Anatomy of the Bank Run

The case of IndyMac, the largest regulated thrift institution to fail in U.S. history, shows just how fundamentally unsound our government supported banking system is. The fractional reserve banking swindle can only continue so long and I hope the IndyMac failure will open some people's eyes.

Of course Murray Rothbard wrote it best in his article "Anatomy of the Bank Run": "But in what sense is a bank "sound" when one whisper of doom, one faltering of public confidence, should quickly bring the bank down? In what other industry does a mere rumor or hint of doubt swiftly bring down a mighty and seemingly solid firm? What is there about banking that public confidence should play such a decisive and overwhelmingly important role?"

Unfortunately, government bureaucrats are playing the same tune now, blaming Sen. Chuck Schumer for the run on IndyMac. He wrote a letter that "expressed concerns about IndyMac's viability." Schumer is correct to deny that he had any part in this, for as Rothbard noted, how can any business be sound if a mere rumor sparks a total collapse?

But Schumer is wrong to blame this on IndyMac and those "greedy capitalists." The fault lies with the government; without the Federal Reserve and the FDIC the fractional reserve banking scheme couldn't continue. We will only see sound banking and real money when the Fed, the FDIC and all those other bureaucracies are abolished.

Reality Check: The Causes of Inflation

Frank Shostak has written a simple yet brilliant article over at Mises.org explaining the recent increases in inflation. Ben Bernanke and other establishment economists will have you believe that inflation is caused by high commodity prices, such as the record price of oil. Mr. Shostak notes, correctly, that no single commodity can cause a general rise in prices. Only an increase in the supply of money and credit can cause the overall level of prices to rise. I won't try to explain any further; just read Mr. Shostak's uncomplicated and lucid essay on the true causes of inflation.

How Many Americans Have to Die in Iraq?

We should continually ask ourselves that question. Are 4,087 dead and 30,333 wounded not enough to realize there has been enough blood spilled? Remind yourself of the lives lost to this unnecessary occupation by visiting the casualties page at AntiWar.com. We all need a good slap in the face now and then. If that isn't good enough, then have a glance at the faces of those who've died.

Congratulations to Bob Barr

Bob Barr just won the nomination to be the Libertarian Party's 2008 presidential candidate. As a Republican and libertarian I saw Ron Paul as the perfect candidate this election cycle. I still support Dr. Paul and he may still get my vote in November. But there is no chance I will support John McCain. From campaign finance to the war in Iraq to immigration policy McCain has been on the opposite side of true conservatives and libertarians. Bob Barr will offer us another option. He is a former Republican Congressman from Georgia so we know he can get Republican and broad-based support. He can also give an outlet for those who don't want to write in Ron Paul come November.

I still haven't made up my mind who I am voting for, but I can say that Bob Barr is near the top of the list. Congratulations to him and the Libertarian Party. Visit his website to learn more.

Back in New Hampshire!

I was pretty busy at school the past month or so. I just got back to NH on Saturday. Sure is good to be back here relaxing and be done with finals. More posts will soon follow!

The Wonders of Central Banking

Zimbabwe has just released a new $50 million bank note. This comes after it was reported that inflation reached 165,000% in the month of February. Oh what prosperity central banks can bring! I can't wait for the day it costs $15 million to buy a loaf of bread here in the United States.

We should take note of this worst case scenario before we start expanding the powers of the Federal Reserve. Economic central planning doesn't work, even in monetary policy. The Fed hasn't solved our problems this time around and sure didn't do a good job during the Great Depression. In fact, we still have business cycles and inflation. What exactly does the Fed do?

First in the Nation 2012

The RNC rules committee recently voted to 28-12 to set a 2012 primary schedule that affirms New Hampshire's first-in-the-nation status. The proposal still needs an OK from the entire convention this year, but I think this is a good start.

I worked with the Ron Paul campaign in New Hampshire and was a meetup organizer here at school in Ohio. The differences were quite large. The people of New Hampshire were generally more aware and open to Ron Paul's message, while everyone seemed so separated from the process in Ohio.

My anecdotal experience confirms what other people have long said: New Hampshire should have the first primary because we honestly care what is going on, it's who we are. Shouldn't those who care have an influential role in the process? I think so.

The Rise and Fall of Society

I just finished reading Frank Chodorov's book The Rise and Fall of Society. I have nothing but praise for this wonderful book. I recommend it to all interested in libertarian theories of the State, both new and experienced.

Chodorov had a way with language. His eloquent style makes the most mundane and convoluted topics almost elementary. The book is short - only 168 pages - but that fact masks its breadth. His clear writing combined with great fluidity allow him to fit everything into so few pages.

For Chodorov, government is created to ensure the security of a community. Production and commerce bring prosperity, and that right is protected by government. But government ceases to be a protective force when it pushes programs and reforms in the name of "society" and "justice." Chodorov reminds us, however, that society is made of individuals. The predatory State degenerates society and takes power away from the people.

Written in 1959, The Rise and Fall of Society is a classic that is just as important today as it was when it first arrived almost 50 years ago. Buy your copy today at the Mises Institute Store. I promise you won't be disappointed.

Insight of the Week

This week's insight comes from Friedrich Nietzsche: "[E]verything that elevates an individual above the herd and intimidates the neighbor is henceforth called evil; and the fair, modest, submissive, conforming mentality, the mediocrity of desires attains moral designations and honors."

The herd, the collective mentality, is a symptom of today's mass democracy. The superior in ability are not tolerated. Democracy places equality high among the virtues of civil society. Public education is a perfect example. The classroom has become a tool for leveling, not advancement, of students. In commerce, the CEO is derided as a "greedy profiteer" while the parasitic bureaucrats that seek to lessen his production are hailed as selfless givers of social justice.

Clearly our sense of what is moral as been inverted. I really see no other cause than mass democracy and the expansion of the state. Our Constitution doesn't seem to be a limiting factor in the growth of the state. "Equality" has become more important than liberty and freedom. But what are we to do?

Spend, Spend, Spend!

CNN reported on March 24 that a clear majority of citizens are going to use their tax rebates to pay off debt or put in savings. The so-called economic stimulus bill will give $170 billion back to taxpayers, or about $600 per individual and $1,200 per married couple. The professed purpose of this scheme is to help the faltering U.S. economy come out of recession. But economist Jared Bernstein is concerned about this news from CNN: “While [saving the rebate] is a valiant thing to do, what you want them to do is spend it.”

Despite having the title of ‘economist,’ Mr. Bernstein doesn’t seem to understand the concept of economic growth and capital accumulation. The economy can only expand, and therefore rise out of recession, with a solid base of capital. The only way to attain the funds necessary for this is through savings. Using Mr. Bernstein’s logic, we would all be rich and prosperous if only we spent all our money on plasma TVs and Cadillacs. Clearly it is unwise for an individual to spend his entire paycheck and go into debt, so why does Mr. Bernstein, and most economists, think increased spending and debt works on the national scale?

Candidates to Support

John McCain might have the presidential nomination sealed up, but that doesn't mean true limited government Republicans don't have a chance at influencing the upcoming federal elections. I am personally supporting two candidates who I believe can win and can make a true difference in Congress: Jim Forsythe and Murray Sabrin.

Jim Forsythe is running for U.S. Representative in New Hampshire Congressional District 1. Murray Sabrin is in the race for U.S. Senator from New Jersey. Both have a history in academia; both believe strongly in freedom; both offer solutions to America's problems.

Unfortunately, I can't vote for either of these men. I live in CD 2 in NH, which isn't New Jersey or CD 1. I don't have a vote to offer, but I do have support to give. I recommend everyone out there who cherishes freedom and limited government to give support to these two candidates, financial and otherwise. You can Donate to Jim Here or Murray Here.

Reefer Madness

Manchester Mayor and likely gubernatorial candidate Frank Guinta has called on state Rep. David Scannell to resign his position as spokesman for the Manchester school district after the representative voted in favor of decriminalizing small amounts of marijuana.

I like what School Board member Chris Herbert had to say: "I don't know what the mayor's deal is. A majority of the House voted for it." True, Scannell is in a unique position working for the school district, but shouldn't kids learn sometime that it is not contradictory to support marijuana decrim on the one hand and oppose drug use on the other.

I also do not agree with this quote: "Scannell insisted he will not resign, saying his vote is a form of political speech protected by the U.S. Constitution." I think it would be better to invoke Article 30, Section 1 of the New Hampshire Constitution: "The freedom of deliberation, speech, and debate, in either house of the legislature, is so essential to the rights of the people, that it cannot be the foundation of any action, complaint, or prosecution, in any other court or place whatsoever." Guinta's letter calling for Scannell's resignation is clearly a political ploy. However, I believe trying to make a man lose his job (which Scannell's coworkers say he does well) over something entirely political is not appropriate.

I don't think Guinta should be worrying too much about Scannell's vote, however. Governor Lynch says he will veto the bill if it reaches his desk. To boot, Senate Majority Leader Joseph Foster said: "I don't think he's going to be seeing it. I know of no interest in the Senate on either side of the aisle to entertain that bill." Why would they entertain a bill that brings the punishment closer in line with the crime?

State House Gun Ban Defeated

HB 1354 was defeated yesterday by a vote of 279-19. The bill would have made it illegal to carry any firearm (open or concealed) or deadly weapon within the State House.

I am not aware of any incidents involving a misuse of firearms in the State House, and I know for a fact that some people do carry inside the building. This is not, however, a matter of how many problems firearms have caused in our state's capitol; this is a matter of whether our representatives believe in our state constitution. Article 2-a states: "All persons have the right to keep and bear arms in defense of themselves, their families, their property and the state." Pretty simple and straightforward to me. Defending the State House is about as close as you can get to defending the "state" itself.

If your representative is on the following list of those who voted against killing this bill, I would recommend sending them a polite message asking them why:

Allen, Peter Democrat Cheshire 6 Nay
Butcher, Suzanne Democrat Cheshire 3 Nay
Chase, Claudia Democrat Hillsborough 2 Nay
Cooney, Mary Democrat Grafton 7 Nay
Cunningham, Howard Democrat Carroll 3 Nay
Fletcher, Richard Republican Hillsborough 7 Nay
Gile, Mary Democrat Merrimack 10 Nay
Ginsburg, Ruth Democrat Hillsborough 20 Nay
Hall, Betty Democrat Hillsborough 5 Nay
Howard, Doreen Democrat Rockingham 12 Nay
Kepner, Susan Democrat Rockingham 15 Nay
Levesque, Melanie Democrat Hillsborough 5 Nay
Moody, Marcia Democrat Rockingham 12 Nay
Nielsen, Ellen Democrat Sullivan 4 Nay
Osborne, Jessie Democrat Merrimack 12 Nay
Pilotte, Maurice Democrat Hillsborough 16 Nay
Preston, Philip Democrat Grafton 8 Nay
Weed, Charles Democrat Cheshire 3 Nay
Yeaton, Charles Democrat Merrimack 8 Nay

Marijuana Decrim Bill Passes NH House

HB 1623, a bill that would decriminalize possession of marijuana under 1/4 of an ounce, passed the New Hampshire House of Representatives today by a vote of 193-141. Current law states that anyone in possession of 1/4 of an ounce or less can be sent to jail for a year and be fined up to $2,000; if passed by the Senate and signed by the Governor, the new law would abolish criminal penalties and reduce the fines to a maximum of $200.

The Message Will Never Die

Great Ron Paul video:

The Lie About Earmarks

John McCain is furious that the Senate shot down his proposal to have a one-year moratorium on spending earmarks. The Senate blocked the proposal by a vote of 71-29 on Thursday. McCain is not a fiscal conservative in any sense of the word; thus, he attacks earmarks as some kind of financial plague that is bankrupting our country.

The truth of the matter is earmarks are merely a way to distribute money that has already been approved for spending. The Congressional Research Service defines earmarks (PDF), informally, as "provisions associated with legislation (appropriations or general legislation) that specify certain congressional spending priorities."

Even if earmarks represent an increase in spending, the total for the latest budget equals a grand total of $14.8 billion. That is out of a $3.1 trillion budget. Will 0.4% of the latest budget really bring financial ruin? For some reason I think the $9.5 trillion of national debt or the inflationary policies of the Federal Reserve pose a greater threat to our economy than Congressional earmarking.

But if he wants to make an issue of negligible spending, John "Open Borders" McCain should look into the proposed United States/Mexico Totalization Agreement. This plan will give Social Security benefits to Mexican citizens who work in the United States as little as a few months. The low-end cost estimates (i.e. government figures) project it will cost $525 million over the first five years. Of course, that wouldn't fit into McCain's agenda of loose borders and wild spending.

I wish McCain would stop pretending to be fiscally responsible. He is just another tax-and-spend Republican in the mold of George W. Bush, who was the biggest spender since LBJ and his Great Society. I also wish he, and all his Beltway buddies would stop playing these stupid games with earmarks and tackle the real financial crises we are facing. Alas, I doubt McCain will suddenly become a voting-clone of Ron Paul.

Yes, We Brought Freedom to Iraq

Neocons love to list off the many reasons why it was good to liberate Iraq. Of course Islam takes a lot of heat. Subjugation of women is a big one for lots of neoconservatives. Many Christian neocons believe we need to overthrow all governments that have Muslims within their ranks; if we don't do it, they will come over here and make our women wear burkhas and subject us to Sharia law.

Our occupation of Iraq, however, has led to an increase in the persecution of Christians and galvanization of the more radical Muslims. A perfect example is here. Archbishop Paulos Faraj Rahho of Mosul, whose body was found yesterday, was one of the highest Catholic clergymen in Iraq. Our invasion and occupation did not bring freedom; if anything it has brought out the more brutal elements.

Please, fellow Christians, if you still support this war, just look at the impact it is having on Christians in that part of the world.

Lew Rockwell on Antiwar Radio

I just got around to listening to this interview today. It is a great survey of all topics important to libertarians: war, economics, political philosophy. Lots of memorable insights during this hour long interview.

Listen here.

Speaking of stable prices...

Fed chairman Ben Bernanke testified before Congress a few days ago, and was schooled once again by Ron Paul. My favorite statement by Bernanke, which he often repeats when discussing monetary issues with Dr. Paul, is that he is charged with creating "stable prices" via the workings of the central bank. It honestly blows my mind that you can assume you are creating price stability by inflating the money supply. Look at this graph of the MZM money stock:

The MZM money supply measurement is the sum of all physical currency, and checking, savings, and money market accounts. As you can see in the graph, this measure of money supply has increased from about $1 trillion in the early 1980's to an astounding $8 trillion today. Every extra dollar added to the money supply lessens the value of every existing dollar.

Just using that fact Bernanke should realize that there is inflation, and therefore prices are not stable. But what he does not even take into account is that in a free market system, with a money supply determined by the market, prices will tend to fall. Does it make any sense that in January of 1996 a gallon of whole milk cost $2.55 and in January of 2008 that same gallon of milk costs $3.87? Shouldn't the price of milk be falling as new technologies and techniques increase the rate of production?

I'm sure Bernanke would argue that there are other factors that lead to the increase of prices for things like Milk, Oil, and Bread. I would say, as Ron Paul did in the Congressional hearing, that prices seem to be stable when compared to the price of gold. We all complain of the rising price of oil, and its derivative gasoline, but do we ever ask what causes this? I believe it is mostly inflation (of course with the increased demand from China and a decreased supply from places like Iraq). Look at this graph of the Price of Oil vs. the Price of Gold:

Seems to me that over the 36 year period in this graph there wasn't much change in the price of oil relative to that of gold. People always say that advocates of a gold standard are strange. Do you think it is strange to want prices that are not continually rising? If you do, just chew on this fact: $100 in 1913 (when the Federal Reserve was created) is equivalent to $2,132.12 in 2008. That's all inflation.

So the next time you hear the Federal Reserve "economists" saying they are looking to stabilize prices and keep inflation to a minimum, remember that in nearly 100 years of existence they have done the opposite of that. Gold and silver look better every day.

Return to Isolationism

My article for the current issue of The Kenyon Observer is now online at out brand-new website. Here is the opening paragraph:

"American foreign policy has become infused with an air of self-righteousness and moral superiority. We have long since strayed from the advice of Thomas Jefferson, that it is best to maintain 'peace, commerce, and honest friendship with all nations, entangling alliances with none.' Foreign adventurism, never-ending war, and complex alliances have entirely perverted the foundation of this country’s foreign policy."

Read the Rest.

The Ron Paul Counter-Revolution

Many libertarians laud the American colonists for instigating a revolution against the British crown, and rightly so. I don't see any more effective redress for the time and circumstances. But I have begun to think that continuing such an analogy to the Ron Paul movement is in error.

Can we really call this the Ron Paul Revolution? I say this is a Counter-Revolution. What is revolutionary about bringing back the traditions of freedom and limited government? I say it is revolutionary to call for destroying the Constitution and starting wars to "democratize" those countries we view as uncivilized.

Garet Garrett put it best in the opening of The Revolution Was:

"There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom."

We are here to take back what is rightfully ours; no more New Deal-style socialism; no more Wilsonian wars for "democracy"; we want authentic prosperity and lasting peace.

What brought this all together for me was reading a blog post by John Cochran on the Mises Institute Blog. He posted a poem by Patrick Barrington, entitled "I Want to be a Consumer":

I Want to be a Consumer

"And what do you mean to be?"
The kind old Bishop said
As he took the boy on his ample knee
And patted his curly head.
"We should all of us choose a calling
To help Society's plan;
Then what to you mean to be, my boy,
When you grow to be a man?"

"I want to be a Consumer,"
The bright-haired lad replied
As he gazed into the Bishop's face
In innocence open-eyed.
"I've never had aims of a selfish sort,
For that, as I know, is wrong.
I want to be a Consumer, Sir,
And help the world along."

"I want to be a Consumer
And work both night and day,
For that is the thing that's needed most,
I've heard Economists say,
I won't just be a Producer,
Like Bobby and James and John;
I want to be a Consumer, Sir,
And help the nation on."

"But what do you want to be?"
The Bishop said again,
"For we all of us have to work," said he,
"As must, I think, be plain.
Are you thinking of studying medicine
Or taking a Bar exam?"
"Why, no!" the bright-haired lad replied
As he helped himself to jam.

"I want to be a Consumer
And live in a useful way;
For that is the thing that is needed most,
I've heard Economists say.
There are too many people working
And too many things are made.
I want to be a Consumer, Sir,
And help to further trade."

"I want to be a Consumer
And do my duty well;
For that is the thing that is needed most,
I've heard Economists tell.
I've made up my mind," the lad was heard,
As he lit a cigar, to say;
"I want to be a Consumer, Sir,
And I want to begin today."

The true revolutionaries are those who inverted the entire discipline of economics. The Austrian economists fought for decades to show that prosperity can only be attained through production, savings, and capital accumulation.

The post-Keynesian and neoclassical economists of today would have you believe that printing money and spending it is the true path to a world of wealth. That is simply wrong; it is, however, the true path to depression and financial disarray.

I could be mistaken, but I do not see what is revolutionary about returning to sound economics, limited government, and a humble foreign policy. We had it once and they stole it from us. Let's win it back.

Long Live the Counter-Revolution!