Archive for May, 2010

Murray Rothbard Meet the New Maine Republicans

May 25, 2010

If only Murray was around to see this..

An overwhelming majority of delegates to the Maine Republican convention recently voted to scrap the proposed party platform and replace it with a document created by a group of liberty activists.

The document calls for the elimination of the Department of Education, the Federal Reserve, a drastic cut in spending while balancing the budget, instituting a plan for paying down the debt, proclaiming that generational debt shifting is immoral and unconscionable and will not be tolerated, asserting the 10th Amendment sovereignty right of the State of Maine, insisting on the 2nd Amendment right to bear arms, supporting a “Read the Bills” act, to insure clarity, eliminating the corruption associated with earmarks, pork and riders, a call for transparent and honest reporting of economic statistics free of gimmicks and distortions while suggesting a return to the principles of “Austrian Economics,” and a redirection of the economy to one of incentives toward savings and investment.

Jim Rogers: “Karl Marx is Probably Dancing Somewhere”

May 20, 2010

”Karl Marx is probably dancing somewhere,” he says with a grin. ”Because, in America right now, the government owns the automobile industry, the insurance industry, the mortgage industry and the banking industry. The government suddenly owns huge parts of the American economy – that’s what Karl Marx said he wanted, and he didn’t have to fire a shot.”

…And he sees a bleak future for any currency backed by massive debts. Top of his list of bad currencies is the once mighty greenback. For which, in great part, he blames the former US Federal Reserve chairman Alan Greenspan.

”In 1998, Greenspan bailed out Long Term Capital Management [the US hedge fund with over $US5 billion in debts], then he bailed Wall Street out again in 2001 because of the dotcom bubble – the bubble he caused because he kept printing money and bailing out everybody in sight.”

…”Greece is bankrupt,” he says, ”whether they acknowledge it or not. Greece should have been made to take its pain, otherwise it will never change. In five months, years or decades later we’re going to be having the same conversation, only worse.”

And of the euro zone’s latest bailout package? ”The idea that you can solve the problem of debt and consumption with more debt and consumption defies belief.”

…He may be one of the investment world’s best-known Sinophiles, but he’s not an apologist. ”Don’t think I have starry eyes about China. It will have a lot of setbacks along the way, as did America. Since the 19th century America’s had a horrible civil war, we had 15 depressions, we had periodic massacres in the street and, at times, very few human rights.

”Plato said in The Republic that the way societies revolve is they go from dictatorship to oligarchy, to democracy, to chaos and back to dictatorship.” China, according to Rogers, is in the early stages of oligarchy. And, America, if it’s not careful, is heading for chaos.

Welcome Economists!

May 13, 2010

So simple even a MIT PhD can understand…

Russ Roberts and John Papola present: Fear the Boom and Bust: A Hayek vs. Keynes Rap Anthem

Fritz Machlup on the Boom and Bust

May 13, 2010

Good Times, Bad Times, You Know We Had Our Share…

In this speech, Machlup, who served as President (1966) of the American Economic Association, and President of the International Economic Association (1971 74), discusses the economy while it is in the midst of the Great Depression. From beginning to end, it reads as though he is discussing today’s headlines.

He is clearly in his “Austrian” mode, as Ebeling indicates, but unlike Hayek and most Austrians today, Machlup discusses the business cycle in terms of money flows, rather than from the viewpoint of interest rates as signals. Neither is incorrect. They are both looking at the same picture, just from a slightly different perspective. Personally, I prefer the money flow perspective and was pleased to see Machlup using it.

Machlup first discusses the fact that during the boom period leading up to the Great Depression, much like the period leading up to the financial crisis, it was mostly just the prices of real estate and the stock market that were soaring. However, he correctly states that this doesn’t mean there weren’t other maladjustments in the economy.

He then takes on the task of explaining why trying to support the economic structure from collapse is an error, even as far as unemployment is concerned.

He then explains why falling wages might even lead to increasing real wages and argues that the government attempts to support wages through an increase in money supply will ultimately lead to a greater crash.

Using the example of locomotives, he explains why even a slowdown in money printing will lead to an unwinding of the economy (This is important to understand in light of the money printing in China, which has slowed, but not stopped).

Machlup finishes by discussing the then problem of excess reserves in the system and the fact the Federal Reserve will have to stand ready to drain reserves should banks start to employ these excess reserves. He then explains the problem for the Federal Reserve is that instead of draining of reserves, the Federal Reserve is:

showing readiness to purchase government bonds in order to support the market for these bonds, the market for new bonds which the government issues in order to finance its budget deficit. As long as the government has a budget deficit and as long as the Federal Reserve banks have to support the price of bonds by purchases, no control can be effective. Thus, even if we know how we might do something toward controlling the boom, we are not able to apply our knowledge at the time being.

Sound familiar?

The End of the World As We Know It

May 11, 2010

Trillion Dollar Madness

European policy makers have unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop the sovereign-debt crisis. The Federal Reserve will also play a role through currency swaps.

The 16 euro nations agreed in a statement to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to countries facing instability and the European Central Bank said it will buy government and private debt.

There is nothing more to be said other than this is potentially the greatest inflationary plan ever designed. Although statements have been made in the past that the EU has failed to follow through on, the statements issued last night appear to have a sense of seriousness about them, especially the ECB announcement to buy government and private debt, and the Federal Reserve launching of currency swaps. Both these actions suggest spectacular inflation may not be far away. Although the ECB statement says the purchases will be sterilized, meaning they won’t increase the overall money supply in the system, one wonders how long this will go on. A sterilization of the money printing would mean that money would be drained out of other sectors of the EU economy to be given to the governments of the PIIGS, who are proven irresponsibles with money. Draining from the potentially productive sectors of the EU economy to give to the PIIGS is almost as insane as printing the money without sterilization.

That no objection to this madness has come from any finance minister or central banker signals how far down the road we are from any real concern about inflation or the taking away from the productive sectors of the economy. Indeed some of the the statements coming out of the emergency meeting of EU finance ministers are simply absurd.

“The message has gotten through: the euro zone will defend its money,” French Finance Minister Christine Lagarde told reporters in Brussels early today. How opening up the printing presses defends the euro, she did not explain. The last I looked printing money destroyed a currency. It did not help the currency…

Liberty and Property

May 7, 2010

This article was originally delivered as a lecture at Princeton University, October 1958, at the 9th Meeting of the Mont Pelerin Society. Hardcopy edition c) Auburn, Ala.: The Mises Institute, 1991. You can listen to Mises deliver this speech on Mises.org, courtesy of Audio Forum. Download the mp3 [44:22].

“[Government] is the opposite of liberty. It is beating, imprisoning, hanging. Whatever a government does it is ultimately supported by the actions of armed constables. If the government operates a school or a hospital, the funds required are collected by taxes, i.e., by payments exacted from the citizens.”
— Ludwig von Mises

Justin Ptak on “Setting the President’s Agenda” from 2004

May 7, 2010

Still relevant for 2008, 2012…

Ending the Fed, bringing the troops home from around the world, freeing education from indoctrination, eliminating the tax on labor, property, answering the health preservation problem, and more…

The Politicking is Over by Justin Ptak via LewRockwell.com:

Mr. President, thank the lord, the election is over. The 2004 election is one for the history books and the historians to haggle over. The dirty politics is over (as if there is such a thing as pristine politics). It is the end of politics, at least theoretically, for another four years. Dan Rather will no longer rack his brain in the wee hours of the morning figuring out a way for you to lose. The choice between the imperfect and the even more imperfect is over and done with. Thankfully, we need not choose between the unbelievable and the incredulous, or as The Economist noted: the incoherent and the incompetent. Now is the time for policy. True policy. Now is the time to return to your roots. Now is the time to show your true colors. Perhaps you did win a mandate. Perhaps you did rally the majority of the voting public around your values. But, now is the time to work for true progress in this country if you truly believe in any conservative ideals or any of your campaign rhetoric.

It is now or never Mr. President. It is time to show the people who voted for you in good conscience the first time around that you believe in what you said. You have a great opportunity to give back to the country for all that it has given you. You have spoken of letting the American people live their dreams without the interference of the federal government. You have spoke of a more humble foreign policy. You have preached the virtues of the free market. You have espoused the benefits of privatization and deregulation. You have even spoken of a nation not beholden to special interests. For the sake of the toiling peasants across the land it is now time to solidify your legacy and make this country proud. Show the people across the land that you are the one able to continue the Reagan revolution and implement his dreams making them a reality.

You have an excellent opportunity when it comes to a number of issues. No president since Eisenhower has had a greater opportunity to rally the people and politicians to implement your policy prescriptions (I exclude the sympathy votes garnered by LBJ). Didn’t you hear the roar of the crowd? The people are behind you. Many politicians owe their reelection to the fact that you were at the top of the ticket.

First, I suggest the abolition of the federal income tax. It is truly immoral to tax the labor of an individual. If you think this is too dramatic, just keep in mind this will only mean a reduction to a 1986 level of federal spending. Yet, Mr. President, this is not nearly enough, I suggest if you truly believe in an ownership society then surely you should be working for the abolition of property taxes as well. After all, can something truly be called your own if one has to keep paying taxes on it year after year? I have never heard of such a thing. The first company to propose this idea would certainly go out of business or quickly change their marketing to incorporate the terms rent or lease in the deal.

If you can accomplish only the two aforementioned items you will be a hero and possibly a candidate for sainthood. But, this is only the beginning there is so much more you can do to strengthen our economy and our standard of living. Next, I suggest ending the inefficient subsidies that obscure an entrepreneur’s profit calculation and hurt consumers all around. Please don’t be afraid of competition. Be afraid of enabling inefficiency. Be afraid of disrupting competition in the market. Despite well-intentioned, but economically-deficient politicians, the steel industry was damaged beyond repair by their pandering while consumers paid the price.

My next suggestion regards education. I know it is an issue dear to your heart. I know that your wife was once a teacher and you endured the presence of Senator Kennedy long enough to try and fix the so-called problem. However, the real problem is exactly this meddling in education. I am sorry if I am the only one to stand up and say it but, education is really the responsibility of the parents. And even then there comes a time when one has to take one’s own education into your own hands. I’ve even heard that you once believed the same thing: not telling your parents when you applied for business school. I can appreciate the fact that you wanted to accomplish something on your own. I think kids will value their education that much more when they realize its own value and strive for it out of their own free will. The expense does not necessarily have to exclude even the most impoverished among us. I will let you in on a little secret. Not only are public libraries free of charge, but you can walk right into a university research library free of charge providing they accept federal or United Nations documents.

Next, it is on to healthcare. Or should I say health preservation. Please don’t believe the hype Mr. President. The last thing we need is a war on obesity. Don’t believe the recent pronouncements in an irresponsible documentary on the ill-effects of a certain fast food provider. What we need in this country is a little bit of common sense combined with some individual responsibility and accountability when it comes to our choices in food consumption. A little restraint, a healthy diet, and some exercise will go a long way in preventing some of the most devastating medical problems. Furthermore, we need to get the federal government out of the doctor-patient relationship. I know you don’t believe in HillaryCare so let’s allow freedom to reign and every individual to exchange for medical services without the doctor worrying about some two-bit bureaucrat interfering with his prognosis or course of treatment.

Contrary to popular belief the greatest presidents were not ones who led us into war, but the ones who presided over a peaceful nation and avoided any imperial entanglements. It is far past time to end the United States military presence around the world and bring our boys back home. We must stop placing economic sanctions on other countries. It is in our best interest and to the benefit of every consumer to end the sanctions. We must also be willing to engage in unrestricted trade with all nations. We should immediately drop all trade barriers with nations that will also agree to do the same. The restrictions on Canadian maple are doing no one any good and the same goes for the furniture coming out of China and the shrimp exported from Vietnam. A neutral stance with regard to foreign disputes will go along way in securing our own security. Tariffs, quotas, and thousand-page trade agreements are the antithesis of truly free trade. Just wait until we all enjoy a dramatic drop in prices for our favorite foreign products. And guess what Mr. President? The people will thank you for it.

I would be irresponsible if I did not mention our exploding deficit and irresponsible debt. I don’t think you want to be sending the message to the youth of today that it is okay not to balance your checkbook. If it is not okay for an individual to bounce checks, it is definitely not okay for the government to do so. It is not only our children that you are burdening with government debt, but it is everyone living today as well.

Finally, Mr. President, I suggest you ask some pointed questions to Alan Greenspan following in the footsteps of the honorable Rep. Ron Paul. The time is upon us to put the Federal Reserve out of business before its reckless policies reduce our medium of exchange to a worthless scrap. The fumbling fiat dollar needs to be defined in terms of gold to save us from the depressing depreciation of purchasing power that has characterized the Fed’s existence. Moreover, the banking industry deserves to be opened up to competition. Not to mention that bank customers also deserve the same courtesy at least then they’ll know where their dollars are going. Federal Deposit Insurance should be eliminated in favor of a market solution. 100% reserves should become an option on the market or at least banks would have an incentive to keep prudent reserves to avoid bank runs. At the very least we can avoid inherently bankrupt banks propped up by the federal government at taxpayer expense. Inefficient banks should not be bailed out anymore than a watered-down lemonade stand on the corner. Imagine a strong dollar in every American’s pocket Mr. President. To put it mildly, your $300 tax credit will pale in comparison.

If you truly want a strong America, it is the very least you can do.

November 4, 2004

Justin Ptak [send him mail] is the Managing Editor of Aubrey Herbert’s Economic Education.

Copyright © 2004 LewRockwell.com