It would be interesting to see what happens if there aren’t enough “patriots” buying these bonds. Maybe a law will be passed to make us buy them–the Bail Out Housing & International Credit Act (BOHICA)?

I can’t help but think this money deal being sold in DC and “financed” by the Fed has major similarities to playing blackjack against a gaffed shoe.

I am a collector of dice and antique poker chips. I am especially interested in gaffes. Gaffes are faked up to look real, but they have a hidden purpose. A marked deck is a gaffe. Loaded dice are gaffes. A gaffed shoe, is a collection of a deck of cards that the dealer deals the hands of a game of blackjack from, but the values of the cards within that collection are not consistent with a normal collection of decks. In other words, some of the values are missing.

A casino that suspects a card counter is at a table, will swap a gaffed shoe in when the pit boss rotates the dealers. The shoe does not contain any 6,7,8 or 9s. Only 2-5 and 10-A of each suit. A typical card counter assumes the existence of the middle values, and computes his predicted outcome on that assumption. But the shoe is gaffed, and so the card counter makes mistakes, and loses the money he won by beating the house against the fair shoes earlier.

The problem for the card counter is similar to the problem for the investor. He must evaluate the cards that he has seen against what he sees now, and decide whether the risk is justified or not, and bet accordingly. The similarity of the bonds to the gaffed shoe, is that the house knows the true outcome, the true nature of the shoe, whereas the players, do not, and cannot know, until it’s too late.

The outcome of the bond game cannot be predicted in your favor, because the game is changing without your knowledge. Don’t bet on a gaffed shoe!

Proudcapitalist quote:
Anyway, it should be less inflationary to suck up peoples’ savings of existing money with such bonds, rather than just creating new money.

And if we can’t get folks to buy the bonds willingly, we’ll start confiscating their money.

I can see the headlines now…Extra!, Extra! Read all about it….
“Gov’t Theft = Low Inflation”
“The Economic Virtues of Gov’t Theft”
“Keep Inflation Low, Gov’t Takes From the Evil Rich”
“Gov’t Induced Social Justice = Low Inflation”
“Big Gov’t = Low Inflation”
“Uncle Sam Needs YOU to fight non-US Bond savings”

No, It’s because the house never bets against it’s own gaffe!

What’s your point, AC???

The gov’t can choose various ways to act. Borrowing money and have interest rates go up. Or printing money while keeping 0% interest rate. Or increase taxes outright. Et cetera. The weight put on different such actions in the gov’t mix will determine the consequences. For example the degree and timing of the inflation ahead.

Maybe bailout bonds is a sign of the gov’t getting afraid of the already huge inflation it has caused?

To ProudCapitalist
The point my good man is that our current gov’t can only pay back debt by issuing more debt or by taxing individuals. And since the gov’t doesn’t collect revenues through voluntary transactions with “customers,” the transactions it does enter into become involuntary, which is a loss of liberty and wealth.

Some might say, ah but folks voluntarily bought the bonds. And this is true. But the real question is how does the gov’t intend to repay those bonds? If the answer is, the gov’t is going to compete in the market place and provide non-monopolized goods/services, then use the profits to repay the bonds, then I’d say, no problem. Maybe gov’t will open a grocery store and earn revenues by providing goods to customers, not likely. But because the only realistic method of bond repayment is by taking someone else’s property against their will, it amounts to theft. And furthermore, our gov’t since 1914 has used a very progressive tax code, meaning it generally takes funds away from people who provide the greatest good to society. In sum, gov’t theft of this magnitude creates loss of liberty and wealth. Furthermore it works to break down society as the productive come to resent the less productive when gov’t gives of the earned goods to the less productive. Gov’t pits the poor against the rich. This does little good to create more wealth for all.

To Mr. Gordon
The statement “the initiation of physical force against an individual’s person or property is evil” is a morality argument. And it is also the right argument to make in order to create a society of liberty and prosperity. What do you think Ludwig von Mises meant when he said, “Do not give into evil, but proceed ever more boldly against it.” Since gov’t transactions are not voluntary, it is not the same as “just business.”

In summary to an absurdly long post and not very coherently articulated, I’ll say this,
Gov’t borrowing, gov’t currency debasement, confiscatory gov’t taxation, is basically the same in that it is ultimately based in violating individual liberty, the very thing gov’t is supposed to protect.

Thanks for engaging.

Ahhhhhhh Mr. Gordon, now I get ya.

I’ve done the same thing before….more than once I might add. It’s funny how when communicating via written word it is more difficult to voice sarcasm.

@Jason Gordon

“How is it that people here can call themselves capitalists, yet always get so caught up in moral arguments? Morality has no place in capitalism, and that’s something with which even the Marxists agree.”

The Marxists agree because it is convenient to do so. It’s easier to claim immorality in your opposition, than to address their strengths head-on.

Capitalism is a moral answer to the problem of Human action and interaction. What decision in business is possible without a morality, an ethic, to guide the outcome to one of mutual benefit? Capitalism depends on the moral and ethical behavior of it’s participants, or the Free-market becomes a free-for-all of immoral stealing and fraudulent dealings.

A Capitalist is not someone who is out for himself. He is a rational thinker, and as such wishes good will towards his fellow man. Why? Because that is his market! Capitalism is chock full of morality and ethics. It has to be to be a viable, or even a desirable alternative to the other forms of economics. Capitalism is the only form that places the power and the trust in the hands of the free individual, and depends upon that individual and all the others in the system to find common ground, common value, and common trust. Without a morality, without an ethic, how could such a thing exist?

I’ve been reading articles at this blog for several weeks now and I have to say you Austrian economists are all very calm people. In the face of all this government theft, while other blog writers are frothing and freaking out, this is an oasis of rationality.

Is there some sort of underlying deterministic philosophy going on? If so, I need a serious shot of it soon. I mean, bailout bonds–sheesh!–I guess they figure their public education brainwashing has come full circle by now.

I certainly hope no one is buying into this latest scam. I see no point in buying these bailout bonds. Especially when there is a good possibility that the interest earned on them down the road won’t even be enough to purchase a postage stamp when the higher rates of inflation eventually set in. Leave this scam to the Fed. After all, they are monetizing the debt anyway by buying up long term treasury bonds they might as well buy these to.

By the way Ninja Kitty, I prefer to practice Buddhist meditation to keep myself calm and collected. Ohm! I like your webpage to. That cat you have on the front page really cracks me up.

Well, AC. A future gov’t just *might* choose to default on those bonds. Like Russia did about 1998 or so, causing the famous default of “Long-Term Capital Management” of the Swedish Central Bank prize winners Scholes/Methon (there exists no Nobel prize in economics, and that’s not even a conspiracy!)

I do think that such bailout bonds might be less bad than outright printing the same money. Maybe it will be printed in the end anyway, but only maybe. At least we could hope for a default.

For sure, there’s not much savings around in the US to finance any substantial bond issue. I believe that such a move would be almost purely propagandistic. Some people want to “contribute”, i.e. sacrifice like people for thousands of years have sacrificed good food to fire for the sake of Gods. Just like propaganda minister Goebbels professionally enjoyed it very much when the German Army, stuck in the deep freeze of Soviet winter, needed civilian winter clothes collected from civilians. Finally people in general got a reason to be happy about the war, because they sacrificed something tangible, their winter clothes, for it. They finally participated in it. You know, all that slave moral stuff about ones own “sacrifice” being the ultimate good.

And of course, any savings put in bailout bonds will be diverted to loss making companies, from profit making ones. Maybe such bonds would do even more economic harm, dollar by dollar, than the corresponding money creating would do in the shape of inflation, dollar by dollar?