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SUBWAY FOUNDER: SUBWAY WOULDN’T EXIST IF STARTED TODAY BECAUSE OF GOVERNMENT REGULATIONS

By Pete Moore On February 28th, 2013 at 6:01 pm

Fred Deluca, the founder of the Subway chain of restaurants, has given a short but revealing interview on CNBC (video here).

First, he’s no economist. At one point he says that while the minimum wage should rise, what Subway pays “depends on the market”. What he was doing, albeit unknowingly, is identify that markets set wages, not regulations, and that those whose market clearing wage is below the minimum wage are effectively declared unemployable. It’s illegal to employ them at their market wage. As Murray Rothbard explained, the result is compulsory unemployment.

It’s after this that he says that increasing regulations hamper his business and says that Subway would not exist, if he tried to start out now, given all the new regulations. Here he helps explain why it is so difficult for many to get nothing but menial jobs. It’s the seen and unseen. Most people don’t realise that many firms are not being started, that entrepreneurs are being incentivised to not take a risk, because of laws and regulations. They don’t realise it simply because no-one ever saw those firms with their own eyes. Government regulations are severely curtailing the number of start-ups, which would otherwise exist, and that’s where a lot of new quality jobs come from.

THE FOLLY OF LEFTIST ECONOMICS

By David Vance On December 6th, 2012 at 9:31 am

All the time we hear the refrain from the political Left that the Government is cutting National Debt “too hard, too fast”. Oh really? This is a siren cry from those who were to the fore in CREATING the debt mountain and here is where it all ends..

“Britain could lose its AAA credit rating after George Osborne admitted he will miss his target to reduce Britain’s debts and have to borrow an extra £100 billion.”

Got that?  By not cutting ENOUGH. Osborne is in trouble.

The maxim is simple; you must not spend what you do not have.

Yet the political left stick their heads in the sand, and act as if deficit reduction is an evil rather than a necessity, whilst walking away from THEIR culpability in creating the very problems that the Chancellor now seeks to solve.

However Osborne will FAIL in his ambition unless he ignores popular media sentiment and actually savages State spending.  I do not believe he will do this so the UK is in for a torrid time as the Government shies away from doing what is right in order to court sentiment.

WHEN THE CRONIES AREN’T AROUND …

By Pete Moore On December 3rd, 2012 at 4:54 pm

… markets take care of business.

Andrew Haldane is the Bank of England’s “executive director for financial stability”. There’s someone who’s crap at his job. He reckons the economic impact of the “global financial crisis” has been as bad as a world war. No it isn’t. The economic impact of states making taxpayers shoulder the debts of the politically-connected might be as bad as a world war, but the “global financial crises” would easily have been contained if the special interests hadn’t been bailed out.

The New York Times unwittingly reports on how it could have been:

A little over a week after Hostess Brands formally announced its plans to wind itself down, the bankrupt maker of Twinkies and Devil Dogs is dealing with more interest from potential buyers than it can handle.

Advisers to Hostess are in active talks with about 110 suitors, including regional bakeries and national supermarket chains, an investment banker for the company said in Federal Bankruptcy Court for the Southern District of New York on Thursday. In perhaps a more reassuring sign, many of these suitors appear ready to spend big amounts of money.

The pieces are being picked up by investors voluntarily willing to risk their capital. When the bust go bust debts are liquidated and good assets remain – but not when politicians are paid by the special interests.

ON ACELOR MITTAL CLOSING UP IN FRANCE

By Pete Moore On November 29th, 2012 at 12:49 pm

What is seen and unseen.

Arcelor Mittal is no longer welcome in France, its minister for industrial recovery, has said, accusing the steelmaker of “lying” and “disrespecting” the country.

The multinational angered workers and the government when it announced a plan in October to close two furnaces at its steel plant in Florange.

Who’s to blame? Turns out it’s the hippies. In other news, there are no free choices in economics. Recycling where and what we can might well be a jolly good thing on the whole, but there are always costs.

SANDY DIDN’T CAUSE FUEL SHORTAGES, GOVERNMENT DID

By Pete Moore On November 3rd, 2012 at 2:13 pm

Government is always and everywhere the enemy of society. Among the many egregious examples this week are the laws against “price gouging” which are causing chronic shortages of fuel and lengthy queues after Hurricane Sandy.

The problem: The storm forced fuel terminals to shut down, causing a shock to supply, thus forcing supply and demand out of balance. The free market solution is to allow prices to rise, constraining demand and allowing supply and demand to rebalance. This is the price mechanism naturally rationing a scarce resource. With free market allocation, those who need fuel desperately will be able to find it. The brain surgeons, business owners and firemen who need to fill up will be able to do so. The retired, those taking time off work, those who don’t need to fill their tanks, they can sit out the (temporary) price rises.

The government solution is to cap prices. This incentivises everyone to clog up the forecourts, keeping supply short and creating problems for everyone. It’s time that the Land of the Free demolished totalitarian controls on rationing and allocation and allowed the market to work.

MANY BROKEN WINDOWS

By Pete Moore On October 30th, 2012 at 4:31 pm

Keynesians rejoice! Your faith in the economic blessings of destruction has been answered.

It will take many months and many billions of dollars to recover. Along the way, much capital and production will need to be diverted from what would have been economically productive enterprises. All this, simply to replace what was there before. Yep, it’s our old friend the broken window fallacy, this time writ large.

BILL GROSS: INFLATION UP AHEAD

By Pete Moore On September 30th, 2012 at 5:30 pm

Bill Gross runs the world’s biggest bond fund at PIMCO with $236billion in funds under his control. He’s the kind of man whose opinion ought to be noted. This is what he tweeted today:

What he’s saying is that the money isn’t available to service national debts. If central banks don’t print up the cash, governments will default. They’ll print it up, but the cost will be massive price inflation.

BANKING ON STUPIDITY…

By David Vance On September 19th, 2012 at 10:25 am

The madness of Business Secretary Saint Vince Cable is once again manifest in this story;

Business Secretary Vince Cable’s plan for a Government-backed bank to increase lending to small businesses will need £40 billion of state funding to make it a success, according to new research. The bank must also be free to raise up to £100 billion on the capital markets to top up the taxpayer-funded investment, urged the IPPR think-tank. It also called on the Government to allow the institution to plough money into infrastructure projects to help rejuvenate the economy.

Where is this £40 BILLION coming from exactly? Magic money trees perhaps? Furthermore, the idea of lending to small business seems fair enough so long as any such loans are commercially acceptable rather than politically expedient. It seems to me that Cable is in denial that much of our economic woe was a DIRECT consequence of foolish lending. Now, he wants the State to lend BILLIONS.

UNIVERSITIES DISCOVER PRICING MECHANISM

By Pete Moore On September 14th, 2012 at 9:35 am

Almost a third of Britain’s leading universities still have places available with less than a week to go before the application deadline, following a sharp drop in student applications, The Daily Telegraph can disclose.

Thirty thousand more places have been made available through the clearing system than at this time last year, increasing suspicions that £9,000-a-year tuition fees have put off many school-leavers.

Some university products are not worth the price charged? A worthwhile discovery. So let them reduce prices or withdraw the products.

FED LAUNCHES INTO QE3

By Pete Moore On September 13th, 2012 at 5:39 pm

People’s Monetary Committee issues following statement:

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month […]

The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.  These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year.

Long live capitalism and free markets, Comrades!

I might have made up that last line. What happens now depends on the banks that are taking in the newly printed cash. If they deposit it back with the Fed to earn interest, then nothing. If it comes out into the economy via loans, the result will be more inflationary bubbles popping up around the economy and higher prices wherever it appears (and a possible boost for Obama).

Stop me if you’ve also heard this one before, but Greece needs another bailout according to the IMF agent installed to speak on its behalf. If our global bankocratic overlords were trying to drag out economic penury they couldn’t do a better job.