Thursday, October 20, 2011

Dr. Fekete, Please Help

Dr. Fekete

I am writing to you in order to bring to your attention the fact that you have at least one very confused disciple – but then I repeat myself.

Please contact Ingo Bischoff. He needs remedial coursework in your “school” of economic thought. While I find myself in disagreement with some concepts for which you are well known (for instance the fallacious monetary theories behind real bills), I often find myself in agreement with you on more traditional topics. It is to these that I refer here.

I quote from the above commentary:

“Many a gold bug has the wrong strategy. He buys high and sells low. He cannot kick the bad habit. He should buy low and sell high.”

In reading this statement (as well as the general tone of your commentary) it seems you are quite comfortable with the idea that gold has a price. Of course, I am also comfortable with this idea as well. I see the price quoted 24 hours a day in such places as, well…this site, for example.

Please sit down before reading the next statement: Mr. Bischoff believes gold has no price. Yes, I too am flabbergasted by his statement. However, approach him with caution on this, as he can turn verbally abusive when he finds he has no logical response to his beliefs of fantasy…but again, I repeat myself.

And to a second point from your commentary:

“At this point the Friedmanite bunk was announced by professors who were the beneficiaries of the purge of old-line economists at American universities that a "weak" currency is boon to the country. It makes exports cheap while making imports dear….to see the Friedmanite bunk in the true light of science we need only recall that devaluation always makes the terms of trade of any country deteriorate. The euphoria of exporting more will last only as long as the stockpiles of imported ingredients used by the exporting industry last. Ever after, the country will have to pay more for the imported ingredients and will also get less value for units of its exports…”

I, course, agree completely with your line of reasoning, and have written so before on this subject here at the pages of DB:

I have extracted my earlier comments here:

I will cite only one exchange from the DB thread:

BM: What good is it to an exporting firm to have a week currency, when most of the inputs to production (commodities) have global prices?

IB: What kind of ridiculous statement is that...??? How can you even try to deal with it...???

You can see, Dr. Fekete, that Mr. Bischoff considers your statements on this subject as ridiculous, as you are today saying nothing different than what I wrote several months ago.

Please help him before it is too late.

Kind regards


Monday, October 17, 2011

Rothbard and Free Banking

From "The Mystery of Banking", Chapter 17, section 3:


Given this dismal monetary and banking situation, given a 39:1 pyramiding of checkable deposits and currency on top of gold, given a Fed unchecked and out of control, given a world of fiat moneys, how can we possibly return to a sound noninflationary market money?

The objectives, after the discussion in this work, should be clear:
(a) to return to a gold standard, a commodity standard unhampered by government intervention;
(b) to abolish the Federal Reserve System and return to a system of free and competitive banking;
(c) to separate the government from money; and
(d) either to enforce 100% reserve banking on the commercial banks, or at least to arrive at a system where any bank, at the slightest hint of nonpayment of its demand liabilities, is forced quickly into bankruptcy and liquidation.

While the outlawing of fractional reserve as fraud would be preferable if it could be enforced, the problems of enforcement, especially where banks can continually innovate in forms of credit, make free banking an attractive alternative.

-----------End of quoted passage----------------

It strikes me that Rothbard is contradictory in this conclusion, at least if free banking is defined in the manner that I understand the term "free." Free, to me, means free. No "shoulds", no "musts". Market participants will decide the manners by which they reach agreement for money, banking, and credit - that is "free" in my book. This cannot be reconciled with Rothbard's item (a) and (d) above. Who will return us to a gold standard? How? By what means? Who will enforce 100% reserves, or alternatively quickly "force" violators into bankruptcy? With what enforcement ability?

I will begin at the end.

"While the outlawing of fractional reserve as fraud would be preferable if it could be enforced, the problems of enforcement, especially where banks can continually innovate in forms of credit, make free banking an attractive alternative."

Setting aside the idea that FRB is "fraud" (if it is known, it isn't fraud; if it is fraud, those harmed can pursue recourse in some manner), 100% reserves cannot be "enforced". Enforced by whom? The little I know of Rothbard, he would not recommend the state be the enforcement arm (nor would I). But if not the state, who?

Absent the state as the enforcement arm, what is left besides market enforcement? And if it is market enforcement, what stops any form of banking and credit to evolve, if it acceptable to the market? Nothing should.

What of bad, or "fraudulent" practices? Cannot the market sort this out? It is true, if a bank is found as untrustworthy in its money and lending practices, cannot its customers go elsewhere? Is this not possible in all other aspects of markets where reasonably free from regulation and government interference?

As to item (b), abolishing the Federal Reserve System, I think it would suffice to remove government from money - no legal tender, no FDIC, no tax consequences for choice of currency. In such an environment, the current Federal Reserve System will cease to exist, as it cannot survive in a free market.

But does this mean there will be no bank cartels formed? I think not. Market efficiencies will likely cause banks to form in such cartels. However, absent the state as enforcement and insurance arm, the market will certainly control excess.

Rothbard's final statement (above) is correct, and is what attracted me to this section. Even if one assumes FRB is bad, it is irrelevant in a free banking environment. Market regulation will suffice, by this I mean regulation by the free choices made by market participants. If participants find a bank is inflating, they are free to move to other institutions that adopt other schemes. Free banking is not just an "attractive alternative", it is the only alternative.

Banking is far less complex than most products brought to market. Individuals are quite capable of deciding which car to buy. They certainly can figure out where and how to bank - without any "shoulds" or musts" thrust upon them by strangers.

Items (a), (b), and (d) in Rothbard's list above are not necessary. Item (c) will suffice. Get the government out of banking and money. The market will resolve the remaining issues.

Monday, October 10, 2011

Hope for Mr. Hultberg?

Mr. Hultberg

Thank you for NOT suggesting that Dr. Paul adopt your dangerous notion of supporting Fed inflation via a constant 4% increase in base money. If this is an indication that you have finally rid yourself of this destructive notion, I applaud you for this. Absent this cockamamie plank, you may yet find Dr. Paul as valuable asset to your cause.

"His [Dr. Paul's] watchword is "steadfast adherence to principle." Compromise if need be on the means of implementation; but never on the principle itself. Never on the Constitution. Never on the rights of man."

Instead of your 4% rule, perhaps you could adopt Dr. Paul's "compromise" on the issue of the Fed: remove legal tender, remove monopoly over money and banking, allow full and free competition in money, remove tax consequences as to choice of use of money and currency, remove government backing of any and all money and banking schemes. Then the Fed will eventually die on its own.

No 4% rule needed on which to pin false hopes (and certainly ensure further economic disaster).

Following is (apparently) Mr. Hultberg's reply to my comments:

Posted by Nelson on 10/10/11 11:26 AM

To: bionic mosquito.

Sorry AFR has in no way abandoned the 4% auto-expansion plan. It is the only way to stop the Fed at this juncture in history from running roughshod over the quality of our currency. The American voters' eyes glaze over when you try to tell them about free-market banking and the monetary intricacies of gold money systems.

I know; I have been at this task for over ten years (check out my articles on the subject). Such reforms will take decades to bring about.

The history of money and economics shows clearly that if left relatively free, an economy will grow its goods and services at roughly 4% annually. History also shows that in a free economic environment (which we had in the 18th and 19th centuries), gold was mined and entered into the economies of the West at roughly 4% annually. Sometimes at 3% and sometimes at 5%, but over the long haul, it averaged 4% annually. When this takes place growth of money and growth of goods balances and brings about a 0% price inflation rate. Thus the Friedman plan's 4% rate for monetary growth.

We certainly support Paul's plan to remove legal tender and eliminate the Fed's monopoly. AFR is working with Edwin Vieira on just such policies. But we are very doubtful that the power elites and their media lapdogs will let 'legal tender' and government monopoly of money go anytime soon. But we are sure that we can convince the people to force the Fed by law to computerize money growth at 4% annually.

No one in the AFR camp has ever said this is a perfect or ideal plan, or a permanent plan. It is, however, a "workable" plan. It will get the issue of money and the Fed's debasement on the table in front of 70 million voters in language they can understand.

This is something that the convoluted monetary explanations of gold money and free-market banking will be hard pressed to do. Gold and free-market banking are definitely the ideals that we need to work toward.

(If you had ever read my works on the subject, you would see that no one is more in support of such policies than I); but they are going to require massive education over a generation to enact. We prefer to save America today with some "imperfect" pragmatism, rather than let her be led into globalist tyranny because the State's libertarian opponents knew nothing more to do than naively talk "instaneous idealism" to the voters.

End of Mr. Hultberg’s reply.

I did not comment further on the DB site – Mr. Hultberg has a knack of turning quite aggressive and alienating, and I didn’t want to start down that path.

Suffice it to say his reply is full of strawman arguments. His complaints about idealistic libertarians can be equally (or more so) applied to those who believe politics can be sustained for the decades necessary to bring about a gradual dismantling of the power of the Fed.

Sunday, October 2, 2011

Tibor Machan at The Daily Bell

TM: We need more judgmentalism when it comes to opponents of the free society and free markets, not less.

BM: Quite true, and we should label those who advocate force in relationships as the immoral beings that they are. It ain’t an ad hominem if it’s true and relevant.

TM: I am disappointed with Reason Magazine adopting the Kantian line since the magazine was founded precisely to counter this trend of thinking.

BM: Long ago, Reason Magazine was one of the principle building blocks of my education regarding freedom and liberalism. I still have the back issues somewhere in the trailer. However, not quite as long ago, the magazine took a turn for the (much) worse.

TM: Unlike government, the private sector demands morality because it doesn't administer coercive laws.

BM: It is quite funny when one considers the accepted wisdom that force should be used to ensure morality. Well, actually not so funny….

TM: Governments can help in keeping the peace and defending society, just as referees at games uphold the rules.

BM: To have government (monopoly of legalized force in a given jurisdiction) so limited is not possible in the sense we use the word “government” today. Of course, in the context of a voluntary anarchic or panarchic society, TM’s statement could be a valid concept.

TM: Those who are government activists don't proclaim it. They disguise what they're after. They have to do so in this country because traditionally American citizens have not been well disposed to government activism, even though there's quite a lot of it.

BM: That it has worked in America despite the traditional disposition against government activism is a tribute to the state funded public education system. Americans are taught that Patriotism equals worship of the state, and supporting state control over many aspects of life.

TM: The idea is that you don't want to use brute force to move people toward a society based on government activism. Instead, you want to nudge people, to move them in tiny increments so they do not find it worth their while to object, or at least not forcefully....Nudging can take place in numerous ways but a lot of it has to do with creating social norms that people will feel they have to conform to.

BM: The most important nudging is the implementation of publicly funded schooling. “Of course it is good that all children have an opportunity for education” they proclaim, when in fact it is the opportunity for proper indoctrination. “The state will educate your children.” Talk about a nudging…right over a cliff.

DB: The thrust of Austrian economics and the freedom movement generally is one that is profoundly objectivist in the Randian sense. It insists that people are perfectly equipped to make sound judgments on their own and to pursue their lives using their senses in a rational way.

BM: I am not sure it can be said that people are “perfectly equipped” for much of anything – people aren’t gods. However, as people aren’t perfectly equipped to make sound judgments on their own behalf, it is therefore certainly true that government bureaucrats and technocrats (being people, after all…well, most of them) CANNOT be better equipped to make sound judgments on behalf of complete strangers than those strangers can make for themselves.

More accurately, I believe the statement can be properly made that no one is better able to make sound judgments for his own well being than the individual himself, and if the individual is physically or mentally incapable, then left to family, close friends, and local institutions.

Friday, September 2, 2011

Land Value Tax

I find the discussion of "Land Value Tax" quite entertaining.

I have commented before that, if developed in a voluntary manner, this method of providing for certain services is preferable to me as compared to the evils of an income tax, for example.

The discussion of the idea of "owning" land (at least in the discussion with Adam on one side, and DB / Danforth on the other) as almost irrelevant - like how many angels can dance on the head of a pin - if I understand the different viewpoints properly:

All seem to agree that the individual(s) occupying the space has rights of use and disposal. This would certainly include the right to enter into ONLY voluntary means of procuring (even so-called "common") services or otherwise encumbering the land. As Adam has pointed out, he does not advocate forcing a non-payer off of his property, nor does he advocate a tax (to me meaning an involuntary contract / payment) of any kind.

If this is so, I guess it doesn't matter to me if Adam says I cannot "own" land, and JD / DB say otherwise. I can use and dispose of my land. I can pass it on to my heirs or anyone else I like - for consideration or not, and without a tax consequence. No one can "force" a tax on me, or use the monopoly power of the state to kick me out. If I find value in the activities of the community, I will likely pay the "land value tax". If I do not choose to pay, the community might use persuasion to get me to pay, maybe publish my name in the paper if I don't, but names can never hurt me... .as the saying goes.

Ingo, on the other hand, has previously advocated and applauded the use of force by the state - even unto death of the "subjects" - in order that the state can preserve its interests. Therefore, in his hands, I would find this concept of "you cannot own land" both deplorable and dangerous.

Unfortunately, in both this world and any likely future world, there are more Ingos than there are Adams.

Friday, July 29, 2011

Will the Fed Reverse the Money Pumping?

"We may ask: Will we face a bad inflation when those interest-earning bank reserves now sitting in Fed accounts are finally released into the economy? Not if the money is removed first. This is not as unlikely as it may seen."

It is very unlikely. Without this injection, the banks are insolvent. They are insolvent because many of the assets they hold are not generating cash and are therefore not worth the mark-to-fantasy values at which they are held.

In other words, there are no excess reserves in truth; they are only excess because of the false accounting.

Additionally, how will the Fed unwind? Who will buy the rotten assets that the Fed took on its books? The Fed took these at what is almost certainly face value (or close to face value) - far above the worth at the time or at any time today or in the future. Who would pay face value to buy these from the Fed? If the Fed sold them all, they will recover only a fraction of the money that was injected when the Fed first bought or swapped for the assets.

There is no way the injection by the Fed is reversed.

Tuesday, July 26, 2011

The Weekly (Gold) Standard

Who would have thought that one would read the following headline at The Weekly Standard:

"Gold Standard or Bust: Fixing the Dollar Before It's Too Late"

It is written by Judy Shelton. She has written often on this subject of backing the dollar with gold. So that she wrote on this again is not a surprise, however that it is in The Weekly Standard is a stunner.

Of course, a government managed gold standard is not a standard to rely upon - better than what we currently have perhaps, but equally open to politics. We have seen this movie before - see Roosevelt in the '30s and Nixon in 1971.

I notice Ms. Shelton does not mention the connection of the fiat dollar and US empire. She also mentions Palin and DeMint, but somehow completely avoids Ron Paul (it cannot be from ignorance that one does not mention Ron Paul in an article about gold backing the dollar, where other politicians are mentioned. It can only be by design). In any case, perhaps these reasons are why the commentary made it past the editors at the Standard.

Or, one can read this as one more hint of the direction we will eventually be led - some sort of government managed kind-of-like gold standard.

Monday, July 25, 2011

(Not) Missing Milton Friedman

I have The Economist to thank for this commentary:

"The influence of this kind of [hawkish inflation] talk has been augmented powerfully by a certain moralising strand of Austrian economics, which is hostile to the very idea of fiat money, and encourages the idea that its entire purpose is to expropriate savings and monetise government debt."

But that IS the entire purpose. It was true in 1913 when the Fed was brought to creation, and it is true today. If the events of 2008 don't prove this unquestionably, then I would suggest a willful ignorance or worse on the part of the speaker.

But wait! What about smoothing out the business cycle, controlling inflation, reducing unemployment? What about all of THOSE things?

Distractions, all distractions. First and foremost, the Fed has failed miserably at all of these so-called objectives. To say otherwise is either willful ignorance or worse. However, it is the Fed that has been the PRIMARY engine of the business cycle (could there be such a thing in a free market for money?), and yet is for some reason hailed as the salvation from the evil it creates!

"Accordingly, macroeconomics as a discipline is often seen as pseudo-science that exists mainly to justify technocratic social control."

Well, macroeconomics is seen this way because it is true. All action is Human Action, taken by the individual based on circumstances and factors that are directly impacting the individual. There is some form of lunacy in those who accept, for example, the idea that financial prudence when taken by an individual is somehow catastrophic for the whole.

"To some, even to play the game of identifying optimal rules for the centralised state monetary authority is to give away the game to the Keynesian social planners."

But it IS social planning. What else can you call it? A small group of individuals is centrally planning the type, quantity, and price of money. It is central planning of the most fundamental commodity in an economic system. If they centrally plan this foundation, what is left to the market?

It is central planning, Soviet style. Just because they don't teach it this way in school does not make it so.

""As in many other spheres," Rothbard wrote, "[Friedman] has functioned not as an opponent of statism and advocate of the free market, but as a technician advising the State on how to be more efficient in going about its evil work.""

Imagine the mind it takes to develop and implement payroll tax withholding. This is the work of Friedman. Is it any wonder he was the "accepted" free market voice in the allowed dialogue? He had free reign to speak his mind, as long as he didn't question central banking and public funding of education. He did neither - however, through his creation of tax withholding and public school vouchers, he certainly did help the state go about its evil work.

"Rothbard's fulminations notwithstanding, Mr Friedman died a beloved figure of the free-market right."

I used to be one who "beloved" Friedman. Until I understood money in a proper, free-market context. And, until I learned about the father of the payroll tax. And until I concluded that school vouchers, while posing as "choice" actually further encroach the state into education. Yeah, besides these, I guess he was free-market.

"Yet it does seem that his influence on the subject of his greatest technical competence, monetary theory, immediately and significantly waned after his death."

Yes, because it all blew up immediately after his death.

Nothing like 2008 was ever supposed to happen when wizards were in charge of centrally planning money. The so-called Chicago School should be relegated to the dustbin where it belongs. Events of the last few years should discredit this idea forever, just like the certain failures due to the spending boom now taking place around the world will end up destroying Keynes once and for all...assuming anyone is actually paying attention.

"When a significant portion of a political movement's activists believe that the whole point of central banking is "systematic robbery", and that inflation is the means by which this robbery takes place, widespread, reflexive opposition to inflation is not surprising. "

Yes, precisely.

"Now, I don't claim that the right, loosely defined, is chock full of Murray Rothbard fanatics."

Sadly, not yet. But we are growing in number.

"And whatever it is that is keeping Ben Bernanke's Fed from loosening up, it's not the enduring intellectual legacy of Murray Rothbard."

WHAT? Ben Bernanke is somehow being kept from "loosening up"? Have you seen the Fed's balance sheet lately? Do we have any idea about the guarantee's and deals the Fed has cut in the last three years?

"If only the free-market right still had such a powerfully persuasive "technician advising the state how to be more efficient", our economy might now be slightly less screwed. Maybe it would help were "advising the state to be more efficient" less widely considered "evil work".

An efficient state, in any sense of the word, is inherently impossible as any student of free markets, capitalism, and incentives would understand.

Our one saving grace is that this is true.

Tuesday, July 19, 2011

Reckless Endangerment: A Review of a Book Review

From Rex Murphy: "If America falls, it will not be from external enemies. It will be by her own hand. That is the inescapable conclusion one carries away from a reading of Reckless Endangerment, an account of the ferocious financial crisis that exploded in 2008 and through which, to this very day, the United States is still struggling to find safe and solid ground."

So far, so good.

"First, a note about Reckless Endangerment’s authors. They are, respectively, Gretchen Morgenson, a Pulitzer Prize-winning New York Times business reporter, and Joshua Rosner, a financial analyst — solidly competent and authoritative both. Reckless Endangerment does not come, in other words, out of the wild territory of hyper-partisanship or the backwaters of conspiracism."

Well, we can also surmise where such authors' will NOT lay blame, but more on that in a minute.

"What brought on the sub-prime crisis, as the meltdown of 2008 has become known? ...The most obvious villain is the one we all know. Wall Street is everything its wildest detractors want to label it....It is a dog of greed and self-interest."

Yes, it is greed. You know, that human characteristic that was never before known to mankind before 2008. That flaw that never exists anywhere but on Wall Street.

But wait, the book is not so shallow. In a dogged desire to find the root cause, the authors dig deeper as any good NY Times reporters would do: "But equally deserving of blame are the two federal institutions somewhat infantilely known (from a phoneticization of their acronyms) as Fannie Mae and Freddie Mac"....and "which elected officials did their bidding. If there is ever a Mount Rushmore for hypocrites, the face of Democratic Congressman Barney Frank — Fannie Mae’s friend in every sordid scrape (until nothing could be hidden anymore) — should be the first to go up."

That's it. Greedy Wall Street, Fannie and Freddie and the politicians that supported these institutions. There is some deep reporting for you.

Where did those characters get the trillions of dollars needed to run such a scam? Where did they get assurance that the failed bets would be made whole? Where did investors get the idea that some institutions are too big to fail?

How could almost every institution make the exact same wrong bet at the same time and in the same direction? What signals were they reacting to that told them this was OK?

Where is it that the authors do NOT lay blame? I will give one hint: End the Fed.

Sunday, July 17, 2011

The World From Berlin

I don't mean to pick on Berlin, or Germany. This is taken from an article from Spiegel Online, and the article addresses the issue of the debt ceiling debate in Washington. I will use the article to burst many bubbles.

The original article can be found here:,1518,774666,00.html

Quoted material is taken from the article.

"The US needs to raise its debt ceiling, currently set at $14.3 trillion (€10.1 trillion), by Aug. 2, otherwise the country will run out of money"

Now, this is not true. The US will NOT run out of money. The US will run out of borrowing capacity. It is quite a different issue. Tax receipts will continue to roll in, only the spending cannot be supplemented via further borrowing. This is an obvious point, and that the author neglects it suggests either financial ignorance or purposeful manipulation. Neither is acceptable.

The US can certainly continue to meet its interest payments and service the debt. The US can then cut expenditures to meet tax revenue. It is not so hard, once one wraps his mind around it. Millions of people do this every day, in both their personal and business lives.

There is no need to talk about default. The best thing that could happen in this issue would be to cut government expenditures to meet revenue (actually, the best thing would be to shrink or eliminate "government" as it is currently understood, but that is another subject).

Frankfurter Allgemeine Zeitung writes: "The politicians in Washington are playing with fire. A swift compromise is needed. Nobody needs a US default."

Certainly, taxpayers and their children and grandchildren, while perhaps not in "need" of "a US default", certainly would be better of for it, assuming that failure to raise the debt ceiling would even result in such an outcome.

Süddeutsche Zeitung writes: ""It's actually unimaginable. On August 2, the US could, for the first time in its history, become insolvent..."

Again, failure to raise the debt ceiling does not necessarily need to result in default. More importantly, it would NOT be the first time for the US to default - not even in the last 100 years.

Walk with me down memory lane:

Roosevelt confiscated gold, just before changing the value from $20 / ounce to $35 / ounce. A default on the promise to redeem currency for a fixed amount of gold.

Nixon defaulted on the promise to foreign governments to exchange gold for dollars in 1971.

Basically, every day since Nixon's default, the US has added to the default - with the dollar now buying only 1 / 1600th ounce of gold.

Die Welt writes: "In the middle of the poker game between the two political parties to prevent a national default on Aug. 2, polls show that 77 percent of Americans believe that they live in the world's greatest system of government."

Yes, it is a farce that so many Americans believe this. On the other hand, if the borrowing was to be stopped permanently, those 77% might just be right!

"The [Tea Party] movement sees traditional politics as corrupt and regards Washington as a den of iniquity."

On this point, the Tea Party (to the extent "members" actually believe this) is correct.

"Compromise, they feel, is a sign of weakness and cowardice."

Actually, compromise on the issue of the debt ceiling is a sign of certain national (in every sense of the word) bankruptcy (in every sense of the word).

Bild writes: ""Irrespective of what the correct fiscal and economic policy should be for the most powerful country on earth, it's simply not possible to stop taking on new debt overnight."

Who said anything about overnight? This problem has been a long time coming, and known to all.

Roger Clemens and Justice

It can certainly be said that justice has been served in the ongoing torment of Roger Clemens. Well, at least I can say it.

Why is an act of voluntarily doing something to one's own body a crime? Why should such a thing be investigated by "authorities"? Yes, don't say that the crime was that he lied to the "authorities", given that the "authorities" had no business in this matter in the first place.

I will not re-state many of my views of this general issue of steroids in baseball. I have written on this previously, as regarding Barry Bonds. The commentary can be found on this site:

I will only mention that this issue, at most, is one between employee and employer - nothing more. It should have stayed that way.

This is why I say that justice has been served in this case. It was none of the government's business to begin with.

Monday, July 11, 2011

2011 Women's World Cup

I do not intend to write a story about the match against Brazil yesterday. Enough (yet not enough) has been said about the wonderful finish to the game.

I only would like to touch on my view of the events.

Many will take pride in the nationality. "USA, USA, USA" and all that. Because some women happened to be born in or otherwise have some connection to a specific geography, I guess.

I saw eleven women (ten, actually) that never gave up. Stunning to see the tying goal with perhaps one minute to go in over 120 minutes played. When all legs should be lost, even if hope might not be (no, I don't mean the goalkeeper).

One may not be able to take pride in another's accomplishment; so I will take this joy: One might say that there is no hope, it is too late, etc., in any personal or group pursuit. But for this group of women, they did not buy this, not on this day. I am happy for them, as a team and as individuals.

The color of uniform is secondary, the passport used for travel is irrelevant. Whoever they are and wherever they are from, this group of ten did something truly remarkable.

It is enough. No need to turn it into a false form of patriotism.

Thursday, July 7, 2011

The Curse of Public Education

Note: This is the first time I have written here on this subject. It is also my 100th post. This seems fitting.

As I have mentioned before, I am torn as to which is the worse evil foisted on the people of the West: central banking or central education. I remain torn.

It is criminal to think that students nationwide should somehow fit into a single mold. Don’t tell me about charter schools, magnet schools, private schools, etc. Yes there are differences, a few major, almost all minor. But for 98% of the student population, the differences are immaterial. Learn to be obedient, learn by memorizing trivialities, learn to conform. Or face punishment and be ostracized.

And then we wonder (on this site and other alternative-view sites) why most people fawn over what their political “leaders” tell them.

John Taylor Gatto has written several books on this subject. He was an award winning teacher in New York City; often railed against by various administrators for his practices of actually “educating” students as opposed to “schooling” them. I offer some comments from one of his books, wonderfully entitled “Weapons of Mass Instruction.”

In it, he often mentions the names Rockefeller and Carnegie as men behind the significant increase in clamor for public funding and centralization of education in the US. He identifies the early “pioneers” of this movement, often funded with endowment money from (or otherwise connected to) the fortunes of these two industry titans.

The following are all points taken from this book:

He quotes H.L. Mencken: “The aim [of public education] is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality”

Professor Arthur Calhoun wrote that the fondest wish of utopian thinkers was coming true: children were passing from blood families “into the custody of community experts.”

Gatto cites statistics on literacy as measured by US Army tests of potential recruits – literacy defined as a fourth grade reading proficiency. From WWII to the Korean War, literacy dropped from 96% to 81%. By Vietnam, it fell to 73%.

In 1940, national literacy for blacks was measured at 80%; despite ALL the disadvantages to those in this population, four out of five were literate. Six decades later, the number fell to 60%. Twice the number were now illiterate.

All this despite the money spent on schooling in real terms having increased by 350%.

From a student-teacher letter to the editor in 1995: 113 years earlier, fifth graders in Minneapolis were reading Shakespeare, Thoreau, Washington, Twain, Franklin, and many others. Today, this student teacher is told fifth graders are not to be expected to correctly spell: back, big, call, came, can (the list continues with 30 similarly “complicated” words).

According to William Harris, US Commissioner of Education from 1889 to 1906, the tool to build such a society [amicable folk waiting around for someone to tell them what to do] was psychological alienation. Alienate children from themselves so they could no longer turn inward for strength, alienation from families, traditions, religions, cultures – so no outside source of advise could contradict the will of the political state.

Gatto continues much further, obviously. If you weren’t already sickened by the centralization of education before you read one of his books, you most certainly would be afterwards – assuming you had an ounce of individuality left in you after years of regimentation.

I have referred to a statement by R.J. Rushdoony before; I do so again – but this time by quoting Gary North:

R. J. Rushdoony had little patience with conservatives who complained about high taxes. “They have tithed their children to the State, and then they complain against how much the government is costing them.” He thought all such tax protests would come to nothing. Well, not nothing, exactly. Mass inflation.

We suffer under central banking because we suffer under central education. Yet most parents are happy to be relieved of the burden of raising their children. The world is crumbling all around them and many don’t see it. Or if they see it, they are oblivious as to understand the underlying causes.

The state will educate your children. A more damnable concept cannot be invented (well, that and central banking). What should be seen as a curse, something to run from, is instead seen as a relief.

Wednesday, July 6, 2011

What is Inflation?

"It is absurd to claim that paper drawn on 100 ounces of gold is sound, while paper drawn on 100 tons of steel is not."

I have been thinking about the idea of "inflation" in a different manner, since ZenB (I think it was) asked me a question in the Salerno thread.

In a fully free banking / free money / free currency environment, would we even think of the term "inflation"?

I don't think so. I think we would think of profit and loss. I think we would utilize forms of money and banking and currency that were the most efficient, effective and stable within the context of the circumstance at the time and place. We would not speak of inflation: if our choice was sound, it will add to our profit. If not, it will add to our loss.

However, this does not eliminate the need to discuss and learn about sound practices. I like the title of Salerno's book "Money: Sound and Unsound." It is worthwhile to discuss and learn about sound money practices. One would not argue against the utility of a book entitled "Business Practices: Sound and Unsound."

People should certainly be free to use unsound practices in business and in money. In business, if they do this often enough they will see bankruptcy. In matters of money, the same would apply. In a free market for money, we would not speak of inflation, I believe. We would speak of losses due to the use of unsound banking and money practices.

History demonstrates that paper backed by gold is quite sound. Paper backed by steel is not quite as much. This doesn't mean a businessman cannot utilize paper backed by steel in his transaction. It only means it is left to him and his trading partners to suffer the consequences (just another form of dealing with bankruptcy) without consequences shifting to the broader public (again, only in the context of a free banking environment).

Real Bills and Flying Elephants

Comments in response to Dr. Fekete's editorial today at The Daily Bell.

AF: The bill and the cloth appear simultaneously and will disappear simultaneously. The former disappears when it matures, and the latter disappears when it is purchased by the ultimate consumer.

BM: So a real bill is not backed by gold (money), but is backed by merchandise. I know of no true hard money economist that the supports the view of money being backed by cloth (or flour).

AF: An increase in purchasing media that is matched by an increase of merchandise in urgent consumer demand is not inflationary.

BM: This is another theory that the central bankers use as an excuse to increase the money supply: the money supply must increase with the level of activity in the economy. It is a reason for man to substitute easily produced paper for true money.

As to not being “inflationary”, this is another trick of the monetarists. They speak of “inflationary” in terms of prices, but the true inflation (with all of the corresponding distortions and boom / bust cycle) come with changes in the money supply. Dr. Fekete is speaking of inflation measured in price increases, it seems.

Price increases are only one of the negative effects of monetary inflation, and perhaps not the worst. The worst is the transfer of purchasing power from the saver to the person who has first access to the funny money. This is called theft in normal society. It is apparently called real bills when one wants to hide the fact of this theft.

AF: The nature and origin of the discount rate are entirely different from that of the rate of interest.

BM: To the merchant, the economic effect is identical. Trying to make the legal distinction is irrelevant to the merchant’s cash flow.

AF: The two rates [the discount rate and the rate of interest] are completely independent of one another.

BM: No two rates are ever independent of each other in a relatively modern economy. All rates are relative to other rates. If the rate of one is significantly different than the other (adjusted for risk), the market will resolve this through pricing.

AF: Tradesmen processing semi-finished goods hardly ever pay cash for supplies to their suppliers. The prices they are quoted are not cash prices. They are "90 days net". The credit is part of the deal: you need not even ask for it. On the rare occasion when you don't need the credit you pre-pay your bill, having applied the discount to its face value.

BM: I am glad Dr. Fekete, at least, can see that real bills are credit, as he says so himself. He should teach his students accordingly. Some of his students do not learn very well.

Credit, not backed by gold (money). This is inflation.

Friday, July 1, 2011

Strauss-Khan: One Positive Outcome

Today we have the news that the case against DSK may be falling apart. There is a wonderfully positive side to this story - beyond the certainly positive outcome for justice in the case.

On a global scale, I cannot recall a US prosecution go so horribly bad in such a public fashion. There have been only a couple of US based stories of such turnaround - the Duke lacrosse team comes to mind, but not many more.

Consider: A high profile arrest of one of the most well known financial actors on the world stage. Drama on the plane just moments before take-off. Perp walks, passport stripped, resign from the job, no more dreams of French politics.

And now, the case seems to have all fallen apart.

If one wanted to find a story to display the worst abuses of the US judicial system to the world, a better example could not have been created than the real-world story of DSK.

There will be discussion about the implications on French Politics, the conspiracy theories behind the story (anyone who DENIES a conspiracy here should be sized for a tin-foil hat). All of this is important.

But I find the exposition of the US judicial system to the scrutiny of the world to be the most fascinating and potentially most important part of the story.

The US judicial system is broken on many levels. There have been many stories known only by family and friends that demonstrate this. There are a few stories that hit a larger audience.

The story of DSK was the biggest story around the world on the day of his arrest. It has remained high-profile because of the financial drama around the world and the search for DSK's replacement at the IMF.

It is a story that was perfect in its design if one wanted to expose the faults of the US justice system to the ridicule of the world. This to me is the biggest part of the story today.

Thursday, June 16, 2011

A Weak Currency is Good for Exports? Not!

Posted by bionic mosquito on 06/16/11 11:57 PM

"When the FED adds to the money supply through QEs, it cheapens the USD/FRN and makes U.S. products more competitive in world markets."

This mercantilist strategy is not so cut and dry. Japan has had one of the strongest currencies in the last several decades, and still runs a trade surplus. Germany as well, first with the Mark, now with the Euro. Meanwhile, the US has had a relatively weak currency over the same time, and has also seen its balance of trade grow worse during this same time.

It is often said: in order to consume one must produce. True as it is, the opposite is true as well: in order to produce, one must consume. In order to manufacture, one must buy raw materials.

What good is it to an exporting firm to have a week currency, when most of the inputs to production (commodities) have global prices? One might consider that the reason Japan is so competitive is that the strong yen has kept oil, steel and other raw materials needed for manufacture at much lower yen prices than what the US has realized with the dollar. As material and energy is often a majority of the cost of any manufactured good, it would seem a strong currency is of more benefit to an exporting nation than a weaker currency.

Posted by bionic mosquito on 06/17/11 12:13 AM

I will add, this idea of weakening a currency to improve exports gets even nuttier. Most manufacturers produce more for their home market than for export - this is especially true for small businesses, but consider even US auto manufacturers.

So, for the majority of sales, a weaker currency is devastating, as it inherently increases the costs of commodities that are priced globally - again, likely a majority of the COGS.

Nuttier still, big business can often work around this - it is easier for General Electric to locate a factory in China or Vietnam than it is for Joe's machine shop. This is true for countless reasons.

So the small guy gets fried, and the big guy can get around it by relocating manufacturing overseas AND pick up market share in the home market after the small guy files bankruptcy.

And we wonder why the US continues to lose manufacturing to foreign firms.

Ultimately one must conclude that this idea of a weak currency helping exports is only a Trojan horse; it is the advertised idea to make palatable for the masses that which is only good for big business. Just one more illogical theory in a long list of theories taught at the school for the economically gullible.

Wednesday, June 15, 2011

Hugo Salinas-Price and Free Coinage

HSP: If silver is currently $36 dollars an ounce, a one-ounce silver coin can be successfully placed in circulation with a monetary, numeric face value of $60 dollars, which overvalues the silver contained in the coin.

These coins would be very useful to the population and would be eagerly snapped up in vast quantities. The population would save these coins and use paper money for transactions - Gresham's Law; individuals would dispose of their silver money only in situations of great need.

BM: I must not be reading this correctly, because it seems absolutely backwards to me. If I have a coin with one ounce of silver content, and on it is stamped “$60”, while an ounce of silver trades at $36, WHY would I NOT trade the coin in for 1 2/3 ounces of silver?

Additionally, the definition of Gresham’s Law is incomplete (and therefore applied incorrectly), as it often is when used by people who write on this subject. The law, more accurately stated:

“Gresham's law is an economic principle "which states that when government compulsorily overvalues one money and undervalues another, the undervalued money will leave the country or disappear into hoards, while the overvalued money will flood into circulation."[1] It is commonly stated as: "Bad money drives out good", but is more accurately stated: "Bad money drives out good if their exchange rate is set by law."”

(from Wikipedia)

Gresham’s Law will result in exactly the opposite of what HSP suggests. The overvalued $60 coin will be eagerly driven into circulation, driving out other forms of money that are artificially undervalued by government decree. The undervalued money will be hoarded or driven underground.

HSP: How can we return to such a sound and realistic economy, where precious metals become once again money itself, because people think in terms of quantities of precious metal, either silver or gold?

First, we do not believe any change can be effected by a decree of any sort. The change must come in a roundabout way, insensibly. The problem of an overnight change, from the whole world's way of economic calculation by simple numbers, to calculation by quantity of precious metal is simply overwhelming.

BM: HSP states “First, we do not believe any change can be effected by a decree of any sort.” Then he goes on to make a decree. In fact, he makes a very bold statement: “There is only one way to achieve this.”


Please, just leave it to the markets. All that is necessary is to remove legal tender laws, remove tax consequences based solely on the type of money used in a transaction, and do not classify currency gains and losses as taxable events. The market is quite capable to figure this out in a manner and time far more efficiently than anyone person can imagine or decree.

Tuesday, June 14, 2011

All the Monetary Pixie Dust in One Place

Posted by bionic mosquito on 06/14/11 09:41 AM

"Anything that confuses people about money and banking is probably helpful to Anglosphere elites in their quest to keep their Money Power franchise intact - which in turn funds their quest for a new world order."

Quite true. We will see many of the confusing (and false) theories posted here today:

1) There is not enough gold to fund modern production

2) Money is created for the principal, but not for the interest

3) A gold standard won't work, as the elite have all of the gold

4) Politicians can control the money supply better than central bankers can

5) The money supply must grow with the size of the economy

6) The source of commercial credit is not saving but consumption

7) Gold and silver should be the only money, but the state must operate the mint

8) Why limit the growth of the economy to the growth in gold?

9) Access to credit needn't be contingent on someone else's agreement to give it up

10) The growth of the money supply doesn't matter, as long as prices are stable

It should be a fun day.

In the end, free-market competition in money and credit is the only proper answer, as DB often suggests. No legal tender laws, no government monopoly of money, no adverse tax consequences based solely on the type of money chosen for use.

The (relatively) free market has solved "money" in the past; the (relatively) free market has solved the problem of the production and distribution of far more complex goods than money today.

"Money" is a relatively simple problem for a free market to solve. Leave it to the market.

Sunday, June 12, 2011

Mark Skousen Part II

DB: Are we headed toward a double dip recession for the world and America?

MS: Only if the US government blunders more than they have already.

BM: The US never left the first dip. The government doesn’t have to blunder anymore, continued recession / depression is baked in the pie. If the government stopped any additional spending, the current programs (both military and social) are unsustainable and enough to bring the economy and the dollar down.

MS: Both have risen so much in the past ten years that I'd be surprised if they keep going. There's got to be a major pullback, and if the US gets its act together, we could see a significant correction. We've already seen it in silver. But as long as the Fed keeps pumping cheap money into the monetary system, and keeps interest rates artificially low, commodities like gold and silver should do well. Oil too.

BM: Enough hedging and contradiction in this statement to make any outcome be the predicted outcome.

“There's got to be a major pullback, and if the US gets its act together, we could see a significant correction.”

The US getting its act together is a political impossibility, but Skousen is theoretically correct.

“We've already seen it in silver.”

Hard to call what happened in silver a major correction. Viewed from the perspective of even a year ago, silver is significantly higher.

MS: I'm very bullish on high-income dividend-paying stocks and funds.

BM: He can only be high on these if he believes that “the Fed keeps pumping cheap money into the monetary system, and keeps interest rates artificially low….” So he must also believe that gold and silver are going higher. But wait, he hedged that comment earlier.

MS: [The dollar is] in a bear market, that's for sure, but once the Fed reverses course and raises rates, and the government stops spending like a drunken sailor, I see the dollar recovering.

BM: Another greatly hedged statement. When does he see this reversal of course for the Fed and the government? It seems the only possibility of a reversal of course is if the Fed decide saving the dollar is more important than supporting Congress, Then, Congress will take over Fed activities (likely incorporate the Fed into the Treasury). A greenbackers dream, and the certainty of a hyper-inflationary nightmare.

Saturday, June 4, 2011

Real Bills One More Time (part II)

Posted by bionic mosquito on 06/04/11 09:38 PM

(In further reply to Bischoff)

You continue to argue that inflation is not inflation because of some legal distinction or some accounting principle, as if some legislation or FASB decree can change the economic nature of the event.

There certainly is a legal and contractual difference between credit and receivables. There is also an accounting difference - each has its own place in the balance sheet. There is different treatment in the case of bankruptcy.

But economically there is no difference. Both capture the deferment of final payment for goods received today, albeit under different legal/contractual principles. All of your goings on about standard accounting principles and the difference of governing law do not change this economic fact.

Now here is where you say "I don't understand the difference" and I say "I don't know how to explain it better." You are one who is convinced that legislative action can change economic reality. You likely will never understand the difference.

Now, in any form (credit or receivable), the economic issue is the same. As Wimpy would say "I will gladly pay you on Tuesday for a hamburger today." It matters not to Wimpy how the seller books the transaction.

Why is it inflationary? Because it is fractional reserve. Why is it fractional reserve? You answered the question yourself. You say there is not enough gold (if you recall, gold = money, money = gold) to support production. (Not enough gold: another false concept, but not important to this discussion).

Not enough money (gold), but somehow through the magic of pixie dust man create some. Just like Bernanke and B of A.

Don't tell me (but I know you will anyway) that it is backed by gold. If the gold was there, then there would be enough gold to support production. But you say there isn't enough gold to support production. There either is enough gold or there isn't. You cannot argue both to be true at the same time.

Real Bills One More Time

Posted by bionic mosquito on 06/04/11 11:06 AM

(In reply to Bischoff)

"Money = Gold

"Gold = Money

"However, with the greater demand for products, the amount of gold used as currency was insufficient to also pay for each of the production steps in bringing an item to market. Unless there was a way to finance the production steps without the use of gold, the gold tied up to finance production would leave no gold with which to make purchases.

"The answer to the shortage of gold to finance both production and trade, lay in the development of a "redeemable" currency. Producers within a production chain for items in immediate demand by the consumer were financed by producers each other by drawing "Real Bills". These "Real Bills" were settled at the end of ninty days, after the end product had been sold.


While recognizing the possible utility offered by real bills, I will suggest that I could not have written a better description of the fractional reserve and inflationary nature of this credit instrument. (Yes, it is credit).

Thank you, Ingo. As in our dialogue yesterday, I find in your words a better statement than any argument I might make on my own. I could save myself much trouble if you would only agree to take my part in our disagreements.

Friday, June 3, 2011

A Further View on Centralized Government

Posted by bionic mosquito on 06/03/11 04:56 PM

While we are waiting for Ingo to gather his thoughts, I would like to expand further regarding my comments about Lincoln's War and the loss of the states' voice.

Declaration of Independence

When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.

Thomas Jefferson makes clear that the people have the right to disband government if the people believe that government is not serving its proper role. Was the South doing something beyond this such that Ingo feels compelled to applaud Lincoln's use of utter devastation? Jefferson makes clear that people are justified to disband the Union, yet Ingo argues that Lincoln was justified to maintain the Union under all circumstances (as he has previously stated). Does Ingo suggest that it is 'just' that a government can compel obedience by such force, even when the people decide that a change in government is in order? What would Jefferson say?

Ninth Amendment: The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.

Tenth Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The Ninth and Tenth Amendments make clear that Federal powers are limited only to those enumerated, and those not enumerated are retained by the states or the people.

Kentucky Resolution (penned by Jefferson): That the several states composing the United States of America are not united on the principle of unlimited submission to their general government; but that, by compact, under the style and title of a Constitution for the United States, and of amendments thereto, they constituted a general government for special purposes, delegated to that government certain definite powers, reserving, each state to itself, the residuary mass of right to their own self-government; and that whensoever the general government assumes undelegated powers, its acts are unauthoritative, void, and of no force; that to this compact each state acceded as a state, and is an integral party, its co-States forming, as to itself, the other party; that this government, created by this compact, was not made the exclusive or final judge of the extent of the powers delegated to itself, since that would have made its discretion, and not the Constitution, the measure of its powers; but that, as in all other cases of compact among powers having no common judge, each party has an equal right to judge for itself, as well of infractions as of the mode and measure of redress.

We see from Jefferson's words that the states did not assume a position of unlimited subservience to the federal government, and that acts of the federal government that go beyond the enumerated powers are null and void.

Virginia Resolution (penned by Madison): That the Constitution of the United States, having delegated to Congress a power to punish treason, counterfeiting the securities and current coin of the United States, piracies, and felonies committed on the high seas, and offenses against the law of nations, and no other crimes, whatsoever; and it being true as a general principle, and one of the amendments to the Constitution having also declared, that "the powers not delegated to the United States by the Constitution, not prohibited by it to the States, are reserved to the States respectively, or to the people," therefore the act of Congress, passed on the 14th day of July, 1798, and intitled "An Act in addition to the act intitled An Act for the punishment of certain crimes against the United States," as also the act passed by them on the -- day of June, 1798, intitled "An Act to punish frauds committed on the bank of the United States," (and all their other acts which assume to create, define, or punish crimes, other than those so enumerated in the Constitution,) are altogether void, and of no force.

We see from Madison's words that the federal government has authority to punish only a very limited set of crimes, also specifically citing the Tenth Amendment.

Finally, is it likely that those wise men who sat in Philadelphia during that hot summer of 1787 would have supported the document if they knew it came with the right of the Federal government to declare war on their home State if there was some disagreement, or even, in fact, if the State later decided to secede? Would the States have ratified the document if they knew that, to enforce the Union under all circumstances, the Federal government would consider as acceptable the type of devastation that was ultimately unleashed on the South - both the military and civilian devastation?

Of course, the answer to both questions is no. Yet Ingo clings to the notion that Lincoln's actions were justified. It is damnable, and it is irrational to conclude that somehow the 17th Amendment carried more weight in diminishing the voice of the States than Lincoln's war did.

Wednesday, June 1, 2011

Global Government, Part II

Posted by bionic mosquito on 06/01/11 02:25 PM

Ingo, one question mark per question will suffice. I get it.

"How can you overcome central control when local culture, will, norms and self-reliance is checked and subject to central control now."

Just because it is so in some places doesn't make it so everyplace. Just because it is so at a specific times doesn't make it so at all times.

How can you overcome central control? Central control cannot last; this has been proven countless times. The Soviet Union is gone, now made up of a dozen separate states. Czechoslovakia is gone, broke in two. Yugoslavia is gone, with a half-dozen states standing in its place.

There will be more. As Cat Writer suggests, the EU will not stand as currently configured, it will break. Iraq will break in three. Afghanistan never was one, and will not be anytime soon despite having a central government in name only. Look at the Caucasus, a cauldron of factions.

It is not so difficult to envision that this will be true for the US as well. Yes, the central government might remain in form, but the power will be removed once the checks bounce (literally or figuratively, it won't matter). People will look to local solutions, as the national ones will fail, as they most definitely will.

A few hundred cannot contain a few million or a few billion by any means - force or otherwise - if the protection racket no longer is functioning.

I have mentioned before Jacques Barzun "From Dawn to Decadence" and Martin Van Creveld "The Rise and Decline of the State." Neither could be described as a radical; both come to a similar conclusion from different approaches. The centralized and all-powerful state is coming to an end, and we are living it.

"Do you advocate violent overthrow of the controlling elite...???"

Violence only in self defense.

"If not, then why hasn't central control been eliminated already...???"

It will likely never be eliminated, but it can be greatly diminished, and certainly decentralized. It has been decentralized where the promises failed. It will be decentralized where promises are yet to fail but will fail, as they must.

Too many non-productive supported by too few productive, with the ratio getting worse (BTW, IMHO this is why they opened the door to China and India - try to suck in a couple billion productive people to change the math. It isn't working, but that is a different subject). This cannot continue. The use of force, a new currency, the UN, the ECB, the IMF, the elite - none of them can change the very basic laws of economics.

When it fails, we will see Human Action. In some places, the new boss might be just like the old boss. In other places, less control will be the rule. In any case, decentralization will offer people more choices.

Global Government

Posted by bionic mosquito on 06/01/11 09:52 AM
"One of the main tenets of Money Power is centralization. This is in fact its most important dominant social theme. The world needs global government. A New World Order. Western elites are not far from their goal actually."

DB is quite astute in pointing out that "Western elites are not far from their goal actually."

Global government is not in our future; it was implemented in our past. All the structures were put in place post WWII. The UN, IMF, and the World Bank are such structures. NATO is another. The US Dollar is another.

A legislative / executive body in the UN. A central bank in the IMF. A lending arm in the World Bank. NATO as the military arm. And the dollar as the world's currency.

The tumult of the first half of the 20th century was the revolution. With central banking and fiat money in force, two world wars to consolidate power and initiate the institutions necessary.

And post 1945? A continued consolidation via an "enemy" - first the Soviets, then the Muslims (consider the foresight of establishing Israel in 1948, a full forty years before it was needed. Consider the work needed to bring the world's support to the Jews, such that this action would be taken.). Wars fought via the US military (the anchor of NATO), authorized solely by the UN, with the congress sheepishly going along.

Consider instigating a financial crisis to bring the IMF and World Bank back to prominence, when (over the previous 10 - 20 years these institutions grew to be despised wherever they entered, even irrelevant).

World government is here. Much work was done before 1945 to make it so. Events since then can be understood simply as further consolidation of power - as DB often says, for control. Nothing more.

The region from Vietnam to the Caucasus was one of the last holdouts to this control. And consider where the physical battles have been fought, almost continuously, throughout this region.

It seems a few holdouts exist: Iran, Libya, and perhaps a few others. And what of powers such as China and Russia? It strikes me that they play the game, do the dance. Leaders there also have a lust for power, and take actions that keep their power in place. Many times these actions align with the desires of those behind global government, it seems.

World government is here, increasing its consolidation and control since 1945. It is a testament to the strength of the machine that the population of the west for the most part continues to fear that world government is a risk of the future, when in fact it has occurred in the past.

Fortunately, it will not work; centralization never can. There are too many vested interests for their own little kingdom of power; these won't go along so easily. Even more important: as force increasingly becomes the only tool left available to the elite, more people will rebel. As the promises of increased security in exchange for less liberty are broken, more people will rebel. When control relies on force instead of passive compliance, enough people will withdraw consent.

Unfortunately, it will be a painful transition.

Thursday, May 19, 2011

More on Fractional Reserve Banking

Posted by bionic mosquito on 05/18/11 02:42 PM

I find this video worthwhile for those not yet exposed to the systematic depredations of the monetary system. In other words, a good introductory video.

The fixation of the Mises Institute (or at least many people associated with it) on the "fraud" of fractional reserve banking is like a lead weight around the neck of this very fine institution. Read the contract. The money is not yours once you deposit it. Understand bankruptcy law as relates banking - you do not have first claim on your deposits, you get to stand in line with the other creditors, many of whom have claims senior to yours.

FRB certainly can be viewed as inflationary to the money supply; FRB certainly adds risk to the enterprise and those doing business with it. But it isn't fraud. Therefore I find no reason by which to "stop" it in a free-market-based system.

Posted by bionic mosquito on 05/19/11 09:25 AM
In reply to: Posted by John Danforth on 05/19/11 08:44 AM

"This is the reality, but this is not how it is sold. It is sold to people as if the bank is a storehouse for their savings and a way to turn their paycheck into usable currency. Not one in ten knows what the real relationship between themselves and their bank really is."

Not to be too blunt, but ignorance of the contract and the law does not allow us to enjoy a contract of our wishes.

Why on earth do depositors need FDIC insurance if they, in fact, have first claim on their deposits? When the FDIC decides to take down an insolvent bank, the good assets go to another institution, the "insurance" pays off the depositors. Why don't the good assets just get sold to pay off the depositors? Why, in fact, is the money not there in the first place? Where did it go if it is mine? How can I get paid interest unless the bank has lent the money to someone on my behalf? Why don't I have to pay a fee for storage for my assets, if in fact the bank is storing them for my use on demand?

"Again, the local bank lends funds that are not someone's savings nor their own: in payment for doing a few hours paperwork they hold title to your real estate, and if you miss a few payments, they end up with the physical asset. What has happened? What has happened was the consummation of a fraud. The fake money itself is fraudulent. The way it is legitimized is fraudulent. The laws that make it legal tender are evil. Perhaps in free banking the practice could be decriminalized, but only if the fraud element is removed, so people know exactly what they are getting into and have the choice to opt out."

There are many practices around the system of banking that a) only occur in an extreme magnitude due to government dictate and protection, and b) may also be fraudulent. But fractional reserve banking, in and of itself, is not one of these.

FRB, in a free market system, is a perfectly viable option for banking and money / credit. If a bank gets carried away with the practice, it will fail; its notes would trade at a great discount. This discipline of failure will be the best check and balance on the system; additionally, strip away the government created idea of limited personal liability and the system will very well discipline itself.

Even today, I would have no complaint about FRB absent the government backing of the entire cartel via the Fed and FDIC (to name two of many enabling agencies). The crime is in the government protection, not in the practice itself.

Of course, I would continue to state that FRB is inflationary to the money supply, but the impact will be only to members of society that utilize or transact in the specific currency being overly expanded. Here again, the crime today is the legal tender laws, giving us little choice, at least little choice absent large risks and consequences.

Such is my view of Real Bills; it is also fractional reserve banking (watch Ingo come out of his chair when he reads that, telling me some law passed by some legislature can defy economic reality). My only point and criticism with real bills is that it is an inflationary expansion of credit (well that and the false idea that there is not enough gold for a modern economy to function. Well probably a couple of other fallacious notions, but that is beside the point). That people choose to use it is entirely up to them in a free market. I even might find use for real bills, if we ever see free banking again, and if free banking results in market participants creating credit in this way (here again, watch Ingo jump).

Same for FRB: in a free market, there will certainly be fractional reserve banks. Mises himself seems to have accepted this. He also accepted the idea that the market would keep the excesses in check.

Saturday, April 23, 2011

Too Late to Tinker Around the Edges??

I cannot help but notice a connection to today’s editorial by Mr. Wile and the editorial a few days ago by Mr. Hultberg and his new political party. Without rehashing all of the discussion from the aforementioned editorial, it would seem Mr. Hultberg’s “practical” solutions fall directly in line with the promotion of austerity, and that the solution lies – not in a complete rethinking of the relationship of government and society – but in a better management of government, with ALL of the control systems remaining in place.

As Mr. Wile said quite well, “Rather than question the fundamental alignment between the public and private sector – the basics of regulatory democracy – the IMF treats a country like a business and prescribes cost-cutting, privatization and other methodologies that address the symptoms instead of the cause.”

I will offer a few quotes from today’s editorial:

FT: This must involve cutting spending, reducing entitlements and raising taxes.

Barr: While the solution to that problem surely lies in more responsible policy – lower spending, a less ridiculous tax code….

Wile: But the real message in Barr's article, like the FT's, has to do with IMF-style remedies in my view. The phrase "less ridiculous tax code" seems to bear that out.

Wile: The conversation, as we can see in the above articles, is constricted. The problem is always defined as too much government spending. The solution is to demand more revenue from the citizens' affected and to slash the public services that many have grown to depend on.

Wile: IMF provisions featuring privatization, tax hikes and public sector "austerity" are designed in my view to provoke the very public anger that Western elites are counting on to fuel a conversation about yet MORE centralization and MORE governmental control – of a "transparent" and "disciplined" type.

Wile: The conversation is constantly to be focused on "better" government, not less of it.

And what will be the likely result of such “practical” solutions as offered by Mr. Hultberg and others like the IMF?

Wile: The result is a controlled social implosion that the powers-that-be can capitalize upon to introduce a new system, presumably a more globalized one, complete, perhaps, with a global central bank administering a new currency.

Finally to the point that “practical” solutions are no longer sufficient, and in fact only a distraction from the true problems:

Wile: One doesn't merely need "less" of what is currently offered. What is needed is a discussion featuring the fundamental freedoms that gave Western-style democracies their strength to begin with. The US 's vibrant economy in particular was built without a graduated income tax and without a central bank. There were no centralized regulatory authorities and no over-arching military-industrial complex.

I would only modify one portion of the statement. The US’s vibrant economy in particular was built without an income tax of ANY kind. The current income tax and the current central bank both were born at the same time, the dreadful year of 1913.

Now, I will say, I wrote all of the above in real time: capturing my thoughts as I read the editorial, and before reading the conclusion. Imagine my surprise, when at the end of today’s editorial, I read Mr. Wile’s conclusion, which is exactly the opposite of everything I gathered (and commented above) while reading the editorial:

Wile: While an even more radical downsizing might be preferred, Hultberg's proscriptions are at least a start and go far beyond the IMF-style conversation now being prepared for the US.

Mr. Hultberg supports a flat income tax, when the vibrant economy of the US was built with NO income tax. Mr. Hultberg supports a Federal Reserve, with a mandated policy to inflate 4% per year, when the vibrant economy of the US was built with no such mechanism of evil. Mr. Hultberg offers a dialogue exactly within the framework of those preaching austerity: fiddle around the edges of a failed system, yet not questioning the system itself.

The conclusion of Mr. Wile’s comments today seems counter to all of the analysis in the editorial.