DOJ-AP, IRS, Benghazi: Who wins?

Caution: this post is one of speculation and wonder.  There will be elements of tin-foil-hat involved, so prepare accordingly.

I am struggling to make sense of these sudden attacks on Obama.  Why now?  It is not as if there haven’t been opportunities before to come down on this president if desired.

From Glenn Greenwald (h/t FFF):

Due to the controversies over the IRS and (especially) the DOJ's attack on AP's news gathering process, media outlets have suddenly decided that President Obama has a very poor record on civil liberties, transparency, press freedoms, and a whole variety of other issues on which he based his first campaign.

Keep in mind, the phenomenal coincidence that these abuses have become national events immediately after Obama’s “no-tyranny here” speech:

Unfortunately, you’ve grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity that’s at the root of all our problems. Some of these same voices also do their best to gum up the works. They’ll warn that tyranny always lurking just around the corner. You should reject these voices.

From Sheldon Richman:

As he said this, three scandals — the Benghazi blunder and obfuscation, IRS political profiling, and secret subpoenas for Associated Press reporters’ phone records — were about to explode in public. As they say in show biz, timing is everything.

This isn’t a coincidence.  It is as if Obama was set-up to give this speech just in time to eat his words.  But why?  And by whom?

From Jon Rappoport:

The liberal jackals are stalking their own leader, the President. After making mind-bending excuses for Obama’s disastrous presidency, they’ve suddenly heard a supersonic whistle, and they’re out for blood.

It is understandable that the press gets worked up after the AP story.  Prior to this, it was standard operating procedure for the press to ignore the civil liberties violations of this administration until these abusive powers were aimed at the press.

Why the IRS?  Since when was the Tea Party a sympathetic entity?

Benghazi: it is easy to see why the right would latch on, but the story seems to have grown far bigger than this.  And why not months ago, when the events occurred?

More from Rappoport:

The IRS and DOJ scandals are manageable. By themselves, absent the press firestorm, they can be contained. Eric Holder can go. The IRS chief has already been dispatched to nowhere land. The president can claim immunity from these two doofuses. Indeed, he may try that.

As long as his liberal allies [keep] pounding on the fact that he’s a great president who has been served badly by his inferiors, the ship could hold water. But right now, that’s not happening. The sudden sea change is swamping the boat.

The clue here, again, is the sudden and boggling liberal press turnaround, their all-out assault on Obama. This kind of thing doesn’t happen by accident. It certainly doesn’t happen from the bowels of the president’s rabid worshipers. But it is happening.

That means marching orders. That means screws have been turned by people who expect and demand and can count on obedience. Those people are players who live far above government. Government is their mechanism, as is the press, when it needs to be.

I am sympathetic to the view that there are players larger than presidents, larger than governments.  These players work through these centralizing institutions to achieve their ends.  Therefore, Rappoport’s suggestions find in me a ready audience.

So I ask: who wins in this?  I find three themes in these new-found scandals:

1)      Civil liberties are under attack by our own government. (AP-DOJ)

2)      The Tea Party is to be made a sympathetic entity. (IRS)

3)      Hillary is out. (Benghazi)

I find one person that can benefit from all three of these themes.  Before I get to this, one more item from Greenwald:

Recall back in 2008 that the CIA prepared a secret report (subsequently leaked to WikiLeaks) that presciently noted that the election of Barack Obama would be the most effective way to stem the tide of antiwar sentiment in western Europe, because it would put a pleasant, happy, progressive face on those wars and thus convert large numbers of Obama supporters from war opponents into war supporters. That, of course, is exactly what happened: not just in the realm of militarism but civil liberties and a whole variety of other issues.

Only Obama could defang the anti-war / civil-liberties movement.  Not Hillary.  This explains the reason for the sudden shift off of the Hillary bandwagon, onto this previously unknown entity Obama.

TIN FOIL HAT ALERT: as was done with Obama eight years ago, the stage is being set today for the candidate desired by the establishment.  There is one candidate that benefits from all three of these themes:

1)      Of those candidates acceptable in the mainstream and by the power brokers, which one has spoken most strongly about civil liberties?

2)      Of those candidates most acceptable in the mainstream and by the power brokers, which one is most closely identified with the Tea Party?

As to Hillary, her ouster clears the way for many.  However, of all of the possible candidates in either party, she arguably is the most formidable – and likely presents the strongest challenge to the Republican nominee.

There is one name that answers these questions; it is the candidate being groomed and presented as the next Ronald Reagan, an objective that struck me almost a year ago.  

To be clear, I do not suggest that this groomed candidate is behind any of this; only that he is the beneficiary of the events directed by those in real power.

As a cautionary note, yes – it is possible I am looking for answers that support my previous conclusions…. I am open to other possibilities that tie these strings together.  However, I am not very open to the possibility that it is mere coincidence.

The Loss of Faith

Faith in the European Union is disintegrating. 

In just the last 12 months, support for the European Union has plummeted on the Continent.

Europe's ongoing economic crisis and lasting currency woes are beginning to rapidly erode faith among Europeans in the EU project. That is the result of a new survey undertaken by the renowned Pew Research Center in Washington D.C. and released on Monday evening.

There are some who speculate that the crisis, including the crisis in Europe, was designed to give reason to further centralize.  I don’t believe so (those in control had it pretty good, and could allow the system to move more slowly – necessary if they want the support of the people), but if so it will not achieve its purpose.

The most important tool for control is the tool of regulatory democracy.  The people live under oppression willingly, because a) they are conditioned to believe that it isn’t oppression, and b) the oppressor delivers the goods.  The European Union is failing on both counts: it is seen more and more as the source of oppression that it is to many of the people in Europe, and it isn’t delivering the goods.

If the people lose faith, regulatory democracy loses power.  The people in Europe are losing faith in the mechanisms of the EU.  They are also losing faith in their national politicians:

Furthermore, people across the EU have nothing but bad things to say about their political leaders.

I don’t believe those in control desired for the crisis that is gripping the globe.  If they wanted it to come in order to usher in an even more centralized society, where is the solution in Europe?  Isn’t it about time for the solution to be brought on stage, before faith is lost completely?  How much longer can they afford to wait?  Can you imagine the euphoria if the European Parliament brought forth the formula to solve the unsolvable?

Can they want to demonstrate that centralization doesn’t work in order to give evidence for even more centralization?  Previous efforts at centralization in Europe have, for the most part, failed: the USSR, Czechoslovakia, Yugoslavia.  Belgium has difficulty existing as one.  Spain, perhaps the same.

They have no formula – they did not create the crisis in order to usher in the formula they don’t have.  In the end, I believe they will allow some decentralization in order to not lose their most important asset – regulatory democracy.

The survey also shows the continuing gulf between Germany and much of the rest of Europe:

When asked about other EU countries, respondents in six of the countries surveyed say they find Germans to be the least compassionate. Five countries see Germany as the most arrogant country. Germans themselves have a slightly different view. They view their own country as being the most trustworthy, least arrogant and most compassionate in Europe.

I believe in the not too distant future we will see a much different Europe – more decentralized, and hopefully with some of the better parts of integration kept in place (passport-free travel, free-trade between countries, free movement of labor).  This will be nothing but bad news for those who desire further consolidation of global government.

Further, we will see a different set of global alignments, with Germany, while maintaining ties to the west, turning east to Russia and China.

H/t Ed Steer

Free Banking

Free Banking: Theory, History, and a Laissez-Faire Model, by Larry Sechrest

This book, available as a free download from the Mises Institute, offers a thorough analysis and review of the free banking model.  As suggested by the sub-title, Sechrest covers the theory and history, as well as offering a comparison of the various free and relatively-free banking models.

Regular visitors to this site know that I favor a free-market in money and banking; this means a free-market: not conditional, not gold-backed, not 100% reserve – while these might emerge as options in a free-banking environment, I find no need to intervene beyond the cleansing work of the market.  It is in this distinction – free as opposed to conditionally free-banking – where I will focus in this review.  I will spend little time on the theory, as this primarily focusses on the comparison of free banking vs. central banking.  I will also not spend time on the history – the author offers an exposition of free banking in Scotland, where he offers a critique of White’s work, and free banking in America.

The book was originally written in 1993.  This edition is a reprinting, in 2008.  The preface to this edition offers some valuable insights.  It is here where I will begin.  In the preface, he calls attention to the work of several Austrian economists opposed to the free banking model, specifically regarding the requirement for holding 100% reserves:

This group is principally composed of certain Rothbardians associated with the Ludwig von Mises Institute, some of whom, by the way, I am pleased to think of as friends. It includes, among others, Walter Block, Jörg Guido Hülsmann, Hans-Hermann Hoppe, William Barnett II, and especially Jesús Huerta de Soto.  In what follows I will explain why I think their various condemnations of fractional reserve free banking (FRFB), despite their energetic efforts, remain unconvincing.

I too have found these efforts unconvincing; I expect I will find some common ground with Sechrest.  He begins with Huerta de Soto:

His massive 876-page treatise, Money, Bank Credit, and Economic Cycles (2006), is intended to be the final and decisive proof that fractional reserves are incompatible with a) a proper defense of private property rights, b) morality, and c) a stable economy. With painstaking effort he investigates legal theory, banking history, business cycles, and even variations in medieval theological doctrine. There is much to interest the curious reader, but a great deal is actually irrelevant to the author’s professed intent.  Further, one will repeatedly encounter, along with some careful scholarship, “straw man” arguments, nonsequiturs, and question-begging.

About a year or so ago I began reading this book by de Soto.  It was suggested to me as a definitive statement regarding the fraud of fractional reserve banking.  The version I have is 812 pages, before bibliography and end notes.  I got to page 66, then stopped – yes, sixty-six.  I haven’t picked it up since, until today for the purpose of this post.

Huerta de Soto begins well enough: in the preface to this edition, he explains well the reason for the bubble, the problems of central banking, etc.  He then suggests a cure, including a mandatory 100% reserve requirement on demand deposits and a return to the classic pure gold standard.  Of course, it is in this prescription where I disagree with de Soto, but then that is why I was reading his book – I wanted to understand the counter-position. 

Why only page 66?  The answer is found in Sechrest’s statement: “…a great deal is actually irrelevant to the author’s professed intent…. “straw man” arguments”

Merovingian Anarchy

The Birth of Western Economy, Robert Latouche

Based on this book by Robert Latouche, I have previously written about the fall of Rome and the beginnings of medieval society.  Latouche next moves on to various aspects of the decentralized monetary and economic system of Merovingian society (described as “anarchy” by Latouche), and the transition toward centralization attempted by Charlemagne – a transition that, fortunately for those who favor decentralization, did not last for long after his death.

This story is a shining light on a successful period of anarchy – not Rothbard’s anarchy, but certainly the absence of a centralized state acting as sovereign.  This possibility was realized as Rome fell, and was reborn after the attempts toward centralization of Charlemagne and the Carolingian Empire.

Merovingian Decentralization

As previously noted, Latouche is favorable toward state-centralization – both regarding Rome and later Charlemagne.  Although I disagree with his conclusions, I find his approach helpful; he has clearly distinguished periods of state-governance from decentralized governance.  In any case, his factual observations of the economic landscape are priceless. 

In the Merovingian period that came after Rome and that preceded Charlemagne, Latouche notes changes in the monetary systems.  During this time, money for daily use moved from gold toward silver:

The theory that the Merovingians kept to the gold standard and that the Carolingians replaced it by an exclusively silver coinage is incorrect and altogether too flattering to the Merovingians.  The reality was less simple.

It seems to me that the issue has nothing to do with flattery, but recognition of market forces at work in a less developed economy, as was the case after Rome.  During Merovingian time, silver became more prominent as the money metal.  Most important, this was not by decree of any king – the Merovingian currency was not controlled by public authorities.  Latouche describes this lack of central control as negligence – in reality it was something more like an open market.

Through the negligence of the kings, coining in the Frankish kingdom became the monopoly of coiners.

There were multiple coiners; how could this be a monopoly?  It is the fact that coinage was by non-state actors that concerns the author.  Latouche recognizes no government authority outside of state authority.  The Merovingian period was a time of individual and community governance, based on sacred oath and with the Church as a constant backdrop.  There was government; it just wasn’t government by a state.

After listing the several areas where the Merovingian kings did not exercise sovereign authority, instead granting “the privilege of immunity” to “influential laymen,” the author laments…

Never in our history has the conception of the state known so complete an eclipse.  Numerous churches obtained privileges of immunity; many enjoyed that of minting money….

That first sentence brings such a smile to my face!  Latouche goes on to identify several churches that held such a privilege of immunity.

What is meant by “immunity”?  Gary North recently wrote on this subject:

The issue is immunity from state sovereignty. A declaration of such immunity is a declaration of legitimate sovereignty.

North cites Robert Nisbet:

So-called diplomatic immunities are but the last manifestation of a larger complex of immunities which once involved a large number of internal religious, economic, and kinship authorities.

This was a normal feature of political life in the Middle Ages.  Again, from North:

Which rights were protected by medieval institutions, and which were not? Remember, "rights" mean "legal immunities from governments." It means the right of self-government.

The people of the Early Middle Ages before and after Charlemagne recognized and enjoyed such rights. 

Returning to Latouche: he decries the varying weights and quality of the coinage produced by these multiple Churches – but isn’t this an expected and natural process of a market?  Multiple producers compete on price and quality.  Further, isn’t this to be expected in a market that, at the time, was quite local – with little need for commonality from region to region?  Eventually, it seems to me, the market would move naturally toward commonality for the sake of efficiency as markets developed. 

The author describes the evolution from gold coinage to silver that occurred under the Merovingians:

Under the Merovingians, silver was minted earlier and on a larger scale than has previously been thought; nor was it the shortage of gold which finally established its supremacy, but the preferences of the northern peoples and the requirements of internal trade.

Gold was hoarded.  Given the relatively low value of the traded goods, this would seem to be reasonable.  Silver sufficed for the trade of the time.  It appears the transition was driven by the market.

This liking for silver coinage marks an evolution which was taking place during the late seventh century.  The gold solidus and even the triens were on the way out.

Antal Fekete at The Daily Bell

DB: This is a great interview with Professor Fekete because in it he abandons some of the vocabulary that tends to confuse people who don't have a sufficiently high intellect to understand him, which means almost everybody.

BM: Agree, speaking as one of those who doesn’t have sufficiently high intellect.  Fekete also did a good job of remaining on good behavior.

AF: World trade is facing an avalanche-like transformation flattening out monetary economy into barter economy.

BM: If true, the majority of the population in developed economies is done for. 

AF: Gold is a monetary metal due to the fact that its marginal utility declines at a rate lower than that of any commodity.

BM: But, admittedly, it does decline.

AF: For this reason gold does not obey the Law of Supply and Demand.

BM: Fortunately, this was stated simply enough for me to understand.  It is statements like these that cause me to look askance at Dr. Fekete. 

Gold has been in the market for thousands of years – has no economist before ever noted that the law of supply and demand is not applicable to this commodity?

All commodities, including money – the most marketable commodity – are subject to supply and demand; if not, how could money be money?  Fekete even suggests that gold has a declining marginal utility.  It does not have a constant marginal utility. It is subject to supply and demand.

AF:  My own position is that manipulation in the gold and silver markets, if that's what's been occurring, is far less important than it is made out to be by market observers.

BM: Agree.  It is difficult to even understand what market manipulation means when every financial market is subject to the non-market backstop of central banking and state-regulation.  All markets are manipulated – there is nothing terribly special about the gold market manipulation.

AF: I don't have much respect for Hayek's position that choosing the monetary standard should be "left to the free market". The market has already spoken.

BM: Then there is little to fear.  The only way to ensure a sound financial system is to allow the market to speak – any other avenue is central planning, and this cannot stand because it suggests no foundation of understanding by market participants.

AF: The value of gold, like the length of the yard, is not subject to individual preferences or to market forces.

BM: On this, I will simply disagree.  Suffice it to say, if this was true, everyone would clamor to own gold, regardless of price (and yes, I am differentiating “price” from “value”).

AF: Instead of saying that there is too much or too little gold, it would be more accurate to say that the rate of interest is too high or too low.

BM: I appreciate the simplicity by which this way of looking at it is stated.  I suspect there may be some differentiation (are long-term or short-term interest rates applicable?), but as far as the statement goes, it is outstanding in its simplicity.

AF: We may recognize ZIRP (Zero Interest Rate Policy) of Bernanke as an imitation of the scheme of Gesell.

BM: This is quite correct, and Bernanke has implemented greenbacker policy – the state is issuing the money to fund the state’s spending, at virtually zero cost.  For this reason, Brown turned from being a critic of Bernanke to a fan. 

Further, Fekete’s criticism of Gesell’s Freigeld theory is sound.

AF [regarding “Real Bills”]: This is not inflationary because the ephemeral cash arises together with the rise of the new merhandise in production, and it expires simultaneously with the removal of the merchandise from the market and with its disappearance in consumption.

BM: It is most certainly inflationary to the money supply, therefore it is distortive; it may or may not be inflationary to prices.

AF [regarding the state as necessary toward the market for “Real Bills”]: Absolutely not.

BM: Thank you!  I agree, the state is not necessary, and it is reasonable to expect that such a market would come forth naturally, through the actions of market participants.

AF [regarding state-mandated accounting standards]: If the government can make them, it can also scrap them, it can ignore them overtly or covertly.

BM: Thank you, again!

AF [regarding why the Rothbardian Austrians are dismissive of the “Real Bills Doctrine”] The Real Bills Doctrine is a thorn in the flesh of the Quantity Theory of Money to which the Rothbardians are uncritically committed.

BM: This comment confused me more than anything in the interview.  The Rothbardians are uncritically committed to the subjective theory of value.  How then can they also be uncritically committed to the Quantity Theory of Money?  Somewhere, there is confusion.

In any case, I believe the Rothbardian criticism is due to the fractional reserve nature of real bills.  That real bills are fractional reserve is without a doubt – Fekete even says so, in his reply to the Rothbardian criticism of fractional reserve banking, when he writes:

“Fractional reserve banking is fraud, in whatever shape and form it may come – they say. However, there is such a thing called self-liquidating credit that Rothbardians refuse to recognize. It is represented by real bills covering goods in most urgent demand and moving to the ultimate consumer with all deliberate speed.”

AF: The demise of the system of irredeemable currency is a foregone conclusion. Not only is it illogical; it is also immoral. A free society cannot be built on a coercive basis. Moreover, the regime of irredeemable currency is incompatible with the ideal of limited government.

BM: The truest words spoken in this interview.  A fabulous statement.

Matt Taibbi Gets Closer

Matt suspects a conspiracy in the financial markets. 

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game.

Welcome to the real world, Matt.

He bases this on a couple of scandals that have recently come to light:

…the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

He believes this opens up the possibility that everything is rigged:

If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it.

Even interest rates!  And the value of money!!! Say it ain’t so.  Who or what is powerful enough to rig interest rates – the price for time and risk of the commodity that is one side of every single transaction in a division-of-labor economy - and rig the price of the money itself?

Matt thinks there is something new here:

These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing.

The banks are only now beginning to realize this?  Come on, Matt – the world didn’t begin on the day of your awakening.  Those high up in banking have known this for centuries.  Those on the outside have, for the most part, remained blind…until recently… thanks to the internet and a certain (now former) congressman from Texas. 

The banks have been colluding in the US with government permission for one hundred years – I think they realized the possibilities of collusion well before they had an official sanction to collude.

He finds fault in the justice system:

Two of America's top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it's dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to "collateral consequences" in the economy.

…this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments…. the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive.

Not one comment pointing to the Federal Reserve or central banking.  I guess I welcomed Matt to the real world a bit prematurely.

The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it.

In fact, the problem is so enormous that even Matt does not see it.  He thinks the corruption and collusion has its roots in the too-big-to-fail banks, without asking anything about what or who is behind the too-big-to-fail banks.

The reason the problem has not received the attention it deserves is because the politicians and much of the mainstream media is in on the scam – knowingly or unknowingly. 

How many people support the end of central planning in money and credit?  How many support market-derived banking? 

Conversely, how many call for better regulation or better regulators?  How many call for justice from people employed by the same people who enable the system in the first place?

Matt, you are inching closer.  Perhaps one day soon the scales will be fully lifted from your eyes.  The market could never support corruption on this magnitude.  Keep looking, with honest intent, and you will find the answer.

Here’s a hint:

End the Fed.