How Christmas ended starvation and enriched the West

The world was flat until 1600. Not the shape of the planet. According to the best economic history, standards of living even in 1800 AD hardly differed from those of 5000 BC. TV shows dealing with the ancient past assume a gradual slope of progress so they portray Egyptians or Abraham and Sarah in the Bible as if they were primitive South American tribes still stuck in hunting and gathering mode for food. But if economic historians are correct, Egyptians in 3000 BC lived as well as the eighteenth century French.

Famine and mass starvation were common. Nobel-Prize winner Robert Fogel wrote that in eighteenth century France 20% of the people could get only enough calories each day to fuel a short walk to the spot where they begged.

Of course, some ancient capitals did better than others by looting conquered nations but per capita wealth never increased; it just sloshed from one conqueror to another. Rome enjoyed wealth and splendor because it had stolen stuff from defeated nations for the most part.

The real economy will end the expansion, not the Fed

The Fed has done an excellent job of preparing the world for this rate hike so it was already built into market prices. Don’t expect much to happen.

Some economists expect rising interest rates to kill the “recovery” and plunge the US economy into a recession. And of course the standard Austrian business-cycle theory teaches that rises rates will cut short an expansion. But as I have written before, recessions can happen without rising rates because of the Ricardo Effect.

But the idea that tight money is the only cause of recessions, as monetarists claim, is an example of the post hoc fallacy: because recessions happen after several rate increases by central banks, people think the event that happened first caused the one that happened later. It’s similar to attributing the rising of the sun every morning to roosters crowing.

US in rut like old German socialism

Mainstream economists and the Federal Reserve are trapped in a rut, condemned to repeating the mantra that monetary policy can save us even though it hasn’t for seven years. Germany after World War I faced a similar situation and the US should heed the lessons.

Socialist ideas swept through Germany like the swine flu in the last half of the 19th century. Otto von Bismarck, the Kaiser’s prime minister, devoted his career to fighting socialists while preserving the monarch by co-opting socialist policies. He promoted unions, nationalized railroads, mines and other large industries. State regulation of industry exploded. He provided social security, healthcare and unemployment benefits. By WWI socialists could not point to a single policy of theirs that Bismarck had not already deployed. Socialists dominated parliament but they weren’t happy because the Kaiser ruled and they didn't.

That changed with the revolution after WWI that gave the German socialist parliament control of the nation. Socialists were jubilant. Now they could demonstrate to the world the superior nature of true socialism. The only problem was that Bismarck had already implemented all of their ideas. They had nothing new to offer. Ludwig Mises described their quandary in his book Omnipotent Government:

Industrial sector data scarier than retail

The sales figures for Black Friday are out and they are scary. Brick-and-mortar store sales plummeted 10.4% over the weekend from last year's levels.

Online sales increased on Black Friday by 14% over last year to $2.7 billion
and on Cyber Monday by about 16% to $3 billion, but that did not make up for the plunge in in-store sales. On-line sales were up about $750 million while in-store sales fell $1 billion.

Retail sales at Walmart and Macy’s have looked sad for a while. Retail sales point to the potential for the Grinch to steal Christmas for investors.