Power & Market

While talk today of the 2008 subprime mortgage crisis that touched off the Great Recession tends to center mainly around the failure of regulators or bad individual actors at the level of banks and lenders, we should not forget that it was Fed policy from 1993 to 2005 that created the crucial conditions for the ultimate collapse.

Put simply, the Fed kept monetary policy too loose for too long. Viewed charitably, it likely did this in response to several potential exogenous shocks that could have negatively impacted on the US economy and financial sector. In a rapid succession of years the Mexican peso, East Asian, and Russian debt crises caused the Fed to lower rates. The Y2K computer scare also prompted a cash infusion.

Predictably, flushing the system with so much cash caused multiple asset bubbles, most notably in technology and housing. The Fed’s policy also caused yield compression, bringing expected payouts from riskier and thereby more profitable investments closer to that of traditionally safe assets. Money managers who had promised their clients high rates of return were thereby forced to pursue even riskier investments in the hopes of making their promised profits.

This, of course, is where subprime mortgage-backed securities (MBS) comes in. Because apart from the role Fed policy played in setting the monetary conditions for the crisis, massive government involvement in the subprime market created a moral hazard, whereby the banks and lenders selling mortgages were not ultimately on the hook for any of the risk in exchange for their profit.

As Powell backtracks from his tepid taper talk of last month, it is worth drawing attention to the role the Fed has again played, and is continuing to play, in blowing up bubbles in housing and technology—this time even directly buying MBS, in violation of its own charter. Reflecting back on the previous cycle, noting the continued explosion in housing prices, and examining the gapping P/E ratios of the stocks of the major tech indexes, the similarities to its run-up are obvious, worrying, and plainly illustrate the continued failure of the Fed.

Less than two weeks after NATO members reaffirmed allegiance to Article 5—that an attack on one member was an attack on all members—the UK nearly put that pledge to the test. In a shockingly provocative move, the UK’s HMS Defender purposely sailed into Crimean territorial waters on its way to Georgia.

Press reports suggest that there was a dispute between the UK defense and foreign ministries over whether to violate Russia’s claimed territorial waters with a heavily armed warship. According to reports, Prime Minister Boris Johnson himself jumped in to over-rule the more cautious Foreign Office in favor of confrontation.

As Johnson later claimed, because the UK (and the US) does not recognize Russian sovereignty over Crimea, the UK was actually sailing through Ukrainian waters. It was an in-your-face move toward Russia just weeks after the US and NATO were forced to back down from a major clash with Russia in eastern Ukraine

This time, as was the case in eastern Ukraine, the Russians took a different view of the situation. Russian coast guard vessels ordered the HMS Defender to exit Russian territorial waters – an order they punctuated with rare live fire of cannon and dropping of bombs.

Having had their bluff called, the UK government did what all governments do best: it lied. The Russians did not shoot at a UK warship, they claimed. It was a previously-scheduled Russian military exercise in the area.

Unfortunately for the UK government, in its haste to create good propaganda about standing up to Russia, they had a BBC reporter on-board the Defender who spilled the beans: Yes, the Russian military did issue several warnings, yes it did buzz the HMS Defender multiple times, and yes there were shots fired in the Defender’s direction.

Similarly, in the spring, Russia rapidly deployed 75,000 troops on the border with Ukraine in response to a US-backed Ukrainian military build-up. The message was clear: Russia would no longer sit by as the US government and its allies intervened next door.

Russia now has demonstrated that it will protect Crimea, which voted in a 2014 referendum to re-join Russia. The Crimean vote was triggered by the US-backed coup in Ukraine. That is called “unintended consequences” of foreign interventionism.

The problem with the UK, the US, and their NATO allies is that they believe their own propaganda and they act accordingly. A famous 2004 quote attributed to George W. Bush advisor Karl Rove, clearly spelled out this line of thinking. Said Rove, “We're an empire now, and when we act, we create our own reality.”

These two recent near-clashes with Russia demonstrate that the “reality” created by an almost religious belief in American or NATO exceptionalism can often crash hard against the reality of 75,000 troops or the Black Sea Fleet

The anti-Russia propaganda endlessly repeated by both political parties in Washington and amplified by the anti-Trump media for more than four years has completely saturated the Beltway and beyond. Even as the Russiagate conspiracy was proven to be a lie, the propaganda it spawned lives on.

Blustering Boris Johnson almost provoked a major war over an infantile desire to continue poking and prodding Russia in its own backyard. This time the war was averted, but what about next time? Will the adults ever be in charge?

Reprinted with permission.

It was about this time in March 2003 that the bombs began to fall on Baghdad. I remember it well. I watched with a bit of trepidation as the TV news carried image after image of phosphorescent flashes lighting up the black desert night sky. I wondered what would happen to American society as we entered what looked to be a long season of war.

The bombing was riveting to behold. Tomahawks hit their targets dead center and the night vision cameras painted the scene in a ghoulish, somehow satisfying green. During the daytime bombing, daisy cutters and MOABs bent the air and the surrounding built environment around them as they exploded, sucking in a little dust and mirage before bellowing out in a giant display of American military ingenuity.

As the bombs kept falling, my trepidation wore off. It was undeniable that the United States was dominating the battlefield with dazzling pyrotechnics. I began to enjoy watching the bombs fall. The bombing was keeping us safe—I nodded in agreement as cable pundits wrung every last drop of ratings out of the patriotic gore. The sorties and the strikes and the urban areas pitted and cratered by strafings from A-10 Warthogs—what a wonderful show. I was proud to be an American. The flags on the flagpoles outside the library and courthouse and grade school in the sleepy town I lived in seemed to snap in salute to the exploits of war fighters in the Middle East. Bombs solve our problems! Bombs bring freedom and democracy! Bombs keep bigger wars at bay! Long live the bombing of Iraq, and let’s think about expanding the bombing to Iran and beyond—for the sake of peace and the USA!

The subsequent two decades dampened my enthusiasm for bombing considerably. I read Rothbard—that was huge. I read Smedley Butler and Albert Jay Nock. I read Lysander Spooner. I began to read books in Japanese by people who had seen American bombing from the ground, not from the air, and who had, for that very reason, a decidedly different view of what the exercise meant. I visited Vietnam and realized, as a novelist acquaintance mentioned in passing recently, that bombs were never going to break the spirit of the Vietnamese. I started to wonder why we had tried breaking anyone’s spirit in the first place. I couldn’t help but think that maybe we had no business in Southeast Asia at all. What if LBJ really had been a baby killer?

What I had argued for during the Bush years—that bombing kept war away from the homeland and always on the doorstep of some other schmucks (and better them than us)—gradually came to seem rather facile. And dangerous. There was, after all, no guarantee that the people doing the bombing would also make such neat distinctions between near and abroad. This was borne out by meeting veterans of foreign wars. The men I met were often on edge, unable to sleep. They brought the war home with them in their nightmares, an interior uniform they could never fold up and put away. War coarsened American society. War made us think that war was who we were, that war was the best we could do for ourselves and for other countries. War began to seep back into the country from abroad. It wasn’t as easy to keep the war over there as I had thought.

And yet, I still had faith in the American form of government. I thought that the Constitution, although honored largely in the breach, would keep the American homeland sitting pretty in civil liberties no matter how much the American military carpet-bombed Syria or pointed batteries of missiles at Vladimir Putin. That was all somewhere else. I read about the history of the CIA and learned that it was basically an international criminal cartel with diplomatic immunity provided by Washington, DC. But never mind about that. The CIA was off causing mischief in Niger or Pakistan, was busy terrorizing the residents of Yemen and Guatemala and Chad. But we still had the FBI in the States, the organization tasked with keeping law and order and busting up Al Qaeda cells before they could blow up our buildings again.

But then I began to study the court cases emerging from the “war on terror” and I couldn’t shake a rising suspicion that it was all a sham. The FBI was perhaps the worst organization in the federal behemoth. These were the guys supposedly keeping us safe and free? Setups of hapless teenagers, infiltrations of patriotic groups, and—what’s this, the history of Ruby Ridge and of Waco and of Elián González is the opposite of what I was told on CBS? And the FBI was spying on peaceful Japanese Americans before World War II, and the FBI was now undermining—with all the fake search warrants and the “FISA” chicanery of the “war on terror” years—the very Constitution it was charged with upholding? Uh oh. Maybe our Plan B—let the CIA assassinate foreign despots, but let the FBI act as constitutional referee back home—was not such a great plan, after all.

The final straw came in the summer of 2016, when James Comey, the FBI director, exonerated—in a one-man speech, on the basis of no delegated authority whatsoever, and in contradiction to the preponderance of the evidence—his preferred presidential candidate, Hillary Clinton. Clinton had been running one of the biggest embezzling operations in the world. But things tend to go very well for someone whose husband makes personal visits to the business jet of the Attorney General of the United States. Amazing how that works.

We later learned that Comey and his G-men were also spying on Trump and his associates, using a two-bit procedural scheme cooked up by deep state paramours who had decided that elections were too important to leave to the American people. It turned out that the FBI was just the CIA on the home front. Even worse, in many ways. The FBI was running a “Clowns in Action” show, but the consequences were taking a toll domestically. And the whole thing was connected in a sleazy political economy of grift, cover-ups, payoffs, “unfortunate accidents,” and the relentless hounding of anyone, even a president, who stood in the way of ever-increasing power.

It was in January of this year, nearly eighteen years since the invasion of Iraq, that it all hit home. Literally, I guess you could say. There was the National Guard, in Washington. They were there to keep American citizens away from the “people’s house.” It was like a bad movie from the 1980s. Would a flinty-eyed Steven Seagal be walking down some marble steps somewhere, a look of supreme put-out-ness on his grimacing face, to take back control of rogue units and end the domestic terrorism by our own armed forces? But, no, no Seagal in sight. Only a decrepit, senile statist, flanked by partisan toadies, washed up athletes, and lounge singers, barely getting through a few pages of boilerplate before being whisked back to an undisclosed basement location to “govern” the country.

The National Guard remained even after the decrepit statist and his hangers-on had gone back to their usual corruption. Apparently there was some “white supremacy” brewing and the National Guard had to be on hand for a pitched battle with the Klan. Or with Q. Or with the Proud Boys or Martha Stewart or something. None of that ever happened, even remotely. And then it all made sense. It wasn’t the military that kept us safe. It was the military that was always our greatest threat.

This is why the founders wanted well-regulated militias, and not a standing army. Standing armies are what our homegrown Kim Il-Sung, Abraham Lincoln, always craved. Ever since the hijacking of Washington by Lincoln’s progressives in 1860, it has been a steady march from republic to police state. We told ourselves that the standing armies were probably OK, as long as they were standing (or bombing, or whatever) somewhere else. Now, we discover that from the perspective of the deep state, we are all a standing army. Bombing is all the state can do. It’s how it solves every problem, with a war—on poverty, on drugs, on women, on Christmas, on childhood obesity. Now we’re on a war footing against an enemy measured in nanometers. The only way to kill this enemy is apparently to destroy small businesses and turn the economy into an alliance between Big Tech and the printing presses of the Federal Reserve. Line up for your checks, citizens. Take the king’s shilling and form ranks to await orders from the kindly commander in chief. Hail to him. Hail to him or else.

I thought, in my youth, that we were attacking Iraq because of 9/11. Now it’s obvious: there was 9/11 because we had been attacking Iraq. The military didn’t protect us, it implicated us in its terror campaigns against unarmed civilians—the same campaigns it’s been waging since Vicksburg and Wounded Knee. And that has utterly destroyed the United States as a free and prosperous country. The military has turned us all into slaves.

Tucker Carlson pointed last week out that flight suits for pregnant women was a very creepy idea. A military man responded by saying that they had gotten top-flight medical advice so that pregnant women could be more “lethal” in combat. Jacking up the lethality of pregnant women—sounds like something a war state would do. And that’s just what we’ve become.

I’ve learned to start worrying and hate the bombing. But it’s probably too late. The DC war machine has come home, and now they are training their cross hairs on us.

Listen to the Audio Mises Wire version of this article.

So, you've heard that big tech companies have transcended the niggling free market and reached the lofty heights of partisan politics—and act accordingly. Unlike prominent political figures, you might not make the top of the purge list, but it's no secret that censorship is surging. Both to protect your freedom and to stop providing resources to those who would undermine it, it makes sense to jump ship. Now, when everybody else is also doing it. But how?

Freedom Is a Skill

In the world of technology the reeds are tall, and you only get as much freedom as your choices afford you. The taint of political virtue signaling has sadly not left the liberty-minded untouched, and there's plenty of snake-oil salesmen looking for your business. So it's paramount to know how censorship can reliably be stymied.

Freedom by Design Beats Freedom by Convention

Have you heard of this or that new platform whose board has “a strong commitment to free speech”? Well, wouldn't you know it, so did “Big Tech” until there was power to be gained by doing the opposite. A more “virtuous” platform, or a partisan platform “from your side” will not sustainably support your liberty. A platform designed with freedom in mind will.

The Core Concept of Free Design Is Decentralization over Centralization

There are two tiers for decentralized design. The first and highest standard is P2P (peer-to-peer), which connects users directly and relies on no centralized infrastructure. Sadly, not all content can feasibly be shared P2P (yet), so—in a wonderful analogy to the offline world—there is a second tier, federation. Federated services use a common protocol via which anybody can distribute content as long as they have the resources to maintain a server. Everybody could technically run their own server, but more often, a few hundred people maintain servers via which they make access to the protocol easily available to casual users. The emergent framework prevents influence (in the form of a large user base) from coagulating in one instance. Users can easily switch to a new provider (often keeping their data), and competition weeds out of abusive providers.

Tell Me What to Use Already

No. The best I can do is share with you the choices I made and provide an example rationale in light of the common priority of sustainable free speech. Your choices might be different.

Text Messaging

Text messaging fortunately is very lightweight, and P2P approaches are feasible. Tox is a protocol which allows you and all of your contacts to chat based solely on an open-source client which you can install on your device. There is no middleman who can censor you, no centralized server that can be taken down by malicious actors, and no one company which can go bankrupt or have a change of heart regarding this whole free speech thing. Yes, it also supports video and audio chat.

The Way This Works

You simply pick a client, install it, get an ID, share it with someone, and you're good. Forever.

Social Media

This is a bit more tricky, as the content requirements do not lend themselves to P2P. The biggest federated social network is known as the “fediverse.” You might never have heard of it, but you might have heard of software which uses the protocol (i.e., what an admin would run on his “instance,” i.e., his server), such as Pleroma or Mastodon. Alternatively, you might have heard of the biggest instance on the fediverse, Gab. That sadly doesn't cover it all, since the choice of an instance remains very important. To protect users from spam, or unwanted content (such as pornography) on their feed, the protocol allows instance administrators to block other instances, i.e., refuse to federate with them. While this fulfills the stated purpose, many admins also choose to block “problematic” instances. Instances generally publish a block list, though. You should check the “about” page of an instance you're considering, either for a statement that they don't block any other instance, or to ascertain that the block list is compatible with your preferences. I am looking to host my own instance, but barring that, I am considering FSE and liberdon—good free-speech instances which maintain no block list. You can also give an instance a try on a whim and switch later, though.

The Way This Works

Find an instance you like (via web search), and register an account.

Video Content

Creators who have been banned or demonetized by YouTube have congregated around a host of alternative platforms. Most of these platforms, however, are simply imitations of the YouTube model, often with cryptocurrency tacked on for futuristic appeal. There exists however a federated video-sharing protocol, PeerTube. Much of what was said about the fediverse applies here as well, other than it being less common for PeerTube instances to federate with everybody. I enjoy using QOTO and there are even a few search engines which look up all instances for content (e.g., PeerTube Index and Sepia Search).

The Way This Works

As a content consumer, you can use one of the aforementioned search engines to look for content you want to watch. No need to even register unless you want to keep track of favorites on somebody else's server. If so, you can use web search or this page to find interesting instances. Ideally, check how many instances they “follow” (more means access to more content) or how many total videos they give you access to (you can rank instances by either of these metrics here), and you're done.

Web Search

Believe it or not, there is such a thing as P2P web search: YaCy. YaCy is fairly easy to run on your own personal computer, and does not require you to maintain a server. In a sort of combination between a P2P or federated model, you can run your own YaCy (which is the recommended approach), or use somebody else's as far as they make it available (e.g., noisytoot). Your mileage may vary, and sadly it will never be as fast as centralized web search, though it could be similarly fast if you install it on your own computer and have a good internet connection.

The Way This Works

You can just download and install YaCy, and you're set up to search the web on your own. There are very very many configuration options, but you don't have to use them.

Email

Email is already federated, as it turns out. This might also help you grasp the concept of federation. That the text following “@” differs from contact to contact, is a dead giveaway for federation (social media accounts look similar on the fediverse). That most people still go for large-scale providers with questionable involvements in nonmarket processes is simply a symptom of good marketing and herd mentality. Many email providers will offer you more censorship-robust services. I particularly enjoy smaller providers, as they tend to have low running costs and can actually finance the service fully through donations. Further, you can host your own email server, as I do.

The Way This Works

If you are concerned about your current provider, you can simply run a web search for alternative providers; the process is much the same.

Some of These Options Look Daunting

Apathy and comfort are the enemies of freedom and very good bait to incentivize you to give it up. After all, that's how we got here. On a more gentle note, you don't have to go for all of the above, but if there is one particular service—such as social media or messaging—where you feel the cold breath of censorship down your back, it would be a good idea to give that a very serious try right now. None of these options require any particular expertise in technology, though, so it's rather a question of stepping out of your comfort zone than of studying anything at any great length. Not least of all, people are happy to help. Most of these technologies have support chats linked on their websites, and their support is considerably better than what you might have become used to from your current provider's help desk. Though it may not be overt or partisan, the spirit of freedom runs deep in the world of alt-tech, and people are more interested in empowering human action than in corralling you into their service. Be wary of “alternatives” which behave otherwise.