“Gold is a noble metal…”

Re: Gold coins, at bottom of sea for millennium, go on display

A wonderful little report about a recent discovery of gold coins off the coast of Israel, which confirms why gold is the premier store of value since time immemorial.
Patrick Barron
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My letter to the Philadelphia Inquire re: Will a new bomber bring boom times?

Dear Sirs:
Ignore for the moment whether or not the US actually needs a new stealth bomber, which is a very complicated and difficult question of how best to protect our country, and understand that building one will NOT create prosperity. Military spending consumes capital, which is the product of private savings. But whereas most private savings go into building the capital stock of the nation in order to provide more goods later, military spending is pure consumption in the present. Oh, the people who build the bomber may find themselves flush, but their temporary prosperity comes at the cost of the rest of the nation both present and future.
Patrick Barron
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Limited Government Is Not Possible in the Interventionist State

Would we have political liberty we must first have economic freedom, for the form of government is determined by the form of economic organization. At first blush the opposite would seem to be self-evident; i.e., that our form of government determines all else, including our economic structure. But Mises advises otherwise. In his magnum opus Human Action, (page 283 of the Mises Institute’s scholars’ edition), Mises explains thus (my emphasis):

 

Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism’s triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders.

 

Likewise, in The Law by Frederic Bastiat, (page 53 of the 2012 Laissez Faire Books paperback edition), Frederic Bastiat has this to say (my emphasis again):

 

A science of economics must first be developed before a science of politics can be logically formulated. Essentially, economics is the science of determining whether the interests of human beings are harmonious or antagonistic. This must be known before a science of politics can be formulated to determine the proper functions of government.

 

The insights of these two titans of liberty are vastly important to those of us who value our liberty and wish to maintain what we have and expand it in the future. It counsels us that attempts to pass laws or even constitutional amendments to ensure our political liberty will be wasted as long as our economic freedom continues to be usurped by government. In other words, limited government will fade in the face of the modern regulatory state, and no laws can protect us from its deprivations. Economics not only trumps politics, it determines its very form.

 

The root cause of economic interventions is the fallacy that government can improve our lives by making decisions for us. But this is impossible. As I explained in an earlier essay, by their very nature economic interventions by government are not something that we desire voluntarily. Cooperation under the division of labor is non-coercive and requires from government only access to an honest criminal justice system to enforce contracts and protect property rights. However, government mandates require government coercion for their enforcement.

 

An example is the mandate that everyone contribute to the government’s Social Security and Medicare programs. Although the public requires no government mandate to buy any of the wide ranging retirement savings and health insurance products available on the free market, government must force us to participate in its Social Security and Medicare schemes. Absent the mandates no one would participate. The systems are fatally flawed transfer taxes, Ponzi schemes of sorts, posing as retirement savings and healthcare plans. There are no real profit producing assets from which to pay the plans’ distributions, merely the promise by government that it will continue to force others to pay you in the future as it forces you to pay others in the present.  The programs can be maintained only by the police power of the state. What may appear to be widespread acceptance of the Social Security and Medicare mandates is the vociferous support of those receiving benefits and the completely rational desire of those paying to stay out of jail. Social Security and Medicare have replaced our freedom to dispose of our own money as we choose with the compliance apparatus of a police state. This is not limited government, and no constitutional amendment can alter this fact.

 

The more government meddles in the economic sphere–which should require no regulation at all, since it is completely voluntary–the more police power is necessary to force us to comply. All government agencies possess huge enforcement mechanisms that not only can confiscate our property but take away our freedom. The Occupational Safety and Health Administration (OSHA) is little more than a government supported extortion racket, finding nebulous health and safety violations in the workplace that apparently do not concern the actual workers themselves, who haven’t been chained to their machines for quite some time now. The Environmental Protection Agency (EPA) shuts down businesses and threatens entire industries for violations of arbitrarily established environmental standards that are of little concern to the people affected. Smokestack emissions and the like are purely local environmental issues for which one would expect a wide variety of standards across the nation. Undoubtedly the people employed by the giant steel mills of Gary, Indiana tolerate smokestack emissions that Beverly Hills residents would find unacceptable. These arbitrary EPA standards are depriving Americans of the opportunity to work at higher paying jobs. Their freedom to tolerate more pollution in order to enjoy a higher standard of living has been usurped by government.

 

Speaking of jobs, just try practicing some profession that requires a government issued license, even if the parties using your service do not care whether you have one or not. Better yet, employ someone who is willing to work at a wage rate below the proscribed minimum or who is willing to work without healthcare or family leave benefits. The police power of the state will descend upon you, even though there is no dispute between you and your employee. Want to reclaim discarded furniture, refurbish it, and sell it out of your house? Better not try to do that without a business license and a store front in an area that is properly zoned. Do you want to hire “an able bodied man” to do some heavy lifting at your place of business? Oh, oh! The discrimination police will put you in your place, which may be a jail cell if you cannot pay their fine.

 

No truly limited government can perform these police functions, so expecting one falls into the category of a cognitive dissonance. In laymen’s terms, we are just kidding ourselves that we are a truly free people with a government that is subservient to our wishes and exists primarily to protect our life, liberty, and property. Keep this in mind the next time you hear that some new economic regulations have been proposed or implemented. Concomitant with these regulations comes an ever more powerful and coercive government.

 

The lesson is clear: Where the state expands liberty retreats.

 

Patrick Barron

 

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My letter to the NY Times re: How much more government “help” can the poor withstand?

Re: Consumer Protection Agency Seeks Limit on Payday Lenders

Dear Sirs:
Although one loses count very quickly, government’s attacks upon the poor seem to come in three’s. First government fights the dreaded specter of deflation, meaning lower prices, by its irresponsible quantitative easing programs that have indeed driven up the cost of housing and reduced home ownership to the lowest level in decades. Next government tries to raise the poor’s income by increasing the minimum wage, which has simply caused a reduction in the employment chances of the least skilled of our population. And now, without a job and without a home to provide collateral, government will prevent Americans with poor credit histories from getting short term so-called payday loans. How much more government help can the poor withstand?
Patrick Barron
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Wrong policies for Greece

From today’s Open Europe news summary:

Greek PM refuses to change course ahead of crucial week of meetings with Eurozone partners

“…Greek Prime Minister Alexis Tsipras…reiterated his plan to increase the minimum wage, halt privatisations, reopen closed public broadcaster ERT and tackle tax evasion.”

Increasing the minimum wage will increase unemployment. Halting privatisations will decrease what Murray N. Rothbard calls “private purchasing power remaining” or PPPR; i.e., resources confiscated and squandered by government cannot be used to satisfy the real needs of the market. Reopening public broadcasting will increase government spending still further–thus, reducing PPPR–and will give the government a propaganda outlet. Tackling tax evasion, although probably a worthy goal in a low and equitable tax environment, will further reduce PPPR and drive many Greeks to desperation. In other words, if pursued with vigor, all four of these policies will make matters worse not better.

Patrick Barron

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The real interpretation of high German exports

From today’s Open Europe news summary:

German exports hit record high in 2014

German exports hit a record-high of €1.13 trillion in 2014, a 3.7% increase from 2013, the Federal Statistics Office announced on Monday. German imports increased by 2% to €915.6bn, while the German think tank Ifo Institute calculates that Germany’s resulting trade surplus of €217bn is the highest of all countries in the world.

I would rewrite the head line to the above report in this way:
“Germany sends real goods to foreigners and receives worthless pieces of paper in exchange.”
Patrick Barron
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I beg to differ…

Re: CAT CEO says strong dollar bad for US economy

Here come US exporters, right on schedule, complaining that a strong national currency is bad for them and for the US economy. Not so. When a nation debases its currency in order to make its exports cheaper to foreigners, the result is not an increase in wealth but a transfer of wealth within a monopolized currency area. In the short run exporters are able to secure resources at current prices; however, the necessary increase in the nation’s money supply causes prices to rise. Eventually the exporters’ international market advantage vanishes, creating calls for another round of currency debasement. This is a sure path to capital destruction and overall impoverishment. No nation can make others subsidize its economy and increase its wealth by debasing its own currency.
Patrick Barron
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Why the welfare state grows, and grows, and grows…

Re: George Will on the mushrooming welfare state

Columnist George Will puts recent research into the adverse consequences of the welfare state into words that we all can understand. However, I do not think that he gets to the heart of the problem. The welfare state grows because there is no clear line (and there can be no clear line) between those who are supposedly “entitled” to benefits and those who are not. There will always be those who fall just fractionally outside the needs-based entitlement. So the entitlement line gradually gets moved to include more and more recipients. The real issue is how state welfare can be justified in a society based on the rule of law that ensures individual liberty. Welfare entitlements are a “taking” from Peter to give to Paul at the point of a supposedly legal gun. But how is state confiscation any different or more just than private robbery? That amorphous entity called the state decides that it will shirk its duty to protect our property and do exactly the opposite. No majority can make such an unjust act legal through the legislative process.
Patrick Barron
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My letter to the NY Times re: Not really a favorable market reaction

Re: Stimulus for Eurozone, but it may be too little or too late

Dear Sirs:
Your analysis of the likely effect of the European Central Bank’s proposed massive quantitative easing program is full of economic fallacies that, unfortunately, masquerade as conventional wisdom. One often stated fallacy is your statement that “…the initial market reaction was favorable.” The nature of the ECB intervention is to buy assets above their current market prices with money that it will create out of thin air. Of course market prices will rise! But one can hardly characterize such a market response as favorable.
Patrick Barron
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Get ready for negative interest rates in the US

Re: Dollar rise puts Fed under pressure

I predict that the Fed will start charging negative interest rates on bank reserve accounts, which will ripple through the markets and result in negative interest rates on savings at banks. I make this prediction only because it is the logical action of the Keynesian managers of our economy and monetary policy. Our exporters will scream that they can’t sell goods overseas, due to the stronger dollar. So, what is the Fed’s option? Follow the lead of Switzerland and Denmark and impose negative interest rates in order to drive down the foreign exchange rate of the dollar.
It is the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”. If savers won’t spend their money, the government will take it from them.
Patrick Barron
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