Incompressible

When you hear the word "liberty" today, you might think of romantic paintings of colonial heroes replete with white stallions, waving flags and tricorn hats. Or, you might think of an eloquent speech by your favorite visionary. Or, you might think of the gun-obsessed paranoid living in some backwater. Most importantly, you are probably thoroughly convinced that you are free, that you have liberty. Today, liberty is more of an abstraction, an obsession of a few complainers for whom nothing will ever be good enough. Today, the only people agitating about liberty are the grumbling misers who don’t want to pay their fair share of taxes along with everybody else or who want to maintain a private collection of dangerous military weapons with no conceivable use of social value. After all, haven’t we achieved equal rights for almost every imaginable social group? Sure, there remains more work to be done, but blacks are no longer openly and formally oppressed, women are paid a far lar...

Frederic Bastiat wrote a now-famous essay titled What is Seen and What is Not Seen . In it, Bastiat discusses the principle of economics that inspired Henry Hazlitt's one lesson in economics: "From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." (Economics in One Lesson) These long-range consequences, or the consequences for all groups mostly consist of Bastiat's unseen. Because these consequences are unseen, it is easy to discount them in the public discourse. There has been a great deal of discussion on the problems of health care and education, among other issues of social concern in the US during this Presidential race. What I wanted to discuss in this post, in ter...

In a retrospective article on the Russian-Georgian conflict, Lewellyn Rockwell discusses Washington's attempt to resurrect WWI-era rhetoric. He quotes a 1915 book written by Francis Neilson, "How Diplomats Make War": "During a war it is no easy task to prevent your sympathy clouding your reason. The whole social system seems to be organized against any individual attempt to concentrate the attention dominantly upon the causes of the war. Governments, churches, theatres, the press, and local authorities, direct their efforts, in the main, warwards; the whole thought of society and commerce seems to be occupied with war; and all desire to question the reasons given by statesmen for participating in the war must be suppressed. It has been ruled already by certain 'leaders of thought' that it is unwise, unpatriotic, and un-English, to suspect the motives of Governments, or waver for a moment in swearing wholehearted allegiance to the authorities: you must think ...

This article has been making the rounds. The author, Paul McCulley, argues that as the banks deleverage their balance sheets they are counter-acting each other. As bad mortgages are sloughed off, the prices of homes generally fall, driving down the asset columns of all banks' balance sheets simultaneously. He has a point, but this is a symptom of the fraudulent nature of fractional-reserve banking and money multiplication, not an indictment of the sound practice of sloughing bad assets to shore up one's balance sheet. McCulley proposes a band-aid solution that only serves to perpetuate the root problem: shifting the bad assets off of the banks that took them on and forcing taxpayers to foot the bill. The moral hazard of socializing investment risk should be obvious. Frank Shostak of the Mises Institute gives a detailed response to McCulley's article here . A key difference between McCulley and Shostak is the mainstream (Keynesian) view of savings versus the Austrian view o...

What is money? Money is a human invention that solves the problem of a double coincidence of wants in a barter (primitive) economy. Man's earliest form of trade was barter: my rock for two of your bones. The problem with barter - as anyone who has been to a swap meet will understand - is that I have to want something you have and I have to have something you want. What if I don't want any bones and all you have to exchange for my rock is bones? Money emerges from barter as the good which is in greatest demand, or the most marketable good. The reason for this is simple: if you are going to accept a good which you don't want for its own sake (money) in exchange for something you have, you want to be sure that you can get rid of that good to someone else in exchange for something they have that you really want. You can only be confident that this will be the case if the good you are accepting in exchange for what you have is very marketable. There are other properties which mo...

Gold prices have been going down since mid-July. But gold prices have to go back up. The reasons are pretty simple. The Fed has been pumping money into the economy like madmen for decades (since 1971 when they cut loose from the gold standard completely... $1 in 2008 is equal to 19 cents in 1971 by official estimates which significantly understate true inflation.) That has resulted in a collapse of the market for credit, which contracts the money supply. If they do not vigorously inflate (even more), deflation will result. They were able to inflate so recklessly for so long without catastrophe because of the artificially created demand for credit. Imagine you have a machine that can create apples at zero cost. You use this machine to create billions and billions of free apples and sell them at 100% profit into the economy. At first, people will want more apples than ever because you can sell them so much more cheaply than ordinary apples. But then, you will have to start lowering your ...

At work last week, I was in a wonderful team meeting where we discussed promotion and raises. As expected, the myth of working harder quickly arose. My boss mentioned one of the Principle Engineers (PE) at the company and said (paraphrase), "Chuck works hard. You will see him filing issues in the database all hours of the night. He has to make a sacrifice of his family time to do what he does. That's why he makes more and has a high grade." This is just a bunch of pig slop. Chuck makes what he makes because if my employer paid him any less, he would get a job somewhere else. That's all there is to it. Chuck may very well work a lot of hours and that may contribute to why his economically ignorant peers believe he is entitled to his rate of pay (perhaps even he himself believes that it is because he works so much that he is entitled to his pay). This is all rooted in the myth of labor. The myth of labor is this idea that economic progress is had by working harder . Eco...