From the Comments: Has the deontological puzzle been solved?

Dr Fred Foldvary (yes, THE Fred Foldvary, the one who predicted the 2008 crash in 1998writes:

It is not clear what the policy consequences are regarding those who lose out due to competition. If we are free to choose our friends, there will be losers who lose someone’s friendship. Should we be forced to stay friends with those we no longer like? If not, then such a loss has no policy implication. Such incidental injuries have less damaging consequences than a law that prohibits ending a friendship. Thus the deontological and consequential effects are complements: Likewise, the consequences of prohibiting economic competition are worse than the losses due to competition. And entrepreneurs should know that the system is a profit and loss system, and anyone in business is vulnerable to losses. The losses due to competition are not torts and they are not coercive harms. They are injuries not deliberately inflicted but incidental to individuals and firms pursuing their happiness.

This is in response to my short post on the ethical divide within libertarianism between deontologists and consequentialists. I don’t think there is too much that we disagree on here; Indeed, it seems as if we are complimenting each other quite nicely (if I do say so myself!).

My one quibble is more of a question than a quibble: Although we cannot predict who will lose out to competition in markets, shouldn’t we be able to make some solid inferences? For example, if the US and Europe were to abolish subsidies to farmers and open up their markets to foreign competition, it stands safe to reason that Western farmers will lose out, at least in the short-run.

The logic behind Dr Foldvary’s comment is relatively clear: abolish protectionist subsidies (which are aggressive legislative acts perpetrated against Western consumers and foreign farmers) and this paves the way for non-aggression. Not only is this logic clear, it is irrefutable. It also shows how deontology and consequentialism are complimentary. However, logic and facts are not very useful when it comes to persuading the public. Philosophically this argument makes perfect sense, and politically and rhetorically Dr Foldvary makes it work, but in the general public sphere (especially the internet) the appeal to deontology has earmarked liberalization for disaster.

I suppose, if we follow Jacob Huebert’s line of reasoning, that the politics and the rhetoric of our ideas should not matter, but on the other hand we live in a world where even in the West libertarians have become a minority. The world will continue to liberalize as long as libertarians continue to be as lucid as Dr Foldvary, but I fear that men of his caliber are in very short supply today.

Are drugs actually bad for you?

There are a lot of psychedelic substances coming out of tribal cultures and we’re finding them to be of immense benefit for mental health issues in the West.

This is from an interview with Scottish filmmaker David Graham Scott conducted by Chem Squier for Vice. The whole interview is worth reading, and it is about using psychedelics to wean people off of opiates (pharmaceutical and illicit). One of the things that bothers me about proponents of drug liberalization is the phrase “We all know drug use is harmful, but…” because it’s not necessarily true that “drug use is harmful.”

Drug use can lead to addiction, but this is not the same thing as drug use is harmful. In fact, echoing Audrey’s recent post on heroin markets, I would argue that the War on Drugs actually creates the dangers associated with drug use. This is so because the base product that illicit drugs are made from is very different from the product that appears on the streets (or in the pharmacy), and the product that hits the streets is different from the initial base product because of the initial product’s illegality.

Slow down Brandon. Let me see if I can rephrase that last sentence. Drugs are made of plants. Drugs in their final street form are not usually consumed in their natural plant form because drug manufacturers have an incentive to alter the plant to avoid detection by government authorities.

Does this make sense? So cocaine, for example, is snorted in a powder form because it is illegal, not because drug manufacturers are trying to get more people hooked on their product.

Drugs have been with us since we first became human beings. So-called “tribal” peoples have continued to show us this through their long-running practices associated with psychedelics and opiates (and cannabinoids for that matter). In fact, there is some archaeological evidence that drugs were with other humanoids long before we homo sapiens were even around. Aside from the fact that “tribal” peoples still have a lot to teach us about ourselves and about the world in general, their drug use habits also show that there is a distinct, legitimate place in society for the use of drugs. Passing legislation to punish this long-held practice will only make life worse for everybody in society (it is important to note that addicts and recreational drug users are not the only ones affected by the War on Drugs).

Think about coffee. Coffee is essentially an addictive product of a plant that may, in the years to come, be recognized as such. Remember that cocaine was consumed in much the same way coffee was a hundred years ago. Should coffee be outlawed by government?

Lastly, addiction rates have hovered around 2% of a given population since data on vices have been available (the early to mid 19th century). This trend has continued to the present day. The only difference between then and now is that drug markets and drug use have become much more dangerous because of government laws that pretentiously state individuals should not consume a product government agents (drugs users themselves, no doubt) think is bad for society. (h/t Ben Huh?)

Immigrant Children Victims of Drug War

Thousands of children are entering the US to escape threats by drug gangs and drug lords. The US has for many years exported its war on drug users to Mexico. The increasing force applied in Mexico has driven the drug dealers to Central America, and now the governments of those countries are being increasingly corrupted and destabilized.

Anti-immigrant voices in the USA are obsessed with the effects of their policies, the child migrants, and seek to strengthen immigration barriers rather than confront the causes. The children are not coming to the USA to take advantage of welfare aid. They are fleeing from physical danger.

The drug gangs in Central America are forcing teenagers to join them, or else get killed. That is how they recruit new members. That is why children are fleeing.

US immigration policy contributes to the problem. With legal immigration restricted, and paths to legal residency blocked, immigrants are forced to work in the underground economy, where they are vulnerable to being arrested by the immigration authorities. The undocumented persons then become victims of extortion rackets. Traffickers tell parents that their children left behind in the home country are in danger, and demand money to bring them into the USA. But often the children are abandoned in the desert or used to carry drugs.

The US government is telling the Mexican government to do more to stop children from entering Mexico. But when a child’s parents have been killed in the drug war, and the children are threatened with death, they will swim across rivers, trek through jungles, and cross deserts to save their lives. The US government is committing policy child abuse by refusing to remedy the causes.

Now US government officials are offering the Central American governments aid to programs to keep children in their home country. But until the violence stops, children will not stay in a school where the drug gangs will kill them or make them miserable.

The only way to stop this tragedy is to end the war on drug users and to legalize immigration. Children are not being victimized in the production and sale of alcohol, because it is legal. When a substance is legal, there is a competitive market, and profits are competed down to normal. There is advertizing, and goods can be transported and traded at normal costs.

When a substance is illegal, we get turf wars and coerced children. The criminal systems treat minors with special care, especially when they have been forced to help criminals. Therefore, the drug lords use helpless children, who are also more dependent on adults.

Besides decriminalizing drugs, as Portugal has done successfully, the US should legalize the immigration of all persons who are not threats. US policy has created violence in Latin America, and then the US refuses entry to the victims of that violence.

Critics of immigration claim that the new residents take jobs from American citizens. This claim has been disproved by economic studies. But immigrants would be even less dependent on governmental welfare if labor were fully legalized. It is illegal even for American citizens to freely engage in labor in the USA; the penalty for labor is a levy on the wages earned. When labor is fully legal, it is free of any tax or minimum wage law. A tax on wages has an excess burden or deadweight loss, making it a penalty for working.

In this way, three deeply unjust policies have created the crisis of immigrant children. First, the prohibition of drugs drives the industry towards drug lords and gangs that enslave children, who seek escape by emigrating. Secondly, anti-immigration policies make children have to suffer long and dangerous trips without protection, to evade immigration controls, and risk getting deported. Third, the children are not allowed to work, work opportunities for undocumented adults are limited, and legal labor is suppressed with heavy taxes.

One hundred years ago, prior to World War I, the US did not suffer this inflow of children. The causes were absent. There was no war on drugs, there were no immigration barriers, and there was no tax on wages. Millions of immigrants entered legally, became employed, and contributed to American prosperity. Now we have a declining labor participation rate, drug violence, and a big immigration problem. Our technology is better, but smarter phones will not save us from fundamentally bad government policy.

Increased/Deadly Potency in Heroin Markets due to Fentanyl

The Boston Globe put out a piece yesterday entitled “DEA details path of deadly heroin blend to N.E.: Potent painkiller fentanyl believed added in Mexico.”

This headline could not be more representative of the problems Dr. Mark Thornton mentions in his book The Economics of Prohibition. To summarize Thornton:

“Prohibition statutes generally consist of three parts. First, to be illegal, products must contain a minimum amount of a certain drug… Second, penalties are generally levied on the basis of weight… Finally, penalties are established for production, distribution, and possession. The prohibition statutes consistently define the product in terms of minimum potency (without constraining the maximum). Also, the heavier the shipment, the more severe the penalty.” (Thornton, 1991, p. 96).

Therefore distributors and traffickers (the Mexican drug cartels moving the heroin that originated in Colombia to the U.S.) have every incentive, in order to avoid detection but keep revenue high, to increase the potency of the drugs they are moving such that they can move the same value of heroin but in a smaller quantity. This is what we see currently happening with Mexican cartels mixing heroin with fentanyl.

From the Boston Globe article, “Ruthless drug organizations are including fentanyl, an opioid 30 times more powerful than heroin, to provide a new, extreme high for addicts who often are unaware the synthetic painkiller has been added.” The final point of this quote is critical. There is a huge information asymmetry between traffickers and the end consumer. Because drugs often change many hands before they reach the final user, quality standards are hard to track and verify. Furthermore, end users have minimal recourse to deal with issues of product contamination or inferior quality. They cannot sue their dealer. They cannot take anyone to court. Therefore, as a direct result of the illegal status of heroin trade, consumers have very few rights and outlets to verify that their product contains what they were expecting. While many people want to point out the Mexican cartels as the villains (and they may very well be on other margins like the relentless killing that is going on as we speak) in this scenario, these cartels are only responding to the incentives set in front of them. If we want to take issue with anyone, we need to look at the laws that have been in place since 1924, and even back to 1914. Since then, these laws have only gotten more restrictive and deadlier to everyone involved in illicit drug trade.

Ed Lazear’s WSJ op-ed on California’s water problems

Ed Lazear had an outstanding op-ed, “Government Dries Up California’s Water Supply,” in the June 26 Wall Street Journal

It brings me back to 1982, when I first moved to California from Texas. Less Antman had the California Libertarian Party hire me as research director, and one of the biggest political issues at the time was water. The fight was over a ballot initiative authorizing construction of a Peripheral Canal around the San Joaquin-Sacramento River delta to divert more water to Central Valley farmers and southern California. It would have been an enormous, expensive boondoggle that united environmentalist and libertarians in opposition. I ended up not only writing but speaking before all sorts of audiences about the issue. My studies made me quite familiar with the socialist bureaucracy, much of unelected with taxing power, which manages California’s feudalistic water system, severely mispricing and misallocating water.

Fortunately, the Peripheral Canal went down to defeat. But little was done to reform California’s water system, and Lazear provides an excellent survey of the myriad drawbacks still plaguing it today. His solution: “Rather than praying for rain, we should get government out of the water-allocation business.” One noteworthy detail he doesn’t mention is that even in non-drought years, because the system encourages overuse of water, the Central Valley’s ground water continues to get depleted. This ensures that each subsequent drought will generate ever more serious problems. Worst of all, one solution being pushed during the current drought is a jazzed up version of the Peripheral Canal.

HT: Corrie Foos

Around the Web

  1. Stiglitz and Toward a Theory of the Rent-Seeking Society
  2. The Truth About Our Libertarian Age; Straw men like this explain why libertarianism will continue to grow stronger.
  3. The Return of Karl Polanyi; Another article full of straw. See if you can spot the piles.
  4. What is the optimal number of immigrants to allow into the US? This is as close to a libertarian answer as you can get.
  5. Hayek and the Intellectuals

Surowiecki on Intellectual Piracy

James Surowiecki had an excellent article in the June 9 issue of the New Yorker about countries committing intellectual piracy. It includes a nice summary of how “stealing” patented ideas played a major role in the early economic development of the United States. In the process, it surveys some of the considerable historical evidence debunking the widespread myth that intellectual property is necessary for, or even makes a contribution to, economic growth.

Deontology versus Consequentialism: The Great Libertarian Divide

I am not a philosopher. In fact, the two courses I took on philosophy in college (Honors courses on ancient Greek ethics and modern ethics) were the two courses where I received my lowest grades ever in college (B+’s). Nevertheless, I have been thinking about the great divide within libertarianism regarding the concept of ‘rights’.

I don’t want to delve into the concept of ‘rights’ here, largely because I have only a superficial understanding of the notion, but for the sake of non-libertarian readers I’d like to briefly explain that, within libertarianism, there is an argument about whether or not deontological ethics (wiki) or consequential ethics (wiki) is the proper framework with which to analyze the world.

Deontological libertarians argue that each and every individual has natural rights and that any sort of aggression upon these rights is inherently immoral. Consequentialist libertarians argue that the initiation of force is not as important as whether or not a policy makes everybody better off. In some ways, you can see these tensions being played out here on the blog.

Under these strict definitions I am a consequentialist, but I don’t think it’s quite right to label me as such. I think that the two ethical systems are complimentary more than they are antagonistic. For instance, I think the deontological framework is important because the urge of those in power to “do something”  for the greater good is often immense. Deontological ethics plays an important role in establishing boundaries that those in power have to respect. Mao Zedong’s Great Leap Forward provides a clear-cut example of what happens when power is unrestrained in the name of a greater good. Ethnic cleansing, famine, and poverty can all be attributed, in one form or another, to the lack of respect for deontological ethics.

On the other hand, deontological ethics is too dogmatic. It is impossible to have a society based completely upon the foundations of non-aggression. Free trade is a perfect example of this impossibility. Deontological libertarians support free trade because in the absence of coercion free trade would be the natural outcome. Yet this does not seem right to me. Free trade is good because it lifts up the overall standards of living for everybody in a society, but there are short-run losers when it comes to free trade. In fact, losers are a natural part of the marketplace as a whole. Without losers there could be no markets. We should all be thanking as many losers as we can, whenever we can (you can start with me; I recently set up a Tinder account).

Free trade, and the losers that it produces, has harmful short-run effects on some individuals and their property. Competition destroys fortunes and job skills alike. Free trade also creates verifiable prosperity for societies, and even the losers – eventually – become better off under free trade. Even the underlying structure of the capitalist order is based on aggressively protecting that “bundle” of individual rights that is so integral to freedom and prosperity (this does not mean that states are a necessity, but only that aggression is unavoidable in social relations).

I am off-base here? Am I knocking down a straw man? It seems to me that the consequentialist position – which is already very deontologically-friendly to begin with – is the better route to take, philosophically, politically, and rhetorically.

Another Liberty Canon: Kierkegaard

Søren Kierkegaard (1813-1855) is well known for his contributions to philosophical and religious thought, and for the literary qualities of his work in these areas. He has not been so well known as a contributor to political thought, though there is now a growing amount of scholarly commentary in this area.

Generally his politics has been seen as directed by an extreme kind of conservative reaction against changes, and particularity movements of  democratic and constitutional change in Denmark in his own time. The sense that he was conformable with the most absolute and conservative kind of monarchism possible has been accompanied by the sense that he was anti-political, that he just did not like politics, which connected with the supposed conservatism, because if there is no need for change in political structures, there is no need for political discussion and thought.

These positions might have some appeal to some libertarian-conservative fusionists, and do have some basis in some aspects of Kierkegaard’s thought. However, his thought cannot be properly characterised overall in this way, which would connect Kierkegaard at a relatively popular level with the political thinking of J.R.R. Tolkein, or at the more historical scholarly level with Robert Filmer, the English ultra-monarchist criticised at length by John Locke, or the Savoyard (French-Italian) ultra-monarchist critic of the French Revolution, Joseph de Maistre.

More justified connections can be made with David Hume, for example. Hume was cautious about both political change and claims that the authority of existing political institutions rests on either reverence for the past, or very deliberate conscious popular consent. Hume thought that though societies with political and legal institutions probably did originate with a contract of sorts between government and governed, such contracts cannot bind future generations, and the ‘contract’, or set of relations, between individuals and the state, are open to reform and renegotiation.

Kierkegaard’s comments on the politic currents of his time, suggest that he had a strong understanding both of the belief in the absolute authority of existing institutions, and of the wish to create a new absolute, in a spirit of revolution. His own view is that negotiation and renewal are desirable, and are certainly inevitable, which he saw as the need to revise historical contractual agreements.

Kierkegaard certainly did not wish for individuals to make politics the highest aspect of their lives, as this would detract from the individual relation with God, which was the central interest of this passionately religious man. However, that is not to say that Kierkegaard thought Christianity gives the answer to everything in worldly life, or that Kierkegaard had nothing else driving him. A passion for writing, which has a strong element of self-exploration even if though the medium of fiction and the pseudonyms, which are used in his books, or as fictional authors for many of his widely read books.

The writing and self-exploration converge, for Kierkegaard, in the understanding and communication of the deepest relation of the self with itself as necessarily a relation with God. The recognition of something more than momentary about the existence of the self, leads to a recognition of an absolute aspect of the self, and a struggle with any dissolution of the self into a series of moments. This was Kierkegaard’s way of exploring the value of the individual, and the word ‘individual’ is frequently and frequently orientates his writing. In this, he provided a great way of thinking about the value of the individual for any political thought concerned about the liberty of the individual, and why that should be at the centre of politics.

Kierkegaard saw in the more absolute kinds of political thought a desire for a version of God, and in doing so provided the basis for distinguishing between a politics that recognises limits to what it hopes for from the state and collective action, and a politics that tries to impose itself on society by turning the state into a substitute for God.

Kierkegaard was very critical of the state church, even though his brother had made a career in it, and suggest that dependent on the state weakened religion, as other forms of dependence create other forms of weakness. He did not argue for a pure nightwatchman state, or individualist-anarchism, but he did argue for caution about how much the state does, and for taking individual responsibility for assisting those who have met with misfortune.

In his emphasis on the individual in his understanding of Christianity, Kierkegaard also understood that Christianity places an enormous burden on the individual compared with earlier forms of thinking, in which the individual is primarily thought of as part of a family or state. Kierkegaard was particularly concerned with the ancient Greek and Roman city states in this context, including the literature they produced. He placed value on his own small city of Copenhagen for preserving some of the value of ancient city-state, where the individual can draw strength from connection with others in a very concrete community, without wanting to see the individual subsumed into any kind of communal or collective identity.

For Kierkegaard, the more worldly part of our lives rests on more than living under a state defined  by law or a society defined  by universal rights, necessary though these are. We need engagement with our social world, including its political debates. Though Kierkegaard was a great loner in some respects, he did walk regularly though crowded parts of the city, live near the centre, accept that he would be recognised,  contributed to magazines, and existed as a public figure, which was sometimes uncomfortable for him, but was never a role he excluded.  He was attacked as an eccentric in the press and condemned as a diabolical figure by some of the church establishment, but like his hero Socrates reacted with humour, intelligence and the assumption that the independent, even self-contained, individual deals with difficult public controversies. In his ways of bringing together an antique commitment to public life and a more modern sense of strong individuality, Kierkegaard made a remarkable contribution to themes which preoccupied the major classical liberal thinkers, like David, Hume, Benjamin Constant, John Stuart Mill, and many others.

It is not possible to recommend specific political theory texts by Kierkegaard, and just about everything he wrote can be read with great reward in association with the issues discussed above. A good starting point for a focus on the more political Kierkegaard though is the literary reflections in Two Agesfollowed up by the three masterpieces of 1843 that established his importance. The most immediately readable is RepetitionFear and Trembling is also relatively short. Either/Or is long and complex, but very rewarding and can itself be followed up by reading its sequel Stages on Life’s Way.

My REASON review on the Panic of 1837

My review of Jessica Lepler’s The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis appears in the July issue of Reason. It has now been posted online.

Only after agreeing to review the book and receiving my copy, did I realize that Lepler’s study was far too academic and specialized for the typical Reason reader. But previously, when they had asked me to review Thomas Fleming’s Civil War book (A Disease of the Public Mind) and I had agreed, it turned out to be an awful example of cliche-ridden, superficial pop history at its worst. So I told them it wasn’t worth reviewing, and I didn’t consider it wise to do that again with the Lepler book, even though it would have been for the exact opposite reason.

A much better, recent book on the panic of 1837, despite my disagreeing with most of its interpretations, is Alasdair Roberts’s America’s First Great Depression: Economic Crisis and Political Disorder after the Panic of 1837 (2013). I mentioned it in the first draft of my Lepler review, but it was in a section that Reason edited out.

Обзор событий в России за последние несколько недель. Часть 2

Итак, мы продолжаем говорить о России. Первая часть записи находится по этой ссылке.

Размышляя в прошлой записи о Украине и так называемых “террористах”, переключусь на настоящий террор, который происходит в мире. Несколько дней назад в Санкт-Петербурге, городе где я живу, прошла специальная операция по задержанию духовных лидеров и вербовщиков одной из исламистских сект, которая в России с 2003 года считается вне закона. Я так полагаю, что она вне закона и в других странах. Основная её идеология базируется на установлении всемирного теологического государства на основах Шариата, а также на полной нетерпимости к другим религиям и воинственность. Самое страшное, что вербовка новых последователей в эту секту велась людьми, которые имеют безупречную репутацию и хорошую ассимиляцию в российском обществе. Как сообщают в наших газетах, их “сдал” какой-то важный свидетель. Сомневаюсь, что без его помощи эту секту как-нибудь раскрыли бы…

Очень много времени занимают репортажи с чемпионата мира по футболу. К сожалению, сборная России выступает не самым лучшим образом и вряд ли выйдет из группы, но тут уж как тренировались – так и выступают, что еще сказать. Я лично не интересуюсь футболом и вряд ли назову хотя бы двух игроков нашей сборной команды, но знающие люди говорят, что у нас нет шансов на кубок.

На прошлой неделе у нас был очень важный государственный праздник – День России. Фактически, самый важный праздник, который празднуется с 1992 года в день 12 июня. В этот день была принята декларация суверенитета и независимости России. Такой праздник есть по всей видимости у каждой страны. У нас было много праздничных мероприятий, салют, парады и всякое такое прочее. В последнее время рейтинг президента России Путина очень высокий, в основном благодаря  жесткой позиции по отношению к Украине и Крыму, которую он видимо не собирается менять в угоду другим мировым лидерам и демонстрирует завидную стойкость. Многие иностранные граждане признают, что позиция Путина, хотя она и отвергается всем миром, во многом более выгодная, чем у президента США. Хотя это не мне решать. У меня есть собственная определенная позиция по разным вопросам, но в сообществе Notes On Liberty я являюсь единственным представителем России, и по этой причине стараюсь наиболее нейтрально и не предвзято доносить свои мысли. Я уважаю все точки зрения и мне не с кем спорить.

Далее. Провал трехсторонних переговоров по газовому кризису между Украиной, Россией и Евросоюзом вынудил российский “Газпром” перевести Киев на предоплату газа. Что это значит? Отныне Украина будет получать только тот газ, за который заранее заплатила. При этом европейские потребители газа не испытают неудобств, так как по договору Украина является страной-транзитом, через которую русский газ поставляется в Европу. Если по каким-то причинам часть газа не дойдет – можно будет задать соответствующий вопрос руководству Украины… Впрочем, это уже лирика.

В завершение хочу порекомендовать всем читателям и авторам сообщества Notes On Liberty читать как можно больше разных газет, чтобы иметь многосторонний взгляд на разные вопросы и продолжать думать своей головой, а не головой пропаганды.

Спасибо за внимание.

Обзор событий в России за последние несколько недель. Часть 1

В Санкт-Петербург пришло лето, и практически сразу же ушло. Третью неделю подряд идут дожди. Холодно – как будто поздняя осень, фермеры опасаются за свой урожай. Такими темпами скоро начнется листопад! В общем, холодное лето, на фоне которого огнём горят события последних недель, про которые я сейчас вам расскажу. В последнее время не часто пишу, так как работа на заводе и развитие собственного вебсайта требует много усилий. Ко всему прочему, я уже четвертый месяц усиленно учу норвежский язык.

Алые паруса. Это традиционный праздник моего города (я живу в Санкт-Петербурге), который собирает зрителей со всей России и даже из-за рубежа. Алые паруса – это праздник выпускников школ, который проходит после выпускных экзаменов перед началом экзаменов в университет. Он сопровождается народными гуляниями, концертами и массовыми мероприятиями с салютом. Главная особенность – в акваторию Финского залива и далее в реку Неву входит шикарный парусный корабль с алыми парусами (если вы помните, подобный образ использовался в повести Александра Грина “Алые паруса”, где героиня Ассоль ждала своего моряка – и дождалась), который символизирует достижение целей и завершение первого этапа обучения в школе. Фактически, выпускникам открывается дорога в жизнь, а корабль это символизирует. Учитывая ошеломляющую подсветку корабля – выглядит это просто потрясающе! В этом году событие также собрало множество гостей из различных регионов России и носило слегка политический подтекст, так как было сопряжено с празднованием возвращения Крыма в состав Российской Федерации. Но вообще это не политический праздник, просто в этом году так совпало…

Отмена постановления о разрешении на ввод войск в Украину. Как многие знают, при разрастании кризиса на Украине республика Крым и город Севастополь провели референдумы о независимости и пожелали вступить в состав Российской Федерации. 1 марта 2014 года президент Российской Федерации Владимир Путин запросил у Совета Федерации разрешение на применение вооруженных сил России на территории Украины при дальнейшей эскалации конфликта и появления угрозы гражданам России, которые проживают в приграничных областях, а также в самой Украине. Совет Федерации такое разрешение президенту предоставил, но по факту он им не воспользовался, чтобы в дальнейшем не усугублять ситуацию, к тому же кризис переместился на юго-восток в район Луганска Краматорска и Донецкой области. По факту президент обладал этим разрешением на применение войск для защиты граждан России. На днях президент предложил Совету Федерации отменить это разрешение, так как наблюдается определенный спад напряжения. Этот поступок должен послужить стабилизации кризиса в Украине и скорейшему разрешению ситуации. Правительство США и руководство Евросоюза положительно оценило этот шаг, так что ждем дальнейшего развития ситуации.

Укрепление отношений между Россией и Китаем. На днях был подписан очередной этап договора между российским “Газпромом” и их коллегами из Китая. Обе стороны готовы к расчетам и в российских рублях, и в юанях. Это очень важный шаг, который способствует укреплению дипломатических отношений между нашими странами. Одновременно с этим ряд китайских фирм инициирует ряд программ по строительству дешевого и доступного жилья для российских граждан.

В следующей части этой записи расскажу вам про некоторые другие важные события, которые успели произойти за последнее время. Оставайтесь на связи!

Central Banks’ Stock Socialism

Central banks have until recently obtained their income from interest on the bonds they hold. But with interest rates now so low, central banks, like other bond holders, are receiving little revenue. So now, central banks are buying shares of stock to get higher income from dividends and capital gains.

Since central banks are agents of governments, their stock ownership amounts to back-door socialism.

The reason interest is so low now is because central banks around the world have been pushing rates down. The low income from savings accounts and bonds has hurt retired folks and have distorted stock markets. The U.S. stock market averages have been making new highs to a great extent because bonds yields are so low, and also because US companies are borrowing funds at low rates to buy back their stocks.

Governments already tax and regulate economies, and they own industries such as education and much of medical care.  Now they want to own more of the whole economy. Even if a central bank buys shares in an index fund, they artificially raise share prices, and they do it with money they create. Moreover, what happens when the price of stocks has a large drop? Will the central banks contribute to the selling, or buy more?

According to a report by the a report to be published this week by the Official Monetary and Financial Institutions Forum, governments and their agencies have already made twenty-nine trillion dollars of market investments. The largest governmental investor is China. The Swiss and Danish central banks have also been buying substantial equities. Central banks have also been buying real estate. Ever more financial and real assets are being acquired by central banks, and thus also by the governments that own and control them.

The ownership of the economy is not what the founders of central banks had in mind. When the Federal Reserve was established in 1913 in response to the banking panic of 1907, its role was to stabilize the banking system as a lender of last resort. For a long time, the Fed purchased US treasury bonds to expand the money supply, as it created the funds it used to buy bonds. But after the recession of 2008, the Fed also bought mortgage-backed securities as well as shares in companies it wanted to bail out.

But now central banks are not buying shares to bail out failing companies, but to increase their income. Ultimately this buying is self-defeating for central banks and all investors, because such massive purchases raise the ratio of share prices to yields, reducing the rates of return.

The pension funds of government employees have, of course, been investing in the stock markets, as well as in bonds and real estate, but these funds can be regarded as belonging to the employees rather than to governments. Governments with surpluses such as from trade or oil sales have set up “sovereign wealth funds” that invest in financial markets, with the potential to manipulate and distort markets. There should be a global treaty to confine sovereign funds to government bonds and global index funds.

It is even worse for central banks to invest in private financial markets because they are creating the money they use for these purchases. This inflation of the money supply is not for stabilizing the currency or helping the banking system, but just to get stock market yield. That monetary inflation will eventually cause price inflation and fuel an even bigger real estate bubble than that which ended in the Crash of 2008.

The ultimate remedy for such asset distortion is the elimination of all central banks. Since that will not happen, we will have to witness a coming financial tragic horror. Just as in the years prior to 2008, we are sitting in boats on a river whose current will take us ever faster the financial waterfall. The most likely year of the next crash will be in 2026, as the 18-year real estate cycle has been the leading cause of the business or interventionist cycle for the past two centuries.

Last time around, government-sponsored enterprises such as Fannie Mae helped stoke the boom by packaging and selling real estate mortgages. The financial reforms after 2007 did nothing to stop the basic causes of the real estate cycle. Now, the massive purchases of stocks, in addition to bonds and real-estate related assets, will help make the Crash of 2026 the biggest ever.

“A SWAT team blew a hole in my 2-year-old son ” [SALON]

Not much to add to this one folks.

A few nights ago, my 8-year-old woke up in the middle of the night screaming, “No, don’t kill him! You’re hurting my brother! Don’t kill him.” How can I ever make that go away? I used to tell my kids that if they were ever in trouble, they should go to the police for help. Now my kids don’t want to go to sleep at night because they’re afraid the cops will kill them or their family. It’s time to remind the cops that they should be serving and protecting our neighborhoods, not waging war on the people in them.

Bear With Me

I am neglecting this blog a little because I am putting together a new thin book of stories in French. It’s going to be called: “Les pumas de grande banlieue.” It means the “Suburban Mountain Lions.” At this point, it’s only for electronic publication.

Please, bear with me. I will be back. You might want to forage through my archives in the meantime. They are worth it. (My best blog work is probably behind me.)  I recommend especially my series of 8 or 9 essays on protectionism. They have lost no validity and they are especially intended  for the intelligent ignorant. They require no knowledge of economics or of economics jargon. I am also pleased with my few essays on fascism, a topical subject right now. They are addressed to the same kind of readers.

The hard, print version of my book in English: I Used to Be French: an Immature Autobiography, is still not ready. It’s frustrating as well as embarrassing. (I won’t say why to protect the guilty.) It’s happening though. When I finally hold it in my hands, it will be a little bit like having a hot date at the tenth-year reunion with the girl you were lusting for in high school: Nice but not what it could have been.

Anyway, it will be for sale on Amazon and also available directly from me through my email when it’s ready ($17 plus $4 for posting).

The electronic version is on Amazon, Kindle only. It will be available for all reading devices July 30th.

http://www.amazon.com/dp/B00JY0G3SA