A Creditors’ Protection Bill

For the present and the foreseeable future, writes George Reisman, there is probably nothing that will stop the Fed from continuing with its inflation.

Is there anything that can be done to stop the potential destruction of the real value of all dollar-denominated savings and long-term contracts by a flood of inflation? Is there anything that can protect people from a possible tsunami of inflation in the United States?

There is something that could be done. There is a financial life raft, as it were, that could be made available to everyone, that would enable people to salvage at least some significant portion of the real value of their savings and contracts denominated in fixed sums of dollars. It is something much more urgently needed, aimed at a much more realistic danger, and much more feasible than efforts to control global warming, say.

What is it? It is the enactment of a creditors’ protection bill, whose essential provisions would be the insertion into all outstanding contracts of a limited, contingent gold clause, and the removal of all legal obstacles to the inclusion of such clauses in all future contracts.

Credit Crisis: Precursor of Great Inflation

The so-called “credit crisis” is gaining momentum. Investors increasingly question the solidity of the banking system, as evidenced by banks’ tumbling stock prices and rising funding costs. With bank credit supply expected to tighten, the profit outlook for the corporate sector, which has benefited greatly from “easy credit” conditions, deteriorates, pushing firms’ market valuations lower. In fact, peoples’ optimism has given way to fears of job losses and recession on a global scale. The obsession with a policy of lowering the interest rate is rooted in a deep-seated ideological aversion against the interest rate. It is a destructive ideology, in particular if the government is in charge of the money supply. Because then the government central bank will lower the interest rate to whatever is deemed appropriate from the viewpoint of the government, pressure groups, and vested interest.

Wildcat Banking in the Virtual Frontier

The new banking policy in Second Life has strong parallels to the adoption of 19th-century banking regulations in the real world. These regulations were supposed to stop wildcat banking, where ambitious bankers expanded credit through risky loans until defaults led to insolvency and left their depositors empty-handed. Similarly, in Second Life, unregulated banks have offered demand deposits bearing interest rates of 40% or more, at least one of which never actually had any loans underlying its interest-bearing deposits. Cases such as that are almost certainly fraud and should be adjudicated as such, but Linden’s adoption of a draconian ban on all interest-paying banks, which had been preceded by a ban on gambling, has established a clear pattern of economic interventionism. This does not bode well for Second Life users, for as Ludwig Von Mises has taught us, middle-of-the-road policy leads to socialism.

The March

Garet Garrett exarmines the critical question. If we are not marching toward socialism, traditionally and technically understood, what are we marching toward? If you say it is toward socialism you leave out the possibility that it may turn into something else. Much more than that, if you say it is toward socialism you fill the view with smoke and may fail to see clearly what it already has in common with every kind of totalitarian government we know anything about, namely, insatiability. There is no way to sate its appetite for more power.

$30 Billion Taxfunded Innovation Contracts: The “Progressive-Libertarian” Solution

I’ve noted before (2) the disturbing trend of intellectuals–some even libertarian or free marketeers—advocating taxpayer-funded “medical innovation prizes” to supplement or replace the current patent system—e.g., Alex Tabarrok’s support of an $80 billion/year “medical innovation prize fund”, and similar proposals by others, including Joseph Stiglitz and

An appropriate balance

Hillary Clinton has explained her view of economics: “I want to get back to the appropriate balance of power between government and the market.”

That’s a bit vague so how about a stricter standard: the federal government can only be as large as the largest U.S. company. There are several ways to look at this, but in terms of sales, the winner is Chevron, with $207 billion. The federal budget is now $3 trillion. This imbalance needs correction!

NYT: Charity Begins in Washington

Yes, that’s an actual New York Times editorial headline: Charity Begins in Washington. Ever-increasing private philanthropy is actually a bad thing, says the Times, because it crowds out government spending. Why, those private philanthropists can just give money to whatever they want! Better to tax us and let Washington decide where that money will go. I know, that sounds like an unfair caricature, it sounds like parody... but, well, read the piece.

Fiscal Follies

Years of spending, inflating, taxing, and redistributing has left the US economy teetering on a recession that our best and brightest — meaning the ones who created this mess — claim requires a multibillion-dollar economic-relief package to quell fears, promote confidence, and spur recovery. And, one might add, to keep things calm past election time, which is the real purpose of this bipartisan proposal. It leaves you wondering about what happened to the 1990s boom, a credit-fueled expansion also influenced by a peace dividend. The end of the Cold War produced a floundering federal government that lost its rationalization to grow and found itself unsure of its purpose, thus promoting an era of relative peace and prosperity. Oh, how things changed in the 2000s, with new monsters to destroy and new justifications for centralized power!

The Trouble With Child Labor Laws

Let’s say you want your computer fixed or your software explained. You can shell out big bucks to the Geek Squad, or you can ask — but you can’t hire — a typical teenager, or even a preteen. Their experience with computers and the online world is vastly superior to that of most people over the age of 30. From the point of view of online technology, it is the young who rule. And yet they are professionally powerless: they are forbidden by law from earning wages from their expertise.

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