Power & Market
Fewer Americans Say They Are Doing "Okay" Financially
In a 2022 survey of over 11,000 respondents, it was found that:
… 73 percent of adults were doing at least okay financially, meaning they reported either “doing okay” or “living comfortably.”
This is 5 percentage points lower than the prior year and one of the lowest observed since 2016.
These findings were published by the Federal Reserve in the report titled Economic Well-Being of U.S. Households in 2022. The report attempts to examine the financial lives of U.S. adults and their families. With the data collection occurring in October of last year, the time lag is considerable.
Overall, the report shows that higher prices have negatively affected most households and overall financial well-being declined over the prior year…
Notable highlights from the fact sheet include:
- The share of adults who said they were worse off financially than a year earlier rose to 35 percent, the highest level since the question was first asked in 2014.
- Some renters indicated they had difficulty keeping up with their rent payments. Seventeen percent of renters were behind on their rent at some point in the prior year.
- Nearly two-thirds of adults stopped using a product or used less because of inflation, 64 percent switched to a cheaper product, and just over one-half (51 percent) reduced their savings in response to higher prices.
The focus of the report primarily revolves around capturing sentiments, emotions, and perspectives on financial well-being, but it fails to delve into the underlying causes of any of the hardships noted. For example, one finding is that:
… higher-income adults were more likely than lower income adults to mention financial challenges related to retirement…
Yet this is hardly a new concept as the Austrians explained how the expansion of the money supply affects people and prices differently over a century ago. Certainly wealthier individuals tend to be more insulated from currency debasement, but it is also because those who receive newly created money first benefit at the expense of all others.
The report does support the idea that year after year life becomes increasingly difficult as dollar purchasing power continues to decline. This can manifest as unaffordable rents, price increases, and a general sense that the future looks bleak. All the while, the increase in interest rates, as we’ve been told is necessary to combat high prices, has only made the cost of carrying debt even more burdensome.
At best, the findings inadvertently shed light on the merits of Austrian economics, revealing the inherent issues arising from the problem with controlling the money supply and interest rates, both of which fall within the purview of the Fed. It serves as a stark reminder that a fairer world would exist if the global financial system did not rest on the whims of a select few individuals. And so, we find ourselves living under the plan of a central bank that continues to examine the detrimental consequences of its own policies, more for public spectacle than anything else.
First Republic Count Down
Citizens Financial Group Inc (CFG.N), PNC Financial Services Group (PNC.N), JPMorgan Chase & Co (JPM.N) and US Bancorp in NFL Draft parlance are “on the clock.” These banking white knights are thought to be among the bidders vying for the remaining carcass of First Republic Bank in an auction process being run by the Federal Deposit Insurance Corp, reports Reuters.
Reuters says, “A deal is expected to be announced on Sunday night before Asian markets open, with the regulator likely to say at the same time that it had seized the lender, three of the sources said. Bids are due by Sunday noon, one of the sources said.”
“Unclear to some involved in the process is whether regulators might use a bid for a so-called open-market solution that avoids formally declaring First Republic a failure and seizing it,” Bloomberg reports.
Bank analyst Chris Whalen tweets the hard facts. “Hello. Bid is zero with a loss share agreement @FDICgov Haircut loan book 15%. Equity number is negative…”
Yes, the taxpayers will be the unwitting holders of First Republic’s bad assets, while one of the FDIC’s favored bidders gets the good stuff at a discount. Jamie Dimon’s J.P. Morgan already has ten percent of the nation’s deposits making that bank ineligible to pick up First Republic but don’t be surprised if Jamie receives a “special government waiver” if he submits the winning bid.
Mr. Dimon has been viewed as the fair haired banker for decades. Ex-FDIC Chair Sheila Bair, in her book Bull By The Horns, called Dimon “deeply experienced” and related a story when she served on a panel with Bill Clinton and Dimon with the JP Morgan CEO calling the FDIC “creditworthy” and “would be happy to lend [the FDIC] money anytime.” Writing about the WaMu failure Bair said, “If Chase had not acted, the FDIC would have suffered tens of billions of dollars in losses.” The FDIC remembers.
James "Jim" Herbert founded First Republic in 1985. Merrill Lynch acquired the bank in 2007, but after Merrill was purchased by Bank of America in the throes of the great financial crisis, BoA sold First Republic and the bank blossomed by luring high-net-worth customers with preferential rates on mortgages and loans. What came with those low loan rate products was uninsured deposits amounting to 68% of the bank’s total deposits.
As was the case with Silicon Valley Bank, First Republic saw more than $100 billion in deposits fleeing in the first quarter, leaving it scrambling to raise money.
Mr. Dimon’s bank, PNC and 9 other big banks made a 120-day deposit at FRC totaling $30 billion in March. It’s unclear if that deposit is insured (why should they be insured? Asks ZeroHedge), uninsured or could be converted into equity as a part of a bailout. This writer can’t believe Mr. Dimon would put up that kind of money uninsured.
Former Treasury Secretary Lawrence Summers told Bloomberg Friday that he was “surprised and disappointed that this situation has continued to linger as long as it has.”
Sounding almost Rothbardian, Summers said “These are things like forest fires, it is much easier to prevent them than it is to contain them after they start to spread.”
Now First Republic is a political football: cover all the deposits or not. Jim Bianco tweets,
Don't bailout the uninsured depositors (who are also uninsured creditors) and most likely they take a loss. Yes, the 11 banks will lose, but so will any other uninsured depositor.
If so, sit back and watch 41% of the US deposit base that is not insured (mainly businesses with deposits greater than $250k) try and get their deposits out of their “not-too-big-to-fail” bank and into one that is too-big-to-fail. Chaos in banking because Yellen reneged about protecting uninsured depositors 5 weeks after her promise to protect them.”
"If no business firm can be insured," Murray Rothbard wrote,
then an industry consisting of hundreds of insolvent firms is surely the last institution about which anyone can mention "insurance" with a straight face. "Deposit insurance" is simply a fraudulent racket, and a cruel one at that, since it may plunder the life savings and the money stock of the entire public.
If Jamie Dimon wants the First Republic, he’ll get it, on his terms. And the fraudulent racket will continue.
Federal Deposit Insurance Isn’t Insurance
The recent spate of bank failures and the Biden Administration's response has some talking about raising or eliminating the federal deposit insurance limit of $250,000. It's important to remember, however, that what we call deposit “insurance” in no way resembles actual insurance. Federal deposit insurance, and every other form of insurance touched by government, is better described, in the words of Murray Rothbard, as a "fraudulent racket."
Insurance is, in many ways, the market process at its most beautiful. We exist in a constant state of uncertainty—a fact that is "implied in the very notion of action," according to Mises. You cannot know whether, in the next year, your business's sales will improve, your house will burn down, or the price of gasoline will skyrocket. All you can do is use your judgment and the knowledge available to make the best-informed decision and act.
However, some uncertainties—such as whether your house burns down—possess unique characteristics. Mises used the term class probability. And Rothbard followed Frank Knight in using the word risk, which they distinguished from uncertainty. Mises summarizes the difference:
Class probability means: We know or assume to know, with regard to the problem concerned, everything about the behavior of a whole class of events or phenomena; but about the actual singular events or phenomena we know nothing but that they are elements of this class.
In my words, these risks are nearly impossible to predict on a case-by-case basis. But when they are grouped into specific homogeneous classes of events, we can be reasonably certain about how frequently they will occur. With that near-certainty, insurance providers can offer coverage tailored to the class probability of these risks.
That's what I meant by beautiful. When left alone, the market process allows people to trade their exposure to risk in a world full of uncertainty and varying levels of risk aversion. On top of that, insurance works as a way to funnel cash from the healthy and able to the old, sick, and downtrodden who need it, relying not on the expropriation of wealth but on voluntary, win-win transactions.
And as many libertarian scholars like Rothbard and Hans-Hermann Hoppe have argued, an insurance model would most likely be used to provide things like protection services in the absence of a state monopoly. There is a lot the insurance model can do. But it requires a free market.
To work, the insurance model rests on the provider's freedom to properly classify risk and both parties' ability to walk away from the transaction. Remove either or both of these elements, and what remains is no longer insurance.
Obamacare did both. Providers were prohibited from classifying risk based on preexisting conditions, and individuals were forbidden from choosing to go without health insurance. The Act represented a large step away from the insurance model towards the crony third-party payment scam that defines today's rotten healthcare system. Interventions have also warped car insurance, flood insurance, and more—bringing about higher prices and riskier behavior.
The government also runs its own "insurance" programs like Medicare. But because they're tax-funded and protected from the feedback of consumer choice, these "insurance" schemes are more accurately described as wealth redistribution programs.
Federal deposit insurance falls into this last category. The government-run Federal Deposit Insurance Corporation (FDIC) is not classifying risks, and depositors are not choosing plans based on their risk aversion and financial status. Instead, the FDIC uniformly covers all deposits up to $250,000—a limit some now want to eliminate.
This isn't insurance. As Rothbard wrote, it's "a massive bailout guaranteed in advance" that props up the banking sector and subsidizes the fractional reserve system. In other words, it’s a fraudulent racket that funnels cash from the downtrodden to the pockets of wealthy bankers. That sounds like the opposite of insurance.
Fedcoin: It Starts with a Trial Run
A cashless society would be the nail in the coffin for liberty and freedom, offering centralization, the likes of which Marx could only dream. The existence of a government backdoor or spyware becomes a real possibility, and given the State’s track record, a real likelihood. Then, of course, the ability to track, freeze, and even set expiry dates on money, will be marketed as “features” to protect the public.
As for the 5.9 million Americans considered “unbanked,” i.e., those who have no checking or savings accounts, (the poor, weak, and vulnerable) they can expect life to get more difficult. This is the price we pay for free market intervention.
Earlier in the week, the Federal Reserve Bank of New York made the announcement:
Members of the U.S. Banking Community Launch Proof of Concept For A Regulated Digital Asset Settlement Platform
The explanation may only make sense for those well versed in crypto technology:
Members of the U.S. banking community today announced the launch of a proof of concept (PoC) project that will explore the feasibility of an interoperable digital money platform known as the regulated liability network (RLN). Using distributed ledger technology, the proposed platform would create innovation opportunities to improve financial settlements and would include participation from central banks, commercial banks of various sizes and regulated non-banks.
Basically, Fedcoin is advancing and is now in the testing stage:
The 12-week PoC will test a version of the RLN design that operates exclusively in U.S. dollars where commercial banks issue simulated digital money or “tokens” – representing the deposits of their own customers – and settle through simulated central bank reserves on a shared multi-entity distributed ledger.
Some of the largest financial institutions are involved in this 12-week program:
BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo.
The technology is being provided by SETL with Digital Asset, powered by Amazon Web Services. Swift, the global financial messaging service provider, is also participating in the initiative to support interoperability across the international financial ecosystem.
From Bitcoin to Dogecoin, there seems little long term hope for those who love privacy and autonomy when the largest corporations and fintech firms work with the Federal Reserve to roll out a Central Bank Digital Currency (CBDC).
Would you like to know who else
is was working with the Feds? Courtesy Coindesk:
Former FTX CEO Sam Bankman-Fried was, until last week, a major political donor – he gave $5.2 million to U.S. President Joe Biden’s presidential campaign and spent another $40 million supporting mainly Democratic candidates ahead of the November midterm elections – and an influential figure in Washington.
Bankman-Fried regularly met with regulators and lawmakers, weighing in on how the crypto industry should be regulated. He was a vocal supporter of one bill, in particular: the bipartisan Digital Commodities Consumer Protection Act (DCCPA), a still-in-progress bill…
We know for certain CBDCs are coming, as well as more regulation. And given the trajectory of both, a cashless society is too. What is less certain is whether or not Sam Bankman-Fried, for his culpability in what may amount to one of the largest thefts of all time, will ever see jail time.
For the Midterms to Matter, the GOP Needs More MTG, Less McConnell
Rather than an election day, for most of the country, today is the conclusion of something resembling an election month. While one would expect any first-world nation to be capable of concluding an election on election night, the same institutions that fortified 2020 have already warned us that the official count could take days or weeks. It is, of course, the most important election of our life. Democracy itself is on the ballot.
While regular readers of the Mises Institute are right to read the last two lines with a proper amount of cynical sarcasm, perhaps even the most devoted anarchist may sense that there is something a bit different about this midterm season.
America is stumbling toward nuclear war in much the same way our president climbs the stairs of Air Force One. Almost everyone reading this has been made poorer in the past two years, factoring in the impact of inflation on your purchasing power, the current state of your 401(k), or the value of your home. In the past several years, the quality of your life has been dramatically impacted by the quality of your governor.
For quite a while now, America has enjoyed an existence of privilege, despite the true lunacy of our political system. As a result, our representatives in Washington have become increasingly mediocre and disinterested in policy. In their defense, most members have very little to say about legislation. Moreover, voting for president seems to have minimal impact on issues of great importance; antiwar presidents find new countries to invade—or at least bomb—while serious financial matters are either left to experts on Wall Street or academics handsomely paid for twenty-minute speeches.
The true distinctions between administrations are the smaller-scale ways they embarrass us. In that sense, the Biden administration’s habit of promoting freaks and fetishists to serious governing positions does help it stand out.
The result is a government that blunders from one debacle to another. No one can ever honestly claim to be in charge, so no one is ever honestly held accountable. The worst-case scenario for a Beltway bigwig is being forced out of the public sector earlier than expected, and always with a higher-paying gig waiting for them.
Have Americans had enough of this?
For the past few decades, much of the most explicit destruction of America’s buffoonish regime has been beyond our borders. Hundreds of thousands dead. Multiple nations thrown into chaos. Economic instability with consequences we will never truly understand.
The cost to Americans was less obvious. The brunt of military deaths, and survivors with trauma, falls on a small minority of the country. The damage that economic policies connected to the regime’s ambitions has done to communities took place over time—the politics of the boiling frog cliché.
But Americans are no longer dealing with gradual decay but an abrupt collapse of faith in our institutions. Rightfully so. We were lied into war. Lied into inflationary policies. Lied to about the value of college. Lied to about flattening the curve. Lied to about vaccines. Lied to in ways that we have completely forgotten.
In the future, more will come to recognize the degree to which they were lied to about Social Security. Lied to about Medicare and Medicaid. Lied to about the security of their pensions. Lied to about the quality of the future our vaguely defined social contract was supposed to guarantee.
Are Americans ready to hold people accountable for these lies?
If so, today’s elections are not enough. If anything, contemporary political history has repeatedly shown how little elections matter. Barack Obama did not bring change. Brexit did not restore British sovereignty. The election of Donald Trump and Jair Bolsonaro did not drain their nations’ respective swamps.
Elections are, at best, the beginnings of political change. But if not followed with deliberate action and a transformative ideological reprogramming of the institutions, elections’ lasting impact will most significantly be felt in the emotions of nostalgia from those who sincerely hoped a new dawn was about to emerge.
So, can this year’s midterms offer any hope of meaningful change beyond the joy of watching the hysterics of corporate journalists?
There is perhaps the most reason for optimism in a handful of states with intriguing governors’ races.
New York’s governor-imposed Kathy Hochul is in desperation mode in her election against (pro-Trump!) Congressman Lee Zeldin. This is even though thousands of would-be Zeldin voters have already escaped to Ron DeSantis’s Florida. This would suggest that concerns over rampant crime will remove Democrats from positions of power in both New York and San Francisco in 2022. If this removal doesn’t result in a serious reevaluation of how crime and the protection of property are handled in the dense urban areas Democrats almost universally control, there is a clear opportunity for genuine political realignment in American cities.
Speaking of crime, there are a variety of covid tyrants who deserve a fate worse than political defeat but certainly deserve at least that. The ghoulish Gretchen Whitmer of Michigan, Tony Evers of Wisconsin, and Steve Sisolak of Nevada are the three that seem to be the most vulnerable. In particular, Whitmer, who at one point made public service announcements in which she smiled while demanding mothers in labor wear a mask at all times, offers a perfect embodiment of the worst type of political sociopath. In a better world, she would face criminal charges—as the heroic Sheriff Dar Leaf of Barry County, Michigan has suggested—but a political defeat to the onetime vice presidential contender would be meaningful.
The biggest political problems, though, are the seemingly insurmountable cancers at the federal level.
While it appears inevitable that the House will swing back into the hands of the Republican Party, it seems just as inevitable that there will be no significant shake-up to Republican leadership. The optimism for anything positive emerging from a Red House, beyond the virtues of divided government, comes from the loudest parts of the MAGA Caucus. Here, firebrands like Marjorie Taylor Greene and Matt Gaetz have been pounding the table for the GOP to investigate Dr. Anthony Fauci, Attorney General Merrick Garland, Hunter Biden, and various other Beltway villains.
The integrity of the party demands their rhetoric become action.
If a Republican-controlled Congress can’t treat any of the villains of the administrative state as seriously as Democrats have treated Steve Bannon or Roger Stone, then the GOP’s legacy as controlled opposition continues.
Their other priority? Shaking up foreign policy, particularly the seemingly limitless appetite Washington has for unaccountable aid grants to the Ukrainian government. Both MTG and Gaetz have vowed to fight so that “not another penny will go to Ukraine.”
This is where things get interesting. It is not rare for there to be some vocal congressional critics of the uniparty foreign policy mission of the day—the late John McCain would call such colleagues “wacko birds.” In Gaetz and MTG, however, you have two of the most charismatic, Trump-y, and nationally recognized members of the Republican Caucus demanding a change in American policy in terms that resonate with average Americans. And it appears to be having an impact.
A recent Wall Street Journal poll showed that 48 percent of Republican voters have soured on America’s limitless support for the Zelensky regime, up from 6 percent in its last poll.
Some Republican candidates have understood this instinctually. Ohio Senate candidate J.D. Vance actively campaigned against US support during his primary in a state with a significant Ukrainian population. Very Serious Pundits suggested this would doom him. Instead, he won by almost 10 percent. Arizona Senate candidate Blake Masters, a noted Murray Rothbard respecter, also opposed any military aid while running for the seat that McCain once held. Even in the shadow of the Washington beltway, retired navy captain Hung Cao opposed Ukrainian support in a surprisingly tight race in a D+6 district.
The result is that even dull Kevin McCarthy has raised the alarm that future Ukrainian aid will face a battle in the House, evoking howls from Mitch McConnell and Mike Pence.
Of course, campaign rhetoric is easy. Follow-through is quite different. It is notable that this shift in Republican campaign rhetoric has followed a change within traditional Conservative Inc. institutions. For example, the Heritage Foundation, under Kevin Roberts’s leadership, has signaled a new foreign policy ideology opposing “hyper interventionism and soulless neoliberal globalism” and defending “what’s best for the American taxpayer.”
This is important. Elections come and go; the real battle is what happens in between.
There is broad recognition, including from Trump world, that the impact of Trump’s election was undermined by poor staffing—which was, in part, a byproduct of a lack of Beltway institutions reflecting a shift in governing ideology. Since 2016, organizations like the Conservative Partners Institute, founded by former Tea Party senator Jim DeMint, have risen to help address “America First” staffing. According to memos from the Trump world, the top priority of a potential Trump administration 2.0 is a massive purge of the federal bureaucracy. This rhetoric is also shared by Vance and Masters, both candidates who enjoyed not only Trump endorsements but Peter Theil’s funding.
The potential MAGA additions to the Senate have one other possible way to make a midterm red wave matter: removing Mitch McConnell from his position as leader. Cocaine Mitch was able to largely co-opt the Trump administration, only to publicly burn all bridges following the 2020 election. McConnell has been able to act unchallenged for quite some time, in part because his ability to fundraise and wield power was unrivaled by the Republican senatorial caucus. In 2020, however, in stepped a Florida man with an impressively effective record of his own: Rick Scott.
While ideologically DeSantis’s predecessor won’t excite many Austro-libertarians, he has the two most important assets to challenge the Senate leadership: money and ambition. He has also been a public defender of Trump’s Senate nominees, jabbing McConnell’s lackluster support for Blake Masters. However, Scott’s greatest vulnerability is publicly admitting that America’s social programs are financially unsustainable, potentially a deadly sin in Washington that will test the strength of Trump’s influence on the Republican caucus most isolated from popular opinion.
If, however, McConnell were somehow able to be dethroned as the king of the Republican Senate, it would reflect a seismic shift in the Beltway GOP, a change that would in many ways be more significant than Trump’s de facto hostile takeover of 2016. A change in actual party structure redefines what is politically possible. Whether or not this would reflect a genuine shift in ideology or simply the changing of nameplates on the board is an open question.
Of course, any discussion of the midterms themselves assumes that any degree of integrity remains in the election system. While many states have tightened up some of the most vulnerable aspects of the 2020 covid-impacted elections, already legal clouds are forming over Pennsylvania, a race to the bottom between a dual-citizen reality-show host from New Jersey and a mentally damaged thug in a hoodie. John Fetterman is already trying to sue improper vote-by-mail ballots into the count. There will be lawyers.
More troubling is the return of familiar rhetoric from all the usual sources. Don’t fall for a “Red Mirage,” says ABC. Election results will be delayed, reminds Facebook. Given the near-unanimously ominous state of polls for the Democrats, it seems alarming that President Joe Biden is warning of election deniers that won’t accept the result of elections they are favored in. Is the night already rigged for his party?
Of course, confusing, self-sabotaging rhetoric is what one should come to expect from our sunsetting commander-in-chief.
In conclusion, today’s midterm elections are most likely to produce little serious change beyond the feeling of satisfaction at watching bad people defeated. This does not, however, mean that there are no indications that there is the potential for something more. Any serious momentum against the regime requires more than replacing team blue with team red; it requires a serious ideological shift within the halls of power and the political will to purge, reform, and ideally destroy the administrative state.
Most Republicans elected today do not have the courage to do that. Their election, however, has the potential to elevate the few that do. Particularly if those few are supported by well-funded, influential institutions that are dedicated to the same ideological shift.
The threat of nuclear war, historic inflation, and spiritual decay are very serious issues.
America desperately needs a serious attempt at addressing them.
Financial Innovation or Intrusion?
Central Bank Digital Currencies (CBDCs) are coming. History shows that technology has never been stopped, nor restrained, for a significant length of time.
Governor Christopher J. Waller commented on some of the risks and benefits that CBDCs can offer. He weighed ideas such as security concerns and how foreign and domestic CBDCs would impact the vital role the American dollar has on the world economy. It appears the Fed is trying to convey their careful consideration of its efficacy and usefulness. Per the Governor, in January of this year:
The Federal Reserve Board published a discussion paper on CBDCs to foster a broad and transparent public dialogue, including the potential benefits and risks of a U.S. CBDC. To date, no decisions have been made by the Board on whether to move forward with a CBDC.
He goes on to proclaim:
But my views are well known. As I have said before, I am highly skeptical of whether there is a compelling need for the Fed to create a digital currency.
Whether for show, pretending the Fed is still on the fence regarding CBDCs, or if he truly is skeptical is unclear. But governments and central planners have no limits when it comes to interfering with the economy and lives of others. When confronted with a technology that will only enhance the powers of the planner, we can be confident the planner will jump at the opportunity.
In his speech, he failed to mention other innovations that CBDCs could offer, such as the ability to track payments, block transactions at will, and set expiry dates on money itself.
If it sounds far fetched, read an excerpt from a paper published by the Bank of Canada last December:
An inconvenient aspect of physical cash is that it can be lost, and there is no way to recover it. We consider a potential feature to solve this problem for offline digital cash: an expiry date to automate personal loss recovery. With this feature enabled, digital cash could not be spent after its expiry date.
Naturally, they try justifying this by claiming:
Consumers whose digital cash expired would automatically receive the funds back into their online account without having to file a claim.
Notice the spin, that, unlike cash which can be lost, if you were to somehow lose your (presumably digital) wallet, then after a set amount of time the money expires and the individual receives the funds again.
Such situations could be useful; yet, there are two sides to every technology.
Consider the “weakening of consumer demand,” according to the Fed. It’s possible they will set expiry dates on CBDCs, forcing people to spend money by a set date in order to “stimulate the economy.” They wouldn’t admit this yet. But once the technology is in place, nightmare financial scenarios such as this could become reality, masquerading as short-term measures or necessary policy decisions.
Either way, once the wheels of progress, or devolution, are in motion, they won’t be stopped. Central banks of the world will continue publishing papers on the pros and cons of CBDCs, and then one day, we’ll wake up to find we’re living in a cashless society.
Fifty Years of Environmentalist Lies
First pollution would cause a new ice age unless we destroyed capitalism and replaced it with socialism and central planning.
That didn’t work out, so then we were told that capitalism was causing global warming and therefore must be destroyed and replaced with socialism and central planning.
That didn’t work out either, so then we were told that capitalism is causing climate change and therefore must be destroyed and replaced by socialism and central planning.
That didn’t happen, so now capitalism must be destroyed and replaced by socialism and central planning with a “great reset” known as the “Green New Deal.”
Fifty years of eco-pocalyptic predictions that turned out to be lies.
Happy Earth Day! And to Klaus Schwab, who displays a framed picture of V.I. Lenin on his office wall, Happy Lenin’s Birthday, too!
Fighting Fire With Fire
Let’s say a house is on fire. The fire department shows up, except rather than spraying water on the fire, they spray gasoline. Moments later they are shocked the fire has gotten out of control.
Yet here we are. The central planners are fighting inflation with more inflation.
In Canada, the province of Quebec plans on giving individuals who make less than $100,000 a year a $500 check to:
…help them cope with higher than expected inflation.
An estimated 6.4 million people are expected to receive this money. Doing the math, the government is spending $3.2 billion it doesn’t have. It will do nothing to decrease the cost of living.
Continuing along these lines, if $500 is good, surely $1,000 would be twice as good. It seems no one in power cares to publicly acknowledge these absurdities. According to the government:
Finance Minister Eric Girard defended the decision to give a $500 cheque to the vast majority of taxpayers as the best solution to help households cope with soaring inflation.
The measure was "better than anything that was proposed," the minister said.
Canada is not the only nation ignoring concepts Austrians have stressed for over a century. In the USA, despite the highest inflation readings in four decades, the desire for new stimulus measures persists, as CBS Reports:
…almost 3 million people have signed a Change.org petition started last year that calls on lawmakers to pass legislation for recurring $2,000 monthly payments.
The petition is only 1.5 million signatures away from being the number one most signed petition on the website Change.org.
But wait, there’s more! Just last week, out of California:
Governor Newsom Proposes $11 Billion Relief Package for Californians Facing Higher Gas Prices
If enacted, eligible residents will receive $400 per vehicle, at a cost of $9 billion, while $2 billion will go to free public transportation.
According to Representative Mike Thompson of California:
The gas stimulus would "provide middle-class Americans with monthly payments to ease the financial burden of this global crisis."
So much stimulus is slated to come out this year that CBS compiled a list of states that will send out stimulus checks to fight inflation. Literally and unapologetically, the headline reads:
Stimulus checks for inflation: Here are the states planning to send money to residents
Of course, all these state stimulus checks cannot hold a candle to what’s coming down the pipeline:
Biden Pitches $5.8 Trillion Plan With Record Tax Hike
Fighting fire with fire, or fighting inflation with inflation; this is what happens when all of history and economic reality is willfully ignored by the powers that be. Money continues to be plentiful, and so too is the government’s desire to spend that which it does not have.
Normally, it's understood that every action has a consequence. This may be true, but unfortunately those writing the checks, levying new taxation, or borrowing newly created money appear to be immune from any adverse consequences. Not only are central planners and politicians not punished, but they’re rewarded with celebrity-like status, unfathomable salaries, and benefits. These few powerful individuals are not widely viewed as villainous traitors against the country; if anything, they get schools named in their honor, maybe a library, and on the odd occasion grace the cover of TIME magazine.
Free Markets Are Not Violent "Social Darwinism"
The ideas of “natural selection” or “Darwinism” are familiar to almost everyone who has an elementary understanding of the natural sciences. It invokes the notion of constant struggle for survival and competition. Only those who are strong will stay alive. Might makes right, in the most literal sense of the term. Even though it is the “Law of the Jungle”, it is commonly believed today that mankind lives outside this jungle, and has escaped the clutches of natural selection.
While the animals instinctively tear each other apart for survival’s sake, humans supposedly are far too advanced for such barbarity. Mankind has long since moved beyond this base instinct of the “survival of the fittest”. We do not try to kill one another, and indeed, even cooperate with each other in order to better ensure our survival. Even though we are not perfect, as the existence of murder, theft, and war indicate, the existence of the human race today is removed totally from any ideas of “natural selection,” and as convincing as this narrative may appear, this entire paradigm of thinking is wholly incorrect.
To be sure, it is true that interpersonal cooperation makes individuals much more productive than they would be in autarkic production. Economists have shown for centuries that the division of labor makes people much more productive than would otherwise be. Additionally, it is true that people today generally do not view each other as potential enemies or threats to their own existence, as they would be forced to do in a setting of brutish nature. However, it is not the case that the civility that people enjoy today was originally an outcome of his own moral stature or belief in non-violence. Man was not driven into cooperation because of his desire to reject natural selection, but because of it.
Some clarification of terms is useful here. The common conception of “natural selection” views it exclusively in terms of creature-vs-creature. In reality, the mechanism of natural selection is much broader than this. Organisms must not only survive against others, but in must survive in their environment. Ludwig von Mises understood and emphasized this crucial point:
Both schools [referring to Social Darwinism and its critics] misunderstood the Darwinian concept of the struggle for survival. It does not refer merely to combat and blows. It means metaphorically the tenacious impulse of beings to keep alive in spite of all factors detrimental to them. As the means of sustenance are scarce, biological competition prevails among all individuals-whether of the same or different species-which feed on the same stuff. It is immaterial whether or not tigers fight one another. What makes every specimen of an animal species a deadly foe of every other specimen is the mere fact of their life-and-death rivalry in their endeavors to snatch a sufficient amount of food. (Theory and History, pg. 39)
As Mises points out, it is a creature’s environment that he must survive within. Other organisms are certainly elements within that environment, but do not wholly comprise it.
Organisms, through the idiosyncrasies and random movements of nature, will gradually evolve and exhibit different characteristics. These differences between organisms will naturally affect their ability to survive in their environment, with those who are more will-adapted surviving at the expense of those who are less well-adapted. Animals and plants we find living in areas with little rainfall have evolved mechanisms by which they can survive without much precipitation (such as many species of cacti, for instance). The differences that these organisms manifested made them more likely to survive within their environment, and as a result, they survived on while others that were less adapted did not.
For millennia, this was all there was to the world’s biological story. Organisms continued to evolve to changing climates and some lived and some died and so it goes. Natural selection just keeps chugging on. Several thousand years ago, mankind came onto the scene. We as a species started out as hunter-gather nomads, but eventually started to form larger communities and grow. Fast-forward to present day, and the world has been largely conquered and tamed by mankind. The modern world is filled with technological marvels and wonders of engineering. Diseases that once killed millions are all but eradicated. What started off as humble bipedal hunter-gatherers have become a planet-conquering race.
However, this success did not come through a rejection of the mechanism of natural selection, but through working within it. Man is, unlike all other animals, species, and organisms, uniquely gifted with the construct of reason. He is granted a conceptual grasp upon himself and the world greater than any other found in all of nature. It was with this reason that man made a monumental discovery. Instead of competing with others, cooperation with others allows for everyone to achieve a greater ability to survive. Instead of the differentiation within all individuals serving as the basis for competition within our environment, those differences can be the basis of trade and cooperation.
If I have a particularly adept ability to bake bread, and my neighbor has a particularly adept ability to craft shoes, one can see an obvious opportunity for trade here. I am better off baking bread and trading my excess bread for the excess shoes of my neighbor. We both get what we want and are wealthier because of the trade. Undoubtably, the option of violence is always available as well. I could simply kill or threaten to kill my neighbor and receive shoes from him in that way. However, violence is always risky. Perhaps he is actually stronger than me and instead I am the one forced to pay tribute to him. Additionally, violence is disadvantageous in the long-term. If I kill him, then I can no longer receive any furniture from him, and continually threatening him can lead to retribution. Regardless, peaceful transaction is more productive and efficient, so it benefits both me and my neighbor for us to trade cooperatively with each other.
Notice that the motivation for peaceful trade has nothing to do with altruism. It is not through a desire to create a more moral society that I engage in peaceful trade, but through my own desire to survive. This change of attitudes has the secondary effect of promoting and encouraging peace and harmony between individuals, but this is not the primary motivator for their trade. The emergence of the division of labor in society was a result of the mechanism of natural selection, not a desire to escape from it. Mises, again, clearly saw and understood this dynamic in the evolution of human civilization:
Man alone by dint of his reason substituted social cooperation for biological competition. What made social cooperation possible is, of course, a natural phenomenon, the higher productivity of labor accomplished under the principle of the division of labor and specialization of tasks. But it was necessary to discover this principle, to comprehend its bearing upon human affairs, and to employ it consciously as a means in the struggle for existence. (Theory and History, pg. 38-39)
Human civilization, as far as we are aware, is the greatest accomplishment of life and reason. Mankind has a grasp and hold on his world in a way heretofore unseen. This accomplishment represents not the rejection of natural selection and its grip upon the future of the human race, but as the greatest level of success within that system. In a world of “survival of the fittest”, human beings in peaceful cooperation have proved to be the fittest, and thus, have survived and thrived.
As Mises stated above, the Social Darwinists and those of similar schools misunderstood the concept of natural selection. They also erred in its application to the human condition. It makes little sense to ask if the ideas of natural selection “should” be applied in modern society. Nobody asks if the idea of 2+2=4 “should” be accepted in society. Math is composed of positive facts, and is not subject to ethical considerations. Similarly, the mechanism of natural selection is a fact of life. It is the basis on which existence within this universe resides. There is no question of whether or not it “should” apply to society. It applies to society whether we like it to or not, just as 2+2=4 applies regardless of how our personal feelings on the matter.
The emergence of civilized society has the effect of making men less aggressive and more kind to each other. In a nomadic existence, those outside the tribe are always potential threats to your own survival. The domesticated and modern man has no such concerns about strangers whom he encounters. This effect is undeniable, but as we stated above, it is a corollary effect. But even in a morally elevated society, man has not escaped the iron grip of natural selection. He must always work to survive in his environment, and his fellow men are only one part of that environment. Having ethically harmonious relationships with those around him certainly improves this aspect of his environment, but is not enough to remove him from the need to survive altogether. He still must eat, drink, sleep, and have clothing and shelter if he is to live, regardless of the comradery he has with those around him.
The peace of modern society is not an incoherent perversion of nature. This peace has emerged in response to the challenges of the natural order. Because man was forced to survive in his environment, he employed his reason to aid him in his quest for survival. His reason led him to production and exchange with others as the best method to aid in his survival. As the marvels of human civilization can show, man’s reason has been amply vindicated. For millennia, the story of human beings was constant violence and distrust towards one another. It was only when this was exchanged for productive peace that the story of human civilization and triumph could begin.
Frank Chodorov: An Intellectual Warrior against the Omnipotent State
February 15 marks the 1887 birth of Frank Chodorov, who Aaron Steelman described as offering an “unwavering defense of individualism” in the “intellectual war against the omnipotent state.”
Born Fishel Chodorowsky, Chodorov was a “lifelong individualist.” Early in his career, he described his position as “unashamedly accepting the doctrine of natural rights, proclaim[ing] the dignity of the individual and denounce[ing] all forms of Statism as human slavery.” Almost two decades later, in his 1962 Out of Step: The Autobiography of an Individualist, he still steadfastly held that position:
If we assume that the individual has an indisputable right to life, we must concede that he has a similar right to the enjoyment of the products of his labor. This we call a property right. The absolute right to property follows from the original right to life because one without the other is meaningless; the means to life must be identified with life itself…We object to the taking of our property by organized society just as we do when a single unit of society commits the act…Robbery is robbery, and no amount of words can make it anything else.
Chodorov also greatly influenced Murray Rothbard, who wrote that “I shall never forget the profound thrill—a thrill of intellectual liberation—that ran through me when I first encountered the name of Frank Chodorov,” and called his analysis “one of the best, though undoubtedly the most neglected, of the ‘little magazines’ that has ever been published in the United States.”
Chodorov’s hope was to reach young people—“the policymakers of the future”--to revive individualism “by implanting the ideas in the minds of the coming generations.” And an important part of that was as editor of the Foundation for Economic Education’s The Freeman, which Leonard Read chose him for in 1954.
As Steelman put it, Chodorov “approached myriad topics from the same perspective: voluntary, peaceful actions are moral and productive and should be encouraged; coercive actions are immoral and should be condemned.” That is why he deserves discovery, or rediscovery, today, when such immoral, coercive actions are much further developed than when he wrote.
As we pass Chodorov’s birthday, it is worth following at least a bit of his thought for those unfamiliar with it. As a sample, consider an abbreviated version of his “Economics Versus Politics,” the first chapter of his 1959 The Rise and Fall of Society:
Becoming Creatures of the State
- The presumably rational human animal has become so inured to political interventions that he cannot think of the making of a living without them.
- It hardly occurs to us that we might do better operating under our own steam, within the limits put upon us by nature, and without political restraints, controls, or subventions…these interventionary measures are placed in our path…for purposes diametrically opposed to our search for a better living.
The State Doesn’t Over-Rule the Realities of Economics
- Society, Government, and the State are basically economic phenomena…so any inquiry into the mechanism of social integrations cannot bypass economic law.
- That there is a science of economics which covers basic principles that operate in all our occupations, and have nothing to do with legislation, is hardly considered.
- Economic laws are self-operating and carry their own sanctions.
- The intrusion of politics into the field of economics is simply evidence of human ignorance or arrogance…Since the beginning of political institutions, there have been attempts to fix wages, control prices…all resulting in failure…because the only competence of politics is in compelling men to do what they do not want to do or to refrain from doing what they are inclined to do.
- The assumption that economics is subservient to politics stems from a logical fallacy…that in controlling men the State can also bend these laws to its will.
- When the State intervenes in the economy…it always does [so] by way of confiscation.
- The Welfare State is in fact an oligarchy of bureaucrats who, in return for the perquisites and prestige of office, undertake to confiscate and redistribute production.
- All welfarism starts with a program of distribution…and ends up with attempts to manage production…and there too they fail.
Violating Economic Laws Leads to State Collapse
- In the long run every State collapses…in its insatiable lust for power [it] increasingly intensified its encroachments on the economy of the nation, causing a consequent decline of interest in production…It was not economically able to meet the strain of some immediate circumstance, like war, and succumbed.
- There is no way for the State to avoid this consequence…except, of course, to abandon its interventions in the economic life of the people it controls, which its inherent avarice for power will not let it do. There is no way for politics to protect itself from politics.
America as a Case Study
- The American State…[was] midwifed by a coterie of men unusually wise in the history of political institutions and committed to the safeguarding of the infant from the mistakes of its predecessors.
- Every precautionary measure known to political science was taken to prevent the new American State from acquiring the self-destructive habit of every State known to history, that of interfering with man’s pursuit of happiness. The people were to be left alone, to work out their individual destinies with whatever capacities nature had endowed them.
- The State was surrounded with a number of ingenious prohibitions and limitations. Not only were its functions clearly defined, but any inclination to go beyond bounds was presumably restrained by a tripartite division of authority, while most of the interventionary powers which the State employs were reserved for the authorities closer to the governed…it was forever, presumably, deprived of the monopoly position necessary to a State on the rampage. Better yet, it was condemned to get along on a meager purse; its powers of taxation were neatly circumscribed.
- The ink was hardly dry on the Constitution before its authors, now in position of authority, began to rewrite it by interpretation, to the end that its bonds would loosen…to extend the power of the central government.
- Social power, the centralization which has been going on since 1789 has pushed American Society into that condition of subservience which the Constitution was intended to prevent.
- In 1913 came the amendment that completely unshackled the American State, for with the revenues derived from unlimited income taxation it could henceforth make unlimited forays into the economy of the people. The Sixteenth Amendment…violated the right of the individual to the product of his efforts, the essential ingredient of freedom.
- There is now no phase of economic life in which the State is not a factor…no enterprise or occupation free of its intervention.
- The metamorphosis of the American State from an apparently harmless establishment to an interventionary machine as powerful as that of Rome at its height took place within a century and a half.
Chodorov’s Main Conclusion
- Society…flourishes only under a condition of freedom.
The Ludwig von Mises Institute has described Frank Chodorov as “an advocate of the free market, individualism, and peace.” In an era when precious few fit that job description, his work is worth renewed understanding and emulation. And reading his work can be the first step to blazing further along the trail he spent his life developing.