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The Roads

March 28, 2012 1 comment

I, Roads

But, who would take care of the roads! Or the airports! Or the [insert state-monopolized capital asset here]! And that’s where someone asks you a question that is impossible to answer. The Statist Roads Argument (SRA) rears its silly head.

If someone asks you how a pencil is made, I’ve come to realize you should simply say, “I see what you’re trying to do here. You’re not going to trick me.” Why? Because no one knows how a pencil is made. The point of Leonard Read’s classic “I, Pencil” is that no one person alone has the knowledge required to describe how something as simple as a pencil is made from start to finish.

The more nuanced point is this: even though no one person can tell you how a pencil is made, pencils are made. Thus, we can conclude that the existence of pencils doesn’t depend on any one person knowing how to produce pencils. Instead, it depends on a complex network of economic activity that results in a pencil.

The same is obviously true of any provision of roads without state monopolization. The how and who would take care of the roads is the same as the how and who would take care of pencils: a complex network of economic activity that results in roads.

Burden of Proof

At this point I think it’s obvious that the burden of proof is on the naysayer to show how something as ubiquitous as automobile transportation would fail despite giving people the freedom to create the complex network of economic activity that results in roads. I can give a few reasons to suspect it would not fail.

In the first place, there’s a high demand for roads. People want them. A lot. However, not every road is equal. So the upkeep for a road without government supervision would depend on how likely the road is to be used, and therefore incur maintenance costs. That is to say, if a road is valuable enough to the people that use it, they will pay for it.

This begs the question, “Can all the users coordinate in order to maintain the road?”

The typical Statist answer to this question is, “Only through government.”

Which brings me to my second point: entrepreneurs exist.

The answer on a free market is, “Yes, and that responsibility falls to the entrepreneur. The entrepreneur coordinates goods such that a specific good or service is provided by coordinating users’ demand in the form of revenue, and perpetuating the provision of said good or service using profit margin analysis. If the entrepreneur fails, he loses money. If he succeeds, he benefits by profiting, and the provision of the good continues.”

Let My People Drive!

A third reason for thinking roads would thrive is that roads are capital assets with predictable fixed costs. The marginal cost of letting another driver on the road is minimal. So the obvious solution to maximizing profit is to have as many drivers on the road as possible. It is in the interest of a road entrepreneur to allow as many people as possible on any particular toll road, excepting dangerous drivers. Variable costs are definitely the products of accidents on the fixed capital assets known as roads. Your GPS will send you to an alternate route. And there goes the day’s take.

A fourth reason is that roads are essentially nothing more than long pieces of rock. I mean, really? Roads!? The market makes fake body parts for crying out loud. Complex molecules are created by private firms in order to coordinate biological activity inside a human being and you’re worried about long pieces of rocks and metal? Shame on you.

Less Talky, More Experimenty

The real farce about the SRA is that the Statist position is merely a hypothesis, but Statists refuse to make any experiment to test it, and accept it as an already established fact.

The real test of the matter isn’t how well a Libertarian can answer an unanswerable question. It would rather be to let Libertarians have their day and let the test be made. It’s unscientific to hypothesize, “The private ownership experiment concerning roads will fail,” and then not undertake the experiment to confirm or deny this hypothesis. It’s rhetoric, plain and simple. That’s all it is.

What Statists are doing when they posit the SRA is confirming a hypothesis out of hand. So I think no matter what I write here today, it’s all beside the point if Statists are going to write off private ownership of roads by entrepreneurs based on unscientific analysis.

Until the experiment is made that confirms or denies roads can be handled by private parties, the suggestion that the same is a fact is nothing more than rhetoric.

And even without the experiment, we know at least one thing for sure: taking from one person to pay for another’s road is just as bad as taking from one person to pay for another’s car. What others posit as “public” goods are really goods enjoyed by private parties, but whose costs have been socialized by force by a bureaucracy that has exhibited an agency problem involving lack of cost control, roads being in a state of disrepair (I live in New Jersey, it’s like a virus), and the creation of artificial barriers to entry for alternative means of transportation.

The answer.

You can’t really assume that any specific ownership type or maintenance process for roads would prevail in the market due to its dynamic nature. It might be the case that some roads would be owned and cared for directly by the people who have property on the road. In other cases, people on the same street all get together and hire a road maintenance company that receives regular fees and fixes potholes when they come about. In yet another possibility, a toll collection company would take care of roads.

In order to see how roads would be provided without the government, one simply has to let people take care of the roads themselves.

So who would take care of the roads absent a state monopoly? The same people who make pencils. That’s who.

How Liberals and Conservatives Are Losing the Battle of Ideas

March 26, 2012 2 comments

The Young Activitists

New ideas, by their very nature, find root in the fertile soil of young minds. Liberals are no longer the bearers of new ideas. Conservatives are still ridiculous. Both groups are hoping enough interested people are out there who prefer their brand of statism and phony philosophies, both of which have been tainted (perhaps from their very inception) by an obvious desire to control individuals and individuality itself.

The young activists in the Republican and Libertarian Parties are truly the most progressive movement out there, 21st Century Libertarians: Homosexuals and Straights, Queers and Squares, Blacks and Whites, Capitalists and Voluntary Socialists, Anarchists and Government Employees, Soldiers and Peaceniks, Mothers and Fathers, Daughters and Sons. (Queue liberal heads exploding everywhere.)

The young activists are showing up and doing their best to drag the Bush Republicans out with the trash. And who would serve in their place? Who do you think? Do you think?

The new dynamic in American politics is Statism vs. Libertarianism. Remember when people use to make jokes about how the government made no sense and was terrible? Now they’re saying, “Wait, why are we joking about this?” Remember when people said, “Live and let live?” People are beginning to say, “Yeah, that’s something we should actually do.”

It is rather beside the point to mention Republicans by and large only pay lip service to Libertarianism. People are waking up to this fact and are saying enough is enough. Statism should be a thing of the past. The Bush Republicans are in trouble; they took first place in the contest to see who Libertarians would try to displace in the Swamp.

When Anti-War, Non-Violence, and Freedom are Truly Considered

However, the Left Statists are also in trouble. While Libertarians have taken up an electoral assault at all levels to the Republican Party, they have also meted out punishment to Liberals in the political conscience of the entire world.

Liberals have tried to keep clear of Libertarian political philosophy by claiming it all boils down to Bush Republicanism or worse by throwing out names like “racist” or “sexist” or “exploiter” instead of taking up fundamental issues like the freedom of association head on.

But it’s not that easy. Libertarian philosophers, economists, and politicians have gained access to media outlets, and more importantly, social networks and the internet. That’s right. More importantly.

Libertarians have become a force to be reckoned with in the minds of the American public, and we see support around the world increasing as well. Conservatives are trying to paint Libertarians as Liberals. Liberals, who used to be known for supporting personal freedom, are doing their best to paint the Libertarian message as Conservative, i.e., all things racist and sexist, with a broad brush of hate.

Behold the Name Calling Olympics

Libertarians are quite comfortable sitting back and watching while Conservatives call Liberals “sluts” and Liberals call Conservatives “racist” and “sexist.” It’s actually quite amazing when either group actually complains about what the other side is doing. It’s like when a child calls his sister stupid and then complains when she calls him stupid back. But when it’s adults on air with access to millions of people, the farce and entertainment factor grows a thousand fold.

The knee jerk reaction of either side these days is to simply call the other some sort of pejorative as if this settles the whole affair. Liberals are the most buffoonish when they do this, since they try to pass it off as actual intellectual commentary. You see Left Statists on the air talking about how the only reason someone would be against Obama is because they are racist. Deluded people are usually the only ones who don’t see the absurdity of their delusions. Many Americans see this sort of talking going on and think to themselves, “That’s really not an answer for all these valid critiques of Obama. Neither is pointing out that some people didn’t have those critiques of Bush. Some people did.”

Libertarians are simply answering all critics with consistent arguments. When these critics reply by impugning the personal beliefs and motives of Libertarians, it’s actually a win for freedom. Remember: a boxer isn’t great because he’s the best in the gym, he’s great because he wins. If Liberals and Conservatives weren’t so obviously bad at answering fundamental questions about freedom, whether economic, sexual, personal, professional, whatever, Libertarians wouldn’t be so obviously gaining ground in the realm of public opinion. Yeah, it’s all fine and good when a Libertarian writes a great book. It’s even better when he or she schools a Liberal or Conservative in public.

Obama, Obama

Left Statists really don’t have much to hang onto when it comes to the current President. Their philosophy has been reduced to, “Vote for the guy who will make sure we can do what we like on the weekends, the hell with anti-war and civil liberties. We’ll care about that when a Republican is President.”

One need only become a regular reader of Glenn Greenwald’s blog to understand the extent to which Obama has further dragged the United States into a fascist, menacing police state that claims life and death over all people and their freedom, ownership over all resources, and the ability to wage war without the consent of anyone but the President and associated counselors.

Liberals constantly like to paint Libertarians as hypocrites. Why don’t you avoid using roads if you think government shouldn’t have a monopoly on the roads you can’t avoid using!? (Hysteria ensues.) That’s really the topic of another blog post, but the point is that if Liberals are asking, “Oh, well, look, you actually do use some government services. How do you explain that?” why can’t Libertarians ask, “Oh, well, look, your preferred road builder is actually killing and imprisoning hundreds of thousands of people every year. How do you explain that?”

Neither Conservatives nor Liberals are Anti-Corporatism

Many people who identify as Christian Conservatives, Romney Republicans, Left Statists and Occupy Wall Street Punching Bags don’t want to see an end to the current power structure in the United States. The television news and print media discuss fundamental issues about power as if it is the personalities wielding these powers that are insufficient and lacking.

Only Libertarians are advancing popular political thinking by questioning whether a political system now well over 200 years old needs some revisiting and self-reflection rather than cheerleading, ever greater legalized plunder, and nonstop attacks on human freedom.

But not your typical Statist! Why, if only we had the best and brightest, I’m sure our perfect political system would work! If only the subsidies were handed out correctly! If only the power to compel a certain morality were given to this President or that President! If only the central bank were more/less politicized! If only taxes were higher/(a little) lower! If only spending were (much) higher/higher!

Republicans aren’t looking for real cuts in spending, and Democrats are looking for more spending. Neither side is doing anything to stop bailouts in any meaningful way, and the feast of rent-seeking at the teat located on Capitol Hill goes on unabated.

Libertarians are the only ones discussing truly anti-corporatist measures like ending all subsidies, ending all bailouts, ending all government-issued monopoly advantages, ending all public school monopolies, and ending all incarceration for victimless crimes. These are radical policies. These are the ideas invigorating young folk, not half measures and unkept promises. People don’t want to see something a little different. They want a lot different, and they want it now.

Even if you throw some of the corrupt players on Wall Street in jail, doesn’t the game go on? Even if you increase (or even decrease) taxes on the rich, aren’t you leaving in place a system that allows rent-seeking to go on, letting people get rich based on government fiat and the enforcement of monopoly advantages with courts and police forces? Even if you elect a Democratic Nobel Peace Prize winner, won’t you still have an increase in the number of wars, war spending, and abuses of civil liberties?

A healthy conscience demands answers to these questions. Conservatives and Liberals offer none.

All Your Intertubes are Belong to Us

As the 24-hour news cycle settles comfortably into its third decade, people are beginning to see the entire forest, not just the trees. Politicians and talking heads are no longer heroes; they’re actors in a script that most people see is just a script.

The real discussion about political events and philosophies happens on the internet. When you load up CNN or Fox News or any other mainstream outlet, the comments are about as interesting as a dry water fountain. However, when you see friends and friends of friends and amateur bloggers duking it out on social networks and blogs, crowd-sourced criticism becomes very valuable. The internet is a crucible into which lies and stupidity go to be smashed apart and die.

Libertarians are using this medium to highlight all the critical thinking that was going on when all the glowy boxes in houses were one way streets. Back in the day, when something stupid and obviously ridiculous was said on TV about the government, you had a smaller group of people at your disposal with which to reflect upon that stupidity. The thought of it is chilling. How terrible it must have been to get an inkling that something stupid was said and you didn’t quite know how to put it.

But nowadays, there is much criticism of the government’s public statements as well as the statements coming out of the traditional news media. Hackers and whistle-blowers are cracking the edifice of government secrecy that journalists have failed to breach in a very long time. If journalists are the watchmen of government, your average internet user has become the watchmen of journalists.

As a rule of thumb, most established news outlets are largely uncritical of government no matter what era or government you’re talking about, including ours. Perhaps especially ours. Previous to the advent of the internet, both official and news media propaganda was harder to criticize. In addition, the duopoly Democratic and Republican parties control was harder to avoid since the obvious answer to something you didn’t agree with was the most widely available criticism of that thing.

No longer is this the case. Now when people turn on the cable news, it’s with the understanding that within a day or two, they will have come across no less than 500 opinions about what was said. Now a typically Statist debate can be shown for what it is: thinking within a very dimly lit and confused box. Libertarians are now able to ask why anyone should have to settle for picking one sort of government harassment over another.

The Future Looks Great

No longer does the sun set so gently on Bush’s successors–Romney, Santorum, and Gingrich–nor their Left Statist critics. Let’s be clear here. Much to the GOP’s chagrin, (they’re resigning over it), and the Democrat’s chagrin (anti-war when convenient), a large number of people from all walks of life are rejecting the idea that government is their best friend just because they’re homosexual, or minorities, or Christians, or women, or men, or veterans, or soldiers, or anything else. The Libertarians are here to stay.

The problem with establishing a legal duopoly in the electoral process, or trying to perpetuate a duopoly in the realm of ideas that has already broken down, is that if you ever lose control of either, you’re on the outside trying to get in. Now you’re the one being smashed in the crucible.

Libertarians need only keep doing what they are doing to grow their numbers, to show old ideas for what they are, and to keep lighting the fires of new ideas wherever the fuel of human curiosity is available. Peace is no longer a concept that applies only to nations, but also to the state of affairs among all men and womenTrue freedom is not licensed or granted by a group, but recognized as necessary for the blossoming of the individual. And the more critics of freedom try to reduce it to hate and selfishness, the more firmly will it take hold in the minds of thinking people who are not so easily dissuaded from rational discourse.

Liberal Universalism

June 9, 2011 1 comment

1 > 50

While liberals would have you believe their universalism is the child of wholly benevolent aspirations, there is a good practical reason they oppose States Rights: they hate competition.

One example is Right to Work laws. Liberal supporters of unions claim to be against RTW because they’re looking out for the little guy, the working man, for whom RTW laws would be a soul-crushing blow and a lifetime sentence of poverty. When state-level democracy trumps union democracy, pro-union liberals invariably assert that it’s the end of the middle class as we know it. Politics of Fear 101.

Note that supporters of States Rights are just fine with different laws for different states. If one state wants forced unionism, let them have it. (I’m imagining right now some liberal coming up with a snappy NIMBY retort chock full of union rat imagery.)

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The reason pro-union liberals don’t like States Rights is at least twofold. First, while multiple jurisdictions are in place, people can compare legal systems and test liberal claims that everything they do is best. Liberals hate that.

It was Marx himself who bemoaned the plenitude provided by free trade as opposed to socialism. If only free trade were outlawed, socialists could claim theirs is the best of all possible worlds and what would anyone have to compare it to?

But when people can discern differences among systems, they choose which they want for themselves. Under a completely federalized system, liberals would attempt to monopolize the legal code. Once successful, they’d claim their laws were a Panglossian monopoly (e.g. public education), and to even question getting rid of the monopoly is an affront to human rights.

To sum up, they hate competition because it denies them the ability to portray their type of government as a superlatively beneficent monopoly for which there can be no alternative lest we all perish aimless idiots in a rising conflagration of our own stupidity.

Every good economist knows to consider both seen and unseen. When liberals manage to force choice  into being unseen by instituting a government monopoly, it becomes much harder to dismiss what remains to be seen.

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Second, RTW laws mean a decrease in political cronyism between politicians and unions. (Oh, right, that doesn’t really exist. Everyone’s just making it up because they hate the working class.)

We saw this with the Boeing unions. The federal government is trying to prevent Boeing from opening a factory in a RTW state because it alleges doing so would amount to “retaliation” against union workers. For what? Who knows?

Liberals need to crush competition in legal jurisdictions to make sure their political allies can have as much power as possible. If a community of people doesn’t want forced unionism, to hell with that, we’ll force them to have forced unionism.

Race to the Race Card

Inevitably, an astute, longtime and dedicated viewer of MSNBC will posit the only logical outcome of a plurality of jurisdictions will be a return to slavery itself. For weren’t States Rights the rallying cry of the dirty, Southern slavers during the heretical rebellion they perpetrated?

If states could write their own civil rights laws, some would be free, sure, but others would be Jim Crow revivals. But this is just another typical left-wing smear dressed up as political theory. The premise, of course, is that States Rights advocates are all closeted racists, and liberals are the only thing preventing the establishment of a Fourth Reich in the USA.

By the way, did anyone else hear about Rand Paul or any other tea party member of congress working to repeal the Civil Rights Act of 1964? Me neither. Nevertheless, as MSNBC portrayed it in October 2010, the whole country was about to re-enslave anyone darker than Mitt Romney. Never mind that tea partiers were talking fiscal policy. Liberals needed their straw men racists so they could paint themselves as the saviors of hyphenated-Americans everywhere.

The Big 1

I’m quite certain most liberals would prefer the UN be in charge of taxation. A variety of tax jurisdictions and regulatory climes makes preventing capital flight very difficult for an aspiring American socialist. They need to pen in their tax cows so there is no escape. So much for a voluntary social contract. What’s a liberal to do?

I know. Claim lowering tax rates is the product of selfishness perpetrated by the rich and enabled by republicans. That’s right, it’s selfish to keep your own money, but not so when you want to take someone else’s while giving nothing of your own in return.

This is why all conservatives should support States Rights and the concept of Nullification: they are the keys to preventing liberals from monopolizing government and crushing any remnants of choice we have left. As all conservatives should know, liberals demonize and politically marginalize anyone who even dares consider a right to choose something other than a government monopoly exists after all. So pick up the slack, conservatives. The choice is yours.

Keeping It Together

February 14, 2011 Leave a comment

Mr President?

Ron Paul won his second consecutive CPAC presidential straw poll this past weekend and already various news outlets and personal acquaintances of mine are harping about the fact that it does not matter.

Apparently the only reason the CPAC presidential straw poll might matter is if it is a good indicator of who will win the GOP presidential primary in 2012.

We should turn back the clock one year, when Ron Paul won his first CPAC straw poll. The same claims were made about the straw poll being irrelevant because it was not a good barometer of who would win the republican nomination for president in 2012. Perhaps it would have been advantageous for Paul detractors to have asked themselves this question at the time:

“What happens when these people concentrate their efforts and find an individual to back for a lower political office?”

Rand Paul was the answer to that question. But in February 2010 he was unelectable, just like his father. Both the left and right of the establishment derided any suggestion that Ron Paul’s brand could succeed anywhere but a small congressional district in Texas. Oops. I’m just glad the establishmentarians on the left and right are still not taking the threat the R3V0Lution represents seriously.

Yet detractors of both doctors Paul still go on dismissing the importance of what is happening here. A dedicated minority is fighting pitched battles one at a time to gain prominence in American politics. Is this dedicated minority ready to win the presidency? Probably not. Is it ready to win a senate seat? Rand Paul. Was it ready to win a senate seat in 2008? No. But that wasn’t the point, was it?

Did Ron Paul seriously think he could win the presidency in 2008? Probably not. Was that the purpose of his run? No. He got the message out and it has been growing ever since. The establishmentarian left and right dismiss this growth because it is not at a stage where it can effectively take over presidential politics. But only time will tell if that day will ever come.

Selection Bias Uh Oh

Admittedly, the reason the straw poll ended up going to Dr Paul is because he had a superior presence at CPAC in terms of supporters who GOTV. As long as his supporters cannot replicate this success during a presidential race, it is true that this particular straw poll is not a good barometer of who will win the presidency.

But it is a good indicator of how well the Ron Paul Army is keeping things together.

Since tea partiers like revolutionary imagery, remember that during the revolutionary war, the colonies did not have armed forces that could take on the whole British military. They did not have to for two reasons.

First, the British did not commit their entire military to the affair much like the establishment has not focused its resources on eliminating Ron Paul or his supporters.

Second, George Washington realized that as long as he could keep his army together and fight the battles he knew he could win without losing too many resources, the army could wait out the British military. He was helped along in this regard by British military incompetence, the French, and sheer good luck at times.

This is the message I have for my comrades:  the R3V0Lution presses on. The Ron Paul Army has not dispersed, but has come together on many occasions to score wins in American political life. It is growing, not declining. And as long as you keep it together, your efforts will bear fruit.

Read more at:  AndrewRushford.com

Rand Paul’s Point

February 8, 2011 1 comment

Rand Paul was on Morning Joe today and made the point that $500bn is the figure you reach if you’re just getting serious about the current federal debt crisis. This is a deft move since most people who liked the plan have been saying, “Well, I know it’s a lot, but you have to do it.”

Rand Paul is effectively saying, “In the long run it may not be enough, but it’s a good start.” With less than a week before CPAC, this should give the Paul brand some flavor.

I have not yet confirmed the figures, but Senator Paul claimed that over the next few years the Democratic plan in congress will add $4 trillion in debt while the Republican plan will add $3 trillion. What’s a trillion dollars between friends anyway?

It’s unlikely that anyone will play ball with the prospect of having to shave $500bn off the budget looming. More likely is the continuation of the USG trying to reanimate the corpse known as the American economy with cheap money. Kablooey! Learn to love the bomb already, would ya?

I don’t think term limits or campaign finance reform would have any effect either way. You don’t have to give to a politician’s campaign directly to win influence in Washington. It certainly can’t hurt, but giving favors can be just as effective. And the prospects of sitting on the boards of powerful interest groups after a political career in Washington is enough to grease some wheels in the capitol.

The Banks Aren’t The Economy

December 2, 2010 2 comments

Today we learned the Federal Reserve made $9 trillion in emergency overnight loans from March 2008 to May 2009 in order to “keep the economy running.”  Three banks, Merrill Lynch, Citigroup and Morgan Stanley account for two thirds of this lending activity.  Immediately liberals and conservatives and Keynesians and Austrians jump out of their seats at the use of quotes.  A grand debate invigorates them all:  does it work or doesn’t it?  Is it fair or isn’t it?

However, why doesn’t anyone ever ask these questions:  how is it that the health of so very few firms can threaten the entire economy?  Why is it that for the economy to survive, three firms need to get $6 trillion?  By what wonder of modern monetary policy could the cure for recessions smack of corruption?  Is it really prudent to let the economy hang on a thread attached to only a few firms?

Before addressing how banking institutions could attain such magnitudes of global importance, one should consider:  is this a position that would be coveted?  I think so.  Think about it:  the demand for an orderly economy (read:  not mass starvation) is very high.  If somehow you can get people to identify an orderly economy with your profit stream, that would be a very lucrative position indeed.  It’s like someone thinking giving you $50 a day just to stay healthy and in the graces of God is a good idea.  This is why televangelists exist:  there’s a large market for people who want to believe the existence of something, anything, stabilizes the world.

Wouldn’t you want that?  Wouldn’t you want people to believe your earning eight figures a year was absolutely essential to the health of the economy?  People would be willing to throw money at you just to make sure it happened.

Enter the US Banks.
Enter American monetary policy.
Enter the Federal Reserve with $9 trillion in overnight emergency loans.

Get the picture?

Lots of good economists will say, “Now wait a minute, are you saying that just letting these firms fail would be good for the economy?  Or that it wouldn’t hurt?  That’s fucking crazy!!!”  And it is.  I don’t deny that if these firms had failed shit would have hit the fan and spread all over your mom’s couch like your lazy uncle.  That’s precisely the point I’m trying to highlight:  the health of the US economy hinges on the success of the banking sector.  If it goes, so too does the economy.

How is this in any way acceptable?  Would we be okay if it hinged on the health of fast food chains?  Well maybe it does.  Maybe that’s why the Fed made emergency overnight loans to McDonalds. McDonald’s.  I didn’t even know McDonald’s had a banking wing.

Lots of people will say, “Drew, it’s the markets, dummy.  See what happens when banking operations are allowed to keep insane amounts of profit?  It’s the natural outcome of free markets; cartels, oligopolies, monopolies and monopsonies form and the little guys get screwed.  Now don’t you see why we need more regulation?”

I guess this is a good explanation if you’re four, maybe five at the outside.  Quick:  name five federal laws passed in the last twenty years that deal with banking oversight.  Can’t do it?  Oh, and apparently you’re some sort of expert on how much government needs to regulate banking, right?

The biggest problem with “The Markets Did It” explanation at this point is everyone knows the profits these firms enjoy are subsidized by the Federal Reserve in the form of cheap loans.  Look at the emergency overnight loans the Fed made.  They were made at 1% – 2% (what the banks had to pay the Fed), but netted between 10% – 48% (what the firms took in as profits on relending the money acquired from the Fed’s lending facility).  Those are some holy fucking shit returns in this economy—or any economy.

The alleged benefit to this practice is the liquidity provided to the overall economy by these banks, which are merely the conduits of monetary policy as directed by the Federal Reserve.  Well, what a wonderful civic duty to be doing.  I wonder if I’ll get paid that much if I go on jury duty.  Maybe the Fed will open a Short Term Jurors’ Facility (STJF) as long as I can prove it increases aggregate demand.

This is trickle-down economics for the twenty-first century.  Back in the day, we were told lowering taxes will automatically create economic activity.  That’s pretty stupid since there are like 900 million other variables at play.  I agree wholeheartedly with getting rid of taxes whenever and wherever I can, but not because it fits into my scientistic plan for economy building.  But I digress.

There is a major difference between reduced-tax trickle down and increased-loans trickle down:  the former is letting people keep something they earned (presumably) while the latter is giving people something they didn’t earn.  Yet the justification springing from either trickle-down theory is this:  that it benefits the economy as whole.

Some will point out that tax reductions for the rich can only provide only so much bang-for-the-buck when it comes to economic theory.  That is to say, the benefits of lowered taxes trickle down is nothing compared to the benefits of the trickle down created by Federal Reserve lending.

And so we might get caught in the mire of technocratic analysis of policy and forget this very important question:  why have we let the success of our economy hinge on profits trickling through fantastically rich firms that employ fantastically rich people?

The answer is amusing:  the banks are the best at figuring out how to lend money and where it should go.  That is to say, they are best equipped to understand where lending should be done and how to make sure the money let loose by the Federal Reserve properly maintains aggregate demand.

In an audaciously stupid attempt to placate free market ideals, the argument is that government shouldn’t be in the business of lending.  It could get corrupt.  Economic activity would be subject to political whimsy, which would disrupt markets severely.  Yet somehow government should be in the business of lending to 30 banks all the time.  How does it know that these banks are the best way to ensure proper lending?  How many major asset bubbles have we been through in the past twenty years?  Five?  Good work, the Fed.  The Goldman Sachs wins again.

The initial reason the Federal Reserve was ever created was to stop economic crises from happening due to the alleged scourges of the free market.  However, a free market in banking did not exist before the Federal Reserve either, and this too lead to economic crises, just as it does today.

Some people get their britches all bunched up when I say this.  How could I believe there wasn’t a free market before the Federal Reserve?  What am I fucking crazy?  Well, here’s a simple counter question by the same token:  then what makes you believe there has been one since?

And another:  is a lack of a Federal Reserve the definition of a free market in banking?  Is the lack of regulations in mortgage lending a free market in banking?  What sort of general equilibrium model for banking activities are you working with and what is the minimum amount of regulation that defines a free market in banking?

The usual answer:  I’m not sure, but what I do know is there simply isn’t enough.  Well that’s an enlightened response.

Back to the point.  The Federal Reserve is created and this is supposed to prevent economic crises.  How?  By making sure banks have a large source of liquidity whenever it is needed.  This explanation skims over the surface of the real issue:  why are we equating the health of the economy with bank liquidity?  Why does money equal banking and banking equal money?

In other words, why is it that monetary policy is largely defined by and done for the benefit of the banks?  Is it simply because this is the best way to run an economy?  Am I suggesting a conspiracy?  No.  I’m suggesting what happens all the time:  the Fed was created by lobbyists and still exists because of lobbyists.  That it created an economy where global economic health hinges on just a few banks is irrelevant to what I’m saying.  Yes, they are now integral parts of the economy, but they don’t need to be.  We can take our money back.

We don’t have to break them apart by law.  We just have to stop subsidizing them.  Allow competition to come in.  Actually allow the banks to pay the debts they owe, and if they can’t, allow a process where the capital they are sitting on can actually be put to good use.  But let’s not have the Fed simply hand money to them.  Allow entrepreneurs to invest in the capital and put it to good use building the economy.  Less giant megafirms that can offer only Mutually Assured Destruction with the American people and a larger number of smaller firms that can go belly up and not destroy the economy.  This sounds more democratic to me.  A free market democracy rather than a bank-subsidized corporate megalocracy.

But before any of this is possible people have to believe the Fed and the banks cannot ensure economic health in any part of the world.  Only wise investments and putting capital to good use making things people want can do that.  Right now people believe the health of the banks is the health of the economy, and it is true.  But this is something that can and should be changed.

Murphy-Krugman

November 4, 2010 2 comments

In case you hadn’t heard, Bob Murphy, Austrian school wunderkind, has come up with a novel way to get Paul Krugman to finally debate and put up or shut up about his particular flavor of pilfer-thy-neighbor economics.

It’s pretty cool. Murphy has raised fifty thousand dollars, that’s right, fifty thousand, that will be given to charity if and only if Krugman debates. You can see more details at http://www.KrugmanDebate.com. You can also pledge toward the 100K goal. Your credit card won’t be charged unless the debate actually occurs.

I like the idea of making Krugman choose between hunkering down in his Ivory Tower and denying hungry people this winter an extra 100K in warm meals or getting his head taken off in a debate against an Austrian economist like Dr. Murphy.

Maybe someone should remind Dr. Krugs this release of money would only help his stated goal of increasing aggregate demand and money flow.

Please visit http://www.KrugmanDebate.com for more info.