Has Capitalism Failed?
Capitalism should not be condemned, writes Ron Paul, since we haven't had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It's not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military-industrial complex, and a foreign policy controlled by corporate interests and overseas investments. FULL ARTICLE
Comments (192)
Mike Sproul
You'll never understand free-market capitalism until you understand that there is no such thing as fiat money. You'll never understand libertarianism until you understand that opposition to fractional reserve banking is unlibertarian. You'll never understand money and inflation until you understand the real bills doctrine.
Published: April 16, 2008 10:43 AM
Bill
Capitalism has not failed however the hybrid socioeconomic model of capitalism and socialism has: Somehow someway mankind must be purged of the want of something for nothing!
Published: April 16, 2008 11:04 AM
Deacon
Both capitalism and Marxism have failed:
Find my essay, "Marxism and Capitalism," in
here:
http://corporateamericawhatwentwrong.blogspot.com/
Published: April 16, 2008 12:00 PM
William Bunker
Capitalism has not failed, since this is not a free market. The concept of corporate and state financial leverage has failed the people.
This more than ever is a call for free markets and populist financial oversight.
Consider this:
If our banks have
If our banks are charing us x% interest, and inflation is >x%, do we make money by doing nothing?
Who has brought us into this multiple-uphill battle? The people? No.
http://www.WilliamBunker2008.blogspot.com
Published: April 16, 2008 12:34 PM
William_Bunker
Correction: If our banks have
Second, if inflation is greater than our interest rating, do we make money by doing nothing?
Our banks should be cut out as middlemen, since they have no money. A slave is cut out of the system, as they have no right to their own work or the profit from it. Are our banks enslaved? Are we enslaved?
Central banks and market leverage movers have attacked us to make our labor not produce profit for us, and for this economy to be destroyed.
Published: April 16, 2008 1:10 PM
Jake
To me, this remains one of Ron Paul's strongest speaches ever.
Published: April 16, 2008 1:19 PM
Jake
To: Mike Sproul
Dear Mike,
You'll never understand free-market capitalism until you understand that there is such a thing as fiat money. You'll never understand libertarianism until you understand that fractional reserve banking is unlibertarian. You'll never understand money and inflation until you understand Austrian Economics.
Have a nice day :-)
Published: April 16, 2008 1:21 PM
Alex Peak
Isn't there an .mp3 somewhere of Dr. Paul actually delivering this speech himself before Congress? I mean no disrespect to Dr. Floy Lilley, but I'd rather listen to the original speech when such things are available.
I bought The Revolution: A Manifesto on Monday. I'm half-way through it.
Published: April 16, 2008 7:08 PM
Owen
Money tied to a fixed object such as gold or a commodity will cause constant deflation as the economy expands but the money supply doesn't.
Deflation causes it's own problems of a similar amount to inflation.
Published: April 16, 2008 7:43 PM
Inquisitor
Except gold does expand, at around 3 - 5% p.a., if Mark Skousen's figures are correct, so this is an empty objection.
Published: April 16, 2008 7:54 PM
Brent
Furthermore, "deflation" or "inflation" due to an increase in the amount of gold has the benefit of being honest. Either "deflation" occurs because gold is more scarce or "inflation" occurs because somebody put more gold into the market -- which is way more desireable than the alternative of the central bank "creating" more fiat money and giving it to the banksters.
Published: April 16, 2008 8:26 PM
Owen
Do you know what a deflationary spiral is? It is as bad for businesses as inflation.
Unexpected economic growth would cause multiple businesses to be unable to repay debts because every year their income is less in dollar terms while the loan they took out was in older lower valued money.
You haven't actually thought this through have you? You do not realise that the real economy is constantly expanding so the money supply needs to stay in pace with this otherwise deflation will result and possibly deflationary spirals.
The best system would be where the money supply increased at pace with the economy to produce steady low inflation. Hey wait, that is what we have now!
The increases in money supply are not caused "honestly" as you put it, but they still have a better effect than a deflationary gold standard would be.
An honest increase in the money supply would be one which benefits all citizens equally and so would be used for necessary government expenditure on defence, law and order, needed infrastructure etc.
As much as you hate to admit it this would produce better results than a deflationary Gold standard.
Published: April 16, 2008 9:14 PM
Bruce Koerber
What is the real value of the medium of exchange? Is it the same as the nominal value?
When you ponder these questions in the light of subjective valuation you will find that the stock of money is not the medium of exchange and so the real value is not limited by the stock of money.
The elementary step of recognizing the potential difference between the nominal value and the real value is helpful. Also it is important to understand the function of the medium of exchange and the harm that comes from conceptually losing sight of its purpose.
Alchemy was proven to be a pseudoscience and likewise counterfeiting is a pseudo-monetary policy. The alchemist has to lie to convince anyone that he (she) has made gold out of lesser elements. The interventionist has to lie to convince anyone that there is now more wealth!
Published: April 16, 2008 9:55 PM
Peter
Back to (Austrian) Econ 101 for Owen... :)
Published: April 16, 2008 10:03 PM
Owen
Back to Maths 101 for Peter.
If X is exchanged for y and the quantity of Y increases (real goods and services, therwise known as GDP) whilst X remains constant (fixed gold amount) then the exchange value of X in terms of Y will increase.
For Peter who didn't finish year 3 maths, this means that the value of money will steadily increase causing deflation or "a steady decline in prices for real goods".
Amazing what a little common sense yields eh?
Published: April 16, 2008 10:10 PM
Mark B.
A gold standard will be self checking. If gold is reaching an excessive value, more gold production will shift from non monetary to monetary uses of gold. Likewise, if gold is falling in monetary value, production will shift to the non monetary uses of gold.
Not to mention the fact that platinum, palladium, silver and other substances can be moved around as bullion for very large transactions, taking the pressure off of gold.
Yet further, most gold will be sitting in 100% reserve faults, being traded on a paper or electronic ledger or as banknotes, not circulating physically, so there will not be the pressure of actually moving the commodity.
Will there be a mild PRICE deflationary trend. Yes. This is a good thing as it will enhance savings and will benefit the lowest classes of people the most.
Inflationary fiat money, such as the Federal Reserve, is nothing short of the rape of the people by the banks. That is by far the most accurate way to describe what the Fed and the banks are doing to us.
Published: April 16, 2008 10:49 PM
FLC
Dr. Paul is the only politician who speaks reason.
The liberals who are the first to call him a nut are also the first ones in line with their hands out seeking recourse from a system that could never offer it to them.
Published: April 16, 2008 11:23 PM
free_sovereign
Owen
"this means that the value of money will steadily increase causing deflation or "a steady decline in prices for real goods".
Wouldn't a decline in prices for goods make more goods available to more consumers? How is the "value of money" related to the rate of profit? If the objective of producers is to satisfy consumers, wouldn't lower prices be beneficial to both?
Published: April 16, 2008 11:28 PM
fusgerm
Inquisitor says:
Except gold does expand, at around 3 - 5% p.a., if Mark Skousen's figures are correct, so this is an empty objection.
Where do you get this figure from? I googled mark Skousen and gold inflation and got this:
Annual production increases at a steady 1-2% a year
http://www.savingadvice.com/forums/banking-insurance-investing/13048-gold-inflation-market-indicator.html
That is consistent with the figure of 1.7% cited by
http://www.dailyreckoning.com.au/dollars-gold/2006/12/04/
It is also commensurate with world population grwoth over the past 100 years.
Owen says:
Do you know what a deflationary spiral is? It is as bad for businesses as inflation.
The best system would be where the money supply increased at pace with the economy to produce steady low inflation. Hey wait, that is what we have now!
You have this back to front. The GDP increase is mostly a reflection of (monetary) inflation. If you adjust nominal GDP for the increase in the money supply then you get the real GDP.
If gold supply grows at about the same rate as world population growth, then we might expect it to maintain purchasing power quite well.
But suppose that mine supply dried up. In that case the purchasing power of gold might well steadily increase over time. You are right that for people whose mindsets are conditioned to inflation this would come as a shock. But if a drop in prices were generally expected then it would have little effect on the economy other than to lower interest-rates by the expected degree of deflation.
On this, Mises commented:
If the opinion that the prices of all commodities will drop becomes general, the short-term market rate of interest is lowered by the amount of the negative price premium. Thus the entrepreneur employing borrowed funds is secured against the consequences of such a drop in prices to the same extent to which, under conditions of rising prices, the lender is secured through the price premium against the consequences of falling purchasing power.
A secular tendency toward a rise in the monetary unit’s purchasing power would require rules of thumb on the part of businessmen and investors other than those developed under the secular tendency toward a fall in its purchasing power. But it would certainly not influence substantially the course of economic affairs.
Published: April 16, 2008 11:54 PM
Walt D.
I don't want to quote Ralph Nader, so I will quote his father!
Capitalism in the USA will never fail - Socialism will bail it out!
Published: April 17, 2008 12:06 AM
Owen
Mark_B:
You are wrong. Firstly deflation surprises are devastating to businesses, much moreso than inflation surprises.
Secondly, just as the worldwide value of oil would drop precipetously tomorrow if vast supplied were detected underground which would be more than 5 times current known reserves, the same case would happen with Gold. If masses of gold or valuable metals were found in some mine then instantly upon that news the value of all gold, and hence the value of all items valued in gold, would be devalued also. What is the point of this? This PROVES that ALL known reserves of oil are computed into current prices, and so in the same way ALL KNOWN amounts of gold are computed into current gold prices. A melting of a necklace into a gold coin would not alter the value of money relative to gold.
It is called the EFFICIENT MARKET HYPOTHESIS, I thought you would have heard of it being an Austrian. So the quantity of gold and precious metals is fixed excepting only to surprises much the same way as oil is priced.
Guess what? If there were too many surprises you might find gold being the worst possible choice for a curency because it's valoue would constantly wildly swing completely unrelated to any market activities.
Free_Sovereign:
Because the money borrowed against in order to achieve that profit will need to be paid back in lower and lower amounts of dollars. If deflation rates are expected this is ok, but when there is unexpectedly high deflation (which is possible) it could cause many marginal firms to go bankrupt.
To be safe from defaulting on it's debt a firm needs inflation/deflation surprises to always be above the zero inflation rate.
Fusgerm:
"You have this back to front. The GDP increase is mostly a reflection of (monetary) inflation. If you adjust nominal GDP for the increase in the money supply then you get the real GDP."
So I suppose the massive increase in resouirces and good and services used and sold now compared to 50 years ago is a dream? Crap. Economic growth is a real phenomenom and you are one of the only people in the world I have ever heard deny it.
"But if a drop in prices were generally expected then it would have little effect on the economy other than to lower interest-rates by the expected degree of deflation."
...and if that drop in prices was not expected then business paying fixed interest loans over the near term using constantly decreasing income will go BANKRUPT. Then you have the bad result you and Mises are evading.
...and I hate to break it to you but growth in gold stocks of 1.7% is not even clost to global Real GDP growth (you know that thing you don't believe happens) which was above 3% annually for the last 35 years.
Published: April 17, 2008 2:02 AM
esgreat
Owen brought up a lot of interesting points to look at.
I've asked myself this question a lot about the high 'price' of gold once a gold standard is used. Would it be unsafe to wear gold (risk of being robbed), etc?
Regarding the gold standard, countries in the world used the gold as money at different times throughout history. Perhaps a question that can be asked to the commentators over here is what case studies have been done on deflation-related problems during these gold standards?
For instance, during the prosperity of the 1950's (which i hear gold standard advocates talk about), how did businesses deal with deflation related problems?
I believe that if there is a true free market and gold standard, the way we do business will be drastically different. For instance, a business will not commit to taking in debt if there's a risk of deflation. Probably then interest rates will hover around 0-2%? Or maybe some interesting refinancing schemes?
I'm just giving my opinion here so we may open our minds to the possible mechanisms developed by the free market if a gold standard is imposed.
Hope to see some more ideas! :-)
Published: April 17, 2008 6:16 AM
WisR
The previous inflation causes entreprenurial error (both non-purposeful in the case of entrepreneurs that don't know that artificially low interest rates can't last, and purposeful in the case of entrepreneurs or management who are looking to sell out or sell options based on artificial paper profits)
There were long deflationary periods during the 1800s in America were the purchasing power of the dollar doubled in the span of several decades, and the economy kept on growing.
@Owen's second comment:
Entrepreneurs would adjust to the fact that the purchasing power of money would go up over time - you're right about one thing, however, and that is that credit wouldn't be so easy - but guess how it is made easy in today's world? Bankers & borrowers benefit by stealing the value of holders of dollars (retirement account holders, those on fixed incomes, regular labor) and lenders.
Deflationary spirals don't occur in a vacuum, and economic growth is perfectly possible in a society with gradual deflation caused by productivity gains as opposed to sudden deflation which manifests itself as a correction of previous mal-investments (Note that the damage has already been done in the case of this second kind of deflation, it's just not reflected in paper losses yet)
You're arguing against a gold standard without understanding what would take place in it.
@Peter - That's right, Owen needs to read Money, Bank Credit, and Economic Cycles and then get back to us.
@Owen's third comment:
What's wrong with the gradual increase of the purchasing power of money when it is expected, which it would be in a 100% reserve backed system?
What about the huge amount of benefits to be derived for knowing that your currency would hold its value, that retirees could expect the value of their money to go up over time, and that bankers could not misappropriate the real goods of others by expanding the money supply?
@Mark - Amazing how few people realize expansion of the money supply = gradual confiscation of the wealth of the people.
@esgreat - The only gold standard worth discussing is one based on 100% reserves. The one we had in the'50s was the equivalent of a several percent reserve backed system at best, which is not the comparison you should be looking at.
19th century American economic history, where there was a good bit of deflation (mixed in with bouts of inflation for an overall 'steady' price level over 100 years time) and a ton of economic growth. But the numbers and data for this is surprisingly sparse.
Published: April 17, 2008 7:06 AM
fusgerm
Owen writes:
Economic growth is a real phenomenom and you are one of the only people in the world I have ever heard deny it.
What I said was that most of the annual increase in nominal GDP can be explained by (monetary) inflation. I'm not sure how you deduce from this that I am one of the only people in the world to deny economic growth. Have you already calculated real GDP from nominal GDP using money-supply growth as the price-deflator (instead of the conventional price-index), and if so which money-supply measure did you use?
if that drop in prices was not expected then business paying fixed interest loans over the near term using constantly decreasing income will go BANKRUPT
You could say something equally absurd of the current inflationary environment: If the rate of inflation drops unexpectedly then a business paying a fixed interest loan and earning lower-than-expected nominal income (due to a drop in inflation) will go BANKRUPT, since current fixed interest-rates already factor in a higher inflation-rate.
You can be sure of one thing: that gold would maintain its purchasing power far better than the dollar, and that therefore interest-rates would be MORE predictable, not less.
Cheers
Published: April 17, 2008 7:36 AM
Inquisitor
"The best system would be where the money supply increased at pace with the economy to produce steady low inflation. Hey wait, that is what we have now!
The increases in money supply are not caused "honestly" as you put it, but they still have a better effect than a deflationary gold standard would be.
An honest increase in the money supply would be one which benefits all citizens equally and so would be used for necessary government expenditure on defence, law and order, needed infrastructure etc.
As much as you hate to admit it this would produce better results than a deflationary Gold standard."
Owen, you'd best rid of your arrogant demeanour. You did not deal with the fact that the gold standard increases more or less in step with productivity gains.
The current system has nothing to do with increasing at the pace of growth, FYI. Hence Bruce's comment to you was perfectly justified. You do not even know the basics of Austrian econ. An honest increase in the money supply would be one that reflects real variables in the economy, and no more and no less. Central banking is automatically disqualified, to everyone's joy, banking socialists notwithstanding.
esgreat, that faux gold standard is not what Austrians advocate.
Fusgerm, he gives the figure in his Vienna & Chicago. I've given the page citation before on this blog. E-mail him about it if you want to get his response.
Published: April 17, 2008 7:49 AM
Simon
In response to Owen:
Entrepreneurs takes risks. A risk being a risk, how is this risk any different to any other? Anyway, perhaps there is even a way around it by using different legal agreements, or perhaps some insurance. At least if the market is determining the prices then you don't have some arbitrary changes in the money supply. How long's the longest fiat currency lasted? How long's gold lasted?
Published: April 17, 2008 7:54 AM
esgreat1
Thanks for the comments!
I'm an Asian novice who just got into knowing Austrian econ. It seems like I have a lot of homework to do...maybe someone can give me a self-study guide :-p? I've read some articles from Murray Rothbard, but the text from Mises is a little difficult to understand...
In my country there are many advocates of 'Islamic Banking'. I know 'Islam' sounds scary to some people, but from a Google glance it looks interesting.
Firstly, they call for a currency backed fully by gold (Gold Dinar). Next, by definition Islamic banking necessitates 100% reserve banking. Apparently Shariah law prohibits "creation of money from money" and other usury laws.
Any comments on this?
Published: April 17, 2008 8:14 AM
Inquisitor
esgreat, start with Callahan's Economics for Real People and Carl Menger's Principles of Economics. Later move on to Rothbard's What has the Fed done to our money? and Mises' Theory of Money and Credit (hope I got the titles right.) If you have the time either Mises' Human Action or Rothbard's Man, Economy and State are must-reads.
Published: April 17, 2008 8:42 AM
fundamentalist
Esgreat: “I've asked myself this question a lot about the high 'price' of gold once a gold standard is used. Would it be unsafe to wear gold (risk of being robbed), etc?”
Good questions! Keep in mind that gold, in dollar terms, has always been high and always will be. Without a gold standard, the dollar will continue to lose value and gold will become even more expensive than it is. Under a true gold standard, the dollar will quit losing value and gold will stop appreciating.
Esgreat: “Regarding the gold standard, countries in the world used the gold as money at different times throughout history. Perhaps a question that can be asked to the commentators over here is what case studies have been done on deflation-related problems during these gold standards?”
You have to go back to the middle ages to find a pure gold standard. When Spain stole the gold of American natives in the 16th century, the flow of gold into Europe caused mild inflation for almost the whole century. In the 1800’s, banks in the US regularly got around the gold-enforced limitations on the money supply by printing boat loads of paper money and causing regular financial panics. Every single instance of deflation in the 1800’s came from the collapse in the value of paper money, not the use of gold.
Esgreat: “For instance, during the prosperity of the 1950's (which i hear gold standard advocates talk about), how did businesses deal with deflation related problems?”
A lot of confusion is caused by not distinguishing between a gold standard and fractional reserve banking. A pure gold standard is one in which the paper money is redeemable in gold and banks must keep 100% reserves on demand deposits. If your gold standard is limited to gold backing, but you keep fractional banking, you’re still going to have booms and busts like we have always had. The business cycle began in the Italian city states, such as Venice, around the 15th century, a time when gold and silver coins were money and no one even thought of using paper money. Bills of exchange were still not very common. But bankers who stored gold coins for people figured out that they could loan their depositors gold to other people with simple accounting entries. People found it safer to make payments to others by having their banker deduct from their account and add to the account of the person the wanted to pay rather than carry gold coins around. It worked well until bankers had loaned out 50 times more gold than they had stored and someone defaulted on a loan. Then the whole house of cards came tumbling down. I’m not aware of serious deflation during the 1950’s, but if it occurred, it wasn’t because we supposedly were on a gold standard, but because of fractional banking.
Esgreat: “I believe that if there is a true free market and gold standard, the way we do business will be drastically different. For instance, a business will not commit to taking in debt if there's a risk of deflation. Probably then interest rates will hover around 0-2%? Or maybe some interesting refinancing schemes?”
As several other have pointed out, the money supply will continue to grow at 2-3% annually, according to Reisman, or faster according to others, through mining. If the economy grows at 2-3% annually, there will be no deflation or inflation. But let’s consider the benefits of mild deflation. They’re obviously hypothetical since we have no history of such a period, but I think we can guess what it might be like. Consumers would be less likely to borrow for durable goods and save for them instead, though they would probably borrow for housing. How would they pay for their house with falling prices? They would have to take small wage cuts every year, just as they expect small increases now. But even as their wages lag behind inflation today, and they become poorer as a result, the wage cuts would probably lag behind deflation and make wage earners wealthier each year. In other words, the falling value of their house would be offset by the rising value of their wages. Still, the mortgage amount would remain fixed, but with increased savings the interest rate would be low. And people would have an incentive to make a large downpayment and pay off the loan soon.
If the deflation was consistently 2-3%, businesses could plan for it as they do for mild inflation. But they would be inclined to invest savings rather than borrowing money, just as consumers are. In short, everyone would have the incentive to save instead of borrow. With increased savings, interest rates would be extremely low, making borrowing for new business ventures much easier.
But probably the best thing about deflation would be the ending of the redistribution of income that inflation causes. With inflation, those who receive the new money first (usually government or financial firms) spend it on assets before the new money causes price inflation. Those who receive the money last, usually wage earners, get it after prices have gone up and the money is worth less. So wealth transfers from wage earners to government employees and financial firms. That’s one reason that people in financial services enjoy the highest average wages in the nation.
Published: April 17, 2008 8:44 AM
MushroomCloud
All these people screaming about deflation when using gold standard have no idea what they are talking about.
They have their minds so clouded by fiat money system that they are trying to aplly it to everything else.
When using gold standard the whole economy would be based mainly on exchange (like it was for millenia), not on LOANS so there would be no need for increasing the money supply!
Do you advocates of fiat money really beleive that truly free market using gold as exchange would destroy itself? - I think it has been proven countless times in history that more freedom always brings more prosperity.
Published: April 17, 2008 9:38 AM
newson
owen says:
"It is called the EFFICIENT MARKET HYPOTHESIS, I thought you would have heard of it being an Austrian."
so you've swallowed the emh, hook line and sinker, eh? perhaps, with the enormous insight you've gained through emh, you'd like to quote us the odds of warren buffett achieving his investment returns for the last fifty years on chance alone? finance graduates crack me up!
Published: April 17, 2008 10:10 AM
PR
I see the word "deflation" used two different ways here. Just as inflation is used to refer to rising prices or an increase in the money supply, deflation can mean the reverse of either.
Slow, steady price deflation would be the likely result under a 100% reserve gold standard. I would argue that this is benign. It would be just like the computer industry is today, for example, but over all goods and services. Wages would not necessarily fall either, since labor productivity would be increasing.
On the other hand, monetary deflation could only happen if gold were physically destroyed or lost. Sure, it's theoretically possible, but how likely is it compared to the near certainty of bank runs or collapsing credit bubbles under fractional reserve or central banking?
The best way to avoid sudden contractions in the money supply is to not artificially expand it beyond the supply of real resources in the first place.
Published: April 17, 2008 10:29 AM
newson
to mike sproul:
if we're arguing about semantics, here's a typical definition of fiat i dragged from the web:
1. An arbitrary order or decree.
2. Authorization or sanction: government fiat.
[Medieval Latin, from Latin, let it be done, third person sing. present subjunctive of fierī, to become, to be done.]
your rbd argument is that the currency owes its value due to its backing. whilst there is an intrinsic component in the dollar's value, there must also be a percentage value attributable to fiat, otherwise the government would tolerate other monies. instead, they are treated as investments, and taxed accordingly.
Published: April 17, 2008 10:42 AM
newson
"pr" is absolutely right. i try to always speak of rising or falling prices, as the classical definition of deflation/inflation has been corrupted.
it sounds pedantic, but i don't think austrians can be too careful in not using the "i" and "d" words for anything but monetary phenomena. clarity of meaning must be a first step in educating the lay public on the money swindle.
Published: April 17, 2008 10:55 AM
Inquisitor
PR, deflation (in its proper sense) can occur whenever the supply of gold relative to demand for it falls (or conversely, demand for it increases, with all else remaining equal.) The idea is that there is not enough gold going around. But as I've pointed out, gold does increase enough to prevent such a scenario, and besides, other metals can complement it if worse came to worse. I think Mark, Fusgerm, WisR and Fundamentalist have all pretty much demonstrated so far that this is a bogeyman.
Published: April 17, 2008 11:23 AM
Mike Sproul
Newson:
"whilst there is an intrinsic component in the dollar's value, there must also be a percentage value attributable to fiat, otherwise the government would tolerate other monies."
Do governments have a choice in the matter? Does Mexico prevent its citizens from using dollars? Currency crosses borders all the time. And what about checking account dollars, credit card dollars, gift certificates, overdrafts, etc.? The existence of that kind of derivative money obviously affects the demand for paper dollars, and would, on quantity theory principles, drive down the value of the paper dollar, with no stable solution short of zero value. This puzzle disappears once you recognize that the value of the paper dollar is determined by the amount of backing at the Fed--not by the supply and demand for dollars.
Published: April 17, 2008 11:34 AM
Oil Shock
Price deflation and economic growth can co-exist, and they make for a better marriage than between monetary inflation and economic growth.
Economic growth between 1801 and 1900 was around 5400%. There was a mild deflationary trend in prices.
Economic growth between 1901 and 2000 was around 2300% and dollar lost 97% of its value.
Published: April 17, 2008 1:23 PM
Oil Shock
Price deflation and economic growth can co-exist, and they make for a better marriage than between monetary inflation and economic growth.
Economic growth between 1801 and 1900 was around 5400%. There was a mild deflationary trend in prices.
Economic growth between 1901 and 2000 was around 2300% and dollar lost 97% of its value.
Published: April 17, 2008 1:25 PM
fundamentalist
Owen: “If masses of gold or valuable metals were found in some mine then instantly upon that news the value of all gold, and hence the value of all items valued in gold, would be devalued also… If there were too many surprises you might find gold being the worst possible choice for a curency because it's valoue would constantly wildly swing completely unrelated to any market activities.”
Gold has lost value in every major gold strike. The Spanish learned that in the 16th century. It happened in California during the gold rush of 1849. But such events are rare and the effects temporary. Gold has never caused problems like the hyperinflations of the 20th century. The alternatives for money aren’t between perfect money and not perfect money, but between the best of all imperfect forms of money. Gold has proven itself as the best alternative for millenia. Paper money, or any form of money controlled by the government, has proven to be the absolutely worst form. Western nations have experimented with paper money for the past 400 years and met with disaster every single time without exception. In the 20th century, the state convinced people that the Fed would solve the problems with paper money, so people quit discussing it. But the 20th century has witnessed the worst financial crises in the history of mankind. What are the chances of another huge gold strike happening? Far less than those of a major oil find happening.
Published: April 17, 2008 3:30 PM
Donald Goward
Our banks should be cut out as middlemen, since they have no money.
Published: April 17, 2008 4:23 PM
Bruce Koerber
Since there is much discussion about inflation and deflation I am curious if anyone would like to read my two blog entries about recession and depression. I would be interested in your feedback. Here they are:
1. http://moneyandethics.blogspot.com/
2. http://economicwisdom.blogspot.com/
Published: April 17, 2008 5:16 PM
newson
mike sproul says:
"Do governments have a choice in the matter? Does Mexico prevent its citizens from using dollars? Currency crosses borders all the time. And what about checking account dollars, credit card dollars, gift certificates, overdrafts, etc.? The existence of that kind of derivative money obviously affects the demand for paper dollars, and would, on quantity theory principles, drive down the value of the paper dollar, with no stable solution short of zero value."
that there isn't demand for paper money wasn't my contention, but this is merely a logical consequence of legal tender laws. yes, mexicans have held dollars as a superior store of value vis-a-vis the peso, because traditionally the fed has conducted a tighter monetary policy than the mexican central bank. but mexicans cannot pay taxes in dollars anymore than americans can settle with the irs in roubles, and all foreign currency holdings are subject to taxation, so there are significant obstacles to competing monies.
Published: April 17, 2008 6:21 PM
fusgerm
Inquisitor says:
Fusgerm, he gives the figure in his Vienna & Chicago. I've given the page citation before on this blog.
I have found the reference on p145 of my paperback copy of Vienna & Chicago:
The amount of world gold stocks increases every year 1 to 5 percent, depending on annual production (Skousen 1996:86). Even the gold rushes of California, Australia and South Africa never increased the aggregate world gold stock by more than 5% in any one year.
Now this statement certainly tallies with the estimate that mine supply increases on average by 1-2% p.a. Even during gold rushes, the supply did not exceed 5% pa, so we would expect that at other periods it would be much lower.
I would be content to leave the matter there, were it not that Skousen also includes a chart copied from Rufus S Tucker[1934] which contradicts his own statement: it shows mine supply increase peaking in 1853 (the height of the Californian gold rush) at 12% pa.
Does anyone have access to the raw data which shows total above gound supply in each year since 1800 (say)? It seems fairly important. An average mine-supply increase of 5% pa would be grotesquely high. By comparison, M1 has grown at an average annual rate of approx 5.5% since 1960, M2 by 7%, and M3 by 8%.
Published: April 17, 2008 6:36 PM
Inquisitor
I'm afraid I do not.
Published: April 17, 2008 6:48 PM
Ryan
I am new. I'd like to direct my comments toward Owen for two reasons: he seems to be very enthusiastic, and he has made comments that sound as though he approves of the mixed economy in the United States.
Taking us back to the question of the blog: has capitalism failed? The answer is no. Many have made comments regarding the level of "success" of the United States economy. However, I think that anyone can easily see that the United States has never allowed capitalism and has, in fact, imprisoned any that have attempted to practice capitalism (by failing to pay taxes). As Murray Rothbard wrote, the full expression of capitalism is anarchy and the full expression of anarchy is capitalism.
In order to experience capitalism, one must be experiencing anarchy. Therefore, no American anecdote can serve to answer the question of the blog. However, the very goals and nature of capitalism can very directly and precisely answer the question.
In order to determine the success or failure of capitalism, we must determine its goals. Most of the bloggers have been focusing on the utility of the American system. However it is not even necessary to examine the utility of a capitalistic system, because utility is not the proper goal of capitalism: it just so happens that the ethical system of capitalism tends to achieve the goals of utilitarianism. The proper goal of capitalism, as Rothbard points out in his For a New Liberty: The Libertarian Manifesto (available from mises.org in pdf and audio format), is freedom from aggression against the property of individuals. Capitalism is a goal in and of itself: if we were to establish capitalism, we would have already achieved our goal of capitalism, that is freedom from coercion.
So, capitalism has not failed, for the following reason: it is not primarily a means to some sort of utility, but it is the end that we seek. If capitalism is established, it's goal is accomplished.
Now that we've examined the amazing and insurmountable virtues of capitalism. I'd like to flatly point out that our mixed economy has failed, because it, inherently is not achieving the end of capitalism. It continues to uphold the interests of our oligarchical government, rather the interests of individual A and individual B and individual C, &c.
The only possible system that can succeed is capitalism, because it is the end; the only possible system that does not inherently fail is capitalism, because it is the end.
Published: April 18, 2008 12:26 AM
WisR
@PR - That is a beautiful statement on how deflation of the money supply under a 100% reserve based gold standard cannot happen.
@ Ryan - Sure, but you have to admit that the US in the 19th century is probably the closest example of capitalism that history gives us. And it did beautifully, raising US to the most powerful (economically) country in the world.
@Oilshock - Where do you get those growth numbers? I've been looking for specific growth numbers of the US economy (no matter the measure) for a while online, and can't find much. Do you know where you can get some form of yearly numbers?
Published: April 18, 2008 4:10 AM
Owen
the answer is to take away from Banks the ability to create money but not to fix the currency to a gold standard.
There are better fixed regimes than gold.
There can be electronic money held on central banks systems, the total quantum of which cannot be changed or else is constantly increased by a low percentage such as 5%. Such systems replicate a gold standard but eliminate the potentially disastrous effects of deflation on the economy. Increases in the money supply can be spend by the government on basic items such as courts, defence, police and infrastructure.
Published: April 18, 2008 11:06 AM
fundamentalist
Owen: “the answer is to take away from Banks the ability to create money.”
Good luck with that! It will ever happen. The banking lobby is too strong and the politicians and economists too ignorant. Only Austrian economists see the problem with fractional banking. Mainstream econ denies it’s a problem at all because in their eyes, money is neutral. Besides, the Dutch Republic outlawed fractional banking in the 17th century and still had financial crises. In order to avoid carrying around gold coins, businessmen used bills of exchange, essentially IOU’s. At one point, the monetary value of the bills of exchange exceeded 20 times the total stock of gold money in the nation. When one debtor defaulted, the entire system collapsed and caused a major crisis. Laws against fractional banking are too easy to subvert.
Owen: “… but not to fix the currency to a gold standard There are better fixed regimes than gold… There can be electronic money held on central banks systems, the total quantum of which cannot be changed or else is constantly increased by a low percentage such as 5%.”
Friedman proposed the computer solution decades ago. But how do you know it would be better than gold? It has never been tried before and is purely hypothetical. As with all hypothetical things, we can’t anticipate the myriad of problems it might cause. Why opt for a hypothetical solution when gold has proven itself for millenia? How much evidence of the superiority of gold as money do you need if 5,000 years isn’t enough?
Published: April 18, 2008 11:37 AM
Joe Stoutenburg
Owen, did you just back pedal in your last comment???
A more general comment:
All human action is risky. As someone said, we can't consider alternatives between perfect and imperfect money. We can only consider best alternatives. Even given a true free market with a gold standard, if (as an illustration) a calamity strikes in which food becomes scarce, you would rather have owned food than gold (unless you have found a way to make gold edible and nutritious).
I think that most people here would agree that the first matter is to remove any element of unjust coercion from every aspect of human life. After that is done, people like Professor Sproul can have their day if they'd like. Just don't throw me in jail if I refuse to use your money or pay your tribute in your currency.
Published: April 18, 2008 11:58 AM
Oil Shock
I am opposed to the idea of government spending the money into the economy. It is a license for government to go overboard with spending sooner or later. Government can change rules in a heart beat (5% which I think is too fast will soon become 6,7,10 15).
WisR,
I found the data set from the following site
http://www.measuringworth.com/usgdp/
Published: April 18, 2008 12:17 PM
John
Just something to think about: since the birth of the United States, there have been ongoing arguments over capitalism vs socialism. There have been arguments over going gold or not. One thing has remained constent though, throughout the centuries; the United States of America is still the most diverse (both economically and socially) and properous country in the world. Those who think we can live fully engaged (100% on either side of the isle), are either hopeless romantics or out of touch.
Published: April 18, 2008 2:40 PM
Owen
A computer system would be better than gold simply because it can exactly replicate gold and/or adjust money supply slightly to eliminate adverse effects of Gold.
fundaMENTAList:
Austrians are NOT the only people who found the fault with fractional reserve banking nor were they the first. Have a look on www.prosperityuk.com nimwit.
With regard to an electronic system being vulnurable to government interference..um...duh...how is a gold standard any less vulnurable? They both rely on the same government to support and defend them. We are talking about the same government right?
Published: April 18, 2008 2:51 PM
Inquisitor
Unless the government can magically boost the supply of gold, a commodity standard is a much greater shackle on it than anything else.
Published: April 18, 2008 4:53 PM
Kevin B
Owen,
You're going to have to convince everyone that the electrical charges of the computer system you refer to are EXTREMELY valuable. Be prepared for a daunting task.
Published: April 18, 2008 6:42 PM
fundamentalist
Owen: "A computer system would be better than gold simply because it can exactly replicate gold and/or adjust money supply slightly to eliminate adverse effects of Gold."
You don't and can't know that. A computer controlling the money supply is total fantasy. No one has ever tried it. The only thing that you can guarantee about a computer-controlled money supply is that it won't work the way it's supposed to on paper. It will have many unintended consequences.
Governments have always tried to control money. From the first day that the ancient Babylonians coined gold money, they began diluting the gold with base metal. But at least with gold as money, government's attempts to ruin it are visible to all and the people have no one but themselves to blaim if they allow the government to do it. But with a computer, owned by the government, no one will know until it's too late what the government has done.
Published: April 18, 2008 6:50 PM
Francisco Torres
With regard to an electronic system being vuln[e]rable to government interference..um...duh...how is a gold standard any less vuln[e]rable? They both rely on the same government to support and defend them.
You're making a wrong assumption - that government makes money, and use of money, happen, but this is not so - government imposes A currency by way of legal tender laws, but only people decide what to use as money. Gold does not require a government to function as money. Besides, historically, the State has been the greatest enemy of gold as money, by way of substitution, debasement or frank expropriation.
A computer system would be better than gold simply because it can exactly replicate gold and/or adjust money supply slightly to eliminate adverse effects of Gold.
A computer system does not "replicate" gold any more than a checkbook does. Computer systems are accounting systems, nothing more.
As for the supposedly "deflationary" effects of gold, the deflationary effect is a result of production, Owen, and not some magical effect related to gold itself. If you have a fixed amount of gold and an increasing amount of, let us say, t-shirts, the value of the t-shirt will lower in terms of the quantity of gold. Why would this be a "bad" thing, you will have to explain, instead of just asserting it out of pure faith.
Published: April 18, 2008 6:51 PM
Owen
The bad thing Francisco is called deflation. Have a look at it in a dictionary. It can be a bad thing. Just as can high inflation or inflation shocks.
If a gold currency was not influenced by a government at all, then the vaults who held the gold would go straight back to printing off a few extra gold-convertible notes for themselves again. Fractional reserve banking was a natural phenomenom before governments even attempted to regulate currencies. Ever heard of a gold smith? Money would continue to be issued in fiat and an unstable world financial system would still result. Go back to economics 101. There needs to be minimal government involvement in order that fractional reserve banking DOESN"T HAPPEN.
An electronic currency is backed by the government's control of the country and the ability to raise taxes.
A gold currency will inherenty expand exponentially and unsustainably because private banks have an incentive to practice fractional reserve banking. What is to stop them? If one bank did it they could get found out but if there were say 4 banks in a country like NZ then they could collude to exponentially increase the money supply at the expense of the people of the country. And with Libertarian no-restrictions on the economy this would be legal.
Banking cartels becoming the richest in the world and thereby dominating the world through their wealth would result because they could endlessly print money and there would not be a possible "run"that could cripple the cartel which could share gold reserves between it to avert any run.
Banking needs to regulated in some way such as at the very least a legal fixed gold to dollar price as in the bretton woods system. Without this we would head towards the abyss...fast.
Therefore, electronic fixed or steadily increasing currencies backed by the country's government is a far better option than a free-market, gold-backed currency.
Published: April 18, 2008 8:30 PM
P.M.Lawrence
Fundamentalist, you wrote "When Spain stole the gold of American natives in the 16th century, the flow of gold into Europe caused mild inflation for almost the whole century" and similar things. Actually, that and the silver flow acted well into the 18th century; according to Belloc's "The Servile State" the total inflation was around 200% (nominal prices rose threefold), which is only a low annual rate (by our standards); and it was not mild - it had serious effects on groups with revenues set in nominal terms, like the English monarchy. The way it worked out, certain classes in middleman countries like England and Holland made lasting gains, while countries at the beginning and end of the value chain (Spain, Portugal, Poland, Turkey, etc.) were impoverished either by having their productive base hollowed out or by exporting real commodities for currency that was declining in value.
Owen, bullion standard deflation is self regulating because of Real Balance Effects (particularly the Pigou Effect, but see also the Keynes Effect). Problems only come up with shocks (basically, while the balances are building up). Fiat currency issues by private actors are a non-problem, if they aren't put in a privileged position; if they try it to the extent that it is material, they go broke as people stop accepting their currency. At lower levels, it is constructive when they are implementing "Real Bills Doctrine" but backing it with their own real assets as an ultimate guarantee or insurance - the doctrine is only unsound to the very real extent that currency issues are backed by assets that turn out not to have the value supposed after all. (And, of course, the real economic activity that generates flows through to bullion production too; bullion is an asset class.)
Published: April 18, 2008 10:46 PM
Owen
P M Lawrence,
So if the banks in a large part of the USA decide to form a cartel and inflate the supply of gold backed notes, exponentially expanding the money supply...you say that that bank will get found out?
In New Zealand today all the banks print money hand over fist and no-one is bothering to initiate co-ordinated action to make them bankrupt. Why? People can't be bothered. You would need to co-ordinate a large number of the population to act at exactly the same time. People do not want to hold millions of dollars of gold. They put it in the banks to keep it safe. They don't want it at home. There would be a huge spate of burglaries.
Eventually banks would consolidate into large cartels or mega-banks and would be practially immune to "runs" because of their size. All the bank needs to do is carefully limit its individual exposure to any one creditor to less than 20% of its total gold reserves and it could comfortably multiply it's ussued currency by 5 times. It has no obligation to let anyone know how much gold it has anyway.
Then it does a secret deal with an overseas bank in an unnamed country to get a ":reserves guarantee" and it can then go and multiply its issued currency by ten times.
Then it does this again and again as banks consolidate internationally and we end up with one or two big banks that collude tyo endlessly print money because it is not possible for internation co-operative action to bring them down and there is no law to force them to reveal how much gold they actually have.
So the system crashes P M Lawrence. Do you know why? Because the gold system requires a government support to succeed and prevent the above scenario from happening.
And if you conceed that government support is needed then gold backed currency is not the best option - electronic fixed or steadily increasing currency is.
Published: April 19, 2008 1:17 AM
WisR
Owen - Why have you not responded to the definitions of different types of deflation spelled out above.
One kind is a gradual fall in prices in relation to money.
One kind is a correction and adjustment to previous inflation of the money supply, an inflation that could not have occurred without fractional reserve banking and bankers expanding the money supply - creating money out of thin air.
The first kind is the only kind that would happen in a true 100% reserve banking system (one where abuses did not occur, yes this has rarely happened in history)
The second is a result of previous artificial expansion of the money supply.
Are you saying the first kind is bad? And if so, why? You still haven't explained why besides saying things like 'deflation can be bad' and 'we could enter into a deflationary spiral'. Actually, the only deflationary spirals that have ever occurred took place after a large artificial expansion of the money supply.
Here's a study you might find interesting, though you have to pay for more than just the summary:
http://www.nber.org/digest/apr04/w10329.html
In Good Versus Bad Deflation: Lessons from the Gold Standard Era (NBER Working Paper No. 10329), authors Michael Bordo, John Landon Lane, and Angela Redish look back at deflationary periods of the late 19th century. These economists find that, contrary to conventional wisdom, deflation may well be more positive than negative.
Bordo, Landon Lane, and Redish focus on the price level and growth experience of the United States, Britain, and Germany during the late 1800s. This period, not unlike the present era, was notable for low inflation or even deflation, for rapid expansion resulting largely from technological innovation, and for a credible and internationally accepted gold standard. The researchers work from the premise that deflation might be good, bad, or even neutral. Good deflation, they maintain, occurs when aggregate supply of goods (say from technological advances, improved productivity, and the like) increases faster than aggregate demand, resulting in falling prices. Bad deflation in turn occurs when aggregate demand falls faster than any growth in aggregate supply. Negative money shocks, for example, that are non-neutral over a significant period - such as occurred later during the Great Depression -- would generate "bad" deflation. Indeed, the authors say, such might be the case in Japan today. A neutral impact o f deflation, meanwhile, might occur where monetary neutrality holds despite negative money shocks.
The researchers identify separate "supply shocks," "money supply shocks," and "non-monetary demand shocks" on output and prices. Their analysis is grounded in a model of money supply under the international gold standard. Their results indicate that deflation in the three leading industrial nations in the late 19th century reflected both positive aggregate supply shocks and negative money supply shocks. Yet the latter had only a minor effect on output. The evidence thus suggests that deflation in the 19th century was primarily good, or at the very least neutral.
Something to think, at least.
Published: April 19, 2008 1:52 AM
Owen
WisR:
I quite clearly said that the deflationary shocks were the ones which caused the problems. Constant low deflation can be dealt with in much the same way as steady low inflation.
You referred to these as "Negative money shocks"
"for example, that are non-neutral over a significant period - such as occurred later during the Great Depression -- would generate "bad" deflation."
You obviously didn't read my posts. You have to go right back up to the top and start again.
Published: April 19, 2008 2:12 AM
scott t
for clarity, why not just make a habit of saying 'price inflation/deflation' or 'monetary inflation/deflation'.
Published: April 19, 2008 3:44 AM
TLWP Sam
I know I said this before but isn't the obvious alternative to paper money be gold and silver coinage? Paper or precious metal? . . .
Published: April 19, 2008 7:45 AM
Inquisitor
"Go back to economics 101. There needs to be minimal government involvement in order that fractional reserve banking DOESN"T HAPPEN."
Assertion upon assertion... no, we don't need "regulation". What we need is to get the government out of meddling with money. Regulation is fiction concocted by economists who cannot handle much else than numbers. Stop trying to rationalize government on such flimsy accounts. Familiarize yourself with texts on the gold standard and free banking, rather than telling others to learn basic econ...
Published: April 19, 2008 7:52 AM
Inquisitor
Owen, could you actually provide an example of such a cartel that lasted, WITHOUT government aid, as opposed to being the fiction of overimaginative individuals?
Published: April 19, 2008 7:55 AM
P.M.Lawrence
Owen, of course the banks would get away with it under your scenario - they have the privileges to consolidate their position. Without those, of course they would get found out; their cartel wouldn't hold up, and people would spot things and start bank runs and so on if they tried to go it alone - the customers would have somewhere else to go. We can see from history that bullion systems do not need government support to make them work; they were how things were done before governments intervened.
Published: April 19, 2008 8:23 AM
fundamentalist
PM Lawrence: ", that and the silver flow acted well into the 18th century;"
Thanks! I didn't know that. Very interesting.
PM Lawrence: "The way it worked out, certain classes in middleman countries like England and Holland made lasting gains, while countries at the beginning and end of the value chain (Spain, Portugal, Poland, Turkey, etc.) were impoverished either by having their productive base hollowed out or by exporting real commodities for currency that was declining in value."
I'm not so sure about that interpretation. The gold did end up in the Dutch Republic and England, but that was because they grew their manufacturing base rapidly while the other countries, especially Spain, continued to rely on plunder and agriculture. The countries of the old Roman Empire still held agriculture in the highest esteem while commerce and manufacturing were virtually despised. The Ottoman Empire continued to grow economically; it was still a wealthy super power well into the 18th century. I don't think the Ottomans and Spanish became poorer; they just didn't grow as fast as the two countries where capitalism was born.
Published: April 19, 2008 9:23 AM
fundamentalist
I'm afraid de Soto, in his book on banking, would agree with Owen on the ease of fractional banking. De Soto points out that it's difficult for a single bank to carry out fractional banking. But several banks working together have less of a problem. If you extend the reach of cooperating banks to the entire nation, you in effect have the Federal Reserve. So national banks, like Bank of America with thousands of branchs, would have the same effect on money as does the Fed. To stop that, the government would have to limit the number of branches a bank can have. That would be the case in free banking anyway. Otherwise, the government would have to impose a 100% reserve requirement. In either scenario, you have a lot of government involvement in the banking industry.
I see the chances of either happening as about those of a snowball in hell, because only Austrians think the money is not neutral. Meanwhile, we should all just accept the mess and learn to make money off it.
Published: April 19, 2008 9:31 AM
Francisco Torres
Owen,
If a gold currency was not influenced by a government at all, then the vaults who held the gold would go straight back to printing off a few extra gold-convertible notes for themselves again. Fractional reserve banking was a natural phenomeno[n] before governments even attempted to regulate currencies. Ever heard of a gold smith? Money would continue to be issued in fiat and an unstable world financial system would still result. Go back to economics 101. There needs to be minimal government involvement in order that fractional reserve banking DOESN"T HAPPEN.
There is nothing inherently wrong with fractional reserve banking as long as two conditions exist: one, the bank has the capability of paying back his depositors by borrowing or liquidating, and two, there is no government interference in the form of bail outs or legal defaults (allowing banks to stop paying back its debtors), which is the same as legalizing fraud. Fractional reserve banking is a dangerous business even if it “naturally” occurs, since there are inherent risks that may be too large for many investors and stockholders. However, it is a fact that precisely because of government interference (in the money supply and in the form of regulations), fractional reserve banking is the norm today and more prevalent than even before. The reason is that governments can protect banks from having to liquidate (going bankrupt) which generates the moral hazard we see today. Fractional reserve banking is prevalent because of government and not despite it.
About fiat currency, you are confused about the term: a bank issuing a note that has no backing in specie is NOT fiat currency – it is still a promise to pay in specie whether the bank can do it or not. Fiat currency or fiat money is an issuance by government mandate, meaning that the issuer does not have an obligation to pay in specie and it mandates people to use it to pay debts and taxes – it is money “because I said so”, hence, fiat
An electronic currency is backed by the government's control of the country and the ability to raise taxes.
Raise taxes to be paid in what, the same electronic currency? This is circular thinking. The government still issues a currency in some form of promise to pay (the Federal Reserve Notes), because economic calculation is done on a currency base, and not in numbers stored in a spreadsheet. I insist that electronic currency does not exist, that you are thinking of the accounting system that credits or debits money from bank accounts, but the bank account still accounts for bills and coins.
A gold currency will inherent[l]y expand exponentially and unsustainably because private banks have an incentive to practice fractional reserve banking. What is to stop them?
Bankruptcy, for one – a note is still a promise to pay, otherwise it is fraud. What stops banks from “infinitively” expand the supply of notes? What stops then is the potential to borrow from other banks to pay back debtors. The issuance of bank notes against gold that does not exist will make the notes lower in value in the market against the same gold, enticing people to withdraw gold for immediate purchases. The issuance of notes does not happen without consequences.
If one bank did it they could get found out but if there were say 4 banks in a country like NZ then they could collude to exponentially increase the money supply at the expense of the people of the country. And with Libertarian no-restrictions on the economy this would be legal.
Owen, they would still have to pay back in specie when the depositors come to collect their savings. Remember that notes cannot be issued from nothing, otherwise people would not use banks or accept their notes. The ONLY organization that makes people accept their notes by fiat is the State, not banks.
Banking cartels becoming the richest in the world and thereby dominating the world through their wealth would result because they could endlessly print money and there would not be a possible "run" that could cripple the cartel which could share gold reserves between it to avert any run.
Owen, the problem is that this would not go unnoticed. An “infinite” number of notes would create an inflation problem, making people take their savings out of banks and place them in investments or in immediate purchases – that would generate the bank run. Also, a banking cartel is a silly idea, that stems from the assumption that business people would abandon their preferences in order to agree with others to limit their market share – that does not happen in a free market, especially if some banks do not agree to join the cartel.
Banking needs to regulated in some way such as at the very least a legal fixed gold to dollar price as in the [B]retton [W]oods system. Without this we would head towards the abyss...fast.
This argument begs the question, Owen: why do you assume the dollar needs to be fixed to a gold price, and what does that have to do with regulating banks? Why can’t the State regulate banks and leave the gold alone, or why do you assume banks need to be regulated in the first place? Again, you are looking at this in the wrong way - the problem is not gold, it is government interference of the market by issuance of fiat currency.
Therefore, electronic fixed or steadily increasing currencies backed by the country's government is a far better option than a free-market, gold-backed currency.
I have not read a single convincing argument that would lead to this conclusion. Therefore, your conclusion is a non sequitur.
Published: April 19, 2008 1:33 PM
Owen
Inquisitor:
You refuted my conclusion without adressing any ofthe premises upon which it is based. Therefore your refutation is not valid.
Francisco Torres:
You need to leard how banks work mate. When someone withdraws their money to buy something then the shop they buy from will then deposit that money. Guess where? In bank! And if the bank has a monopoly of over any geographic area then simply deciding to spend your money will not change a thing.
A fractional reserve bank can only be "found out" as you say if EVERYONE does it at the same time. This is more and more unlikely the larger and more 'cartelised the banking inductry gets.
Remember because of the nature of the banking product (money) the natural size of banks is always lager and larger not smaller. The smallers ones get swallowed up. That is why in Australia they have the "Four Pillars" law preventing the four major banks from merging or being sold. Because without government prevention this would happen.
Face it. Frational reserve banking is the natural state of the banking industry.
Published: April 19, 2008 6:12 PM
Inquisitor
Owen, I don't waste time refuting assertions. As I said, I want an actual example of such a cartel that has no government propping it up, and not just half-baked reasoning. All you've done so far is assert, ad nauseam.
Published: April 19, 2008 6:30 PM
Inquisitor
BTW, on this monopoly BS please take the time to read Dominick Armentano's works, where he eviscerates the case for the "anti-trust" myth.
Published: April 19, 2008 6:32 PM
scott t
i dont know how the term bank derived.
if the goldsmith at first had fully backed gold receipts - then i guess it wasnt a bank.
if the term bank itself means holding fractional reserves of some sort then thats what it means. i guess the 100% backed reserves alternative would be called a "gold warehouse" or or 'gold storage and investment.'
the storage terms (would be contractually spelled out.)
if you made a deposit of 100 grams of gold and let the gold warehouse lend out 10 grams (risk capital) to be repaid with interest, well, you would still have 90 grams in your gold holding and hopfuly the 10 grams would be repaid to the gold warehouse at a profit.
is that how 100% reserves would work?
Published: April 19, 2008 6:46 PM
Owen
Inquisitor:
"I don't waste time refuting assertions." Sounds like the words who has no idea about how to carry on an aduklt argument.
The petrol companies are prevented by the government of New Zealand from acting as a cartel.
They are not supported the the NZ government at all. They face only regulation restraining their actions.
They have been accused of increasing prices in concert because it benefits them all. It is obvious that they do this because it is in their best interests. So would banks.
So consider this your example. And you are refuted.
Published: April 19, 2008 7:38 PM
Inquisitor
Your attempts at argumentation thus far have been lacking, so the fact that anyone here even bothers with you should be viewed as charity at best. What I'll consider it as is an attempt at evasion, as I asked for an example of a cartel that formed and remained stable without government aid, not speculative claims regarding cartels that allegedly would've formed, which is what anti-trust theorists claim but rarely, if ever, try to prove. I am asking for proof that, absent government aid, such cartels would be stable. D. Armentano has given good empirical and theoretical reasons to doubt this.
Published: April 19, 2008 8:00 PM
Clemence
Inquisitor, I don't find your arguments convincing at all, and BTW there is not enough gold *physically* in the world to cover all transactions and savings. Perhaps 100 years ago, yes.
Published: April 19, 2008 8:16 PM
Mike Sproul
Francisco Torres:
"Raise taxes to be paid in what, the same electronic currency? This is circular thinking. "
I'm not sure if this is what you meant, but there's a sense in which this is not circular. In 1690, Massachusetts paid its soldiers in newly-issued paper shillings that were declared acceptable for taxes in lieu of silver shillings. This tied the paper shilling to the silver shilling, as long as Mass. was capable of collecting taxes. But this was not always the case, so the paper shilling fell relative to the silver shilling. Mass. then issued new paper shillings and lent them in exchange for IOU's denominated in paper shillings. These new paper shillings were backed by assets denominated in paper shillings. There was a certain circularity, but it worked. (see my paper "The Quantity Theory versus the Real Bills Doctrine in Colonial America" by clicking on my name above.)
Published: April 19, 2008 8:24 PM
Inquisitor
Clemence, to the first point I really don't care, to the second Rothbard and Reisman have both addressed this, so yawn.
Published: April 19, 2008 8:28 PM
Clemence
Would you care to re-state the arguments? AFAIK Rothbard just said that *any* quantity of gold was optimal. That does not seem credible.
Published: April 19, 2008 8:41 PM
Matt
Dr. Paul,
This was an excellent article, you hit the nail on the head squarely. The issue basically is a moral one.
Which way should the country go? By way of theft
or honesty. Gold has been shown throughout history to keep Man most honest and create wealth for all, go off of the Gold Standard and you have slowing progress and increased poverty.
Capitalism is a recent discovery and to the degree it is practiced it will create prosperity, strangle it with countless socialistic jury rigged laws and down hill we go.
Is why the Soviet Union collapsed, the arch enemy of Capitalism so difficult to understand?
Published: April 19, 2008 8:52 PM
Brandybuck
Fractional reserve banking is libertarian... but only if it is open and disclosed. This allows the market mechanism to work and apply pressure to banks who set their reserves too low. Depositors can avoid banking with those who set their reserves too low.
But without that disclosure, fractional reserve banking is a fraud.
Published: April 19, 2008 9:50 PM
Owen
Inquisitor has the ability to add nothing to a debate and still claim he is right.
His assertion that banks could not tend towards larger rather than smaller businesses is absurd.
Banks did not and do not trade on their reserve ration but rather on their ability to convert their currency to gold. A large fractional reserve bank could do this just as well as a small 100% reserve bank whilst creating a maneagable amount of money from thin air.
yawn...
Published: April 19, 2008 10:31 PM
Owen
Brandybuck:
Fractional reserve banking is a natural phenomenom and stems from the inability of the average bank customer to see insude the bank and the abank to diffuse the potential for collapse by constantly expanding its exposure.
As a consequence a common practice of banks these days is to syndicate their exposure to different companies so they never hold more than a certain amount of money with any one business. For example if it was possible to lend to $200million to one business or $40million each to five business it will choose the latter.
See how if it chooses the $40million option the chances of all creditors coming to the bank for their money at the same time is drastically reduced.
The magic of reserve banking!
If you assert that gold-backed banks need some legal regulation to force them to disclose reserves then you are advocating government intervention into a supposedly "private" area.
So are you saying Rothbard was wrong? I for one am saying that free-for-all banking is not viable because it produces fraud just like you said.
Published: April 19, 2008 10:38 PM
Fred Mann
Clemence --
I'm curious to know what criteria you used to determine that there's not enough gold to cover the current volume of transactions.
Published: April 19, 2008 11:54 PM
Owen
Charles Manson:
Banks create money. It is not their business to worry about how much is already out there. WHATEVER their gold reserves there is the incentive to fractionally-reserve these and create more money.
If it pays more and produces only marginally more risk then why not do it. Doing the opposite (not fractionally-reserving) would be the irrational thing to do.
Published: April 20, 2008 1:32 AM
scott t
i sent this message to my credit union...."hello...i have been reading about a phenomenon called 'fractional reserve banking.'
if the pehenomenon is true and in existence does secu participate in 'it'.
what i mean is - if every share account holder and checking account holder approached the credit unions and demanded their cash money - could secu be able to say..."strange request, but sure credit union customer, here is your cash. (or simething similar)" and then hand over the customers deposits (not pixie dust assets) in full."
this is the reply i received............"Thank you for your message. Every branch will attempt to meet all reasonable member demands for cash. Each branch can not hold the excess cash but will hold enough cash for what is deemed to be normal usage for that specific branch. We cannot provide large amounts in cash to a member on demand, but we can certainly at the time of the request order the funds for delivery at a later period.
State Employees' Credit Union is committed to protecting member deposits. As required by law, annual reserves are set aside for additional protection. SECU is also insured by the NCUA. The National Credit Union Administration (NCUA) is an independent United States government agency that insures the deposits of credit union members nationwide."
is there someting i could have added to get a more thorough answer?
what and where are the 'annual reserves'? are these reserves the 'thin air money' often spoken about?
"Each branch can not hold the excess cash" what would the excess cash be?
Published: April 20, 2008 2:30 AM
P.M.Lawrence
Fundamentalist, you wrote "The gold did end up in the Dutch Republic and England, but that was because they grew their manufacturing base rapidly while the other countries, especially Spain, continued to rely on plunder and agriculture. The countries of the old Roman Empire still held agriculture in the highest esteem while commerce and manufacturing were virtually despised. The Ottoman Empire continued to grow economically; it was still a wealthy super power well into the 18th century. I don't think the Ottomans and Spanish became poorer; they just didn't grow as fast as the two countries where capitalism was born."
This is incorrect. The gold (and silver, which kept coming in from mines and extended the duration of these processes) didn't end up in England and Holland, it went through them as middlemen. Also, in that time frame, their manufacturing bases weren't built up, their carrying trade and overseas possessions were - and that build up was on the back of the middleman function.
The Ottoman Empire's resources shrank from the (mostly silver) inflation, and that in turn led to all sorts of capitulations and concessions from the 18th century on; the total resources didn't shrink much, but they started passing into European hands.
Clemence, "there is not enough gold *physically* in the world to cover all transactions and savings" is wrong, in two ways. First, there are actually very considerable supplies that are not economical to extract at today's prices, that you probably haven't allowed for. Second, gold prices would rise if it was needed for that much coin (you wouldn't go back to the same old coins as before, you would have, say, 1/3 or 1/4 oz coins denominated in hundreds or more likely thousands of today's US$).
Owen, when you write "a common practice of banks these days is to syndicate their exposure to different companies so they never hold more than a certain amount of money with any one business. For example if it was possible to lend to $200million to one business or $40million each to five business it will choose the latter. See how if it chooses the $40million option the chances of all creditors coming to the bank for their money at the same time is drastically reduced.", you are describing what they try, but it's a good idea that doesn't work once things get too big, because all the diversifying comes around again (think "fallacy of composition").
It was the thinking behind the Mexican loans problem in the '80s. There, they tried lending to lots of different Mexican businesses - but the aggregate effect flowed throughout Mexico, so they ended up with a common pattern of defaults affecting the whole of their Mexican portfolios.
Published: April 20, 2008 4:15 AM
Inquisitor
Owen, I've added more than you have with your meaningless assertions, which BTW you have been unable to prove. I do claim that I am right, in the sense that you've offered not a stitch of proof for anything you've said so far. I only put in effort proportional to the amount you put in.
Clemence, you're discussing the amount of gold in terms of a fiat currency. That is where the problem rests.
Published: April 20, 2008 7:45 AM
newson
owen says:
"The petrol companies are prevented by the government of New Zealand from acting as a cartel.
They are not supported the the NZ government at all. They face only regulation restraining their actions."
you've forgotten to ask how this situation come about. the nz wholesale fuel market is hardly competitive, with only one refinery, jointly owned by the four majors, who also import refined product using the same ships, and share the same port.
there is only one competing importer, gull petroleum (with its own port at mt manganui).
so why not more competition? go look at the complex maze of government legislation to open a new refinery or fuel port, the opposition by nimbies, and the powerful green lobby, and well as the large capital outlays for a small population, and you'll understand why there are no new entrants into the market.
australia with seven refineries is only marginally better, with the government red-tape and special-interest groups thwarting any major capital investment in refining capacity or ports. there are laws allowing only certain types of fuel to be imported, and the individual states have different fuel norms, preventing fuel from freely passing from one to another.
also, in australia, check out how badly caltex was doing from refining in the nineties, and you'll appreciate they're only just now compensating for the long, lean years.
as regards the retail market, the anti-trust body (accc) has all sorts of screwy rules against undercutting competitors' prices, as well as gouging etc.
fuelwatch (wa) has been effective in hurting small operators, despite the planners' (stated) best intentions. now it's going to be rolled out nationwide.
Published: April 20, 2008 9:01 AM
fundamentalist
PM Lawrence: "This is incorrect. The gold (and silver, which kept coming in from mines and extended the duration of these processes) didn't end up in England and Holland, it went through them as middlemen. Also, in that time frame, their manufacturing bases weren't built up, their carrying trade and overseas possessions were - and that build up was on the back of the middleman function."
I don't agree at all. Check out Israel's "The Dutch Republic" and De Vries's "The First Modern Nation." The Dutch started the industrial revolution.
PM Lawrence: "The Ottoman Empire's resources shrank from the (mostly silver) inflation, and that in turn led to all sorts of capitulations and concessions from the 18th century on; the total resources didn't shrink much, but they started passing into European hands."
That's simply not true. Years ago I read a two-volume economic history of the Ottoman empire by a Turkish economist. I'll get the name if I can find it. The Ottoman's had very little trade with Europe until the 19th century because the Europeans didn't have anything the Ottoman's wanted. Almost all of their trade was with China and India, and it was vast. The concessions the Empire gave to Europeans meant almost nothing to the Empire because they were such a tiny part of their total trade. Ottoman manufacturing didn't really begin to suffer from European competition until the late 19th century. And the Ottoman's ended each century wealthier than they began it, but the growth was very small. Europe didn't harm the Ottoman economy; it simply grew faster. Traditional economics in which the state controlled prices and confiscated property held the Ottoman Empire back, not the Europeans.
Published: April 20, 2008 9:09 AM
Owen
newson:
Most of what you describe: small population, prohibitive entry costs...are pure free-market economic factors.
There is no prohibitive government legislation in New Zealand preventing a fuel port or refinery. That is crap. If someone wanted to do it they could there is no reason why the New Zealand government in their protectionist/interventionist mindset would not encourage it.
Duh, it would increase competition.
But no-one wants to because it is plainly uneconomic to do so.
The same line of reasoning holds true for banks and the possiblity that nationwide loan defaults would bring down a fractional-reserving bank IS THE VERY REASON why banks would expand world-wide to reduce the likelihood of this hurting them.
Can't you see? The banking market in it's natural state encourages:
(1) Fractional-reserve banking;
(2) Contunuous world-wide expansion;
(3) Cartels;
This is enough reason to put the many in grave danger of the mega-banking few and therefore enough reason for some regulation and controls on our meduim of exchange.
Published: April 20, 2008 6:50 PM
P.M.Lawrence
Fundamentalist, you wrote "The Dutch started the industrial revolution". So what? England and Holland had acquired lasting wealth before that (by the mid 18th and late 17th centuries respectively). It was represented in the ways I described.
"The Ottoman's had very little trade with Europe until the 19th century because the Europeans didn't have anything the Ottoman's wanted"; the first part is wrong, even though the second part is almost completely accurate if you are talking about goods and services they wanted (they did bring in English gardeners, for instance). That is precisely why there was a bullion flow that way - to pay for goods that the Turks didn't want European goods for (and yes, in regard to India and China, Turkey was a middleman too - but it also exported its own products).
"The concessions the Empire gave to Europeans meant almost nothing to the Empire because they were such a tiny part of their total trade". Possibly you aren't familiar with concessions and capitulations. They weren't trade concessions, by and large, but grants of extraterritoriality in regard to one sector or another (sometimes geographical). You may be counting these sectors as still Ottoman, from whose sovereignty they were under, when the resources had been compromised as far as being Ottoman went. You may also not have been counting the resources that were de jure European at the beginning of the period, that the Ottomans had tapped into with raids and tribute, which they then lost.
"Ottoman manufacturing didn't really begin to suffer from European competition until the late 19th century". Why this emphasis on manufacturing and competition from European manufacturing? While completely true, it has nothing to do with these economic processes, which was the internal dislocation caused by exporting for depreciating currency - not external competition at all, with manufacturing or otherwise. The most significant effect came from exporting less finished goods for bullion and so not retaining them and value adding to them for local needs (and so winding back the capital that did the value adding), not from any competition.
Published: April 20, 2008 8:50 PM
Vanmind
"...deflation surprises are devastating to businesses, much moreso than inflation surprises."
From what I understand, consumers are always more important than producers, and consumers certainly enjoy deflation surprises more than inflation surprises.
Even as producers (of hourly-wage labour), humans appear to be hurt more by inflation surprises because their wages always lag -- whereas businesses will respond to deflation surprises by cutting wages asap and/or laying off people (fortunately prices also tend to decrease so as consumers those laid off can afford to last a bit longer between gigs).
Mind you, I'm not even a second-rate economist. Seems, though, to be the gist of what Dr. Paul was saying about letting markets do their thing without government intervention.
Published: April 20, 2008 9:26 PM
WisR
Published: April 20, 2008 11:08 PM
newson
owen says:
"There is no prohibitive government legislation in New Zealand preventing a fuel port or refinery. That is crap. If someone wanted to do it they could there is no reason why the New Zealand government in their protectionist/interventionist mindset would not encourage it.
Duh, it would increase competition.
But no-one wants to because it is plainly uneconomic to do so."
on paper, there is no specific prohibition from opening either port facilities nor refineries, but there are rafts of laws regarding use of waterways, and also the siting, and operation of heavy industrial plants. you'll find the green lobby quite powerful in nz, and there are plenty of opportunities for "stakeholders" to thwart any proposed development using existing laws.
(the nz labor party depends on green votes, as you're probably well aware).
as long as free entry into the market isn't barred, then the market isn't a cartel. cartellization is not defined by number of market players (could in theory even be a sole player), but denial of entry to market.
it's probably no accident that only the well-capitalized oil majors can wade through the legislation regarding chemical processing, shipping etc.
banking is only cartellized in australia and nz because of the central banks' iron control over new entrants. until banks are treated in the exactly same manner as ordinary companies, there is no free market and the cartel stays.
why can't you start up owenbank p/l as a $2 shelf-company tomorrow, and use your superior financial insights to grab market-share from the majors?
Published: April 21, 2008 12:51 AM
Owen
Newson:
Balony. Those are merely public safety laws and exist for all forms of activity be they public or private in New Zealand.
They would not add greatly to the difficulty in establishing an oil port or refiner in NZ. Compared to the tens of millions it would take to establish such an investment, and then the many millions more at risk over the first few years of operation, these would only constitute a few million at most and would likely cost less than the economic evaluations and financing costs that would need to be done also.
You are clutching at straws. The New Zealand government would allow anyone who wanted to build one the right to do as but there is just no need because the capacity of the existing one is enough for the entire country's needs.
There is no economic case for one being built, that being the case.
WisR:
If you believe that a constant low rate of inflation is what caused the 30's depression...you've gotta have a look at your economics 101 man. It was caused by the DEFLATION SHOCK. If the money supply was continued to be increased at a constant low rate so that CPI inflation remained within 0 - 3% then there would have been no depression. You gotta do better than that mate.
I have already explained to you that a gold standard is potentially much worse than a Steadily Increasing Money Supply (SIMS) system because a gold system allows Fractional reserve banking which would not be possible under a SIMS.
If you propose to enact regulations to stop gold-backed banks from fractionally reserving then you have just broken the cose of Austrian 101 - no government intervention in the economy.
My assertions:
(1) The ultimate goal is one main thing - to achieve a stable or stadily increasing money supply;
(2) steady increase in the money supply could pay for government spending on defence and law and order;
(3) Gold backed systems without government regulation allow fractional reserve banking which is just the same as what we have now - banks could counterfeit money though constant expansion, cartels and non-disclosure of their reserves.
Published: April 21, 2008 4:24 AM
Owen
Inquisitor:
Oil companies in New Zealand have regularly been accused of operating as a cartel. This is based on analysis of their actions.
Read "Man, Economy and State" by Rothbard who clearly says that cartels are possible and natural features if a free market.
Ever heard of economic game theory? There is a long established FACT that given certain sets of conditions firms are likely to choose the option that would give them the best return BASED ON THEIR EXPECTATIONS OF WHAT OTHER PARTICIPANTS DO. In the case of oil and banking gues what? The commidity is identical and therefore there are only two ways to compete: Price and service. The CARTELS are not as stupid as you and quite obviously found that they can make more money by raising the prices and acting more like a joint-monopoly than individual competitors.
Geeze you are the only person I have ever hear claim to the non-existence of cartels. People on all sides of the economic divide agree on their existence.......except you.
I also think this is just embarrasing for you because the very first comment you made on this topic was proved wrong by almost everyone else (that gold expands at 3-5% annually). It is more than half that in real life. You know real life? the thing all the rest of us are dealing in....After that...constantly on the backpedal and unable to come up with any arguments at all really. Sad. Kepp going though it is entertaining if nothing else...
Published: April 21, 2008 5:37 AM
Inquisitor
Owen, can you actually replicate arguments without thereby misrepresenting them? No, it seems not. I asked, and continue to ask for, proof of a cartel, acting in a monopolistic fashion, in absence of the government, not counterfactual scenarios based on your imagination. You ignore both Rothbard's and mainstream economists' arguments against the stability of cartels, conveniently - and also work done by D. Armentano eviscerating conventional monopoly theory. PM Lawrence has also highlighted your failure to prove the stability of this arrangement. You have not succeeded at this, so now you're attempting (and failing at) character assassination. The figure I provided can be found in Skousen's work, so the error would be his, not mine.
Published: April 21, 2008 7:53 AM
Inquisitor
Owen, you constantly refer to economics 101 - which "economics 101"? Keynesian? Monetarist? Marxian? Austrian? New classicist? Post-keynesian? Which? They all have different theoretical accounts for the phenomena in question. As per usual you're making assertions without proving any basis for them.
Published: April 21, 2008 8:03 AM
fundamentalist
PM Lawrence: “"The Dutch started the industrial revolution". So what? England and Holland had acquired lasting wealth before that (by the mid 18th and late 17th centuries respectively).”
It’s important because you seem to think the Dutch did nothing but shipping. The wealth gained from the carrying trade happened before the rebellion of the Dutch against Spain when Antwerp was a major port. Holland did not enjoy that luxury. Antwerp stayed with Spain after the rebellion and declined as a center of trade. Holland took over some of that trade, but for the most part the Dutch achieved their wealth and supremacy from manufacturing in the 17th century. Again, see Israel and De Vries for proof.
PM Lawrence: "The Ottoman's had very little trade with Europe until the 19th century because the Europeans didn't have anything the Ottoman's wanted"; the first part is wrong, even though the second part is almost completely accurate if you are talking about goods and services they wanted (they did bring in English gardeners, for instance).
By “very little trade”, I meant as a percentage of total foreign trade, and it I am correct. You need to read some Turkish economists, not just European ethno-centric ones. The two-volume series I mentioned earlier is “History of the Ottoman Empire, 1300-1914” by Halil Inalcik, Suraiya Faroqhi, Bruce McGowan, Donald Quataert, Sevket Pamuk. You’ll find that trade with Europe was negligible until the 19th century.
PM Lawrence: “Possibly you aren't familiar with concessions and capitulations.”
No, I’m very familiar with them. The book mentioned above discusses them in detail. Europeans may have thought they had scored a major victory with the concessions, but the Ottoman’s thought very little of them.
PM Lawrence: “While completely true, it has nothing to do with these economic processes, which was the internal dislocation caused by exporting for depreciating currency - not external competition at all, with manufacturing or otherwise. The most significant effect came from exporting less finished goods for bullion and so not retaining them and value adding to them for local needs (and so winding back the capital that did the value adding), not from any competition.”
I’m sorry but I don’t understand what you’re try to say. How did the currency depreciate, since it was gold? And how does exporting unfinished goods hurt?
The Ottoman Empire exported very little during most of its existence, according to the Turkish economists. The Empire had a policy that would chill mercantilists to the bone: it subsidized imports and taxed exports of goods considered necessary, such as food and clothing. It left luxury goods alone for the most part. Unlike mercantilists, Ottoman’s didn’t see wealth in terms of bullion held by the treasury, but in terms of the abundance of goods in the Empire. Now socialist economists get it backwards and blame this policy for the Ottoman decline. But in view of Austrian econ, that policy would have helped sustain the Empire longer because it was the Ottoman government control of the economy that retarded growth.
Military history may shed some light on the problems with Euro-centric history. When Europeans won their first naval battle against the Ottomans at Lepanto, Europeans celebrated for weeks and wrote songs about their great victory. However, the Ottomans hardly noticed, it was such a minor affair for them. I think something similar has happended with Euro-centric economic history. Europeans don’t seem to understand how wealthy the Ottoman Empire was at the beginning of the industrial revolution. West of China, Instabul was the center of wealth, education, science, art, and culture well into the 18th century. Ottoman’s look upon Europeans as aborigines. The real question of economic history is why capitalism didn’t develop in the Ottoman Empire, which was far more advanced in every way, instead of the Dutch Republic?
Published: April 21, 2008 9:09 AM
newson
owen says:
"Those are merely public safety laws and exist for all forms of activity be they public or private in New Zealand.
They would not add greatly to the difficulty in establishing an oil port or refiner in NZ."
a few million dollars for regulatory hurdles, and tens of millions in construction? sorry to burst your bubble, but reliance are building one in india, and expect to fork out more than usd$6 billion. so you're out by orders of magnitude. typically they take around five years of construction time. have you never seen an oil refinery? perhaps you'd wake up if one was planned for your neighbourhood. does the word "inflammabile substance" mean anything to you? the americans haven't built one since the mid-seventies for the same reasons as nz, regulatory impediments.
your argument is all over the place. first you state the existence of a "cartel" in oil companies in nz. cartel meaning there is a group of companies colluding to keep margins higher than they otherwise would be. then, about bringing on new capacity you say:
"there is just no need because the capacity of the existing one is enough for the entire country's needs."
just to bring you up to speed, companies invest on the basis of returns on capital outlayed, not on some quirky thing like"national needs". if, as you say, there are no regulatory barriers to entry, then there is no cartel.
"joint-monopoly" perhaps you'd like to share this interesting concept with us?
Published: April 21, 2008 11:33 AM
Owen
Inquisitor:
Seems like you are missing the point. A banking cartel is not the same as a business selling widgets.
A good is not produced and sold but rather
The performance of 100% reserving banks will always be eclipsed by fractionally reserving banks because they can pay their depositors interest and barring very very very very unlikely situation of millions of customers arriving on the same day, they will be able to meet all claims.
All this whilst printing money for themselves. They can print money that their customers can then use to withdraw all the gold from smaller banks because due to the size of the large counterfeiting bank it could swap all the gold in the other bank for worthless paper from it's printing presses.
And you still think this is a good idea? What have you been smoking?
Published: April 21, 2008 5:56 PM
Owen
Newson:
The "need" is as demanded by freely participating consumers in the market. There is no need by these consumers as judged by their demand thereby meaning that a new refinery would be a susstantial outlay for non-existent demand.
Secondly there is such a thing as voluntary cartels. Look up your Economics 101 book.
Exactly you are right. New Zealand oil companies have been accused for decades of moving together on prices and keeping them artifically inflated. Everyone knows it is in their best interest anyway.
Your "regulatory impediments" are other peoples "measures which save lives" and are simply the conditions of doing business in New Zealand. The existing refinery must comply with all of these anyway so there is no favouritism.
I am not into oil refineries but it seems you have proved my point that the economic cost considerations far outweigh any claimed "regulatory barriers to entry" as you may put it.
We also make it a condition of entry that businesses in New Zealand do not shoot and kill their customers and rob them and ransom their body parts, despite how lucrative this might be for the business concerned. Would you also call the prohibition of this act a "regulatory barrier to entry"?
You are crazy!
Published: April 21, 2008 7:08 PM
Inquisitor
Gee, silly me for asking for you to actually prove your case. You can't refrain from insulting either. I still want to know what this "economics 101" is.
Published: April 21, 2008 7:14 PM
Owen
Inquisitor:
"Economics 101"? You obviously never graduated Hugh School. Maybe you should stick to discussions you can add to. If ther eare any.
You obviously don't get bored with endlessly trolling message boards adding nothing to any discussion except displaing your inability to grasp simple things.
Published: April 21, 2008 8:02 PM
Inquisitor
Troll? No, merely an Inquisitor. I will not hesitate in pointing out the fact that so far all you've done is asserted ad nauseam, offering little to no proof for anything you've said. I asked, which school of economics, outlining a range of possible answers. You merely decided to label me a troll and again (as before) avoid giving an answer. So much for me being the troll.
And you're right, I never graduated "hugh school", whatever that is.
Published: April 21, 2008 8:07 PM
Owen
Yes, Troll is the best word for people like you. Troll it is. Now get back to saying nothing about everything, ok?
God, another person who hasn't graduate High School coming on message boards and trying to play with the big boys. Sad. Just sad.
Published: April 21, 2008 9:09 PM
newson
owen says:
"Secondly there is such a thing as voluntary cartels. Look up your Economics 101 book."
no, you explain what you mean! voluntary cartel? how would that work? what textbook are you citing? if one can freely enter a market, with no more than capital costs as a barrier, then it's no cartel. any attempt at cartellization without the force of government is destined to fail.
"regulatory impediments" are other peoples "measures which save lives" and are simply the conditions of doing business in New Zealand."
so the government sets up strict entry conditions with the pretext of "saving lives" - in other words, the state makes competition by all but the biggest and most sophisticated players impossible.
Published: April 22, 2008 1:15 AM
Owen
newson:
Ever heard of predatory pricing?
Ever heard of markets with high economic barriers to entry?
Well, when firms can stop competing with eachother and set prices above a competitive level by MUTUAL AGREEMENT.
Then this is a voluntary cartel. It has nothing to do with government regulation. It is what we have in New Zealand. There are hundreds of oil companies in the world but only 4 operate in New Zealand YET there are no rgulatory barriers to their entry. In fact the New Zealand government would encourage them...except for the fact that once they came they would just end up setting their prices the same as tthe other 4...why?
BECAUSE IT IS A CARTEL MARKET STRUCTURE. Which for you because you do not understand is when 4 firms can from the outside seemingly act as if they were one.
Who told you the New Zealand government sets strict conditions for the setting up of oil refineries in New Zealand? The government with the mandate of the people does not let any one business or group knowingly endanger the lives of the people. I think you will find that barring the finding of a suitable piece of land which will not be hard, a refinery would be welcome in New Zealand. It would create jobs and we need those at the moment.
So you are wrong...twice.
Published: April 22, 2008 3:58 AM
Owen
I think you will find, once again, that the exclusion of all but the "biggest and strongest" competitors from the New Zealand oil industry is because of the economic and financial barriers to entry.
NOT any perceived government regulation which doesn't actually exist.
Published: April 22, 2008 3:59 AM
Owen
I think you are mixing New Zealand up with some other imaginary government out there.
The government just lets the market do it's thing with regard to petrol and oil products.
The New Zealand Government knows, like I said before, that even if another player was in the market it would just join the cartel pricing agreements and prices and supply would remain unchanged.
So who cared anyway. BUT it is a cartel and that is th main point.
Published: April 22, 2008 4:05 AM
ktibuk
"Then this is a voluntary cartel. It has nothing to do with government regulation. It is what we have in New Zealand. There are hundreds of oil companies in the world but only 4 operate in New Zealand YET there are no rgulatory barriers to their entry. In fact the New Zealand government would encourage them...except for the fact that once they came they would just end up setting their prices the same as tthe other 4...why?"
After this assertatioın there are two possible options.
Either there are nobody else in the world with a profit motive, that does or can do oil business in NZ.
Or you are very ignorant to the real facts of the New Zealand oil industry.
Common sense says it is the second option.
If you were in the oil business, would you go and undercut the so called cartel and make shit load of money by taking a big percentage of the market, or would you join the so called cartel and just do with whatever leftover for you, and not bigger than 20% since there would be only 5?
Published: April 22, 2008 7:18 AM
Inquisitor
Alright, so you can't prove your point, so you resort to calling me a troll. What a lovely demonstration of how utterly pathetic you are. You can't even identify the school of economics to which you refer. Sad, just sad.
Published: April 22, 2008 7:22 AM
Jeremy
Hi Owen,
Quoting myself here:
The deflation of the 30s could not have occured absent the prior inflation of the money supply that took place in the 20s.
That inflation of the money supply took place with an almost constant CPI - no apparent inflation. Yet the money supply was 'increasing at pace with the economy' - in fact, the money supply was increasing almost perfectly in step with productivity gains, hence the very low CPI inflation.
Now quoting you:
If you believe that a constant low rate of inflation is what caused the 30's depression...you've gotta have a look at your economics 101 man. It was caused by the DEFLATION SHOCK. If the money supply was continued to be increased at a constant low rate so that CPI inflation remained within 0 - 3% then there would have been no depression. You gotta do better than that mate.
I have already explained to you that a gold standard is potentially much worse than a Steadily Increasing Money Supply (SIMS) system because a gold system allows Fractional reserve banking which would not be possible under a SIMS.
If you propose to enact regulations to stop gold-backed banks from fractionally reserving then you have just broken the cose of Austrian 101 - no government intervention in the economy.
Let's see... I very clearly stated that the inflation of the money supply was a large contributing cause to the great depression, but that CPI stayed almost constant during the 20's.
Go look up CPI for the 1920s - you'll find that it was almost 0 on average. That's because the CPI measures consumer prices (hey, something you don't understand at all aparently. Better go back to your econ 101 book - and by the way, if you want to continue making assinine comments about basic econ, I got a 3.9 GPA in Econ at the #1 / #2 public school in the nation, so stfu). You're right when you say that the money supply increased quite a bit during the 20s, you are absolutely wrong to equate the CPI with the money supply.
A gold standard and 100% reserve backed banking are not mutually exclusive. You are 100% wrong to say that all Austrian economists believe that a 100% reserve requirement is not within the province of government. Why? They view it as a basic legal protection against what is really nothing more than the legalized counterfitting of money.
There is a very strong legal argument to be made for 100% reserves. Whether an Austrian economist agrees with it or not should be based on the legal, moral , and economic arguments supporting a 100% reserve backed requirement, not their guy feeling (and many Austrian economists do support 100% reserve backed banking). Read the first three chapters of De Soto's Money, Bank Credit, and Economic Cycles, which deals with the legal case against fractional reserve banking. Actually, read the whole book.
Look, Owen, you have twice told me things that are not true. The first time is when you said I hadn't clearly read your arguments - actually, I had, you hadn't clearly read mine. The second is when you flat out incorrectly told me that I believed there was little inflation of the money supply leading up to the Great Depression, after I had clearly stated there was - based on your idiotic misunderstandings of CPI and aggregate inflation of the money supply.
Published: April 22, 2008 10:16 AM
newson
owen says:
"The government just lets the market do it's thing with regard to petrol and oil products."
the maritime safety authority of new zealand administers the use of seaways using the following codes:
*Maritime Transport Act 1994,
*Ship Registration Act 1992
* The Hazardous Substances and New Organisms Act 1996 (maritime sections)
* Health and Safety in Employment Act 1992
nz is also subject to multiple international treaties, like the environmental protocol to the antarctic, as well as the london dumping and MARPOL1 conventions, plus the rotterdam convention on international trade of hazardous chemicals etc.etc.
this is only part of the regulatory regime, the tip of the iceberg. you've also got the onshore maze - Petroleum Products Specifications Regulations 2002
Environmental Protection Act 1994
The Hazardous Substances and New Organisms Act 1996 (land sections) etc etc.
have you ever had to pay for a lawyer? do you know how many tens of thousands of billing hours (partner rates) would be required even to get you to base one of the application process?
then the battles with local councils, stakeholders etc.
give owenomics 101 a break and take a wander in the real world. come back when you've got some facts.
thanks for the laughs, though, it's been a rare treat on this generally serious site.
Published: April 22, 2008 11:29 AM
Owen
ktibuk:
If you undercut a Cartel then you better be bigger and stronger than all the other members of the Cartel combined because they will jointly undercut you back and bankrupt you then raise their prices again.
If you don't believe there is such thing as a financial barrier to entry (i.e. the building of a refinery, massive marketing and a network of 500 petrol stations) you are an idiot. That is an entry barrier amounting to hundreds of millions if not billions and has nothing to do with the government.
If you know nothing about cartels don't try and say you do, ok? It just makes you look silly.
Non-Inquisitor:
Once again says nothing so we'll move on.
Jeramy:
I think we are closer than you think.
First of all. The inflation of the 20's was a precurser to the Depression but there has been many other periods of high inflation since then in various countries. The difference is that people learned from the depression and ensured that banks DID NOT TURN OFF THE MONEY SUPPLY thereby causing a depression.
Inflation means things get more expensive in nominal dollar terms.
Shock deflation means there is suddenly less money in the economy and businesses start going broke and people go out of business.
The solution to the Depression was simple...turn the money back on. That was done via war related spending and away we go again.
Low, steady inflation has absolutely no comparison to the shock deflation which caused the depression. And stop arguing otherwise...you look silly.
I am all for 100% reserves and that is exactly what I am advocating for. Problem is an unregulated Gold standard DOES NOT ACHIEVE THIS because it is still possible under a free gold standard for large multinational banks to fractionally reserve and "create money" thereby allowing the few to dominate the many with their "created money".
newson:
Those are not artificial barriers to entry. They are for the protection of the public. They merely specify how to carry out such activities safely based on years of practice. In fact following them would save in the long run because they would likely prevent catastrophies which would end up costing more. So in this sense we can say that the government is actually helping business. Funny that? How your onerous regulations can be turned around to be in fact assistance for business in reducing their potential thrid party liabilities.
Newson is proposing we allow bazooka wielding terrorists who wanna commit genocide because stopping them would be a "barrier to entry" too. Sad.
Considering that most of these regulations are for helath and safety and thereby reduce potential future litigation and liabilities for the prospective business they are actually in most cases a net positive financial impact on new business.
A new business would always employ experts to analyse it's business case from an engineering, financial, legal and economic standpoint. The regulations simply give useful guides on the best way to navigate the health and safety part - for free!!
Thank you New Zealand Governmet.
Published: April 22, 2008 4:27 PM
Inquisitor
Owen again lies and tries to evade the issue, so we'll move on.
Why not just admit you're clueless? You can't answer any of my questions.
Published: April 22, 2008 5:56 PM
newson
owen, again:
"A new business would always employ experts to analyse it's business case from an engineering, financial, legal and economic standpoint. The regulations simply give useful guides on the best way to navigate the health and safety part - for free!!
you're probably too young to have paid any taxes, so the experience will be new to you. but free it ain't.
business will employ all the experts it deems necessary (and no more) to avoid tort actions. do a search on mises under "environmentalism" or "pollution" if you have any genuine interest.
leave the war comics and read psychology 101 - people spend others' money more freely than there own.
Published: April 22, 2008 6:19 PM
Owen
Inquisitor:
Youi can't answer any of mine. You first.
Newson:
The regulations set up in New Zealand that you referred to are those which will ensure the business does not incur any torts or third party liabilties of negligence.
Businesses that comply will save the equal amount in reducing their liability to future torts.
Businesses that do not follow these regulations would incur this amount further down the line in the form of tort payments to third parties.
So they are benign because the cost of compliance is roughly equal to that amount that would otherwise need to be spend on lawyers and safety experts to estimate and measure and research in order to avoid future tort legislation.
The government has done all this expert research and investigation and so the regulations are a help not a hinderance. I would actually be very surprised if they didn't save money in the long run.
Do people complain about the "onerous" building safety or vehicle safety regulations? If they do what they don't realise is that if they didn't follow these guidelines then researching and creating their own that would limit their liability to Torts would likely cost them more.
Next question.
Published: April 22, 2008 7:35 PM
newson
owen says:
"The government has done all this expert research and investigation and so the regulations are a help not a hinderance. I would actually be very surprised if they didn't save money in the long run."
how much did this "expert research and investigation cost the nz taxpayer? figures please, not guesses! i guess you think the government invented car airbags, too. try to back your personal views with facts, if possible.
Published: April 22, 2008 8:44 PM
Owen
Airbags were a great invention. They save lives. They are not however compulsory in any New Zealand cars.
The Majority of people in New Zealand (who vote) have decided that we wish these standards to be introduced. It is done bycommissioning the same scientists that would be commissioned by the private sector.
So you lose.
Published: April 22, 2008 8:59 PM
newson
how much did this "expert research and investigation cost the nz taxpayer? figures please, not guesses!
Published: April 22, 2008 9:17 PM
newson
to owen:
you're obviously too young to have lived through robert muldoon's prime ministership, but those days the "wise" government used to run virtually everything in nz. in 1984, i can remember the place was full of 1950's cars, just like cuba is today. whitegoods were unbelievably expensive, and i saw washing machines in private houses that would have done any museum proud. thanks to the lively reforms put in during post-muldoon, nz actually has a very successful multinational whitegoods company - fisher & paykel. add nz contemporary history 101 to your reading list. happy studying!
Published: April 22, 2008 9:39 PM
Owen
Newson:
If you are comparing health and safety regulations which protect lives to government participation in private markets...then it is you that needs to go back to economics 101 mate.
Health and safety regulations which actually save businesses money (by conducting research and investigation into potantial tort liabilities) are completely different to a government producing and selling cars.
Governments have no business participating in private markets.
They have every business in regulating markets so that participation by anyone does not injure or put in jeapardy the health or life of citizens.
Instead of picking up the pieces of damage done it is much cheaper and easier to prevent these things ocuring.
Or are you anti-common sense?
Published: April 22, 2008 10:12 PM
newson
how much did this "expert research and investigation cost the nz taxpayer? figures please, not guesses!
Published: April 22, 2008 10:24 PM
Owen
Newson:
It costs the same that it would have cost the businesses to do it themselves because the very same private independent scientists and experts would have been used and their findings turned into legislation by our Parliament.
But then divide that between the number of business in the market and they each actually make a saving.
Sounds like everyone got a good deal. The people of New Zealand people that voted (the majority of the country over 18) find such expenditure a good use of their money as a hedge against having to litigate and suffer ill-effects later from business mistakes and tradgedies.
If the people didn;t find it a good use of money then why aren't there more libertarian party members in New Zealand? I guess because people feel that the government is meeting their needs at the moment.
Next question.
Published: April 23, 2008 4:50 AM
David C
In all this talk about airbags in NZ reminds me of th eperversity of legislating safety standards in general.
why cant a member of th epublic choose himself? cheaper car, less safety, or more expensive car, more safety. Why force everybody into the expensive option - are they deemed too stupid to assess their own risks, costs and benefits?
And besides, airbags and indeed safetybelts make the roads more dangerous, not less. SUre, forced seatbelt wearing might perhaps reduce the number of deaths per 1000 accidents. But they INCREASE the number of accidents. Simply because seatbelts and other safety features reduce the cost of bad driving.
If you believe in a nanny state, and want to really make a difference in road accident statistics, your best option is to
- make passenger seatbelts compulsory by all means, but
-BAN drivers from wearing them. And replace the steering wheel airbag with a spring loaded spike that plunges into the driver's chest on impact. And watch your accident statistics plunge.
Not that Im advocating it, mind, this is just to show the perversity of compulsory safety standards.
Published: April 23, 2008 8:17 AM
Inquisitor
Owen, why don't you actually offer some hard quantitative proof to Newson of that claim? That is after all what he asked for. Whilst your at it, get to answering my questions too.
BTW, heard of the book Beyond Politics? Might wanna check it out if you're so confident in government-mandated "safety" regulation.
Published: April 23, 2008 8:25 AM
Inquisitor
you're*
Published: April 23, 2008 8:30 AM
newson
to owen:
clearly you're not able to back your wild theories with facts, only appeals to the infinite wisdom of crowds.
please try and rebuff my central contention - that one is less careful spending others' money than one's own.
a democratic election only reflects what's on offer. sir robert muldoon was a very successful politician following socialist/nationalist policies. sir roger douglas lead the counter-revolution back towards the market. helen clark has charted a middle course. three different political directions, all elected by majorities - proves absolutely nothing about economics.
at least one point you are right on - the libertarian movement struggles in nz and elsewhere because the allure of socialism is in its perceived fairness, and it's promise of the illusory free lunch, mixed in with a good dose of class-envy.
people still proudly wear hammer and sickle lapel-pins in parts of europe, confident in the moral superiority of socialism, and its inherent fairness. it doesn't matter how many mass graves are unearthed, because their hope in the "marxian "new man" springs eternal.
as you've ably demonstrated, socialists are uneasy with figures, be they regulatory compliance costs or corpses. it's feelings that count.
Published: April 23, 2008 11:15 AM
Owen
Inquisitor:
The New Zealand government doesn't employ world leading experts in every conceivable area of medicine, science and health and safety. But it does want their research to make decisions.
There is the proof. The regulations on health and safety in New Zealand are drawn up by reference to the work of such people who where necessary are commissioned to give opinions.
Do you have no idea how governments work?
David C:
The government is protecting the child passengers of cars and the passengers of other cars who had no influence over the car that was bought. There is a legitimate argument that instead of picking up their dismembered limbs off the road and pursuing litigation it is cheaper and more humane to enforce minimum safety regulations to prevent such a thing happening.
You must remember that New Zealand is a Libvertarian society...but just one in which the majority have been able to force their will onthe minority.
You know the old Libertarian Maxim - "might is right"?
Secondly, you say that government safety regulations increase the liklihood of accidents...well so does insurance which is a purely free-market phenomenom. So that argument doesn't hold. In fact it cancels itself out.
Newson:
I agree that one is less careful spending anothers money than their own. But you seem to think that New Zealand is not a libertarian state? It is. Only the largest majority is called the government and they enforce their laws and morals on the rest. Other 'groups' are free to emerge but so far libertarians for example number in the hundreds not the thousands.
So...the majority spends the minority's money swell as their own to achieve their own ends because...they ca. Remember in Libertarianism "might is right" and their are no state laws but only the ability of one group to bring another to justice. Well I would like to see the libertarians her ebring hte NZ government to justice. They can't .
That answers why the government spends libertarian's money. I am not sure whether it is right or wrong and it doesn't matter because in Libertarianism there is no "right" or "wrong" only defence of one's perceived own "rights" against another.
It is obviously you that want to force people into something they don't want. Seems Democracy is not forcing anyone. No-one is forced to vote here.
Libertarianism preaches freedom of choice...so how can you impose a choice on them? The libertarian party is on the electoral role and has candidates in many electorates. Sadly their policies do not attract many people.
Published: April 23, 2008 6:57 PM
newson
owen says:
"You know the old Libertarian Maxim - "might is right"?
never heard anything of the sort from a libertarian. your epithet sounds like something out of the little red school book - sure it's not a mao quote? non-aggression is the cornerstone of libertarianism. defense of both person and property is only legitimate in the face of attack.
"Seems Democracy is not forcing anyone. No-one is forced to vote here."
non-voters are still subject to the rule of the majority. hitler won power through democracy, as did chavez, mugabe etc. does majority rule legitimize them?
"Libertarianism preaches freedom of choice...so how can you impose a choice on them?"
it seems you have taken little away from this discussion. the creed of libertarianism involves no imposition on others, except for the non-initiation of violence.
libertarians hope to win followers not by oppression or intimidation, but by the merits of their arguments.
there will always be a percentage of any population who is not taken in by political spin. these people are the hope of libertarianism. read george orwell's 1984 and decide whether you're with the proles or with big brother.
libertarianism treats people as goats, not sheep. if you're more comfortable running with the flock, then socialism's your kettle of fish.
Published: April 23, 2008 9:29 PM
Jeremy
Owen,
Newson is 100% correct. Might is right is a term that socialists or at least those who don't believe in the nonaggression principle believe in.
It is 100% contrary to libertarian views.
Published: April 24, 2008 2:31 AM
Owen
Newson and Jeremy:
This is good constructive debate. Let me respond:
Might is right is actually a Anarchist Maxim stemming from the fact that an Anarchist rejects any function for a government at all and instead believes that all people should defend their own rights by themselves. Of course what actually happens is that those with more resources (i.e. Might) are able to enfore their rights over and at the expense of others leading to them being "Right" - well at least in all practical senses of the word.
Aswell, if you are an Anarchist then you have no problem with other people joining up as a group in order to enforce their rights upon others, No? Guess what the biggest of such groups is....ta da
! The Government! it is actually just the largest libertarian group that uses it's own democratic processes in order to choose it's leadership which then goes on to enforce it's rights upon all others within it's territory. If you don't like it then it is your problem because it is a libertarian institution that is simply enforcing the right's of it's members at the expense of those people who disagree with those rights.
This is a violent and merciless world and much like the state of nature where humans came from - each for himself. For those within the "group" called government there are rules and processes and freedoms and rights. Outside of this group, unless you are stronger than this group and have for example a nuclear warhead, you can be trampled on and if you don't wanna pay taxes or obey with the health and safety laws the "group" imposes on you, then you are liable to go to prison or at the worst be killed. Such has it been throughout history.
This is just the way of the world guys...like it or lump it. Moaning about it won't change either.
Now. If you are not Anarchist, and DO indeed believe that there is a role for the government to play in enforcing the rights of one man against another then you accept the right of that government to ask for an equitable amount of money from each Citizen in order to enforce those rights. For you cannot say that you believe there should be an independent and soveregn power withe the power of enforcement over all peoples in a territory if you are unwilling to fund your fair share if it. If you deny it's funding then you deny it's existence. So you accept funding if you accept it's existence.
If you accept the existence of the government but you believe that it has it's fingers in too many pies and enforces too many positive and negative rights on people then you have your right to say this every three years in an election. For your voice is not any more worthy than another man's. If your thoughts are shared be many others then there might indeed be a pullback in the operations of government. But until then you have to accept that the majority of people's views are as equally valid as yours and in a democratic society you have no right to force your views on others other than by democratic means.
That is a brief reasoning for why you either think that "Might is Right" or conversely you agree to paying taxes. There is no in-between.
Published: April 24, 2008 5:05 AM
Inquisitor
Owen, arguing with you is a waste of time. You are nothing short of a socialist liar unable to offer even the slightest amount of proof for your claims (the best you can do is "the government knows best", evading the request to actually prove your claim), as the above has proven beyond doubt.
"You know the old Libertarian Maxim - "might is right"?"
Why is anyone still wasting time by responding to this troll advocate of government-enforced parasitism?
Published: April 24, 2008 10:41 AM
newson
owens says:
"Might is right is actually a Anarchist Maxim"
which libertarian anarchist has ever stated this? names, please!
your language is that of a typical socialist. the "dog-eat-dog" line is a classic socialist caricature of libertarianism. sanctity of all property rights (especially those of the weak and vulnerable) is at the heart of all streams of libertarianism, be it minarchism or anarchism. the former sees an extremely limited role of government in overseeing the administration of justice and defence, the latter allowing spontaneous collaborations and mutual protection arrangements to spring up, but with no central oversight.
civil society existed, and indeed flourished before the income tax was introduced. family structures were stronger, not denatured by welfare, communities grew up with self-reliance.
philanthropy would be more amenable if the tax burden were less punitive. why help anyone when that's the nanny state's role?
what is an "an equitable amount of money from each Citizen" 10%, 20%, 80%?
obviously everyone on this forum understands the voting mechanism, and is bound to respect whatever may be the outcome. however, just as socialism looked a spent force immediately after marx's death (only capturing the public psyche last century), things may well improve in the future. certainly venues like mises.org mean the ideas have a much larger audience that was the case pre-internet.
one thing however, unlike socialism, libertarianism will not achieve predominance by the cracking of skulls.
Published: April 24, 2008 11:06 AM
Owen
Inquisitor:
Again adds nothing to the debate
newson:
"one thing however, unlike socialism, libertarianism will not achieve predominance by the cracking of skulls."
Yes we both agree.
I guess the difference between libertarianism and whatever systems are in place now boils down to a differing rank order of values.
Whereas a Libertarian values the rights to property highly and above (almost?) all others, those who followthe UN Declaration of Independence suborinate the right to property to the right's to basic necessities, moving freely, being safe in their country and having protection of their rights by Police.
What this effectively means is that someone who believes in Libertarianism does not believe in having tax taken off them in order to achieve these "higher order" rights but manoy other people do.
As I stated before we live in a world which is in fact still in a "state of nature" where might is right outside of governments. Governments answer to no-one and disagreements are settled with negotiation or resort to force. As governments are simply a voluntary organisation of people you have the choice to be a member of one or you have a choice to be independent but in being independent you send yourself back into the "state of nature" where you may be subject to any form of force which is not governed by any higher power.
So a government is simply an Anarchistic organisation that has forcibly won the power to impose its rank order of rights and responsibilities on all people who will submit. One government cannot force it's value system on people who are members of other government "groups" because they can defend with force.
However within a country such asthe USA or New Zealand, you either submit to their value system, fight it (futility!) or leave and join another government group or live in exile.
Fancy notions of "lets all live in a yellow submarine" of libertarianism can only be achieved if enough libertarians are found to create a state and to forcibly defend it.
There is no magical higher power or set of rights to which all peoples in the world will submit as is amply evidenced by the US Government's stubborn refusal to accept any UN Resolutions it doesn't like - thereby destroying the illusion that the UN has power other than that which it can enforce with guns.
It is noble to say "governments are despotic and impose their will on others" but there is no other possible state of the world unless you wanna get everyone to start smoking pot and mellowing out. This is because the Paradox that a libertarian says "you have no right to force me to do anything I don't wanna do" is merely a reflection of their rank order of rights. And once you mention the word rights...
...another person will say "we have the right to control how you use your land and force you to pay for taxes because that is part of our higher order of rights and responsibilities".
There is always an inevitable clash of "Priorities of Rights" and just at the moment libertarian rights are losing.
Maybe someday they will become stronger - you never know? Hell, if Osama gets his way our women will all have to cover their faces and not be able to drive because that is based his fundamentalist form of "rights".
Published: April 24, 2008 2:58 PM
Inquisitor
Ah I see, lying and misrepresenting the claims of others and offering no proof of anything is "adding" to the debate. Well have fun "adding" to the debate then.
Published: April 24, 2008 5:49 PM
Owen
Inquisitor:
Oxford Dictionary - Debate:
"to discuss or argue about"
According to the Oxford dictionary one is not required to put forth proof or evidence of their assertions in order to carry on a debate. A debate is about arguing propositions using logic.
Sad that you do not even know the meaning of the words you are using? Are you still in highschool?
BTW/ Go to the other thread and you will see your fabulous lack of logic on full display.
I would provide evidence to a PARTICIPATING person in this debate if it was required. However so far i have countered assertions with logical assertions that have not yet been countered at all within this debate so they require no proof as of yet.
For example, to the question of:
"how much would it cost for government to make those safety regulations"
I countered:
"this is irrelevant because government would use the same scientists and experts the private sector would".
Therefore I won on that point because that is true that governments obviously do not hire the worlds experts on everything and yet laws are made with that knowledge those experts hold. Governments pay the same market price for their expertise as a private firm does.
Do you wanna keep goin down?
Published: April 24, 2008 7:54 PM
newson
to owen:
unless you want to fault my earlier assertion - that people spend others' money more freely than their own - all appeals to the wisdom and parsimony of government spending are futile.
you've not given me facts, so at least try and argue how anybody could possibly care more about your welfare than you yourself do.
self-interest is a primal survival instinct, as you've acknowledged in your "dog-eat-dog" comment. why should government not be subject to self-interest? is not government a collection of self-interested agents?
Published: April 24, 2008 9:32 PM
TLWP Sam
Inevitably Owen hits on the one issue that hit Libertarians' Achilles Heel - there are many governments in the world therefore how is this not competition? Governments have to be reasonable with their rules and laws lest they lose their best and brightest. Similarly in the private world if there's a rental shortage such landlords can up the rent and rules knowing their tenants won't leave because there's no rental places without the high rent and rules whilst having the same comfort - the landlords are acting fully within the free market besides tenants complain now but they won't be complaining when the market changes and the landlords have to compete viciously to provide high quality apartments at rock-bottom prices. So there's a global land shortage whereby governments control the best lands such that there's only desert left unoccupied and no aspiring pioneer wants that. Oh dear tough luck for those who want find their land and start anew. Smart Libertarians could secretly conspire to create spaceships and explore nearby stars for new land before any one else and therefore get first dibs.
Published: April 24, 2008 10:39 PM
Owen
newson:
Yes. People do spend others' money more freely than their own.
Government is done via the collective will of those who support it and if its spends their money that is by their consent. If it is not by their consent then they will vote in someone else or impeach them.
The "supreme" machines of commerce and free-market interaction also carry out purchases and make decisions on behalf of shareholders so it is exactly the same thing.
In fact, think of yourself as a shareholder. You were given a share in the government of your land when you werre born. For those "shareholders" who didn't want any government...um...I have already explained that of course they will consider this a form of theft. And that would be their point of view. From others' point of view it is simply the enactment of a perceived right.
Outside of the sanctity of a government "group" it is Might is Right. I thought you knew that?
If you wanna diagree with the majority in any situation then prepare to either back your position up with force or be quiet. that is the way of the world.
Can you tell me the "Laws" governing the actions of governments on the international stage?
There are none. Why? Because "laws" only apply within groups of people who freely consent to live within those laws. For those who dont, they have to live in the much scarier world called "Might is Right" where they are either strong enough to defend their patch, or they perish or they submit to another groups will.
Or did you think the world was rose petals and rainbows? Sorry to burst your bubble sunshine...Two major World Wars, a Cold War and a Current hegemonic balance of power should tell you that there ain't nothin but foce deciding what goes and what doesn't.
Again, if you want everyone to just mellow out and "leave eachother alone" then you will in fact be infringing on other peoples perceived rights. They will defend these rights with deadly force if required.
Published: April 24, 2008 11:38 PM
newson
owen says:
"If you wanna diagree with the majority in any situation then prepare to either back your position up with force or be quiet."
words of a socialist. you ignore the option of non-violent dissent. Aleksandr Solzhenitsyn's account experience as a political prisoner (read " the gulag archipelago" or "one day in the life of ivan denisovich") blew away the idealized view of soviet life. ideas have power, too.
Published: April 25, 2008 1:44 AM
newson
to owen:
your "might is right" mindset blinds you to the power of ideas. take a look at how active the chinese government is in stamping out falun gong, a social movement with religious overtones. the communists understand the force of ideas, why don't you?
Published: April 25, 2008 1:51 AM
Owen
newson:
Yes I agree with you Newson. THe only and best way to improve things is via "passive resistence" and education to begin a chaning of ideas.
I too agree that government well oversteps its mark in the current world:
- fractional reserve banking has ruined economic prosperity
- Governments extremely overtaxing and then spending on frivilous things that benefit a select few rather than the majority only
- in fact I disagree with all income taxes in all their forms and only would accept a small property tax which is redistributed in order that every man has his right to lifes necessities.
- But I do agree with protection of peoples rights as they exist in documents such as the declaration of human rights or constitutions
- Healthcare and education should not be the business of the state because althoug they are 'essential' goods in some respects, they can be much better provided by the free market. For those that cannot afford either then their land tax redistribution would cover this.
- I do not agree with prohibitions on recreational drugs or activities that cause no harm to others
Obviously these are my beliefs and I do not expect that others will share many or all of them but my only recourse is to share them by education and passive resistance.
Published: April 25, 2008 2:03 AM
Inquisitor
Owen, look up the burden of proof too, seeing as you're such a dictionary afficionado. Dictionaries are not going to come to your rescue.
Your counterpoint proved nothing. Newson asked for figures. You said the government would use the same experts as the private sector. Umm, so what? The logic you provided is empty, as you did not prove that governments were acting profitably (and by this I do not mean simply spreading their costs across the population.) Bryan Caplan actually has a book on why voting populations are far less economically rational than market participants. The only one going down here is you, with your repeated exhibitions of horrifying ignorance... typical of socialists.
Published: April 25, 2008 8:21 AM
newson
interesting... i was just now reading "the freedom philosophy" (downloadable from the publications archive), and bumped into this essay from frank chodorov (p62)
"The basic axiom of socialism, in all its forms, is that might is right. And that means power is all there is to morality. If I am bigger and stronger than you, and you have no way of defending yourself, then it is right I thrash you; the fact that I did thrash you is proof that I had the right to do so.
strange how a turn of speech can reveal a whole mindset.
Published: April 25, 2008 9:51 AM
Owen
Inquisitor:
You will not find "burden of proof" in a dictionary idiot.
Newson asked for figures to prove that government spends more on providing that service than the private sector would. Showing that in fact they spend the same nullifiesthat line of argument.
You lose. How does it feel?
I never said they were acting profitably, that is a livertarian word which has limited meaning. I said governments provide a service which would definately need to be provided under libertarianism, at a cost the SAME as a private market would.
I have no doubt that Bryan Caplan's book has many valid detractors. Not least of all because the decisions made by voters are not only economic ones.
Newson:
"Might is right" is merely the state of nature in the world we live in. It is the interaction experienced outside of the sanctity of a governments protection, and explains the interactions between governments.
Published: April 25, 2008 6:22 PM
Inquisitor
"You will not find "burden of proof" in a dictionary idiot."
Erm, duh. That's why I said dictionaries will not come to your rescue. Now go find an accurate description of the notion.
"Newson asked for figures to prove that government spends more on providing that service than the private sector would. Showing that in fact they spend the same nullifiesthat line of argument."
But you haven't even shown that much.
"You lose. How does it feel?"
Amused at your silliness? Yes, that.
"I never said they were acting profitably, that is a livertarian word which has limited meaning. I said governments provide a service which would definately need to be provided under libertarianism, at a cost the SAME as a private market would."
Bullshit. It means that the expected gains of an action exceed its costs. This can be psychic, pecuniary etc. You also did not demonstrate the latter assertion.
"I have no doubt that Bryan Caplan's book has many valid detractors. Not least of all because the decisions made by voters are not only economic ones."
Even if that were so, you're discussing economics here, so this won't save you.
Published: April 25, 2008 6:32 PM
Owen
Inquisitor:
"burden of proof"...I know what it means. If you are unsure why are you still asking others to find the meaning for you...socialist troll.
I don't need define the cost of a government action if it is the same as the cost under libertarianism. What is the point? It is the same. The answer achieves nothing...like everything you say.
Therefore I won.
I said governments provide a service which would definately need to be provided under libertarianism, at a cost the SAME as a private market would.
Profitability does not enter that. However unprofitable that government would be...then the market would then be the same...becaus the government is using the market.
We are not discussing economics child. We are discussing whether government should regulate markets to protect health and safety of citizens.
I have shown that it would cost the same or cheaper than under a free market and have better outcomes (less litigation and loss of life).
health and safety is not an economic topic, it is a health and safety topic. It has economic implications but those are just one aspect of it.
You really have to come out of your dark, confederate flagbearing militia basement buddy and join the world.
Published: April 25, 2008 7:21 PM
Inquisitor
'"burden of proof"...I know what it means. If you are unsure why are you still asking others to find the meaning for you...socialist troll.'
You're the one throwing dictionary definitions around, so you might as well bring the relevant terms into the discussion.
'I don't need define the cost of a government action if it is the same as the cost under libertarianism. What is the point? It is the same. The answer achieves nothing...like everything you say.
Therefore I won.'
No, you need to demonstrate far more than that. You need to demonstrate that individuals would in fact choose to bear the given cost, i.e. that they'd consider it economically sound, when spending their own money. So you've won nothing. You haven't even shown it'd be the same as under libertarianism - you just posited that governments may use the same experts as the private sector. So what?
"I said governments provide a service which would definately need to be provided under libertarianism, at a cost the SAME as a private market would."
Because you said governments would hire experts that firms would? Again, so what?
"Profitability does not enter that. However unprofitable that government would be...then the market would then be the same...becaus the government is using the market."
Oh please. Yes, and its spending money its taken from the populace at large, that is to say money that is not its own - hence Newson's point regarding people being wiser with their own money than that of others.
"We are not discussing economics child. We are discussing whether government should regulate markets to protect health and safety of citizens."
Yet we are, dolt. Whether citizens would in willingly fact bear the costs of this extra "safety" definitely falls in the realm of economics.
"I have shown that it would cost the same or cheaper than under a free market and have better outcomes (less litigation and loss of life)."
Except for the small problem that you haven't.
"health and safety is not an economic topic, it is a health and safety topic. It has economic implications but those are just one aspect of it."
It's all economics, given that you're bringing the market into it.
"You really have to come out of your dark, confederate flagbearing militia basement buddy and join the world."
I'm not American, but thanks for revealing what a prejudiced twat you are.
Published: April 25, 2008 7:37 PM
Inquisitor
*in fact willingly
Published: April 25, 2008 7:42 PM
scott t
"'I don't need define the cost of a government action if it is the same as the cost under libertarianism."
well...you dont need to be posting crap here but you are.
what if a drought in an area drained a monopoly municipal water supply.
the local govt wouldnt allow private wells in yards even though the underground water table was still sound.
just the local resivoir was drained due to drought and use.
i would say that govt in that case does create additional costs - the cost of making water more scarce.
Published: April 25, 2008 8:10 PM
Jeremy
Owen,
You're right about one thing - might is right is the way the world works. However, it is a question of degrees. Going out in the opposite direction of the road to serfdom is the road to freedom.
You are completely wrong in saying that 'might is right' is a libertarian term. Defending oneself and one's property is not the same as 'might is right'. Sorry that you believe this is so.
Libertarianism is based on the 'non-agression' principle, which means that any government that uses force in any form (attacking another country, taxation that is not voluntary, etc) is not libertarian. I'm not saying I think no government is the answer to our problems, just that it is not a libertarian entity.
Published: April 25, 2008 9:01 PM
Owen
Inquisitor:
Congratulations, you actually tried to add something!
"You need to demonstrate that individuals would in fact choose to bear the given cost"
Um, if firms purposely act without any regard for public safety then we will pick up the pieces later and they are in fact endangering the health and safety of the people, a right held dear by MOSt people (except you). Therefore the majority are happy to force their will upon the minority in order that no-one knowingly endangers the life of others. If the firm in question wanted to make and sell hand grenades outside schools this would be banned. So would any and all actions by firms that endanger the lives of the people.
It is also CHEAPER to prevent the damage such actions WILL cause before it happens. How much does a seatbelt cost compared to the present value of future lost earnings of a lost life of a 1yr old person who was killed in a car with no seatbelt? Case closed. You lose.
Still a bit of a worry how you think everything is about economics when it clearly isn't.
Scott t:
Good try but the debate was specifically about regulations used to enforce health and safety when building and operating an oil port and/or refinery in New Zealand. The cost to government in this case of creating the regulations would be the same as a firm in investigating how to safely operate without incurring future potential libabilities due to negligence tort actions against it.
I agree with what you say about wells but in this case does not that government have the support of the majority of the population in preventing people damaging the local ecosystem? I think it does and if that wasn't the case then that rule would not be there.
Jeremy:
I understand and also agree with your post. However, many would argue that every action taken by a state is in fact don so as to "defend the dearheld rights of it's citizens".
Libertarians view of rights that are to be defended are different than many other people. Therefore a government might use force to collect taxes in the name of "defending the rights of the poor to eat" or "defending the right of the people to a clean natural environment" when prosecuting a polluting firm.
Libertarian ideals of defence used only to protect property stem from "property" being the main right held dear by libertarians. Current Western Democratic governments protect citizens rights to: freedom of movement, right to basic standard of living, minimum health and safety levels etc and believe it is their right to levy taxes upon residents in their jurisdiction in order to meet these rights.
Because most people in democracies do not put the right to property above others' rights to eat, move freely and be safe.
Published: April 26, 2008 6:56 AM
Inquisitor
To the troll:
This will be my last response to you. I've wasted enough precious time on your incessant evasions and lies.
"Um, if firms purposely act without any regard for public safety then we will pick up the pieces later and they are in fact endangering the health and safety of the people, a right held dear by MOSt people (except you). Therefore the majority are happy to force their will upon the minority in order that no-one knowingly endangers the life of others. If the firm in question wanted to make and sell hand grenades outside schools this would be banned. So would any and all actions by firms that endanger the lives of the people. "
What was asked was whether this so-called government safety regulation was actually economically efficient and whether it does in fact reflect how a free market would handle it. Your response was that governments hire the same experts that private firms would, which again does not prove your point. Continuously citing "might makes right" and "the majority wills it", as if I were some majoritarian, honestly leaves me unphased.
"It is also CHEAPER to prevent the damage such actions WILL cause before it happens. How much does a seatbelt cost compared to the present value of future lost earnings of a lost life of a 1yr old person who was killed in a car with no seatbelt? Case closed. You lose."
Right, and governments are necessary to force profit-oriented firms into adopting measures that will reduce their liabilities, correct?
"Still a bit of a worry how you think everything is about economics when it clearly isn't."
Still a bit of a worry that you haven't proved a single thing yet.
Published: April 26, 2008 7:09 AM
Owen
Unquisitor:
It being cheaper to prevent safety violations than to litigate them after the fact and deal with the inevitable costs means that government regulation is cheaper than leaving it to private litigation.
The fact that a government would employ at market rates the samer experts that a private firm would ensures that the cost would be equal. When this cost is then spread over all firms in that same market you get a two fold reduction compared with the private market of :
A) Preventing public safety violations rather than litigating and dealing with the costs of them after the fact is much much cheaper.
B) Government does not have the resources to investigate and develop such regulations so must use private market experts at market rates the same as a firm would have to. This cost is then only needed to be incurred once and then is made freely available to all market participants in the form of health and safety regulations so meaning that pointless duplication of such efforts is avoided.
So government regulations are cheaper and more efficient than leaving it to the private market.
Published: April 26, 2008 9:52 PM
newson
owen says:
"It being cheaper to prevent safety violations than to litigate them after the fact and deal with the inevitable costs means that government regulation is cheaper than leaving it to private litigation.
this is a non-sequitur. the threat of litigation motivates private interests to avoid tort actions. responsible behaviour (avoiding injury to third parties from negligence) springs from self-interest.
as well, private interests are less likely to over-invest in prevention than government. government has every incentive to render an environment too safe, as this plays out well politically - over-zealous is better than lax when fronting the public on safety issues. heck, everybody should be driving the latest bmw if money is no object. let's make it illegal to drive budget cars.
in contrast to this outcome, if private interests either over, or under-invest in preventative measures, they will be punished in the market. private interests who are slack on accident mitigation will face higher insurance premiums or risk being ruined by a successful tort action, and companies who spend too freely on prevention will find themselves with less profit than their more thrifty competitors. this is a dynamic equilibrium which government cannot replicate because it doesn't have the same incentives.
Published: April 27, 2008 2:27 AM
Owen
Newson:
"the threat of litigation motivates private interests to avoid tort actions. "
Of course. And how will they do that? By basing their actions on exactly the same research and investigation that the government would.
The "market punishment" that safety-tort undermitigators face in the market in terms of insurance premiums and in lives lost and lawyers fees at trial....is going to cost more than it would to prevent such actions taking place in the first instance.
Prevention is still cheaper than cleaning up after the fact. Especially when the government uses market means to develop such prevention guidelines.
Published: April 27, 2008 4:09 AM
newson
owen (highlighted) says:
"the threat of litigation motivates private interests to avoid tort actions. "
Of course. And how will they do that? By basing their actions on exactly the same research and investigation that the government would.
this is where the error is. the government sees things through a political prism, the costs are not borne by them - why would they care how much is spent on safety? if they overspend they'll sell it as compassion for the public. a lot of the safety regulations promulgated by government are a smokescreen for other purposes (job creation for friendly unions, hobbling certain firms in favour of others etc)
"Especially when the government uses market means to develop such prevention guidelines.
the government purchases goods and services on the market, but does not use market means to achieve its ends. it will tend to hire too many experts rather than too little, because the financial constraints aren't there. it is not subject to the same budgetary pressures, and hence there will be wastage.
private companies will not base their decisions on the same information as government precisely because they have two completely different agendas. one has political popularity as its goal, the other profitability.
Published: April 27, 2008 5:32 AM
Owen
Newson:
I accept that government would not be as ruthlessly efficient but I don't think the gap would be too large.
It strikes me that even one unecessary death as a result of corporate negligence would have far greater financial implications. Imagine a small child killed through corporate negligence of some sort. Well that child might have grown up to work for 40 years in high paying employment aswell as having 8 children who do the same and so on and so on so on until you could caluculate that one negligent death costing hundreds of millions if not billions through forgone potential future earnings and societal benefit.
This could quite probably outweigh any inefficiencies government might have had in conducting intitial reserch and investigation to create regulations which are divided up amongst market participants in the first place anyway.
Published: April 27, 2008 6:00 AM
newson
tort actions regularly ascribe damages on the basis of forgone earnings, physical and emotional hurt, degree of contributory negligence etc. nothing revolutionary here.
in fact, if you go through court records, you can get a ball-park figure for different types of disaster.
romanticizing the victim doesn't shed any light on the argument. the government doesn't weep inconsolably every time a taxpayer (current or future) dies, nor does business. both are motivated by numbers, the former votes at a poll, the latter figures on a p&l statement.
the family's pain is private.
Published: April 27, 2008 7:10 AM
Owen
Newson:
If the future generations of a person and all of their potential earnings into infinity are destroyed upon their unnecessary death this would immeasurably outweigh any costs of creating regulation to prevent the death. We could be talking billions here for one person.
The insurance premiums and/or research and investigation costs in order to mitigate that potential expense far outweighs the cost of government creating the legislation, which if the firm follows, will not lead to any tort action.
If you wanna put a price on everything then you gotta put a price on human life. Since human life is so expensive (potential foregone future earnings of every human generation that person could create) it is still more efficient to regulate than to litigate.
Published: April 27, 2008 4:50 PM
Ryan
Owen (with fixed spelling of "vulnerable"):With regard to an electronic system being vulnerable to government interference..um...duh...how is a gold standard any less vulnerable? They both rely on the same government to support and defend them. We are talking about the same government right?
What our friend, Owen the Statist, is ignoring here is that capitalism properly calls for not only a gold standard or a standard fixed to any commodity for that matter (it could be cheese graters if the market called for it), but it calls primarily for the separation of economy from the state. The state is the greatest thief. Through, not only taxation, but through engineered inflation through fractional reserve banking, government funds its own interests. The Fed is created in 1913: World War I ensues; the dollar is removed from the gold standard domestically in 1933: World War II; the dollar is removed from the gold standard worldwide in 1971: double-digit inflation in '73 and '74. Now, is it any wonder that Ron Paul and Ben Bernanke aren't best friends? It's because Paul calls for separation of economy and state (as vital as separation of church and state to a truly free people) and the return to a commodity standard, while Bernanke perpetuates organized crime every time he claims to have any authority!
The problem here, Owen, is that we're not talking about the same government. Your big brother is tucking in your blankets at night: the real big brother is putting you in shackles any time you claim to have a right to your own labor.
Published: April 27, 2008 9:23 PM
Ryan
Owen, did you just say that something could outweigh any costs of creating regulation? That hurts. The costs of creating regulation are what is immeasurable. Going through existence, we constantly "mix our labor" with items. We perpetuate our existence through our labor. Property is ours, because we have put something of ourselves into it. If government attempts to regulate to save lives it inherently kills a part of everyone's ability to live, because private property is essential to an actualized existence.
Published: April 27, 2008 9:29 PM
Owen
Ryan:
Yes. If the future generations of a person and all of their potential earnings into infinity are destroyed upon their unnecessary death, this would immeasurably outweigh any costs of creating regulation to prevent the death.
We could be talking billions here for one person when all their future generations of offspring's future earnings are taken into account.
The insurance premiums paid by all firms in the industry in order to mitigate that huge potential expense far outweighs the minimal added cost of government commissioning the research and investigation instead of the firms repeating this research each themselves.
We do live in a libertarian society Ryan, except you don't realise that in a libertarian society people are allowed to form groups to perpetuate their interests. It just so happen that the largest of these groups is called the "government" and all other groups are so small as to have no ability to negotiate any rights or agreements with it. Governments negotiate between eachother because their is a balance of power somewhat. Between an individual and the government of their territory there is no need for the government to give any credence to others.
OUtside of the sanctity of a government you are on your own and there are no "higher laws" upon which your interactions are governed. A government could execute you for no reason at all because there is no laws or enforcement thereof to prevent this. Only within a government are their laws and rightsgiven to citizens.
So as for having my "labor stolen"...I consent to it. If I don't agree I put my name in the hat and cast my vote another way to reduce taxes or regulations which many people do but at the end of the day because they participated in the political process they must accept the outcome or go outside of the government where there is nothing protecting their rights.
Published: April 27, 2008 10:45 PM
newson
owen says:
"it is still more efficient to regulate than to litigate."
apart from the fact that you've not given us any facts to support this line of reasoning, and conceded that government is less"ruthlessly efficient" in restraining costs, you still fail to see that it's the very threat of litigation that encourages firms to engage in prevention.
nobody is suggesting that prevention isn't better than cure.
you seem very idealistic about the nature of government. wait till you have to do business with them, the scales will fall from your eyes.
Published: April 27, 2008 10:50 PM
Owen
Newson:
If a firm does not comply with what a government considers to be safe production then it will proceed with action against the firm for endangering the public.
In that sense the regulations can be seen as a guide to business for how they might best avoid such litigation.
Government necessarily acts for those that vote (because by voting they legitimize it's power over them) and therefore government is simply the representative of the majority of citizens within a geographic area who are able to force their will upon non-members without any guiding laws to regulate this interaction. Once you step outside of government sanctity you are into "might is right" so you better be mighty or you will lose.
So in that sense regulation can be seen as a warning for a firm to stay within what the majority ruling party deems acceptable for that firm to do. If the firm steps outside these rules they face the consequences.
This is another way to look at it.
Published: April 28, 2008 3:40 AM
Ryan
Owen: "the largest of these groups is called the 'government.'"
Government is the antithesis of a private group promoting its interests according to the libertarian creed. Government is the largest criminal, not the largest private organization. The libertarian society requires a regard of all coercion as illegal, and, yes, in response to your "there are no 'higher laws' upon which your interactions are governed," there is one (and it is absolute) law according to the libertarian creed: that no aggression against a person or their property shall be allowed. If you're still a little confused about how laws can exist without government, PLEASE see The Libertarian Manifesto, chapter 12. Owen, if you take the time to understand what this "libertarian" idea is, rather than making heinous claims that the absence of government is the absolute proliferation of government, your argumentation might even stand in the minds of those who have been socialized as well as yourself. People are, easily, allowed to form groups, absence of coercion, to further their ideals. But as soon as coercion creeps in, we have gone against the libertarian creed, and the individuals who would claim in our libertarian existence to have the "right" to govern others would be taken to the private courts to be tried for their acts of coercion.
Next, Owen, your "love it or leave it" stance is sadly typical. You've just said that those who wish that government would discontinue its aggression against them ought to simply step back and leave to some far off anarchist colony, rather than asking that their wrongs be made right, that government be the one to step back, and that government realize how self-defeating it is to tell the individual to crawl around and die. Certainly, the true libertarian ought to vote for lower taxation at any chance he or she is given; but, the libertarian will never settle. The lowering of a tax does not make the remaining tax just: it is merely less unjust than the previous tax. Again, a critique of this reality is available in the Libertarian Manifesto (this time in the 15th chapter), if a Statist like yourself can care at all for intellectualism (see chapter 7).
Owen: "If a firm does not comply with what a government considers to be safe production then it will proceed with action against the firm for endangering the public."
And thus we have inefficient school systems, inefficient road systems, inefficient garbage disposal, inefficient retirement plans, inefficient anything and everything that the government puts its hands on. If a firm does not comply with what the market considers to be safe production then it will proceed with action against the firm, because that's what the market calls for. Isn't it beautiful? It's amazing that there's a system out there where those who receive a good or service are those who determine what that good or service will be and how it may be produced.
Businesses do need a guide. They receive their demand from the market. Demand is usually a good guide for those attempting to supply the market. You know, supply, demand, equilibrium, all of that good, sensible stuff.
Owen, voting is not a legitimization of government. Voting for an increase in government is a legitimization of government. Voting for a decrease in government is a nonviolent attempt to bargain an aggressor out of existence.
Anarchy does not perpetuate "might is right." You have already admitted that government is the entity that attempts coerce others, therefore wielding "might." In the market, anything free from coercion is right.
The only way to look at regulation is a coercive means of restricting a business and its consumers. Regulation tells a business to go against (or perhaps not bother exercising) its better judgment. It tells the consumers that they cannot choose. It provides businesses with the rationale that whatever they can get away with doing, within the regulations of government, ought to be done. What ought to be done in any case ought to be determined by the market, and would be under a market economy.
Published: April 28, 2008 10:57 PM
Owen
Ryan:
Couple of points:
1. If you vote for a party in a fair election you would gladly accept if your party won, no? Well if your party loses then you must oblige the other participants in that election of their rights to then pursue their form of government. If you are not willing to accept their form of government then do not vote. You legitimize an election of government by voting, this is common knowledge. So I take it you don't vote.
2. All those who do vote therefore accept the winner of that election as being able to lawfully hold authority over them when it is elected including enforcing all the laws they propose to enact. This stems from your legitimisation of their rule by your vote. Again, if you are not prepared to accept this rule then you must not vote. Otherwise you would be a hypocrite.
Therefore a government is the embodiment of the sentiment of all who voted. If my winner does not win I will still support and follow the government that is elected. If there are hopeful candidates for government that went against any moral fibre of the being of the others then they would be excluded by the others of standing for government. This ensures that within a certain government there will only ever be political viewpoints across an acceptable range.
If one "outside" group insists on taking part in elections then the majority would then move away, choose their government and move back and forcefully expel the rebel group they hated.
The sum total of all of this is that government DOES represent the will of the people who voted. It can therefore be regarded as a voluntary group (because no-one is coerced to vote) within a larger libertarian society.
3. Laws between can only exist if they are capable of being enforced. Because the law will be infringed from time to time by members of society it cannot be a natural law because a natural law could not be infringed. Therefore, absence enforcement, there is no law. Outside of national governments there is no universal or even regaional laws because there is simply no method of enforcement.
So the enforcement must come from one of the two parties at dispute. Let's say two groups of libertarians - for example government (the largest voluntary group) and a smaller group. The smaller group would be patently unable to enforce any of it's conceptions of laws onto the larger group however the government could enforce any and all of it's laws on the smaller group.
This is the current situatiation of the world today and there is no way to change it.
4. I agree that most things that government puts it's hands on are run inefficiently. I think that all activities should be returned to private citizens and business, or contributed to on a voluntary basis, except for the following few:
1 Defence
2 Infrastructure (i.e. natural monopoly networks)
3 Law making*, enforcement and arbitration
4 Foreign Affairs
(*3 Is actually a wide scope and would require constitutional limitations to prevent anti-competition laws for example.)
4. I don't think libertarians should leave I think they need to engage in the political process in order that many of their good ideas are heard. I don't call myself libertarian because I have eclectic political views that are a combination of libertarian, democratic, georgist, and republican.
5. It would be great if might did not equal right Ryan...sadly in this world that is not possible. There is no higher authority than a national government. The only way is for you to work from within to change attitudes to economic management and rights etc.
Published: April 29, 2008 3:31 AM
TLWP Sam
On the other hand, Owen, the Market for Liberty with its notion of privatised justice system competitors presumes a diverse horiztonal society but no vertical structures. If we were to presume a anarcho-Libertarian did have various vertical structures then these hierarchies would be 'just'. It seems history instead would show in a time of no higher government people tended to live in clans in order to play the numbers game in their favour against roving violent gangs. I also believe being exiled from a clan would be a virtually death sentence, it'd probably be guaranteed if nearby clans didn't automatically accept exiles as a matter of course. And, ultimately, if the rebuttal is 'well you'd have to be a good clan member and abide by the rules and keep your act clean then you'd have nothing to worry about' would confirm the Libertarian notion that everyone is in some sort of a gang and the biggest gangs win.
Published: April 29, 2008 5:22 AM
Owen
TLWP Sam:
Sadly, history shows that we got to where we are now PRECISELY because the natural tendancy of humans is to form and join clans that protect their interests and security. When the interests of one clan overlaps with another as happens when clans grow and forge new ground and develop (another natural human tendency) then they quarrel and the winner takes all. The process continues until stable clans are formed that can be defended militarily - we now call these governments.
I wish we all just loved eachother and helped eachother but that is not what the evidence says.
Published: April 29, 2008 5:36 AM
Ryan
Owen, I would not gladly accept the victory of my party. The libertarian party inherently sees their victory as the best of the inherently evil options available to them. Anarchy is the goal, but, on the way to anarchy, we attempt to minimize the role of government. Minimal government is not just. It is less unjust than other governments.
The legitimization of an election by voting is not common knowledge. Common knowledge assumes an a priori principle or explicit empirical knowledge. You've merely presented the legitimization theory. I hold that government is a criminal to be reckoned with, not to be pardoned.
Not voting would in fact be the act of hypocrisy. Any libertarian feels the need for achieving anarchy as soon as is possible. In order to do so, libertarians should not silence themselves: this would be hypocrisy, for it inherently goes against the goal. The only hypocritical action in voting is voting against the goals of the libertarian party, and a “no vote” would in fact be voting against the goals of the libertarian party.
You said, “If my winner does not win I will still support and follow the government that is elected.” This, in fact is hypocrisy. For if one claims a support of one thing, and then claims to be satiated by its antithesis, one cannot claim to have any legitimate stance at all. They have been the hypocrite.
The “acceptable range” of political action for the libertarian can only include action that goes against the existence of government. To do otherwise would be the death of the libertarian stance.
“Forcefully expel?” Exactly, Owen. You don’t seem to get that being coerced goes against an individuals will. If you vote to be taxed, then and only then have you given your consent to the tax. If I vote against a tax, then I stand against that theft and I never step down: because any libertarian must shun hypocrisy.
In response to “no one is coerced to vote,” when I vote against an attack on their property (taxation), they are simply doing something they can to avoid “forceful” aggression. They are not volunteering their support of a tax. To say so is: “hypocrisy.”
The method of enforcement of the law of anarchy is through the market. I assume you haven’t read or listened to the audio book version of the twelfth chapter of the Libertarian Manifesto yet. As I assumed, you must despise intellectualism.
Owen, it’s comforting to know that you only agree to theft for some causes and not for others. That makes your stance less unjust than the stances of others.
In response to, “There is no higher authority than a national government,” government has no authority; it merely has structure, the ability to steal and enslave.
Published: April 29, 2008 9:57 AM
Owen
Ryan:
...sounds like you are not actually interested in being a participant in the democracy at all but just wanna use the other party and take what you can get out of it and not give anything back.
Actually you did accept the outcome because unless you are typing from jail after defiantly not paying your taxes. So, you DID adhere to the decision - you followed it. Thanks, we need all the taxes you can get.
You can moan ad nauseum about how you don't like it (as many people do) but you followed it after being forcefuly compelled to do so.
You did not but remember you are USING not participating.
Yes, libertarianism is allowed in democratic elections because it is within acceptable morals. Examples of choices which would be excluded would be "Axe Murderers", "Neo-Nazi's" and "Suicide pact" parties. They would not be accepted as viable options by the majority based on their professed beliefs, in fact most of them would probably be locked up or in treatment anyway.
You can vote against a tax but you paid it, right? You followed the outcome of the election.
No-one holds your hand and pushes it into the box so you are not physically compelled to vote. You still have a choice.
The situation we have now is anarchy. The largest voluntary group of individuals is called the "government" and it interacts with other groups within an anarchy environment.
Anarcy allows voluntary groups of people, right? Government is a voluntary group of people. You are not forced to join with this group - you can choose to defy it or leave. You chose to stay.
If you wanna go to another anarchist group you could choose another government group or make your own but sorry there is no land left and our government (voluntary group of people) is not interested in just giving you any of ours. So what will you do? It is up to you.
Libertarianism allows the "theft" of another's property as restitution for violating the right of one's private property. In many cases the "offender" will not agree to this. The "victim" is considered to have the right to streal some property off the offender in order to restore their right (property).
Taxation is based on the same principle of someone (the people represented by their democratically elected government) having the right to steal some property off the offender (citizens who have consumed/stolen government services without paying for them yet) in order to restore their right(s) (Freedom of movement, right to basic necessities, right to security, right to national defence, right to due process, right to an environment, right to life).
So "theft" of property from another is justified in Libertarianism and Democracies by the "rights" that need to be restored from this property.
In a libertarian society the government provides no services and therefore cannot legitimately demand payment from citizens.
A democratic government provides a range of services that benefit the public (security, defence, law and order, freedom...), so is entitled to seek payment from the consumers of those goods. If they do not want to pay then it can forfully exctract payment.
Was there a contract for payment? Yes, because by living in that society and voting (honestly) you agree to abide by any laws, including taxes, that are made by that government.
Published: April 29, 2008 10:43 AM
PR
Remember, folks...
If you vote, you have no right to complain, because by voting you implicitly agree to accept the outcome, whatever it may be.
If you don't vote, you have no right to complain, because you forfeited your chance to change things.
If you stay within the country, you have no right to complain, because staying implies consent to everything the government does.
If you leave the country, you have no right to complain (even about foreign policy that directly affects you), because you're not a citizen anymore.
Published: April 29, 2008 11:16 AM
Owen
Couldn't have said it better myself.
Oh, you forgot to add that since the government is just a voluntary group of individuals within an anarchist society, you really have nothing to complain about because your libertarian utopia is already here...except with the small catch that another group of libertarians have defined their rights differently from yours and are using their "private security firm" to enforce these rights.
It is what you wanted right? Private security? Anarchy? Well it's here...just you can't see it.
Published: April 29, 2008 11:45 AM
Ryan
Owen, your arguments and mine, it would seem, have become centered around denotative meanings.
I hold that consent is saying something is just. You hold that the slave who does not revolt out of fear for his life is giving his consent. Our definitions of consent do not coincide. It seems that I would accept that taxpayers give consent to a tax in your sense, and that you would accept that taxpayers who vote against a tax do not give consent in my sense.
Further, you hold that anarchy includes the presence of government, while I hold that anarchy is the absence of government.
You said, "But sorry there is no land left." This is an important point. I could flee government to establish myself in the Rothbardian definition of anarchy, but I am prevented from doing so by the omnipresence of government. Government is self-perpetuating and has covered the earth. If there were unclaimed land anywhere, imperialist countries would snatch it up as it has in the past.
Restitution for a crime committed is not theft, because as Locke pointed out in the libertarian tradition in 1690, those who do not abide by the one law of non-aggression are not guaranteed the rights thereof: life, liberty, and property.
Government is not the sole entity capable of providing certain magical goods and services. To say that no one could privately provide garbage pick-up is as ludicrous as to say that the shoe market shouldn't have survived in the private realm. Government has coercively claimed the right to force us to pay for goods and services that we may or may not desire, and to force competitors to stay out of the market. Rights are guaranteed by the market. The only rights "guaranteed" by government are those which government claims it will not stop the market from providing to us.
You said, "In a libertarian society the government provides no services and therefore cannot legitimately demand payment from citizens." Thank you. That was a very good and rightful concession.
I have no contract with government, because government has encompassed the earth. Even if it did not encompass the earth, it would tax me, making it even more difficult to "just leave" and go establish anarchy. In our world, it is impossible to give implied consent. Government is always there to fight everything that libertarians stand for.
What you fail to see, Owen (and PR), is that A LIBERTARIAN EXISTENCE DOES HAVE A LAW. It is the law of non-aggression, and hence government is the largest and most grotesque criminal. Again, please don't dodge private legal systems. It's in the Libertarian Manifesto. It will barely take you an hour to listen the audio book of chapter twelve. Please, please, try to think, instead of avoiding this crucial argument.
Published: April 29, 2008 1:19 PM
PR
Just to be clear, my post above was meant as sarcasm. Owen is glibly conflating aquiescence with consent and is with ought. That he apparently sees no moral problem with my Catch-22 situation should tell you everything you need to know about him.
Published: April 29, 2008 2:11 PM
Scott D
Owen:
"You will not find "burden of proof" in a dictionary idiot."
http://dictionary.reference.com/browse/burden%20of%20proof
Tee hee. Now, what else has Owen been wrong about so far....
Published: April 29, 2008 3:01 PM
Owen
Scott D:
Seems quite clear that "burden of proof" applied to legal courtrooms only.
So not here. Sad that, huh?
Published: April 29, 2008 6:02 PM
Inquisitor
burden of proof
–noun 1. Chiefly Law. the obligation to offer evidence that the court or jury could reasonably believe, in support of a contention, failing which the case will be lost.
2. the obligation to establish a contention as fact by evoking evidence of its probable truth.
--------------------------------------------------------------------------------
[Origin: 1585–95]
burden of proof
noun
the duty of proving a disputed charge
Convenient that you should ignore the non-legal definitions of the term.
Published: April 29, 2008 6:10 PM
Owen
Scott D
Scientific enquiry is also a legitimate area of burden of proof.
However....
Fallacy = Because one non-syllogistic argument is wrong, another is also wrong.
One incorrect statement (regarding burden of proof) does not invalidate any other arguments made that do not rely on this argument.
Published: April 29, 2008 6:12 PM
Owen
Scott D:
Lets exemplify that fallicious argument for you a little:
Mises was not God;
Therefore he made some mistakes;
Therefore Mises theories were also wrong.
Can you see the fallacy? The above wrongly relies on the additional premise that because a person makes one error, that EVERYTHING they do is also wrong. We all know that not to be the case.
Arguments stand or fall on their individual merit not on whether statements upon which they do not rely were correct or incorrect.
Back to elementary school eh?
Published: April 29, 2008 6:16 PM
P.M.Lawrence
If I recall correctly, Inquisitor, like me, is in Australia where not voting is not an option. For case histories in how to cope with a rigged political structure that claims you support it one way or another regardless, look at the Irish join-and-sabotage political tactics of the 19th century and early 20th century.
Published: April 29, 2008 7:02 PM
TLWP Sam
Guvmints has encompassed the globes? So what? In a privately-owned world the propertyless might feel the same dillemma too. So what difference is there other than Libertarians work from the premise that government have no right to exist?
Published: April 29, 2008 10:44 PM
Owen
The Australian system of compulsory voting is a bit strange really. I guess it is just another right that the majority imposes onto others within the libertarian land of australia.
Somehow, it is part of the majority's view that they have the right to make everyone vote and those that don't should either leave or suffer the consequences because you have infringed their "rights". Much the same way as if they had infringed your property rights...but sadly you have no power to enforce your concept of "rights" on the other much larger voluntary group called the government.
Yeh, I mentioned the join and sabotage method earlier in this thread. It is an option which would be tolerated for only so long until the members of that group are prevented from standing for government. If they did by a miracle win seats or power well then there would simply be civil war and the winner would again be the one with the most guns.
TWLP Sam:
yes you are correct. In libertarian philosophy a very important tenet is that right to not be deprived of property comes before your right to life. Pretty screwed huh? Which one would you rather have?
Published: April 29, 2008 11:19 PM
Scott D
Owen,
We call that one "straw man". If I say, "Oh, look, there's a sock. Let's see if I can find my other one," it isn't the same thing as saying, "I found one sock, therefore there is another one here." Notice how the first is not phrased as a deductive statement? Good. The fact that you are willing to go to such great stretches and twists of logic in an attempt to prove your argumentative superiority only shows that you are not truly interested in reaching a resolution, but simply want to fight.
Just a little tip: don't call people "idiot" or suggest remedial education. It makes you feel that you've won, when in reality people just leave you alone in disgust, as I am already doing.
Published: April 30, 2008 9:10 AM
P.M.Lawrence
They tried barring the Irish from participating first - and that stopped democratic safety valves from working. Then, they changed parliamentary procedure with guillotines and such so that "and sabotage" couldn't be done - and found that that too stopped the safety valve from working. In the end the Irish had to be let go, since there was a violent recourse available that they fell back on. But it was not civil war (though came later, between the Irish groups), since there was a sectional split - most of Ireland, and the rest of the UK. The Irish War of Independence was not a civil war, which shows that these tactics do not have to lead to one.
Published: May 1, 2008 5:13 AM
Owen
Ah, the proud fighting Irish...
Another voluntary "group" of individuals who were able to (through force) establish their own government - which reflected the morals and perceived 'rights' of the majority of members - in this anarchist state of nature we live in.
Exactly as I said.
Published: May 1, 2008 6:25 AM
Ryan
Wow, I apologize: I took a trip to Washington, D.C. the first week of May, so I dropped the blog. I never imagined Owen would get the last word; so, now I will fix that.
TLWP Sam: The crowding of the globe by governments is not applicable to a libertarian society. The need to find new land of which I spoke was out of an effort to escape government. In a libertarian society, and in the extreme imaginary construct of a world with no natural land (i.e., land in the state of nature) remaining, it is not very likely that anyone would fall down on their knees crying out of need of a place to lay their head at night: a libertarian society leaves space open for the opening of new markets, and if this entertaining situation arose, I would be one of the first to build onto my house and rent out the top floor. Thanks for leading me on that train of thought: it was a very entertaining imaginary construct.
Owen: your "right to life" kills itself (what about its right to life?). If "society" owes "members of society" (and anarchists) their lives, then no one could have a right to property, because it would be required to preserve their lives. We then become a bunch of cockroaches eating each other, telling each other to stay alive: it doesn't work. The only way to keep oneself alive is to maintain that one has a right to oneself, as property. No one else can attack you; but, in turn, you cannot attack someone else and live off of their blood (they may in fact gift it to you, but that would be a gift, obviously). So quite basically, right to property is part of the essence of life, but as soon as we claim a "right to life," we basically turn life against itself. Life is your property in yourself; but you are not required to bleed for someone else.
Additionally, Owen, you'll recall that the Irish enjoyed their anarchic existence, until they were taken over by a government that was external. And technically, that may be said of all government takeovers, because anyone governing is government (I won't bother explaining that one; I think we can agree that it stands (to reason)). So, any governing force is separate from an anarchic force. Anarchy is voluntary is non-aggressive is capitalism; government is non-voluntary is aggressive is communism (if we could say that communism IS, which of course we can't so instead, we'll put death and nothingness as the antithesis to capitalism).
Considering that no one posted on the blog again after I got back from my week in Washington, D.C., I doubt that anyone will read this. However, if you do, please remember that there is no legitimate reason for government; but don't take my word for it: read For A New Liberty, The Ethics of Liberty, Man Economy and State, and Power and Market, by Murray Rothbard, now available through the Mises Institute in print, PDF, and audiobook.
Published: October 16, 2008 6:54 PM
Mohamed
I think that capitalism and socialism failed. A perfect system wich never existed, should combine between these two systems. It should combine between the "defensive strategy" of the socialism and the "offensive strategy" of the capitalism. The proove of the failure of capitalism is the economical crises back to 1929 and today 2008.
Published: November 17, 2008 12:45 PM
Stanley Pinchak
Mohamed,
Sorry, economics shows that the world doesn't work that way.
Middle-of-the-Road Policy Leads to Socialism
Published: November 17, 2008 1:04 PM