These are items that have been moved from other areas of this website and may be referenced elsewhere.
written December 12, 2008
Please read the excellent article by Professor George Reisman:
The Myth that Laissez Faire Is Responsible for Our Present Crisis
I’m fascinated by those that have read my article and disagree with my placing blame on the Federal Reserve System for the horrible economic condition we find ourselves in.
It is their opinion that “deregulation” is not the answer, rather MORE regulations are needed because “businesses cannot be allowed to run wild”. These responses have come from a particular Internet forum that specializes in discussing real estate. I felt it inappropriate to post a lengthy rebuttal on that forum so I’m going to quote the statements and respond to them individually here.
“If we have learned anything in the past few years it is that a total (or close to it) hands-off approach is an important ingredient in a recipe for disaster"First off, I’m not for “deregulation” in the manner these people interpret it.. In their minds eliminating a few rules is deregulation. That’s not what I’m proposing. I’m for eliminating the Federal Reserve System. To say that we’ve had total or close to hands-off control over businesses in the past few years is ridiculous. The Federal Register, which is the official record of federal regulations, has continued to grow. How can anyone say we’ve reduced government involvement? At best it can be said the regulations have changed and those changes have usually been in favor of the plutocrats and politicians.
“Regarding your bid for “economic freedom”, I disagree with the removal of regulation. It was the systematic destruction of regulations for the past 30 years generally, and the blatant unwillingness of the current administration to enforce regulations, specifically, that have produced the economic collapse we are now facing.”
I’ll refer to my previous statement and add that the alleged “unwillingness..to enforce regulations” is evidence of my accusation that the heart of the problem is an unholy alliance of government and corporate interests. It is government sponsorship of the banking system and large industries that erodes our freedoms and virtually steals the food from our mouths.
“True economic freedom is like true freedom. It’s called anarchy. In a truly free society, people can rape, kill, murder, and steal as long as no one else can stop them. Likewise, in a regulation-free economy, businesses can violate contracts, steal ideas, pollute the water supply, make dangerously unsound loans and then pass on the risk to investors, whatever they like.”
This is the typical “Hobbesian” argument for monopolistic government enforcement of laws. (Thomas Hobbes 1588 -1679) It makes the assumption that you cannot have laws and social cooperation without a monopolistic government force, once again, a ridiculous statement. Not only are there examples of social cooperation without the implication of forced law throughout history, the American colonists had a system of confederated states that were very successful without having a monopolistic federal government. In a libertarian society anyone that is harmed in life, limb or property has recourse under either a contractual system or a judicial system that is set up in a cooperative manner. How someone could read my article and completely miss my argument that it is government sanctioning of the banking system that allows “dangerously unsound loans” to be made mystifies me. I’ll quote myself:
“..the numerous banks that exist could not get away with unlimited credit expansion and dwindling reserves were there not a government run Central Bank continuing to inject credit into the economy.”
If that wasn’t bad enough, the most intellectually disingenuous defense of Thomas Hobbes I’ve seen recently is that he was right because of all the unrest in Iraq. Apparently because the United States invaded and occupied a comparatively defenseless country and wiped out it’s government and infrastructure proves that a country without a central government cannot function. What a load of….ahem….anyway….moving along.
“We need a regulated economy. But that’s not what we have had for a long time. Instead we have had an economy regulated by agents of large business owners (corporatism or plutocracy), instead of agents of the public (socialism). One system benefits the few; one system benefits the many.”
Corporatism is not exemplary of non-intervention by the government. It is the epitome of government intervention. Corporations were conceived of in Europe and came to an apex in the guise of the East India Company, which was a government-sanctioned and protected entity of the British Empire. The abuses of the East India Company are legendary and still find their way into modern films. What is a corporation? Corporations are entities that exist separate from individual persons with the sole purpose of protecting those individuals from responsibility for corporate actions that may result in legal action. Where does this protection originate? From a monopolistic central government, of course. It is another unfortunate inheritance from our British masters just as evil as a government sanctioned central banking system.
“Regulations are not strictly a tool for socialist governments. They are a tool for every form of government especially those who seek to gain an advantage economically. Our government is not sufficiently safeguarded against the corruption of corporations.”
So, you begin to see where this type of circular logic leads. The government is not sufficiently protected against the corruption of those entities that it created. The solution offered is not to eliminate government-sanctioned abuse but MORE government. Utter nonsense.
“We’ve had 30 years of increasing deregulation and privatization, 30 years of declining household incomes and 30 years of suppression of working people’s right to organize….And where has that led us? Into this depression.”
I would like to point out another fallacy I’m repeatedly faced with. Defenders of “progressive” political thought seem to think that prior to 1971 everything was grand, or at least, that’s when all that progress made during the 60’s was undone. It’s no wonder their viewpoint is skewed. You cannot correctly view economics in the United States without going back much, much further.
The remark about “working people’s right to organize” needs to be commented on. The history of unionization has been presented to us Americans as a glorious achievement for the common worker. Under closer scrutiny it becomes clear that this is yet another protectionist tactic designed to maintain higher wages for those that are already “in” by keeping “out” competition in the form of workers who are willing to do the same work, or more, for less money. Rather than reducing poverty unionization has only increased it by reducing job opportunities. Proponents of unionization like to maintain that it was necessary because the “evil businessmen” were abusing the workers. If we remove government-sanctioned protection of corporations the resultant increase in competition would give workers more options for employment. They then could leave an employer and go to another that treats it’s employees better, or pays more. Government intervention stifles competition and competition is good, protectionism is not.
This comment is also very limited in it’s scope when it comes to government growth. The focus is on the alleged deregulation acts by the Federal Government. Any deregulation that has occurred has been directed at specific industries, airlines for example. The more important point that is completely ignored is the overall size and scope of the Federal Government. Every year the federal budget grows, the number of departments increases and despite the claim there are fewer regulations, the actual number of federal regulations has increased.
As for incomes decreasing; with the increase in federal spending the deficit grows, the national debt increases, the money supply grows all of which creates inflation which is the direct result of the devaluation of the dollar. We all grow poorer every day. Then, when market corrections come in the form of recessions, the government tries to intervene which results in even more government spending, more debt and more devaluation of the dollar. Deflation is not something to be avoided; it is exactly what is needed to correct all the damage that has been done.
“I really have a hard time believing there are still people out there defending neo-liberal classical capitalist economics when those very policies have led us down such a terrible road; and we’ve reached the dead end sign.”
I find this statement to be an example of someone that has discovered a disparaging term (neo-liberal) that fits his or her particular ideological bent and enjoys tossing it out at every opportunity. The ideals of liberty, freedom and self-determination are not new. It is those ideals that this country was supposed to be founded on. Social groups around the world throughout history have resisted powerful central governments that restrict freedom, confiscate property and treat the citizens as mere peasants that exist only to supply the rulers with money, commodities and fodder for their wars. The founders of this country knew that power corrupts and cannot be trusted in the hands of individuals. It must be restricted and divided as much as possible. Unfortunately we have allowed power to become increasingly centralized with the Federal government and even more so with the President. It is this concentration of power that has led us to the “dead end sign”.
“Freedom is not abt maximizing your personal ability to be greedy. Freedom is a shared experience, a mutual endeavor, Imho.”
This is such a bizarre statement I’m not sure what to make of it. Freedom is about FREEDOM. The basis of the concept is that “I” am the best qualified to determine what is best for “me”. “I” am not qualified to determine what is best for “you”. “You” are not qualified to determine what is best for “me”.
“Personally, I think the idea that you can have property taken from you for not paying your taxes is appropriate. If you will not pay for the services which are inherent to the upkeep of your property (roads, fire department, law enforcement, education of future generations of doctors, cops, etc), you should not reap the same rewards as those that do. This concept has been around since the first city-state.”
The only moral way to collect taxes is through a cooperative, contractual arrangement. Having a powerful ruler or ruling class demand payment from you under threat of force so they can maintain power is immoral. The argument of whether or not services should be provided by government or private interests is another topic. I’m focusing here on forced confiscation of property under threat of violence and/or imprisonment. If all the government did with our tax money was build roads and schools I would have less to argue about. The problem is that once a powerful government is given the power of taxation they will take the money and use it to further their power. This country has seen an endless string of wars since it’s inception, all paid for through debt financed by a central banking system backed up by the ability to tax the public on demand under threat of force. How many millions of innocent people that did no harm to you or me have died at the hands of our government using our tax dollars? If I decided I was not going to continuing paying taxes that are being used in such a manner I would have my wages garnished, liens placed on my property and potentially be thrown into jail. If I resist arrest I may be killed.
“I don’t agree with the bailout. Personally, I think that finance is a basic infrastructural requirement. You cannot trade without a monetary system. Today, you cannot buy or sell effectively without a debit card system, letters of credit for shipping, etc. Many communities cannot build construction projects without a loan of some kind. I believe the private sector has shown time and again that it cannot be trusted to manage this responsibility. It must be either highly regulated (and not by industry cronies, but by actual cops), or the financial infrastructure should become the domain of the state.”
Does this person realize he is describing FASCISM? Do I need to argue again that it is the concentration of power in the Federal Government and the Federal Reserve System in particular that has led us to this point? People don’t need a government-sponsored financial system to conduct trade. Humans have been trading for centuries and long before centralized government existed. By studying the history of money it’s easy to see that people will create a system cooperatively that works best for them; if that includes the creation of currency so much the better.
“Yesler Hill - I think (based onreading his web pages “Rants and Raves”) that Another Tim is basing his argument for more deregulation based on the fact that citizens and small businesses have seen greater regulation and abuses of power.”
He missed my point completely. This is an example of “blinders” being thrown up anytime the idea of less government is proposed.
“At the same time, the regulation that does exist for the bad actors in our economy is totally inadequate. This discrepancy is obvious when you look at the Big 3 bailout vs. the Financial Bailout. The Big 3 are far from being like you and me, but they are no match for the campaign contributions that Wall Street regularly showers on DC. The financial community got $700 billion in two weeks without ever appearing before congress. It was their agents, Paulson and Bernanke that had to do the begging. This was a crisis entirely of their own making. From the origination of MBSs and CDOs to the insurance of these catastrophes, to the rating of them by the complicit ratings agencies who were beholden to the very owners of the products they were rating. The Big 3, on the other hand had to beg Congress twice for money in order to save their businesses due to an unprecedented drop in sales (30-40% for the Big 3, 30-35% for their foreign competitors) since people were no longer able to secure credit - a problem created by the financial bad actors. I doubt I’m telling anyone anything new, I’m just trying to defend why I think we need to either regulate the hell out of the financial community, or we need to nationalize it.”
The idea of a free market is so abhorrent to this individual that he won’t even consider it. Instead he wants more socialism or outright fascism. He’s taken a very narrow view of the economic catastrophe we’re experiencing while completely disregarding the history that led up to it. There is a monumental difference between actual entrepreneurs and “plutocrats”. Someone that has made a profit, even a great deal of profit, on his own initiative without being subsidized by the government is not the same as companies who thrive, feeding at the government pig trough on money confiscated from taxpayers, because of government intervention and protectionism. Besides, it was the Federal Reserve that created the illusion of wealth and prosperity where none existed as I pointed out quite clearly in my previous article.
Taxpayers should never be forced to bailout companies. The market can and will decide which businesses should thrive and which should fail. The US carmakers are a perfect example, especially General Motors. If you take GMs annual budget and divide it by the number of automobiles they project to sell in the next year you get a net loss of $4000 per vehicle. Why should we be expected to support an industry that is a pure money loser? Why is it that Nissan was able to open a new factory in the US just last week without a handout from the Federal government? Isn’t it interesting that while the House of Representatives passed the auto bailout and the Senate killed it that the White House has the power to use the TARP program to do it anyway? Is this the government we are supposed to have under the Constitution? This is nothing short of abuse of power by the Executive Branch of the government going against the will of the elected representatives of the citizens. This action is clearly unconstitutional but that won’t stop them, neither will the Judicial Branch challenge it. The Constitution has become a worthless scrap of parchment.
The reason capitalism succeeds is because it is self-cleansing. Businesses that provide a product the market wants are rewarded and succeed because individuals choose to purchase their product. Businesses that do not provide something the market wants go under because individuals choose not to purchase their product. It’s as simple as that. The end result is a vibrant, efficient and competitive marketplace that provides goods and services the people want and are willing to pay for. Without government interference businesses that try to cheat, steal and abuse the public will be shunned and disappear. This only happens when government gets out of the way and allows competition. The people will go to the competitor rather than the abuser.
When the government intervenes in the market it disrupts the natural order of things and companies that should go under continue to divert resources away from successful businesses, inhibiting production, squelching competition, increasing the burden on the average citizen and leaving the whole world poorer. Debt dependent governments want inflation because it allows them to pay debts with inflated dollars that are actually worth less than the money originally borrowed.
The primary destroyer of economic freedom and prosperity in the world today is the US Government itself, which doesn’t have to compete in the marketplace. There are no checks left in place that allows US citizens a say in how their money is used. This is not the result of capitalism but the systematic destruction of freedom and liberty by a monopolistic and powerful central government.
The Economic Crash of 2008written October 12, 2008
Please read the excellent article by Professor George Reisman:
The Myth that Laissez Faire Is Responsible for Our Present Crisis
We’ve heard the explanations as put forth by the mainstream media and our politicians.Greedy Wall Street types created bad loans that were forced on unsuspecting borrowers and when they couldn’t pay them back a chain-reaction began.
Save us!
Lehman Brothers, Fannie Mae, Freddie Mac, institutions called “too big to fail” did fail, so the Fed swept in to “save the day”. They took control, arranged buyouts with institutions such as JP Morgan and CitiBank, and bought up 80% of the shares of Fannie Mae and Freddie Mac. The US Government is now the largest mortgage holder in the country.
Unfortunately, that wasn’t enough.
Banks failures started occurring. We now needed an emergency infusion of capital into the market arbitrarily estimated to be $700 billion. The House of Representatives refused to allow this fleecing of taxpayers so the Senate took it up. They took a 3 page document, expanded it to 400 pages, added an additional $150 billion, passed it and sent that to the House where it inexplicably passed.
That didn’t work either.
The Dow Jones Industrial Average continued it’s plummet and is now 6000 points below it’s high in October 2007.The most common causation given is being called a “credit freeze”. Apparently the banks are not lending to each other because the lender is afraid the borrower will not be there tomorrow. This has led to a “melt down” in the stock market because businesses are unable to use short-term credit as they have become accustomed to. (I’m not sure how a “freeze” and a “melt down” happen at the same time but they seem to like these particular graphic descriptors.)This is now a global situation and the members of the G7 are gathering to, so they say, save the day for America and the world.
Only symptoms, not the problem.
Is
this truly an explanation of the cause? I contend they are merely
addressing the symptoms and will not, or dare not, look at the true
cause of the problem.There is a better explanation out there. It’s
somewhat lengthy but I’ll try to trim it down a bit for the sake of
this article. (For more details see the suggested reading list at the
bottom.) It comes down to bank credits and how they are handled.
Why Do We Have a Central Banking System?
Following
the fight for independence the new confederation of independent states
was saddled with a large war debt. One of the founders of the Bank of
New York, Alexander Hamilton, proposed a Bank of the United States just
like the European central banks following the ratification of the new
Constitution of the United States of America. This bank would give the
new nation the ability to “borrow from itself” to help offset the debt.
Thomas Jefferson called the idea “an infinity of successive felonious
larcenies”. That was because Hamilton’s proposal included the issuance
of paper money based on little more than faith in the government rather
than a hard currency standard.
The history of paper money in
Western nations is based on a concept practiced centuries before when
goldsmiths were asked to store gold for people in their vaults. The
owners of the gold were issued warehouse receipts. The holders began to
negotiate commerce on the promise that the gold was in the vault and
could be retrieved at any time. It didn’t take long for the goldsmiths
to figure out they could issue more receipts than there was gold to
back them up. This gave them the ability to “borrow” some of the gold
to negotiate commerce for themselves. This concept is, of course,
“larcenous” as Jefferson said of Hamilton’s similar idea.
Hamilton
countered Jefferson’s protest with a 15,000-word opinion written to
President Washington arguing the constitutionality of a central bank
based on the loose standard that the Constitution must confer implied
powers along with those actually enumerated. This is in opposition to
the 10th amendment, which states:
"The powers not delegated
to the United States by the Constitution, nor prohibited by it to the
States, are reserved to the States respectively, or to the people."
Unfortunately,
President Washington did not have the 10th amendment to rely on, as it
would not be ratified, along with the rest of the Bill of Rights, until
8 months later.
Economist David Ricardo came up with this explanation.
The banks in Country A expand credit, issuing notes that are theoretically redeemable in some form of hard currency. In reality this is not possible because banks typically loan out much more than they hold in reserve. In a typical transaction, the bank will take in $100 in the form of a deposit. They will then loan out $90. The $90 is then deposited in another bank where that bank will loan out $81. Before too long, the original deposit is showing up as a credit in multiple accounts for many times more than the original $100. This is known as "fractional reserve banking". No problem, as long as there is no concerted “run” on the banks by depositors wishing to redeem their credits.The banks in Country A happily continue to expand credit because the more credit they expand the higher their profits will be. This results in an expansion of the money supply, which in turn increases incomes and expenditures in Country A, and this bids up prices of goods resulting in inflation and a “boom” economy. As the residents of Country A experience more income they begin to purchase more goods from Country B. As Country A’s cost of goods increases they lose competitiveness so even more goods are purchased from Country B. Now Country A is experiencing a trade deficit. Country B doesn’t want Country A’s “funny money”, they want hard currency for the bank notes. This further pushes down the actual reserves in Country A’s banks. The banks start getting nervous and stop expanding credit. This results in economic contraction. The public gets nervous so they start pulling their money out. Businesses suffer followed by bankruptcies, unemployment and deflation of prices, commonly called the economic “bust”. Country A eventually recovers once their prices become competitive again and the trade balance reverses itself. According to Ricardo this is the typical “boom and bust” business cycle.
In the last century we’ve seen the Keynesian economic model adopted in which the Central Bank tries to control this cycle. They do it by adjusting the interest rates. The idea being that if the boom is too fast you slow it down by increasing the interest rate. If it’s too slow the interest rate is lowered. In this fashion, the economy is kept teetering on the edge of a knife between expansion and contraction, inflation and deflation. Modifications made to the Keynes model include reassuring bank depositors through guarantees made to their accounts. Lenders are given guarantees that they will get their money back should the borrower default. All this is designed to keep the economic expansion going.
Not.
Unfortunately, all this does is delay the eventual adjustment to the boom that must occur. The money supply keeps expanding resulting in the continued devaluation of the currency, which is evidenced by price inflation and increasing trade deficits. Production shifts away from the local economy to places where it’s cheaper.
Each
time a necessary period of adjustment looms the government steps in and
injects more capital into the economy. Of course, this is not “real”
capital because it’s based on loans by investors, many foreign, who buy
US Treasury Notes. This is the same expansion of credit method Ricardo
described earlier.
Additionally, the
regulation dictating how much actual "money" the banks must hold in
reserve has escalated astronomically. At present, the required reserve
ratio on nontransaction accounts is zero, while the requirement on
transaction deposits is 10 percent, which is near the legal minimum.
Now when people get nervous and withdraw their money it does not take
much time for the banks to get into serious trouble.
As a result, each “boom and bust” period becomes greater and deeper than the one preceding it, which requires even greater amounts of capital injection.
The solution to the “boom and bust” cycle is to eliminate the practice of unlimited bank credits. The way to do that is to eliminate the government sponsored Central Banking System. Why? Because the numerous banks that exist could not get away with unlimited credit expansion and dwindling reserves were there not a government run Central Bank continuing to inject credit into the economy.
Prior to the establishment of the Central Banking system there were no “boom and bust” cycles the size of what we have witnessed since. If one bank or country inflated it's currency by over-expanding it's credit, a “run” would result. The bank would go under and the country would be forced to contract it's economy, lower prices and as a result get it's gold back. This provided an incentive to keep credit under control.
Additionally,
the central governments need to stay out of the normal day-to-day
functions of the marketplace. This means “laissez-faire”, or hands-off
governance. Government interference in the establishment of prices or
wages contributes greatly to economic instability. There are many that
point to the Great Depression of the 1930s as the example of the
failure of the free-market capitalist system. This is a complete myth
promoted by the supporters of expansion of government power and those
that benefit from it.
The myth of the Great Depression.
The tremendous growth cycle of the 1920s was the direct result of bank credit expansion throughout the Western world deliberately adopted by the Coolidge Administration and, most importantly, the US Federal Reserve System. When the usual “bust” occurred in 1929 it was the Hoover Administration that introduced wage and price controls, ordered the plowing under of crops to keep prices high, gave money to failing businesses and created huge government work programs all of which forestalled the normalization of the economy. Franklin Roosevelt took these programs, expanded and continued them until World War II. It was not until after the war ended that the cycle was allowed to complete ending the Depression. The result was a “bust” cycle that lasted far longer than it should have.
Make the bad man stop.
The deficit spending, credit-driven, Keynesian-style economic system must be eliminated and a return to a free-market, capitalist system based on hard currency needs to take its place. This of course will not happen because those that have the power to change the system will have to give up their power as a result.
We are now seeing unprecedented attempts by the governments of the world to once again shore up a system that must, at some point, be allowed to make an adjustment and achieve some form of equilibrium. These governments will individually guarantee all loans made to banks in their countries. In this way, they calculate, the flow of cheap loans will resume and the global economy will resume a growth cycle rather than continuing to contract. In the short term they are correct, at least until the next “bust” occurs, which it inevitably will. This means the next “fix” will need to be even bigger.
I’m no forecaster of the future but we’ll likely see the eventual creation of a global central banking system that will be charged with trying to keep all the economies of every nation on earth in balance.
That will be a feat of prestidigitation the likes of which have never been witnessed before.
Realize the truth of the situation. Assume the government will do the wrong thing. Know that another, even greater “bust” is coming. When the next “boom” cycle occurs, reduce or eliminate all your debt, make yourself as “liquid” as possible, then hang on.
Suggested Reading
The Austrian Theory of the Trade Cycle – Ludwig von Mises
Money and the Business Cycle – Gottfried Haberler
Economic Depressions: Their Cause and Cure – Murray N. Rothbard
Can We Still Avoid Inflation? – Friedrich A. Hayek
The Case for a 100 Percent Gold Dollar – Murray N. Rothbard
Part Two: Additional Thoughts
September 27,2008
Why Did the North American British Colonists Revolt?
The British citizens inhabiting the American Colonies had grown accustomed to their nearly autonomous lifestyle. It was their expectation that this confederation of independent, self-governing states would continue as it had. When King George threatened to take this away from them they at first appealed through the legal system but eventually resorted to violence.
It’s interesting to note that the “revolt” was not “revolutionary” in the sense that it purposed to replace the existing system. The Colonists revolted in order to keep (conserve) what they had. They cited the British Constitution that, they believed, gave them the same rights all British citizens possessed. These rights included “the only and sole exclusive right and power to lay taxes and impositions upon the inhabitants” of the Colonies. In other words these “taxes and impositions” could only be created in the individual legislatures of each State rather than dictated to them from a large, distant central government.
Rather than being rebels the colonists were staunchly conservative.
The history of paper money in Western nations is based on a concept practiced centuries before when goldsmiths were asked to store gold for people in their vaults. The owners of the gold were issued warehouse receipts. The holders began to negotiate commerce on the promise that the gold was in the vault and could be retrieved at any time. It didn’t take long for the goldsmiths to figure out they could issue more receipts than there was gold to back them up. This gave them the ability to “borrow” some of the gold to negotiate commerce for themselves. This concept is, of course, “larcenous” as Jefferson said of Hamilton’s similar idea.
Hamilton countered Jefferson’s protest with a 15,000-word opinion written to President Washington arguing the constitutionality of a central bank based on the loose standard that the Constitution must confer implied powers along with those actually enumerated. This is in opposition to the 10th amendment, which states:
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
Unfortunately, President Washington did not have the 10th amendment to rely on, as it would not be ratified, along with the rest of the Bill of Rights, until 8 months later.
A “civil war” is defined as a war between two distinct factions for control of a central government. No such thing has ever happened in the history of the United States of America.
Amidst the arguments of whether or not slavery should be allowed in newly acquired territories such as Missouri and Louisiana the issue of states rights came to the fore, much as it did in the 1770s. When Abraham Lincoln won the presidential election in 1860 with 39.9% of the popular vote (180 electoral votes) it was clear the federal government would not allow the States to keep their rights as guaranteed under the Constitution. Several of the States exercised their right to secede after which they joined together to form the Confederate States of America. They became, legally, constitutionally and in reality, a separate nation.
It’s unlikely anyone today would say that slavery is a good thing. It is an abominable practice. What is likely however, is that had the Lincoln Administration stood by the Constitution allowing the southern States to secede the issue would have resolved itself without the enormous loss of life and destruction the war brought.
The Northern States were already allowing free passage of “fugitive” slaves. It is likely they would have the opportunity for citizenship as well. Once the slaves in the Southern States learned of this it would be impossible to completely halt the migration eventually leading to the economic demise of the South. The “war” could have been won without a single shot being fired and probably in the same or a shorter period of time.
This war was not a “Civil War” but it was a disregard of the enumerated role of the federal government by President Lincoln and the Republican Party.
Lincoln’s choice to defy the Constitution led to the deaths of 620,000 soldiers, 1,030,000 casualties, widespread destruction of property and an enormous national debt. It also set the stage for unlimited expansion of the federal government in defiance of the Constitution of the United States.
Why don’t we ever hear about it? Because it was so short. By 1922 it was over.
Was this due to the brilliance of President Warren G. Harding? It was hardly Harding. He essentially did nothing. There’s a lesson to be learned here. Recessions are a natural brake applied to our over-exuberant consumerism. They bring things back into balance. So why was the Great Depression so great? Because unlike Harding, President Herbert Hoover implemented a bizarre series of “fixes” he was convinced would help. Hoover was convinced keeping wages and prices artificially high would shorten the recession.
Following the stock market crash of 1929:
1. President Hoover persuaded business leaders to keep wages artificially high, which increased unemployment.
2. President Hoover created the Federal Farm Board, which maintained high food prices by making loans to farmers so they would keep their crops off the market. This made it even harder on people with little money to buy food.
3. The FFB created the Grain Stabilization Corporation to further maintain high food prices by purchasing wheat from farmers instead of allowing it to be exported.
4. The FFB chairman asked state governors to plow under every third row of cotton that was being grown so cotton prices would stay high.
5. President Hoover pushed through the Smoot-Hawley Tariff. Our trading partners retaliated with tariffs against the US essentially shutting US manufacturers out of overseas markets further increasing unemployment.
6. The Revenue Act of 1932 was the largest peacetime tax increase to date confiscating capital that could have been invested in businesses.
7. President Hoover created the Reconstruction Finance Corporation to provide emergency low interest loans to, primarily, railroads and banks. The RFC eventually loaned money to state governments for unemployment and to fund public works projects. The businesses Hoover tried to save either went under anyway or were burdened with a crushing debt for the remainder of the 1930s.
The “takeaway” is that government intervention, when incorrectly applied, can create a greater problem than originally existed. This government has a history of creating a crisis, providing a solution, which leads to another crisis so they can once again swoop in to save the day. This is something to think about during these tough economic times.
Part One: Where we started, where we are now
June 2008
As we approach the 232nd anniversary of the signing of the Declaration of Independence I would like to reflect on where we started and where we are now as a nation.
A large percentage of the persons that accepted the challenge of life in the new colonies on the North American continent were looking to escape the archaic form of government that had dominated Europe for centuries. Kings and abusive aristocracies had ignored the plight of the common man choosing instead to focus on expansion of empires, increases in power and wealth and petty jealousies of other royals. There was no rule of law as the King was the final authority arbitrarily controlling all activities. The people could never be certain of what the future held since decisions from the King were subject to change as often as the mood occurred. Foreign alliances were formed then suddenly dissolved leading to an unending chain of wars. Religious fanaticism combined with greed for power and wealth created oppression and inhumane treatment of individuals who were accused of heresy based on little more than insinuation.
The supporters of archaic governments believed that none outside the aristocracy were capable of the intellectual prowess required for political leadership. Writers during the Age of Enlightenment such as Jacques Rousseau took an opposite and critical view of royalty and promoted the concept of a government submissive to the will of the people. These writers encouraged their readers to re-examine the assumptions of past political theorists especially those arguing for the traditional aristocracy and the involvement of religion in politics. Words such as republic, liberty, human rights and equality echoed across Europe. These radical ideas had a profound influence on the people that would eventually establish the new American republic.
It took a while for the American Colonists to decide they needed to sever ties to England. The specter of armed conflict with the English Empire was not very appealing. Thomas Paine was instrumental in justifying the sacrifice by publishing “Common Sense”. Over 150,000 copies of this pamphlet made their way around the Colonies encouraging the people to declare independence and take up arms to secure that independence if necessary.
What were the founding fathers talking about when they used the word liberty? It’s important to remember that these men were part of the group of thinkers of the Enlightenment. They saw the need to get rid of the arbitrary authority of aristocracy and established churches and replace them with governments of, by and for the people in order to ensure the greatest amount of freedom possible within the restraints of the State.
They believed that individuals rather than governments were the best qualified to determine the best way to live their lives. Expanding upon that is the belief that it is immoral for individuals and/or governments to impose their will upon others without consent.
Naturally, for a society to function there must be some concessions in the form of laws. After all, a guarantee of freedom does not give you the right to violate your neighbor’s rights.
In the latter part of the 1780s, it was decided that the Republic should have a new constitution to replace the Articles of Confederation. One of the primary reasons was to create more unity between the States for the purposes of trade, defense and taxation, not only domestically but internationally as well. The new Constitution was not perfect ** but it represented the best governmental structure ever devised by man.
**For example; slavery was not prohibited but the new constitution did allow for amendments.
The basic tenets of this new government were liberty for all citizens and limited government. The authors went to great lengths in an attempt to provide for the protection and general welfare of the people by spelling out as best as they could what the government could, but more importantly, could not do.
Today’s United States of America could not have been imagined by the Founding Fathers or at least, it’s not what they had hoped for. They envisioned an independent nation that was separate from the corrupt aristocracies and oligarchies they had left behind in Europe; a country of self-determined individuals united by a common belief in the rule of law and the concept of liberty for all of mankind. They recognized the dangers of getting involved in the affairs of other nations, especially those that do not share the same values.
In his farewell address George Washington laid out those dangers in no uncertain terms. He said that an unnatural connection with any foreign power is “intrinsically precarious” and that “a passionate attachment of one nation for another produces a variety of evils”.
“Against the insidious wiles of foreign influence (I conjure you to believe me, fellow-citizens) the jealousy of a free people ought to be constantly awake, since history and experience prove that foreign influence is one of the most baneful foes of republican government.”
The United States of America had a unique opportunity that the world may never see again. We were separate, apart and free to determine our own destiny in a land rich in natural resources. We were unified and strong.
“Why forego the advantages of so peculiar a situation? Why quit our own to stand upon foreign ground? Why, by interweaving our destiny with that of any part of Europe, entangle our peace and prosperity in the toils of European ambition, rivalship, interest, humor or caprice?”
“The duty of holding a neutral conduct may be inferred, without anything more, from the obligation which justice and humanity impose on every nation, in cases in which it is free to act, to maintain inviolate the relations of peace and amity towards other nations.”
Supporters of United States interventionist policies like to describe the concept of non-interventionism as “isolationist”. This is a wild exaggeration. The avoidance of forming alliances with other countries doesn’t mean we don’t have relations with them. Trade is possibly the best and longest lasting method of influencing nations to behave peacefully toward each other. The United States has long been antagonistic towards the Communist regime in China yet we maintain peaceful relations with them because of trade. They do not want to attack their best trading partner and we do not want to attack our largest source of inexpensive goods. This approach is having a moderating effect on China due to the Chinese people becoming more affluent and looking to the West for modernization. This doesn’t mean we remain silent about their human rights abuses however.
Nor does non-intervention mean outlawing cultural influences from immigrants. The United States has long been thought of as a “melting pot” of peoples from different ethnic backgrounds and cultures that have united in order to pursue the ideals laid out in the Declaration of Independence and the Constitution. This is far from being isolationist.
It’s interesting that the people accusing the non-interventionists of being isolationist are the same people promoting isolationism, except the military kind. Their xenophobic perspective promotes locking down our borders and propagates fear of foreigners and other cultures. The hypocrisy of decrying interference in American affairs while encouraging interference in other cultures is staggering.
Rather than fulfilling the vision of the Founding Fathers the United States has taken on the role of the World’s Police Force. President George W. Bush’s policy of “pre-emptive war” is the clearest example of this and also demonstrates the failure of this type of thinking.
As a nation, we seem to have a very short memory. The problems we are experiencing in foreign lands did not start in 2001, or in 1991 or in 1979. They started in 1898 when we decided to use our economic and military strength to interfere with the affairs of sovereign nations far beyond our borders.
Each time we choose to intervene politically and militarily in the affairs of another nation we incur what is known in the Intelligence Community as “blowback”, or unforeseen negative consequences of our actions.
So many examples of blowback exist in our history. When we chose to support Great Britain in their imperialistic ambitions in the Middle East we joined in abusing a group of people that finally revolted. Our support of abusive dictators resulted in a revolution that not only continued the abuses but also created an intense hatred of America that eventually resulted in the deaths of over 3000 people in New York City in 2001.
When we chose to join Europe in World War I we became involved in a quagmire that turned into World War II costing the lives of thousands of Americans. Nazism was a scourge on mankind however we don’t know if it would have expanded the way it did had we stayed out of European affairs 30 years earlier. Many blame the vengeful Treaty of Versailles following World War I for Hitler’s rise to power.
Following World War II we formed a ”passionate attachment" with the nation of Israel causing a major shift in how we chose to deal with other Middle East nations.
In Iran we supported the Pahlavi Shah who treated his people so badly they chose an extremist Islamic form of government so we turned our support to Saddam Hussein who in turn used the weapons we provided him to fight Iran against Kuwait and his own people so we chose to attack him. Millions of lives have been lost in these conflicts. History tells us there is likely to be blowback from the US occupation of Iraq as well. Support from our "friends" is already waning.
Once we knock down the first domino we cannot stop the chain reaction.
We are harmed at home as well. We’ve yet to deal with our energy situation which is becoming a huge burden on the economy and environment. The distraction of foreign intervention and the resulting deaths also damage us in ways we can’t see on the surface. The psyche of America has been severely damaged along with our reputation.
It doesn’t seem to bother us that our civil liberties have been slowly eroding over the years. It’s at the point now, and this is not an exaggeration, that the current US Administration has disregarded Constitutional protections allowing Americans to be accused of subversive activities and retained indefinitely without the right of habeus corpus. All the President has to do is declare you a suspected terrorist and you're wisked off to Guantanamo to be tortured in violation of Common Article 3 of the Geneva Conventions. http://www.cageprisoners.com/prisoners.php?location=US
They’ve also performed unwarranted wiretaps of phone calls and monitoring of communications by and to Americans beginning prior to 9/11/2001, then passed a retroactive law to protect the communcation companies participating in this illegal act. This is unheard of during peacetime, and yes, we are in “peacetime” as no state of war has been legally declared. "Terrorism" is a tactic. How can you declare war on a tactic?
Where is the outrage? After 232 years we have become what we hated.
Change to Believe In?
Insanity: doing the same thing over and over again and expecting different results.
-Albert Einstein
Every four years politicians line up to offer us “change” yet no perceptible change from the course of expanding the empire has appeared. Chances are the election of 2008 will be no different. The Republican and Democratic parties play musical chairs in the Legislative and Executive branches but both continue the policies of military intervention and imperialist expansion. The recent victory of the presumptive nominee for the Democratic Party, Barak Obama, shows there is a desire for someone or something different. Unfortunately, Sen. Obama is now compromising in order to attain political victory. It remains to be seen if he will fulfill his pledge of change but I’m not holding my breath. I do know that if Sen. McCain becomes the next President there will be absolutely no change. More unfortunate is that those who could offer real change were defeated early and never given real legitimacy by the majority of voters anyway. The only person that continues to arouse any excitement at all for real change is Dr. Ron Paul.
http://www.campaignforliberty.com/
For all those that oppose changing the course we’re on the rebuttal is; we’ve not really tried heeding the words of George Washington. There’s every indication that had we chosen non-interventionism we would have dedicated our energies and resources to dealing with the challenges at home resulting in economic success, stability, peace and most important liberty. We could be a nation of people to emulate rather than fear which would have far reaching and long lasting impact on the entire world.
People of other nations have long looked at the United States as a shining example of what freedom and liberty can provide to the citizenry or at least they did until recent events dimmed that light.
By following the ideals of the Founding Fathers we can pursue our dreams and ambitions, protect ourselves, allow immigration to like-minded individuals and influence other nations simply by living our lives.
The opportunity to realize this dream is rapidly slipping away. Perhaps it’s already gone.
When federal courts accept the executive branch’s state secrets claims as absolute, our system of checks and balances breaks down. By refusing to consider key pieces of evidence, or by dismissing lawsuits outright without considering any evidence at all, courts give the executive branch the ability to violate American laws and constitutional rights without any accountability or oversight, and innocent victims are left unable to obtain justice."
This is exactly what the Obama administration is doing now. Change? What change?