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I hate wasting my time but since you made me:http://www.dollarsan...0305miller.htmlThat's my favorite but there's plenty more if you want. It's the Heritage Foundation; they don't get things right. At some point, I shouldn't have to defend that statement anymore.this quote was good too: "Undoubtedly, economic growth does depend on a degree of economic freedom, and under some circumstances, more freedom will promote additional growth. But the paths to growth that countries take are much more complicated than the Index indicates. In the case of newly prospering countries, the Index confuses cause and effect: freedom is more often the result than the cause of development. With regard to countries already rich, the book starts from the faulty assumption that growth is all that their citizens should care about. The Index is hardly a straightforward report of scientific research." also good:Third, both the Heritage and Freedom House indexes are highly subjective. Neither presents an underlying set of data which is then used in a systematic manner in the rating process. While both list factors considered in their ratings, it is often unclear precisely how these factors influence their category ratings. Furthermore, evaluation of countries on the basis of the factors listed requires the authors to make numerous subjective judgements. This is simply a beauty-contest approach where the ratings reflect the subjective views of the authors. It is not indicative of serious research. Perhaps none of this would matter very much if it did not lead to some unusual outcomes. Consider the case of Bahrain, a country which the 1997 Heritage Index ranks as the third freest economy in the world. Bahrain is characterized by monetary stability and liberal financial markets. It deserves high marks in these areas. But it is also an economy dominated by government. In fact, 45% of all consumption expenditures are determined by the government rather than by the personal choices of its citizens. This is the largest share-more than Sweden, more than Russia, more than any former Soviet bloc country-among the 115 countries in our study. Can a country that uses central planning and political power to allocate almost half of total consumption be classified as one of the freest in the world? In essence, Bahrain is a big government welfare state financed with oil revenues. Since the Heritage Index gives very little weight to size of government, Bahrain earns an exceptionally high rating. The development of the Freedom House and Heritage indexes was based on a different set of objectives, including public relations and political considerations.... The Heritage Foundaton has made it clear that their index was designed to influence Congress, particularly the allocation of the foreign aid budget of the United States. As a result, the Heritage spokesmen explained, it was necessary to keep the index simple. The bottom line is this: the indexes of both the Heritage Foundation and Freedom House are ambiguous and poorly structured, and they often generate inaccurate and misleading outcomes.

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I would think a country like Bahrain, one that basically started up with huge oil money and a monarchy like system of government all at a jump start would be an anomaly in terms of using it as an example to be compared.A country wholly run by one king could still be a free country with happy citizens as long as the king was benevolent. Will they still rate high as free if the leader changes his MO?And Cane, you have used as an example of a 'good' country the 'leading indicator of general happiness' before with me. If that isn't a 'subjective judgement' that nothing is. I guess when you use it to defend your positions its okay, but Heritage is not allowed to use a similar rating system as determined by someone who has an axe to grind?

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this quote was good too: "Undoubtedly, economic growth does depend on a degree of economic freedom, and under some circumstances, more freedom will promote additional growth.
OK, so they agree....
But the paths to growth that countries take are much more complicated than the Index indicates. In the case of newly prospering countries, the Index confuses cause and effect: freedom is more often the result than the cause of development.
This is pure speculation, based on nothing whatsoever.
With regard to countries already rich, the book starts from the faulty assumption that growth is all that their citizens should care about. The Index is hardly a straightforward report of scientific research."
The index has no assumption built into in regarding what people should care about. It is merely meant as a predictive tool. So the argument is that if you misundertand the Index and pull "facts" out of your ass, then the Index is no good? Uh....OK....
Third, both the Heritage and Freedom House indexes are highly subjective. Neither presents an underlying set of data which is then used in a systematic manner in the rating process. While both list factors considered in their ratings, it is often unclear precisely how these factors influence their category ratings. Furthermore, evaluation of countries on the basis of the factors listed requires the authors to make numerous subjective judgements.
If they have an actual objection, they should create a non-subjective version. Or perhaps they could provide the criteria and the actual data to 20 people and combine the scores (something Heritage already does). Or, they could just snipe and say "whaa whaa I don't like their result..."Their remaining criticisms are similar: I don't like their resutls and there is some theoretically better way to do this but of course we can't be bothered to do it and neither can anybody else. Nevermind that the index has a great record of predictive ability regarding economic growth."See, whenever someone complains about it, that's ALWAYS the criticism. Never "here's a better method". Never "there is a low correlation between the index and economic growth." Just "whaa whaa Heritage whaa whaa not perfect whaa whaa we'd do better if we could be bothered to actually do the work...."
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The Wrong Austerity Cure
BERKELEY – Fiscal profligacy did not cause the sovereign-debt crisis engulfing Europe, and fiscal austerity will not solve it. On the contrary, such austerity has aggravated the crisis and now threatens to bring down the euro and throw the global economy into another tailspin. In 2007, Spain and Ireland were models of fiscal rectitude, with far lower debt-to-GDP ratios than Germany had. Investors were not worried about default risk on Spanish or Irish sovereign debt, or about Italy’s chronically large sovereign debt. Indeed, Italy boasted the lowest deficit-to-GDP ratio in the eurozone, and the Italian government had no problem refinancing at attractive interest rates. Even Greece, despite its rapidly eroding competitiveness and increasingly unsustainable fiscal path, could attract the capital that it needed.Deluded by the convergence of bond yields that followed the euro’s launch, investors fed a decade-long private-sector credit boom in Europe’s less-developed periphery countries, and failed to recognize real-estate bubbles in Spain and Ireland, and Greece’s slide into insolvency. When growth slowed sharply and credit flows collapsed in the wake of the Great Recession, budget revenues plummeted, governments were forced to socialize private-sector liabilities, and fiscal deficits and debt soared.With the exception of Greece, the deterioration in public finances was a symptom of the crisis, not its cause. Moreover, the deterioration was predictable: history shows that the real stock of government debt explodes in the wake of recessions caused by financial crises
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Real world effects of "austerity".Some highlights:
The Canadian government cut defense, unemployment insurance, transportation, business subsidies, aid to provincial governments, and many other items. After the first two years of cuts, the government held spending growth to about 2 percent for the next three years. With this restraint, federal spending as a share of GDP plunged from 22 percent in 1995 to 17 percent by 2000. The spending share kept falling during the 2000s to reach 15 percent by 2006, which was the lowest level since the 1940s.
Aside from budget cuts, Canada improved its fiscal outlook by fixing the Canada Pension Plan, which is like our Social Security system. In 1998 Canada began moving the CPP from a pay-as-you-go structure to a partially funded system. Today the CPP is solvent over the foreseeable future, which contrasts with Social Security's huge unfunded obligations
Canada's fiscal reforms undermine the Keynesian notion that cutting government spending harms economic growth. Canada's cuts were coincident with the beginning of a 15-year boom that only ended when the United States dragged Canada into recession in 2009. The Canadian unemployment rate plunged from more than 11 percent in the early 1990s to less than 7 percent by the end of that decade as the government shrank in size. After the 2009 recession, Canada has resumed solid growth and its unemployment rate today is about a percentage point lower than the U.S. rate.
The most dramatic cuts were to corporate taxes. The federal corporate tax rate was cut from 29 percent in 2000 to 15 percent in 2012. Most provinces also trimmed their corporate taxes, so that the overall average rate in Canada is just 27 percent today. By contrast, the average U.S. federal-state rate is 40 percent.[...]Canada's federal corporate tax rate has been cut from 38 percent in the early 1980s to just 15 percent today. Despite the much lower rate, tax revenues have not declined. Indeed, corporate tax revenues averaged 2.1 percent of GDP during the 1980s and a slightly higher 2.3 percent during the 2000s.Now compare Canada with the United States. In 2012, Canada is expecting to collect 1.9 percent of GDP in federal corporate income taxes with a 15 percent corporate tax rate. The United States is expecting to collect 1.6 percent of GDP at a 35 percent corporate tax rate. Thus, the high U.S. rate is not only bad for the economy, but it also doesn't help the government collect any added revenue.
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We've had some pretty responsible governments in Canada starting with the Liberals and now the Conservatives.They cut spending when they should just like Keynesians would suggest when the economy was growing and they stimulated the economy during the recession by investing in infrastructure and bailing out GM and Chrysler.We also have been very fortunate that our banks are closely regulated and aren't allowed to take on the risk that banks in other countries do so we haven't had to bail out our financial industry.When business is deleveraging because there is no demand and when consumers are deleveraging at the same time while you are in a liquidity trap and monetary policy no longer can work that leaves government to provide that demand in an economy since it won't come from anywhere else in the short term.

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When business is deleveraging because there is no demand and when consumers are deleveraging at the same time while you are in a liquidity trap and monetary policy no longer can work that leaves government to provide that demand in an economy since it won't come from anywhere else in the short term.
So moving money from one pocket to another stimulates demand? There really is no logical explanation for that; the only attempts I heard are just hocus-pocus that counts the easily seen and ignores the unseen. "Oh look, we spent a billion dollars on the Digging Holes With Spoons Initiative, look at all the jobs!". No mention is made of the 5000 businesses that didn't hire because their taxes went up, or had to lay people off.Moving money from the productive economy to the political economy can never have a net positive effect on growth.But I don't mean to take away from Canada's success. Every country could be better, and over the last decade, Canada has had our lunch.
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Investing in good beneficial infrastructure increases the productive capacity of the country.
Like solar panel manufacturing plants?
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Cleaning up the mess: Bank resolution in a systemic crisis
Daniel Gros Dirk Schoenmaker6 June 2012In Greece, the problem is an insolvent government bringing down the banks. In Spain, the problem is now insolvent banks bringing down the government. This column argues that despite their differences, the potential costs to the rest of Europe mean that both problems require a European solution.The diabolic loop between the solvency of the banking system and the sovereign fiscal position is now apparent (Lane 2012).•In Greece, it is the insolvency of the government that has sunk the banks;•In Spain, the banks are sinking the government.What is common in both countries is that savers are running away when they see the banks and the sovereign propping each other up. Unless the banks in both Greece and Spain are soon recapitalised, the on-going gradual deposit flight might turn quickly into a classic run, the consequences of which are hard to imagine.ARTICLE CONTINUED AT LINK ABOVE
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Spain: Save us or the Euro falls

Spain is warning that Europe's single currency will unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozone and agree on a strategy to pool responsibility for failing banks.
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Investing in good beneficial infrastructure increases the productive capacity of the country.
If the government was good at that, that would be a valid point. They build the freeway system 40 years ago, and since then it's just been flushing money down the toilet on pork projects. So is the NET gain measured over 50 years still positive?Most of what the government calls "stimulus" is just pure, wasteful pork, the equivalent of digging holes with teaspoons.
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Solution to over-centralization: more centralization! Makes perfect sense, right Henry?
Yep. The losers always like being put into the same boat as the winners. I'm guessing Germany isn't so thrilled about Spain's idea.
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Yep. The losers always like being put into the same boat as the winners. I'm guessing Germany isn't so thrilled about Spain's idea.
Well anybody who understands economics also understands that a currency union can not exist without a close fiscal union as well.Germany has benefited hugely from the Euro Zone and the policies that benefited them and their banks are the reasons that Spain is in trouble not because of Spanish overspending by their government.Spain still has less Government spending per person than Germany does and was running budget surpluses before the Financial Crisis hit. If they had their own currency they would still have issues because of the housing bubble that was caused by policies designed to help Germany integrate East Germany but they would be able to make the adjustments.Only the simple should think Germany good, Spain bad.
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Germany is stuck with guilt keeping them in.Once they overcome their guilt over the last 2 world wars, they will begin serious take over plans for Europe economically.

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If the government was good at that, that would be a valid point. They build the freeway system 40 years ago, and since then it's just been flushing money down the toilet on pork projects. So is the NET gain measured over 50 years still positive?Most of what the government calls "stimulus" is just pure, wasteful pork, the equivalent of digging holes with teaspoons.
you give them to much credit, the Interstate network was building the 50's correct? it has been over 60 yrs....
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It's getting uglier and uglierThe Growing Pain in Spain

Yiagos Alexopoulos at Credit Suisse estimates that Spanish capital outflows are currently running at an annualised rate of 50 per cent of GDP. No question, the bank run is clearly accelerating, and one can easily understand why. The country is turning into a Little House of Economic Horrors. The alleged “rescue” of Madrid’s banks is a non-starter. 100 billion euros won’t begin to cover the scale of the problem on any honest accounting or “stress test” (and that’s before we get to the next phase of announced austerity measures).marshall2.jpgChuck Davidson of Wexford Capital has completed a report where he looked at the Spanish banks, extrapolating to all of them from a close look at the big five.. He haircutted their assets by 25%, which hardly seems excessive. Moving from the big 5 to the entire banking system, he came up with 990 billion euros as the capital needed to get Spain’s banks to Basel 3 risk weighted capital standards. Madrid, we have a problem!
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