Forget about the second wave of the virus, get ready for a recessionary tsunami

Originally published at the Hill Times.

In the midst of multi-phase re-opening plans, Covid-19 cases are back on the rise around the world. This has caused talks of a second round of lockdowns to circulate before this first round of unlocking. This is music to the ears of struggling business owners. Yet we shouldn’t expect a government-orchestrated economic plan to be harmonious. The new normal for businesses will still mean a cacophony of higher input prices and disrupted distribution networks. 

Finance Minister Bill Morneau’s fiscal snapshot delivered Wednesday predicts a very sharp recovery in GDP, with a gentle tapering of unemployment. This is a bad prognosis. With or without a second round of lockdowns, the economy will fall sharply ill again. Simply put, the global economy of the past few months has produced less stuff to use in trade, production, and manufacturing. What makes it worse is that these disruptions have happened at the arbitrary whim of bureaucrats. Even if demand returns to pre-Covid levels tomorrow, businesses may not be able to support their existing workforces or capital structure. 

The invisible hand of supply and demand will soon be greeting the market not with a socially distant salute; but rather with an invasive groping of revenue streams and supply chains. Investors and business owners must prepare for the worst. Expect more layoffs, store closures, and bankruptcies, as entrepreneurs unmask what the new normal will look like.

Politicians themselves will never admit to these problems. Many will tout that their decision-making has been prudent and shrewd, as they’ve been seeking expert advice. Officials tell us to expect the economy to bounce right back, even though these advisors are not economists themselves. Whether the recovery will look like a “V” or “U”, we should seriously question the alphabet soup of optimism that we’re being told to swallow. 

Foremost: politicians have no objective measure for determining what is and isn’t essential. The global supply and distribution system is, quite literally, unimaginably complex. The metaphor of a supply “chain” is misleading, as it implies a clear beginning and end. Since what may be a consumption good for one person may be a capital good for another, it’s more accurate to talk about an economic crochet—an intricate interweaving of supply threads and demand threads, coming together in an ever growing pattern of commerce. Plucking away at random threads may seem harmless at first, but it fundamentally alters the structural integrity of the whole economy. 

The impacts are already being felt. Scholars estimate an increase of over 253,000 cases of infant mortality this year due to the global lockdowns (compare that number to 550,000, the worldwide death total of Covid-19). 

Between overloaded mental crisis hotlines, deferred cancer testing and treatment, an increase in domestic abuse, disruptions in supplying pharmaceuticals, and a global food supply crisis that the UN’s World Food Programme says could lead to 270 million people being “acutely food insecure”, it will be years until the full effects of these lockdowns will be reckoned with. 

Governments around the world have been almost uniform in their response: hand out money to seemingly anyone who asks for it. Where did all this money come from, in a time when many are working and earning less? The central banks. Yet printing money to prop up financial assets devalues the currency overall. Ultimately, all of us will be forced to pay higher prices for everyday goods and services. 

Although this pandemic is novel, the laws of economics remain unchanged. Prices are determined by supply and demand, and enterprising individuals will find a solution to anything profitable. Understanding these principles will be the key to a healthy prognosis for recovery. The only complication to worry about is more meddling by politicians, which has a simple cure: civic vigilance.  

Human Action in One-Syllable Words

Human Action by Ludwig von Mises — in one-syllable words (inspired by the summaries of famous philosophical works by Jason Brennan). Here is a short summary, before launching into a part-by-part treatment:

You can choose. With this true face, we can use just our wits to learn some more true facts: like you act in time, you have doubt about fate, and that you give up your least liked piece of a thing to get more of what you want. If you live with a group that you trade with, you should each own the goods you use to make things with and trade them for cash. The cash math will help with your growth plans. If you don’t, your group will break and rot. If any bank makes fake cash and lends it out, it will cause a boom and bust. Folks are blind to these facts; you must help them see.

Continue reading “Human Action in One-Syllable Words”

Understanding the Fed’s Bond ETF Program

Yesterday, the Federal Reserve did something it’s never done before: purchasing exchange traded funds (ETFs) that are invested in corporate bonds. As a brand new program, this has generated a lot of confusion on behalf of the public. Why is the Fed buying bonds? Who is the Fed helping by buying corporate bond ETFs?

I’ll try to answer these questions (and more) in this article.

Continue reading “Understanding the Fed’s Bond ETF Program”

The Collected Works of Ludwig von Mises

MisesLibrary.jpgIt always struck me as strange that such a great and important thinker as Ludwig von Mises, whose last posthumous work was published in 2012, did not have a dedicated and comprehensive anthology. Since I personally have a significant interest in “what Mises said” on this or that topic, it also frustrated me that there was no simple online resource available where I could do this—despite so much of Mises’s works being available online.

Thus, I’ve used my time during the COVID-19 lockdown to create this compendium: over 8600 pages, 36 separate volumes, 200 megabytes.

Find it under the Free eBooks section of this website, or simply click here. This version was last updated May 12th, 2020. 

The list of titles of the collected works include:

Title

CTRL+F

Pages of the PDF

A Critique of Interventionism

KZ01

4-143

Bureaucracy                                                                                

KZ02

144-272

Economic Freedom and Intervention                                                     

KZ03

273-585

Economic Policy: Thoughts for Today and Tomorrow                                  

KZ04

586-682

Human Action (Scholar’s Edition)

KZ05

683-1635

Interventionism: An Economic Analysis                                               

KZ06

1636-1764

Liberalism                                                                                  

KZ07

1765-1973

Liberty and Property                                                                    

KZ08

1974-2028

Marxism Unmasked                                                                       

KZ09

2029-2154

Memoirs                                                                                     

KZ10

2155-2303

Money, Method, and the Market Process                                            

KZ11

2304-2658

Nation, State, and Economy                                                             

KZ12

2659-2883

Notes and Recollections, with the Historical Setting of the Austrian School         

KZ13

2884-3068

Omnipotent Government                                                                 

KZ14

3069-3421

Planned Chaos                                                                            

KZ15

3422-3465

Planning for Freedom (and other essays)

KZ16

3466-3658

Profit and Loss                                                                             

KZ17

3659-3718

Selected Works Vol I                                                                     

KZ18

3719-4151

Selected Works Vol II                                                                    

KZ19

4152-4608

Selected Works Vol III                                                                   

KZ20

4609-4929

Socialism: An Economic Analysis                                                           

KZ21

4930-5524

The Anti-Capitalistic Mentality                                                          

KZ22

5525-5613

The Clash of Group Interest and Other Essays                                       

KZ23

5614-5650

The Free Market and Its Enemies                                                       

KZ24

5651-5769

The Theory of Money and Credit                                                       

KZ25

5770-6306

The Ultimate Foundation of Economic Science                                         

KZ26

6307-6451

On the Manipulation of Money and Credit                                                                       

KZ27

6452-6676

The “Austrian” Theory of the Trade Cycle                                                                          

KZ28

6677-6689

Economic Calculation in the Socialist Commonwealth                                                     

KZ29

6690-6780

Money and Inflation                                                                                

KZ30

6781-6874

Epistemological Problems of Economics

KZ31

6875-7123

Entries for the Encyclopedia Britannica

KZ32

7124-7134

Theory and History

KZ33

7135-7529

Human Action (Liberty Fund Edition, volumes 1-3)

KZ34

7530-8442

A Critique of Bohm-Bawerk’s Reasoning

KZ35

8443-8451

Glossary (“Mises Made Easier”)

KZ36

8452-8602

Three Short Stories on Housing Economics

Originally published on Notes on Liberty. 

Do you love housing economics but have struggled to get the basic ideas across the younger generation? Yes, you get excited about reading 60-page reports, but kids these days have better things to do.

That’s why I wrote these three, action-packed, short stories which you can read to any child (or child at heart).

So without further ado, here are three stories about how the supply of housing affects the prices of housing.

Continue reading “Three Short Stories on Housing Economics”

The Economic and Political Dynamics of Zoning

Originally published on Mises.org

Ludwig_von_Mises[1]Both economic decisions and political decisions involve choices and tradeoffs. The difference is that economic decisions are ultimately informed and rely upon monetary prices, revenues and costs. Political decisions, meanwhile, do not depend on market outcomes—they can be based on love, legacy, favors, or establishing power relations.

Zoning is the practice of governments controlling the type, size, and population density of buildings. (Zoning should not be confused with building codes, which control the building materials and other design aspects of buildings.) The purpose of zoning has been to create separate regional “zones” of building types: broadly, these categories typically include residential, industrial, retail, and parks. The zones are then broken down into more minute categories, like low, medium, and high density homes, different kinds of retail businesses, and so on.

Zoning is a type of government intervention into economic decision making: it the practice of the state (whether it is the municipality, subnational, or national level) intervening in the affairs of private individuals in where and what they can build. By intention, zoning is a limit on the supply of housing. In effect, it is a limit on the quantity of the stock of housing; that is, it acts like any other quota or prohibition.

While many economists, from Rothbard himself, to even those in the mainstream, recognize the deleterious effects of zoning, there does not exist a single, thoroughgoing Austrian analysis on the subject. The purpose of this piece is to be that analysis. It is broken up into two sections: the politics of zoning, and the economics of zoning.

Continue reading “The Economic and Political Dynamics of Zoning”

Rethinking the Yellowbelt: Report Release

After a full year of research, the largest, most comprehensive report on the economics, politics, history, and policies of zoning in Toronto is available for download.

The full report is available both on the Housing Matters website, and quickly downloadable here: Rethinking the Yellowbelt. 

The “Yellowbelt” refers to the portion of the city that’s zoned exclusively for detached homes. The report goes into detail explaining when and why such a zone came into existence, where it spreads in the city, who is hurt by the existence of this zone and how; and what it will take to change the system.

A summary of the report follows. Of course, the report itself goes into much more detail.

Continue reading “Rethinking the Yellowbelt: Report Release”