Sunday, January 24, 2016

The black-sheep founder


That phrase is a stark truth from the American Revolution, yet most people can’t tell you who said it and where.  It’s not as if it didn’t deserve better.

Even if you believe the Revolution was a bad idea, given the inflation that funded it and the Hamiltonian government that emerged from it, it would be hard to find words more influential in determining our history.  

The argument in their favor goes something like this: In late 1776 Washington’s troops were chased from New York City and fled across New Jersey, finally settling across the Delaware River near Philadephia. Not only the British but many colonists were certain of their surrender, and only a Christmas break and snow were delaying the inevitable.  Legend has it that while the troops were camped out waiting for their enlistments to expire, one of them, Thomas Paine, a British expatriate who had arrived in the colonies only two years earlier, borrowed a fellow soldier’s drum to use as a desk so he could pen an essay that General Washington had his officers read to the men.
THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.
Paine’s message got the troops standing tall again for an afternoon.  With Paine among them they crossed the ice-strewn Delaware, marched nine miles through the night in a blizzard to Trenton, and surprised a British detachment of hung-over German mercenaries on the morning of December 26, 1776.  The fight was over quickly, and the General had achieved his first victory in the war for independence.

A new thought suddenly emerged among the colonists: The war might not be futile.  Morale was temporarily restored among civilians and soldiers.  “The dramatic victory inspired soldiers to serve longer and attracted new recruits to the ranks.” (Wikipedia)

Paine had already achieved fame earlier that year for his pamphlet Common Sense, in which he argued persuasively that the colonies could govern themselves, and that George III was no more than the “Royal Brute of Britain” rather than some loving father who cares for his subjects.

“For as in absolute governments the King is law, so in free countries the law ought to be King,” Paine wrote.  In a Paine-style flourish he added:
O ye that love mankind! Ye that dare oppose, not only the tyranny, but the tyrant, stand forth! Every spot of the old world is overrun with oppression. Freedom hath been hunted round the globe. Asia, and Africa, have long expelled her.—Europe regards her like a stranger, and England hath given her warning to depart. O! receive the fugitive, and prepare in time an asylum for mankind.
To attack the king in such manner was considered blasphemy and treason, but in the colonies it found a sympathetic audience.  Six months after publication the widespread popularity of Common Sense nudged the Continental Congress to draw up a Declaration of Independence.

Thomas Paine, in other words, ignited the drive for independence and kept it alive during its darkest hours.   

You might think Paine would deserve to be named among the country’s key Founding Fathers, at the very least.  Yet his name is usually not listed among them.  Most Americans have heard of Washington, Jefferson, and Adams — but Paine?  Some historians regard him as an unfortunate footnote in the country’s creation and nothing more.

The Age of Reason

Among the reasons for his diminutive stature was a three-volume book he wrote much later, The Age of Reason, which was openly critical of organized religion and the Christian Bible in particular.  Paine’s attack was based on his personal biblical scholarship and as such called for scholarly counterarguments by those who disagreed.  While there were rebuttals, most people seemed to regard him as Teddy "Bully Boy" Roosevelt did many years later, as a “filthy little atheist.”

Is Roosevelt’s charge legitimate?  Age of Reason opens with the “author’s profession of faith,” as Paine described it, written while he was living in France during the Terror of the French Revolution:
As several of my colleagues, and others of my fellow-citizens of France, have given me the example of making their voluntary and individual profession of faith, I also will make mine; and I do this with all that sincerity and frankness with which the mind of man communicates with itself. 
I believe in one God, and no more; and I hope for happiness beyond this life. 
I believe the equality of man, and I believe that religious duties consist in doing justice, loving mercy, and endeavoring to make our fellow-creatures happy. 
But, lest it should be supposed that I believe many other things in addition to these, I shall, in the progress of this work, declare the things I do not believe, and my reasons for not believing them. 
I do not believe in the creed professed by the Jewish church, by the Roman church, by the Greek church, by the Turkish church, by the Protestant church, nor by any church that I know of. My own mind is my own church. 
All national institutions of churches, whether Jewish, Christian, or Turkish, appear to me no other than human inventions set up to terrify and enslave mankind, and monopolize power and profit.  
I do not mean by this declaration to condemn those who believe otherwise; they have the same right to their belief as I have to mine. But it is necessary to the happiness of man, that he be mentally faithful to himself. Infidelity does not consist in believing, or in disbelieving; it consists in professing to believe what he does not believe.
Is this is how a filthy atheist expresses himself?  You be the judge.  As one writer has observed,
When [Paine] had composed passionate defenses of freedom against political tyranny, the masses had loved him. But now that he had composed a passionate defense of freedom against religious tyranny, they hated him.
Paper Money

Paine had little in the way of formal education, yet his understanding of complex issues and his ability to articulate them clearly and passionately were without parallel in his lifetime, which is why he was the bestselling author of the 18th century.  One of his most profound essays addressed the nature of paper money
The pretense for paper money has been that there was not a sufficiency of gold and silver. This, so far from being a reason for paper emissions, is a reason against them. . . .
As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom — and property no security — where this practice can be acted . . . .
If anything had or could have a value equal to gold and silver, it would require no tender law; and if it had not that value it ought not to have such a law; and, therefore, all tender laws are tyrannical and unjust and calculated to support fraud and oppression. . . .
[If] money be made of paper at pleasure, every sovereign in Europe would be as rich as he pleased. But the truth is, that it is a bubble and the attempt vanity. Nature has provided the proper materials for money: gold and silver, and any attempt of ours to rival her is ridiculous….
It’s difficult to document Paine’s contributions to liberty in anything less than a book, but for more extended presentations please see “Thomas Paine: Liberty’s Hated Torchbearer” and “The Sharpened Quill.”  And for a script dramatizing his role in the nation’s founding, see Eyes of Fire: Thomas Paine and the American Revolution.






Thursday, December 31, 2015

Happy New Year from a prestigious thief

We think of thieves as conducting their work when no one is looking, such as breaking into a house while the owners are away.  But the most successful thieves have done their stealing in plain sight, on a grand scale, while the owners are home and often with their tacit approval, though with sleight of hand techniques that not one man in a million is able to detect.  Such a thief entered our lives when Woodrow Wilson signed the Federal Reserve Act into law on December 23, 1913.  

A central bank such as the Fed has a remarkable character.  According to establishment boilerplate it’s purpose is to stabilize the economy and ensure prosperity and “full employment.”  The decision makers at the Fed are of necessity selected for their superhuman brilliance and neutrality of judgment, thus qualifying them to adjust the amount of money available to the banks so that they may in turn serve the interests of a public numbering some 322,267,564.  If for some reason certain members of the public don’t reap the benefits of this policy — or worse, end up losing their jobs, their savings, their businesses, and/or their homes — it’s not because the Fed itself is a bad idea.  How could it be?  Without the Fed as an emergency lender bankers threw the economy into Panics in the 19th and early 20th centuries.  No less than Ben Bernanke himself admitted this, telling Ron Paul the Fed exists to prevent Panics.  If economic problems arise, they won’t be Panics, and the culprit or culprits will be found somewhere other than in the Eccles Building.

There’s another side to the Fed’s character that is somewhat less wholesome than its public image and is best revealed by the manner in which it was founded.

The Bankers’s Dream

Before the Fed’s founding bankers in general and Wall Street in particular  complained about the lack of “elasticity” of U.S. currency.  “Elasticity” in this context is one of the great euphemisms of human history.  According to lore, this missing feature of “hard” money such as gold or silver was responsible for the Panics of 1873, 1884, 1893, and 1907.  The uncooperative coins that were behind the paper money substitutes couldn’t be increased in supply when needed.  They — gold and silver — were therefore said to be inelastic.  Because of this inelasticity, the legend persisted that banks were having trouble meeting the demand for farm loans at harvest time, as G. Edward Griffin explains*:
To supply those funds, the country banks had to draw down their cash reserves which generally were deposited with the larger city banks. This thinned out the reserves held in the cities, and the whole system became more vulnerable. Actually that part of the legend is true, but apparently no one is expected to ask questions about the rest of the story. Several of them come to mind. Why wasn't there a panic every Autumn instead of just every eleven years or so? Why didn't all banks— country or city— maintain adequate reserves to cover their depositor demands? And why didn't they do this in all seasons of the year? Why would merely saying no to some loan applicants cause hundreds of banks to fail? [Kindle, 7827]
The Morgan and Rockefeller bankers on Wall Street dreamed of having a central bank that could supply money when needed, as a “lender of last resort.”  A central bank would also control the rate of inflation of the banks under its control.  If bank reserves could be maintained at a central bank and a common reserve ratio established, then no one bank could expand credit beyond its rivals and therefore there would be no bankruptcies caused by the draining of currency from overly-inflationary banks.  All banks would inflate in harmony, and there would be tranquility and profits for all.   
All [banks] would walk the same distance from the edge [Griffin explains], regardless of how close it was. Under such uniformity, no individual bank could be blamed for failure to meet its obligations. The blame could be shifted, instead, to the "economy" or "government policy" or "interest rates" or "trade deficits" or the "exchange-value of the dollar" or even to the "capitalist system" itself.  [Kindle, 518-519]
With bankers off the hook, Griffin notes, “the door then could be opened for the use of tax money rather than their own funds for paying off the losses.”

The bankers who traveled a thousand miles to meet on Jekyll Island in November, 1910 understood they needed a cartel to bring their dream to life.  And a cartel meant they needed the threat of state violence to make it work.  Thus, included in their secret meeting were two politicians serving as the bankers’s advocates in Washington.  Together with the media they could slip their cartel on the American public over the Christmas holidays, though for political reasons it was delayed until 1913.  

The public would be a hard sell.  Americans were profoundly suspicious of Wall Street and cartels.  They distrusted anything big in business or government.  A central bank operating for the benefit of the big banks had no chance of becoming law, unless it was promoted as a way to shackle Wall Street itself.  This could be accomplished, it was widely believed, through a government bureaucracy of overseers.  

The Pujo Committee

Frequent speeches by Wisconsin Senator Robert LaFollette and Minnesota Congressman Charles Lindbergh brought public outrage over the “Money Trust” to a boil.  LaFollette charged that the entire country was under control of just fifty men; Morgan partner George Baker disputed the allegation, claiming it was no more than eight men.  Lindbergh pointed out that bankers had controlled all financial legislation since the Civil War, through committee memberships:  
These committees have controlled the nature of the bills to be reported, the extent of them, and the debates that were to be held on them when they were being considered in the Senate and the House. . .  No one, not on the committee, is recognized ... unless someone favorable to the committee has been arranged for. [Kindle, 8425]
Government, acting as the sword of justice, decided to take action, with most people oblivious to the fact that the executioner and the accused were one and the same.  From May 1912 until January 1913 it held hearings headed by Louisiana Congressman Arsène Pujo, then roundly considered to be a spokesman for the “Oil Trust.”  

The Pujo Committee hearings followed the usual pattern, bringing forth immense quantities of statistics and testimonies from bankers themselves.  Though the hearings were conducted largely as a result of the charges brought forth by LaFollette and Lindbergh, neither man was allowed to testify.  Gabriel Kolko explains:
The evidence seemed conclusive, and the nation was suitably frightened into realizing that reform of the banking system was urgent— presumably to bring Wall Street under control....  
The orgy of Wall Street was resurrected by the newspapers, who quite ignored the fact that the biggest advocates of banking reform were the bankers themselves, bankers with a somewhat different view of the problem.... Yet it was largely the Pujo hearings that made the topic of banking reform a serious one.  [Kindle, 8441]
Under the direction of Paul Warburg, the principal author of the Jekyll Island plan that in its essentials became the Federal Reserve Act, the banks provided 100% financing for something called the National Citizens League, the purpose of which was to create the illusion of grass-roots support for Warburg’s brainchild.  University of Chicago economics professor J. Laurence Laughlin was put in charge of the League’s propaganda, ostensibly to bring a measure of objectivity to the discussions.  John D. Rockefeller, whose representatives at Jekyll were Senator Nelson Aldrich and bank president Frank Vanderlip, had endowed the university with fifty million dollars.  [Kindle, 8476]

It should also be noted that Woodrow Wilson was an outspoken critic of the Money Trust in his 1912 presidential campaign, all the while receiving funding from the very Trust he was condemning.  Wilson:
I have seen men squeezed by [the Money Trust]; I have seen men who, as they themselves expressed it, were put “out of business by Wall Street,” because Wall Street found them inconvenient and didn’t want their competition.
When the Fed began operations in late 1914 the man in charge of the system was Morgan banker Benjamin Strong, Jr., one of the Jekyll Island attendees who served as president of the Federal Reserve Bank of New York from its inception until his death on October 16, 1928.  Strong, in the Morgan tradition, was an anglophile who inflated the U.S. money supply from 1925-1928 to keep Britain from losing gold to the U.S.  Details of Strong’s reign and the pre-Crash conditions he created can be found in Murray Rothbard’s America’s Great Depression. 

Conclusion

The big bankers got what they wanted: A cartel run by and for the bankers.  From What is Money? by Gary North:
A central bank provides emergency money to commercial banks. This reduces the threat of bank runs. Central banks intervene to save large banks. This is why no large American bank went bust in the Great Depression, while over 6,000 small banks did.  
Central banks are the enforcing arm of the fractional reserve banking system. Central banks determine which banks survive and which do not in a national bank run. Their job is to protect the largest commercial banks.

* Mysteriously, the excellent Kindle version of Creature is not currently available.

Friday, December 18, 2015

Take comfort, libertarians, the future is ours

Bad news: Government is getting bigger and more oppressive.

Good news: As it gets bigger it also gets weaker.

Better news: Technology is making us, as individuals, stronger.

How do we know government is getting weaker?  Because it is sustained by central bank counterfeiting and debt, and the lies of state sycophants.   How long can massive fraud last?  To say that government is corrupt is saying water is wet.  The whole apparatus of government — a bandit gang writ large, in Rothbard’s famous depiction — is an affront to civilization and human dignity.  Yet it’s the absence of government — anarchy — that we’re supposed to avoid at all costs. We’re avoiding it, all right, and we’re paying dearly for it.

Meanwhile, a quiet revolution is ongoing that almost no one seems to understand, yet is talked about incessantly: The rising power of technology.  Without asking our permission, technology is taking us down the path to anarchy.  How is this so?

Technology today is climbing up the curve of the exponential but if you look at any one point it appears linear.  In our day-to-day lives we are looking at points, seeing incremental improvements but nothing that would suggest radical innovation.  Yet it happens.  We see magic but consider it mundane.  We have smartphones that can transmit live video from around the world, and say “So what?”  We read about a young programmer who builds a self-driving car in his garage, and say “Huh.”   We need to step back and look at the trend to see where all this is going.  Ray Kurzweil explains:
Early stages of technology – the wheel, fire, stone tools – took tens of thousands of years to evolve and be widely deployed. A thousand years ago, a paradigm shift such as the printing press, took on the order of a century to be widely deployed. Today, major paradigm shifts, such as cell phones and the world wide web were widely adopted in only a few years time.
He adds (from The Singularity is Near, 2005):
A primary reason that evolution— of life-forms or of technology— speeds up is that it builds on its own increasing order, with ever more sophisticated means of recording and manipulating information. . .  [p. 39]
For example,
The first computers were designed on paper and assembled by hand. Today, they are designed on computer workstations, with the computers themselves working out many details of the next generation’s design, and are then produced in fully automated factories with only limited human intervention. [p. 40]
As the technology continues to build on itself, it will eventually take “full control of its own progression.”  It will no longer need human intervention.

But fear not, he says.  In the future we will not see super-smart robots controlling or wiping out humans; rather, what will evolve is a merger of humans with their technology.  Humans, as his book’s subtitle tells us, will “transcend biology.”  Kurzweil:
It would mean that human performance is not necessarily dependent on the biological substrate that comprises our brains today. The biological information processing in our brains is, after all, much slower than information processing in conventional electronics today. Information in our brains is transmitted using chemical signals that travel a few hundred feet per second, which is a million times slower than electronics.  [p. 122]
We will reach a point when “the pace of technological change will be so rapid, its impact so deep, that human life will be irreversibly transformed.”  Or as Kevin Kelly, founder of Wired Magazine, puts it: "all the change in the last million years will be superseded by the change in the next five minutes.”  Before we can say “So what?” again we will have reached what Kurzweil and others call the Technological Singularity.  

Kurzweil refers to this progression as the law of accelerating returns.  It is “inexorable,” and his books are packed with charts showing why this is so.  According to his prediction the law will reach the Singularity by 2045.  It sounds incredible but so have most of his other predictions that have played out to be true.    

He also considers the progression to be in terms of price-performance, meaning that “all of these technologies quickly become so inexpensive as to become almost free.” [SIN, p. 430]  It’s not the case that only the rich will have access to them.

But what about government?  Won’t it feel threatened and impede innovation?  As Kurzweil points out, “the nature of wealth and power in the age of intelligent machines will encourage the open society. Oppressive societies will find it hard to provide the economic incentives needed to pay for computers and their development.” [p. 128]

He brings up a crucial point: The law of accelerating returns has always operated under government-controlled conditions.  Government wars, depressions, genocides, currency debauchery, regulations, etc. have not slowed it down, or at least not for long.  To repeat, the law is inexorable.
Innovation has a way of working around the limits imposed by institutions. The advent of decentralized technology empowers the individual to bypass all kinds of restrictions, and does represent a primary means for social change to accelerate.  [SIN, p. 472; my emphasis]
Technology in the hands of the government can be a nightmare.  But as it disperses into the lives of individuals it becomes empowering.  Over time it quietly undermines government power, as Gary North tells us:  
Technological innovation is not going to be stopped by any local government, state government, national government, or the World Trade Organization. Technological innovation is about as close to an autonomous process as anything in history. 
Technological innovation is decentralized on a scale never before seen. Because of the Internet, because of 3-D printing, and because of innovation of all kinds, technological innovation is a tsunami that is headed for all government welfare programs, all government central planning, all government regulatory agencies, every labor union, and every good old boy network. Technological innovation is simply sweeping everything before it. 
This is going to change the whole shape of civilization, and it isn't going to take three generations. It is fairly far advanced now, and another 40 years of this is going to change the political landscape entirely.
I say 20 years, but either way government is doomed, liberty is enhanced.

For libertarians, that’s a comforting thought this holiday season.

Tuesday, December 1, 2015

Was the Fed ever a good idea?

There’s an idea at root among some libertarians that the Federal Reserve was originally a sound institution that has grown corrupt.  As a bankers’ bank, it’s fine, they believe, but not as the monster it’s grown to be.  If only we could go back to the Fed’s founding charter, all would be well.

I’m thinking of two well-known financial analysts who are unsurpassed in their analytical brilliance and knowledge of markets, who rightly regard the bureaucratic FOMC as the father of bubbles, busts, stagnation, and market privilege.  In their articles they hammer the Fed relentlessly and rightfully for its cluelessness, corruption, and threat to our material and spiritual well-being.  They have authored engaging bestsellers on the state of the economy and place blame where it belongs, on the monetary policies of the federal reserve.  

Yet, strangely, their recommendations stop short of eradicating the cancer altogether.  They want the Fed reformed, not abolished.  In each case they believe the Fed in its infancy was an institution compatible with free markets. 

Peter Schiff writes,  “the role of a central bank is limited: to control the currency so as to keep prices and interest rates fairly stable. . . .  This sort of central bank is one I could have supported. But the Federal Reserve Bank of the United States never functioned this way, and it probably was never meant to.“  And he concludes: “We never should have trusted the Fed to respect its boundaries.”  (The Real Crash, Ch. 2)

Later in his book he adds: “The ultimate destroyer of the U.S. dollar was the Federal Reserve System, which was supposed to be the guardian of the currency. As I discussed in chapter 2, the original idea of the Fed was a good one: providing a uniform currency backed by gold.”

In The Great Deformation, David Stockman tells us: 
The Federal Reserve System, therefore, was intended to be a ‘banker’s bank,’ not an agent of national economic management.  This founding charter has been literally blotted out of modern day discussions . . . [p. 197]
In his closing chapter, he lists various steps he believes will avoid the worst of possible catastrophes, beginning with the restoration of the Fed as a banker’s bank and the adoption of sound money, by which he means “a gold-backed dollar.”  (p. 707)

Why was the Fed created?

In the years before the Fed, the number of non-national banks was growing steadily, as was their percentage of total bank deposits.  By 1896 the number of non-nationals had grown to 61% and their share of deposits to 54%; by 1913 those numbers had increased to 71% and 57%, respectively.  Thus, Wall Street power was waning.  It was also being diminished by a new trend in industry in which growth was being financed from profits rather than borrowed funds. Bank interest rates were too high for many ventures.  

Then there was the long-standing problem with depositors.  They would leave their money with a bank, believing it was available on demand, while the bank turned around and loaned it out.  When enough customers lined up to withdraw their money, the bank could only close its doors (or get an exemption from government).  

So, from Wall Street’s perspective there was the problem of competition — from non-national banks and industry’s preference for thrift over debt — and the public’s irritating tendency toward bank runs when they panicked.

To address this situation, four representatives of the Morgan, Rockefeller, and Kuhn-Loeb interests, along with Senator Nelson Aldrich and Assistant Secretary of the Treasury A. Piatt Andrew, huddled secretly at Morgan’s retreat on Jekyll Island, Georgia in November, 1910.  The bankers accounted for an estimated one-fourth of the world’s wealth.  Led by Paul Warburg of Kuhn-Loeb they devised a banking cartel that became law in late 1913.  The Money Powers — Wall Street  — sold it to the public as a means of controlling the vast power of Wall Street.  

How was Wall Street shackled?  By appointing Wall Street bankers to the Federal Reserve Board and to the most important post in the system, Governor of the New York Fed.  (reference here)

The original manifestation of the Fed included such tidbits as these:
  1. The Fed’s monopoly on the issue of all bank notes; national and state banks could only issue deposits, and the deposits had to be redeemable in Fed notes and gold.
  2. All national banks were drafted into the Fed, and their reserves had to be kept as demand deposits at the Fed.  
  3. As banks around the country sent their depositors’ gold to the Fed they received Fed notes in return.  Thereafter, when the public made withdrawals they were handed Fed notes instead of gold coins.  The disuse of gold coins not only encouraged inflation, it made confiscation easier later on.
  4. With the centralizing of gold and bank reserves, the Fed doubled the inflationary power of the banks by reducing the reserve requirement from 5:1 to 10:1. With more credit available, the banks could lower their interest rates.  (reference here)
Banks violate their depositors’ property rights

As I note in chapter 5 of The Jolly Roger Dollar, the key to the success of free markets is the establishment and defense of property rights.  Government law has never recognized the right of depositors to their property, meaning their deposits.  Alan Greenspan in his famous 1966 essay writes:
Since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits . . .
Observe the language: “. . . the banker need keep only a fraction of his total deposits.”  How different the impact of that sentence would be if he had said: The banker need keep only a portion of his customers’ property that they entrusted to him for safekeeping. 

I’m not trying to nit-pick.  Consider that fractional reserve banking is behind most if not all banking crises, that if bankers respected their depositors right to their deposits they would be practicing full-reserve (100% reserve) banking.  Yet the law has always sided with the bankers:
As Rothbard observed, a bank that fails to meet its deposit obligations is just another insolvent, not an embezzler. Following the British ruling in Foley v. Hill and Others in 1848, U.S. courts consider that money left with a banker is, "to all intents and purposes, the money of the banker, to do with as he pleases.”  This holds even if the banker engages in "hazardous speculation." Thus, according to the state there can be no embezzlement because the money belongs to the bank, not the depositor.  (JRD, Ch. 4)
A bankers’ bank without government

The desire of bankers for a bankers’ bank is not misguided, as long as it’s disconnected from the government. 
In the interval between the War of 1812 and the Civil War, banking was de-centralized into state-chartered banks issuing banknotes redeemable in gold or silver coins. One of the highlights of this period was the development of a clearinghouse in Boston called the Suffolk Bank.   
Formed by prominent merchants, the Suffolk System allowed New England banks to accept the notes of other banks, including country banks, at par with specie. Members of the system had to keep a sufficient reserve of specie at Suffolk to redeem all the notes it received. Suffolk could not keep banks from inflating but it could remove them from the list of approved banks and cause their notes to trade at discount.  (JRD, Ch. 11)
Conclusion

The federal reserve was never a sound system that has grown corrupt.  It was always a corrupt system that has grown more corrupt.

Ron Paul has the right approach — End the Fed.  Get it the hell out of our lives and restore monetary freedom — the right to choose a medium of exchange.









Thursday, October 22, 2015

Hands off, Bernie!

Libertyhangout.org is looking for donations to pay for enrolling presidential candidate Bernie Sanders in Walter Block’s economics course at Loyola University in New Orleans.  Of course no one expects Sanders to take the course even if the necessary $3,096 is raised.  But it draws attention to what some people believe is a serious flaw in his thinking, that socialism is a defensible economic system.

(Note: Mises Academy offers a year’s worth of online courses (plural) in free market economics at 3% of the price above.) 

But to Sanders and many like him, it doesn’t matter if socialism is deeply flawed.  I’m sure he would say it isn’t but that’s irrelevant.  It doesn’t matter that it’s not even an economic theory but a political agenda of confiscation and redistribution. In case you missed it, Sanders’ socialism is not the kind that went bloody, like those in the USSR, North Korea, Cuba, China, and Nazi Germany.   According to Wikipedia, “Sanders favors policies similar to those of social democratic parties in Europe, particularly those instituted by the Nordic countries.”  He wants Americans to surrender their wealth to government bureaucrats obediently, then wait in line for their fair share while the anointed try to figure out what it is.  

Recently, Mises Institute published articles removing the shine from two socialist paradises, Sweden and Norway.  As one of the authors points out, the Nordic countries have looked prosperous because they’ve been consuming their capital, much like a family that heats its house by burning its furniture.

But none of this really matters.  What matters is that these regimes hold the moral high ground, much as the USSR did in the 1930s.  They were born of an inspiration to raise mankind through sacrifice of the individual to a higher calling.  They placed “society” above any of its members, unless those members controlled the levers of power.  

As collectivists, socialists are morally corrupt, not economically ignorant.  They need to learn not to touch what’s not theirs.  They need to learn to keep their hands to themselves, not in someone else's pockets.  They need to learn that theft is wrong, even if it’s done by majority vote.

Leonard Read launched the Foundation for Economic Education on March 7, 1946.  A week earlier Ayn Rand had written to Read explaining why she thought the organization’s program would not succeed, based on its prospectus.  She wrote:
The mistake is in the very name of the organization.  You call it The Foundation for Economic Education.  You state that economic education is to be your sole purpose.  You imply that the cause of the world’s troubles lies solely in people’s ignorance of economics and that the way to cure the world is to teach it the proper economic knowledge.  This is not true—therefore your program will not work.  You cannot hope to effect a cure starting with the wrong diagnosis. 
The root of the whole modern disaster is philosophical and moral.  People are not embracing collectivism because they have accepted bad economics.  They are accepting bad economics because they have embraced collectivism. . . . (emphasis added) 
When the social goal chosen is by its very nature impossible and unworkable (such as collectivism), it is useless to point out to people that the means they’ve chosen to achieve it are unworkable.  Such means go with such a goal; there are no others.  You cannot make men abandon the means until you have persuaded them to abandon the goal. . . . 
The moral and social ideal preached by everyone today (and by conservatives louder than all) is the ideal of collectivism. Men are told that man exists only to serve others; that the “common good” is man’s only proper aim in life and his sole justification for existence; that man is his brother’s keeper; that everybody owes everybody a living; that everybody is responsible for everybody’s welfare; and that the poor are the primary concern of society, its holy shrine, the god whom all must serve. 
This is the moral premise accepted by most people today, of all classes, all stages of education and all political parties. 
How are you going to sell capitalistic economics to go with that?  How are you going to get them to accept as moral, proper, and desirable such conceptions as personal ambition, economic competition, the profit motive and private property? 
It can’t be done.  Their moral ideal has defined these conceptions as evil and immoral. — Letters of Ayn Rand, Michael S. Berliner, Ed., pp. 256-258, 1995
No matter what evidence the free market offers for providing material abundance, for slashing the prevalence of disease, child mortality, and poverty, for promoting peace among people through trade, it is still, at base, premised on the idea of rational self-interest.  This is nothing new.  Adam Smith
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
Notice Smith’s use of “humanity,” as if only charitable activities constitute a moral undertaking and anything resulting in a perceived advantage is somehow bereft of human decency.

People engage in free trade because both parties perceive it as a benefit.  I buy a hamburger because I value the food more than the money to pay for it, the seller of the hamburger regards the money received higher than the hamburger sold.  There is no theft.  There are no guns involved.  There is a mutual advantage through voluntary agreement.   It's a win-win.

This is the free market: People producing and benefiting through voluntary exchange.  No theft, no guns, no role for a coercer like the State.  Though people need protection of their property, the State has proven itself grossly unfit for the job.

Gary North has rewritten Hazlitt’s masterpiece and called it Christian Economics in One Lesson.  He adds something missing from Hazlitt’s presentation: Explicit reference to theft as a violation of morality. Being a Christian, he presents his moral case with references to Biblical passages.

Regardless of what you might think of his approach, most people view theft as wrong and harmful.  The problem arises when the thief is the government in the guise of a savior.  It is never a savior, except for the well-connected, and however grand and glorious it might seem it is always a thief in action.  

Never forget this.

What Sanders and other social planners need to learn is not economics so much as common morality. 


Friday, September 4, 2015

Pocketing the next president

Free marketers reviewing the major candidates for U.S. president in 2016 would feel justly nauseated at the prospects.  Unsurprisingly, every one of them promises to use the heavy hand of state power to solve our problems and make us prosperous — provided, of course, we’re members of favored voting blocs or generous supporters.

But is it possible our choices are not limited to this craven constellation?

Is it possible a new star could appear to brighten our spirits?

I say, “Yes, indeed!”  Look no further than Apple’s annual fall event scheduled for next Tuesday, September 9th.  It’s all but certain Apple will announce a more “proactive” Siri

Proactive, as in enterprising, bold, take-charge.  Proactive, as in possessing a trait shared by successful entrepreneurs.  Proactive, as in to offer help without being asked. 

Come Tuesday, Siri could be ready for prime time.  

Do you feel a milligram of hope in that possibility?  Think of it: If the candidates are Hillary, Donald, and Siri, who do you think would be the sentimental favorite?  Who do you suppose would be grabbing the headlines?  Getting the interviews?  Other than for masochistic amusement, why would anyone attend a scheduled speech by Clinton or Trump when they’ve got a proactive Siri right in their hands?

Can you picture the three of them in a debate?  For those uncomfortable seeing a smartphone on the dais, an appropriate avatar could be provided, perhaps along the lines of Simone.  Siri would have access to the world’s knowledge, much like IBM’s Watson

And consider this: Siri doesn’t lie.  Siri knows the Constitution.  Siri doesn’t forget, doesn’t equivocate, doesn’t bloviate.   She’s never rude and always accessible, unless your phone’s turned off.  And her contract runs for only two years instead of four.

Siri, as president, would need no cabinet or advisers.  She would continue doing what she does now, scouring the world’s knowledge to help you through the day.

There would be no need for an extravagant inauguration, and the Secret Service would be replaced by cyber security experts to defend against hackers.

Siri wouldn’t be “your president.”  She would be your personal president.  “Your president” was never yours, he belonged to the moneyed cabal that got him elected.  

When was the last time Hillary, Donald, or any other politician did anything for you personally?  Did they help you find that sought-after restaurant or answer your query about telomere-shortened chromosomes?  Whatever politicians do they hit you up for it — extravagantly, over and over — whether you want it or not, while pretending they’re doing you a favor.

You say, “Siri’s not perfect.  She sometimes screws up.”  I say, “And the politicians?”  

And when the politicians screw up, who pays?

You say, “This is ridiculous!”  I say, “Who would better understand your needs?  Some multimillionaire living far away in a heavily guarded mansion, someone you never once meet, someone who cuts deals with God-knows-who or for what — or a knowledgeable young woman ensconced digitally in your purse or pocket, always on-call?”

You say, “She’s controlled by programmers we know nothing about!”

I say, “And the human candidates?  What do you know about the bankers pulling their strings?”  No banker pulls Siri’s strings.  That alone should get her elected.

You say, “She would form a partnership with the NSA and destroy what little privacy we have left!”  I say, “That horse left the barn long ago.”

You scream, “How could Siri sign off on new legislation?!  How could she issue executive orders?!  How could she continue the bombardment for democracy and oil in the Middle East?!”  I repeat, “Siri knows the Constitution.”

You say, “Wait!  Wait!  Siri was vetted as a possible candidate in 2012, by none other than Stephen Colbert!  When asked if she wanted to be president, she said, ‘I have everything I need in the cloud.’  There are no political offices in the cloud.  She doesn’t want to be president!”

I say, “Precisely.”

You say, “Janet Yellen will be up for renewal or replacement in 2018.  How will Siri handle that?!  How will Siri ensure the Fed doesn’t collapse because the Fed’s chair is empty?  How will Wall Street make its profits without Fed “stimulus”?  How will the Fed keep increasing the cost of living through inflation targeting or ZIRP?  How will the Fed bail out the TBTFs when the bubbles pop?  Who will run the monopoly’s printing presses without a viable FOMC?  What will happen to the fiat dollar?  What if people start using whatever they want for money?!”

I say, “Siri for president!”






Sunday, August 9, 2015

It’s challenging to be a pessimistic libertarian

Optimism is a state of mind.  It means to be hopeful or confident about the future.  It is a belief that the movie you’re starring in will have a happy ending, no matter how bruising the journey getting there.

No one knows what the future will bring because the future doesn’t bring anything.  People do.  You and I and the rest of the world make the future, some more so than others — some a lot more so.  The leading future-makers of the past century — at least those who entered national politics — have left a long trail of blood and misery, and today’s political leaders are staying the course. 

There’s an old saying: “Man proposes, but God disposes.”  If the U.S. government is today’s god, what chance do a relative handful of freedom-loving people have against such an institutional behemoth?  We’re only a false flag away from martial law.  The internment camps are built and ready for occupancy.  The police are militarized and ready to carry out orders.  The voters remain insouciant.  This is no time for optimism.  It’s time to run for our lives.

But before we take off, we would do well to take stock of our assets.

There’s a scene in the Clint Eastwood movie “Absolute Power” that illustrates the point I wish to make.   Eastwood, as legendary jewel thief Luther Whitney, witnesses the murder of a young woman during one of his heists.  The president (Gene Hackman) and his SS agents are the murderers.  The victim is the wife of the president’s biggest supporter, an octogenarian billionaire (E. G. Marshall) whose mansion Luther was robbing.  Whitney was hiding behind a one-way mirror at the time but later learns he’s a suspect, because of the missing jewels.  Luther knows the president’s henchmen will try to kill him before he can expose them and rather than fight such a powerful foe makes arrangements to leave the country.

While at the airport ready to depart he sees a staged press conference on TV.   It’s an appalling political spectacle.  A mournful president is offering sympathy to the bereaved husband, who’s standing beside him.  “This man has been like a father to me,” he announces, then turns to his friend. “I would give the world to lessen your pain.” He blots his eyes, apparently too choked up to continue.

Luther simmers with fury.  “You heartless whore,” he says aloud to the TV.  “I’m not about to run from you.” 

Luther rediscovered his true grit.  He also had conclusive evidence in his possession, as well as a daughter he cared about.  What about you?  If optimism still seems like a stretch, ask yourself what it would take for you, an informed libertarian, to be pessimistic.

First and foremost, you would have to view your “informed libertarianism” as thoroughly grounded in blind faith, not to mention wrong.

More precisely, to be pessimistic you would have to believe that the Keynesians are right, that the current recovery is indeed real and not a bubble, that free markets are inherently flawed and in need of regulation, debt-financed stimulus, bail-outs of the big boys, and an instantly-inflatable money stock to shore up emergencies.  You might long to be free, but the economic truth is, notwithstanding such longings, freedom in a social context is a return to the robber baron days of the 19th century.  

Along with this, you, an informed libertarian, would have to believe that Mises, Rothbard, Hazlitt, Salerno, Hulsmann, DiLorenzo, Paul, Rockwell, de Soto, Shostak, Woods, North, Murphy, and many other Austrian authors were either grossly ignorant or lying when they championed unhampered free markets and sound money as the necessary precondition of peace, freedom, and prosperity.

Along with this, you would have to ignore the overwhelming data showing that market economies improve living standards and concede that what we need is more government in our lives.

For a libertarian to be pessimistic, you would have to believe that bureaucrats and other time-servers inoculated against market forces will outwit entrepreneurs in the long run.  You would have to believe that politicians who steal your money to start wars and bail out their friends contribute more to our welfare than Tim Berners-Lee, inventor of the World Wide Web, or Jeff Bezos and countless other entrepreneurs. 

As a pessimistic libertarian, you would have to believe that central bank counterfeiting produces a sound monetary system, that a market-selected money inevitably goes astray, that money under control of a politicized committee produces the best results for everyone, and that a managed monetary system will last indefinitely.  You would have to believe gold is truly a barbarous relic, of no more value than a pet rock (when in fact it's more like a door stop, where "door" refers to government).

Along with this, you would have to believe that in this age of Wikipedia, web browsers, Khan Academy, Mises Institute, YouTube, the Ron Paul Curriculum, Facebook, Twitter, Skype, texting, email, TED, the proliferation of web-accessible computing devices, and the high Alexa ratings of libertarian web sites, the government will maintain its grip on education, keeping the vast majority of people clothed in tax-funded wool, inculcating the population with the court view of history, with the state/Keynesian view of crisis management, and getting them to swallow whole the pronouncements that pass for news and rational commentary on banker-controlled media.  

Along with this, you would have to believe John White, Daniel Ellsberg, Frank Serpico, Perry Fellwock, Mark Felt, Michael Ruppert, Frederic Whitehurst, Karen Kwiatkowski, Jesselyn Radack, Sibel Edmonds, Joseph Wilson, Samuel Provance, Russ Tice, Thomas Andrews Drake, Edward Snowden, Chelsea Manning, and numerous other whistleblowers are cowardly traitors and are universally regarded as such.  You would have to believe that these people were determined to subvert the lawful undertakings of government rather than exposing the government’s heinous wrongdoings.

Along with this, you would have to believe that the decentralizing, deflationary, and individual-empowering character of information-based technologies, which has been advancing at an exponential pace at least since 1890 and which is powering research in other fields such as medicine (where 3-D printing is producing surrogate body parts) — and which has put in your pocket a device with more computational power than an early 1990s supercomputer — will slow significantly because engineers and researchers are at a loss to move us beyond the current computing paradigm, Moore’s Law.  

It’s challenging to be a pessimistic libertarian.  Luther was nearly assassinated and his daughter almost killed in “Absolute Power,” but in the end everything worked out.  Don’t let the fact that the movie is fictional discourage you.  Use fiction as a guideline and make your own movie real.  If you feel your optimism fading turn up the grit and move ahead.