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Reformed Libertarian Blog Posts

Joe Sobran Breaks Down the Labels

If you want government to intervene domestically, you’re a liberal.bio-reduced.jpg

If you want government to intervene overseas, you’re a conservative.

If you want government to intervene everywhere, you’re a moderate.

If you don’t want government to intervene anywhere, you’re an extremist.

“Need” now means wanting someone else’s money.

“Greed” now means wanting to keep your own.

“Compassion” is when a politician arranges the transfer.

—Joe Sobran

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Welcome to the New Site!

Hurrah! The new site is up! Click here.

What do you think? Please know: it’s still a work in progress and I’m still adding features and making tweaks. So I know some of you are going to really have some major critiques. Please be nice. But I welcome feedback and suggestions.

Please click on at least one of the newest 4 articles when you get to the site to get a feel for how it looks.

A couple notes on the new structure of things:

The very biggest change is the main site where all the major articles and pages are hosted is now distinct from the blog. As you will find on the main site in the menu area (far right), “The Blog” takes you to the subdomain where the blog exists. Here’s the cool thing: each and every blog post feeds into the various pages on the main site in the sidebar section so if you visit the main site, you can still see all the blogposts; clicking it will just take you to the blog site. The blog site is blog.reformedlibertarian.com .

What is the difference between an article and a blog? An article is original content, developed arguments, and longer/more thought out material. The blog, on the other hand, will be shorter and mostly unelaborated. You will find links, memes, jokes, quotes, quick thoughts, and references to outside pieces.

The transition between the main site and the blog site is pretty seamless. You will hardly notice.

I’m still working on the photo sizes on the front page. So some of them may seem a little off. Just bear with me. I have lots of tweaks to do. The mobile site is very cool. The side menu option (the three lines on the upper right hand side) is available on both desktop and mobile. The primary menu is only seen on desktop, and it is just the major categories, plus a link to the blog site.

I am going to be putting all the major pages (i.e. The Reading List) in the side menu (three line thing) and leave the primary menu for the site’s categories (topics).

The biggest annoyance for me right now is the block quotes on the main site’s articles. The default formate is all capital letters. I am working to get this changed to cursive. So again, bear with me.

Any other suggestions or feedback is appreciated. Some of you may think the blog/site distinction is a little odd. But four things: 1) You’ll get used to it. 2) How cool is it that you can scroll straight down the blog page and it reads like a legit blog! 3). I had to do it this way with the way the main theme is in order to make a single tiny blogpost not look really weird on the site.

And #4: I have a couple really cool plans in store for the blog site that I am still working on. Stay tuned for that announcement!

I will be adding new features and cool designs all week. So keep checking back in. It’s not complete yet. But for the most part it’s ready to launch. So check it out.

And finally, thank you to all who contributed to this next step with a small donation. It is always helpful and shows me the kind of interest that exists for these types of resources. I’m always appreciative. Here is what I said yesterday on Facebook on this topic:

Hey everybody, time to do this again. Once a year, I do one round of extremely low pressure fundraising for some site expenses. Let me say the same thing I say every single time: there is nothing on the site that will be prevented if no one donates. I have the same hosting/domain/theme expenses I always do and I personally have the funds to pay everything. So it’s not like you would be keeping the site up. It’ll be up regardless.

However, the reason I do this is because I know many of you have benefitted from the site and may want to express yourself in this way. A few people per year do ask me if I need any help financially and I always tell them I don’t need help per se, but there are expenses and I am indeed honored to receive contributions.

My one big change that I am doing this month is –finally– getting a modern and beautiful theme all installed. A much better one than just the tinkering with the current one I’ve been doing off and on. You guys deserve it. It’s going to be legit. So anyways, besides the regular expenses, that’s what I’ll be spending money on this time around.

If you want to contribute, I’d be thrilled. Here is the link:

https://paypal.me/reformedlibertarian

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Trumped! New Stockman Book

David Stockman has announced a new book that is coming soon:

I am in the throes of finishing a book on the upheaval represented by the Trump candidacy and movement. It is an exploration of how 30 years of Bubble Finance policies at the Fed, feckless interventions abroad and mushrooming Big government and debt at home have brought America to its current ruinous condition.

It also delves into the good and bad of the Trump campaign and platform and outlines a more consistent way forward based on free markets, fiscal rectitude, sound money, constitutional liberty, non-intervention abroad, minimalist government at home and decentralized political rule.

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The Cycle of Decivilization

The state artificially creates a variety of laws from fiat.

People inevitably break these laws.

The state uses its coercive power to enforce the law.

People get annoyed, some react with physical violence (unwise).

The state clamps down and gets more fierce.

This causes more blowback.

[fast forward decades]

Behold, the cycle continues. Hoppe’s theory of the decivilization effects of Democracy and public law is being proven correct.

More laws, more crime. More crime, more tension between state and people.

Some blame institutionalized racism. This is wrong. Racial disparity in the enforcement of artificial law does not itself logically imply racism (the theory that certain races are morally or biologically superior to others).

Others see zero guilt in the law enforcement and only consider them categorically as heroic. This is wrong. See above for the state’s role.

The state grows more powerful and more tyrannical as it becomes more desperate to maintain its beloved grasp on society. But this is a continuation of the spiral and feeds the careless and unthinking mob-like reaction. Back and forth it all goes.

Society collapses upon itself.

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Jim Hale’s Change of Heart

Yesterday I was so impressed by Jim Hale’s exclusive article over at the Ron Paul Institute wonderfully titled “Confessions of a War Propagandist,” that I also posted here on TRL. A major reason for my being impressed, of course, was because of who Jim Hale is. As the article states, Hale was the media relations director at the Committee of the Liberation of Iraq, a key influencer on behalf of the War Party’s efforts for regime change in Iraq. Hale worked closely with neocon head honcho Bill Kristol and their favorite advocate in the Federal Government: John McCain.

At any rate, today Tom Woods published Hale’s first interview since “confessing” his role in the deceitful and destructive efforts toward a completely unnecessary, unjustifiable, and unconstitutional war in Iraq. It was pretty fascinating. Apparently, Hale was one who knew Ron Paul was right in his understanding of the facts and the theory of the entire war effort, both in terms of the actual cause of the events and also in terms of the propaganda that was being promoted to drive the country toward war. But both in 2008 and 2012, Hale admits rejecting Paul’s arguments by rationalizing the very false narrative to himself until just this year when first Rubio and then Cruz quit the GOP race. At that point, Hale knew it was over and he “woke up one morning” and decided he was done.

He even cites his faith as a key motivator to his change of heart.

He literally stumbled onto Tom Woods’ site by accident, starting listening to the podcasts, bought a whole stack of the site’s recommended books to educate himself on the liberty philosophy (and no doubt on all the war-related podcasts Tom Woods has done). He even decided to give Ron Paul’s book The Revolution a chance. This was all a couple months ago, apparently. He messaged Tom Woods and recorded his first public reflection on the matter.

Completely remarkable. I mean this guy was at the very top of the propaganda efforts and here he is today, the weight of his lies finally off his chest, ready and willing to dig into the liberty movement’s resources and  open up about his change of heart. We always like the dream of the day when an “insider” will finally come clean about the corruption and lies that go on, to expose himself and his colleagues and to tell the truth about what they are doing. It’s been done before, but this truly is a great moment.

Here is the interview, give it a listen!

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FedGov and Statist Christian

The role of the Federal Government is to make up laws out of thin air and then convict people and businesses who happen to fall short of the arbitrary, often socially and economically harmful, standard.

The role of the statist evangelical Christian who lacks a coherent political theory is to praise the Federal Government for upholding “law and order” and stigmatize the person/business for acting “illegally.”

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Robert Higgs on Minimum Wage Studies

From his Facebook page:

Suppose you wanted to know how many of the soldiers who served in World War II were killed in that war. So you sent inquiries to a random sample of veterans of that war, asking: were you killed in the war? I presume that all of those who responded to the survey would reply, no. Having conducted your scientific poll, you could then conclude that none of the soldiers who participated in World War II were killed.

The mistake you would have made in this case is known as the result of survivorship bias. It affects many sorts of studies, including many where the study design is not so obviously stupid as in my foregoing example. Surveys have sought, for example, to determine how an increase in the legal minimum wage affected employers’ amount of.employment. Such a forced wage increase, especially if it were a large one, might well cause some firms to go out of business. They would then be unavailable to respond to a poll or other survey to indicate that the increased minimum wage had caused them to reduce their employment to zero, wiping out however many jobs they had previously maintained.

You might think that any well-trained economist would be aware of survivorship bias and would not draw unwarranted conclusions by failing to take it into account in designing or conducting a study. But if you thought so, you’d be wrong. Mainstream economists, including super-duper econometricians, not uncommonly make this freshman mistake.

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Excerpt from Mises’ Biography

I like this first part of the preface of Mises: The Last Knight of Liberalism, brilliantly researched and written by Jorg Guido Hulsmann. It really captures Hulsmann’s appreciation for Mises, and touches on Mises’ contributions to the freedom philosophy.

IN THE SUMMER OF 1940, with Hitler’s troops moving through France to encircle Switzerland, Ludwig von Mises sat beside his wife Margit on a bus filled with Jews fleeing Europe. To avoid capture, the bus driver took back roads through the French countryside, stopping to ask locals if the Germans had been spotted ahead—reversing and finding alternative routes if they had been.1970023

Mises was two months shy of his fifty-ninth birthday. He was on the invaders’ list of wanted men. Two years earlier, they had ransacked his Vienna apartment, confiscating his records, and freezing his assets. Mises then hoped to be safe in Geneva. Now nowhere in Europe seemed safe. Not only was he a prominent intellectual of Jewish descent; he was widely known to be an archenemy of National Socialism and of every other form of socialism. Some called him “the last knight of liberalism.”

He had personally steered Austria away from Bolshevism, saved his country from the level of hyperinflation that destroyed interwar Germany, and convinced a generation of young socialist intellectuals to embrace the market. Now he was a political refugee headed for a foreign continent.

The couple arrived in the United States with barely any money and no prospects for income. Mises’s former students and disciples had found prestigious positions in British and American universities (often with his help), but Mises himself was considered an anachronism. In an age of growing government and central planning, he was a defender of private property and an opponent of all government intervention in the economy. Perhaps worst of all, he was a proponent of verbal logic and realism in the beginning heyday of positivism and mathematical modeling. No university would have him. Margit began to train as a secretary.

Over the next decade, they would slowly rebuild and Mises would find new allies. He would also publish his most important book, Human Action. It would earn him a following whose admira- tion and devotion were beyond anything he had known in Europe.

When he died in October 1973, he had only a small circle of admirers and disciples, but this group became the nucleus of a movement that has grown exponentially. Today his writings inspire economists and libertarians throughout the world, and are avidly read by an increasing number of students in all the social sciences. There is an entire school of “Misesian” economists flourishing most notably in the United States, but also in Spain, France, the Czech Republic, Argentina, Romania, and Italy. This movement is testimony to the lasting power and impact of his ideas.

The purpose of the present book is to tell the story of how these ideas emerged in their time. It is the story of an amazing economist, of his life and deeds. It is the story of his personal impact on the Austrian School and the libertarian movement. It is above all the story of a man who transformed himself in an uncompromising pursuit of the truth, of a man who adopted his ideas step-by- step, often against his initial inclinations.

Once a student of the historical method in the social sciences, he would become the dean of the opposition Austrian School and humanistic social theory. He went from left-leaning young idealist in Vienna to grand old man of the American Right. Dismissive of “the metallists” early in his career, he became an unwavering spokesman for a 100 percent gold standard. His example inspired students and followers, many of whom would take his message and method farther than he himself would go.

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H.L. Mencken on Envy and Democracy

Mencken:

No doubt my distaste for democracy as a political theory is, like every other human prejudice, due to an inner lack-to a defect that is a good deal less in the theory than in myself. In this case it is very probably my incapacity for envy.

That emotion, or weakness, or whatever you choose to call it, is quite absent from my make-up; where it ought to be there is a vacuum. In the face of another man’s good fortune I am as inert as a curb broker before Johann Sebastian Bach. It gives me neither pleasure or distress. The fact, for example, that John D. Rockefeller had more money than I have is as uninteresting to me as the fact that he believed in total immersion and wore detachable cuffs. And the fact that some half-anonymous ass or other has been elected President of the United States, or appointed a professor at Harvard, or married to a rich wife, or even to a beautiful and amiable one: this fact is as meaningless to me as the latest piece of bogus news from eastern Europe.

The reason for this does not lie in any native nobility or acquired virtue. Far from it, indeed. It lies in the accidental circumstance that the business I pursue in the world seldom brings me into very active competition with other men. I have, of course, rivals but they do not rival me directly and exactly, as one delicatessen dealer or or clergyman or lawyer or politician rivals another.

It is only rarely that their success costs me anything, and even then the fact is usually concealed. I have always had enough money to meet my modest needs and have always found it easy to get more than I actually want. A skeptic as to all ideas, including especially my own, I have never suffered a pang when the ideas of some other imbecile prevailed. […]

And there is only one sound argument for democracy, and that is the argument that it is a crime for any man to hold himself out as better than other men, and, above all, a most heinous offense for him to prove it.

What I admire most in any man is a serene spirit, a steady freedom from moral indignation, an all-embracing tolerance-in short, what is commonly called good sportsmanship. Such a man is not to be mistaken for one who shirks the hard knocks of life. On the contrary, he is frequently an eager gladiator, vastly enjoying opposition. But when he fights, he fights in the manner of a gentleman fighting a duel, not in that of a longshoreman cleaning out a waterfront saloon. That is to say, he carefully guards his amour propre by assuming that his opponent is as decent a man he is, and just as honest-and perhaps, after all, right. Such an attitude is palpably impossible to a democrat. His distinguishing mark is the fact that he always attacks his opponents, not only with all arms, but also with snorts and objurgations-that he is always filled with moral indignation-that he is incapable of imaging honor in an antagonist, and hence incapable of honor himself.

Such fellows I do not like. I do not share their emotion. I cannot understand their indignation, their choler. In particular, I can’t fathom their envy.

And so I am against them.

Taken from A Blind Spot from the Smart Set, 1920, pp.43-44

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A Wealthy Zuckerberg’s Sly Move

In our wealth management practice, there is an important reminder that we help some of our extremely wealthy clients to remember: it is better to be in control and not be an owner than to be an owner and have limited control.

What we mean by this is that there are certain legal disadvantages to personally owning something, including tax and inheritance implications. Among these “somethings” that can be owned is stock of a given company.

This is how we should view the recent hoopla surrounding Mark Zuckerberg’s announcement that he will be “giving away” 99% of his ownership in Facebook. The progressive left when berserk. “This is what the wealthy SHOULD be doing! Good for Mark!”

Here’s the deal: this is exactly what the wealthy should be doing indeed, and it is what I might advise (some) people to do (if their situation calls for it). Why? Because what he just did was to transfer the wealth from his own taxable control (ownership) to a new foundation that is controlled by– you guessed it– him. Now he still controls the wealth, but he does not own it; therefore, he will not be taxed on it. That’s right: capital gains tax on the transfer? Nope. Future estate taxes for his heirs? Nada. But what about a tax deduction for the donation? You bet!

Am I saying he shouldn’t be allowed to do this? On the contrary! He should indeed! We need these strategies to protect our wealth!

What should the wealthy person do to protect wealth from the state and from the masses who demand its redistribution? What should the wealth do as a strategy to preserve the long term integrity of his wealth? He should do what Zuckerberg just did. But won’t the media and the Progressive Left be super angry?? Not if you do it under the guise of giving away your wealth for future generations. Like Zuckerberg just did. Then they lavish praise on you!

Robert Wenzel comments on the matter:

Zuckerberg Announces He Is Going To Take His Money Out Of His Left Taxable Pocket and Put It Into His Right Non-Taxable Pocket

We may have our first full-fledged billionaire couple with child, who can most aptly be described as slogan Marxists. It doesn’t appear they have any deep knowledge of Marxism, or any other social theories, they are just sloganeers: “equality for all, especially future generations.”

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Interest Rates and the Strength of the Economy

Janet Yellen’s explanation for continuing the absurd trend of ZIRP (Zero Interest Rate Policy) was essentially that, while the Fed had hit its official unemployment level goals (for clarification, the reason for this is that the labor participation rate is at historically low levels and also because we are in a boom phase of the business cycle due to the expansion of the money supply, per the Austrian Business Cycle Theory.), the economy itself was not yet strong enough to withstand the beginnings of a raise in the Federal Funds rate.  The economy is still holistically too weak for the Fed to be comfortable with a 25 basis point uptick in the price of credit.

Richmond Fed President Jeffrey Lacker was the lone dissenting voice from this position. In his estimation, the economy is actually strong enough to take on the early stages of what must eventually be a long haul toward historically normal interest rate levels.

CONTINUE READING

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Matt McCaffrey Defends Misesian Economics

Matt McCaffrey defended Austrian economics against John Mueller’s odd claim (in the Quarterly Journal of Austrian Economics!) that there’s a missing element in Austrian economics; namely, that it cannot account for things like love because Austrian economics (especially Misesian economics), centered on the methodology of praxeology, which sees all human action as a result of self-interest. Stated differently, all human beings have ends that need to be satisfied and therefore they act; this action constitutes employing means to accomplish that end.

Mueller then, presupposing that love itself must not be self-interested, states that there is a missing element in Austrian economics. For in his eyes Austrian economics is limited to action stemming from self-interest.

I think Mueller’s claim is remarkably silly.  McCaffrey easily overcomes Mueller’s observation, first by stating Mueller’s example:

For example, a mother who feeds her child is not acting out of self-interest, but of love for her infant, which explains why she feeds her child rather than consuming all her food herself. According to Mueller, standard economic assumptions cannot account for either the mother’s loving behavior or her distribution of food to her child. Likewise, there are an enormous number of similar non-exchange behaviors that fall outside economic analysis. What is needed then is a thorough revision of theory to incorporate these missing actions, and this is what Mueller sets out to do.

Nevertheless, readers of Mises will perhaps see the difficulty with Mueller’s argument: praxeology suggests that all action is self-interested in that it tries to substitute a more for a less satisfactory state of affairs, from the point of view of the actor. Action is thus a kind of exchange, though not necessarily an exchange of goods and services. Rather, when a loving mother feeds her child, she exchanges the less desirable state of the child’s hunger for the more desirable state of the child’s nourishment. Taken this way, selflessness, or love, does not pose much of a problem for economic theory.

And actually, I think there is a much stronger defense of Mises’ praxeology than McCaffrey himself gives.  Beyond McCaffrey’s point, the fact remains that the mother actually is acting in self-interest (properly understood) in feeding her child.  And this is proven by the action itself! Every single act is a revelation of the value placed on a given means/ends relationship as considered by the human actor.  The mother does not feed her child even though she would rather feed herself; she actually feeds her child because she sees the act of feeding her child as bring her more satisfaction than the act of feeding herself.  In other words, she weighs the value, mentally, of the satisfaction that would be brought about in her mind by feeding herself, against the value of the satisfaction that would be brought about by feeding her child.  Praxeology explains why she acted in that way: her self-interest made her choose the option that would satisfy her more.

In a previous post, I quoted Jonathan Edwards:

A man never, in any instance, wills any thing contrary to his desires, or desires any thing contrary to his will.

…but yet his Will and Desire do not run counter all: the thing which he wills, the very same he desires; and he does not will a thing, and desire the contrary, in any particular.

[…]

And therefore I observe, that the Will (without any metaphysical refining) is, That by which the mind chooses any thing. The faculty of the will, is that power, or principle of mind, by which it is capable of choosing: an act of the will is the same as an act of choosing or choice.

[…]It is sufficient to my present purpose to say, It is that motive, which, as it stands in view of the mind, is the strongest, that determines the will. But may be necessary that I should a little explain my meaning. By motive I mean the whole of that which moves, excites, or invites the mind to volition, whether that be one thing singly, or many things conjunctly. Many particular things may concur, and unite their strength, to induce the mind; and when it is so, all together are as one complex motive. And when I speak of the strongest motive, I have respect to the strength of the whole that operates to induce a particular act of volition, whether that be the strength of one thing alone, or of many together.

And then I commented on Edwards:

If the will is the faculty that chooses, and the will cannot choose anything contrary to the desires, then it is impossible to conceive of a situation in which we don’t choose that which satisfies the chief desires of our heart.  Thus, to obey God without our minds considering this activity the most satisfying thing at the moment is an idea that runs contrary to the entire nature of man himself.  This is an anthropological consideration; can man distance himself from his desires?  Can he act contrarily to his own will?  Piper and Edwards say no, and to disagree seems to fly in the face of reason and consistency.

Indeed, Mises economic theory does not overlook the role of love in praxeology, it merely incorporates it into the system. Mueller should understand this.

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Mises on American Prosperity

(from p.37-39 of Ludwig von Mises, Profit and Loss)

“The tycoons are too powerful, too rich, and too big. They abuse their power for their own enrichment. They are irresponsible tyrants. Bigness of an enterprise is in itself an evil. There is no reason why some men should own millions while others are poor. The wealth of the few is the cause of the poverty of the masses.”

Each word of these passionate denunciations is false. The businessmen are not irresponsible tyrants. It is precisely the necessity of making profits and avoiding losses that gives to the consumers a firm hold over the entrepreneurs and forces them to comply with the wishes of the people. What makes a firm big is its success in best filling the demands of the buyers. If the bigger enterprise did not better serve the people than a smaller one, it would long since have been reduced to smallness. There is no harm in a businessman’s endeavors to enrich himself by increasing his profits. The businessman has in his capacity as a businessman only one task: to strive after the highest possible profit. Huge profits are the proof of good service rendered in supplying the consumers. Losses are the proof of blunders committed, of failure to perform satisfactorily the tasks incumbent upon an entrepreneur. The riches of successful entrepreneurs are not the cause of anybody’s poverty; it is the consequence of the fact that the consumers are better supplied than they would have been in the absence of the entrepreneur’s effort. The penury of millions in the backward countries is not caused by anybody’s opulence; it is the correlative of the fact that their country lacks entrepreneurs who have acquired riches. The standard of living of the common man is highest in those countries which have the greatest number of wealthy entrepreneurs. It is to the foremost material interest of everybody that control of the factors of production should be concentrated in the hands of those who know how to utilize them in the most efficient way.

It is the avowed objective of the policies of all present-day governments and political parties to prevent the emergence of new millionaires. If this policy had been adopted in the United States fifty years ago the growth of the industries producing new articles would have been stunted. Motorcars, refrigerators, radio sets, and a hundred other less spectacular but even more useful innovations would not have become standard equipment in most of the American family households.

The average wage earner thinks that nothing else is needed to keep the social apparatus of production running and to improve and to increase output than the comparatively simple routine work assigned to him. He does not realize that the mere toil and trouble of the routinist is not sufficient. Sedulousness and skill are spent in vain if they are not directed toward the most important goal by the entrepreneur’s foresight and are not aided by the capital accumulated by capitalists. The American worker is badly mistaken when he believes that his high standard of living is due to his own excellence. He is neither more industrious nor more skillful than the workers of Western Europe. He owes his superior income to the fact that his country clung to “rugged individualism” much longer than Europe. It was his luck that the United States turned to an anticapitalistic policy as much as forty or fifty years later than Germany. His wages are higher than those of the workers of the rest of the world because the capital equipment per head of the employee is highest in America and because the American entrepreneur was not so much restricted by crippling regimentation as his colleagues in other areas. The comparatively greater prosperity of the United States is an outcome of the fact that the New Deal did not come in 1900 or
1910, but only in 1933.

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Rothbard on inflation and interest rates; their connection

Rothbard’s “myth 4” out of the 10 myths he refuted here has to do with the relationship between inflation and interest rates:

Every time the Fed tightens the money supply, interest ratesrise (or fall); every time the Fed expands the money supply, interestrates rise (or fall).

The financial press now knows enough economics to watch weekly money supply figures like hawks; but they inevitably interpret these figures in a chaotic fashion. If the money supply rises, this is interpreted as lowering interest rates and inflationary; it is also interpreted, often inthe very same article, as raising interest rates. And vice versa. If the Fed tightens the growth of money, it is interpreted as both raising interest rates and lowering them. Sometimes it seems that all Fed actions, no matter how contradictory, must result in raising interest rates. Clearly something is very wrong here.

The problem is that, as in the case of price levels, there are several causal factors operating on interest rates and in different directions. If the Fed expands the money supply, it does so by generating more bank reserves and thereby expanding the supply of bank credit and bank deposits. The expansion of credit necessarily means an increased supply in the credit market and hence a lowering of the price of credit, or the rate of interest. On the other hand, if the Fed restricts the supply of credit and the growth of the money supply, this means that the supply in the credit market declines, and this should mean a rise in interest rates.

And this is precisely what happens in the first decade or two of chronicinflation. Fed expansion lowers interest rates; Fed tightening raises them. But after this period, the public and the market begin to catch on to what is happening. They begin to realize that inflation is chronic because of the systemic expansion of the money supply. When they realize this fact of life, they will also realize that inflation wipes out the creditor for the benefit of the debtor. Thus, if someone grants a loan at five percent for one year, andthere is seven percent inflation for that year, the creditor loses, not gains. He loses two percent, since he gets paid back in dollars that are now worth seven percent less in purchasing power. Correspondingly, the debtor gains by inflation. As creditors begin to catch on, they place an inflation premium on the interest rate, and debtors will be willing to pay it. Hence, in the long run anything which fuels the expectations of inflation will raise inflation premiums on interest rates; and anything which dampens those expectations will lower those premiums. Therefore, a Fed tightening will now tend to dampen inflationary expectations and lower interest rates; a Fed expansion will whip up those expectations again and raise them. There are two, opposite causal chains at work. And so Fed expansion or contraction can either raise or lower interest rates, depending on which causal chain is stronger.

Which will be stronger? There is no way to know for sure. In the early decades of inflation, there is no inflation premium; in the later decades,such as we are now in, there is. The relative strength and reaction times depend on the subjective expectations of the public, and these cannot be forecast with certainty. And this is one reason why economic forecasts can never be made with certainty.

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Guido Hulsmann on Religion and Liberty

A little glimpse of the personal perspective held by Jorg Guido Hulsmann on religion and liberty, as written in the forward to Ralph Raico’s book The Place of Religion in the Liberal Philosophy of Constant, Tocqueville, and Lord Acton.  It’s always neat to read little things like this from economists that have greatly impacted you.

Religion and liberty—few issues are more controversial among current-day libertarians. At least four positions can be distinguished. One well-known position holds that religion and liberty are separate spheres that are almost hermetically sealed from one another, while any historical point of contact is purely accidental or contingent. According to another wide-spread position, religion and liberty are outright antagonistic. These advocates see in religion the most deadly foe of individual liberty, an even greater enemy of mankind than the state. A third position contends that religion and liberty are complementary: on the one hand, pious men facilitate the workings of a society with minimal or no government and, on the other hand, political liberty facilitates religious life as each one sees fit. Finally, some thinkers defend a fourth position, namely, that religion—and in particular the Christian faith—is fundamental for individual liberty, both as far as the historical record is concerned and on the conceptual level.

In our thoroughly secularised culture, the third position is held to be daring and the fourth insolent. Yet today, I do believe that they are both true and that the third is a skin-deep statement of the truth, while the fourth goes to the root of the matter. Once a pagan interventionist, I first saw the truths of libertarian political theory, and eventually I started to realize that the light of these truths was but a reflection of the encompassing and eternal light that radiates from God through His Son and the Holy Spirit.

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Bloomberg: Help! Prices May Fall!

An article at Bloomberg expresses deep concern over the fact that, recently, the United States has experienced a strong dollar, relative of course to the world’s other fiat currencies.

While the steel industry has been fading in the U.S. for decades, things have gotten worse recently. A strong U.S. dollar, combined with a slowing Chinese economy, is bringing unprecedented amounts of cheap, foreign steel to the U.S., swamping domestic producers.

Stop. Reflect.

>”Things are getting worse.”

>”unprecedented amounts of cheap, foreign steel to the U.S.”

For real? Consider:

Jones: “Things are getting worse in my household financial situation”

Smith: “Oh yeah? What’s going on?”

Jones: “Well everytime I go to the store things are getting cheaper and now I am able to purchase unprecedented levels of goods.”

Smith: “Yikes. I’ll keep you in my prayers.”

The doctrine of mercantilism weighs economic success by the ability of the domestic producers to lead the industry worldwide.  Thus, when foreign producers are able to produce things cheaper, the mercantilist panics.  For this means that the domestic producers are not able to compete.  But why is it inherently better for economic progress is the domestic producers in one industry maintain control of the industry?  There is no reason for this.

Economic prosperity and progress depends on the division of labor.  It depends on the fact that some people are better, more efficient, at producing some things than others.  And it is good for the economy that those who are best at something specialize in it and those who are not as good at something find another role in society.  While Bloomberg panics that the Chinese are able to produce more cheaply, they should be thrilled: for now the American consumer of steel can save money, invest what he would have spent, and thereby direct scarce resources into productive activities in the domestic area.

Bloomberg complains: “The recent devaluation of the yuan could make Chinese steel even more attractive to U.S. buyers.”  This is exactly right. And this is the lesson that the entire mainstream economic commentator profession needs to understand: Chinese devaluation is not a boon for China… it is a boon for the US consumer!  China, far from “cheating” by devaluing, are merely hurting themselves and their own consumers.  The US citizen is the primary beneficiary!

Bloomberg:

“U.S. producers have had no choice but to pull back. Andrew Lane, an analyst at Morningstar, expects U.S. steel production to come in at around 85 million metric tons this year, down from 98 million in 2007. “I don’t think we’ll get back to that level until 2020,” Lane says.”

There is nothing wrong with this. Obviously those employed in the steel industry will be negatively affected. But those in the importing industries, as well as those in the industries that will suddenly receive more money from the savings of the American consumers who will no longer be spending as much money on steel, will be positively affected.  Economics, as Bastiat and Hazlitt taught, is a matter of considering the bigger picture; not just the immediate and obvious consequences.

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Nice Email from Lawrence Reed of FEE

Lawrence Reed, President of the Foundation for Economic Education (FEE), sent along a nice email thanking us for sharing his article on Presbyterian stalwart J. Gresham Machen.  He basically said that he was previously unaware of the site but is excited to look around and even stated that he may become one of our biggest fans “based on the name itself!”

It’s always such a pleasure to receive supportive emails from people like Reed and Walter Block.  If you haven’t yet read the Machen article, make sure you do. And look around FEE’s site for some great resources in the free market economics tradition.  FEE is one of the older libertarian foundations and was founded in 1946 with money from the Volker Fund, which was instrumental in funding important books that are now cornerstones of the modern libertarian movement.

Many very important players in the early development of the modern libertarian movement went through FEE, including people like Henry Hazlitt, Hans Sennholz, and FA “Baldy” Harper.  Murray Rothbard, in “The Private Volker Fund Memos,” wrote the following:

With the formation of the Foundation for Economic Education in 1946, the libertarian movement turned a corner and began its postwar renaissance. […]

[FEE] gathered together the many isolated and loose strands of the libertarians, and created that crucial open center for a libertarian movement. It not only disseminated libertarian literature; it provided a gateway, a welcoming place, for all hitherto isolated and neophyte libertarians. It launched the movement.

This great feat of FEE in launching the libertarian movement is testimony to the enormous need for a functioning “open center” for libertarians. For not only did this open center provide a channel and gateway for people to enter the libertarian ranks; not only did its agitation convert some and find others; it also, by providing an atmosphere and a “center” for like-minded students of liberty, pro- vided the atmospheric spark for rapid advance from old-fashioned laissez-faire to 100 percent liberty on the part of much of its staff and friends. In short, FEE, by its very existence, exerted an enormous multiple leverage in creating and advancing and weaving together the strands and people in the libertarian cause. For this may it always be honored!

Thanks Lawrence Reed for the email!

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Patrick Barron on Cash Elimination

I thought Patrick Barron’s response to the Financial Times on cash was especially fantastic.  He wrote:

Dear Sirs:

I was appalled at your supposed “case” for eliminating cash, which you yourselves describe as the peoples’ “go-to safe asset”. And what IS your case?

One, “cash…limits the central banks’ ability to stimulate a depressed economy.” Really? Although I am not in favor of debasing money as a path to prosperity, I see no limit to the central banks’ ability to hit the “enter” key on their computer screens in order to manufacture out of thin air as much money as they dare. Two, banks cannot impose a negative interest rate–what we common folk call stealing–on the cash in one’s pocket. Your preposterous goobledygook that a negative interest rate is required by central banks in order to have sufficient “ammunition” when tightening from a “lower band” is as vacuous a statement, although often heard, that one can imagine. Three, that unlike electronic money, cash cannot be tracked…to which I answer “so what?” and “thank God for that!” Four, that former chief economist of the International Monetary Fund, Kenneth Rogoff, thinks eliminating cash is a wonderful idea. Let’s set the record straight. The IMF gets its money from sovereign states, who tax their people against their will in order to give the money to the IMF to squander and give bad advice around the world. Any self-respecting economist would try to hide the fact that he had anything to do with such an institution; therefore, I find little comfort in Mr. Rogoff’s endorsement of the cash-confiscation scheme. Four, the state can more easily levy a Value added tax in order to make tax collection easy. Oh, how nice! Here…let me put my cash in the bank in order to make it easier for government to tax it away. Ah, but then you conclude your support of the cashless society with the caveat that we minions might, just might, be allowed to carry some cash…but at a cost. Our cash could carry an expiration date, for example. As you state: “The benefits of cash are significant–but they need not be offered for free.” A more Orwellian statement would be hard to find.

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My Favorite H.L Mencken Quotes

H.L. Mencken (1880-1956) was one of the most important social critics and columnists in American history. His prose and ability to craft remarkable sentences are now of legend.  He was well known for covering the Scopes trial (it is popularly known as the “monkey trial” –this was Mencken’s doing). Here is Murray Rothbard’s essay on Mencken: “H.L. Mencken: The Joyous Libertarian.”  While Mencken was well known as an agnostic and for his harsh words against religion (which, if applied to the right religious groups –the moralist Progressives and the anti-philosophy Arminian fundamentalists– are entirely agreeable), he had much respect for a hero of this website: J. Gresham Machen. Here is a quote from Mencken’s obituary of Machen. Keep in mind that this is coming from someone who generally despised religion:

What caused [Machen] to quit the Princeton Theological Seminary and found a seminary of his own was his complete inability, as a theologian, to square the disingenuous evasions of Modernism with the fundamentals of Christian doctrine. He saw clearly that the only effects that could follow diluting and polluting Christianity in the Modernist manner would be its complete abandonment and ruin. Either it was true or it was not true. If, as he believed, it was true, then there could be no compromise with persons who sought to whittle away its essential postulates, however respectable their motives.

Thus he fell out with the reformers who have been trying, in late years, to convert the Presbyterian Church into a kind of literary and social club, devoted vaguely to good works. Most of the other Protestant churches have gone the same way, but Dr. Machen’s attention, as a Presbyterian, was naturally concentrated upon his own connection. His one and only purpose was to hold it [the Church] resolutely to what he conceived to be the true faith. When that enterprise met with opposition he fought vigorously, and though he lost in the end and was forced out of Princeton it must be manifest that he marched off to Philadelphia with all the honors of war.

And finally, here are my favorite quotes of Mencken’s:

  • “A professional politician is a professionally dishonorable man. In order to get anywhere near high office he has to make so many compromises and submit to so many humiliations that he becomes indistinguishable from a streetwalker.”urgetosavemencken1
  • “Democracy is an art of governing the circus from the monkey’s cage.”
  • “The men the American people admire most extravagantly are the most daring liars; the men they detest most violently are those who try to tell them the truth.”
  • “The most dangerous man, to any government, is the man who is able to think things out for himself… Almost inevitably, he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.”
  • “The urge to save humanity is almost always a false front for the urge to rule.”
  • “I believe that it is better to be free than to be not free, even when the former is dangerous and the latter safe. I believe that the finest qualities of man can flourish only in free air– that progress made under the shadow of the policeman’s club is also progress, and of no permanent value. I believe that any man who takes the liberty of another into his keeping is bound to become a tyrant, and that any man who yields up his liberty, in however slight measure, is bound to become a slave.”
  • “The truth, indeed, is something that mankind, for some mysterious reason, instinctively dislikes. Every man who tries to tell it is unpopular, and even when, by the sheer strength of his case, he prevails, he is put down as a scoundrel.”
  • “When a candidate for public office faces the voters he does not face men of sense; he faces a mob of men whose chief distinguishing mark is the fact that they are quite incapable of weighing ideas, or even of comprehending any save the most elemental — men whose whole thinking is done in terms of emotion, and whose dominant emotion is dread of what they cannot understand. So confronted, the candidate must either bark with the pack or be lost… All the odds are on the man who is, intrinsically, the most devious and mediocre….”
  • “As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”
  • “The aim of public education is not to spread enlightenment at all; it is simply to reduce as many individuals as possible to the same safe level, to breed a standard citizenry, to put down dissent and originality.”mencken-dressed-up1024x675
  • “The typical lawmaker of today is a man wholly devoid of principle — a mere counter in a grotesque and knavish game. If the right pressure could be applied to him, he would be cheerfully in favor of polygamy, astrology or cannibalism.”
  • “It is [a politician’s] business to get and hold his job at all costs. If he can hold it by lying, he will hold it by lying; if lying peters out, he will try to hold it by embracing new truths. His ear is ever close to the ground.”
  • “Public opinion, in its raw state, gushes out in the immemorial form of the mob’s fear. It is piped into central factories, and there it is flavoured and coloured and put into cans.”
  • “I believe that all government is evil, and that trying to improve it is largely a waste of time.”
  • “The state… consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting ‘A’ to satisfy ‘B’. In other words, [the state] is a broker in pillage, and every election is a sort of advanced auction on stolen goods.”
  • “Democracy is a pathetic belief in the collective wisdom of individual ignorance.”
  • “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins.”
  • “The notion that a radical is one who hates his country is naive and usually idiotic. He is, more likely, one who likes his country more than the rest of us, and is thus more disturbed than the rest of us when he sees it debauched. He is not a bad citizen turning to crime; he is a good citizen driven to despair.”
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