Power & Market
The current head of the International Monetary Fund, Christina Lagarde, is the likely replacement for Mario Draghi at the European Central Bank. Draghi's eight-year term ends on October 31.
In practice, this has meant negative interest rates and huge growth in the ECB's balance sheet. Via these mechanisms, the central bank has intervened to prop up demand for government debt in Europe, and bail out a financial system in desperate need of liquidity.
Under Draghi's leadership, ECB's key target rate has been negative since June of 2014, and has been -0.4 percent since March of 2016.
There had been some speculation that the EU might nominate a compromise candidate who was inclined to moderately more hawkish policy favored by some German policymakers.
With the nomination of Lagarde, it looks like that's not going to happen.
Thus, in response to Lagarde's nomination, Alasdair MacLeod averred on Twitter: "Lagarde replaces Draghi. Bundesbank will be most unhappy: goodbye euro, hello mark?"
Macleod is likely engaging in hyperbole, as in the short term it seems unlikely the Bundesbank will be looking to make an exit. However, when the next recession hits, it becomes increasingly likely Europe will continue to splinter into two camps: the productive, savings-minded, and relatively financially-sound northern bloc versus the more profligate and less financially stable southern bloc.
German savers will be left all the more yield-starved by the ECB so as to keep interest rates for government debt down and liquidity high. It will essentially be a wealth transfer from northern Europe to southern Europe.
With Legarde at the helm of the ECB, this looks to be likely, and is no departure from the current road that Europe and the ECB are already headed down.
After all, as the AP reports today, Lagarde's easy-money leaning have long been quite apparent:
Under Lagarde’s leadership, the IMF has called for the ECB to continue its monetary stimulus efforts aimed at raising inflation and supporting a recovery that appears to be losing steam. The IMF’s review of the eurozone last year warned against premature interest rate increases and urged clear forward guidance, that is, promises to keep rates low well into the future. The report echoed much of what Draghi had been saying, including his urging for governments to do more to support their economies with well-targeted spending, and to engage in pro-business reforms.
Moreover, Lagarde sang the praises of negative interest rates back in 2016:
“We see the recent introduction of negative interest rates by the ECB and Bank of Japan—though not without side effects that warrant vigilance—as net positives in current circumstances,” Ms. Lagarde said.
For the established political powers, of course, Lagarde is a sound choice. She is by training not an economist at all, but a lawyer and politician. She knows how to manipulate Europe's regimes to buy support for the EU and to keep the status quo going by any means necessary.
If that requires a near-total takeover of financial markets— as recently described here by Thorstein Polleit, then Lagarde can be counted on to offer no resistance.
In November a year will have passed since the renegotiation of NAFTA. Although this version has new guidelines, for the most part its main principle prevails: free trade is beneficial for both parties. This is true with or without free trade agreements or the existence of "fair" trade. However, as a Parametria survey published in 2016 shows, most Mexicans still don't understand the multiple benefits that these opening policies entail.
Those benefits include:
- A greater diversification of brands and categories of consumer goods (According to IMCO)
- An increase of 21.154 billion dollars on foreign direct investment and of 339.244 billion dollars on Mexico's annual exports of goods and services since 1994 (According to the World Bank)
- Indirectly strengthening libertarian principles such as globalization (the free movement of ideas, people, capital and consumer goods) and property rights. As the liberal economist Frédéic Bastiat explained in his essay titled "Communism and Protection":
Every citizen who has produced or acquired a product should have the option of applying it immediately to his own use or of transferring it to whoever on the face of the earth agrees to give him in exchange the object of his desires. To deprive him of this option when he has committed no act contrary to public order and good morals, and solely to satisfy the convenience of another citizen, is to legitimize an act of plunder and to violate the law of justice .
- A possible contribution to the reduction of extreme poverty (measured as an income interval and not as inequality — less than half of the average national income — or access to specific consumer goods and services)
In "The Role of Trade in Ending Poverty," the World Bank estimates that between 1990 and 2010 the global percentage of people living under extreme poverty fell by half. In this report they use as a reference Kraay and Dollar's article titled "Growth is good for the poor" (in which they concluded that growth benefits the poor as much as it does the typical household) in order to explain the correlation, and possible causal relationship, of multiple economic variables. Their interpretation of the data establishes that GDP growth increases both the demand for labor and real wages for low skilled jobs:
It is the strong growth of the global economy over the past 10 years that has enabled the majority of the world’s working-age population to find employment. Real wages for low-skilled jobs have increased with GDP growth worldwide
In "The macroeconomy after tariffs," after studying the economic behavior of 151 countries from 1963 to 1914, its authors concluded that each increase of 3.6% on effective tariff rate produces a productivity reduction of 0.9% in 5 years. In some cases, this increase in average productivity is not only the result of the exit of less efficient companies from the market. As Nina Pavcinik shows in "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," companies that survive this trade opening also experience an increase in productivity.
A little known fact is that the percentage of people in Mexico who lived below the international line of extreme poverty in 2016 (income less than $1.90 dollars per day) is lower than in 1994: 4.1% less. In absolute numbers a similar scenario also occurs: 2.9 million people less. If the poverty line is used as a measure below $3.2 per day, we observe a reduction of 4.6 million people and of 9.3 in percentage points.
Due to the particular circumstances of the Mexican case (e.g., the 1994 financial crisis, social programs such as Oportunidades, among others), it is not possible to accurately determine if this commercial treaty contributed to the reduction of extreme poverty by only using global aggregates. Nevertheless, because of or despite trade liberalization, Mexico's extreme poverty has decreased since NAFTA.
The thesis here is that libertarianism as a political theory only carries the veneer of importance and centrality due to the strength and power of the democratic, administrative state in our time. Everywhere we look, we see the influence and effect of the state as an apparatus that guides and oversees the machinations of modern civilization. We speak not merely of the obvious libertarian issues like taxes and regulation but we see in the modern western state a cultural force. We so often push the idea that politics is downstream from culture, that we have lost the culture and therefore the state has followed the path of destruction.
But as was hinted on the AL editor’s blog, it is far more likely that Paul Gottfried has it right: the state has morphed into something much more sinister and it now leads the culture toward its own ends. The modern administrative state is the creator of culture and culture is now downstream from the state. Gottfried is especially succinct as to his meaning in his short excerpt:
Contrary to an older understanding of culture, what we are referring to is a process of moral and social radicalization. It is a process that didn’t come about unbidden but which powerful, pervasive administrative rule promoted. And the social engineering function of public administration here and elsewhere in the West has been particularly evident since the 1960s, with governmentally encouraged immigration and an accelerating war against discrimination. Presumably, when Hillary Clinton assured a gay rights group that she was addressing last year (October 5, 2015) that she would use the IRS to force recalcitrant religious institutions into endorsing gay marriage, she was not simply responding to a cultural condition. She was working to create one.
We have entered into a full politicization of society; there is nothing that the state-cultural complex does not touch. It guides the way we interact with others, the way we process and interpret events, and the way we think about social norms and basic social units and institutions.
Now then, to bring this back to the thesis: “libertarianism as a political theory only carries the veneer of importance and centrality due to the strength and power of the democratic, administrative, state in our time.” Since the state is everywhere we look, and libertarianism has a set of particular ethical critiques against the state, it seems to follow that libertarianism plays such an important place in our lives.
Stated differently, according to the libertarian doctrine, the initiation of aggression against the body or exterior property of others is a breach of ethically-laden rights; and the state is the most systematic, constant, and egregious violator of the principle. And as the state surrounds our every move, so we see libertarianism as a response to so much of our world.
This creates the illusion that libertarianism plays a fundamental role in society. That political theory itself is of primary importance for a people who wish for a better world, a world that is both more ethical and more free. And from this, we work to create a libertarian political strategy and a libertarian movement as well. And thus, the disease of modern administrative statism, which takes over our minds as the lens through which we find meaning, produces the impulse that one ought to dedicate himself to libertarianism as a path toward social preservation.
But it should be made clear that the only reason libertarianism as such seems to play such a fundamental role in the self-identity and life-meaning of so many in libertarian circles is due to the politicization of society. We live in the administrative state’s world and thus we even put our path toward social improvement strictly in terms of the political. It is not just that the state formally speaking is everywhere we look, it is that there is hardly any longer a culture that is distinct from the state. When Buck Johnson recently asked Paul Gottfried whether the Left or the State was the chief enemy in our time, Gottfried quickly responded: “what’s the difference?”
We Are Not the State
In times past libertarians correctly and properly held firm that “we” are not the state! Society and the state were separate and the state is an artificial entity as compared to society, which is natural. While importantly and profoundly still true, this does not take into account the extent to which the state has replaced natural and spontaneous society with its artificial one. It is true that the natural society is not born out of the state; the state is not the thing that naturally binds together peoples. But as the administrative, democratic state has come of age, it has created its own artificial society which is of course a society of Egalitarian Terror.
Under a free society that is not created by or bound up in the existence of the state, libertarianism plays much more the role of a legal theory, not a political theory. It’s important to remember that libertarianism chiefly speaks wisdom to scenarios of tension and strife between people who want to use scarce resources for their own ends. Libertarianism offers a standard by which we can determine who gets to use which good and in what way.
The role of libertarianism is to help us resolve disputes and arbitrate in situations of conflict. In other words, libertarianism is chiefly a legal theory that of course has political ramifications once society faces the creation of the state as an institutionalization of aggression (or as Murray Rothbard described it, “a band of robbers writ large.”).
Thus, the writer known as "Bionic Mosquito," offers:
I think we might want to stop thinking in such terms [as libertarian movement]. Not to give up on libertarian ideas, as these have a proper and meaningful place in any free society. Instead, to consider that libertarianism – properly defined – is so thin as to not allow any “libertarian” movement to form.
What this means to me is that men are not connected to other men on the basis of libertarianism. Marxist political movements, for instance, purport that classes are held together by their economic status: workers of the world unite. You are neither German nor Russian nor English. You are a worker, or you are a member of the bourgeois.
It is not the same with libertarianism, or at least a meaningful and realistic libertarianism over against the more universal libertarianism . Let me be clear here: libertarianism is only the thing that binds us is we presume the state’s politicized world! The Marxist worldview is at its root political so it makes sense that Marxism as an ideology binds them.
But libertarianism plays a different role in a free (non-politicized) society; it comes to the picture as a set of principles and guidelines by which we can judiciously determine what is criminal and what is legal, what should be responded to with coercion (such as murder or theft), and what should not be responded to with coercion (such as creating goods and services on the market).
In this case, those of us who are beginning to pay particular attention to the rapid and concerning leftist social revolution likely have more in common with each other, outside the bounds of libertarianism as a legal theory. And as the left-libertarians and mainstream libertarians in general either praise these developments as at the culmination of the “libertarian spirit” or at least just watch it all with neutral expressions and ambivalent reaction, they likely have more in common, generally speaking, with the progressive left.
The response to this is so often that “libertarians are connected not by their cultural preferences but by their anti-statism!” But this is only true under a politicized worldview. Putting aside the issue of politics, which presumably all libertarians would eventually want out of the way anyway, there is nothing else that binds us. And thus, our pretending that we are transcendentally bound by our libertarianism is exactly the sort of artificial connections that the state has aimed for!
Men form society not on the basis of a unifying legal theory, but the legal theory is adopted post-society. Libertarianism is a helpful tool in the development of peaceful civilization; it is neither the spring nor the engine from which society flows. Libertarianism as a unifying spirit is only conceivable because we operate in a world that has experienced the imposition of a political society. But perhaps, to presuppose this statist-world moving forward, and to subsequently work toward a bigger libertarian political movement, is to have already made the very mistake that continues to undermine our efforts toward a free society.
Brexit has caused some turbulent political times in Westminster, but the hole left by the UK in Brussels will be felt throughout the continent.
Putting the tedious fight of Brexit negotiations aside for a moment; what kind of Europe are we going to see develop in the next 10 years, after the UK departs the union? Will France and Germany continue to take the lead and form an ever-closer union? Will the central European axis of populists in Poland, Hungary, and Italy halt any kind of reform attempts? Will the UK become a free-market, competitive paradise that will force the EU to implement market-friendly policies as well?
Liberal, free-market supporters should not bet on either. Instead, their best hope is to aid the Netherlands – to make Europe more Dutch.
Despite being one of the six founding members of the EU, the Netherlands has always been the neglected junior partner, stuffed between France, Germany, and the UK; countries that shaped the future of the union in more significant ways. However, with the UK’s departure, the balance of power is likely to change, and Dutch politicians are hoping to benefit from this realignment.
Even if the UK regains some of its international reputation after the Brexit blunders, it will lose its ability to shape the future of the continent in the same way, like it did for the past 40+ years. The European Council will lose a member that could stop the tax harmonisation attempts of the Commission. There won’t be British MEPs who could push for the completion of the single market in the service sector, or be the voice of reason when it comes to financial regulation.
France and Germany will continue to prioritise the issues most important to them; finding a common EU solution for the migration issue, more foreign policy and military cooperation, and further eurozone integration. Germany is also likely to continue endorsing further free trade negotiations, whilst remain the centrist, compromise-seeking voice within the EU (instead of a country that dares to push for bold liberalising reforms).
However, there are many new proposals from the European Commission and ideas floated by the Parliament that would be bad news for anyone who would like to see a more liberal, market-friendly Europe.
The Commission’s recent proposal to push for Qualified Majority Voting in the European Council on certain tax issues would mean that individual member states could no longer veto tax harmonisation attempts. If it passes, then the corporate tax reform, known as CCCTB, would become suddenly a lot easier to implement.
In practice this means an additional layer of tax bureaucracy, undermining member states’ tax sovereignty, and creating new hurdles for business expansion.
Multiple member states and the Commission floated the idea of a digital turnover tax, applied to major multinational tech companies. France and the UK are especially keen on this harmful policy, that would lead to less tech investment on the continent. (The fact that the whole debate revolves around misleading numbers about tech companies not paying their fair share of tax burdens is just a side note in the story.)
There are also plans to expand the social pillar of the EU – essentially protectionist measures disguised as welfare regulation and harmonisation.
Can a single EU member state, like the Netherlands, halt these harmful policy proposals and introduce ones that would truly help European citizens? The latter could include the completion of the single market in the service sector, conducting free trade agreements that lower tariff and non-tariff trade barriers alike, and passing Treaty reforms that would enable pan-European institutions to focus on big picture policies, instead of trying to micro-regulate all aspects of our lives.
The Dutch won’t be enough on their own, but they are better placed to become the behind-the-scenes brokers of EU compromises than most of their European counterparts.
The German political elite tries to avoid the image that the whole show is run by them, while the French politicians love grandiose ideas, but lack the political capital to implement them – which is often for the better, as they rarely mean more liberal, free market policies. The new EU member states still have not yet developed a significant diplomatic force – especially now that some of them have declared Brussels as their ‘#1 enemy’, they have little chance of suddenly becoming the efficient dealmakers of Brussels.
On the other hand, the Netherlands, in close partnership with the Scandinavian countries, could gather the majority support for significant reforms. It can certainly gather enough support to reduce tariff and non-tariff trade barriers with the help of Germany and the central European manufacturing powerhouses. It can work together with France, Spain, Italy, and Germany to find workable solutions for eurozone reform. It can cooperate with Scandinavian and central European countries to stop harmonising attempts in taxation policy and push for a competitive European tax environment.
Netherlands is far from a free-market liberal paradise, and it certainly has its own challenges and bad policy proposals. However, broadly speaking it is one of the most pro-trade, pro-competition, pro-decentralisation EU member states.
Despite some wishes to the contrary, the European project has become more important than ever. The policies decided in Brussels will have a significant impact on most of our lives throughout the continent, even if certain citizens in Europe will cease to be EU citizens.
It is important to make the case for a liberal, laissez-fair EU, that’s slim, efficient and enables member states to compete within the single market, whilst remaining open to the rest of the word.
First published at the Institute for Economic Affairs
Back in 2016, Donald Trump criticized the Federal Reserve for keeping interest rates too low. Trump explained that the Fed's work to keep interest rates artificially low benefits the wealthy at the expense of the poor:
And you know the people who are hurt the most are people that saved all their lives, and thought they were going to live off the interest. Those people are getting absolutely creamed.
As a wealthy investor, though, Trump says he "loves low interest rates."
But those who cut down on debt and save their money are hurt by Fed policies:
The ones who did it right — they saved their money [and] they cut down on their mortgages, ... and now they're practically getting zero interest on the money," Trump said. "Those people have really been -- you could almost say discriminated against.
Trump also accused the Fed of creating a "false economy" that made Obama look good, but was really nothing more than a system propped up by Fed stimulus and quantitative easing.
At the time, many Trump supporters used this apparent awareness about the damage done by Fed policies as an indication that Trump would be hostile toward dovish Fed policies once in office.
This hope, however, has proven to be utterly unfounded. Trump apparently doesn't understand or doesn't believe his earlier (correct) critique of Fed policy.
He's done an about-face and If anything, Trump, now that he's in office, has been relentlessly enthusiastic about continued Fed stimulus.
He has repeatedly criticized the Fed to raising interest rates, saying in November:
So far, I’m not even a little bit happy with my selection of [Fed Chairman] Jay [Powell]. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.
Trump main beef with Powell and the Fed has been the bank's turn toward (very mild) hawkishness under Powell.
In other words, Powell has been doing what Janet Yellen should have done years ago, but lacked the guts to do.
The rate hikes under Powell are far too small, of course, and the Fed's balance sheet continues to be enormous. Powell knows that dumping the Fed's assets, which would have few buyers in the open market, deflation would likely set in.
(According to the dominant ideology in DC, this would be a terrible thing.)
But at least Powell appears to realize that unless the Fed can get the target rate back up to a level sufficiently above zero to allow for maneuvering in case of recession, the Fed will be boxed in.
Trump, who has never demonstrated any actual grasp of monetary policy — or economics in general — just wants to keep the current boom going. And whether he knows it or not, the "false economy" Trump pointed to under Obama is now Trump's false economy.Trump doesn't want that to go away so he now publicly calls for lower interest rates.
Given this, it's now a pretty safe bet that if recession does come during Trump's presidency, he'll be calling for ever-higher levels of stimulus and QE infinity. If he's pushing so hard now for low rates, just imagine what he'll do when the going gets even tougher.
Last September a very informative paper was published by the neoconservative Atlantic Council. In connection with this institution are such important public figures as Collin Powell, Condoleezza Rice and Henry Kissinger. The paper, written by John T. Watts, summarizes the main conclusions drawn at this year's Sovereign Challenges Conference in Washington, DC. The text allows for a deep look into some of the minds of the American elite and their allies. Its reading is therefore highly recommended. The inclined reader, however, should sometimes overlook empty phrases and distracting rhetoric to get to the heart of the matter.
At its core, it's about maintaining power. According to Watts, the big problem is “disinformation”, which is disseminated through new and alternative media. It destabilizes public institutions and in the worst case undermines the sovereignty of the state. This must be prevented.
Neoconservatives are fully aware that any state system ultimately depends on the trust of its citizens. Trust is the basis for the functioning of state institutions. New communication technologies, however, have increasingly enabled “extremist ideological” currents to spread their toxic messages and deprive people of confidence in existing institutions. It is precisely this loss of trust on the part of citizens that endangers the sovereignty of the state.1
The flood of information in the Internet age plays a decisive role because it makes targeted “disinformation” by small but well-organized groups possible in the first place. It leads to exaggeration, isolation and one-sidedness within one's own “echo chamber”. According to Watts, the sudden availability of large amounts of information can overburden a society. Too much useless and qualitatively inferior information can lead to isolation and polarization. People specifically select their sources of information and limit themselves in the process. They even have to do so in view of the many alternatives available to them. But in doing so, they tend to rely on those sources that confirm and reinforce their own prejudices.
In order to underline the potential seriousness of the situation, Watts refers to Nate Silver's book The Signal and the Noise, in which a parallel is drawn between the invention of the printing press and the advent of the Internet. This analogy was also taken up by the Scottish historian Niall Ferguson in his recent book The Square and the Tower.2 Both authors recall that the invention of printing not only made Luther's Reformation of the Christian Church possible, but also provided a powerful means of communication for many populist and, from today's point of view, deterrent movements. Here, for example, one can refer to the witch hunts of the early modern period. After Luther's Reformation, Europe was also plunged into centuries of religious wars. Is something similar threatening us today in the age of the Internet? It is clear that also today existing hierarchies and power structures are questioned and start to falter. This usually leads to the old elites giving their all in order to maintain their privileged position.
But first it has to be clarified who is really behind the specter of “disinformation”. Watts refers not only to all sorts of “conspiracy theorists” like “truthers,” “chemtrailers” or “anti-vaxxers”, whose political and social impact can really be doubted, but also to Islamic terror groups or the Russian secret service, which is said to have influenced the outcome of the American presidential elections through such powerful social networks as Facebook.
At this point, however, we should pause for a moment. Is interference in the political affairs of other countries an exclusively Russian phenomenon? No. This has always been the case everywhere, especially on the part of the USA in recent history. So, if the Russian secret service is behind targeted disinformation, can the American establishment really free itself from it? Here, too, a clear no. Think, for example, of the deliberate manipulation of public opinion before various military interventions in the Middle East.
For Watts it is simply about which narrative dominates and determines public opinion. Truth is an elastic term, he claims. The question is merely: "Whose truth?” So, it is nothing but a power struggle. From this point of view disinformation is merely a truth deviating from one's own truth and must be fought against. One's own truth becomes the disinformation of the opponent. Therefore, according to Watts, new gatekeepers are needed in the modern flow of information. The prevailing opinion must be brought back on track.
The good thing, however, is that Watts is wrong. Truth is not subjective. It is, if at all, very limited in elasticity. And if it turns out that the hitherto so dominant narrative of the American establishment has overstretched the truth at one point or another, it is a blessing that modern communication technology makes it possible to point this out critically and effectively. We can only hope that technology will always stay one step ahead of regulators and gatekeepers – and that citizens will ultimately trust the narrative that is closest to the truth.
The excellent British online magazine Spiked recently published this article warning about deteriorating attitudes toward elderly people in the UK. As the article points out, there is more to the problem than logistical and financial concerns about providing socialist medical care to an aging population. Nor do increasing lifespans in the West, with attendant increases in loneliness and age-related morbidity, account for this unhappy state of affairs. No, the root of the problem is simply a lack of caring and empathy, made worse by fewer intact multi-generational families and alienation between taxpayers and pensioners:
These are not just technical questions for the social-care sector to grapple with. They are far bigger than that, touching upon the issue of what kind of society we want to live in, and what we expect of each other. At root, there is the issue of what we regard as individual and collective responsibilities; and what the duties of the young are to the old; and the question of how elderly people come to decide for themselves how they should be cared for later in life.
More than that, the problems facing the social-care system need to be understood in the context of a wider generational hostility that is compounding, if not driving, a longstanding official neglect of older people’s care.
Sad, yes, but entirely predictable. Britain, perhaps faster and more vigorously than most western countries, has fallen prey to the doctrine of "presentism": an ahistorical narrative in which the past is always bad and repressive, feelings and "lived experiences" (generally quite lacking among the young, yes?) prevail over facts, and group identity dictates ideology. If the past is all wrong, the people who lived in it and even prospered during it surely are not to be admired or cared for:
‘Negativity about ageing and older people is pervasive in our society’, says Caroline Abrahams at Age UK. Whether it’s the nasty sentiment that Brexit voters are a bunch of selfish old bigots whose demise can’t come too soon, or that Baby Boomers have been piling up problems for moaning millennials, or that old people are just getting in the way with their ‘bed-blocking’ and their unreasonable expectation that younger folk should subsidise their state pensions, free bus passes, TV licences and winter fuel allowances – again and again, we see generational disdain for older people.
Democracy, as usual, doesn't help. Brexit voters in the Leave camp skew older, more rural, and more "English." Remainers skew younger, urban, and more "European." In their 2014 independence referendum, younger Scottish voters overwhelmingly chose to leave Britain and fully embrace the European Union; older Scots chose the perceived safety of London pensions over counting on Holyrood and Brussels State pensions and state-provided healthcare, even more sacrosanct in the UK than Social Security and Medicare are here, will never be reduced or addressed by voting. Yet just as the American entitlement system faces a $200 trillion shortfall—the likely cost of future promised benefits minus likely future tax receipts— Britain's younger taxpayers will struggle mightily in coming decades to pay ever-expanding old-age pensions.
America is in the same boat, with the population above age 65 set to double over the next thirty years. Republicans and Trump voters are older, whiter, more rural or suburban, and more likely to see America in far rosier terms than the average Ocasio-Cortez supporter. Social Security, which in 1940 boasted more than 100 paying workers to one beneficiary, today struggles with a ratio of less than 3 to 1. And those three workers in many cases are decidedly younger, more left-liberal, less white, and less affluent than the one beneficiary. Unskilled workers, recent immigrants, and teenagers often work at low-wage hourly jobs, but still pay full Social Security taxes on their meager earnings.
All of this is a recipe for intergenerational strife.
The baby boomer mantra—never trust anyone over 30— is now bequeathed to millennials, but for very different reasons. In many senses millennials are more conservative than their grandparents were at the same age, particularly when it comes to sex, recreational drugs, education, and a carefree live-for-today attitude toward life. There is no millennial version of Easy Rider or American Graffiti; slacker paeans like Superbad show teenagers with low aspirations and no interest in eclipsing boomer noncomformity. But millennial distrust for older Americans is based on the strong perception that today's economic and social horizons are far less robust for them than previous generations, generations that are happy to ride out the clock until entitlements run out.
It will get worse. Cultural, economic, fiscal, and political fault lines in America today all bode ill for harmony between younger and older generations. But what should we expect in a country where politics and government dominate? Where transfer payments dominate old age and government schools dominate youthhood?
Family, religion, and civil society don't play nearly the same role for young people today as for Baby Boomers, who rebelled against all three. What we're left with, in the view of many Americans, is a society where government is the only thing we all belong to. Many scoff at the notion of any natural order, without recognizing that government simply substitutes an unnatural political order run by those in power.
Sensible societies harness the energy, optimism, and beauty of youth in productive ways: their talents are unleashed in art, athletics, business, and technology (not war). But apart from standout exceptions young people are not the leaders of sensible societies, because we recognize that what one believes at 16 or 20 or 25 will change, and often change radically. So sensible societies venerate the wisdom of older people, wisdom that is separate and distinct from mere information. Unlike data on a smartphone, this wisdom passes down naturally—albeit not without friction—because everyone recognizes the healthy and mutually beneficial connection between generations. Over time bad ideas, traditions, and modes fall away, replaced by new and better ones.
Decaying, dysfunctional societies, by contrast, pit generations against each other at the ballot box and otherwise. Politics and government become powerful weapons in an intergenerational cold war. Aging western populations skew the demographic political balance in favor of older people, especially active older voters. Brexit, Trump, and the Scottish independence referendum have now exposed this growing reality.
One of the dangers facing those who have come to believe in a certain philosophy or approach is the temptation to ignore or reject useful insight from those who are not “pure” enough—those who deviate from “the Truth” either in their position on certain issues or because of the hypocrisy of actions inconsistent with their alleged beliefs.
That is bad strategy. After all, in a world where, ultimately, ideas are what matters, one cannot successfully rebut incorrect positions one is ignorant of. But it also wastes useful insights.
Rejecting an insight because of hypocrisy that is unrelated to that insight or which does not disprove it is a logical error, with potentially serious consequences. For instance, that approach would put the wisdom of America’s founders “out of bounds,” particularly those whose actions once they had power differed from the principles they enumerated and fought for beforehand. Their abuses, once in power, testify to power’s ability to corrupt, but do nothing to reject their insights into the importance of liberty and the corollary need to curb government.
Restricting oneself to the insights of those who are “pure” amounts to an appeal to authority. Such consistency adds important endorsement to the power of a valid insight (one reason why libertarians are so fond of Murray Rothbard). That is particularly important in a complex world, where one can easily miss important incentives or causation mechanisms, undermining the degree of certainty one can have about deductions to be drawn. Those who have earned reputations for recognizing what others miss act as insurance against such potential mistakes. Yet a true statement is true regardless of whether the source is “pure of heart and action,” just as falsehoods that come from good men do not become true because they are stated by good men.
People also tend to shy away from giving much consideration to those viewed as deviating from “the Truth” in some of their actions. But such deviations do not justify ignoring their contributions.
In some situations, there may be only two basic positions possible—support for a particular group, especially the one in power, or joining with the opposition. Especially in violent disputes, one may be unable to opt out, forcing a choice between two imperfect options. Joining the opposition, often far from pure, may yet be the only effective means of opposing a greater evil (e.g., the resistance in World War II). That does not, however, amount to endorsing everything those in the opposition stand for. That is why defending the currently abused side can make the most sense (in the limited sense that in such choices, “the enemy of my enemy is my friend”), even if their positive program, should they come to power, would also be abusive of those to be “ruled.”
Similarly, someone can have a valid objection to something that is wrong, without having an adequate conception of what is right or of what would best correct the wrong in view. As a result, just because you disagree with someone else’s broader understanding or “solution” does not justify throwing out their valid insights with their confusion. This seems most frequent in considerations of justice—I can often recognize when an injustice is imposed on me, but that does not mean my preferred “solution” either solves the injustice or does so without imposing new injustices on others (e.g., one of the attributes of negative rights is that they prevent injustice without causing injustice elsewhere, which positive rights cannot).
One practical consequence is that we can learn from and be inspired by victims of abuse and tyranny, who recognize the wrongs, without endorsing their possibly misguided or even harmful “solutions.”
A good example of someone generally overlooked by libertarians for certain “indiscretions” is Albert Camus, the 1957 Nobel Laureate in Literature, whose birthday is November 7. One can easily take issue with or be unconvinced by his existentialism or his conclusion that everything comes back to absurdity. One can also object to actions such as his brief membership in the Communist party, his personal infidelities, etc. But despite those issues, his defense of liberty against tyranny, particularly in World War II and its aftermath, was very important. Consider just a few of his most important insights.
- The real passion of the twentieth century is servitude.
- Political utopias justified in advance any enterprises whatever.
- The welfare of the people…has always been the alibi of tyrants, and it provides the further advantage of giving the servants of tyranny a good conscience.
- The tyrannies of today…no longer admit of silence or neutrality. One has to take a stand, be either for or against. Well, in that case, I am against.
- The only conception of freedom I can have is that of the prisoner or the individual in the midst of the state. The only one I know is freedom of thought and action.
- Absolute domination by the law does not represent liberty, but without law there is no freedom.
- Freedom is not a gift received from the State or leader.
- Freedom is not a reward or a decoration that is celebrated with champagne…It’s a long distance race, quite solitary and very exhausting.
- Freedom is nothing else but a chance to get better, whereas enslavement is a certainty of the worse.
- Liberty ultimately seems to me, for societies and for individuals…the supreme good that governs all others.
- It is the job of thinking people not to be on the side of the executioners. Is it possible…to reject injustice without ceasing to acclaim the nature of man and the beauty of the world? Our answer is yes.
- Instead of killing and dying in order to produce the being that we are not, we have to live and let live in order to create what we are.
- The aim of art, the aim of a life can only be to increase the sum of freedom and responsibility to be found in every man and in the world. It cannot, under any circumstances, be to reduce or suppress that freedom, even temporarily…there is not a single true work of art that has not in the end added to the inner freedom of each person who has known and loved it.
- The current motto for all of us can only be this: “without giving up anything on the plane of justice, yield nothing on the plane of freedom.”
- Being aware of one’s freedom, and to the maximum, is living, and to the maximum.
- More and more, when faced with the world of men, the only reaction is one of individualism. Man alone is an end unto himself.
There are many things Albert Camus wrote or did that I may have issues with. But it would be a shame to lose the inspiration of words such as these due to differences that do not negate their validity.
In a world where time and energy are scarce, choosing to read someone we have learned to consistently expect insight from makes a great deal of sense. It increases the chances that the time will be well spent. It expands our own insights and reminds us of how important some things are to life. That is why libertarians read a great deal from those who similarly value freedom. But while that may be our foundation, we cannot stop there. While holding on to our recognition of the importance of liberty, we can also learn from and be inspired by those who may be fellow travelers only in part.
Perhaps Neel Kashkari is angling for the Fed Chair job, should Donald Trump attempt an Eccles palace coup and oust Jerome Powell for his tightening ways. General Mattis may be sending troops to the border to head off the “caravan” enroute from Guatemala (or was it the middle east?), but he can certainly redirect them to Federal Reserve HQ to suppress President Trump’s “biggest risk.”
Mr. Kashkari, the president of the Minneapolis Federal Reserve Bank, has hopscotched through various positions after being hired by then Secretary of the Treasury Henry Paulson. He’s worked at PIMCO, he’s run for governor of California, and he administered the much beloved TARP program during the financial crisis.
Today his op-ed appears in the Wall Street Journal urging the Fed’s home office to lighten up on the interest rate hikes already. The President must be pleased. The 2 percent inflation target, which tall-Paul Volker writes in his new book, “I puzzle at the rationale. A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification,” is, according to Kashkari, “symmetric” not a “ceiling.”
The Minnesota Fed man writes, “In 2015 the FOMC estimated unemployment could not go below 5.1% without triggering inflation. Its current estimate is 4.5%; the actual unemployment rate is down to 3.7%, and wage growth and inflation are still muted.”
Inflation is muted, except if you calculate it the way it used to be calculated. John Williams does that for us at shadowstats.com and he says CPI is 6 percent using the 1990 method or 10 percent using the 1980 approach.
Courtesy of ShadowStats.com
“Every time we do something great, he raises the interest rates,” Mr. Trump told reporters from the Wall Street Journal, adding that Mr. Powell “almost looks like he’s happy raising interest rates.”
During his meeting with the WSJ reporters, Trump, “pushed a red button on his desk, summoning an iced cola delivered to him on a silver platter.”
I can imagine Idi Amin did that.
He also talked like Amin or other dictator. The reporting crew from the WSJ write,
He referred to economic gains during his time in office as “my numbers,” saying, “I have a hot economy going.” He described his push for growth as a competition with former President Obama’s record, saying that increases under his Democratic predecessor were skewed because of low-interest rates.
Mr. Kashkari, himself, questions the government’s numbers to make the case to stop the interest rate music from being turned up too loud.
And the formal unemployment rate only counts people actively looking for work. By another measure—the percentage of prime-age Americans who are employed—nearly a million adults are still missing from the job market relative to 2006, and more than 2.5 million fewer are working relative to 1999. How many more of those missing workers would re-enter the labor force if wages picked up? We don’t know.
All of that is true, but typically not uttered by government employees of any sort of rank. Evidently, it doesn’t matter what you write from the distant Minneapolis Fed outpost.
And, how about this from Kashkari,
Critics argue the tax cut is delivering a Keynesian sugar high, that modest growth rates will return once the high has worn off, and that taxpayers will be left holding $1.8 trillion in additional outstanding debt. Who’s right? It will take time to find out.
“Keynesian sugar high? Did he really take the Lord Keynes’ name in vain?
The former TARPmaster closes with,
But until inflation or inflation expectations get meaningfully higher, the Fed should allow the economy to continue to strengthen, so as to allow as many Americans as possible to participate in the recovery.
That sentence, even grammatically, sounds Trumpian.
Trump feels as if Powell lied to him. “He was supposed to be a low-interest-rate guy. It’s turned out that he’s not.”
Of course, it’s all about Trump v. Obama. Michael C. Bender, Rebecca Ballhaus, Peter Nicholas and Alex Leary write,
Mr. Trump demurred when asked under what circumstances he’d remove Mr. Powell, whom he selected for a four-year term that started in February. “I don’t know,” he said. “I’m just saying this: I’m very unhappy with the Fed because Obama had zero interest rates.”
Wah, wah, wah. Mr. Kashkari, your next office may be in the Eccles Building.