the heck is happening there? How come you have people with “Menos Marx, Mais Mises” signs down the streets? Aren’t you some kind of left-libs? Isn’t Lula, now jailed for corruption, ‘Obama’s man’?

The curiosity about Brazil and what is happening here is so widespread that people have discussed that in the US (see here and here), in the UK, and even in Italy.

Every time people ask me about it, I tend to respond in a somewhat different manner, and I tend to forget stuff. So here I want to tell you what I think about the whole thing.

Usually I divide my explanation into three parts:

1. Eight years of hard interventionism (2008-2016 under Lula da Silva and Roussef) pushed the country to the limits. There was no way out, either more libertarian ideas would enter in the common discussion or we would be heading to full blown real-life communism, Venezuela style;

2. Internet, social networks, and bottom up organization via ‘apolitical’ movements; and

3. A weak but vigorous intellectual environment is slowly forming for libertarian (or what Americans might call "conservative") ideas. (See, for example, Olavo de Carvalho.

#1: There are more than 30 political parties down here. Only one, the NOVO labels itself as "classical liberal/libertarian." There are more than ten communist/socialist parties. The so called ‘conservative’ candidate for the forthcoming presidential election had to strike an agreement with a lib-left party to get his way into the candidacy.

Since redemocratization in the late 1980’s/early 1990’s, Brazil has had five presidents, two of them communists. Lula da Silva and Roussef. There was one social-democrat: Cardoso. These presidents served 22 years in total. The current president, Temer, belongs to a center party that has never been anti-establishment in the last 35 years. Our system gives way too much power to the executive branch, which lead to growing interventionism. The government represents 40% of the GDP and has been growing in the last 20 years.

On the practical side, the last relevant libertarian politician in Brazil, Roberto Campos, passed away 30 years ago. There was nobody defending libertarian ideas in the political world, which was a reflection of the cultural and academic environment. Statism, empirically represented by the expenditures with the soccer stadiums for the 2014 World Cup, lead the country to the biggest economic crisis in its history. The GDP decreased by more than 3% in two consecutive years, 2015 and 2016. In 2017, there was no growth.

#2. Another new development was  the Brazilian Mises Institute (Instituto Mises Brasil - IMB), inspired by the MI. It emerged in the mid 2000’s, and was founded by Hélio Beltrão with the academic support of Prof. Ubiratã Iorio. From the beginning, the institute distributed a lot of free material online and used social media to spread the ideas, some facts on that:

There was no libertarian movement in Brazil in 2010 (I’m writing that in 2018!), people had started talking about it, but there was nothing organized. Nowadays, there are around 40 thousand visits to mises.org.br every day, in 2008 the number was 13 times lower. There are 300,000 likes on Facebook. The Institute has a podcast running for 5+ years with more than 300 episodes. 1 million books have been downloaded. Since 2013, "Mises" has more Google searches than "Keynes."

Well, here is where the story gets complicated and this is where we get to #3.

In my view there are two complementary responsible for the intellectual change: Olavo de Carvalho and Instituto Mises Brasil.

Olavo is a Brazilian philosopher, he became known in the late 1990’s, but gained traction in the mid 2000’s with a weekly web-radio show where he presented his conservative positions and waged cultural war on widespread communist ideology in Brazilian culture, universities, and the media. With his attack on the centralization of power, he always mentioned the calculation debate and has used methodological individualism in his political analysis.

Meanwhile, the IMB provided materials and events on economics and political science and spread the ideas to a wider and more libertarian, less conservative, audience.

So, what is ahead?

In October there will be national elections in Brazil, including races for congress and the senate, new governors and houses in the states, and a new national president.

There is likely to be be somewhere between 20-25 libertarian representatives, a huge jump from the zero of the last 30 years. Maybe some senators and numerous state representatives. 

But, we have got to keep fighting the ideological war.

The Brazilian experience can be an inspiration to other movements elsewhere in the globe, and those lessons could be a starting point to those that want to do something about it.

Medicare Part D is a relatively new "entitlement" program that provides a subsidy to retirees for prescription drugs. It is supposedly designed to help seniors, but is the drug companies that benefit most. Started in 2006, it was expected to cover 11 million, but that figure was 24 million after just one year! Not surprisingly the costs of the program have escalated far beyond original projections and are expected to continue to rise in the future.

One recent development intersects the opioid crisis. Seniors are receiving vast amounts of opioid prescriptions using this subsidy. Almost 5 million received three or more months of pills and nearly 60,000 received "extreme amounts" in 2017. Many seniors are receiving multiple prescriptions and using multiple prescribers and pharmacies. Surely, some of these extreme users are diverting pills to increase their income, but many are at risk from overdosing and dying. 

Just as sure, this would not be a problem if they had to pay the regular retain price.

HT: FL

Here we go again. A fed official is once again going to the media to repeat the age-old myth that the Fed is totally independent of political influence.

The last time we heard about this from someone at Powell's level what last year, when Steve Mnuchin reminded everyone of the Fed's alleged independence in January:

Responding in writing to questions from Senator Bill Nelson , Steve Mnuchin described the Fed as “organized with sufficient independence to conduct monetary policy and open market operations.” He also praised “the increased transparency we have seen from the Federal Reserve Board over recent years.”

This time, it's Fed chair Jerome Powell himself, who granted an interview to NPR's Marketplace . Most of the interview was devoted to making this point about independence. Here's some of it:

Ryssdal: There is a question that has to be asked — actually a couple of them — about the political environment in which this economy operates right now. Granting that the Fed has always been a source of political frustration for many in the executive branch, it's worth pointing out here that Larry Kudlow, the chairman of the president's National Economic Council, and the president himself have said they are low-interest rate guys. Larry Kudlow encourages the Fed to move very slowly on interest rates on the theory that rising interest rates would be a tricky thing for the president politically. Do you think it's appropriate for the White House to be not telling the Fed what to do, but saying these things in public?

Powell: Let me just say I'm not concerned about it, and I'll tell you why. We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns. We do our work in a strictly nonpolitical way, based on detailed analysis, which we put on the record transparently, and we don't consider political considerat — we don’t take political considerations into account.

I would add though that no one in the administration has said anything to me that really gives me concern on this front. But this is deep in our DNA. For a long, long time the Fed has felt it important to conduct our business that way. I'm deeply committed to that approach. And so are all of my colleagues here.

Ryssdal: Which I understand, but you're also humans. And when the White House leans on you, you must feel it.

Powell: Again, nothing has been said to me publicly or privately that gives me any concern about our independence.

Ryssdal makes a point that anyone not trained to believe Washington, DC sound bytes would see. Powell, like everyone else involved in the Fed's governance is a human being and brings with him his own biases.

We saw some of this in 2016 when it came to light that Fed employers donated far more money to the Hillary Clinton campaign, than to any other campaign:

Bloomberg had an interesting report this week looking at the political contributions of Federal Reserve employees this election season. Unsurprisingly, Hillary Clinton is dominating the field, receiving $18,747 in contributions — over four times more than all other candidates combined. While most of the donations came from lower level Fed officials, Federal Reserve Governor Lael Brainard came under fire for making several donations to Clinton’s campaign.

When people like Powell say "non-political," though, they don't mean non-ideological or unbiased. They mean they aren't making decisions in a way so as to benefit certain candidates or certain political parties.

Even if this were true — which it's not (see below) — it would be of little comfort. The Fed can still act to benefit certain groups over others. Its policies can be employed to keep interest rates low for governments, so as to keep the cost of the national debt low. The Fed can adopt policies that benefit Wall Street more than Main Street. The Fed can act to benefit spenders rather than savers.

These acts of picking winners and losers, and influencing public policy, would be considered "political" by a normal person — as indeed they are political. They're just not directly connected to any political campaign.

Besides, the fact the Fed behaves as a political institution has been documented for years by political scientists. ( Whole classes are taught on the subject .) Only economists and media talking heads are so naive or so willfully ignorant as to believe a policymaking institution can be "non-political."

But even on the matter of straight-up efforts to influence elections, the Fed is guilty. In 2010, when Fed Chairman Arthur Burns's diary was published, Doug French noted:

Burns's diary is page after page of political dirty dealing, lying, and backstabbing. Nixon went so far as to plant negative press about Burns and threatened to expand the Fed's Board of Governors to dilute the chairman's influence, all to bring Burns in line with the president's economic meddling. None of that seems necessary; Burns's diary would indicate that the president had him at hello.

No doubt a well-worn path still exists between the Eccles Building and the White House. But the myth continues. Economist Mark Zandi told CNBC's Lori Ann LaRocco recently,

I think the worst thing that could happen is if the Fed was politicized. An a-political Federal Reserve is a cornerstone of our financial system and broader economy. So nothing is more important than maintaining the Fed's independence. And the fact that its wrapped in the political process is just disturbing and disconcerting.

Ultimately, though, we need to ask ourselves if "independence" is even something that is desirable. After all, the flipside of "independence" is a lack of accountability. The only way for the Fed to be truly independent would be if it was totally unaccountable. Murray Rothbard wondered if that would be a good thing:

“Independent of politics” has a nice, neat ring to it, and has been a staple of proposals for bureaucratic intervention and power ever since the Progressive Era...But it is one thing to say that private, or market, activities should be free of government control, and “independent of politics” in that sense. But these are government agencies and operations we are talking about, and to say that government should be “independent of politics” conveys very different implications. For government, unlike private industry on the market, is not accountable either to stockholders or consumers. Government can only be accountable to the public and to its representatives in the legislature; and if government becomes “independent of politics” it can only mean that that sphere of government becomes an absolute self-perpetuating oligarchy, accountable to no one and never subject to the public’s ability to change its personnel or to “throw the rascals out.”

Not surprisingly, Judge Napolitano sees the Kavanaugh appointment for what it is — a nod to the DC establishment. On Fox and Friends this morning, Napolitano said:

“The Washington establishment, sometimes known as the swamp, wanted Judge Kavanaugh,” said Napolitano. “I am disappointed in the president because this is not the type of person he said he would pick. Justice [Neil] Gorsuch was. This person is at the heart and soul of the D.C. establishment against whom the president railed.”

See the video:

.@Judgenap: “I am disappointed in the president because this is not the type of person that he said he would pick… this person is at the heart and soul of the DC establishment.” pic.twitter.com/Dygeg4zywi

— Fox News (@FoxNews) July 10, 2018