The Freedom Bulletin

Guess who was recently in Beijing to give a speech on the European economy? None other than Dominique Strauss-Kahn, who chose today to make his return to the world of economics after his career and presidential hopes were derailed by (ultimately dismissed) sexual-assault accusations in May. In a 35-minute address at a business conference hosted by internet company NetEase, he said that European leaders are in denial about the severity of the financial crisis, that countries need to work together more, and that his former rival, French President Nicolas Sarkozy, and German Chancellor Angela Merkel don’t really understand each other. According to news reports, he received a warm welcome, and Chinese economist Li Daokui told him that many people in China love and support him. He looked and sounded just like his old self. Although DSK’s politics may be different than mine, I am so glad to see him back.

In related news, DSK’s wife, Anne Sinclair, was named France’s woman of the year on the same day by the magazine Terrafemina. The magazine cited her loyalty and courage and called her “both a heroine and a kind of anti-heroine.” I also was impressed by her support of a man who was hated and presumed guilty by so many. In my opinion, it is Sinclair, and not those who jumped to conclusions based on sexist and racist stereotypes, who was the true feminist throughout Strauss-Kahn’s ordeal. Although there have been rumors in the past month and a half that she might be thinking of leaving him, this seems to be false for now (knock on wood), as they were recently seen visiting Israel together and later celebrating their 20th wedding anniversary. As long as Sinclair doesn’t end up ditching her husband in the midst of his continuing legal and reputational struggles, I’d say she deserves this title for sure.

And finally, another surveillance video from the Sofitel hotel was published by French magazine Le Nouvel Observateur. It shows Brian Yearwood, the technical director of the hotel, following DSK around, perhaps a little suspiciously.

Sources: AFP, AP, Financial Times, IBN Live, News.com.au, RFI, Telegraph, Wall Street Journal

For a long time, I didn’t quite get why Ron Paul and his supporters made such a big deal about the Federal Reserve. I’ve never been a fan of inflation, and returning to the gold standard always seemed like a decent idea to me, but I place much more importance on direct and severe violations of our liberty, such as the Durham-Humphrey Amendment, full-body scanners, and the individual health insurance mandate.

I recently read Paul’s book End the Fed, in which he logically explains that inflation (increasing the money supply) causes high prices, which penalize saving by decreasing money’s purchasing power. This is essentially equivalent to taxation or even stealing.

Additionally, Paul argues that central banks, and their power to print new money, make possible the financing of big government and its accompanying violations of our liberty. If the Fed was abolished, all anti-freedom laws and programs would eventually crumble as well, because the only ways to finance them would be through taxes and debt, which would be unacceptable to the people and therefore to Congress.

One of the greatest passages from Paul’s book:

“When you think about it, debasing a currency is counterfeiting. It steals value from every dollar earned or saved. It robs the people and makes them poorer. It is the absolute enemy of the workingman. Inflation is the most vicious and regressive of all forms of taxation. It transfers wealth from the middle class to the privileged rich. The economic chaos that results from a policy of central bank inflation inevitably leads to political instability and violence. It’s an ancient tool of all authoritarians.”

(p. 134)

I heartily recommend End the Fed. It is a great introduction to economics from a libertarian perspective and an excellent explanation of the relationship between the Fed, the economy, and personal liberty.

President Obama recently gave a speech praising the recently passed version of health insurance reform and warning insurance companies not to use the new law as an excuse to raise prices. But unless strong measures are taken to prevent this, “Obamacare” will actually cause the price of health insurance to rise.

I oppose Obamacare, primarily because it requires all Americans to have health insurance. In my opinion, this violates everyone’s rights because people have the right to decide how they want to spend their own money, as long as they don’t do anything that violates the rights of anyone else. But according to economic theory, the individual mandate has a bad side effect as well – it makes the cost of health insurance go up.

If you haven’t studied economics before, here are the basics:

Usually, the higher the price of a good, the less the demand. Makes sense, right? Also, the higher the price of a good, the higher the supply, because producers are more willing to make a product if they can sell it for a high price. The supply and demand curves (or lines) can be shown on a graph. The point where the two lines intersect is called the equilibrium. This represents the quantity and price that will be produced in a free market.

However, by requiring everyone to purchase a product (in this case health insurance), the government stops demand from responding naturally to price. The degree to which demand for a good responds to price is called price elasticity of demand. People will buy necessities such as food, water, or insulin for diabetics regardless of their price. In economics-speak, the demand for these goods is inelastic. The demand for things such as lattes, CDs, and stuffed animals is elastic, because people can live without them and therefore tend to buy less of them if the price goes up. When demand is perfectly inelastic, the demand curve looks like a vertical line.

By forcing everyone to buy health insurance, the government makes the demand artificially inelastic. The problem with this is that when demand is perfectly inelastic, price basically approaches infinity. If consumers are going to buy something no matter what it costs, you can bet that producers are going to charge a lot.

Bottom line: according to traditional economics, the individual mandate will make the cost of health insurance go up.

Yes! Economist Joel Waldfogel wrote an article in the Globe yesterday saying exactly what I’ve been saying for years: the custom of exchanging gifts decreases people’s utility.

“When you spend $50 on me, you’re operating at significant disadvantage. You don’t know what I like. I might not have been willing to pay anything for the item you purchase for me with $50. While $50 in spending normally produces at least $50 worth of satisfaction, there’s no guarantee that $50 in gift spending will produce nearly as much satisfaction for the recipient. And if you buy me something worth nothing to me, you have destroyed at least $50 worth of value.”

Check it out!