America’s Last Statesman

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Journal of a Wayward Philosopher
America’s Last Statesman

February 5, 2016
Hot Springs, VA

“The #1 responsibility for each of us is to change ourselves with hope
that others will follow. This is of greater importance than working on
changing the government; that is secondary to promoting a virtuous
society. If we can achieve this, then the government will change. The
best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of Liberty.”

-Dr. Ron Paul

The S&P closed out Thursday at $1,915. Gold closed at $1,157 per ounce. Crude Oil closed at $31.72 per barrel, and the 10-year Treasury rate closed at 1.86%. Bitcoin is trading around $388 per BTC today.

Dear Journal,

Most of the snow has finally melted here in the mountains of Virginia with only intermittent white patches left dotting the landscape. Having been covered for more than a week, the revealed ground appears saturated, muddy, and grimy – much like the current election cycle here in the U.S.

After ignoring the circus entirely for four months, I did tune in to a portion of last week’s GOP debate. I was primarily interested in observing Rand Paul as he seemed to move back towards advocating Liberty, having failed to adequately pander to the Straussian neoconservatives who have come to dominate the Republican party.

After distancing himself from his old man throughout his campaign, Rand even invited three-time presidential candidate Ron Paul to help rally supporters on the campaign trail in Iowa. Ron’s arrival was reportedly greeted by students chanting “End the Fed!”, which I must admit triggered heavy nostalgia within me. Continue reading “America’s Last Statesman”

Why Politics Fail

excerpt from The Left, the Right, and the State by Llewellyn H. Rockwell Jr. :Illustration: Truth and Lie

The logic of the market is predicated on the pervasive and glorious inequality of man. No two people have the same scales of values, talents, or ambitions. It is this radical inequality, and the freedom to choose our own lot in life, that makes possible the division of labor and exchange. Through money and contracts, markets allow us to settle differences to our mutual advantage. The result—and here is why people call the market miraculous—is a vast, productive system of international cooperation that meets an incomprehensibly huge range of human needs, and finds a special role for everyone to participate in building prosperity.

Now, to politics. The system of voting is designed to replicate the market’s participatory features. In fact, it is a perverse distortion of the market system. In markets, you get the goods you pay for. If you don’t and there’s been a violation of contract, you have legal recourse. In voting, people are not actually purchasing anything but the politician’s word, which is not only legally worthless; he has every incentive to lie to produce the desired result.

Politics take no account of individuals. You and I are merely tiny specks on the vast blob called “the American people,” and what this blob “thinks” is only relevant insofar as it accords with a political agenda advantageous to the state and its friends.

You think you are voting for tax cuts. Instead you get secret tax increases and perpetual increases in spending. You think you are voting for smaller government. Instead you get ever more government intrusion. This is because it is not the voters who are managing the system. It is well-organized interest groups who feed at the trough managed and owned by the state. Thus there is a vast gulf that separates the average voter from the politician’s real day-to-day interests.

The spectacle of elections grows more absurd every year. We are asked to cast ballots for people we do not know because they make promises they are under no obligation to keep. What’s even worse, the voting gesture is pointless on the margin. The chances that any one vote (meaning your vote) will actually have an impact are so infinitesimally small as to be meaningless.

In markets, entrepreneurial talent means the ability to anticipate and serve the needs of the buying public. In politics, success means the ability to manipulate public opinion so that enough fools (so regarded by politicians) reaffirm the politician’s power and glory. It takes special talents to do this—talents not cultivated in good families.

If American politics were characterized solely by voting and the products of voting, the system would be loathsome enough. And yet the corruption runs deeper. The real power behind Leviathan is wielded by a vast, unelected army of bureaucrats who fancy themselves specialists in the pseudoscience of public policy. In their minds, the only role for the citizenry, treated as a homogenous blob, is to conform or suffer the consequences. Gone are the cooperation, peace, and genuine diversity of markets. Instead, we experience brute force.

Intellectuals specialize in dreaming up grandiose tasks for government that would be doomed to fail even if perfectly implemented. And yet the most obvious criticism of all government schemes is that they must all be mediated by this corrupt system called politics.

How different is this system from the one envisioned by people like Patrick Henry and George Mason? They hoped to erect a wall of separation between society and government to protect the people from being manipulated by cunning political forces. Indeed, the best of the American revolutionaries hoped for a society free of politics, a society free of any visible signs of government. Albert Jay Nock was right to characterize the state, democratic or not, as a parasite on society. Like a plague bacillus, its only successes are from its own point of view.

How the Fed Grows Government

by Hunter Hastings – Mises Daily
Article originally published in the January 2015 issue of BankNotesEccles Building

We are told that elections are important, but the most powerful state institution, the central bank, is totally out of reach of the voter.

Ludwig von Mises viewed democracy as a utilitarian concept. It was the form of political organization that allowed the majority to change the government without violent revolution. In Socialism, Mises writes “This it achieves by making the organs of the state legally dependent on the will of the majority of the moment.” He identified this form of political process as an essential enabler of capitalism and market exchange.

Mises extended this concept of utilitarian democracy to citizens’ control of the budget of the state, which they achieve by voting for the level of taxation that they deem to be appropriate. Otherwise, “if it is unnecessary to adjust the amount of expenditure to the means available, there is no limit to the spending of the great god State.” (Planning for Freedom, p. 90).

Today, this utilitarian function of democracy, and the concept of citizens’ limitations on government mission and government spending, has been taken away by the state via the creation and subsequent actions of central banks. The state carefully created a central bank that is independent of the voters and unaffected by the choices citizens express via the institutions of democracy. In the case of the US Federal Reserve, for example, the Board of Governors state that the Federal Reserve System “is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”

Independent from Voters, But Not from Politicians

Importantly, the central bank is independent of the citizens in this way, but, in practice, not independent of politicians. Alan Greenspan, former chairman of the Federal Reserve, is quoted as asserting, “I never said the central bank is independent,” alluding to similar statements in two books he has written, and pointing to one-sided political pressure significantly limiting the FOMC’s range of discretion.

This institutionally independent, but politically directed central bank spearheads a process that enables largely unlimited government spending. It expands credit and enables fiat money, which is produced without practical limitation. Fiat money enables government to issue debt, which, at least so far, also has been pursued without restraint. The unlimited government debt enables unrestrained growth in government spending. The citizenry has no power to change this through any voting mechanism.

Thus, the state is set free from having to collect tax revenue before it can spend, and as Mises explained, in such a case, there is no limitation on government at all:

The government has but one source of revenue — taxes. No taxation is legal without parliamentary consent. But if the government has other sources of income it can free itself from this control.

In other words, when faced with the possibility of voter reprisals, members of Congress are reluctant to raise taxes. But if government spending no longer necessitates taxes, government becomes much more free to spend.

Without restraints on government spending, there are no restraints on government’s mission, or on the growth in the bureaucracy that administers the spending. The result is a continuous increase in regulations, and a continuous expansion of state power.

Has The Central Bank Limited Itself?

In the one hundred years since the creation of the Federal Reserve in 1913, US federal government spending has grown from $15.9 billion to a budgeted $3,778 billion in 2014 (a number we now refer to as $3.8 trillion to make the numerator seem less egregious). Spending as a percentage of GDP has advanced from 7.5 percent to 41.6 percent over the same period. A comparison of regulation growth is more difficult, but over 80,000 pages are published in the Federal Register annually today, versus less than 5,000 annually in 1936.

The evidence, therefore, is that voting makes no difference to this lava flow of spending and regulation. Whatever the will of the majority of the moment, government spending and government power will continue to expand, with consequent reduction in the economic growth that is the primary goal of the society that is being governed.

John Locke opined that, when governments “act contrary to the end for which they were constituted,” they are at a “state of war” with the citizens, and resistance is lawful. (Two Treatises of Government, p. 74). The theory and practice of unhampered markets and individual liberty are particularly relevant at election time.

Hunter Hastings is a member of the Mises Institute, a business consultant, and an adjunct faculty member at Hult International Business School

Please see the January 2015 issue of BankNotes for this article and others like it.