Power & Market

Nowhere are memories shorter than in finance and speculation. Yield farming is back in the crypto market, meaning the “ lending of cryptocurrency which gets you interest and sometimes fees, with the kicker being new cryptocurrency is paid on top of the interest. “The real payoff comes if that coin appreciates rapidly. It’s as if banks were luring new depositors with the gift of a tulip -- during the Dutch tulip craze,” wrote Olga Kharif for Bloomberg back in 2020. 

The Sam Bankman-Fried trial should have jogged everyone’s memory of the crypto crash and the dangers of leverage. Muyao Shen reminds us that just a year and a half ago Terra algorithmic stablecoin triggered an industry-wide meltdown. Upwards of 70% are being offered by “exchanges ranging from GMX to Binance are offering double-digit incentives as a way to jumpstart trading activity after months of stagnation.” 

Admittedly, this idea sounds bad. Both “sell out” and “selling out” have a bad odor to them. Rather, we should “stand firm!” And there is nothing like perking up that patriotic spirit that compares to bashing supposed foreign enemies. However, there are deep and dire problems with this attempt at demagoguery.

First of all, there is simply no mention in the U.S. Constitution, let alone prohibition of, selling land to foreigners. We have been doing so since practically the beginning of our country. A relatively recent high-profile case in point is the sale of Rockefeller Center in New York City to Japanese interests. This land parcel contains 19 buildings ranging from three stories to sky scrapers, and comprises 22 acres dab smack in the middle of Manhattan. A 51% share was purchased for $846 million in 1989 by the Mitsubishi Corporation. As it happens, this sale did not go all that well for the buyers; they sold out in 1995 for a loss (but that is entirely beside the point). If the U.S. Constitution prohibited sales of this sort, this one never would have occurred.

Second, according to one opponent of such sales, a Republican candidate for Governor of Washington state:

“The practice of selling American land to anyone other than American citizens is heinous and unconstitutional. American soil belongs to American citizens. End of discussion.”

Did you notice anything missing from this harangue, apart from a failure to mention which part of the U.S. Constitution is of relevance? In most sales, nay, all sales without exception, there is a buyer and seller. So far, so good. There are these two countries. But there is also a price! What is the price the Chinese are willing to pay for our precious farm land? Typically, fertile agricultural acreage sells for about $3,800 per acre in the United States. Well, suppose the people of the Middle Kingdom offered double that amount, or $7,600 per acre. Then, the likelihood of Americans going without “access to reliable and sufficient quantities of affordable, nutritious food” would be decreased, not increased, by all such sales. American farmers could then purchase twice as much arable land in nearby Canada or Mexico; they would be enriched, and we would have more food rather than less.

Here is a multiple-choice question for those of you who have not yet had Economics 101: are the Chinese likely to offer less than $3,800, that exact amount, or more than that figure, for their average purchase? Go to the head of the class if you selected that latter option. For an explanation: with these new offers for our terrain, the demand curve for it will shift to the right and prices will tend to be higher, not the same or lower. Maybe not double, as in this example, but higher!

Should we sell the entire country to the Chinese? It all depends upon what they offer for it! If it is the sun, the moon, and the stars, then yes. If it is eternal life, plus the entire remainder of the planet, including China itself, then, again, yes, of course. Without knowing what the precise financial and otherwise offer is, it ill behooves anyone to reject any deal!

Third, according to that old folk wisdom, if goods don’t cross borders, armies will. Farm land is not usually thought of as a tradeable good, but it is. The United States is now confronting China in a myriad of ways. Both are nuclear armed. Do we want to exacerbate tensions between these two military giants, or dial them down a notch? There can be only one sensible answer to that question. A nuclear conflagration can ruin your entire day!

What about the lack of reciprocity? Posit that China refuses to allow Americans to purchase land in their country. Should we follow that pattern and ban the sale of our real estate to them? This might be psychologically sound but makes no economic sense. Bob and Allen have a good commercial exchange in product X. Each benefit from it. But Allen refuses to engage in a similar manner regarding product Y. Would Bob benefit from cutting off trade with Allen in X? Of course not. We are positing that both benefit from buying and selling X. If Bob does so, he is cutting off his nose to spite his face, as that old adage states. Ditto for U.S. and China relations.

Let me try again. Two men are sitting in a wooden rowboat. The first one shoots a hole in the hull. Water starts seeping in. Should the second one shoot yet another hole in the boat to get even with his fellow passenger? Not if he has even a modicum of rationality. Yes, China should allow Americans to purchase land there too. And, perhaps, they will one day do so if the advice by candidates like the one above is soundly and widely condemned.

Remember, we invaded their country in the past (and not only tried, but succeeded in shoving addictive drugs down their throats). They never returned the “favor.” They have more of a right to be suspicious of us than we of them.

For the record, I acknowledge that the U.S. government should not be selling land to anyone else. They never homesteaded any of it. They are not the proper owners of any of it. We are here discussing, only, private land sales, as in the case of Rockefeller Center.

Originally published by The Libertarian Institute.

The Kingdom of Spain held elections on July 23 and the resulting configuration of the lower house of Congress presents several challenges for governability. In Spain, the executive branch of government is not directly elected but is rather designated by the vote of elected representatives in a fashion comparable to the American Electoral College or the British Parliament. For a party or coalition to form a government they require at least 176 votes out of the 350 members. If none achieve the 176 votes, then it is possible to form a government by receiving more votes in favor than votes against. If, after two months from the first vote, no government is successfully formed, then the King must dissolve Congress and call for new elections.

The current challenge stems from the composition of Spain’s government. The incumbent left-wing coalition obtained 171 seats. The right-wing opposition obtained 172 seats. The remaining seven seats are held by Catalan secessionists, whose leader, Carles Puigdemont, has stated is only willing to support the formation of a government if they agree to a full amnesty for those prosecuted for the events of the 2017 failed secession attempt and to a binding independence referendum.

Puigdemont has also stated that he does not trust the incumbent left-wing President, Pedro Sanchez, to deliver on promises, which appears to outright preclude any support from the former for a government under the latter. On the other hand, a constituent party of the right-wing coalition, Vox, characterized by being conservative and unionist, is strictly opposed to any independence referendums.

There is a possible yet unlikely scenario in which the two largest parties from each coalition, which also happen to be the more moderate ones, form a centrist grand coalition. Such a coalition would be 258 seats strong. In such a case, it is probable that neither of the party leaders would become President, but rather a technocrat be selected in the Italian fashion. The main factors making this scenario unlikely are that the relevant parties clearly campaigned against each other, and a poor performance could result in a significant leakage towards the extremes for both parties in the next election.

The most likely outcome is a new election, as was the case in 2019. Government paralysis is not likely to have a significant impact on day-to-day life further than the perpetuation of issues that are yet to be addressed. Among the most pressing issues, the general housing situation can be highlighted, including the matters of high costs, low availability, and squatting. It is interesting to note that there are those who defend the squatters. Perhaps they overlook the fact that an institutional arrangement that is favorable to squatters is also necessarily prejudicial to renters. The increased costs from the increased squatter risk lowers the profitability of housing provision, which lowers housing provision itself, resulting in lower availability and higher costs to renters.

A couple of days ago, the New York Times published a story about the brutal authoritarian regime of Aleksandr Lukashenko, the leader of Belarus. The article points out that after winning a “widely disputed” election three years ago, Lukashenko has crushed dissent and “ushered in a chilling era of repression.” According to the article, “even the smallest sign of protest can land a person in jail.” Security forces are rounding up critics, journalists, lawyers, and dissidents. People are even being arrested for wearing red and white, which are considered to be symbols of the protest movement against Lukashenko.

This raises an obvious question: Should the U.S. government invade Belarus to free the Belarusian people? 

I suspect that most Americans, including even a large percentage of interventionists, would answer no. While we certainly can sympathize with the people of Belarus, we would not want the U.S. military to invade, attack, and bomb the country in an attempt to save the Belarusians from tyranny, especially since a large number of them would be killed or maimed in the process and have their homes and businesses destroyed.

However, an interesting aspect of this is that if the U.S. national-security establishment decided to invade Belarus to free the Belarusian people, a large percentage of Americans, especially the interventionists, would have a completely different mindset. In that event, they would immediately rally to the support of the Pentagon and the CIA and come up with all sorts of arguing points as to why it was necessary and beneficial for the U.S. to intervene on behalf of the Belarusian people. 

In other words, a certain percentage of American citizens, especially the interventionist segment, automatically looks to the Pentagon and the CIA for their cue as to what they should believe, and they meld their mindsets to the sentiments of these two agencies.

Consider Eastern Europe during the Cold War. Countries like Poland, Czechoslovakia, Hungary, and East Germany were under the iron grip of the Soviet Union, which was ruled by a brutal communist regime. For some 45 years, the people of those countries had to live their lives in that way. 

At no time did the U.S. government ever invade any of those countries to free them from communist tyranny. Moreover, the overwhelming sentiment of the American people, including the interventionists, was not to invade and free them.

But then consider Iraq in 2003. The people of Iraq had been suffering under the brutal dictatorship of Saddam Hussein, who ironically had been a partner and ally of the U.S. government. The U.S. government could have taken the same attitude toward that situation that it had taken with those Eastern European countries during the Cold War. 

Instead, the Pentagon and the CIA initiated their invasion of Iraq. Immediately, a large number of Americans, especially the interventionists, melded their mindsets to those of the Pentagon and the CIA and came up with all sorts of reasons why it was necessary and beneficial to invade Iraq, including the need to “free” the Iraqi people from the tyranny of Saddam Hussein.

Consider Hong Kong. Ever since the British relinquished control over Hong Kong, China has relentlessly established ruthless totalitarian control over the people of Hong Kong. Yet, the U.S. government has never come to the defense of Hong Kong by invading. Moreover, notice that there is no widespread sentiment among the American people, including the interventionists, to do so.

But then compare that to Taiwan. There, the U.S. national-security establishment has made it clear that the Taiwanese will be treated differently than the people of Hong Kong. If China attacks Taiwan, U.S. forces are likely to come to their defense. A large number of Americans, especially the interventionists, have come up with all sorts of reasons why the U.S. should do so.

Consider Ukraine. When Russia invaded Ukraine, the national-security establishment could have stayed out of the conflict, just as they did with Eastern Europe during the Cold War and have done with Belarus and Hong Kong. Instead, the Pentagon and the CIA decided to come to the active assistance of Ukraine, which caused a large number of Americans, especially the interventionists, to immediately meld their mindsets to those of the Pentagon and the CIA and, in the process, come up with all sorts of reasons why the U.S. should intervene in Ukraine.

Our nation’s Founding Fathers came up with the ideal foreign policy, which was expressed in John Quincy Adam’s famous Fourth of July address in 1821 entitled “In Search of Monsters to Destroy.” Adams pointed out that there are lots of bad things — monstrous things — that happen in the world — tyrannies, dictatorships, famines, wars, invasions, revolutions, and the like. But the U.S. government, Adams pointed out, should never send its armed forces into foreign lands to slay these monsters, in part because inevitably the United States would end up becoming like the monsters it was slaying. 

In other words, Adams was saying that the founding U.S. foreign policy of non-interventionism, which was applied to those Eastern European countries during the Cold War and that is being applied to Hong Kong and Belarus today should be the U.S. foreign policy across the board for all the monstrous things that happen in the world. 

Given the dark-side totalitarian-like powers (e.g., assassination, torture, indefinite detention, and mass secret surveillance) that have come with America’s conversion to a national-security state, one that wields the omnipotent power of foreign interventionism, who can deny that Adams has been proven correct, especially given that the U.S. government, in the immortal words of Martin Luther King, long ago became the greatest purveyor of violence in the world, even greater than the monsters it slays?

Originally published by the Future of Freedom Foundation.