The Fed's Brilliant Plan? More Inflation and Higher Prices

The Fed's Brilliant Plan? More Inflation and Higher Prices

09/08/2020Ron Paul

Listen to the Audio Mises Wire version of this article.

Federal Reserve chairman Jerome Powell recently announced that the Fed is abandoning “inflation targeting,” where the Fed aims to maintain a price inflation rate of up to 2 percent. Instead, the Fed will allow inflation to remain above two percent to balance out periods of lower inflation. Powell’s announcement is not a radical shift in policy. It is an acknowledgment that the Fed is unlikely to reverse course and stop increasing the money supply any time soon.

Following the 2008 market meltdown, the Fed embarked on an unprecedented money creation binge. The result was historically low interest rates and an explosion of debt. Today total household debt and business debt are each over $16 trillion dollars. Of course, the biggest debtor is the federal government.

The explosion of debt puts pressure on the Fed to keep increasing the money supply in order to maintain low interest rates. An increase in rates to anything close to what they would be in a free market could make it impossible for consumers, businesses, and (especially) the federal government to manage their debt. This would create a major economic crisis.

The Fed has also dramatically expanded its balance sheet since 2008 via multiple rounds of “quantitative easing.” According to Bloomberg, the Fed is now the world’s largest investor and holds about one-third of all bonds backed by US home mortgages.

Congress has expanded the Fed’s portfolio by giving the central bank authority to make trillions of dollars of payments to business as well as to state and local governments in order to help the economy recover from the unnecessary and destructive lockdowns.

Contrary to what most “mainstream” economists claim, a general increase in prices is an effect—not a cause—of inflation. Inflation occurs whenever the central bank creates money. Increasing the money supply lowers interest rates, which are the price of money, distorting the market and creating a bubble (or bubbles) that provides the illusion of prosperity. The illusion lasts until the inevitable crash. Since the distortions come from money creation, the system cannot be “fixed” by just requiring the Fed to adopt a “rules-based” monetary policy.

Once the lockdowns end, the Fed’s actions may lead to a short-term boom. However, the long-term effect will be even more debt, continued erosion of the average American’s standard of living, and the collapse of the fiat money system and the welfare-warfare state. The crisis will likely be brought on by a rejection of the dollar’s reserve currency status. This will be supported both by concerns about the stability of the US economy and resentment over America’s hyperinterventionist foreign policy.

The question is not if the current system will end. The question is how it will end.

If the end comes via a meltdown, the result will likely be chaos, violence, and increased support for authoritarian movements as desperate people trade their few remaining liberties in hopes of gaining security.

However, if proliberty Americans are able to force Congress to begin cutting spending—starting with the money wasted on militarism—and to move toward restoring a sound and sane monetary policy that includes ending the Federal Reserve, we can minimize an economic crisis and begin restoring limited constitutional government, a free market economy, and respect for liberty.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

Why Democracy Cannot Protect Our Freedoms

53 min agoGary Galles

As has become typical for years divisible by four, we are well into the high-intensity portion of the various "must vote" campaigns. Both parties push that as a bipartisan narrative, even though each side focuses their message mainly toward getting more of "their people" to vote. But while that pattern has become "same old, same old," there has been a change in the pitch. While "this is what democracy is all about" arguments once focused almost exclusively on getting out the vote, there has been a sharp rise in assertions that "and we should have democracy everywhere (we think we would win)," where everything should be determined by some majority vote.

That complementary theme changes things considerably, as there is a big difference between choosing who will best do the enumerated job spelled out, and limited, by the Constitution, and turning everything over to current majority politics together with efforts to get out "our" vote on every front. For instance, the Bill of Rights was designed to protect Americans' rights from abuses by the government, but if those rights can be overturned by some transient political majority (especially when such a majority can be newly created by electoral "reforms"), one of the most important reasons for American greatness—that is, greatness in protecting Americans—would disappear.

However, this trend is not new, just accelerating, which means there may be earlier wisdom available on the topic. And we are fortunate that Foundation for Economic Education creator Leonard Read considered this issue in chapter 9 of his 1964 book, Anything That's Peaceful.

Read began with The Columbia Encyclopedia's statement that “the existence of only two major parties…presupposes general public agreement on constitutional questions and on the aims of government.” He highlighted that fact as "fundamental," because only under such circumstances can we rely on one of the two major parties to check the abuses of the other.Without that circumstance, one party need not check the others' abuses, and, in fact, government abuse can easily be bipartisan. It is worth following Read's argument.

The two-party system presupposes a general agreement on constitutional questions and the aims of government and aims at, if it does not presuppose, honest candidates contending for office within the framework of that constitution…each office seeker is supposed to present fairly his own capabilities as related to the agreed-upon framework, voting being for the purpose of deciding which candidate is more competent for that limited role.

Clearly, the theory as originally conceived did not intend that the positions of candidates should [concern]…the content or meaning of the constitution and the aims of government.

If there were "a general public agreement on constitutional questions and on the aims of government," and if candidates were vying with each other for office solely on their competency to perform within this framework, I would have no comment. But there is little contemporary agreement as to constitutional questions and the aims of government! Name a point that can now be presupposed.

[Politicians] no longer contend with each other as to their competence to serve within a generally accepted framework but, instead: (1) they compete to see which one can come up with the most popular alteration of the framework, and (2) they compete to see which one can get himself in front of the most popular voter grab bag in order to stand foursquare for some people's supposed right to other people's income.

[But] the role of the legislator is to secure our rights to life, liberty, and property," and such "Principles do not permit of compromise; they are either adhered to or surrendered.

Voting is deeply embedded in the democratic mores as a duty….Yet any person who is conscious of our rapid drift toward the omnipotent state can hardly escape the suspicion that there may be a fault in our habitual way of looking at things.

Government in the U.S.A. has been pushed far beyond its proper sphere. The Marxian tenet, "from each according to ability, to each according to need," backed by the armed force of the state, has become established policy….Within this kind of political framework, it is to be expected that one candidate will stand for the coercive expropriation of the earned income of all citizens, giving the funds thus gathered to those in groups A, B, and C. Nor need we be surprised that his opponent differs from him only in advocating that the loot be given to those in groups X, Y, and Z. Does responsible citizenship require casting a ballot for either of these political plunderers? The citizen has no significant moral choice but only an immoral choice in the event he has joined the unholy alliance himself and thinks that one of the candidates will deliver some of the largess to him or to a group he favors…the problem is not one of responsible citizenship but of irresponsible looting.

Does responsible citizenship require voting for irresponsible candidates? To ballot in favor of irresponsible candidates as though it were one's duty is to misconstrue the meaning of duty.

Americans…have some abhorrence of forcibly taking from the few and giving to the many without any sanction whatsoever. That would be raw dictatorship. But few people with this propensity feel any pangs of conscience if it can be demonstrated that "the people voted for it"….And, as government increases its plundering activities, more and more citizens "want in" on the popular say-so.

Read then turns to Frederick Bastiat's The Law, for its insights into how the purposes governments pursue influence voting:

If law were restricted to protecting all persons, all liberties, and all properties; if law were nothing more than the organized combination of the individual's right to self-defense; if law were the obstacle, the check, the punisher of all oppressions and plunder—is it likely that we citizens would then argue much about the extent of the franchise?

Under these circumstances, is it likely that the extent of the right to vote would endanger that supreme good, the public peace?

If the law were confined to its proper functions, everyone's interest in the law would be the same. Is it not clear that, under these circumstances, those who voted could not inconvenience those who did not vote?

In summary, Read argues that the traditional defense of democratic voting in our Constitutional republic is that it defends its principles, but instead, "[Our] two-party, ballot-casting system…no longer presupposes any agreement on constitutional questions and the aims of government." And he provides us with and apt warning:

If it be conceded that the role of government is to secure "certain unalienable rights, that among them are the right to life, liberty, and the pursuit of happiness," by what stretch of the imagination can this he achieved when we vote for those who are openly committed to unsecuring these rights?

When commenting, please post a concise, civil, and informative comment. Full comment policy here

There Really Is Nothing Smart about Joe Biden


The big winner of last night’s presidential debate may have been H.L. Mencken, as his opinion of democracy seemed to be embraced by Americans all across the nation.

On one side you had President Trump staying true to his WWE persona, unlike his milder first performance four years ago with President-Assumed Hillary Clinton. On the other, you had Joe Biden, whose combination of short temper and low energy makes him resemble a disappointing Chinese firecracker. In the middle, you had Chris Wallace reduced to begging the participants to follow the rules of the whole affair.

Nothing of real substance was discussed, of course. We still do not know if Joe Biden stands with the mainstream of his party when it comes to stacking the courts and eliminating the senate filibuster (though we can be confident that his opinion on the subject would matter, even if elected). We do not know if President Trump recognizes the fragility of the debt-fueled economic recovery, though in the eyes of Chris Wallace this is “free market ideology.” We do not know if anyone watching these debates is even capable of having their mind changed, or whether the goal is simply to not discourage any would-be supporter from mailing in a ballot (or two).

We do however know two things: people are recognizing the failures of American democracy, and there really is nothing smart about Joe Biden.

The first point is important. First of all, the act of “recognizing” a problem does not mean that the problem is a new one.

While the media will predictably spin last night’s circus as the latest example of Donald Trump embarrassing the presidency, the truth is that presidential debates have long been farces. The 2012 debates were defined by an inaccurate fact check by Serious Journalist Candy Crowley and the phrase “binders full of women” taken out of context. Prior to that, SNL skits ended up doing more for framing candidates than any debate performance (perhaps the decline of SNL is the real tragedy in American politics).

The superficial nature of presidential elections may not be a new phenomenon, but it is worth noting that this was not always the state of American politics. Once upon a time, party platforms offered substantive analysis of important issues and candidates were expected to have an operational understanding of serious questions. During the election of 1896, for example, the gold standard was such a prominent election issue that it was featured prominently in both campaign literature and candidate posters.

Unfortunately, there tends to be an inverse relationship between democratization and serious political campaigns. In much the same way that products intended for mass consumption on the marketplace tend to be of lesser quality than those of specialty niche stores, a political system based on who can convince simply the majority of American adults to vote for them can resemble an intellectual race to the bottom.

This is not true with every election, however. For example, the single issue of school choice was found to have had a decisive impact in Florida’s 2018 gubernatorial election. Studies found that Republican Ron DeSantis won 18 percent of the female black vote, even while running against what would have been the first black governor of the state. The recognition that Andrew Gillum’s defense of traditional state schooling would have a direct impact on the quality of their children’s education was enough to transcend a lot of the typical tribalist instincts that tend to shape national politics.

For those interested in improving governance in America, this is a strong argument in favor of decentralizing democracy. (For those not interested in improving governance, there is another option.)

The second point may seem petty, but it's also important—Joe Biden is an example of the sort of mediocre talent rewarded by the current political system. Prior to his 47-year career in elected office, he had a brief career as a lawyer with the ambitions of being elected senator and president. To achieve those ends, he falsified his resume to appear far more talented than he was.

His record in the Senate was significant, but he has spent most of his presidential campaign running against the positions he once had. Understandably so. His history of prior presidential runs did more for television comedians than his own legacy. His greatest asset was his relationship with Barack Obama, though much of the Democratic Party is far to the left of the former president. His instincts are so good that he picked for vice president someone who appears to be a true sociopath and is the elected Democrat who has made the most personal attacks on his record.

Of course, none of this matters to Biden true believers who seem to view the former vice president as a shortcut to reviving the nostalgia of the fictional West Wing. The alliance of former Bush and Obama administration officials wants voters to believe that Biden is a return to normalcy.

These are the very same people that mock red America for being gullible.

Image source:
Gage Skidmore | Flickr |
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Did the Fed Really Ask for Fiscal Support?

09/29/2020Robert Aro

In testimony before the US House of Representatives on Tuesday, Chair Powell noted economic challenges under covid, as well as supposed triumphs such as an increase in household spending “likely owing in part to federal stimulus payments and expanded unemployment benefits.”

That would be laudable if it weren’t free market interventionism:

We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.

His reference to “tools” refers to his self-declared “forceful actions” since March, which “helped unlock more than $1 trillion of funding” by:

implementing a policy of near-zero rates, increasing asset holdings, and standing up 13 emergency lending facilities. We took these measures to support broader financial conditions and more directly support the flow of credit to households, businesses of all sizes, and state and local governments…

We can look past what he told Congress to see that since mid-March, the M2 money supply and the balance sheet have both increased by about $3 trillion to $18.58 trillion and $7.06 trillion, respectively. Powell also provided updates on various lending programs, noting around $2 billion for loans to the Main Street Lending Program, nearly $13 billion for the Secondary Market Corporate Credit Facility (corporate bond/ bond-ETF) buying program, and $250 million for the municipal bond purchase program. To clarify, all this money didn’t exist in February, it is literally “new money” credited to various bank accounts across the country.

He touched on the lesser-known Term Asset-Backed Securities Loan Facility (TALF), mentioning how nearly $100 billion can still be lent, but just under $3 billion has been utilized to date. Of course, these funds are not for Main Street since the three-year loans are reserved for:

certain triple A-rated ABS [asset-backed securities] backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.

So just who exactly has been receiving the nearly $3 billion in TALF support? Powell didn’t say. However, when we review the monthly reports to Congress under TALF’s September 8, 2020 transaction-specific disclosures, we see that the aptly named Mackay Shields TALF 2.0 Opportunities Master Fund LP received $571 million from thirty-two loans, with an interest rate from 0.76 to 1.30 percent. Per the company’s website, Mackay Shields is a firm of 210 employees managing $134 billion in assets. The collateral pledged to the loans was commercial mortgages, student loans, and several small business loans under SBA 504, which is a “loan program that offers small businesses another avenue for business financing” according to the Small Business Administration’s website.

Looking deeper into the data other names, large asset managers and some overseas firms are mentioned; only one question remains:

What about BlackRock? We know they helped the Fed launch its corporate bond buying program; surely by now we can expect Wall Street to receive more than Main Street.

Also included in the report, they received seven loans totaling $113 million, with the same favorable interest rate of the Mackay Shields loans for commercial mortgages and, naturally, small business loans.

Now imagine BlackRock, having $7.32 trillion in assets under management and getting small business loans from a central bank! Meanwhile the man responsible appears before elected US officials and isn’t met with so much as any scorn, ridicule, or calls to resign. Yet who dares ask of the long-term effects of stimulating a semi–shut down economy with a money machine? As usual, some on Main Street get breadcrumbs while the richest companies in America get entire loaves of bread!

Regardless of what the Fed does or Powell says, does any of it matter to Congress? If it did, one would think they would have ended the Fed, especially by now. As if to prove the point, Powell delivers the coup de grace at the very end, saying that, despite their efforts,

Many borrowers will benefit from these programs, as will the overall economy, but for others, a loan that could be difficult to repay might not be the answer. In these cases, direct fiscal support may be needed.

We know we’re in trouble when central bankers are asking for fiscal stimulus. Where does the Fed think Congress will get the money if not from the Fed? Not many, if any, elected officials understand the origins of money. But what’s Powell’s excuse?

When commenting, please post a concise, civil, and informative comment. Full comment policy here

The Fed Has Decided the Phillips Curve Is Wrong after All

09/28/2020Robert Aro

Chairman Powell at the August 27 Jackson Hole symposium emphasized what he sees as the malleability of economic theory, noting that the apparent tradeoff between inflation and unemployment, known as the Phillips curve, hasn’t been working as once hypothesized. He alluded to an era when the curve allegedly worked better than it does now:

In earlier decades when the Phillips curve was steeper, inflation tended to rise noticeably in response to a strengthening labor market.

Strange, because for many decades Austrian economists raised concern about the theory, asserting that correlation does not equal causation. While Powell doesn’t acknowledge the efforts made by Austrians, he somewhat agrees. The framework used generations ago may no longer be relevant.

During the September 16 Federal Open Market Committee (FOMC) meeting, he noted the “new framework” and the move away from the unemployment/inflation tradeoff:

The good news is we think we can have quite low unemployment without raising troubling inflation.

This may sound new but Powell said almost the exact same words to Congress in July of last year:

I think we really have learned though that the economy can sustain much lower unemployment than we thought without troubling levels of inflation.

Vice Chair Clarida, in an August 31 statement, takes the idea one step further by appearing to rationalize the “flat curve” as reason to push for the importance of inflation expectations:

This is especially true in the world that prevails today, with flat Phillips curves in which the primary determinant of actual inflation is expected inflation.

Twentieth-century mainstream economists—until recently—have generally asserted that unemployment is a primary determinant of actual price inflation. But now that Fed economists have concluded the Phillips curve has flattened this can no longer be said. In our new era, “expected inflation” is the “primary determinant.” It's a vague term, but as Clarida explains, it can be “inferred from surveys, financial market data, and econometric models.” This approach hinges on the Fed influencing the market to instigate higher inflation which manifests itself into higher prices; a theory impossible to prove.

The following day Governor Lael Brainard similarly bent reality by referencing the “flat curve” to justify low interest rates:

With a flat Phillips curve and low inflation, the Committee would have to sustain the federal funds rate below the neutral rate for much longer in order to push inflation back to target sustainably.

At least she’s honest when affirming low rates are “conducive to increasing risk appetite, reach-for-yield behavior, and incentives for leverage” ultimately leading to more economic instability.

Finally, September 23 delivered the final nail in the coffin when Vice Chair for Supervision Randal K. Quarles stated:

This recent experience in the United States, which has also played out elsewhere, has led to a growing consensus in the economics profession that the relationship between unemployment and inflation—commonly known as the Phillips curve—has flattened.

It’s not that the Phillips curve, invented over sixty years ago, once worked and now inexplicably doesn’t. It never worked at all. A theory must work at all times to be considered credible, not just when it’s convenient. What’s worrisome is that the Fed’s mandate centers around inflation and unemployment. But with no tradeoff between the two, the Fed’s balancing act must be called into question.

[RELATED: "The Phillips Curve Myth" by Frank Shostak]

As for the Fed, we will never get a concise version of their stance. However, it appears they have come to terms with there being little, if any, tradeoff between inflation and unemployment. They won’t admit to implementing an obsolete theory. Therefore, it must be the curve that has changed.

This creates a new error. Rather than taking the opportunity to reflect on what went wrong, they, in effect, doubled down on their mistake. Using the unresponsiveness of the curve as an opportunity to be free of long-standing economic constraints, the Fed “freed” itself. Inflation expectations, low rates, and money supply expansion can continue indefinitely to help bolster job growth, all while seeing minimal effects of price inflation; only now, the flat curve can be incorporated into a new narrative, some unnamed theory, the equivalent of disabling a car’s onboard computer system to drive over a cliff at an even faster velocity.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

The US Economy Would Have Been Stronger Had the US Never Had Slavery

09/27/2020George Reisman

Ancient Rome, Greece, Babylon, Egypt, India, China, and Africa too, all had slavery. None of them created the Industrial Revolution. Great Britain and the United States did create the Industrial Revolution, on a foundation of economic freedom and respect for individual rights.

The great blemish of slavery played no greater positive role in the history of the US than it had played previously in the world, which is to say virtually none. Ignoring its overwhelming negatives, its utmost positive contribution here may have been a temporarily larger supply of raw cotton. But even that is probably not true. Free labor could have picked cotton. True, it would have had to be paid more than a wage equal to the price of a slave's minimum necessities, but it undoubtedly would have been less expensive per pound of cotton picked.

Free labor would have done away with the cost of a system of overseers and the cost of acquiring slaves. It could easily have been accompanied by a system of piecework and thus eager competition among workers in picking more cotton and thereby earning more money. Free workers would also have been motivated to find brand new ways to increase production, because they would have financially greatly benefited from doing so. Thus, improvements in raw cotton production might have come generations sooner. People who believe that slavery is an efficient system of production are people who are ready to impose 100 percent marginal rates of taxation in the belief that doing so is economically harmless.

The alleged economic benefit of slavery is a core belief of the Left both in current politics and in the interpretation of economic history. It sees no connection between freedom and production and no difference between work for positive gain and work to avoid pain.

Fundamentally, the Left does not recognize the distinction between human beings and draft animals, in that it believes the value of human beings derives from their muscles rather than their motivated minds. So far is slavery from having been a source of gain in the United States that the actual truth is that had it never existed and had no African ever been involuntarily brought to the US, the effect would have been enormously positive economically, socially, and culturally. Incentives to produce and save would have been greatly increased. No portion of accumulated savings would have been constituted by the market value of human beings but only by that of physical assets, implying the accumulation of more physical assets. There would have been no need for a civil war to free the slaves, a war that killed six hundred thousand Americans. And today there would be no racial animosities traceable to slavery.

The US would be more the country that its fundamental principles have designed it to be: a country in which the material self-interests of men function harmoniously, to the benefit of all, because they deal with one another by means of voluntary trade, not physical force.

Slavery is as much an economic benefit as holding up gas stations. Not only does the gas station owner lose what the robber gains, but both his motivation to produce and his means of producing are reduced. A world of robbery, which is what slavery is, is a world of great poverty.

This is why the standard of living of even the kings and emperors of the preindustrial world was far below that of the average worker in any capitalist country today.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

What You Need to Know about Amy Coney Barrett's Jurisprudence

09/27/2020Robert Wenzel

Below is a look from a libertarian perspective at the statements and rulings of the likely Trump nominee for the Supreme Court, Amy Coney Barrett.

President Trump is expected to officially announce his choice for the Supreme Court on Saturday afternoon.

The good from a libertarian perspective:

  • Barrett wrote in 2017 that Chief Justice John Roberts pushed the Affordable Care Act beyond its plausible meaning in order to save it.

  • Barrett dissented when the appeals court upheld a decision restricting the Second Amendment rights of a felon convicted of mail fraud. She said nonviolent offenders should not lose their constitutional right to firearms possession.

  • In a dissent, Barrett defended the Trump administration's rule denying immigrants permanent residence if they become regular users of public assistance.

  • Barrett helped to block the US Equal Employment Opportunity Commission's effort to stop an employer from transferring Chicago-area employees based on their race or ethnicity. The agency had accused AutoZone of making the transfers to reflect area demographics.

  • Barrett ruled that the Age Discrimination in Employment Act does not apply when policies impact plaintiffs unintentionally. The ruling went against a 58-year-old job applicant who lost out to someone half his age when the company sought to hire a person with less than seven years' experience.

  • In the case Rainsberger v. Benner, Barrett authored an opinion in which she denied qualified immunity—a protection for government officials from being sued for judgment calls they make on the job—for a police officer who was alleged to have submitted a document "riddled with lies and undercut by the omission of exculpatory evidence" that led to a man being put in jail for two months.

  • "In a 2019 opinion…she concluded that Drug Enforcement Administration agents violated the Fourth Amendment when they searched a suspect's apartment based on the consent of a woman who answered the door but did not live there."

  • "In 2018, Barrett concluded that an anonymous tip did not provide reasonable suspicion for police to stop a car in which they found a man with a felony record who illegally possessed a gun. 'The anonymous tip did not justify an immediate stop because the caller's report was not sufficiently reliable,' she wrote for a unanimous three-judge panel. 'The caller used a borrowed phone, which would make it difficult to find him, and his sighting of guns did not describe a likely emergency or crime—he reported gun possession, which is lawful.'"

  • "Barrett has written several opinions overturning excessive federal sentences. In a 2019 case, she said that a methamphetamine dealer should not have received extra time because of prior convictions under a state truancy law. That same year, she concluded that a judge should not have imposed a four-level enhancement for possessing a gun in connection with a drug offense without citing any evidence of that connection."

The bad from a libertarian perspective:
  • "In a 2019 decision, two members of a three-judge panel said that Indiana courts and a federal district court had erred by rejecting a defendant's claim that prosecutors improperly withheld exculpatory evidence when they tried him for attempted murder. According to the Supreme Court's 1963 decision in Brady v. Maryland, the failure to disclose such information is a violation of due process….

    "The defendant in the 7th Circuit case, Mack Sims, did not discover until after he was convicted that the victim, whose testimony was crucial in identifying Sims as the perpetrator, had undergone hypnosis prior to the trial, which may have tainted his recollection of the crime. Between the attack and the trial, 7th Circuit Judge William Bauer noted in an opinion joined by Judge David Hamilton, the victim's account changed, as did his confidence that Sims was the man who had shot him….In these circumstances, they concluded, the use of hypnosis was an important piece of information that could have affected the outcome of the trial.

    "In her dissent, Barrett said the majority had failed to give the Indiana Court of Appeals proper deference. 'Even though I think that the undisclosed evidence of [the victim's] hypnosis constitutes a Brady violation, it was neither contrary to, nor an unreasonable application of, clearly established federal law for the Indiana Court of Appeals to conclude otherwise,' she wrote. "If I were deciding the question de novo, I would agree with the majority that the suppressed evidence of hypnosis undermined confidence in the verdict. But because I can't say that the Indiana Court of Appeals' decision was "so lacking in justification that there was an error well understood and comprehended in existing law beyond any possibility for fairminded disagreement," I would affirm the district court's denial of Sims's habeas corpus petition.'"

  • She was part of a three-judge panel that rejected the state GOP’s request for a preliminary injunction against enforcement of the lockdown order issued by Gov. J.B. Pritzker. The appeals court also rejected the state GOP claim that Pritzker was selectively enforcing the political gatherings ban by allowing and even endorsing massive Black Lives Matter street protests while refusing to allow other political groups to assemble.

Image source:
When commenting, please post a concise, civil, and informative comment. Full comment policy here

The Fed Plans to "Overshoot" the Target for Max Employment

09/22/2020Robert Aro

Fed Chair Jerome Powell laid out our targets for our future at the September 16 Federal Open Market Committee meeting. “Accommodative stance” on monetary policy, up to 0.25 percent interest rates until maximum employment, plus a moderate overshoot of the 2 percent inflation target all must be met. Clearly, there is no plan to ever stop monetary stimulus.

He didn’t explicitly say this, nor would he. But, per his guidance and Q&A, conclusions can be made. Maximum employment for example:

We are assigned maximum employment. Now what does that mean? As I mentioned earlier, it doesn't mean a particular headline unemployment number. What it means is maximum employment.

Unemployment rate? Not much substance offered there:

I can't be precise about a particular number, but let me just say there was a lot to like about 3.5 percent unemployment. It's not a magic number. No one would say that number is the touchstone or that is, you know, maximum employment.

Touchstone? Curious what number that would be. Upon further questioning, he clarified that maximum employment is “not something which could be reduced to a number.” Apparently, the Fed will determine when that goal is reached. However, support does not end once employment is met.

Regarding that inflation target, Powell informs us:

Even after -- if we do lift off, we will keep policy accommodative until we actually have a moderate overshoot of inflation for some time.

Interesting to note the consensus in the Fed’s statement of economic projects: inflation won’t reach 2 percent until 2023; even then the highest projection made is 2.4 percent, hardly an overshoot. However, Powell remained steadfast:

In terms of inflation, you know, this is a Committee that is both confident and committed and determined to reach our goals. And the idea that we would look for the quickest way out is just not who we are….Okay, so just understand that, you know, we're strongly committed to achieving our goals and the overshoot.

How much more could be done to keep policy “accommodative?” Aren’t they out of ammunition? The Chair gives a definitive NO.

I certainly would not say that we're out of ammo, not at all. So first of all, we do have lots of tools. We've got the lending tools. We've got the balance sheet, and we've got forward guidance…

Translation: new Fed/Treasury bailouts, more bond buying, eventually equity purchases, and, of course, more statements extolling the virtues of maximum employment and inflation. But, it could also mean negative interest rates in the future.

Again, he will never outright say this, but accommodative monetary policy inevitability takes over nations. We are already seeing this across the globe. Why should the Fed be any different? These policies and goal settings carried out by central banks go by many names: interventionism, socialism, anticapitalism. They create asset bubbles and boom/bust cycles, but the Fed tells us their work is necessary to “provide relief” and “support recovery” as long as needed.

They have explicitly stated that interest rates will stay low for the next several years and this “accommodative stance” will continue at least until maximum employment is met with a consistent overshoot of inflation. Looking back on the last ten years, if price inflation was only around 1 percent, we could hardly imagine a decade of inflation being around two to five, seemingly the ballpark for which they are striving. As for maximum employment, it’s a target that cannot be measured nor particularly articulated. It appears nothing more than a carrot on a stick, intended to continue on a path which has a nearly unattainable end goal. But which is worse, the Fed somehow meeting their goals or continually falling short?

When commenting, please post a concise, civil, and informative comment. Full comment policy here

The War on Assange Is a War on Truth

09/22/2020Ron Paul

It is dangerous to reveal the truth about the illegal and immoral things our government does with our money and in our name, and the war on journalists who dare reveal such truths is very much a bipartisan affair. Just ask Wikileaks founder Julian Assange, who was relentlessly pursued first by the Obama administration and now by the Trump administration for the “crime” of reporting on the crimes perpetrated by the United States government.

Assange is now literally fighting for his life as he tries to avoid being extradited to the United States, where he faces 175 years in prison for violating the “Espionage Act.” While it makes no sense to be prosecuted as a traitor to a country of which you are not a citizen, the idea that journalists who do their job and expose criminality in high places are treated like traitors is deeply dangerous in a free society.

To get around the First Amendment’s guarantee of freedom of the press, Assange’s tormentors simply claim that he is not a journalist. Then CIA director Mike Pompeo declared that Wikileaks was a “hostile intelligence service” aided by Russia. Ironically, that’s pretty much what the Democrats say about Assange.

Earlier this month, a US federal appeals court judge ruled that the NSA’s bulk collection of Americans’ telephone records was illegal. That bulk collection program, born out of the anti-American PATRIOT Act, was first revealed to us by whistleblower Edward Snowden just over seven years ago.

That is why whistleblowers and those who publish their information are so important. Were it not for Snowden and Assange, we would never know about this government criminality. And if we never know about government malfeasance, it can never be found to be criminal in the first place. That is convenient for governments, but it is also a recipe for tyranny.

While we might expect the US media to aggressively come to the aid of a fellow journalist being persecuted by the government for doing his job, the opposite is happening. As journalist Glen Greenwald wrote last week, the US mainstream media is completely ignoring the Assange extradition trial.

Why would they do such a thing? Partisan politics. Journalists—with a few important exceptions like Greenwald himself—are no longer interested in digging and reporting the truth. These days they believe they have a “higher calling.”

As Greenwald puts it, “If you start from the premise that Trump is a fascist dictator who has brought Nazi tyranny to the US, then it isn’t that irrational to believe that anyone who helped empower Trump (which is how they see Assange) deserves to be imprisoned, hence the lack of concern about it.”

That may seem like a good idea to these journalists in the short term, but for journalism itself to become an extension of government power rather than a check on that power would be deeply harmful.

We cannot have a self-governing society as was intended for our Republic if the government, with the complicity of the mainstream media, decides that there are things we are not allowed to know about it. President Trump should end the US government’s war on Assange…and on all whistleblowers and their publishers.

Reprinted with permission.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

What Consumers Say Is Not as Important as What They Do in the Marketplace

09/21/2020Raushan Gross

It is preposterous to assume what customers say is more important than where they place their feet and the price they pay for products or services. The customer's mind is still elusive and challenging for entrepreneurs. If understanding the mind of the customer were easy, everyone would do it!

The insights of the Austrian school of economics tell us that people act purposefully toward future betterment. That is, customers and entrepreneurs both act to attain better future situations than their current situations compared to if they had not acted at all. Customers operate on a value scale, an important insight developed by Carl Menger, elucidating that value is in customers' minds. In this regard, Menger urged entrepreneurs to "reduce the complex phenomena of human economic activity to the simplest elements."1

I echo the sentiments of Menger, but some do not. For example, a recent article titled "2 Simple Steps for Testing If Your First Customers Like Your Product" recommends surveys and the search for "moments of truth" and "tipping points." The only simple way of ascertaining customers' product sentiment is through the market itself.

The market process provides excellent insights into customers' unspoken motives and whether they like your products and services. The best way to figure out if your customer likes your products is to turn to market phenomena. That is, the market price, as reflected by customers' subjective valuation and competitors' offerings. Different opinions about the value of a product or service are drawn out through this process. The real test, the market signals, shows how much and to what extent customers are willing to sacrifice to attain your product or service offering.

The customer wants the product with high use value, intended for whatever purposes to help them reach their end. The value of any product is in the customer's eye, the same way that beauty is in the beholder's eye! We never truly know to what extent a customer chooses your product over a competitor's. That is to say, the only reliable data on customer sentiments is that customers have purchased your products—the more, the merrier. Ludwig von Mises in Human Action expressed that "It is ultimately always the subjective value judgments of individuals that determine the formation of prices.”2

Market prices and exchanges alert the entrepreneur whether the product is more or less valuable to the customer than the forgone opportunity to withhold their cash holdings. Money measures prices, and prices measure value. Buying and selling or market abstention determine prices. As such, prices are what customers are willing to pay for a product based on their subjective valuation, keeping in mind their future benefit from that product.

In his salient book Economics for Real People, Gene Callahan agreed that "only real market prices convey information on the freely chosen values of acting man."3

Therefore, it is sensible to observe market price signals as a means of analyzing customer sentiments. Customer dissatisfaction and loyalty occur when product or service incongruities exist. Market incongruities also exist between the entrepreneurs' perceptions of changing market realities. The entrepreneur's function is to address any market incongruities in which the customer, because of market changes, is better off than they were before. The market is in constant movement, which means customer preferences are in perpetual motion.

Retention of customers is a less complicated phenomenon which an entrepreneur might observe. Only individuals act in concert with one another in a spontaneous way to reach their goals in any given market. As the author of the cited article proposes, the concept of customer retention is somewhat misguided, because retention relates to competitors' actions and their substitutable products. The question should be, how many substitutable products exist in my ecosystem? Are other entrepreneurs doing something that I am not doing?

First, the customer is the holder of the perception of value. Secondly, the customer making future choices is the cornerstone of the basic axiom of action. While taste preferences change over time, so do the market actions of your customers and your competitors. The first axiom of praxeology is that people act; they act to pursue a better situation based on the choices they are presented with. Mises reminds us of this in his work Human Action. What the customer says and the action the customer takes are two different things, because it is the customer's action that provides market signals to the entrepreneur. As long as you satisfy the customer's needs and wants, profits will ensue, and losses decrease.

You strive to get rewarded for the risks involved with bringing new products to the market. Your competitors are seeking the same market reward.

Some do not understand that competition works as a signal of incongruities, leading to profits or losses. Indeed, competition exists so long as customers have market choices and can exercise them. The reality is that customers vote with their dollars and feet. They may voice their liking of your products, but at the same time be enthralled with a competitor's quality, service, and prices. Competition, therefore, acts as the entrepreneur's light post, guiding them toward market opportunities that may go unrealized or deterring them from those that are unfit.

Competition, in the Austrian view, is aimed at who can serve the customer best. Providing the best quality and product to the customer is the leading role of entrepreneurial competition. Competition is not and should not be insidious—rather, it should be productive and dynamic. If entrepreneur A wants to enter a market with capital to prove he or she can do things better than entrepreneur B, that should be his or her choice. Entrepreneur B will come to realize they missed many market opportunities only because that knowledge appears as a result of the competitiveness of entrepreneur A. For example, customers may choose the products of entrepreneur A one day and B the next.

It is not what customers say, but what they do. Entrepreneurial insight about the market and the changes that will occur should be the guiding light for entrepreneurs. Entrepreneurs have to ascertain how people will respond to changes. Customer purchases, retention, a likeness of products or services, and loyalty are results of entrepreneurial market observation, and not causes.

  • 1. Carl Menger, Principles of Economics, trans. James Dingwall and Bert F. Hoselitz (Auburn, AL: Ludwig von Mises Institute, 2007)
  • 2. Ludwig von Mises, Human Action: A Treatise on Economics, scholar’s ed. (Auburn, AL: Ludwig von Mises Institute, 1998).
  • 3. Gene Callahan, Economics for Real People: An Introduction to the Austrian School, 2d ed. (Auburn, AL: Ludwig von Mises Institute, 2004).
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Will Kirkpatrick Sale's Collapse of 2020 Come True?

09/17/2020Doug French

America is about growth and getting big, supersized, or bigly, as the president would say. There’s no debate, growth is good, in fact essential; bigger is better.

One man who believes the end of all this bigness is nigh is Kirkpatrick Sale, a prolific author, most notably of Human Scale and Human Scale Revisited, and a notable proponent of secession. Simply put, Sale believes the world is destroying itself. In a piece for Sale wrote, “the government we have in this country is too incompetent, inept, corrupt, wasteful, and inefficient, too centralized, undemocratic, unjust, and invasive, and too unresponsive to the needs of individual citizens and small communities, and all because it is too big.”

For readers wanting a warm-up before launching into the meaty Human Scale, Sale’s latest book is The Collapse of 2020, which started with a $1,000 bet Sale made in 1995 with Wired magazine editor Kevin Kelly that civilization would collapse by, well, 2020. At the time, that year sounded a long way off and Sale, who in those days had little more than a thousand bucks to his name, figured $1,000 would be inflated away to virtually nothing by 2020.

Not quite, of course, and civilization hasn’t completely collapsed, but Sale believes we are close and now puts the doomsday year at 2030. He has produced a pithy little book (44 pages) to give us a status report. The author tells us the earth has experienced five previous extinctions: a meteor strike which changed the climate and four others caused by greenhouse gases. The sixth is underway.

“Industrial civilization,” Sale writes, “in other words, is an inherently self-destructive system with limits beyond which it cannot survive, and utterly consumes itself like the self-burning tree of Gambia discovered by Mungo Park.”

Political collapse is underway in 43 percent of all nations on earth, without including “a dozen smaller nations that are locked into autocracy and poverty.” There are plenty of examples in the political collapse category for Mr. Sale to cite: Brexit, the Trump election “(and the subsequent attempt to overturn it),” and protracted protests in Poland and Hong Kong. Sale mentions the work of two political scientists who claim that “the state system seems to be failing all over the world” and believe work must be done to study “how to grow, maintain, and fund states so as to avert their collapse.” Anarchists would cheer “let them fail!”

Political collapse stems, Sale believes, from the world’s population, which, like everything else, has grown too big. There will be wars and competition, because “there will be no diminution in overpopulation--it has grown steadily and irredeemably by 83 million people a year since 1975.” Sale describes the United Nations as a waste of time and money; “in short,” he writes, “[the U.N.] is an example of the collapse of politics at the global level.”

Also collapsing on a global scale are capitalism, which Sale says “has everywhere turned into a disputative autocracy or a failed anarchy,” and the Catholic Church, which “has proven itself incapable of self-reform or doctrinal coherence.”

These examples of political collapse have led to increasing rates of addiction, suicide, and mental illness around the globe, while rates of marriage and religious affiliation have declined.

Individual contempt and distrust of government are increasing, with terms like “deep state” and “the swamp” being common pejoratives.

The author sees the economy as “the Sophoclean and Shakespearean heroes who go into disasters unable to change.” The problem in a word is debt—government, corporate, and individual combine to unsustainable levels. The weight of all that debt will collapse the dollar. Sale quotes a Swiss banker as saying that “The long-term trend of the dollar is clear: it will go into oblivion faster than anyone can imagine.” China and Russia are of the same opinion and have added to their gold holdings at an increasing pace while unloading the dollar.

In the end, Sale believes the collapse will be due to “Heedless technological advances pushing heedless exponential growth beyond human capacity to control…, just as I predicted.”

Although he wrote before the covid-19 outbreak, Sale predicted that new deadly infections would spread to all continents. Perhaps this is the canary in the coal mine.

When commenting, please post a concise, civil, and informative comment. Full comment policy here
Shield icon power-market-v2