3 Charts Showing Just How Boxed-in the Fed Is

3 Charts Showing Just How Boxed-in the Fed Is

The Fed met market expectations by cutting its target for the fed funds rate by 25 basis points, down to the range of 1.75 - 2.00 percent. In this post I want to demonstrate just how boxed in the Fed has now become, with the help of 3 charts.

First, let's review just how low interest rates have been (and still are), in a long-term historical context:

fed funds.png

As the chart shows, the (effective) fed funds rate was in this range back during the early 2000s, which helped spawn the housing bubble and bust (as I predicted in this Mises.org article which ran 11 months before the financial crisis). Before then, we have to go all the way back to the early 1960s to see rates this low. And furthermore, to the extent that Mises was right, and artificially low interest rates lead to an unsustainble boom, then the seven years of virtually zero percent interest rates (from December 2008 - December 2015) have fostered a plethora of malinvestments.

Now here's the irony: In the midst of the Fed cutting rates, and injecting $75 billion in repo operations on Tuesday to push down a spike in short-term rates, at least on paper we see that everything seems to be fine. Specifically, consumer price inflation is a bit lower than the Fed's desired level but is still at a "healthy" 1.8% (year over year, as of August), while the official unemployment rate is still at a 50-year low:


Finally, despite the apparently healthy economy (vis-a-vis the Fed's "dual mandate"), there is still an extraordinary stockpile of excess reserves in the banking system, relative to the pre-crisis era:

excess reserves.png

Medical metaphors for economics are never perfect, but we can certainly say this: Far from being in the midst of a robust "recovery," the patient--i.e. the US economy--is still incredibly weak, needing constant infusions of medicine to stave off a crisis in its circulation.

On the one hand, it's refreshing that Fed officials don't think the economy can be summed up in two numbers, namely the official unemployment and consumer price inflation rates. But on the other hand, the fact that the Fed is cutting rates now, in spite of the "healthy numbers," is an ominous indication of just how deep the rot goes in the economy's capital structure.

Unfortunately, the world may soon see exactly why 7 years of unprecedently loose monetary policy was a very foolish idea.

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The Fed Unlocks Trillions of Dollars!

10 hours agoRobert Aro

What happened to the trillions of dollars allocated for the CARES Act emergency lending facilities? In a statement he gave to the US Senate on Tuesday, and one of his last public statements for the year, Federal Reserve chair Jerome Powell honored Secretary Mnuchin’s request to terminate five of the lending programs, confirming:

the Federal Reserve will return the unused portion of funds allocated to the lending programs that are backstopped by the CARES Act in connection with their termination at the end of this year. 

Powell then provided a statement on each of the programs and how much of the funds have been used:

The Main Street Lending Program allows up to $600 billion in loans granted to small to medium size businesses (and nonprofits), an amount nearly the size of the initial Troubled Asset Relief Program during the Great Recession! As of November 25, nearly:

600 lenders representing more than half of U.S. banking assets have registered to participate in the program, and the program has purchased just under $6 billion in participations.

The Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) hold $75 billion to purchase bonds directly from business in the primary market, or on the exchange in the secondary market. Surprisingly:

there have not been any PMCCF transactions, nor have any indications of interest been received. While the PMCCF has not purchased any bonds since it opened.

As for the SMCCF, the value of the corporate bonds and corporate exchange traded funds now stands at $13.6 billion.

The Municipal Liquidity Facility could have purchased an astounding $500 billion in state and local debt. But so far only two issuances have been made, for a total of $1.7 billion.

The last of the five, soon to be discontinued, programs is the Term Asset-Backed Securities Loan Facility, able to provide up to $100 billion in loans for those who own student loans, credit card debt, and auto loans. These debts are not normally owned by most people on “main street.” Nonetheless, only $3.8 billion of loans have been granted.

To date, the five programs lent out a total of $25.1 billion, of what could have been $1.275 trillion of support programs. And while it is 2020, and the anticapitalism mentality remains strong, we should feel lucky that “only” $25.1 billion was created to buy assets such as corporate bonds. If the programs were fully utilized, an extra trillion dollars would have been added to the money supply, the ends for which we’d never know.

Now, imagine if $500 billion was given to buy state, city, and local debt across the country. Perhaps the money would have gone to build a bridge or road, or maybe just to pay salaries or pensions. Regardless, we must be reminded it all amounts to collectivist decision-making; decisions by the few on the behalf of the many. Whether or not the money is used is not as unsettling as the fact these individuals have the power to create and spend unfathomable sums of money in the first place.

While it could have been worse, it’s still not good. As Chair Powell praised the Fed’s action because they:

helped unlock almost $2 trillion of funding to support businesses large and small, nonprofits, and state and local governments since April.

He doesn’t reconcile this amount. But it likely includes some $525 billion of forgivable loans from the Paycheck Protection Program, some of which went to Congress and their family members, as reported by the Washington Post; nor does he mention the $3 billion increase to the Fed’s balance sheet, now standing at over $7.2 trillion.

As December begins and the year soon ends, the Fed’s actions have led to many more trillions of dollars injected into the economy, allocated to some and circulated in ways we’ll never know. The central planners and mainstream media appear content, with a covid vaccine on its way, the stock market making new highs and a likely transition in the White House. Of course, we’re in uncharted territory with no escape plan. The problem with inflationism is that is must never end, while the magnitude of the next stimulus, increase to money supply and support programs must now only accelerate.

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Schools Are at the Core of the Left's Hegemony

12/03/2020Trevor Daher

Ryan McMaken wrote an excellent piece recently, explaining “3 Reasons the Left Keeps Winning.” The article was short and sweet, but its points were profound and insightful. The first two reasons McMaken gave for the victory of the Left are, one could say, fraternal twins: “The Left Understands the Importance of Ideas and Ideologies” and “The Left Takes a Long-Term View.” In the article, McMaken made numerous references to education, i.e. the inculcation of ideas in the minds of children; the dissemination of ideas through school teachers and college professors to subsequent generations of youth. One thinks these ideas merit some further consideration, in light of the mess that we find ourselves in presently. McMaken has hit the nail on the head.

One could look to the arts and the culture as a source of corruption in the minds of our youth, of course. This has been a great pastime on the right since at least the 1960s. One could attempt to lay the blame at the feet of media pundits and journalists, too, if it weren’t for that devil of a problem that many young people don’t read news articles or watch news broadcasts. Maybe the drugs have crept into our neighborhoods and into the hands of our youth; the ghost of Timothy Leary is urging them to “turn on, tune in, drop out.” This is possible. However, there does seem to be one problem—more obvious and troublesome—which stands tall above the rest. Namely, that many of our children spend their waking hours, and at least a dozen years—their formative years—in the charge and care of radical socialist, collectivist, and fanatically atheist teachers.

For how long have we known that the avowed enemies of our civilization have been running our educational institutions? For how long have we known that our schools, from primary and secondary schools, to colleges and universities, were indoctrinating our children in Marxism, collectivism, fanatical atheism, and all manner of ideologies which, just a few generations ago, would have been identifiably inimical to the values and ideas of American society and culture?

In classes, at least those dealing with the study of man, such as history, it seems plausible that little more has been produced than a profound hatred and disassociation on the part of the students. Innocent babes have been devoured by wolves; their hearts, minds and souls formed in an environment in which they are taught to memorize the loathsome lessons of a collection of cruel and hateful ideologies.

Many of them listen and obey, as they are instructed to do by their teachers, and as they are encouraged to do by their parents—to the extent that they have parents who take an interest in their education. The others, those children who are fortunate enough not to pay much attention in class, do not seem to emerge from the experience any happier or any less angry than the rest. Though they may not all complete their homework, the schools nevertheless pressure children to take their lessons home with them and continue their studies in the evenings and on the weekends, lest they find something more stimulating to do in their free time.

For twelve years, many of these children are subjected to this malformation and indoctrination. All the while, many of them are encouraged by teachers and parents to commit themselves to their studies and excel. Many students, especially those of exceptional intelligence or diligence, are encouraged to continue their studies for a period of years in undergraduate school and, possibly, in graduate school. The cost to them is not just that of tuition and fees, room and board, but the forgone opportunities to begin their lives, to begin their work, to start a family, or otherwise to pursue their own ends.

How often, and how readily, do we shake our heads and look down our noses at these youth? How could they emerge, after all of this, and yet suffer from a deadly combination of ignorance, hatefulness, and ingratitude? How, indeed.

Let us consider a hypothetical situation, a mental exercise, if you would. Imagine approaching some of your libertarian, free market, conservative or religious friends and confiding in them one of your most embarrassing secrets: that you are considering a career as a schoolteacher, an educator of children. One suspects that many of them would call you a fool; according to dictionary.com, a silly or stupid person; a person who lacks judgement or sense. You would willingly endure the indignity and the tedium of attempting to teach hopeless children in exchange for a meager wage? Good Lord, and their parents, they must be insufferable! Meanwhile, the collectivists, many of whom hate mankind, recognize teaching as among the noblest of pursuits, the noblest of professions. Teachers are heroes and saints to the Left.

In all fairness, your more conservative friends do have a point. There are obstacles. The tides are against you. The state will require licensing, which means pedagogy, examination, and scrutiny. The state will also require your school to meet certain “standards,” which will mean state-sanctioned curricula. Plus, how are you going to get past HR (human resources), DIE (diversity, inclusion, and equity), and all of the rest of the alphabet soup? The hiring committee? The department head? The principal? The parents?

Mercifully, though, there are some good options. There are private schools—Christian schools, chief among them. There are also secular private schools dedicated to providing children with a classical education, such as those which were founded by the Mises Institute’s own Robert Luddy. The Great Ron Paul has his homeschool program. There are even some public charter schools that have sprung up out of the ground, dedicated to the same—the Barney Charter School network that is affiliated with Hillsdale College, and the Great Hearts network, to name just a few.

Beyond the simple recognition that there are serious problems in our educational institutions, perhaps more of us ought to get serious about seeking out those schools and institutions which remain, in the old form, dedicated to the inculcation of knowledge and the cultivation of virtue. More of us, this author included, ought to utilize and support them—perhaps we ought to thank them for their service! One of the silver linings to this year’s lockdowns and cultural revolution, as many commentators here and elsewhere have pointed out, is that many parents are finally waking up to the reality of our educational institutions and doing just that.

The case could be made that much of what ails the human mind, the human heart and the human soul are the results of ignorance, miseducation, and malformation. Though not the sole cause, certainly many of the troubles and evils in our hearts, in our homes, in our communities, and in our country can be traced back to their roots in the schools and institutions of higher learning, and the damage which they have wrought upon the minds, hearts and souls of so many.

One need not embrace the ignorant, hateful, and ungrateful thugs and criminals who have so plagued our streets and darkened our living rooms of late. One must recognize, though, that man does not emerge from the womb with a hammer in the one hand and a sickle in the other; nor a dogged hatred for mankind in his mind and in his heart.

Perhaps it is time that we set about to fix the problem which so many of us have, for so long, left alone. Someone must tend to the flock, though it is a dirty, difficult, and lonely task—nor are there fortunes to be made as a shepherd. Yet, someone must shield the babes against the wolves in sheep’s clothing. After all, those poor old liberal arts aren’t going to teach themselves.

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The Education of the Modern Socialist

12/03/2020Finn Andreen

Libertarians often wonder why socialism continues to be so popular, even though it has proved to be such a failure as a political ideology and as an economic system. Though a public education system and a biased mainstream media are key reasons for this, the stubborn resiliency of socialism is also somewhat fictitious since socialism has evolved: the socialist of yesteryear is not the socialist of today. This distinction is important to remember when setting the themes for a libertarian education. 

he difference between the traditional and the modern socialist corresponds to the distinction that Ludwig von Mises discerningly made between socialism and state intervention in the free market. The traditional socialists, of direct Marxist inspiration, have almost disappeared today, as one socialist experiment after another failed during the twentieth century as well as in our times. No one calling himself a socialist or a "progressive" today believes that the state’s ownership of the means of production is the best way to organize society. No modern socialist or "leftist" condones the socialist state’s typical political oppression and economic suffocation of society. 

But the modern socialist still turns a blind eye to the overwhelming evidence showing that the free market is the greatest creator of wealth in history, even when it is hobbled by state intervention. She/he still refuses to accept that billions of people have been brought out of poverty by capitalism—though a hampered version of it—and that hundreds of millions of people have joined the middle class thanks to the liberalization of international trade and the opening up of large swaths of developing economies.

The modern socialist is therefore a paradoxical creature; he both accepts and rejects the free market. To believe in free markets in some cases but not in others is an ambiguous ideological position; one that seems intellectually untenable and that at least ought to be defended. But modern socialists generally do not address directly this intellectual incoherence. Rather, they usually claim that the free market works to some extent, and that it must be limited and controlled. They are convinced that the state must play a fundamental role in society, to protect the "workers" against "unbridled" capitalism that will otherwise not only continue to oppress them, but even destroy civilization itself.

Modern socialists include leftists and progressives, but also mainstream social democrats and standard liberal elites, as well as many right-wingers, and those conservatives who have abandoned classic liberalism in order to adapt to the times. They represent a very large and heterogeneous majority of the population, but they have one thing in the common: their trust in the state. Following Mises’ dichotomy above, modern socialists can thus also be called "statists". As the name implies, statists believe that the state should intervene in the market to correct its many perceived excesses and provide a regulatory framework without which, they are convinced, it would run amok. Large areas of the economy (like education or healthcare) should be brought under state control, if they aren’t already. The sectors that can be left in private hands must, in their view, nevertheless be regulated by the state and protected, if needed, by subsidies, tariffs, and other kinds of wealth transfers. Statists often believe, though they might not always admit it openly, that "inappropriate" social and cultural values, such as consumerism or conservatism, be choked by the state.

The popularity of such ideas has had very serious economic, political and social consequences over the last decades. Most statists mean well, but they have been inculcated with an ideology that is based on erroneous convictions, misunderstandings, and frankly, ignorance. Perhaps the most fundamental mistake that statists make is how they define "capitalism". What they call "capitalism" is really "state capitalism." This is capitalism as corporatism, with its inevitable cronyism, artificial monopolies, vested interests and regulatory capture, which libertarians have long criticized as the inevitable outcome when the state gets involved in the economic life of society. In other words, what many confused statists think is "unfettered" capitalism, is actually free market capitalism that is fettered to the state. They confuse cause and effect, since it is their statist ideas that in the first place have created the political and economic conditions that they now criticize. Put in another way, they are convinced that the state must intervene in society to correct problems for which it is largely itself responsible.

Most statists are not aware of this contradiction, nor the nefarious consequences of their political beliefs. This is inevitable since they haven’t learned how the unhampered market economy works and the myriad ways in which state intervention distorts it. They are simply followers of the modern socialist ideas and "progressive" values that they have received from their schools and universities, from the media, and often unwittingly, from family and friends. The overwhelming majority of the population has unfortunately never been introduced to libertarianism, and therefore do not have the conceptual tools to understand why this statist conventional wisdom is wrong.

There is thus a screaming need for a different kind of education—a libertarian education. It is the education in the economic and political pillars of libertarianism; respectively, Austrian economics and natural law. It might seem presumptuous, and even condescending, to suggest that modern socialists need to be educated. It would indeed seem presumptuous to propose an alternative education to the majority if modern society were free, peaceful, harmonious and affluent. But this is not the case, as most statists immediately acknowledge. Further, libertarians are humbled by the fact that most of them were themselves statists, before they also received the same education in liberty. Incidentally, this is why libertarians understand statists so well, while the reverse is almost never the case.

When setting the curriculum for this libertarian education, the distinction between traditional and modern socialists is relevant. Since modern socialists interpret and express "socialism" differently compared to traditional socialists, the education needed to convince statists of the foolishness of their political and economic ideas cannot be the same as the one used in the past. Traditional socialists needed to be educated first and foremost in the disastrous consequences of central planning, the definition of freedom, and the essential role of prices in society. This is why they needed to understand Böhm-Bawerk’s early critique of Marxism, Mises’ critique of socialist economic calculation, Hayek’s warning against collectivism and his theory of the use of knowledge in society.

That education, though still important, is not as essential as it used to be, since modern socialists have already implicitly learned these lessons. They realize that Marx’s theory of surplus value is flawed, that a centrally planned economy and the attempt to abolish private property will eventually lead to the collapse of society. What statist do need to be educated about are the causes and consequences of the state’s intervention in a free society. The education of the modern socialist should thus include such key concepts as the Cantillon effect of inflation, Say’s law of production, Bastiat’s broken window fallacy, Rothbard’s analysis of the state, and Hoppe’s critique of taxation.

These libertarian concepts are essential to understanding why a highly regulated and tax-financed state capitalist society becomes unsustainable and unstable over the long term, inevitably embarking on an economic, political and cultural decline. A libertarian education is essential for reversing this trend, by teaching the younger generations that modern socialism is inherently decadent, as individual savings decrease, family values weaken, personal responsibility evaporates, rent seekers multiply, and trust in politicians plummet. All of these outcomes are predictable consequences of modern socialism.

The moral and financial bankruptcy of the current political and economic system, and with it the nagging feeling that this system has now come to the end of the road, can make many statists receptive to the answers that libertarianism provides. The education of the modern socialist should also be a simpler task than converting a traditional socialist to libertarianism. The latter often had a solid ideological framework based on the writings of Hegel, Marx, Engels and Lenin. But most modern socialists have never read these authors and are at best only vaguely familiar with their ideas. Statists have no real ideology to speak of; their political beliefs are usually based more on emotions than principles. A typical example is when the mandatory payment of taxes is smugly construed as an act of "solidarity."

The libertarian education of the modern socialist must therefore also include morality. It needs statists to become convinced that adopting libertarianism will make them feel good about themselves. If they embark on this education with an open mind, if they take the time to truly understand the political and economic insights of libertarianism, they will find that free market capitalism, properly understood, leads to most peaceful, stable and just society.

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The US Treasury vs. the Fed: Who’s Really in Charge?

12/03/2020Robert Aro

There is something brewing in the nation’s capital, and it has been since Congress unconstitutionally gave power of the nation’s money supply to the Federal Reserve over a hundred years ago. While the tension has existed since, it’s a great opportunity to watch the friction unfold.

On November 19 Secretary Mnuchin wrote a letter to Fed chair Powell asking that five asset purchase programs, including the corporate bond and municipal bond purchase programs, to expire on December 31, as intended by Congress. He also instructed that:

As such, I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.

Nothing is more permanent than a temporary solution.” We have previously expressed our concerns that these “temporary” asset purchase programs would never end. Consider instances such as the European Central Bank’s corporate bond buying program, launched four years ago, or the Bank of Japan’s equity program running for over a decade, and how both appear to have no end in sight. While only a few of the Fed’s programs, like the Paycheck Protection Program are to be extended for ninety days. However, this time, we may be able to give some credit to the secretary for wanting to stop most of the programs; after all, if these temporary measures don’t have a set end date, they could become permanent as well. He reiterated his stance:

While portions of the economy are still severely impacted and in need of additional fiscal support, financial conditions have responded and the use of these facilities has been limited.

The following day, Fed chair Jerome Powell wrote a reply to Mnuchin acknowledging the secretary’s authority:

The CARES Act assigns the Treasury Secretary sole authority to make certain investments in Federal Reserve emergency lending facilities… You have indicated that the limits on your authority do not permit the CARES Act facilities to make new loans or purchase new assets after December 31, 2020, and you have requested that we return Treasury’s excess capital in the CARES Act facilities.

So far so good…until this happened; ABC News writes:

The Fed issued a rare public rebuke in a statement, saying that it "would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy."

This might not come as a surprise. Powell has recently made various statements in which he suggests Congress increase the fiscal stimulus. Comments from the Fed chair normally amount to little more than “suggestions,” as the Fed cannot direct treasury spending. However, this “rebuke” seems a little more than a passing comment normally answered in a Q & A session.

Of course, where does this leave the fate of these temporary asset purchase programs?

Enter Janet Yellen, the 2014–18 Fed chair who preceded Jerome Powell, may soon replace Mnuchin as secretary if confirmed by Congress. If she becomes the first female to hold the position, she will have the ability to either continue with the existing directive from Mnuchin to end the temporary facilities or she can agree to the request made from Powell.

Time will tell. But currently, it doesn’t look good for those who long for a return to sound money, as just last month on Bloomberg Television she made an appearance saying:

“While the pandemic is still seriously affecting the economy we need to continue extraordinary fiscal support, but even beyond that I think it will be necessary,” Yellen said…“We can afford to have more debt,” she added, because interest rates will probably be low “for many years to come.”

In the Constitution, Congress was charged with managing the nation’s money supply. At the turn of the century, they practically outsourced this role to the Federal Reserve Banking system. Over the last few decades, and related crises, the Federal Reserve managed to use the powers granted by Congress, to acquire more assets, commensurate with an extraordinary increase in supply of money and credit. The lines between the Treasury and the Fed, who directs whom, and who controls what gets blurrier by the day; having the previous monetary policy head sitting at the top of our fiscal policy does nothing to make this distinction any clearer.

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We Need Some of Mark Twain's Humor Right Now

11/30/2020Gary Galles

Even though huge issues are still in doubt, Americans have largely survived an election full of serious ill will, hypocrisy, and ominous implications. However, in the process, we have accumulated a deficit of self-reflection and humor.

That provides an excellent excuse to turn to someone many Americans have fond memories of—Mark Twain. After all, not only was he once the most famous living American, he garnered much of his fame through both his serious and humorous reflections about politics and government. Perhaps as important, as Twain himself put it, “Irreverence is the champion of liberty and its one sure defense.”

His credentials for the task include the fact that, according to Brian Hoey in “The Politics of Mark Twain,” “his combination of beliefs is not currently represented by either major American political party,” but is “in many ways a pitch perfect, almost radical version of classical liberalism.” Or as Jeff Tucker put it in his “Mark Twain’s Radical Liberalism,” “Biographers and critics have had difficulty figuring out how the same person could champion the interests of the Newport capitalist class while founding the Anti-Imperialist League. He loved America’s attachment to property and commerce but emerged as the country’s most severe critic of the warfare state.” Further, his November 30 birthday provides an excuse.

  • When you are in politics you are in a wasp’s nest with a short shirt-tail.
  • When politics enter…government, nothing resulting therefrom in the way of crimes and infamies is then incredible.
  • In…politics people’s beliefs and convictions are in almost every case gotten at second-hand, and without examination, from authorities who have not themselves examined the questions at issue but have taken them at second-hand from other non-examiners, whose opinions about them were not worth a brass farthing.
  • The government of my country snubs honest simplicity, but fondles artistic villainy.
  • In this great factory where are forged those rules that create good order and compel virtue and honesty in the other communities of the land, rascality achieves its highest perfection.
  • History has tried to teach us that we can’t have good government under politicians.
  • Our Congress….In their private life they are true to every obligation of honor; yet in every session they violate them all, and do it without shame….In private life those men would bitterly resent—and justly—any insinuation that it would not be safe to leave unwatched money within their reach; yet you could not wound their feelings by reminding them that every time they vote ten dollars [in] appropriation, nine of it is stolen money and they the marauders.
  • It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress.
  • One of the first achievements of the legislature was to institute a ten-thousand-dollar agricultural fair to show off forty dollars’ worth of pumpkins in.
  • I believe the Prince of Darkness could start a branch hell in the District of Columbia (if he has not already done it), and carry it on unimpeached by the Congress of the United States, even though the Constitution were bristling with articles forbidding hells in this country.
  • No one’s life, liberty, or property is safe while the legislature is in session.
  • Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.
  • If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re mis-informed.
  • There are laws to protect the freedom of the press’s speech, but none that are worth anything to protect the people from the press.
  • Patriotism is supporting your country all the time, and your government when it deserves it.
  • Whenever you find yourself on the side of the majority, it is time to pause and reflect.
  • The government is merely a servant—merely a temporary servant; it cannot be its prerogative to determine what is right and what is wrong, and decide who is a patriot and who isn’t. Its function is to obey orders, not originate them.
  • Patriotism…always commemorates a robbery.
  • No party holds the privilege of dictating to me how I shall vote.
  • No country can be well governed unless its citizens as a body keep religiously before their minds that they are the guardians of the law, and that the law officers are only the machinery for its execution, nothing more.
  • A man’s first duty is to his own conscience and honor—the party or the country come second to that, and never first.
  • Judges have the Constitution for their guidance; they have no right to any politics save the politics of rigid right and justice when they are sitting in judgment upon the great matters that come before them.
  • Vast power and wealth corrupt a nation. It incites dangerous ambitions and can bring the republic down. It can pack the Supreme Court with members friendly to its purposes, run down the Congress and crush the people’s voice.
  • Only when a republic’s life is in danger should a man uphold his government when it is wrong. There is no other time.
  • To lodge all power in one party and keep it there is to insure bad government and the sure and gradual deterioration of the public morals.
  • Men think they think upon the great political questions…but they think with their party, not independently.
  • No public interest is anything other or nobler than a massed accumulation of private interests.
  • The candidates re-arrange the facts to suit themselves and keep the lies and half-truths spinning in the air while the great gullible public cheers and shouts and stomps its approval.

Mark Twain’s view of the reality of government seems to be summed up by his modification of Abraham Lincoln, that “Wherefore being all of one mind, we do highly resolve that government of the grafted by the grafter for the grafter shall not perish from the earth.” Or as Louis Budd more seriously described it, “his work does posit that the essential job of developing civilization toward an ideal is to be undertaken by private individuals in their social and economic lives, and not by some mythical institution called the state or an ideology that contradicts the practical experience of people in their communities.”

And he saw problems with that reality for a nation founded in liberty:

The mania for giving the Government power to meddle with the private affairs of cities or citizens is likely to cause endless trouble…and there is great danger that our people will lose our independence of thought and action…and sink into the helplessness of [one] who expects his government to feed him when hungry, clothe him when naked, to prescribe when his child may be born and when he may die, and, in fine, to regulate every act of humanity from the cradle to the tomb.

Mark Twain wrote long ago. But he seems at least as insightful about the government we experience today as those he observed directly. And the defense of liberty in modern America, with a government that has ballooned far beyond anything he could have anticipated, would certainly benefit from a healthy new dose of the same patriotic irreverence that animated Twain.

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YouTube Attempts to Silence the Mises Institute

11/25/2020Jeff Deist

YouTube, the dominant video platform owned by Google, decided yesterday to remove a Mises Institute video. This decision apparently lasts for all eternity, cannot be appealed to an actual human, and comes with this friendly admonition: "Because it’s the first time, this is just a warning. If it happens again, your channel will get a strike and you won’t be able to do things like upload, post, or live stream for 1 week." 

The video, a talk by Tom Woods titled "The Covid Cult" with more than 1.5 million views, was recorded at our live event in Texas two weeks ago. It offered challenges to the official narrative surrounding the coronavirus, particularly with respect to mask mandates. Woods's talk featured several charts showing rises in Covid "cases" across multiple cities and countries not long after imposing mask rules, demonstrating how such rules apparently have little effect on slowing transmission of the virus.


The speech was nothing less than a heartfelt tour de force against the terrible lockdowns and pseudoscience plaguing the debate over Covid, and a call to reexamine tradeoffs and priorities. It was, as you might imagine, a mix of unassailable data combined with our friend Tom's strong prescription for liberty and personal choice rather than centralized state edicts.

In other words, YouTube had no earthly business removing it. This kind of discourse seems to me the best and highest use for YouTube, its most important function.  

"Big Digital," as Professor Michael Rectenwald terms tech companies, have become "governmentalities": supposedly private enterprises turned into instruments of state power and state narratives. This sordid process is different for each company, (some are more complicit than others, a few are heroically non-compliant) but it involves a mix of early start-up funding; connections and contracts with state agencies, particularly relating to defense and surveillance; and propaganda campaigns in service of state narratives. Rectenwald explains this phenomenon in his own recent talk titled "The Google Election":

In short, Google, Facebook and others are not strictly private sector entities; they are governmentalities in the sense that I have given to the term. They are extensions and apparatuses of the state. Furthermore, these platforms are governmentalities with a particular interest in the growth and extension of governmentality itself. This includes championing every kind of “subordinated” and newly created identity class that they can find or create, because such “endangered” categories require state acknowledgement and protection. Thus, the state’s circumference continues to expand. Big Digital is partial to the interests and growth of the state. It not only does business with statists but also shares their values. This helps makes sense of its leftist bent and their preference for the deep state Democrats. Leftism is statism.

We encourage readers to consider the entirety of Rectenwald's talk, and his sobering book Google Archipelago for his thorough treatment of the facts and realities behind tech companies and the US state. This is not alarmism or conspiracies, but documented examples of how Google, Facebook, YouTube, Twitter, Instagram, LinkedIn and others actively participate—including financially—in a melding of corporate and state power. 

This, then, is real fascism. Big Digital—what writer Ilana Mercer calls "Deep Tech"— is not a collection of private companies in the sense we think of such. They are partners of the federal government, committed to ideological service as part and parcel of their own bottom line.

Thankfully,  the sneering call to "build your own platforms" is being answered. Companies like Bitchute and LBRY (its video platform is Odysee) continue to host Mises Institute content, and promise to continue doing so. In fact, you can view Dr. Woods's forbidden talk at those respective source here and here.

Truth tellers matter more than ever. It's time for our own institutions and platforms, which is precisely why the Mises Institute exists.

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Judy Shelton Could Still Be Confirmed. But It's Looking Very Unlikely.

11/23/2020Robert Aro

On July 2, 2019, President Donald Trump nominated Mrs. Judy Shelton to join the Federal Reserve Board of Governors. She has a distinguished career as an economist and even co-authored a book called Roads to Sound Money, which supports ideas such as sound money and individual liberty. To those who support the free market and monetary/fiscal responsibility, her nomination is nothing short of a Godsend. But as of Tuesday’s vote, the Republican majority Senate still has not confirmed her nomination. Despite this process being highly bureaucratic and requiring many if’s, she actually still has a shot! CNN reports:

The final vote was 47-50.

The 50 votes against Mrs. Shelton include:

Senate Majority Leader Mitch McConnell, who had initially voted for the nominee, switched to vote against her, giving him the procedural right to bring her up for another vote in the near future.

Mitch switched his vote, utilizing a “procedural right,” something most citizens could never cite nor likely even knew existed.


Sen. Chuck Grassley, a Republican from Iowa, announced he would have to quarantine after potential exposure to Covid-19 and miss the vote -- his first missed vote in 27 years. He joins Florida Republican Sen. Rick Scott, who announced Saturday he would be away from the Capitol for the same reason.

If” the two Republican Senators were in attendance, and “if” Mitch voted for Shelton, then things would look much different; but that did not happen. So where does that leave things?

Should there be another vote, CNN goes on to say, it will likely be scheduled after Thanksgiving. But this complicates things as:

Sen.-elect Mark Kelly, a Democrat who won a GOP seat in the special election in Arizona, is expected to be sworn in, meaning there would likely be one more Democratic "no" vote…

This wouldn’t bode well, as the Wall Street Journal reports that Democrat Mark Kelly would be sworn in on Nov 30, if combined with the three Republicans Mitt Romney, Susan Collins and more recent “dissenter” Lamar Alexander, it would make an already slim “yes” confirmation all the more difficult.

Once the math, voting strategy, and party lines become drawn, a new question arises:

When did the Federal Reserve governor nomination become “partisan politics” in Washington?

Even the Wall Street Journal notes:

Party-line votes for Fed board positions haven’t occurred before, reflecting the institution’s apolitical nature. 

For all that’s been said about this “controversial” pick, Mrs. Shelton would have only one vote on a seven member board. She’d hardly be a threat to stopping the (unofficial goal of) US dollar debasement overnight, nor would she be able to implement a gold standard anytime soon. But what she has already done, even if inadvertently, is illustrate various problems with the way this system of democracy and central banking works. Since her nomination, we’ve seen countless displays of this “system,” which appears to not even help those it claims to serve.

Republican Senator Lamar Alexander displayed this on Monday when he came out against Mrs. Shelton, as CNBC quotes him saying:

I don’t want to turn over management of the money supply to a Congress and a President who can’t balance the federal budget.

Lamar is just one of 100 elected Senators, chosen “by the people” to represent their interests. In this case, they must confirm someone to serve on the board of governors to manage the nation’s central bank, an idea championed by many anti-capitalists, including Karl Marx.

Nonetheless, as the system is currently designed, it requires elected Senators like Alexander to be charged with managing the economic affairs of the entire nation; whether these senators understand economics is besides the point. Luckily, in instances where an elected official doesn’t understand, or wishes to be rid of someone with an idea they disagree, they can employ demagoguery to sway public opinion. As noted above, the Senator can paint a picture that the nation’s money supply would be somehow handed over to the President and Congress. This is misleading because it completely misunderstands the notion of sound money, limited government, and the control of the money supply, all which underline the gold standard.

If Judy Shelton does not get confirmed to the Federal Reserve, we lose an opportunity to expand the knowledge base at the Fed. We’ll have to add that to the list of things gone wrong in 2020, then move on. This leads us to the inevitable, unpleasant question: If not Judy, then what must the next candidate say or do in order to appeal to both sides of the political aisle?

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Even in the Midst of a Culture War, Policy Debates Still Matter

11/23/2020M.J. Galles

Watching as Biden and Trump supporters went at it, I found myself bewildered by what was hardly being discussed, by the dearth of coverage of the serious issues facing us today. Differences between competing visions for the future have never been greater, yet even as Americans process election results, the focus remains nearly entirely on ad hominem arguments. Republicans can’t believe “Sleepy Joe” may have now wrapped it up, while Democrats seem apoplectic “bullying Trump” is fighting back, claiming he threatens the fabric of our democracy while ignoring their own maneuverings years past.

None of this is surprising in our heavily partisan environment. Easier to craft salacious headlines and lob heated charges against a candidate than to enumerate policy differences driving current results, to thoughtfully analyze what brought us to this point. Yet those differences drew many to the polls this November. And it’s ultimately what drew me into checking out Jo Jorgensen. In my mind, policies still count.

Late in the game I began quietly supporting the Libertarian candidate. “Quiet” because I endeavored to remain at peace with friends and family. To speak up often meant feeling anger and scorn. Instead, I kept my mouth shut. Increasingly, however, I’ve been filled with growing repugnance, watching as the disputed election drags on. The principles at stake matter, yet the media gives them short shrift. It’s why, even if libertarians are kept from debates and underreported, going forward I will more openly support their positions and ideas. Democracy itself was once only the germ of an idea into which flesh and blood breathed life.

However far from current policy some of their positions may seem, libertarians offer proposals that honor the agency of every citizen. They are filled with possibility and hope.

As Jorgensen laid out on her website, the War on Drugs has long been racist and destructive. Americans have died in droves. Total deaths far exceed the deaths from covid-19, yet where is the focused plan of attack? We can’t mandate masks for that. And where is real reform of our criminal justice and prison systems? For decades we have seen bluster with little progress. Minority communities in particular continue to be devastated. And forget about serious immigration reform. Beyond the hype, nobody has made more than a dent. Then there’s the devastation of our environment along with our undeniable need for energy. Both major parties play games with environmental claims and data, leading to much distrust. Wind power, for example, looks good on paper, if you only compare it to the pollution from fossil fuels while ignoring its slaughter of birds and the replacement of the blades with short lifespans. Challenging to break down, those fields of gigantic blades don’t decompose. Yet Americans are inventive. By removing governmental barriers to entry, as Jorgensen proposes, small innovators and businesses, where the greatest innovation comes, will once again stand a fighting chance. They can meaningfully compete against corporations who now receive preferential treatment from the federal government.

Perhaps most important for the world of my grandchildren, I’ve been won over by the libertarian idea of neutrality, the belief that we, as a nation, have no business being imperialists. Humanitarian “interventionists,” assisting with aid, certainly. Americans have famously opened up their hearts when global disasters strike. But better to take Jorgensen’s position in my mind, to use Switzerland as our model, neutral and well armed, open to the world for trade and for tourism, while remaining secure in our defense. I have only to look around at our sons and daughters who served our military to see the cost of our decades of arrogance and folly. Our veterans’ brokenness, continually underserved by our government, remains a true national disgrace.

The list of differences I have with the major political parties is a long one, from allowing seizure of private property to regulating love. And while I’m well aware some of these positions can trigger outrage in many, are libertarian ideas really that improbable? Perhaps. In today’s environment, it’s a battle to be sure. But are they impossible to enact? Far from it. Though they are dangerous for those invested in the status quo.

Oscar Wilde once said, “An idea that is not dangerous is unworthy of being called an idea at all.”

In the aftermath of such a tumultuous and painful year in America, maybe it’s time to consider a new path.

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John Milton Explains Freedom of Speech

11/19/2020Gary Galles

Recently, I told my wife that the 2020 election follies made me think of John Milton. She commented that I may have been the only one in America to make that connection to the second most important author in the English language, after Shakespeare, best known for his poetry. After all, very little of this year’s politics has been poetic (though it could be argued to fit somewhere in Paradise Lost). I was thinking of Milton’s prose.

The primary reason is that well before America was founded, Milton famously argued for freedoms of speech and the press, and against censorship in England. His defense of freedom of conscience and religious toleration later powerfully resonated with America’s founders, as is most evident in the First Amendment to the US Constitution.

In contrast, we have of late been experiencing a widespread attack of censorship, which has not just limited citizens’ freedom of expression, but undermined Americans’ ability to inform themselves before voting for who will represent them. Because it originated with private actors rather than government, even though the intent was to dictate the government chosen, it was not a violation of the First Amendment. But the consequences of multiple powerful actors putting all of their thumbs on the same side of the scales they intended voters to use was, and remains, a serious threat to America. So it is worth remembering John Milton’s words on behalf of freedom of belief and expression, and their connection to our ability to discover truth.

  • Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties.
  • Truth….Let her and falsehood grapple.
  • Who ever knew Truth put to the worse in a free and open encounter?
  • Truth…needs no policies or stratagems…to make her victorious. These are the shifts and the defenses that error uses against her power.
  • There is no learned man but will confess he hath much profited by reading controversies—his senses awakened, his judgment sharpened, and the truth which he holds firmly established. If then it be profitable for him to read, why should it not at least be tolerable and free for his adversary to write…it follows then, that all controversy being permitted, falsehood will appear more false, and truth the more true; which must needs conduce much to the general confirmation of an implicit truth.
  • If it come to prohibiting, there is aught more likely to be prohibited than truth itself.
  • No institution which does not continually test its ideals, techniques and measure of accomplishment can claim real vitality.
  • When complaints are freely heard, deeply considered, and speedily reformed, then is the utmost bound of civil liberty obtained that wise men look for.
  • Knowledge forbidden? Suspicious, reasonless. Why…?
  • Truth and understanding are not such wares as to be monopolized.
  • When language in common use in any country becomes irregular and depraved, it is followed by their ruin and degradation. For what do terms…which are at once corrupt and misapplied, denote but a people listless, supine, and ripe for servitude?
  • How oft [have] nations gone corrupt…by their own devices brought down to servitude.
  • Discern…in what things persuasion only is to work.

Not only was Milton an important advocate for freedom to discover truth without artificial constraint, he was an influential defender of other liberties whose defense relies upon that discovery. America’s founding generation echoed him in several ways. In fact, one could say that is best reflected in the Declaration of Independence’s assertion of unalienable rights to “life, liberty and the pursuit of happiness,” which, while more famously connected to the thought of John Locke, can also be collapsed into the word liberty, as Milton used it, as our right to life is part of our liberty and our ability to pursue happiness is the result of liberty.

In contrast, much of what has been proposed by politicians this year has involved widespread invasions of our liberties, disguised by focusing only on those promises to give, without much mention of the corresponding unavoidable promises to take from others to do so. His words sharpen our ability to judge that deviation from the ideas that created America.

  • No man…can be so stupid to deny that all men naturally were born free, being the image and resemblance of God himself.
  • The whole freedom of man consists either in spiritual or civil liberty.
  • [God] created them free and free they must remain.
  • Liberty…who loves that, must first be wise and good.
  • None can love freedom but good men; the rest love not freedom, but license, which never hath more scope than under tyrants.
  • Nations grow corrupt, love bondage more than liberty.
  • [Those] with their freedom lost, all virtue lose.
  • Liberty of conscience…above all other things ought to be to all men dearest and most precious.
  • Liberty hath a sharp and double edge, fit only to be handled by just and virtuous men; to bad and dissolute, it becomes a mischief unwieldy in their own hands: neither is it completely given, but by them who have the happy skill to know what is grievance and unjust to a people, and how to remove it wisely; what good laws are wanting, and how to frame them substantially, that good men may enjoy the freedom which they merit, and the bad the curb which they need.
  • Love Virtue, she alone is free.
  • Is it just or reasonable, that…voices against the main end of government should enslave [those] that would be free? 
  • They who seek nothing but their own just liberty, have always right to win it and to keep it, whenever they have power, be the voices ever so numerous that oppose it.
  • Who can in reason then or right assume monarchy over such as live by right his equals, if in power or splendor less, in freedom equal?
  • The power of Kings and Magistrates is nothing else, but what is only derivative, transferred and committed to them in trust from the People, to the Common good of them all, in whom the power yet remains fundamentally, and cannot be taken from them, without a violation of their natural birthright.
  • It is lawful…for anyone who have the power to call to account a tyrant.

Americans have been major beneficiaries of John Milton’s literary blows for liberty against tyranny through his political impact on our founders. But this year’s dramatic violations of our freedom to seek the truth and express our views to one another, and its widespread proposals to violate other core liberties, show that heritage to be at serious risk. Revisiting Milton’s arguments in these areas is a good way to recognize the risks we have already been exposed to and their ominous implications for the future and a good source of reinforcement for the principles our country was founded upon. And at their heart is his conclusion that free we must remain.

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Why They Hate Judy

11/17/2020Doug French

Trump’s lady-in-waiting for the Federal Reserve, Judy Shelton, is losing Republican support by the day. The Washington Post unleashed its comeliest columnist, Catherine Rampell, to finish off Shelton, whose primary negative is her past support for the gold standard and her questioning the need for the central bank at all.

Adherents of the Austrian school of economics have been cuckoo for Shelton for those very reasons, but, Rampell describes the Fed nominee as “a demonstrably unqualified partisan quack.” 

Rampell claims a gold standard “might be popular among the right-wing fringe, but it was abandoned worldwide long ago and remains almost unanimously rejected by economists. For good reasons, including that gold prices are volatile. Linking the dollar to gold can also restrict liquidity when the economy needs it most—as happened during the Great Depression.”

She forgets: the Great Depression was inevitable given the boom the Fed created in the years before. “The Federal Reserve System launched a further burst of inflation in 1927,” wrote Hans F. Sennholz, “the result being that total currency outside banks plus demand and time deposits in the United States increased from $44.51 billion at the end of June 1924, to $55.17 billion in 1929. The volume of farm and urban mortgages expanded from $16.8 billion in 1921 to $27.1 billion in 1929. Similar increases occurred in industrial, financial, and state and local government indebtedness. This expansion of money and credit was accompanied by rapidly rising real-estate and stock prices. Prices for industrial securities, according to Standard & Poor's common stock index, rose from 59.4 in June of 1922 to 195.2 in September of 1929. Railroad stock climbed from 189.2 to 446.0, while public utilities rose from 82.0 to 375.1.” 

What were once referred to as panics, then depressions, and now recessions are the healing of the economy from inflationary and speculative booms, which lead to malinvestment and dangerous economic distortions. “The ensuing recession is a period of repair and readjustment. Prices and costs adjust anew to consumer choices and preferences,” explained Sennholz. 

As Ms. Rampell writes, today’s economists, trained in the modern Keynesian framework, believe corrections aren’t allowed and malinvestment should be enabled by cheap money forever, with the result being zombie companies wasting precious capital. Capitalism requires success and failure. A link from gold to the dollar keeps government and private business in check. 

“Shelton’s confirmation could represent a point of no return for corrupting the mission and functionality of the Fed,” writes Rampell, “and destroying whatever bipartisan resolve remained to not tank the economy for political gain.”

In his book Money of the Mind: Borrowing and Lending in America from the Civil War to Michael Milken, Jim Grant wrote, ”the pro-Federal Reserve System forces had promised to uphold the gold standard and to defend the new Federal Reserve notes against the well-observed tendency of government-backed currencies to depreciate.” 

Elihu Root, Republican senator from New York, spoke eloquently and at length against the Federal Reserve Act, with his primary argument being that the central bank could be inflationary. While it didn’t have to be, he insisted it would be. Fed proponents claimed the country would be fortunate to have an “elastic” currency. “Root retorted that it would rather be an ‘expansive’ one—all growth and no contraction,” Grant wrote. 

Senator Root was prescient beyond his dreams. Ms. Shelton might bring a tiny bit of historical wisdom to the arguments in the Eccles building.

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