Monday, January 30, 2017

What Do I Tell My Daughter?

This morning, I’ll have to tell Layla that Hillary Clinton lost, that a woman won’t be president. Even more difficult, I’ll have to tell her that Donald Trump won. The man she knows as a bully who says terrible things about women, people with disabilities and immigrants – the man who brags about hurting people and separating families – will lead her nation.

I fought back tears as I sent them off on the subway to school on Wednesday morning. I feared for their safety in a way that’s fresher and more urgent than it has been since the days after 9/11, when my older child was a baby.

Now it’s 2 in the morning….In six hours they’ll wake up and we’ll have to figure out how to talk to them about the election; about the next few years; about what this means about how their country thinks not only of women but of queer people, immigrants, and people of color.

OK.  You get the point.

I have a suggestion.  Instead of whining in your self-absorbed cesspool of self-pity and narcissism, why not tell your daughters the following:

·        Americans didn’t want to elect a president who would thereafter belong on the Mt. Rushmore of corrupt presidents.
·        Americans didn’t want to elect a woman whose primary job qualifications were riding her (truly) sexist / rapist husband’s coattails to Washington.
·        Americans didn’t want to elect a woman who thought so little of herself that she would instead protect her sexist / rapist husband by attacking the victims of her husband’s aggression.
·        Americans didn’t want to elect someone who basked in the glory of killing millions of men, women and children of color throughout North Africa, the Middle East and Central Asia.
·        Americans didn’t want to elect someone who had close ties to Saudi Arabia, the most sexist, homophobic country on the face of the earth.
·        Americans didn’t want to elect someone whose ties to Wall Street evidence her controllers.
·        Americans didn’t want to elect someone who thought of most Americans as “deplorable.”
·        Americans didn’t want to elect someone who used the party machine to crush her more popular primary opponent.
·        Americans didn’t want to elect someone who couldn’t walk to her car without physical support.
·        Americans were tired of having your cultural nightmares crammed down their throats.
·        Americans didn’t want to elect someone who represented so many things you claim to hate while you basked in the self-righteous hypocrisy of giving her your full support.


Americans didn’t want to elect the only candidate the democrats could have nominated that could lose – for all of the above reasons and more – to Donald Trump.

And after all of this, you can try to explain to your daughter why you so desperately wanted this deplorable candidate to become the next president of the United States.

Sunday, January 29, 2017

Who Will Pay That 20 Percent Tariff?

Trump has floated the idea of a 20 percent tariff on goods imported from Mexico in order to pay for the wall.  This is Trump’s way of fulfilling a campaign statement (one dare not call them promises, given the track record of virtually every elected official on earth): Trump will build a wall and Mexico will pay for it.

One bad idea begets another.  The wall is the first bad idea: there have been numerous “walls” built along the southern border of the United States; none have apparently been successful towards the intended purpose.  Why try another?  There are other ways to patrol a frontier; better yet, place all property in private hands and let’s be done with this issue.

The tariff is a second bad idea.  Why punish Americans via an added sales tax?

But just how, precisely, will Americans be punished?  And will the tariff be borne only by American consumers?  I suggest not.  I will use an example of an import of which I know something about: beer.

Dos Equis – a fine Mexican beer.  Let’s call the price today $6 for a six pack.  Will I now have to pay $7.20?  Only if one believes the producer is in charge of the price.  But of course, in a market it is the consumer that is in charge.

Most beer drinkers can enjoy multiple varieties of beer.  In place of Dos Equis, it is easy enough to buy a nice Belgian import – say Leffe – a beer not subject to this new tariff.  Is this American who buys Leffe instead of Do Equis subject to the tariff?  Certainly, he may not be able to enjoy his preferred choice of beer, but he still has many fine beers to choose from; Mexico isn’t the only beer-producing country in the world.

What happens next?  Will all non-Mexican producers of beer raise prices by 20% to take advantage of this gift from Trump?  I suppose it is possible, but given the level of competition in the beer market, not likely.  Of course, for the handful of beer connoisseurs who model themselves after “the most interesting man in the world,” nothing but Dos Equis will do.  For these consumers, the 20% increase will come out of their wallet….or will it?

What is more likely is that sales of Dos Equis will fall due to this tariff.  The burden will end up on the shoulders of the producer in Mexico.  Will the producer cut price to maintain volume or will he maintain price and see a reduced volume?  This is the producer’s choice and in either choice the producer will pay.

In other words, Trump is more right than a simple analysis suggests.

I know my example is a simple one – there are much more complicated situations – the electronics and automotive industries have complicated supply chains between and amongst Mexico, the United States, Canada, Europe and Asia, for example.  Exactly how these play out, under any scheme floated by Trump, is anyone’s guess.  But I stick to a subject I know – beer!

Am I suggesting that I support the tariff because the other guy will pay?  Never.  Reduced trade is always a bad idea; any government action that restricts trade is a bad idea (in other words, every government action is a bad idea because every government action restricts trade).  It lowers the standard of living for everyone – not only the two involved in the trade, but for everyone else (except for the thief and his friends).  Money stolen for one purpose is money not spent on the value-driven choice by the owner on a different purpose.

But my main point regards who will pay.  And economics teaches us that the answer is not so simple; there are always secondary effects to be considered.

Friday, January 27, 2017

More on Fractional Reserve Banking

Frank Shostak has written a piece on this topic.  Some of his comments I disagree with, some I question, the largest portion I say are spot on – which raises, once again, my view on “focus” when it comes to this topic.  With this. Let’s begin:

The so-called multiplier arises as a result of the fact that banks are legally permitted to use money that is placed in demand deposits.

The banks are not only legally permitted to do this, there are several provisions in the contract between bank and customer that implicitly allow the banks to do this.  Importantly, they are not contractually prohibited from doing this.

As to the multiplier effect: consider a hypothetical.  Consider the “multiplier” that is possible if all bank transactions were to clear through a single bank – a monopoly on money and credit.  The bank would never have to fear a run because all withdrawals were immediately offset with the corresponding deposit (less currency withdrawals which are certainly immaterial relative to total balances). 

My point?  It isn’t a hypothetical.  There is a multiplier effect because the entire banking system can be considered as one single bank with a central bank to ensure every transaction can clear. 

A monopoly.

Banks treat this type of money as if it was loaned to them…

Depositors also treat this type of money as if they are loaning it to the bank – otherwise, why would they expect (and in most cases and in normal interest rate environments receive) interest income?

For example, if John places $100 in demand deposit at Bank One he doesn’t relinquish his claim over the deposited $100. He has an unlimited claim against his $100.

This isn’t really correct.  The regulation underlying the contract makes clear that his claim is conditioned on the bank’s ability to make good; the regulation makes clear that there are certain conditions under which John might have to wait some time before receiving his $100.  His claim is limited.

A case could be made that people who place their money in demand deposits do not mind banks using their money. But, if an individual grants a bank permission to lend out his money, he cannot at the same time also expect to be able to use that money.

Of course he can expect to “use that money.”  I will suggest that, since 1934, people have been able to “use that money” 99.99999999999% of the time “on demand.”  I suggest that this level of performance is higher than that to be found in any other industry; therefore, why wouldn’t he expect to be able to use that money? 

I can expect to use the money when I want to with a higher degree of certainty than I can expect my car to start in the morning or my Windows operating system to function properly.

…from an economic point of view, [this banking practice] produces a similar outcome that any counterfeit activities do. It results in money out of “thin air” which leads to consumption that is not supported by production, i.e., to the dilution of the pool of real wealth.

I will suggest that it is the consolidation of the banking industry into and under a monopoly central bank that allows for the creation of this money out of thin air.  An individual bank, with no backstop other than its own capital, would loan out only an amount of these types of deposits (given the contract) that it felt were secure; a prudent reserve ratio would be used. 

A bank that was imprudent to the point of insolvency would, of course, cost the depositors their deposits.  But absent the consolidation of the industry into a single bank, this would be nothing more than a blip to the larger economy.  And, with the insolvency, voilà!  A reduction in the multiplier.  Left to the market, it is all so self-regulating; markets will discipline banks as to the proper duration matching necessary.

Consider: if the individual bank with no outside backstop successfully predicts it can safely loan 80% of its demand deposits, what does this mean?  It means depositors never touch, in aggregate, 80% of the money deposited.  I don’t mean multiplier in digits – in passbooks or account statements; I mean multiplier in terms of circulating currency (or digits).  However one describes it, 80% is functioning as permanent capital for the bank.  So, where is the multiplier? 

This I pose as a question; I would welcome reasoned feedback.

The rest of Shostak’s post focusses on the primary issue – and in my mind, the only issue:

In a truly free market economy, the likelihood that banks will practice fractional-reserve banking will tend to be very low.

I don’t know how “very low” it would tend to be; but the solution is “a truly free market economy.”  A “truly free market economy” would not include a central bank or government deposit guarantees and the like.  I do know that in a truly free market economy banks and their customers will be required to exercise proper fiduciary caution.  This is what will discipline the practice of fractional reserve banking and this should be the issue of focus.

The issue is the monopoly.  Remove the government backing; the market via contractual relationships between bank and customer will manage the practice. 

Wednesday, January 25, 2017

Monarchy Without the King

The work of the Revolution was the restoration of absolute monarchy.

So writes Bertrand de Jouvenel in his book On Power: The Natural History of its Growth.  He is writing of the French Revolution.  While it took somewhat longer for the effects to become visible, the words could just as easily apply to the American Revolution.

What is de Jouvenel saying?  What ever happened to liberté, égalité, fraternité?  All men are created equal?  Reason over the church? 

The checks and balances were all swept away, and here, as Mirabeau saw, lay the king’s great opportunity.

In the course of a single year liberty has triumphed over more of the prejudices impeding authority, has wiped out more enemies of the throne, and has obtained more sacrifices for the national prosperity, than the royal authority could have done in several centuries.  I have always called attention to the fact that the obliteration of the clergy, the Parliaments, the state lands, the feudal nobility, the provincial jurisdictions and every species of privilege was a victory both for the nation and for the monarchy.

Finally: all men created equal, leaving no man powerful enough to stand up to Power.  When competing powers and authorities are removed, all that is left is monopoly.  The Revolution took power not only from the king, but from every other source of competing power.  It consolidated this power in one place.

The logic of a revolutionary epoch is to be found, not in the ideas, but in the facts.  The central fact is the erection of a new Power…

…because there will be no vacuum.

The boundless authority of Napoleon was the goal towards which the entire upheaval had been proceeding from the day on which the ambition of Orleans or the vanity of Lafayette set it in motion.

One could suggest that the United States achieved this goal with Lincoln.

The despot replaced the demagogue.  Both had the will to tyranny; both had a common enemy – local custom.  According to Benjamin Constant:

The interests and memories which spring from local customs contain a germ of resistance which is so distasteful to authority that it hastens to uproot it.  Authority finds private individuals easier game; its enormous weight can flatten them out effortlessly as if they were so much sand.

And in this we find the reasons behind everything from open borders to LGBTLMNOP rights.  To fight custom and culture is to welcome tyranny. 

The King is Dead; Long Live…Democracy?

Regarding democracy, de Jouvenel writes:

Conceived as the foundation of liberty, it paves the way for tyranny.  Born for the purpose of standing as a bulwark against Power, it ends by providing Power with the finest soil it has ever had in which to spread itself over the social field.

The most important question for the liberated masses?  Where is the law to come from?

The Middle Ages knew nothing of this difficulty; for them the law was fixed, the rule a premise.  But from the time that the divine law was rejected as superstition, and custom as mere routine, the law had to be made.

And who dares deny that it is in this (man) made law where we find every sort of mischief.

“The English Parliament,” it has been said by some wit, “can do anything except change a man into a woman.”

“Mmmm…pardon me…way in the back here….”

My…how times have changed.

The Libertarian Dilemma

Proclaiming as it does the sovereignty of each man over himself, its sufficient requirement is that every member of society should have a domain proper to himself in which to be his own lord.

Such is the libertarian idea as described by de Jouvenel.  Yet, he offers (as do I), that something or someone must be “in charge around here”; the choice of that “something” or “someone” will allow for either liberty or tyranny.

I suggest that (in a world populated by humans) the most libertarian “something” is based on custom and culture and that the most libertarian “someone” is the head of each family (however narrowly or expansively chosen).

It is the law as understood in the Middle Ages – the old and good law from custom; with governance relationships to be found in the family.  From Tocqueville:

Everywhere men are leaving behind the liberty of the Middle Ages, not to enter into a modern brand of liberty but to return to the ancient despotism; for centralization is nothing else than an up-to-date version of the administration seen in the Roman Empire.

Tuesday, January 24, 2017

Libertarians and the Election

In the aftermath of this US presidential campaign season, I would like to take a few moments to reflect on this topic of libertarians and this election.  In many ways, I feel a review of this is premature – in the case of Trump, it would be nice to give him some time in office to see how he blossoms; let’s see some fruit before judging the tree.  On the other hand, there are many concrete, real examples of change that are worth recognizing.

I will begin with the most pure libertarian position: “I am a libertarian who does not vote; more than that, I think it is wrong to even hold a rooting interest in which slave owner wins.  Even more, to even discuss the topic gives the slave owner credibility.”

I can easily accept this position, it is perfectly consistent with libertarian theory; it isn’t the only position that I believe fits this bill, but it certainly does.  Of course, we don’t live in theory – and libertarianism isn’t going to win the day merely by chanting “NAP, NAP, NAP” all day long.

What of the libertarian with the rooting interest?  After all, I have seen (or could see) a case made for any of at least four candidates by those libertarians in this camp.  Some in this camp enjoy the spectacle of politics; others suggest that fewer beatings are better than more beatings; even others see the Libertarian Party banner as a credible endorsement; some even suggest rooting for the most evil candidate in the hopes that the world comes crumbling down sooner (and on his or her watch).

So, now I have painted a picture of two, broadly defined camps.  In the first, the purists; in the second, those with a rooting (and for many, a voting) interest.  From here on, I will explore this second camp; all subsequent comments should be read in this context.

I can comment on four candidates – I do not know others well enough to comment:

Jill Stein: she had one thing going for her – at least one thing of which I am aware.  She seemed to be the most anti-war and anti-foreign interventionism.  Being that I see this issue as the single most important libertarian issue, I can understand libertarian support for this candidate.

Gary Johnson: he was the Libertarian Party candidate for goodness sakes.  He held several reasonably good libertarian positions; he vetoed many bills as governor of New Mexico.  I can understand libertarian support for this candidate.

Hillary Clinton: the only argument I saw for this candidate was that she would bring the system crashing down on itself the soonest.  I suppose some libertarians might also support her because she would use government force to ensure that anyone is free to live any lifestyle they choose and the rest of us will be forced to accept this – you know, bake them cakes and take their pictures; this latter point might appeal to the libertine libertarians.

Donald Trump: this one really caused controversy, in many ways rather understandable.  I will first get those “understandable” ways out of the way – not in detail, but as a whole. 

We can take each of the four candidates on my list and identify dozens or hundreds of positions they have held that are in direct violation of the NAP.  I have never been very interested in examining these; the general direction of government in the US (and most places) has been toward further violations of the NAP (regardless of the efforts of beltway libertarian think-tanks and policy shops). 

So, that Trump or Clinton or Johnson or Stein might move us faster or slower along this path is interesting to me, but not very important.  I am more interested in where one or more of these candidates might derail this train.  And in this, of these four candidates, Trump stood head and shoulders above the rest.

I can hear the screams: “No, you fool, it was Johnson.  He held, overall, a more libertarian leaning.”  I say…maybe.  Except for one thing: Johnson does not have the in-your-face, defiant personality necessary to sustain this war – and it is and will be a war.  He doesn’t demonstrate that he has the b@!!s. 

Stein?  Her after-election activities made clear her inconsistency toward any anti-war principle she might have held.

Clinton?  She was part of the machine.  My biggest concern?  Tell me where, with Clinton, the US would stop pushing Russia.  Clinton, would walked hand in hand with Victoria Nuland.  Cheer all you want about how Clinton will bring the system crashing down on itself faster; with Clinton the possibility was growing to a probability that Russia would be faced with an existential threat – and respond in every way necessary to defend itself.

To cheer for Clinton was to cheer for a race: calamity within the US machine vs. calamity with Russia.  Not a bet I am willing to take.

This leaves Trump.  It is so easy to focus on the bad with Trump – he makes it easy, almost every time he opens his mouth (or types a tweet).

But look at what he has brought to the table – every one of which being an item that supports libertarianism and the decentralization that is the practical application of the NAP.

First: if there is one thing he has been consistent on – and it may be the only thing – he says he will talk with Putin.  I could end my list here and this would be enough for me.  But there is so much more.

·         He has questioned NATO.

·         He has questioned the Fed.

·         He questions trade deals.  I understand the dilemma that this presents for libertarians and free market types, but we can’t have it both ways: we know that the so-called “free trade” foisted on us isn’t free trade, it is government management crony trade.

·         He has nominated for secretary of state an individual who has made a career out of successfully negotiating peaceful deals with every sort of nefarious character in the world.

·         He has nominated for head of the department of education someone who at least questions the public school system.

·         He has had at least two meetings with Judge Andrew Napolitano.

·         He has given a big black eye to the mainstream media.

·         He is vocally supportive of the decentralization of Europe.

·         He has questioned the entire climate change narrative.

·         He has exposed the true divide: not democrats vs. republicans, not black vs. white.  It is subjects vs. rulers, mainstream vs. the rest of us, neocons vs. the world.

·         Perhaps most important of all (after the Russia thing): he has made it acceptable to question everything about the narrative that has been jammed down our throats over the last seventy years.  In order to tear down the state, one must expose the lies.

I am sure I am missing a dozen other such points where Trump has turned the table or changed the conversation.

Am I suggesting that Trump is a libertarian?  Not a chance.  But go back and look at the list; tell me who else has accomplished so much good for the possibility of destroying the myth of the state and supporting decentralization.  I will save you the trouble: no one.  Trump is riding on the wave set in motion by Ron Paul.  However, Trump has ridden the wave infinitely farther (and, sadly, not in exactly the same direction) than did Ron. 

Now, some might say that Trump is a tool of the elite.  Maybe, maybe not.  I heard many say the same thing about Ron Paul (laughable).  We certainly cannot know this about Trump today. 

However, of this I am certain: the elite are not a unified camp, the deep state is not a unified camp.  It is clear to me that some subset of these two powerful groups were behind Trump.  It is also clear to me – given the reaction to Trump by the mainstream warmongers and mainstream media – that the faction behind Trump is not the mainstream.

But what if I am wrong about this?  What if Trump is a tool of the wrong side?  Go back and read my list above, especially the part about questioning everything about the narrative.  This doesn’t go away (just like Ron Paul’s campaign issues didn’t go away), no matter whose pocket Trump is or isn’t in.

And after global nuclear war, this is the next most important point for libertarians who claim that they want to dismantle the state.  You can’t dismantle the state if the narratives are believed and supported.  Destroying those narratives is a necessary (but not only) precondition.

For this, Trump has earned my rooting interest.