Were it not for the fact that you’d still have to suffer the eternal torment of actually living with your wicked, miserable little self, life as a willing and active member of The State might be pretty tempting. After all, Team State — operating in direct competition with Team Freedom — enjoys some rather significant advantages, both on and off the field.

For one thing, Team State writes the rules of the game…rules it claims the right to change at any time and for any reason. It can choose to make Team Freedom’s goal the size of a pea, for example, and its own goal the size of…well…whatever it wants. It can recruit a million, steroid-jacked players to wear its own colors, and limit Team Freedom’s membership to a couple of wimpy, though doggedly irreverent, newsletter writers. Who listens to those guys, anyway? Pshhh…

Off the field, Team State may choose to sequester part or all of Team Freedom’s funding. And if Team Freedom doesn’t like it, Team State — reading again from its own rulebook — can choose to simply begin kidnapping members of Team Freedom at gunpoint and locking them up in cages.

More troubling still, Team Freedom suffers the added disadvantage of large scale defection and even of outright collusion with the enemy. In other words, many of Team Freedom’s players are really (whether knowingly or not) playing for the other team…using morally malleable catchphrases like “fair share,” “civic duty” and “social contract” as a way to distract and bamboozle some of Team Freedom’s star players. They read aloud and with unashamed authority from Team State’s own rulebook, exclaiming with sweaty excitement, “But it’s the law! Look, Team State wrote it down, right here!”

And what can Team Freedom do about all this, other than vote for another member of Team State to act as game referee every four years or so? Nothing. Or so it would seem…

Fellow Reckoners will by now be aware of the latest scheme by Team State to encroach on the lives of those they clearly consider to be “their property.” Sens. Chuck Schumer and Bob Casey, two of the more…er…“active” members of Team State, held a press conference Thursday morning on Capitol Hill where they outlined legislation that would prevent Eduardo Saverin, the Brazilian-born, Singapore residing co-founder of FaceBook, from ever returning to the United States.

Now, why would these senators do such a thing, you ask? What do a couple of freeloading, career barnacles have against the entrepreneurial spirits of a go-getting, 30-year-old success story?

Turns out that, back in September of last year, Saverin decided he didn’t want to be considered a US tax slave anymore…a move 1,700 other now-freer people also made during the same year. Abiding by the law, as decreed by members of Schumer and Casey’s Team State, Saverin relinquished his citizenship and moved to Singapore back in 2010, a place where he (and his property) are treated in less of a “gun-in-your-face, gimme-all-your-money” manner.

According to industry estimates, the move should “allow” Saverin to keep about $67 million more of his own money than he would have otherwise been “entitled to” were he still officially a US resident when Facebook makes its IPO, tomorrow.

Of course, the fact that he followed the law, to the letter, wasn’t enough for the senators. Why? Put simply, they didn’t get (what they saw as) their cut. Curiously, Schumer claims Saverin somehow owes “the country” something…beyond the hundreds of millions of dollars he must — and does — already pay.

“Saverin has turned his back on the country that welcomed him and kept him safe, educated him, and helped him become a billionaire,” Schumer said at the conference. “This is a great American success story gone horribly wrong.”

Apparently, helping to found a free product that serves 901 million voluntary users is not enough for Schumer and Casey. Of course, the Senators are not in the business of voluntary transactions, so we can see how this achievement might be lost on them. After all, their own transactions are made not with a handshake, but looking down the barrel of a gun.

So what’s their beef, specifically, this time?

Facebook today serves approximately 180 million people in the US alone…including both Sens. Schumer and Casey. One might think that, if the Senators were so upset with Saverin, as they piously claim, they would take down their own Facebook pages. Since they have not, we encourage Fellow Reckoners to swing by and leave them a warm and fuzzy message. (See links above.)

Clearly not embarrassed to showcase their own conspicuous lack of real world marketing skills, Schumer and Casey are calling their little bill the “Ex-PATRIOT — Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy — Act.” Seriously. Who, besides Team State, would even let these guys play for their side?

The proposal targets wealthy Americans who seek to renounce their citizenship — and, along with it, their tax slave status — unless the unfortunate, would be escapee can convince the IRS they are not leaving the country “for tax purposes.”

In other words, individuals looking to protect their property must first convince the thieves that they are seeking to do so for reasons other than protecting their property. Yes, you read that correctly. If the person is unable to prove the “innocence of their intent” to the IRS — just imagine! — they will be subject to a 30% capital gains tax on all future US investments…regardless of where they live…and assuming they still want to invest in their former jailer’s country at all.

Stranger still, the newly emancipated individuals will not be allowed back into their cell. Said Schumer: “They could not set foot in this country again.”

The battle line has been redrawn again, Fellow Reckoner. But as always, where the state exists, freedom does not. And where freedom exists, the state does not.

Choose your team wisely.

Joel Bowman
for The Daily Reckoning

P.S. As always, we encourage our readers to “pirate” any and all of our material. Feel free to share and “like” this article…especially, today, on Facebook.

Run, Saverin! Run! originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

…and his head stuck firmly in his computer screen.

But we will soldier on, Fellow Reckoner. We will ignore the blissful and beckoning distractions of one of the world’s most famous esplanades just across the way. We will pretend the little cabanas down by Ipanema’s Post 10 have exhausted their supplies of frosted, cachaça-based refreshments and that the hot bods tanning on the sand and frolicking in the water are really just figments of our imagination. We will turn away from this little heaven on earth and cast our gaze, instead, upon its equal and opposing force…

…but not just yet.

We’re here in South America’s largest economy to scope out opportunities in the local business scene. The country is booming, as you’ve no doubt heard. And as far as the BRIC countries go, Brazil might just be our favorite. Well, at least it’s our favorite to visit. Unlike China, Brazil’s demographics are favorable. Unlike India, its social mobility is flexible. And Unlike Russia, the weather is agreeable. Also, the South American nation didn’t just “re-elect” Vladimir Putin. Then again, many would argue, neither did Russia.

All of which is not to say the place is without its “fair share” of problems. It has many. Official growth here has slowed. Considerably. The parasite class — politicians in Brasília — had forecast a growth rate of 4.5% for the year 2012. Now they figure it will be closer to 2.7%. Policy makers are “under pressure,” say the papers, to “do something.”

A standard quote from The Financial Times:

With the world economy slowing, many argue Brazil needs a fresh spark to keep it growing. Policy makers are under pressure to consider a second generation of reforms in areas such as taxation, infrastructure and education to make the country globally competitive.

Hmm… Maybe policy makers do have a role to play. But we’d bet that role is best served by getting out of the way and allowing the magic of the market to work its wonders.

Fortunately, there is a growing contingent of young entrepreneurs who are advocating just that. Your editor was delighted to meet a handful of them at the III Conferência de Escola Austríaca hosted by the Instituto Ludwig von Mises Brazil, this past weekend. A crowd of young and excited attendees sat glued to their seats while absorbing presentations from a host of Austrian School superstars, including Laissez Faire Book’s own Jeffrey Tucker…the only man to inspire a standing ovation after his spectacular speech on Intellectual Property in the Digital Age.

Imagining what a country like Brazil could do if the ideas of liberty and freedom were to take hold here is, in itself, an inspiring thought experiment. And the blossoming trend of independent young thinkers and innovative entrepreneurs is one we hope to be a part of in the very near future. As, it seems, do many others.

Tellingly, attendees at the conference hailed not only from around Brazil, but also from Europe and the US, both struggling markets that promise little or no future for the generation currently graduating from universities there. And these fugitive career seekers are not alone.

Portugal’s official unemployment rate — not atypical for the PIIGS economies — stands above 14%. The reality on the ground, however, is likely much worse than that. Among youths, the figure is closer to 40% and, as one Reuters journalist writing from Lisbon put it recently, the former colonial power offers “little hope for a sharp, job-generating recovery any time soon.”

Conversely, Brazil’s official unemployment rate hovers around multi-decade lows (between 5-6%). Given the common language, it’s hardly surprising therefore to find youth flocking to the opportunity rich South American powerhouse. Continued the Reuters piece:

Emigrating is fast becoming a preferred option for many seeking a decent living as their bailed-out economy suffers under debt, low growth and poor competitiveness. Portugal’s booming ex-colonies in Africa and Brazil are a natural choice.

Similarly, the employment situation in the US is inspiring many fresh-faced college grads…inspiring them to learn a new language and to seek jobs abroad, in healthier, more promising markets. And why not?

While student loan debt in the US recently surpassed outstanding credit card debt, unemployment data for the youth demographic suggests the cost of education might not have been worth it. Data from 2011 reveal that more than half of all US graduates with a bachelor’s degree were either unemployed or underemployed at the end of last year. What does underemployed mean? From a recent CNBC article:

In the last year, [students with bachelor’s degrees] were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).

Why flip burgers in Alabama, Kentucky, Mississippi or Tennessee (states with the highest rates of youth unemployment, along with the Mountain West region) when you could move to Rio de Janeiro and start an online business of your own? Why hang around waiting for government handouts on the streets of Lisbon when you could be flashing your skills in São Paulo’s bustling professional scene?

For many, the “service and protection” of the US government is no longer an adequate response…in fact, it’s becoming the very reason to leave. More on that, tomorrow…

Joel Bowman
for The Daily Reckoning

Why the World’s Unemployed Youth are Flocking to Brazil originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

Well, a gloriously strong chávena de café at one of this city’s many colorful, street side vendors (not Starbucks) will set you back one Brazilian real, or around fifty cents. In other words, pretty cheap. A Caipirinha on the deck of what is surely the most unique hotel bar your editor has recently visited, however, will cost you the equivalent of maybe forty chávenas de café — about twenty dollars. Still, you pay for the view…and for the city skyline in the background.

As for those other markets — the kind with ticker symbols and stock charts — they’re a bit harder to get a handle on. The little arrows have been almost exclusively red this month…and the little squiggly lines tracking index performance have been trending almost exclusively south. In fact, the Dow achieved its so-far high for May at 1pm on the very first day. Since then it’s been down…down…down…

Gold is lower too…down another $15 an ounce overnight. The Midas metal is back to where it began the year, at about $1,565. But how could that be? Aren’t central banks around the world working furiously to debase their flimsy fiat notes? And aren’t the Chinese buying the stuff hand over fist? As Eric Fry showed last week (in his essay “China Buys Gold…No Matter Who’s Selling”), the squiggly line representing the Middle Kingdom’s monthly gold imports from Hong Kong is trending almost exclusively upward.

Yes, Fellow Reckoner, it’s tough to know quite what’s going on in those other markets. Government-caused distortions abound. Price fixing — including for the price of money itself! — sends strange signals to buyers and sellers, convincing them to do things they ordinarily wouldn’t do. Like buy a house they could never afford or speculate in the stock market instead of save their hard-earned for a rainy day. Thus are false booms fueled…and real corrections avoided. For a time…

At least when we pay outrageous prices for a cocktail at a tourist trap we know we’re being taken for a ride. But it’s a ride we’re willing to pay for. Conversely, when the state takes us for a ride, we don’t have any choice. That’s why we have to look for alternative investments…market workarounds…contrarian viewpoints…

Speaking of which, we received the following “letter” from a Fellow Reckoner in response to our Lysander Spooner vs. the USPS musing last week. Writes our friend David S…

Glad to have an excuse to write to you about my own area of research — postal history. We talked a little about postal history near the end of the Rancho Santana Sessions in March.

The Wikipedia article that you cited is inaccurate in part. The United States Post Office did not have a 12-cent stamp in 1844 when Spooner started his American Letter Mail Company; in fact it had yet to issue any stamps. A few local postmasters were permitted to experiment with stamps in 1845; the first national postage stamps in the United States were issued in 1847. In 1844, when Spooner started his company the letter rates in the US were based upon distance and the number of sheets of paper, ranging from 6 cents under 30 miles to 25 cents over 400 miles for a single sheet of paper. And, none of the rates were 12 cents. Since envelopes counted as a second sheet of paper, they were not generally used.

The Post Office Act of 1845, besides strengthening the monopoly on letter mail, reduced the postage rates to 5 cents per half ounce under 300 miles and 10 cents per half ounce over 300 miles. By matching the rates of the private mail companies (there were others besides Spooner) it was easier for the government to force them out of business.

By the time the 3-cent letter rate was established in 1851, Spooner had sold his mail business and moved on to other things. That rate reduction was not so much in response to Spooner as to other reformers. And, the 3-cent rate was not short-lived, but in fact rates were reduced even more. The 3-cent letter rate continued until 1883 when it was reduced to 2 cents; the rate was essentially halved in 1885 when the weight step was raised from half an ounce to a full ounce. The 2-cent per ounce rate lasted from 1885 until 1932 except for a couple years during World War I when the letter rate was 3 cents to raise money for the war effort.

All of this is simply factual background on postal operations in the 1840s — it does not change the essential points about Spooner’s argument against the Post Office Department (as it was known then, the USPS dates to 1971) or refute your conclusions about private business. I just like to see the story accurately told.

There is however, one additional point to consider when seeking to understand Spooner. He was an abolitionist and cheap postage was a major focus of that movement until the 1851 3-cent rate. They needed cheaper rates of postage for mailing anti-slavery tracts. So in many respects the cheap postage reformers of the 1840s were more interested in their other agendas than just in reforming the Post Office. For more on this perspective, you might read my paper, “Cheap Postage: A Tool for Social Reform” published by the Smithsonian two years ago in their postal history anthology. Mine is the final paper in the volume.

I enjoy your columns and I am always happy to discuss postal history.

Thanks for the corrections, David. We’re always happy to discover new and more accurate information…especially when it comes from our Fellow Reckoners.

Joel Bowman
for The Daily Reckoning

The Difference Between Market and Government Swindles originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

— “Return to Sender”, lyrics by Otis Blackwell and Winfield Scott

This just in: The state still sucks at delivering the mail. Shocker!

According to news across the wire…

(Reuters) The US Postal Service said its loss widened to $3.2 billion in the first three months of 2012 and repeated on Thursday its warning that it will likely default on payments to the federal government unless Congress passes legislation offering some relief.

“Of course sales are down,” we hear a few reckoners contest, “nobody uses snail mail anymore. It’s all email today. And Tweets and Facebook ‘likes’ and LinkedIn networking. Sheesh… Get with the times!”

Ah, but we are with the times. You’re receiving this in electronic format, aren’t you? Besides, FedEx isn’t in the email business. It still delivers packages. And its sales for the quarter ending February 29 were, at $521 million ($1.65 per share), more than double sales for the same quarter of last year — $231 million ($0.73 per share). And that, despite the fact that volume in its US express business slumped 4%.

Profits were up for UPS too, though not by as much. Net income for the world’s largest package company rose to $970 million, or $1 per share, from $915 million, or 91 cents per share from the same period last year. Revenue rose 4.4% to $13.14 billion.

And yet, the United States Postal Service can’t manage to balance a budget. USPS enjoys a “statutory monopoly” on non-urgent First Class Mail and the exclusive right to put mail in private mailboxes. (No joke!) Yet it bleeds money like no privately-owned business ever would…or even could. Why is that?

American individualist anarchist and proud owner of one of history’s coolest beards, Lysander Spooner, thought he knew the answer to this question 150 years ago. Put simply: It’s the government, stupid!

Postal rates were notoriously high during the 1840s, a direct result, thought Spooner, of the USPS’s aforementioned monopoly status. Why charge less when there is no competition? Nobody’s going to undercut you…at any price. Similarly, why bother to offer better service? Nobody’s going to siphon off your customers. You’re the only game in town!

In response to the outrageous rates and abysmal service, Spooner set about opening his American Letter Mail Company. He argued that the constitution (with which he didn’t necessarily agree on many issues), granted the government powers to establish mail…but not to exclude others from entering the marketplace too.

“The power given to Congress, is simply ‘to establish post-offices and post roads’ of their own, not to forbid similar establishments by the States or people,” wrote Spooner in his 1844 pamphlet, The Unconstitutionality of the Laws of Congress, prohibiting Private Mails.

Pressing on the issue of unnatural, coercive monopolies, he later continued…

“The idea, that the business of carrying letters is, in its nature, a unit, or monopoly, is derived from the practice of arbitrary governments, who have either made the business a monopoly in the hands of the government, or granted it as a monopoly to individuals. There is nothing in the nature of the business itself, any more than in the business of transporting passengers and merchandise, that should make it a monopoly, either in the hands of the government or of individuals.”

Spooner’s pamphlet was published the same year his American Letter Mail Company went into business. The company had offices in Baltimore, Philadelphia and New York among other cities.

Of course, Spooner’s analysis of the market for mail wasn’t restricted solely to ethical grounds. He saw what all good businessmen see when they decide to go into business…an opportunity to profit, in this case born by the dismal service and high prices of USPS mentioned above. The market — defined as the individuals acting within it — was crying out for a competitive alternative to USPS. And Spooner gave it to them.

His mail company significantly reduced the price of stamps, undercutting the government’s 12-cent standard, and even offered free local delivery on some routes. Hooray for faster, cheaper mail!

Of course, the government doesn’t like competition. It’s bad for “business.” That’s why it maintains and enforces a self-granted monopoly on things like counterfeiting and putting people in cages. (Don’t believe us? Try inking your own dollars or kidnapping your neighbor because he didn’t give you a portion of his annual income.) And so, after years of fines and state-sponsored assaults on his enterprise, Spooner was finally forced out of business in 1851.

But the story of Spooner and his American Letter Mail Company is not entirely a sad one. True, the government forced him out of business by leveling against him unpayable fines for breaking (fundamentally unconstitutional) “laws.” And yes, it forced him to shutter operations before he had the opportunity to fully litigate his own constitutional claims. But the joke is surely on the practically bankrupt USPS, which continues to run at a loss even now, a century and a half on.

Moreover, Spooner’s company proved what many at the time already knew: that the government is no match for private enterprise, neither in offering competitive prices and services or for being able to read and respond to the real world demands of the market. (Interestingly, USPS actually ended up offering a 3-cent stamp in direct response to the challenge from the American Letter Mail Company. Though with Spooner out of the way, it was short-lived.)

Perhaps most importantly, Spooner taught us to always question unnatural authority, rather than simply accepting the limits it forever seeks to impose on us. And, thanks to his example, the next time someone trots out that tired old line, “Yes, but who would provide X service (roads, schools, whatever) if not the government?” you can simply answer them, “Anarchists would, my good sir…anarchists just like Lysander Spooner.”

Joel Bowman
for The Daily Reckoning

Lysander Spooner vs. the USPS originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

We don’t go in for daily numbers, Fellow Reckoner. They’re too volatile. Too capricious. Too whimsical. One minute, stocks are on an upward tear. The next they’re crashing down again. Then you take a step back and realize the chart you’re looking at tracks movements by the fractions of a point. It’s like watching footage from a tiny camera, strapped to the back of an ant…at an IMAX theatre. Comfortably navigable ground suddenly becomes a terrifying terrain of Himalayan proportions. Who needs the headache, the vertigo or the motion sickness?

A nose-on-screen perspective is fine — necessary even — if you are day trading in and out of stocks…but your editor has neither the discipline nor the stomach for such demanding activity. Besides, it’s hard to really glean much from a second-by-second analysis of events. The sheer amount of information is simply too much for the human brain to process, much less to arrange in any meaningful kind of pattern.

The price of gold, for example, might have been cheap a few minutes ago…when compared to the price a few more minutes ago. Then, compared to the price yesterday, it’s cheaper still. About $8 bucks cheaper an ounce. (And even that number will have changed by the time you read this.) But so what? One year ago, you could have bought an ounce for about $180 less than today. That would seem to make today’s price expensive, no? But wait. Five years ago, you could have bought two and a half ounces for the same price it costs you to buy just one today. And ten years ago, you could have bought five and a half ounces. Does that make gold cheap, or expensive? A buy, or a sell?

It depends on your perspective. We’ve all wished we could go back in time and buy ’90s shares of Apple, acres of unpopulated beachfront and unloved ounces of gold. Alas, time marches in one direction and one direction only. So where will gold be tomorrow…a year from now…next decade?

Central bankers seem to be betting on a higher price — perhaps a much higher price — in the months and years ahead. Perhaps they’re looking at the divergence between the paper gold market — largely dominated by exchange traded funds and futures — and the physical, stuff-you-can-touch-and-feel market. Reads the April letter from Sprott Asset Management (courtesy of Dave Gonigam over at The 5-Minute Forecast):

“Although the paper gold price has been range-bound over the past month, the physical gold market has been undergoing staggering change…

“It was revealed,” write Eric Sprott and David Baker, “that Hong Kong gold imports into China totaled nearly 40 tonnes in the month of February, representing a 13-fold increase over the same month last year… There isn’t a physical market on Earth that can withstand that type of demand increase without higher prices over the long run.”

Adds Dave, always hard on the story for The 5’s loyal readers, “And that’s not a one-off event; Chinese gold imports during the last eight months have grown nearly eight-fold year over year. And as we noted a few days ago, China’s hardly alone: The IMF says 12 countries bought 58 tonnes last month — with Mexico, Turkey, Russia and Kazakhstan leading the charge.”

“Meanwhile,” continues Dave, “Cheviot Asset Management reckons for every one bar of physical gold, there are 100 open positions in the ‘paper gold’ market.”

“The paper market for gold can continue its charade,” conclude Sprott and Baker in their report, “but demand in the physical market will soon overpower it through sheer momentum — there’s only so much physical to go around, and it appears that there are some very large buyers that are eager to take it.”

We have no idea where gold is ultimately going, Fellow Reckoner…only that, throughout history, the Midas Metal has proved a tremendously successful insurance against central banker folly. That’s a fact onto which even the central bankers themselves appear to be cottoning. Don’t let them beat you to the punch.

Joel Bowman
for The Daily Reckoning

Examining the Long-Term Benefits of Gold Investing originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

— Bertrand Russell

Is the world marching off to battle, Fellow Reckoner? If history is any guide, the answer would seem to be a categorical, “always.”

“US may have to strike Iran: Republican VP prospect” read a headline from the wires yesterday afternoon.

Apparently Marco Rubio, one of the contenders tipped to fill Romney’s presidential ticket, said a unilateral “military solution” from the United States may be needed to stop Iran acquiring a nuclear bomb.

“America has acted unilaterally in the past,” gloated Rubio, “and I believe it should continue to do so in the future — when necessity requires.”

Ahh…did you see that, Fellow Reckoner? The ol’ “When necessity requires” clause. Phew! Now we feel better. What could possibly go wrong with an administration constrained by such watertight definitions?

There’s trouble in Syria too…and across the Middle East. And the financial crisis in Europe has left the continent smouldering with discontent. All that’s required is a breeze from the right direction and the whole thing could go up in flames…

Reports in from France show the far right gaining political ground in the face of widely unpopular austerity measures. From France 24/7:

Far-right National Front candidate Marine Le Pen obtained a surprising 18% of the vote in the first-round of France’s presidential election Sunday night…

“When things are going well, people vote for the status quo,” observed Bill in Tuesday’s issue. “When they aren’t going so well, they move farther out on the political spectrum.”

And it’s at the fringe of that political spectrum where the war drums usually start beating…

Of course, history is not always a reliable forecaster of future events. Men had never before taken to the skies…until they did. Never had they been drunk on wine…until, merrily, they were forever after. And never had they placed their trust in central bankers…until they let the bastards rule the world.

Indeed, the history of mankind is mostly one of dull and bromidic humdrum…perforated by short and blinding instances of a truly disruptive nature. War, as far as we can tell, belongs firmly to the latter category…at least as much as it does to the former. That probably depends on whether you’re “in” it or not…

We were thinking about this the other day, during our afternoon stroll home from the office. Half a world away, at around the same time, back on that great red hunk of land whence we came, millions of antipodeans bowed their heads in an oddly collective silence. Dawn Paraders marched the sun scorched streets. Dewy-eyed onlookers uttered, in sad unison, “Lest we forget.” News anchors reported the ghastly affair with pregnant pauses and tawdry emotion.

ANZAC Day is a day of remembrance in Australia and in New Zealand too. The occasion is set aside each year to honor those fallen in the disastrous WWI campaigns, into which their ashen bodies were hurled in sacrifice to the Empire. They were boy soldiers of the Australian New Zealand Army Corps., sent to kill unfamiliar boy soldiers of another state with whom their own Empire had a beef. This was a war, lest we forget, to “end all wars.” But only a fool ignites a tragedy in the hope of ending one. And only a knave would claim the hand of history on his shoulder, thrusting him forward into the bloody breach.

The ANZAC boys should have been at home, the extent of their gentlemanly combat restrained to scuffles at the local pub. Lads will be lads…and all that. Instead, they were cut down at the knees in Somme mud, left agape and lifeless on the beaches of Gallipoli, annihilated by the tens of thousands in missions at once idiotic and pointless.

Likewise the lads’ “enemies,” themselves child puppets of the opposing state, were slaughtered en masse…by “our boys.” The difference between the Victoria Cross and an Iron Cross is not the “degree of courage,” but the color of the flag sewn onto the victim’s uniform.

Their missions were pointless. Disastrous. The outcome a heretofore unprecedented massacre of human life and its vast, ultimately unrealized potential.

It’s tradition…whatever that means. So too was the precursor to ANZAC Day; Trafalgar Day, when long-removed convict descendants of the old empire would gather to commemorate Admiral Lord Nelson’s naval victory over Napoleon in that infamous namesake battle. Children in Queensland state schools were subject to such ridiculous war glorification rituals until 1918…a few years before the terrible event was replaced by its modern equivalent.

Then, of course, there was Empire Day…another commemoration foisted onto young, impressionable minds during the late 19th and early 20th Centuries. Reads the strangely proud description on the Queensland Education website:

Empire Day was a formal commemoration of the British Empire and its member nations. The day itself and the accompanying celebrations throughout the Empire acted as symbols of unity, supremacy and philanthropy and commemorated the Empire’s birthday. Loyalty and patriotism were encouraged.

Of course, only the sparse of scepticism would swallow the “philanthropy of the empire” hogwash without chewing. Half of Ancient Cairo currently resides in the City of London…along with treasures from all over the once conquered world. There by the grace and benevolence of an eleemosynary crown!

Continues, without so much as a hint of shame, the propagandist offal…

On the appointed day, usually in late May each year, teachers in Queensland schools gave special lessons on the growth, freedom, rights and privileges enjoyed by the Empire’s citizens. Through these lessons, children were reminded of the vastness of the British Empire and the rights Australians as members experienced as a consequence. The lessons were also used to stimulate patriotic sentiment among pupils.

May we all, friend and foe alike, forever and with courage resist the “freedom” of being owned by any Empire, be that Empire celebrated or not.

War isn’t something to make the chest swell, Fellow Reckoner. It’s something to make the stomach sink.

Joel Bowman
for The Daily Reckoning

Lest We Repeat originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

— William Cowper, Table Talk

Emblazoned across the lucre-basted exterior of the Internal Revenue Service building in Washington DC, reads one of the most intellectually polluted quotes any free mind is ever likely to encounter:

“Taxes are the price we pay for a civilized society.”

Its effortlessly officious author, associate Justice of the United States Supreme Court, Oliver Wendell Holmes Jr., could scarcely have been more wrong in his (albeit paraphrased) assertion. Unless, that is, the mustachioed Rooseveltian meant to define “civilized society” as an arrangement that favors and promotes rule by brute force and violence, rather than one of free and voluntary association.

If, indeed, that was Justice Holmes’ idea of “civilized,” we shudder to think what he regards as uncivilized. But shudder we will…

Let us consider, by way of illustration, the concept of the caveman, that apocryphal amalgam of prehistoric humans so often used to epitomize the unwashed, uncivilized elements of mankind’s past. To what does this boorish troglodyte resort when it comes to resolving complex matters of dispute? What is his go-to instrument for dealing with the problem posed by, say, the natural scarcity of goods? With what tool does he arbitrate over issues involving titles, rights and claims?

Like Justice Holmes, Captain Caveman’s preferred instrument of justice is…a club. Force, in other words. “It’s my way…or (insert oafish, baboon-like noises here) me club you to death.”

There is no opt-out here. No choice. And therefore, it must be said, no freedom. As the author Salman Rushdie (a man who spent a good deal of his life under threat of force and violence from a particularly hysterical clutch of our fellow primates) once remarked, “Freedom to reject is the only freedom.”

Justice Holmes may have liked paying taxes. (He may have liked being flogged with a club, too. Who are we to say?) But by mandating that others do likewise, by employing the force of the state to ensure that they do, by denying them the freedom to reject the state’s claim on their property and to defend themselves against it, he is wielding the club — dangerously disguised as a gavel — of a decidedly uncivilized version of “justice.”

There are, of course, those questionless minds among us who take false refuge in such meaningless platitudes as, “But…but…but it’s the law!” To which we reply, “What kind of law is yours that seeks to endorse violence rather than to protect us from it?”

“The purpose of the law,” observed classical liberal theorist, Frederic Bastiat, “is to prevent injustice from reigning.” It is not to cause justice, in other words, but to shield us from its opposing force. And how are we to know when a law has fallen into the service of evil? The Frenchman offers this simple Litmus test:

See if the law take from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what that citizen himself cannot do without committing a crime.

And if we find the state of affairs to be as such? Bastiat urges us to “abolish this law without delay, for it is not only an evil itself, but it is a fertile source for further evils because it invites reprisals.”

For Holmes and his wretched ilk, the difference between “them” and “us,” between savage and civilized, is not to be found in the distance between war and peace, between force and voluntarism, between slavery and freedom. His is a civilization measured in degrees according to the size and efficacy of the agent of force…and the sickening pleasure its beggarly subjects derive in forever dwelling on the harsh receiving end of it.

Of course, the liberty-minded recognize immediately, almost instinctively, that no amount of initiated force is ever tolerable in a truly just and civilized society. Indeed, this is the core tenet of the Non-Aggression Principle. Writes noted free market economist, Walter Block, on the subject:

The non-aggression axiom is the lynchpin of the philosophy of libertarianism. It states, simply, that it shall be legal for anyone to do anything he wants, provided only that he not initiate (or threaten) violence against the person or legitimately owned property of another.

In stark contrast to this fundamental bedrock of freedom, Justice Holmes not only implicitly advocates the use of force…but explicitly revels in it as a kind of privilege for which to be eternally thankful.

Wherever this core principle is endorsed, it betrays in its proponents a profound disgust for the human species, a disgust so visceral that it compels, urges, lusts even, for their ownership over and enslavement of others…all for the slaves’ own good, of course.

The impulse to own and to be owned is rooted in a foul and reprehensible sociopathy, one forged from a deep self-loathing, at once slavish and brutal. As such, it stands in special need of constant and public denunciation, of fierce, unapologetic and uncompromising resistance by all who strive to further the cause of liberty.

Joel Bowman
for The Daily Reckoning

A Caveman’s Account of “Civilized Society” originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

— The Sun Also Rises, Ernest Hemingway

We began yesterday’s bitty missive with a simple enough observation: The world, it turns. From light to darkness; day to night; freedom and liberty to control and coercion. Of course, when it comes to day and night, coordinates matter. And when the spreading creep of twilight washes the late afternoon sky of one horizon, the dawn of a new day peers inquisitively over another.

We were thinking about all this on our afternoon stroll through the city yesterday. The old porteños were out in the plazas, sipping their mates by the big iron gates, smoking tobacco and chatting idly amongst themselves. Their faces wore deep creases, choked with years of stillborn promises and hopes long since smothered in the still of night. Salt and pepper whiskers. Unkempt hair, longish below upturned collars. Sunset in Buenos Aires.

This was not always the case. The world has turned.

From the mid-1800s, following the ousting of Juan Manuel de Rosas, through to until the 1930-40s, Argentina thrived as a bastion of relatively free commerce and trade. Spurred by many of the ideas encapsulated in Juan Bautista Alberdi’s Bases for the Political Organization of the Argentine Republic, the South American nation became the envy of its neighbors. Echoing the writings of Jefferson and Madison, Alberdi was an ardent defender of what he saw as unalienable rights, including the rights to earn and own property, without let or hindrance from the state. At the time, his thoughts on the matter were considered revolutionary:

Today we must strive for free immigration, liberty of commerce, railroads, the navigation of our rivers, the tilling of our soil, free enterprise…

Our revolutionary wars sought to establish liberty from outside oppression…what we now need is liberty within…

Our leaders want both glory and liberty, and the two are contradictory…

And so the fruits of these ideas sprung forth. By the turn of the 20th century, Argentina was the 8th most prosperous nation on earth. Only Belgium, Switzerland, Britain and a handful of former English colonies — including the United States — were more favorably positioned, economically. In 1913, Argentina’s bustling, cosmopolitan capital, Buenos Aires, had the thirteenth highest per capita telephone penetration rate in the world. Her per capita income was, around this time, 50% higher than in Italy, almost twice that of Japan and five times greater than its northern neighbor, Brazil. Argentina’s industry churned out quality textiles and frigorificos (refrigerated ships) carried her prized beef from the fertile plains of the pampas to the farthest reaches of the known world.

Argentina rose with the arc of the century…and fell with it too.

Eventually, indifferently, came the long shadows of afternoon, and with them a costly era of protectionist policies at home and increased competition abroad from the post-WWII, export-led economies. The temptation to meddle became too much for the liberty-fed pupils of Alberdi to resist. War, currency debasement, civil unrest, military rule and the usual accelerant of politicians, equal parts corrupt and inept, conspired to stultify Argentina’s vast potential. Almost without a trace, and with precious few really understanding why, the warm glow retreated from the plazas. Then, evening fell.

“I cannot walk through the suburbs in the solitude of the night without thinking that the night pleases us because it suppresses idle details, just as our memory does.” — Jorge Luis Borges.

Even now, standing atop a half century of hard won disaster, of blood and of suffering untold, the Argentine state seems only to grow in its arrogance. Long is this darkness…and long-suffering its good people.

Joel Bowman
for The Daily Reckoning

The Peaks and Valleys of a Changing World Economy originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

The usual rabble and riff-raff have left for the long weekend. The city is empty. And quiet.

Still, there is reckoning to be done…

Markets continue with what Eric Fry yesterday dubbed the “everything off” trade. “Investors are dumping everything with a ticker symbol,” observed Mr. Fry. “US stocks, foreign stocks, government bonds, corporate bonds, precious metals, crude oil and almost every other commodity”…everything is “off.”

And that includes ol’ yella, gold. The Midas metal has lost about $100 per ounce over the past 30 days. It’s back to where it was six months ago.

So…what gives?

This is supposed to be a recovery, isn’t it? The cover of last week’s Economist magazine seemed to think so. (Or was it the week before?) You might have seen the hopeful image, as we did, while strolling through an airport lobby. It depicted a couple of machete-wielding explorers shining a light on a gleaming treasure chest.

“The Recovery?!!” exclaimed one of the hapless cartoon figures.

Hmmm…

And then there was that cover of The Atlantic magazine, the one with a smug-looking Fed Head on it, obsequiously awaiting his due praise. “The Hero” screamed the headline; the accompanying subhead pondered, “Ben Bernanke saved the global economy. So why does everyone hate him?”

Another “Hmmm…”

We wonder, does one have to be a cartoon sketch — or possess the cerebral processing capacity of one — to believe the world is in recovery mode? Come to think of it, what is “recovery mode” anyway? We hear so darned much about it…but who stops to think about what it really means?

To recover from something supposes a return to normalcy, as if after some unnatural shock. One might “recover” from an illness, for example, returning to a normal state of health. Likewise, one might recover from a bad fall…or a drunken evening…or a bad fall as a result of a drunken evening. A relationship might recover after its participants get into a nasty row. A driver may recover control over his vehicle after a temporary distraction.

In any case, the term recovery implies a return to things as they once were. A return to normal. A return to average.

But what if this is not that kind of a situation? What if we are in for a new normal, and along with it, a new kind of average? What if we are, as they say, past the point of “no return”?

A third, and this time more concerted, “Hmmm…”

Imagine a stage coachman waiting for a return to normal after the introduction of the automobile. “Business will soon pick up again,” he might have muttered as a spiffy new Model T passed him by. And imagine, for one reason or another, business actually did pick up for a few days…or a week…or even a month. “This is it,” he could have concluded. “The recovery is in!”

One could make the same point with a million other yesteryear industries. But will business ever return to “normal” for members of the United Blacksmith Guild? Are we to expect a sustained upward profit trajectory in the disposable camera sector? Is a recovery on the horizon for purveyors of offline pornography?

In a word, no. These industries have had it, gone the way of yesterday’s news.

And we are all better for it, are we not? Modern 2012 Man (and Woman) needn’t fuss about with the unending annoyances of the anvil-chained life. Nor does he find cause to curse his lagging photography skills when picking up his prints from the store. Now, he simply erases the offending digital composition and snaps another shot with his phone. Likewise, he needn’t alert the local magazine vendor to every detail of his private whims and fetishes. One person’s desire is another person’s domain name.

So what about this “recovery,” then? The term implies a return to the way things were, “pre-GFC.” Our guess is that’s not going to happen.

And thank goodness for that!

The market wants debt destroyed. It wants accounts settled and moribund institutions extinguished. It thirsts for a flurry of “Lehman moments.” The market wants capital freed from tarpit-bound enterprises so that newer, fresher-faced companies, with superior products and innovative business models, can make better use of it. It wants errors punished, mistakes corrected and the lessons of the processes therein made available for all to know and to learn from.

If The Atlantic was right, and Bernanke did save the global economy, he did so only in the sense that he “saved” investors from the lessons they needed to learn. Similarly, he “rescued” the market from the evolutionary process through which it needs to go. And, having done so, the man with his hand on the dollar printing press continues to “save” us from the future we might otherwise be enjoying.

Thankfully, Bernanke can’t “save” the economy forever. Whether everyone hates him or he is universally adored, his job will one day go the way all things must do…the way of yesterday’s news.

And then, the future will be free to begin again.

Joel Bowman
for The Daily Reckoning

Misguided Faith in an Economic Recovery originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

Now imagine being positively amazed at the lightning speed of this vastly improved communication efficiency. Previously, it had taken at least a month — sometimes many more — for your (and our) long-distance notes and wandering tales to find their desired recipient…if they even arrived at all. In this case, a mere ten days — less than a fortnight! — would be cause for celebration.

And now, finally, imagine that the awe-inspiring agent of change, the driver of such a disruptive communications technology, the catalyst for this Herculean leap forward in efficient information delivery is…a pony.

Such was the case (more or less) on this very day, 152 years ago. Explains an article on The History Channel website:

On this day in 1860, the first Pony Express mail, traveling by horse and rider relay teams, simultaneously leaves St. Joseph, Missouri, and Sacramento, California. Ten days later, on April 13, the westbound rider and mail packet completed the approximately 1,800-mile journey and arrived in Sacramento, beating the eastbound packet’s arrival in St. Joseph by two days and setting a new standard for speedy mail delivery.

Depending on your starting point, even a humble, broken quadruped might be considered a technological breakthrough. And so it was when, eightscore less eight years ago, a pony took (only!) ten days to do what had previously taken months to achieve: deliver communication between the relatively established Heartland and the frontier outposts of California’s Wild West, itself a strange and largely unknown land for pioneers and Johnny-and Jannie-come-lately goldbugs; a land which had only “achieved” statehood a decade earlier.

Today, a ten day lag is unthinkable when it comes to delivering vital information to millions of recipients around the world. If you’re going to Starbucks to get a $5 skinny mocha latte on the way to your mani-pedi, you want your 734 “friends” to know about it now. Never mind that you haven’t actually met most of these recipients…or that they’ve probably “hidden” your inane and incessant updates from their “newsfeeds.” They ought to be alerted to your activities now. Not next week, when the caffeine has worn off and the fuchsia lacquer adorning your twenty little fashion-starved ungues has long since dried. But now, as in the moment you hit “Post” on Facebook.

If you didn’t understand most of the last paragraph, don’t fret. We had to look a good deal of it up too…though not, somewhat scarily, the mani-pedi parts.

Such are the times in which we live, Fellow Reckoner, where, given that the number of recipients is potentially infinite, we can fairly say that information travels faster than the speed of light (i.e., we can post our insightful observations/inane chatter on the web where it may then be viewed by millions or even hundreds of millions of people…simultaneously. Eat your heart out, Pony Express. That’s progress!)

The speed at which ideas spread is, history tells us, of vital importance to our continued evolution as a species. That means both the creation of new, resilient and, lately, increasingly decentralized political and social structures, and the destruction of old, brittle and, lately, centralized, vertically hierarchical ones. This appears to be particularly true when ideas course through the social veins of an oppressed and/or disenchanted citizenry.

Last year’s Arab Spring comes to mind, as does the “Revolution Lite” Occupy versions mushrooming across cities in the US and, eventually, around the world. Both are examples of “Open Source Warfare,” and both were made possible because of the dynamism and flexibility of non-centralized organizations. [Terrorism itself owes a great deal of its “success” to having leveraged the enormously asymmetric power differential between old-style, top down combat strategy and newly dynamic, decentralized “swarm,” “flash” and “disperse” methods.]

A sudden and unforeseen change in the tools used to drive and circulate these ideas has, time and again through the ages, shaken these rigid and brittle structures — particularly political and military structures — to the core, often to the point of outright revolution and eventual destruction (usually after the nation funding archaic engagement strategies enters — or, more correctly, eventually declares — bankruptcy).

The work of one Johannes Gutenberg in the 15th Century is probably the most obvious example of such a disruptive phenomenon. His epochal work in developing mechanical movable type printing paved the “information highways” for the Renaissance, Reformation, the Age of Enlightenment and the Scientific Revolution and, according to Wikipedia, “laid the material basis for the modern knowledge-based economy and the spread of learning to the masses.”

Not bad for a couple of hand moulds, eh?

Joel Bowman
for The Daily Reckoning

How the Speed of Information Has Affected Human Progress originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".