Power & Market

Axel Leijonhufvud RIP, 1933–2022

05/20/2022Judy Thommesen

It is with a sad heart that we note the passing of Axel Leijonhufvud on May 2. He wasn't an Austrian (but rather, as a good Swede, a Wicksellian), nor did he like pigeonholes, but he leaves a large legacy that is relevant to the Austrian school. He, much like Roger Garrison, knew more about what Keynes said than most any other scholar, past or present. His dissertation On Keynesian Economics and the Economics of Keynes argued that Keynes's General Theory didn't actually deal with sticky wages and prices, but instead with inter-temporal coordination failures. He was more interested in out-of-equilibrium processes than in mathematical models of equilibrium, and this led to his advising some of the former republics of the Soviet Union (notably, Kazakhstan) on how to transition to a market economy. He was a gentleman, and a true friend to those who knew him. He will be missed.

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A Renewed, Libertarian America: What Must Be Done

05/19/2022Archie Richards

The following policies would result is a more peaceful and equitable society:

-- Federal legislators are limited to one term each, with much reduced pay. Senatorial terms are cut from 6 years to 4. These changes would make Congress less responsive to constituent demands, inducing people to meet more of their needs in the private sector. After the government incurs a deficit, the remuneration of legislators and administrators is reduced during the year that follows. Judges are limited to ten-year terms.

-- The government is isolationist. The U.S. State Department and its embassies are abolished. The U.S. leaves the United Nations and requires the United Nations to leave the United States. The U.S. defends the nation from military and electronic incursions only from Mexico, Canada, the sea, the air, and from space. Its navy stops patrolling the world’s oceans.

-- Private-sector Americans, including those engaged in trade, tourism, and private foreign aid, may be as interventionist as they please. Military weapons owned by private parties may be stored in America for use by them elsewhere. The U.S. government does not ensure the safety of its citizens abroad.

-- The Federal Reserve Bank is abolished. Attempts by anyone, never mind a government agency, to regulate the economy cannot help but make things worse. The Fed has greatly increased economic volatility, making life especially hard on the poor during downturns. Keeping interest rates low increases the value of assets. Since most assets are owned by the prosperous, wealth has become ever more unequal. The government’s monopoly over the dollar is removed. Anything may serve as a currency. Currencies are freely exchangeable, allowing the people to choose which ones are most convenient and best hold their value.

-- The Civil Service System is abolished. The former spoils system did little damage and created far less incentive to expand government.

-- The premiums for health insurance are low, since policyholders pay all of their medical costs up to the year’s substantial deductible. Policyholders thereby become familiar with healthcare costs, and competition between suppliers drives the costs way down. After a person’s deductible is spent, the insurance company covers all health costs. Younger people leave most of their deductibles unspent.

-- Government has nothing to do with education. Many government schools are poor, especially in low-income areas, and universities are replete with idiotic notions. All schools are owned privately, for profit or non-profit. With taxes lowered, the prosperous would likely compete as to who can provide the most help to central-city schools.

-- Government stops gathering statistics, because the statistics induce the government to try to solve problems, and most such solutions make things worse. Statistics are collected and paid for by the private sector.

-- Bank deposit insurance is terminated. The guarantees have caused depositors to care about the rate of interest and the convenience, but not the money’s safety – a partial cause of the nation’s enormous expansion of debt.

-- Government zoning impedes free markets and is abolished.

-- Federal laws that support unions are repealed. The interaction between employees and employers is none of the government’s business. Workers can unionize, but without government backing.

-- Government’s flood insurance with excessively low premiums is terminated. When floods occur, the costs are spread among all the people or added to the debt. The benefits to the few seacoast dwellers are substantial and obvious. The per-capita costs to the many Americans are small and hidden.

-- The Jones Act restricts American shipping and imposes significant costs on Americans. It is abolished.

-- The government stops paying farmers for staple commodities, especially corn. The subsidies have lowered consumer costs of staple commodities and contributed to widespread obesity. 

-- Drug testing is not performed by the government. Bureaucrats avoid blame by keeping effective drugs off the market longer than necessary. More lives are lost from the delays than are saved by ensuring the drugs are safe.

-- Government funding of scientific developments has politicized science and is terminated. Scientific development is funded exclusively by the private sector, partly in concert with the military.

-- All tariffs and impediments to trade are repealed. Nations that do not impede international trade are more prosperous and more equitable.

-- Gun controls prevent good people from owning guns. Bad people obtain them anyway. Gun controls therefore make things worse and are abolished.

-- Government does nothing about viruses. Corrective measures, if any, are taken within the private sector.

-- The forfeiture of privately-owned assets to benefit police departments is terminated.

Dynamics of Government

Like everyone else, government bureaucrats act in their own best interests. Having no profits, they measure their self-worth by expanding their budgets, avoiding blame, and increasing their power over others. They generally avoid actually solving problems, because doing so would render their jobs unnecessary. Government’s principal objective is to expand its reach and power. With few exceptions, government is the worst and most expensive way to do anything.

With big government, the rich gain wealth faster than the poor, because legislators reward the rich for their campaign gifts. With small government, the poor gain wealth faster than the rich, probably because they’re willing to work harder.

Media stories about government are newsworthy. But unless wrongdoing or sex is involved, stories about individuals going about their private affairs are not newsworthy, since they usually affect only the individual involved. The media’s natural inclination to favor government is a danger to society and is partly corrected by education.

Police Funding

Providing the following provisions are first enacted, the funding of police departments is much reduced:

-- Members of the public may carry weapons, hidden or not, without licenses. The public would largely police itself, as occurred successfully in the 19th Century. Trying to prevent unbalanced people from owning guns is the job of the private sector, not government. 

-- The disastrous war against drugs is terminated. Drugs are treated as medical problems, not crimes, and information about drugs is taught in schools.

-- Prostitution is legalized. What people choose to do with their bodies is none of the government’s business.

-- Since unions try to prevent bad cops from being fired, police departments may not unionize.

-- Businesses that fail to obtain suitable property and casualty insurance cannot obtain financing. Insurance companies coordinate with banks and finance companies to determine the proper conditions.

-- Cameras at intersections are operated by a consortium of insurers. If a car has not stopped appropriately, the owner is automatically sent a ticket and notified that his auto insurance premiums have been raised. 

The Federal Debt

The default of at least a portion of the federal debt is closer than people realize. If the cost of carrying the debt rises even to the current rate of inflation, it would crowd out current expenses and force at least a partial government default.

The federal government owns 28% of the nation’s land and almost $5 billion of gold. It should transfer these assets to private parties in return for their accepting portions of the nation’s debts. Rivers, inland waterways, lakes, swamps, aquifers, mountains, forests, prairies, deserts, tundra, roads, highways, bridges, dams, reservoirs, the national parks, and the 12-mile band of ocean that rings the nation could all be exchanged for debt relief. Amtrak, urban transportation, airports, and the postal service should all be privatized.

The owners of the Mississippi and Missouri Rivers, for example, could earn money from those who use the waters for irrigation, transportation, manufacturing, fishing, drinking, and recreation. After Congress decides the extent of liability by the owners for floods, the values of these rivers would be sky-high.

Policies that Especially Hurt the Poor

The following government policies make life more difficult and more expensive for the poor and are terminated:

-- Government lotteries are advertised heavily in poor areas, encouraging people to treat them as investments, not entertainment. The lotteries create gambling addictions and breed poverty.

-- Used automobiles are bargains. The prosperous pay heavily to buy new cars. The non-prosperous underpay to buy them subsequently. This substantial, non-governmental, income-transfer program operates now because government interferes relatively little with automobile marketing. But land-use, building, banking, environmental, farming, mining, water, tax, and who knows what other laws interfere with real estate sales, preventing a much larger income-transfer program from operating with housing.

-- Occupational licenses require fees and long periods of training, restricting the number of people in the professions. The resulting shortage of workers elevates the prices of their products. The poor can’t afford the fees and expensive training to join the professions, but they pay the higher prices when they buy the products.

-- Rent control enables older, relatively prosperous tenants whose lives are stable to enjoy low rents. But after they vacate the apartments, the rents are raised. The higher rents are paid by younger, less prosperous people who move frequently.

-- Many small businesses are exempt from paying minimum wages. After government requires larger companies to raise minimum wages, the number of employees who begin being paid below the minimum greatly outnumber those who enjoy the higher minimum wages.

-- Regulations often raise child-care costs beyond the reach of lower-income parents, preventing them from obtaining jobs.

-- The Social Security system transfers money from workers to retirees and holds no investment reserves. With the number of retirees growing faster than the number of workers, the system is certain to fail.

-- The life expectancy of black men is shorter than that of white women. Since Social Security benefits terminate when a person dies, the FICA taxes paid by black men support white women, but not the other way around.

-- Anti-gouging laws force down the prices of products during emergencies, reducing the supply of the products, especially in poor areas.

-- Taxing the rich at high tax rates hurts the poor, because the rich have less money available to create jobs.

Without government holding them down, the poor would pull themselves out of poverty. Any social safety net that’s necessary would be supplied by the private sector.

Government’s Proper Duties

The long-term results of the following government duties are beneficial:

-- The federal government defends the nation and sets and enforces immigration policies.

-- The states set and enforce election laws.

-- Local and state governments enact basic laws, keeping people from hurting others by force or fraud. They are backed by the police, the armed citizenry, and the courts. The owners of roads and other infrastructures furnish their own police forces.

-- The enforcement of contracts and adjudication of lawsuits are discharged by the courts to the extent those issues are not resolved by mediators.

Summary

Most laws and government regulations cause long-term harm. The government sector therefore constitutes less than 5% of the GDP.

Since the government sector has grown during most of the years since 1900, the long term has come home to roost, making the nation more and more dysfunctional. Government’s increasing use of force induces increasing violence among the people.

The private sector creates a solution whenever there’s a purchase and sale – literally billions of times a day. On all such occasions, the buyers and the sellers feel that they benefit.

Transactions expected to be beneficial may of course turn out to be mistakes. Some people make more mistakes than others. The only solution is the individual’s effort and learning.

Since government resists change, the only solution for its mistakes is to make government much, much smaller.

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Alex Pollock Examines Central Bank Digital Currencies

05/19/2022Ryan McMaken

In this video panel on central bank digital currencies (CBDCs), Mises Institute Senior Fellow Alex Pollock moderates a discussion on what CBDCs could mean for the banking sector and the monetary system overall. Panelists include: 

  • Bert Ely, Principal, Ely & Company, Inc.
  • Chris Giancarlo, Senior Counsel, Willkie Digital Works LLP; Former Chairman, US Commodity Futures Trading Commission
  • Greg Baer, President & Chief Executive Officer, Bank Policy Institute

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Alabama Passes Sound Money Law, Expands Sales Tax Exemption Involving Gold and Silver

04/16/2022Jp Cortez

With Governor Kay Ivey’s signature on sound money legislation today, Alabama has become the second state this year to expand its sales tax exemption involving gold and silver.

Alabama Senate Bill 13, championed by Sen. Tim Melson and Rep. Jamie Kiel, passed with unanimous support out of the Alabama Senate and then passed unanimously through the Alabama House before making it to the governor’s desk.

In 2019, Alabama originally removed sales taxes from most gold, silver, platinum, and palladium coins and bars. This year, SB 13 clarified that the exemption covers all common forms of bullion, removed burdensome reporting requirements, and extended the sales tax exemption until 2028.

Backed by the Sound Money Defense League, Money Metals Exchange, and in-state supporters, SB 13 now fully ensures that Yellowhammer State citizens cannot be penalized with taxation when acquiring the monetary metals for investment, to protect their savings from the ravages of inflation, or any other reason.

Stefan Gleason, president of Money Metals Exchange, explained the importance of extending the existing sales tax exemption on precious metals: “Many states surrounding Alabama (Georgia and Florida) have cultivated pro–sound money environments, eliminating sales taxes on gold and silver. Alabama savers and investors are thankful that the legislature expanded and extended the state’s exemption.”

Alabama follows Virginia, which had only days earlier expanded and extended its own sales tax exemption involving the monetary metals earlier this month.

Including Alabama, forty-one US states now fully or partially exempt gold and silver from the sales taxes. That leaves nine states and the District of Columbia as the primary jurisdictions that still harshly penalize citizens seeking to protect their savings against the serial devaluation of the Federal Reserve Note.

Jp Cortez, policy director for the Sound Money Defense League, noted that SB 13 is part of a growing national trend. “Tennessee and Mississippi, both states that border Alabama, have been considering the elimination of sales taxes on gold and silver. So are Alaska, Hawaii, and New Jersey.”

States are removing sales taxes from monetary metals for the following reasons:

  • Taxing precious metals is unfair to certain savers and investors. Gold and silver are held as forms of savings and investment. States do not tax the purchase of stocks, bonds, ETFs (exchange-traded funds), currencies, and other financial instruments, so it makes no sense to tax monetary metals.
  • Levying sales taxes on precious metals is illogical because gold and silver are inherently held for resale. Sales taxes are typically levied on final consumer goods. But precious metals are inherently held for resale, not “consumption.”
  • Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers in states with precious-metals sales taxes often take their business to neighboring states that have eliminated or reduced sales tax on precious metals. Coin conventions also tend to avoid the sales tax states.
  • Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals aren’t fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money. Precious metals investors are purchasing precious metals as a way to preserve their wealth against the damages of inflation. Inflation harms the poorest among us—including pensioners, those on fixed incomes, wage earners, savers, and more.

The Sound Money Defense League is a nonpartisan, national public policy group working to restore sound money at the state and federal level and publisher of the Sound Money Index.

Money Metals Exchange is a national precious metals investment company and news service with more than 500,000 readers and 350,000 customers. It also operates Money Metals Depository for the vaulting of gold and silver and Money Metals Capital Group, a collateral lending institution.

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Are US-Iran Relations Permanently Strained?

04/16/2022José Niño

As the United States saunters blindly down the dark hall of multipolarity, new questions about its capacity to handle the new realities of international affairs are surfacing.

Most attention is being directed towards Russia, as it’s conducting a controversial military campaign against Ukraine. On top of that, is the perennial question of China. The US is ostensibly making a pivot towards Asia in its efforts to contain the East Asian giant’s rise.

Generally overlooked nowadays is how the US will deal with Iran — one of the Deep State’s long-time bêtes noires. Part of the Biden administration’s foreign policy agenda is to re-enter the Joint Comprehensive Plan of Action (JCPOA), colloquially known as “the Iran nuclear deal.” Over the past few months, the two parties have attempted to resurrect the nuclear deal. The US’s current energy crunch — a largely self-inflicted predicament — has prompted the Biden administration to desperately revive this deal to allow for Iranian oil to continue flowing to the states.

Whether the deal will be finalized is still up in the air. Signed in 2015, the Iran nuclear deal was a hallmark of Barack Obama’s second term in office. Under this agreement, Iran, the US, and the European Union signed the agreement where Iran ostensibly agreed to iron out several issues with its nuclear program in exchange for sanctions relief from the US and EU.

However, the succeeding Trump administration scrapped the deal on the grounds that it was not fully permanent, did not address Iran’s development of a ballistic missile program, and did not tackle Iran’s expanding influence in the Middle East, namely its increased foothold in Syria, Iraq, Lebanon, and Yemen.

From there, the Trump administration pursued a maximum pressure strategy to bring the Middle Eastern nation to its knees through tightened sanctions and punitive actions such as the assassination of Major General Qasem Soleimani. While tensions did not escalate any further, US-Iran relations likely took a irreparable beating.

Although the Biden administration is still making efforts to rejoin the JCPOA, re-entry into this agreement has been a chore for both parties. US officials have previously accused Iran of not being serious about taking steps to return to compliance with the JCPOA.

On the Iranians' end, they have every reason to be skeptical of dealing with the US due to the long history of animosity between the two countries. More importantly, the US’s growing instability at home is infecting its foreign policy decision making. When a country sees one American president sign an agreement that is scrapped by a succeeding administration, they would be hesitant about re-entering an agreement that was previously scrapped.

Despite the obstacles they’ve faced in recent decades, the Iranians have proven to be resilient in the face of US pressure. In correspondence with Arta Moeini, an international relations scholar specializing in Iranian geopolitical affairs, Moeini called attention to how “years of 'maximum pressure' campaign by Iran hawks in the Trump administration have emboldened Tehran, reassuring it 1) that it can withstand almost any duress, and 2) that it has leverage because of it." Getting back into this deal will not be a walk in the park to say the least.

Putting oneself in an international actor’s shoes allows for one to understand why countries like Iran might not be so giddy about striking future agreements with the US. Why should Iran deal with a US government that has a long track record of reneging on its treaties, sanctioning countries at will, promoting covert operations that destabilize countries, and destroying countries wholesale in the name of democracy and human rights? For all the talk DC foreign policy apparatchiks make about rogue states, the US’s behavior on the world stage ironically embodies such behavior. It’s the classic case of the pot calling the kettle black. 

While diplomacy is preferable to DC’s usual strategy of saber-rattling, stiff sanctions, covert destabilization, and diplomatic isolation, perhaps it’s time to consider a bolder alternative. That would consist of a full-blown withdrawal from the Middle East altogether and stop interfering in Iran’s internal affairs.

From supporting the coup that deposed Mohammad Mossadegh in 1953 to pursuing draconian sanctions against the current Islamic Republic, the US has a long history of interfering in Iranian politics. The latter sanctions have only harmed Iranians, while doing nothing to topple the Mullah’s regime.

Moreover, the negative effects of the sanctions have incentivized Iran to form a strategic partnership with the emerging Eurasian axis that China and Russia are spearheading. Iran has deepened its relation with China by signing a 25-year $400 billion trade deal last year, and is in process of strengthening defense ties with Russia. Similarly, Iran’s 2021 accession into the Shanghai Cooperation Organization has reinforced its relationship with this Eurasian bloc.

The types of blowback that American foreign policy is generating will not just come in the form of terrorist attacks but also manifest themselves in the creation of parallel military partnerships. Such alignments will only make Iran even stronger thanks to the injection of money and military hardware from these rising powers.

If the US couldn’t take down the Iranian regime when it wasn’t part of any meaningful alliance structure, what makes American regime change architects think that they can topple an Iran that is beginning to enjoy stronger backing from the likes of China and Russia?

The US is now in a geopolitical environment where it’s no longer the only major actor on the world stage to boss other countries around. The unipolar moment is over and the dinosaurs in DC haven’t updated their foreign policy software. Failure to adjust to the new realities on the world stage, could result in the US stumbling into a disastrous conflict.

With the US mired in so many domestic problems as it is, getting ensnared in a misguided military adventure abroad is the last thing it needs.

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America’s Top Post-WW2 Export Has Rapidly Been Losing Value

04/14/2022Allan Stevo

In the last World War, the United States of America beat the fascists, drew a line between freedom and the communists, and then spent the next 70 years turning into what it claimed to abhor. 

There were notable milestones on that road. There was 1971 when government had swelled so large that it had to publicly announce that it could not pay for itself absent a monetary game of Three-card Monte. On August 15 of that year, gold was decoupled from the dollar. Then in 2001, the US went full police state, a framework that it had long been marching toward in small and big ways. In 2020, it shut down all churches, schools, and most businesses, seizing total control over life in the period known as corona communism. 

Like the Reichstag Fire of February 27, 1933, a minor, non-event — a seasonal illness — was turned into an excuse to seize power more completely. Each year, about 1% of Americans died from all causes. That was the normal baseline rate. In 2020, there was not a bubonic plague level event of one-third of the population dying. There was not a decimation-under-seize level event of one-tenth of the population dying. About 1% died that year, just like many other years. Americans had long marched toward communism, and by some mystery, that seasonal illness became the pivotal event that society widely consented to as the moment a defining transition into corona communism would take place. 

Through this all, from the time of its fight against the unfree nations all the way to its shift into an unfree nation, America consistently pushed its chief export in the post-World War Two era. Some may debate that America’s chief export is material. Others may debate that America’s chief export is debt. Both of these claims misunderstand the significance of the American economy in the world. 

Its most significant export in the post-WW2 era was the regulatory framework that America pushed into virtually every corner of the globe — its abolition of financial freedom. 

Washington, D.C., Langley, and New York City alike collaborated in a powerful system of “modernizing” banking and financial record keeping globally, to the extent that merely desiring to have privacy in one’s financial affairs was enough to cause one to be declared a criminal and an enemy of the state. 

This took place through rules on taxation, through money transfers, through accounting standards, through anti-financial privacy laws, through innocent sounding “know your customer” policies, through righteous sounding sanctions, and many other methods as financial privacy was effectively renamed “money laundering.” It was presumed that if one were to seek financial privacy that one was a terrorist seeking to harm innocent civilians, a narcotics trafficker seeking to ravage homes and communities, or a human trafficker seeking to drive that which is good and pure from the face of the earth. 

While this system captured many troublemakers, an untold number of innocents were harmed in this attack on financial freedom, a detail that was seldom mentioned by the opponents of financial freedom. Eventually, the biggest troublemaker of them all was hardest to ignore. In time, it became known that the US government, to a virtually incomparable level, engaged in acts of terror on civilians, engaged in trafficking of narcotics, and engaged in trafficking of humans. Just as that government spoke freedom loudly while instituting tyranny, it also became all manner of evil it claimed to oppose.

Eventually, this war on financial freedom became so total that some non-American banks would not even open an account for an American citizen because of the compliance headaches it caused. Once the calling card of freedom in the world, the American passport even turned into a business liability. Far from being seen as a warning sign that such anti-financial freedom regulation had gone too far, this was an indication that some places were too free if there was competition among passports. The regulatory regime increased in both velocity and mass. 

On February 24, 2022, a minor border skirmish between virtually indistinguishable neighbors — one of dozens taking place around the globe at the time — turned into an opportunity for the United States to seize upon a new level of financial control. Never before, not even against Nazi Germany, had such a level of economic sanctions been rolled out against a country. Russia, declared an aggressor nation by the United States in a conflict with the Ukraine, suffered crippling economic sanctions. 

The United States had gone about the world using the financial regulatory framework to de-bank individuals and removing them from the global economy. This brutal de-banking of people had come to be seen as a normal and legitimate role for the US Government to play. This was a new extreme, though. The entire country of Russia was in many ways de-banked, isolated from the world economy, and massive economic ramifications occurred. The currency, the Ruble, plunged in value. It was widely argued by American media experts that the Russia economy and Russian people would crumble in days, perhaps even resulting in a coup d’etat. 

In a desperate effort to prop up its currency, the Russian government responded by requiring payment in its own currency for its exported commodities. Russians, after all, had no access to international banking, so the US Dollar had suddenly become largely worthless to this 2% of the world’s population who occupied about one-tenth of the world’s land mass. The Russian government did an additional, uncommon thing for a post-1971 country. It tied its currency to gold, a move that was considered by leading economists to be a barbarous relic. 

Crippling sanctions continued, proxy war with other nations on Ukrainian soil raged, Russia was soon to be defeated, and its leader deposed by the Russian people, American media experts announced. 

By April 7 of that year, the Russian currency found itself trading even higher than it had on February 24. For the first time ever, the post-World War Two economic order — and its promises of economic destruction for all who disobeyed — had failed. 

No matter how much bluster you have, no matter how much talk, no matter how tough your words are, those things just can not beat gold. Those things can not beat the no nonsense real life call to action appeal of gold. Everywhere in the American sphere of influence, talk of the evilness of those who would stand against American financial regulatory hegemony filled the airwaves. The numbers did not lie, though. Talk lost. 

Gold had taken its proper seat again as money. Paper had taken its proper seat again as gold certificates. A glimmer of freedom sparkled through the world in those darkest days of 2022, the evil empire and its crippling sanctions, sanctions felt even by its own people, that evil empire had finally been shown to have a limit to its evil at home and in the world, and that evil empire had an expiration date on its evil. 

If its most powerful export — the eradication of financial privacy and the elimination of financial freedom — could be combatted with something as powerfully simple and disarming as the truth contained in a room full of gold, then it was clear that there were other simple, disarming truths that could return the world to its proper order as a place of free men.

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A Trillion Here, A Trillion There

04/08/2022Robert Aro

In this world, few things can be measured in the trillions. The US national debt, which first hit $1 trillion under President Reagan, is one. During his tenure, the national debt increased from roughly $700 billion to $2 trillion; a percentage increase that, if happened today under President Biden, would be nothing short of calamitous. 

The era of the trillion-dollar balance sheet is still relatively new, with 2008 being the first time the Fed’s balance sheet crossed the trillion-dollar threshold. Apple, in 2022, with assistance from the Federal Reserve’s $5 trillion increase in asset purchases since the start of the pandemic, became the first company valued at $3 trillion. Meanwhile, at $1.76 trillion, the largest asset held by the United States Government is the student loan account receivable.

Yesterday Forbes reported that:

Biden announced an extension of the student loan pause. For over two years, payments on most federal student loans have been suspended, along with interest accrual and collections efforts against borrowers in default on their federal loans. 

Without a doubt, the $1.76 trillion “asset” (plus interest) will never be collected by the US Government. To even call this an asset is disingenuous since “government grant” or “student stimulus” is more befitting.

Contrary to popular opinion, debt does matter. Like the student loan debt, the current national debt of over $30 trillion will also never be repaid; not that anyone in power seems to mind. The only real questions to ask are: “How many trillions will the next government spending bill require?” “When will the next stimulus check arrive?” and eventually… “How many trillions are needed for the next Federal Reserve bailout?”

Society has never moved beyond inflationism as a monetary policy. Perhaps that’s why every new generation of economic wizards conjure up inventive names to describe their Magical Monetary Techniques, hinging upon the pretense of increasing the supply of money and credit, passing it around rather hurriedly in times of societal distress with claims of making our lives easier.

We’ve seen the Paycheck Protection Program nearing the trillion-dollar mark. As part of a $5 trillion pandemic relief fund, it included several government stimulus checks totalling around a trillion dollars. Considering all we’ve been through in the past few years, society may have very well become numb to the significance of a trillion dollars.

A trillion here and a trillion there. No one knows when the next big crash will happen. But a crash after a boom is always inevitable, unless we’ve entered a new epoch where market downturns and stock market crashes never happen again. The timing of the catastrophe is unknowable. But the response by our central planners is reasonably assured. There will be trillions in government spending, trillions added to the balance sheet, and with enough new trillions added to the financial system, the stock, housing, and bond markets should be poised to gain that much more trillions in value.

Sadly, everyone is a trillionaire in Zimbabwe. We can only hope it will never come to this, but there’s nothing to show us it won’t. Yet it lies within the realm of possibility that our children, or our children’s children will all be trillionaires. And should this day ever come to pass, they’ll all remark how: “a trillion dollars ain’t what it used to be.”

Image source:
Getty
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A Search Engine That Respects Users Will Usher In Narrowcast Media and Freedom

04/07/2022James Anthony

For most of my life, twice a week everyone would get free newspapers that ran stories but that existed to sell ads.

That’s the business model of all current search-engine businesses. Their customers aren’t us, their customers are their advertisers.

Current search engines work the way they do because Google saw an opportunity to create new technology, got there first and best, and sells ads. No current search engines do the best their technology could do to produce the results that users want.

Those free newspapers? We always had better sources of stories, so twice a week we just threw those newspapers away. They’re not delivered to houses anymore. I could pick one up in the grocery store, but I don’t. Chances are, you don’t either.

That business model used to work for advertisers, but it never worked for us.

Information and Freedom

Search engines address an age-old need and want: Every person’s time is scarce, and every person wants to use some of his time efficiently to get the information that’s the most valuable to him.

Artificial intelligence has crawled many sources but has delivered scattershot quality. People, including parents, teachers, librarians, and colleagues, have always been the highest-quality curators of information.

And information is tremendously valuable.

The printing press brought individuals the Bible, which greatly increased individuals’ faith in Jesus. Faithful individuals soon stood up in large-enough numbers to make life, liberty, and property more secure from legacy churches and governments. The result was a sudden, breathtaking leap up in productivity that brought us the modern world.

Current search engines, in contrast, don’t advance individual freedom. Google skews its results to favor big advertisers, big medicine, and bigger governments. Now even DuckDuckGo is skewing its results.

These aren’t bugs, these are features. Skewed outputs are the inevitable result of current search engines’ skewed inputs.

Engines that Listen and Deliver

The streaming music service Pandora offers a straightforward picture of what’s feasible technologically.

Pandora’s recommendation engine tailors its outputs based on a user’s inputs of likes and dislikes and on a user’s mode selection of either my station, crowd faves, discovery, deep cuts, newly released, or artist only.

No comparably-clear inputs are used by any current search engine.

Pandora also delivers a constant stream, just like broadcast media. Search engines have the potential to likewise deliver tailored, streamed, narrowcast content—video, print, other visual content, or audio—that fits the wants of an individual user or of a gathering of individuals.

Search engines sooner or later will listen to users well and will deliver the information that users want the most. When they do, this will relegate mass-market broadcast media to the garbage heap of history.

Information that in this way is further tailored to individuals’ wants will leap further up in value. And this will further affect not just the valuable, isolated development of individuals but also the valuable social securing of freedom.

The extent that freedom is made secure by governments depends on the structures of the governments and on the structures of the major parties. Parties in turn eventually get joined by politicians who jump on the bandwagon, but initially are started by activists and media.

Once voters get information that’s sourced from the universe of finely-tuned, narrowcast information and that’s curated to match each individual voter’s needs and wants, voters will very-effectively bypass the current gatekeeping of the major parties and of their mass-market broadcast media cronies.

This will change the candidates and parties that voters will choose. Voters will finally be empowered to nominate and elect the candidates they prefer, who offer the most freedom.

Gatekeepers’ Structures and Incentives

Keeping individuals’ freedoms secure will require suitable limits on governments, on at least one major party, and on at least one major search engine.

For governments, the Constitution defines separated powers, limited enumerated powers, and offsetting powers. This design will need to be followed in all jurisdictions. For political parties, The Constitution Needs a Good Party applies this structure to a major political party. For search engines, this structure will need to be applied to a major search-engine business.

The resulting nested, recursive overall structure will have the advantage that as the organizations get smaller, they will more easily be ultimately controlled by voters and users. Plus, the lessons learned in the smaller organizations will be readily scaled up and used in the larger organizations.

Each organization’s structure will provide a very ingenious incentive: to succeed, ambitious people will need to limit other ambitious people. This incentive will tend to limit each organization.

Search-engine businesses have already shown that they need an additional incentive: their users must be their customers.

Here again, the way is shown by Pandora. Pandora users can stream music for free with ads, but they also can go on to subscribe. Since a small fee is worthwhile in exchange for curating streamed music, a small fee will also be worthwhile in exchange for curating streamed, narrowcast content—video, print, other visual content, or audio—that helps users learn efficiently and vote well.

This structure and these incentives will keep a search-engine business’s customers in ultimate control of the search engine.

Once users are in ultimate control of at least one major search engine, this will put voters in ultimate control of at least one major party, and this will put voters back in ultimate control of governments.

The time is ripe for our next giant leap up in freedom.

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A Destructive Concept That Behooves to Be Rehabilitated: Grand Strategy

The Evolution of Modern Grand Strategic Thought by Lukas Milevski. Oxford: Oxford University Press, 2016. 175pp., £50.00 (h/b), ISBN 9780198779773

The concept of grand strategy is one of trendy concepts that has been used by numerous states to describe comprehensive national security policies, especially since the end of the 20th century and in today's context, it was first used by Carl von Clausewitz & Baron Antoine-Henri de Jomin, Napoleon's students during the Napoleonic Wars. The concept considers the world as a chessboard and the civil society living on it as chess pieces. This conceptual approach reduces the humanistic nature of civil society to the mechanistic level, as we often see in statist political systems (socialist, fascist, and fundamentalist), and as the result, wrecks all individual rights and freedoms. This work of Milevski clearly reveals the intellectual history of this destructive concept.

The first systematic theories on this concept were put forward by Alfred Thayer Mahan & Julian S. Corbett, two Englishmen working on maritime strategy in the pre-World War I period, who today are regarded as the fathers of grand strategic thinking. Mahan & Corbett built their theory on the understanding of protecting maritime trade and avoiding escalations on land by using civil and military instruments on a national scale.

The British school of strategic thought was able to establish its identity by J. F. C. Fuller & Basil H. Liddell Hart, who are known as the giants of this school in the interwar period and who basically continued the thematic understanding of their predecessors Mahan and Corbett. In addition, in the same period, the concept was approached with different comprehensions both from within and outside the school. While two British strategists, Henry Antony Sargeaunt & Geoffrey West, introduced understandings that focused on the social benefits of war (in terms of social development), Edward Mead Earle from the United States enriched the concept with another approach that linked military ends with political results.

The atomic bombs dropped on the skies of Hiroshima and Nagasaki were the harbingers of a new era in strategic thinking as well as in world history. Despite the fact that many new names began to produce ideas in this field in the hottest period of the Cold War, which started when the wreckage of the Second World War had just been removed, the most common point of the few original ideas that were put forward was on the concept of limited war.

In the détente period of the Cold War, which was entered in the shadow of the Vietnam Wars, it is seen that there was a relative revival of the concept. The names John M. Collins, Edward N. Luttwak, Barry R. Posen & Paul Kennedy reinterpreted the concept with a national security-centered understanding in accordance with the spirit of the time.

In the post-Cold War era, which John Hattendorf, John L. Gaddis, Gregory Foster, William C. Martel & Robert Art came to the fore, more civilian contributions to the concept began to be made, especially from international relations, political science and even history. For the historian John B. Hattendorf, grand strategy was a force driving the war. For Gaddis, this concept was about how to use everything one has to achieve the desired goal. According to Foster, grand strategy was a supra-political concept that guided politics. William C. Martel revealed that grand strategy is a framework paradigm that determines international relations policies. Finally, Robert Art has put forward a conceptualization that focuses only on the use of force and the relationship between politics, in line with his retrospective approach that adapts the roots of strategic thinking to the present.

Nowadays, the concept of grand strategy has become a more psychological and developmental concept, even an ideal concept that institutions and individuals can apply to their own lives, with the effect of globalization and individualization. Two names at this point; Hal Brands and Peter Layton stand out. According to Hal Brands, while grand strategy is understood as the guide to self-actualization of a nation to succeed in such a competitive world, from Peter Layton's point of view, the understanding that grand strategy is a specific method for the decision-making process is dominant.

As a result, the concept of grand strategy is a non-standard, thinker-centered concept that is constantly open to new understandings. According to Milevski, the concept of grand strategy is useless as it is, since it does not provide the principle of clarity and commonality, which are the most basic conditions for developing a useful scientific theory on this concept, but first of all, the concept behoves to be rehabilitated in order for it to become academically useful.

As it is seen, Milevski has analyzed the evolution of the concept of grand strategy quite adequately, and contrary to what he claims in his title, he has not put forward a new understanding and a new synthesis with an evolutionary integrity, he has only been content with revealing the intellectual history of the concept and complaining that the concept is polysemous, and has suggested the concept is not academic as it is. He argues that the concept behoves to be rehabilitated in order for it to become academic. In addition to it, the fact that each decision-maker attributes different meanings to this destructive practical concept clearly shows us how arbitrary the threat to individual rights and freedoms can be.

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An Echo, Not a Choice: Living in a Political Duopoly

American politics is a duopoly; consequently, the Democratic Party’s imminent division and collapse will soon lead to the resurgence of an anti-Republican Party. The entire process, therefore, will only appear shocking and unpredictable; in fact, it’s inevitable.

Just as we know that no entity other than one of the NFL’s official franchises will win the Super Bowl, we know that no entity other than one of this country’s two major political parties will ever win the White House or a majority in either branch of Congress. Political parties in the United States are - and always have been - a duopoly, two parties that share political power and that frequently cooperate with each other, particularly on issues relating to the exclusion of actual and potential competitors. Since candidates win by garnering a plurality (more votes than anyone else), rather than a majority, third parties cannot hope to win elections on any consistent basis; consequently, third parties are always fools’ errands, and, thus, we have always had - and always will have - a duopoly because potential entrants face insurmountable barriers, both legal and practical, that ensure their eternal electoral impotence. 

Moreover, like any duopoly, this duopoly achieves its monopoly rents by reducing supply. In this case, the duopoly undersupplies both extreme and unique policy proposals. That is, neither party does enough to attract support from its extreme wings precisely because both parties know that their extremists do not have, and never will have, a viable alternative. Likewise, both parties know that people or groups with unusual interests have no choice: they must settle for whatever the major parties are offering. Thus, this duopoly suppresses voter turnout and political participation. If, for example, any group that could attract 1% of the national vote could also attain 1% of the seats in the House of Representatives, then we would have some very unusual members of Congress, and a great deal more voting. There are valid reasons to want to exclude groups that can only attain support from 1% of the population, but excluding such groups will reduce voting in exactly the same way that outlawing RC Cola will reduce total cola sales (even if RC Cola is destined to remain a distant third in the cola wars). Just as there’s always somebody who will only drink RC Cola, there’s always somebody who will only vote for a “fringe” party.

The two parties are, and always have been, fairly evenly matched. To win, parties must build coalitions that include people who oppose whatever that party supposedly supports. In other words, every winning coalition will include its Romneys and Sinemas because intra-party heterodoxy is the price of victory. That is, there simply aren’t enough people who agree on enough issues to form a majority coalition that doesn’t include Romneys and Sinemas. Thus, victory always leads to defeat, as at least some members of the groups who lost the intra-party fight for power will join the opposition. Just as price always trends towards marginal cost, the parties always trend towards equilibrium as both the threat of defeat and the promise of victory are the glue that hold each party’s warring factions together; without both, the party cannot hold as the losers within the party must believe that they can win while the winners in the party must fear that they might lose, forcing both to compromise. In other words, the purpose of a political party is not to actually achieve anything; rather, the purpose of a political party is to convince the warring factions within the party that they each might achieve something, but if and only if they continue making the compromises required for victory.

Producers, of course, attempt to earn more than their marginal costs, and they can from time to time do so precisely because they can take advantage of temporary dislocations in the market. For instance, the first person to sell peach ice cream can make super normal profits until his competitors discover how to replicate her success. 

Similarly, political parties can achieve super normal results whenever they can take advantage of temporary dislocations in the market; thus, we expect that party dominance will swing between the parties from time to time, as each gains an advantage that the other is slow to replicate.

Yet, politics – and economics – are more complicated than this model implies. Sometimes, there’s a fundamental change that threatens the entire industry. For example, the most powerful taxi monopoly imaginable will find itself largely defenseless against ride-sharing technology. Similarly, the Whigs were incapable of adjusting to the consequences of America’s acquisition of Mexican territories in the West.

Fundamentally, I believe we’re witnessing another such tectonic shift because the American dollar is losing its reserve status, which means we are losing our ability to print money at will. In that sense, Modern Monetary Theory (MMT) was correct, but only with regards to the United States and only with regards to a short period of time. To illustrate my point by analogy, smoking is perfectly harmless over a sufficiently short period of time; likewise, MMT is perfectly correct over a short period of time and provided that the issuer is an unquestioned hyperpower. 

Now, of course, the chickens are coming home to roost in the form of ruinous inflation, which means the Democrats can longer paper over the differences between the Democrats who want to ban cars and the Democrats who want to build them. Similarly, many Democrats want to demonize whites, and many Democrats are white. Many Democrats want to ban or strongly-discourage children, and many Democrats want to raise them. The contradictions are too numerous to list, but the Democrats are more vulnerable precisely because they’ve always used government spending to resolve their internal squabbles. 

It is, for example, perfectly acceptable to “defund” the police as long as you mean that you are increasing funding for unionized police officers while adding funding for their social worker “replacements.” That is, defunding the police largely meant creating a second bureaucracy on top of the police, and that was a compromise that most Democrats could accept.

Until now. When the money’s run out.

Just as the Whigs were more vulnerable to the slavery issue because they were the party that advocated compromises based upon limiting the expansion of slavery, the Democrats are more vulnerable to inflation because they are the party that advocates compromise based upon higher government spending. (For older readers, Senator Paul Simon was right!). And, just like the Whigs before them, the Democrats will change radically or disappear.

I suspect they’ll break up before they wake up because the stakes are simply too high. Whichever faction within the Democratic Party that leads its resurgence will, in effect, gain one half the political power in this country; I doubt they’ll let the other side get that power based merely on speculations regarding who will win. Instead, they’ll likely test their strength at the ballot box.

Just as ex-Whigs ran as both Know-Nothings and Republicans in 1856 before settling on the Republicans in 1860, the Democrats are likely to divide before they conquer. I would expect some sort of Socialist/Progressive candidate and some sort of “moderate.” 

Soon, of course, we’ll have a new duopoly – perhaps with new names, perhaps not. In the meantime, the Republicans should attain extraordinary results because 50% of the market is exceptional when the other half is divided. If, for example, one half of the Democrats managed to attain 80% of the party, they’d still lose by ten. And, as seems far more likely, the Democrats split far more evenly, then the Republicans can easily expect to win by twenty points or more. 

From the Republicans’ perspective, therefore, I think retaining the party’s existing market share is far more important that appealing to the middle because two Democratic parties will have an innate advantage in attracting “moderates” – after all, neither needs to win, so they can be more ideologically pure and/or they can offer positions that no winner can match. To put it another way, Republicans will be seeking a majority of the vote while the two Democratic replacements will merely be seeking a majority of non-Republican voters; thus, each can adopt positions that would be poisonous in a general electorate, but attractive to non-Republicans. 

To illustrate my point by example, the replacement parties can enthusiastically endorse student loan forgiveness precisely because they don’t need to attract anyone who is opposed to such policies. Winning 30% of the total vote constitutes a decisive victory when you only need to get a majority of the minority not voting for Republicans. Thus, in my example, you’d lose by 20 to the GOP, but you’d beat the other replacement party by 10, thereby making you the new duopolist.

It’s precisely the fact that each replacement party needs to win only a comparatively small fraction of the total vote to become the new duopolist that ensures this impending division within the party. That is, no socialist may believe that he or she can attain a majority, but she doesn’t need to – she only needs to win more votes than whomever the other non-Republican party nominates. If she achieves that, then she will control the new anti-Republican party, and that’s enough to place her on the path to power as the duopoly will eventually turn against the Republicans. Granted, she may have to modify her socialism, but the Republicans weren’t going to be kept out of power forever – nor will the new anti-Republicans. 

Once we appreciate that the parties are really fighting over monopoly rents, the previously-incomprehensible becomes the unavoidably-obvious: Republicans are about to win crushing victories, to which their rivals will respond after first sorting out which of them will lead the new duopolist. 

Today’s victories will lead to tomorrow’s defeats, but the rent-seeking will continue unabated.

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