Yearly Archives: 2013

1 – 1 = 0

Parental responsibilities and authority have well understood boundaries even though no formal written contract exists between parent and child. It is wholly non-controversial that any parent exceeding such boundaries should have their authority curtailed if not entirely rescinded. It is then a rather curious circumstance that when government, whose duties and authorities are clearly articulated in written forms (constitutions, charters, etc.), exceeds its legitimate authority it is considered nearly an act of treason to merely point out that its actions fall outside the scope of its authority.

Representative democracy (e.g. a republican form of government) is relatively insensitive to the will of the people insofar as the representatives are not obligated to act in every circumstance as would the people. This can be beneficial in tempering a mob mentality toward governance (tyranny of the majority), however that benefit can easily become a liability when rent-seeking special interests co-opt and corrupt the system (tyranny of the minority).

There does at least remain one avenue by which the people can expediently and directly make their voice heard: jury nullification. It is the final arrow in the people’s quiver against a tyrannical government. Georgia House Bill 25 (“Fully Informed Jury Action of 2013”) has recently been introduced into the Georgia state legislature. It would protect the right of the defense in a trial to build a case on the grounds of illegitimacy of the law in question. Jury nullification is already a de facto right of juries (in that jurors are not required to disclose their reasoning thus one is always free to rule based on their conscience). However judges (and prosecutors) typically prefer that jurors remain ignorant of this right as they feel the interpretation and application of “law” is their sole domain and that jurors’ only responsibility is to answer questions of fact (“did he do it or not?”). Judges will often outright prohibit any mentioning of nullification lest a mistrial be declared. House Bill 25 would end such prohibitions. This is a uniquely powerful check on government power insofar as juries are composed of one’s peers, not distant bureaucrats or politicians. If the citizens who voted in the politicians do not agree with what they are doing they have the right nullify what they are doing now as there is no guarantee that future voting will undo the harm that has been wrought. Just as jury nullification (and state nullification) was used to ignore unjust and illegitimate laws like the Fugitive Slave Law of the 1850s, it may also be used today to ignore similarly illegitimate laws related to drugs, unpasteurized milk sales, and similar victimless “crimes”.

Government is established when sovereign individuals convey certain rights to their local state government (while retaining all non-conveyed rights to themselves). Likewise the federal government was established when the states granted the federal government certain “powers” (see 10th Amendment to the US Constitution) while retaining all others not specifically conveyed. So, just as the individual can nullify certain state laws based on a breach of authority so too can the states nullify federal laws on a breach of constitutional authority. To argue that jury or state nullification is invalid is to argue that it is better that some be made the victims of immoral and unjust laws rather than sacrifice the appearance of unity of the polity.

I shall address next week several of the common objections to nullification. Stay tuned…

False Alarm

It seems that can our government kicked down the road back on January 1 is upon us in the form of the looming March 1 “sequestration” cliff. One can both admire and be sickened by the hyperbole employed by politicians when discussing these impending “cuts”. President Obama in his 2013 State of the Union address  described them and their effects as “harsh” and “devastat(ing)” to our “priorities” as well as “jeopardizing” military readiness. Really? So a 5% cut is going to jeopardize essential government operations? That’s funny, because the governments own Congressional Budget Office report states that “If no additional appropriations are provided by then, nonessential functions of the government will have to cease operations.” The operative word there being “non-essential.” If all the things the President pointed out are truly “priorities” then there should be nothing to worry about as only non-essential items will be cut. Of course this begs the question as to why these “non-essential” things were funded in the first place. Isn’t government only supposed to do what is essential by definition? Claiming that essential programs will be devastated by a 5% cut is to claim that the government lacks the common sense of any citizen. If your ability to spend is reduced do you immediately cut back on your food budget in order to keep paying your cable bill? No, you prioritize. Those things valued most highly are paid for first, those things valued least are paid last or cut. It’s the same ruse they used during the debt-ceiling crisis in 2011 that precipitated this whole mess. At that time they suggested grandma wouldn’t get her social security check. Yes, that’s right, let’s pick the thing everyone values the most and claim it will be the first thing to be cut. That makes so much sense. I mean, how stupid do they think we are? (Don’t answer that.)

But I have to hand it to Obama, somehow he deftly managed to imply that everyone’s oft paraded and favored government employees (teachers, police, and firefighters) would be laid off if sequestration takes place. It’s really more of an assertion as it has no basis in fact whatsoever. They are funded at the local level and would not be in any way affected by sequestration. This is just another scare tactic that the dishonest use to mislead the uninformed.

So, if a 5% cut is devastating then I don’t know how this country survived a mere 10 years ago when the federal budget was about 50% smaller than it is today! Even adjusting for the ratio of budget to GDP, the Clinton years should have been a time of societal and defensive collapse with a mere 18% federal budget burden to GDP. Today it is over 22% and cuts that might bring it to 23% are impugned as bringing about the end of civilization as we know it. Wait, 23% is not down from 22% is it? Read on.

Federal outlays are projected to be $47 trillion from 2014-2023 and these cuts amount to removing $1.2 trillion from that total or a 2% decline in overall federal spending. But even this is not a true decrease. Even if the 2014 projected budget were frozen for 10 years the total outlay would be $36.2 trillion. So even with these “cuts” total federal outlays will increase by 27% which is still an increase from 22% to 23% of GDP. Repeat after me. There are no cuts. There are no cuts. There are no cuts.

Obama and his ilk are simply trying to sell us the government diet. That’s the diet where you gain 10 pounds but claim you lost 5 lbs because you “projected” you were going to gain 15 lbs.

A tax by any other name

And so it has come to pass – nearly 100 years since the post office ceased Sunday mail delivery (dropped in 1912 primarily due to religious and workers rights reasons) the United States Postal Service will cease Saturday mail delivery later this year. This time the reasons are financial rather than ecclesiastical. The Postal Service expects this change to save $2 billion a year – although this barely scratches the surface of a $15.9 billion loss in 2012 (although $11.1 billion of that loss was the result of a Congressional mandate forcing it to pre-fund future retiree health benefits – something it requires of no other federal agency). The Postal Service is a quasi-private entity. It technically receives no funding from Congress, however it’s ability to operate is tightly controlled by Congressional whim. But one area where it does benefit from its governmental relationship is with respect to the “Private Express Statutes”. These are a set of statutes that confer on the US Postal Service a legal monopoly of letter delivery. This monopoly is enforced by a mandate that any entity delivering “letters” must charge at least 6 times the current rate for the first ounce of a single piece First-Class mail letter. Fortunately “parcels” do not fall under that mandate; otherwise FedEx and UPS would be nothing but big “What ifs”.

Although Congress is specifically authorized in the Constitution (Article 1, Section 8) to  “establish Post Offices”, such authorization does not on its face imply that the federal government is the ONLY entity permitted to do so, merely that this is one thing it MUST do. The reasoning behind establishing a monopoly position in the marketplace was the concern that private business would simply come in and “poach” business away from the more profitable mail routes. This would then mean either prices would have to rise on the less profitable (rural) routes or tax dollars would need to be employed to subsidize costs along these less profitable routes. Gee, with a justification for monopoly like that I don’t understand why we don’t establish a monopoly within each sector of the economy. Why not give Publix a monopoly on groceries in this country? Then they wouldn’t have to waste money on competing or advertising and could provide “affordable” food prices for everyone by subsidizing less profitable stores with the receipts from the more profitable stores.

Mandated monopolies, whether in private industry (e.g. utilities), or in government (Postal Service) make no economic sense. Consider the argument here: private mail delivery companies would out compete the Postal Service by charging less thereby depriving the Postal Service of income. So instead of overcharging some customers in order to subsidize the undercharging of other customers it would be necessary to overtax some people in order to provide a net benefit to some other people. How are the two processes different exactly? Both involve individuals in Group A paying more than necessary in order that individuals in Group B pay less than necessary. So if the worst outcome (raising taxes) is equivalent to what you are doing right now, then there is nothing to lose in trying the alternate approach. Best case it is a zero sum game (the money people save is simply taxed away to fund the Postal Service losses). The more probable outcome is that there is a net benefit to society when multiple entities compete for the customer’s dollar. Perhaps private competitors might be so efficient that they could provide mail service to even the “unprofitable” areas at an “affordable” price (which is what I believe UPS and FedEx currently do in the area of package shipments).

Congress should eliminate the monopoly provisions on mail delivery, let the chips fall where they may and let the market solve this problem. In the age of $20 cell phones somehow I doubt there will be an issue in providing “affordable” delivery of folded pieces of paper.

Barking at Ethics

Georgia House Bill 142 (introduced on January 29, 2013) attempts to reform ethic laws in this state. Sadly, legislators have, in their zeal to cast a wider ethical net, broadened the definition of lobbyist so wide that it now encompasses basically everyone except elected officials themselves (just wait, that will come next!). Yes, this includes even you and me. The particularly onerous portions of this bill, the reporting requirements, do not apply to individual citizens expressing “personal views” UNLESS they are speaking to someone elected statewide who was not elected within their district. In other words, as the law is written (as of today February 10, 2013) if you wish to speak to the Governor, Secretary of State, Public Service Commissioner, etc. and discuss anything other than the weather or sports you technically would need to register with the state of Georgia as a lobbyist and pay a $300 annual fee for the privilege thereof.

This provision clearly violates the 1st Amendment to the US Constitution (in conjunction with the supremacy clause) or the 14th Amendment (take your pick) insofar as the 1st Amendment guarantees “the right of the people… to petition the Government for a redress of grievances.” That key phrase “right of the people to petition” – defines precisely what “lobbying” is. Therefore any laws that in any way hinder the ability of anyone to petition (lobby) are violations of this core Constitutional right. It is immaterial toward the exercise of this right whether I (or a group of people) personally petition the government or if I hire someone to act on my (or our) behalf.

The idea that society requires the intervening hand of a strong, beneficent governing body in order to keep us all in line relies upon the argument that, in general, people are bad and need to be governed. This faith in a paternalistic government rests squarely on the assumption that elected officials must necessarily be “better” than the rest of us, for if they are not, what is the point in being ruled by those no better than we? And if they are indeed not any better than we (as evidenced by the apparent need for various ethics and transparency laws), this then begs the question: if the problem with society is imperfect humans, why put imperfect humans in charge? We make the problem worse by conferring special power privileges to those in charge that invite a level of abuse that would otherwise be impossible absent such special privilege.

The fact that we find it necessary to pass ethics laws demonstrates the fundamental flaw of monopoly government. Abuse of power. Ethics laws are mere band-aids that do not address the underlying incentive problem. It is in man’s nature to abuse power just as surely as it is in a dog’s nature to bark. You can muzzle the dog, but he still barks, albeit softly. Ethics laws simply shift unethical behavior underground. I suppose if sweeping dirt under the rug constitutes “cleaning” then ethics laws “solve” ethical issues equally well.

I, like so many others, am justifiably upset with the power and sway some lobbyists seem to hold over many in government. But I’m not upset with the lobbyists; rather I’m upset with a system that encourages rent seeking by a small but vocal minority (rent seeking being the activity of manipulating the power of government so as to benefit oneself at the expense of others). The only way to solve “ethics” problems in government is to remove the incentives to “buy” power. Eliminate the monopoly power government has over the activities being lobbied. I don’t lobby McDonalds to build a restaurant near me, rather, I eat at Burger King. If McDonald’s wants my dollar, they have to earn it. So too should it be with government.

National ID = National Disgrace

The Washington Post’s editorial board recently opined that a national ID card would be the most effective method to thwart illegal immigration. Their idea was bolstered by the fact that both President Obama and a bipartisan group of eight senators recently put forward similar ideas (“fraud-resistant, tamper resistant Social Security card”). Superficially this makes sense. If the problem is uninvited guests crashing your party then the most logical solution would be to demand your guests show their invitation at the door. The Post then dismisses any potential concerns about civil liberties as nothing more than empty rhetoric by citing the fact that 35% of Americans already have a passport.

The Post misses the point in a grandly ironic fashion by citing the innocuousness of the tool the state uses to violate our civil liberties whilst simultaneously ignoring the actual violation. Move along, nothing to see here. The truth is that ID’s don’t harm civil liberties; rather it’s those that require them that do. Government says to step from point A to point B you must show this card. Government says to get a job you must show this card. Government says to start a business you must show this card. There is no end to what new actions the government could conceivably try to control by making one’s right to engage in an action contingent on the possession of “proper” ID. Do you want to go shopping? Buy gas? Go to a movie? Buy a car? Open a bank account? Go to the library? Go to the park? Please – show me your papers. Yes, ID is already required for many of these things. But that is the point. It should not be. Think about it. What are you doing when you show your ID? You – a grown adult – are asking for PERMISSION to engage in some action. It is one thing to ask for permission to engage in something that is not a natural right (i.e. enter a private residence or business), it is quite another to ask permission from the State to engage in an activity that is innocuous to others (traversing a border, starting a business, getting a job, etc.). We are not children, and the State is not our parent. I stopped asking for permission when I turned 18. How about you?

Sadly the real immigration “problem” has never been addressed. The problem is immigration prohibition. In fact the prohibition of anything innocuous to third parties always leads to more harm than ever could result from the prohibited activity itself (violence being the primary result). Drug prohibition is at least plausible albeit still as harmful as alcohol prohibition. But immigration? How can immigration harm anyone? By “stealing” that lucrative low wage job no American wants? Some say immigrants drive wages down. Although nominal wages for low skilled labor may decline, real wages rise for society because cheaper goods and services mean each dollar buys more. Some say immigrants are mooching off our socialist safety net. Well seeing as how it is not so much as a net as it is a luxuriant feather bed what did you expect? Turn it back into a mere net and that problem will vanish. Both big employers and low skilled workers use government to protect themselves from competition. The former uses regulation and the latter uses immigration. A few benefit at the expense of the many.

The solution to “illegal” immigration is to end the prohibition on immigration. Completely free and open borders. Chaos? The end of America? Hardly. Illegal aliens constitute a mere 2% of the US population. Even if every Mexican (all 110 million) came to live in the US (an absurd notion) “native” Americans would still outnumber them 3 to 1. Since even that outlandish scenario would not “end” America, perhaps we should face what immigration control has always been about. Fear. Fear of the unknown, of new customs, of new languages, of new competition. It is only when we humans give in to fear and allow it to guide our actions do we engage in the most reprehensible and irrational behavior. Since fear guides all immigration policy perhaps it is time to examine the rationality of such policies. If the process of entering or exiting this country is indistinguishable from the process of entering or exiting a jail, then are any of us truly free?

Resistance is Not Futile

This will be my last foray (part 1, part 2) into the whole gun debate issue and so I would like to address a common objection to “ordinary” citizens owning “military” grade weaponry. I received this question from a friend recently: “How do sovereign people adequately defend themselves from their government that has vastly superior weapons?” The assumed “gotcha” response is that such defense is obviously futile and thus having demonstrated such futility ipso facto there can be no legitimate reason for a citizen to posses such weapons. This was not my friend’s intent in asking this question though; he raised a legitimate question and was seeking a thoughtful answer.

To answer this we must first ask: What is the objective of such people defending themselves? Is it to achieve an outright resounding victory or is it to merely resist? Although the former objective may be the desire clearly the difference in weaponry would make that an unlikely immediate outcome. However, resistance is a different matter. Resistance does not require equivalent weaponry, merely minimally repulsive weaponry. The truth of this is found throughout a history replete with stories of rebelling forces that were vastly outgunned and outmanned resisting against superior forces for years on end. For example, the American Indian (various tribes) resisted the growing incursions of the United States into their various territories for decades. They did ultimately lose that battle, however there was resistance. Had they been completely disarmed the resistance of the Indians would have lasted days rather than decades.

There are also examples where resistance can ultimately translate into victory. If your goal is not to win but rather to simply wear your enemy down, then it is often possible for the “weaker” party to prevail. For examples of that look no further than our own American Revolution. An army of farmers armed with muskets defeated the mightiest military on the face of the earth. Likewise the tables were turned in Vietnam when we, with the mightiest military on the face of the earth, were defeated by a grass roots militia. Some might quibble over the details of these examples, but there are plenty of others and it does not detract from the underlying point, which is that a weaker party can overcome a stronger party even when they may only posses the most basic defensive weaponry. Don’t believe me, believe history.

So if resistance is a legitimate use of such weapons does that mean possession of such weapons by citizens should be legal? Yes. Does this mean then that everyone is going to rush out and buy their own bazooka and surface to air missile launchers? Of course not – those things are expensive! According to the Internet a bazooka costs around $50,000 and a single round costs $500. In other words the market already has a built in regulation of such weaponry as they are simply financially out of reach for 99% of the population. The 1% that can afford them have no interest in them and the 0.001% that can afford and do have an interest in them are not going to risk losing them by doing something stupid.

If our government were actually serious about restricting weapon sales they could do so today without passing any laws or regulations. Simply make it a condition of any purchasing contract with arms manufacturers that any weapon the military purchases may only be sold to them (e.g. an exclusivity contract). The arms manufacturer is free to sign such a contract or not. Violations of such a contract would entail loss of future multi-million dollar contracts and other damages. Additionally, the military should destroy all weapons when they are designated for retirement rather than selling them through “surplus” stores or to other governments that are not so careful about where they end up. This might not eliminate every instance of these types of weapons getting into the hands of citizens but even advocates of gun laws agree that gun laws won’t eliminate every instance either. So all things being equal it seems a contract based market approach coupled with common sense prevention (destroy, don’t sell, old weapons) will have greater success (today) in achieving the goal of reducing weapon supply. It would limit supply to both criminal and non-criminal alike whereas weapon laws restrict only non-criminal possession.

Breaking Bad (Rules)

Unless you’ve been living under a rock for the past week you’re probably aware of the confessional interview Lance Armstrong had with Oprah Winfrey in which he revealed that he had been “doping” in order to gain a competitive advantage (or perhaps simply leveling the playing field as it has been reported that 20 of 21 top-3 finishers from 1999 to 2005 were also doping). In another recent story HSBC was fined a record $1.9 billion by the US Justice Department due to violation of several anti-money laundering statutes .

What do these two stories have in common? Each contains an apparent villain that has been dutifully brought to light or justice. But upon closer inspection we find neither party has done anything “wrong” in the traditional Judeo-Christian morality sense. They did not kill anyone. They did not steal anything. Armstrong did lie and liars are generally not held up in our society as paragons of virtue, but consider the context. He lied about violating a policy that is irrational and thus is nearly universally ignored. Imagine that your employer established a new policy: all employees are prohibited from drinking soda at work or at home. You know this policy is just silly so you ignore it. If asked by your employer concerning your soda status what do you do? Do you tell the truth and lose your job or do you lie and keep your job? I suspect most would lie over a rule this inane. It is easy to lie when the policy in question is just plain silly, universally ignored, and enforcement is basically impossible. Is “dope” free sport a noble goal? Sure it is. And so is a world free of all weapons. But just like with guns, that genie is out of the bottle. The last guaranteed dope free sporting event took place sometime in the 18th century. Anti-doping policies are disingenuous at best insofar as they give a free pass to mechanical technologies that enhance performance (e.g. high tech bikes that cost more than your car). If anti-doping policies were truly driven by a concern about eliminating “unfair” advantages then every cyclist would be required to ride the exact same model of bike and the genetically less endowed athletes would be permitted to “dope up” to the same VO2 max as their more genetically endowed competitors. Then everyone could cross the finish line together holding hands. Cum by yah.

If private organizations like UCI (International Cycling Union) want to ban doping that is their prerogative (although international treaties banning the practice (such as the US ratified “International Convention against Doping in Sport”, attempt to remove all such discretion from athletes and their athletic organizations). Perhaps the only place where Armstrong and others like him did err is that they did agree to the rules of that private organization when they joined. The most proper way to have proceeded would have been to have not joined any anti-doping organizations but rather to have formed a new entity that did permit doping. Athletes that dope can join that group, those that don’t are free to join any of the others. However I suspect the aforementioned treaty makes “doping permitted” groups illegal. In which case government again short-circuits market based solutions.

HSBC behaved similarly to Armstrong. They simply ignored all of the silly anti-money laundering rules and regulations. To understand why money laundering is considered “bad” consider who is leveling the claim: government. Money laundering can only occur in connection with illegal activities, however it is government that defines what is illegal. It is actually easy to end all money laundering; simply make such associated activities legal. If drug prohibition were ended there would be no drug money to launder. If governments ceased their interventionist policies or did not force people to remain part of their respective unions (Northern Ireland, Palestine, Chechnya, Serbia, Kurdistan, Basques, etc) all terrorism would end (and thus the associated laundering of money toward those ends). In other words, governments (or sometimes private groups) often create the very problems they then proclaim only they can remedy. When they eventually ensnare a violator they parade it around for all to see as both a sign of their effectiveness and as a warning. But we should be skeptical of any hunter who demonstrates his prowess by bagging a Holstein on his own property.

Vaccination Cures Gun Epidemic

Those that are opposed to gun control frequently resort to the tactic of citing some statistic that demonstrates how some ordinary object (e.g. a hammer, a fist) is used far more frequently to kill someone than is a “rifle.” This approach is not particularly constructive to the debate. While it is true that hammers are used to kill more people than “rifles”, “guns” are used to kill far more than all other methods combined. Since the real debate is on gun control and not rifle control, it is a bit dangerous to argue such control is unnecessary owing to relatively low death totals. If your opponent switches from “rifle” control to “gun” control your argument will fail.

An adjunct to this argument is an appeal to common sense. Most intuitively accept the premise that that it would be silly to ban things because they might be misused (which taken to its logical conclusion would involve banning everything). However, people generally go along with banning something if it has no apparent “legitimate” use (e.g. drugs, high capacity guns, cigarettes) but bristle at banning objects that are predominantly used for “legitimate” purposes, particularly if the loss of that legitimate use would present a substantial hardship. The main problem anti-gun control advocates have is that the legitimate use and illegitimate use of a gun have the same result: death. The difference between the legitimate and illegitimate use of a hammer is obvious, not so much with guns. How does one overcome this hurdle? Always forthrightly confront any questions of the “why do you need a gun that does X?” variety. If asked why does one need more than 6 rounds, explain real life is not like the movies and one bullet does not kill someone instantly (recently a mother in Loganville, Georgia shot an intruder 6 times and he still walked away!

a disarmed population is as unprotected as an un-vaccinated child

 

The current approach of gun control advocates is equally counterproductive toward their cause. They seek to regulate the weapon and not the individual. Even the 2nd Amendment says “a well regulated militia” not a “well regulated arsenal”. So while I am no fan of the state deciding who may or may not own a weapon (by what subjective metric will it make that determination?), this approach resonates with the reasonable notion that we don’t want “crazy people” to have weapons. If the state determines I am safe and sane (how they will do that I have no idea and is unsettling prospect) what difference does it make what type of weapons I own? Similarly, if you have a driver’s license you can drive a Mini or a Ford F350 Dually. Nobody asks “why do you need that F350?” – so why do they ask “why do you need that AR-15?”. But since this is so commonly asked, allow me to answer. Those best able to answer that would be the following: Jews in pre-war Germany, civilians in Stalinist Russia, civilians in the Cambodian killing fields, or civilians in Maoist China. Guns are not merely for self-defense; they are also for defense of the sovereign people against their own (illegitimate) government when such government would seek to violate their sovereign rights. All of the 20th century genocides occurred on populations that were entirely unarmed and unable to resist. I do not believe there is some “master plan” to commit such atrocities in the US. However, a disarmed population is as unprotected as an un-vaccinated child. The first exposure to a dangerous element will be impossible to resist. Democracy is no prophylactic against tyranny: Hitler was elected through a democratic process. Those that genuinely do wish to disarm everyone (probably) have their heart in the right place. Any one of us would, if we could, wave a magic wand and eliminate every weapon on the face of the planet. Sadly that is nothing but a utopian fantasy. Once man creates technology it can never be made “unknown”. The only way to resist the misuse of technology is to maintain a level playing field so that all can access it and thereby mankind keeps mankind in check.

 

Mo’ Money, Mo’ Problems

It has recently come to my attention (thank you George Warren) that the economist Steve Keen has proposed a solution to our economic woes: the government should give people money to pay off their debts. According to Keen it is the high level of private debt (about three times that of annual US GDP ) that is causing the economy to move so sluggishly. While enormous artificial debt creation did indeed foster the previous boom and our current bust, Keen has erred in both identifying the root cause of this debt explosion as well as an appropriate solution.

It is revealing that Keen does not ask the most pertinent question: he blames the banks for the debt explosion yet he does not address how is it possible banks could collectively lend out five times the amount of money in existence ($50 trillion in private debt vs a $10 trillion monetary base (M2))? He then decries “bad lending” – lending for purely financial market speculation, but again fails to ask why it would be in a lender’s interest to make such “gambling” loans – loans that more often than not would default (hint: moral hazard).  What is the answer to these unasked questions? Government. Government interference in the market (legal tender laws, legalization of fractional reserve lending, a central bank, implied bail outs, etc) resulted in the distorted outcomes Keen identifies. Being apparently unaware that government is the root cause of the problems he cites, he then unwittingly invokes that same entity as our savior: he proposes that “government created money” (through deficits) will solve the problem of too much bank created money (loans). But government is the sole reason banks can (legally) create money out of thin air to begin with! The legality of a central bank and fractional reserve lending makes phony debt possible. In a truly free, hard money economy (where the lending of demand deposits would constitute the actual theft that it is) credit expansion and unproductive loans to gamblers would cease to exist (because loan defaults will not be bailed out.) Only time deposits are eligible to be loaned out, thus naturally regulating the debt load in an economy.

Keen falls into the trap of blaming those capitalizing on the fruits of the government created circus (speculators, brokers) with causing the circus. That’s like blaming the existence of slavery on slave traders; slave traders capitalized on a situation made possible only by governmental enforcement of the legality of slavery. It’s the same old story: government creates an artificial scenario that some other group takes advantage of and then that group is subsequently piously vilified while the root cause is ignored.

As the intricacies of lending and finance are rather opaque I shall attempt to distill what has occurred and what Keen proposes to a simple narrative. Let us imagine three friends, Dave, Bob and Gary. Dave needs $800 to buy a house. Nobody has money to lend to Dave. Gary has a solution. Gary prints money ($1000) and gives it to Bob (because Gary doesn’t want Dave to know he is the source of the money). Bob loans the money ($800) to Dave and Bob keeps $200. Dave has his house built which provides builders with money. When the house is done Dave begins paying Bob back. All the builders are sad because Dave is not paying them anymore. Others are sad because Dave buys fewer goods because he has to repay Bob. When Bob gets money from Dave he gives it to Gary who promptly burns it (to hide what he has done). Because Gary is burning the money it is not being spent and so all the sad people ask Gary to print more money (so they won’t have to lower their prices) and to give it directly to Dave so Dave does not have to pay Bob anymore. So Gary prints more money and gives it to Dave to pay Bob, who then gives it to Gary who burns it. So what is the end result here? Dave got a free house and Bob got $200 for handling the money. Seems like everyone came out ahead here, right? Almost makes counterfeiting seem noble – I wonder why it is illegal? Oh, that’s right, because it is theft. It is theft from those not mentioned in the story. It is theft from every other person who holds and is paid in dollars as their dollars become worth less (because there are now more dollars) or worthless – take your pick!

When people propose “solutions” to our economic woes that involve government bailing out some group know that it is nothing more than calls to legally do what would otherwise land any one of us in jail were we to do so individually. It is theft. To have government take from unfavored groups and give to favored groups is theft. It was wrong to bail out the banks and it is wrong to bail out individuals. The only solution is to remove all authority government has over fiscal and monetary concerns. All unfairness in our current system is attributable to crony-capitalism fostered by big government colluding with big business. Dismantle big government and you’ll dismantle the inequity it fosters.