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Almost the entire political class has isolated itself not only from people,             
Mission Statement
but from the laws of physics, economics and common sense. (John Brignell)                                           
Government is not the solution to our problems;
Government  IS  the problem !   (Ronald Reagan)

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Podcasts from around the Globe  

Tax competition between countries is good. International agreements that organise tax harmonisation are bad. Tax competition
compels governments to economic use of
public resources. It stimulates efficient public services, prevents wasteful public spending
and saves taxpayers money. Learn the logic, ethics & Benefits of of  tax competition in
this 5 min Video by Daniel J. Mitchell  Ph.D.

Happiness, Inequality, and Envy
Richard Epstein of the University of Chicago
talks with EconTalk host Russ Roberts about
the relationship between happiness and wealth, the effects of inequality on happiness, and the economics of envy and altruism. He also applies the theory of evolution to explain some of the findings of the happiness literature.

Europe's grat deception

The “Great Deception”
involves that successive treaties embodying economic integration were needed to give more jobs and economic growth, when the real agenda throughout has remained political integration, the construction of a Federal European Superstate under the joint hegemony of France and Germany.
Former Federal Reserve Chairman Alan Greenspan, Former Treasury Secretary John Snow, and SEC Chairman Chris Cox testified about the state of the economy, recent turmoil in the U.S. and global financial markets, and the role of federal regulators in the breakdown of the market on Wall Street. In response to sometimes partisan and pointed questioning Mr. Greenspan said that he may have been mistaken about the reliability of some financial instruments, such as insurance-like credit-default swaps, that were not yet common when he expressed his views about markets being able to police themselves
  See the 24-10-2008 hearing here
Listen to Ron Paul's comments here
Do Oil prices cause Inflation or are they just a Consequence?
One of the biggest fallacies of the current debate is that high oil prices cause inflation. That is not true. Only excessive money supply can cause a general price rise. Central Banks' easy money is  the only cause of the inflation they claim to fight.
Bernanke struggles to define
what banks FED could let fail

( Bloomberg Aug 17 2008 )
Greenspan warns:
More Bank Failures in the Pipeline

The insolvency crisis will come to an end only as US home prices begin to stabilise, and this is when the absorption of the huge excess of vacant homes that emerged from the housing boom is much further advanced than it is now. (Aug 4 2008)

Watch List
Imploded and ailing Institutions

Lew Rockwell interviews Jörg Guido Hülsmann on the FED's over- expansionary monetary policy
(18 min. mp3)  -  04 Aug 2008

Mark Thornton explains the reason why record setting skyskrapers are excellent forebodes of recessions: Unnatural abundance of easy credit causes unnatural construction booms which cannot but unwind in a bust when
overexpensive buildings find no tenants.

(10 min. mp3)  -  18 Aug 2008
The Truth About Inflation
Just where does inflation come from ?
Outer space, perhaps?
Lessons from the 1970s
The only historical period that bears any resemblance to what is happening today is the 1970s. Then, and now, an oil price shock turned into a rise in the general price level. Both then and today, central banks largely accommodated this price rise. It was a mistake then and is a mistake now. Monetary policy has been excessively accommodating for more than a decade, building up excessive inflationary pressures in the global economy....

podcastMust hear Audio Podcasts

The Role of Zoning in the Housing Bubble

How Urban Planning and Land Use Regulation
create artificial shortages and harm our prosperity,
our quality of life and our children's future
(cato Institute)

    Meltzer explains why and when Inflation is coming?
Prof. Allan Meltzer talks with EconTalk host Russ Roberts about the current state of monetary policy and the potential for inflation. Meltzer explains why inflation hasn't happened yet, despite massive increases in reserves created by Fed policy. Then he explains why inflation is coming and why it will be politically difficult for the Fed to stop it. Meltzer also analyzes the Japanese experience in recent years and talks about why so many investment banks overreached and destroyed themselves.

An Interview with Tom Woods on his new book
Woods gives his free-market look at why the stock market collapsed, the economy tanked, and government bailouts will make things worse.   Tom Woods' web site     Von Mises Institute Review

The Austrian Perspective on Business Cycles and Monetary Policy
Peter Boettke, of George Mason University, debates with EconTalk host Russ Roberts on the Austrian analysis of business cycles, monetary policy and the current state of the economy. The debaters explore the distortions and exuberance resulting from of easy money policy and government intervention. Another great EconTalk podcast which lifts the public debate on public policy on a higher level.  

Robert Higgs, of the Independent Institute, talks with EconTalk host Russ Roberts about the Great Depression, the New Deal, and the effect of World War II on the American economy. Using survey results, financial data, and the pattern of investment in the 1930s, Higgs argues that New Deal policies created a climate of uncertainty that prolonged the Great Depression. Using consumption data, he argues that prosperity did not return during wartime, but rather after the war when government intervention in the economy subsided.

Inflation and the Business Cycle:
The Collapse of the Keynesian Paradigm
Murray N. Rothbard   From the book "For A New Liberty" as read by Jeff Riggenbach.  
Mises University Media ( 1h 13: mins MP3)

The Economics of Inflation   
by George Reisman  
Mises University Media   ( 54:37 mins MP3 )

You can shear a sheep many times,
but you can only skin it once...

Most popular Items

The Audio library of Economics
Free to Choose: The Milton Friedman TV series
The freedom library - Economics &  philosophy

Is the Credit Crisis really over?
Destructive State Agencies
Green gone wild: Nature vs Human Rights
Economics & Business principles 25 videos  
The paved road to HyperStagflation
5% growth is no Utopia
The Failure-o
US & European Public Debt loose AAA Rating
The Future of the EMU

Causes of European Growth Differentials
European Social Model: Facts & Fairy Tales
Europe needs Saving
Great Myths of the Great Depression
Europe on the road to Serfdom?

Book Reviews: interviewing the authors (mp3)
Statistics: Guide to Global Data Sources
Quotes of the world wisest thinkers

Lisbon Treaty: Lies, Fraud and Deceit
Lisbon Treaty: Europeans want Referenda
Al Gore-ists advocate green Bureaucracy
Publications and lectures of H.H.Hoppe (mp3)
Tax competition: Logic & Benefits (YouTube)
Is the European Social Model doomed?
Can we still avoid Inflation (Hayek)

The Path to Sustainable Growth
Will pension time bomb sink the Euro?
Inflation & effective Monetary Policy
Fiscal Policy Lessons from Europe 
Entrepreneurship is lucrative... and just.
The optimal size of public Spending
Equality and growth: a non-linear relationship.

A Danish Model for all? IMF says No
More Europe will not solve our problems
Flexicurity:a Danish fairy tale come true?
Inflation explained on one Page.
What is Money - What is inflation.
Great Myths of the Great 1929 Depression

Is online banking Safe? Northern Rock lessons
Letter to President Bush
Shifting Tax on pollutors helps Economy.
Quotes of the world wisest thinkers

More Europe will not solve our problems
Flexicurity:a Danish fairy tale come true?
Inflation explained on one Page.
What is Money - What is inflation.
The Failure-of-Central-Banking
Shifting Tax on pollutors helps Economy.
Quotes of the world wisest thinkers

Other Languages
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   Free to Choose
The  famous Economics Series by
Nobel Prize laureate Milton Friedman

  Vol.  1 - The Power of the Market
  Vol.  2 - The Tyranny of Control
  Vol.  3 - Freedom & Prosperity
  Vol.  4 - The Failure of Socialism
  Vol.  5 - Created Equal
  Vol.  6 - What's Wrong with our Schools
  Vol.  7 - Who Protects the Consumer?
  Vol.  8 - Who Protects the Worker
  Vol.  9 - How to Cure Inflation
  Vol.  10 - How to Stay Free

States are aggressive entities which steal property through taxation and expropriation,  initiate physical force, create monopolies, and restrict trade. States today are as normal as slavery was in the old days.

Short Messages

For the 13th year in a row
Auditors refuse to approve the European Union budget.
12 % of regional spending was not accounted for. Farm subsidies got to Horse-breeding and golf courses

The rise of anti-Americanism in Europe is a danger to both American and European pocketbooks, and our collective liberty. Here is why: Europe and America are each other's biggest trading and investment partners, and anything that damages that relationship is harmful to everyone involved.

by Jan Krzysztof Bielecki
 More social spending by EU governments is not the best way to reduce inequalities, and can have unintended consequences, says Jan Krzysztof Bielecki, a former Prime Minister of Poland. He argues that the fastest route to cohesion both between and within member states is freer movement of people, capital and services
How poor are the American Poor ?
Poverty is an important and emotional issue. Last year, the Census Bureau released its annual report on poverty  declaring that there were 37 million poor persons living in the United States in 2005.  12.6 percent of all Americans. This number has varied from 11.3 percent to 15.1 percent of the population over the past 20 years. To understand poverty in America, it is important to look behind these numbers—to look at the actual living conditions of the individuals the government deems to be poor. Official data show 43% of them own a three bedroom dwelling. 80% enjoy air conditioning, 75% have a car and 31% of the poor families even have two vehicles. American poor on average dispose of 114 m² living space. Substantialy more than the European agerage of poor ànd wealthy families together: 86 m² in Belgium and 85m² in the UK.  
This analysis of the Heritage Foundation learns many american poor
are in fact much better of than most of the European wealthy

The Clean Energy Scam
Ethanol increases global warming, destroys forests and inflates food prices. So why are we subsidizing it?
Shadow Government Statistics

Analysis Behind and Beyond Government Economic Reporting

Big Government increases Poverty Rates
by Matthew Ladner, Ph.D., 
Using data from the U.S. Census Bureau, the Goldwater Institute finds High-tax and -spending states suffer  increases in poverty rates, both general and in childhood poverty rates.  The paper provides scientific evidence that private-sector job growth is the most effective antipoverty program. Policymakers who seek to reduce poverty and improve the lot of the poor should embrace policies promoting as much private-sector growth as possible, and therefor reduce taxes and limit the growth of public spending.  Contrary to dogmatic beliefs and special interest claims by those those employed by the government programs the paper demonstrates that the promotion of Big Government, high taxes and public spending destroy wealth and actually hurt the poor.

The Laffer Curve explained
  In these short Youtubes, Dan Mitchell
explains the relationship between tax rates
and tax revenue, and the reasons
why marginal tax revenu declines
when tax rates increase. Historical examples
proove the case for moderate tax rates.
laffer curve
by Daniel J. Mitchell  Ph.D.
Part 1   Part 2     Part 3
Please also visit :
Center for Freedom  and

Destructive State Agencies
  by Dr. Martin De Vlieghere  Ph.D
    Not only dictatorships but also democracies have appallingly destructive state agencies, that threaten both internal and international peace. Apparently western civilization has not yet developed an adequate understanding of the dangers of state power. Martin De Vliegere analyses the destructiveness of state activities and investigates the reasons why Why it is so difficult to curb the growth of government.

„There will be no further crash in our lifetime“,   John Maynard Keynes

The Paper Money Collapse
Detlev Schlichter talks about the Folly of Elastic Money, the benefits of deflation and the chaos of the Coming Monetary Breakdown. He explains why our "Paper Money sytem" is inherently unstable and due to Collapse just as all fiat monetary systems in collapsed in the past. (Youtube)

The European Stability Mechanism (ESM)
is the End of Democracy (YouTube)

discover the draft treaty here

Euro Rescue Program at IMF could spread Rescue Risk Worldwide

For Euro Investors, Time to Check the Fine Print
About the Problem of Redenominated Contracts after an Euro split. (WSJ)

Why the ECB Won't (and Shouldn't) Just Print

Pacta sunt Servanda
Treaty on the Functioning of the European Union (TFEU)
as amended by the Treaty of Lisbon (2007)

Article 123 : Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as "national central banks") in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments

Article 125 : The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.

EFSF Spread widens to 195 BPS
Leveraging compromises Funding Capacity

Van Rompuy and Sarkozy Oppose Eurobonds

The Beginning of the Endgame (John Mauldin)

"If France is downgraded, a number of French banks will almost certainly be downgraded, following which other European banks will face the same destiny. Such a scenario has the potential to cause calamity across Europe. The 90 European banks which recently went through the (so-called) stress test organized by the European Banking Authority need to roll a total of €5.4 trillion1 (!) of debt over the next 24 months. A massive amount even during the best of times. Probably undoable during times of stress.... T
he demographics of Spain and Italy are horrendous, soon to be on a level with Japan. The government portion of GDP in France is already 53% and is only going to get worse as aging Boomers have been promised monster benefits....  If Greece defaults on its debt, the E.C.B. will not only lose a pile on its holdings of Greek bonds but must return the bonds to the European banks, and the European banks must fork over $450 billion in cash."

Economic Freedom & Quality of Life (Youtube)

Markets are now pricing in a de facto Break Up of the Eurozone

Breaking News: Greece Considers Exit from Euro Zone
Secret crisis meeting in Luxembourg on Friday night

FRAUD: Federal Reserve Is Selling Put Options On Treasuries
To Drive Down Yields (video-evidence)
The ultimate FED fraud explained after interests are manipulated down to zero

CNBC interviews Jeremy Grantham (video)
Investment strategist Jeremy Grantham, explains why stimulus packages fail to stimulate the real economy. The sole effect of the artificially low interest rates is risky asset bubbles, causing massive damage when they burst. The wealth effect of manipulated stock markets is minute. Grantham advises his investment strategy during times inflating global asset bubbles

Why European Bonds won't reduce the PIIGS' public funding cost
(Daniel Gros @ project Syndicate)

In substance, the current eurocrisis can be summarized to the systemic flaw that a single monetary policy for economies with highly different growth rates is not sustainable and leads to the leveling down of growth prospects. On average, the growth deficit due to the single currency can be estimated at a yearly 2 to 3%. For Ireland, the introduction of the euro caused an abrupt end to a most prosperous period of 20 years of unprecedented growth.

The Daily Bail
News Portal about Public Debt, Deficits, Bailouts, QE, CDO's, CDS's, IRS's,
Central Banks, Swap Lines...  and other ponzi schemes

 S&P cuts Japan’s Credit Rating Cut to AA-

RODRIK: Don’t Count on Global Governance

Matt Ridley: Rational optimism.
A cheerful survey of the never ending story of human development. Ridly explains the 
rationality behind its accelerating trend. Profit seeking innovators, improving communications, advancing science and creativity, and globalizing trade are all multiplicative forces ever increasing the pace of progress and improving our use of resources.  Time after time apocalyptic alarmism about depletion is being denied by reality: the stone age did not end by lack of stone, nor did the bronze age by lack of bronze. Even so will the oil age end long before we run out of oil. History is an ever lasting repetition of improving products, tools and processes. For sure next generation of Ipad’s and gadget will be better than today’s. For sure entrepreneurial greed and globalizing trade will make our cars ever more fuel efficient.  The only treat to nature and mankind are restrictive forces obstructing progress: Statism... and environmentalism.  Some more evidence here:

Tax Competition:
Swiss Lessons from the Belgian Constitutional Debacle
It is more than four months now since the elections, and the formation of a Belgian government seems further away than ever. Walloon and Flemish politicians are diametrically opposed on a new Finance Act. The degree of regional fiscal autonomy is the discordant issue.   read more....

Did Frensch Mercantilism cause the Great Depression?  
(Douglas Irwin @ Econtalk)

Ask not whether Government will default, but how, and vis-à-vis whom

ECB Study:  The Impact Of High Public Debt On Growth
Negative growth effects of high public debt start already from levels of around 70-80%  of GDP, through delirious effects on private saving;  total factor productivity and sovereign long-term nominal and real interest rates. From a policy perspective, the results provide additional arguments for debt reduction to support longer-term economic growth.

FED Paper:  The Money Multiplier does NOT Exist
 The results in this paper suggest that the unprecedented rise in quantity of reserve balances is not likely to trigger an increase in lending.

Europe's Bank Stress Tests May Be Too Little Too Late

ECB Economists on Why Austerity Is Better Than Stimulus

Why the Fed has no other Alternative left but to print Money
Dr. Marc Faber

Do European Banks continue to hide their Losses?
“There are a lot of insolvent European banks" Kenneth Rogoff says. “They need a lot of restructuring. They’re in denial.”  Angela Merkel wants “maximum transparency” about the stress tests to restore confidence

How insane can Environmentalism get?
Congressman Hank Johnson (Georgia) expresses his concerns (video)
that the US. Island of of Guam is going to "tip over and capsize" due to overpopulation.

The effect of Government Size on Life Satisfaction

The Asch Experiment on Group Conformity (YouTube)

Climategate Update
The scientific scam explained (YouTube)
A perfect storm is brewing for the IPCC
The errors of the IPCC's report are not incidental
but systhematic and fundamental, says Christopher Booker
  Phil Jones admits: NO significant Warming since 1995 ! (BBC)
  Chief UN Climate alarmist De Boer resigns
Pachauri pressured to quit  (video)
   Scientists forged Global Warming Research

Roubini warns for new bubbles at Davos

Beware the 4 new asset bubbles

How Will The Greek Tragedy end ?

Climategate: Scientists forged Climate Research 
to make up the Global Warming Hoax

The anti-globalist Agenda behind the Climate Conference
 Why a Climate Treaty is both Unfeasable and Undesirable 
The environmental lobby gradually succeeds in promoting "the environment" to the "Golden Calf" of the 21st century. Rationality and sense of proportion have  vanished from the environmental debate. Whoever questions Al Gore's climate alarmism gets labeled as "negationist" worse even than Holocaust deniers. Even human rights, democracy and prosperity give way to the new idolatry.Recent research however learns how much the climate alarmists exaggerate “global warming” an its effects. Anti-globalist motives seem to dominate the Copenhagen Climate Conference rather than environmental concerns. This hidden agenda is likely to distort global trade and inflict development and the environment more bad than good.

The Dangerous return of Utopian Socialism at the UN
Not Capitalism but our ill conceived Monetary System caused the Crisis
We do not need to replace the Capitalist System with a Swedish style social model as UN economist Jeffrey Sachs argues. We only need a just monetary system. Such  system can only be equitable and achieve efficient allocation of resources when money growth is zero or at the most limited to the growth of the real economy. A return to the gold standard may be the best guarantee thereto

 Economic Recovery Requires Capital Accumulation,
Not Government "Stimulus Packages


Classical Liberalism versus Anarchocapitalism
Why the State is a superfluous Body and why it is so difficult to Limit its Power

Understanding the Crisis in the Markets
Exclusive panel discussion of Harvard Experts (Video)

How Each government job destroys two jobs in the private sector.

America’s triple A rating is at risk (Financial Times)
Prices on credit default insurance on US government bonds are rising, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s....

wall street crash keynesian debacle
Lessons from the 1929 Crash & Great Depression
How we can avoid a Remake of the Keynesian Debacle

The  Laffer Curve  in the USA:  Facts and figures
Tax Rates, Tax Revenues and Taxcode :  1975 1985 1989 1995 2005
Highest marginal Tax Rate (%) 70% 50% 28% 39,6% 35%
Tax Revenues as a % of GDP 17,9 17,7 17,3 18,5 17,6
Words in the Income Tax Code (Millions) 2,9 4,4 4,8 5,7 7,1

The Fallacy of Keynesian Spending Stimulus
Two key questions Keynesians never aswer about their bailouts and spending stimulus packages are: Where does the money come from? How would the money have been spent without public interference?
The fact of the matter is that the money spent or re-allocated by governments allways comes from somewhere else in the economy. Public programs are financed through higher taxes, through borrowing or -worse still- through inflationary money printing. Buying power is thereby withdrawn from the private sector and public spending is therefor allways crowding out private spending. Moreover public agencies face high operating costs and lack the tradition, knowledge and incentives for efficiency, making public initiatives far less productive than the foregone private investment. Public interference is therefor hindering growth and productivity rather than boosting it. Japan's lost decade is a typical example how public misallocation of resources has lead to a long lasting stagnation.  From The Wallstreet Journal

RAHN: The optimal Size of Government Spending
Fundamental research shows that economic growth and new job creation begin to slow when total government spending is larger than about 25 percent of GDP, Government spending in the United States is actualy about 36 percent of gross domestic product (GDP). Is Obama's big spending policy really the way to to create more jobs and boost economic growth?  See the Washington Times

The Chris Martenson Crash Course
Learn everything you need to know about the economy in the shortest amount of time. A unique series of 20 spoken presentations of ± 5 minutes each. The series helps to understand the challenges in these troubeled times of creative destruction of malinvestment and excessive bureaucracy and helps to see the opportunities in this transgression to a more prosperous society.

The EUSSR wishes you an even more totalitarian 2009 ! 

The centralisation of power in the European Union continues apace. Last week, the Bruges Group and exposed the policies that the EU wants to force on Europe over the coming year. These plans include adding more costs onto business; more EU control over financial services; EU oversight of the nuclear industry; more EU control over energy policy; complete EU control over asylum and immigration; even more EU threats to consumer rights; more EU control over transport; more EU control over justice and home affairs; and more EU involvement in health and education...
Expense Allowance Abuse
by EU- MEPs 

Interest rate cuts may be desirable, but are ineffective in dealing with the current crisis. The only effective instrument to prevent economic downturn is fiscal policy.

We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads -- the difference between the government cost to borrow and what private-sector borrowers must pay -- are at historic highs. Ms. Schwartz, co-author with Milton Friedman of "A Monetary History of the United States" explains that this is not due to a lack of money available to lend,  but to a lack of faith in the ability of borrowers to repay their debts.

"The Fed," Ms. Schwartz argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is the uncertainty if the balance sheets of financial firms are credible."   Ms. Schwartz explains how to restore interbank trust and how to avoid the present financial crisis from develloping in a full blown depression.    more here

" If a loose monetary policy and rapid asset price inflation really were the route to economic prosperity, Argentina would be the richest country in the world by now."  Read this and 8 other most pertinent observations on the present financial crisis and  the inevitable conclusion here
(another great analysis from John Mauldin's Frontline Thoughts )

also see :  Lessons from the 1929 Crash and the Great Depression

It was fear for loss of their sovereignty which made the Irish vote NO against the Treaty of Lisbon:
fear that European law would prevail above national law particularly in the field of taxation, morals and abortion. The European Court of Justice now seizes the power which the Irish People rightfully refused to grant her. In the Metock ruling the European Court lets prevail European laws above national immegration laws anyway. This is a most dangerous precedent as in this way Europeans step by step loose their souvereighty. Denmark has the most immediate problem: this jugment declares their recent immigration legislation   completely void and worthless.  04 Aug 2008   read more here
Dr. Hans Herman Hoppe shows that small countries are performing much better than large ones. Prosperity, well being and democratic rule are better in small states. He explains why the EU superstate is not about free trade and peace, but about bureaucracy and about harmonising  legislation and tax regimes throuhout Europe to avoid tax competition and enabling exploitation of hard working European citizens by the political elites.

Ireland votes NO to foreign Rule - YES to Democracy
Results & comments here
When will they listen to the People's Voice?
EU Referendum results

Free Trade: Yes!

Super-State: No! 
The French and Dutch peoples rejected the EU Constitution in their
2005 referenda. In order to avoid more defeats, the political elites
annuled referenda in 5 other countries. In stead they disguised the rejected Constitution as the "Treaty of Lisbon" with identical content.
Only the Irish people were asked for their consent, and the verdict
again was a clear NO ! Politicians of other EU states agreed to give up their sovereignty to Brussels without referenda. The political elites are thereby violating EU rules and transforming European democracies into a Sowjet-like centralised bureaucratic superstate. Under EU laws, if one member state rejects a treaty, the EU must scrap the bill. Should the Eurocrats ignore the Irish NO-vote and pursue anyway, the EU would loose its legitimity and EU democracy will be changed in an illegitimate autocracy of manufactured consent.

Lisbon Treaty:  Lies,  Fraud and Deceit
The text most governments introduced to their Parliaments is NOT the same as the final version of the Treaty.Governments sold a pig in a poke. Peter Mach discovered a seemingly inconspicuous sentence in the middle of the final consolidated version enabling the EU Council of Ministers to adopt directives on minimum rates for taxes and excise duties upon a claim that national rates distort competition. The sentence gives a fatal blow to the sovereignty of member states in the most crucial field of fiscal matters. This was not approved as such by Parliament. The  fraud exposes what this treaty really is about: disabling Tax Competition and transforming the European continent in a huge HIGH TAX CARTEL from which no escape is possible.  more.... 

Why the EU can get along without Lisbon Treaty very well.

     PART  1         PART 2:  EUSSR

EU Commissioner Wants Far-Reaching New Powers for Brussels
The EU's monetary affairs commissioner has called for far-reaching new powers for the European Commission. He would like Brussels to have greater control over economic policy in euro zone countries and wants its members to speak with one voice on the international stage

The Costs of Regulation and How the EU Makes Them Worse

 Everyone, including politicians, agrees that red tape stifles the economy. Unnecessary and preventative regulation, based on no data or scientific investigation, let alone a risk assessment, impedes entrepreneurial activity, social existence and liberty. It makes the lives of those it tries to protect, empty and dull; it prevents technological development; and lowers economic performance, keeping many people in poor conditions.   Read the pdf paper here

Euro – Dollar: Soon Back to Parity?   by  John Mauldin
June 4th 2008. Milton Friedman once declared: "Europe is becoming ever-more susceptible to asymmetric shocks. Sooner or later, when the global economy hits a real bump, Europe's internal contradictions will tear it apart."   Friedman foresaw all to well that at some point, the weaker European countries were going to need more monetary stimulation than the majority of the countries in the union.  The major asymmetric shock may well come from an unexpexted source: Asia. Asian central banks have long been buying US$ and Euro to prevent their currencies from rising. Rapidly rising food and energy are now leading to fast inflation rates across Asia. This has triggered a change in Asian monetary policy, notably a willingness to let the currencies appreciate and slow down their inflation. As a result Asian central banks will no longer buy as much Euro bonds, and at least some European governments may well find it very difficult to raise further financing.
 Will this Asian asymmetric shock mean the end of the Euro?  Maybe. The problem is that Europe is not a nation and the Euro is still an experiment in cooperation, and that governments go bust when they issue too much debt in a currency that they cannot print themselves. Considering the number of players involved in the monetary decision process policy paralysis could soon grip Europe. Markets have finally acknowledged that the European solemn promises to converge have not been kept. All across Europe, spreads between bonds of the "stronger" nations (Germany, Holland..) and the "weaker" signatures (Italy, Greece, Belgium, France) are widening. Another question, of course, in the present credit crunsh is what would happen in the event a major European bank went bankrupt. Would EU's competition rules allow the ECB or government to bail out the failing institution?  Read the analysis here         More on the Euro here  

Surging inflation will stoke riots and conflict between nations, says report.
Merrill says inflation will widen gap between rich and poor and that governments must curb rising prices. Riots, protests and political unrest could multiply in the developing  and developed world as soaring inflation widens the gap between the "haves" and the "have nots", the investment bank predicted...

The Stateless Society - An Examination of Alternatives
by Stefan Molyneux

The single greatest danger to human life is the centralized political State, who extinguished more than 170 million souls during the bloodiest rampage in recorded history. Modern States are the last and greatest remaining predators. The danger has not abated with the demise of communism and fascism. All Western democracies currently face vast and accelerating escalations of State power and centralized control over economic and civic life. In almost all Western democracies, the State chooses how children are educated,  the interest rate citizens can borrow at, the value of currency, how employees can be hired and fired, how more than 50% of their citizens’ time and money are disposed, when to go to war, who can live in the country,  where we can build our houses etc...Most of these intrusions into personal liberty have occurred over the past 90 years. States are parasites which always expand until they destroy their host population.  Most people are comfortable with the idea of reducing the size and power of the State. Most become uncomfortable with the idea of getting rid of it completely. It could be done and make us all hapier and wealthier...     read more here 

Alarming rise in US and German inflation.  Oil at $130
The world’s most important central banks:Fed,ECB and BoE are losing all credibility. They persistently fail in their prime duty of fighting inflation. Fake official inflation figures fool people about the pace their savings are loosing value. Monetery policy is no longer targeted at price stability but at bailing out the banking sector from their greedy malinvestments at the expense of people's buying power and living standard.  More about the political pressures facing Central Banks   in this  *****  podcast

By Wolfgang Munchau (Financial Times)
Burst asset price bubbles triggered the Great Depression in the 1930s and more recently cost Japan a decade of economic growth. The stupidity that got us into the presenty financial mess was low, and occasionally negative, real interest rates over long periods of time. Now that the housing bubble has burst, central banks are responding by cutting interest rates yet again....

By Paul de Grauwe, K. U. Leuven
The subprime crisis laid bare the unsustainability of the US economy. US monetary authorities allowed Credit and liquidity to expand to unsustainable levels. This fueled the unsustainable US consumption boom. What the US needs is a higher savings rate. There is no way around it. The best way to achieve the structural reforms needed is through an old-fashioned recession. Unfortunately US authorities will do everything they can to prevent such a structural reform.

Why are central bankers giving us misleading m2 money supply figures and deceptive (partial) Consumer Price Indices (CPI)? Central bankers do not want You to know the real rate at which they are printing money nor that M3 Growth rates hit all-time highs all over the world. They do not want people to know at what rate our money is loosing its value. John Williams (Shadow Government Statistics) is interviewed here by CNN. He expects the deception wil end in a deep depression.  In this interview with "Financial Sence Newshour" (Apr 12th 2008), Williams warns US m3 money growth reaches 17% and that real inflation already is a double digit rate. Williams forecasts that the FED's continued low interest policy will lead to a massive flight out of the Dollar and forecasts a hyperinflationary Depression in the US by 2010. Inflation is the only way out to avoid US government from defaulting on its massive debt and unfunded social security obligations amounting to 400% GDP.

The International Monetary Fund last week gave central banks some wicked advice*. They should no longer ignore residential property prices when setting interest rates. At the same time, the IMF recommends central banks should retain their inflation-targeting frameworks. It all sounds very plausible. Unfortunately the two goals are inconsistent.
Inflation targeting proponents view central banks’ responsibilities as minimalist. But the subprime crisis shows that central banks cannot avoid taking responsibilities that include the prevention of bubbles and the supervision of all institutions that are in the business of creating credit and liquidity.

There is a 9 month inventory of unsold homes. It will take until 2010 before the US residential construction sector begins to recover....

See this CNN report how easy money and the bank sector's greed  causes social drama. See how aggressive mortgage sales & refinance loans lead to overindebtness and tragic situations in millions of American households. It is time to fundamentally rethink this monetary system which favours such abuse and risks to cause a global crisis. High finance caused too much grief already.

In the past, housing shocks were transmitted across the Atlantic. Will it happen again? There is a high correlation between US and EU house prices. Deutsche Bank measured the sensitivity of European house prices to change in US house prices, and concluded that Ireland and Spain are most vulnerable to a slowdown in US housing...  

More about the Credit Crisis & US Housing Bubble at :
 Calculated Risk   or    Eurointelligence   or   Stormwatch

Is the Credit Crisis over ?
The fundamental Analysis Your Banker won’t disclose
by Paul Vreymans
The credit crisis is the school model of malinvestment resulting from exorbitant credit expansion. Runaway money supply, highly underrated inflation and disguised credit risk disturbed the correct pricing of the risks of credits and lead the credit mania.

Lessons from 200 years of Stock market crashes, 
Booms and Recessions from 1800 to 2002 - Facts and figures
By Wolfgang Munchau (Financial Times) 29.04.08

The repackaging of CDOs (known as CDO repacks) is a relatively recent phenomenon arising from the poor performance of a number of CDOs in 2002 and 2003. Repacks are considered to be ‘first derivatives’ of CDOs and, as Moody’s explains: “In a typical repack, the terms of the existing CDO are restructured, with changes in seniority, notional amount, coupon, maturity and waterfall priority. The cashflows of the existing debt are used to support restructured debt securities to achieve the desired ratings.”  Learn How mortgage CDOs work in this 3 minute graphic presentation

Moody's, Standard & Poors as well as US Chief accountant Comptroller General David WALKER confirm: Social security may pressure US and European public debt ratings if medicare and social security reforms are not carried out. Moody's Investors Service cautioned, adding that subprime risks do not affect the government's rating.  'In the very long term... these two programs are the largest threats to the long-term financial health of the US and to the government's 'Aaa' rating,' said Moody's vice president Steven Hess.  Loss of AAA rating would skyrocket the burden of the public debt service.

OECD finally confirms:
Consumption Tax is the Way of the Future.

ncreased international tax competition will make it more difficult for governments to collect corporate and personal income taxes from their citizens. Taxes on consumption will become a more important source of revenue. This tax shift will however improve economic efficiency, boost growth and protect employment as it will encourage savings and investment.  It will also reduce marginal tax rates and thus increase the incentives for indeavour. Specific indirect taxes can also be help to improve efficiency and environment friendlyness. Distortions from consumption taxes are much less harmful than those from income taxes.        Read the full OECD report here  

by  Christian Bjørnskov,

High public spending does not only cause slow economic growth. Big Government also significantly lowers the quality of life.  This is the main conclusion of an empirical research into the effects of government involvement in the economy and into the question whether public involvement is conducive or detrimental to life satisfaction in a cross-section of 74 countries.

Christian Bjørnskov, Axel Dreher and Justina Fischer provide a test of a longstanding dispute between standard neoclassical economic theory, which predicts that government plays an unambiguously positive role for individuals’ quality of life, and public choice theory, that was developed to understand why governments often choose excessive involvement and regulation, thereby harming voters’ quality of life. Results of the empirical research show that life satisfaction decreases with higher government spending.

This negative impact of the government is stronger in countries with a leftwing median voter. It is alleviated by government effectiveness – but only in countries where the state sector is already small.   
        pdf format here....

Charity Doesn't Mean Spending Other People's Money.
Cal Thomas hits the nail on the head in a column defining compassion:

Before government hijacked charity in the form of the New Deal and Great Society, compassion and charity began at home. People were to feed the hungry, clothe the naked, visit prisoners, care for widows and orphans and love their enemies. Those were biblical commands to individuals, not government.
Democratic politicians see things differently. Apparently believing there aren't enough caring people, they want compassion to originate in Washington or Brussels, depriving it of its true meaning. They define compassion as big and ever-growing government and a guaranteed check forever with no expectation - or requirement - the recipient will ever better his or her circumstances.
Traditionally, Republican compassion has encouraged private charity with government picking up the leftovers of what religious and other charitable institutions were unable to do. President Bush, through his "faith-based initiative," took this one step further by subsidizing religious groups with federal money. This removes the responsibility and privilege from individuals and turns it over to government. When that happens, religious organizations become one more constituency in the never-ending campaign for political support. ...When politicians speak of compassion, put your hand on your wallet because they intend to spend your money, not theirs.
The subprime Meltdown

Is the Credit Crisis really over ?

The fundamental Analysis Your Banker won’t disclose.
ECB-M3-money-supply-RateTo find out whether the present financial crisis annex real estate bubble and hedge fund collapse will remain confined to a minicrash or whether more turmoil is still to come, the authors investigate whether the deeper causes leading to the crisis are now remedied. The credit crisis is the school model of malinvestment resulting from exorbitant credit expansion. Runaway money supply during the boom and highly underrated inflation disturbed the correct pricing of the risks of credits and lead to a credit mania. 

The ECB played a central role in the credit expansion. For the sake of the lagging countries in the European Monetary Union the ECB maintained interest rates too low for too long, causing an exorbitant 11.7% money growth rate which was still adding to the worldwide credit bubble initiated by the FED.  The essay launches an original and justified plea for a reduced money supply not higher than the growth rate of the real economy for as long as gold standard is not restored. The essay ends with an strong advise to savers to closely monitor the money growth rates and interpret any further acceleration as an unmistakable early warning of worse to come.        More here....       pdf format here....  

Manipulating the Interest Rate: a Recipe for Disaster
By Thorsten Polleit - 12/13/2007

The turmoil in the US subprime mortgage market has developed into an international credit crisis. It is eroding investor confidence in credit and credit-related products and, most important, raising concerns about the solidity of the banking sector, as evidenced by banks' elevated funding terms and diminished stock prices.

As a direct response to the credit crisis, the US Federal Reserve Bank lowered borrowing costs even further, disregarding the alarming risks of inflation since early 2006. Financial markets are speculating that the US central bank could cut rates even further. The cause of the international credit crisis lies in the government-controlled paper-money regime and their systematic attempt to push interest rates below the natural market rate in an effort to boost the economy. This artificial boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom will come to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.  


Mortgage Mess Hits Home For Nation's Small Builders

March 21, 2008

In the first wave of the housing crisis, homeowners across the U.S. lost their properties to foreclosure. Now, many of the nation's small and midsize home builders are on the ropes....

In the end we are all  Debt
Europe Goes Bankrupt too!
The onrushing financial collapse in the United States is receiving ample coverage. The financial problems are however not limited to the US; they are of a global nature. It seems unknown to most, that in fact the majority of the Western 'developed' world and not just the United States is facing national bankruptcy shortly ahead.
Standard & Poor's warn that European indebtness is just as unsustainable as the American, and that downward rating of public debt is in the pipeline.
You can read alarming  internal S&P report from the Worldbank website here

The Long Johns - The Last Laugh - George Parr - Subprime
The best and funniest explanation
of the subprime meltdown
Youtube Broadcast on 14/10/2007
. John Fortune & John Bird on the South Bank show

International Forecaster Weekly

New Statistical Study Confirms that High Tax Rates
Discourage Productive Behavior:
America Should Learn From Europe's Mistakes

The Center for Freedom and Prosperity Foundation today released a study estimating the negative employment impact of high tax rates on labor. The Prosperitas report, which analyzed data from the United States and several European nations, is adapted from A.J. (Bram) de Bruin's thesis, submitted as part of the graduate program in Econometrics and Management Science at Erasmus University in Rotterdam, Netherlands.

Mr. de Bruin's paper entitled, "Labour Supply and Marginal Tax Rates:  A case study of Belgium, France, Italy, the Netherlands, the United Kingdom and the United States of America," investigates the effect of labor income taxes on the supply of paid labor for several Western countries over the last two decades. In addition to confirming the damaging effect of labor income taxes, the paper also gives specific estimates of its magnitude for several countries and at the same time sheds some light on the amount of time it takes for changes in taxation to affect the labor market.

Peter Heemeijer, a lecturer on quantitative economics at the University of Amsterdam, who wrote the policy summary for this study, found that the "conclusions of this paper are consistent with the notion commonly known as the Laffer Curve, which holds that a decrease in marginal tax rates on productive activity in high-tax societies will stimulate economic activity, thereby generating at least some additional government revenues that compensate for the revenue loss due to the lower tax rate."    Link to Paper: 
Tax Competition File

We should favour Tax competition between countries and fight against international tax cartels and
tax harmonisation because tax competition compels governments to economic use of public resources.
It stimulates efficient public services,  prevents wasteful public spending and saves taxpayers money.

The cause of tax evasion are taxes
By: Wolfgang Münchau
The German government purchased a CD with stolen information from a Liechtenstein bank as part of a wider jihid against tax evaders. Germany always had a problem with tax evasion because of high marginal tax rates. Slovakia with its 19% flat tax has no such problem. Austria, which has one of the lowest tax rates of the industrialised countries, has no such problem either, even though, unlike Germany, it has a direct border with Liechtenstein...

Threats to Financial Privacy and Tax Competition       
by Richard W. Rahn and Veronique de Rugy

High-tax nations and international organizations such as the European Union, OECD and UN seek to squelch tax competition between nations. Severe sanctions against tax havens and countries protecting financial privacy are already in place. The OECD is incriminating tax competition as being “harmful”. This a reversal of reality. Competition is on the contrary encouraging efficiency and higher growth rates. Tax competition limits the ability of governments to limitless tax increases and provide politicians with incentives to improve government efficiency. Competition between governments encourages efficient public services save taxpayers money and prevent wasteful public spending.  Tax competition therefor promotes good fiscal policy and protect human rights. The anti tax-competition campaigns and the attacks on financial privacy are intended to perpetuate highly uncompetitive structures and wasteful bureaucracies rather than searching to reform the European high-tax regimes.

People aiming to stifle tax competition often assume that competition is a zero-sum game. In reality, the large economic gains made possible by tax rate cuts mean that tax competition can be beneficial for all countries.  As countries adopt more efficient tax systems, economic growth is maximized, and all citizens have higher incomes. All countries end up better off as each country pursues its own interests. Tax harmonization initiatives aim to place higher taxes on capital, yet capital formation is the key to economic growth. Higher taxes on savings and investment result in less investment, lower real wage growth, and more poverty. Tax competition is therefor beneficial to both prosperity and freedom.    Read the analysis here

Tax Competition Helps the Global Economy   
by Daniel J. Mitchell & Jason Clemens  

Tax competition exists when people can reduce their tax burdens by shifting capital and/or labour from high-tax to low-tax jurisdictions. This migration disciplines profligate governments and rewards nations that engage in pro-growth tax reform. This process is good for the global economy since lower tax rates increase incentives to work, save, and invest. Not surprisingly, some high-tax governments despise tax competition and would like to see it reduced or eliminated....

International competition between governments is akin to market competition for products. Market competition encourages production efficiency and satisfaction of consumer demands. Tax competition provides politicians with incentives to improve government efficiency and satisfy voter demands. The result of tax competition should be that the level of taxes reflects typical preferences within each jurisdiction. Tiebout’s theory focused on local governments, but with growing international flows of labor and capital, national governments are becoming more like local governments as they compete for taxpayers across national borders.

 Rising tax competition has caused governments to also adopt defensive rules to prevent residents and businesses from enjoying lower tax rates abroad. Defensive responses to tax competition include proposals to harmonize taxes across countries and to restrict countries from offering tax climates that are too hospitable to foreign investment inflows. Such defensive responses are detrimental to progress as well as to tax receipts...    :

Behind the tax haven taboo
Daniel J Mitchell

Too much sloppy thinking concerns itself with evasion. Low-tax and notax environments offer many social benefits, writes Daniel J Mitchell. Many “onshore” nations are tax havens, and this is a good thing. Tax havens, wherever they are based, promote good fiscal policy and protect human rights. The anti-tax competition campaigns of international bureaucracies, by contrast, are based on bad economics and dubious morals. If high-tax nations want to reduce tax evasion, they should fix their tax systems. Thanks to tax competition, this process already is under way, but many politicians from high-tax governments – particularly in Europe – are fighting to preserve their uncompetitive welfare states. The narrow and selfish agenda of these politicians should not be allowed to undermine the valuable role of tax havens in the global economy. 

"This paper examines various arguments addressed in favour and against tax competition. We pay attention to deӿnitional matters of tax rates and bases, review empirical evidence concerning development of corporate taxes in the EU and the OECD countries over last decades and investigate whether anything suggests that there has been interdependence in corporate tax rate setting across countries. Furthermore, we recapitulate efforts done both by the OECD and the EU to stop tax competition. Finally, we argue that tax competition is not harmful and that it emerges as a means of constraining governments to discipline."
  Number 2, 2006, New Perspectives on Political Economy, Volume 2, , pp. 86 – 115, by Dalibor Rohác, Evidence and Myths about Tax Competition


Places in the sun: the Economist Defends Tax Competition.

The Economist has an entire section on the "offshore" world in the latest issue. Among the key findings are that so-called offshore financial centers promote growth and discourage wasteful government:
   …the most vexing problem that highly mobile financial flows pose for governments is that when they cross borders they may take tax revenues with them. …As companies become ever more multinational, they find it easier to shift their activities and profits across borders and into OFCs. …Financial liberalisation—the elimination of capital controls and the like—has made all of this easier. So has the internet, which allows money to be shifted around the world quickly, cheaply and anonymously. …tax, regulatory and other competition is healthy because it keeps bigger countries' governments from getting bloated. Others argue that OFCs may be an inevitable concomitant of globalisation. "Even if today's OFCs were somehow stamped out, something like them would pop up to take their place," says Mihir Desai of Harvard Business School. Some academics have found signs that OFCs have unplanned positive effects, spurring growth and competitiveness in nearby onshore economies. …International organisations have launched various initiatives to try to get OFCs to tighten supervision, co-operate more with foreign governments to catch tax cheats and, at least in Europe, eliminate "harmful" tax practices. OFCs think such initiatives are designed to force them out of business. The countries that set these standards "are an oligopoly trying to keep out smaller competitors. They are both players and referees in the game. How can they be objective?", asks Richard Hay, a lawyer in Britain who represents OFCs. …the broader concern over OFCs is overblown. Well-run jurisdictions of all sorts, whether nominally on- or offshore, are good for the global financial system. 

 The European Tax Cartel

The Financial Times attacks Brussels' misguided campaign against tax Competition

The FT notes that tax competition between nations encourages responsible behavior by the tax-authorities and that low taxes promote growth. Unfortunately Europe's big-tax lobby will not be satisfied until all such pro-growth tax policies are exterminated. The European Commission seems to recognise no limits in its drive to impose tax harmonisation across Europe. Having issued a sanction against Luxembourg last July for its preferential tax regime on holding companies, Brussels is now trying to put pressure on a country outside the European Union by targeting Swiss cantons' tax breaks and low business tax rates.

   Such a move, if it succeeds, will hurt not only the Swiss but all taxpayers in Europe. Tax competition gives you - the entrepreneur or citizen - the opportunity to escape fiscal pressure from your own government by moving to jurisdictions with more favourable tax regimes. It gives strong incentives for all governments to lower taxes, allowing taxpayers to keep more of their money and making markets less distorted.   Such tax competition has existed for some time in Europe and is being intensified by globalisation. The EU harmonisation logic will inevitably lead EU bureaucrats to attack other regimes that benefit taxpayers, be they in the EU or outside. In Ireland, for example, the corporate tax rate is lower than in Swiss cantons and in Estonia undistributed corporate profits are simply not taxed. When can we expect pressure on Ireland to raise its rates or on Estonia to repeal a system that has contributed to its economic dynamism?    Read the FT essay here
  More concerns over Europe's attempted Tax Cartel here    and here               and here    and here.....

Excellent New Study on European Tax Cartel

The European Tax Cartel and Switzerland’s Role

  • Most European States expect to record high increases in public spending, due to the lack of adaptation of social dependency programs in the face of demographic change. The taxpayers' fiscal exhaustion leads some Member States to use the European Union to centralize and standardize tax systems in order to render less competitive those countries deemed too attractive for capital or residents, increasingly encouraged to "vote with their feet

  • Tax centralization at European Union level progresses at a much faster pace than is generally perceived. High minimal rates for the VAT, which represents more than one third of all tax revenues, the standardization of excise taxes and tariffs, the Savings Tax Directive and the project of a Common Consolidated Corporate Tax Base for corporate income taxes are all examples suggestive of the extent to which the European tax cartel is already a reality. The EU makes use of such dubious concepts as "harmful tax competition" or "fiscal state aid" in order to attack less penalizing tax regimes, as in the case of the current tax dispute with Switzerland.

  • Fiscal diversity places some limits on an excessive tax burden and thus favors capital accumulation at the source of innovation and economic progress. It leads to greater overall prosperity than under a standardized tax regime. Tax competition is also an essential condition for institutional innovation by allowing comparisons between countries and the emulation of best practices. Finally, fiscal diversity is a necessary bulwark for individual freedom and legitimate rights by restraining the potential for abuse of the monopoly of force intrinsic to the State and by making "voting with one's feet" easier. (Link to full study below.)

July 2007, Institut Constant de Rebecque, The European Tax Cartel and Switzerland's Role

How did Ireland become the ‘Celtic Tiger’? 


 If we want to apply to Irish recipe to other countries, we should not use the wrong ingredients. The Goldwater Institute identifies the key features of the Irish growth.  
In the mid-1980s, Ireland transformed its economy from a European backwater into the “Celtic Tiger” by achieving impressive rates of economic growth. Government non-interest spending declined, from a high of about 55 percent of gross national product in 1985 to about 41 percent of GNP by 1990. The top Irish tax rate dropped from 65 percent in 1985 to 44 percent in 2001. The standard income tax rate dropped from 35 percent in 1989 to 22 percent in 2001. All these measures increased Irish wealth and reduced poverty. According to the Goldwater Institute, some experts have been drawing the wrong lessons from Ireland’s economic success in attributing it to subsidies in biotechnology. The Irish boom began many years before these investments were made. In fact, these subsidies may have harmed the growth. According to the author, the key feature for Ireland’s sustained growth has been an increasing economic freedom.           Read the full report here.

EU Subsidies Were Not Key to Irish Economic Miracle

DublinIreland's economic boom and explains that smaller government and lower tax rates are the key reasons the nation's explosive growth. Bureaucrats in Brussels and opponents of limited government sometimes claim that subsidies from Brussels deserve the credit, but advocates of this position are unable to explain why Greece and Portugal (which received similar subsidies) have remained poor.

Tax relief—particularly corporate tax relief—has played an indispensable role in Ireland’s economic success.  At present, Ireland has a 12.5 percent corporate tax rate, which has made it a magnet for powerhouse firms: Google, Yahoo, Microsoft, and scores of other companies have established their European headquarters in Ireland.  In 2004, then-Irish finance minister Charlie McCreevy, who now serves as EU commissioner for internal markets, proudly declared: “In Ireland, I have reduced the standard and top rate of tax by 6 percentage points each since 1997 and have put in place measures which have resulted in a situation where 35 percent of all income earners are now outside the tax net.” In the same speech, McCreevy urged envious nations calling for Ireland to raise its corporate tax rate to mind their own business.

     There have been increasing signs of optimism from European economy watchers. After some years in the doldrums, with slow growth and rising unemployment, things appear to be looking up: labor markets are more efficient; growth was good for 2006; and the euro is doing well against the dollar after years of weakness following its inception in 1999. However these promising signs must not be misunderstood as indications of permanent improvement, for the conditions that caused Europe's decline—rigid and inflexible markets, too-high public spending, and excessive taxation—are still there. The long-term survival of the European "social model," with its massive welfare spending, will ensure that the continent will lag behind America, much to the chagrin of the chauvinistic French, and the Germans who seem to have forgotten the Erhard doctrine and the secret of the success which once made Germany the world's third-biggest economy...  Although there once was a radical freemarket tradition in France, this is now but a distant memory. Formal Marxism might be dead, but it still casts a long shadow.  read the essay article here

OECD Admits Living Standards Lagging in European Welfare States.
Writing in the Washington Times, Helle Dale points to a recent OECD study which found that the EU and other European countries are falling further behind the United States as Europe's economy continues to stagnate. Among the key reasons for Europe's economic woes are protectionist policies which favor national companies at the expense of foreign competition. American politicians who are intent on turning the clock back on free trade can learn a valuable lesson:  According the OECD Economic Survey of the European Union (, the EU and other European countries are falling further and further behind the United States in standard of living as the U.S. economy continues to outgrow those of Europe.

The Mona Lisa, Leonado da Vinci's oil painting from 1503 - and in excellent condition is perhaps the most famous and most desired piece of art in the world. It is property of the French state, and may come up for in five to ten years, when France's doomsday of bankruptcy nears.

Other lines of thougt to finance France's unfunded pension debt go in the direction of more discrete sale and lease-back formulas.  Indian financiers are reported to have made conctrete sale and lease back proposals
for both the Louvre Museum and Eifel Tower, which have however been dismissed by Frensh officials as these were seen as the greatest humiliation of France since the state last went bankrupt in 1720.

Read more :
Mona Lisa up for sale in French doomsday

French PM Fillon tells farmers 'France is broke'

France is bankrupt and can no longer afford to pay its workers generous salaries and subsidies, its prime minister has declared.   Francois Fillon made the undiplomatic outburst during a trip to the French island of Corsica, where farmers were demanding more government money.  "I am at the head of a state that is in a position of bankruptcy," he said. 
read here :

Public finances should be put on a sustainable path so as to avoid large increases in taxes – and hence in the excess burden of taxation – or brutal cuts in social programmes when ageing related budget pressures rise. The HFC estimates that public finances would be on a sustainable path if the structural budget balance were increased to a surplus of 0.3% of GDP in 2007 rising to 1½ per cent of GDP over 2011-18 before slowly falling back to zero by 2030 as the budget costs of ageing rise. Public debt would fall from 97% of GDP in 2004 to 30% by 2030. Effectively, lower interest payments make room for higher ageing-related budget costs on this trajectory. There is still some way to go to put public finances onto this path – taking into account announced measures and abstracting from non-recurring transactions, the structural budget balance is projected by the OECD to be a deficit of around ½ per cent of GDP in 2007, similar to the estimated current level. The government should take consolidation measures to increase the structural budget balance (abstracting from non-recurring items) by about 1% of GDP by 2007 so as to put public finances on a sustainable path. In view of Belgium’s already high tax burden and the adverse effects that this has on economic activity, the priority should be given to expenditure restraint in budget consolidation

 The IMF and the Itenera Institute caution the Danish reality is bleaker than it appears. In the latest edition of their bi-annual study of Westen social models, the Brussels Free Institute for Economic Research found Danish performances deplorable. Obligate employment in low-productive jobs ruins productivity and leads to social regression. They warn flexicurity is a painfull and totally useless exercise and that the social cost is high. Flexicurity means late retirement, early school leave, loss of job security, shrinking leisure and time for a decent family life and lacking opportunity for the children's education. Flexicurity is not an economic miracle nor the social paradise some want us to beleive. The institute found the Irish model by far the best performing alternative.             
 Global Warning File 
 Al Gore-ists and Kyoto-crats advocate green Bureaucracy

Hard working Yuppies have no time to think. Whenever they get a few days off, their suitcases are packed to fly to Ibiza for a weekend-party or for some pro-active off-road Hummer-adventure. Their vacations are as hectic as their jobs. So even then there is no opportunity to reflect on their lifestyle. This is a vicious circle: pressed by the mass media and the advertisement industry the young professionals do not get the chance to question their cultural image of normality. Politicians do not have the courage to tackle the squandering either. Rather than simply taxing energy consumption they create a new bureaucracy with thousands of inspectors and technicians to promote ‘ecological’ technology. A CO2tax is much more simple and effective. Let the polluters pay the ecological cost of their squander. High fuel prices can stop the madness and encourage research without new bureaucracy. ...continue reading Martin De Vliegere's analysis here...

  Worldwatch:  Shifting Tax Burden to Polluters
 could cut Taxes on Wages and Profits by 15%

Increasing taxes on pollution and resource use while lowering taxes on income and wages is a powerful new tool for protecting the environment, reports a new study from the Worldwatch Institute titled Getting the Signals Right: Tax Reform to Protect the Environment and the Economy. Such a tax shift could also create millions of jobs and boost living standards of the working poor.
 Countries around the world are now experimenting with environmental taxes, says the report, which documents how five nations have made revenue-neutral "tax shifts," using the money from environmental taxes to cut the conventional taxes that penalize work and investment.
Continue reading the Worldwatch views here. (Worldwatch is an Independent research institute for an environmentally sustainable and socially just society.)

Is Golbal Warming  a hoax ?  : see this  5 min YouTube
In this eye-opening documentary viewers will discover how the most respected researchers from all over the world explode the doom and gloom of global warming. Humans stand accused of having set off a global climate catastrophe by increasing the amount of carbon dioxide in the atmosphere. The prophecy of doom is clear and media pass on the message uncritically. Now serious criticism has arisen from a number of heavyweight independent scientists. They argue that most of the climatic change we have seen is due to natural variations.
Also see: The great global warming swindle (Channel 4 Doccumentary YouTube  Part 1  Part 2  Part 3  Part 4  Part 5              Part 6  Part 7   Part 8   Part 9: Debate )

dan_mitchelWestern Europe and the United States are wealthy. Both achieved this because of sensible policies and institutions. While much of the world was and still is crippled by the absence of functioning market economies, Europe and the United States have enjoyed remarkable growth thanks to property rights, the rule of law, and minimal government.

However over the last decades some European nations allowed the burden of government to climb to depressing levels. Government spending consumes more than 50 percent of GDP in Fr
ance and Sweden and more than 45 percent in Germany and Italy.

eir poor performance  provide useful lessons about the economic consequences of bigger government, and these lessons suggest that also America is on the wrong track. The most important lesson to be learned is that GDP is linked to policy.

Even a curso
ry review of European economic performance shows that excessive government has serious adverse effects: slower growth, higher unemployment, lower living standards, and a bleak future. Bluntly stated, the United States is in danger of becoming a decrepit welfare state like France.     Find out more here at :
Zimbabwe's Economy is at the end of its tether.
From   Apr 5th 2007
Judging by the pot-holes, rusting street lamps, broken traffic lights and pencil-thin residents of Harare, Zimbabwe's capital city, the former model of an African economy is at the end of its tether. The water supply fails in much of Harare as frequent electricity cuts hit. With each passing month the city is darker, a bit more decrepit and home to more child-beggars. Those with jobs are forced to walk for hours to get home, as wages no longer cover the cost of public transport. Hunger is spreading. Life expectancy has dropped to roughly 35 years as AIDS and lack of food bite. More families skip meals entirely. Political tension is rising high: divisions in the ruling Zanu-PF party; a series of violent attacks by police on the opposition Movement for Democratic Change this month ....

One more very sad example confirming Hayek"s law: when dictators rule the economy rather than free markets they only create create artificial scarcity, inflation, and price- and market distortions, economic stagnation and ultimately political instability....          

read the full story from the economist here
The OECD says Sweden should consider abolishing the state income tax

In a report on the Swedish economy, the Oecd the notes the problems of Sweden's high tax rates and excessively generous welfare benefits. It calls for the elimination of the wealth tax and reductions in punitive marginal tax rates. It even suggests that Sweden abolish the state income tax alltogether.

Sweden's new government has will stick to the target for general government net lending of 2% of GDP over the cycle which is necessary to keep public finances on a sustainable path. Underlying this target is the assumption that taxes can be sustained at current levels which could be difficult in the future, not least due to mobile tax bases and international tax competition.

The share of 20 64 year olds who depend on public income transfers has declined to 20% in 2006, but it remains much too high. Sickness absence among those employed and the number entering disability pension increased rapidly from the late 1990s. The numbers are now falling, although the stock of disability pensioners remains among the highest in the OECD. 

Letting people keep a bit more of the value they create is vital to encourage both labour supply and entrepreneurship. The plans to abolish the wealth tax should therefore be endorsed as it might lead to repatriation of capital, possibly making more investment capital available for new small firms. Marginal income taxes are also important. The combination of social contributions, income and consumption taxes drives the effective marginal tax rate above 70% for over a third of the full-time employed, helping to explain why working hours for those employed are below the OECD average. In fact, completely abolishing the state income tax would cost just 1½ per cent of GDP.
big government
Big Public Spending
means poor Growth.

Slow Growth
results in Poverty.

are the key findings from our research
confirming the results of earlier studies such as this
which compared the growth differentials of 30 OECD countries
over 45 years  
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The monetary union drives the EU toward further political integration. It sets in motion forces that are difficult to control probably ending in a United States of Europe, a real federal state with a central fiscal, social, educational, trade and foreign policy. Martin De Vlieghere explains why this will likely happen, why it is better to stop this development but why it is so difficult to stop, and what the history learns us about earlier monatary unifications.     
It could still go the other way. This means broadening the European Union, but not deepening it, by accepting additional member states (the more the better) without abandoning the veto-right of each member state in matters such as fiscal and social harmonisation. The ten new member states have had a beneficial effect on European politics. They have caused mounting pressure to reform the Common Agricultural Policy. Since the Poles joined, for instance, their agriculture has gained access to an enormous market and it will grow enormously. There are no physical restraints to the expansion and the productivity rise in Polish agriculture. But under the current CAP rules the numerous Polish farmers and the emerging big industrial farms will devour the entire European budget. European agricultural policy will simply collapse if it is not changed drastically.  Continue reading.    printerfriendly version

by Paul Vreymans

competitivityThe introduction of the Euro was an erroneous policy inspired by Europe's haughty ambition speed up integration and to catch up with the US. Europe's economies were  unsufficiently synchronised for justifying a common monetary policy.  Today the consequences of this political gamble disregarding economical reality are dramatic. 7 years only after the launch of common currency, European economies have seriously grown apart. In just 7 years a fast modernising country like Ireland gained 37% in competitivity relative to the OECD average, whilst Italy lost 19%. This adds up to an intramonetary union difference in competitivity gain of 57%. In a system with national currencies the Lira would have continued its long term tradition of depreciations and Italy would have maintained its competitiveness. With this option now excluded, and international labour mobility lacking Italy faces the risk of a deep depression if it stays inside the EMS. Unable to set interest rates at an appropriate level for its fast growth, Ireland now risks run-away inflation, and a sudden and sad end to its uninterrupted quarter century success-story of fabulous growth.   .....  Find out more here

The population in Europe is aging and declining. A trend that could have been perfectly manageable with foresight could turn into a catastrophe given the increasing unfunded liabilities arising from pay-as-you-go (PAYGO) public pension programs, now more than 200 percent of GDP in France and Italy, and more than 150 percent of GDP in Germany. This situation is especially difficult in a continent where entitlements are deeply entrenched in a welfare state culture.  The European Commission recently stated, "There is a risk of unsustainable public finances in some half of EU countries. Belgium, Germany, Greece, Spain, France, Italy, Austria and Portugal are on this black list."

EMU countries with Unfunded pension schemes may want to follow the old Latin American recipe—namely, devaluation, so that the ensuing inflation reduces the purchasing power of benefits. But "Funded EMU countries " will probably oppose devaluing the euro. A clash may ensue amidst the centers of decisionmaking in Europe, especially within the board of the European Central Bank.  So, the PAYGO pension system could turn out to be one of the gravest threats to the single European currency.

In this paper the European Central Bank (ECB) studies the performance and the efficiency of the public sectors of 23 industrialised OECD countries. They compute public sector performance (PSP) and efficiency indicators (PSE) for the government as whole and for its core functions. When deriving performance indicators they distinguish the role of government in providing "opportunities" and a level playing field in the market process and the traditional "Musgravian" tasks of government.  The results for  Belgium are remarkable:  Although Belgium has the second best industrial productivity in the world, it has the third worst public sector efficiency.... 
Read the full study here:
Great Myths of the Great Depression      Images of the 1929 Recession here      Cartoons here
great_depressionLawrence Reed explains how Governments and the Central Bank catastrophically mishandled a moderate slowdown of the business cycle, and so caused a mild recession to degenerate in the full blown 1929 financial crisis.  He explains how the excessive money supply in the late twenties first caused the reckless stock market mania and a generalised asset bubble. When the Fed finally decided to slow the asset inflation they unexpectedly contracted the money supply by a massive 1/3 in six months from August'29 till March'30. The market reacted most vigorously. Stocks plummeted and asset prices crashed. Governments then tried to remedy the accelerating recession by raising import duties, causing reprisal trade bareers by trading partners. The new tariffs slowed down international trade, boosting unemployment. Facing declining revenues and increasing wefare demands President Hoover doubled income taxes in his 1932 Revenue act. In 1933, Roosevelt symply seized peoples gold holdings, abandoned the gold standard, and devalued the dollar with 40%....

It was in deed not free market failure which produced the 1929 depression. It was political bungling on a grand scale, with the one
policy blunder succeeding the other: tradecrushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops, coercive labor laws and not in the least the FED's mismanagement. The social cost of the political blunders was the severest crisis in history. Stocks fell to 10% of their pre-crash value, income fell by 28%, car production fell by 75%, banks failed in record numbers, dragging down hundreds of thausends of customers. 13 million unemployed in the US causing rumors of revolt even.

The author also impressively describes
how massive public spending in Roosevelts' New Deal and the excessive dirigism in the National Recovery Act (NRA) rather than remedying the 1929 crisis, prolongued it well into the fourties.

Great Dane, Great Pain   An analysis of the Danish welfare State on TCS Daily.

Henrik Rasmussen first lived in the Danish Wellfare State, and then under the American "Anglosaxon social model". He reports his ample expericence. A testimony about two types of life-styles.

Followed by a lively debate:
"Denmark is a country where few have too much, and even fewer have too little". They seek to equalize the masses and prevent the accumulation of wealth. This is presented as a noble cause. The failure of this thought is what incentive to build and grow a business, take risk, does the individual have in a society that both prevents his failure and limits his success? The great success of America is the unlimited ability to succeed. The ability to fail and succeed are as important to life as air. Socialists in general apparently abhore risk. Hence they move to create a risk free Utopia when in reality there is no such beast. I for one would forgo all saftey nets for the chance to achieve greatness. One final thought, name one great economic industry or product innovation to come from Denmark? Which countries bring forth the latest innovations, technologies, medicines? The free market is equality of opportunity. Socialism is equlity of outcome and misery.
  Europe's Ailing Social Model: Facts & Fairy-Tales.      Martin De Vlieghere and Paul Vreymans     
Europe's social model is unable to tackle the modern challenges of globalization, and has left Europe with gigantic problems: an unsurmountable public debt and pension liabilities, a rapidly ageing population, 19 million unemployed, and an overall youth unemployment rate of 18%. The unemployment figures may easily be doubled to account for hidden unemployment. The untold reality is that Europe's real unemployment stands at the level of the 1932 Depression. The very essence of the welfare state is at stake.
A man-made Disaster :  Europe's social disaster is unfolding while the rest of the world is booming at its fastest rate in three decades. 2004 and 2005 were record years for China and India, which have double-digit growth rates, and for the USA, which fully enjoys the benefits of globalization. The world's economy is booming at an average rate of over 4%, but Europe's growth has stagnated at an inflated 1.5%. 

Entrepreneurship is lucrative.... and just.
BY Edmund S. PHELPS - 2006 Economics Nobel Prize winner

edmund_s_phelpsThere are two economic systems in the West. Several nations--including the U.S., Canada and the U.K.--have a private-ownership system marked by great openness to the implementation of new commercial ideas coming from entrepreneurs, and by a pluralism of views among the financiers who select the ideas to nurture by providing the capital and incentives necessary for their development. Although much innovation comes from established companies, as in pharmaceuticals, much comes from start-ups, particularly the most novel innovations. This is free enterprise, a k a capitalism.

The other system--in Western Continental Europe--though also based on private ownership, has been modified by the introduction of institutions aimed at protecting the interests of "stakeholders" and "social partners." The system's institutions include big employer confederations, big unions and monopolistic banks. Since World War II, a great deal of liberalization has taken place. But new corporatist institutions have sprung up: Co-determination (cogestion, or Mitbestimmung) has brought "worker councils" (Betriebsrat); and in Germany, a union representative sits on the investment committee of corporations. The system operates to discourage changes such as relocations and the entry of new firms, and its performance depends on established companies in cooperation with local and national banks. What it lacks in flexibility it tries to compensate for with technological sophistication. So different is this system that it has its own name: the "social market economy" in Germany, "social democracy" in France and "concertazione" in Italy...

read more in the Wall Street Journal here.
EU TAX CARTELThere is something rotten in the welfare state of Europe

The time has come for Europeans to ask themselves the unthinkable: can their vaunted social model endure?  Something is rotten in the state of western Europe. The continent retains valuable assets from the past. But these are showing symptoms of decay. The underlying cause seems increasingly evident: the hypertrophy of the state. Symptoms are not hard to find: this is a continent of high and persistent unemployment, declining productivity growth, rapid ageing and growing fiscal strains; it is also one whose once-proud role in knowledge-creation is in decline.  

But in one respect, western Europe remains pre-eminent: its states are the taxand-spend champions of the world. This is the heart of the European model. But it is no model for well-informed outsiders.

Maybe they can see what Europeans will not. The European state is maternal: protective but also infantilising. Its high taxes and benefits discourage anybody from doing too well, while ensuring that nobody does badly. Its services are available to all, but are also mediocre and inflexible. It is an example of what the journalist Andrew Neill, following Friedrich Hayek, calls the "fatal conceit": the view that society can be rationally planned and directed. 
  Read the article by Martin Wolf  of the Financial Times.....                       and the debate here
One year after the NO-vote: Two thirds of Frensh and Dutch voters want to either take back powers from the EU or leave it altogether.

to a new poll, around two thirds of voters in both France and the Netherlands want to either take back powers from the EU or leave it altogether.
Detailed opinion polling immediately after the Dutch referendum revealed that the top seven reasons given for voting no all reflected opposition to deeper integration and opposition to losing control. The top three reasons people voted no were over fears that "the Netherlands will have less influence under the Constitution" (54%), that "large countries will determine the future of Europe" (52%), and that "politicians will take decisions over our heads" (42%). Results of the poll :
Do you want to :
France Netherlands
Give more power to the EU
Keep the current balance
Take back powers from the EU
Leave the EU altogether
10% 14%
The importance of Public Expenditure reform for economic Growth and Stability

The ECB names Ireland and Spain as examples of successful expenditure reforms and concludes: "further expenditure reforms are needed in many countries to reduce the level of spending on non-core tasks of the public sector, enhance the efficiency and incentive effects of public spending and prioritise productive objectives within public sector activity. Spending reductions would alleviate fiscal imbalances while also allowing for lower taxes. Such measures would support macroeconomic stability, promote growth and create a better environment for price stability."                 read more:  ECB Monthly bulletin page 61-73

The Myth of the Scandinavian Model
growth_performance"America's social model is flawed, but so is France's," the Parisian newspaper Le Monde recently wrote. According to Le Monde Europe should adopt the "Scandinavian model," which is said to combine the economic efficiency of the Anglo-Saxon social model with the welfare state benefits of the continental European ones.  The praise for the Nordic model comes from Bruegel, a new Brussels-based think tank, "whose aim is to contribute to the quality of economic policymaking in Europe." The think tank is a Franco-German government initiative and is heavily funded by EU governments and corporations. In October Bruegel published a study

 In 1970, Sweden's level of prosperity was one quarter above Belgium's. By 2003 Sweden had fallen to 14th place from 5th in the prosperity index, two places behind Belgium. According to OECD figures, Denmark was the 3rd most prosperous economy in the world in 1970, immediately behind Switzerland and the United States. In 2003, Denmark was 7th. Finland did badly as well. From 1989 to 2003, while Ireland rose from 21st to 4th place, Finland fell from 9th to 15th place.
Together with Italy, these three Scandinavian countries are the worst performing economies in the entire European Union. Rather than taking them as an example, Europe's politicians should shun the Scandinavian recipes.
Retirement Finance Reform Issues Facing the European Union      by William G. Shipman

Changing demographics are forcing countries around the world to reexamine their public pension systems. The EU nations are among those facing the greatest social, budgetary, and economic challenges as a result of their aging populations. Therefore, EU members will be forced to rethink their public pension programs and move away from traditional pay-as-you-go (PAYGO) pension models to new systems based on savings and investment.  Given demographic trends, the current PAYGO pension plans of EU member states are unsustainable.
Major reform is, therefore, inevitable. This paper examines many of the issues involved in reforming European pensions and reaches the following conclusions:

1. Long-run data from many countries show that the yield on market assets is sufficient to provide adequate retirement income at a reasonable cost. Indeed, such income is likely to be significantly higher than income that can be provided through PAYGO systems.

2. A market-based system would not necessarily reduce the redistribution that some Europeans consider an important characteristic of EU pension programs. Moreover, those programs may be far less redistributive than commonly believed.

3. Moving to a market-based pension system can help promote labor market flexibility by more closely linking contributions and benefits. In addition, a market-based system would eliminate incentives for older workers to leave labor markets prematurely.

4. Although transition financing would be a complex issue, it is cheaper to move to market-based systems than to continue current PAYGO systems. It is possible to design a transition scenario that is a winwin situation for all generations. Administrative costs in a market-based system can be kept low. Market-based systems would increase asset ownership and give workers greater control of the wealth-producing assets of society.              Full text of SSP No. 28 (PDF, 24 pp, 232 Kb) 
Inflation and the ineffectiveness of Monetary Policy

The dogmatic belief that loose monetary policy can boost economic growth is increasingly being questioned. Ever more empirical evidence is In deed pointing at total ineffectiveness of monetary policy. Two decades JP_chevallierof close to zero interest rates in Japan and Switserland have been unable to stimulate their sluggish growth.  Since over 30 years, Nobel-prize winners  Friedman, Lucas and Phelps are expressing their doubts about the effectiveness of easy money policy. 

remarkable are the recent empirical findings by prof. J-P. Chevallier (2006). Chevallier found that "Excess Money Supply (EMS: Growth of the Money Supply M3 in excess of the growth rate of the real economy)  has a most remarkable inverse relation to the real economy's growth rate. High EMS coincides with low growth. Chevallier's study is based on over 550 data pairs covering 47 years of US monetary history from 1960 till 2006.     read more here ....

by Matthew Bishop, Liam Halligan, L. Jacobo Rodríguez, (2006) 

We are facing a demographic time bomb: by 2050, there will be 2 workers to every 1 retired person in most European countries. In some countries that ratio will be 1:1. The harsh reality is that current pay-as-you-go pension systems are simply financially, economically and socially unsustainable - without reform, pensioners will bankrupt the welfare state.     

It is time to defuse the pensions time bomb. This timely book offers Europe a way ahead

Download the full study
Taxation, tax reform and monetary policy
                        The present Governor of the Bank of England, Mr Mervyn King, once observed that "Central banks are often accused of being obsessed with inflation. This is untrue. If they are obsessed with anything, it is with fiscal policy."[1] I would not go quite as far as to call it an obsession. But it is certainly true that central bankers in general, and European central bankers in particular, take a close interest in public finances. And this is hardly surprising. Perhaps it is not by chance that having a strong public finance background -experience either in academia or in government, or in both - is not uncommon amongst central bankers.
  I would not elaborate more on whether and how the professional career of central bankers affect their interest in public finance issues. ....

Speech by José Manuel González-Páramo,  Member of the Executive Board of the ECB. Universidad Complutense Madrid, 13 May 2005.

Time for the Truth: EMU and Tax Harmonisation      Jonathan Collett -  The Bruges Group

As Britain watches the birth of the Euro and euro-integrationists advocate Britain joining euro-land as soon as possible it is surely time for an honest debate to begin? Many have forgotten the personal suffering and the huge disincentives to enterprise and investment induced by a culture of high taxation. They need to remember fast, before advocating such a colossal folly.  Whether by accident or design, many have misled when explaining the meaning of EMU and the emergence of a European Single Currency. EMU does not stand for European Monetary Union, as they have tended to suggest, but instead stands for Economic and Monetary Union. This is a crucial error to make and neglects one of the key effects of the introduction of EMU: the harmonisation of nations' economic and monetary policies and ultimately of fiscal and taxation policies. As the current president of the Bundesbank, Hans Tietmeyer, remarked in October 1995 "it is an illusion to believe that the States will retain their independence in fiscal policy."

The Myth of Europe    by  Russell Lewis

Contents  :

  • Undemocratic
  • Overregulation
  • Corruption
  • Hostile to British Interests
  • Not Bonkers but out of Date
  • Europe as Economic Pace–Setter
  • Historical Inevitability
  • Evidence Against
  • Euro–Mythology
  • Former European Supremacy
  • Nationalism in the Dock
  • Glory in Diversity
  • Fortunate Failure
  • Scientists Persecuted
  • Unity Versus Capitalism
  • Unity Hinders Progress
  • Why not China?
  • Meddling Mandarins
  • Why not India?
  • Why not the Arabs?
  • Soviet Arthritis
  • Unconvincing
  • Legal Serfdom
  • Totalitarian Democracy
  • Subsidiarity A Fraud
  • Freedom Day Comes Late
  • Don't Harmonize, Denationalize

More Europe is not a remedy for European economic troubles.       Petr Mach

Economists and politicians agree that Europe's economy has been  suffering from a serious disease. In 2000 the Lisbon Agenda identified the symptoms of this disease – high unemployment and low economic growth. In his presentation Peter mach argues that the Lisbon Agenda misunderstood the real cause of the underperformance of European economy, and therefore prescribed wrong treatment..

Read more here....

A New Road to Serfdom?   By hans H.J. Labohm

hans_labohmRecently, I was invited by the Ludwig von Mises Institute Europe to address an audience on what Friedrich von Hayek would have thought about the enlargement of Europe. I decided to reread his classic, The Road to Serfdom. Old hat, of course, because since Francis Fukuyama's The End of History and the Last Man, we know that after the collapse of the Berlin Wall, capitalist liberal democracies are the end-state of the historical process. So there is nothing to worry about. Yet, even before finishing the introduction (by Milton Friedman) and the (three) prefaces of Hayek's magnum opus, I realised that I was completely wrong. The Road to Serfdom still contains insights that today are as visionary and relevant as when they were published for the first time in 1944.

Imagine the Zeitgeist of the thirties and forties! The free market economy was under siege, because it was believed to generate chaos with its business cycles and monopoly power. The planned society envisaged under socialism was supposed to be not only more efficient than capitalism, but socialism -- with its promise of social justice -- was expected to be fairer. I­t was considered the wave of the future. Only a reactionary, it was argued, could resist the inevitable tide of history. In this context The Road to Serfdom appeared with a seemingly anachronistic message.

But the message was not obsolete. It had a profound impact on the development of our economies and societies at large. In his recently published book European Integration, 1950 - 2003, Superstate or New Market Economy?, the American historian John Gillingham reveals that a few years before, in 1939, Hayek published an article on a (classical) liberal project for the integration of Europe. That is why Gillingham ranks Hayek alongside Jean Monnet and many others as one of the founding fathers of the new era.....     read more here
Dignity and the Burden of the Welfare State


The burden of the welfare state may be analysed from an economic as well as a more normative perspective.

This paper attempts to do both things. By the use of the case of Sweden the expansion and the costs of the welfare state is described, partly in international comparison, and explained, largely in terms of unintended consequences.

Special attention is given to the effects of taxes. Next, the concept of dignity is explicated and used to evaluate the Swedish welfare state. The overall conclusion is that the burden of the welfare state is high indeed, both in economic terms and from the perspective of human dignity.

Consequently, if we want to promote economic efficiency, growth and dignity the size of the state should be radically decreased.

A Dimensão do Estado

Quando se fala do peso excessivo do Estado, imediatamente quem def(p)ende (d)a sua existência clama que se responda, sem ambiguidades, qual deve ser a dimensão do Estado. Vou hoje fazer algumas reflexões sobre essa matéria, sublinhando todavia que não é um problema de solução única. A solução depende da eficiência do próprio Estado, da «qualidade» do sistema fiscal e do projecto que se tem para o país: Qual o doseamento entre desenvolvimento e igualitarismo.

Como eu escrevi há dias «Sem a existência de um governo suportado num aparelho estatal está instalada a anarquia e não é possível uma actividade económica sustentável, nem há condições para o progresso económico e civilizacional.». Ou seja, se a despesa pública fosse 0% (ou não houvesse impostos), a receita fiscal seria 0 e o PIB seria nulo. Haveria produção, para subsistência, mas esta não teria expressão monetária, visto que «a ameaça de expropriação é real e permanente. A actividade económica reduz-se à subsistência». Esse seria o limite inferior.

À medida que as taxas de imposto vão aumentando, os bens e serviços públicos essenciais ao funcionamento normal do mercado vão sendo disponibilizados – justiça, defesa, infra-estruturas básicas, educação básica. Nesta zona os efeitos destes aumentos em eficiência produtiva vão contrabalançando os efeitos desincentivadores das taxas de imposto para a actividade económica.           A Dimensão do Estado.....

Is the European Social Model doomed?
The Continent's economic death spiral.

Is the European "social model" doomed? It's a question that comes up with increasing frequency as unemployment across Western Europe has climbed into the double digits and economic growth has ground to a virtual halt across much of the Continent.  Updated GDP figures for the euro zone came out last week, and growth in the first quarter was a disappointing 0.5%. Last month both the European Commission and the European Central Bank cut their annual growth forecasts for the euro zone to 1.6% from 2%, and that ugly word recession is in the air.

Did Phelps Really Explain Stagflation?

nobel_prizeThe Nobel committee credits Phelps for clarifying the relationship between inflation and unemployment. Indeed, he did make a contribution in this respect. What he did not do is what most economists credit him for doing: identifying the true causes behind the phenomenon of stagflation.

The phenomenon of stagflation is characterized by the simultaneous occurence of a strengthening in the growth momentum of prices and a decline in real economic activity. A famous case of stagflation occurred during the 1974 — 75 period. In March 1975, industrial production fell by nearly 13% while the yearly rate of growth of the consumer price index (CPI) jumped to around 12%. Likewise a large fall in economic activity and galloping price inflation was observed during 1979. By December of that year, the yearly rate of growth of industrial production stood close to nil while the rate of growth of the CPI stood at over 13%....
read more here....
by James Gwartney, Professor of Economics and Policy Sciences at Florida State University

james_gwartneyThis paper shows that excessively large government has reduced economic growth. These findings present a compelling case that rather than devising new programs to spend any surplus that may emerge from the current economic expansion, Congress should develop a long-range strategy to reduce the size of government so we will be able to achieve a more rapid rate of economic growth in the future.

The expansion of the U.S. economy has now moved into its eighth year and it has been 15 years since there has been a major recession. Despite this positive performance, the growth of real GDP in the 1990s is less than half the rate achieved during the 1960s. In fact, the average growth rate of real GDP has fallen during each of
the last three decades. The economies of other developed nations have followed this same pattern of more stability, but less rapid growth.

big_governmentThe OECD countries currently spend 15 percent of GDP or less on the core functions of government-protection of persons and property, national defense, education, monetary stability, and physical infrastructure. When governments move beyond these core functions, the empirical evidence indicates that they retard economic growth. The reduction in GDP growth rates in the United States and in many nations around the world can be traced directly to their increases in government expenditures far in excess of the growth-maximizing level. 

read more here....

Taxes and Economic Growth    November 2006
by Gerald W. Scully Senior Fellow National Center for Policy Analysis

armey-curveNew study shows high cost of big government. A thorough new study from the National Center for Policy Analysis concludes that the size of government is far above the growth-maximizing level. That's the good news. The bad news is that the study indicates that the growth-maximizing level of taxes is 23 percent of GDP. This almost surely is an overstatement, especially since it implies that Hong Kong today would grow faster by increasing its tax burden, or that the United States would have grown faster before World War I by doubling the tax burden. In reality, studies such as this are constrained by the absence of good data from nations with small governments for the unfortunate reason that such nations no longer exist. As such, statistical studies looking at the growth-maximizing size of government generally conclude that it should be about the size of the smallest governments in existence during the periods covered by the study:

Beyond some minimum level, however, government becomes a net drain on the economy. Empirical evidence shows that as the tax burden rises beyond a certain level, the rate of economic growth slows. As government grows, money flows to less productive projects (think "bridges to nowhere"), and taxes are increasingly used to redistribute income through transfer payments (such as Social Security and Medicare) and to fund myriad special interest group projects. Whereas private decision-makers tend to make decisions based on economic costs and economic benefits, elected offi cials tend to make decisions based on political costs and political benefi ts (as refl ected, for example, in votes, campaign contributions and so forth). High tax rates reduce the incentives of taxpayers to produce, while benefi ciaries of government largesse are discouraged from additional effort. ...To maximize economic growth, federal, state and local taxes combined should average about 23 percent of gross domestic product (GDP). Tax revenues as a share of GDP have not been at that level since 1950, and for years have averaged between 30 percent and 34 percent of GDP. Real GDP increased at a compound growth rate of 3.5 percent per year from 1950 to 2004. If instead of rising to 30 percent and more, an average tax burden of about 23 percent of GDP had been in effect throughout the 54-year period, the growth rate would have been 5.8 percent per year
Growth Effects of Public Expenditure on the State and Local Level.
Evidence from a Sample of Rich Governments
by Christoph A. Schaltegger
There is a vast empirical literature investigating the relationship between government size and economic growth. But the empirical evidence of growth effects of public expenditure using cross-country regres-sions is still inconclusive. According to a number of authors this is not surprising since the negative rela-tionship only applies for rich countries with a large public sector. Restricting their analysis on rich coun-tries only they can show the predicted negative impact. Naturally, a selection of a sub-sample of rich countries is always somewhat arbitrary. Another possibility is to concentrate on governments within a rich country. However, only few studies investigate the effect of state and local spending on economic growth. This paper concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from Switzerland over the 1981-2001 period. The general finding is a fairly robust negative relationship between government size and economic growth. However, in contrast to public spending from operating budgets there is no significant impact on economic growth by expenditure from capital budgets.
Primož Pevcin - University of Ljubljana

pevcinGrowth theory is an important part of modern macroeconomics. The analysis of growth has long been based on the Solow (1956) "growth accounting" approach, also termed as neo-classical growth theory, which has two important predictions about growth in the long run. These predictions are that economic growth occurs as a result of exogenous technological change, and that income per capita of countries will converge. Since it is presumed that all determinants of growth are exogenous, it is obvious that government policy cannot affect growthrates, except temporarily during the transition of economies to their steady state. Consequently, the role of government in growth process was usually not investigated in standard neo-classical growth models.

iron_curtainEmpirical work on the determinants of economic growth seems to present strong evidence that a large government sector negatively affects economic growth. This result has been confirmed in numerous studies (e.g., Barro (1991), Engen and Skinner (1992), Hansson and Henrekson (1994), Gwartney, Holcombe and Lawson (1998), Fölster and Henrekson (2001)). More specifically, in recent studies, the negative impact of government size on factor productivity and capital formation has been stressed, resulting also in lower economic growth.

read the full study here....
New !!!   Now free on-line:  2006- Update of our Main Study
comparing Effectiveness of European Social Models
The Path To Sustainable Growth
Lessons From 20 Years Growth Differentials In Europe
Martin De Vlieghere and Paul Vreymans
Abstract:    While the rest of the world is booming, Europe lags behind. Europe's performance is weak in spite of high productivity and knowledge, high level of development and good labour ethics. Growth is also remarkably dissimular among regions. France, Germany and Italy are stagnating, and so do Denmark, Sweden and Finland. All gained less than 44% prosperity over the last 20 years. The Irish economy grew 4 times faster, gaining 169% wealth over the same period. In half a generation Ireland so metamorphosed into Europe's second richest country creating jobs for all.
" Big government " is the main cause of Europe's weak performance. The oversized Public-Sector lacks productivity and undoes the entire productivity gains of the Private Sector, eradicating all of its outstanding performance and productiveness. Europe can improve its overall performance by copying the Irish success formulas: Scaling down Public Spending, downsizing bureaucracy, and shifting the tax burden from income on consumption. This book demonstrates why the Lisbon Agenda and decades of Keynesian inflationist demand stimulation have failed. It devellops alternative and workable supply-side strategies as well as effective cures for humane growth and a financially sustainable social security.
This book reads as a   step-by-step manual for economic recovery.   It is a data-reference for students and politicians interested in growth, wellfare and in social modelling.   It is a  classic  for  economists concerned about Big Government,  poor public sector productivity  and for parents worrying about  their declining standard of living and their children's future.

My views on government spending can be summarizedby the following parable: If you spend your own money on yourself, you are very concerned about how much is spent and how it is spent. If you spend your own money on someone else, you are still very much concerned about how much is spent, but somewhat less concerned about how it is spent. If you spend someone else's money on yourself, you are not too concerned abouthow much is spent, but you are very concerned about how it is spent. However, if you spend someone else's money on someone else, you are not very concerned about how much is spent, or how it is spent.               Milton Friedman.