Tag Archive for: ElizabethWarren

Could Chile Turn Its Back on Freedom?

Estimated Reading Time: 6 minutes

Editors’ Note: Chile is a beautiful country, as is the United States of America. This article is clearly about America as much as it is about the potential loss of liberty and a far leftist takeover in Chile. The parallels are stunning with actors like Elizabeth Warren, Bernie Sanders and the radical progressives (Obama inspired) driving the out-of-control Biden presidential bus. It is an important read and an important message for freedom loving, hard working, and law abiding American citizens who believe in the foundational principles of individual sovereignty and the rule of constitutional law that has guided the greatest experiment in governing by consent of ‘We the People’.


Most people outside of South America do not follow trends there very closely. You may not be aware that democracy and freedom are being threatened in the most successful country in Latin America: Chile. That development threatens us here as well.

A quick history lesson. In 1970, Chile became the first country to freely elect what became a Communist government under Salvador Allende. The Chilenos did not want Communism. Allende was elected with only a little more than a third of the total votes when the other two candidates split the Conservative vote. Allende quickly became a puppet of the extreme left, and the country spiraled into chaos, pushed along by Henry Kissinger and the CIA. Things got so bad in terms of inflation, unemployment, etc. that on August 22, 1973, Congress by a large majority asked the armed forces to put an end to multiple violations of the Constitution.  General Augusto Pinochet staged a coup d’etat on September 11, 1973, ousting Allende who shot himself in the Presidential palace.

Pinochet became dictator until 1989 when he freely relinquished office after honest elections. He gets a bad press in the U.S. because of the brutal methods he used to suppress the Communists, who were not about to give up power easily. It was during the Pinochet era that I was traveling regularly to Chile. The reality on the ground was quite different from what we NorteAmericanos were told by our media.

Anyone could walk around the cities and talk freely about politics and the government, as long as you did not promote insurrection. If you did, you might find that the Police would come down on you with una mano dura (an iron fist). But for the most part, there was no censorship. Restaurants were full. Most people led normal lives and were comfortable speaking their minds.

Most people liked Pinochet. He quickly restored order from chaos. I asked friends how they felt about the allegations of brutality, which were true. None approved of it, but generally, I was told, “You weren’t here. Anything is better than how it was under Allende.” What was so bad about him? It was largely the fact that he promised everything to everyone for free, all at Government expense. Naturally, this was popular with the poor and the uneducated, but it was totally unsustainable. The economy collapsed.

Pinochet hired a group of economists from the University of Chicago, disciples of Milton Friedman, to come down and tell him how to straighten things out. Among other things, they revamped their Social Security System which was bankrupt. Taxes were still collected, but instead of turning the money over to the politicians to spend, a group of companies was allowed to compete to be managers of the pension funds that were seen to belong to the individual citizens. This was how I became involved, as my company became one of those investment managers.

The program was wildly successful. Chile became one of the few countries anywhere that had a public pension system that was not built on smoke and mirrors. Among other things we established a system where individuals could go to a public kiosk, punch in their Social Security ID, and learn exactly how much they had accumulated on their behalf.

Not everyone was happy, however. The Pinochet reforms primarily benefited those who worked. Chilenos are serious people. If you work, you benefit. If you don’t, you can’t look to the Government to take care of you. This is anathema to people who see society as a global village where everyone is responsible for everyone. Politics is usually about the division of the spoils, and inevitably the pendulum of power swings back and forth between those who are content with the way things are and those who would like things to be more favorable to their interests.

After Pinochet, Chile tried Governments of the Left and of the Right over the next 30 years, but generally, they did not stray too far from the precepts of Milton Friedman. People always speak of Chile as a model for South American governments, which historically have tended to be either corrupt or inept.

In the last few years, however, the gap between the Haves and the Have-nots has widened dangerously. This is a global phenomenon that threatens to topple Governments. With the Internet, social media, and cell phones ubiquitous, public opinion and public action can be mobilized rapidly.

In Chile, the Have-nots are rising. Not surprisingly, they resent the fact that those who have been contributing and saving for retirement are in better financial condition than they are. Chile’s social safety net is not satisfactory. With rising power, those on the political Left have forced a Constitutional rewriting. Recently, a 600-page draft was released which, if adopted, would put the country back on the path they abandoned when Allende fell.

Among other things, the draft calls for a more socially just allocation of retirement assets. Put bluntly, that would mean giving the Government the power to seize all the accumulated retirement assets of individuals and spread the money around to the less fortunate. Another name for confiscation is “theft”, but to the apostles of social justice, this is dismissed as just an excuse for keeping poor people down.

In today’s world, to be poor is seen as being a victim of elites in an unjust society, which is translated into having rights denied. As more and more people come to see themselves as victims, they are increasingly using the political system for a redress of grievances over rights denied.

“Rights” are things to which one has a proper claim. Some, like freedom of religion, if enshrined in law, are ours to enjoy without regard to anyone else. But many rights also place obligations on others to facilitate or pay for those benefits or alter their behavior. The so-called right to health care, or the right to security in old age, involve costs that have to be paid for somehow by someone. In other words, many rights are affected by the political process that determines obligations associated with those rights.

Increasingly, politicians and judges have invented rights like the right to privacy, the right to an abortion, etc. It is not so much a matter of appropriateness as it is a matter of funding. This largely depends on political power. This is what is playing out in Chile. The proposed new Constitution is full of rights, but vague on how they will be financed. Chilenos will vote in September. Most likely, few will have actually read the entire document, relying instead on political slogans.

What has this to do with the United States? Politicians like Bernie Sanders and Elizabeth Warren are at the forefront of politicians proclaiming the existence of many rights on the grounds of morality. Their answer to the question of who pays is the greedy rich and greedy corporations. Chilean politicians make similar arguments. Isn’t it immoral for some to have so much more than they could ever need when so many are currently in desperate need? The BLM movement argues that many of the great corporations and great fortunes were built on the backs of slaves, and therefore reparations are in order to right old wrongs. Proposed “wealth taxes” are merely confiscation by another name.

These are powerful arguments that swing voters, ignorant of the fatal flaws inherent in what is essentially a Communist core belief. (“To each according to his needs from each according to his ability.”)

There are no easy answers. However, I was disturbed by a recent article in the Wall Street Journal that highlights the potential fragility of Capitalism in our time. Jamie Dimon, the popular CEO of JPMorgan-Chase Bank was awarded a $52.6 million dollar “special” bonus on top of his regular compensation of $32 million. That doubled his pay from the previous year. Now Dimon had not invented a cure for cancer or “saved” JPM in a time of great financial peril. He had simply done a good job, as he usually does.

Shareholders overwhelmingly refused to approve the special bonus. However, the Journal calmly reported that it is doubtful he will give it back. Jamie is not like a baseball pitcher who argues he should get a bonus because when he pitches the attendance always goes up. Dimon manages a large bank and does it well. It is unquestionably a challenging task. But $80+ million dollars?

I don’t believe that Chilean corporations pay their CEOs as lavishly. But the Dimon incident gives ammunition to those who find the “wealth gap” intolerable. As political power shifts back and forth, those of us who believe in Capitalism would be well advised to minimize examples of excesses that fan the flames of resentment. The mob always has the power of numbers.

Watch the Chilean referendum on the new Constitution carefully. The vote will be on September 4. The betting is that it will not be approved because it goes too far to the Left. But you never know. The winds of change will still be blowing even if it is defeated.

Do Greedy Countries Have Higher Inflation?

Estimated Reading Time: 2 minutes

Blaming high inflation on corporate greed has become a favorite pastime of some prominent politicians. Senator Elizabeth Warren (D-MA) has accused large corporations of driving inflation, a view that is out of sync with the data. More recently, Senator Bernie Sanders (D-VT) joined the chorus. “Corporate greed is Tyson Foods raising the price of beef by 35 percent while its owner became $1.6 billion richer during the pandemic, its profits skyrocketed by 140 percent last quarter to $1.12 billion and its CEO got a 22 percent raise last year to $14 million,” Sanders tweeted, “It’s not inflation. It’s greed.”

If inflation is the result of greed, as Sanders claims, one should expect to see more inflation in more greedy countries and less inflation in less greedy countries. But that’s not the case.

The 2021 CAF (Charities Aid Foundation) World Giving Index ranks countries based on (1) the amount of help given to strangers, (2) money donated to charities, and (3) time volunteered to an organization. The higher the score, the higher the giving. To the extent that giving is (negatively) correlated with greed, one can use the CAF World Giving Index as a measure of how greedy a country is. The higher the score, the lower the greediness of the country.

The following figure plots the CAF World Giving Index score and inflation rate for 66 countries. There is no relationship between greed and inflation. And, to the extent that there is any relationship, it goes in the opposite direction than suggested by Senators Warren and Sanders: Greedy countries have slightly lower inflation rates.

Figure 1. Inflation and greed across countries, 2021

If the Warren-Sanders greed hypothesis were correct, one would observe a negative trend between inflation and the CAF World Giving Index with countries relatively close to the trend line. Instead, there is a slightly positive trend line, with countries located all over the place. Japan and Italy are greedier than the US, but they have significantly lower inflation rates. India and Thailand do not differ much from the US in terms of greediness, but both countries have lower rates of inflation than the US. Estonia and Pakistan, on the other hand, are greedier than the US and have higher rates of inflation. Needless to say, the correlation between inflation and the CAF World Giving Index offers no support for the Warren-Sanders greed hypothesis.

The lack of correlation between greed and inflation is not the only empirical problem for the Warren-Sanders view. The data also show that, at least relative to other countries, the US is not very greedy. Indeed, it is one of the most charitable countries in the world. In terms of greed, the US ranks 54th out of 66 countries. It has the 10th highest inflation rate.

Blaming big corporations for inflation no doubt serves the political interests of Sens. Warren and Sanders. But it is inconsistent with the available data. That is not surprising: It is inconsistent with standard monetary economics as well.


This article was published by AIER, American Institute for Economic Research, and is reproduced with permission.

Economist Offers Harsh Assessment of Elizabeth Warren’s Inflation Theory

Estimated Reading Time: 3 minutes

Harvard economist Jason Furman said the notion that “corporate greed” is driving inflation is not grounded in sound economics.

Over the weekend, Jason Furman, a former top economist for President Barack Obama, threw cold water on Sen. Elizabeth Warren’s claim that “corporate greed” is driving inflation.

“Corporate greed is a bad theory of inflation,” Furman bluntly told Business Insider in an article published Sunday.

Furman, currently a professor at Harvard University’s John F. Kennedy School of Government and a Senior Fellow at the Peterson Institute for International Economics, said the surging inflation in the US economy has a simple explanation.

“I think almost everything other than the Federal Reserve is a sideshow when it comes to the dynamics of inflation,” Furman said.

‘Corporate Greed’ Causing Inflation?

Warren, a populist progressive from Massachusetts, has hit the cable shows in recent weeks to argue that inflation—which in December saw a year-over-year increase of 7 percent, its biggest leap clip since 1982—is the fault of greedy corporations.

“Prices at the pump have gone up. Why? Because giant oil companies like @Chevron and @ExxonMobil enjoy doubling their profits,” Warren tweeted. “This isn’t about inflation. This is about price gouging for these guys & we need to call them out.”

Warren has used the “corporate greed” talking point to argue for antitrust legislation, saying businesses like Kroger should be broken up, which would lead to lower prices.

Furman isn’t the only Obama economist to point out that Warren’s arguments are not grounded in sound economics.

In December, Lawrence Summers, who served as the director of Obama’s National Economic Council from January 2009 until November 2010, had harsh words for those claiming antitrust legislation could be used to curb inflation.

“The emerging claim that antitrust can combat inflation reflects ‘science denial,’ Summers tweeted. “There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.”

Could corporate greed really be behind inflation? Put aside for a moment the economic modeling. There’s an even more obvious reason Warren’s suggestion is silly, my colleague Brad Polumbo pointed out.

“Senator Warren’s attempt to pin the blame for rising gas prices on corporate greed makes little sense. Are companies ‘greedy’ in the sense that they’re focused on increasing profits? Yes, absolutely,” he writes.

He continues:

“But it does not in any way explain the current increase in gas prices that is hurting Americans. Chevron and Exxon are no more or less greedy or profit-focused than they were last year. Or the year before that. Or 20 years ago. There’s simply no reason to believe that they suddenly became extra greedy this year, or something…..

The true causes of high gas prices are complicated, and ultimately, prices are set by supply and demand—not by the whims of individual companies. (Otherwise, they’d always set them as high as they could. But other suppliers and customer demand keep companies’ prices in check).”

Okay, so if “corporate greed” is not driving inflation, then what is? Well, Furman is mostly correct when he said “almost everything other than the Federal Reserve is a sideshow” when it comes to inflation.

After all, an authority no less than Nobel Prize-winning economist Milton Friedman noted that inflation is primarily a phenomenon stemming from monetary policy.

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output,” Friedman famously noted.

The reality is, the Federal Reserve has been printing money at an alarming rate. Fed Chairman Jerome Powell, by his own admission, said the central bank “flooded the system with money.” As a result, 35-40 percent of dollars in total circulation have been printed in the last 22 months.

Still, there’s another quote often attributed to Friedman that deserves attention.

“Inflation is caused by too much money chasing after too few goods,” the quote goes.

Money here is part of the equation; the other part is “too few goods.” While monetary policy is the elephant in the room when it comes to inflation, it’s also true that policies that discourage or frustrate the production of new goods or the ability to get them to market can also influence prices.

So while the Fed’s money printer is the primary culprit, lockdowns—which disrupt supply chains—and policies that discourage workers from working (such as ultra-generous unemployment benefits) also presumably played an inflationary role, though to what degree is unclear.

Whatever the case, many Americans unfortunately are experiencing significant inflation for the first time, a phenomenon that tragically falls hardest on the poor. If inflation continues to grow worse, claims that “corporate greed” are causing it will undoubtedly grow louder—which could spur calls for even more government action.

But if we want a solution that actually works, it’s imperative that the true culprit is identified. And in this case, the culprit is the usual one.

“I do not think it is an exaggeration to say history is largely a history of inflation,” the Nobel Prize-winning economist F.A. Hayek observed in The Denationalization of Money, “and usually inflations engineered by governments for the gain of governments.”

It’s just as they say: the more things change, the more they stay the same.


This article was published by FEE, Foundation for Economic Education and is reprinted with permission.

Comrade Down: Senate Forces Biden to Dump OCC Nominee, Lenin Scholar

Estimated Reading Time: < 1 minute

Five Senate Democrats tell Biden they won’t back Lenin scholarship winner Saule Omarova

Five Senate Democrats told the White House late Wednesday they will not support Lenin scholarship recipient Saule Omarova to serve as Comptroller of the Currency, nuking her chances to serve as the country’s bank regulator.

The Democrats—Sens. Jon Tester (D., Mont.), Kyrsten Sinema (D., Ariz.), Mark Kelly (D., Ariz.), Mark Warner (D., Va.), and John Hickenlooper (D., Colo.)—join all Senate Republicans in opposition to Omarova, who came under scrutiny over her proposals to use the banking system to “bankrupt” the oil and gas industry and her education in the Soviet Union. Axios reported Wednesday that the Democrats informed the White House they will not support Biden’s nominee.

The failed nomination marks a major setback for progressives, who championed Omarova over her criticism of big banks and fossil fuel companies. Sen. Elizabeth Warren (D., Mass.) hailed Omarova’s nomination as “tremendous news.” The left-wing Sierra Club touted Omarova as a bulwark against “climate chaos” and hoped she would set up “guardrails against Wall Street’s risky fossil fuel investments.”