"Wherefore We must interrupt a silence which it would be criminal to prolong, that We may point out...as they really are, men who are badly disguised." Pope St. Pius X, September 8, 1907, Pascendi Dominici Gregis

Monday, February 28, 2011

Remember the Peak Land Crisis?

From time to time I will post articles that were originally published elsewhere, but that are still relevant to the theme of Actual Anarchy. These I will call Actual Anarchy Classics. The posting of this classic is inspired by the following video:

Remember the Peak Land Crisis?
(Or: Why the Crisis-mongers aren’t as smart as they think they are.)

As we await the imminent peak oil crisis (Never mind those new discoveries of oil in Kansas! - http://cache.search.yahoo.net/search/cache?ei=UTF-8&p=%22houston+chronicle%22+EOG+bakken&fr=yfp-t-501&u=www.commonvoice.com/process.asp%3Ftype%3Dh%26id%3D37792&w=%22houston+chronicle%22+eog+bakken&d=P5FI4Rg5RM2J&icp=1&.intl=us - and Brazil! - http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQXB9FxXLKHw – and the fact that hydrocarbons are likely a renewable source of energy! - http://www.esa.int/esaSC/SEMCSUUHJCF_index_0.html), it seems quite appropriate that we ought to recall our experience the last time we ceased finding more of some valuable input to the world’s economy. I want to talk about the Peak Land Crisis.

Sometime, oh, around 1492, the last major land discovery was made by Christopher Columbus.  Well, I am being a tad Eurocentric and sarcastic. Continuing with my Eurocentrism, Australia was discovered later on. I couldn’t find any information on Antarctica’s discovery. And for those of you who are really picky, advanced satellites around about the 1980s finally discovered every last small, ocean island.  Anyway, since that time, the world has had to suffice with what remains of all known land reserves. The advent of Peak Land was a tumultuous time: land prices skyrocketed to unheard of highs, mass starvation occurred everywhere, population growth permanently halted, and the marketplace was unable to shift to alternative terrain sources.

Except, we all know this is exactly NOT what happened. Land is still affordable – so affordable that during the Great Depression and even now it can be harder to find a job than it is to find land: http://en.wikipedia.org/wiki/Shanty_town. The world’s population is today greater than it’s ever been.  And the marketplace successfully turned its attention towards making “known land reserves” yield more produce per acre. So why are we scared now?

The answer to that question is that there are groups with particular interests, such as the media, politicians, and environmentalists – I referred to them as “crisis-mongers” – who have discovered that they can parlay our fear into an increase in power for themselves. The media – considering the relative stability of modern life thanks to the advances of capitalism – have an interest in creating crises where there are none to attract viewers. (Hence the enormous coverage of, e.g., kidnapped children or shark attacks, even when the average incidence of such events on a year-by-year basis has decreased - http://www.sharksavers.org/content/view/23/59/ )  Politicians need so-called “market-failures” to justify their infringement upon our economic freedom, but since the market cannot fail, we must be made to believe that it can. We are told that high oil prices now are a direct result of too much oil consumption in the past, i.e., the 1990s, the era of the gas-guzzler. We are told we should’ve begun our conservation of oil long ago, and that we are not moving away quickly enough from oil today. But this is where the media, the politicians, and the environmentalists among them, are exactly wrong.

The fact of the matter is that the market is extremely efficient at properly allocating resources throughout time.  Considering the fact that new oil deposits have been found (see above concerning Kansas, Brazil), the opposite, i.e., we consumed too little oil during the 1990s, may be true.  There were owners of oil reserves that did not produce oil in the 1990s, speculating that prices would rise in the future. Considering the recent downward pressure (whatever its extent) put on the price of oil due to new discoveries, at the margin, a few of those owners, i.e., the one’s speculating on the highest price rise, now wish that they had produced earlier. 

  As Economist Robert Murphy explains:

 “If oil traders really believe…that [for example] up to a million extra barrels will be hitting the market in a decade, then this will obviously reduce the expected world price of oil starting at that time. Consequently, any oil producers who had previously settled on a production rate with ‘excess capacity’ [now] — i.e., where they could have produced and sold more barrels today, but decided not to for reasons of profit — will re-evaluate their decision.”

Over at the LewRockwell.com Blog – which I highly recommend - they advise taking anything the government tells you and assuming the opposite is true.  Their theory is proven correct again.

Now there are those who may concede that what I have just said is true, but they will nonetheless question why we should let the market decide the proper rate of oil consumption in the first place. Most of you have probably really never thought about the market price system. It is one of the most miraculous creations of mankind. EVERYONE – you, me, Bill Gates, Mr. Obama, the homeless guy on the bench down the street – contributes to the creation of a price on the free market. Both our willingness to pay particular prices for particular goods and our abstention from payment and thus purchase, helps to determine the proper price for everything on Earth.  As Ludwig von Mises says, 

A price is expressive of the position which acting men attach to a thing under the present state of their efforts to remove uneasiness….In [the] collection of things considered valuable by the value judgments of acting men, each [thing]’s place is interrelated with those of all other [thing]s. What is called a price is always a relationship within an integrated system which is the composite effect of human relations.”

In the case of the oil market, the oil producers decide to sell a certain amount of oil, given their expectations about what price for oil EVERYONE else will be willing to pay (or not pay) in the future and what price EVERYONE else is willing to pay (or not pay) now.  EVERYONE else, in turn, seeing how much oil the producers are willing to sell, increase or decrease the price we are willing to pay now, if we deem that they are selling too much now or too little. This interaction goes back and forth, eventually determining the optimal amount of oil consumption.

So, who are you gonna trust? Everyone or some know-it-all environmentalist? Moreover, if the environmentalist crisis-mongers are actually correct in their assertion that too much oil was consumed during the 1990s, they should have bought up all the oil in excess of the amount they deemed appropriate for then current consumption, in order to sell it later at a profit. They either did not do this because, alas, they were as shortsighted as the rest of us, or they are actually wrong about the optimal rate of oil consumption, as determined via the price system by all people, and thus would not be turning a profit of late. If the first is the case, they are as guilty as everyone else. If the later is the case, their current disparagement of past oil consumption indicates merely a desire to substitute their own wishes for the wishes of all consumers everywhere – a dictatorial desire if ever there was one.

So, if we have been consuming the optimal amount of oil as determined by EVERYONE, are we consuming the right amount of oil now? Of course. As we have seen, the price system guaranteed that, given our then current knowledge about the amount of total oil reserves, the optimal amount of oil to consume was consumed. The same is true today. Prices are first now saying, “Hey guys, it’s time to start conserving!”  Now is the time to begin looking for ways to make our use of oil more efficient. High prices now do not mean we should have conserved in the past; they mean we should conserve now! The crisis-mongers have put the cart before the horse, so to speak. In their attempt to make up for our supposed lack of conservation in the past, the politicians now consider hindering the very mechanism that otherwise guarantees the proper rate of conservation, as determined by everyone: the price system.  

It would seem unnecessary to point out that there are things besides oil that need to be conserved at an optimal rate. Let us consider corn fields, for example. Prior to ethanol subsidies, there was a price for corn as determined by EVERYONE that guaranteed the optimal amount of land conservation. However, government has since stepped in with money taken coercively, i.e., taken from people who did not choose to purchase corn or ethanol, and through purchases of ethanol that – and this is the key - would not have otherwise taken place, they have upset this optimal rate of corn field conservation. In addition to the notable tortilla inflation that is starving poor folks in Mexico, the overuse of our cornfields (and the complimentary under use of our oil reserves) will come back to haunt us in other, unforeseen ways. The government’s attempt in this instance to make oil MORE available in the future than it otherwise would’ve been will actually hinder our move towards greater oil efficiency, as this decreases expected future oil prices.

Just as with the “Peak Land Crisis,” the best thing to do during the crisis of “Peak Oil” is to sit back, relax, continue to participate in the marketplace in the way you see fit, and ignore the pleadings of those who only think they are smarter than everyone else.

Saturday, February 26, 2011

My Tunisian Street Vendor Moment

On Saturday I learned that my brokerage firm, Zecco, a firm I have enthusiastically recommended to all my friends, which provides ten free stock trades per month with a minimum balance will no longer do so.  Suddenly, I find myself in a profound Jeffrey Tucker moment wherein what really is, considered broadly, only a slight change fully in line with everything else around me pushes me off an intellectual cliff, pressing me to reflect on profound questions, raising issues of the grandest importance.

These issues, like the increasing cost of doing business and my unemployment, are not issues that I was not and suddenly became aware of, nor were their weight not previously felt. Like Mohamed Bouazizi, I have long been dissatisfied with my situation and quite disaffected by my inability despite wit and perseverance to make inroads towards change. But also like him, what should have been a small, fully anticipated change, an increase in the cost to trade stocks, will lead to profound changes in my life. You see, I have long been able to justify my unemployment by filling my time with investment research and proudly eking out small gains. This grew my income and was justifiable as a way to hone skills relevant to the workplace.  Instead of being unemployed, I was an investor.  And a good, if not massively profitable, one too.  I may have traded a few shares of SUSS from $9 to $14 and made a small sum, but this gave me a chance to feel larger than I was. That was my contribution to American capitalism!

 No longer.  With standard brokerage fees, my small trades quickly become unprofitable to do.  I can attempt to find another broker that is cheaper, but a certain amount of damage is done.  Even if I find free trades elsewhere, gone are the innocent days when I could expect such a consistent boon to my trading and structure my entire portfolio around it.  My trades will be fewer and my positions much larger and easier to monitor.  I find myself angry at my lost, but far too wise to be angry with Zecco.  Indeed, I am another small time Tunisian street vendor, who has had my cart confiscated by Bernanke’s inflation.  But unlike Bouazizi, the only thing I’m going to devote my anger, intelligence and free time towards immolating is the power of my enemies.

Tuesday, February 22, 2011

2012: An Un-cheery Consensus


We’re pushed to the limit. Indebtedness in all parts of the economy is at or near record highs, most especially for the remaining sector that continues on a binge, the government.  Interest rates are at or near their absolute limit. They literally cannot go below 0%. Already, even with record indebtedness and non-decreasable interest rates, cracks are seen in the consumer economy: housing prices continue to fall, Borders just filed for bankruptcy, Barnes and Noble is on the edge. Can you imagine what happens if interest rates move up? Can you imagine when the inflation we’ve pumped into emerging markets and commodities finally comes home (ok, so American wages might not increase, but foreigners’ will, and who makes most of the stuff we consume?)? Can you imagine what kind of effect an even slight decrease in government fiscal stimulus would have on a teetering economy? Can you imagine what even a slight bump in interest rates would do? We will within the next two years face an unimproved economy moving back towards recession. At this point, our policymakers will have to decide whether to finally allow an all-out bust and restructuring of the economy, or to follow their bail-out, paper-over policy to its ultimate logical conclusion: hyperinflation. They will pick the later.


I’m fond of asking the following series of simple questions:  

What kind of monetary policy favors debtors?


Who is the biggest debtor in the world?

The US government.

Who sets monetary policy?

The US government.

What kind of monetary policy do you think we’ll have?

And one more key point: The last time the Fed increased interest rates to a ridiculous level to get us out of an inflationary death spiral, the majority holders of US debt were Americans. Today, they are foreigners.

I’ve thought this before: If you really think about it, the US government has pursued an ingeniously rational course of action from their perspective. Having a monopoly on the creation of the world reserve currency, the dollar, it makes perfect sense to trade ultimately worthless paper dollars for oil and manufactured goods. Hell, who wouldn’t fund generous domestic welfare policies and conserve domestic oil supplies, if you can get foreigners to provide these things to you essentially for free?  And this is exactly the policy the US has pursued since Nixon went off the gold-standard in 1971. The only problem is the tab is finally coming due. That’s why and when we’ll bail.

Like Lindsey Williams indicates, we will stiff our creditors. The debt level is too high to work our way out of it.  We will default by printing dollars. Treasuries will become worthless and because there are so many outstanding in independent actors’ hands, this will happen drastically in short order.

There would be absolutely nothing surprising about a dollar collapse in 2012. The only surprising thing would be if it didn’t happen. Lindsey Williams has been right in the past. There’s no reason not to prepare for this. Middle East contagion ultimately fueled by the loose monetary policy of the Fed can easily snowball into the American Empire’s equivalent of 1989.

So What’s This All About?

For anyone who’s not well versed in the contemporary American libertarian perspective, a website like this one can be a little overwhelming or even put-offish. That’s understandable; and even for most, it will be acceptable. Because they have no interest in recognizing anything, however legitimate, that threatens their worldview. But, from time to time, for the honest truth-seekers it will be necessary to summarize and tie everything that appears in this blog together.

We began with an indication that the world is, indeed, already in a state of anarchy. This is true in many respects, but it also true in one key respect that even the most superficial libertarians have overlooked. We should be clear about what anarchy means. The world is not chaotic, indeed, in absence of human malevolence, or from the theological perspective, sin, it is indeed well ordered. God’s natural law abounds everywhere and easily usurps and punishes man’s attempts to override it. Indeed, judged by these criteria even today the world is well-governed. 

However, like for the Jews in the 1st Samuel book of the Bible, this is not sufficient and the superficiality of man demands that we have worldly rulers. But unlike God, such earthly rulers do not and never can have ultimate sovereignty. Whether they be Saul of the Jews, the Monarchs of older Europe, the presidents and legislatures established by constitutional contract, or puppet dictators established by outsiders (and what truly is the difference in all of these?), they reign at the behest, or at a minimum the acquiescence, of their domestic populations and ultimately, of course, God’s law itself. At few times in history is it as easy to realize this as today, when the withdrawal of popular consent toppled the governments of Tunisia and Egypt in a month’s time and threatens to do so comprehensively in the Middle East. As we pointed out, this has implications not only for Arab populations but ours as well.

Ultimately, then, no one holds a monopoly on the use of force over a geographic area, as is required in the Weberian and contemporary libertarian political theory’s definition of the state. Thus, we are in a state of actual anarchy.

The remainder of our most recent posts has mostly consisted of empirical attempts to show the futility of government’s actions in light of economic law and the real costs of the Faustian bargain that is trading a consciousness of our true anarchic state for the pretense of human government.

Finally, of course, and hopefully towards which the most of our future effort will be directed, we have endeavored to show the advantages of coming to terms with the inherent anarchy of the world and what actions we must take in order to further this realization in our fellow men, to realize in our own lives the advantages of ending the pretense of human governance, and finally, as the imminent French political theorist √Čtienne de la Bo√©tie says, to “resolve to serve no more, and [be] at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break in pieces.”

You can run on for a long time,

run on for a long time,

run on for a long time…

…sooner or later God'll cut you down.

Saturday, February 19, 2011

There is No Reason for the American Public Education System to Exist

“According to the 2009 OECD figures, the US government spends more per pupil than any nation in the world except Switzerland. The US spent an average of $149,000 for the K–12 education of every 2009 public high school graduate. That works out to $11,461 per year or so.

So the solution is obvious: shut down the schools and invest the money instead. Just let the kids stay home and study on the Internet. Let’s even save some money to reduce the deficit, and only invest $11,000 per year. At 7% return, each child would have a $391,000 IRA when they’re 18. That way, even if they spend the next 50 years surfing or hiking the Appalachian Trail, they would all retire at 68 with $12,512,000 (assuming the same 7% average yearly return). This solves not only the education crisis, but the Social Security problem (they wouldn’t need it) AND the health-budget crisis (how much heart disease could there be, if everyone spent their time surfing and hiking?)”

Even without a 7% rate of return, these kids would be handsomely wealthy! Can you imagine if you factored in the savings of not going to college as well? And then, if instead these children worked during the time they'd normally have spent in school, even if it was in a minimum wage job, which is likely all they're going to get after graduation anyway! What waste!

So, as it turns out, Peter Thiel may be correct in his thesis that the flaws in our education system are the reason we’re not as rich as we should be.  And think, all those bums in Madison and the teacher that wrote this would have to get real jobs.

I’m a libertarian, but who on Earth would not consider a system where we just gave these children the $11,461.00 per year that it costs to create make-work for teachers, most of which haven’t even mastered basic logic, a superior solution?  Let’s see, welfare that forces you into the ideologically blind-folded, cookie-cutter schooling system, or welfare that enables you to live a prosperous life.  Let’s abolish the schools now!

Friday, February 18, 2011

Last Call Before the Collapse?

Protests are spreading to Libya, Yemen, Bahrain, with a chance of spreading to Saudi Arabia. That could really be the end of the US world order. There’s a doubled or tripled oil price to consider, but the Saudis are also the fifth largest holders of US debt (after Fed, China, Japan, UK). Can you imagine if a Saudi collapse sparked a run on the dollar because of concerns the new regime would dump treasuries. Game over. These things really do come out of nowhere. That self-immolating cart owner in Tunisia is like the so-called ‘anarchist’ that assassinated Franz Ferdinand. Anyway, it’s not a dumb time to get ready to the extent you haven’t already. Price increases are coming anyway, so stock up on non-perishables. If anything, this is all just a reminder of how precarious our situation is.

Wednesday, February 16, 2011

Can Tech Outrun the Regulatory State?

A while back, I became aware of something called a Mobile Ad-Hoc Network. For those not tech savvy, this basically consists of a computer network that functions via individual connections from one computer to the next. As computers are turned off and on or moved, these connections rearrange themselves such that a given computer is always connected to the closest computers around it and this true for all of the computers in the network. It is wireless, and so as we mentioned mobile, and is constantly changing in the aforementioned pattern, and thus, ad-hoc. The significance of such a network struck me immediately. If there were ever a move to shut down the internet by unplugging the centralized servers, such Mobile Ad-Hoc Networks, or MANets, would spring up as an alternative means of networking without the central servers. The only way to kill a MANet is to take out every computer individually, one at a time.

Fast forward to today, and between the machinations of the Obama administration and the recent events in Egypt, we are all well aware of the imminent danger of government control over centralized servers.  Technological evolution, which has the possibility to become the guarantor of human freedom, is moving ever closer to making MANets a reality. Enter the FreedomBox Foundation. The goal of the foundation is to create a cheap, personal server that will store all of your information, doing an end run around centralized sites like Facebook, in a decentralized, secure manner, safe from the prying eyes of private-public partnerships. His goal is very Fullerite in that it aims to make the solution to our collective social problem so clearly advantageous that everyone will adopt it voluntarily: the device will produce all the benefits we currently enjoy online, with none of the “free spying” that the founder of FreedomBox decries in his very intriguing lecture. I encourage you to become aware of these issues and perhaps contribute monetarily or otherwise to this effort.

Tuesday, February 15, 2011

Why I Quit My Last Job

I’m currently unemployed. Not involuntarily, but because I chose to be. Why did I choose to quit my last job? Because most American industries are oligopolistically controlled by a few regime favored firms, which are allowed to function relatively unfettered while the up and coming competition is held at bay via huge costs to market entry instituted through massive regulation. I’m not making this up. By way of example, right now, I’d love to start a hedge fund or an investment holding corporation. I could set up a corporation that trades on a major exchange in order to sell shares to the public at large, but this would require the use of at a minimum a lawyer, an accountant, compliance with GAAP and Sarbanes-Oxley, which I cannot afford and still have significant funds left over to invest, and a whole host of regulations I don’t even know about but some bureaucrat who would love to trounce a newly created firm does, which would be strictly enforced with hefty fines the minute I made any headway or got public recognition. I could start a hedge fund, but I would need a few millionaire friends. I could start a LLC, and as long as I kept the number of investors to a minimum, there’d be little regulation. But those whose partnership I’d seek first, my friends, would be able to contribute very little individually and certainly not enough to allow me to make a living and reward them sufficiently off our gains.  

That’s just an example of how I’m kept out of the current industry I’d like to enter. So what’s the problem with oligopoly? When oligopoly is artificial, that is, created by a grant of government privilege, it disincentivizes hard, honest work and customer service. Firms who sell products we cannot do without that are not subject to the normal incentives of the marketplace do not care about their customers. They are more interested in pleasing the bureaucracy that gave them the privileges in the first place, and living off the rents that result. Many economists will argue that the corporate managerial system that has come to dominate American “capitalism” results from our regulatory regime where banks cannot be large percentage stockholders in corporations and thus, not only do we have the classic Berle-Means situation where the owners are not the operators of the firm, but ownership of US firms is so widely dispersed that the leverage that owners use to force managers to act according to owner interest is decreased. However, American capitalism, ever adaptive, has solved even this problem to a significant extent with the hostile takeover. More to the point, I think one reason for the heavy reliance on managers and managers of managers in the American corporate system is as a mechanism by which to divvy up the rent that oligopolistic firms collect. A bureaucratic phenomenon instead of a market one, the result of such higher rents is distributed, perhaps to a certain extent based on performance, but in the cases most insulated from market demands, based on seniority. This is the system we see in public education, both at the lower and higher levels, as in the federal government, so why would not this same logic extend to corporations to the extent that they are insulated from market constraints? Indeed, if we take into further consideration that the sustenance of a government privilege based system is shady connections and relationships, instead of honest, hard work and wit, it would make sense to promote relatively incompetent managers over time into higher and higher rent-funded salaried positions, in order to maintain their relationships with governing agencies, which is the real “expertise” for which they are compensated.

In such situations then, which almost perfectly describe the largest banks in the banking industry in which I worked, there is little concern with the needs to the customers, and a lot of rule-following behavior that often leads to a waste of time. For example, despite being perhaps one of the most competent employees at my previous firm, I would first need to seek the permission of untold numbers of other uninterested, slothful managers in order complete a basic transaction per regulations. The slow response to the customer, then, was often pinned by the customer on me because I really didn’t have the time, in my desperate effort to help them, to explain to them the nature of the situation. Besides, why should I tell them this, and why would they accept that as a valid answer? My job is to get the job done, not explain why I can’t do it. Of course, as understanding as I am, I can forgive the customer their ignorance or inconsideration of my plight. What I could not forgive, however, and felt it absolutely critical to hold accountable, were the actions of my superiors, who would pretend to be running a professional operation while in fact standing in the way of the very such operation. Their incentive to do so is explained previously. So, I quit.

If you can suggest any countries in which this problem is less pronounced, please do so. I am aware that certain industries are more regulated than others in the US. The problem is my expertise and enjoyment are found in the financial field. What I would give to be a computer programmer!

Saturday, February 12, 2011

Bloomberg: "Our Viewers Tend to be Fairly Austrian"

Bloomberg has long been one of the few channels I can actually stand to watch, but it was still a surprise to see Bloomberg journalist Matt Miller admit that "our viewers tend to be fairly Austrian" starting at 9:50 in this video.

Feds Digging Up More Dirt on Toyota (Likely On Behalf of GM)

I have long suspected the recent hype surrounding Toyota's problems is a ploy by GM and its backers in the government and media to prop up the failing US car industry. A recent report by NASA cleared Toyota of any design flaw blame related to the over-acceleration of its vehicles. As Alex Jones would point out, these retractions do not get nearly as much airtime as the original accusations, nor do they compensate Toyota for the forgone sales due to the original hype, even if they were to clear Toyota's name fully going forward. However, it looks like the Feds are at it again. According to the PLASTICS Daily News e-mail newsletter dated February 10, 2011:

REGULATORY:  FBI Raids Auburn Hills Auto Supplier

      The Detriot News reports this morning that FBI agents raided the offices of automotive safety equipment maker TK Holdings, Inc. of Auburn Hills. Alby Berman, v-p of marketing and public relations for the firm, told the newspaper that the agents never stated a purpose for the raid but he suspected it was part of a probe into antitrust activities withing the supplier industry.
     The 25 agents involved in the raid are reported to have spent five hours copying computer hard drives, removing files and interviewing employees. In particular, the agents appeared interested in dealings with Toyota Motor Corp.
     The newspaper also reports that international agents searched the offices of some suppliers in Japan and Europe later on Tuesday.
     According to The Detroit News, TK Holdings employs about 400 people in Auburn Hills, most of them working in sales or engineering. It is the North American subsidiary of Japan's Takata Corp., which is a major supplier of safety systems to Japanese automakers.
I'll just add that I think Alby Berman is either a shill or not very bright:

Background of Constant Negative Toyota Press + FBI Interest in Toyota Information = A Probe into Antitrust Activities within the Supplier Industry?  Give me a break...

Friday, February 11, 2011

“It’s not F-ing Funny,” The Pathetic State of an American School

I’ve had a number of run-ins with H.M. King high school, enough to fill a few other posts. It angers me to no end how easily and eagerly public schools trip up and come down on their own students. There was no one of age or authority who cared to speak up for me when I was the victim not so long ago. That will not be the case for this generation of H.M. King H.S. students.

I stumbled upon this document during a recent walk around the school.

There are so many criticisms here; it is difficult to know where to begin. We are told that high schools are meant to prepare us for the mental rigors and experience of college. While my criticisms of the contemporary college experience are also many, one realm where I have no qualms with it is personal freedom.  If you want to wear sweatpants and listen to Lady-Gaga via headphones while you doze in class, there really is no problem. And the few professors who do have a problem with this will be polite and cognizant of your human dignity enough to communicate to you that they believe there is enough of value to learn from today’s lecture to justify your paying attention. Not so at H. M. King. Choose to set your head down, we will immediately assume you are sleeping, reply sarcastically when you claim you are not, make fun of you for stuttering, and send you to two days of detention.

Now I am familiar enough with H.M. King to know that sleeping is probably the most effective use of this student’s class time. But regardless, how does it follow that the proper punishment for not paying attention in class is to remove you entirely for two days from the chance to pay attention in class?

A creative institution that truly cared about the intellectual achievements of its students would consider this entire situation a travesty instead of standard policy. Not only did the teacher fail to captivate the student’s attention and imagination - which reflects poorly on the teacher - but any number of learning opportunities were passed up as well. If falling asleep in class is really an offense worthy of punishment and the student objects to the charge, why not have a jury of his peers decide? Instead of the summary judgment of an administration official, why not use this as an opportunity to teach the class a civics lesson?

Only in a truly tyrannical system could “leaving without permission” be considered an offense. Is this a school or a prison? If the teacher fails to keep the student’s attention, or the student truly feels he has something better to do, he has not only the right but the obligation to leave. Why can’t teachers be held accountable by their own students?

Even if the student actually used the so called ‘F’ word, why isn’t his speech protected by the first amendment or just plain common sense? I’ve never understood the concept of profanity anyway. Since when is fucking a profane act? Since when is saying ‘fuck’ impolite? I thought religiously it is so sacred it can only be engaged in after the sacrament of marriage. Who gets to decide what is and is not profane? Again, this entire experience is about an effort to make the student feel like they’ve done something wrong, guilt trip them, and accustom them to a culture of submission so that the teacher and administrator can get a power trip, not enable the student to make the most of himself intellectually.

Sadly, American public schools, like H. M. King, are not interested in the intellectual advancement of their students. The staff of these horrid institutions is interested in cushy jobs with plush benefits and having a captive audience to push around. This is pathetic, and in one of the rare statements of genius to originate at H.M. King, it really is not f-ing funny.

Re: Ron Paul Can't Get Elected

There aren't very many people I can admire in American public life, so it is always very disappointing to see the few I do going after one another instead of working together. Donald Trump is often a classy guy.  He built a hugely successful business and brand, and for that I deeply respect him. I admire his can-do attitude that allows nothing to get in the way of his vision and his dedication to absolute excellence. He is one of the few people with enough gall and fortitude to actually address our national problems. He could stare down Ben Bernanke and the Fed, saying simply 'you're fired,' and unlike Reagan or Kennedy, honestly not have to worry about follow up assassination attempts. I am always skeptical when businessmen make a move to the political arena, just look at Mitt Romney or Michael Bloomberg. But I thought because of Trump's grit and demonstrated commitment to accountability and the exceptional need for these traits in the political sphere to effectively address our problems, Trump could be an exception. He still can. But I think he's on the wrong track.  I wrote him this letter after his recent interview on Newsmax.tv:

"Dear Mr. Trump:

It was with great excitement that I discovered your interview on Newsmax.tv. As a former employee of a republican congressman who shares your deep concern about our economic future, I was very interested to hear of your dedication to the economic preeminence of the United States. While the interview communicated your awareness of our national situation and I believe few others possess the personal resolve to adopt the necessary solutions, I am somewhat concerned with the focus of your solutions. 

While the price of oil and the loss of our manufacturing jobs remain barriers to our own economic progress, there is much we can do on our own to address our economic conundrum.  China and OPEC must eventually conform to the dictates of economic reality, but it does little good to confront our neighbors from a compromised negotiation position. China would have difficulty securing the massive dollar holdings necessary to devalue its currency, if Washington did not insist on the vast issuance of treasury bonds. Indeed, the yuan-dollar exchange rate is equally a burden to many Chinese, whose consumption of U.S. goods is restricted by a lack of purchasing power, because of our government’s commitment to supplying the Chinese central bank with hordes of treasury obligations.

Similarly, while OPEC no doubt has an impact on the price of oil, often detrimental to the short term interests of our oil dependent industries, even in absence of OPEC, the true market price of oil is impossible to determine in view of the constant manipulation of the components of the money supply by our Federal Reserve. An accurate picture of the availability of loanable resources for economic growth and a corresponding constellation of prices in the commodity markets is consistently obscured by the creation of new, fiat loanable funds by our central bank. Many projects, such as our recent massive housing bonanza, are undertaken in light of inaccurate market signals which are later revealed through an adjustment of commodity prices (often upwards) to have been based solely on the mirage of loanable funds created by a Greenspan or Bernanke. OPEC may be a problem, but a short term limitation of the availability of oil is far less detrimental to our economy than the actual waste of such resources on projects which by their very nature could not be completed given the actual array of loanable resources in absence of monetary manipulation.

Having built a web design and hosting business in high school and being involved currently in the investment management field, I am well aware of the obstacles expanding businesses face.  As someone who does not currently hold a typical job, but is dependent upon my own entrepreneurial efforts for income, the regulations and taxes I face on a daily basis have allowed me little headway in my efforts. With all due respect, Mr. Trump, getting our own house in order will go a much longer way towards addressing our problems than effectively confronting our competitors. Indeed, the first people we must confront, for which I believe only you have the resolve, are those constituencies at home which benefit from our current economic morass."

This letter was written, of course, prior to Mr. Trump's recent assertion that 'Ron Paul can't get elected.'  Well, Mr. Trump, it should be equally clear that America won't get on the path to prosperity without adopting Mr. Paul's policy proposals. So instead of attacking candidate Paul, why don't you outline some proposals of your own that will get us back on the road to prosperity? Outline some proposals that hold domestic policymakers, bureaucrats and politicians accountable, instead of laying all the blame at the door of foreign institutions. Is America really so weak in your view that we can't make progress without beating up China?  Like Piers Morgan pointed out in your recent CNN interview, isn't your approach some kind of convoluted passive-aggressivism? Did the Egyptian people sit around and mope that America funded their dictator and military or did they stiffen up and say, "Hosni...  You're fired.'  Instead of countering those dedicated to effective change in your own party, shouldn't you be confronting those in our government that brazenly stand in the way of such change? Why not try to co-op the Paul youth movement by embracing their goals and praising Paul as a potential running mate?

Why not Trump-Paul 2012?

Thursday, February 10, 2011


There’s a lot of talk about the need for the Federal Reserve's dual mandate of low unemployment and price stability. But as we all intuitively know, and as John Thompson points out, like a game of whack-a-mole, the suppressing or forced stability of one variable may merely cause a natural disruption to pop up somewhere else. That is, to use a recent example, suppressing the price swing mole may lead to large upward movements in the supply of houses mole.

Now let us forget for a moment that the fed has consistently failed in its price stability goal. Not only is the dollar worth less than 5% of its original value when the Fed was founded, but instead of price stability we have, as this chart clearly indicates, some sort of unidirectionality in price fluctuation. Instead of price fluctuations that sometimes reward creditors (i.e., deflation), sometimes debtors (i.e., inflation) that tend to equal out over time as the market participants see fit, since Fed policy really got underway in the twentieth century we have only inflation that constantly rewards the politically well connected receivers of freshly printed dollars at the expense of savers and all other dollar holders. This new phenomena of unidirectionality in long-term price movements has attendant deleterious cultural effects that have recently come to dominate our economy. On the one hand, many are now averse to hard work and saving because in an inflation-only world the rewards of these are diminished. On the other hand, in an effort to overcome the effects of purchasing power erosion many people are now unnecessarily career obsessed, and this is especially true in the case of women and the rise of the two-income household.

By the way, if deflation truly creates an economic death spiral into the abyss of economic collapse, how do mainstream economists account for the consistent re-emergence of inflation following periods of deflation in early American history when we were on the gold standard? Just a question.

And as at least nine percent of the population is currently painfully aware, the Fed really hasn’t been able to maintain low unemployment either.  

So, even if the Fed could somehow smooth out fluctuations in the employment rate and prices, it is almost certain that the adjustments that would otherwise play themselves out through prices or changes in employment will instead manifest elsewhere in the economy. Or, moreover, as our current predicament tends to suggest, the very adjustments in prices and employment that the Fed attempts to smooth out, may indeed be shallower, viz., lesser in magnitude, but also become more chronic, viz., longer in duration. In short, there is no free lunch. The Fed cannot magically fix the natural adjustment process of the market economy. It can only shift the adjustments in ways that are, given its incentives, favorable to political insiders or deleterious to the wealth creating tendencies of the market.

Wednesday, February 9, 2011

Why aren’t you as rich as you should be?

I really can’t sit quietly after watching an academic, whose biggest achievement admittedly is taking out a mortgage during the housing boom, try to trump the assertion of Peter Thiel, who co-founded PayPal and was one of the ground level investors in Facebook, that given our technological advancement America really should be far better off today than we are. A typical, superficial observer, the academic wants to label Thiel’s argument a pessimistic or paranoid one, when it is quite clear that effective optimism and evaluation of incentives of the type it takes to create world-bettering businesses involves evaluating how a situation was lacking in the past and devising a remedy.

Peter asserts that the thesis of the book, The American Challenge by J. Servan-Schreiber, that Americans should by now have sufficient incomes to maintain our standard of living by working only four days per week, seven hours per day, and taking thirteen weeks of vacation per year was by and large realizable and an accurate extrapolation of trends from the late 1960s. However, as a nation we have put many stumbling blocks in our way that have prevented us from its actual realization. In a fit of academic cluelessness, the host attempts to demonstrate statistically that we are actually as well off as we can expect to be, even though it is clear that the qualitative changes predicted in the American Challenge have not come to pass. While Mr. Thiel appears to have reality on his side, does accurately recognize that there is indeed “something wrong with the real economy,” and puts forward education as an area that needs some improvement, he does not put forth as effective an argument as he could if he understood the Austrian theory of the business cycle and particularly the insidious role of inflation. I will try to supplement Mr. Thiel in this effort.

Mr. Thiel addresses the phenomenon of bubbles and its recent manifestations in the housing and tech sectors by claiming that such booms could have progressed apace if underlying growth had actually lived up to expectations. Perhaps, but this it seems begs the very question, why did underlying growth not actually live up to expectations? The Austrian business cycle theory accounts for this clearly. An artificially lowered interest rate by the central bank’s creation of new money via the printing press indicates to entrepreneurs and consumers alike that there are more loanable funds and their attendant resources  available than actually exists. Because buffers exist in the economy, and there is a certain amount of available capital to put into any particular project at a given time, entrepreneurs begin building more and different new capital goods and consumers begin consuming more goods than they would in absence of the improper interest rate signal. This is sustainable for a time but only in the way that building a new structure that requires one hundred bricks can be built with bricks limited in availability to fifty. We will build a too large a foundation, realizing half-way through the process that we cannot complete the structure, and indeed we should have drawn plans for building a structure with only fifty bricks. The grasping for any remaining available bricks to actually complete our misinformed plan leads to rampant inflation, it becomes clear consumers and businesses cannot complete their plans and the bust ensues.

We know why booms lead to busts and wealth destruction. In our example, after inflation, we realize that the foundation for our hundred brick home must be tore down and our plans adjusted not only to account for the availability of only fifty bricks, but indeed fewer than, because no doubt some bricks will be destroyed in the process of rearranging the foundation, not to mention the attendant waste of time and effort. But let us take this one step further and attempt to flesh out exactly how living standards would be better in absence of such waste.

A boom it seems, in agreement with Thiel, is an attempt to have all of the gains of future progress now.  In these short-sighted forays, we set ourselves back through our waste of time, effort and scarce physical resources. Reality cannot yet live up to expectations. A key point is how the bubble ends. Prices for the remaining scarce resources are bid up to unnatural levels that match and compensate for the unnaturally low interest rates set by the central bank. Inflation eats away our remaining savings. Can inflation really account for the difference between the American Challenge’s prediction of four day work weeks and thirteen weeks of vacation and today’s reality of decreasing incomes, equally long work weeks and two-income households?   My instinct tells me it can.

This is one area I really think has been lacking from the standpoint of research put forth by leading Austrians.  Austrians widely acknowledge that inflation has a redistributing effect from the holders of the previously printed dollar bills, particularly those who are to be paid at a set nominal dollar amount in the future (e.g., pensioners, creditors) to the spenders of the freshly printed dollars. It thereby distorts the constellation of naturally occurring market prices and also during the business cycle reveals that there are actually too few resources currently available to sustain the boom, leading to the bust. But often the line in the discussion is drawn here, saying inflation interferes with the normal functioning marketplace and this is not good. But I think this line of thought can and should be taken a step further.  Like Hayek said, before we can understand what has gone wrong, we must understand how things can go right. Austrians sort of set the theory out there, substantially demonstrate how inflation interferes and then vaguely say, we would all be wealthier if inflation hadn’t occurred.  Fine, but how would we be wealthier? To what extent? Is this just a slight set back, or is this the reason for the future’s failure to live up to expectations?  Can we provide some definite examples?

I realize we are now dealing with questions that can be variously styled as hypothetically historical, thymological, empirical and subjective, but if we really want to convince people that the boom and bust cycle is substantially impoverishing, we will have to grope towards an answer. The objection has even occurred to me:  What if the process of the creation of excess capacity during the boom actually leads to the invention of valuable technology that otherwise would not have been created or created much later? There are two immediate ways to address this issue that spring to mind. There is the moral objection that if we can establish an undeniable moral justification for the institution of private property (subject matter appropriate to another paper), then the central bank is in fact one way or another committing an act of fraud in the creation of dollar bills out of thin air. There is also the related epistemological argument that it is quite literally impossible to concretely differentiate between the actual results of the boom and what actually would have happened in absence of one.  This is not so much an argument against the boom, as it is an argument that we ought to default to the preference of a non-boom situation for perhaps the aforementioned or other justifications, since we can make no valid case for a boom. But I am curious if we can put forward a third objection:  The boom is so substantially impoverishing that any possible technological advantages it provides are overwhelmed.

Superficially this argument already seems plausible, for if the booms weren’t substantially impoverishing or the technology created during the boom somehow compensated for this impoverishment, then why do we still have a clearly recognizable bust? Indeed, technology first used during a boom may appear in that way superficially beneficial, but in a vague attempt to abstract the scientific process from short term fluctuations in larger economic conditions, we could say that the new technology may have been created or deployed sooner without the wealth misallocation of the boom because the current trends in science would’ve been there anyway and would’ve had more resources available to use towards their progress. Moreover, technology as an idea, per se, is useless. We only make use of the actual physical embodiments of technology, and Austrians have shown indisputably that this capital embodiment of our technological progress is clearly wasted during a boom.

Still even more to the point, I believe this ‘technological progress’ argument in favor of booms is really a historical anomaly. It was born, I think, out of the tech boom. Indeed, in the case of our most recent boom the ‘technological progress’ argument not only can barely be made, but almost works in the opposite direction. If interest rates indicate that there are plenty of resources available to build our next swath of suburban housing developments as a nation, why implement technology that would save these resources?  Indeed, the incentive structure suggests that fewer technological innovations would be implemented during the boom than without a boom, because there appears to be a far lesser need to conserve scarce resources. And ultimately, we can apply this argument back to the case of the tech boom; it is just semantically awkward, because how could a tech boom lead to a lessening use of technology?  But as any Austrian could tell you, economic progress is not solely about the amount of technology available, but about how effectively it is used, embodied and distributed in capital throughout time in order to satisfy human wants. And as Mr. Thiel shrewdly points out, 'really how much technological benefit did the hundredth online pet food company provide to the economy overall?'

Let us return, then, to inflation. It is true, as is mentioned in the video, that great productivity gains were made in recent decades both through the advancement and implementation of new technology and the expansion of the division of labor to emerging economies. As Austrians have pointed out, such productivity gains are normally embodied in the market process by benign deflation. We get a hint of this in the tech sector, where every year new computers are not only more productive but also monetarily less expensive. This is in fact a phenomenon that should apply to a lesser extent to the economy as a whole. The 1990s, far from being a period of low two to three percent inflation, in absence of the central bank’s use of the printing press should’ve been a period of substantial, perhaps five percent, deflation.  Two to three percent headline inflation, then, was actually seven to eight percent real inflation.  In this scenario, then, eight percent of real productivity gains disappear.  Where does this time and energy and these resources go?

Indeed, they go to the holders of the newly printed dollars, who in fact do not produce anything of real value to exchange for these dollar holdings. This is a class of parasites that live off of the productivity of the real economy. Not only do these entities siphon off real economic growth, but often the efforts that are undertaken by those enabled with newly printed money attack or hinder the remainder of the real economy. As Peter Thiel points out this includes public schools, who receive newly printed dollars when the Fed prints money to buy U.S. Treasuries, but it also includes defense contractors, regulatory agencies like the FCC, SEC, and FDA and large and well connected banking institutions. Indeed, these predatory banking institutions are given newly printed money that eat up your own productivity gains that they turn around and lend to you. They are effectively using an institutional gimmick to lend you funds representing time, effort and resources that are rightfully yours. The interest paid on these loans, which is substantial, is in effect a theft of your wealth used to support a class of parasitic bankers that pretend to have a legitimate role to play in our capitalistic system. In absence of money printing, however, such bankers would have to find real jobs that actual expand the productivity of the economy by creating something of real value, instead of charging you interest to use productivity gains that are rightfully yours.

In absence of such corruption, would the real economy have provided the productivity gains necessary to achieve the four day work week in the year 2000?  Something tells me yes.  But we need more research that indicates this.

Chrysler Does Everything Except Deliver

For a long time I have had a nagging sense that what American automakers needed to do to be ‘right back on top again’ was to adopt the aesthetics that established the American car industry from the beginning.  Everyone loves classic cars. There’s something about those cars from the ‘20s, ‘30s, ‘40s and ‘50s that speaks to you.  Sure, our modern cars may be more fuel efficient or better designed to manage air-flow over the chassis, but if the only point of wearing clothes is to keep you warm, then we should all run around in the winter dressed up like the Matrix cast in thermal suits. Similarly, our cars serve other purposes than merely getting us somewhere.

You can’t argue with a boom, so I sat with these thoughts patiently in the back of my mind throughout the ‘90s and the first decade of this century.  In 2009 came hope with the bankruptcy of GM.  I even wrote GM a letter. I thought maybe American car makers would learn their lesson.  Well you can thank GM’s rich uncle, Sam, for providing the funds to allow GM to wallow in its ‘90s adolescent hangover culture and design immaturity a little while longer.  (Can you even compare? http://www.cadillac.com/ctsVWagon/2011/gallery/ vs. http://en.wikipedia.org/wiki/File:1940_Cadillac_90.JPG )

The only one of the ‘big three’ which has shown even a hint of class in recent years has been Chrysler.  From the PT Cruiser (ok, not the greatest car ever, but again, compare! http://www.seriouswheels.com/pics-2005/2005-Startech-Chrysler-PT-Cruiser-Convertible-FA-1280x960.jpg vs. http://l.yimg.com/dv/izp/chevrolet_hhr_ls_2009_exterior_angularfront.jpg ) to its Bentley look-alike to its Jaguar XKR convertible look-alike, Chrysler at least tried.

So you can imagine my elation and anticipation when I first saw an indication that Chrysler would self-consciously adopt the timeless-class theme for its automobiles.  It began with a quick visit to the Chrysler web site where I encountered this promo. 

Finally, a confident embrace of the style that made American cars great.  What more could I ask for?  Well, maybe a product that lived up the hype.

Like Frank Sinatra said, you’ve either got or you haven’t got style.  Give me a call, Chrysler…

The Domestication of the American

There is a great tension in American society between our current predicament and its cultural trappings and the process which gave rise to the nation we know it today.  How did a country founded by self-reliant pilgrims, minutemen, pioneers, yeomen farmers, entrepreneurs and immigrants, who risked their lives merely to come to this country, much less to establish themselves prosperously thereafter degrade into the country with the highest prison population where half of the population accepts a government handout having an unemployment rate upwards of 20% where people complain if they are 'uninsured'?

After much pondering, the critical change I have come to believe took place during the perhaps purposefully misnamed 'Greatest Generation.'  During the Great Depression, the Hoover and Roosevelt administrations worked tirelessly to keep wages from falling. As UCLA economist Lee E. Ohanian points out, "The Depression was the first time in the history of the U.S. that wages did not fall during a period of significant deflation."

Thus, as business revenue fell, unable to pay employees less, employers during the Great Depression were forced to fire employees.  As we all know, the Great Depression created not only some of the highest unemployment rates ever seen in the United States, but high rates that were chronically so.  We have following the start of the Great Depression what is likely the first and only (so far) decade in the United States where the unemployment rate persisted above 15% for the entire decade!

This difference was diabolically crucial.  In an economy where employers are allowed to spread the decrease in revenue amongst all of its employees relatively equally, everyone is given a chance to scrape by.  And what else would expect from a nation with the aforementioned cultural heritage of the then-United States?  However, when wages are kept artificially high for an extended period of time (i.e., a decade) forcing employers to fire some workers for the sake of keeping the others, we create a class of chronically unemployed workers who really have no where to turn except towards government handouts for their sustenance.  Intentional or not, this was the domestication of the American.  Americans, concerned about the welfare of their family and unable to scrape by through work were forced to turn to government handouts for day to day living.  And if we know anything about habits, it is that it is far easier to avoid the behavior in the first place than change the behavior once acquired.

The 'Greatest Generation,' then, was anything but.  Instead of another proud American generation dedicated to hard work, thrift, independence, peace and prosperity, we have a generation that broke down (or was allowed to break down), were the first to accept our current culture of dependency, learned incorrectly that success and prosperity lie in military endeavors (during WWII), and remain through our bankrupt Social Security program one of the greatest dole-dependent classes in the United States.


I wanted to name this blog "nation building," but that address is taken by some former Haitian presidential candidate turned farmer.  After a great deal of thought about exactly what constitutes the world around me, I became a dedicated free marketeer.  But I didn't leave it at a mere embrace of the free market economic system. As a believer in natural law, it seemed to me that if I truly had a proper understanding of the natural law, which as a libertarian I believe I did, that I had to somehow account for the fact that the world is not libertarian.  For certainly if I truly understood natural laws, these laws indeed carry some weight and they support the libertarian political thesis, then how do I live on a planet monopolized by non-libertarian entities, i.e., governments?  Eventually I came to realize that this particular naive notion of libertarianism and natural law was really a reification.  In fact, we already live in a state of total anarchism. As Murray Rothbard said, 'the state is just a gang of thieves writ large.'  Or put a little more concretely, "there’s no such thing as the government, but there are a bunch of guys in  uniforms with guns who will get angry if you don’t pretend there is."

After this realization, a few things fall into place.  The world is already libertarian; it is just not self-consciously so.  As a few people in the Middle East recently found out, at even the hint that people will exercise their full  intelligence and discretion years of tyranny can disappear in the matter of days.  The power is entirely in our hands, and we need not have any regard for the government more than we might have for the mob: sometimes for the sake of your life or well-being, it's smart to do what they say.  This does not violate natural law.  The trick then becomes to exercise your discretion and will in such a way that minimizes your interaction with these unsavory elements.  Indeed, as those affiliated with the Mises Institute so often point out, the biggest libertarian project is education.  If we can help our fellows to realize that the government has no more power than we allow it, we are one step closer to acting on that proposition and realizing a world where competing defense services and legal systems are recognized as legitimate by society.  At the same time, however, we cannot become so hung up on education and merely discussing the problem that we fail to take the actions we can towards pushing the world in a more consciously libertarian direction.  That has become my focus in recent years and will be the primary subject matter of this blog.  Hence, my desire for the title 'nation building,' as nations or civilizations are not built by governments, but by the cumulative effect of our daily actions.  But perhaps an admission that anarchy is