Power & Market

Deregulate the Policing Market

Priti Patel (the UK secretary of state, akin to the US’s attorney general but with a much wider purview) has been recently considering new laws to tackle a spate of dog thefts across the country. The crime wave has been spurred by lockdown measures, with many people desiring “covid pets.”

This increase in demand for pets, especially dogs and puppies, has led to an increase in prices, with some puppies now costing as much as £1,883. Most Austrian economists will not be surprised that the “the bureaucracy is expanding to meet the needs of the expanding bureaucracy” but where a problem is presented that seemingly needs a solution, what else is to be done?

In this case it’s existing regulation (prelockdown) that is causing the most major problems for this not to be a state issue. It's about crime and how it pays. According to the most recent data (as of July 2019), only 7.8 percent of all reported crimes in England and Wales end in a conviction.

The usual calls when this happens are for more police to be dropped on the streets, as if this were some God Simulator computer game where spawning enough units eventually gets the job done while the economy shuffles on certis paribus. But this is the real world, and the economic constraints of resources, funding, training times, and acquiring competent applicants exist.

So what is the alternative? Deregulate the policing market. Why should we leave a government monopolist police to concentrate on petty theft and dog napping when rape convictions are at their lowest point ever? Private police forces already exist in the UK, mostly in response to state budget cuts (another argument against monopoly is that the state’s ability to “giveth and taketh away” on a whim often does not correspond to local demand).

However, the role of private police forces needs to have the support of the home secretary in regard to jurisdiction. This became the issue with the port authorities (who have had private police in the UK since the 1840s). Delivering criminals from the port to custody meant breaching a “mile radius” zone of jurisdiction and so making it illegal to bring a criminal to justice! Luckily the powers of the constable were increased to ensure this was legal.

Private policing, being nothing new, adds a whole host of benefits to the area of policing as well, including increased conviction rates and reduced costs. There are opportunities for communities to have their own police from their own backgrounds (the UK police are still not trying to understand why young black men won’t join the Met [Metropolitan Police] or why nationalists won’t trust the PSNI [Police Service of Northern Ireland]).

The state police are needed at the moment to deal with serious crimes: rape, murder, child grooming, and abuse. These serious damages to person are in a rational society detestable, and no one, excepting the most lunatic fringes of liberal academia, would want to see their perpetrators roaming the streets. Whether these are sent for treatment or punishment is another debate, but their exclusion from society is accepted by most.

So let’s give the private police a chance to prove that this is a market that can not only reduce the government’s time and money, but can have an exponential amount of positive externalities. We can begin to let people trust their own police, run by them for their community, in accordance with the laws of the land, of course. This is not a call for miniwarlords, just a way for the market to prove its efficiencies over the state.

It’s unlikely, given the new Tory (see Labour) method of tax and spend that an actually viable, free market solution will be picked up. However, getting this conversation started and offering solutions that are more than just “stop and search” or “hug a hoodie” is important. We must look to all the options before our police force is given powers they don’t need to fight crimes that are none of their concern or dwindle into a restricted, powerless force that simply protects the wealthy and is mistrusted by everyone else.

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Development Issues in Production, Innovation, and Inclusion

The problem of "development" continues to be a topic that draws the attention of academics and is also becoming more and more the concern of every person. This is especially seen when government policies, such as those made in relation to the spread of covid-19, present clear cases which directly affect the lives and well-being of individual citizens.

For the Austro-libertarian, the definition of sustainable development by the Brundtland Commission back in 1987 carries several questionable implications, as argued by Morgan Poliquin. Nowadays, however, development studies as a practice has evolved to include other ideas in the attempt to see different and multifaceted understandings of development.

In online lectures by Jeffrey Sachs based on his book The Age of Sustainable Development, he notes that development has evolved into a more practical and holistic approach composed of three pillars: economic development, environmental sustainability, and social inclusion. Despite the broader definition, it is important to remain critical, so for this article, we shall critique of these aspects to see what could be usefully applied in practice.

Economic Development

Traditionally, the first pillar of economic development has been measured using gross domestic product, or GDP for short. Asim Hussain argued that GDP cannot measure the quality of life, and Frank Shostak outlined how GDP growth doesn’t necessarily indicate true economic growth. This single number, often used by governments to report to citizens how well or poorly their country is doing economically, has been lauded as the main economic indicator for a long time, and questioning it has been long overdue.

Even Jeffrey Sachs acknowledges that GDP has limitations, which is why he posits that other measures of development are also important for a more complete picture of development. These can range from metrics that consider and aggregate other aspects of development, like the Human Development Index, or metrics that try to measure subjective happiness, such as the Cantril ladder.

Such approaches are at least better in that the human factor is given more emphasis, but as with any mathematical model made in an attempt to aggregate human experiences, we should always remain skeptical, and as with GDP, understand and be wary of their limitations. In this way, policies enacted to reach such measures of economic ends should rightly be scrutinized.

Environmental Sustainability

The next pillar that needs to be examined is that which ties development to the state of the environment. However, this leads to several problems regarding how to approach growing the economy, especially when this always seems to be at odds with the usage of resources and the environment. The Austro-libertarian perspective favors a movement toward innovation, which will manage, at its own accord, without further prodding, to create the goods and services that we need for our day and age, and not only in an environmental sense.

Tyler Watts wrote a critical argument about how concepts of environmental sustainability are at odds with economics. Among the ideas discussed was the power of innovation: in a free market economy, innovation would happen more naturally. The creation of cheaper, more efficient—and, by extension, cleaner and less wasteful—products and services is bound to happen as a consequence of progress and functional prices, due to the enabling of entrepreneurs to create competitive goods in the economy.

The idea that innovation pushed by economic freedom in the market is inherently reckless certainly needs to be examined. As Gary Galles contends, it is not a zero-sum game, for society as a whole prospers through innovation. The betterment of the world can come from allowing entrepreneurs to thrive.

Social Inclusion

Finally, the more human elements of development can be addressed in the last pillar, which is about humanity itself. Development should never be seen independently of the context of the people who make up society, and it is a valid human desire to be part of a society wherein they feel enabled to participate.

There are, of course, various ways to include people in society, and this continues to be a subject of debate and scrutiny. Nevertheless, there are humanity-centered approaches to development that can further the position of an Austro-libertarian—such as the human security approach or the capabilities approach—but one of them stands out in particular: the rights-based approach.

An inclusive society through the rights-based approach means that all persons should be able to live with their fundamental rights intact, and where they are not oppressed, but rather empowered. This should include the ability of individuals to participate fully in the economy and to have their personal liberties protected. To be able to live in a free society that honors these rights is a goal for social inclusion, and a desirable end for the Austro-libertarian.

The other approaches, such as the human security approach, which can be used to promote the value of peace and denounce the horrors and ultimate costs of war, or the capabilities approach, which can highlight the importance of realizing individual freedom, could also be looked into for similar valuable insights. War and slavery are, after all, unwelcome in an inclusive and free society.

Conclusion

Contemporary approaches and theories in sustainable development expand the definition of its study to consider perspectives beyond the original definition of the Brundtland Commission. These are perspectives that can be compatible with the Austro-libertarian perspective. The need to critically examine these emerging ideas, to lobby for the values of the free market and of personal liberty, and to hold governments accountable for desirable ideas of development, continues to be as relevant and important as before.

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Democrats Are Poised for a Federal Takeover of Elections in America

01/28/2021Ryan McMaken

Listen to the Audio Mises Wire version of this article.

The Capitol riots of January 6 are the gift that keeps on giving to the Democrats' drive to pass a number of new expansive pieces of legislation. At least in the short term. For now, in the realm of elections, Democrats are claiming state control over election methods led directly to the riot. The riot, it is claimed, was fueled by the Trump administration's claims that the election was not conducted in a fair manner. 

The solution? More federal control. If and when federal officials can dictate and oversee how elections are conducted in every corner of the nation, then we'll know everything was done in a free and impartial manner. According to the AP:

Democrats, asserting constitutional authority to set the time, place and manner of federal elections, want national rules they say would make voting more uniform, accessible and fair across the nation. The bill would mandate early voting, same-day registration and other long-sought reforms that Republicans reject as federal overreach.

This will all be fixed by new legislation, HR 1. Of course, it is never explained why federal bureaucrats and regulators are less corrupt or more efficient or less prone to bias than state-level officials. The ideological reasoning behind HR 1 is just a retread of the usual Washington view, which assumes that no one outside the Beltway can possibly hope to do anything right without federal oversight. (For the more cynical among us, of course, it must also be pointed out that Democrats support the bill because they think it will get them more votes.)

Yet, this is the zeitgeist we live under: Americans can't be trusted to run their state governments competently, so it's up to the federal regulators in office buildings hundreds or thousands of miles away to determine the best way to do things. 

Naturally, no one in Washington or in the federal courts cares that this sort of thing contradicts more than two centuries of real-world practice in conducting elections. What matters is that the nation continue to move toward putting every institution, process, law, and custom under the oversight of federal officials. 

The Member States Have Historically Controlled Elections 

Most Americans probably assume that elections are now and always have been, constitutionally, the domain of the federal government. But, this has never been the case. The Federal Election Commission wasn't even created until 1975, and even now, the FEC's power is limited primarily to regulating campaign finance, and not elections. 

The federal takeover of elections, to the extent that it has been successful, has primarily been carried out by the courts, with the Supreme Court and other federal courts handing down decisions to states in regard to how elections must be conducted. 

Historically, however, states have controlled voting requirements and systems precisely because the United States was intended to be a union of independent states. 

This was explicit in the first constitution of 1776 (i.e., the so-called Articles of Confederation) but continued in a watered-down form with the new constitution in 1788. In terms of congressional representation, states were to elect their representatives in a manner chosen by the state, with state control over who could vote. The member states of the union were to be treated as truly independent states, united in policy for only a handful of purposes such as foreign policy and trade agreements. 

For example, there is no particular reason why all members of NATO must select their lawmakers in a similar way. Similarly, it is not necessary for all member states of the US to have "uniform" election systems. 

Indeed, this sort of thinking continued to be reflected in methods of selecting US senators until the Seventeenth Amendment. Although many think that the Constitution mandated that state legislatures appoint US senators prior to the Seventeenth Amendment, the fact is states employed a variety of methods in selecting US senators prior to the change. While the US Constitution says the state legislatures shall elect the US senators, it does not say how that should be done. For example, must most candidates for US Senate receive a majority of legislative votes or will a plurality do? Can those senators be recalled by the legislature? The US Constitution is silent on this. Moreover, in practice, states were free to pass their own state laws creating popular elections for senators that were then binding on members of the state legislature.

In other words, until 1913, the states themselves were to determine how their delegations in the US Senate were elected and by whom. 

Not surprisingly, states have implemented a variety of different policies at different times when it comes to voting and elections. 

Indeed, various states engaged in a wide variety of electoral policies, with most coming down on the side of liberalization. For example, as the nineteenth century entered the Jacksonian era, states greatly expanded who could vote. By 1845, nearly all states had removed the land-ownership requirement for voting, resulting in near-universal suffrage for nonslave males. 

During the nineteenth century, many Western and Midwestern states also had very liberal laws when it came to what is called "declarant alien voting," by which twenty-two states and territories extended the vote to noncitizens. By doing so, the states also—in effect—lowered the bar for citizenship while encouraging immigration into those states.

Western states also were among the first to extend the franchise to women. Wyoming was the first in 1869, a full fifty years before the federal government followed suit. 

Montana was the first state to elect a woman to Congress—Jeanette Rankin—before the adoption of the Nineteenth Amendment federalizing policy on women's suffrage. Today, women comprise a higher percentage of representatives in state legislatures than in the US Congress. (Colorado has the highest percentage, with 42 percent of General Assembly members being women.)

All the while, the federal government had little role in dictating to states how elections should be conducted or whom should be granted the right to vote. 

The Gradual Federal Takeover of Elections

Over time, however, the federal government has increasingly intervened in local election prerogatives. 

The largest expansion of federal control over state election laws arrived with the Voting Rights Act of 1965. The act sought to end local efforts to curtail voting by nonwhites in some Southern states, specifically through literacy tests and related measures. 

Yet, by 1970, federal provisions on literacy tests had been expanded to all fifty states, regardless of the purpose or motivation behind such measures. 

Federal control over elections has continued to expand. Perhaps most damaging among these new measures are federal court rulings preventing state governments from requiring that voters provide proof of identity in order to vote. 

In the United States, one can't so much as drive down the street or purchase cough syrup without government-issued identification. Yet federal courts consider it beyond the pale that voters confirm they are who they say they are. 

Federal officials have also suggested expanding federal control over elections in the name of combating "hacking" by Russians and other foreigners. Following the 2016 elections, pundits and politicians suggested that federal agencies be put in charge of "securing" voting data. 

Now, of course, we have the drive to greatly expand federal control in the form of congressional Democrats' HR 1. It's just another nail in the coffin of American federalism.

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Getty
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Don't Worry, "the Economists" Have Everything under Control

01/22/2021Robert Aro

Listen to the Audio Mises Wire version of this article.

At Tuesday’s Senate confirmation hearing, former Fed chair and President Biden’s pick as US Treasury secretary Janet Yellen claimed to have an appreciation for the nation’s debt burden, then proceeded to show she clearly doesn’t:

But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs…

This imprecise term, "act big," is apparently being used to describe economic ideas, mainly how the government plans to spend $1.9 trillion. It’s a statement devoid of any calculation, open to an infinite number of interpretations. When she says the benefits outweigh the costs, this claim cannot be substantiated. Unfortunately, we live in an era where few question the expertise of the “economic experts.” As Treasury secretary, Yellen will be in a tremendous position of power, making decisions on our behalf. It’s in our best interest to consider the rationale behind such “big” ideas.

Yellen expressed some of her rationale for supporting the proposed spending bill:

I think there is a consensus now: without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later.

Who are these economists? Where is this consensus? This was not the first time in the past week that “economists” were cited as supporting inflationist policies. In last Thursday’s speech, where the $1.9 trillion spending plan was initially unveiled, Biden referred to “economists” five times!

Like Yellen, the appeal to a higher economic power is strong. The first of his references mirrored hers:

We have to act and we have to act now. This is what economists are telling us….Our growing chorus of top economists agree that in this moment of crisis, with interest rates at historic lows, we can not afford inaction.

These economists are apparently in favor of borrowing trillions of dollars to fight against the pandemic, forced shutdowns, and a recession. The newly appointed president of the United States of America attempts to make the case for more debt compelling by telling us:

A growing number of top economists have shown, even our debt situation will be more stable, not less stable if we seize this moment with vision and purpose.

In what sounds like Fedspeak, supposedly taking on debt today will make our debt situation “more stable” in the future.

Finally, near the end of Biden’s speech, we are given an inkling as to who these economists could be who advocate spending trillions of dollars. He acknowledges it “does not come cheaply,” however, he urges that failure to act would be a much worse fate. After all:

The consensus among leading economists is we simply can not afford not to do what I’m proposing. Independent, respected institutions from around the world, from the Federal Reserve to the International Monetary Fund have underscored the urgency. Even Wall Street firms have reinforced the logic.

The “economists” providing this information remain unknown. Nevertheless, the Federal Reserve, the International Money Fund, and Wall Street firms are said to be on board with the Biden/Yellen spending plan. Perhaps with good reason, as they tend to benefit handsomely from government stimulus bills, which are paid for by society. As for those who don’t fall into those categories, that remains to be seen, since the threat of currency collapse and national bankruptcy continues to fall outside the purview of the Fed and the world’s leading economists.

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Don’t Forget LBJ’s Election Theft

The mainstream pro-Biden media is poking fun at Donald Trump’s suggestion that there could be fraud involved in the post-election receipt of mail-in ballots. Apparently they’re not familiar with the election-theft case of Lyndon Johnson, who would go on to become president of the United States.

The entire matter is detailed in Robert Caro’s second book in his biographical series on Johnson. The book is entitled Means of Ascent.

Johnson election theft took place in 1948, when he was running for the Democratic nomination for US Senate against Texas Governor Coke Stevenson, one of the most admired and respected governors in the history of the state.

In the primary election, Stevenson led Johnson by 70,000 votes, but because he didn’t have a majority of the votes, he was forced into a run-off. The run-off was held on a Saturday. On the Sunday morning after the run-off, Stevenson was leading by 854 votes.

As a New York Times review of Caro’s account stated, the day after the run-off election it was “discovered” that the returns of a particular county had not yet been counted. The newly discovered votes were overwhelmingly in favor of Johnson. Then, on Monday more returns came in from the Rio Grande Valley.

Nonetheless, on Tuesday, the State Election Bureau announced that Stevenson had won by 349 votes. Nothing changed on Wednesday and Thursday after the election. On Friday, precincts in the Rio Grande Valley made “corrections” to their tallies, which narrowed Stevenson’s lead to 157.

But also on Friday, Jim Wells County, which was governed as a personal fiefdom by a powerful South Texas rancher named George Parr, filed “amended” returns for what has become famous as “Box 13” that gave Johnson another 200 votes. When all was said and done, Johnson had “won” the election by 87 votes.

It was later discovered that one of Parr’s men had changed the total tally for Johnson from 765 to 965 by simply curling the 7 into a 9.

Where did the extra 200 votes come from? The last 202 names on on the election roll in Box 13 were in a different color ink from the rest of the names, the names were in alphabetical order, and they were all in the same handwriting. When Caro was researching his book, he secured a statement from Luis Salas, an election judge in Jim Wells County, who acknowledged the fraud and confessing his role in it.

As the Washington Post reported, to investigate what obviously appeared quite suspicious Stevenson employed the assistance of Frank Hamer, the Texas Ranger who had trapped and killed Bonnie and Clyde. It was to no avail. Johnson got a friendly state judge to issue an injunction preserving the status quo, after which the Democratic executive committee, by one vote, declared Johnson to be the winner.

Stevenson took the matter to federal court but the Supreme Court punted, declaring that it had no right to interfere with a state election.

So, Lyndon Johnson stole the election and ended up going to Washington as Texas’s US senator. Ironically, if Stevenson had become the state’s senator instead, Johnson would never have been selected to be John Kennedy’s vice presidential running mate and, consequently, would never have been president.

No wonder Donald Trump is worried about those Democrats! For that matter, those Democrats should be just as worried about those Republicans! 

Originally published by the Future of Freedom Foundation.

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Don't Confuse Gold Futures with Gold

10/06/2020Robert Aro

The gold price manipulation conspiracy received validation in August when Reuters reported:

Scotiabank to pay over $127 million for precious metals price manipulation.

One of Canada’s largest banks earned itself a proverbial black eye for “spoofing” the gold price, something precious metal traders have cried foul on for years.

Spoofing involves placing trade orders with an intent to cancel them before they are executed, typically in connection with an effort to manipulate prices.

And just how long has this manipulation persisted?

Authorities said that over more than eight years, four Scotiabank traders placed thousands of unlawful orders for gold, silver and other metals futures contracts to deceive other traders and benefit their employer.

Almost a decade of practice, and it was only four rogue traders who managed to manipulate the price of precious metals? Doubtful.

But wait, there’s more! Reuters reported on September 23:

JP Morgan set to pay nearly $1 billion in spoofing penalty.

Three JP Morgan employees as well as eight unnamed coconspirators were involved. CNBC noted that this is a record fine for spoofing, which was made illegal in 2008. “Gold price manipulation” can no longer be relegated to conspiracy theory. But were these just instances of traders behaving badly, or is there a global effort to distort gold’s price? Perhaps it’s best to share several key facets of the gold industry and allow readers to decide:

A 1974 cable published by WikiLeaks reveals a message from London gold dealers to the US secretary of state explaining how the futures market controls supply and demand:

TO THE DEALERS' EXPECTATIONS, WILL BE THE FORMATION OF A SIZABLE GOLD FUTURES MARKET. EACH OF THE DEALERS EXPRESSED THE BELIEF THAT THE FUTURES MARKET WOULD BE OF SIGNIFICANT PROPORTION AND PHYSICAL TRADING WOULD BE MINISCULE BY COMPARISON. ALSO EXPRESSED WAS THE EXPECTATION THAT LARGE VOLUME FUTURES DEALING WOULD CREATE A HIGHLY VOLATILE MARKET. IN TURN, THE VOLATILE PRICE MOVEMENTS WOULD DIMINISH THE INITIAL DEMAND FOR PHYSICAL HOLDING AND MOST LIKELY NEGATE LONG-TERM HOARDING BY U.S. CITIZENS.

The gold futures market remains one of the most volatile markets due to the use of leveraged “contracts,” as explained by the Chicago Mercantile Exchange (CME). For example, if you have $10,000 and you want exposure, you can buy one

Gold futures contract, which represents 100 oz. If initial margins are $4,400 you can buy two Gold futures contracts. You will have exposure to the equivalent of 200 oz. of gold.

With gold at $1,900 per ounce, one could have trading exposure of $380,000! And that is no secret, per the CME:

It is clear that the amount of precious metal traded on the world’s markets is many times the amount produced from mining and recycling activities.

On August 11 the exchange reported a record trading day of 1.55 million contracts for all precious metals. This supports the leaked report, because “physical trading would be miniscule” in comparison to what can be traded on the futures market. Now imagine price discovery when the world’s bullion banks use highly leveraged contracts to spoof gold’s price!

Beyond futures, there are exchange-traded funds (ETFs) like SPDR Gold Shares (ticker GLD, approximately $180 per share), which claims to hold 1,275 tons of gold, more than most central banks in the world. If a trader wanted to redeem shares for physical gold, the prospectus states that they need a minimum requirement of 100,000 shares or nearly $20 million! Needless to say, most people redeem with dollars instead of gold.

As for Fort Knox, CNN released grainy black and white photos of Secretary Mnuchin in what appears to be a small room, surrounded by a pile of bars in the background. After the visit he declared: “Glad the gold is safe!”

Other than Mnuchin, few, if any, have ever claimed to even have seen the gold at Fort Knox.

To add one last wrinkle, where there appears to be tons of gold located in a safe, how can we know it’s not “fake”?

Reuters recently reported that China’s largest 24-karat gold jewelry company, Kingold Jewelry, secured $2.83 billion dollars on 83 tons of gold, some of which was actually tungsten-filled bars. For every ton of gold held in a large vault, how much could be tungsten?

Between the futures market, ETFs, and mammoth-sized vaults, we see peculiar traits to this market. Through the futures, we’ve seen bullion banks manipulate prices in the very market that sets the spot price. The world’s largest vaults can hardly be accessed, and the gold in them is not exactly being audited by reliable third parties. 

At best, the paper market could seem unfair, at worst, highly fraudulent. On the other hand, if people demand paper gold instead of physical, then paper demand will continually be met with paper supply.

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Did the Fed Really Ask for Fiscal Support?

09/29/2020Robert Aro

In testimony before the US House of Representatives on Tuesday, Chair Powell noted economic challenges under covid, as well as supposed triumphs such as an increase in household spending “likely owing in part to federal stimulus payments and expanded unemployment benefits.”

That would be laudable if it weren’t free market interventionism:

We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.

His reference to “tools” refers to his self-declared “forceful actions” since March, which “helped unlock more than $1 trillion of funding” by:

implementing a policy of near-zero rates, increasing asset holdings, and standing up 13 emergency lending facilities. We took these measures to support broader financial conditions and more directly support the flow of credit to households, businesses of all sizes, and state and local governments…

We can look past what he told Congress to see that since mid-March, the M2 money supply and the balance sheet have both increased by about $3 trillion to $18.58 trillion and $7.06 trillion, respectively. Powell also provided updates on various lending programs, noting around $2 billion for loans to the Main Street Lending Program, nearly $13 billion for the Secondary Market Corporate Credit Facility (corporate bond/ bond-ETF) buying program, and $250 million for the municipal bond purchase program. To clarify, all this money didn’t exist in February, it is literally “new money” credited to various bank accounts across the country.

He touched on the lesser-known Term Asset-Backed Securities Loan Facility (TALF), mentioning how nearly $100 billion can still be lent, but just under $3 billion has been utilized to date. Of course, these funds are not for Main Street since the three-year loans are reserved for:

certain triple A-rated ABS [asset-backed securities] backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.

So just who exactly has been receiving the nearly $3 billion in TALF support? Powell didn’t say. However, when we review the monthly reports to Congress under TALF’s September 8, 2020 transaction-specific disclosures, we see that the aptly named Mackay Shields TALF 2.0 Opportunities Master Fund LP received $571 million from thirty-two loans, with an interest rate from 0.76 to 1.30 percent. Per the company’s website, Mackay Shields is a firm of 210 employees managing $134 billion in assets. The collateral pledged to the loans was commercial mortgages, student loans, and several small business loans under SBA 504, which is a “loan program that offers small businesses another avenue for business financing” according to the Small Business Administration’s website.

Looking deeper into the data other names, large asset managers and some overseas firms are mentioned; only one question remains:

What about BlackRock? We know they helped the Fed launch its corporate bond buying program; surely by now we can expect Wall Street to receive more than Main Street.

Also included in the report, they received seven loans totaling $113 million, with the same favorable interest rate of the Mackay Shields loans for commercial mortgages and, naturally, small business loans.

Now imagine BlackRock, having $7.32 trillion in assets under management and getting small business loans from a central bank! Meanwhile the man responsible appears before elected US officials and isn’t met with so much as any scorn, ridicule, or calls to resign. Yet who dares ask of the long-term effects of stimulating a semi–shut down economy with a money machine? As usual, some on Main Street get breadcrumbs while the richest companies in America get entire loaves of bread!

Regardless of what the Fed does or Powell says, does any of it matter to Congress? If it did, one would think they would have ended the Fed, especially by now. As if to prove the point, Powell delivers the coup de grace at the very end, saying that, despite their efforts,

Many borrowers will benefit from these programs, as will the overall economy, but for others, a loan that could be difficult to repay might not be the answer. In these cases, direct fiscal support may be needed.

We know we’re in trouble when central bankers are asking for fiscal stimulus. Where does the Fed think Congress will get the money if not from the Fed? Not many, if any, elected officials understand the origins of money. But what’s Powell’s excuse?

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Dear Portland, It's Not America's Job to Solve Your Problems

08/05/2020Ryan McMaken

Listen to the Audio Mises Wire version of this article.

In response to my article last week opposing the use of federal soldiers and federal agents on the streets of American cities, my inbox and the article's comment section filled up with readers claiming that it most certainly is the job of the US federal government to step in and take control of US cities against the will of the state and local governments.

These interventionists have lots of reasons for their federalization of local law enforcement:

  • "The author is not realising the seriousness of the communist insurgency under way."
  • Federal intervention is unjustified "except in cases where the local elected officials refuse to do what they had taken an oath to do."
  • "The people are under the protection of the Constitution, thus during insurrections the president has the duty to mobilize to restore order."
  • "Oregon state and Portland city governments either or both can't or don't want to stop violent protests with destruction of public and private properties. Therefore federal government needs to intervene to restore the order, normal functioning of city businesses and government offices."

Many of these readers attempt to make claims about constitutional authority, such as the meaningless claim that "the people are under the protection of the Constitution"—whatever that means—and that therefore the feds can do whatever they want to "restore order." Other claims are just vague legal assertions about how the president can send in troops wherever local officials aren't doing what "we" want them to do.

To this I would only restate that the entire historical and legal context of the Declaration of Independence, the Constitution, and the American Revolution is one of preventing distant national powers from sending in their agents, bureaucrats, and troops to carry out federal prerogatives.

But even if the current US Constitution did authorize federal takeovers of local police—which it doesn't—then the Constitution ought to be ignored, because constitutional authority is inferior to the larger moral principle of subsidiary, self-determination, and local control.

As with all things, the Constitution is only useful and worthy of being quoted when it limits federal power. When it doesn't do so, it should be ignored. The Constitution is not some holy writ. It's useful when it attempts to limit federal power, and worthless when it doesn't.

In this case, the Constitution is on the right side: it limits federal intervention in these cases. But if it weren't on our side, then it would be wrong. Stated simply, here is the basic principle at hand: as an American taxpayer who lives many hundreds of miles from Portland, it's not my job to solve Portland's problems.

To business owners and others who live in Oregon and Portland and who are being negatively affected by the riots there, I'm sorry you continue to choose to live in a poorly run state where the political leaders are craven socialists who kowtow to the mob. I highly recommend you consider moving away or expending your own time and energy to do something about it. I'm sorry you didn't see the writing on the wall years ago as the voters put into power—again and again—left-wing demagogues. You decided to stick around. But it's not now the job of Americans in other places to bail you out.

I fully encourage you to organize a local militia, a local political movement, recall effort, or some other strategy to deal with it. But Americans have plenty of their own problems in their own cities. We have our own crime problems and our own problems with corrupt politicians to deal with it. I'm sorry that residents of Portland and Oregon appear to be especially inept in this regard, but neither the Constitution nor common sense dictates that it's our job to swoop in and save Portland from itself, especially when the local majority is apparently fine with the situation.

There are a lot of poorly run cities in America. Like Baltimore, for instance, where the homicide rate is ten times the national rate. It’s not the job of the American taxpayer to solve Baltimore's problems either.

I know that some readers fancy themselves the only ones who truly appreciate the fullness of the "communist insurgency under way." In their minds, the federal government cannot possibly be given too much power, so long as that power is used to crush the commies. Anyone who insists on limiting federal power is thus "naïve." Yet it is these nonnaïve people who want to grant even greater power to a federal establishment that clearly views the American people as the enemy. These federal agencies are the ones who have relentlessly conspired to remove the current democratically elected president because he was not to their liking. These are the bureaucrats who let 9/11 happen, and then got raises afterward. These are the federal hacks who massacred women and children at Waco and at Ruby Ridge. These are the people who wanted the Patriot Act so they could spy on every American.

Back in the 1990s, NRA CEO Wayne LaPierre referred to federal agents as "armed terrorists dressed in Ninja black…jack-booted thugs armed to the teeth who break down doors, open fire with automatic weapons and kill law-abiding citizens."

While I’m no particular fan of LaPierre or the NRA, he was right. Wanting to limit the power of these feds is hardly the naïve position.

Image source:
Getty Images
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Drudge Report, RIP

06/16/2020Ryan McMaken

Like many people, there was once a time when I visited the Drudge Report multiple times per day. Drudge often had a fun mix of contrarian articles and unusual viewpoints that were hard to find without its help as a curator of articles.

But in recent years, the site has become more or less indistinguishable from a standard mainline legacy media site. It has consistently carried articles and headlines that promote Russiagate hysteria and pro-FBI, pro-CIA positions.

To a certain extent, this wasn't shocking, since the site has always been bad on foreign policy and had a neoconservative slant in that respect.

But now the Drudge Report consistently leans in favor of COVID lockdowns and promotes panic, authoritarianism, and generally pushes crisis porn on a daily basis. It is now, for all practical purposes, a sister site to CNN.com or The Atlantic.

The only aspect of the site that remains unchanged is its devotion to carrying lurid stories on the topics of pornography, brothels, and Hollywood gossip. Rarely does a week go by, for example, when the Drudge Report doesn't carry at least one new headline on sex with robots, or perhaps robot brothels. These headlines historically were good for a laugh. But now these headlines, never actually worth a click, are just side by side with standard mainstream media headlines that parrot the views of the CDC, the WHO, or some other group of government "experts."  In other words, the joke headlines aren't valuable enough in themselves to warrant a visit to the site anymore.

Why did this happen?

Some claim that Matt Drudge sold the site to others and new editors have taken over. I have no idea if this is the case. It's entirely possible that Drudge is still the editor but is phoning it in. After all, the problem may simply be that he's just getting old and lacking in ideas. He may have just lost his touch.

Either way, it's now safe to ignore the the Drudge Report as a source of any "alternative," rare, or unusual viewpoints. You'd get pretty much the same content going straight to the Washington Post.

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Don’t Forget about the TALF!

05/15/2020Robert Aro

Does anyone remember, during the last financial crisis, the “evil bankers” who almost collapsed the entire financial system? Then, in order to save the world, the Fed provided loans and bailouts to those same bankers?

Considering the relatively “small size” of the TALF (Term Asset-Backed Securities Loan Facility) and how most living on main street are not in the business of granting loans, it didn’t garner much attention when the updated TALF term sheet was announced this week. Still, after looking further into the program some may discover, or remember, TALF is not new. It was implemented during the Great Recession over a decade ago. During that time, Matt Taibbi wrote an article in Rolling Stone called The Real Housewives of Wall Street which discussed the original TALF program. Per the article, the wife of then Chairman of Morgan Stanley and the widow of another high-ranking Morgan Stanley employee started a company with close to $15 million, borrowing nine loans for $220 million under the TALF. With these low-interest loans they bought student loans and commercial mortgages. At the time of writing, he noted roughly $150 million had yet to be paid back to the Fed. The public didn’t know how much money the borrowers earned from their dealings, as there was no accountability. But the loans were structured such that 100% of the gains would go to the recipients while 90% of the losses would go to the treasury. Understanding the article was written in an entertainment magazine, and not with Austrian economics in mind, he did capture a very important detail:

Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.

Without comparing the previous TALF to the current, and assuming control issues have been ameliorated by the Fed, the underlying problem with these programs remains the same. They all require money be created then lent to certain members of society for the supposed purpose of saving society in time of need. If the loans are successful, the gains go to the borrower. When the loans are not repaid or forgiven, the newly created money and its accompanying debt will exist as a cost to be paid by future generations. To the masses, these loans seem palpable when the borrower is not considered “rich.” However, the problem persists regardless of the borrower’s income bracket.

The new TALF follows the same Special Purpose Vehicle (SPV) and US Government equity stake to which we’ve now become accustomed. Under the program, the treasury is only making an initial $10 billion equity investment with a maximum lending limit, thus far of only $100 billion. Eligible borrowers can make loans to the public, then use those loans as collateral to borrow from the SPV. In this program, eligible loans include: auto and student loans, credit card receivables, equipment and floorplan loans, leveraged loans, and commercial mortgages to name a few. Even though the TALF may be smaller than the other Fed programs, the anti-capitalist nature and prior history warrants attention.

The day after the updated term sheet was announced, Chairman Powell gave a speech where he stated:

At the Fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way.

At the week’s end, the Fed’s balance sheet hit a record $6.9 Trillion. With many programs still yet to open, central bankers remain convinced their inflationary tools and ability to judge who needs money most far outweighs the life, liberty and happiness of the many. The programs may be larger, but the narrative and risk to the public remains the same.

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