Power & Market
Back from Texas: On the Coastal Mindset
I recently traveled to Texas to speak about South Africa, at the Free Speech Forum of the Texas A & M University.
To travel from the Pacific Northwest all the way to College Station, Texas, without experiencing more of the "Lone Star State" was not an option.
So, after driving from Austin eastward to College Station (where I was hosted by two exceptional young, Southern gentlemen), I headed south-west to San Antonio. There I lingered long enough to conclude:
The Republic of Texas is a civilization apart.
Ordinary Texans—from my brief travels—tend to be sunny, kind and warmhearted. Not once did I encounter rude on my Texas junket.
On the Pacific Coast, however, kindness and congeniality don't come naturally. Washington-State statists are generally aloof, opprobrious, insular. And, frankly, dour.
Southern historian Dr. Clyde N. Wilson tells of receiving "a package containing a chamber pot labeled 'Robert E. Lee's Soup Tureen.'"
It came from … Portland, Maine.
Unkind cuts are an everyday occurrence around here, where the busybody mentality prevails.
Stand still long enough, and they'll tell you how to live. They'll even give chase to deliver that "corrective" sermon. A helmeted cyclist once chased me down along a suburban running trail.
My sin? I had fed the poor juncos in the dead of winter. (Still do).
Having caught up with me, SS Cyclist got on his soap box and in my face about my unforgivable, rule-bending. Wasn't I familiar with the laws governing his pristine environmental utopia?
Didn't I know that only the fittest deserved to survive? That’s the natural world, according to these ruthless, radical progressive puritans.
Yes, mea culpa for having an exceedingly soft spot for God's plucky little creatures.
When a Washington statist gets wind of your core beliefs—why, even if your use of the English language irks His Highness—he will take it upon himself to fix your "flaws," try to make you over in his sorry image.
For the distinct cluster of characteristics just described, Dr. Wilson aforementioned uses the term Yankee.
The professor, whose métier is American intellectual history, was described by Eugene Genovese as "an exemplary historian who displays formidable talent." Another stellar scholar, Thomas Landess, lauded Wilson as "a mind as precise and expansive as an encyclopedia."
Duly, Dr. Wilson makes the following abundantly clear: By "Yankee," he does not mean "everybody from north of the Potomac and Ohio.”
“The firemen who died in the World Trade Center on September 11 were Americans. The politicians and TV personalities who stood around telling us what we are to think about it are Yankees."
"Yankee" as a designation belongs to "a peculiar ethnic group descended from New Englanders, who can be easily recognized by their arrogance, hypocrisy, greed, lack of congeniality, and a penchant for ordering other people around."
"A perversity of character," said Thomas Jefferson succinctly of the Yankee character.
Indeed, "Puritans long ago abandoned anything that might be good about their religion but have never given up the notion that they are the chosen saints whose mission is to make America, and the world, into the perfection of their own image."
The cover of Wilson's "The Yankee Problem: An American Dilemma" is bedecked with the quintessential Yankee mugs of Hillary Clinton, George W. Bush and John Brown, each a murderer in his or her own right. The one butchered with his bare hands. The other two killed by proxy.
The contemporary face of the fanaticism alluded to here is pundit Richard Painter, who is the spitting image of Brown. A Republican until Trump, Painter is now a member of the anti-Trump high-command at MSNBC.
In zealotry, Painter could pass for the terrifying Radical Republican Thaddeus Stevens.
A broader truth hit me in the solar plexus during the sojourn from the American Deep North to The South. On hand to better contextualize it is my friend, Clyde Wilson:
“Texas is still a Red State, despite a large number of minorities. That is because Texas, as you observed, Ilana, has a real culture. That means that there is a reality there that minorities can identify with and assimilate to. Unlike, say, Chicago or New Jersey or L.A., where they simply become aggrieved ‘victims,’ clamoring for special benefits, that being the only culture present."
"The peculiar character of the Yankee was observed by Tocqueville in the 19th century and Solzhenitsyn in the 20th. The first great American novelist, James Fenimore Cooper, wrote a whole series of books about the New England Yankees who spread into and destroyed the unique culture of his home country of Upstate New York.”“Plenty of Northerners, like Governor Horatio Seymour of New York and Governor Joel Parker of New Jersey, blamed the War between the States on New Englanders, and not the South, which simply wanted to be let alone."
"One cannot really grasp American history unless you understand how Yankees have dominated and distorted it since the late 18th century.”
The Ideological Push for Legalization
Austrian economists have an great frustration of not being able to quickly change public policy in the short run despite having great theoretical insights on economics and policy. However, we know that in the long run that we can help change public policy when we can use scientific insights and theories to change public opinion or ideology which in turn changes public policy. A good case in point is cannabis or marijuana which has been illegal nationally since the passage of the Marijuana Tax Act of 1937 which became a prohibition and eventually landed cannabis as a Schedule 1 drug in the same class as heroin. America was exposed to a century of propaganda against cannabis. Most famously, movies in the 1930s such as Reefer Madness made fictional claims that consuming cannabis could turn good people into murderers, drive them insane and result in their death. In 1972 only 12% of Americans supported legal cannabis. This experience has ruined millions of lives and it will surely go down in history as one of the greatest blunders in human history.
Of course more recently many states have legalized medical and recreational cannabis. Now more that 62% of Americans support legalizing recreational marijuana and almost no one opposes medical marijuana. Scientists have long been leery to weigh in on this issue. Dr. Sanjay Gupta reversed his position to endorse cannabis and that probably changed many peoples minds. Today we have the announcement that Fiona Godlee, editor in chief of the prestigious British Medical Journal confirmed the journal's position that illegal drugs should be legalized and regulated from a public health perspective. I chronicle economists written views on drug policy here.
Her statement in full:
Some numbers in this week’s journal bear reflection. The war on drugs costs each UK taxpayer an estimated £400 a year. The UK is now the world’s largest exporter of legal cannabis, yet recreational and medicinal use are criminalised. Scotland has the EU’s highest rate of drug related deaths, double that of 10 years ago. The global trade in illicit drugs is worth £236bn, but this money fuels organised crime and human misery. Why should it not instead fund public services?
A growing number of countries are taking a more enlightened route, say Jason Reed and Paul Whitehouse (doi:10.1136/bmj.k1999). In Portugal, where non-violent possession of drugs has been decriminalised, consumption hasn’t increased but drug related deaths have fallen considerably. In the Netherlands, the USA, and now Canada, regulated markets for the sale of cannabis generate substantial tax revenues.
Meanwhile, in the UK vast sums are spent on prosecuting individuals and trying vainly to interrupt the flow of drugs into cities, carried along “county lines” by vulnerable children. Reed and Whitehouse speak for the Law Enforcement Action Partnership, which calls for legalisation and regulation. They say that the money could instead be spent on quality control, education, treatment for drug users, and child protection. Revenues could be diverted from criminal gangs into government coffers.
When law enforcement officers call for drugs to be legalised, we have to listen. So too when doctors speak up. Last month the Royal College of Physicians took the important step of coming out in favour of decriminalisation, (doi:10.1136/bmj.k1832) joining the BMA, the Faculty of Public Health, and the Royal Society of Public Health in supporting drug policy reform (doi:10.1136/bmj.j3461.)
This is not about whether you think drugs are good or bad. It is an evidence based position entirely in line with the public health approach to violent crime. In their Editorial, John Middleton and Jonathan Shepherd say that the UK’s epidemic of gun and knife crime is in part due to the increased availability of fentanyl and crack cocaine (doi:10.1136/bmj.k1967). The UK government’s newly released Serious Violence Strategy acknowledges the link between drug prohibition and violence, but it proposes spending £40m on prohibition related policies. Reed and Whitehouse say it will do nothing to tackle drug related crime.
The BMJ is firmly behind efforts to legalise, regulate, and tax the sale of drugs for recreational and medicinal use. This is an issue on which doctors can and should make their voices heard.
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When Hayek was Harassed by the IRS
(The photo below) Friedrich A. Hayek arriving for one of the morning sessions at the second Austrian Economics conference at the University of Hartford in June 1975. The conference was sponsored by the Institute for Humane Studies, with Don Armentano as the conference director.
Toward the end of the week, Hayek was called away for a phone call during one of the sessions. When he returned and the session ended, Hayek said that the Internal Revenue Service (IRS) had tracked him down at the conference, and told him he would not be allowed to leave the country later in the summer before he documented all income he earned while in the United States and had paid all required taxes owed! Friedrich Hayek potential prisoner of the Tax State.
(Originally shared on Facebook.)
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CEI: Federal Regulations Cost $1.9 Trillion Annually
A recent report from the Competitive Enterprise Institute highlights the cost of America's regulatory state.
According to CEI:
The estimate for regulatory compliance and economic effects of federal intervention is $1.9 trillion annually for purposes of comparison with federal spending and other economic metrics. This estimate was compiled using available federal government data and reports, in context with contemporary studies.
Putting that number into perspective:
The estimated burden of regulation is equivalent to nearly half the level of federal spending, expected to be $4.1 trillion in 2018.
If it were a country, U.S. regulation would be the world’s eighth-largest economy, ranking behind India and ahead of Italy
The regulatory hidden tax is equivalent to federal individual and corporate income tax receipts combined, which total an estimated $1.884 trillion in 2017 ($1.587 trillion in individual income tax revenues; and $297 billion in corporate income tax revenues).
This significant drain on America's productive sector exists in spite of the fact that deregulation has been one of the bright spots of the Trump Administration. So far the Administration has been able to maintain its objective of repealing two rules for every new one written and the number of pages in the 2017 Federal Registry was down dramatically from the previous Federal regimes.
Still, the full costs of Federal regulation are truly impossible to calculate because beyond the compliance costs imposed on current businesses are those companies that do not exist due to America's regulatory environment. As Per Bylund noted while discussing his book Seen, the Unseen, and The Unrealized: How Regulations Affect Our Everyday Lives:
Regulations make it costlier to act — and therefore some actions are no longer profitable when they would have been otherwise. So, for those businesses that lack political influence and aren’t the most effective, a regulation may decide whether there is a business or not. At the same time, businesses that survive the regulation might benefit from a protected situation because the regulation raises barriers to entry. This is why, for instance, it is rational for Walmart to support a high minimum wage — it will hurt Walmart’s competitors more than it hurts Walmart.
The real losers are common people who, as consumers, do not get the valuable goods and services they otherwise would have, and, as producers, cannot find the jobs they otherwise would. The winners are the incumbents, at least short-term, and — as always — the political class.
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Americans Pay for Washington Secrecy
Secrecy is a knavery entitlement program. Thanks to the ludicrously named Congressional Accountability Act of 1995, victims of alleged sexual harassment by members of Congress receive secret taxpayer-funded settlements. That means constituents rarely learn that their tax dollars underwrite their representatives’ allegedly roaming hands. More than $17 million has been spent in payoffs to congressional employees who filed workplace grievances.
At the same time an iron curtain of secrecy descended on much of official Washington, the feds multiplied their intrusions against everyone else. While the National Security Agency is vacuuming up Americans’ private data, federal agencies made the decision more than 50 million times to classify documents in 2016. The Freedom of Information Act, one of the underrated bulwarks of self-government, has become largely a mirage in recent decades.
The more information the government withholds, the easier it becomes to manipulate public opinion. By revealing only details that buttress the administration’s policies, citizens are prevented from assessing the latest power grabs or interventions. As a federal appeals court warned in 2002:
“When government begins closing doors, it selectively controls information rightfully belonging to the people. Selective information is misinformation.”
Trump won the presidency in 2016 in part because of Americans’ disgust and distrust for Washington. By perpetuating the vast majority of official secrecy and creating new cloaks, Trump is missing his best shot against what he calls the Deep State. Sunlight would be far more effective at draining the swamp than Trump’s huffing and puffing.
Read the full article at The Hill
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Argentina Sells Baloney for a Bailout
Surprise, surprise! With the peso continuing to drop like a stone against the U.S. dollar, Argentina has appealed to the IMF for emergency credit. In requesting the bailout, President Macri cited the sudden emergence of global factors beyond his control for the current plight of the peso.
During the first two years [of his administration] we have had a very favourable global context, but today that is changing, global conditions are becoming increasingly complex due to several factors: interest rates are rising, oil is rising, currencies of emerging countries have been devalued, all variables that we do not control.
But this is a load of baloney. As I pointed out in my post yesterday, the slide of the peso is due to one and only one thing: the enormously high rate of growth of the money supply since Macri took office in December 2015. The money growth rate exceeded 45% year over year during the first three quarters of 2017 and has never fallen below 25% during Macri’s tenure. Rather than requesting aid, which will guarantee more currency crises in the future, President Macri needs to call a halt to central bank intervention in the foreign exchange markets and allow the peso to depreciate and reveal the true extent of past monetary inflation. If he then implements a credible program—and at this point, only a shock program will be considered credible—to bring inflationary monetary policy to an end, the currency crisis will cure itself.
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David Stockman on the Tom Woods Show: the Real Condition of the Trump Economy
This week David Stockman joined the Tom Woods Show to cut through the fake news about the US economy.
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The NSA Continues to Abuse Americans by Intercepting Their Telephone Calls
One of the few positive things in the ill-named USA FREEDOM Act, enacted in 2015 after the Snowden revelations on NSA domestic spying, is that it required the Director of National Intelligence to regularly report on its domestic surveillance activities. On Friday, the latest report was released on just how much our own government is spying on us. The news is not good at all if you value freedom over tyranny.
According to the annual report, named the Statistical Transparency Report Regarding Use of National Security Authorities, the US government intercepted and stored information from more than a half-billion of our telephone calls and text messages in 2017. That is a 300 percent increase from 2016. All of these intercepts were “legal” under the Foreign Intelligence Surveillance Act (FISA), which is ironic because FISA was enacted to curtail the Nixon-era abuse of surveillance on American citizens.
Has the US government intercepted your phone calls and/or text messages? You don’t know, which is why the surveillance state is so evil. Instead of assuming your privacy is protected by the US Constitution, you must assume that the US government is listening in to your communications. The difference between these is the difference between freedom and tyranny. The ultimate triumph of totalitarian states was not to punish citizens for opposing its tyranny, but to successfully cause them to censor themselves before even expressing “subversive” thoughts.
We cannot celebrate our freedom or call ourselves an exceptional nation as long as we are under control of the kind of surveillance that would have turned the East German Stasi green with envy. We know the East German secret police relied on millions of informants, eager to ingratiate themselves with their totalitarian rulers by reporting on their friends, neighbors, even relatives. It was a messy system but it served the purpose of preventing any “unwelcome” political views from taking hold. No one was allowed to criticize the policies of the government without facing reprisals.
Sadly, that is where we are headed.
Our advanced technological age provides opportunities for surveillance that even the most enthusiastic East German intelligence operative could not have dreamed of. No longer does the government need to rely on nosy neighbors as informants. The NSA has cut out the middleman, intercepting our communications – our very thoughts – at the source. No one who calls himself an American patriot can be happy about this development.
Not even the President is safe from the surveillance state he presides over! According to a news report last week, federal investigators monitored the phone lines of President Trump's personal lawyer, Michael Cohen, even when he was speaking to his client – the president!
An all-powerful state that intercepts its citizens’ communications and stores them indefinitely to use against them in the future does not deserve to be called the leader of the free world. It is more the high-tech equivalent of a Third World despotism, where we all exist subject to the whim of those currently in political power.
Edward Snowden did us all an enormous favor by risking it all to let us know that our government had come to view us as the enemy to be spied on and monitored. If we are to regain the liberty that our Founders recognized was granted to us not by government, but by our Creator, we must redouble our efforts to fight against the surveillance state!
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The Next Time You Read Central Bank Policies Create Growth...
(From Daniel Lacalle on Twitter)
His article last year "Are Central Banks Nationalising the Economy?" explains how the two charts are connected:
The government is not issuing “productive money” just a promise of higher revenues from higher taxes, higher prices or confiscation of wealth in the future. Money supply growth is a loan that government borrows but we, citizens, pay. The payment comes with the destruction of purchasing power and confiscation of wealth via devaluation and inflation. The “wealth effect” of stocks and bonds rising is inexistent for the vast majority of citizens, as more than 90% of average household wealth is in deposits.
In fact, massive monetization of debt is just a way of perpetuating and strengthening the crowding-out effect of the public sector over the private sector. It is a de facto nationalization. Because the central bank does not go “bankrupt,” it just transfers its financial imbalances to private banks, businesses, and families.
The central bank can “print” all the money it wants and the government benefits from it, but the ones that suffer financial repression are the rest. By generating subsequent financial crises through loose monetary policies and always being the main beneficiary of the boom, and the bust, the public sector comes out from these crises more powerful and more indebted, while the private sector suffers the crowding-out effect in crisis times, and the taxation and wealth confiscation effect in expansion times.
No wonder that government spending to GDP is now almost 40% in the OECD and rising, the tax burden is at all-time highs and public debt soars.
Monetization is a perfect system to nationalize the economy passing all the risks of excess spending and imbalances to taxpayers. And it always ends badly. Because two plus two does not equal twenty-two. As we tax the productive to perpetuate and subsidize the unproductive, the impact on purchasing power and wealth destruction is exponential.
To believe that this time will be different and governments will spend all that massive “very expensive free money” wisely is simply delusional. The government has all the incentives to overspend as its goal is to maximize budget and increase bureaucracy as means of power. It also has all the incentives to blame its mistakes on an external enemy. Governments always blame someone else for their mistakes. Who lowers rates from 10% to 1%? Governments and central banks. Who is blamed for taking “excessive risk” when it explodes? You and me. Who increases money supply, demands “credit flow,” and imposes financial repression because “savings are too high”? Governments and central banks.
Who is blamed when it explodes? Banks for “reckless lending” and “de-regulation”.
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Cato's Michael Cannon is Wrong about Baby Alfie
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