It’s a little break from blogging the relentless assault on Second Amendment rights. It’s worth noting the same people who hate the free market are typically the same ones who hate firearms rights, or any citizen freedoms.
It’s a little break from blogging the relentless assault on Second Amendment rights. It’s worth noting the same people who hate the free market are typically the same ones who hate firearms rights, or any citizen freedoms.
President Barack Obama managed to overtake Republican challenger Mitt Romney on the exit poll question “Who is better for the economy?” and a strong majority of Obama voters felt that the economy is better off than four years ago. Indeed, anyone (particularly Bernanke) would concede that without the Fed’s zero interest rate policy we would be experiencing a far worse economy—the true Obama-Keynesian economy.
The danger here, as we have seen in every other bust for a century or more, is that we can only suspend the laws of economics for so long. And in general we are only good at considering immediate consequences, while being very, very bad at considering later consequences. As 19th century French economist Frédéric Bastiat observed, “The bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”
In the short run (and this is what is so insidious about the Fed’s artificially low interest rates), all we are seeing is an illusion of economic progress. Specifically, the Fed has manufactured a distortion intended to trap both consumers into spending more and entrepreneurs into investing more, or lengthening their production periods (becoming more “roundabout,” as the Austrian School economists said), as if savings were more plentiful. This combination would never occur in an unhampered, noninterventionist economy for the simple fact that higher consumption would mean higher interest rates (from less savings), which would discourage longer production.
Thus, investment in this illusory economy is malinvestment, or investment that always unravels with the intervention’s inevitable end, due to either untenable credit levels (such as today’s corporate debt-to-asset ratio, still at historic highs) or a resource crunch (rising commodity prices) that eliminates any advantage from printing money; and one or both of these scenarios is unavoidable.
Economic progress requires a chain reaction from lower time preferences: foregone current consumption and a higher pool of savings lowers interest rates and triggers a natural entrepreneurial response, greater productivity, and subsequent economic growth. (The “Paradox of Thrift” that warns of the hazards of higher savings is the nonsensical stuff of the ivory tower.) By circumventing this process, as we have today, we have built but a temporary façade.
Long story short, we’re kicking the can down the road. There will be very hard times ahead financially due to this.
Also worth revisiting:
German police officers fired a total of 85 bullets in 2011, 49 of which were warning shots, the German publication Der Spiegel reported. Officers fired 36 times at people, killing six and injuring 15. This is a slight decline from 2010, when seven people were killed and 17 injured. Ninety-six shots were fired in 2010.
Meanwhile, in the United States, The Atlantic reported that in April, 84 shots were fired at one murder suspect in Harlem, and another 90 at an unarmed man in Los Angeles.
I love these kinds of stories because they’re so simple in what they’re trying to imply, yet how quickly they fall apart as a narrative. The clear objective of them is to show how wonderfully marvelous Europe, European government control, and enlightened Europe is, and how backwards and gun-oriented we are in the US.
People are free to make bad decisions in the US. And once deadly force is used it’s deadly force, whether it’s one round fired or one hundred.
“Our police officers are no thugs in uniform,” Lorenz Caffier, interior minister of Mecklenburg-Vorpommern, said at a press conference Tuesday.
“It is gratifying that the use of firearms by police officers against people is declining,” Caffier added.
It’s gratifying only if there is a lack of crime that necessitates fewer violent encounters. Otherwise the police could be running away or ignoring crime, especially in Gastarbeiter neighborhoods.
There’s a joke about the difference between heaven and hell. They’re the same, except different nationalities have different professions. In heaven, the English are the cops, the Germans are the engineers, the Italians are the cooks, the French are the lovers, and the Swiss run everything. In hell, the Germans are the cops, the English are the cooks, the Italians are the engineers, the Swiss are the lovers, and the French run everything.
Thing is, there’s little comparison in those statistics. The German police deal with a mostly homogenous, aging society that for the most part doesn’t have that much crime. There’s also the argument that they lost a lot of alpha males and their genes in WWI and then WWII, so they don’t even have the risk-taking types who end up skirting the line and becoming criminals anyway. The US has a naturally more volatile society, but we have a more free society. We have multiple ethnic groups (and as posted recently, we even have illegal criminal invaders), we have a vast, free country that leaves people to their own ends to a greater degree than Germany.
Ultimately, a few criminals and the regrettable, tragic losses of life that come from conflicts with the law that aren’t resolved well are a small price to pay. See, there’s a reason the “Germans are the cops” line applies to hell.
F.A. Hayek dedicated entire chapters in The Road To Serfdom explaining why the worst get on top in a socialist system (slightly less so in other systems) – because ultimately, such a system is totalitarian, and desires control. A system which makes for a pacified society ultimately leads to the violence at the hands of government authorities and police as per in Germany’s not-too-distant past. Otto von Bismarck’s socialist state that began offering government benefits set the stage for a government with more and more and more control.
Ultimately, many of the instruments of government control were already in place by the time things got far worse.
American law enforcement, where some 150+ officers were killed in 2011, and a greater number of criminals were killed, even when spread out over 300 million people, looks like a large number. Assuming that American cops kill ten times the number of officers killed, we could guess there are some 1500 people killed by law enforcement each year (a few internet searches couldn’t pull up a real number, so I’m just making that up based on a 10:1 ratio).
Just because I’m making numbers up, let’s assume it’s more like 5,000 per year. Totally made up number. It will still take 1200 years of 5,000 per year to equal Germany just from their famous years, and that’s with Germany’s lowest estimate. More than likely it’d take some 2400 years, and that’s not including East Germany’s actions for 40 years, the actions of the Kaiser or Bismarck before a decidedly anti-freedom Austrian made Germany’s police famous.
Read This Book, Obama!
by David Frum Apr 15, 2012 4:00 PM EDT
Emerging from JFK’s shadow, Lyndon Johnson wielded power ruthlessly—and delivered big results for liberals. In this week’s Newsweek, David Frum on what Obama could learn from Robert Caro’s new biography.
A great work of history is never only about the past.
The fourth volume of Robert Caro’s great biography of Lyndon Johnson—The Passage of Power—tells a story from seemingly long ago. Page after page conjures up a vanished world: a world in which labor unions had clout and lunch counters were segregated. Yet it’s also a world deeply familiar to us: a world in which urgent national problems go unaddressed year after year, and Americans despair over the paralysis of their government.
But no, we don’t. We despair over government acting too much, spending too much money, printing money to create inflation to sustain itself, and we despair over government creating perpetual recipient-class voter blocs. We despair over government that’s run amok, spending and spending and spending with no end in sight. We despair over government’s absurdities, not society’s. And in the 1960s, the labor unions had clout through government power, and the segregated lunch counters were being desegregated not through government force, but by people sitting down and demanding to be served.
This lunch counter isn’t famous because of government, it’s famous because of a sit-in.
For nobody, perhaps, is this turn of history more challenging than for Robert Caro himself. Over more than 2,500 pages of powerful prose, Caro has summoned Lyndon Johnson to vivid, intimate life. We come to know him better, thanks to Caro’s remorseless research, than almost any of Johnson’s contemporaries could have hoped to do. It’s not an attractive picture. Caro’s Johnson is a bully and braggart, a wheedler and manipulator, a man of bad personal morals and worse business ethics.
And it is this, frankly, monstrous character who realized more of Caro’s liberal ideals than any politician in modern times, Franklin Delano Roosevelt very much included—and vastly more than the charming, winning, but domestically ineffectual JFK.
In a story already rich with drama, this tension between author and subject—between Caro’s loathing of Johnson and his reverence for Johnson’s accomplishments—is the tensest drama of all.
How did Johnson do it?
Here is Caro’s disconcerting message: Johnson didn’t do it by inspiring or exhorting. He did it by mobilizing political power, on a scale and with a ruthlessness that arguably surpassed all other presidents, before or since.
The ends justify the means. Hayek had something worth noting on this:
Advancement within a totalitarian group or party depends largely on a willingness to do immoral things. The principle that the end justifies the means, which in individualist ethics is regarded as the denial of all morals, in collectivist ethics becomes necessarily the supreme rule. There is literally nothing which the consistent collectivist must not be prepared to do if it serves “the good of the whole,” because that is to him the only criterion of what ought to be done. Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarianism which horrify us follow of necessity. From the collectivist standpoint intolerance and brutal suppression of dissent, deception and spying, the complete disregard of the life and happiness of the individual are essential and unavoidable. … To be a useful assistant in the running of a totalitarian state, therefore, a man must be prepared to break every moral rule he has ever known if this seems necessary to achieve the end set for him. In the totalitarian machine there will be special opportunities for the ruthless and unscrupulous.
Meanwhile, LBJ had this to say:
The monstrous character realized leftist, socialist, Modern Liberal ideas through ruthless force. The left has found the moral equivalent of war and ruthless application of force appealing since the Progressive Era of the early 1900s. The end justifies the means. They find the means “monstrous” but choose them because they really want the ends. So why does something “good” have to be achieved at the cost of massive applications of force, corrupt men of “monstrous character”? Because it’s the tyranny, stupid.
The lunch counter sitters and protest marchers were winning the hearts and minds of the public. Civil disobediance won the day. It showed the noble character of the both the mission and the people.
Johnson, by contrast, was the same ruthless monster the left loves to be ashamed of, but emulates and desires to be again and again.
It’s hard not to detect in these pages an unspoken critique of Barack Obama. Yes, certainly, Obama shares Lyndon Johnson’s gift for driving opponents crazy, if it is a gift. But the use of power Caro so vividly describes is not something that comes naturally to our current president. The constant searching for opportunities; the shameless love-bombing of opponents; the endless wooing of supporters; the deft deployment of inducements and threats—these are the low arts that led to Johnson’s high success.
Obama is fundamentally opposed to the success of the nation. He doesn’t “drive opponents crazy”, he infuriates his opponents because they don’t find the US to be a cruel nation in need of “fundamental transformation”. We have been a classic liberal representative republic focused on liberty. What about that needs changing?
LBJ’s successes were ultimately at the cost of the nation. Thomas Sowell often writes of what the black family was like in the 1950s and 1960s, and did a specific piece on black-owned businesses in California which were destroyed by LBJ’s “Great Society”, he often notes that political rhetoric never matches the effects in reality.
LBJ cared about power. He is respected by the left for his use of power. They find it “monstrous” but so appealing. It’s as though they can get something done… their programs always need more money, more regulations, more authority; their campaigns always need more votes – no matter how they cheat to get them; they always need more power, power to control…
Milton Friedman discussing Friedrich Hayek’s the Road To Serfdom back in 1994. As relevant again today as ever.
Part 2 is perhaps the more interesting of the two, especially around the 12 minute mark on. Friedman points out that experience may be more important than the influences of books or television; and how people have seen the failures in the former Soviet Union and the successes in Asia and the Pacific where unfettered economies succeeded. Arguably the internet and the 24 hour news cycle has become even more important, because it shortens the memory and lessens experience, but as he mentions, it’s a sophisticated question not easily answered.
Some important quotes:
If an experiment in private enterprise is unsuccessful people lose money and they have to close it down. If an experiment in government is unsuccessful, it’s always expanded.
Particularly relevant to the health care debate:
The founders of our country believed in individual freedom, believed in leaving people be, letting them be alone to do… whatever they wanted to do. But our government has been increasingly departing from those Constitutional principles. You know there’s a provision in the Constitution that congress shall not interfere with interstate commerce. That provision had some meaning at one time. But it has no meaning now at all. Our courts have ruled that anything you can think of is interstate commerce and so the government exercises extensive control over things that it has no business interfering with.
Around the 17 minute mark, Friedman begins dissecting the Federal Reserve.
At the 19 minute mark, Friedman discusses the collapse of the nation under debt. His belief was that the changes in public perception were going to allow the people to halt the expansion of government.
In response to why socialists would be happier about the history of the last 50 years (before 1994, though it works the same today) at the 21 minute mark:
Because the story they tell is a very simple story – easy to sell. If there’s something bad, it must be an evil person who’s done it. If you want something done, you’ve got to do it – you’ve got to have government step in and do it.
The story Hayek and I want to tell is a much more sophisticated and complicated story. That somehow or other there exists this subtle system in which without any individual trying to control it there is a system in which people in seeking to promote their own interests will also promote the well being of the country – Adam Smith’s invisible hand. Now that’s a very sophisticated story. It’s hard to understand how you can get a complex interrelated system without anybody controlling it. Moreover the benefits from government tend to be concentrated. The costs tend to be dispersed. To each farmer the subsidy he gets from the government means a great deal. To each of a much larger number of consumers it costs very little. And consequently those who feed at the trough of government tend to be politically much more powerful than those who provided the wherewithal.
Eloquently stated and encapsulating the relationship between people and government very succintly.
Afterwards he breaks down what parties mean what – bringing up liberalism as classical liberalism, and states he’s libertarian in philosophy, though not party. He mentions Hillarycare in passing as incredibly socialist. The EIC that he mentions at the end he supported as a replacement for all welfare programs with the EIC, a “negative income tax”, that helps to establish a baseline income. He ended up fighting against it, because as we all know, the EIC just became another welfare program, not a replacement for the patchwork of welfare that was already in place.
Well worth watching.
And as a reminder:
No, the other Hayek.
What our generation has forgotten is that the system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not. It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we has individuals can decide what to do with ourselves. If all the means of production were vested in a single hand, whether it be nominally that of “society” as a whole or that of a dictator, whoever exercises this control has complete power over us.
And who will deny that a world in which the wealthy are powerful is still a better world that one in which only the already powerful can acquire wealth?
- F.A. Hayek, The Road To Serfdom (pg 136)
Why bring this up? Because of this guy. We currently have an administration that focuses on “Choice Architecture” by which you will be regulated into doing what they wish.
For an example, consider that Sarah Brady of the Brady Campaign (to ban guns) was told by President Obama that his administration would be working on banning guns “under the radar”. How does a government do that? Through regulation. The ATF famously enforces more regulations than laws (when they’re not supplying guns to cartels to kill Border Patrol and ICE agents, that is), as does the EPA, TSA, and numerous other government agencies that aren’t listed as constitutional functions of government. What happens when you have someone who is willing to modify regulations to modify behavior is you get situations similar to Australia and Britain. Gun control there is so strict that even dedicated collectors end up giving up their firearms rather than deal with the hassle, and the average citizen won’t even want to bother, and both are left completely defenseless against crime and tyrannical government. Power becomes concentrated in the hands of those who hold government positions, and government no longer exists at the consent of the governed, but as a condition of those who rule choosing to do so.
The same applies to the myriad dictates of the EPA which change the costs of your food and fuel, the tax code (which is probably somewhere around 16,000 pages long), TSA regulations that abuse children, and so on and so forth. Government acquires power and then dictates, government may not seize property as in communist regimes, but it controls the individuals’ use of their own property. This coercion and “nudging” is mostly a distinction without a difference.
Those who have power are the only ones who can make things comfortable for themselves, at the expense of those who they lord over. This becomes a system of kings and serfs, wherein the individual is made a slave to the state – the very warning of The Road to Serfdom – a road taken by many nations in the past, and one that demagogues today seek to lead us down “for our own good“.
As soon as the state takes upon itself the task of planning the whole economic life, the problem of the due station of the different individuals and groups must indeed inevitably become the central political problem. As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power. There will be no economic or social questions that would not be political questions in the sense that their solution will depend exclusively on who wields the coercive power, on whose are the views that will prevail on all occasions.
I believe it was Lenin himself who introduced to Russia the famous phrase “who, whom?” – during the early years of Soviet rule the byword in which the people summed up the universal problem of a socialist society. Who plans whom, who directs and dominates whom, who assigns other people to their station in life, and who is to have his due allotted by others? These become necessarily the central issues to be decided solely by the supreme power.
- F.A. Hayek, The Road To Serfdom (pg138-139)
This is where redistribution comes in. This is where the “Obama Money” comes in. In the US, the fedgov has already used some 16,000 pages of tax code to take in money, and now it decides where to spend it and how, and also how much to borrow from China to continue spending on its pet projects. This is a major reason why we’re in the economic conditions we’re in. Politicians have promised so much with other people’s money (often Hu Jintao’s money) that they continue to spend that money due to political pressures of the zero-liability voter recipient class.
Many of the current crop of politicians agree that spreading other people’s wealth around is a good idea – and the ideological reason is to create equality of outcome (regardless of who has to pull others’ slack), but the political reason is that the people who vote for them want them to plunder from the better-off-than-them. The politicians have encouraged the nonsense of class warfare and run entire campaigns against “the rich”, promoting a crab in the bucket mentality, rather than removing government barriers impeding individuals so that they may improve their own status, or to show how wealthy even the poor in America are compared to the rest of the world (though they do tell us the rest of the world is poor every time they tell the US that we need to make sacrifices – but that’s more advanced international socialism).
And this is where Hayek comes down to quoting Lenin. Lenin knew that the socialist state would be one that is totalitarian of necessity, and the only question is how to operate it. There is no other way that such political structures can be created. The population must be forced into redistributive socialism, whether through indoctrination, coercion, reduction of choices (Sunstein’s nanny-state tyranny), or outright violence.
It reduces the individuals’ ability to choose, it reduces the free market’s ability to create dynamic solutions to lifes’ problems, but it certainly empowers the socialist in charge. It creates massive power and authority for the government (no longer by the consent of the governed) that will end up wielded by some supreme governmental power, whether it be by deciding what business lives or dies, or what people live or die.
We just need to get off that Road To Serfdom… maybe put it in low gear…
Mike in East Texas, a special guest on Charley Jones’ Texas Overnight show on 1080 KRLD, has a very good breakdown on what’s gone on in the last week that serves as a microcosm of the bigger economy.
The silver crash is of large note, as a lot of people are invested in commodities, and the adjustment to silver came when the New York market silver is traded on came up with a new regulation for silver trading. This affected oil and gold, which people invested in silver are often also invested in, as they began to dump contracts to try and save their positions.
There’s an artificial bubble in energy driven by speculators, whose belief in high energy prices is pretty unfounded. With the economy in a recession (or depression), fuels aren’t being used at the same rate – demand is low. Supply is still at the same level it was before the recession, or close to it. With shale oil reserves in places like the Bakken Formation and untapped and unused oil wells all across the US, supply really isn’t a problem. Demand is low. Speculation is a bubble.
The artificial bubble in precious metals is due to people wanting that oft-advertised “insurance against inflation” and stability – whether the individual buying bullion or the fund manager buying a huge contract. Once stability is actually provided by level-headed governments, banks will begin loaning again, businesses will begin to expand with the capital they’re sitting on, and PM prices will probably go down. Of course, with the radical Keynesians in charge, that’s not going to happen for a while, so the bubble will continue – and gold and silver will still be worth quite a bit, but a drop from $50 to $32 in silver is pretty substantial.
Now what’s the key factor that caused silver to change so dramatically? The market rules changed.
So what’s keeping the economy stagnant? Change.
Uncertainty for a consumer is a killer. If you, Jane or Joe Citizen, wants to make a purchase of X item, but don’t know how much X item is going to cost, you’ll be more likely to hang onto your money, whether X is a house with collapsing value or silver with fluctuating value or even gasoline you don’t need. Discretionary spending gets cut to nothing in a household, because you have to get the things you need before you get the things you want.
Uncertainty for a business is a killer. Do you want to open that new factory? Will the government put new regulations on you? Do you want to hire that new employee? Will taxes go up because government won’t stop spending? When your taxes go up, can you keep that new employee? Can you open the new factory if they put a new tax on factories? What if they send the unions after you? Will the government make you pay for health care? Will health care pass, be ruled unconstitutional, and then be enacted anyway, even after being ruled illegal?
That dynamic change, that fundamental change of the American system, with the observable intent by even former supporters of “change” of remaking the nation in a socialist-communist model, is something that rightfully leaves business and individuals scared to spend. Banks, being businesses, aren’t willing to spend on other people’s projects if they don’t think they’ll come to fruition – and people don’t ask for the money if they don’t think they can pay it back. It keeps businesses, individuals – the entire economy stagnant.
Now, mind you the stock market looks great… but that’s because businesses are all streamlining. That’s why unemployment is so high, and that’s not even taking into account the real unemployment numbers which include those who have “left the workforce” by being unemployed more than 6 months. Businesses are going lean and maximizing profit and minimizing loss as much as possible just to stay alive. That makes them more attractive with regards to stocks. Employees who aren’t of the highest value are going away – and govt is watching them arrive on unemployment, even if it starts writing them off as having “left the workforce”.
Stability and certainty and rule of law mean that things can be accomplished. It means you’re willing to buy that house because you know your taxes won’t jump. You can build that factory because the government won’t change the definintion of dust or declare every breath you exhale illegal.
Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand – rules which make it possible to forsee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.
- F. A. Hayek
And a final positive note, I’ll give credit where it’s due, even if I do so grudgingly. Obama did a good job of not screwing up getting Osama. I’d give Obama non-grudging credit if it weren’t for the odd circumstances of the disposal of Osama’s body, the odd way the operation was conducted, the blathering by his useless VP who outed the SEALs, the multiple stories about how the engagement went down, and the inherent hypocrisy in most of Obama’s stances concerning Gitmo and the War on Terror.
I think this sums up quite a bit of it:
Barry, you’re downright hostile to the nation, your wife hated the country until you got to be a presidential candidate, you utterly lie about transparency, you insult people living next to a war zone when they demand you do your job, and you’re actively working to install people whose life goals are to destroy the nation. But you let the people who had to kill Osama kill him, so good work. Especially for someone who loves to meddle and install meddlers, you didn’t f*ck it up. Good job, Mr. President. If for some crazy reason you’re reading this blog, you know that’s about the highest praise you’re going to get, unless…
You did a decent job following one of Bush’s policies that worked – and you left the military alone and you let it work. Now sir, if you want to change something Bush did and actually do it better, remember what he said right before he left office – “I’ve abandoned free market principles to save the free market.” Barry, you need to abandon Keynesian-socialist-communist meddling and that will let the free market work! If you want to jumpstart the economy, let the people work on their own – let us live free.
Then do yourself a favor and read The Road To Serfdom, Atlas Shrugged, and the Constitution. Toss in some books by Sowell, Friedman; and then swing by A Human Right. Then swing on by my place, I’ll give you a tour of where I work, and we can go have a beer – I’ll even buy the first round.