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Source link: http://archive.mises.org/9478/economic-fascism-and-the-bailout-economy/

Economic Fascism and the Bailout Economy

February 20, 2009 by

The whole structure of the national American political system has rested on the solvency of the largest American banks, writes Gary North. These banks have all been called into question. They are now gutted. Do I see this as the end of freedom? No, I see it is the end of the fascist state. The monstrosity came close to going belly-up last October. It is on its last, tottering legs. It has lost the respect of the public. FULL ARTICLE

{ 38 comments }

Rob Green February 20, 2009 at 10:07 am

Great article. I agree with you completely. But what should we do with our money and portfolios? The basic answer seems to be “buy gold”, but is there anything else we can do?

Nathan February 20, 2009 at 10:28 am

This really far below the average clear concise arguments for Austrian economic world view. It jumps around constantly with shoddily supported attacks that fall on deaf ears. If I were to send this to a person interested in Austrian economics they would ask me what the point of the article was. To call everyone a Facist and use the negative connotations of the word to make an argument against them?

If anyone is crazy it is probably this author. Banks are collecting wealth right now. As the market deleverages and deflation sets in for a short period, these banks are given massive amounts of money at 0% interest. They are buying up half the country, and when inflation returns they will be sitting on a gold mine that can be milked for a lifetime.

Matt R. February 20, 2009 at 10:49 am

Nathan,

I agree. This is a poorly written article.

Bobby February 20, 2009 at 10:54 am

Nathan,

What exactly would be a positive connotation of the word Fascist? He is describing how the conservatives and liberals are both pointing fingers at each other for the same thing and describing exactly what is and is going to happen when this house of cards collapses. So, what exactly were the “shoddily supported attacks” that you refer to? It seems his intellectually-backed attacks only fell onto one set of deaf ears…yours.

Matt February 20, 2009 at 11:47 am

This is an outstandingly clear and precise article explaining the origin of the economic mess we are in.

Garry North used the term “Fascist” correctly, for those that are uninformed look up the definition.

The corrupt economic chickens have come home to roost.

The old order of Financial gimmickry is in the process of collapsing. The same old tactics of manipulating the interest rates and Fractional Reserve Banking that continuously robbed the saver and rewarded the spendthrift has hopefully ended.

The economic pains ahead will be measured in years. To unravel this mess is no easy matter as it was in past recessions. Many will receive an education that was deliberately kept from them while being schooled.

Joe Stoutenburg February 20, 2009 at 12:10 pm

I am cautiously positive on this article. People have been predicting the demise of our financial system for decades. I think that the case is sound that the system is unstable and that it can not continue indefinitely. If this is true, then eventually a forecast is going to turn out correctly.

I think that there is ample evidence that “this time it’s different.” However, there are so many dynamics at play, so many self-interested actors who have a stake in diverting collapse, that predictions should be more cautious. I would not take the tone of certainty as does the author. However, I would account for a significant chance that something along the lines of his prediction may come about. I am planning accordingly.

Gary North discounts the conspiracy theorists who think that the game is rigged. He may be right. I am sure that people who try to manipulate the economy are not so omniscient. They must surely be surprised at times. However, these people have massive resources at their command. Most importantly, they have states that, while opinion has waned, still command the obedience of most humans on the planet.

I remain of the opinion that the people who have profitted from the fascist arrangement will work things out (unless there is a truly unexpected radical revolution) to their benefit whatever happens. The former Soviet Union is a case in point. The author’s contention is silly that Russia’s rulers are not Communists. True, Russia is no longer Communist. It is fascist. But the same oligarchs who ran the Communist Soviet Union now run the fascist Russia. Maybe they didn’t plan for the way things turned out. But they certainly came out ahead.

Whatever your conclusion on conspiracy, I think that most readers here will agree that there needs to be a new worldview on current power structures. Perhaps the unfolding crisis will lead to that change. I fear though that the people who dominate today will find ways to dominate in whatever system evolves after the current system has dissolved.

NA February 20, 2009 at 12:55 pm

To quote Mises: “Capitalism and socialism are two distinct patterns of social organization. Private control of the means of production and public control are contradictory notions and not merely contrary notions. There is no such thing as a mixed economy, a system that would stand midway between capitalism and socialism.”

DD February 20, 2009 at 1:08 pm

This is a fantasitic article!

It is obvious that the intention was not to dwell in economics, but to express the common political point of view that is likely to be seen throught the lens of Austrian economics.

I found the article quite emotional and powerful. The author is clearly expressing a certain degree of frustration that many I think can relate to.

pbergn February 20, 2009 at 1:09 pm

Very misleading and disappointing article to say the least…

As one of the said “ignoramuses”, I can tell that the author is being intellectually disingenuous…

The reality is very simple:

Ladies and gentlemen, please welcome – Globalization, in its pure vanilla form… Courtesy of global elites who are tired of playing democracy (or otherwise known as “The Plebs and the Patricians” game)…

Yeah, when they pull off that curtain, there is nothing there but a brick wall…

Call it whatever you like – Capitalism, Fascism, Communism…

The Iron Rule of Oligarchy Rules!

Welcome to the 21st century – the age of slaves!
Enjoy being had, and don’t forget to say “thank you”!

Lara Braveheart February 20, 2009 at 1:30 pm

Mr. North,

Great Article. A few thoughts:

The Nuclear Age preface, appears a plausible Nuclear Age future, as the reality of Einstein’s ‘The greatest tragedy of the human race is it its incapacity to understand the consequences of the exponential function’ (www.exponential-yewgenics.co.nr) merges with the predictions of The Tragedy of the Commons (www.armigideon-titanic.co.nr)

I had a good laugh with:
The thought that commercial-bank insiders actively demolished trillions of dollars of their own equity as part of a conspiratorial plan is so imbecilic, so outrageous, so ludicrous that I am convinced that these conspiracy worshippers have lost whatever remained of their minds. They have been gutted intellectually, just as the banks have been gutted financially.

I don’t know if there was a conscious intentional conspiracy; if anything was probably similar to the conduct of any alcoholic whose addiction to alcohol is stronger than his willpower to resist. He knows where the road to being an alcoholic may lead him, if he stops for serious contemplation; a future of a destroyed family, destroyed life, etc.. and yet he goes down that path.

And if you don’t think that the elite investment bankers, and their families, whether known as Rockefeller, or Morgan, etc. are addicted to their power, status, as the Big Brother beneficiaries of the Phallic Worship Masonic $lave and Cannon Fodder Breeding ‘exponential growth’ of population, use of scarce, limited and finite resources; just like any alcoholic to his beer, football addict to his football, sex addict to sex, etc; then you shall not be able to conceive how these arguably very smart people, surround themselves with ‘advice’ as to what they want to hear; and not impending future reality (in this case the consequences of exponential functions and living as if they don’t exist in a finite resource ecological environment).

Alternatively giving them the benefit of the doubt; they did know what was coming; and realized the truths of exponential functions on populations and Austrian Economics of Mises and Rothbard; and living in their Hegelian Dialectic World, they chose the option of being the covert Tony Robbins; encouraging the ‘addicts to overdose on the (endless economic growth) chocolate’, until they get so sick of chocolate, they either find the will to confront their addiction, or they overdose.

Well, the impossibility of (exponential function) ‘economic growth’ or even ‘sustainable growth’ and certainly ‘population growth’ (which is the driving force behind political policies, etc. See http://www.navyjag-humint.co.nr) ADDICTS appear to still ain’t come to face reality.

Anyway, I particularly chuckled at the clarity of your following statements, especially within the context of ‘getting addicts to face reality about their addiction’:

It has been the Austrian School economists who have warned, decade after decade, that the increase in the federal debt would eventually threaten the solvency of the government and the stability of the dollar.

Fractional-reserve banking has been a con job from the beginning. Rothbard and Mises pointed this out, and they were hated for it. The economists trust bureaucracy. They trust people with Ph.D.’s just like themselves. But, except at the Federal Reserve, the agencies are run by lawyers and by appointees who hope to get a fat lobbying salary when they leave the government. Why should we think that a bunch of Harvard- and Yale-educated lawyers, who were recruited by New York City banks that were always protected by the Federal Reserve System, would have any idea of how to run an economy? We now know how well they could run the economy: they stripped off million-dollar bonuses for running the system over the falls.

These scholars agree: we are seeing the bankruptcy of every Western government that has made too many big promises to too many voters regarding free healthcare and guaranteed retirement. All of it will collapse. The tatters of the promises will point to the tatters of those who made the promises — politicians — and the tatters of the system that was supposedly going to guarantee delivery of the promises.

The academics still believe in the healing power of the state. The voters still believe this, too. But voters are catching on more rapidly than the academics that the state is running out of wiggle room. Millions of voters have figured out that they are going to get stiffed. They don’t know what to do about it, but at least they understand that they really are going to get stiffed.

Just one little disagreement I have with you, or possible contradiction. You say:
It is not going to get much better. The banks are gutted. The best and the brightest graduates will not be going into banking for as long as there is a $500,000 cap on salaries, if Obama gets his way.

Personally I don’t think the best and the brightest are necessarily those attracted by the largest sums of $$$. They are definitely the greediest. In my view if we consider history’s brightest, very, very few of them were the greediest for financial reward. Consider just one: Voltaire.

Or modern day brightest and best, who know that to be ‘bright’ means to face reality; as a politician that means you don’t promise what you cant’ deliver; it means you demand voters hold themselves accountable. Brightest politicians these days may be people such as: Ron Paul and Chuck Baldwin…

Lara

Alex February 20, 2009 at 1:33 pm

The article is on the right track, albeit a bit too much on the offensive side for an average person’s digestion. The term ‘fascist’, used in post-WWII world, is pejorative. Additionally, since fascist system (much like communism) is a one-political-party dictatorship, although U.S. president has way too much power, we still do not live in full-blown dictatorship. That is not to say that there are no resemblances, but the politicians of our day are much more clever than Mussolini (or Stalin, for that matter) were. And, if we want to reach majority of folks out there, we should be careful with the choice of terms.

I agree with most of the article. I take exception on few points. Predictions are hard, especially about the future, so the fact that the system will eventually collapse is certain, but when it will happen is not at all. With all of the current U.S. mess, this still appears to be the least bad place on the globe (think e.g. Ireland with exernal debt amounting to 900% GDP).

Author says that “There is no academic hue and cry against the massive deficits of the federal government and the massive bailouts by the federal government.” This is not at all true. Check Cato Institute’s NYT ad:

http://www.cato.org/special/stimulus09/alternate_version.html

The real question is: do the politicians care for an opinion countering their intentions? Obviously not (“I don’t care what somebody on some college campus says.” ~G. Bush):

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/28/AR2008092802213_pf.html

And, then, rhetorical questions like this one:

“Why should we think that a bunch of Harvard- and Yale-educated lawyers, who were recruited by New York City banks that were always protected by the Federal Reserve System, would have any idea of how to run an economy?”

have been answered long time ago and the answer is – they don’t and we don’t think they do. It’s just nothing we are doing about it. Ayn Rand called it the ‘sanction of the victim’. We either know what’s going on and do nothing or not even care enough to find out. At any rate, they have a gun, that’s why they can get away with it.

And finally:

“The success of the Ludwig von Mises Institute in getting Austrian School economics in front of hundreds of thousands of young people, all over the world, who would never have heard about Mises or Rothbard had it not been for the World Wide Web, indicates that the foundations of the modern fascist economy are being undermined where it counts, which is in the minds of bright people who are no longer buying into the system.”

Just watch how those with the gun try to take away the freedom of speech on the Internet.

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’ ”

Ayn Rand, “Atlas Shrugged”

Nathan February 20, 2009 at 1:55 pm

Ayn Rand was no Austrian. She plainly supports government intervention. Austrians are anarcho-capitalist. All governments are equally absurd to Austrians; Democracy, Fascism, Communism, Theocracy, Hyper-environmentalism, etc. They are all morally defunct because they allow the oppression of the minority with the will of the majority.

For a so called Austrian to use the implied connotations of Fascism as if they were any better or worse than other governments is a ridiculous assumptions, and is plainly meant to stir emotions rather than to put forth valid points on economics.

Shane Coley February 20, 2009 at 2:18 pm

Dr. North blasts people who see a conspiracy, as though they are morons, or was it ignoramuses…

Anyway, then he goes on to remark about the “silence of unindicted coconspirators”, followed by a highlighted repeat of the statement, no less.

Does Dr. North’s use of the term “coconspirators” make him an ignoramus too?

Here is an example definition of Conspiracy: “a secret plan or agreement between two or more people to commit an illegal or subversive act”

Dr. North makes several remarks in the article that describe acts that would fit the definition. I suppose Dr. North must be the arbiter of the boundaries, classes and categories wherein the term “conspiracy” may be used. Those who draw the lines in different places are ignoramuses.

I don’t know if the following quote is correctly attributed to one of the old bankers or not, but based on my observation, it seems to be reasonably accurate.

“The few who understand the [monetary] system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class. The great body of people, mentally incapable of comprehending the tremendous advantages will bear its burden without complaint.”

In addition, to support his argument about how the bankers are losing, Dr. North would need to be right about how detrimental all this has been for the banks. Dr. North confuses the peons, so to speak, having big paychecks with the real owners of property farther up the chain.

I agree with Nathan’s remarks above. I have watched banks and property owners in my region come up on the losing end of their bank notes over the past few months, but not for the reasons one might expect.

The government agencies come in and close down a bank, then reopen with some assets sold to another bank. Then the government manages a series of notes and assets that they sell at deep discounts upstream to larger banks in $100 million dollar units, categorized by the debt to equity ratio.

If you are in good standing, current with all your bills and able to show capacity to service debt, it makes no difference. They want the notes paid at maturity because of “illiquidity” in the credit market.

Borrowers are put in a position that they cannot break off collateralized pieces of property, for example, in order to sell a subset at a discount in order to pay the note and hold the balance of their property.

The government takes property, on behalf of banks, by making them be handled and paid as “all or nothing”. For most people and businesses, there is no way to even attempt a bid on your notes, which are being sold at deep discounts, because the packages are $100 million dollar units.

As Dr. North stated in the article, there are indeed people agreeing to do subversive things (some people label the this activity “conspiracy”).

But the banks are not the losers here. The currency is not the prize. All the property, which has intrinsic value, remains, as do the titles. Its just that many of the titles have been coercively transferred to new owners.

Andras February 20, 2009 at 2:32 pm

@Nathan: “Austrians are anarcho-capitalist. ”

Really? Was (Is?) Mises? Was Mises then an Austrian?
Are we on austrians.org or mises.org?

I think this is a great article, a wonderful misesian diagnosis!

DD February 20, 2009 at 4:44 pm

Nathan,

Austrians Economics is about just that: Economics! “Austrians” realize that an economy based on Laissez-fair Capitalism, that is, one that does not violate Individual rights and property rights, is by far, the most superior system of all other alternatives.

Given the ramifications of Austrian economics, one cannot ignore other more philosophical and political issues as well.

One, who understands Austrian economics, realizes that that the only role of government, if it is to exist at all, must be extremely limited, and its only proper role would be to protect individual rights. Some however, would not view government as compatible with freedom at all, and see no reason what so ever as to why there should be any legal coercive monopolies at all, and will offer as an alternative Anarcho-capitalism, which relies on the free market to also provide individual protection and justice

DD February 20, 2009 at 4:53 pm

Also,

Fascism in the article is meant to contrast Capitalism, and not Democracy. Democracy doesn’t really indicate much about its economic system or anything for that matter.

Matt Houseward February 20, 2009 at 4:55 pm

I like North. I like this article.

North’s articles are definitely more at home on rockwell’s site, which has a broader scope.

I like North because he reminds me that this isn’t just about value-free economics. Political and economic manipulation often leads to tyranny, war, and chaos. The economic manipulation of the west in the 30′s is partly responsible for provoking WWII. This kind of thing is a big deal, and it should be treated as such; not simply as a matter of economic efficiency and maximizing production.

I must say that I would find it humorous (if it weren’t so damn sad) that the East adopted communism about the same time the West adopted fascism as their economic models. Apparently, we can expect fascism to last about 20 years longer than communism, and neither will reach a century.

Although, I would be surprised if America and the Euro Union didn’t try full-blowned nationalization of all production means before they collapse like the Soviet Union. Or maybe we’ll just suffer for 20 years and try the whole damn thing all over again. If they can keep us despondant long enough we will eventually lose heart and hope. When the market finally reasserts itself, we will probably be so grateful to have a steady income that we will be unwilling to push the envelope and force a systematic change of our economic underpinnings.

Maybe next time we’ll all try a little freedom. How about that?

All that being said, you can only read so much North before you start to feel like Christopher Robbin hanging out with Eeyore. “Oh, bother.”

pbergn… I don’t think I understand your post. What do you mean by globalization? Trade between nations? New World Order? Or are you implying that “the corporations” are our rulers? If the latter, I have to agree with North. The market can and will assert itself. Those corporations that participate in the fascist system of economic manipulation are co-dependant on the government. Nobody “runs the show” so to speak. But again, I don’t really understand how you are using the term globalization.

Abhilash Nambiar February 20, 2009 at 6:10 pm

This article is a work of excellence. I felt like I was reading good poetry even though it was all prose. I am a bit concerned though, legal wise. Gary North is giving what can be interpreted as investment advice. I am referring to these lines


Put your money where the experts tell you that you should not put your money. You should take your money out of those segments of the economy into which the experts say you should put your money, claiming it will soon boom. They have ignored the fact that the stock market has been a losing case since March 2000.

Those experts he is criticizing are legally allowed to give their advice, even if we agree that they are bad. But what about him? I do not know. I just don’t.

More Than Hesitant February 20, 2009 at 6:36 pm

The article seems a little unhinged. It’s not cogent. I don’t think it positively reflects on the credibility of the other articles on this site.

I think an editor at Mises.org took a chance on publishing this, and I doubt it’s going to work out too well.

Are there other articles by Mr. North on Mises.org ?

ehmoran February 20, 2009 at 6:39 pm

Abhilash Nambiar,

My experience is LISTEN, but be very, very cautious. Do your home work, maybe listen to the little guy on your shoulder a little, and LEARN.

Remember, those guys are there to TAKE your MONEY, because you’re there to TAKE theirs.

And they’ve got more information than YOU and they don’t like to LOSE.

Abhilash Nambiar February 20, 2009 at 6:52 pm

ehmoran

By those guys are you referring to the experts that Gary North is criticizing?

ehmoran February 20, 2009 at 7:21 pm

The Consolidated Bankers, how about Oligarchs, yes. Actually, I was talking about Market Analysts. For instance, an Analysts recommended a buy or a solar stock YGE at $21.00. Well, it kept falling till it bottomed at $2.50. I emailed the BRAIN and asked him “when exaclty was I suppose to BUY, at $21.00.

Three things about Stock tips: Either the adviser

1) has inside info, which if you follow him, you also are INSIDE TRADING, illegal;
2) has an ulterior motive, he’s in and needs you to buy to raise the price so he can sell;
3) or is completely full of CRAP and CLUELESS, which generally is the case.

So tell advisers to leave their TIPS with the waitress.

Oligarchs are the very minority that influence Governments and Government influencing these few individuals. That’s the BIGGER and whole problem.

And North rejects the Conspiracy, well, a conspiracy is just a thought that hasn’t been revealed. I’ve had conspiracies lately about the Market, guess what, they’re no longer conspiracies, they actually became Prophecies, I have the proof.

The thing about an accurate Prediction is that if you and enough others know the event(s) leading up to predicted outcome, if you change the event(s), the outcome doesn’t occur. But a p

ehmoran February 20, 2009 at 7:23 pm

Sorry, not done

But the outcome of a prophecy cannot be changed!!!

Chad Rushing February 20, 2009 at 7:25 pm

Nathan: “Austrians are anarcho-capitalist. All governments are equally absurd to Austrians; Democracy, Fascism, Communism, Theocracy, Hyper-environmentalism, etc. They are all morally defunct because they allow the oppression of the minority with the will of the majority.”

I respectfully disagree with this statement as even Gary North, the author of this article himself, is a Christian minarchist, not an anarchist, and has described his idea of good government in his book Inherit the Earth. Mises aka “Mr. Austrian economics” was not an anarchist, either, believing that the State had legitimate, protective functions in a society:

“State and government are the social apparatus of violent coercion and repression. Such an apparatus, the police power, is indispensable in order to prevent anti-social individuals and bands from destroying social co-operation. Violent prevention and suppression of anti-social activities benefit the whole of society and each of its members.”
– Ludwig von Mises, Planned Chaos, 1970.

One can fully support Austrian economics without being an anarcho-capitalist.

Freedom February 20, 2009 at 9:16 pm

@Chad Rushing
“Mises aka “Mr. Austrian economics” was not an anarchist”

This was a major failure in his theory (because there is no benign coercion) which was later corrected by Murray Rothbard.

Dianne February 20, 2009 at 9:53 pm

For Shane Coley: I too was confused at first by the “conspiracy” coments. Having read articles and books by Gary North before, I think that what he is objecting to is the idea that conspirators are omnicient and omnipotent and incapable of failing in their objectives as some would suggest. I hope that he is right and that the conspirators have gone “a bridge too far” and that their world is crumbling.

newson February 20, 2009 at 9:53 pm

as kinsella says:
“Mises was wrong. However, his views on this matter were so close to anarchy to be almost indistinguishable. See Rothbard (http://www.lewrockwell.com/rothbard/rothbard169.html):

“How far would Mises push the principle of secession, of self-determination? Down to a single village, he states; but would he press beyond even that? He calls the right of self-determination not of nations, “but rather the right of self-determination of the inhabitants of every territory large enough to form an independent administrative unit.” But how about self-determination for the ultimate unit, for each individual? Allowing each individual to remain where he lives and yet secede from the State is tantamount to anarchism, and yet Mises comes very close to anarchism, blocked only by practical technical considerations…”

Maybe it was Gamers February 21, 2009 at 10:16 am

Interesting perspective on the question that everyone is asking: Was this a conspiracy?

If a large group of drug addicts and alcoholics suddenly died, would you say “Oh well, they were just a bunch of drunks and junkies” or might you also consider the possibility of murder?

Just because we don’t know the answer to Who Gains, doesn’t mean the collapse was not engineered. After all, gaming is America’s #1 pastime.

For all we know, the investment banks were brought down by a group of teenage financial wizards and computer hacks from Indiana.

Today’s average computer savvy kid on the street is infinitely smarter than the U.S. Government’s Keynesian blinded head nodders who slumber away in subsidized fat cat lounges.

Seriously, the fact that Neil Kashkari was the first guy on the scene speaks volumes. He is first and foremost a computer genius, he’s an AE, worked for NASA as a software engineer, then for Goldman Sacs.

The government system was ripe for a fall, but it was also ripe for picking. No longer is it just the government that can do whatever it wants just because it’s so big. Now they have to compete with the computer geniuses, the financial wizards, the gamers of the world.

My bet is on the gamers and whiz kids.

Shane Coley February 21, 2009 at 11:48 am

Dianne,

Thank you very much for your comments. I am familiar with some of Dr. North’s work as well.

And I too hope the people and entities who benefit from our present monetary system have miscalculated and are crumbling. The problems I have with that view are multi-faceted. Following are a few brief thoughts.

In a fiat/fractional money system every person fills one of two roles. One either pillages or is pillaged. There is no alternative and opting out is not possible. The definition I use to describe this dynamic is as follows:

The purpose of inflation is to use costless NEW MONEY to purchase REAL ASSETS at OLD PRICES, thereby causing a wealth transfer from the people who get the new money last toward the people who get the new money first.

We each find ourselves with wealth moving into or out of our possession through the fiat money conduit. If the average person can aggregate wealth by understanding, or at least using, the system, then those who control vast quantities of property and capital can certainly do so more effectively.

The question is not whether the currency is good anymore or whether the stock price of a business that shuffles paper has suffered. The question is this: Is there a group of people who have positioned and structured their resources to acquire real property at discounts in this distressed environment? As I noted above, I see property changing hands at deep discounts that should not be changing hands at all.

If every piece of paper money were gone tomorrow, the property having value would remain. The fiat/fractional “banking system” is currently an administrator and self-imposed necessary resource for the conduct of business. But bankers and dollars that strip productivity from the hands of the producers are certainly not a benefit to producers. Granted losing the financial networks would make sorting out the methods and valuations for indirect exchange challenging and difficult for a time. But the property will remain and will belong to someone.

The value of one property relative to another will stabilize in a new economic environment and the levels of production will be profitable for the owners of the means of production.

Ultimately, nothing is ever purchased except with productivity. However, as in our current system, many things are purchased through theft of someone else’s productivity.

To make the point about productivity, even if one owned billions of tons of gold, one could not acquire a hamburger, for example, unless someone had planted and harvested grain for flour, raised tomatoes and made ketchup, raised cattle and fed out a steer, and then brought these things together such that a hamburger existed to be exchanged for a bit of gold. Even the gold would not be present except through either productivity or theft.

One must produce or confiscate production.

Have they miscalculated? Let’s watch to see who owns what as this process unfolds and then perhaps we will know.

K Ackermann February 21, 2009 at 5:41 pm

There are things to obviously agree with here, but this was really just another ideological rant.

What’s the conclusion? Are we doomed forever?

There is always going to be a ‘state’. That is a constant. It is needed for the things that it is needed for. That gives it power, and the trappings power carries with it.

If you somehow think an ideological free market would act honorably and not try to rig the system, you are wrong.

The single largest contributor to government inefficiency and corruption comes from private enterprise. It has infested government.

It has rewritten laws that have allowed for massive media consolidation, and the results of that obvious.

It has literally written the health care legislation with an eye only on free money.

Corporations can be counted on to go to extreme lengths to deny responsibility for mountains of dead bodies, and miles of scortched earth. They will gladly sell peanutbutter known to be contaminated into the market.

They will aim to create systemic risk scenarios and exploit it to the fullest.

Do you know why the citizens of France seem to be doing just fine? It’s because they are not afraid of their government. Populist revolution is long-lived lesson, it would seem.

The free market has not produced medical care for all, yet all in France have access to it. Do you know why? Because the people demand nothing less.

More proposals and less rant is what is needed.

Here; I’ll start it off: mandate public campaign financing and outlaw all campaign contributions.

JD February 21, 2009 at 6:41 pm

Humans are always looking for an advantage, & with the implementation of the Modern multi-layered “State”, its much easier to conspire for coercive advantage over others without the messy clean up that goes along with use of gun, sword, club, or axe against an individual or group of folk. They now use the State, to curb out competion when they are threatened, by way of Regulation or even as we have seen with the new book regarding IP.

What we have is the continuation of the Mercantillistic practices of Europe. I’m NO historian & I’m sure that it was practiced elsewhere, but this practice is what we as Free Men have been fighting against for in my best estimate 500 years. Cronyism/Collusion, with a coercive agent, “The State”.

There really is no new conspiracy here….it really results from people wanting to be taken care of by the “State”. You wouldn’t have a large portion of the population on that dole & carrying out the daily work of the conspiracy if it weren’t true.

The “Root Cause” is illustrated here everyday. Central Banking, because when the monetary unit is politicized (Nationally),….. its all cake for the so-called conspirators from there on.

Mr. Rothbard’s take on this at least in the 20th century is, as far as I can tell fairly accurate in the description of the so-called Modern Conspiracy of the Central Bank/Industry/The State.

MB221 February 21, 2009 at 8:56 pm

K Ackermann,

“If you somehow think an ideological free market would act honorably and not try to rig the system, you are wrong.”

I don’t think you would find a single person on mises.org (including the author of this article), that believes in an ideological free market that acts honorably 100% of the time. My journey into (truly)free markets and study of Austrian economics has lead me to quite the opposite of your conclusion.

The free market has already, somewhat inherently, accounted for these few people who constantly seek to “rig the system.” Those who seek to immorally exploit weaknesses in the markets, like you suggest, are always found out and eventually pushed out of their respective industries. As recent history has shown us, though, government intervention and “regulation” in the markets quite literally changes the rules of the game, and thus allows these frauds to continue their tricks under a new set of rules, but with the government on their side. Government regulations, as we clearly see today, do NOT stop people from perpetrating frauds and acting un-honorably. Rather, it seems that the regulations act as mere hurdles that force any scheme to simply become more complex, and thus more difficult to discover (see: Madoff).

In a truly free market without any government intervention, these frauds would be expelled from their markets almost immediately upon discovery, via the forces of natural competition and (likely) disdain from the general market populace towards these fraudulent actions. Madoff would never of had the tools to perpetrate his scheme because there would be no protection from government “intellectual property” regulation. He would have been forced to disclose exactly what he was doing with people’s money, or else lose his business.

I’d like to offer you (and all supporters of government regulation in the markets) a question: Which of the two sources do you think would offer the most unbiased, fair, and efficient regulation in the market?

A. The government: a group of normal, irrational, MISTAKE MAKING human beings, with absolute power and more interested in keeping their political office (their jobs) than always doing what is in the best interest of the general public.

B. The average market Joe: a single individual who acts solely in his best interest, who if makes a mistake in the market (i.e A bad investment) will have to learn the hard way, likely suffer from it, but will remember that mistake and build on it.

I think the answer is clear. Ole’ average Joe doesn’t know it, but he is a very powerful form of regulation. His money, his consumption, is the strongest force in the market. He decides where to take his business, and thus decides where the market moves. If Joe senses something fishy about a certain company (lets just assume this company is operating under fraudulent or other immoral business activities), he will likely take his business somewhere else (thus acting as a form of regulation). Sure, some of the Joe’s in the market are not as smart as our Joe and will invest in this crappy company. But when things hit the fan, the unlucky Joe’s who fell for the scheme and are currently suffering, are much more wise and will be more diligent and careful with their money in the future, thus helping to prevent (and regulate) any immoral business practice from becoming long-term.

The government does not learn like Joe does, and when the government makes a bad decision (which happens all the time – they are humans after all) it affects EVERYONE in the market, not just Joe. I feel like that alone is the basic idea behind 100% free markets. Governments make mistakes in the market and hurt everyone involved; the market makes mistakes and only hurts itself, becoming better off in the long run because it has learned what not to do (and also does not have an outside source coming in and changing the rules all the damn time).

Government regulations and policies in the market are like treating an acute mental disorder with an array of “modern medicine”, when in reality the only real and permanent treatment is SELF CORRECTION by the individual. The drugs (regulations) only cover up the problem temporarily. The patient must heal itself from the inside for any lasting effect to take hold. Why must the markets (really just a bunch of people) be any different?

MB221 February 21, 2009 at 9:12 pm

Just wanted to add a tidbit of rhetoric to what I posted above above government intervention in the markets.

Doesn’t it seem like the government would be more predisposed to make irrational mistakes, or biased mistakes, solely because of their power? I think we can all agree that power corrupts the mind and hinders the ability to think rationally (which is also the reason why corrupt power always fails!).

K Ackermann February 21, 2009 at 10:05 pm

Hi MB221,

As to your second post, there is no doubt what you say is true, but how did it come to be?

There cannot be an unregulated market, because collusion will take place. If there was always an efficient way around it, then we would have no health care debate, as the free market would have found a solution by now.

The money market is a collective phenomenon. It is efficient, and of great utility. I contend that there are rolls that a ‘state’ can play to reach overall systemic efficiencies that self-interest cannot contemplate.

I don’t even know what you call aspects of our system, but I do know some of the labels are poisonous.

What is this: the taxpayer funds 48% of the research for new drugs, yet a single company is allowed to brand the drug without compensating for the public funds. The industry calls that free market capitalism.

Now here is what I would call real capitalism, but others would call socialism: the government imposes a regulation that no company can both design and manufacture a drug. Bear with me on this…

To use an extreme example, let’s suppose the government increases its funding for new drugs from 48% to 100%, and in exchange it owns the patent for the drug which it keeps in a public escrow.

Companies that only ran research labs for new drugs would no longer use strictly potential end sales as the criteria for designing new drugs. They would want to design as many drugs as they can.

The government would then sell licences to these drugs to manufacturers who only build pills. The normal market efficiencies would apply to the pricing of these drugs, with greater efficiency rewarding everyone.

The cost of the licences could be based on the number of pills sold, with money-losing diseases being amortized, but still being developed.

From that one single regulation, all parties could make out, with the public benefiting the most in total. It would not only have more treatments available, but it would not have to pay for branding, and it would benefit from competitive pricing.

ehmoran February 21, 2009 at 10:05 pm

I heard Obama will reduce our deficit to $533 billion before the end of his first election. Now, how’s he going to accomplish that?

Another, if 91% of American homeowners are still making their monthly payments, how can 9% of the people defaulting on loans collapse the entire U.S. Financial Sector and send the global economy into recession?

From my understanding, Banks account and prepare for nearly 10% of the loans they make to go default. So What’s Up.

MB221 February 21, 2009 at 10:54 pm

K Ackermann,

I can agree with you that collusion would take place in an unregulated market, but as recent events have shown us, no amount of government regulation will stop collusion or other sorts of malpractices either. I guess my point is that I believe free markets are in a much better position to fight malpractices rather than the government through an array of regulations.

The idea of free markets does not imply completely unregulated business. Of course there will need to be a set of standards and accepted practices like we have today (GAAP, etc.); those are necessary and serve as a foundation of moral principles that guide business practices. The market creates the guidelines for business and lets the natural market forces (aka human behavioral tendencies) to take over from there. Let the market punish those who don’t follow the market’s rules, not the government.

It’s the government interventions to protect/stimulate/whatever specific areas of the market is what I am against. The state typically sees only one side of the picture, and does not consider all parties involved. Hazlitt’s “Economics In One Lesson” is a brilliant piece of literature that covers this very topic about the effects of state interventions in the market.

I guess I haven’t been following this particular debate close enough to follow you, but I did not catch your reference to health care – perhaps you could expand on that?

K Ackermann February 21, 2009 at 11:28 pm

MB221,

Thank you for the book reference. I need to become better aquainted with existing bodies of work. I have so little time for immersive study that books which cut to the chase are greatly appealing to me.

I agree with you on the behavior of the state. I think our existing government is pathological. The average American has no other reference to go by, but when you look at a country like England, they can point back through a history of having once been on top of the world, and of having some of the worst governments that you can think of. I wonder if it is this perspective that allowed them to have the common courtesy to plan for the dissolution of their empire. We seem intent to keep it winding out until it explodes.

When you look at the epic failure of things such as the SEC and the Fed to carry out their most fundamental responsibilities, yet still vest them with power and seek no real changes, then you know you are dealing with a pathological government, and we should be taking steps to protect ourselves.

My reference to health care was just in the general sense that 49 million are without insurance cards, and those with cards run the risk of denied treatment on almost arbitrary guidelines.

The free market has not found a way to put our health care system on a level with the rest of the Western world. We may have the best equipment, but we have lousy access to it.

I actually bought a defibrilator because I am out in the country, and a few of my neighbors are getting on in their age. These things are brilliant. Basically they say ‘to save life, press button’. Mine actually talks the operator through the procedure.

I can now deal with a heart attack at home, but not an infection.

Francisco Torres February 22, 2009 at 2:53 pm

There cannot be an unregulated market, because collusion will take place.

This is a non sequitur.

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