Some random thoughts

Ambition of central planners
I must admit, that despite being a libertarian, then I cannot help it but to admire those who preach big government with a great, central authority over almost every aspect of every individuals' life. I cannot imagine a more ambitions program than the program of central planning over society, be it via law and regulation, or direct force and coercion. A project doomed to fail, whether judged from reason or experience, but an ambitious one indeed!

The two groups of individuals
For me, people more or less divide into two groups (with a big gray area in between): Those who want the central government to thrive, and those who want individuals to thrive. What benefits one cause, damages the other. Its as simple as that.

Role of government, anybody?
Most people vote, or have an opinion on who should be voted, and who should not be. Depending on the choice of vote, most of us tend to categorize ourselves according to some party lines, willingly or not. For example, lets say I could vote in the USA, and voted for Republicans. Many would then call me a Republican, and hence assume I am for the war in Iraq, against homosexual marriages, for fiscal discipline in government finances, Christian, and so on. So those who vote Republican who started out voting because of one but not all of the issues will probably tend to agree with the other ones, and converge towards the "one and only" Republican party line.

But what if people did not know what the options were before going to the polls? That before voting, everyone had to draw up an independent picture of what he or she thinks the role of government, and its politicians, should be. How many of Obama votes would have then found themselves compatible with Obamas rhetoric when walking into the poll booth? Or John McCain's? Or Al Gore's? Because all of these gentlemen have preached to some extent, and then practiced in great extent, the consumption of the entire society by the State.

It seems that few people have actually sat down and thought for themselves what the government should do, and what it should refrain from doing. Does the State monopolize money because most people want to, or because no-one can think outside the box, or remember a 100 years back when no such entity as the Federal Reserve Fund existed?

I guess not

Debtors and creditors of the world

This is a very interesting website:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

It basically shows who are the debtors and creditors of the world. Now the creditors who have been supplying the USA with debt, used for consumption, will stop their lending, and spend on their own economies. More on this here (Peter Schiff is a genius).

The US dollar is the new toilet paper, aligning itself with the Zimbabwe dollar. The German style "careful" monetary policy of the European Central Bank will, despite the socialism of European politics, make Europe rise above the USA by many multiples as an economy.

Socialist swallowing of truth

Capitalism has been as unmistakable a success as socialism has been a failure. Here is the part that's hard to swallow. It has been the Friedmans, Hayeks, and von Miseses who have maintained that capitalism would flourish and that socialism would develop incurable ailments. All three have regarded capitalism as the 'natural' system of free men; all have maintained that left to its own devices capitalism would achieve material growth more successfully than any other system. From [my samplings] I draw the following discomforting generalization: The farther to the right one looks, the more prescient has been the historical foresight; the farther to the left, the less so.

More here. Yes, its probably difficult to swallow ones own words, but great men acknowledge their failures, and earn my respect by doing so.

Skattmann (Icelandic)

In 1989, Icelanders had a Leftist government. Now, after the collapse of the international financial system, more and more Icelanders are beginning to long for another one. This video should deter at least some of them, I hope.

Who was right and who was wrong?

Peter Schiff is probably the hardest working preacher of sound economics in todays media. So what does he have to say about the future of the dollar? Look no further: http://www.youtube.com/watch?v=S8HRRQ6JkCw

Air pollution - the libertarian remedy

The remedy against air pollution is therefore crystal clear, and it has nothing to do with multibillion-dollar palliative government programs at the expense of the taxpayers which do not even meet the real issue. The remedy is simply for the courts to return to their function of defending person and property rights against invasion, and therefore to enjoin anyone from injecting pollutants into the air.

Quote taken from For A New Liberty - The Libertarian Manifesto, Chapter 13. The greens and leftists have NO solutions to the problems of pollution. Libertarians, on the other hand, do.

Solution suggestion: Do nothing!

When it was realized that many paper bank notes were just that, their values began to collapse, many to zero (the same amount of gold you could get for it), and the money supply contracted at a ferocious rate. From the fall of 1818 to the beginning of 1819, demand liabilities at the central bank fell from $22 million to $12 million (Dupre 2006, p. 272) and the total money supply fell about 28% (Rothbard 2007, p. 89).

Insolvent banks and overextended debtors alike collapsed, while prices, no longer pumped up by the bubble, raced downward to their equilibrium. As the money supply cleansed itself of the bad apples, time and effort had to be paid so that the flow of funds could adjust back to their best uses, following prices as their guideposts. It was a massive, countrywide downturn, and introduced a slowly industrializing America to a new experience — mass unemployment.

Compared to now however, the state and federal politicians did basically nothing to "help" the economy recover from the Panic of 1819, yet by 1821 the economy had begun to get back on its feet, which must seem a stunning outcome to anyone burdened with a degree in economics.

The quote above is taken from this article about the recession in USA in 1819. The political policy measures taken in this recession compared to the "action filled" recessions of 1929 and today's recession give a very strong indication of what politicians should do today to get us out of the recession: Nothing.

Well, repeal some laws, e.g. tender laws, but basically whatever it takes to fiddle as little as possible with the economy. A lesson that points the way forward? Yes. Lesson learned? No.

There Will Be (Hyper)Inflation

Commercial banks can be expected to put their excess reserves to use, because base-money balances do not yield any interest: banks need to generate income to be in a position to pay interest on their liabilities (demand, time and savings deposits, and debentures).

Extending loans is one option. However, in an economic environment of financially overstretched borrowers, banks might be hesitant to increase their loan exposure vis-à-vis households and firms. In fact, it might be increasingly difficult for banks to do so given that equity capital has become increasingly scarce and costly.

So commercial banks may wish to monetize government debt, as the latter does not require putting equity capital to use. The government then spends the additionally created money stock on politically expedient projects (unemployment benefits, infrastructure, defense, etc.), and the money stock in the hands of households and firms rises.

If, however, commercial banks decide to refrain from additional lending, and even call in loans falling due, the government may decide — as another drastic, but logically consequential step of interventionism — to nationalize the banking industry (or at least a great part of it). By doing so, it can make the banks increase the credit and money supply.

Alternatively, the central bank could print additional money, distributing it to households and firms as a transfer payment.

I can not recommend this article strong enough. It is a must read in today's monetary climate.

Condemned monetary policies practiced in Western Europe?

The following is from a statement from the The Reserve Bank of... (name of country follows quote)

As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests. That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide. Yet there are telling examples of the path we have...For instance, when the USA economy was recently confronted by the devastating effects of Hurricanes Katrina and Rita, as well as the Iraq war, their Central Bank stepped in and injected life-boat schemes in the form of billions of dollars that were printed and pumped into the American economy.

..Zimbabwe! Source.

At least now we know where the modern day, Western monetary policies are coming from, right?

Words of warning (from 2005)

So in conclusion, while we can be fairly optimistic about the US economy in the short run because of the likely boom in business investments and in the long run because of its still comparatively market-oriented economic structure, the imbalances created by the Fed's cheap money policies make a sharp recession likely in the medium-term outlook. However, if this likely sharp recession will induce an extremely destructive response in the form of protectionism, higher taxes and spending, or high inflation it could make the long-term outlook more pessimistic. (#)

So, what's it gonna be?

Written in 2004 (by an Austrian, of course)

"[Asian central banks] increasing purchases of U.S. assets make them increasingly vulnerable to heavy losses if the dollar falls, but the increasing U.S. current account deficit forces them to increase their purchases to prevent their currencies from rising. The longer this unsustainable process is allowed to continue the heavier losses that will be inflicted on both sides."
- America's Unsustainable Boom

More here. I love Austrian economics. I wish more journalists and pundits would do the same.

What Has Government Done to Our Money?

It appears that the latest (of many, historically recent) shock in the international finance market comes as a huge surprise to most people. Some are even talking about a "market failure" and/or a "flaws in capitalism".

I understand statements like these. I understand them because I know where they come from and what their basis is. They come from populist preachers of faulty economics.

So how should one understand the latest (of many) crisis in the world's financial markets? The answer is here. Written in 1980 (as fourth edition of the publication, so the text is considerable older), was the following:

Until and unless we return to the classical gold standard at a realistic gold price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rate,s with each system posing unsolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of dollars and hence of American prices which show no sign of abating. The prospect for the future is accelerating and eventually runaway inflation at home, accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as gold, and by removing government totally from the monetary scene.

I dare anyone to say that this prognosis hasn't come true. History and sound economics will quickly kick such a denial to the ground. Do you dare?

The Case for Radical Idealism

If libertarians refuse to hold aloft the banner of the pure principle, of the ultimate goal, who will? The answer is no one, hence another major source of defection from the ranks in recent years has been the erroneous path of opportunism.

The Case for Radical Idealism, by Murray N. Rothbard

We are deceived by money - by Socialists!

Says Bastiat:

We are deceived by money. To demand the cooperation of all the citizens in a common work, in the form of money, is in reality to demand a concurrence in kind; for every one procures, by his own labour, the sum to which he is taxed. Now, if all the citizens were to be called together, and made to execute, in conjunction, a work useful to all, this would be easily understood; their reward would be found in the results of the work itself.

But after having called them together, if you force them to make roads which no one will pass through, palaces which no one will inhabit, and this under the pretext of finding them work, it would be absurd, and they would have a right to argue, "With this labour we have nothing to do; we prefer working on our own account."

A proceeding which consists in making the citizens cooperate in giving money but not labour, does not, in any way, alter the general results. The only thing is, that the loss would react upon all parties. By the former, those whom the State employs, escape their part of the loss, by adding it to that which their fellow-citizens have already suffered.

Copenhagen's Secret Service

Those who use Copenhagen's metro service these days (or go to the movies in Denmark) cannot avoid seeing a ridiciouls advertisement clip that Copenhagen municipality is wasting my tax-receipts on. A serious man knocks on a door of a surprised citizen, who is told how many pizza boxes and plastic glasses he has thrown on the streets for his entire life. The point? To make people feel bad about the city of Copenhagen FAILING to clean the streets of this filthy city. Yes, make people feel bad because a government spy has been accumulating information about everyday behaviour. Yuk!

The Case for Liberty

Economic science, in short, establishes existential laws, of the type: if A, then B. Mises demonstrates that this science asserts that laissez-faire policy leads to peace and higher standards of living for all, while statism leads to conflict and lower living standards. Then, Mises as a citizen chooses laissez-faire liberalism because he is interested in achieving these ends. The only sense in which Mises considers liberalism as “scientific” is to the extent that people unite on the goal of abundance and mutual benefit. Perhaps Mises is overly sanguine in judging the extent of such unity, but he never links the valuational and the scientific: when he says that a price control is “bad” he means bad not from his point of view as an economist, but from the point of view of those in society who desire abundance. Those who choose contrasting goals--who favor price controls, for example, as a route to bureaucratic power over their fellow men, or who, through envy, judge social equality as more worthwhile than general abundance or liberty--would certainly not accept liberalism, and Mises would certainly never say that economic science proves them wrong. He never goes beyond saying that economics furnishes men with the knowledge of the consequences of various political actions; and that it is the citizen’s province, knowing these consequences, to choose his political course.

From Rothbard's In Defense of "Extreme Apriorism". Beautiful!

Blame Governments, Not Speculators for High Oil Price

This is why.

If I DON'T brake the law, do I become a moral person?

Many (false) arguments have been used to justify 'tax', i.e. the power of the State to forcefully demand a certain part of the individuals' property (for whatever reason). One of the most common arguments for taxation in the so-called "welfare" societies is the "distribution of the common burdens" of society, most notable the funding of the "rich" of education, health care and support for the poor so that a certain "equality" in lifestyles can be obtained. By soaking the rich, it can be guaranteed that "equal access" is to education´and health care and that everyone is insured a certain minimum income.

Fair enough I say. This attempt to obtain "equality" is a goal in itself, and those who rule the State can choose this goal or any other and wield the State to reach it. Hitler used the State to enslave and slaughter millions of people. The Social democrats use the State to soak the rich and distribute their property to other groups in society. Both goals are in themselves only different in their type of violation of individual rights - one takes the life of individuals away from them, the other robs individuals of their property.

The problem with these promoters of State-enforced equality is their self-declared moral stance. They claim that they are using the State to reach a moral goal - equality of income and "opportunities". The Social democrats would never accept my definition of them as violators of individual rights, different only from Hitler in the kind of violation they engage in with the use of the State. No, the Social democrats will say that tax is a necessary good (or evil) to obtain a moral goal, and it is therefore justifiable.

But now for the tricky part. Lets say that equality really is a moral goal. How is it moral to obtain it with force? If it is a moral action to donate money to the poor, how is a person moral for being forced to do it? Isn't a goal only morally reached if a person does so by his or her own free will? By demonstrating a free will to be moral. Or is a monkey a moral animal if I force it to bring food to the homeless?

The very morality of giving to the poor disappears as soon as force is used to make people give to the poor. The welfare society may very well have a moral objective (although I am not convinced about that), but the very existence of it (and its tax-forced funding of its "moral" actions) wipes all morality away from it, and replaces with force and violation of individual rights, which are very doubtful moral attributes of a society.

What is taxation?

"Taxation is not just a punishment of consumption without any effect on productive efforts; it is also an assault on production as the only means of providing for and possibly increasing future income and consumption expenditure. By lowering the present value associated with future-directed, value-productive efforts, taxation raises the effective rate of time preference, i.e., the rate of originary interest and, accordingly, leads to a shortening of the period of production and provision and so exerts an inexorable influence of pushing mankind into the direction of an existence of living from hand to mouth. Just increase taxation enough, and you will have mankind reduced to the level of barbaric animal beasts."

From The Economics of Taxation by Hans-Hermann Hoppe.

So true

"That a fact is deemed true by the majority does not prove its truth."
- Ludwig von Mises, Omnipotent Government