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Austrian School of Economics

Jacques Rueff Conference in Monaco

Jacques Rueff Conference in Monaco

“No religion spread as fast as the belief in full employment, and in this roundabout way, allowed governments that had exhausted their tax and borrowing resources to resort to the phony delights of monetary inflation.” Jacques Rueff (1896-1973), 7th Minister of State of Monaco

Irresponsible socio-economic and fiscal policy measures with alarming demographic problems and depleted state coffers have brought most of the European Welfare State to the brink of collapse. The explosive immigration issues lures masses of disenchanted citizens increasingly to populist rhetoric and confiscatory government actions that challenge the very foundations of a civil society, democratic principles, and the rule of law.

The I. International
Jacques Rueff Conference

Principality of Monaco, November 8, 2016

On the Worldwide Collapse of the Welfare State.
Will the End of a Daydream Turn into a Nightmare?

The I. International Jacques Rueff Conference is an academic one-day academic co-operation of CEPROM (Center of Economic Research for Monaco, MC) and ECAEF (European Center of Austrian Economics Foundation, FL).

Academic Director:  Kurt R. Leube, ECAEF (
Administrative Director:  Emanuel Falco, CEPROM (
Media Contacts: Nicolas Saussier, CEPROM (
Conference Date: November 8, 2016
Participation: by invitation only
Location: Musee Oceanographique de Monaco, Principality of Monaco
Conference Languages: English and French; simultaneous translation

Conference Venue:
09:00-9:30 Registration
09:30-9:45 Welcome: H.S.H. Prince Albert II. and H.S.H. Prince Michael of Liechtenstein

Session I: The End of a Daydream (9:45-12:15)
09:45-10:00 Chair: Pedro Schwartz (ES)
10:00-10:30 10:00-10:30 Unlike Socialism, the Welfare State cannot be Defined: Antonio Martino (I)
10:30-10:45 Discussion
10:45-11:15 Coffee break
11:15-11:45 The Fatal Illusion of ‘Social Justice’: Hardy Bouillon (D)
11:45-12:15 Discussion

12:15-14:15 Luncheon for speakers and invited guests

Session II: The Beginning of a Nightmare (14:15-16:30)
14:15-14:30 Chair: H.S.H. Prince Michael of Liechtenstein (LI)
14:30-15:00 Unintended Consequences of the Welfare State: Victoria Curzon-Price (CH)
15:00-15:15 Discussion
15:15-15:45 On the Looming Financial Fiasco: Pascal Salin (F)
15:45-16:00 Discussion
16:00-16:30 Coffee break

Session III: There is a Way Out! (16:30-18:40)
16:30-16:45 Chair: Pedro Schwartz (ES)
16:45-17:15 An Inspiring Revolution: Pension Savings in Personal Accounts: Carlos Gomez (Chile)
17:15-18:15 Panel discussion with Bouillon, Curzon-Price, Gomez, Klaus, Salin)
18:15-18:30 Discussion general
18:30-18:40 Farewell Remarks: Emmanuel Falco, CEPROM (MC)

18:50-19:50 Farwell Reception at the Palace for invited guest and speakers, hosted by H.S.H. Prince Albert II.

Monetary Voodoo

GIS statement by Prince Michael of Liechtenstein

The governors of the European Central bank met on December 2 and decided to make a further small reduction in already negative lending rates, while extending their bond purchasing program by another six months to March 2017. In its unsuccessful way, the ECB is trying to resolve a trilemma. It wants to spur economic growth through low to negative interest rates, hit its targeted inflation rate of 2 per cent by increasing money supply, and relieve the fiscal pressures on member states by a huge bond purchasing program.

The idea is that by paying negative rates for deposits at the central bank, the ECB will prod commercial banks to increase lending to corporations and consumers, rather than maximize liquidity. In addition, commercial banks are expected to pass these negative rates along to depositors, discouraging savings and boosting consumption.

This plan is understandable and logical, in a shortsighted way. The difficulty is that it is detrimental to the economy in the long term and completely unsustainable. I have yet to hear a convincing explanation of why the magic figure of 2 per cent inflation is beneficial.

In order to alleviate the debt servicing problems of all-but-bankrupt European states, the ECB began quantitative easing in March 2015. The central bank purchases 60 billion euros of sovereign debt each month under this program. Counting the latest six-month extension, the total cash injection provided by QE comes to 1.46 trillion euros.

This policy of flooding the economy with liquidity has not spurred growth. While inexpensive credit can support expansion in a healthy economy, it cannot create growth. What cheap money does do effectively is to destroy savings, especially retirement savings.

Sustainable growth happens when businesses decide of their own free will to invest. To make such decisions, companies need to have confidence in the future. Today, this confidence has been undermined by erratic policies and overregulation.

The quickest way to restore trust would be to introduce the dreaded (by politicians) structural reforms that truly unleash private investment. Public spending on useful infrastructure could play a supporting role in this recovery plan.

Bond buying is not solving the euro area’s sovereign debt problem because member states continue to overspend. What it does do is buy time, which the national governments use to put off reforms.

Consumer price inflation has not returned to 2 per cent, but asset inflation is evident in stocks, bonds and real estate prices. This kind of sustained growth normally ends in a bubble.

In voodoo and tribal religions, priests intercede with the supernatural to ensure the welfare of the community. Looking at the long term causes and consequences, there appears as much logic in a witch doctor’s potions to dispel evil spirits as in the ECB’s efforts to heal the economy. Except the witch doctor probably causes less harm.

Read the original statement “Monetary Voodoo” here -> GIS

Terrorism and the money-trail mirage

GIS statement by Prince Michael of Liechtenstein

French investigators suspect that the perpetrators of the November 2015 terrorist attacks in Paris used prepaid debit cards to cover their expenses. New measures will be proposed by the European Commission next month to make it harder to finance such operations, writes Prince Michael of Liechtenstein.

This “action plan” will outline a series of steps, including legislation, for consideration by the next European Union finance ministers’ meeting in February, according to the Commission’s Vice President Valdis Dombrovskis.

France is proposing to cap the sums that can be loaded onto prepaid cards, and to curb the conversion of virtual or crypto-currencies such as Bitcoin into legal tender. The French also claim that Bitcoin allows anonymous transactions that cannot be monitored, which happens not to be true.

Two aspects of this issue are striking.

Since the 9/11 attacks, Western governments have insisted that finances are the Achilles heel of international terrorism, which would wither once the money flow is cut off. The financial services industry has been doing its utmost to shut down these flows for 15 years – to little effect. Perhaps the lesson is that there is nothing significant to shut down. Terrorism is not particularly expensive. Attacking the money trail sounds good, but distracts us from the real threat.

Another, cynical aspect should not be ignored. Cash and crypto-currencies have become a thorn in the side of certain central banks and governments. Cash makes it more difficult for governments to control people’s behavior or for central banks to misappropriate savings by applying negative interest rates. The same applies to crypto-currencies, which compete with legal currencies and thus force monetary policies to become more efficient. In this sense, fighting terrorism could just be another pretext for protectionism.

I am reminded of a popular Twitter meme showing a herd of sheep staring out of a pen. Mummy sheep asks: “Kids, do you know why we are permanently surrounded by those barbed-wire fences?” Baby sheep compliantly answers: “I do, Mummy – it’s to keep the terrorists out, so we can all enjoy our freedom.”

Read the original statement “Terrorism and the money-trail mirage” here -> GIS

Semantic Traps

Semantic Traps

Semantic Traps:
Politics with Loaded Terms

A Seminar for Scholars, Journalists and Entrepreneurs

“One must always repeat the truth, because even the error around us is preached again and again. And not from individuals but from the crowd.”   J.W. von Goethe

     When political speech writers pen speeches for presidents, prime ministers, and other influential dignitaries, they choose their words carefully, knowing that rhetoric matters. A classic case of an intentional deception of words, according to Schumpeter was the hijacking of the term liberal. In a similar fad, the market economy is increasingly condemned as a system of crony capitalists, the empty notion of social justice turned into a general verdict on our society’s moral status, or carbon pollution became a substitute for the greenhouse gases. In chapter 7 of The Fatal Conceit, “Our Poisoned Language,” F.A. von Hayek lists over 100 words before which we put social ranging from social accounting to social property to social waste, and in each case obfuscate their meaning.
Have you ever wondered how many of our habitual political terms have assumed quite different meanings or, maybe deliberately, have even taken on undertones that suggest something detrimental to what we want to get across? It seems as if the old Confucius warning “when words lose their meaning people will lose their liberty” has more relevance today then ever before.
With Confucius’ admonition in mind, PERC, Liechenstein Academy, and ECAEF have teamed up to organize a seminar on “Semantic Traps: Politics with Loaded Terms”. Details including the agenda are listed below. If you are interested in finding out more about the seminar, contact co-directors, Terry Anderson or Kurt Leube.

Seminar Date:  June 9-11, 2016 (Thu evening to Sat noon)

Location:  Liechtenstein Academy Foundation Campus: Freudenfels Castle at Lake Constance, Eschenz, Switzerland

Admission Fee:  Free Admission

Program Director:  Hans-Rudolf Maag

Academic Directors:  Terry L. Anderson and Kurt R. Leube

Seminar Program

Thursday – 9 June, 2016:
tbd Opening Dinner (optional) and welcoming remarks by H.S.H. Prince Michael of Liechtenstein

Friday – 10 June, 2016:
09:00 – 09:30 Registration
09:30 – 10:00 Welcome and Opening
Member of the Princely Family (LI), Hans-Rudolf Maag (CH) and
Terry L. Anderson (USA)

Session I: Politics
10:00 – 10:30 «On the Confusion of Terms in the Political Debate»
Michael Wohlgemuth (D)
10:30 – 10:45 Discussion
10:45 – 11:15 Coffee break
11:15 – 11:45 «Justice, Fairness, Solidarity! The Prophecy of a ‘Socially Just’ Society»
Hardy Bouillon (D)
11:45 – 12:00 Discussion
12:00 – 12:30 «Is the ‘Public Interest’ really in the Public’s Interest?»
Carlos Gebauer (D)
12:30 – 12:45 Discussion
12:45 – 14:00 Buffet Lunch for all participants at seminar site

Session II: Economics
14:00 – 14:30 «Are the Poor really Getting Poorer as the Rich are Getting Richer?»
Erich Weede (D)
14:30 – 14:45 Discussion
14:45 – 15:15 «In Defense of Private Property»
Gary Libecap (USA)
15:15 – 15:30 Discussion
15:30 – 16:00 «Fair Trade and Sustainability: Is Globalization Evil?»
Robert Nef (CH)
16:00 – 16:15 Discussion
16:15 – 16:45 Coffee break
16:45 – 18:00 Q&A, Session I and II
19:00  Dinner at the seminar site (Freudenfels Castle; mandatory); Speaker TBA

Saturday – 11 June, 2016:
08.00 – 09.15 Breakfast
09:30 – 09:45 Directorial Remarks
Hans-Rudolf Maag

Session III: Environmental Issues
09:45 – 10:15 «Dynamic Economics and Dynamic Ecology: The Essence of Free Market
Terry L. Anderson (USA)
10:15 – 10:30 Discussion
10:30 – 11:00 «On Secular vs. Non-Secular Environmental Beliefs»
Mark Pennington (UK)
11:00 – 11:15 Discussion
11:15 – 11:45 Coffee break
11:45 – 12:15 «Unleashing the Power of Free Market Environmentalism»
Martin Hostettler (CH)
12:15 – 12:30 Discussion
12:30 – 12:45 Closing remarks
Member of the Princely Family (LI), Hans-Rudolf Maag (CH) and
Terry L. Anderson (USA)
12:45 Individual departures

Vernon Smith Prize Winners

Vernon Smith Prize 2014
Austrian Econonmics Applied: 8th International Vernon Smith Prize 2015.

8th International Vernon Smith Prize 

Vaduz (FL), January 24, 2016. After much reading, long discussions and at times quite difficult deliberations, the international jury of the VSP finally came to a conclusion and is delighted to announce the winners:
The 1. Prize goes to Daniel W. Issing (Germany), the 2. Prize to Demelza Hays (USA), and the 3. Prize to Mats Ekmann (Finnland). Heartfelt congratulations! Their profiles and essays will be posted after the winners have defended their papers at a special festive event on February 15, 2016 in Vaduz, the Principality of Liechtenstein.

The annual Vernon Smith Prize for the Advancement of Austrian Economics is sponsored and organized by ECAEF – European Center of Austrian Economics Foundation, Vaduz (Principality of Liechtenstein).  Topic of the 2015 Essay Competition was:

Edward J. Snowden:  Hero or Villain?