Power & Market

The latest Federal Open Market Committee (FOMC) meeting minutes shows a series of questionable ideas. Other than the people in the closed door meeting, it’s difficult to know whether they believe what they discuss, or just go through the motions, attempting to stave off economic collapse for as long as possible.

With just a few quotes, the direction the Fed/US Government is taking us becomes clear:

Alongside the rise in U.S. yields, broad U.S. equity price indexes increased moderately, with the largest gains in cyclically sensitive sectors.

GDP also looks to be on the rise:

The information available at the time of the March 16–17 meeting suggested that U.S. real gross domestic product (GDP) was expanding in the first quarter of 2021…

In the first quarter of 2021:

Consumer spending appeared to be increasing in the first quarter at a pace considerably faster, on balance, than in the fourth quarter of last year.

But not only is spending on the rise:

In addition, the personal saving rate jumped to an even higher level in January, and ongoing gains in labor earnings along with further fiscal support pointed to additional increases in accumulated household savings.

Per inflation calculations:

Real PCE expanded strongly in January after declining over the preceding two months, with spending likely boosted by federal stimulus payments sent out in early January.

Yields, GDP, the stock market, spending, savings, inflation, on the rise; overall debt levels, the money supply, and the Fed’s balance sheet are also on the rise. But we should pay attention to federal stimulus payments as well as central bank accommodation, which, you guessed it, are on the rise.

It’s strange that for all the central bank and government inflationary schemes, the Fed will still make claims such as:

Improved U.S. economic growth prospects and optimism about the eventual lifting of social-distancing and related restrictions globally were major drivers of asset prices abroad, spurring sizable increases in sovereign yields in advanced foreign economies.

For some peculiar reason it seems to be everything except the increase in money supply, debt levels, and currency debasement as the cause for asset prices abroad.

Naturally, other central banks reacted to this:

In response to rising yields, the Reserve Bank of Australia increased its bond purchases, and the European Central Bank indicated it would increase the pace of its bond purchases going forward.

It’s not just in America. The same interventions are being played out the world over under the guise of economic policy aimed to help the economy, or worse, achieve arbitrary employment and inflation targets. The notion that governments and central banks can spend to prosperity is highly regarded as economic dogma.

Of all the people in the meeting, with the years of experience and credentials between them, surely at least one of them would question the sustainability of an economy where everything rises due to central banks and government increasing the money supply, while simultaneously taking on debt, for no clear purpose other than obtaining stimulated economic effects.

Stories depicting the savagery of cancel culture are becoming increasingly popular. As expected, many invoke political correctness as the genesis of this development. But rather than looking for simple explanations, we must ponder why people conform to politically correct opinions. In truth, conformity has a biological basis. Humans are social creatures who thrive on intimate connections. Hence conforming to social conventions by expressing politically correct assumptions is one way to signal membership in a community. As such, conformity protects people from the emotional scars of rejection.

Indeed, conforming to social norms like respecting property rights and being polite yields favorable results. Without a doubt, positive conformity is crucial to the success of our species. Yet retrograde conformity, indicated by the fame of ideas like white privilege and systemic racism, can foster destructive results. Preventing the growth of retrograde conformity is challenging, because the success of an idea is not hinged on intellectual rigor.

Like biological organisms, an idea's receptivity is linked to its capacity to increase social fitness. People imitate each other, so ideas are reproduced mimetically. Therefore, the prosperity of an idea is driven by conformity bias. As a result, heterodox ideas even if they are rigorous cannot compete with mainstream views. Moreover, researcher Robert Henderson points out that the ability of socially accepted beliefs to increase social bonds explains the appeal of cancel culture: “Cancel culture strengthens social bonds…. People enjoy uniting around a common purpose. They derive satisfaction from coming together against a perpetrator. They enjoy the solidarity it provides.”

Further, sanctions are created to stifle controversial claims and are reinforced by institutional protectionism. When journals and newspapers retract articles for failing to affirm orthodox beliefs, this is emblematic of institutional protectionism. Unfortunately, such actors may think that they are acting morally by shielding the public from offensive views. Similarly, like conforming, we are biologically predisposed to acting morally. So, gatekeepers may contend that allowing the free flow of ideas could act as an incentive for their appropriation by rogue actors.

However, this contention is misguided. In the absence of a robust market for debate, society suffers from intellectual stagnation and citizens are forced to substitute rhetoric for evidence. For instance, if researchers could study racial differences without backlash, we would be in a better position to cater to the diverse needs of the population. This sentiment was articulated in a 2002 paper published in the Journal of the National Medical Association: “There is good evidence to show that therapeutic substitution of drugs within the same class places minority patients at greater risk. This is because effectiveness and toxicity can vary among racial and ethnic groups.”

Another reason for the success of politically correct beliefs is that they confer psychological benefits. By promoting the rightness of mainstream narratives, elites can present themselves as morally superior and cement their influence in society. Economist Jennifer Roback refers to this phenomenon as “psychic rent-seeking.” Because of the social rewards derived from institutional protectionism, elites are unlikely to tolerate intellectual innovations, since they can undermine institutional authority.

But the cure for political correctness is to be found in a free market for ideas. Economic historian Joel Mokyr rightly contends that the free market for ideas led to the discoveries nurtured by the Enlightenment: “European political fragmentation created the environment in which dissident and heterodox opinions could be put forward with increasing impunity. Had a single, centralized government been in charge of defending the status quo, many of the new ideas that eventually led to the Enlightenment would have either been suppressed or possibly never even proposed.” Only a free market for ideas can solve the problem of political correctness and prevent its pernicious effects.

Judged by the sheer quality and volume of his intellectual output, Murray Rothbard was a genius. Though we reflect on the ingenuity of his peculiar intellect—we must never forget that Rothbard was the master of defying stereotypes. Unfortunately, many assume that libertarians are hostile to Christianity, but it was Rothbard who admitted that “[t]he greatest and most creative minds in the history of mankind have been deeply and profoundly religious, most of them Christian.” Rothbard also informed readers that the Spanish Scholastics made a pivotal contribution to economics.

Christianity

Rothbard in several articles and books refuted the uncharitable characterization of late Scholasticism as intellectually barren. In his article “New Light on the Prehistory of the Austrian School,” Rothbard asserts that we owe religious thinkers a debt of gratitude for laying the foundations of modern economics. Despite popular belief, late medieval thinkers and not Adam Smith offered the first systematic justification for modern economic theories. Rothbard writes of the Scholastics: “It was the sixteenth-century Spanish Scholastics who developed the purely subjective and profree-market theory of value. Thus, Luis Saravia de la Calle denied any role to cost in the determination of price; instead, the market price, which is the just price, is determined by the forces of supply and demand, which in turn are the result of the common estimation of consumers on the market. Saravia wrote that 'excluding all deceit and malice, the just price of a thing is the price which it commonly fetches at the time and place of the deal.'”

Notably, the Spanish Scholastics were remarkably sophisticated in applying supply and demand analysis to money. Rothbard writes of the Dominican Martín de Azpilcueta Navarro: “Citing previous Scholastics, Azpilcueta declared that “money is worth more where it is scarce than where it is abundant…. Because “all merchandise becomes dearer when it is in great demand and short supply, and that money, in so far as it may be sold, bartered, or exchanged by some other form of contract, is merchandise and therefore also becomes dearer when it is in great demand and short supply.”

This analysis is illuminating because Azpilcueta provided relevant examples: “We see by experience in France, where money is scarcer than in Spain, bread, wine, cloth, and labour are worth much less. And even in Spain, in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver. The reason for this is that money is worth more where and when it is scarce than where and when it is abundant.”

The Black Power Movement

Rothbard was such an objective analyst that he could even appreciate the political aspirations of the Black Power movement. Unlike many on the right, he noted that “the goals and means of civil rights were statist and Liberal to the core.” Rothbard argued that the failure of civil rights to change the hearts of men resulted in an awakening among black activists, who recognized that they could not force racists to tolerate their demands. As a result, instead of lobbying for integration, these leaders thought that it would be prudent for blacks to create communities free of white control, and Rothbard supported them in this regard in a popular essay: “The Negroes began to turn, and turn swiftly, from the old Liberal ideal of compulsory integration to another tradition that had previously lingered, underground and un-respectable, at the core of the Negro community. This was the idea of black nationalism, an idea that had always appealed, not to the educated and articulate Negroes, but to the poorest inhabitants of the ghetto. The black nationalist idea came to the fore in the 1920s with the phenomenally popular Marcus Garvey.”

Rothbard felt that the circumstances of the 1960s justified black separatism: “For a time many conservatives were enthusiastic about black nationalism…. The conservatives were overjoyed with the nationalist and Muslim emphasis on Negro self-help, thrift, dignity, and pride, in contrast to the old ideals of coerced integration from above. But there is one thing that the conservative proponents of black nationalism overlooked: self-help, pride, thrift, Negro businesses, etc. are all well and fine. But they cannot hope to flourish within the context of the black reality in America: permanent oppression by the white 'power structure.' None of these good and libertarian things can be achieved without first and foremost, getting the white-run U.S. and local and state governments off the backs of the Negro people.”

Nationalism and National Liberation

Although libertarians frequently condemn nationalism, Rothbard held that in some cases nationalism can result in the liberation of oppressed groups. As he contends in a 1966 essay: “There are two contrasting types of nationalism: a desire to liberate an oppressed nation from the chains imposed by another nation (a movement for 'national liberation'); as against a desire to aggress against other nations and impose one's own national domination upon them…. One is a libertarian form of nationalism, the other an invasive, profoundly anti-libertarian form. A Negro nationalist movement in present-day America is a movement for national liberation; any white insistence on thwarting such a movement is an example of white imperialism. Such are the qualitative differences within the concept of nationalism.”

In his radicalism, Rothbard posited that black Americans were a colonialized people and needed to be free from the clutches of the state. Specifically, urban renewal activists and school administrators are singled out for criticism in his controversial piece on black power. Rothbard details the negative effects of urban renewal on black communities: “All good Liberals, not so long ago, used to admire urban renewal as a means of helping the poor and bringing esthetics to the city. Now, radicals and some conservatives are beginning to agree (in another burgeoning form of 'Left-Right' coalition) that urban renewal is really a vast subsidy to the real estate interests at the expense, not only of the taxpayer which was always evident, but also of the poor themselves, who are summarily kicked out of their homes by the urban renewal bulldozer, and forced elsewhere, redoubling the slums there. If they try to move into the new urban renewal housing, they find that there is far less space available, and at much higher rents than they were paying before. And so, more and more people are coming to recognize 'urban renewal' is really 'Negro removal'—for urban renewal has been concentrated in the Negro ghetto areas.”

He is equally critical of administrators: “The compulsory attendance laws force all of the youth of the country, regardless of their talents or inclinations into this vast prison-system, and the teachers and administrators are their guards and wardens. The oppression lies much the heaviest in the urban Negro areas, where so many children are not inclined toward schooling and where racism as well as hatred for working-class mores are given full rein by the school staff, armed with the power of compulsory education to force their charges to stay in school. No wonder that Negro youth are embittered by their enforced stay in the system.”

So, Rothbard continues to confound even in death. For example, the average person who has not read his publications would assume that he had no interest in Christian philosophers. And as expected people under the spell of liberal delusions believe that he was a racist without assessing his ideas. However, Rothbard was a giant among men and an exceptionally articulate defender of black sovereignty.

Henry Grady Weaver worked through many jobs on the way to becoming director of customer research for General Motors, which landed him on the November 14, 1938 Time cover. But virtually no one remembers that. Now he is best known for his short 1947 book, The Mainspring of Human Progress, that the Ludwig von Mises Institute’s website called “the true story of progress for the human race with acute understanding of the fundamental cause: freedom itself,” which led to the fact that now “Several generations count this book as the very one that started an intellectual revolution.”

The book had an interesting background. It draws heavily from Rose Wilder Lane’s 1943 The Discovery of Freedom: Mans’s Struggle Against Authority. It became a very influential book, ranking 67^th in a 1999 Modern Library readers poll of the best nonfiction books. But Lane was not satisfied with it, so despite continuing interest, she refused to allow it to be reprinted after only 1000 copies were made. That continuing interest led Weaver to ask Lane’s consent to use her ideas, but retell it in his own way, which she granted. Ironically, even though Mainspring was thus what John Hood called “an amateur’s paean to freedom and individual ingenuity,” it ranked 48^th in the same poll.

Reader comments about Mainspring have included “Nothing I say will adequately describe how awesome this book is,” “If I ever gave a list of books people needed to read before they die, this would be in the top three,” and “Best book I’ve read in 5 years. A concise and condensed summary of recent Western civilization cultural ideas.” Such raves justify giving it some serious attention. As a beginning, consider some of its most insightful words.

• Most of the major ills of the world have been caused by well meaning people who ignored the principle of individual freedom, except as applied to themselves…professional “do-gooders”… who would ruthlessly force their views on all others--with the abiding assurance that the end justifies the means.
• What is the human purpose in society?...it is a matter of benefitting yourself by getting something you desire from another person who, at the same time, benefits himself by getting something that he desires from you…the peaceful exchange of benefits, mutual aid, co-operation--for each person’s gain. The incalculable sum of all these meetings is human society, which is simply all the individual human actions that express the brotherhood of man.
• To discuss the welfare and responsibilities of society as an abstract whole…is an oversimplification and a fantasy. The real human world is made by persons, not by societies. The only human development is the self-development of the individual person.
• Even today, many civilized persons…have harbored the pagan belief that the sacrifice of the individual person serves a higher good…in the false ideal of selflessness--which emphasizes conformity to the will-of-the-mass--as against the Christian virtues of self-reliance, self-improvement, self-faith, self-respect, self-discipline, and a recognition of one’s duties as well as one’s rights. Such thinking is promoted under the banner of social reform, but it gives rise to the tyrants of “do-goodism”…who slaughter…the very people who look to them for the more abundant life and for protection against harm.
• It is highly presumptuous of any mortal man to assume that he is endowed with such fantastic ability that he can run the affairs of all his fellowmen better than they, as individuals, can run their own personal affairs.
• Every living thing must struggle for its existence, and human beings are no exception. The thin defenses of civilization tend to obscure the stark realities; but men and women survive on this earth only because their energies constantly convert other forms of energy to satisfy human needs, and constantly attack the nonhuman energies that are dangerous to human existence.
• In the last analysis, there can be no progress except through the more effective use of our individual energies, personal initiatives, and imaginative abilities…
• It all comes back to the effective use of human energy…the decision to act and the action itself are always under your own control.
• Your freedom of action may be forbidden, restricted, or prevented by force…But the fact remains that no amount of force can make you act unless you agree--perhaps with hesitation and regret--to do so.
• Individual freedom is the natural heritage of each living person.
• Freedom cannot be separated from responsibility.
• Your natural freedom--your control over your own life energy--was born in you along with life itself. It is a part of life itself. No one can give it to you, nor can you give it to someone else. Nor can you hold any other person responsible for your acts. Control simply can’t be separated from responsibility; control is responsibility.
• Man has enormous powers…to make new things and to change old things into new forms. He not only owns property but he also actually creates property…without ownership, there is little incentive to improve it.
• Free minds are inventive minds.
• Overlords develop their ambitious plans, enforced by the firing squad and supported by huge predatory armies…but they are contradictory to the nature of human energy. They are always at the expense of individual initiative; they always result in oppression, leading to human degradation and war.
• In America…Free men were to have an opportunity to live their lives, plan their own affairs, and work with one another--not under the lash of coercive authority but under the discipline of enlightened self-interest and moral responsibility.
• Americans had no overall plan. They had something more important. They had personal freedom to plan their own affairs; and the avalanche of human energy resulting from that freedom.
• This country had been covered by...a tumultuous multitude of free men…living under the weakest government in all the world. The people who had been left to shift for themselves--who had learned the lessons of realism…were creating a new world.
• Unrestrained majority rule always destroys freedom, puts the minority at the mercy of the mob, and works at cross-purposes to the effective use of human energy and individual initiative.

Henry Grady Weaver’s The Mainspring of Human Progress drew out how poverty was almost everyone’s fate throughout world history until the evolution of capitalism made civilization possible. That is a lesson well worth remembering, because as Weaver put it:

• One of the best ways to ensure future progress is to keep clearly in mind the things which have been responsible for our past progress, as well as the things which may have kept America from being as great as it might have been.