In other news, the first part of the Atlas Shrugged film trilogy will be released in a couple of months, and here’s the trailer. Can’t help thinking that filming the story like they did with Sky Captain, or even the animated Batman series of yore would have added to the drama. Flat screens and cell phones don’t get along that well with steel mills and railroads.

—

Immoral, and irrational, laws deserve to be broken, but without getting caught. The world doesn’t forgive people who get caught. Government employees who get paid for doing unproductive work harassed a singer who was leaving the country with his own hard-earned money. That’s how I see the Rahat Fateh Ali Khan fiasco. The sum in question pales in comparison to what officials of the various “revenue” departments of the state have amassed from bribes. And people point fingers at “tax dodgers.” I hope Mr. 10% and his revenue department don’t show up at the airport to receive Khan, after the Indians are through with him. That would make a bad situation worse.

Here are some amazing (and very sad) facts:

I just learned that by the time the average American graduates from high school, he or she has watched 360,000 ads on television. Yes, three-hundred-sixty-thousand.

The majority of these are food ads, and now here it comes: 95 % of the advertised foods are actually unhealthy. Speak of nutritional education, or rather indoctrination. A bad ad or two might not influence a person right away, but thousands and thousands of junk-food ads? Who can withstand that kind of brainwashing, especially as a child?

Clearly, laissez-faire capitalism doesn’t have the answers here.

1. Legalise insider trading.
2. Repeal legal tender laws.
3. Eradicate crony capitalism.

Obviously these suggestions have driven most commentators mad. They think its an April Fool’s Day joke. Therefore, the comments are an even better read with Evans responding to the diatribes.

Update: His blog.

Over the weekend, I watched a CNN report on the Tea Party demonstration in Washington. Behind the reporter stood someone who carried a sign that read “Who is John Galt?” – a reference to Ayn Rand’s novel Atlas Shrugged. Rand, who was born in Russia but chose to become an American, wrote her book in the 1950s largely in response to Marxism. And she does an incredible job showing why Marxism ultimately does not work.

However, I’m less convinced by what she puts in Marxim’s place, namely laissez-faire capitalism, meaning capitalism (almost?) completely free of government intervention. Here are two questions I have for proponents of laissez-faire capitalism:

1. How will unrestrained capitalism be able to protect our environment (and thus, in the long run, us)? Without restraint, capitalism will self-destruct and take the planet with it.

2. How will unrestrained capitalism prevent the cancer of virtual money from spreading? By “virtual money” I mean the fact that money is nowadays primarily a virtual entity that does not necessarily stand in proper relation to the material world. Money can beget money to the point where it utterly exceeds the actual value of work and property. Theoretically, someone could  multiply his virtual money to such a degree that they owned more than the real value of all human property in the entire world. Needless to say, this destroys the balance and stability in the world. How will laissez-faire capitalism reign this in?

Somone carrying a sign with a reference to Atlas Shrugged seems to suggest that laissez-faire capitalism is the answer to the problems we are currently facing. To me, this is naive. I can forgive Ayn Rand for ignoring the destruction of the environment and the existence of virtual money in the 1950s. But now? Now that it has become glaringly obvious how very serious these issues are?

Let John Galt stay in the world of literature. In the real world, there are other solutions required.

Look at it this way: the rest of the industrialized world views our unique, selfish, greedy, primitive form of commodity driven healthcare as a hideous indictment of the weakness of the American citizen.  In their eyes, we don’t have enough brains or heart to stand up and demand what the rest of the world has already won for themselves and now takes for granted.  To them it’s as clear as day.

But the problem is, in the new inner-connected world of global finance, what infects one cell, will certainly condemn the entire body.   Our illness is rapidly making it’s way across the seas to our more socially advanced cohabitants faster than the phony H1N1 virus scam.  And if we don’t stop it at the source, they don’t stand a chance.

Along comes Sicko, a passionate film from Michale Moore that in one seamless stroke,  stirred compassion and anger in people all across this country, no matter what side of the political divide they were on.  Compassion for the suffering of our neighbors and anger toward the cruel institutions that profit from creating it.

Enter the new president of CHANGE.  He and his administration promised at least a strong public option that could compete with the private insurance companies.  But that’s all gone now.  And don’t kid yourselves folks; the scant loonies babbling about “socialism” at the town-hall meetings don’t have that much clout.

About a month ago I wrote an article about how this sickness that we call American Democracy is starting to infect the rest of the world at a faster and faster pace.  Yes, we have been secretly stuffing ballot boxes and installing dictators all across the globe for decades now.

Let’s face it, what do you think the CIA actually does?  That’s ALL they do folks.  The CIA is nothing more than our version of the KGB, but that makes it all right doesn’t it? The fact that they are our little secret assignation posse for the global corporate elite.  I beg someone to tell me one thing, just ONE decent thing the CIA has done in their ENTIRE existence.

But now under the Obama administration, all that secretive empire building is coming out into the light of day.  Yesterday at the summit of G20 nation financial leaders, two issues that shed a little light on what I was talking about should be noted:

1. Since Geithner and his globalist banking buddies don’t seem to have to worry about any real backlash from the ‘progressive” base, he has decided to block EU efforts at restricting the massive bonuses that the global bankers want to pay themselves.  That’s right. Not only did he allow the bankers in this country to take the bailout money and put it straight in the pockets of those who helped create the CDS bubble and housing bubbles and thus cripple this economy… not only did he do that to us… but now he is working diligently to make sure the other bankers across the pond get to line their pockets with the same kind of loot that the American banking elite got as well.

Top finance officials from rich and developing countries agreed Saturday to curb hefty bankers’ bonuses, but the proposed crackdown on excessive payouts so far falls short of European demands after the U.S. and Britain shied away from imposing a cap.  MSNBC

2. The social safety net is always targeted as the Friedman/Greenspan neoliberal free-market “brick” gets slammed down on other countries.  Well, we can now add the United States to the growing list of free-market, laissez faire capitalist victim nations.  Add France and Europe as a whole, while you are at it.

The French PM warned today that the famous European model social saftey network is now in “crisis” due to the global economic meltdown, so of course they are going to have to take a more “moderate” approach to their labor market; meaning less unions, less benefits, less restrictions on trade, lower wages, … all to make France “more competitive in the global marketplace”.

Of course France and Germany both just experienced a level of economic growth this past year, which makes his comments even more ridiculous.

“With this sluggish growth, we cannot preserve the European social model or reduce our public debt,” said Fillon, addressing a high-level gathering of political and business leaders at Italy’s Lake Como. “The level of our structural deficits threatens the long-term survival of our economy,” he added.

… Fillon warned that European governments will not be able to cover social costs or reduce public debt without a change of course. He called for “refocusing (EU) policies to serve growth and European competitiveness against a background of globalization, and restoring our public finances by means of a concerted plan” that included cuts in public spending. MSNBC

So here we are. A nation full of people that continuously pat themselves on the back for being the freeist and the bravest democracy in the world.  And what is the reality?

The reality is we have allowed such rampant corruption within our own shores that it is blatantly spilling over into the living rooms and kitchens of our allies.

Forget the suffering and the murder that we are allowing our military industrial complex to inflict on Iraq, Afghanistan, Pakistan (Iran? Venezuela? Columbia? Honduras? Somalia?).  Those tragedies are blatant and hung about our necks like scarlet medallions of cowardice.  We wear those every single day, only most Americans hardly even notice anymore.

No this new international crime wave, like the crimes being orchestrated here at home by our leaders of CHANGE, will certainly be more subtle, but far more devastating in the long run.

It used to be said, right here on this site, that we couldn’t just do nothing for we held the very future of every young American in our hands right here today.  Well, that is still true.  But imagine a world where every nation is run by the likes of the Cheney’s and the Emanuels of this nation.  Imagine the Neocans and the DLC New Dems neoliberal model of savage capitalism everywhere on the planet.

Each and every human being, if they don’t starve to death or get blown to pieces because they dared to try and get some free gas from a tanker, will be FORCED to buy insurance from AIG. No more universal healthcare in Cuba, Canada, France, or Britain.  No more decent wages or employee bonuses. No more maternity leave or collective bargaining.

We are a nation of weak minded followers.  Our sickness has allowed a cancer to grow unchecked.  Now that cancer is rapidly moving to other bodies all across the world.

Healthcare is killing

the mercantilist mindset provides policymakers with some important advantages: better feedback about the constraints and opportunities that private economic activity faces, and the ability to create a sense of national purpose around economic goals. There is much that liberals can learn from it.

Indeed, the inability to see the advantages of close state-business relations is the blind spot of modern economic liberalism. Just look at how the search for the causes of the financial crisis has played out in the US. Current conventional wisdom places the blame squarely on the close ties that developed between policymakers and the financial industry in recent decades. For textbook liberals, the state should have kept its distance, acting purely as Platonic guardians of consumer sovereignty. (via Dani Rodrik: Mercantilism reconsidered).

Public sector or oblivion?

During the Great Depression, more than 19 auto companies (similar to the number of banks today) were folded into the Big 3. The Big 3 lived to fight for another 70 years. In their death throes, the US Big Auto is likely to go the way European auto sector has gone – public sector or oblivion.

What is on the table

Hobson's choice?

2 out of the G-7 countries are bankrupt – US and Britain. Their industrial base was supported by raw materials and captive markets – acquired by genocide, and the loot of centuries.

France, Germany, Canada, Italy  and Australia (not in G7) are tethering on the brink – under the weight of their social security system, and most of their business is in the public sector. A geriatric Japan is dependent almost entirely on exports to these declining seven. Japan’s investment in India and China has been negligible.

Real low … real truth (seen an oxymoron like that?)

The real question – who will pay for this financial crisis?

Not the Americans! No siree. Definitely not. Neither the American super-rich or the American welfare-poor! Not the American tax payers or the American tax evaders? Not the American Whites or the American Blacks?

It is the Chinese, the Russians, Indians, Brazilians, and above all, the Africans, who will pay for these bailouts! They (BRICS+Africa) have done, what bankers call non-recourse lending! The Chinese, Russians, Indians, Brazilians and the Africans, have no recourse. Who will the Chinese go to, for redeeming their US$2 trillion? The bankrupt US of A?

Welcome to the real world.

US economic outlook

How can the West become competitive?

US auto is down – but not yet out. It will limp along for few more decades. The US is still the prime force in the computing industry – though not on the manufacturing side. US oil industry no longer dominates international markets the way they did in mid-20th century. The US nuclear industry faces increasing competition from a public sector French and Russian industry. The seemingly strong position of the US in agriculture is based on two aspects. Massive direct subsidies – of more than 8 billion dollars. And indirect subsidies of possibly another US$ 8 billion. Most of which goes to the 46000 farmers who account for 50% of the US agricultural production. The communication sector has again seen the erosion of US competitiveness – with the domination of GSM technology seemingly solid for another 10-15 years. The global financial markets were dominated by the US organizations in the past – but with the global financial crisis and the end to dollar dominance may see reduced clout for US firms.

Big Government ... Big oil ...

With such an economic outlook over the next 10-25 years, what the US leadership may focus on, is Arctic oil. Oil will remain a strategic asset only with high prices (slower production increase and faster demand growth) and if no other energy source appears. Oil finds in the Atlantic and Pacific republics may spoil the party – for instance, Cuban oil.

Much like the respite of the North Sea oil to Britain, Arctic oil may provide a temporary halt to the slide in US economic dominance. If the US can lay its hands on a significant part of it!

The other option is to nationalize the US economy. Like France, Germany and Italy. The economies of France, Germany and Italy are practically run by public sector monopolies – or subsidized behemoths, who make survival of competitors difficult by their ability to sustain losses – based on Government largesse.

The lure of ‘capitalism’ …

The Franco-German-Italian public sector model may be the only answer

Why is the West so keen on calling these publc sector, subsidy driven regimes as Capitalism? Capitalism depended on looted capital and slave labour to prosper – resulting in the famous ‘laissez faire’ quip. Capitalists wanted and got ‘laissez faire’ capitalism – which was a ‘coda’ for unlimited slavery. The restrictions on laissez faire were actually restrictions on slaves.

Now under socialism, they get unlimited protection from ‘destructive’ competition. Which is being papered over by names like crony capitalism, free market capitalism. etc.,  etc.

After the multi-trillion dollar bailout, which has just begun, and with more than US$4 trillion with China, Japan, Russia and India, neither is the outcome certain nor is the outlook bright.

Last but not the least, we must remember the power wielded by the Chartered Companies of Europe – another word for public sector.  East India Company was a public sector company!

The Rest of the World needs to be careful of these public sector monsters!

I sort of failed Home Ec, but, my grandparents got me a Singer Sewing machine and I used to design a lot of things.

I think looking at this book and reading about what women did in this community to help the poor might have been one of the seeds for my feminism.  Imagine– that is 1974.  Whew.

Anyway.

This is a book about a crafts cooperative, and how that started.

These women who had nothing made quilts.  You can read a little about them over here by clicking this link…

Well, the time has come in America to revist that 70′s spirit again.

I have read so much about “Liberals” of late I thought I’d let you know what that means to me — because there are two strands of that.  Here is the wiki:

Liberalism

“…Liberalism is a broad class of political philosophies that considers individual liberty and equality^[1] to be the most important political goals.

Liberalism emphasizes individual rights and equality of opportunity. Within liberalism, there are various streams of thought which compete over the use of the term “liberal” and may propose very different policies, but they are generally united by their support for constitutional liberalism, which encompasses support for: freedom of thought and speech, limitations on the power of governments, the rule of law, an individual’s right to private property,^[2] and a transparent system of government.^[3][4][5] All liberals, as well as some adherents of other political ideologies, support some variant of the form of government known as liberal democracy, with open and fair elections, where all citizens have equal rights by law.^[6]

According to author and philosophy professor Peter Vallentyne, “Liberalism comes in two broad forms. Classical liberalism emphasizes the importance of individual liberty and contemporary (or welfare) liberalism tends to emphasize some kind of material equality.”^[7] In Europe, the term “liberalism” is closer to the economic outlook of American economic conservatives. According to Harry Girvetz and Minoque Kenneth “contemporary liberalism has come to represent different things to Americans and Europeans: In the United States it is associated with the welfare-state policies of the New Deal program of Democratic President Franklin D. Roosevelt, whereas in Europe liberals are more commonly conservative in their political and economic outlook”.^[8] In the United States, “liberalism” is most often used in the sense of social liberalism, which supports some regulation of business and other economic interventionism which they believe to be in the public interest. A philosophy holding a position in accordance with Adam Smith, that laissez-faire economics will bring about a spontaneous order or an invisible hand that benefits the society, is referred to as “classical liberalism.”^[9]…”

My mother taught me in childhood to help those less fortunate than myself — so, the fact that I had this book in the 70′s shows my mindset at that time.  I suppose I am a classical liberal in the European sense, except, where the “invisible hand” of goodness that laissez-faire capitalism provides normally? — when that has failed AMERICA?  A new order of LIBERAL is in order.

That is a green thinking grassroots liberal.  I think that is what the Republican party might want to build for America right now?

Classical liberalism

“…Classical liberalism (also known as traditional liberalism^[1], laissez-faire liberalism^[2], and market liberalism^[3] or, outside the United States and Britain, sometimes simply liberalism^{[citation needed]}) is a doctrine stressing individual freedom, free markets, and limited government. This includes the importance of human rationality, individual property rights, natural rights, the protection of civil liberties, individual freedom from restraint, equality under the law, constitutional limitation of government, free markets, and a gold standard to place fiscal constraints on government^[4] as exemplified in the writings of John Locke, Adam Smith, Ludwig von Mises, David Hume, David Ricardo, Voltaire, Montesquieu and others. As such, it is the fusion of economic liberalism with political liberalism of the late 18th and 19th centuries.^[2] The “normative core” of classical liberalism is the idea that laissez-faire economics will bring about a spontaneous order or invisible hand that benefits the society,^[5] though it does not necessarily oppose the state’s provision of some basic public goods with what constitutes public goods being seen as very limited.^[6] The qualification classical was applied retroactively to distinguish it from more recent, 20th-century conceptions of liberalism and its related movements, such as social liberalism.^[7] Classical liberals are suspicious of all but the most minimal government^[8] and object to the welfare state^[9]…”

Take a look at this article off the Guardian on POVERTY in America.

US families rely on handouts in world’s richest country

You read that.

An overbloated Government has done nothing to solve poverty in America in my lifetime.  I thought the Democratic Party had actually been working on that all these years.  But no.

I am sick to my stomach after seeing the slums in Chicago in the web and reading this article.

I don’t consider myself part of that party anymore.

Something NEW politically has got to be born in America.  Something from the Grassroots of the collective American Heartbeat.  The Democratic Party had illusions of grandeur in my lifetime — and it has neglected its own.  It has neglected its own.

Laissez-faire policies have ruined our great country.

So, like the co-ops of old it is time to rebuild confidence here.  You gain far more by employing Americans than stuffing welfare down their throats.

So, perhaps the Repblicans can pick up where the Democrats left off?

John McCain’s ideas regarding jobs in this country were great.

“Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime.”

————————————–Lao Tzu

That is how I feel, as a Californian who tried to help the poor.  Every day I see the homeless here.  They have nowhere to go.  Nothing to hope for.  Nothing to build towards.

It seems to be a time of starting from scratch and the whole country feels it.

I have spoken many times of Maslow’s Heirarchy of Needs.

After you finish reading that article off the Guardian?  You will see that even the bottom rung has not been achieved.  One other thing the 70′s did had to do with tremendous preservation.  Of architecture.

Green liberals believe in that, in our disposable culture of 2009.  It isn’t hard to see how that model is healthier for all.  Maslow’s bottom rung is where these new Republicans can start?

It’s not a big deal to see how a Democrat can leave their political party.

All you need to do is read this link.

Real Democrats do a lot of research before they vote for people, or at least we all did once.

I have no problem changing political parties at all, right now.

Personally?  I think a dose of people who care about the Republic are in order.

Basically, Silverwolf thinks the President is a nice guy, with a winning manner, but without any deeply thought out or deeply held convictions or principles. A compromiser and pragmatist at heart, loath, as was War Criminal Lyndon Johnson, to ever move against a majority. The many immoral actions the President has taken, in the sense of anti-Jeffersonian violations of the Bill of Rights, illustrate that the President lacks this deep commitment to Principle, and his economic program shows the frequent lack of economic understanding one can encounter even in the brightest lawyers. Quick-wittedness in the law does not necessarily mesh with quick-wittedness in business, or in seeing the tangential necessities of economic freedom and personal liberty. What is so exhilarating about the 17th and 18th century French “laissez-faire” economists, thinkers like Turgot and Cantillon,  is their commitment to personal liberty, and their seeing the connexion betwixt that liberty and economic freedom. To laissez-faire, to “let to do” is not only the best thing for the individual, but also for the society at large. And government regulations on businesses of which the government bureaucrats know nothing, but the entrepreneurs know a great deal, only act as a tax which ends up costing the consumer in higher prices, impoverishing society as a whole, to benefit both some special interest group, and the bureaucrats who enact and enforce these regulations, in the form of their salaries and benefit ”packages”. Rothbard taught us to always ask, Qui bono? when it comes to government regulation of an industry. Who benefits?

 All these things are beyond the comprehension of our new President, whose choice of Geithner as Treasury Secretary shows that he is completely brainwashed in the Keynesian, government-must-always-intervene, mentality. It is in this sense that the President, quick-witted though he be, has never flashed on the moral implications of Liberty, as they were protected and promoted by the U.S. Constitution and the Bill of Rights, with the philosophical ideas that inspired these being propounded in the Declaration of Independence and the Preamble.

It is this personal charm, and the President’s public speaking prowess, combined with this complete lack of deep political and economic Principle, that are so dangerous in this President. With his vast majority in the Senate, the President can “fast-track”, i.e. ram through, any legislation, unConstitutional or not, through a complaisant Congress.

However, the President, and his equally unprincipled fellow Party members in the Legislative Branch, will soon see that their Keynesian mish-mash will presently turn the American economy to mush, and they will then try to get out of it by both raising taxes on the entrepreneurs, while inflating to rid themselves of the real value of the debt they have been running up for the last 76 years. As they kill the incentive to work with higher income taxes, their tax revenue base will shrink, while the inflation and higher taxes will drive more and more to seek the shelter and “security” of a government handout. This will, in turn, greatly increase the tax demands on government, while simultaneously shrinking the tax base. And both these processes will accelerate constantly at an ever-increasing velocity, until, in a very few years, the system grinds to a halt, and they issue a new currency, and will talk of a “fresh start”, meanwhile having completely destroyed the value of the money for anyone who saved the old currency, or didn’t spend it down to the last unit before it became worthless.

Karl Marx and the sadistic fox-hunter, Friedrich Engels, used to quack about how Capitalism would eventually collapse of its own accord, no matter what anyone did. But they had it completely turned around, for while Capitalism can pretty much go on indefinitely producing wealth, and new forms of wealth as technology advances, it is Socialism, as exemplified in Keynesian meddling in the private economy, that is doomed to fail from the moment it gets a foothold in government. This is one of the great insights of von Mises and Hayek. And it is this lesson that we are now witnessing in America and around the world — the great failure of Keynesian, Socialist, big government.

And this is the lesson that President Obama — a nice guy at heart— can never grasp or even comprehend. There is a difference between quick-wittedness and intelligence, cleverness and profundity. A difference of which the President is not even conscious.

Hooooooooooooooooooooooooowwwwwwwwww! — Silverwolf

An excerpt from the first chapter-

As far as the political problem is concerned, some people who supported sound economics did so in order to justify, or to defend, the bourgeois civilization. But these defenders didn’t know the whole story.They limited their fighting to a very small territory, similar to the situation today in Korea where one army is forbidden to attack the strongholds of the other army. In the intellectual struggle, the same situation exists; the defenders are fighting without attacking the real foundation of their adversaries. We must not be content to deal with the external paraphernalia of a doctrine; we must attack the basic philosophical problem.

The distinction between “left” and “right” in politics is absolutely worthless. This distinction has been inadequate from the very beginning and has brought about a lot of misunderstanding. Even objections to the basic philosophy are classified from that point of view.

Auguste Comte [1798–1857] was one of the most influential philosophers of the nineteenth century, and probably one of the most influential men of the last hundred years. In my own private opinion, he was a lunatic as well. Although the ideas he expounded were not even his own, we must deal with his writings because he was influential and especially because he was hostile to the Christian church. He invented his own church, with its own holidays. He advocated “real freedom,” more freedom, he said, than was offered by the bourgeoisie. According to his books, he had no use for metaphysics, for freedom of science, for freedom of the press, or for freedom of thought. All these were very important in the past because they gave him the opportunity to write his books, but in the future there would be no need for such freedom because his books had already been written. So the police must repress these freedoms.

This opposition to freedom, the Marxian attitude, is typical of those on the “left” or “progressive” side. People are surprised to learn that the so-called “liberals” are not in favor of freedom. Georg Wilhelm Friedrich Hegel [1770–1831], the famous German philosopher, gave rise to two schools—the “left” Hegelians and the “right” Hegelians. Karl Marx [1818–1883] was the most important of the “left” Hegelians. The Nazis came from the “right” Hegelians.

The problem is to study basic philosophy. One good question is why have the Marxists been to a certain extent familiar with the great philosophical struggle, while the defenders of freedom were not? The failure of the defenders of freedom to recognize the basic philosophical issue explains why they have not been successful. We must first understand the basis for the disagreement; if we do, then the answers will come.

—

The ET published Robert Samuelson’s Newsweek column today. Samuelson writes about a book that analyzes the Great Depression. He says-

In this well-researched and elegantly written book, Ahamed—a professional money manager—attributes the Depression to two central causes: the misguided restoration of the gold standard in the 1920s and the massive intergovernmental debts, including German reparations, resulting from World War I.

[...]

Still, striking differences separate now from then. The biggest is the response of governments, which—unencumbered by the gold standard—have eased credit, propped up financial institutions and increased spending to arrest an economic free fall.

[...]

The mistakes of the Depression were largely rooted in prevailing economic orthodoxies, which had been overtaken by new and misunderstood realities. The present policies likewise reflect today’s economic orthodoxies. But what if they, too, turn out to be misguided because the world economy has moved on in ways that become obvious mostly in retrospect?

While he’s not taking a stand that returning to the gold standard (Mises’ term, the more accurate one, is the “gold exchange standard”) caused the Depression, his conclusion is strange to say the least. He’s essentially saying that we can only know what would have happened after it has happened and that any action taken before the “happening” are due to “economic orthodoxies” which cannot be prevented – there may not be anything else to do. He’s thus dismissing economic theory altogether. Maybe he should read the above Mises book, particularly the chapters on “money and inflation” and the gold standard-

During the first World War, the British government again embarked on an inflation.The pound was devalued against its gold equivalent.Then after the war the government wanted to return to the gold standard. But again they didn’t realize that to return to the gold standard at the pre-war parity of the pound would bring a sequence of events similar to that which occurred after the Napoleonic Wars. It was inexcusable that the great British Empire did not know how to go about it.They didn’t understand the theory, nor did they know the history. They had had the experience but didn’t recognize it.The situation was once aptly described by a Swedish man [Count Oxenstierna] who said, “Dost thou not know, my son, with how little wisdom the world is ruled.”

In 1922, Lord Keynes had already written a book in which he pointed out that domestic stability is more important than the stability of foreign exchange rates. I remember when I had a talk several years before this occurred with a British banker, not a socialist agitator, who told me, “Never again will the British people have to pay a higher rate of interest to the usurers of the world market for gold in order to keep a British currency at parity.” These were the ideas that prevailed, you know. And it was the same in this country.

When Britain returned to the gold standard after World War I, the Chancellor of the Exchequer at the time [1925], Mr. Winston Churchill, returned to the pre – war parity of the pound. He didn’t know that conditions were different in Great Britain than in other countries. London was the banking center of the world before the first World War, and for this reason foreign nations kept considerable amounts of deposits with the British banks. When war comes, these foreign deposits are called “hot money,” because depositors fear inflation and devaluation of the pound. They are anxious to withdraw their money but will wait if they believe that Great Britain will return to the pre-war parity.

[...]

Great Britain made a bad mistake by returning to the pre-war parity of the pound in 1925. This added to the income of persons who had bought bonds or otherwise lent money in “light” pounds.The government had to collect more taxes to repay those bonds in “heavy” pounds. A catastrophe resulted.

And the mob licks its lips, and listens. These people are going to work, for free, for my benefit, it thinks. Let them, it says, but I can’t let them free – completely – I need to control them, regulate them, so that they don’t defraud me, disappear with my share of the wealth. But the only thing the mob is capable of is destruction. For all its rules, and regulations, and controls, the market cannot be “controlled” – invariably something will go wrong (because the mob is blind to the fact that its “intervention” tilts the scales in favor of the unscrupulous). And the mob won’t get its share of the promised wealth; it will cry “fraud”. It will demand that “capitalists” should commit hara-kiri, that they should be hanged, stoned, jailed etc etc. And the “capitalist”, the pleader-capitalist, will get his comeuppance.

From Reason comes this article by economist Carlota Perez-

The long decades of laissez faire have made a dogma of the ‘free market’. It has been seen not as a rule-guided mechanism there to serve social ends, but as an unrestrained process the consequences of which, however toxic or harmful for the economy and society, must be accepted as right and legitimate. This is the typical -perhaps inevitable- view that prevails during Installation periods. Those are the conditions that enable a technological revolution to really transform the economy and to let the new leaders emerge. But, once Installation has run its course, this view needs to be replaced. Fortunately, bubble collapses and the many revelations of market wrong-doing put the dogma into question. The debate has now moved from whether regulation is necessary or not to what is good or bad regulation. Further still, the notion that the State has a direct responsibility in what happens in the economy has been reinforced in two senses: first, by the widespread recognition that the lack of regulation facilitated the casino and, second, by a general agreement on the need for government to come to the rescue directly and to stimulate the economy well beyond simple monetary policy.

This is not merely a financial crisis; this is the end of a period. As Stephen Roach puts it: leaders must have “the wisdom and the courage to shift the policy debate away from tactics and toward strategy”. To move ahead is not just to restore the previous “normality”, the false prosperity created by the financial boom. What is needed is to facilitate structural change and to create new conditions for a very different sort of prosperity into the future, where market and competition function under well designed rules and with a set of incentives that maximise growth and well being in a socially agreed direction.

[...]

The condition for the necessary switch of leadership to take place is for the State to come back into action and tilt the playing field decisively in favour of real production investment–using market mechanisms in implementation wherever these are fitting– while creating policy instruments to spread the benefits of the new wealth to the widest possible number (which is also a way of widening markets). That is what Bretton Woods and the Welfare State did the previous time around. The legitimacy of capitalism rests on fulfilling its promise of achieving the common good through individual pursuit of wealth and power. Installation periods, and especially bubbles, bring the system to extreme individualism and callousness; bubble collapses and the ensuing Deployment periods tend to bring back the balance and put the accent on the common good.

So socialism, a philosophy adopted by every thief, mass-murderer and plunderer in history is good by itself, but capitalism is good only if it results in “the common good.” And the productive man is just the means to a “social end” – like a donkey or a mule or an ox. This is the philosophy that is at the root of the present crisis.

A “capitalist” who jettisons the “natural rights” theory of ethics and accepts utilitarian ethics is digging his own grave, building his own guillotine. And he deserves all the ridicule and unearned brickbats he gets.

I will tackle some of the questions one by one. He writes-

An interesting question on the subject was added to my last post by Lemming, a regular commentator. I will quote his question, as others are asking similar questions, such as whether there is enough resource for endless growth:

Can you design a system of capitalism which doesn’t rely on economic growth to function? (Or is this simply a contradiction in terms?)

Capitalism is not a building designed by Frank Lloyd Wright, nor is it an operating system designed by Dave Cutler. It is an economic system based on free trade that “evolved” from the transactions people did with each other – transactions that have their roots in the barter system. Hence it cannot be designed, or imposed, or reconfigured by “someone” to meet nebulous ends. Mises writes about Capitalism in his “Human Action”-

The system of market economy has never been fully and purely tried. But there prevailed in the orbit of Western civilization since the Middle Ages by and large a general tendency toward the abolition of institutions hindering the operation of the market economy. With the successive progress of this tendency, population figures multiplied [p. 265] and the masses’ standard of living was raised to an unprecedented and hitherto undreamed of level. The average American worker enjoys amenities for which Croesus, Crassus, the Medici, and Louis XIV would have envied him.

The problems raised by the socialist and interventionist critique of the market economy are purely economic and can be dealt with only in the way in which this book tries to deal with them: by a thorough analysis of human action and all thinkable systems of social cooperation. The psychological problem of why people scorn and disparage capitalism and call everything they dislike “capitalistic” and everything they praise “socialistic” concerns history and must be left to the historians. But there are several other issues which we must stress at this point.

The advocates of totalitarianism consider “capitalism” a ghastly evil, an awful illness that came upon mankind. In the eyes of Marx it was an inevitable stage of mankind’s evolution, but for all that the worst of evils; fortunately salvation is imminent and will free man forever from this disaster. In the opinion of other people it would have been possible to avoid capitalism if only men had been more moral or more skillful in the choice of economic policies. All such lucubrations have one feature in common. They look upon capitalism as if it were an accidental phenomenon which could be eliminated without altering conditions that are essential in civilized man’s acting and thinking. As they neglect to bother about the problem of economic calculation, they are not aware of the consequences which the abolition of the monetary calculus is bound to bring about. They do not realize that socialist men for whom arithmetic will be of no use in planning action, will differ entirely in their mentality and in their mode of thinking from our contemporaries. In dealing with socialism, we must not overlook this mental transformation, even if we were ready to pass over in silence the disastrous consequences which would result for man’s material well-being.

The market economy is a man-made mode of acting under the division of labor. But this does not imply that it is something accidental or artificial and could be replaced by another mode. The market economy is the product of a long evolutionary process. It is the outcome of man’s endeavors to adjust his action in the best possible way to the given conditions of his environment that he cannot alter. It is the strategy, as it were, by the application of which man has triumphantly progressed from savagery to civilization.

[...]

It would be correct to describe this state of affairs in this way: Today many or some groups of business are no longer liberal; they do not advocate a pure market economy and free enterprise, but, on the contrary, are asking for various measures of government interference with business. But it is entirely misleading to say that the meaning of the concept of capitalism has changed and that “mature capitalism”–as the American Institutionalists call it–or “late capitalism”–as the Marxians call it–is characterized by restrictive policies to protect the vested interests of wage earners, farmers, shopkeepers, artisans, and sometimes also of capitalists and entrepreneurs. The concept of capitalism is as an economic concept immutable; if it means anything, it means the market economy. One deprives oneself of the semantic tools to deal adequately with the problems of contemporary history and economic policies if one acquiesces in a different terminology. This faulty nomenclature becomes understandable only if we realize that the pseudo-economists and the politicians who apply it want to prevent people from knowing what the market economy really is. They want to make people believe that all the repulsive manifestations of restrictive government policies are produced by “capitalism.”

The idea of laissez-faire capitalism is a very simple one – people trade with each other without “any” government intervention – no regulations, no taxes, no import duties, anti-dumping duties, Universal Service Obligation Funds, Central Banks, Securities and Exchange Commissions etc etc. One group of people demand something, another group meets the demand. That is all there is to it. The only thing government intervention, or any “redesign” will successfully end up doing is make capitalism more inefficient. And then what you have is an economy that can at best be called a “mixed economy” and at worst – an unmitigated disaster.

Next, CE writes-

On the other hand Lemming’s question does raise a more fundamental question. If endless economic growth is a problem it would imply that, at some point, economic growth should be frozen. This is a difficult idea, as it raises the question as to when exactly, or at what stage of development, growth should be stopped.

If (limited) resources are the bottle-neck as far as economic growth is concerned, then isn’t it obvious that the growth will automatically stop when we use up all the resources? Why does “someone” have to stop it from “outside” the system? Further, such speculation disregards history because I sincerely don’t remember any “resource” which we have run out of over ten thousand years of recorded civilization and have suffered critically as a result. If history teaches us anything at all (and we are ready to learn the lessons) it is that we often underestimate mankind’s capacity for progress and inventiveness. I am not talking about teleportation and space travel (I am no scientist but hopefully even these will happen in a few hundred years) here but about simple things like “food security.”

CE does defend capitalism against his own argument, but as I said at the beginning of the post, who is the subject here? Meaning, the question “If endless economic growth is a problem…” should be reframed as “If endless economic growth is a problem [for xyz]…” and then concrete reasons have to be offered as to who is xyz and why is economic growth a problem for xyz.

Then he writes-

It is very easy to sympathise with a view that relentless economic growth driven by consumption is somehow unacceptable. However, there appears to be a curious ‘moralism’ that frames the arguments about consumption.

Astute readers may, at this point, see that in some respects I may be setting up a straw man. I am starting to try to link consumption with a notion of worthiness. However, in linking the examples of consumption here to worthiness, I am hopefully illustrating a point. The point is that it is actually very difficult to regulate/control what is acceptable consumption. For example, a person may travel to far away places and offer the justification that they are learning about other cultures and people. That such an activity consumes massive resources might be considered acceptable by the person who undertakes such travel. On the other hand, another person might claim that this is an unacceptable use of resource.

He is right about the “curious ‘moralism’” part. And he’s right about the difficulty of “regulating acceptable consumption” because all human actions particularly in the economic sphere are subjective in nature – my spending pattern and my neighbor’s pattern will not match – our interests are different. And such “subjectivity” MUST be respected. NO ONE has the right to “regulate” the same, whatever argument they proffer, particularly a Mill-like “‘positive’ liberty” argument.

Next up-

However, there is a problem in the modern system of credit. One of the first points is that there is a system in which it is very complicated to work out how much debt we are really taking on. For example, cost of credit is often presented in terms of monthly repayments, rather than absolute cost. ‘Interest free’ credit is promoted to such an extent that it becomes irrational not to accept the credit. However, it is not interest free, as the interest is loaded on the goods upfront, thereby disadvantaging the cash buyers. This then encourages the use of credit.

These problems can be addressed through legislation. For example, information can be better presented, with an emphasis on the actual real cost of the credit. Consumer credit law might be devised such that retailers can not charge less for credit than they themselves are paying for the cost of the money that they are lending (though this might be complicated to administer). Teaser rates, variable interest rates, and a whole host of other methods for potentially leading consumers into debts that they can not repay are also amongst the subjects that should be addressed. For example, how can a consumer know what their debt obligations might be on a variable rate of interest, when even an economist is unable to make that prediction? All of these solutions would likely see a shrinkage in consumer credit, but would not restrict the freedom of an individual to access credit. The central point is that the system should be transparent and allow people to make well informed decisions.

[...]

I therefore accept a role of government, but only in making the role and nature of credit transparent.

I disagree that this is a problem that can be addressed through legislation. I would actually say that legislation is the problem here – government control over banks and their fiddling with the interest rates through their central banks. But that’s going away from the specific point under discussion. Is it the fault of the bank that the customer, even if he is an economist, is unable to understand the “real” cost of credit? The important part here is consent. As long as either party to a contract is entering into it voluntarily, NO ONE has the right to tell them that they cannot. If the consumer is unwilling to hire an expert who will then tell him what the rates mean, or is unwilling to spend the time to learn how to calculate it himself, he has no right to tell the government to force bankers and shopkeepers to make it easier for him. As for the uncertainty of a debt obligation under a variable interest rate, isn’t every thing uncertain in the sense that we aren’t omniscient? I don’t know if I will wake up tomorrow morning, or if a car will hit me on Sunday night, or if my business will pickup in a couple of months, or if my investments will have the same value in thirty years time as they do today. The reason people go for variable rate mortgages/ loans is because they are cheaper than fixed rate ones and they are willing to risk an increase in the interest rate in the future. Those who are risk-averse can surely pay a percentage point or two over and above the variable rate and lock themselves into a fixed rate loan. Why demand that the government enter the picture?

CE says – “All of these solutions would likely see a shrinkage in consumer credit, but would not restrict the freedom of an individual to access credit.” Yes, it probably won’t restrict the freedom of the individual to access credit, but that is because the legislation is not / will not be targeted at the individual – but at the “credit provider.” Bastiat’s Broken Window Fallacy, remember?

Every government intervention has a cost. Someone always pays.

Then-

Whilst the government is not holding a gun to the heads of consumers to make them borrow, they have sought to structure their economies to encourage such borrowing.

I agree. Since interventionism is no longer a dirty word thanks to Keynes, I think this needs to be considered-

By also severing interest returns from the price of time or from the real economy and by making it only a monetary phenomenon, Keynes was able to advocate, as a linchpin of his basic political program, the “euthanasia of the rentier” class: that is, the state’s expanding the quantity of money enough so as to drive down the rate of interest to zero, thereby at last wiping out the hated creditors.

He concludes-

In other words, the underlying system works. There are broader questions about how we might sustain such economic growth in the face of finite resources, and how the marketing of goods and services might ignite a desire to consume more than we would otherwise do. However, the problem arises as to how we might restrict consumption without making moralistic judgements, and how such consumption might be restricted in a way that is fair or just. If I wish to use money for all of the consumption necessary to use the Internet, then I would feel aggrieved if someone told me that this was unacceptable. Twenty years ago, the majority of us would not have even owned a computer, but we now all accept them as items we want, and which are useful to us.

This is the reality of economic growth. We are all tied into it and, as much as we may protest otherwise, we all reap the benefits.

I said that it is a half-hearted defense of capitalism and this is why – “the problem arises as to how we might restrict consumption without making moralistic judgements, and how such consumption might be restricted in a way that is fair or just.” There is no “problem.” Leave individuals to make their own judgments on all issues both in the political/personal and economic spheres. You can have an “opinion” on consumerism and “materialism” and so can I. We make not “like” it but we have no right to demand that it be “restricted.” Otherwise freedom – liberty – is put at risk.

I think Mises’ brief monograph – The Anti-Capitalistic Mentality – should be a sufficient answer to all the context-less grumbling about capitalism.

Note that the target is not the fraudulent behavior per se – that would be understandable, but the “men who earn millions” who also indulged in such behavior; that’s why the hatred for bankers, financiers and the private sector as a whole with the real thugs – politicians – leading the lynch mob. Intellectual honesty would demand that the angry mob recognize that the biggest Ponzi schemes are run by governments around the world, and that they steal more money from people in the form of taxation – both openly (direct and indirect taxes) and by stealth (inflation is a hidden tax on your money) – in a year than all the Madoffs put together do in their lifetimes. But mobs, by definition, have no brains.

The Times of India carried a column by Timothy Egan writing for the NYT – “Greed and Need”-

I was thinking of the Ponzi scheme thief [Madoff] and his cellar mates in the dungeon of truly awful rich people – Ken Lay, late of Enron and this world, and Leona “Only the Little People Pay Taxes” Helmsley – while working up a froth of good cheer over some other tycoons.

Bill Gates Sr. is 83 years old, six-foot-seven inches tall, with the kind of thin-haired crown that newborn babies and older men have in common. Though he looks like an avuncular conductor of a giant toy train set, he labors daily trying to give away one of the world’s biggest fortunes, that made by his son at Microsoft.

[...]

In the political realm, he is best known for fighting George W. Bush’s efforts to repeal the estate tax, a tax he feels is needed to prevent a permanent economic aristocracy in this country. If you need a moment of instant populist outrage, imagine all those children of people who made billions in the casino of credit default swaps passing on the gains to their little darlings, tax-free.

[...]

Warren Buffett, who until the recent meltdown was the world’s richest man (Bill Gates is tops again), is a fellow far-sighted traveler, who has pledged the bulk of his fortune to senior’s care at the Bill and Melinda Gates Foundation – the world’s largest philanthropy.

[...]

She lived alone in a one-bedroom apartment, quietly giving away more than $100 million.

But she protested when I suggested that her generosity was a way to return wealth made by her mother. “I don’t give back,” she said. “I give forward.

The moral of the story – if you want our good will, “buy” it from us , and we will shower you with praises, and call you “far-sighted”; because if you don’t, its clear as daylight that you are an evil, selfish, self-indulgent, b*****d intent on stealing money from grandmothers.

When Maira began his irritating and downright stupid writings on the failure of capitalism, I defended both Gates and Buffett. But there is no point trying to save a man who is hell bent on committing suicide, is there?

Gates Sr. is for the estate tax – he is afraid of a “permanent economic aristocracy.” The tax takes away the right of those who earn wealth to decide who they want to leave it to, or at least allows the government a significant say in who the beneficiaries of the wealth will be. And this is “good” because it “spreads the wealth around.” Does he know what wealth is, or at least how it grows? Or why an economic aristocracy cannot exist, at least in a free market where protectionism doesn’t save incumbents and their wealth and the only way to maintain the “aristocracy” is by continuously reinventing oneself and meeting the requirements of customers? I think not.

CNBC carried an interview with Buffett the other day. He said that any tax breaks that “help” him (and people earning in millions) are not helpful. Help those who need it, he said. There is nothing wrong with reducing taxes on a majority of people, but something is wrong if a minuscule minority pays for the upkeep of the majority. The compulsory progressive taxation system that is followed by most countries in the world – the tax on income – is not based on the principle that regular business transactions follow – exchange of value. It is based on a simple premise – he who earns more pays more. Why? Because he earns more – meaning in most cases – that the market is willing to pay him top dollar for his abilities. So, in effect it is a tax on your ability. The system thus punishes success and rewards failure (the dole for the unemployed is a good example).

Two Ayn Rand pieces are very relevant here. The first is “The Age of Envy” from Return of the Primitive where she tears into the people I mentioned, and their mentality. Among other things, she writes about the war against success-

A noted economist proposed the establishment of a tax on personal ability, suggesting that “a modest first step might be a special tax on persons with high academic scores.” What would this do to the talented, purposeful young people who are barely able to make a living while working their way through school? Would they be able to pay a tax for the privilege of using their intelligence? Who—rich or poor—would want to use his intelligence in such conditions?

The economist she refers to is Jan Tinbergen, the first winner of the “Economics Nobel.” This crook proposed a lump sum “capability tax.” Couldn’t find much on his idea online except this. Good riddance.

The second piece is Francisco D’Anconia’s famous “Money speech” in Atlas Shrugged. These sections particularly-

But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made—before it can be looted or mooched—made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can’t consume more than he has produced.

[...]

Only the man who does not need it, is fit to inherit wealth—the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue that was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it.

—-

From a Mises article-

Last weekend, Harvard University sponsored a conference called (I am not making this up) “The Free Market Mindset: History, Psychology, and Consequences.” Its purpose was to try to figure out why, since everyone knows the current crisis amounts to a failure of the market economy, the stupid rubes continue to believe in it. The promotional literature for the conference opened with That Quotation from Alan Greenspan — the one in which he suggested that there was, after all, a “flaw” in the free market he hadn’t noticed before.

Well, that does it, then! If our Soviet commissar in charge of money and interest rates says the free market doesn’t work, who are you to disagree?

The promotional material continues:

If the current state of the U.S. economy makes clear that former Federal Reserve Chairman Alan Greenspan’s faith in free markets was misplaced, the question remains: what was it about free markets that proved — and still continues to prove — so alluring to economists, scholars, and policy-makers alike?

Because, of course, if there’s one guiding principle behind the largest government in world history, it’s free markets. Ahem.

Why would intellectuals in major universities be so unsympathetic to free markets? One reason is that they don’t like freedom – egalitarianism and the “central planner” rulez! The other reason is that they don’t know better. Their answer to a “why” is “we have always done it like this.”

—
“I am the man whom you did not want either to live or to die. You did not want me to live, because you were afraid of knowing that I carried the responsibility you dropped and that your lives depended upon me; you did not want me to die, because you knew it.” — John Galt

The crisis has renewed interest in Rand’s writings, and the move to raise taxes on the highest earners is making people consider “Going Galt.” Predictably, the response to such a “threat” is “you think you are that important? we don’t need you.” Read what Ed Cline has to say on the subject. There is one person who has done it – Shrugged. He did it over 40 years ago, and has also written a book on the whole philosophy. Read it here. [Note: I have committed some blunders in the past, linking to people I shouldn't have linked to, and have regretted it later on. To clarify, as of now, the only chapters I have read are 11, 12, 13, 1 and some part of 2, and there isn't too much I disagree with in them.] He says-

After I had thought about Atlas Shrugged for a while, I realized that Shrugging is appropriate not just to someone at or near Galt’s level of productive capability, but to anyone who is concerned with the ethical propriety of his life. I believe that even though there are immense differences between Galt and a track walker, they are differences merely in quantity, not in quality. Thus Mr. Walker may well have just as legitimate a concern for the ethical nature of his behavior as Galt has for his. When I contemplated the question “If Galt steps down to the level of the track walker, what would the track walker step down to?” I identified this as the essence of Shrugging: do not pay tax on your creative ability. I believe that every person has some creative capacity, and that the proper way to respond to government is to deny it the benefit of that creativity. As Rand observed: “Physical labor as such can extend no further than the range of the moment. The man who does no more than physical labor, consumes the material value-equivalent of his own contribution to the process of production, and leaves no further value….”

Rand herself talked about it (she didn’t support “Shrugging”), calling it the “sanction of the victim”-

Then I saw what was wrong with the world, I saw what destroyed men and nations, and where the battle for life had to be fought. I saw that the enemy was an inverted morality—and that my sanction was its only power. I saw that evil was impotent—that evil was the irrational, the blind, the anti-real—and that the only weapon of its triumph was the willingness of the good to serve it. Just as the parasites around me were proclaiming their helpless dependence on my mind and were expecting me voluntarily to accept a slavery they had no power to enforce, just as they were counting on my self-immolation to provide them with the means of their plan—so throughout the world and throughout men’s history, in every version and form, from the extortions of loafing relatives to the atrocities of collectivized countries, it is the good, the able, the men of reason, who act as their own destroyers, who transfuse to evil the blood of their virtue and let evil transmit to them the poison of destruction, thus gaining for evil the power of survival, and for their own values—the impotence of death. I saw that there comes a point, in the defeat of any man of virtue, when his own consent is needed for evil to win—and that no manner of injury done to him by others can succeed if he chooses to withhold his consent. I saw that I could put an end to your outrages by pronouncing a single word in my mind. I pronounced it. The word was “No.”