The basis of the "nonconservative" doctrine is simple: Just as the Romans used military power to colonize the world, the U.S. should use its power to democratize the world. It is viewed as a moral imperative, under the basic principle that, if a fellow human is suffering under tyranny, you should help liberate him, if you can. That was the underlying basis of the War in Iraq, i.e. to establish a democracy in the heart of the middle east. I supported the war originally on this basis alone (I never bought the WMD argument), but changed my opinion after the high cost was revealed. In short, because we can't afford it, we shouldn't do it. Too late now, I suppose.
I am of the opinion that Bush will be viewed quite favorable by history regarding Iraq because a democracy will emerge there. The younger generation will have access to the internet. If you go to a third world country, and see all the school kids on computers and surfing the internet, you are immediately struck by the notion that these kids will almost surely improve upon the society that they inherited. Their minds have been set free, in a very real sense. Their parent stare at them in wonder. Its hard to imagine computer and internet literate people living in mud huts.
To Africa: The problem we face in trying to help Africa is that most of the continent lacks the basic foundations for growing a free society. The three legs are (1) the uncorrupted rule of law under liberal, minimalist principles and a strictly limited government focused on police and public safety issues, (2) protection of private property rights, and (3) a stable currency. Once these three legs are in place, a stable, free society will grow, no matter what else happens. The Africa problem will not be solved until institutions, likely government institutions, are established that guarantee these things over an adequate geographic area.
I think we should now focus our attention on establishing a stable society somewhere in Africa. This we could likely afford. The plan, in short: (1) Pick a nice piece of land appropriate for the establishment of a new African state, (2) send the military to occupy it, (3) govern according to the three legs. I would also note that democracy is overrated. In fact, it would be counterproductive to establish democratic rule until the populace is educated, which will happen only after decades of evolution, if ever.
A post arguing against representative democracy would be too long to complete here. But I would suggest that a better form of government might be semi contractual, with the agreement between the people and the government being something along the lines of this: The government agrees to provide certain government services. The citizens agree to pay taxes to support these services. So how do we choose the rulers? We vote on contracts of a certain term, say 10 years, proposed by various sets of aspiring ruling parties, with each contract listing the power structure proposed, the services to be rendered, and the cost. Long term debt would not be allowed. If you want a contract with more services, you need to pay as you go. Also, the tax structure outlined by the contract would have to be evenly spread among the population as a flat tax, possibly with an exemption on the first, say $10,000 of income. That is the only way I see for the cost of government services to be taken into account by the body of voters. And of course, the tendency of voters to ignore the costs of the government they demand is at the root of our current problems.
Sunday, January 25, 2009
Saturday, January 10, 2009
Yay for Obama
The current media take on the large "economic stimulus" package now being advanced by Mr. Obama is that it is an "attempt to save capitalism".
It is quite the opposite. It is rather a last ditch attempt to save the concept of central government planning in America. It is beyond reasonable dispute that the American economy has been centrally planned since at least the early 1970s, and the intensity of the planning effort has increased every single day, and continues to increase. Without going into the details of the myriad government interventions, regulations, and plans, suffice it to say that the vast majority of capital allocation decisions in our economy have been either directly made or fundamentally influenced by government programs, policies, or regulations. Every decision, down to a decision as small as to whether or not to buy an apple, is heavily influenced or directly controlled by government (in the case of apple, an apple is normally not subject to sales tax, so government encourages it, and a host of international trade regulations that regulate type and price of apples further limit consumer choices among foods and relative prices).
When Mr. Obama was elected, I was pleased, but was having trouble articulating why. I decided to write this post because my feeling have crystallized a bit.
The next president is going to be the standard bearer of the pro-government forces last stand, their last chance to demonstrate that a society characterized by government planning and intervention is sustainable.
Both Republican and Democratic Parties (along with all minor parties other than the Libertarians) are devout planners and regulators. It is an unfortunate fact that Americans, thanks to inexcusably incompetent media organizations and the government educational establishment, have been taught that the Republicans are a "small government" party, that they represent a non-central-planning philosophy. Of course, nothing could be further from the truth.
So either party, if given power, would do the same thing: Take all steps possible in an attempt to "save government."
Put simply, I'm happy that Obama will soon be president because I want the best, most honest, most well-intentioned, most popular, most "progressive" central planner in charge of the last ditch attempt to save government.
I (unlike many of my progressive buddies) am not thoroughly convinced in my convictions. I know that the evidence is strong and growing that a society planned by the government is not sustainable. But now we are going to find out whether central planning can work or not. If Obama cannot make it work, who can?
I would be willing to bet that Obama, despite his intelligence, integrity, and good intentions, will utterly fail. But we don't need to speculate. We're now, finally, going to see.
It is quite the opposite. It is rather a last ditch attempt to save the concept of central government planning in America. It is beyond reasonable dispute that the American economy has been centrally planned since at least the early 1970s, and the intensity of the planning effort has increased every single day, and continues to increase. Without going into the details of the myriad government interventions, regulations, and plans, suffice it to say that the vast majority of capital allocation decisions in our economy have been either directly made or fundamentally influenced by government programs, policies, or regulations. Every decision, down to a decision as small as to whether or not to buy an apple, is heavily influenced or directly controlled by government (in the case of apple, an apple is normally not subject to sales tax, so government encourages it, and a host of international trade regulations that regulate type and price of apples further limit consumer choices among foods and relative prices).
When Mr. Obama was elected, I was pleased, but was having trouble articulating why. I decided to write this post because my feeling have crystallized a bit.
The next president is going to be the standard bearer of the pro-government forces last stand, their last chance to demonstrate that a society characterized by government planning and intervention is sustainable.
Both Republican and Democratic Parties (along with all minor parties other than the Libertarians) are devout planners and regulators. It is an unfortunate fact that Americans, thanks to inexcusably incompetent media organizations and the government educational establishment, have been taught that the Republicans are a "small government" party, that they represent a non-central-planning philosophy. Of course, nothing could be further from the truth.
So either party, if given power, would do the same thing: Take all steps possible in an attempt to "save government."
Put simply, I'm happy that Obama will soon be president because I want the best, most honest, most well-intentioned, most popular, most "progressive" central planner in charge of the last ditch attempt to save government.
I (unlike many of my progressive buddies) am not thoroughly convinced in my convictions. I know that the evidence is strong and growing that a society planned by the government is not sustainable. But now we are going to find out whether central planning can work or not. If Obama cannot make it work, who can?
I would be willing to bet that Obama, despite his intelligence, integrity, and good intentions, will utterly fail. But we don't need to speculate. We're now, finally, going to see.
Saturday, September 27, 2008
The Financial Crisis
Many people are confused about what is going on in the economy right now. I thought I'd provide a post that describes how it would be viewed by adherents of the main branches of modern economics.
The two most credible strains of economics are the Monetarists and those of the Austrian School. Keynesians represent a third school.
Monetarist theory is associated with Milton Friedman and current Fed Chairman Ben Bernanke, among others. No politicians, to my knowledge, are associated with Monetarist theory.
The Austrian School is associated with economists Fredrick Hayek, Ludwig Von Meise, and Murray Rothbard, and politician Ron Paul, among others.
The work of both the Monetarists and the Austrians are clear expansions on the work of Adam Smith ("The Wealth Of Nations", well accepted arguments in favor of free trade and free association, and of the free market mechanisms that create wealth), and have few contradictions with it.
The Keynesians are associated with John Maynard Keynes, and by implication, Carl Marx and his contemporaries. The Keynesians would claim linage to Adam Smith, but their theories are inherently inconsistent with much of Smith's work, and directly contradict the theories of the Monetarists and the Austrians.
It should be noted that no respectable economist is now a pure Monetarist or Austrian. They are two competing theories that have many of the same underlying principles, and differ mainly on whether monetary policy can be used constructively. The Federal Reserve is a tool of Monetarism, and the Fed Chairman has no choice, under law, but to act like a Monetarist, attempting to use the printing of money promote economic growth.
It should also be noted that the current system, put in place by the government, is an attempt to use the (most controversial) aspect of Monetarism that theorizes that monetary policy can be used as a productive economic tool, in conjunction with Keynesian economic planning. This is somewhat ironic, in that any serious Monetarist will reject Keynesian planning in virtually any form. This is, in practice, why Federal Reserve Officials are constantly advising Congress to reduce government interventions, warning that there is only so much they can do to support the economy.
All current elected leaders (other than Ron Paul) subscribe to the Keynesian/Monetarist hybrid philosophy, whether they know it or not. (Pure Keynesians are extinct in serious economics circles).
So how would members of the various schools view the current financial crisis?
The Keynesian/Monetarists:
The Cause: It is a Keynesian style economic "planning" effort that the United States has employed since the beginning of the 20th Century. One would expect that they would attempt to explain the current crisis in terms of fixable shortcomings an otherwise good "plan" to improve on the free market's allocation of housing, as well as more Marxist explanations related to the greed of capitalists. This is exactly what we are seeing in the news. They assert that the aspect of the "plan" now causing trouble, i.e. an artificially high rate of housing development, followed by the bursting bubble, is only causing trouble due to a lack of proper regulations, and the resulting ability of greedy businessmen to run amok. (The relevant policies related to this part of the Keynsian "plan" include the home mortgage deduction, various direct subsidies for housing including the FHA and HUD, the creation of subsidized and government guaranteed mortgage insurance with Fannie Mae and Freddy Mac, and various "civil rights" type laws requiring banks to provide loans in poor areas such as the Community Reinvestment Act, along with the Federal Reserve policy of keeping interest rates artificially low).
The Solution: Fix the plan by outlawing certain behaviors that are incentivized under the structure created by the plan (such as uncreditworthy people buying houses, and investors taking high levels of financial risk). Massive government spending financed by printing money, and lower interest rates (more printing money) will create jobs and save the economy.
The Monetarists:
The Cause: The pure Monetarists believe that the problem was cause by a fundamentally flawed "plan," which would describe virtually any economic plan conceived by government. Their theories dictate that the unavoidable misallocation of resources caused by any large scale government planning effort would, as a mathematical certainty, eventually result in a major economic contraction. The plan, they would argue, turned the irresistible forces of economics toward a bad result. They would point out that the plan created an underlying structure in which people and lenders had a strong incentive to act just as they have acted. They would argue that more regulation (i.e. a less bad plan with more laws making it difficult or inconvenient for people to act in accordance with their structural incentives) could have slowed the progression of the unavoidable adverse economic effects of the plan, making them better able to mitigate the damage through activist monetary policy.
The Solution: Drastically alter the plan to slow the progress of it damaging effects. Better yet, eliminate government intervention in the economy completely. The resulting economic downturn can, to at least some degree, be mitigated by massive monetary expansion. Printing money and giving it to banks, and low interest rates.
The Austrians:
The Cause: The Austrians believe, like the Monetarists, that the problem was cause by a fundamentally flawed plan. But they would focus on the activities of the Federal Reserve, and would assert that excess money creation, artificially cheap credit (i.e. the primary tool of the Monetarists), would alone have caused the problem, regardless of the so-called "quality" of the plan. The combination of the flawed Keynesian plan and the flawed Monetarist monetary policy is the worst of all possible worlds.
The Solution: There is no solution. We are in for a major economic contraction. The more the government does to try to stop it, the deeper and longer it will be. If the government again attempts to use monetary policy to "bubble" our way out of economic trouble, it will either fail, leading to the immediate downfall of our society, or, if successful, create a bigger bubble which will cause a far more severe crash in the near future, one from which there will be no escape. The Austrians would state that the best option is to reform the monetary system, creating "sound money" and stopping the government from printing money, which will cause a very severe, but relatively short-lived (say 3-7 years), economic contraction, after which sustainable economic progress could resume. It would also be best to abandon the Keynesian plan in its entirety immediately. However, if Keynesian planning continued under a "real" money system, the damaging economic effects of the plan would be impossible to conceal.
It is an unfortunate fact that the Austrians are the only branch with any success in predicting macroeconomic trends. In early 1929, both Hayek and Von Meise predicted the then-coming depression. More recent Austrians predicted both the Internet Bubble and the current Housing Bubble. They have been warning of the current financial crisis. The Austrians also predict that, prior to the ultimate disintegration of our society, great institutions of the Keynesian system, thought invulnerable, will crumble spectacularly, like pillars of sand. That is one reason why the recent fall of all five venerable investment banks on Wall Street and the largest insurance company in the world are very concerning events to students of economics: They are late-stage predictions of the Austrians, events that occur shortly before a "death spiral".
It is worth noting that the increasing frequency with which the predictions of the Austrians were coming to pass was a central theme of Ron Paul's presidential campaign.
The Keynesian/Monetarists and the Monetarists would predict that we are in for a mere recession. Unfortunately, neither the Keynesian/Monetarists nor the pure Monetarists have any record of macroeconomic predictive success. Neither branch would have predicted the severity of the current crisis, and the Keynesian/Monetarists would have thought it utterly impossible. Further, Keynesian (and arguably some measure of Monetarist) "solutions" to the Great Depression were not successful, in terms of measurable macroeconomic effects.
Finally, it should be noted that there is much argument in serious economics circles about whether the Great Depression could have been avoided. The Keynesians are not serious participants, as it was Keynesian policies that were tried and unambiguously failed during the Depression. However, the Monetarists (notably current Fed Chairman Ben Bernanke in this PhD Thesis) argue that massive monetary expansion could have turned the Depression into a mere severe recession. The Austrians say that is rubbish, and that massive monetary expansion would have only aggravated the situation by causing hyperinflation, to go along with the economic contraction.
The current solution being attempted by the Government is a combination of Keynesian and Monetarist solutions. For us economics buffs, it will be interesting to see whether the Austrians or the Monetarists are right. Just a very bad recession, or a hyperinflationary depression? Oh well, at least its good to live in interesting times.
The two most credible strains of economics are the Monetarists and those of the Austrian School. Keynesians represent a third school.
Monetarist theory is associated with Milton Friedman and current Fed Chairman Ben Bernanke, among others. No politicians, to my knowledge, are associated with Monetarist theory.
The Austrian School is associated with economists Fredrick Hayek, Ludwig Von Meise, and Murray Rothbard, and politician Ron Paul, among others.
The work of both the Monetarists and the Austrians are clear expansions on the work of Adam Smith ("The Wealth Of Nations", well accepted arguments in favor of free trade and free association, and of the free market mechanisms that create wealth), and have few contradictions with it.
The Keynesians are associated with John Maynard Keynes, and by implication, Carl Marx and his contemporaries. The Keynesians would claim linage to Adam Smith, but their theories are inherently inconsistent with much of Smith's work, and directly contradict the theories of the Monetarists and the Austrians.
It should be noted that no respectable economist is now a pure Monetarist or Austrian. They are two competing theories that have many of the same underlying principles, and differ mainly on whether monetary policy can be used constructively. The Federal Reserve is a tool of Monetarism, and the Fed Chairman has no choice, under law, but to act like a Monetarist, attempting to use the printing of money promote economic growth.
It should also be noted that the current system, put in place by the government, is an attempt to use the (most controversial) aspect of Monetarism that theorizes that monetary policy can be used as a productive economic tool, in conjunction with Keynesian economic planning. This is somewhat ironic, in that any serious Monetarist will reject Keynesian planning in virtually any form. This is, in practice, why Federal Reserve Officials are constantly advising Congress to reduce government interventions, warning that there is only so much they can do to support the economy.
All current elected leaders (other than Ron Paul) subscribe to the Keynesian/Monetarist hybrid philosophy, whether they know it or not. (Pure Keynesians are extinct in serious economics circles).
So how would members of the various schools view the current financial crisis?
The Keynesian/Monetarists:
The Cause: It is a Keynesian style economic "planning" effort that the United States has employed since the beginning of the 20th Century. One would expect that they would attempt to explain the current crisis in terms of fixable shortcomings an otherwise good "plan" to improve on the free market's allocation of housing, as well as more Marxist explanations related to the greed of capitalists. This is exactly what we are seeing in the news. They assert that the aspect of the "plan" now causing trouble, i.e. an artificially high rate of housing development, followed by the bursting bubble, is only causing trouble due to a lack of proper regulations, and the resulting ability of greedy businessmen to run amok. (The relevant policies related to this part of the Keynsian "plan" include the home mortgage deduction, various direct subsidies for housing including the FHA and HUD, the creation of subsidized and government guaranteed mortgage insurance with Fannie Mae and Freddy Mac, and various "civil rights" type laws requiring banks to provide loans in poor areas such as the Community Reinvestment Act, along with the Federal Reserve policy of keeping interest rates artificially low).
The Solution: Fix the plan by outlawing certain behaviors that are incentivized under the structure created by the plan (such as uncreditworthy people buying houses, and investors taking high levels of financial risk). Massive government spending financed by printing money, and lower interest rates (more printing money) will create jobs and save the economy.
The Monetarists:
The Cause: The pure Monetarists believe that the problem was cause by a fundamentally flawed "plan," which would describe virtually any economic plan conceived by government. Their theories dictate that the unavoidable misallocation of resources caused by any large scale government planning effort would, as a mathematical certainty, eventually result in a major economic contraction. The plan, they would argue, turned the irresistible forces of economics toward a bad result. They would point out that the plan created an underlying structure in which people and lenders had a strong incentive to act just as they have acted. They would argue that more regulation (i.e. a less bad plan with more laws making it difficult or inconvenient for people to act in accordance with their structural incentives) could have slowed the progression of the unavoidable adverse economic effects of the plan, making them better able to mitigate the damage through activist monetary policy.
The Solution: Drastically alter the plan to slow the progress of it damaging effects. Better yet, eliminate government intervention in the economy completely. The resulting economic downturn can, to at least some degree, be mitigated by massive monetary expansion. Printing money and giving it to banks, and low interest rates.
The Austrians:
The Cause: The Austrians believe, like the Monetarists, that the problem was cause by a fundamentally flawed plan. But they would focus on the activities of the Federal Reserve, and would assert that excess money creation, artificially cheap credit (i.e. the primary tool of the Monetarists), would alone have caused the problem, regardless of the so-called "quality" of the plan. The combination of the flawed Keynesian plan and the flawed Monetarist monetary policy is the worst of all possible worlds.
The Solution: There is no solution. We are in for a major economic contraction. The more the government does to try to stop it, the deeper and longer it will be. If the government again attempts to use monetary policy to "bubble" our way out of economic trouble, it will either fail, leading to the immediate downfall of our society, or, if successful, create a bigger bubble which will cause a far more severe crash in the near future, one from which there will be no escape. The Austrians would state that the best option is to reform the monetary system, creating "sound money" and stopping the government from printing money, which will cause a very severe, but relatively short-lived (say 3-7 years), economic contraction, after which sustainable economic progress could resume. It would also be best to abandon the Keynesian plan in its entirety immediately. However, if Keynesian planning continued under a "real" money system, the damaging economic effects of the plan would be impossible to conceal.
It is an unfortunate fact that the Austrians are the only branch with any success in predicting macroeconomic trends. In early 1929, both Hayek and Von Meise predicted the then-coming depression. More recent Austrians predicted both the Internet Bubble and the current Housing Bubble. They have been warning of the current financial crisis. The Austrians also predict that, prior to the ultimate disintegration of our society, great institutions of the Keynesian system, thought invulnerable, will crumble spectacularly, like pillars of sand. That is one reason why the recent fall of all five venerable investment banks on Wall Street and the largest insurance company in the world are very concerning events to students of economics: They are late-stage predictions of the Austrians, events that occur shortly before a "death spiral".
It is worth noting that the increasing frequency with which the predictions of the Austrians were coming to pass was a central theme of Ron Paul's presidential campaign.
The Keynesian/Monetarists and the Monetarists would predict that we are in for a mere recession. Unfortunately, neither the Keynesian/Monetarists nor the pure Monetarists have any record of macroeconomic predictive success. Neither branch would have predicted the severity of the current crisis, and the Keynesian/Monetarists would have thought it utterly impossible. Further, Keynesian (and arguably some measure of Monetarist) "solutions" to the Great Depression were not successful, in terms of measurable macroeconomic effects.
Finally, it should be noted that there is much argument in serious economics circles about whether the Great Depression could have been avoided. The Keynesians are not serious participants, as it was Keynesian policies that were tried and unambiguously failed during the Depression. However, the Monetarists (notably current Fed Chairman Ben Bernanke in this PhD Thesis) argue that massive monetary expansion could have turned the Depression into a mere severe recession. The Austrians say that is rubbish, and that massive monetary expansion would have only aggravated the situation by causing hyperinflation, to go along with the economic contraction.
The current solution being attempted by the Government is a combination of Keynesian and Monetarist solutions. For us economics buffs, it will be interesting to see whether the Austrians or the Monetarists are right. Just a very bad recession, or a hyperinflationary depression? Oh well, at least its good to live in interesting times.
Friday, September 26, 2008
The Bailout
The Actual Truth About The Bailout: The basic purpose of the bailout is to allow banks to sell their toxic assets, mostly mortgage backed securities, for more than they are worth. I.e., to give free money to banks and financial companies.
The reason cited is that banks with lots of these assets cannot borrow money from each other, because one bank will not lend to another bank if the other bank has a bunch of toxic assets. This is because they don't know if that bank, the borrowing bank, will suddenly declare bankruptcy, wiping out the loan. The Bailout Plan will buy those assets. Thus, the banks will not have those toxic assets, and they will be willing to lend to each other again. This, in turn, is important, because banks usually have lots of their assets tied up in illiquid things, like business loans, so they need to be able to borrow cash when, for example, a bunch of people withdraw their money.
The bailout plan is not necessary because for several reasons.
First, most banks are not in trouble. They did not make the large returns that the now toxic bonds paid. They were conservative. There are enough banks to provide all the credit our economy needs. It should be noted that none of the major financial conglomerates are in trouble, e.g. BofA, Wells Fargo, JP Morgan.
The bailout is for $700 billion (it will ultimately be at least twice, maybe ten times that much). The argument is that only the government can come up with that much money. That is a specious argument. This $700 billion is not just one chunk of money, but a whole bunch of small chunks. The private market will provide capital to save the banks that can and should be saved. Private capital has already saved Morgan Stanly, Goldman Sachs, and saved the depositors of Washington Mutual. Without the bailout, the worst managed banks and financial companies, those that cannot raise capital, will fail. And guess what? They should fail
The only things the bailout accomplishes are(1) saving a group of recklessly managed banks and financial companies that made exorbitant profits for years by investing in risky securities, and (2) giving free money to strong banks, that don't really need it, but will happily take free money.
The overall effect of the bailout will be negative for Main Street. The positive effects of the $700 billion of printed money pumped into the banks will be more than offset by the negative effects of a declining dollar, increased inflation, and the structural effects of keeping all of the bad financial institutions in business.
And, of course, can there be any doubt that there will be wholesale corruption? This $700 billion is likely to be little more than a piggy bank for the administration and its friends. Do you think a bank with shareholders that are enemies of the administration will be getting loans? Fat chance. So the other result will be that the Administration will be able to give its friends a huge business advantage over its enemies.
Frankly, we'd be better off funding increased amounts of insurance deposits (the FDIC) to make sure that depositors don't lose their money, (even over $100,000). That would prevent bank runs.
Then, the government could handle crisis individually, as they come up. But it the private market will not come in to save an institution, there is no conceivable reason that the government should.
The reason cited is that banks with lots of these assets cannot borrow money from each other, because one bank will not lend to another bank if the other bank has a bunch of toxic assets. This is because they don't know if that bank, the borrowing bank, will suddenly declare bankruptcy, wiping out the loan. The Bailout Plan will buy those assets. Thus, the banks will not have those toxic assets, and they will be willing to lend to each other again. This, in turn, is important, because banks usually have lots of their assets tied up in illiquid things, like business loans, so they need to be able to borrow cash when, for example, a bunch of people withdraw their money.
The bailout plan is not necessary because for several reasons.
First, most banks are not in trouble. They did not make the large returns that the now toxic bonds paid. They were conservative. There are enough banks to provide all the credit our economy needs. It should be noted that none of the major financial conglomerates are in trouble, e.g. BofA, Wells Fargo, JP Morgan.
The bailout is for $700 billion (it will ultimately be at least twice, maybe ten times that much). The argument is that only the government can come up with that much money. That is a specious argument. This $700 billion is not just one chunk of money, but a whole bunch of small chunks. The private market will provide capital to save the banks that can and should be saved. Private capital has already saved Morgan Stanly, Goldman Sachs, and saved the depositors of Washington Mutual. Without the bailout, the worst managed banks and financial companies, those that cannot raise capital, will fail. And guess what? They should fail
The only things the bailout accomplishes are(1) saving a group of recklessly managed banks and financial companies that made exorbitant profits for years by investing in risky securities, and (2) giving free money to strong banks, that don't really need it, but will happily take free money.
The overall effect of the bailout will be negative for Main Street. The positive effects of the $700 billion of printed money pumped into the banks will be more than offset by the negative effects of a declining dollar, increased inflation, and the structural effects of keeping all of the bad financial institutions in business.
And, of course, can there be any doubt that there will be wholesale corruption? This $700 billion is likely to be little more than a piggy bank for the administration and its friends. Do you think a bank with shareholders that are enemies of the administration will be getting loans? Fat chance. So the other result will be that the Administration will be able to give its friends a huge business advantage over its enemies.
Frankly, we'd be better off funding increased amounts of insurance deposits (the FDIC) to make sure that depositors don't lose their money, (even over $100,000). That would prevent bank runs.
Then, the government could handle crisis individually, as they come up. But it the private market will not come in to save an institution, there is no conceivable reason that the government should.
Monday, September 22, 2008
Sunday, January 20, 2008
Sacramento Bee Response
One Kevin Yamamura wrote this article in the Sacramento Bee about Ron Paul. I sent him this email response:
Why do you insist on misrepresenting Paul's positions?He does not advocate a "return to the gold standard." I doubt you have any understanding whatsoever of monetary policy, so to even address this subject is irresponsible. However, I'm sure you know that saying somebody advocates "a return to the gold standard" makes them sound crazy, like saying he believes in UFOs (same with calling them an "isolationist", see below).At any rate, Paul advocates legalizing transactions in instruments other than federal reserve notes. Such transactions are currently illegal. If I want to pay you for your services in gold or stock or bonds, we both go to prison (unless we comply with IRS regulations and pay lots of taxes on the transaction). The reason he advocates this is because printing money causes asset bubbles and inflation."Isolationist beliefs?" Why not just call him a "child molester"? It would be just as accurate.And why do we get so angry? Because we are trying to save our country from becoming a third-world slum. This isn't "feel good" politics. We are running out of time. The regulatory/socialist state has run up at least $60 Trillion in debt and unfunded liabilities, at the Federal level alone. That is more than $500,000 for an average American family. That is a CURRENT LIABILITY. That's not: we need to pay $500,000 over the next 50 years. That's: each family would need to come up with $500,000 NOW and put it in an interest bearing account to have enough to pay the debt and unfunded liabilities that are about to start coming due. If that sounds unlikely to you, I'd ask you to do some research. Try googling statements by the Comptroller of the Currency of the United States.Ever ask yourself why your readers are generally totally oblivious to this most important of facts?The only, ONLY solution is to stop this disasterous experiment NOW, and return to a free society. That's not my opinion, that the opinion of lots of Nobel Lauriets.I have a three year old kid who is going to be inheriting a society in collapse, and I'm not happy about it.Do you know what happened after the Collapse of the Roman Empire? Look into it. Hint: Try wikipedia on "Dark Ages."If you don't want to help us, at least don't misrepresent our positions, please.
Friday, December 28, 2007
The Case For A Third Party Ron Paul Run
The bloggosphere, and now the major media, is awash with discussion about the ramifications of a third party Presidential bid by Ron Paul.
Mr. Paul, a ten-term congressman from Texas, is currently competing in the primaries, seeking the spot as the Republican nominee for President. Despite the astounding level of support that has spontaneously coalesced around him, it remains difficult to imagine that he could actually win the Republican nomination. The reasons underlying this unfortunate prediction have little to do with Dr. Paul, and everything to do with Republican primary voters.
Dr. Paul's positions are based entirely on economics, the lessons to be gleaned through an objective and deep understanding of world and American history, and compelling logic and moral-based political philosophies. Republican voters do tend to have some understanding of economics (at least the economics of the business many of them run, and home economics). This leads to their generally low-tax sentiment. However, they tend to have trouble with logic (they are mostly religious, and religion requires a disciplined, global rejection of logic) and don't do much reading. Their knowledge of political philosophies consists entirely of their preachers' teachings from the Bible. They watch lots of TV. If they home-school their kids, its not to provide a superior classical education, but to indoctrinate them into Biblical notions of creationism and such. They couldn't tell you how Social Security works, let alone explain the convoluted fiat money creation process practiced by the Federal Reserve. They are, by and large, extremely conventional, ignorant, uneducated, and stubbornly unwilling to give-up any of these traits.
This general disposition leads them to be susceptible to a hair-trigger rejection of Ron Paul based on Dr. Paul's desire to send many of their Sacred Cows off to slaughter. For example, they teach their kids that the Civil War was unambiguously good, an indisputable example of America's transcendent goodness. To them, Abe Lincoln is a virtual deity, who only wanted to end slavery. That is, of course, absurd. When Dr. Paul pointed out that the Civil War was likely unnecessary (See Recent Meet The Press Interview), he surely and irrevocably lost a large percentage of the Republican electorate (though most were already Romney, Giuliani, or Huckabee supporters anyway).
Likewise, Republicans tend to believe that an aggressive foreign policy is not only preferable to a non-interventionist one, but the only imaginable course. This is because they believe in the notion that Islamic terrorists could actually take over America or do us significant harm, if we don't maintain a Cold War size military and attack any Islamic country that looks at us wrong. (Could Al Queda, its entire membership massed and armed, even take over Bakersfield from the local population of hicks with their deer rifles? I doubt it.) Dr. Paul's desire to bring our boys (and girls) home seems to them unthinkable, the equivalent of pulling your NASCAR out of the race a few laps early when a thorough ass-kicking victory is all but assured.
These observations constitute the first leg of the three-legged stool that supports the notion that Paul should undertake a third-party run: He cannot be the Republican nominee.
The second leg is based on the notion that Mr. Paul's cause, i.e. rationalism, good economic and monetary policy, non-intervention, free markets, can only be advanced by educating the public at large. The concepts underlying economics often involve multi-step logic, a stark contrast to socialist ideas. Republican and Democrat regulatory-socialists have two step logic. Here is an example: Poverty is bad. Therefore, government must take money from people to give to poor people. As you'll notice, there no serious logic connecting those two propositions. Although the premise is acceptable, the immediate conclusion that government must confiscate money from people is essentially plucked out of the air. Any serious non-biased economist will tell you that this conclusion does not fare well under serious scrutiny, mainly because of the unintended consequences of providing welfare, such as incentivising poverty and fatherless households, which in turn leads to other bad outcomes like drug addiction, with the whole mess regenerating in a generational cycle.
Another example would be Social Security: It's nice for people to have a minimum level of retirement security, therefore the government should confiscate people's money and put it in a retirement fund for each worker. Again, this common wisdom is flawed on several levels. First, there is simply no reason to believe that people would not save for their retirement if left alone. Indeed, Milton Freedman won a Nobel Prize in Economics for proving that they will. Of course, a few will not manage to save enough to survive, but that number would be so small that family, friends, charity or at worst a minimal welfare program could care for them. This is hardly a justification for a full scale compulsory government retirement system. And of course, the government does not "save" the confiscated money, but simply spends it and writes itself I.O.U.s. It's like me spending all my savings, and then when someone asks me how much I have saved, saying "I've got $100,000 in assets, all of it I.O.U.'s to myself!"
Understanding these and most other concepts underlying Paul's libertarian philosophy requires people to have a certain level of knowledge, and to apply that knowledge logically. In short, a high-profile third party run would provide a singular opportunity to begin to educate the public about why libertarian social policy is good economics and good philosophy, and why the socialist/regulatory/populist line is bunk.
Third, and by far most importantly, a third party run by Paul could cause the Republicans to lose. The Republican party was, at one time, a party of vigorous debate, where market economics, protection of civil liberties, and non-interventionist foreign policy concepts were accepted and supported by a strong wing of the party (See Taft and Goldwater). The coming of LBJ and the "Great Society" signaled the demise of this wing of the Republican Party which, although it resurfaced for a somewhat pathetic last gulp of air under Ronald Regan, has now all but disappeared.
Ron Paul has the potential to lead us in establishing once and for all that there are enough of us libertarians to make or break the Republican Party. There is only one way to do it: Make them lose, and lose bad. A devastating loss would, with absolute certainty, force them to adopt our principles and put forth candidates that actually supported them. Why? Because the Republican electoral strategy consists of attracting votes from three main constituencies: Christian whack-jobs, aggressive war mongers, and us libertarians. But the Republicans get the Christian vote simply by acting like they are opposed to abortion. The Christians have nowhere else to go. The aggressive war mongers will, likewise, have nowhere else to go.
At this point, you might be thinking: "Well, we don't have anywhere else to go either." I should thus amend my previous comments to state that any of these groups could theoretically vote for a third-party candidate and get their way too. But they are too stupid to do it. They are told by the television that "Voting for a third party is throwing away your vote." And they believe! The war mongers are just as stupid.
But let's face it: Us libertarians are about ten million times smarter than these other groups, and we know that the "don't throw away your vote" line is a cynical lie. Indeed, it has been clearly established by people who establish such things for a living that, by far, the most powerful vote you can cast is vote for a third party candidate that supports your views.
Ron Paul may not have a chance to win the presidency running as a third party standard bearer. But by simply running, and shaking the establishment to its foundations in the process, he would probably end up effecting the domestic and especially foreign policies of the United States more profoundly than any President in recent history. And who knows? He could just win it.
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The American Revolution represented the expulsion of religion from government.
So, those who had forever held power on the basis of divine right needed a new religion that would avoid the new rules.
The answer: Socialism. The priests of social engineering.
Their proposition: We will give you Heaven on Earth. You need need only give us control of your government.
Our only defense to this attack was reason.
So they perpetrated the lie that social engineering is something that can be accomplished by the ignorant through the whims of the heart. Reason is not relevant in matters of social engineering, they said. They told you that your opinion is what really matters, your innate spiritual sense of right and wrong, and you believed it. They told you that those greatest of economic minds, Hayek, Von Meise, Friedman, Smith, were false prophets. Their mathematics were false. Their empirical data corrupted. The engineers were the priests, and the priests the engineers.
They told you to just do what feels good. Just believe. They said: "Know that if we are your rulers, you are righteous, moral, true, good. But if we are not your rulers, you prove yourself greedy, base, inhuman."
So I ask you, if you have persuasive counterarguments against the great libertarian economists (most are Nobel laureates), why have you not yet received prizes and accolades recognizing your transcendent insights?
If you have discovered the secret of centrally planned social engineering that will not lead to civilizational collapse, as the true economists all predict (their predications are coming to pass as I write), publish it. You'll be the most famous economist in human history.
The answer is that you are the worst kind of fools. You are the modern day armies of inquisition. You have brought our society to the edge of the abyss by your determination to impose your religion on society by force. You are no different than all the tyrants, and their ignorant minions, before you.
Obama is the Great Prophet of the Socialists, though he cannot call himself this. The great Priest of Social Engineering. His blank-eyed minions, entranced baying mobs, worship every word he utters.
We are doomed.
(By the way, McCain is merely a lesser priest of the same sect. Ron Paul was our last hope, and, though unable to defeat his arguments, you rejected him and the great economists whose views he advanced, as would an Evangelical an atheist).