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A Critique of Pure Bullshit, Part Three: Eichengreen on Ron Paul (A Tale of Two Monies)

September 2, 2011 Leave a comment

I have been critiquing Barry Eichengreen’s unprincipled attack on Ron Paul and his demand for a return to the gold standard, but, so far, I have danced around the real question posed by this vicious hit piece. Eichengreen’s argument is not about whether or not Ron Paul’s ideas can be compared to the insanity of Glenn Beck, nor is it even about the criticism of the Fascist State proposed by the argument of Frederick Hayek, who plays in this venal attack only the role of betrayer — Ron Paul having based his argument on many of the insights of Hayek, is ultimately betrayed by him when the latter dismisses
the possibility of a return to the gold standard.

Hayek concedes, in other words, to the necessity of totalitarianism.

Ron Paul, having been deserted by Hayek, even before he begins his career as a politician, is left alone in the company of Glenn Beck, who (Beck) is trying to foist gold coin on you at an astounding markup. The implication of this being that if Ron Paul is not himself in cahoots with Glenn Beck, he is just another hopeless sucker to be played. Just another miser looking for a place to safely store up his accumulated wealth from the predations of the investment banksters.

All of this is nothing more than an attempt at misdirection, a ploy to distract you from asking the important question:

What is money?

Ask this question to Ron Paul, and he will tell you gold is money — honest money, not a fiction of money as is ex nihilo currency. When Ron Paul asked Fed Chairman Ben Bernanke if gold was money, the Chairman tried his damnedest to avoid giving a straight answer. The chairman knows that money can perform two useful functions: universal means of payment in an exchange, and store of value. Even if gold is not recognized as the official standard of prices in a country, it can still perform exceptional service as store of value. And, in this function, it entirely fulfills the definition of a money – moreover, it fulfills this function better than any other commodity. And, it certainly fulfills this function better than currency created out of thin air.

Yes. Gold is money. But, of course, that is not the question I am asking:

“What is money?”

Not what thing can serve as money, but what is money itself. No matter what serves as money, or the functions of money it fulfills; what is money itself, i.e., the functions to be filled by the things?

Simply stated: Gold is money, but money is not gold.

People always make this silly argument: “Why can’t dogs, or sea shells or emeralds be money?” Yes. Within limits, anything can serve as money; and, this fact makes the thing serving as money appear entirely accidental and arbitrarily established. So, for instance, whether gold or dancing electrons on a Federal Reserve terminal is money seems simply a matter of convenience and fit.

But, the real questions raised by this is why anything serves as money? That is, why money? This question appears to us entirely irrational. We take the existence of money for granted, and therefore, argue not about money itself, but the things to be used as money. Eichengreen wants us to believe the question, “What thing should serve as money?”, has no deeper significance but for a handful of scam artists and marks like Glenn Beck and Ron Paul. A fifty dollar gold coin (worth some $1900) is inconvenient for daily purchases; we should use dancing electrons on a Federal Reserve terminal.

But, why do we have to use anything at all when it comes time to fill up the SUV for a trip to the corner store? Why isn’t the gas free? In other words, what is money doing coming between us and the things we need?

“Because”, the economist Barry Eichengreen will tell us, “there is not enough of stuff to go around.” Well, how does Barry know this? Does he have some insight into how much of one or another thing is produced in relation to demand for that thing? No. He doesn’t. The function of money is to tell us which things are in shortfall relative to demand because those things have a price in the market place. Prices presuppose the existence of scarcity; of a relation to nature marked by insufficiency of means to satisfy human want. Money is not an attribute of a fully human society, but the attribute of a society still living under the oppressive demands of nature.

So, the question,

“What is money?”

really comes down to

“What is scarcity?”

And, this can now be answered: it is insufficient means to satisfy human needs. But, this answer is still insufficient, because we really have no way to know directly if scarcity exists, right? What we know is the things generally have a price, and we infer from this that things must be scarce. But, this too is a fallacy like “gold is money = money is gold”. I stated that prices presuppose scarcity — but I must now correct myself. Scarcity of means to satisfy human needs is necessarily expressed by prices, but prices do not of themselves necessarily express scarcity of means.

Catelization, monopoly pricing, false scarcity and the Fascist State

We know, for instance, near the turn of the 20th Century, certain big industries learned they could maintain artificially high prices on their products by creating entirely artificial scarcities. We know also how this expertise was put to use and the reaction of society to it. Or, at least, we think we do. Folks like Joseph Stromberg, Murray Rothbard, Paul Baran and Paul Sweezy tell a much different story than the official record. That alternative narrative is summed up brilliantly by Kevin Carson in his work here.

Carson argues:

But merely private attempts at cartelization before the Progressive Era–namely the so-called “trusts”–were miserable failures, according to Kolko. The dominant trend at the turn of the century–despite the effects of tariffs, patents, railroad subsidies, and other existing forms of statism–was competition. The trust movement was an attempt to cartelize the economy through such voluntary and private means as mergers, acquisitions, and price collusion. But the over-leveraged and over-capitalized trusts were even less efficient than before, and steadily lost market share at the hands of their smaller, more efficient competitors. Standard Oil and U.S. Steel, immediately after their formation, began a process of eroding market share. In the face of this resounding failure, big business acted through the state to cartelize itself–hence, the Progressive regulatory agenda. “Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.”

In fact, these folks argue, cartelization and monopoly pricing wasn’t very successful until the state stepped in at the behest of industry to organize them. Carson again:

The Federal Trade Commission created a hospitable atmosphere for trade associations and their efforts to prevent price cutting. (18) The two pieces of legislation accomplished what the trusts had been unable to: it enabled a handful of firms in each industry to stabilize their market share and to maintain an oligopoly structure between them. This oligopoly pattern has remained stable ever since.

It was during the war [i.e. WWI] that effective, working oligopoly and price and market agreements became operational in the dominant sectors of the American economy. The rapid diffusion of power in the economy and relatively easy entry [i.e., the conditions the trust movement failed to suppress] virtually ceased. Despite the cessation of important new legislative enactments, the unity of business and the federal government continued throughout the 1920s and thereafter, using the foundations laid in the Progressive Era to stabilize and consolidate conditions within various industries. And, on the same progressive foundations and exploiting the experience with the war agencies, Herbert Hoover and Franklin Roosevelt later formulated programs for saving American capitalism. The principle of utilizing the federal government to stabilize the economy, established in the context of modern industrialism during the Progressive Era, became the basis of political capitalism in its many later ramifications. (19)

But, there’s a problem with this cartel argument by Austrians, like Hayek and Mises, and Marxist-Keynesians, like Baran and Sweezy: Following Rudolf Hilferding, they describe prices realized by cartelization as “tribute exacted from the entire body of domestic consumers.”

The “monopoly capital” theorists introduced a major innovation over classical Marxism by treating monopoly profit as a surplus extracted from the consumer in the exchange process, rather than from the laborer in the production process. This innovation was anticipated by the Austro-Marxist Hilferding in his description of the super profits resulting from the tariff:

The productive tariff thus provides the cartel with an extra profit over and above that which results from the cartelization itself, and gives it the power to levy an indirect tax on the domestic population. This extra profit no longer originates in the surplus value produced by the workers employed in cartels; nor is it a deduction from the profit of the other non-cartelized industries. It is a tribute exacted from the entire body of domestic consumers. (64)

The problem with this theory is this: if we assume a closed system where the wages of the working class are the overwhelming source of purchasing power for the goods produced by industry, with prices of commodities more or less dependent on the consumption power of the mass of workers who produce them, these workers are unable to buy what they produce. The problem cited by Marx that the consumption power of society is an obstacle to the realization of surplus value is only intensified by cartelization.

Cartelization, even if it could be achieved in one or two industries, could not be the principle feature of any closed economy. Moreover, Marx’s theory predicts as productivity increased, and the body of workers needed to produce a given output shrank, this imbalance worsens. Even with the full weight of the state behind it, monopoly pricing would result in the severe limitation of the consumption power of society. This wholly artificial limitation on the consumption power of society would be expressed as a reduced demand for the output of industry and generally falling prices. So, in any case, the attempt to impose a general scarcity on society through cartelization alone must, in the end, fail miserably.

At this point it is entirely necessary to again ask the question:

“What is money?”

But, this time, not in the fashion we previously addressed it,

“Why is money coming between us and the things we need?”

We now can ask it in the form Barry Eichengreen wants us to consider it:

“What thing should serve as the money?”

As we just saw, cartelization must fail, even if it is sponsored by the state, owing to the artificial limits on the consumption of society. The limited means of consumption in the hands of the mass of workers must place definite limits on the demand for the output of industry.

But, what if — and this is only a silly hypothetical — another source of “demand” could be found within society? What if, out of nowhere, government should suddenly find itself in possession of a previously untapped endless supply of gold? What if, no matter how much of this supply of gold was actually spent, the gold coffers of the state remained full to the bursting point. Indeed, what if, for every bar of gold the state spent, 2 or 3 … or one thousand bars took the place of the spent gold?

In this case, the consumption power of society lost by cartelization and monopoly pricing could be made up for by judicious Fascist State spending, for instance on the military or building out an entire highway system or leveling the industiral competitors of entire continents in a global holocaust or pursuing a decades long Cold War/War on Terror/War on Democracy, to offset the limited demand of society. Since all gold bars look pretty much the same, no one need know that the state had a secret vault that produced gold as needed. No one need know that gold had lost its “price” as a commodity, because it was so incredibly abundant as to exceed all demand for it.

Which is to say, no one need know that in gold-money terms, all other commodities, including labor power, were essentially being given away for free.

The only people who would know this would be the men and women who managed the vault. And, since they were getting a cut of every bar spent into circulation, they could be relied on to keep this a tightly held secret.

So, again:

“What is money?”

Is it gold, a commodity in limited supply, and requiring a great deal of time and effort to produce? Or, is it the dancing electrons on a computer terminal in the basement of the Federal Reserve Bank in Washington, DC? Is it real gold, available in definite limited quantities? Or, is it “electronic gold”, available in infinite quantities? The first choice makes it impossible for state enforced monopoly pricing and cartelization; the second makes it entirely possible.

So far as I know, I am the only one making this argument — Marxist or non-Marxist. But, it is the entire point of Ron Paul’s campaign. It is what makes his campaign a potentially revolutionary moment in American society. Of far greater importance than he imagines, because, like any petty capitalist, he is only looking for a safe place to store his wealth. The radical potential of a demand for the return to the gold standard, even from the mouth of this petty capitalist, this classical liberal is a dagger aimed directly at the heart of the Fascist State, and of its globe-straddling empire.

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A Critique of Pure Bullshit: Part Two: Eichengreen on Ron Paul (Money and Crisis)

August 30, 2011 Leave a comment

Austrian School economists Ludwig von Mises and his student Friedrich A. Hayek

Barry Eichengreen makes much of the role the theories of Friedrich Hayek play in Ron Paul’s world view for a reason that becomes immediately clear:

In his 2009 book, End the Fed, Paul describes how he discovered the work of Hayek back in the 1960s by reading The Road to Serfdom. First published in 1944, the book enjoyed a recrudescence last year after it was touted by Glenn Beck, briefly skyrocketing to number one on Amazon.com’s and Barnes and Noble’s best-seller lists. But as Beck, that notorious stickler for facts, would presumably admit, Paul found it first.

The Road to Serfdom warned, in the words of the libertarian economist Richard Ebeling, of “the danger of tyranny that inevitably results from government control of economic decision-making through central planning.” Hayek argued that governments were progressively abandoning the economic freedom without which personal and political liberty could not exist. As he saw it, state intervention in the economy more generally, by restricting individual freedom of action, is necessarily coercive. Hayek therefore called for limiting government to its essential functions and relying wherever possible on market competition, not just because this was more efficient, but because doing so maximized individual choice and human agency.

Yes, folks: Ron Paul is a follower of the very same theories recently endorsed by that cheap huckster of gold coin: right wing conspiracy theorist nut job, Glenn Beck.

Indeed, Ron Paul hails from that portion of the libertarian movement that is a reactive response to the growing role of the state in the economic activity of society. While Marxists predict this increasing state role — demanding only that state power must rest in the hands of the workers whose activity it is — libertarians of Paul’s type reject this role entirely and warn it can only have catastrophic implications for human freedom. Thus, these two streams of communist thought diverge less significantly in their respective diagnoses what was taking place in 20th Century than in their respective solution to it.

As Eichengreen points out, Ron Paul sees in the ever increasing interference by the state in economic activity a danger to individual freedom and a growing threat of totalitarian statist power, in which the state attempts to determine the individual and society rather than being determined by them. This has echoes among Marxists, who themselves had nothing but disdain for nationalization of industry, and by Marxist writers, like Raya Dunayevskaya, who, during the same period Hayek was developing his own ideas, observed an inherent tendency of the state to organize society as if it were a factory floor.

“At the same time the constant crises in production and the revolts engendered befuddle the minds of men who are OUTSIDE of the labor process… where surplus labor appears as surplus product and hence PLANLESSNESS. They thereupon contrast the ANARCHY of the market to the order in the factory. And they present themselves as the CONSCIOUS planners who can bring order also into ‘society,’ that is, the market.”

Paraphrasing Marx, Dunayevskaya points to the inherent logic of this process:

If the order of the factory were also in the market, you’d have complete totalitarianism.”

What Eichengreen wants to treat as an observation specific to the “loony right” turns out to be a view held in common by both the followers of Marx and the followers of the Austrian School. Moreover, it is not just the fringes of political thought who warned of growing convergence between the state and capital, the mainstream of political thought also recognized this inherent tendency, Eichengreen acknowledges, by citing President Richard Nixon’s famous quote, “we are all Keynesians now.” What emerges from this is a very different impression than the one Eichengreen wishes us to take away from his tawdry attempt to discredit Paul by noting his affinity with Glenn Beck for the writings of Nobel Laureate Friedrich Hayek and the Austrian School within bourgeois economics: As Engels predicted, the state was being driven by Capital’s own development to assume the role of social capitalist, managing the process of production and acting as the direct exploiter of labor power.

While mainstream bourgeois political-economy was treating the convergence of Capital and State power as a mere economic fact, the followers of Hayek and the best of the followers of Marx warn not merely of the effect this process would have on economic activity, but the effect it must have on the state itself — as social manager of the process of extraction of surplus value from the mass of society, the state must become increasingly indifferent to its will, must increasingly treat it as a collective commodity, as a mass of labor power, and, therefore, as nothing more than a collective source of surplus value.

Although lacking the tools of historical materialist analysis, that comes from familiarity with Marx’s own methods, libertarians, like Ron Paul, have actually been able to better understand the implications of increasing state control over economic life than Marxists, who, having abandoned Marx’s methods to adopt spurious theories propagated from whatever academic scribbler, still to this day have failed to completely understand the Fascist State.

*****

Eichengreen, worthless charlatan that he is, deftly sidesteps this critique shared by both Austrians and Marxists of the political impact of growing Fascist State control over the production of surplus value, and instead directs our attention to the entirely phony debate of whether gold as money serves society better than ex nihilo currency to abolish the crises inherent in the capitalist mode of production itself. He begins this foray by admitting the failure of of monetary policy to prevent the present crisis, but poses it as a non sequitur:

Why are Ron Paul’s ideas becoming more popular among voters?

The answer, as is Eichengreen’s standard practice in this bullshit hit piece, is to blame Ron Paul’s popularity on Glenn Beck:

BUT IF Representative Paul has been agitating for a return to gold for the better part of four decades, why have his arguments now begun to resonate more widely? One might point to new media—to the proliferation of cable-television channels, satellite-radio stations and websites that allow out-of-the-mainstream arguments to more easily find their audiences. It is tempting to blame the black-helicopter brigades who see conspiracies everywhere, but most especially in government. There are the forces of globalization, which lead older, less-skilled workers to feel left behind economically, fanning their anger with everyone in power, but with the educated elites in particular (not least onetime professors with seats on the Federal Reserve Board).

Only after we get this conspicuously offensive run of personal attacks on Ron Paul’s reputation, does Eichengreen actually admit: Ron Paul’s ideas are gaining in popularity, because the Fascist State is suffering a crisis produced by a decade of depression and financial calamity:

There may be something to all this, but there is also the financial crisis, the most serious to hit the United States in more than eight decades. Its very occurrence seemingly validated the arguments of those like Paul who had long insisted that the economic superstructure was, as a result of government interference and fiat money, inherently unstable. Chicken Little becomes an oracle on those rare occasions when the sky actually does fall.

Ah! But, even now, Eichengreen, forced to admit, finally, the present unpleasantness, cannot help but label Ron Paul a broken clock for having rightly predicted it in the first place. Okay, fine.

So, it turns out that the banksters really do extend credit beyond all possibility of it being repaid; and, it turns out that this over-extension of credit plays some role in overinvestment and the accumulation of debt, and, it turns out prices spiral to previously unimaginable heights during periods of boom — and, finally, it turns out all this comes crashing down around the ears of the capitalist, when, as at present, a contraction erupts suddenly, and without warning.

This schema bears more than a passing resemblance to the events of the last decade. Our recent financial crisis had multiple causes, to be sure—all financial crises do. But a principal cause was surely the strongly procyclical behavior of credit and the rapid growth of bank lending. The credit boom that spanned the first eight years of the twenty-first century was unprecedented in modern U.S. history. It was fueled by a Federal Reserve System that lowered interest rates virtually to zero in response to the collapse of the tech bubble and 9/11 and then found it difficult to normalize them quickly. The boom was further encouraged by the belief that there existed a “Greenspan-Bernanke put”—that the Fed would cut interest rates again if the financial markets encountered difficulties, as it had done not just in 2001 but also in 1998 and even before that, in 1987. (The Chinese as well may have played a role in underwriting the credit boom, but that’s another story.) That many of the projects thereby financed, notably in residential and commercial real estate, were less than sound became painfully evident with the crash.

All this is just as the Austrian School would have predicted. In this sense, New York Times columnist Paul Krugman went too far when he concluded, some years ago, that Austrian theories of the business cycle have as much relevance to the present day “as the phlogiston theory of fire.”

(I think it is rather cute to see Eichengreen present himself as the disinterested referee between the warring factions of bourgeois political-economy, by gently chiding Paul Krugman for going too far in his criticism of the Austrians — after all, the Fascist State will have to borrow heavily from the Austrian School to extricate itself from its present predicament)

Where people like Ron Paul go wrong, Eichengreen warns, is their belief that there is no solution to this crisis but to allow it to unfold to its likely unpalatable conclusion — unpalatable, of course, for the Fascist State, since such an event is its death-spiral as social capitalist. Apparently, without even realizing it, this pompous ass Eichengreen demonstrates the truth of Hayek’s argument:  Fascist State management of the economy, once undertaken, must, over time, require ever increasing efforts to control economic events, and, therefore, ever increasing totalitarian control over society itself.

Eichengreen pleads us to understand the Fascist State does not intervene into the economy on behalf of Capital (and itself as manager of the total social capital) but to protect widows and orphans from starvation and poverty:

Society, in its wisdom, has concluded that inflicting intense pain upon innocent bystanders through a long period of high unemployment is not the best way of discouraging irrational exuberance in financial markets. Nor is precipitating a depression the most expeditious way of cleansing bank and corporate balance sheets. Better is to stabilize the level of economic activity and encourage the strong expansion of the economy. This enables banks and firms to grow out from under their bad debts. In this way, the mistaken investments of the past eventually become inconsequential. While there may indeed be a problem of moral hazard, it is best left for the future, when it can be addressed by imposing more rigorous regulatory restraints on the banking and financial systems.

Thus, in order to protect widows and orphans from starvation, the Fascist State is compelled to prop up the profits and asset prices of failed banksters and encourage the export of productive capital to the less developed regions of the world market — not to mention, leave millions without jobs and millions more under threat of losing their jobs. Eichengreen even has the astonishing gall to state the problem of moral hazard identified by Austrians, “is best left for the future, when it can be addressed by imposing more rigorous regulatory restraints on the banking and financial systems.” Eichengreen takes us all for fools — did not Washington deregulate the banksters prior to this depression, precisely when the economy was still expanding? If banks are deregulated during periods of expansion, and they cannot be regulated during periods of depression, when might the time be optimal to address moral hazard?

The question, of course, is rhetorical — and not simply because Eichengreen is only blowing smoke in our face. Eichengreen actually argues that Fascist State intervention prevented a depression!:

…we have learned how to prevent a financial crisis from precipitating a depression through the use of monetary and fiscal stimuli. All the evidence, whether from the 1930s or recent years, suggests that when private demand temporarily evaporates, the government can replace it with public spending. When financial markets temporarily become illiquid, central-bank purchases of distressed assets can help to reliquefy them, allowing borrowing and lending to resume.

And, here we can see the role of the thing serving as money and its relation to the crises inherent in the capitalist mode of production. Ex nihilo currency does not abolish crises, it merely masks them from view: while ex nihilo dollar based measures of economic activity indicate the economy suffered a massive catastrophic financial crisis in 2008, gold indicates this financial crisis is only the latest expression of an even more catastrophic depression that has, so far, lasted more than a decade.

NEXT: The tale of two monies

Eichengreen on Ron Paul and Gold: Part One: A critique of pure bullshit:

August 29, 2011 2 comments

Washington has a problem, and Barry Eichengreen is doing his bit to save it. The problem’s name is Ron Paul, and this problem comes wrapped in 24 carat gold:

GOLD IS back, what with libertarians the country over looking to force the government out of the business of monetary-policy making. How? Well, by bringing back the gold standard of course.

Last week, Eichengreen published a slickly worded appeal to libertarian-leaning Tea Party voters, who, it appears, are growing increasingly enamored with Ron Paul’s argument against ex nihilo money and the bankster cartel through which Washington effects economic policy.

The pro-gold bandwagon has been present in force in Iowa, home of the first serious test of GOP candidates for that party’s presidential nomination. Supporters tried but failed to force taxpayers in Montana and Georgia to pay certain taxes in gold or silver. Utah even made gold and silver coins minted by Washington official tender in the state. But, the movement is not limited to just the US: several member states of the European Union have made not so quiet noises demanding real hard assets in return for more bailout funds for some distressed members burdened by debt and falling GDP.

No doubt, these developments are a growing concern in Washington precisely because demands for real assets like commodity money threaten to blow up its eighty year old control of domestic and global economic activity through the continuous creation of money out of thin air.

Although Eichengreen invokes the difficulty of paying for a fill up at your local gas station, “with a $50 American eagle coin worth some $1,500 at current market prices”; the real problem posed by a gold (or any commodity) standard for prices is that such a standard sounds a death-knell to a decades long free ride for the very wealthiest members of society, and would end the 40 years of steady erosion of wages for working people here, and in countries racked by inflation and severe austerity regimes around the world.

Make no mistake: Ron Paul is now one of the most dangerous politicians in the United States or anywhere else, because his message to end the Federal Reserve Bank and its control of monetary and employment policy has begun to approach the outer limits of a critical mass of support — if not to end the Fed outright, than at least to bring the issue front and center of American politics.

Eichengreen begins his attack on Ron Paul’s call for an end to the Federal Reserve by choosing, of all things, Ron Paul’s own writings as weapon against him:

Paul has been campaigning for returning to the gold standard longer than any of his rivals for the Republican nomination—in fact, since he first entered politics in the 1970s.

Paul is also a more eloquent advocate of the gold standard. His arguments are structured around the theories of Friedrich Hayek, the 1974 Nobel Laureate in economics identified with the Austrian School, and around those of Hayek’s teacher, Ludwig von Mises. In his 2009 book, End the Fed, Paul describes how he discovered the work of Hayek back in the 1960s by reading The Road to Serfdom.

For Eichengreen, Paul’s self-identification with Hayek is a godsend, because, as Eichengreen already knows at the outset of his article, Hayek ultimately opposed the gold standard as a solution to monetary crises:

At the end of The Denationalization of Money, Hayek concludes that the gold standard is no solution to the world’s monetary problems. There could be violent fluctuations in the price of gold were it to again become the principal means of payment and store of value, since the demand for it might change dramatically, whether owing to shifts in the state of confidence or general economic conditions. Alternatively, if the price of gold were fixed by law, as under gold standards past, its purchasing power (that is, the general price level) would fluctuate violently. And even if the quantity of money were fixed, the supply of credit by the banking system might still be strongly procyclical, subjecting the economy to destabilizing oscillations, as was not infrequently the case under the gold standard of the late nineteenth and early twentieth centuries.

Eichengreen pulls off a clever misdirection against Ron Paul by deliberately conflating the problem of financial instability with the problem of limiting Fascist State control over economic activity. Ron Paul’s argument, of course, is not primarily directed at eliminating financial crises, which occur with some frequency no matter what serves as the standards of prices, but at removing from Washington’s control over economic activity not just at home, but wherever the dollar is accepted as means of payment in the world market — and, because the dollar is the world reserve currency, that means everywhere. But, by conflating the question of Fascist State control over the world economy with solving the problem of financial and industrial crises that are endemic to the capitalist mode of production, Eichengreen takes the opportunity to foist an even more unworkable scheme on unsuspecting Ron Paul supporters: privatize money itself:

For a solution to this instability, Hayek himself ultimately looked not to the gold standard but to the rise of private monies that might compete with the government’s own. Private issuers, he argued, would have an interest in keeping the purchasing power of their monies stable, for otherwise there would be no market for them. The central bank would then have no option but to do likewise, since private parties now had alternatives guaranteed to hold their value.

Abstract and idealistic, one might say. On the other hand, maybe the Tea Party should look for monetary salvation not to the gold standard but to private monies like Bitcoin.

It is cheek of monumental — epic — proportion. Even by the standards of the unscrupulous economics profession — a field of “scholarship” having no peer review and no accountability — the sniveling hucksterism of Eichengreen’s gambit is quite breathtaking. However, not to be overly impressed by this two-bit mattress-as-savings-account salesman, in the next section of this response to Barry Eichengreen, I want to spend a moment reviewing his examination of the problem of financial instability, and the alleged role of gold (commodity) money in “subjecting the economy to destabilizing oscillations… under the gold standard of the late nineteenth and early twentieth centuries.”

Part Two: Money and crises

This fascinating intersection…

December 12, 2010 1 comment

Okay, so this is how I see it.

Almost unnoticed there is an emerging consensus between otherwise irreconcilable groups over their attitudes toward Washington. It would be too much to say this consensus is intentional, let alone acknowledged or conscious — it is some sort of quasi-consensus; apparent only in the overwhelming rejection of the Obama-GOP tax deal as well as the outpouring of support for, and defense of, Wikileaks.

Mind you, I am not prophesying the dawn of the millennium here. There isn’t a single positive statement both the far Right and the far Left can agree on. For the Right, it is all about Patriotism, Property, Sound Money and the Constitution; while the Left champions One World, Hostility to Property, Equality and Social Justice. Even on a good day, you couldn’t get the two sides to agree on what to have for lunch.

And, that is the point: There is a convergence happening despite the gulf in world views.

Let me be extremely cautious here; I don’t want to blow this convergence out of proportion. The Libertarians will never agree with the Socialists on the need to abolish private property. And, the Socialists will never agree with the Libertarians on the fundamental necessity of unfettered capitalism. Mises.org will not be publishing excerpts from Karl Marx (except to debunk them) any time in the near future — say, until the Sun goes nova.

Still, the followers of Ron Paul and the followers of Karl Marx have been expressing an identity of interest these days on, at least, the following issues:

  • End imperial adventures abroad
  • End the suppression of dissent and attempts to regulate private individuals
  • End the Federal Reserve and the domination of banker cartel
  • End the politics of compromise and backroom deals
  • End the lobbying and corruption of public life by special interests
  • End the bailouts and life support for the banks

And, there may be a reaction to it — a pullback from association between the sides generated by a genuine horror of this prospective practical convergence. Since, at root, there is nothing in common between them in terms of a positive vision of the future, both sides are subject to manipulation and the deliberate introduction of sophisticated well-crafted wedge issues of no real significance to keep the sides at each others’ throat.

Don’t Ask, Don’t Tell? Like anyone believes it to be a matter of principle that openly gay soldiers get the opportunity to kill Afghanistan villagers beside their straight counterparts.

Anti-immigrant legislation? Like the pivotal economic issue of our time is who picks lettuce in California, cleans windows in Massachusetts or processes chicken for Perdue on the DelMarVa peninsula.

You can expect distractions like these to increase as it becomes clearer there is only one real target in this crisis: the Washington-Wall Street Axis.

Addendum: For those who are interested, this is a short history on the use of wedge issues. They seem to be pretty effective because the Washington-Wall Street Axis take a known interest of some section of the population — abortion, immigration, gay rights — which they know will divide Left and Right into opposing camps and hype this issue into national prominence in a coordinated media campaign.

After asking yourself which side you are on, the best defense against a wedge issue is to ask: “Who does this issue put on the other side and how does it distract me from the real enemy?”

Ron Paul calls for the end to the “welfare/warfare state”. Mass outbreak of suffocating spasms of uncontrollable laughter ensue.

November 8, 2010 Leave a comment

Following on last week’s rather desultory rejection of the Messiah’s Wall Street-inspired Ponzification of the United States economy (“Uh, no this isn’t what we meant by change. Hey, how about those Tea Party assholes over there.”) Ron Paul calls on the now thoroughly adrift sheeple of the United States to embrace yet another dream of unicorns carrying fairies on saddles of gossamer and gold.

Just before this fantastic wonderland devolves into another sequel of Nightmare on Main Street.

Reject the Welfare/Warfare State

Last week’s midterm elections have been characterized as a victory for grassroots Americans who are fed up with Washington and the political status quo. In particular, the elections are being touted as a clear indicator that voters demand reductions in federal spending, deficits, and debt.

If the new Congress hopes to live up to the expectations of Tea Party voters, however, it faces some daunting choices. For all the talk about pork and waste, the truth is that Congress cannot fix the budget and get our national debt under control by trimming fat and eliminating earmarks for “Bridges to Nowhere.”

Real reductions in federal spending can be achieved only by getting to the meat of the federal budget, meaning expenditures in all areas. The annual budget soon will be $5 trillion unless Congress takes serious steps to reduce spending for entitlements, military, and debt service. Yet how many Tea Party candidates who campaigned on a platform of spending cuts talked about Social Security, Medicare, foreign wars, or bond debt?

With regard to entitlements, the 2010 Social Security and Medicare Trustees report tells it all. It paints a stark picture of two entitlement programs that cannot be sustained under even the rosiest scenarios of economic growth. No one, regardless of political stripe, can deny the fundamental problem of unfunded future liabilities in both programs.

We should understand that Social Security was intended primarily to prevent old widows from becoming destitute. Life expectancy in 1935 was only about 65, when there were several workers for each Social Security recipient. The program was never intended to be a general transfer payment from young workers to older retirees, regardless of those retirees’ financial need. Yet today Social Security faces an unfunded liability of approximately $18 trillion.

First, Congress needs to stop using payroll taxes for purposes not related to Social Security, which was a trick the Clinton administration used to claim balanced budgets. Second, Congress should eliminate unconstitutional spending – including unnecessary overseas commitments – and use the saved funds to help transition to a Social Security system that is completely voluntary. At some point in the near future Congress must allow taxpayers to opt out of federal payroll taxes in exchange for never receiving Social Security benefits.

Medicare similarly faces a shortfall of $30.8 trillion in unfunded future benefits. The Part D prescription drug benefit accounts for approximately $15.5 trillion, or half of the unfunded Medicare liability. Congress should immediately repeal the disastrous drug benefit passed in 2003 by President Bush and a Republican Congress.

Fiscal conservatives should not be afraid to attack entitlements philosophically. We should reject the phony narrative that entitlement programs are inherently noble or required by “progressive” western values. Why exactly should Americans be required, by force of taxation, to fund retirement or medical care for senior citizens, especially senior citizens who are comfortable financially? And if taxpayers provide retirement and health care benefits to some older Americans who are less well off, can’t we just call it welfare instead of maintaining the charade about “insurance” and “trust funds”?

Military spending and interest on the national debt similarly represent large federal expenditures that Congress must address by rethinking our foreign policy and exercising far greater oversight over the Federal Reserve and the Treasury department.

I have for a long time criticized our interventionist foreign policy and the Fed, and I will continue to do so. It’s time for Congress to face the fundamental problems that affect Social Security and Medicare, and show the courage necessary to make real changes to both programs by rejecting the welfare/warfare state.

Yes, Ron. We should remove all the support for the poor, the unemployed, the sick, and the elderly, because the facts show poor, hungry, unemployed, disabled elderly huddling in cold unlit shacks never existed until government invented them.

Republican boss slams the Federal Reserve…

November 3, 2010 Leave a comment

While Rand Paul will have a few months to hide in the Senate cloakroom before he absolutely has to put his money where his mouth is, and shut Washington down — or sprain his lips trying to filibuster America’s public debt manufacturers into an early retirement — Representative Cathy McMorris Rodgers (R. Wa.), vice chair of the House Republican Conference, has called out the Bernanke Bankster Mafia Krewe at the Federal Reserve. While much of the specifics in the statement make us laugh — for instance, the following:

As a believer in the free enterprise system, I believe the best thing the federal government can do to spark our economic recovery is to create a favorable climate for small-business owners to expand and create jobs.

— she nevertheless, appears fully prepared to aim her tea cup at the swollen head of Mr. Bernanke, and, thus, earns our notice. With Rand Paul’s dad, Representative Ron Paul now set to chair the monetary policy subcommittee in the House, things just might be getting a little interesting along the corridors of that Whore House of Washington D.C.

(And, yes. We know they are all right-wing-nuts. But, that is what makes it so interesting: watching all the defenders of property, handcuffed together, in blindfolds, and going at it with kitchen knives!)

Read more…

Anti-Washington versus Anti-Empire…

April 25, 2010 14 comments

On Alternet, some members of Code Pink report on their recent attempt to survey members of a recent TEA Party demonstration to see if there is some common ground between the tax resistors movement and the peace movement.

On Tax Day, my CODEPINK colleagues and I conducted 50 interviews with Tea Party members about the cost of war and empire. With military spending eating up 20 percent of the federal budget and half of all discretionary spending, we figured that any serious effort to shrink government would have to deal with this bull in the china shop.

While a recent New York Times/CBS poll showed the Tea Partiers to be relatively homogenous group of older, white, mostly males, we found that this group certainly doesn’t speak with the same tongue when it comes to the U.S. role in the world. On one side are the neocon interventionists who think the United States is God’s gift to the world. On the other side are non-interventionists who want to slay the warfare state. The extreme fissure is bound to upset the tea cart as more Tea Party leaders are forced to articulate their foreign policy positions.

Not surprising, they encountered a great deal of hostility to the cause of demilitarization – even to the point of being spat upon by at least one person – and about 70 percent support for present US military policy:

In our very small, unscientific sample, the hawks — many of whom were retired military or have close family in the military — outweighed the doves. Take the first question about the 800-plus bases the U.S. military maintains at a cost of over $100 billion a year. Thirty-five of the 50 respondents wanted to keep the bases. “We need those bases to maintain stability in the world. Nature abhors a vacuum, and if we weren’t there, the Islamists or the Chinese would jump in,” said Bruce Welker, a retired law enforcement officer from Pittsburgh. “I’d hate to see what would happen to the world without our military presence.”

The 15 people who wanted to dismantle the web of foreign military bases included Josh Little, a college student from Alexandria, Virginia. Josh said that his grandfather helped overthrow Hitler, but that was 60 years ago and it was high time for us to leave Germany. “I’d say the same for Japan, Korea and all of Europe. They can take care of themselves.”

The Code Pink activists found support for the idea of an alliance between left and right among those who did not support present US military policy. The common effort of Representatives Dennis Kucinich and Ron Paul has some resonance within the group. Of the latter, the Code Pink activists note that Ron Paul’s “anti-empire message may be catching on” among these conservatives:

Cong. Ron Paul’s message of cutting the welfare/warfare state has attracted an enthusiastic following within the Tea Party. While progressives are turned off by his call for ending all kinds of domestic social programs, his anti-war and anti-empire message and consistent votes against war funding is a refreshing turn from liberal Democrats who decry war but always vote to fund it.

At the Tea Party Tax Day gathering, Cong. Ron Paul was one of the last to take the stage at the evening rally. He began by chastising liberals for their social spending, and then took on the conservatives for wanting to be the policemen of the world. “We’re stretched too far with all this government spending overseas,” he said to fans who had waited all day to hear him. “We should just mind our own business.”

Even Glen Beck was forced to give some lip service to this tendency in the TEA Party movement. The writer senses a great deal of tension within the TEA Party movement over the issue of Empire:

Tea Party leaders have been trying to keep this huge division between supporters of republic and empire under wraps. Aside from Ron Paul, you’ll rarely here them mention the raging wars or bulging military coffers. Their new Tea Party Contract from America, which talks about a limited government and an end to budget deficits, doesn’t mention military spending.

But you can’t have small government with a humongous military traipsing all over the world. Sooner or later, Tea Party leaders and manifestos will have to articulate their foreign policy positions.

Perhaps, what disappointed us after reading this very interesting report, was the writer’s apparent ignorance of the intellectual contradiction that also exists within the thinking of progressives: can you have big government without an equally “humongous military traipsing all over the world”? As one particularly astute young TEA Partier stated, “The hawks represent the old guard — so do both the Republican and the Democratic parties. With a few exceptions, they all love war and empire. But a small-government movement worth its salt can’t just be anti-Washington, it has to be anti-empire. If not, I’m outta here.”

The writer misses an important opportunity to ask: If you can’t be anti-Washington without also being anti-Empire, is it possible to be anti-Empire, without also being anti-Washington? Is the European Social compact worth the cost of an American Empire? Or, does the cost of the Empire make the compact not a prize but a burden, since the compact relies not on export surpluses, as in Germany, but on the ability to draw in massive surpluses produced abroad, i.e., since the American social safety net relies on the Empire?

Clearly, the division between the TEA Party and Libertarians on the one hand, and, progressives and Socialists on the other comes down to this!