The Misguided Quest for High Wages

LvMIC:

The American Conservative, the periodical upholding the roots of true, anti-interventionist conservatism of the Old Right,  is a daily reading of mine. The foreign policy views and discussions on theology make for enjoyable discussion – a galaxy apart from the dreary, narcolepsy-inducing editorials by “approved of” pundits. But to my occasional dismay, the economic theories espoused by more prominent writers come wrapped in the repulsive aroma of progressive ideology. The most common instance is vocal support for minimum wage laws, advocated on the basis of national upliftment. These defenses of compulsory wages are not without reasoned thought behind them; again, a testament to TAC’s quality. It’s just a pity the expertise is at a lack for basic economic law.

In a recent article, critic Noah Millman questions Kevin Drum over his advocacy for immigration reform. Drum, in a blog post for the liberal publication Mother Jones, cited a study of the hiring patterns of the North Carolina Growers Association that demonstrated an unwillingness on the part of American citizens to perform agricultural labor. According to the study, 80% of native workers hired to pick crops quit after two months on the job. The spread between presumably Mexican, and thus illegal, laborers was significant enough to indicate an overwhelming reluctance by Americans to partake in physically arduous work. Drum, whose chief political influences are fascist Franklin Roosevelt and flippant reversals on the efficacy of the Iraq War (invasion), claims the study bolsters the need for immigration reform that allows for more guest workers. Millman disagrees to the extent that such a policy invites more low-wage positions, and hence drags down national living standards. My immediate take: if Americans, as lethargic as they act, find picking tomatoes below their misplaced, nationalist-driven superiority, then Mexicans, Latinos, or whatever politically-correct term is fashionable for fence-hoppers below the Southern border, should not be barred from contractual employment. Violence in the name of jingoism is still violence, driven by the zealotry of invented boundaries.

Millman does bring up a good point: leftist thinkers who push for less stringent immigration requirements are doing so on the basis of filling low-wage jobs in the agricultural sector. Yet when their opinions drift on to other industries, progressives are quick to decry the inhumanity of any wage less than six figures. It’s as if they want all the spoils of economic opportunity while pressing for the stifling mandates that curtail it. Inconsistency is a prerequisite to becoming a card-carrying member of the Progressive crowd. Millman’s criticism is spot-on in that regard but misses the larger picture.

I am always left scratching my head as to why high wages in themselves are seen as important for societal betterment. Wages are, after all, determined solely through one’s marginal productive capacity – or how much they contribute to an employer’s profit gains. Workers who fail to bring in revenue only act as a kind of infection, draining the life out of business. In any reasonable environment, unproductive employees would be told to improve or be let go. But in the fantasies of society’s most apt to dictate, no adverse consequences could possibly occur through state interference in the marketplace. Even Millman falls into the trap of proposing a “substantially higher minimum wage” on account of labor’s unequal “bargaining power to capital.” The result of mandated wage floors is always the same: imposed unemployment of anyone not productive enough to bypass the legislatively-established price floor. No amount of pathos or rhetorical pride can budge irrefutable law. What makes Millman’s error in understanding all the more surprising is that he clearly understands David Ricardo’s principles of comparative advantage.

The focus on wages seen and heard by a lion’s share of people is demonstrative of just how widespread ignorance is when it comes to basic economics. In the handful of low-skill jobs I have had, most of my superiors and peers paid heavy attention to their dollar-per-hour wage – I being among them on a count of shared crudeness. Unions, teachers, politicians, professors, and even some heads of business all enjoy focusing on the so-called price of labor. Neither of these exploitive bunches find it hypocritical their lives are enhanced immensely by products created those whom they portray as slaves. Little thought is given to the massive array of goods built with the toil and sweat of the lesser paid. Abundant harvests of food, looming skyscrapers of steel, and landscapes of elegant beauty come to mind. Production is the engine of wealth creation – not wages. The old fable of Henry Ford paying his employees $5 a day so they could, in turn, purchase the cars they produced is nothing more than leftist disinformation. Ford was able to pay higher-than-market wages because of his innovative capital investment in assembly line equipment.

Reading so many analyses on the utility of high wages, I can’t help but think the writers, as mature and observant as they may be, are at a total loss to explain why man accepts employment from others. Certainly, there are economic thinkers whose only function is to advocate for vigorous intervention on behalf of the state. Regardless of the detrimental effects of their preferred policy, these undeservedly respected commentators will cling to the religion of statism as a kind of cult, incapable of being refuted by logic or reason. Keynesians are the most mendacious of offenders. No matter the clear failure of econometric predictions or empirical debunking of the Phillips curve, devotees of Lord Keynes will cling to the Bible of The General Theory like preachers of geocentrism.

The criticism of immigration and low wages by Millman separates itself from the progressive cacophony polluting the mainstream press, but it still misses mankind’s purpose in the market economy. Nobody works for money. The end desire is greater availability of scarce resources. If we lived in the Garden of Eden, there would be no need for jobs. Everything would be plentiful – with the exception of one’s bodily space as Hans-Hermann Hoppe points out. Wages are an effect of production, and not the sole determiner of material health.

The irony of Millman’s critique is that progressives are, in fact, for low wages whether they realize it or not. The Left has built itself into a political ideology that claims empathy and compassion as a chief motive. This translates to bureaucratically administered work programs that attempt to push wages upward with the barrel of a gun. The outcome is some with more income, and some with less. The state is not a benevolent deliver of prosperity, but an aggressive force, transplanting the stolen wealth of others. It’s policies are self-defeating. Any effort to lift wages above market level will cause the less-skilled to remain unemployed. And measures that employ government force to restrict immigration are a violation of the freedom of movement. If Noah Millman’s goal is for a richer, more prosperous America, his concern for high wages should be dedicated to encouraging policies that remove barriers to production.

In the realm of economic nonsense, the proposal for a higher minimum wages could be worse. Thankfully TAC is not home to France’s socialist moron (do I repeat myself?) of a President, Francois Hollande, calling for a mammoth Eurozone government or Hugo Chavez’s inept successor blaming toilet paper shortages on political enemies. But ignorance can breed with itself if left unchecked. I suggest Millman, and his colleagues, revisit basic supply and demand curve analysis and learn why appeals to human dignity fail to squelch overarching truth.

Behaving On Public Transit

LvMIC:

Television’s favorite bumbling anti-hero Homer Simpson once described public transportation as being reserved strictly for “losers.” I used to share his sentiment. But working in what James Pinkerton calls“Powercity” with a subway stop outside my Virginian apartment, it’s much more cost effective to bear the nearly hour-long commute then sit in bumper-to-bumper traffic. So for five days a week, I do my best to grasp onto what little sanity is retained by venturing into the soulless pit known as Washington D.C. The journey is made unnecessarily worse due to the brutish and discourteous behavior of fellow travelers. In response to the continual abuse, I will offer up some advice on how to conduct oneself in crowded, public areas. Admittedly, I have no formal knowledge in this subject outside of anecdotal experience and my own understanding of praxeology.

First, it must be clarified that I fully understand the pitfalls of state property, and thus all the arguments to be rid of it. Transportation with the word “public” in front of it unquestionably invites abuse. As far back as Aristotle, private property was recognized as the greatest coordinator of efficiency through limiting waste. And in most instances, public transit acts more as pocket-filler for crony capitalists than a genuine social good. However, since government-owned and operated transportation exists, it shall be dealt with.

The thing to remember is the Washington D.C. metropolitan area stands out from other sprawling public transport cities. It is a rathole teeming with diseases such as sociopathy, uncurled jealously, and the unrelenting desire to oversee the lives of millions. Business, for the most part, is conducted on a popularity contest basis. And yet the loathsome bunch who operate the behemoth machinery of the federal government are not at all unpleasant when removed from the habitat of legalized aggression. Indeed, the state bureaucrat is an interesting creature. While sulking from place to place, they act surprisingly innocuous. Given that most are members of the greatest criminal gang on the face of the Earth, I imagine they justify their monotonous day jobs with mental somersaults over the efficacy of state-sanctioned murder, theft, and oppression.

Even so, the typical government employee will not hesitate to resort to animal instincts if it means arriving at their destination a few minutes earlier. This means crowding into trains at full capacity, denying any and all empty breathing room. Like a herd of cattle, they are strangely comfortable with having their bodies closely packed together. Inevitably, one will shout for others to make room. The nuisance will be one of three things: overweight, elderly, or naturally loud-mouthed.

Natural law theory, which no public employee has familiarity with, is based on humanity’s unique attributes to determine what actions are conducive to pursuing the good while promoting overall flourishment. With this in mind, it is almost subhuman the way others behave on the metro. Man was not meant to have his face hard-pressed against another’s for the sake of convenience. The very act is illogical. To voluntarily submit yourself and others to congested conditions may not be premeditated aggression but it’s degrading for all involved.

Next, it should go without saying that talking on the phone in a crowded, confined space is universally taboo. Unless you are a major Wall Street Trader (and thus implicating yourself for the non-crime of insider trading) or a high-ranking military official with the authority of war declaration, your conversation is an impediment to relaxing silence. Still, middle-aged folks refuse to learn this lesson, as they yammer away to their spouse on the necessity of the family minivan being parked curbside so as to avoid the terrifying outdoors upon departure. Worse are those who keep the ringer on their cell phones at the loudest setting; like an irritant time bomb ready to explode.

The same critique applies to the endless chatter of work environments. In the rush hour traffic, there never fails to be two or more co-workers who find it necessary to hold boisterous conversations about their respective occupations. Usually this will entail a mix of complaining and grandstanding, directed primarily toward gathering peer approval. When government workers engage in sharing war stories, the annoyance metric is multiplied tenfold. Talk of wooing lobbyists with pathetic flattery or authoring some inane piece of legislation is enough to make any decent man struggle to maintain a tight composure. These episodes are made worse by the loudness in tone – an element necessary to be bothersome to begin with. Children need to be reprimanded to use their “inside” voices. Adults should not have to.

Possibly the worst offense in mass transit conduct occurs when a passenger decides to sit on the outside of a seat meant for two persons, thereby denying everyone the chance to avoid standing. There is absolutely no excuse for this, other than the brazen narcissism that accompanies an empty sense of accomplishment from government work. Colleagues of mine claim to have called attention to this rude behavior by demanding to sit in the abandoned space. I have never found a need to be so brash. The man or woman who consciously chooses to close off a perfectly good sitting area will receive a justful amount of stares and contempt. Disdain may not have a physical presence, but it still can be observed.

Thomas Hobbes famously depicted ungoverned humanity as a pack of violent savages who would rip each other limb from limb if it were not for the state. This characterization has been utilized by collectivists for centuries to justify their stranglehold over the populace. But if you observe people going about their everyday business, they are relatively benign. In the great struggle for material security, energy is invested more in productive efforts than aimlessly harming others. So affronts to living the good life are done in a more subtle manner as opposed to explicity. The government provides the unscrupulous enough of an outlet to act out their antisocial urges. At the same time, these officials who employ the machinations of the state do not, in a sense, carry their destructive work home with them.

Libertarianism finds its basis in the principle of non-aggression. As a political philosophy, it says nothing about manners or how to behave among others. Being the most civilized of all ideologies, refined social conduct would appear to go hand and hand with the moral framework of property rights. The harmony created by the voluntary division of labor requires, at the very least, a mannerly comport to be most effective. If the statist busybodies in D.C. could only learn these lessons, I would not look forward to my commute like I look forward to visiting the dentist.

How To Not Attack Capitalism

LvMIC:

The mark of any flunk economic thinker is the statement “we live in a capitalist system.” Without a doubt, the United States, along with the rest of the West, is still gifted with a market-based economic system. But calling it capitalism – the uninhibited buying and selling of goods and services – is a crime against words and their meaning. In the U.S., the state has its filthy presence in practically every marketable transaction. A true, unadulterated market has not been allowed to proliferate in over a century; perhaps more.

The greatest peddler of the “laissez faire” myth are often university professors, decrying the immorality of profit-seeking while assigning their own textbooks to the student body. In one of the most poorly written, unthought out pieces of economic diagnosis I have ever had the displeasure of reading, DePaul University professor Paul Buchheit gripes at Alternet.com that “raw, unregulated capitalism” is “acting like a cancer” on America. And the guy is serious; absolutely sincere. Modern liberal tirades that put free markets through the wood chipper are, on occasion, backed by criticism of seemingly untainted sectors of the economy. The best of these handily ignore the influence of government. While incorrect in diagnosis, at least the reasoning of many capitalism-skeptics can be followed and made to seem plausible once state interference is removed from the equation. But Buchheit doesn’t even attempt to do that. He simply issues a laundry list of complaints, and proceeds to attribute unfettered enterprise to those failings. Calling himself a professor of “economic inequality” at DePaul University should have rung the alarm in my head as to the simpleton nature of his critique. I read on anyway, only to be infuriated at the stretched-beyond-reason conclusions.

Buchheit’s first target is the common villain of subtly Marxist left-wingism: capital investment. As he writes, the income earned through speculation and finance is somehow detrimental to “vital programs” such as food stamps. The vast profits earned in the investment field are made to appear evil when compared to the paltry sum spent on welfare subsistence (neverminding the fact that the food stamps program is an enormous subsidy to large agricultural conglomerates).

This characterization should strike the economic reader as atrociously misguided if Buchheit’s objective is a wealthier society, and not just an excuse to satisfy a fetish for thievery. The delaying of consumption, also known as investment, is the lifespring through which all economic progress flourishes. If humanity was composed entirely of hedonistic animals devouring everything around it, there would be no resources to devote to future purpose. The division of labor would collapse, as would the market of intermediate goods which employs millions. It is only the act of production that allows for consumption. Claiming otherwise is analogous to putting the cart in front of the horse. And as economist Robert Higgs has shown, today’s economic malaise persists in due part to real private fixed investment lagging behind aggregate consumption recovery. The ensuing result has been tepid growth and employment of labor. If Buchheit can’t recognize the social good brought about by high level investment, it should not be a surprise the rest of his commentary comes off as blind takedown of an imaginary enemy.

Our greed-fighting author proceeds his capitalism exposition by highlighting the plight of college graduates. He argues that not only has capitalism left only minimum wage jobs for former collegians, but it has also contributed to the incredible hike in tuition cost. Would Dr. Buchheit be happier if these graduates were not working at all? His tirade implies that free markets are the culprit behind the dismal employment picture of college graduates. He gives no explanation why except a greater number of degree holders are staffing lower paying jobs. Having a PhD in computer science, it’s doubtful Buchheit is versed in the practice of logic as he easily falls prey to the post hoc ergo proper hoc fallacy. Choosing to attend university with a useless major like art appreciation or gender studies is capitalist choice. Those who graduate with little prospects have no one to blame but their gullible belief in the sanctity of higher education. Setting that aside, Buchheit pays no mind to the government’s encouragement of higher education through subsidized loans.

Next, Buchheit brings in the novelty device which succeeds in eliciting both inordinate amounts of hatred and sympathy: children. He blames the declining rate of health in youngsters precisely on American capitalism, and nothing else. The truth that only private investment could have funded the advent of vaccines and better medical technology just happens to go without acknowledgement. Buchheit also fails to take note of the different methods in which the infant mortality rate is calculated in the United States when compared to other countries. Because low birth weight infants are not accounted for in the mortality rates of countries such as Canada or Germany, the land of Uncle Sam appears to harbor a murderous resentment for newborns. Funny how things work out when your goal is playing arson to a field of strawmen.

Buchheit’s next victim are tax loopholes which deprive the money grubbers in Washington of much needed revenue. Here, the fussy professor offers what I can only describe as the stupidest comment ever penned by someone attempting to make an economic argument: “Loopholes and exemptions cost the public about a trillion dollars a year, and underreported income costs another $450 billion.” How can any functioning human brain come up with that sentence? What the statement implies is that tax dollars are not, in actuality, taken from the public. Or that they are, but somehow the act of state plunder adds to society’s stock of wealth. Just as the law “production must precede consumption” is true in every circumstance, so it is that government can only take from the private citizen. The state is a great redistributive force – passing along the stolen goods to those with political clout.

To conclude, the intellectually exhausted Buchheit bemoans the corruption of democracy at the hand of unfettered free markets. In his words, the pitiful voters are “useless” in comparison to the “greedy mass of nutrient-taking super-rich” who spend their day finding new ways to press their boot harder upon the low-class miserables. “Too much money in elections” is the last rallying cry of progressives who view corporations as shadowy manifestations of pure evil. But as George Will always points out, the amount of actual dough used in campaigns is a relatively paltry sum compared to economy-wide spending. In 2012, $6.3 billion dollars in total was spent on the cycle of political beauty pageantry. In comparison, $2.4 billion was spent on Halloween candy in the month of October. Regardless of the surprisingly low amount of money put to electing patsies, bribing public officials does not fall within the realm of the free market. Cash is transacted sure, but the marketplace if based on volunteerism – not the funding of potential compulsion on the innocent. Capitalism has as much to do with the political system as President “maim women and children” Obama has to do with peace, transparency and impartiality.

After a temper tantrum of an argument filled solely with complaints of unfairness a teenage girl might formulate, Buchheit posits a remedy of localism combined with solar panels is the magic bullet to kill the beast of laissez faire. But as made clear at the beginning of this rebuttal, there is no free enterprise dragon to slay. Buchheit is Don Quixote tilting at windmills.

I do not state this lightly: Buchheit’s post was one of the most stupid, inane and illogical pieces ever written on modern political economy. Not only should Alternet.com be apologetic for publishing the piece, DePaul University should be embarrassed to even have this man as an instructor to students. God only knows what garbage the graduates of Dr. Buchheit have instilled in their head. Yes, this is an ad hominem attack, but if there is anything more deserving of one, it’s the author of such an intellectually grotesque piece of writing that fails at deserving to be called an “article.”

Respect is reserved for serious thinkers who, rightly or wrongly, make their case in a coherent manner. This was not a respectable argument by a respectable writer. It was the juvenile ramblings of a leftist who reads way too much of Arianna Huffington’s online rag. Murray Rothbard once quipped that it is “no crime to be ignorant of economics” but it is “totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” Dr. Bucheit might fancy himself a serious educator of the “dismal science” but his knowledgeable makeup is composed entirely of progressive sound bites, swallowed and regurgitated much like a robin’s supper for her offspring.

Ottawa Combats White Privilege

LvMIC:

I was passed along an advertisement recently of a graphic designer vaunting their wage subsidy provided by Human Resources Development Canada. If hired, this person would have their income partially paid for by the government. It’s assumed this is a favor to potential employers. In actuality, the subsidy is not a costless benefit to hiring businesses. It is tax money, taken from the many and given to the few. Little is ever gained in the giveth-and-taketh game the state takes part in. That this budding graphic designer views welfare aid positively is a definite sign of naïveté. Welfarism is only looked to endearingly by the righteous calvary of social workers, government bureaucrats, and progressive university faculty. The rest of society’s productive members put on a sympathetic face for dole collectors while reserving a sharp disdain for their bottom-feeding. The employer, looking down upon a worker too deficient in ability to receive a tax-financed grant, knows full well such an arrangement is not sustainable. Once the monetary assistance is gone, so is the position without a second thought.

This is but one example of misguided interventionism hatched from the minds of Canada’s ruling class. It’s asinine to believe you can tax business owners to partially cover the cost of otherwise unemployable workers and expect to skirt the laws of economics. There is no wealth to be gained through the use of “a clenched fist,” to borrow a phrase from Leonard Reed. That aphorism has never stopped the dubious thought constructs of men longing to create a society equitable and prosperous for all. If anything, it has emboldened the sick, fantastical conception of a clay populace willing to be molded to fit nicely into egalitarian predilections.

The graveyard of victims wrought by public policy created on the behalf of victimized classes is filled with the unused talent of a new breed of martyrs. To add another casualty to the heap, I will also throw in simple decency as well. The attitude of self-styled antagonists of privilege is just plain awful. From screeching feminists to Ivory Tower anti-racists who have never been within one hundred feet of a minority individual, their pompous rhetoric of disdain for the underlings would be admirable if it were not guided by Utopian derangement.

Say what you will, but at least conspiracy theorists remain charming for their incessant yammering over a cryptic plot by globalists to take over the world. A cabal of bankers cozying up to the heads of nation states in smoked filled rooms makes for an intriguing, not to mention true, narrative. On the other hand, egalitarian interventionists are upfront and unembarrassed about their agenda, almost to the point of being pitiable. Their total lack of astonishment over the ire some have for objectives like racial quotas makes them even more of an annoyance.

Recently the Canadian Broadcast Company was accepting applications for the host of a new television show aimed at children. The catch was the applicant could be of any racial makeup barring the devil race: Caucasian. Shortly after, the stipulation of having any skin color – with the exception of morbid white – vanished down the memory hole. A spokesman for the network declared the advertisement was a mistake and it would be looked into more thoroughly. Chances of the incident being brought up again are the same as Karl Marx coming back from the afterlife and declaring all the dialectic materialism and talk of communism’s inevitability was a practical joke. The issue will be soon forgotten, and attention will be diverted back to another irrelevant cause for social justice like ensuring transgendered folks are allowed to attend a musical festival for women.

The progressive mindset is aflame with blatant contradictions; lambasting private persons for racial preference while cheering for government’s hiring quotas topping the list. Somehow it’s neanderthalic to hang a “whites only” sign outside your business but perfectly acceptable, and high brow cosmopolitan, to do so as a state official. The only reasoning I can figure behind a scheme like government affirmative action is to make up for decades of prejudicial treatment. It’s similar to the same train of thought that told Harry Truman to drop the atomic bomb on Nagasaki in the name of peace and saving lives.

Naturally, state bureaucrats find it reasonable to matter-of-factly discriminate in hiring practices. Canada’s monopoly of force has been utilizing minority “targets” since 2003.  Even so, spokespeople for Ottawa agencies assert that no Canadian is prohibited from public sector jobs “based on race or ethnicity.” But how can this be if psychologically malignant administrators are purposefully seeking nonwhites to man help desks at the Department of Motor Vehicles? There is no acceptable retort other than these are, indeed, mutually exclusive goals. The quest for egalitarianism must involve the discrimination of persons. Forming a rainbow workforce means choosing every color from the bunch.

Conceding for a moment that the state is legitimate, the use of tax dollars to reward anything other than merit should strike a negative chord with the few in society who still possess a functioning inner compass for fairness.   Equal opportunity is not the same as special treatment, even if the latter is truly a product of good conviction. Thus far, the bureaucrats in Ottawa have done a miserable job at acclimating the workforce to reflect the demographic picture of Canada. Both the disabled and so-called “visible minorities” are underrepresented in the federal government when compared to overall population. No doubt the champions of the trampled want to replace entitled caucasians with workers of darker melanin. That is the likely culprit behind the “whites need not apply” mentality at the CBC.

The wish of the Canadian government – along with its kindred force monopolizers around the world – is to create a citizenry with beaming, multi-colored faces similar to the glint of green on newly wetted shrubbery. This vision requires the employment of guns and badges to carry forth the diktat of equality-for-all. Compassion through compulsion is the progressive creed. The logic of “the best man for the job” is cast aside as a stale euphemism for the white superiority of antiquity.

If state policy is going to require discrimination, the Canadian government should think it best to place someone like Abercrombie & Fitch CEO Mike Jeffries in charge of hiring and placement. The recent public castigation over his comment on overweight women indicates a strong will to be prejudice, even in the face of bawling indignation. For admitting he wants only “beautiful” people wearing the Abercrombie label, an expected assemblage of steamed, and likely not-too-courteous to the eye, women declared Jeffries to be the anti-Christ and his store a haunt for the damned. One peeved commenter declared no “full-figured women” should be “judged by this man.” Forget gingerly political appointees trying so hard to not be offensive they end up insulting everyone – Canada needs a man like Jeffries to make tough calls like picking a gimp-legged aboriginal over an able-bodied white man. Regardless of his superficial appearance, Mr. Abercrombie has done more good for the world with his candid illiberality than sobbing defenders of the downtrodden who staff Ottawa’s many federal agencies. It’s just a shame he is white, and thus unhirable.

The Futility of Bank Regulation

LvMIC:

It’s been over four years since the financial crisis ripped through the American banking system like a viral disease and put the world economy in a coma. From that fateful Autumn when Washington took off the blinds and showed its allegiance to the banking system by shoving almost $1 trillion in the pockets of Wall Streeters, public outcry has diminished to a low mute. Various political uprisings spawned in the wake in the blatantly fascist effort deceptively labeled the Troubled Asset Relief Program, each falling back into complicity of the prevailing order. Times change; and so do people’s priorities.

Today the big banks are larger than ever with assets to the tune of $8.5 trillion. Public interest for reining in the excess has largely faded away while the political will to crack the whip lingers. Back in 2010, the regulatory bill named after the toad-resembling Congressman Barney Frank and Senator turned Hollywood whore Chris Dodd passed Congress to much fanfare and little results. Certainly no financial meltdowns have struck, but catastrophic events in complex systems like economies are not a common occurrence. Still, there is an unease in many, ignorant in basic economics as they are, over another contagion event that could tear a hole in the collective balance sheet of the banking system.

Senators Sherrod Brown of Ohio and David Vitter of Louisiana are coming together to put out the fire before it grows any bigger. Their newly introduced bill to tame the big banks includes a 15% reserve requirement for mega institutions that hold over $500 billion in assets. Currently, the Fed mandates banks hold at least 10% of their deposits at the vault of the central bank. The Brown-Vitter effort would force large players to keep more of their deposits on hand, thus decreasing the amount available to lend out and put to work. In theory and practice, it would seem quite sensible to limit the amount by which the banking class can get themselves in trouble with. But as is the case with all government legislation, this is kabuki theater designed as a pat on the back for “doing something” instead of accomplishing a laudable goal.

The Brown-Vitter legislation is being hailed as reform with enough bite to actually subdue the reckless tendency of banks. It’s assumed that economic catastrophes stem from the financial system – a suspicion that is more or less correct. Given money’s ubiquitous role in the operation of a modern economy, the notion of a select bunch of finely dressed men on Wall Street sending the economy careening off into another abyss is a sane concern. The question is why the practice of deposit warehousing and lending appears to give birth to all types of calamity. In better terms, why does the banking system seem to be at heart of, in Murray Rothbard’s words, an entrepreneurial “cluster of errors?”

The answer is contained in the Brown-Vitter bill, as well as every government crackdown on lending. Praise is being thrust upon the Brown-Vitter legislation for the new reserve requirement. It begs inquiring as to why stop at 15% and not extend all the way to 100%? I assume every crank economist would object to such a stringent restriction because it would greatly deplete a bank’s ability to earn revenue by borrowing short and lending long. But, therein lies the problem: it is the loaning out of unbacked funds which leaves the banking system, and thus the economy, privy to downturn. Slapping a 15% reserve requirement on the largest financial institutions does little to address the continual teetering on the brink fractional reserve practices create.

 

In any other industry, claiming to warehouse a good while simultaneously applying ownership of said product to another party constitutes fraud. For instance, if a car service center were to lend a customer’s automobile without his express consent, a legal case could be made should the original owner discover the operation. The same concept applies to banking, except the loaning of deposits available on demand is quite common. There exists a deeper contradiction in fractional reserve banking – one that violates the very nature of the physical world. When a depositor puts his money in a bank, assuming it is loaned out, two objects are created out of one when only one truly exists. A contradiction of rights (as in the claim to the money) comes into play, which Walter Block calls a “logical impossibility.”

The crew lapping praise over bank regulation rarely give an iota of consideration to the fraudulent nature of present banking. Paul Curmudgeon (Krugman), who never tires of filling the Grey Lady’s sheets with Keynesian tirades, will spill plenty of ink over the great need for oversight but never devotes a word, let alone a paragraph, to the special privilege afforded to the banking class. The fiction posing as economic ideology in major press presumes the creation of money and credit facilitate economic growth in a positive manner. Yet the expanding of money substitutes – that which represents real money – is not at all similar to the pro-creating stones of Pyrrha and Deucalion. The poisonous idea that an increasing amount of money is needed for robust, modern economies is pervasive in much of the public. But the production of what Mises named “fiduciary media” beyond society’s collective time preference in the form of real savings does not facilitate economic vigorousness; it simply sets the stage for a subsequent bust. The money is lent, pushing up the asset prices of first receivers along the way. Along with a central banks’ inflating of the money supply, the expansion of unbacked credit induces malinvestments through the process of corrupting economic calculation. The old-fashioned dictum of there being “no free lunch” makes no exception. Eventually this process must be quelled to prevent inflationary pressures. The unraveling and ensuing corrections must then begin to liquidate themselves.

The talk surrounding the Brown-Vitter regulation bill is cheap to say the least. If passed, it will do little to prevent another economic bubble or financial crisis. The existence of the duration mismatch in deposit banking is what fosters the boom-bust cycle. All the political parroting that surrounds Wall Street regulation falls within a chasm of little length and even smaller intellectual depth. If the newest escapade in reining in the excesses becomes law of the land, it will do nothing but help the democratic peoples feel satisfied. Government and the banks are adjoined at the hip for each’s mutual benefit. No amount of outcry is going to sever the incestous partnership anytime soon.

The modern central banking system is setup for the express purpose of coordinating unbacked credit expansion, and thus increasing marginal profits with the charging of interest on loaned funds. In a sense, Ben Bernanke, or whoever happens to be chairman of the operation, is the conductor while the various bankers, moneylenders, and traders are musician men playing a symphony of destruction. As long as the masses don’t suspect anything is amiss with their deposits, there will be no grand effort to reclaim what is rightfully owned. The entire foundation of fractional reserve banking rests entirely on eroding sand.

The riches made in banking come from the privilege granted to create resources out of thin air. As famed bank robber Willie Sutton observed, banks are where the money is at. That depravity is alive and well today, albeit in a different manner. Under Roman law, it was plainly illegal to lend money and credit unbacked by real deposits. It’s a shame that lesson in justice and logic has been forgotten. Then again, such is the outcome of the omnipresent state dictating property rights.

Bravery

LvMIC:

Following the bombing at the Boston marathon, the mandatory condolence period of three days came and went before the news media fixes its gaze on another topic of little relevance. The tears, mourning, tributes, and pledges of vengeance played out in usual fashion. Democrats, in their infinite conniving for power, used the tragedy to supplement their email list. The whole episode finally climaxed with a predictably grand and empty statement from someone who has a passing affiliation with the city.

Red Sox designated hitter David Ortiz was the lucky one chosen to deliver the sermon of adversity. Upon taking the field in Fenway Park the day after Dzhokhar Tsarnaev was caught, the record slugger bellowed to the crowd, “this is our f***ing city and nobody is going to dictate our freedom.” Ortiz, who is originally from the Dominican Republic, previously played on the Seattle Mariners and Minnesota Twins; in addition to numerous minor league teams. “Big Papi,” as he is affectionately known, never made the Cradle of Liberty his home until 2003. You could say Papi was an absent father to the city he now claims as his own. Ortiz’s accent had a deficiency of the famous Bostonian sneer, but that was no impediment to the riling of the masses who reveled in the utterance of an expletive. Even the Chairman of the Federal Communications Commission let the profanity slip in tribute to the raw uncouthness of the delivery.

Theatricality aside, the statement of triumph through adverse circumstances was nothing but hubris covering for a less-than-courageous response. After the bombings occurred, the ensuing manhunt saw a pandemic of armored, militarized police rush into residential neighborhoods and effectively turned the city into something out of a zombie outbreak film. Public transportation shut down, businesses forced to closed, armed searches of homes without judge-issued warrants – this was the intrepid response of a city that would never let its freedom be dictated. As former Congressman Ron Paul wrote, it was a “taste of martial law,” force fed to a metropolitan too scared to resist. The goal of terrorism is to invoked political change by implanting violence and fear. If Tamerlan and Dzhokhar Tsarnaev were attempting to strike at the root of American freedom, they certainly succeeded for a timespan of almost twenty four hours. The people displayed their gratitude for blatant property violations by celebrating the mighty-fine police work of Boston authorities. The private citizen who actually located the wounded suspect received little thanks even as the men in blue lied about their own shoddy work.

The sad display of faux bravado in Boston was not exclusive to the city. Human beings seem to take pride in fabricated conceptions of their own gallantry. The world is a battlefield and nobody wants to look weak in comparison to their fellow man.  And no, I am not referring to a combat zone envisioned by neoconservatives in their disturbingly restful dreams. The sphere of social relations we enjoy comes with stigmas developed over the course of thousands of years. Along the way, it became acceptable to puff out one’s chest for deeds of little heroism, or even downright timidness.

This longing for empty acceptance often manifests itself in deference to the state and its all-mighty power. Just as people pay fealty to authority figures who help themselves to the productive efforts of the public at large, they will petition for a share of the omnipotence. No group excels at the practice like the slice and diced mobs of “victims” who feel entitled because of a metaphysical oppression they have been told to decry. Arguably the bravest of these warrior clans dedicated to wiping social injustice off the Earth is the gay community. Their crusade for eradicating marriage conventions could once be considered a noble effort, rebel wise. Rabble rousers need a spine to break norms. Now, homosexuals have become another tired cliche of privilege complainers, albeit dressed in ridiculous attire. The call for gay matrimony is no expression of an unorthodox minority. It is conformity through the perpetuation of the unnecessary role the state plays in private relationships. Monopoly government has corrupted the sanctity of marriage, and gays are courting the devil for their own benefit. This quid pro quo has tarnished whatever righteousness the movement once had. Putting on drag and begging for the political class’s respect is just plain pitiful.

The betrayal extends beyond the right of nuptials. In the soon to be held Gay Pride Festival in San Francisco, imprisoned Army private Bradley Manning was supposed to be honored as a grand marshal. One day after the announcement, the President of the Board of SF Pride overturned the decision by claiming his crimes put “in harms way [sic] the lives of our men and women in uniform.” In totalitarian fashion she overturned the SF Pride Electoral College’s vote for Manning because the decision did not have the interest of the “broader community” in mind. With sponsors like Bank of America, Wells Fargo, and the Bain Capital-owned Clear Channel, it’s tough for a Gay Pride Festival to dress itself up as anything different than a mainstream event funded by right-wing linked corporations. Any memory of the gay private known as Bradley Manning, who had the actual courage to put his conscience above the law reveal the true barbarity of war, is hushed and disregarded. As Glenn Greenwald trenchantly puts it,

“That’s how this parade was so seamlessly transformed from orthodoxy-challenging, individualistic and creative cultural icon into yet another pile of obedient apparatchiks that spout banal slogans doled out by the state while viciously scorning those who challenge them.”

The counterculture movement, which the gay community inhabits, once shrugged off bourgeoisie values to right society’s various wrongs. Misguided as the worldview was, at least the ethos of defiance was consistent. Today, homosexuals will do everything they can to court the state; even if it means sacrificing one of their own. For every principle forfeited by a movement, legitimacy dissolves incrementally. Eventually, any bold foundation that may have existed begins to resemble a paltry caricature of what it was.

Thoreau once wrote that a man is man who “has a bone in his back which you cannot pass your hand through.” Two young men murder three people and bring an entire city to its knees. A gay pride festival celebrating diversity and counterculture values shuns a homosexual in order to maintain corporate sponsorship. These are the stories of empty bluster in America – though it’s doubtful they are unique to the United States. Heads of government are of a cowardly class. Their loyalty is easily won by those who find no moral anxiety in diving headfirst into the sludge of political patronizing. The combined assault of jingoism, nationalism, welfarism, and contempt for higher learning has done inestimable harm to the idea of courage. The very same people lauded as heroes are more often than not despicable.

Most of us will lie to ourselves to look at the face staring back in the mirror. I have yet to determine which is more natural to human conduct: taking pride in cowardice or accepting the truth, no matter how distressing. I would like to think the latter. Having to witness the tossing away of liberty for safety on a daily basis makes me question my own judgement.

Rethinking the Drug War

LvMIC:

A number of recent polls reveal that over half of the U.S. population favors the abolishment of marijuana prohibition. This includes many young followers of Christianity who, if you consider the bombardment of “tolerance” evangelism preached everywhere, probably find it a crime to judge others. Why the collective change of heart on dope is taking place, it’s not entirely certain. With no statistical evidence I will assume most people either dabble with weed or are familiar with someone adversely impacted by its prohibition. This reversing of public opinion’s tide is likely driven by witnessing the inhumanity of forced confinement for smoking a plant, in addition to the overall cost of tax dollars for enforcement. In a word, it would seem like sensibility is catching up with undue suspicion.
 

Residents of two states, Colorado and Washington, voted last November to legalize recreational use of the drug in sheer protest of federal law. The current and most recent U.S. president have both admitted to taking a few hits at the bong. Obama, who has presided over the most jailing of pot abusers in recent history, actually paid tribute to his dealer in his high school yearbook. It’s grass for me, not thee to the once Commander-in-Kief. The Marijuana Policy Project predicts more states will pursue decriminalization in coming years. To libertarians and actual liberals (you know, people who want guns and badges everywhere but the bedroom), this should be reason for celebration. Sure, it’s not full-out drug freedom, but steps are being taken. And yet, not everyone is happy.

Writing in Taki’s Magazine, hipster extraordinaire Gavin McInnes details an excursion with today’s concoction of marijuana and the hazardous potency it embodies. Speaking with some young pot smokers, he describes the harrowing experience of inhaling an herb that is technology more infused than your father’s backyard stash. After a severe coughing fit, McInnes asks “Should we legalize a really, really heavy drug?”

First, let’s get one thing straight: there is no “we” legalizing anything. To borrow the apt Spooner phrase, the robbers and murderers “who call themselves the government” are the individuals currently enforcing prohibition. Legalization relies on the state’s cooperation in letting the public smoke dope to their lungs’ content. Sure, direct democracy has effectively nullified Washington’s legal barring. But there remains no guarantee that federal stormtroopers will respect the vote. The Director of the Office of National Drug Control Policy has made it known the Department of Justice will continue to target large-scale distributors. For all its flaws, the biggest of state democracy is the open possibility that entrenched authority will overrule the ballot box. The people may want to smoke a joint without going behind bars, but the choice is hardly up to them.

The biggest flaw of McInnes’ argument is his understanding of why exactly marijuana is infused with more Tetrahydrocannabinol (THC) than decades past. During the crack epidemic of the 1980s, self-styled drug warriors were up in arms over the violence and crime that swirled around the narcotics trade. It was half a century since the republic’s first drug laws were passed and here was a substance that packed more of a punch than its relatively softer cousin, cocaine. The press was at loss to explain the use of such a dangerous substance thanks to the propaganda machine that was and still is the Drug Enforcement Agency. It was inconceivable that the same policies aimed at quelling drug usage could actually be responsible for the emergence of something more deadly and addictive.

But like most things concerning the state, orthodox thinking lacked the intoxicating potency of logic – specifically basic economics. As Richard Cowan wrote in National Review, the outlawing of cocaine incentivized dealers to deliver a product just as effective and at a higher value-per-unit. Outlawing pushed commerce underground while necessitating the development of more convenient transportation. The cracking down on supply raised the price point to where it becomes lucrative for unsavory characters to cash in on the profits. In Cowan’s words, the “narcs created crack.”

What made the 1980s more woeful was the fact that it was a virtual repetition of the 1920s and the rise of organized crime. Liquor consumption increased following Prohibition, as the thirsty opted for more potent spirits. More resources were devoted to liquor production, which resulted in the price of less alcohol-rich beer rising at a higher level than the more heavy spirits. In sum, ale drinkers switched to whiskey as real crime (meaning property violations) ascended.

This is the essence of the iron law of drug prohibition. Increasingly potent marijuana possess a health risk only because the drug was prohibited to begin with. Continuing to treat cannabis like murder will only encourage further experimentation in delivering more “high” with less quantity. If McInnes’ concern is with making sure the indolent masses don’t smoke themselves to death, his preferred policy should be the swift beheading of any and all enforced restraints on weed.

The outlawing of marijuana consumption has lead directly to the rise of what’s known as “dabbing.” According to Vice Magazine (the popular magazine McInnes co-founded), dabbing involves the extraction of THC into oil form. The byproduct is then vaporized using a kind of glass piece combined with the heating of a steel plate using a blowtorch. The ensuing vapor smoke ends up being “the most efficient use” of weed due to the high concentration of THC in each toke. The outcome has been an increased number of close-call overdoses with the drug nobody thought you could actually go overboard with.

I may only be a half-decade removed from my teenage years, but I can say with confidence that the emergence of “dabbing” is a sure sign of marijuana’s unnecessary complexity – the result of which is a direct consequence of prohibition. In my more rambunctious days, the only expertise needed to get high was being able to balance pinches of weed on a magazine cover while sitting in the passenger seat of an erratically-driven car. The most forethought put into smoking was remembering to purchase a blunt cigar to hollow out. The kind of capital investment involved with THC extraction today has made toking a science project. Recreational drug usage was never supposed to be about obscene amounts of preparation time. Normal people smoke weed to give their mind a break, not wrack it finding new methods of attaining a high.

At its core, drug prohibition is not just the suppression of mind-altering substances, but of the individual. Freedom to use one’s body is the hallmark of self-ownership, and all the moral notions of law that follow. The majority of marijuana legalization do not view it this way, though their support is welcome. As a libertarian, I would hope Mr. McInnes can make the distinction in favor of reason and not utility.