More on the Cat Fight

I mentioned the libertarian cat fight here, but I didn't go into specifics because, well, just because. I didn't notice at the time that Libertarian Think Tank covered the CATO involvement pretty well, so I'll link it now.

Even though someone from CATO read my post on the cat fight (twice) they didn't bother to comment, which is probably just as well. I just don't think CATO has anything to offer any more.

A Cat Fight Breaks Out in the Herd

If you ever run into a long-time Libertarian, make sure to ask them for a good story or two. They can always pull some doosies out of the hat when they need to.

There are always juicy "who did what to whom" stories from the conventions, shady deals involving shady people, and the inevitable "once he got out of jail" vengeance; you know, pretty much the juvenile behavior that typifies politics and government in general. The difference is, when Libertarians fight it pretty much just degenerates into a nerd-off and doesn't involve actual homicide like Republican and Democrat fights.

This fight is one that has simmered on the back burner for decades and had to boil over sooner or later. It's always been a war of words, but now that blogs are much more important than magazines and newsletters, the volleys are coming in near real-time. Folks who are new to libertarianism are in for a real treat without even having to go to convention: a good old-fashioned Libertarian cat fight.

On one side you have "government that I agree with is good government" beltway hacks and the A/V club. On the other side, you have the holier-than-thou academics. The basic premise of the fight is simple. The academics say that the beltway hacks see compromising principle as a virtue, and the A/V club will only take a break from rockin' the ganj long enough to address "hip" issues. The hacks fault the academics for not going-along-to-get-along (with Republicans and Democrats) and the A/V club thinks the academics are harshing their mellow.

The latest dust up is a prime example of cannibalism at its finest. An associate of the academics had a damn fine year, for a libertarian, and the academics have been breaking their arms patting themselves on the back. The hacks have become increasingly grumpy about the situation because it hasn't required compromise, and the A/V club, while grudgingly giving support, has their share of reservations because he's a devout Christian and talks too wonkishly.

The thing about Libertarians, though, is in addition to being freakishly nerdy, they are also insufferably transparent. At the beginning of 2007, when it appeared the libertarian was going to have an OK year, the hacks and A/V club warned against involvement because there was a strong possibility of failure (you see, you can't fail if you never try). In mid-2007, when the candidate was merely having a good year, the hacks continued to attack while the A/V club prepared to jump aboard. In late 2007, the candidate was not only having a phenomenal libertarian year but also a great year for a Republican. The A/V club, seeing where the cool-kid money was going, conveniently forgot their reservations and the hacks suspended their attacks just in case they had to jump aboard this new-found gravy train.

Then came January 3, 2008. Iowa Republicans soundly repudiated any notion that they should be counted among the cool kids (as if there were a question).

With blood in the water, the hacks pulled the trigger on an attack that must have been in the making for some time. The hacks had revealed the secret burial grounds of some bones the candidate and the academics just as soon stay buried. As late as January 7th, the A/V club agreed to coordinate a "New Hampshire surprise" with a liberal mag that had dusted them off and inspected them.

Rather than the "boom" they all expected from their bombshell, a solitary "pop" echoed in the blogosphere for all of 24 hours and much less than that in the old media.

Why the bomb didn't have the planned impact is simple: the bones that were uncovered were disgusting rants about gays and minorities, hateful to libertarians, but, frankly, strictly in line with the Republican base. Ah, but sweet, sweet irony, how I love thee. The rants were, apparently, penned by the academics specifically to appeal to the Republican base.

With the candidate's die already cast (6-10% of Republicans who bother to show up and vote), the hacks and A/V club are still trying to get some shrapnel to hurt the academics, saying that the hateful rants "taint" libertarian philosophy. While I agree with that, I don't think it taints it any more than condoning preemptive war or smoking dope.

I remember something about glass houses.

Anyway, I don't think the beltway hacks or A/V club can have any effect on the candidate. Any recent loss of support is just the familiar Libertarian post-election burnout and actual Republican support is continuing to rise (or, at least, not falling). It sure is fun to watch, though.

QFT

via inRich.com:

Republican officials dismissed the poll's outcome, noting that Paul has been concentrating on winning straw polls all over the country.

"He brought people in here. What is more critical to look at is who finished second and third. That is a more true indicator of the feelings of the Republican Party of Virginia," said Tucker Watkins of Randolph in Charlotte County, a former 5th District GOP chairman.

Exactly. The true feelings of the Republican Party have nothing to do with the people. I couldn't have said it better myself.

A Big Thank-You

A gigantic thank you to Ian & Mark from Free Talk Live for their on-air read of "There Is No War on Drugs". Although I normally listen to the podcast the day after the show, I just happened to be listening live that night while I was cleaning out a storage shed. Imagine my surprise to hear words from my little corner of the Internet broadcast live on a nationally-syndicated radio show!

Free Talk Live Podcast - 9/29/07 (.mp3 27.3 MB)

Free Talk Live has enjoyed a permanent spot on my "kick-ass podcasts" list from (I believe) the beginning of this blog. I'm certainly not alone in my admiration - FTL has won the Podcast Awards' "Best Political Podcast" award 3 years in a row!

But, Free Talk Live is much more than a podcast. In a little more than four years, Ian Bernard has taken Free Talk Live from an experiment in local content on a radio station in Sarasota, FL to a nationally-syndicated show broadcast on 29 affiliates nationwide. TALKERS magazine has listed FTL in their "TALKERS 250" for two years in a row. It seems like every month I get an email from Ian telling me that two more stations are carrying Free Talk Live.

Ian & Mark, along with day hosts Gardner Goldsmith, Wayne, Toby, Nick, and Julia broadcast Monday through Saturday from 7-10 ET. They also stream the show live.

The Free Talk Live website has the last year of the show archived, its own wiki, and the only forum (the BBS) worth participating in on the entire Internet. The cost to you? Free!

Oh, and the only presidential candidate with the cajones to go live with Mark & Ian? That'd be Ron Paul! (.mp3 4.4 MB)

Is Armageddon at Hand?

Lew Rockwell notes what has to be a sure sign of a coming apocalypse:

BTW: About 200 enthusiatic, sign-carrying young people accompanied Ron [Paul] on a walk from his breakfast fundraiser to his luncheon event. I never thought I'd be part of Republican parade on the streets of San Francisco chanting antiwar slogans!

UPDATE: Now with video!

A Parable on the Use of the US Armed Forces

Imagine you and I live on a farm, with separate houses on either side of a pond. As part of our contractual arrangement for living on the same farm, you are to do the fishing for both of us, and I'm to tend to the fields.

Now, the area we live in is fertile and normally receives more than enough rainfall to keep the crops healthy. Being wise planners, however, we install an irrigation system that draws water from the pond in case there is a drought. Since use of the irrigation system will affect your fishing, we decide that I will hold the key to the pump motor, but that you are the one to determine that there is, in actuality, a drought.

For years, our arrangement works nicely, and we survive a few tough summers with both fish and crops aplenty. At some point, however, you notice that I've been doing some irrigating when there is no drought and confront me on what you see as an overstep.

"It's simple," I explain, "sometimes the crops need a little extra water even though there is no drought. Since I'm the one in charge of the pump motor, it's my call to use it when I need to."

"No," you reply. "By the intent of our agreement, I'm the only one who can authorize the use of the pump motor whether or not there is a drought. I'm reasonable and know that emergencies may crop up where you can't get my authorization beforehand, but in those cases you need to get ahold of me as soon as possible and let me make the decision to keep the irrigation system on or turn it off."

Well, we never really come to a meeting of the minds on this. I maintain that, since I have the key to the pump, I determine when it gets used and you maintain that I need your authorization. Instead of arguing about it, though, I just declare every use as an emergency and back-brief you on the situation. That keeps the peace, but the pond is slowly being drained until it seriously threatens your ability to fish.

You check with your lawyer to see what you can do to restrict my use of the irrigation system without destroying the crops. Your lawyer tells you, "unfortunately, the original agreement made only contemplates use of the irrigation system during a drought. Since you didn't mod the original agreeement to include non-drought use, whether or not you provide authorization is irrelevent."

My advisor acknowledges the same circumstances, but comes up with a different read. "It's true that the original agreement only contemplates a drought and hasn't been modded. Therefore, non-drought use is purely by your discretion. Besides, even if the 'non-drought authorization' garbage were binding, he has given you open-ended authorization to use the system."

This parable has no end or moral, it is just meant to bypass impassioned rhetoric to show the two reads on the use of the US Armed Forces. You are the US Congress, I am the President, our original agreement is the US Constitution, the irrigation system is the armed forces, drought is war, and the "non-drought use authorization" is the War Powers Resolution of 1973, vetoed by President Nixon, overridden by the congress, and considered unconstitutional by every President since.

After the second GOP debate, my adviser was Sean Hannity and your lawyer was Presidential candidate Ron Paul (who is not a lawyer but a strong constitutionalist). At the end of this clip is the quick exchange about declaration of war:

Who is right? Well, it's certainly not cut-and-dried (as the parable shows), but Dr. Paul has every President from Nixon to the current President Bush on his side that the War Powers Resolution is unconstitutional (although I doubt any would agree with him that the use of the armed forces is constitutionally limited to declared wars). Hannity, who rarely expresses any rationale beyond gut instinct, seems to accept that the War Powers Resolution IS constitutional, although he is contradicted on this point in the book Let Freedom Ring by...Sean Hannity.

Last night, Hannity was more civil toward Congressman Paul. I get the feeling that Hannity knows he's going to be dealing with Dr. Paul for a long while, but also that, as he mentions at the very end of the clip, "it's always good to spar with you":

We've Learned Our Lessons

Last night a friend advanced the hypothesis that "we've learned our lessons." His implication was that the Federal Reserve Board is firmly in control of the money supply and there won't be a complete dollar meltdown. Ironically, that statement was made in the context of the Las Vegas housing market which is in the throws of a Fed-induced meltdown.

Even people like my friend that know we should all be as liquid as possible and heavily weighted toward hard asset investments aren't grasping the significance of the writing on the wall. The dollar is at all time lows, the current-account deficit is staggering, real price levels of staples (not the faux CPI-U which even ticked up hard last month) are rising incredibly fast, and, most tellingly, foreclosures are moving past sub-prime mortgages and cutting huge swaths in regular mortgages.

I think my friend treated the stats I threw at him incredulously, even though deep down he knows they are right. Not surprisingly, they are the exact stats that came up during Ben Bernanke's recent visit to the House Financial Services Committee (which I hadn't seen until this morning):




It doesn't appear to me that Bernanke has learned his lessons at all (even beyond the belief that the Federal Reserve can magically manipulate the money supply without doing a lot of damage).

Cheap TVs and Cars - A How-To

Photograph: Bishop Asare/EPA

At night, retailers dream about throngs of customers storming the aisles and snapping up the highest-priced items. The customers flood the check-out lanes with their purchases and fist-fulls of cash. It would be better than the day after Thanksgiving. Or, would it?

As with most questions the answer is, "it depends."

Zimbabweans are shopping like there's no tomorrow. With police patrolling the aisles of Harare's electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as £20. Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world's fastest shrinking economy gorged itself on one last spending spree.

Car dealers said officials were trying to force them to sell vehicles at the official exchange rate, effectively meaning that a car costing £15,000 could be had for £30 by changing money on the blackmarket. The owners of several dealerships have been arrested.

President Robert Mugabe's order that all shop prices be cut by at least half, and sometimes several times more, has forced stores to open to hordes of customers waving thick blocks of near worthless money given new value by the price cuts. The police and groups of ruling party supporters could be seen leading the charge for a bargain.

For the monetary-exchange challenged, that's $US 61.10 for a $US 30,550 car. I'll bet the vast majority didn't even have to finance.

What's the penalty if you don't comply with the government?

The price cuts were ordered by the joint operation command, a committee of army, intelligence and police officers closely tied to the ruling Zanu-PF and chaired by Mr Mugabe.

The government despatched security personnel and party cadres, including its notorious "green bomber" thugs, to enforce the price cuts, in some cases by beating up shop managers who did not implement them quickly enough.

Sounds awfully peaceful to me. So, what is the result of "Operation Reduce Prices"?

The impact of the price cuts was felt almost immediately as fuel virtually disappeared from sale after garages were forced to sell petrol for 23p a litre, less than they paid the state-owned supplier.

The police and army broke the locks on petrol pumps at some garages and tanks ran dry amid panic buying. Now petrol is available only on the blackmarket, at more than seven times the official price and three times what garages had been charging. By Saturday, most minibus taxis had gone from the roads because drivers could not find petrol. Crowds of workers were left on kerbs for hours trying to get to or from their jobs.

The riot police had to be called out to the South African-owned Makro super store in Harare after thousands of people stormed the shop after it was forced to slash prices. The scenes were replicated in stores throughout Harare. The Bata shoe chain's shops were stripped bare in two days by people snapping up pairs for as little as 20p.

Food is still available, although bread, sugar, cornmeal and other staples are hard to find, and meat has all but disappeared because livestock owners say it is now uneconomic to slaughter their animals. Much of the meat that is available is goat slaughtered in backyards and sold in informal markets.

The rest of the food supply - already severely undermined by drought and lack of production on land seized from white farmers - is also under threat after Mr Mugabe threatened to take over manufacturers if they shut down their plants on the grounds that they were uneconomic. "Factories must produce. If they don't, we will take you over ... We will seize the factories," he said.

Darn. If only there was some type of science that could predict such an outcome. Oh, wait! Here it is:

Economists say the price cuts will only deepen the national crisis, leaving many shops bare because they will not be able to afford to restock while official retail prices remain lower than the cost of buying wholesale or importing. Mr Mugabe has dismissed such warnings as "bookish economics".

The sick part of that statement is that he's right. Economists tend to be extremely bookish - if it can't be observed from their desk chair, they aren't interested in it. Until progenitors of the "dismal science" learn to actually use the scientific method "bookish" is the best you can say of them. The Zimbabwe scenario, repeated so many times throughout history, will continue until they do.

However, to do so would require work (something that economists tend to praise, but eschew at all costs). It would require proofs and controlled experiments. It would require hypothesis and testing. It would require publishing results incongruous with personal bias.

Worse, it would require funding. Funding that would have to come from sources open to the possibility of results antithetical to their social agendas.

It's much more fun, I guess, to live in a world where governments promote mass starvation and genocide at the point of a gun.

Fiat Money and the Business Cycle

2008 Presidential candidate Congressman Ron Paul has, as one of his campaign issues, returning sound money from its current outlaw status. It's an easy process, actually, of reversing the steps by which fiat currency gained its hegemony. It is as simple as removing capital gains taxes on the items people may choose to use as money and calling off the dogs at the Treasury Department that are currently spreading personal opinions as legal fact in regard to alternative currencies.

Congressman Paul is promoting sound money with a populist message: the Federal Reserve is exacting an "inflation tax" by debasing the very dollars in your wallet. It's a simple message (simplified further by his supporters to "abolish the Fed") as far as it goes, and non-controversial from the standpoint that no one other than Ron Paul supporters has even bothered to notice it.

What I've noticed, though, is that Paul seems to be studiously avoiding the subject of fiat money and the business cycle. I have to wonder if he isn't missing an opportunity right now to talk about this far more lecherous effect of the federal reserve system. This will be a controversial topic - what better time to broach something controversial than when everybody seems to be ignoring you?

Respected economists and high finance types are going to start throwing bolts of lightning if an "abolish the Fed" campaign gains the least bit attraction. The axes that unions and corporations will throw at a non-corporatist candidate will pale in comparison.

Big investors, lenders, and borrowers are far too addicted to easy credit to give up without a big fight.

Speaking of...

...fiat currencies, sound money, and inflation, here's Congressman Ron Paul giving a speech at a campaign rally in Des Moines, IA, yesterday:

Part I

Part II

Part III

For the Love of Money

A well-managed fiat currency can outperform commodity money under certain circumstances.

That is a simple statement all economists can agree with. It is vague and sufficiently qualified to be uncontroversial. The qualifiers, however, should be sufficient to keep that statement purely normative with no practical application. To see why, consider this equally true statement:

Given perfect information, a perfect monopoly can maximize profits by controlling supply.

If, however, a would-be monopolizer did not have perfect information or did not have a perfect monopoly and attempted to exercise monopoly power, market forces would act to decrease any actual monopoly power the firm held. Any exercise of monopoly power increases the incentives for both competition to arise and consumers to seek suitable substitutes. This can be seen every day: telephone monopolies are challenged by wireless, cable monopolies are challenged by satellite, etc.

And, so it is with governments which issue fiat currency. Long before 1961, when Nobel Prize-winning economist Robert Mundell penned his article, "A Theory of Optimum Currency Areas," states issued fiat currencies. Although Mundell argued against it, governments seized on his ideas as rationale for issuing fiat as a matter of nationalistic pride. Every government, no matter how powerless or underfunded, fancies themselves as being the monopoly provider of currency as a divine right.

Right off, there is an obvious problem. Between the presence of commodity money and every nation issuing their own fiat currency, there is certainly no lack of suitable substitutes. This means that an individual nation actually has very little in the way of monopoly power; to maintain the charade, governments have to resort to the use of force against their own people, commanding that they use only that nation's fiat currency and confiscating other fiat and commodity money.

Another problem, which should be obvious but which is a topic rarely broached, is that a government cannot begin to assemble perfect information. Perfect information would require the instantaneous knowledge of the preferences and actions of every man, woman, child, nation, and force of nature now and in the future. That information would have to be analyzed (correctly) and changes to the fiat supply planned (with laser accuracy).

There is no question that this information cannot be known, therefore all analysis and planning is based on assumptions about assumptions. The end result is not management of the fiat currency, it is educated guessing, and more often wrong than not. This causes recessions, depressions, boom and bust, inflation, and inevitably hyperinflation.

Since the management of fiat currency is based on speculation and not fact, it cannot be well-managed, and thus the first qualifier of the top statement can never be met. That leaves us, then with the statement, "a fiat currency can outperform commodity money under certain circumstances."

At the turn of the 20th century, Georg Simmel wrote, "although money with no intrinsic value would be the best means of exchange in an ideal social order, until that point is reached the most satisfactory form of money may be that which is bound to a material substance." We can safely conclude that Simmel would not consider the current state of human affairs an "ideal social order." Even if we temper his requirement, we can confidently predict that nothing approaching the certain circumstances qualifier of our statement is likely to ever occur.

With no hope of ever satisfying the qualifiers, our fine, universally-agreed upon normative statement boils down to the following when practically applied: a fiat currency can not outperform commodity money.

Why, then, when the consequences of failure are so destructive in terms of human lives and resources, do nations persist in issuing fiat currency, and why do otherwise-rational economists give such a system their blessings?

With the US dollar in free-fall mode, the soundness of this system should be in serious doubt. But, in the American Idol contest for the Presidency in 2008, only one of the candidates even understands the danger of a fiat monetary system, let alone has the courage to broach the subject publicly.

Congressman Ron Paul has written extensively on the subject of sound money, and yet columnists, whose monetary expertise consists of picking up a dinner check now and then, have described him by saying his "economics are wacky." Not a moment too soon, though, economists and journalists are being forced to admit that Paul's injection of real economic hazards into his Presidential campaign is going to make him look very prescient in the coming months and years.

After nearly a century of happy-go-lucky welfare and warfare, such a large portion of the world is dependent on the hegemony of the US dollar that its eminent collapse will trigger a world-wide depression. But, as Ron Paul knows, all that is needed to prevent such a calamity is to reject the monopolist charade and allow sound, commodity money to compete on the market with US dollars. Let the users of the currency decide on their own schedule whether they prefer the fiat currency or sound money.

Open competition between sound and fiat currencies will ultimately result in a stronger system than we have now, even if consumers decide to stick with a fiat system!