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Liberty News

  • Ten Reasons Why Every State Should Welcome the Graham/Cassidy/Heller/Johnson Health Reform Bill    (2017-09-25)
    By John C. Goodman; Three states--California, New York and Massachusetts--are receiving 37 percent of all Obamacare funds, according to a group of Republican senators. As an example of this inequity,...
  • The Political and Economic Mystiques of State Power    (Richard M. Ebeling, 2017-09-25)
    By: Richard M. Ebeling One of the great political mysteries has been the success of governments in ruling over societies with little opposition and resistance from the vast majority of the population, even when those governments have been brutal tyrannies and openly dictatorial in their control.This has been true, no less, under democratic regimes, as well, under which levels of taxation have been far higher and the degrees of regulation over personal, social and economic activities often much more intrusive than under tyrants of bygone ages. This has been in spite of the fact that those governments are formally “answerable to the people” through regular elections determining who holds high political office with legitimized power over the electorate’s lives.Conquest and Plunder as the Origin of the StateIt has long been understood by historians that most modern States, such as in Europe, have their origins in conquest and plunder. Invading tribes and bands would vanquish existing rulers and their peoples, and settle down to permanently live off those whom they had not killed during the conquest.The German sociologist, Franz Oppenheimer (1864–1943), especially emphasized this in his classic work on the origin of political power and authority, The State (1914). He argued that there are fundamentally two ways by which individuals may obtain the material means that they wish to have to maintain and improve their lives: the economic means and the political means: Said Oppenheimer:There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. There are work or robbery, one’s own labor and the forcible appropriation of the labor of others.I propose in the following discussion to call one’s own labor and the equivalent exchange of one’s own labor for the labor of others, the “economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means” ...Oppenheimer warned that when individuals have the choice between these two methods for acquiring what they desire, people were too often tempted to use coercion rather than avenues of peaceful production and trade. He said: “Wherever opportunity offers, and man possesses the power, he prefers political to economic means for the preservation of his life.”Oppenheimer then asked:What, then, is the State as a sociological concept? The State ... is a social institution, forced by a victorious group of men on a defeated group, with the sole purpose of regulating the dominion of the victorious group over the vanquished, and securing itself against revolt from within and attacks from aboard. ... This dominion had no other purpose than the economic exploitation of the vanquished by the victors. No primitive state known in history originated in any other way.From Roving Bandits to Permanent PowerOppenheimer’s view was restated in more recent times by the Public Choice theorist, Mancur Olson (1932–1998), in his posthumous work, Power and Prosperity (2000), in terms of the economic motives and actions of the conqueror.  Olson argued that the origin of the state could be seen in the replacement of roving bands of plundering thieves by stationary bandits who settle down to rule over a territory over a prolonged period.The roving band cares nothing for what happens in the area it has looted and then leaves behind. But the stationary bandit who wants to permanently live off the conquered area has to take into consideration the conditions and the incentives of his subjects if they are to keep producing and therefore creating something for him to plunder through taxation year-after-year.Thus, out of the taxes he imposes, the stationary bandit must also, in his own self-interest, to some extent secure his subject’s property rights, enforce contracts, establish a judicial system to adjudicate their disputes, and even supply some “public goods,” such as roads and harbors to facilitate commerce.But the resident conqueror’s motive in providing any such protections and enforcements for those over whom he rules is to extract the greatest amount of tax revenue for himself at the least cost of respecting and enforcing the property rights of his subjects, but to whom he must offer some minimal degree of such security. Otherwise, their incentive to produce the wealth out of which his tax revenues come might be far less. Said Mancur Olson:The bandit leader, if he is strong enough to hold a territory securely and monopolize theft there, has an encompassing interest in his domain. This encompassing interest leads him to limit and regularize the rate of theft and to spend some of the resources he controls on public goods that benefit his victims no less than himself.Since the settled bandit’s victims are for him a source of tax payments, he prohibits the murder and maiming of his subjects. Because stealing by his subjects, and the theft-averting behavior that it generates, reduces total income, the bandit does not allow theft by anyone but himself.He serves his interests by spending some of the resources he controls to deter crime among his subjects and to provide other public goods. A bandit leader with sufficient strength to control and hold a territory has an incentive to settle down, to wear a crown, and to become a public goods-providing autocrat.But brute force and fear is, in the long run, not a sustainable basis for permanent plunder and privilege by a conquering few over the conquered many. It is far better if those over whom the ruler rules not only acquiesce in his control and commands out of fear, but also do so willingly through belief in the rightness and justness of his political authority over them.How, then, do political rulers inculcate this belief in their right to rule and with it an obedient allegiance and loyalty by the subjects and citizens to the governments they command?Louis Rougier and Political and Economic MystiquesThis was a theme taken up by the French philosopher and classical liberal economist, Louis Rougier (1889–1982). Especially in the two decades of the 1920s and 1930s, between the two World Wars, Rougier was one of the leading European defenders of limited government and free market, competitive capitalism, and a critic of the totalitarian collectivisms of that time that seemed to be threatening to dominate much of the world.He discussed this question in two works, Modern Political Mystiques and Their International Impact (1935) and Modern Economic Mystiques and Their International Impact (1938), both originally delivered as series of lectures at the Graduate Institute of International Studies in Geneva, Switzerland. The Graduate Institute was a classical liberal-oriented seat of higher learning that with the rise of Italian fascism and German Nazism served as a refuge for a number of prominent scholars searching for an intellectual home away from their, now, totalitarian homelands (including the Austrian economist, Ludwig von Mises, German economist, Wilhelm Röpke, and Italian historian, Guglielmo Ferrero, among others).Governments and ideological movements, Rougier explained, wrap themselves in “mystiques” that serve as the rationales for claims to an ethical and legal right to rule. What is a “mystique”? Said Rougier:The term refers then to a combination of beliefs which could not be demonstrated by reason or based on experience but which are accepted blindly for irrational reasons: by the effect of custom of which Pascal speaks, of education, of authority, of example, of preconceptions alleged to be inevitable, in short by the effect of all the pressures of social conformism.These beliefs may be moral, esthetic, scientific, social, or political. Every doctrine that one no longer feels the curiosity or the need to call into question, whether it is because one accepts it as a dogma so evident that any inquiry about its solidity is superfluous, or because one adheres to it by an act of faith considered so necessary as a consequence of its sacrosanct beneficence that to abandon it would be outrageous, is a mystique and is accepted as such.The Economic Mystique versus Laws of the MarketplaceAn “economic mystique,” Rougier said, is one that allows a person to believe in the power of government to do anything it wants, say, in the form of various types of government intervention affecting wages, prices or production with the unquestioning presumption that what the government declares as the intervention’s purpose will fully materialize with no negative or unintended consequences.The notion that there are economic “laws” of supply and demand, or cost and price relationships effecting profitability or employability, are either unknown or ignored or rejected by a seemingly unreasoned belief that because the stated goal of the intervention is “good,” then it is only necessary for government to implement the interventionist policy to make it so. The same applies, Rougier, said, in the case of the proponents of socialist central planning.If something hinders or prevents the achievement of the intervention’s goal, then it must be due to either not enough “force” being applied or not enough money spent to make it so; or some nefarious, socially evil individuals or groups acting to thwart it. The same applies, Rougier argued, in the case of the proponents of socialist central planning. The failure to successfully meet the government’s planning targets can only be due to intriguing “enemies of the people,” or traitorous “wreckers” in the service of foreign powers trying undermine the triumph of the collectivist utopia, or a negligent lack of sufficient enthusiasm and disciplined dedication among some of the workers and managers.The classical liberal-oriented economist has reason on his side relative to the believer in such economic mystiques because, Rougier insisted, not every value-judgment is merely a matter of “subjective” or personal, desire or belief, not open to objective investigation or evaluation. If a person says that he prefers wearing red ties to blue ones, or enjoys driving one type of car versus another, there may be little to dispute or challenge by someone else about that stated preference.But if someone says, for instance, that they support a government imposed minimum wage or a trade barrier because he believes that such a policies will, respectively, improve the living condition of the unskilled with no affect on the amount of employment for such workers, or will increase the overall level of production and employment in the economy with no adverse effects, the economist has a logical and experiential benchmark on the basis of which to evaluate them. That benchmark is: will the interventionist means chosen, in fact, achieve the goals, purposes and ends in mind? Or as Rougier expressed it:If afflicted with an inferiority complex, you prefer authoritarian regimes [because it “subjectively” enhances your sense of self-esteem], nobody will deny that your choice answers a real need in your character, and there is nothing to argue about. But if you state, ‘I prefer authoritarian and totalitarian governments to liberal government because they are better suited to assure the well-being of individuals and the peace of nations,’ you offer a judgment that one can submit to the verification of experience, to the facts and of history.And the lessons of economic history and economic theory show beyond much of a reasonable doubt, said Rougier, that the means chosen in these cases — minimum wage laws, protectionist trade barriers, authoritarian regimes — will not bring about the desired ends of higher incomes, improved living standards, and international peace and harmony.Attempts to reason with the holders of such economic mystiques are often brushed aside by their believers. The reasoned argumentation, presentation and discussion of historical or contemporary facts and evidence or logical argument are often emotionally rejected as a proof that the critic of the economic mystique has no compassion or a sense of caring for those to be helped by the intervention or the government planning.Political Mystiques as Rationalizations of Power and PlunderPart of the reason for this, Rougier suggests, is the wider and deeper problem of “political mystiques” that serve as the bases to justify and legitimize the right of some to rule over others, and the accompanying belief in their power to do “good” if only given enough power.From the time of antiquity, Rougier explains, the conquerors and rulers have searched for that legitimizing justification for their control and command over others in society. The “monarchical mystique” did so, and for thousands of years, by successfully rationalizing political power through the claim and the indoctrination of a divine right to rule. The king held his absolute and unquestionable authority because he was a “god” himself, or had had this status bestowed on him by “the gods” or God.From the time of the ancient Hebrews the anointing of the ruler by a high priest by poring “holy oil” upon his head, or being handed the sacred sceptered, or by having placing a crown upon the royal head, all symbolized that a “higher power” than any mortal man had selected this person and his heirs to command all others in his domains with loyalty and obedience by all those below him.In Europe a long train of events over several hundreds of years challenged and weakened the absolutist claims of the king or emperor; this was partly done by the Catholic Church attempting to maintain or extend its own autonomy and authority, and partly by noblemen and then commoners who chafed under and resented and resisted the arbitrary decisions and demands of the monarchs under which they lived. By the time of the Enlightenment in the 1700s, secular skepticism and political dissent weakened and finally undermined the “superstition” of the “divine” authority and legitimacy of kings. While it linger on into the 1800s, the right of kings to rule over and command others was symbolically beheaded along with the actual decapitation of the king of France, Louis XVI, in Paris in 1793.The Democratic Mystique of “the People’s” Self-RuleBut a new mystique arose rapidly in its place in the late eighteenth and early nineteenth centuries, the “democratic mystique.” From the rule of “the one” there emerged the idea and ideal of the “rule of the many.” Rougier explained:By a daring transposition sovereignty was transferred from the monarch to the people themselves. It appeared that as soon as power was exercised by those who bore its burden, it would be exercised with the minimum of despotism ...Since all the citizens are considered by their representatives to participate in the establishment of the law, the law seems to be the expression of the general will. Everyone submits to it willingly because everyone has the illusion that he has participated in its formation and that, obeying everybody, he obeys himself. The fundamental political problem, that of freely granted obedience, is, in a way, solved by definition.  This is where the great strength of democracies comes from. Never has any form of government exercised such extensive discretionary power over the governed without the apparatus of coercion.Let us compare the ease with which the democracies have established general [military] conscription or have taken away up to 80 percent of the wealth of their citizens without provoking a revolt with the difficulty the monarchies under the old regime had in raising soldiers and taxes. By making the sovereign and the subject one, the democratic mystique has brought about the maximum of authority with the minimum of constraint.But democracy “works,” argued Rougier, only for as long as the reach and responsibility of a government extends, in general, no further than primarily securing, protecting and respecting the rights of the individual members of society to their lives, liberty and property. The freedom of the individual is only assured for as long as the government does not intrude into the marketplace with interventions, regulations, controls and central planning.That is, democracy served as a peaceful way of appointing those holding political office and securing people’s liberty rather than violating it only for as long as it functioned in a cultural and social setting based on the ideas and ideals of political and economic classical liberalism. In Rougier’s words:As soon as the state adds economic power to its political power, whether it holds all the means of production or simply claims to regulate production according to a preconceived plan, it turns out to have all powers and to grant some of them only arbitrarily to individuals.In reality, for an individual to be free vis-à-vis the state he must be able to do without the state’s services, he must be able, if need be, to resign from a public function, if he is forced to act against his conscience, without running the risk of not finding other employment. Now this in inconceivable in a statist or collectivist regime, where the individual has no other alternative than to be a functionary, a client of the state, or die of hunger.Buried in the democratic mystique, Rougier explains, in the fallacy of “the people” ruling themselves. Once delegation of authority is transferred from the citizens themselves to representatives in the government who pass, administer, and enforce legislation and the law, two things have historically come into play. First, the elected representatives are discovered to have their own purposes and interests that may have little or nothing to do with that of the constituents as a whole who have put them in political office.And, second, election and reelection may be more easily assured and maintained by serving coalitions of special interest groups who see ways of using the State for their own ends outside of the free and voluntary competition of market exchange. The political system of politicians and special interests “buries economic liberalism by using state intervention for its own benefit to maintain the positions it has acquired,” lamented Rougier.Writing in the 1930s, Louis Rougier’s concern and fear was that the corrupted and corrupting “democratic mystique” was being superseded by the “totalitarian mystiques” of communism, fascism and Nazism – mystiques surrounding alternative collectivisms in the forms of Marxian class conflict, fascist aggressive nationalism, and Nazi “race warfare.” Here were other conceptions of the collective mystique of “the will of the people” far more brutal and tyrannical than anything seen in modern history.The Tyranny of Modern Tribal Identity MystiquesToday, there are other “political mystiques” that are advancing over the landscape of society. These are the “gender mystique,” the new multicultural “race mystique,” and the new anti-income inequality “social class conflict mystique.” They are all versions and forms of cultural and economic collectivism joined with demagogic intolerance of speech, thought and peaceful action, based on new tribal mystiques of group identity within which the individual is confined and from which there is no escape as an thinking and choosing individual.And here, once again, what makes them “mystiques” as Rougier defined them, are unreflective and unchallengeable beliefs not open to reasoned discourse and debate. Any questioning and criticism of them is met with hysteria, emotional condemnation, and insistence that the opponent of the new tribal-group identity mystique be forcibly silenced and banished. Even, as some dare to say, to be put to death as an enemy of the gender, racial or ethnic collectives declared to be the irreducible social entities within which the individual is to be culturally and politically imprisoned.In the 1930s, Louis Rougier insisted that if both the democratic mystique and the totalitarian mystiques were to be stopped and reversed, there was only one lasting avenue: “to return to the practices of political, economic, and cultural [classical] liberalism.” That message is no less true and relevant today in the face of the emerging totalitarianism of the new gender, racial and ethnic “identity politics” mystiques.
  • Doesn't Mexico Have Building Codes?    (Ryan McMaken, 2017-09-24)
    By: Ryan McMaken During the 1987 Whittier Narrows earthquake in Los Angeles, my mother was working in downtown Los Angeles in one of the buildings then known as the Arco Towers. The building was of early 1970s vintage, but thanks to expensive technology introduced to help high-rises withstand earthquakes, the Arco Towers merely swayed from side to side, rather than collapse in response to the quake. That earthquake was a medium-sized earthquake (to use casual terminology), but the building is designed to withstand far larger tremors. Eight people died in the wake of the quake. Two years earlier, the 1985 Mexico City earthquake struck with devastating results. While the earthquake was considerably stronger, the casualty totals were far beyond what we would expect were a similar quake to hit Los Angeles. While the number is still in dispute today, more than 30,000 people may have died in the quake, thanks largely to collapsed buildings. Fortunately, the death toll in Tuesday's Mexico-City quake looks to be much, much smaller than was the case in 1985. So far, casualty counts number in the low hundreds. The Wall Street Journal today attributes this to improvements in building codes: Mexico City’s building codes improved dramatically in the years following the city’s 1985 earthquake, a magnitude 8.1 temblor that killed more than 6,000 and toppled nearly 2,300 buildings, including hospitals, schools, hotels and entire high-rise apartment blocks.After 1985, “the building codes changed a lot,” said Ricardo Warman, an architect who both builds and renovates houses in the Condesa and Roma neighborhoods of central Mexico City, among the hardest hit on Tuesday. “That is why most of the buildings that fell are from the 1950s, ’60s and ’70s.”But why was Mexico still building earthquake-prone construction in the 1970s? By the mid-80s, California had already been at work addressing the earthquake issue for years. Why didn't Mexican cities pass better building code laws before then? RELATED: "Why Natural Disasters Are Worse For Poor Countries" by Ryan McMakenWell, it turns out that they did have building codes before then, but merely passing laws doesn't actually solve problems. Prior to this week's quake — while commenting on Hurricane Harvey — Bret Stephens at the New York Times recalled: Why do richer countries fare so much better than poorer ones when it comes to natural disasters? It isn’t just better regulation. I grew up in Mexico City, which adopted stringent building codes following a devastating earthquake in 1957. That didn’t save the city in the 1985 earthquake, when we learned that those codes had been flouted for years by lax or corrupt building inspectors, and thousands of people were buried under the rubble of shoddy construction. Regulation is only as good, or bad, as its enforcement. So, for nearly 30 years leading up to the 1985 quake, new, improved building codes had been in place. but it seems that — as one Mexico City engineer described it — enforcement was "very lax."But why did they ignore them? Was it part of just an amorphous tolerance for doing a lousy job? As Walter Block recently noted, we can't just blame corruption: They can have all the regulations and “safety standards” they want in poverty-stricken nations such as [Bangladesh]. Either these bureaucratic rules will be ignored, or, if they are rigidly upheld and enforced, then virtually no new houses will be built, and almost all extant houses will have to be torn down. Why? Since this country is so poor, it cannot possibly live “up” to these modern, western, regulations and “safety standards.”In most cases, people don't ignore building codes because they're sociopaths who don't care about the safety of their customers.Thanks to the existence of greed, of course, there's always the temptation to skimp on safety in order to pad profits, and just hope things work out. But in wealthy nations, there are numerous incentives beyond government regulation to not do this: (1) insurance companies may refuse to insure structures that are of questionable safety, and (2) there are well-developed legal systems that facilitate lawsuits against negligent builders. But perhaps most importantly: consumers of housing and office space in wealth countries can more often afford to pay for units in buildings where expensive retrofits and safety features have been added. In poor countries, by contrast, consumers are far less likely to be able to afford buildings constructed to specifications that would be considered run-of-the-mill in wealthier areas. Given that producers can only set prices at levels their customers can afford to pay, builders will build accordingly. The end result is that in wealthy areas, paying close attention to code regulations may shave some profitability off a building project. But in a poor country — as Block correctly suggests — rigid enforcement is more likely to totally erase profitability, and prevent new construction from being built at all. On other words, the opportunity cost of building a modern, earthquake-proof building in a poor country is much higher. So what's the solution? As Stephens points out: "Every child knows that houses of brick are safer than houses of wood or straw — and therefore cost more to build." Mexicans — of course — are already well aware that the ideal solution is to produce high quality housing for everyone. The problem is that sort of thing is expensive. Unfortunately, the answer to this conundrum is the same as with building to withstand hurricanes and other natural disasters:  bulding wealth is the only true long term solution. City councils can pass building code laws all day long, but as long as residents lacks the incomes necessary to afford housing, offices, and factory space that's built to withstand earthquakes, there will always be an especially large incentive to cut corners on construction. Innocent people will suffer as a result. 
  • There's Nothing Moral about Opposing "Price-Gouging"    (Christopher Westley, 2017-09-24)
    By: Christopher Westley Let’s face it. The economic case for “price gouging” is one for which economists have both a strong argument and minority view, relative to more popular narratives drilled onto the three-by-five card of acceptable opinion. In that sense, we are in familiar territory, going back at least to Thomas Carlyle’s attack on economics as “the dismal science” when he realized economic arguments, when accepted by the broader population, would hasten the demise of slavery. So I was not surprised when a good friend sent me a Dallas News op-ed by University of Texas sociologist Daniel Fridman raising moral objections to the economic case defending rising prices for necessities following natural disasters. I had an idea about the depth of Mr. Fridman’s argument when he began acknowledging the economic case thusly:[Some economists] claim that we should not mess with prices, whose job is to get goods to those who want them the most. If prices go up, buyers will think twice before purchasing something they may not need, while suppliers will be incentivized to go the extra mile and provide needed goods in order to make more money. If you take that extra gain away, you will have fewer goods and in the wrong hands.There is some truth to this.It’s very broad-minded for Mr. Fridman to acknowledge some truth to the Laws of Supply and Demand. Coming from someone in the People’s Republic of Austin, this must be something of a milestone. (One wonders what other natural laws in which he recognizes some truth.) But it’s not the truth of these laws that concern him. Rather, it’s how they ignore the moral case against “gouging,” which Mr. Fridman believes is understood “almost universally.” He writes:The moral condemnation of price gouging is a recognition that in certain social situations, raising prices is kicking vulnerable people when they are down. Our reaction to price gouging is not some silly knee-jerk rejection from people who don't know enough about economics, as it is sometimes portrayed. It is, rather, deeply reflective of the societal need for mechanisms other than markets.I am not here to criticize the moral case against price “gouging” except to note that a thinker on the level of Thomas Aquinas considered its shortcomings. Rather, I would suggest that morality is hardly divorced from the case made by economics and that recognizing this relationship is key to returning economics to its roots. Between the time of Adam Smith and the Progressive Era, one studied economics as a branch of the Moral Sciences. Even today, a common thread between a Thomas Sowell and a Paul Krugman, or a Jeffrey Sachs and a Bill Easterly, would be moral indignation about something, and the desire to apply economic theory to correct it.So what are the moral cases for “gouging”? Let’s consider three.First, one wonders about the morality of those who would urge acts of violence — fines or imprisonment — against individuals for selling their own property at whatever price they want. This is essentially what Mr. Fridman argues for when supporting anti-“gouging” rules. But would he be willing to impose it himself by, say, personally raiding the perpetrator’s savings or locking her up in his garage for charging prices he dislikes? If he would have moral qualms about executing such acts himself, then why wouldn’t he have qualms about leaving them up to individual functionaries of the state? By arguing for such state power, Mr. Fridman simply trades small, disparate moral harms (subjectively determined) for actual large, institutionalized ones.This point gets to the nature of the state, which is an entity in society that performs actions legally that would be considered profoundly immoral when performed on an individual basis. Those who support anti-“gouging” legislation effectively support putting a boot on the neck of many producers crucial to surviving a natural disaster.Second, there’s the morality of allowing prices to reflect market conditions before and after a natural disaster. Given the certainty of shortages, waste, and needlessly prolonged recoveries when anti-“gouging” laws are enforced (through threats of violence!), then why can’t opposing such ordinances be based on morality as well? While Mr. Fridman argues pro-“gouging” economists such as Mark Perry and Michael Salinger ignore morality, they might be motivated by it.One is reminded of the role of market prices in causing self-interested individuals to act in ways that are socially beneficial. One woman from the Florida Keys told USA Today about the sense of foreboding she felt driving back to her house and witnessing the damage wrought by Hurricane Irma, and the profound relief she felt upon finding her own home relatively unscathed. “Thank God our insurance company threatened to cancel us if we didn’t put on a metal roof,” she said. The threat of lost or higher priced insurance motivated many property owners to upgrade their houses to hurricane strength. Hundreds of thousands of Floridians, for instance, received discounted insurance for buying and then using hurricane shutters. According to the Associated Press, “Citigroup estimated that damages were just $50 billion — well below initial figures — in part because some homes were better equipped to weather the wind and rain than during [Hurricane] Andrew.”Finally and most importantly, the debate over “gouging” illustrates a dominant utilitarianism in which the majority should be allowed to force its will on the minority, as long as the end is valued highly enough. For Mr. Fridman, the near universal acceptability of anti-gouging laws are enough for him to determine their morality. Mises addresses this point in Human Action (Scholars Edition, p. 153):The liberals do not maintain that majorities are godlike and infallible; they do not contend that the mere fact that a policy is advocated by the many is a proof of its merits for the common weal. They do not recommend the dictatorship of the majority and the violent oppression of dissenting minorities. Liberalism aims at a political constitution which safeguards the smooth working of social cooperation and the progressive intensification of mutual social relations. Its main objective is the avoidance of violent conflicts, of wars and revolutions that must disintegrate the social collaboration of men and throw people back into the primitive conditions of barbarism where all tribes and political bodies endlessly fought one another.It follows that permitting “gouging” is congruent with a political economy of peace, whereas intervening in the price system invites violence. Forcing markets below those that would clear the market always and everywhere, in normal times and during natural disasters, pits buyers against sellers and consumers against producers, when they otherwise would have strong incentives to cooperate.I fear I may not have been fair to Mr. Fridman. After all, he wrote an op-ed with strict word count restrictions. He may well be familiar with the moral case on the other side of the “gouging” debate and yet be unable to address them. Still, I’d hope he’d concede that while natural disasters are by nature disruptive, the anti-“gougers” have no unique claim on the moral high ground. Economists who advocate against policies that prolong suffering and hinder recovery have morality on their side too.
  • The New Electronic Police State    (Matthew Feeney, 2017-09-24)
    Matthew Feeney According to the government, your privacy protections evaporate the moment you set foot in an airport. Although the Fourth Amendment protects us and our “effects” from “unreasonable searches and seizures,” Customs and Border Protection agents can take advantage of an exception to this constitutional protection and search our electronic devices at airports without first establishing reasonable suspicion or securing a warrant. According to the government, your privacy protections evaporate the moment you set foot in an airport. It’s a problem that’s only getting worse. Last week the American Civil Liberties Union and the Electronic Frontier Foundation entered into a suit on behalf of eleven travelers against the Department of Homeland Security. The plaintiffs claim that warrantless and suspicionless border electronic device searches violate the First and Fourth Amendments. They’re absolutely right. CBP agents are gaining access to massive troves of personal information related to law-abiding Americans. This exception is an affront to everyone’s privacy and must be revoked. For example, earlier this year Sidd Bikkannavar, an engineer at NASA’s Jet Propulsion Laboratory, was subject to a secondary airport inspection at the airport in Houston, and was asked by a customs and border patrol agent for the passcode to a phone he was carrying. The phone belonged to NASA, and although Bikkannayar explained as much, the agent continued asking for the code. Fearing that CBP would seize the phone and that he would miss his connecting flight to Los Angeles, Bikkannavar relented and provided it. After around 30 minutes the agent returned with the phone, telling Bikkannavar the phone had been analyzed with “algorithms” and that no “derogatory” information had been found. The idea that the border or airport is a region of reduced privacy expectations is not new. As Justice Rehnquist noted in the 1977 case United States v. Ramsey, the same Congress that proposed the Bill of Rights passed the United States’ first customs statute, giving officials the authority to search “any ship or vessel, in which they shall have reason to suspect any goods, wares or merchandise subject to duty shall be concealed.” It was also in Ramsey that Rehnquist declared, “That searches made at the border, pursuant to the longstanding right of the sovereign to protect itself by stopping and examining persons and property crossing into this country, are reasonable simply by virtue of the fact that they occur at the border should, by now, require no extended demonstration.” Yet today, unlike 1977 or 1789, more than three quarters of American adults own smartphones. These devices contain vast amounts of data related to our personal and professional lives. CBP policy does not allow agents to access information housed on remote servers, but even a search of information resident on an electronic device can uncover videos, texts, photos and reveal what apps someone has downloaded. These apps can expose dating habits as well as religious affiliations. Thanks to current policy, any traveler could be coerced into allowing CBP to access this private information without any suspicion that they have violated immigration law. CBP searches of electronic devices are relatively rare, but the number of such searches has been increasing over the last few years. These searches do not always target travelers from terrorist hotspots, either. Bikkannayar is an American citizen and member of the Border Protection Global Entry program, which is designed for what CBP describes as “pre-approved, low-risk travelers.” Earlier this year then-DHS Secretary John Kelly discussed, among other things, these electronic device searches at a Senate Homeland Security and Governmental Affairs Committee hearing. While some might think that the warrantless searches of electronic devices may be a valuable counter-terrorism tactic, Kelly did not cite a single instance where an electronic device search had lead to a terrorism charge or conviction. As the recent ACLU and Electronic Frontier Foundation suit shows, these searches have disrupted the lives and violated the privacy of a NASA engineer, a former Air Force Captain, a Harvard graduate student, a nursing student, and entrepreneurs, all citizens with no connections to terrorist activity. It’s important that the federal government keep us safe from foreign threats, and CBP should be able to examine phones and laptops belonging to people who are the subject of a warrant. But CBP should not have the authority to go on fishing expeditions for incriminating data, harassing and intimidating citizens and permanent residents without any evidence of wrongdoing. Matthew Feeney is a policy analyst at the Cato Institute.
  • Elvis's Own Personal Drug War    (Chris Calton, 2017-09-22)
    By: Chris Calton When Elvis Presley died in 1977 from drug abuse, he was an official, badge-carrying federal agent for the Bureau of Narcotics and Dangerous Drugs, an honorary appointment granted by President Richard Nixon.To say that Elvis Presley had a respect for law enforcement is to drastically understate his enthusiasm. In another life, he would have liked to have been a police officer, and he was obsessed with collecting police badges and uniforms. When he would perform shows around the country, he always made an effort to obtain a badge from the local police force, sometimes by using his celebrity status and other times by donating money to police functions. In some cases, he would offer a $5,000 donation to a police ball in order to procure a badge. He was also known to give expensive cars to local sheriffs, including Sherriff Bill Morris of Memphis who gratefully deputized Presley after receiving a gift of a Mercedes-Benz.Elvis's Memphis police badge and IDHis generosity was so lavishly offered to members of the Denver police that it actually brought about suspicions of graft and corruption after the King’s death. Along with Cadillacs and Lincoln luxury cars, he paid for officers to take high-class vacations and gifted them with pricey jewelry. He purchased his own Denver police uniform and was made an honorary captain of the Denver Police Force. He would have been a police officer, Elvis once confided, but “God blessed him with a voice.”Elvis posing in his Denver police uniformElvis Becomes a Drug WarriorIn 1970, California senator George Murphy promised to get Elvis a meeting with FBI director J. Edgar Hoover and Bureau of Narcotics and Dangerous Drugs (BNDD) director John Ingersoll. In both cases, Elvis was hoping that a generous private donation would be enough to buy him a federal badge from each of these departments.Elvis never did get to meet Hoover, and when called the BNDD, Ingersoll was out of the office. He spoke, instead, to the number-two man of the Bureau, Deputy Director John Finlator. The deputy director was not swayed by Elvis’s fame or money and informed him that his department could neither accept donations nor issue honorary badges. Elvis’s offer was spurned.Undeterred, Elvis penned a hand-written letter to President Nixon. In the letter, Elvis expressed his concerns for the “drug culture, the hippie elements, the SDS [Students for a Democratic Society], Black Panthers, etc.” Offering his services as a celebrity communicator to the president, Elvis went on to say, “I can and will do more good if I were made a Federal Agent at Large.”To help the president wage his war against the drug users, the hippies, and the communists, Elvis said, “all I need is the Federal credentials.”On December 21, 1970, President Nixon agreed to meet the King. In full form, according to an interview given by Egil Krogh, Nixon’s aide who received Elvis, he arrived “in a purple jumpsuit and a white shirt open to the navel with a big gold chain and thick-rimmed sunglasses.” The meeting with the president got off to an awkward start, with Elvis complaining to Nixon about the difficulties of performing in Las Vegas and expressing his anger for The Beatles.Finally, Elvis revealed his agenda. “Mr. President,” he said, “can you get me a badge from the Bureau of Narcotics and Dangerous Drugs?”This is what Egil Krogh was worried about. He knew that Elvis had already been turned away by the BNDD on this exact matter. Nixon turned to Krogh, calling him by his nickname: “Bud, can we get him a badge?”“Well, Mr. President,” Krogh answered, “if you want to get him a badge, we can do that.”Nixon gave the order to get the King a badge, which elated Elvis so much that he crossed to the other side of the desk and gave the president a bear hug. Elvis then had his body guards bring in the gifts he had brought with him, which he lavished on the president and his aides, including jewelry for their wives. Before leaving, Nixon and Elvis posed for one of the most famous photographs ever taken in the Oval Office.Elvis was now a badge-carrying drug warrior, and he carried his badge with him for the rest of his life, until he died seven years later from a drug overdose.
  • The Supreme Court Failed Us On Vietnam    (Jacob G. Hornberger, 2017-09-22)
    By: Jacob G. Hornberger With last weeks’s beginning of Ken Burns’ new documentary about the Vietnam War, the war will be brought back to the front burner for national discussion and debate.There is one thing that is crystal clear and indisputable about the U.S. intervention into Vietnam’s civil war: The intervention was illegal under our form of government. That’s because it was waged in violation of the U.S. Constitution, the document that sets forth the powers of U.S. officials, including those in the military and the CIA.When the federal government was called into existence by the Constitution, its powers were limited to those set forth in the document itself. If a power isn’t enumerated, then it cannot lawfully be exercised.The Constitution does not give the power to initiate war to the president. The Framers and the American people who ratified the Constitution did not want the president or the military making that decision. That’s why the Constitution delegates the power to declare war to Congress, the elected representatives of the American people.Thus, if the president initiates war against another nation without a congressional declaration of war, he is acting unlawfully under our form of government.The interesting question is: Why didn’t the U.S. Supreme Court and the federal judiciary declare the U.S. war on North Vietnam to be unconstitutional?Ever since the Supreme Court’s decision in Marbury vs. Madison in 1803, the Court has assumed the authority and responsibility to declare acts of the president or laws enacted by Congress to be unconstitutional. And ever since Marbury, there have been many cases in which the federal courts have declared presidential actions or congressional laws unconstitutional.Yet, when it came to U.S intervention into the Vietnam War, the federal judiciary declined to act. Why?The issue was certainly clear-cut. The Constitution required a congressional declaration of war against North Vietnam. There was no congressional declaration of war against North Vietnam. Therefore, by initiating a war against North Vietnam, the president, the Pentagon, and the CIA were acting illegally under our form of constitutional government.The federal judiciary has long rationalized its deference to the Pentagon and the CIA in terms of rhetoric like respect for “the coordinate branches of the government” or by suggesting that federal judges lack foreign-policy expertise or by simply asserting that a petitioners lacks “standing” to bring a legal action to declare a war to be unconstitutional.In actuality, there is a more fundamental reason for judicial deference to the president and the U.S. national-security establishment.The federal judges and the Supreme Court justices knew that, as a practical matter, there was no way that the president, backed by the military and the CIA, would comply with a judicial decision declaring the U.S. war in Vietnam to be unconstitutional. They also knew that, as a practical matter, there was no way for the federal courts to enforce their ruling against the president, the Pentagon, and the CIA.Therefore, rather than expose the impotence on the part of the federal judiciary with respect to that particular part of the Constitution, the federal judiciary decided that it would be more prudent to create an appearance of lacking the authority or jurisdiction to declare the U.S. war in Vietnam unconstitutional. In that way, they could create the façade that the federal judiciary was still the ultimate arbiter of the constitutionality of an action while, in reality, deferring to the overwhelming power of the president, the Pentagon, and the CIA to wage what was clearly an unconstitutional war.Everyone would have been better off if the Supreme Court and the lower federal courts had not shirked their responsibility under the Constitution and had instead done their duty by declaring the U.S. intervention into the Vietnam War to be unlawful and unconstitutional, even if the president, the Pentagon, and the CIA had ignored the court’s judgment. At least the American people would be able to easily see why President Eisenhower warned the American people of the grave threat that the military-intelligence establishment poses to the liberties and democratic processes of the American people.Reprinted with permission. 
  • Week in Review: September 23, 2017    (Mises Institute, 2017-09-22)
    By: Mises Institute Almost a decade later, the Federal Reserve this week announced it will begin reversing quantitative easing. Slowly. Very slowly. The balance sheet currently stands at $4.5 trillion and they will begin allowing $10 billion in assets to roll off their sheets next month. Given the unprecedented nature of QE, even this modest reduction has many market observers on edge. Of course, the fallout from the Fed's actions are still being felt, while the Trump Treasury is making threats that it would have disastrous consequences if acted on.On Mises Weekends, Jeff is joined by Dr. Mark Thornton to get his take on the Fed's actions and what it all means for stock markets, investors, and the US economy. Can quantitative easing, a roundabout form of monetizing debt, actually work? Can monetary policy make us rich? Or are Fed officials just groping in the dark, putting off a day of reckoning?And in case you missed them, here are this weeks Mises Wire and FedWatch articles, covering a wide array of topics:There's a  Bubble in New York City Taxi Medallions by Doug FrenchThe Agony of the Welfare State, Finnish Style by Joseph T. SalernoWhy is NASA Covering Up Elon Musk's Mistakes? by Drew ArmstrongGovernment Regulation and Crony Capitalism is Keeping Thousands in Florida without Power by Tho BishopIf the Majority Votes to Secede — What About the Minority? by Ryan McMakenMises and Cosmopolitanism by David GordonQuestions Remain as the Fed Finally Begins to Reverse QE by Tho BishopThen Came Nixon by Chris CaltonThe Washington Post's Latest (and Lamest) Attack on the Mises Institute by Ryan McMakenWhat Is the Correct Amount of Money? by Frank ShostakTrump's China-Sanctions Madness Imperils the Dollar by Ryan McMakenLet Catalonia Decide by Jeff DeistPasschendaele: A Century after the Horror by Matthew McCaffreyUS Sanctions Against Venezuela Will Hurt Americans by Ryan McMakenThe World Is Creeping Toward De-Dollarization by Ronald-Peter StöferleCongress Shirks Its Duty on Foreign Policy Yet Again by Ron PaulLudwig von Mises on Collectivist Fallacies and Interventionist Follies by Richard M. EbelingThe Capitalist Revolution by Ludwig von MisesMoney-Supply Growth Drops Again — Falls to 108-Month Low by Ryan McMakenJohnny Appleseed: Land Speculator, Alcholol Dealer, Capitalist by Chris Calton     
  • Elivs's Own Personal Drug War    (Chris Calton, 2017-09-22)
    By: Chris Calton When Elvis Presley died in 1977 from drug abuse, he was an official, badge-carrying federal agent for the Bureau of Narcotics and Dangerous Drugs, an honorary appointment granted by President Richard Nixon.To say that Elvis Presley had a respect for law enforcement is to drastically understate his enthusiasm. In another life, he would have liked to have been a police officer, and he was obsessed with collecting police badges and uniforms. When he would perform shows around the country, he always made an effort to obtain a badge from the local police force, sometimes by using his celebrity status and other times by donating money to police functions. In some cases, he would offer a $5,000 donation to a police ball in order to procure a badge. He was also known to give expensive cars to local sheriffs, including Sherriff Bill Morris of Memphis who gratefully deputized Presley after receiving a gift of a Mercedes-Benz.Elvis's Memphis police badge and IDHis generosity was so lavishly offered to members of the Denver police that it actually brought about suspicions of graft and corruption after the King’s death. Along with Cadillacs and Lincoln luxury cars, he paid for officers to take high-class vacations and gifted them with pricey jewelry. He purchased his own Denver police uniform and was made an honorary captain of the Denver Police Force. He would have been a police officer, Elvis once confided, but “God blessed him with a voice.”Elvis posing in his Denver police uniformElvis Becomes a Drug WarriorIn 1970, California senator George Murphy promised to get Elvis a meeting with FBI director J. Edgar Hoover and Bureau of Narcotics and Dangerous Drugs (BNDD) director John Ingersoll. In both cases, Elvis was hoping that a generous private donation would be enough to buy him a federal badge from each of these departments.Elvis never did get to meet Hoover, and when called the BNDD, Ingersoll was out of the office. He spoke, instead, to the number-two man of the Bureau, Deputy Director John Finlator. The deputy director was not swayed by Elvis’s fame or money and informed him that his department could neither accept donations nor issue honorary badges. Elvis’s offer was spurned.Undeterred, Elvis penned a hand-written letter to President Nixon. In the letter, Elvis expressed his concerns for the “drug culture, the hippie elements, the SDS [Students for a Democratic Society], Black Panthers, etc.” Offering his services as a celebrity communicator to the president, Elvis went on to say, “I can and will do more good if I were made a Federal Agent at Large.”To help the president wage his war against the drug users, the hippies, and the communists, Elvis said, “all I need is the Federal credentials.”On December 21, 1970, President Nixon agreed to meet the King. In full form, according to an interview given by Egil Krogh, Nixon’s aide who received Elvis, he arrived “in a purple jumpsuit and a white shirt open to the navel with a big gold chain and thick-rimmed sunglasses.” The meeting with the president got off to an awkward start, with Elvis complaining to Nixon about the difficulties of performing in Las Vegas and expressing his anger for The Beatles.Finally, Elvis revealed his agenda. “Mr. President,” he said, “can you get me a badge from the Bureau of Narcotics and Dangerous Drugs?”This is what Egil Krogh was worried about. He knew that Elvis had already been turned away by the BNDD on this exact matter. Nixon turned to Krogh, calling him by his nickname: “Bud, can we get him a badge?”“Well, Mr. President,” Krogh answered, “if you want to get him a badge, we can do that.”Nixon gave the order to get the King a badge, which elated Elvis so much that he crossed to the other side of the desk and gave the president a bear hug. Elvis then had his body guards bring in the gifts he had brought with him, which he lavished on the president and his aides, including jewelry for their wives. Before leaving, Nixon and Elvis posed for one of the most famous photographs ever taken in the Oval Office.Elvis was now a badge-carrying drug warrior, and he carried his badge with him for the rest of his life, until he died seven years later from a drug overdose.
  • Mark Thornton: Can the Fed Unwind?    (Mark Thornton, Jeff Deist, 2017-09-22)
    By: Mark Thornton, Jeff Deist Federal Reserve Chair Janet Yellen announced the bank would begin selling assets it has relentlessly bought since the Crash of '08. The financial press, including the Wall Street Journal, dutifully praised Yellen for her steady hand. But our guest Dr. Mark Thornton has a different take on what it all means for stock markets, investors, and the US economy. Can quantitative easing—a roundabout form of monetizing debt—actually work? Can monetary policy make us rich? Or, are Fed officials just groping in the dark, putting off a day of reckoning? Jeff Deist and Mark Thornton unwind the narrative.
  • There's a Bubble in New York City Taxi Medallions    (Doug French, 2017-09-22)
    By: Doug French It’s as old as time: taking on debt to fund a sure thing. Be it houses, stocks, cryptocurrencies, tulip bulbs or taxi medallions. Winnie Hu tells the current tale of woe brilliantly for The New York Times. Big city taxi medallions were once considered to be good as gold. Ms. Hu writes,Sohan Gill once saw his medallion as such a good investment — ”better than a house” — that his wife bought two more in 2001. Now they cannot find enough drivers for the cabs because business is so bad. And Mr. Gill, 63, who had retired from driving, had to go back on the road. “How many more years am I going to drive to take care of these medallions?” he asked.That sounds so much like Las Vegas 2005. Why own one house? Buy two more. Now retirement is put on hold.A full blown medallion crash is unraveling in New York City as Ms. Hu explains.Since 2015, a total of 85 medallions have been sold as part of foreclosure proceedings, according to city records. In August alone, 12 of the 21 medallion sales were part of foreclosures; the prices of all the sales ranged from $150,000 to $450,000 per medallion.A medallion being essentially a license to drive a cab, $150,000 to $450,000 doesn’t seem like the bottom, however at the peak. 2014, a medallion went for $1.3 million. By the way, Uber was founded in 2009, but New York cab owners either didn’t get the memo, or didn't understand the implications.In 2014, those crafty devils at New York City Hall sold 350 new medallions at the height of the market, generating $359 million in revenue.The city has capped the number of medallions at 13,587, but, “There are more than 63,000 black cars providing rides in the city through five major app services: Uber, Lyft, Via, Gett and Juno,” writes Hu.Cabbies are fighting back the way they always have, in court. But so far, to no avail. “We are not against competition, we are not against technology, but we want to compete fair and square,” said Nino Hervias, 58, a taxi owner and spokesman for the Taxi Medallion Owner Driver Association.A couple drivers have taken legal action, known as an Article 78 proceeding, to compel the city and its regulators to establish and enforce standards that will make sure that all licensed cars — including yellow cabs — “are and remain financially stable.” It sounds like subsidies are being sought. The State Supreme Court will hear the case in October.Meanwhile, a guy like Uppkar Thind, 46, an immigrant from India, is driving 11 to 13 hours a day trying to pay off a medallion he bought for $357,000 in 2006 with money borrowed from his relatives and a credit union. “I worked hard,’’ he told the Times. “I achieved my American dream and it turned into a nightmare.”The nightmare sounds like it will continue. Ms. Hu writes,In an unprecedented fire sale of medallions, up to 46 of them are expected to go on the auction block later this month as part of bankruptcy proceedings against taxi companies affiliated with an embattled taxi mogul. While the city has previously held auctions to sell a limited number of new medallions — about 1,800 since 1996 — this is believed to be the first auction to dispose of foreclosed medallions, according to city officials.“I see my future crashing down,” says Issa Isac, 46, an immigrant from Burkina Faso who borrowed $335,000 to buy a medallion but couldn’t keep up with the payments. “I worry every day. Sometimes, I can’t sleep thinking about it. Everything changed overnight.”As you would expect, some financial institutions have been sucked into this vortex. Forbes reports, Three New York-based credit unions that specialized in loaning money against taxi cab medallions, the hard-to-get licenses that allow the city's traditional cab fleet to operate, have been placed into conservatorship as the value of those medallions has plummeted.However, while the over leveraged are hurting, big money is circling. Crain's New York Business reports, that private equity firms are kicking the tires. "A lot of very smart people who run very successful firms feel the market may have bottomed out," says Andrew Murstein, president of Medallion Financial. Gary Sernovitz writes for The New Yorker, "if you can buy medallions for ninety per cent less to operate in a business that’s down twenty per cent, the conditions may be ripe for a value investment—like buying real estate in 2009. Some institutional investors are tantalized."New Yorkers may be getting a ride from Blackstone in the near future. 
  • The '25th Amendment Solution' to Replace President Trump Is Nuts    (Gene Healy, 2017-09-22)
    Gene Healy On Sunday morning, the president of the United States took time out from mulling the North Korean nuclear crisis to retweet a gag GIF from a fan with the Twitter handle “@fuctupmind.” In such circumstances, you can hardly blame people for worrying about the condition of the president’s mind. Prompted by President Donald Trump’s repeated outbursts of “Twitter Tourette’s” and erratic public appearances, a growing number of legislators advocate using the 25th Amendment to remove the president on the grounds that he’s mentally “unable to discharge the powers and duties of his office.” Rep. Zoe Lofgren, D-Calif., recently introduced a resolution calling for Trump’s examination by “psychiatric professionals” and “immediate action” by Vice President Mike Pence and the cabinet. A similar measure, the “Oversight Commission on Presidential Capacity Act,” from Rep. Jamie Raskin, D-Md., now has 28 co-sponsors, including more than half of the Democrats on the House Judiciary Committee. Granted, there’s ample reason to worry about a president who drifts from ranting at Boy Scouts to making off-the-cuff nuclear threats. But declaring Trump mentally disabled is constitutionally dubious and wildly impractical. In their quest to “stop the madness,” the 25th Amendment brigade might create a situation more bizarre and destabilizing than the Trump presidency itself. The 25th Amendment wasn’t designed to be an “eject” button for presidents who are impulsive, reckless or otherwise spectacularly bad at the job. That’s because the convoluted process Section 4 of the amendment sets up for replacing the president could stick us with two presidents and two cabinets jockeying for recognition as the “real” government. The term “constitutional crisis” gets thrown around far too loosely, but the “25th Amendment solution” might just deliver the genuine article. Back in 2012, when Trump was best known as the host of “Celebrity Apprentice,” law professor Brian Kalt published a book, “Constitutional Cliffhangers,” that identified the 25th Amendment as a “constitutional weak spot” that could crack, if put to the test. To illustrate the danger, here’s an updated version of the scenario Kalt sketches. Imagine Vice President Mike Pence is privately more Machiavellian than he lets on; and he’s begun plotting with his colleagues at the Cabinet’s weekly Bible Study meeting. Pence and company decide to pull the trigger, activating Section 4 with a declaration to the Speaker of the House and the president pro tem of the Senate. Here’s how it might play out from there: Trump, enraged, sends a counter-declaration to Congress contesting the charge. Then he summons the cabinet, and unleashes his signature line from the Apprentice: “You’re fired!” Trump then replaces his rebellious “team of rivals” with reliable subordinates. Pence and the original cabinet counter with an additional, “no, really, he’s nuts” declaration to Congress. When Trump orders the Secret Service to frogmarch the “fake Cabinet” out of the building, how do they respond? Who’s in charge here? Section 4’s language is less than lucid on this point. It specifies that, upon sending the initial declaration, “the Vice President shall immediately assume the powers and duties of the office as Acting President,” but “when the President transmits … his written declaration that no inability exists, he shall resume the powers and duties of his office unless,” within four days, the VP and a majority of the cabinet reaffirm that the president is incapacitated. Whether Trump had the right to sack his cabinet turns on whether it was “his” when he gave the order. Under Section 4, does Pence hold the reins, pending Congress’ resolution of the issue - as much as three weeks later — or does the president get his powers back as soon as he informs Congress he’s up to the job? Will Congress make the call, or will it be settled by the Supreme Court, in a case that would make Bush v. Gore seem low-stakes by comparison? “It is indisputable,” Kalt writes, “that Section 4’ s creators intended for the vice president to remain in charge during this waiting period.” But since the text is murky on this point, “if push ever comes to shove, things could go very badly.” Indeed, as Kalt notes, the provision is more likely to be used when things are already going badly, in “an external crisis,” like the outbreak of a major war. Drafted in the wake of President John F. Kennedy’s assassination, the 25th Amendment aimed at situations of near-total disability. It wasn’t designed to be an “eject” button for presidents who are impulsive, reckless or otherwise spectacularly bad at the job. Impeachment is the proper constitutional remedy for that sort of presidential incapacity. And, while a majority in the House and two-thirds of the Senate is a heavy lift, the double-supermajority the 25th Amendment requires to finalize the switch is a nearly insurmountable bar. As the amendment’s principal architect, then-Sen. Birch Bayh, D-Ind., explained, “We were concerned about the politics of the palace coup,” and deliberately made it harder to remove a president via Section 4 than it is to impeach him. Still, the disability amendment has one advantage over the old-fashioned method: If you think politics hasn’t been quite entertaining enough lately, the “25th Amendment solution” could really kick this reality show up a notch. Gene Healy is a vice-president of the Cato Institute and the author of The Cult of the Presidency.
  • The Agony of the Welfare State, Finnish Style    (Joseph T. Salerno, 2017-09-22)
    By: Joseph T. Salerno The title of this post—minus the reference to Finland—is shamelessly copped from a prescient essay that Ludwig von Mises wrote in 1953.  In his article Mises pointed out that in Great Britain and Europe, the system of progressive taxation was already confiscating nearly the entire  “surplus” incomes of the successful capitalists and entrepreneurs, meaning that higher tax rates would no longer produce additional funds to finance these countries’ ever-expanding welfare states.  “Henceforth,” Mises foretold, “the funds of the beneficiaries themselves have to be tapped if more handouts are to be made to them.”Today things have gotten far worse than even Mises foresaw.  For now it is becoming evident that the “beneficiaries” of the most advanced welfare states are not reproducing rapidly enough to pay for the benefits that they are receiving and are therefore “endangering” the “long-term survival” of the “more generous” welfare states.  A notable example is Finland, which faces a “massive baby problem.”   Thus, in 2016, Finland recorded the lowest number of newborn babies in 148 years, or since the great famine of 1868.  The Finnish fertility rate has fallen to 1.57 per woman and the number of people under 20 years of age as a percentage of the working age population is the lowest among Nordic countries at less than 40%, down from 60% in 1970. The situation has left mainstream economists devoid of solutions and wringing their hands in despair.  For Heidi Schauman, the Aktia Bank chief economist, the statistics are "frightening.”  As Ms. Schauman explains:They show how fast our society is changing, and we don't have solutions ready to stop the development.  We have a large public sector and the system needs taxpayers in the future.Schauman clearly does not appreciate the delicious irony of the modern welfare state revealed in the emphasized part of her statement.  Without ability to further expropriate wealthy capitalists and entrepreneurs, the welfare state has become a crazy machine with no purpose but to perpetuate its own existence by devouring massive quantities of taxes extracted from the people it ostensibly serves.  If demographic trends threaten the existence of the machine, well then, more people must be produced to feed it.   It reminds me of the wonderful Twilight Zone episode, “To Serve Man.”
  • Why is NASA Covering Up Elon Musk’s Mistakes?    (Drew Armstrong, 2017-09-21)
    By: Drew Armstrong On June 28th, 2015, Elon Musk’s SpaceX Falcon 9 rocket launched a Dragon resupply ship not into space, but rather into the Atlantic Ocean. It was a catastrophic failure that cost taxpayers $112 million. The payload that was meant to resupply the International Space Station (ISS) went up in a huge plume of smoke and flames. However, even though SpaceX did not complete their mission, they still received all but twenty percent of the full payment. Standard NASA protocol is to release a report on every launch accident, but to this day — two years later — there is still no formal statement as to what went wrong on the SpaceX accident.Per NASA, there won’t be one released anytime soon. The Agency recently announced that it will in fact not publicly release a report on their investigation into the disastrous explosion of the SpaceX Falcon 9 rocket. They had originally committed to reporting their results by the summer of 2017, but have instead passed the buck to the FAA.“Since it was an FAA licensed flight, NASA is not required to complete a formal final report or public summary, and has deferred any additional products related to the matter at this time,” the agency’s Public Affairs Office (PAO) stated. “The data is important for historical purposes, but the mishap involved a version of the Falcon 9 rocket, the version 1.1, that is now no longer in use.” Apparently, the fact that SpaceX is no longer using that version of the Falcon 9 after this $112 million “mishap” of taxpayer funds means the American taxpayers have no right to know what happened. Strangely, that storyline did not work for a competing firm’s similar failure that occurred eight months prior.On Oct. 28th, 2014, an Orbital Sciences Antares rocket was loaded with NASA Supplies aboard a Cygnus cargo ship worth $51 million bound for the ISS. Upon lift-off, the booster exploded, and the payload was lost, severely damaging the launch pad. Just like the SpaceX flight, the Orbital rocket was an official FAA-Licensed commercial launch. Both the Antares and the Falcon 9 launches were conducted under the same NASA Commercial Resupply Services (CRS) program. And just like the Falcon 9, the Antares was part of an expiring line of rockets. Yet, NASA completed and published an executive summary within one year of the Antares incident.The smell of hypocrisy has never been so potent.After the report on the Antares accident was released, the explosion was traced to a failure of a turbo pump on an aging AJ26 first stage engine that was originally built for the Soviet Union’s lunar program more than 40 years earlier. Two months after the accident, Orbital announced it would replace the AJ26 engines with newly manufactured RD-181 engines which would require substantial modifications to Antares. The company learned from its mistake, as it should have been expected to do.The same cannot be said for SpaceX. The only report NASA has made public regarding the Falcon 9 accident was an audit conducted by the agency’s Office of Inspector General. This report focused only on the loss of Dragon on NASA’s resupply program. The audit spent less than one page discussing the cause of the accident without presenting any conclusions.This glaring hypocrisy between the handling of the Orbital and the SpaceX cases has not gone unnoticed. Rep. Lamar Smith (R-Texas), chairman of the House Committee on Science, Space and Technology wrote a letter just after the SpaceX accident to NASA Administrator, Charles Bolden, expressing his belief that this “discrepancy … raises questions about not only the equity and fairness of NASA’s process for initiating independent accident investigations, but also the fidelity of the investigations themselves.”The lack of a full investigation into the SpaceX Falcon 9 accident begs the question: Why is SpaceX given such preferential treatment? It appears that NASA is playing favorites with SpaceX. Considering the high risk and astronomical cost of the space program, shouldn’t all those involved be held to the highest standards?Instead of getting to the bottom of the problems leading up to the SpaceX explosion, NASA responded by giving SpaceX a new long-term contract. The contract included discounted prices for future cargo missions and other “significant considerations,” but it still gives the impression that NASA has chosen to reward failure. The whole process raises questions about how NASA handles launch failure investigations, manages risk for cargo flights, and assigns cargo for those missions — not to mention their standards of accountability to the taxpayers that are funding the space program.While there is no doubt that SpaceX has implemented some innovative, cost-cutting solutions for NASA, it should not be held to a different set of standards. Over the years, there have been various amendments proposed to completely ban the use of the company’s competition. For instance, in the FY 2018 NDAA, the House Armed Service Committee has proposed limiting funding for Russian rocket engines, as well as funding for new launch vehicles and launch vehicle systems. Competitors like the United Launch Alliance (ULA) are working on new, competitive evolved expendable launch vehicles (EELVs) that use American-made rockets, but the NDAA in its current form would kill their progress and give SpaceX a monopoly.
  • Mises, Cosmopolitanism, and the Mises Institute    (David Gordon, 2017-09-20)
    By: David Gordon Organizations named for someone often are accused of deviating from that person’s ideas, and the Mises Institute unfortunately is no exception. Recently, we have come under attack along the following lines: Ludwig von Mises was a cosmopolitan, opposed to nationalism and racism. Critics claim But the Mises institute, though named after him, has betrayed him. Guided by Murray Rothbard and Lew Rockwell, the Institute has allied with rightwing groups that oppose liberal humanist values. Mises would never have done this.To assess this accusation, we must first ask, what is meant by “cosmopolitan”? The word is a translation from a Greek term introduced by Diogenes the Cynic in the 4th century B.C., who said, “I am a citizen of the world [kosmopolitês]” This notion became important in Stoic thought, and readers interested in the Greek idea of the “cosmic city” will find in Malcolm Schofield’s The Stoic Idea of the City a valuable guide.The term often means something else today. Cosmopolitans, in this sense, oppose traditional values. They propose to liberate people from “old-fashioned” morality .and wish to promote the interests of feminists, homosexuals, and the transgendered, as well as ethnic groups they regard as oppressed. They are “multicultural” and deplore undue stress on the West, as against other cultures. All peoples and cultures are equal, except of course for the oppressive West. They wish to spread what they call “tolerance” all over the world, and view customs they oppose as obstacles to be eradicated.It is clear that Mises was not a “cosmopolitan” in this new and extended sense. When Mises in Liberalism talks about cosmopolitanism, he has in mind a fundamental point in his social theory. Everyone benefits through peaceful and cooperative exchange on the free market. With social cooperation through the market, human beings are no longer locked in a struggle in which the gain of some comes at the expense of others. Interference with the free market impedes peaceful cooperation and should be opposed by those who want peace and prosperity.Mises’s remarks about nationalism depend on this basic insight. He opposed trade restrictions and other policies like currency devaluation by which one nation tried to gain at the expense of others. As always for Mises, social cooperation through the free market was of primary importance.Mises did not oppose the self-determination of peoples. To the contrary, he favored it. He cited with approval Ernest Renan’s famous definition of a nation as a “daily plebiscite”: people in a national group have the right to form an independent state. Incidentally, Mises used Renan’s phrase in his account of consumer sovereignty. No one who reads Mises’s Notes and Recollections can be in any doubt that he cared very deeply for the survival of an independent Austria.Though people had the right to form a state, they did not have the right to prevent groups within their borders from seceding and forming their own state. Mises is scathing in his criticism of the Spanish liberal Salvador de Madariaga for his opposition to autonomy for Catalonia. Ideally, the right of secession should extend to individuals. As always, Mises’s attention centers on the social cooperation of free individuals. Those in search of greater detail on Mises’s view of nationalism should consult the brilliant and comprehensive essay by Joseph Salerno, “Mises on Nationalism, the Right of Self-Determination, and the Problem of Immigration.” Exactly the same principle lies at the heart of Mises’s discussion of race. For Mises, the Darwinian struggle among animals does not apply to human beings, who can cooperate productively regardless of race. Mises strongly opposes eugenics, another ill-thought-out measure of interference in the market. However, he also rejects accounts of history based on racial struggle.Mises was not a supporter of radical feminism. In Socialism, he says; "So far as feminism seeks to adjust the legal position of woman to that of man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, desires, and economic circumstances — so far it is nothing more than a branch of the great liberal movement, which advocates peaceful and free evolution. When, going beyond this, it attacks the institutions of social life under the impression that it will thus be able to remove the natural barriers, it is a spiritual child of socialism. For it is a characteristic of socialism to discover in social institutions the origin of unalterable facts of nature, and to endeavor, by reforming these institutions, to reform nature"In sum, Mises’s cosmopolitanism is just the free market, no more and no less.Thus, it would be silly to think that anyone at the Mises Institute opposes the free market. If, though, we at the Mises Institute count as cosmopolitans in Mises’s sense, have we acted against what he taught by alliances with illiberal persons and groups?Precisely the opposite is the case. Mises was on friendly terms with Monsignor Seipel, the Christian Social Party Chancellor of Austria, supported the authoritarian government of Engelbert Dollfuss, and joined the Patriotic Front, an organization that Dollfuss founded.After he moved to the United States, Mises became a member of the Editorial Advisory Board of American Opinion, published by Robert Welch of the John Birch Society, and wrote an article for it, “On the International Monetary Problem” (March 1967).In Liberalism, Mises says, “The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction.” This is exactly what we favor at the Mises Institute. 
  • Mises and Cosmopolitanism    (David Gordon, 2017-09-20)
    By: David Gordon Organizations named for someone often are accused of deviating from that person’s ideas, and the Mises Institute unfortunately is no exception. Recently, we have come under attack along the following lines: Ludwig von Mises was a cosmopolitan, opposed to nationalism and racism. Critics claim But the Mises institute, though named after him, has betrayed him. Guided by Murray Rothbard and Lew Rockwell, the Institute has allied with rightwing groups that oppose liberal humanist values. Mises would never have done this.To assess this accusation, we must first ask, what is meant by “cosmopolitan”? The word is a translation from a Greek term introduced by Diogenes the Cynic in the 4th century B.C., who said, “I am a citizen of the world [kosmopolitês]” This notion became important in Stoic thought, and readers interested in the Greek idea of the “cosmic city” will find in Malcolm Schofield’s The Stoic Idea of the City a valuable guide.The term often means something else today. Cosmopolitans, in this sense, oppose traditional values. They propose to liberate people from “old-fashioned” morality and wish to promote the interests of feminists, homosexuals, and the transgendered, as well as ethnic groups they regard as oppressed. They are “multicultural” and deplore undue stress on the West, as against other cultures. All peoples and cultures are equal, except of course for the oppressive West. They wish to spread what they call “tolerance” all over the world, and view customs they oppose as obstacles to be eradicated.It is clear that Mises was not a “cosmopolitan” in this new and extended sense. When Mises in Liberalism talks about cosmopolitanism, he has in mind a fundamental point in his social theory. Everyone benefits through peaceful and cooperative exchange on the free market. With social cooperation through the market, human beings are no longer locked in a struggle in which the gain of some comes at the expense of others. Interference with the free market impedes peaceful cooperation and should be opposed by those who want peace and prosperity.Mises’s remarks about nationalism depend on this basic insight. He opposed trade restrictions and other policies like currency devaluation by which one nation tried to gain at the expense of others. As always for Mises, social cooperation through the free market was of primary importance.Mises did not oppose the self-determination of peoples. To the contrary, he favored it. He cited with approval Ernest Renan’s famous definition of a nation as a “daily plebiscite”: people in a national group have the right to form an independent state. Incidentally, Mises used Renan’s phrase in his account of consumer sovereignty. No one who reads Mises’s Notes and Recollections can be in any doubt that he cared very deeply for the survival of an independent Austria.Though people had the right to form a state, they did not have the right to prevent groups within their borders from seceding and forming their own state. Mises is scathing in his criticism of the Spanish liberal Salvador de Madariaga for his opposition to autonomy for Catalonia. Ideally, the right of secession should extend to individuals. As always, Mises’s attention centers on the social cooperation of free individuals. Those in search of greater detail on Mises’s view of nationalism should consult the brilliant and comprehensive essay by Joseph Salerno, “Mises on Nationalism, the Right of Self-Determination, and the Problem of Immigration.” Exactly the same principle lies at the heart of Mises’s discussion of race. For Mises, the Darwinian struggle among animals does not apply to human beings, who can cooperate productively regardless of race. Mises strongly opposes eugenics, another ill-thought-out measure of interference in the market. However, he also rejects accounts of history based on racial struggle.Mises was not a supporter of radical feminism. In Socialism, he says; "So far as feminism seeks to adjust the legal position of woman to that of man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, desires, and economic circumstances — so far it is nothing more than a branch of the great liberal movement, which advocates peaceful and free evolution. When, going beyond this, it attacks the institutions of social life under the impression that it will thus be able to remove the natural barriers, it is a spiritual child of socialism. For it is a characteristic of socialism to discover in social institutions the origin of unalterable facts of nature, and to endeavor, by reforming these institutions, to reform nature"In sum, Mises’s cosmopolitanism is just the free market, no more and no less.Thus, it would be silly to think that anyone at the Mises Institute opposes the free market. If, though, we at the Mises Institute count as cosmopolitans in Mises’s sense, have we acted against what he taught by alliances with illiberal persons and groups?Precisely the opposite is the case. Mises was on friendly terms with Monsignor Seipel, the Christian Social Party Chancellor of Austria, supported the authoritarian government of Engelbert Dollfuss, and joined the Patriotic Front, an organization that Dollfuss founded.After he moved to the United States, Mises became a member of the Editorial Advisory Board of American Opinion, published by Robert Welch of the John Birch Society, and wrote an article for it, “On the International Monetary Problem” (March 1967).In Liberalism, Mises says, “The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction.” This is exactly what we favor at the Mises Institute. 
  • Questions Remain as the Fed Finally Begins to Reverse QE    (Tho Bishop, 2017-09-20)
    By: Tho Bishop Today the Federal Reserve announced that it will finally begin the process of reversing quantitive easing. Following the process it outlined earlier this year, the Fed will start allowing assets (Treasurys and mortgage-backed securities) to mature off its balance sheet, rather than re-investing them as had been its prior policies. The current plan is to start with a $10 billion roll off in October, and increasing quarterly until it reaches $50 billion by October of next year. Considering the Fed’s balance sheet currently stands $4.5 trillion, the Fed is envisioning a slow, multi-year process. As Philadelphia Fed President Patrick Harker described it earlier this year, the goal is for it to be “the policy equivalent of watching paint dry.”Of course the old saying about the “best laid plans of mice and men” also applies to central planners, and as Janet Yellen once again noted today, “policy is not on a pre-set course.” Should markets react negatively, as they did when Bernanke hinted at reducing their purchases in 2013, the markets have reason to expect the Fed to act. In fact, when asked, Yellen kept the door open to both lowering interest rates and stallings its roll off should market conditions worsen. In fact, it appears that markets are already betting on the Fed to not follow through on its projected December rate hike.As the Fed has been signaling for months now that a taper was in the works, the mainstream narrative suggests that tapering has been priced in (though stocks dropped on the news.) There are still major questions left unanswered.One of the biggest questions going forward is who will step up to replace the Fed’s purchasing power in the US Securities market? In the past, the US has been able to count on China to purchase US debt. Even before the Trump Administration threatened the country with sanctions, China was selling off Treasurys in order to help prop up its struggling economy. With other nations also backing off from US debt, the hope is that investors will fill the gap. While the continued actions of the ECB, BOJ, and other central banks may make US debt more attractive in comparison, increased investments in bonds is likely to come at the expense of other assets.Of course the noise of the Fed’s actions only serves to distract from the real issue, which is the continuing economic stagnation of the US economy. While Yellen continues to boast about modest employment gains, full-time employment remains lower than it was prior to the recession.  Meanwhile, American’s personal debt has reached record highs – following the example of their government. How much of these gains are being fueled by credit and the false prosperity of inflated stocks and other assets? We’ll see.For what it’s worth, the Fed itself – which is regularly overly-optimistic – doesn’t seem to have much faith in the future. It is now projecting long-term below 2%.
  • Then Came Nixon    (Chris Calton, 2017-09-20)
    By: Chris Calton In this episode, Chris Calton explains how the Nixon Administration kicked off the modern War on Drugs, featuring no knock raids, fictional crime stats, and the expansion of the American police state.
  • Then Came Nixon    (Chris Calton, 2017-09-20)
    By: Chris Calton In this episode, Chris Calton explains how the Nixon Administration kicked off the modern War on Drugs, featuring no knock raids, fictional crime stats, and the expansion of the American police state.
  • Government Regulation and Crony Capitalism is Keeping Thousands in Florida without Power    (Tho Bishop, 2017-09-20)
    By: Tho Bishop Almost two weeks have passed since Hurricane Irma made landfall in South Florida, yet tens of thousands remain without power. With temperatures regularly eclipsing over 90 degrees, these outages are not only a grave inconvenience for Floridians cleaning up after the storm, but have proved to be deadly. Given the power of Irma, it is not surprising that it has left behind incredible devastation. Unfortunately it is also not surprising that it is a government-protected utility that has done the most to impede recovery. The pain and suffering currently being felt is the direct result of government policy and the perverse incentives of crony capitalism.One of the talked about examples of how bad policy is making things worse for Florida families are a variety of government policies that discourages the use of solar power in the Sunshine State. Government policy dictates that Floridians are required to be connected to the central power grid, even if they have enough solar panels installed to power their entire house. Because of this requirement, a family stuck in areas without power with solar panels installed cannot use them now because doing so could endanger workers trying to restore power for their neighbors. Once again government’s desire for centralized control has unintended consequences.Of course, even without such rules, it’s unlikely that all of Florida would decide to go off the grid. Given that, it’s important to understand how the legal monopoly granted to electric companies not only traps customers into being entirely reliant upon a single company, but actively incentivizes those companies to be reactive – rather than proactive – when it comes to natural disasters and other events that threaten service.After all, companies like Florida Power & Light will respond to Irma as they have done to hurricanes past, by increasing prices on their customers.  Unfortunately, the revenue reaped seems to have made little impact in FPL’s preparedness for future storms. While the company has reported that its recovery efforts have moved faster this year than when Hurricane Wilma hit South Florida in 2005, more residents suffered outrages due to Irma – in spite of the fact that Wilma actually had higher sustained winds when it made landfall.  Along with the temporary wage hikes following storms, the company also charges annual “storm fees” meant to pay for tree maintenance around power lines. FPL is now facing a class-action lawsuit in the aftermath of Irma over their apparent failure to do so.  Legal cases are certainly nothing new to FPL, as they have often legally fought measures requiring more of their powerlines to be buried underground, rather than be subjected to tropical storm winds above.While FPL may be skimping on storm preparedness, they do make significant investments in the one resource that is truly vital to their business model: government.FPL and other power companies are regularly among the largest political contributors in the state of Florida. In return, their lobbyists have been able to earn significant influence in writing energy legislation in the state of Florida. Of course this is the inevitable result of government granting monopolies to private companies. Isolated from the competition of the market, a business has no need to satisfy the needs of the customer, they only need to protect the relationship they have with government. Mises summed it up well in Human Action when he wrote, “Corruption is a regular effect of interventionism.”Now given the amount of heat companies like FPL are facing following Irma, it’s possible the companies may finally have the political incentive to make some changes in the way they conduct business. Legislators may even be shamed into removing some of the restrictions on solar panels.What Florida really needs, however, is to do away with the entire concept of natural monopolies for public utilities. There should be no legislation arbitrarily awarding either private or public companies a commercial fiefdom by legally protecting them from competition. Doing so ensures that desires of customers will always take a back seat to the good will of politicians, and will stifle the ability of the market to innovate superior methods of delivering such important services.As Murray Rothbard wrote in Man, Economy, and State:Regulation of public utilities or of any other industry discourages investment in these industries, thereby depriving consumers of the best satisfaction of their wants. For it distorts the resource allocations of the free market. Prices set below the free market create an artificial shortage of the utility service; prices set above those determined by the free market impose restrictions and a monopoly price on the consumers. Guaranteed rates of return exempt the utility from the free play of market forces and impose burdens on the consumers by distorting market allocations.Hurricanes in Florida are as inevitable as Florida Man headlines. It is not a matter of if Florida will be hit with another powerful storm, but when will it happen next. If its state government wants to truly do everything it can to protect its citizens from the damage Mother Nature can wrought, it should free them from the devastation they face at the hands of government monopolies and crony capitalism. 
  • The Washington Post's Latest (and Lamest) Attack on the Mises Institute    (Ryan McMaken, 2017-09-20)
    By: Ryan McMaken Earlier this year, when Nancy MacLean released her book on economist James Buchanan, Democracy in Chains, many of Buchanan's supporters were shocked that someone would manufacture such an intricate and strained conspiracy theory to attack Buchanan. MacLean employed all the usual tricks of innuendo and hearsay to arrive at her conclusions: Buchanan was a racist. Buchanan supported dictators. Buchanan pushed a dark agenda of undermining America's most cherished institutions. All accusations relied on guilt-by-association tactics and assigning motivations to Buchanan that MacLean could not possibly have known. "But Buchanan was such a harmless guy!" went up the chorus from Buchanan's supporters, who were surprised by the personal nature of many of the attacks. What Buchanan's people did not understand was that no matter how much one tries to play "nice" with the mainstream media and mainstream academia, they'll never get beyond their hatred of anyone who favors lower taxes, decentralization, or even the most general libertarian positions. In the minds of the typical academic or journalist, the central crime of the libertarians is that they want to leave people alone, and reduce government power. This fact alone makes libertarians despicable. Thus, there's no real harm in trying to pin on them additional charges related to racism or loving dictators. After all, anyone who's awful enough to want to abolish the minimum wage is also likely to be fine with slavery and Pinochet-style car bombings. It's facile logic, of course, but this is the natural result of what we might call "libertarian derangement syndrome" — in which no accusation is too over-the-top when it comes to attacking libertarians. Thus, imagine my lack of surprise when The Washington Post this week published its latest screed against libertarians in general and the Mises Institute in particular. The Post publishes a new one of these every year or so, trotting out the same examples over and over to illustrate how libertarians — who might seem to be harmless to the untrained eye — are really part of a dark underbelly of white-supremacist militarism.The article is all retreads, including the insinuation that Murray Rothbard was a racist because he saw no problem with right-wing anti-tax positions. Even worse in the minds of WaPo editors is the fact that Rothbard concludes that government regulations "trample on the property rights of every American" and are a bad thing. It is here where libertarian derangement syndrome most rears its head. Rothbard was against using government coercion to boss around private citizens and business owners, telling them whom to hire and what to pay employees. Therefore, he must be targeted for destruction by the official outlets of respectable opinion. Since Rothbard can't be quoted actually advocating for any act of aggression or oppression against anyone, we must therefore draw the conclusion that he was secretly a white-supremacist militant because he held certain anti-tax, anti-regulation opinions in common with some racists. This is a bit like condemning vegetarianism because Hitler was a vegetarian. By the end of the article, however, the author tips his hand and admits that the real problem is libertarianism in general, not with any particular alleged sin of Murray Rothbard or his associates at the Mises Institute. The evils of libertarianism, we are told, revolve around its "abstract notion of self-interest" which lends itself to all sorts of violence and sinister leanings.Unfortunately, WaPo can't even get this right since libertarianism is not based on "self-interest" at all. The author may be confusing libertarianism with the philosophy of Ayn Rand — who specifically hated libertarians and condemned them. Libertarianism, rather, is based on the idea that it's wrong to inflict violence on other people. The end. Obviously, an ideology such as this is directly at odds with white supremacists or anyone else who walks around threatening others or committing acts of violence. What really galls WaPo though, is that this libertarian foundation of non-violence also means opposition to state-sponsored violence, including the regulatory state, the welfare state, and the endless wars of modern "humanitarian" America. It's because of these positions that libertarians will earn the ire of mainline academics and journalists forevermore. 
  • Here Are the 3 Takeaways from Trump's UN Speech    (Sahar Khan, 2017-09-20)
    Sahar Khan On Tuesday morning, President Donald Trump addressed the UN General Assembly for the first time, unveiling his “American First” vision on the world stage. His speech was marked with his trademark bellicosity as he spoke about respecting sovereignty, destroying North Korea, targeting Iran and criticizing Venezuela. While the president did not reveal anything new about the U.S. stance on various issues, the speech had three main takeaways that point to an emerging Trumpian grand strategy that includes buttressing homeland security and increasing the military budget. The first takeaway was recreating the Bush administration’s “axis of evil” by targeting North Korea and Iran’s varied nuclear ambitions. Referring to Kim Jong-un as the “rocket man,” the president declared the United States as “ready, willing and able” to potentially attack North Korea, declaring the state’s pursuit of nuclear weapons as “reckless” and a “suicide mission.” He did look toward the UN, but not without his known skepticism of the organization: “That’s what the United Nations is all about; that’s what the United Nations is for. Let’s see how they do.” Yet, the UN has been at forefront of countering North Korea: fresh UN sanctions were placed on North Korea after it fired its latest missile over Japan on August 15 following the joint U.S.-South Korea military exercises. The president then singled out the “murderous regime” of Tehran and called the 2015 Iran Deal as “one of the worst and most one-sided transactions the United States has ever entered into” and “an embarrassment to the United States.” But again, the Iran Deal has been successful in halting Iran’s nuclear program. The president’s ambiguity on the Iran Deal now has world leaders worried that if the United States backs out and imposes sanctions, Iran might restart its nuclear program. The second takeaway from the president’s speech was a familiar use of nationalist language and an emphasis on sovereignty. Yet, as he called on world leaders to “fulfill our sovereign duties to the people we faithfully represent,” his actions at home have been doing the opposite. For example, a month after taking office, he signed an executive order halting refugees from six Muslim countries, affecting thousands of American families with Middle Eastern roots. Most recently, he moved to end the Deferred Action for Childhood Arrivals (DACA) program that shielded illegal children from deportation, again affecting thousands of American families and businesses. Furthermore, by singling out North Korea, Iran, Cuba, Syria and Venezuela, it is clear that not every state’s sovereignty needs to be respected. Being so brazenly selective about the sanctity of sovereignty can unnerve targeted nations and incentivize destabilizing arms races. The president’s remarks also seem to indicate his predilection for increasing military spending to promote his “America First” strategy, which is contrary to his desire to end nation building. The final takeaway stems from the issues absent from his remarks. The day before his speech, there was speculation that the president would discuss how to reform the UN, a topic him and Secretary-General António Guterres actually agree on. But he did not discuss any reforms. Similarly, as he openly criticized socialism and communism, and its devastating effects on Cuba, Venezuela, and the Soviet Union, he did not mention China, a leading power that is politically communist. As the first opportunity to address the international community as a leader, the president did what he did best: threaten force without encouraging alliances and cooperation. Instead of taking this opportunity to promote a grand strategy of great power balancing, the president instead opted for using the rhetoric of realpolitik, stating that the United States will be “guided by outcomes, not ideology.” Yet, outcomes are almost always influenced by ideology. In other words, the world heard what it expected to hear from President Trump: a collection of contrary statements and a weak road map for world peace. Sahar Khan, Ph.D. is a Visiting Postdoctoral Research Fellow at the Cato Institute.
  • Graham-Cassidy Is a Too-Mild Improvement on Obamacare    (Michael D. Tanner, 2017-09-20)
    Michael D. Tanner Yogi Berra was right: It’s déjà vu all over again. Health-care reform is back on the table. With time rapidly running out — the reconciliation rule that would allow legislation to pass with just 50 senators’ votes expires on September 30 — Republicans may take up yet another proposal to “repeal and replace” Obamacare. The legislation, proposed by Senators Bill Cassidy (La.) and Lindsey Graham (S.C.), is less ambitious than previous repeal efforts, which might just enable it to piece together enough votes to pass. Essentially, Graham-Cassidy would fold all current Obamacare funding, both premium subsidies and Medicaid-expansion funding, into a single block grant to each state. Keeping this money flowing means that Graham-Cassidy must keep most Obamacare taxes in place. Only the individual and employer mandates and the medical-device tax are repealed. This has led Rand Paul to warn that the bill simply “rearranges the furniture a bit, changes some names, and otherwise masks what is really going on — a redistribution of ObamaCare taxes and a new Republican entitlement program, funded nearly as extravagantly as ObamaCare.” Single-payer is inevitable if the GOP can’t come up with a bold alternative. Particularly troubling is the way that the bill’s sponsors are using a reallocation of funding to round up support from reluctant Republicans. The bill would shift money from some high-cost states, such as California, Massachusetts, and New York, to more rural states (read: red states). The bill’s supporters are essentially playing the time-honored Washington game of promising “free money” to the states. That never fails to be popular with governors and senators from those states that “win.” On the positive side, supporters of the legislation correctly point out that it would give the states far more flexibility with the funds they receive, and would allow them to waive many of Obamacare’s more onerous regulations, including the mandate to buy coverage, mandated benefits, and pre-existing-condition coverage requirements. Those are the regulations most responsible for driving up premiums and destabilizing insurance markets. Meanwhile, on the other side of the aisle, Bernie Sanders has introduced his latest version of “Medicare for All.” Like the Republicans, Bernie has also scaled back his proposal, which originally called for a government-run, single-payer system. This one would cost only $1.4 trillion per year. That would be more than a third of our entire current federal budget. Wary that the price tag will likely terrify many Americans, Bernie doesn’t actually include any mechanism in the bill to pay for all this new spending. Still, his office suggests some possibilities, including: a 7.5 percent hike in payroll taxes (bringing the total tax to nearly 23 percent), a 4 percent income-tax increase on all Americans, and additional tax hikes on corporations and “the rich.” While calling his proposal Medicare for All, he would actually offer benefits far more generous than those found in current Medicare, including dental and vision care. In fact, the benefits would be more generous than almost any national health-care system anywhere, including Canada. And it would all be “free”: No deductibles, co-payments, or out-of-pocket costs. And when Bernie says single payer, he means it. His plan would outlaw private insurance, either employer-sponsored or individual. If you don’t like what the government gives you, tough! The contrast here is not just between rival health-care plans. Ever since 1945, when Harry Truman first proposed a national government-run health-care system, progressives have known what they want. From Medicare and Medicaid through the Children’s Health Insurance Program and the Affordable Care Act, they have advanced steadily, if incrementally, toward that goal. We are not talking about a conspiracy theory, but an ideological worldview that encompasses health care. Bernie’s plan is the latest step in that long march toward government health care. It is not going to pass anytime soon. But that fact that it is co-sponsored by 17 senators and supported by nearly every rumored Democratic candidate for the 2020 presidential nomination shows the degree to which Democrats are united around a common goal. We can disagree with what they seek, but at least we know what it is. And, Republicans? They want a bill that will pass. Think about it. In the battle of ideas over health-care reform, Republicans have unilaterally disarmed. When was the last time Republicans explained what a free-market health-care system would look like, how it would work, and why it would be better for health-care consumers? The old adage is true: You can’t beat something with nothing. That’s why Republicans are once again trying to eke out a narrow win on a bill that slows but doesn’t reverse the ongoing march to socialized medicine. Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis.
  • Trump's China-Sanctions Madness Imperils the Dollar    (Ryan McMaken, 2017-09-19)
    By: Ryan McMaken Last week US Treasury Secretary Steve Mnuchin warned the US will impose new sanctions on China if it doesn't conform to UN sanctions on North Korea:"If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful."In other words, the administration wants to sanction one of the US's biggest trading partners, and the world's second-largest economy.China is the world's third-largest recipient of Americans exports, behind only Canada and Mexico. China is the world's largest source of imports for Americans, slightly ahead of both Mexico and Canada.In 2016, Americans exported $169 billion in goods and services to China while importing $478 billion of goods and services. Every year, both consumers and producers benefit from the importation of Chinese electronics, machinery, food, footwear, and more.Ratcheting up economic warfare with China could serve to cut off these avenues of trade and thus will only cost consumers and small business owners who currently benefit from lower-cost machinery, clothing, and more.For the mercantilists in the Trump administration, of course, American consumers import "too much" from China anyway, and Americans and ought to be prohibited by the US government from purchasing what they want. The North Korea situation could serve as a convenient excuse for slapping prohibitions on American consumers in the name of "fair trade" while also serving as a foreign policy tool.The last thing the US consumer needs is a trade war with China.At this point, however, the US isn't talking about cutting off trade in such a blunt manner.As Mnuchin notes, the strategy here is to "prevent [the Chinese] from accessing the U.S. and international dollar system." In practice, this would likely mean restricting access to the so-called SWIFT system which facilitates international transactions in dollars.This idea is highly problematic in its own way. Were the Chinese to be cut off from the dollar, this would only create an enormous incentive for the Chinese to move away from the dollar into other currencies — including its own. China's largest trading partners would likely follow China in this exodus. Moreover, China and Russia have already foreseen the possibility of SWIFT being "weaponized."As Jeff Thomas notes:China, Russia and others have seen this day coming and have created their own SWIFT system, world cable network and world banking system. All that’s needed to kick it all into gear is a major international need to bypass SWIFT. The US government has just provided that need with this threat. There would certainly be teething pains in getting the new system running on a massive scale, but the sudden worldwide need would drive the implementation.Moreover, China is a key trading partner for Germany, Russia, Australia, Japan. Brazil, and South Korea. Will these countries simply write off China as a trading partner because thy can't settle accounts in dollars?  It's unlikely. While this would not necessarily destroy the dollar, a movement away from the US dollar would greatly diminish the dollar's standing as the world's reserve currency. It would diminish the dollar's role as the go-to currency, and this would, in turn, drive up borrowing costs — i.e. interest rates — for the US government. This would turn the US's currently sustainable debt problem into an unsustainable one. Massive domestic budget cuts in the US would follow. The fact is, as Foreign Policy noted last year, China is becoming "too big to sanction." Todd Williamson writes on how the IMF has now added China’s currency, the renminbi (RMB), to its basket of four reserve currencies known as Special Drawing Rights. In doing so, Williamson notes, the IMF "may have delivered a severe blow to the strength of a key tool in the West’s geopolitical arsenal: financial sanctions."He continues: The RMB is currently the fourth-most traded currency on the global market (behind the dollar, euro, and pound). It now holds the third highest percentage in the basket, at just under 11 percent, placing it ahead of the pound’s 8 percent (though far below the dollar, which holds more than 40 percent). The IMF’s decision to include the RMB is more than a symbolic sign of the currency’s liberalization: It’s also a big step toward the RMB’s regular usage outside of China. The SDR determines the mix of currencies in which the IMF lends out — a total of $112 billion in 2015 — and the RMB’s inclusion in this distribution mechanism will likely drive up the currency’s demand. The comfort level of the RMB’s usage in global transactions among central banks, sovereign wealth funds, and other massive financial institutions will rise with the currency’s greater accessibility.In other words, slapping financial sanctions on the Chinese is nothing at all like doing the same to the Iranians or the Venezuelans. The Chinese economy and the Chinese currency are already huge global players which huge trading partners. Now, as Thomas notes, if the US forces China away from the dollar will not be without pain. If it were painless, the Chinese state would have abandoned the dollar already. China Is Highly Motivated to Go Its Own Way on North KoreaShould the US force the Chinese regime's hand, the regime will be highly motivated to stay the course on North Korea, in spite of the potential for economic disarray. China already feels itself surrounded by Western client states, including Japan, South Korea, Taiwan, and the Philippines. The Chinese state is not going to abandon its buffer state in North Korea. Were North Korea to be absorbed into a Greater Korea on American terms, this would be seen as a disaster by the Chinese, since it would place US forces right on a Chinese land border, just across the Yalu River. To get a sense of why the Chinese will not cave to US attempts at regime change in North Korea, imagine how the US would behave if China threatened the US with sanctions — unless the US permitted Chinese troops on the south bank of the Rio Grande. Add in the fact that the Chinese state is not subject to elections, and we can see the political will to carry on with de-dollarization in the face of US sanctions would be significant indeed. Another likely outcome of financial sanctions would be to encourage the Chinese to dump their holdings of US debt. China currently holds seven percent of all US bonds. Were the Chinese to dump these holdings, it will become far more difficult for the US and its central bank to continue paying rock-bottom interest rates on its 20-trillion-dollar debt. If the US wants to really continue with this sanctions game, it need also be prepared to face the reality that its not 1989, and that the world may not be willing to treat dollars and US sanctions in the way the US expects it to. The likely response will only be the latest evidence that the US "unipolar moment" is over. 
  • What Is the Correct Amount of Money?    (Frank Shostak, 2017-09-19)
    By: Frank Shostak Most economists believe that a growing economy requires a growing money stock, on the grounds that growth gives rise to a greater demand for money, which must be accommodated. Failing to do so, it is maintained, will lead to a decline in the prices of goods and services, which in turn will destabilize the economy and lead to an economic recession or, even worse, depression.Since growth in money supply is of such importance, it is not surprising that economists are continuously searching for the correct — or the optimum — growth rate of the money supply.Some economists who are the followers of Milton Friedman — also known as monetarists — want the central bank to target the money supply growth rate to a fixed percentage. They hold that if this percentage is maintained over a prolonged period of time it will usher in an era of economic stability.The idea that money must grow in order to sustain economic growth gives the impression that money somehow sustains economic activity. According to Rothbard,Money, per se, cannot be consumed and cannot be used directly as a producers' good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing.1Money's main job is simply to fulfill the role of the medium of exchange. Money doesn't sustain or fund real economic activity. The means of sustenance, or funding, is provided by saved consumer goods. By fulfilling its role as a medium of exchange, money just facilitates the flow of goods and services between producers and consumers.Historically, many different goods have been used as the medium of exchange. On this, Mises observed that, over time,. . . there would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.2Through the ongoing process of selection over thousands of years, people settled on gold as their preferred general medium of exchange.Most mainstream economists, while accepting this historical evolution, cast doubt that gold can fulfill the role of money in the modern world. It is held that, relative to the growing demand for money as a result of growing economies, the supply of gold is not adequate.Furthermore, if one takes into the account the fact that a large portion of gold mined is used for jewelry, this leaves the stock of money almost unchanged over long periods of time.It is argued that the free market, by failing to provide enough gold, will cause money supply shortages. This, in turn, runs the risk of destabilizing the economy. It is for this reason that most economists, even those who express sympathy toward the idea of a free market, endorse the view that the money supply must be controlled by the government.What do we mean by demand for money?When we talk about demand for money, what we really mean is the demand for money's purchasing power. After all, people don't want a greater amount of money in their pockets so much as they want greater purchasing power in their possession. On this Mises wrote,The services money renders are conditioned by the height of its purchasing power. Nobody wants to have in his cash holding a definite number of pieces of money or a definite weight of money; he wants to keep a cash holding of a definite amount of purchasing power.3In a free market, in similarity to other goods, the price of money is determined by supply and demand.Consequently, if there is less money, its exchange value will increase. Conversely, the exchange value will fall when there is more money.Within the framework of a free market, there cannot be such thing as "too little" or "too much" money. As long as the market is allowed to clear, no shortage or surplus of money can emerge.Once the market has chosen a particular commodity as money, the given stock of this commodity will always be sufficient to secure the services that money provides.Hence, in a free market, the whole idea of an optimum rate of growth of money is absurd.According to Mises:As the operation of the market tends to determine the final state of money's purchasing power at a height at which the supply of and the demand for money coincide, there can never be an excess or deficiency of money. Each individual and all individuals together always enjoy fully the advantages which they can derive from indirect exchange and the use of money, no matter whether the total quantity of money is great, or small. . . . the services which money renders can be neither improved nor repaired by changing the supply of money. . . . The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do.4However, how can we be sure that the supply of a selected commodity as money will not start to rapidly expand because of unforeseen events? Would it not undermine people's well-being?If this were to happen, then people would probably abandon this commodity and settle on some other commodity. Individuals who are striving to preserve their lives and well-being will not choose a commodity that is subject to a steady decline in its purchasing power as money.This is the essence of the market selection process and the reason why it took several thousand years for gold to be chosen as the most marketable commodity.The prolonged market selection process raises the likelihood that gold is the most suitable commodity to fulfill the role of money.But even if we were to agree that the world under the gold standard would have been a much better place to live than under the present monetary system, surely we must be practical and come up with solutions that are in tune with contemporary reality. Namely, that in the world in which we presently live, we do have central banks, and we are not on the gold standard. Given these facts, what then should be the correct money supply growth rate?It is not possible, however, to devise a scheme for a "correct" money growth rate while central authorities have coercively displaced the market-selected money with paper money. Here is why.From commodity money to paper moneyOriginally, paper money was not regarded as money but merely as a representation of gold. Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services, these certificates came to be regarded as money.Paper certificates that are accepted as the medium of exchange open the scope for fraudulent practice. Banks could now be tempted to boost their profits by lending certificates that were not covered by gold. In a free-market economy, a bank that over-issues paper certificates will quickly find out that the exchange value of its certificates in terms of goods and services will fall.To protect their purchasing power, holders of the over-issued certificates are likely to attempt to convert them back to gold. If all of them were to demand gold back at the same time, this would bankrupt the bank. In a free, competitive market then, the threat of bankruptcy would restrain banks from issuing paper certificates unbacked by gold. On this Mises wrote,People often refer to the dictum of an anonymous American quoted by Tooke: "Free trade in banking is free trade in swindling." However, freedom in the issuance of banknotes would have narrowed down the use of banknotes considerably if it had not entirely suppressed it. It was this idea which Cernuschi advanced in the hearings of the French Banking Inquiry on October 24, 1865: "I believe that what is called freedom of banking would result in a total suppression of banknotes in France. I want to give everybody the right to issue banknotes so that nobody should take any banknotes any longer."5This means that in a free-market economy, paper money cannot assume a "life of its own" and become independent of commodity money.The government can, however, bypass the free-market discipline. It can issue a decree that makes it legal for the over-issued bank not to redeem paper certificates into gold.Once banks are not obliged to redeem paper certificates into gold, opportunities for large profits are created that set incentives to pursue an unrestrained expansion of the supply of paper certificates.6This uncurbed expansion of paper certificates raises the likelihood of setting off a galloping rise in the prices of goods and services that can lead to the breakdown of the market economy.To prevent such a breakdown, the supply of the paper money must be managed. The main purpose of managing the supply is to prevent various competing banks from over-issuing paper certificates and from bankrupting each other. This can be achieved by establishing a monopoly bank (i.e., a central bank) that manages the supply of paper money.According to Hoppe, "If one is to succeed in replacing commodity money by fiat money, then, an additional requirement must be fulfilled: Free entry into the note-production business must be restricted, and a money monopoly must be established."7To assert its authority, the central bank introduces its paper certificates, which replace the certificates of various banks. (The central bank's money purchasing power is established on account of the fact that various paper certificates, which carry purchasing power, are exchanged for the central bank money at a fixed rate. The central bank paper certificates are fully backed by banks’ certificates, which have the historical link to gold.)The central bank paper money, which is declared as legal tender, also serves as a reserve asset for banks. This enables the central bank to set a limit on the credit expansion by the banking system via setting regulatory ratios of reserves to loans.It would then appear that the central bank can manage and stabilize the monetary system. The truth, however, is the exact opposite. To manage the system, the central bank must constantly create money "out of thin air" to prevent banks from bankrupting each other.This leads to persistent declines in money's purchasing power, which destabilizes the entire monetary system. This tendency to destabilize the system is also reinforced by the fact that a money monopolist naturally has the incentive to look after his own interest.According to Hoppe,He can print notes at practically zero cost and then turn around and purchase real assets (consumer or producer goods) or use them for the repayment of real debts. The real wealth of the non-bank public will be reduced-they own less goods and more money of lower purchasing power. However, the monopolist's real wealth will increase-he owns more non-money goods (and he always has as much money as he wants). Who, in this situation, except angels, would not engage in a steady expansion of the money supply and hence in a continuous depreciation of the currency?8Observe that while, in the free market, people will not accept a commodity as money if its purchasing power is subject to a persistent decline, in the present environment central banking authorities are coercively imposing money that suffers from a steady decline in its purchasing power.Since the present monetary system is fundamentally unstable, the central bank is compelled to print money out of thin air to prevent the collapse of the system. It doesn't really matter what scheme the central bank adopts as far as monetary injections are concerned – they can print money directly or they can act in the money markets to target interest rates, as is now more frequently the case. Regardless of the mode of monetary injections, the boom-bust cycles will become more ferocious as time goes by.Even Milton Friedman's scheme to fix the money growth rate at a given percentage won't do the trick. After all a fixed percentage growth is still money growth, which leads to the exchange of nothing for something — i.e., economic impoverishment and the boom-bust cycle.What about removing the central bank altogether and keeping the current stock of paper money unchanged? Would that not do the trick? No, it would not.An unchanged money stock will cause an almost immediate breakdown of the present monetary system. After all, the present system survives because the central bank, by means of monetary injections, prevents the fractional reserve banks from going bankrupt.It is therefore not surprising that the central bank must always resort to large monetary injections when there is a threat from various political or economic shocks. Observe that the same fate is likely with other schemes. The only difference, of course, is that with these other schemes it may take some time before the final breakdown occurs. How long the central bank can keep the present system going is dependent upon the state of the pool of real wealth. As long as this pool is still growing, the central bank is likely to succeed in keeping the system alive.Once the real pool of wealth begins to stagnate — or, even worse, shrink — then no amount of monetary pumping will be able to prevent the implosion of the system.In a true free market, if people raised their demand for gold as a result of a major upheaval, this would lift money's purchasing power, and that would be about it; no further disruptions would emerge. The monetary system would remain intact.Also, as opposed to the present monetary system, in a true free market money can't disappear and set in motion the menace of the boom-bust cycles.In fractional reserve banking, when money is repaid and the bank doesn't renew the loan, money evaporates. Because the loan has originated out of nothing, it obviously couldn't have had an owner.In a free market, in contrast, when the gold is repaid, it is passed back to the original lender; the money stock stays intact.ConclusionSince the present monetary system is fundamentally unstable, there cannot be a "correct" money supply growth rate. Whether the central bank injects money in accordance with economic activity or fixes the growth rate, it further destabilizes the system.The only way to make the system truly stable is to permit the free market to take over. In a truly free market there is no need to be concerned with the issue of the "correct" rate of money supply growth and no institution is required to regulate the supply of money. 1. Murray N. Rothbard, Man, Economy and State (Los Angeles: Nash Publishing, 1970), p.670.  2. Ludwig von Mises, The Theory of Money and Credit (Irvington-on-Hudson, N.Y: The Foundation of Economic Education, 1971) pp. 32-33. 3. Ludwig von Mises, Human Action, 3rd rev. ed. (Chicago: Contemporary Books, 1966), p.421. 4. Ibid. 5. Ibid., p.446. 6. Hans-Hermann Hoppe, “How is Fiat Money Possible?-or, The Devoluton of Money and Credit,” The Review of Austrian Economics 7, no.2 (1994), pp.49-74. 7. Ibid., p.59. 8. Ibid., p.62.
  • If the Majority Votes to Secede — What About the Minority?    (Ryan McMaken, 2017-09-19)
    By: Ryan McMaken In recent years, left-wing groups have often been the driving force behind secession movements. This has been the case in Scotland, in Catalonia, and in California. In each case, the secession movements have been initiated in part to forward left-wing goals, such as the creation of a larger welfare state or to escape limitations imposed by political interest groups and institutions deemed to be too right-wing. Within the American context, the loudest calls for secession right now are coming from California where leftists are eager to assert their independence from the Trump administration in Washington.Generally speaking, these California secessionists want single-payer health care, an even larger welfare state, confiscation of private firearms, and an ever larger environmental "protection" bureaucracy. That is, they want a European-style welfare state. California as Case Study This case presents Americans — and especially libertarian-minded Americans — with a question that continues to come up in recent years on secession matters: should they support a left-wing secession movement? Is it right or moral to support a secession movement that, in the short- and medium- terms is almost guaranteed to adopt policies that are counter to the cause of freedom and free markets? The answer must first and foremost be compared against the reality of forcing political union on a separatist region. That is, the cost of allowing a region to separate must be compared to the cost of keeping it in — i.e., military invasion, occupation, mass arrests, government surveillance, martial law, and worse.Not surprisingly, we're forced to conclude the answer is the same whether we're talking about secession in Scotland, in California, or in Catalonia: the answer is yes.What About the Minority Interests? Often, the immediate retort to this position is to point to those groups in the minority who are left stuck in the seceding territories. The argument goes something like this: "Now that you've cut California loose, what about those poor conservatives, gun owners, and business owners who will now be negatively impacted by a newly empowered California government? Before, California was at least somewhat restrained by its membership in the United States. Now the California government is even more free to inflict misery on the hapless taxpayers and productive people who are stuck there." To this criticism, there are at least two responses.One: California Independence Means More Freedom for the Rest of the Country Those who wish to focus on merely what happens to those who are in California take a parochial and far-too-limited view. Yes, it's true that business owners, religious Christians, and gun owners in California (to name just three groups) would likely be negatively impacted by California independence. The California government has long illustrated an open hostility to these minority groups. The other side of the coin, however, is that California secession would lead to a significant expansion of freedom for the "rump" United States left behind. Freed of the influence of California on American politics, the remainder of the United States would likely move significantly in the direction of more freedom in markets. Federal regulations would likely be scaled back, and presidential candidates would no longer need to cater to interest groups with sizable memberships in California. California's 53-member delegation in Congress (39 of them Democrats) would be gone, and voting patterns in Congress would likely shift in a direction more hospitable to freedom and free markets. In other words, the nation would be freed from a great weight tied around its neck. One might even say the situation is analagous to the removal of an infected appendage. It wouldn't be the first time such a thing had happened. In 1861, when Southern States began seceding from the Union, New Yorker George Templeton Strong welcomed the prospect of being freed from the political influence of the slave drivers down south. He concluded "the self-amputated members were diseased beyond immediate cure, and their virus will infect our system no longer."But, unlike Strong who might have been induced by conscience to think of the slaves left behind in the seceding territories, we face no similar scruples. Obviously, comparing modern California to a slave state of old is laughably inappropriate, and unlike the slaves, Californians are free to move away. Nor is it the moral obligation of Texans, or Floridians, or Coloradans to protect the Californians from the excesses of their own government.Thus, when we think of post-secession California subject to the whims of a hard-left government there, we must also think of the 285 million remaining Americans who would benefit from the separation. Note also that this situation even has advantages for the taxpayers and business owners in California who wish to escape the California regime. Now that the rump United States has been improved by California's absence, those in California who seek a more business-friendly legal environment can dramatically change their fortunes for the better by moving across the new national boundary to Arizona or Nevada. For these migrants, the net gain achieved by leaving California has grown larger thanks to California's departure. Two: More States are Preferable to Fewer States The second response to the objection lies in the fact that secession already brings with it a solution to the problem. That is, the problems caused by one secession are solved by more secession. As I've explained here, here, and here, a larger number of states is preferable to a smaller number. A larger number of small states provides more practical choices to taxpayers and citizens in choosing a place to live under a governments that more closely match their personal values. Thus, in considering the problems of an independent California, we find that the primary problem faced by taxpayers and productive residents in California is that the state is simply too large and contains too diverse a population within its boundaries. As noted by numerous commentators over the years — including supporters of the Six Californias initiative — California's population is quite politically and culturally diverse, although it has been dominated for decades by a hard-left coalition of voters based around the Bay Area. Compared to these voters, Southern California residents appear downright centrist, but one would not know this by looking at statewide politics because Northern California is so adept at throwing its weight around. The solution to this, problem lies in breaking up California into still smaller pieces. We can see many of these political lines ripe for decentralization in the voting patterns revealed by statewide votes such as those for Propsition 187 and Proposition 8. We can see it in the map of legislative districts. Nor is this just a matter of metropolitan areas versus rural areas. Many suburban areas within the metroplexes of California are quite right-of-center in their own rights, and would surely benefit from further political decentralization. Urban core cities ought to be their own self-governing territories, with suburan and rural areas kept separate and self-governing in their own ways. The net result of all of this would be to offer a multitude of choices among taxpayers, entrepreneurs, gun owners, and moral traditionalists as to where they might live and enjoy the benefits of self-determination within their own communities. But before any of this can happen, we must first establish and extend the moral and legal legitimacy of self-determination through secession and decentralization. Clinging to the status quo of existing regional and national boundaries is reactionary in the extreme. Insisting that no community ought to be allowed self government unless its leaders are hard-core libertarians is impractical, irresponsible, and doomed to failure. Nevertheless, when confronted with new attempts at decentralization and secession, even some of those who claim to be for freedom and self-determination cling to ideas of imposing nationalistic control over others. They invent emotion-laden fictional slogans claiming "we are one nation" or "secession is treason" or other sayings designed to justify using the power of the state to impose political unity.  Ultimately, this is an ideology of monopoly and coercion, and tramples the very ideals of freedom that the nationalists claim they hold dear. 
  • Could Legalizing All Drugs Solve America’s Opioid Epidemic?    (Jeffrey Miron, 2017-09-19)
    Jeffrey Miron Drug policy in the U.S. is at a crossroads. On one hand, at least 22 states have decriminalized recreational marijuana, eight of which have gone a step further by legalizing it altogether. At least 29 states permit medical marijuana for qualifying patients. Several additional states look poised to consider legalization, decriminalization, or medicalization in 2018. At the federal level, Sen. Cory Booker (D-NJ) has introduced a bill to end the national prohibition of marijuana. U.S. policy toward marijuana, at least, is on a path toward liberalization — if not outright legalization. On the other hand, the opioid epidemic creates pressure in the other direction. Many proposals for taming the epidemic involve further constraining access (for example, Centers for Disease Control and Prevention guidelines restricting prescriptions or state laws limiting access to painkillers). In addition, U.S. Attorney General Jeff Sessions seems intent on reversing marijuana liberalizations, calling marijuana “only slightly less awful” than heroin. Given this tension over drug policy, it is useful to note some of the positive outcomes of drug liberalizations around the world. Portugal is a prime example: It decriminalized all drugs in 2001 amid a heroin addiction crisis and soaring numbers of drug-related AIDS deaths. Possessing small amounts of illicit substances is now treated as a public health problem. Instead of facing jail time, drug users who are caught must meet with medical experts, social workers, and psychologists who assess their situation and often direct them toward treatment or other rehabilitative services. Around the world, liberal drug policies have had great success in reducing the harms from drug addiction, such as HIV and overdoses. Faced with a raging opioid crisis, the U.S. would be wise to model its own drug policy after countries that have undergone similar experiences. The results of this policy have been astonishing. Drug use has declined across all age groups. Overdose deaths have plummeted to just three per million adults, the second lowest rate in the European Union. For comparison, the drug overdose death rate in the U.S. is a staggering 185 per million adults. Portugal’s drug-related HIV infections have fallen by 94% since 2001. And the number of people arrested for criminal drug offenses has declined by over 60%, which has allowed Portugal to channel money once spent on arresting and imprisoning addicts toward more effective treatment programs. As described by one Portuguese counselor who works directly with recovering addicts, “It’s cheaper to treat people than to incarcerate them. … If I come across someone who wants my help, I’m in a much better position to provide it than a judge would ever be.” Unsurprisingly, this humane approach to drug treatment has garnered widespread support among Portuguese citizens. Similarly, the Czech Republic has removed penalties for limited personal use of marijuana, cocaine, heroin, LSD, and other substances. The nation’s lenient polices encourage users to seek treatment; largely as a result, annual overdose deaths are on par with Portugal at about five per million adults — much lower than the EU average. Perhaps most radically, Uruguay fully legalized marijuana in 2013 and has decriminalized cocaine and heroin. While it is too early to determine its long-term effects, the new policy has helped Uruguay focus law enforcement resources on drug smuggling. The country’s government even operates a program that sells cannabis for just $1 per gram, making it difficult for black markets to thrive. Domestically, recent marijuana legalizations in Colorado, Washington state, Oregon, and Alaska have yielded positive outcomes. Numerous studies show little to no rise in marijuana use following legalization, coupled with possible declines in cocaine and heroin use. Moreover, legalizations appear to have had no impact on violent crime and traffic accidents, consistent with medical research showing little association between marijuana and impaired cognition or driving ability. Critics of drug liberalization often warn that further decriminalizing drugs in America will worsen the opioid epidemic. Citing “gateway” effects, many commentators (such as Sessions) advocate reducing opioid addiction via greater law enforcement and heavier penalties against all substance possession and use. But this reasoning ignores that opioids are already highly restricted, and that previous attempts to control them more tightly have been counterproductive. Around the world, liberal drug policies have had great success in reducing the harms from drug addiction, such as HIV and overdoses. Faced with a raging opioid crisis, the U.S. would be wise to model its own drug policy after countries that have undergone similar experiences. Jeffrey Miron is the director of economic studies at the Cato Institute and the director of undergraduate studies in the Department of Economics at Harvard University.
  • Let Catalonia Decide    (Jeff Deist, 2017-09-19)
    By: Jeff Deist Should Catalonia be independent?Surely Catalans must answer that question. Some Catalans consider themselves Spanish and some don’t. Many Spaniards consider Catalonia part of Spain, while some don’t. But it’s clear that a significant number of Catalans feel politically conquered, and resent it. Why should they live under a Spanish government, when their history, culture, and language are not Spanish?It’s a fair question, and one for which western democracies have no easy answer. If democratic voting is sacrosanct, are the results also sacrosanct, whatever the outcome? Do democrats really want democracy?Ludwig von Mises summed up the problem succinctly in Liberalism1:The situation of having to belong to a state to which one does not wish to belong is no less onerous if it is the result of an election than if one must endure it as the consequence of a military conquest.Surely many Hillary Clinton voters in the United States feel this way today. They don’t consider Trump a legitimate president (even aside from the electoral college issue), and are not particularly interested in respecting election results or the views of Trump voters. They feel “their” government not only does not represent them, but is actively hostile toward them.They feel, in short, like many Catalans.Understanding any region’s local politics and history is always a dangerous proposition for outsiders. Catalonia has a messy and complex past, dating back to the late 15th century and the nascent Kingdom of Spain. Momentum for independence from Madrid gathered throughout the 20th century, culminating in a 2014 referendum which the Spanish central government attempted to block in court. Over 80% of voters supported independence, yet only about a third of Catalans participated in the vote. It is unclear whether a scheduled October 1st vote on a new referendum will happen, given the possibility of Spanish criminal charges against the Catalan politicians behind it.Should Secession Be Allowed for Groups We Disagree With? There are also very serious questions about what an independent Catalonia would mean, not only for economically wobbly Spain but also neighboring France and the EU.Marta Hidalgo, a Spanish financial adviser and 2017 Mises University graduate, argues that Catalonia is Spain. She questions the region’s historical claims to independence, arguing that Catalan nationalism has been fraught with propaganda from those seeking to make a political movement out of a minority sentiment. She also points out that Spain is Catalonia’s principal market, propping up the Catalan economy through duties and tariffs on (otherwise) cheaper and better imports from England or Germany. And she stresses polls showing only about 2 million out of 7.5 million Catalans support secession.But these arguments don’t address the fundamental underlying issue of self-determination. Should Catalans be allowed to make their own decisions, even if those decisions are “bad,” and we (or Spain or the EU) disagree with them?Yes, some people would be worse off under an independent Catalan state — assuming Ms. Hidalgo is correct. But by the same token, some Spaniards may be objectively better off as a result of becoming unyoked politically from Catalonia. It’s a complex factual question, and both sides have arguments.But whether an independent Catalonia would be better off or worse off is highly subjective, and simply not for us to decide.Self-Determination Is the Highest Political EndFor libertarians, self-determination is the highest political end. In political terms, self-determination is liberty. In an ideal world, self-determination extends all the way to the individual, who enjoys complete political sovereignty over his or her life. The often misued term for this degree of complete self-determination is anarchy.In an imperfect world, however, libertarians should support smaller and more decentralized governments as a pragmatic step toward greater liberty. Our goal should be to devolve political power whenever possible, making states less powerful and easier to avoid. Barcelona is less ominous than Madrid. The Legislature in a US state is less fearsome than Congress in Washington DC. Street gangs are bad, but they can be avoided in ways Uncle Sam cannot.Ultimately, the argument in favor of Catalonian independence mirrors the argument for Scottish independence in 2014:Some … libertarians claimed that we should oppose the referendum on the grounds that it would create a new government, and thus two states would exist in the place of one. But reducing the size and scope of any single state’s dominion is healthy for liberty, because it leads us closer to the ultimate goal of self-determination at the individual level, to granting each of us sovereignty over our lives. It’s always good to reduce the number of individuals over which any government asserts authority.Furthermore, some conservatives argue that we should not support secession movements where the breakaway movement is likely to create a government that is more “liberal” than the one it replaces. This was the case in Scotland, where younger Scots who supported the independence referendum in greater numbers hoped to create strong ties with the EU parliament in Brussels and build a Scandinavian-style welfare state run from Holyrood (never mind that Tories in London were overjoyed at the prospect of jettisoning a huge number of Labour supporters!).But if support for the principle of self-determination is to have any meaning whatsoever, it must allow for others to make decisions with which we disagree. Political competition can only benefit all of us. What neither progressives nor conservatives understand — or worse, maybe they do understand — is that secession provides a mechanism for real diversity, a world where we are not all yoked together. It provides a way for people with widely divergent views and interests to live peaceably as neighbors instead of suffering under one commanding central government that pits them against each other.So let Catalonia go, if it chooses. 1. Interestingly, Mises criticized the Spanish diplomat and ostensible liberal Salvador de Madariaga for opposing independence for Catalonia.
  • The Case Against "The Case for Colonialism"    (Sahar Khan, 2017-09-19)
    Sahar Khan The Third World Quarterly (TWQ), a reputable academic journal in international studies, is currently under fire by academics including Ducks. In its latest issue, it published an article titled “The Case for Colonialism” by Dr. Bruce Gilley of Portland State University. In this article, Gilley calls for a return of colonialism, citing the benefits of a “colonial governance” agenda over the “good governance” agenda, which would involve overtaking state bureaucracies, recolonizing some areas, and creating new colonies “from scratch.” He argues that this new colonialism will be: 1) beneficial because it will be chosen by “the colonized,” and hence, will be legitimate; 2) attractive to Western conservatives because they are financially low-risk, and to liberals, because they will be just; and 3) effective because they will be designed like charter cities, which have proven to be efficient and effective at governance. At first glance, the article seems like a bad joke. Can someone, a scholar no less, actually make a case for colonialism? And advocate for its return? Also, considering that the TWQ is jointly involved in creating an award named after Edward Said, the founder of postcolonial studies, it is especially surprising that the journal would publish a poor quality article on the subject of colonialism. The response has been swift. Though there are some apologists, social media has exploded with criticism against the author and the journal, even sparking a petition calling for the article’s retraction. Within a day, the petition gathered over 1500 signatures, with more signing on. Academia has a duty to inform with integrity, honesty, and evidence. If scholars and journals alike are not held to this standard, it provides an opening for falsehoods and misinformation to take hold, shape perceptions, and dictate policies. The problem is not that the article is offensive (which it is). The problem is that it is empirically and historically inaccurate, misuses existing postcolonial scholarship, and largely ignores interdisciplinary approaches to the study of colonial legacies. There are at least five blatant examples of this. First, in the introduction, Gilley cites Berney Sèbe’s article that analyzes imperial figures in Zambian, Nigerian, and Congolese history, and advocates for replacing the “good governance” agenda with a “colonial agenda.” Sèbe’s research is essentially about the role of colonial history in the creation of Zambia’s, Nigeria’s, and the Congo’s state narratives where the state is still grappling with the scars of its colonial past. Sèbe notes that the rebirth of colonial leaders as heroes uncovers the profound effect of colonialism on the state’s nation-building narratives. He further concludes that these narratives are moving from the post-colonialism calls of political emancipation toward “a post-racial form of cosmopolitan nation-building,” which attempts to combine anti-colonial sentiments with the modern conceptions of nationhood within African countries that are complex and multi-layered. Gilley conveniently ignores the latter part of Sèbe’s research, and instead, only focuses on this resurgence of colonial heroes as evidence of the failure of anti-colonial rhetoric. Handpicking arguments that fit into your own theory is bad methodology—and as a professor, Gilley should know better. Second, Gilley praises Sèbe’s “cosmopolitan nation-building” as an “explicit rejection of the parochial myth of self-governing capacity that drove most postcolonial countries into the ground” (p.8). Gilley has not only misused Sèbe’s term but clearly has also misunderstood it. Sèbe’s use of “cosmopolitan” is descriptive. According to the Merriam-Webster dictionary, cosmopolitan means “having worldwide rather than limited or provincial scope.” It does not, as Gilley concludes, reject the “myth” around postcolonial states governing capacity. There is ample historical evidence on how almost all postcolonial states inherited bureaucracies that they could not immediately manage. The lack of management was not because they did not know how to govern but was due to a myriad of factors that involved dealing with scarce resources, an influx of refugees, internal ideological divisions, and external threats to territory, as examined by Ayesha Jalal and Bertrand Badie. Gilley’s characterization of Sèbe’s “cosmopolitan nation-building,” therefore, is misleading and blatantly ignores postcolonial scholarship. Third, Gilley labels decolonization as “sudden,” which again, is empirically inaccurate. For example, the decolonization of the Indian sub-continent that resulted in the independence of Pakistan and India in 1947 can be dated to the 1840s, when calls for independence from the British began. Likewise, the Indonesian independence movement from the Dutch began in 1908—and is called the “Year of National Awakening”—resulting in independence in 1945. Similarly, Algerian calls for independence from French rule date back to World War I. After a bloody war of independence, Algeria was decolonized in 1962. Morocco was also colonized by France and Spain and gained independence in 1956. There are, therefore, numerous examples of states that struggled for independence for decades. This may be news to Gilley but decades of emancipatory struggles is not “sudden.” Fourth, Gilley describes anti-colonial literature’s emphasis on the harmful effects of colonization as biased, inadequate, and not thorough enough. However, he ignores how disproportionate the benefits of colonialism were toward colonized populations. It is true that during their colonial rule, the British, French, Portuguese, Spanish, and Dutch built railways, expanded education systems, improved healthcare, created systems of taxation, and outlined basic governance infrastructure. And so Gilley states that a colonial governance agenda “resurrects the universalism of the liberal peace and with it a sharedstandard of what a well-governed country looks like” (p. 8). He uses Alexander De Juan and Jan Henryk Pierskalla’s article to make this point against anti-colonial critiques. De Juan and Pierskalla’s article, however, does not advance a pro-colonial agenda. Instead, it is a literature review showcasing four areas for growth within interdisciplinary postcolonial scholarship that include internal dynamics of colonial rule, disaggregating variables and units of analyses, and investigating contexts that shaped the consequences of colonial rule. Furthermore, advancements under colonial rule were not for everyone; not only did these measures favor elites and pro-colonizer groups but also created divisions along ethnic, religious, and linguistic lines within indigenous populations that continue to exist today. The colonial method of governance, therefore, was to oppress, violate, and divide resources and populations—and is thoroughly documented and researched within political science, sociology, anthropology, and history. For example, the British exploited differences between the Hindu and Muslim communities in the sub-continent, creating deep resentments and divisions that persist today due to the 1947 Partition. Similarly, differences between the Hutus and Tutsis that led to the Rwandan genocidewere created and exploited by Belgian colonizers. Historians and anthropologists alike have argued that these differences were economic, not ethnic. In fact, Hutus and Tutsis are indistinguishable. Since the genocide, Rwanda has become a “beacon of hope,” and exemplifies how reconciliation can eliminate differences imposed by colonialism. And fifth, Gilley attributes the abolition of slave-trading to colonialism, which in addition to being ridiculous, is factually incorrect. The Portuguese began slavery in the 1500s as they explored West Africa while the British brought the first installment of African slaves to Virginia in 1619. Colonizers, therefore, created the slave trade. Systematic decolonization and subsequent wars of independence eventually ended the slave trade. Academia has a duty to inform with integrity, honesty, and evidence. If scholars and journals alike are not held to this standard, it provides an opening for falsehoods and misinformation to take hold, shape perceptions, and dictate policies. We are living in a critical political climate, especially in the United States, where President Trump’s apparent sympathy for radical right-wing groups is troubling. This kind of scholarship is dangerous not just because it legitimizes the whitewashing of academic literature but also stands to undermine U.S. foreign policy as it taints important scholarship on concepts related to neocolonialism. Aside from being wrong on the facts, articles like these merely perpetuate dubious justifications for U.S. military interventionism and long-term nation-building projects in distant lands with populations that resent foreign occupation. We should expect more from scholarly journals. Sahar Khan a visiting research fellow in the Cato Institute’s Defense and Foreign Policy Department.
  • Passchendaele: A Century after the Horror    (Matthew McCaffrey, 2017-09-19)
    By: Matthew McCaffrey The period July to November this year marks the centenary of the Battle of Passchendaele. In a war already overflowing with misery, Passchendaele remains a byword for unspeakable suffering; it was one of the most appalling campaigns of the First World War, claiming almost half a million casualties and inflicting lifelong physical and psychological damage on the survivors. It’s also a gruesome example of the human costs of war and the evils of war-making.War-Making as PoliticsCarl Von Clausewitz famously claimed that war is the continuation of politics by other means, and in a sense this was true at Passchendaele, where political ambitions and expediency and military delusions trumped even the most basic, humane common sense, and where personal disputes between politicians and military commanders lead to carnage on an almost incomprehensible scale.The historical context of the battle is discussed in detail in Paul Ham’s recent book Passchendaele: Requiem for Doomed Youth. (The subtitle is a reference to Wilfred Owen’s “Anthem for Doomed Youth.") On the Allied side, Passchendaele, also known as Third Ypres, remains most significant for the British, who both devised the offensive—against the advice of their allies—and mainly used British and “Dominion” forces to fight it.Britain had initially been drawn into the war by its treaties with the Entente powers—publicly, to defend Belgian neutrality—but by 1917, this justification was wearing thin. The tremendous loss of life on the Somme and at Verdun in 1916 threatened to undermine support for the war effort, so politicians and journalists were obliged to change tactics to keep up enlistments and war production. Instead of fighting to help political allies, the war’s public purpose became simply to exact revenge on the Germans—the only way to redeem the sacrifice of a generation of young men was to inflict violence and loss on the enemy on an even greater scale. A major breakthrough on the Western Front was therefore required to show the public that victory was possible without a negotiated peace. Without total war and total victory, tens of thousands of lives would have been lost in vain (pp. 48-49). The sunk costs alluded to in this logic were to become tragically literal in the fields of Flanders.Many factors influenced the development and execution of the offensive, but personal battles were often at the root of larger strategic decisions. Paul Ham frames the saga in just these terms, as the result of an intense hatred between Prime Minister David Lloyd George and the commander of the British Expeditionary Force, Field Marshall Douglas Haig (pp. 45-46; 424-427). Lloyd George was an arch manipulator who wanted to be immortalized as The Man Who Won the War (pp. 29-32), while Haig was a Victorian-era professional soldier who believed with Calvinist certainty that he was a divine instrument destined to bring victory over Germany (pp. 44-45, 426-427). The two men were united in their desire for victory, but clashed over the question of how it was to be achieved. Lloyd George wanted a knock-out blow to end the war quickly, while Haig favored a ‘wearing-down’ war designed to deplete German manpower, even if at tremendous cost to his own men.The offensive Haig and his staff planned for Flanders in 1917 offered a nominal political goal, but rapidly devolved into a version of Haig’s original plan for a battle of attrition. The official goal was to clear the Belgian coastline, destroy the U-boat bases at Ostende and Zeebrugge, and possibly drive the Germans out of Belgium entirely. Doing this required a breaking through the heavily fortified German lines and capturing a series of ridges that the Germans were using to control the Ypres salient. Passchendaele Ridge, north-east of the city of Ypres, was to be a focal point of the attack.However, by mid-1917, when the campaign began in earnest, the Germans were already losing the U-boat war, and their bases on the Belgian coast had lost most of their political value. Yet the offensive went forward anyway. Things on the ground were just as confusing, and Haig’s subordinates were often unsure about the tactics they were expected to employ and the practical objectives of each stage of the fighting.Despite the disappearance of its original justification, however, Lloyd George agreed to let the battle go forward on the condition that it would be stopped if it failed to make progress. Once it started, however, there is no evidence that he did anything to stop it. Control over the fates of the British and Dominion forces remained with Haig throughout.Driven by religious conviction, Haig tended to be irrationally optimistic about the prospects for victory. He interpreted incoming news in the most positive light, which often resulted in severe distortions of the truth, and even viewing failure on the ground as modest victory. Haig also let his prejudices interfere with his judgment. His diary, for example, records his reaction to a (reliable) report he’d received from the Director of Military Intelligence at the War Office, a report that undermined Haig’s claim that the German army was broken and on the verge of collapse:I can’t think why the War Office Intelligence Dept. gives such a wrong picture of the situation except that General Macdonogh (DMI) is a Roman Catholic and is (perhaps unconsciously) influenced by information which doubtless reaches him from tainted (i.e. catholic) sources. (p. 317)Irrational exuberance also lead Haig to overlook what would prove to be his worst enemy in the campaign: the weather. Only dry weather would allow the infantry and, especially, its artillery support to advance quickly in the initial stages of the battle, and to consolidate any gains made by the attack. Disastrously, Nature did not accommodate Haig’s plans, and throughout the Autumn, normally rainy Flanders experienced a deluge of Biblical proportions.“I died in hell (They called it Passchendaele)”It might seem that military mistakes and political hubris were roughly the same in this as in any other war, and in a sense they were. The lesson of Passchendaele, however, lies in understanding the staggering human cost of these errors and the sheer amount of suffering they inflicted.First-hand accounts are unanimous on one point: it is impossible to convey the reality of the battle to people who weren’t there. Nevertheless, numerous survivors have tried, and their words and stories give us a glimpse of the horrors they and so many others experienced.The weather added the uniquely ghastly dimension to the battle. The fields across which the British and Dominion forces attacked were shelled for days and sometimes weeks before the soldiers advanced, so as to break the German defensive lines before the real attack even started. But the shelling also destroyed the centuries-old drainage systems that prevented the region from flooding. The result was that the area around Passchendaele turned into a swamp of mud and putrid water that concealed countless shell holes, barbed wire entanglements, and other obstacles beneath its surface. In the aftermath, one soldier described it:“I won’t forget my experience today if I live for a thousand years… I have never seen such destruction… as I saw it today, it’s simply an awful nightmare, a hideous reeking swamp seething with living (and dead) beings. A place that stamps itself on one’s mind and memory like a red hot iron.” (p. 329)Fighting in these conditions was almost impossible. The British and Dominion troops repeatedly advanced through the quagmire, sometimes wading knee-deep in the muck, often while under heavy shellfire. Floundering in the mud made them easy targets for German machine gunners and artillery, and their heavy equipment meant that even a slight stumble off a safe path through the swamp meant death by drowning. There was little the soldiers could do to assist each other. Sergeant Berry of The Rifle Brigade recalled watching helplessly while a comrade drowned:“He went down gradually. He kept begging us to shoot him. But we couldn’t shoot him. Who could shoot him? We stayed with him, watching him go down in the mud. And he died. He wasn’t the only one. There must have been thousands.” (p. 314)Another British soldier sunk first to his knees, then his waist, as his fellows’ efforts to help him failed:“There were no footholds from which to dig or haul him out. Duty compelled the men to move up the line [so they left him]; two days later, they returned along the same route and found ‘the wretched fellow… still there but only his head was now visible and he was raving mad.’” (p. 341)Evacuating the wounded took hours, often days, and was as perilous as actually attacking. On their return trips to aid stations in the rear, “Bursting shells blew horse-drawn ambulance waggons off the track, hurling their damaged human cargo into the mire” (p. 311). In another case,“Some 500 New Zealand stretcher cases lay at a casualty clearing station… Exposed to hail and driving rain, they began sinking into the mud, ‘just dying there where they’d been dumped off’… most of them drowned or succumbed to gas gangrene.” (p. 325)Soldiers could be forced to stay in the field for days, shivering in water-logged shell holes or in the ruins of local towns waiting to be relieved. The battlefield at night conjured up “something like the medieval idea of hell; pitch dark, except in the evil flashed of bursting shells; screams, groans and sobs; men writhing in the mud, men trying to walk and falling down again” (p. 326).At one point, because the mud prevented the artillery from moving up in time, the Australians and New Zealanders were sent into battle without support, and were ordered to simply assault the waiting and intact German defenses. Several New Zealand units suffered casualty rates of 85 percent (pp. 316-324). Their commander, Sir Andrew Russell, put it bluntly: “you cannot fight machine guns plus wire, with human bodies” (p. 323). Yet such were the tactics of British commanders. One captured Australian soldier told his interrogator that the Germans could not possibly win this fight, because, “’the cannon fodder of the entire world is at our disposal’” (p. 338).After months of relentless attacks in these unimaginable conditions, the British and Dominion forces finally captured the village of Passchendaele (which was only one of their original objectives; the overall campaign was a failure). In a final trick of cruelty, however, the town no longer possessed any military or political value. It was also impossible to defend, and so was abandoned a few weeks later.Anthem for Doomed YouthThe lesson of Passchendaele is the same as for the entire First World War, and for war in general: the slaughter was pointless and avoidable. It was the product of decisions made without reference to morality or humanity, and that considered only the political and military interests of states.Yet comprehending the human costs of the war is a necessary step in fighting the arguments of revisionist historians who argue that, although tragic, the conflict was necessary and ultimately worth the price. Paul Ham captures perfectly the poverty of such arguments:[A]t what point would the catastrophe not have been worth it? How many millions would have had to die, how many nations destroyed, how many fascist and communist seedlings sown, how many families struck down with grief, before politicians, the press and military revisionists would concede that the First World War was not worth it? (p. 422; emphasis in original)The last word should be had someone who saw the tragedy of Passchendaele for himself. The following is a poem titled “War,” by Ellis Humphrey Evans. Evans died in Flanders on July 17th, 1917.Bitter to live in times like these. While God declines beyond the seas; Instead, man, king or peasantry, Raises his gross authority. When he thinks God has gone away; Man takes up his sword to slay His brother; we can hear death’s roar.  It shadows the hovels of the poor.  Like the old songs they left behind,  We hung our harps in the willows again.  Ballads of boys blow on the wind,  Their blood is mingled with the rain._______________________________________________________________________________
  • Why Retailers Should Increase Water Prices after Hurricanes    (Ryan Bourne, 2017-09-19)
    Ryan Bourne What do landlords, foreign holiday resorts, Uber, and bottled water retailers in Houston have in common? In recent years, all have been criticised for charging “excessive” or “extortionate” prices for their products. Landlords are accused of greedy profiteering in London. Thousands signed petitions in 2014 criticising airlines and holiday companies for charging much more during school holidays — an issue eventually discussed in parliament. Uber was panned for its surge pricing following the 2016 New York terror attack. And the selling of water at higher-than-normal prices following Hurricane Harvey in Texas was met with outrage. The price mechanism plays an important role in both coordinating activity and allocating resources efficiently. The assumption of the upset in each case seems to be that firms decide their prices in the absence of any consideration of broader market conditions, purely on the basis of exploiting consumers and greedily fattening their profits. The reality is quite different. In competitive markets, price tags are simply messengers of relative scarcity, or the interactions of supply and demand. Rent levels are high in London because the supply of new properties is very unresponsive to demand, which rises through population and income growth. Foreign holidays are more expensive in school holidays because demand explodes. Uber pricing surges after terrorist atrocities because there’s a huge unforeseen spike in those wanting vehicles to depart the area, and a reluctance to use public transport. And bottled water prices rise before and after hurricanes as demand rises (people stock up in case of losing water supplies), and supply falls (due to the increased costs and difficulty of delivery). Price then is the market’s messenger. It conveys important information about the relative scarcity of a product, which leads to adjustments in the quantity demanded or the quantity supplied. And it actually leads to some changes in behaviour that can be beneficial given the economic reality. When prices are high because of restricted supply, such as bottled water in the aftermath of hurricanes or rental property in London, the price tag encourages a reduction in the quantity demanded. The high price deters people from stockpiling bottled water, for example, making it likelier more consumers can obtain the product in stores. A high rental price in London likewise leads to people renting smaller apartments or commuting from further away, allocating the scarce properties within the city more efficiently to those who place the highest value on being closer to the city centre. When prices are high because of increased demand, such as Uber surging following terror attacks, or foreign vacations during school holidays, the higher price likewise helps increase the quantity supplied. It encourages Uber drivers to come onto the road to service the increased needs of passengers, or airlines and hotels to ensure more rooms are available. The longer term effect is perhaps even more important. If prices really are “too high”, and companies are able to make large profits as a result, then new firms or entrepreneurs are encouraged to enter and serve the market. This increases overall supply and brings prices back down. Arguably, Uber itself has done this, acting as a substitute for the taxi market, as has Airbnb in expanding the supply of rentable accommodation. As the hurricane pressures subside, a high market price will encourage lots of businesses who supply bottled water from further afield to bring their goods to this lucrative market. The price mechanism plays an important role in both coordinating activity and allocating resources efficiently, which is why it can be so damaging to call for price controls that muffle these signals. From rent controls, to bans on surge pricing, or laws that prohibit price gouging, restraining prices from increasing is akin to capturing the messenger and forcing him to tell a comforting lie (as my former colleague Kristian Niemietz has explained). This comforting lie signals to people “this product is readily available”, encouraging consumers to load up on it, and severely restraining firms’ ability to make profits, thus discouraging innovative new supply. The truth is, there are only two ways scarce goods or services can be allocated: either through the price system, allowing markets to clear, or through restrictions such as rationing or queuing. Difficult situations — including emergencies such as hurricanes or terror attacks, and decades of overly-restrictive planning laws — have limited positive outcomes. But while we would all prefer goods to be cheap and abundant all the time, willing prices lower through legislation, price controls or consumer campaigns merely compounds the relative scarcity by discouraging new supply and encouraging over-use. If we really want cheap goods, the only way forward is to remove restrictions on new entry as far as possible and to allow markets to operate. Ryan Bourne occupies the R Evan Scharf Chair in the Public Understanding of Economics at the Cato Institute in Washington DC.
  • Alternatives to the Iran Deal Carry Too Much Risk    (John Glaser, Emma Ashford, 2017-09-19)
    John Glaser and Emma Ashford President Donald Trump is poised to make one of the most fateful decisions of his White House tenure. In his speech to the United Nations General Assembly, he lambasted the regime in Iran and, in a deeply misleading reference to the Iran nuclear deal negotiated by his predecessor, he said this of the United States: If President Trump chooses not to certify Iranian compliance in mid-October, he will be kicking off a process likely to end U.S. participation in the nuclear deal, split us from our European allies, weaken moderate reformers in Iran and set the United States down a far more dangerous and confrontational path. “We cannot abide by an agreement if it provides cover for the eventual construction of a nuclear program.” The President added: “Frankly, that deal is an embarrassment to the United States, and I don’t think you’ve heard the last of it, believe me.” That threat is an apparent reference to Trump’s stated intention to begin to deliberately unravel the nuclear deal next month. Yet his Administration has offered no good alternative, and every policy option outside the deal will push Iran towards the bomb. The President is choosing to risk a dangerous and destabilizing confrontation. Following the signing of the Joint Comprehensive Plan of Action (JCPOA), which rolled back Iran’s nuclear program in 2015 and placed stiff restrictions on it for the foreseeable future, Congress passed legislation requiring the president to certify Iranian compliance every 90 days. Iran is clearly abiding by the deal’s requirements, as President Trump himself has twice formally acknowledged. But the President appears determined to ignore U.S. allies, his own intelligence community and the International Atomic Energy Agency, which has affirmed eight separate times in detailed reports that Iran is in compliance with the deal. This desire to withdraw from the JCPOA is difficult to explain. Whatever his reasoning, this much is clear: All of America’s options outside the JCPOA carry unacceptably high risks and threaten to exacerbate the very behavior Iran hawks hope to forestall. The first obvious alternative is re-imposing harsh economic sanctions related to the nuclear program. But any renewal will only affect change with European support, which the United States is unlikely to receive if it unilaterally withdraws from a successful arms control agreement without cause. The trade-off — new sanctions in exchange for an unfettered Iranian nuclear program — is undoubtedly worse for U.S. security. Another option supported by some in Washington is a policy that challenges Iranian influence in the Middle East, through support for an anti-Iran coalition or direct military action against Iranian proxies in Iraq, Syria or Yemen. But more U.S. military involvement in these battles won’t substantially moderate Iranian behavior and risks bogging American forces down even further in endless regional conflicts. Some in the Trump Administration, including Secretary of State Rex Tillersonand C.I.A. Director Mike Pompeo, have advocated supporting Iranian opposition groups in order to foment internal unrest and generate “regime change from within.” In his U.N.G.A. speech, Trump reiterated this sentiment, framing his comments on Iran by pitting the people against the government. “Iran’s people are what their leaders fear the most,” he said. “Oppressive regimes cannot endure forever, and the day will come when [Iran’s] people will face a choice” to change the regime in Tehran. This is hopelessly unrealistic. First, no viable candidate exists for U.S. support. The exiled opposition group Mujahadeen-e-Khalq (MEK) is a favorite of U.S. hawks and Trump allies like former U.N. Ambassador John Bolton and former House Speaker Newt Gingrich. But the MEK was designated a terrorist group by the State Department as recently as 2012, and they have zero support base inside Iran. Another oft-cited candidate for U.S. support is the so-called Green Movement that emerged amid the protests over the contested Iranian presidential elections in 2009. But Green Movement leaders have never suggested they are interested in overthrowing the regime and, in any case, whatever popular support the movement continues to have would quickly evaporate with any whiff of U.S. backing. More to the point: America’s record of regime-change operations, whether overt or covert, is one of consistent failure and blowback. Recent history counsels we reject such policies. Perhaps the most extreme alternative to the JCPOA is military action, most likely in the form of targeted airstrikes on select Iranian nuclear facilities. Such a policy would harken back to the preventive war doctrine adopted by the Bush Administration in the run-up to the U.S. invasion of Iraq. Not only would this option violate international law, which requires either a legitimate self-defense rationale or U.N. Security Council approval for such a use of force, it could easily escalate to a regional conflagration that would cost more in blood and treasure than the Iraq and Afghanistan wars combined. In her recent speech at the American Enterprise Institute, U.S. Ambassador to the United Nations Nikki Haley argued that if President Trump chooses not to certify Iranian compliance, it would merely open a debate on Iran’s nuclear program and on the future of U.S.-Iranian relations. She neglected to mention the reality of that debate. If President Trump chooses not to certify Iranian compliance in mid-October, he will be kicking off a process likely to end U.S. participation in the nuclear deal, split us from our European allies, weaken moderate reformers in Iran and set the United States down a far more dangerous and confrontational path. Trump inherited an Iran that forfeited 98% of its enriched uranium, dismantled two-thirds of its operating centrifuges and opened itself up to the most intrusive inspections regime ever voluntarily agreed to by any state. Undermining the JCPOA could undo all of that. Trump’s decision will shape the U.S.-Iran relationship for decades to come, and may ultimately mean the difference between war and peace. John Glaser is director of foreign policy studies at the Cato Institute, where Emma Ashfordis a research fellow.
  • US Sanctions Against Venezuela Will Hurt Americans    (Ryan McMaken, 2017-09-18)
    By: Ryan McMaken After fifty years of imposing embargoes and other sanctions, the United States never managed to topple Cuba's communist regime. After forty years of the same in Iran, the US met with similar amounts of success. Ongoing sanctions against North Korea have not toppled to regime there. But, some people in Washington won't let decades of failure dissuade them. Last week, Congressman Mike Coffman (R-Colo.) introduced new legislation to bar Americans from importing oil products from Venezuela. The Washington Examiner reports: [T]he Protecting Against Tyranny and Responsible Imports Act, or the PATRIA Act ... would target Venezuelan President Nicolas Maduro after he stripped the country's democratically elected national assembly of its power and authority. According to the bill, the proposed ban on imports would last until the assembly's power is fully restored."The goal is to change the conduct, the character of the Venezuelan government under Maduro. I think the window is closing," Coffman told the Washington Examiner. "They are dependent upon the export of oil really to fund their government, and without that, they can't pay their security forces."Experience suggests there is little reason to believe that sanctions will cause the regime to give up in Venezuela. If the regime has less oil money with which to pay the military, the regime can always steal more from the average citizen to make up the difference. In other words, ordinary Venezuelans will suffer more in response to US sanctions. Source. Moreover, aggressive moves such as these against the Venezuelan regime have tended to only solidify support for the regime among its supporters. Both the current president Maduro, and his predecessor Hugo Chávez, were both successful in building support for themselves on a platform of opposing US meddling in Venezuelan political and economic institutions. When the US threatens to intervene in local politics, this only strengthens the resolve and support of the regime's supporters. The US has already been acting in a reckless manner in this regard, as illustrated by President Donald Trump's recent speculations about invading Venezuela to effect regime change. As noted by Daniel Politi at Slate, American threats directed at the Venezuelan regime do nothing to help the opposition: Throughout his power grab that has accompanied Venezuela’s descent into chaos, Maduro has long warned the United States was planning to invade the country. Trump’s words seemed to play straight into his narrative, recalling a time when Washington saw Latin America as its backyard where it could intimidate governments into doing its bidding. “Maduro must be thrilled right now,” said Mark Feierstein, who was a senior aide on Venezuela to former president Barack Obama. “It's hard to imagine a more damaging thing for Trump to say.”Similarly, threatening Venezuela with more sanctions — something that may make the regime even more violent and desperate — do nothing to help the Venezuelan people in general, and only energize the regime's base. Coffman claims the sanctions would be lifted if the Venezuelan regime were to restore the prerogatives and power of the national legislature, which has essentially been disbanded by Maduro. RELATED: "Are Oil Prices to Blame for the Venezuelan Crisis?" by Daniel Fernández MéndezIn recent months, the Venezuelan regime has rapidly become more dictatorial as forces loyal to Maduro have increasingly clamped down on opposition politicians and essentially ignored the results of recent elections that have brought many opposition leaders to power in the National Assembly. The working philosophy here, apparently, is that the imposition of sanctions will force the Venezuelan regime to democratize in response. One would be hard pressed to find examples of similar tactics actually working, however.More astute observers might also ask why — if Coffman is so committed to democracy — he hasn't called for similar embargoes of Saudi Arabian oil. The Saudi regime, of course, has been a dictatorship ever since its founding, sponsors international terrorism, and tolerates no religious freedom or freedom of speech. The Saudi regime, for instance, routinely arrests critics of the regime, and the regime's spokesman has outright denied that elections should be allowed in Saudi Arabia. If human rights are of such pressing concern to the Congressman, its unclear why Venezuela is at the top of the sanctions list. As with all Trade Sanctions, Americans Suffer As with any discussion of sanctions, of course, we need not even consider the strategic futility of sanctions, or the morality of foreign regimes. Far from being a matter only of concern to foreigners, US sanctions are built on the cornerstone of limiting the freedoms of Americans.As I noted earlier in regards to the Cuban embargo: [S]upporting an embargo means supporting the government when it fines, prosecutes, and jails peaceful citizens who attempt to engage in truly free trade. Support for an embargo also requires support for a customs bureaucracy that spies on merchants and consumers, and the whole panoply of enforcement programs necessary to punish those who run afoul of the government’s arbitrary pronouncements on what kind of trade is acceptable, and what kind is verboten. Naturally, this is all paid for by the taxpayers...At their heart, embargoes are nothing but a specific type of prohibition. Sometimes, the government imposes prohibitions on transactions involving certain goods, such as cannabis. Other times, the prohibition extends to all transactions with people in a certain place. The fundamentals are the same, however, in that they prohibit peaceful exchange, with heavy penalties for violators.In the case of a new embargo against Venezuela, the effect would be to place prohibitions on American importers, and thus drive up prices for oil and energy for all Americans. Government bureaucrats would be dispatched to monitor private industry to make sure they don't violate the prohibitions. Government agents will impose fines, and make arrests if necessary. The American government will become more powerful at the expense of American consumers and American taxpayers. Indeed, this has already been going on with smaller-scale sanctions imposed by the Trump administration against Citgo oil refineries. Thanks to the sanctions, Citgo refineries in the US, which constitute four percent of American fuel capacity, and which employ American workers, are finding it more costly to obtain the oil they need for the refineries. Both domestic and foreign suppliers must scramble to work around the new regulations in order to avoid fines and lawsuits from government regulators who oversee trade. The effect of this will be to put pressure on more marginal employees and on more marginal operations, leading to layoffs and diminished refining capacity. Ultimately, it is Americans who will pay the price. 
  • The World Is Creeping Toward De-Dollarization    (Ronald-Peter Stöferle, 2017-09-18)
    By: Ronald-Peter Stöferle The issue of when a global reserve currency begins or ends is not an exact science. There are no press releases announcing it, and neither are there big international conferences that end with the signing of treaties and a photo shoot. Nevertheless we can say with confidence that the reign of every world reserve currency has to come to and end at some point in time. During a changeover from one global currency to another, gold (and to a lesser extent silver) has always played a decisive role. Central banks and governments have long been aware that the dollar has a sell-by date as a reserve currency. But it has taken until now for the subject to be discussed openly. The fact that the issue has been on the radar of a powerful bank like JP Morgan for at least five years, should give one pause. Questions regarding the global reserve currency are not exactly discussed on CNBC every day. Most mainstream economists avoid the topic like the plague. The issue is too politically charged. However, that doesn't make it any less important for investors to look for answers. On the contrary. The following questions need to be asked: What indications are there that the world is turning its back on the US dollar? And what are the clues that gold's role could be strengthened in a new system?The mechanism underlying today's “dollar standard” is widely known and the term “petrodollar” describes it well. This system is based on an informal agreement the US and Saudi Arabia arrived at in the mid-1970s. The result of this deal: Oil, and consequently all other important commodities, is traded in US dollars — and only in US dollars. Oil producers then “recycle” these “petrodollars” into US treasuries. This circular flow of dollars has enabled the US to pile up a towering mountain of debt of nearly $20 trillion — without having to worry about its own financial stability. At least, until now.For a long time the basis on which this global currency system rests was poorly documented. Finally, Bloomberg published a comprehensive article in May 2016, which provided detailed confirmation of the agreement that was hitherto only known as a rumor. The fact that this article is published now also represents a subtle clue that there are simmering shifts in the global currency system.The trend becomes ever more tangible and can be described by the following term: de-dollarization. The world is looking for alternatives to the dollar — and finds them more and more often. At the same time the big oil producers and the largest exporters have stopped accumulating US debt securities. In one sentence: Since 1973 the dollar standard has been based on “usage demand” for dollars — they were needed. But when China and Russia find alternatives for their bilateral trading activity, they need fewer dollars. The same applies to European countries which have adopted the euro since 1999.There have been many attempts by various nations to undermine the dollar's preeminence in recent decades. Some were nipped in the bud by US interventions — such as the plan of Iraq's former dictator Saddam Hussein to sell oil for euros. Or the rumored plan of Libya's eccentric ruler Muammar al-Gaddafi to issue a pan-African gold currency.Others are less well known, but are indeed continuing to “bubble” below the surface: For example, since 2008, an agreement exists between Saudi Arabia, Kuwait, Bahrain, and Qatar which provides for the creation of a monetary union. The planned new currency is nicknamed — rather unimaginatively — the “gulfo.” “The project is inspired by the European currency union, which is seen as a great success in the Arab world,” according to an article by Telegraph journalist Ambrose Evans-Pritchard. He inter alia quotes Nahed Taher, the CEO of Bahrain Gulf One Investment Bank: “The US dollar has failed. We need to delink from it.” However, it appears the plan has been put on hold in recent years. As recently as mid-2013 a statement was issued according to which the common currency was going to be put in place “by 2015 at the latest.” Today it is no longer even talked about. Moreover, other potential members such as the United Arab Emirates or Oman have so far failed to join the club. One should nevertheless keep an eye on developments in the Gulf.A clear signal that something is afoot would be the abolition of the Saudi riyal's peg to the US dollar. As recently as April of this year economist Nasser Saeedi advised Middle Eastern countries to prepare for a “new normal” — and specifically to review the dollar pegs of their currencies: “By 2025 it is clear that the center of global economic geography is very much in Asia. What we’ve been living in over the past two decades is a very big shift in the political, economic, and financial geography.”While the role of oil-producing countries (and particularly Saudi Arabia) shouldn't be underestimated, at present the driving forces with regard to de-dollarization are primarily Moscow and Beijing. We want to take a closer look at this process.There exist numerous political statements in this context which leave no room for doubt. The Russians and Chinese are quite open about their views regarding the role of gold in the current phase of the transition. Thus, Russian prime minister Dimitri Medvedev, at the time president of Russia, held a gold coin up to a camera on occasion of the 2008 G8 meeting in Aquila in Italy. Medvedev said that debates over the reserve currency question had become a permanent fixture of the meetings of government leaders.Almost ten years later, the topic of currencies and gold is on the Sino-Russian agenda again. In March, Russia's central bank opened its first office in Beijing. Russia is preparing to place its first renminbi-denominated government bond. Both sides have intensified efforts in recent years to settle bilateral trade not in US dollars, but in rubles and yuan. Gold is considered important by both countries.The gradual move away from the USD to a multi-polar monetary order has several important effects, which only make sense when viewed through this lens. Contrary to what is asserted in most mainstream reports, oil-producing countries are not so much interested in a much higher oil price in USD terms, but rather in competition for market share. They are increasingly able to choose in which currencies they want to trade. The most important effect has become evident since 2014: two of the largest holders of US treasuries (China and Saudi Arabia) have abandoned their support of Washington. On the other hand, oil producers have no interest in recycling their revenues as “petrodollars.”The process of moving away from the dollar — prepared by Europe and triggered by China and Russia — can no longer be stopped. And as a “supra-national” reserve asset, gold plays an important role in it.
  • Congress Shirks Its Duty on Foreign Policy Yet Again    (Ron Paul, 2017-09-18)
    By: Ron Paul Last week, Senator Rand Paul (R-KY) reminded Congress that in matters of war, they have the authority and the responsibility to speak for the American people. Most Senators were not too happy about the reminder, which came in the form of a forced vote on whether to allow a vote on his amendment to repeal the Afghanistan and Iraq war resolutions of 2001 and 2002.It wasn’t easy. Sen. Paul had to jump through hoops just to get a vote on whether to have a vote.That is how bad it is in Congress! Not only does Congress refuse to rein in presidents who treat Constitutional constraints on their war authority as mere suggestions rather than as the law of the land, Congress doesn’t even want to be reminded that they alone have war authority.Congress doesn’t even want to vote on whether to vote on war!In the end, Sen. Paul did not back down and he got his vote. Frankly, I was more than a little surprised that nearly 40 percent of the Senate voted with Rand to allow a vote on repealing authority for the two longest wars in US history. I expected less than a dozen “no” votes on tabling the amendment and was very pleasantly surprised at the outcome.Last week, Rand said, "I don't think that anyone with an ounce of intellectual honesty believes that these authorizations from 16 years ago and 14 years ago ... authorized war in seven different countries."Are more Senators starting to see the wars his way? We can only hope so. As polls continue to demonstrate, the American people have grown tired of our interventionist foreign policy, which burns through trillions of dollars while making the world a more dangerous place rather than a safer place.Some might argue that losing the vote was a defeat. I would disagree. For the first time in years we saw US Senators on the Senate Floor debating whether the president should have authority to take the US to war anywhere he pleases. Even with just the small number of votes I thought we might have gotten on the matter, that alone would have been a great victory. But getting almost 40 percent of the Senate to vote our way? I call that a very good start!The first step toward rebalancing the separation of powers is for Congress to re-assert its authority and responsibility for declaring war. To this point, Congress has preferred to transfer its war responsibility to the president.The second step, once Congress understands its obligations, is to convince our representatives that war was not designed to be the first choice in foreign policy, but rather to be the last resort when we are under attack or when a direct attack is imminent!Just because Congress decides to approve the use of force does not mean that the war is just, justified, or wise. Congress is just as susceptible to war propaganda as the rest of America and unfortunately it is dominated by the false opinion that if you are not enthusiastic about US military solutions to disputes overseas then you are not being tough enough. In fact, it takes far more strength to exercise restraint in the face of the constant war propaganda and disinformation coming from the media and the neocons.We have achieved a small victory last week, thanks to Senator Paul. But we still have a lot of work to do! We must keep the pressure on and convert more to the cause of peace and prosperity!
  • Toward Cybersecurity without Trade Protectionism    (Daniel J. Ikenson, 2017-09-18)
    Daniel J. Ikenson Information and communications technology (ICT) products are to the modern economy what iron and coal were to the industrial revolution: building blocks essential to innovation and progress. But with this productivity-enhancing, living standards-boosting technology comes parallel potential for nefarious goals. Protecting critical economic and national security infrastructure from cyber-malfeasance is a legitimate responsibility of government. But, as with other areas in which governments are obligated to protect the public, success requires proper identification of the sources and nature of the threats, as well as recognition that risk mitigation brings its own set of costs. Efforts undertaken by the U.S. and Chinese governments in the name of cybersecurity have become some of the most serious sources of trade policy tension in recent years. Both Washington and Beijing have been heavy-handed, choosing absolutist approaches that seem more befitting a program of economic protectionism than cybersecurity. Following a decade of evolving indigenous innovation policies intended to catapult China into a position of global technological preeminence, the Chinese government has begun implementing a set of new laws that effectively require imported ICT products and components to be “secure and controllable.” U.S. companies anticipate this will cause supply chain disruptions and that they will be forced to provide Chinese authorities with proprietary information about their products, which could compromise their intellectual property and deter trade, investment, and the scope for collaboration in these industries. To have more effective, less innovation-impeding cybersecurity, the United States and China can and should adopt policies that wed valid statistical methods with best business practices. Meanwhile, Chinese ICTs have been blacklisted, effectively, by the U.S. government, which advises U.S. telecommunications firms to avoid purchasing their products. Since 2013, U.S. appropriations legislation has included provisions that effectively prevent certain federal agencies from procuring or using ICT products made by Chinese companies. On more than one occasion, the Committee on Foreign Investment in the United States raised security concerns over prospective acquisitions of U.S. companies by Chinese suitors, ultimately preventing those transactions from taking place. The weakness in that approach is that all major ICT manufacturing companies produce in China or rely on inputs manufactured there. Most suppliers to global network infrastructure source their components from their Chinese facilities or through second and third-tier Chinese suppliers. The stretching of supply chains to include more entities operating in more countries has increased vulnerabilities, which means that all firms in the vast ICT ecosystem can present risk, or be exposed to it. Targeted risk mitigation policies provide a false sense of cybersecurity, reduce the scope for innovation, collaboration, and economic growth, and threaten the global trading system. To have more effective, less innovation-impeding cybersecurity, the United States and China can and should adopt policies that wed valid statistical methods with best business practices. During the Obama administration, the federal governments spent tens of billions of dollars to identify cyber threats and solutions, and the National Institute of Standards and Technology developed a framework to help organizations manage cybersecurity risk. PricewaterhouseCoopers publishes annually the results of its Global State of Information Security Survey, which is essentially an inventory of best business practices in cybersecurity. Last year, the East-West Institute published a buyers’ guide for purchasing secure ICT products, which seems to leave no stone unturned in its identification of all of the questions that must be asked, all the internal and external systems that must be in place, and all the additional safeguards that should be taken for a given enterprise to minimize threats. In other words, the private sector and government, in collaboration and operating independently, have created a reasonable set of best practices that companies in the ICT supply chain should be expected to implement. It should serve as the basis for creating a comprehensive set of best practices with which companies should comport in order to import, purchase, or sell ICT products in the United States. Compliance with these best practices can be demonstrated to the U.S. Department of Homeland Security (DHS), for example, not only by confirming that all of the necessary boxes have been checked, but by demonstrating that the company has implemented automated, auditable systems that are shown to be statistically reliable in identifying vulnerabilities and mitigating the associated risks. As incentives to invest in the development of these systems and to stand ready for spot checks or more comprehensive audits, participating companies would earn something akin to a seal of approval and, ultimately, would not be held accountable if a product that breaches cybersecurity passes through their supply chains. Companies that chose not to develop secure systems would not receive a seal of approval and would be subject to heavy fines if breaches were to occur. Of course, the specific program details would follow from an expert assessment of these best practices. This compliance concept isn’t especially new to the U.S. government. U.S. Customs and Border Protection, an agency within DHS, has been administering a program for 25 years called “Informed Compliance,” which was developed in collaboration with the private sector to incentivize accurate classification and valuation of imported and exported merchandise. It is premised on the idea that the private sector can be deputized to self-monitor its compliance if the appropriate balance of carrots and sticks are deployed. Many of the elements of the Informed Compliance program could be incorporated into an efficacious, nondiscriminatory cybersecurity program on the basis of best business practices using applied statistics without unnecessarily impeding trade, investment, and innovation. In fact, all ICT components and end-user equipment (imported and domestic) destined for application in critical infrastructure could be subjected to this kind of risk mitigation effort. That approach would protect critical infrastructure from cyber malfeasance better than banning Chinese ICT companies and their products does, with the added benefit of encouraging collaboration, innovation and economic growth. Daniel J. Ikenson is the director of Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
  • Ludwig von Mises on Collectivist Fallacies and Interventionist Follies    (Richard M. Ebeling, 2017-09-18)
    By: Richard M. Ebeling For more than a century the world has been caught in the grip of social engineers and political paternalists determined to either radically remake society from top to bottom in collectivist directions, or to use various government regulatory and redistributive policies to try to modify existing society into desired “social justice” forms and shapes. Both are based on false conceptions of man and society.One of the leading voices challenging the social engineers and the interventionist-welfare statists in the twentieth century was the Austrian economist, Ludwig von Mises. In such important works as Socialism (1922), Liberalism: The Classical Tradition (1927), Critique of Interventionism (1929), Planning for Freedom (1952), and in his monumental treatise, Human Action (1949; 1966), Mises demonstrated the economic unworkability and negative unintended consequences resulting from attempts to impose systems of socialist central planning on society, as well as the social quagmire brought about by introducing piecemeal regulations and interventions into the market economy.But it was in his often-neglected work, Theory and History: An Interpretation of Social and Economic Evolution, that Ludwig von Mises systematically challenged the underlying philosophical premises behind many of the socialist and interventionist presumptions of the last one hundred years. This year marks the sixtieth anniversary of the publication of Theory and History in 1957, and it seems, therefore, worthwhile to appreciate Mises’s arguments and their continuing relevance for our own time.The Illusive Search for Meaning and Purpose in LifeThe world is a confusing and uncertain place. While we may live in communities and societies the values, traditions, customs and routines of daily life of which we have grown up in and tend to take for granted, and which provide us with degrees of orienting certainty and predictability in our everyday affairs, they still fail to answer a variety of “big questions.”Among these big questions are, why am I here? What is the meaning of life? What is it – life and reality – all about? Why do bad or disappointing or “evil” things happen to others and to me? Who’s to blame? How do we make a “better world”? Ludwig von Mises argued that attempts to find and pursue particular answers to these questions have sometimes brought with them disaster and destruction to society.Over the ages, people have turned to religious faith and philosophical reflections to try to “understand it all and how it all fits together,” and to find ways to accept and live with those things that seem to be unchangeable (at least in one’s lifetime) and to try to improve those things in society that do seem to offer avenues and openings for personal and social betterment.The Rise of Modern Science and Its Positive ImpactIn the nineteenth century, Mises explained, there arose new ideas about man, society, and social change. Out of the Enlightenment era of the earlier eighteenth century had come an increased freeing of the human mind from constraining superstitions and political prohibitions on the freedom to inquire into and discover the reality of the natural world surrounding man. The problem was that the unaided human mind is not only limited and faulty in its powers to correctly see the world as it really is, but that same human mind is often filled with ghostly fantasies and thought-confining superstitions about the universe and man’s place in it.In place of these fantasies and superstitions there arose modern science with its method of observation, conjecture, and empirical testing. The physical world around us has shape, form and size. If we are to know this world, we need to quantify and measure its magnitudes and dimensions, to have benchmarks for understanding outside of the subjective and unreliable belief systems in any one person’s imperfect mind.The development of this scientific method was and has been transformative. It has enabled man to understand many of the past mysteries of physics, biology, and chemistry. And now, knowing more of the objective “laws of nature” and their workings, men were and have been able to harness them for changes and improvements in the physical and social surroundings of humanity.The Error of Reducing Man to Merely Measurable MatterBut a fundamental misstep was taken, Mises argued, when a further conclusion was drawn. If we needed to give up the faulty and imperfect surface impressions about the physical or natural world provided by the unaided “subjective” human mind, and we needed to step out of ourselves to, instead, look at that physical reality in terms of its “objective” and quantifiable characteristics to really understand it, then if we are to better understand man, we need to similarly ignore the human mind’s pretentious beliefs about itself, and study man, as well, in terms of the measureable and quantifiable.It is no denying that man, too, is a physical, biological, and chemical entity, just like everything else in the world in which he lives. But man has something that most other life forms on earth do not possess – a self-reflecting, thinking, conceptualizing, planning and acting mind.Even in the twenty-first century’s scientific advancements, including the accelerating attempts to develop robots possessing “artificial intelligence,” the workings of the human mind and the “mystery” of how the impact and impressions of the external, physical world generate the creative act and form of human ideas remains unanswered.Some developers of robots with artificial intelligence consider an achievable goal to be when the complexity of the robot’s computer “mind” will enable it to absorb external sense data and information, and then devise “solutions” to unique and unplanned for problems and situations not already programed into the machine.If this point were ever reached, then the robot’s “mind” would have a degree of unpredictability similar to the human mind that had created it. The robot’s mind, just like man’s, would be an autonomous source of non-deterministic causal change, which even the human creator of the mechanical brain cannot fully predict and determine ahead of time. It may still be inappropriate, at that point, to assert that such a robot had transcended its own origin as a machine, and now possessed human-like consciousness and qualities, and therefore “human rights” (as some are already suggesting). But it would no longer be a mere “calculating machine” in the traditional meaning of that concept.Our Mind and Not “Observations” Explain Human ActionMises insisted that if man is to understand himself and the social world in which he lives, he must accept the fact that the working of the human mind cannot simply or merely be reduced to physical matter and external measurable influences on it, on the basis of which human actions may be predicted, manipulated and controlled.In his many writings on these wider “philosophical” issues, Mises pointed out, and especially in Theory and History, that is there is one certain fact that man can know about himself if he but undertakes an introspective reflection on the workings of his own thought processes, and that is that there exists a logical structure to his own mind, which guides his thinking and his acting. It tells us that two plus two cannot equal five, that an object defined as a triangle cannot have four sides, and that “A” cannot simultaneously be “non-A.”Human action, Mises said, is nothing more than our reason applied to the pursuit of our purposes under conditions of scarcity. And, thus, the logic of choice and action, are not something “out there” in the physical world to be learned about through “observation,” “measurement,” and “empirical testing.”From only physical observation all that would be seen in the actions of men would be “movements,” no different than billiard balls bouncing off the felt sides of a pool table or a rock falling to earth. We know that our own actions are not such because our very consciousness tells us that they are intentional actions, and we make the same assumption about the “movements” of others based on the “empirical” observation that the observed object is a conscious human being like ourselves.The fundamental relationships and “laws” of economics, therefore, are not “out there”; they are inside each of us and are derived from the inescapable ways that our minds work. Weighing alternatives, comparing “costs” and “benefits,” deciding on desirable “trade-offs,” undertaking “exchanges” in terms of what’s worth giving up to get something the decision-maker prefers more, are all aspects of the logic that guides our practical and inescapable actions when we discover that means are too scarce to satisfy and fulfill all the imagined ends for which they might be applied.But Mises also emphasized that what men may concretely imagine, what specific ends they may want to pursue, which particular types of things might be judged to be useful means, what terms of trade would or would not be acceptable to justify entering into an exchange, these are not known “a priori” from the logical structure of our minds. These depend on the “empirical” reality and circumstances of the physical and social world around each of us.We discover these things through our lived experience in society and among other humans who are also choice-making and action-undertaking beings. The logic of choice and action is the template within which our own decision-making is undertaken, and which provides us with an interpretive method for understanding and discerning the underlying logic in the actions of others.But within all this, the human mind remains the creative and never fully predictable agent of imagination, possibility and change. It has been and remains the ideas that form in men’s minds that drive “the course of human events,” that is the source of all that we call the products and residues and forms of human history. The future ideas of others and even ourselves can never be deterministically predicted from the observed experiences and actions of people in the past. Ideas remain an inexplicable “cause” of the various consequences that comprise the subject matter and content of history.Furthermore, it is only individuals who have minds, individuals who conceptualize, who imagine, who project themselves into possible futures, who design mental blueprints of plans for possible action, and then attempt to bring to fruition the ends and goals that seem worth the costs to do so, rather than to follow some other future possibilities that they may have imagined.Marxism and Imaginary “Laws” of HistorySo what does all of this have to do with the collectivists, social engineers and “social justice” regulators of our own time? The task that Ludwig von Mises primarily set for himself in Theory and History was to show the philosophical and ideological house-of-cards upon which the designs and plans of these political paternalists are all built.Fascinated and, indeed, overpowered by the successes of the scientific method in the natural sciences, some thinkers wondered if the use of the same tools might open the door to discovering the “laws” of human societal development and change. At the same time, if such laws of societal evolution could be discovered, might not man have it within his powers to bend society into the shapes and patterns of his own desire? This could give “meaning” to the “why?” of life and the course it follows, and provide hope that the world could be and will be redesigned for greater happiness and the illusive security for which many yearn.The most revolutionary of these theories of societal evolution, Mises argued, in terms of its impact on history during the twentieth century, was Karl Marx’s theory of dialectical materialism. Marx offered an image of the social world in which technological means and methods of production follow an autonomous trajectory of evolutionary development that leads to a final state of mechanical sophistication at which point machines will produce such a degree of material abundance that work, worry and human hardship will finally be a closed chapter in the history of mankind.But each step and stage in this evolution of the technology around men requires its own particular social institutional setting for its full transformative development, before the next step and stage in this evolutionary process requires a new and different set of human institutions to sustain its further development.Hence, the slave society, the system of feudalism, the capitalist system of profit-oriented production have all been necessary and inescapable stepping-stones to the final stage of societal change, that being post-scarcity socialist and communist societies. Here was a vista and vision that could make sense of it all to the poor and the weary – and more especially to the many intellectuals who are always asking “why” in a world that often seems to not make sense.The poverty and hardships experienced by many are part of history’s preordained path, Marx explained. But the abuse and misery born by untold generations under the boot of the feudal lord or the capitalist exploiter would all come to an end with the arrival of socialism and communism. The world of material plenty would belong to all humankind once the autonomous technological evolution of the methods of production had reached the point at which they could shed the last vestiges of the cruel, unjust and exploitive institution of private property. Salvation is coming – the “laws of history” dictate it. Praise Marx, for “scientifically” showing us the way, the truth and the collectivist light at the end of the capitalist tunnel.Carried away by this vision of a historical force of technological change that is on a seemingly teleological mission to take humanity from poverty to plenty, the revolutionary Marxist high priests saw it as their duty and destiny to be the “mid-wife” to the final radical change to socialism and central planning. Their task, as the “vanguard” of the revolution, was to lead, guide and impose the new collectivist order on “the masses” who were too ignorant or brainwashed by their former capitalist bosses to fully know where their “true” workers’ interest lie. Freedom for mankind would come through a transition period of the dictatorship of the proletariat. And if the blood of many individuals had to flow to bring it about, the collective interests of all took precedence over the personal desires of any one, even if that personal interest by any individual was to be simply left alone to live his life peacefully as he chose in voluntary association with others.Men Make Machines, Machines Do Not Impose Ideas on MenWhile claiming to be objectively scientific, at the heart of Marx’s conception of “history” is an unspoken mystical notion of “technology gods” who decide on how and when they will develop, and what they will dictate as the social arrangements that they need and want at each stage of their pre-ordained path to a final stop at the doorstep of socialism. Machines become the acting agents on the stage of history, and man the mind-passive entity carried on the back of technological transformations outside of human understanding and control.Mises challenged this mystical belief in technologies and machines that followed autonomous paths of evolution and change. Machines do not make and dictate the actions and institutions of men. Machines are inanimate objects made of physical materials. It is the human mind that imagines and manufactures the machines that serve men’s purposes. How could a technology or method of production dictate the social conditions and thoughts of men, when it is human ideas about imagined productive possibilities that bring technologies into existence, and which are facilitated in their forms and uses by the social institutional setting within which they are applied? Mises emphasized:A technological invention is not something material. It is the product of a mental process, of reasoning and conceiving new ideas. The tools and machines may be called material, but the operations of the mind which created them is certainly spiritual.Furthermore, Mises asked, on what basis do these purveyors of the “law” of predetermined historical transformation claim to know what are the “true” and “real” interests of “the workers” versus that of the property-owning capitalists? In each of his actions, the individual manifests and demonstrates what he considers to be his “interests,” whether this concerns the breakfast food he eats, the clothes he likes to wear, or the political and social ideas and beliefs he holds.The Marxists, and all other collectivists like them, merely have shown their personal arrogance and dictatorial hubris, Mises said, in asserting and claiming the right to impose a particular set of values and governmental policies on all through the use of political force to make everyone conform to the central plans within which they wish to confine humanity.The Planner’s Hubris vs. Unintended ConsequencesAll philosophies of history, including Marx’s, presume that “history” follows a special and particular course, a predetermined path leading to a specific outcome and end result. In analyzing these claims, Mises insisted upon playing the role of the boy in the story who announces loudly that the ideological and philosophical “emperors” have no clothes.If “history” is on some “mission” or is following some predetermined course, this is beyond any common sense or “scientific” human understanding. History, Mises explained, is the story of human actions guided by the ideas men come to have about ends worth wanting, means chosen to try to attain them, and the intended and unintended consequences that have followed in the wake of men undertaking the actions and interactions that we call the cumulative course of human events.Human history is the record of all the successes and failures, the triumphs and tragedies of men along the way of the lives they have lived. History recounts the beliefs and ideas men have held and which have guided their implementing economic and social changes, institutional reforms, and political policies.History also reminds us, Mises pointed out, that much of what we consider the social results and institutional products of human design are in fact the unintended, longer-run consequences of choices and actions, the later outcomes and impacts of which none of the human actors in their own, earlier time could have even imagined. As Mises expressed it:But the historical process is not designed by individuals. It is the composite outcome of the intentional actions of all individuals. No man can plan history. All he can plan and try to put into effect is his own actions that, jointly with the actions of other men, constitute the historical process. The Pilgrim Fathers did not plan to found the United States . . .The monumental tombs of the Egyptian kings still exist, but it was not the intention of their builders to make modern Egypt attractive for tourists and to supply present-day museums with mummies. Nothing demonstrates more emphatically the temporal limitations on human planning than the venerable ruins scattered about the face of the earth.The inescapable humility that such things should guide men to have, based on the misplaced attempts by earlier generations to “plan for the ages” or to presume to know what their own actions will bring about when it was beyond their own mental horizons to even fully imagine, highlights how pretentious and presumptuous all recent and present-day social engineers and economic planners have been and continue to be. As Mises also said:The utopian author wants to arrange future conditions according to his own ideas and to deprive the rest of mankind once and for all of the faculty to choose and to act. One plan alone, viz., the author’s plan, should be executed and all other people be silenced . . .[The central planner] will . . . reduce all other people to pawns in his plans. He will deal with them as the engineer deals with the raw materials out of which he builds, a method pertinently called social engineering.Historicism and the Denial of EconomicsOne other variation of this theme, Mises argued, was that of the “Historicists,” the social philosophers who have insisted that there are no “laws” or patterns or regularities to be persistently discovered in the course of human events. Here we find, Mises explained, those who deny or implicitly reject the notion of there being “laws of economics,” such as those of supply and demand and the coordinating order that tends to emerge out of the competitive interactions of consumers and producers, buyers and sellers, in the arenas of market exchange.For the Historicist, governments may do anything they want with no noticeable negative consequences in terms of the policy goals they insist upon pursuing. Workers’ incomes are “too low,” then simply impose a minimum wage above those wages set in the market; there will be no loss of jobs, they assert, due to employers concluding that some workers are not worth what the government says they are now to be paid.Some are “too poor” while others are “too rich,” then simply impose higher and higher taxes on the wealthy “Peter” to redistribute to the “Paul” who has “too little.” This can all be done with no negative effects on the those bearing this greater tax burden in terms of their willingness and ability to save and invest so as to maintain or increase the overall output of goods and services upon which everyone is ultimately dependent in terms of their material betterment and standards of living in society.All such interventionist and redistributive policies, Mises insisted, ignore that there are patterns and coordinative regularities discoverable in the competitive interactions of the marketplace. They are the interpersonal market manifestations of those basic and inescapable laws of economics that originate in and emerge out of the logic of choice and action that start in the minds of men, that we discussed earlier.Government dictating what people must pay for something if it is bought, does not necessarily make it worth that amount in the mind of a person who is weighing his personal, or subjective, costs and benefits, and deciding whether the price the government commands to be paid is worth the cost and would still generate a profit rather than a loss. Hence, the worker may remain or become unemployed due to the government pricing that worker out of the market in terms of the subjective valuations and appraisements of those who might otherwise have hired or retained him in their enterprise’s workforce.Taxing even the very wealthy does not change the fact that the individual having great financial means still weighs and compares the trade-offs of the benefits versus the costs from continuing to save, invest, and produce as much as they have been or could be as enterprisers, entrepreneurs and businessmen when, at the margin, the net gains from the effort after the higher taxes reduces the ability for or incentive from doing so.As long as men think, plan, choose and act, there will be the resulting “laws of economics” in their own minds and lives, and in their interactions with others in the arenas of exchange. Governments may try to ignore these elementary laws of choice and action, and impose commands, controls and restrictions on people in the marketplace. But at the end of the day, the economic logic of the human mind will prevail over the dictates of political paternalists and the hubris of the social engineers.These lessons, and many others that space does not permit highlighting, are easier to learn and understand due to the arguments and insights to be found in Ludwig von Mises’s Theory and History. For this reason, sixty years after its original publication, the words on its pages still relevantly speak to us in our own time.Reprinted with permission. 
  • De-Escalating the U.S.-China Technology Trade War    (Daniel J. Ikenson, 2017-09-18)
    Daniel J. Ikenson For more than a decade, China and the United States have been engaged in a game of tit-for-tat technology protectionism, which now threatens to escalate into a wider high-tech trade war. If executed properly, the Trump Administration’s recently initiated “Section 301” investigation of various Chinese technology and trade policies could be an important first step toward de-escalation. To improve prospects for an enduring solution, however, Beijing should challenge the U.S. government’s discriminatory treatment of Chinese technology companies at the World Trade Organization (WTO) . The Chinese government has long been in the business of fostering development of a world-class domestic semiconductor industry. However, Beijing has been accused of ignoring and sometimes abetting intellectual property theft. In 2009, the American Chamber of Commerce in China issued a report that exposed “a web of industrial policies,” as well as Chinese government plans to build national champions by “borrowing” Western technology. For more than a decade, China and the United States have been engaged in a game of tit-for-tat technology protectionism, which now threatens to escalate into a wider high-tech trade war. Since 2006—if not before—Beijing has been promoting discriminatory indigenous innovation policies, which accord preferential treatment to companies that develop or register their intellectual property in China. Over the years, U.S. companies have reported being forced to share their technology with Chinese companies or the government, as the price of access to the market. U.S. objections and complaints have lead, not to termination of these practices, but to their modification, reformulation, or repackaging under the names of the latest central plan. It’s a safe bet that the WTO Dispute Settlement Body would find most, if not all, of those practices to be “out of conformity” with China’s treaty obligations—a ruling that would compel Beijing to abide by its commitments or face the loss of trade privileges. But the U.S. government has never sought resolution of those issues through that channel. Instead, Washington has invoked cybersecurity concerns to impose de facto bans on Chinese technology firms and to make it more difficult for Chinese companies to acquire U.S. technology and firms. As the protectionist implications of China’s indigenous innovation policies were being absorbed in Washington in 2008, Chinese ICT company Huawei Technologies made a bid to acquire U.S. software company 3Com. But opposition to the deal from certain U.S. policymakers—and eventually by the Committee on Foreign Investment in the United States (CFIUS) on the grounds that the transaction, if consummated, would present a threat to U.S. national security—caused the parties to walk away. In 2011, the U.S. House Permanent Select Committee on Intelligence initiated an investigation into whether Huawei and ZTE (another Chinese ICT company) presented security threats to U.S. telecommunications networks. The investigation culminated in a report recommending that U.S. firms—especially telecoms with hopes of participating in federally funded infrastructure projects—avoid contaminating their supply chains with equipment and components produced by these Chinese companies.  But the report contained no smoking gun—only innuendo. Six months after publication of the House Intelligence Committee report, U.S. lawmakers inserted language into the Continuing Budget Resolution making it illegal for U.S. government agencies to purchase or use Chinese ICT products.  Later that year, as conditions for its approval of a Japanese telecommunications company’s acquisition of Sprint Nextel, CFIUS required the purchaser, Softbank, to purge Chinese ICT components from its supply chain and to obtain preapproval from the U.S. government for any new vendors it wished to bring into its supply chain.  Similar notification and approval conditions have been required in subsequent acquisitions. If these measures were intended to compel China to scale back its own technology protectionism, they have failed utterly. In 2015, Beijing approved a new $160 billion investment to help close the technology gap between the domestic semiconductor industry and the world’s cutting-edge firms. The country recently implemented two new laws—the National Security Law and the Cybersecurity Law—which aim to tighten state control over information by requiring data and technology used in certain sectors of the economy to be “secure and controllable.” U.S. and other western companies are concerned that the Cybersecurity Law’s vague objectives and ambiguous language grant too much discretion to Chinese authorities, who could require firms to share source code and other proprietary information to gain market entry. In reaction to Beijing’s policies, U.S. officials have begun to recommend greater scrutiny of Chinese acquisitions of U.S. technology firms. Senator Chuck Schumer has even called for the prohibition of all Chinese acquisitions of U.S. technology companies. Cyberespionage, cybertheft, and cyberterrorism constitute real threats to critical infrastructure that governments have a legitimate interest and obligation to protect. But the policies adopted and measures proposed provide a false sense of cybersecurity; reduce the scope for innovation, collaboration, and economic growth; and threaten the global trading system. ICT products are essential building blocks of the 21st century economy, so cybersecurity policies cannot be developed in a vacuum. To achieve greater cybersecurity, the United States and China can, and should, adopt policies that wed valid statistical methods with best business practices, while minimizing disruptions to legitimate, growth-enhancing trade and investment. Meanwhile, protectionism need not be met with protectionism. The Trump administration should use the evidence it obtains from its Section 301 investigation to file a formal challenge of China’s practices at the WTO. Likewise, Beijing should launch a similar WTO challenge of U.S. restrictions of Chinese ICT companies. Two sets of rebukes from that body could provide the necessary momentum to successfully de-escalate the technology trade war. Daniel J. Ikenson is the director of Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
  • The Capitalist Revolution    (Ludwig von Mises, 2017-09-18)
    By: Ludwig von Mises The pre-capitalistic system of product was restrictive. Its historical basis was military conquest. The victorious kings had given the land to their paladins. These aristocrats were lords in the literal meaning of the word, as they did not depend on the patronage of consumers buying or abstaining from buying on a market. On the other hand, they themselves were the main customers of the processing industries which, under the guild system, were organized on a corporative scheme. This scheme was opposed to innovation. It forbade deviation from the traditional methods of production. The number of people for whom there were jobs even in agriculture or in the arts and crafts was limited. Under these conditions, many a man, to use the words of Malthus, had to discover that “at nature’s mighty feast there is no vacant cover for him” and that “she tells him to be gone.1” But some of these outcasts nevertheless managed to survive, begot children, and made the number of destitute grow hopelessly more and more.But then came capitalism.  It is customary to see the radical innovations that capitalism brought about in the substitution of the mechanical factory for the more primitive and less efficient methods of the artisans’ shops. This is a rather superficial view. The characteristic feature of capitalism that distinguishes it from pre-capitalist methods of production was its new principle of marketing. Capitalism is not simply mass production, but mass production to satisfy the needs of the masses.The arts and crafts of the good old days had catered almost exclusively to the wants of the well-to-do. But the factories produced cheap goods for the many. All the early factories turned out was designed to serve the masses, the same strata that worked in the factories. They served them either by supplying them directly or indirectly by exporting and thus providing for them foreign food and raw materials. This principle of marketing was the signature of early capitalism as it is of present-day capitalism. The employees themselves are the customers consuming the much greater part of all goods produced. They are the sovereign customers who are “always right.” Their buying or abstention from buying determines what has to be produced, in what quantity, and of what quality. In buying what suits them best they make some enterprises profit and expand and make other enterprises lose money and shrink. Thereby they are continually shifting control of the factors of production into the hands of those businessmen who are most successful in filling their wants.Under capitalism private property of the factors of production is a social function. The entrepreneurs, capitalists, and land owners are mandataries, as it were, of the consumers, and their mandate is revocable. In order to be rich, it is not sufficient to have once saved and accumulated capital. It is necessary to invest it again and again in those lines in which it best fills the wants of the consumers. The market process is a daily repeated plebiscite, and it ejects inevitably from the ranks of profitable people those who do not employ their property according to the orders given by the public. But business, the target of fanatical hatred on the part of all contemporary governments and selfstyled intellectuals, acquires and preserves bigness only because it works for the masses. The plants that cater to the luxuries of the few never attain big size. The shortcoming of nineteenth-century historians and politicians was that they failed to realize that the workers were the main consumers of the products of industry. In their view, the wage earner was a man toiling for the sole benefit of a parasitic leisure class. They labored under the delusion that the factories had impaired the lot of the manual workers. If they had paid any attention to statistics they would easily have discovered the fallaciousness of their opinion. Infant mortality dropped, the average length of life was prolonged, the population multiplied, and the average common man enjoyed amenities of which even the well-todo of earlier ages did not dream.However this unprecedented enrichment of the masses were merely a by-product of the Industrial Revolution. Its main achievement was the transfer of economic supremacy from the owners of land to the totality of the population. The common man was no longer a drudge who had to be satisfied with the crumbs that fell from the tables of the rich. The three pariah castes which were characteristic of the pre-capitalistic ages—the slaves, the serfs, and those people whom patristic and scholastic authors as well as British legislation from the sixteenth to the nineteenth centuries referred to as the poor—disappeared. Their scions became, in this new setting of business, not only free workers, but also customers.This radical change was reflected in the emphasis laid by business on markets. What business needs first of all is markets and again markets. This was the watch-word of capitalistic enterprise. Markets, that means patrons, buyers, consumers. There is under capitalism one way to wealth: to serve the consumers better and cheaper than other people do. Within the shop and factory the owner — or in the corporations, the representative of the shareholders, the president—is the boss. But this mastership is merely apparent and conditional. It is subject to the supremacy of the consumers. The consumer is king, is the real boss, and the manufacturer is done for if he does not outstrip his competitors in best serving consumers.It was this great economic transformation that changed the face of the world. It very soon transferred political power from the hands of a privileged minority into the hands of the people. Adult franchise followed in the wake of industrial enfranchisement. The common man, to whom the market process had given the power to choose the entrepreneur and capitalists, acquired the analogous power in the field of government. He became a voter.It has been observed by eminent economists, I think first by the late Frank A. Fetter, that the market is a democracy in which every penny gives a right to vote. It would be more correct to say that representative government by the people is an attempt to arrange constitutional affairs according to the model of the market, but this design can never be fully achieved. In the political field it is always the will of the majority that prevails, and the minorities must yield to it. It serves also minorities, provided they are not so insignificant in number as to become negligible. The garment industry produces clothes not only for normal people, but also for the stout, and the publishing trade publishes not only westerns and detective stories for the crowd, but also books for discriminating readers.There is a second important difference. In the political sphere, there is no means for an individual or a small group of individuals to disobey the will of the majority. But in the intellectual field private property makes rebellion possible. The rebel has to pay a price for his independence; there are in this universe no prizes that can be won without sacrifices. But if a man is willing to pay the price, he is free to deviate from the ruling orthodoxy or neo-orthodoxy. What would conditions have been in the socialist commonwealth for heretics like Kierkegaard, Schopenauer, Veblen, or Freud? For Monet, Courbet, Walt Whitman, Rilke, or Kafka?In all ages, pioneers of new ways of thinking and acting could work only because private property made contempt of the majority’s ways possible. Only a few of these separatists were themselves economically independent enough to defy the government into the opinions of the majority. But they found in the climate of the free economy among the public people prepared to aid and support them. What would Marx have done without his patron, the manufacturer Friedrich Engels? Excerpted from Liberty & Property 1. Thomas R. Malthus, An Essay on the Principle of Population, 2nd ed. (London, 1803), p. 531.
  • Money-Supply Growth Drops Again — Falls to 108-Month Low    (Ryan McMaken, 2017-09-17)
    By: Ryan McMaken Growth in the supply of US dollars fell again in August, this time to a 108-month low of 4.2 percent. The last time the money supply grew at a smaller rate was during August 2008 — at a rate of 4.1 percent. The money-supply metric used here — an "Austrian money supply" measure — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on this metric and its growth.The "Austrian" measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short time deposits, traveler's checks, and retail money funds). M2 growth also slowed in August, falling to 5.3 percent, a 75-month low. Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of falling money-supply growth. Thanks to the intervention of central banks, of course, money supply growth in recent decades has never gone into negative territory. Nevertheless, as we can see in the graph, significant dips in growth rates show up in years prior to a economic bust or financial crisis. For insights into what's affecting money supply growth, we can look at loan activity, such as the Federal Reserve's measure of industrial and commercial loans. In July of this year, growth rate in loans fell to a 75-month low, dropping to 1.5 percent. In August, loan growth rebounded slightly, climbing back to 2.1 percent. Loan growth has not been this weak since April of 2011, in the wake of the last financial crisis. We find similar trends in real estate loans and in consumer loans, although not to the same extent. The current subdued rates of growth in the money supply suggests an economy in which lenders are holding back somewhat on making new loans, which itself suggests a lack of reliable borrowers due to a lackluster overall economy. This assessment, of course, is reinforced by the Federal Reserve's clear reluctance to wind down it's huge portfolio, and to end its ongoing policy of low-interest rates — concerned that any additional tightening might lead to a recession. Growth in consumer loans hit a 27-month low in August, and real estate loans hit a 28-month low during the same period. 
  • Johnny Appleseed: Land Speculator, Alcohol Dealer, Capitalist    (Chris Calton, 2017-09-17)
    By: Chris Calton Similar to the English legend of Robin Hood, the character Johnny Appleseed has evolved over time into a progressive icon. In the former, the famed outlaw, made an enemy of the government by reclaiming unjust taxes, became a socialist folklore hero who “stole from the rich and gave to the poor.” Johnny Appleseed, an American legend, is depicted as a selfless peripatetic, traveling the country planting apple trees so that nobody would go hungry. He lived an ascetic lifestyle, preached the gospel of Jesus Christ, and refused to hurt any of God’s creatures (one apocryphal tale claims that he angrily threw away his shoe out of guilt for having accidently stepped on a worm).Some of these fabled characteristics are based in truth. Johnny Appleseed did live well below his financial means, for example, giving people the false impression that he was a poor man. But Johnny Appleseed’s true accomplishments – the successful accumulation of wealth through entrepreneurial speculation and calculated claims to the private property he developed with his apple seeds – have been entirely omitted from the legends taught to schoolchildren. Accurately told, the life of Johnny Appleseed is a capitalist success story.Johnny Appleseed Brings Alcohol to the FrontierThe legend of Robin Hood was a fiction born out of a different fiction, but the legend of Johnny Appleseed is a fiction born out of a real person. John Chapman was born on September 26, 1774, the son of a Revolutionary War veteran who would later encourage his son to become an orchardist.Apples, at this time, were not eaten very commonly. As a fruit, apples are radically heterozygous, meaning that a random apple seed is wildly unpredictable regarding the type of apple it will produce. Modern apples, such as the ever-popular “Red Delicious” that we still find in grocery stores today, are reliably reproduced in a process known as “grafting,” in which the stem of a new apple tree is planted into the “rootstock,” thus growing apples identical to the original tree rather than the random apples of an independent seed.John Chapman didn’t believe in grafting. He saw it as an arrogant manipulation of nature that offended his sensibilities as a Christian. The practice of grafting did not become common in the United States until after Chapman’s death, so most apple trees produced apples that were bitter, mushy, or otherwise unfit for eating. The more common use of apples was the production of hard cider.Prior to indoor plumbing, sanitary water was difficult to come by. You might boil the water, but this was a time-consuming process in an age when labor was needed for any number of other activities. For many members of the rural poor, it was much more prudent to simply produce alcoholic cider, which was vastly more healthy to drink than water found in nature (some people are appalled at the young age that parents gave their children alcohol in the early nineteenth century and before, but in the context of the time, it was often the healthier alternative).The temperance movement would eventually, after Chapman’s death, push the apple industry toward food cultivation. The aforementioned “Red Delicious” came about from a nineteenth century contest to produce the best tasting apple, grafting became more widespread, and the slogan “An apple a day keeps the doctor away” was popularized as a marketing strategy to encourage people to eat apples.But during Chapman’s lifetime, apples were still predominantly used for alcohol, and when he traveled through Ohio and other undeveloped regions of the country planting apple orchards, he was anticipating the future desire of settlers to have cider, rather than food. And his speculation was profitable.Homesteading and Land SpeculationContrary to legend, John Chapman’s choices as to where to plant his apple orchards were calculated business decisions. By planting the seed on unclaimed land, he was homesteading it, both in a libertarian sense and according to the legal system of the time. Developing apple orchards gave him a government-recognized claim to the land.His orchards were an investment. Once he got them started, he moved on to new lands and planted an orchard there, as well. Eventually, he would return to a previous orchard – now fully developed – and sell the land to new settlers. They wanted land, and apple orchards were a valuable commodity that they no longer had to try to start on their own. John Chapman correctly anticipated the desires of future customers and profited handsomely from it.The legend of Johnny Appleseed depicts him as a poor, itinerant nature-lover. That he loved nature is undoubtedly true. That he dressed himself modestly enough to give the appearance that he was poor is true as well. But the real John Chapman accumulated quite a bit of wealth over his lifetime. How much wealth he had is difficult to ascertain because he did not trust banks, choosing instead to bury his money in various places throughout his travels. However, it is not contested among historians who have studied him that he was a calculating businessman who died with a considerable amount of wealth and an estimated 1,200 acres of yet-unsold orchards.Even in his lifetime, Johnny Appleseed (as he was known long before his death) was a beloved figure by those who knew of him. He was often offered lodging throughout his travels, he was popular with children, and when selling his seeds to individuals to plant their own orchards on land already acquired, he preferred to barter directly for goods rather than exchange indirectly with money. Combine these truths with his apparent love of nature and animals (though the extent of his nature-loving has almost certainly been exaggerated), and it is easy to understand why he became the mythologized icon of progressive morality. Johnny Appleseed is a man truly deserving to be considered an American hero, but first and foremost, he should be remembered as a hero of American capitalism.Sources:Pollan, Michael. The Botany of Desire: A Plant's Eye View of the World. New York: Random House, 2001.http://bestapples.com/resources-teachers-corner/johnny-appleseed/https://www.biography.com/people/johnny-appleseed-38103
  • America May Push Iran into Becoming the next Nuclear Crisis    (Ted Galen Carpenter, 2017-09-17)
    Ted Galen Carpenter It’s no secret that the Trump administration is busily building a case to have the United States repudiate the P5+1 nuclear agreement with Iran. Even when the president grudgingly conceded that Tehran was complying with the explicit terms of the accord, he groused that Iranian leaders were violating “ the spirit ” of the document. A cynic could easily have pointed out that a key reason why nations spell out the binding aspects of an agreement through written provisions—rather than relying on vague oral comments and handshakes—is that only the written clauses constitute true obligations. Disagreements about the “spirit” or intentions could be endless. The preponderance of evidence indicates that Iran has, in fact, abided by its legal obligations under the agreement. Unfortunately, administration officials and a vocal flock of hawks in the United States seem determined to sabotage the accord. The latest salvo was the speech that U.S. ambassador to the United Nations Nikki Haley delivered to the ultra-hawkish American Enterprise Institute on September 5. That address contained a multitude of distortions , all of which seemed designed to build a foundation for the administration to repudiate the agreement. Indeed, if Haley’s comments are taken seriously, a drive appears underway to go beyond that step and make the case for war against Iran. An increasingly popular line of argument among proponents of a militant policy toward Tehran is that North Korea’s behavior is a harbinger of what the United States will face regarding Iran if Washington does not harden its approach. During an appearance on the Fox News program “Tucker Carlson Tonight” in mid-July, prolific neoconservative author retired Col. Ralph Peters warned that if the United States did not confront Iran now, then it would in a few years encounter the same kind of nuclear crisis with that country as the current nightmare with North Korea. Since Peters previously had recommended U.S. military action against Pyongyang, there was little doubt about what type of confrontation he had in mind. Trying to isolate Iran has been—and will continue to be—an exercise in futility. Peters is hardly alone in making that argument. Hawks openly excoriate the Clinton administration for concluding the 1994 nuclear agreement with North Korea. Clinton’s naïve decision, they argue, enabled Pyongyang to flout the so-called restraints on its nuclear program, and we now face a much worse situation when that program is far advanced. They emphasize that U.S. leaders must not make the same error by adhering to a similar, fatally flawed, agreement with Iran. The clerical regime in Tehran is carefully watching how Washington deals with North Korea’s defiant entry into the global nuclear-weapons club. If Pyongyang causes the United States to back down, the reasoning goes , Iran will actively pursue the same ambition, regardless of any agreement to the contrary. To bolster their case, critics of the agreement cite various experts who see a smoking gun in the form of evidence that Iran and North Korea already cooperate closely on both nuclear matters and missile technology. John Bolton, a former ambassador to the UN, has even asserted that if North Korea retains its nuclear-weapons arsenal, along with developing reliable ballistic missiles, Tehran could have the same capabilities “the next day” simply by “writing a check” to Kim Jong-un. Using North Korea’s behavior as an excuse to trash the nuclear agreement with Iran is at best a dangerously simplistic reaction. Although hawks typically insist that their goal is to replace the current version with a better, stronger one that more effectively reins in Tehran’s supposed nuclear ambitions, at least some hardliners clearly want U.S. military action against Iran. That course would be extraordinarily reckless. Shredding the agreement even without the follow up of preemptive strikes would needlessly escalate tensions throughout the Middle East. Admittedly, there is a risk that Iran could venture down the same path as North Korea toward the goal of a nuclear-weapons capability. But hawks learn the wrong lesson from Pyongyang’s behavior. Given the way Washington has treated such nonnuclear adversaries as Serbia, Iraq and Libya, North Korea’s desire for a nuclear deterrent is hardly irrational. Belligerent rhetoric coming from influential figures such as John McCain, Tom Cotton and Lindsey Graham (and their neoconservative allies) heightens the Kim regime’s paranoia. To a considerable extent, the United States has brought this problem on itself. Explicitly repudiating the goal of forcible regime change toward countries that are on bad terms with Washington might help reduce the incentive of those governments to develop nuclear arsenals. Finally, even if the United States continues its misguided, sterile policy of isolating North Korea, much less embracing the perilous option of resorting to war, the adverse consequences of adopting the same tactics toward Iran would be much worse. North Korea is an obnoxious little state, but it has little significance beyond its immediate neighborhood. In terms of being an economic power, Pyongyang is a joke, and its political or diplomatic appeal scarcely reaches that level. Matters are quite different with Iran. Like it or not, that country is a major diplomatic, military and economic player throughout the Middle East—and even into Central and Southwest Asia. As the principal representative of Islam’s Shia branch, Tehran exercises considerable influence in such countries as Iraq, Lebanon, Syria, Bahrain and Yemen. Trying to isolate Iran has been—and will continue to be—an exercise in futility. And launching a military attack on that country would trigger another disastrous war in the Middle East. The course with which the Trump administration seems to be flirting should be avoided at all costs. The president must not listen to the siren call of reckless hawks who have been wrong about so many different issues. Ted Galen Carpenter, a senior fellow at the Cato Institute and a contributing editor at the National Interest, is the author of ten books, the contributing editor of ten books and the author of more than 650 articles on international affairs.
  • Don't Worry about Short-Term Deficit    (Chris Edwards, 2017-09-17)
    Chris Edwards With tweets, speeches and meetings, President Trump is urging Congress to cut taxes by the end of the year. The president argues that our high business taxes are driving investment abroad and hurting U.S. workers. Most members of Congress agree that we need to reduce our 35% federal corporate tax rate, which is one of the highest in the world. America’s businesses and their workers need a more competitive tax code, and Republicans should seize the opportunity to get it done. The disagreement comes when Trump says he wants “the biggest tax cut … in the history of our country,” as he tweeted the other day. He seems to be promising to vastly slash Uncle Sam’s grab from our wallets. That would be great if Trump and Congress matched the tax cuts with spending cuts. But without the latter, deficits would rise and simply impose higher taxes on people down the road. An alternative would be to cut individual and corporate tax rates and offset the deficit impact by ending unneeded breaks, such as the state and local tax deduction. That would be a good reform, creating a simpler tax code and improving incentives for working and investing. Alas, Republicans cannot seem to cut spending, and they have not yet agreed on which tax breaks to repeal. Without such deficit offsets, they should scale back their tax package to just the most pro-growth elements, particularly a corporate tax rate cut. A corporate cut would initially reduce federal revenues, but over time companies would build more U.S. factories, bring foreign profits back home, and evade taxes less. The tax base would expand and reduce any resulting deficits over time. Such dynamic growth effects are evident in reforms abroad. Canada cut its federal corporate tax rate from 29% to 15%, and Britain cut its rate from 30% to 19%. In both countries, corporate tax revenues as a share of the economy are more or less unchanged despite the sharp rate cuts. If the GOP focuses on pro-growth tax changes, we shouldn’t worry about the short-term hit to the deficit. America’s businesses and their workers need a more competitive tax code, and Republicans should seize the opportunity to get it done. Chris Edwards is director of tax policy studies at the Cato Institute.
  • Why Isn't There a Debate about America's Grand Strategy?    (Christopher A. Preble, 2017-09-16)
    Christopher A. Preble “The United States needs a new set of ideas and principles to justify its worthwhile international commitments, and curtail ineffective obligations where necessary,” argue Jeremi Suri and Benjamin Valentino, in the introduction to their edited volume Sustainable Security: Rethinking American National Security. “Balancing our means and ends requires a deep reevaluation of U.S. strategy, as the choices made today will shape the direction of U.S. security policy for decades to come.” Though rarely spelled out in such stark terms, this question would appear to be at the core of America’s grand strategy debate—if such a debate were actually occurring. We should ponder why it isn’t, and therefore why an arguably “unsustainable” strategy persists. (As the economist Herb Stein famously said, “If something cannot go on forever, it will stop.”) The window hasn’t closed on a serious strategic debate, but the ball is now in Congress’s hands. I foresaw this problem not quite two years ago. “U.S. foreign policy is crippled,” I warned in testimony before the Senate Armed Services Committee: by a dramatic disconnect between what Americans expect of it and what the nation’s leaders are giving them. If U.S. policymakers don’t address this gap, they risk pursuing a policy whose ends don’t match with the means the American people are willing to provide. And I concluded as follows: the military’s roles and missions are not handed down from heaven. They are not carved on stone tablets. They are a function of the nation’s grand strategy… That strategy must take account of the resources that can be made available to execute it. Under primacy, in the current domestic political context, increasing the means entails telling the American people to accept cuts in popular domestic programs, higher taxes, or both, so that our allies can maintain their bloated domestic spending and neglect their defenses. It seems unlikely that Americans will embrace such an approach. The best recourse, therefore, is to reconsider our global role, and bring the object of our foreign policy in line with the public’s wishes. That hasn’t happened. Although public officials and thought leaders shouldframe strategy as a choice among competing ends (what we seek to achieve), and means (i.e. the resources that we are willing to apply to achieve them), they have stubbornly refused to do so. They have clung to the same strategic goals, and simply hoped that the obvious fiscal constraints would magically disappear. Given his willingness to challenge the foreign policy establishment, Trump’s upset victory last year might have changed all that. But, so far, it hasn’t. Arguably, it’s gotten worse. In a recent discussion at the Cato Institute, Valentino observed how the reaction to Trump’s victory had divided into two camps. One side was gripped with utter horror. A vast array of policy insiders—on both the left and the right—were appalled by the mere suggestion that the United States would revisit any of its international obligations, or abandon long-time allies. Even Barack Obama, who defied the foreign policy establishment from time-to-time, urged the incoming president “to sustain the international order that’s expanded steadily since the end of the Cold War.” “American leadership in this world really is indispensable,” Obama explained in a letter to his successor. Another group of individuals was willing to entertain challenges to the status quo. Though largely appalled by Trump’s antics and rhetoric, they were cautiously optimistic that his rise would stimulate a long-overdue grand strategic debate. Both sides were wrong. There has been neither a major retrenchment, nor even a debate over whether such a retrenchment is warranted or wise. In other words, Valentino noted, we seem headed for the worst of all worlds: status quo by default. The window hasn’t closed on a serious strategic debate, but the ball is now in Congress’s hands. Alas, nearly everyone in Congress seems utterly disinterested. Consider, for example, the stifling of any discussion surrounding a new Authorization for Use of Military Force (AUMF). This week, Sen. Rand Paul (R-KY) threatened to bring the Senate to a crawl unless it debated a new AUMF, but very few other elected officials are prepared to challenge the president’s authority to wage perpetual war at will. Sen. John McCain went so far as to dismiss Paul’s call for an AUMF debate as a waste of his time. There is a similar lack of interest in the House. Back in July, GOP leaders blocked Rep. Barbara Lee’s attempt to force an AUMF debate. Although Lee’s proposal won bipartisan support in the House Appropriations Committee, Speaker Paul Ryan’s office called it “an irresponsible measure” that “endangers our national security.” Speaker Ryan, Senator McCain and others on Capitol Hill who don’t wish to debate the nation’s wars should understand that our military interventions are ineffective precisely because Congress—and therefore the public—is disengaged. The nation fights in many wars that, unlike Korea or Vietnam, don’t get tens of thousands of U.S. soldiers killed. But wars that aren’t worth fighting unless they are cheap and easy might not be worth fighting at all. Indeed, the unwillingness to expend resources on dubious foreign wars is a mark of the public’s collective common sense. Meanwhile, to the extent that they don’t feel much pain, or suffer any apparent trade-offs, the vast majority of Americans who don’t serve in the military remain rationally ignorant of the wars that don’t obviously cost them anything. In short, the public doesn’t care because Congress has given them little reason to care. And U.S. foreign policy proceeds as if on autopilot. Christopher Preble is vice president for defense and foreign-policy studies at the Cato Institute and the author of The Power Problem: How American Military Dominance Makes Us Less Safe, Less Prosperous, and Less Free.
  • Week in Review: September 16, 2017    (Mises Institute, 2017-09-15)
    By: Mises Institute As Ron Paul once wrote, "politicians who compromise and seek bipartisanship are the most dangerous among the entire crew in Washington." This week Trump began making his Clinton-esque pivot toward being such a president, making deals with Nancy Pelosi and Chuck Schumer on the debt ceiling and immigration. Along with the neocon's victories over foreign policy realists and Trump's embrace of an activist Fed, any hopes of draining the swamp are long dead.Luckily, however, nullification is still alive and well.On Mises Weekends, Jeff is joined by former Harvard Crimson and Bills linebacker Jake Lindsey. Fresh off a pre-season tryout and looking to continue a career in the NFL, Jake joins Jeff for a candid interview about his two passions, football and Austrian economics.And in case you missed them, here are this weeks Mises Wire and FedWatch articles, covering a wide array of topics:With a Central Bank, Bank "Deregulation" Can Be a Bad Thing by Frank ShostakWhy Natural Disasters Are Worse For Poor Countries by Ryan McMakenDon't Trust Government To Protect Your Privacy by Caleb FullerThe Neoconservatives Have Declared War on the Realists by Ryan McMakenJanet Reno, American Saint by James BovardHuman Action, Mises's Masterpiece by Henry HazlittThe Space Race Is Now "Privatized" — But You're Still Paying for It by George Ford SmithThink Gentrification Is Bad? The Opposite Is Worse by Ryan McMakenA Bad Trip: The US Government and LSD by Chris CaltonKeynes: A Master of Confused and Confusing Prose by Hunter LewisWhy Is the Euro Still Gaining Against the Dollar? by Daniel LacalleIs Forced Military Service Good for the Economy? by Ryan McMakenH.L. Mencken: The Joyous Libertarian by Murray RothbardMaine Is Nullifying Federal Regulations that Cripple Local Farmers by Chris CaltonHow Much Policing Do We Really Need? by Tate FegleyWhat If Every Person Paid an Equal Share of the Military Budget by Ryan McMakenWhat We Lost on September 11th by Jeff DeistLudwig von Mises and the Real Meaning of Liberalism by Richard M. EbelingWhy Police Cannot (and Will Not) Protect Our Rights by William L. AndersonCongress Exploits Hurricane to Raise Debt Ceiling by Ron PaulRule by Experts? by Peter G. KleinStanley Fischer's Well-Timed Fed Exit by Brendan Brown
  • To Combat "Hate," Make Government Weaker    (Justin Murray, 2017-09-15)
    By: Justin Murray On 18 August 2017, the mayor of Boston Marty Walsh announced that the city should avoid the Commons on 19 August 2017 because of white supremacists and the chances of violence at a planned free speech rally. Predictably, thousands of people showed up to protest this group based on the words of the mayor. The mayor was rather unambiguous, “The courts have made it abundantly clear. They have the right to gather, no matter how repugnant their views are. But they don’t have the right to create unsafe conditions. They have the right to free speech. In return, they have to respect our city.” The mayor said that unpleasant white supremacists were going to show up and spout hateful rhetoric, so avoid it at all costs so you aren’t subject to these repugnant views.The problem here? To put it in the words of one very confused protester that was interviewed by the Boston Globe, “Excuse me sir, where are the white supremacists?” As it turns out, this hate speech movement that Mayor Walsh was warning everyone about was a simple campaign stump speech by a Republican candidate for the Massachusetts State Senate. Who was this despicable white supremacist? Indian-American Shiva Ayyadurai. While his profile does have some bizarre claims, mainly his claim that he invented e-mail, this isn’t any stranger than claims many other politicians make and nothing in his background seems to indicate any form of racial animosity or racial supremacist beliefs, white or otherwise. If anything, his views indicate the opposite as he accuses the US of operating a caste system where academics and politicians take the role of the Brahmin in India and is anti-GMO. These are hardly hallmarks of a right-wing belief structure and have far more in common with the American left.Further, this is the speech he made. To cap it off, he was flanked by people holding Black Lives Do Matter signs and a woman protesting GMO food. This is a twist that was comical years ago when done on the Dave Chappelle Show, but it loses a bit of its comedy when we fast forward to 2017 and people are actually taking this as gospel, carving out time on a Saturday to yell down a few odd ducks — who dislike Monsanto — as racists.And this mayoral behavior is expanding. San Francisco mayor Ed Lee has recently come on record denouncing a prayer group operated by Patriot Prayer on Saturday, 26 August 2017. Much like Boston mayor Walsh, Mayor Lee is rather unambiguous in his speech about the purpose of this gathering, “But as mayor of this city, I say: Any message of hate is not welcome.” And as predicted, thousands are going to show up to protest this gathering. But, much like the problem Mayor Walsh incited, this particular rally is going to feature Hispanics, homosexuals and a transsexual speaker all of which will be be run by a person of Japanese descent. His interview makes him sound like he hits most of the Progressive tropes, including ending wars and promoting gay rights.So, what is going on here?Why a Climate of Fear Exists Politicians are actively tapping into modern stress that is generated by the state itself. Emotion is a powerful political motivator. People are heavily motivated to believe things that hit their emotions strongly, as shown by the classic tests to ban water. People generally have no idea what they’re protesting, just that the person has a compelling emotional hook.When a major villain like, say, Donald Trump, manages to get a hold of a very powerful political organization like, say, the US federal government, people are bound to become fearful for their way of life if they supported a different politician for the role. As I noted previously in an open letter to Clinton supporters, this anxiety is entirely the fault of the anxious since they were the ones that insisted on building those powerful institutions that would inevitably be taken over by individuals that you may not support and used in ways that were not intended.This is how politicians, who are angling to generate a much more powerful government, so long as you vote for them, are able to paint groups like the Ku Klux Klan and the National Socialist Movement, the two largest white supremacist groups in the country, as major threats to the safety of minorities. And by largest, I mean that the KKK has around 3,000 members nationally (out of 320 million people) and the second largest, the NSM, has around 400. Narratives don’t work without an enemy and the traditional enemy of the mayors actively inciting violence against in their cities is so trivial they can barely make up a decent crowd at a minor league baseball stadium, let alone constitute a threat to the Republic. And nothing stirs up the emotional ire more than some Nazi sympathizers that we’ve had drilled into our heads since elementary school history are, rightfully, right evil bastards.To point out how trivial and powerless these groups are, bees are responsible for around 100 deaths per year, which is over double the combined amount of alleged right-wing hate groups are responsible for between 2002 and 2016, making the everyday bee 31 times more deadly than white supremacist groups. Yet we don’t see massive rallies of college age students stomping through apiaries demanding bees to be snuffed out, because it’s ridiculous to fear something so powerless.Politicians are doing what they do from time immemorial, leveraging our fear into the growth of the state. We saw it in the wake of 9/11 with the passage of the Patriot Act, for justification to enter the First World War and even going back further to the dissolution of the Roman Republic into an Imperial power. Manufacture fear, either via an existing external threat or, in the case of Rome under Gaius Julius and the latest mayoral pronouncements that racists are going to run amok in the city, a fake one, stir up the fervor of the population then arrive with the solution, one that requires additional money and power for public office and then ride to the rescue. Stirring up riots and a few deaths perfectly plays to their narrative.Simply asking people to get along isn’t going to work so long as there is a massive power structure in place that is driving the actual fear. If the people are afraid of the Trumps and KKKs of the world, they could demand their politicians dismantle the power structures at the federal level so it cannot be taken over by disfavored groups and reinstall them at a local level where it is far easier to control who hold the reins of power.
  • Save Us From the Health Care Reformers: They're the Problem, Not the Solution    (2017-09-15)
    By John C. Goodman; From the middle of the 19th century until the 1970s, about every serious health reform in the United States was due to the efforts of organized medicine. The American Medical Association,...
  • Jacob Lindsey: NFL Hopeful from Harvard on Why He Loves Austrian Economics    (Jeff Deist, Jacob Lindsey, 2017-09-15)
    By: Jeff Deist, Jacob Lindsey Jake Lindsey is a brilliant young Harvard grad who majored in economics. His favorite thinkers? Ludwig von Mises and Murray Rothbard. But unlike most young fans of the Mises Institute, Jake was a dominant linebacker for the Harvard Crimson who attracted the attention of scouts from the Buffalo Bills. He's fresh off a pre-season tryout and looking to start a career in the NFL. Jake joins Jeff for a candid interview about his two passions, football and Austrian economics.
  • With a Central Bank, Bank "Deregulation" Can Be a Bad Thing    (Frank Shostak, 2017-09-15)
    By: Frank Shostak Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a "terrible mistake."President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a bid to ease banks' ability to lend.In an interview with the Financial Times on August 16, 2017, Fischer said that loosening capital and liquidity requirements is dangerous and could lead to a new economic crisis. "I find that really, extremely dangerous and extremely short-sighted."While Fischer is not a friend of a free market, in this case I am in agreement with Fischer’s comment.A True Free Financial Environment vs A Central-Bank Controlled Financial System The proponents for less control in financial markets hold that fewer restrictions imply a better use of scarce resources, which leads to the generation of more real wealth.It is true that a free financial environment is an agent of wealth promotion through the efficient use of scarce real resources, while a controlled financial sector stifles the process of real wealth formation. The proponents of deregulated financial markets have overlooked the fact that the present financial system has nothing to do with a free market. What we have at present is a financial system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking. In the present system the more unrestricted the banks are the more money out of “thin air” generated and hence greater damage inflicted upon the wealth generation process. (With genuine free banking (i.e., the absence of the central bank) the potential for the creation of money out of “thin air” is minimal).Prior to the 1980’s financial de-regulation, we had controlled banking where the central bank tightly supervised banks’ conduct. Within this type of environment, bank’s profit margins were nearly predetermined (the Fed imposed interest rate ceilings and controlled short-term interest rates) hence; the “life” of the banks was quite easy, although boring. The introduction of financial de-regulations and the dismantling of the Glass – Steagall Act changed all that. The de-regulated environment resulted in fierce competition between banks.The previous profit margins came under pressure and this called for an increase in volumes of lending in order to maintain the level of profits. In the present central banking framework, this increase culminated in an explosion in the creation of credit out of “thin air” - (massive explosion in the money supply). (In the deregulated environment, banks’ ability to amplify Fed’s pumping has enormously increased). Note that the AMS to its trend ratio (the trend calculated from January 1959 to December 1979) hovered very closely at around 1.0 during 1959 to early 1980’s. Since early 1980’s this ratio has been rising visibly, climbing to 2.2 by October 2016 before closing at 2.1 in June 2017.This massive explosion of money out of “thin air” has severely damaged the pool of real savings. Rather than promoting an efficient allocation of real savings, the current so-called de-regulated monetary system has been promoting channeling money out of “thin air” across the economy.From this, it follows that in the present banking system what is required to reduce a further weakening of the real wealth generation process is to introduce tighter controls on banks. I do not suggest here suppressing the free market, but instead suppressing banks’ ability to generate credit out of “thin air.” Please note the present banking system has nothing to do with a true free market economy.More controls will suppress banks’ ability to amplify the Fed’s pumping, so in this sense it is preferable to a so-called deregulated banking sector.
  • With a Central Bank, Bank "Deregulation" Can Be a Bad Thing    (Frank Shostak, 2017-09-15)
    By: Frank Shostak Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a "terrible mistake."President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a bid to ease banks' ability to lend.In an interview with the Financial Times on August 16, 2017, Fischer said that loosening capital and liquidity requirements is dangerous and could lead to a new economic crisis. "I find that really, extremely dangerous and extremely short-sighted."While Fischer is not a friend of a free market, in this case I am in agreement with Fischer’s comment.A True Free Financial Environment vs A Central-Bank Controlled Financial System The proponents for less control in financial markets hold that fewer restrictions imply a better use of scarce resources, which leads to the generation of more real wealth.It is true that a free financial environment is an agent of wealth promotion through the efficient use of scarce real resources, while a controlled financial sector stifles the process of real wealth formation. The proponents of deregulated financial markets have overlooked the fact that the present financial system has nothing to do with a free market. What we have at present is a financial system within the framework of the central bank, which promotes monetary inflation and the destruction of the process of real wealth generation through fractional reserve banking. In the present system the more unrestricted the banks are the more money out of “thin air” generated and hence greater damage inflicted upon the wealth generation process. (With genuine free banking (i.e., the absence of the central bank) the potential for the creation of money out of “thin air” is minimal).Prior to the 1980’s financial de-regulation, we had controlled banking where the central bank tightly supervised banks’ conduct. Within this type of environment, bank’s profit margins were nearly predetermined (the Fed imposed interest rate ceilings and controlled short-term interest rates) hence; the “life” of the banks was quite easy, although boring. The introduction of financial de-regulations and the dismantling of the Glass – Steagall Act changed all that. The de-regulated environment resulted in fierce competition between banks.The previous profit margins came under pressure and this called for an increase in volumes of lending in order to maintain the level of profits. In the present central banking framework, this increase culminated in an explosion in the creation of credit out of “thin air” - (massive explosion in the money supply). (In the deregulated environment, banks’ ability to amplify Fed’s pumping has enormously increased). Note that the AMS to its trend ratio (the trend calculated from January 1959 to December 1979) hovered very closely at around 1.0 during 1959 to early 1980’s. Since early 1980’s this ratio has been rising visibly, climbing to 2.2 by October 2016 before closing at 2.1 in June 2017.This massive explosion of money out of “thin air” has severely damaged the pool of real savings. Rather than promoting an efficient allocation of real savings, the current so-called de-regulated monetary system has been promoting channeling money out of “thin air” across the economy.From this, it follows that in the present banking system what is required to reduce a further weakening of the real wealth generation process is to introduce tighter controls on banks. I do not suggest here suppressing the free market, but instead suppressing banks’ ability to generate credit out of “thin air.” Please note the present banking system has nothing to do with a true free market economy.More controls will suppress banks’ ability to amplify the Fed’s pumping, so in this sense it is preferable to a so-called deregulated banking sector.


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