Year: 2013

Changement de marée?

Jacques Delacroix Politics

[Editor’s note: this essay first appeared on Dr. Delacroix’s blog, Facts Matter, on Nov 4 2009]

Il est arrivé quelque-chose d’important hier dans la politique américaine que les media francais n’auront peut-être pas estimé à sa juste valeur. Plusieurs elections partielles, hors-calendrier, ont pris place le 3 Novembre, dont trois que tous les observateurs jugeaient importantes. Dans l’election parlemantaire au nord de l’etat de New York, le candidat Democrate l’a emporté par 49/46. Sa victoire, pour être numériquement nette, n’en est pas pour autant impressionante car le jeu électoral avait été brouillé par la présence d’une troisième candidate. Celle-ci, nominalement Républicaine mais très proche des positions d’Obama, s’était retirée de la course deux jours avant l’élection, Son nom étant demeuré sur le bulletin de vote, elle a ramassé six pour cent des votes donc, assez potentiellement pour renverser les résultats de cette compétition.

La course pour le poste de gouverneur de l’état de Virginie s’est conclue par une dramatique défaite du candidat Démocrate. (Rappel: les gouverneurs d’ états sont élus independemment; ils ont leur propre budget sans aucune tutelle fédérale; les plus gros des affaire domestique est du ressort de l’état et non du gouvernement fédéral comme les media francais semblent le croire.) Dans une course avec deux candidats, le Démocrate a recueilli seulemnt 39% de votes contre 59% pour le gagnant Républicain. On ne voit que rarement une marge de ce gabarit dans les elections américaines. Obama avait conquis la Viriginie avec une marge de 6% l’année dernière. Ce dernier scrutin represente donc un recul de 26 points pour le parti Démocrate en un an de présidence Obama. Du jamais vu! Continue reading →

Around the Web

Brandon Christensen Current Events, Links

Hey all, I’ve been busy lately. I’ve got four more months of college left so I’m trying to take advantage of every last bit of it.

  1. Healthcare Isn’t a Free Market, It’s a Giant Economic Scam
  2. The United States that Could’ve Been
  3. It’s official: Marxism is a religion
  4. Property Rights: the Key to Economic Development
  5. The Evolution of Irregular War. I’ll have more on this later (I hope!).

Methodological Individualism

Warren Gibson Books, Liberty , ,

I am just now rereading Ludwig von Mises’s magnum opus, Human Action.  What a joy it is to get reacquainted with Mises’s masterful work and to use it as a benchmark to gauge my own intellectual odyssey since first reading it more than 40 years ago.

Early on the reader encounters the term “methodological individualism.”  This mouthful may seem at first to be some abstruse epistemological concept that can be forgotten once the foundations for Mises’s economics have been established.  On the contrary, revisiting Mises has made me realize just how thoroughly I have internalized the concept and what a big difference it has made in my thinking about political and economic controversies.

Let’s start with what methodological individualism is not.  It has nothing to do with “rugged individualism.”  It is not ideology at all.  It is a term that describes the essential nature of human thought and action.  It is a bedrock principle on which Mises grounds his entire exposition of economics.

“The Hangman, not the state, executes a criminal.”  This is Mises’s pithy summary of methodological individualism.  Mises does not deny that the hangman acts under the influence of his relationships to others in society.  He is an employee or a servant of some penal system and is obliged to carry out executions when so ordered. He may fear consequences if he fails to act as ordered.  He may have a family that he provides for.  He may wish to secure his place in Heaven. None of these conditions alters the basic sequence of events: The hangman ponders the action he is set to perform, thinking carefully or hardly at all.  He believes his best choice is to pull the rope that opens the chute.  He causes his arm to move and the deed is done. Continue reading →

Free Banking Explained

Fred Foldvary Economics , , , , , ,

Free Banking is free-market banking. In pure free banking, the money supply and interest rates are handled by private enterprise, there is no restriction on peaceful and honest banking services, and there is no tax on interest, dividends, wages, goods, and entrepreneurial profits. Free banking provides a stable and flexible supply of money, and allows the natural rate of interest to do its job of allocating funds among consumption and investment, thereby preventing inflation, recessions, and financial panics.

To understand free banking, we first need to understand the relationship between capital goods and interest rates. Capital goods, having been produced but not yet consumed, have a time structure. Think of it as a stack of pancakes. The bottom pancake is circulating capital goods, which turnover in a few days, such as perishable inventory in a store. The higher levels take ever longer to turn over. The highest pancake level consists of capital goods with a period of production of many years, the most important type being real estate construction.

Lower interest rates make the pancake stack taller, while higher interest rates make it flatter. Think of trees that take 20 years to mature. Suppose the trees are growing in value at a rate of three percent per year. If bonds pay a real interest rate of four percent, and the interest rate is not expected to change, then the trees will not be planted, since savers will put their funds into bonds instead. But if bonds pay a rate of two percent, then the trees get planted. So the lower interest rate induces an investment in long-lived trees and steepen the capital-goods pancake stack. Continue reading →

Bank Deregulation: Friend or Foe?

Warren Gibson Economics, History, Law , , , , ,

Banking has changed a lot during my lifetime—for the better. The changes are partly due to technology (ATMs, online access), but also to deregulation that subjected banks to a lot more competition. What were the major deregulatory moves and how might they have contributed to the recent crisis? Before addressing those questions, a little personal history.

I got interested in money and banking at a very young age. My mother often took me along on shopping trips, explaining what money was, why we needed it in stores, and how my father got it for us. Trips to the bank were a special treat. The Cleveland Trust branch near us was an imposing affair, with a limestone façade, high ceilings, and tellers ensconced behind ornate barred windows. The architecture was intended to instill confidence, but to me it was just a magic place.

Later, my sixth-grade class operated a student branch of another bank, the Society for Savings. Twice a month our classroom was rearranged like a bank branch. Tellers (all boys, as I recall) would accept student deposits of a dime, a quarter, or sometimes a whole dollar. Assistant tellers (girls) would write the amount of the deposit in the student’s passbook, while the boys handled the cash. After closing we tallied the deposits and packed the loot—perhaps $50—into a canvas bag, and a privileged student would trundle it off to the principal’s office under the watchful eyes of two “guards.” What great lessons we learned: thrift, honesty, attention to detail!

By the time I was 14 I was earning good money shoveling snow, raking leaves, and mowing lawns. I had become something of a saving fanatic. I soon found out that the local savings and loan (S&L) offered higher interest than commercial banks, so I opened an account there. Savings passbooks seem quaint in hindsight, but mine was a treasured possession, a tangible reminder of my growing nest egg. Continue reading →

An Act of Self-Defense: A Review

Warren Gibson Books, Liberty , ,

“The Tree of Liberty must be refreshed from time to time with the blood of patriots and tyrants,” said Thomas Jefferson.  Erne Lewis does a terrific job of adapting this theme to 21st-century America in his new novel, An Act of Self-Defense.

Like Atlas Shrugged, his story is set in an immediate future where the economy is collapsing, and more so than in Atlas, personal freedoms are vanishing.  Unemployment is at 20 percent and all communications are recorded and tracked by the NSA.  RFID badges are worn by all federal employees and will soon be required for all citizens.  A small group of patriots takes matters into their own hands, and the action is fast and furious.

Lewis draws the correct battle lines of our time: not left versus right but libertarian versus fascist.  The f-word correctly describes anyone on the left or right who would use government power to suppress personal or economic freedom while leaving nominal ownership in private hands.  The novel’s villains are of both stripes, some of them decent people who entered politics with good intentions but became corrupted.  That leaves libertarians as the only consistent defenders of what Ludwig von Mises called the “Free and Prosperous Commonwealth” founded on the rule of law, particularly respect for property rights.

I had to wonder, when reading his portrayals of  atrocities committed by government agents: How much of this is fiction?  Can they do such things?  Are they close? Have they already?  The Patriot Act is law, so the atrocities seem disturbingly plausible. Continue reading →

Around the Web

Brandon Christensen Current Events, Links
  1. Rand Paul’s foreign policy speech. A realist gives his thoughts.
  2. Free Soviet-era films online! I have a weird thing for Soviet art and literature. I’m always fascinated by what the censors would promote. Indulging in Soviet arts and letters forces me to ask why such art and literature was promoted by the state in the first place. What was it about the art that championed socialist man? (h/t Tyler Cowen)
  3. Why didn’t we know that the Russian meteor was coming?
  4. D-7 (original version)
  5. Did somebody say “tribal clashes”? (from 2008). Kenya is voting again. Let’s hope this piece proves to be a flash in the pan.
  6. Federalism for the 21st century.

North Korea’s “Artificial Earthquake”: What is to be Done?

Brandon Christensen Current Events, Politics , , , ,

Foreign policy has been awfully quiet these days. President Obama has been murdering people left and right on a whim, and nobody in Washington seems to care. You can imagine what the reaction would be in Washington if a Republican had been the one flaunting the rule of law. The Economist has a good article on this development if anyone is interested.

One newsworthy item that concerns American foreign policy has been centered on the Korean peninsula, a place that the United States first became involved militarily during the 1950’s. Given that our government is currently mired in two foreign occupations at the peripheries of the Islamic world (Afghanistan and the Balkans) as well as being embroiled in conflicts along the Sahel (thanks to President Obama’s attacks on the Libyan state), one should naturally be curious as to why the current affairs of the Korean peninsula are of interest to the United States government.

To make a long story short, the US government currently has some 50,000 troops stationed along the border of the North-South divide (drawn up in the 1950’s after a devastating war was fought between communist and conservative factions within Korea, China, and the United States), and has an alliance with the South that guarantees military help in case of a war with the communist North. The later state is actively attempting to build a nuclear weapon.

As a rule, I think it is appropriate that when citizens of a republic hear about other nations and events, the subject matter ought to revolve around how beautiful the geography of a said nation is, or how beautiful the women are, or how bad the food is, or which team won the national championship, and in which sport. That American citizens are hearing about a possible escalation of military tension in the region is, by itself, not a bad thing nor a surprising thing, but when our military and our tax dollars are suddenly involved in the escalation itself, then American citizens have ample cause to be worried, angry, and tense. These are not qualities that are often sought out by individuals on a daily basis, and when a government that claims to be republican in nature begins to cause these said psychological factors within it’s borders, then citizens ought to question the supposed republicanism of their government. Continue reading →

L’ Anarchisme et la recherche de la liberté: recommendations des Déserts du Nouveau Monde.

Jacques Delacroix Books, Current Events, Liberty ,

Je suis vieux mais j’ai quand même un copain lycéen à Paris. Je l’ai rencontré un Quatorze Juillet justement, en Californie où je vis depuis déjà longtemps. Ugo a quinze ou seize ans. Il me dit par courriel qu’il lit Bakounine et Kropotkine. Cela me fait plaisir à deux titres. D’abord, cela signifie qu’il a échappé à la malédiction du relent de totalitarisme collectiviste qui habite toujours de nombreux Français comme une croûte en Octobre colle encore aux lèvres des revenus de la colonie de vacances du mois d’Août.

La deuxième raison de ma réjouissance c’est que de telles lectures ne peuvent qu’allonger l’aune à laquelle Ugo mesurera la liberté. (J’allais dire la “liberté individuelle” mais, il n’y en a pas d’autre, c’est une mauvaise manie verbale.) Il me semble en effet que quand on vit dans le brouillard d’une societe étatique comme la France il doit être difficile seulement de reconnaitre le simple fait de liberté. Dans une telle société, on doit être menéinconsciemment à une mesure de la libertéétriquée pour la simple raison que les nombreux “droits” des autres ne peuvent que limiter naturellement, automatiquement les siens propres.

L’un de ces soi-disant droits est le droit de vivre correctement sans avoir jamais às’efforcer, c’est-à-dire aux crochets d’Ugo et d’autres qui ne rechignent pas à travailler ou àinventer. Continue reading →

Horse Meat and the European Union

Jacques Delacroix Current Events, Liberty , ,

Big scandal in the European Union about horse meat masquerading as beef. Neither in Europe nor in this country do people really understand the story. Good thing I am here with my cross-cultural skills!

First things first and a confession: I ate much horse meat as a child, something like twice or three times a week. It was cheaper than beef. The horse butcher was half a block from the beef butcher. Horse meat was cheaper. My mother was concerned that her sons would not develop the right kind or quantity of hormones if they didn’t get red meat at every meal. Well, I don’t want to appear immodest or lacking in humility but it appears that my mother was right about the effect of horse meat on virility!

We ate ground horse meat barely singed. It tasted good, a lot like beef, in fact but also a little sweet. We did not feel sorry for the horses. There was a horsey set in France but it did not live in the government housing where I grew up. We did not know any of them although we read about some of them in the tabloids. Long story short: There is no particular health hazard associated with horse meat if it’s normally inspected. It’s probably less dangerous than say, chicken. Continue reading →

Possession Two (or too)

Jacques Delacroix Liberty

Part Two: No Place to Stay

Update: In a previous blog (“The A.A President,” posted 10/7/09 ), I argued that President Obama’s current string of failures was not surprising because he had never accomplished much of anything in his life under his own power. I mentioned that his passing the bar exam might prove me wrong. There is nothing on Wikipedia about his having passed the bar anywhere. There is nothing I could find on the Internet. Not trusting the thoroughness of my search, I went straight to the source. Nine days ago, I emailed the White House website asking when and where the President had passed the bar. No answer to-date.

In the first installment of this essay, I began to attempt to use a small-scale entity to explain the damage done by innocent government intervention. The small-scale entity is my town of Santa Cruz (population about 40,000). In Part One, I showed how the municipality’s practice of taking possession of buildings downtown to shelter social services impoverished the tax roll. There is worse.

Santa Cruz has two main parallel arteries. On one side of the river, lies Ocean Street, leading to the Boardwalk, a permanent carnival near the beach. Ocean avenue is appropriately lined with fast food joints and motels. It’s as devoid of interest as any similar commercial artery anywhere in the US.  Continue reading →

Possession

Jacques Delacroix Economics, Liberty , , , , ,

Part One: Drying up the tax fountain

I suspect many people have troubling getting a good grasp of the on-going conservative struggle to prevent large-scale takeover of the economy by the federal government. I think there are two main obstacles to their understanding.

First, the idea of the virtuousness of the market as a regulator and organizer of economic life is difficult to communicate. It’s an abstract idea and it does not correspond well to people’s own experience. In their personal life, people think that when good things happen it’s a because someone (some one) made good decisions. First, it’s Mom, and then, it’s the “leadership” of the many organizations within which they live, schools, churches and especially employing organizations. To an extent, the one is themselves.

In daily life, there are few occasions to reflect upon the fact that the myriad decisions made by anonymous decision-makers, including bad decisions, aggregate into good outcomes. The market processes involved are both too magical-seeming and too abstract.

At any rate, for some reason, schools and universities do a bad job of explaining these processes. Liberal Arts teachers don’t understand them themselves and they are hostile to them. Most of them are born socialists. If you eat the King’s bread long enough, you become a monarchist.  Continue reading →

Credit Booms Gone Wrong

Fred Foldvary Economics, History , , , , , , , ,

Recent research by economists Moritz Schularick and Alan M. Taylor have confirmed the theory that economic booms are fueled by an excessive growth of credit. They have written a paper titled “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008“, published by the National Bureau of Economic Research.

A major cause of the Great Depression was a credit boom, as analyzed by Barry Eichengreen and Kris Mitchener in their paper, “The Great Depression as a credit boom gone wrong” (BIS Working Paper No. 137). Eichengreen and Mitchener cite Henry George’s Progress and Poverty as providing an early theory of booms and busts based on land speculation. They also credit the Austrian school of economic thought, which in the works of Friedrich Hayek and Ludwig von Mises, had developed a theory of the business cycle in which credit booms play a central role. Henry George’s theory of the business cycle is complementary to the Austrian theory, as George identified the rise in land values as the key role in causing depressions.

An expansion of money and credit reduces interest rates and induces a greater production and purchase of long-duration capital goods and land. The most important investment and speculation affected is real estate. Much of investment consists of buildings and the durable goods that go into buildings as well as the infrastructure that services real estate. Much of the gains from an economic expansion go to higher land rent and land value, so speculators jump in to profit from leveraged speculation. This creates an unsustainable rise in land value that makes real estate too expensive for actual uses, so as interest rates and real estate costs rise, investment slows down and then declines. The subsequent fall in land values and investment reduces total output, generates unemployment, and then crashes the financial system.

We can ask whether this theory is consistent with historical evidence. One strand of evidence is the history of the real estate cycle, which has been investigated by the works of Homer Hoyt, Fred Harrison, and my own writings. Another strand is the history of credit booms, as shown by Schularick and Taylor, who assembled a large data set on money and credit for 12 developed economies 1870 to 2008. They show how credit expansions have been related to money expansions, and how financial innovations have greatly increased credit. Because economic booms are fueled by credit expansion, Schularick and Taylor note that credit booms can be used to forecast the coming downturn.

Followers of Henry George have focused on the real estate aspect of the boom and bust, while the Austrian school has focused on credit, interest rates, and capital goods. A complete explanation requires a synthesis of the theories of both schools, but these recent works on credit booms have not recognized the geo-Austrian synthesis. In order to eliminate the boom-bust cycle, both the real side (real estate) and the financial side (money and credit) need to be confronted.

Current Austrian-school economists such as Larry White and George Selgin have investigated the theory and history of free banking, the truly free-market policy of abolishing the central bank as well as restrictions on banking such as limiting branches and controlling interest rates. In pure free banking, there would be a base of real money such as gold or a fixed amount of government currency. Banks would issue their own private notes convertible into base money at a fixed rate. The convertibility and the competitive banking structure would provide a flexible supply of money along with price stability. The banks would associate to provide one another with loans when a bank faces a temporary need for more base money, or a lender of last resort.

Both the members of the Austrian school and the economists who have studied credit booms have not understood the need to prevent the land-value bubble by taxing most of the value of land. That would stop land speculation and eliminate the demand for credit by land buyers.

But the credit-bubble theorists have not understood that financial regulation and rules for central banks cannot solve the financial side of credit bubbles. Credit booms always go wrong. As the Austrians have pointed out, there is no scientific way to know the correct amount of money or the optimal rates of interest. Only the market can discover the rate of interest that balances savings and borrowing, and only the market can balance money supply with money demand.

Thus the remedy for the boom-bust cycle is both land value taxation and free banking. Land speculation would not be as bad without a credit boom, but will still take place as land values capture economic gains and land speculators suck credit away from productive uses. But also, a credit boom with land-value taxation will still result in excessive construction and the waste of resources in fixed capital goods, reducing the circulating capital need to generate output and employment, as Mason Gaffney has written about.

Economic bliss requires both the public collection of rent and a free market in money.

[Editor’s note: this essay first appeared on Dr. Foldvary’s blog, the Foldvarium, on April 4 2010]

Equal Pay for Equal Work: The New/Old Trojan Horse; Unfairness

Jacques Delacroix Current Events, Law, Politics , , , , , ,

I am a sore loser. Thoughts of re-emigration dance around in my head. However, I am too old. And the very mechanism that I fear is trapping this whole society has entrapped me: I am dependent on Medicare which is not transportable. I am a ward of the federal government which took loads of my money for forty years and turned it against me, like a two-bit dope-dealer. Like other conservatives I know, I am tempted by the option of personal, psychological secession from the new Obama Peronista United States. But, finally, there is nothing to do right now but to continue to sound a voice of reason and of conscience in the hope that it will reach some of the inner children Pres. Obama has been singing to.

(Personally, I make it a practice to take my inner-child out every so often and to beat his ass.)

President Obama won re-election handily not by winning arguments but by side-stepping deftly vital issues of the solvency of this society, present and future, and of the role of government in restricting our freedoms. (There was also quite a bit of slime he threw at hapless Romney but that was secondary in his victory, I think.) After his inauguration speech I wonder if he is going to succeed in side-stepping central matters again by raising silly issues such as that of homosexual marriage. (I don’t use the word “gay” because it carries a political agenda. I am not against homosexuals, however. I don’t even think they have a greater chance of burning in Hell than I do, for example.) Continue reading →

I Have Been Summoned (Poll!)

henrymoore Law, Liberty , , , ,

So I have Jury Duty tomorrow morning. Early. I don’t know any of the details of the trial. I’ve been dreading it all week long but have gradually come to accept that there is no way out of it (or at least out of showing up the first day) so I might as well make the most of it. The problem is I don’t know what to expect. Will the lawyers cross examine me first? Or did that form I filled out a few months back suffice to make me a good juror (this is Montana after all, I’m sure we don’t have big-city standards)? I don’t think the form contained enough information about me for the prosecuting and defense teams to decide I am a good juror.  So I am inclined to think that there will be additional questioning. And if so, that would be my ticket out of it because if just one team of attorneys thinks that I would make a decisive, respectable, impartial juror, the court will probably dismiss me. And I would likely never be summoned again. To be honest, I don’t think I would make a “good” juror because I don’t like authority all that much. Not cops. Not judges. Not elected officials. And I absolutely loathe lawyers with rare exception. If they ask my opinion about any of of these things should I tell them or hold back?

Should I be honest (assuming they ask me the right kinds of questions) and tell them I think their courtroom — no, their entire system — is running a racket? This would basically be the cowardly way to reclaim my rights to my own person because they can’t do anything to you for expressing an opinion. The less cowardly way would be to refuse to show up, but that could put me in a world of trouble since all commands handed down by the state are in essence backed by the barrel of a gun. Talk about judicial fiat! (Pardon the monetary lingo.) Continue reading →