Notes from the train

I finished reading Prophet of Innovation during my train ride, and thumb-typed the following on the way:

I am starting to understand the fourth division of the factors of production: entrepreneurship. While the other three are necessary for the continuation of existing productive structures, the creation of new ones requires the entrepreneur, and successful entrepreneurship is rewarded by profits. The rewards of capital are necessary for the maintenance of capital, the rewards of labor maintain labor. Potential profits are the spur of innovation, and actual profits are evidence of success.

The rewards of land, on the other hand, maintain nothing, and it is from there that the funds of mischief can be found, and it is there that public funds can be safely and justly appropriated.

When I was taking economics classes, I was surprised to learn that my teachers spoke not of three factors of production, but four, with the additional one being "entrepreneurship", "profit" being the name for that particular revenue stream. I wondered: what differentiates "entrepreneurship" from other forms of labor (which can take both physical and mental forms) that it gets its own category? Sure, the entrepreneur's "wage" is more dependent on the success or failure of a business than the hourly or salaried worker, but that's no different than the independent laborer who works directly with marginal land.

But according to Schumpter (or at least, according to his biographer) the entrepreneur isn't just any businessman, and economic profit isn't just any revenue stream. It's an exceptional revenue stream, the result of being among the first to engage in some vital new enterprise. It's a huge, but temporary revenue stream, a sudden reward for innovation that dwindles as competitors enter the market. The entrepreneur doesn't make changes that modestly improves efficiency; he introduces new products, services, and modes of business organization that alter the landscape, people's ways of life, in fundamental (and in the long term, highly beneficial) ways.

Land, Labor, and Capital were the only terms needed by the early economists, before the art of finance matured to the level where the entrepreneur and the financier could be separate entities: banks make loans to entrepreneurs so they can try their ideas. The banks then collect interest (which is most likely the sum of the rewards of both capital and land), or they lose the money if the entrepreneur defaults. But if the entrepreneur is correct, revenues can greatly exceed labor costs and bank obligations (including the opportunity cost of working for himself instead of someone else)... and the entrepreneur himself collects a tidy sum, which is rightly called "profit".

This was a new phenomenon when economics got its start, and I think Joseph Schumpter is recognized as the first economist to formally recognize the role of the entrepreneur in the capitalist economy. Wages, interest, rent: these provide for the maintenance of the status quo. But profit: that is what spurs men to wrack their brains and work ridiculously long hours in an effort to do what none have done before. The freedom to do this, and to reap the rewards, is the thing that makes a national economy great.

In Defense of Savings: Credit Card Cancer by Peter Schiff

Peter Schiff has written an article on the subject of savings and credit which expresses similar sentiments to what I have been posting over the past few months, so I thought I'd link it here. He simply makes the point that, contrary to what the economists our politicians are currently listening to seem to say, credit is not the bedrock of a healthy economy; savings is. Without savings, credit cannot be extended. What this means is that if one is relying upon an open line of credit (a credit card) as one's supply of emergency funds, those emergency funds will not be available when one needs it most: during a recession. Savings, however, would be, and can continue to serve as the base for the extension of credit.

I'll have been on a train for three days by the time I would normally post, so that's all I've got for this week.

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McCulloch vs. Maryland: The Anti Magna Carta

I just finished reading William Norman Grigg's latest article over at Lewrockwell.com, The Martial Law Mind-Set. It basically details a number of incidents of assault and murder by policemen in response not to any actual criminal activity, but rather to simple insistence on the part of citizens that they be treated as citizens and free men, rather than simply cringing in servile obedience. It includes a number of contemporary examples, and one ancient one: the murder of Archimedes by an occupying Roman soldier... making the point that many policemen today are behaving much more like an occupying army under a condition of martial law, than as peace officers.

The thing that got me thinking was the idea that policemen may never be prosecuted as individuals. They are generally subject only to departmental discipline, and otherwise above the law... not subject to it... at least when they are on duty and in uniform. The theory behind this, in its basest expression, is that a man acting in the name of the State is not subject to the law, but rather IS the law.

This is far from the ideal, derived from ancient English tradition, that all, even the King himself, are subject to the law. This ideal is best known, to me, through the myths of King Arthur. The best historical expression that I am aware of, perhaps the starting point, is the Magna Carta. Signed at swordpoint by a defeated king, it was the first document detailing certain rights which have survived to this day, including the right of Habeas Corpus. Also included was an explicit declaration that the King is subject to the law, and it even established a procedure for a particular group of barons to take matters into their own hands should the King violate the law. This portion was repudiated at the time, but it indicates the trend of the day, which continued for a very long period of the history of English speaking peoples.

Then came McCulloch vs. Maryland. The State of Maryland attempted to levy a tax on all banks not chartered by the Maryland legislature, including the then new Second Bank of the United States, which had opened a branch in Baltimore, Maryland. McCulloch was the head of the Baltimore branch, and refused to pay the tax on the grounds that institutions established by Congress are immune to State laws. All Maryland's state courts sided with Maryland, until the Supreme Court overturned it on appeal, establishing the principle that the United States Government was supreme. Nobody acting on behalf or the United States Government could be held subject to the law of the several states in any fashion that could be construed as interfering with the actions of the United States. The Court chose the position of the Bank, which the Constitution did not authorize, rather than the States, which the ninth and tenth amendments stated were to be deferred to in all matters not explicitly delegated to the Federal government.

True, this governed only the relationship between the two levels of government. However, it established a principle: our community is not a community of equals, but of higher and lower. The higher are those blessed by their association with the State, exclusively represented by the United States Government (and increasingly by the President alone). The lower is everyone else, and wherever their interests clash, higher must always defer to lower. State governments are subject to their federal superior; ordinary citizens must submit, without complaint or caveat, to those who serve the United States.

I'm not sure if I have a point in this. I simply found the comparison of the two events interesting, representative of two incompatible principles. It was Grigg's article that got me thinking about this.

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Interest Rate Manipulation: Insights From Joseph Schumpter

About a week ago, I finished reading Progress and Poverty, and started up a biography called Prohpet of Innovation: Joseph Schumpeter and Creative Destruction, by Thomas K. McGraw. It's a very enjoyable read. Schumpeter himself, as told by McGraw, is turning out to be a very interesting character. Even better, some of the description of his intellectual influence upon the field of economics is cluing me in to some of the logic behind interest rate manipulation in the interest of economic progress. I've barely begun to read (I'm only on the sixth chapter or so), but it has inspired me to tackle this issue from another angle. I don't know, yet, if it is Schumpeter's angle, but it may be a good one, nonetheless.

Schumpeter, apparently, was the first to effectively make the point that the proper pricing for a product is not necessarily based upon the average cost per unit, but rather upon the marginal cost. The idea is that if one charges the marginal cost, the low price will result in increased demand, meaning that, in the long run, one who charges the marginal cost will make a better profit.

Say you're a kid with a lemonade stand. You plan to make fifty glasses of lemonade. It will cost you $40 (totally arbitrary number out of a hat) to produce those fifty glasses. Average cost is $20/50 glasses, or $0.40. Fifty cents is a nice round number, and gives you a small profit over the average cost.

However, you could make one more glass of lemonade for, say, ten cents. This is because, once you've bought your equipment (your table, sign, lemon squeezer, pitchers, etc?), you don't have to buy it again (economy of scale). According to Schumpeter, you'd do better to base your price off that ten cent marginal cost, than the fourty cent average cost. You take a loss in the short run, but in the long run, people come running for the cheap lemonade, and you end up selling hundreds or thousands of glasses at a larger total profit than you would have sold the fifty around average cost.

However, the businessman who prices in this manner must be able, somehow, to cover the losses on those initial units. He has to start off in the hole... and this requires financing. The lower the interest rate he's offered, the more likely he is to to enact such a plan. A plan of this sort is very good: the entrepreneur makes a profit, and lots of people get a desired product much cheaper than they used to. Resources are being used more efficiently. Everybody wins.

If lower interest rates induce entrepreneurs to innovate, lower interest rates are automatically better, right? John McCain was correct to wish the interest rate would go to zero, right? Not really. Associating low interest rates with innovation, then deciding that it causes the innovation by itself, is, I think, an example of post hoc ergo proctor hoc. It's a bit like the modern economics equivalent of a cargo cult: planes with gifts land on airstrips, therefore we can cause such planes to land on our island by building an airstrip.

Returning to our hypothetical lemonade stand kid, imagine if he established his stand in the middle of winder. Imagine if he established it in the depths of an industrial recession, amid people poor enough they'd rather drink fetid water than pay ten cents a glass. Imagine if he established it in the middle of a sparsely populated desert (sure, folks are thirsty, but there aren't many customers out there). Imagine if he spent hundreds, thousands, millions of dollars on equipment that would bring his marginal costs down to one cent per glass at a certain level of production... and not enough people showed up even to cover his fixed costs. With a zero percent interest rate, he could try... but he could not succeed unless economic conditions were such that people were "ready" for this particular innovation.

This is particularly true for new products that customers don't know enough about to know whether they want one or not.

It isn't enough for the entrepreneur to establish a new productive process; his potential customers must be in a position to buy. A whole host of factors go into this: their current perceived financial security, their attitude regarding novel products, the marginal utility of the new product as compared to their existing stock of wealth, the number of competing new products, and so on. While lemonade stand kid could easily figure this out through simple observation, for larger scale production the information necessary to appraise the likelyhood of customer acceptance is much more difficult to come by.

However, there is one piece of information that reflects conditions better than any other, and it is very easy to find: the interest rate. The interest rate is the price of borrowing money: the intersection between the supply and demand curve for loanable funds. When these curves are not interfered with by government action, they accurately transmit the necessary information to the entrepreneur.

The supply curve indicates, most basically, the aggregate savings rate of all the individuals in a given society, and how available those funds are for loan. (If they're not available for loan, this savings rate expresses itself in lower factor prices, which can work nearly as well, I think.) It indicates a willingness on the part of people to contribute to production without immediately consuming the results, which is necessary for the establishment of new capital. It also indicates how financially secure people might feel, and how much people might be willing to spend on new products (the wealth effect).

The demand curve, on the other hand, telegraphs just how much competition there is for the available loanable funds, and therefore the available resources they represent. If there's a load of new construction, innovation, consumption, and such already happening, there isn't much left in the way of resources to divert to yet more new production. Divert more, and you end up diverting it from basic necessities. It's a bit like a new colony full of people who spend the summer digging for gold, and enter the winter with little to no food stores. What it is actually, is what we call the business cycle: a burst of activity and optimism, followed by sudden disaster.

These two numbers set a barrier of sorts to innovation, which is higher or lower depending upon the conditions. A higher rate might indicate either a society not receptive to trying out new things; or a society that is quite ready, but also with a great deal of competition as to who is going to do the innovation. Either way, the high barrier dissuedes new entrepreneurs from entering the fray, diverting their abilities to safer efforts. A low rate definitely indicates a consumer base that is ready for new products and factors of production available for use in the production of such, and possibly a dearth of entrepreneurs... assuming the supply curve isn't being manipulated by dishonest banking practices, nor the demand curve by excessive borrowing by the government.

In other words, low interest rates don't cause progress. They merely indicate that conditions are ripe for progress, and invite the would-be entrepreneur to try his hand. Artificially low interest rates, the result of an inflationary monetary policy, trick the would-be entrepreneur into innovating at a time when the economy is not yet ready for it. The naturally high rates that result from such conditions would encourage consumers to cut their consumption, thus preparing the ground for future innovation.

Public Resources Corporation?

Heh, it was only a few days ago I was looking at my old posts on this subject and was like, "PRC? Where have I seen that before? Oh, right. Doh!" Totally not intended.

My previous, most radical suggestion is that there should be some entity that collects the rent, and only the rent, and then turns around and distributes it back to the People on a roughly one-to-one basis. This was designed to satisfy my desire for economic justice, my distrust of the state in whatever form, and, let's face it, my desire to justify personally living on the government dole, in some fashion. I've called the position "market geoanarchism".

It also included (tentatively) an elaborate scheme in which each individual at the time of institution was given a share (like corporate stock, only with some extra restrictions), which was then passed down and divided through the generations. This was initially included to satisfy what remained of my faith in Thomas Malthus' ideas regarding population growth, and then retained to render my ideas palatable both to others who still believe in these ideas (who would like the aspect of the plan that penalizes having large families), and to nationalists (who would like the consequence that only existing citizens and their children could take part in the system). It would also appeal to family-centered types, since, after that first generation, the shares would largely be concentrated in society's oldest members.

As I said before, I am re-reading Progress and Poverty; I'm nearly finished. On this re-read, I realize how much of this elaborate scheme of mine, while it rests upon Henry George's ideals, it is also shaped by the assumptions he spends a considerable amount of time debunking... effectively, I might add. However, what follows are not his musings, but my own.

My desire for economic justice has always been hampered by my mistrust for the packages in which it so often comes. I am not a Communist, a Socialist, or any other kind of "ist" which calls for the enslavement of all to all (or rather, the oligarchs that represent the "all"). I grew up thinking I would be a Republican. I had in me the notion that poverty was caused, not by any kind of injustice, but by indolence, sloth, stupidity—all manner of vice. The rich were rich because they deserved it; the same with the poor. The size of the gap between the richest and the poorest bothered me... but if that was the result of the operation of a free market, who am I to argue?

Of course, our market is not free, and even some of the institutions people assume are a necessary part of a free market are neither necessary nor just... which Henry George has helped me to see.

Then there is my mistrust of the State. It begins with the dawning recognition of stupidity on the part of representatives and bureaucrats that anyone who is paying attention must see, moves on through the recognition of the fact that our "democracy" is not. Then I hear the complaints about "too much money" in politics. The rich purchase the government, and then use it to trod upon the poor... mostly the poor of other countries, but here, as well. Then there are the government schools I attended as a child... only one out of the three was actually decent. The environment in which I grew up colors my view of the state as an only somewhat mitigated evil.

However, there is a second feature of the single tax system I had missed is that, not only does it free the laborer and the capitalist from the burden of all manner of taxes in addition to the rent they must in any case pay (income, payroll, capital gains, tariffs and excises, not to mention the bookkeeping necessary to keep all these straight); it also siphons off for public use that excess, unearned wealth which is currently used for the monopolization of mass communications (among other purposes). Those who justly earn their money would, of course, still be able to use their money to influence a democratic process... but the increasingly oligarchic character of this competition for airtime would be shattered. With wages and interest up and the revenues of land ownership in the hands of a democratically shaped government, the tendency of democratic forms to produce oligarchic results would be greatly lessened. Perhaps we could trust such a government.

As to my desire to live on the dole... well, I guess not. A good part of my goal was to see the money that presently makes oligarchs and dilettantes out of a small portion of the people spread among the whole population, with the belief that it would only produce a whole population of dilettantes when the day came that producing wealth was so easy that a very few could produce the material needs of an entire population, voluntarily. (Star Trekonomics, I called it.) A democratic government could still decide to distribute their funds that way... but it doesn't necessarily have to be that way.

The agrarian equivalent, an even distribution of agricultural lands with free public access to woodlands and pasture, still requires the people to work to get what they want from that land. To simply distribute land rent among the population would likely have every bit as much of a checking effect upon progress and productivity as the current waste of resources engaged in continual efforts to overthrow the oligarchy, and the counter to those efforts... whether it be the enormous resources poured into mass media to decide elections in this country, or the extraordinary wastes of life and wealth in other countries. It wouldn't be as bad as conventional socialism, which either pays people to be poor (my system would have continued paying regardless of how much money you actually earned) or takes not only the rent, but the whole reward of labor; but there would still be plenty of people who would take the opportunity to be lazy... like me. ^.^'

Finally, there is Malthusianism. I no longer believe that there can be such a thing as "too many people". Malthusianism rests upon the idea that the cause of poverty is simply too many people to too few resources. However, George's investigation of three cases generally thought to be poverty resulting from population pressure (China, India, Ireland) were, in fact, cases of poverty caused by rapaciously unjust regimes, with lower population densities than those seen in England and Western Europe. The problem was not that the land was incapable of supporting the population, but that no accumulation of capital was allowed... since any savings would quickly be taken away by the authorities. Without savings, any bad harvest becomes a humanitarian disaster, and no production enhancement can occur.

I'm pretty sure this principle is universal: poverty, even mass starvation, is the result not of "population pressure" but the mass theft that is the complex of taxes and rents (if not outright rampant banditry) that afflicts any advanced society. As it is so often said, the problem with world hunger isn't production, but distribution. There's plenty of food, even more could be produced, and with more people comes an ever greater variety of products and services. Production is not insufficient, but is rather diverted to both the service of and the opposition to an oligarchy.

Thus, there is no need to regulate population by any means. Opportunity costs relative to the bearing and raising of children increase as wealth increases. This keeps population in check quite well (evidenced by the fact that the richer the family or society, the lower the birthrate, generally speaking)... and there is no justice in penalizing the descendants of those increasingly few that do keep the population up. In addition, treating it as stock with all kinds of special restrictions on who can buy and sell and when to prevent the accumulation of the stock in an aristocracy simply complicates the plan unnecessarily. Thus, the hereditary stock portion of the plan is both unnecessary and undesirable.

Additionally, I see no reason to disenfranchise the young in an effort to artificially buttress the authority of elders. In an earlier stage of society, the eldest may lead, but the land belongs to the whole family or clan... not to the individual. I would still include a mechanism by which a group as small as a family could (temporarily?) secede from the centralized system, to allow for other public services to other subgroups... but i no longer feel the need to have membership determined by heredity.

This leads me to the nationalist aspect. The nature of the single tax ensures that everybody living in the country is contributing to the system (since no production can occur in a mature economy without a portion of that production being distributed out via rent), which means that the specter of the "illegal immigrant" who mooches off public services while paying no tax is eliminated. To work requires access to land, and to access land is to be taxed... period (whether or not the government is collecting this tax). The only question that remains is who is allowed to vote... and that, I think, can be safely delegated to the legislature, provided the initial enfranchisement is broadly constructed on the ideal of universal suffrage. With both oligarch and pauper reduced if not eliminated, legislative power becomes considerably safer.

In other words, I'm pretty much scrapping most of the ideas for the Public Resources Corporation.

Weekly Ramble Greatest Hits

Right now, I'm going through my old posts looking for something specific to refer to in a new post... and as I do, I'm discovering ones I'm enjoying reading. I figure now is as good a time as any to link what I consider to be my own "hall of fame;" or rather, posts I do not feel embarrassed about when I re-read them. So I guess I'll link them here:

• RE: Salon's Psychoanalysis of Libertarians
• Hillary Clinton Comes to Fresno
• Eternal Sonata - Free Liberal RPG
• I Know an Old Lady
• The Fall of Santiago - I love when I find an excuse to refer to video games ;)
• Loyalty Day - Primarily because the phenomenon it exposes is so darned bizarre
• Liberalism
• On Readiness for War - I was trying not to include any long ones in this list, but this one is too good not to.
• Santa Claus, Atheist Myth - I really wish I knew where to put this. I'd love to start a flamewar over this.
• Legality and Morality - Primarily because it's the post that helped me find Cranky Weasel.
• The Garden of Eden - An example of Daniel Quinn influenced thinking
• The Urban Archipelago - Probably the most in conformity with the new theme for this blog; an appeal from a libertarian to liberals stinging from the wounds inflicted by neoconservativism

I can't help but notice that I get the most comments from people I don't know in resp0nses to posts in which I advocate the public collection and distribution of rents. That's a good sign, I think.

Saving Part 4: The Federal Reserve System

The stated purpose of the Federal Reserve is to prevent industrial depression. It does so not by sober management of the supply of money and credit, but rather by allowing the inflationary boom to occur, and then attempting to prevent the resulting deflation by shoveling new money into the economy faster than it can disappear. In doing so, it transfers wealth from those who have earned it to a few favored parties who are "at the spigot" so to speak.

There are three basic ways the Fed increases the money supply.

It is most commonly done through the purchase of government securities: Treasury notes, that is. Banks may find themselves unable to lend due to the fact that previous lenders are defaulting on their loans... and the assets forfeited are not worth as much as it was appraised to be when the loan was first made. This is the problem the banking industry found itself in when house prices began to collapse: the economy began to slow, debtors walked away from their houses, which were worth significantly less than the loan at this point, and the banks no longer have sufficient reserves to open up new loans.

The Fed comes to the rescue by buying government securities (bonds) from the banks, thus giving the banks the liquidity needed to return to making loans. (Thus, banks are relieved of the duty of making sure their borrowers are people who can actually repay.) The money the Fed pays for the bonds does not come from any reserve they've been holding for such a purpose; rather, they simply declare it into existence. This is an increase in the money supply, which increases the wealth of the people who receive it before prices rise, at the expense of those who must pay the higher prices before they receive the new money.

The second way is to change the size of the reserves banks are required to keep on hand, enabling to make more loans against fewer deposits. The third is to lower the rate at which the Fed loans money directly to member banks. These two options were not used as often as the first under Alan Greenspan, though Bernake has made extensive use of both.

The first is of greatest interest to me because, in addition to increasing the money supply to the benefit of well connected speculators at the expense of the common man; it also enables the government to appropriate revenues indirectly through inflation. This is how it works:

The Treasury issues bonds to cover expenses in excess of tax receipts. Various private parties (as well as the central banks of other governments) purchase these. If the buyers hold these bonds, they receive payments of "interest" over time. This, in itself, represents a government transfer of wealth from the working class to the creditor class. It doesn't stop there, I think I'll stop here a moment to illustrate one of the consequences of a system like this.

The United States Treasury issues Treasury notes, and sells them to the general public. At the same time, trade is going on between the United States of America and the People's Republic of China. If they chose to do so, the Chinese could use those dollars to purchase goods exported from the United States. However, their government keeps the money for the most part, and their people are not in any position to demand a greater share of export revenues. At any rate, they have another option: They can use it to purchase Treasury Notes, and as a result, receive "interest" on those notes.

So you have the Chinese government, which returns US Dollars to the United States by way of the government, rather than in standard trade, creating what to the rest of us feels like a trade imbalance. On the one hand, poorly compensated Chinese workers send goods to the United States, but don't get as much in return as they could. On the other hand, American workers find industrial jobs migrating to China at a faster rate than would otherwise occur. So at the top of this scheme, you have the United States Government giving future American tax revenues to the Chinese Government in exchange for past Chinese tax revenues. (This is not to mention the rest of the world's creditor class, which subsists to a significant degree off tax revenues.) At the bottom, you have both American and Chinese laborers, both suffering a grave injustice.

But as I said before, it does not stop there. If this were the end of it, and they were borrowing the money that arises naturally from society, there would be a limit to how much can be borrowed. For the more the government borrowed against future tax revenues, the less that would be available for private businesses, with the interest rate rising in response to the government's contribution to the overall demand for loanable funds. This would slow economic growth, "crowding out" business finance in favor of government finance.

Thus, the Federal Reserve steps in to save the day, by inflating the supply of money and credit, artificially lowering the interest rate.

As I said before, they do this by purchasing government securities. So the circle is complete. The Treasury sells them to the general public. The Fed then buys them from the general public. The middleman, generally the Wall Street investment bank, obviously won't sell unless they're going to make out better than they otherwise would; thus, they make a "profit" off the exchange. And the the Federal Reserve Banks are required by law to return 3/4 of the interest they receive on government securities to the US Treasury... relieving the government of much of the interest they would otherwise have to pay.

Thus, new money is issued, with the Government getting to spend some of it, and the "investors" (or should I say "fences?") who act as middlemen between the Treasury and the Fed getting a cut, as well. Wealth is transferred to both parties, at the expense of everybody else. The second spenders, of course, are the government's workers and suppliers, who maintain corps of lobbyists to ensure they retain this privilege. Their workers and suppliers are the third spenders, benefiting less, until the money finally crosses the line into the hands of those who saw prices rise before they saw the new money come into their hands.

Hence, inflation IS a tax, which employs bankers and speculators as well paid tax collectors. It is also a highly regressive, as the poorest of workers also tend to be furthest from the government money spigot, while those who are closest, if they aren't already wealthy, will be pushed in that direction. And it occurred to me as I was writing this that, given the state of the US Dollar as the "World's Reserve Currency", nobody is further from the spigot than the poorest of the poor in a third world country. This dynamic may go far to explain third world poverty. I shall have to explore the issue further in the future.

New Name!

Rummaging around in my old posts, I ran across a name: Eugene Plawiuk. I decided to check out what he's been up to in the world of blogging, and (re?)discovered Carnival of Anarchy, a left anarchist site. It seems there's something going in in Greece, that has a lot of energy and little direction. But I was more interested in this post, in which Marja E briefly touched upon her journey from state socialism to more of a true anarchism, or "anhierarchical libertarianism." Stories like this make me happy. It tells me that we are, truly, aiming at similar ends; that it is merely the means and flavoring where we truly differ.

I've had an image in my mind for some time, a roughly two-dimensional political spectrum model with the usual "left" and "right", but circular, and inverted, like a Moebius Strip. Those who go far enough Right (like a Rothbardian conservative), or far enough Left (like an anarcho-syndicalist), find themselves, if they bother to look, occupying very similar territory. My image has us, who have journeyed to this point from Left and Right, unaware of our proximity since each of us stands on the opposite side of the strip (I may have to make an icon to show this). But if we would but look over the edge, we might see the other staring back, close enough to touch.

I am one who started out by journeying Right, along the path laid down by my fathers before me, both my physical father, and my political fathers... those we call the Founding Fathers. But the further right I went, the more I found myself in the company of others who journeyd from positions I once considered implacable enmities. Now I look over the edge to the side, and I call out to my fellow travlers... from the Dark Side of the Mobeius Strip.

Excerpt: Progress and Poverty

I am reading through Henry George's Progress and Poverty a second time, and am currently in the chapter in which he examines various proposed remedies to the problem of the expanding wealth gap and the extreme poverty of the lowest classes, pointing out their deficiencies. On passage in particular jumped out at me, since it tears down a current practice that many accept as an article of faith. In Book VI, Chapter 1, page 277:

As to the truths that are involved in socialistic ideas I shall have something to say hereafter; but it is evident that whatever savours of regulation and restriction is in itself bad, and should not be resorted to if any other mode of accomplishing the same end presents itself. For instance, to take one of the simplest and mildest of the class of measures I refer to—a graduated tax on incomes. The object at which it aims, the reduction or prevention of immense concentrations of wealth, is good; but this means involves the employment of a large number of officials clothed with inquisitorial powers; temptations to bribery, and perjury, and all other means of evasion, which beget a demoralisation of opinion, and put a premium upon unscrupulousness and a tax upon conscience; and, finally, just in proportion as the tax accomplishes its effect, a lessening in the incentive to the accumulation of wealth, which is one of the strong forces of industrial progress.

I just wanted to share that. Note that the work, itself, is not simply a bashing of socialism, but rather a book that examines the problem of the link between progress and increasing poverty, and ends by proposing a solution simpler, more economically sound, but also more radical than socialism.

Saving Part 3: The Banks

Last week, I asked, where does the new money come from? Where does the wealth it procures go? I'll start with something I think all agree is not a beneficial practice: outright counterfeiting.

It's simple: just print something which can pass for the things printed up at the US Bureau of Printing and Engraving, and then use it to buy stuff. Who loses? If it's a particularly bad forgery and they spend it in through particularly foolish marks, probably that first victim: this person then takes it to the grocery store or something, which uses their methods for detecting counterfeit bills, and they refuse to take it. The counterfeiter has conned only one person, and stolen from only that one person.

But there are very likely better counterfeiters whose creations might circulate through considerably more hands before they are discovered... if ever. No one person is defrauded in this case, though obviously, someone has been. In truth, everybody has been; the ill-gotten wealth is taken not from any individual particularly, but from the common stock of wealth generally. Every false bill that enters circulation withdraws something from this stock, without first adding anything to it. Every false bill that enters circulation makes everyone else just that much poorer.

Fact: the number of "dollars" circulating through the economy in one form or another (mostly electronic) increases over the long term, and it very rarely decreases in the short term. Where do the new dollars come from? In the following paragraphs, I will describe the mechanics of monetary expansion, and leave the judgment as to whether or not this is justified to the reader.

One agency that introduces new money is the banks. Banks are permitted by law to loan out more money than they have on deposit. The amount the bank must have either in their vault on on deposit with a Federal Reserve Bank is determined by the Federal Open Markets Committee, but for the purpose of this illustration I will assume a 10% reserve requirement. What this means is that if you deposit $100 at the bank, they are now allowed to loan out an additional $900. They do this by simply creating an account that says "I have $900 in me." There is, of course, only safe if the depositors do not attempt to withdraw more than 10% of the amount the bank owes them... which is what happened to IndyMac last July. There was a time when such a failure would destroy not only the bank, but the money the depositors thought they had. These days the FDIC, backed by tax dollars should they run out of money, ensures that the depositors do not lose their money.

Now, the banks' contribution to monetary expansion is not uniformly upward, but rather somewhat cyclical. Were it not for the business cycle (economic growth and recession), the money supply would grow, plateau, and then not grow any more. Who would benefit from this growth? The answer is that those who borrowed and spent money earlier in this growth would benefit more than those who borrowed and spent it later, with those not borrowing getting the shaft. Much like the counterfeiter, the early borrower gets to spend the money before knowledge of the existence of this new money is dispersed through the market... that is to say, before prices rise (or slow their decrease) in response to this new money being spent in. Unlike the counterfeiter, the borrower has to pay interest on this new money, and must pay it back, but he gets to spend it when it is worth more, and pay it back when it is worth less... meaning he gets more out of it than he puts back in. He gets it from later borrowers to a later extent, and non-borrowers to a greater extent. Additionally, the banks themselves get to collect another portion of the increased productivity that can result from additional investment in the form of interest, some of which goes to depositors, some of which goes to the bank's investors.

Note that this serves, during the increase, as an incentive to borrow and a disincentive to save.

The reality of the business cycle, however, ensures that the banks' contribution doesn't plateau, but rather cycles. During the boom, they lend out more money. During the recession, they concern themselves primarily with getting loans paid back, and are less inclined to loan (because people seem less likely to pay them back). And just as lending against a fractional reserve adds more money to the economy, that same loan being paid back removes it. So long as loans are being made and paid back at the same rate, the overall quantity of money does not increase. But the reality is that there are times when there is more lending than repayment (the boom), and times when there is more repayment than lending (the bust, or "recession"). (I won't be talking about the cause of the business cycle here, but for my preferred explanations google "Austrian Business Cycle Theory" and "Land Market Cycle".)

So our economy goes (or rather would go, if the Federal Reserve allowed it) through periods where the banks expand the money supply, and periods where they contract it. Those who exploit this system wisely can profit from increased money, and avoid the dropping prices that result from reduced money (as those who got out at the top of the recent housing boom did) at the expense of those to whom they sold it. It's rather like an exceptionally successful counterfeiting ring who manage to unload large quantities of exquisitely crafted fake money onto suckers, enjoy what they've already bought as everyone else's prices rise in response... then sell their stuff for real money right as the forgeries begin to to be discovered and removed, but before the prices begin to return to their original levels in response... and THEN buy yet again, at the lower prices.

These days, however, the money supply is rarely allowed to truly decrease (though money is continually injected into and removed from this speculative market or that as the fads change, causing volatile price changes over the short term... as was the case when the banks significantly loosened criteria for lending against real estate... and then suddenly tightened them again). The Federal Reserve System also has ways of manipulating the money supply, by manipulating the base against which the banks lend. And while, given a fixed base, the banks could theoretically plateau at a new level and never increase again; the Federal Reserve has ways to constantly increase the base... and does, to the benefit of a different set of parties.

The Federal Reserve's role will be next week's topic.

Saving Part 2: Introducing Inflation

In my previous entry, I made the following comment.

When the saver finally does begin spending his savings for consumption, there is more wealth available for purchase than there was when he began saving.

To see this principle in action, one need look no further than the emerging technology industry. If one buys his computer, video game system, or plasma TV today, he'll pay a higher price than if he saved his money and bought it at some future date. He can then spend the rest on something else. The reason one is able to buy more later than earlier is because the available wealth in that sector, both in terms of quantity and quality, has increased over time. New, more efficient ways of producing these items have been implemented. Less materials, less space, and/or less work are required to produce them, so his share of it has increased in size, though not necessarily in proportion.

The same principle is constantly operating in every area of a healthy economy. Those few areas for which new processes are not developed can also be increased if necessary, as resources from other areas can be freed up via efficiency improvements in those sectors.

However, this probably doesn't coincide with the average person's experience. "Prices always go up over time," I so often hear. How can prices go up when the general stock of wealth is increasing, and production methods improving? One word: inflation.

I can hear it now. "Well, duh!" one might say. "Prices go up because prices go up? That reasoning is so circular the circle can be seen in a single statement!"

Inflation is NOT rising prices. Inflation can CAUSE rising prices, but the term itself refers to an increase in the money supply, and more specifically, an expansion of the supply of money beyond the basic commodity upon which it is based. Imagine increasing the size of a balloon by filling it with air. The quantity of rubber has not been increased, but the size of the balloon has. "Inflation" as a term was coined in an era when money was based upon a supply of gold, and referred to the increase in the supply of gold-based negotiable instruments relative to the actual quantity of gold. And, much like the balloon, if the money supply were expanded too far, it could, and did, pop.

Of course, these days, we don't use gold for money, and the "base" upon which our money is built is the decisions of the federal reserve banks, growing and shrinking the monetary base at will, which banks are able to issue additional drafts against much the same way they once did with gold. The term "inflation" isn't quite so illustrative or literal as it was under the "gold standard," but it should still be reserved for changes in the size of the money supply, rather than being transferred wholesale from cause to effect... because if we call the effect "inflation," what do we call the cause? Nothing... and that is precisely how the apologists for the current system would have it.

I'm rambling.

To return to today's topic (now that' I've defined what I mean by "inflation"), inflation is the reason that, despite increasing efficiency, prices continue to rise. For however fast the overall supply of goods and services grows, the money supply grows faster. If it did not, prices would go down over time. What would this mean?

This would mean that the benefits of economic growth would be shared among all responsible people. Anyone who was saving money against a rainy day, or for their future, or for their kids' future, or for whatever purpose, rather than spending it all and ending up down on their luck at the first sign of disaster, would benefit from overall economic growth, because when the day came to spend it, they could get more for it than if they had spent it right away. This is justified, because if nobody labored without immediately consuming (ie. saved nothing for the future), that extra wealth would never have existed. Saving money is a socially beneficial act, and with non-inflatable money supply, this benefit goes to the saver. It also goes to the non-saver, since even he benefits from lower prices, but the saver benefits even more.

By saying that savers would benefit under another system, am I suggesting that savers are NOT the ones reaping the benefits of economic growth under our system? I am. And the answer to the question, "But who DOES reap the benefits under our current system" is to be found in the answer to another question. "Where does the new money come from?"

This, I shall explore in my next post.

In Defense of Saving

I read too often about this economist or that denigrating saving as a drag on the economy. People "oversave." The idea, of course, is if you don't spend all your money, someone is going to go out of business. If you don't buy that extra toy... if everybody is forgoing that extra toy... the toymaker goes out of business. Now he can't buy as much, which means the people he (and everyone like him) previously spent his money with will get less, which means they'll have to reduce their spending, on into a ZOMG DEATH SPIRAL OF DOOM which DESTROYS THE ECONOMEH!!!

Therefore, everybody must go continually into debt if production is going to go on, and because they won't, the Government must.

Bullshit.

Saving is a necessary component of any growing economy. Without saving, there cannot be growth. The saver doesn't necessarily have to be you or me, but, on the aggregate, wealth must accumulate. Consumption must be less than production, because if all production is consumed, what's left for capital improvement? Allow me to illustrate, with the simplest of economies: the subsistence farm.

Start with a farming family, a stock of seed, tools, (both being capital) and arable land. The field is ploughed, seeds are planted, the crops watered, and ultimately the produce harvested. But they can't eat it all. If they do, they starve next year. Some of the produce must be saved for seeds, which can be planted next year. And if that's all they save, we're not talking about a growing economy, but rather a stagnant one. They're just barely making ends meet.

To truly grow, there has to be a positive wealth accumulation. Some of their resources must go toward things they can't consume, but will rather increase future harvests. Maybe a new fence needs to be built to keep a herd of animals out of the crops, increasing the yield. Maybe a new barn would enable them to better store their crops and tools, reducing loss and maintenance. Maybe they can devote some of their efforts to making better tools, or trade some of their crops for better tools. Take them out of subsistence farming and put them in a money economy (even if by "money" we're referring to grains of wheat, rice, or what have you, which are serving as a medium of exchange) and they can save money to buy even better tools in the future... maybe a tractor. Or, they can devote a part of their future produce to paying off a loan to buy the tractor. Either way, part of their produce is diverted from consumption to production of capital goods, with the main difference being that if one saves, one gets to keep the interest the creditor would otherwise collect. And even if the producer does not save, the creditor must: else what does he loan?

The principle can be abstracted to a full market.

When a laborer labors, he is adding to the economy's stock of wealth. When he spends his wages, he is withdrawing his share from that stock. If every individual spends his revenues the moment he acquires, that means all production is going to satisfy consumer desires. That's fine, if that's what people want, but productivity cannot increase unless some of that labor is going to improve the capital structure.

When someone saves money, he is effectively, in the short term, doing part of his work for nothing. He labors, but he does not consume the result of his labors. If that were the end of it, if he were burning the money rather than saving it, it'd be a recipe for a lot of waste: rotting uneaten food, ships rusting and rotting in harbor, houses falling apart from disuse... while for some bizarre reason, people slept outside and went hungry. But he WILL spend it in the future, and that future demand spurs today's capital development, to give the producer an edge in future production.

For when he saves money, he is also increasing the supply of investable funds. This signals the likelihood of future consumption to the entrepreneur in the form of lower interest rates. The lower the interest rate, the more likely a producer is to borrow in an effort to increase his productivity. When the saver finally does begin spending his savings for consumption, there is more wealth available for purchase than there was when he began saving. This can happen even if he doesn't make the funds available for lending, because either the cost of borrowing money goes down, or the cost of employing resources.

I shall use another illustration.

Suppose for a moment that a lot of people abruptly decide to stop buying their lunches at fast food places, and decide instead to make lunch at home, in an effort to save money. Let us also suppose, for simplicity's sake, that the saved money is not made available for lending, but is rather saved under their mattresses. The immediate impact is that, demand having shifted away from fast food restaurants, a number of fast food places go out of business. This is bad for them in the short term: they have to find new jobs. But it's good for people in the business of selling the stuff people make sandwiches out of, demand having shifted toward them.

The result is that available resources are going to shift into, for example, the bread making industry. Workers who previously flipped burgers now make bread (probably for less, the overall demand for labor being less). Makers of capital goods who previously made fast food equipment shift over to making bread making equipment. Entrepreneurs who previously attempted to dream up ways to break into the fast food market are now trying to figure out how to break into the bread market. Land that was previously devoted to fast food restaurants now is involved in making sandwich fixings. (And if that's too analogous for you, just imagine total resource allocation shifting to meet new demand conditions, rather than a direct conversion.)

The result: increased competition in the bread market results in bread that is either cheaper, or better, or sometimes both. The quality of life of those who like the new breads is improved. Those who are fine with the cheap bread now find themselves with extra spending money... which they devote to NEW demands. They are now able to consume more while maintaining the same level of saving!

Thus, drop in demand for available resources (including labor) is short term. In the long term, improvements in the efficiency of the production of necessities (which could not have occurred if resources were not made available for that purpose by savers declining to consume those resources immediately) enable resources to be shifted away from those areas, and into luxuries.

The problem with saving in our society isn't saving in and of itself, but rather the wild fluctuations in the rate of savings, which frustrate long term planning, and result from excessively elasticity in our money supply (not to mention its revenue-diverting effects). I'll try to tackle this element of this discussion in my next entry.

Reconsidering Jefferson

I have posted a few things over at my Myspace site, but due to frequent loading issues on Myspace in general, I am moving my more general thought stuff back over here. It's more readable, and I like the formatting better.

I've been doing some thinking about Thomas Jefferson. I've always thought of myself as more allied with the Jeffersonian party, certainly more so than the Hamiltonian party, which I regard as the great villains of the American drama. But the more I think about the things he actually did when the had the power to do more than just speak and write--when he had actual choices to make--the more I realize that he was, at the very least, inconsistent in terms of principle.

He spoke and wrote eloquently on the matter of freedom. But over those whose freedom he had power, what was his action? He freed only those slaves he himself fathered, while the others were sold upon his death, families divided among many estates.

The Declaration of Independence was a masterpiece, declaring the rights of men with regard to sovereignty, the right to abolish governments that do not suit them. He also declared that there should not be a public debt, and that he would retire the whole thing during his administration. But when offered the opportunity, he put the federal government further into debt, in recognition of the sovereignty of a military dictator over a full third of a continent which properly should have been regarded as both the property and the dominion of the myriad peoples who inhabited the region, and had little relation to the French monarchy, let alone the revolutionary government that deposed it.

Thomas Jefferson also recommended, and eventually achieved, the separation of the Anglican church and the State of Virginia. At the same time, he advocated a state supported educational system designed to cultivate a "natural aristocracy." It is clear that he didn't so much intend to separate the State from the dispensation of knowledge in general, but rather favored one system over another, and was prepared to use the means of the state (force) to dispense that favor.

All of these errors, particularly that second one, may stem from the error of factional loyalty. It is one thing to oppose Alexander Hamilton and his ilk for the exceedingly erroneous social, fiscal, and monetary policies pursued by that party. But it is another to compromise principles, one's sense of right and wrong, for the sake of factional loyalty. Consider the second item I listed.

Jefferson was motivated by loyalty to break from his opposition to the continuance of public debt. First was his loyalty to agrarian interests (as opposed to mere opposition to public aggrandizement of commercial and financial interests), which demanded that he ensure white farmers a steady, ready supply of free land to found ever more small farms on, producing what was, to him, a more desirable electorate (the Indians be damned). Second was loyalty to Left Wing politics in Europe, chiefly the French Revolution, which though it had long since degenerated into mass executions, death squads, and military dictatorship, still commanded the loyalty of so-called "liberals" everywhere.

For Jefferson's act, an opportunity was lost to deal a potential death blow to the financial interests that stood to benefit from perennial debt financed by perpetual taxation, a subsidy for bankers upon the backs of working men (that continues today in a very big way). Had Jefferson managed to retire the debt that began with the Revolutionary War, a very good precedent may well have been set. In addition, Napoleon Bonaparte was given a bit more money to play with, extending a dark chapter in European history that may otherwise have been cut short... possibly even averting the War of 1812.

On Medical Freedom

Lately, in regards to the current debate as to whether we ought to have some form of federally sponsored health care regime, I've been running across the following type of comment: We already know what a free market in medicine looks like (or capitalistic health care), and we already know that it doesn't work. I beg to differ.

I am not any kind of expert on the health care industry. I am not a doctor. I do not work in the insurance industry (though I did once process records for workman's compensation). I'm not any kind of lawyer. However, from my own vantage point, I can see that we do not have a free market in health care in this country. And it isn't merely that it isn't "free enough," so far as I'm concerned, it's not really all that free, at all.

I have worked for a couple employers over the years that provided health benefits. One of them allowed a choice between Kaiser Permanente and Cigna; the other, Kaiser only. Those were my options. Sure, I could have opted not to participate in my employer's program and gone with an independent provider, but in doing so I both forgo the matching contribution of my employer, and become one in a very small, noncompetitive market: people who get their health care through someone other than their employer. In short, it is very expensive to get health insurance via any source other than an employer, and your employer offers very limited options, if any. With such a captive subscriber base, is it any wonder health insurance is expensive?

This state of affairs is not the result of the functioning of the market. It is the result of government regulations that require certain kinds of employers to provide health care to certain kinds of employees. These regulations, creating a captive market, drive up the price of health insurance. Given it is mostly insurance companies paying doctors for their services, it also drives up the cost of health care, in general.

Then there are the doctors themselves. Medicine is a highly guarded field in this country. In unregulated product and service fields, you generally have a range of qualities of product and service, with a similar range of prices. You can pay some kid or immigrant to mow your lawn, or you can hire a professional, highly paid landscaper to turn your yard into a work of art. You can buy the older model car used for a couple thousand, or you can pay fifty grand for a luxury car. You can get a free cell phone from a service provider that has frequent outages for next to nothing, or you can get one of the latest models with all the bells and whistles from a carrier that covers everything for considerably more. But when it comes to medicine, if you're not doing it yourself, it's either The Doctor, a Nurse supervised by The Doctor, or nothing at all.

Simply put, Doctors (along with people in many other service professions, including teaching and my own industry: pest control) enjoy a situation much like that of the crafts guilds in mercantilist Europe: the right to control the supply in order to keep prices artificially high, to the point of being able to prosecute anyone outside their club of practicing "without a license." With the AMA enjoying a monopoly--established, once again, by the government, not by the market--in medical services, is it any wonder prices are high?

Even if anyone was allowed, there's still the paperwork. No, I don't know the details, but sending enormous stacks of records and reports to the government costs money, as well. Either the doctor has to waste time he could spend helping patients filling out stacks of redundant paperwork, or he can hire someone else to do it. Either way, that's more money to spend.

Then there's prescription drugs. The price of bringing new drugs to market includes the price of assuring the government that the drug is totally and completely safe: that price is astronomical. And if you think that the approval process is necessary for public safety, understand something: under current regulations, aspirin would not be approved. This is a drug that, while most people are aware there are potential problems with it, most people use safely both as a pain reliever and as a heart medication. I won't even go into the tendency of the federal government to ban any potential medicines that could be grown just about anywhere (cannabis was long known as an effective medication until that "evil Mexican weed" marijuana was banned during the early twentieth century).

Put all this together, and you have an enormously expensive system, and every last extra expense is the result of government regulation. I'd say it isn't the result of the greed of the market participants, but understand that the organizations I mentioned earlier--the AMA and the big pharmaceutical corporations--lobby for and approve of efforts to regulate the industry further. There is corporate greed, but the tool with which they express that greed is not the market (where the consumer is king--that's you and me), but the government.

Sure, there are people out there that can't afford medical care regardless, and perhaps some change is necessary to help those people out. However, I am certain that the number of people unable to get care would drop considerably if both existing and potential medical providers were given the freedom to compete for our business, rather than existing providers alone being given barriers to prevent competitors from finding ways to lower prices. It wouldn't surprise me a bit if those last few who couldn't afford care in a society that possesses medical freedom are few enough that doctors (and other medical practitioners) could afford to treat them themselves, without government payment. Or not.

Public distribution of land rent could help.

John McCain Invokes Godwin's Law

lol

Throne, Altar, and Uniquely American Conservatism

I honestly didn't expect, when I first read this article, to digg and blog off it. David Gordon's review of Paul Gottfried's "Conservatism in America" initially came across as dry, long, and moderately interesting... worth a read, but probably not worth adding my digg to maybe ten others. Then I got up to start cleaning my kitchen, and all kinds of thoughts started sparking off. You can read, and digg, the article that has inspired me by following the links below.

read more | digg story

I have, for the past few months, been very perplexed as to what, exactly, Conservatism is. I understood that, in the REALLY old days, Conservatism in America would have meant loyalty to the English king, and opposition to the American Revolution. In a way, I've seen today's Conservatism meaning a leaning toward enthusiastic assumption of Britain's former imperial glory. How does that square with the longstanding rhetoric Conservatives have given in favor of the Constitution, and reverence of the Founding Fathers, most of whom were, in their day, quite liberal?

Paul Gottfried's Conservatism in America (or rather, what I gleaned from David Gordon's review) points out that European Conservatism has always referred to "an all-encompassing reverence for 'Throne-and-Altar,' for whatever divinely sanctioned State apparatus happened to be in existence." Thus, French Conservatism was distinguished by loyalty to the French King, the feudal order, and the Catholic Church. German Conservatism was distinguished by loyalty to the Kaiser, the feudal order, and the Lutheran (or possibly the Catholic) Church. British Conservatism was distinguished by loyalty to the British Monarchy, the slightly less feudal order, and the Anglican Church. And so it would go for any European country.

The American Conservative would appear to be in a bind. Without a feudal order, without a state-sanctioned church, and with liberalism (in the old European sense, not in today's socialistic sense) firmly ingrained in the American character, what is a would-be Conservative to do? Where is their "throne-and-altar?" The answer that came to me (as I placed dishes in the dishwasher) suddenly became a startling argument in favor of American Exceptionalism, a doctrine I normally reject. For the American Conservative, the only throne they can look to is the Constitution, and the only Altar they can look to is the melchisian high priesthood of Jesus himself!

At its best, this produces an uneasy unity between Conservative and Liberal that was absent in Europe. The Conservative can be devoted to liberty, limited government, religious tolerance and similar ideas due to their enshrinement in the Constitution. The Liberal shares a similar devotion on principle alone. A Conservative with a view of scripture that prohibits warfare on the grounds that warfare is as far from "love thy enemy, and pray for him that persecutes you" as it can get, can ally with a Liberal that opposes warfare on humanistic grounds. Constitutionalist Conservatives and Liberals can rally together in defense of the freedom of speech, assembly, and worship.

Of course, this doesn't make America into some kind of land without conflict. In addition to the disagreements and dislikes that naturally arise between the two temperaments, there is another conflict that is, I believe, uniquely American (today, at least): that between those who favor the limited government spelled out in the Constitution (for whatever reason), and those who favor a much more active, authoritarian government (for whatever reason). This is a conflict that transcends "Conservative" and "Liberal", for both sides can rally behind one, or the other.

For the Conservative, I suppose it is the underwhelming nature of Constitution and Jesus as their "throne-and-altar" that produces this schism. From the very beginning of the Republic, there have been those who hungered for a much more down-to-earth hierarchy to revere, which I identify with Alexander Hamilton's advocacy of a government headed by a congressionally elected president with a lifelong term (a king, basically), which would pursue "imperial glory" (his words). Being a Puritan, he likely also favored the idea of a state-sanctioned church (as the Puritan Church was in his day). Today, we see this idea coming to full fruition: a staunch Conservative alliance lining up behind an Imperial Presidency, with interchurch associations bragging about their closeness to and influence over various politicians, even as the influence flows the other way as well, and various church leaderships actively support one candidate or another.

For the Liberal, I suppose it is the disappointment in the failure of the Liberal political program to achieve Liberal results. Egalitarianism is a prime goal of Liberalism, and the fact is, even if you extend the vote to every last man and woman in the country, the State will continue to be largely the playground of the rich and the politically connected. The belief that this can be dealt with by the forceful application of the power of the state, at the behest of a popular majority, to the distribution of property, is yet strong in this country. Thus, while Liberalism in continental Europe continues to refer to what we call Libertarianism in this country, in America Liberalism became, in the minds of many, synonymous with Socialism. Thus, from another angle, we see Liberals advocating a government every bit as powerful as that aimed at by conservatives dissatisfied with the Constitution as written.

To big government Liberals, I pose a question: how is it then that an institution that is incorrigibly under the influence of wealth and power is expected to supply a remedy to the problem of the misuse of wealth and power?

To big government, religious Conservatives, I pose a warning: you seek to bring throne-and-altar down from heaven onto earth. Understand, however, that what you will get is not throne-and-altar, but usurper-and-idol. In particular, America has long been blessed by a Church which is lead, at the top level, not by Man or Men, but by God. Will you overturn this, and place your image of God in His stead?

Hands Off Iran

Okay. So Chris Hedges has declared that, should the Administration attack Iran, he will not pay his taxes. This is an issue I myself have wrestled with privately over the past couple years--what would it take for me to rebel against the Government in this fashion? Given the accelerating violations of constitutional law by the governing elite, I think we can consider ourselves at the point where the government is now fully illegitimate.

I will now declare openly what I have considered privately: if the Administration declares war on Iran, I will take the actions recommend by Chris Hedges. I modify this only slightly: if Congress can actually muster the political will to make a proper declaration of war, I will continue to pay my taxes. If, however, we have the Administration committing yet more illegal acts of war, I will join this tax revolt.

Somebody set up a pledge site. I think a message needs to be sent.

read more | digg story

Republican Unity?

One thing that kept coming back to me today was the fact that the existing party structure here in Fresno seemed anxious to bring the Ron Paul supporters into the fold. The last of the speakers, speaking on behalf of... was it Mitt Romney?... took some of his time to congratulate the Ron Paul supporters for their strong showing (this was before the vote count) and to express his pleasure at seeing so many excited activists. He also tried to make the point that the honorable thing for us to do is to support whomever the Republican nominee turns out to be, whether or not it's Ron Paul. A lady who came to sit at the table I was sitting at reiterated the point. I'm fairly certain some Hillary doom-and-gloom was mentioned, as well.

I can see their point. Indeed, I am at the point where I have officially participated in a Republican event. I am participating in the primaries, and I am beginning to believe that perhaps supporting the eventual nominee, regardless of whom it turns out to be, could well be the honorable thing to do. I am also aware, however, that many, if not most, Ron Paul supporters are not susceptible to this sort of thing. For many of us, what we are doing is not participation; it is an invasion. They are in now, but if Ron loses the nomination, they will be gone just as quickly, many of them supporting a third-party or write-in campaign whether Ron likes it or not.

And I can definitely sympathize. I do have respect for the non-voter, and my usual practice of voting for a third-party candidate serves a similar purpose. There is nothing wrong with making an exception for Ron Paul. And given the fact that our laws fairly firmly establish a two party system, there is nothing wrong with joining an established party and attempting to enact change from within, any more than there is anything wrong with a Soviet-era Russian joining the Communist party, lacking other options, or an Iraqi joining the Baath party, lacking options. Indeed, if the "core" of the Big Two really want to keep their parties to themselves, they're going to have to establish voting methods that provide what can only be described as the disenfranchised portion of the population opportunities for representation, such as approval voting, or, better yet, range voting. So if more established Republicans don't like the Ron Paul Revolution invading "their" party, they really only have themselves to blame.

However, I tend toward seeing what I am doing as participation, not invasion. Partially this is because I don't like invading, and partially this is because I strongly believe that acting like an invader will only end up stirring up more active resistance to our attempts to get Ron Paul nominated. Is that not the very same principle behind much of our opposition to the Iraq War--that there are other ways of getting at the terrorists that do not generate yet more sympathy for the terrorists among their potential recruiting and fundraising base? The principle looks the same to me, thus I shall endeavor to treat my newfound Republican colleagues with due respect. I may only be around for this election cycle, but I'm not going to act like an asshole while I'm here. (For anyone who thinks I am calling them an asshole, please re-read the previous paragraph.)

However, even if the Republican party does manage to keep a few Ron Paul votes, I can tell you for sure: they will not get our energy or our enthusiasm. This isn't because we will withhold it in a miserly fashion; it simply will not exist to be given. If the Republicans want us to cut a single check (figuratively speaking) in favor of their candidate, it had better be Ron Paul. If they want awesome videos on YouTube for their candidate, it can be no candidate other than Ron Paul. If they want us on street corners, waving signs and cheering their candidate's name, it has to be Ron Paul--and no other. I just might vote for whomever the Republican nominee turns out to be, but the Revolution is for Ron Paul alone.

And so that's the score. So what do you Republicans, those of you primarily concerned with beating the Democrats (and not primarily concerned with beating any particular potential Republican nominee), want behind our candidate? Big big corporatist and/or military/industrial money, money that comes with corrupt strings attached? Or do you want the Revolution's money? Do you want slick campaign ads that at least 60% of the population will regard with only the most contemptuous cynicism? Or do you want a labor of love? As I said in my previous entry, it really looks like it's going to come down to Giuliani vs. Paul. For those of you who have your candidates being left in the dust, what is it you want not only in a candidate, but the campaign that will come with him?

Rudy Giuliani is pro-choice, but likely to nominate so-called "strict constructionist" judges. Ron Paul is straight-up pro-life--he outflanks the Democrats on the Right. However, his goal at the Federal level is simply to remove it from the jurisdiction of Federal Courts, making him non-threatening to pro-choicers in pro-choice majority states who also have localist sympathies... and yes, they do exist. This makes Dr. Paul more palatable to staunchly pro-life voters than Rudy Giuliani, while at the same time making him less frightening to pro-choice voters than Mike Huckabee, for example.

It is pretty well demonstrated that a majority are opposed to continuing the Iraq War. Rudy advocates an even more warlike foreign policy than the current Administration. Ron is against the Iraq War... but unlike most of the Democrats, he is also staunchly in favor of a strong national defense, and has also stated repeatedly that he DOES want to go after the terrorist threat, but using different (and more precise) tools than are currently being used. Believe the Democrats don't know what they're talking about regarding foreign policy if you want (and I tend to do the same), but Ron Paul is an expert. Thus, he outflanks the Democrats on the LEFT... while at the same time being sensible enough to keep us safe, making him far less frightening to voters on the Right than any Democrat.

On these two issues alone, we see how Ron Paul outflanks any Democratic candidate on both the right AND the left, while Rudy has issues which make him at least vaguely unpalatable on both sides of the spectrum. Many on the Religious Right are underwhelmed by Rudy's stance on abortion, while lefties of all stripes would support Hillary over Rudy, perhaps begrudgingly, but support her all the same.

And wouldn't you want to see the Income Tax gone? From what I've read, the federal budget has grown at such a rate that we only have to go back to year 2000 spending levels to account for the loss of revenues from the personal income tax. And the benefits of ending the Income Tax only begin with the amount of money people would be allowed to keep. In my opinion, the primary benefit is the removal of the tax code compliance burden that currently limits economic creativity, and thus limits the population's ability to create new wealth.

Finally, I want to ask a question: when are rank-and-file Republicans going to hold their own representatives accountable for broken promises? My primary example is the Department of Education. From what I understand, Republicans once held the position that if they controlled the government, they would abolish the federal Department of Education. However, with Republican majorities in both the House and Congress, as well as a Republican in the Oval Office, we didn't get the Department of Education abolished. What we got was No Child Left Behind, an expansion of federal power over education unprecedented even in Democratic years. Why? I really want an answer to this question.

We Won! WHOOOOOO!!!

Honestly, I wish I had more to report on this event. I just got back from the straw poll, held by the Fresno County Republican Party. Ron Paul took first place, edging out Rudy Giuliani by two votes (good thing my brother and I showed up!). Ron had something like 35% of the vote. Mitt Romney was third, I think, at 17%. The only other number I remember is that Fred Thompson has 7%. I think Huckabee might have taken 2% or something like that.

Honestly, at least so far as I can see, it's looking like the Republican primary is shaping up to be a contest primarily between Rudy Giuliani and Ron Paul. So for all you Ron Paul supporters out there, don't forget to sign up at http://www.teaparty07.com/. I fully expect that the Tea Party will be an even bigger success than Guy Fawkes Day was, with all the coverage that got him, and all the new supporters that's likely to generate.

I think we may have even won a new convert tonight, an undecided fellow who came to sit at our table, and went away carrying Ron Paul yard signs. Oh, how I wish I had a yard to put a sign in!

The Fed Has Wrecked the Stock Market

"America is finished, washed up, kaput. Foreign investors and central banks around the world have lost confidence in US markets and are headed for the exits. The dollar is sinking, the country is insolvent, and its leaders are barking mad. Investors are voting with their feet. They've had enough."

So says Mike Whitney "and many others" at Lewrockwell.com. I feel the need to be contrary to the alarmism. Yes, the dollar is on the way down, down to the bottom... of the market (not the ocean). However, it is entirely possible that the bottom is NOT at flat zero value. I've been concerned in the past that the deliberate attempts to artificially raise foreign demand for the dollar (such as the constant maneuvering, both diplomatic and warlike, to ensure that the middle eastern oil market continues to do business in US Dollars) was unsustainable. The dollar was strong, but brittle. The current rejection of the dollar as "worldwide reserve currency" was bound to happen at some point, and is now dropping relative to foreign currencies not because the physical part of the US economy has anything wrong with it now that it did not have before, but because the foreign dollar speculation "bubble" has burst.

So long as the response in the US is not panic, but rather acceptance of our new place in the international order, it's entirely possible that this situation can pass, that the bottom for the dollar will not be total collapse, but rather a settling to a lower, more sustainable level. The US can, as a result of its lowered currency, go back to being an exporter and a lender, rather than relying upon artificial foreign demand for our currency for our standard of living. The other thing that has to happen, of course, is for the political and economic elites to realize they can no longer borrow and inflate at the rate they once did.

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