Tuesday, June 22, 2021

Why do we live under a monopoly when we don't have to?

“there are strong reasons to suppose that civil war would be much less likely in a region dominated by private defense and judicial agencies, rather than by a monopoly State.  Private agencies own the assets at their disposal, whereas politicians (especially in democracies) merely
exercise temporary control over the State’s military equipment. . . . In the 1860s, would large scale combat have broken out on anywhere near the same scale if, instead of the two factions controlling hundreds of thousands of conscripts, all military commanders had to hire voluntary mercenaries and pay them a market wage for their services? — Robert P. Murphy, But Wouldn’t Warlords Take Over?

In today’s world we have nothing but coercive governments, and aside from politically-slanted media few people would say our social and economic life is in good shape and getting better.

Where is the evidence for this dim perspective?

Clearly, coercive government is not bad for everyone under its rule.  As one example, roughly half the people don’t pay any income tax, while the heaviest burden falls on relatively few high earners.  Sounds a lot like slave labor since those who create wealth for the benefit of others do so under compulsion.  Only a marginal few think this way, so the racket sails on with the blessing of moral leaders, until it either collapses or Atlas decides he’s had all he can stand.    

But what exactly is the problem with a central government that rules an area with a legal monopoly of violence?  True, the world is ruled by a multitude of bickering and sometimes threatening monopolies, with media struggling to hold the lid on government genocide, but if things work out for Klaus and Bill someday soon they will all be rolled into one big happy monopoly-fest with one Woke military force securing our safety.

But wait a minute — monopoly?  No one likes a monopoly except the monopolist and its close friends.  Any long-standing monopolist will necessarily have a lot of friends, government being the prime example.  But rather than exonerate its malfeasance, it only obscures it.  It also explains why a formal definition of government rarely appears in big media.  If people thought of government as an honest-to-God monopoly with all its documented evils they might infer something is terribly wrong with the world — but government’s grip on education and media keeps that threat a whisper.

Regardless, let’s keep this bad boy

But here’s the odd part: The great majority who see the evil in government don’t want to get rid of it altogether.  Not only do they want to keep it small, but they consider it their ideal political system: Limited government.  It’s like shrinking but not eradicating a cancerous tumor.

What’s their argument for limited government?  It is a belief that free markets are incapable of providing security from domestic and foreign threats, and are incapable of providing a legal system for securing property rights and settling disputes.  And there’s the argument that without coercive government gangs (warlords) would take over, as Robert Murphy addressed.  Free markets have never had a turn at bat, but limited-government advocates somehow insist free markets have built-in deficiencies: Markets deliver the goods, but they don’t answer the call for traditional government services (defense, courts, and police), in their view.

They don’t answer the call because they’ve been forbidden to answer the call.

They also somehow think limited government will stay limited.  They are big on history yet didn’t get the memo: Governments grow, and as they grow they take a great many down with them, through intent and incompetence.  This is anything but a secret.  Any night watchman government that wants to flex its muscles can create a crisis.  Emergencies call for extraordinary measures, and though the emergency might end only some of the measures go away.  Government thus accumulates an inventory of interventionist statutes, such as the Trading with the Enemy Act of 1917 and The Current Tax Payment Act (withholding tax) signed into law on June 9, 1943.  Free-market economist Milton Friedman had a hand in creating withholding legislation, commenting in his memoirs, 

At the time, we concentrated single-mindedly on promoting the war effort. We gave next to no consideration to any longer-run consequences. It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom. Yet, that was precisely what I was doing.

Free markets can provide for all our needs, if only we let them.  

The first step in living under a free market government is to announce you want to.  For more information see my book, Do Not Consent, or watch my YouTube movie of the same name.


George Ford Smith is the author of nine books, including The Flight of the Barbarous Relic, Eyes of Fire: Thomas Paine and the American Revolutionand The Fall of Tyranny, the Rise of LibertyHe is also a filmmaker whose works include Do Not Consent- Think OUTSIDE the voting booth, Breaking Free from 2020, Last Day, and Risky Pinch Hitter.

Wednesday, June 2, 2021

The mother of all counterparty risks

Investors looking for safety consider US treasuries the safest investments possible because they are guaranteed by the US government. If you’re looking to minimize counterparty risk you buy treasuries. 

Though rarely mentioned by investment analysts, the government’s “guarantee” of payment is backed by the guaranteed invasion of coercive taxation.  If a person refuses to pay taxes the government will fine, incarcerate, or murder him.  In buying treasuries, therefore, investors will at least get the nominal value of their investment back at term, but at the price of helping to fund a supreme criminal organization.

Most people of course don’t see the government as organized crime, so they view the purchase of treasuries not only as an investment but an act of patriotism.  They are helping in some small way to sustain this great country we live in.  

Make no mistake, it is still a great country.  But in some small way they are making it less so by feeding the beast.  

Are governments as they exist really criminal in nature?  

How could governments be criminal if most political scientists view them as necessary for the survival of civilization?  How, in other words, could a criminal organization be the necessary foundation of a free society?  It makes no sense.

Thomas Paine, in his blockbuster pamphlet Common Sense, which lit the fuse leading to the American Declaration of Independence, argued that “the race of kings” under which mankind suffered had no honorable origin: 

It is more than probable, that, could we take off the dark covering of antiquity and trace them to their first rise, we should find the first of them nothing better than the principal ruffian of some restless gang; whose savage manners or pre-eminence in subtlety obtained him the title of chief among plunderers . . .

The conquered country “had a king, and then a form of government; whereas the articles, or charter, of government should be formed first, and men delegated to execute them afterwards.”

Sounds reasonable but how successful has Paine’s recommendation been?  The US started with the Articles of Confederation in 1781 but, due to the nationalists push for a more “energetic” government, were replaced with the US Constitution in 1789 that included taxing powers.  Two years later Alexander “implied-powers” Hamilton succeeded in establishing the First Bank of the United States (BUS), “explicitly rejected by the constitutional convention” and nowhere found in the new government’s charter. 

(For those arguing for the necessity of government in the sense of a powerful central state, note the absence of any such government during the war itself, 1775-1781, which saw colonists, albeit with foreign aid, defeat the contemporary world’s most powerful military.)

The rematch

The US launched a war against Great Britain in 1812 in retaliation for impressing some 15,000 American sailors into the British military since 1793.   It went to war without the inflationary support of the BUS, the charter for which had expired in 1811.  Since wars are fought with massive debt, this was a major problem. Without the aid of the capital-intensive banks of New England, where the war was highly unpopular, the US government

“encouraged an enormous expansion in the number of banks and in bank notes and deposits to purchase the growing war debt. These new and recklessly inflationary banks in the Middle Atlantic, Southern, and Western states, printed enormous quantities of new notes to purchase government bonds. The federal government then used these notes to purchase arms and manufactured goods in New England.”  Rothbard, The Mystery of Banking, epub, p. 350

What was wrong with this arrangement?  Without it, the government would have to rely on high taxes to fund the war.  And that would mean negotiating a truce, since no one wanted taxes increased to pay for the war.  Wars and taxes had been the core reason for declaring independence from the mother country.  Was there to be no escape? 

Apparently not.  By the war’s end the number of bank notes and deposits had increased by 87.2%, while specie support (gold in bank vaults) had declined by 9.4%.  Bank counterfeiting, a deceptive form of taxation, paid for the war.  

But it wasn’t that straightforward.  As the inflated notes piled up, the New England banks demanded redemption in specie from the inflating banks, which they mostly didn’t have.  In August, 1814, governments at the state and federal level allowed the inflationary banks to remain in business while declining their contractual obligation for redemption.  At the same time they were allowed to force their debtors to pay up.

New England bankers, who perhaps thought they were operating in a free market, were victims of counterparty theft.  They got shafted.  It’s little wonder why New England nearly seceded from the union at the Hartford Convention of 1815.  

Keep in mind that under free market capitalism, “the moment a bank cannot pay its notes or deposits in specie, it must declare bankruptcy and close up shop.”  (Rothbard, p. 351)

But the precedent for fraud had been set, and the US government would return to it again and again, especially after the creation of the Federal Reserve System, which has proved indispensable for funding its welfare/warfare programs through dollar destruction. 

While on the topic of the Creature and our forced counterparty risk, let’s not forget how it has kept its part of the bargain to keep the US dollar  sound:


Had fractional-reserve banking been regarded as embezzlement, the argument for the FED would dry up.  Banks that counterfeited credit would go out of business.  Before the FED’s dollar arrived ordinary people could save by keeping gold or silver coins under their mattress.  Their money actually appreciated because prices declined.  Gold truly has no counterparty risk unless the government decides to control it.  

But then it’s the criminal government, not gold, that poses the risk.


George Ford Smith is the author of nine books, including The Flight of the Barbarous Relic, Eyes of Fire: Thomas Paine and the American Revolutionand The Fall of Tyranny, the Rise of LibertyHe is also a filmmaker whose works include Do Not Consent- Think OUTSIDE the voting booth, Last Day, and Risky Pinch Hitter. 

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