Power & Market
Tyler Harrell was found guilty of a charge of aggravated assault today in a case that should concern anyone who cares about the right to self-defense.
Back in 2016, Harken grabbed his AK-47 after being awaken by a loud bang. With him and his mom believing his house was being broken in to, he went on to shoot one of the intruders in the knee. Unfortunately for Harken, the people that broke down his door had government badges. The Austin SWAT team, allegedly responding to Snapchat photos of Harrellwith drugs, guns, and cash, were conducting a no-knock raid on the house. Their search found no drugs, but Harken faced the assault charge as well as an even more ludicrous charge of attempted capital murder, of which he was found not guilty. He now faces thirteen-and-a-half years in prison.
While it's a shame that someone was hurt during the police raid, Harrell is the clear victim in this situation. After all, what is a reasonable person supposed to do when armed men knock down your front door without any sort of announcement? Anyone who favors gun rights must concede that the natural reaction is to defend yourself and everyone else in the home. Unfortunately, the overlap between the Blue Lives Matter and NRA crowds mean we are unlikely to hear many national voices come to Harken's defense.
Unfortunately situations like Harrell's are not all the uncommon, as the government continues to wage its absurd war on drugs. As Tate Fegley noted following the disastrous Utah vs Streiff Supreme Court case:
To read the decisions of the Court regarding the Fourth Amendment, which prohibits the government from conducting unreasonable searches and seizures, is to read of its slow death, with drug prohibition playing a role almost every step of the way.
Consider, for example, one of the most odious developments in modern American policing: the no-knock SWAT raid. There are, on average, over 100 raids per day and the majority of them are to serve low-level drug warrants. Such a dangerous procedure inevitably has led to a huge number of botched raids, resulting in unnecessary property damage and death. It is a common law principle that officers of the law “knock-and-announce” themselves prior to the search of a dwelling in order to give the occupant time to compose himself and answer the door. The Supreme Court has created exceptions to this principle, such as the possibility that suspects could destroy drug evidence, thus providing a necessary condition to the environment that allows a raid-happy style of policing to exist. In consideration of this, it is not hard to imagine how the Strieff decision could lead to widespread pretext stops and ID-checking in order to go on fishing expeditions for evidence.
Last month, we reported that money-supply growth accelerated for the first time after a year-long period of falling growth rates, at the end of which money-supply growth fell to a near-ten-year low of 2.6 percent, year over year.
In March of this year growth rates had headed upward, rising to a year-over-year growth rate of 5.1 percent.
In April, however, growth rates lessened again, coming in at a rate of 4.3 percent, year over year.
(The money-supply metric used here — an "Austrian money supply" measure — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.)
Meanwhile, the more commonly used measure of money supply, M2, continued to experience falling growth rates through the first part of this year. In April, M2 increased 3.7 percent, year over year, making it the smallest increase in M2 since 2011.
Part of what has pushed the Austrian measure of money supply above growth rates from last year was an increase in treasury deposits at the Fed.
The inclusion of deposits at the Fed is a key difference between M2 and the Austrian measure of the money supply, and growth in these deposits has added to the differences seen in growth between M2 and the Austrian measure.
In April, treasury deposits at the Fed hit a 16-month high, rising to $324 billion. The highest level for treasury deposits ever reported occurred in November of 2016, at a total of $394 billion.
What does the trend in money supply indicate?
Historically, a sizable drop in money supply growth rates suggests that a recession is on the horizon — but not on the immediate horizon.
In this graph, provided by RealForecasts.com, we see how dips in the money supply growth rate often precede recessions, but with a lag period of a year or so. In many cases, money supply growth is trending upward again by the time the recession officially begins.
Moreover, if we look at TMS totals (in terms of dollar amounts) we can see that flattening in the money supply has occurred to varying degrees on three occassions over the past 20 years. There was a slight flattening leading up to the 2001 recession, and then another in the lead up to the 2008 financial crisis. And we are experiencing some flattening now — although to a lesser extent. It's unknown if this trend will continue or if growth will pick up again.
So does the recent downturn and subsequent uptick indicate a recession?
It's difficult to say how long the current boom period will last. Home prices continue to sail upward for now, although we do see volatility in the stock market. Unemployment data doesn't point to anything catastrophic at this time.
Some indicators suggest problems, however. Delinquencies in auto-loan debt continue to trend upward, household formation is stagnating, and growth in commercial loans — a factor in expanding the money supply — remains near multi-year lows:
Roll over David Ricardo, former White House Chief Strategist Steve Bannon, says a trade war is great for America’s Main Street, even if Wall Street doesn’t like it. "Ask the working people in Ohio, Pennsylvania and Michigan about Wall Street. Wall Street supported and cheered on the export of their jobs. To hell with Wall Street if they don't like it. It's time somebody stood up to them and Donald Trump is the perfect guy. Wall Street is always short term. Trump is trying to protect the beating heart of American capitalism — our innovation," Bannon told Reuters in a telephone interview.
While Bannon frames the trade war as a class fight. However, Ricardo’s idea of comparative advantage, demonstrated the benefits of international specialization of international trade. His free trade argument put Britain on the course of exporting manufacturing and importing food in the 19th century.
So, to use Bannon’s bluster, America innovates, while China’s labor creates the fruit of those innovations cheaper to the benefit of U.S. consumers, including those living in Ohio, Pennsylvania and Michigan.
Bannon blathered on,
It's full throwdown. Trump has planned this out for a long time. He led with the smart things, forced technology transfers. It's obvious the Chinese have no real response to this. I think they played completely into his hands. By putting tariffs on agricultural products and avoiding addressing the technology questions they've shown once again they consider us nothing more than a tributary state.
Unfortunately, a full throwdown doesn’t end with just trade harming consumers. Ludwig von Mises explained that Trump’s tactics are nothing new.
History is a struggle between two principles, the peaceful principle, which advances the development of trade, and the militarist-imperialist principle, which interprets human society not as a friendly division of labour but as the forcible repression of some of its members by others.
Brannon acts like Trump’s tariffs will benefit working people when, in fact, it is just the opposite.
Murray Rothbard explains,
Tariffs and various forms of import quotas prohibit, partially or totally, geographical competition for various products. Domestic firms are granted a quasi monopoly and, generally, a monopoly price. Tariffs injure the consumers within the “protected” area, who are prevented from purchasing from more efficient competitors at a lower price. They also injure the more efficient foreign firms and the consumers of all areas, who are deprived of the advantages of geographic specialization. In a free market, the best resources will tend to be allocated to their most value-productive locations. Blocking interregional trade will force factors to obtain lower remuneration at less efficient and less value-productive tasks.
To make Rothbard’s point, Trump’s 25% tariff on 1,300 goods include, raw materials, construction machinery, agricultural equipment, electronics, medical devices, and consumer goods.” No American consumer will escape paying higher prices on something.
In 1930 Senator Reed Smoot and Representative Willis C. Hawley were able to pass into law an act raising U.S.tariffs on over 20,000 imported goods, helping put the Great in Great Depression.
Making America Protectionist again will turn out to be anything but great.
“It’s time to stop calling this a recovery, and start calling it a boom,” writes Noah Smith for Bloomberg.The Elliott Wave Financial Forecast (EWFF) reports, The National Federation of Independent Business index of small business owners “Now Is a Good Time Expand” rose to its highest level in the 45-year history of the survey. “Main Street is roaring,” says the NFIB’s president.
EWFF points out that it feels like the year 2000 all over again.
There are many parallels to the top year of 2000, but two key ones stand out. The Conference Board’s Consumer Confidence Index hit 130.8 last month, its highest level since November 2000. Meanwhile, one of the most widely followed measures of economic performance, the U.S. unemployment rate, fell to 4.1% in January, its lowest level since December 2000.
The housing market is so hot, buyers are bidding up properties, sight unseen. Bloomberg reports,
Katia Dmitrieva writes for Bloomberg, “the biggest share of households since 1998 said their finances had improved over the past year and expected continued gains in the year ahead.”
No wonder there is euphoria, “This is the everything bubble generated by seven years of zero interest rates and negative interest rates overseas and massive amounts of money printing. It shows up in the asset price inflation in many different places," Peter Boockvar told CNBC.
However, the easy money chickens are ready to come home to roost. Zero Hedge reports, “legendary trader Paul Tudor Jones (PTJ) argues that US inflation is set to accelerate sharply, making bonds a very poor investment, and that the Fed must act swiftly to tackle financial bubbles created by prolonged monetary easing.”
Jones doesn’t believe the current positive mood is sustainable.
Sitting where we are today, this grand experiment with negative real rates might seem successful: We have the strongest economy in 40 years, at full employment. The mood is euphoric. But it is unsustainable and comes with costs such as bubbles in stocks and credit. Navigating these bubbles will be one of the most difficult jobs any Fed chair has ever faced.
Will Main Street roar with the ten-year rate of 3.75% that PTJ is projecting? Jones doesn’t seem to think so. He doesn’t even want to buy stocks, let alone expand a small business. He says he ready to hunker down owning only commodities, hard assets, and cash, while everyone else believes they can continue to ride the Fed’s bubble.
Breaking up the United States, a view thought dangerous and toxic way back in 2015, continues to trickle out in mainstream political conversation.
The latest example comes from Jesse Kelly at The Federalist:
This idea of breaking up the country may seem a bit outlandish now, but you won’t think so once real domestic unrest comes to your town. Our political disagreements have become a powder keg, one that already would have blown if conservatives had liberals’ emotional instability.
Nobody is expected to cheer for this split. Cheering is not a normal reaction when couples get a divorce. We cheer for old married people on their fiftieth wedding anniversary.
But life is imperfect. Life is hard. We both now agree that living under the other side’s value system is wholly unacceptable. The most peaceful solution we Americans can hope for now is to go our separate ways. So let us come together one last time and agree on one thing: Irreconcilable differences.
John C. Williams will be taking his talents to New York, as the San Francisco Fed President has been announced as the successor to William Dudley. The selection, made by bank representatives within the New York Fed, is the latest example of the Federal Reserve maintaining the status quo.
Williams is a career academic who collected his first Fed paycheck after completing his PhD in 1994. As a current FOMC member, Williams has been a reliable vote in support of the moderate interest rate increases we've seen over the last few years.
With Republicans in DC increasingly interested in Fed reform, Williams's history offers a mixed bag. He has certainly flirted with proposals such as NGDP targeting, but he has also been a vocal supporter of Fed flexibility in a time of crisis. These views are reflected in his academic work, such as a 1999 Fed paper which touted that simple monetary policy rules may "very effective at minimizing the fluctuations in inflation, output, and interest rates," they must also take into the complexity of the real world. In other words, monetary rules are great until they aren't.
Williams is more reliable in defense of the Fed's most important - and controversial - policy tool, excess on interest reserves. In fact, as Patrick Barron noted in 2011, Williams believes IOER and other Fed actions represent a "Brave New World" in monetary policy:
One wonders if Mr. Williams ever read Aldous Huxley's chilling book warning the world of the threat to individual freedom by a tyrannical one-world state. If he had I doubt that he would have included "Brave New World" in the title of his speech.
But perhaps he selected this title on purpose! For Mr. Williams's speech was an unvarnished plea to recruit academics as co-conspirators to spread as economic truth the Fed's latest make-it-up-as-we-go-along, and increasingly panicked, monetary interventions masquerading as well-thought-out policy. The speech was nothing less than an admission that the Fed's monetary theories have failed, that it is experimenting with new ones, and that it wants academia to endorse whatever its latest policy experiments happen to be and incorporate them into college curricula. Here are his very words:
We depend upon educators like you to explain how the Fed works and how our policies affect the economy. We all benefit when the public understands what we do and why, so we are very grateful for the work you do.
Mr. Williams launched into a rather disjointed defense of the reasons that the Fed had to employ new monetary policy tools. (He proudly declared that, of the 12 policy tools on the Fed's own website, 9 of them did not exist four years ago.) I bet you he didn't realize that one reason monetary policy had to change was because of advances in the payment system. It seems that our ability to use debit and credit cards for purchasing goods and services has made traditional monetary aggregates obsolete. Again, in his own words:
How do 1950s theories of cash and checks apply in a world in which you and I can instantly take out a loan of several thousand dollars with the swipe of a card at the cash register?
It is obvious that Mr. Williams has never read Ludwig von Mises's The Theory of Money and Credit.
Unfortunately the most vocal criticism of Williams's selection will not come from his embrace of Bernanke-Yellen's radical monetary policy, but rather the fact he does not fit the push for "diversity" that Elizabeth Warren and other progressives desire. Of course, as Jonathan Newman noted in 2016, the policy aim of the push for diversity is keeping interest rates low - seen by misguided progressives as a benefit to the poor. The tragic irony is that, of course, those are precisely the ones hurt the most.
In Friday's article on Mexico homicides, I briefly mentioned the myth that Mexican homicides are driven by American guns. This myth drives so much of the rhetoric about Mexican crime, that it bears some examination in slightly more detail.
For example, in the wake of the Florida shooting, The National Observer ran an article titled "More guns, less crime? Not according to the data." The article centered around the idea that crime in Mexico is a result of "too many" American guns. The central premise of the claim is that an overwhelming majority of guns used for illegal purposes in Mexico come from the United States. The National Observer claims:
The aggregate data almost certainly understates the global impact of American guns. According to the U.S. Government Accountability Office, the vast majority of guns seized and traced in Mexico are of American origin. About a quarter of these weapons are high-caliber weapons, such as AK and AR-15 type semiautomatic rifles.
But, Stratfor has provided some pretty damning research for that position in an article titled "Mexico's Gun Supply and the 90 Percent Myth." The research concludes that the calculations behind the "90 percent myth" are so sketchy as to be extremely misleading. Specifically:
Interestingly, the part of this argument pertaining to guns has been adopted by many politicians and government officials in the United States in recent years. It has now become quite common to hear U.S. officials confidently assert that 90 percent of the weapons used by the Mexican drug cartels come from the United States. However, a close examination of the dynamics of the cartel wars in Mexico — and of how the oft-echoed 90 percent number was reached — clearly demonstrates that the number is more political rhetoric than empirical fact.
By the Numbers
As we discussed in a previous analysis, the 90 percent number was derived from a June 2009 U.S. Government Accountability Office (GAO) report to Congress on U.S. efforts to combat arms trafficking to Mexico (see external link).
According to the GAO report, some 30,000 firearms were seized from criminals by Mexican authorities in 2008. Of these 30,000 firearms, information pertaining to 7,200 of them (24 percent) was submitted to the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for tracing. Of these 7,200 guns, only about 4,000 could be traced by the ATF, and of these 4,000, some 3,480 (87 percent) were shown to have come from the United States.
This means that the 87 percent figure relates to the number of weapons submitted by the Mexican government to the ATF that could be successfully traced and not from the total number of weapons seized by Mexican authorities or even from the total number of weapons submitted to the ATF for tracing. In fact, the 3,480 guns positively traced to the United States equals less than 12 percent of the total arms seized in Mexico in 2008 and less than 48 percent of all those submitted by the Mexican government to the ATF for tracing. This means that almost 90 percent of the guns seized in Mexico in 2008 were not traced back to the United States.
The remaining 22,800 firearms seized by Mexican authorities in 2008 were not traced for a variety of reasons. In addition to factors such as bureaucratic barriers and negligence, many of the weapons seized by Mexican authorities either do not bear serial numbers or have had their serial numbers altered or obliterated. It is also important to understand that the Mexican authorities simply don't bother to submit some classes of weapons to the ATF for tracing. Such weapons include firearms they identify as coming from their own military or police forces, or guns that they can trace back themselves as being sold through the Mexican Defense Department's Arms and Ammunition Marketing Division (UCAM). Likewise, they do not ask ATF to trace military ordnance from third countries like the South Korean fragmentation grenades commonly used in cartel attacks.
Of course, some or even many of the 22,800 firearms the Mexicans did not submit to ATF for tracing may have originated in the United States. But according to the figures presented by the GAO, there is no evidence to support the assertion that 90 percent of the guns used by the Mexican cartels come from the United States — especially when not even 50 percent of those that were submitted for tracing were ultimately found to be of U.S. origin.
But note that the Observer article goes beyond indicting the US for Mexican violence. By referring to the "global impact of American guns" it's also implied that US guns are responsible for region-wide violence in Latin America.
But, the 2012 Small Arms survey suggests otherwise. First of all, official government stockpiles of guns are a clear source of illegal guns in Brazil:
[M]any weapons are diverted from Brazilian government-controlled stockpiles to the illicit market. Dreyfus confirms this finding, showing that 18 per cent of firearms that have been traced back to their origins stem from official institutions, including the military police and the army.
Illegal weapons are also tracked back to government sources in Mexico, as the Stratfor report notes:
There are also many .45-caliber and 9 mm semiautomatic pistols and .357 revolvers obtained from deserters from the Mexican military and police, purchased from corrupt Mexican authorities or even brought in from South America (guns made by manufacturers such as Taurus and Bersa).
But, if we want to blame the US for Mexican guns, there is one place we can truly lay blame: the US government. Famously, of course, there was the "Fast and Furious" debacle in which the US government handed over guns to Mexican cartels as part of a failed and cockamamie plan to track the guns.
But the US has also played a part in putting many guns into the black market through the US's involvement in Central American civil wars in previous decades. The Small Arms Survey notes:
El Salvador and Honduras were the largest recipients of weaponry from the US government in the 1980s and early 1990s, El Salvador because of the war against the communist guerrillas and Honduras because it was the primary base of operations for the US-backed Nicaraguan resistance known as the Contras
These guns later worked their way into black markets in the region.