Willing buyer and willing seller. These five words form the very basis from which the system of capitalism is based on. You have something you want to sell and if I want to buy it then we either agree or disagree on a price. If we agree then I give you money, take the product, and walk away. And if we disagree then we move on with our days.

In his book, Basic Economics, Samford Professor Thomas Sowell described the role of prices in the economy as “conveying information about an underlying reality while at the same time providing incentives to respond to that reality. Prices, in a sense, can summarize the end results of a complex reality in a simple number.” Prices are determined in a decentralized manner based on the relationship between supply and demand. When a product is in high demand then the seller will usually be selling his products at the price he sets and when demand is low, then the seller must lower his price to one consumers agree to. In a true free market society, there are only two authorities when it comes to setting a price: the buyer and the seller.

Price controls are restrictions on prices created and enforced by the government. These are done with the virtuous incentive of protecting buyers and sellers from each other. A price ceiling prevents sellers from charging more for a product and service than the government dictates while a price floor prevents buyers from paying less than what the government determines to be fair. In many cases throughout history, the noble intentions of these policies to promote fairness and affordability usually result in shortages and black markets when confronted with reality.

Price controls fail because they do not have the flexibility to respond to the collective demands of the market in a quick fashion in the same way that prices do. A price is a subjective idea that only becomes true once a buyer and seller agree on it. Both parties involved in the transaction are the only real authority on what the price will be.

The recent $355 million-dollar civil law suit filed by the state of New York against former President Trump and his business empire goes against the concept of willing buyer and willing seller. The core argument the state is that Trump committed fraud because he inflated the value of his properties when using them as collateral to obtain loans. The claim is that he used false valuations because the state and judge believe these properties were worth less than what Trump valued them to be.

But the judge and the state’s Attorney General Leticia James were not the ones who were loaning Trump money. The sellers in these transactions were the banks. The state claims that they were cheated by Trump because if the valuations for his property were lower, then the loans would have been riskier than originally thought and higher interest rates would have been charged. Never mind that these big banks have departments of people who created their own valuations that in the end decided that it was okay to proceed with these values.

The banks were willing to sell their loans to the former president and Trump was willing to buy them. And in the end they were paid back. The terms of the contract were honored and everyone moved on.

New York State found out about these deals years later and decided to go after Trump because, officially, they disagreed with the values he assigned to his property, and they called that fraud. Keep in mind that they were not a party in this transaction and, if government has a role to enforce contracts, then this contract was fulfilled and did not require intervention. The banks did not call for help and did not see themselves as being victims. The $355 million is not being paid to the banks but is instead going to the state’s treasury.

But because the state disagreed with the values and therefore disagreed with the prices in the contract that everyone else was happy with, they went after Trump in court and were assigned a judge who openly agreed with them before the day in court even began.

Many are warning New York State based businesses that they should leave the state before becoming the next target of an overzealous government. Governor Kathy Hochul tried to play down these fears and claim that businesses who do not break the law and commit fraud should not have anything to worry about. But when she was asked about Trump’s case she said that the former president was punished for his “misrepresentation of assets.” But what was misrepresented? He put a price tag on what he valued his properties to be. The banks did their own due diligence and agreed.

What has happened in New York is worse than a price control because the government’s idea of fairness is entirely subjective and not transparent.

Using these criteria, a government agency can go after a small business by claiming they are committing fraud by asking for a higher price for their product or service than a bureaucrat is willing to personally pay. Or you could one day wake up to find your bank account frozen because the price you sold your old house for in 2021 is higher than its value in 2019 and you are accused of taking part in a “fraud” that drove up the value of homes while pricing others out of the market. When the rule of law is thrown away and all that matters is the mood and discretion of who is in charge, you will find yourself living in a tyranny.

Regardless of how you feel about former President Trump, the ruling against him in New York goes against the free-market principles that made America the economic powerhouse it is today. Price controls, central planning, and the law becoming opaque all have historical track records of failure. These concepts should be vigilantly discouraged if we want to continue having a thriving society.

The Consumer Price Index numbers have recently come in with a slight decline to 3.1 percent YOY in January 2023. This is down from a peak in June 2022 of 9.06 percent inflation. Federal Reserve officials laude this as a victory. “Inflation has been conquered! Long live rate cuts!” they cry. The possibility of rate cuts has been touted after the fastest rate hikes in 40 years. Consumers, however, are not buying this rhetoric. The University of Michigan’s Consumer Sentiment Index saw an uptick, but nowhere close to its pre-COVID levels. Prices haven’t gone down for the average consumer even as inflation numbers “get better.” Why?

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Source: Barron’s

It is important in any discussion of inflation measures to distinguish between the Core CPI measure that the Federal Reserve uses as a measure, and the “Headline” CPI. Both are an index measuring the general price level of a basket of goods. If one was to check the Consumer Price Index proper, they would find the index level at 309.685. That number may not mean much to the average consumer who glances at the data, but it becomes more readable when one calculates the YOY (year over year) percentage change.

Core CPI is different from Headline CPI in that the former removes so-called volatile goods like energy and food. The logic behind this exclusion is that energy and food prices are volatile. Their prices can change rapidly often as a response to political actions, disasters, and other supply shocks that will eventually be dealt with. These might not contribute to the overall increase in the price level in the long term, as the prices very well might lower or rise if they rapidly sink, so they are removed.

Core CPI is currently higher at 3.875 percent, meaning that when you include the volatile factors their prices have decreased. Looking to the Consumer Price Index’s Gasoline Index, you can find a decline from its peak in June 2022 (at 411.984) to today (at 293.287). Average gasoline prices have declined from a peak also in June 2022 at $5.05 on average to $3.21.

picture2.png

Source: St. Louis FED

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Source: St. Louis FED

Food similarly has declined in terms of percentage change, but its price level continues to rise overall, even if it has slowed down. It appears that a decline in energy costs has pushed headline CPI down.

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Source: St. Louis FED

That aside, the CPI and Core CPI are down since 2022. Yet, consumer sentiment hasn’t recovered. Getting nearer to the coveted 2 percent inflation range hasn’t made things easier for most consumers. The inflation rate has continued to decline, but prices haven’t gone down overall, exempting energy prices. To properly understand this, one must understand how CPI and inflation rates work.

 The Consumer Price Index is a measure of the general price level of a basket of goods over time. That basket changes as spending habits change over time. A base level for the index is at 100, and the standard inflation rate reported is a report of the percentage change over a year. The 3.1 percent inflation for January 2024 tells us that between January 2023 and January 2024 there was an increase in the index of 3.1 percent. A positive inflation rate means that the Consumer Price Index is still growing. As it becomes lower, that simply means it grows slower than previously.

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Source: St Louis FED

The CPI continues to grow, meaning that the general price level has continued to grow. The inflation rate falling doesn’t necessarily mean that prices will return to their pre-COVID levels. Prices haven’t come down precisely because the price level continues to grow. To properly see a proper decline in the general price level, there must be deflation. Deflation would be reflected in negative inflation rate measures, as the CPI declines. To see a return to the pre-COVID price level there would need to be deflation enough for a decrease of 50 points on the index.

Austrians have long pointed to the connection between inflation and the growth of the money supply. The principle is simple enough when one understands marginalism. As the supply of goods increases, the value of an individual unit of those goods declines. To see a proper decline in prices to pre-COVID levels there is a need to see a decline in the money supply, all else held equal. Ryan McMaken has tracked the growing decline in the money supply as the Federal Reserve has raised rates, but the decline is not enough.

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Source: Ryan McMaken at Mises.

The Federal Reserve may have slowed the growth of the general price level, but it has not done enough. There is a need for serious deflation if consumers wish to see prices return to where they once were. The price level is still growing, and it is easy enough to see if you understand what the inflation rate actually means.

Demand Side economists, like Paul Krugman, claim that officials can use changes in the inflation rate and in public debt to “manage the economy”. Higher inflation rates supposedly act as a stimulus to increase GDP, and to lower the unemployment rate. How is this supposed to work? In the original form of this argument workers are fooled by inflation. That is, workers don't perceive the effect that inflation has on the purchasing power of their wages. Employers do perceive cheaper real wages, so they pick up some bargains by hiring some additional workers. These marginal workers have lower productivity, but since wages have gone down, they are well worth hiring. In many modern versions of the demand side theory, some businesses are slow to raise their prices in response to a general increase in prices. Hence, total demand for goods may increase. The idea that higher inflation leads to lower unemployment is known as the “Phillips Curve”.

Modern economists all agree that the stimulative effects of inflation, if any, must be temporary. Markets will adjust to inflation over time, and these adjustments will shift aggregate supply so as to nullify any prior increase in aggregate demand.

Statistical data suggests that workers respond to inflation promptly and aggressively. The graph just below shows that unit labor costs increase during inflationary booms. When the Federal Reserve increases the money supply this increases total spending, and many prices begin to rise.

There is in fact some evidence of inflation reducing unemployment rates, temporarily. However, workers react to tight labor markets by pressing for higher wages and by not working as hard. The trendline in the above graph represents the immediate effect of inflation on unit labor costs, there is no lag in this regression. If there was a long lag in the effect of inflation on labor market conditions, then Federal Reserve officials would have some room to manipulate labor markets. It takes some time for Federal Reserve policy to affect the rate of inflation, but very little time for workers to nullify the effect of inflation. Furthermore, the effectiveness of inflationary policies depends on the strength, not just the timing, of our responses to these policies. Changes in unit labor costs have a 27.5% correlation with inflation rates. Only a few of the data points above are exactly on the trend line, most are either well above or below. This means that the specific response to Federal Reserve policies and labor markets does vary in each case. Worse still, this effect seems to shift during severe crises (e.g the Subprime and C- 19 crises). Hence, the task of crafting optimal inflationary policies is a guessing game. In other words, Federal Reserve officials face the worst combination of conditions for using inflationary monetary policy to achieve lower unemployment.

The evidence in the above graph directly contradicts the original version of the Phillips Curve . This data also poses difficulties for contemporary proponents of the Phillips Curve. The data presented above also indicates that the recent wave of inflation was unnecessary. The Federal Reserve created a wave of inflation in order to deal with the Covid-19 crisis. The benefits of the aforesaid inflationary policy were doubtful from the outset, and reducing inflation will likely cause a recession in 2024.

[This article first appeared at "On the Other Hand..."]

Five days before the last Federal Open Market Committee (FOMC) meeting, Tho Bishop wrote about how the Fed and other agencies are preparing for a crisis without telling everyone they are preparing for a crisis. In his article, he showed how the Fed and the Office of the Comptroller of the Currency were working on a policy that would require banks to access the Fed’s discount window once a year, which would diminish the stigma associated with crawling up to the window as a last-ditch effort to save your failing bank.

This is clearly crisis prep. They see the dominos falling: commercial real estate valuations, credit card delinquencies, regional bank failures last year, the expiration of the Bank Term Funding Program (which was emergency lending without calling it “emergency lending”), high-profile corporate layoff announcements, etc. They are getting ready for their next power grab once the crisis is in full swing.

The minutes from the January FOMC meeting were released today, and they reveal, in Fedspeak, of course, worries about the economy and the banking system.

In the discussion of financial stability, participants observed that risks to the banking system had receded notably since last spring, though they noted vulnerabilities at some banks that they assessed warranted monitoring. These participants noted potential risks for some banks associated with increased funding costs, significant reliance on uninsured deposits, unrealized losses on assets resulting from the rise in longer-term interest rates, or high CRE exposures.

My translation: “The underlying problems in the banking sector that resulted in the bank failures last year have only been papered over, and not meaningfully resolved. Deposits, commercial real estate loans, and all those assets with unrealized losses you’ve marked as ‘held-to-maturity’ are not safe.”

While participants noted that they were not seeing any signs of liquidity pressures at banks, several participants noted that, as a matter of prudent contingency planning, banks should continue to improve their readiness to use the Federal Reserve's discount window, and that the Federal Reserve should continue to improve the operational efficiency of the window.

My translation: “We are definitely seeing signs of liquidity pressures at banks, so they should get ready to line up at the discount window for a loan of last resort.”

Given that the stresses that emerged at some banks early last year have subsided, members agreed to remove from the statement the reference to the resilience of the U.S. banking system as well as to tighter financial and credit conditions and their effects on the economic outlook.

My translation: “Yeah, we were definitely lying earlier when we said ‘risks to the banking system had receded notably’ and how we aren’t ‘seeing any signs of liquidity pressures at banks.’ We’re just gonna delete the ‘banking system is sound and resilient’ line.”

Oh but ain't that America for you and me.

Ain't that America something to see baby

Ain't that America home of the free

Little pinks houses for you and me.

John Cougar Mellencamp

Released in 1983 after double-digit price inflation from 1979-1981 

Shrinkflation has President Joe Biden annoyed. He called it a “rip off” on social media ahead of the Super Bowl. “Some companies are trying to pull a fast one by shrinking the products little by little and hoping you won’t notice,” said Biden, who evidently just now noticed, and is calling for companies to stop it.

While the President is focused on snacks and such, the New York Times reports that homebuilders like Lennar are building 400 square foot structures and calling them homes. The Times piece by Conor Dougherty entitled “The Great Compression” explains “Over the past decade, as the cost of housing exploded, home builders have methodically nipped their dwellings to keep prices in reach of buyers. The downsizing accelerated last year, when the interest rate on a 30-year fixed rate mortgage reached a two-decade high, just shy of 8 percent.”

“Their existence is telling,” Ali Wolf, chief economist of Zonda told Mr. Dougherty. “All the uncertainty over the past few years has just reinforced the desire for homeownership, but land and material prices have gone up too much. So something has to give, and what builders are doing now is testing the market and asking what is going to work.”

With 400 square feet, no garage, and driveways just wide enough for one vehicle or two motorcycles — builders can offer prices under $300,000 in markets like San Antonio and Redmond, Oregon. The days of the $100,000 to $300,000  starter home are long gone in many markets. “This is the front end of what we are going to see,” said Ken Perlman, a managing principal at John Burns Research and Consulting.

Levittown, N.Y. Cape Cod homes, considered the model post-World War II suburb, were about 750 square feet. However, Americans want more space for their stuff and the median home size has increased to about 2,200 square feet, up from around 1,500 in the 1960s. 

As for snacks, “This corporate greed is one of the reasons that Americans are frustrated by expensive grocery bills,” Senator Bob Casey D-Pa., said in a December statement.

The good Senator should study the work of Ludwig von Mises who explained,

No complaint is more widespread than that against “dearness of living.” There has been no generation that has not grumbled about the “expensive times” that it lives in. But the fact that “everything” is becoming dearer simply means that the objective exchange value of money is falling.

While prices rise, the value of the dollar shrinks, the number of chips in a bag and the size of houses shrink.

“The advocates of public control cannot do without inflation, Mises wrote. “They need it in order to finance their policy of reckless spending and of lavishly subsidizing and bribing the voters.”

[Pre-order the 4th Expanded Edition of Early Speculative Bubbles & Increases In The Supply of Money today.] 

I used to be an environmentalist.

I once wrote that “scientists are right about climate change.” I long opposed logging clear-cuts and excessive drilling. I even voted for the Green Party candidate (gasp!) for president. But this long-time supporter of environmentalism has completely abandoned its modern instantiation. Here are five reasons why.

1. Failed climate change predictions.

Science is about accurate prediction. If Newton’s theory had failed to predict how apples fall, then it would be useless.

Few scientists have been as bad at this (basic) job as climate scientists. In one of the most comical episodes I’ve ever seen, climate scientists erected signs in Glacier National Park predicting its glaciers would be gone in 2020—only to be forced to leave the signs after the predictions proved false. For a year, tourists to the park were met with a monument to the legacy of climate science: They stood looking simultaneously at glaciers … and the sign that promised, on the good authority of climate science, that the glaciers were not there.

Increasingly, climate scientists have appeared to me not as serious intellectuals but as the crazy old coot on the corner with a sign proclaiming: “The End is Near!” At some point, it is best to just avert your eyes and walk on by.

2. Where did the wild spaces go?

Thoreau said of nature: “We need the tonic of wildness.” Thoreau was right about me at least. One of my primary motives for being an environmentalist was that I believed natural wild spaces were good for the soul.

I still believe that. But many modern environmentalists don’t. They have abandoned this idea and substituted in its place a cult-like obsession with a set of things that clearly won’t preserve wild spaces at all.

And that brings us to wind farms. I hate wind farms. They kill birds and destroy forest habitats. The blades are made of materials that fill waste dumps and can’t be recycled. They require lithium batteries that have to be mined with methods that create the very kinds of problems the “clean energy” movement is supposed to solve.

But for all that, my primary reason for hating wind farms is the same as my motive for opposing all those oil derricks years ago: They destroy the wild spaces of my sanity. They dilute Thoreau’s tonic.

The real problem is the scope of their effect. An oil derrick isn’t attractive—but it is a fairly contained ugliness. Wind farms, on the other hand, ruin everyone’s view for miles and miles and miles around. The higher you go in the Pennsylvania mountains, the more you ought to feel freedom. But the higher you go, the more likely you are to have your vast wild vistas displaced by wind turbines. Even if a specific turbine design is attractive, it still interrupts our ever-diminishing wild spaces. So unless you happen to be a rich Massachusetts politician with the power to stop wind farms from messing up your own pristine ocean view, the tonic you get from nature will be appreciably less curative.

Wind farms make oil derricks feel like pure mountain streams. Can we start drilling again soon?

3. Bullying over debate.

One of the clear signs that a movement is rotten is when it resorts to silencing its opponents rather than debating them. The modern “green” movement contains the worst set of bullies I’ve ever seen; indeed, they serve as primary fodder for my forthcoming book called Liberal Bullies. Rather than meet fact with fact, the movement increasingly calls people they disagree with climate deniers and engages in intentional censorship to silence the voice of opponents. Not only is this repugnant to those of us who value free speech, but it is also a clue that the movement doesn’t have a lot of substantive arguments. You don’t need to silence people when you can win an argument with facts.

4. Politics over facts.

Speaking of facts: The relationship between science and politics only works when the causal arrow between them goes from scientific facts to politics. The modern green movement has that backwards. I remember seeing a science presentation at a San Francisco aquarium where the speaker confidently asserted that Glacier National Park had less than 10 glaciers left. I thought that was odd because we had just visited the park and the park officials had told us there were over 40 glaciers. But trying to discuss this with a presumed expert was a parable of the modern movement: no amount of fact would change his conviction, because the facts didn’t fit his political beliefs.

5. Lack of a cost/benefit analysis.

Even at the height of my pro-environmentalist sentiment, I wasn’t opposed to all oil drilling. I know we need energy; I use it every day. I just wanted moderation that purposefully preserved a significant amount of wild nature. Well, across the board, the green movement increasingly just bludgeons us with simple-minded ideas that ignore the obvious costs of their policies. They push for recycling without considering the environmental costs of (say) moving recycled goods (even The Atlantic recently admitted that recycling wasn’t accomplishing all that much). They push for climate change initiatives while dismissing the costs for everyday families. They don’t often consider that, compared to other methods, wind farms produce a small amount of energy relative to the destruction they cause.

Concluding Thoughts

All movements have problems, including my own. All movements have bullies, including my own. I realize there is a danger in hand-picking a few extreme examples here. There are plenty of good environmentalists. I know some of them. I don’t want to paint the entire movement with one brush.

And yet, from my little corner of the world, something seems amiss. The green movement has increasingly ignored common people’s real experiences in favor of an ever-narrowing and cult-like political agenda. If it ever regains a focus on the reality most of us inhabit, I’ll re-consider.

But I’m not holding my breath.

This article was originally published by Grove City College's Institute for Faith and Freedom. 

Alexei Navalny – seen as a pro-democracy, transparency, anti-corruption Russian nationalist gadfly – died while on a walk in his Siberian prison.  He was serving a long sentence, one the Biden administration raged about:  the Russian judiciary had convicted him of several crimes including fraud, embezzlement, “inciting extremist activities” and “rehabilitating Nazi ideology.”

I’m sure Donald Trump can sense the irony.

Navalny’s recent incarceration in Siberia comes of the heels of a less reported imprisonment and death of an actual pro-democracy, transparency, anti-corruption US, UK, and Ukrainian gadfly – who died of untreated pneumonia in a Ukrainian prison.  Gonzalo Lira, a 55-year-old American citizen, married father of two, was a journalist and commentator.  He had been charged by Kiev, without a date or plan for a trial, with “justifying Russian aggression against Ukraine.” Lira was said to have violated Ukrainian criminal code, a code Lincoln, Wilson and FDR would have enthusiastically enforced.

Lira and Navalny criticized and annoyed certain governments.  One did so as a politician, backed by several countries that, as a matter of policy, constantly call for regime change in Russia; the other criticized the Ukrainian government, for its US-pressed bombing the breakaway Donbass region, its refusal to abide by the Minsk Accords, its Nazi influences within the Army and government, and its efforts to join NATO.  Lira also reported what he saw during the past few years of war –  Kiev bleeding billions of Western dollars and hundreds of thousands of lives, and displacing nearly half of its population, because, as a matter of policy circa 2024, Kiev and its US master, will not negotiate with Putin.

The United States government was involved in the fates of both of these men. Navalny received continual support, funding and media advocacy from the West, in hopes of regime change in Russia; as for Lira, he was a US citizen by birth (born in California) and as an American, was due legal and welfare advocacy from the US Embassy in Kiev.  Instead of support, he was ridiculed on the front pages of mainstream media in the US for his eyewitness reporting from inside Ukraine, and received no financial or any other kind of support as he served as one of the few objective American voices watching and reporting on this expensive and destructive proxy campaign.  The US embassy in Kiev is large and quite well staffed. Yet, the embassy said little, and did even less for Gonzalo Lira.

DC’s upside-down morality is on constant display, but with these accidental examples of two middle-aged men, both working to expose government wrongdoing, only one was spending millions of dollars with connections to many European and NATO leaders, and their intelligence agencies, as this video illustrates.  Only one was celebrated in the West, to include his wife’s invitation and presence at the most recent “Davos of Defense” three day military conference, along with the US Vice President and key EU leadership.  Only one was a “democratic hero.”

Some memorable lines, as reported by Reuters, on behalf of Navalny, are instructive:

Navalny’s mother, Lyudmila Navalnaya, wrote, “I don’t want to hear any condolences. We saw him in prison on the (Feb) 12, in a meeting. He was alive, healthy and happy.”  Clearly and predictably, she does not accept what is being reported.  That Navalny seemed happy is important to note.  From Lira’s distraught father, we have this: “I cannot accept the way my son has died. He was tortured, extorted, incommunicado for 8 months and 11 days and the US Embassy did nothing to help my son.”

Speaking to Reuters, Russian newspaper editor and 2021 Nobel Peace Prize winner Dmitry Muratov called the death “murder” and said that he believed prison conditions had led to Navalny’s demise. In 2022, Muratov sold his Nobel Prize and gave the proceeds to UNICEF for their distribution in support of Ukrainian refugees.  He stated that he would have rather the prize been given to Navalny.  Similarly, friends and family of Gonzalo Lira also believe his death was murder.  Lira was not only married to a Ukrainian, a father to Ukrainian citizens, he had repeatedly reported about the horrific conditions for and harm done to Ukrainians inside Ukraine, and in the meat grinder of battle.  But somehow, there were no Nobels to auction, and no newspapers in the West were interested.

U.S. Secretary of State Blinken, the man in charge of all US Embassies, extended his condolences to Navalny’s family. He said, “[Novalny’s] death in a Russian prison and the fixation and fear of one man only underscores the weakness and rot at the heart of the system that Putin has built. Russia is responsible for this.”  Curiously, I can find nothing where Blinken addresses Lira’s repeated arrests, mistreatment, and eventual death at the hands of the Ukrainian government, and how hard he, as Secretary of State, tried to prevent it.

French President Macron noted “In today’s Russia, free spirits are put in the Gulag and sentenced to death.” I doubt Macron has even heard of Gonzalo Lira, but perhaps he did know of him.  Gonzalo was a free spirit, a bold and brave spirit, and he was put into a Ukrainian gulag without a syllable of French outrage, poetic or otherwise.

German Chancellor Olaf Scholz said, “I met Navalny here in Berlin when he was trying to recover in Germany from the poisoning attack and also talked to him about the great courage it takes to return to his country. And he has probably now paid for this courage with his life.” Scholz, who sacrificed his entire nation’s economy far into the future with his criminally silent assent of the US destruction of the Nordstream pipelines, among other things, should, for the sake of Germany, be making his commentary on courage from inside a German prison cell.

German Foreign Minister Annalena Baerbock, tweeted “Like no one else, Alexei Navalny was a symbol for a free and democratic Russia. That is precisely the reason he had to die.”  As a suspected CIA and/or MI-6 asset, Navalny’s death, as his life, continues to serve a Western agenda.  One wonders if Annalena, noted for her accidental and sometimes embarrassing blurts of truth, did it again with this one.

Zelensky, speaking in the same Munich security conference this week, stated, “It is obvious: he was killed by Putin, as thousands of others were tortured and martyred by this one ‘creature’. Putin does not care who dies as long as he keeps his position. And that is why he should not keep anything. Putin should lose everything and answer for what he has done.”  Given what we know about church banning, free speech, Nazi influences, suspension of both opposition political parties and elections in Ukraine under the US-backed Zelensky, he proves himself, once again, to be a tiresome narcissist, projecting malignantly.

EU Council President, Charles Michel, along with many heads of state in EU countries, rushed to hold Putin responsible for the death of Navalny.  “Alexei Navalny fought for the values of freedom and democracy. For his ideals, he made the ultimate sacrifice. The EU holds the Russian regime solely responsible for this tragic death.”  The dramatic language is almost Versailles in its absolutism.

EU President Ursula Von Der Leyen, tweeted the real import of this death. “A grim reminder of what Putin and his regime are all about. Let’s unite in our fight to safeguard the freedom and safety of those who dare to stand up against autocracy.”  How about let’s all pray for a degree self awareness to dawn upon the EU ruling commission and the US imperial capitol – fighting against autocracy is indeed what we all should be doing, starting at home, resisting over-centralization and global mandates, and autocrats everywhere, wherever they are.

NATO Secretary-General Jens Stoltenberg made a wise observation, “We need to establish all the facts, and Russia needs to answer all the serious questions about the circumstances of his death.”  While the US shamefully did nothing to protect the rights or the life of its own countryman Gonzalo Lira, and Western media joked and celebrated his death, Stoltenberg’s recommendation should have been made, and followed, as soon as we discovered that Lira had died in a prison in Kharkiv.

Those most feared by governments are most at risk.  The US is rich with examples – Julian Assange, Edward Snowden, Jeffery Epstein, Seth Rich, John F. Kennedy and his brother Robert, or the hundreds of people who showed up for the January 6 reading of the electoral count only to be tracked down and arrested to rot awaiting trials in DC prisons, and thousands of others, most not even household names.  The list is long, and we all know someone on that list. Those who effectively challenge state narratives and objectives always put themselves in danger.

Post-Republic, non-democratic governments always need to persecute and murder their political enemies.  Instead of accepting or tolerating such governments, we should work to expose, overwhelm and obliterate them, starting and ending with the one we know best — our own.

Originally published on LewRockwell.com. 

In two columns, David Gordon reviewed my forthcoming book, Socialism: A Logical Introduction, and the Power & Market has very kindly given me the opportunity to reply.

As Gordon explains, I define socialism (chapter 2) as coming in degrees along two axes: (i) the degree of collective ownership and control of the means of production and (ii) the degree of egalitarian distribution of resources. The book then analyzes common arguments for and against socialism, and I ultimately advocate moving much further in the socialist direction than where we are in the United States, though I favor neither complete democratic control of the economy nor a completely equal distribution of resources. I argue that moving in the socialist direction would not violate rights (chapter 4) and that it would better promote human well-being than the more-capitalist alternative (chapters 6–12).

Gordon first takes issue with my treatment (in chapter 5) of an argument that many socialists make against capitalism: that by exploiting the workers, capitalism violates rights. I reconstruct and analyze versions of the argument, but in the end, I do not endorse it. Nonetheless, Gordon believes that I give the argument more credence than it deserves, and he says that I rely on a theory of the value of labor that economists generally reject. While I could defend my analysis, I’ll leave that point aside, since Gordon and I agree that this particular argument against capitalism does not clearly work.

Some of Gordon’s objections seem to rely on a misinterpretation of my view, though he began the review with a correct summary. For example, he says that it is a “glaring omission” that I do not respond to the argument of Ludwig von Mises, according to which “a socialist economy—by which he meant an economy run by central planners—would collapse into chaos” because “in the absence of numerical market prices, resources cannot be allocated rationally.”

Gordon is correct that I ignore this argument, but it is for the simple reason that I am not advocating for a centrally planned economy without numerical market prices. Such an economy would be the extreme version of the first axis of my definition of socialism; I never said—indeed I explicitly denied—that I advocate this extreme version.

Similarly, when I argue that socialism need not violate political rights and I point to the Scandinavian countries to illustrate this (chapter 2 shows that the Scandinavian countries are much further in the socialist direction on the two axes), Gordon responds: “Sehon misses a fundamental point. The [Scandinavian] countries he mentions aren’t centrally planned economies.” Indeed, they are not. Why is that relevant, given that I do not argue for a centrally planned economy?

Also, in the context of rights and socialism, Gordon says I ignore Friedrich von Hayek’s argument in The Road to Serfdom “that centrally planned economies suppress important political rights.” Again, I fail to see the relevance of an argument against a view that I do not hold. Even in Hayek’s “Present State of Debate,” an article that Gordon cites, Hayek makes no argument that is directly relevant to the sort of socialism I am defending. (This is not to say that nothing Hayek says is relevant or poses a challenge; I discuss Hayek at some length in chapters 9–11 of the book.)

I’m honestly not sure what to make of criticisms that assume that I argue for a view that Gordon’s own summary clearly indicates that I do not endorse. With respect to the first axis, it is as if Gordon thinks that there are only two alternatives: either a completely planned economy or a completely free market. However, this would clearly be wrong: both in principle and in practice, we see that there are varying degrees to which we can exert democratic control over the economy.

Perhaps Gordon’s thought is this instead: if a completely state-run and state-controlled economy would be disastrous, then any move away from state control is desirable—the further from central planning, the better. However, this does not follow. It is clearly possible that there is a sweet spot with markets and prices, but with significant democratic control, particularly in certain areas. That’s what I argue, especially in chapter 9, where I cover arguments inspired by Hayek and Milton Friedman for free markets, and then in chapters 10–12, where I consider areas where we can expect the market to fail as a mechanism for increasing human well-being.

There is one point that Gordon makes on which I will concede some ground. In chapter 4, I respond to an argument by Matthew Harwood in which (on one reconstruction of the argument) Harwood simply assumes that socialism is an awful system. Harwood then infers that socialists will violate political rights, with the idea being that proponents of an awful system will need to suppress opposing speech in order to stay in power.

I point out that this is essentially question begging: if one starts with the premise that socialism is an awful system, we don’t need the rest of the argument in order to know that we should not adopt socialism. Gordon agrees with this much. However, he says that this “doesn’t make the argument useless,” for “if you do have grounds to think that socialism is an awful system,” then Harwood’s argument would allow you to infer that it would also be likely to violate rights.

Fair enough; if we had grounds on which to claim that socialism is an awful system, then its awfulness would likely compound itself into the further awfulness of repressing speech. While that is a concession, it is not much of one. If I were willing to grant, as a premise, that socialism is an awful system, then I obviously would not have written a book defending it.

Of course, most readers of Power & Market probably do have the antecedent conviction that socialism is awful. I invite you to read my book to see whether I can convince you otherwise!

Big corporations and global leaders adhere to and assume the growing interventionism and the advance of socialism because, for politicians, it is an excellent way of perpetuating their power and control over citizens, while multinationals tolerate it because they have enough financial muscle and size to absorb the pernicious effects of the massive rise in public debt and monetary imbalances, public spending, taxes, barriers to trade, and progress.

They all know that the burden of interventionism falls entirely on small businesses and families, destroying the middle class in the process. The wealthy can escape the negative impact of monetary debasement and confiscatory taxes. People with salaries and small entrepreneurs cannot.

Who suffers the constant erosion of real disposable income from those gigantic and wrongly called government “stimulus plans” that never stimulate anything but bureaucracy, leaving a massive trail of debt and impoverishment caused by increased inflation and ever-increasing taxes? The middle classes and small businesses.

Why do global leaders accept a rising trend in destructive policies that they know will fail? There is a perverse incentive. Business leaders who should value the success of productive investment and free markets are afraid that the interventionist cancelling crowd will attack them and, therefore, prefer to look elsewhere or even finance the advance of anti-freedom ideas in the hope that the mob will let them work and invest in peace. Others believe they may keep their market share and avoid the threat of competition if they stay close to political powers. It doesn’t work. They do not leave them alone, and leaders lose more than they gain when they fall for cronyism. Whitewashing Marxist collectivism does not stop it. It is no surprise to see how this neocommunism disguised as social justice attacks with even greater cruelty those companies and leaders who embrace their false messages. Just like wokeism often cancels and destroys its most staunch defenders, Neomarxism does the same with corporations and business owners because its objective is full control.

The West is in danger, and Javier Milei explained this in detail at Davos, crushing the consensus narrative. “It should never be forgotten that socialism is always and everywhere an impoverishing phenomenon that has failed in all countries where it’s been tried out. It’s been a failure economically, socially, and culturally, and it has also murdered over 100 million human beings, he said. However, the most important point of his speech for me is to remind people what socialism is. “I know, to many, it may sound ridiculous to suggest that the West has turned to socialism, but it’s only ridiculous if you limit yourself to the traditional economic definition of socialism, which says that it’s an economic system where the state owns the means of production. This definition, in my view, should be updated considering current circumstances.

Today, states don’t need to directly control the means of production to control every aspect of the lives of individuals. With tools such as printing money, debt, subsidies, controlling the interest rate, price controls, and regulations to correct so-called market failures, they can control the lives and fates of millions of individuals. This is how we come to the point where, by using different names or guises, a good deal of the generally accepted ideologies in most Western countries are collectivist variants, whether they proclaim to be openly communist, fascist, socialist, social democrats, national socialists, Christian democrats, neo-Keynesians, progressives, populists, nationalists, or globalists. Ultimately, there are no major differences. They all say that the state should steer all aspects of the lives of individuals. They all defend a model contrary to the one that led humanity to the most spectacular progress in its history.” This is critical because the average citizen has been led to believe that massive money printing, piles of new regulations and laws, rising public debt, and constant interest rate interventions are capitalist or neoliberal policies, when they are tools of statism to accelerate the rising size of government in the economy. Socialism does not seek progress; it seeks control. Large companies that fall into the trap of buying socialism suffer the same attack and further deteriorate their ability to create value and wealth.

Milei destroyed all the current myths in one speech at Davos, and millions watched in awe because it was obvious that he was telling the truth. And that, coming from Argentina, he knows what he is talking about. When one speaks with Argentine citizens, they often remind us all that they “come from the future.”.

The example of Argentina is obvious. Between 2007 and December 2023, the world looked to the other side in the face of a massive increase in poverty and inflation. They even had the audacity to justify that inflation was due to exogenous factors, not massive money printing, and that poverty was miscalculated, exculpating socialist governments from any responsibility.

The left’s shocking silence in the face of the humanitarian and ecological disasters created by the Socialism of the XXI Century governments in Venezuela, Nicaragua, Argentina, and other countries shows that they could not care less about the welfare of citizens or the protection of the environment but used seemingly harmless causes to take power and destroy the economy. Why? Because the goal of any socialist leader is to create poor hostage clients who depend on a state in which those leaders become obscenely rich as the country goes down. Do not be mistaken; statism does not seek the redistribution of wealth from the rich to the poor, but the accumulation of the wealth of the nation in the hands of a few politicians.

Thankfully, Davos Milei was an undeniable success, and this shows that not all is lost. According to the World Economic Forum page, ten times more people watched his speech than all other leaders combined. Socialist leaders like Spain’s Sanchez bombed with less than 5,000 views. No, businesses do not depend on the state. There is no welfare state without powerful and productive enterprises, and there are no public services if private wealth is not created. There is no public sector without a thriving private sector. Progress does not depend on a crony, extractive, and confiscatory state but on a strong civil society of free individuals with independent institutions that act as a counterweight to political power. Legal certainty and investor attractiveness, or respect for international law, do not happen due to the generosity of political leaders, but thanks to free markets and independent institutions that limit political power. The world does not progress due to big governments, but despite the obstacles they put in place,

Milei crushed it by telling the truth. Those who remained silent for years about Argentina’s economic ruin now fear him.

Socialism is an impoverishing system that has failed and should not be defended out of fear of retaliation.

Milei reminded companies that they are the heroes of poverty reduction and progress and that the left only uses environmental and gender excuses to impose totalitarianism.

Milei reminded everyone at Davos that Argentina’s ruin is not a coincidence or a fatality, but the result of years of implementing the same interventionist policies that many at Davos have defended or tolerated.

Vladimir Putin isn’t a hero, but his interview with Tucker Carlson brings out some basic truths that we would do well to consider. In contrast to brain dead Biden and his gang of neocon controllers, Putin isn’t dominated by an ideological vision that requires world hegemony. He is a nationalist who aims to advance the interest of Russia. This enables him to have a realistic perception of world politics. In what follows, I’ll discuss some of the vital points we can learn from him.

Some people don’t want us to learn these lessons. As usual, the great Dr. Ron Paul is on top of this. Right after the interview, the mainstream media attacked it. They don’t want you to know that there is another side to their propaganda. Dr. Paul says:

“There has been much written and said about Tucker Carlson’s interview with Russian President Vladimir Putin last week. As of this writing the video on Twitter alone has been viewed nearly 200 million times, making it likely the most-viewed news event in history. Many millions of viewers who may not have had access to the other side of the story were informed that the Russia/Ukraine military conflict did not begin in 2022, as the mainstream media continuously reports, but in fact began eight years earlier with a US-backed coup in Ukraine. The US media does not report this because they don’t want Americans to begin questioning our interventionist foreign policy. They don’t want Americans to see that our government meddling in the affairs of other countries – whether by “color revolution,” sanctions, or bombs – has real and deadly consequences to those on the receiving end of our foreign policy.

To me, however, perhaps the most interesting aspect of the Tucker Carlson interview with Putin was the US mainstream media reaction. As Putin himself said during the interview, “in the world of propaganda, it’s very difficult to defeat the United States.” Even a casual look at the US mainstream media’s reporting before and after the interview would show how correct he is about that. In the days and weeks before the interview, the US media was filled with stories about how horrible it was that Tucker Carlson was interviewing the Russian president. There was the danger, they all said, that Putin might spread “disinformation.”

That Putin might say something to put his country in a better light was, they were saying, reason enough to not interview him. With that logic, why have journalism at all? Everyone interviewed by journalists – certainly every world leader – will attempt to paint a rosy picture. The job of a journalist in a free society should be to do the reporting and let the people decide. But somehow that has been lost. These days the mainstream media tells you what to think and you better not dispute it or you will be cancelled!

What the US mainstream media was really worried about was that the “other side of the story” might start to ring true with the public. So they attacked the messenger.

The CNN reporting on Tucker’s interview pretty much sums up the reaction across the board of the US mainstream media. Their headline read, “Tucker Carlson is in Russia to interview Putin. He’s already doing the bidding of the Kremlin.”

By merely doing what used to be called “journalism” – interviewing and reporting on people and events, whether good or bad – one is “doing the bidding” of the subject of the interview or report?

No wonder fellow journalist Julian Assange has been locked away in a gulag for so many years. He dared to assume that in a free society, being a journalist means reporting the good, the bad, and the ugly even if it puts those in power in a bad light.

Read the full article at LewRockwell.com. 

Protecting democracy and the Constitution from Donald Trump and the “MAGA extremists” is a major theme of President Biden’s reelection campaign. As is often the case in American politics, President Biden is just as, if not more, guilty of posing an “existential threat” to the Constitution as those he smears as “extremists.” For example, President Biden and members of his administration have waged a campaign to undermine the First Amendment by “encouraging” companies to suppress the expression of “unapproved” views online.

The latest example of the administration trying to get a private internet company to censor Americans may be the most outrageous of all. House Judiciary Committee Chairman Jim Jordan recently released a series of emails between Biden administration officials and Amazon, the world’s largest online retailer. The government officials wanted Amazon to remove from its online catalog books containing “misinformation” regarding the safety and effectiveness of covid vaccines, meaning anything questioning the government’s pro-vaccine propaganda.

While Amazon did try to push back some against the administration, it did remove at least one “anti-vaccine” book from its online catalog. Amazon also manipulated its search results to make sure books expressing skepticism of vaccines were buried under books touting the pro-vaccine line. The company probably hoped that by “burying” these “dissident” books Amazon could make the administration happy without actually removing all books that question the covid vaccines. The company also promised the administration that it would expand use of a Centers for Disease Control (CDC) warning for books promoting “anti-vaccine” narratives.

Some libertarians say that Amazon should not be criticized for its decisions. These libertarians point out that, as a private company, Amazon has the right to decide what books to sell and also has the right to decide to make it difficult to find books expressing viewpoints the company finds dangerous or distasteful. This is true but ignores one important fact: Amazon’s decision to suppress books critical of covid vaccines was not done to attract consumers who would not shop at a site that sells “anti-vaccine propaganda” or “conspiracy theories.” Instead, Amazon acted at the behest of government officials who were seeking to prohibit Americans from accessing alternative views.

Amazon may have been eager to cooperate with the government to avoid being subjected to antitrust litigation. At the very time the administration was demanding Amazon suppress covid dissidents, President Biden was preparing to appoint Lina Khan, an advocate for antitrust litigation against Amazon, to lead the Federal Trade Commission.

It is clear that the US government has been a major spreader of covid disinformation, while those challenging the government’s pro-mask, pro-vax, and pro-lockdown propaganda have been the truth-tellers. Covid is an example of why protecting the First Amendment is vital to protecting not just liberty, but also our prosperity and health.

Congress should prioritize its investigation into the Biden administration’s efforts to silence Americans because of their views. Congress should then impeach all high-level federal officials, including President Biden, who took action to violate Americans’ First Amendment rights.

Market expectations of rapid disinflation and a soft landing remain, but January has given a few new risks to the optimistic estimates of disinflation with no impact on the economy.

The first risk comes from the commodity complex and freight costs. Market participants have all but ignored the spread of geopolitical risk and assumed the extraordinary and counterintuitive decline in commodity prices in 2023 as something permanent. However, January has shocked analysts with a dramatic increase in freight costs and a significant bounce in oil prices. Furthermore, the December inflation figures in the eurozone proved that the base effect was an uncomfortably large driver of the consumer price index annual decline in November. In fact, all the components published by Eurostat in the December advance came significantly above the European Central Bank target.

We have been discussing too much about rate cuts and too little about net liquidity, sometimes forgetting that rising net liquidity has driven markets higher in the fourth quarter, and the first quarter will likely be more challenging considering the estimated volatility in the reverse repo figures. Additionally, massive deficit spending by the U.S. government may keep inflationary pressures above the level that broad and base money reductions would suggest.

The third risk comes from the inflationary impact of government protectionism. As trade barriers continue to build, the monetary disinflation process may be decelerating due to governments implementing trade wars, barriers to commerce, and tariffs. Unfortunately, governments in the euro area and the United States are tightening protectionist measures disguised sometimes as “environmental policies,” making competition more challenging and prices of food and shelter more expensive, by slashing access to land and farming as well as limiting building projects. Interventionism and trade wars make goods and services more expensive for citizens by placing a floor on prices even when monetary aggregates decline.

Food, commodities, and real estate inflation are all monetary effects. More units of newly created currency are going to relatively scarce assets. At the same time, deficit spending and the rising weight of government in the economy reduce the positive effects of monetary contraction and certainly decelerate the disinflation process. However, all those negative effects combined also contribute to the risk of a hard landing, especially when the U.S. and Europe are already in a private sector recession.

We need to be careful with excessive optimism about inflation and even more aware of the perils of expecting disinflation with no economic harm. Many market participants are suddenly surprised that January has started with a negative trend, but this is explained by the excessive expectations of aggressive and immediate rate cuts.

President Joe Biden made an appearance in a White House advertisement during this year’s Super Bowl. He put one of the biggest problems facing the country—inflation—front and center for the largest broadcast audience since the 1969 Moon landing. Yet, he deflected responsibility for it entirely. A leader with integrity could be expected to level with the general public about the consequences of prior decisions made, but that’s not the style of U.S. leadership, unfortunately. Shifting blame to someone else is the name of the game and the politicians continue to play America.

In the ad, the President called attention to a phenomenon known as “shrinkflation.” It refers to manufacturers changing their products while trying to maintain relatively stable prices on the shelves rather than just raising prices, which would be too obvious to consumers. Some approaches include cutting down the amount of food contained in the same package, producing the product with cheaper ingredients, or cutting corners in other ways that consumers may not immediately notice—all while keeping prices the same or only slightly higher. Another term, “skimpflation,” refers to the method of keeping the volume or weight of a product the same, but changing the proportions of different ingredients contained within, such as using a starchy filler over protein in a canned soup. 

As he squinted into the camera, Biden spoke casually to the audience, saying:

It’s Super Bowl Sunday – if you’re anything like me, you like to be surrounded by a snack or two while watching the big game. You know, when buying snacks for the game, you might’ve noticed one thing, sports drinks bottles are smaller, bag of chips has fewer chips, but they’re still charging us just as much. As an ice cream lover, what makes me the most angry is that ice cream cartons have actually shrunk in size, but not in price. I’ve had enough of what they call “shrinkflation.” It’s a rip-off. Some companies are trying to pull a fast one by shrinking their products little by little and hoping you won’t notice. Give me a break. The American public is tired of getting played for suckers. I’m calling on companies to put a stop to this. Let’s make sure businesses do the right thing now.

Biden made the classic politician’s play in calling out shrinkflation. Of course, it’s the immoral greed of the snack companies that is to blame for you paying more for less! It’s not right that big businesses are pulling the wool over your eyes as you shop for tasty treats! On game day no less!

Senator Elizabeth Warren made the same cry of outrage a couple of weeks ago on X when she said:

Fewer Doritos in your bag.

Fewer Oreos in your box.

Less toilet paper on your roll.

You aren’t imagining it—big corporations really are making you pay the same amount (sometimes more) for less. It’s called “shrinkflation,” and we’ve got to crack down on it.

Warren reiterates the adolescent notion that consumers have a right to the myriad of products on the shelves and nobody can “make them” pay more for less. No one is forcing consumers to buy Doritos. But it's the government that does force you to act against your will. It forces people to pay taxes on special interests and foreign interventions on top of juicing the money supply to service its out-of-control spending.

In a twisted hint to the prudent viewer, the President even wore a small pin in the ad with the American and Ukranian flags joined together—a nod to the many rounds of spending packages that the government has approved for the war in Eastern Europe. That is why Americans are losing the purchasing power of their money. That is the real root of so-called ‘shrinkflation.’

If the producers of snacks and household items that everyday Americans buy simply raised prices on stocked goods, it would likely hurt the current administration’s image. By going the “shrinkflation” route, companies are actually masking the damage that has been done to the U.S. economy by Washington. The impact of gas prices on public sentiment toward the U.S. president is a well-known dynamic. 

Businesses would prefer to keep prices the same for a given quantity and quality of their products so that consumers continue to buy from them so that they can continue to make a profit and stay in business. If they can’t make it work, they go out of business, the product disappears from shelves, and the jobs go away.

In a free market, prices should fall as businesses and entrepreneurs sharpen efficiencies and provide better products. When the state spends money through debt, the central bank increasingly resorts to counterfeiting by creating new money to pay for it. A recent Congressional Budget Office projection estimates that U.S. debt will reach $54 trillion in the next decade. Under such conditions, everyone—including businesses—must adapt to the falling value in the currency and it will become increasingly difficult to do so.

Ironically, the president correctly stated that “the American public is tired of getting played for suckers.” But the real immoral greed is that of the political class and Biden was there to run interference for it on Superbowl Sunday.

Bloomberg reports that Treasury Secretary Janet Yellen’s pick for a dream date lunch would be none other than John Maynard Keynes, who Bloomie reporter Christopher Condon describes as “the founding father of modern macroeconomics.” I thought John Law held that title. 

This pronouncement happened during a speed round of questions in Detroit while chatting with Michigan Governor Gretchen Whitmer. “I would choose John Maynard Keynes,” said Yellen. Keynes “changed the way all of us understand business cycles, public policy and financial markets.”

Murray Rothbard referred to Keynes in his History of Economic Thought class class as simply “Maynard.” In his Forward to Henry Hazlitt’s The Failure Of The ‘New Economics’, What Yellen reveres so much, Rothbard called a “Keynesian holocaust” in his Forward to Henry Hazlitt’s The Failure Of The ‘New Economics’. Yes, there's been bubbles, busts and inflation ever since. About Keynes, the man, Yellen’s dream date, Rothbard wrote, 

John Maynard Keynes, the man — his character, his writings, and his actions throughout life — was composed of three guiding and interacting elements. The first was his overweening egotism, which assured him that he could handle all intellectual problems quickly and accurately and led him to scorn any general principles that might curb his unbridled ego. The second was his strong sense that he was born into, and destined to be a leader of, Great Britain’s ruling elite. Both of these traits led Keynes to deal with people as well as nations from a self-perceived position of power and dominance. The third element was his deep hatred and contempt for the values and virtues of the bourgeoisie, for conventional morality, for savings and thrift , and for the basic institutions of family life.

There “is really a bipartisan understanding that he really hit deep insights into how economies work,” the Treasury chief said. Macroeconomics “as a distinct discipline began with Keynes’s masterpiece, The General Theory of Employment, Interest and Money, in 1936,” according to an International Monetary Fund note.

Rothbard in his Forward to Hazlitt’s critique of Keynesianism, wrote that Hazlitt “in this vitally important and desperately needed book throws down the challenge in a detailed, thoroughgoing refutation of the General Theory.” 

The General Theory was anything but a masterpiece. As Hazlitt explained,

Now though I have analyzed Keynes’s General Theory in the following pages theorem by theorem, chapter by chapter, and sometimes even sentence by sentence, to what to some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original. What is original in the book is not true; and what is true is not original. In fact, as we shall find, even much that is fallacious in the book is not original, but can be found in a score of previous writers.

During her gushing the Treasury Secretary noted that President Richard Nixon famously said in the 1970s “we’re all Keynesians now.”

Not all of us.

Pre-order the 4th Expanded Edition of Early Speculative Bubbles & Increases In The Supply of Money today. 

This video is an  English translation of Jesús Huerta de Soto's comments about President Javier Milei's address at Davos. This lecture was recorded during a session of the Master of Austrian Economics program at King Juan Carlos University:

For at least twenty years, the term "illegal alien" (or similar variations like "illegal immigrant") has been the subject of a contentious debate between pro-immigation and anti-immigration activists. Over the past decade, the Left has increasingly managed to limit the use of the term "illegal" to refer to any migrant. For example, until fairly recently, the Associated Press was still using the term "illegal immigrant," but as Foreign Policy magazine notes, under "pressure from immigration advocates, the Associated Press update[d] its stylebook" to change the term in 2013. Other media organizations have followed suit. Nonetheless, some government organizations occasionally continued to use the term "illegal alien" until 2021 when the Biden administration instructed the US executive branch to abandon the term "alien" altogether. "Illegal alien" is on its last leg.

The disagreement between Left and Right is largely over how to portray the immigrants themselves. The Left seeks to banish the term "illegal" so as to normalize undocumented migration and increase it in general. The Right, on the other hand, seeks to portray undocumented immigration as nefarious in order to further restrict overall immigration. 

For the sake of argument, however, let's say that we are agnostic on the matter of whether immigration should be increased or decreased. 

So let's ask: is the term "illegal immigrant" useful? The answer is: "it depends." Moreover, the designations of legal and illegal do little to tell us about the productivity of a migrant, or the demands he or she makes of the welfare state. In practice, legal immigrants have greater access to public funds than illegal immigrants, and it shows. 

How Bureaucrats Arbitrarily Decide What is Legal

The core of the problem lies in the fact that the designations of legal and illegal are not rooted in market transactions or voluntary exchange. Rather, the designations rely primarily on arbitrary bureaucratic criteria. For example: Congress has declared that if immigrant X has filled out the appropriate approved paperwork and has been given the green light by some federal agent, he is thus legal. Congress has also declared that if immigrant Y's paperwork does not receive the necessary rubber stamp from some bureaucrat, he is not legal. In this latter case, private employers are not legally permitted to hire the worker regardless of the worker's skills or the employers needs. Even for those specific "illegal" immigrants who have been offered jobs and lodging in the private sector—and can pay their own bills—the lack of proper government paperwork precludes these potential workers from peaceful exchanges with employers and others.  

We can see the arbitrariness of this sort of thing in a number of other examples. 

One example is the minimum wage: the government has declared that an employer cannot enter into a contract with employees at a wage level under the minimum wage. Thus, employment at or above the minimum wage is "legal." Employment below that level is "illegal." The contract remains illegal even if both parties are willing. Thus, the line between legal and illegal in this case is totally arbitrary and based on mothing more than the central-planning impulses of federal lawmakers. 

We see a similar phenomenon in relation to drugs. At the federal level, Viagra is legal because Congress says so, and marijuana is illegal because Congress has decreed it. There’s certainly no objective standard determining why the federal government grants private citizens the freedom to choose one but not the other. There’s no clear difference between the two in terms of long-term health risks. In fact, Viagra is likely a bigger risk than marijuana. 

A final example can be found in the idea in the lockdowns that governments imposed on businesses and households during the covid panics of 2020. At that time, the government arbitrarily defined some businesses as essential while other businesses were deemed non-essential. In some jurisdictions, those workers deemed non-essential were even told to not leave their homes or risk prosecution. Thus, there were "legal" businesses and "illegal" businesses. This distinction was purely arbitrary, of course, and reflected nothing more than the biases of politicians and health officials. 

In all four examples, the only real difference at work here is that a legislator or bureaucrat has decided that one drug/immigrant/employee/business fits a government-defined standard while another drug/immigrant/employee/business does not. 

Nonetheless, the distinction between legal and illegal is relevant in the context of law and public policy. Obviously, when an employee and an employer agree the employer will pay the employee less than the government's minimum wage, that can bring serious penalties. The same is true of using illegal drugs or hiring illegal immigrants. In all cases, the state has the de facto power to prosecute and sanction those who run afoul of the regime's arbitrary decrees. The regime violates property rights when it prosecutes people for these peaceful activities, of course, but states have never much troubled themselves about violating property rights. 

The use of the terms "legal" and "illegal" in these contexts also serve a rhetorical purpose. They tell us that government policymakers like the legal thing, and don't like the illegal thing. Skeptics of the state's "wisdom," however, have long understood that governments have never been reliable arbiters on what is good, moral, proper, or healthy. The legal status of an activity or person or product has never been a definitive criterion on which to base an opinion about much of anything. 

Using Legal Status to Expand the Welfare State

The arbitrariness of the legal/illegal distinction in immigration cuts both ways.

It's true that the designation of "illegal" can be used to reduce immigration by cutting off access to the legal marketplace for immigrants without the proper government approval.  On the other hand, the designation of "legal" can be used to expand taxpayer-funded subsidies. Contrary to the widely-held belief that legal immigrants are productive and illegal immigrants are unproductive, the reality is that legal immigration tends to be a larger overall drain on taxpayer resources that illegal immigrants. This is partly because there are more legal immigrants than illegal. But it's also true because most legal immigrants have more access to the American welfare state than do illegal immigrants. Moreover, many legal immigrants avail themselves of the many generous American safety-net programs.  

Indeed, a label of "legal" can often be applied to unproductive immigrants who take advantage of welfare programs and who may not even work for a living. Measures of legal immigrant use of welfare programs show robust levels of participation in these programs. The best that can be said of legal immigrants (on average) in this regard is that (according to some conservative measures) they collect welfare at slightly lower rates than the native population.  But this should not be surprising. After all, after a mere five years of residence in the United States, most immigrants with legal permanent resident status have access to the full array of welfare programs including food stamps, Medicaid, CHIP, cash assistance, and more. Some US states (California, for example) offer taxpayer-funded benefits to immigrants without the five-year bar, including Medicaid and food stamps. 

Consequently, the extension of the status of "legal" immigrant is really just an indication that the immigration is more likely to collect taxpayer-funded benefits of one type or another. Yes, illegal immigrants are eligible for some social benefits such as emergency medical care and taxpayer funded childcare.  Legal immigrants, however, are eligible for far more in the way of social benefits. A permanent resident—once declared "legal"—cannot be deported for being willfully unemployed or collecting social benefits.  In other words, an immigrant can obtain and maintain legal status even if he or she is unemployed, on welfare, and a net drain on taxpayers. Note that such a person can be "legal" while self-reliant immigrants with jobs and private economic support can still be arbitrarily labeled "illegal." 

Moreover, there are additional loopholes that allow the regime to declare many immigrants—many of them initially labeled "illegal"—as eligible for greater and more immediate access to taxpayer funded benefits. For example, "[r]efugees, people granted asylum or withholding of deportation/removal, Cuban/Haitian entrants, certain Amerasian immigrants" and other specific groups are exempted from the waiting period.  By definition, everyone in these groups is a legal immigrant. Yet, it is not at all necessarily the case that legal immigration results in fewer demands on the taxpayers than illegal immigrants. 

[Read More: "How the US Regime Subsidizes Immigration—both Legal and Illegal" by Ryan McMaken]

So, is the term "illegal alien" useful? It's not very useful beyond simply determining the state of that migrant's paperwork and the migrant's relationship with government authorities. When it comes to the private sector and the net economic contribution that person makes, the terminology doesn't tell us much about any specific case. 

A more fruitful question may be to ask how much taxpayers ought to be called upon to fund foreign nationals, legal or otherwise.1 By limiting access to the welfare state for all foreign nationals—not just the "illegal" ones, but also legal permanent residents—immigration policy would move toward a less arbitrary standard that is not quite so easily manipulated by government policymakers. 

• 1. There are many definitions of "foreign national" in use, and many organizations claim that legal permanent residents are not foreign nationals. Common defintions of "foreign national," include "a person or organization who is not a citizen of the United States, and who is a citizen of a foreign country" or "A non-naturalized citizen of a country." The US Department of Homeland Security defines legal permanent residents as "foreign nationals who have been granted the right to reside permanently in the United States." According to the State Department, a "national" is "a person owing permanent allegiance to a state." WIt is reasonable, therefore, to conclude that a colloquial understanding of the term "foreign national" strongly suggests all non-citizens are best classified as foreign nationals.There are presently approximately 23 million foreign nationals living in the United States. 

Stock markets tumbled this morning when the January Consumer Price Index (CPI) data came in hotter than expected. If you are wondering what the connection could be, the answer is that higher-than-expected price inflation means a longer-than-expected wait for the Fed to cut its interest rate target. It’s clear that financial markets are addicted to artificially low interest rates when any hint of a delay in rate cuts pushes stock prices off a ledge. Even news that most would consider good, like quarterly GDP growth and official unemployment rate data staying below 4%, can sour markets because of their implications for monetary policy.

The CPI release shows that “Team Transitory” ran its victory laps before the race was over. Paul Krugman has been declaring victory for over a year, with headlines like these:

• Goodbye, Inflation: The latest numbers show that it’s yesterday’s problem.
• The Soft Landing Is Happening: Why the new inflation numbers contain some very good news.
• Why Did So Many Economists Get Disinflation Wrong?
• Inflation Is Down, Disinflation Denial Is Soaring
• None Dare Call It Victory: Has the war on inflation already been won?
• How (Many) Economists Missed the Big Disinflation: The fault lay not in the models, but in themselves
• Everything’s Coming Up Soft Landing: Inflation seems to be fading without a recession
• Wonking Out: From Stagflation to ‘Immaculate Disinflation’

Meanwhile, monthly CPI data hasn’t reached the Fed’s 2 percent target.

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Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL] and Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average [CPILFESL], retrieved from FRED, Federal Reserve Bank of St. Louis.

Annualized monthly rates over the past few months also show that Krugman’s “Immaculate Disinflation” isn’t materializing.

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Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL] and Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average [CPILFESL], retrieved from FRED, Federal Reserve Bank of St. Louis.

Krugman was widely ridiculed for using tortured price inflation statistics that remove food, energy, shelter, and used cars to help him make the claim that the economic picture is better than surveys of economic sentiment suggest.

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This prompted me to construct the “Anti-Krugman Price Index,” which only includes the items he excludes. When we compare the AKPI to average earnings, we see why he wants to ignore these components.

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Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Food in U.S. City Average [CPIUFDSL], Consumer Price Index for All Urban Consumers: Energy in U.S. City Average [CPIENGSL], Consumer Price Index for All Urban Consumers: Shelter in U.S. City Average [CUSR0000SAH1], Consumer Price Index for All Urban Consumers: Used Cars and Trucks in U.S. City Average [CUSR0000SETA02], and Average Weekly Earnings of All Employees, Total Private [CES0500000011], retrieved from FRED, Federal Reserve Bank of St. Louis.

The prices of these items, as measured by their corresponding CPI components, have risen twice as much as average earnings since 2020.

The moral of the story is that court intellectuals will weave a narrative that supports the State, using whatever (manipulated) statistics will help them tell their tales. Krugman especially wants to tell the story that under Biden’s lucid leadership, the economy is doing great and the government (with help from the Fed) can simply turn the dials to steer the economy toward stability and growth without any negative repercussions.

Of course, this is a farce. Printing money and manipulating interest rates have many consequences, and the full costs are yet to be realized.

The 1920s in America, as well as much of the West, were characterized by a feeling that anything was possible. In the Roaring ‘20s Americans no longer worried about war, and they had seen the post-war depression of 1920-1921 vanish quickly, thanks to a paucity of government meddling. The Federal Reserve was managing the money supply in what eventually became a fatal disaster but was heralded at the time, and inventions flowed forth from a great release of creative energy that had been pent-up during the war.

With low unemployment Americans were prosperous and mobile as mass-production made cars affordable for the middle class. Women had won the right to vote and were asserting their independence in culture and work, and alcoholic beverages were prohibited giving rise to massive defiance in the form of organized crime and speakeasies. In dance, the fast-kicking Charleston became wildly popular. 

The 1920s was also the Jazz Age. Originating from African American musicians in New Orleans, “jazz” had no agreed-upon definition, though improvisation became one of its defining elements.

As one writer described it,

Jazz represented the Roaring Twenties’ spirit: energetic, modern, and slightly rebellious. Musicians like Louis Armstrong, Duke Ellington, and Bessie Smith became national icons, pushing musical boundaries with improvisation and new rhythms. Jazz clubs, especially in cities like New York and Chicago, became cultural hubs, drawing diverse audiences and facilitating the mingling of different racial and social groups.

The popularity of jazz rendered it an American signature, but the reigning classical orthodoxy considered it low brow. Americans, therefore, were low brow.

This bothered some jazz musicians, and one of them decided to shake-up that prejudice.

Paul Whiteman’s concert

On Friday, January 4, 1924 Ira Gershwin sat reading the morning’s New York Tribune while his younger brother George and a friend were nearby playing a game of pool. Ira noticed an item in the music section headlined “Committee Will Decide ‘What is American Music?’.” As he read on he learned that jazz bandleader Paul Whiteman was planning a concert for Lincoln’s Birthday, February 12 — five weeks away. 

Whiteman’s “An Experiment in Modern Music,” he read, would be judged by four iconic musicians of the day: Sergei Rachmaninoff, Jascha Heifetz, Efrem Zimbalist, and Elma Gluck. How they would know if the “experiment” could be called American music was likely a mystery even to them.

It was the brief article’s last paragraph that made Ira straighten up and take notice:

George Gershwin is at work on a jazz concerto, Irving Berlin is writing a syncopated tone poem and Victor Herbert is working on an American suite.

His brother is at work on a jazz concerto?! In the upcoming days George would be occupied with a musical comedy he had written which was about to open on Broadway, Sweet Little Devil. Where did Whiteman get the idea Gershwin was writing a concerto?

It turned out George had forgotten about his promise to Whiteman during talks back in December. He called the band leader early the next morning to tell him it would be impossible to write a concerto in the time remaining. But Whiteman somehow talked him into it, though Gershwin promised not a concerto but a freer piece such as a rhapsody. Whiteman assured him he only needed to write the piano score; his trusted in-house arranger Ferde Grofé would do the orchestration.

After he had sold his first song in 1916 at age 17 for 50 cents, Gershwin worked as a song plugger and producer of piano rolls for a while. His first commercial success as a composer was the ragtime Rialto Ripples in 1917 followed by a bigger hit Swanee in 1919. With songwriter William Daly he began collaborating on Broadway musicals beginning in 1920. 

Gershwin had been in the habit of jotting down song ideas in what he called his Tune Books. Now, at age 25, he had collected an abundance of musical phrases, and he turned to these to get him started on what would eventually become a sure bet to pack concert halls here and abroad for the next 100 years — Rhapsody in Blue.

Manuscript evidence suggests he only worked on Rhapsody a total of 10 days from January 7, 1924, to the end of rehearsals in February.

Last minute anxiety

Carnegie Hall had been booked for February 12, 1924, and surrounding dates, so Whiteman settled for the less-capacious Aeolian Hall. 

Whiteman was taking a risk for the concert he had planned. On the day of the event, scheduled to begin at 2:45 p.m., he slipped out of the hall to check on the box office, and in his own words:

There I gazed upon a picture that should have imparted new vigor to my wilting confidence. It was snowing, but men and women were fighting to get into the door. . .

Such was the state of my mind by this time that I wondered if I had come to the right entrance. And then I saw Victor Herbert going in. It was the right entrance. . . The next day the ticket office people said they could have sold out the house ten times over.

All very encouraging but by late afternoon Whiteman’s experiment was fading. Applause had been polite for the performances up to that point. Slowly, people began to head for the exits.

Then Gershwin, “a lank and dark young man,” stepped quietly on stage. Settled at the piano he nodded to Whiteman, who gestured to Ross Gorman whose clarinet wail electrified the audience. The hall’s deserters rushed back in.

Later, critics said Rhapsody was flawed, it was too heavy on the piano part and its form was not classically proportioned. But when the final ffz (very loud) chord was struck by Gershwin and orchestra, the audience exploded with applause. According to Whiteman he and the young composer took five curtain calls.

The question “What is American music?” never got answered. 

Today, a who’s who of concert pianists have recorded the Rhapsody, many available on YouTube. 

In late January of this year pianist-composer Ethan Iverson wrote a piece for the NY Times, saying

Thanks to the centennial, you’re likely to come across a lot of “Rhapsody” performances this year — not that the anniversary makes much difference, because that’s always the case.

As conductor Michael Tilson Thomas once said, Gershwin’s music has that elusive quality of making people fall in love with it.

Happy centennial, Rhapsody in Blue!

A few days ago, Ginny Garner sent me a message. Ginny wrote:

“Lew,

We know Biden is not a man of peace. This week Trump did not tell the Nevada Caucus rally audience he opposed sending billions for the war in Ukraine, instead he said European nations should contribute more. And, after a long pause, RFK Jr. when questioned by comedian/podcaster Dave Smith said he didn’t know if he was concerned about Israel’s influence over American foreign policy. So much for RFK Jr. being the antiwar candidate. It looks like anyone wanting to vote for an authentic pro-peace presidential candidate is going to have to write in the name of Ron Paul.”

Dr. Ron Paul is our greatest living American, and he is sound on all issues. None of the other candidates is sound on all issues. You might object, “It would be great if Ron would run—but he won’t! The answer to that is simple. We have to draft him!

I spoke about being sound on all issues, and the most important of these issues is the one Ginny mentioned—being anti-war. Ron has been clear that the neocon gang who control brain-dead Biden have always been trying to get us into war. Here is what he said about them last December:

“Over the weekend Defense Secretary Lloyd Austin explained to the American people what’s really wrong with US foreign policy. Some might find his conclusions surprising.

The US standing in the world is damaged not because we spent 20 years fighting an Afghan government that had nothing to do with the attacks on 9/11. The problem has nothing to do with neocon lies about Iraq’s WMDs that led untold civilian deaths in another failed “democratization” mission. It’s not because over the past nearly two years Washington has taken more than $150 billion from the American people to fight a proxy war with Russia through Ukraine.

It’s not the military-industrial complex or its massive lobbying power that extends throughout Congress, the think tanks, and the media.

Speaking at the Reagan National Defense Forum in California’s Simi Valley, Austin finally explained the real danger to the US global military empire.

It’s us.

According to Secretary Austin, non-interventionists who advocate “an American retreat from responsibility” are the ones destabilizing the world, not endless neocon wars.

Austin said the US must continue to play the role of global military hegemon – policeman of the world – because “the world will only become more dangerous if tyrants and terrorists believe that they can get away with wholesale aggression and mass slaughter.”

How’s that for reason and logic? Austin and the interventionist elites have fact-checked 30 years of foreign policy failures and concluded, “well it would have been far worse if the non-interventionists were in charge.”

Read the full article at LewRockwell.com.

The amount of commercial real estate loans coming due in 2024 has jumped to $929 billion according to the Mortgage Bankers Association. Previously the amount had been estimated to be $659 billion, with the 40% increase “attributed to loan extensions and other delays rather than new transactions,” according to Bloomberg’s John Gittelesohn.

Of the nearly $1 trillion in commercial-property debt maturing this year, banks hold $441 billion of it, the mortgage bankers group reported. 

With commercial-property prices down 21% from the early 2022 peak and office prices falling 35%, an estimated $85.8 billion of commercial property debt was considered distressed at the end of 2023, according to MSCI Real Assets, who believes there is an additional $234.6 billion of potential distress.

Reuters reports “investors are combing through portfolios of regional banks, as small banks account for nearly 70% of all commercial real estate (CRE) loans outstanding, according to research from Apollo.”“As long as interest rates stay high, it's hard for the banks to avoid problems with CRE loans," said short-seller William C. Martin of Raging Capital Ventures told Reuters, who decided to place a bet against NYCB after the bank's disastrous Jan. 30 earnings release which detailed real estate pain and led him to believe that shares could sink further on more real estate losses.

"The regional banks ... (are) doubly more exposed to rates," said Dan Zwirn, co-founder and CEO of distressed debt investment firm Arena Investors, who is avoiding real estate for the next year or two, citing in part higher risk of default.

Nearly 1,900 banks with assets less than $100 billion had CRE loans outstanding greater than 300% of equity, according to Fitch.

Credit rating company Fitch, in a detailed report in December, said if commercial real estate “prices decline by approximately 40% on average, losses in CRE portfolios could result in the failure of a moderate number of predominantly smaller banks,” Reuters reported. (emphasis added)

NYCB said on Wednesday options could include loan sales and that the bank "will be razor-focused on reducing our CRE concentration."

But loan sales are unlikely with properties now valued 50%-75% below their valuations at the time loans were made. No one will buy loans at par where the underlying collateral has fallen by 25%-50%. Selling loans at a loss will generate capital-eroding losses these banks can’t afford. For the same reason, borrowers seeking an extension for their undercollateralized loan will be asked to pay down the principal balance with cash they likely don’t have. "Loans that were done over the last five to seven years, a lot of those are challenged now," said Ran Eliasaf, founder and managing partner of real estate investment firm Northwind Group, who is investing in the New York multifamily market.

Real Estate investor Ken McElroy told Jeff Snider that if this real estate downturn is a baseball game it is in the 2nd or 3rd inning.

Watch this space. 

Pre-order the 4th Expanded Edition of Early Speculative Bubbles & Increases In The Supply of Money today. 

There has been much written and said about Tucker Carlson’s interview with Russian President Vladimir Putin last week. As of this writing the video on Twitter alone has been viewed nearly 200 million times, making it likely the most-viewed news event in history.

Many millions of viewers who may not have had access to the other side of the story were informed that the Russia/Ukraine military conflict did not begin in 2022, as the mainstream media continuously reports, but in fact began eight years earlier with a US-backed coup in Ukraine. The US media does not report this because they don’t want Americans to begin questioning our interventionist foreign policy. They don’t want Americans to see that our government meddling in the affairs of other countries – whether by “color revolution,” sanctions, or bombs – has real and deadly consequences to those on the receiving end of our foreign policy.

To me, however, perhaps the most interesting aspect of the Tucker Carlson interview with Putin was the US mainstream media reaction. As Putin himself said during the interview, “in the world of propaganda, it’s very difficult to defeat the United States.” Even a casual look at the US mainstream media’s reporting before and after the interview would show how correct he is about that. In the days and weeks before the interview, the US media was filled with stories about how horrible it was that Tucker Carlson was interviewing the Russian president. There was the danger, they all said, that Putin might spread “disinformation.”

That Putin might say something to put his country in a better light was, they were saying, reason enough to not interview him. With that logic, why have journalism at all? Everyone interviewed by journalists – certainly every world leader – will attempt to paint a rosy picture. The job of a journalist in a free society should be to do the reporting and let the people decide. But somehow that has been lost. These days the mainstream media tells you what to think and you better not dispute it or you will be cancelled!

What the US mainstream media was really worried about was that the “other side of the story” might start to ring true with the public. So they attacked the messenger.

The CNN reporting on Tucker’s interview pretty much sums up the reaction across the board of the US mainstream media. Their headline read, “Tucker Carlson is in Russia to interview Putin. He’s already doing the bidding of the Kremlin.”

By merely doing what used to be called “journalism” – interviewing and reporting on people and events, whether good or bad – one is “doing the bidding” of the subject of the interview or report?

No wonder fellow journalist Julian Assange has been locked away in a gulag for so many years. He dared to assume that in a free society, being a journalist means reporting the good, the bad, and the ugly even if it puts those in power in a bad light.

In the end, the massive success of the Tucker Carlson interview with Vladimir Putin demonstrates once and for all that the American people are sick to death of their mainstream media propagandists and liars. They are looking not for government narratives, but for truth. That’s the really good news about this interview.

[From the  September-October 2023 issue of The Austrian.]

David Jarrett has been a longtime supporter of the Mises Institute and attended Mises’s NYU lectures in 1965, when they were held in Nicholas Hall. The building no longer stands, but the photos that David took one evening with his Leica M3 camera and APO-Summicron-M 90mm f/2 ASPH telephoto lens are still around. The negatives have been carefully guarded for decades, and now, David has generously donated them to the Mises Institute: 

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[This article was originally published on LewRockwell.com in 2003.]

If gold is to be re-monetized, then this must mean that it has been de-monetized. But isn’t gold money?

No, gold is not money. It has not been money for Europeans since 1914, when the commercial banks stole it from depositors at the outbreak of World War I, and central banks then stole it from commercial banks before the war was over. Gold has not been money for Americans since 1933, when Roosevelt unilaterally by executive order stole it from the public.

Gold is high-powered money for central bankers, who settle their banks’ accounts in gold. But this is so far removed from the decisions of consumers that I can safely say that gold is not money.

The question is: Will it ever again become money?

This is the most important of all monetary questions.

THE MARKETABILITY OF GOLD

Money is the most marketable economy. Gold is therefore not money. You have to buy gold from a specialized broker. There are so few gold brokers any more that they are all known to each other. Local coin stores don’t do much business in bullion gold coins such as the American eagle or Canadian maple leaf. The large wholesale firms like Mocatta don’t deal with the public. There are so few full-time bullion coin dealers that you could have a convention of them in a Motel 6 conference room. (When was the last time you were in a Motel 6 conference room?)

But . . . it costs $39 to rent a Motel 6 room. That tells us something. It’s not $6 a room any longer. Inflation has done its work.

Money is liquid. Liquidity means that you can exchange money for goods and services directly without the following costs:

• Advertising
• Discounting
• Waiting

There is a price spread between what you can sell a gold coin for (in money) and what you buy a gold coin for (in money). Gold coins therefore are not money.

I realize that old-time gold bugs go around saying “gold is the only true money” and similar slogans. These slogans reflect a lack of understanding of either gold or money. They are comforting slogans, no doubt, for someone who bought gold coins at twice the price that they command today, and held them for a quarter of a century at no interest while all other prices doubled or tripled. If he had instead made down payments on rental houses, he would be a whole lot richer. But the fact is, gold is not only not the only true money, it is not money at all. When you can walk into Wal-Mart and buy whatever you want with a gold coin or gold-denominated debit card, then gold will be money. Not until then.

To tell a gold bug this is to strike at his core beliefs. But his core beliefs are based on a lack of understanding of economics.

Money is the most marketable commodity. Gold is not the most marketable commodity. Given the lack of retail outlets where you can buy and sell gold, it is not even remotely money. Unless you are a central banker, gold is not money for you.

THE DE-MONETIZATION OF GOLD

Gold is a valuable commodity. It was originally valuable for its physical properties: its glorious shine, its imperviousness to decay, its limited supply (high cost of mining), its malleability, its divisibility. In most religions, gold is used to represent deity or permanent truth. When something is “as good as gold,” it’s valuable.

Because of these properties, gold long ago became widely used in economic exchange. When the city-state of Lydia started issuing gold coins over five centuries before the birth of Jesus, gold became the most recognizable form of money in the classical world. Gold had been monetized long before this, as all historical records indicate, but the convenience of the coins amplified what had already been the case. This increased the demand for gold.

Gold was no longer money in Western Europe after the fall of Rome in the fifth century. In March of 2003, I visited the British museum. The museum has an exhibit of an early medieval grave-ship, where a Saxon seafaring king had been buried. The wood is gone, but metal implements remain. There was a small stash of gold coins. This is the Sutton Hoo exhibit. The burial’s date is estimated at 625. By that time, gold coins were rare in the West. In another museum exhibit of gold coins, you can see that from about 625 until the introduction of gold coins in Florence in 1252, there is only one gold coin.

Gold coins did circulate for the entire period in the Eastern Roman Empire (Byzantium), from 325 (Constantinople) to the fall of Byzantium to the Turks (1453). But there was little trade between the two halves of the old Roman Empire until late in the Middle Ages. The low division of labor in the West made barter far more common, and silver and bronze coins were the media of exchange.

It was the rise of the modern world, which was marked by an increasing division of labor, that brought gold coins back into circulation. Fractional reserve banking and gold coins developed side by side. Fractional reserve banking is why the boom-bust cycle has been with us, with credit money stimulating economic growth (an increase in the division of labor), and bank runs shrinking the money supply and contracting the economy (a decrease in the division of labor).

There has been a 500-year war in the West between gold coins and bank-issued credit money.

THE WAR

Bankers want to make money on money that their institutions create. They use the promise of redemption-on-demand in gold or silver as the lure by which they trick depositors into believing in something for nothing, i.e., the possibility of redemption on demand of money that has been loaned out at interest. The public believes this numerical impossibility, but then, one fine day, too many depositors present their IOU’s for gold or silver to the bank. A bank run begins, the lie is exposed, and the bank goes bankrupt (bank + rupture). The depositors lose their money. They get nothing for something, which is always the small-print inscription on the other side of something for nothing.

The bankers hate gold as money. Gold as money acts as a restraint on their profits, which are derived from creating money “out of thin air” and lending it at interest. Gold as money acts as a barrier to the expansion of credit money. The public initially does not trust the bankers or their money apart from the right of redemption on demand. Depositors initially insist on IOU’s for gold coins. So, the bankers partially submit to gold, but only grudgingly.

To keep from facing their day of judgment — redemption day, when the public presents its IOU’s and demands payment — fractional reserve bankers call on the government. They persuade the government to create a bankers’ monopoly, called a central bank, which stands ready to intervene and lend newly created fiat money to any commercial bank inside the favored cartel that gets into trouble with its depositors. By reducing the risk of local bank failures, the central bank extends the public’s acceptance of a system of unbacked IOU’s, called “an elastic currency” when members of the banking cartel create it, and called “counterfeiting” when non-members of the cartel create it.

Then why do central bankers use gold to settle their own interbank accounts? Because central bankers don’t trust each other — the same reason why the public prior to 1914 used gold coins and IOU’s to gold coins. The central bankers don’t want to get paid off in depreciating money. At the same time, they do want to retain the option of paying off the public in depreciating money.

It’s not that they want depreciating money. They want economic growth, lots of borrowers, and lots of opportunities to lend newly created money at interest. The problem is, they are never able to maintain the economic boom, which was fostered by credit money, without more injections of credit money. The same holds true for additional profits from lending. If a bank has additional money to lend and a booming economy filled with would-be borrowers, that’s great for the bankers. But the result has always been either a deflationary depression when the credit system collapses, or else price inflation, which overcomes the collapse at the expense of reliable money. The result in both cases is lost profits.

Bankers want the fruits of a gold coin standard: predictably stable or slowly falling prices, a growing economy, international trade, and a currency worth something when they retire. But they don’t want the roots of a gold coin standard: lending limited by deposits, a legal link between the time period of the loan and the time period when the depositor cannot redeem his deposit, and profits arising solely from matching lenders (depositors) with borrowers. Bankers sacrifice the roots for the profitable pursuit of the fruits. The results: boom-bust business cycles, bankruptcies, depreciating currencies, shattered dreams of retirement, and political revolutions.

In the twentieth century, fractional reserve bankers won the war of economic ideas: Keynesianism, monetarism, and supply-side economics. They also won the political wars. They succeeded in getting all governments to de-monetize gold, thereby creating unbreakable banking cartels (but not unbreakable currencies). The result was the decline in purchasing power of the dollar by 94%, 1913—2000. Verify this here:

Verify this with the Inflation Calculator, posted on the U.S. government’s Bureau of Labor Statistics Web site.

$1,000 in 1913 = $17,300 in 2000. 1 divided by 17 = .06, or 6%.100% minus 6% = 94%.

In other nations, the depreciation was even worse: World War I and its post-war inflations, plus World War II and its post-war inflations, when added to the Communist revolutions, destroyed entire currency systems, sometimes more than once.

WHERE IS THE GOLD?

Official statistics indicate that most of the world’s gold is stored in the vaults of central banks. The bulk of the rest of it is in women’s dowries in India, or on ring fingers of Westerners, or in jewelry of affluent women. But, as I have argued previously, central banks have in fact been transferring their gold to private owners by way of the “bullion banks,” which have borrowed gold at 1% per annum, sold it to the public, and invested the money at high interest rates.

If my thesis is correct, then gold has been de-monetized almost completely. It is no longer serving as an ultimate restriction on central bank policies. The central bankers are now trading paper gold — promises to pay gold — that have been issued by private bullion banks, which cannot afford to buy the gold back to re-pay the central banks. The bullion bankers have done to the central bankers what the fractional reserve bankers did to their depositors, and the central bankers did to the commercial banks. They have gotten their hands on gold in exchange for written promises to repay this gold — promises that cannot possibly be fulfilled — and have made oodles of money by lending the money derived from the sale of the gold.

This means two things: this gold has been repatriated to the private markets (yea!), and gold in general is now almost fully de-monetized (boo!). Men have put bracelets and necklaces on their daughters (India) and wives (the West), but consumers do not have gold coins in their individual repositories, especially their pockets.

This means that what had been the highest-value use for gold for 2,600 years — gold as money — has disappeared except among central bankers, and even then increasingly merely IOU’s to gold issued by bullion banks. There has been a huge, historically unprecedented reduction in demand for gold since 1914. This should be obvious to anyone. Demand for gold today is for industrial and ornamental uses, not monetary uses. Yet I am just about the only person within the camp of the gold bugs who is willing to admit this in print.

IS THIS SITUATION PERMANENT?

Nothing is permanent except death, taxes, and the lies of politicians, but in the West, the de-monetization of gold appears to be as permanent as the West. The West has bet its future on fractional reserve banking. This is additional evidence that the West is doomed. It has placed the extension of the division of labor into the hands of the bankers’ cartel.

Faculty members in Western universities are agreed on few things, but one universally shared assumption is that gold should not be money. In business schools and economics departments, in political science department and history departments, the professors are agreed: gold is a relic, and probably a barbarous relic.

But then there is Asia.

In Asia, the people are still barbarians. This means that they don’t trust their governments because they know the truth: governments cheat, lie, and steal. Government corruption is a way of life in heartland Asia. This is a tremendous advantage that Asians enjoy. The less educated the Asian, the more likely he is to distrust the government. He is partially immunized against trusting promises to pay that are issued by governments. This is why Chinese peasants still want silver coins and Indian peasant wives still have gold jewelry. All over the Asian mainland, paper money has universally depreciated. The division of labor has been thwarted.

In the Asian tiger nations, whose economies have been closely tied to the capitalist West, fractional reserve banking is accepted, and fiat currencies are trusted. These nations have experienced a loss of trust in gold, which is the other side of the debased coin of fractional reserve banking. The war is on in Asia.

China’s currency is government-controlled and highly inflationary. What is saving China from mass price inflation is the rapid spread of the division of labor through freeing the economy. Capitalism’s extension of the division of labor is paralleling the Bank of China’s extension of credit money. So far, capitalism has won the race. But the race is not a sprint; it’s a marathon. At some point, there will be a massive recession in China as a result of the monetary inflation that has been going on for two decades. The boom will turn into a bust. Then the Chinese may remember the truth that their great-grandparents knew: you cannot safely trust government money. Those Chinese who did trust government’s money in 1948 were destroyed economically by Chiang’s mass inflation and then wiped out politically and economically by Mao’s tyranny.

CONCLUSION

Gold is an inflation hedge. There has been inflation since 1980. But gold has not risen in price since 1980 for many reasons: the gold bubble of 1979, the continuing de-monetization of gold by central banks, the steady sell-off of gold by central banks, the central banks’ gold leasing programs (disguised sales), and dollar supremacy internationally. The third factor, dollar supremacy, is looking shaky.

Gold is not a deflation hedge whenever it is not monetized, and it has not been monetized for generations. But, in the midst of deflation, there is a possibility of the re-monetization of gold. I regard this as a distant possibility. During a breakdown in the payments system — cascading cross defaults, as Greenspan calls it — there is an outside possibility that gold will become used again in the monetary system. But for this change to take place, a massive breakdown is necessary, in order to overcome a century of anti-gold economic theories. There is no case for gold being made by Ph.D.-holding economists, politicians, pastors, and TV commentators. A return to gold as money in the West will take a cataclysm, which will impose enormously high costs on the public for not using gold as money, thereby pressuring consumers to adopt gold as money. In a cataclysm, the cost of moving from fiat money to gold would be accompanied by a horrendous reduction in the social division of labor — life-threatening, in my view. A collapse of the derivatives market could produce such a cataclysm. To say that it cannot happen is foolish, but very few people can afford to do much to prepare for such an event. I have. Maybe you have. But we are a minority. We are all dependent on the division of labor to sustain our lives, let alone our lifestyles.

In Asia, the costs of returning to gold as money are much lower. The division of labor is lower. There is less trust in government. Old ideas die hard. There is also increasing wealth, which will further the purchase of gold. But I think this will be gold as ornament and investment, not gold as money.

That’s why I do not expect to see gold as money in my lifetime. But I still recommend gold as an investment. This is because, when it comes to monetary inflation, the mamby-pamby policies of the post-war West are only a cautious prelude to the future. To overcome any deflation of the money supply in today’s debt-induced, credit-induced world economy, central bankers will stop acting like wussies. They will start inflating in earnest, for only through inflation can the fractional reserve process continue. It is inflate or die. They will inflate. Then the West’s currencies will die. But bankers will inflate now in order to postpone the death of money. They believe that “something will turn up” other than prices.

For gold to become money in the West will take an economic cataclysm. I am too old to be enthusiastic about going through such a cataclysm. So, I remain content with the de-monetization of gold. The consumer is economically sovereign, and he has not shown any interest in gold as money. Long live the consumer, especially in his capacity as a producer!

But as for gold as an inflation hedge . . . that’s a horse of a different color. Gold as a commodity will outperform digits as money.

In this sense, I remain a pessimist. The world needs gold as money, but the transition costs are astronomical. “Everybody wants to go to heaven, but nobody wants to die.”

Nevertheless, I would rather be a rich pessimist with gold than a poor optimist with digits.

How about you?

The upcoming ZeroHedge Debate—"The Fate Of The US Dollar"—featuring Bob Murphy and Jim Rickards versus Michael Every and Brent Johnson, and moderated by Adam Taggart, will be streamed concurrently on the Mises YouTube Channel on Tuesday (February 13) at 6:00 p.m. CST.

The most common news to come out of the Federal Reserve is the result of FOMC meetings and changes to the Federal Funds Rate. Jerome Powell has made news with his aggressive rate hikes that some fear will topple the economy. However, how they raise and change the Federal Funds Rate has changed over time. If one is to offer proper analysis of the Fed’s actions, we must be able to properly understand what its tools are, and how they have changed over time. The fitting target to observe is the Federal Funds Rate above.

The Federal Funds Rate is important to define in understanding it. It is often referred to as “the Fed raising interest rates,” and this is not totally inaccurate. The Federal Reserve setting the Federal Funds Rate can affect consumer credit markets. But what is it?

The Federal Funds Rate is a benchmark rate, more accurately a target range for a rate, that banks charge for overnight lending of reserves. Banks in the United States operate on a fractional reserve model, where they loan out their deposits whilst maintaining the illusion, they can meet all the demands of their depositors. Accounts at such a bank are called demand deposits, and the banks play a dangerous game maintaining only a fraction of their reserves (hence the term “fractional reserve”) hoping depositors won’t withdraw all their deposits at once.

The game relies on the bank having enough reserves to meet any day’s deposit demands and not too little. Having too little means some demands will go unmet and a bank run will result. All depositors will rush to get what is left of their deposits and the bank will go under as it tries to fulfill all the demands.

Banks generally set a reserve minimum, that they assume will be satisfactory to meet day by day deposits. If a bank has what might be called excess reserves, it will often loan the excess to banks that are not able to meet their depositor demands. The Federal Funds Rate is simply the target the Fed sets for a minimum interest rate charged between banks that engage in lending overnight.

This affects short-term loans, as any additional loans come out of excess reserves. Raising the Funds Rate makes lending more expensive for banks and thus consumers, and vice versa.

The means for establishing the range have changed over time as the Fed has adapted its tools. In the past the Fed would use Open Market Operations to buy assets from a bank. If a bank owned, say, a treasury bond the Fed might buy that bond and deposit dollars into that bank’s Master Fed Account. This increases excess reserves and lowers interest rates. When more reserves, not reflective of true savings, enter it will drive down the interest rates. When the Fed sells an asset to a bank it removes dollars from the Fed’s accounts. This raises interest rates as the reserve amount becomes scarcer.

After the Financial Crisis, how the Fed established the rate changed. Rather than buying or selling assets, it offers interest on reserves. This essentially establishes a floor for interest rates. The Fed offers interest on reserves parked at the Fed overnight in a Fed Master Account. Why would a bank loan out their excess reserves at a rate lower than what they can get by parking it at the Fed. The Fed doesn’t carry the risk that a commercial bank does. But this can be confusing, and analogies help to teach how this works.

If we want to understand the original method of Open Market Operations, a helpful comparison is a video game: Flappy Bird. The story of the game, which is worthy of its own article, is not important so much as the mechanics of the game. The way Flappy Bird works, the player taps on the screen which moves the bird up. By releasing your finger from the screen, the bird falls. The goal is to weave the pixelated bird into the opening between pipes. How does this apply to the Fed?

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Much like the bird deals with upward and downward pressures, so do banks under the traditional open operation method. The Fed buys assets, applying an upward pressure to interest rates, and sells them to apply downward. The Fed is the player of Flappy Bird, tapping on the screen to move the bird (the Federal Funds Rate) or letting go (selling assets) to let rates fall.

An odd analogy to say the least, but one that younger future economists can understand.

We can apply a similar analogy to understand the new Federal Funds Rate mechanism post-2008. The mobile video game for this mechanism is called Geometry Dash. Another game adored by younger generations! The point of this game is controlling a square, and tapping the screen as it runs along a horizontal map, jumping over obstacles. Now this may seem similar, but the trick is the arrangement of this map.

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The game forces the cube to run along the bottom of the map and hop upwards to avoid obstacles. The floor that the cube runs along provides a lowest point that the cube can be at. This is like the floor provided by interest on reserves. The cube is the interest rate, and it must rest above and cannot go below the interest on reserves. It can go higher at times, but it has a floor to run along.

It is easy to criticize the Fed based upon talking points. It is another thing to understand how it works. The Fed has an immense effect on the economy, and we had best understand it. That involves understanding the tools it uses to play surgeon with the economy. While they change over time, we can properly understand with a few analogies and some careful analysis.

Thursday offered a remarkable contrast between the two world leaders. Tucker Carlson released his much-anticipated interview with Vladimir Putin on alternative media hours before Joe Biden addressed the White House press on the question of whether he is a senile man suffering from significant mental decline.

On the one hand, Putin is one of the few guests that made Carlson seem, at times, out of his depth. The Russian president started the interview by responding to a question about the outbreak of the 2022 invasion of Ukraine with 1,200 years of Russian history. In comparison, the American president confused Egypt with Mexico.

In many ways the two men were fitting illustrations of their two nations. Putin, a strong autocrat, was composed and confident. He passed over an easy attempt to flatter America’s leading critic of his geopolitical rival in favor of projecting strength, even taking a shot at Carlson’s failure to join the CIA after college. In Biden, the American people were offered an angry and weak man being propped up by evil and desperate people by any means necessary. A cynic may suggest it’s a fitting testament to the virtues of democracy, if one believes in the integrity of the 2020 election.

The differences between Putin and Biden, however, are low-hanging fruit. What is more interesting is the similarities between the two world leaders.

The obvious failures of modern America make it understandable for critics of the regime to project onto Washington’s enemies virtuous characteristics. Putin, in particular, has developed one of the best online PR campaigns of any modern leader. Before there was God-emperor Trump, there was macho, bear-riding Vlad: champion of Christendom, sworn enemy of the degenerate West, and the very embodiment of nationalist fervor that globalist elites despise.

This projection from the very online, anti-regime right has always rested on insecure foundations. Putin’s Russia has long suffered from high rates of addiction, abortion, and suicide. While the Russian government condemns these facts while US officials often seek to normalize them, international branches of their official state media RT has had no problem elevating leftist narratives abroad.

More substantial, however, is Putin’s rejection of nationalism in favor of his own form of political consolidation.

Here, Putin’s long history lesson to Tucker is very illustrative.

Carlson’s question about 2022 was served up as an easy opportunity for Putin share with a largely American audience a similar version of modern Russian-Ukrainian history that Tucker himself has touched on occasionally over the past two years: Russia’s actions in Ukraine were a direct response to foreign policy arrogance from Washington. Putin feared Western aggression, so he attempted to take Kyiv.

Instead, Putin’s lecture made it clear that, in his mind, questions of Ukrainian sovereignty are beside the point. Ukraine belongs to Russia because of its history. The entire notion of a separate Ukrainian identity is a fiction. They are a family, separated simply due to past failures of the Russian state, failures that Putin is now able to rectify. Those who are slaughtered as a result are simply the costs of a family reunion.

Many Very Serious American pundits will clutch their pearls at Putin’s version of Ukrainian history, but of course they have similar convictions within the context of the US. In their books, the people of the South were traitors that deserved to have their cities burned, economies devastated, and their right to self-governance stripped from them for years after the Civil War. Biden has not yet launched cruise missiles into Texas, but he has threatened to bomb Texans with fighter jets paid with their tax dollars.

Another commonality is the desire to erase historical figures that are inconvenient to the aspirations of imperial capitols.

This was on display when Carlson asked Putin to clarify what he meant by “de-Nazification.” This was perhaps the one moment where Putin seemed to actively play up to Carlson’s audience, offering red meat in the form of mocking Justin Trudeau’s government for honoring a Ukrainian World War II survivor who fought against the Soviet Union. This, of course, meant fighting on the side of the Axis.

While there are hours of podcast fodder to be had debating the merits of the service provided by Ukrainian soldiers in the 1940s, what really matters is the question of what de-Nazification means in 2024 as a condition for peace in Ukraine.

To his credit, Carlson pushes Putin on this point. While the Russian president failed to provide a clear answer, he seemed to favor similar approach to how Germany addressed its history – and how the left has treated the South. This means the removal of any public displays or celebrations of historical figures that stand opposed to the victorious, conquering forces. Putin can no more stand a statue of Stepan Bandera than Joe Biden can allow a celebration of Robert E. Lee.

The plight of Ukrainian nationalists is one of the great tragedies of the war. On one side is an invading military that seeks to eradicate its existence. On the other, a Western-back government that aspires the cultural homogenization that is a key characteristic of the American empire. Both Moscow and Washington are motivated by their own form of imperialism.

These underlying similarities between the animating ideologies of Biden and Putin do not undermine the real value that Carlson’s interview provides for America, a look at the hypocrisy of the American regime. While Washington tries to depict Putin as a cartoonish villain, a modern-day Hitler (or worse, a more fit Donald Trump), in reality, he has a lot more in common with the most competent and entrenched figures of the American state.

Neither care about democracy or elections and will lock up political opponents if they become a real threat. Neither have any respect for nationalism or political self-determination if it thwarts their political ambitions. Both will make rhetorical claims to “human rights” and the plight of oppressed minorities, while having no issues sending thousands into the meat grinder of war.

Neither have the moral high ground.

Putin’s military adventures just happen to be cheaper and closer to home.

A judge put the kibosh on the “Montana Miracle” – for now – showing the movement for housing abundance needs to do more than pass laws; it must also remember and rearticulate the nation’s unique values.

“Big Sky Country” might not seem like a place lacking in space to live, but when it comes to housing supply, it is. A combination of limited housing supply and increasing demand over the past few years has caused mortgages and rent costs to explode. The Montana Miracle was a series of radical market-based zoning reforms proposed in 2023 that would have revolutionized the housing market by allowing denser developments, and reduced housing prices.

The TV series Yellowstone and COVID-19 made us a destination for political refugees and people looking for a trendy place to live, increasing demand by approximately 40,000 more people in only 3 years. The problem is that Montana’s cities have historically been hesitant to build outward (encroaching public lands), build up (covering the mountain views), or build more densely. Judge Salvagni’s decision to kill zoning reform centers around the idea that if someone adds a duplex to a single-family-zoned neighborhood, their neighbors are “injured” by that process. This paradigm is destructive and contrary to our historical values.

The judge’s decision to suspend the miracle reflects a cultural shift away from the values that created modernity and the great enrichment. For the next generation to access the American dream, we will have to once again prioritize the dignity of low income and young people.

Economic Historian Deirdre McCloskey’s epic Bourgeois trilogy details the fundamental cultural changes that created the West and our ‘great enrichment.’ McCloskey argues that the rise of the West hinged on a few critical ideas like “entrepreneurs aren’t suspicious upstarts” and “working people have a unique dignity worthy of respect.” Culture changed, and as a result the common law to this day is premised on the understanding that competition is no “injury.”

During the progressive era, however, America returned to the pre-enlightenment view without a clear intention to discriminate against low-income people. Progressivism’s obsession with scientific planning of society created the view that someone’s innovation, labor, or competition was an injury to others if it violated the expert plan. Inevitably this results in the people with the smallest stake from being included; in this case, the people who can’t buy a home in an expensive environment lose out to the folks who already own homes.

This change is what James Burnham called America’s counter-revolution of managers, and we can see its impact on zoning in Euclid v. Ambler Realty (1926), in which SCOTUS decided that zoning was a “proper police power” under a very broad regime. The creation of HUD attached federal funds to zoning, pushing the ideas across the nation. It’s time policymakers challenged this bankrupt principle.

Ultimately, Judge Salvagni’s decision reflects the values of the counter-revolution of managers, in which “injury” isn’t tangible as it is in common law, to be discovered on a case-by-case basis in an adversarial court process. Instead, a low income American can “injure” a neighbor simply by moving in next door, perhaps impacting their home value and upsetting city managers’ carefully made plans.

During the push to secure the Montana Miracle, I spoke in front of hundreds of conservative grassroots activists from around the state to persuade them to support this effort. I found the same two types everywhere I went: folks who opposed it because of their interest in keeping the housing supply limited and people with a coherent freedom philosophy that harkened back to the values of empowerment. The latter did not see young and low-income people as a threat to their prosperity, but as the future. This is the culture we must encourage.

This Montana lesson shows that we can’t just change the law; we must rediscover the values of empowerment; otherwise, the primary interest of the single-family “stakeholders” will continue to prevail in protecting their assets in legislatures or courts. To overcome rent-seeking, the housing reform movement must articulate the empowerment values of dignity and equality for young and low-income people into the larger culture.

The dream of home ownership and the promise of a better life can become a reality, but it will require a cultural values shift, a more robust property rights philosophy, and more than just code change. We must return to the values that created our great enrichment to enable the American dream for the next generation.

Since the horrific atrocities perpetrated by Hamas against Israeli civilians on October 7, 2023, Israel has been engaged in a devastating military operation in the Gaza Strip. Over 25,000 Palestinians have been killed, 70% of whom have been women and children, and tens of thousands injured. About 85% of Gaza’s 2.2 million inhabitants have been internally displaced with no safe place to go.

Israel has systematically targeted Gaza’s civilian infrastructure, including hospitals. Over 60% of Gaza’s housing units have been damaged or destroyed. As a result of Israel’s siege of Gaza, which has blocked all but a trickle of humanitarian aid, half of Gazans are starving, and the entire population is at imminent risk of famine. The government of South Africa has filed an application with the International Court of Justice (ICJ) charging Israel with the crime of genocide.

So, how should libertarians view this situation?

There are two basic positions on this issue held by Americans. One is that Israel is justified in doing whatever it takes to eliminate Hamas in Gaza. The other is that, while Israel has a right to self-defense, it must exercise that right in accordance with international humanitarian law.

The only view compatible with the foundational ideal of libertarianism, the non-aggression principle, is the latter.

While much of the post-World War II regime of “collective security” under the United Nations, enforced primarily by U.S. power, may be objectionable from a libertarian standpoint, Israel’s government is a signatory to the UN Charter, the Geneva Conventions, and the Genocide Convention so it is in their case the law, and ceteris paribus they are bound by it.

Apologists for criminal Israeli government policies defend the indiscriminate nature of Israel’s attacks by absolving it of responsibility on the grounds that Hamas uses civilians as “human shields.” This argument, though, depends on a euphemistic use of that term that rejects its definition under international law to instead mean any civilians killed simply by virtue of their being in Gaza.

There is also the popular trope that Israel benevolently ended its occupation of Gaza in 2005 only to come under repeated attack by Hamas. But while Israel withdrew military forces and settlers from Gaza, it has remained an Occupying Power by virtue of its continued control of the strip. Nothing and nobody go into or out of Gaza without Israel’s permission. Gaza remains, as it was described in 2004 by Head of Israel’s National Security Council Giora Eiland, “a huge concentration camp.”

The 2005 withdrawal was part of Israeli Prime Minister Ariel Sharon’s “disengagement plan,” which entailed abandoning the Jewish settlements in Gaza while maintaining control over the territory and advancing the illegal settlement regime in the occupied West Bank with the aim of Israel unilaterally determining its yet-undeclared borders. In the words of Sharon’s top advisor Dov Weisglass, the disengagement plan provided the “formaldehyde” that was “necessary so there will not be a political process with the Palestinians.”

Another important piece of context is how Israel initially supported Hamas as a counterforce to Yasser Arafat’s Palestinian Liberation Organization (PLO), which in the late 1980s had accepted the two-state solution premised on the applicability of international law to the conflict, including implementation of UN Security Council Resolution 242.

Passed after the June 1967 war, that resolution requires Israel to withdraw to the armistice lines drawn after the 1948 war, during which 750,000 Palestinians were ethnically cleansed from their homes to establish the demographically “Jewish state.”

About 70% of the population of Gaza are refugees from the 1948 ethnic cleansing and their descendants, and about half the population are children who have lived their entire lives in this “huge concentration camp.”

In 2004, Hamas founder Sheikh Ahmed Yassin announced a shift in policy by stating the group’s willingness to accept a Palestinian state alongside Israel within the pre-1967 boundaries, with a long-term truce to establish mutual intent. Israel responded by assassinating him. Nevertheless, Hamas repeatedly reiterated its truce offer thereafter while also engaging in the political process by participating in municipal elections in 2005.

In 2006, though winning only a plurality of the votes, Hamas defeated Fatah, the party of Palestinian Authority (PA) President Mahmoud Abbas, in parliamentary elections. In response, Israel colluded with the US and Fatah to overthrow the elected Hamas-led government. That effort failed, resulting in Hamas taking total control of Gaza while the PA remained in power in the West Bank.

Israel’s further response was to escalate the blockade of Gaza in place since 1967 to a state of siege designed to collectively punish the entire civilian population for living under Hamas’s rule—yet another violation of international law.

For over half a century, Israel has defied international law by maintaining a belligerent occupation of the West Bank and Gaza that UN bodies and international human rights organizations have in recent years described as an apartheid regime. Indeed, it should hardly be controversial to state that Israel exists as a Jewish supremacist state. To demonstrate this, it suffices to observe that the Jewish National State Law passed in 2018 literally defines self-determination in Israel as a right exclusive to Jews.

Israeli Prime Minister Benjamin Netanyahu has also long maintained a policy of utilizing Hamas as a strategic asset to block movement toward peace negotiations with the Palestinians. As he reportedly told fellow Likud party members in the Knesset, “anyone who wants to thwart the establishment of a Palestinian state has to support bolstering Hamas” as part of the strategy of keeping the Palestinian leadership divided.

Speaking at the UN General Assembly on September 22, 2023, Netanyahu also illuminated the aim of Israel’s efforts to “normalize” relations with Arab states by effectively demanding that the Palestinians accept their subjugation, and by holding up a map of the “New Middle East” showing only Israel from the Jordan River to the Mediterranean Sea. The Palestinians would neither have equal rights as Israeli citizens nor independence in a state of their own. They would just have to accept their total defeat and indefinite subjugation.

As President John F. Kennedy once said, “Those who make peaceful revolution impossible will make violent revolution inevitable.” While there is no possible justification for Hamas’s killing and kidnapping of civilians on October 7, neither is there any possible justification for Israel’s retaliatory violence against the entire civilian population of Gaza, which has been characterized by war crimes carried out with impunity because of the US government’s support, which has included blocking a ceasefire resolution in the UN Security Council.

While South Africa’s case at the ICJ doesn’t raise the matter of US complicity, this move also places the Biden administration on notice that the 1948 Convention on the Prevention and Punishment of the Crime of Genocide not only prohibits the US from supporting genocide but also obligates the US to act to prevent it.

Self-described libertarians are in the meantime obligated by the non-aggression principle to oppose indiscriminate attacks on civilians regardless of the ethnicity or nationality of either the perpetrators or the victims.

Progressives are celebrating yesterday’s Michigan verdict in which an Oakland County jury effectively overturned a couple of U.S. Supreme Court rulings from the early 1800s in order to enable prosecutors to convict people of crimes even though they did not break statutory law. According to the New York Times:

The guilty verdict on Tuesday against the mother of a Michigan teenager who murdered four students in 2021 in the state’s deadliest school shooting is likely to ripple across the country’s legal landscape as prosecutors find themselves weighing a new way to seek justice in mass shootings.

In convicting Jennifer Crumbley of involuntary manslaughter after her then 15-year-old son Ethan Crumbley killed four fellow students and wounded several others in a school shooting, using a gun that his parents legally purchased for him, the jury (urged on both by the prosecutor and the judge) vastly expanded criminal law using common-law mechanism. This overturns long-held policies by both state and federal governments to leave criminal law as statutory:

Criminal Law, though, has not been a true common law subject for many years. The Supreme Court, for example, announced almost 200 years ago that there are no federal common law crimes. As a result of the nineteenth century codification movement, every American state has for decades accepted the notion of legislative supremacy in Criminal Law-the idea that legislators rather than judges should create and define criminal offenses.

As I will point out in an upcoming article that takes an in-depth look at this case and its implications, Jennifer and James Crumbley were neglectful parents and they made numerous errors in judgment in how to deal with their troubled son. They also are Trump supporters, which further casts them into a category of people progressives believe should be denied basic rights. However, neither of them broke any statutory laws with the gun purchase for Ethan or how they stored it in their home. Nor did they break the law or defy medical or legal directives in their interactions with Ethan.

(Bad parental judgment is not necessarily illegal. If it were, most of us who have reared troubled children would be in jail.)

Instead, jurors decided that Ms. Crumbley should have known that her son would engage in a school shooting, and that she didn’t do enough as a parent to stop this tragedy. Perhaps we should note that school officials also knew about some of Ethan’s issues and even decided not to search the boy’s backpack at school less than two hours before he went on his shooting rampage.

In other words, government officials had both information and the legal authority to intervene but chose not do so, yet the mother is the one going to prison for many years while no government official will lose anything. (The father, James Crumbley, is scheduled to go to trial next month.)

In his article today on the Mises Wire, Connor O’Keeffe notes that progressive prosecutors for political reasons refuse to enforce existing law in many jurisdictions even when perpetrators engage in violent criminal activity. We can add that the same political ideology that encourages progressive prosecutors to neglect existing law will encourage them to use criminal law to go after anyone who falls on the wrong side of the leftist political spectrum.

One can hope that the appeals courts or SCOTUS will see this verdict for what it is and overturn it, but given that US courts are as politicized as the rest of society, it is doubtful that they will do their duty.

Rothbardians don’t worship the U.S. Constitution. In fact, Murray regarded the Constitution as a centralizing coup against the Articles of Confederation, which weren’t ideal either. But, as Murray also taught us, we have to decide how to cope with current realities to best advance the cause of liberty. Right now, the big danger comes from brain-dead Biden and his gang of neocon controllers. They want to gain control over the entire world. How do we stop them?

One tactic that can be very useful in doing this is to stress certain parts of the Constitution. In particular, we need to emphasize that the United States, which used to be called “these United States” was founded as a compact between the states. The federal government possessed only limited and carefully enumerated powers.

Some libertarians object to this. They point out that only individuals have rights, not states. That’s true, but states’ rights aren’t in conflict with individual rights. The President of the Mises Institute, the great Tom DiLorenzo, explains why not:

“The idea of states’ rights is most closely associated with the political philosophy of Thomas Jefferson and his political heirs. Jefferson himself never entertained the idea that “states have rights,” as some of the less educated critics of the idea have claimed. Of course “states” don’t have rights. The essence of Jefferson’s idea is that if the people are to be the masters rather than the servants of their own government, then they must have some vehicle with which to control that government. That vehicle, in the Jeffersonian tradition, is political communities organized at the state and local level. That is how the people were to monitor, control, discipline, and even abolish, if need be, their own government.

It was Jefferson, after all, who wrote in the Declaration of Independence that government’s just powers arise only from the consent of the people, and that whenever the government becomes abusive of the peoples’ rights to life, liberty, and the pursuit of happiness it is the peoples’ duty to abolish that government and replace it with another one. And how were the people to achieve this? They were to achieve it just as they did when they adopted the Constitution, through political conventions organized by the states. The states, after all, were considered to be independent nations just as England and France were independent nations. The Declaration of Independence referred to them specifically as “free and independent,” independent enough to raise taxes and wage war, just like any other state. See this.

That is why the political heirs of Thomas Jefferson, mid-19th-century Southern Democrats, held statewide political conventions (and popular votes) to decide whether or not they would continue to remain in then voluntary union of the Founding Fathers. Article 7 of the US Constitution explained that the states could join (or not join) the union according to votes taken at state political conventions by representatives of the people (not state legislatures) and, in keeping with the words of the Declaration, they also had a right to vote to secede from the government and create a new one.”

Lord Acton, one of the greatest nineteenth-century English classical liberals, strongly supported states’ rights. He saw in this concept a necessary bulwark for liberty. He said this in a letter he wrote to Robert E. Lee after the War Between the States:

“I saw in States’ rights the only availing check upon the absolutism of the sovereign will, and secession filled me with hope, not as the destruction but as the redemption of Democracy. The institutions of your Republic [i.e., the Confederate Constitution] have not exercised on the old world the salutary and liberating influence which ought to have belonged to them, by reason of those defects and abuses of principle which the Confederate Constitution was expressly an wisely calculated to remedy. I believed that the example of that great Reform would have blessed all the races of mankind by establishing true freedom purged of the native dangers and disorders of Republics. Therefore I deemed that you were fighting the battles of our liberty, our progress, and our civilization; and I mourn for the stake which was lost at Richmond more deeply than I rejoice over that which was saved at Waterloo.”

Read the full article at LewRockwell.com.