He's talking about Britain's exit from the Gold Standard

"To this day sterling's reputation has not recovered from the blow it unwillingly received under the policy adopted in September 1931. And this policy became a "pattern" not only for the British but for many other Treasury chiefs. At first, the damage was moderated by a general understanding that a banker's bankruptcy is "excusable" when his debtors leave him in the lurch. Excusable or not, the result was a violent shock not only to the prestige of England but to the reputation of the whole privately managed system of international finance based on gold.

The downfall of the gold standard became the wellspring of an intentional legend which might be described as the "Keynesian trap." It has become a dogma that it was the 1925 return to sterling's pre-1914 parity that necessitated the subsequent devaluation, if not the Great Depression, altogether. As far as this writer is aware, no one has made any attempt to demonstrate the logical or causal "mechanism" which could connect the abandonment of the gold standard in 1931 with the return to gold in 1925 other than that the one followed the other after a six and a half years' interval!-post hoc ergo propter hoc. Since the burden of proof should rest on proponents of this thesis, a few questions may be pertinent.

1) Would the choice in 1925 of a lower parity to gold, or of no parity at all, have strengthened the British balance of payments beyond providing "monetary" reliefl49 Suffice it to recall that by, or before, the end of 1926 British prices were generally adjusted to theAmerican level.

2) By what mysterious interplay of forces did sterling's return to the old parity bring about a world-wide crisis? How did it promote or provoke the domestic overindebtedness in the United States and the excessive capital flow to Germany-or the illiquidity of German banks and the overproduction of prime commodities? Patently, the purpose of the "Keynesian trap" is to divert attention from the errors, mischiefs, misjudgments, and maladjustments, both public and private; which accumulated and were compounded during the seventeen-year period beginning with the inflationary financing of the war and the world-wide disruptions it brought about.

3) If a chief obstacle to restoring a "healthy" British trade balance was the obstructionism of organized labor, as has been pointed out, how would this obstacle have been removed by returning to a sterling of a lower parity, or of none at all?

Sterling's departure from gold was greeted with sarcasm by Britain's enemies and with enthusiasm by a broad sector of the AngloAmerican economic "intelligentsia." Keynes, who at the moment, oddly enough, was opposed to devaluation, became the hero of the day. Had he not opposed the return to gold in 1925, almost singlehandedly? He was vindicated; the event demonstrating, allegedly, that a postwar gold standard was doomed from the outset. In reality, nothing of. the sort had been established."

Melchior Palyi: 'The Twilight of Gold'. pg 272

A brief snippet of Rothbard

Schiff on the Hill

The YouTube blurb:

Does Washington have the American taxpayers' interests as their top priority? Watch as lobbyists drown out your voice and Peter fights the tide.

Go to http://www.TinyURL.com/RealCrash to order my new book, "The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country"

Hat tip: Tom Woods

The good, old days of the Gold Standard

"The gold standard was "sacrosanct" to the generations brought up on the Adam Smith ideals of free markets, free from arbitrary and discriminatory interventions by governmental powers. Indeed, it was an essential instrument of economic freedom. It protected the individual against arbitrary measures of the government by offering a convenient hedge against "confiscatory" taxation, as well as against the depreciation or devaluation of the currency. It was an instrument of "mobility" within and beyond national borders. Above all, it raised a mighty barrier against authoritarian interferences with the economic process. "That insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs" (Adam Smith), had to keep the national budget in good order. Authoritarians of all denominations had to keep their inflationary propensities under control and to refrain from excessive taxation in order to forestall the loss of people's confidence in the currency, the breakdown ofthe standard. The public purse had to be held tight. The business community had to learn to live with the salutary realization that illiquidity caused by short-sighted overinvestment and irrational speculation would be penalized by loss of gold and an "automatic" tightening of the money supply, as well as a rise in the price of money.

The gold standard in the classical sense was part and parcel of an economic order. It was a keystone of the system of public law, social customs and institutions, called "capitalism"-the term coined by Karl Marx-a system that rested on what appears in perspective as virtually unlimited freedom of consumer choice, business enterprise, and markets."

Melchior Palyi; Twilight of Gold, 1914 - 1936, pg 5

Peter Schiff on Julia and Obama's 65 year presidency

Peter Schiff presents an alternative narrative to Obama's big government chunder-fest.

My favourite quote: "Government aid or government benefits; it's like you get a blood transfusion from your right arm to your left arm, and you spill half the blood on the floor."

Taxation, Theft and Pragmatism

As any right-thinking anarcho-libertarian will tell you; taxation is theft, or to be more accurate, robbery. This kind of straight talk tends to make the minarchists and classical liberals wince. They may concede the point on the blandly rational grounds that it is correct, but they find it a little tactless to point it out too stridently, especially as their aim is not to abolish the state entirely, but rather to cut it down to a more manageable size.

Nevertheless, there is no reason for the various strands of libertarianism to fall out. I would say the time for that would be when the ‘night-watchman’, minimal state has been achieved, and until that time, the disputes amongst us are largely academic. We are lumbered with the status quo, and that includes a big state and heavy taxation. But, by accepting the fundamental injustice of taxation, it does at least free us from seeking after the will o’ the wisp of a ‘fair’ system, a ‘neutral’ system, and instead lets us focus the mind on reducing taxation in general and the very heart of the matter; government spending.

Whatever the theoretical destination may be, the only way to get there is by little steps, just as long as they’re steps in the right direction. Bringing in new taxes, even with the intention that they will replace other ones would seem to be a mistake, with the risk that we’ll wind up with the old ones and the new ones. Better to freeze the system as is, and then start chipping away at it, piece by piece.

Some taxes seem more pernicious than others. An example, in my view is Inheritance Tax, or Death Tax, as it should be known. Not only does it visit injustice upon the heads of the bereaved, it causes sub-optimal decisions to be taken by the individual while still alive, in order to minimise the bill. Nevertheless, an attempt to abolish it will provoke political opposition with the accusations that it is helping the rich – the implication being that anything which does so, harms the poor. This brings us to the issue of political expediency.

If the possibility arises to cut taxes, it would seem sensible to ‘spread the joy’ as widely as possible. I would target VAT on fuel, alcohol and cigarettes. The justification for this would be that each of these is already subject to a separate duty. A reduction of the cost of fuel would benefit everyone, either directly or indirectly. Not only this, it would be visible. Other targets could be the aforementioned Death Tax and Employer NI. This latter seems a singularly foolish levy on employment, and its abolition could only improve the jobs market. No doubt the left would demand the saving be passed on to workers (a quick way to nullify the point of the change), but it should not be difficult to make a convincing political case for ending Employer NI.

Reducing the size (not to say sheer weight) of the tax code must also be a priority. I suggest setting a target that it should be no bigger than ‘War and Peace’ would be a good place to start.

In summary, a libertarian programme of tax-cutting, whether premised on the inherent criminality of tax or a more moderate position, should avoid attempts to find ‘fairer’ means to provide loot to the government (such as ‘shifting the burden’ onto the rich), but should rather seek to freeze the system as it is, and then proceed to dismantle it little by little, through across-the-board reductions or when possible the abolition of particular taxes. There should be no new taxes (with one possible exception: cannabis!), and an overtly populist tone should be struck, with the stress on giving the people back their money.

(Cross-posted at Libertarian Home, where you can read my responses to someone advocating a large increase to the income tax threshold, rather than across-the-board tax reductions).

Sanitizing the monetary system

Here's George Reisman, eminent economist - not least because he studied under Ludwig von Mises, speaking in 2009 on the subject of "A Pro-Free-Market Program for Economic Recovery". For the first twenty minutes he discusses what the US government and the Fed have been up to with their printing presses, namely putting in place the potential for an enormous credit expansion.

Reisman then plots a path back toward sound money, i.e., a 100% reserve, gold-backed currency. The first stage of this would be to move to a 100% paper currency. This seems like the most plausible way of sanitizing the dollar, although another way forward would be to move towards private gold-backed currencies, which is discussed by Henry Hazlitt in the final part of 'The Inflation Crisis and How to Resolve it'. This would be preferable, due to it being a free market solution, but it does have one significant drawback; the high likelihood of bringing the full force of government aggression down on your head.

With thanks to Mises Institute Media

An old argument, but a vitally important one

Over at Liberal Conspiracy (sic), one of their number is attacking Daniel Hannan for his comments on Roosevelt's New Deal. It's enough to make statues weep, to see the same ludicrous nonsense trotted out to defend the fascistic Roosevelt and his disastrous policies.

The problem is that, even if people take different views, there has to be a common area of facts, but on this issue, no matter what evidence and rational debate is presented to overthrow the fairy tale of Roosevelt's success ( and you'd think the fact it's known as 'The Great Depression' may suggest a lack of success), it is a mammoth task to cut through the wall of willful ignorance. The enemies of liberty cannot refute the evidence of Benjamin M. Anderson, Murray Rothbard etc., who have laid out the water-tight case against Roosevelt's stinking New Deal. All they can do is cover their ears with their hands and shout 'la la la'.

Anyway, here's an interesting extract from Thaddeus Russell's 'Renegade History of the United States', which draws attention to the parallels between Roosevelt's policies and those of Hitler and Mussolini, and notes many instances where these latter two and their supporters were effusive in their praise for America's Great Dictator.

Patent History

Fritz Machlup, writing on the development of patent laws in various countries:

Four different legal philosophies about the nature of the inventor’s right were thus expressed in the patent laws of the various countries; the French, recognizing a property right of the inventor in his invention and deriving from it his right to obtain a patent; the American, silent on the property question, but stressing the inventor's legal right to a patent; the English, recognizing the monopoly character of the patent, and regarding it in theory as a grant of royal favor, but in practice regularly allowing the inventor’s claim to receive a patent on his invention; the Austrian, insisting that the inventor has no right to protection, but may, as a matter of policy, be granted a privilege if in the public interest.

Fritz Machlup; An Economic Review of the Patent System; from the introduction, page 3

Thanks to the Mises Institute

Economics and Ethics

"Economics cannot itself decide on ethical judgments. But in order for anyone to make ethical judgments rationally, he must know the consequences of his various alternative courses of ac­tion. In questions of government intervention or union action, economics supplies the knowledge of these consequences. Knowl­edge of economics is therefore necessary, though not sufficient, for making a rational ethical judgment in these fields."

Murray N. Rothbard, from Man, Economy, and State -chapter 10; labor unions

Steve Baker on money

Steve Baker must be the soundest MP in the House when it comes to economics. Here he is giving some old time religion on monetary theory.

I'm not familiar with Positive Money, although I think I heard something of the proposals in the past. I will endeavour to check it out.

Catching up with everybody's favourite Praxgirl

Put down those dusty Austrian tomes, sit back and let the dulcet tones of the angelic and super-brainy Praxgirl lead you to enlightenment. Here is Episode 17: Catallactics. Check out all the rest here.

Schiff fighting the good fight

In my quest for knowledge, I do not shy away from things that may damage my settled views. Hence, when a YouTube clip is titled 'Peter Schiff Destroyed by Lawrence O'Donnell', from August 2009, I have no option but to see for myself.

Peter is obviously a hate figure to the Keynesians, and there are many other anti-Schiff clips, and all fail to deliver on their vainglorious claims of victory. In this present example, what we see is an interviewer hectoring him, attempting to stop him answer the questions he keeps pouring forth, and Peter, like a deft pugilist, dodging and weaving the ham-fisted O'Donnell, while landing punch after punch with surgical precision.

Extremist? Moi?

Meanwhile, as Nato busily arms Al Qaeda in Syria, the FBI are on the trail of the 'real' extremists - people who 'think' (sic) that the USA went bankrupt when it went off the Gold Standard.

Well, that statement is pretty much apodictically true. The USA had debts equal to a set amount of gold. Under Nixon, it repudiated the link between the dollar and gold, because it could no longer continue the charade that it could cover its debts in gold. If you can't pay your debts, you are bankrupt. QED.

Anyway, here's Max talking about that and other matters, such as MF Global and the curious case of the 'vaporized' billions.

Forget Cameron, here's someone who understands the free market

The venerable Tom Woods, speaking on 'The Free Market: Fallacies and Facts' at the Mises Circle in Houston, 14th January, 2012.

As recommended by Mises

I'm reading Benjamin M. Anderson's 'Economics and the Public Welfare' at the moment, recounting the economic history of the period 1914 to 1946, mainly of the United States, but also, and necessarily so, covering events in Europe and the rest of the world. The following observation (at the end) struck me as particularly well said.

France entered the war with bad government finance. She had a national debt of 30 billion gold francs as against an estimated national wealth of 300 billion gold francs at the beginning of the war. France had had chronic deficits for many years before the war. There was governmental extravagance, and there was a great reluctance on the part of the people to submit to direct taxes. They did tolerate very heavy indirect taxes. When Caillaux undertook early in 1914 to introduce an income tax of 2 percent in the effort to balance the French budget, the outcry in France was so extreme that one would have supposed that the end of the world had come. During the war France did relatively little with taxation, and the public debt ran up from 30 billion to 147 billion francs before the war was over.

Then France began to have some real deficits. Adherents of the school of Keynes and Hansen would do well to study the history of French finance from 1918 to 1926. The one difference between the policies followed in France in this period and the polices advocated by the New Deal spenders for the United States is to be found in the fact that the French were ashamed of it and tried to conceal it and to find excusees for it, whereas the New Deal spenders would glorify it and call it "investment".

From chapter 14 - France 1918-24

Mises for the lazy

I was reading the excellent Mises collection of essays and addresses "Planning For Freedom", and it occurred to me that I could kick back and let someone else take the trouble, in this case Gennady Stolyarov II. Thw lecture was originally presented to the University Club of New York, April 18, 1950, and bears the title 'Middle-of-the-road leads to socialism' - also found in the Mises Institute publication "Two Essays".

Orthodox Truth

The following is a quotation from Ludwig von Mises, taken from a lecture he gave in 1945 on the subject of state intervention in the economy. Plus ca change!

Interventionism the Cause of Depression

It is true, many people believe that economic policy should not bother at all about long-run consequences. They quote a dictum of Lord Keynes: "In the long run we are all dead." I do not question the truth of this statement; I even consider it as the only correct declaration of the neo-British Cambridge school. But the conclusions drawn from this truism are entirely fallacious. The exact diagnosis of the economic evils of our age is: we have outlived the short-run and are suffering from the long-run consequences of policies which did not take them into consideration. The interventionists have silenced the warning voices of the economists. But things developed precisely as these much abused orthodox scholars had predicted. Depression is the aftermath of credit expansion; mass unemployment prolonged year after year is the inextricable effect of attempts to keep wage rates above the level which the unhampered market would have fixed. All those evils which the progressives interpret as evidence of the failure of capitalism are the necessary outcome of allegedly social interference with the market. It is true that many authors who advocated these measures and many statesmen and politicians who executed them were impelled by good intentions and wanted to make people more prosperous. But the means chosen for the attainment of the ends aimed at were inappropriate. However good intentions may be, they can never render unsuitable means any more suitable.

It must be emphasized that we are discussing means and measures, not ends. The matter at issue is not whether the policies advocated by the self-styled progressives are to be recommended or condemned from any arbitrary preconceived point of view. The essential problem is whether such policies can really attain the ends aimed at.

It is beside the mark to confuse the debate by referring to accidental and irrelevant matters. It is useless to divert attention from the main problem by vilifying capitalists and entrepreneurs and by glorifying the virtues of the common man. Precisely because the common man is worthy of all consideration, it is necessary to avoid policies detrimental to his welfare.

The market economy is an integrated system of intertwined factors that mutually condition and determine one another. The social apparatus of coercion and compulsion, i.e., the state, certainly has the might to interfere with the market. The government or agencies in which the government, either by legal privilege or by indulgence, has vested the power to apply violent pressure with impunity, are in a position to decree that certain market phenomena are illegal. But such measures do not bring about the results which the interfering power wants to attain. They not only render conditions more unsatisfactory for the interfering authority. They disintegrate the market system altogether, they paralyze its operation, they bring about chaos.

If one considers the working of the market system as unsatisfactory, one must try to substitute another system for it. This is what the socialists aim at. But socialism is not the subject matter of this meeting's discussion. I was invited to deal with interventionism, i.e., with various measures designed to improve the operation of the market system, not to abolish it altogether. And what I contend is that such measures must needs bring about results which from the point of view of their supporters are more undesirable than the previous state of affairs they wanted to alter.

Taken from 'Planning for Freedom'

Tu ne cede malis, sed contra audentior ito

Extra helpings of Schiff

Peter Schiff Part 2. After listening to the clip below, I came to this, which is definitely worth checking out. From the blurb:

"Peter Schiff, CEO and chief global strategist of Euro Pacific Capital, discusses how excessive government intervention hinders economic recovery and growth, during a Fraser Institute policy briefing on Thursday, Oct. 13 at the University Club of Montreal. "

I also listened to this pithy dissection of a recent Obama speech on the economy.

The freedom to make mistakes

I'm reading a relatively short work by Ludwig von Mises, "Economic Policy; thoughts for today and tomorrow", which is the transcription of a series of lectures he gave in 1959 in Buenos Aires. It is a very good introduction to his works, as it lays down in simple terms his overall views. Here's an extract from the lecture on socialism:

The fact is that, under the capitalistic system, the ultimate bosses are the consumers. The sovereign is not the state, it is the people. And the proof that they are the sovereign is borne out by the fact that they have the right to be foolish. This is the privilege of the sovereign. He has the right to make mistakes, no one can prevent him from making them, but of course he has to pay for his mistakes. If we say the consumer is supreme or that the consumer is sovereign, we do not say that the consumer is free from faults, that the consumer is a man who always knows what would be best for him. The consumers very often buy things or consume things they ought not to buy or ought not to consume.

But the notion that a capitalist form of government can prevent people from hurting themselves by controlling their consumption is false. The idea of government as a paternal authority, as a guardian for everybody, is the idea of those who favor socialism. In the United States some years ago, the government tried what was called "a noble experiment." This noble experiment was a law making it illegal to buy or sell intoxicating beverages. It is certainly true that many people drink too much brandy and whiskey, and that they may hurt themselves by doing so. Some authorities in the United States are even opposed to smoking. Certainly there are many people who smoke too much and who smoke in spite of the fact that it would be better for them not to smoke. This raises a question which goes far beyond economic discussion: it shows what freedom really means.

Granted, that it is good to keep people from hurting themselves by drinking or smoking too much. But once you have admitted this, other people will say: Is the body everything? Is not the mind of man much more important? Is not the mind of man the real human endowment, the real human quality? If you give the government the right to determine the consumption of the human body, to determine whether one should smoke or not smoke, drink or not drink, there is no good reply you can give to people who say: "More important than the body is the mind and the soul, and man hurts himself much more by reading bad books, by listening to bad music and looking at bad movies. Therefore it is the duty of the government to prevent people from committing these faults."

And, as you know, for many hundreds of years governments and authorities believed that this really was their duty. Nor did this happen in far distant ages only; not long ago, there was a government in Germany that considered it a governmental duty to distinguish between good and bad paintings—which of course meant good and bad from the point of view of a man who, in his youth, had failed the entrance examination at the Academy of Art in Vienna; good and bad from the point of view of a picture-postcard painter, Adolf Hitler. And it became illegal for people to utter other views about art and paintings than his, the Supreme Führer's.

Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important?

Freedom really means the freedom to make mistakes. This we have to realize. We may be highly critical with regard to the way in which our fellow citizens are spending their money and living their lives. We may believe that what they are doing is absolutely foolish and bad, but in a free society, there are many ways for people to air their opinions on how their fellow citizens should change their ways of life. They can write books; they can write articles; they can make speeches; they can even preach at street corners if they want—and they do this in many countries. But they must not try to police other people in order to prevent them from doing certain things simply because they themselves do not want these other people to have the freedom to do it.

This is the difference between slavery and freedom. The slave must do what his superior orders him to do, but the free citizen—and this is what freedom means—is in a position to choose his own way of life. Certainly this capitalistic system can be abused, and is abused, by some people. It is certainly possible to do things which ought not to be done. But if these things are approved by a majority of the people, a disapproving person always has a way to attempt to change the minds of his fellow citizens. He can try to persuade them, to convince them, but he may not try to force them by the use of power, of governmental police power.