The Brothers Austrian

In case you missed this classic story in the news yesterday, Secretary of Education is encouraging local school districts to spends the stiumlus money fast (emphasis added).

The Department of Education’s ‘five-page guidance’ manual actually says, “Spend funds quickly to save and create jobs…”

I was thinking of some more appropriate endings to that statement, here’s my top 5:

1) Spend funds quickly to ensure there is nothing left when the dollar becomes worthless.

2) Spend funds quickly before Congress realizes cuts in education spending actually may improve school efficiency.

3) Spend funds quickly to let China know that we are putting its money to good use.

4) Spend funds quickly so we can hurry up and get some more!  This is way better than actual budget balancing!

5) Spend funds quickly before people realize that more money doesn’t actually mean better schools.

Teacherman Government Spending, Interventionism, Politics arne duncan, budget, china, education, stimulus

Picking up off a recent blog article that made some waves, this post is in support of H.R. 1207.  Ron Paul introduced the Federal Reserve Transparency Act of 2009 last week.  According to Paul, the bill is the first step to open up the Fed’s ‘opaque’ operations to the public.  As Rothbard put it in The Case Against the Fed,

By far the most secret and least accountable operation of the federal government is not, as one might expect, the CIA, DIA, or some other super-secret intelligence agency. The CIA and other intelligence operations are under control of the Congress. They are accountable: a Congressional committee supervises these operations, controls their budgets, and is informed of their covert activities. It is true that the committee hearings and activities are closed to the public; but at least the people’s representatives in Congress insure some accountability for these secret agencies. It is little known, however, that there is a federal agency that tops the others in secrecy by a country mile. The Federal Reserve System is accountable to no one; it has no budget; it is subject to no audit; and no Congressional  Committee knows of, or can truly supervise, its operations. The Federal Reserve, virtually in total control of the nation’s vital monetary system, is accountable to nobody—and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue.

Teacherman Federal Reserve, Politics Federal Reserve, ron paul, rothbard, transparency

Has anyone ever noticed that rarely do you ever hear or see Ron Paul’s testimony either on Bloomberg or CNBC? Especially recently? Is it possible that the establishment wants to keep him quiet and out of public sight as much as possible? Am I being too much of a conspiracy theorist to think that the establishment sees Ron Paul as dangerous? Here is a statement by Ron Paul to Congress back in 2002:

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress’ constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation’s founders: one where the value of money is consistent because it is tied to a commodity such as gold.  Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans’ standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.

In the Case Against the Fed, Rothbard warns against the dangers of the fractional banking system. He cautions that fractional banking is legalized embezzlement a ponzi scheme. Banks take your deposits and loan them to other people, thus creating money that they don’t have, with money that isn’t theirs. Essentially every bank that practices  fractional reserve banking is insolvent.  The scheme will eventually be exposed by those that start to understand the fraudulent activity that banks are taking part in when they go to redeem their money and cannot get it back upon demand.

I believe that Ron Paul is seen as menace to this scheme. That perhaps people know that his opinions are given credence by the media and that perhaps the bank runs that Rothbard warns are inevitable will be touched off.   General Electric CNBC as well as other channels, fearing the anarchy that would be created in the wake of bank runs, decide to not give him the prime time that other congressmen get.

MisesBeliever Federal Reserve, Politics cnbc, congress, congressmen, fractional reserve banking, media, ron paul, rothbard

“Often the masses are plundered and do not know it.”

Ah, yes, nary a week should go by without hearing from our good friend Frederic Bastiat.  The French economist, who died too early and too soon after his emergence as a economist.  Bastiat died at the age of 49, only six years after truly finding economics, as a theoretical study, at the age of 44 (thanks Wikipedia!). In that time Bastiat published some real economic gems.  This from his Selected Essays on Political Economy:

“But what relief can the landless find in the proclamation of the right to employment? In what respect will this new right increase the amount of food or the number of jobs available to the masses? Is not all capital employed in giving them work? Will it increase by passing through the public treasury? By taking it away through taxation, does not the state close at least as many sources of employment on one side as it opens on another?”

Fast forward to today and we face a similar, but different problem for the masses.  In all of their zeal to get reelected save the economy, the government spending trillions of dollars.  Some of these ‘stimulus projects’ will help select portions of the masses, but in the end, the only real stimulus will be in the green ink industry.  What will the masses be left with?  At the very best significant inflation, at the very worst hyperinflation.  Inflation always falls upon the masses the hardest.  And thus, the masses are being plundered without even knowing about it.

Teacherman Government Spending, Inflation, Politics economist, employment, frederic bastiat, hyperinflation, Inflation, masses, political economy

A recent Time article quoted an Iranian as saying the difference between the Republicans and the Democrats is like the difference between Pepsi and Coke. When it comes to economic policy I could not agree more.

CHANGE is here right? Wrong! Since 1896 the Keynesian viewpoints began to overwhelm capitalism.

(I know some of you are chomping at the bits to say that such an assumption cannot possibly be true being that Keynes would have been 13 in 1896. What I am referring to is the emergence of interventionist policy that started to take hold in during the banking crisis in the late 19th century.  To me Keynes merely gets credit for the wave interventionist monetary policy which came to a perverse apex during the great depression).

FDR, Obama and Kennedy all attended Harvard. H.W Bush, Clinton, G.W Bush all attended Yale. The same schools produce the MBA students that litter the ranks of Goldman Sachs. Under Bush the there was Paulson (Goldman Sachs). Under Obama there was/is Rubin (Citi), and Larry Summers who head Obama’s economic council. Current Treasury Secretary Geithner (Dartmouth) worked under Rubin and Summers from 1999 to 2000. Change?

Whats my point? All of these people come from the Keynesian school of thought. We can spend you way out of this thing.  We can do it if we try, we can do it. Hey, it worked in Great Depression…right? It worked for the Japanese, right?

Former Treasury Secretary O’Neill made the following comments to the LA Times.

“Doesn’t this seem like lunacy to you?” said O’Neill, who was President Bush’s first Treasury chief, from 2001 to 2002, in a telephone interview today. “The consequences of it are unbelievably bad in terms of public intrusion into the private sector.”

… “Is anybody thinking there?” asked O’Neill, who also served as deputy budget director in the Ford administration. “It’s too late, it’s not going to make any difference and it’s aggravating as hell when there’s a better idea and you can’t even get it in play,” he said, recognizing little success so far in pitching his own proposal.

I suppose it come down to what was repeatedly preached by Mises. Governments pick the winners and the losers. In the modern era the history books were written by FDR’s Keynsians that graduated from Ivy league schools. They are the ones picking the winners. They are a best and our brightest, right? My gripe is that they all tend to come from the same school of the thought. They leave no room for the entrepreneur to pave his own way.

Obama Pepsi, Bush Coke…when can we have a little Sprite?

MisesBeliever Interventionism, Politics Change, dartmouth, Economics, government, harvard, Keynes, keynesian, mises, obama, yale

I have a message for President Obama: If you want to save the economy, make the entrepreneur eager to invest.  If you want to create your two million three million (wait wait, we have hope, let’s make it…) four million jobs, stop wasting money investing in ‘public works’ and start reassuring the entrepreneur.

The problem is that everything this country has done in response to this economic crisis should scare the entrepreneur, not encourage him to assume risk.  It does not take an Austrian to realize the power and potential of the entrepreneur in the American economy.  First of all, what can the entrepreneur do?  According to Israel Kirzner the entrepreneur plays a critical role in the economy thanks to his or her ability to be alert to new and shifting opportunities.  After all, it is the entrepreneur who will create (and alter) what goods are produced as well as where and how they are produced.  Entrepreneurs, through their keen alertness to profit and trepidation of losses, will adjust production activities to best respond to market demands.  In other words, if you let the entrepreneurs among us go freely, we will sort out the bad assets from the good naturally.

There in lies the problem.  What entrepreneur can act freely at this juncture?  The stimulus bill hinders economic activity in many ways, not the least of which is its massive borrowing.  This capital could have been used by entrepreneurs for economic endeavors not based on the ruling class’s whims, but based on those insane ideas of profit and loss.  Let’s not forget the rhetoric of Washington these days: blame capitalism, blame greed, and regulate, regulate, regulate … and soon … nationalize!  With that coming from the statists in Washington, what entrepreneur is feeling confident in assuming risk in this country?  Let’s not blame Obama entirely, the Bush crew, also deserves some blame.  It was Paulson and Co. that bullied the largest banks in the country to take Federal money.  In the case of Bank of America, taking that money also meant taking all of Merrill Lynch’s assets at a price that the market had entirely rejected.  This is not an environment fostering entrepreneurship, it is one downright hostile to it!

There are a ton of ways in which the government foster entrepreneurship, I don’t think I could recommend them all here.  But I do have one idea.  One idea that is entirely not remotely a possibility, but one that would provide instant ‘stimulus’ is an immediate 25% cut of the minimum wage.  True, an abolishment would be better, but that wouldn’t have the same air of practicality now would it, let’s be reasonable.  There is obviously a surplus of labor in the country right now and given that surplus there is obviously a large number of unemployed Americans who would be willing to work for less, but are currently being priced out of the market.

Teacherman Entrepreneurship, Interventionism, Politics banks, bush, entrepreneurs, Entrepreneurship, miniumum wage, obama, stimulus