What we're told

We’re told that the War on Terrorism is a war against “militant Islamists, al-Qaeda, and other jihadi groups” and in the words of President George W. Bush will not end “until every terrorist group of global reach has been found, stopped and defeated.”  We have no idea when this will be.

We are told that the government has to treat many Americans as potential terrorists, especially those who support peace and liberty.

We’re told Obama does not “believe that people should own guns,” yet he raises no objections to the DHS purchase of 1.6 billion rounds of hollow-point bullets, which would give the bureaucracy “the means to fight the equivalent of a 24-year Iraq War.” We’re told the DHS is acquiring these bullets for target practice, though they don’t specify the nature of the targets.

We’re told that FEMA camps are disaster response facilities, not concentration camps.

We were told the Iraq invasion would be a cakewalk, that it would pay for itself, that it was not about oil, that it would cost under $50 billion, that Americans would be greeted as liberators, etc., etc., etc.

We were told to believe the claims of the Bush Administration regarding the need to invade Iraq, yet the Center for Public Integrity’s War Card found that Bush officials lied about WMDs or Iraq ties to Al Qaeda on at least 532 separate occasions prior to the invasion in March, 2003.

We are told that we live under the rule of law, but that the U.S. president can have anyone killed he wants to because of the terrorist-filled world we live in.

We are told that John F. Kennedy was murdered by a lone nut, that 9/11 was the work of “19 Arabs, none of whom could fly planes with any proficiency, [who] pulled off the crime of the century under the direction of a guy on dialysis in a cave in Afghanistan,” and that anyone who challenges these conclusions should be hit with the weaponized term, conspiracy theorist.

We are told that the government does not spy on the personal affairs of Americans.

We are told that a war killing close to 750,000 Americans was necessary to end slavery, while slavery elsewhere - including the Northern states in the U.S. - was ended without violent conflict; that a world war killing over 16 million people, 117,465 of whom were Americans, was necessary to save the world for democracy, and that yet another world war killing between 50-70 million people, most of whom were civilians, was needed because we were the victims of an unprovoked attack on a Hawaiian naval base.

We are told that the presidents who took us into these wars are among the greatest presidents in American history.

We’re told that unprecedented amounts of fiat money injected into the economy has resulted in a fount of prosperity, and it may be time for the Fed to slow down the injections.

We are told that some businesses are so big their failure would produce an economic catastrophe.  As failing enterprises are those that squander wealth rather than produce it, and that the larger the business, the larger the squandering, perhaps such firms are instead “too big to be kept alive.”

We are told that a free market gold coin monetary system is a threat to our well-being, though not so mysteriously "the international gold standard from 1815 until the outbreak of World War I 1914 [was] the greatest period of economic growth in recorded history." Nevertheless, we're told gold money is a barbarous relic.

We are told that a fiat monetary system controlled by a central bank provides macroeconomic and financial stability, notwithstanding such episodes as the recent financial crisis and the Great Depression.

We are told that a massive public debt is nothing to worry about.  A Nobel Prize-winning Op-Ed columnist explains why:

the debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources. . . .  Talking about leaving a burden to our children is especially nonsensical; what we are leaving behind is promises that some of our children will pay money to other children.

In other words we borrow, they pay - or default.  An economist with a different perspective says this:

[It is argued that] a public debt is no burden because we owe it to ourselves. If this were true, then the wholesale obliteration of the public debt would be an innocuous operation, a mere act of bookkeeping and accountancy. The fact is that the public debt embodies claims of people who have in the past entrusted funds to the government against all those who are daily producing new wealth. It burdens the producing strata for the benefit of another part of the people. It is possible to free the producers of new wealth from this burden by collecting the taxes required for the payments exclusively from the bondholders. But this means undisguised repudiation.  [p. 229]

We are told by this same Nobel prize-winning commentator that fractional reserve banking is simply a way for bankers to “improve the tradeoff between returns and liquidity” and can be kept in check with proper government regulation, and the incurably ignorant who have a problem with this hold “Ron Paulish monetary ideas.”

We are told that the most important factor in generating the boom-bust cycle is human emotions, as if these emotions were unrelated to banks’ practice of distorting prices through fractional reserve banking.

We are told that the Great Depression was a failure of capitalism, and that economic fascism was needed to save capitalism.

We are told that our government is of the people, by the people, and for the people, rather than run by the highest bidders. 

We are told that progressive economic regulations and bureaucracies, such as the Federal Reserve, exist to protect the public weal rather than provide subsidies and privileges to special interests.

We are told that sending children to schools that have no way of protecting them is fine, even though government has no solution other than anti-gun hysteria to the mass murders that occur from time to time.  Few people would consider closing the public schools.

We are told that government will provide for us in our old age, that it will provide for us when we can’t find work, that it will pay for our health care, that it will bestow many other blessings if only we are willing to make the damn one percent pay for it all.

We read that the Syrian government engaged in chemical warfare against Syrian civilians, and that, even if the attack was ordered by someone other than President Assad, he alone is responsible.  Meanwhile, AIPAC and other war hawks are hammering Congress to vote for a strike, even though there is evidence the attack may have been launched by U.S.-backed rebels.  The Administration is hungry for a strike even with a majority of Americans surveyed strongly opposing U.S. intervention, and even though such action has the potential to ignite the World’s Last War.

We are told that we are endowed with certain unalienable rights, and that to secure these rights governments - monopolies of violence - are instituted among men.

Because this is the one coercive monopoly that allegedly serves our welfare we are told government is a blessing, that anarchy would be death and chaos for all but the most ruthless - notwithstanding the brilliant insights of Stefan Molyneux, Robert P. Murphy, Murray Rothbard, and many others.

Once upon a time, a man's home was his castle

As of late Friday, July 5, the We the People website of the White House had 127,756 signatures on the petition to pardon Edward Snowden, surpassing the 100,000 minimum needed to qualify for a response. I doubt that anyone signed it with the expectation that Snowden might actually get pardoned.

In a sense one can’t blame the White House for failing to pardon him.  They’re the guilty party.  Whatever law or laws he might’ve broken are nothing compared to the flagrant constitutional violations of the federal government.  Like it or not, in this country, in 2013, the Constitution is still the supreme law, and the Fourth Amendment says the government will not mess with our privacy or come stomping into our “castle” without a warrant issued by a judge on suspicion of a specific crime.  By virtue of Katz v. United States, 389 U.S. 347 (1967), in which the Supreme Court ruled that the unreasonable search and seizure clause of the Fourth Amendment includes immaterial intrusion with technology, the American surveillance state is grossly unconstitutional.  The guilty do not issue pardons. 

The right to privacy is sometimes captured in the phrase, “a man’s home is his castle.”  Where did this idea come from?

Most Americans regard George Washington as the father of their country, but few realize James Otis, Jr. was the father of the American Revolution.  Long before Lexington and Concord, Otis’s fight for civil liberty gave rise to the heart and soul of the rebel cause.  According to Wikipedia,

Otis graduated from Harvard in 1743 and rose meteorically to the top of the Boston legal profession. In 1760, he received a prestigious appointment as Advocate General of the Admiralty Court. He promptly resigned, however, when Governor Francis Bernard failed to appoint his father to the promised position of Chief Justice of the province's highest court; the position instead went to longtime Otis opponent Thomas Hutchinson. In a dramatic turnabout following his resignation, Otis instead represented pro bono the colonial merchants who were challenging the legality of the "writs of assistance" before the Superior Court, the predecessor of the Massachusetts Supreme Judicial Court. These writs enabled British authorities to enter any colonist's home with no advance notice, no probable cause and no reason given.

Prior to the court challenge, British Prime Minister William Pitt had decided to raise Crown revenue by enforcing the six pence per gallon tax on molasses rather than imposing a new tax.  Since the passage of  the Molasses Act in March, 1733, which was an attempt to protect molasses exporters in the British West Indies from their more competitive rivals on other islands, smuggling, bribery, and intimidation of customs officials had effectively rendered the Act null and kept the huge continental rum industry alive. In August 1760, Pitt sent a letter to each colonial governor conveying this new policy, emphasizing the need to put a stop to all smuggling.

Massachusetts’ Governor Bernard knew that to catch smugglers his customs men would have to make heavy use of the “blank check” search warrants.  As governor he would get a cut of all confiscated smuggled goods sold at auction.  To uphold the legality of the warrants, he put Hutchinson in charge of the Superior Court.

Hutchinson agreed that for trade to flourish the tax would have to be less than three pence per gallon of molasses, but he raised no objections.  The sixty rum distilleries in the province were in danger of ruin, and the loss of business would disrupt trade throughout the colony.

“Something profound changed in America”

The merchants’ challenge was argued on February 24, 1761 before Hutchinson and four other justices.  Jeremiah Gridley served as counsel for the customs office.  Otis and his associate, Oxenbridge Thatcher, represented sixty-three prominent Boston merchants, in opposition to the writs.

Gridley opened for the Crown by arguing that the Court of Exchequer was issuing such general writs in England.  If they were legal in England they would certainly be legal in England’s colonies.  He further argued that such warrants were necessary in the collection of taxes and in protecting the state from foreign and domestic subversives.  In any society, he said, individual liberties must give way to certain restrictions.

Thatcher, 41, spoke first for the merchants.  Gaunt, tired, and suffering from tuberculosis, Thatcher spoke briefly then turned the defense over to his partner.  In wig and black gown, Otis rose to speak, and as historian A. J. Langguth puts it, “something profound changed in America.”

One critic described Otis as "a plump, round faced, smooth skinned, short necked, eagle eyed politician," but the young John Adams, who attended the trial and wrote down the account in his diary and again some fifty years later, claimed, "Otis was a flame of fire!"

Otis, who read voraciously and had an almost flawless memory, spoke for over four hours.  He relied on English law books to prove that only special warrants were legal and attacked the writs as "instruments of slavery."  Defending the right to privacy, he proclaimed that the power to issue general search warrants placed "the liberty of every man in the hands of every petty officer." In perhaps his most moving passage, Otis declared,

A man’s home is his castle, and whilst he is quiet, he is as well guarded as a prince in his castle. This writ, if it is declared legal, would totally annihilate this privilege. Custom house office may enter our houses when they please and we are commanded to permit their entry. . . What a scene does this open! Every man, prompted by revenge, ill humor, or wantonness to inspect the inside of his neighbor’s house, may get a writ of assistance. Other’s will ask it from self-defense; one arbitrary action will promote another, until society be involved in tumult and blood.

Otis said man’s right to life, liberty, and property, “were inherent and inalienable: that they never could be surrendered or alienated,” except by the mentally incompetent.  He claimed these rights applied to all men, including Negro slaves.

The individual is sovereign, not the state

Speaking directly to Gridley, Otis said the principle of man’s rights took precedence over everything, even the survival of the state.  Lawyers in the room scribbled madly, jotting down phrases “that would be used to establish the literature of the revolution.” (Three Men of Boston, John R. Galvin, p, 32)

When Otis was through, Hutchinson said he would write to England to get more information. 

While Boston waited for clarification, Otis got elected to the House and opened five more cases against customs officials.  Then in November, Hutchinson convened Superior Court with a copy of a writ used in London.

Once again, Gridley took to the defense, claiming the writs did not violate liberty because they required a sheriff to accompany a customs official.

Then Otis rose from his chair.  He said simply if this writ were valid in England, then Parliament had made a mistake.  Writs were contrary to the constitution, the colony’s charter, and man’s rights, and were therefore illegal the instant they were created.

Though the presence of a sample writ allowed the court to rule for the Crown, Otis and Thatcher continued to oppose the writs, and thanks to the efforts of judges and lawyers writs were seldom used.

Conclusion

If our elected representatives were actually guarding our rights, they would be arranging a ticker-tape parade for Edward Snowden, and the words “treason” and “traitor” would be used only in reference to the countless guilty in government.  That they’re hunting him down like a dog reminds us yet again that this government in no way represents what patriots like Otis regarded as the American vision of freedom.

It’s a sorry mark of this country’s about-face that the original ticker-tape parade spontaneously erupted in New York City on October 28, 1886, during the dedication of the Statue of Liberty.

The Exit on the Road to Serfdom

One of my favorite quotes from the quotable Thomas Paine is a mere footnote in his treatise, Rights of Man, Part Second, in which he wrote:

It is scarcely possible to touch on any subject, that will not suggest an allusion to some corruption in governments.

Paine was referring to “the splendor of the throne,” which he said “is no other than the corruption of the state.  It is made up of a band of parasites, living in luxurious indolence, out of the public taxes.”  He thought the U.S. federal government, newly created by the Constitution, provided hope against political corruption because of the limitations it imposed on the government.  Paine was in England at the time and had no idea that the new government, whose intellectual leader was Alexander Hamilton, was busy interpreting those limitations out of existence.

Paine also didn’t know the Constitutional Convention of 1787 was in fact a coup d'état.  The participants had been authorized only to amend the Articles of Confederation, but the nationalists, at least, wanted to replace the Articles with a new government that would be more “energetic.”  Knowing that Washington’s presence at the convention would be critical to its success, Henry Knox told the retired general that he would be given the president’s chair, and moreover, that he would not be presiding over some middling conference of officials tinkering with the “present defective confederation,” but instead would lead a prestigious body of men as they created an “energetic and judicious system,” one which would “doubly” entitle him to be called The Father of His Country.

In a previous note Knox had awakened Washington’s interest by lying about the meaning of Shays’s Rebellion.  According to Knox, former Revolutionary War officer Daniel Shays had organized the riffraff of Western Massachusetts to shut down the courts to avoid paying their taxes.  They were levelers, Knox said, who sought to annihilate all debts through “the weakness of government.”  Washington, who owned some 60,000 acres in the Virginia backcountry, thought that such people were “a wretched lot, not to be trusted, and certainly not to be the bone and sinew of a great nation.”

In truth, as historian Leonard L. Richards has shown, Shays’s Rebellion was not an uprising of poor indebted farmers, but a protest against the Massachusetts state government and its attempt to enrich the few at the expense of the many through a regressive tax system. The rebellion began as peaceful petitioning and escalated into violence only after the state repeatedly ignored the petitions.  Though they were described in various disparaging terms, the rebels saw themselves as regulators whose purpose was “the suppressing of tyrannical government in the Massachusetts State.”  They drew their inspiration from the Declaration of Independence that said people should throw off any government that is destructive of their rights.

But the rebellion was finally crushed and has since been interpreted as proof that a stronger central government was necessary.  Following ratification, “We the people” were headed down the long road to serfdom at an accelerated pace.

Is there an exit on that road?

A few thinkers have argued that there is.

In 1849 in Paris, Gustav de Molinari and his laissez-faire colleagues met to discuss Molinari’s new book, Les Soirées de la Rue Saint-Lazare, a series of fictional dialogues between a conservative, a socialist, and himself, whom he referred to as the economist.  Molinari argued that the free market could produce the state’s traditional function of security without monopoly, or as he put it in another essay, “the production of security should . . . remain subject to the law of free competition.”

His friends at the meeting included Charles Coquelin, Frederic Bastiat, and Charles Dunoyer.  None of them accepted his thesis.  In the absence of a monopoly state, Coquelin asserted, competition was “impossible to put into practice or even to conceive of it.”  Bastiat said the only way to guarantee justice and security is with force, and that requires a “supreme power,” not spread over bodies “equal amongst themselves.”  Coquelin later wrote a review of Molinari’s arguments, correctly describing the latter’s position as one in which

the State would be nothing but a kind of insurance company, a rival to many others, and each person would, just as he pleases, freely subscribe to this one or to that one to guarantee himself against the troubles that threaten him, exactly as one would guarantee his house against fire or his ship against shipwreck.

Murray Rothbard describes the Belgian-born Molinari as the most “consistent, longest-lived and most prolific of the French laissez-faire economists.”  He was proposing life without a state, and there were virtually no takers.

Almost simultaneously in England a young Herbert Spencer was advancing a nearly identical thesis in his book, Social Statics.  Spencer argued that government would inevitably become smaller and “decay” as the voluntary institutions of the market replaced it.  As David Hart points out, “it must be assumed that the two thinkers arrived at their positions independently of one another, suggesting that anti-statism is inherent in the logic of the free market.”

A disciple of Spencer’s, Auberon Herbert, agreed with Molinari that the market, unhampered by the state, could satisfy every want that we have, including protection services.  David Hart:

Neither Spencer nor Herbert went as far as Molinari's suggestion that these voluntary defense agencies would be fully professional business organizations whose prices would be determined on the market by competition. They merely limited themselves to criticizing the monopoly of the state and arguing that the individual had the right to organize freely.

However reasonable their views might sound, they never had a wide following.  Molinari believed that the state would die a natural death, that full liberty and a free market were inevitable, yet in the last half of the 19th century he witnessed the rise of statism in all its virulent forms.  David Hart:

Molinari had well understood the fact that these groups which controlled or had access to the state, comprised a class which would not willingly give up the privileges that power bestowed. Unfortunately, he had badly over-estimated the readiness of the exploited classes, the workers, the consumers and the industrialists who did not seek state privileges, to identify government intervention as the enemy of progress.  [emphasis added]

The State: Protector or Predator?

Before dismissing Molinari as a hopeless idealist we should refresh ourselves on what the state actually is.  As Rothbard has written in “The Anatomy of the State,” one can acquire economic goods either by production or predation.  Following the line of thought of German sociologist Franz Oppenheimer, Rothbard says the state, as a monopolist of violence, “is the systematization of the predatory process over a given territory.”  More precisely,

The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively "peaceful" the lifeline of the parasitic caste in society.

With this understanding, its hardly surprising that the state’s biggest problem is ideological.  To stay in control, it needs the support of the majority of its subjects, even if such support is only grudging acceptance.  Political leaders alone cannot muster the needed support.  The rulers need intellectuals to persuade the masses that the state is “good, wise and, at least, inevitable, and certainly better than other conceivable alternatives.”  In return for this support, the state sees that its intellectuals are well-taken care of. 

From this it follows that the greatest danger to the state is the person who publicly proclaims the nakedness of the emperor. 

This is our cue.  The state will continue to grow relentlessly if people are convinced that at the very least it is a necessary evil, as Paine once put it.  But the state’s abundant historical record is clear: It isn’t at all necessary.  It is simply evil. 

Snowden vs. Bernanke

From the regime’s viewpoint only, who is the greatest threat, Edward Snowden or Ben Bernanke?

The government’s defenders would likely turn their backs on the question, but they ought to look closely at it.  Here’s their take: Snowden has broken the law and exposed sensitive government snooping operations.  At the very least he should be in prison.  Bernanke is keeping the economy’s engine running with prodigious amounts of digital money, all of it backed by the full faith and credit of the U.S. government, and by most indicators he’s doing a stellar job.  Bernanke is a hero, Snowden is a traitor.  It’s not even an open-and-shut case because it doesn’t deserve to be opened.

But if they did open it, what might they find?  Snowden made headlines with his Glenn Greenwald interview but he’s revealed nothing new.  James Bamford started writing about the NSA’s warrantless eavesdropping back in 1982.  At worst, Snowden is reminding the public of something they should already know.  But that’s it.  If what he’s done has created a crisis, it’s only a crisis of confidence - confidence in the trustworthiness of government.  Congress will continue funding the NSA, and the NSA will continue doing whatever it wants.  Americans thought they had constitutional protection from prying government eyes, but it turns out they don’t.  If they had been paying attention they would’ve known this years ago.  A lot of people are outraged, but this too will blend with countless other government misdeeds and will fall off the radar.

Bernanke, on the other hand, recently tested the waters, perhaps inadvertently, and the result was terrifying to investors.

Gary North described the results in picturesque terms:

Stocks fell, bonds fell, gold fell, oil fell, commodities fell. All over the world, markets tanked.

Why? Because Bernanke hinted that the U.S. economy is recovering, and the Federal Reserve may cut back sooner than expected on its trillion-dollar-a-year pump-priming operation.

Bernanke is the equivalent of the head of the international drug cartel. He is the pusher. He is the man supplying the daily “fix.” Around the world, addicts depend on his supplies of digital “snow.” The fix is in. Bernanke is the fixer.

When the pusher hints that the supply of the investors’ drug of choice — digital money — is likely to be reduced, they panic. The fear of withdrawal discomfort spreads through “the street.”

There was a rush to the exits yesterday [June 20]. People run to cash, especially the dollar, when they think the markets are going to lose their supply of counterfeit money. The world is dependent on the continuing supply of digital money, which is supported by government IOUs.

Bernanke’s hint has exposed a fatal flaw in the alleged economic recovery.  If the influx of fake money is ever slowed or stopped, it’s over.  If the Fed stops printing, investors go back in their shells.  If investors even get a hint of a slowdown, the indicators so supportive of a recovery will reverse, unless Bernanke holds a press conference to stop the bleeding.

It’s highly unlikely that a whistleblower like Snowden can seriously impair the regime’s expansionist aspirations.  Revelations of snooping aren’t monetary issues.  The Fed’s QE programs are.  If they don’t work, the government’s grandiose aspirations, based as they are on confiscated wealth, are seriously threatened.  If the Fed can’t keep manufacturing money at will while keeping the economy at least stable, the regime will be in serious trouble.  The Fed was created by and for the big bankers but it can’t exist without government protection.  In return for this favor the Fed buys government debt, directly or indirectly, to augment its tax revenue.  In recent years the government’s been doing a lot of augmenting - in the range of a trillion dollars per annum.  If this racket proves defective - if the economy can’t shoulder the burden - then government will have to turn to more overt forms of confiscation.  And that, in turn, could threaten the perceived legitimacy of the state.

People think they can live while being spied on in all their communications.  And most of them can.  Many of them think it’s a necessary freedom to surrender if they don’t want to be murdered by terrorists, even if they’re four times more likely to be killed by a lightning bolt, and even if they have no choice about surrendering their freedom.  They’ve been pawns of the government for so long “political freedom” is little more than a collection of nonsense syllables, so they don’t miss it.  They can learn to hate Snowden and love their government herdsmen.

What they can’t live without in a modern economy is sound money.  They don’t know what sound money is, but they do know what they earn and what it costs to live.  If the former is not in a good relationship with the latter they suffer, and they know who to blame for their pain.  Historically, government has gotten away with attacking speculators, hoarders, and of course the free market when their schemes blow up.   Thanks to the internet, Ron Paul, and Austrian economists, their schemes are now more transparent to more people.  The co-conspirators - the Fed and the government - will take the heat when the next crisis arrives.

Bernanke has given the world a sneak preview of the soundness of his counterfeiting program.  Counterfeiting theory says counterfeiting favors the counterfeiters and his pals, which in this case is the banking cartel and the government.  It also says that in the long run it doesn’t favor anyone because the money becomes worthless, but they’ve forgotten this.  If the bureaucrats are in the mood to identify threats to their power, they should forget Snowden and bring Bernanke in for some in-depth questioning - preferably by someone trained in Austrian economics.
     

The “Case” Against Thomas Paine

Thomas Paine died on the overcast morning of June 8, 1809, in New York City.  Libertarians have long savored his unabashed attacks on government and the many evils of paper money, and the fact that he not only ignited the drive for American independence but kept it alive during its darkest moments.  He played an important role in history, both here and abroad, yet is not given the respect he deserves.

If you extend the list of “Founding Fathers of the United States” far enough you find “Thomas Paine” included on it.  Historians for the most part consider a Founder as one who signed the Declaration of Independence or the Constitution; Paine signed neither, nor was he invited to sign them.  Joseph Lewis published a reasoned and well-documented case that Paine might have authored the first draft of the Declaration. 

If a Founder can be considered someone who helped change the united colonies to the United States, then Paine should be at the top of the list.  It could even be argued that Paine was the founder, and all the others were supporters but only after Paine took the lead.

Of all the nominal Founders, he was perhaps the only one who publicly condemned slavery, cruelty to animals, dueling, and war.  As editor of Pennsylvania Magazine he published “An Occasional Letter on the Female Sex,” one of the first essays for women’s rights in the West.   

If we think of the Founders - Washington, Jefferson, the two Adams, Franklin - what do we have for support?  With the exception of Washington, they all favored independence but none of them attempted to rally support for it among the general population.  Without that support, independence was a futile wish.  Congress chose Washington to lead the troops against the British in 1775, but without a clear aim.  As Pulitzer Prize-winning historian Bernard Bailyn has written,

A group of influential and articulate leaders, especially those from Massachusetts, were convinced that only independence from England could properly serve American needs, and Benjamin Franklin . . . had reached the same conclusion and had found like-minded people in Philadelphia.  But that was not the common opinion of the Congress, and it was not the general view of the population at large.  Not a single colony had instructed its delegates to work for independence . . . All the most powerful unspoken assumptions of the time -- indeed, common sense -- ran counter to the notion of independence. [Bernard Bailyn, Faces of the Revolution, pp. 69-69, emphasis in original]

Paine, unlike most Founders, unlike most people, was not afraid to take great risks. Six months after the publication of Common Sense, in which he referred to the king of England as a "hardened, sullen tempered Pharaoh" and "the Royal Brute of Great Britain," Congress announced the colonies’ independence as thirteen sovereign states.   Later that summer, he joined the Continental army as General Nathaniel Greene’s aide-de-camp.  Paine proved to be a willing but mostly incapable soldier, and senior officers decided he would serve the cause better with his writing.

During the fall of 1776 Washington had suffered defeats in New York and had retreated across New Jersey to the Pennsylvania side of the Delaware River, nine miles north of Trenton.  The British were convinced the war’s end was imminent, and British General William Howe, rather than pursue the rebels and capture Philadelphia, retreated to New York, leaving contingents at various New Jersey outposts, including Trenton.  Howe had a mistress, Mrs. Elizabeth Loring, whom he had brought from Boston to New York, and he favored spending winter with her instead of subduing a ragtag army of farmers.

In mid-December, Paine, carrying a draft of a new essay, trudged 35 miles from the army’s campsite to Philadelphia, finding the city in chaos.  Congress had fled to Baltimore, and Tory Americans were posting welcome signs to General Howe on the windows of their shops, anticipating his arrival.  Paine Biographer Craig Nelson:

News of defeat after defeat had frightened the vast majority of residents into flight, and morale had collapsed. . .  British troops were just across the Delaware River, ready at any moment to march into the city and force the American capital to surrender. . .  It was, Paine said, “the very blackest of times . . . when our affairs were at their lowest ebb and things in the most gloomy state.”

He frantically began writing the first of what would eventually number a series of thirteen pieces, one in honor of each colony.  [In American Crisis - Number One] Paine used every weapon in his propagandist’s arsenal to upend the great advantage Britain held in its favor -- fear.  In the America of 1776, everywhere they looked, Americans saw reasons to be profoundly afraid -- afraid of what the redcoats would do to them, their families, and their property; afraid of losing their British empire and their British citizenship; afraid of what this new homemade government would do, and what it would require.  Paine answered all of these vague and paralyzing terrors in a mere eight pages.  [Craig Nelson, Thomas Paine: Enlightenment, Revolution, and the Birth of Modern Nations, pp. 107-108]

The Philadelphia Journal published the Crisis pamphlet a week before Christmas, with Paine once again waiving any profits from the publication, as he had done with Common Sense.  Printers in other colonies distributed it, and its opening words became immortalized throughout the world: These are the times that try men’s souls.

Prior to crossing the Delaware for a surprise attack on Trenton, Washington had his officers bring the troops together in small squads and ordered them to read Paine’s essay to the men.   Whether enlisted men standing around in sleet and snow, hungry and ill-clad, could be brought to life listening to an officer read a pamphlet, is open to question.  But it did have the effect of lifting citizen spirits when it was published, along with news of Washington’s victory.  It was either John Adams or Joel Barlow who is reputed to have said, “Without the pen of Paine, the sword of Washington would have been wielded in vain.”

The evils of paper money

After the war, Paine sailed to England and continued to write on political and economic issues.  In an essay titled “Prospects on the Rubicon,” Paine saw clearly the defects of paper money.

Every thing shows, that the rage that [overran] America, for paper money or paper currency, has reached to England under another name. There it was called Continental Money, and here it is called Bank Notes. But it signifies not what name it bears, if the capital is not equal to the redemption. . . .

Credit is often no more than an opinion, and the difference between credit and money is that money requires no opinion to support it. . . .

In short, the delusion of paper riches is working as rapidly in England as it did in America. A young and inexperienced Minister, like a young and inexperienced Congress, may suppose that he sees mines of wealth in a printing press, and that a nation cannot be exhausted while there is paper and ink enough to print paper money. Every new emission, until the delusion bursts, will appear to the nation an increase of wealth. Every merchant's coffers will appear a treasury, and he will swell with paper riches till he becomes a bankrupt.

In another essay, in which Paine defended the Bank of North America as a means of curtailing the issuance of paper money, he wrote:


However paper money may suit a borrower, it is unprofitable, if not ruinous in the end, to every other person. The farmer will not take it for produce, and he is right in refusing it. The money he takes for his year's produce must last him the year round; and the experience he has had of the instability of paper money has sufficiently instructed him, that it is not worth a farmer's while to exchange the solid grain and produce of a farm for the paper of an Assembly, whose politics are changing with every new election . . .

Paine’s most complete attack on paper money is to be found in his essay, “DISSERTATIONS on government; the affairs of the bank; and paper money”:

The only proper use for paper, in the room of money, is to write promissory notes and obligations of payment in specie upon. A piece of paper, thus written and signed, is worth the sum it is given for, if the person who gives it is able to pay it; because in this case, the law will oblige him. But if he is worth nothing, the paper note is worth nothing. The value, therefore, of such a note, is not in the note itself, for that is but paper and promise, but in the man who is obliged to redeem it with gold or silver.

Such simple truths, so long-forgotten today.

Unforgivable transgressions

Had Paine died at this point in his life perhaps he would be fondly remembered in official histories.  But he lived to write a blistering criticism of Washington and what to many was a savage attack on the Bible.

While a member of the French legislature during the French Revolution, Paine had fallen victim to Robespierre’s Terror and had been imprisoned to await execution.  He expected Washington, as his long-time friend and now president, to intervene on his behalf through the U.S. envoy to France, Gouverneur Morris.  When this didn’t happen Paine became embittered, and following his release after a ten-month incarceration, he composed an open letter to Washington dated July 30, 1796.  It was published in Philadelphia by Benjamin Franklin’s grandson, Benjamin Franklin Bache, editor of the republican journal Aurora.  Paine biographer John Keane writes:

In his open letter, Paine gave a detailed account of his imprisonment and said that he held Washington personally responsible for the fact that until [the arrival of James Monroe, who replaced Morris as envoy], he had not been considered an American citizen. . . .

Characterizing the president as “treacherous in private friendship . . . and a hypocrite in public life, Paine warned him that “the world will be puzzled to decide whether you are an apostate or an impostor, whether you have abandoned good principles, or whether you ever had any.” [John Keane, Tom Paine: A Political Life, pp. 430-431]

Paine, born in Thetford, England in 1737, answered the charge of not being an American citizen by claiming that, until July 4, 1776, there were no true Americans, only Englishmen or English-Americans.  Furthermore, Paine took an oath of allegiance to the United States on two occasions, once in 1776, and again in 1777.

Nevertheless, Washington’s reputation as “father of his country” was already too well established for his letter to go over well.  Around the same time he published Age of Reason Part II, in which he wrote, referring to the Old Testament:

To believe, therefore, the Bible to be true, we must unbelieve all our belief in the moral justice of God; for wherein could crying or
smiling infants offend? And to read the Bible without horror, we
must undo everything that is tender, sympathizing, and benevolent in the heart of man. Speaking for myself, if I had no other evidence that the Bible is fabulous than the sacrifice I must make to believe it
to be true, that alone would be sufficient to determine my choice.

But in addition to all the moral evidence against the Bible, I
will in the progress of this work produce such other evidence as even a priest cannot deny, and show, from that evidence, that the Bible is not entitled to credit as being the word of God.

In Age of Reason Part I he had written:

Whenever we read the obscene stories, the voluptuous debaucheries, the cruel and torturous executions, the unrelenting vindictiveness, with which more than half the Bible is filled, it would be more consistent that we called it the word of a demon, than the word of God. It is a history of wickedness, that has served to corrupt and brutalize mankind; and, for my part, I sincerely detest it, as I
 detest everything that is cruel.

Though Paine wrote Age of Reason because of his conviction that false systems of religion were encouraging the spread of atheism, he has been often regarded as an atheist ever since.

In describing how Paine has been remembered, biographer Jack Fruchtman, Jr. notes that

On the occasion of the one hundredth anniversary of the Declaration of Independence, the city of Philadelphia refused to allow a bust of Paine to be placed in Independence Hall.  In 1933, a New York radio station first invited, then refused, to allow a City College professor to give a short talk on Paine because the old radical was regarded as “a dangerous subject and not suitable for radio discussion.”  The station later relented. [Jack Fruchtman, Jr., Thomas Paine, Apostle of Freedom, pp. 441-442]

The victors, in writing the histories, tell us who should be remembered and why.  Paine, critic of Washington and the Bible, has been shunned to the back of history’s bus.

The Pope joins the chorus in blaming free markets

On Thursday, May 16 Pope Francis delivered a short speech on economics and finance, blaming the “cult of money” for the millions of people suffering in poverty.  He addressed the New Non-Resident Ambassadors to the Holy See, calling for “financial reform along ethical lines.”

He describes the problem thusly,

While the income of a minority is increasing exponentially, that of the majority is crumbling. This imbalance results from ideologies which uphold the absolute autonomy of markets and financial speculation, and thus deny the right of control to States, which are themselves charged with providing for the common good.

This is taken to mean the world is at the mercy of “unchecked capitalism” (Guardian), and States therefore “should impose more control over their economies . . . to provide ‘for the common good’.” (Telegraph)

It’s hardly novel for a world leader to blame economic crises on the free market.  When was the last time you heard one cast aspersions on government deficits and central banking?   But this intellectual defect isn’t limited to leaders.  Browsing the comments posted on the Pope’s speech, I have yet to find one that finds fault with his assertion that “the absolute autonomy of markets” is the devil driving more people into misery.

The cult of fiat money and central banking  

There is indeed a growing disparity between the haves and have-nots, and there is indeed something like a “cult” of money ruling the economies of the world.  If “cult” is taken to mean a movement at odds with the beliefs of the larger society and membership in which is closely guarded, then today’s central banking/fiat money systems could be viewed as a cult.  As the existing order’s most important institutions, central banks are not in this sense very cult-like.  But as secular altars erected against the market’s retribution, with secret meetings and an aura of mystery surrounding their pronouncements, they bear a close likeness to cults.

And this brings us to a crucial point, so obvious it hurts to mention it: Central banks are not free market institutions.  Nor are they a kind of pacemaker that protects the market from shocks.  On the contrary, because central bank operations are essentially a counterfeiting process that quite intentionally distorts prices, they are the creators of shocks.  In today’s world they are a government-enforced cartel with a monopoly on the production of money, specifically paper money or its digital equivalent.  Left to the market, money becomes a store of value; consigned to a monopoly producer, money undergoes a reverse transubstantiation and becomes a way of stealing value. 

Banks once issued banknotes as a way of certifying ownership of a certain weight of precious metal, usually gold or silver.  Banks have never liked precious metals because their supply cannot be increased at will.  Metal put a practical limit on loans, which in turn limited profits.  It also safeguarded the value of a worker’s wage.  In fact, real wages increased under a metal standard because of gains in production efficiency.  Under the federal reserve system, the redemption requirement was removed yet the Fed still issued notes called “money.”  The former bank substitutes - banknotes - became money itself, by fiat.  Economist Guido Hulsmann explains:

The suspension of payments that turns banknotes into paper money entails various “reverse transubstantiations”—an expression we use because the phenomenon at issue bears a certain resemblance with the central liturgical event of the Catholic mass. We have to speak of a reverse transubstantiation, however, because the transubstantiation that results from human hands in the economic sphere cannot be said to sanctify things or otherwise improve them in any sense.

Where there are central banks we don’t have free markets, and central banks sit at the center of virtually every economy on earth.

The political way is not the market way

Everyone understands that central banking only works with the coercive power of government behind it, yet almost everyone insists we have a market that’s free.  Perhaps we can clear this up with the aid of a catechism:

Q: What is the free market?
A: Murray Rothbard, the foremost advocate of a free market, tells us that “free market” is a summary term for the array of voluntary exchanges that take place in society.  “Trade, or exchange, is engaged in precisely because both parties benefit; if they did not expect to gain, they would not agree to the exchange.”  Mercantilists old and new argue that trade involves exploitation, that there are always winners and losers.  “We can immediately see the fallacy in this still-popular viewpoint: the willingness and even eagerness to trade means that both parties benefit. In modern game-theory jargon, trade is a win-win situation . . .” Both parties benefit from an exchange because each “values the two goods or services differently, and these differences set the scene for an exchange.”

But exchanges are not necessarily free. Many are coerced. If a robber threatens you with "Your money or your life," your payment to him is coerced and not voluntary, and he benefits at your expense. It is robbery, not free markets, that actually follows the mercantilist model: the robber benefits at the expense of the coerced. . .

Government, in every society, is the only lawful system of coercion. Taxation is a coerced exchange, and the heavier the burden of taxation on production, the more likely it is that economic growth will falter and decline. Other forms of government coercion (e.g., price controls or restrictions that prevent new competitors from entering a market) hamper and cripple market exchanges, while others (prohibitions on deceptive practices, enforcement of contracts) can facilitate voluntary exchanges.

Q: What is a central bank?
A: In the U.S., the federal reserve, as Rothbard notes, is a government-created and -sanctioned cartel device that allows the nation's banks to inflate in a coordinated fashion.  It was sold to the public as a way "to provide the nation with a safer, more flexible, and more stable monetary and financial system," according to the Fed's website.  What can we say about the Fed's stewardship when the dollar has lost 96 percent of its buying power over the last century?

Establishing a central bank requires coercion and gross deception.  It is a grant of privilege from government to special interests - large commercial banks - that are seeking protection from market forces. 

Q: What market forces?
1. Competition.  Through its government-privileged monopoly to print money, a central bank in effect becomes a monopoly counterfeiter.  Printing money is a regressive tax, meaning the poor suffer the most.  But people within the jurisdiction of the government are not allowed to choose a better money, as government attacks on market alternatives such as Bitcoin, e-gold, and the Liberty Dollar have made clear.

2.  Protection from losses.  A free market implies the possibility of profits and losses.  A market where government protects businesses from losses is not free.

Commercial banks choose to operate on a fractional-reserve basis, meaning they normally loan much more money than they actually have.  Clearly, it is both a shady and a shaky operation.  In the absence of institutional protections, if a fractional-reserve bank gets too extravagant in its loans, it can fail.  The failure of one bank can create a panic that shuts the doors of other banks.  Banks could abandon fractional reserve banking, but they don’t because it can be very profitable, in the same way counterfeiting can be profitable for the counterfeiter.

A central bank takes control of the reserves of all banks within its system, so that one bank won’t over-inflate and bring the roof down on the others.  Governments also provide deposit insurance to ease the minds of the depositors.  (In the U.S., banks insured by the FDIC “are required to place signs at their place of business stating that ‘deposits are backed by the full faith and credit of the United States Government.’”)  Deposit insurance and the central bank also ease the minds of bankers, who are freed from a significant degree of market retribution.

3.  Has this system worked?
Until 2008 it seemed to most observers to be working effectively for all market participants.  The FDIC had kept depositors from scrutinizing their banks’ activities, and the government, by redefining the dollar as a piece of paper, had given the Fed a green light on the creation of money.  The result was a boom in financial markets and housing that most pundits thought was sustainable.

4. What happened in 2008?
The banking system, released from the discipline of market forces and ordered by government to issue a mortgage to any applicant with a pulse, experienced a meltdown.

The government and the Fed then did something. 

According to Bloomberg news, as of March 31, 2009, the U.S. government and the Federal Reserve "spent, lent or committed $12.8 trillion," an amount that approached the GDP of the year before, “to stem the longest recession since the 1930s.”

Has this massive intervention worked?  The Washington Post, May 31, 2013:

American households have rebuilt less than half of the wealth lost during the recession, leaving them without the spending power to fuel a robust economic recovery, according to a new analysis from the Federal Reserve.

From the peak of the boom to the bottom of the bust, households watched a total of $16 trillion in wealth disappear amid sinking stock prices and the rubble of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed released Thursday.

In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker.

Call it cronyism.  Call it corporatism.  Call it interventionism.  Call it mercantilism.  Call it a system rotten to the core. 

But don’t call it free market capitalism.  That’s the last thing these guys want.

 

Would you watch a movie about a counterfeiting cartel?

One of the biggest strangleholds on our freedom is the money and banking system we’re forced to endure.  I wrote a novel about it in 2008.  It’s good, especially for a first novel, but good isn’t good enough.  It doesn’t have the broad appeal I wanted.  It steps hard on some cherished postulates such as the legitimacy of U.S. entry into World War I.  It was supposed to be the war to end all wars, not an expedient to save Morgan’s investments.

World War I was a classic example of the wealth transfer effect of monetary inflation.  When wealth is shifted to a government eager to go to war, the country goes to war, and millions of people die, most of them young.  Even when bundled snugly within a tense plot, the connection of fiat money to war and other government adventures is not something the general reader cares about.  Evil bankers they readily accept, but an evil banking system leaves them cold.  

Nevertheless, I’ve always thought the story’s tagline - that of a Fed chairman who sparks a grass-roots movement to bring the roof down on our money and banking system - could serve as the backbone for a good movie.

I therefore set about to develop a screenplay based on that premise, using the book as a rough guideline while re-structuring the plot to incorporate more suspense and action.  Omitting certain characters and scenes helped sharpen the storyline.  I also allow the characters to use profanity as they see fit, though there’s still very little.   Along with most of the world, I’ve learned a few things since 2008 and wanted to reflect that in the story as well.  As it stands the script is 99 pages long, which translates to about 99 minutes of run time. 

A producer reads a script for one reason: to decide if it could make money.  Can a story about a topic few people find interesting be injected with enough adrenaline to make it profitable?  Without diluting the message?  Some pro-liberty movies have been financially successful, others have not.  Antiestablishment financial success depends on many things, but chief among them is the manner in which the writer exposes the problems.  Does the writer work up a case against bad people in a good system?   Or does he argue that the system itself is flawed and only attracts bad people?   

Most people cling tightly to the belief that the system that rules them is fundamentally good but subject to corruption.  They accept corruption.  Corruption can be corrected.  They don’t accept being told the system is inherently bad.  They can’t correct the system without a revolution, and people are not revolutionaries.  With few exceptions the ones who claim they’re revolutionaries can be bought off. 

V for Vendetta was a strong anti-state film set in a dystopian future, with a production budget of $54 million and worldwide gross receipts of $132,511,035.  V strikes a blow against totalitarianism but is vague on what should replace it.  The black comedy Wag the Dog in which a Hollywood producer is hired to create a fake war to distract attention from a presidential sex scandal had a budget of $15 million and pulled in $64,256,513.  Unlike V, Wag the Dog had marquee stars to help boost sales.  Wag the Dog hits hard against democracy and the manner in which voters can be manipulated, but does not even hint that democracy should be replaced.

In both movies government flaws were exposed while providing strong entertainment value, though of a categorically different nature. Both movies made money without providing answers to the problems they exposed.  People don’t go to the movies for answers.  If they walk out of the theater with an answer it is not an answer to a question the movie explicitly raised.

Hollywood follows the advice Samuel Goldwyn once gave a producer: “If you want to send a message, use Western Union.”  Don’t make movies that lecture.  Make movies that entertain.  A movie that lectures might appeal to critics but it turns most movie-goers off.  Check the list of top grossing films.  Avatar, Titanic, The Avengers, Harry Potter, Transformers, The Lord of the Rings -- it is not a lecture series.

Atlas Shrugged is a novel that does a lot of lecturing.  How do you make it into a movie people will pay to watch?  Answer: You omit the lectures, or at least scale them down considerably.  But if you omit the lectures, what will you have?  An entertaining something that’s not Atlas?  Even with the lecturing at a minimum, Atlas parts I & II have lost money.  There are other reasons for the losses - low budget, lack of big stars, splitting it up into parts - but without the lectures libertarians were disappointed, and they’re the ones who had to be fired up enough to drag others to see it.

Given that a recent poll found that “banks and financial institutions are still the least trusted sectors in the whole global economy,” there’s a plausible train of thought that says people would have a strong interest in a movie that shows them why their distrust is well-placed -- provided it’s also highly entertaining.  It’s not as if people are distrustful of certain banks or bankers; it’s the institution of banking they don’t trust.   Superficially, at least, this suggests people are ripe for a drama about a counterfeiting cartel.  Maybe they are, and maybe this is an idea a scriptwriter could sell to Hollywood.  (That’s what I’m attempting.)  Or maybe it’s not in Hollywood’s domain, since it has to answer the question: What’s wrong with banks and financial institutions?

But even if a script could be written that wows a few people in Hollywood, who would finance it?  Certainly not Ben Bernanke.  Certainly not his banking cohorts.

I told a friend my script would need at least three miracles to complete the transformation from caterpillar to butterfly.  They’re the standard requirements for any script, but in this industry it is miracles that a speculative scriptwriter needs.  And they are:  Getting at least one producer to fall madly in love with it, getting financing for it, getting it produced. 

I’m at the pre-miracle stage, looking for a producer.