California Dreamin’

If it is impossible for something to continue indefinitely, it will eventually stop.

The politics of the modern redistributionist state is founded on the assumption that politicians can buy votes by promising voters ever more munificent entitlements – from federal deposit insurance against bank failures to government-subsidized medical care – with the money for these things always somehow being painlessly extracted from somebody else.

Once voters have agreed to forget that every single dollar of tax revenue is extracted from the productive economy by threat of force (including corporate taxes, which are then passed along as higher prices), there is no incentive for any politically favored interest group to do anything but eat subsidies as fast as it can, before all those less deserving other interest groups get a snout in. The demand for entitlements, income transfers, and subsidies will, accordingly, rise without limit. And why not, when “somebody else” is paying?

For this con game to continue working on the suckers voters who buy it, there always has to be a “somebody else” from which more money can be painlessly extracted. It’s “the rich” or “corporations” or (when governments borrow money against future tax revenues) ourselves in the future.

But what happens when there is no “somebody else” left? California’s voters posed that question today when they rejected six referenda designed to raise taxes or borrowing, all of it allegedly intended to pull the state out of a $21-billion-dollar hole. Exit polling made the voters’ reasoning clear; they don’t believe that allowing taxes to rise will produce anything but ever larger deficits as politicians recklessly overspend on behalf of those politically favored interest groups. The state of California is now facing imminent bankruptcy.

The U.S. as a whole will almost certainly face the same problem before the end of Barack Obama’s administration in 2012. Social Security obligations were due to exceed collections in 2013; even before Obama quadrupled the federal deficit this meant a giant blazing meteorite was already hurtling straight at the heart of the Feds’ dinosaurian finances. And the second-order effects of Obama’s socialism-lite economic policy are pushing tax revenues rapidly downwards as investors cut back economic activity in order to avoid being skinned (that is, skinned worse than they already are – the top 1% of earners already pay 39% of all income taxes).

The underlying problem is that in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed. Even if none of the money ever stuck to our political class’s fingers on its way through, the structural trend would be to ever-increasing deficits; moral outrage about corruption, while justified, is a distraction from the real problem, which is redistributionism itself.

But. If it is impossible for something to continue indefinitely, it will eventually stop.

Soon – very soon, in historical time – it will become clear that democratic redistributionism cannot deliver on its promises. All such systems, not just California’s and the U.S’s, are running headlong towards a terminal state of moral, political, demographic, and financial bankruptcy.

Then, the question will become: what happens afterwards? And it is a serious one, because the crisis could resolve either through the end of democracy or the end of redistributionism. On one path, we learn that we must live within our means and reject the delusion that redistribution can solve more problems than it causes; down the other path lies Peronism on steroids.

I am not in doubt which of those I will choose. If I am given any choice…

107 thoughts on “California Dreamin’

  1. Hmm… the article you linked to didn’t seem to say whether NJ tax revenues declined because we’re on the far side of the Laffer curve as you say we are, or simply because of the poor economy. AFAIK Reaganomics did not increase tax revenues as promised, so what makes you sure of the former possibility? On the other hand, there is some evidence suggesting that the government has been lowballing inflation rates in order to lowball its SS obligations.

  2. >the top 1% of earners already pay 39% of all income taxes

    This seems approximately fair. The top 1% control 30–40% of the country’s wealth. They are paying in proportion to the share of the benefits they receive.

    The top 1% can amass that sort of wealth because they live in a (relatively) well-governed country; I suspect they would be significantly poorer if they lived in a free country like Somalia.

    >moral outrage about corruption, while justified, is a distraction from the real problem, which is redistributionism itself.

    This is basically a “tragedy of the commons” situation. In countries where corruption is illegal, it’s possible for redistributionist governments to run balanced budgets.

  3. Thomas, the second-order effects I was thinking of weren’t from changes in tax rates, not yet anyway. I have no doubt the effects of Obama’s tax policies will be extremely bad, but I was thinking more of the prompt effects on credit markets of actions already undertaken and legislation pending.

    For example, we now know that it is an awesomely stupid idea to lend money to a company with a unionized workforce – because if it goes bust, the Obama administration will kick secured creditors to the kerb in order to let the unions walk off with the equity. And no one but a blithering idiot would write new mortgages (and most especially not new mortgages for members of politically favored groups like black people) when there is every likelihood that a future judge would be empowered by Federal law to execute a cramdown on them.

    The message investors are getting is that if they put their money anywhere the government can see it, they’re likely to be the target of expropriation-by-another-name. Of course they’re stuffing their cash into mattresses. They’d be crazy to do anything else.

  4. I am not in doubt which of those I will choose.

    The question is, “Is there any doubt which of those will be chosen for you?”

  5. And no one but a blithering idiot would write new mortgages … [snip] … The message investors are getting is that if they put their money anywhere the government can see it, they’re likely to be the target of expropriation-by-another-name.

    Riiiiiight. That’s absurdly over-simplified nonsense. The real solution is what — a fiercely cut-throat Darwinian non-state? Every man for himself? A Libertarian paradise of no taxes and armed militias? That’d be quite orderly and safe for all involved. After all, crime was non-existent when the US was more Libertarian than it is now. No race riots, no wars, no crime – it was paradise! Hell, while we’re at it, cut off all social services and leave the poorest of the poor to themselves – they’ll either kill each other or pick themselves up by their bootstraps and make something of themselves! It’s all so simple!

  6. >Riiiiiight. That’s absurdly over-simplified nonsense

    Fine. You raise the capital, you write the mortgages. You’ll pardon me if I don’t weep for you come cramdown time when your capiital has been garnisheed. No, the rest of us will be over here, pointing at you and laughing.

    Personally, I’d take the Libertarian paradise of no taxes and armed militias in a second – but that’s a political value judgment that is irrelevant to my original post, which (believe it or not) is not about libertarian politics at all. It’s about the value-free consequences of redistributionism, as inexorably crushing as the law of gravity.

  7. > The message investors are getting is that if they put their money anywhere the
    > government can see it, they’re likely to be the target of expropriation-by-another-name.
    > Of course they’re stuffing their cash into mattresses. They’d be crazy to do anything else.

    And there is another important point here. One of the first acts of the Obama administration was to engage other countries in an attempt to close off tax havens, and undermine the traditional privacy aspects of banking (such as Swiss banks for example.) This is simply speaking an attempt to cartel the world’s governments to eliminate any other choices. That is to say, to eliminate all the places the rich might fly to to escape the voracious appetite of the politically favored.

    Furthermore, I wanted to point out that the government here, and worldwide are implementing a “money in the mattress tax”. It is called inflation, where they deeply devalue all that fiat money by borrowing against it massively. Yes, that is right, all this bond buying by the government is nothing less than a home equity loan against your cash. So the whole mattress thing won’t work either.

    FWIW, both of these things are continuations of the previous administration’s policy, so anyone who looks to the political parties for a solution is on a fools errand. (In fairness, no doubt McCain would have screwed up the economy a little bit more slowly than Obama.)

  8. >(In fairness, no doubt McCain would have screwed up the economy a little bit more slowly than Obama.)

    Agreed. The coming entitlements crash is not a partisan issue; both Democrats and Republicans have peddled the fiction that “somebody else” would pay. Republicans have been marginally less enthusiastic about the con, but I don’t think that is likely to exempt them from the consequences of the crackup.

  9. So what’s a little guy to do? Buy land? Buy small gold and silver baubles and canned food and the like? Vote for the Marijuana Party? Buy ammo? Lots of people agree that there’s a bad moon on the rise, but I wish there would be more suggestions of what to *do*. Certainly it seems that keeping your wealth in currency form is a bad idea. What then?

  10. Andrew — rule of law. Laws are set up. A certain group of people wants to change them after the fact, over and over and over again. Why should anyone sign a contract or believe one? They will ignore it if they want to. What kind of an idiot plays with someone who throws a temper tantrum and demands the rules of the game change when they aren’t winning? (See also: year 2000 election).

  11. just a clarification from the golden state: voters didn’t reject “six referenda designed to raise taxes or borrowing”; it was actually five. the sixth measure — a moratorium on salary raises for elected officials — won by a large margin, so the net effect was still a six-for-six night for california taxpayers.

    Hell, while we’re at it, cut off all social services and leave the poorest of the poor to themselves – they’ll either kill each other or pick themselves up by their bootstraps and make something of themselves!

    well, of course they will. even as a small child, i didn’t understand why this isn’t the obvious answer. i still don’t.

  12. Alex VanderWoude,

    All signs point to investing in steel (guns) and brass (ammo) as a wise choice. I hear firearm makers and ammunition producers are working overtime. I’ve noticed for many, many weeks that the ammunition counter at Wal-Mart has been abnormally bare compared to each and every other shelf in the store.

    History bears examples that investing in determination can also be fruitful.

  13. >it was actually five.

    Thanks for the correction. The phrasing in the news stories I used as a source was unclear.

  14. well, of course they will. even as a small child, i didn’t understand why this isn’t the obvious answer. i still don’t.

    Either you’re naive, or you’re willfully blind to how humans grow psychologically. Although most people claim to have done it already (yet haven’t), I suggest you spend some time in extremely poor areas — both urban and rural — and then see if the people should be left to their own devices. Spending time there doesn’t mean driving past and pointing out through the window of your air conditioned SUV.

  15. This post reminds me strongly of Mancur Olson’s “The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities”. Wikipedia has a decent summary:

    The idea is that small distributional coalitions tend to form over time in countries. Groups like cotton-farmers, steel-producers, and labor unions will have the incentives to form political lobbies and influence policies in their favor. These policies will tend to be protectionist and anti-technology, and will therefore hurt economic growth; but since the benefits of these policies are selective incentives concentrated amongst the few coalitions members, while the costs are diffused throughout the whole population, the “Logic” dictates that there will be little public resistance to them. Hence as time goes on, and these distributional coalitions accumulate in greater and greater numbers, the nation burdened by them will fall into economic decline…

    We’re apparently in the economic decline part of the story, especially here in California.

  16. Either you’re naive, or you’re willfully blind to how humans grow psychologically. Although most people claim to have done it already (yet haven’t), I suggest you spend some time in extremely poor areas — both urban and rural — and then see if the people should be left to their own devices. Spending time there doesn’t mean driving past and pointing out through the window of your air conditioned SUV.

    I’ve lived in horrible neighborhoods enough to have a perspective that perplexes Eric. I understand why the Lie is appealing, even as it corrodes anything resembling self worth and a family structure. I’ve hung with people who see the “American Dream” as a sucker’s bet. (If you ever want an interesting job, try selling financial services at a bank branch that’s had the neigborhood shift from urbanite to ghetto in the last decade.)

    We have farming towns in the Midwest that are basically drying up and dying out. Towns where the median age is over 40, towns that have depopulated because of demographic shifts to cities.

    I sometimes ponder the mordant view that if you’re going to accept the government’s dole, that the government gets to put you to work. Give every household a copy of the 1912 Brittanica, ship them out to East Buffalo Butt North Dakota, and give them a stipend to buy root stocks and seeds to grow their own food. Give them the excellent USDA farming manuals. Make sure there’s a USDA office within easy driving distance.

    Would making people who live lives of shiftlessness and despair become self sufficient – even with being given, in fee simple, a farmhouse and 40 acres to grow crops on – be cruel? They’d be able to sell them and move back to the city if they could find a buyer. They can stay there and take whatever education assistance we can give. But they won’t get paid a weekly check for raising kids that don’t go to school or learn to do something useful.

  17. > Social Security obligations were due to exceed collections in 2013

    Actually, SS started to become a problem the day that the delta between the taxes and payouts started to decrease.

    Up until that point, SS was an increasing revenue generator. When the trend switched the other way, other revenues or borrowing had to start taking up the slack.

    The only thing that changes the day that the delta goes to 0 is that we learn whether the “loans” that SS made to the general fund will be honored. If the US govt has to choose between honoring those loans and honoring other loans, I’ll bet that they go with “other”. Why? Because other will still have money to lend and SS won’t for the forseeable future. Since the US govt still needs loans…

  18. just a clarification from the golden state: voters didn’t reject “six referenda designed to raise taxes or borrowing”; it was actually five. the sixth measure — a moratorium on salary raises for elected officials — won by a large margin, so the net effect was still a six-for-six night for california taxpayers.

    I actually voted against all six, including 1F. It’s a stupid gimmick that I’d rather not have cluttering up the state constitution, and it’s incentive for affected officials to cook the books to disguise deficits.

  19. Alex VdW– that’s exactly the question I was wondering about. I’m finishing college right now, and about to start a job with salaries and retirement accounts and stock options and all that… thrust headlong into the world of finance and investment whether I like it or not. And the only piece of advice I’ve heard on the matter (except Thane E’s brief response above) is from my Depression-vintage grandmother: “I think I’ll buy more shovels,” she said, as we carried four shovels back to the shed. “When the system breaks down, everybody’s going to have to do everything by hand, and shovels are going to be worth their weight in gold.”

  20. As Europe has played the same game longer and harder and haven’t yet collapsed, one can deduct that the American collapse is not imminent, there’s still lots of capital to waste, it shouldn’t run out for at least 20 or 30 years.

  21. I suggest you spend some time in extremely poor areas — both urban and rural — and then see if the people should be left to their own devices. Spending time there doesn’t mean driving past and pointing out through the window of your air conditioned SUV.

    http://space4commerce.blogspot.com/2009/05/in-which-i-get-ranty-and-use-too-many.html :

    “If the Poor didn’t spend their money buying Lotto tickets, they’d just piss away the money on something else. That’s why they are poor. …

    “My first wife’s family ran a liquor store. …

    “Twenty years on I want to go back in time and bitch slap [the customers who blew their money on the gambling machine] and tell them to put that god-damned money into the BANK that was across the street. …

    “But people will always find ways to shit all over themselves. No government trickery needed.”

    But there is a solution ( http://tjic.com/?p=3319 ).

  22. >As Europe has played the same game longer and harder and haven’t yet collapsed, one can deduct that the American collapse is not imminent, there’s still lots of capital to waste, it shouldn’t run out for at least 20 or 30 years.

    Until recently I would have agreed with you. However, it is a fact that the voters in California just told their political class to get stuffed; this means that Mancur Olson’s inherent contradiction between the interests of political rent-seekers and the interests of voters in general has gone critical, and the state is going to have to shut down some pretty substantial portion of its operations in the near-term future.

    The usual blackmail, “Give us more money or we’ll de-fund the nurses and firemen!”, didn’t work. This is genuinely new.

  23. Eric, what about balanced proportional budgets? While redistributionist, a balanced budget works within exact boundaries. (Assuming, for example, that you collect taxes last year and that’s your budget this year. This might be a necessary addition.) I think you’re implying that over time, there will be pressure to increase the spending and that the pressure will be given in to. Are you saying that it’s impossible for balanced budgets to continue indefinitely?

    Or, put another way, could you see the next constitution to say something like “the taxes will be 20% on this and no other, and the government must never borrow money”?

  24. esr, you suggest taxation has developed into a Ponzi scheme, bound to stop through bankruptcy. You argue convincingly that “the underlying problem is that in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed” and you further say that democratic societies “are running headlong towards a terminal state of moral, political, demographic, and financial bankruptcy.” On the other hand, you interpret the referendum results as the Californian voters’ will to reject the system and to break away. However this does not change the fact that “the state of California is now facing imminent bankruptcy.”

    So, is the vote a democratic reversal of the trend that “in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed”? Actually, the voters may have simply decided to let others (politicians, the federal government, etc.) foot the bill. If these votes are indeed a change of direction, what has caused it now nd how viable is it? Will it result in balanced non-redistributive budgets, or will it stop the moment resources are again available?

    Do you think the vote is a step in the right direction or is it another one down the slope? If it is a good thing, why? Can this step be followed by other steps? Why and how?

  25. @esr:

    “The politics of the modern redistributionist state is founded on the assumption that politicians can buy votes by promising voters ever more munificent entitlements [...] with the money for these things always somehow being painlessly extracted from somebody else. “

    That is only valid for ignorant people who don’t pay taxes. Most of us know exactly where the money used by the government to pay for stuff. From our pocket.

    Plus, it’s not true. As Shenpen said, most welfare states in Europe manage just fine. And those that struggle don’t do so because of taxation.

  26. “Either you’re naive, or you’re willfully blind to how humans grow psychologically. ” – wait. Just because someone points out a certain medicine meant to cure such and such a disease has this and this side-effect, it doesn’t mean the disease is better left uncured. Reacting to it like “You are so bad, BAD! You want people to be diseased!” is not a proper answer. The proper is answer is trying to figure out ways to cure it that doesn’t have such side-effects.

    Generally, I think the whole concept of welfare and state services should be based on the idea that it’s success must be measured by the number of people who don’t need them anymore.

    (The single worst thing about them almost everywhere in the world is that they do exactly the opposite, catching people in a trap of psychological immaturity, in a habit of dependence and learned helplessness, because the the personal power and prestige of the bureaucrat is factor of the number of helpless people who need his help.)

    Generally, the way to achieve that would be to put incentives into the system that try to make the clients imitate the behaviour of responsible middle-class folks, in a hope that imitation leads to good habits. F.e. make welfare dependent on the school performance of children, make state health care dependent on living a healthy lifestyle (you pay 30% of your health costs if you smoke and another 20% if you are obese), give tax breaks to companies employing young people from poor backgrounds, because if you’ve been incentivized to study hard plus you get 2-3 years of work experience, then later on you can take care of yourself etc. etc.

    Such measures could bring about a world where such stuff is simply not needed anymore, not in significant numbers, at least, because people learn to take care of themselves and their families.

  27. (that is, skinned worse than they already are – the top 1% of earners already pay 39% of all income taxes).

    Can we stop pretending that this is a good metric? The aggregate distribution of income tilts sharply upwards at the right, which causes tax revenues to do the same. I’ve pointed this out before; to quote myself:

    This makes an impressive cycle. I’ll explain how it goes: first, cut taxes on the wealthy. They’ll acquire more wealth, and so, despite paying a smaller proportion of their income, will make up a larger proportion of total tax receipts. Then complain that the wealthy are paying too much in taxes, so you’ll cut their taxes again. More wealth flies to the top, and now, despite paying a lower tax rate than before, the wealthy make up an even greater proportion of income tax receipts. It’s delicious rhetorical magic, and it even works when you have a tiny landed gentry cowering in gated communities paying a token amount in taxes, surrounded by oceans living in dire poverty, while they grumble about what lucky duckies those on the outside are. Neofeudalism ahoy!

    I’m not saying that the rich don’t pay a disproportionate share of taxes (though I’m not saying that they do); I’m saying that this is a cheap rhetorical trick which doesn’t stand up to anything more than the most cursory examination. Your conclusion doesn’t follow from your premise using the argument given.

    esr: Personally, I’d take the Libertarian paradise of no taxes and armed militias in a second

    And yet I see no sign of you emigrating to the libertarian paradise of Somalia, where there are armed militias, but no taxes. One might think that your political positions are less than entirely sincere.

  28. “As Shenpen said, most welfare states in Europe manage just fine.” – that’s NOT what I said.

  29. > Generally, the way to achieve that would be to put incentives into the system
    > that try to make the clients imitate the behaviour of responsible middle-class folks,
    > in a hope that imitation leads to good habits.

    Often, the solution to many putatively intractable problems is simply to call things by their right name. If we stopped using words like “welfare” and “entitlement”, and instead called it what it is: “Charity”, we would go a long way to righting the problem. If we actually made it charity, by funding it by private donations to private caring organizations, we would get pretty close to solving the problem entirely.

    Removing the stupid anti drug laws would help a lot too.

  30. “The underlying problem is that in ANY democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed.” (Emphasis mine.)

    Good! In a few years you’ll become a good, old-fashioned monarchist :-)))

    Seriously, give it a look, Hoppe seems to talk sense in this economic analysis here (PDF):

    http://hanshoppe.com/publications/time_preference.pdf

  31. Sidenote. If you ask the question what should be, if any, the science behind the establishment of political institutions, the answer is almost obviously pyschology. (Economics is applied psychology.) Isn’t it curious then that almost all ideologies predate the rise of psychology as a serious science? One wonders how the ideology-makers of the XIX. century thought: they had no serious psychology to use, on the other hand, they dismissed the past psychological observation of philosophers like Aristotle and the general traditional folk knowledge about psychology as superstitious relics of bygone dark ages, which means they had no sort of psychological knowledge to base the ideology on. But in 2009 we should know better.

    Shouldn’t we scrap all ideologies, read The Happiness Hypothesis, and start all over?

  32. Shenpen, you’re right that European countries have pushed this kind of policy pretty far without collapsing in an absolute way. For that matter, some Latin American countries have pushed crony capitalism pretty far too. It’s an important general point that nations can often be pushed remarkably far without collapse. (David Friedman likes to remind us of Adam Smith’s remark on this subject, “there’s a lot of ruination in a nation.”)

    That said, while the current policy problems and trends don’t seem to be enough to cause absolute economic collapse, they might be enough to cause absolute economic decline. What if pulling policy halfway toward Europe turns out to be enough to pull the per capita GDP halfway toward Europe (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita)? Decline can be an interesting challenge for a political system.

  33. Once again socialist redistribution does not work. I guess we will be doomed to keep learning this lesson until we bankrupt ourselves someday.

    The big lie of socialism is that it can provide both equality and abundance. This is a promise on which it simply cannot deliver.

  34. “The underlying problem is that in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed. Even if none of the money ever stuck to our political class’s fingers on its way through, the structural trend would be to ever-increasing deficits; moral outrage about corruption, while justified, is a distraction from the real problem, which is redistributionism itself.”

    It helps if you think of redistribution as a formalized instance of corruption.

    I’m reasonably certain that in the US, corruption in the traditional sense of bribes and theft are fairly rare, at least in comparison to pork and related excess. You could easily find zero-sum wealth distribution schema in the US Federal balance sheet that exceed the GDP of first-world countries.

  35. >Are you saying that it’s impossible for balanced budgets to continue indefinitely?

    There is, at least, no historical case in which this has occurred.

  36. >(Economics is applied psychology.)

    I can’t think of any way in which this claim predicts anything useful about economics. It seems nonsense to me.

  37. >Do you think the vote is a step in the right direction or is it another one down the slope?

    If it is impossible for something to continue indefinitely, it must eventually stop. Yes, I think this is a step in the right direction. The only way the con can continue ofter this is if California gets a federal bailout – but (a) that can at most defer the problem until the federal finances visibly collapse from the same causes, and (b) even Democratic strategist are saying that the Obama administration would pay a heavy price for that bailout in the 2010 midterms.

  38. though most people claim to have done it already (yet haven’t), I suggest you spend some time in extremely poor areas — both urban and rural — and then see if the people should be left to their own devices. Spending time there doesn’t mean driving past and pointing out through the window of your air conditioned SUV.

    I think part of the problem I have with this is quantifying ‘spending some time’.

    Does one have to take out payday loans and live hand-to-mouth in a tar-roofed shack? Rent a walk-up apartment with roaches and rats and gangers downstairs and do day-labor? A church mission so you can tell yourself what a Good Person you are while walking above the filth?

    As for ‘driving past’ – man I lived for a year in SE D.C. [1] and that gave me the drive to get the heck out of Dodge and not look back.

    Poverty sucks. The cure is hard work.

    [1] And later Redneckville, Maryland – just as bad as South East but in different ways.

  39. > Soon – very soon, in historical time – it will become clear that democratic
    > redistributionism cannot deliver on its promises. All such systems, not just
    > California’s and the U.S’s, are running headlong towards a terminal state of
    > moral, political, demographic, and financial bankruptcy.

    Eric,

    You’re far too optimistic about peoples’ ability to collectively learn from the past. There will be a backlash, to be sure, but it will be short lived. Mine is a whiney, spoiled generation with their hands out. So long as democracy exists, so will hand-outs. Plato posited this. The only likely way out of this mess is a cruel fascist state.

  40. A bit off point, but I think it relates.

    At the risk of sounding corny (and taking a lot of hits for being silly), how about this (not my idea, but I was sort of taken with it). Instead of using 700 billion dollars of tax payer money and debt and giving to financial institutions to stabilize them and in some sort of mystic way promote new lending and miraculously fix the economy, give it to the people the government took it from. Let’s see. Let’s take half of that. 350 billion; less to borrow. Divide between the population over 18 (people that work and pay taxes). There are about 306 million people in the country (more or less). Say 2/3 are over the age of 18. Call it 200 million people.

    That’s about 1.75 million each. So give it back. 1.75 million dollars to everyone over the age of 18. Remember this is for every adult US Citizen over the age of 18 including the folks who lost their jobs at Lehman Brothers and every other company that made decisions that got us in trouble. And of course, for those serving in our Armed Forces or getting laid off and looking for a job. Of course, you would have to have filed a tax return, so that lets out drug dealers, but hey, maybe they filed one. It even includes bureaucrats already on the government dole.

    What would you do with 1.75 million?

    -Pay off your mortgage – housing crisis solved.
    -Repay college loans – nice to start life without a ton of debt.
    -Put away money for college – it’ll be there.
    -Save in a bank – create money to loan to entrepreneurs.
    -Buy a new car – create jobs and save the US auto industry thought actual sales.
    -Invest in the market – capital drives growth.
    -Pay for your parent’s (and your own) medical insurance – health care improves.
    -Or just blow it – huge increase in consumer spending.

    Does it solve California’s financial problems? Well, Californians would be happier and certainly the tax revenues would increase. Sales tax if nothing else.

    Point is, giving it to financial institutions is going about it the wrong way. OK, this is ridiculously simplistic. But the basic point that has already been outlined is, increasing taxes makes it worse. Giving them back (or not taking them in the first place) makes it better. If the Obama wants to redistribute wealth, this seems brighter. Of course this can’t and maybe shouldn’t be done for any number of reasons, but the point is, taking more money from people already struggling just leads to collapse.

    The older I get, the more I become a Hamiltonian and less a Jeffersonian.

  41. Randy, your math is wrong (350 bn$/200 million people is $1750 per person.)

    However, in a sense you are right. Individuals are much better at spending money effectively than big government agencies or corporations who have already proved their poor financial management.

    Following Hurricane Katrina, the Bush Administration put up $100bn for relief efforts. (Of course, the other side said it wasn’t enough :-) If you go down there the place is still a disgraceful mess. If you had gone your route, and distributed the $100 billion amongst the million or so people affected, (that is $100,000 each) then New Orleans and Southern Mississippi would be a utopia. As it is, it is a cesspool.

    However, if you give $100 billion dollars to the mayor of the most corrupt city in the most corrupt state in the union, you can hardly be surprised that most of it goes astray.

    BTW, let me be clear, I am not advocating doing this big government giveaway, I’d rather people were smart enough to get insurance, and that private organizations provide relief for the truly destitute. But it is better than the insanity of what the Bush administration did.

    BTW2, isn’t it funny how, in our new Obama governed world, that $100 billion dollars doesn’t seem all that much any more?

  42. Eric, California will get a federal bailout. I’d be shocked by any other outcome. The fact that there’s political pressure against it just means that CA might have to bounce a paycheck to the police force before it happens &emdash; but they probably won’t have to bother going that far.

  43. “>(Economics is applied psychology.)

    I can’t think of any way in which this claim predicts anything useful about economics. It seems nonsense to me.”

    It predicts what’s called “the new macroeconomics, post-sixties”, the recognition of the need for “microfoundations”. I.e. that empirically observed macrophenomena MUST have “a plausible story constructed why people would actually choose to behave so” (I think it’s a quote from Stephen Landsburg but I’m not sure, anyway, it’s a quote from some well-known Neoclassical who is starting to see “the light” ;-) ), in other words, it predicts that the “Austrians” were right all along: that the laws of economics must be tracked back to how and why individuals make economic decisions and what goes on in their minds or else all we have is an unreliable, approximate set of empirically observed rules of thumb.

  44. Daniel:

    What good is a bailout when you’re cash-flow negative? That was the thing about the bank bailouts – they were still viable but had liquidity problems (unlike the TARP money that went to Chrysler and GM, which was an obvious handout). Give CA $100B and they’ll be back in a year, two at the most, and even worse off.

    It gets worse, of course; if we do bail out CA, nobody else will take tough budget numbers – NY and NJ won’t be far behind unless the economy turns around fast, and pretty soon it’ll be obvious to every state house living within their means they’re playing the sucker and had better get in on the game…

  45. “And no one but a blithering idiot would write new mortgages (and most especially not new mortgages for members of politically favored groups like black people) when there is every likelihood that a future judge would be empowered by Federal law to execute a cramdown on them.”

    And then, of course, the next step is coordinated media outrage about discrimination, then stronger anti-discrimation regulations, and more money to the agency that’s supposed to enforce them. It’s so predictable that one cannot stop wondering that it’s not at least half-intetional.

  46. Will California get a bailout? Everybody pretty much assumes yes.

    But… everybody agrees the political price for giving a bailout is going to be very high. CA has 53 districts/reps, which I’m counting as 34(D) and 19(R). A grateful state may elect, what, three or four more democrats? A lot of those districts aren’t going to change either way, regardless. Meanwhile, you’re quite likely to lose way more than even the full theoretical 19 seats you could pick up as a result of this action. Especially after New York and a couple of other states also line up for handouts.

    Meanwhile, if you don’t out California, you lose, what, three or four Cali seats? Worth it to not lose the others. Again, I don’t have the time to do any sort of full analysis but it’s not like Pelosi’s district is suddenly going to send a Republican up just because they didn’t get bailed out.

    I’m not sure how to make the advantages of bailing out Cali (and New York and …) add up for Obama or the Congressional Democrats. Unlike a lot of other situations where they can use Federal money to call the shots, frankly the feds have already got the state governments on short leashes so there isn’t even much benefit there.

    I’m not ready to bet against a bailout, but I’m not ready to call it “certain”. The costs/benefits for the bailouters may not be there.

  47. >The costs/benefits for the bailouters may not be there.

    Your analysis pretty much parallels mine. That’s why I don’t think it’s a done deal either.

  48. > it’s not like Pelosi’s district is suddenly going to send a Republican up just because they didn’t get bailed out.

    It’s conceivable, though unlikely, that we could throw out Pelosi and send Cindy Sheehan. I have no idea whether or not she’d be an improvement. Not that the stakes of electing one rogue congresswoman amount to much, but she’d be an unguided missile.

  49. Jacek:
    >> Are you saying that it’s impossible for balanced budgets to continue indefinitely?

    esr:
    > There is, at least, no historical case in which this has occurred.

    Now that’s not a useful reply there. There is no historical case in which any form of economy/government/anything has continued indefinitely. You seemed to be saying there was an arguable boundary on when redistributionism would fail (when it uses all the savings and wants to use more output of the economy than there is). And I was wondering whether you thought a balanced-budget-in-constitution could be a way to go, or whether you rather expected the forces for spending growth to quickly enough find a way to increase the state-executed redistribution, getting us back where we are now.

  50. >There is no historical case in which any form of economy/government/anything has continued indefinitely.

    I intended a stronger claim; I know of no case in which deficit spending was not already a serious failure mode of a democratic government at time iof collapse, whether the collapse was due to economic failure or other causes.

    >And I was wondering whether you thought a balanced-budget-in-constitution could be a way to go, or whether you rather expected the forces for spending growth to quickly enough find a way to increase the state-executed redistribution, getting us back where we are now.

    The latter. What we’d see, I think, is maneuvers to shift politically favored spending off-budget.

  51. yeah, this is a feature of every faux-liberal person: the firm belief in the infinity of The Others. my praxaeology framework provides an explanation of why. basically, it’s an outcome of a few related interacting lowerlevel worldviews of highly Social people (in the sense that geeks tend to be more Mundane than Social: see the real world before the world of people).

    Australians might recognise the reference when I label this particular emergent behaviour “Magic Pudding” syndrome: every time you cut a slice and eat it, the whole pudding is magically restored.

  52. having said that, i’m actually cautiously in favour of what you term “redistributionist” policies, as they tend to act both to explicitly counteract other implicit breakdowns/positive-feedbacks in other human behaviour (eg genuine innovators/entrepeneurs aside, social/economic success is far more Social-process driven than Merit-driven: eg, lawyers and doctors and politicians are richer in every culture for Social reasons, regardless of their actual contribution), and to explicitly counteract the Tragedy of the Commons.

    i quite LIKE having sewerage and police. i regard the small-S “socialist” extraction of small value from all in order to provide great benefit to all quite A Good Thing.

    but yes, this is the extreme good end of the overall domain of which the “tax & spend” toxicity is the other end. parasites get everywhere, and they stuff things for everyone (else).

  53. One thing that I found interesting that someone else said: if this is true (“in any democratic system, the political demand for redistribution of wealth rises faster that the economy’s ability to generate wealth to be redistributed”), what does that imply? end of democracy? end of redistribution within democracy? is that possible, given esr’s statement above? if it does imply end of democracy, what fills the void?

  54. Ob. de Tocqueville: “When Americans find that they can vote themselves money from the public till, the experiment will be over” (possibly apocryphal, since I can’t find it in Gutenberg’s translation of Democracy in America)

  55. Something I think worth mentioning here is that one of the big worries with printing all this fake money is that we will see massive inflation. (This happens when the same amount of money is used to represent the same, or less, actual value in the economy.) However there is one other major source of inflation is fake bank money. (Also called “commercial money”.)

    The way this works is this: you deposit $10,000 in the bank. I then borrow $8,000 of this money to buy a car. After this transaction, there is now $18,000 in the economy (your $10,000 plus my $8,000), so the bank has basically created $8,000 out of thin air. Now, I buy the car, and the dealership deposits this $8,000, which Eric borrows $6,000 of. Now there is $24,000 out there, $14,000 created out of thin air. In the long term it all does kind of cancel out, but, as JMK once said — in the long run we will all be dead.

    This is the essence of fractional reserve banking (meaning the bank has to keep a fraction of your deposits available on demand, and can lend the rest out.) It is basically a license to print money on the part of the bank. Of course it is tightly regulated by the Federal Reserve.

    Now, here is the important point. Banks aren’t lending. Consequently, they aren’t creating money out of thin air. So this reduction in commercial money is offsetting the amount of fake fiat money the Government is printing. You can see this in the money statistics where there really hasn’t been a huge increase in the M1/M2 money supply (which means the amount of currency and commercial money.)

    Of course this runs out eventually, and, to quote a famous pastor, “the chickens will come home to roost.” However, this credit tightening is working to the advantage of the Obama administration at least insofar as it is delaying a spike in inflation. I doubt it will last long, and the inability of businesses and consumers to raise money will kill in both the short and long term. But it will probably delay inflation.

    Needless to say, I am not a fan of this situation, but it is worth factoring into the calculations of what is going to happen.

  56. I am trying to figure out how California *can* meaningfully go bankrupt. Assume no federal bail-out, voters blocking “revenue enhancement” measures, etc. How would it work?
    Bankruptcy of a person or corporation means a bankruptcy judge takes over the remaining assets, cuts down the debtors’ claims according to certain rules, and (in the Chapter 11 case) tries to keep the enterprise/person alive, emerging from bankruptcy with debts and obligations trimmed to the point where they can survive financially. A bankruptcy judge has the power to discharge legal obligations and forestall lawsuits to get this done in a definitive fashion.
    Presumably all the private economic actors owned by the state of California can go bankrupt like that. But most of the claims against California are *laws*. So-and-so-much of the budget *must* be spent on schools, and it must not decrease year-over-year; the voters said so. When the California Teachers’ Association sues in all available courts to keep getting their money year after year, what judge, under what legal doctrine, is going to tell them to stuff it?
    I foresee endless negotiations of California “stakeholders”, each trying to preserve their respective legal prerogatives, each daring the others to blink first. I foresee years of dueling initiatives, each trying to nail down “their” money in favor of others. Who is supposed to play the role of the bankruptcy judge? Or are we looking at a horrifically magnified version of the White House Chrysler cram-down? (Should I move now? :-)

    Seriously – anyone who talks about “California going bankrupt” – what are you talking about?

    Thanks
    — perry

  57. >Seriously – anyone who talks about “California going bankrupt” – what are you talking about?

    It means the state will stop being able to write checks because there won”t be money in the treasury to cover them. It implies that they won’t be able to borrow against future revenues, either, as the risk premium they’d have to offer on bonds would go way, way up.

    This will happen to the Federal government too, soon enough.

  58. >>> This is the essence of fractional reserve banking (meaning the bank has to keep a fraction of your deposits available on demand, and can lend the rest out.) It is basically a license to print money on the part of the bank. Of course it is tightly regulated by the Federal Reserve.

    As another poster pointed out, banks create money. So my question is this:
    Is banking inflationary? Do banks, in their normal course of doing business, exert inflationary pressure on the currency? Or does the fed regulate and control things so this doesn’t happen? If so, is it through manipulating interest rates, or some other mechanism?

  59. >And yet I see no sign of you emigrating to the libertarian paradise of Somalia, where there are armed militias, but no taxes. One might think that your political positions are less than entirely sincere.

    Thank you, I want to live in a civilized anarchy, not a polyarchy inhabited by barbarians who think all knowledge begins and ends with the Quran.

    That being said, Somalia is causing me to question some of my assumptions about the kind of cultural capital required to make an ungoverned place other than a hellhole. The place is no paradise, but by objective measures like levels of violence, availability of food, infant mortality., etc., it’s actually doing remarkably well, considering that neither civil society nor Anglo-American common law are part of its traditions.

  60. >It argues that the “Third American Republic” (the New Deal State) has turned into a Special Interest State which has shed all restraints – and thus is going to self-destruct soon.

    Hmmmm….Pretty good parallel to my analysis, isn’t it? I think I know why; the author, like me, takes Mancur Olson’s analysis of the logic of collective action seriously.

  61. “That being said, Somalia is causing me to question some of my assumptions about the kind of cultural capital required to make an ungoverned place other than a hellhole.”

    That’s how I went from something akin to a classical-liberal position to a skeptical-conservative one. Basically, you can start from the NAP, but add lots of historical realism-pessimism: realize that most of the time aggression was pretty much the default mode of human interaction. Largely because of mimetic violence, tit-for-tat…

    The optimism induced by the relative period of peace after 1945 was thorougly false: all that happened that aggression turned into a gamble, a gamble with extreme stakes: flip a coin, head, relative peace, tail, kill something like 2 billion people with global thermonuclear war and the after-effects. Any way I estimate it, the expected value of such gamble is 1 billion corpses, thus, we could call 1945-1990 the most violent period of history.

    So all we can hope for the long run is trying to lower the general level of aggression somewhat. And that can often require very _roundabout_ solutions – maintain some sort of theoretically aggressive, but still relatively civilized intervention here or there, that in turn maintains some sort of psychological or cultural effect that prevents larger scales of aggression from happening.

    As we don’t have a fully tested system of psychology at hand for this purpose, attempts to “engineer” such things should be seen as very dubious, I think in that we agree. I don’t like social engineering. However, historically evolved (i.e. traditional) arrangements are best to be _preserved_, until he we have a complete system of psychology that can help us judge which works and which doesn’t.

    It’s wholly different question to try to engineer something we don’t fully understand, or to preserve something _because_ we don’t fully understand it.

    This I largely picked up from Burke’s analysis of Revolution of France. It’s entirely wrong to see Burke as a boring traditionalist, he spent most of his life fighting against aggression, f.e. slavery, religious intolerance, the rape of India, and so on. His major problem with the Revolution of France too was that it led to lots of violence, and he tried to identify the psychological causes behind the violence and the social arrangements and beliefs and traditions and whatever that maintained the psychological causes behind the previous, relatively more peaceful period.

    This is my favourite passage:

    “But now all is to be changed. All the pleasing illusions, which made power gentle, and obedience liberal, which harmonized the different shades of life, and which, by a bland the simulation, incorporated into politics the sentiments which beautify and soften private society, are to be dissolved by this new conquering empire of light and reason. All the decent drapery of life is to be rudely torn off. All the super-added ideas, furnished from the wardrobe of a moral imagination, which the heart owns, and the understanding ratifies, as necessary to cover the defects of her naked shivering nature, and to raise it to dignity in our own estimation, are to be exploded as ridiculous, absurd, and antiquated fashion.

    On this scheme of things, a king is but a man; a queen is but a woman; a woman is but an animal; and an animal not of the highest order. . . . On the scheme of this barbarous philosophy, which is the offspring of cold hearts and muddy understandings, and which is as void of solid wisdom, as it is destitute of all taste and elegance, laws are to be supported only by their terrors, and by the concern, which each individual may find in them, from his own private speculations, or even spare to them from his own private interests. In the groves of their academy, at the end of every vista, you see nothing but the gallows. . . . ”

    As you can see, the main issue is not far away from a NAP position: his main problem is that it all leads to the gallows. But what he tried to do is look into the psychological and cultural causes of it all. It was a vague attempt, at best, a work of rhetoric and not a real analysis, but pointing towards a good direction IMHO…

  62. Saltation,

    here’s a useful rule of thumb: if it’s universal and absolute, it belongs to the government. I.e. “do not steal” is: it’s not like some people should steal a little but it’s like nobody ever, no matter who, no matter how much. Because it’s universal, it’s OK to act collectively i.e. government, police and stuff like that. One could make a similar case f.e. for running water. Everybody needs it, it’s universal. Same for electricity etc.

    But if it requires individual decision-making, then keep it private. Charity, welfare, is exactly this case. Person A may be totally faultless, just unlucky: then he should be helped. Person B is at fault, was irresponsible, then it’s better to pay him only 2/3 of what he lost in order to teach a lesson, and also take care that that 2/3 is well spent, that the irresponsibility won’t continue. Perhaps for Person C no help is necessary, because he looks strong enough to recover on his own, and thus facing the consequences of the failure teaches a useful lesson, besides, that that doesn’t kill us, only makes us stronger.

    So in this thing every case is different: this is why I’d keep it private, because it’s as various and complicated as making the right sort of sweets or cars for the right segments of the market.

  63. > Is banking inflationary? Do banks, in their normal course of doing business, exert
    > inflationary pressure on the currency? Or does the fed regulate and control things
    > so this doesn’t happen? If so, is it through manipulating interest rates, or some
    > other mechanism?

    There is nothing inherently inflationary about banking. However, nearly all modern banking systems are designed to be inflationary. The very name “fractional reserve” essentially means you can lend money you don’t have. So fractional reserve banking is intrinsically inflationary, as is any system of money based on anything things like “faith” and “credit”.

    In history there are examples of full reserve banking, and in fact the Islamic World generally uses full reserve banking. What that means is that if I deposit $10,000 and you borrow $8,000, I have $2,000 and a note from you. Having said that, Islamic banking has various other screwy features that I would not recommend.

  64. >my assumptions about the kind of cultural capital required to make an ungoverned place other than a hellhole.

    Eric, I think this is a very interesting subject. I am not an anarcho capitalist like you, more a minarchist, and it is examples like Somalia that make me so. I recognize that the veneer of civilization is very thin and it does not take much to rip it off. It is clear to me, anyway, that simply eliminating government does not lead to a successful libertarian society automatically, there are other necessary things to make it happen. I’d be interested to hear what you think the minimum set of conditions are to produce a civil society a-la “Machinery of Freedom.”

    I think an equally interesting question is this one: what does it take to maintain a free society? Jefferson said that it took the blood of tyrants and patriots to refresh the tree of liberty, but are there other alternatives?

  65. re: Somalia

    There was an interesting article in The Economist a few years ago, commenting on the fact that Somalia had by far the best cellphone network of any part of Africa. Apparently regulations, bribery, and restrictions on demand of the government-monopoly land-line carries made GSM deployments a nightmare in the rest of Africa, but in Somalia, as long as you gave a few free accounts to the local warload you were good to stick up towers whereever you liked…

  66. A redistributionist state can only exist if a majority of the voters believe that politicians are trustworthy. Most people in fact would not claim to trust politicians if you asked them, but come election day they vote as if they did. (Because everybody else does the same, and most people are herd animals.)

    Once people truly stop trusting politicians with their wallets, there will be an opportunity to convince the world that the only legitimate purpose of government is the prevention of violence. The logical result of which is no taxes and peaceful anarchy.

  67. @ESR: So at what point in history do you think we developed the requisite cultural capital for an anarchy to be worth living in?

  68. >@ESR: So at what point in history do you think we developed the requisite cultural capital for an anarchy to be worth living in?

    Until recently I would have said about 1776 – confluence of the Enlightenment, the American Revolution, and Adam Smith. However, Somalia raises the possibility that I have over-specified the preconditions. Under my model of what’s necessary the Somalians should have been fucking up the anarchy thing much worse than they actually seem to be doing.

    I need to seriously rethink this issue, but I can’t do it effectively without better factual understanding of the Somalian situation than I have as yet.

  69. “I can’t think of any way in which this claim predicts anything useful about economics. ”

    It predicts the need for “microfoundations”, the realization that macroeconomics MUST be tracked backed to why individuals would actually choose to do something or something else in a given situation, that the statistical analysis of macro-phenomena is just not enough. “Microfoundations” is a polite term for saying the “Austrians” were righ all along with their quasi-psychological approach ;-)

  70. >It predicts the need for “microfoundations”,

    I can’t disagree.. I reacted badlly because when you said “economics is a branch of psychoilogy”, what I heard suggested some attempt to re-found economics on the ungrounded vagueness that passes for theory in psychology. And shuddered at the very thought.

  71. JessicaBoxer: >Something I think worth mentioning here is that one of the big worries with printing all this fake money is that we will see massive inflation.

    bear in mind that 97% (correct number) of the money in the economy is “fake money”, as you put it: it exists solely due to the financial system allowing “extrapolation” of currently un-used cash.

    to be clear: what you see as “money” is only 3% of the whole.

  72. Perry the Cynic: >I am trying to figure out how California *can* meaningfully go bankrupt.

    they’ve come perilously close before, at least once, just in the last few years.

    the consonance with eric’s underlying point re “left” is hard to ignore…

  73. eric: >This will happen to the Federal government too, soon enough.

    amusingly, the ONLY AAA-rated economy to default on its debt in the last few decades… is the USA.

    a technical breach (one part of govt (congress?) blocked the treasury’s money supply for a couple of months: full catchup payment later), but enough to trigger all sorts of major repercussions in the financial markets as “guaranteed” or “risk-free” cash suddenly failed to appear and hedged people downstream all ove the shop went into default.

  74. Shenpen: >here’s a useful rule of thumb: if it’s universal and absolute, it belongs to the government. I.e. “do not steal”

    try a subtle but profound rewording: “if it’s universal and absolute, it belongs to the people”

    now, in our culture, govt acts as the nominated representative of the people (in theory, if not (always) in practice).

    but other cultures have worked very well without govt interposition into general affairs of this nature. eg, Iceland, which spent many centuries with what would today be called a privatised criminal law. you could sell your punishment of another to a 3rd party. note though that the State was still implicit in the fact of the criminal law, despite not having a real physical human representation. (rather like the australian “queen”)

  75. > to be clear: what you see as “money” is only 3% of the whole.

    Since my comment was almost entirely about the other “97%” I presume you did not read past the first sentence. (Unless you are claiming that M2 is 3% of M3?)

  76. “try a subtle but profound rewording: “if it’s universal and absolute, it belongs to the people””

    I have no issues with that, my emphasis was on that if it’s not absolute and not universal, then it does NOT belong to the government. This was meant as a counter-argument to you saying you accept some amounts of limited redistributionism: yes, but as each and every case requires a different amount and approach and whatnot, as it must be carefully balanced to give a good opportunity but empathically NOT give unearned results, should not outcompete personal help-yourself, should not, in general, spoil people and keep them in perpetual childhood, i.e. it should be something like doctors prescribing medications, exactly the right kind and right amount for the problem at hand and not a bit more, a top-down bureaucratic organisation is just not the right tool for the job. To use a medical parallel, most bureaucratic welfare schemes are like prescribing chemotherapy (i.e. poisoning) for every bellyache.

  77. > I’d be interested to hear what you think the minimum set of conditions are to produce a civil society a-la “Machinery of Freedom.”

    I used to have a well-worked-out answer to this question – a tradition of civil society, the rule of law and the joint-stock corporation were parts of it. My problem is that Somalia seems to be falsifying that set of assumptions – not by showing them to be insufficient but by suggesting that they may be stronger conditions than are actually necessary.

    That is, if anybody had asked me whether you could take a bunch of butt-ignorant Islamic tribesmen in a notably inhospitable part of the world, remove their government, and have anything but a Hobbesian hellhole left afterwards, Eric the ideological anarchist would have thought he was being a mature realist by saying “Fuck, no! Takes cultural capital they don’t have!”

    Well, post-government Somalia may be any number of bad things, but it is evidently not a Hobbesian war of all against all. Its rate of internal violence doesn’t look at all bad by African standards, I’ve seen a U.N. study suggesting that infant mortality and hunger are both low for the region, and a previous commenter pointed out that they’ve got better cellphone coverage than any of their neighbors.

    This is a theoretical problem for me. It’s a bigger one, though, for minarchists like you and “skeptical conservatives” like Shenpen – because your praxeological theories make much stronger predictions than mine does that the Somalis should be living in in a self-made hell.

  78. “on the ungrounded vagueness that passes for theory in psychology” – whut???? I thought you have high hopes in at least the evolutionary branch of it. You yourself used it in many articles here in this blog. And the evolutionary branch is quickly becoming the standard, mainstream branch of pyschology. Esp. since Jon Haidt re-founded Seligman’s Positive Psychology – which was in itself an extremely good rediscovery of lots of stuff that were well known before the Age of Enlightenment and were quite a bit forgotten afterwards – on an evolutionary basis in The Happiness Hypothesis.

    I appreciate you have little patience for stuff like Gestalt Psychology, but seriously, does anyone really care about that sort of stuff in 2009?

    On cultural capital: read “Trust – The Social Virtues And the Creation of Prosperity” from Fukuyama. Really do. The guy had forgotten all that triumphant nonsense about the end of history and wrote something utterly brilliant. And perhaps you are already familiar with “The Moral Basis of a Backward Society” from Edward C. Banfield? If not, it’s recommended: it describes something you are already familiar with, but perhaps he drew some conclusions from it that you – judging from your blog posts – haven’t yet done or haven’t considered important.

  79. “It’s a bigger one, though, for minarchists like you and “skeptical conservatives” like Shenpen” – it is, I admit that. I’ve heard that those pirates are remarkably non-violent, treating hostages like guests, fairly well etc. Those pirates are really behaving better I’d think they would. They even have a sense of humour (announcing an offer to buy a major bank or something). Compare it with the brutality of the pirates of those ages when piracy was a kinda undercover government-activity via a proxy (a way to fuck with competing nations) and one could quickly jump to the conclusion that in the absence of government even even violent crime loses half of its evil.

    But if you take the long historical view, most governments we know in the West are the descendants of barbarian warlords i.e. organized criminals taking over after the collapse of the Roman Empire, using the simple and efficient “obey or get disemboweled” approach to politics, and it took really a long time to tame them so that now they don’t kill you for criticising them. Abolishing them would almost automatically would make organized criminals with enough firepower take over as de-facto governments (in many mini-states), and then the whole process should start all over – what would be the point in that?

    I would empathically not define governments as some sort of entity different “in essence” from the people at large. ANY bunch of folks with enough firepower to maintain territorial monopoly over some land is a government. A strong enough ghetto gang with a turf in which neither the police nor other gangs dares to intrude is a government. And a hunger for power on one side and cowardice or minding-my-business on the other one are such profound features for human nature that there always will be a group with enough firepower. Thus the real question is always what sort of incentives can keep governments relatively civilized and modest, and also what incentives can make them enforce civilized arrangements in society at large.

  80. >“on the ungrounded vagueness that passes for theory in psychology” – whut???? I thought you have high hopes in at least the evolutionary branch of it

    Yeah, but those people are biologists. :-) Never mind me, I guess I was just over-identifying “psychology” as you used it with the kind of crap the Freudians and Behaviorists used to spoon out.

  81. So under your previous assumption, what would you have wanted African governments to do? Just pass the time until the local culture assimilates the appropriate capital?

  82. >I would empathically not define governments as some sort of entity different “in essence” from the people at large.

    I’d agree with this if it weren’t meaningless. “The people at large” are not an entity or a moral agent, just a bunch of individuals. There is no “thing” there for a government to be.

  83. >Just pass the time until the local culture assimilates the appropriate capital?

    Well, yes, basically – doing as little damage as possible in the meantime. That would certainly have been an improvement over all the London-School-of-Economics corporate/socialist crap they actually did, which has mired most of the continent in squalid poverty.

  84. BTW setting theoretical considerations aside, I have a practical problem with Libertarianism (including minarchism): even if accepting that having absolutely no economic interventions would be a good thing, it does not follow removing any ONE randomly chosen intervention would be a good thing. As interventions are often designed to fix the problems caused by a previous one. (Or more generally: to fix a problem that arised in a situation with a thousand and one previous interventions, likely caused by one or more of them, even if we don’t know which one.) This is very important to understand: there are absolutely no reasons to assume removing ONE randomly-chosen intervention would do any good, as it could just make the side-effects of another intervention even more painful.

    But of course, the electorate naturally wants to test the theory, with a gradual approach: remove one intervention first and see what happens.

    Thus, Libertarianism would need a theory or at least some rules of thumb what kinds of interventions are the safest to remove FIRST, i.e. what interventions can be removed without making the side-effects of other interventions more painful. Such theory or rules of thumb, AFAIK, does not exist. This is a HUGE problem, it means, as of now, Libertaranism is nearly useless.

    Examples. Say you remove welfare first. OK so what you get then that the bankers get bailouts but the unemployed get nothing. How glaringly unjust would that be, to let the rich steal from the taxpayers but stop the poor from doing so! It goes without saying that if – I said: IF – we must put up with theft, ceteris paribus, it’s better to let the poor steal than to let the rich steal. It’s just not a good beginning. OK, so let’s do it the other way around: remove corporate welfare and bailouts first, and let poor welfare go for a little while. Then what you have is the increase of the _net_ tax burden on the rich and on corporations, thus, investor flight, and the usual side-effects. So neither would be a good beginning. Similarly, I can tell you from Post-Commie practical experience over here (Hungary and generally East Central Europe and Russia) that privatizing the property of the state while keeping a thousand and one other interventions in place is not a good beginning, it leads to a horrible kind of oligarchy, it leads not to real capitalism but to feudalism without any sense of noblesse oblige, a pretty bad system.

    So what, then, would be a good beginning of a gradual libertarianization process? This, I think is the No. 1 practical problem with Libertarianism. It’s bright and intelligent and well-reasoned and all, except that AFAIK you haven’t a slightest clue how to implement it gradually i.e. what first steps to make that would not have any really bad side-effects arising from the side-effects of those interventions the first step haven’t yet addressed.

  85. >it does not follow removing any ONE randomly chosen intervention would be a good thing.

    Yes, it does. You’re forgetting the second order. The problem with statist intervention in the market isn’t just that individual interventions have bad results (though that is usually the case), it’s that having the kind of society that intervenes has unacceptable long-term results. It’s not sustainable, as Californians are now learning.

    Come on, man – you call yourself a conservative, where’s your awareness of process costs and the value of stable order? I don’t really expect better from lefties; they have to be blind to process costs or their entire ideology would collapse. But someone who claims to be a Burkean should know better.

  86. “it’s that having the kind of society that intervenes has unacceptable long-term results. ”

    “Come on, man – you call yourself a conservative, where’s your awareness of process costs and the value of stable order?”

    Yes of course – but this implies removing all or most interventions with a single stroke of pen – unrealistic. Or rather – it implies a society where these sort of stuff weren’t ever done, i.e. one with people unspoiled.

    Please take my previous comment VERY literally, word-by-word, as it seems you have misunderstood it: with the usual gradual approach you can expect with a democracy, which means: remove a randomly selected intervention, lay back and “watch the win roll in”, half a year later everybody is happier and will be ready to remove another one, well, this won’t happen, at least, without knowing which ones are safe to remove first.

    With the removal of one randomly selected intervention, just one is not enough to make anything similar to a stable order, just one won’t create the psychological prerequisites of a free society (independence, responsibility etc.), it will make some things better but it’s likely that the unmitigated side-effects of all other interventions temporarily left in place (because it’s likely a randomly chosen intervention will be one that was supposed to mitigate the side-effect of another intervention) will at least, cancel it out, at worst, make things worse.

    I wonder why do you misunderstand it, it’s really so obvious to me… Let me use an example.

    You’ve got a patient with medical condition A, to treat the symptoms, a medicine is used which as a side-effect creates medical condition B. To treat those new symptoms, another one is used, which creates side-effect C, and the same thing is repeated eight times again, so you’ve got a patient with 10 medical conditions, using 10 medications, 1 of them treating the original, natural condition, and 9 of them treating the conditions caused by the other 9, in turn. This models the history of economic interventions, rather accurately, I think.

    We both agree the patient is worse off than being untreated: but will the removal of any ONE medication make her any better?

    Nope: remove medication number six and the medical condition F caused by medication number five might even kill her. And she doesn’t agree to remove all of them at once, it, understandably, just looks to risky, a too big change. People like things more gradual. Thus: you really need to figure out which one can be removed first with very little side-effects from another medication or from a natural condition, or you can do nothing.

    That’s what’s not happening.

  87. > Yes of course – but this implies removing all or most interventions with a single stroke
    > of pen – unrealistic. Or rather – it implies a society where these sort of stuff weren’t
    > ever done, i.e. one with people unspoiled.

    The fact is that most loosening of the state requires a big chop, it generally doesn’t roll back bit by bit. It is like cutting the grass. You don’t chop it back every day by one tenth of a mm, you chop off two centimeters every other weekend.

    Historically speaking the only successful rolling back of big government has taken place in big strokes, multiple items at a time, whether Magna Carta, American Revolution, or the collapse of the Soviet Union. Personally, I liked Harry Browne’s slogan on this: “Would you give up your favorite government program if you never had to pay taxes again?” That is the essence of how countries become more free.

    BTW, I am not saying it will work right now, or that any of these particular turn arounds were perfect in themselves, I am just saying that this seems to be the only way liberty is increased.

  88. “Historically speaking the only successful rolling back of big government has taken place in big strokes, multiple items at a time, whether Magna Carta, American Revolution, or the collapse of the Soviet Union.”

    Well both the Magna Carta and the American Revolution I see as people having some rights, a despot is trying to take them away, revolution, success, and the restoration of the old rights plus a bunch of new rights, just to be on the safe side, to avoid it happening again. A big change from the temporary violations of the old rights by the despot, but not really a huge change from the old rights enjoyed _before_ the despot.

    The collapse of the SU is a complicated case, I’d say a really radical reduction of government size happened only in formerly-SU countries outside Russia, like, the Baltic States.

  89. @Shenpen: So what do you think went well in, say, Estonia, that went horribly wrong in Russia?

  90. “@Shenpen: So what do you think went well in, say, Estonia, that went horribly wrong in Russia?”

    I’m not sure, but generally, I think it was something like http://en.wikipedia.org/wiki/Denazification after WW2. Changing from a dictatureship to democracy goes well only when they also manage to break the grip of the informal networks of the former potentates on the state.

  91. Had to do a web search for the meaning of the word Peronism and then Juan Peron. Learned something today. This is why I am not in favor of raising social security taxes to solve the actuary problem that program has. The government Increase that tax during Reagen’s term to fund the program for the baby boomer generation and their parents. The program was just months away from being insolvent. Well the government just spent that money leaving us in our current mess. I am encourage that such a liberal state as California can see that we cannot tax our way out of our problems. There is hope for us yet. But lots of pain is coming soon. We must scale back our entitlements soon. I am getting close to retirement age but it is not OK with me to burden my children and grandchildren with an unsustainable tax structure. I am very welling to do my part to prevent this including having social security benefits reduce to a level that can be sustain. But I have been fortunate and smart enough to provide for myself and even with out social security would be ok. The funding of entitlements has grown to be the lion share of the federal government budget and if you want to fix this problem that is where the cuts must come from.

  92. “That is *some* complacency there.”

    Could be, but it fits to the Oakeshottian view of political action – that ideologies explain or rationalize political action, but in reality people tend to do whatever they have practical experience doing: we all are creatures of habit. One could safely predict Americans will always go for a democratic republic in the foreseeable future because they simply have absolutely no experience in doing anything else.

  93. Well, so long as it’s one of the options on the menu presented to them they should be just fine, then.

  94. >One could safely predict Americans will always go for a democratic republic in the foreseeable future because they simply have absolutely no experience in doing anything else.

    Well, it’s relatively easy to go from a true democratic republic to a dictatorship under one’s name. I don’t think the political-inertia factor would help against that.

  95. > Eric, what about balanced proportional budgets?

    FWIW, CA supposedly has one, or a “reasonable” approximation thereof. A huge fraction of its spending is locked to either a fraction of state spending (education) or some revenue source. (One of the recent ballot propositions was to divert money from the mental health fund, which comes from the “millionaire’s surtax”, a bracket that CA doesn’t list as a bracket.)

    > Or, put another way, could you see the next constitution to say something like “the taxes will be 20% on this and no other, and the government must never borrow money”?

    How about “money loaned to govt is non-collectable debt”?

    Of course, there’s at least one way around that. For example, folks would “loan” money to govt as bribes, as in “Joe has been such a good supporter of govt that we should do something for him.” Professional sports franchises are already doing something like this.

    The relationship between govt revenue and spending is a social problem. In fact, the choice of govt revenue and spending is a social problem.

    This is important because social problems don’t have technical solutions and screwing with the rules is a technical solution.

  96. > The fact that there’s political pressure against it just means that CA might have to bounce a paycheck to the police force

    That’s extremely dangerous. At some point, someone is bound to point out that state revenues significantly exceed what the state spends on what reasonable people would call essential services.

    Yes, folks have been trying to point that out whenever the state says “more taxes or no police”, but if there’s actually no police, things may be different.

  97. I forgot to mention that while “no police” is seen as a big threat, police strikes in the US have not resulted in carnage (apart from that co-incident with labor “action”). It’s unclear how that experience will affect police behavior if a state/city decides to cut police entirely to keep other lights on.

  98. Shenpen: >BTW setting theoretical considerations aside, I have a practical problem with Libertarianism (including minarchism)

    careful. libertarianism is (until “New Labour”) the fundamental legal & political basis of britain. “everything is legal” is the bedrock fundamentalism of the law; “a man’s home is his castle” is the bedrock fundamentalism of society. the british monarch has far less and fewer power/s than the australian monarch, let alone any other western head of state (eg america): just one more (albeit heavy) participant in society.

    and you know? it works. as a culture.

    for all the micro-fuckups, it’s interesting to see just how many aussies and kiwis hit britain and stay put. for this reason.

    JessicaBoxer: >I presume you did not read past the first sentence

    you presume wrongly.

    you also misuse “presume” for “assume”.

    >“Historically speaking the only successful rolling back of big government has taken place in big strokes, multiple items at a time, whether Magna Carta”

    actually, the magna carta is a very bad example, albeit understandable that you nominate it due to the way it’s typically presented. the magna carta was merely an elite re-enforcing the status quo of a few years before.
    a vastly better example is the Battle of Lewes, which quite literally created across Europe the political assumptions we now take for granted: representative democracy rather than insulated autocracy.

    that afternoon’s action was literally the biggest political landmark in the history of the west. napoleon bonaparte being the next-most important, albeit for 2nd-order effects.

    BTW, I am not saying it will work right now, or that any of these particular turn arounds were perfect in themselves, I am just saying that this seems to be the only way liberty is increased.

    this is actually part of a more-general observation re human behaviour: that human groups generally show a pattern of increasing tightening-up as parasites increasingly dominate, but occasional crisis-points blow open the previous processes and a reset is possible. in management studies/theory, this has been termed the “unfreezing/freezing” process, and the key benefits arise from taking full on-the-burst/at-the-flood benefit of the temporary loosenesses to create new structures.

    britain is (very) currently in the throes of a non-trivial political-/politician- culture reset moment at the moment, for example.

  99. “careful. libertarianism is (until “New Labour”) the fundamental legal & political basis of britain. ”

    Yeah. Because Old Labour was so libertarian… I know what you mean but the libertarian assumption/basis in British politics was destroyed much, much earlier. http://www.civitas.org.uk/pdf/Tocqueville_rr2.pdf (PDF),

  100. heh. New Labour was a landmark for making the rollover Formal, rather than just an ongoing parasitic creep. and Tocqueville’s core cultural observations actually reflected patterns of english society documentably existing over a thousand years earlier.

    i think the key underlying point is that, to paraphrase parkinson, parasites will expand to fill the niches available.

  101. > Will California get a bailout? Everybody pretty much assumes yes.

    Hey, get this! Obama has refused to bail out California – see wikipedia article

    Most relevant quote: “The state had been selling bank-guaranteed short-term notes to get cash, but in 2009 its credit rating got lower. When the state asked for a federal guarantee of the notes, the Obama administration said it had no legal authority to back state notes and that the state should solve its own problems.”

  102. I won’t have time to form a coherent, concise post, but here goes some quick cut & paste from some things I have written recently…

    ESR wrote:
    “That being said, Somalia is causing me to question some of my assumptions about the kind of cultural capital required to make an ungoverned place other than a hellhole.”

    Shenpen wrote:
    “That’s how I went from something akin to a classical-liberal position to a skeptical-conservative one. Basically, you can start from the NAP, but add lots of historical realism-pessimism: realize that most of the time aggression was pretty much the default mode of human interaction. Largely because of mimetic violence, tit-for-tat…”

    Both of you are clinging to order (perceptions) at the cost of experience all the growth and excitement that comes with releasing it into disorder. There is no one solution to maintain local order, because the universe is a closed system and is trending to maximum disorder (1956 theorem on thermo applies, see my link to wikipedia).

    I’ve read that Somalia has some of the most beautiful African women, something about the mixing with the Persians (free markets). Perhaps as pagan/Islamists, they prefer to some extent an “eye for eye”, instead of the Christian commandment “thou shall not steal”. But it also sounds like they have followed that commandment internally to large extent with property rights respected, and they simply follow the Biblical principle that it is okay to charge usury (steal) from foreigners. I do know that we rarely know a place by what we read in the news, as otherwise I wouldn’t be writing this from wonderfully peaceful Mindanao (supposedly the land of extreme terrorism according to mainstream propoganda). Western shared perspectives are so far warped, that they perceive (imagine) that their life is something desireable (yeah a life of sitting at a desk jail typing comments in blogs is a life?). What a joke Western people are, I am confident Somalia is a more real place to experience more human interaction and love, and a less zombified, Western lifestyle. I have actually given thought to relocating to exactly that region next (Ethiopia/Somalia). Western culture derives from the notion that scientific method is somehow more absolute or less random, than say Christianity. Well just study the Shannon-Nyquist theorem (see my recent debate at Wikipedia and successfully accepted edits), to see that we can guarantee nothing about the signal we think we are sampling, unless it is an imaginary infinite time signal, because we can never be sure we are not dealing with some Fat Tail distributed event. This whole resonance thing (shared perception) gives us a false sense of confidence that order is something permanent.

    Take a read of a different outlook on reality:

    http://www.coolpage.com/commentary/economic/shelby/Bell%20Curve%20Economics.htm

  103. On a gold standard not a solution…

    > I will comment on your text paragraph by paragraph;
    > First, making income with gold without risking the gold is only possible under a fiat system; in effect one takes advantage of the distortions of the Fiat system. You will find more on this at http://www.professorfekete.com specifically Bull In Bear’s Skin?
    > under ‘popular economics’.

    I have read it many times, and I have presented in detail to Sandeep and Fekete why I think it is not achieveable. I have not received specific rebuttal to my specific points. In highest level summary, one can’t beat the money printing machine by betting with printed money. The machine can always overrun your bets in the short-term (remember futures are not long-term contracts). I think Fekete’s theory is correct to a point, but the exogenous factors (the control the big players have of the paper system) make his theory mute in practice. I stand very receptive to specific rebuttal. If you want me to detail my specific reasons to you, I can. I will give you statement to chew on, the risk of loss of physical metal by selling calls is unlimited. Do you really think the fiat masters can’t muster enough loses on buying your calls to take your physical from you, i.e. they can create volatility in the gold basis to extract your metal surgically (without needing a magic wand to change the long-trend which they can not control). Fekete is correct about the long-trend of the basis, but due to the volality of these exogenous factors, his basis work is irrelevant to the point of making “gold beget gold” in a fiat regime. The insiders are making “gold beget gold” because they control the exogeous factors within their managment and dominant positions in the futures market. Any entity that dominates a market can not earn profit by leaving the market (they sell if they were long or buy if the were short from themselves), but rather can only earn a profit by manipulating the direction of the market and capturing the wave energy due to their a priori knowledge.

    > Second, (my area of focus); interest based income (under a gold
    > standard) is very easy, but not with real bills; bills do not pay interest.

    Real Bills do pay interest (the discount) to the banks which exchange them for cash.

    > The way to earn income with gold under a gold standard is
    > through the mechanism of bonds… that is Gold bonds in particular; gold bonds pay interest in gold.

    Agreed that is another way usury is done on a gold standard.

    > Of course, the reason this is possible
    > is because the borrower presumably has a higher value use for the capital gold represents, and this clearly ties to entrepreneurship and rates of return (profit margins) higher than the interest being paid. Furthermore, this is real not nominal income; under a gold standard, the gold supply grows more slowly than the economy, thus the purchasing power of gold increases rather than declines,

    Precisely what I said in my prior email, any gain in purchasing power is due to increases in production, not due to the interest earned in gold. Everyone is earning the prevailing interest rate, so this is net break even on the aggregate.

    Interest in all cases is a mutual theft system. We all on net aggregate steal from each other, so none of us come out higher, unless we have politcal connections that enable us to gain leverage over the booms and busts the debt causes. You see debt does not guarantee success, but it does create an enforceable obligation, which is the genesis of center of social power.

    Some argue that interest is the only way to aggregate savings and
    multiplex it back into large and small capital projects. This is I think true, but also be prepared for the negative outcome of debt– it always gravitates to centralized social power.

    A gold standard is not a panacea, rather it is just a stage in the repeating historical and future cycle of debasement of money, then reset, the repeat.

    > as paper money’s
    > purchasing power declines under the inflationary bias of the Fiat system.

    Agreed that for the duration of time that soceity can be on a higher level of reserve ratios (i.e. the early stages of a return to a gold standard), then the inflationary distortion of the paper money is less severe. But all gold standards have paper bills and these get abused. The difference is that in the early stages, one at least has some choice between
    competing bills of exchange (and notes of deposit).

    > Third, real bills do not attempt to dictate anything to any bank;

    I did not say they force anything. But I did say they leave the bottom of the tent vulnerable.

    > in
    > fact, real bills or commercial invoices were created much before the advent of banks. Bill circulattion has no need for banks.

    There will always be need for banks, unless you want people burying their gold as in Dark Ages. For example, with Real Bills, the bill needs to be broken down into small units (cash) so workers can be paid. The bank serves this function and gets paid an interest rate (a discount) for doing this. Banks always get their nose under the tent, then it is only a matter of time before they are inside the tent.

    > Power to create money does NOT exist under an *unadulterated *gold standard, only under the partial gold standard as practiced in the nineteenth century.

    If people are not exchanging physical coin (or other barter) for every transaction (Dark Ages), then the power to create fractional reserves exists, and throughout history has always been used to get the bankster camel’s nose under the tent.

    > For example, the US dollar was ‘backed’ by 25% gold
    > as early as the 1870’s. Even the best currencies such as the Swiss frank were only 40% backed. The balance of the money supply consisted of the ‘fiduciary’ component, that is borrowed, or ‘created’ money. Under the unadulterated gold standard, only mining and refining can add to the money supply.
    > Indeed, the unadulterated gold standard is free from ‘exponential growth and decay’… in fact, the reality is that year by year growth in gold stock above ground is around 2%… and declining.

    And as the Dark and Middle Ages proved, society just won’t be able to stick with such a ideal system. This ideal exists only in the mind of us (my idealistic self included) Libertarians as a mathematical model. It has never existed in the real world. Never. Never will, at least not on any large scale in spacetime. The reason is it restricts exponential growth and exponential growth is a fact of nature.

    > This notwithstanding
    > the second law of thermodynamics. This law is not applicable to
    > intelligence, only to inanimate matter…

    Disagree. A long discussion would need to ensue, which neither of us have time for. You can chew on the impossibility of a operable definition of “inanimate matter” (try to explain the distinction from the quantum level up) that would so distinguish, to prove to yourself that it is an
    inoperable distinction.

    > see Fekete, Monetary Economics
    > 101 Lecture 13: The Unadulterated Gold Standard
    >

    On cursory review, I did not see any discussion of entropy in that article, rather refer to this one:

    http://www.professorfekete.com/articles%5CAEFEconomicEntropy.pdf

    Indeed over time exponential growth (too much concentrated mass) must decaying exponentially into disorder once again, thus agreeing with what Fekete wrote. In the article you quoted, Fekete contradicts this natural cycle because he assumes that maximum disorder is the local preferred order of nature. But if that were true, our existence would trend to no contrast. Rather nature prefers maximum constrast in exponential bursts of shared perception, when then eventually decay again, as all shared perception must stop when it can no longer add new mass at an exponential rate. For example, had the baby boomer generation been an infinite population, then the current boom would never had needed to end. Alas, mass is limited, because it is against the long trend of the universe. So the 1856 law applies to everything, even biology (wikipedia biolog and thermo).

    > As far as one world bank, maybe… but I am not convinced. The central banks have been spending their gold hoards in an ongoing and ultimately futile effort to keep the (paper) price of gold down. This dispersal is contrary to centralization of power. For more on this very issue, see Fekete, Gold Vanishing Into Private Hoards
    >

    Do not miss my statement that the world banksters are simultaneously increasing NPLs in BRICs by orders-of-magnitute, and this will give them the social political leverage (centralized influence over economic volatility) to get that gold back when we move to a gold standard and the usury is paid to them in gold.

    We both know that the prime modus of attack of the banksters is not to take overtly directly from your pocket, but to use society’s love of usury to take it slowly without ever touching your pocket.

    I understand our shared emotional desire to want to remove this cancer from our world, but I am sorry to inform you that it can not be. God provides our only salvation from this human condition.

    I am a former idealist who has learned (or still trying to learn) that the only ideals are in my mind and in heaven, and is better to get on with it in the real world.

    > . The implication is that centralization is failing, the empire is in decline.

    Debt+derivatives are not decreasing globally yet.

    And if and when the debt does do a radical decrease, it will be
    hyperinflationary for the value of gold, thus dislodging a lot more gold to those who stand ready to direct the new forms of usury liquidity. The banksters know that nature has given them this role. They see themselves as the rightful managers of the world. They are simply trapped in the human condition also, because nature will lead to one world exponential peak, then it will finally fail and fall down to a long Dark Ages. Are we there now? I think not, but we will see if the dollar was already the one world currency system.

    After the next Dark Ages, which I presume is the metaphorical 1000 years Jesus is supposed to come back and reign, then we can start this mess again.

    This makes me appreciate the life of a simple subsistence farmer. We think too large of ourselves. We are on a treadmill of our own ego. Nevertheless, I will stay aware that the Bible reminds us to participate in the exponential growth “plant an entire acre and trade”. But just keep in mind, it is all a mirage. The life of the simple farmer goes on, just as contented.

    > As far as ‘money is the root of all evil’ the quote is that ‘the LOVE of money is the root of all evil’… in other words, while money is important, we should only love those who are able to reciprocate love; puppies included!

    That is a good point. How ridiculous that we put so much energy into things that can love us back. That is why I want to repeat that I appreciate you, Fekete, and Sandeep as human beings. I have seen the former two in video and they are lovable men (and I am not gay).

    > You are quite correct in pointing out the desire of
    > people to get “something for nothing”; however, consider this from a prominent Austrian economist;
    >
    > “Sound money and free banking are not impossible, they are merely illegal. That is why money must be deregulated. The Gold standard will return as soon
    > as people realize that honesty is the best policy.

    Agreed! I think we agreed actually overall, it is just a disagreement of whether people can stick with honesty.

    When people get tired of being slaves, we will revert to a Dark Ages. I think in many ways the Dark Ages might be a nice time to live in, think again of the subsistence farmer and also of course the exponential growth that will come after the next Dark Ages, when people get bored with honesty again. Maybe we would have more fun in life as comedians!

    > As hope of ill gain is
    > the
    > beginning of the fiat standard, so is honesty the mother of the Gold standard.
    > The Gold standard is as old as civilization. Throughout the ages, the Gold standard has emerged again and again because man needed a dependable medium
    > of exchange.”

    Again agreed. It will come back and it will be in some ways a better time but in other ways a more difficult time. But it will not be a sustainable heaven on earth.

    Apologies for the Christian overtones, and I think those points are not central to my thesis.

    I do respect and admire all our collective desire for an honest gold standard. I can not argue against it on idealist grounds, because I share the ideal. I am only arguing against misplaced idealism as it leads to totalitarianism.

    All my warmest and best regards to all,
    Please enjoy this life and our many smiles be amongst us,
    Shelby

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>