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Source link: http://archive.mises.org/5867/financing-the-empire/

Financing the Empire

November 9, 2006 by

The adoption of the Federal Reserve central bank, the breaking of the last linkages with gold, and the further dollarization of the world banking system has only enhanced the economic arm of US imperialism. Nowadays, the US Treasury can issue bonds in astronomical amounts only to be absorbed seemingly harmlessly by the Fed and central banks around the world. For its part, the Fed pays for the bonds with a simple electronic bookkeeping entry in its accounts and no one is the wiser. FULL ARTICLE

{ 128 comments }

Francisco Torres November 13, 2006 at 3:26 pm

Somewhere along the way you’ve been taught that “collectivism” is some horrible evil (and it can be), when sports leagues, religious orders, families, and mutual insurers are all examples of collective ownership.

Sports leagues, religious orders, families and mutual insurers are NOT collectivist organizations. “Collectivist” means that the person surrenders his or her will to a collective of individuals or a society. In the case of the above organizations, an individual enters voluntarily and can leave voluntarily – which means there is no surrender and thus no collective. For example, the NBA does not own the players, nor do the players decide en masse about the actions the collective will take.

A person that surrenders his or her will to a collective cannot exercise that will. This is why a Collective is a self-defeating construct – without will, there cannot be progress, innovation, creativity or even incentives to live. Organization and Collective are NOT the same thing.

billwald November 13, 2006 at 3:41 pm

The Govt’s assets? Half the land west of the Mississippi. 90% of Alaska.

Does Gresham’s Law apply to gold? Why do people who own gold want to trade their gold for my paper dollars?

If our international electronic money system crashes we won’t revert to a gold standard. We will will revert to a machine gun standard. If I have the only food in town and sufficient fire power doesn’t matter how much gold you have.

billwald November 13, 2006 at 3:41 pm

The Govt’s assets? Half the land west of the Mississippi. 90% of Alaska.

Does Gresham’s Law apply to gold? Why do people who own gold want to trade their gold for my paper dollars?

If our international electronic money system crashes we won’t revert to a gold standard. We will will revert to a machine gun standard. If I have the only food in town and sufficient fire power doesn’t matter how much gold you have.

Saturdaynightspecial November 13, 2006 at 4:18 pm

Gated communities are a result of wealth and/or an ignorance or a contempt for the principles of freedom.

Wealthy can afford a wall surrounding their property (“good fences make for good neighbors too”) to protect their wealth (and contentment.)

The rules found in gated communities are rigid; a telltale about a restrictive lifestyle, mindset, especially imposed on others. Some of these types (to stereotype) want to live in air filtered cocoons. In the corner of the brain of every liberal (lefty socialist) lies this arrogance about how every individual should live.

But gated communes provide security too.

Mises would say to ignore any heavy inflow of workers; in time it would slow or stop (it’s temporary). But Mises didn’t live (or vacation) in the year 2005.

Migrants lower the cost of labor and perform work most others don’t want to do. Or simply do work that needs to be done.

I don’t believe in any population controls such as birth control imposed by others (or government). But telling others red apples are better than green apples is harmless the same as telling others to practice birth control (as opposed to forcing them). There is a benefit to self imposed birth control: not only does it reduce some births but it reverses the “be fruitful and multiply” advice. Who cares if we shrink – believe me, we can easily reverse that trend more easily than we can retract our three hundred million back to the more pleasant two hundred million. Who’s to say three hundred million (or 4 hundred million) is better than two hundred million ? A greedy or get-rich-quick business person who wants a steady reliable supply of low cost labor ??

“Please tell me why the immigration issue is being brought up in this article by commenters?”

My answer is because immigration (or restricting it) determines the size of a labor market including military manpower used to perform empire building. Gold standard restricts a government’s ability to perform empire building and that makes us more free. But imagine a government not having enough troops to maintain it’s empire. It would be another prohibitive effect on empire building.

If we respect the principles that make us free (and allow migration and free movement from one country to another) then we must tolerate a crowded America (at least temporarily) but when we do that then don’t we also give up some freedom ? That is why I fantasize about that former two hundred million we had about forty years back.

Jim November 13, 2006 at 7:59 pm

Reactionary,

Since you brought up the word “Marxist,” I’m sorry to say this, but it has become quite apparent that not only are you not familiar with what Libertarianism is but also what the intellectual basis of Marxism is.

“. . . the fact is that Human beings are social animals who build communities with collective decision making in order to function . . . ” well there you just painted yourself to be a Marxist. Kar Marx’ own intellectual framework was built on human being’s supposed need to integration into a collective in order to avoid anxieties of alienation.

To answer your question one point at a time:

1. What about Children? Children are wards of their parents until they are old enough to make their own decision. At that point, they have the option of leaving the gated community if they wish. So long as their parents are not dead, the ownership stake belongs to their parents. If their parents are dead, and the children inheritting the shares find the rules of the community not to their liking, they can sell their inheritted property, for substantial sums. Obviously, citizens can not sell their citizenship in a nation-state. There, you can see it clearly that a gated community, being a private property voluntarily organized, is a creator of market-recognized value, whereas a nation-state, despite all its talks of “collective good” is not a real creator of value. BTW, I’m not the one who brought up gated community and compared it to the nationa-state; you were.

2. Minority shareholders may or may not get on the market what they think their shareholding is worth; however, unless the entity is thoroughly run down and bankrupt, they always get something and often times substantial return on their sale. On the other hand, stakes in a fantasy “collective” is always worth zero in the market place. That should show you that the a “collective” is a destroyer not a creator of value.

3. Sports league, religious orders and mutual insurers are all voluntarily entered into. Even families do not impose obligations on individuals what the individuals do not wish to bear; not even laws require debt pass from father to son, for example. The “collectivism” in the name of a nation-state is quite a different story. Obligations are imposed on the vast majority of citizens without them ever having been consulted. The equivalent is not voluntary religious orders, but religious pogroms! Pogroms are exactly the sort of thing sponsored by nation-state in the name of “collective good.”

Jim November 13, 2006 at 8:24 pm

Saturdaynightspecial

I bear no special grudge against gated communities. If people join voluntarily, let them. If the rules become too restrictive, over-zealousness will be reflected in the market price of the stakes/shares/houses inside that community when it comes up for sale. That’s the difference between a joint share-holding company and a commune or “collective.” There is no value to a membership in the “collective” or commune, so the random rule making in the “collective” are not naturally restrained by market forces . . . a little like the restrained fiat money creation or bond issueing in the name of the “people”/”collective” if you will.

Immigration came up because there is a dispute over whether “collectively owned” nation-state border is a real property, which should not be trespassed by individuals, or simply a figment imagination designed to encroach the real property rights of those individuals living inside that border, such as your property rights being abridged by the outlawing of its being rented to certain individuals who are willing to pay; your property rights being abridged by the outlawing of certain class of workers that you’d like to take care of your property.

The concept of “collective ownershp” is the root cause of much evil including the financing of an empire. Empires can issue sovereign debts in our names only because some of us, enough of us, are brainwashed into believing that somehow we “collectively” own the Empire. We do not. “Collective ownershp” is not real ownershp by the individual, but only ownership by the elite to exploit the vast majority of individuals . . . because the individual can never cash out their share of the empire for anything! Just like in a commune, or communist people’s republic. All that money is borrowed in our names, yet each one of us is not entitled to any concrete asset in that empire.

What is yours is yours, what is mine is mine. What is neither yours nor mine is not “collectively owned” by us. “Collective ownership” is almost always a deceptive construct designed to abridge existing private ownerships. For example, collective debt issuance means dilution of the money we earn through our hard work; collective ownership of air means we can not drive our cars as we wish; collectie border means limitations on what we can do inside or with our own properties, etc. etc.

Jim November 13, 2006 at 8:52 pm

1. None of the government held land is placed in the Federal Reserve system. Nor does national debt stipulate repayment in land. All government bonds stipulate is repayment in federal reserve notes. So the land does not come into play at all in the discussion on money

2. Gresham’s Law refers human behavior under legal tender law that is still functioning. When there is no legal tender law (such as trade on the international level) or when legal tender laws break down, people prefer transaction in the most trusted form of money, not the cheapest and least reliable money . . . for the exact reason you mentioned: people producing gold would not want your paper, nor would producer of anything else.

3. Machinegun Standard does not work for long, for the simple reasons that you can’t give people machines or bullets as payment and still expect yourself to either maintain a monopoly on firepower or carry on transaction with the same people again; so you as the ruler will cast around for a monetary medium that is not related to machine gun, even if it’s some kind of paper backed by your machine guns . . . i.e. the system we have now, only a little less stable perhaps :-)

Once people have seen in their own lives how quickly a paper currency system can collapse, their faith in replacement paper system would be vastly reduced. So some kind of sound money sytem will have to be resorted to.

Mike Sproul November 13, 2006 at 9:10 pm

G. Kysor
“1.) What are the Fed’s assets?”
Bonds, gold, buildings, private IOU’s, foreign IOU’s, etc

2.)” How can the dollar be returned to the Fed in exchange for the Fed’s assets, i.e., what is the procedure one must follow when exchanging dollars for part of the Fed’s assets?”
The Fed offers a bond for sale and I buy it with paper dollars; The Fed offers a desk for sale and I buy it with paper dollars. The fed offers a building for sale…

3.) “Don’t people’s valuation of the dollar as well as of goods and services establish prices?”
If a dollar were a claim to one ounce of silver, then a dollar would be worth one ounce. Both demand and supply of dollars would be horizontal at 1 oz/$. The price of silver itself would be determined by supply and demand. Supply and demand works for commodities, but not for pieces of paper that are themselves a claim to a commodity.

4.) “If so, doesn’t it follow that when people’s valuation of the dollar lessens then prices increase if the other factors remain unchanged?”
Think of the supply of dollars as horizontal. Then a reduction in demand just causes a fall in quantity without affecting value.

5.) “Isn’t it also true that as people’s valuation of the dollar continually decreases there will eventually come a point where people’s acceptance of the dollar will decline? ”
yes.

Mike Sproul November 13, 2006 at 9:24 pm

Jim:
“(1) In contentional banking, an IOU from a client is not a bank’s reserve asset. Deposits are reserve assets, but IOU’s are money already lent out.”
I borrow $100 from my bank and give them an IOU worth $100. The IOU is the bank’s assets and my liability. The bank has issued 100 checking account dollars to me. Those dollars are my assets and the bank’s liability.

(2) “What is government bond? It’s a stack of Fed notes at a maturity date. So even if the Fed actually undertook to exchange bond for Fed notes printed earlier, it’s just a matter of exchanging one stack of Fed notes for another. Regardless which stack is left outside the Fed’s door, new money has been introduced to dilute existing money.”
I own a $100 bond. One day I sell it to the Fed, and they hand me 100 newly-printed dollars. The next day I sell the dollars back to the Fed for the bond. The bond existed before the dollars. If bonds are confusing you, you can just as well imagine that the Fed printed 100 new dollars and bought a desk with them. The Fed’a assets would rise by $100 along with the money stock, so the value of the dollar is unaffected.

“There was a time when government bonds are not allowed to be counted as reserve assets for banks, as logically how it should be (see point 1 above). It was changed either during the Civil War or WWII to accommodate the government cash requirement.”
That must have been a pretty brief period. The Fed has always held gov’t bonds. National banks used to hold $110 of bonds for every $100 issued. Are you thinking of state banks?

Jim November 13, 2006 at 11:15 pm

Mike Sproul,

Your are confusing “asset” and “reserve asset.” Take the following simple example: if a new bank takes $100 deposit from you and give $100 check dollars to you, it’s at 100% reserve. Then if it takes a $300 IOU from you, and gives you $300 check dollars. What’s the bank’s asset? $100 plus the $300IOU; what’s the bank’s reserve asset? $100; i.e. the IOU is not a reserve asset. In other words the reserve ratio is 25%.

Then if the bank lends $1000 to the government, taking $1000 bonds (i.e. IOU) from the government. . . what’s the new reserve ratio? You’d think it’s 100 / (100 + 300 + 1000) = 7%, right? No. The war-time introduced rule contends that IOU from the government, unlike IOU from you, is reserve asset, in other words, the bank’s reserve ratio is now (100+1000) / (100+300+1000) = 78.5%! If the reserve requirement is 5%, then the bank can go forth and lend additional $17000! All because you deposited $100, and the government borrowed, not deposited, $1000! If not for the government IOU being counted as the bank’s reserve asset, the 5% cap would have limited lending to an additional $600 (after the first 100 and 300 for you and $1000 for the government). That’s more than an order of magnitude difference.

That’s how fraudulent the federal reserve system is.

BTW, if Fed printed $100 and bought a desk with it, the economy outside of Fed would have 100 more dollars chasing a physical economy with one desk less. So yes, price of desks would go up compared to otherwise.

George Thomas Kysor November 14, 2006 at 3:00 am

Michael F. Sproul:

1.) How do you, or anyone outside the Fed, know what physical assets the Fed has?

2.) How is buying what the Fed puts up for sale a redemption of the Fed’s IOUs/dollars? (I assume you contend that dollars are IOUs since you stated, “Just as I can’t force people to accept my IOU’s, the Fed can’t force people to accept its IOU’s”).

3.) Are you implying that dollars are demands for commodities by your statement (“Supply and demand works for commodities, but not for pieces of paper that are themselves a claim to a commodity”)? But if pieces of paper were used as virtual substitutes for actual commodities, then why wouldn’t supply and demand affect people’s valuation of those pieces of paper?

4.) Think of it this way, wouldn’t people’s decreasing valuation of dollars lead to increased bartering and consecuently a lessening demand for dollars?

Saturdaynightspecial November 14, 2006 at 3:34 am

If the government borrows to pay for war (and empire) then why are some saying it is printing more money to pay for war ?

When the Chinese buy US securities it is done as an investment. First they must buy dollars, then they can buy US securities. The government uses the money it has borrowed from the Chinese to pay for war. And then the government must pay back the principle and the interest. To do that it collects taxes (it does not “*counterfeit money”); but if it does not collect enough taxes it must borrow again to pay off IOU’s as they mature. This process is what raises the cost of borrowing to the public and to the government. And when the government’s costs increase (while it fails to collect enough taxes) a deficit is created. This deficit increases until the government stops it’s spending. Deficits raise the cost of borrowing.

A rising cost to borrow can be slowed if more outsiders buy (or participate) in US securities – this is the case when China buys US securities. Because more dollars are available for lending (reducing the cost for borrowing.) This is why interest rates have not skyrocketed from the Iraq war (for now). Because the supply of dollars is increased from the Chinese.

If only gold and silver were used and not any paper currency then the government could not borrow to pay for war because it would not be able to repay loans due to the growing cost of borrowing from not being able to collect enough taxes (in gold). Imagine our gold going to China to pay for war.

Government simply prints more dollars to pay loans (*counterfeits.) After more dollars are in circulation then what’s the problem with that?
===============================================

The dollar will never collapse. It is actually gaining acceptance – ask any Cuban. And this is not bad – ask any Cuban.

People have more faith in the dollar than any other currency or means of exchange. You could not use gold in most stores today without first informing the public of it’s value (you couldn’t use gold to purchase groceries).

But a gold and silver currency could make us much more prosperous, secure and content. And changing back to gold/silver could easily gain greater respect than the dollar.

Björn Lundahl November 14, 2006 at 5:53 am

Jim

Your comment “Mike Sproul your are confusing “asset” and “reserve asset”” and the rest of it, is very straightforward, good and true. Another truth, obviously, is that Mike Sproul does not want to learn.

Björn Lundahl

banker November 14, 2006 at 6:59 am

The Chinese central bank cannot expand the supply of dollars. Only the Federal Reserve can do that. However, Congress decided to spend like drunken sailors (as always), which necessitated Mr. Greenspan to crank up the printing presses. Also, the Fed was trying to inflate its way out of the previous stock market bubble.

The Chinese central bank, in keeping with a fixed exchange rate, have to inflate their currency to keep pace with the dollar. I am thinking that the US and China are at the same point in the credit cycle.

In essence, Fed prints dollars->Chinese print yuan->Chinese use new yuan to buy new dollars (ie invest in treasuries). Chinese boom + US real estate boom = Bust

Reactionary November 14, 2006 at 8:26 am

Jim,

Sports leagues, mutual insurers, mutual aid societies, families and religious orders are all examples of successful collectives. Without collective modes of ownership and a social order, human beings would live in an unsustainable state of individual autarchy. Collectivism per se is not the problem, the problem is the inability to make rational economic calculations in the absence of profit and loss.

The reason I lump in anarchists with Marxists is because they both believe that human beings are shaped solely by a priori economic axioms, and they are both perpetual levellers of traditional society.

Jim November 14, 2006 at 2:27 pm

“Without collective modes of ownership and a social order, human beings would live in an unsustainable state of individual autarchy.”

I hope you are not copying from a book by Karl Marx, but merely re-inventing the wheel while not knowing that Karl already had that “insight” a century and half ago.

Sports leagues, mutual insurers, mutual aid societies, families and religious orders (not talking about religious theocracy here, right?) are certainly not collectives in the sense that the borders of a nation-state are being claimed to be “collectively owned.” Individual sportsman can quit a league and go play for a different league, so can mutual insurers cash out, so do mutual aid societies, families and religious orders. . . none of them has the element of coercion. Every single one of them allows secession and setting up of a competing entity (or can do nothing about stopping you, at the least.) The nation-state and the borders thereof a are a completely different story. Ever heard of the American Civil War? That’s what happens when someone wants to quit the nation-state. Have you ever seen war breaking out over someone quitting Sports League, mutual insurance, mutual aid society? Murder is not exactly the norm when someone wants to quit a family or quit a religion, is it? Yet civil war is common when someone wants to quit the nation-state.

You simply can not compare the empty-air “collective ownership” to the normal joint-ownership in the private economy. The latter has severability, the former is severable therefore empty rhetoric put forth by a dictatorship.

You got really close when you observed that the problem is the inability to make rational economic calculations in the absence of profit and loss. That’s exactly the fundamental problem with “collective ownership.” The membership/supposed ownership is not severable, therefore has no market value. How can you caculate profit or loss associated with a membership when the collective memership itself has no value? That’s exactly the difference between “collective ownership” vs. normal “joint shareholding.”

“Collective ownership” is an empty concept invented to dress up a dictatorship. If you really want to an example of “collective ownership” in a family, that would be a family in which individual members can not run away and take his/her share of it with him/her . . . what does it sound like? Sounds to me like the position of a slave in pre-1860 America. “Collective ownership” is essentially a property that never vests or get paid to the individual for his/her contribution. What do we call non-voluntary labor without compesation? Slavery.

Jim November 14, 2006 at 2:32 pm

typo earlier. Whereas normal private joint ownerships usually are severable, “Collective ownership” is _not_ severable . . . therefore there is no real ownership per se in “collective ownership,” only the right of some individuals to ride roughshods over others.

Reactionary November 14, 2006 at 2:59 pm

Jim,

Families are one example of a collective with no calculable financial value that frequently allocate resources on the basis of need. Shocking I know. You must surely cheer the day when such an inherently uneconomic institution follows the Soviet Union into history.

You also need to educate yourself on what a nation-state really is. Hint: the USA has never been one. If you have any Serbian or Croatian friends they can probably help you out on this one.

Mike Sproul November 14, 2006 at 3:30 pm

adi:
“Mike Sproul’s monetary theory is at odds with our Austrian monetary theory;”

True. As to Fekete’s version of the RBD, we both reject the Austrian view that fractional reserve banking is fraudulent. I think Fekete and I would both say that as long as the bank and its customers agree to the terms of fractional reserves, there is no fraud. A few commentators from mises.org have even agreed with this, though most reject it. Austrians claim that a bank that replaces some of its gold reserves with an equal value of silver, copper, wheat, etc., is commiting fraud–even if the customers agree to it. I have rarely seen such an indefensible statement in print.

Another difference between myself and Fekete is that he claims the real bills rule maintains a stable price level by assuring that the quantity of money moves in step with real output, while I claim that it works by making the quantity of money move in step with the bank’s assets.

Mike Sroul November 14, 2006 at 3:44 pm

Jim:

OK. We’re clear on the difference between assets and “reserve assets”. Our debate comes down to you saying that the multiplication of money causes inflation, while I say that as long as assets move in step with money, the amount of assets per dollar stays the same and there is no inflation.

“if Fed printed $100 and bought a desk with it, the economy outside of Fed would have 100 more dollars chasing a physical economy with one desk less. So yes, price of desks would go up compared to otherwise.”

I think you’d agree that if GM printed a new share of stock, worth $60, and bought a $60 desk with it, then the price of GM stock would be unaffected even though there would be “one more share of GM stock chasing a physical economy with one less desk.” You’re saying paper money is unique among financial securities, while I say it is just like any other security.

Mike Sproul November 14, 2006 at 3:58 pm

G. Kysor
“1.) How do you, or anyone outside the Fed, know what physical assets the Fed has?”
For that matter, I don’t know what assets anyone has. I just trust the accountants to tell me.

2.) “How is buying what the Fed puts up for sale a redemption of the Fed’s IOUs/dollars? (I assume you contend that dollars are IOUs since you stated, “Just as I can’t force people to accept my IOU’s, the Fed can’t force people to accept its IOU’s”).”

The Fed prints $100 and buys a desk. Then they sell the desk and receive $100 in exchange. If they destroy the dollars, they have been redeemed. Every dollar that comes out of the Fed can go back in.

3.) “Are you implying that dollars are demands for commodities by your statement (“Supply and demand works for commodities, but not for pieces of paper that are themselves a claim to a commodity”)? But if pieces of paper were used as virtual substitutes for actual commodities, then why wouldn’t supply and demand affect people’s valuation of those pieces of paper?”

Every economics book I’ve ever seen discusses supply curves and demand curves in the context of actual commodities–apples, cars, houses, music, etc. They never discuss the supply and demand for paper claims to those commodities, for the simple reason that paper claims can be created and destroyed instantly in infinite amounts. The model of supply and demand is not applicable. Consider a paper certificate redeemable for 1 oz. of silver. If the price of that certificate rose to 1.01 oz, suppliers would offer infinite amounts while demanders would want none. If the price fell to .99 oz, demanders would want infinite amounts while suppliers would offer none. Both demand and supply are horizontal at 1 oz., and meaningless in the determination of price.

4.)” Think of it this way, wouldn’t people’s decreasing valuation of dollars lead to increased bartering and consecuently a lessening demand for dollars?”
A moot point if my answer above is accepted

George Thomas Kysor November 15, 2006 at 12:38 am

Michael F. Sproul:

1.) Well then, which accountants do you trust to tell you what physical assets the Fed has?

2.) That’s great, so one day when that desk reaches a valuation of, say, $100,000 the Fed could then exchange one of its new SuperDollars for every thousand dollars (during a time period set by the government) for a mass redemption?

3.0 So, doesn’t the following comparison illustrate why government coercion (i.e., enforcement of fiat currency laws) is necessary?

A.) With the Fed’s previous silver certificate, one could then exchange on demand a one dollar silver certificate at the Fed for a vial of actual siver.

vs

B.) With the Fed’s present fiat dollar, one can’t now exchange one fiat dollar at the Fed on demand for any sized vial of silver.

4.) Think of it this way, wouldn’t people’s decreasing valuation of dollars lead to increased bartering and consecuently a lessening demand for dollars for a vial containing actual silver) vs the Fed’s present fiat dollar (now it can’t be exchanged at the Fed for any amount of silver on demand) illustrate why government coercion (i.e., enforcement of fiat currency laws) is necessary?

4.) Think of it this way, wouldn’t people’s decreasing valuation of fiat dollars lead to increased bartering and consecuently to a lessening demand for dollars and thereby to an overall rise in the price of goods and services?

George Thomas Kysor November 15, 2006 at 12:57 am

Michael F. Sproul:

This post supercedes my previous post.

1.) Well then, which accountants do you trust to tell you what physical assets the Fed has?

2.) One day when that desk reaches a valuation of, say, $100,000 could the Fed then exchange one of its (new) SuperDollars for every thousand dollars (during a time period set by the government) for a mass redemption?

3.) So, doesn’t the following comparison illustrate why government coercion (i.e., enforcement of fiat currency laws) is necessary?

A.) With the Fed’s previous silver certificate, one could then exchange on demand a one dollar silver certificate at the Fed for a vial of actual silver.

vs

B.) With the Fed’s present fiat dollar, one can’t now exchange one fiat dollar at the Fed on demand for any sized vial of silver.

4.) Think of it this way, wouldn’t people’s decreasing valuation of fiat dollars lead to increased bartering and consecuently to a lessening demand for dollars and thereby to an overall rise in the price of goods and services?

Jim November 15, 2006 at 2:17 am

Families are voluntary entities. People form families and split on voluntary basis. That is clearly not the case with the kind of “collective ownership” when in reference to national borders. Can I have my share of the border and let anyone who wants to be in, in?

Not sure why you would even suggest libertarian values are anti-family. You have it exactly backwards: it’s the “collective welfare of the society” concept that led to mandatory public education and social workers than can step in between the parents and their own children . . . because somehow they believe they “collectively own” your children! The very idea of “collective ownership” by a society at large is anathema to Family! Heck, if you really believe the society at large collectively decide how the resources should be allocated, you should support family planning like the commies do. That’s why, like I said before, “collective ownership” is the very intellectual foundation of communism and dictatorship. It’s a very different animal from voluntary joint shareholding.

USA is very much a nation-state. The nation-state was first formed after the 13-state rebellion, when states like RI were forced into accepting the Article of Confederacy, then followed by a drastic revision that created a powerful central government, then enormously consolidated by the Civil War. The fighting in bleeding Kansas in the 1850′s alone killed more people than the fighting between Serbs and Croats in the 1990′s. Sherman’s march through Atlanta and US Cavlry action against Indian tribes were far more thorough than the jobs done by Serb and Croat ethnic cleansers.

Jim November 15, 2006 at 2:33 am

Mike Sproul,

Glad we cleared up the confusion regarind assets vs. reserve assets.

The difference between money and GM stock is that GM stock is not legal tender whereas government printed money is!

It comes back to the special “reserve asset” status given to government bond, unlike any other IOU out there. Think about it, if the whole banking system is built upon the government bond being “reserve asset,” in reality it has just given the government the power to print all the money it wants, through bond issueing. There is a limit to how much bond GM can issue because the issue has to find subscribers . . . whereas the government bond is automaticly purchased by the Federal Reserve system, and counted as reserve assets!

daveweilacher November 20, 2006 at 10:12 am

Instead of arguing for a gold standard, shouldn’t the argument be against a compulsory government currency standard?

Marco Saba November 20, 2006 at 10:21 pm

I think the problem with gold is also that the gold market is somehow manipulated (see: http://www.gata.org)
Furthermore, it is owned by the very same people that hides behind the Federal Reserve. (Rothschild, Morgan, etc.)
Which in the end are responblwe for the mess we are in now with the FED Dollar. (I suggest to fire them as soon as possible)
When you buy a T-bond, who do you think will pay for the bond at the end? Yourself through taxation. So the actual system is a scam where the only who benefits are the Fed and the Gov. At the expenses for the common citizen taxpayer. We can avoid this by letting the gov. directly print banknotes and credit (as he do with coins, retaining the seigniorage). You can have a check on gov monetary policy through the political system, while you cannot have a check on a private entity like the Fed that is herself her ultimate judge. (this is the most crazy part of the scam)
But I can add more: the Federal Reserve fake the balance by writing the face value of banknotes in the liability side instead that in the profit side (so they can hide their monetary rent, avoiding to be taxed for).
There is a very interesting book dealing with this problems, New Paradim in Macroeconomics, by Richard Werner. There is not real competition between those very special companies like banks that can create money and credit out of YOUR debt. You pay, they gain. (They assumes as for true that they would be lesser corrupts than government officials, which is only a lie, whithout a check and balance system).

The problem arises as more and more people become aknowledge about money and credit mechanics. And about how they are routinely expropriated of the seigniorage on the money and credit.
In the end, you can have a civil war. Or you must enroll all the citizens as policemen – which is a crazy way to redistribute the seigniorage.
Another problem is if we can reform the system BEFORE a collapse and disruption on the banking industry. This is the real moral hazard, in my opinion.

Julien Peter Benney June 3, 2008 at 6:24 am

Francisco’s comment that sports leagues are “not collectivist organisations” may be a little wrong.

Historically (certainly in my Australian homeland) many sports leagues have imposed exactly the price controls and other market restraints that are so much anathema to Austrian economists.

Zoning to give players a single buyer amongst twelve or so clubs, and wage ceilings to allow poorer clubs a hope of good players were a prominent part of both the VFL and NSWRL for over fifty years. Yet they in the long run merely created shortages of players: by the 1960s wage ceilings were very much binding and clubs could not find enough players.

Another curious thing is that sports leagues in Australia have actually been historically owned by the clubs and decisions made by them. The consequences have not necessarily been good, even when one realises sport’s popularity actually has no relation to the standard of play as I know with the County Championship in England.

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