Written by Roger Erickson, a version also posted at Mike Norman Economics

Is there hope, a banking cynic asks?   Not from that quarter (the banks) - but ample hope is available from seemingly indirect sources.  Even after over 280 years of correspondence, direct discussion and multiple re-discovery, many still don't grasp that a fiat currency issuer doesn't "get" revenue in the form of currency.  For a reptable source, see Ben Franklin, 1727; "The Nature and Necessity of a Paper-Currency".

Did we just get a "huge boost in government revenue?" Before answering, one has to use a variant of the now famous "Clinton defense" - actually appropriate in this case. "Define revenue" for a fiat currency issuer. Asking that self-answering question opens the obvious escape from the policy quagmire-trap that the orthodox antkillers have skillfully trapped themselves and all newcomers in.Read more »

Previous French socialist leaders were wedded to Keynesianism. But Mr. Hollande (pictured) is the first French socialist president to advocate a supply side approach to growth.

So says Philippe Aghion in a recent Finanacial Times article.   The piece is a nice diplomatic effort to appease the Germans.  However, it is only that.  The article continues on the subject of economic growth:

This growth package should have a few distinct components.

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This is the thirteenth article of the series: “Towards An Ideal Form of Government”.

Previously, I identified two similarities between communism and democracy:

1. Destruction of capitalism (Democracy and Communism: Are They Really the Same?).
2. Brainwashing (Brainwashing in Communism and in Democracy

In this article, I will point out that ideology is a third major similarity between communism and democracy.Read more »

- Public announcement GEAB N°65 (16 May 2012) -

Whilst waiting for Euroland to equip itself, by the end of 2012, with a medium to long term common political, economic and social project, especially following the election of the new French president François Hollande, anticipated many months ago by LEAP/E2020, players will remain prisoners of the short-term reflexes related to the sudden Greek political tremors, the uncertainties over Euroland governance and to the risks in public debts.

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Ursula Engelen-Kefer and Hans-Werner Sinn discussed the above question at the Berlin School of Economics. It turned out that Hans-Werner Sinn opposes austerity and calls for Greek exit, although he was shy to discuss what Germany could do to help. Anyway, his main argument was that you can move the price level some way, but those countries that are too far away from the price level that they should have to repay their debts should exit. For their benefit, he stressed.  Mrs. Engelen-Kefer stressed the point that politics in Europe and European nations is driven by powerful interests.  Mr. Sinn disagreed somehow, claiming it was the markets doing. I don’t think that these position are incompatible, once you recognize that the rich have more influence on the market than the poor.

The whole episode shows once again how far removed from reality the European Commission is. Consider this bit from President of the Commission Jose Manuel Barroso on Europe Day:Read more »

Before you read the excerpts from the following article, visualize this scenario:

The eurozone proudly builds an airplane with their own hands. They feel it’s a great achievement.

But unaccountably, they have bolted both wings to the same side of the hull. The plane won’t fly. Rather than admit they did it wrong, and move one wing to the other side of the hull, they install a gyroscope in the plane, to override the imbalance, and force it to fly.

But the gyroscope needs to be heavy — too heavy for the plane to get off the ground. So they insert a huge helium balloon in the hull to make the plane lighter. But the balloon needs to be big. It takes up so much space in the hull, there in no room for passengers. So the eurozone bolts some chairs onto the wings, but the chairs interrupt the aerodynamics.

The eurozone insists everything is O.K., but when they try to fly their plane, it wobbles so much, it almost crashes.

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A fallacy of composition is defined as an illogical projection to an aggregate, based upon the assumption that a local relationship projects unchanged to the whole. One example heard from Randy Wray:

"If you stand up at a sports stadium, you'll get a better view.  Therefore, if everyone stands up, they'll ALL get better views!"

It's often useful to call it instead a fallacy of scaling.  An aggregate falling for a fallacy of scale is diverting it's tremendous capabilities into mistakes and dead-ends on a culture-wide scale.  Nothing is more costly to us.  Fallacies of composition are employed broadly in American society and have, unfortunately, become accepted truths by many.  Even worse, this logical pitfall can occur even in the work of professionals.  Examination of case studies would be a worthwhile activity, but that will be postponed here, for the most part, as this discussion will proceed more generally.

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