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Richard Rahn

THE RIGHT TO BE WRONG IS CRITICAL FOR FREEDOM

freeyourmindMost people who have reached a certain age have changed their minds about something or someone that they firmly believed in the past. Many of the real conflicts in society, including hate-driven mass shootings, result from people who fail to acknowledge, even to themselves, that they could be wrong.

Yet today, we see some subset of Moslems who think they can take action against the rest because they are unable to acknowledge that they could be wrong in their beliefs.

We see the effort of many in colleges to shut down the free speech of those they disagree with. We see the effort of some to shut down media whose messages they reject.

We see those for whom global warming has become a religion rather than a science. They speak with great certainty about things they cannot possibly know, because of the immense number of variables, or in the words of F.A. Hayek, they suffer a fatal conceit (as did the early Bolsheviks).

All of this comes from a failure to admit, “I may be wrong,” and without such understanding, a civil society cannot exist.

We see those for whom global warming has become a religion rather than a science. They speak with great certainty about things they cannot possibly know, because of the immense number of variables, or in the words of F.A. Hayek, they suffer a fatal conceit (as did the early Bolsheviks).

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GOVERNMENT GREED – THE WORLD’S GREATEST ECONOMIC PROBLEM

WashMoney

At the end of this past week (6/10), The Washington Post ran a long story on the Center for Freedom and Prosperity (CFP), an organization that I have long supported. It appeared that the original goal was to do a hit piece on CFP because it had been a leader in the fight for global tax competition and smaller government.

It seemed to stun The Washington Post’s writers that only a couple of people with a tiny budget were able to stop major governments from even doing more of a tax-and-regulatory grab — mainly because the CFP only needed to effectively expose the facts and the truth, which they did.

Dan Mitchell, chairman of the board of CFP, quoted Michigan’s former Democrat Sen. Carl Levin (1979 to 2015) as saying that the CFP’s “activities run counter to America’s values and undermine the nation’s ability to raise revenue.”

Note: During the time the senator was in office, federal tax receipts soared from $463 billion to $3.2 trillion — and he complained that was not enough, showing there is no limit to the greed on the left to spend other people’s money, no matter how much economic and social damage it causes.

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THE FATAL SICKNESS OF FREE STUFF

The U.S. economy has been going nowhere for seven years, and there are increasing fears that it is going into a recession with only 38,000 jobs being created last month.

At the same time, Venezuela, the country with the largest oil reserves on the planet, is sinking into economic chaos. None of this need happen. The disease is the same -- only the fever is higher in Venezuela.

Politicians, at least going back to ancient Rome (with its bread and circuses), quickly understood that they could buy temporary support from the people if they were promised “free stuff.” As Margaret Thatcher famously said:

“The problem with socialism is that eventually you run out of other people’s money.”

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THE FEDERAL REGULATORY PARASITE

When Moses came down from the mount, he brought with him 10 rules covering most things that people really needed to know and could remember. There are now literally millions of federal rules that we are all supposed to have knowledge of and comply with — clearly an impossible task for any mere mortal.

The result is we have lost our individual liberty because, if the feds decide to target you, they can always find some rules you have broken. The IRS is Exhibit A, with more than 70,000 pages of rules that no one can possibly know.

Several studies from highly reputable institutions have been released in the last number of days, all with similar alarming conclusions — namely, millions of new jobs have not been created, and wages for existing jobs have stagnated because of the ever-increasing costs of new regulations.  What can we do about it?

Well, what do you do when you see a mosquito on your arm biting you?

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IS THE END NEAR?

The end is near — depending on how you define “near” and where you live.

A couple of weeks ago, hedge fund legend Stanley Druckenmiller gave an important talk arguing that the crisis is about to hit and investors should liquidate their equity holdings. He and others who have similar views have been the subject of much debate among economists — more of it about the timing of the next global and U.S. downturn and not so much about whether it will come.

The crisis has already hit many — depending on where you live and what assets you hold — and will eventually spread to billions of others, including a very large segment of the U.S. population.

The fundamental problem is most countries are experiencing little or no growth as a result of excessive government spending (particularly on transfer payments), and destructive regulations and tax policies.

The unwillingness of the politicians (and their voters) to cut back on spending and regulation has led to an explosion of government debt, which is not sustainable at current levels of economic growth. This, in turn, is fueling a demand for more government spending (more free stuff) and thus more debt.

How long do you think this can go on?

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GLOBAL PICKPOCKETS

Well brought-up individuals are taught not to take things from other people’s pockets: “Thou shall not steal.” There are those who never learned the lesson — criminals, and many in the global political class.

PickpocketsThe latest targets of the global looters are multinational corporations.  During the last few years, there has been an effort by high-tax countries (many of which are rich) to establish global minimum corporate taxes and for international tax bureaucrats to determine how taxes on a company should be allocated among the jurisdictions in which it operates.

Even though the effort is cloaked as an issue of "tax fairness," it is really an effort of more powerful countries and their political classes to take away more from those who earned it and spend it on themselves and their friends.

This effort to tax companies more raises a series of questions.

First, is it wrong for corporate officers to try legally to minimize their company's tax bills? No, in fact, corporate officers have a fiduciary responsibility to their stockholders, employees and even their customers to minimize costs, including taxes.

Second, should corporations be taxed at all? Again, the answer is No.  Here’s why.

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CLIMATE LYSENKOISM

This past month, I received an email from a European friend (who has a doctorate in chemistry) saying: “Dear Richard: Now you are a member of this illustrious club! I am beginning to be afraid! What is going on?” It seems my name had been put on a “Global Warming Disinformation Database.”

New York Attorney General Eric Schneiderman has invited more than a dozen state attorneys general to join him in investigating fossil fuel companies and their donations, because they raised questions about some of the “science” used by the global warming lobby. Al Gore joined him at the press conference.

What is going on is nothing more than modern-day Lysenkoism, named after Soviet biologist Trofim Lysenko, who had rejected Mendelian inheritance and the evolutionary theory of natural selection.

Lysenkoism is now used in a metaphorical way “to describe the manipulation or distortion of the scientific process as a way to reach a predetermined conclusion as dictated by an ideological bias, often related to social or political objectives.”  This is precisely the case with Climate Alarmism.

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NEGATIVE MADNESS

Would you like for the bank to give you a check each month for your mortgage interest payment rather than you paying the bank interest?

As mad as that question seems, the fact is that some homeowners in Denmark are now receiving checks each month because their mortgages have negative (below zero) interest rates. A negative interest rate is the situation in which the lenders pay you to borrow money from them.

A number of central banks now have negative interest rates, including Japan, the European Central Bank, Sweden, Denmark, Switzerland and others — all done in the hope of increasing inflation (which is more madness). The chairman of the U.S. Federal Reserve has said she is not ruling out negative interest rates.

Negative, zero or very low interest rates encourage people to buy much more expensive homes than they normally would, which is to their benefit until interest rates rise. Despite stagnant economies many European cities are experiencing a rapid rise in home prices largely because of low interest rate policies. This real estate bubble cannot be sustained, so at some point it is going to all come crashing down.

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FIGHT THE LEFT OR DIE

Last week, the nation’s largest coal company, Peabody Coal, declared bankruptcy, as have many other coal companies in the past few years.

They were partly victims of the development of fracking technology, which greatly increased the supply and reduced the cost of natural gas –  but they were even more victims of President Obama’s stated war on coal.

The officials of the coal industry could not do much about the fracking revolution, but they allowed themselves to be unfairly and irresponsibly pilloried by the green lobby and the Obama administration.

Over the years, I have watched many industries, companies and individuals be destroyed by unwarranted attacks, and even entire countries maligned. But I have also been impressed by those that have successfully fought back.

Just contrast the reaction of the National Rifle Association (NRA) and the coal industry.

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WE NEED MORE FINANCIAL CONFIDENTIALITY, NOT LESS

The “Panama Papers” uproar has caused the predictable calls for more financial transparency. Even if you are a person of modest means, do you want the government to know everything about your spending habits? Folks in government will always assure the people that any personal information — income, tax and health records — will be kept totally secret. But that is a lie.

Over the last couple of years, the innermost secrets of the U.S. government, involving national defense, personnel and IRS records have all been hacked or stolen. Far too often, those in government use sensitive information for their own purposes or for general citizen abuse and even blackmail.

To quote the British writer and barrister, Stanley Brodie, “The idea that everyone’s tax and financial affairs, assets and wealth should be open to inspection by the world at large only has to be stated for its absurdity to be seen.”

The “Panama Papers” revelations have caused many to attack “shell” companies. Most all companies begin as “shell companies,” meaning they have few real assets or operations. Some become giant corporations, some become proper vehicles for investment and productive uses, and a few are used for illegal purposes.

Cars, homes, boats, planes, businesses and government agencies can be used for proper and legal activities or, in the hands of bad people, can be used for criminal purposes. If we banned everything that is used for destructive purposes, we would all be lying naked in a cave without sticks or stones.

The fact is the world cannot function without a high degree of confidentiality, including financial confidentiality.

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THE CRUELTY OF GROUP SLANDER

Endless cruelties have been and continue to be committed on the basis of group slander.

The communists and socialists imprisoned and slaughtered many of their merchant and property-owning citizens on the basis of a gross slander, not to mention what the Nazis did to the Jews. In America, blacks, gays, many ethnic groups and women were first stereotyped, then slandered, and then discriminated against.

But the fashion of which groups of individuals can be slandered has changed to such people as Wall Street bankers; pharmaceutical, coal and oil company executives; conservative scholars; those who question the global warming establishment; and white males, among others.

The general rule that one is innocent until proven guilty goes back at least to ancient Roman law: Ei incumbit probatio qui dicit, non qui negat — “Burden of proof lies on him who asserts, not on him who denies.”

Over the centuries, not only individuals, but whole classes of people, have been denied this basic human right. The oppressors normally begin by slandering a group, and then use the slander to discriminate and ultimately persecute — and, unfortunately, this persists even in America.  Let’s take Bernie Sanders as a prime example.

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WHY IS HONG KONG RICH, CUBA IMPOVERISHED, AND PUERTO RICO BROKE?

Back in 1955, the islands of Puerto Rico, Cuba and Hong Kong had roughly the same real per capita income. They each took very different economic paths.

Now, some 60 years later, Hong Kong is even richer than the United States on a per capita income basis. Cuba is an economic disaster, having gone from the richest Caribbean nation to the poorest, next to Haiti. And Puerto Rico finds itself flirting with bankruptcy, with a per capita income much higher than Cuba’s but only roughly half that of Hong Kong.

The contrasting lessons of Hong Kong and Cuba provide a clear path that Puerto Rico must take to have an economic future.

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BEWARE OF GOVERNMENT GLOBAL NEWS NETWORKS

Berlin, Germany.  Even though the Berlin Wall was destroyed more than a quarter-century ago and the city rebuilt, new propaganda wars are being waged here and elsewhere by the major and some minor powers in a more sophisticated way than the Soviets ever imagined.

Disinformation has always been a staple of states and spies, but now the world’s airways are being swamped with state-controlled TV “news” stations. Of the 83 TV channels I have access to in my hotel room, roughly 32 of the 51 non-German channels are largely owned or controlled by various governments.

This includes the Russian, Chinese, Qatar (Al Jazeera), Thai, Vietnamese, Armenian, Turkish, and Cuban governments. The Russian, Chinese, Qatar, Japanese and French governments have full-time English-language channels here in Berlin, clearly designed to reach an audience outside of their home-country nationals who may be living in or visiting Berlin.

These are almost entirely commercial-free channels, paid for by the taxpayers of their respective countries, and are now found in most major cities in the world, at some considerable cost. The question is: Why are they doing it?

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TYRANNY AND FREE SPEECH

Do you support free speech? How about free speech for climate change skeptics? For homophobes? For racists? For sexists? For white males? For even Donald Trump?

Those who defend free speech, as did the American Founding Fathers, understand it is not about defending speech you agree with, but defending speech you disagree with. Without free speech, there is no liberty.

The State Department diversity officer, John Robinson, has just warned the staff that they may be penalized for engaging in "microaggressions," which include jokes or other comments that someone who hears them may find offensive.

In a recent letter, he referred to a definition of microaggressions as "everyday verbal, nonverbal and environmental slights, snubs or insults, whether intentional or unintentional, which communicate hostile, derogatory or negative messages to target persons." In other words, whatever you hear may be considered a microaggression if you choose to be offended.

Such vague and infinitely elastic laws and regulations are the bread and butter of all totalitarian regimes.

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AN ENDLESS NUMBER OF MILLION DOLLAR GIFTS

The presidential candidates have been decrying the real stagnation in income over the last seven years. People are unhappy but are not rioting in the streets. Why aren’t they?

Because despite wage stagnation, most people are living much better. How can that be? It is because those reviled capitalists all over the world are creating more and better goods and services at lower cost, and in doing so improving everyone’s real standard of living, well-being and happiness.

There are now 2.6 billion smart phones in the world — a product that is less than 20 years old. The Apple iPhone is only 10 years old, but it has changed the world.

Some economists have calculated that 20 years ago, if one had to buy all of the devices that do what iPhone apps can do, it would have cost much more than $3 million (that does not include those features that could not have been bought at any price two decades ago because the technology did not exist).

And that’s only the start of an endless succession of million dollar gifts capitalism has bestowed upon each of us.

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HOW TAXPAYERS WERE SOLD OUT FOR THE PRICE OF A GOOD MEAL

If a member of Congress told you that he was going to use some of your hard-earned tax dollars to support an international organization that demands that you pay higher taxes, what would you say?

Unfortunately, the question is not hypothetical, because that is exactly what is now happening. Congress is giving more than $70 million a year to the Organization for Economic Cooperation and Development (OECD), which has morphed over the last two decades from an organization that promoted trade and growth policies to an organization that pushes for higher taxes, which will reduce economic growth.

Meanwhile, the organization’s officials and lobbyists in Washington undertook an active campaign to wine and dine members of Congress and other agents of influence in order to preserve the funding they obtain from U.S. taxpayers, which accounts for about 25 percent of the OECD budget.

Here’s how we’ve been sold out for the cost of a nice lunch.

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THE ECONOMICS OF ALICE

MadhatterWhat the world’s major central banks have been doing is not working. Rather than go back to the tried and true, they are now digging in deeper on policies that are bound to fail, such as the move to negative interest rates, which many will find personally harmful.

The first bank-like institutions started more than 2,000 years ago by serving as a place for safekeeping of one’s gold and silver coins, with the understanding that the “bank” would lend out some of these coins in exchange for a payment — known as interest.

But now the financial world has been upended with the efforts of the major central banks to ...

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RESCUING OUR REPUBLIC FROM DEMOCRATIC TYRANNY

This past week, a majority of the members of the Supreme Court gave notice that there is a limit to how much of their and Congress’ power they will allow the executive branch to grab.

The Environmental Protection Agency (EPA) has been expanding its own definitions of what it is able to do under the Clean Air Act. The Supreme Court, in essence, said enough is enough when it put a stay on the EPA’s initiative to limit carbon emissions from power plants, in response to suits brought by several dozen states and industry groups. This was just one of several recent defeats of the EPA by the courts.

The tragic loss of Supreme Court Justice Antonin Scalia did, at least, ignite a discussion of the proper way to interpret the Constitution and may cause the next president to pick more justices who respect liberty. As Justice Scalia once noted: “There is nothing new in the realization that the Constitution sometimes insulates the criminality of a few in order to protect the privacy of us all.”

The American Founders created three branches of government — the legislative, judicial and executive — to serve as checks and balances on each other in order to limit the abuse of the people by those in government.

The Founders also created America as a federal constitutional republic and not as a democracy. This distinction, which too few Americans understand, is what preserves our liberties, even though many have been eroded.

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PROGRESSIVES ARE ANYTHING BUT

What does a "progressive" stand for? How does this differ from what a liberal, conservative or libertarian stands for?

More so than in most years, the presidential candidates are debating about labels. Hillary Clinton and Bernie Sanders got into an argument last week about what a progressive is, and Mrs. Clinton enlightened everyone by telling us "the root of that word, progressive, is progress."

There are two conflicting philosophical views as to the proper role of government. One sees the role of the state to protect the individual from the transgressions of others, while at the same time protecting the individual from the state in order to ensure individual liberty.

The other view is that the function of government is to protect the collective, and to directly provide for individual needs.

Correctly said, there is an endless struggle between "libertarians" and "statists."

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ENDING GOVERNMENT CORRUPTION BY ENDING SOVEREIGN IMMUNITY

A major reason for the growing distrust of government is the double standard whereby government officials and employees often suffer no consequences from incompetence, misbehavior and even criminal violations of the law.

In the common law, there is a general principle that if a person is damaged by the actions of others through negligence or illegal behavior, he or she has a right to redress.

The actions of government officials and employees are often far more damaging than those in the private sector, but they are protected by “sovereign immunity” and civil service protections.

Sovereign immunity is a “legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil suit or criminal prosecution.” It comes from the ancient concept that the “king can do no wrong.”

Since we don’t have kings in America, one way to get rid of much corruption and criminal malfeasance by government bureaucrats would be to substantially get rid of sovereign immunity. Let’s take what’s happened in Flint, Michigan as an example.

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SOCIALISM IS A FORM OF SLAVERY

Do you know what socialism is? Hillary Clinton struggled to find an answer when recently asked.

Socialism is a system in which the government owns or controls the means of production, and allocates resources and rewards.

Sen. Bernie Sanders proudly proclaims himself a “democratic socialist.” Many in the Democratic Party seem to have no problem with this and, in fact, are embracing him and his ideas.

America -- and its unique success as a nation -- was built around individual liberty and opportunity, not collective coercion. All too many no longer understand what the American Founders were trying to, and largely did, achieve. It is a tragedy that too few Americans understand the dangers of unlimited government.

The young people who support Mr. Sanders, and even Hillary, seem to be generally ignorant of why America worked. Many do not want the government to restrict unfettered abortions or their right to smoke pot, but seem to be oblivious that socialism and big government makes everyone into an economic slave.

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THE RECESSION OF 2016

There will be a recession in the United States and much of the rest of the world in 2016.

After reading the above sentence, you should be thinking, what possibly could the writer know that the International Monetary Fund, the Federal Reserve and the Obama administration do not know given all their resources and all of their professional economic forecasters?

If one looks at the forecast record of the IMF and the Fed over the past several decades, one will not find any case in which a year of positive growth was followed by a year of contraction in which the IMF or Fed anticipated the recession in April of the growth year.

Given the evidence, economic forecasting is far from an exact science, and forecasters and model-builders have much to be modest about. In fact, I do not know for certain that my opening sentence is true or not, but the following is my case for why my assertion is more likely to be true than the various official forecasts. There’s a quartet of reasons.

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HOW ABOUT REAL QUESTIONS INSTEAD OF GOTCHAS?

Do you know what type of person the various presidential candidates would appoint to the Supreme Court?

The next president is likely to be able to pick several Supreme Court justices, and those decisions will influence the direction of the American republic for decades in the future.

Despite the fact that we have had numerous "debates" between the candidates, we still know little about their governing philosophies. It would be helpful if the moderators for this Thursday's debate (1/14) delved more deeply into the way they would conduct themselves as president than just asking questions about current events or what they think about the other candidates.

Here are some real questions the moderators could ask instead of gotchas.

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WHY DOESN’T THE ECONOMIST UNDERSTAND ELEMENTARY ECONOMICS?

Those who have not studied economics often rely on the press, who are often equally ignorant of economics and, hence, are unable to differentiate between sense and nonsense. While The Wall Street Journal (and particularly the editorial page) normally gets it right, The New York Times and many other newspapers too often let political bias get in the way of the facts.

It is particularly disappointing when a former great newsmagazine, The Economist, allows very sloppy reporting and analysis on serious economic topics. This week, The Economist published an article, “Indecent Disclosure” (1/02) describing tax reform proposals of the Republican candidates as “exorbitant,” putting forth “hugely expensive” plans before “accounting for economic effects.”

The whole point of tax reform is to reduce the economic drag of the current US tax code -- which The Economist correctly describes as “a mess.”

But the article implies that higher tax rates will always bring in more revenue (which they appear to view as desirable) and lower tax rates will bring in less revenue. For very low rates that is true, but for high rates, it is false.

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RATIONAL GLOOM FOR 2016

The economist and philosopher F.A. Hayek warned us about the limits to knowledge and forecasting. What we do know, however, based on past behavior is that some future events have a much higher probability of occurring than others. So, now for 2016:

*There will be a major disruption in the global oil market, leading to higher prices, and this is why…

*There will be another financial crisis, and global economic growth will be less than the most recent International Monetary Fund (IMF) forecast, and this is why…

*Iran will let the world know that it has a nuclear bomb while publicly denying it, and this is why…

Happy New Year anyway.

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CHRISTMAS BRINGS PEACE TO THE WORLD

Why do billions of people, Christians and non-Christians alike, look forward to Christmas?

It is a holiday that makes almost all children, and most adults, happy. Globally, it has evolved into a non-threatening holiday that non-Christians can embrace with good cheer. Merchants of all faiths love it because it means more sales. And it is a joyful holiday that promotes peace and good will toward others.

There are, of course, those who dislike Christmas – atheistic socialists who hate anything to do with religion and commercial activity, fundamentalist Moslems, and those who are openly hostile to even the origins of Christianity.

Some Christians are, and have been for the last two centuries, unhappy about the way Christmas is celebrated as it has moved away from its religious roots -- perhaps without fully realizing that the secular Christmas celebrations around the globe, for the most part, also carry the indirect message of helping others, along with peaceful and happy coexistence.

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WASHINGTON IS MORE DANGEROUS TO FREEDOM THAN TERRORISTS

The chance of dying in a terrorist attack in any year in the United States is less than one in a million (even including the terrible attack of the approximately 3,000 killed on Sept. 11, 2001).

Many in the media over-hype the chances of dying in a terrorist attack while at the same time underestimating the number of potential terrorists and terrorist cells among us. At times like these, it is important to be rational about relative risks and prudent in mitigating them.

Most people have little understanding of the relative risks of dying when using various forms of transportation. Commercial airlines are by far and away the safest form of transit per passenger mile. In fact, you are about 62 times safer in an airplane than an automobile for a long-distance trip.

What most people have even less understanding of is the relative risks to our freedom that Washington bureaucrats and politicians create compared to those of Islamic terrorists. The former, it turns out, is far greater.

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KNOWLEDGE THAT ISN’T

ReaganTroubleVidWhen you hear politicians speak (the president or members of Congress) and they tell you that the science or facts are settled, do you tend to believe them or treat their comments with skepticism?

Those who survey such things show that faith in government and politicians has fallen to record lows. But many other professions have also seen a decline in public trust.

The government produces a "food pyramid" and dietary guidelines telling us what is good for us to eat and what is not. But it keeps changing -- eggs and whole milk were bad, and now they are good.

Global warming alarmists keep telling us the science is settled -- but doomsday keeps being pushed back. Not one of the major global warming models predicted the recent 18-year pause in global warming. Is it any wonder most of us now ignore the constant warnings of warming by Mr. Obama?

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SAVING HONDURAS WITH CAPITALISM

Tegucigalpa, Honduras. Why has Honduras lagged behind its neighbors and much of the rest of the world?

It is resource-rich, has deep-water ports both on the Caribbean Sea and the Pacific Ocean, is very scenic and, because of its mountain terrain, has sub-climates that meet most people’s preferences.

As can be seen in this table, Honduras compares poorly with neighboring countries and some other countries of similar size. Guatemala next door has a per capita income roughly 50 percent higher, Costa Rica three times higher, Chile five times higher, and Switzerland and Hong Kong about 12 times higher than Honduras’.

Honduras lags and suffers because of the lack of the rule of law and economic freedom. Now, a highly innovative program based on free market capitalist principles is being launched to come to the rescue of Honduras.

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A THANKSGIVING BOUNTY OF HUMAN PROGRESS

Your Thanksgiving dinner is going to be less expensive.

This year the average person will need to work 2 hours, 21 minutes and 57 seconds to pay for all the items in a standard Thanksgiving dinner for 10 people -- a work reduction of one minute and 8 seconds from last year. Back in 1986, the average person needed to work 3 hours, 12 minutes and 27 seconds to pay for the same dinner, or 50 minutes and 30 seconds longer than a worker today.

This is the great beauty of the capitalistic system -- in real terms, as measured by the time necessary to work to buy most anything, the price falls year after year.

Life expectancies have continued to grow both in the United States and worldwide (an amazing average increase of about three months per year for the last 150 years) -- despite all of the scare stories about what is going to do you in. Life expectancy is a good proxy for overall levels of health.

Real gross domestic product per capita (inflation adjusted) is now about three times higher than it was in 1950, and can continue to increase forever because of endless innovation and productivity growth (which, of course, is dependent on sensible economic policies).

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SAVERS AREN’T SAVING A DIME

Do not expect to get a higher real rate of interest on your savings — ever. Traditionally, people could expect to receive 2 or 3 percent more than the rate of inflation on their savings or money market accounts.

For instance, if inflation was 2 percent, many people received 5 percent interest per year on their government-insured savings accounts. The IRS would then tax the entire amount of interest received. So, even after inflation and taxes, most received a small, 1.5 to 2 percent real positive rate of return on their savings.

Contrast the current situation with what people traditionally expected. Now, if you are lucky, you may be receiving a half percent or so interest rate, about equal to the rate of inflation, yet the IRS still taxes you on this meager amount even though you have had no real interest income. So, at the end of the year, you are worse off — a negative return — because you did the responsible thing, and that was to save for your retirement or for various emergencies that come along with life.

The following is a simplified but accurate description of how we got into the mess and why the situation will not get better ...

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ATTACK OF THE GLOBAL TAXERS

Whatever happened to "no taxation without representation"?

Are you aware that the American government has been slowly giving away its power to international bureaucrats to determine how its businesses and citizens are taxed?

Most wars do not turn out the way the people who started them intended. Setting aside the hot military wars, look at the consequences of the “war on drugs” and the “war on money laundering and tax evasion.” The global war on money laundering and tax evasion has failed in the three decades since it began in earnest, and it is now on its way to undermining the rule of law around the world, the legitimate role of financial institutions, and the right of sovereign governments to determine their own tax policies.

The new anti-money-laundering laws and regulations have resulted in millions of Americans who live abroad and others living outside their home countries being unable to get bank accounts and other financial services in the countries where they live.

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COULD THE CONNECTION BETWEEN FREEDOM AND PROSPERITY BE MORE CLEAR?

There was good news for Argentina last week.

It was expected that Daniel Scioli, the Peronist candidate and political heir of Cristina Fernandez de Kirchner, would win the presidential election. Much to most people's surprise, Maurico Macri, the more free-market-oriented mayor of Buenos Aires, won almost as many votes as Mr. Scioli, forcing a runoff, which Mr. Macri has a good chance to win.

The Peronists (named after former dictator Juan Peron) have had political control much of the last 70 years, and it has been a disaster for the country. In 1900, Argentina was one of the 10 highest-income countries in the world, having an estimated gross domestic product per capita of roughly 80 percent of that in the United States.

Successive Argentine governments have squandered much of the wealth and potential of the economy, so now Argentina ranks approximately 57th in per capita income.

In contrast, Chile moved toward enhancing economic freedom, including increasing free trade, the rule of law and protection of private property, and curtailing corruption. The result is that Chile now has the highest per capita income in South America.

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SAVING PUERTO RICO SHOULD NOT BE DIFFICULT

Ultimately, if you continue to spend more than you take in -- whether you are an individual, business or government -- there will be a day of reckoning. Puerto Rico is likely to reach that day by December 1st.

Back in June, the governor of Puerto Rico, Alejandro Garcia Padilla, announced that the government debt of $73 billion had grown so large that it was no longer "repayable." At that time, many of us who have had experience with countries in fiscal crisis made recommendations (see my America's Greece) to avoid what is now almost certain to happen.

As is its pattern, the Obama administration waited until the last minute -- this past week -- to unveil its "solution," dubbed "Super Chapter 9." Chapter 9 is a provision in the U.S. bankruptcy code that allows local governments in U.S. states, but not the states themselves (including Puerto Rico), to declare bankruptcy.

Typically, this “solution” will make the problem worse rather than solving it.  The causes of Puerto Rico’s problems are clear – and so are the remedies.  Here they are.

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WHY ARE DEMOCRATS SADISTIC TOWARDS THE POOR?

On Sept. 29, Congress held a hearing on the rules proposed by the Consumer Financial Protection Bureau (CFPB) that would likely destroy much of the small-dollar loan industry and drive many low-income and poor credit-risk people into the arms of loan sharks.

The CFPB rules are so costly that most lenders will likely go out of business — by government intent.

Officials in the Obama administration’s IRS and Treasury have been callous and mean-spirited in destroying the ability of millions to obtain needed banking services, without providing legal and low-cost alternatives.

President Obama has made clear his intent to kill the coal and other fossil fuel industries. The results are that energy costs are being driven much higher, that hundreds of thousands of workers in these industries are now losing their jobs, and that low-income people will suffer the most from unnecessarily high energy costs.

These and so many other examples provide evidence that Democrats are sadistic towards the poor.

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HILLARYNOMICS

If Hillary Clinton were to be elected president, what economic policies would she propose and what would be the effect on the economy? To try to get an answer, I have looked at her statements, her campaign website, and her Senate record.

Mrs. Clinton has recognized the major economic problem of slow growth and stagnant incomes, and her economic platform is called, “A plan to raise American incomes.”

Unfortunately, the plan is largely a list of feel-good statements with very little specificity and contains nothing that would have a major positive impact on economic growth. (In fact, some of the proposals, such as increasing the minimum wage and overtime rules, would be negatives).

So let’s take a look at what she has done, not what she says.

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HOW GOVERNMENT IS INCREASING THE MISERY OF THE POOR

Grand Cayman. Government is supposed to make life better for people — particularly the poor — but the U.S. and European governments are increasing the misery of the poor.

In the popular culture, Cayman is viewed as place were tax evaders and money launderers put their wealth. The truth is quite different in that most money laundering takes place in the big financial centers like London and New York, not Cayman.

For many years, Cayman has had information exchange agreements with the Internal Revenue Service and U.S. Treasury and the major European governments — so one would be very foolish to put money in a Cayman bank with the intent of not getting caught for tax evasion or money laundering.

Cayman is a high-income jurisdiction as a result of having a prosperous financial sector (having nothing to do with illegal activity), a vibrant tourist industry, and an increasingly diversified economy.

It also provides a good example of how the US government in collusion with others is increasing the misery of the poor in countries around the world.

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THE GLOBAL CONSPIRACY OF MONEY-GRUBBING TAX BULLIES

Are you aware that there is an international effort to increase taxes, including those paid by Americans?

Next Monday (Oct. 5), the Organization for Economic Cooperation and Development (OECD, based in Paris) will release its “final package of measures for a coordinated international approach to reform the tax system under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.”

In plain English, what the OECD bureaucrats are attempting to do is put in place minimum international corporate tax rates, and companies will be required to share sensitive and proprietary information with non-Americans who may misuse it.

The OECD started life several decades ago as a trade promotion and statistical organization created by the few big, rich nations. As bureaucracies tend to do, the OECD grew in number of members and engaged in “mission creep,” most notably becoming a lobbying organization — using taxpayer money — for those wanting higher taxes.

The OECD should be re-titled OMGTB, the Organization for Money-Grubbing Tax Bullying.

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A COUNTRY OF THE FUTURE

Rahn_092215Tallinn, Estonia. Right now, Estonia is arguably the most advanced country in the world when it comes to use of the Internet and related technologies.

Estonia is a most improbable success, in that a mere quarter of a century ago it was still under domination of the Soviet Union as a very poor backwater on the Baltic Sea. Now it is a developed country and a member of both the EU and NATO.

Estonia has been the most successful of the former communist-controlled countries, in part because of excellent political leadership since independence, including the remarkable Mart Laar -- the father of the economic reform, who served as prime minister from 1992-1994, and again from 1999-2002.

The Estonians now have the rule of law, the lowest debt-to-GDP ratio in the EU, a balanced budget, free trade, and a flat-rate income tax -- all of which have led to their high economic growth and prosperity. Here’s how they did it – and why theirs is a country of the future.

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A NATION TO EMULATE

Zurich, Switzerland — When you think of Switzerland what comes to mind?

Beautiful lakes surrounded by the Alps; a rich country with happy people; the home of milk chocolate, expensive watches and discrete bankers; a peaceful country that has not been at war in more than two centuries?

All that is true, and even more. Switzerland is at or near the top of almost every measure of a successful country, including the just released Human Freedom Index compiled by the Cato and Fraser Institutes, and others.

The world would be far better off if a majority of its countries were run like Switzerland. And in this way too: almost no one knows who the president of Switzerland is. Do you? That’s also something to emulate.

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