It is incredibly important to have some knowledge of economics in today’s world. Understanding econ will help you to have a much better vantage point on the current crises we are all facing today. In fact, I am even now currently preparing a series of articles on basic econ for LCC readers to reference in the future. Stay tuned for more!

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How to Be a Crook

Anthony Gregory asks, “You call this a war? I’ll show you a war.” He contends that we are prone to forget the atrocities of today’s wars because they are so distant to our daily lives. This is the most important link you can read from this weekly news post.

David Theroux, President of the Independent Institute, did an interview this week with To the Source about C.S. Lewis and the State.

One of my heroes, Stephan Kinsella, did an amazing interview with The Daily Bell this week on libertarianism and intellectual property. It is a superb read with a great many further links and resources for the interested reader.

In other IP news, Summit Entertainment is apparently claiming to own the date “November 20, 2009” and issued a DMCA takedown on art created on that day. No kidding.

Have you heard that Tide is now being used like money on the black market? Talk about money laundering…

I’m a science fiction fan, so here’s something for other SF lovers out there: Top 10 Best Retorts in Science Fiction and Fantasy.

Remember Kony 2012, or is that old news at this point? Here is another perspective on Kony and the White Savior Industrial Complex.

Are you involved in the Ron Paul 2012 presidential campaign in some way? Here is a new book you can download for free that might interest you.

There was a lot going on at home this week (in particular, my wife was in town!) so posting time was scarce. But if you didn’t visit LCC this week, here is what you missed:

• Time for a Drink

Have some relevant news and links you want to share? Post in the comments below. I read every comment and respond to almost all of them. Let me know what you’re thinking!

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News of the Week: You Call this a War?

Needy in Hungary? (Pun intended.) How about burning your fiat currency to stay warm? I just knew there had to be a good use for worthless paper… (HT Bob Murphy)

In other financial news, ProPublica has an interesting article reporting how Citi basically dumped bad mortgages onto taxpayers.

Did you have a nice Valentine’s Day? Do you know who St. Valentine actually is and how he defied the Roman State?

Shaun Connell writes a good piece about Romans 13. For more perspectives, make sure you read LCC’s offering on the theology of Romans 13 as well.

Geoff Plauche reports on free speech violations on a university campus. I just like it because it involves one of my favorite shows ever, Firefly.

The city of Keene, New Hampshire gets a freaking tank for its SWAT team. Has anybody here not figured out yet that cops are essentially bought and paid for by the Federal Government at this point? Well, they are. I doubt there are very many decent policemen around anymore. I certainly have met very, very few. Incidentally, Keene is a bastion of the Free State Project.

This week was the last week ever for Judge Andrew Napolitano’s show FreedomWatch. Here is the final segment from the final episode. We shall miss you, Judge.

Did you visit LCC this week? Here’s what you missed if not:

• Ron Paul is Right About United States Overseas Military Bases
• What is the Christian Libertarian position on recreational drug use?

Just a heads up to everyone, I am defending my PhD thesis this next Tuesday. From then on, you can call me “Dr. Horn,” thank you very much.  

Preparations for my defense have been the primary reason I have not been posting quite as much these past few weeks, but it’s all over soon! If you feel so moved, say a prayer for me on Tuesday morning. Thank you all for your support!

Have some relevant news and links you want to share? Post in the comments below. I read every comment and respond more often than not. Let me know what you’re thinking!

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News of the Week: Fiat Money Proves Useful After All

The internet is going crazy right now with talk about the TSA nekkid-scanners and groping, it’s clearly the hottest topic of the week. FoxNews.com has a pretty good article explaining what’s going on, as does the Mises Institute.

Barack Obama says the new power-sharing agreement in Iraq marks another "milestone" for the country. Riiiiight.

My good friend Jason Rink says David Ramsey is cool, but wrong about a lot of macroeconomics.

Have you been watching silver and gold prices reaching new highs? It’s kind of a big deal.

Facebook appears poised to release a new email app in the next week. Is Project Titan a Gmail killer?

Best comic of the week.

Here is a little something for all you gamers out there (inside-joke alert).

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News of the Week: November 7-13, 2010

Bob Murphy is looking to raise money to debate Paul Krugman. Big name “mainstream” economists like Krugman demand thousands for a mere appearance, so if this is pulled off it will be an amazing feat. So far he has raised 21k. AND, all money raised will actually be donated to FoodBank.

Rolling Stone published a very interesting article on General Stanley McChrystal in July that I recently read. Old news but good.

The amazing whistleblower organization Wikileaks has released 400,000 new documents, yet again showing the terrible nature of the Iraq War.

Wes Messamore encourages busy student libertarians with a list of particularly good articles on personal productivity.

Between November 2008 and April 2010, 39 percent of households had either been unemployed, had negative equity in their house or had been in arrears in their house payments. Yikes.

Cal Newport has words of wisdom for those falling into the passion trap of perpetually looking for the “perfect job.”

TechCrunch reports on how data that the government collects is being used by private entities in a “silent revolution” of public data analysis. Kind of interesting and creepy at the same time.

Have you written a book you would like to publish? Publish it in the iBookstore.

My favorite comic of the week.

And if anybody knows where I can get some fused silica optical windows with 15 mm diameter and 10 mm thickness, you know where to find me…

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News of the Week: October 17-23, 2010

According to the Tax Foundation, Americans will spend about 30 percent of their income on taxes in 2008. For comparison, in 1900, it was around 6 percent. Put differently, for almost four months out of the year you work just to pay for government. In the current system most types of income are taxed, sometimes twice, and often progressively. These are just some of the taxes levied by government: federal and local income tax, sales tax, property tax, gasoline tax, cigarette tax, liquor tax, vehicle sales tax, utility tax, marriage license tax, inheritance tax, and capital gains tax, etc. On top of that, you pay to compensate for taxes levied on others. For instance, you, as a consumer, pay higher prices for goods and services because of the corporate income tax levied on businesses. The government, if it is to exist, should protect people from force and fraud. Therefore, at most, government should tax only to maintain a national defense, a police force and law courts. But instead, legislators seek to fulfill the so-called “needs” of the constituencies and special interest groups that put and keep them in office. So, the government has tasked itself with providing cheaper prescription drugs for seniors, improving education for children, supporting for farmers by keeping food prices high and paying them for any product they fail to sell, covering the living expenses of the poor, paying for medical research, and so on. The result is not a system that protects our individual rights but a system that provides benefits to some at the expense of others. Typically there will be concentrated benefits and dispersed costs, which makes organizing resistance difficult and leads to even larger government interference.

Taxes violate individual rights. Specifically, it violates your property rights. By using taxation to benefit some people, the government says that you have no right to keep what you have earned or how you spend it, as long as there is someone else who needs or wants it, and that it, the government, has the right to seize your property in order to provide it to the person or group they see fit. That’s damn close to making you a slave. As John A. Pugsley stated, “How does the IRS agent who collects our taxes differ from the gunman? He does not. You are forced to pay under threat of imprisonment (the gun). Your money is taken without your voluntary consent. It is used by other people who claim that their need is a just demand of your property. The process is justified because a group of people (voters) decide as a group that you should be robbed and that the money should be used for whatever purposes they deem proper.”

The current tax system creates winners and losers. The government does not create wealth, but only usurps and redistributes it. The winners in this redistribution are legislators and the special interest groups that pander to them. Also, foreign producers win because the taxes levied on businesses increase prices on domestic goods. Tax accountants win because they garner more business due to the complicated the tax codes. And, people who are the least productive win because their income tax is lowest; some do not have to pay income tax at all. The losers are clearly productive individuals, those who have created wealth by providing goods and services to others, who have chosen to voluntarily patron their business. But more than that, everyone who pays income tax loses because they have to spend time and money to complete complicated income tax returns. As Mark Skousen penned: “Oliver Wendell Holmes once said, ‘Taxation is the price we pay for civilization.’ But isn’t the opposite really the case? Taxation is the price we pay for failing to build a civilized society. The higher the tax level, the greater the failure. A centrally planned and totalitarian state represents a complete defeat for the civilized world, while a totally voluntary society represents its ultimate success.” Taxes trample the idea of virtue. Forcing individuals via taxation to pay for the “needs” of others (often determined by a bureaucrat) does make them benevolent or charitable. What makes people charitable and benevolent is realizing that there are persons in true need and causes well worth while contributing to. Many people do realize this, which is why they give voluntarily. Moreover, excessive taxation discourages charitable giving because people have less money to give, or figure that their taxes already pay for helping the needy.

Taxation is frequently “progressive.” That means that individuals who earn more are forced to pay more. But why? They do not derive any greater benefit from the government by doing so. The underlying assumption of progressive taxation is that wealth is a like a fixed pie from which some people get to take a larger piece, thereby decreasing the share of others. Accordingly, income inequality is the expression of unfair wealth distribution and should be decreased by reallocation from the top to the bottom. Hence, those who make more should pay more because they have to give back in some way what they have taken from others. This depiction of the economy is inaccurate. More production generates more economic progress which leads to an increase in wealth for everyone (at least in a free market system), so that the pie does not remain a fixed size.

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Tax Slavery Sucks

The current Social Security (aka “socialist insecurity”) system is designed as a pay-as-you-go system, in which current workers’ tax dollars pay for the benefits of retirees. And the system is in serious trouble. With increased life expectancy and a declining birth rate, there are fewer workers to support a greater number of retirees. In 1950, there were 16 workers paying for the benefits of one retiree. Today, there are about three workers per retiree, and by 2025 there will only be two. According to the Social Security Administration itself, if unreformed, Social Security will begin running a deficit by 2017, and by 2060 Social Security and Medicare combined will make up 71 percent of the federal budget.

Social Security violates individual rights. It is predicated upon two ideas. One, that the strong should support the weak: in this case, the young should support the old financially when the old cannot do so themselves any longer. Two, that life entails certain basic risks that people either encounter at no fault of their own, such as economic downturns, or simply fail to prepare for. Now, while these ideas might be true, they miss an essential point. Your life belongs to you. Since it is you living your life, and you have the most interest in it, most likely you know your financial situation much better than any politician or bureaucrat. Therefore, as long as you are not violating someone else’s rights, you should be free to control your life and to make the choices that affect your future, even if you end up making mistakes. You are not violating anyone’s rights by planning for your retirement. So, you should be free decide whether you want to save for retirement and how much risk you are willing to take in investing, reaping the rewards or incurring the losses. As for helping the less fortunate, since Social Security is a bad investment with a poor rate of return (see below), it actually disproportionately hurts poor people because they cannot afford to invest additional funds for retirement privately.

Social Security negates choice. By forcing individuals to contribute to Social Security, the government takes away important choices they should be able to make about their own retirement. If you work, you are forced to pay into it but have no choice about how the money is invested. In fact, your Social Security taxes are not even invested at all; they are paid out to current retirees and to loan the federal government money for other government programs. You have no choice over how many years you work or when to retire in order to collect any benefits. You have no choice about what happens to the accumulated money after you die; you cannot pass it on to your family or your favorite cause.

Social Security is a bad investment. According to the Congressional Budget Office, if you are in your late twenties today, the most optimistic projection for your Social Security return is 0.7 percent! By contrast, historically returns on private investments have been much higher: stock market returns 6.8%; corporate bonds 3.8%; treasury bonds 3.3%; a balanced portfolio (50% stock/30% corporate bond/20% treasury bond) 4.9%. If you were able to invest your money privately, you could choose which type of investment you prefer. Stock markets might be riskier but involve higher returns than money market or plain old savings accounts. And, if you invest your money privately, you have a legal right to any returns on that money.

You have no legal right to Social Security benefits. In 1960 the Supreme Court ruled in Flemming v. Nestor that, “a person covered by the [Social Security Act] has not such a right in benefit payments as would make every defeasance of ‘accrued’ interests violative of the due process clause of the fifth amendment.” Hence, Congress can change or rescind those benefits at any time. For instance, before 1983 Social security benefits were not taxed. Since the 1983 Amendments to the Social Security Act, up to one-half of the benefits received are taxed if the recipient’s yearly income exceeded a certain threshold (generally individuals making more than $25,000 and married couples making $32,000). So, not only does the government forcibly take part of the money you earned out of your control, you also are not guaranteed to derive full benefits. That is legalized robbery.

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Social Slavery

Capitalism is the only moral social system. Only a capitalist system allows you to act in your own interest, to keep what you have worked for and trade it with other willing individuals. For much of human history, wealth has been produced primarily by looting or enslaving others. Under capitalism wealth is created by serving others, by creating values for them. Individuals who produce the best goods and services are rewarded by making the most profit. Those who produce shoddy goods, mediocre services or try to defraud others are weeded out when exposed.

Capitalism is win-win. Producers only make profits on goods and services that consumers choose to buy. Competition among producers ensures that consumers have a variety of goods and services at different price ranges to choose from. Workers and employers come together based on mutual consent. Employers can choose to fire incompetent workers, and workers can choose to leave an employer for a better job. Competition among employers for qualified workers drives wages and benefits up. Whereas politics is a zero-sum game in which power and tax dollars are redistributed from one group to another, capitalism continuously creates more wealth, thereby growing the pie and increasing prosperity for all.

Capitalism is fair. Capitalism is predicated upon and respects individuals’ free choices. No one has to pay for what he does not want and derives no benefit from. Under capitalism, individuals and businesses cannot seek politically enforced advantages or handouts. For instance, in a capitalist system steel producers would not be able to obtain tariffs and subsidies in order to avoid being undersold or driven out of business by foreign competitors, and a workers’ union could not get government to force employers to provide higher wages, more benefits and greater job security. Unable to run to the government for help, these groups must prove themselves entirely based on the worth of the goods and services they produce. That is fair to consumers and competitors.

Capitalism empowers the consumer. The consumer votes for or against goods and services with his money. If companies do not offer the kinds of goods and services consumers want to buy, they fail — but their demise inspires the emergence of new markets, new products, new services, and new methods of production. In this way, capitalism promotes innovation and efficiency through a process of creative destruction. Capitalism also fosters the creation of mass communication tools such as the internet. Thus, consumers can make informed decisions about what to purchase and can let others know about the quality of that purchase. Many consumers united together can persuade a producer to lower prices or change his product or service for the better.

Capitalism reflects human nature. People have limited knowledge. State-planned economies fail because no bureaucrat or committee, no matter how well educated in economics, has the knowledge to coordinate the actions of millions of individuals. People are also motivated by different values. Under capitalism people can pursue their chosen values, provided of course that they do not violate the rights of others. Pursuing values and being allowed to keep, dispose of and profit from the results of that pursuit motivates people to take care of things, to produce, and to innovate. Further, by tapping into human beings’ competitive nature, capitalism makes everything better. Just compare the best car created under a capitalist system to the best car created under a socialist system, where competition is suppressed.

Capitalism fosters benevolence. When individuals are well-off, as would be the case for the bulk of individuals under capitalism (perhaps only those currently receiving special treatment from some government body would be the exception), they have time and money to take care of others. Further, if they have the right to keep what they have worked for and dispose of it in the way they choose, they are more likely to embrace helping people in need and give more than if their money is forcibly taken from them by the government via taxation. For instance, you might already donate money to your local homeless shelter, food pantry or to an organization working for a cause that is very important to you. But if you were not taxed as heavily as you are, you might be willing and able to donate more.

Capitalism makes everyone richer. Even the least well-off person in a developed country today lives a life of luxury beyond the wildest dreams of the richest kings centuries ago: consider televisions, computers, iPods, cell phones, microwaves, cars, washing machines, or air conditioning. Compare how poor people live in the United States today to how they lived in the US a hundred years ago, or to how they live in Third World countries today. In fact, capitalism is our best hope for alleviating and eventually eradicating poverty worldwide because it creates more wealth — for everyone — than any other social system.

Capitalism promotes peace. Capitalist countries are less likely than non-capitalist countries to initiate violence against their citizens or against other countries. Where people come together for mutually beneficial interaction such as trade, issues of race, religion, ethnicity, gender, or sexual orientation are less important. What matters is whether you can offer me the kinds of goods and services I want for the price I am willing to pay.

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Enjoy Capitalism!

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Fear the Boom and Bust: Hayek vs. Keynes

For the bulk of my life so far, I have lived in the age of Alan Greenspan, the chairman of the Federal Reserve Bank from 1987 to 2006. Mentioning a Federal Reserve chair like this in the past would not have been considered normal, yet Mr. Greenspan has a sort of legendary status associated with him. Well, at least some people consider him to be an iconic figure, but more and more the general public is coming to realize the destructive effect he has had on the world economy. Books like Frederick Sheehan’s Panderer to Power have something to do with the dispelling of the myth.

Sheehan’s book is the first critical, post-crash biography of Greenspan. Using Greenspan’s own words, Sheehan tracks Greenspan’s education as a young man, early professional life, his meteoric rise to stardom as a celebrity figure, and his tenure as Federal Reserve chair. The questions primarily raised are: What kind of man is this who has so much power over the world, and what did he do that has led us to today’s economic crisis? The answers are quite surprising. Here are some of the things I learned about Greenspan.

• Greenspan was supposedly a disciple of Ayn Rand, yet he probably did not understand what Rand generally was talking about. Nathaniel Branden wrote later, “I wondered to what extent he was aware of Rand’s opinions.” Apparently, he would even argue the question of his own existence with the objectivist coterie. Rand herself wondered, “Do you think Alan might basically be a social climber?”
• Even in his pre-Fed years, Greenspan was actually a rather mediocre economist and forecaster. Time after time he would make highly-publicized predictions and yet the exact opposite would occur (see pages 43, 54, and chapter 7).
• Greenspan was a master self-marketer, which is probably the reason for his rise to stardom. He constantly engaged the media and the New York financier social scene, hence he had everyone’s ear without the wisdom to back it up. How else can you be both a professional economist and yet date Barbara Walters?
• Even though Greenspan has supposedly had a historically apolitical career, he was a master politician (read: liar). One only need look to his involvement during the Nixon and Carter presidencies to realize that he knew how to play the political game brilliantly.
• Greenspan’s policies during his Fed years were incredibly political as well. He frequently timed his actions in accordance with what was politically expedient. Wall Street and the fat cat Congress could count on the legendary “Greenspan Put” to be their savior when things were looking down.
• Post-crash, Greenspan has tried to play his own game of historical revisionism about his policies that led to the economic crisis. Sheehan exposes these and many other lies.
• Greenspan has been hired as a consultant by many of the firms who profited from the economic crisis via government handouts. Go figure, the man who enriches Wall Street and causes the meltdown gets the extra paycheck…

Clearly, there is much yet to learn about the man whom many called “the second-most powerful man in the world” for nearly twenty years.

In summary, Sheehan’s retrospective on Greenspan is a fascinating read, and I anticipate it will become a valued resource for those looking to understand the Greenspan years from a perspective that offers more than tacit approval of inflationism and government intervention in the economy. Keep in mind, though, it is not an easy read. Economics is discussed at a fairly high, but understandable level. You will probably end up like me, referring to Wikipedia and other sources to recall certain investment and econ topics. Nevertheless, Panderer to Power is worth your time if you desire more knowledge about the Greenspan legacy.

Please consider buying Panderer to Power at Amazon.com and LCC will then get a small kick-back from the sale. Remember, LCC receives a small percentage of any shopping you do at Amazon when you go through an LCC link. Help keep LCC growing and growing; your support is much appreciated!

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Visit Frederick Sheehan’s website.

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“Panderer to Power: The True Story of Alan Greenspan” Book Review