American Thinker Article, Blog Post on Privatizing Roads, and What a Bank Run Looks Like

Gotta work some crazy hours today and tomorrow so another quick post.  First, I apparently had an article over at the American Thinker last week but didn't realize it got published.  Entitled "Insider Trading Is Fine - But Not in Congress" here is an excerpt:

Insider trading, which is essentially the quick disbursement of relevant market information by individuals closest to select industries, shouldn't be illegal by itself.  This argument has been made numerous times by economists Murray Rothbard and John Tamny.  This particular passage by Rothbard outlines the sheer absurdity of insider trading laws:

There is another critical aspect to the current Reign of Terror over Wall Street. Freedom of speech, and the right of privacy, particularly cherished possessions of man, have disappeared. Wall Streeters are literally afraid to talk to one another, because muttering over a martini that "Hey, Jim, it looks like XYZ will merge," or even, "Arbus is coming out soon with a hot new product," might well mean indictment, heavy fines, and jail terms. And where are the intrepid guardians of the First Amendment in all this?
But of course, it is literally impossible to stamp out insider trading, or Wall Streeters talking to another, just as even the Soviet Union, with all its awesome powers of enforcement, has been unable to stamp out dissent or "black (free) market" currency trading.

Much to the dismay of those who regard government as the great equalizer in society, humanity is inherently unequal.  Certain people have better access to information than do others.  In the realm of a market economy, the faster industry information is shared, the sooner productive factors are designated to more efficient use.  Our world of scarce resources necessitates the allotment of information as soon as possible.

The irrationality of insider trading prohibition can be thought about in another way.  Suppose a stock trader overhears a conversation at a bar between two executives of, say, Apple.  The executives are expecting a supply chain disruption of raw materials to a key manufacturing plant.  This information is not public yet.  Because of this "insider information," our stock trader decides against buying more shares of Apple.  The next day, Apple stock tanks, and the stock trader isn't at a loss because he refrained from buying a stock he was initially going to purchase.  Should he then be prosecuted?  How does one prosecute non-action?

But though a case can be made for private-sector insider trading, the dynamics of congressional insider trading are drastically different.  Congress members have unique access to information by the very fact that they dictate much of how the economy behaves and reacts to regulations and legislation.  And, if you can imagine, congressional members have exempted themselves from prosecution for insider trading activity.  How convenient.

One of the commenters said it was the stupidest article he ever read; a clear sign of my ever growing popularity.  Some people just have a child-like faith in "public institutions" and supposed norms that they can't see the obvious when it is explained in a perfectly clear fashion to them.

I wrote a quick blog post on privatizing roads in Canada and Thanksgiving today at LvMIC entitled "You Say Toll Roads, I Say Privatize."  Here is an excerpt:

Basic economics teaches us a few things; namely the idea that when a service is in higher demand, its price should rise.  This reaction not only protects against shortages but incentivizes the use of substitutes.  According to the poll, most Canadians recognize this problem and are seeking to rectify what they see as an over-use of highways.  Admittedly, their logic is spot on when it comes to the issue of decreasing congestion by increasing the price of usage.

However, this simple economic phenomena isn’t so simple when it comes to “public” goods.  As Kheiriddin notes:

So why do most politicians speed away at the very mention of road tolls? For the same reason they shun user fees for health care and decry parents’ topping up funding for public schools. These are all imagined to be universal goods — paid for by all and equally accessible to all, even if some citizens make greater use of them than others.

What she classifies as “universal” goods are really “public” goods.  And the problem with “public” goods is that their costs aren’t always bared by those who make direct use of said goods.  Since today happens to be Thanksgiving, it would help to bring up the lesson on socialism that many early American colonists had to learn the hard way.  Though not mentioned nearly enough in the history curriculum of the U.S. public school system, the beginning years for the European settlers were anything but gravy (pardon the pun).  As Richard J. Maybury wrote:

In his History of Plymouth Plantation, the governor of the colony, William Bradford, reported that the colonists went hungry for years, because they refused to work in the fields. They preferred instead to steal food. He says the colony was riddled with “corruption,” and with “confusion and discontent.” The crops were small because “much was stolen both by night and day, before it became scarce eatable.”
In the harvest feasts of 1621 and 1622, “all had their hungry bellies filled,” but only briefly. The prevailing condition during those years was not the abundance the official story claims, it was famine and death. The first “Thanksgiving” was not so much a celebration as it was the last meal of condemned men.

So then how did the settlers finally obtain an abundant food supply? Capitalism of course!

After the poor harvest of 1622, writes Bradford, “they began to think how they might raise as much corn as they could, and obtain a better crop.” They began to question their form of economic organization.

This had required that “all profits & benefits that are got by trade, working, fishing, or any other means” were to be placed in the common stock of the colony, and that, “all such persons as are of this colony, are to have their meat, drink, apparel, and all provisions out of the common stock.” A person was to put into the common stock all he could, and take out only what he needed.

This “from each according to his ability, to each according to his need” was an early form of socialism, and it is why the Pilgrims were starving. Bradford writes that “young men that are most able and fit for labor and service” complained about being forced to “spend their time and strength to work for other men’s wives and children.” Also, “the strong, or man of parts, had no more in division of victuals and clothes, than he that was weak.” So the young and strong refused to work and the total amount of food produced was never adequate.
To rectify this situation, in 1623 Bradford abolished socialism. He gave each household a parcel of land and told them they could keep what they produced, or trade it away as they saw fit. In other words, he replaced socialism with a free market, and that was the end of famines.

The solution to all cases of public goods wrought with overuse and declining quality is to establish a new system of ownership that deals with both problems: privatize it!  Not only does private control enforce conservatism (what business sits idly by as its money generating asset declines in value?) but  it also internalizes costs as a means to prevent overuse and free riders.  This falls completely in line with Kheiriddin’s proposal:

Sorry folks, but at some point, the rubber will have to hit the road. On the highway, as in life, you get what you pay for — and if you use it, you should pick up part of the tab.

Not too bad considering I had to work overnight and wrote it after I got home at 7am.  I wanna end by pointing out some pics of a modern day bank run in Latvia.  Here is some background via Bloomberg Businessweek:

Nov. 23 (Bloomberg) -- Lithuanian prosecutors issued an arrest warrant for Vladimir Antonov and Raimondas Baranauskas who are former shareholders of Bankas Snoras AB.

Both men are suspected of embezzlement and document forgery, the Prosecutor General said in a statement on its website today. Baranauskas is also suspected of accounting fraud and abuse of authority, it said. Antonov’s spokeswoman, Natalja Olesik, couldn’t be reached on her mobile phone for a response to the allegations. Calls to Antonov’s U.K. and Latvian phone numbers were not answered.

The Baltic nation’s government took over Snoras on Nov. 16 after the central bank discovered at least 300 million euros ($402 million) in assets were missing. Latvia’s bank regulator suspended operations of Latvijas Krajbanka AS, the country’s sixth-biggest deposit bank which is owned by Snoras, on Nov. 21, saying 100 million lati ($190.7 million) was missing.

Depositors can withdraw 50 lati a day beginning today for the rest of the week, said Krumane at a press conference.

Deposits are insured for up to 100,000 euros and the total cost of paying out the insurance may be 350 million lati, which will be covered by the 149 million lati in the deposit insurance fund and borrowing, said Krumane.

Snoras Bank resumed cash withdrawal operations at three of its offices today. Customers can withdraw 500 litai per day. (my emphasis)

And the pics via Zerohedge:

Of course under a fractional reserve banking system, such withdraws have a chance of collapsing the system hence the limit on the amount able to be withdrawn.  As I wrote about already, there is a slow movement in Greece to withdraw money from the banks which will most likely bring about a bank holiday declaration.  I am shopping around an article right now on the subject and I hope to find a buyer soon before it actually happens.