Power & Market

A Problem with the Fed's Dual Mandate

03/04/2021Robert Aro

It’s almost as if Federal Reserve governor Lael Brainard read the February 11 Mises article "The Fed and 'Maximum Employment'" and then rebutted with a class lecture at Harvard two weeks later. Whereas the Mises article starts by cautioning that maximum employment is used to justify the state’s interventions in our lives, the governor starts her class saying:

[What] I hope you remember from today is that economics provides powerful tools to enable you to analyze and affect the issues that matter most to you.

The problem begins here because what matters most to the economic planner is the goal of staying both in control and relevant, thereby ensuring perpetual employment income for oneself. As the Upton Sinclair quote goes:

It is difficult to get a man to understand something, when his salary depends on his not understanding it.

Brainard follows with the history of maximum employment and its roots in the Great Depression, leading to the Employment Act of 1946, which allowed government to pursue:

conditions under which there will be afforded useful employment for those able, willing, and seeking work, and to promote maximum employment, production, and purchasing power.

A lofty goal, that the government should find or create jobs for all who want to work. The mechanism as to how this was to be achieved remains unstated, but it was the measurement which was problematic. By 1950 there were discussions of “full employment,” and what this actually meant. Luckily there was an academic at the time, Dr. Palmer, who was able to shed more light on the situation.

Palmer was a professor at Wharton, a fellow of the American Statistical Association, a worldwide expert on manpower and labor mobility, and a consultant with the Office of Statistical Standards.

The Palmer’s contribution argues:

Inherent in the phenomena being measured are so many degrees and kinds of labor force activity that no single definition or classification can adequately summate them.

Thus, when it came to measuring full employment, or maximum employment, no single data point could suffice, instead, it required a wide range of data to “summate” in a manner only the planner can determine is best.

By 1977, the Federal Reserve Act was amended, giving the Fed:

the goals of maximum employment, stable prices, and moderate long-term interest rates, commonly referred to as the dual mandate.

Another present-day familiarity we see emerging from the 1970s was the notion of “full employment” being useful to minorities, as explained by one congressman:

without genuine full employment it would be impossible to eliminate racial discrimination in the provision of job opportunities.

The importance of full employment, we are told, is as pressing today as it was in 1930, 1946, and 1977, yet has lacked a proper definition for nearly one hundred years.

Ultimately, Brainard settles on the narrative of there being no single indicator of full employment and consulting a “variety of indicators that together provide a holistic picture of where we are relative to full employment.”

Ten different charts and a variety of labor market indicators are utilized to explain how they arrive at a conclusion, though each data point is rife with its own set of problems. For example, the “Labor Force Participation Rate” (LFPR) equation is defined as: (Labor Force / Population). Seems reasonable until we’re told the labor force includes people who are “actively seeking work” and population means “the working-age population.” As for what the LFPR should be or how all of the data is utilized in a way discernible to the planner, that is anyone’s guess.

Even if we don’t agree with the data metrics, it’s not the data which is the problem. The problem occurs when the data is used to justify perpetual expansion of the Fed’s balance sheet and artificially low interest rates. It’s not a question of using “better data,” it’s a question of using data to calculate the incalculable as an excuse for government intervention.

At institutions of higher learning across the country, the economics of liberty and freedom are not offered as a part of the curriculum. And why would it be? The entire apparatus of mainstream economics serves the central planner first and foremost. In a free market, they’d be at the bottom rung of society, but under socialism they continue to stay on top.

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ACB's Betrayal of Trump Continues the Red Pilling of Conservative America

02/24/2021Tho Bishop

Listen to the Audio Mises Wire version of this article.

If we were searching for a reason for political optimism in 2021, we were delivered another reminder of the degree to which mainstream American conservatives are waking up to what the state truly is. The latest institutional betrayal of Republican voters came from the Supreme Court, which rejected considering a lawsuit challenging late changes to Pennsylvania’s election process. The majority that voted to dismiss consideration included Trump nominees Brett Kavanaugh and Amy Coney Barrett.

Are Notorious ACB shirts getting treated like the jerseys of an athlete who just jilted a fanbase?

This was predictable, of course. Not because there wasn't a substantive issue worth addressing: the degree to which state courts can interject themselves in election law seems like a valid question—regardless of one’s opinion about the 2020 election. As Justice Clarence Thomas noted in a particularly blunt dissent, this was simply the SCOTUS avoiding the issue entirely:

That decision to rewrite the rules seems to have affected too few ballots to change the outcome of any federal election. But that may not be the case in the future. These cases provide us with an ideal opportunity to address just what authority non-legislative officials have to set election rules, and to do so well before the next election cycle. The refusal to do so is inexplicable.

Of course, this is precisely the sort of behavior that we have come to expect from spineless politicians, and that is what you find on America's highest court—politicians in robes. While it’s become more fashionable lately to mention this in recent years thanks to the particularly hammy performance of John Roberts, this has long been the case.

As Ryan McMaken has explained:

The truly political nature of the court is well documented. Its politics can take many forms. For an example of its role in political patronage, we need look no further than Earl Warren, a one-time candidate for president and governor of California, who was appointed to the court by Dwight Eisenhower. It is widely accepted that Warren’s appointment was payback for Warren’s non-opposition to Eisenhower’s nomination at the 1952 Republican convention. The proposition that Warren somehow transformed from politician to Deep Thinker after his appointment is unconvincing at best. Or we might point to the famous “switch in time that saved nine[,]” in which Justice Owen Roberts completely reversed his legal position on the New Deal in response to political threats from the Franklin Roosevelt administration. Indeed, Supreme Court justices are politicians, who behave in the manner Public Choice theory tells us they should. They seek to preserve and expand their own power.

The court, jealous of its power, and reluctant to hand down decisions that might actually cause the court to lose prestige, is at times careful to reflect the majority opinion regardless of how atrocious it might be. To see this, we need look no further than Korematsu v. United States[,] in which the court declared it perfectly legal to round up American citizens and throw them into concentration camps.

The court forever plays a careful balancing act with both the public and with other branches of the federal government in which i[t] continually pushes the bounds of federal power without rocking the boat to the point of calling its legitimacy into question among the majority of the population. Naturally, Congress and the presidency, themselves committed to untrammeled federal power, have no problem with most of this on most occasions, except perhaps in the details.

It is the last paragraph that brings us to this week’s decision. Regardless of the merits of the argument, there can be no tolerance for any major institution that invites questions over the legitimacy of the 2020 election in Joe Biden’s Americans. Particularly not one that resides in the current war zone of the American capital.

Already there are agents of the corporate press trying to spin Justice Thomas’s dissent as an act of sedition. I would be surprised if no Democrat ends up calling for his impeachment over the issue.

In terms of the incentive for a justice to build up their own prestige, none had more to gain from ruling against Florida’s first president than Kavanaugh and Barrett. Kavanaugh’s lack of principles has long been obvious to anyone who followed his career in the Bush administration. It is a testament to the repulsive treatment he received from the corporate press that they managed to make a Yale Law alum turned Beltway lawyer sympathetic.

It is also understandable to see how both could be convinced that this decision was a practical necessity for their historical reputations. In the view of America’s most powerful institutions, there is no greater stain than having Trump as a benefactor. The only way to be forgiven for this sin is to become politically useful in stopping him. With this case, the last legal challenge of 2020 is likely done.

This is yet another example of the unique value of Trump’s presidency. The failure of a conservative-aligned Supreme Court to defend Donald Trump is being properly recognized by many Americans as showing that it also cannot be trusted to defend them. Many who believed that a “conservative legal movement” could effectively defend the Constitution in DC—if only Republicans could get a true majority!—have now lost their innocence.

This invites an important question: What happens when yet another governing institution loses the faith of a large portion of the American public? While Congress has long been viewed as dysfunctional and the popularity of the presidency has largely been partisan, the Supreme Court has tended to be held up as a uniquely noble governing body. Now, we see its legitimacy questioned with increased frequency on both the left and right.

While this may be a bitter red pill for some to swallow, ultimately it is necessary medicine.

The growth of the American empire has always been dependent upon convincing the public that it is acting in its interest. When large portions of the population begin to recognize that this is an obvious lie, that the empire ultimately serves the interests of a privileged few, governing becomes more difficult. As Jefferson noted, the first step to opposing imperial rule is for people to recognize that they no longer consent to a government that is hostile to their lives, liberty, and pursuit of happiness.

In America today, there are 50 million+ Trump supporters who believe Joe Biden is a president imposed on the nation—potentially with the help of foreign powers—armed with a Democrat-controlled legislature and a Supreme Court whose credibility is now compromised.

Yet another reason why secession is becoming popular.

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Aggregate "Excessive" Consumption Is Not a Problem

02/15/2021Raushan Gross

The writer of a recent Forbes article doesn’t want consumers making their own choices about what to buy and how much to buy. Instead, he provides a plan for consumers to avoid what he calls excess consumerism. In other words, what the writer suggests is essentially that "excessive consumption" is terrible for you and everyone else.

To put the matter mildly, the concept of "excessive consumption" has no basis in how flesh and blood people operate in the real world. This view of excessive consumption does not account for the fact that people’s goals are not focused on buying stuff. They are making individual choices using their own income and making their own decisions to fulfill their own needs and wants. They are not seeking the judgment or moral approval of Forbes writers.

One thing is for sure, and that is people prefer to obtain what they want now rather than later. Real people have time preferences—this statement is far from new. Each of us has time preferences, and we express these preferences in the market, where we make decisions on how we spend our time and income. For example, if I asked you to choose between taking $50.00 today or $50.00 in two years, which option would you choose? If you had the option to purchase bread for $1.50 today, would you buy the same loaf of bread tomorrow for $3.00? These examples clearly show that people make their choices to satisfy their want satisfaction under personal time preferences. Unfortunately, the idea of consumerism, or excessive consumption, posed by the recent Forbes article clearly shows a widespread misunderstanding of how real people operate in the marketplace. 

The Consumer Confidence Report finds consumer confidence has improved since December 2020, including a reported an uptick in January 2021, and stated that "Consumers' expectations for the economy and jobs … advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future." This is good news for consumers and producers. Consumers are confident in the market conditions for consumption, and guess what—the customer still rules!

Let us face it, the idea of excessive consumption in the aggregate is all wrong. Those who support the notion of excessive consumption do not see human behavior as it is but rather how they think it should be. What is essential for a functioning Marketplace is not buying more than a Forbes writer believes that one may need, but how people choose to buy more or less of what they want. The market process is about consumers making personal choices using their own time and income to buy what makes them happy and is useful toward their goals. What is wrong with that? I love coffee, and I tend to buy coffee from different places, and I buy beans to make at home. Should a coffee shop owner tell me that I can only buy one bag of coffee because three bags of coffee is excessive? This is true of most things like shoes, streaming movies, exercise downloads. What may be more for one person can very well be less for someone else.

You see, when it comes to consumption, people tend to pick and choose for themselves what is excessive and what is not. The Forbes writer’s proposition is: what is excessive to me should be excessive to everyone else in the world. However, excessive consumption cannot go beyond what is produced—as we all know, there is scarcity.

Like most people, I want to buy what I deem useful, necessary and has value. For one thing, consumers are not bumbling idiots—they have goals in mind as they shop for items. Consumers are attentive to prices, needs, timing, and market conditions related to their situation. As long as excessive buying does not harm others or is illegal, they should enjoy an economic system that produces material goods for consumers' purposes and enjoyment. My enjoyment is a hot cup of joe, and you enjoy power tools or clothes. We can enjoy these things because we earn income to buy them, and they bring joy.

Let us get to the point; consumers who "buy excessively" are, in reality, exercising their freedom in the Marketplace. Consumers can determine on their own to either buy fewer or more significant amounts of bread; however, if they buy fewer amounts of bread, they will cause the incomes of wheat producers to fall. On the other hand, consumers who purchase more video game downloads raise the incomes of people employed in that industry. Moreover, the opposite effect happens when consumers are told not to make their own choices in the Marketplace. Do not buy more than two cups of coffee a day as that is excessive. Ha!

We must remember that production takes time. Rome was not built overnight, and neither were the items bought in person or online by millions of people every day. That means if less is purchased, less will be produced in the future.

Producers and manufacturers determine what to make more or less of based on market demand. Demand begets production. The market provides for those willing to buy, and people who are not willing to buy do not stimulate production. Producers accommodate mass demand with scarce resources. Consumption is a balance of scarcity and abundance, and the outcome creates more choices for consumers. You see, economic thriving does not revolve around buying stuff, it is the outcome of consumer choice.

On the whole, excessive consumption may not fulfill a Forbes writer’s desires, but it may bring true happiness for some people. People who buy—whether excessively or not—fulfill their economic role of supporting business owners and their local community. To assert that consumers should stop "excessively" buying products assumes away the prospect that people do not change shopping patterns or increase family sizes over time. I was always told that you do not bite the hand that feeds you. The market is the only social place where the coordination between consumers and producers can facilitate goals and mutually beneficial choices for everyone involved via the buying process. These "excessive" purchases fuel the economy, which helps all people flourish and live their best lives.

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A Fond Farewell to the "Midnight Economist"

01/29/2021Gary Galles

This month, UCLA economist William R. Allen, whom Peter Boettke called “a force in the great UCLA tradition of economic education,” passed away at ninety-six. As I was privileged to work with him both as a graduate student and subsequently, I would like to offer a few thoughts.

Bill influenced me even before graduate school. I used his phenomenal book with Armen Alchian, University Economics, as an undergraduate. I was blown away by its clarity and power (Don Boudreaux called it “Among the ten greatest books ever written in economics,” with “keener instincts into economic forces at work than are had by some Nobel laureates in economics.”), which was a major reason I chose UCLA for graduate school. Then I used it there as a teaching assistant.

I was unable to take classes from Bill. But I worked with him on various free market projects. Mainly, I worked in connection with his famed Midnight Economist broadcasts. Named for its radio time slot, it clearly and consistently developed the principles of economics to a lay audience from 1978 to 1992. In doing so, I “caught” some things that have stuck with me. I saw the importance of good writing. My “tastes” became for a good argument were heightened. And I became (and stayed) sold on communicating economic principles to “real” people in understandable language, because I think that has the greatest potential to change the world for the better.

After leaving graduate school, Bill let me use his Midnight Economist scripts for a booklet of some of my favorites, which I edited, with added questions, to stimulate class discussion.

Since my closest connection to Bill Allen is via The Midnight Economist, I would like to mark his passing with some of my favorite wisdom from it, which stands in sharp contrast with public policy discourse.

  • Economic analysis…elegant tools and rigorous techniques of thought must be supplemented with accumulated learning and developed wisdom in order to distinguish the profound from the superficial, the appropriate from the inapt and the inept, and the feasible from what cannot work well.
  • A world of scarcity is inherently a hard world. But…what ground rules and institutions can we evolve and adopt which will enable people to live together peacefully and productively?
  • People usually have done as well in their personal affairs as they have been permitted to do….Much of our misery has stemmed from dumb economics—inefficient institutions, inappropriate property fights, wasteful processes, debilitating policies.
  • The best of achievable worlds will still be a world of scarcity—and thus a world of choices, costs, and competition. But good economics will help us to do best, even if not well, in a hard world.
  • Market processes, with efficient production and exchange…do not require that we like one another and are inspired by purity of heart to cooperate with one another. Market institutions and prices provide options and incentives to use our privately-owned resources well…we individually prosper by supplying valuable goods and services to others.
  • With appropriate ground rules of the market, we canquite amazinglychannel acquisitive instincts and aggressive inclinations to mutual advantage and the common good.
  • Do we ration goods among competing claimants through fighting and force? That is suicidal anarchy. Do we ration through governmental directives? That is stultifying repression. Do we ration through market processes? That is efficient freedom.
  • Negotiated harmony…[is] a matter of rights to use of property. When those rights rest with a governmental third-party dispenser of privileges, the society and the firms inevitably fight and resources are badly used as alternatives are restricted and costs are ignored. But when those property rights are privately owned, market negotiations replace grabs for politically exercised power and persuasion is used through appeals to the interests of the other party. The choice…is not difficult.
  • Freedom of individual choice is compatible withand, indeed, required forsocially efficient use of a scarce resource, with people paying and receiving market-clearing prices….To obtain more, one efficiently produces what others want… neither producer nor consumer…imposes his will on the other. Each has only the right to offer for sale or to purchase.
  • Each person is the appropriate, relevant judge of his own condition…no matter what the preferences and assessments of others may be.
  • Freedom must mean the right to choose among offerings….Give me optionsand then stand aside while I make my own choices.
  • When the objective is efficiency in using resources, the mind of man has not conceived, and the machinations of man have not evolved, a better arrangement than a private property, price-directed economy.
  • The market produces sinews of adaptability to and survival in an unfriendly world.
  • Economics is not to be the ultimate arbiter of morality and ethics. Indeed, economics is amoral, being simply a technique of thought to help explaindispassionatelycertain cause-and-effect relationships. In uncoerced exchange, both parties gain, and, if no one else is hurt, it might seem pretty clear that the transaction should be permitted.
  • Moral outrage…is not an adequate substitute for systematic thought.
  • In their own interests, people will listen to the market, and adjust to it, if government does not block the message….But…we can frustrate its beneficial operation.
  • Political sorts commonly are not very good economists.
  • There are those anxious to diddle with data, not to comprehend the world, but to promote a political purpose.
  • Controls…bring only regimentation, shortages, less wealth, and loss of much personal liberty.
  • In a purported spirit of “fairness” and a striving for “equity,” we sometimes stipulate maximum prices….Such stipulation does not eliminate scarcity. It does not eliminate competition. Rather, it simply curtails one form of competition, so alternative forms must now be used.
  • “Taxes are what we pay for civilized society,” observed Oliver Wendell Holmes in an era of very low taxation. But more taxes do not necessarily produce more civility.
  • Compared with the marketplace….The fundamental problem of government is not so much inadequate ethics as of deficient rules, which provide inadequate information, faulty guidance and ineffectual constraints.
  • No politician’s quickie gimmick of market subversion will make us wealthy.
  • In the world of economics….We can easily mislead ourselves by stopping the thought process too quickly, noting only immediate characteristics of problems and effects of policies, overlooking indirect implications and consequences.

Rest in peace, Bill. Thank you for the lessons.

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A Host of New Programs and Regulations Coming from the Biden Administration

01/20/2021Robert Aro

It’s called the American Rescue Plan! By now everyone has heard about the $1.9 trillion bill which includes a $15 national minimum wage and $1,400 stimulus checks. CNN captures the essence of the rescue package quite well:

Bigger stimulus checks. More aid for the unemployed, the hungry and those facing eviction. Additional support for small businesses, states and local governments. Increased funding for vaccinations and testing.

There’s a lot in the plan, yet it amounts to nothing more than the government allocating resources on our behalf. It requires either central planning for millions of businesses, as is the case with the minimum wage, or giving money to certain people or sectors in society, as we see with stimulus checks. Very few people in charge appear concerned about the rising debt and money supply these actions create. 

Start with the idea of the government setting a national minimum wage. When this happens, it forces the entrepreneur to make a decision: they must either choose to do nothing and accept a lower profit margin and/or inevitable bankruptcy, or make changes to increase profitability. This may include cutting staff or raising prices with the hope consumers will accept the higher prices. It is the instance of “raising prices,” we should take note of.

In 2021, consider who should take credit if the Fed reaches or overshoots its desired price inflation target. How can anyone tell whether it was the result of the Fed’s actions (such as low interest rates) or if it was due to the government’s action of increasing minimum wage laws? Those are just two reasons why prices change, but there are actually countless. The Fed cannot reasonably say they are managing price inflation. They have no idea what actions have contributed to the rise of prices of goods or services.

The other economic fallacy is the idea that money creation will alleviate financial hardship. We saw Trump give $600 last month and Biden wants to give $1,400 this month. This is supposed to help “the hungry,” those in need, etc. Yet very few people have addressed how this adds to the national debt level, debases the US dollar, makes life less affordable for the masses and ultimately makes them poorer. “The poor,” much like the nation itself, will continually require greater amounts of debt to survive. This vicious cycle seems to be of little concern to our planners.

As for how the $1,400 was decided instead of doubling it to $2,800 for twice the potency, no one has explained why. However, we do know where this money comes from. Given that in fiscal year 2020 the US treasury received only $3.42 trillion in tax revenue but spent over $6.5 trillion, it’s apparent the money is not in the Treasury's bank account. Since the money is not with the Treasury, and tax dollars are not enough to cover government spending, the only place left is the debt market.

Many will still lend to the US government. But the issue is at what cost? If the Fed was not going to buy a substantial amount of debt, price discovery would occur and interest rates on US debt would rise. As of today, and for the foreseeable future, this is not the world we live in; as CNBC cited Jerome Powell on Thursday:

The Fed’s benchmark short-term borrowing rate is anchored near zero and it is continuing to buy at least $120 billion in bonds each month.

If the American Rescue Plan is a sign of things to come, we’ll soon learn a lot more about the effects of national minimum wage laws, continuous stimulus checks, government debt, and perpetual increases to the money supply. And this is just the beginning.

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Announcing the Winner of the Central Bank of the Year Award…

12/31/2020Robert Aro

The Swiss National Bank (SNB) wins 2020! Unfortunately, the Federal Reserve's hubris could not compete with the smug assertiveness of the Swiss. SNB chairman Thomas Jordan invoked a Ben Bernanke–like assuredness when he made his case that deflation shouldn't happen here. This comes the day after the US Treasury named Switzerland a currency manipulator, after they met the arbitrary threshold of having a:

$20 billion-plus (CHF17.7 billion) bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of Gross Domestic Product and a global current account surplus exceeding 2% of GDP.

Chairman Jordan rejected the title, reported by Reuters, by saying:

Just to be very clear. The U.S. treasury report has no impact on our monetary policy.

The SNB's policy has led to the lowest bank rate in the world at –0.75 percent, and it remains fixated on ensuring the Swiss franc doesn't become "too strong." Whether it's the threat of deflation or the fallacy that exports will suffer, it's always uncanny to see central bankers deflect their actions back on the public. Like the Fed, which normally caveats its actions by referring to its mandate given by Congress, the SNB uses a similar tactic, as Jordan told reporters:

Our monetary policy is necessary and legitimate, in fact it's the result of our mandate that we were given by the Swiss people and parliament to maintain price stability….It is very important that we maintain this price stability in order to avoid a deflation in Switzerland.

The coup de grace was delivered in a formal statement the same day, when the SNB declared in writing:

The SNB's expansionary monetary policy provides favourable financing conditions, counters upward pressure on the Swiss franc, and contributes to an appropriate supply of credit and liquidity to the economy.

Apparently unaware that there is no such thing as an optimal supply of money and credit, the SNB refutes this in the most Keynesian fashion of all: declaring a truth simply by declaring it true. Similar to the comment that their monetary policy is “necessary and legitimate,” the Swiss bank claims it has found the “appropriate supply of credit and liquidity” without the slightest bit of proof, rationale, or calculation.

Additionally, they declared that:

In light of the highly valued Swiss franc, the SNB remains willing to intervene more strongly in the foreign exchange market.

If true, the SNB will increase its foreign purchases, and as with all other central banks, the race for expansionary policy with the goal of price inflation should make for an interesting 2021.

Still, the comedic element is not lost on us, considering The Economist's Big Mac Index shows Switzerland is still home to the most expensive Big Mac in the world, costing over $7 USD as of July 15. Yet the central bank still commits itself to weakening the franc,  because, apparently, there is nothing worse than a strong currency.

So the Swiss bank wins: currency manipulation, the lowest interest rate in the world, purchases of US equities and foreign currencies with money created out of thin air, all to support the untenable position of maintaining the "appropriate" supply of credit. While the US dollar remains the world's unofficial reserve currency, Switzerland's publicly traded central bank does things the Fed only dreams of. Similar actions would be unfathomable if ever implemented in America. We hope.

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A Just Society Is a Society Based on Political Liberty

12/31/2020Gary Galles

Listen to the Audio Mises Wire version of this article.

As we approach the calendar turn to 2021, many Americans’ thoughts will turn to New Year’s resolutions. Those I hear about from others typically revolve around things like getting in shape, quitting smoking, consuming fewer intoxicants, spending more time with family, etc. Of course, I have no objection to anyone trying to be better. But I also think that, at a time when proposals to undermine the rights that comprise our liberties have been ever more commonplace, resolutions to better defend and advance our liberties would make all of America better.

To help motivate such resolutions, I would turn to Lord Acton, who wrote, “Liberty is not a means to a higher political end. It is itself the highest political end…not for the sake of a good public administration…but for the security in the pursuit of the highest objects of civil society, and of private life.” And given the inexhaustible creativity politicians show in undermining our liberty, and with it our ability to pursue our own highest goals as we wish, one powerful weapon of defense is to focus on some absolutely essential aspects of a good life and a good society that are possible with liberty, but not in its absence.

So, with apologies to John Stuart Mill’s On Liberty, consider what only liberty offers individuals and the society they comprise, including what only economic liberty offers us.

Only Liberty

Only liberty is consistent with a society in which “thou shall not kill” and “thou shall not steal” are honored.

Only liberty is consistent with all individuals being of transcending importance, equally “made in the image of God.”

Only liberty provides equal respect for every individual’s inalienable rights.

Only liberty prevents some from ruling over others, who are sacrificed to the interests of those in power.

Only liberty is consistent with true peace between individuals and societies.

Only liberty allows moral and ethical development and improvement, increasing our integrity and generosity, because we cannot improve or grow without the freedom to make our own choices.

Only Economic Liberty

Only economic liberty—private property and free markets—allows the use of productive knowledge that no central planner, whether a single person or a group, can effectively employ.

Only economic liberty enables the greatest degree of human creativity and productive discovery, by allowing anyone the possibility to discover new and improved options and offer them to others without artificial restriction.

Only economic liberty guarantees that arrangements are mutually acceptable to those involved, given their circumstances and preferences, rather than coercive impositions by those more powerful on those less powerful.

Only economic liberty offers people the greatest incentives to do for others, even when they don’t know them or may not like them.

Only economic liberty allows adjustments to changed circumstances by way of price changes, without requiring coercion or nasty political battles for control.

Only economic liberty unlocks the potential for economic growth to the greatest possible extent, as history attests.

Asking what only liberty can do for us helps us see why resolving to better protect and advance it is so important. Liberty is essential to creating the most peaceful, prosperous, and profoundly improving society we can have. When combined with Acton’s recognition, that “Liberty alone demands, for its realization, the limitation of the public authority, for liberty is the only object which benefits all alike, and provokes no sincere opposition,” it can lead people to ask, “How could I even think of giving up the irreplaceable benefits of liberty for things that are so much less valuable?” And that question is crucial because, as Leonard Read powerfully expressed it in “Freedom and the Fate of Nations”:

it is only in an essentially free society that certain trends have the possibility of prevailing: self-responsibility, improved morals, a passionate striving for intellectual excellence, a will to overcome obstacles, an energetic enthusiasm turned toward self-improvement, and abounding entrepreneurial spirit, competition and free pricing.

Note: This article is adapted from a chapter in Gary Galles’ latest book, Pathways to Policy Failures, just released by the American Institute for Economic Research.

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An America with Two Presidents

11/06/2020Tho Bishop

In the aftermath of Election Day 2020, ballots continue to be counted, states remain undecided, and party lawyers are dreaming about where to invest their upcoming billable hours. One thing we can count on, America’s political institutions are about to face a unique and fascinating challenge to their legitimacy.

For those who have better things to do than closely following late-arriving ballots in swing states, here is where things stand right now:

Joe Biden is poised to be able to claim victory in the election as blue ballots continue to trickle in from high-density urban areas in states like Pennsylvania, Nevada, and Georgia. At the same time, Donald Trump’s team continues to project confidence about Arizona swinging red and counting on military absentee ballots to make up any ground lost in the Peach State. Meanwhile, online sleuths are churning out anecdotal evidence of possible voter fraud and highlighting statistical anomalies in certain vital Democrat areas. As of Friday, they were even still allowed to talk about it on Twitter.

The confusion surrounding this election obviously evokes flashbacks to the Bush-Gore debacle of 2000. To Joe Biden’s advantage, Al Gore was dealing with a Republican state government at the time. Now, most of the states in question have a firmly blue state government, while most of the high-density urban areas are obviously governed by Democrat-controlled machines (none of which are particularly known for either competency or integrity).

Of course, even suggesting that partisan government officials may have more loyalty to their party over the civil religion of “democracy” is outrageous in the eyes of the corporate press.

Luckily, one of the major takeaways of the 2020 election is just how little the public actually thinks of America’s punditry class. After all, five years of nonstop stories about the sexist, white supremacist, unhinged Donald Trump gave rise to the most diverse political coalition the Republican Party has seen since 1960. The only demographic Trump underperformed relative to 2016 was white males. Oddly enough, the Left is not concerned with the privileged white patriarchy.

So where does that leave us?

If we assume, as we should, that the legal system inevitably leaves us with a Joe Biden inauguration, the next few years could be very interesting indeed. America will have a former president, deeply beloved by a base that stood out in the freezing cold past midnight in the tens of thousands during the campaign, who is not likely to go quietly in the night. Would it surprise anyone if Donald Trump boycotts a Biden inauguration? If so, is it possible he would hold a competing rally at the same time the forty-sixth president was being sworn in?

Does anyone doubt the attendance he would draw?

After all, regardless of the legal outcome, America is about to find itself with a president that will be viewed as illegitimate by a large portion of the population—and perhaps even the majority of some states. There is no institution left that has the credibility to push back against the gut feeling of millions of people who have spent the last few months organizing car parades and Trumptillas that their democracy has been hijacked by a political party that despises them.

To his credit, Joe Biden isn’t blind to what he is inheriting either. His problem is that a half century in politics has him out of touch with the America that actually exists. It is likely that Biden will stress bipartisan unity in his administration—a move made easier by the fact that he will need moderate Republicans more than the far-left caucus of his own party. In the past, America’s most hotly contested elections were decided with backroom deals among party bosses. Non-Trump Republicans are currently figuring out their price for standing with Joe Biden over their 2020 nominee.

It would not be surprising to see a Biden administration feature names like Bush, Kasich, or Flake. The problem is that this style of bipartisanship is as dated as the West Wing. The Left and Right want their sides to rule and dominate their enemies, while the center is more motivated by disgust of both sides than the desire for them to just get along.

If this is correct, the Biden administration will end up being precisely what the nonhysterical left always feared: the restoration of a neoconservative-neoliberal uniparty.

Adding to the chaos is the fact that Donald Trump will now be free of the burdens of responsibility that come with governing. America’s forty-fifth president will have the ability to do what he most enjoys: sit back, watch cable news, and start firing away from @realDonaldTrump. That is, of course, until he is predictably deplatformed by Jack Dorsey for being a threat to national unity.

Of course, blowback is not limited to foreign policy blunders by the American empire. Every attempt by those in power to silence Donald Trump going forward will have consequences they are not prepared to deal with.

For example, the second Donald Trump is forced to use a competing social media platform, the concerns about tech monopoly may begin to seem antiquated. Better still, a Trump news network seems inevitable—either built from scratch or by adopting one of the standing second-tier conservative options that currently exist. We can be sure that Donald Trump will never forgive the Murdochs for calling Arizona so quickly on Tuesday.

The majority of America’s mediocre elites residing in Washington and New York City are going to take a Joe Biden presidency as a repudiation of Trumpism. The massive increase in his support suggests otherwise. Their blind arrogance ensures that the anger felt by the masses that brought President Trump to power in 2016 will not go away.

As Ludwig von Mises understood, there are inevitable limitations to a state if the public does not view its leaders as legitimate.

Only a group that can count on the consent of the governed can establish a lasting regime. Whoever wants to see the world governed according to his own ideas must strive for domination over men’s minds. It is impossible, in the long run, to subject men against their will to a regime that they reject.

A Joe Biden presidency may be imposed on red America, but the establishment of old will never be able to persuade the Make America Great Again movement that he is their leader. Thanks to Donald Trump, a large portion of the US are likely to view themselves as the enemies of America’s next president.

Which brings us back to the most fundamental question of modern American politics: What do you do with political orders that no longer serve the interests of their people? How do we treat politically vanquished people who just aren’t going away?

Luckily, there is no reason to fear an economic crisis any time soon… Such an event might really make things interesting.  

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A Collection of Bovardian Epigrams

10/29/2020James Bovard

Election Day can be the longest day of the year. Especially if the presidential race remains undecided late into the evening, neither Xanax nor vodka may be enough to kill the pain. In lieu of other sedatives, following are some cheerful lines which might blunt the impact of the prattling on CNN or MSNBC, though there is no known antidote to PBS’s piety.


  • The most dangerous political illusion is that votes limit politicians’ power.
  • Nowadays, we have elections in lieu of freedom.
  • The defects in any system of choosing rulers outweigh the risks of letting people run their own lives.
  • People are entitled to far more information when testing baldness cures than when casting votes that could lead to war.
  • What’s the point of voting if “government under the law” is not a choice on Election Day?
  • Having a vote does nothing to prevent a person from being molested by the TSA, spied on by the NSA, or harassed by the IRS.
  • Politicians are increasingly dividing Americans into two classes—those who work for a living and those who vote for a living.
  • Voting for lesser evils makes Washington no less odious.
  • Politicians have mandated warning labels for almost everything except voting booths.
  • On Election Day, Americans are more likely to be deluded by their own government than by foreigners.
  • Politicians talk as if voting magically protects the rights of everyone within a fifty-mile radius of the polling booth.
  • Political consent is defined these days as rape was defined a generation or two ago: people consent to anything which they do not forcibly resist.


  • Modern democracy pretends that people can control what they do not understand.
  • We have a drive-by democracy where politicians wave to voters every few years and otherwise do as they please.
  • The more power politicians capture, the more illusory democracy becomes.
  • A democratic government that respects no limits on its own power is a ticking time bomb, waiting to destroy the rights it was created to protect.
  • The surest effect of exalting democracy is to make it easier for politicians to drag everyone else down.
  • The Washington Post’s motto is “Democracy Dies in Darkness.” But democracy also dies from too many Iron Fists.
  • The phrases which consecrate democracy seep into Americans’ minds like buried hazardous waste.
  • Rather than a democracy, we increasingly have an elective dictatorship. Voters merely designate who will violate the laws and the Constitution.
  • Democracy unleashes the State in the name of the people.
  • The more that democracy is presumed to be inevitable, the more likely it will self-destruct.
  • America is now an Attention Deficit Democracy where citizens’ ignorance and apathy entitle politicians to do as they damn well please.
  • Democracy must be something more than two wolves and a sheep voting on what to have for dinner.
  • Americans now embrace the same myths about democracy that downtrodden European peasants formerly swallowed about monarchy.
  • Instead of revealing the “will of the people,” election results are often only a one-day snapshot of transient mass delusions.
  • Nothing happens after Election Day to make politicians less venal.


  • A lie that is accepted by a sufficient number of ignorant voters becomes a political truth.
  • America is increasingly a “Garbage In, Garbage Out” democracy. Politicians dupe citizens and then invoke deluded votes to stretch their power.
  • Promising to “speak truth to power” is the favorite vow in the most deceitful city in America.
  • Truth delayed is truth defused.
  •  A successful politician is often merely someone who bamboozled more voters than the other liar running for office.
  • The biggest election frauds usually occur before the voting booths open.
  • Politicians nowadays treat Americans like medical orderlies treat Alzheimer’s patients, telling them anything that will keep them subdued. It doesn’t matter what untruths the people are fed because they will quickly forget.
  • When people blindly trust politicians, the biggest liars win.
  • Secrecy and lying are often two sides of the same political coin.
  • The more powerful government becomes, the more abuses it commits, and the more lies it must tell.

Government et Cetera

  • America is rapidly becoming a two-tier society: those whom the law fails to restrain, and those whom the law fails to protect.
  • Idealism these days is often only positive thinking about growing servitude.
  • It is naïve to expect governments to descend step-by-step into barbarism—as if there is a train schedule to political hell with easy exits along the way.
  • The first duty of today's citizen is to assume the best of government, while federal agents assume the worst of him.
  • America needs fewer laws, not more prisons.
  • Every recent American commander in chief has expanded and exploited the dictatorial potential of the presidency.
  • Many people reason about political power like sheep who ignore the wolf until they feel its teeth.
  • Political saviors almost always cost more than they deliver.
  • There is no such thing as retroactive self-government.
  • The arrogance of power is the best hope for the survival of freedom.
  • Washingtonians view individual freedom like an ancient superstition they must pretend to respect.
  • Paternalism is a desperate gamble that lying politicians will honestly care for those who fall under their sway.
  • Citizens should distrust politicians who distrust freedom.
  • The Night Watchman State has been replaced by Highway Robber States in which no asset or right is safe from marauding politicians.
  • P.T. Barnum may have been thinking of Washington journalists when he said there’s a sucker born every minute.
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An IMF Official Describes the "Long Ascent" Ahead

10/16/2020Robert Aro

The ascent refers to the difficult climb nations face as they “come back from the depths of crisis.” It promises to be “long, uneven and uncertain,” as explained by the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, at an event hosted by the London School of Economics (LSE). This “path forward” for the 189 member countries serves as a precursor to the IMF’s 2020 Annual Meetings which commenced this week. A great deal of effort has gone into these economic plans, yet the question remains: Is this actually economics?

According to the director, the “whatever it takes” approach by advanced economies greatly helped the situation and “put a floor under the world economy.” As she tells it :

We have reached this point, largely because of extraordinary policy measures that put a floor under the world economy. Governments have provided around $12 trillion in fiscal support to households and firms.

A $12 trillion “floor” laid by government cannot be substantiated. We don’t know whether the floor would have been there if the government support did not take place. Nor can the various pernicious effects, such as loss in purchasing power, increase in cost of living, and greater world reliance on debt can be factored into the cost of said floor.

Even though she praises the increase to the money supply, she notes that risk remains high due to rising bankruptcies and stretched valuations in financial markets. She goes on to say many countries have become vulnerable and:

We estimate that global public debt will reach a record-high of about 100 percent of GDP in 2020.

While implied world debt levels are concerning, debt levels have long taken a back seat to central planners, especially in times of crisis. This is fortunate because heavy debt-laden/ inflationist policies underline the IMF’s four priorities:

First, defend people’s health.

This includes coordinated vaccine efforts, distribution and contact tracing. It seems out of scope for the IMF considering it’s an economic, not a health organization. This would be akin to the World Health Organization discussing the need for central banks to reign in their balance sheet!

Second, avoid premature withdrawal.

They agree “tax deferrals, credit guarantees, cash transfers, and wage subsidies,” should be given to firms and workers. This may sound promising but the sheer allocation of resources is beyond comprehension. These interventions could initially help, yet the government would never know if the positive effects of the program outweighs the negatives. If a wage subsidy, for example, leads to higher consumer prices and a higher national debt level, the government would have no basis to know if the effort and various trade-offs were worthwhile.

But it doesn’t stop on the fiscal side as the IMF notes the equal importance of “continued monetary accommodation and liquidity measures to ensure the flow of credit, especially to small and medium-sized firms.” Unfortunately, this too is problematic. Any notion of the optimal level of liquidity cannot be measured and immeasurable goals are normally difficult to achieve.

Third, flexible and forward-leaning fiscal policy.

This explicitly calls for governments to reallocate capital and labor to support the transition, requiring both “stimuli for job creation, especially in green investment,” as well as measures such as expanded unemployment insurance. This follows the pattern of governments using money to take action which cannot be reasonably calculated or justified, but acceptable since it’s perceived preferable than to “do nothing.”

Fourth, deal with debt.

For low-income countries especially, the goal is to create “more grants, concessional credit and debt relief, combined with better debt management and transparency.” This includes restructuring of sovereign debt. As many countries continually struggle with national bankruptcy because of debt, it’s ironic more debt would be a solution.

Piecing it together, we find there may be a long ascent after all; not the struggle of having the IMF corral the world to embrace more anti-capitalist policies, but the struggle required to build a future where the IMF ceases to exist. While a tall order, it seems justified considering the economic methods employed by the IMF appear devoid of economic explanation.

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