The Myth of Political Inaction on Gun Control

The Myth of Political Inaction on Gun Control

08/05/2019Tho Bishop

One of the many unfortunate consequences of the politicization of America is the natural reaction for political factions to bunker down with dependable talking points in the immediate aftermath of a tragedy. There is perhaps no issue where this is more obvious than gun control, where the political discourse has effectively devolved into sharing mindless memes before even the most basic facts are known. Obviously, the repeated reading of political scripts lends itself to the perpetuation of false conclusions and faulty analysis.

One of the best writers out there correcting the record is our own Ryan McMaken. His work has highlighted there is plenty of evidence that shows that there is simply no correlation between gun ownership rates and gun violence, the misuse of international comparisons to America, and that it’s a general mistake to look at a collective rate of gun violence in the US.

Beyond the issue of gun policy itself, there is another basic fallacy whenever there is a discussion over political solutions to a particular problem — a narrow focus on federal action.

For example, in the aftermath of this weekend’s shootings, there has been a lot of noise regarding the lack of federal responses to past mass shootings. Ignoring the questions of whether any sort of legislative response would be either desirable or constitutional, there is a fundamental problem in viewing the federal government as the only legislative body that creates public policy.

If we consider state governments, for example, we have seen a dramatic rise in gun control measures since the Parkland High School shooting in 2018.

As Pew Research noted in August of last year, 50 different gun-focused bills were signed into law by both Democrat and Republican governors just five months after the tragedy. This trend continued in 2019, with numerous bills working their way across the country, particularly the “red flag” laws that have even won the support of the NRA.


Source: Pew Research

(For a handy chart of 2018 legislation passed, click here.)

As one would expect, states have taken dramatically different approaches to the issue, based on their population and ideological bent of the legislature. California, for example, has passed some of the most restrictive laws in the country, including background checks on ammo purchases and a ban on large-capacity magazines that has been the subject of a legal challenge. In contrast, Oklahoma’s governor signed a “Constitutional Carry” bill just this year.

The advantages of this decentralized approach are numerous.

One, there are clear differences in the needs and wishes of a state like California and a place like Wyoming or Montana.

Two, it helps defuse the high-stakes game of political domination that has helped erode American civil society. If half the country views the right to bear arms as a natural right that serves as a vital bulwark against government tyranny, and the other views it as an immoral defense of normalizing weapons of war, there is very little room for compromise. Instead, these political disagreements become a battle of the politically powerful vs. the politically vanquished, with the sides being determined every two years. Control over the senate or the judicial system becomes a matter of self-defense. The result is the saying of “politics as war through other means” taking on a very literal reading.

A third advantage arises when we look at the performance of these state-passed gun laws, allowing the opportunity for unexpected consequences of these policies to play out in real life. 

For example, we have seen how red-light laws in Maryland have led to the death of a man never convicted of a crime. Similarly, we’ve seen county-level nullification of tighter gun control laws in Washington state, with rural county sheriffs refusing to enforce laws promoted by urban politicians that they see as unconstitutional infringements on the second amendment (and an example of political decentralization beyond the state level).

A less obvious consequence is that pushing for legislation at the federal level helps feed the political theater of the absurd. 

For example, if Republican politicians know that gun control is extremely unpopular with their base, but don’t want to be seen as being indifferent to a national tragedy, their response is to find easier targets to hit. This has played out this weekend with many Republican leaders, including the president, returning to the tired old crusade of ranting about video games and social media as the true villains of this weekend's tragedies.

Of course, we should not underestimate a politician's ability to turn obvious absurdity into law. It is easy to foresee there being enough dolts in Congress willing to act on such desperate scapegoating. 

In fact, as some forms of gun control manage to win bipartisan support, the best protection against federal infringement of American gun rights is the very political dysfunction often lamented by the press and other “Serious People.”

Any American that values their gun rights should hope some new twitter spat between Trump and "the Squad" can prevent bipartisan cooperation toward the president's desire to “take the guns first, go through due process second.”

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The WEF’s Outlook for 2023

01/30/2023Robert Aro

With January’s world elite submit in Davos wrapping up earlier this month, members of the World Economic Forum (WEF), who publicly celebrate their infiltration of governments across the globe, continue to do what they do best, i.e. intervene in the market for the purpose of destabilizing the world with ominous projects like the Great Reset.

Their predictions begin with a recession in 2023:

A global recession is seen as likely by two-thirds of respondents to the World Economic Forum’s Chief Economists Outlook…

Surely, everyone should anticipate a recession by now, but maybe not? Further details are provided:

…expect growth to drop to 1.9% this year from 3% in 2022 because of intersecting crises such the Ukraine war, surging inflation, debt tightening and the climate emergency.

Take a moment to consider just how much the average person, not just in America, but the entire world, is forced to pay for that which they have no business in, no part of, and no desire to support. Notice some of the problems ahead:

The War in Ukraine costs billions of dollars. You may sympathize but unless you have family or loved ones in the region, you likely don’t feel directly responsible for its funding.

Primarily due to the Federal Reserve printing trillions of dollars a few years ago, “surging inflation” was exacerbated by governments forcing a worldwide economic shutdown during the same time period.

“Debt tightening” is something no one should hold their breath on. If there has ever been a documented case of government showing spending restraint through monetary/fiscal policies, those instances have been few and far between.

The following chart highlights America’s debt and debt ceiling problem since 1970:

Few things in life should be given a 0% chance of ever happening; but if anything is to be assigned a probability of zero, it would be debt tightening. Per the chart, there is absolutely no historical evidence that managing the debt was ever possible. The advent of the Federal Reserve ensured debt management would never be something the country could handle.

Rounding out events to anticipate in 2023: “climate emergency.” Likely a costly endeavor; how much money will be needed to fight climate change? And, how will this impact the economy? This has yet to be seen.

What is seen is the unimaginable central planning power wielded by a handful of elected and unelected officials, whether through war, money (debt) creation, or other schemes such as climate change. The average person, Sumner’s The Forgotten Man, is funding a great deal that has nothing to do with them.

The WEF’s list provides plenty more risks and unpleasant events; this was only some. But at the conclusion of their summary of existing and potential economic problems, which they are largely to blame, they ask:

Can central bank digital currencies help stabilize global financial markets?

The unequivocal answer is and should always be a hard “no.” Central planning had its shot in the 20th and failed miserably. Unfortunately, so few seem to remember, or care. We’re almost a quarter of the way into the 21st century and, so far, the role of the central planner has only gained in stature. We can only wonder how many more times humanity must saddle the brink of collapse due to the precious plans of a few.

There are some excellent podcasts regarding the WEF that warrant a listen. The Human Action Podcast topic was Davos: Has Globalism Peaked, Radio Rothbard discussed How the Fed Fuels WEF’s Managerial Revolution, and Michael Rectenwald wrote an interesting article titled: Mastering the Future: The Megalomaniacal Ambitions of the WEF. It’s probably also a good idea to read the WEF’s website for good measure, since it’s good to know the direction in which they intend to nudge or overtly direct society. Or, if nothing else, to at least consider the  5 reasons why eating insects could reduce climate change. Much can be learned from the WEF, especially that the best place to keep a conspiracy, in fact, is in plain sight.

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Crypto Custody… At the Fed?

01/23/2023Robert Aro

The idea that billionaires would gather behind closed doors and discuss the fate of the world is no longer conspiracy. The more you read, the more you’ll see. The plans are laid out in plain sight.

Take a look at this chart from the World Economic Forum (WEF) itself. Notice anything strange (hint: top right)?

Central Bank Digital Currency (CBDC) was undoubtedly on the agenda at this years’ meeting in Davos. Here is where one must maintain a keen eye. When they discuss risks surrounding cryptocurrency, like custody, they provide neutral points and maintain an air of uncertainty. Per the chart above, they’re not stating a conclusion, but merely showing how risk is reduced the higher up one goes on the scale.

Self-custody was once the safest way to store your crypto. Looking at this chart, if a central bank offered custody of “your” CBDC, it would offer an even higher measure of security.

They’ll try to convince you by claiming they spent a lot of money, time, and expertise exploring the issue of digital money for the “public’s interest.” Nonetheless, no different than a scientific research paper, we must ask, who funded the project?

Over the past year, an interdisciplinary research team funded by the Bill & Melinda Gates Foundation…

If Bill Gates can influence the future of CBDCs the same way he has the scientific, medical, and drug market, then we’re in for something spectacular in the future.

And this future could be just around the corner. According to one of the experts at the World Economic Forum:

Over the next four years, we should expect to see many central banks decide whether they will use blockchain and distributed ledger technologies to improve their processes and economic welfare.

Four years from now seems a lifetime away, especially when most people in the wealthiest nations on earth are living paycheck to paycheck, struggling with an ever-increasing cost of living, and very little about the future looks promising. Yet, one day, CBDCs will be implemented.

It’s all part of the plan. Literally, the WEF has the Centre for the Fourth Industrial Revolution, where, amongst other things they’ve:

…built a global community of central banks, international organizations and leading blockchain experts to identify and leverage innovations in distributed ledger technologies (DLT) that could help usher in a new age for the global banking system.

The plan is progressing quite nicely too! They have no problem saying:

We are now helping central banks build, pilot and scale innovative policy frameworks for guiding the implementation of DLT, with a focus on central bank digital currencies (CBDCs). 

The difficulty is that as of yet, these ideas are still intangible to the public. There is currently no functioning Fedcoin. If we are cashless, it is only by choice. Individuals cannot hold a deposit at the Federal Reserve.

But just because the world looks like this today, doesn’t mean it will look like this tomorrow. Everything the WEF publishes, these meetings in Davos, and whatever the response to the next crisis will be are all designed to move the masses away from liberty, freedom, privacy, security, and autonomy, to be handled by another. They market whatever it is they’re doing as a public service. The reality is anything but. Society has seen this before, many times and in many forms.

Unfortunately, by the time CBDC hits the front page, by the time society has become officially cashless, and by the time you're forced to accept a salary, or pay debts in Fedcoin, held in custody at your local Federal Reserve branch, it will be too late. It’s like waiting for a tornado to touchdown on your front porch; you know it’s coming. It’s just a question of how bad it will be, whether you’ve prepared for it, or whether you’ve left town completely.

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More Lies in the CPI

01/16/2023Robert Aro

As reported by CNBC last week, the Consumer Price Index (CPI) figure of 6.5% shows how the mainstream media disseminates false economic information for consumption by the masses. Try to spot some of the more concerning parts:

Initially, the chart raises questions such as where this data comes from and who participated in the sampling. Once the data was compiled, how did statisticians determine what constitutes the “average” egg, frankfurter, or new vehicle?

In another article, CNBC tries to explain:

CPI is the most closely watched inflation gauge as it takes into account moves in everything from a gallon of gas to a dozen eggs and the cost of airline tickets.

As discussed on multiple occasions, calculating (price) inflation is the Art of Moving the Goal Posts. Consider the impossibility of comparing gas, eggs, and an airline ticket. Adding them up and dividing by 3 would not produce meaningful results.

However, if weights of relative importance were assigned to every individual item then apples could be compared to oranges, mathematically. Of course, statistical calculation doesn’t equal sound logic. In addition to using highly subjective guess work to arrive at these relative weights, other tactics such as adjusting for seasonality or simply excluding certain items if they’re “too volatile” are employed to massage the CPI.

Consider the two images below, the first being the latest snapshot of the CPI data showing the relative importance:

Now compare the relative importance from almost a year ago:

According to the charts, since last year, food has become less important while energy has become more important. Unfortunately, we live in a society that values statistical calculation and the ability to draw upon data more than reasoning.

Rather than argue with merits or lack of logic itself, mainstream economists found that the best career move is to not fight for the truth, but embrace the data, flaws included. This leads to Fedspeak like this excerpt from Andrew Hunter, a senior economists at Capital Economics who told CNBC:

The huge amount of inflation we had from rising gas prices has now almost completely reversed.

It’s one thing to say (price) inflation has slowed in recent months, but to claim “almost completely reversed,” simply makes no sense. The average person could only wish that prices have reversed, meaning price decreases, but this is not the case. At best, we can hope for a slowdown in the rate of increase.

He’s not alone in his inflation elation. In the same article, Mark Zandi, chief economist at Moody’s Analytics said:

I don’t think people will be talking about inflation this time next year.

And despite the skyrocketing price of eggs as purported by the abundance of memes on social media, he went so far as to say:

I think it’s already starting to feel better for people.

Naturally, Moody’s top economist is in a much higher income bracket than the average person; so his perspective could be skewed.

Ultimately, the biggest red flag is waved, not by the data itself, or the economists whose job it is to cheerlead the Fed and its support system, but it comes from this:

Inflation closed out 2022 with a 6.5% annual reading, as measured by the consumer price index, the U.S. Bureau of Labor Statistics said Thursday. It was in line with economists’ expectations.

Given the countless data fields and inputs, including relative weights of importance required to arrive at the CPI figure, how is it conceivable that economists’ expectations matched that of the bureau of labor and statistics?

Either these economists are really that good, or this data is really that bad. 

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Kevin McCarthy Faces New House Rules and the Debt Ceiling Fight

It took 15 votes and a host of concessions to the Freedom Caucus and its allies, but Kevin McCarthy (finally) became Speaker of the House. Of course, the real length of the delay (in McCarthy’s eyes anyway) was much longer than the three days last week. Afterall, when John Boehner abruptly stepped down in 2015, McCarthy had been the heir apparent. A similar lack of support among the more hardline fiscally conservative members, however, resulted in the elevation of Paul Ryan to the top job in the House.

With Steve Scalise and Jim Jordan lurking in the prospective background, McCarthy initially talked tough: in a speech before the first vote he demanded the members loyalty, saying he’d “earned” the job.

A few embarrassing votes later, and the necessary concessions came on like a flood.

Frankly, there is a lot to like:

Apart from the fact any member may now precipitate a vote to vacate the chair, in the new House all income tax increases will now require a three fifths vote; general spending cut amendments will be allowed; no unauthorized appropriations may be increased; and, perhaps biggest of all, any increases in mandatory spending must be offset immediately by equivalent cuts.

Or, as the Washington Post put it: “The Terrorists Have Already Won.” 

Gross hyperbole aside, the now-familiar debt ceiling standoff later this summer looks set to be a big one. McCarthy has, rightly, never been trusted, and his concessions to secure the job of Speaker rendered him effectively impotent. Whatever he and his allies may think they have cooked up to get out of the debt ceiling fight, they are mistaken.

It will be a fight, or it will be his job, and if Kevin McCarthy has proven one thing over the course of his time in D.C., it is that he will do anything for power. 

Already looking ahead, Republicans and Democrats are openly mulling the parliamentary technicalities that might be exploited to avoid a government shutdown or default. A discharge petition, for example, could theoretically advance the bill directly to a vote over the objections of the Speaker.

McCarthy would no doubt be grateful. 

It had been before the Civil War that an election for Speaker took longer than it did for the 118th Congress. Should he face an attempted ouster (likely), McCarthy will make history again as the first to face a privileged motion to vacate the chair in a century.

Recognizing his predicament, some Democrats are already speaking openly of the next debt ceiling fight as an opportunity. With Biden already saying he “refuses to negotiate” and that the debt ceiling must be raised “without strings,'' Democrats seem to be banking on a repeat of the experiences of both Clinton and Obama, who benefited politically from their respective standoffs and shutdowns.

A long shot, but not unimaginable scenario given the narrow margins in the current House, is Hakeem Jeffries winding up Speaker before the year is out. There are still a number of Tuesday Group Republicans in the House, and in the event of a stalemate some of them in purple districts might be tempted to jump ship in order to save themselves.

Such political consequences are impossible to predict with any certainty, and so only time will tell. However, for their part those committed House Republicans should stick to their guns: government spending needs cutting and the debt needs reducing.

As a parting observation, the revolution continues to eat its children: Just as Gingrich came to be viewed as too willing to compromise by his own protégés, such as John Boehner, Boehner in turn was forced out by his own more hard-edged newer colleagues, like Jim Jordan – who, surprisingly, threw his critical support behind McCarthy in his final bid.

In an alternate universe, Jim Jordan headed the conservative opposition to McCarthy in his bid for Speaker, and the California Republican never got to move his things back into the Speaker’s office he had presumptively occupied.

As things stand, the Kevin McCarthy of this universe shouldn’t make himself too comfortable.

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Powell Answering Questions No One Asked

01/11/2023Robert Aro

The average price of eggs increased by 49%, butter/margarine by 34% year-over-year, CNBC reported as of November. Yet, with his first speech of the year, Federal Reserve Chair Jerome Powell addressed the issue of the Fed’s independence. Yes, the conference was on Central Bank independence. But how many Americans have any concern, or the slightest care for this?

At a conference in Sweden, Powell made his case using an appeal to democracy:

With independence comes the responsibility to provide the transparency that enables effective oversight by Congress, which, in turn, supports the Fed's democratic legitimacy. 

Strange that one of the country's most opaque (and possibly most unconstitutional) organizations speaks about both transparency and democratic legitimacy; but once the propagandists commit to Orwellian leaps of the absurd, they must never deviate from the narrative.

Normally, talk about Fed independence centers around being independent from Congress. It was Congress who was tasked by the constitution to handle monetary affairs of the country; it was also Congress who essentially outsourced the task to the Fed. However, Powell somewhat deviated from script when speaking about Fed independence in relation to the banking system.

In the area of bank regulation, too, the Fed has a degree of independence, as do the other federal bank regulators. Independence in this area helps ensure that the public can be confident that our supervisory decisions are not influenced by political considerations.

It’s an odd relationship. I frequently express how peculiar it is that the Fed is tasked with regulating the banking system while simultaneously paying an annual dividend to the very banks it regulates. In addition to the payout of very (normally) large profits, the Fed acts as the “lender of last resort,” creating money to buy bonds when it chooses, bails out wall street, pays interest on bank reserves held at the Fed, conducts repo/reverse repo operations, carrying out all sorts of tactics to keep the banking sector afloat.

No other industry is supported like the banking industry. The existence of the Fed allows banks to take on tremendous amounts of risk, knowing the Fed will protect the downside. In other words: privatize profits and socialize losses; one of the many reasons those who long for a free and fair society are against the Fed.

And so, in addition to lack of transparency, the Fed has an independence problem, whether from Congress or the banking sector. If there was something to agree with him yesterday, it would be that the Fed should not use its monetary powers to tackle climate change. Unfortunately, his stance on not being a “climate policymaker” is not without caveats. Powell tells us:

Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public's will as expressed through elections.

… if it wasn’t clear:

But without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.

Was he giving a wink to Congress?

The moment Congress gives the Fed explicit direction to fight climate change is the moment it becomes appropriate to use the Fed’s monetary firepower to fight the war on climate change. As the democratic process affords, this would be okay if the public, via the electoral process, expressed enough interest on the topic.

It all invokes an interesting conclusion which illustrates the myth of Fed independence. It’s Congress (backed by wealthy individuals) who allows the Fed to exist. The Fed can only serve as a tool to protect special interests (i.e. the same wealthy individuals); and the Fed would never end itself anymore than Congress would. It’s a messy affair! But the Fed, Congress and the current banking system are inextricably linked, and by their very nature go against the public’s interest.

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Economists Should Help Limit at Least One Major American Political Party

01/10/2023James Anthony

Great economists have worked on the economy’s key initial and boundary conditions—those in politics and governments. Now, maximum leverage will come from improving on the current party system.

Economics Is the Study of Humans’ Actions to Add Value

Economists study human action that’s intended to add value. Economists make use of philosophy, theory, and observations. Everything flows from the axiom that humans act intentionally.

Economists consider complex, real-world action. Because good economics is anchored in sound theory, it provides understanding that’s empirically valid. This is what the proper study of real-world action should be expected to do, since after all the most-complete model of the real world is the real world itself.

Politics Sets the Key Initial and Boundary Conditions

Politics is human action related to governments. On the human action that adds value, which is the subject of economics, politics is what sets the key initial and boundary conditions.

Initial and boundary conditions critically influence the actions throughout systems across time.

Initial and boundary conditions influence model systems, but equally influence real systems. In both cases, initial and boundary conditions limit the extreme values that any parts of the system reach, and constrain the time that this takes.

In economic systems, initial and boundary conditions limit how much value can be added by human action.

Voter Education Isn’t a Prerequisite for Change

It may seem that before we will get less-economically-harmful actions from governments, we will need voters to achieve numeracy and economic literacy. Or that before we will get constitutional limited governments, we will need voters to understand how the Constitution is designed to work. But in both cases the key limit is not education but organization.

Generations of voters were taught to favor the policies of Prohibition and of Progressivism before these policies began to be adopted. This was helped along by government schools. Government actions produce results that are bad, so proponents need voters to be indoctrinated.

But voters need little education to support economically-sound low taxes and constitutional limited governments. In the American Colonies, under astoundingly-limited governments, voters experienced growth substantial enough to propel them from subsistence-level to having per-capita purchasing power that exceeded that of Great Britain’s people by 68%. These voters eagerly supported keeping total taxes as a fraction of GDP no higher than 1% to 2%, and these voters watchfully supported the Constitution’s government-limiting processes. Government-limiting actions produce results that are good, so proponents only need to utilize effective government-limiting processes.

Maximum Leverage Is Provided by a Good Major Party

Today, the missing government-limiting process is the design and operation of at least one major party that’s good.

So far, no parties have been good. All parties to date have used centralized, top-down control and unenumerated, unrestrained power to select and elect candidates. All parties to date have lacked processes to disqualify bad incumbents.

The processes that all parties to date have used have ended up selecting for candidates who won’t use the Constitution’s decentralized, bottom-up control and offsetting powers to limit government.

A good party, by design, and in operation, will use Constitution-derived decentralized, bottom-up control and offsetting powers to limit the party government. A good party will have processes to disqualify bad incumbents.

Given this design and operation, a good party will select for candidates who will in turn use the Constitution’s decentralized, bottom-up control and offsetting powers to limit governments.

Past Great Economists Have Taken on Politics

To appreciate the relationship between economics and politics, it’s not necessary to visualize the economy as being capable of being mathematically modeled, it’s only necessary to pay attention to the big picture. Economics includes bedrock content—money, banking, finance—that, in historical experience, has resulted from the combined action of government people and their business cronies.

Naturally, then, politics has been considered in detail by great economists. For example:

These men, and others in their intellectual tradition, would have a field day with today’s decentralized media, today’s Tea Party and more-libertarian elected minorities in politics, and today’s opportunities to spontaneously network, experiment, and innovate.

Present Economists Should Help Limit At Least One Major Party

Many who present as economists conform their understanding to the desires of politicians. They are deep in the game, changing the outcomes. If good economists stand on the sidelines, that inaction might be all that’s needed to allow evil to triumph.

Economics isn’t a spectator sport, economics is purpose-driven action. The key value-adding actions are those of customers and producers. The key value-subtracting actions are those of politicians and cronies. And politics is controlled by parties, the tails that wag the dog.

To limit governments, then, limit at least one major party. To limit a party, focus first and foremost on processes that limit the party government. Build at least one good party to last.

Voters keep trying to break up the activist-crony, business-crony Progressive monopoly over government that has been grabbed by the major parties. All voters need is the right decentralized, self-limited party organization.

Economists are well-prepared to understand this and to be integral to the action that’s needed. Liberty is calling!

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7 Months of QT Down

01/06/2023Robert Aro

Another month has passed, and the Federal Reserve has once again been able to shrink its balance sheet. It’s now 7 months since the official start of Quantitative Tightening (QT). As of last release, on Thursday, their balance sheet stood at $8.507 trillion.

The long-term chart reveals it’s much easier to expand the balance sheet than to shrink it, with stock market crashes and recessions typically following.

The prior month’s article left off on November 30, when the balance sheet was over $75 billion higher. From Nov 30 to Jan 4, the US Treasuries (UST) balance decreased by roughly $58 billion and the Mortgage-Backed Securities (MBS) balance decreased by roughly $17 billion. (The reports come out every Thursday, so the time period is irregular).

Until we reach the inevitable conclusion of this Fed “tightening,” we will undoubtedly witness milestones and data points which we don’t see too often. Ryan McMaken wrote an article on the money supply and its recent move into negative growth. He noted that it is “not in itself an especially meaningful metric;” however, it does speak to the times we’re living in considering the last time this happened was 28 years ago. Look for new milestones to be hit as we continue along the path to a formal recession. Metrics such as how low the yield curve goes, for example, is a good one to watch.

In addition to economic data we must follow the headlines, like this one from CNBC, just at year end, to serve as a sign of things to come:

Stocks slipped on Friday to end a brutal 2022 with a whimper, as Wall Street wrapped up its worst year since 2008 on a sour note.

Of course, the Fed’s Monumental Monetary Tightening tends to have that effect on equities. And while the Fed can always print more money and may never technically become bankrupt, not every institution is as lucky. CNBC reminds us:

Bed Bath & Beyond warned Thursday it’s running out of cash and is considering bankruptcy.

Anyone holding Bed Bath & Beyond’s $1.2 billion in unsecured notes should be worried. To assuage reader’s fears, I checked the Fed’s Secondary Market Corporate Credit Facility (SMCCF) to see which corporate bonds America’s central bank held due to the COVID-19 crisis. The “SMCCF Transaction-specific Disclosures (XLSX)” document reveals the bonds previously held by the Fed:

(Note: The list above is from the last disclosure XLSX file on October 13, 2021, but on the January 11, 2021 file, the Fed held bonds of 557 different companies; this excludes all bond ETF holdings!).

Luckily Bed Bath and Beyond didn’t make the list. But why the Fed held bonds of Pfizer, Target, or Toyota… or any other multinational organization is knowledge in which we’ll never be privy.

In 2023, expect to see news headlines pile up as more companies inexplicably find that the sure bets they placed when credit was cheap and easy are not so certain anymore, now that credit is more expensive and harder to come by.

As a reminder, the continual problem (and inevitable conclusion) did not start when the Fed decided to tighten in 2022; rather, the foundation for failure was laid in 2020 when they chose to expand the balance sheet (again). It began with the $5 trillion money creation scheme, when the Fed intervened, buying bonds of Target instead of our once beloved, and possibly now defunct Bed Bath & Beyond.

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2023 Begins With a $1.7 Trillion Theft

01/03/2023Robert Aro

The Federal Reserve has been oddly quiet this holiday season. However, members of congress have not. Only a few days before the new year, on December 29, President Biden signed the $1.7 trillion government funding bill known as the Consolidated Appropriations Act, 2023.

So, what do you get for $1.7 trillion these days?

The answer is not much, if you’re an American, as explained in the 53-page Summary of Appropriations Provisions by Subcommittee provided by the House Committee on Appropriations. Reading through the document reveals more Alphabet Soup Agencies than one thought possible, a whole host of foreign aid packages, as well as billions marked for Ukraine.

Continuing with the long-standing tradition of using public resources to fund special interests:

…the package includes $27.9 billion as part of the fourth Ukraine supplemental…

It’s almost meant to be confusing as the summary of this Act cites other Acts, so it’s difficult to determine the total amount being sent to Ukraine. For example:

The Additional Ukraine Supplemental Appropriations Act, 2023, provides $45 billion in emergency funding to support the Ukrainian people, defend global democracy in the wake of Russia’s unprovoked attack on Ukraine, and for other purposes.

This is in addition to last year’s funding, which according to the Council on Foreign Relations:

In 2022, the Biden administration and the U.S. Congress have directed nearly $50 billion in assistance to Ukraine…

Determining just how much money has, and will, ultimately be sent to Ukraine might take some time to figure out, as the war has yet to be won.

With each turn of the page the Consolidated Appropriations Act, 2023 reveals startling insights into how the government plans to spend $1.7 trillion of public money. Consider the section where it lists “support for U.S. allies, partners, and programs,” such as:

Venezuela: Recommends $50 million for democracy programs, as well as funding to support Venezuelan migrants in third countries.

Which pales in comparison to:

Colombia: Recommends $487 million, including $37.5 million for rule of law and human rights activities and $40 million to enhance security in rural municipalities with high coca production or levels of illicit activities.

It seems the War on Drugs also has yet to be won.

Then there are the usual amounts to keep the State Apparatus running: $858 billion in defense, $158.3 billion for Supplemental Nutrition Assistance Program (SNAP, i.e., food stamps), $4.25 billion for the patent office, $3.5 billion for the FDA, $1.75 billion for the ATF, and don’t forget:

The bill includes $12.3 billion for the IRS.

Unfortunately there is little comfort to offer. But if there is any consolation, the US Congress website provides the phone number of state representatives and senators.

It would be nice to talk to them. Ask them about their thoughts on a multitude of issues, such as how they decided to fund which countries, programs, and how they arrived at the amounts. Then consider how much more difficult this would be if the Fed wasn’t ready to create US dollars, buy US debt, and intervene in the market at a moment's notice, amongst other things…

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The Bad Economics of Democracy: Why Horse Trading is More Than Just a Moral Problem

01/01/2023Jayat Joshi

If you follow Indian politics, chances are you expect news of political horse trading every major election cycle. Horse trading is the phenomenon of elected representatives switching their party affiliations, often in exchange for money or roles in government. When there are simultaneous elections in several states, and the time that lapses between elections less, the machinery of all our political parties is devoted to churning out strategies for winning. And this makes the partisan system of our politics the elephant in the room, but an invisible one.

Horse trading has been around for as long as Indian democracy, yet we always view it as something that morally corrupts the ideal realm of politics every other season. In reality, it is a result of the incentives created by the institutional structure of our polity.

Partisanship has come to be seen as a default in contemporary politics, but this was not always the case. Moreover, it is not viewed as a source of our political problems per se, because both political action and analysis obscure the incentives that it gives rise to.

In ancient Athens, eligible adult male citizens could vote on laws and contest to lead (though this criterion wasn't ideal). Throughout medieval India, there existed one form or another of republican government, some of which continued into the modern period at smaller levels. When the United States was being formed, the Founding Fathers too wanted to insulate the spirit of republicanism from the tensions inherent in a democratic setup. James Madison famously argued about the threat factionalism posed to citizens’ rights. s

In a republic, the constitution is supposed to place institutional checks on the government and places power with the individual. In a democracy, it is the people, the majority, from whom flows the power to govern and make laws. A democratic system is supposed to supervene upon a republican framework, not overwhelm it.

But once elected, a democratic government may escape the checks placed on it constitutionally. This issue is magnified in the case of India, whose constitution already tilts more towards a unitary state than a federal one. Even China boasts a greater degree of decentralization (albeit with its own set of drawbacks). But primarily, it is the capacity of this democratic ideology to generate partisan political factions that allows it to upend the power given to voters.

First, it is important to wrest the romance associated with democracy and the election process. The way in which people exercise their votes is itself highly opaque and ethically fraught. Several scholars like Garett Jones, Bryan Caplan and Jason Brennan have studied this in detail.

Once we have a nonromantic view, it can be extended to the contestants of the election process. Unlike voters, those who contest for representation end up competing for votes as well as factions/parties. A win/loss in one space sends out corresponding signals in the other. In fact, this is exactly how a democracy draws out and maintains the voter-legislator distinction, which is normatively absent in a republic. 

Horse trading, a metaphor that originated from the untrustworthy market for horses during the so-called Gilded Age in the US, is indicative of the lack of market mechanisms (profit/loss and pricing) to discipline immoral behavior. It is apt for an institutional environment that creates a ‘market’ for politics, but not where it may be useful.

In other words, it is the voting mechanism that needs to be supplemented with improved knowledge, but it is large, powerful political parties that become the principal buyers and sellers. They shape outcomes and trade the stamp of their identity and partisanship with politicians. Often, politicians are not identified by the policies they espouse but by their party-based identities. This completely misses the fact that governance and representation are services provided to citizens, not just marks of social status.

There are two ways to overcome such partisanship: by creating a single party state, and by creating an altogether nonpartisan state. The former requires a strong, authoritarian, top-down structure, which is incompatible with the essential freedoms of individuals. The latter is the way to go forward. Nonpartisan politics do not entail that we get divided into tiny republics. For Madison too, it was the opposite. To go beyond narrow-minded factionalism, one needed to be politically positioned in a larger national sphere. In our times, the challenge he grappled with is even more critical. Polarization and partisanship still loom large, even if they are not dramatically high. But this is exactly the context in which an institutional intervention becomes vital.

This kind of intervention ought to be Hayekian in a sense, as it would be aimed at shifting the rules of the game to make it more conducive to catallactic action. In his famous essay, “The Use of Knowledge in Society,” Hayek cautioned against the seductive power of the belief that civilizational phenomena are produced and maintained through some sort of conscious ordering.

Thus, recognizing the shortcomings of ideological democracy does not go to suggest that the republic is the best political fix. It is to draw attention (especially in the Indian context) to why we constitutionally call ourselves a ‘republic’: to preserve our ability to have an individual political life within the socioeconomic collective, and continuously check the centralizing institutional orientation of democratic politics.

We ought to bend away the channels for partisan tendencies to get concentrated at the top. It is a matter of urgent political reform to reimagine the service of governance as equivalent to any other essential good or service, not as something that sits outside the economy.

The conventional view that compares opportunistic political transactions to greed-infested, bad-faith ‘markets’ gives us a simplistic description, not an analysis of the causes. It presumes that democratic politics exists in an ideal realm, and its flaws are the imperfections of humanity.

On the other hand, the institutional view underlines how, when certain rules of the game have ossified, general economic behavior can have corrupt outcomes. The economist James Buchanan said this best in his 1986 Nobel Prize lecture:

The relevant difference between markets and politics does not lie in the kinds of values/interests that persons pursue, but in the conditions under which they pursue their various interests.

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Brave New World Still Resonates with the Modern Reader

I’m rereading Brave New World as we’re kind of living in it. I loved it at school more and preferred it over 1984 because the characters were better developed, and the plot development more skillful, although each had a profound effect on me that has lasted throughout my life, and I often remember key scenes from each of them.

It’s amazingly perceptive, and replete with subtle meanings that are not explicitly stated. The masses of society participate meaningless activities with outpourings of emotions. One of the characters sees it for what it is and seethes with resentment at people objectifying one another as well as their lack of ability – or willingness – to critically examine the meaningless mantras that they repeat which form the social norms of their society.

However, the fact that he can see through the emptiness of his culture does not make him immune to the excruciating pain of being an outsider with no one to connect with. And it doesn’t stop his natural attraction to women, nor the pain of rejection that comes with it. At one point, feeling inadequate, he wants to assets himself to a friend, and mentions that he has a date with Lenina, a desirable woman. But his friend is tall and important and responds with, “Oh, good for you,” because he’s got girls throwing themselves at him for group sex in the park by virtue of his social status.

Perhaps you see yourself reflected in Brave New World, if you are a critic of the Covid regime, or mainstream politics, or what passes for economics these days. Knowing you have right on your side but feeling the clawing of the outsider.

The novel does not only capture the shallowness of society (“degeneracy” as is commonly now referred online) but how cruel it is to those who see through it, having nowhere to turn. It demonstrates how the carrot of worldly success and verbal rewards for conformity is underwritten by the stick of social rejection - encompassing exclusion from dating - pitting man against himself in an internal battle between the love of the truth as he sees it and the desire to experience communion and be one with his tribe.

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