Power & Market
Shelton Over Kelton
Judy Shelton and Stephanie Kelton; one was denied a congressional appointment to the Federal Reserve because she asked questions, the other found reward by telling the establishment exactly what they wanted to hear. Last week Judy Shelton published an article in the Wall Street Journal that was nothing short of honest, aptly titled: Congress Needs to Rein In a Too-Powerful Federal Reserve.
Opening with a mention to banks, money managers, and other investors who hang on to every speech from the Fed, looking for clues as to what their actions mean for their portfolios. She quickly answers the question: What about everyone else?
But for people who live off paychecks rather than portfolios, the game of deciphering Fed officials’ intentions is a sideshow that leaves them further behind. This is no way to run monetary policy. Our nation’s central bank has become too prominent, too political and too powerful.
It doesn’t require a PhD to understand. When the Fed unleashes trillions of dollars into the market and holds interest rates low, the benefit goes to those who are able to get this new money first. This goes into the bond, housing, and stock market pushing prices up. The Fed has never clearly explained how they think this helps people working outside of the financial industry.
Shelton confirms the influence on assets and interest rates:
The Fed’s ability to purchase massive quantities of U.S. Treasury securities is the dominant factor influencing interest rates across the board and thus the valuation of financial assets… What would that benchmark yield reveal if Fed purchases weren’t distorting the market?
Her technical acumen is always impressive:
The Fed’s prominence not only undermines supply-and-demand interactions for accurately pricing the cost of investment capital; it also compromises the relationship between fiscal and monetary policy.
For a long time, the relationship between fiscal and monetary policy has been blurred. With Congress unveiling multi-trillion loans every few months, spending amounts well over tax revenues, there is no question that the Fed funds the nations’ fiscal policy through asset purchases.
She notes:
Meanwhile, the Fed continues to accumulate those assets—its current $8.33 trillion balance sheet total equals 37% of U.S. gross domestic product.
What resonated most was when she discussed lower income workers and minorities. All too often the Fed mentions them as a talking point, noting their existence, but little else about the financial problems they face. Whereas Shelton gives the answer:
…Mr. Powell laments that “joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African-Americans and Hispanics” …the Fed’s solution of buying Treasury debt and agency mortgage-backed securities seems ill-suited to the problem. It hardly improves the financial prospects of those not invested in rising equity markets. It doesn’t make today’s median-priced $374,900 home more affordable, even with rock-bottom mortgage rates.
Unfortunately, Shelton had her shot… But Republicans like Mitt Romney and Susan Collins voted against her appointment. She never had enough votes and was not appointed to the Fed’s Board of Governors.
Reading the quotes above, could anyone confidently stand up and say that they disagree with her ideas?
Of course, there is Stephanie Kelton. Ironic as just a few days after the Wall Street Journal article, Kelton was named as “One of the Most Creative People in Business” by Fast Company. This is a magazine which caters to “progressive business leaders.” Her university published the article, where they discussed the Covid spending bills. Kelton noted the relief efforts of:
…$5 trillion with no problem and no tax increase.
In the article, Stephanie Kelton likened herself to an eye doctor who corrects people’s vision:
If I’m an optometrist, my job is to fix your vision… I just fix your eyes. That’s how I think of my role as an educator.
Makes sense. But where does one go when the doctor suffers from severe myopia of both economic history and reality?
Small Businesses Are not the Key to Economic Growth
Small businesses are usually touted as the driving force behind economic growth in modern societies. Throughout the world, politicians earnestly argue that small businesses are the backbone of the economy. In America, there is even an administration dedicated to building the capabilities of small businesses known as the “Small Business Administration.” The SBA oversees a dazzling suite of services to small businesses and is strangely insulated from criticisms.
Republicans and libertarian commentators in the media have upbraided the EXIM Bank for fostering crony capitalism. Generally, right-leaning economists scrutinize subsidies and special privileges, but despite the benefits accrued to small businesses – they remain a venerated symbol of American capitalism. Few seriously question their impact on economic growth or contribution to innovation. Instead, it is automatically assumed that small businesses generate prosperity.
But how did America’s fascination with small businesses emerge? According to historian Benjamin C Waterhouse the perception that small businesses hold the keys to economic dynamism is fairly recent. Waterhouse posits that the influential position occupied by small businesses in America, coincided with the election of Jimmy Carter who by situating himself as the first “small business owner” in the white house since Harry Truman infused lobbyists with energy.
Small businesses were also given a major boost when the findings of economist David Birch submitted that they were responsible for 80% of all new employment opportunities during 1968-1996. Although Birch recanted by admitting that the figure is dubious this statistic is frequently adduced to justify support for small businesses. Luckily, today there are ample studies guiding analysts to properly dissect the efficacy of small businesses.
Based on the data furnished by researchers it is evident that the importance of small businesses has been greatly embellished. For instance, innovation charity NESTA reported that during 2002-2008 in the United Kingdom, six percent of high-growth firms generated half of employment growth. Moreover, in their piece featured in the Harvard Business Review of Tuesday, February 3, 2014, Isenberg and Ross assert: “The literature consistently shows that a very small number, from one percent to six percent, or so, of all ventures in a region account for the lion’s share of net job creation and spill overs from entrepreneurship. However, increasing the number of start-ups has not increased the number of high-growth ventures.”
In fact, it appears that the reverse is true: small businesses are adept at making jobs redundant, since by the end of a decade 30 percent of small businesses remain viable. With such a dramatic failure rate the view that small businesses are initiators of jobs is indeed untenable. Similarly, libertarians may challenge Mariano Mazzucato’s theory that the state is necessary for innovation, but at least she is accurate in her summation of small businesses. Writing for the Economist she enunciates a clear case against prioritizing small businesses in Britain: “Once you take into account the number of SME jobs lost after the first three years of their creation, there is very little net job creation by these firms. Only 1% of new enterprises have sales of more than £ 1million six years after they start.”
On closer inspection, these findings are unsurprising because entrepreneurs are unequal in potential. Opportunity-driven entrepreneurs, on average, are more educated and often start businesses to capitalize on new challenges, whereas necessity-driven entrepreneurship is motivated by economic needs and typical of low-growth economies. Specifically, Robert Atkinson, the founder and President of the Innovation and Technology Innovation Foundation revealed to this writer in an interview that the typical small business owner rarely intends to form the next superstar, in essence, he is running a lifestyle business with little aptitude for expansion.
Economic literature also suggests that since firm productivity is associated with firm age, then on average, newer firms are less efficient in the management of resources. Economist Scott Shane in a seminal paper informs readers that high rates of new business formation are indicative of economic sluggishness: “As countries become wealthier the rate at which they create start-ups goes down. Societal wealth leads average wages to go up, which encourages business owners to use machines to replace work that used to be done by hand. As a result, the increased use of capital leads companies to grow in size and hire people who would have otherwise gone into business for themselves.”
Compared to large corporations small businesses are inept at ameliorating the conditions of workers as analysts based at ITIF points out in a recent report:
- Workers in firms with more than 500 employees earn 38 percent more than workers in firms with less than 100.
- Stores with 500 plus employees pay high school educated workers 26 percent more than stores with fewer than 10 employees, and they pay workers with some college education 36 percent more.
- In 2012, workers in goods-producing industries were injured 25 percent less frequently in firms with more than 1,000 employees than they were in firms with 10- 49 employees.
Big firms even offer more lucrative benefits:
- Workers in companies with more than 500 employees receive 85 percent more overtime and bonuses, 2.5 times more paid leave and insurance and 3.9 times more retirement benefits than workers in companies with fewer than 100 employees.
Large firms are resourced to provide an incredible array of benefits due to superior productivity:
- The four largest firms in any industry have an average 37 percent higher productivity and 17 percent higher wages for production workers.
Meanwhile the notion that Americans would be better off if the economy was dominated by small businesses is refuted by data:
- If the United States had the same firm size distribution as Europe which has more small firms then average annual income in America would be $5,200 lower. Shrinking the size of large firms in the United States to match Canada’s firm structure, would decrease U.S. per capita GDP by 3.4 percent.
In short, small businesses are not the pillar of the economy and neither is their performance superior to large corporations. Although the bureaucracy designed to enrich small businesses appears untouchable, the evidence presented should convince us that welfare for small businesses is unwarranted and must be gutted. Research foundations and private incubators can fill the gap created by the exit of government welfare. Funding unsustainable businesses is too costly for taxpayers.
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Scientific Credibility and the File-Drawer Problem
A trope of contemporary social commentary is that “science” has somehow become “politicized,” such that people no longer trust or believe what is presented as the scientific consensus on important social, political, and economic issues. The most salient example until recently was climate change, where various scientific professionals, associations, interest groups, and the like were portrayed as purely disinterested seekers of truth while disfavored outsiders were described as self-interested, ideological, or worse. We saw this in particular on social media where outsiders—often scientifically literate laypeople and technical professionals in adjacent fields, independent researchers, and others who paid careful attention to theory and data—were dismissed as “tech bros,” arrogantly expressing opinions without proper authorization. As I noted a few years ago, this trope ignores the fact that scientific research, education, and communication are social institutions and can be analyzed like any other group of purposeful human actors. Joe Salerno’s 2002 article on the role of resources, ideology, and institutions on the rebirth of the Austrian school is a good example of how to analyze intellectual and social movements from an institutional point of view; Michael Bernstein’s A Perilous Progress does something similar for the economics professional as whole.
The idea of scientists as a priestly caste, criticism of whom constitutes “science denial” or “spreading misinformation,” is of course central to the conventional narrative about covid-19. Many commentators worry that substantial public disagreement on the nature and significance of the covid-19 pandemic and the efficacy of vaccines and mitigation measures such as lockdowns, border closures, masks, and social distancing will contribute to a decline in trust of scientists and even science itself. Indeed, there is evidence that experience with previous epidemics leads to reduced trust in scientists and their work (though not “science” in the abstract).
Little acknowledged in these discussions, however, is the role that scientists themselves, particularly in their public communications, have played in eroding public trust in themselves and their work. Systematic misrepresentation of the scientific evidence on covid-19 and its mitigation measures has been a central feature of news coverage and social media commentary for the last year and a half. Press releases from scientific organizations and government agencies, news reports of scientific papers, and social media posts by prominent scientists continue to focus on statistics such as the number of positive test results without controlling for the number of tests administered, the characteristics of the tested population, and the cycle threshold (sensitivity) for PCR tests; to present highly aggregated measures of infection and spread that obscure the enormously skewed distribution in severity by age and health status; and to ignore context that would allow for comparison across similar locations or among similar diseases over time.
Another problem is the idea that, in addressing a complex public policy issue with a variety of social, cultural, and economic ramifications, only the views of infectious disease epidemiologists (and the personal experiences of healthcare professionals) are relevant in deciding if cities should be locked down, children prevented from attending school, businesses closed, and the like. Issues such as the constitutionality or legality of mitigation measures, what risks people consider reasonable, and how to assess marginal tradeoffs among specific health outcomes and other goals—even the idea of tradeoffs and marginal analysis itself—are considered irrelevant.
More specifically, there is a wide gulf between the scientific evidence on mitigation measures—the so-called nonpharmaceutical interventions or NPIs—and the way this evidence has been described. Back in spring 2020, when these mitigation measures began to be imposed, I did my own minireview of the scientific literature on the effectiveness of NPIs on the spread of infectious diseases, particularly respiratory viruses. I focused on the handful of studies that featured randomized controlled trials or quasi-natural experiments in a real-world setting. The consensus of this precovid literature is that masks, frequent hand washing and hand sanitizing, distancing, and the like had either very small effects or no effect on disease severity or spread. This was at the time that shops, restaurants, schools, and offices were beginning to require masks and social distancing, installing plastic barriers and HEPA filters, adding extra cleaning and sanitizing, and other interventions – presumably on the basis of hard, scientific evidence. But that evidence was lacking. I didn’t see it until later but Slate Star Codex published a review of mask studies that covered many of the same papers and reached the same conclusions I did.
What about now, more than a year into the covid-19 pandemic? Surprisingly, most of the evidence offered by government agencies is based on computer or lab simulations of the movement of particles (or anecdotes). The most highly touted field studies are observational (i.e., there are no treatment and control groups, making it impossible to assign causality). Given that the scientific (and social scientific) establishment has maintained for decades that randomized-controlled trials are the “gold standard” for assigning causality, the absence of RCT evidence on masks and other NPIs is surprising. Here is a recent review of what we know. The majority of the evidence is that masks, distancing, plastic barriers, and the like have played at best a very small role, and most likely no role, in mitigating the spread of covid-19. The evidence is almost entirely at odds with the message presented to the public.
Scientists themselves have played a role in spreading this misinformation, partly via the “file drawer problem” in which experimental results that support the preferred narrative are publicized and promoted, while those that disconfirm the narrative are downplayed or ignored. A good example is a recent, large-scale study conducted by the US Centers for Disease Control on the effectiveness of masks in school. Media outlets and the CDC itself breathlessly touted the finding that mask requirements for unvaccinated teachers, along with improved air circulation, had a small, negative effect on virus transmission in schools. However, the executive summary and virtually all the news accounts neglected to mention that the study also looked at student mask wearing, distancing requirements, hybrid teaching, physical barriers in classroom, and the installation of HEPA filters and found that these had no statistically significant effect on transmission.
As schools (and colleges) around the world are hotly debating mask requirements, the fact that the most comprehensive experimental study to date found that masks have no effect on transmission is completely ignored – because few people know about this finding. (Kudos to David Zweig and New York Magazine for covering the story in a major feature this week: “Over the course of several weeks, I also corresponded with many experts—epidemiologists, infectious disease specialists, an immunologist, pediatricians, and a physician publicly active in matters relating to covid—asking for the best evidence they were aware of that mask requirements on students were effective. Nobody was able to find a data set as robust as the Georgia results [which found no effect]—that is, a large cohort study directly looking at the effects of a mask requirement.”) Among the general population, the most comprehensive, large-N experimental study on masks to date is the Danish RCT which found no effect of mask wearing on transmission—a study that was file drawered in its entirety.
If scientists are concerned about a decrease in public confidence in their work, and the standing of scientific research more generally, they should look not at “Twitter trolls” but at the way scientists themselves have presented their findings and the magnitude and significance of their work. Science is a process of inquiry, not a body of revealed truth, and scientists are participants in the community of exploration, discovery, analysis, and communication, not arbiters of “misinformation.” By positioning themselves as guardians of truth and the only legitimate authority on complex policy issues, certain segments of the scientific community have largely created the very problems they now deplore.
Update: Here is Jacob Sullum making essentially the same points.
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Supreme Court Reforms? Ask America’s First Homegrown Legal Philosopher
President Biden has just appointed a commission to study Supreme Court reform. However, I noticed that no one seems to be talking about reform to mean “re-form to better reflect the Constitution than under current precedents and interpretation,” reflected in the notable paucity of defenders of the Constitution as understood at the time it was adopted. That is why the commission could use some guidance from James Wilson for insight.
James Wilson signed both the Declaration of Independence and the Constitution. Earlier, his Considerations on the Nature and Extent of the Legislative Authority of the British Parliament argued that it had no authority to legislate for the colonies. At the Continental Congress, he was a member of the Committee on Detail, which produced the first draft of the Constitution. He also argued forcefully for ratification of the final version in Pennsylvania. In fact, his October 6, 1787, ratification speech before the Pennsylvania legislature received more coverage than The Federalist.
George Washington appointed Wilson to the first Supreme Court in 1789. Then, in a set of law lectures beginning in 1790, he became America’s first homegrown legal philosopher, spelling out the thinking behind the Constitution and early Supreme Court decisions. He articulated the purpose of government as to secure citizens’ preexisting rights and that the Constitution was crafted to create such a government. Remembering those ideas, now seriously compromised and threatened with further erosion, would be a reform actually likely to benefit Americans.
Wilson clarified our founders’ understanding of law: “The defense of one’s self, justly called the primary law of nature, is not, nor can it be, abrogated by any regulation.” What does each individual’s self-ownership, and right of self-defense that derives from it, mean for government? “All men are by nature equal and free. No one has a right to any authority over another without his consent.”
Wilson spelled out the implications of government consistent with that understanding of law: “The liberty of every member is increased … each gains more by the limitation of the freedom of every other member, than he loses by the limitation of his own. The result is that civil government is necessary to the perfection and happiness of man.” In consequence, government “should be formed to secure and enlarge the exercise of the natural rights of its members; and every government which has not this in view as its principal object is not a government of the legitimate kind.”
Since all must be better protected to expand everyone’s rights and liberties, law had to treat everyone equally. “In the enjoyment of their persons and of their property, the common law protects all.” No one’s liberty could be invaded; no one’s property could be violated. Instead, “private property and personal liberty … will be guarded with firmness and watchfulness.” This is what led America’s founders to agree with Wilson that “without a good government, liberty cannot exist.”
Because good government was considered central to liberty, “A good constitution is the greatest blessing which a society can enjoy.” And because “in this government, liberty shall reign triumphant,” Americans were bequeathed “that system of government which would best promote their freedom and happiness.”
Because some would override our free choices with their dictates, an important consequence follows: “Among the virtues necessary to merit and preserve the advantages of good government [are] a warm and uniform attachment to liberty and to the Constitution,” because “enemies of liberty are artful and insidious…. Against these enemies … the patriot citizen will keep a watchful guard.”
James Wilson was a great American statesman whose words reveal what was truly revolutionary about our experiment in liberty. His discussion of “those principles upon which we ourselves have thought and acted,” which echoed John Locke’s recognition that just government exists for the good of its people, not the other way around, is worth relearning. And just as for other Americans, the Supreme Court Reform Commission would benefit from proposals that recognize, with Wilson, that “without liberty, law loses its nature and its name, and becomes oppression,” because our liberties have grown far scarcer than the Constitution was designed to provide.
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Schumer to America: Help Is on the Way!
Last week, Senator Chuck Schumer reassured us eight times that “help is on the way.” Madame Vice-President and Speaker Nancy Pelosi both reiterated this stance. This should be cause for celebration! As Schumer said:
You will receive your $1,400 checks in a few weeks. Help is on the way. People are being vaccinated more quickly and more effectively than we ever imagined. Help is on the way.
The senator took things one step further, adding:
Half the children in America will no longer be in poverty. And help is on the way.
This was not the first time they’ve suggested poverty almost being irradicated, thanks to the economic jab of the government.
The day prior, during President Biden’s much anticipated address, where he announced the signing of the American Rescue plan, he told the nation:
It extends unemployment benefits. It helps small businesses. It lowers health care premiums for many. It provides food and nutrition, keeps families in their homes, and it will cut child poverty in this country in half, according to the experts.
The experts weren’t named. Perhaps they mean former head of the Fed Janet Yellen, now US Treasury Secretary, considered one of the greatest economic experts of our time. In regards to the stimulus package, she said:
We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing…
Sounds horrible, but she continues:
I think these checks really will provide relief and they’ll help jump-start our economy, giving people money to spend when we can get out again and go back to our former lives.
As for the Fed’s stance? We’ll have to wait, as they remain on media blackout until this Wednesday’s conclusion of the March committee meeting.
Unfortunately, when elected officials resort to claiming help is on the way, they really mean more government intervention and debt creation. The worse things get, the more “help” we apparently require. Unfortunately, the more help the State provides, the worse things inevitably get, in a perpetually vicious cycle.
Yellen provides several figures to show that many American’s are struggling, but nowhere does she show the source, and most assuredly, no one ever accuses the government or central bankers for being the cause.
One would think the monetary experts, who employ countless economists across the nation, would know these checks won’t “jumpstart our economy,” anymore than any other nation has found in increasing its money supply to create economic prosperity, whether it’s Zimbabwe or Japan.
For a very long time we have been indoctrinated into believing that giving money to the people does wonders for the economy, the $1,400 check being the latest in this perpetual train of thought. But it will not be the last. With $1,400, those in need can pay rent, or presumably eat. But they could also use it to buy stocks or cryptocurrency…. Of course, few people ask where this money comes from, what would happen if America’s central bank stopped buying America’s debt, or any other negative consequence of these inflationist policies.
If help is on the way, rest assured, it will not come from the government nor the Federal Reserve. It can only come from social cooperation, individual and voluntary interactions. The problem is that government and central banks represent the exact opposite of social cooperation. Should this be the help society is seeking, then “no,” help is not on the way. And when things inevitably get worse, we’ll be offered even more help.
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Sarah Everard's Murder Exposes a Big Problem with British Policing
In the wake of the brutal murder of Sarah Everard, Boris Johnson’s government has fallen into the twin perils of modern conservatism in relation to policing: heavy-handed police tactics and promises of further spending. With the prime suspect being a police officer in the murder, UK confidence in state policing looks to drop even further than its current low standing.
The first response of the UK government was through the Metropolitan Police to attempt to stop the vigil that had been planned in remembrance of Sarah Everard. Under the guise of covid restrictions, the Met decided to ban even a socially distanced vigil.
When the vigil went ahead anyway, the Met decided to drag mourners away who were trying to place candles. This has caused an unfathomable outrage among ordinary people in the UK, with people at the vigil chanting “arrest your own.”
The government then played a game of pass the parcel, with Cassandra Dick (chief of the London police) saying she would have an inquiry, Priti Patel (the minister responsible for policing across the UK) saying she would look into it and the prime minister adding not much more to the proceedings.
However, it has now come out that the government’s real response is to have more police officers and have them in even more places. Therefore, not only does this serve as a massive insult to the memory of Sarah Everard, but at the same time it curbs civil liberties, increases the police force and places them in an increased position of power after a policeman was shown to have abused this power.
Remember that Boris was once hailed as a libertarian, but piece by piece, from military spending to what people eat, he has eroded this image to show us that he is nothing more than the same old authoritarian politician we have had for years.
If there was a true libertarian in No 10 Downing Street, their response would be something more like the following:
Firstly, the vigil should have been allowed to proceed as normal. Not curbing civil liberties at such a sensitive time, for such a small amount of people, would have been the sensible thing to do.
Secondly, in the wake of this murder, increased rigor in selecting police officers should have been introduced. As one of the most important jobs in any community, it’s essential that we have the best and brightest applicants on the force.
Thirdly, the ridiculous laws governing equipment for personal protection should be relaxed, and if the government wanted to spend money, maybe community-supported self-defence classes for young women would have been more appropriate than dragging innocent people off the street.
Women (and men) in the UK at the moment are in a precarious and dangerous position; few crimes are dealt with to the satisfaction of the victims but no real solution is ever posited. As I have discussed before, deregulation is now necessary to deal with this epidemic of crime.
The UK government needs to wake up to the fact that they are barely dealing with 10 percent of all reported crimes and that serious crimes are on the rise. The state-enforced lockdown has exacerbated this situation and ordinary working- and middle-class people are suffering daily because of it.
This needs to change and fast so that people can feel confident in the police force and safe on their streets and in their homes.
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State Legislators Are Considering a Host of New Sound-Money Reforms
Listen to the Audio Mises Wire version of this article.
More state lawmakers than ever are introducing sound money legislation in the opening days of the 2021 legislative session.
Several states will consider measures to remove sales or general excise taxes on the purchase of gold, silver, and other precious metals.
Many other states will weigh bills to eliminate income taxes on gold and silver.
Still others will decide whether state funds can be held in physical gold and silver—and may even consider establishing a state-chartered bullion depository.
With debt-funded spending and money printing in our nation’s capital at breakneck speed, will states see the wisdom of enacting measures to counteract these policies of currency debasement?
Here’s a rundown of the newly introduced state legislation:
In Mississippi, House Bill 375, sponsored by Representatives Henry Zuber and Brady Williamson, and House Bill 978, sponsored by Representative Joel Bomgar, include language to exempt precious metals from sales taxes.
Two of Mississippi’s neighbors, Alabama and Louisiana, have already exempted precious metals from sales taxes—so the Magnolia State will continue to be at a competitive disadvantage if it maintains its current policy of taxing real money.
South Carolina’s representative Stewart Jones just introduced three sound-money measures. House Bill 3378 excludes from gross income any net capital gain derived from the exchange of precious metal bullion. And Jones’s House Joint Resolution 3379 would create a committee to explore the feasibility of a state-chartered metals depository. Finally, Jones has put forward House Bill 3377, which reaffirms that gold and silver are money.
Building on prior efforts to make precious metals purchases tax-free, Tennessee senator Rusty Crowe introduced Senate Bill 251. Meanwhile, Tennessee representative Bud Hulsey and Senator Paul Rose introduced House Bill 353 and Senate Bill 279, respectively. These bills would create a study commission regarding a gold depository for the Volunteer State and a report of findings to the state senate and house of representatives.
In Arkansas, a measure that would eliminate the sales tax on precious metals purchases has been submitted for introduction by Representative Delia Haak, Representative Robin Lundstrum, and Senator Mark Johnson. Senator Johnson introduced a similar measure in 2019.
In Alabama, Representative Andrew Sorrell will reintroduce a measure to remove income taxes from gold and silver. While Alabama enacted a precious metals sales tax exemption in 2018, the original bill sponsor, Senator Tim Melson, plans to introduce a bill this year to clear up some ambiguity in the 2018 language and to push out a sunset provision for another five years.
Way to the west, Representatives Val Okimoto and Dale Kobayashi in Hawaii have introduced House Bill 1184, a measure to exempt precious metals from Hawaii’s general excise tax.
And Idaho representative Ron Nate and Senator Steven Vick have put forward House Bill 7 to permit the state treasurer to hold a portion of state funds in physical gold and silver. Idaho hopes to join Ohio and Texas as one of the few states to make such a move to secure state assets against the risks of inflation and financial turmoil and/or to achieve capital gains as measured in Federal Reserve notes.
Washington State removed sales taxes against sound money decades ago, but a lawmaker hopes to take it a step further. House Bill 1417, introduced by Representative Rob Chase and cosponsored by Representative Bob McCaslin, seeks to eliminate all Evergreen State taxes on the only form of money mentioned in the US Constitution.
Sound money forces could face some defensive battles in 2021 as well.
Fortunately, there are now thirty-nine states that have removed some or all sales taxes on precious metals. But during the shortened 2020 session, revenue-hungry politicians in Maryland, Pennsylvania, and Washington State tried to buck the trend and repeal those sales tax exemptions.
All three of these recent attempts to reinstate taxes on the monetary metals have been defeated, but taxpayers should be wary of their return.
By communicating with lawmakers, providing testimony, and igniting a vocal grassroots response, the Sound Money Defense League and its allies continue to make the case for sound money and to defend the existence of current sound-money policies.
Massive debt-financed government spending in response to covid-19 has reemphasized the importance of sound money.
As state legislatures and Congress consider actions in the face of a global pandemic and an unprecedented economic meltdown, they would be wise to remove the disincentives that stand in the way of protecting citizens and their states with sound, constitutional money.
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Social Media Is an Obstacle to Civilization
On January 5, Variety published an article about an interview between Rowan Atkinson, the actor behind the “Mr. Bean” character, and the British outlet Radio Times. In the midst of the lengthy interview, which saw Atkinson discuss a host of different topics pertaining to his role, a brief and personal opinion was given about the dangers to free discussion and civil discourse that social media may induce:
“The problem we have online is that an algorithm decides what we want to see, which ends up creating a simplistic, binary view of society. It becomes a case of either you’re with us or against us. And if you’re against us, you deserve to be ‘canceled.’”
As expected, of all the substantive topics that Atkinson would go on to discuss in greater detail, it would be this relatively short dialogue that grasped the attention of many on social media. In fact, the tweet from Variety advertising the article received over a thousand replies. Responses ranged from stating that social media provides a justice-driven “accountability culture,” to people downplaying it as a myth, to some saying that social media profiles are exposed to a wide range of opinions, but that “most of those opinions suck.”
The truth, however, is far from the contradicting excuses offered by the masses of Twitter; and the implications of this truth are dangerous to the notion of free speech and the necessity it poses.
The Problem with Social Media
Firstly, it is true that every social media platform utilizes an algorithm to customize the user’s “feed” with content they enjoy. The problem with this lies in not necessarily that the social media platform may be biased, but that the math employed in every user’s experience delivers solely content they agree with, whether it be the profiles and accounts they follow or the recommended posts that meet the standards of the user’s liking.
From the “explore” page of Instagram to the recommended videos on YouTube, the services we’re increasingly using in our daily lives are solely reaffirming our beliefs while actively preventing opposing ones from coming to our attention. By only being exposed to one viewpoint, the effects of free discussion’s absence are evident: the allowance of misinformation, the incentives for intolerance, and the suspension of progress.
The Growth of Misinformation
By allowing opinions to go uncontested and incontrovertible, being welcomed by a presupposed audience that already agrees with it, there’s no source of pushback that may debunk or at least challenge such a claim.
Given that the opinion is received by a group of users already in agreement with it, it’s most likely that such an audience won’t commit to the same intellectual rigor of its certification if it were to be received by a group in disagreement with it. The audience will want to accept it as truth, and do so.
Every ideology and school of thought has a means through which the world is viewed and events are judged. The adherence to solely one likely negates important viewpoints in others. If only one is consulted, an almost certainly misleading or downright fallacious opinion is engendered. Without any opposition, this incorrect view persists unchallenged, and as we’ll see later, grows into resentment. In the absence of free exchange and a diversity of thought, flawed and defective opinions may be pushed which are otherwise easily refutable or debunkable by opposing ideologies. As John Stuart Mill writes:
“There is the greatest difference between presuming an opinion to be true, because, with every opportunity for contesting it, it has not been refuted, and assuming its truth for the purpose of not permitting its refutation.”
An opinion is true if it withstands every challenge or refutation made to it. In an online setting where users can limit their audience, block accounts, and protect comment sections, which extends to most platforms, the marketplace of ideas where truth is determined is substituted for the enclosed rally of participants around an opinion treated dogmatically.
The Grounds for Intolerance
In the absence of the exposure to a given opinion, a resentment of such an opinion or its author may grow. If the only sources consulted and ideas entertained are the ones that are already agreed with, sheer ignorance conflicts with the reality of the opposition.
Discussion only amongst those in agreement has an inherent tendency to corrupt. Devoid of any challenge, such opinions held in unanimity will be treated as a dogma, an irrefutable idea whose deviation from is intolerable. This is far more likely to occur than many are willing to recognize. When the people you surround yourself with are all passionately ascertained with a given idea, such an environment necessarily grows a prejudice for those who disagree.
Worse yet, the homogenous dialogue of a particular idea may be symptomatic of the first issue, if the ideas of the opposition were to be mistaken by the group. This “straw man,” unable to be corrected, could easily lead to passionate disdain if misinterpreted to a certain extreme.
Regardless, if much of one’s daily or online exposure is exclusively to a group of people with a set of common opinions, people without such opinions may be seen as mysterious and threatful, with a lack of subjection to them or their opinions undermining their entitlement to one.
This is what Atkinson alludes to when saying, “It becomes a case of either you’re with us or against us. And if you’re against us, you deserve to be ‘canceled.” Social media allows us to surround ourselves with agreement, which further alienates those who disagree. Without anyone representing the opposite opinion to defend themselves, a single point of view is compounded, and as it further summates without any refutation, those who may disagree appear to be much more villainous and impersonal than they likely are. The more passionate or ubiquitous an opinion is, the less likely that those that adhere to their own beliefs and happen to disagree are tolerated. It’s a matter of human nature.
The Obstruction of Progress
Alongside the free discussion of differing ideas, no matter how popular or unpopular these given ideas may be, the end product is ultimately progress. This is because as different conceptions and opinions are exchanged and debated, it’s more often than not that the truer ones are uncovered.
This is similar to the first consequence, in that misinformation grows. Whereas fallacies emerge when only a single idea is preached, the truth emerges when many ideas are debated. This is no accident. Recall that an opinion is true if it withstands every counterargument and refutation; in fact, it’s the only way of certifying its truth. Therefore, the only way to determine what is objectively true in any number of issues is to allow the freedom of discussion and debate in the first place.
Furthermore, the “truth” doesn’t have to be some scientific fact or physical observation that we normally associate with the word. In this regard, it more often than not means a “moral truth,” a notion or belief that society rigorously holds on to. Some of the most unpopular opinions of their times would become these moral truths. The notions of classical liberalism; ideals we now think of as necessities such as liberty, equality, and democracy, were considered radical and saw little support for most of mankind’s history.
The free market economy, and along with it the principles of voluntary cooperation and free trade, found its roots in the mightily unpopular movements of peasants to cities, ditching the centuries-long order of feudalism. Society progresses when these would-be moral truths are granted the environment to be debated. Over time, unpopular opinions are tested and, if they prove applicable to the state of man or society, and if they withstand every challenge to it, are embraced.
If we consider progress as the discovery of truth, then it can only be through the tolerance of many viewpoints and exchange of many ideas that such progress can be obtained.
The Threats of Social Media
The culture and way of life enabled by social media platforms has come into direct conflict with the principles of free discussion, embarking on a path of dogmatic ideals and misinformed users.
Algorithms are coded that effectuate an echo chamber of unfollowed posts and users nevertheless in agreement with the profile, enabling hours in content of further reaffirmation. The user holds the ability to restrict who sees their profile, content, and is allowed to respond to it, creating the aforementioned homogeneous discussions and communities multifariously adorning platforms.
Other users can be blocked; blotted out of existence with their content and beliefs, and along with it their access to the blocker’s content and beliefs, restricted from sight, sparring any inconvenience found in viewing such content. What these tools of social media enable is a culture where the user is constantly right and the opposition constantly wrong. Where every tap, click, and like validates what’s already believed in while ostracizing what’s already refuted.
It’s a culture of self-affirmation and vindication, of an insulated access to the wide array of intellectual opinions for the sake of the amplification of clung-to beliefs. To the detriment of the occupants of such insulated spaces, those in outspoken disagreement must be careful or else they’ll be “cancelled,” the consequence of negating one of the occupants’ many dogmatic and irrevocable ideals.
There’s an unprecedented supply of misinformation; no one is there to refute it. There’s been scarce a time of greater polarization and divisiveness; the direct result of people choosing to expose themselves only to the conveniences found in agreement. Society seems to be regressing, not improving; because opinions go unchallenged, with divisiveness around different truths replacing unity around fundamental beliefs.
Although not much can be done to assuage this societal retroversion, the largest impact must come individually. For the sake of the furtherance of truth, tolerance, and progress; have a discussion with that friend or family member you disagree with. Read a post or article about the other side of the issue. Choose to respectfully engage the opposing viewpoint that may be nagging you. Most importantly, use sparingly the many tools social media offers to limit free expression.
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Snowden and Assange: There Is Still Time for Trump to Do the Right Thing
It is amazing to me that President Trump has pardoned some people whom he considered heroic while continuing to leave Julian Assange and Edward Snowden, two genuine heroes, in the lurch. Assange, of course, is getting the worst of it, given the brutal conditions under which US and British officials have incarcerated him in England. But it still can’t be a bundle of joy for Snowden to be living in Russia, given the societal jail-like environment that comes with living under the Russian regime.
Consider Trump’s pardons of two former Border Patrol agents, Ignacio Ramos and José Compeán. They were chasing an undocumented immigrant who was fleeing back to Mexico. The best account of what happened was detailed in a Texas Monthly article entitled “Badges of Dishonor.”
When the immigrant, Osvaldo Aldrete Dávila, held his hands up and tried to surrender, Compeán swung at him with the butt of his gun. Aldrete Dávila then ran and both agents began firing at him. A bullet hit him in the buttock but he was able to make it back to Mexico.
The two agents then did their best to cover up their actions. They retrieved their shell casings and threw them into a ditch. When later investigated, they said that they had seen a shiny object in the victim’s hand and thought it was a gun. In their later criminal prosecution for assault, a federal jury concluded they were lying and convicted them.
One of the first things I learned as a kid from watching westerns on television was that you never shoot someone in the back. Doing that is about as cowardly and shameful as you can get.
But not according to Trump as well as a coterie of his conservative cohorts, They consider Ramos and Compeán to be real heroes for “defending our border.” They point out that Aldrete Dávila’s vehicle contained seven hundred pounds of marijuana, as if furnishing pot to Americans who wish to smoke it is some sort of horrible offense. Never mind, also, that at the time they were firing their guns at Aldrete Dávila’s back they didn’t know about the pot.
Trump also pardoned another former Border Patrol agent, a man named Gary Brugman. He got convicted for brutally assaulting undocumented immigrants after they were already in captivity and behaving peacefully.
Trump also pardoned Joe Arpaio, the anti-immigrant, crusading former Arizona sheriff who was convicted of contempt for refusing to comply with a court order to cease racial profiling.
He also pardoned Blackwater personnel who were convicted of killing innocent Iraqis.
Now compare those people to Assange and Snowden, two men who have risked their lives, liberty, and well-being to disclose the truth about evil and immoral actions of the US national security establishment. That’s why the Pentagon, the CIA, and the NSA are going after them with vengeance—because they told the truth about the US government.
Will Trump pardon these two genuine heroes? He might yet surprise me, but I doubt it because we can see from the people he has already pardoned that his values are warped and perverted. But he still has two weeks in which to do one right thing before he exits the White House.
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Swiss National Bank Q3 2020: $128 Billion in US Equities
Will Switzerland become the next country to be labeled a currency manipulator?
The definition of “currency manipulator” has been laid out by the Treasury and explained by the Council on Foreign Relations (CFR) below. It requires the following three criteria to be met:
- a trade surplus with the United States of more than $20 billion
- a current account surplus (the current account is a broader measure of trade that includes foreign debt payments and investment income but is usually close to a country’s overall trade balance) of more than 2 percent of the economy’s gross domestic product (GDP)
- intervention—government purchases of dollars in the foreign exchange market—of over 2 percent of the economy’s GDP, with purchases of foreign exchange in six of the last twelve months
A driving factor behind this designation is to crack down on those nations that supposedly get an unfair trade advantage through currency devaluation, the belief being that a weaker currency is good for exports.
The Swiss National Bank’s (SNB) Q&A on asset management states:
In order to implement its monetary policy, the SNB carries out monetary policy operations which affect the size and composition of its balance sheet. The assets side of the SNB's balance sheet is primarily composed of the currency reserves….The foreign exchange reserves consist of bonds, equities and investments at central banks.
On Friday, Reuters said that the US will report on currency manipulation in the coming weeks. Switzerland could now be classified as a currency manipulator due to finally meeting the “2% of GDP of net FX purchases” requirement. If so, it could face retaliatory intervention by the US such as import tariffs, as China experienced when it was labeled a currency manipulator. Per the news release, the SNB defends itself citing:
Officials have said in the past that interventions are aimed at limiting the appreciation of an “overvalued” currency, rather than at deliberate devaluation to help exporters.
The Swiss steadfastly maintain that their currency intervention has nothing to do with trying to get an unfair trade advantage. Rather, it’s to help manage the exchange rate of the Swiss franc as part of their monetary policies. Of course, what the “correct” value of the franc should be and what the purpose of wanting to devalue a currency, if not for a trade advantage, remains unclear.
Even if the SNB is not trying to devalue the currency for an export advantage, but because they truly believe the currency is overvalued, they might try to hold the franc down this way, also explained by the CFR:
They do this by selling their own currencies and purchasing dollar bonds or other foreign assets. The result is large holdings of foreign assets in central banks or sovereign wealth funds (SWFs).
The issue becomes what to do with all those dollars. Perhaps the SNB can engage in various currency trades or simply hold US dollars. But why hold billions of dollars at today’s low rates when a central bank could put that money to work?
In the case of Switzerland’s central bank, their latest quarterly 13F filing showed a market value of nearly $128 billion in US equities, an increase of $10 billion from the previous quarter. Their largest holding remains Apple, in which the foreign central bank owns an astounding $7.8 billion worth of stock! Having one of the largest portfolios on the planet is an impressive feat. And while having this large an equity holding doesn’t qualify the SNB as a currency manipulator, are its assets not the result of a currency manipulation?
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