The Ultimate Minority

Whenever you find that you are on the side of the majority, it is time to reform – Mark Twain

magic_hat_kzmrSome of the most heated discussion over the bailouts has been around executive bonuses and lavish parties ongoing at the corporate beneficiaries of redistribution.

This debate, fueled by the government’s kept media, serves two primary purposes:

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1)  To redirect the water cooler discussion to the millions in bonuses while distracting the masses from the hundreds of billions that were extracted from them in the first place

- and more importantly -

2)  To reinforce the meme that government is good and the free market is bad.

To make the first point clear, we’ll use the AIG bailout and the recent uproar over $150 million in bonuses paid out to executives.  I present you with a bar graph comparing the $150 million in bonuses to the $150 billion that the AIG bailout has cost (so far…)  I had to stretch it out a little to get the bonuses to show up, so you may have to scroll a bit.  Pardon me for not inserting it directly in the post.

The great physicist Richard Feynman once commented:

There are 10^11 stars in the galaxy. That used to be a huge number. But it’s only a hundred billion. It’s less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.

Of course, that was in Feynman’s day.  Today, the national deficit will be $1.7 trillion dollars.  These numbers are not even comprehensible to humans.  I propose that we rename Feynman’s economical numbers to governmental numbers.

And yet, the masses debate over $150 million…

On to the second and more important point:  To shift the blame from government to the “free market.”

The institutions in question are the farthest thing from free market institutions.  They are creation of the State.  The government builds these corporations with legislation and regulation designed to protect them from competition.  In return, government officials get their campaign coffers filled and score highly paid positions within these corporations when their term is done (not to mention the many under-the-table benefits we never hear about.)  This cozy government/business partnership is not capitalism, it is corporatism.

These corporatist institutions would never survive in a truly free market.   Government creates them, and then gets to blame the free market and capitalism when they inevitably fail.  This reinforces the meme that the free market is greedy, corrupt, and will run out of control without the hand of government to guide it and keep the greedy capitalists in check.  Study your history, and you’ll find that the robber barons have always been highly politically connected, and have used the force of the State to gain their monopoly position.  Corporatists hate the free market, it is too uncertain.  They seek State power to kill their competition, to reduce the amount of uncertainty in their market.

Bailouts are an inevitable result of the corporatist state.  The business models fail because protectionism breeds complacency, and inefficiency results.  But even more importantly, the cozy relationship with the parasites in DC (and their central bank) encourages irrational risk-taking behavior, because they know they’ll be bailed out if they fail.

The worst effect of the failure of corporatist enterprises is that the government gets more control over the market.  It is a truly vicious cycle:  Government creates the corporatist system, then grows in size and power when its creation fails, as there is outcry for more protection from the “greedy capitalists.”

So please, keep your eye on the ball, and don’t let the government and its kept media distract you.  Place the blame where it belongs:  The Federal Government and its evil central bank, the Federal Reserve System.  Without them, no one gets “too big to fail.”  No one gets to privatize their profits while socializing their losses.  In a true free market, scandal and unscrupulous practices will still exist, but they will be dealt with swiftly and judiciously – and you won’t be forced to pay for it.

Here’s a clip of me speaking with the great Scott Horton of Antiwar radio on March 5, 2009.  Scott and I are discussing the inevitable end of the American empire, and how it will play out.  I brought up systems theory but don’t do a great job of elaborating on it here.

You can listen to Scott’s incredible bank of interviews at antiwar.com/radio or listen to his show live at www.kaosradioaustin.org Tuesday-Friday from 2pm to 4pm Eastern time.

This clip is (13:17)

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We’re All Socialists Now?

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The February 16, 2009 issue of Newsweek indicates all that is wrong with the old dinosaur mainstream media.  The article is devoid of any economic theory, nor even a premise other than that socialism is inevitable and, what the heck, we might as well embrace it because “since neither consumers nor business is likely to do it, the government will have to stimulate the economy.”

About the only insight the article offers is that the Republicans, after their turn at growing government with their brand of corporate fascism are now crying “foul” over socialism in the Obama regime.  This is a ploy to keep themselves relevant as the party of smaller government.

The authors go on to state that once the crisis passes, the US will try to revert to a more free-market style of capitalism.  Implied, of course, is that a free market is not the solution to the crisis;  government is.

And here’s the kicker:  “The Obama administration is caught in a paradox. It must borrow and spend to fix a crisis created by too much borrowing and spending.”

Seriously, who gets paid to write this stuff?  Is this some kind of inside joke I’m missing out on?  So…if I’m in trouble because I went on a spending binge using my credit cards, the solution is to get more cards and spend more money I don’t have?

Newsweek, like all of the old-school print media, is in decline.  Their days are numbered, and the end can’t come too soon.  Get your news from the Internet.  Avoid this useless drivel – what do people pay, four bucks or so for this at a newsstand? -  and get your economics from Mises.org.

Socialism is not something to be taken lightly, it is the end of liberty and the devolution to tyranny and mass murder.  The fact that this “mainstream” publication offers nothing more than acceptance at best, advocacy at worst, disgusts me.  Die Newsweek.  Die.

100% Austrian

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misescrestI’ve been studying the Austrian School of Economics for some time now, and I am proud to have finally found a home.

In the business and management world, Dr. Deming taught that without proper theory, one has no sound basis for action.  Without theory, one finds themselves endlessly reacting to events that occur around them, and their attempts to “fix” the problem only wind up making matters worse by tampering with the system.  Theory provides a lens with which one may view events, place them in context, and make rational decisions.

The Austrian School is my lens for the study of economics; the study of how individuals, acting in their own self-interest, interact with others in society and improve the standard of living of mankind through mutually beneficent exchange.  The Austrian School is proper theory because it recognizes order in society as an emergent property, the result of billions and billions of individual choices and actions taking place in the free market.

Mainstream economics, as represented by the Keynesian school, denies the emergent property of order, and instead prescribes central control as the means by which order is imposed on society.  Keynesianism is Statism.  (For more, please see my post The Two Schools of Economics.)

So after a long period of independent study, I was pleased to receive feedback in the form of a 100% Austrian score on the Austrian Economics Quiz at Mises.org.  Personally, I didn’t find the quiz all that difficult, and I know I still have a lot to learn about the Austrian School, but it was nice to verify that I’m on the right track.  In the coming years, I hope to not only be a student of the Austrian School, but a contributor to the theory.  A solid foundation in Dr. Deming’s System of Profound Knowledge provides insight that I believe can add value to the Austrian School.  I still have the itch to go back to school and earn my PhD, and have decided that if I am to do so, the study will be Economics.  I’d have to find the right fit, though, as I have no interest in earning a PhD in the Keynesian school that dominates academia.

I encourage you to take the Austrian Economics quiz – it is 25 questions in multiple choice format, and even if you choose the “Keynesian” answer, it will present the Austrian answer to each question for you to ponder.  Let me know how you did in the comments!

I Don’t Know the Answer

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questionThis is a statement that I wish those who advocate the free market used more often:  I Don’t Know the Answer.

Those who argue for the State often challenge those of us who are against the State to pose our alternative.  Pick your scenario, it doesn’t matter:  How would we provide “xxx” without the State?  Too often, those who will defend the free market feel compelled to provide a solution.

The right answer is “I don’t know.”

It’s easy for statists to say “Ah hah!  Without a better solution, you’re lost!”

To that I say “BUNK.”

If I professed to know “the answer” I would either be:

A)  The one who will provide a market-based solution, subject to the discrimination of everyone…and if successful; hugely profitable and documented as one of the great business visionaries of all time

-or-

B) On the same plane as a government official claiming that his solution is the “right” solution for all members of society, and imposing it on all others as “law.”

If I claim to be none of the above, I only posit that the free market will come up with millions of solutions, and that the best solutions will rise to the top – and that as better and better solutions are found, they’ll supplant the earlier solutions at the top.

This is because that is what the free market is all about:  Ideas.

If you have a better idea of how things should work, introduce your idea to others.  If they think it’s a good idea, they’ll tell you with their choices, by allocating their money to your idea.  If it’s not good enough, it will fail because people won’t support it with their hard-earned money.

Yes, it is that simple.  It is a deterministic ideal to believe that there is a “one best solution” to all issues confronting mankind.  The best solution is to let them be presented with multiple choices, and to let the best one emerge in the market of free choice.

Pick any example.  Post it in your comments.  I’ll respond with a few potential ideas, but not the “right one.”

In order to have a clear understanding of rights, one must first understand the concept of property.  Questions of “right” can be easily sorted out when approached from the perspective of property.

Most envision a piece of land when thinking about property, but this is too narrow a definition.  Property begins with self ownership.  As an individual, you have full ownership of your own body.  You have the absolute right to determine what goes in to your body.  No one has the right to infringe on your property, in this case, to assault your body.  Your labor is your property.  What you produce with your hands, or with your mind, is your property.  When you go to work, you sell your labor to your employer, who in turn sells you money in exchange for your labor.  Everything you acquire through lawful exchange is your property, and you have the absolute right to determine the disposition of your property, whether you choose to sell it, give it away, or dispose of it.

Property ownership is transferred through mutually agreed upon exchange.  If I own a bicycle, I may agree to sell it to you or I may give it to you.  Once I have decided to do so, I have transferred the property and therefore the property rights to you.

Understanding rights from the perspective of property helps us clear the air of confusion when collectivists put forth their “but” arguments against individual rights.  For example, many have heard the argument that you have a right to free speech, “but” it has to be limited because it shouldn’t be a “right” to run into a theatre and yell “FIRE!”

Approached from the perspective of property rights, it is easy to see why yelling “FIRE” in a crowded theatre isn’t a “right” in the first place.  First, the theatre owner (as the property owner) has the absolute right to establish rules of conduct on his property.  By purchasing a ticket, you consent to his rules.  The act of yelling “FIRE” disrupts his business operations on his property, endangers his customer relationships and future revenues, and may subject him to liability if people are harmed.  The property rights of the individuals attending the show are similarly violated, as they exchanged their money for 110 minutes of entertainment, and cutting the show short deprives them of the property they rightfully purchased.

Speaking of individual rights, it should be noted that only individuals have rights.  There is no such thing as a “group’s” right.  Groups are abstract concepts, only individuals exist.  Every individual in a group has rights inherent in his humanity, but no additional rights are acquired by membership in a group.  The rights of a group are simply the rights of its individual members.

Election day, 2008:

I don’t think I’ve ever voted Democrat or Republican in a general election – maybe sometime in the past, I’m not sure, but for the most part I’ve always voted third party.

This time around, I made a different choice: I chose not to vote.

I chose not to vote for the lesser of two evils, because I would still be voting for evil.  I chose not to vote third party, because I do not believe this government can be “reformed” if we can just get the “right people” in office.  I chose not to vote to express something much more profound: I have withdrawn support for this government, and I will not legitimize it by participating in its grand show of validation.

History has shown that while government has had minor setbacks in its growth from time to time, the long term trend is that it will continue to grow.  Growth of government and individual Liberty are inversely proportional.  Each administration has left us less free than we were upon its taking of office.

The constitution has failed in Thomas Jefferson’s vision that it would bind the government down with chains.  This government resembles the constitution only in form, in that it has three branches and holds elections every few years.  The constitution is, at best, nothing more than a speed bump to be occasionally overcome by an ambitious ruling class.  When the constitution was the supreme law of the land, it could be said that we lived under Rule of Law.  Due to its failure, we live under rule of men.

This government has ruled the world money supply for decades with its worthless fiat money, and – as is always the case with the unlimited power to create money out of thin air – it has destroyed the value thereof, devastating the productive base of the nation and the middle class that it built.  The future value of all fiat monies, at some point in time, is zero.  The three decades since the final breakdown of the Bretton Woods arrangement have brought about deterioration at an exponential rate, manifest in the recent trillion dollar bailout and the multi-trillions yet to come.

This government cannot be reformed.  It draws evil to its ranks, and quickly converts the well-intentioned into evil with its black hole-like power center.  It is, after all, the most powerful government in the history of the world, running the most expansive empire in the history of the world.  As children, we were taught two things about empires:  They’re evil, and they are always doomed to failure.  This empire’s day is coming, whether it be five years or fifty years from now, I do not know.  But it will fail.  The only question is whether it will go out with a bang or with a poof.  I do not claim to know the outcome.

I do know that I have taken the first and most important step that all of us must take if this government is going to go out with a poof. We must reject its claim to rule over us.  We must declare our individual sovereignty.  We must strip it of its legitimacy, and then dismantle it – lest we (or succeeding generations) will be forced to shed blood in order to reclaim our natural rights to life, liberty, and property.

I, for one, do not wish to pass that burden to future generations.

You Can Be a Millionaire!

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wheelAnd it won’t take any action on your part.  All you need to do is sit idly by while government grows – more government intervention and regulation of the “unfettered free market.”  More government intervention in foreign affairs, constant war, and ongoing occupation of 130 countries.  And most importantly, sit and watch as more power and control are handed over to the engine of government growth:  The Federal Reserve System.

An ever-expanding government needs money to run its wars, to subsidize and bail out its politically connected corporatists, and to pacify the masses with handouts.  It can only tax its subjects so much before they revolt, so it fires up the printing presses and creates new money out of thin air.

When government pumps new fiat money into the economy, it inflates the money supply.  This is the true definition of inflation.  When the money supply increases, the purchasing power of the dollar declines, as there are more dollars competing for the same amount of goods in the marketplace.  Prices for everything go up, which is now misleadingly called inflation (shifting the name to the effect rather than the cause) to mask the tampering going on behind the curtain.

As the dollar declines and the economy suffers, the government “takes action” to stimulate the economy – by inflating.  Government spending programs are launched and easy credit is pushed into the marketplace to pump up consumerism.  You read that right – using inflation to cure the problems caused by inflation.

Thus begins the vicious cycle into hyperinflation.  And this is where your millions come in.

In the Weimar Republic of 1923, the currency was inflated to the point that men were paid several times a day by their employer.  Their wives stopped by the job, picked up the money, and spent it on food before it lost more value.  Near the end, a man walked into town with a wheelbarrow full of cash seeking to trade it for food.  He left it parked on the sidewalk while he inquired with the shopkeeper.  When he returned to get his money, he found it dumped on the street and his wheelbarrow stolen.

In Zimbabwe today, the government has discovered that the paper going into the production of money is worth more than the currency itself, so they have resorted to printing extra zeroes on existing supply.

There are many examples like these throughout history; it can and will happen here – the only question is when.  The future value of all fiat currencies, at some point in time, is zero.

Shortly before the complete collapse of the dollar, you will be a millionaire -  but you’ll be dirt poor – because along the way, the central bank will have obliterated the middle class, having completed a massive transfer of wealth from the proles to the bankers.  The only amelioration is that you won’t have to lug wheelbarrows full of cash down to the store to buy a loaf of bread, because you’ll have a debit card.

If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered. – Thomas Jefferson

The People Have Spoken

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And their elected “representatives” have ignored them, and have done what they planned to do all along.

Today, the congress passed the massive bailout bill, the biggest ripoff in American history next to its causal predecessor, the Federal Reserve Act of 1913.  Last week, a reluctant House of Representatives voted down the bailout bill after a tsunami of calls, letters, and emails in opposition.  There was a brief ray of hope, in that the roaches had been sent scurrying out of fear for losing their jobs.  Paul Ryan (R-Wis) said:  “We’re all worried about losing our jobs…Most of us say, ‘I want this thing to pass, but I want you to vote for it – not me.’”

One may have been encouraged by the failure of the first bailout bill.  One may have believed that this is, in fact, representative government because, ultimately, the people can “throw the rascals out” if they do not do their bidding.  One may counsel one’s self that if enough people can be motivated to take action, the system works – the threat of removal from office would enforce the will of the people.

One would have been disappointed.

The Senate took the responsibility to correct the failure of the House of Representatives, repackaging the bailout in a swift and unconstitutional manner, originating a bill of revenue in the Senate (against the requirements in Article 1, Section 7:  All bills for raising Revenue shall originate in the House of Representatives.)  They passed their bill 74-25 and handed it down to the House.  Emboldened by Senate action, pacified with more welfare and promises, House passage of the bill was a formality.

The first version of the bailout bill was three pages in length.  The second version was over 400 pages.  The bill went from $700 billion to $810 billion.  Another $110 billion in pork was added to win over the support of those congressmen who could be persuaded with goodies for their district, or more accurately, welfare and subsidies for those who stuff their campaign coffers.  To this end, we paid for:

  • Sales tax exemption for certain wooden arrows designed for use by children:  $2 million over the next 10 years
  • Tax breaks for a motor sports racing facility:  $100 million
  • Tax breaks for rum importers:  $192 million.
  • Corporate welfare for research and development:  $19 billion

The list goes on and on.  Taxpayers for Common Sense gives an overview here.

This act of government intervention was always about one thing and one thing only:  Preservation of government power and corporatism.  You did not factor in to the decision.  Your outpouring of objection was a minor annoyance to be overcome.

In the end, it matters not what you think.  The government will go ahead and do what it wishes, because you are not as important as the State.  These “elected officials” are not representatives – they have assumed the role of the ruling class.  You are not a constituent, you are a subject to their rule.

It is time to face the cold reality:  You are not represented by this government.  The sooner you free yourself of this myth, the sooner you can begin to reclaim your liberty.  The constitution failed long ago to bind government down with chains, as Thomas Jefferson suggested.  There is no chance for reform, we are well beyond that point.  Our only path to restore liberty is to tear this government down, learn from our mistakes, and start anew.

Follow-up:  The People Have Spoken II – The Futility of Politics

taxpayer-bailoutThe title of this post is also the title of Chapter 3 of G. Edward Griffin’s book The Creature from Jekyll Island.  The creature he refers to is the Federal Reserve System.

If you want to understand the root cause of this bailout, you need to understand the Federal Reserve System.  It is nothing more than a banking cartel, using the force of government to protect banker’s profits and socialize their losses.  It establishes a pyramid scheme of fractional reserve banking – a fragile house of cards that is capable of generating massive profits in credit booms, but is always subject to wide-scale failure when the inevitable bust occurs.  The system was designed to allow the banks to enjoy the booms, and to protect them from failure in the bust by passing on the cost of failure to the taxpayers.

The Federal Reserve created the crisis, through manipulation of interest rates and inflationary monetary policy.  Yes, there were irresponsible lenders and borrowers;  yes, there is a tangle of government regulation forcing banks to create risky loans – but these are symptoms, not root causes.  None of this will occur in the first place without the Federal Reserve System and its central planning and control.  The housing boom itself was a product of the Federal Reserve, as outlined in this document sponsored by the central bank itself:

“Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission.”

Monetary policy transmission = avenue for inflation.

And now it is the Federal Reserve that will “save the economy” by bailing out politically connected bankers. Once again, we’re told that the people who created the mess are the ones who understand how to “fix” it.  This line should be getting old.

The bailout is nothing less than outright theft.  It will not “save” the economy, it will only prolong our pain and make matters worse.  The damage has been done:  There is a lot of malinvestment out there.  The best way to deal with the problem is to allow the market to revalue the “toxic paper” and liquidate the bad debt.

The Mises Institute has put together a nice collection of writings they call the Bailout Reader.  Anyone wishing to get an in-depth understanding of this mess would be well advised to start there.  It is from the perspective of the Austrian School of free market economics.  The Austrian School predicted this crash years ago, based on sound economic theory and an understanding of the perils of central banking and fiat money.

You are being robbed by a small number of extremely wealthy people.  They profited handsomely from this crisis, and will walk away from the mess they created unscathed, as usual.  Your congress is complicit, because it benefits from their gains as well.  Campaign coffers are filled by wealthy bankers intent to keep the scheme going.

Save the republic.  Abolish the Fed.