Income Inequality and Fractional Reserve Banking

Today’s Mises Daily is an interview with Andreas Marquart on the subject of “why others are getting richer at your expense.”  In the interview, Mr. Marquart addresses the subject of income inequality.

AM: First of all, inequality and income inequality are natural phenomena because people are different. They all have different talents and that is a reason for the division of labor…. The key question is: is income inequality the result of the free market and the free decisions of voluntary interacting actors; or is income inequality the result of the expansion of fiat money and the creation of money out of thin air that benefits the privileged few at the expense of many? That is, is it the result of state intervention? If the latter, case we have a problem.

The key question, as offered by Marquart, is a false choice; he offers the choice: is income inequality due to the free market or to fiat money, only subsequently redefined as “state intervention”?  The counter position of the free market is not “fiat money,” but the entire edifice of the crony capitalism system we live under today (“state intervention”), of which monopoly money via central banking is the most significantly distorting feature.  But fiat money, in and of itself, is a phenomenon that has and can occur in a free market as well.

And it isn’t fraud.

MI: When caused by state intervention, what is the primary source of the problem?

AM: The primary source is fiat money inflation and the artificial increase of the money supply by bank credit.

With this qualifier included – “when caused by state intervention” – I agree fully. 

MI: In your book you contend that “good money” is important for economic prosperity. What is good money and why is this true?

AM: Commodity money is good money because it is free-market money.

This is incorrect.  Free-market money is good money because it is free-market money.  Often, but not always, the market has chosen a commodity-backed money to serve its purpose.  However, I find no reason offered in free-market theory to suggest that a directed money can be more stable than a market-derived money, honed by the competition of the market.

The only way to achieve and maintain 100%-backed commodity money is to order it and maintain it via force.  There is no other way, when the subject is understood within the framework of my above-referenced post.  How can this be more “good” than money derived by and enforced via free-market mechanisms?  Does central planning work for money and credit?

AM: We have good money when the government has nothing to do with the monetary system and people themselves can decide what money they want to use spontaneously and without any coercion from the state.

Again, we agree completely.  The disagreement comes in the proper extension of this statement.

Whatever the faults of a truly free market in money and credit, one thing is clear – and both Mises and Rothbard concur: a free-market offers the best regulation of inflation. 

I find no reason to invent rules when the market is perfectly capable of providing regulation.  Let the market police credit expansion, and the soundest money of all will result – a free-market derived system for money and credit.

Roosevelt’s BFF “Uncle Joe,” Part II

When I think of special relationships I think about family, close friends, good business acquaintances, etc.  In the murderous art of statecraft (as it is practiced today), we are told that the United States has a special relationship with Great Britain and Israel (I have no idea how they will all fit in my dining room next Thanksgiving).

There was another special relationship, of a sort, between Franklin Roosevelt and Joseph Stalin.  I have written about this relationship once before, in one of my many posts while reviewing the book “Freedom Betrayed,” by Herbert Hoover (I highly recommend the book if you have not read it).

I will revisit this special relationship via a book written by Robert Nisbet, “Roosevelt and Stalin: The Failed Courtship.”  This book was recommended to me by one of the most knowledgeable men I know – a real expert in several fields including history.  When someone like this suggests that I read a book, well…it would be pretty stupid to ignore the advice.

It is interesting that, simultaneously, there were significant increases in the totalitarian nature of governments throughout the world – this, especially true in the 1930s.  Call them socialists, communists, fascists, whatever.  The United States under FDR, Germany under Hitler, Italy under Mussolini, the USSR under Stalin.  One can also point to such leanings in Japan and France; even Spain went through a civil war fought (basically) between supporters of two different totalitarian ideologies.

Was it coincidence?  A result of the Great War?  The depression?  Far beyond the scope of this post to explore.  However, suffice it to say, it was.  Viewed in this light, one might consider Roosevelt no different than the rest.  Garet Garrett certainly saw this.

There are certain aspects of the book that stretch me outside of the narrative that I am developing in my own mind about Roosevelt, Stalin, Churchill, and the general events preceding and through this time.  I will address these as they arise throughout my reviews (I don’t know how many posts I will write on this, certainly more than one), however, to summarize:

·        Roosevelt is presented as idealistic toward Stalin, not purposeful.  I tend to see in Roosevelt both – more purposeful, perhaps.

·        Churchill is presented as an unwilling accomplice (due to Churchill’s desires to save Britain) in his favorable treatment of Stalin, always seeing clearly Stalin’s larger goals.  Yet, if Churchill could see this (and be concerned by it), why not Roosevelt?

Let’s see how this plays out. 

Secretary of Labor Frances Perkins recalls a conversation she had with FDR in which he was plainly impressed by the Russians.  Perkins mentioned this view that the Russian people “desire to do the Holy Will.”

To which the president replied: “You know, there may be something in that.  It would explain there almost mystical devotion to this idea which they have developed of the Communist society.  They all seem really to want to do what is good for their society instead of wanting to do for themselves.  We take care of ourselves and think about the welfare of society afterward.” (P. 4)

This conversation between Perkins and Roosevelt is attributed to a time “just after his [FDR’s] return from a meeting with the Soviet leaders.”  Roosevelt’s first meeting with Stalin was at Teheran at the end of 1943.  There is no prior listing of a meeting between Roosevelt and any other Soviet leader.

By 1943, what had Stalin done to deserve such praise from Roosevelt – the model of altruistic (and even “Holy”) society, it would seem?  There was the Great Purge, various population transfers and deportations, the collectivization of agriculture – contributing to the great famine and the Ukrainian Genocide.  Just during the 1930s, estimates range from 8.5 million to 20 million deaths under Stalin in the Soviet Union.  These are all before the cover of war.

Circuses

"Bread and circuses" (or bread and games) (from Latin: panem et circenses) is metonymic for a superficial means of appeasement. In the case of politics, the phrase is used to describe the creation of public approval, not through exemplary or excellent public service or public policy, but through diversion; distraction; or the mere satisfaction of the immediate, shallow requirements of a populace, as an offered "palliative." Juvenal decried it as a simplistic motivation of common people.

I am struck by the recent glaring example of circuses used as a means to distract from anything important within the United States: for the important, I offer Russia and the Ukraine, with the US playing an obviously antagonistic role; for the circuses, I offer two different recent sports stories: Donald Sterling and Michael Sam.

Ralph Nader has this nailed:

…fans have an expertise in sports that’s unparalleled in any other area that fans interact with, other than their regular job. When you compare how much fans know about their members in Congress, or their state legislature, or corporate crimes, there’s no comparison compared to what they know about the game.

I suspect all readers of this post are quite familiar with the backstory occurring in Eastern Europe.  However, as I know I have many visitors from places other than the fifty states, I offer a brief description of the two sports stories:

Donald Sterling: On April 25, 2014, TMZ Sports released a recording of a conversation between Sterling and a female friend, V. Stiviano. In the recording from September 2013, a man confirmed to be Sterling was irritated over a photo Stiviano had posted on Instagram, in which she posed with Basketball Hall of Fame player Magic Johnson. Sterling told Stiviano: "It bothers me a lot that you want to broadcast that you're associating with black people", and, "You can sleep with [black people]. You can bring them in, you can do whatever you want", but "the little I ask you is ... not to bring them to my games."

On April 29, 2014, NBA commissioner Adam Silver announced that Sterling had been banned from the league for life and fined $2.5 million, the maximum fine allowed by the NBA constitution. Silver stripped Sterling of virtually all of his authority over the Clippers, and banned him from entering any Clippers facility. He was also banned from attending any NBA games. The punishment was one of the most severe ever imposed on a professional sports owner. Moreover, Silver stated that he would move to force Sterling to sell the team, based on a willful violation of the rules….

There is so much I could write about the Donald Sterling incident; however most of it has nothing to do with the subjects pertinent for this blog.  Let’s just say I am awaiting the exposure of the backstory on this; if anyone has the money and demeanor to dig it up, it is Sterling.  I only hope he lives long enough.

Michael Sam: Michael Alan Sam, Jr. (born January 7, 1990) is an American football defensive end for the St. Louis Rams of the National Football League (NFL). He attended the University of Missouri, where he played college football for the Missouri Tigers football team for four years.

After completing his college football career, Sam publicly came out as gay. He was selected by St. Louis in the seventh round, with the 249th overall pick, of the 2014 NFL Draft, becoming the first publicly gay player to be drafted in the league. If he plays in the league, he will also become the first active NFL player to have publicly come out.

Apparently Sam is interested in doing much more than focusing on his football prospects; it was recently announced that he will cooperate in a documentary of his training camp endeavors with Oprah Winfrey.

So I tried a simple check.  I did a search on the four topics – the one that could lead to a cataclysmic war, and the three that matter not a whit to anyone’s personal well-being beyond that of the named individual and those few close to him. 

I narrowed the search parameters: last 30 days, in English, in the United States.  The number of items?

Russia and the Ukraine: 142 million

Donald Sterling: 202 million

Michael Sam: 167 million

I tried the Russia / Ukraine search again, however this time excluding any of the following terms: cnn cnbc msnbc bbc fox abc nbc cbs.  I figured this would remove the bulk of US government puff-pieces on the subject, without removing any actual analysis based on facts. 

For this, I returned 84 million hits.

I guess I have nothing really to add.  I was just curious: a perfect opportunity for juxtaposition was offered, and I thought I would share the results.

When Swimming in Mud

I recently received an email in which a couple of interesting questions / comments were raised.  I thought it worthwhile to offer a post from my response.  I paraphrase the comments from the email.

What of businesses who make a significant portion of their income from the state, or thrive due to state regulation?  These are not libertarian.  Yet there is pro Walmart and pro Apple stuff at LRC – Ron Paul even praises Google.

Every company is in some way cooperating with the state to some degree (even a black-market, cash-only business is presumably using FRNs, or delivering product over public roads).  The question is where to draw the line?  Always there is gray.  Your question even pre-supposes that gray: objectively define “significant portion.”

In the case raised, several concepts are applicable, I believe:

1)      Is the company petitioning the government for advantage (whether funds, favorable market-limiting legislation, whatever)?  This certainly would be a violation.  This, it seems to me, is different that being a relatively third-party recipient of government funds – for example, Wal-Mart sells to customers who pay using the modern version of food stamps.  As long as Wal-Mart isn’t lobbying congress for an expansion of the program, this practice seems acceptable.

2)      It seems to me appropriate for a company to petition the government for a reduction in government intervention – a form of self-defense, in my view.

3)      What of cases where the government says “cooperate with us, or else”?  This gets interesting.  Few if any choose to shut down (I recall one email provider recently).  Most have co-operated.  While some blame might be placed upon those willing to co-operate, it is important to keep in mind which party is initiating the aggression.  Also, keep in mind that in certain cases it is a criminal offense to make anyone aware that the government even asked for “cooperation” (in a real stretch of that term).

4)      Finally, why the good words from LRC / Ron Paul for the Googles, Apples, and Wal-Marts of the world, when they sometimes / often violate libertarian principles?  I cannot speak for LRC or Ron Paul; however, it seems to me that on balance, each of these companies have, on net, greatly increased the possibilities for liberty (certainly in different ways). 

I stress the term “on net” and the term “possibilities.”  Lowering costs increases the possibilities for liberty; providing choice increases the possibilities for liberty; making the world of information available to me at my desk or on the road increases the possibilities for liberty.  These firms have certainly done this, as opposed to firms (for example) who a) live at the government trough, and b) produce products of destruction (financial or physical).

The next topic raised:

Employers should respect the individual liberty of their employees…

I believe the employer, as the property owner, has the right to set terms.  The (potential) employee has the right to accept the terms, or not.  If the employer still gets plenty of qualified applicants, so be it.  If the employer does not, perhaps he will change his practice.

I do not see a means, consistent with the NAP, to intervene in this.

My Further Thoughts for P.M. Lawrence

I had a conversation with “P.M.Lawrence” at my post “Lionizing Winston.” During this, (for expediency, I will assume) he suggested that my idea that there was a purposeful effort by the Anglo-elite to transfer power from Great Britain to the US as their primary tool of global reach and control might be mistaken.  For example:

BM, we know (separately) from their own accounts that the British elite did not see value in subordination to the U.S.A., because they simply did not entertain the possibility until it was a fait accompli.

I replied that I will stick with Stead until I find something more authoritative.  Lawrence replied:

Well, BM, I did cite some of the names of the groups and people involved when I told you you could check these matters to their own accounts, e.g. the "Round Table", Sir Lionel Curtis, and Sir Reginald Coupland, so you could google those.

So, I did a check:

Sir Lionel Curtis: Lionel George Curtis (1872–1955) was a British official and author. He advocated British Empire Federalism and, late in life, a world state. His ideas concerning dyarchy were important in the development of the Government of India Act 1919 and more generally, his writings influenced the evolution of the Commonwealth of Nations.

His experience led him to conceptualize his version of a Federal World Government, which became his life work.

A “Federal World Government” is certainly not contrary to my hypothesis.

Sir Reginald Coupland: Sir Reginald Coupland, KCMG, FBA (2 August 1884 – 6 November 1952) was a prominent historian of the British Empire who between 1920 and 1948 held the Beit Professorship of Colonial History at the University of Oxford. He is most known for his scholarship on African history. Coupland was elected a Fellow of the British Academy in 1948.

Both of these gentlemen were still babes at the time Rhodes had power – and Rhodes is the primary actor in Stead’s book.

Round Table: The journal was established in 1910 as the journal of the Round Table movement, established the previous year to promote closer union between the United Kingdom and its self-governing colonies.

Round Table Movement: The Round Table movement, founded in 1909, was an association of organisations promoting closer union between Britain and its self-governing colonies.

Historian Carroll Quigley claimed that the Round Table Groups were connected to a secret society, which South African diamond baron Cecil Rhodes is believed to have set up with similar goals. Rhodes was believed by some to have formed this secret society in his lifetime. This secret society is supposed to have been named the Society of the Elect.

Rhodes first formalised his idea with William T. Stead, editor of the Pall Mall Gazette, when he and Stead agreed on the structure of the secret society.

I also found an interesting read on the Round Table here.

All roads lead to Rhodes!  (I couldn’t resist.)

Look, it is possible that Lawrence’s statement “that the British elite did not see value in subordination to the U.S.A.” was true, or at least true for some subset of elite.

I see a couple of possibilities, both of which could have been in play by different factions of what we call the elite:

1)      As Lawrence suggests, the British elite saw no value in subordinating British political power to the US.

2)      As I suggest, the Anglo-elite saw benefit in subordinating British political power to the US.

Yes, I purposely use two different terms to describe the elite.

I will offer here what I suggested to Lawrence:

I believe you make a mistake believing any of the elite actually care about Britain or the US as political bodies. They don’t think in such terms. They decide which political body / bodies they need to control, and then figure out how to gain control.

The elite don’t care about national interests – at least not the elite that are the elite.

Nothing I read in the above, as suggested by Lawrence, is conclusive to the idea that my working hypothesis is wrong.  And I have one trump card working in my favor: the results.  This is not conclusive that it was the intent, but it certainly is supportive.  And to add one last piece of evidence, again from my earlier comments:

The City of London still means something.

There is nothing national about the elite.  National boundaries mean nothing.  Various operations are located in various countries.  The elite don’t care about borders.  If they did, they wouldn’t be very elite, would they?

The elite care about control.  At the turn of the last century, it was clear to at least some subset of the elite that control could no longer be expanded (or even held) via the government of a tiny island in the North Atlantic.  They looked west, and saw a much better bet for the longer term.

That’s my story, and I’m stickin’ to it…until I find something that definitively counters this view.

Sheldon Richman Takes Down Walter Block & Lew Rockwell?

(Note: I am trying something suggested by Robert Wenzel in his post “Note to Libertarian Bloggers: How to Boost Traffic to Your Sites.”  I am going for a three-bagger with my title; the power hitter in the bunch should be pretty obvious.)

We have a new post from Sheldon Richman regarding thick libertarianism.  In this post, he contrasts his vision of libertarianism with that of Walter Block and Lew Rockwell, via recent posts by these two. 

His first couple of paragraphs are better left ignored.  I will start by offering Richman’s proposition:

The proposition on the table is that the most robust case for the libertarian philosophy (such as I articulated but of course did not originate) entails commitments not only to the Nonaggression Principle — or what I now call the Nonaggression Obligation — but also to other values that don’t directly relate to aggression (for example, opposition to even non-rights-violating forms of racism).

This is not a good start.  Do we really need to change the term again?  Max Borders recently did the same thing, using as his term of obfuscation and confusion “non-harm.”  “Nonaggression obligation” is even less visible on the internet (4 hits, two being Richman) than is non-harm (30 hits at last check).  Nonaggression principle?  13,000.

Why try to hide the absolute core of the foundation?  (Hint: because it must be hidden else the house built on this foundation of sand will come crumbling down.)

Richman brings some clarity to his view via his cite of Charles W. Johnson:

While no one should be forced as a matter of policy to treat her fellows with the respect due to equals, or to cultivate independent thinking and contempt for the arrogance of power, libertarians certainly can — and should — criticize those who do not, and exhort our fellows not to rely on authoritarian social institutions, for much the same reasons that we have for endorsing libertarianism in the first place. (Emphasis added by Richman.)

Wenzel warned me (if I recall correctly) that the “thicks” are making a “should” argument, not a “must” argument.  This appears to be the case.  It doesn’t help their case, but it appears to be the case.

Why? I know this will put me squarely in the camp of dim-bulbs, but here goes: what happens to the foundation of a philosophy when the “shoulds” of the philosophy come into direct conflict with the “musts,” as they must in Richman’s case?  If the foundation contains such a contradiction, then what does it say about the structure built upon it? 

The contradiction?  In this post, Richman uses the term “property” only once, and this only when referring to a statement made by Block.  He cannot discuss property because to do so will destroy every “should” he wishes upon libertarians, or introduce so many “excepts” that the “shoulds” become meaningless

Lionizing Winston

Working Hypothesis

The elite work through government to achieve their control.  The Anglo-elite purposefully chose to transition (as their primary tool of control) from the government of Great Britain to that of the United States.  This transition began toward the end of the nineteenth century and was complete by the end of World War Two.  Besides the evidence presented with the benefit of hindsight (it happened), there is much evidence that something to this effect was intended. 

At least that’s my story.

Background

Perhaps the most significant work that I have come across that demonstrates this purposeful intention is a book by W.T. Stead: The Americanization of the World.  I cover this book in several posts, to be found here.  I also find the assassination of McKinley quite curious, for reasons explained here.

If this version of history is correct, one man should be considered as perhaps the most important political figure throughout this time – an on-again-off-again leader during most of the transition period of fifty years: Winston Churchill.  Certainly there were others: Teddy and Franklin Roosevelt and Woodrow Wilson come to mind – yet, while they could build-up American expansionism, they couldn’t directly control British actions.  Churchill’s presence on the global stage spanned this time period, playing a key role in many of the events that contributed to this transition and the downfall of Great Britain as empire.

Therefore I wonder – was Churchill selected to play this part, to ensure the transition that was desired by the Anglo-elite?  Did Churchill know he was playing this part?  Did he need to know?  To try to find some clues, I decided to read a biography of the man: The Last Lion, by William Manchester.  This volume covers the years 1874 to 1932.  These years would be the critical years in my chase – if he was chosen, it happened early on, and for reasons that were visible early on.

An American is struck by the facility with which so many British intellectuals slight the man who saved their country. (P. 16)

Perhaps, being British, they have a different view.  For the British, it could be concluded that Churchill was a key figure in the demise of Empire; of even a more direct and personal impact, consider the fate of the British economy in the several decades after World War II (something to consider if / when the US empire follows this same course).

Churchill certainly had a vision early on in the Second World War:

…by combining the might of the English-speaking peoples in so strong a defense of the United States and the Commonwealth that the rest of the world would be held at bay, as it had been held by the British Empire in the relatively quiescent nineteenth century. (P. 16)

For my hypothesis to hold water, it would be helpful to find evidence that some hint of this was known to the elite early on – perhaps even forty or fifty years earlier.  If the characteristics that allowed Churchill to make this statement were known to those who walk in important circles early on, perhaps my wild goose chase will have a happy ending. 

Wow, what am I thinking?

Manchester’s book is thick.  I never thought I would read a biography of Churchill; such is the world of tin foil.  I will cover the book in some detail (it will take several posts), but I am only concerned with tidbits that touch on my quest – who did Churchill know, who knew of Churchill, where might he have crossed paths with important people, what characteristics of his were visible early on that might have provided an insight into his win-at-any-cost attitude to the war (even when a fight was not necessary) – thereby ensuring that the cost would be the British Empire in favor of an American Empire – a good outcome for the Anglo-elite, not so good for too many others.

For now, an overview.