Power & Market

A Politically Weaponized FBI Is Nothing New, but Plenty Dangerous

06/13/2018James Bovard

The Justice Department Inspector General is expected to release on Thursday its report on alleged FBI misconduct during the 2016 presidential campaign. Trump supporters and opponents are already pre-spinning the report to vindicate or undercut the president. Unfortunately, the report will not consider fundamental question of whether the FBI’s vast power and secrecy is compatible with American democracy.

According to some Republicans, the FBI’s noble history was tainted by its apparent favoritism for presidential candidate Hillary Clinton. Democrats have gyrated over the past 18 months, first blaming the FBI for Clinton’s loss and then exalting the FBI (along with former FBI chief and Special Counsel Robert Mueller) as the best hope to save the nation.

In reality, the FBI has been politically weaponized for almost a century. The FBI was in the forefront of the notorious Red Scare raids of 1919 and 1920. Attorney General Mitchell Palmer reportedly hoped that arresting nearly 10,000 suspected radicals and immigrants would propel his presidential campaign. Federal Judge Anderson condemned Palmer’s crackdown for creating a “spy system” that “destroys trust and confidence and propagates hate.” He said, “A mob is a mob whether made up of government officials acting under instructions from the Department of Justice, or of criminals, loafers, and the vicious classes.”

After the Palmer raids debacle, the FBI turned its attention to U.S. senators, “breaking into their offices and homes, intercepting their mail, and tapping their telephones,” as Timothy Weiner noted in his 2012 book, “Enemies: The History of the FBI”. After the FBI’s political espionage was exposed, Attorney General Harlan Fiske Stone, warned in 1924, “A secret police system may become a menace to free government and free institutions because it carries with it the possibility of abuses of power which are not always quickly comprehended or understood.” Stone fired the FBI chief, creating an opening for J. Edgar Hoover, who would head the FBI for the next 48 years. Hoover pledged to cease the abuses but the outrages mushroomed.

In the 1948 presidential campaign, Hoover brazenly championed Republican candidate Thomas Dewey, leaking allegations that Truman was part of a corrupt Kansas City political machine. In 1952, Hoover sought to undermine Democratic presidential candidate Adlai Stevenson by spreading rumors that he was a closet homosexual.

Read the full article at The Hill
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Anthony Bourdain on Kitchen Hierarchy

06/08/2018Peter G. Klein

Before Kitchen Confidential made him a celebrity, Anthony Bourdain was a real chef, working upscale New York kitchens at places like the Supper Club and Sullivan’s. Bourdain’s style is not to everyone’s taste, but he knows how to manage a restaurant crew. A chef, after all, is not primarily an artist, but a manager, facing the same set of organizational challenges — delegation, incentives, monitoring — as any administrator.

I mention this because I recently stumbled upon an interview with Bourdain in the July 2002 Harvard Business Review. Despite several attempts by interviewer Gardiner Morse to get Bourdain to endorse creativity, spontaneity, and empowerment in the kitchen, Bourdain remains an unreconstructed devotee of Escoffier’s “brigade system,” a sort of culinary Taylorism in which each member of the cooking staff has a fixed place in the production chain, a very narrow job description, and an obligation to obey his chef de partie (section leader) and the head chef without question.

Q: There’s been a trend in business to move away from hierarchies and empower workers, but you’ve embraced a very rigid staff structure and an old style of management with great success. Why do you think it works?

A: You’re defined by the job you do, not by whatever . . . predilections you have. . . . And to have any delusions that you’re better than anyone else, however true that might be as far as your technical skills are concerned, is not allowed. Your commitment is to the team effort. Everyone lives and dies by the same rules.

You have a tremendous amount of personal freedom in the kitchen. But there’s a trade-off. You give up other freedoms when you go into a kitchen because you’re becoming part of a very old, rigid, traditional society — it’s a secret society, a cult of pain. Absolute rules govern some aspects of your working life: obedience, focus, the way you maintain your work area, the pecking order, the consistency of the end product, arrival time.

This is a case where the advantages of hierarchy — the need for fast, coordinated decision-making, the ability to internalize externalities, the possession of “decisive knowledge” by the top decision-makers, and the like — appear to outweigh the high-powered incentives and Hayekian knowledge benefits of decentralization. Look for a future Foss-Klein paper (with Nils Stieglitz) discussing this tradeoff more systematically.

Originally published January 18th, 2008 on Organization and Markets
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America’s Incredible Shrinking Influence

05/29/2018Ron Paul

Just two weeks after President Trump pulled the US from the Iran nuclear agreement, his Secretary of State, Mike Pompeo, issued 12 demands to Iran that could never be satisfied. Pompeo knew his demands would be impossible to meet. They were designed that way. Just like Austria-Hungary’s ultimatum to Serbia in July, 1914, that led to the beginning of World War I. And just like the impossible demands made of Milosevic in 1999 and of Saddam Hussein in 1991 and 2003, and so many other times when Washington wanted war. These impossible demands are tools of war rather than steps toward peace.

Secretary Pompeo raged at Iran. The mainstream news media raged at Iran. Trump raged at Iran. But then a strange thing happened: nothing. The Iranians announced that they remained committed to diplomacy and would continue to uphold their end of the nuclear agreement if the Europeans and other partners were willing to do the same. Iranian and European officials then sought out contacts in defiance of Washington in hopes of preserving mutually-beneficial emerging commercial relations.

Washington responded to the European snub by threatening secondary sanctions on European companies that continued doing business with an Iran that had repeatedly been found in compliance with its end of the bargain. Any independent European relationship with Iran would be punished, Washington threatened. But then, again, very little happened.

Rather than jump on Washington’s bandwagon, German Chancellor Angela Merkel made two trips to Russia in May seeking closer ties and a way forward on Iran.

Russia and China were named as our prime enemies in the latest National Security Strategy for the United States, but both countries stand to benefit from the unilateral US withdrawal from the Iran deal. When the French oil company Total got spooked by Washington threats and pulled out of Iran, a Chinese firm eagerly took its place.

It seems the world has grown tired of neocon threats from Washington. Ironically the “communist” Chinese seem to understand better than the US that in capitalism you do not threaten your customers. While the US is threatening and sanctioning and forbidding economic relations, its adversaries overseas are busy reaping the benefits of America’s real isolationism.

If President Trump’s canceled meeting with North Korea’s Kim Jong-Un remains canceled, North and South Korea have shown that they will continue with their peacemaking efforts. As if Washington was no longer relevant.

I’ve often spoken of the unintended consequences of our aggressive foreign policy. For example, President Bush’s invasion of Iraq only helped Iran – our “enemy” – become more dominant in the Middle East. But it seems new consequences are emerging, and for the neocons they must be very unintended: for all of its bellicosity, threats, demands, sanctions, and even bombs, the rest of the world is increasingly simply ignoring the demands of Washington and getting on with its own business.

While I am slightly surprised at this development, as a libertarian and a non-interventionist I welcome the growing irrelevance of Washington’s interventionists. We have a far better philosophy and we must work hard to promote it so that it can finally be tried after neocon failure becomes obvious to everyone. This is our big opportunity!

Reprinted with permission.

 

 

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After Pointlessly Groping Countless Americans, the TSA Is Keeping a Secret Watchlist of Those Who Fight Back

05/29/2018James Bovard

"I need a witness!" exclaimed the security screener at Ronald Reagan Washington National Airport. Because I had forgotten to remove my belt before going through a scanner, he explained, I must undergo an "enhanced patdown." I told him that if he jammed his hand into my groin, I'd file a formal complaint. So he summoned his supervisor to keep an eye on the proceedings.

I thought of this exchange last week when the New York Times revealed that the Transportation Security Administration has created a secret watchlist for troublesome passengers. The TSA justified the list by saying that its screeners were assaulted 34 times last year, but did not release any details about the alleged assaults.

Naturally, the TSA's official definition of troublemaking goes well beyond punching its officers. According to a confidential memo, any behavior that is "offensive and without legal justification" can land a traveler on the list, as can any "challenges to the safe and effective completion of screening." Anyone who has ever "loitered" near a checkpoint could also make the list. So could any woman who pushes a screener's hands away from her breasts.

The memo would be more accurate if it stated that anyone who fails to unquestioningly submit to all the TSA's demands would be found guilty of insubordination. As an attorney for the American Civil Liberties Union, Hugh Handeyside, told the Washington Post, the policy gives the agency wide latitude to "blacklist people arbitrarily and essentially punish them for asserting their rights." Rep. Bonnie Watson Coleman (D-New Jersey) expressed similar worry. "I am concerned about the civil-liberty implications of such a list," she said.

The watchlist would seem less perilous if the TSA were not one of most incompetent agencies on Earth. After a series of undercover tests at multiple airports across the country, the Department of Homeland Security concluded last year that TSA officers and equipment had failed to detect mock threats roughly 80% of the time. (In Minneapolis, an undercover team succeeded in smuggling weapons and mock bombs past airport screeners 95% of the time.) An earlier DHS investigation found the TSA utterly unable to detect weapons, fake explosives and other contraband, regardless of how extensive its pat-downs were.

According to the TSA, travelers can take consolation in the certainty that its agents will never assault them. But Americans have filed thousands of complaints that suggest otherwise, claiming screeners used excessive force or inappropriately touched them. How many have been fired as a result? It's hard to say: When I asked the TSA, they told me to file a Freedom of Information Act request.

Read the full article at the Los Angeles Times 
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Americans Pay for Washington Secrecy

05/09/2018James Bovard

Secrecy is a knavery entitlement program. Thanks to the ludicrously named Congressional Accountability Act of 1995, victims of alleged sexual harassment by members of Congress receive secret taxpayer-funded settlements. That means constituents rarely learn that their tax dollars underwrite their representatives’ allegedly roaming hands. More than $17 million has been spent in payoffs to congressional employees who filed workplace grievances.

At the same time an iron curtain of secrecy descended on much of official Washington, the feds multiplied their intrusions against everyone else. While the National Security Agency is vacuuming up Americans’ private data, federal agencies made the decision more than 50 million times to classify documents in 2016. The Freedom of Information Act, one of the underrated bulwarks of self-government, has become largely a mirage in recent decades.

The more information the government withholds, the easier it becomes to manipulate public opinion. By revealing only details that buttress the administration’s policies, citizens are prevented from assessing the latest power grabs or interventions. As a federal appeals court warned in 2002:

“When government begins closing doors, it selectively controls information rightfully belonging to the people. Selective information is misinformation.”

Trump won the presidency in 2016 in part because of Americans’ disgust and distrust for Washington. By perpetuating the vast majority of official secrecy and creating new cloaks, Trump is missing his best shot against what he calls the Deep State. Sunlight would be far more effective at draining the swamp than Trump’s huffing and puffing.

 

Read the full article at The Hill
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Argentina Sells Baloney for a Bailout

Surprise, surprise! With the peso continuing to drop like a stone against the U.S. dollar, Argentina has appealed to the IMF for emergency credit.  In requesting the bailout, President Macri cited the sudden emergence of global factors beyond his control for the current plight of the peso. 

 During the first two years [of his administration] we have had a very favourable global context, but today that is changing, global conditions are becoming increasingly complex due to several factors: interest rates are rising, oil is rising, currencies of emerging countries have been devalued, all variables that we do not control.

But this is a load of baloney.  As I pointed out in my post yesterday, the slide of the peso is due to one and only one thing:  the enormously high rate of growth of the money supply since Macri took office in December 2015.  The money growth rate exceeded 45% year over year during the first three quarters of 2017 and has never fallen below 25% during Macri’s tenure.  Rather than requesting aid, which will  guarantee more currency crises in the future, President Macri needs to call a halt to central bank intervention in the foreign exchange markets and allow the peso to depreciate and reveal the true extent of past monetary inflation.   If he then implements a credible program—and at this point, only a shock program will be considered credible—to bring inflationary monetary policy to an end, the currency crisis will cure itself. 

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Attention Vancouverites: Sell Your House

04/09/2018Jeff Deist

Bob Haber at Forbes has a short and sweet column warning about crazy conditions in the Vancouver real estate market. Prices for single-family detached homes have more than tripled just since 2002 in Canadian dollars, even with a Bank of Canada that has been far more circumspect in expanding its balance sheet than the Fed. 

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But this time will be different! Just ask a Realtor.™ The Chinese are buying up everything with cash! It's a beautiful city! 

So why does the majority of the local population believe that this time is different? They refer to Vancouver as geographically constrained (ocean to the west, border to the south, and mountains to the north) and believe that housing will only go higher and higher. However, the same can be said about many coastal cities (including NYC) that have experienced boom and busts through typical real estate cycles over the years. This time is NOT different and investors should be aware of the possible knock-on effects of a large Canadian real estate correction.

Huber also points to the huge disparity between the cost to "own" and rent the same housing unit, a ratio which was particularly out of whack during the late years of the US housing boom in the mid-2000s. Taxes, mortgage interest rates, and personal debt to income ratios are all trending higher in Canada, which signal trouble for real-estate "investors."

Also, there are new catalysts that can’t be ignored. Taxation and interest rates are going higher. Cap rates on rentals or commercial properties are shockingly low (think 1% to 3% in most circumstances). In fact, Canada’s price-to-rent ratios are now well above what they were in the U.S. during the 2006 housing debacle. According to the Bank of Canada, 47% of Canada’s mortgages will reset in the next 12 months. To put that in perspective, a five-year fixed mortgage rate in Canada averages approximately 5.14%. This is 11% higher versus the 4.64% that it averaged for most of the past 2 years.

The specious idea that Vancouver is an international city, and thus blessed with an endless supply of foreign home buyers, seemingly applies to New York, London, and Dubai as well. Should we assume real estate prices will never fall in these cities? As for the influx of Chinese immigrants into Vancouver since the reversion of Hong Kong, that's been nearly two decades now. There are always limits to the number of cash buyers, the number of creditworthy buyers, and the amount either type will pay. And I'm reminded of when it seemed like "the Japanese" were snapping up high profile real estate across the US during the 1980s, including Rockefeller Center, Columbia Studios, and the famed Pebble Beach Golf Links.

Just a few years later, in 1993, a Japanese consortium sold Pebble Beach for a $340 million loss.  

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Abolish the Supreme Court, Not the Second Amendment

03/27/2018Tho Bishop

The crusade for greater gun control received another PR victory today with an op-ed by retired Supreme Court Justice John Paul Stevens in the New York Times calling for the repeal of the 2nd Amendment. 

Of course Stevens' hostility to gun rights is nothing new. As he notes in the piece, he was one of the four dissenters on the District of Columbia v. Heller and is one of the most prevenient legal voices to argue that the 2nd Amendment was meant to apply exclusively to militias and not citizens. When defending this view, he has referred to the work of popular contemporary historians such as Joseph Ellis, to try to bring "context" to the discussion. This is, in part, due to Stevens' larger judicial philosophy that relies on "original intent" rather than "original public meaning" - which leads him to try to search through letters and correspondence of the Founding Fathers justify a position, rather than simply looking at what the text of the Constitution was understood to have said. (Naturally his disagreements with Justice Scalia on this matter did not prevent the two from agreeing on several very bad decisions.)

The obvious problem with this is that the Founding Fathers did not share a homogenous world view, and therefore you can find conflicting interpretations among the leading voices of the era. While Stevens grounds his narrow view of the Second Amendment on James Madison's work on militias in the Virginia Constitution, the Constitution was certainly not ratified based on the limited perspective of Mr. Madison. Of course, the fact that this debate continues to this day is simply another example of the dangers of relying on the Constitutional interpretation for individual rights. 

The most unfortunate aspect about Stevens opinion is that it's hardly a radical one in the modern legal climate. This is exactly why it's a bad idea to allow a group of unelected, isolated scholars in black robes be the deciding authority on the proper size and scope of government.

The solution? Abolish the Supreme Court, or at least aim to dramatically reduce its influence. 

As Ryan McMaken wrote following the death of Justice Scalia:

We’re told by pundits and politicians from across the spectrum how indispensable, awe-inspiring, and absolutely essential the Supreme Court is. In truth, we should be looking for ways to undermine, cripple, and to generally force the Court into irrelevance.

With the expected eulogies for Scalia among his supporters, we’re being berated with the idea that Scalia was an “originalist” who stuck doggedly to the clear text of the Constitution as imagined by its authors. In truth, Scalia was no originalist, since, if he had been one, he would have rejected the whole notion of judicial review, which is itself a total innovation and fabrication dreamed up by Chief Justice John Marshall. Absolutely nowhere does Article III of the Constitution (the part that deals with the court, and is half a page long) give the court the power to decide on what can be legal or not in every state, town, village or business of the United States. Moreover, as Jeff Deist notes today, the Court’s powers we so blithely accept as fait accompli are mostly made up:

  • The concept of judicial review is a fabrication by the Court, with no basis in Article III. 
  • Constitutional jurisprudence is not constitutional law.
  • The Supreme Court is supreme only over lower federal courts: it is not supreme over other branches of government.
  • Congress plainly has constitutional authority to define and restrict the jurisdiction of federal courts.

But don’t look for many in Washington to admit this any time soon. The Supreme Court serves a very important function in centralizing federal power in DC and in the hands of a small number of senior federal personnel. And how convenient it is for members of the ruling classes to influence and access these guardians of the federal government's intellectual respectability: the members of the court, presidents, and senators are all generally all members of the same socio-economic class, send their children to the same elite schools, and work and live together in the same small social circles. At the same time, this closed social and professional circle also helps to diminish the influence of those outside the Washington, DC bubble. 

If it wished to, Congress could overhaul the Court this afternoon. Nothing more than simple legislation would be necessary to radically change or completely abolish the lower federal courts.  Congress could decide what topics fall under the lower courts' jurisdiction, and thereby limit the Supreme Court’s jurisdiction as well. Congress could also decide that the Supreme court is made up of one justice or 100 justices.

Indeed, since the Supreme Court is nothing more than a legislature, why not make it one? Why not make SCOTUS a body of 50 “judges,” with the understanding that the Senate will not ratify any appointment which does not hold to the rule that each state gets a judge on the Court? Politics and ideology prevent this, but no Constitutional provision does. 

While some Constitutionalists still cling to the romantic notion of the Supreme Court as a check on the Federal legislature, American history is very clear on this matter. The Supreme Court has mainly served as a tool for centralizing power in Washington, and it should be viewed with as much suspicion as any other branch of the Federal government. 

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Another Reminder that Elizabeth Warren is a Fraud

03/13/2018Tho Bishop

Elizabeth Warren's entire career has been based on a lie. I speak, of course, of the notion that she's some sort of expert on the financial sector. Not only is the Senator from Massachusetts bad on basic economics — advocating policies that would grossly punish the poor, ignore the consequences of central banking, and being a general embodiment for everything bad about modern progressivism — but she is ignorant of basic facts that played out during the financial crisis. 

For example, today Warren unleashed a barrage of tweets targeting legislation designed to reverse some of the Dodd-Frank regulation that has helped further consolidate the banking industry and increase the size of Too Big to Fail banks. I have not yet gone through the legislation, and it's quite possible that there are objectionable parts to the legislation, but one tweet from Warren just doesn't hold up reality.

This is simply wrong. BB&T never took a bailout, because they had no need for one. In fact, the bank's CEO at the time, John Allison, was the loudest industry voice criticizing the entire scheme. While BB&T did receive TARP funds, it was only because they were forced to do so by the Obama Administration that once employed Warren. In fact, the North Carolina-based bank is perhaps the one of the large financial institutions who can honestly contend to be a victim in the Washington bailout, as they were forced to pay high rates on lending due the government forcing them to accept TARP funds

In short, Senator Warren's opinions on financial services matters should be treated with the same seriousness as her contributions to the Pow Wow Chow Native American cookbook. 

(Allison's book on the financial crisis is a personal favorite. If you purchase it — or any book — on Amazon using this link, the Mises Institute benefits thanks to Amazon Smile.)

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Auburn Legend Pat Dye at the Mises Institute!

03/08/2018Tho Bishop

The Mises Institute has been doing some grounds work the past few weeks, and we had a special visitor today as we planted a new tree: Auburn football legend Pat Dye. 

A player at the University of Georgia, Dye served as both head football coach and athletic director from 1981-1992. He was inducted in the College Football Hall of Fame in 2005,  and the playing field in the football stadium is named "Pat Dye Field" in his honor.

It was great to have Coach Dye with us today, and to show-off the Mises Institute campus to an Auburn legend. 

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