Europe Should Reject Concessions To Greece

Because the Greek constitution has a provision which makes no sense at all, that new elections must be called for unless 60% of the parliament choose a new President (Then again it’s Greece, and few things in modern Greece (unlike ancient Greece) makes any sense at all), new elections were called for and the party that calls itself the Coalition of the Radical Left, better known by its Greek acronym of Syriza, has won the Greek election.

I analyzed their two key demands in a previous post and I stand by that analysis. I can only add that I both believe and hope that other European countries will reject their promises to the irresponsible Greek voters as the combination of debt writedown and deficit spending is unacceptable as it effectively amounts to a demand to receive foreign aid, which the Greeks have definitely made themselves unworthy of, by constantly being so irresponsible.

It should again be pointed out that it’s not like Greece have a good bargaining position. Though it has achieved a primary (excluding interest payments) surplus through the policies Syriza denounces, that surplus would disappear if Syriza’s radical left policies of deficit spending were implemented. And that would leave them with the position of having to ask someone to lend to them, which is not gonna, and certainly not should, happen if they just inflicted previous lenders with great losses.

Thoughts On The End Of The Swiss Currency Peg

What are my thoughts on the end of the Swiss currency peg?

Well, this is just another example of how difficult it is to maintain a fixed exchange rate without capital controls when markets believe the currency is either highly overvalued or, as in the case of Switzerland, highly undervalued. To maintain the peg, the Swiss National Bank has had to buy foreign assets equivalent to almost 80% of GDP, a number that would increase further if the peg would have been maintained something that would have meant that the future losses once the peg was ended. The purchases so far meant losses of about 13% of GDP (the equivalent of $2.3 trillion in the U.S.).

The macroeconomic effect of this is deflationary for Switzerland but inflationary for the rest of the world, especially the Euro area ( since it has most trade with Switzerland) since exchange rates are a zero sum game. When one currency, such as the Swiss franc, rises in value compared to other currencies, this means that other currencies falls in value by an equal amount. One country’s currency appreciation is other countries currency depreciaton. There can never be general or average currency appreciation- or depreciation.

One really funny thing about this is how Paul Krugman laments the end of the peg. This is funny because he of all people should welcome this given what he has said in other contexts. First of all he has argued for floating exchange rates, even going so far as saying that fixed exchange rates constitutes “currency manipulation” when China does it, yet when Switzerland does it, he endorses it, even though Switzerland has a bigger current account surplus relative to GDP than China. Secondly, as pointed out above, exchange rates are a zero sum game so this is inflationary for all other countries. And given the fact that Switzerland is very close to full employment with an unemployment rate of only 3.4%, it is odd that Krugman would conclude that Switzerland has a greater need for inflation than the rest of the world

Two “Anti-war” Delusions About The French Terror Attacks

Unfortunately, some U.S. libertarians, presumably driven by opposition to foreign interventions, keeps saying really stupid things to trivialise Islamist terror. The despicable terror attack on a French satirical news paper provides two more examples of this.

One was Ron Paul, who asserted that the attack was “foreign policy blowback”. Seriously? Why would they specifically target cartoonists if it had been about foreign policy? Shouldn’t it be blatantly obvious that the reason that Islamists target cartoonists who had satirized Muhammed is the cartoons, especially considering that one of the murderers specifically stated that they had “avenged the prophet” after carrying out the killings of people had satirized the prophet? I like many of the things Paul have done, including his promotion of Austrian economics, but his delusional belief that foreign policy intervention is the only thing that could possibly motivate Islamic terror is beyond stupid.

The other was Lucy Steigerwald at, who rhetorically asked whether “Free Speech martyrs were worthier victims than war casualties”? Actually, the issue isn’t those who are killed but those who are killing, but otherwise the answer is “yes”, this terror act is a lot more serious than collateral damage vitims in war. First of all, those murdered in Paris were clearly intentionally murdered while civilian casualties are (at least in the case of bombs from U.S. and other Western countries) clearly unintentional. And yes, it matters whether you kill someone by purpose or by accident, that’s why the justice system rightly distinguish between murder, manslaughter and killings in self-defence.

The other reason is that the intention and effect of this act wasn’t just the death of 12 people. It is also to stifle free speech as anyone who considers writing or drawing anything that Muslims considers blasphemous knows that doing so might result in their execution

Krugman Has Employment Numbers All Wrong

In his latest New York Times column, Paul Krugman asserts that employment has risen by 14 million in the U.S. in the past 8 years, which he says are only “slightly less” than the 16 million gain during the Reagan era.

No, it hasn’t. The Bureau of Labor Statistics says it has risen by only 2 million between November 2006 and November 2014. Why Krugman would want to publish such an easily checkable lie is hard to understand. It might be the case that he isn’t lying, but simply negligent in his research. What is clear though is that his numbers are wrong.

Also, comparing absolute numbers in employment numbers between the 1980s and the 2000s are obviously misleading since the absolute number of employed was 46% higher in 2006 than in 1980. So even if that 14 million number was correct (which it isn’t), it would have represented a gain of less than 10%, compared to the 16% gain during the Reagan era. It is more difficult to believe that this more methodological error is due to mere negligence.