Power & Market
Jeff Deist joined CrossTalk yesterday to discuss the influence of neoconservatives like John Bolton on Trump's foreign policy. Things get heated with another guest when Jeff questions the dubious "War on Terror," the enormous US military budget, and whether Trump's actions regarding endless Middle East wars matches his rhetoric.
Jeff Deist recently published an editorial in the Washington Times challenging various proposals—popular among DC think tanks—to create monetary policy "rules" or targets based on statistical data related to inflation or GDP.
One hopes Mr. Powell sticks to his guns and his earlier commitment to tightening in the face of bad economic news. He certainly will face pressure, and not only from President Trump and Congress. Nearly the entire think-tank chorus sounds alike when it comes to monetary policy: The Brookings Institution, the American Enterprise Institute, the Heritage Foundation, the Mercatus Center, and the Cato Institute all offer up some version of rules-based policy.
Rules are meant to be broken. Rules-based proposals are relatively complex and not particularly suited to winning over Congress. It’s one thing to legislate a broad dual mandate for the Fed and hope for the best. It’s another to reach bipartisan agreement on the Taylor Rule and mandate its execution by law. Rules-based proposals are likely to become internalized Fed policies at most, not laws.
But as we’ve seen, policy rules tend to go out the window in times of economic crisis. Fed chairs do not serve in a vacuum; politics and current events often lay waste to the Fed’s vaunted independence. Only Paul Volcker and William McChesney Martin seemed to have resisted the bidding of unhappy presidents.
Monetary rules don’t truly get at the heart of things. Technical analysis and mathematical formulas only obscure the complexity and human fallibility of the real world. Mr. Powell and company are tasked with determining the “best” monetary policy for 320 million Americans with widely diverse interests.
The answer to our coming economic woes lies in recognizing that no monetary policy tinkering can replace the fundamental corrections that must take place: bankruptcy, liquidation and restructuring of firms to clear out bad debt; higher interest rates to encourage capital formation and discourage more malinvestment; an end to direct bailouts by Congress and roundabout bailouts by the Fed; and a serious program of spending and debt reduction in Washington that spares neither entitlements nor defense.
As the article makes clear, statistical or mathematical analysis of economic data cannot save Fed officials from their insurmountable task: determining the supply and price of money in a vast economy. As Ludwig von Mises explained more than a century ago in The Theory of Money and Credit, money is a marketplace phenomenon; as such it cannot be engineered through any amount of technical monetary or fiscal policies:
All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfills its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit.
We can't "reform" the Federal Reserve Bank any more than we can reform the FDA or IRS or TSA. Politics and the economic calculation problem cannot be overcome by tinkering.
The Accad and Koka Report, hosted by two MDs, focuses on free-market approaches to medicine and health.
Drs. Michel Accad and Anish Koka recently hosted Mises Institute president Jeff Deist for a no-holds barred look at how Congress, the medical establishment, and lobbyists work together to make healthcare anything but free. Watch the interview here.
The late Sen. John McCain is being lauded far and wide for his long career of public service. Rep. John Lewis, the famous civil rights activist, hailed McCain as a “warrior for peace.” In reality, McCain embodied a mix of moralism and militarism that worked out badly for America and the world.
When he was awarded the Liberty Medal last October at the National Constitution Center in Philadelphia, McCain declared, "We live in a land made of ideals... We are the custodians of those ideals at home, and their champion abroad. We have done great good in the world.” He warned that it would be “unpatriotic” to “abandon the ideals we have advanced around the globe.” But idealism has fared better in political speeches than in the lives of American soldiers or purported foreign beneficiaries...
McCain’s career illustrates the peril of exalting uplifting rhetoric over the lessons of history. There are plenty of nasty dictators in the world but U.S. military campaigns have dismally failed to spread democracy this century. America can no longer afford an idealism that consists of little more than combining bombing and wishful thinking.
Read the full article at USA Today
At least some of them.
Last week, US Attorney General announced he plans to step up prosecutions of people who make "undetectable" firearms, such as the 3D-printed guns that have recently received attention. According to the AG's web site:
Statement of Attorney General Jeff Sessions on State of Washington v. U.S. Department of State:
The Department of Justice yesterday filed a brief in opposition to a preliminary injunction in the State of Washington v. U.S. Department of State, a case about 3D printed guns.
After the filing, Attorney General Jeff Sessions issued the following statement:
"Under federal law, it is illegal to manufacture or possess plastic firearms that are undetectable. Violation of this law is punishable by up to five years in prison. Such firearms present a significant risk to public safety, and the Department of Justice will use every available tool to vigorously enforce this prohibition. We will work with federal, state and local law enforcement to identify any possible cases for prosecution.
"We will not stand for the evasion, especially the flouting, of current law and will take action to ensure that individuals who violate the law by making plastic firearms and rendering them undetectable, will be prosecuted to the fullest extent."
Considering that sessions has also pledged to step up prosecutions of persons who use marijuana where it is legal under state law, one might be forgiven for coming to the conclusion that Jeff Sessions's favorite past time is locking peaceful Americans in prison. Sessions was so unhinged in his drive to intervene in state legal affairs that even GOP senators had to intervene to get the Trump administration to back off.
This, however, should not be surprising. As Mike Maharrey has pointed out, the Trump administration has been enthusiastically prosecuting a war on private gun ownership in recent years:
[D]uring Trump’s first term, ATF enforcement of federal gun laws increased in every single category compared to the last year Obama was in the White House.
We can start with the number of firearms cases investigated. In 2016, the final year of the Obama administration, the ATF investigated 31,853 firearms cases. During Trump’s first year, the agency investigated 35,302. That’s 3,349 more firearms cases than under Obama, a 10.81% increase. (See Footnote 1)
We see similar increases in other enforcement categories during Trump’s first year. There were 786 more cases recommended for prosecution, 789 more indicted cases, and 630 more defendants convicted. (See Footnote 2)
The ATF also investigates arson, cases involving explosives, and alcohol and tobacco cases, but these make up a small percentage of the total. Under Trump, 92% of the cases investigated by the ATF involved firearms. It was slightly less under Obama – 90%.
ATF enforcement of federal gun laws under Trump increased at roughly the same trajectory as it did during the last three years of Obama’s second term. In other words, the NRA-backed, GOP protector of the Second Amendment was no better than the Democratic Party gun-grabber, and continued to ramp up enforcement of federal gun control.
It's unlikely, however, that Trump will receive any flack from this from Republicans. It's the usual song and dance: these are "illegal" guns, after all. So, respect for peaceful exchange and private property rights can just go right out the window. It's the usual blind spot of the "law and order" conservative.
But what's the difference between a legal gun and an illegal one? It's the same difference between a legal or illegal drug — or a legal and illegal immigrant. It's a totally completely arbitrary designation made up by legislators. If an employer wants to offer a job to a worker without the proper government paperwork? Well, that's "illegal," and the right of free contract goes right in the garbage. Someone wants to sell you a gun without filling out the proper government paperwork? Well, that's punishable with years in a government cage. That fact that all parties involved might be peaceful otherwise-law-abiding citizens is meaningless to government prosecutors.
At the recent Mises University, Jeff Deist and Ryan McMaken recorded a live edition of Mises Weekends focused on radical decentralization and addressing some of the points raised against it. While in this conversation and in many others related to it intellectual titans like Mises and Rothbard are invoked to support the decentralist view, many libertarians unfortunately fail to call upon one of the most articulate critics of centralized political power with unparalleled intellectual and cultural influence; JRR Tolkien. While Tolkien is no doubt a popular figure among many libertarians, an unfortunate unfamiliarity with his work on a deeper intellectual level often prevents his enormous cultural influence from being brought to bear against the forces of statism and centralization.
There is no need to wonder about Tolkien’s political leanings, as he made them quite explicitly clear in a 1943 letter to his son Christopher Tolkien (who would later edit a great many of Tolkien’s posthumous works) he wrote “My political opinions lean more and more to Anarchy (philosophically understood, meaning abolition of control not whiskered men with bombs) – or to 'unconstitutional' Monarchy.” In the same letter Tolkien continued that “Anyway the proper study of Man is anything but Man; and the most improper job of any man, even saints (who at any rate were at least unwilling to take it on), is bossing other men. Not one in a million is fit for it, and least of all those who seek the opportunity.”
With such political sentiments, it is hardly surprising then that Tolkien incorporates a disdain for centralized power and a warning about its seductive nature in his work. In The Lord of the Rings, perhaps Tolkien’s best known work, the story traces the journey to destroy the One Ring of Power and chronicles the various effects the potential to wield this power can have. Tolkien does not attempt to hide the nature of the Ring, its purpose is clearly labeled upon itself:“One ring to rule them all, one ring to bind them, one ring to bring them all and in the darkness bind them.” The One Ring is just that, one, singular, representative of a unitary will that imposes itself upon all.
Sauron, the creator of the One Ring, is unambiguously evil, driven by a desire to impose his will and dominate all others. Yet, Tolkien’s message does not simply end with the idea that power should not rest in the hands of clearly evil tyrants, but rather penetrates much deeper into why centralized power by its very nature is too dangerous to exist.
One of the first characters to fall prey to the temptation of the Ring’s power is the wizard Saruman. Saruman’s reasoning for wanting power is quite simple and is certainly a sentiment that we hear everyday from the DC class. “The time of the Elves is over” he tells fellow wizard Gandalf, “but our time is at hand: the world of Men, which we must rule. But we must have power, power to order all things as we will, for that good which only the wise can see.” Such an attitude is all to common when it comes to the actual and aspiring members of the governing class who believe that they know best and are justified in imposing their kind hearted plans upon everyone else. Whether it is social democrats who believe they can plan the economy, or neo-conservatives who believe they can plan the entire world order and engage in “building” entire nations at the point of the gun in the Middle East, the world is full of wannabe Saruman’s fully convinced of their own wisdom and infallibility.
Tolkien examines in great psychological depth the process by which ordinary people end up abusing power, most poignantly in his creation of the Ring Wraiths; men who were once mighty kings who over time became subdued to Sauron’s will after accepting the nine rings of power gifted to men. Tolkien expert Dr. Thomas Shippey has said that “the Ringwraiths are Tolkien’s most original and distinctive image of evil” in part because they represent the danger that power poses in the hands of anyone, even oneself. Shippey calls this process by which ordinary people who begin with good intentions end up becoming corrupted and twisted as they acquire power the “wraithing process.” The use of the adjective “twisted” is quite intentional, as the word “wraith” stems from words such as wreath and writhe which are both twisted things. The etymology of “wraith” also draws upon the important element that wraiths are more defined by shape than by substance. According to Shippey, what fills this shape is ideology with power.
The suspicion is that people make themselves into wraiths. They accept the gifts of Sauron, quite likely with the intention of using them for some purpose which they identify as good. But then they start to cut corners, to eliminate opponents, to believe in some ‘cause’ which justifies everything they do. In the end the ‘cause’, or the habits they have acquired while working for the ‘cause’, destroys any moral sense and even any remaining humanity. The spectacle of the person ‘eaten up inside’ by devotion to some abstraction has been so familiar throughout the twentieth century as to make the idea of the wraith, and the wraithing-process, horribly recognizable, in a non-fantastic way.1
The dangers of the wraithing-process by which ordinary people end up becoming consumed by ideological power and committing atrocities are known all too well to anyone familiar with the bloody history of the 20th Century, a century in which, with bureaucratic efficiency, millions were exterminated in the ideological crusades of the USSR, Nazi Germany, and Communist China among others. According to Shippey, Tolkien’s portrayal of evil through the wraithing-process “is a curiously distinctive image of evil, and… a very unwelcome one because what it says is it could be you and under the right circumstances, or I should say the wrong circumstances, it will be you.”
While there is still much left to unpack from Tolkien’s prodigious body of work, one of his central theses is very clear: centralized power is too dangerous to be allowed to exist. If concentrated power exists people will be corrupted by it. This important point cannot be ignored in arguments for decentralization.
- 1. Shippey, Tom J.R.R. Tolkien: Author of the Century pg. 125