What is the logic, the driving force, the agent of change?

Yes, the software works fine, and yes, the managers and owners have entrepreneurial minds. But the real secret to Facebook is its internal human gears — the individual users — which turn out to mirror the way society itself forms and develops.

The best way to see and understand this is to compare the workings of Facebook with the workings of the democratic political process. Watching Facebook’s development has been fun, productive, fascinating, useful and progressive. The election season, in contrast, has been divisive, burdensome, wasteful, acrimonious and wholly confusing.

That’s because Facebook and democracy work on entirely different principles.

Facebook is based on the principle of free association. You join or decline to join. You can have one friend or thousands. It is up to you. You share the information you want to share and keep other things from public view. You use the platform only to your advantage while declining to use it for some other purpose.

The contribution you make on Facebook extends from the things you know best: yourself, your interests, your activities, your ideas. The principle of individualism — you are the best manager of your life — is the gear that moves the machine. Just as no two people are alike, no two people have the same experience with the platform. All things are customized according to your interests and desires.

But of course, you are interested in others too, so you ask for a connection. If they agree, you link up and form something mutually satisfying. You choose to include and exclude, gradually forming your own unique community based on any selection criteria you want. The networks grow and grow from these principles of individualism and choice. It is a constantly evolving, cooperative process — exactly the one that Hans-Hermann Hoppe describes as the basis of society itself.

Democratic elections seem to be about choice in some way, but it is a choice over who will rule the whole mob. It provides the same user experience for everyone, regardless of individual desire. You are forced into the system by virtue of having been born into it. Sure, you can choose to vote, but you can’t choose whether to be ruled by the voting results.

In this democratic system, you are automatically given 220 million “friends” whether you like it or not. These fake “friends” are given to you because of a geographic boundary drawn by government leaders long ago. These “friends” are posting on your wall constantly. Your news feed is relentless series of demands. You cannot delete their posts or mark them as spam. Revenue is not extracted from advertising but collected as you use the system.

Nothing is truly voluntary in an election. You are bound by the results regardless. This creates absurdities. This is incredibly apparent in the Republican nominating process. If people under 30 prevailed, Ron Paul would win. If religious families with several kids prevailed, Rick Santorum would win. If chamber of commerce members prevailed, Mitt Romney would be victor. It all comes down to demographics, but there can be only one winner under this system.

Therefore, an election must be a struggle between people, a fight, a wrangling around, a push to assert your will and overcome the interests and desires of others. In the end, we are assured that no matter the outcome, we should be happy because we all participated. The individual must give way to the collective.

We are told that this means that the system worked. But in what sense does it work? It only means that the well-organized minority prevailed over the diffused majority. This is about as peaceful as the kid’s game “king of the mountain.”

Facebook has nothing to do with this nonsense. Your communities are your own creation, an extension of your will and its harmony with the will of others. The communities grow based on the principle of mutual advantage. If you make a mistake, you can undisplay your friend’s posts or you can unfriend him. This hurts feelings, sure, but it is not violent: It doesn’t loot or kill.

Your friends in Facebook can be from anywhere. They “check in” and plot their journeys. Whether your friend lives in or moves to Beijing or Buenos Aires doesn’t matter. Facebook makes possible what we might call geographically noncontiguous human associations. Language differences can be barriers to communication, but even they can be overcome.

Democracy is hyperbound by geography. You vote in an assigned spot. Your vote is assembled together with those of others in your county to produce a single result, and therefore, your actual wishes are instantly merged. They are merged again at another geographic level, and then at the state level and, finally, at the national level. By that time, your own preferences are vaporized.

Sometimes people get sick of Facebook. They suddenly find it tedious, childish, time wasting, even invasive. Fine. You can bail out. Go to your system preferences and turn off all notifications and take a sabbatical. People might complain, but it is your choice to be there or not. You can even delete your account entirely with no real downside. Then you can sign up again later if you so desire or join some other system of social networking.

Try doing that to democracy. You can’t unsubscribe. You are automatically in for life, and not even changing your location or moving out of the country changes that. It is even extremely hard to delete your account by renouncing your citizenship. The leaders of the democracy will still hound you.

We can learn from Facebook and all other social networks that the Internet has brought us. These are more than websites; they are models of social organization that transcend old forms. Make the rest of life more like a social network and we will begin to see real progress in the course of civilization. Persist in the old model of forced democratic community and we will continue to see decline.

Regards,

Jeffrey Tucker

Why Facebook Works, And Democracy Does Not was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Official inflation is over 4 percent in the UK, so how printing more money is going to help meet a 2 percent inflation target is a bit difficult to grasp, but let us not quibble over such details. What counts is that the Bank of England is the undisputed champ of QE. After the next round of money printing, the BoE will have created new money to the tune of 20 percent of GDP, and will fund more than a quarter of all outstanding government debt via the printing press.

£275 billion of QE so far have not solved the crisis — the economy last year grew by less than 1 percent — but have lifted inflation and thus squeezed real incomes. At the same time, this policy has kept the government’s borrowing costs low and the banks from shrinking and in certain cases from collapsing. As with any policy of monetary debasement, the direct beneficiaries are the state and the banks.

This has tradition behind it. The Bank of England was founded in 1694 for the specific purpose of financing the Crown, which at the time was in low standing with its creditors. From its inception the Bank of England enjoyed numerous legal privileges that cemented its dominant position in the nascent but growing British banking system. Among them was the privilege to issue money against obligations of the Crown — a form of early ‘debt monetization’. Of course, the gold standard was a hindrance to unlimited money creation, so whenever the state needed more funds, usually at times of war, the Bank of England was conveniently absolved of any of its contractual agreements to redeem in specie, and kindly asked to fund the state through the creation of new money.

Gentlemen, start your printing presses!

But only after the gold standard was abandoned and the dollar’s gold window finally shut in 1971, the party could really begin. From 1965 to 2007, the year the present crisis started and UK banks began to collapse, the pound has lost more than 90 percent of its purchasing power! Two generations of British savers have been locked in a desperate struggle to sustain the real value of their savings. But hey, why save? Just borrow!

Such persistent monetary debasement has created a freak economy, in which every high street is littered with the cheap-looking branches of retail banks and in which property speculation is a national pastime. The English seem to live in the smallest and oldest houses of all of Europe but thanks to money-induced housing booms consider themselves to be wealthy, on paper at least, as long as they managed to get onto the housing ladder early enough. Why bother with engineering, once the hallmark of British industrial superiority, when you can flip a few semi-derelict terraced houses with borrowed money?

On a GDP-per-capita basis, 19 countries in the world now generate more income than the UK, but the UK is still world leader when it comes to leverage. According to a study by McKinsey, private and public debt combined stand at 5 times GDP, only Japan comes close.

But when the bubbles finally burst, the overstretched banks teeter on the brink of collapse, and the credit edifice wobbles, the central bankers counter with the only tool at hand: more money printing at an ever increasing rate. The central bankers are the arsonists of this crisis who now pose as fire fighters quickly labelling further monetary debasement ‘stimulus’. (In June 2011, Mervin King, the governor of the Bank of England, was knighted for his efforts during the financial crisis.)

This is the BoE’s strategy: to fight a hangover by opening another bottle of booze. “There is not a credit boom that a few trillion pounds cannot extend for a few more years.” That seems to be the modus operandi.

Or, will the public debt situation be better? Will the economy have deleveraged and rid itself of an unsustainable debt load? And will the economy then grow without the burden of the accumulated debris from previous cheap-money booms? –No, and no again! Deleveraging is verboten! Credit contraction is verboten! Bringing the economy back to anything that resembles a stable and sustainable structure is verboten! QE is designed specifically to stop the cleansing of the economy’s imbalances.

“Quantitative easing” has one objective: to generate headline growth through more money debasement, more credit creation, more balance sheet extension, and more debt! More money, more credit, more debt! If that sounds familiar, it is because that was the growth model of the past twenty years, the growth model that has set us up for the crisis.

The central bankers and their supporters among financial market economists have no other model. More money, more credit, more debt — that is the motto of the fiat money economy, and ever since the last link between state money and gold was severed, all central banks have constantly expanded their balance sheets, constantly bought government debt and created new bank reserves, constantly encouraged bank credit creation and borrowing.

In a fiat money economy, central banks are designed to be “quantitative easers”. That is what they do. The only thing that has changed recently is that the disastrous consequences of such a policy are now palpable and that the private sector is reluctant to participate any longer. The drastic acceleration in money printing that is now called “quantitative easing” simply marks the desperate attempt to outrun the system’s desire to shrink.

No, I am sorry, dear experts, but the idea that any of this will stop at £400 billion, £600 billion, or £1,600 billion is silly. You obviously failed to grasp the very essence of a paper money economy. We removed the golden shackles so that there will NEVER be an end to credit expansion and monetary debasement.

Well, actually there will be an end. But that will come not through a calm measured decision by the MPC, the monetary policy committee that is digging itself an ever deeper hole. It will come when the public begins to lose faith in this charade. But whether that point is reached at £600 billion or at £325 billion, nobody can say.

Regards,

Detlev Schlichter

Paper Money Collapse

Parting Shot:

(From Mac Slavo of SHTFPlan…)

“Proponents of Gold Standard May Be Violent Extremists; Report ALL Suspicious Activity To the FBI”

If you support returning the United States monetary system to sound money backed by the gold standard and believe that our country is bankrupt as a consequence of out-of-control spending and fiat money printing, then you may soon receive a visit from your local DHS/FBI office.

This morning your family, friends and neighbors were alerted by representatives of the Federal Bureau of Investigation that you and those who share similar ideas as you are potentially dangerous extremists that could threaten the national security of the United States:

“Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday.

These extremists, sometimes known as “sovereign citizens,” believe they can live outside any type of government authority, FBI agents said at a news conference.

“The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

Source: Reuters

Whether you like it or not, if you promote the ownership of gold, reject the notion that forced taxation is your patriotic duty and prefer to live in a country with limited government interference, you have now been stereotyped and grouped in with the handful of criminals who have recently turned violent against law enforcement officials. And, chances are that those close to you, who may not necessarily share your views, have now been alerted to your volatile nature and potential for violence against local law enforcement officials and the free people of the United States.

“Routine encounters with police can turn violent “at the drop of a hat,” said Stuart McArthur, deputy assistant director in the FBI’s counterterrorism division.

“‘We thought it was important to increase the visibility of the threat with state and local law enforcement,’ he said.

“In May 2010, two West Memphis, Arkansas, police officers were shot and killed in an argument that developed after they pulled over a “sovereign citizen” in traffic.

Last year, an extremist in Texas opened fire on a police officer during a traffic stop. The officer was not hit.”

The narrative is clear: If you share the same ideas as someone who has made a personal choice to turn to violence in the past, then you too must be an equal threat. Furthermore, the FBI is actively instructing businesses in your local area to be on the look-out for suspicious activity which may be precursors to anti-government activities. In a related story from Infowars, Paul Watson reports that FBI advisory aimed at Internet Cafe owners instructs businesses to report people who regularly use cash to pay for their coffee as potential terrorists.

“The flyer, issued under the FBI’s Communities Against Terrorism (CAT) program, lists examples of “suspicious activity” and then encourages businesses to gather information about individuals and report them to the authorities.

…

“Indeed, the flyer aimed at Internet Cafe owners characterizes customers who “always pay cash” as potential terrorists.

“Of course, the vast majority of people who visit Internet Cafes use cash to pay their bill. Who uses a credit card to buy a $2 dollar cup of coffee? A lot of smaller establishments don’t even accept credit cards for amounts less than $10 dollars.

“Other examples of suspicious behavior include using a “residential based Internet provider” such as AOL or Comcast, the use of “anonymizers, portals, or other means to shield IP address” (these are routinely used by mobile web users to bypass public Internet filters), “Suspicious communications using VOIP,” and “Preoccupation with press coverage of terrorist attack” (this would apply to the vast majority of people who work in the news or political blogging industry).”

Source: Info Wars

Also See: FBI CAT – Potential Indicators of Terrorist Activities Related to Internet Café [pdf]

In a coincidental stroke of good luck and timing for the national security apparatus of the United States, the recently passed National Defense Authorization Act (NDAA) allows for the rounding up and detainment of of these potential extremists without charge or trial, because the last thing we need is for courts, juries, and evidence to be involved in ensuring the security of American citizens.

Be warned fellow Americans. No one will be immune to the violative laws, policies and regulations of the police state which is quickly and forcefully embedding itself into all aspects of American life and culture.

In the new America, every man, woman and child is a suspect, person-of-interest and potential terrorist.

–Mac Slavo,

SHTFPlan.com

There Will Be No End to Quantitative Easing was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

It is their explanation for why things go wrong, however, that I find most illuminating. Both Schumpeter and Sowell write about “intellectuals” who have academic credentials of some sort but are lacking in knowledge that would make them particularly valuable to the market. Incapable of commanding significant wealth and status through voluntary market mechanisms, these intellectuals resent the wealth of more-successful people. As a result, they envy and resent the entire market system that has failed to reward them as they believe they deserve to be rewarded.

Others have also explored this theme. Another Austrian, Helmut Schoeck, wrote the book that is widely considered a masterpiece of sociology, Envy: A Theory of Social Behavior (Der Neid: Eine Theorie der Gesellschaft). You can go back even further, if you like, to the Tenth Commandment’s proscription on “coveting.”

Intellectuals who consider inequalities in wealth evidence of injustice often seek political remedies. These take the form of legislation and, more often, regulation. In the process, of course, they are able to portray themselves as heroic opponents of injustice. If they have sufficient support, they are also able to acquire significant power, wealth and status. We know from experience, however, that these intellectuals rarely consider their own wealth evidence of injustice.

In Europe, these intellectuals have been far more successful in the past than in America. For this reason, American intellectuals in academia, politics and media have for decades told us that the U.S. is woefully unsophisticated and behind the times. In fact, economists have shown consistently that quality of life is higher for Americans at all income levels than it is in most European nations. It is difficult, however, to compete with a movement that has had, until recently, a near monopoly on pulpits, podiums and programming.

That’s all changed. Not only has the United States seen Keynesian policies on steroids crash and burn, but the European model has been revealed as the house of cards that it is. For decades, governments have propped up living standards by borrowing to appease voters. In effect, nations have consumed at artificially high levels by sending their children the bill.

Naturally, governments run by these intellectuals have tried to raise taxes to support their habits. Many succeeded, but then discovered the reality of the Laffer curve. Taxes necessarily transfer resources from the private tax-generating sector to the public tax-consuming sector. At some point, taxes depress economic growth, which reduces government revenues. This point is usually much lower than the critics of capitalism assume. Moreover, their targeting of the wealthiest individuals is most damaging to the economy. The wealthiest are also those with the most money to invest in the innovations that create all net new jobs.

So we’re seeing tax recipients rioting in Greece and elsewhere. These riots will spread, but it will do no good. The money doesn’t exist to support the intellectuals’ schemes, no matter how bloody their tantrums. Times will get hard enough to create a generation that hates the intellectuals who promised that everybody would be able to retire young with no worries.

We are in the midst of a historic transition. The intellectuals got their way. Now the consequences of their ideologies are going to be painful enough to allow market reforms. That’s how self-equilibrating market mechanisms work.

This is all very good news for North Americans. Canada, by the way, is way ahead of America in learning the limitations of government. America, however, is learning quickly. Three years ago, the intellectuals were gloating that they could use the forthcoming economic downturn for their advantage. The public, they predicted, would blame free markets and give even more power to the planners.

That, as you know, has not happened. Despite the orchestrated efforts of the Occupy Wall Street crowd and other fans of socialism, the American public is far more wary of government than it is of business:

An overwhelming 64% of people surveyed said big government was the biggest threat to the country, compared with just 26% who said big business is their gravest concern and 8% who picked big labor.

Government debt schemes are failing. This is creating remarkable opportunities for investors. It amazes me, in fact, that more people don’t understand this.

On those rare occasions when I watch financial shows, I’m always surprised by the never-questioned assumption that up markets are good and down markets are bad. This is nonsense.

The name of the game for investors is “Buy low, sell high.” Given the inevitable fluctuations of the market, we know that markets have always gone through this sort of big cycle. They always will.

If this were not the case, “Buy low, sell high” would be nearly impossible. Sure, selling high is more fun, but you can’t do it if you haven’t bought low. This seems awfully obvious to me, but it’s clear that most people just don’t get it.

We are at an incredible historic juncture. The world is, once again, realizing it has been duped by fast-talking political scam artists. This is not a new story. In fact, we’ve actually gotten off pretty easy this time. By necessity, market-killing programs will be cut back, freeing investors and innovators to create wealth once again. This liberation of capital will come just as the greatest scientific revolution in history swings into high gear, delivering extended healthy life spans and new levels of wealth. I know it doesn’t always feel like it, but these are wonderful, extraordinary times.

Someday, some younger investor is going to say something to you like this: “You were so lucky to be investing back then, when prices were at rock bottom but the whole world was changing for the better. I’d be rich too if I were investing in those days.”

In fact, they will probably be wrong. Most people never see the big picture while it’s happening. This type of once-in-a-lifetime situation is always easy to see in hindsight. When you’re living through it, though, it takes real character and vision to grasp the opportunities.

Regards,

Patrick Cox

The Ongoing Recovery from the Folly of Intellectuals was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The last time there was talk about this issue was more than 30 years ago, after the devastating inflation of the late 1970s robbed an entire generation of their savings, upended American family life and launched a debt addiction that has destabilized economies all over the world. The Nixon administration promised a rose garden after the paper dollar; the results were very different.

The crisis in our times is not (yet) hyperinflation, but it is just as serious. The problems of the Fed-managed paper dollar system are too many to name, but they can be reduced to three that hit the average person most seriously.

First, it is no longer possible to earn a conventional return on saving money. That reality pretty much undermines the whole practice and ethics that built prosperity as we know it. The reason is directly related to the quality of money: Lacking any independent substance at all, its value and yield is managed by a small group of technocrats in a marble palace. They have used that power to impose the ultimate price control on the relationship between time and money.

Second, the problem of unemployment and the ever-shrinking labor participation rate has hit the young generation in a way that we’ve never seen before. This has terrible economic effects but just as devastating cultural ones. It attacks the core hope that people have for the future. Again, the paper dollar, as the generating force behind the bust and boom, is a cause.

Third, there is a growing movement against the power, secrecy and insider racketeering by the Federal Reserve, which prints and throws around inconceivable volumes of loot to its friends and clients in total disregard for the political process or the fate of the American middle class. This angers people of all political persuasions. The opening up of the records and dealings of the Fed has not calmed people down, but rather has confirmed the worst possible fears.

In the 1970s, writers like Henry Hazlitt struggled mightily to get people to see the connection between monetary policy and the falling value of the dollar. While the Ford and Carter administrations lashed out at business and speculators, Hazlitt and others pointed to the real cause. His message stuck. By 1980, even the Republican platform included a call for a sound dollar. Congress formed a gold commission.

The connection between the Fed’s paper money and our economic plight is even more difficult to make this time around. But the intellectual foundations have been in place for years, and they have been given voice in the relentless hammering away at this issue by Ron Paul in interview after interview. He never misses a chance to talk about this previously unspeakable subject.

A tricky issue for the movement now is dealing with the diverse political coalition coming together against the current monetary system. The biggest critics of the Fed, for example, agree that the current system is a mess but don’t seem to agree about what to do about it.

This week in D.C., I debated Dean Baker of the Center for Economic and Policy Research. The setting was fantastic: a speak-easy environment sponsored by the beautifully named Empire Unplugged. Baker is a strong critic of the Fed for reasons both good and bad. On the good side, he is as appalled as Ron Paul at the insider racketeering of the central bank. On the bad side, he would like to see its powers transferred to a body with more political oversight and democratic influence.

This is the exact opposite of what I argued for: the complete depoliticization of the entire system. We went back and forth for an hour on these topics, agreeing on the great evil, but disagreeing on what should replace it. As is typical of progressive critics of the Fed, he raised fears that market control of money and banking would revive the wildcat banking of the 19th century. This camp conveniently forgets that the age of the gold standard (which was never perfectly adhered to) also happened to produce history’s largest and most-positive economic transformation, propelling the creation and entrenchment of what is called the middle class.

Do these debates matter that much? On the level of theory, yes. In practice, not so much. These mirror the kinds of debates in the middle stages of the collapse of socialism in Eastern Europe. Recall that the movement against Polish central planning began not as a movement for private ownership of capital, but rather as a labor union protest against power and privilege of state-connected oligarchs.

This tendency made the champions of free markets squeamish, for good reason. Replacing a state monopoly with a state-protected labor monopoly does not necessarily look like improvement. But that’s not what ended up happening in Poland. Solidarity was the major vehicle that wrecked the regime as it stood. At one point, the major labor organization Solidarity had 9.5 million members. That mass movement upended history. Today, Solidarity is a normal union like any other, with membership at half a million and declining and no serious power. The result was not a labor monopoly, but a beautifully prosperous market society.

The lesson here: Sometimes you have to topple the system that exists and see what happens. This is why Ron Paul has been tolerant of a wide divergence of views within the anti-Fed movement. He is right to be so. Writers at The Wall Street Journal and elsewhere wring their hands about the dangers of political control of money in the post-Fed age. But history shows that the reform is not so easily managed. Breaking up the current monopoly is the most-important priority right now.

If the Fed were an Eastern European socialist government, the year would be about 1987. If the economy takes another dive after the fake boomlet that Bernanke’s printing presses have manufactured, he should make sure that the helicopter on the roof is in good working order.

Regards,

Jeffrey Tucker

The Great Monetary Debate was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

So what? Well, none of this could have happened 10 years ago. Not only that, you would probably wouldn’t have understood the paragraph in the slightest because it contains words and actions no one had heard of. Had I told you in 1992 that in 20 years, virtually anyone would be able to speak in wireless real-time video to anyone else on the planet, even to the point of sharing a real-time digital experience, you would not have believed it.

And if I had added that the technology was not outrageously expensive, but rather being carried around in the pockets of students and commuters everywhere, this would have seemed too outrageous for science fiction. What amazing force in the universe hath rained down such blessings on us mere mortals?

The truth is that we all live in a world today that would have been unimaginable to us only very recently. It is so much woven into our lives that we don’t think about it much anymore. And contrary to the rap on the digital age, that it is all about geekery and gadgetry, the real driving force behind this innovation is the flesh-and-blood human being and the oldest desires known to humankind (such as wanting to stay in touch with family).

Another quick example. I was emailing with a U.K. choir director two nights ago, and I mentioned a book of chanted music. He hadn’t heard of it, so I sent him a link, from which he downloaded the material (that magic click that creates a copy!). This morning, his choir sang the piece in church halfway around the world, and he let me know that it was fabulous.

Here we have it: digits flying over oceans in a matter of seconds, and then embodying themselves in beautiful music, sung now with the same human energy as music was sung in the ancient world, that transforms real lives. The person kneeling to prayer didn’t know and didn’t need to know how the music arrived there. The technology is just the means; the end is the improvement of human life.

Such cases like this are only a tiny snapshot of two things I can briefly recall. Just today so far, I’m sure I’ve read articles I never would have seen, talked with people I would have long ago lost touch with, found out about events that would have remained forever unknown to me, connected with someone who found something I said interesting enough to consider…and just now, I recall that I heard word that a friend with asthma is out of out a Shanghai hospital all safe and sound. None of this would I have known only a few years ago.

Again, ask the question: What is causing all of this amazing change? What is the driving force, the source of the manna, the wellspring of all this avalanche of human progress?

I’ll tell you what is not causing it: politics. It’s the great lie, the most-gigantic drain of valuable human energy ever conjured up in the mind of man. What is politics but a grand argument about how we should rule each other? Meanwhile, every step forward in history has come not from this task, but a completely different one.

American politicians are always running on a platform of change. They explain how their policies will make your life better. They map out timetables. They present a portrait of a future. Above all else, they presume that the future is theirs to control, and voters often go along with this idea. As an example, look no further than the history of the State of the Union address.

What if none of it is true? Just think about education. Everyone has a plan for how to improve what exists. So it has been for a hundred years. Meanwhile, the private sector, through physical and digital technology, is reinventing the entire enterprise from the ground up through every possible means. This decentralized, private-sector-driven, technologically sophisticated education reform is making it almost impossible not to be educated about something with each passing hour.

Online academies are opening by the day. Universities are putting their courses online for free. For-profit companies are distributing every manner of teaching tool one can imagine. For-profit learning centers are opening in every town, all making a buck from teaching kids what the public schools have failed to teach. For that matter, the History Channel alone offers more sweeping programs than any public school textbooks two generations ago.

Anyone in the world can be a teacher to the world today, with a laptop and an Internet connection, and so, too, anyone can be student.

It’s true in health care reform, too. For all the problems in the pricing system and terrible insurance system, health care is getting better, mainly due to private-sector innovations. The best radiologists in the world can examine your scans in minutes, no matter where they actually happen. Access to medical information is no longer trapped in a dusty book but flies all over the world from hand-held devices. Error is more likely to be corrected this way, saving and changing lives.

Society is not waiting for the politicians. When you listen to what they say, when you watch what the bureaucrats do, when you look at what the agencies are regulating, you suddenly realize that the political monstrosities that burden the world are hopelessly out of touch with the kind of progress that people are experiencing in their daily lives now.

Politicians can make the world a worse place, to be sure. But if you look at the actual trends that are driving change in a positive direction in our world today, none of them is inspired by political initiative. They take place outside the public sector, and even outside the purview of the politicians and bureaucrats. Sometimes it seems as if the political class is clueless that the world has long ago moved on.

What is driving the world in a forward direction? It is people connecting with people through free association, communication, money exchange, enterprise, risk taking, commercial aspirations and the practical arts. And from these forces, we are newly discovering the wonderful fruits of civilization: arts, music, philosophy, faith.

And truth. Truth above all. The truth that is all around us, the one that the public-sector machinery somehow cannot and will not see, is that global society is making a future for itself without the help of the world’s self-described public servants. The state in all its manifestations struts and preens — builds monuments to itself and waves its flags — but when it comes to really making change, we must look elsewhere.

Regards,

Jeffrey Tucker

How Change Happens was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The great “old right” commentator Frank Chodorov once described the income tax as the root of all evil. His target was not the tax itself, but the principle behind it. Since its implementation in 1913, he wrote, “The government says to the citizen: ‘Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.’”

He really does have a point. That’s evil. When Congress ratified the 16th Amendment on Feb. 3, 1913, there was a sense in which all private income in the U.S. was nationalized. What was not taxed from then on was a favor granted unto us, and continues to be so.

This is implied in the text of the amendment itself: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Where are the limits? There weren’t any. There was some discussion about putting a limit on the tax, but it seemed unnecessary. Only 1% of the income earners would end up paying about 1% to the government. Everyone else was initially untouched. Who really cares that the rich have to pay a bit more, right? They can afford it.

This perspective totally misunderstand the true nature of government, which always wants more money and more power and will stop at nothing to get both. The 16th Amendment was more than a modern additive to an antique document. It was a new philosophy of the fiscal life of the entire country.

Today, the ruling elite no longer bother with things like amendments. But back in those days, it was different. The amendment was made necessary because of previous court decisions that stated what was once considered a bottom-line presumption of the free society: Government cannot tax personal property. What you make is your own. You get to keep the product of your labors. Government can tax sales, perhaps, or raise money through tariffs on goods coming in and out of the country. But your bank account is off-limits.

The amendment changed that idea. In the beginning, it applied to very few people. This was one reason it passed. It was pitched as a replacement tax, not a new money raiser. After all the havoc caused by the divisive tariffs of the 19th century, this sounded like a great deal to many people, particularly Southerners and Westerners fed up with paying such high prices for manufactured goods while seeing their trading relations with foreign consumers disrupted.

People who supported it — and they were not so much the left but the right-wing populists of the time — imagined that the tax would hit the robber baron class of industrialists in the North. And that it did. Their fortunes began to dwindle, and their confidence in their ability to amass and retain intergenerational fortunes began to wane.

We all know the stories of how the grandchildren of the Gilded Age tycoons squandered their family heritage in the 1920s and failed to carry on the tradition. Well, it is hardly surprising. The government put a timetable and limit on accumulation. Private families and individuals would no longer be permitted to exist except in subjugation to the taxing state. The kids left their private estates to live in the cities, put off marriage, stopped bothering with all that hearth and home stuff. Time horizons shortened, and the Jazz Age began.

Class warfare was part of the deal from the beginning. The income tax turned the social fabric of the country into a giant lifetime boat, with everyone arguing about who had to be thrown overboard so that others might live.

The demon in the beginning was the rich. That remained true until the 1930s, when FDR changed the deal. Suddenly, the income would be collected, but taxed in a different way. It would be taken from everyone, but a portion would be given back late in life as a permanent income stream. Thus was the payroll tax born. This tax today is far more significant than the income tax.

The class warfare unleashed 99 years ago continues today. One side wants to tax the rich. The other side finds it appalling that the percentage of people who pay no income tax has risen from 30% to nearly 50% in this period of economic downturn. Now we see the appalling spectacle of Republicans regarding this as a disgrace that must change. They have joined the political classes that seek advancement by hurting people.

It’s extremely strange that the payroll tax is rarely considered in this debate. The poor, the middle class and the rich are all being hammered by payroll taxes that fund failed programs that provide no security and few benefits at all.

It’s impossible to take seriously the claims that the income tax doesn’t harm wealth creation. When Congress wants to discourage something — smoking, imports, selling stocks or whatever — they know what to do: Tax it. Tax income, and on the margin, you discourage people from earning it.

Tax debates are always about “reform” — which always means a slight shift in who pays what, with an eye to raising ever more money for the government. A far better solution would be to forget the whole thing and return to the original idea of a free society: You get to keep what you earn or inherent. That means nothing short of abolishing the great mistake of 1913. Forget the flat tax. The only just solution is no tax on incomes ever.

But let’s say that one day we actually become safe from the income tax collectors and something like blessed peace arrives. There is still another problem that emerged in 1913. Congress created the Federal Reserve, which eventually developed the power to create — on its own — all the money that government would ever need, even without taxing.

For the practical running of the affairs of the state, the Fed is far worse than the income tax. It creates the more-insidious tax of inflation. In a strange way, it has made all the debates about taxation superfluous. Denying the government revenue does nothing to curb its appetites for our liberties and property. The Fed has managed to make it impossible to starve the beast.

Chodorov was correct about the evil of the income tax. Its passage signaled the beginning of a century of despotism. Our property is no longer safe. Our income is not our own. We are legally obligated to turn over whatever our masters say we owe them. You can fudge this point: None of this is compatible with the old liberal idea of freedom.

You doubt it? Listen to Thomas Jefferson from his inaugural address of 1801. What he said then remains true today:

“…what more is necessary to make us a happy and a prosperous people? Still one more thing, fellow citizens — a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement and shall not take from the mouth of labor the bread it has earned.”

Regards,

Jeffrey Tucker

Ninety-Nine Years of Evil was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

“It may come as a shock …” wrote John Flynn, “to be told that[you] have never experienced that kind of society which [our] ancestors knew as the American Republic …” Flynn, the editor of the popular weekly the Saturday Evening Post, had already come to this conclusion in 1955. In his book The Decline of the American Republic, Flynn observed that Americans needlessly “live in the war-torn, debt-ridden, tax-harried wreckage of a once imposing edif ice of the free society which arose out of the American Revolution on the foundation of the U.S. Constitution.”

An empire needs a source of income suff icient to fund its military campaigns, regulatory regimes, and domestic schemes. It also needs a strong central authority to direct its ambitious new programs. In one short 12-month span, a year the writer Frank Chodorov calls the “Revolution of 1913,” the empire got the tools it needed. That year—the same year European countries abandoned the gold standard in preparation for World
War I—the old Republic ceased to exist.

WHERE THE MONEY COMES FROM

America’s current system of income tax is a twentieth-century invention. Previous attempts at creating a national tax had failed or had been thrown out because they violated tenets of the Constitution deemed essential by the founders. In its f irst 100 years, the United States supported its federal government with a series of what we would call “sin taxes” today, on

whiskey, tobacco, and sugar. By 1817, all internal taxes were abolished by Congress, leaving only tariffs on imported goods as a means for supporting the government.

The first income tax that citizens of the young Republic were forced to endure came about because Congress had been asked to fund the War between the States. In 1862, a tax on incomes between $600 and $10,000 was assessed at the rate of 3 percent, and the Internal Revenue Service (IRS) was created. The war was costing $1.75 million per day.2 The government sold off land, borrowed heavily, enacted various fees, and increased excise taxes, but it simply wasn’t enough. The income tax seemed like the only way to finance the war and service the country’s then-staggering $505 million debt. That tax was promoted as a temporary wartime measure. Temporary it was. In 1872, after servicing the Reconstruction, Congress yanked the “temporary” tax.

But that was not the end of it. The income tax appealed to empire builders because it alone offered enough cash to finance the enterprise. But it had another appeal—to the larceny and envy in the hearts of ordinary citizens. Following a banking panic in 1893, Senator William Peffer of Kansas, supported the progressive income tax in this way:

Wealth is accumulated in New York, and not because those men are more industrious than we are, not because they are wiser and better, but because they trade, because they buy and sell, because they deal in usury, because they reap in what they have never earned, because they take in and live off what other men earn… . The West and the South have made you people rich.

That sentiment was puffed up by Nebraska’s bellicose worldimprover William Jennings Bryan, who argued against the “equal taxation” requirement in the Constitution, in favor of the current progressive one:

If New York and Massachusetts pay more tax under this law than other states, it will be because they have more taxable incomes within their borders. And why should not those sections pay most which enjoy most?

This logic is simple. People who are more productive should be forced to pay a bigger share of their common expenses. But this kind of logic had no place in a free republic where all men were supposedly created equal; if they were equal they could each carry their own share of

the burden of central government. Under this new regime, men were no longer equal, but given differing loads to carry based on the whims of elected hacks.

With considerable foresight, one member of the House of Representatives predicted:

The imposition of the [income] tax will corrupt the people. It will bring in its train the spy and the informer. It will necessitate a swarm of off icials with inquisitorial powers. It will be a step toward centralization.

… It breaks another canon of taxation in that it is expensive in its collection and cannot be fairly imposed … and, finally, it is contrary to the traditions and principles of republican government.

When the tax was again introduced in 1894, a challenge went to the U.S. Supreme Court. In 1895, even among the cacophony of appeals in Congress to “soak the rich,” the Supreme Court declared the bill unconstitutional in a 5-to-4 ruling. In writing the majority opinion, Justice

Stephen J. Field quoted another case to support his conclusion:

As stated by counsel: “There is no such thing in the theory of our national government as unlimited power of taxation in congress. There are limitations, as he justly observes, of its powers arising out of the essential nature of all free governments; there are reservations of individual rights, without which society could not exist, and which are respected by every government. The right of taxation is subject to these limitations.”

But when the winds of empire blew, the old yellowed paper of the U.S. Constitution went f lying. Following The Panic of 1907, President Theodore Roosevelt sided with a faction in the Democratic Party that wanted to amend the Constitution to allow a national income tax. In

1909, President Taft stated that he had “become convinced that a great majority of the people of this country are in favor of vesting the National Government with power to levy an income tax.”

Of course, politicians are always able and willing to argue that “the people” want a government to have more power. If the voters see a free lunch in the deal, they’re for it. By 1913, just in time for Wilson’s emergence on the world stage, the Sixteenth Amendment had been ratified by enough states to put the income tax into law. The Amendment states:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

It wasn’t long before Congress exercised its new powers. Wilson even convened a special session of Congress to rush through the f irst tax law under the Sixteenth Amendment, in which earnings above $3,000 were subject to a 1 percent tax, gradually moving up to 7 percent on higher income levels.

With its rather modest rates, the original income tax was viewed as a benign inconvenience. As early as 1916, however, the top rate was more than doubled from 7 percent up to 15 percent. Then as cash was needed to send Pershing to France, the rate was hiked to a staggering 67 percent in 1917 and 77 percent by 1918. Even the low rates were raised. From their microscopic origin of only 1 percent, the rate settled into a “modest” 23 percent by the end of World War II. But by that time, the people of the old republic had grown to accept an income tax as a necessary evil. Now that the nation was an empire, it needed the money.

In our present era, the complexity of the Internal Revenue Code (IRC) has created an army of specialized lawyers and accountants. Even attempts at reform are out of control. A “technical corrections” bill exceeds 900 pages of adjustments. In fact, by the beginning of the twentyfirst century, the tax codes exceeded 7 million words, about nine times longer than the Bible; and the IRS was sending out about 8 billion pages of forms and instructions every year—at the cost of about 300,000 trees! All this effort translates to about 5.4 billion hours spent every year by Americans just complying with the tax rules.

From 1913 to 2005, the income tax has enabled, entitled, empowered, and engorged the federal government, states, and local governments, private enterprises, and millions of private citizens. Spending has grown by more than 13,592 percent.

The income tax gives the federal government a blank check to spend money, even money it does not yet have. The federal government lays a claim on all future economic activity of its citizens; its massive debts are a lien on the earnings of people who have not yet even drawn their first breaths. What’s more, the income tax could be used as both an economic tool and as a political weapon. Tax rates could be manipulated, for example, to punish or reward favored political groups.

When the Constitution was ratified in 1789, the colonists in the New World believed they had won for themselves a measure of freedom and independence. “A republic, if you can keep it,” Benjamin Franklin warned.

But by the end of 1913, a scant 124 years later, Americans were happy to lose their republic; an empire was what they wanted.

Regards,

Bill Bonner

Addison Wiggin

The Revolution of 1913 was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Let me make a secret confession right here. For years, the producer of my radio talk show and I would draw straws each January to see who would “have the high privilege and distinct honor” of watching the president’s State of the Union address.

Do I have to clarify that the loser had to watch?

In case the president said something important – which almost never happened – I felt an obligation to play some audio clips and talk about it on the show the next morning. But, personally, watching Republican and Democrat presidents recite their laundry list of promised giveaways for the year ahead was more than I could bear.

I learned early on that I could avoid all of the ovations and applause, save time, and still capture what substance there might have been in a written paragraph or two. Soon, I’ll give you such a written account, a perennial synopsis that will allow you to watch something else – like American Idol – and still have a handle on what the president says.

And you might even have time left over to keep an eye on the real news.

While We Were Watching…

The State of the Union is treated with utmost seriousness by the dominant news media. All four major TV networks and the cable news channels carry the event. My local newspaper devoted most of the front page and big chunks of the inside pages to its coverage: photos, accounts, sidebars, response, and analysis.

But it’s actually a spectacle that crowds out the real news. News about the impact American diplomacy is having on our future standard of living. News about the U.S. dollar’s reserve status winding down.

On the day of the State of the Union address, news flashed around the world – but not on your favorite network or in your morning paper – that India and Iran have agreed to end-run the U.S.-imposed sanctions on Iran.

They will use gold to do so.

Those [U.S.] sanctions, which have now been agreed to by the European Union as well, will ratchet up in July. Their enforcement means that banks and financial institutions involved in oil transactions with Iran will be barred from doing any business with financial institutions in the United States and Europe.

According DEBKAfile, a news source based in Israel, Iran has taken steps to bypass American and European banks and their currency desks altogether, agreeing instead to sell its oil to India for gold. China is expected to soon agree to use gold in buying oil from Iran as well. It’s a move that would leave the long-standing global dollar pricing of petroleum in tatters.

The gold-for-oil agreement means a three things:

1. It hastens the unwinding of the U.S. dollar’s global reserve currency status.

The rest of the world is actively developing alternatives to the U.S. dollar. Although it will mean a falling standard of living for the American people, U.S. policies and secretaries of state, like Condoleezza Rice and Hillary Clinton, have spurred what will become a stampede away from the dollar. DEBKAfile also reports that both China and Russia have secret mechanisms already in place to pay Iran in non-dollar currencies for its oil. And only a month ago, China and Japan, the world’s second- and third-largest economies, agreed to develop direct yen/yuan trading, forgoing the dollar as the reserve currency intermediary.

2. It accelerates the global monetization of gold.

Both China and India have been aggressively adding to their gold reserves. Other countries are following suit. The Keynesians, who have been in charge of American monetary policy, having destroyed the value of the dollar and enabled our ruinous debt, may actually believe that gold is a “barbarous relic.” But it is clear that their opinions have little functional value in the real world. The world is turning to gold more and more as U.S. debt continues to mount. Indeed, is there a better alternative monetary unit to be found? Certainly, it’s not the euro. Jim Grant of Grant’s Interest Rate Observer says gold is the only answer to the question, “if not the dollar, then what?”

3. It reveals the growing global impotence of the U.S.

Long able to enforce reluctant countries to adhere in its missions and embargoes around the world, the U.S. is finding its will frustrated. Nations that once had to weigh the favor of the U.S. against their own commercial and domestic political interests are increasingly ignoring the global dictates of the U.S. State Department. In 2003, Turkey, where the prospect of a U.S. invasion of Iraq was wildly unpopular, refused even bribes to allow the U.S. to stage the invasion from its soil. Today, the threat of a U.S. or Israeli strike on Iran is meeting with growing disapproval, especially from countries like China and India which rely heavily on Iranian oil.

Routine. Tired. Repetitive.

It may be that the State of the Union’s falling ratings – Obama’s speech the other night was down 12 percent from the year before, and was down 21 percent from 2010 – are a sign that people in large numbers have discovered there are better sources of important news than network television and Washington’s lapdog press.

Or, even better, maybe they’ve had about enough of the Washington party.

Or, maybe it’s simply because it’s all so routine, so tired, so repetitive. Even American Idol, entering its 11th season, has more surprises than the State of the Union. Consider:

Obama, who clearly doesn’t understand anything about markets, offered to have the government interfere with the real estate market in brand new ways in 2012. What could be more predictable than some president announcing a scheme to screw up the real estate market again in the new year?

It’s so routine. So tired. So repetitive.

And while the contestants on American Idol are fresh every year, the promises that make up the State of the Union are just reruns, season after season.

Now, if you’d like to be free to pay attention to the real news that actually affects your freedom and prosperity, let me provide you the following short, beginning-to-end account of this year’s State of the Union. You’ll be able to refer to it year after year, so that while you’ll still be informed about the president’s address, you can skip the show and save yourself time.

Time to follow the real news. Or to watch American Idol.

“Thank you so much. Thank you very much. Thank you. Thank you.”

The president agreed to do something for (to?) homeowners. He also has decided to help teachers. And students. And women. Workers, too. The president wants to help workers, for sure. And jobs galore. The president is all about creating jobs in 2012. And more jobs in energy. Oh, they’ll be clean ones for sure!

Plus, he’s going to reform regulations so that regulators will be able to regulate better. And he wants to get a handle on the bureaucracy. And he wants to reform education. And both make government more effective and still grow the economy. Did he forget men and women in uniform? The president most certainly did not!

“Thank you, God bless you, and may God bless the United States of America.”

Regards,

Charles Goyette

Source

The State of the Union, Just Another Reality Show was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

But here there still be monsters. Before another day had passed, the FBI and DOJ made a show of intellectual property force under existing law (specifically the PRO-IP Act signed by Bush in 2008). They shut down the popular site Megaupload and jailed its principals, who happen to be non-U.S. persons not living in the U.S.

On Black Wednesday itself, the Supreme Court handed down a decision in Golan v. Holder that authorized Congress to re-copyright works that had long been in the public domain.

Then, last week, Poland joined with seven other nations — including the U.S., Japan and Canada — by signing ACTA (Anti-Counterfeiting Trade Agreement), the international trade agreement that criminalizes intellectual property theft across borders. The U.S. signed in 2010 when the negotiators termed ACTA an “executive agreement” instead of a “treaty”…because that allowed them to skip merrily around the Senate ratification that would have been required for a treaty.

As Timothy B. Lee explains on the Ars Technica site:

“If ACTA becomes a binding part of international law, it will create a precedent for future treaties that avoid basic principles of transparency and democratic accountability.

“More generally, the treaty continues the one-way ratchet toward ever-stronger copyright protections. ACTA establishes a new, higher minimum of copyright protections and enforcement that countries must provide, but it doesn’t require countries to preserve mechanisms like fair use and intermediary immunity that protect intellectual freedom.

“If Congress ever decides that IP rights have swung too far in one direction, it can always re-balance them by changing the law, right? Not exactly. International agreements like ACTA bind the hands of legislators unless the U.S. is willing to withdraw from them first.

“That’s why Rep. Darrell Issa (R-Calif.) last week called ACTA ‘more dangerous than SOPA.’ He added, ‘It’s not coming to me for a vote. It purports that it does not change existing laws. But once implemented, it creates a whole new enforcement system and will virtually tie the hands of Congress to undo it.’

“Unfortunately, these arguments are hard to explain to the general public. So too many ACTA opponents are, perhaps unknowingly, attacking ACTA for provisions that aren’t in the treaty. We’re not going to shed too many tears if this misinformation helps to kill a bad treaty, but we’d rather win the debate honestly — and prepare people for the upcoming ACTA sequel.”

Hmm. We agree that the poor treaty (or executive agreement for those U.S. presidents who can’t be bothered with Senate ratification) ought not be maligned for what it doesn’t contain. Especially when the wretched thing is detestable for what it really does contain…and for what it represents.

What the Internet has forced us all to confront is this: Free expression and the sharing of information that drives progress are not compatible with the notion — and state enforcement — of intellectual property. The cognitive dissonance is wide and growing between defense of intellectual property and the defense of liberty and acceleration of progress.

In today’s feature article, Stephan Kinsella explains more and, in doing so, throws down the gauntlet against the defenders of IP.

The SOPA Wake-Up Call to Abolish Copyright
by Stephen Kinsella (Source)

I’ve blogged quite a bit lately about SOPA and PIPA and the recent Internet blackouts and other protests against these bills, which threaten free speech and the open Internet (Mike Masnick et al. at Techdirt have also been great on exposing and analyzing SOPA).

As Jeffrey Tucker noted recently, the protests against SOPA started not with conservatives or even “libertarians,” but with civil libertarians of the “left,” as well as Silicon Valley tech types. Of course, some libertarians have been opposed to SOPA (and copyright) from the beginning — the more-radical and anti-state libertarians, in particular Austro-libertarians and left-libertarians.

Aside from the anti-state libertarians, however, most of the protests against SOPA concede that copyright is good, intellectual property is important and piracy is bad…but then they bemoan that SOPA “goes too far.”

For example, consider this article in PC Magazine, providing the response of 11 PC Mag staffers asked for their take on SOPA. The response to SOPA was universally negative, but most of them first prefaced their opposition to SOPA by genuflecting to copyright and recognizing that IP piracy “is, of course, a real problem.” For example:

• “Yes, theft of intellectual property is wrong, but it shouldn’t be protected at the cost of free speech and an open Internet”
• “SOPA is a perfect case of a disproportionate reaction to a real problem. Lawless websites full of pirated content are a real problem, but breaking the Internet isn’t the solution”
• “This proposed legislation is akin to having libraries monitored, or even shut down, because there is a chance that a book may contain a piece of plagiarized work”
• “IP is a precious thing. For example, every writer on PC Mag has had their work pirated at one time or another. However, this legislation goes” too far
• “There is definitely a need for content owners like movie studios and music labels to protect their content from piracy, but the proposed legislation isn’t the answer.”

This is the type of response that almost all the SOPA opponents have taken, such as Facebook and Mark Zuckerberg, which said that

“‘…rogue foreign sites that pirate American intellectual property or sell counterfeit goods pose significant problems for our economy,’ but PIPA and SOPA ‘are not the right solution to this problem, because of the collateral damage they would cause to the Internet.’”

This type of argument is extremely common. Depressingly common.

And not only do most opponents of SOPA accept the basic legitimacy of copyright, they also accept the RIAA/MPAA propaganda about “piracy” imposing billions of dollars of “cost” to the economy every year — even though there is no evidence of this.

The problem is that copyright obviously infringes free speech and other individual rights. This is no surprise, given its origins as a tool of censorship. As the Supreme Court recognized in its most-recent copyright decision, Golan v. Holder (the case authorizing Congress to re-copyright public domain works), “Concerning the First Amendment, we recognized that some restriction on expression is the inherent and intended effect of every grant of copyright.”

It is widely recognized that copyright (and even patent) restricts freedom of speech and expression. By assuming that copyright is legitimate — as the courts do — and that the First Amendment protects freedom of expression, a balance must always be found between freedom and censorship. And this is the dilemma most people find themselves in when they start with the premise that we must protect intellectual property rights, but we can’t “go too far” because otherwise we would harm free speech (and the open Internet) “too much.”

Obviously, there is a conflict between copyright and censorship and government control of ideas on the one hand, and freedom of expression and the open Internet on the other. This is being increasingly recognized. Leo Laporte recognized this in a recent episode of This Week in Tech. You have to choose: the Internet or copyright, he observed (opposed to technocrat Nilay Patel).

In the aftermath of the SOPA battle, we have people finally asking important questions. The Washington Times questions copyright abuse in its opposition to the Golan decision. The Daily Caller questions copyright’s legitimacy. Mark McKenna at Slate, in “Don’t Stop at SOPA,” asks: “SOPA and PIPA are (almost) dead. Now can we talk about the law that already exists?” Glyn Moody at Techdirt asks the important question: “OK, So SOPA and PIPA Are Both on Hold: Where Do We Go From Here?”

And what is the answer? Some people are hinting at it, or directly suggesting it: Abolish copyright. As Rick Falkvinge observes in “It Is Time to Stop Pretending to Endorse the Copyright Monopoly”:

“…the copyright industry is actually right that these ridiculous laws are needed to sustain the copyright monopoly. General-purpose networked computers, free and anonymous speech and sustained civil liberties make it impossible to maintain this distribution monopoly of digitizable information. As technical progress can’t be legislated against, basic civil liberties would have to go to maintain the crumbling monopoly. And these are the laws we’re seeing on the table.

“There comes a tipping point when somebody says that this entire system of cultural monopolies is absurd. A tipping point where the part before the ‘but’ is unceremoniously and collectively dropped, the part that didn’t count, anyway. A tipping point in which everybody just stops pretending to support it. I think it is time to create that point on the history line.”

Falkvinge here recognizes that if you support copyright, you should support SOPA. And conversely, if you oppose SOPA, you should oppose copyright. Copyright is the problem, people.

We are at a moment in history when people who have absorbed the idea of copyright, but who are not ideologically committed to it, have seen that it conflicts with more deeply held values: freedom of expression, commerce, digital life, the Internet. They are seeking a framework, a way to coherently express what they sense is wrong with escalated copyright enforcement. We need to let them know: The problem is copyright itself. If you have copyright, of course you want to enforce it. All the problems we see are merely symptoms of the copyright mentality.

We must press our fleeting advantage to let our halfhearted allies know that their intuitions are right: Censorship and SOPA and state control of private property and SOPA are wrong. And this means copyright, which is the engine behind all these things, is wrong, and must fall, or at least be radically scaled back, not strengthened.

The argument against patent and copyright is not a socialist or liberal one. It is, in fact, rooted in respect for private property rights, capitalism, the free market and competition. A coherent understanding of private property and free markets reveals that copyright is an anti-competitive grant of state power for purpose of censorship or favoritism that can only seek to undermine private property rights and empower the police state — as we are seeing now.

I remind our anti-SOPA brethren that the battle is far from over. They opposed SOPA and PIPA, but where were they when the 1998 Digital Millennium Copyright Act (DMCA), which has led to so much persecution and harm to the Internet, was enacted? Where were they in 2008 when George Bush signed the PRO-IP Act, which was instrumental in the FBI raids in New Zealand on the Megauploads principals, a day after the alleged SOPA blackout protest victories?

And what about the Golan decision, released the day of the SOPA blackouts, authorizing Congress to re-copyright works long in the public domain? What about the one-year federal prison sentence handed down to a man for uploading a copy of the Wolverine movie? What about the British student faced with extradition to the U.S. for having the wrong links on his website?

Where were they when President Obama signed ACTA (unconstitutionally, without Senate ratification), a global Internet treaty even worse in some ways than SOPA? Right now, nations are negotiating in secret the TPP (Trans-Pacific Partnership), an “agreement that the entertainment industry is betting on to get SOPA-like laws introduced around the globe.”

In other words, the dangers of SOPA are already here. This is because of copyright.

The problem is that all the people opposing SOPA undercut their opposition by acknowledging the importance of copyright and IP by condemning piracy. It is admirable that they are taking the ride side of the chasm caused by their cognitive dissonance, but dissonance it is. If you support copyright, you oppose piracy, and you support the state’s existence and its attempts to enforce these “property rights.” You cannot have both copyright and Internet freedom/freedom of speech.

The threat here to property rights, to individual rights, to Internet freedom and freedom of speech and expression and the press comes from copyright itself. We must strike at the root. SOPA is just a symptom of the disease. The disease is copyright.

Everyone is trying to treat the symptom — enforcement efforts like SOPA — with halfhearted treatments like labeling the response “disproportionate” or going “too far.” This is like trying to treat a brain tumor by taking Tylenol — sorry, acetaminophen — in response to the headaches caused by the tumor. All opponents of SOPA and censorship, all denizens of the Web and proponents of freedom, must oppose copyright itself (and patent too). Those libertarians and others who oppose SOPA and who are for copyright reform, but who are not for copyright abolition, should realize that a modest, fair, efficient, “reasonable” or “sensible” copyright system is completely impossible.

Since the dawn of copyright, its scope, length, penalties and enforcement have only increased, because of the relentless pressure by special interest factions like Disney, the RIAA, the MPAA, and other content providers and entrenched interests. As we can see with the pressure to adopt SOPA, PIPA, PRO-IP, DMCA, Berne, WIPO, TRIPS, COICA, Sonny Bono/Mickey Mouse Copyright Term Extension Act, ACTA, TPP and other measures (see “The Mountain of IP Legislation”), the Big Content interests are relentless and will not stop pressuring Congress and other legislatures to expand the war on information sharing and the Internet.

Even if we had a less-noxious copyright system — say, one with 10-year terms and less draconian penalties and enforcement — it would soon metastasize into what we have now, just as it has done (originally 14 years, now it is over 100). So a modest, “reasonable” copyright system is really off the table.

The question that SOPA opponents have to ask themselves is would you rather have today’s copyright system, with its draconian terms and penalties and continual pressure to expand and internationalize it, or no copyright at all? Only one of these choices is compatible with opposition to SOPA and to censorship. The only way to stop SOPA-type provisions and to maintain Internet freedom is to get rid of today’s copyright system.

- Stephen Kinsella

This is bound to generate some discussion and argument (Oh, our aching inbox! ggibsonagora@gmail.com). Heck, as quite a few of our Whiskey Shooters have noticed and emailed us about, there’s a little copyright warning at the bottom of these very missives and everything Agora Financial publishes.

This is still fairly new territory we’re exploring. A couple of years ago, we were far more in the Ayn Rand/Objectivist camp when it came to intellectual property (though not as far as the entertainingly pro-IP libertarian Andrew Joseph Galambos, who reportedly changed his name from Joseph Andrew Galambos so as not to infringe on his father’s claim to the specific name and who dropped a nickel in a box every time he used the word “liberty” to pay the estate of the reputed coiner of the word, Thomas Paine). It’s only recently that our friend Jeffrey Tucker got us thinking — and rethinking — the issue.

There are a couple of ways to approach it. We’ll undoubtedly have cause to explore them all in future issues (like Stephan points out, there are too many state-backed monopolists with too much money on the line for these kinds of legislation to go away), but here’s one way of thinking about it that we really like…

Property rights are the natural way to deal with scarcity in a world of scarce physical resources. Without property rights — based in first occupancy, not labor or use of material — ownership reverts to a temporary condition determined by might. Property rights aren’t natural in the sense that gravity is, and not as fundamental, but very nearly so, in the context of human existence. They are as natural, as essential to peaceful co-existence as your right not to be beaten, killed and possibly eaten by your stronger neighbor.

Ideas — even complex ones — are nonscarce, unlike physical property. They are literally infinitely reproducible without damaging the original in any way or depriving the owner of its use. Yes, potential income is damaged in the absence of intellectual property monopoly enforcement, but that could be said about a great many things that aren’t protected by this notion of intellectual property. It takes some serious mental contortion and far-reaching legislation to make ideas and thought patterns scarce. This is what SOPA, PIPA, ACTA and all the rest are making us all realize.

When you see how far the state has to go to enforce monopoly use on nonscarce things…when you see how this monopoly enforcement really hampers progress and restricts the way people use their own property, as it does with these threats to a free Internet (people are now actually afraid to send links to public websites in private emails)…you have to start to wonder at the soundness of the premise.

The arguments for intellectual property strike us as about as sound as arguments for a flexible state-run currency…or for military adventurism…or for gun control…or for prohibition. That is to say, they are fundamentally unsound in that they rely on the force of the state to interfere with the natural forces of the market…with all the distortions you’d expect, along with a continual growth in state power to wage effectively.

At least that’s how we see it here in the Whiskey editorial room. We suspect the world is waking up to this fact as this unsound, indefensible idea gums up the engine of the digital world.

The only way to defend intellectual property in this digital age is for the states of the world led by the U.S. to keep on pushing this invasive, punitive legislation.

We don’t think that’s such a good idea. The entire world that benefits from a free Internet seems to agree, even if most of that world holds onto a belief in intellectual property.

We’re curious to see how this will play out. We suspect strongly that progress will win. Eventually. In fact, we’re willing to put our money where our big mouth is on that one. Those who bet on progress tend to win. Those who bet early win the biggest.

To Save the Future, Abolish Copyright was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

In today’s world, burying that money might have been the better idea. Otherwise, the servant would have paid fees for depositing, withdrawing and transferring and would have earned no interest at all, and the money would have depreciated in value the whole while. It’s enough to cause you to weep and gnash your teeth.

That parable has had a long life because earning interest on deposits is a universal feature of the human experience in any finance economy. Until now. The Fed has announced that it will work to keep interest rates at zero for the next several years, all with the supposed goal of refurbishing the economy. Or so Bernanke tells us at great length.

But here’s the problem: This very strategy of driving interest rates to zero has been a feature of the period in which the Fed has managed the post-meltdown world. The result has been what The Wall Street Journal accurately described as a five years of missing economic progress: The economy today is barely larger than it was at the end of 2007, despite a rising population and a gigantic explosion in technology. Household income is still sinking, and an entire generation has readjusted its expectations for the future.

What has the Fed done? It has moved to create and guarantee some $13 trillion in phony assets to prettify the balance sheets of financial institutions that would have otherwise gone belly up. Those fake assets have served as substitutes for real reserves to create the illusion of balanced books. It has made its own discount rate vanish as a way of opening up its own reserves to the banking system to keep it floating. Finally, it has made it clear that it stands ready to be the lender of last resort for just about everything, removing the risk premium that would normally be attached to longer-term loans.

Altogether, this strategy has nearly abolished the banking system’s capacity to function, in effect turning banks into public utilities to serve themselves and governments, instead of depositors and lenders. Private industry seeks funding outside the official banking system, investors are scrambling for some other option and banks themselves have turned to other pursuits, like interest rate arbitraging and lending to other financial institutions, hedge funds, insurance companies and real estate.

During the 1930s, New Deal policies tried to revive agriculture and economic activity generally by telling farmers to plough under their crops and kill their livestock. Today, Fed policies are trying to revive real estate, banking and economic activity generally by undermining the capacity of the loan markets to function with any degree of normalcy.

Michael Hudson insightfully explains the problem:

“People used to know what banks did. Bankers took deposits and lent them out, paying short-term depositors less than they charged for risky or less-liquid loans. The risk was borne by bankers, not depositors or the government…Banking has moved so far away from funding industrial growth and economic development that it now benefits primarily at the economy’s expense in a predatory and extractive way, not by making productive loans.”

Even if Bernanke were telling the truth that this is all about inspiring recovery, there is no hope that it can work. The real estate markets are still an amazing mess, with one-quarter of the existing mortgages contracts marked above their market value. It fights against gravity to keep trying to lift up what wants to go down the instant that artificial stimulus recedes. And it should be obvious by now that ever lower rates don’t stimulate lending in this environment, but rather the reverse.

As the Austrian tradition has long explained, the basis of future prosperity is capital accumulation and deferred consumption in the form of real savings. These policies punish both. Worse: They make conventional savings nearly impossible. These policies encourage ever more consumption and debt accumulation and do nothing to address the core problem that brought about the artificial boom and the resulting bust.

But is Bernanke really telling the truth? No. In the balance between restoring growth and saving the banking system from the consequences of its own irresponsible policies, the Fed has chosen the latter. This is the unavoidable conclusion.

Otherwise, we would have to believe that the Fed is utterly blind to the recently proven results of its own policies. It is not managing the Fed in the public interest, but in the interests of the banks and the governments that are in hock to them. That you can’t earn a reward from saving money anymore is a microeconomic indication of a much-larger problem.

Consider the opportunity costs of these policies. We are living in a time of unprecedented innovation, thanks to digital media, the Internet and daily improvements in the production, management and distribution of information. Vast swaths of the commodifiable world have left the realm of scarcity to enter the sector in which infinite reproducibility is not only possible, but a regular feature of daily life.

With a healthy economic foundation, society should be getting get wealthier and wealthier at a pace that exceeds even that of the Gilded Age, when 10% and 15% growth was common and the human population began to thrive as never before. The digital age has given us economizing technologies that make all that have come before look like mere warm-ups. Instead, we are being denied those benefits and that growth, thanks to catastrophic policies of governments backed by central banks and dependent financial institutions.

What is the scenario under which normalcy returns? From Bernanke’s point of view, there is no end to this. It means ongoing stagnation for no good reason. For this reason, there has never been a more urgent time to abolish the Fed, institute a free market system and let a new monetary system emerge on a sound foundation. At the same time, the Fed has never faced more reason to keep alive the system that is killing future prosperity.

If the Parable of the Talents could be retold today, it would need a different ending, with a different gang of thieves thrown into the darkness to face weeping and gnashing of teeth.

Regards,

Jeffrey Tucker

The Transformation of Banking was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.