Sunday, March 30, 2014

Antal Fekete on Gold, Real Bills, and Deflation

Today’s Daily Bell interview is with Antal Fekete; it seems to be at least partially in response to earlier comments by Richard Ebeling.  I will post DB’s editorial introduction in full:

Editor's note: The following questions and responses are derived from recent articles of Dr. Fekete's. And some of them deal with a recent paper by Dr. Richard Ebeling. However, we wish to note that Dr. Ebeling's views are within the mainstream of a certain Misesian perspective. Not only do his perspectives represent the larger viewpoint of an element of his peers, his career shows him to be a staunch proponent of freedom and a courageous proponent of free-market thinking. Singling him out personalizes what is obviously a theoretical disagreement – and one, in fact, that might better have been better handled in a theoretical manner instead of an ad hominem one. We regret any offense taken by either party.

With that, let’s jump right in:

AF: …money must be not just a commodity; it must be the most marketable commodity, the marginal utility of which is virtually constant. Mises categorically stated that constant marginal utility is contradictory in that it indicates infinite demand. (emphasis added)

Here in a nutshell is one example of the confounding nature of Dr. Fekete.  Which is it: “virtually constant,” or “constant”?  The terms do not mean the same thing, yet he uses one to beat Mises over the head regarding the other.

AF: You cannot reconcile the variable demand for commercial credit with the idea of "100 percent gold standard."

I believe you can, although human nature might struggle with the necessary price adjustments.  In any case, this problem likely isn’t terribly significant, as generally, I expect, in a free-market economy, the demands for credit would slowly and somewhat steadily increase. 

Dr. Fekete will tie the significant fluctuation involved in bringing crops to market in the form of consumption goods.  But turning wheat into flour into bread is not the only market in which credit is necessary – and certainly not as meaningful in the economy today as it was in the heyday of real bills.

DB: Why is there a prejudice among Misesians against real bills?
AF: That is a mystery.

As best as I can tell, the reason is inflation.  Dr. Fekete will protest – real bills are not a source of inflation.  But he would be wrong.  It is a mathematical truism: if he states that 100% gold standard is not sufficient – and some form of paper demand on future gold must be created – then there is more currency circulating than the gold backing it.

However, inflation is not reason enough to be “against” real bills (or “gold bills” as Dr. Fekete now names these).  If this is demanded in the market, there is no justification to stop it by force.  There is no reason to reject the practice.

AF: On the other hand, Dr. Ebeling obviously thinks that gold bills are inflationary and therefore detrimental to the public interest…. Please ask him why he thinks he knows better than the producers of goods of higher order did who accepted payment in gold bills and did not insist on getting paid in gold coins.

That’s what I said.

AF: Further problems with central banks arose during World War I, especially in the United States. The Federal Reserve (F.R.) banks started putting their credit at the disposal of the Entente powers to finance their purchases of war materiel in violation of the F.R. Act of 1913, to say nothing of the Neutrality Act, practically the same day as war broke out in Europe in August, 1914.

There is a hidden corner within the new-Austrian community that looks at the initial Federal Reserve legislation as sound.  This ignores the reality that monopoly will always lead to corruption.  Dr. Fekete has identified one of the earliest corruptions of central banking within this statement.
DB: What will the nature of the deflation be – a collapse of the monetary system?

AF: Much more than that. It will be a repetition of the deflation and depression of the 1930s, but on a much larger scale. Falling-domino-style bankruptcy of firms, devastating waves of unemployment, falling prices induced by falling interest rates are just some of the consequences.

It may be all of the things Dr. Fekete states; but these are not “Much more” than the “collapse of the monetary system”; they are much less.

A true collapse of the monetary system will result in the death of perhaps 95% of the people in the developed world. Is this the future Dr. Fekete predicts?  Has he planned accordingly? If not, I will suggest he doesn’t truly believe in the possibility of a collapse. 

Once Is Chance, Twice is Coincidence, Third Time Is a Pattern

I need some help.  Bringing this difficulty to a head is the recent action in the Ukraine by Russia; this is the event behind the second and third episode. 

Once: the first episode was due to a post I wrote regarding World War II and Wilson’s actions during the First World War that helped to move Europe toward the second.

This post received, by far, the most comments of any post I have written.  I had an extended dialogue with who I believe to be (as the comments were by “Anonymous”) one individual.  He had no problem criticizing me for my lack of understanding about the war from an Eastern European perspective – which at the time was certainly true and today is still somewhat so.  The tone was often derogatory; at the same time, I learned quite a bit from the exchange. So, to the extent I felt the conversation was somewhat productive, I continued.

However, I stopped replying after the following comment – after first recognizing that I might have enlightened him a bit regarding Roosevelt’s actions:

Anonymous July 24, 2013 at 2:31 PM

Also let me ad[d]ress this literary crown jewel:

BM: "What would happen? I envision, in the end, two spent countries, neither capable of doing any significant harm to western states – who, in the meantime, armed themselves sufficiently."

Are you in a habit of telling Jews that "Holocaust was not a big deal".  Because that statement actually would be more accurate. Where do you think WWII happen? Connecticut? The North Pole? That statement is so out there that here you go: Some relevant WWII jokes for you

Q: Do you know what is the title of the chapter on "western front" In Russian textbooks?
A: The bombing of civilians.

Q: Why did Americans drop the atomic bombs on Japan?
A: Because after 3 years of bombing Germany they finally realized they can't hit sh*t with normal bombs.

Q: Where are western casualties of WWII listed in the comparison table?
A: Under "statistical error".

I could go on. Sorry for the burn but you were sooo asking for it :D

A simple premise – the US had no business getting involved in European wars, and even France and England could have minimized if not avoided the harm of a European war if they just stayed out and / or didn’t instigate matters in the first place.  This is where I came from in the subject post and in much of my writing to date on the subject. 

Since then, certainly I have looked into other perspectives, including from a Russian – Suvorov.  While my understanding of the roots of the war as well as the events during the war continues to increase, I have read nothing to change my view that the west, and especially the US, should have just stayed out.  With or without the US involvement, life for those in central and eastern Europe was going to be intolerable, if not deadly.

In any case, this was almost a year ago.

Twice: Recently, in a conversation about the situation in Ukraine with someone well-versed in Russian history and perspective, a similar comment came to light.  Not similar, like obnoxious, but similar like sentiment.  To paraphrase, the comments from individuals like Ron Paul and posts at LRC are seen as horrendous by people living in the Ukraine.  Putin is being painted as a saint.

Now I have not read such comments – I see criticism of US actions, but not praise of Putin or his actions.  Some issues of relativism (which I will further expand upon shortly), but not praise. 

Am I blind to this because of my western perspective?  Or are the critics blind to this because of their Eastern European perspective?

Third: In the comments section of a Paul Craig Roberts post at The Daily Bell, I read the following by “vanyam”:

My first question.. how much is Russia Today supporting sites like PCR , Lew Rockwell (which both run on shoestring budgets by the way) who are both stumping for Russian domination in Ukraine…

Before spouting all this pro Moscow propaganda of their own, perhaps these guys need to stop and realize that they are throwing Ukraine under a bus "blindly" as they attack the West's agenda for control.

Again, I don’t see this; what I see is condemnation of US involvement.  The commenter vanyam seems to recognize the distinction:

Before you throw Ukraine under the bus, place your disgust over US hegemony where it belongs.. in America.

This is what I read when I read PCR or posts at LRC.  I don’t see this as the same as approval of Russian actions (although some statements can be read in relative terms – for example, Russia has more interest in Ukraine than does the US.  This is, it seems, undeniably true – to the extent one can speak of national interests). 

What am I missing?

Saturday, March 29, 2014

The Soviet Union Invades Finland

I continue with my detailed review of this book; for all posts in this series, see here.

Many point to the difficulties of this Soviet invasion of Finland as evidence of the lack of capability of the Soviet military; according to Suvorov, and given the winter conditions and the elaborate defenses established, it was one of the most impressive offensive showings of the war.  Stalin demonstrated that he would pay any price to achieve his objectives.  I will touch further on this controversy at the end of this post.

The story, and controversy, will revolve around the Mannerheim Line – a line of Finnish defenses established to repel any Soviet invasion through the Karelian Isthmus.  Starting shortly after the end of the Great War, the Finnish Army began work on fortifications on the isthmus – Finland having just won independence from Russia. 

This activity increased significantly after 1929, with a solid line of fortifications known as the Mannerheim Line, named for the Commander-in-Chief who had won the war of independence in 1918. (P. 136)

It was this territory that Stalin demanded from Finland:

In October of 1939, immediately after the division of Poland between Germany and the Soviet Union, Stalin’s diplomats addressed the government of Finland, demanding the cession of the Karelian Isthmus. (P. 136)

Stalin offered two-for-one in terms of raw acreage – a trade of land for land.  While offering double the acreage in exchange, in terms of strategic significance Stalin might as well have asked for all of Finland:

The Karelian Isthmus is a direct gateway to the capital of Finland, the largest ports and most populated regions. (P. 136)

Of course, the offer was not accepted.  But this was not the end of Stalin’s plans.  He also prepared a second step – a communist revolution in Finland.  In October 1939, Stalin established within the 106th Rifle Division of the Red Army a group of Finnish Communists, then living in the Soviet Union; this division could then be declared the “national army of Finland” at the appropriate time. (P. 137)

A communist national government was also prepared, one to be sent to Helsinki in accordance with “the will of the Finnish people.”  Otto Kuusinen, a Soviet intelligence officer, was appointed head of this government. (P. 137)

Stalin issued an order to crush Finland.  For an attack, the Soviets needed a pretext.  As if on demand, on November 26, 1939, seven artillery shells allegedly flew in from the Finnish side and exploded on the Soviet side, killing three privates and one junior officer. (P 137)

Finland had no artillery near the border, and declared immediate willingness for an investigation by neutral third parties.  Stalin did not wait.  On November 30, after a brief but intense artillery firing, Soviet troops crossed into Finnish territory. (P. 138)

Radio Moscow declared that the Finnish people rose up against capitalists and the Red Army was heading forward to assist the uprising.  Units of the Red Army occupied the small village of Terioki.  Immediately Kuusinen’s “government” arrived from Moscow and went to work. (P. 138)

The Mannerheim Line was not located on the immediate border, but deeper in Finnish territory behind the “security pale.”  The space in between was filled with granite boulders and concrete blocks.  The intent was to slow down an invading army, such that those manning the true defensive line had appropriate warning of the coming attack.

Friday, March 28, 2014

Holists and Halfists

Well, not exactly. 

Max Borders has written a column at FEE, “Libertarian Holism.”  In it, he introduces a new language to describe the holders of different views of libertarian / pseudo-libertarian thought:

I hesitate to introduce yet another dichotomy (thick or thin, brutalist or humanitarian)…

Yet he does so: holists and solipsists.

The masters of persuasion are libertarian holists.

A holist is one who accepts that different individuals come to libertarian thought in different manners; this is something no one can disagree with, I imagine.  More so, a holist is skilled at effectively communicating with all such comers.  A great skill, useful in all areas of life.

…the other end of the continuum from the holist is the solipsist. This person is content in the echo chamber, sometimes even being alone with his principles.

Once again, as I did in my post regarding libertarian humans and brutes, I won’t spend much time or spend too many words on this one.  I offer only a couple of observations:

Borders first identifies the group that comes to accept libertarian thought through first principles, “like a principle of non-harm.” 

I assume he means non-aggression; why he chooses to invent a term for this well-known phrase is…confusing?  A search of the two phrases yields over 13,000 hits for NAP, and about 30 for NHP.  Is Borders trying to hide something?

He then identifies other paths through which individuals have come to accept libertarian thought: “personal or emotional values,” “through talk of being excellent and/or realizing one’s concept of happiness,” “Buddhist writings,” or “Limbictarianism” 

Borders identifies that the starting point for many is the understanding and acceptance of the principle of non-aggression.  However, nowhere in his post does he suggest that – no matter how someone comes into the libertarian fold in the first place – to be libertarian, one must certainly eventually land on the non-aggression-principle square.

This is the root of libertarian principle.  Without pointing to it always, there is no libertarian – there is just my opinion is better than your opinion.


However we might admire the first quarter of Mises’s Human Action, we can pretty safely admit that reading it is not the only starting point.

He is referring to the point of view of the solipsist. 

You want a real solipsist?  Try Rothbard.  More principled that Mises and easier to read.   Except his is the name that cannot be mentioned, even when writing posts that, as Borders suggests “Most who read this publication self-identify as a freedom-lovers.”

Hayek is easy for the insider-libertarians to present.  Mises is, thankfully, growing more so (there is little choice, thanks to the power of the internet).  Eventually they will have to admit that Rothbard exists, and that without a principled position on non-aggression, there is no such thing as a libertarian.

I know principle is tough, but without it libertarian philosophy will be just one more political philosophy that makes it up as it goes along.

What is the point of that?

It Could Have Been Worse

Obama recently spoke to an audience in Europe.  I do not know the topic or audience.  When finishing the Q&A with an answer regarding America’s honoring of the rule of law, etc. in the context of the NSA, he was greeted with silence.

(HT Ed Steer)

Sunday, March 23, 2014

The Problem Presented by Principle

I want to expand a bit on comments made in my recent post “Some Libertarians are Not Nice People.”

The initial comment:

Anonymous March 16, 2014 at 6:09 AM

Call me cynical but if this isn't the beginning of an attempted purge then what is? Won't be too long until the Tuckers, the Reisenwitzes, the Milequetoastarians and Technocrats start marginalizing and disavowing those who don't toe the line of the culture-warring left.

(Edited for spelling.)

bionic mosquito March 16, 2014 at 6:28 PM

It is not the beginning of a purge, it is the continuation of the (attempted) purge of Rothbard with a tangential chapter being the (attempted) purge of Ron Paul.

I cannot recount all of the details regarding the purge and shunning of Rothbard, however the story of the break between him and Cato is fairly well known; additionally, even today, while there is finally – with reluctance – at least some recognition of Mises even in the mainstream (Hayek was always the safe Austrian), Rothbard is still all but ignored by virtually every near-libertarian organization.

As to Ron Paul, it seemed to me the attempted purge began almost immediately around the time he conceded his run for president two years ago – even at the time Rand endorsed Romney.  Various near-libertarians (or those who travel in intersecting circles) started the process of subtly (and not so subtly) distancing themselves from Ron.  I have previously documented several of these; I will not revisit this here.

Back to the comments from my earlier post, continuing the dialogue:

Anonymous March 19, 2014 at 5:49 AM

6:09 AM Anon here.

Sorry if I misconstrued this. The treatment both Rothbard and Paul receive in the "movement" has irked me for some time now, especially the tendency to negate their achievements and portray them as a bunch of delusional loons.

So the questions to ask would be why and who, correct?

(Edited for spelling.)

bionic mosquito March 19, 2014 at 7:08 AM

I can only speculate:

Why? Because the two stand for principle over acceptance.

What was the principle?  In Rothbard’s case, it was the non-aggression principle, to be applied in all circumstances and to all actors both with and without badges.  While one might debate certain conclusions reached by Rothbard, I don’t believe one can demonstrate that he reached such conclusions because he compromised with the principled objective – a world absent the initiation of force.

In Ron Paul’s case?  While I speculate that deep down inside, Ron Paul is probably in complete agreement with Rothbard regarding libertarian political philosophy, while in political office he stuck to an absolutely conservative reading of the Constitution – consistent, he believed, with the most conservative intent of the most conservative framers.

As for the desire for acceptance, C.S. Lewis gave a wonderful speech on the Inner Ring.  It is worth reading if you are not familiar with it.  Neither Ron Paul nor Murray Rothbard ever showed an ounce of desire for acceptance over principle.

Continuing with my reply:

I imagine there is plenty of psychological thought as to why less principled people who want to be seen as principled react strongly when faced with principle.

I have no idea why Tucker wrote what he wrote regarding principled libertarians.  I have no idea why those who shun or otherwise distance themselves from a principled libertarian position do so.  In other words, I don’t know their thinking.

What is clear is behavior, as demonstrated in their words.  They speak as if change can come without somebody somewhere holding to principle; they believe change can come via an uneducated population.  They believe (or want to convince others to believe) that they can hit the target without aiming for the bulls-eye.

Who? The less principled who want to be accepted into respectable society - whether for political, financial, or other gain.

Both Rothbard and Ron Paul are reminders of principle.  Such reminders are not welcomed by those seeking acceptance.

There is a range of acceptable dialogue within mainstream society.  Politics, the mainstream press, and the business community all exist within this dialogue.  It is acceptable to debate tax policy, but don’t question the legitimacy of taxation; it is acceptable to question Fed policy, but don’t question central banking; it is becoming marginally acceptable to question the Iraq war, but don’t question the right for America to go to war at anytime and anyplace (although this seems to be shifting, thank God). 

Rothbard questioned these; Ron Paul questions these.  To be accepted in polite society, individuals must distance themselves from such questions.

I will return to the reason I began this post – a comment to my brief post in response to Tucker’s now infamous (within our circles) brutalist vs. humanist article.  In his article, I see Tucker fighting, for whatever his reasons, against those who are principled. 

I have no idea to whom he is referring (and I haven’t seen anywhere where he has identified the brutes).  I can think of a few who have a public voice, starting with Murray Rothbard and Ron Paul.  I can also add Hans Hoppe, Lew Rockwell, Walter Block, Tom Woods, and a few others.  I wish there were hundreds.

If we ever, at some distant decade or century in the future, come closer to some version of a libertarian society, it will be thanks to men such as these, and these will be the ones that are remembered – no one will remember the “milquetoasterians.”  If we never make such an improvement to life on earth, none of this will matter much anyway.

Such principled individuals should be thanked.  Among them are the most courageous people I know. 

In the world of political theories, the non-aggression principle is as close as it gets to the golden rule – a rule existent in numerous religions around the world and a rule as old as recorded history.

Without a consistent, principled worldview, all that is left is to make it up as we go along.

Now THAT is what I would call brutalism.