Power & Market

In a recent speech, one of the lesser-known Fed Governors, Philip N. Jefferson, discussed the importance of having a home:

Beyond location, a home provides both basic needs, such as shelter, and invaluable benefits, such as a sense of personal safety and dignity. It is a refuge in which our minds and bodies can recuperate and regenerate so we are prepared to participate in all aspects of life, including the next day's work. The costs of living in disadvantaged areas or of dealing with financial hardship can be seen in all areas of life. Higher stress, the frequent necessity of working more than one job, the absence of benefits, and the time and money spent commuting—all these exact a financial and psychological toll.

On some level, he must understand that most Americans are under tremendous financial hardship, given the increase to both the cost of living and interest rates.

He asked the question:

What can the Fed learn from research on opportunity and inclusive growth?

Then tried to elaborate further what this meant:

The better we understand the channels that affect the health and function of the overall economy, the better we can calibrate our policy decisions to deliver on our dual mandate.

Continuing:

In pursuing its dual mandate, the Federal Reserve is essentially trying to foster and maintain the conditions in which the economy and all its participants can thrive.

And again:

Pursuing our dual mandate is the best way for the Federal Reserve to promote widely shared prosperity.

For well over a hundred years the Austrians have documented the economic problems a currency monopoly creates. Even beyond the mechanics of money creation lies moral, ethical, and legal considerations. The summary to Bastiat’s The Law, provides a succinct account:

The question that Bastiat deals with: how to tell when a law is unjust or when the law maker has become a source of law breaking? When the law becomes a means of plunder it has lost its character of genuine law. When the law enforcer is permitted to do with others’ lives and property what would be illegal if the citizens did them, the law becomes perverted.

Bastiat, as one of the proto-Austrians, or predecessors to the school, shared countless ideas which have always remained relevant. Hayek built upon this idea, explaining one of the problems with central planning:

The economic planning which was to be the socialist means to economic justice would be impossible unless the state was able to direct people and their possessions to whatever task the exigencies of the moment seemed to require. This, of course, is the very opposite of the Rule of Law.

What the Fed has successfully done over the last century is normalize one of the biggest crimes of the century: Counterfeiting.

Not a day goes by where the Fed is not mentioned on all business channels. Whether it’s CNBC, Bloomberg, on TV, or in print, a significant amount of effort goes into talking about the Fed, what they will do next, and how they may help or hinder the economy. Mainstream economists seem to revere the Fed, with the institution being widely incorporated into their dogmatic beliefs.

But let’s never forget: The Fed is a counterfeiter.

Should one individual try to pass even $100 of fake note as legal tender, they may face grave punishment. And depending on how large the scheme, the individual could face consequences stiffer than murder charges. Yet, when the Fed prints billions to trillions of dollars, not one in a thousand economists think anything of it. If anything, they’ll applaud the inflationary policy.

Like democracy through the barrel of a gun, or dropping a bomb for freedom, the words and actions of a central planner are usually diametrically opposed to each other. If the Fed was serious about helping the poorest members of society, wanted to ensure more “inclusivity,” and really wanted Americans to know the joy of home ownership and the pursuit of the American dream, then the best thing it could do is to stop everything it is doing today. If they really cared, they’d surrender to the rule of law, and not the law of the central planning authority.

What matters in every election is what progress has been made by constitutionalists.

Constitutionalist voters and politicians have formidable difficulty getting constitutionalists past the Republicans’ Progressives. Progressives are helped by state primary processes, party rules and practices, crony media buys, and legacy-media support.

Even so, constitutionalist voters are in the majority. And constitutionalist politicians, who would earn Conservative Review Liberty Scores of at least 80 percent pro-liberty, went into this election making up around 27 percent of elected Republicans.

The slow turnover of senates and the results of the Republican primaries each guaranteed that this election would bring little increase in liberty in the near term. But next steps were taken towards improving elections, increasing the number of constitutionalist voters, and improving the choices in constitutionalist politicians.

Progressive Incumbent Politicians

The unfolding Great Inflation II has been brewing for a long time. Since 2008, the true money supply has increased by an astounding 303 percent. This dwarfs the Great Inflation I 1960-1978 increase of 176 percent, the Financial Crisis 1995-2007 increase of 128 percent, and the Great Depression 1921-1929 increase of 62 percent.

The Great Inflation II lockdowns, and the recent covid portion of its true money supply increase, an unprecedentedly rapid 120 percent, came under much the same Republicans as now, and Trump.

Going into the Republican primaries, the future senate’s swing vote could have at-most improved from Susan Collins, who had been voting 20 percent pro-liberty, to Mitch McConnell, who had been voting 44 percent pro-liberty.

Going into this election, the current house’s Republican leadership promised far-too-little, and could be counted on to deliver even less.

Election Problems

This election brought even-more-glaring disparities between reliable polls and the vote counts recorded by election officials in numerous precincts.

A kind of natural selection is in progress. Republican state politicians are ultimately going to have to either use their constitutional powers to ensure that voting is untainted, or go extinct and get replaced by new politicians who will use their powers.

Newly Independent Voters

Various voters in the past had been Democrats but, in this election, supported Republicans.

These voters were motivated by economic factors and social policies. Even if they identify as Republicans for now, most will really function as independents, since what drives their voting is that they are economic and social refugees.

Most such refugees’ backgrounds are from cultures, whether foreign or domestic, that have long accepted bigger governments. Any economic refugee’s vote for a big-government Republican Progressive will be a temporary setback, until the refugee sees the natural consequences of this action and learns how to stop getting burned. That will happen sooner or later.

And meanwhile, many economic refugees already arrive with intuition that will help them recognize Progressives, and determination to choose constitutionalists. Constitutionalist voting is growing.

Constitutionalist Politicians

Toward the end of Trump’s time in office, Liberty Scores of at least 80 percent pro-liberty had been earned by 8 percent of that house and 6 percent of that senate. At mid-2022, these had increased to 17 percent of that house and 14 percent of that senate. Given the favorable retirements and the probable losses by some of the worst newcomers like Dr. Oz, when the dust from this election settles, we will likely see that the proportions of constitutionalists have increased further.

But keep in mind that to even block a veto override takes 33 percent of one house. To enact legislation requires 50 percent of a house and a senate, plus a willingness to stand up and be counted using constitutional simple-majority voting in a senate, plus a presidential signature, or else requires 67 percent majorities in a house and a senate.

Change toward constitutionalist governance can come much faster under Constitution-following, emotionally intelligent executives. On this score, this election brought the clearest improvement.

This election made the next president less likely Trump and more likely Ron DeSantis, Rand Paul, or Thomas Massie.

More evidence on election integrity, new independent voters, and a better future president—in a single mid-term election, constitutionalists made helpful progress on many fronts.

Check out this clip from Caitlin Long of Custodia Bank at a Bitcoin conference last year, explaining the dangers of highly leveraged crypto exchanges like FTX. Long calls out the practices of Sam Bankman-Fried, while sharing a stage with the disgraced crypto trader.

Why was Caitlin able to see what most of the financial world, including major financial institutions, couldn't? She's read her Ludwig von Mises. As she explains, there is a fundamental difference between "commodity money" and "circulation money," which Mises calls "fiduciary media" in his treatise A Theory of Money and Credit. 

Written over 100 years ago, the consequences of leveraged fractional reserve banking and the artificial increase in credit remain. Mises's work remains vital in a world of hedonistic central banks and a financial world shaped by the dangerous fallacies of bad economics.

In the case of FTX, we have an exchange without the backing of the state, though one whose CEO attempted to gain regulatory capture with donations to powerful politicians and their pet ideological causes. In classic beltway-style, Bankman-Fried's failings are now being used by power-hungry politicians to promote the very legislation he advocated, at the expense of responsible actors like Long. Ultimately though, the same dangerous economic views underpinning his approach to crypto continue to guide the globe's traditional financial system. 

The only way out is an ideological revolution into how civilization considers the vital topic of money and banking.

As Mises noted in this important work, "No very deep knowledge of economics is usually needed for grasping the immediate effects of a measure; but the task of economics is to foretell the remoter effects, and so to allow us to avoid such acts as an attempt to remedy a present ill by sowing the seeds of a much greater ill for the future."

Get your copy of Theory of Money and Credit today from the Mises Bookstore.

This year’s midterms came at a time when most Americans are poorer than they were two years ago, violent crime is on the rise, and exit polls seemed to unanimously point to voters prioritizing these basic facts over abortion rights and “democracy.” Everything was primed for a Republican red wave to set the table for a potential sixty-seat Senate majority in 2024.

Instead, Republicans underperformed historical midterm trends. The only “red tsunami” was in Florida, where Governor Ron DeSantis won with the largest margin since 1868.

The aftermath has reopened wounds that were inflicted when Donald Trump mounted his hostile takeover of the Republican Party. Beltway Republicans, who had largely remained disciplined in holding fire on Trump since his victory in 2016, have unleashed their pent-up rage, trying to scapegoat him for all of the Grand Old Party’s electoral woes.

No one is helping their case more than the former president. DeSantis’s dominating victory has further elevated the one political figure who presents a sincere risk to Trump’s position as a de facto political leader. What started as some public jabs against the governor before the midterms have now evolved into a full-on attack calling into question DeSantis’s “class” for refusing to pledge that he won’t run for president in 2024.

Unfortunately for Americans sincerely concerned about the rising threats presented by the modern Left, Trump’s in-character tantrums distract from a much larger problem: the political institutions of the American Right are led by unserious, inadequate individuals. If Republicans cannot recognize and properly respond to this, the Democrat Party will continue to enjoy the privilege of being the political equivalent of the Harlem Globetrotters, again dunking on the Washington Generals.

The greatest blame for the red trickle should be directed at Republican McLeadership: Kevin McCarthy, Mitch McConnell, and Ronna Romney McDaniels of the Republican National Committee (RNC).

McCarthy has spent his time as Republican House leader largely stumbling through inner-party politics, such as propping up the sinister Liz Cheney in House leadership before ousting her for refusing to follow his very stern warnings not to antagonize the party base. His attempt at crafting a vision for what Republicans do with power includes such vapid statements as “A Future Built on Freedom.” As party leader, he prioritized dedicating millions of dollars to attacking Republicans he feared wouldn’t follow his lead, such as Florida’s Anthony Sabatini and Washington’s Joe Kent, in primaries.

McCarthy’s performance can only be defended by contrasting it with McConnell’s. With the ancient turtle of the Senate facing his own budding rivalry with DeSantis’s successor turned senator, Rick Scott, McConnell’s Senate Leadership Fund was responsible for reallocating almost $10 million dollars away from Arizona’s tight senate race and to Alaska, propping up loyal swamp creature Lisa Murkowski against another Republican competing in the state’s jungle election. McConnell also enjoys the distinction of being the single most hated Republican in Washington, with an approval rating over twice as low as Donald Trump’s.

Hating Mitch McConnell is one of the few issues that can unite an increasingly polarized America.

Of course, many Republicans voted for Trump in 2016 in large part to remove the McCarthys, McConnells, and Romneys from power. Instead, Donald Trump let them back in, making Paul Ryan speaker in 2017, bringing McConnell’s wife onto his cabinet, endorsing Mitt Romney for Senate, and making his niece leader of the RNC. Additionally, Trumpworld raised over $100 million this election cycle for the Save America PAC to help finance Trump-style candidates. Less than $15 million was spent.

At a time when so many Americans wanted Donald Trump to lead the Republican Party, he outsourced that responsibility to his enemies that now want him purged.

While Trump’s brand of populist politics was never perfect, his instincts were always better than traditional Washington’s: a folk opposition to “stupid wars,” an emphasis on revitalizing the American economy, spicy rhetoric lambasting the worst of the Beltway’s political class, attacks on the corporate press, and a recognition that the regime security state was a threat to his liberty (and by extension, ours). As a right-wing populist leader, he thus embodied many of the characteristics that drew Murray Rothbard to Pat Buchanan’s 1992 presidential campaign.

Unfortunately, populism is a political strategy, not an end in itself. To his credit, Trump’s disruption of neoconservative hegemony over the GOP has manifested itself in the intriguing National Conservativism project, which could yet still provide the sort of intellectual artifice needed to reverse American decline. That requires, however, leadership capable of wielding power in a way that truly threatens the regime.

The problems America faces currently, however, are issues that politics alone are inadequate to address.

The current inflationary struggles undermining American quality of life result from the bipartisan empowerment of a Federal Reserve that—along with central banks worldwide—has engaged in decades-long monetary hedonism. Policies that have been disastrous for real America have been a boon for financial institutions and large corporations that have been happy to serve as an extension of the federal regime and to finance campaigns in return.

The third rail of American politics, Social Security, Medicare, Medicaid, and various other social welfare programs, suffers from a basic math program. The size of unfunded liabilities continues to grow as America itself becomes older. Young Americans are getting married later and less often, resulting in fewer children and creating new economic stress that many seek to address with increased immigration. The social costs of declining birth rates and changing migration patterns have additional consequences that economics alone can’t analyze.

Additionally, the Democrats’ overperformance in the midterms has identified major cultural concerns. Many voters have demonstrated they are more offended by the idea of a fifteen-week limit on abortion than by tyrannical covid lockdowns. Maybe there is a connection between an election that elevated a mentally damaged man to the Senate and a voter base that refused to punish governors whose policies are responsible for damaging the intellectual development of children.

These issues aren’t solved with elections but with a profound change in America’s economic, spiritual, and cultural realities.

The question now is what comes next.

As I noted after Biden’s inauguration, Trump’s moment has been one of the most exciting political developments in modern American electoral history. This remains true, even if the man responsible for its creation seems increasingly ill-prepared to lead it. Trumpers are still better than Trump.

This is why the brightest spot for Republicans in 2022 appears to be the best hope for American politics: Ron DeSantis. The question now is, Can he hold up in the face of a category 5 Trump storm after so many others have not?

Several points indicate DeSantis may be different. 1) He himself is a product of Trump, as the former president has noted. DeSantis went from afterthought to Republican nominee only after Trump’s endorsement, and his primary campaign was dedicated to reminding people just how dedicated he was to the MAGA brand. 2) He’s an executive with an unparalleled record of covid-era competency, effectively resisting both federal and corporate tyranny, genuinely increasing the quality of life of his population, and 3) now he's an electoral powerhouse reshaping the politics of his state.

For the first time, Trump’s attacks on a rival seem to be coming from a place of weakness, not from a place of New York swagger.

DeSantis has also demonstrated qualities unique in modern American politics. For one, he has been able to surround himself with truly talented people, such as his communications general, Christina Pushaw, who successfully pivot a media-created narrative about a “Don’t Say Gay” bill into a conservative war on “groomers.” DeSantis is also, well, intelligent. As Dr. Jay Bhattacharya told Tom Woods last year, he found it “remarkable” that the governor “knew all of the details” when discussing scientific studies on covid that did not fit the regime’s narrative.

He was even able to rebuild a bridge faster than several states count ballots.

America’s issues, however, are bigger than covid. Will DeSantis be able to apply similar distrust of “policy experts” in other areas of deeply ingrained Washington corruption, such as foreign policy, monetary policy, and the national security state? Skepticism of any politician is always warranted.

Ultimately, though, this year’s midterm disappointment for Americans hoping the lunacy of the Left would fundamentally weaken the Democrat Party highlights that the very real problems we face will not fall under their own weight. The antihuman threat of progressivism continues to rise, no matter how visually absurdly it manifests itself.

For those with a sincere interest in protecting themselves, their families, and future generations from the horror, now is the time to start formulating real solutions and strategies to engage it.

We can no longer afford unserious people.