Why anyone who disagrees with Austrians on anything is a socialist or fascist!

[trailhound]

Sorry, but that is, with all due respect, the most ridiculous assertion I've heard in months (and that's saying a lot), because the quadrillion-dollar derivatives bubble (a) dwarfs not only the most liberal estimate of the U.S. money supply, but the annual productive output of the entire planet, and (b) is nothing more than the accumulated gambling debt of Wall Street scam artists.

The "financial meltdown" of 2008/2009 was the direct and inevitable result of not cancelling that ridiculously fraudulent debt.

 No shit sherlock.   (with all due respect)  I dont see any austrian thinkers shying away from the fact that liquidation time is here.  

Please watch the following, then perhaps you'll understand not only how it "differs," but why the "power" ultimately lies with the "holder" of debt-free Greenbacks, not the "issuer" (primarily since, unlike Federal Reserve Notes, they never have to be paid back to the "issuer," plus  

  No need to be snide Geo, your plans are not without huge gaping holes either.

  You propose a fascist system. The govt would print the money and spend it into circulation.  Who would get the money first is the key, haliburton? Come on, we would end up with the same fascist cronyism going on now.  And what happens to any savings you may have when the govt prints a trillion dollars for its next world war to "spend into circulation" with haliburton?

  I know what you're going to say, miraculous election and lobbying reform laws...i just dont buy it.  

   I have said before your proposals would be better than the current system but in the long run I could also see your proposals enabling a great monster much like the current system does.

  The austrian model has its downsides, but the fact that it would greatly inhibit the masters of war in their games with our lives makes it worth considering.  Your proposals would allow the govt to 'expand the economy as necessary' with endless war.  Very dangerous imho.

[Geolibertarian]

I dont see any austrian thinkers shying away from the fact that liquidation time is here.

 
What you're either unaware of or unwilling to admit to is that, when Austrian snake-oil salesmen "thinkers" start blabbing about the need for "liquidation," they're referring not to legally voiding all "derivatives" contracts, but to the liquidation of housing and of the physical economy:

       http://forum.prisonplanet.com/index.php?topic=202072.msg1234508#msg1234508

No need to be snide Geo,

I get the feeling your definition of "snide" is the mere act of disagreeing with anything you say.

your plans are not without huge gaping holes either.

I'll gladly let readers decide that for themselves.  

You propose a fascist system.

This is why I regard the Austrian School as little more than a glorified cult, because its brainwashed followers go around mindlessly accusing anyone who advocates a government program of any kind of espousing either "socialist" or "fascist" views.

The govt would print the money and spend it into circulation. Who would get the money first is the key, haliburton?

You just love bashing your own straw-men, don't you?  

The reform I advocate is the same as De Fremery's, but with two exceptions:

1.  We should mandate by law that new money be issued to fund only (a) the production and repair of public goods that everyone can see and benefit from, and that add to the productive capacity of the economy (roads & bridges and maglev rail would qualify as public goods; prisons and military weapons would not), and (b) a "National Dividend" (see this and this).

2.  Instead of instituting what I consider to be an overly-rigid "population standard" -- whereby the money supply is allowed to expand only to the extent necessary to keep the per capita supply of dollars constant -- we should mandate by law that the debt-free expansion rate of our money supply be such that (a) the per capita supply of money never falls (thus guarding against depression-inducing contractions, such as the 1/3 contraction that caused the Great Depression), (b) the money supply never increases by more than 1/3 in any given year (thus guarding against runaway hyperinflation), and (c) new money issuance is moderately adjusted inversely with the rise or fall of the general price level.

What part of the above quote do you not understand?

I know what you're going to say, miraculous election and lobbying reform laws...i just dont buy it.

Of course you don't, because that would mean having to abandon the Austrian School's "solution" of letting everything collapse (since to politically interfere in any way with the banker-engineered depression would be to offend the almighty god of "market forces").  

I have said before your proposals would be better than the current system but in the long run I could also see your proposals enabling a great monster much like the current system does.

And I've had to explain over and over again in response to this straw man that there aren't any meaningful proposals that have any chance of ever being implemented if we don't first -- or at least simultaneously -- implement the election reforms I listed at the start of this thread.

Yet no matter how many times I explain this, Austrian Schoolers continue to pummel the same ridiculous straw man, because their entire ideology is based on the presumption that government -- irrespective of whether it's controlled by "the people" or not -- is the sole source of all evil, and so should never be utilized in any way to serve the general welfare. That's why they don't "buy" the emphasis I and others have long placed on election reform, because they don't want to buy it, since it undercuts their cartoonish government-is-to-blame-for-everything-and-so-can-never-be-trusted-to-do-anything argument.

The austrian model has its downsides,

That's like saying mass starvation has its "downsides."

but the fact that it would greatly inhibit the masters of war in their games with our lives makes it worth considering.

I've already explained why, economically, it actually serves the masters of war:

Austrian School ideologues and commentators routinely suggest or imply that we must sheepishly let the banker-engineered depression simply "run its course," and that to politically interfere in any way with the so-called "corrections" that this orchestrated collapse is imposing on our economy -- an example of such interference being Webster Tarpley’s proposal to “stop all foreclosures on primary residences, businesses, and farms for five years or the duration of the depression” -- would be to offend the almighty god of "market forces." After reading that six-part report by David DeGraw, I can only hope that the hardcore “conservatives” and right-leaning “libertarians” in this forum understand now (if you didn't beforehand) why I regard this as nothing more than a euphemistic way of saying that we must -- in the name of “liberty” and of “living within our means” -- let the ruling elite's economic war against us run its course.

 

Your proposals would allow the govt to 'expand the economy as necessary' with endless war.

Wrong again, they will do the exact opposite. Since we can't both be right, we'll just have to let readers decide for themselves, won't we?

All that being said, since you seem intent on hijacking this thread in much the same way that Austrian School trolls hijacked my Monetary Reform thread, I respectfully request that you create your own thread, and devote it to explaining why anyone who disagrees with the Austrian School on anything is, by definition, a socialist, quasi-socialist, or outright fascist.

[trailhound]

Geolibertarian wrote

All that being said, since you seem intent on hijacking this thread in much the same way that Austrian School trolls hijacked my Monetary Reform thread, I respectfully request that you create your own thread, and devote it to explaining why anyone who disagrees with the Austrian School on anything is, by definition, a socialist, quasi-socialist, or outright fascist.

 Yes I know you dont like any healthy debate going on in your threads and when someone tries to make a point they are a troll and worse, whatever.  Good luck winning support with that style.

[Geolibertarian]

Yes I know you dont like any healthy debate going on in your threads and when someone tries to make a point they are a troll and worse, whatever.

Oh please, arrogantly ascribing an emotionally-loaded term like "fascist" to a viewpiont that is clearly not fascist hardly qualifies as engaging in "healthy debate" or as merely making a "point."  On the contrary, it's the very sort of childish flamebaiting that limousine liberals engage in when they invoke the term "racist," and that warmongering neocons engage in when they invoke the term "anti-American."

I strongly oppose the sales tax, yet I'm not about to mindlessly accuse those who advocate it of espousing a "fascist" viewpoint, and then laughingly pat myself on the back for having contributed to a "healthy debate" or for having made a valid "point."

Good luck winning support with that style.

Good luck winning support with the troll-like tactic of blindly throwing pejorative labels such as "fascist" and "socialist" around every time someone commits the blasphemous sin of disagreeing with Austrian School dogma.

[adissenter2]

where did this partial post come from and why is it a sticky?

[EvadingGrid]

Gold is not the answer.

[trailhound]

I didn't start this thread, Geo didt want readers of his thread to consider the fact that he proposes we give blanket authority to the govt to print as much money as it sees fit to fight wars and create social programs etc.
 But, according to Geo, the people will control it and won't let corruption run amok, a lot like how the people control the govt now. (Rofl) Good one Geo, great joke.

 Just plant some govt money trees and all will be well, lol. Can't afford to fight a world war america? No problem we'll just print it
.Don't worry it will be good for you because there will be more money for you to work for,mmkay?

[Geolibertarian]

I didn't start this thread, Geo didt want readers of his thread to consider the fact that he proposes we give blanket authority to the govt to print as much money as it sees fit to fight wars and create social programs etc.

On the contrary, I merely refuse to let you get away with blatantly lying about what my proposal does or doesn't do. I specifically explained that my proposal includes a legal mandate that new money issuance be limited to two things, and "war" is clearly not one of them. Yet here you are repeating the same lie again.

If you want to disagree with my views, fine, but to knowingly lie about what those views in fact are is a form of trolling.

[Geolibertarian]

where did this partial post come from and why is it a sticky?

It's a split off from this thread, and is now unstickied.

[adissenter2]

legal mandate on new money issuance?

no thanks I want lawful money

ever read this?

METRO 1313  HEAD OF THE BEAST; in three chapters

http://friends-n-family-research.info/FFR/Merrill_METROchapter1.pdf

http://friends-n-family-research.info/FFR/Merrill_METROchapter2.pdf

http://friends-n-family-research.info/FFR/Merrill_METROchapter3.pdf

[Geolibertarian]

legal mandate on new money issuance?

Yes. More accurately a legally-imposed limitation on what debt-free money can be issued to finance.

no thanks I want lawful money

There's already a legal precedent for debt-free Greenbacks, so your objection is moot. And even if there wasn't such a precedent, they could still be made lawful via the Amendment process.

ever read this?

No, but now that I have, I'm not surprised to see that it's irrelevant to anything I've posted, since what I propose would put the very "Bankers" it rightly criticizes out of business, and hence out of power.

Contrary to what the Austrian School wants so desperately for everyone to blindly believe, elite bankers have always been vehemently opposed to debt-free Greenbacks:

       http://www.youtube.com/watch?v=Bi2gOhvpOHg (The Money Masters - part 9 of 10)
       http://www.youtube.com/watch?v=Pyaj30n8kZY (The Money Masters - part 10 of 22)

Thus, with "opponents" like the Austrian School, the Rothschilds and Rockefellers of the world don't need any allies.

[trailhound]

On the contrary, I merely refuse to let you get away with blatantly lying about what my proposal does or doesn't do. I specifically explained that my proposal includes a legal mandate that new money issuance be limited to two things, and "war" is clearly not one of them. Yet here you are repeating the same lie again.

If you want to disagree with my views, fine, but to knowingly lie about what those views in fact are is a form of trolling.

  Ok so how does the govt finance wars then? I was just thinking it would be good if they had to start taking it directly out of the citizens pockets, that would put an end to the empire real quick!   I like that idea!

 Im just imagining Pelosi and co. with a printing press...*facepalm

[trailhound]

http://mises.org/daily/4102

 The Dangers of Monetary Reform

Mises Daily: Thursday, February 18, 2010 by Kaj Grussner
'Bracelets for Ms Liberty' by Alexia Markarian

Austrians have long called for a reform of the monetary system. The current, Fed-driven, fiat-money system is on the verge of collapse. But however bad the current system is, a new system won't necessarily be better.

Many libertarians would favor a return to the gold standard, while others would be content with simply repealing legal-tender laws and allowing competition in currencies. However, even in a great collapse like the one looming now, these reforms may still seem too extreme to the general public. This is especially true if they have an alternative that seems reasonable and gives total control over the monetary system to the state. One such alternative is the 100-percent-reserve solution advocated by Stephen Zarlenga, director of the American Monetary Institute, and author of the book "The Lost Science of Money."

I caught an interview with Mr. Zarlenga on Gnostic Media, in which he discusses his book with host Jan Irwin. The first part of the interview was broadcast on August 30, the second part on December 20, 2009. Neither Zarlenga nor Irwin are economists, but both have strong opinions about economics and economists.

On several occasions, Zarlenga singles out the Austrian School and makes unfounded claims about Austrians, their methodology and their approach to monetary theory in general. In this article, I will attempt to correct Zarlenga on the issues he has with the Austrian School and his ideas on monetary theory in general.
The Definition of Money

Zarlenga claims that Austrians define money as gold, a definition that according to Zarlenga has its roots in the classical economics of Adam Smith. I'm not sure on what he founds this claim, but, obviously, it is not true.

Generally, Austrians define money as a good that is commonly or universally accepted as a medium of exchange. It was the invention of money that allowed the transition from the ineffective barter economy to the dynamic indirect-exchange economy. The Austrian focus on gold is mainly due to the fact that over time the market has selected gold as the primary medium of exchange. This means that while gold can be said to be money, money is not necessarily gold.

Zarlenga misses this completely. He also disagrees with the Austrian notion that money is something that arises naturally on the market. The Austrian position is supported by the fact that many things have been used as money throughout history in various parts of the world: commodities such as salt, clamshells, and animal skins. Zarlenga will have none of this.

Instead, he advocates what he calls the Aristotelian view, which is that money doesn't come about by nature, but by law. In short, the market can't produce a monetary system; only the state can do so. This view is of course refuted by the very existence of the various money commodities mentioned earlier. Zarlenga does not address this issue, however, nor does the host raise the question.

The mistake Zarlenga makes is that he confuses state intervention in the monetary system with state provision of a monetary system. To be sure, the state has injected itself into the monetary system for centuries. But this does not mean that the market is unable to provide a monetary system. On the contrary, when the state injects itself into a monetary system, it in fact injects itself into a system provided by the market.
The American Monetary Act

What is the 100-percent-reserve solution Zarlenga advocates? It is set out in a bill sponsored by Democratic representative Dennis Kucinich called the American Monetary Act. It has three key elements:

   1. The Federal Reserve must be nationalized and brought into the US Treasury, making it part of the government.
   2. Private banks must be stopped from creating money through fractional-reserve banking. Only the government should create money.
   3. Government would then print money and spend it into circulation on various programs, such as infrastructure.

The aim of the bill is to transfer the money power, as Zarlenga puts it, from the private Federal Reserve System directly to the government. It would be government who creates all the money, not the banks. Instead of the government issuing bonds and paying interest, it would be receiving interest from anyone it lent money to.

This would also reduce taxes, as the government could print the money it needed to fund various programs instead of taxing it away from the public. For instance, universal healthcare and education could and should be funded by government-printed money, according to Zarlenga. In addition, the government would spend money on infrastructure.

This solution is, as Zarlenga also points out, not a new one. The idea of having the government print money directly has been tried several times in history. Zarlenga claims that these experiments have by and large been successful — certainly more successful than private issuing of money (by which both Zarlenga and I mean private banks creating money out of thin air).

Even though I very much agree with Zarlenga that such private issuance of money has caused disaster after disaster, I challenge his thesis that government-printed money would be better.
Nationalizing the "Private" Central Bank

The natural first step in implementing the 100-percent-reserve solution would be to nationalize the formally private Federal Reserve. Like many other critics of the Fed, Zarlenga is diligent to point out that the Fed is in fact private and not a government agency. I'm not sure whether it was Dennis Kucinich himself who invented the phrase "The Federal Reserve is no more federal than the Federal Express," but he certainly has made it his own.

The private member banks formally own the Fed. Many libertarians point this out too, and it is sometimes difficult to judge whether they actually agree with Kucinich's slogan or not. Because the private ownership of the Fed is often used as an argument against free-market solutions to the problems of the financial sector, I feel compelled to discuss the nature of the Fed.

While it is undoubtedly true that the Fed is owned by private banks, the notion that it is a private company, as private as Federal Express, is wrong.

First, the Fed was created through an act of Congress. Not only that, a separate constitutional amendment was added in order to create the central bank. What other private company can claim the same? Certainly not Federal Express.

Second, the Fed has been given the governmental authority to control the nation's money supply and direct monetary policy. As a rule, private companies don't enact and enforce national policy. That is the function of government. Any entity authorized to enact and enforce policy is a de facto government agency.

Third, one of the Fed's main functions is to fund government expenditures. The same can be said for almost all other central banks in history. Obviously, the private bankers reap huge profits from this partnership with the state, but that does not negate the fact that the state itself benefits hugely as well.

Since the creation of the Fed, all the of the United States' wars and all of its major welfare programs have to a very large extent been funded by the Fed's printing presses. Ron Paul has been pointing this out for decades. The Fed makes even Halliburton look like a beacon of free-market capitalism.

Of course, the authority given to the Fed by Congress was never Congress's to give, as the Constitution does not allow Congress to issue paper money, and certainly not to enact legal-tender laws making paper notes the only legal money of the nation. If Congress does not have a certain power, it certainly cannot delegate that power to a private entity. If it does so anyway, the recipient of this unconstitutional monopoly cannot be compared to an ordinary private company.

This being the case, the outright nationalization of the Fed would not change much. However, as Zarlenga's goal is to completely nationalize the "money power," even the formal ties to private ownership must be severed.
Abolishing the Fractional-Reserve Banking System
"If Congress does not have a certain power, it certainly cannot delegate that power to a private entity. If it does so anyway, the recipient of this unconstitutional monopoly cannot be compared to an ordinary private company."

The second key element of the plan is certainly something the Mises Institute and the American Monetary Institute can agree on, albeit with completely different objectives. Zarlenga is correct when he points out that private banks presently create money (or credit) out of thin air through fractional-reserve banking. The 100-percent-reserve solution calls for a government monopoly on creating money, which is why Zarlenga advocates the abolition of such banking. That way, the government won't have any competition.

Presently, the banks have only a fraction of their deposits in reserves. How does Zarlenga propose to solve the problem of the transition from fractional reserves to full reserves? He proposes to lend government-printed money to the banks, thus increasing their reserves to cover all outstanding claims on them. This solution has a few flaws.

First, the government-created paper currency is no more real than the credit issued by the banks, as neither represent actual resources accumulated from real savings. For this purpose, it makes no difference who issues the phony money, the banks themselves or the government.

If banks can create credit that is then converted into money lent from the government, they have every incentive to keep creating credit. This situation would also encourage the government to keep lending money to the banks, not only for the interest they can charge, but because the ever-increasing supply of money leads to more and more taxable consumption, not to mention that the government itself can fund its own vote-buying programs so much more easily. Runaway inflation would be nigh on unavoidable.

Second, the bank's equity is not enhanced by the government loans. When the bank has lent out 90 percent of its deposits, it has, say, $1,000 in reserves and $9,000 in loan receivables on its asset side, and $10,000 in deposits on its liability side. The infusion of a $9,000 loan would increase its reserves to $10,000, thus covering all of its deposits, but it would also increase its indebtedness by the same amount.

If every depositor withdrew their money, the bank would be left with $9,000 in debt on the liability side, but with $9,000 in loan receivables it is not allowed to have on the asset side. If the bank were forced to write off the loans because every depositor withdrew his money, the bank would be left with $0 in assets and $9,000 in debt to the government.

The solution presented is thus no solution at all, only a mechanism by which the same type of continuous inflation of the money supply could be carried on under the guise of full reserves, leaving both the government and the banks to continue to create money out of thin air. This would debase the currency and cause boom-bust cycles, all the while enriching government and the banks.

So while we can agree on the abolition of fractional-reserve banking, Zarlenga's solution to the transition problem is deeply flawed.
Spending Money into Circulation

The 100-percent-reserve solution has government running the printing presses itself and spending the newly created money into circulation. By spending the money on "productive" projects and programs, such as infrastructure, healthcare, education and so on, Zarlenga claims that the money won't lose its value over time. The inevitable rise in prices would be offset, he claims, by the increased production the government spending leads to.
"When this economic crisis evolves into a currency crisis, which it most probably will, reform will become inevitable. The question then is what ideas for reform are lying around for the people and the politicians to choose from."

I argue that the 100-percent-reserve solution would drive up prices. The government would always find new programs to spend money on. The more money the government spends into circulation, the more it debases the value of the previously printed money, causing the purchasing power of each existing dollar to fall.

This also shows the fallacy in the argument that a dollar's value can be set by government, which is one of Zarlenga's key underlying arguments. Money is a function of law, as he claims in good Aristotelian fashion, which means that its value can be set and enforced by the government.

However, because the printing of money is so much easier than the production of actual goods and services, the production of new money is likely to far surpass the production of new goods and services. So in order to keep prices from rising, the government would eventually have to impose price controls. This has been done several times before, most recently by Nixon in the 1970s.

However, the price controls would simply lead to economic chaos and black markets, where people try to make exchanges at real market prices. Additionally, the chronic price inflation would encourage people to borrow and spend, since the value of their debts would steadily decline. The lenders would have to counter this with increasingly high interest rates, making long-term investing very difficult, which in turn would greatly disrupt economic activity.

Since Zarlenga intends to fund such things as healthcare and education with government-printed money, it becomes obvious how catastrophically inflationary the 100-percent solution would be. In the interview, Zarlenga says that one of the first spending projects would be revamping the nation's infrastructure. According to the calculations of civil engineers, a complete overhaul of roads, bridges, and so on would cost $2.3 trillion. This could, according to Zarlenga, be paid for with the printing press.
The Moral Dimension

Zarlenga criticizes economists for many things. One of these is that economists have taken morality out of the science of economics. He also says that economists have tried to hide this exclusion of morality, because if people were told about this atrocity they would be outraged.

Of course, morality has no place in the science of economics. Science is, by its very nature, value-free. When you try to explain why action A had consequence B, you should examine theory and fact. It is only when you start to advocate certain actions or programs, such as the 100-percent-reserve solution, that morality comes into play. Let us therefore examine the moral aspects of Zarlenga's monetary reform.

From the very outset, printing dollars out of thin air, declaring them legal tender, and purchasing goods and services with them is tantamount to theft. The printer acquires property without giving anything of real value in return. After all, the money is merely ink on paper with no value of its own except what it derives from the violent force of the government.

In addition, it is always those who get the new money first who benefit the most. In this instance, it would be the government. But those who are second in line will benefit too, while the new money still has most of its value. The recipients of the new money can turn around and again acquire something for nothing. The amount that can be acquired diminishes over time, so those who get the money last are the ones who pay for the early recipients' gains.

Zarlenga explicitly mentions healthcare and education as being areas of government spending, as this would benefit the masses, who otherwise couldn't afford such services. What he fails to understand is that it isn't the students and patients who benefit, but the hospitals and universities. It is the medical professionals and academics who are the true recipients of the money. It is to them that the money is paid for the services they provide, and the constant influx of new money into these sectors will of course raise prices significantly over time.

Every bout of new money will draw value from the existing amount of money, which means that after the initial theft of property by the government and its preferred interest groups, the debasement of the currency will continue at an ever-increasing rate; the more devalued the dollar gets every year, the more dollars must be printed every year to pay for the same things. For people far away from the printing press, this means that the value of their savings and income is transferred to the money printers and first recipients of the new money, much as it is today.

Another obvious problem with having the government print money is that it creates rent-seeking behavior. With fresh supplies of money coming from the government at an increasing rate, it becomes more and more reasonable for private corporations to lobby for a part of the public-spending cake than to appeal to consumers. In the long run, this means that an ever-increasing part of the private sector will become dependent on the influx of new government money.

From a moral point of view, it makes no difference who counterfeits the money and acquires property for nothing. It is still fraud and theft.
Conclusion

There is no point in making the Austrian case for commodity money here. There are many easily read books that do that. The purpose of this article is to explain that no matter how bad a system is, it can always get worse. Not all reforms are improvements. As we have seen, the 100-percent-reserve solution is ripe with unintended consequences.

When this economic crisis evolves into a currency crisis, which it most probably will, reform will become inevitable. The question then is what ideas for reform are lying around for the people and the politicians to choose from.

The reform advocated by Zarlenga and introduced to the Congress by Dennis Kucinich may very well appeal to politicians and bureaucrats. Also, the increasing animosity toward both the Fed and the banking establishment as a whole will likely encourage ordinary Americans to support Zarlenga and Kucinich's initiative. On the face of it, the solution sounds rather reasonable and has the support of a very popular congressman.

Just think about it. It would strip the banks of their privileges and put the money power back into the hands of the people through their elected representatives; it would break the bankers' secretive monopoly racket, which enables them to pay out billions in bonuses while ordinary people suffer. Doesn't that sound familiar? Isn't that how the Federal Reserve system was sold to the American public following the Panic of 1907?

For Austrians, it is easy to dismiss Zarlenga as a crank, which, based on the ridiculous claims he makes, he undoubtedly is. So why should we pay attention to someone like him? Because if we don't, we increase the risk of him being successful in making the American Monetary Act become law. After all, similar monetary systems have been tried before.
 
This is why Austrians need to expose the real dangers of such a system. It would be a mistake to simply assume that that everyone will recognize its inherent problems and reject it. If the government can pass a constitutional amendment to sign the Federal Reserve Act into law and thus create a private central bank, they can certainly do this too.

So in addition to making the case for the free-market solution in money and banking, Austrians need to take up the debate with all their intellectual opponents. Zarlenga is one of them, and he should not be taken lightly.

[trailhound]

http://www.garynorth.com/public/4993.cfm

False Flag Infiltrators: Gold-Hating Fiat Money Inflationists Inside the Libertarian-Conservative Movement
Gary North
 

May 25, 2009

A web page by Ellen Brown is making the rounds. It is here:

http://www.webofdebt.com/articles/hyperinflation.php

Ellen Brown is a lawyer. She is anti-Federal Reserve. So, she gets a hearing in conservative circles. This is unfortunate. There is nothing conservative about her. She is an apologist for statism and the United States Treasury (a wholly owned subsidiary of Goldman Sachs).

Her article is about the hyperinflation of Germany, 1921-23. She has no understanding of what happened or why, but she talks as if she does.

If you want the real story on the German hyperinflation, you can get it on the Mises.org site. All of these are available for free.

    First, there is Hans Sennholz's article, "Hyperinflation in Germany." http://mises.org/story/2347

    Second, there is Adam Fergusson's book, When Money Dies. http://mises.org/resources/4016

    For even more detail, read this: The Economics of Inflation (1931), by Constantino Bresciani-Turroni. http://www.mises.org/books/economicsofinflation.pdf

These books show that price inflation in Germany was exclusively the result of the central bank of Germany, which expanded the monetary base.

Ms. Brown offers a different explanation for the German inflation.

    Schacht Lets the Cat Out of the Bag

    Light is thrown on this mystery by the later writings of Hjalmar Schacht, the The Lost Science of Money by Stephen Zarlenga, who writes that in Schacht's 1967 book The Magic of Money, he "let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted wisdom' the financial community has promulgated on the German hyperinflation." What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark's decreasing value by selling it short.

    Short selling is a technique used by investors to try to profit from an asset's falling price. It involves borrowing the asset and selling it, with the understanding that the asset must later be bought back and returned to the original owner. The speculator is gambling that the price will have dropped in the meantime and he can pocket the difference. Short selling of the German mark was made possible because private banks made massive amounts of currency available for borrowing, marks that were created on demand and lent to investors, returning a profitable interest to the banks.

To say that this is economically erroneous does not do justice to how wrong it is.

First, short selling is as legitimate as going long (buying). Speculators forecast future prices; they do not cause those prices. For every long position, there is a short. Those speculators, long or short, who guess wrong lose money. For every gain made by shorting the German mark, there was a loss imposed on a speculator who was long.

Second, she describes short selling on the stock market. She does not mention commodity futures. The rules on the commodity futures market are different. These contracts do not involve borrowing the asset. This woman hasn't a clue about financial markets.

Third, the argument was refuted as long ago as 1931, in the still-definitive book, The Economics of Inflation. The author reports:

    The accusation that the collapse of the German exchange was provoked by bold groups of professional speculators seems better founded. The objection to that is that speculation cannot be the original cause of the depreciation of the currency of a country. On the contrary, speculation appears when for certain reasons, such as the Budget deficit, the continual issues of paper money, the disequilibrium of the balance of trade, and the political situation, the exchanges are unstable. Speculation weakens and eventually disappears when the causes which provoked the original depreciation of the currency become less. Speculation in Austrian crowns flourished so long as that currency was unstable; but it disappeared as soon as the stabilization plan was adopted. Directly the monetary reform of November 1923 made the German exchange stable, speculation ceased, after some fruitless attempts to prevent the success of the operation (pp. 100-101).

Fourth, the banks were destroyed with the currency. Bankers suffered along with everyone.

Fifth, Schacht was a fascist economist. He was the Minister of Economics from 1934 to 1937. In short, he ran Hitler's economy.

Sixth, it was central bank policy that caused the inflation. Commercial banks merely lent the money created by the central bank. The head of the central bank, Helfferich, refused to stop printing money. Professor Bresciani-Turroni's analysis has stood since 1931. He began with a quotation from the head of the central banks, Helfferich:

    "To follow the good counsel of stopping the printing of notes would mean--as long as the causes which are upsetting the German exchange continue to operate--refusing to economic life the circulating medium necessary for transactions, payments of salaries and wages, etc., it would mean that in a very short time the entire public, and above all the Reich, could no longer pay merchants, employees, or workers. In a few weeks, besides the printing of notes, factories, mines, railways and post office, national and local government, in short, all national and economic life would be stopped."

    The authorities therefore had not the courage to resist the pressure of those who demanded ever greater quantities of paper money, and to face boldly the crisis which (although painted in unduly dark colours by Helfferich) would be, undeniably, the result of a stoppage of the issue of notes. They preferred to continue the convenient method of continually increasing the issues of notes, thus making the continuation of business possible, but at the same time prolonging the pathological state of the German economy.

Seventh, Schacht served as the currency commissioner of the country, beginning in late 1923. He had tried to get the job as the head of the central bank. He later did take over as the head of the Reichsbank. He was a central banker. So, he wanted to blame foreigners, not the central bank. Those evil speculators! As Hans Sennholz pointed out in 1970, this was the argument of the central bank: the speculators did it. As he wrote:

    When all other explanations are exhausted, modern governments usually fall back on the speculator, who is held responsible for all economic and social evils. What the witch was to medieval man, what the capitalist is to socialists and communists, the speculator is to most politicians and statesmen: the embodiment of evil. He is said to be imbued with ruthless and fickle selfishness that is capable of wrecking the national economy, government plans, and, in the case of German inflation, the national currency. No matter how blatantly contradictory this explanation may be, it is most popular with government authorities in search of a convenient explanation for the failure of their own policies.

    The same German officials who denied the very existence of inflation lamented the depreciation caused by speculators, or they blamed the Allied reparation burdens and simultaneously denounced speculators for the depreciation. Dr. Havenstein, the President of the Reichsbank, embracing every conceivable theory that exculpated his policies, also pointed at the speculators. Before a parliamentary committee he testified: "On the 28th of March began the attack on the foreign exchange market. In very numerous classes of the German economy, from that day onwards, thought was all for personal interests and not for the needs of the country."

Ms. Brown believes the self-serving explanation by the central bankers who destroyed the German currency.

    At first, the speculation was fed by the Reichsbank (the German central bank), which had recently been privatized. But when the Reichsbank could no longer keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.

Ms. Brown has no understanding of central banking. She repeats the very argument of the head of the German central bank: the bank could not keep up with demand for money. The destroyers of Germany's currency thought they were doing the nation a favor. She believes them.

    If Schacht is to be believed, not only did the government not cause the hyperinflation but it was the government that got the situation under control. The Reichsbank was put under strict regulation, and prompt corrective measures were taken to eliminate foreign speculation by eliminating easy access to loans of bank-created money.

Schacht is not to be believed.

The German central bank stopped inflating in 1923 because it had destroyed the currency. The entire nation had gone to barter or foreign currencies. To re-establish central bank control over the economy, the bank reformed the currency. Schacht was one of those in charge of that revaluation. He was an also an apologist for the bank. Yet Zarlenga and Brown praise his understanding!

I really do get weary of what passes for historical and economic analysis in conservative political circles.

Who is Zarlenga? A statist fiat money promoter. Here is a recent interview with him. How free market does this sound?

    Stephen Zarlenga: It was understood at the time, and Harvard finally did something valuable in this area and did a study which showed that to coin money meant also the paper. Our colonial period has many examples of fiat paper money.

    Thom Hartmann: Right.

    Stephen Zarlenga: And in fact that's what built the infrastructure of our country. Until we started using it, the country was in trouble because the Brits and the Dutch did not allow coinage to come over to America. It was against their laws.

    Thom Hartmann: Right. And we didn't have that much gold and silver here that we could make our own.

    Stephen Zarlenga: No. No, we're not going to make our own, and in fact, the very nature of money, as Aristotle told us in the fourth century BC, money exists not by nature but by law. It's not something that comes out of a mine, it's not something that comes out of a farm, it's an abstract legal power.

    Thom Hartmann: Right.

    Stephen Zarlenga: So all money is ultimately, all true money is fiat money. And that's what built the colonies.

You want more? I'll give you more.

    Thom Hartmann: Right, now I, in reading your work, one of the things that I noted, unless I'm misremembering, but I don't think so, was that you are suggesting that (a) that the Treasury Department should be issuing our money and, if I have this right, and (b) that the value of the money should be defined by the government but it should not be defined by, it should not be an intrinsic value. In other words, we should not go back to gold coins and a gold standard.

    Stephen Zarlenga: Yeah.

    Thom Hartmann: Why is that? I agree with that, but I know that there are a lot of, particularly the libertarians, this is really big with a lot of conservatives, 'let's go back to the gold standard'.

    Stephen Zarlenga: Well, OK, we know how to handle that question with them, and first of all you never did have a gold standard. It was always a fraudulent thing. There were promises to pay gold, it was never really there. But what they've done, and the Ron Paul people especially are tuned into this that we need gold for money, they are confusing an investment with a money. Now, they like gold as an investment, and at certain times gold's a fine investment, other times it's terrible. But you want an investment to go up and up and up. You don't want money to go up and up and up. You want money to be relatively stable. So what you need out of an investment, which might be gold, at a time, and what you need out of money, totally separate. And the Ron Paul people, they understand this when tell them.

    And as to the fiat part, any Ron Paul person listening in now will understand the following completely. The problem is not fiat money. The problem is the private issue of fiat money. Then it operates like a tax.

Zarlenga is a greenbacker. The greenbackers were left-wing populists in the late 19th century who attacked the gold standard. They got their name because of their advocacy of Lincoln's fiat paper money, demand notes, which were printed on green paper. When the North went off the gold standard in 1861, the government needed money. The government printed it. The public called the printed notes greenbacks. The greenbackers favored a totally unbacked currency. The Greenback Party began in 1874. It was an inflationist farmer-labor alliance. It promoted the interests of debt-burdened farmers who wanted to steal from their creditors by paying off their debts with paper money. They opposed the re-establishment of the gold standard. They were inflationists. Zarlenga is their ideological heir.

Back in 1965, I wrote an essay for my not-yet father-in-law, R. J. Rushdoony, who had been taken in by these people, briefly, because they opposed the Federal Reserve. I wrote it to convince him these people were believers in centralized government power. Rushdoony grasped this, and never again promoted them. He was teachable. Zarlenga isn't. If you want to read my essay, read chapter 11 of my 1973 book, An Introduction to Christian Economics. Download it here:

http://www.garynorth.com/freebooks/docs/2236_47e.htm

Then Ms. Brown continues:

    More interesting is a little-known sequel to this tale. What allowed Germany to get back on its feet in the 1930s was the very thing today's commentators are blaming for bringing it down in the 1920s -- money issued by seigniorage by the government. Economist Henry C. K. Liu calls this form of financing "sovereign credit." He writes of Germany's remarkable transformation:

        "The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began."

Liu is a Keynesian. Schacht was a Keynesian. Germany was a fascist economy. They had government controls on labor unions and businesses. They had operational price controls and shortages. It was during Schacht's tenure as Minister of Economics that John Maynard Keynes write his Foreword to the German Language edition of The General Theory of Employment, Interest and Money (1936). He admitted that his system could be better imposed in Germany's state-run economy. He wrote:

    The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory.

Yet this is what Ms. Brown thinks is a really great system.

I have been dealing with people like her and Zarlenga for over 45 years. They are utterly self-deceived. They think they are conservatives because they don't like the Federal Reserve System. But what is their recommended alternative? Congress and the U.S. Treasury. They trust the state.

The reason why these people get a hearing from free market conservatives is that most conservatives have no real understanding of monetary economics, especially Austrian School monetary economics. They have never read a book on monetary theory by an Austrian School economist. They have not spent an hour reading a short booklet, such as my free Mises on Money. They have not spent a couple of hours reading Murray Rothbard's classic mini-book, also free, What Has Government Done to Our Money?. They are the targeted and intellectually defenseless victims of these fiat money promoters. Conservatives who ought to know better cannot spot these people for what they are: statists, inflationists, and economic ignoramuses. Ludwig von Mises accurately described them as monetary cranks. They are the blind leading the blind into the ditch -- the ditch of National Socialism. Ms. Brown gushes:

    While Hitler clearly deserves the opprobrium heaped on him for his later atrocities, he was enormously popular with his own people, at least for a time. This was evidently because he rescued Germany from the throes of a worldwide depression -- and he did it through a plan of public works paid for with currency generated by the government itself. Projects were first earmarked for funding, including flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange called Labor Treasury Certificates were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. The workers then spent the certificates on goods and services, creating more jobs for more people. These certificates were not actually debt-free but were issued as bonds, and the government paid interest on them to the bearers. But the certificates circulated as money and were renewable indefinitely, making them a de facto currency; and they avoided the need to borrow from international lenders or to pay off international debts.6 The Treasury Certificates did not trade on foreign currency markets, so they were beyond the reach of the currency speculators. They could not be sold short because there was no one to sell them to, so they retained their value.

    Within two years, Germany's unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries, circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Although Germany's economic experiment was short-lived, it left some lasting monuments to its success, including the famous Autobahn, the world's first extensive superhighway.

Ah, yes, Hitler the creative economic genius who rescued Germany's economy from the Great Depression. And who was his senior economist? Horace Greeley Hjalmar Schacht.

The fact that this woman gets a hearing among conservatives indicates that thousands of well-meaning conservatives care nothing about economic theory. They are willing to accept the entire fascist economy, just so long as the promoter says a few negative words about central banking, even when she then justifies her fiat money theory by quoting the ideas of the only man who ever served simultaneously as the head of both a national central bank and as Minister of Economics: Schacht. This woman praises Hitler's economics, and conservatives nod their heads and say, "Yes, this is what we need. We'll call it the ownership society." It's pathetic. I have watched this for a generation.

To understand the economy that Schacht built, read The Vampire Economy. It's free.

http://blog.mises.org/archives/006248.asp

As soon as Hitler came into power, the head of Sun Oil, J. Howard Pew, began pulling out. He was a Christian and a free marketer. He and his father had competed successfully with the Rockefellers for 50 years. He sold his German holdings to the government. Hitler sent him a letter begging him not to pull out. Pew know it was socialism. He swapped for German steel and pipes. He understood. Ms. Brown does not.

I have shown you her view of the productive wonders of National Socialism. Here are her views on America.

    In the nineteenth century, Senator Henry Clay called this the "American system," distinguishing it from the "British system" of privately-issued paper banknotes. After the American Revolution, the American system was replaced in the U.S. with banker-created money; but government-issued money was revived during the Civil War, when Abraham Lincoln funded his government with U.S. Notes or "Greenbacks" issued by the Treasury.

Henry Clay was the intellectual and political heir of Alexander Hamilton, the founder of the First Bank of the United States. Clay was a supporter of the Second Bank of the United States. These were our first experiments in central banking. If you want to know about those corrupt engines of inflation, read Part 1 of Murray Rothbard's great book, A History of Money and Banking in the United States. Download it here: http://mises.org/books/historyofmoney.pdf. For background on Clay's brand of government boondoggle economics, click here.

I raise all this because several of my subscribers have asked me if Ms. Brown's position has any merit. It doesn't.

She is a greenbacker. She is in the tradition of Gertrude Coogan and the other 1950's greenback inflationists whose footnote-free books are kept in print by Omni Books. They all have this in common: they want the American money system to be run by Congress.

If that's conservatism, include me out.

[phosphene]

IMO. Bill Still pinpoints the problem(not the solution) perfectly in his "Money Masters" movies....

"Who controls the quantity?"

Unfortunately, his conclusion is "At least having Congress print the money is better than a private bank."

I tend to perceive Congress controlled money like trailhound....

I know what you're going to say, miraculous election and lobbying reform laws...i just dont buy it.

Plus, there aint enough precious metals to go around to begin with. And the metal that has been mined, is already controlled by the NWO. So, moving to a gold standard wouldn't work either.

To summarize....
Bank controlled fiat currency bad
Congress controlled fiat currency bad
Gold standard bad.
It's all just replacing one control module for another. We hand over control to the NWO either way. They can't lose.

Looks like we have to stop believing in money altogether. heh. If money is the root of all evil, why do we want more of it? Because money is the NWO's most powerful spell.

[Geolibertarian]

(Note: Since Austrian School reactionaries are engaging in the canned straw man-bashing they always resort to whenever someone posts information they don't like, I thought that -- in the interest of balance, and of providing relative newcomers an opportunity to examine both sides of the debate and decide for themselves which ideology they most agree with -- I'd repost here what I've posted elsewhere concerning the Austrian School.)

In the following clip Alex Jones explains how the global elite control politics through the use of the false "left-right" paradigm:

       http://www.youtube.com/watch?v=fTahZE4q90U

Thanks primarily to Alex, millions of people are now aware of that paradigm (although, since it relates primarily to the two major parties, I think a more accurate term than "left-right" would be "Democrat-Republican"), and have either broken free of it or are at least attempting to break free.

Sad to say, very few people seem to realize that there are other false paradigms in which, if one is not careful, one can easily become entrapped.

An obvious case in point is the reactionary manner in which right-wing ideologues routinely employ the use of red-baiting labels.

For instance, if (hypothetically speaking) Obama gives the lion's share of federal outlays to the poor, he's called a "socialist"; if, on the other hand, he does the opposite and gives it instead to the parasitic war machine and to his filthy rich cronies on Wall Street -- which is actually what he's doing! -- he's still called a "socialist."

-------------------------------------

http://www.globalresearch.ca/index.php?context=va&aid=12517

America's Fiscal Collapse

by Michel Chossudovsky
Global Research
March 2, 2009

“We will rebuild, we will recover, and the United States of America will emerge stronger" (President Barack Obama, State of the Union Address 24 Feb 2009)

"Those of us who manage the public's dollars will be held to account—to spend wisely, reform bad habits, and do our business in the light of day—because only then can we restore the vital trust between a people and their government." (President Barack Obama, A New Era of Responsibility, the 2010 Budget)

"Strong economic medicine" with a "human face"

“Promise amid peril.” The stated priorities of the Obama economic package are health, education, renewable energy, investment in infrastructure and transportation. "Quality education" is at the forefront. Obama has also promised to "make health care more affordable and accessible", for every American.

At first sight, the budget proposal has all the appearances of an expansionary program, a demand oriented "Second New Deal" geared towards creating employment, rebuilding shattered social programs and reviving the real economy.

The realities are otherwise. Obama's promise is based on a mammoth austerity program. The entire fiscal structure is shattered, turned upside down.

To reach these stated objectives, a significant hike in public spending on social programs (health, education, housing, social security) would be required as well as the implementation of a large scale public investment program. Major shifts in the composition of public expenditure would also be required: i.e. a move out of a war economy, requiring a movement out of military related spending in favour of civilian programs.

In actuality, what we are dealing with is the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people.

The Obama promise largely serves the interests of Wall Street, the defence contractors and the oil conglomerates. In turn, the Bush-Obama bank "bailouts" are leading America into a spiralling public debt crisis. The economic and social dislocations are potentially devastating.

[Continued...]

-------------------------------------

In light of the above, most readers will likely realize just how spot on Webster Tarpley is when he explains, in the following clip, why attacking Obama from his "right" serves only to strengthen Obama politically by giving him the "left cover" he needs to implement what in reality is a pro-Wall Street agenda:

       Webster G. Tarpley | WCR 041109 "Obama's Charm Offensive" 5/8

Now, at this point the question arises: if accusing Obama of being a "socialist" and of wanting to redistribute wealth to the undeserving poor is the very thing that Obama's public relations experts and media whores thrive upon, then why do so many conservatives and libertarians continually play right into their hands?

For the same reason they so often scapegoat the poor for the crimes of the rich: because they bought into the lie that the only alternative to Austrian School "capitalism" is either Marxist "socialism" or some Keynesian variant of it.

Consequently, their minds and intellects are literally enslaved within the ridiculously narrow and self-defeating confines of one or both of the following overlapping paradigms:

       * The false Marxist-vs-anarcho-capitalist paradigm.

       * The false Keynesian School-vs-Austrian School paradigm.

(On an interesting side note, one of the most scathing criticisms of John Maynard Keynes I've ever seen came -- not from an Austrian School supporter -- but from an ardent fan of FDR and the New Deal. Yet another indication that things are not always as simple or black-and-white as label-obsessed ideologues incessantly make them out to be.)

Now, I'll be the first to agree that socialism, particularly as defined by Karl Marx, simply does not work.

The most masterful refutation of Marxist socialism I know of is the following book (which can be downloaded for free in PDF form) by Single Tax advocate, Max Hirsch:

       http://books.google.com/books?id=D5QWAAAAYAAJ

As for Keynesian economics, while arguably not as bad as Marxism, it is nevertheless inherenty and fatally flawed in its own right, due primarily to its reliance upon (a) an anti-labor/pro-land speculation tax system and (b) a debt-based money system.

Unfortunately, due to the overlapping paradigms mentioned above, many if not most within the so-called "liberty movement" have been duped into believing that the only "alternative" to those two horribly flawed ideologies is the equally flawed Austrian School.

There's a reason for this.

What is that reason?

I'll adress that question in my next post.

[Geolibertarian]

There are an alarming number of Austrian School cultists who routinely suggest or imply that anyone who supports having any sort of social safety net is, by definition, either a Marxist or neo-Marxist.

Although they'll never admit to this openly, the real reason said cultists are so morally and self-righteously offended by the very idea of a social safety net is not because they love "liberty" so much, but because their cult was founded by privileged, parasitic aristocrats who had a deep-rooted disdain for the poor -- a disdain matched only by the deep-rooted love they had for their own elevated socioeconomic status.

There's nothing these aristocrats hated more than the sight of millions upon millions of what once were poverty-stricken, working class peasants transforming into a relatively healthy, happy and prosperous middle class. So they silently funded a propaganda campaign to counteract this trend:

----------------------------------

http://www.scoop.co.nz/stories/print.html?path=HL0812/S00378.htm

Mr. Anonymous and the Not-So-Spontaneous Birth of the Libertarian Movement

William S. Volker (1859-1947)
Mr. Anonymous

William Volker, alias "Mr. Anonymous," alias the "First Citizen" of Kansas City, Missouri, "was an extremely modest, enormously wealthy home-furnishings tycoon. He became the unrecognized donor of thousands of gifts, large and small."

Volker was born on April 1, 1859 into a prosperous household in Hanover, Germany. At age 12, Volker's family immigrated to Chicago. At 17 he went to work for a picture frame manufacturer. With the death of his employer in 1882, Volker bought out the company and moved the enterprise to Kansas City. From there, his "little window shade business" grew into a national giant.

In 1911, 52 year old William Volker married. Returning from his honeymoon, he announced he had put one million dollars in his wife's name and, he said, intended to give the rest of his enormous fortune away. Over the next 36 years, he donated millions of dollars, much of it anonymously. When Volker died at age 88 on November 4, 1947, many schools, parks, and public spaces were named for the furnishings tycoon.

So why pick on this guy?

The answer is that the overwhelming priority of Volker's "philanthropy" was focused, not on public spaces but on reactionary ideology. Dismayed by the rise of Socialism in America and doubly dismayed by what he saw as the evolution of government and political thinking towards accommodation and a "new liberalism", eventually personified by the widespread adoption of the economic views of John Maynard Keynes and the New Deal policies of Franklin Roosevelt, Volker set out to create a new and much more reactionary "mainstream" ideology based loosely around his own ideas of "laissez-faire" capitalism (i.e. a largely unregulated economy) and social Darwinism (the pseudo-scientific notion that in society, unhindered competition would allow the "cream to rise to the top").

In truth, Volker was no great scholar or thinker. The ideology he set out to create was built upside down, starting only with a set of foggy conclusions for which he had a predisposition. From these conclusions, it was the task of Volker's considerable fortune to find a set of justifications, then an enabling ideology or "theory" that gave it all perspective and unity and, eventually, a true philosophical platform from which to launch the whole. But if this task was analogous to building the Great Pyramid, starting from the top, Volker was undaunted. He may not have had a brain but he had money... and he had a personal connection to one of the most reactionary sections of that most reactionary of organizations - the National Association of Manufacturers. Volker's "associates", who would all participate closely, included Jasper Crane of DuPont, B. E. Hutchinson of Chrysler, Henry Weaver of General Electric, Pierre Goodrich of B.F. Goodrich, and Richard Earhart of White Star Oil (which through many mergers and acquisitions would eventually become Mobil Oil). Moreover, Volker had "influence" at the leading scholarly institution in his home town: The University of Chicago was founded by none other than John D. Rockefeller and created with a certain ideological "bent".

In 1932 Volker established the William Volker Fund and, with that, started on the road to becoming perhaps the most significant anonymous a-hole of our times. In every way, William S. Volker was the true "father" of Libertarianism and Modern Conservatism.

For the first dozen years, the fund largely floundered. There is some evidence that Volker may have flirted with Fascism. That ideology though, which attracted such celebrities as Henry Ford and Charles Lindbergh, was thought to have a limited future in America. In the face of Keynesian economics, widespread social spending, and the CIO, what was really required was a return to pre-New Deal economic policy and an anti-communist/anti-union social policy.

Eureka!

The breakthrough came in 1944, when Volker's nephew, Harold Luhnow, took over, first the business and then the Fund. In the same year, Friedrich Hayek's The Road to Serfdom was published. The book was a product of the "Austrian School" of economists, originating at the University of Vienna and first coming to modest prominence at the end of the 19th century in its attacks on Marxist and Socialist economics. Hayek's book was an almost mystical (and hysterical) defense of laissez-faire capitalism and the "free market". According to Hayek, market prices created a "spontaneous order, or what is referred to as 'that which is the result of human action but not of human design'. Thus, Hayek put the price mechanism on the same level as, for example, language." In turn, any attempt at regulation would inevitably lead to "totalitarianism" and in this, both Marxist and New Deal "socialism" were essentially similar. The theory was perfect. Volker and Luhnow had found their ideology. The cash began to flow.

In short order, the Volker Fund and its larger network arranged for the re-publication of Hayek's book by the University of Chicago (a recurring and important connection) despite the fact that it had been almost universally rejected by the Economics establishment. A year later, the book was published in serial form by the ultra-reactionary Readers Digest not withstanding the fact that it was supposed to be a "scholarly text", ordinarily inappropriate for the readership of the Digest, and despite the fact that it had also had been panned by literary critics. In 1950, the Fund arranged for Hayek to secure a position at the University of Chicago and when the University only granted an unpaid position, they arranged for the Earhart Foundation to pay him a salary. Hayek was only the first of a veritable flood of émigré, "scholars".

Recruiting the Homeless

Hayek's teacher in Vienna had been one Ludwig von Mises who, in turn, had been the student of Eugen von Boehm-Bawerk (who had gained fame for his attack on Marxist Economics) and who, in his turn, had been the student of Carl Menger, the founder of the Austrian school. Each of these had published several books that were virulent attacks on Socialism and defended "pure capitalism". It was all very good. Von Mises book was called Socialism: An Economic and Sociological Analysis and it too had been received with yawns when it was published in English in 1936.

While von Mises really had "taught" at the University of Vienna, his was an unpaid position. The University had turned him down on four separate occasions for a paid position. Not surprisingly, in 1940 the nearly destitute von Mises had emigrated to the United States. In 1945, an unpaid "visiting professorship" was obtained for him at NYU while his salary was paid by "businessmen such as Lawrence Fertig". Fertig was an associate of the Volker Fund and a friend of Henry Hazlitt, the Fund's friendliest journalist. In all, they would fund von Mises for 25 years and von Mises never would need a "real job".

In fact, this was typical of the Fund's "bait and switch" tactic for developing resumes. In the United States, von Mises was the "famed economics professor from the University of Vienna". In Europe, he would become the "famous American economist from NYU".

Local Reinforcements

The economist Milton Friedman, during his fifteen minutes of fame, took the opportunity of the publication of his opus, Capitalism and Freedom to decry the shabby treatment that the likes of Hayek and Mises had received from the Economics "establishment". On his own similar reception, he wrote in the 1982 preface of his book:

"Those of us who were deeply concerned about the danger to freedom and prosperity from the growth of government, from the triumph of welfare-state and Keynesian ideas, were a small beleaguered minority regarded as eccentrics by the great majority of our fellow intellectuals.

"Even seven years later, when this book was first published, its views were so far out of the mainstream that it was not reviewed by any major national publication--not by the New York Times or the Herald Tribune (then still being published in New York) or the Chicago Tribune, or by Time or Newsweek or even the Saturday Review--though it was reviewed by the London Economist and by the major professional journals. And this for a book directed at the general public, written by a professor at a major U.S. university, and destined to sell more than 400,000 copies in the next eighteen years."

It is attractive to believe that Friedman was really this foolish and that his expertise in the "politics of fame" was similar to his expertise in Monetary Policy. In fact, his separate acknowledgements of the importance of the Volker Fund belie this possibility. In truth, the Fund and its progeny identified Friedman early on, shepherded his career at the University of Chicago, subsidized him through a paid lecture series (which eventually were combined into Capitalism and Freedom), paid his way to Mont Pelerin, arranged for the serialization of his book by Reader's Digest, and bought a significant number of the books that Friedman was so proud of "selling".

Friedman was only one of dozens of such local "scholars" who were suddenly "discovered" through the efforts of the Fund.

The Fund also now began to recruit friendly young "future-scholars" and subsidize their development. Not only was the cause thus advanced, but a modest intelligence network became a part of the "Libertarian Movement". One such early recruit was Murray Rothbard, later to become famous as the "father" of "Left Libertarianism", "Libertarian anarchism", and "anarco-capitalism". Later much castigated for his "sellout to the Right-wing Republicans", Rothbard had, from the first, been intimately wrapped up in Anti-Communism, McCarthyism, the "Old Right", and the right-wing ideology of the Volker Fund. It was through the Fund that he became an associate of Ayn Rand and a student of Mises.

"Rothbard began his consulting work for the Volker Fund in 1951. This relationship lasted until 1962, when the VF was dissolved. A major part of Rothbard's work for the VF consisted of reading and evaluating books, journal articles, and other materials. On the basis of written reports by Rothbard and another reader - Rose Wilder Lane - the VF's directors would decide whether to undertake massive distribution of particular works to public libraries.

The VF also asked Rothbard to submit reports on particular questions, such as how to rank sundry economists in terms of friendliness to the free market, surveys of the literature on monopoly, Soviet wage structures, etc., etc. Rothbard's memos number several hundred, covering works in economics, history, philosophy, and political science. The memos, which range in length from one page to seventy pages, provide a window into the scholarship of the period - and Rothbard's views on that scholarship. They thereby shed much light on Rothbard's emerging worldview and his systematic defense of "liberty."

They also shed "much light" on how the Fund decided which "scholars" to promote, and which to attack. Rothbard later called his work with the Volker Fund, "the best job I've ever had in my life".

Multiplying Like Rabbits

In support of the imported scholars and the new ideology, the Volker Fund also pioneered a process which would become the hallmark of the "Libertarian Movement". The Fund started to spin-off organizations by the boatload, each intended, not just to serve specific purposes but to give the appearance of many "independent" efforts spawned by a "mass" appeal. The list of "begats" is too numerous to chronicle but the first set are illuminating.

Among the very first "front organizations" of the Volker Fund was the "National Book Foundation". While the Foundation's affiliation to the Volker Fund was not hidden, it was circumspect enough to suggest, even to most "Libertarians", that it was independent. The fund began modestly enough by distributing free copies Eugene Böhm-Bawerk's works to thousands of libraries and universities across the country. As the Volker efforts geared up, the Foundation began to distribute millions of books from dozens of authors, all coming from the Fund's stables. Many educational "incentives" were initiated such as "teach a course on Hayek, get 10 (or 100) textbooks for free"...

The Foundation for Economic Education was spun out in 1946, under the leadership of Leonard Read, a leading figure in the Chambers of Commerce. The grand-daddy of all libertarian "think-tanks", the FEE initiated the original Mont Pelerin Society meetings. Its own publication, The Freeman, became the founding journal of "Libertarianism". The rent was paid by Volker.

The Institute for Humane Studies was created by Floyd "Baldy" Harper, the "ace recruiter" of the Volker Fund, in 1961. The IHS identified and subsidized "bright young students" and "promising scholars" friendly to the new "Libertarian" doctrine. Not only did the IHS fund thousands of "students", but it spawned dozens of similar organizations throughout the world. After the Volker Fund was finally closed, subsidies for the IHS shifted to some of the most reactionary organizations in America: The Scaife Foundation, Koch Family Foundations, The Bradley Foundation, and the Carthage Foundation.

The Intercollegiate Studies Institute was founded in 1953 to combat what they would eventually call "political correctness" and "'left-bias" in colleges and universities. The organization now consists of 50,000 college students and faculty and through its lavish subsidies, sponsors dozens of programs representing the entire spectrum of right-wing "Libertarian" causes. The first president of the ISI was a young William F. Buckley Jr.

The Earhart Foundation was created by and named for Richard Earhart of White Star Oil, one of Volker's original collaborators in the National Association of Manufacturers. This foundation was used to subsidize various émigrés and not only financed Hayek but also Eric Voegelin, yet another "Austrian". Through Voeglin, the Earhardt Foundation became connected with the infamous Leo Strauss and, since then, various "projects" of not just a "libertarian" but of a "neo-conservative" perspective have been beneficiaries of the Foundation. In addition, The Earhart Foundation helped to pioneer still another use of the newly-emergent Libertarian think-tanks. As the network of these think-tanks grew, they undertook not only to promote ideology but also specific points of policy, particularly in support of private corporations. The culmination of the Foundation's efforts in this direction came with the founding of the George C. Marshall Institute in 1984. The Institute was initially a foremost proponent of the Strategic Defense Initiative (SDI), heavily promoted by the Defense Industry....The CEO of the Institute is currently a registered lobbyist for ExxonMobil.

Through the list of organizations, above, the Volker Fund's near-biblical "begats" encompass nearly every single prominent individual and organization of the "Libertarian" and "New Conservative" movements of today.

The Not-So-Secret Society

"In 1947, 39 scholars, mostly economists, with some historians and philosophers, were invited by Professor Friedrich Hayek to meet at Mont Pelerin, Switzerland, and discuss the state, and possible fate of classical liberalism and to combat the "state ascendancy and Marxist or Keynesian planning [that was] sweeping the globe". Invitees included Henry Simons (who would later train Milton Friedman, a future president of the society, at the University of Chicago); the American former-Fabian socialist Walter Lippmann; Viennese Aristotelian Society leader Karl Popper; fellow Austrian School economist Ludwig von Mises; Sir John Clapham, a senior official of the Bank of England who from 1940-6 was the president of the British Royal Society; Otto von Habsburg, the heir to the Austro-Hungarian throne; and Max von Thurn und Taxis, Bavaria-based head of the 400-year-old Venetian Thurn und Taxis family."

If the above rings of "Bohemian Grove" and similar fodder for conspiracies, it is because informal "retreats" at out-of-the-way resorts are one of the favorite methods by which the wealthy of many countries formulate a common international policy. What distinguishes the Mont Pelerin Society, however, is that it did not consist primarily of the wealthy. Instead, it was comprised of a majority of marginal, thread-bare "scholars", united only by their common hatred of "socialism" and Keynesianism (which were one and the same for most of them) and sprinkled with only a handful of rich patrons and journalists. In fact the Mount Pelerin Society was organized as much by the Volker Fund as by Hayek himself and the Foundation paid the way for all 10 of the American "participants".

Once in Switzerland, the "scholars" agreed on their hatred of "socialism" but on little else except to meet yearly to "facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems."

From this not-so-secret-but-thoroughly-right-wing society's more than humble beginnings, the phoenix of laissez-faire capitalism would rise, propelled skyward by unlimited funds. Over a dozen of the scholars who could not previously get a job, a review, or a book deal would go on to win the "Nobel Prize in Economics" (this "epic" story will be told separately). More importantly, the Mont Pelerin Society would itself beget 500 foundations and organizations in nearly 80 countries... again with strategic contributions from Mr. Anonymous. Once transformed into an "international movement", there was no end to what was possible. One example tells the story.

Initiated at Mont Pelerin and copying the FEE, the Institute of Economic Affairs (IEA) was created in London in 1955. Serving as a conduit for both cash and "ideas", the IEA set about the task of "rejuvenating" the dead and decaying British Tories. By 1985, the "Iron Lady", Margaret Thatcher, would positively gush on the occasion of the Institute's 30th Anniversary: "You created the atmosphere which made our victory possible... May I say how thankful we are to those who joined your great endeavor. They were the few, but they were right, and they saved Britain." With that, the IEA begat the Atlas Economic Research Foundation, which in turn created a network of over 50 "think-tanks" in more than 30 countries.

[Continued...]

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Note: In my view, a more accurate title for the above essay would be, "Mr. Anonymous and the Not-So-Spontaneous Birth of the Royal Libertarian Movement."

Also, notice how it dovetails with the following four-part interview of Webster Tarpley:

       http://www.youtube.com/watch?v=tuHCAXtjZ6Q (part 1 of 4)
       http://www.youtube.com/watch?v=rlJT-5w21IY (part 2 of 4)
       http://www.youtube.com/watch?v=rxe-LlAO_cQ (part 3 of 4)
       http://www.youtube.com/watch?v=bl5jOUvIcuI (part 4 of 4)

[Geolibertarian]

So, if Marxist, Keynesian, and Austrian School economics, respectively, are not the only options, then what else is there?

There are several other options from which to choose. Webster Tarpley, for instance, advocates the so-called "American School" of economics (which I partly agree with).

I, on the other hand, advocate Georgism:

-----------------------------------

http://www.politicaleconomy.org/gaffney.htm

Excerpts from The Corruption of Economics

by Mason Gaffney

Neo-classical Economics as a Stratagem against Henry George

Neoclassical economics is the idiom of most economic discourse today. It is the paradigm that bends the twigs of young minds. Then it confines the florescence of older ones, like chicken-wire shaping a topiary. It took form about a hundred years ago, when Henry George and his reform proposals were a clear and present political danger and challenge to the landed and intellectual establishments of the world. Few people realize to what a degree the founders of Neoclassical economics changed the discipline for the express purpose of deflecting George and frustrating future students seeking to follow his arguments. The stratagem was semantic: to destroy the very words in which he expressed himself. Simon Patten expounded it succinctly. "Nothing pleases a ... single taxer better than ... to use the well-known economic theories ... [therefore] economic doctrine must be recast" (Patten 1908: 219; Collier, 1979: 270).

George believed economists were recasting the discipline to refute him. He states so...in his posthumously published book, The Science of Political Economy (George, 1898: 200-209). George's self-importance was immodest, it is true. However, immodesty may be objectivity, as many great talents from Frank Lloyd Wright to Muhammad Ali and Frank Sinatra have displayed. George had good reasons, which we are to demonstrate. George's view may even strike some as paranoid. That was this writer's first impression, many years ago. I have changed my view, however, after learning more about the period, the literature, and later events.

Having taken shape in the 1880-1890s, Neo-Classical Economics (henceforth NCE) remained remarkably static. Major texts by Alfred Marshall, E.R.A. Seligman and Richard T. Ely, written in the 1890s, went through many reprintings each over a period of 40 years with few if any changes….

Not until 1936 was there another major "revolution," and that was hived off into a separate compartment, macro-economics, and contained there so as not to disturb basic tenets of NCE. Compartmentalization, we will see in several instances, is the common NCE defense against discordant data and reasoning. After that came another 40 years of Paul Samuelson’s “neoclassical synthesis.” J.B. Clark’s treatment of rent, dating originally from his obvious efforts to refute Henry George (see below), “has been followed by an admiring Paul Samuelson in all of the many editions of his Economics” (Dewey, 1987: 430).

Clark's capital theory "... gives the appearance of being specially tailored to lead to arguments for use against George" (Collier, 1979: 270). "The probable source from which immediate stimulation came to Clark was the contemporary single tax discussion" (Fetter, 1927: 142). "To date, capital theory in the Clark tradition has provided the basis for virtually all empirical work on wealth and income" (Dewey, 1987: 429; cf. Tobin, 1985). Later writers have added fretworks, curlicues and arabesques beyond counting, and achieved more isolation from history, and from the ground under their feet, than in Patten's dreams, but all without disturbing the basic strategy arrived at by 1899, tailored to lead to arguments against Henry George.

To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals' success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today's counterproductive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.

The Imperative to Put Down Henry George

Neo-classical economics makes an ideal of "choice." That sounds good, and liberating, and positive. In practice, however, it has become a new dismal science, a science of choice where most of the choices are bad. "TANSTAAFL" (There Ain't No Such Thing As A Free Lunch) is the slogan and shibboleth. Whatever you want, you must give up something good. As an overtone there is even a hint that what one person gains he must take from another. The theory of gains from trade has it otherwise, but that is a heritage from the older classical economists.

Henry George, in contrast, had a genius for reconciling-by-synthesizing. Reconciling is far better than merely compromising. He had a way of taking two problems and composing them into one solution, as we lay out in detail below.

[Continued...]


http://www.monetary.org/henrygeorgeconceptofmoney.htm

HENRY GEORGE’S CONCEPT OF MONEY
And Its Implications For 21st Century Reform

by Stephen Zarlenga
American Monetary Institute
2001

Preface and Synopsis:

Attesting to the importance of Henry George’s life and work are his 5 million books in print; the active Henry George organizations and schools around the globe with thousands of supporters and uncountable others who still respond to his name with “Oh yes - the single tax”. A man considered important enough to require the attention of one of the political establishment’s most potent operators to derail his 1886 campaign for Mayor of New York City. George was influential enough to merit that POPE LEO XIII direct a section of a Papal encyclical at his work in 1891.

This kind of effect, I’d suggest, was not generated by the economic theorizing or theoretical observations of any individual or school, but has resulted from what was really a great moral crusade for economic justice.

To George, the land question was the key means to that end, and his name is rightfully associated with land tax reform -- with the “single tax”, described below. But although that was his main focus, there was a lot more to George than that. As Ken Wenzer pointed out “An important element of Georgism was reform of the banking and monetary system”  That’s the main focus of this paper.

My task has been to find and present George’s monetary views, within the context of his own times and values; and to evaluate their relevance to present day questions. A task made more complex by the confusion and misinformation in which the monetary subject has traditionally been shrouded. For this reason it was necessary to organize the paper into several steps. Step one describes George’s major views and values; step two describes the real monetary context of his time, separating out the monetary myths. George’s explicit monetary views are presented in step three. Step four draws some “Georgist” conclusions on monetary reform today and offers suggestions for consideration.

This study was proposed because several years ago on first reading George, I found indications that his monetary views might have been quite advanced and potentially relevant to present day arguments over the proper monetary role of government. This research has confirmed that -- to a much larger and clearer extent than I had imagined.

His monetary viewpoint may be especially important to the divergent monetary prescriptions advocated from participants within the present day Georgist movement. Some prominent Georgists advocate a move to “free banking”; a quite radical change from our present monetary system. Other prominent Georgists advocate the establishment of a gold standard. Some support establishing forms of locally circulating moneys often referred to as LETS (Local Exchange Trading Systems). An awareness of George’s viewpoint could be an important factor in such discussions.

The conclusion of AMI’s monetary research to date is that such monetary systems cannot be reconciled with two of George’s overriding requirements: that social institutions be consistent with individual self-determination; and with the principle of equal rights.

True monetary reform must take a better path. AMI’s research indicates that money, properly defined, is a legal institution of society and government, not a commodity or economic good of the markets; that if money is a legal institution, then the control of monetary systems can be rightfully viewed as a proper function of government; much as the law courts are. This broad definition or attribute of money leads directly to conclusions on what is needed for a monetary system to operate justly; not favoring one or another group through the establishment of special monetary privileges. This study finds (repeatedly in his own words) that Henry George in large part shared this view.

This viewpoint does go counter to the current idolization of free markets, and the faith being placed in them to automatically create optimum results for mankind. But the overwhelming body of historical evidence that we’ve studied indicates that while some things can and should be left to free markets, a society’s monetary system is emphatically not one of them.

This was the reason suggested by AMI to the Schalkenbach Foundation, that we do this study rather than just requesting others much better versed in Henry George’s work to simply look up what he wrote about money. His monetary views need to be examined in the light of their implications for present day questions. The local currency advocates would find some very limited support from George’s actions. The free bankers and the gold advocates would probably both tend to characterize George’s monetary position as primitive. But according to AMI’s research, this is a misreading -- perhaps not so much of George’s views, but of monetary theory -- of the nature of money.

GEORGE’S WORLD VIEW

We now step back a bit from our monetary topic to note the major aspects of George’s work which will later help place his monetary ideas into context. Bear with me -- those of you who know George like the back of your hand. This paper does not assume the reader is well versed in his work.

THE MORAL CRUSADER

“(Political Economy) may be argued in a great many different ways, but I prefer the ground that its opponents have taken, the ground of justice. I believe that justice is the supreme law of the universe”, wrote Henry George

One of George’s important accomplishments was the re-introduction of moral issues into economic thought. From Adam Smith’s Wealth Of Nations (1776) and earlier, there had been a tendency for moral questions -- evaluation of the right or wrong -- the good or evil of economic policies to be largely ignored or shunted aside and replaced by a questionable utilitarianism which generally ended up supporting the status quo of the power structure.

Thus Ingram wrote of Adam Smith that “He does not keep in view the moral destination of our race, nor regard wealth as a means to the higher ends of life.”

One of Smith’s contemporaries -- economist Reverend Thomas Malthus -- twisted morality to preach that the poor must choose between what he called “vice” -- having children and therefore engaging in sex -- or starvation. Economics rightly earned the title of “the dismal science”.

In The Scholastic Tradition

But there is nothing dismal about George’s writings, which can be seen as in the much older tradition of the Catholic “Scholastics” or “Bookmen” -- the church scholars of about 1100 to 1500 AD who were very familiar with the existing written works available in the west. The Scholastics made the first attempt at a science of economics to build a rationally based moral code of business behavior and determine what should be, rather than what was. To their credit, they were much more influenced by Aristotle than by the bible, and many of them such as Albert the Great of Cologne and his student Thomas Acquinas were later canonized as saints.

Though George was generally well read, I didn’t find indications that he was aware of this body of work which has become better known in the English speaking world since the 1940’s.  When George uses the term “Scholastic” it is to refer negatively to the university economists of his day.

While the content of George’s work differed greatly from that of the Scholastics, their form was very similar. George did not focus on the issues of concern to the Scholastics -- mainly usury, and the “just price” -- but he would have probably felt very much at home with their method, and especially with their deep concern for justice. Their method -- a reliance largely on theoretical reasoning -- is useful for investigating questions of morality, but not as useful in determining questions of fact or of utility. Interestingly, most 19th and 20th century economists continued using the Scholastics theoretical method, but ignored the moral questions and inappropriately applied it to other matters. George, concentrating on moral issues, generally avoided this error.

GEORGE’S GUIDING PRINCIPLES

Also diverging from the Scholastics was the manner in which George’s guiding principles were framed. The great goal of justice was shared by both, but the Scholastic’s aims were more socially oriented -- a just order of society, in conformity with reason, observation, tradition and law -- natural, human, and sacred law. George’s primary guidelines on the other hand, are framed in a much more individualistic fashion.

The two core principles which are George’s anchors, are evident -- and explicit -- throughout his writings:  The principle of equal rights, and of individual self determination. George expresses this as “The law of human progress…the moral law…the equality of right between man and man …(and) the perfect liberty which is bounded only by the liberty of every other…” (P&P, 526).

[Continued...]

-----------------------------------

[Geolibertarian]

Although I strongly disagree with him on several key issues -- e.g., gun control, compulsory schooling, the rose-colored glasses through which he views Keynesian economics and debt-based money, etc. -- I nevertheless generally agree with much (though far from all) of what Steve Kangas has to say in critique of the Austrian School.

Below are two criticisms I particularly agree with:

----------------------------------

http://www.huppi.com/kangaroo/L-gold.htm

Myth: The gold standard is a better monetary system.

Fact: The gold standard causes deflation and depressions.

. . . .Gold bugs argue that we don't need to adjust the size of the money supply to match the level of economic activity -- the value of money will automatically adjust itself to the level of economic activity. Here's how it works. Suppose three people live in a village, and they have 100 gold coins among them. And suppose this covers 100 units of work. A loaf of bread may require five units of work, and therefore cost five gold coins. Now suppose that their economy grows to 120 units of work. There are two ways for the money supply to adjust to this new activity. The villagers could simply add 20 more coins to their money supply, so they now have 120 coins. Or they could let the value of the coins increase.

How would that work? Well, suppose the extra 20 units of work is being produced by just one of the three villagers. Obviously, he is eager to sell his product, just as the other two are eager to buy it. But no one can afford the sale, because there is insufficient money. So they artificially "create" money by lowering their prices for all their other goods, to increase their savings so they can buy it. For example, a loaf of bread still requires five units of work, but they may lower its price from five to four gold coins. The extra gold coin can now be used towards the purchase of the new product. This process is called deflation.

Prices do indeed inflate and deflate in this way. The problem is that this process is terribly inefficient. In real economies, prices tend to be "sticky" -- that is, enormously resistant to change. (At least in a downward direction. In an upward direction, they climb easily. This is good if you want to fight inflation, bad if you want to fight unemployment and recessions.)

There are several reasons for price stickiness. One is psychological -- people hate to cut their prices and wages. Another is that salaries and wages are often locked into contracts, the average of which is three years. And for many, raising prices incurs certain costs (reprinting, recalculating, reprogramming, etc., not to mention a dip in business) that may not make the price change seem worth it. Even if they do decide to change prices, it takes many companies quite some time to put them into effect. Sears, for example, has to reprint and remail all its catalogues. But perhaps the most important reason is that in a big and complex economy, people just don't realize at first when goods start becoming excessive on the market, and the glut may have to reach severe proportions before people notice it and take action.

Price stickiness means that the value of money is slow to adapt to changing economic conditions. Economists have found it much faster and simpler just to expand the money supply and cut the recession short. The Great Depression, for example, dragged on for ten years, with the natural deflation of money proceeding at a glacial pace. It wasn't until World War II that the government was forced to conduct a massive monetary expansion (to fund its defense spending). The result was such explosive economic growth that the U.S. economy doubled in size between 1940 and 1945, the fastest period of growth in U.S. history. Another example is Japan in the 1990s. Its economy has stagnated for five years now, and many economists have criticized its government for not doing enough to expand the money supply. But whatever the solution, the important point is that Japan's government has done very little, and its economy has not deflated or adjusted itself -- Japan's economic pain continues five years later. . . .

Bitter controversy over the gold standard was a hallmark of the Gilded Age. It was widely regarded as a tool of the rich. Democratic presidential candidate William Jennings Bryan spoke for the poor when he charged, famously, that "You shall not crucify mankind upon a cross of gold." The U.S. suffered three depressions during the Gilded Age, and the gold standard and its bank panics were often held to blame.

Throughout this era, the value of gold was fixed at a certain price. One U.S. dollar, for example, was defined as 23.22 grains of pure gold. A British pound sterling was defined as 113.00 grains of pure gold. This meant that the total value of a nation's money supply was determined by the size of its gold reserves. Furthermore, fixed rates meant that international exchange rates were also fixed. In other words, the world operated under a single, unified monetary system. One British pound always equaled 4.8665 U.S. dollars (113.00/23.22), at least according to the official rate. The actual rates might fluctuate, due to the shifting supply and demand of international trade, but the nations set up a system to make sure that they never fluctuated too far from the official rate. This system was rather complex, but basically it kept exchange rates stable and close to the official rate by making sure that nations with trade deficits paid their bills quickly and directly in gold.

But there were economic consequences to such a system. Suppose Britain ran up a trade deficit with the U.S., and promptly paid in gold. The U.S. money supply would expand, and its economy would experience a mixture of inflation and growth. Conversely, the British money supply would shrink. Theoretically, this should have resulted in deflation, but in practice it resulted in widespread unemployment, due to price stickiness. Therefore, outflows of gold from a country were often very painful to its economy. And when people learned that gold was leaving the country, they often conducted bank runs, trying to withdraw their gold before it ran out. Thus, the Gilded Age was replete with bank panics and failures.

The Gilded Age was brief, lasting from the 1870s to 1914, when World War I broke out. During the war, nearly all nations either placed restrictions on gold convertibility or issued non-convertible paper money. But one of their top priorities after the war was the recreation of the full gold standard. It took several years before they succeeded. Britain restored its gold standard in 1925, but in an act of folly, made the pound worth $4.86 again in U.S. dollars -- its old, pre-war parity. Unfortunately, the pound was overvalued at this price now, due to changes in the price of gold, and Britain subsequently experienced a drastic outflow of gold. Again, severe unemployment was the result, not the expected deflation. Britain would struggle with unemployment for the rest of the decade.

By 1928, all the major currencies and most of the minor ones had returned to the gold standard. But the coming Great Depression would lay bare all its disadvantages. A unified monetary system meant that no nation could protect itself from a disaster that occurred in another nation. When the depression struck in the U.S., it quickly ricocheted across the Atlantic. In the U.S., two gigantic bank runs caused over 10,000 bank failures. So many people were left holding worthless banknotes that the money supply shrank by about a third -- a catastrophic reduction.

When Roosevelt took office in 1933, unemployment had soared to nearly 25 percent. His inauguration took place literally in the middle of a third bank panic. Roosevelt stopped it in its tracks by doing something novel: he intervened. He declared a "banking holiday" that closed banks to the public for eight days, to prevent further withdrawals. During that time, the banking system was reorganized. When banks finally reopened, banks deposits actually exceeded bank withdrawals. It was a tremendous political success for Roosevelt, and America's last bank run. Later under the New Deal, bank deposits would become insured by the federal government.

After the Great Depression struck, the world wasted little time severing its ties to gold. Britain left the gold standard in 1931, as did the U.S. in 1933. By 1937, not a single country remained on the gold standard. After World War II, the U.S. partially restored the gold standard for international trade. And to prevent citizens from bank panics, it made its currency inconvertible at home. In 1971, a diminishing gold supply and growing deficits caused the U.S. to suspend the gold standard even for international trade. Ever since, international trade has been based solely on the dollar and other paper currencies. Today, there are no mainstream economists who call for a return to the gold standard; it is widely regarded as a fringe idea of the radical right.

[Continued...]


http://www.huppi.com/kangaroo/L-ausmon.htm

MONOPOLIES

Austrians believe that the government destroys the market process for several reasons. Rockwell writes:

"One obvious example… takes place at the Justice Department's antitrust division. There the bureaucrats pretend to know the proper structure of industry, what kind of mergers and acquisitions harm the economy, who has too much market share or too little, and what the relevant market is. This represents what Hayek called the pretense of knowledge.

"The correct relationship between competitors can only be worked out through buying and selling, not bureaucratic fiat. Austrian economists, in particular Rothbard, argue that the only real monopolies are created by government. Markets are too competitive to allow any monopolies to be sustained."

The claim that governments cause monopolies defies the historical evidence. History actually shows the opposite: the more unregulated the market is, the worse the problem of monopolies.

However, the Austrian claim is not wholly without merit. Utilities are examples of monopolies run or regulated by the government (although they are natural monopolies, and privatizing them doesn't work, as Britain found out in the 80s). Often companies persuade governments to erect barriers of market entry to potential competitors. Sometimes government subsidies allow one company to overpower its competitors. But such cases are usually the result of money-based lobbying, which is a corruption of the system. Corruption in the public sector no more "refutes" its central principle than does corruption in the private sector. The solution to corruption is to eliminate it by enforcing better laws. European democracies offer broad practical evidence that this sort of corruption can be greatly reduced.

But this Austrian critique completely ignores another, more common type of monopoly: that which forms naturally on the unregulated market. There are many reasons for this tendency, ranging from "it takes money to make money" to the greater efficiency of large corporations. Without antitrust laws or some other countervailing market force, growing companies will not stop until they become monopolies or oligopolies.

The height of monopoly growth and abuse in the U.S. coincided with its greatest period of laissez-faire, or government nonintervention in the market. Known as the Gilded Age (the period between the Civil War and World War I), this period saw the phenomenal rise of the Robber Barons and their great trusts (monopolies). John D. Rockefeller monopolized oil under his Standard Oil Company; J.P. Morgan dominated finance; Andrew Carnegie, steel; James Hill, railroads. Historians have well chronicled the ruthlessness of these men -- Morgan once remarked that "I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do." Rockefeller's father once boasted that "I cheat my boys every chance I get, I want to make 'em sharp." These men lived for market conquest, and plotted takeovers like military strategy.

In the late 19th century, trusts formed also in wheat, fruit, meat, salt, sugar refining, lumber, electrical power, rubber, nickel, paper, lead, gypsum, iron, cottonseed oil, linseed oil, whiskey distilling, cord manufacture -- and many others. Once a trust emerged, it would raise its prices and drop its quality of service, as well as engage in unfair trading practices that drove other firms out of business. The abuses of these monopolies became so great that they became a national scandal. So deep was antitrust sentiment that when both houses of Congress passed the Sherman Antitrust Act in 1890, there was only a single dissenting vote! But U.S. presidents did not bother to enforce it, and the monopoly problem continued to worsen.

The worst period of monopoly formation was between 1898 and 1902. Prior to this, there was an average of 46 major industrial mergers a year. But after 1898, this soared to 531 a year. By 1904, the top 4 percent of American businesses produced 57 percent of America's total industrial production, and a single firm would dominate at least 60 percent of production in 50 different industries. The power of these monopolies easily dwarfed the governments that oversaw them. As early as 1888, a Boston railroad company had gross receipts of $40 million, whereas the entire Commonwealth of Massachusetts had receipts of only $7 million. And when Rockefeller, Carnegie and Morgan united in 1901 to create U.S. Steel, the result was an international sensation. Cosmopolitan magazine wrote:

"The world, on the 3rd day of March, 1901, ceased to be ruled by… so-called statesmen. True, there were marionettes still figuring in Congress and as kings. But they were in place simply to carry out the orders of the world's real rulers -- those who controlled the concentrated portion of the money supply."

The role of government in all this was to stand back and let this market process happen. It wasn't until Teddy Roosevelt launched his great "trust-busting" campaign in 1902 that this process was reversed. Actual enforcement of the Sherman Act reduced monopolies until the Roaring 20s, when laissez-faire policies again returned to Washington. Over that decade, about 1,200 mergers swallowed up more than 6,000 previously independent companies; by 1929, only 200 corporations controlled over half of all American industry. The New Deal era ushered in yet another era of antitrust policy, again reducing the percentage of monopolies. This was followed by the Reagan era, a period which saw both massive deregulation and another frenzy of mergers and takeovers. In 1988, Federal Trade Commissioner Andrew Strenio remarked:

"Since Fiscal Year 1980, there has been a drop of more than 40 percent in the work years allocated to antitrust enforcement. In the same period, merger filings skyrocketed to more than 320 percent of their Fiscal Year 1980 level."

Two objections are possible here. The first is that these growing corporations may have captured government and then used it as a tool to capture the market. Those familiar with the Golden Age and Roaring 20s know, however, that governments were basically bribed to stand back and do nothing. They passed very little legislation that actively prevented any firms from entering the market and competing. The Reagan era was different, in that corporate lobbyists began using government as a proactive agent to discourage competition. Nonetheless, the periods of government trust-busting show the proper role of government, and its effectiveness in restoring market competition.

The second objection is that a wave of mergers may result in a more natural and efficient equilibrium of larger players, and this could be beneficial for the economy. The result doesn't have to be a monopoly -- perhaps just an oligopoly. The problem is that at the top end, mergers become increasingly harmful to the economy, with monopolies merely representing the worst result. Even oligopolies engage in price-gouging and collaboration. A natural equilibrium hardly represents the best equilibrium -- as recessions and depressions show.

How do Austrians deal with the historical correlation between laissez-faire and monopolies? By denying it, of course. The presence of any government at all proves that their conditions of a free market were not met, so the entire correlation is rejected. This is like someone attempting to argue that not watering a plant will result in the fastest growth. And when you point out to him that there is a correlation between the amount of water given to a plant and its rate of growth, he dismisses these experiments on the basis that they all used water.

----------------------------------

[Geolibertarian]

If I had to pick a label other than "geolibertarian" with which to describe myself ideologically, it would be progressive libertarian -- "libertarian" in the sense that I advocate limited government on both personal and economic issues, "progressive" in the sense that I believe efforts to reduce government spending should be directed at programs designed to assist the poor only to the extent that the tax, monetary and regulatory policies that created the apparent need for such programs in the first place are either abolished outright or structurally reformed.

If I were a Congressman, for instance, I would oppose efforts to repeal the minimum wage so long as Congress insisted on taxing wages to death. I would oppose cutting Medicare spending so long as Congress refused to relegalize alternative medicine (including medical marijuana) and revoke overextended drug patents (particularly those granted for "me-too" drugs and for drugs developed primarily at taxpayer expense). I would oppose cutting individual welfare so long as Congress insisted on wasting nearly $100 billion a year on corporate welfare. I would oppose cutting tax-funded job training programs so long as state governments refused to reduce occupational licensing barriers.

The underlying principle of my approach to economic issues in general is crystallized in the following quote:

"Social injustice, therefore, prevails, not on account, nor in spite, of Individualism, but through the absence of Individualism, through the active and passive disregard of equal individual freedom by the State. The removal of social injustice, therefore, is not to be obtained by still further interference with equal individual freedom, and still less by the abolition of individual freedom which Socialism contemplates; it can be obtained only by the removal of all interferences with individual freedom which exceeds that necessary for the maintenance of equal freedom for all.

"This conclusion is not invalidated by the admission that remedial measures involving further restrictions of individual freedoms...may have had beneficial results. For if State limitations of individual and equal freedom have deprived the majority of the people of independence and power to resist capitalistic oppression, as they have done and are still doing, restrictions placed upon the oppressors, otherwise unnecessary, may to some extent alleviate the oppression. Nevertheless, it is clear that such consequential interferences would be unnecessary if, through the removal of the original interferences, the balance of power were restored. At their best, moreover, they are merely attempts to alleviate symptoms without touching the cause of social disease."

-- Max Hirsch, Democracy vs. Socialism, pp. 254-5

Now, to fully understand and appreciate the progressive libertarian approach to public policy reform, one must understand the issue of privilege:

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http://savingcommunities.org/issues/

Privilege

Behind all issues lies the problem of privilege -- legal mechanisms that give some people artificial advantages over others, enabling them to enrich themselves at the expense of others. Political privileges give leverage in the political system, ultimately conferring a political monopoly over others. Economic privileges are similarly leveraged over time into economic monopoly.

Three privileges stand out. The core political privilege is the way we choose leaders. What was supposed to be citizens deliberating and choosing officials to serve them has degenerated into a competition by those who want more and more political power over a largely passive electorate. The economic privileges are a land tenure system that allows some people to monopolize the earth and its resources and a monetary system that lets private institutions lend money that was created out of nothing into circulation.

Other economic privileges include privately owned public utilities, monopoly franchises, over-extended intellectual property laws, subsidies, artificial restrictions on competition, and policies that benefit established businesses to the detriment of potential new competitors.

They tie together because people with economic privileges help those in office keep their political privileges and those in office reciprocate.

[Continued...]

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Royal libertarians (of which Austrian Schoolers are a subset) are fond of railing against the "welfare state" that was instituted by FDR and then expanded by LBJ. Yet what they refuse to acknowledge is what created in the minds of the masses the apparent need for a welfare state in the first place.

It was the original layer of economic privileges that had been bestowed to the rich -- and the horrid economic conditions to which that original layer had, in turn, given rise -- that created the widespread demand for all of these additional layers of compensatory and/or offsetting privileges for the poor.

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"This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour -- nothing like it had ever been seen in modern times....People began to say, perhaps naturally, if this is what State absentation comes to, let us have some State intervention.

"But the State had intervened; that was the whole trouble. The State had established one monopoly, -- the landlord's monopoly of economic rent, -- thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into the factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labour market, thus creating a huge, constant and exigent labour-surplus." [Emphasis original]

-- Albert Jay Nock, Free Speech and Plain Language, pp. 320-1

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As they say, a picture speaks a thousand words. And although I generally support limited government and free enterprise (I'm a Georgist on economic matters, not a Marxist), I nevertheless think the following image accurately reflects both the corporate monstrosity that laughingly passes for "capitalism" these days and the plutocracy that laughingly passes for "democracy."



And as Max Hirsch correctly points out, if the "original" privileges were simply eliminated, then socioeconomic conditions would so improve that there would soon thereafter cease to be a widely perceived need for all of the bureaucracy-ridden additional ones -- at which point they could be easily and gracefully phased out of existence and replaced with a Guaranteed Income (see this).

Thus, the difference between progressive libertarians and royal libertarians is that the latter want to start abolishing privileges at the bottom of the power pyramid and work their way upward (and even then only to a point), whereas the former want to start at the top and work their way downward.

[Geolibertarian]

Below are two excellent essays, both written from a progressive libertarian angle:

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http://www.cooperativeindividualism.org/omara-mike_ethics-beyond-left-and-right.html

Ethics Beyond Left and Right: Progressive Freedom-oriented Policies

by Mike O'Mara


Many prominent advocates of rationalism and freethought have gone beyond "left" and "right," by promoting progressive, freedom-oriented policies as rational, practical alternatives to bureaucratic governments controlled by special interests. Governments dominated by special interests are typically inefficient and wasteful, and tend to enact counterproductive laws favoring the few while harming most citizens, resulting in poverty and extreme inequality.

Among those who have advocated such alternative policies are Thomas Paine, Thomas Jefferson, and John Stuart Mill. Other more recent rationalists and freethinkers have endorsed similar progressive, freedom-oriented policies as a more practical, humane alternative to the failed policies of "left" and "right."

This essay will discuss two wings of the movement promoting freedom: progressive advocates of freedom and conservative advocates of freedom. Another term that could be used to describe progressive advocates of freedom might be "progressive libertarians," but use of the term "libertarian" is problematic. From about the 1950s, many people who are fundamentally economic conservatives have been claiming the term "libertarian," although they distort the original meaning of the word. While such conservative "libertarians" do tend to support civil liberties, they confuse economic freedom with economic conservatism, an outlook based on very different principles. As will be shown, genuine economic freedom requires freedom from corporate welfare (subsidies and other favoritism to corporations), freedom from policies that cause concentrated ownership of land and natural resources, and freedom from other policies that involve favoritism to special interests, leading to poverty for the many and to extreme inequality between the rich and the poor.

Many people are surprised to hear that the word "liberal" originally meant the same as "libertarian." Both come from the word "liberty." "Liberals" used to emphasize the need to limit the power of government, because, as the old and wise saying goes, "power corrupts." Liberals used to recognize that we need to limit the amount of power we give to politicians and government. The kind of liberals in that original tradition are now called "classical liberals." But too many of today's liberals seem to have forgotten the point that power corrupts, resulting in a modern liberalism that bears little resemblance to classical liberalism and its emphasis on liberty and suspicion of authority.

Although the terms "progressive libertarian" or "progressive classical liberal" might come close to describing the tradition of liberty as advocated by such progressive advocates of freedom as Paine and Mill, the common misuse of the words "libertarian" and "liberal" requires correction. This article will avoid these terms and will focus on the main points that distinguish progressive advocates of freedom from conservative advocates of freedom.

The Ethics of Government Power

Liberty is neither "left-wing" nor "right-wing." Instead of talking about "left" or "right," advocates of liberty have found it helpful to understand liberty in terms of "up" or "down, where "up" is toward individual liberty, and "down" is toward authoritarianism. Advocates of liberty base their ethics on the principle that no person should have the right to violate another person's freedom by initiating force against them or dealing fraudulently with them. Liberty is the opposite of authoritarianism.

The Bill of Rights was written by advocates of the ethics of individual liberty, and that document reflects the recognition that the form of government most likely to protect liberty is a constitutional democracy, a type of constitutional republic which places limits on the power of government. These limits are specified in the Bill of Rights.

Advocates of liberty insist that power corrupts, which is why governmental powers must be limited. George Washington expressed this view by observing that "Government is not beauty, it is not eloquence -- it is force. Like fire, it is a dangerous servant, and a fearful master." Every law made by government is ultimately backed or enforced by police power -- the use of government force. We should therefore be very careful how far we go in handing over power to politicians and government. Governments lacking proper limitations on their power can and do use the force of law and police power to make people do what the government decides they need to do or refrain from doing, including what they are allowed to say, publish, drink, smoke, believe, choose for entertainment, and how they may spend their money and live their lives.

Progressive advocates of freedom have pointed out that seeking to maximize liberty is the most practical approach to social issues. Liberty is like a truce: an agreement to allow people to have the right to freedom of religion, belief, and lifestyle, the right to keep the products of their own labor, the right to have access to the earth's natural resources (more about that in a moment), and the right to freely exercise one's values and preferences as long as one does not violate the same freedoms which others should also have. A progressive system of liberty is the most benevolent system because it not only prohibits violent forms of oppression and persecution, it also prevents economic oppression that arises from the concentration of economic power in special interests that seek governmental support for policies inconsistent both with liberty and efficiency.

No nation currently comes close to being consistent about upholding liberty, although some countries at least have more freedom than others. For example, the U.S. has usually tended to have more civil liberties than most other countries, but on the other hand, it still has many violations of civil liberties and many policies that violate economic freedom by favoring special interests.

The Two Wings of the Freedom Movement

As mentioned earlier, since about the 1950s, the word "libertarian" has been increasingly used by people who are really economic conservatives. Although they support the civil liberties specified in the Bill of Rights, they promote a distorted version of economic liberty. Many conservative advocates of freedom are unconcerned with cutting corporate welfare or avoiding favoritism to special interests, although some of them do speak out against such favoritism as a violation of economic freedom. The biggest difference between conservative advocates of freedom and progressive advocates of freedom is over the question of concentrated ownership of land and natural resources, including oil, mineral deposits, valuable urban land, and TV and radio airwaves, which are also natural resources.

Progressive advocates of freedom have emphasized that economic freedom requires limitations on the concentrated ownership of land and natural resources, since such concentrated ownership results in concentrated control over the rest of the economy. These ideas are found in the writings of Paine, Jefferson and Mill, and can also be found in the writings of Benjamin Franklin, Henry George, and Leo Tolstoy. More recently, eight Nobel Prize winning economists have advocated similar policies. Current organizations promoting a progressive idea of freedom include the Democratic Freedom Caucus and the Banneker Center for Economic Justice.

Conservative advocates of freedom include the Cato Institute and the Libertarian Party, which have both long avoided the basic issue of concentrated ownership of land and natural resources. The University of Chicago has also long been a center for the conservative wing of the freedom movement, and most Chicago School economists avoid these crucial issues. Later in this article, I'll have more to say about the differences between the two wings of the freedom movement.

[Continued...]


http://geolib.com/essays/sullivan.dan/greenlibertarians.html

Greens and Libertarians

The yin and yang of our political future

by Dan Sullivan
(originally appearing in Green Revolution, Volume 49, No. 2, summer, 1992)


Over the past three decades, people have become dissatisfied with both major parties, and two new minor parties are showing promise of growth and success. They are the Libertarian Party and the Green Party. These are not the only new parties, but they are the only ones that promise to attract people from across the political spectrum. Most other small parties are either clearly to the left of the Democrats or to the right of the Republicans. Such parties would have a place in a system that accommodates multiple parties, but are doomed to failure in a two-party system.

The Libertarian Party is made up mostly of former conservatives who object to the Republican Party's penchant for militarism and its use of government to entrench powerful interests and shield them from market forces. The Green Party is made up mostly of former liberals who object to the Democratic Party's penchant for centralized bureaucracy and its frequent hypocritical disregard for natural systems of ecological balance, ranging from the human metabolism and the family unit to the ecology of the planet.

Both minor parties attempt to adhere to guidelines that are much clearer than those of either major party. Libertarians focus on rights of individuals to control their own lives, limited only by the prohibition against interference with the rights of others. These rights include their right to the fruits of their labor and the right to freely associate and form contracts. They advocate limiting government to protecting those basic rights.

Greens advocate ten key values (ecological wisdom, grass roots democracy, social justice, non-violence, decentralization, community-based economics, post-patriarchal values, respect for diversity, personal and global responsibility, and sustainable future focus as a guide for government as well as for their own party organization.)

These different guidelines underscore basic differences between the approaches of the two parties and their members. Libertarians tend to be logical and analytical. They are confident that their principles will create an ideal society, even though they have no consensus of what that society would be like. Greens, on the other hand, tend to be more intuitive and imaginative. They have clear images of what kind of society they want, but are fuzzy about the principles on which that society would be based.

Ironically, Libertarians tend to be more utopian and uncompromising about their political positions, and are often unable to focus on politically winnable proposals to make the system more consistent with their overall goals. Greens on the other hand, embrace immediate proposals with ease, but are often unable to show how those proposals fit in to their ultimate goals.

The most difficult differences to reconcile, however, stem from baggage that members of each party have brought with them from their former political affiliations. Most Libertarians are overly hostile to government and cling to the fiction that virtually all private fortunes are legitimately earned. Most Greens are overly hostile to free enterprise and cling to the fiction that harmony and balance can be achieved through increased government intervention.

Republicans and Democrats will never reconcile these differences, for whatever philosophical underpinnings they have are overwhelmed by vested interests that dominate their internal political processes. These vested interests thrive on keeping the distorted hostilities alive and suppressing any philosophical perspectives that might lead to rational resolution of conflict.

But because minor parties have no real power, they are still primarily guided by values and principles. Committed to pursuing truth above power, they should be more willing to challenge prejudices and expose flaws in their current positions.

There is nothing mutually exclusive between the ten key values of the Greens and the principles of the Libertarians. By reconciling these values and principles, we can bring together people whose allegiance to truth is stronger than their biases.

This could be of great value to both parties, partly because any new party that wants to break into a two-party system has to appeal to a broad spectrum of voters. But even more importantly, each party needs attributes the other has to offer. Libertarians need the intuitive awareness of the Greens to keep them from losing touch with people's real values, and Greens need the analytical prowess of the Libertarians to keep them from indulging in emotional self-deception. Libertarians can teach Greens about the spirit of enterprise and the wonders of economic freedom, and Greens can teach Libertarians about the spirit of compassion and the wonders of community cohesion.

Reconciliation is absolutely necessary. Even if one of the parties could rise to power, it could do great harm by implementing its current agenda in disregard for the perspective of the other. Moreover, proposals that violate values and principles of one party often violate those of the other. If members of both groups come together to discuss each other's proposals, they are likely not only to find areas of agreement, but to find conflicts between each group's proposals and its own principles. If this happens, and the two parties work in concert, they stand a real chance of overtaking one of the major parties and drastically altering the political power structure.

Many third parties have had important impacts on American politics, but the last time a political party was dislodged was when the Republicans knocked the ailing Whig party out of contention over 130 years ago. It should be noted that the Republicans were a coalition of several minor parties with seemingly differing agendas, including the Abolitionist Party, the Free-Soil Party, the American (or Know-Nothing) Party, disaffected northern Democrats, and most of the members of the dying Whig Party. A similar coalition of parties has a much better chance of repeating this success today.

Anyone who looks at current national platforms of Greens and Libertarians will conclude that bringing these groups together is no easy task. For example, the Libertarian platform states dogmatically that they "oppose any and all increases in the rate of taxation or categories of taxpayers, including the elimination of deductions, exemptions, or credits in the name of 'fairness,' 'simplicity,' or 'neutrality to the free market.' No tax can ever be fair, simple, or neutral to the free market." On the other hand, the national platform of the Greens leaves one with the impression that they never met a tax they didn't like.

Yet the historical roots of the Greens and the Libertarians are quite similar. That is, early movements for alternative, intentional communities that live in harmony with nature greatly influenced, and were influenced by, anarcho-syndicalists who advanced principles now embraced by the Libertarian Party. This essay will attempt to show that the differences that have emerged are due less to stated principles and values of either group than to the baggage members have brought to each party from their liberal and conservative backgrounds.

On Conservatism and Liberalism

It is said that Libertarians have a conservative philosophy and Greens have a liberal philosophy. In reality, conservatism and liberalism are mere proclivities, and do not deserve to have the name "philosophy" attached to them. People who have more power than others are inclined to conserve it, and people who have less are inclined to liberate it. In Russia, as in feudal England, conservatives wanted more government control, as government was at the root of their power. Liberals wanted more private discretion.

In the United States today, where power has been vested in private institutions, conservatives want less government and liberals want more. What passes for conservative and liberal "philosophies" is merely a set of rationalizations that power-mongers hide behind.

Conservative support for traditional approaches and liberal support for new ways of doing things also follows from the desire for power. Traditional approaches have supported those now in power, and change threatens to disrupt that power. Changes are often embraced by conservatives once they prove unable to disrupt the underpinnings of power.

For Greens and Libertarians to rise above the power-based proclivities of liberalism and conservatism, they must focus on their roots and reconcile their positions with their philosophical underpinnings.

On the Roots of the Greens

In The Green Alternative, a popular book among American Greens, author Brian Tokar states that "the real origin of the Green movement is the great social and political upheavals that swept the United States and the entire Western world during the 1960's." As part of that upheaval, I remember the charge by elders that we acted as though "we had invented sex." Mr. Tokar acts as though we had invented Green values.

Actually, all the innovative and vital features of the Greens stem from an earlier Green movement. The influx of disaffected liberals to the movement since the sixties has actually imbued that movement with many features early Greens would find offensive.

This periodical, for example, has been published more or less regularly since 1943, calling for intentional communities based on holistic living, decentralism, sharing natural bounty, freedom of trade, government by consensus, privately-generated honest monetary systems and a host of other societal reforms. Yet the founder, Ralph Borsodi, wrote extensively about the evils of the state, and would clearly oppose most of the interventionist policies brought to the Green Party by disaffected liberals and socialists. The same can be said of more famous proponents of Green values, such as Emerson and Thoreau.

The Green movement grew slowly and steadily and quite apart from mainstream liberalism throughout the sixties and seventies. In the eighties, however, it became clear that the liberal ship, and even more clear that the socialist ship, was headed for the political rocks. The left had simply lost credibility, even among those who felt oppressed by the current system. Gradually at first, discouraged leftists discovered the Green movement provided a more credible platform for their positions.

Because of their excellent communications network, additional members of the left quickly discovered the Greens, embraced their values (at least superficially), joined their ranks and proceeded to drastically alter the Green agenda. For example, early Greens pushed for keeping economies more diverse and decentralized by promoting alternative, voluntary systems, and by criticizing lavish government expenditures on interstate highways, international airports, irrigation projects, and centralized bureaucracies that discriminated against small, independent entrepreneurs.

Today the National Platform of the Green Party calls for "municipalization" of industry (that is, decentralized socialism), limits on foreign trade to save American jobs (which they insist is not protectionism), and other devices to create artificial decentralization under the guiding hand of some benevolent central authority.

The influence of Greens who are fond of government intervention (referred to as "Watermelons" by more libertarian Greens) seems to be strongest at the national level and weakest within most Green local organizations. Despite the National Green Platform's resemblance to a new face on the old left, many people who are genuinely attracted to Green principles are either undermining or abandoning the left-dominated Green Party USA. Specifically, the principle of decentralism is being used to challenge the right of a national committee to dictate positions to local Greens. This is fortunate for those of us interested in a coalition of Greens and Libertarians, as reconciliation between the Green Left and libertarianism is clearly impossible.

On the Roots of the Libertarianism

The Libertarian Party was born in 1971. Like the Green Party, it has philosophical roots that extend far back into history. It emerged, however, at a time when conservatism was in decline. Just as Greens attract liberals today and are strongly influenced by the liberal agenda, Libertarians attracted conservatives and were influenced by their agenda. However, as Libertarians are more analytically rigorous, there are fewer blatant inconsistencies between their positions and their principles.

Libertarian bias tends to show up more in prioritization of issues than in any particular issue. For example, Libertarians are far more prone to complain about the capital gains tax than about many other taxes, even though there is nothing uniquely un-libertarian about that particular tax.

Many Libertarians ignore classic libertarian writings and dwell on the works of Ayn Rand, Murray Rothbard and Ludwig von Mises. The classical libertarians get mere superficial attention. For example, few have read Tragedy of the Commons, but many quote the title. Specifically, they are unwilling to recognize that the ecological mishaps like those referred to in that work had been absent for centuries when almost all land was common. As with the tragedy of the reservations, commons were abused because so many people had to share access to so little land. All this was a result of government sanction, allowing vast tracts of commonly held land to be appropriated by individuals without proper compensation to those who were dispossessed of access to the earth. These facts are ignored because they cannot be reconciled with pseudo-libertarian conservatism.

Just as contemporary Greens have fondness for government and contempt for private property that their forebears did not share, Libertarians take an extreme position on private property and have hostility to all forms of government that their philosophical predecessors did not share.

Their refusal to acknowledge natural limits to private property and their insistence of unlimited protection of property by the state is their one great departure from their predecessors and their principles. For example, they dismiss the following statement by John Locke, known as the father of private property:

God gave the world in common to all mankind. Whenever, in any country, the proprietor ceases to be the improver, political economy has nothing to say in defense of landed property. When the "sacredness" of property is talked of, it should be remembered that any such sacredness does not belong in the same degree to landed property.

They similarly ignore Adam Smith's statement that:

Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which can best bear to have a peculiar tax imposed upon them.

Private ownership of the earth and its resources is the one area where Libertarians depart from their own philosophy. After all, their justification of property is in the right of individuals to the fruits of their labor. Because the earth is not a labor product, land value is not the fruit of its owner's labor. Indeed, all land titles are state-granted privileges, and Libertarians deny the right of the state to grant privileges.

Even here, Libertarians are on solid ground when they argue that freedom could not survive in a society where land tenure depended on bureaucratic discretion. They are split, however, over devices like land value taxation that would, with a minimum of bureaucracy, put the landless in a more tenable position with respect to land monopolists. Just as liberals dominate the National Greens, conservatives dominate the Libertarian position on this issue, though many Libertarians, including Karl Hess, former editor of the Libertarian Times, do not share that conservative position.

Again, this is a key issue for reconciliation. The Green tradition cannot be reconciled with pseudo-libertarian claims that a subset of the people can claim unlimited title to the planet.

The Magic of Honest Compromise

Compromise is too often a process whereby people on each side give up what they know to be right in order to gain a supposed advantage for their interest group. What I am proposing is that each side give up supposed advantages in order to harmonize with what is right. It takes an open mind and a great deal of courage, but the results can be magnificent.

[Continued...]

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[Geolibertarian]

Since self-appointed Thought Police from the Austrian School so love to demonize Greenbackers such as Ellen Brown and Stephen Zarlenga (presumably for the purpose of discouraging relative newcomers from ever reading what these evil thought criminals have written on the issue of monetary reform), I think it's only fair that I post the following so that readers can decide for themselves which side of this debate they most agree with:

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http://www.webofdebt.com/excerpts/chapter-37.php

Chapter 37

THE MONEY QUESTION:
GOLDBUGS AND GREENBACKERS DEBATE


You shall not crucify mankind upon a cross of gold.
                     -- William Jennings Bryan, 1896 Democratic Convention


At opposite ends of the debate over the money question in the 1890s were the "Goldbugs," led by the bankers, and the "Greenbackers," who were chiefly farmers and laborers. The use of the term "Goldbug" has been traced to the 1896 Presidential election, when supporters of gold money took to wearing lapel pins of small insects to show their position. The Greenbackers at the other extreme were suspicious of a money system dependent on the bankers' gold, having felt its crushing effects in their own lives. As Vernon Parrington summarized their position in the 1920s:

To allow the bankers to erect a monetary system on gold is to subject the producer to the money-broker and measure deferred payments by a yardstick that lengthens or shortens from year to year. The only safe and rational currency is a national currency based on the national credit, sponsored by the state, flexible, and controlled in the interests of the people as a whole.

The Goldbugs countered that currency backed only by the national credit was too easily inflated by unscrupulous politicians. Gold, they insisted, was the only stable medium of exchange. They called it "sound money" or "honest money." Gold had the weight of history to recommend it, having been used as money for 5,000 years. It had to be extracted from the earth under difficult and often dangerous circumstances, and the earth had only so much of it to relinquish. The supply of it was therefore relatively fixed. The virtue of gold was that it was a rare commodity that could not be inflated by irresponsible governments out of all proportion to the supply of goods and services.

The Greenbackers responded that gold's scarcity, far from being a virtue, was actually its major drawback as a medium of exchange. Gold coins might be "honest money," but their scarcity had led governments to condone dishonest money, the sleight of hand known as "fractional reserve" banking. Governments that were barred from creating their own paper money would just borrow it from banks that created it and then demanded it back with interest. As Stephen Zarlenga notes in The Lost Science of Money:

All of the plausible sounding gold standard theory could not change or hide the fact that, in order to function, the system had to mix paper credits with gold in domestic economies. Even after this addition, the mixed gold and credit standard could not properly service the growing economies. They periodically broke down with dire domestic and international results. In the worst such breakdown, the Great Crash and Depression of 1929-33, . . . it was widely noted that those countries did best that left the gold standard soonest.

The debate between these two camps still rages. However, today the Goldbugs are not the bankers but are in the money reform camp along with the Greenbackers. Both factions are opposed to the current banking system, but they disagree on how to fix it. That is one reason the modern money reform movement hasn't made much headway politically. As Machiavelli said in the sixteenth century, "He who introduces a new order of things has all those who profit from the old order as his enemies, and he has only lukewarm allies in all those who might profit from the new." Maverick reformers continue to argue among themselves, while the bankers and their hired economists march in lockstep, fortified by media they have purchased and laws they have gotten passed, using the powerful leverage of their bank-created fiat money.

Congressman Ron Paul of Texas is one of the few contemporary politicians to boldly challenge the monetary scheme in Congress. He is also a Goldbug, who argued in a February 2006 address to Congress:

It has been said, rightly, that he who holds the gold makes the rules. In earlier times it was readily accepted that fair and honest trade required an exchange for something of real value . . . . As governments grew in power they assumed monopoly control over money. . . . In time governments learned to outspend their revenues (and sought) more gold by conquering other nations. . . . When gold no longer could be obtained, their military might crumbled.

. . . Today the principles are the same, but the process is quite different. Gold no longer is the currency of the realm; paper is. The truth now is: "He who prints the money makes the rules". . . . Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system.

. . . The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value.

Modern-day Greenbackers, while having the highest regard for Congressman Paul's valiant one-man crusade, would no doubt debate the details; and one highly debatable detail is his assertion that it is the government that now has monopoly control over money, and it is the government that is counterfeiting the money supply.  Greenbackers might say that the government should have monopoly control over money creation, but it doesn’t. Wars are fought, not to preserve the dollars of the U.S. government, but to preserve the Federal Reserve Notes of a private banking cartel. It is this private cartel that has monopoly control over money, and its monopoly grew out of a shell game called "fractional reserve banking," which grew out of the very "gold standard" the Goldbugs seek to reinstate. We have been deluded into thinking that what is wrong with the system is that the government has a monopoly over creating the money supply. The government lost its monopoly when King George forbade the colonies from printing their own money in the eighteenth century. Banks have created most of the national money supply for most of our national history. The government itself must beg from this private cartel to get the money it needs; and it is this mounting debt to an elite class of banker-financiers, not profligate government spending on social goods, that has brought the United States and most other countries to the brink of bankruptcy. If Congress had used its Constitutional power to create money to fund its own operations, it would not have needed to pursue imperialistic foreign wars to extort money from its neighbors.

[Continued...]


http://monetary.org/refute.htm

A REFUTATION OF MENGER'S THEORY OF THE ORIGIN OF MONEY

Here below is a two page summary plus communication with the Austrian School

A challenge to the Austrian School of Economics and the Ludwig Von Mises Institute. Of much more general importance than it sounds, obeisance is universally paid to Menger's 19th century re-incarnation of John Law's theory of money, by present day Austrian economists. Menger's origin theory is also at the base (often explicitly) of much so-called libertarian thinking and writing today. For example Robert Nozick uses it to launch his book Anarchy, State, And Utopia, (p.18) one of the Libertarian's "bibles".

This paper most likely deals a "death blow" to this core thesis of the Austrian School, as formulated by Carl Menger, the school's founder. In effect the Austrian's are left without a viable theory of money. It would be difficult to imagine that one could be provided by Von Mises a more confused and self contradictory book than THE THEORY OF MONEY AND CREDIT. The understandable reluctance of "Austrian gatekeepers" to address this issue is documented below.

SYNOPSIS:
The paper challenges Menger on three grounds:

METHODOLOGICAL GROUNDS:
Though it is generally assumed that Menger's theory is at least in part derived from historical evidence, the paper demonstrates that its derivation is entirely theoretical, by showing that all the historically based evidence cited by Menger is 180 degrees counter to his theory. The paper points out the inappropriateness of attempting to divine an historical event or process with only deductive logic.

RATIONAL GROUNDS:
The paper points out that even within the framework of Menger's scheme, there are two fatal flaws. First the circularity of his reasoning in determining his causes of liquidity, which arises from his use of the "development of the market and of speculation in a commodity" as a cause of liquidity, when in fact it is a definition of liquidity and even Menger uses it as such. The paper explains the crucial difference. This is not quite an example of what has been called "Weiser's Circle". Second, the paper points out that within Menger's scheme, it is not liquidity, but volatility (or lack of it) which is much more important.

FACTUAL GROUNDS:
The paper shows that some of Menger's closely held general views of the stability of gold and silver and their universal use as money, are simply false. In addition the existence of the millennia long dichotomy in the gold-silver ratio between east and west, which Menger seems to be unaware of, appears sufficient to doom his theory.The paper presents some of the factual evidence gathered by William Ridgeway, in the ORIGIN OF METALLIC WEIGHTS AND STANDARDS; by A.H. Quiggin in A SURVEY OF PRIMITIVE MONEY; by Paul Einzig in PRIMITIVE MONEY; and by Bernard Laum in HEILEGES GELD; all as an indication that an institutional origin of money, whether religious or social, is much more likely to have occurred than Menger's assumed market origin.

[Continued...]


[Andrew] Jackson and Van Buren removed the monetary power from the private bankers but did not re-establish it in the hands of the nation. Instead, Van Buren organized the Independent Treasury System, establishing 15 sub branches of the Treasury to handle government moneys in 1840. From December 1836 the government moved toward making and receiving all payments in coinage, or truly convertible bank notes....Once the state bank notes were no longer accepted by the government, their circulation was cut back dramatically.

This was the closest our nation has ever come to implementing a real gold/silver standard. Operating under the commodity theory of money, Van Buren, who truly cared for the Republic, helped bring on the worst depression the Nation had ever seen, starting in 1837. It was reportedly even worse than that caused by the 2nd Bank of the U.S. in 1819. Bad as the state bank notes were, they had still been functioning as money!

Those who proclaim that no gold and silver money system has ever failed should consider that whether you are a laborer, farmer, or industrialist, the money system's success or failure is not measured by the value of a piece of metal. When your job, your farm, or factory has disappeared in a monetarily created depression, the system has failed!

-- Stephen Zarlenga, The Lost Science of Money, p. 426

Thanks to over a century of relentless propaganda, the image of the Greenbacks comes down to us as worthless paper money. But upon more careful examination, on balance they were probably the best money system America has ever had....Demonstrating how far monetary history has been distorted, readers may be surprised to learn that every Greenback printed was ultimately as valuable as its gold equivalent, and became redeemable for gold coinage at full value. Today the Greenback supporters are erroneously presented as merely being pro-inflation or against sound money. What they really wanted was a more honest money system, controlled by government, instead of banks....

They [Greenbacks] were receivable for all dues and taxes to the U.S., except import duties, which still had to be paid in coin. The Greenbacks were payable for all claims against the U.S. except interest on bonds which was still payable in coin. The Greenbacks were declared a legal tender for all other debts, public and private....

Greenback critics argue that they were inflationary and mistakenly measure the inflation against gold, starting at equal to a gold dollar in early 1862, and falling to 36 cents against a gold dollar by mid 1864. So one gold dollar exchanged for nearly $2.50 in Greenbacks. That is often the whole of their analysis and it is very misleading. Actually the Greenbacks did drop against gold; first to 58 cents at the end of 1862, then back up to 82 cents in mid 1863 and then down to a brief low of 36 cents on July 16, 1864.

From that point they moved up steadily, averaging 39 cents for August; 45 cents for September; and 48 cents for October, 1864. They retreated to $0.44 in December, and averaged $0.68 for December 1865. From there they gradually rose to $1.00, at par with gold in December 1878. Greenbacks became freely convertible into gold, dollar for dollar, in January 1879....

Economists mistakenly argue that it was only because the Greenbacks were eventually made convertible into gold by law, that made them hold and increase their value. However, that law was a hard fought political struggle, dependent on the 1868 presidential election. The battle could have gone either way and the actual "resumption" law could not get passed by Congress until 1874, for implementation in 1879. This could not have kept the Greenback from further declines, and start moving it upward back in mid-1864.

What did occur in July 1864 was that our government put a limit of $450 million on the Greenbacks and from that month they started rising (i.e. gold began falling in terms of Greenbacks)....

While the Greenbacks lost substantial value for a period, the nation was engaged in the bloodiest war in its history, in which 13% of the population served in the armed forces and 625,000 died....Is it reasonable to expect that any government in those circumstances could completely protect its citizens from financial and other hardships?

[Economic historian Irwin] Unger has noted that:

"It is now clear that inflation would have occurred even without the Greenback issue."

And comparing a wartime inflation under a government run money system (the Civil War) to wartime inflation under a private banker run system (WW I), Civil War historian [J.G.] Randall wrote:

"The threat of inflation was more effectively curbed during the Civil War than during the First World War."....

The fact that the Greenbacks were not accepted for import duties may also have been an important negative factor against the currency:

"Hence it has been argued that the Greenback circulation issued in 1862 might have kept at par with gold if it, too, had been made receivable for all payments to the Government," wrote financial historian [Davis Rich] Dewey.

Also, if interest payments on government bonds had been paid in Greenbacks instead of gold, a large part of the demand for gold would have disappeared.

-- Stephen Zarlenga, The Lost Science of Money, 453-65

The great German hyper-inflation of 1922-1923 is one of the most widely cited examples by those who insist that private bankers, not governments, should control the money system. What is practically unknown about that sordid affair is that it occurred under the auspices of a privately owned and controlled central bank.

Up to then the Reichsbank had a form of private ownership but with substantial public control; the President and Directors were officials of the German government, appointed by the Emperor for life. There was a sharing of the revenue of the central bank between the private shareholders and the government. But shareholders had no power to determine policy.

The Allies' plan for the reconstruction of Germany after WWI came to be known as the Dawes Plan, named after General Charles Gates Dawes, a Chicago banker. The foreign experts delegated by the League of Nations to guide the economic recovery of Germany wanted a more free market orientation for the German central bank.

[Hjalmar] Schacht relates how the Allies had insisted that the Reichsbank be made more independent from the government:

"On May 26, 1922, the law establishing the independence of the Reichsbank and withdrawing from the Chancellor of the Reich any influence on the conduct of the Bank's business was promulgated."

This granting of total private control over the German currency became a key factor in the worst inflation of modern times.

The stage had already been set by the immense reparations payments. That they were payable in foreign currency would place a great continuing pressure on the Reichsmark far into the future.

HOW IS A CURRENCY DESTROYED?

In a sentence, a currency is destroyed by issuing or creating tremendously excessive amounts of it. Not just too much of it but far too much. This excessive issue can happen in several ways, for example by British counterfeiting as occurred with the U.S. Continental Currency, and with the French Assignats. The central bank itself might print too much currency, or the central bank might allow speculators to destroy a currency through excessive short selling of it, similar to short selling a company's shares, in effect allowing speculators to "issue" the currency.

The destruction of an already pressured national currency through speculation is what concerns us in this case. A related process was recently allowed to destroy several Asian currencies, which dropped over 50% against the Dollar in a few months time, in 1997-98, threatening the livelihood of millions.

It works like this: First there is some obvious weakness involved in the currency. In Germany's case it was World War One, and the need for foreign currency for reparations payments. In the case of the Asian countries, they had a need for U.S. dollars in order to repay foreign debts coming due.

Such problems can be solved over time and usually require national contribution toward their solution, in the form of taxes or temporary lowering of living standards. However, because currency speculation on a scale large enough to affect the currency's value is still erroneously viewed as a legitimate activity, private currency speculators can make a weak situation immeasurably worse and take billions of dollars in "profits" out of the situation by selling short the currency in question. This doesn't just involve selling currency that they own but making contracts to sell currency that they don't own -- to sell it short.

If done in large amounts, in a weak situation, such short selling soon has self-fulfilling results, driving down the value of the currency faster and further than it otherwise would have fallen. Then at some point, panic strikes, which causes widespread flight from the currency by those who actually hold it. It drops precipitously. The short selling speculators are then able to buy back the currency that they sold short, and obtain tremendous profits, at the expense of the producers and working people whose lives and enterprises were dependent on that currency.

The free market gang claim that it's all the fault of the government that the currency was weak in the first place. But by what logic does it follow that speculators take this money from those already in trouble? Currency speculation in such large amounts should be viewed as a form of aggression, no less harmful than dropping bombs on the country in question.

Industrialists should realize that when they allow such activity to be included under the umbrella of "business activity," they are making a serious error. They should help isolate such speculation and educate the populace on how destructive it is, so that it can be stopped through law.

Limitations could easily be placed on speculative currency transactions without limiting those that are a normal part of business and trading, while stopping the kind of transactions that are thinly disguised attacks on the country involved. Placing a small tax on such transactions would be a healthy first move.

TOO MANY GERMAN MARKS ISSUED

By July 1922 the German Mark fell to 300 marks for $1; in November it was at 9,000 to $1; by January 1923 it was at 49,000 to $1; by July 1923 it was at 1,100,000 to $1. It reached 2.5 trillion marks to $1 in mid November, 1923, varying from city to city.

In the monetary chaos Hamburg, Bremen and Kiel established private banks to issue money backed by gold and foreign exchange. The private Reichsbank printing presses had been unable to keep up and other private parties were given the authority to issue money. Schacht estimated that about half the money in circulation was private money from other than Reichsbank sources.

CAUSE OF THE FIRST INFLATION: SCHACHT'S FIRST "EXPLANATION"

There is often a false assumption made that the government allowed the mark to fall, in order to more easily pay off the war indemnity. But since the Versailles Treaty required payment in U.S. Dollars and British Pounds, the inflationary disorder actually made it much harder to raise such foreign exchange.

Hjalmar Schacht's 1967 book, The Magic of Money, presents what appears to be a contradictory explanation of the private Reichsbank's role in the inflation disaster.

First, in the hackneyed tradition of economists, he is prepared to let the private Reichsbank off the hook very easily and blame the government's difficult reparations situation instead. He minimized the connection of the private control of the central bank with the inflation as mere co-incidence....

THEN SCHACHT GIVES THE REAL EXPLANATION

Schacht was a lifelong member of the banking fraternity, reaching its highest levels. He may have felt compelled to give his banker peers and their public relations corps something innocuous to quote. But Schacht also had a streak of German nationalism, and more than that, an almost sacred devotion to a stable mark. He had watched helplessly as the hyper-inflation destroyed "his mark."

For whatever reasons, after 44 years he proceeded to let the cat out of the bag, with some truly remarkable admissions, which shatter the "accepted wisdom" the Anglo-American financial community has promulgated on the German hyper-inflation....

SCHACHT'S REVELATION

It was in describing his 1924 battles in stabilizing the Rentenmarks that Schacht made his revelation, giving the private mechanism of the hyper-inflation. Schacht was obviously very upset when the speculators continued to attack the new Rentenmark currency. By the end of the November 1923:

"The dollar reached an exchange rate of 12 trillion Rentenmarks on the free market of the Cologne Bourse. This speculation was not only hostile to the country's economic interests, it was also stupid. In previous years such speculation had been carried on either with loans which the Reichsbank granted lavishly, or with emergency money which one printed oneself, and then exchanged for Reichsmarks.

"Now, however, three things had happened. The emergency money had lost its value. It was no longer possible to exchange it for Reichsmarks. The loans formerly easily obtained from the Reichsbank were no longer granted, and the Rentenmark could not be used abroad. For these reasons the speculators were unable to pay for the dollars they had bought when payment became due (and they) made considerable losses."

Schacht is telling us that the excessive speculation against the mark -- the short selling of the mark -- was financed by lavish loans from the private Reichsbank. The margin requirements that the anti-mark speculators needed and without which they could not have attacked the mark was provided by the private Reichsbank!

This contradicts Schacht's earlier explanation, for there is no way to interpret or justify "lavishly" loaning to anti-mark speculators as "helping to keep the government's head above water." Just the opposite. Schacht was a bright fellow, and he wanted this point to be understood. He waited until he wrote the Magic of Money in 1967. His earlier book, The Stabilization of the Mark (1927), discussed inflation profiteering but did not clearly identify the private Reichsbank itself as financing such speculation, making it so convenient to go short the mark.

Thus it was a privately owned and privately controlled central bank, that made loans to private speculators, enabling them to speculate against the nation's currency. Whatever other pressures the currency faced (and they were substantial), such speculation helped create a one way market down for the Reichsmark. Soon a continuous panic set in, and not just speculators, but everyone else had to do what they could to get out of their marks, further fueling the disaster. This private factor has been largely unknown in America.

--   Stephen Zarlenga, The Lost Science of Money, pp. 579-87

------------------------------------


Byron Dale on why the gold standard is not the panacea that monetary flat-earthers from the Austrian School blindly insist it is:

       http://www.youtube.com/watch?v=9E0UPBtmTb0 (part 1 of 3)
       http://www.youtube.com/watch?v=Y9FWECWWN5o (part 2 of 3)
       http://www.youtube.com/watch?v=aM7D3mnUSI0 (part 3 of 3)

[Geolibertarian]

http://libertyrevival.wordpress.com/2010/04/05/anarcho-capitalism-has-failed/

Anarcho-Capitalism Has Failed

by Keith Gardner
April 5, 2010

Capitalism has failed not because we’ve haven’t tried the von Mises version of anarcho-capitalism but because we have tried the von Mises version of anarcho-capitalism. We haven’t tried to figure out how to implement capitalism correctly using true Libertarian and Natural Law principle, addressing the Georgist consideration of rent, wealth through finding rather than earning.

We’ve tried full private ownership of land. We’ve tried gold as currency. They’ve failed because anarcho-capitalism is invalid when considering land and currency. Anarcho-capitalism is part of the problem since anarcho-capitalism is a corruption of capitalism, secured property rights, liberty, free markets, and libertarianism. Anarcho-capitalism is true to it’s former part of the name, anarchy, where financial fraud and theft is legalized. Deflation is theft. Gold fiat is theft. Property, or wealth earned with labor, is not theft, but land, or wealth gained through findings, is theft.

Paper fiat was successfully tried for many centuries with the Tally Stick in England. Otherwise, paper fiat was only tried during the worst of times during the American Revolution and the Civil War. With the case of the Civil War, an argument could be made for a currency having a preserve of land, natural resources, and commodities, such as land, gold, oil, and capital goods, which could be used to back the currency in the event of catastrophic failure. Harry Browne did argue against the State holding such preserves, but he also indirectly advocated the use of preserves to rescue humanity from a failed State.

However, currency should not be directly exchanged for a commodity since that has an effect of pegging the value of the currency to that of a commodity, which has changing value according to supply and demand for that commodity, corrupting the market for the commodity itself and the free market itself of all other commodities, including savings and loans, as a whole, with inflation and deflation. Gold fiat is like debt fiat in that regards, in that gold fiat corrupts gold markets as debt fiat corrupts the market for savings and loans. With any functioning currency, you do always have the ability to exchange it for the commodity of your choice, if you wish to hold your monetized wealth in a commodity. If you want to use gold to store your wealth, you can do that now. If you want to use silver to store your wealth, you can do that now.

Going back on the gold standard is opening the old can of worms. It solves no immediate or long-term problem. It doesn’t stop the bankers and private holders of gold from manipulating the value of the currency. It doesn’t stop deflation, and when the commodity bubble bursts, it doesn’t stop inflation.

Some anarcho-capitalists have this idea we should have private competiting currencies. We had that in the colonies. Some states paid taxes and debt in grain, some in tobacco, some in Spanish notes, some in British notes, some in gold, some in silver, some in beaver tails, and some in other currencies. If you think that is going to work now, you’re insane. And the founding fathers did away with it in the U.S. Constitution. You’re also retarded if you think the market flooded with different currencies is a good thing. It would be more inflationary and full of fraud than even the Federal Reserve and fractional reserve lending. You really need to stop drinking the Kool-Aid because it is making you look stupid.

Going on a true public debt-free paper fiat has immediate and long-term benefits. It can solve the national debt problem. It can solve the budget crisis. It can solve a lot of problems since coming off fractional reserve lending is the act of replacing debt dollars with debt-free dollars. Paper fiat is justice with a real reward, debt-free dollars to pay off the national debt and end income taxation.

Goldbugs are the stumbling block for ending the Federal Reserve since they offer no solution and no benefit for ending it, except perhaps to those who want to increase the value of their holdings of yellow rocks. They would increase the hording rate, but they wouldn’t increase the savings and lending rate since deflation would prevent lending. An old fraud is no solution for the current fraud.

Full respect for land as community property was successfully tried for many centuries with American Indians until the invasion of Europeans. We have partially respected land as community property with sales taxes, an indirect tax on natural resources, and property taxes, an indirect tax on land ownership. We have great economists who explored the topic of land ownership, such as Proudhon, John Locke, Adam Smith, Thomas Paine, David Ricardo, and Henry George, along with the Bible’s consideration of addressing inherited land wealth with the jubilee in Leviticus. Private ownership of land can be respected if the rental value of the land is given to the people. Henry George demonstrated taxing land value, the value that goes up in one’s sleep, not to be confused with property value, or the developed value due to labor, causes positive economic benefits and encourages productive use of land in economic centers, and makes it very affordable, especially outside of economic centers.

In recent times, the unregulated market resulted in a derivatives crisis. Anarcho-capitalism doesn’t work. Legalization of financial fraud is not the answer. Men are not angels. Thus, government is necessary. Legalized fraud is not a magical hand. It does not bring order out of chaos. The fascist state will not go away under Communism once an order is achieved. The fraud will not go away under anarcho-capitalism once an order is achieved. In fact, the only order that will be achieved under socialism or anarcho-capitalism is that of crime. To the most criminal goes the spoils.

The egoism and social darwinism of Ludwig von Mises, Murray Rothbard, Ayn Rand, Alan Greenspan, Herbert Spencer, Thomas Malthus, Max Stirner, and others have corrupted the principles of Libertarianism or classical liberalism rooted in Natural Law or the idea of individuals having inalienable rights which need to be secured for free markets to work correctly. Anarcho-capitalism is the philosophy of thieves and eugenists, where those unable to work as slaves to obtain land, natural resources, and gold shall starve under the weight of the deflationary effects of feudal gold and land monopolization, where the only people who are able to get ahead are the people who find wealth, as the land and gold increase in value, in their sleep. There are no free lunches. As the one with the gold and land steal wealth in their sleep, it is as the expense of someone who tries to earn a living while they’re awake.

Arbitary division of wealth between the State and private individuals will not work either. Keynesian economics is a blind and corrupt solution. There is a true center, but it isn’t arbitary. It requires complex understanding of property rights. Income taxes and any tax on earned wealth is a form of slavery and unnecessary when there are better sources for public revenue on found wealth, such as found in increasing land values, which are a result of the existence of the population as a whole rather than the individual with an empty lot in the middle of a city or the individual with a gold mine, a stash of beaver tails, or whatever commodity is being used as the currency.

Only correctly implemented capitalism, free markets, and secured inalienable rights can prevent poverty. Unfortunately, Karl Marx, Ludwig von Mises, and John Maynard Keynes all miss and fail. There is a pink elephant in the room at the Ludwig von Mises Institute. His name is Henry George. Maybe if the students can see the cat, they’ll notice the pink elephant.

Who needs scientific evidence, common sense, and reality when you got big words like praxeology and funding from the Rockefeller Foundation to confuse, blind, and brainwash the masses with logical and definitional absurdities until they can’t even consider the historical evidence and the points raised by great minds like Albert Einstein, Thomas Edison, Henry George, Thomas Jefferson, Thomas Paine, J.S. Mill, Cicero, John Locke, Adam Smith, Winston Churchill, and many others, including people within their own political party and institutions?

[trailhound]

Gold is not the answer.

 Thanks for reminding me I meant to argue the point that Gold AND Silver are good couples as money. Geo and others have posted many arguments about there not being enough gold to go around etc. That is why the constitution proscribed Gold AND Silver   to be used as lawful money. 

 

[africknamerican]

Ah, Steve Zarlenga! A fount of information. With some annoying personality traits and, more importantly, annoying biases, that get in the way of the large amount of truth he conveys.

But there is nothing dismal about George’s writings, which can be seen as in the much older tradition of the Catholic “Scholastics” or “Bookmen” -- the church scholars of about 1100 to 1500 AD who were very familiar with the existing written works available in the west. The Scholastics made the first attempt at a science of economics to build a rationally based moral code of business behavior and determine what should be, rather than what was. To their credit, they were much more influenced by Aristotle than by the bible, and many of them such as Albert the Great of Cologne and his student Thomas Acquinas were later canonized as saints.

I have Zarlenga's 700-page tome. There are many things that a competent editor and typesetter could have done to make his book more concise and readable--and perhaps, reduce the weight and the price ($40 "discounted"!) Probably a couple hundred pages of redundancy, off-topic meandering and wasted space could have been cut. One thing a professional editor would axe is his irrelevant editorializing about the Bible and Christian theology and history, subjects on which he is uninformed compared to his research on money. He doesn't do himself or the monetary reform movement any favors by airing his irrelevant peeves with religion.

The Bible was in fact a huge part of Henry George's inspiration on questions of economic justice. The "Moses" lecture was a staple for George, as he espoused how his own views of land tenure and economic justice were basically updatings of the Old Testament law. The medieval scholastics may also have happened to have agreed with the Bible on some points, although they arrived at this agreemnt largely through pagan philosophers and reasoning apart from the Bible.
l
Zarlenga's other problem has been that like Tarpley, he's an old lefty, and he could not help but link the libertarian issue of monetary sovereignty to welfare-state issues like national health care and education (which he thinks needs more funding!). The two things have no connection, except in Zarlenga's personal world view. I had a long argument with him one day after attending one of his seminars, that he should detach these drastically different issues. Public infrastructure spending to circulate the new money is constitutional, and nobody would argue with fixing roads and bridges. Education and healthcare, however, are totally different creatures.

To get monetary reform requires building a broad-based coalition from left to right, and if you're piggybacking New Deal rhetoric with monetary reform, then you lose the right. In '08 I advised him to talk to the Ron Paul people, and at the time he violently resisted the idea. It seems that he has come around a bit since then (probably at Cook's urging -- or maybe Kucinich's).  I also think that now, since Obamacare has passed, Zarlenga will set aside his opinionizing about the need for national health care, and focus on the real task of implementing a sound and just money system.

[worcesteradam]

lets remember George was also an inspiration for Fabian Socialists.

[Geolibertarian]

lets remember George was also an inspiration for Fabian Socialists.

Do Fabian Socialists advocate abolishing wage taxes as George did?

No.

Do they advocate abolishing sales taxes as George did?

No.

Do they advocate abolishing taxes on the value of capital goods as George did?

No.

Do they advocate abolishing taxes on the value of houses, buildings and other improvements as George did?

No.

Do they categorically reject both social Darwinism and the Malthusian theory of population as George did?

No.

Yet does that prevent Austrian School reactionaries from mindlessly invoking red-baiting labels anyway in a desperate attempt to (a) misrepresent Georgism as being the virtual opposite of what it actually is, and (b) divert attentiom from the fact that the privatize-everything Austrian School was financed out of obscurity in the U.S. by the Rockefeller Foundation?

No!  

[EvadingGrid]

lets remember George was also an inspiration for Fabian Socialists.

"For the first years of Ludwig von Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

 

[WakeUpAmerica]

Austrian School was financed out of obscurity in the U.S. by the Rockefeller Foundation?

Can you show some proof of this? If you're right that raises some serious doubts about Ron Paul...

[EvadingGrid]

Can you show some proof of this? If you're right that raises some serious doubts about Ron Paul...

I would not worry about Ron Paul, but the evil ones in washington really, really, really are scared of Ron Paul. His proposals such as "Audit The Federal Reserve" are terrifying the stool out of the evil ones, and he provides a mainstream path for truth seekers.

The quote was from this man Richard M. Ebeling
http://www.fff.org/aboutUs/bios/rme.asp

You need to ask GeoLib for details.

[worcesteradam]

Can you show some proof of this? If you're right that raises some serious doubts about Ron Paul...

http://mises.org/media/6215/18-201migr233-in-New-York

[WakeUpAmerica]

http://mises.org/media/6215/18-201migr233-in-New-York

It says he contacted his friends at the Rockefeller Foundation but it didn't work out.. is it later into the recording?

[worcesteradam]

dont listen to it if its too long. Just thought it might help. Its a chapter discussing his arrival in America.

[africknamerican]

The Austrian viewpoint actually has a lot of offer. It's just that some key truths are missing or misrepresented. For instance, along with the "neoclassical" school, Austrians pretend that land doesn't exist -- i.e., it's economically not significant, or it's just another form of capital. So they deny that land is its own independent factor of production, which also indepdently receives a huge portion of the wealth produced by society. The top Georgist economists are actually working with a fusion of Austrian and Georgist concepts.

Conventional macroeconomics lacks a warranted explanation of the major business cycle, while the Austrian and geo-economic (Georgist) schools have incomplete theories. A geo-Austrian synthesis, in contrast, provides a potent theory consistent with historical cycles and with explanations about the root causes.

-- Fred Foldvary, The Business Cycle: A Geo-Austrian synthesis

[worcesteradam]

So if land cannot be owned privately, then who owns the land? Presumably the government? federal or local? or UN?

[Freeski]

"For the first years of Ludwig von Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

 

Who cares? It's the principle that matters, not the messenger. And that's the beauty of truth. Just look with your own eyes: the buildings just fell with little to no resistance, all three of them! You saw it with your own eyes. Mises, Ron Paul, Michael Cloud, Libertarians in general (Austrians as you call them) simply want to live and let live.

For example, Geolibertarian said:

If I had to pick a label other than "geolibertarian" with which to describe myself ideologically, it would be progressive libertarian -- "libertarian" in the sense that I advocate limited government on both personal and economic issues, "progressive" in the sense that I believe efforts to reduce government spending should be directed at programs designed to assist the poor only to the extent that the tax, monetary and regulatory policies that created the apparent need for such programs in the first place are either abolished outright or structurally reformed.

Private charity will do it's best to take care of it.

I detest labels because even if I have 99.9% of the qualities of an Austrian Schoolist, that's just some summation in your mind. Just like the left-right paradigm, it's a useless categorization.

I challenge you or anyone to find a single human textbook definition of Catholic or Republican or Communist. There isn't one.

I think the root issue in the divide between "Libertarians" & "Progressive Libertarians" is that "Progressive Libertarians" simply don't trust pure unmolested freedom. We need a social safety net? Good idea but what, you're going to take money from some to give to others? That there violates the basic premise of freedom, as well as the non aggression principle, so who are you or anyone else to order me into paying for some common good fund? You impose a tax scheme, I resist, you take my shit, I try to take it back and then you shoot me? No deal!

It's time to stop smearing true liberty! If you don't trust it, fine, but maybe one day you will see the light. It's about control, and every single government program, no matter how small or seemingly benign, requires the "authority" to force people to fund it.

Faith in freedom is just that: a belief that there are plenty of good people in the world. Yeah, we'll have criminals whether we have this global grid or not -- but as we know, the globalists can and do nasty things.

The system has proven itself from day one to be an incubator of corruption. It's time to pull the plug.

BTW I know this is rantish and I apologize but the whole Austrian label has been bugging me for a long time. We all want the same things: we just disagree on the destination.

[masterofthemoon]

I agree that the austrian system is not a bedrock of absolute truth though some of its positions are leaps and bounds superior to our current corporate statist model.
 What I find absurd is the Geolibertarian claiming Mises was a rockefeller stooge or at least he implies so in his signature.
 Where is the extraordinary evidence to back up this extraordinary claim?

The role or lack thereof of government in Anarcho-Capitalism is far more ideal then in what I see GL advocating and that does imply a blanket approval of all things austrian-anarcho-capitalist of which I do have some issues with.

Why does he use such hyperbole in a vicious way when talking about them? This thread title alone claims all austrians are irrational reactionaries.

Those are my questions.

[worcesteradam]

If someone got paid by the Rockefeller Foundation it is not unfair to claim he is a stooge or to imply the entire movement might be controlled that way.

Why would the foundation be interested in him? Mises is clearly connected to influential people and he taught at the Graduate Institute of International Studies, a huge globalist operation.

[africknamerican]

So if land cannot be owned privately, then who owns the land? Presumably the government? federal or local? or UN?

The argument is that individuals should own (possess & control) the actual land, and should profit from any improvements (buildings etc.) or products produced on it.  But they should not be able to treat the land itself as a for-profit commodity. Buildings and products are produced by individuals, but the land value (rental value) is not -- it's a social product. It's created by the existence of a growing community, and of government services such as roads, utilities, police protection, etc. So, the rental value should be recovered ("taxed")and reinvested in the  services that helped make the land valuable in the first place. (As determined by the voters, part of it could also be distributed back to citizens as an equal dividend, just as a corporation can reinvest some profits and also distribute a dividend to shareholders.) This is the way to finance public goods without taxing productive activities. It also serves to "pre-distribute" economic opportunity so that everybody has about an equal amount, and so the free market can work on a relatively level playing field.  

Under the ideal version of this system, if you own land of no value (as determined by the market), you pay zero taxes on anything. (No income tax; no sales tax; no excises, etc.) In fact, you'd receive a dividend as compensation for being in a comparatively undesirable location. That would be a nice benefit for folks who voluntarily want to live off the grid!

I think that some tariffs on foreign products could be retained in order to equalize the unfair trade advantages enjoyed by countries like China, who repress/opress their people. However, a purist Single Taxer would say we should and could get rid of tariffs, because the benefits of the other measures would be so great that American productivity would skyrocket, our manufacturing base would revive, and we wouldn't need to buy so many cheap Chinese goods anyway. We could afford to untax them (for the benefit of people who still want to buy them).

This whole plan would provide huge economic benefits, but also has an ethical foundation. Land is the origin of all wealth and it's absolutely necessary for life and work (you have to live and work somewhere on earth). And on that basis, you can deduce that the right to own land of equal quality -- including location -- is a human right. John Locke wrote about this: he said everybody has the right to "as much and as good" land as everybody else. But he didn't provide a way to assure this right to everyone. Because of its nature (land is fixed, while population is always growing), the only way to assure everyone their equal right to land is to either redistribute land physically, every generation, or to redistribute it economically, through the Single "Tax" and Citizens Dividend. Obviously, the latter would be a far better way to do it.

This could all be done by existing local and State government mechanisms because it's essentially a modification of the real estate tax already in place within the States. The conventional RET in most places is broken, though,  because it lets most gains from land slip through (encouraging land speculation) while it taxes improvments pretty severely (discouraging building/renovation), which is backwards.

Going to the Single Tax system could enable us to drop federal income/excise taxes, because most revenue could be originated locally. The system could be redesigned so the federal government would have to rely on local and States governments for revenue, just like under the Articles of Confederation. (That, and we could give the fedgov the rents from federal lands and resources, like grazing, timber, offshore fishing and oil -- supposedly they already collect oil royalties, but not really, as we're seeing with all the controversy lately.)

[worcesteradam]

The argument is that individuals should own (possess & control) the actual land, and should profit from any improvements (buildings etc.) or products produced on it.  But they should not be able to treat the land itself as a for-profit commodity. Buildings and products are produced by individuals, but the land value (rental value) is not -- it's a social product. It's created by the existence of a growing community, and of government services such as roads, utilities, police protection, etc. So, the rental value should be recovered ("taxed")and reinvested in the  public goods that helped make the land valuable in the first place. (As determined by the voters, part of it could also be distributed back to citizens as an equal dividend, just as a corporation distributes dividends to shareholders.) This is the way to finance public goods without taxing productive activities. It also serves to "pre-distribute" economic opportunity so that everybody has about an equal amount, and the free market can then work on a relatively level playing field. 

What i am thinking is under this system there wouldnt be any rental property market anymore. Or if you taxed only a % of the rental income that would make renting more expensive.
Do you agree with that.