Power & Market
It’s Beyond Time for a National Divorce
It’s been about six years since Michael Malice wrote his article “The Case for American Secession,” for the Observer. Since then, the talk of a disuniting of the American Empire has been discussed by people on the right, left, and the middle. There has always been a multitude of cultures in the USA, however recently the cultures on the right and the left have bubbled over into the political sphere. Everything from BLM protests gone violent, to January 6 protests entering the Capitol, shows that the political discourse is at a tipping point.
Every four years, a portion of American citizens go out and vote for who will sit in the White House and dictate many aspects of their lives. The right calls whoever is running on the left a commie, and the left calls whoever is running on the right a fascist. The political divide is getting deeper, you can see it at your Thanksgiving dinner table, in the media, and in national research polls. The question I ask, and asked by Michael Malice six years ago, is why should we remain as one country?
What is holding us together anymore? For those on the left, why would you not want to separate from the racist, fascist, hillbillies that you despise so much? You could have a much more left leaning country, where you could have UBI, universal healthcare, etc. You could adopt a model like the Nordic states in Europe. For the right, why would you not want to separate from the evil baby killing, commie, uppity yankees that you hate, and who don’t want you to be able to carry a firearm to protect your family? You could have a country where you could have constitutional carry, the Bible taught in schools, and outlawed abortion.
When I speak with my family and friends on the right side of the culture, their adverse reaction to a national divorce is usually about either what would some foreign powers do, or what about the idea of America. Well first, the idea of America is dead. We are a debtor’s economy now, with a global empire that is vastly overstretched and we are paying for it here at home. Inflation, caused not just by Biden, but by all those in congress that have voted for decades to keep the money printer going burr. And on the foreign power, such as China? The paper tiger economy of that quasi communist state is surrounded by enemies, and would have trouble mounting the largest amphibious assault in the history of earth on Taiwan, let alone America.
Any friends I speak with on the left that are against the idea of a peaceful national divorce, they’ll just say things like, “Well what would happen to all those minorities in the new conservative country or countries?” I don’t know, they’d likely go about their daily lives, with a better chance of affecting their government with it being smaller. The arguments I generally get from the left are all about what the left generally wants, power. They want you to submit to their drag queen story time hour for toddlers, and if you reject that, then you must be put in your place.
There are many valid questions to ask when discussing national divorce, what would happen to the nukes, federal government property, national debt, etc. This can all be done peacefully and without bloodshed. Look at the dissolution of the Soviet Union not long ago. A couple months after I turned one, the Soviet Union fell, and if you would have asked experts in the decades leading up to that, most never saw it coming. That was done mostly peacefully, and nuclear weapons were not spread out across the world and used in dirty bombs like you would see in Hollywood movies. Federal property, the national debt, and other issues are all something that will have to be negotiated by lawyers and politicians, but I repeat myself, if and hopefully when states begin to secede.
Recently the Libertarian Party, the third largest party in the USA, had sweeping victories for the Mises Caucus, who then proceeded to add secession to the planks of the party. It is time for Republican parties in each state, to do the same. Add secession to the planks of your state party, and fight like hell for it. I don’t see state Democratic parties adding this to their planks, but if you are involved in your state democratic party, you should really consider the opportunity this would give you.
I have looked at countless different national divorce scenarios, from two different countries to ten different countries. When the dust settles from the breaking up of the world’s largest empire in the history of the world, we would see a peaceful and more prosperous America, or Americas I should say. You may ask, what about my favorite sports teams, yes, they can play other teams from other countries, it happens in most major sports already with teams in Canada, or throughout Europe. You may ask, what about defense? Well, we’d likely see mutual defense pacts form for the new countries, so that if any foreign powers, as unlikely and disastrous for them as it would be, decided to invade the former borders of the USA, then they would have a defensive pact.
If you need any other motivation to entertain the idea of a national divorce, just look at the national debt, the skyrocketing prices for everything from food to homes. I’m in my early thirties with a stable good paying job, and it’s still hard for me to purchase a home. Multiple debt bubbles are ready to burst, social security running out in the next fifteen years. The US government has troops in over seventy countries worldwide, with about eight hundred bases! The global empire is just not sustainable, it never was, and our politicians in DC used it to enrich themselves and their friends. It’s time we broke away from the corrupt DC swampy empire, that has done nothing but destroyed our economy and our culture.
National divorce is a scary proposition. Just as anything you do in life that will better yourself or your family will likely be a scary decision. Can we afford a house at this mortgage rate, another car, school, etc. Just as on an individual level, we make the decision for being better in the long term or short term, we must make that decision on a national level as well. I fear that if we do not have peaceful votes at state levels to secede and join new forming nations, we are all headed down the path of most other falling empires. Ruin, and death.
No One Should Have This Much Power
If you’ve never given much consideration to the power of central banking, it’s time to make that a priority. June 15 marks the start of the Fed’s balance sheet reduction. It’s important to understand what’s in store regarding the upcoming crisis and who’s to blame.
Look at some of the ideas produced by the Federal Reserve System. In the paper, authored by four economists, titled Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion:
Overall, the model predicts that reducing the size of the balance sheet by about $2.5 trillion over the next few years, as opposed to maintaining the size at its peak level, would be roughly equivalent to raising the policy rate a little more than 50 basis points on a sustained basis.
Their model equates shredding a quarter of the Fed’s nearly $10 trillion balance sheet to no more than a 0.50% increase in interest rates. However, the real-world economy seldom, if ever, fits into their economic models.
Then there is the St. Louis Fed illustrating the projected monthly balance sheet run-off:
By the end of next year, nearly $1.7 trillion is scheduled to be removed from the balance sheet.
Even in one of the very many Fed surveys, they expected a reduction of:
$2.8 trillion in total runoff or about a third of the balance sheet over 3 years.
Unfortunately, none of these projections are going to come to fruition. While one can never say never, a confident probability of approaching zero percent can be assigned. It begins with just one chart:
With gray bars denoting formal recessions, the last time the Fed reduced treasury holdings was from 2018 to 2019 by roughly $400 billion and from 2007 to 2008 by around $300 billion!
Of course, the Fed, mainstream economists and those on TV never discuss the Austrian Business Cycle or how the Fed causes booms and busts. But take note that in the last two instances where treasury holdings were reduced, there was a significant decline in the stock market, an eventual market crash, a recession… and lastly, further expansion of the balance sheet to climb out of the recession.
Naturally, the mainstream narrative was that COVID caused the last crash and evil bankers (excluding central bankers) caused the previous crash.
Consider where we are now in the boom-bust cycle. We’re waiting for the appearance of a gray bar in 2022 or 2023; but those take time and recessions are called after the fact. The Fed will begin shrinking tomorrow. Should history be our guide, the reduction will not last 1 to 3 years. The stock market will continue to decline, leading to another crash. There will be a recession (we may already be in one), and the Fed will eventually announce the resumption of balance sheet expansion.
Consider “boom” periods like 2010 when the Fed owned less than $800 billion of US Treasuries. Rather than reduce holdings, they increased them to $1.6 trillion by 2011. And again, during an alleged period of prosperity, they further increased holdings to $2.4 trillion by 2014.
What the Fed could not do in a strong economy can scarcely be done in a weak one. True, the Fed will reduce its asset holdings; however, this is transitory. Any talk of asset reduction being remotely close to a trillion dollars, let alone two or three trillion, becomes, for lack of better words, laughably absurd.
“But inflation is high” some may say. Also true, inflation measurements are considered astronomically high by American standards. But this sentiment misconstrues the role of the Fed, erroneously believing they possess the knowledge to fight (price) inflation, or even the will to do so.
Once this current round of Quantitative Tightening fails, should inflation still persist to levels deemed unacceptable by society, there will be a new narrative explaining why we need high inflation, or why high inflation is preferred to a depression or other catastrophe. Ultimately, it doesn’t matter what inflation numbers we see. The balance sheet can only go one way, and that is up. The entire history of central banking and unbacked fiat currency supports this.
If the government provided you the ability to legally counterfeit currency, the only restraint being your own will, would you ever stop? This is the case with the Federal Reserve. They will never stop growing the balance sheet. A currency monopoly on the US dollar is more powerful than a nuclear bomb. No one would ever freely give up that power; no one should even have that power.
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Wholesale Prices Rise More than 10 Percent, Pointing to Continued Price Hikes
The US Bureau of Labor Statistics released new Producer Price Index (PPI) data today, and it’s not good news for consumers.
The PPI is a measure of prices at the production phase of goods and services, and is often an indicator of where consumer prices are headed. Prior to 1978, the index was known as the Wholesale Price Index.
This May, year-over-year PPI growth came in at over 10 percent for the sixth month in a row, reaching 10.8 percent. This was a small drop from April’s year-over-year rate of 10.9 percent, but continues to suggest ongoing upward pressure in prices. The month-over-month change for May was 0.8 percent, which was up from April's month-over-month change of 0.5 percent. Movement remains upward, and from a very elevated base.
Year-over-year changes in the PPI have been over 7 percent for twelve months.
As with the Consumer Price Index, the narrative among optimistic analysists was that PPI measures would moderate significantly in May and signal a downward turn. That does not appear to be the case so far. Indeed, consumer prices showed few signs of moderating in May, as CPI inflation surged near to a forty-one-year high of 8.6 percent. Continued growth in the PPI points toward ongoing growth in consumer prices as well.
Changes, of course were not uniform, and the AP reports today:
A 1.4% jump in the prices of goods accounted for nearly two-thirds of the rise in the PPI. Goods prices, which rose 1.3% in April, were driven by soaring costs for energy products.
Wholesale gasoline prices rebounded 8.4% after falling 3.0% in April, making up 40% of the rise in the costs of goods. Jet fuel increased 12% after shooting up 14.8% in April. There were also increases in the cost of residential natural gas, steel mill products and diesel fuel.
Wholesale food prices were unchanged after increasing 1.4% in the prior month as the cost of beef and veal fell 9.5%, offsetting an increase in processed young chickens. Excluding food and energy, goods prices rose 0.7% after increasing 1.1% for two straight months.
These numbers will put further pressure on the Biden administration and the Federal Reserve to "do something" about price inflation. It is unclear what this means for the Fed, however, which has signaled it is reluctant to depart from its ongoing policy of extremely timid moves toward slowly ratcheting up the federal funds rate and selling off Fed assets. Rather, the Fed is increasingly behind the curve. It is truly remarkable to have a CPI inflation rate of 8.6 percent while the federal funds rate sits at 1 percent and the Fed portfolio remains near $9 trillion in assets.
The Fed will meet this Wednesday, and the consensus is that the Federal Open Market Committee will raise the target rate by 50 basis points. The Wall Street Journal even reported yesterday that there is growing evidence that the FOMC could raise rates by 75 basis points. If this happens, we'll be in uncharted territory, since the Fed will then be raising rates just as the S&P500 (a leading economic index) enters a bear market, and as the yield curve is showing signs of inversion and flashing warning signs for a recession. On the other hand, if the Fed elects to do nothing, it will have no room to maneuver as economic conditions continue to worsen. That is, the Fed routinely cuts the target rate by more than 200 basis points going into recessions, but the Fed will be in negative territory if it cuts even 100 basis points, given the current target rate. One could now easily imagine a scenario in which the Fed raises the target rate by one or two percentage points midyear this year only to cut by the same amount later this year. This would follow the Fed's usual playbook of resorting to easy-money stimulus whenever the economy shows signs of slowing down. The problem the Fed now faces, however, is that price inflation will continue until the Fed truly scales back on its easy-money efforts—which will likely cause a significant downturn.
There is no easy way out. No matter what the Fed does, the economy will still have to deal with the countless malinvestments and bubbles that have sprung up on the back of easy money over the past decade—and which accelerated in 2020 and 2021. Simply raising the target rate won't make this difficult adjustment go away. We must also acknowledge that the Fed cannot pick the "correct" target rate that will "fix" the economy. The only fix is for the Fed to altogether stop using open market operations to manipulate market interest rates and let the market set prices.
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Should Gun Laws Be Decided at the Federal Level? Or Even the State Level? Why Not the Local Level?
Uvalde, Texas, is where I was born. It’s where my mom taught kindergarten less than a mile from Robb Elementary. Uvalde is where I learned to master a Daisy BB gun. I took that – that took two years before I graduated to a 410 shotgun. Uvalde is where I was taught to revere the power and the capability of the tool that we call a gun. Uvalde is where I learned responsible gun ownership. And Uvalde called me on May 24th, when I learned the news of this devastating tragedy. I had been out of cellular range working in the studio all day when I emerged and messages about a mass shooting in the town I was born began flooding my inbox.
These were the words of Uvalde native actor Matthew McConaughey at the White House following the recent tragedy. This same tragedy has led to all sorts of calls for gun control. Most notably, the Protect Our Kids Act which, among other things, would raise the age to purchase an “assault rifle” to 21 and would bar the sale of large capacity magazines and dictate proper at-home gun storage.
My gut instinct as a proud gun owner is to rail against such legislation - as anyone should. As Mises Institute editor, Ryan McMaken, has written, such legislation would merely put more faith in the police. The very same police who have proven time and time again - including this very same tragedy - that they have no duty to protect you.
McMaken, in another article, explains many of the obvious inherent flaws in such gun control legislation. In addition to all this that has already been laid out, there is the fact that as Austrians we don’t believe in “gun rights” or any other specific rights but rather we know that all rights are property rights. As Ludwig von Mises has said, “The truth is that every infringement of property rights and every restriction of free enterprise impairs the productivity of labor.” Such regulation as this would infringe on the property rights of millions simply on the grounds that they may one day far down the line become a criminal (and these outcomes of becoming such a criminal are far less likely than we are often told).
However, the solution goes deeper than that. The reaction to such a tragedy should not be handled by the Congress but rather by - as McConaughey repeated many times for emphasis - Uvalde, Texas itself. Mises Institute President Jeff Deist has previously posed the question “Why couldn’t the big question of the twenty-first century be where you’re governed rather than how?” We as libertarians like to get bogged down in the how, but the question of where is equally - if not, more - important.
This issue has absolutely no realistic reason to be handled at the federal legislative level. The state of Texas has time and time again proven it values its guns highly through actions like their constitutional carry law passed last year. But despite this, Uvalde, in a moment of wholly justified fear, is calling for a reverse in that trend. We like to ask in arguments favoring soft secession and hard federalism why Alabama and California under any logical system would be forced into the same abortion laws. But the question goes further, why should Uvalde and Fort Worth, Texas, have the same gun laws? Why should Miami and Okeechobee, Florida, have the same systems? Why should Birmingham and Morris, Alabama, face the same restrictions? We find ourselves with wildly diverse cultures even within the same state. In the face of these gun control debates the answer is to allow them to be decided at the most local level. If Uvalde in the face of tragedy wants to crack down on guns, then let them. However, on the flip side, if a more conservative student body in College Station or Lubbock wants to have campus carry readily allowed then Uvalde must respectfully allow that as well.
Another Mises Wire editor, Bill Anderson, has explained that the more we politicize mass shootings the more we simply guarantee them in the future. Decentralizing these decisions will take the heat out of them and let them be more peacefully and diplomatically handled at federal levels - as with any conflict. We can close this issue with the words of Jeff Deist:
Mass democracy, under shifting rules often determined by nine politicized judges, is not a prescription for harmony and goodwill among 330 million very diverse Americans. Those millions don’t much agree about guns, God, abortion, and plenty more. But they don’t have to agree. In a “post liberal” and post-good-faith environment, aggressive federalism and realistic discussions of political secession are the obvious path forward. If you claim to love your fellow American citizens, unyoke them from the federal superstate and demand the same for yourself. The universalist, totalizing impulse, which resulted in the dramatic centralization of state power through the twentieth century, must be reversed in the twenty-first. The other way lies political strife, and worse.
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Is It Time to Rethink Ayn Rand?
It has become trite for American fiction writers to lambast capitalism and the free market system as inherently immoral. Because few have entered the fray to counter these spurious notions, progressives dominate fiction, allowing them to mold the cultural milieu into one that is increasingly statist. Of the few in fiction who do defend liberty, Ayn Rand is perhaps the most prominent. Yet, while Rand makes a persuasive case for her worldview, she misunderstands key components of the market system, inadvertently giving ammunition to those who wish to characterize the market as merely a selfish, base enterprise.
Rand defined selfishness in The Virtue of Selfishness as “concern with one’s own interest.” Since she writes that this is the dictionary definition, it is not unreasonable to expand upon that by including Merriam-Webster’s definition as well: “concerned excessively or exclusively with oneself.”
Since Rand believed that selfishness was a moral virtue, Rand’s heroes and heroines exhibit the trait by design – it is what separates her protagonists from the other characters. But Rand’s veneration of this vice causes her defense of capitalism leaving much to be desired. Setting aside moral philosophy and discussions of the like, selfishness is not something central to capitalism at all – in fact, quite the opposite. Capitalism is a system that works only if agents are not selfish.
Ludwig von Mises argues in Human Action that the free market is a system of social cooperation organized around the division of labor. This system, says Mises, is driven by the wants of consumers:
In his capacity as a businessman, a man is a servant of the consumers, bound to comply with their wishes. He cannot indulge his own whims and fancies. But his customers’ whims and fancies are for him the ultimate law, provided these customers are ready to pay for it.
Mises continues by pointing out the obvious fact that people are “never merely a consumer.” Because our activities are organized according to division of labor, people serve multiple roles in the marketplace at the same time. For example, when we work, we produce as producers, and when we patronize businesses, we consume as consumers. We must provide something that others desire so that we can trade for the goods and services we don’t produce ourselves. Making something that others want to purchase requires us to consider what others’ interests may be. Those that are selfish, by definition, cannot do this – or at the very least cannot do it well.
It is certainly true that people’s actions are guided by self-interest. Adam Smith in The Wealth of Nations and The Theory of Moral Sentiments describes self-interest as a restrained version of selfishness in which people pursue goals they deem desirable while considering the effects their actions will have on others. Put another way, when people act in their self-interest, they act in such a way, within the bounds of just behavior, that will help them reach the ends they have selected as good.
For people to attain the goals they believe good in a market system, they must satiate the desires of those around them. If people were blind to what their neighbors needed, goals would be left unachieved for lack of the necessary means. Under capitalism – that is a system organized around persuasion and trade rather than coercion - people must look beyond themselves and serve others if they hope to serve themselves. If market actors were selfish, they would never seek to understand - nor care to understand - how to satisfy others’ wants and needs. Self-interest is not selfishness and vice versa.
Thus, Rand’s protagonists are misinforming readers – the market system is not a system guided by selfishness. Certainly, the market system’s virtues do not come from the fact that it allows people to act selfishly. The market system demands that actors not be selfish, else there would be no trade, and everyone would become a Robinson Crusoe on their own island, fighting for survival and struggling for self-sufficiency.
Since criticizing Ayn Rand without proposing a replacement is useless, I propose we should turn to Jean Valjean in Victor Hugo’s Les Misérables as a character whose actions better argue the case for free markets.
Valjean is an ex-convict who, in dodging parole, assumes a new identity and moves to a hamlet outside of Paris. He reshapes the town’s economy, which is driven by manufacturing consumer goods, when he suggests using a lower cost substitute for one of the inputs in the production process. Hugo writes, “This very slight change had worked a revolution.” Valjean becomes incredibly wealthy, providing jobs for people in the town and donating generous sums to build hospitals and schools - just like the “robber barons” of the Gilded Age. Because of Valjean’s ingenuity, “idleness and misery were unknown” in the town. In proposing a change in the production process – that is, in innovating – Valjean “had become rich, which was well, and made all around him rich, which was better.”
Valjean, unlike Dagny Taggart, was not guided by selfishness – he was guided by self-interest, which in his case was to improve the lives of those around him. As Hugo’s narrative explains, in the entrepreneur’s pursuit of their own interests, they enrich others and enhance the lives of those around them. He helped himself only by first helping those around him. Valjean’s actions explicate the fact that the free market necessitates that people concern themselves with others’ interests. Rand’s view of capitalism neglects this truth entirely, lending credence to asinine conceptions of the market system as an inhumane system driven primarily by self-centered materialism.
Defenders of liberty must utilize fiction if they hope to make the case for the market system. People’s minds are not changed through economic theory or political philosophy so much as they are changed through fiction – through the stories we tell ourselves. But proponents of the free market must not settle for authors who feed into the erroneous arguments raised against capitalism. Jean Valjean and characters like him - not John Galt - should serve as the spokespeople of capitalism.
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Democracy Dies of Democrats
“Democracy is under attack!” I wish I had a fiat nickel for every time I heard some variation of this panic-line these past half-dozen years.
Trump will destroy our democracy!
Our sacred democracy is under assault!
Mostly peaceful protesters are in the streets trying to protect our besieged democracy!
Rioters stormed the Capitol to take down our democracy!
We must have more democratic process in boardrooms—for Diversity, Inclusion, and Equity (DIE)!
We need a Disinformation Czar to approve citizens’ conversations so we can save democracy!
I don’t have any fiat nickels left, alas. I spent them all at the local gas station.
But I do have good news. Democracy is a political ideology. It’s not something that you should want to save in the first place. We can all relax and wish democracy a speedy death. I know you’ve read Hoppe and Rothbard. Democracy is a sham. It’s the same old organized crime as governments of old, except under democracy you get to “vote” (LOL—cf. the 2020 “election”) for the people who will rob you. So, be of good cheer, friends. Democracy is bunkum, and you don’t have to give a damn if it’s under assault. In fact, if someone is “attacking democracy,” my first thought is to ask myself how I can help him out. Because I know I will be much freer and happier the sooner democracy and all other ideologies disappear.
In fact, though, democracy doesn’t need any special attacking to keel over. It collapses of its own accord. Democracy doesn’t die in darkness, as the motto of a certain fake news emporium would have me believe. Democracy dies of democrats. Huzzah! All I have to do is sit back and wait, and democrats will kill and bury their own ideology for me. That’s something really worth celebrating.
And not just democracy. All political ideologies are destroyed by those who truly believe in those ideologies. The more feverish the believer, the faster that believer will lay the beloved ideology low. The more people double down on the political ideology of the hour, the faster that ideology collapses. Thank God in Heaven. If this is true, then all the talk we are hearing about democracy being in peril is very, very good news. Perhaps, soon, the thing really will die and leave us all in peace.
Democracy dies of democrats. Let us rejoice.
Consider just a few heartening signs of democracy’s imminent demise, and all from just one American newspaper which has made “democracy” the very reason for its ongoing existence. This past week, some members of the “democracy dies in darkness” crew at the Washington Post spent most of their time on Twitter sniping at one another for not being sufficiently democratic. It began when one person at that newspaper liked one tweet containing one off-color joke. Another person at the Washington Post responded on Twitter in the tone of innocent indignation which defines the Twitter brand—the social media equivalent of clutched pearls. A third Washington Post person jumped in to chide the pearl clutcher for calling out the tweet-liker in public. The Post’s executive editor then issued two memos to address the incident. The pearl-clutcher lashed out again online. Then others at the Post got involved and it turned into a dugout-clearing tweet brawl. (https://www.foxnews.com/media/washington-post-week-from-hell)
Now, democracy, I have been told since I was old enough to be brainwashed by democrats in an American public school, is about listening to other people’s opinions. It’s about honoring all views. You have to be able to have reasoned debate. You need to protect minority positions so that everyone can share their ideas and we can all decide together how to run our country.
I can’t remember when I stopped believing that any of that was true. I think it was probably around the time that I read Hans-Hermann Hoppe. But please let me recap the latest WaPo saga for anyone who still clings to the fiction that democracy is “the good ideology,” the one that’s “the worst except for all the others that have been tried.” The people who keep shouting at us that democracy is dying, that democracy is under attack, have proven incapable of acting democratically and resolving their differences through reasoned debate. In true democratic fashion, the person who found herself in the minority in the Twitter fracas was promptly fired. This was after the WaPo bigwigs tried clamping down on the debate using pure power of office.
Zoom out a little and you can see that the WaPo in microcosm is pretty much the same as the WaPo writ large. Honoring all views? Protecting minority positions? You may have noticed—at least I have—that when I don’t agree with the Washington Post or other democratic ideologues, I am branded a “fascist” or a “racist” or a “bigot” or a “denialist” or a “Republican.” I abhor all five, but never mind. Democracy has nothing to do with debate. Democracy is—has always been—about throwing your opponents into prison or, better yet, sentencing them to death.
Plato had a serious problem with democracy, probably because he watched a gaggle of democrats run Athens into the ground during the Peloponnesian War and then execute the one man in that city who had refused to play political games with the warring factions. The Washington Post is not Athens, but you get the idea. Don’t like the fact that I liked a tweet? You’re gone! Fundamentally, absolutely nothing about democracy has changed in going on three thousand years.
All of this business about tweet-liking is to say nothing of the Washington Post’s other woes of recent days, such as yet another fake news scandal involving beleaguered Post reporter Taylor “Save Democracy!” Lorenz (https://www.washingtonexaminer.com/opinion/twitter-saga-obscures-the-washington-posts-taylor-lorenz-scandal), or the disturbing revelation that the defamatory material which the Post published in 2018 about Johnny Depp was not only false but also ghostwritten by the ACLU. (https://www.insider.com/aclu-wrote-amber-heard-washington-post-oped-johnny-depp-2022-6) It’s not just that democrats can’t debate and refuse to listen to other people’s views. It’s that democrats can’t stop feeding lies to the general public. Why? Because democracy must be protected at all costs.
Hmm. Doesn’t quite add up, but I’m not buying anyway so I don’t care.
Here’s the bottom line, the one that will never make it into your friendly neighborhood democratic newspaper. Democracy doesn’t die in darkness. It always dies in broad daylight. And it dies at the hands of democrats.
Why do democrats kill democracy? The reason is simple. Democracy is an ideology. Like all ideologies, it operates under magical assumptions. An ideology is an insistence that contingency can be controlled by ignoring certain facts and facets of lived reality. An ideology attempts to enclose the world within a cocoon of words and wishes. Ideologies, to put it bluntly, are elegant-sounding, actionable lies. The whole point of an ideology is to blind oneself, or others, to the way things really are.
Because ideologies are magic spells to make the real world turn into something that can be controlled, ideologies necessarily produce people incapable of making rational decisions. Ideologues—and that includes democrats—will almost always double down on the ideology when faced with clear and mounting evidence that it isn’t true. It must be true. That’s what makes it an ideology. And the more an ideology fails, the more, under the twisted logic which makes ideology possible in the first place, it must be infallible. The ideology crumbles, all while the ideologues keep insisting that only the ideology can save them. Robespierre and the guillotine were not aberrations of ideology. It’s always that scene in one form or another. Every ideology ends when that ideology’s ideologues take the ideology to its natural conclusion and declare war on reality.
The people who work at the Washington Post (or used to!) are among the most rabid democratic ideologues on the planet. If they can’t make democracy work, then nobody can. If the people who want to inflict democracy on all the rest of us can’t even sort out who gets to like a tweet and what should be done when someone else disagrees about it, then democracy is shown to be the farce that it is. In the event, even the WaPo democrats failed at democracy. That’s how ideology operates. Democracy dies of democrats.
The same can be said, mutatis mutandis, of any other ideology. Take communism, for instance. In the Soviet Union, communism worked just as the Austrian economists knew it would. Secret police, bread lines, gulags, personality cults, misery, death. No surprise there. Communism is a hateful ideology. Mises and Hayek tried telling us just that.
No one had more reason to understand this than the communists themselves. They were the ones standing in bread lines or rotting in gulags, after all, or else condemning others in their communist paradise to those fates. But what did the communists do? Just what the democrats at the Washington Post did. They ratcheted up the ideology.
We need price boards! What’s missing is more collectivization! What we really have to have is a purer Marxism than ever before!
And so on, as millions, and then millions more, starved to death or snitched on their mothers for a promotion at the Number Four Munitions Factory. Communism didn’t die in darkness. It died in broad daylight. And it died of communists.
I could extend the list, but you get the idea. Insert the name of any ideology into the blank and then run the program. Or just flip through the pages of a history book to see how the mechanism works in real life. An ideology is a vehicle to power at first. It’s what gets the worst people to the top of any government—Hoppe and Rothbard proven right again and again. Once in power, the ideology begins to work against its erstwhile masters. The ideology takes over, and ideologues work themselves into a sustained trance. The ideology must be true. The way to overcome apparent failures in the ideology is with more ideology. This scales up, the gearwheels of ideology and yet more ideology turning faster and faster, until total collapse comes.
How does one get out of an ideology? One simply walks away. One stops believing in it and therefore stops trying to prove to oneself and to others that it’s true.
But, truth be told, anti-ideology can itself feel like an ideology at times. It’s not so easy to free oneself from the grips of ideological thinking, I mean, and it’s even harder to shake others out of the trance. Try this experiment if you don’t agree with me. Ask an average American how to fix what’s wrong with the country. He or she is likely to say, “We have to wait until the next election. Then we can vote our way to a better democracy.”
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Rate Hike Incoming
The near certainty of another 50-bps rate hike at the Federal Open Market Committee (FOMC) next week forces us to consider the monetary system in which we find ourselves; whereby currency debasement is a useful economic tool, that is until it becomes detrimental, which according to the Fed, can only be cured by rate increases.
Let’s see what the planners have been saying regarding next Wednesday's announcement. CNBC reports that Cleveland Fed President Loretta Mester claims:
…she doesn’t see ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases.
Clearly, more pain lies ahead. Elaborating on this, she provides the following quote:
I don’t want to declare victory on inflation before I see really compelling evidence that our actions are beginning to do the work in bringing down demand in better balance with aggregate supply.
According to her, the June, July, and September meetings could see a 50-bps rate hike and that a pause on rate hikes is unlikely.
Not alone in that sentiment, San Francisco Fed President Mary Daly supports diligently raising rates until “inflation comes down to a reasonable level,” going to say:
We need to do that expeditiously, and I see a couple of 50 basis point hikes immediately in the next couple of meetings to get there… Then we need to look around and see what else is going on.
It’s unclear what she means by “what else is going on,” but it could be a recession, stock market crash, or a housing market collapse…
The Fed’s second in command also gave insight on what our future holds. Fed Vice Chair Lael Brainard said it’s unlikely the Fed will break its rate hiking cycle “anytime soon.” Strangely confident about the state of the economy, she was quoted:
We’re certainly going to do what is necessary to bring inflation back down… That’s our No. 1 challenge right now. We are starting from a position of strength. The economy has a lot of momentum.
Between the three of them and the latest FOMC minutes, which echoed similar sentiment, the world is expecting more rate hikes for the foreseeable future. Of course, it’s not without its challenges. Talk of a recession has been aggressively making headlines. As CNBC explains, data from the Atlanta Fed showed this could be “the second quarter of negative growth,” the official marker of a recession. Reiterating:
…the economy doesn’t have much further to go before it slides into what many consider a recession.
However, CNBC was quick to explain that:
To be sure, while the notion of two consecutive negative GDP quarters is often considered a recession, that’s not necessarily true… However, there has never been a period with consecutive negative-growth quarters that did not entail a recession, according to data going back to 1947.
Where the members of the Fed see strength, others see great weakness. With rates raising next week and the balance sheet finally set to shrink this month, it will be interesting to see how the markets and GDP figures fare in the months ahead.
With today’s Consumer Price Index (CPI) reaching 8.6% for the month of May, we must also wonder just how high will they raise rates to fight inflation readings, and how many rate increases can this so-called strong economy take before it implodes?
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Sound Money Movement Scores 2022 Wins
As state legislatures clear out and head home for the summer, one reality has emerged: Sound money is a winning issue in the states.
At a time of record-high inflation and geopolitical uncertainty across the globe, states are wisely taking steps to better enable citizens to acquire, sell, and/or use gold and silver.
Last year, Arkansas and Ohio repealed sales taxes on gold and silver coins, bars, and rounds. And Ohio invested almost $1 billion worth of physical gold in its Ohio Police and Fire Pension fund.
This year brought three new legislative victories in Tennessee, Virginia, and Alabama, thanks largely to efforts by Money Metals Exchange, its customers, and its Sound Money Defense League project.
All told, sound money allies introduced bills in 11 states to remove sales and income taxation on the monetary metals, create state depositories, and/or protect state pensions and reserves with an allocation to physical gold.
Here’s a full rundown…
Eleven States Considered Sound Money Bills This Year
Virginia had exempted sales taxes on most purchases of precious metals back in 2015, but purchases under $1,000 were still taxed and the whole exemption was scheduled to sunset this year.
Mobilizing grassroots support, the Sound Money Defense League worked with Delegate Amanda Batten’s office on House Bill 936 and secured a five-year extension of the existing exemption, while also securing its expansion to cover ALL transaction sizes.
Before the ink could dry on Gov. Glenn Youngkin’s signature, Alabama finalized sound money legislation of its own.
In addition to prompting in-state supporters to make literally thousands of calls and emails to members of the Alabama House and Senate, Money Metals’ public policy team worked closely with legislative allies to extend Alabama’s precious metals sales tax exemption and also clarify that the exemption covers ALL common forms of bullion.
The successful Alabama bill also removed some burdensome reporting requirements.
During a house committee hearing on Alabama’s Senate Bill 13, the committee chairman proclaimed the precious metals bill was “the most popular bill of the session.” Governor Kay Ivey’s signed SB 13 into law in April.
Meanwhile, a groundswell of Volunteer State citizens prompted the Tennessee legislature to secure its place as the 42nd state to remove sales taxes from gold, silver, platinum, and palladium coins, bars, and rounds.
During the Senate floor vote, Sen. Janice Bowling commented, "I just want to thank the senator for bringing forward this bill along with half of the state of Tennessee that contacted all of us!"
Meanwhile, sound money bills in other states fell short of passage, but efforts laid the groundwork for victories in 2023 and beyond.
Kentucky House Bill 272 aimed to remove sales taxes on gold, silver, platinum, and palladium coins and bars, but the measure did not receive a hearing this year.
In Mississippi, the Sound Money Defense League worked with Rep. Jill Ford, the Mississippi Center for Public Policy, and in-state supporters to advance House Bill 426, another sales tax exemption effort.
HB 426 passed the Mississippi House by a vote of 121-1 but died in Sen. Briggs Hopson’s Senate Appropriations Committee without a hearing.
In Hawaii, Rep. Val Okimoto led the way in pushing sound money legislation (House Bill 1184) out of the House Finance Committee. It passed overwhelmingly out of the full House but failed to receive a hearing before Hawaii’s Senate Finance Ways and Means Committee.
Meanwhile, lawmakers in Alaska held two hearings on House Bill 167, a measure to declare gold and silver “specie legal tender” as well as prevent boroughs and cities from slapping sales taxes on purchases of the monetary metals.
In the Garden State, Assemblyman Ronald Dancer introduced A3007 to end New Jersey’s sales taxes on precious metals. A companion bill was introduced in the New Jersey Senate while other cosponsors joined the effort.
New Jersey’s legislature is still in session, so there’s still an outside chance of progress there this year.
Meanwhile, Oklahomans appear eager to build on the Sooner State’s existing sound money policies. Proponents introduced bills to eliminate capital gains tax on the sale of precious metals, establish an in-state gold depository, and protect taxpayer reserve funds with gold and silver. These bills enjoyed grassroots support, but they did not pass out of any committees.
West Virginia and Washington legislatures introduced measures to eliminate various tax liabilities on precious metals, but these bills didn’t receive hearings in 2022.
The Idaho House overwhelmingly passed a bill that would permit the state treasurer to hold gold as a hedge against the state’s massive pile of negative yielding debt paper, but the senate failed to act on the bill.
In the end, the big news for 2022 is the newly minted sales tax exemption in Tennessee – followed by more incremental wins in Virginia and Alabama.
Hawaii, Kentucky, Maine, Mississippi, New Jersey, New Mexico, Vermont, and Wisconsin remain as the only states that still charge full sales taxes on precious metals, without any exceptions.
Leading the Sound Money Push
As the de facto public policy leaders for the entire precious metals industry, Money Metals Exchange and the Sound Money Defense League are preparing to redouble efforts in the remaining eight sales tax states and continue pushing ahead on other policy fronts. We've been blessed to have broad public support on our side -- along with help from local dealers and groups like Campaign for Liberty.
As inflation rages on, the folly of endless currency printing becomes more undeniable.
Thankfully, individuals, states, and even countries are increasingly considering the role of gold and silver in protecting against the twin threats of Federal Reserve Note devaluation and weaponization.
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Have We Kicked the Can to the End of the Road?
With “recession“ dominating economic headlines these days, many have forgotten the K-shaped versus V-shaped recovery debate of late 2020.
Still riding the high of stimulus checks and PPP loans, nearly all market pundits concurred that we were largely out of the woods of financial turmoil. Their disagreement lied in whether the rebound would take place in the real economy (V-shaped) or solely in asset prices (K-shaped), leaving Main Street behind.
While 2021 saw euphoric asset valuations and even a precipitous decline in unemployment, it now appears that both camps may have been incorrect. With roaring inflation, an ominous negative GDP print, and the S&P nearing a bear market, Peter Atwater, an expert who focuses on investor confidence, believes we are on the cusp of a financial crisis on both Main Street and Wall Street.
To illustrate how this might play out, Atwater highlights the common practice by which the wealthy borrow against their asset holdings at historically low rates to fund expenditures. Rising rates and quantitative tightening have the potential to not only increase interest fees, but also lower the value of the pledged collateral, potentially triggering margin calls for the upper echelon of society.
Atwater points out that personal loan volumes (mortgages, margin debt, etc.) have increased to a greater degree than those of credit card loans. This is a sign that Wall Street may be more levered, thus more vulnerable to monetary tightening, than Main Street. Whereas the Main Street, many of whom are not asset owners, might actually welcome a decline in asset prices, especially in real estate. Instead, the Average Joe’s main concerns today are food and gas prices.
These realities give insight into the policy path central bankers may choose, who are in a difficult position as they attempt to quell inflation with pressure from Wall Street who have gotten used to lofty asset prices.
Will the Fed sacrifice Wall Street to protect Main Street? Atwater isn’t sure that it’s that simple.
He believes there is one key point central bankers seem to be ignoring: potential business failures. With over 30% of the companies in the pre-pandemic Russell 2000 being zombies (i.e. companies with revenues barely sufficient to service their debts), it’s hard to see how raising interest payments will not initiate a wave of bankruptcies and accompanied layoffs.
Therefore, even if the Federal Reserve elects to help the little guy by taking on inflation, the pain may instead be felt in the jobs market.
For all the details on Peter’s insights, listen to his full interview with Wealtion, hosted by Stephanie Pomboy,
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The Theme of Failure
Last week Biden sat down with Powell in a rare, but not uncommon, meeting between the Commander-in-chief and the head of America’s central bank.
Per Whitehouse transcript, Biden says:
It starts with a simple proposition: Respect the Fed and respect the Fed’s independence, which I have done and will continue to do.
The problem is that the Fed’s independence was compromised a long time ago. Both the Fed and Congress worked together during the pandemic to incorporate new companies for the purpose of skirting legislation, forming inflationary lending programs, as well as direct stimulus programs, spending trillions of dollars in the last two years.
The primary reason prices have drastically risen, or the dollar weakened, is due to the expansion of the money supply created by these programs, exacerbated by forcing businesses across the country to shut down. Of course, they will never rightfully acknowledge the current inflation problem being the result of government and central bank intervention.
After the proposition, he talks about the plan on tackling inflation:
Chair Powell and other leaders of the Fed have noted, at this moment, they have a laser-focus on addressing inflation, just like I am.
Since both Biden and Powell fail to understand the nature of inflation, they create narratives for the public, hence sometimes inflation is caused by Putin, sometimes it's bottlenecks, and sometimes just a transitory phenomenon. We can't believe they have a “laser-focus on addressing inflation” now considering they’ve never shown this before. The public hears narratives and finger pointing rather than credible discussion over why our currency is debasing.
In time, each new narrative is proven false. Just this week on CNN, Treasury Secretary Janet Yellen admitted:
I think I was wrong then about the path that inflation would take.
Consider the gross negligence perpetrated by one of the most decorated economists of our generation when Janet Yellen weaved a tale about “transitory inflation,” which really did turn out to be just a story more than economic theory.
The theme of failure continues. It’s important for the public to realize how central planning an economy ends; and it always ends the same, with mistakes, errors, oversight, falling behind the curve, et cetera, et cetera. When their follies, or worse, flat out lies are eventually exposed, the burden of failures by the planners falls on society to pay the cost.
It’s important to understand the system as a whole, how it’s designed for failure and how we allow this to happen. Rather than ask the same officials to do a better job of planning the economy, we must somehow rid ourselves of these planners entirely; especially considering “we the people” don’t need the planners. The planners need us.
Perhaps it was their recent failures in understanding inflation, coupled with month after month of high inflation readings that prompted the Biden-Powell meeting?
The day before the meeting, Biden had an op-ed statement in the Wall Street Journal, where he wrote:
First, the Federal Reserve has a primary responsibility to control inflation. My predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.
His message says nothing regarding the path forward and instills no confidence that the future looks promising. If they're trying to convince us that all will be well, or that they’ve somehow learned from the past, they’re not doing a very good job. We should be concerned with Biden’s message to trust the process since it appears their short-run goal is to bring on a recession, crash the stock, bond, and housing market, and in the long run destroy the purchasing power of the US dollar. Should they accomplish this, the current system ensures none of the people who brought us to economic ruin will ever face any form of recourse.
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