Mises Institute

Rather than give the people a voice, democracy allows for the choking of life by men and women of state authority.  When Occupy protestors were chanting “this is what democracy looks like” last fall, they wrongly saw the power of government as the best means to alleviate poverty.  What modern day democracy really looks like is endless bailouts, special privileges, and imperial warfare all paid for on the back of the common man. None of this is to suggest that a transition to real democracy is the answer.  The popular adage of democracy being “two wolves and lamb voting on what’s for lunch” is undeniably accurate.  A system where one group of people can vote its hands into another’s pockets is not economically sustainable.  Democracy’s pitting of individuals against each other leads to moral degeneration and impairs capital accumulation.  It is no panacea for the rottenness that follows from centers of power.  True human liberty with respect to property rights is the only foundation from which civilization can grow and thrive.

John Tamny of Forbes is one of the more informed contributors in the increasingly dismal state of economic commentating.  Tamny readily admits he is on the libertarian side of things and doesn’t give into the money-making game of carrying the flag for a favored political party under the guise of a neutral observer.  He condemns the whole of the Washington establishment for our current economic woes and realizes that government spending is wasteful in the sense that it is outside the sphere of profit and loss consideration.  In short, Tamny’s column for both Forbes and RealClearMarkets.com are a breath of fresh air in the stale rottenness of mainstream economic analysis. Much to this author’s dismay however, Tamny has written a piece that denies one of the key functions through which central banks facilitate the creation of money.  In doing so, he lets banks off the hook for what really can be classified as counterfeiting.  In a recent Forbes column entitled “Ron Paul, Fractional Reserve Banking, and the Money Multiplier Myth,” Tamny attempts to bust what he calls the myth that fractional reserve banking allows for the creation of money through credit lending.  According to him, it is an extreme exaggeration to say money is created “out of thin air” by fractional reserve banks as Murray Rothbard alleged.  This is a truly outrageous claim that finds itself wrong not just in theory but also in plain evidence.  Not only does fractional reserve banking play a crucial role in inflationary credit expansion, it borders on being outright fraudulent.

The unconscionable behavior of the political class should be thought of as a contagious disease that infiltrates any industry that comes within influence of the state.  Government contractors, lobbying associations, favored corporations, and even the press all seek to use the monopolized power of government to further their own interests.  Instead of attempting to roll back stifling regulations, many of these firms simply wish to get in on the spoils of the great extortionary scheme.  The results are always the same.  Politicians pretend to be saving the people from cold-natured capitalism while politically-connected businessmen and bankers act as if their commercial success is completely of their own doing.  The hidden truth is both act in tandem to fleece the average taxpayer.

In a recent BBC News article, philosopher John Gray asks the quaint but otherwise vain question of what would John Maynard Keynes do in today’s economic slump.  We call the question vain because practically every Western government has followed Keynes’ prescribed remedy for the so-called Great Recession.  Following the financial crisis of 2008, governments around the world engaged in deficit spending while central banks pushed interest rates to unprecedented lows.  Nearly four years later, unemployment remains stubbornly high in most major countries. Even now in the face of the come-down that inevitably follows any stimulus-induced feelings of euphoria, certain central banks have taken to further monetary easing. The question of interest shouldn’t be “what would Keynes do” but rather “why even listen to someone so pompous and nihilistic to begin with?”  Just as Keynes missed the Great Depression, modern day Keynesians missed the housing bubble and financial crash.  From his contempt for moral principles to his enthusiastic support for eugenics, Keynes saw the world as something separate from the bubble of his fellow elitists. Outside of that we guess he was a great guy!

It’s tough to do just about anything today without experiencing the far-reaching hand of the growing regulatory state.  Virtually everything the average shopper see on the store shelf is stamped with government approval.  With the increasing use of red light safety cameras and even domestic surveillance drones, the dystopian world which George Orwell painted so brilliantly in 1984 is sounding more prophetic by the day.  The result is a new generation that is coming of age amongst a pervasive and all-inclusive nanny state.  With a federal register that grows by tens of thousands of pages each year, tyranny is spewing forth across America from Leviathan’s home of Washington D.C. every single day. In a free society, it would be unjust to force some into paying for the constant supervision of those less cautious of life’s risks.  Just as a child learns to avoid a hot stove by painfully touching it, we all learn through misfortune.  The Jersey Shore drownings, tragic as they are, should serve as a lesson all beach visitors.  Common sense isn’t something to be legislated.  It can only form when the right incentives are involved for people to make smart decisions without relying on a central source of authority.  And just like the free market, common sense is also a product of spontaneous order.

During an economic boom, exuberance finds itself lodged in all types of industries.  When profits soar, so does the public’s disregard for prudence.  And as tax revenues rise, politicians can’t help but give in to their bread and butter of buying votes.  In the case of a credit-expansion boom fueled primarily by fractional reserve banking and interest rate manipulation through a central bank, the boom conditions are destined toward bust.  Liquidation then becomes necessary as the bust gets underway and malinvestments come to light. What the city of Scranton has in common with San Bernardino, Detroit, et al. is that its dire fiscal condition is due to one thing and one thing only: benefits promised to unionized workers, and, it appears, "the salad days of the government employee are coming to an end, as they have already in Greece, Italy and Spain." To those sick and tired of the tax-eater mentality that is destroying the very core of society’s productive capacity and moral base, those days can’t come soon enough.

In lieu of the election of Socialist President Francois Hollande and a Socialist Party collision as the majority in France’s Parliament, the New York Times recently asked “what does it mean to be a Socialist these days, anyway?”   According to The Grey Lady, socialism today is “certainly nothing radical” and simply meant the “the emancipation of the working class and its transformation into the middle class” during its heyday.  Essentially the article categorizes the contemporary socialist as one who is a rigorous defender of the welfare state.  The piece quotes French journalist Bernard-Henri Levy as saying “European socialists are essentially like American Democrats.”  It even accuses center-right political parties in the West of being quite comfortable with socialism’s accomplishments. So is the New York Times correct?  Is socialism just a boogeyman evoked by the “fringes” to scare the public into questioning the morality and efficiency of the welfare state?

Josh Barro of Bloomberg has an interesting theory.  According to him, conservatives in modern day America have become so infatuated with the school of Austrian economics that they no longer listen to reason.  It is because of this diehard obsession that they reject all empirical evidence and refuse to change their favorable views of laissez faire capitalism following the financial crisis.  Basically, because the conservative movement is so smitten with the works of Ludwig von Mises and F.A. Hayek, they see no need to pose any intellectual challenge to the idea that the economy desperately needs to be guided along by an “always knows best” government; much like a parent to a child.  CNN and Newsweek contributor David Frum has jumped on board with Barro and levels the same critique of conservatives while complaining that not enough of them follow Milton Friedman anymore.

To put this as nicely as possible, Barro and Frum aren’t just incorrect; they have put their embarrassingly ignorant understandings of Austrian economics on full display for all to see.

Picture yourself walking into a department store to purchase some laundry detergent.  As you approach the aisle stocked full of brightly-labeled containers, you come face to face with a crucial decision.  Which detergent do you choose?  Do you go with the tried-and-trusted brand?  Do you save money with the generic variety?  What’s on sale?  What about the high-efficiency kind? The choice between something as inexpensive as laundry detergent seems trivial in a modern economy marked by mass production and the division of labor.  But the large selection of goods that consumers are faced with today is an incredible betterment relative to the past thousand years of human existence.  Indeed, the lives of even the most impoverished in Western economies far surpasses that of kings centuries ago. For all the condemnation it receives by those considered on the forefront of intellectual thought, capitalism is responsible for lifting mankind out of a dreary life of hand to mouth survival.  Economic freedom is ultimately to blame for the higher standard of living the West enjoys compared to the once Communist East.  Material prosperity is a phenomenon not brought to the world by governments but by entrepreneurial spirit.  The state just is a reactionary institution that derives its power from the gun it puts to the back of public’s head.  Those who succeed in the marketplace only do so by appealing to consumers.  Businessmen force no one to purchase their wares less they play footsie with the political class for special privilege.  The pursuit of profit is what drives competition and expanded choice.  Without it, societal progress stagnates as living standards lower.

I’ll be the first to admit the incredible aggravation I feel whenever liberty is trampled upon by the state’s obedient minions.  Everywhere you look, government has its gun cocked back and ready to fire at any deviation from its violently imposed rules of order.  A four year old can’t even open a lemonade stand without first bowing down and receiving a permit from bureaucrats obsessed with micromanaging private life.  The state’s stranglehold on freedom is as horrendous as it is disheartening. The worst part is that the trend shows no signs of slowing down, let alone reversing.  Politicians are always developing some harebrained scheme to mold society in such a way to circumvent the individual in favor of total dictation.  If it isn’t politicians, then it’s an army of unelected bureaucrats acting as mini-dictators.

I won a bet today.

A few weeks ago I wagered with a coworker that the United States Supreme Court would uphold the Affordable Care Act otherwise known as Obamacare.  He reasoned that the federal government has no authority under the Constitution to force an individual to purchase a product from a private company.  My reasoning was much simpler.  Because the Supreme Court is a functioning arm of the state, it will do nothing to stunt Leviathan’s growth.  The fact that the Court declared no federal law unconstitutional from 1937 to 1995—from the tail end of the New Deal through Lyndon Johnson’s Great Society—should have been proof enough.  He naively believed in the impartialness of politically-appointed judges.  For the first time he saw that those nine individuals are nothing more than politicians with an allegiance to state supremacy.

It was a tough but valuable lesson to learn.

Despite already being engaged in drone wars in Pakistan, Somalia, Yemen, and still occupying Afghanistan, the U.S. is being duped into yet another war based on shaky evidence and at the behest of deep-pocketed special interests.  This is coming even while a secretive cyber war already being waged to damage Iran’s nuclear capability.  According to the Pentagon, “computer sabotage coming from another country can constitute an act of war.”  Not only that, but the draconian sanctions thus far placed on Iran are doing enormous harm to the citizens who hardly have a say in what their government does.  The Belgium-based SWIFT payment system that facilitates most international payments has already denied service to many Iranian banks.  With the imposing of an oil embargo from the European Union just around the corner (July 1^st) that will all but make it impossible for oil tankers to be insured by Lloyd’s of London, an actual naval blockade is being floated by U.S. lawmakers.  Much like the Antebellum South and Japan, Iran too is being pushed into a corner.... Then and now, wealthy special interests are a driving force behind American imperialism.  Lies will be spun till they are seen as facts.  When the truth comes out, the irreparable damage will already be done.  Like anything the state lays its filthy hands on, war is a racket.  The beneficiaries of the ruling class’s gleeful foray into mass murder are few in number.  The masses, still brainwashed into feverish nationalism, end up paying the costs with their pilfered income, eroded liberty, and, ultimately, their own lives.

The word “privatization” is a loaded term these days.  Unions and big government worshippers scoff at the idea of any public services being in the hands of ruthless, greedy capitalists.  The left has the distorted view that people in the private sector are driven primarily by their desire to cut costs and throw workers out on the street.  To them, government workers are angels sent from heaven to do God’s work. In our world of unceasing centralization of power, lawmakers are finding more deceptive ways to mask their lust for dominance.  Public-private partnerships are the embodiment of what Mussolini dubbed “corporatism;” that is the “merger of state and corporate power.”  Under corporatism, the ruling class is able to expand unbeknownst to the Boobus Americanus and its equivalent in other countries.  The Average Joe still has his wallet forcefully stripped of its contents but now the state’s cronies get to partake in the plunder.  Meanwhile the same big businessmen who benefit from government privilege still maintain their praise for free markets while working with politicians to forcefully subdue their competition. There is actually another, more accurate term for public-private partnerships.  It’s called fascism; plain and simple.

Recently, there has been an intense debate in Europe on the TARGET2 system (Trans-European Automated Real-time Gross Settlement Express Transfer System 2), which is the joint gross clearing system of the eurozone the interpretation of this system and its balances has provoked divergent opinions. Some economists, most prominently Hans-Werner Sinn, have argued that TARGET2 amounts to a bailout system. Others have vehemently denied that. Philipp Bagus adresses the question of whether this 'mysterious' system, that we have been so vociferously discussing, simply amounts to an undercover bailout system for unsustainable living standards in the periphery? Concluding by comparing TARGET2, Eurobonds, and the ESM, he notes that all three 'devices' serve as a bailout system and form a tranfer union but governments prefer to hide the losses on taxpayers as long as possible and prefer the ECB to aliment deficits in the meantime.

Though the November election will be hyped as two opposites squaring off against each other, both candidates are considered rather moderate compared to who could have been the nominees.

The question is, are Barack Obama and Mitt Romney really that moderate?

Let’s account for the similarity in policy of both.