Saturday, December 5, 2009

Democrats: the Party of Selfishness, Greed

The "Progressive" Republicans and Democrats, the parties of Theodore Roosevelt, Franklin D. Roosevelt and Barack Obama, have created a system where each aims to steal from each. This system has crystallized most completely in New York State, where the Service Employees' International Union has formed a one million strong unit whose aim is to expand the public sector to create ever greater numbers of unproductive government jobs. New York's economy is no longer founded on productive economic work but rather on the Wall Street bubble economy, which depends on government extraction of wealth from the rest of the world via the Federal Reserve Bank and the Bush-Obama bailout.

The way the Progressive Republicans and Democrats accomplish the wealth extraction is that the Fed deposits monetary reserves in the money center banking system, which is empowered to lend a larger amount (up to six or seven times as much) to the public. The first borrowers are Wall Street banks and hedge funds. The increased monetary reserves push down interest rates and push up the stock market, as has recently occurred. Wall Street benefits. The money circulates, and the poor pay higher prices. Propagandists for Wall Street such as William Greider in his book Secrets of the Temple deny this mechanical process, claiming that inflation affects all neutrally. That is also the claim of university economists. A moment's reflection makes clear that this is impossible. Most of the money is lent to hedge funds, for corporate takeovers, the carry trade and real estate speculation. By the time the money circulates through the economy, its purchasing power has diminished. Only fools would claim otherwise.

Perhaps no phenomena better testifies to the authoritarian greed of the Democratic Party and the "Progressive" Republicans than the bailout, which some have predicted will eventually amount to as much as $24 trillion. All of the advocates of remedying "income inequality" among the Democrats and the "Progressive Republicans" supported this massive transfer to the wealthy in unison.

The Democrats are a party of school teachers who do not educate but demand higher salaries; unions whose workers expect make work jobs; government employees who produce nothing but demand large raises; trial attorneys whose work cripples the economy but lobby for laws that protect their privileges; and on and on.

Karl Popper makes the point in his book Open Society and Its Enemies that, 2,500 years ago, Plato intentionally confused the debate concerning individualism versus collectivism. Plato was a communist who believed in tight state control of every aspect of human existence. To defend this claim, he equated selfishness and individualism. He claimed that collectivism, violent control of humanity, was justice.

The Democrats are very much in the Platonic tradition. Their advocacy of extremist versions of environmental regulation that would impose high costs on homeowners via the cap and trade provision is only the beginning. In upstate New York, Congressman Maurice Hinchey has proposed a plan to turn the Hudson Valley into a federal park. The extent of regulation in a federal park under the regulatory authority of the cap and trade administrator is potentially crushing. The very people who will potentially be forced to leave their homes because of cap and trade continue to applaud Mr. Obama.

Friday, December 4, 2009

Question for Steve Forbes

Sharon Gitelle of the Forbes Blog Network sent the following:

Re: The Forbes Network: December 11th interactive call: Steve Forbes

Dear Mitchell,

Please join us for an interactive call with Steve Forbes, on Friday, December 11th at 3 PM Eastern time for a discussion about his new book called How Capitalism Will Save Us. (To learn more about this book please click here: )

The expected duration of the call is 45 minutes.

Steve Forbes will be answering your questions about capitalism—please submit your question(s) to me by e-mail by Wednesday, December 9th. You will be notified by me if your question has been selected prior to the call.

My response:

Here is my question for Steve Forbes, Sharon.

In the 1870s an investment bank, Jay Cooke and Co., failed. In many respects it was similar to Citigroup and other of the Wall Street firms in that it had been heavily subsidized by the federal government throughout its life but was so incompetently run that it failed despite the large subsidies. In the case of Jay Cooke, the subsidy resulted in part from its involvement with the Civil War greenbacks (like Henry Paulson, one of its representatives, if I recall Salmon P. Chase, had been been appointed to be Secretary of treasury). In the case of Wall Street and the money center banks today, the government subsidy has taken the form of access to large amounts of artificially created money. That is, until the socialist Bush-Obama bailout, where cash was simply handed to the incompetently run American financial institutions.

In the aftermath of the Civil War, despite the subsidies it had received, Jay Cooke failed in tandem with the crash of 1873. No one was foolish or gullible enough to believe that sustaining Cooke would have helped the economy. That would have been a fool's fantasy. Following Cooke's failure and the crash there was a depression. The depression and crash were associated with the federal government's retiring of the greenbacks and deflation. During this continual deflation there were three depressions. However, real wages grew at a much faster pace than they have since 1970. Moreover, innovation occurred at a much faster pace than at any time in the history of the world, culminating with the creation of the concepts of television and radio by Nikola Tesla in 1897 and numerous inventions that were so vibrant that they continued to subsidize the American economy through the 20th century, a century of dramatically slowed creativity.

At the same time, real wages rose at an uneven clip, roughly two percent per year, more or less until the founding of the Federal Reserve Bank in 1913. As David Ames Wells points out in Recent Economic Changes (1889) the innovation and real growth of the economy was astonishing. What Wells mistakenly calls "overproduction" (see diatribe in Hazlitt's Economics in One Lesson) resulted from the dramatic innovation, as Wells points out. Of course, corporations, banks and Wall Street disliked the intense competition and deflation, which led to declining profits and hard work, but American workers saw their wages grow rapidly, as Wells pointed out.

Since the abolition of the gold standard in 1971, real wages of American workers have grown 2% over the 40 years. That's 2% in total over 40 years. In contrast, during the deflation of the late nineteenth century, real wages rose 2% per year. Yet, today's all-thumbs economics establishment claims that deflation is a major threat. It is, of course, to the banks who provide economists with endowed chairs, but it is not to workers who wish to raise their living standards. Workers did much better under deflation from 1865 to 1913 than they have under inflation from 1970 to 2009.

Thus, the 1873 failure of the major investment bank in America and the contraction of the money supply, deflation, left American workers much better off but Wall Street and corporate America less profitable. This was the period of freest markets in American history, the closest to what might be called a libertarian economy. Of course, Wall Street and the money center banks, then like now, opposed libertarianism and free market capitalism, preferring the socialist pattern that Alexander Hamilton and the Federalists advocated (Hamilton was indeed a socialist and advocated a government owned manufacturing firm that would establish American manufacturing).

Forbes has supported the bailout of Wall Street. In addition, you have echoed the all-thumbs economics establishment's obsessive fear of deflation. When I say "all-thumbs" I mean all-thumbs as far as the public is concerned, not all-thumbs as far as the government-subsidized banking interests are concerned. Politically the economists are wise servants of power.

Forbes has been on the bailout bandwagon. The bailout does not reflect libertarian or pro-free market sentiments, but sentiments in favor of the subsidization of a specific sector of the American economy through state intervention, Wall Street and banking. As I wrote to one of your columnists, and contrary to your philosophy, a libertarian America would need Wall Street as much as I need lung cancer.

Thus, it would seem that Forbes has taken not so much a free market position, but a crony capitalist or socialist position, closer to Hamiltonian Federalism, or fascism than to libertarianism, the idea that markets should be governed by a non-judgmental, objective legal standard.

Can you reconcile Forbes's position on the bailout with the views of Presidents Andrew Jackson and Grover Cleveland?

Best wishes,

Mitchell Langbert

Sharon's reply:

Great. Thank you!

Thursday, December 3, 2009

Will Cap and Trade Abolish Your Home Equity Value?

Jim Crum had sent me a copy of the Cap and Trade bill. Notice section 202, which creates a federal regulatory authority over home energy standards. The authority could not be controlled by state or local government. What would stop the regulator from establishing insulation standards that are so expensive that your home equity is reduced or eliminated? What would stop them from establishing regulations that force homeowners in rural areas to move to cities, creating large, empty parks regions? Might Congressman Hinchey's recent proposal to turn the Hudson Valley into a federal park dovetail with section 202 of the Cap and Trade proposal?

Enviro-totalitarians Plato's Successors

Jim Crum writes

I happened to hear the NPR program on the "Climategate" or "Climaquiddick"- the scandal no one wants to mention in the old media. For them it is hardly an issue, an event only worth a brief mention as they barrel down the abyss by trying to fix an unproven planetary issue by taxing us into the stone age. It was very bizarre to listen to the report and it became quite clear that the denial tag is firmly in the court of those promoting global warming and all of its taxing and wealth redistribution programs.

If "consensus" has been reached by using falsified data, purposely distorting programming, and suppressing opposing views, then what type of consensus is that? If those with questions then find that the source data has been lost or dumped, what does that say about the scientific method being followed? It means that this endeavor has regressed from science to dogma.

It's my job to pay, their job to think. I am a moron who just works for a living to support these intellectual giants who set policy and national agenda.

Since HUGE money is involved, perhaps this is just Climatological Alchemy.


My response

In Open Society and Its Enemies I-Plato Karl Popper shows that Plato advocated a strict totalitarian society divided among the "guardians" who had wisdom and could think, a warrior class who would enforce the guardians' views, and the workers, everyone else. Roughly, says Popper, these were equivalent to a shepherd (the guardian class), a sheep dog, the warrior class, and the sheep, the general public. Plato was reacting specifically to the change, progress, and individualism that had evolved under Athenian democracy. Plato was contemptuous of democracy and individual choice. To Plato, justice meant that the sheep should stay in their place. Plato's vision has served as a model for successive generations of totalitarians. In America, authoritarian socialists, following Plato, have used a scheme whereby they call themselves moderate or mainstream, advertise their brand of totalitarianism as "social democracy", and establish political correctness, clamp down on alternative speech, and train themselves to think in unison, guided by the Ochs Sulzbergers, their Wall Street friends, the guardian class, and, in universities.

The Democratic Party's vision of society is totalitarian but differs from Plato's in that he saw academics as comprising the guardian class, whereas the Ochs Sulzbergers and Wall Street, a business elite, comprise the guardian class in the Democratic Party's scheme. Academics and the Democratic Party media are part of the warrior class. Incidentally, much like today's Democrats, Plato strongly argued that weapons should only be in the hands of the warrior class.

The current enviro-totalitarians are one more in a long line of followers of Plato's reactionary vision of society as a single organism. Plato was interested in arresting change. His theory of forms is that an unchanging ideal is real, the changing phenomena of the sensual world are inferior, degraded versions of an unchanging reality that the forms constitute.

His prescription was to reinstate the world as it had existed in primitive times. This is the vision of the enviro-totalitarians. It is a totalitarian, reactionary and elitist position.