Mark Thornton on Why Socialism Is Deadly and Dangerous

Mark Thornton on Why Socialism Is Deadly and Dangerous

02/12/2019Mises Institute

Mark Thornton explains why socialism can never work, the history of the death and misery its caused and we discuss a better way to help everyone live a more free, peaceful and prosperous life. We need look no further than Venezuela.

The Chronically Human Podcast Ep 11 - Dr. Mark Thornton

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Long Live the Almighty Dollar

4 hours agoRobert Aro

The saying goes: “The grass is always greener on the other side.” But is it really?

US Dollar supremacy is something to which we have become accustomed. It’s easy to take for granted that the dollar is still the world’s reserve currency despite relentless efforts made by central bankers and governments to destroy it.

Few born in America have ever experienced what would be formally called a “hyperinflation” To most, hyperinflation is only something we hear about in other countries like Venezuela or Zimbabwe; those unfortunate countries whose currency was legally counterfeited into oblivion by those in charge of the printing press. The list of nations with an undesirable currency is long. But Lebanon has now joined the group of nations experiencing fiat destruction, as reported by Reuters , using the definition of hyperinflation as a period of time where a country's inflation rate exceeds 50% per month. Per press release:

Now, Lebanon has been gripped by the phenomenon, becoming the first country in the Middle East and North Africa to suffer from rapid, runaway price rises for goods and services.

For some inexplicable reason, all over the planet and throughout history we find instances of perpetual inflation and hyperinflation appearing as the rule, not the exception. Central planners claim inflation in America has remained stubbornly low for a very long time. If nothing else, they’ve found a risk of “deflation” being the concern; the cost of living and affordability of life for the average person will decline in such dramatic fashion that it would be a terrible thing for the economy.

Fortunately the “problem” of inflation may finally get solved within in a few short months, as CNBC explains in a eye-catching breaking news headline :

The Fed is expected to make a major commitment to ramping up inflation soon

It starts slowly:

In the next few months, the Federal Reserve will be solidifying a policy outline that would commit it to low rates for years as it pursues an agenda of higher inflation…

The ideas get progressively worse from there, as neither the mainstream media nor mainstream economists understand inflation:

The Fed and other global central banks have been trying to gin up inflation for years under the reasoning that a low level of price appreciation is healthy for a growing economy.

Even the Chicago Fed President, Chris Evans weighed in and said he would like to:

keep rates where they are until inflation gets up around 2.5%, which it has not been for most of the past decade.

So stay tuned! We may soon find, come September’s Fed meeting, our monetary planners are set to embark on a formal policy for more inflation. Despite the fact economists have struggled with “low inflation” for the past decade, while neglecting the majority of American’s who are struggling with a high cost of living, low savings rate, and high debt levels, those in charge of monetary policy will soon find reasons to further weaken the purchasing power of your dollar.

In countries like Zimbabwe, Venezuela and now Lebanon, there are those who look at their bankrupt nation and wonder how could those in charge lead them astray. Versus in America, where we think the government will forever wield the Almighty Dollar, printing as many dollars at essentially no cost. And in other news, gold has reached its all time high…

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Swiss National Bank Q2 2020: $118 Billion in US Equities

4 hours agoRobert Aro

While Congress argues about how many trillions of dollars to create in the new Coronavirus Bill to pay for things like basic income or a new $1.75 Billion FBI building , the Swiss National Bank posted quarterly profit of USD $43 Billion for the second quarter. As Reuter reports :

Although making a profit is not part of the SNB’s mandate, Switzerland’s federal and regional governments appreciate the payout it makes, which increased to 4 billion francs this year.

We can be sure the government appreciates the windfall. But to make the year even better, the Central Bank’s ( SWZNF ), quarterly filing statement showed its US equity portfolio now stands at a whopping USD $118 Billion, up by approximately $24 billion from last quarter!

Reading through the list of 2,438 companies is impressive, especially to see many of them pay strong dividends like Apple, or that some of them are gold companies like Kirkland Lake, who may offer a substantial upside in the years to come. Even more impressive is what Switzerland is getting away with. Most other central banks, like those in South America, Africa and Asia, would surely suffer from runaway inflation if they made purchases of US equities with money created out of thin air. This “Swiss Privilege” is unique to say the least, but how did it come to pass?

Switzerland has done a lot of things “right,” such as having a population smaller than New York City, avoiding wars and invasion, and having a central location in the heart of affluent Europe. On top of that they do something integral to success, which remains lost on mainstream economists: they produce goods and services. Whether it’s watches, chocolate, banking or gold, coupled with a relatively strong embrace of economic freedom, Switzerland remains one of, if not the most, wealth y nations on the planet.

Very much like the Fed, whose $7 trillion balance sheet hasn’t (yet) lead to a complete currency collapse, the Swiss are in a league made for only a handful of countries. Ironically, their lack of economic understanding and hubris rival that of the Fed, as Swiss Chairman Thomas Jordan explains in his last speech when discussing foreign exchange markets:

Interventions prevent an excessive appreciation of the franc, but also expand the SNB's balance sheet and thus increase the financial risks. However, they are currently indispensable, together with negative interest, in order to ensure appropriate monetary conditions in our country.

Unfortunately, this is 2020 and the world we live in. The Chairman can talk about how their money creation scheme is simply a by-product of the desire to weaken the franc, as if they know what price the franc should be, and as if it’s not stealing from those both at home and domestic. The Swiss planner will say inflation is low and therefore negative rates are okay, yet Switzerland is one of the most expensive countries in the world to live in. And they won’t tell you about having the most expensive Big Mac in the world at USD $6.91. They will talk about policy and the difficult choices they have to make to take the economy somewhere that can hardly be articulated. However, there is no mystery beyond the workings of the Swiss National Bank. Like the Fed, the man behind the curtain is revealed to be nothing more than a charlatan, exposed the instance common sense questions are considered.

Swiss production created both wealth and demand for their currency. That they inflate their franc from time to time is “relatively” okay because everyone else is doing it, and so far it seems to be working. As the balance sheet expands, asset prices rise, purchasing power continues to erode and the bank wins, while society loses. This cannot continue indefinitely, but so long as the game isn’t figured out, the game will always continue, and the portfolio will always get bigger.

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This Jobs "Recovery" Is Turning into a Long Slog

5 hours agoRyan McMaken

Growth in total employment slowed in July, following two months of big gains in employment, during May and June. But it all comes after the US economy shed more than 19 million jobs during March and April.

In July, the US added 591,000 payroll jobs, with total employment rising to 139.1 million. This is a sizable slowing from June, when more than 5 million jobs were added. At its most recent peak in November 2019, more than a 153 million Americans were employed. From November to July, the US is down 14 million jobs, or 6.7 percent of the US's working age population.

In other words, the US remains well below peak employment, and three months in since enormous job losses began to mount, it remains unclear if the jobs recovery will require several years, as was the case after the 2008 financial crisis.

As of July, total employment is at 90 percent of peak levels, which is below anything we saw during the previous four recessions. At its nadir, employment fell to 91 percent of the peak during the 2007-2009 recession (the Great Recession). But from that point, four years went by before employment returned to its former peak level.

Many commentators on the current crisis have insisted the US will experience a rapid "v-shaped" jobs recovery. This result, however, is far from guaranteed, especially if the world's governments revert to mandating forced "lockdowns" and business closures again this summer or later this year.

[The graph shows total employment indexed to the previous peak. For example, the black line shows the number of months since the previous jobs peak (November 2019) during which jobs remain below peak levels. Similarly, the brown line shows the number of months after the June 2007 jobs peak that total employment remained below peak levels. Recent jobs recoveries have taken significantly longer than was the case during the 1980s and 1990s.]

The unemployment rate remains at recessionary levels as well. July's unemployment rate was 10.5 percent, slightly below the peak unemployment rate during the Great Recession, when it was 10.6 percent. In any case, of course, this is a high unemployment rate.

So, is there any sign yet that the jobs recovery will soon come roaring back?

Not really.

The Labor Department also released new data on initial unemployment claims, and new claims data shows only very slow progress is being made.

As of the week of August 1, 984,000 workers filed for initial unemployment benefits. This is a decrease from the previous week's total of 1.2 million, and it is well down from the the 6.2 million newly unemployed that filed for benefits the week of April 4. However, at nearly 1 million, newly unemployed remained higher than during any week recorded during the Great Recession.

Moreover, these are just newly unemployed. Continued unemployment claims, as of the week of July 25, still showed more than 15.8 million Americans were receiving unemployment benefits. This is more than double than what we saw at the peak of the Great Recession, when continuing claims hit 6.4 million.

Looking at the unemployment claims data, combined with the payroll data, it is extremely likely the US now has at least 15 million unemployed workers, and there is no guarantee most of these can look forward to a quick re-hire so long as there remains the looming threat of government-forced shutdowns. Thanks to threatened shutdowns, regime uncertainty remains immense for employers, which is likely to reduce the demand for employees or business expansion.

What Can Be Done?

What could be done to help the situation? The first necessary step would be to end the threat of forced government shutdowns, and forced  changes in business capacity. As it is, the current spate of executive orders being issued in the one-man rule-by-decree regimes the place in most US states amount to a huge expansion of the regulatory state. Business shutdowns and new requirements on building use and building capacity impose enormous financial and regulatory burdens on business owners. Naturally, hiring suffers as a result. If policymakers wanted to actually do something about unemployment—as well as enormous public health burden that results, in the form of suicides and other threats to health—policymakers would immediately announce that the threat of business closures have passed. Until this happens, expect hiring to remain lackluster.

This isn't to say that businesses would not need to adapt to a public which—even in the absence of government mandates—is likely to reduce spending on certain goods and services that are now less attractive in light of fears over the Covid-19 disease. However, so long as governments continue to hand the threat of shutdowns and additional regulations over the heads of employers, this will continue to hamstring businesses' ability to adapt to new realities and will greatly hamper employment.

A second important step would be to reduce the overall regulatory burden. This would include regulations that pre-date the current round of job-killing mandates. These include rules on hiring such as minimum wage laws, licensing regulations, and other measures designed to limit hiring and employment in the alleged pursuit of higher quality or "higher wages." The real result from all these measures is that employment is outlawed for wide swaths of the population, and entrepreneurs are prohibited form expanding their own services or from hiring others.

The need to reduce barriers to employment is needed now more than ever. In July, more than 32 percent of Americans missed their housing payments. Evictions are mounting and more Americans, due to income losses, are unable to pay the rent. Politicians—in the the thrall of well-paid and out-of-touch health bureaucrats—have decided this is no big deal, and refuse to take the necessary steps to allow entrepreneurs and employers to usher in a jobs recovery. So long as these "public health" officials dictate economic policy, more and more Americans will become unemployed and destitute. Many will become homeless. The effects of the jobs implosion are just beginning to be felt.

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Why Two Wealthy Senators Might Not Like Judy Shelton

08/05/2020Robert Aro

Just two days after Trump’s nominee Judy Shelton was approved by the Senate committee, it was Mitt Romney (R), senator of Utah, who said:

I’m not going to be endorsing Judy’s Shelton’s nomination to the Fed.

No reason was provided as to why he intends to vote against her, and CNBC reports that his office declined to comment further. However, they noted:

That Romney would oppose the nomination is not entirely surprising given his contentious relationship with Trump.

It seems strange that a US senator would not offer a reason for something as important as this vote. Without providing anything to defend his position, we are left only with assumptions to make.

If Mitt is making his decision based on the relationship he has with Trump, as CNBC suggests, then it could mean that he's judging Shelton's qualifications based on the opinion he has of the president. He would still be within his right, but his reasoning might be called into question.

And yes, this is the same Mitt Romney who is currently one of America’s wealthiest congressmen, with an estimated net worth around $174 million that he accumulated by founding and operating Bain Capital. Also, yes, this is the same Bain Capital that a quick internet search reveals was involved in many highly publicized leveraged buyouts (LBOs), whereby a company acquires another company primarily with debt backed by the assets of the company being acquired.

There may be nothing inherently wrong with LBOs per se. If a bank is willing to put up the money, then the bank (shareholders/depositors) are taking the risk. But perhaps this is also a reason why he may fear Judy Shelton. In a world where credit is no longer cheap and easily given to the rich and powerful, people like Mitt would not be multimillionaires today. Unfortunately, since he remains silent as to the reason for his decision, we are left with little to make of his rationale besides his dislike for Trump and success with tapping credit markets.

The second Republican is Senator Susan Collins from Maine. She’s not as wealthy as Mitt but still not someone to take lightly, hailing from a fourth-generation political family. Her website proudly boasts:

Senator Collins is recognized as a skillful legislator, which is one reason why ELLE magazine named her one of the most powerful women in Washington.

On Monday, The New York Times quoted her:

Ms. Shelton has openly called for the Federal Reserve to be less independent of the political branches, and has even questioned the need for a central bank.

It remains unclear to the liberty and freedom crowd what the problem is, but the “skillful legislator” continued:

This is not the right signal to send, particularly in the midst of the pandemic, and for that reason, I intend to vote against her nomination if it reaches the floor.

Unlike Romney, Senator Collins offered an explanation. The problem is that it’s not a very good one. According to Collins, because Judy Shelton asks questions, especially during a crisis, she’s not qualified for the job. Sadly, this is not the America the Founding Fathers envisioned. Liberty dies when subservience is considered a virtue and questions are considered a crutch. Having a sound money advocate at the Fed creates much-needed discourse, but without one we may only continue to see the same anticapitalist groupthink. Especially in a time of crisis we should welcome such questions.

Tangled is this political web in which the nation finds itself. One person who has unimaginable wealth and another who is an heiress of a political empire are allowed to make economic decisions, yet little understanding of economics has been on their part. At least when the Fed lies to us it’s done using Fedspeak, supported by impressive degrees and data we cannot see. But the politicians—they can simply cast a no vote!

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A Lefty Politician Wants to Get Rid of History Class. He's Right.

08/05/2020Ryan McMaken

An Illinois politicians wants the state board of education to get rid of history classes until the curriculum can be made less racist. The local NBC affiliate reports:

Leaders in education, politics and other areas gathered in suburban Evanston Sunday to ask that the Illinois State Board of Education change the history curriculum at schools statewide, and temporarily halt instruction until an alternative is decided upon….

Before the event Sunday, Rep. Ford's office distributed a news release "Rep. Ford Today in Evanston to Call for the Abolishment of History Classes in Illinois Schools," in which Ford asked the ISBOE and school districts to immediately remove history curriculum and books that "unfairly communicate" history "until a suitable alternative is developed."

There are both good ideas and bad ideas here.

First of all, it's unclear in what way exactly history as taught in Illinois—as critics put it—"overlook[s] the contributions of women and minorities"

In practice, history as taught in most schools overlooks the good deeds of a wide variety of good people—not just ones who are women or members of certain ethnic groups. The usual history curriculum focuses overwhelmingly on politicians, military personnel and other government employees, who are supposedly the people who make the most important contributions, and allegedly make life livable for the rest of us. The private sector is generally ignored, including all the entrepreneurs, workers, business owners and managers who actually did the hard work of improving the lives and standards of living of countless human beings. Whenever business owners are mentioned, its usually as some sort of evil "robber baron" or similar caricature. If workers are mentioned, it is only nonspecific workers in a Marxian context.

So, given that the general focus in history courses is on "great men"—most of whom are actually despicable, craven politicians like LBJ or FDR or Woodrow Wilson—then yes, I'm sure women and nonwhites get little mention. There's a bias in whose contributions are mentioned, all right. But that bias tends to be in favor of the government class, regardless of race and gender.

But if the answer is to abolish history class, then I am all for it.

Ever since its conception, history class in public school has never been anything other than lessons in government-approved historical narratives designed to push a certain ideology. As historian Ralph Raico has noted, people's ideological beliefs are largely determined "by what they think they know about history." So as long as people think Americans invented slavery, or that capitalism means children must work until they get black lung disease in coal mines, then people will select their ideologies accordingly. What is taught in history will naturally shape a student's worldview.

That said, there is no "correct" unbiased narrative, of course. All history is written by specific human beings with their own experiences, judgments, and biases. Each historian must make decisions as to which information is important and which is not. Some historical events are mentioned, and other are not. This alone determines what people will learn and conclude about human history. As Ludwig von Mises noted:

Now, a real reproduction of the past would require a duplication not humanly possible. History is not an intellectual reproduction, but a condensed representation of the past in conceptual terms. The historian does not simply let the events speak for themselves. He arranges them from the aspect of the ideas underlying the formation of the general notions he uses in their presentation. He does not report facts as they happened, but only relevant facts.

Historians don't just recreate history. They make judgments about what historical narratives are told. The result is a narrative that is influenced by ideology and the historian's context.

Thus, it would be madness to leave it up to public school bureaucrats to determine which history ought to be taught and to cede to government employees the power to teach to children—for twelve or thirteen years, no less—the "correct" historical narrative.

Early proponents of public schooling were well aware of this, and they made sure history was taught in ways that backed up their own prejudices. In the early years of public schools, in the late nineteenth century, "history" class was designed to communicate anti-Catholic progovernment propaganda as approved by the progressive New England intelligentsia.

By midcentury—helped along by outright progovernment rituals like the socialist-authored Pledge of Allegiance—history class became a hotbed of center-left ideological studies designed to into inculcate American children the idea that men like Theodore Roosevet and Franklin Roosevelt were saintly harbingers of the American "progress" made possible by a strong US state. Also, central to the curriculum was the idea that all wars waged by the American state were virtuous crusades that made the world a better place.

Things have only gotten worse since then.

As a solution, Rep. Ford wants to get rid of history class. I say have at it. Let's just make sure history class is abolished permanently, and not temporarily, as Ford wants. Ford believes a "suitable alternative" can be developed, but I most certainly don't want anyone learning whatever version of history meets Ford's requirements.

I know that some old-fashioned readers will think it's still a good idea to teach children history in public school. These people are still in the thrall of the never true notion that there's some sort of "objective" history out there that everyone can agree on. This notion is wrong of course, and because of this, we'd all be better off if public school history class were replaced by reruns of old Saturday morning cartoons. That would be better than the twelve years of anticapitalist propaganda students are getting now. Moreover, students could concentrate on more ideologically neutral topics like math and reading, and leave the teaching of history up to parents. In truth, though, given that public schooling is for most people little more than government daycare, most parents wouldn't even notice if history class were abolished forever.

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The Implosion of the Virus Hysteria Smells a Lot like 1989

The weeks-long coronavirus lockdown is being exposed as, at best, a wild overreaction. Americans are starting to protest the destruction of their economy, the loss of their jobs, and the attacks on their basic constitutional rights. The walls of oppression built by the petty tyrants throughout the country are beginning to crack. It reminds me of the feeling that was in the air in that memorable year 1989, when the world as we knew it was turned upside down.

What was so significant about 1989, and why do I suddenly get that feeling in the air again? For me, it was two things: 1) the Tiananmen demonstrations—I was in Hong Kong during this period (I actually arrived I think a day before the death of Hu Yaobang, which is what started them), and 2) the fall of the Berlin Wall and the events that led up to it.

What it smelled like was this:

All of a sudden, anything at all was possible. All of a sudden, people realized that the chains that bound them weren't as real as they had always believed them to be. Of course, in China, as exhilarating as the demonstrations were, it did not end well. But for Eastern Europe it was very different.

I remember seeing the images of the picnickers (and others) from Hungary hopping the fences into Austria. Just hopping what looked like two-foot-high little wire fences. Like that was the only thing that had ever been holding them in. To me, those were the most moving images of all: people realizing that they were free.

By the time they started hammering away at the Berlin Wall, everything had already happened. It seemed like just the tearing down of a symbol at that point. I had visited Berlin five years earlier, and I remember people telling me it would never come down. Everyone hated it, everyone wanted it down, but nobody knew how to do it, and there seemed to be a widespread acceptance that there was nothing they could do about it.

Until there was.

That's what this feels like now. The governments' over-the-top response has pushed people too far. Which I imagine they anticipated, but I also imagine they believed that would result in riots and violent protest (which it will, once people can't put food on their tables—but we're not there yet.) But instead of rioting in the streets, people are engaged in peaceful protests, and more importantly, they are starting to simply defy the orders. Businesses, churches, and even some schools, are starting to open up again, in blatant disregard for the orders they have been given. They are ignoring the state.

There is more of this coming. And the more people who do it, the more are emboldened to. I don't know what goes on inside the minds of the people who want to rule the world, but I can only imagine that they believe people will always be easily manipulated by fear. It's true that people are far too easily manipulated by fear, but the capacity to do that is not infinite, and I think those who are using it have overplayed their hand this time.

Because what I'm seeing now is not people driven by fear. There was a lot of fear when this first started—but I think a lot of people are coming out of that now. I think a great many are realizing that the costs of the shutdowns are going to be much, much worse than the impact of the virus, and I also see a lot of people recognizing that individuals should decide for themselves what risks they are comfortable with. I'm seeing a lot of pushback against authoritarianism, and it's not coming from fear, but something else. I don't think the people who engineered this anticipated that something else.

Yes, there are still the people buying into the fear, ratting out their neighbors, etc. But I'm seeing a lot more of the opposite: people recognizing who the enemy is here, and that it is not their neighbors. I'm seeing small business owners having the courage to reopen their businesses against government orders, at the risk of losing their licenses and, here in LA, their power and water supply. And I see a huge number of people ready to support them. People are planning more peaceful protests, and more and more businesses are planning to open up. They're saying (here in CA) "They can't arrest all of us." What I see is that people are starting to realize that their chains aren't as real as they thought they were.

That's what 1989 smelled like.

Reprinted from the Ron Paul Institute.

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Dear Portland, It's Not America's Job to Solve Your Problems

08/05/2020Ryan McMaken

In response to my article last week opposing the use of federal soldiers and federal agents on the streets of American cities, my inbox and the article's comment section filled up with readers claiming that it most certainly is the job of the US federal government to step in and take control of US cities against the will of the state and local governments.

These interventionists have lots of reasons for their federalization of local law enforcement:

  • "The author is not realising the seriousness of the communist insurgency under way."
  • Federal intervention is unjustified "except in cases where the local elected officials refuse to do what they had taken an oath to do."
  • "The people are under the protection of the Constitution, thus during insurrections the president has the duty to mobilize to restore order."
  • "Oregon state and Portland city governments either or both can't or don't want to stop violent protests with destruction of public and private properties. Therefore federal government needs to intervene to restore the order, normal functioning of city businesses and government offices."

Many of these readers attempt to make claims about constitutional authority, such as the meaningless claim that "the people are under the protection of the Constitution"—whatever that means—and that therefore the feds can do whatever they want to "restore order." Other claims are just vague legal assertions about how the president can send in troops wherever local officials aren't doing what "we" want them to do.

To this I would only restate that the entire historical and legal context of the Declaration of Independence, the Constitution, and the American Revolution is one of preventing distant national powers from sending in their agents, bureaucrats, and troops to carry out federal prerogatives.

But even if the current US Constitution did authorize federal takeovers of local police—which it doesn't—then the Constitution ought to be ignored, because constitutional authority is inferior to the larger moral principle of subsidiary, self-determination, and local control.

As with all things, the Constitution is only useful and worthy of being quoted when it limits federal power. When it doesn't do so, it should be ignored. The Constitution is not some holy writ. It's useful when it attempts to limit federal power, and worthless when it doesn't.

In this case, the Constitution is on the right side: it limits federal intervention in these cases. But if it weren't on our side, then it would be wrong. Stated simply, here is the basic principle at hand: as an American taxpayer who lives many hundreds of miles from Portland, it's not my job to solve Portland's problems.

To business owners and others who live in Oregon and Portland and who are being negatively affected by the riots there, I'm sorry you continue to choose to live in a poorly run state where the political leaders are craven socialists who kowtow to the mob. I highly recommend you consider moving away or expending your own time and energy to do something about it. I'm sorry you didn't see the writing on the wall years ago as the voters put into power—again and again—left-wing demagogues. You decided to stick around. But it's not now the job of Americans in other places to bail you out.

I fully encourage you to organize a local militia, a local political movement, recall effort, or some other strategy to deal with it. But Americans have plenty of their own problems in their own cities. We have our own crime problems and our own problems with corrupt politicians to deal with it. I'm sorry that residents of Portland and Oregon appear to be especially inept in this regard, but neither the Constitution nor common sense dictates that it's our job to swoop in and save Portland from itself, especially when the local majority is apparently fine with the situation.

There are a lot of poorly run cities in America. Like Baltimore, for instance, where the homicide rate is ten times the national rate. It’s not the job of the American taxpayer to solve Baltimore's problems either.

I know that some readers fancy themselves the only ones who truly appreciate the fullness of the "communist insurgency under way." In their minds, the federal government cannot possibly be given too much power, so long as that power is used to crush the commies. Anyone who insists on limiting federal power is thus "naïve." Yet it is these nonnaïve people who want to grant even greater power to a federal establishment that clearly views the American people as the enemy. These federal agencies are the ones who have relentlessly conspired to remove the current democratically elected president because he was not to their liking. These are the bureaucrats who let 9/11 happen, and then got raises afterward. These are the federal hacks who massacred women and children at Waco and at Ruby Ridge. These are the people who wanted the Patriot Act so they could spy on every American.

Back in the 1990s, NRA CEO Wayne LaPierre referred to federal agents as "armed terrorists dressed in Ninja black…jack-booted thugs armed to the teeth who break down doors, open fire with automatic weapons and kill law-abiding citizens."

While I’m no particular fan of LaPierre or the NRA, he was right. Wanting to limit the power of these feds is hardly the naïve position.

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The Fed Has No Escape Plan

08/03/2020Robert Aro

Fed chair Powell would shock the world if he said something like this:

The Federal Reserve’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices, along with our responsibilities to promote the stability of the financial system. The problem is that these are misguided policies made by my predecessors. Maximum employment is just an arbitrary number made up by economists. There is nothing stable about prices that are expected to increase by 2 percent year over year. A stable financial system cannot happen when a central bank manipulates interest rates and controls the money supply…

Unfortunately, he has never said anything like this, although he would be correct if he did. But we can dream! Would the world not be a better place if he had?

Instead, the chair said little that was honest or interesting in his most recent press conference. He plans on keeping rates low while continually increasing the money supply in order to inflate away the US dollar. The crisis is different, but the response remains the same. Actions taken by the Fed must be swift but also temporary. The takeaway is that there is nothing more permanent than a temporary solution.

As far as the trillion-dollar temporary lending facilities are concerned, in the Q&A Powell answered:

So I wouldn’t look for us to be sending signals about cutting back on facilities or anything like that for a very long time. We’re in this until we’re well through it.

This was confirmed by a press release during the week that noted:

The Federal Reserve Board on Tuesday announced an extension through December 31 of its lending facilities that were scheduled to expire on or around September 30.

Not only were the lending facilities extended, but:

The Federal Reserve on Wednesday announced the extensions of its temporary U.S. dollar liquidity swap lines and the temporary repurchase agreement facility for foreign and international monetary authorities (FIMA repo facility) through March 31, 2021.

Between lending facilities, swap lines to foreign central banks, and repurchase agreements for “monetary facilities” outside of the United States, we get a clear understanding about how things truly work at the Fed.

The press conference itself gave more expected fluff. In one breath Powell expressed the usual concern for the disenfranchised:

In particular, the rise in joblessness has been especially severe for lower-wage workers, for women, and for African Americans and Hispanics. This reversal of economic fortune has upended many lives and created great uncertainty about the future.

It’s interesting that he acknowledges a problem exists, but then does everything he can to exacerbate the problem by continuing inflationary wealth-destroying policies. He even went so far as saying in the Q&A that Congress appropriated $454 billion for the Fed’s facilities, pretending to not be aware that this money is borne by the entire nation, especially those “lower-wage workers” and the disenfranchised.

The top economists in the world continue to be dead set on a dual mandate which postulates a tradeoff between “inflation” and “unemployment,” and their beliefs require them to continually lower the interest rate and money supply in hopes of creating economic recovery. Ironically, these policies do the exact opposite of what they are intended to do. But the effects become more pernicious when we realize that the Fed is at a stage where they cannot go back. While they won’t admit it, the balance sheet cannot be reduced any more than these temporary facilities can actually be made temporary. Never have we seen a central bank successfully reverse course, whether it’s interest rates, balance sheet, or asset purchases including bonds and stocks. The Fed is no different.

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Economic Regulation Means Government Picks Winners and Losers

08/03/2020Per Bylund

There is severe confusion about the meaning of economic growth. Many seem to mistakenly think that it has to do with GDP or producing stuff. It does not. Economic growth means that an economy's ability to satisfy people's wants, whatever they are—that is, to produce well-being—increases.

GDP is a rather terrible way of capturing this using (public) statistics and is corrupted by those benefitting from corrupting such figures. GDP is not growth.

Likewise, having more stuff in stores isn't growth. Producing increasing quantities of stuff that nobody is willing to buy is the very opposite of economic growth: it is wasting our limited productive capacity. But note the word “willing.” Well-being is not about (objective) needs, but about being able to escape felt uneasiness. It can turn out to be right or wrong, but that’s beside the point.

Economic growth is the increased ability to satisfy whatever wants people have, for whatever reasons they may have. Examples of economic growth aren't the newest iPhone or plastic toy made in China as much as it’s the availability of quality housing, food and nourishment, and the ability to treat disease. One obvious example of economic growth since the days of Malthus is the enormous increase in our ability to produce food. The quantity and quality have increased immensely. We use less resources to satisfy more wants—that's the meaning of economic growth.

“Economic” means simply economizing or finding the better use of scarce resources (not only natural ones).  Economic growth is thus better economizing. It means that we have the ability, which means we can afford, to satisfy more wants than just the basic needs.

The beautiful thing with economic growth is that it applies to society overall as well as to all individuals: increased productive capacity means more ways of satisfying wants but also cheaper ways of doing so. But this does not, of course, imply that the distribution of access and ability to consume is equal and instantaneous. It spreads in stepwise fashion and will reach everyone.

Increased productivity increases the purchasing power of all money, including (and most importantly) low wages, thus making it much more affordable to satisfy one's needs and wants. But the distribution of such prosperity cannot be equal or instantaneous: any new innovation, new good, new service, etc. will be created somewhere, by someone—it cannot be created for 7 billion plus people instantaneously.

So anything new, including new jobs and new productive abilities, has to spread, as ripples, across the economy. As new things are created all the time, this means that we'll never actually get to a point where everyone enjoys exactly the same standard of living. It cannot be any other way, because economic growth, and the well-being it generates through the ability to satisfy wants, is a process.

Perfect equality is possible only by not having growth: to pull the brakes, not increase well-being. In other words, to not increase convenience and living standards, not figure out how to treat diseases that we would otherwise soon be able to cure. Those are our options, not the fairytale of "equal access to the outcome of growth."

This doesn't mean, of course, that we should be satisfied with inequalities. It only means that we should recognize that some inequality is inescapable if we want everyone to enjoy higher living standards. But we should also recognize that much of the inequality we are seeing today is not of this “natural” kind: it's inequality of political rather than economic origin. This comes in two forms: inherited from privileges enjoyed by a few in the past, reinforced by contemporary political and social structures, and privileges created today through policies creating winners (cronyism, favoritism, rent seeking, etc.).

From the point of view of economic growth as an economic phenomenon, policy-originated inequality has effects on both the creation and distribution of prosperity. First, policy creates winners by (a) protecting some from the competition of new entrants and future winners and (b) restricting (monopolizing) the use of new technologies, thereby propping up incumbents. Second, policy creates losers by redistributing value and economic capabilities to those favored politically. This means that policy has two primary effects on economic growth: it limits the creation of value and distorts its distribution.

Needless to say, this inequality is not beneficial for society overall, but only for those who are favored. It is the creation of winners by creating losers. This is not economic growth, which is accomplished by better economizing—increased ability to satisfy wants.

In a sense, political favoritism and the inequality it causes are the opposite of economic growth, since it creates winners (rich) at the expense of others (generally spread out across a larger population). It's just a redistribution of value already created by introducing inefficiencies into the system: productive capabilities are not allocated based on the creation of well-being but based on political clout. Over time, the economy is actually worse off because of this, so the process of economic growth suffers.

It is important to keep these two “sides” of the inequality coin in mind when discussing the problem. Simply pushing the stop button on economic growth will only accomplish politics’ increased influence over economizing. That's hardly beneficial, at least not for those other than the political class and insiders of the corporatist system. Rather, a solution would be to get rid of politically created and reinforced privilege and allow economic processes to readjust to reality: to target production of well-being instead of favors and influence. This will not do away with inequality as such, but will significantly decrease it and will do away with most of its harmful effects. It would mean an economy where entrepreneurs and workers alike would benefit from producing value for others. In other words, economic growth and higher living standards.

The alternatives are rather easy to understand, yet what's commonly on the agenda of pundits and political commentators is made-up alternatives, often ignorant utopias, that distort the meaning of both privilege and economic growth. The alternatives we have are the ones stated above, nothing else. Make your pick. Striving to realize impossible fairy tales is a waste of time, effort, and resources. That's not how we increase well-being and raise the standard of living. To me, the solution is quite obvious. Most people seem to pick the fairy tale.

[This article is an adaptation of a Twitter thread.]

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The Road Back from Interstellar Serfdom

08/03/2020Gary Galles

Almost as long as I can remember, I have been a fan of science fiction. I like it for the escapism it allows me, especially when I have some free time on a trip. But sometimes I also find some real nuggets of insight or inspiration there. That probably reflects, in part, how my attraction to liberty affects my book choices. A good example is a passage from a book that I read on the trip I just returned from, during a time when escapism from current reality seems particularly justified, particularly with respect to liberty.

It comes from chapter 29 in Jaxin Reid’s Operation Starfold, the seventh of ten books in his Pirates of the Milky Way series, in a conversation about the nature of government, represented in the series by the League versus the Republic.

It’s not so much the actual League or the Republic, it’s the systems of government they represent.

The worldviews are incompatible with one another…control versus freedom…the underlying fundamental assumptions of both systems are diametrically opposed.

When you have a controlled society like the League, eventually everything has to be controlled to make it work….that leads to totalitarianism. Total control by the government.

This is why communism always fails. It’s why socialism eventually fails, too….More and more control is gathered up by the government and when it hits a tipping point, everything falls apart.

The League still operates from a fundamental assumption regarding control of its citizenry….People are meant to be directed rather than fully allowed to pursue their own self-interests.

The Republic, on the other hand, has a fundamental assumption regarding human liberty. People there are free to do what they want, within reason…so conflict between the two was inevitable.

This conversation, which reflects an important aspect of Reid’s series, reminds me so much of the work of Friedrich Hayek that I might call it The Road Back from Interstellar Serfdom. And Reid’s conclusions also echo Hayek.

Ultimately, the system offering more freedom is the side to be on….Because freedom always burns bright in the human heart, no matter what system of government it lives under at the moment.

I respect the notions of personal liberty more than I ever did before. I see now why people have been willing to die so their children can grow up in a more free society. It’s worth fighting for.

As a professor of economics for the last four decades, it has been painful for me to observe how many have received college degrees, or taught classes to those students, while knowing less (or the opposite) of the central importance of liberty, not only in society, but in everyday life, than they could have acquired from reading insightful “escapist” science fiction such as Jaxon Reid’s. And it is hard to be optimistic about what will qualify one as “educated” in the immediate future. But I find hope for the inspiration to love liberty, which can still be found, even if not very easily at far too many colleges.

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