Nerds Like Me

From The Dan Patrick Show, and an interview with Geddy Lee from RUSH:

“If RUSH were doing their final show, and you absolutely knew it was your final show, what would be the last song you played if it was your choice?”

“Working Man.”

RUSH recently completed their R40 tour – forty years of this trio playing together.  The last song?  Working Man.  There are other hints floating around that the band is done touring, although they may have one more studio album in them.

Regular readers know my affinity for RUSH.  While my history with the band doesn’t extend 40 years, it does cover pretty much all of my adult and adolescent life.  I cannot say I was the most die-hard fan – there were many who would see them numerous times on every tour.  I saw them numerous times over the course of my life.

Most pleasantly, I saw them on the tour prior to this one – the Clockwork Angels tour.  I am very happy I did, as I believe that the Clockwork Angels album is their best one of all; that says something for a band that has put out 20 studio albums.

RUSH introduced me to libertarianism.  Most specifically, from their album 2112, “dedicated to the genius of Ayn Rand,” I found her book Anthem (instead of a lightbulb, the band’s hero finds a guitar).  The rest is…the rest.

When I walk around Toronto (the band’s hometown), I feel I am walking on hallowed ground.  I will guess that I could probably write 100 posts based on the lyrics from 100 different RUSH songs.  But that isn’t for me…today. 

Today is about the likelihood that they are done touring. 

From the introduction from another interview, “still down with the nerds”:

[RUSH] has recorded more consecutive gold and platinum albums than any other group besides The Beatles and the Rolling Stones.

Down with the nerds?  Count me in.

Borders and Culture

The long awaited Paul Bonneau reply has arrived.  It is not a reply to either of the two questions raised in the post in which he promised a reply; it is a reply to my post “Why Culture Matters.”  In any case, I will address certain points.

Bionic Mosquito has written a thoughtful piece on the border/immigration issue. The money quote? “So what does culture have to do with maintaining a libertarian order? This, to me, is quite simple: the less conflict, the less chance that some self-proclaimed and self-pitying disadvantaged group will look to a savior to deliver them from their perceived suffering.”

I’m not sure I buy this. It does seem true to some extent that a society of like-thinking people will have less conflict…

For me this is certain, and self-evident.  Bonneau at least grants that it is “true to some extent.”  No big disagreement here, but I take exception to what comes next:

…however, a leavening of other culture does add its own form of good to society--for example, the questioning of authority, and reducing mindless conformism.

This is not any different in practical application than what I wrote in the subject post.  From that post:

Culture doesn’t like revolutionary change.  Culture evolves slowly and gradually – this has been true throughout history and such change is a very natural human condition.  It is the unnatural human condition that brings this topic to the fore; the unnatural human condition brings revolutionary change, not evolutionary change.

What do I mean by the “natural human condition” in this context?  Culture evolving via market forces, via introduction of the new via voluntary interactions and voluntary acceptance.  Day-to-day these are imperceptible changes, noticeable only when looking back over a period of years or even decades.  This is how a culture evolves naturally.

What do I mean by the “unnatural human condition”?  Much of the world today.

War, for example, is tremendously culture-destroying.  Of course, the Great War marked a significant turning point in Western culture.  War – certainly on such a scale – is only possible via the presence of the state and state control over much of societal activity. 

In the subject post, when describing cultural change, I used some variant of the term “evolve” four times; eight more times in the comments.  Isn’t this the same “leavening of other culture” that Bonneau chides me for in his very opening paragraphs?

Returning to Bonneau:

Add to this the fact that almost any modern larger society will have large segments of distinctly different cultures…

This is clear.  Yet – and I offer this only as an observation – many of those individuals who make up these “distinctly different cultures” find ways to both assimilate within the majority culture, peacefully influence the majority culture, and maintain aspects of their own culture.  I should know.

…just as Panarchy posits…

What is panarchy?  From a different column by Bonneau:

The crucial advantage of Panarchy is that it converts aggressive violence into defense.

Most people on the Internet tend to “stick with their own kind”; for example, liberals read only sites like Daily Kos. However, when they venture out and run into those of different persuasions, you always see a battle of competing arguments, and the participants are quite earnest about it. There is a reason for this.

Isn’t this what I said about commonality of culture reducing conflict?  Come on, Paul.

The advantage of Panarchy, again, is that it converts aggressive violence into defense. That is, anyone who argues from a position of Panarchy cannot be taken as someone trying to grab that cudgel of power. There is no latent threat behind the argument, especially when an advocate of Panarchy states (and should state if he has any sense) that liberals should get what liberals want, conservative should get what they want, and so forth. How can anyone be threatened by the statement, that they should get what they want?

“…liberals should get what liberals want, conservative should get what they want, and so forth.”  Thanks, Paul.  This very sensible statement will come in handy in a short time.

Exploring Central Banking

In response to my most recent post regarding the Fed and interest rates, I receive an email query.  Having received permission to publish the email, here it is (with my thoughts / comments interspersed):

Thanks for today's article. I've been waiting for someone to address IOER for a long time.

Please consider putting your mind to this as it may benefit those of us trying to navigate the storm ahead.  In reality, the Fed's dual mandate is:  (1) to maintain and preserve the US dollar hegemony/monopoly here and abroad; and (2) keep alive the US federal government, its benefactor and protector.  In short, the Fed's primary goal is control and keeping the wheels on the money cart…

This seems to be as good a job description as any – better than the publicly available mumbo-jumbo.

…it doesn't care about profits or losses of its MBS portfolio.  The Fed could (and may) take the trillions of worthless MBS securities on its balance sheet and simply throw them in the furnace or hit the digital "delete" button. 

There are a couple of points I would raise: first, I am not sure what it means if a central bank was to have a negative equity position on its balance sheet; let’s just say I have never come to a settled view on the ramifications of this.  Certainly, if the mortgage securities are / were not worth what the Fed paid for them, this possibility becomes real.  However, I believe the Fed values its (claimed) gold holdings at $44 or some such.  Properly valued, this could offset any negative positions on the securities.

In any case, I don’t know if a negative equity position matters at all for the Fed. 

But the “throw them in the furnace” part is something I have thought about for some time.  The Fed holds government securities, government backed securities, and securities the government would bail-out if necessary.  At the same time, after covering a few billion dollars of expenses, the Fed returns (off the top of my head) $50 - $70 billion per year to the treasury – interest income and the like.

The Fed holds the bonds; the Fed returns the interest to the creditors.  Neither principal repayment nor interest is expected from the debtor.  Doesn’t this suggest that the debtor (the government) has in essence defaulted on the bonds being held by the Fed?

I am not sure what this means, but it means something.  As long as price inflation is politically tolerable, I continue to wonder why the Fed would ever shrink this portfolio – and in fact why not keep buying.  Borrowing without repaying, paying no interest, defaulting without embarrassment for the US government.  This seems to me to be the current situation for at least $4 trillion of US obligations.

It doesn't need to "unwind" anything, as it is not a market player and doesn't care about its own losses or bad purchases.  It is a monopoly game banker that will do anything within the confines of maintaining monetary control.  Wondering what the Fed will do with its balance sheet may therefore be a red herring. 

In many ways I agree.  I only began exploring this topic because I became curious about the mechanism of how the Fed would raise rates – it always struck me as an issue for the Fed to be able to raise rates with today’s level of excess reserves.  I wanted to understand the mechanisms and possibilities, nothing more.

So, what it to prevent the Fed from:  (1) raising its interbank/overnight rate 25 basis points (or even more); (2) delivering helicopter money/inflation to mainstreet by, instead of paying IOER, charging rent, thereby forcing banks to lend; and (3) tempering the mass inflation potentially caused by 2 by raising reserve ratios?  

Don’t 2 & 3 offset or neutralize each other?  Setting this question aside, I think helicopter money is possible, even likely if price inflation continues to remain tame.  Let’s see if commodities push ever higher in price – it seems we have seen this bust and it isn’t clear that anything on the near horizon will change this.

I suspect the reason it can't do this is that it will negatively affect treasuries and potentially kill the US gov's ability to borrow but I don’t' know how or why. 

I have not figured out what ends this game as long as price inflation stays politically acceptable.  We have had significant expansion of central bank balance sheets around the world – and not all of the expansion is sitting in excess reserves; trillions of dollars of central bank expansion globally, and no price inflation to be found anywhere.  Why can’t the game continue – with further central bank balance sheet expansions and returning the interest income to the Treasury?  The Fed increased its balance sheet to over $4 trillion.  Why not $8 trillion?  $12 trillion?  Default without embarrassment.

It is possible that the game doesn’t end until we reach a point where the shrinking productive class can no longer support the growing non-productive class.  (This post is two years old, so I won’t vouch for every word, but it will give some idea of what I am getting at.)

Think about the inclusion of Mexico, China, India, Eastern Europe, etc., into the division of labor economy.  Yet, we have not seen corresponding price deflation (as should have been expected); instead the added productivity billions of newly-productive people has been consumed, introduced as feedstock for the non-productive class.

Consider the almost unbelievable advances in technology and communication – perhaps as valuable to productivity as the industrial revolution.  Where is the corresponding price deflation?  Again, consumed by the non-productive.

Someday this must end…I think.  But when and why?  The best answer might be found in demographics.  This says we are still decades away.

Also, helicopter money may be pushing on string because average joe is tired of debt and won't take the bait this time. 

It doesn’t have to be debt.  Why not just deposit $1000 per month for every individual over 18?   Why not charge demurrage to encourage spending?  Again, until price inflation picks up, why not?

Further, Repos and reverse repos sound like de minimus/at the margins monetary tools.  IOER (and ROER, rent on excess reserves) are the big guns and for some reason the fed hasn't used them to put money on main street. 

From my understanding, the problem with IOER is that it doesn’t touch enough players – money market funds, etc.  This is why they have to go also to reverse repos.

Why hasn’t the Fed charged the banks – forcing the banks to lend?  I think for the reason I have earlier offered: the main objective was to ensure liquidity in the system.  But if inflation stays tame, they could do this (of course, after further growing the balance sheet).  There is a cost (negative interest) to holding money in other countries at the moment – Switzerland comes to mind – yet price inflation remains low.

Thanks again for your analysis.  

I hope I helped.

I know others, like Wenzel, believe we are on the cusp of significant price inflation.  I certainly will not argue with him, and I certainly do not study the data the way he does.  If, a year from now, price inflation moves to 4% or higher, it wouldn’t shock me.  

But I look around and wonder why this game cannot continue for some time.  I have yet to find a reason.

The Sobering Reality of Trump

Justin Raimondo has a great piece, entitled “Trump: America’s Funhouse Mirror,” subtitled “He’s not saying anything that hasn’t been proposed before.”  To summarize: Trump may be over-the-top in how he says things, but he is saying nothing more than what has been said by others before.  Trump’s difference is one of style, not substance (a shocking insight, I know).

It is a sobering read, only because it is so true.  Like Trump, Raimondo’s piece puts it right in your face.  What is the “it”?  Trump is America – more specifically, Trump represents what many Americans want, believe, think.  Trump is merely a manifestation of this desire.  Trump’s words are no different than what other politicians believe and say and do; other politicians just find flowery (or deceptive) ways to say it.

It is a sobering read because Raimondo puts in your face the picture of your neighbors, friends, relatives – many of the people you know, and many of the people you don’t know.

The latest outburst of self-righteous indignation directed at Donald Trump underscores what hypocrites Americans are, as well as illustrating their seemingly endless capacity for self-delusion. This latest eruption of moralizing is occasioned by Trump’s proposal that all travel by Muslims into this country must be ended – “until we find out what the heck is going on.”

Raimondo goes on to point out that this call by Trump is just another plank in a building long ago constructed – for example:

Yet Congress is set to approve a bill with broad bipartisan backing that would deny visa-free travel to anyone who has been in Iraq or Syria in the past five years.

Raimondo offers other examples of supposedly outrageous Trumpisms that are outdone by the actions of politicians and various security agencies every day – today.

And not just today.  Trump points out that it wasn’t just the Japanese that were abused by Roosevelt during WWII. 

“Take a look at Presidential Proclamations 2525, 2526, and 2527, having to do with alien German, alien Italian, alien Japanese. They stripped them of their naturalization proceedings. They went through a whole list of things; they couldn’t go five miles from their homes. They weren’t allowed to use radios, flashlights. I mean, you know, take a look at what FDR did many years ago and he’s one of the most highly respected presidents.”

As Raimondo ends the post:

The fear-mongering and war hysteria that has dominated the American political landscape since 9/11 has come back to haunt our Establishment – and they don’t like it one bit. This is “blowback” with a vengeance, and it conjures in my memory this quote from a trenchant observer of the march of human folly, Henry Louis Mencken:

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

I am not so sure that the “Establishment” doesn’t like it.  Anyone with half a brain knew that the road being travelled could lead to this.  (NB: there was a time it seemed Trump was less warmongerish than the others; I am no longer so sure about this.)

In any case, for me a couple of other quotes come to mind.  First, from Étienne de La Boétie:

Poor, wretched, and stupid peoples, nations determined on your own misfortune and blind to your own good! You let yourselves be deprived before your own eyes of the best part of your revenues; your fields are plundered, your homes robbed, your family heirlooms taken away. You live in such a way that you cannot claim a single thing as your own; and it would seem that you consider yourselves lucky to be loaned your property, your families, and your very lives.

All this havoc, this misfortune, this ruin, descends upon you not from alien foes, but from the one enemy whom you yourselves render as powerful as he is, for whom you go bravely to war, for whose greatness you do not refuse to offer your own bodies unto death. He who thus domineers over you has only two eyes, only two hands, only one body, no more than is possessed by the least man among the infinite numbers dwelling in your cities; he has indeed nothing more than the power that you confer upon him to destroy you.

Where has he acquired enough eyes to spy upon you, if you do not provide them yourselves? How can he have so many arms to beat you with, if he does not borrow them from you? The feet that trample down your cities, where does he get them if they are not your own? How does he have any power over you except through you? How would he dare assail you if he had no cooperation from you? What could he do to you if you yourselves did not connive with the thief who plunders you, if you were not accomplices of the murderer who kills you, if you were not traitors to yourselves?

You sow your crops in order that he may ravage them, you install and furnish your homes to give him goods to pillage; you rear your daughters that he may gratify his lust; you bring up your children in order that he may confer upon them the greatest privilege he knows — to be led into his battles, to be delivered to butchery, to be made the servants of his greed and the instruments of his vengeance; you yield your bodies unto hard labor in order that he may indulge in his delights and wallow in his filthy pleasures; you weaken yourselves in order to make him the stronger and the mightier to hold you in check.

If that was too long, I offer a summary from Senator Padmé Amidala in Star Wars: Episode III: Revenge of the Sith (2005):

"So this is how liberty dies... with thunderous applause."

How weak this so-called liberty.  Since 911, there have been a total of 45 people killed by so-called jihadist attacks in the US (including San Bernardino). 

Or about one typical month in Chicago.

Libertarian Austrians

Or is it Austrian libertarians?

Several weeks ago I was putting together a post on various topics.  After I had a good draft, I decided not to publish it – most of it was just me whining.  One section I found worthwhile, and turned it into a post about culture and why culture matters to some libertarians.

This is a post about another section: the intersection of libertarian theory and Austrian economics, and why those drawn to one are so regularly drawn to the other.  I suspect this road has been travelled before; I only will offer a modified version of what I concluded.

What kind of libertarian are you?

One who believes the non-aggression principle grounded in private property. 

While I’m at it, let’s cover the Austrian ground

I think more so than Austrian, I would describe my economics as free-market.  Of course, the Austrian School comes infinitely closer to this ideal than any other school of economic thought (of which, frankly, there is only one other school of economic thought – some form of central planning and interventionism).

How would I define free market economics?  The non-aggression principle grounded in private property.  Funny how that works.

Conclusion

The non-aggression principle grounded in private property – I cannot think of a much better definition for each of libertarian theory and Austrian economics.