Compared to What?

Libertarians and immigration; absent the state, the answer is easy.  In today’s world, every second-best answer is a compromise; some second-best answers offer worse.

Jacob Hornberger offers his thoughts.  I do not intend to go into a line-by-line analysis; I am of the view that finding libertarian purity on this issue in this world is a fool’s errand.  Instead, I offer one snippet:

There’s one big problem, however, for libertarians who support immigration controls: The enforcement of immigration laws entails socialism, police-state totalitarianism, and infringements on economic liberty. That means, obviously, that libertarians who support immigration controls are, at the same time, supporting socialism, police-state totalitarianism, and infringements on the exercise of economic liberty.

Is that a good thing?

I freely admit it isn’t a pure thing.  But “a good thing?”  Compared to what?  The option of a private market for immigration decision-making and enforcement does not exist (and there would be a private market for this, not in violation of the NAP).  Thereafter, we are stuck with second best options for those libertarians who do not believe that their property or their neighborhood (with the neighbors’ agreement) should be freely open to all bipeds.

I will offer Mr. Hornberger my Mr. BHNC libertarian test; in order to not personalize such a dreadful thought, I will modify my customary practice regarding this test.

Mr. Hornberger’s best friend calls him with horrible news.  His friend’s wife and children have been murdered.  Mr. Hornberger, despite knowing that government law-enforcement and judicial agents offer the only means to achieve justice and punishment (at least not including means that will put his friend in jail), in any case tells his best friend the following:

There’s one big problem, however, for libertarians who support calling the police and using state district attorneys and courts in this circumstance: The investigation and adjudication of a murder case entails socialism, police-state totalitarianism, and infringements on economic liberty. That means, obviously, that libertarians who support such investigations and adjudications are, at the same time, supporting socialism, police-state totalitarianism, and infringements on the exercise of economic liberty.

Is that a good thing?  Compared to what?  Not bringing the murderer to justice?

Libertarian theory is easy (most of the time).  Putting libertarian theory to practice in today’s world, not so much – every libertarian makes compromises every day; this is unavoidable (well, you can hand me your FRNs if you are so pure in practice).

I have the right to keep people off of my property; I therefore have the right to hire an agent to perform this task.  As I have no choice about the agent…well, I am being repetitive to my prior posts on this topic.

I will only add a minor point, and one that I will not address at this time:

Libertarians pride themselves for being about freedom. …libertarians…support the right to do “anything that’s peaceful.”

Something always sticks in my gut whenever I read these, especially the “anything that’s peaceful” thing.  I am not sure exactly what, and maybe my gut is wrong.  Someday I might dive into it.

Another Thought or Two on Fractional Reserve Banking

Mr. Engel has offered his reply to my earlier post on this topic.

I will not make this a long, drawn out post (cheers erupt from the audience and likely Mr. Engel as well).  I will comment on what strikes me as the primary points of emphasis or disagreement; this is not to suggest that I agree with everything else (I have other disagreements), only that these don’t seem as important to me.

Regarding my position that the current bank deposit contract does not fit the definition of FRB as Mr. Engel defines the term, it is offered:

…the entire plethora of Austrian works pointing the finger to our current Fractional Reserve system for our economic woes are entirely confused – for perhaps we don’t have an FRB system at all.

I will not get into a debate about the Austrian position; I do not believe it is this simple.  I do believe that our current banking system is at the heart of our current economic woes – but it is the monopoly, not the practice of deposits and lending that is at the root.

Rest assured, I remain steadfast that ABCT is quite valid; the issue behind boom-bust is excess or artificial credit creation.

Now, define “excess” or “artificial.”  I suggest excess or artificial can mean nothing more than credit created beyond that which is supportable by strictly free-market processes.  Free markets don’t produce “excess” in any meaningful (“our economic woes,” suggesting national or international calamity) sense; in truly free markets, prices clear.

In other words, remove the monopoly (allow for truly free markets) and Austrian “busts” would be quite limited – both geographically and in scope.  “Bust” will be nothing more than bankruptcies to individual entities based on poor or inaccurate entrepreneurial choices and decisions. 

The validity of ABCT will serve as a warning against monopoly (or other means of governmental support) in banking and credit creation.  Just remove the monopoly.

My next key point of emphasis / disagreement regards:

Hoppe argues that the problem with the free banking argument that today’s depository contract provides an example of a non-fraudulent FRB contract, lies with the contract itself in that the contract does not represent the actions of the two parties in fact.  In other words, whereas the modern deposit contract appears to escape being a bailment contract, the action of the contract’s parties contradict this.

…if the nature of the demand deposit is that it is a debt, then the claim must be a title to a quantity of future money, not a present money, for the present money is presently under the ownership of the bank.  And if this is the case, then the very idea that the money can be available on demand by the depositor contradicts the nature of the debt transaction itself.

Present money, future money, present money, future money.  How much time must pass?

The future disappears into memory

With only a moment between.

Now, there are a lot of words in between these two statements in Mr. Engel’s post, but what is being suggested is that for a creditor – debtor relationship to be proper (or valid or whatever similar term you like) there must be either a) a minimum term of time or b) perhaps a variable term after some minimum time period or notice period has lapsed.

In other words, an instantly callable loan cannot be a loan; it must be deemed a bailment. 

To which I ask, why? 

Next:

However, in fact, as Hoppe points out,

the money depositor A receives from the bank B a claim to present money, rather than a debtor equity title.

It is a conditioned claim.  I find no reason or (more importantly) a non-aggression-introducing manner to stop two parties from conditioning between them the control, use, and disposition of property.

Finally:

Hoppe continues:

It is not the case, as is claimed, that fraud (breach of contract) is committed only if B, the fractional reserve bank, is actually unable to fulfill all requests for redemption as they arise.

I don’t even claim that this is fraud.  Not every “breach of contract” is a fraud.  It is bankruptcy.  I don’t even like the term “fraud” very much; let’s just say it can only be fraud if it is first a violation of the contract.  For fraud, other additional factors must be present.  Anyway, this practice isn’t even a violation of the contract; when the bank can’t make good on the withdrawal claim, it may very well be nothing more than poor entrepreneurial decision-making.

That’s enough.  I think I will remain on my square as I have previously defined it; in the meantime, I thank Mr. Engel for his views.

American Muscle

I have always wanted to write a post about the Muscle Car era in the United States.  Big blocks, Six-Packs, 400+ horsepower, Detroit Lockers, no handling.  Here is a nice sample, although the list doesn’t include the best example.

I want to write that post someday; this isn’t it.

I will return to something from my “Clowns” post, something that struck me afterwards.  In the post, I referenced a comment from John Kerry.  His comment is in reference to the Iran nuclear agreement.  He cautions those congressmen and others as being mistaken regarding their belief of the leverage America holds over the rest of the world, those who falsely believe…

“’America is strong enough…we can just bring the hammer down and force people to do what we want to do…'"

-          John Kerry

Now, you read that comment and think “bring the hammer down.”  What immediately comes to mind?  Drone strikes?  B-52s?  Aircraft carriers?  Viruses delivered via the NSA?  Bob the Builder (just kidding, I want to see if you are paying attention)?

Now, I am playing a little game as I have excluded a key portion of his statement:

“If everybody thinks 'Oh, no, we're just tough. . . . we can force people. . . . America is strong enough, our banks are tough enough, we can just bring the hammer down and force people to do what we want to do,'"

“Our banks are tough enough”!

Our banks.  Kerry is Secretary of State; he is not Treasury Secretary (not that this should make any difference).  He is an employee of the US government; he does not himself own any of these banks (well, not to my knowledge). 

Our banks.  Not our tanks.  Our banks.

In whatever country you live, whatever currency you regularly use: imagine being blocked out of the system.  No bank deposits or withdrawals; no credit card transactions; no debit card transactions; no wire transfers.  No ability to bank.

Pretty tough, huh.

Almost every country in the world is in some manner or another dependent on the US Dollar; if this isn’t enough, they are also dependent on the transaction infrastructure (back-office, if you will) provided by US banks.

Imagine being shut out of this system.  This is the weapon that Kerry referenced.

Now, this concept of the banks as a weapon may not be a big surprise to many of you.  But have you ever heard a high-level US government official say so?  I don’t recall it.

However, Kerry is saying that this weapon – always reliable in the past – may not be as potent in the future.

Have you ever heard a high-level US government official say this?  American power – American banks – may not be omnipotent? 

I haven’t either.

Not Made in China

I stood at the top of the mountain

And China sang to me

In the peaceful haze of harvest time

A song of eternity

I thought of time and distance

The hardships of history

I heard the hope and the hunger

When China sang to me...

When China sang to me

-        Neil Peart

I have noticed something strange for the last several weeks, and today was prompted to write something about it.  Let me explain.

Until about six weeks ago, Ambrose Evans-Pritchard was all Greece all the time.  (The link is to a perpetual list of his articles, so it may not make any sense in a week or two….)

Since July 20, his posts have been all China all the time – ten out of seventeen posts have been about China – slump this, currency that, etc.

What prompted me to write something today – nothing very insightful, just an interesting note – is a post by Peter Schiff, “The Fed Is Spooking the Markets Not China”:

Have no illusions, while most market observers are quick to blame the sell-off on China, this market was given life by the Fed, and the Fed is the only force that will keep it alive.

Schiff is correct – no reason to single out China.  The reality – perhaps being faced now or yet to come – is that the boom (as defined by Austrians) will be followed by a bust (as defined by Austrians).

This is true for the Fed, the BOE, the ECB, the PBOC, the BOJ, etc.  All have supported asset prices beyond the value justified by underlying economic reality.

I know I am offering nothing earth-shattering in this post.  It’s just that for several weeks I found it strange regarding AEP’s almost singular focus.  It seems he was doing his part to plant the seed of the narrative, such that the explanation will be common knowledge by the time reality came about.

Oh what a tangled web we weave, when first we practice to deceive!  Here come those chickens.

Comments (and More on FRB)

I have really enjoyed the last couple of months as bionic mosquito.  I always enjoy my time on this project, but during the last two months there has been much in the way of wonderful comment and dialogue.  I always enjoy this aspect as it affords the opportunity for me both to learn and to hone my arguments and views.

In this time, I have written about 35 posts.  There have been well over 500 comments – several of these were mine, of course, but still a sizeable number for this blog in such a short period of time.  The topics most commented on (not in any particular order): libertarians and culture, right-libertarians, left-libertarians, bankruptcy, abortion, free banking / fractional reserve banking.

A very robust dialogue.  Thank you one and all.

There was a comment on my recent post regarding fractional reserve banking; I was accused of being “dogmatic.”  I tell you, I sulked all day, working through what was presumably intended to imply that I was closed minded.  I finally decided I liked the label; a nice post followed, something that helped me to clarify my own dogmatic thoughts.  I even have received 3 “likes” for the post! 

I know at times my frustration on the topic of free banking / fractional reserve banking comes out in my comments (well, on other topics as well).  I would like to explain….

The story begins with my dogmatism, I guess.  I listed several of my beliefs and views in the above-referenced “dogmatic” post.  From these, I reach conclusions on various topics libertarian / Austrian / etc.

I enjoy being challenged on these – and the challenges come on two levels.  Certainly, conclusions can be challenged.  As an example, I have absolutely zero doubt that Walter Block comes to his conclusion favoring evictionism from what he views as an unadulterated view of libertarian theory.  I come to a different conclusion regarding abortion – I also believe I come to it via an unadulterated view of libertarian theory. 

Now, one or the other of us might be applying the theory incorrectly; or, maybe libertarian theory doesn’t offer a clear-cut answer.  But I do not question Walter’s intent to stick to principle (call it dogmatic) when applying libertarian theory.

In other words, conclusions on real-world events grounded in theory offer one level of being challenged.

But on a deeper, more fundamental level – the dogma.  I feel quite settled on the six items listed in the dogmatic mosquito post.  If you want to challenge me on the basis of any of these – like my belief is not well-placed – I say pack a lunch, because you will be at it for some time.

But don’t pack dinner.  If you don’t hit me with your best shot within a couple of tries – something that causes me to think “you know, free markets might actually be a bad idea” or something like “I think saying hello with a punch in the nose and taking your candy bar is a good way to order society,” well I will grow tired.

After two or three back-and-forths, I will be done with the conversation – I won’t pay much attention to the next time you say the same thing, or something even smells like the same thing, or something that seems like you don’t understand what I have written…more than once.  You may not like the way it ends; this is of little concern to me by this point. 

It certainly happened on the recent FRB post: I have a firmly held view about the sanctity of contract, and an equally firm view about how to resolve disputes between parties if there is a disagreement regarding the interpretation of a contract. 

I believe allowing for violations of either of these views will lead a society to chaos – just open the door for people to say (and get away with saying) “OH, I didn’t know that THAT is what I signed up to do” and see how far your free-market libertarian world will travel – a perfect door opener for government intervention, protecting the little guy and all that.  Alternatively, I believe that when people understand that contracts cannot be ignored in such a manner, they will quickly learn how to order their relationships accordingly.

On the topic of fractional reserve banking and free banking (and banking generally), I have read Mises, Rothbard, Sennholz, Salerno, Ballvé, de Soto, Sechrest, Selgin, North, White (and others).  Some of these authors are for and some against.  I have read dozens of posts at LvMI and elsewhere.  I have commented and gone back and forth on several threads at LvMI and The Daily Bell.  I have asked a real expert on money and banking for the best critique of FRB, for the most clear-cut argument that it is fraud.  I read this as well (it was Rothbard – who I read, not who I asked!). 

My earliest post on these topics was almost five years ago – December 2010 (it’s still pretty good, I think).  I have written almost 130 posts with one or the other label (I know several posts have both labels, so perhaps 100 posts total).  In these posts, I have commented dozens of times to feedback.

Look, I am not saying that it isn’t worth trying to shake me on my view; I am saying that I have already read and considered the views of the best authors on this topic.  I have responded to the same criticisms more than once.

I have read clarity twice on this matter of fractional reserve banking and the fraudulent (or lack thereof) nature of the practice.  The first time was more a moment of enlightenment – a light-bulb moment – from an interview of Joe Salerno, at The Daily Bell – about painting a house both red and green at the same time.  It can’t be done, it is an impossibility.  It took me a while to properly understand and then internalize and contextualize his meaning; when I did, it offered much clarity on the matter.

The second was the definition provided by Mr. Engel.  Mr. Engel gets Joe Salerno’s meaning!  I agree with Mr. Engel completely on the issue of FRB when applying his definition.  The problem, however, remains – and is two-fold: his definition does not describe today’s banking practice, and his definition is not consistent with the definition offered by other sources.  I await patiently his promised clarification on this matter; it is now nine days and counting.  Perhaps I have missed it.

I suspect if the commonly accepted and understood definition was the one provided by Mr. Engel, all proponents of FRB would be against it – as a matter of contract and potentially fraud.  I know I would be.

If you want to criticize my views on FRB, I am open to it.  Just know that you better come stronger than or with something different than some of these aforementioned authors.  Stronger than Rothbard on fractional reserve banking?  That’s a high hurdle.

Anyway, returning to where I began: thank you all for the dialogue!