Bake The Cake and Sell The Gun

Bake The Cake and Sell The Gun

03/06/2018Tho Bishop

At first I was quick to dismiss the lawsuit by a 20-year old Oregon man against Dick's Sporting Goods as another attempt at victimization for cheap exposure, but the details are more interesting than at first glance. The suit focuses on Dick's recent move to ban gun sales to customers under the age of 21, which the plaintiff argues goes against Oregon's laws on discrimination. This is the same law that was used against a Christian Oregon baker in a court case similar to the one now under the consideration of the Supreme Court

Many libertarians have criticized the Colorado's case before the Supreme Court for relying on the argument that the law restricts the bakers' first amendment right to expression and religion. In a libertarian society, the issue would simply be one of property rights — with the right of the baker to refuse service to any client he does not want to do business with. The problem, as Ryan McMaken has noted, is that public accommodation laws have effectively neutered the property rights of business owners in the eyes of the court. As such, for practicality sake, the bakers legal strategy may be his best hope at having the court side in his favor.

Dick's, of course, would have a hard time making that case, and the wording of the Oregon law seems to make this case a clear one. The law clearly states that discrimination based on age is illegal, and Oregon law protects the right of anyone over 18 to purchase and own a gun. 

Now that we have a case that involves the opposite end of a cultural battle, perhaps this will force the state of Oregon to re-evaluate its discrimination laws. 

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Don't Trust Cuban Health Care Statistics

1 hour agoRyan McMaken

We've long been told that Cuba's health care system is one of the greatest in the world. In spite of the fact that health usually correlates with wealth in national statistics, we're assured that Cuba's obvious poverty is offset, at least in part, by amazingly low infant mortality rates and life expectancy.

But in a new short article for the journal Health Policy and Planning, Gilbert Berdine, Vincent Geloso, and Benjamin Powell examine some of the ways that the data is being manipulated in Cuba to ensure better-looking health statistics.

For example, on the matter of infant mortality, doctors have been known to redefine dead infants as dead fetuses:

[There is] evidence that physicians likely reclassified early neonatal deaths as late fetal deaths, thus deflating the infant mortality statistics and propping up life expectancy. Cuban doctors were re-categorizing neonatal deaths as late fetal deaths in order for doctors to meet government targets for infant mortality.

Abortions of babies in utero who might die soon after birth is a tactic as well:

Physicians often perform abortions without clear consent of the mother, raising serious issues of medical ethics, when ultrasound reveals fetal abnormalities because ‘otherwise it might raise the infant mortality rate.’ ... At 72.8 abortions per 100 births, Cuba has one of the highest abortion rates in the world.

The focus on infant mortality may have led to increases in other types of mortality:

[T]hese outcomes come at cost to other population segments. The maternal mortality ratio of Cuba in 2015 was higher than in Latin American countries like Barbados, Belize, Chile, Costa Rica, Mexico and Uruguay ( Trends in Maternal Mortality 1990 to 2015, 2015). In terms of healthy life expectancy, Cuba ranked behind Costa Rica, Chile, Peru and Bermuda and marginally surpassed Uruguay, Puerto Rica, Panama, Nicaragua and Colombia

Some factors that have led to a more fit population have nothing at all to do with health care delivery:

[C]ar ownership is heavily restricted in Cuba and as a result the country’s car ownership rate is far below the Latin American average (55.8 per 1000 persons as opposed to 267 per 1000) (Road Safety, 2016). A low rate of automobile ownership results in little traffic congestion and few auto fatalities. In Brazil, where the car ownership rate is 7.3 times above that of Cuba, road fatalities reduce male and female life expectancy at birth by 0.8 and 0.2 years

Forced exercise helps:

[Another factor includes] forcing the population to increase their reliance on more physically demanding forms of transportation (e.g. cycling and walking) (Borowy, 2013). In fact, local physicians attribute a strong role to the massive introduction of bicycles in order to explain the decrease in traffic accidents mortality

So does making the population go hungry:

During the ‘Special Period’ (the prolonged economic crisis caused by the collapse of the Soviet Union), there were ‘sustained shortages in the food-rationing system’ that led to reductions in per capita daily energy intake (Franco et al. 2007). Combined with the increase in the levels of energy expenditures due to the reliance on physically demanding forms of transportation, this led to a reduction in net nutrition...this crisis led to the halving of obesity rates and, although one has to be careful in causal terms, this likely contributed to important reductions of deaths attributed to diabetes, coronary heart diseases and strokes (there were also increases in the number of cases of neuropathy).

As Berdine, et al point out, a key factor here is the unseen opportunity cost of mandating that more and more resrouces be directed toward health care at the expense of other sectors of the economy. Cuban central planners have decided that large amounts of national income be devoted to health care so as to improve (some) national indicators on health. But, given the choice, would Cubans choose to devote so much to health care?

Many advocates for government-directed health spending like to claim that health and longevity are the most important factors. But ordinary human behavior makes it clear this is not actually true. People routinely spend money on non-essentials like non-basic automobiles, large houses, and costly vacations when they could save that money for medical emergencies. Even in countries with so-called socialized medicine often have options for private supplemental health insurance — which would expand and improve quality of care for the purchaser. And yet few elect to use this option. Clearly, living as long as possible is only one value balanced against many others.

In light of this, can we conclude the Cuban government is hitting the "correct" amount of health care spending? Since each person's value ranking differs, this is obviously impossible.

Nevertheless, the Cuban healthcare system is clearly geared toward hitting certain goals arbitrarily set by government officials. This can lead to abuse, of course, and also to unreliable data.

RELATED: "Life Expectancy: If Denmark Were a US State, It Would Rank Equal To or Worse Than Sixteen US States

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Professor Israel Kirzner Receives Distinguished Fellow Award

Congratulations to Israel Kirzner who received the Distinguished Fellow Award from the History of Economics Society at its 2018 annual meetings held in Chicago this past weekend. The Society confers the honor of “Distinguished Fellow” on “those who have contributed a lifetime of study to the history of economics.”  In receiving this honor, Professor Kirzner, one of the most illustrious representatives of the modern Austrian school,  joins a roster of eminent economists including Friedrich Hayek, George Stigler, Lionel Robbins, Don Patinkin, and Joseph Dorfman among others.  Kirzner’s book The Economic Point of View: An Essay in the History of Economic Thought, which was based on the Ph.D. dissertation he wrote under Ludwig von Mises, remains the best history of the transformation of economics from a study of the causes of material wealth to the science of human action. 

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Forget the Human Rights Council, Why Not Leave the Entire UN?

4 hours agoTho Bishop

Trump Administration recently announced that the US will withdrawal from the United Nations Human Rights Council. Their justification is that the council consists of human rights violators, such as Cuba, China, and Venezuela, and has demonstrated a bias against Israel.

UN Ambassador Nikki Haley took to the pages of the Wall Street Journal to further expand on the decision, writing:

After more than a year of unsuccessful efforts to fix these fundamental defects, the U.S. delegation announced Tuesday our withdrawal from the council. Our country will no longer be party to this deeply flawed institution, which harms the cause of human rights more than it helps it....

In the end, our allies’ case for the U.S. to stay on the council was actually the most compelling argument to leave. They said American participation was the last shred of credibility left in the organization. But a stamp of legitimacy on the current Human Rights Council is precisely what the U.S. should not provide.

Of course the exact same logic could be used to advocate the United States from pulling out of the UN entirely.

The UN’s website outlines the five core missions for the organization. These include:

  • Maintain International Peace and Security
  • Protect Human Rights
  • Deliver Humanitarian Aid
  • Promote Sustainable Development
  • Uphold International Law

Its failure to maintain international peace and security is obvious, though obviously the United States raising that objection would open America to deserved ridicule. The failure of the United Nations, however, to restrain fifteen years of US militarism points to the inherent weakness of the organization.

The disastrous human rights record of the UN also goes deeper than the criticism of the HRC. While, again, it’s not surprising for the US government being hesitant in raising particular objections, in recent years the UN has witnessed member countries resurrect widespread torture programs and help foster an active slave market in Libya.

As Lucy Wescott wrote in Newsweek, international human rights organizations have been vocal in questionining the usefulness of the UN:

The U.N. remains vulnerable after a number of governments have stopped it from preventing mass atrocities, including wars in Syria and Yemen. Syria is an example of “a systematic failure of the U.N. to fulfill its vital role in upholding rights and international law and ensuring accountability,” according to the report.

“[The U.N. is] certainly an organization that is creaking at the seams, that was designed for the 20th century,” Richard Bennett, head of Amnesty International’s U.N. office, tells Newsweek. “ There are questions about whether it’s fit for purpose in the 21st century.”

While the UN does manage to carry out some humanitarian aid missions, these too are plagued with expected problems of a vast international bureaucracy. The organization’s own estimates place the rate of fraud at 30%, but even those numbers understate the bleak reality that the biggest winners of the UN’s programs tend to be government officials who are the most to blame for international poverty.

William Easterly, co-director of New York University’s Development Research Institute, has written on how the United Nation's humanitarian model gets everything wrong:

[The UN swoops] into third-world countries and offer purely technical assistance to dictatorships like Uganda or Ethiopia on how to solve poverty.

Unfortunately, dictators’ sole motivation is to stay in power. So the development experts may get some roads built, but they are not maintained. Experts may sink boreholes for clean water, but the wells break down. Individuals do not have the political rights to protest disastrous public services, so they never improve. Meanwhile, dictators are left with cash and services to prop themselves up–while punishing their enemies.

This same top down approach underscores the failures of the UN’s “sustainable development” objective as well. Unsurprisingly, the inherent fallacies of economic central planners don’t vanish when executed by a vast international organization. Instead, we have bad economic policy, usually backed by Malthusian fearmongering, empowering globalist bureaucrats who aspire to one day be able to impose direct taxes on sovereign countries.

For those reasons and more, Trump should do what he does best and disrupt the status quo by pulling the US out of the UN and evict the organization from New York City. Then, if he wants to actually succeed where the UN has failed, he’d find a way to make his truly free trade zone happen. After all, nothing is better for peace, development or human rights as the wonders of international trade.

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EU Trade Hypocrisy, in Two Charts

9 hours agoDaniel Lacalle

The hypocrisy of the EU in two images.

“EU to impose duties on U.S. imports Friday after Trump tariffs”...

Really?

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From Daniel Lacalle's Twitter @dlacalle_IA

Related: 

Global Reaction to Trump’s Tariffs Highlights the Myth of the “Era of Free Trade” by Tho Bishop

Must Free Trade Be Reciprocal? by Frédéric Bastiat

Free Trade versus "Free Trade" by Peter Klein

 

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Republicans are Reasonable to Prefer Kim Jong Un to Nancy Pelosi

06/20/2018Tho Bishop

In a constantly changing media landscape, the value of the shock political poll continues to stand the test of time. Whether it comes in the form of man-on-street interviews, or the slightly more scientific polling firm, seeing a surprising number of Americans give their support to an outlandish position is an evergreen idea to spawn clickable blog posts and perhaps even a spot on Drudge Report. Going beyond the obvious question of why, given the state of American politics, anyone continues to find humorous outcomes from these quasi-ballots is that sometimes they actually reveal a valuable insight about the public as a whole.

My personal favorite example was the 2015 PPP poll that found that 30% of the Republican base – including 41% of Trump supporters – endorsed bombing Agrabah, the country featured in Aladdin. Considering that online trolls were a natural core group of the Trump base, it’s fair to question the sincerity of the widely mocked poll’s findings. It does, however, correlate to another trend we see in public polling on military action. The Washington Post, for example, has found that Americans are more likely to support bombing a country if they couldn’t identify it on the map:

Does it really matter whether Americans can put Ukraine on a map? Previous research would suggest yes: Information, or the absence thereof, can influence Americans’ attitudes about the kind of policies they want their government to carry out and the ability of elites to shape that agenda….

The further our respondents thought that Ukraine was from its actual location, the more they wanted the U.S. to intervene militarily.

Given that, it’s not unreasonable to think that many Republicans really don’t mind attacking some random country with a vaguely Arab name. This would explain how some politicians still manage to find public favor, in spite of always being on the wrong side of history on matters of war.

Another valid insight couched in a poll shared for humor was an IPSOS poll that found Republicans have a more favorable view of Nancy Pelosi than North Korean dictator Kim Jong Un. Pelosi’s office naturally used the story to attack Trump supporters, with her spokesman telling The Hill:

On a daily basis, President Trump praises this dictator and thug so it only makes sense that his party is following his lead like lemmings over a cliff.

To be fair, the poll only compared generic favorability/unfavorability measurements to various other figures polled, with Pelosi only being seen a slightly less favorable to Kim. That being said, it would be reasonable for more Republicans – or Americans broadly – to find Pelosi a greater threat to their livelihood to than Trump’s latest bromance.

After all, for all the warnings about North Korea and its nuclear arsenal, the danger of it being wielded against American citizens is about as valid as fears about Saddam Hussein. Meanwhile Pelosi, and the rest of Washington for that matter, poses a very real threat to the life, liberty, and property of Americans on every day. While earnest human rights activists would undoubtedly point to the repulsive horrors of the Kim regime, Pelosi’s support for the Iraq War and other American escapades makes it difficult to defend her on even broad utilitarian grounds.

So yes, any American would be justified in hating Nancy Pelosi or just about any other politician in Washington. At least Kim has agreed to shake the hand of peace, something Congress is entirely unwilling to even consider.  

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Eric Holder's Gross Hypocrisy on Police Shootings

06/19/2018James Bovard

Attorney General Eric Holder arrives today in Ferguson, Missouri, in response to the unrest after a local policeman shot 18-year-old Mike Brown. Holder assured the people of Missouri: "Our investigation into this matter will be full, it will be fair, and it will be independent."

But Holder's own record belies his lofty promise. As the U.S. Attorney for the District of Columbia from 1993 to 1997, Holder was in charge of policing the local police. When police violence spiraled out of control, he did little to protect Washington residents from rampaging lawmen.

The number of killings by Washington police doubled between 1988 and 1995, the year 16 civilians died due to police gunfire. Washington police shot and killed people at a higher rate than any other major city police department, as a Pulitzer Prize-winning Washington Post investigation revealed in late 1998. The Post reported that "Holder said he did not detect a pattern of problematic police shootings and could not recall the specifics of cases he personally reviewed." Holder declared: "I can't honestly say I saw anything that was excessive."

There was such a dearth of oversight from Holder's office that Washington police failed to count almost a third of the people killed by their officers between 1994 and 1997. Even when police review boards ruled that shootings were unjustified or found contradictions in officers' testimony, police were not prosecuted. In one case, a police officer shot a suspect four times in the back when he was unarmed and lying on the ground. But Holder's office never bothered interviewing the shooter.

Some of the most abusive cases involved police shooting into cars - a practice which is severely discouraged because of the high risk of collateral damage. Holder told the Post: "I do kind of remember more than a few in cars. I don't know if that's typical of what you find in police shootings outside Washington" Actually, "more than 50 officers over five years had shot at unarmed drivers in cars," the Post noted, and Washington police were more than 20 times as likely to shoot at cars than were New York City police. Reports about some of the shootings were tainted by police perjury.

Shortly after Holder became U.S. attorney, a local judge slammed the Washington government for its "deliberate indifference" to police brutality complaints.

Read the full article at the USA Today

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What Should Politically Vanquished People Do?

06/19/2018Jeff Deist

What should politically vanquished people do? Should they resist the political status quo no matter what, or accept it in the spirit of civil comity and bide their time for the next election? What if their political fortunes are waning, and they are ever less likely to prevail politically? What rights and power do seemingly permanent political minorities (e.g. libertarians) possess? At what point is open rebellion permitted in a supposed democracy, and how do we judge principled resistance as opposed to sour grapes from political losers?

Furthermore, what can political majorities rightfully do-- in spite of a minority's strident opposition-- and what policies cannot be altered regardless of majority consensus? What spoils rightfully belong to political victors, and what longstanding rules should not be upended?

These are uneasy questions in the Age of Trump, especially since western governments long ago abandoned constitutional restraints and the cliched "rule of law" in favor or administrative governance by bureaucratic managers. Democracy, at least the mass variety practiced in modern western welfare states, provides no satisfactory answers. Are those unelected managers bound by popular will, or much of anything? What restrains the state?     

Ludwig von Mises, a robust social theorist in addition to his staggering work in economics, saw these issues clearly. Despite--or perhaps because-- he witnessed the ravages of actual combat in the Great War, he chose to use the language of warfare in describing the plight of political minorities: 

It was liberalism that created the legal form by which the desire of the people to belong or not to belong to a certain state could gain expression, viz., the plebiscite. The state to which the inhabitants of a certain territory wish to belong is to be ascertained by means of an election. But even if all the necessary economic and political conditions (e.g., those involving the national policy in regard to education) were fulfilled in order to prevent the plebiscite from being reduced to a farce, even if it were possible simply to take a poll of the inhabitants of every community in order to determine to which state they wished to attach themselves, and to repeat such an election whenever circumstances changed, some unresolved problems would certainly still remain as possible sources of friction between the different nationalities. The situation of having to belong to a state to which one does not wish to belong is no less onerous if it is the result of an election than if one must endure it as the consequence of a military conquest... To be a member of a national  minority always means that one is a second-class citizen.  (italics added)

The almost unbelievable rancor surrounding the Trump administration demonstrates precisely how little even rich westerners really revere democracy when they don't like its results. Anti-Trump forces indeed consider themselves conquered, feeling suddenly like second-class citizens in a country they thought they knew (one where an inevitable "progressive" arc would of course elect Ms. Clinton). They don't accept Trump any more than they would accept the head of a hostile and occupying foreign power. But rejecting the outcome of elections is strange position for Clinton supporters, a candidate who frequently gushed about "our sacred democracy."

The same can be said for the Brexit referendum in the UK and rising anti-immigration sentiment across continental Europe-- both pilloried as sinister and ill-intentioned populism as opposed to noble expressions of "the people" exercising their democratic rights. But populism is just democracy delivered good and hard, and technocratic administrators are correctly portrayed as gross hypocrites who use the veneer of democratic support only when it bolsters what they plan to do anyway. 

Democracy, far from yielding compromise and harmony, pits Americans against each other while creating a permanent bureaucratic class. All of this is understandable and predictable from a libertarian perspective. Only libertarians make the consistent case against democratic mechanisms, and consider freedom from state power as far more important than majority consensus. Freedom isn't up for a vote, as the hopeful saying goes. Liberty-- properly understood as nothing more and nothing less than freedom from the state-- is the highest political end.

But we don't live in a free world, and most people are not ideological libertarians. Most people, though far less thoughtful, are (small d) democrats like Mises himself. In the interwar years, following the collapse of European monarchies and the rise of Nazism in Germany, Mises saw democracy as nothing short of the societal mechanism for avoiding further wars and bloodshed:

Democracy is that form of political constitution which makes possible the adaptation of the government to the wishes of the governed without violent struggles. If in a democratic state the government is no longer being conducted as the majority of the population would have it, no civil war is necessary to put into office those who are willing to work to suit the majority. By means of elections and parliamentary arrangements, the change of government is executed smoothly and without friction, violence, or bloodshed. 

Nearly 100 years later we might wonder if he would still write those words today, having seen the 20th and now 21st centuries unfold. In hindsight they seem unduly optimistic. We'll never know, of course. and even the most doctrinaire anarchist can admit democracy played a part in the success of America and the West.

But there have been both literal and figurative casualties along the way, and more will become apparent in the coming decades. The elite western consensus, favoring globalism, a vague "neoliberalism," and social democracy will butt up against nationalist and breakaway impulses. Whether "democracy" will be permitted when it goes against elite sentiment is very much an open question, and people are not so easily fooled that globalist projects are in any way democratic.  

It's vitally important to understand that Mises saw self-determination as the highest political end, and thus strongly argued against universalism and in favor of political subdivision wherever needed and feasible. Reordering political arrangements by creating smaller units, or abandoning them altogether via secession, was Mises's answer to the question of how political minorities could be protected. Breakaway movements were the safety valve in Mises's conception of democracy:

The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions and civil and international wars. 

At some point Americans of all ideological stripes have to ask themselves a question: if one really believes 30 or 40 or 50 percent of the population is beyond redemption, utterly immoral, stupid, fascist, racist, or communist, what should be done? Should they be killed? Deported? Herded into camps? Re-educated against their will until they vote correctly? Forced into low-caste status, politically, socially, and economically? Tolerated, but punished in future elections? 

Or should we listen to Mises, and elevate political separation, federalism, and localism to the highest political principles?

Top-down rule from DC isn't working, and in fact it's making people miserable and ready to think unthinkable thoughts about civil war. Pro-Trump and anti-Trump sentiment is destroying social cohesion, the real "law" in any society. And for what? Miniscule policy differences between two parties that will never lift a finger against war, state power, entitlements, or the Fed? 

It takes 70 million votes to control the White House, and the (deep) administrative state may be beyond the reach of even an overwhelming political majority. No matter where you sit ideologically, the risk of becoming a marginalized political minority grows as state power grows. It is time to stop trying to capture DC and start talking about realistic breakaway or federalist solutions, even under the umbrella of an ongoing federal state. The elections of 2018 and 2020 won't settle our problems, but only make them worse. At least 50 or 60 million Americans, a group far larger than most countries, will be politically disenfranchised and ruled by a perceived hostile government no matter what candidates or parties prevail.

If breaking up seems unthinkable, so does civil war. Is it written in stone that 330 million people must live under one far-flung federal jurisdiction, no matter what, forever?

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Inflation: Its Cultural and Political Consequences

Dr. Guido Hulsmann joined the Tom Woods show last week to discuss his work on the cultural and political consequences to inflation - a subject often neglected by most economists. 

To read more about Dr. Hulsmann's work on the topic, check out his book The Ethics of Money Production

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Why Can't We Sue the TSA For Assault?

06/18/2018Ron Paul

When I was in Congress and had to regularly fly between DC and Texas, I was routinely subjected to invasive “pat-downs” (physical assaults) by the Transportation Security Administration (TSA). One time, exasperated with the constant insults to my privacy and dignity, I asked a TSA agent if he was proud to assault innocent Americans for a living.

I thought of this incident after learning that the TSA has been compiling a “troublesome passengers” list. The list includes those who have engaged in conduct judged to be “offensive and without legal justification” or disruptive of the “safe and effective completion of screening.” Libertarian journalist James Bovard recently pointed out that any woman who pushed a screener’s hands away from her breasts could be accused of disrupting the “safe and effective completion of screening.” Passengers like me who have expressed offense at TSA screeners are likely on the troublesome passengers list.

Perhaps airline passengers should start keeping a list of troublesome TSA agents. The list could include those who forced nursing mothers to drink their own breast milk, those who forced sick passengers to dispose of cough medicine, and those who forced women they found attractive to go through a body scanner multiple times. The list would certainly include the agents who confiscated a wheelchair-bound three-year-old’s beloved stuffed lamb at an airport and threatened to subject her to a pat-down. The girl, who was at the airport with her family to take a trip to Disney World, was filmed crying that she no longer wanted to go to Disney World.

The TSA is effective at violating our liberty, but it is ineffective at protecting our security. Last year, the TSA’s parent agency, the Department of Homeland Security (DHS), conducted undercover tests of the TSA’s ability or detect security threats at airports across the country. The results showed the TSA staff and equipment failed to uncover threats 80 percent of the time. This is not the first time the TSA has been revealed to be incompetent. An earlier DHS study fund TSA screenings and even the invasive pat-downs were utterly ineffective at finding hidden weapons.

The TSA’s “security theater” of treating every passenger as a criminal suspect while doing nothing to stop real threats is a rational response to the incentives the TSA faces as a government agency. If the TSA puts up an appearance of diligently working to prevent another 9/11 by inconveniencing and even assaulting as many travelers as possible, Congress will assume the agency is doing its job and keep increasing the TSA’s budget. Because the TSA gets its revenue from Congress, not from airline passengers, the agency has no reason to concern itself with customer satisfaction and feels free to harass and assault people, as well as to make lists of people who stand up for their rights.

Congress should end the TSA’s monopoly on security by abolishing the agency and returning responsibility for security to the airlines. The airline companies can contract with private firms that provide real security without treating every passenger as a criminal suspect. A private security firm that assaults its customers while failing to detect real dangers would soon go out of business, whereas the TSA would likely have its budget and power increased if there was another attack on the US.

If shutting down the TSA is too “radical” a step, Congress should at least allow individuals to sue TSA agents for assault. Anyone who has suffered unfair treatment by the TSA as a result of being put on the “troublesome passengers” list should also be able to seek redress in court. Making TSA agents subject to the rule of law is an important step toward protecting our liberty and security.

Reprinted with permission.

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Texas's Gold Depository — A "Bank" For Gold-Based Money — Has Now Opened

06/18/2018Ryan McMaken

In 2015, the Texas State government announced plans to create a "gold depository." At the time, we reported this could be a significant step toward wider use of gold and silver as legal tender by essentially creating a parallel banking system based on precious metals. 

The basic idea has always been simple: create a place where gold and other precious metals could be stored. The implications, however, are for far ranging in that over time, such an institution has the potential to function as a bank that could potentially offer the ability to facilitate the use of gold as money.

Existence of the depository opens up the possibilities for users creating a new type of currency in which purchases are made electronically with the backing of the gold in the depository. In other words, one could potentially use the depository's infrastructure to make purchases using gold, and to have gold either directly deposited into another's account, or converted to US dollars and deposited in a conventional bank. Arguably, this is just an electronic version of gold-backed money.

And now the Texas Bullion Depository has opened for business. The Ft Worth Star-Telegram reports :

The Texas Bullion Depository opened in Austin Wednesday, three years after state lawmakers signed off on creating an official place for people to store their gold and other precious metals.

“We’re proud that the nation’s first state-administered bullion depository is now a reality — this is a big day for Texans who want to secure their precious metal assets,” said Texas Comptroller Glenn Hegar , who became the depository's first customer this week. “I deposited some gold."

The article notes that gold deposits are verified and insured.

Although administered by the State of Texas, the depository is significant as an institution that provides a means of storing what are potentially highly liquid assets outside the US banking system regulated by the Federal Reserve and the US federal government.

Moreover, as the article notes,

Financial institutions, cities, school districts, businesses, individuals — even other countries — could do business with the depository.

The depository is funded by fees, and in a normal world, this might act as a significant disincentive to using the depository's services. But in a world of enduring near-zero interest rates, the opportunity cost of not keeping money in a bank has become especially low. If banks were paying, say, three percent on savings accounts, cash would look a lot more lucrative. But when banks won't pay even one percent on deposits, you're not missing out on much by putting some wealth in the form of gold into a depository.

Response to the depository in the media has been generally muted outside Texas, although New York lawyer Joe Patrice did see the implications of the depository, and emotionally condemned the idea , claiming that it violated the so-called "supremacy clause" of the US Constitution. Couched placed between several insults directed at Texans, Patrice writes:

Though this does bring us to the actual reason for the bill: a symbolic gesture to convince morons that Texas is an independent realm...Having their own money bin and currency system — writing checks based off stockpiled metals creates, for all intents and purposes, an independent, gold-backed currency — goes a long way toward fluffing the illusion that Texas holds sway over the rest of America.

Of course, the depository doesn't violate any provision of the Constitution, and invoking the phrase "supremacy clause" is just the usual M.O. of people who don't want anyone doing anything anywhere without the explicit approval of the federal government.

If anything, with the depository, Texas is moving in the direction mandated by the US Constitution in which, as Bill Greene notes at mises.org, contains a negative mandate in which “No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Not that something is necessarily good because the US Constitution says so. The Constitution was, after all, primarily adopted to increase the power of the federal government. That's why the anti-federalists opposed it.

The state legal tender provision, however, reflects the 18th-century wisdom that government money unmoored to commodity money empowers governments at the expense of ordinary people.

It will be interesting to follow the Texas experience in this regard and see what effect, if any, it has on other state legislatures that have also expressed interest in expanding the use of gold and silver as legal tender. We have already seen a number of states, including Arizona, Idaho, Utah , and Wyoming.

The biggest potential downside, of course, is the risk of the federal government outlawing and seizing gold as it did in the 1930s. 

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