Power & Market
In his ABC interview last Sunday, former FBI chief James Comey boasted endlessly of his devotion to truth, which he said “has to be central to our lives.” Touting his role in bringing down Martha Stewart, he declared, “The truth matters in the criminal justice system.” But, when he was FBI boss from 2013 to 2017, his agency duped the American public whenever convenient.
In 2014, Comey declared that “We do use deception at times to catch crooks, but we are acting responsibly and legally.” His comment was spurred by revelations that an FBI agent had masqueraded as an Associated Press reporter and fabricated an AP story. The Associated Press complained that the FBI’s tactics undermined “the vital distinction between the government and the press," while the Reporters Committee for Freedom of the Press protested that the ruse “creates the appearance that it is not independent of the government.” But Comey declared the technique was “proper and appropriate,” allowing such scams to continue.
The AP charade was chump change compared to the FBI’s next media flim-flam. After a high-profile confrontation between federal agents and Nevadan ranchers in 2014, the FBI created a bogus independent film crew that spent almost a year hounding the Cliven Bundy family and their supporters, taping their comments to propel federal charges against them. The feds eventually arrested and prosecuted Bundy family members.
This past January, federal judge Gloria Navarro dismissed all charges, denouncing “flagrant” and “reckless” misconduct by federal prosecutors. The FBI was exposed for lying for more than three years regarding its deployment of sniper teams around the Bundys’ ranch prior to the Bundys summoning supporters to protect them.
The Justice Department inspector general last month exposed Comey’s arguably deceitful tactics regarding his campaign to outlaw private encryption, which he perennially portrayed as a grave peril to public safety. After a Muslim couple gunned down 14 people in San Bernardino, Calif., the FBI invoked a 1789 law to sway a federal judge to order Apple to write anti-encryption software that would hand the FBI the keys to break into the terrorist’s iPhone (and all other iPhones).
Read the rest at The Hill
When lampooning the various arguments for trade barriers, Murray Rothbard would like to try to use the arguments offered against foreign trade to trade between states themselves.
As he wrote in Making Economic Sense:
The best way to look at tariffs or import quotas or other protectionist restraints is to forget about political boundaries. Political boundaries of nations may be important for other reasons, but they have no economic meaning whatever. Suppose, for example, that each of the United States were a separate nation. Then we would hear a lot of protectionist bellyaching that we are now fortunately spared. Think of the howls by high-priced New York or Rhode Island textile manufacturers who would then be complaining about the "unfair," "cheap labor" competition from various low-type "foreigners" from Tennessee or North Carolina, or vice versa.
Fortunately, the absurdity of worrying about the balance of payments is made evident by focusing on interstate trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances.
If we think about it, it is clear that a call by New York firms for a tariff against North Carolina is a pure rip-off of New York (as well as North Carolina) consumers, a naked grab for coerced special privilege by less-efficient business firms. If the 50 states were separate nations, the protectionists would then be able to use the trappings of patriotism, and distrust of foreigners, to camouflage and get away with their looting the consumers of their own region.
Unfortunately such "absurdity" has been ruled to be the law of the land in Canada. As the National Post reports:
After a legal battle fought all the way to Canada’s highest court, a New Brunswick man’s quest to be able to buy slightly cheaper alcohol in a neighbouring province has failed.
In a unanimous decision handed down Thursday, the Supreme Court of Canada ruled provincial trade barriers are constitutional as long as they’re aimed at a valid purpose within the province’s jurisdiction, with only an incidental effect on trade. Canada’s constitution simply “does not impose absolute free trade across Canada,” it declared....
On its face, the case was about booze. But had the challenge been successful, the precedent could have struck down a massive swath of provincial trade barriers, from agricultural supply management to e-commerce to environmental controls. Crown attorneys from every province had lined up at the Supreme Court to argue against the challenge, with the federal government siding with them.
The ruling declared that allowing “full economic integration” within Canada would “significantly undermine the shape of Canadian federalism, which is built upon regional diversity within a single nation.” Federalism means there must be “space to each province to regulate the economy in a manner that reflects local concerns,” the court ruled.
As Maxime Bernier, a Conservative Member of Parliament and a student of Austrian economics noted, "Sad day for defenders of economic freedom in Canada."
Prior to the 2016 election, Ryan McMaken noted that history shows the fastest way to increase government spending is to vote Republican:
[F]or decades, we've been told that a vote for the GOP is a vote for "smaller government." This is repeated both by Republicans, who say it like it's a good thing, and by Democrats who still seem to think that the GOP is committed to cutting grandma's safety net.
If we look at federal spending, though, it's easy to see that the myth of the budget-cutting Republican president is just that: a myth.
As such, it's no surprise that projections for the US deficit has now ballooned to over $1 Trillion two years sooner than previously estimated.
The U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases signed by President Donald Trump do little to boost long-term economic growth, according to the Congressional Budget Office.
Spending will exceed revenue by $804 billion in the fiscal year through September, jumping from a projected $563 billion shortfall forecast in June, the non-partisan arm of Congress said in a report Monday. In fiscal 2019, the deficit will reach $981 billion, compared with an earlier projection of $689 billion.
The nation’s budget gap was only set to surpass the trillion-dollar level in fiscal 2022 under CBO’s report last June.
Of course many pundits and Democrats in Washington are going to direct the blame to Republican tax cuts passed year - the one really good policy we've seen from Congress.
Naturally anyone familiar with the CBO would be justified in questioning the accuracy of their work (these estimates, for example, include projecting interest rates of 4% by 2021 - higher than the Fed's own projections.) In this case, however, increased deficits were inevitable given that the Trump Administration has allowed Republicans in Congress the cover they've needed to finally act on bipartisan hostility to the sequestration caps on the Federal budget. The GOP has managed to get increases in military spending that are larger than Russia's entire defense budget, while Democrats have been able to receive funding for all sorts of projects that the GOP would have objected to if Obama was still in office.
Now the proper reaction to these new fiscal concerns should be for both sides of the isle to get serious about spending. What we will instead see are new calls to increase revenue - perhaps by increasing taxes that are easier to hide than the income tax - and renewed calls to abolish the debt ceilings.
At the end of the day though, this news really should simply be seen as another reminder that US default is just a matter of how, not if.
The hubbub over the Trump administration’s proposal to ask respondents about citizenship in the 2020 Census is mystifying because the response is so far out of proportion to the White House’s request. But the dispute is obscuring a much greater peril that the Census Bureau poses to Americans.
Recommended: The Census and Despotism by Lew Rockwell
Former Attorney General Eric Holder denounced adding a citizenship question to the Census questionnaire as “motivated purely by politics.” By contrast, the Obama administration’s push to expand the Census to ask if respondents were gay, lesbian, bisexual, or transgender was non-political, right? Holder declaimed that the citizenship question “is a direct attack on our representative democracy.” But how can representative democracy be subverted by getting an accurate count of people who may be ineligible to vote?
From 1890 through 2000 (excluding the 1960 Census), the long version of the Census form asked about citizenship status, as the Census’s American Community Survey, received by around 3.5 million households each year, currently does. At what point did inquiries about citizenship become the moral equivalent of a “direct attack” on our country?...
Recommended: Don’t Want a Muslim Registry? Abolish the Census by Alice Salles
But the Census Bureau has a long history of betraying respondents. In the early 1940s, the Census brazenly violated federal law by providing key information on 120,000 Japanese Americans so that the Army could round them up for internment camps. The detentions were among the worst civil liberties violations in modern U.S. history.
For more than 60 years, the Census lied about its role in this debacle, even boasting that it had done nothing to betray people who were wrongfully corralled.
Read the full article at The Hill
It was great to have C.Jay Engel join us for this years AERC.
At AustroLibertarian.com he has written about his experiences at the conference.
One of the keynote lectures at the 2018 AERC event was given by the immensely interesting Richard Ebeling who gave a talk relating to his once-in-a-lifetime opportunity to visit Moscow to work through the Mises papers and notes that had been stolen by the Nazis when they raided Mises’ Vienna apartment. (My wife and I were lucky enough to visit the apartment in 2013 when we visited Austria.) Ebeling tells the tale of a Mises who, despite very real political odds set against him as an opponent of the rising tide of Economic Planning in the world of growing Nazism, continued with tremendous output. And not only was there an impressive quantity to this output, there was also a perhaps even more impressive quality.
For Mises truly lived up to the motto of his family crest, that one should never give in to evil. The principles held firm in the mind of Mises were of great worth. And not even the threat of academic neglect, of unpopularity, of certain death if he stayed in Austria– not even these could stay Mises’ pen. This commitment to the discovery and advancement of truth is why the Mises Institute exists today. And I am grateful that I get to involve myself more and more in the their efforts to stand as an intellectual bulwark against statism in our time. The Mises Institute is a wonderful testament to the achievements that can be made by sticking to principle and repudiating the economic, political, and social trends of the age.
It is common practice in DC for politicians to stuff spending bills with all sorts of additional bad legislation — the policy equivalent of being overcharged for a meal that gives you food poisoning. This week's vote is no exception.
As Axios and others have reported, Congressional leadership has included the “Fix NICS” bill into the package. The legislation gives new funding and power to Federal agencies to add on to the national background check registry. As Thomas Massie and other pro-2nd Amendment advocates have noted, it is precisely these sort of registries that have been used in the past to limit American gun ownership rights without due process. As Jose Niño noted on the Wire this week, this is part of a long time trend of governments using "mental health" designations to disenfranchise citizens. (This week is one of several particularly concerning aspects of recent legislation passed in Florida.)
Of course these concerns pre-date the most recent gun control debate, as I noted when the bill came up last December:
While Republicans and supporters of the NRA may not fear the Trump Administration coming after their guns, it is obviously reckless to grant additional power and resources to future administrative states that may be quite hostile to the right to gun ownership. To put it simply, there is never a good reason to give Federal agencies the power the revoke an individual's ability to lawfully purchase a weapon without due process.
Further, if one needed an example of how dangerous it is to centralize gun legislation in Washington DC, look no further to what gun owners in states like Ohio and Hawaii are currently facing. Both states, having recently legalized the use of medical marijuana, have placed those who need it with the choice of either owning a gun or receiving life-improving medicine.
In 2011, the Federal government sent a letter to licensed gun dealers reiterating that marijuana users were prohibited from owning a gun — even if it they have a medical prescription. The 9th U.S. Circuit Court of Appeals upheld this decision last year. Hawaii, which requires gun registration, has gone as far as to sending letters to permitted gun owners with marijuana prescriptions requiring they turn over their weapon. While the state is currently asking for “voluntary cooperation,” it could be a matter of time before it turns into compulsory compliance.
At that time the NRA tried to sell this legislation as a way of helping promote a national concealed carry reciprocity law (which is also not a great idea.) That legislation is not included in this spending bill, and yet the NRA continues to oddly find itself promoting legislation sponsored by Diane Feinstein.
Last month, I noted how Colorado's Congressional delegation was incensed at Jeff Sessions' posturing on the drug war and his efforts to override Colorado's constitutional measures against marijuana prohibition in the state.
Both Republicans and Democrats from Colorado condemned Sessions, and this should surprise no one. Marijuana legalization would never have passed in the first place without significant amounts — even majority support — from a number of Republican counties.
Even rural Colorado is far from the sort of Bible Belt politics that impels Jeff Sessions to blithely call for federal meddling in the daily lives of private citizens. More inclined toward libertarian leave-me-alone politics, Colorado Republicans are (slightly) less likely to go running to the federal government to manage their personal habits than in some other parts of the country.
On the matter of marijuana, rejecting federal marijuana prohibitions has now become widespread in Colorado in both parties where a good economy and relatively low crime rates are not exactly driving voters to call for a repeal of the the legalization measures a majority of them voted for in 2012.
So, it's not shocking to see yet another Colorado legislator join the anti-Sessions pile-on. The latest addition is this op-ed by Colorado Springs Republican Owen Hill who writes:
I have taken oaths to uphold the constitution as both a commissioned military officer and a state senator. Our state constitution clearly provides that marijuana, both recreational and medical, is legal by a popular vote of the citizens of Colorado. The US constitution also clearly states in the 10th amendment that any powers not expressly granted to the federal government are reserved to the states.
While some will wrongly argue that the supremacy clause or the commerce clause give the federal government the authority to meddle in our local issues, I side with conservative Supreme Court Justice Clarence Thomas: That if Congress can regulate this under the Commerce Clause, then it can regulate virtually anything — and the federal government is no longer one of limited and enumerated powers.
He goes on to say: “Whether Congress aims at the possession of drugs, guns, or any number of other items, it may continue to appropria[te] state police powers under the guise of regulating commerce.”
There are a couple of things to note here. Hill is from Colorado Springs which is the most right-wing part of Colorado, and is home to mega churches and military bases. It's about as Republican as you can get. Given the tone of his op-ed, however, it's clear Hill doesn't exactly fear blowback from his strident opposition to Sessions.
Secondly, Hill's defense of state autonomy using the Tenth Amendment is especially laudable and is the sort of thing we should routinely hear from state legislators.
Hill is right, of course, that there is nothing at all in the US Constitution autorizing federal control of substances like marijuana. It's simply not in there, and any claim of federal "supremacy" in this matter conveniently ignores the Bill if Rights.
For pragmatic reasons, Hill supports federal legislation making it clear that the federal government will leave states alone when they legalize marijuana. It is also clear from his argument, however, that such federal legislation isn't actually necessary. Federal prohibitions on drugs that void valid state laws are simply unconstitutional, whether there's any federal statute recognizing this fact, or not.
Today on The Tom Woods Show, Chris Calton joined Tom to discuss one of the most fascinating characters in American history, Lysander Spooner.
Chris and Tom look at how Spooner evolved as a thinker, and in particular his view on the Constitution. They also talk about the podcast Historical Controversies and the war on drugs.
A day after Bill Gross called bonds a bear market, reports are out that the Chinese government is considering slowing our halting US Treasury purchases. While it's easy to connect the dots between this potential change and anti-trade rhetoric from President Trump - which, to date, has thankfully been more bark than bite - the larger issue is central banks are slowly backing away from policies that have inflated bond markets. It's a good time to re-vist an article by Thornton Polleit titled "The Super Bubble Is in Trouble":
First and foremost, the US economy appears to be addicted to cheap money. The latest economic recovery has been orchestrated, in particular, through a hefty dose of easy monetary policy. It is therefore fair to assume that market agents will have a hard time coping with higher interest rates. For instance, corporations, consumers, and mortgage borrowers, in general, will face higher credit costs and a less favorable access to funding if and when interest rates edge higher.
In particular, higher interest rates could send the inflated prices of stocks, bonds, and housing southward. For instance, expected future cash flows would be discounted at a higher interest rate, deflating their present values and thus market prices. The deflation of asset markets would hit borrowers hard: Their asset values would nosedive, while nominal debt would remain unchanged so that equity capital is wiped out — a scenario most investors might assume to be undesirable from the viewpoint of central banks.
Moreover, the yield curve has become flatter and flatter in recent years. This, in turn, suggests that banks' profit opportunities from lending have been shrinking, potentially dampening the inflow of new credit into the economic system. A further decline of the yield spread could bring real trouble: In the past, a flat or even inverted yield curve has been accompanied by a significant economic downturn or even a stock market crash.
That said, investors might expect that central banks find it hard to bring interest rates back up, especially back to a level where real interest rates are positive. This holds true for the Fed as well as for all other central banks, including the ECB. This is because the monetary policy of increasing borrowing rates by a significant margin would most likely prick the “Super-Bubble” which has been inflated and nurtured by central banks’ monetary policies over the last decades.
However, it wouldn’t be surprising if, again, central banks, the monopolist producers of fiat money, turn out to be the major course of trouble. After many years of exceptionally low interest rates, central banks may well underestimate the disruptive consequences an increase in borrowing rates has on growth, employment, and the entire fiat money system. In any case, the artificial boom created by central banks must at some point turn into bust, as the Austrian business cycle theory informs us.
The boom turns into bust either by central banks taking away the punchbowl of low interest rates and generous liquidity generation; or the commercial banks, in view of financially overstretched borrowers, stop extending credit; or ever greater quantities of fiat money need be issued by central banks to keep the boom going, inflating prices so that ultimately people start fleeing out of cash. In such an extreme case, the demand for money collapses, and then a Super-Super-Bubble pops.
As Troy Vincent, a market analyst and Mises Wire contributed, offered an additional note this morning on Facebook:
The fact that Bitcoin didn't get bid up in response to this news, while treasury yields and physical gold did, is pretty interesting.
Congratulations to former Mises Research Fellow Karl-Friedrich Israel for successfully defending his thesis at the University of Angers in France.
Dr. Israel's academic research has largely focused on monetary policy, monetary theory, and the history of macroeconomics.
At AERC in 2016, he presented a fascinating paper on the history of econometrics and how the concept has changed over the years. In it he highlights that the originator of the term, Pawel Ciompa, considered it a way of illustrating accounting, as a opposed to a means of developing economic theory. The paper can be read on the University of Angers website.
Dr. Israel has also written several articles for the Mises Wire, including:
He has joined Jeff Deist twice on Mises Weekends: