Power & Market
Mises Institute president Jeff Deist tells The Hill why the "stimulus" bailout is very bad for America in this excerpt from his op-ed:
The unasked question lurking underneath the Senate bill is this: How do we pay for it all? Congress doesn’t have $2 trillion to spend, and 2020 tax receipts won’t begin to cover the bill. This means the federal government will effectively “print” the money, likely in a circuitous way by issuing new Treasury debt and using the Federal Reserve Bank as a backstop to buy it all if investors won’t. And what sort of investor wants to loan Uncle Sam money for 10 years at less than 1 percent interest anyway?
At least Sen. Bernie Sanders (I-Vt.) is more honest: He thinks government simply should give Americans money every month, with or without a crisis. We now see plainly that congressional Republicans agree with him, at least conditionally. What a sad state of affairs.
If the bailout of 2008 had worked, U.S. companies would not need a bailout today. They would have thanked their lucky stars then, and focused on building healthier balance sheets with more cash and less debt. Let new owners, not American taxpayers, save them today.
Many anticapitalist ideologies have long relied on the idea that capitalist oppressors use advertising to force/compel/trick people into purchasing goods and services "they don't need." Advertising, the theory goes, is a tool employed by the capitalists to exercise power against the workers. Left to their own devices, workers would save more money and only buy things they truly need. Workers would then use this savings to gain greater financial independence from the capitalists.
The anticapitalists assure us that this doesn't happen however, because advertising exists as a means to control workers and force them to spend virtually all their surplus on useless trinkets and status symbols.
For more, see this analysis of "consumerism."
Mises used the example of how modern advertisers can't convince people to purchase technologically obsolete goods. He noted that all the ads in the world are unlikely to get people to stop buying lightbulbs and light their houses with candles instead.
A notable popularizer of the anticapitalist position on this, however, was John Kenneth Galbraith. Galbraith took the opposite position of the Austrians. While Austrians maintain that producers produce in order to meet consumer demand, Galbraith claimed that producers made things and then relied on advertising to get people to buy new things. In other words, in the Austrian view, producers follow the consumers. In the Galbraithian view, consumers follow the producers.
It's a pretty big difference with major implications that I won't cover here at the moment. But a central mechanism at the core of this idea is the notion that producers basically tell consumers what to to buy. And the producers do this by using advertisements.
But, as Mises suggested with this example of lightbulbs, there are ample examples disproving Galbraith's theory.
Three examples were discussed in my article last week:
1. Mike Bloomberg's failed $500 million ad campaign.
2. The demise of the waterbed industry.
3. The decline of expensive funerals.
But recently one reader, Richard Wilcke, a former business professor, noted a very important example: the Ford Edsel. He writes in an email:
The assumptions of "nudgers" that posters, PSAs, even horrific cancer warnings on cigarette packs as in the UK, have major effects on public opinion is not evident, a topic on which I have lectured often in the past.
What I wanted to share is an interesting coincidence. Precisely as Galbraith’s book contending that corporations have great power—expressly through advertising—to sell anything they choose to American consumers was being published, Ford Motor Company was in the midst of the largest advertising campaign in history to sell the Edsel as "the most exciting and advanced new car ever." Ford’s marketing execs loved that many thousands of consumers were lined up at dealers to see the vehicle as it was unveiled. They expanded the budget on the grounds that selling merely 200,000 Edsels would be a grand success.
But in spite of their advertising, they sold barely 70,000 in 18 months and the company pulled the plug. Most glowing reviews of Galbraith’s book did not get it; namely, that a real-world experiment—a test of the idea—had been going on at that same time. I believe it dramatically disproved Galbraith’s thesis.
Ford was highly motivated to get buyers for the Edsel, to say the least. And yet they failed. So, if ad wizards couldn't get people to buy the Edsel, why should we assume Galbraith and his fellow travelers have been right about advertising?
In this vein, we could also note Robert Batemarco's 2014 article, which observes two cases that also suggest advertising is not at all a reliable tool for "making" people do anything.
One is military enlistment. If ads works so well, why not just run a bunch of advertisements about how military service is wonderful? If this actually worked, then there would be no military draft. And even when there is no draft, if ads worked, the US government would never have to increase wages for military personnel. Why raise wages, when they could just run an ad campaign telling workers to be content with one dollar per hour, on-base housing, and some canned slop at the commissary? Yet, as it is, recruiters have to make all sorts of promises to convince people to sign up.
And then there's the problem of people not buying health insurance. As we've often been told in the context of Obamacare, there are too many uninsured Americans, because many simply don't buy health insurance. This is especially true of young and healthy people who need few medical services. The "solution" to this is assumed to be laws that force people to buy health insurance. But why pass laws when the feds could just run a bunch of ads commanding people to buy health insurance? If ads are so powerful in getting consumers to buy things, Obamacare mandates would have never been "necessary."
While we're assured by the financial press that the Fed is full of Very Serious People, it's alarming how clueless some members of the Fed seem to be about the current operations of the central bank. The latest example is Neel Kashkari's take that the injections into the repo market have no impact on equity pricing.
Will Not-QE soon become QE4? Danielle DiMartino Booth thinks so. "The Fed will tell you it’s all technical in nature," she said. "In their last minutes, they said that if they had to move into [longer] coupons, they would. So the table has been set."
A decade of massive credit expansion in China has manifested in a variety of bubbles within the country, particularly in real estate. While the fallout from 2008 wasn't nearly as severe in the country as it was in the West, it severely shook confidence in China's stock market—which has never recovered to precrisis times. Instead, Chinese consumers have focused on land and financial products offered by shadow banks. Now, the consequences of China's debt-saturated economy are starting to make the middle class anxious.
South China Morning Post: China’s middle class frets the ‘good times’ are over amid sliding house prices, stagnant wages
#SouthKorea’s president thinks spending $51.2 bn on infrastructure will revive SK’s floundering #economy. The last decade of failed #govt spending programs suggest otherwise. #FreeMarkets, not white elephant infrastructure, will turn the economy around.https://t.co/XPI1LZwHuM— Prof. Steve Hanke (@steve_hanke) January 20, 2020
Until the Fed did 3 quick rate cuts over the summer further intervening into "markets" to uninvert the yield curve. https://t.co/0gAXyqJ7lk— Jason Burack (@JasonEBurack) January 17, 2020
Fed bugs are people with stubborn and unyielding belief in the abilities of central bankers, even in the face of history and current evidence to the contrary.— Jeff Deist (@jeffdeist) December 30, 2019
According to Inspector General Michael Horowitz, we have two options in explaining how the FBI conducted itself in relation to the FISA court and its clearly illegal and immoral efforts to spy on at least one American citizen involved in the 2016 presidential campaigns:
1. Gross incompetence/negligence
2. Intent to do harm.
When asked about it, former FBI Director James Comey, who headed the FBI during the agency's repeated use of invented "facts" to justify its interventions in the 2016 elections, Comey insisted the lies and abuse of power were not intended. Which means Comey is admitting multiple FBI agents — and the leadership — practiced "gross incompetence."
That is apparently the best the FBI can hope for in determining why the has so little regard to the law and for basic decency: "hey America, we're not evil, we're just grossly incompetent!"
Michael Horowitz concludes in his IG report that three separate teams made errors in FISA application process. James Comey responds on FOX News Sunday: "As Director you are responsible for this." #FNS #FoxNews pic.twitter.com/Irt1kb4JjP— FoxNewsSunday (@FoxNewsSunday) December 15, 2019
Unfortuantely, however, many Americans aren't paying very close attention, or the details are too arcane for many people to make sense of them. Certainly, the American mainstream media has no interest in covering these abuses of power.
But last week, Glen Greenwald summarized where we are with the FBI and its utter disregard for due process, privacy, and the Bill of Rights:
If you don’t consider FBI lying, concealment of evidence, and manipulation of documents in order to spy on a U.S. citizen in the middle of a presidential campaign to be a major scandal, what is? But none of this is aberrational: the FBI still has its headquarters in a building named after J. Edgar Hoover – who constantly blackmailed elected officials with dossiers and tried to blackmail Martin Luther King into killing himself – because that’s what these security state agencies are. They are out-of-control, virtually unlimited police state factions that lie, abuse their spying and law enforcement powers, and subvert democracy and civic and political freedoms as a matter of course.
In this case, no rational person should allow standard partisan bickering to distort or hide this severe FBI corruption. The IG Report leaves no doubt about it. It’s brimming with proof of FBI subterfuge and deceit, all in service of persuading a FISA court of something that was not true: that U.S. citizen and former Trump campaign official Carter Page was an agent of the Russian government and therefore needed to have his communications surveilled.
In order to get this authorization from the FISA court, FBIS agents simply lied to the court, asserting as facts information from the Steele Dossier, and thus
the FBI touted a gossipy, unverified, unreliable rag that it had no reason to believe and every reason to distrust, but it hid all of that from the FISA court, which it knew needed to believe that the Steele Dossier was something it was not if it were to give the FBI the spying authorization it wanted.
FBI agents did this not once, but repeatedly, employing, what the IG report calls "significant inaccuracies and omission” to get spying authorization.
But this should hardly be shocking. This is the same FBI that was headed by James Comey. This is a man who while Deputy Attorney General publicly claimed to oppose the US government's use of torture , but privately signed off on 13 different barbaric methods of torture. That is, it wasn't enough for Comey to approve of torture, he also lied about it.
When it came time for Comey to offer help to the Mueller investigation — which ended up indicting no one for any actual collusion with the Russians, we were told repeatedly by pundits and supporters about what a "boy scout" Comey is.
This sort of fawning over DC police-state politicos is par for the course at this point, though. As Greenwald notes on the media's complicity:
But the revelations of the IG Report are not merely a massive FBI scandal. They are also a massive media scandal, because they reveal that so much of what the U.S. media has authoritatively claimed about all of these matters for more than two years is completely false.
Ever since Trump’s inauguration, a handful of commentators and journalists – I’m included among them – have been sounding the alarm about the highly dangerous trend of news outlets not merely repeating the mistake of the Iraq War by blindly relying on the claims of security state agents but, far worse, now employing them in their newsrooms to shape the news. As Politico’s media writer Jack Shafer wrote in 2018, in an article entitled “The Spies Who Came Into the TV Studio” :
In the old days, America’s top spies would complete their tenures at the CIA or one of the other Washington puzzle palaces and segue to more ordinary pursuits. Some wrote their memoirs . One ran for president . Another died a few months after surrendering his post. But today’s national-security establishment retiree has a different game plan. After so many years of brawling in the shadows, he yearns for a second, lucrative career in the public eye. He takes a crash course in speaking in soundbites, refreshes his wardrobe and signs a TV news contract. Then, several times a week, waits for a network limousine to shuttle him to the broadcast news studios where, after a light dusting of foundation and a spritz of hairspray, he takes a supporting role in the anchors’ nighttime shows. . . .
[T]he downside of outsourcing national security coverage to the TV spies is obvious. They aren’t in the business of breaking news or uncovering secrets. Their first loyalty—and this is no slam—is to the agency from which they hail. Imagine a TV network covering the auto industry through the eyes of dozens of paid former auto executives and you begin to appreciate the current peculiarities.
In a perfect television world, the networks would retire the retired spooks from their payrolls and reallocate those sums to the hiring of independent reporters to cover the national security beat. Let the TV spies become unpaid anonymous sources because when you get down to it, TV spies don’t want to make news—they just want to talk about it.
It’s long been the case that CIA, FBI and NSA operatives tried to infiltrate and shape domestic news, but they at least had the decency to do it clandestinely. In 2008, the New York Times’ David Barstow won the Pulitzer Prize for exposing a secret Pentagon program in which retired Generals and other security state agents would get hired as commentators and analysts and then – unbeknownst to their networks – coordinate their messaging to ensure that domestic news was being shaped by the propaganda of the military and intelligence communities.
But now it’s all out in the open. It’s virtually impossible to turn on MSNBC or CNN without being bombarded with former Generals, CIA operatives, FBI agents and NSA officials who now work for those networks as commentators and, increasingly, as reporters.
When these lifelong "intelligence" bureaucrats — who have spent virtually their entire adult lives sucking the taxpayers dry — go on TV to comment on their fellow spies, it's no wonder we hear relentlessly about what principled heroes they all are. Indeed, this week intelligence agencies trotted out former CIA and FBI director William Webster to come ot the agencies's defense. Webster rebuked both Donald Trump and William Barr for criticizing the the FBI, repeating old bromides such as the claim the FBI is brimming with "people who risk their lives to keep us safe," and that any attack on these well-paid bureaucrats in suits known as FBI agents is "dangerous."
But as Shafer and Barstow have shown, spooks and former spooks look out for each other.
Beltway politicos will insist they're all heroes, but at best, it looks like they are incompetent heroes. Comey swears up and down he meant no harm when he signed all that paperwork riddled with lies, and designed to manipulate the FISA court into approving FBI spying on an American citizen without cause. Comey didn't mean to throw the Bill of Rights in the garbage. No, he was merely — to use the IG's words — "grossly incompetent."
Jeff Deist joins the Death to Tyrants podcast to discuss themes in his recent article, "Politics Drops Its Pretenses" and his recent speech on how "meaningless words" create a narrative. Is "democracy" really a good thing? Do those who use it even know what it means? Are we best off when 51% of the voters force their will upon the other 49%? Is it realistic for libertarians to find the right presidential candidate that will win over a majority of voters in hopes to live in a libertarian society? What if secession and decentralization is the best way moving forward? We will hear the establishment tell us that "politics and voting will bring us together" and "democracy in action is a good thing". Why does it seem, then, that the further entrenched government becomes in our lives, the more divisive and at odds the country becomes?
Judy Shelton's recent interview with the Financial Times is nothing short of remarkable. Her comments represent the most substantive attack on the Fed, and central banking generally, by any potential nominee to the Fed board in recent history. She not only challenges how Jerome Powell and Fed officials conduct monetary policy, but whether they can conduct it competently at all.
Consider this salvo against the Fed's inescapable role as central planner:
How can a dozen, slightly less than a dozen, people meeting eight times a year, decide what the cost of capital should be versus some kind of organically, market supply determined rate? The Fed is not omniscient. They don’t know what the right rate should be. How could anyone?” Ms Shelton said. “If the success of capitalism depends on someone being smart enough to know what the rate should be on everything . . . we’re doomed. We might as well resurrect Gosplan,” she said, referring to the state committee that ran the Soviet Union’s planned economy.
And her attack on the Fed's outsized role in the economy:
She also said that the Fed should continue to reduce its balance sheet below the $3.5tn target set by Jay Powell, the chairman. “I would rather the Fed be less of an entity. When a central bank buys up government debt, that’s the beginning of compromised finances.”
She also recognizes malinvestment:
“It’s the distorting aspect of the Fed that is the worst aspect — it’s a wag-the-dog situation. People are fixated on the Fed and are making money by arbitraging, trillions of a second after the latest FOMC announcement,” she added.
And she isn't afraid to support a role for gold in monetary policy:
Ms Shelton has long been sympathetic to the gold standard, which the US fully abandoned in the early 1970s in favour of a flexible exchange rate for the dollar. “People call me a goldbug, and I think, well, what does that make them? A Fed bug,” she says.
"Fed Bugs"! Why didn't we think of this?
Shelton, who works as an economic adviser to Trump, is not an economist by training. Her PhD in business administration, from Utah State no less, is sure to draw jeers from the Ivy League central bank crowd. But it's Ivy League economists, after all, who created the last crisis in 2008. And needless to say they're sounding alarm bells about Mrs. Shelton. The worst offender is former Treasury official Larry Summers, who shamelessly calls Shelton "dangerous."
Sorry, but a financial terrorist and chief architect of the weaponized derivatives market in the 2000s should have the simple decency to keep quiet and thank his lucky stars he's not in jail.
Judy Shelton is not an Austrian. She appears mostly aligned with the supply-side camp of her longtime friend and mentor Larry Kudlow, who heads the Trump administration's (useless) National Economic Council. And her support for a modified gold standard rests on shaky ground, as she unfortunately favors a rules-based approach under which the Fed would target a dollar price for gold—what Joe Salerno refers to as "price-rule monetarism."
So Shelton doesn't want to End the Fed. But in the parlance of woke America, she's an "ally." Recognizing the limits of central bank omniscience, and challenging its benevolence, are important first steps on the road to redeeming our money and our economy.
After a hiatus of about 10 years, the Mises Institute is resuming publication of the Journal of Libertarian Studies, with volume 23 scheduled to appear before the end of the year. This peer-reviewed, interdisciplinary journal, with David Gordon as editor, will complement the economics-focused Quarterly Journal of Austrian Economics.
The influential JLS dates back to 1977, with Murray Rothbard as the founding editor and many of the brightest scholars in libertarianism serving on the editorial board. The first volume contained articles by Murray Rothbard, Ludwig von Mises, Walter Block, Ralph Raico, Don Lavoie, Randy Barnett, Williamson Evers, and many others. Back issues of the journal are available here.
A Blockchain Study Finds 0.00% Blockchain Success Rate . The study reported also reported 0 vendor call backs when asked for evidence of implementation.
Though Blockchain has been touted as the answer to everything, a study of 43 solutions advanced in the international development sector has found exactly no evidence of success.
Three practitioners including erstwhile blockchain enthusiast John Burg, a Fellow at the US Agency for International Development (USAID), looked at instances of the distributed crypto ledger being used in a wide range of situations by NGOs, contractors and agencies. But they drew a complete blank.
"We found a proliferation of press releases, white papers, and persuasively written articles," Burg et al wrote on Thursday. "However, we found no documentation or evidence of the results blockchain was purported to have achieved in these claims. We also did not find lessons learned or practical insights, as are available for other technologies in development."