Monday, January 24, 2011

A Thought About the US Constitution


1) inviolate property rights,

2) recognition that coercion is not a proper means to order society, and

3) no one, regardless of employer, is subject to laws different than the rest (setting aside who makes and enforces the laws),

the Constitution is of little comfort as a document, although certainly better than others of which I am aware (especially when taken with The Declaration of Independence).

That these were not clearly delineated is a flaw. There may be hints of this in the document, but like any written document, subject to interpretation. Even the Fifth Amendment makes clear that private property can be taken.

Of course, there is that little problem of being party to an agreement that one was never party to....

Friday, January 21, 2011

Anarchy, by Roderick Long

I only recently came across this gentleman. To my detriment. He speaks and writes quite eloquently regarding anarchy as a means of organizaing society.

Two podcasts from LRC:

His blog:

The text of a speech given at The Mises Institute:

Thursday, January 20, 2011

More on Real Bills, with Ingo Bischoff

I will encourage all to visit the comments by Ingo Bischoff at the subject article, beginning at: Posted by Ingo Bischoff on 1/19/2011 1:56:59 AM.

The article can be found at:

Following is my reply to Mr. Bischoff's post at: Ingo Bischoff on 1/19/2011 10:31:07 PM. I encourage that his post is read in its entirety.

@Ingo Bischoff

I thank you again for your diligent and detailed comments in this dialogue. You offer a wonderful example of the positive aspects of such forums.

1-3: I believe I haven't been clear in my use of the term “saved consumption good.” I am not speaking of milled flour being “saved” to deliver to the baker. I am speaking of (in this example) bread, not milled flour. There can be no production of milled flour without there first being a savings of previously produced bread. The miller must eat while he is milling. The baker must eat while he is baking. Neither is living on the bread that is yet to be produced. The previous “savings” of milled flour is not edible to the producer of bread while the producer of bread is producing bread. The producer of milled flour cannot produce milled flour without the savings of previously produced and saved bread.

There must be savings in the form of goods immediately ready for consumption for there to be further production of consumption goods. To have time to produce, one must have access to bread in the meantime.

4: “In the absence of Real Bills, all steps in the production of a consumption item would have to be financed by savings.”

But all steps in the production of ANY good requires savings, and must be “financed” by savings. The miller must have access to previously saved bread to sustain his life in order to attend to the task of milling. The baker must have access to previously saved bread for the same reason. Real Bills cannot provide the bread for sustenance during the production of bread if the bread doesn’t exist as savings.

5: Please see my comments to 1-4 above. I do not hold this position due to my growing up under Fed central banking, Keynes, or Friedman. I hold these positions because I know if I am to spend time milling, I must in the meantime rely on previously saved bread to live. It is a question of needing to eat while I work on something I cannot immediately eat. It is not due to any supposed mis-guided economic ideology.

6: By your own statements, I can conclude this is inflation. You state that “In the absence of Real Bills, all steps in the production of a consumption item would have to be financed by savings.” The problem is ALL steps MUST be financed by savings. Real Bills cannot change this fact. Your statement indicates that Real Bills offers credit (not in the legal sense, but in an economic sense: meaning accepting deferment of an immediately consumable good in trade for my output) absent savings. This is inflation. It is the same as the actions practiced by central banks. They also offer credit absent savings.

Posted by Bionic Mosquito on 1/21/2011 11:32:51 AM

@Ingo Bischoff

Thank you for the understandable example. I will only add that every participant in the chain (the owner of the granary, the miller, the baker) must also have savings (or access to savings) in order for production of bread to occur. There must be savings (in the form of consumption goods previously produced but not consumed) in order to provide credit (commercial or otherwise) to fund the production that serves consumption. Absent savings, the credit is inflation.

I return to Dr. Fekete's statement: "I made the central point that the source of commercial credit is not saving but consumption." I have attempted to gain clarification on this many times before (I apologize, as I don't recall if I had this discussion with you in addition to others).

The terms used by Dr. Fekete must have meanings different than I understand and different than what I can glean from your example. Or his theory is different than your theory, or I can not grasp the nuance, or ???

In any case, I feel as if we are now talking in circles. I am satisfied that I understand your explanation. However, if Dr. Fekete again emphasizes this statement in an editorial at DB, I will again raise my question.

Posted by Bionic Mosquito on 1/21/2011 12:43:00 PM

@Ingo Bischoff

Respectfully, Dr. Fekete did not say: I made the central point that the INCENTIVE TO PROVIDE commercial credit is not saving but consumption.

Such a statement would fit in with your explanation. And it would be somewhat understandable.

I will quote him again: “I made the central point that the source of commercial credit is not saving but consumption."

He made "THE CENTRAL POINT" that the "SOURCE" of commercial credit is not saving but consumption. This is a combination of Ellen Brown and central banking. I will not repeat again all of the reasons I conclude this. It is so.

The more I hear statements trying to explain away this seeming impossibility of his “central point”, the more I conclude it is a wrong statement. With his “central point” he is, in fact, advocating inflation as the source of wealth creation.

Posted by Bionic Mosquito on 1/21/2011 3:05:46 PM

@Ingo Bischoff

The key word is "source". Dr. Fekete must be using this in a manner I do not understand, and a manner different than its conventional meaning. In the manner I understand the term, and in its conventional meaning, I conclude real bills, via monetary inflation, facilitate production. His own statement (and statements you have made) only confirm this for me.

There is a difference in my statement and Dr. Fekete's. Source does not mean "incentive to provide." I do not know how to explain it differently.

Ellen Brown defines the source of credit as a claim on future production (to the extent she even has an answer, as her comments to Schiff demonstrated her confusion more than anything else). This is, of course, wrong. This is the similarity in a nutshell.

In any case, we have gone in circles, and I have taken up too much of your time. My point is not to convince you, as I am sure that will not happen in any case. My point is to try to gain clarity myself as to real bills and inflation, and secondly to put the conversation in a public forum such that others can draw their own conclusion. In this, I think enough has been done on this thread and on this aspect of real bills.

I thank you again.

Wednesday, January 19, 2011

More deflation? Antal Fekete at the Daily Bell

"But as my theory suggests…the presence of risk-free speculation renders the increase in the money supply counter-productive. It causes prices to fall rather than rise."

Dr. Fekete spent the entire article talking about bond prices rising, he concludes by saying prices are falling. Which prices? Bond prices? If he is referring to other prices, where is this so? The Fed, the banks, and the Treasury have been playing this game for decades, certainly since the death of Bretton Woods. Are commodity prices on average lower today than they were in 2000? 1990? 1980? 1970?

The depression is a poor example: start with no FDIC insurance as a big culprit for price deflation. In any case, a few years out of a hundred doesn’t tell the tale. The relevant period for comparison should be post-1971, when redeemability died. The Fed, the Treasury, and the banks have been playing the bond game the doctor describes since then, and prices have gone up over five-fold.

If the doctor is correct, cash is the asset everyone should hold. Cash and only cash. This would make investing life much easier, and also generates no taxable income. My purchasing power will improve without generating taxable income. Why do anything but hold cash?

This scam of bonds has gone on for decades. There has been no price deflation. No wonder the doctor is a lone voice in the wilderness.

Tuesday, January 18, 2011

Price Deflation, by Dr. Fekete

The subject editorial can be found at:

I was going to go through a point by point commentary of this editorial. I cannot. As is usual with Dr. Fekete's writing, it is not very comprehensible to me. Make of that statement what you will: I have a feeling that there will be two camps with opposite and strong opinions of this as it relates to my competence.

It appears that the good doctor is saying that the actions of the Fed and other central bankers in the world will result in the purchasing power of the dollar and other fiat currencies to increase. If so, this would be a first in history to my knowledge. No wonder he is a self-proclaimed lone voice on this subject.

Of course, as with all discussions of inflation and deflation, one item missing here is a proper definition – or at least a definition that the doctor would like us to use. Is he speaking of prices as measured by the CPI? Is he speaking of asset prices? Is he speaking of the money supply? Left unsaid, an Austrian would assume the topic refers to the money supply. I have no idea what the good doctor is referring to, but he seems to be discussing consumer prices as he refers to targets the Fed is aiming for. In the common lingo, this is consumer prices.

To varying degrees, the Fed (with and through the banking system) has been creating money since 1913, accelerating since 1971 and supercharged since 2008. Yet, other than perhaps one year in the 1950s, there has been price inflation continuously. I wonder: is there some reason we should expect something different now? Why hasn’t this great deflation that is so certain in our future happened at any time since the end of the war? The same practice has been going on for decades, without deflation. But somehow it is different this time. Let’s get this one out of the way now: don’t go back to the depression; the money supply shrank because of the lack of FDIC insurance. That isn’t a problem today.

Now, it is quite possible we will see a deflation in asset prices, especially assets propped up by leverage in the banking system as currently configured. But a lower CPI? Highly unlikely.

The Fed wants people to watch the CPI. As long as it is benign, it is all systems go for money printing. As has been true with all money printing (or coin shaving, or whatever you want to call it), the money will eventually fail. I do not see how this can result in that same failed money gaining purchasing power.

More on Real Bills at The Daily Bell

The original article can be found at:

@Ingo Bischoff

I thank you again for taking time to further expand on this.

"So we go on and defend our view points in the meantime."

Yes, but more. I think the discussion allows for the proof of that being discussed, it allows for the testing of ideas. It helps in better dissemination of the ideas. The internet, and certainly forums like that DB offers are good avenues to prove by fire the ideas we each hold.

"Without the use of Real Bills to fund production of consumption goods, the savings pool in gold would have to be fifty times larger than with the use of this "social circulating capital".

This statement gets to the heart of my criticism regarding real bills and inflation.

1) Paper (in the form of Real Bills) doesn’t fund the production of consumption goods. Saved consumption goods (previously produced goods, not yet consumed) provide the ability to fund the production of other consumption goods.

2) If there is savings in the form of consumption goods such that it is available to fund the production of further consumption goods, then these will be funded to completion. Real Bills may facilitate the necessary division of labor, but this mechanism isn’t the only one available.

3) If there is not such savings in the form of previously produced consumption goods, the projects cannot be funded to completion. Eventually, the market will realize that the resources are not available to complete the open projects. (The “bust” of the “boom and bust” twins.)

4) In the case the savings exist, there does not need to be 50 times more gold. Prices would be one-fiftieth of what they would have been absent real bills. (No, I am not advocating validity of quantity theory of money, I am speaking directionally.)

5) To claim that some form of “paper” is what is necessary to fund production strikes me as the same theory of central banking today. They are “priming the pump”, trying to “engage the animal spirits”, or whatever. It is a different form of claiming the same thing: using paper to hide the fact that there are not enough resources saved.

6) Hence, inflation. With all of the distortions that such a system brings into the economy. Including the bust that comes when the market concludes that the resources do not exist to complete the open projects.

7) Perhaps the 90 day window limits this damage, but the damage is in any case real. And as assets utilized in the production of consumption goods can alternatively be used for other goods, the damage of inflation will not stay limited or constrained. Distortions will reverberate throughout the market.

Thank you again for the dialogue. While others might have had a vision regarding real bills, it still eludes me as to my objections. Perhaps due to my shortcoming, or perhaps due to the theory. I am satisfied in the fact that the dialogue gets a fair airing, as DB so graciously allows.

Sunday, January 16, 2011

Ellen Brown at The Daily Bell

The interview can be found at:

As has been stated by others, where one falls on this subject depends on one’s belief of acceptable social structure. On the one hand, force, coercion, theft, fraudulent money. On the other hand voluntary relationships, human action, individual freedom.

The feedbackers are easily identifiable in one camp or the other. No need to name names, it is quite obvious who favors force and slavery (with no shame) as opposed to freedom and human action (with great eloquence).

As to Ms. Brown, her comments are quite clear and should leave no doubt as to her viewpoint.

“To be a sustainable system, profits need to be returned to the community rather than siphoned off into private coffers.”

Very communistic. Equally deadly to the masses in the end.

“Their access to credit needn't be contingent on someone else's agreement to give it up. The system would be mathematically sustainable.”

Federal Reserve / Central Banking. And equally (not) sustainable.

“I believe a government could be structured so that it actually served the people; but first, it would have to recapture control of its monetary system.”

I will use the trick others use when free markets / anarchy are proposed as the best solution: Show me some successful examples of such a government. There are at least 100 million dead and countless more displaced in the last century that would disagree. The monopoly of force and violence will ALWAYS attract the people most desirous of abusing this privilege. Always.

“According to the New York Times of September 2010; Per the NY Times; I'll go with the NY Times.”

Economic and financial counsel from the NY Times.

“Loans grow organically in response to the demands of trade, and that credit-money disappears when the loans are paid off.”

Sounds like Real Bills. Equally inflationary.

“Without government you would not have roads, bridges, court systems, etc.”

Not historically true, and certainly naïve.

@Ellen Brown "We're not the enemy. We're all taking potshots at each other instead of presenting a united front against those dark forces that now control banking AND government."

It is not true that the enemy of my enemy is my friend. In a revolution, all may agree they are against the "current" yet not agree on the solution. Your proposal is as bad as the current system ' some plusses, some minuses. But to exchange one man with a gun pointed at my gut for another man with a gun pointed at my gut is not my idea of improvement, and not an idea worth spending one minute's time to support. If there is one system worse than the current, it would be to give politicians complete control of the money supply, as you propose. The only "good" I can see coming from your idea is that it will destroy the dollar that much sooner.

@Julius Abanise, Ingo Bischoff " the comments that you quote were mine, not DB's. Although I understand the confusion, as the fault is due to my internet limitations. Please see the original comments to confirm DB was providing to me a courtesy of posting my response. (I will reply to Ingo in more detail later)

@DB ' have you ever approached Dr. North for an interview?

@Ingo Bischoff

As mentioned above, the comments were mine, not DB's. Please see the commentary at:

"It is critical to understand that there is NO CREDIT involved in creating "Real Bills"."

The distinction may be a valid legal distinction; I do not see it as an economic one. Later in your post, you seem to describe the credit aspects of real bills. For example: "THERE IS NOTHING MORE CREDITWORTHY THAN THE "READY DEMAND" OF CONSUMERS." Please explain...maybe a "real bills for dummies" would help. Is it credit, or isn't it? How can you describe something as "creditworthy" and also state it is not credit? If it is not credit, why do I care if it is creditworthy?

Also, please reconcile your statement with that of Dr. Fekete, where he describes an attribute of real bills as follows: "I made the central point that the source of commercial credit is not saving but consumption." He is describing the source of credit, not the source of clearing (although I recognize he also attributes to RB the latter function as well).

"This can be done by a 90-day Invoice or a "Real Bill"."

This is credit. It is not clearing. Anything beyond COD is credit in economic terms, whatever the legal terms might be.

"The statement by "The Daily Bell" that Real Bills are inflationary is incorrect. The bank notes created against a "Real Bill" expired with the maturity of the "Real Bill"."

Again my statement, not that of DB. So, they are only inflationary for the period they are outstanding. As it is expected that real bills would constantly exist due to the continuance of economic activity, when exactly do they mature as a paper (fiduciary media) instrument? This seems like the same as saying government debt is retired...when in fact it merely rolls over (and grows).

I am open to simple, straightforward explanations regarding real bills. Please see the commentary I posted to Dr. Fekete’s latest editorial at DB. My objections remain.

@Ingo Bischoff, thank you for your detailed and reasoned response.

“The legal distinction between a "Credit Agreement" and a "Real Bill" makes all the difference in the world.”

Not as it relates to inflation. Credit extended without savings is inflation, an unavoidable law of economics. By contract, two parties can agree to anything. However, just as they cannot, by contractual agreement, defy the laws of gravity when jumping off a cliff, they also cannot agree by contract to defy the laws of economics.

“I would be grateful to you, if you could explain what you mean by "legal terms" in contrast to "economic terms" when it comes to "Real Bills" and "Credit".”

In economic terms, anything other than final settlement upon transfer of goods is credit. From a legal standpoint this “agreement” can be accomplished via extended payment terms, the time required for a check to clear, the billing cycle of a credit card, or final settlement in coin via real bills. The legal form is irrelevant to the fact that credit (a delay in final settlement) was extended.

“If "Real Bills" circulate on their own, are they inflationary? Decidedly, they are not.”

Private money not backed by savings (my interpretation of your statement “circulate on their own”) is inflationary just as easily as any other money not backed by savings.


"Yes, North debunks her, and does so thoroughly, but then she rebuts many of his criticisms as well."

Per North, she attempted to debunk only his historical criticisms, to which he replied. She has ignored his economic criticisms, as well she should. See Dr. North's comments today to this Ellen Brown interview at DB:

"That is why we have tried to focus on the larger picture " freedom versus state, in other words."

I agree that this is the larger issue.

@Ingo Bischoff

Once again, my compliments as your explanations are helpful to this discussion.

"Let's assume a worker in a bakery gets paid with script good for "x" number of loaves of bread. A worker in a dairy gets paid with script for "y" number of gallons of milk."

What of the laborers who worked on the intermediate steps of the process? They cannot eat milled flour (bear with me, as I am attempting to work within your example). They can eat bread, but there is as of yet no bread.

There must be a savings of bread somewhere in order to facilitate the miller's life until the flour he milled is eventually turned into bread.

Thus my struggle remains – there must be savings (as excess of prior production over consumption) in order to legitimately provide credit – commercial or otherwise. During the 90 days of the cycle, those working on the intermediate goods must eat from someone else's (or their own) previously "saved" production.

If there is not this excess in terms of real goods having been saved, all the trading paper in the world (real bills or otherwise) will act just as inflation does to a fiat money supply. Pump priming to get the economy going through inflation.

@Ingo Bischoff

To clarify one comment: "...there must be savings (as excess of prior production over consumption) in order to legitimately provide credit..."

By credit, I mean any form of deferment of receipt of a good ready for consumption. By consumption, I mean a finished good (bread) as opposed to an intermediate good (milled flour).


"From the end of the Napoleonic wars until about the beginning of the Great War there was no price inflation."

Those in power have convinced the masses of their desired definition of inflation. It is a nice "rule of thumb" as far as TPTB are concerned; "common sense" to the uninitiated, the rubes, and the pawns; “good enough” for those who like "to speed up the process of finding a solution."

There is a Greek word that describes this type of thinker, this rube for TPTB. It is on the tip of my tongue. Perhaps you can help?

Yes, TPTB have convinced many that inflation is to be measured by prices. They do this so no one watches the money supply. Of course, in an economy based on sound money and with the productivity improvements seen over the centuries, prices would and should fall. But don’t tell the serfs, convince them to watch prices – in fact convince them that a little price inflation is healthy.

Certainly prices were more stable in the era you cite, likely because the money supply was anchored to gold. I believe even those who support RBD say that the critical feature (in fact, RBD cannot work without this) is an ultimate redeemability in gold. The key to a stable money supply is gold, not real bills.

But you knew that already, right? Having an a priori stoush is more fun, right?

Saturday, January 15, 2011

The Art of NOT Being Governed: The fight for control

The second chapter of my running commentary on this book....

The book uses the name "Zomia" to describe the region under question: all the lands at altitudes roughly 300 meters and higher, stretching from the Central Highlands in Vietnam all the way to the far northeast tip of India. This region, up until approximately 50 years ago, was fundamentally an ungoverned region. The book goes on to explain how and why.

Other parts of the world have shared similar geographic and political characteristics. Some extend the region even further westward all the way to Afghanistan. The author allows for this, but the further region is not his area of study.

This point, however, caused me to reflect. Coincidentally (or not, perhaps) the two bookends (Vietnam and Afghanistan) have a couple of obvious shared relationship…I will pause for a moment on this.

I have come to appreciate that the underlying objective of the wars of the West over the last 100 years and more is for control. Not for oil, not to stop the spread of Communism, not to make the world safe for democracy, not for women’s rights, not for WMD. I first came across this concept of war for control at The Daily Bell.

Just control. If a region can be brought under control, then all exploitation is available to the conqueror. Yes, this may also include exploitation of local natural resources, but mostly it appears it is for exploitation of the population through the mechanisms of western style regulatory democracy. Central banking, funny money, taxes, corporate-state mercantilism, etc.

Has there ever been a more thorough system of control developed? Better than slavery and serfdom, as the victims of the modern western state are groomed to one day (perhaps after a generation or two) be voluntarily plucked.

So what of the two shared relationships? Let’s go to the less obvious (at least to me before I began reading this book) first. The two bookends (and the regions in between) shared the feature that they were quite ungoverned in the altitudes above approximately 300 meters. No state was receiving the benefit of exploiting the population. (I will discuss the reasons why in future posts.)

Now to the more obvious shared relationship: the two share the position of being on the opposite side in multiple and various wars against the west.

In hindsight, it is very difficult for any standard explanation regarding the purpose and objectives for the war in Vietnam to hold together. For Afghanistan, we don’t even need much hindsight. This war and its objectives cannot be explained.

So what if the objective was merely control, control for exploitation via the mechanisms of western political and economic levers? All tried and proven levers useful to extract wealth from an almost unsuspecting population. Perhaps you don’t believe this is true, and you might be right. But the shoe certainly does fit.

Left alone and outside of the sphere of state control, this population worked primarily for their own benefit, and that of family and community. However, once controlled, they could be counted. They could be taxed. They could be easily conscripted. They could be levered up to increase the wealth of those in power – wealth being one of the byproducts of such control.

The control does not have to be direct – it was not needed that Vietnam became the 51st state. With the mechanisms of mercantilism in place, wealth can be extracted. This is sufficient.

It strikes me that there is good reason to look at this region (including Zomia, but in fact running further west to Afghanistan) in this light. Also to look at other regions with similar characteristics elsewhere in the world in the same way.

As mentioned earlier, I will get into why these areas were ungoverned and why the people lived in such a state. For now, it is perhaps enough to consider that this idea of control is enough of an objective for war. For the spark of this insight, I owe The Daily Bell. For bringing the idea to fruition, I am indebted to the author of this book.

Perpetual War

Original article at The Daily Bell:

@Rick Spencer

“I feel the problem with this article and all others like it is that they are unwilling to admit to the evil that exists among men…”

There is no doubt evil exists in this world. I admit it.

“…and the hatred of many who want to destroy the U.S.”

Although one valid query is to ask why so many want to (supposedly) destroy the US, I will skip that one. Many need something to fear. Instead, I will ask, what power on earth could have destroyed the US? Don’t offer global nuclear holocaust, as those with the capability to “destroy” the US via nuclear means also knew the consequences of this attempt.

So who? Hitler? Saddam? Neither had the ability or desire to destroy the US. Hitler couldn’t even cross the channel (and never wanted to) let alone the Atlantic.

Men with towels on their heads living in caves? Nineteen men hijacking four planes? No ability to destroy the US here, other than setting in motion the completely suicidal reaction of the US Government. In this you have a point, although my guess is it is not the one you are attempting to make.

Who or what in the last 100 years posed this threat?

“What are we to do? Of course war is detestable and the last group that wants it is the military, as they along with their families are the major groups to personally suffer.”

If they don’t want to suffer, don’t volunteer. Don’t send their sons and daughters to fight 10,000 miles away against people who never did anything against them and never would or could anyway.

Certainly, defend the shores of America. A five thousand mile wide moat on both sides and a hundred million gun owners are a pretty good start toward national defense.

“Most readers were not around to experience WWII, the Cold War, Korea, Vietnam, or the present actions as have I. Without U.S. involvement in these you would have a far different life and the whining would be considerable higher.”

None of these conflicts posed a risk to the situation in the US. However, they each contributed to the bankruptcy of the US. They each contributed to destroying the productive capacity of the US – both man and machine.

The Great War would have ended with a much more just peace had not the US intervened. Germany would have reached a more reasonable settlement with France and England. Then, who knows? Does WWII even happen? And when it did, where was the risk to the US? Had FDR not done everything in his power to ensure the US was attacked, it is likely the US would not have even been attacked. The Cold War was an invention, it is now quite well recognized that the US regularly inflated Soviet capabilities in order to maintain an enemy. Korea? Where is the risk you are concerned about? Vietnam? The US lost, and the “free” world didn’t end as we were promised it would before and during the war.

And missing from your list: Iraq and Afghanistan. Do you have a special purpose in mind here as well? Retribution for the acts of 19 people? None of whom survived the event anyway?

Keep peeling back the onion, you will find even more evil behind the insanity of the last one hundred years. I have only outlined the first layer or two of the fallacy.

The sad part is that, despite all the evidence to the contrary to anyone who spends a little time looking, people still believe as you do. And they will continue to send their sons and daughters to kill people that never did them any harm, and they will continue to send their sons and daughters to be killed.

Friday, January 14, 2011

Geo-Rent: A Plea to Public Economists, Fred Foldvary

This article can be found in PDF form via a Google search.

I read the article at the encouragement of Ingo Bischoff. I "met" Ingo through our posting at The Daily Bell.

I will offer a brief summary of the article, and a few thoughts. Of course, errors in my summary, if any, are my own.

"The idea is to tax the market value of land, exclusive of the value of improvements."

This is the basic idea of taxation, as presented by Foldvary. The idea is that, through "public" services / expenditures, it is the land value increase that best reflects the ultimate value and efficiency of the "public" improvements. Therefore, it is the land value that should bear the burden of paying for the services. (Here you have my stumbling explanation of Foldvary's eloquently stated idea.)

It is an intriguing idea. Set aside my distaste for any form of taxation (it is theft, after all), the idea of a land value tax has a nice ring. To the extent roads, sidewalks, security (including national defense presumably), public spaces, provide utility, they do so to a given geographic location and inherently make that land underlying the location more valuable.

The tax follows the location, not the person. To the extent an individual feels unfairly taxed (and to the extent that this land value tax replaces all other forms of tax), it is quite easy to avoid paying the tax - sell the property and leave the jurisdiction.

Another possibility comes to mind, however I will admit I have not thought it through....

It would seem that this idea is quite conducive to eliminating (at least greatly reducing) government from the equation. Certainly a private enterprise would be motivated to improve the land value via providing market-demanded benefits in the most cost-efficient means possible.

Localities (cities? counties?) could regularly bid out the contract, with a predetermined tax rate and / or the tax rate to be submitted as part of the bid. Assessments would also be preformed by a third party. Basic services could be outlined in an RFP/RFQ process. The possibility of the service provider being kicked out at the end of the contract term (due to poor service or other reasons) would help motivate toward better performance, and bankruptcy does not automatically have to be paid for by the "customers" (as opposed to the tax-payers always being on the hook.

As I said, I haven't thought it all through. But it is an interesting concept.

I thank Ingo Bischoff for writing and advocating a read of this concept.

Wednesday, January 12, 2011

Fekete: Gold and Honey

My various comments posted at the Daily Bell:

1) The only source of non-inflationary credit is savings.

2) If credit is provided absent savings, it is inflation by definition

3) Gold can circulate without any assistance from real bills

4) Silver (or any other unencumbered asset a party in the trade finds acceptable) can extinguish debt

@Jeff Albertson For an article, start here.

Blumen wrote a series of article, I believe this is the first in the series. If you want further discussion, type "Fekete" in the search box at

One nice feature of Austrian economics is that it is not "over my head." But economics shouldn't be over anyone's head. It only describes how we live our daily life. The basics of Austrian economics are quite simple to grasp: value is subjective, money should be commodity based, etc.

I do not ascribe the same description of simplicity to RBD as it relates to Austrian economics. I understand the mechanism of RBD, just as I understand other economic mechanisms ' for example, central banking. But I do not see a connection of RBD to Austrian economics ' see my post above. The explanations to some basic questions seem over my head, but I am not a trained economist.

@Philip Mccormack, Jeff Albertson

My intent with the Blumen article was not to suggest it was the last word, or that I agree fully with each comment. As Jeff mentioned "...because I had never seen him mentioned by the Von Mises-linked scholars..." I thought I would get the ball rolling regarding this comment.

As does Philip, I also suggest you read all you desire on this subject. I have done so and am not satisfied regarding my four critiques above.

So, I guess instead of looking "upon it as a gift", I see a void. I guess my eyes weren't "opened!" :-)

@Philip Mccormack

"Austrian economists have the same problem with RBD." Yes, it appears many do. The entire doctrine would bother me less if Fekete did not refer to himself or his economics as Austrian – just as I am not so bothered with Friedman as he didn't refer to himself as an Austrian. The theories can be wrong, but at least not associated with the Austrian school.

"Strictly speaking a bill of not a credit instrument. It is a clearing instrument." Perhaps I take his words out of context, but this is how Dr. Fekete has described at least one aspect of real bills in a previous article: "I made the central point that the source of commercial credit is not saving but consumption." As this was discussed exhaustively the last time Dr. Fekete posted here, without correction or clarification from any advocates as to my interpretation, I assume I do not misunderstand him.

As a source of credit without savings, it must be inflationary. As a clearing instrument, it is not necessary. Gold (or silver, or whatever the market chooses) can clear.

I accept that real bills may naturally spring up in a free market, and in fact can provide certain benefits. But, just like drug use in a free society, it does not require me to be a proponent or to ignore the fallacies, the main ones listed above.


"...eventually some low-life crook (read moneychangers) will seek to control or corrupt the standard. In such a case it is the government's rightful place to step in and regulate it."

Trusting a monopoly, with the power to legislate, interpret, and enforce its own dictates (backed by a gun), is the most certain way to ensure that which you most fear. Virtually every time the government held this monopoly, it cheated. Why would you expect otherwise now?

There is no need for a government mint. We do not have a government "mint" for cars, yet the production of cars is infinitely more complex that the production of turning bullion into a recognizable coin.


Fekete: "I made the central point that the source of commercial credit is not saving but consumption."

DB: “What is your point regarding this statement? Can you clarify?”

My point is reflected in the first two statements of my first post on this topic.

1) The only source of non-inflationary credit is savings.

2) If credit is provided absent savings, it is inflation by definition

There can be no credit without savings. Credit comes from savings. Absent savings there is no credit. How many ways can I say it? EXCEPT if the credit is NOT backed by savings. Then it is no different than funny money, and it is inflation.

This point was discussed ad nauseum the last time Dr. Fekete wrote for DB, and never clarified or refuted. It was defended that the source of commercial credit is something other than savings...the source is consumption.

Credit comes from consumption? If there is some theory that explains how two people can eat the same meal, I am all ears. Seriously...enough people fawn all over Dr. Fekete (including Ingo Bischoff, who I have grown to respect) that I want to believe there is meat there. Let's start by explaining this seeming impossibility.

And keep it simple, as Austrian economics doesn't require convoluted explanations.

@DB, I will clarify one statement in my last post, I did not mean to suggest that I include Ingo as one who "fawns" over Dr. Fekete, as many others do. I have found his statements on many subjects quite well reasoned, even though I don't always come to the same conclusion as he does.

@PAGAU, this is too much. Is there only the government mint, or will others be allowed to compete freely, unhindered by legal tender laws or other tax and legislated disadvantages?

@Philip Mccormack, "Social Circulating capital." This adds nothing to clarification. This term is nonsensical to anyone who understands free markets and Austrian economics. Words have meaning. If these words are yours, please consider the interpretation. If they are Dr. Fekete's, I would suggest the same to him. Is the "New Austrian School" inventing an entirely new dictionary with new meanings to old terms?

In any case, Dr. Fekete is quite clear, and I am not misquoting him. "I made the central point that the source of commercial credit is not saving but consumption." Perhaps these terms also have meanings not previously understood in the study of economics and finance.

With apologies, I will sign off for the next day or two, other responsibilities. If there is any clarification offered in the meantime, I shall reply when I come up for air.

Intuitive Reason: "These accounts are used in the purchase of bills, and are the 'savings' that form the source of credit. As the source of credit is a pool of savings, the credit is non inflationary."

Dr. Fekete: "I made the central point that the source of commercial credit is not saving but consumption."

Your statement and Dr. Fekete's statement are not only contradictory, you have made the argument fully circular: The source of credit is a pool of savings which is not the source of credit.

@Intuitive Reason

Saying the same thing in a different way doesn't change the fact that you are saying the same contradictory thing.

It isn't only the transfer of gold from the consumer to the retailer that is involved. That covers one day of the ninety days. What of the other eighty-nine days, and all the intermediate producers involved? For eighty-nine days there is no transfer of gold, just transfers of man-made paper. Fiduciary media, by any other name, smells as (un)sweet.

"At the same time, what these funds are between receipt and maturity is savings. And as you said, savings are a non-inflationary when used as credit."

But Dr. Fekete says the source IS NOT SAVINGS. Why do you say it is (except when you say it isn't)?

The beauty of Austrian economics (besides its truth) is in its simplicity. It is simple because it captures very well human behavior and human action.

Besides the inflationary, fiduciary media, non-asset backed currency aspects of real bills, something as convoluted as RBD, whatever the merits, cannot be called Austrian. My objections still stand.


BM: "Is there only the government mint, or will others be allowed to compete freely, unhindered by legal tender laws or other tax and legislated disadvantages?"

PAGAU: "You seem to have zero tolerance for government involvement in money."

Yes. Tell me why some people who happen to work for a particular employer should be allowed a monopoly, backed by force, over this process? The market is supremely capable of sorting this out.

"I am in favor of reining in the out of control government….But I consider a government operating within the limits of the constitution to be a good thing."

How do you propose reigning in a group of people to whom you gladly grant a monopoly of legalized force over you? By what means will you be able to keep them in “control”?

What would you propose to do if a group of individuals decided that they willingly and voluntarily wanted to transact in coin other than that minted by the government? By what moral basis would you stop them? Your answer will either cause you to refute your faith in granting the government such a monopoly, or it will condemn you as a willing cheerleader for a government agent compelling that group via a gun to the belly.

Your choice.

The Art of NOT Being Governed: Introduction

This is the first of what I anticipate will be a series of commentaries regarding the above titled book, authored by James C. Scott.

A description of the book can be found here:

I do not intend this to be a traditional book review. I have found several comments and thoughts within the book that I find valuable, and my intent is to expand on these.

The subtitle of the book is: An Anarchist History of Southeast Asia. I find this intriguing. Whenever the idea of anarchy is discussed (in the sense of no sovereign authority), one of many objections raised is that of looking for examples where anarchy has "worked."

Before moving on with the book, consider this query: where has anarchy worked? Those who defend anarchy on whatever grounds have likely had this thrown at them in every conversation. Those who believe anarchy equals chaos likely have thrown this out in every conversation.

First, what does “worked” mean? Worked for whom? Worked how? The same can be asked about the state. When has the state (defined as the legal monopoly of force and the resultant violence) worked? For whom? How?

For those who don’t want to be under the threat of coercion, inherently anarchy works. For those who prefer peaceful means of relationships, again anarchy works. For such people, in fact it is the only form of structuring society that “works.”

For those who believe it is right that man lords over man, anarchy does not work. The state certainly works. For those who believe that the same act could be either legal or illegal, depending on the employer of the actor, the state works.

But where has the state worked in regards to those areas of our lives the state says it is working on? The economy, peaceful coexistence with others in the world, elimination of poverty, teenage drinking, illicit drugs, health care, etc. the list is exactly as long as the list of state-run programs. Should the burden of proof really be on the proponent of anarchy?

That there is a lack of historical record regarding successful anarchist societies is not necessarily a reflection of the possibility that there were none. In fact, much of the world for much of recorded history was without a state as that term is known today.

But even if there were no examples in history, certainly if enough people believed in living peacefully with their neighbors, anarchy would work. In fact, much of our lives are lived this way. There is no central authority in developing our personal relationships, food choices (once you get past the government approved list), vacation destinations (once you get past the government approved list), etc. Why could not more / most / all of our actions be developed in a similar manner, free from coercion? It certainly COULD work if enough people wanted it so.

As to the history, or lack thereof, of anarchist society, I return to the book, and a quote:

“It is said that the history of peoples who have a history is the history of class struggle. It might be said with at least as much truthfulness, that the history of peoples without history is a history of their struggle against the state.”

Pierre Clastres, La societé contre l’état

Why is there so little information of people living outside of the organizing power of the state? I offer two thoughts:

1) Those outside of the control of the state didn’t bother documenting much of anything. Why would they? No need for a census, birth certificates, tax records, W-2 forms, etc. No rulers bent on documenting or fabricating a legacy.

2) What benefit is there to the state (the gatekeeper for much of the education of the world) to educate people on the true history of those who lived outside of the state? We are taught that this is not possible. Why would the state teach anything else?

Where are the examples of anarchist society? Look around you. Much of what you truly enjoy in life is based on choices and relationships that you make without being forced into these.

Look at history, the state as it is known throughout the world has not always been so all-encompassing throughout every corner of the planet. Those derogatorily referred to as barbarians, gypsies, the “raw”, natives, aborigines, etc., are those who lived outside of the state.

This book looks specifically at one region of the world in order to tell this tale. It is the highland area of Southeast Asia, from Vietnam west to the easternmost tip of Northeast India. But the story is applicable elsewhere, as the author makes clear and as I will further explore.

Saturday, January 8, 2011

Arizona Rep. Giffords Shot, Five Are Killed in Rampage

Violence is not the answer. Education is my preferred method. Others prefer political action. Any non-coercive method is fine. Violence only begets violence. It does not bring lasting solutions. It only harms innocent people.

This is a sad event. Violence is not the answer.

Thursday, January 6, 2011

re How to Use the Constitution, Dr. Machan

This editorial is found at The Daily Bell:

My reply, also posted at the host site:

"Honest constitutional study and understanding would be needed. Only then would the imperative to pay heed to the Constitution come to something valuable, important."

This statement is a nice summary of the problems inherent with a call for a "return to the Constitution." Those "bent on pushing other people around" will always find new meanings, loopholes, etc., one building upon the other in a never ending circle of more control. They fought a war that resulted in the deaths of over 600,000 to prove this point. They have eliminated state appointment of senators. They have ensured all "checks and balances" are those held by members of the home team.

These games will always be so when the people are convinced that one entity has the legitimate authority to write the laws, interpret them, and provide enforcement and adjudication. Today, some longingly look to congress to be the force to return to the Constitution (whatever that means). Dream on.

Until it is recognized that coercion is not a tool to be used by any individual in civilized society regardless of who signs the culprit’s paycheck, there is little in the document worth “returning” to.

The whole point of the Constitution was to protect the States and the people from Federal encroachment. The actual result was exactly the opposite. Lysander Spooner had it right.