The Federal Reserve Turns 100: A Timeline Of Economic Mismanagement

On Dec. 23, 1913, Congress passed the Federal Reserve Act, which created a central banking system in the United States, of which all nationally chartered banks were forced to become members. (State banks had a choice, but nonmember banks had to keep deposit accounts with member banks, and so were under control of the Federal Reserve as well.) The Federal Reserve Note, the current legal tender, was also created at this time. It has now been a full century since this institution was created, so let us reflect upon its various (mis)deeds. This a timeline of some of the major events involving the Federal Reserve over the past century:

1913: The Federal Reserve is created.

1914: Benjamin Strong becomes the first Governor of the Federal Reserve Bank of New York, which was the most powerful position in the Federal Reserve until the Banking Acts of 1933 and 1935. Charles S. Hamlin becomes the first Chairman of the Federal Reserve.

1916: Prices have increased over 10 percent since 1913. William P. G. Harding becomes Chairman of the Federal Reserve.

1918: World War I drives prices higher. Prices have increased over 50 percent since 1913.

c. 1919: The money supply has doubled since 1913. This is an inflation rate of 100 percent in a six-year period by the correct definition of inflation.

1920: Prices have doubled since 1913. This is an inflation rate of 100 percent in a seven-year period by the commonly used (but incorrect) definition of inflation. This, along with the realignment to a peacetime economy following World War I, helps to cause the Depression of 1920-21.

1921: Following the Depression of 1920-21, the Fed continues inflationary policies to pay off war debts and help the Bank of England maintain a phony gold standard. This consequences of this were partly to blame for the Great Depression.

1922: Prices fall, but have still increased 70 percent since 1913. Prices remain near this level for the rest of the decade. Daniel Crissinger becomes Chairman of the Federal Reserve.

1927: Roy A. Young becomes Chairman of the Federal Reserve.

1928: Benjamin Strong dies in office. George L. Harrison becomes President of the Federal Reserve Bank of New York.

c. 1929: The money supply has tripled since 1913.

1930: Eugene Meyer becomes Chairman of the Federal Reserve.

1930-33: Prices fall again, and continue falling until reaching a low of 31 percent above 1913 levels in 1933. Prices remain near this level for the rest of the decade.

1933: Eugene R. Black becomes Chairman of the Federal Reserve. President Franklin Roosevelt orders that gold owned by American citizens be confiscated and replaced with Federal Reserve Notes.

1933-35: The Banking Acts create the Federal Deposit Insurance Commission, insuring individual deposits and thereby creating a moral hazard for banks, which no longer needed to be as careful with their assets.

1934: Marriner S. Eccles becomes Chairman of the Federal Reserve.

1938: The Federal Reserve panics at the potential for inflation, and doubles the minimum reserve requirements. This sends the economy into a tailspin of credit liquidation.

c. 1941: The money supply has quadrupled since 1913.

1941-45: World War II drives prices higher, from 41.4 percent above 1913 levels in 1941 to 81.8 percent above 1913 levels in 1945.

c. 1943: The money supply has quintupled since 1913.

1947: Prices are again more than double those of 1913.

1948: Thomas B. McCabe becomes Chairman of the Federal Reserve.

1951: William McChesney Martin becomes Chairman of the Federal Reserve.

c. 1952: The money supply has increased ten-fold since 1913.

1960: The money supply has increased twenty-fold since 1913.

1961: Prices have tripled since 1913.

1966: The money supply has increased thirty-fold since 1913.

1970: Arthur F. Burns becomes Chairman of the Federal Reserve. The money supply has increased forty-fold since 1913.

1971: Prices have quadrupled since 1913. President Nixon ends the Bretton Woods system, closing the gold window. From this point onward, the Federal Reserve is able to create currency at a much greater pace, leading to much faster inflation and price increases.

1972: The money supply has increased fifty-fold since 1913.

1975: Prices have quintupled since 1913.

1978: G. William Miller becomes Chairman of the Federal Reserve.

1979: Paul Volcker becomes Chairman of the Federal Reserve.

1980: The Depository Institutions Deregulation and Monetary Control Act gives the Federal Reserve more control over non-member banks. The money supply has increased one hundred-fold since 1913.

1983: Prices have increased ten-fold since 1913.

1987: Alan Greenspan becomes Chairman of the Federal Reserve.

1990: The money supply has increased two hundred-fold since 1913.

1995: Prices have increased fifteen-fold since 1913.

2000: The money supply has increased three hundred-fold since 1913.

2004: The Federal Reserve lowers its interest rate target, leading to malinvestments in housing that create a bubble. The money supply has increased four hundred-fold since 1913.

2006: Ben Bernanke becomes Chairman of the Federal Reserve. Prices have increased twenty-fold since 1913. The housing bubble peaks.

2008: The money supply has increased five hundred-fold since 1913. The housing bubble bursts. The Federal Reserve begins quantitative easing in an attempt to mitigate the financial crisis of 2007-08.

2009-2011: Bloomberg L.P. sues the Board of Governors of the Federal Reserve System for disclosure of information about banks and other financial institutions that had borrowed from the Federal Reserve discount window during the United States housing bubble and ensuing financial crisis. The Fed was forced to release the information, which showed that the Fed had made as much as $1.2 trillion available to banks and other companies in the form of emergency loans between 2007 and 2010.

2013: Over the past century, the US dollar has lost 95.6 percent of its purchasing power. On average, an item that cost $100 in 1913 costs $2,354.23 at present. Also, while there were approximately $16 billion in circulation in 1913, this has expanded to $10.9718 trillion, an increase of over 68,000 percent.

Book review: It’s a Jetsons World

It’s a Jetsons World: Private Miracles and Public Crimes is a collection of essays about the wonders of the free market and the failures of statism written by Jeffrey Tucker.

Mr. Tucker begins by comparing the current world situation to that of the Jetsons cartoon, and finding that despite some differences in the available technologies, the only real difference is that we also have a leviathan state which runs counter to the advancements brought about by voluntary exchange. The rest of the first section, titled “Private Miracles,” explores the dichotomy between voluntary and coercive interactions through various situations and conundrums, from grocery store checkouts to auto-defrosting refrigerators to internet connections.

The second section of the book, “Free Association, Peace, and Plenty,” explores the benefits of voluntary interactions, some of which we overlook and/or take for granted. Several of the examples also make the point that central planning through government coercion could not produce such benefits, as Mises once proposed with the economic calculation problem.

“Work for Free,” the third section of the book, speaks mostly about the functionality of the free market and how it can adapt to various situations and problems. It is here that Tucker’s wisdom truly shows, for he is able to debunk with counterexamples the claims of anti-free market theorists that voluntary exchange has no way of dealing with heartless people, criminals, or uncertainties in the medium of exchange. He also shows through the examples of the decline of the U.S. piano industry and the relief efforts following the Haitian earthquake that economic interventions tend to hurt the very people they are supposed to help.

The next section of the book, “Can Ideas Be Owned?,” is a collection of arguments against patents, copyrights, and other forms of “intellectual property.” Tucker shows through examples of agricultural and pharmaceutical patents, as well as book, music, and movie copyrights, that monopolizing knowledge serves to restrict knowledge and hold back progress. A large part of the section is a favorable book review of Against Intellectual Monopoly by Michele Boldrin and David Levine.

Tucker concludes with a section on “Public Crimes,” which delves into the true nature of government laws and regulations and their ill effects on civilization. He also turns his attention to the difference between capitalism and corporatism, as well as the coercive nature of government-run military defense. The last subsection returns to the Jetsons theme, discussing a particular episode that presents a credible case for how even the remains of the state that may still be with us in the future will be relatively harmless and even comical compared to the monstrosities of the present day.

While the book does not go into extensive detail on free market economic theories, it presents a message of liberty in a fun, lighthearted manner that is ideal for a person curious about libertarian ideas.

Rating: 5/5

Sriracha pollution and how a free society might handle it

On Oct. 31, Judge Robert H. O’Brien denied a request made by attorneys representing the city of Irwindale, Calif. for a temporary restraining order against a Sriracha hot sauce factory. Residents of the city have been complaining that pollution from the factory in the form of garlic and chile vapors are causing coughs, sneezes, headaches, burning throats, and watering eyes.

John R. Tate, representing Huy Fong Foods, the company that manufactures Sriracha, argued that shutting down the factory now would cause severe financial harm and interrupt a delicate production cycle, as well as prevent inspectors from the South Coast Air Quality Management district from completing an analysis of the air coming from the plant.

An upcoming hearing on Nov. 22, a judge will decide whether to grant a preliminary injunction against Huy Fong Foods. If this is denied, the city has also sought a permanent injunction on factory operations, though a hearing date has not been set for this request.

Situations like this one present one of the greatest challenges to free market anarchists, as many people cannot envision how people could solve a problem like environmental pollution without a government, and will thusly support the state out of this believed necessity. It is therefore worth examining how voluntary methods can solve pollution problems.

First, we must define what pollution is. The Free Dictionary provides a useful definition: pollution is the contamination of soil, water, or the atmosphere by the discharge of harmful substances. As everything in a stateless society is privately owned, pollution results in damage to private property. Thus, dealing with pollution is properly viewed within the context of dealing with damage to private property.

The first step is to mitigate losses, which as with other forms of private property damage, such as fires and floods, is best handled through insurance. Pollution insurance would cost a property owner a certain amount to maintain a policy and pay out a certain amount if the insured property becomes polluted in a manner described in the insurance policy. This system protects property owners against losses and incentivizes the insurance company to act to maintain a clean environment, as they make a steady stream of money unless and until pollution occurs, at which point they lose money. (Note: this type of pollution insurance is not the same as the commercial pollution insurance that is used today. Commercial pollution insurance is for the purpose of making sure that victims of pollution can be compensated in the event of the bankruptcy of a corporation that has caused an environmental disaster. As corporations are legal fictions created by the state, a stateless society would have no corporations in the contemporary sense, but commercial pollution insurance policies would likely still be held by private business owners.)

As with many problems, an ounce of prevention is worth a pound of cure. Such prevention can be accomplished through a system of dispute resolution organizations (DROs). These organizations would provide dispute resolution services, contract insurance, and contract enforcement in the absence of a state, and it would be necessary to retain the services of a DRO to ensure that one’s business associates cannot repudiate contracts without penalty. It is easy to ensure that people abide by DRO rulings which they agreed to accept in advance by employing a reputation rating or contract rating that works similarly to today’s credit ratings. Not keeping one’s word reduces one’s contract rating, which leads to higher costs for DRO services (if the DROs do not ostracize the person completely) as well as a reluctance by any other person to enter into a contract of business with a person who is known to be untrustworthy. This would make it difficult to acquire even the basic necessities of life, so people would obey DRO rulings in all but the most extreme cases.

Now that the conceptual organizations of a free society have been discussed, let us see how they can deal with pollution. Whenever the owner of a potentially polluting business wants to set up shop somewhere, they must first buy land from someone. In a free society, if private landowners choose not to sell to a particular buyer, then no one can force them to do so, as eminent domain is a violation of property rights which can only occur under a coercive system, such as the current statist system. But suppose that someone is willing to sell land to a potential polluter. A pollution insurance business then has several options: it can move to outbid the potential polluter, depriving them of a place to pollute; it can engage with the seller and explain why selling to the potential polluter is bad for everyone; it can pay the potential polluter to refrain from polluting; or it can work out a non-polluting contract with the potential polluter.

Let us assume that the potential polluter is extremely rich, such that outbidding the potential polluter is impossible. Let us also assume that talking the seller out of selling to the potential polluter is unsuccessful. The pollution insurer can pay the potential polluter up to the amount of money coming in from policyholders and still be making some profit. This could go toward pollution reduction technology, a buyout of the polluting factory, or a subsidy for running the factory at less than full production. Failing all of this, the insurer can pay out the claims from the property owners in the polluted neighborhood so they can clean up their properties or move away from the pollution source.

The DRO that represents the potential polluter would also be against the pollution, as pollution results in damage to private property, which leads to damage claims against the polluter. (Such claims can be filed regardless of pollution insurance, as a violation of property rights is occurring either way.) The DRO, in its roles as dispute resolver and contract insurer, would be paying out on such damage claims. A DRO would recoup these losses by raising rates for the polluter, and may drop the polluter as a customer if the claims against the polluter become too costly. The polluter would be unable to enter into contracts if no DRO is willing to accept the cost of paying out pollution damage claims, which would cripple the polluter’s business.

In a free society, there are the DROs of the residents, the DRO of the potential polluter, and the pollution insurance company all working to minimize pollution levels. The market has not failed at solving the problem of pollution; it has been forcibly prevented from doing so by state violence.

The Truth About the History of U.S. Sovereign Default

During the ongoing US government shutdown, there have been worries that a sovereign default is looming if no deal is reached. While many people in the establishment media have been claiming that a sovereign default is unprecedented, this is false. Let us examine the depth of the historical inaccuracy being perpetuated in the establishment media.

The first event in American history that could be called a sovereign default occurred in 1779. In June 1775, the Continental Congress issued bills of credit amounting to 2 million Spanish milled dollars to be paid starting in 1779 in four annual installments. $4 million more were issued later in 1775, and $13 million were issued in 1776. Such bills continued to be issued until $241,552,780 of them were outstanding, and the British were successful in forging even more of them. The Continental Congress made each state responsible for redeeming the bills in proportion to their respective population sizes, as it had no power to levy taxes. As the Revolutionary War went on, the public realized that neither the Congress nor the states were able to redeem the bills, leading to the phrase “not worth a Continental.” Congress admitted default on the bills in November 1779 by announcing a devaluation of 38.5 to 1.

Revolutionary War debts also led to the second US default. The Continental Congress borrowed money in addition to its money printing. The domestic portion of this debt was 11,710,000 Spanish dollars. The Continental Congress began to default on these obligations on March 1, 1782. With the Funding Act of 1790, the US Congress assumed these state-held debts while offering to pay only part of the owed money. This act of federal acquisition of state debts was the first “bailout” in American history.

Another default occurred during the War of 1812, when America was on the brink of defeat. The White House and the Capitol were burned in 1814, and American soldiers were fighting without pay. In November 1814, the Treasury defaulted on some of its bonds.

The fourth default episode occurred during the Civil War. In August 1861, Congress created a new paper currency, which became known as the “greenback” due to its ink color. There were $60 million of these printed in denominations of $5, $10, and $20. They were redeemable in specie at a rate of 0.048375 troy ounces of gold per dollar, but this promise was broken on Jan. 1, 1862. More greenbacks were issued in 1862, and while these were not defaulted on, their holders did not get their promised specie until 1879.

The theme of war leading to default would continue in delayed fashion after World War I. On Apr 24, 1917, Congress began issuing “Liberty Bonds” to pay for the war effort. The fourth round of these bonds was issued on Oct. 24, 1918, and was an issue of $7 billion at 4.25 percent interest for 20 years, callable after 15 years, and payable in gold at a rate of $20.67 per troy ounce. By 1933, the interest payments on these bonds were draining the coffers of gold, with only $4.2 billion in gold remaining. There was no way to pay the principal when it matured in 1938. The total national debt at the time was $22 billion, meaning that paying the interest on the national debt would soon empty the gold reserves. Franklin Roosevelt’s solution was to refuse redemption in gold to Americans and increase the exchange rate to $35 per troy ounce of gold for foreigners.

The gold window was closed to Americans in 1933, but it was closed to everyone by Richard Nixon in 1971 in the event known as the Nixon Shock. At the end of World War II, America owned 574 million troy ounces of gold, the majority of the world’s gold reserves. As Germany and Japan recovered in the 1950s, the US share of global GDP decreased from 35 percent to 27 percent. Inflation by the Federal Reserve, a negative balance of payments, Great Society programs, and Vietnam War debts further strained the Bretton Woods system. Between 1960 and 1971, the US gold reserve was cut in half. During the year of 1970, the monetary supply inflated from $590 billion to $633 billion. Nixon responded by ending all convertibility of the dollar to gold, thereby defaulting on promises to creditors.

The most recent default occurred in 1979. Due to a debt ceiling debate in April 1979, a failure of word processing equipment used to prepare check schedules, and record high volume of participation by small investors, $122 million in bills coming due on April 26, May 3, and May 10 were not paid in full and on time. A class-action lawsuit, Claire G. Barton v. United States, was filed in the Federal court of the Central District of California over whether the Treasury should pay additional interest for the delay. The government decided to pay up to attempt to move past the incident, and no one lost any money that they were owed on the bills. Still, the end result was a permanent increase in the interest rates of Treasury bills by 60 basis points.

Whether or not a default ultimately results from the current gridlock in Congress, the truth is that such an event would be not the first of its kind in American history, but the eighth.

We are not a country of anarchists: a philosophical rebuttal

On Oct. 4, Sen. Elizabeth Warren (D-MA) made a blog post which presents a statist viewpoint of the necessity of government services as well as an incorrect association of Republicans with anarchism. Let us examine her sophistry and rebut it line-by-line. In the interest of reason, something which tends to make statists uncomfortable, we will skip around occasionally.

“If you watch the anarchist tirades coming from extremist Republicans in the House, you’d think they believe that the government that governs best is a government that doesn’t exist at all.”

Right out of the gate, there are multiple fallacies and falsehoods. Anarchism is an anti-political philosophy which holds the state to be an unnecessary, immoral, and harmful institution. Anarchists advocate for stateless societies with an absence of force, fraud, and coercion. This is not the position of any House Republican.

“Extreme” is a philosophically invalid term that is used frequently by statists, particularly those of a progressive bent, to dismiss a position without having to argue against it. As such, it is an example of argumentum ad lapidem.

No government exists; only its component parts (each person, each building, each gun, etc.) exist, because only those parts have independent forms in physical reality. To define existence in a way that does not require an independent form in physical reality allows for abstractions and universals to exist alongside concrete objects, which deprives the idea of existence of meaning, as anything can then be said to exist.

“But behind all the slogans of the Tea Party – and all the thinly veiled calls for anarchy in Washington – is a reality: The American people don’t want a future without government.”

“The American people” is a nonexistent universal, just like government. Each individual person exists; “the American people” does not. Therefore it cannot be a reality that the American people do not want a future without government. It is also not the case that each individual person wants a statist future. Some individuals within the geographical area of the United States are anarchists, this writer included.

“When was the last time the anarchy gang called for regulators to go easier on companies that put lead in children’s toys? Or for inspectors to stop checking whether the meat in our grocery stores is crawling with deadly bacteria? Or for the FDA to ignore whether morning sickness drugs will cause horrible deformities in our babies?

When? Never. In fact, whenever the anarchists make any headway in their quest and cause damage to our government, the opposite happens.

…The Food and Drug Administration makes sure that the white pills we take are antibiotics and not baking soda. The National Highway Traffic Safety Administration oversees crash tests to make sure our new cars have functioning brakes. The Consumer Product Safety Commission makes sure that babies’ car seats don’t collapse in a crash and that toasters don’t explode.”

Here, Sen. Warren is going after her straw man caricature of House Republicans, but let us take the attack upon anarchism at face value. First, we should consider the nature of regulations imposed by the state. Such regulations are written by legislators, who are routinely bribed by lobbyists hired by the most powerful people in the very industries to be regulated. Under such a system, regulations serve not the interests of the common man, but the interests of the wealthy business owners.

On the other hand, all of the above examples can be handled through private dispute resolution organizations in a free market. People who destroy life, liberty, and property with their goods would be made to either perform restitution or be economically ostracized. Economic ostracism would make it impossible for them to continue their harmful practices, as no one would buy their goods or sell them anything for fear of being ostracized themselves. All of this can be forcefully backed by individuals acting in self-defense or by private defense agencies.

“After the sequester kicked in, Republicans immediately turned around and called on us to protect funding for our national defense and to keep our air traffic controllers on the job.

And now that the House Republicans have shut down the government – holding the country hostage because of some imaginary government ‘health care boogeyman’ – Republicans almost immediately turned around and called on us to start reopening parts of our government.”

By pointing to Republican efforts to protect certain government employees and services, Sen. Warren has contradicted her previous assertion that Republicans are anarchists.

A hostage-taker is a person who threatens to harm peaceful people unless certain demands are met. Any legislator who passes a law of any kind is doing exactly that, because anyone who peacefully disobeys a law is in danger of being harmed by agents of the state. Therefore, every member of every legislature is a hostage-taker, not just House Republicans.

“Why do they do this? Because the boogeyman government in the alternate universe of their fiery political speeches isn’t real. It doesn’t exist.”

Sen. Warren says that government does not exist. Even a blind squirrel occasionally finds a nut.

“Government is real, and it has three basic functions:”

And sometimes, a blind squirrel promptly loses the nut again.

“1. Provide for the national defense.”

Like a government and the American people, a nation is yet another nonexistent collective. There is no such thing as national defense apart from the sum of individual defenses.

“2. Put rules in place, like traffic lights and bank regulations, that are fair and transparent.”

As shown above, regulations in a statist society are anything but fair, as the affluent can easily bribe those who write the regulations. A state is not necessary for there to be regulations, as the free market imposes its own regulations which arise through spontaneous order.

“3. Build the things together that none of us can build alone – roads, schools, power grids – the things that give everyone a chance to succeed.”

Here, Sen. Warren commits the great fallacy of statism, which goes like this:

1. The state provides service X. X can be anything; in this case, Sen. Warren mentions roads, schools, and power grids.
2. Without the state, service X would not be provided.
3. Therefore, those who do not want the state to provide service X do not want service X to be provided at all, and do not care about people who need service X.

The problem with such reasoning is that step 2 is a positive claim, which carries a burden of proof. This burden is never fulfilled by statists, nor can it be, as one must ultimately disprove every possible solution to a problem that does not involve the state. This is an inexhaustible proof by exhaustion. On the other hand, all that an advocate of liberty must do is to find a solitary example of such services being provided in the free market. Examples of roads and schools which are built and maintained privately are abundant. Power grids can be more tricky to open up to free market competition, but it can be done.

“These things did not appear by magic.”

This is a straw man, as no one claims that they did.

“In each instance, we made a choice as a people to come together. We made that choice because we wanted to be a country with a foundation that would allow anyone to have a chance to succeed.”

From here on out, Sen. Warren continually uses “we” to refer to “the American people,” a collective which has already been shown not to exist. It is impossible for “us” to make a choice because there is no such thing as a collective mind; there are only individual minds. For the sake of avoiding unnecessary repetition, this rebuttal should be understood to come after each bit of text by Sen. Warren from this point forward. In this excerpt, the collective pronouns render all points invalid.

“We are alive, we are healthier, we are stronger because of government. Alive, healthier, stronger because of what we did together.”

This is a post hoc ergo propter hoc fallacy. Just because individuals acted on the idea of government before people became healthier and stronger does not mean that the idea of government is the cause of such benefits. There could be any other cause for an increase in the health of individuals.

“We are not a country of anarchists. We are not a country of pessimists and ideologues whose motto is, ‘I’ve got mine, the rest of you are on your own.’ We are not a country that tolerates dangerous drugs, unsafe meat, dirty air, or toxic mortgages.”

Here, Sen. Warren proposes that one must either believe a government that regulates many aspects of the economy, or be a stereotypical bomb-throwing chaos-seeker who views selfishness as a virtue. This is a false dilemma fallacy, as it is quite possible to believe that people should form voluntary associations to solve problems without the use of force, fraud, or coercion.

“We are not that nation. We have never been that nation. And we never will be that nation.”

The future is unknown and unknowable. People once said that a constitutional republic would never work. People once said that (chattel) slavery would never end. People once said that landing on the moon was impossible. Now Sen. Warren says that the end of the state will never come. She is on the wrong side of historical precedent.

“The political minority in the House that condemns government and begged for this shutdown has its day. But like all the reckless and extremist factions that have come before it, its day will pass – and the government will get back to the work we have chosen to do together.”

There is no government shutdown; there is only a roughly 17 percent slowdown.

Sen. Warren comes full circle with the philosophically invalid terms “reckless” and “extremist.”

Book review: Unlocking More Secrets of Libertarian Persuasion

Unlocking More Secrets of Libertarian Persuasion is a book about communication of libertarian ideas written by Michael Cloud. The book is a sequel to Secrets of Libertarian Persuasion.

Mr. Cloud’s approach is to begin with insights about the nature of libertarianism as well as libertarian positions on various issues. He then tells stories and parables to illustrate points about libertarian communication, and finishes by discussing a number of persuasion techniques.

The book goes into more detail about specific issues than the first book, and is better for it. The discussions on health care, the nature of credit, and the effect of minimum wage laws are especially enlightening, and the essays about the need to define terms correctly touches on an issue that is of paramount importance for anyone who wishes to have a rational discussion. But like the first book, the focus on political libertarianism rather than philosophical libertarianism remains, along with the minarchist stance of Mr. Cloud’s writing throughout the book.

While Mr. Cloud’s libertarianism may not be 100% philosophically pure, his book is still very useful for those who seek to convince others of the benefits of individual liberty and limited (or no) government.

Rating: 4/5

Book review: Secrets of Libertarian Persuasion

Secrets of Libertarian Persuasion is a book about communication of libertarian ideas written by Michael Cloud. Mr. Cloud’s approach is to begin with stories that illustrate libertarian positions on issues as well as some lessons about communicating libertarian positions. He then discusses a number of persuasion techniques, and finishes by analyzing the psychology of some failed approaches to libertarian persuasion.

The persuasion techniques outlined in the book are useful not just for libertarians seeking new converts to their political philosophy, but for anyone who wishes to persuade someone else to do almost anything. With interest in libertarianism rising, the book is sure to help libertarians increase the number of people who will join the libertarian movement.

The book contains a serious flaw, however. Mr. Cloud’s view of anarchism and its position within the libertarian movement is certainly not welcoming to anarchist libertarians. On page 77, Mr. Cloud says quite plainly that “libertarians are not anarchists.” This is only true of the more political types of libertarians. Those who have a philosophical understanding of libertarianism from first principles are necessarily anarchists, because such an approach leaves no room for a state to function, as it cannot do so without violating absolute moral principles. He also says in multiple places in the book that “libertarians advocate small government,” which again is only true of political libertarians, or those who do not apply libertarian philosophy consistently and from first principles.

Despite the flaw of his treatment of anarchism, Mr. Cloud has still written a useful book, and Secrets of Libertarian Persuasion is still worth a read.

Rating: 4/5

The Real Reason Why We Pay Taxes

A page present on the website of the South Carolina Department of Revenue (SCDOR) contains a short explanation written by agents of the state concerning the reasons why citizens pay taxes. The arguments are typical of the arguments frequently made by statists to attempt to justify the moral criminality of taxation. Let us examine the SCDOR perspective and construct a rebuttal.

“Everyone pays taxes in one form or another – mostly income and sales taxes. But why do we pay these taxes?”

We will see the real answer to this question at the end of this rebuttal. For now, let us move along.

“There are many services offered to citizens…”

This is a deceptive way of describing the nature of government services. To offer means to present for acceptance or rejection. If citizens reject government services, they are still forced to pay for them.

“…that could not be managed effectively under any other system.”

This is a positive claim, so the burden of proof is upon SCDOR. However, no evidence is provided by SCDOR to attempt to fulfill this burden of proof. We may therefore disregard the SCDOR claim that the current system of taxation and government provision of services is necessary because SCDOR has committed the argumentum ad ignorantium fallacy.

“The federal government uses your tax dollars to support Social Security, health care, national defense and social services such as food stamps and housing. Services provided by taxes in South Carolina are public schools, safe highways, health care, prisons and social services for low-income citizens. The city or county where you live provides water and garbage service, police and fire protection and also contributes to public schools.”

Let us examine how governments are managing these services, and what alternatives are currently available. Social Security is not being adequately supported, and will be insolvent by 2033 if no action is taken. Medicare will be insolvent as soon as 2026 if no action is taken. National defense is currently being threatened by the actions of the armed forces, as an interventionist foreign policy creates enemies that would not otherwise exist. Social services have ultimately destroyed poor families, leading to increases in child abuse, drug abuse, and violent crime. Public schooling is a euphemism for forced indoctrination, as government maintains a monopoly on the education of children and refuses to allow true competition. (Private schools and homeschooling exist, but are held to government standards.) As for safe highways, South Carolina actually has the most dangerous highways in the nation, ranking no higher than 33 out of 50 in any measured category. Prisons are more expensive than they need to be because they are housing more criminals than the prisons of any other nation. Water and garbage services are currently available in the private sector. In South Carolina, private security officers have the same authority as sheriff deputies, being able to respond to calls, make arrests, use blue lights and traffic radar, and are authorized to issue traffic tickets. Volunteer fire departments exist in many small towns that cannot afford a government-run fire department.

“We can all admit that these services are necessary.”

No, we cannot all admit this. Some of these services are necessary, and some of them are not. But as the need for government to provide these services was not proven, this is a red herring.

“But why must they be paid for with taxes?”

We will return to this question a bit later.

“Why shouldn’t we just pay individually for what we use? The answer is simple: Because no one could afford it. Each person would have to pay the full fee for the service regardless of their ability to pay.”

Here, SCDOR claims that services in a free society would be too expensive. This claim ignores that people in a free society would have much more money to spend because taxation would not be stealing their income as well as discouraging production. Regulations would be set by the market rather than by bribed bureaucrats, leading to increased economic efficiency. Also, competition among service providers would drastically reduce costs compared to the current statist monopoly. Finally, this claim disregards the role of charity, as a business owner in a free society would not want to have a reputation of refusing poor people in desperate situations because of an inability to pay.

“But why must they be paid for with taxes?”

The reason is that the state has monopolized these services and used its violence to eliminate all open competition.

“Our tax system is based on our ability to pay. The more money we earn, the more taxes we pay. And the opposite is true. If we earn a small income, we pay less taxes.”

This is true for the most part, but it is irrelevant to why we pay taxes.

With the above rebuttals having been made, let us return to the first question:

“Everyone pays taxes in one form or another – mostly income and sales taxes. But why do we pay these taxes?”

The answer is simple. We pay taxes because agents with guns will kidnap and imprison us if we do not, and exercising one’s logical right of self-defense against such action will result in one being murdered by the agents of the state, and such murder being portrayed as just in the establishment media.

Book review: The Handbook of Human Ownership

The Handbook of Human Ownership: A Manual for New Tax Farmers is a book about historical and political theory written by Stefan Molyneux. In The Handbook of Human Ownership, Molyneux presents a theory of history and politics from the view that government emerged and evolved as a way for elites to control the masses. The book is presented as a welcome message and instruction manual from the ruling elites to a newly elected member of a government.

Molyneux makes the argument that history has been a process of the evolution of human ownership, beginning with primitive cannibalism and continuing through the slavery of classical antiquity, the serfdom of the medieval period, and the current period of free labor and taxed wages. He then portrays the role of public education as a means to keep the ruling classes from being overthrown by teaching children that government is necessary. Molyneux next discusses the origin of the socialist movement as a response to the declining influence of the church in the 19th century, and how the remnants of religion combined with socialism have been used to support and extend the power of the state. He finishes his historical theory by noting that the cycle of human ownership is nearing its end, as the system of fiat currency and government-protected corporations mathematically cannot continue.

Molyneux’s views of history and the future prospects of humanity are certainly not discussed in the mainstream, but the book does a good job of explaining this as well. For anyone who wishes to take a philosophical look at the current world situation and is unafraid of strong medicine, The Handbook of Human Ownership is an excellent, if short, read.

Rating: 5/5

Book review: The Law

La Loi (The Law) is a book about legal theory written by Frédéric Bastiat. In The Law, Bastiat analyzes the role that law has played in society, compared with its original purpose: to act as a shield against injustice, and thereby defend the natural rights to life, liberty, and property. He examines various government policies that have acted to do more than this, and shows that such actions lead to infringements upon individual rights.

Bastiat identifies two main ideological causes of such actions: stupid greed and false philanthropy. He shows that it is man’s nature to resort to crime when it is profitable to do so, and that the law becomes a tool for the commission of crime when enough people can convince a government to plunder on their behalf. He then points out a fundamental flaw of democratic government: when it is time for an election, the people are held up as experts on all important matters, but after the election, the people are viewed as little more than clay to be molded by politicians. Bastiat goes on to show that various government programs to help people ignore what people could have done to help themselves without government interference.

Bastiat’s view of God and religion may be off-putting to atheists, and his lack of consideration for anarchism is understandable for the time in which he wrote (1850), but if his reliance on a divine origin (rather than a logical origin) for natural rights can be overlooked, then The Law is an excellent blueprint for a free society.

Rating: 5/5