The Bear’s Lair: Avoiding the fate of the horses

We are not horses. Yet the Luddite left is telling the story of how the horses lost their jobs after 1900 as a parable of what might happen to most humans as the robots take over. In a truly free market, in which government was small and with little power, this would be impossible; the world economy is set up to benefit humanity, not horses, so the market would adjust to robots as a useful new human tool. Yet we are far enough from a free market today, and government is powerful enough and stupid enough, that the equine nightmare cannot entirely be ruled out. We must thus take steps to avoid being sent to the glue factory. Continue reading

The Bear’s Lair: Don’t ask cronies to reform crony capitalism

Paul Ryan’s health care “reform” bill was defeated last week without even receiving a vote in the House of Representatives, in spite of the care he had taken to get input from the health insurance industry. That was the problem. In a crony capitalist system, where bad lobbyist-pushed laws and regulations have poured illicit profits into the pockets of oligopolists, the oligopolists are the last people to consult on how to reform those laws. The same dynamic is visible in monetary policy, in bank regulation and in corporate and individual tax. We are a long way from true free-market capitalism, and we won’t get there by consulting the current crony “capitalists.” Continue reading

The Bear’s Lair: When Big Brother knows everything

We are rapidly approaching a position where, though genetic testing and infinite information searching, both the state and some private companies can know everything they need to know. Our genetic predisposition to disease, our dislike of the government, our taste in partners and our risky behaviors in gambling joints, strip clubs, empty roads, Internet porn and alt-whatever sites and the drug store will all be readily available information. We need to figure out how such a society could possibly be made to work. Continue reading

The Bear’s Lair: Say No to Scottish and Catalonian independence!

In general I am in favor of self-determination for small nations. I would have been on South Carolina’s side in 1861 (though not on the issue of slavery, obviously), and in 1991 I was on the side of Slovenia, Croatia, Macedonia and the other dissolving parts of the former Yugoslavia. However, in today’s world it has become more difficult for small nations to be economically self-sustaining, so they need to be a member of a larger grouping. The problem is to find a grouping that is large enough, crosses no cultural fault lines, yet offers an adequate measure of influence over the central bureaucracy to preserve rights, freedoms and local culture. The United Kingdom, Spain and the former Austria-Hungary pass these tests; the former Yugoslavia and the European Union fail them. Continue reading

The Bear’s Lair: Where is all the malinvestment?

We have had eight, nearly nine years of zero interest rates and negative real interest rates. You don’t have to be a convinced Austrian economist to believe that in this length of time an extraordinary amount of “malinvestment” – investment that is not justified by economic reality – has grown up. Now that interest rates seem to be rising, that malinvestment will collapse, losing lenders’ and investors’ money. This column therefore surveys the various forms that malinvestment may have taken, and where the greatest value traps lie. Continue reading

The Bear’s Lair: All our futures depend on the next few months

Crunch time is here for the Trump administration, and for us all. President Trump’s economic policies, in particular his deregulation and an ongoing rise in interest rates, will if they work as advertised produce a surge in productivity growth that will allow the United States to pay the bills coming due. If the productivity growth does not materialize, or if other less benign Trump policies pull the global economy off course, it is difficult to see how we can avoid economic collapse and universal debt default. Things could genuinely go either way. Continue reading

The Bear’s Lair: French election offers best chance for EU reform

In a column last month “Europe needs an Anti-Maastricht Treaty” I outlined the kinds of reform that would make the EU beneficial for its member states and their inhabitants. I did not however at that stage see much chance for such a reform occurring. Now with the French election on April 23 and May 7, I see potential for a genuine opening that might push the EU in the right direction. I will explain why. Continue reading

The Bear’s Lair: The battle between Moore and Eroom

Gordon Moore propounded in 1965 his Law, that the number of transistors in an integrated circuit doubles every two years. That Law has been gradually ceasing to apply over the last few years. Meanwhile, Eroom’s Law, that the cost of discovering a new drug doubles every nine years, appears to continue in full strength. Our future thus hangs in the balance; in the Manichean struggle between Moore and Eroom for dominance of our economy. Regrettably, my money is on Eroom. Continue reading

The Bear’s Lair: Reform the Fed before de-regulating banks!

President Trump has promised financial de-regulation, and has hired the former Chief Operating Officer of Goldman Sachs, Gary Cohn, to design it. Given Goldman’s sorry record over the last decade, that should worry us. It should worry us even more when we consider that there is no sign of a change in Fed policies, so that the “funny money” that caused the 2008 financial crash and subsequent malfeasances is till in full effect. Without reforming the Fed, de-regulating banks will be largely counterproductive. Continue reading

The Bear’s Lair: How far will de-globalization go?

The last couple of weeks have been full of events justifying predictions made in this column over the years, which is very gratifying. A 2010 prediction in this column and in a presentation to the American College of Cardiology talked about the possibility of de-globalization. Remarkably, that prediction appears to be coming to pass. I thus thought it worthwhile to look at how far the de-globalization trend might go, and whether it, unlike globalization, will be permanent. Continue reading