What makes him so annoying is his unquestioning, reflexive and almost childlike enthusiasm for state intervention, even in the face of its obvious failure, and his apparent unwillingness to probe any deeper into the real causes of our present economic problems or to show any willingness to investigate the effectiveness or ineffectiveness of his particular medicine. His Keynesian convictions are presented as articles of faith that no intelligent person can seriously question.

A Krugmanesque argument is always built on a number of assumptions that are beyond doubt:

1) Recessions, depressions and crises are the result of the unhampered market. We actually do not have to investigate if markets were really free when recessions occurred or what really were the specific causes of whatever threw the economy off track. When there is a recession, depression or crisis, there must have been too much of an uncontrolled market.

2) The Great Depression was caused by uncontrolled markets.

3) Recessions, depressions and crises are practically the result of one problem: a lack of aggregate demand. People, for whatever reason (and who cares about the reason; let’s not get hung up on those details!) don’t spend enough. If everybody were to spend more, people would sell more. Problem solved. It is the role of government to get people spending again. This is done by printing money and causing inflation so that people spend the money rather than save it. Or by the government running up deficits and spending it on behalf of the stupid savers.

4) The Great Depression was solved by the government spending lots of money and the central bank printing lots of money.

5) This explains ALL economic problems.

6) If there are recessions, depressions and crises, they can all be solved by printing money and by deficit spending.

7) If after many rounds of money printing and deficit spending there is still a recession, then only one conclusion is permissible: There was obviously not enough money printing and deficit spending. We need more money printing and deficit spending.

If after another round of money printing and deficit spending we still have a recession, then….well, are you stupid, or what? We obviously have NOT PRINTED ENOUGH MONEY and we are NOT ACCUMULATING ENOUGH DEBT!

(And, by the way, remember (7) above.)

Krugman is practicing Keynesianism as a religion. The 8 commandments above are not to be questioned. Whoever questions them is not worthy of debate. Consequently, Krugman has turned down requests to debate people like Peter Schiff or Bob Murphy. Interestingly, he agreed to debate Ron Paul on TV. The link is here.

I have to say that Ron Paul did not do as well as I had hoped he would. He did not sufficiently attack Krugman in my view, for the failure and ultimately disastrous consequences of his policy prescriptions. Krugman is the one who should be made to explain his policy recommendations. After all, t’s policies like the ones he is recommending got us into this mess in the first place Krugman needs to explain why his policy ideas have been implemented for years to no effect.

Yet, Krugman succeeded in putting Paul on the defensive, something in which he was greatly helped by the following: While Krugman may be the most outstanding, unashamed and fundamentalist of the celebrity Keynesians, the attitudes of the general public, the other journalists and thus most of the TV viewers are predominantly shaped by Keynesianism as well, and this means that Krugman, more than Paul or any ‘Austrian’ debater, can rely on some sense of intellectual sympathy.

Maybe the viewers don’t quite share the unquestioning, almost vulgar dedication to the Faith, that Krugman epitomizes. Maybe they feel queasy about printing trillions of paper dollars and running trillion-dollar deficits. Of course, a true believer like Krugman will never allow himself such feelings. But in general, the public, too, believes that the free market (and greedy bankers) caused the financial crisis; that we need low interest rates and other government measures to stimulate the economy; and that inflation is really not our main concern. Krugman, I think, cleverly used these attitudes to present himself as the safe and rational choice, and Paul as the weirdo who wants to pour out the state-policy baby with the crisis bath water.

Ron Paul started strongly by pointing out that Krugman’s policy is based on the idea that a bureaucratic elite can set interest rates and decide how much money should be created, and that this involves an arrogant and dangerous pretence of knowledge. Very good point.

Immediately, the apostle Krugman raised his head. “You cannot get the state out of money.” “The Fed has to set interest rates.” “You cannot go back 150 years.”

I think this is where Ron Paul should have dug in and put Krugman on the defensive:

“Why not? There was no Fed before 1913. That the Fed made things more stable is your assumption. But is it true? People like you and Bernanke tell us that the gold standard was to blame for the Depression. In the run-up to the Depression we had a gold standard but we also had a Fed. How can you say that the gold standard was to blame and the Fed was ultimately the solution?

“Dr. Krugman just said, ‘history told us’. That is nonsense. History doesn’t tell us anything. You need theory to interpret history, and your theory is wrong. You assign blame for the depression according to your Keynesian theory. If that theory is wrong – and I think it is completely wrong – your interpretation of history is hopelessly wrong.

“Dr. Krugman, we do no longer live in the 1930s. Why is it that you are harking back to those days? Are we still solving the Great Depression?

“Fact is that the monetary and economic institutions of America were shaped by people with your beliefs, Dr. Krugman. We have your system today. We have conducted and are conducting your policies. And, Dr. Krugman, do you really want to tell the American public that these policies and these institutions, such as the Fed, are working?

“We have no gold standard. Since 1971, the Fed is entirely free to print as much money as it likes. That is your system, isn’t it? That is what you recommend. – You say the Fed needs to keep interest rates low and print money to stimulate growth. That is what the Fed did in 1998 after LTCM and the Russia default, just as you recommended. That is what the Fed did again after the NASDAQ bubble burst and after 9/11 – surely, that was not an Austrian policy but a Keynesian one. It was straight out of your rule book, Dr. Krugman. You say the uninhibited market is to blame for the financial crisis. I say your policy is to blame. The mortgage bubble was blown by the ‘stimulus’ policy of the Fed – low interest rates and plenty new bank reserves – between 2001 and 2005. That was your recommendation, right? And those of your Keynesian buddies, such as Paul McCulley at Pimco.

“Since 2007, the Fed is conducting your policy. So is the US government. You demanded monetary stimulus and you got it. The Fed created $2 trillion dollars out of thin air. Interest rates have been zero for years. The US government is conducting stimulus policy to the tune of $1trillion-plus every year. Are you telling me, these are not Keynesian policies? What is it, Austrian policy?!

“What you are recommending has in fact been the guiding principle of global economic policy for years. What you are recommending is a systematic distortion of the market place. It is persistent price distortion. That is why we had an unsustainable housing boom. That is why we had a mortgage boom. That is why we had a financial industry boom. And whenever these artificial booms – that you create with your policy – falter, the American public has to pay the price. And what do you suggest then? More of the same. More cheap credit. More government debt. In the hope that you can generate another artificial boom for which a later generation will again have to pay the price.

“Dr. Krugman, you just answered the question of this journalist about how much more debt we should accumulate, by saying maybe another 30 percent but that nobody can say for sure. I agree that nobody can say how much debt the system can still take. But tell us, why do you think that the next 30 percent of state debt will magically stimulate the economy and that these 30 percent will thus achieve what the previous 30 percent obviously failed to do.

“Dr. Krugman, you have me worried here. And I think our viewers too. The only response you have to the abject failure of your policies is that we should do more of them. Whatever Keynesian stimulus is being implemented and whatever money the Fed prints, all you ever say is that it is not enough. We need more. Has it ever occurred to you that maybe the problem is the policy itself? Maybe your medicine is making things worse and not better.

“And something else worries me, Dr. Krugman. When do we ever stop printing money and borrowing? I think that you are stuck in a failed paradigm, a failed economic theory and a failed policy program. This has happened to scientists and politicians before. You cannot admit that failure. When you are confronted with the failure of modern central banking, of Keynesian stimulus and of moderate inflationism, your only answer is that nothing is wrong with any of it, it is just not implemented forcefully enough. Dr. Krugman, you remind me of a doctor, who misdiagnosed the disease and prescribed the wrong medicine and who is now unwilling to look at the situation objectively. All you want to do is increase the dosage.

“If the viewers really want to understand what is going on, they should not buy Krugman’s new book but go to the website of the Mises Institute and look for some excellent Austrian School literature, in particular anything written by Ludwig von Mises himself. But if you don’t have time to do this, an excellent start is a book by Detlev Schlichter, with the title Paper Money Collapse.”

Well, I guess this is how it could have unfolded.

Regards,

Detlev Schlichter

How To Debate Paul Krugman was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

So, when Congressman Paul took a magnificent second place, only 1% behind the winner, I said to myself, Hot diggity dog; the MSM can’t ignore him now. They cannot dismiss this entire result since if they did so, they would have to also deprecate Michele Bachmann’s win, and that they will not do. They now MUST give Dr. Paul his due credit, since he finished in close second place to her. They will be forced to discuss his ideas: bring the troops home, get rid of the Fed, drastically reduce taxes, eliminate a slew of illicit Federal departments, legalize drugs and other victimless crimes, stop foreign “aid,” save the American dollar via 100% gold backing, etc.

Silly me. That shows how much I know.

Instead, the talking heads are now tooting this line: “The three front runners are Mitt Romney, Rick Perry and Michele Bachmann.” In their view, these are the major candidates, and all the others are also-rans.

Why Mitt Romney? Well, he looks presidential, and he has a good chance with the tea partiers despite his Romney-car health policy in Massachusetts, oh so similar to Obama-care. Why Rick Perry? Well, he’s the governor of Texas, the second biggest state, isn’t he? And this despite the fact that he has not yet won anything in the presidential sweepstakes. Why Michele Bachmann? This is because, of course, she just won the Ames Iowa poll. Notice any name missing from all of this? I’ll give you a hint: this is the guy who came in SECOND, 1% behind “major candidate” Bachmann in this recent election.

There used to be among the beltway “Austro-libertarians” a campaign to promote and study Austrian economics without “You Know Who” (Ludwig von Mises, of course). There is now a campaign amongst the major media to analyze the Republican presidential process without uttering the name of “You Know Who” (Ron Paul, of course).

What can be done about this? Well, keep sending in those cards and letters; keep protesting; keep writing those e mails to these self-appointed judges. Vote for Ron Paul. And, most of all, let us all pledge to donate as much as we can to all of the upcoming Ron Paul money bombs.

There are some otherwise excellent libertarians who hold their noses at the political process. They think it is somehow incompatible with the non aggression principle, the foundation of our philosophy. Voting just gives “them” sanction, these people think.

Well, if so, then libertarians should not use fiat currency to transact grocery purchases, travel on government roads, attend concerts at public theatres, patronize public libraries, parks, museums, teach in, or attend, any public university, or even private one that is subsidized. They should also not eat food, since the government is heavily involved in subsidizing some of it. They should not live in houses, since the statists have heavily involved themselves with building materials. They should eschew… the list goes on and on, and includes every jot and tittle of the economy, so heavily ensconced in it is the state apparatus.

The point is, the modern government is so heavily engaged in ALL facets of our lives. If we really didn’t want to give “sanction” to them, and wanted, also, to be logically consistent, we could not operate in modern society at all. We would have to either go off to live in a self sufficient farm, or commit suicide. Hey, we don’t want to lose our souls, do we?

Some libertarians say that we have a choice regarding whether or not to vote, to support Dr. Paul, whereas we have no choice with regard to any of these other things. Nonsense. No, nonsense on stilts! Human action always includes choice. We are engaging in human action all over the place. Self sufficient farming, and/or suicide ARE choices! This attitude of libertarians is very self destructive. It prevents us from supporting Ron Paul to the extent that would otherwise be the case.

I suggest a remedy for this sort of irrational thinking. It is Murray Rothbard’s “Do you hate the state?” (While you’re at it, read this other excellent piece by the same author, about my man Hector). If we really see our political leaders as the gangsters most of them are (there are but a few honorable exceptions to this general rule, certainly including in the modern day You Know Who, and his son, the junior Senator from Kentucky), we will reject this utter nonsense that to engage with them in any way is to be false to libertarianism.

If we don’t engage them, in many, many ways, certainly including voting, how will we ever rid ourselves of this pestilence? If we don’t support the greatest advocate of libertarianism now active in behalf of the cause of liberty (hint: You Know Who), we lose the best opportunity we now have to promote this philosophy.

Regards,

Walter Block

Dr. Block is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable and Labor Economics From A Free Market Perspective. His latest book is The Privatization of Roads and Highways.

Ron Paul and Liberty was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

The format is one we’ve seen before in books like Libertarianism A to Z. In Liberty Defined, the introduction lays out the overarching principles of liberty and anti-authoritarianism. The book itself then devotes each chapter to an individual issue, starting with abortion, then moving through things like Austrian economics, capital punishment, evolution and creation, global warming, hate crimes, Keynesianism, taxes, unions and much more. The chapters are fairly short at just a few pages each, written in clear language that seeks to discuss and educate. Each chapter is a delight to read, particularly for lovers of liberty, but even when you don’t fully agree with Dr. Paul, you’ll find his position compelling and his honesty and consistency incredibly refreshing.

“The phrase ‘Austrian School’ or ‘Austrian economics’” Dr. Paul writes, “is not something I ever expected would enter into the vocabulary of politics or media in culture. But since 2008, it has. Reporters use it with some degree of understanding, and with an expectation that readers and viewers will understand it too. This just thrilling to me, for I am a long-time student of the Austrian tradition of thought.”

And no doubt many readers will share Dr. Paul’s joy. They will also note that it is Dr. Paul himself who has been tirelessly campaigning for the free market principles of the Austrian School for the past several years. He tells about the founder of the Austrian School, Carl Menger (1840-1921) “who wrote that economic value extends from the human mind alone and is not something that exists as an inherent part of goods and services; valuation changes according to social needs and circumstances. We need markets to reveal to us the valuations of consumers and producers in the form of the price system that works within a market setting.”

Dr. Paul notes that Keynes’ “entire agenda presumes the existence of a wise activist state that is involved in every level of economic life. Liberty was not an issue that concerned him.”

The Austrian School, however, believes, “We are not cogs in a macroeconomic machine; people will always resist being treated as such.”

Liberty Defined is certain to make people on both sides of the left-right political debate uncomfortable. Dr. Paul decries the welfare state beloved by those on the left, but repeatedly shows that such a state is just the other side of the coin of the interventionist foreign policies of those on the right. Dr. Paul himself is a man of religious and spiritual conviction, but he also doesn’t shy away from analyzing how the neoconservatives of the modern right use adulterate religion and patriotism to garner support for their imperialist adventures.

“Instead of religious beliefs being the cause of war, it is more likely that those who want war co-opt religion and falsely claim the enemy is attacking their religious values. How many times have we heard neoconservatives repeat the mantra that religious fanatics attack us for our freedoms and prosperity? Neoconservatives use religion to stir up hatred toward the enemy.”

Dr. Paul also isn’t given to idealism. He admits, for example, that a truly libertarian position would have porous borders, but he points out that that just isn’t possible right now. He notes that even in a stateless society, all property would be privately owned and those property-owners at the borders would have the right to decide who cross their land. Dr. Paul handles the issue deftly and his proposals of work permits and conditional green cards as opposed to deportation, among other things, struck even this anarcho-capitalist leaning reader as reasonable.

And Dr. Paul is certainly no anarchist, but he is close enough for government work. He is the kind of politician even an anarcho-capitalist could love. Dr. Paul is well versed in the dangers of governments and their tendencies to grow; yet he thinks there is room in the world for a minimal amount of government. It’s a delicate balance. He pulls it off with aplomb. In the chapter on prohibition he says:

“Government should not compel or prohibit any personal activity when that activity poses danger to that individual alone. Drinking and smoking marijuana is one thing, but driving recklessly under the influence is quite another. When an individual threatens the lives of others, there is a role for government to restrain that violence.

“The government today is involved in compulsion or prohibition of just about everything in our daily activities. Many times these efforts are well intentioned. Other times they result from a philosophic belief that average people need smart humanitarian politicians and bureaucrats to take care of them. The people, they claim, are not smart enough to make their own decisions. And unfortunately, many citizens go along, believing the government will provide perfect safety for them in everything they do. Since governments can’t deliver, this assumption provides a grand moral hazard of complacency and will only be reversed with either a dictatorship or a national bankruptcy that awakens people and forces positive change.”

Liberty Defined is layered with a practical view of the political realities, but it never fails to stay true to its moral core. Dr. Paul repeatedly points out that many of his solutions — which ultimately come down to the federal government getting out of the way — simply won’t be applied because the federal government is just too intertwined with the problem.

But Dr. Paul never wavers. With the fearlessness for which he has become famous, Dr. Paul continues to assault all the bad central planning policies and popular misconceptions that allow them to continue even in the face of failure.

On Keynesianism:

“…Something did change with the publication of The General Theory. Keynes gave the governments of the world a seemingly scientific rationale for doing what governments wanted to do anyway.”

On unions and government labor laws:

“Union power, gained by legislation, even without physical violence, is still violence. The laborer gains legal force over the employer. Economically, in the long run, labor loses.

“…If only it were so easy to help the working class. Just dictate wages and everyone will be financially better off. Unfortunately, this leads to disastrous results, whether it’s the prolonging of the economic mess as it did in the 1930s or the tragic results in American industry that we’re witnessing today.

“What good is it to mandate a $75 per hour wage if there are no jobs available at that price? What good is a minimum wage of $7.50 if it significantly contributes to overall unemployment?

“The reaction to the economic argument explaining the shortcoming of labor unions and minimum wage laws is that it’s heartless and unfair not to force ‘fairness’ on the ruthless capitalists. But true compassion should be directed toward the defense of a free market that has provided the greatest abundance and the best distribution of wealth of any economic system known throughout history.”

The chapter on taxes, however, is probably the best (and certainly this reviewer’s favorite). It sums up so many of the important themes: private property, liberty versus coercion, public education, economic misallocation, and the voracious appetite of the state.

“‘Taxes are the price we pay for civilization,’ according to Oliver Wendell Holmes. This claim has cost us dearly…If we as a nation continue to believe that paying for civilization through taxation is a wise purchase and the only way to achieve civilization, we are doomed.”

I am tempted to quote the chapter in its entirety, but at this point I would simply urge you to buy the book so you can read it there, along with the rest of this wonderful work.

Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder

April 25, 2011

P.S.: Click here to get your copy now.

A Review of Ron Paul’s Liberty Defined was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Gingrich and Ferrara are correct in their recent editorial on the Obama Administration proposals for new mandatory automatic IRA accounts and their goal to force existing retirement funds into government controlled annuities. But this is only the tip of the iceberg for Teresa Ghilarducci and her big government proposals to loot your IRA and retirement plan assets to fund the federal government.

Future Washington revenue needs and the growing treasury debt may require government mandates directing retirement plans to purchase government bonds. Stealth nationalization and ultimately confiscation of a majority of private retirement assets is coming to bail out failing state and municipal retirement plans which already have a deficit of at least one trillion dollars. Eventually underfunded union plans and even a bailout of the federal retirement system could take place as these groups line up to get another pound of flesh from productive Americans who worked hard and saved for their retirement years.

It Is Time for a Change!

How would you like to make a pleasant choice for a change each April 15th, the most hated day of the year? Your decision would be whether to give the first $5,000 each year you owe the IRS to the federal government or contribute it to your own “ironclad” private IRA account and receive a full tax credit for the contribution.” This is the Freedom IRA proposal in a nutshell.

Today the news is filled with stories about the Washington proposals for new mandatory IRA’s with the end game to nationalize, control and even force your retirement funds into government annuities. Washington needs the $15 trillion in private retirement plans to ultimately become the forced “buyer of last resort” for the treasury bond market as foreign investors and nations begin to avoid our debt like the plague it has become.

The retirement savings threat from a desperate federal government with falling revenues is real but just warning about the problem and defending the current private system is not enough. The American people must see this attempt to force full coverage with the proposed automatic IRA as the Trojan Horse to set the stage for stealth nationalization as they turn our retirement benefits into Washington’s ATM Machine.

Rather than creating a mandatory clone of the bankrupt Social Security System, let’s consider a simple, new retirement alternative I call the Ron Paul Freedom IRA. We hope he will introduce a bill along with other members of Congress to create this new Freedom IRA. This will generate publicity about the threat to your existing retirement funds from the Obama Administration and offer a free-market alternative to the forced, mandatory proposals from the left.

The Freedom IRA

Basically this would be an IRA with a $5,000 maximum contribution annually where instead of a tax deduction the individual contributor would received a tax credit for the entire contribution. So the ultimate question for the working taxpayer would be, “would you rather give the first $5,000 each year you owe the IRS to the government or contribute it to your own “ironclad” private IRA account?” For lower income workers who might contribute more than their annual tax bill, the tax credit could be carried forward to future years thus creating a future tax holiday for the participant.

It would operate under current IRA rules except distributions would be prohibited before the 59½ current retirement age except in the case of death or full disability. Note the plan funds would be totally protected from lawsuit, government or judicial asset seizures and other outside attacks on your retirement assets.

It would operate under and be automatically grandfathered under existing retirement regulations in the future and would be a voluntary addition to any existing plans covering the participant. Investment options would be up to the participant and investment providers but could range from conventional stocks, bonds and money market funds to CD’s annuities, mining shares, approved gold and foreign currency investments.

No one questions that the American private retirement system is broken due to excessive government regulations, bureaucracy and related costs but more of the same old big government solutions with mandatory coverage and forced participation is not the answer. I’ve worked in the financial and retirement planning industry since the early 1970’s and this is a simple, voluntarily solution to the existing system.

The Game Plan for Secure Retirement

First, contact Ron Paul’s office and urge him to introduce a bill for the Freedom IRA. Then we can contact all responsible Congressman and urge them to support a real cut in taxes and solve the existing retirement system problems in a few short years with the Ron Paul Freedom IRA.

The alternative from Obama and the Democrats means we will have a forced, mandatory government program in our future with growing nationalization and confiscation threats. You can learn more about how this could this happen in the 20-page special report, “Are You Ready for the Coming Obama Retirement Trap?”

Remember the adage, “the best defense is a good offense” and the Freedom IRA is a direct attack on the coming Obama Retirement Trap. Join us and work together to safeguard and secure our existing and future retirement benefits from the desperate Washington political elites.

Regards,
Ron Holland
for Whiskey & Gunpowder

March 4, 2010

P.S.: You can read the part of that 20-page report here.

The Ron Paul Freedom IRA was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

But just days ago, the Petersen/Pew Commission on Budget Reform warned in a new report that “over the past year alone, the public debt of the United States rose sharply from 41 to 53 percent of gross domestic product (GDP). Under reasonable assumptions, the debt is projected to grow steadily, reaching 85 percent of GDP by 2018, 100 percent by 2022, and 200 percent by 2038.”

And long before the debt reaches such staggering levels, the commission tells us: “Fears of inflation and a prospective decline in the value of the dollar would cause investors to demand higher interest rates, and shift out of U.S. Treasury securities. The excessive debt would also affect citizens in their everyday lives by harming the American standard of living through slower economic growth and dampening wages, and shrinking the government’s ability to reduce taxes, invest, or provide a safety net.”

All of this financial tragedy is the direct and highly predictable legacy of our Federal Reserve System and their bankster cronies on Wall Street. Ben Bernanke and Alan Greenspan were the men in charge — and these are the very people who failed us every step of the way. Under Fed leadership, the U.S. financial system has buried our hard working middle class under a mountain of debt for the benefit of Goldman Sachs and a handful of “too big to fail” banks. It seems more than a coincidence that virtually every government official in charge of making these decisions, both here in America and around the globe, are former Goldman Sachs executives (and usually partners).

Yet Time magazine singles out Bernanke as the man to be recognized for his good deeds. We’re sure Ben’s supporters would say “Give him more time.” Well we agree. We suggest 15 to 20 years…in prison. A warm spot in a jail cell would be more appropriate for worldwide king of counterfeiters. Every day that the Federal Reserve prints more money, it is robbing the American taxpayer — and future generations — of our wealth, property and financial stability.

On the other hand, one politician has been fighting to protect the American taxpayer for over 30 years…demanding accountability from the Fed…trying to save the American economy from the Bernankes of the world. For more than 30 years Congressman Paul has been looking out for the little guy. For more than 30 years, Congressman Paul has been trying to get Congress to think about our children’s financial future, not just today’s re-election campaign. For more than 30 years, Dr. Paul has been dogging the heels of our runaway Fed and calling them to account for their despicable practices.

Congressman Paul has been sponsoring bills to audit the Fed ever since he first entered Congress in 1976, and on six occasions Paul has introduced bills that would have ended the Fed entirely. Standing largely alone, yet seeing clearly into the future, Ron Paul has challenged a rotten to the core Fed over a period of decades, while Congressional colleagues and a mainstream media, asleep at the switch, were busily applauding people like Bernanke and Greenspan as masters of the universe and oracles of the modern world. So who was right all this time . . . and who was wrong? The answer, we’ll tell you, is crystal clear: It wasn’t the Ivy League bankers or Wall Street masters of the universe. It was a country baby doctor named Ron Paul, by a country mile. If Time magazine cared at all about the American taxpayer, its true “Person of the Year” in 2009 would certainly have been Texas Congressman Ron Paul.

When Paul ran for president in 2007 and 2008, he was genuinely surprised to find that his youthful audiences were responding powerfully to his message about ending the Federal Reserve. An audience of college students at the University of Michigan went so far as to burn “Federal Reserve Notes” (otherwise known as dollar bills) as Congressman Paul spoke about the Fed and its counterfeiting. These students figured out what the adults in charge were doing to their financial future — burning it.

By 2009 these students were no longer alone. Everyone, it seems, was catching on, and even our palace courtier “mainstream” economists began to notice that the Federal Reserve was responsible for inflating the housing bubble and otherwise dumping our once great country into the throes of imminent bankruptcy. Even Barack Obama seems to be catching on — speaking just days ago about the imminent financial disaster of the costs of Medicare and Medicaid. Even a big spending, big taxing leftist like Obama agrees that unless we act fast America faces insolvency and bankruptcy due to a tsunami of debt. Unfortunately, Obama’s solution to “government-gone-wild” and government-run healthcare programs bankrupting the country…is bigger government and expanding government-run healthcare to everyone.

Unlike a real doctor like Dr. Paul, President Obama’s prescription will kill the sick patient. Obama believes that if a patient suffers from obesity, diabetes and a mouth full of rotting teeth, the prescription is ice cream for breakfast, lunch, dinner and dessert. Not just any ice cream, but triple orders of Ice Cream Sundaes covered in chocolate syrup for EVERYONE! And it’s all free to eat as much as we want, as many times a day as we’d like. How will we afford it? The Fed will print all the money we need. That may be how a corrupt politician bribes the public to get re-elected, but it’s also the exact economic model of the Roman Empire…or the Greek Empire…or Argentina at the turn of the 20th century…or the Weimar Republic before World War II…or Zimbabwe today. All of those countries and empires ended badly. Unfortunately America is on the same path to economic ruin.

More and more “respectable” voices are picking up Ron Paul’s “End the Fed” mantra every day, and you ain’t seen nothing yet. The truth is that our criminal Fed is already a dead man walking, and Ron Paul, more than any other single American, killed it. What an achievement for a lonely Congressman, armed with nothing more than common-sense, courage and honor. Perhaps Don Quixote isn’t so helpless or hapless after all. Perhaps one lonely man tilting at windmills is exactly what is necessary to save our great country (and economy).

Ron Paul introduced two bills in the House during 2009, which will one day finish the job and end the Fed’s misery (and ours) forever. House Resolution 1207 generated more than 317 co-sponsors reflecting widespread bipartisan support for a Fed audit which would go far beyond the narrowly defined scope of Government Accountability Office reviews presently allowed. Specifically, H.R. 1207 would allow auditors to report on Fed dealings with foreign banks and nations, actions on monetary policy matters, and operations of the Federal Open Market Committee. For the first time, the Fed in 2009 faced a very real prospect that the American people will find out what it’s been up to, and while the bill has been temporarily stifled by bankster cronies and Goldman Sachs alumni, there can be no doubt that a line in the sand has finally been drawn.

Dr. Paul’s second bill, the “Free Competition in Currency Act of 2009” is even more far-reaching than H.R. 1207. Dr. Paul’s new bill proposes that the money monopoly of the banksters be ended forever and competing currencies be established to bring financial sanity back to the marketplace. America became the greatest nation in world history because of our economic freedom. Free markets worked. [They still do.–ed.] Here Congressman Paul is proposing free markets in money! It’s not a radical idea at all, and ending the money monopoly is an idea whose time has come. The “Free Competition in Currency Act of 2009” stands as the starting point for a new era of financial freedom and prosperity for America. A big thank you, Ron Paul — you’re far and away our “Person of the Year.”

Yes, the Fed needs to be ended. Until that happens, there are many other important steps that can be taken to restore fiscal sanity and encourage economic recovery for this great country. Let’s start with limiting the power of government; dramatically reducing government spending; cutting, instead of expanding entitlements; drastically cutting taxes, so that the people who earn the money get to keep more of it and will be encouraged to invest it in homes, stocks and opening small businesses (thereby creating jobs); restore the gold standard, so we limit the money that politicians can spend and waste; and perhaps most importantly, holding the politicians and bankers who caused this mess accountable. Let’s start limiting the politicians to two terms: one term in office…and one term in prison. Then we can start to put America back on track, and Americans back to work.

Regards,
Wayne Allyn Root
Rick Williams

January 7, 2010

Wayne Allyn Root is a small businessman, home-school father, and citizen politician. He was the 2008 Libertarian Party Vice Presidential candidate, and is a frequent guest on FOX News, FOX Business, CNBC and media across the country. His newest book is, “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gambling & Tax Cuts.” Wayne’s web site is RootForAmerica.com.

Rick Williams is a lawyer in Los Angeles, and is Chairman/CEO of Basic Media, Inc. and BreakTheMatrix.com.

Time Magazine Blunders with Bernanke was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

“One man scorned and covered with scars still strove with his last ounce of courage to reach the unreachable stars; and the world was better for this.”

— Cervantes, Don Quixote

MONDAY WAS NOVEMBER 5, a red-letter day in the history of revolutionary politics.

As you may know, it was on this day that Englishman Guy Fawkes was arrested in 1605 while attempting to blow up the bustling House of Lords during that year’s opening of Britain’s Parliamentary session…

Fawkes was part of a conspiracy launched by a handful of militant British Catholics to simultaneously assassinate King James I and most of England’s Protestant ruling aristocracy — using approximately 1,800 pounds of barreled black powder stashed in the basement of Westminster Palace. Ever since, the fifth of November has been commemorated in the U.K. and other areas strongly tied to British history, and is today perennially celebrated as Guy Fawkes Day (or Night).

In keeping with this spirit of political and religious upheaval, November 5, 2007 is when the so-named “Ron Paul Revolution” set the current record among 2008 Republican U.S. presidential candidates for campaign funds raised in a single day: $4.07 million. This prodigious sum was generated through an ingenious Web campaign tying Paul’s presidential bid to that historic attempt at fiery rebellion Fawkes nearly pulled off 402 years ago.

Undeniably, shrewd campaign gimmickry was greatly responsible for this single-day avalanche of cash, which has no doubt catapulted Paul into contention for the lead in fourth-quarter campaign funding. Coupled with Paul’s surprising fourth-best fundraising effort among GOP candidates in the third quarter, Paul’s “Revolution” seems clearly on a roll…

But more importantly, this snowballing support serves as a revealing barometer of disunity among rank and file American Republicans. And today, I want to consider for a moment what that could mean.

Before I get started, let me say that I intend this essay to focus on what I perceive as the broader implications of Ron Paul’s 2008 presidential campaign, not necessarily to be an endorsement of his candidacy. There are enough columnists out there carrying his torch already, especially in the universe of libertarian thought…

That being said, in the interest of full disclosure I must confess this: I have met and spoken to Candidate Paul, heard him lecture in person, and even had the honor of being a fellow speaker at this summer’s FreedomFest in Las Vegas, where Paul was the Keynote. And in my opinion, he’s a sincere, bright, appealing candidate who makes a lot of sense.

But like I said, that’s neither here nor there.

“A little revolution now and then is a good thing…”

— Thomas Jefferson

Unlike with every other presidential candidate in recent memory (or in the current crop), the main question about Ron Paul isn’t whether he means what he says or not…

According to everything I’ve seen and all I could dig up, Paul is a man of sterling character and reputation. He’s clearly sincere in his stated desire to end the war in Iraq, reform, shrink or eliminate most every agency or institution of the government, restore a true laissez-faire economy, and return America to a system much closer to the one the Framers of the U.S. Constitution laid out 200-plus years ago in Philadelphia…

But is this what Americans want? Do we really want a president who gives it to us straight? Carter did, in his brutal-truth “malaise” speech, and look what happened to him. And do we really want smaller government and the increased personal responsibility that comes with it?

Granted, I think these are things we should want, and so do a lot of politicos and pundits far smarter, more important and more influential than me. But that’s irrelevant. Judging by poll results and past voting histories, Americans of neither dominant political party really want smaller, less invasive government. By all indications, what the vast majority of people seem to want is bigger and more powerful government — but only if it serves their party’s agenda at the expense of their political adversaries. For examples:

From what I gather, most voters on the right couldn’t care less about compromising Constitutional safeguards on personal privacy, blurring the line between church and state, and eradicating the freedom to choose who we marry, when we have our kids and how we end our bed-ridden lives. They’re also square with granting more power to the police and FBI to watch us 24/7 and enacting a strong-arm foreign policy — as long as all of this results in what they perceive as a safer, more secure nation of higher (translation: Christian) morality…

Conversely, many on the left seem not to care if certain Constitutionally guaranteed rights (e.g.: gun rights) fall by the wayside, if agents of the government pass judgment on matters of parenting and the family, or if arbitrary Federal mandates reduce our freedom to choose how we live, what vehicles we drive, what we put into our bodies, and what we do with our own property. They also seem perfectly cool with anyone who can physically get inside the country gaining unlimited access to the public teat — as long as all of this stuff results in what they perceive as a state with a more equitable (translation: Socialist) distribution of wealth and opportunity…

All of these ends, right or left (and right or wrong), require bigger, more invasive, more costly or more oppressive government. And Republicans and Democrats who vote seem to cast their ballots for it every time. So again, the main question about Ron Paul isn’t whether we can trust him, but this: Is America ready for him?

Will we tolerate a president who reduces the scope and reach of government — if it means he eliminates some of our own pet causes in the process?

Will we accept a nation in which we’re more fully accountable for ourselves and our families — or have we grown too accustomed to the guardrails and safety nets Big Brother puts in place to protect us from our freedom?

Will we have the discipline to use the tax dollars we’ll save with smaller government to look after our own retirement finances — or will we spend the extra cash like drunken, uh, senators?

Will we embrace a downsized bureaucracy if it means fewer cushy state and federal government jobs — and a private sector workforce that’s all of a sudden flooded with incompetent boobs who are used to collecting tax-funded paychecks for doing basically no work?

Under a purist president like Ron Paul, this is the kind of stuff that would happen. In true Fawkes-esque fashion, Paul would attempt to explode into splinters (figuratively, of course) the bloated system we’ve built here in America. He’d attempt to dismantle, reform, cut, shrink or outright eliminate whole agencies of the government; he’s already said he’d abolish the IRS, the Department of Education and much more if he had the power to do it…

Again, I’m not saying this would be a bad thing. In my opinion, the presidency of a person like Ron Paul may be the only hope of restoring America to the greatness our founders envisioned. I’m only wondering if anyone else in power from either party would allow it — or if the mainstream media would get behind it.

I’m betting not. The brutal truth is that we may be too far-gone to embrace a candidate like Ron Paul. He may be sincere, but he may also be jousting at windmills in the current American political climate…

“The natural progress of things is for government to gain ground and for liberty to yield.”

— Jefferson again

Let’s consider this for a minute. If Paul gets elected, every time he gets his way about anything, a bunch of career politicians and bureaucrats who currently have power will lose it, regardless of which side of the aisle they’re sitting on. That’d be an inevitable fact under any president whose goal is to shrink and contain government…

The hen-ish and clucking, education-meddling, tax-raising, welfare-doling, illegal-hugging and militant environmental contingents on the left would find themselves cut off at the knees by a president who can’t be bought by a sea of tax money he could use for his own agenda — or the promise of votes from millions of overnight “citizens.” That’s because he likely wouldn’t have much of an agenda except the abolition of existing programs and pork, and probably wouldn’t much care about serving a second term.

On the flipside, the goals of hawkish, spread-democracy-at-all-costs (code for “kill non-Christian infidels”), bedroom-meddling, surveillance-peddling, isolationist, and militantly anti-immigration factions of the right would find their agenda mercilessly thwarted by a president they can’t literally put the fear of God into. Many of their pet causes would be squarely in the crosshairs of a president whose sole agenda isn’t his own party’s power, but a return to Constitutional fundamentals.

So, given that all of this is the case, how would a guy like Ron Paul ever be able to garner either party’s nomination — no matter how much 11th hour cash he raises or how much support he may have from the public?

In other words: Is either party (in Paul’s case, the GOP) willing to put someone in office that’s going to attempt to render large numbers of their own kind obsolete, superfluous or illegal?

I don’t think so. They should, but they won’t.

“…I believe the very heart and soul of conservatism is libertarianism.”

— Ronald Reagan, 1975, Reason magazine

Let’s also consider what would actually have to happen in order for the libertarian-leaning Republican Ron Paul to be elected president — assuming for a moment that he were somehow able to secure the GOP nomination and raise enough money to mount a credible challenge.

First, he’d have to get a huge number of praise-the-Lord-and-pass-the-ammunition Republicans to vote against their own Iraq war stance, or else corral the votes of a huge number of moderate anti-war Democrats to make up the deficit. Would Pauls’s anti-war message attract more moderate donkeys than it alienates conservative elephants?

Who can say? What can probably be safely said is that Paul’s staunchly pro-life stance would likely give Democrats inclined to vote for him a moment of pause…

But would this neocon-friendly abortion stance be enough for far-right Republicans (who vote in huge numbers, by the way) to overlook Paul’s determination to end the war in Iraq — an issue a lot of hard-core Christians must surely perceive as “God’s will” being done with American lead?

Complex questions, all.

None of it really matters, though, because the one thing a man like Ron Paul needs more desperately than anything else in order to ascend to the presidency is the one thing he’ll never get: Massive exposure and support in the media.

The only way Ron Paul can get elected is if he can get his message out — because that message IS a persuasive one. It resonates with Americans of many different stripes. More than perhaps any other presidential candidate in recent memory, Paul’s obvious sincerity, selflessness, intelligence and focus on returning America to its own Constitution may indeed be enough to sway rank and file voters into casting a ballot against one or more facets of their core belief structure.

But that message will NEVER get out in force (and it isn’t) through the typical channels.

Think about it. Paul is the Democrats’ worst nightmare — a small-government, pro-gun, free-market loving, pro-life opposition candidate who’s threatening to scoop up and claim as his own the only issue they’re firmly in line with the bulk of the American public on: The Iraq war.

This means that Paul is ALSO the mainstream media’s worst nightmare. You can argue it until the cows come home, but earnest study and plain old common sense show that the bulk of the do-gooder mainstream media is as bent to the big-government left as any of the candidates — more so, since they don’t have to compromise on their message in order to corral votes.

What about FOX News? True, they may not be as left-leaning as the others, but they don’t seem to be doing Ron Paul any favors. Quite the contrary, it seems. Some online sources have argued that FOX is desperate to oust Paul from the race in favor of more “conservative” (ironic, since Paul is by far the best example of a classical conservative) candidates like Romney, Huckabee and Thompson. I’m inclined to agree.

Indeed, FOX’s “You Decide 2008” Web site posts only five news-line items for Paul, the last one being from back in October. No mention is made of his Guy Fawkes Day fundraising record. Conversely, GOP candidates Romney, Huckabee, Thompson, Richardson and even the relatively liberal Rudy Guiliani and John McCain have between 15 and 20 posts each, with most of them featuring more recent updates, some from as recently as this morning.

So who in the mainstream media is going to help Ron Paul get his message out? Aside from a sizeable presence on the Internet, a fairly visible (yet shoestring-budget-looking) grassroots effort and a precious few debate appearances, how are rank and file voters going to be able to hear how much sense Paul is making?

The key to this is in the debates, which unfortunately, not a lot of people are watching. But if they were, they’d see something pretty interesting…

First, a preface: Poll results are a tricky thing, and in my experience, the reporting of poll results seems far from objective — or even complete. Yet according to a many sources online, Ron Paul is consistently declared by multiple polls as either the outright winner or among the leaders in the nine out of 10 GOP presidential debates he has participated in thus far.

So why aren’t we seeing and hearing more Ron Paul talking points and sound bites in the mainstream media?

This is all especially interesting when one remembers how much media exposure a far less appealing, credible or qualified H. Ross Perot got during the 1992 presidential campaign. Many think this is because everyone knew Perot’s presence would siphon more votes from George H.W. Bush’s re-election effort than it would from Bill Clinton’s election campaign. But anti-war Ron Paul is likely to pull votes from both sides…

And so he must be stopped.

What’s even more interesting is that despite being under heavy fire from all political sides, having a funding war chest that’s dwarfed by the front-running candidates (perhaps not for long, though), and enduring a near-blackout in the mainstream media, Ron Paul’s latest CNN opinion poll numbers put him sixth among Republican candidates at 5% of the vote, were the election held today.

This isn’t bad for this stage in the game. However, the real support numbers may be significantly higher than this. According to USAElectionPolls.com, data from a large number of “straw polls” nationwide put Ron Paul’s real-world support at between 15-20%…

Again, why aren’t we hearing about any of this from Big News?

It’s because Ron Paul is dangerous to the system that butters everyone’s bread.

“Remember, remember, the fifth of November, the gunpowder, treason and plot…”

— Guy Fawkes Rhyme, author unknown

People who care (not nearly enough of us do in America) can trumpet all day long about Ron Paul’s 10 consecutive terms as a Texas Congressman, his squeaky-clean reputation, his true-to-the-Constitution voting record, his common-sense platform, his consistently dominating performance in debates, and on and on and on. But unless he wins enough states in the primaries to get the GOP nomination, it’s all nothing more than a footnote. He’ll be an asterisk in an otherwise status-quo election cycle.

I see this as a defining moment for the Republican Party, perhaps more so than any other in my lifetime. If Ron Paul succeeds in staying in the mix despite the best efforts of BOTH political parties and the media, this election could be the first in years to truly revolve around issues and a core governing philosophy instead of money, pandering and back-room political dealings.

It remains to be seen whether the GOP far-right will vote en masse solely for whoever they think will put God first (the jury’s out on who this is, but Romney’s looking like the Chosen One) and kick righteous ass on the non-Christian world…

It remains to be seen whether the pro-war faction of the party can be persuaded that their votes thus far have been in error, and that a vote for Paul isn’t necessarily a vote for a weaker, less secure America (it may be — but only time will tell)…

And it remains to be seen whether Republicans REALLY WANT smaller, less invasive government, lower taxes and more freedom — even if it means more discipline, fewer jobs and pork-barrel safety nets, less ligature between church and state, and greater personal responsibility…

The bottom line is this: Starting right now, with Ron Paul’s some-would-say-quixotic candidacy, the GOP has its best chance in decades to decide who it is, and refocus on what’s supposed to be their core philosophy: Smaller government and a more strict interpretation of the Constitution.

Does the GOP have the guts to finally walk like it talks? It’s worth my vote to find out, I think.

I guess we’ll have our answer in the wee smalls of next November 5.

Waiting and debating,

Jim Amrhein
Freedoms Editor, Whiskey & Gunpowder

Ron Quixote? was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

He’s made a splash in the first three Republican debates, which he’s parlayed into a booming online presence, along with interviews on The Daily Show and The Colbert Report. He’s made inroads in more traditional media, being interviewed by each of the national cable news channels and meriting a Page 1 profile in The Washington Post. He’s generated tremendous buzz as the most principled opponent of the Iraq war among both of the major parties’ candidates.

But soon, that alone won’t be enough. It’s time to move to the proverbial “next level.” It’s time he starts effectively selling the message of liberty to people who are unfamiliar with it. Paul had a unique opportunity to do so last week on The Colbert Report, and he missed it.

Credit Where Credit’s Due

Let me give Paul credit. He has climbed a steep learning curve with the art of extemporaneous speaking in a remarkably short amount of time. During the first debate, he made several cringe-worthy statements, moments when I wished with all my might that he’d made his point a little differently, less awkwardly. It’s one thing to deliver a prepared speech on the floor of the House, something Paul has done very well for decades. It’s another thing to speak off the cuff on a regular basis, and it showed in Paul’s early performances.

Granted, the current president is not, shall we say, the most able ad-libber, but by God, when someone actually gets the rare chance to express the principles of liberty on national TV, you expect him to articulate them better than you would yourself.

Or at least I do. Perhaps I have higher standards than most, after spending a career in journalism, where I’ve become accustomed to silver-tongued, media-savvy politicians blowing smoke with grace and aplomb. I endured a 20-year span of spin that culminated in watching the meteoric rise of that consummate BS artist Barack Obama while working at a TV station in his home base of Chicago.

But Paul’s been a quick study. With each debate and each interview, he’s become more comfortable in his own skin, and by the time of the third GOP debate, I found myself cheering for him probably three times as often as he made me wince.

Which brings me to the Colbert appearance. Now, don’t get me wrong. His performance was very strong. Many a lesser politician has been tripped up by Colbert and made to look like a fool. Paul thrust and parried with him as well as anyone. When Colbert, in his right-wing persona, told Paul, “I’d rather be alive than free and dead,” Paul had a terrific comeback: “I’d rather be free and alive!” That really hit home with an audience that feels the Bill of Rights has been all but repealed by the current administration, and that senses intuitively that liberty need not be exchanged for security. Paul validated that intuition and brought it to a conscious level. Fabulous.

Turning the Curious Into Converts

The missed opportunity came at the end of the interview. Colbert rattled off the names of about a dozen government agencies and asked Paul to raise his hand each time if he wants to abolish them. Paul obliged each and every time. Which is fine as far as it goes. But he missed a chance to turn the curious into converts. I suspect the reaction from many viewers was similar to that of the leftist blogger Manila Ryce:

“[Stephen Colbert] did not let Paul get away as easily as fellow liberals [Jon] Stewart and [Bill] Maher have. Instead, he pointed out the differences between Paul’s far-right ideology and that held by the left. Stephen’s audience obviously wanted to cheer for Paul, but seemed thoroughly confused after they realized that the enemy of your enemy isn’t always your friend.”

Colbert’s list started with the Department of Education. Paul could have raised his hand, stopped him right there, and said: “Yes, I want to abolish the Department of Education. I know that sounds pretty radical, but let me tell you why.”

That last sentence is crucial to the success of Paul’s campaign going forward. He can’t say it often enough to preface unorthodox views that will be unfamiliar to liberals — and for that matter, many younger conservatives with little memory of Ronald Reagan’s small-government rhetoric. Without compromising his principles (as I’m sure he never would), Paul must nonetheless acknowledge that his views might make people a bit uncomfortable; that basic expression of empathy alone will make them much more receptive to what he has to say.

And what he could have proceeded to say was something like this:

“You know, there was once a time when most Republicans wanted to abolish the Department of Education. But a funny thing happened. When Republicans won political power, they realized, ‘Hey, we can use this Department of Education to push our own agenda on the rest of the country.’ And that’s why you have these endless fights now over how our kids are supposed to be educated, Republicans and Democrats each wanting to impose a one-size-fits-all solution on the entire nation. It’s crazy. If they want to teach creationism in Oklahoma, fine, let them. If they want to teach condom use in New York City, that’s fine too. Why should this all be imposed from Washington, D.C.? You know, there isn’t one word in the Constitution about education, and that’s because the Founders knew that education was something best left to states and communities and parents and teachers. But what do we have now? We have this crazy No Child Left Behind law where every kid in the nation is getting drilled in how to pass standardized tests and they’re not actually learning anything. And don’t forget, that law is the brainchild of Ted Kennedy every bit as much as it is of George W. Bush.”

At that point, the allotted time for the interview would have been over, and Paul would have given Colbert’s audience an awful lot to stop and think about. This message of devolution (or if you prefer, states’ rights) is central to Paul’s brand of libertarianism, and it could really resonate with liberals who feel as if Christian fundamentalists are trying to impose Taliban-like rule nationwide and conservatives who still retain a memory, however deeply suppressed, of a time not very long ago when they had an innate suspicion of centralized power in Washington, D.C.

A Nation Divided

The fixation on a one-size-fits-all template has seized hold of both liberals and conservatives in nearly every matter of “public policy,” and the resulting free-for-all has left the America of 2007 a deeply divided country. The divisions began with the ascendance of political Christianity in the ’80s, gathered pace during Clinton’s polarizing presidency in the ’90s, reached a crescendo with the 2000 Florida recount, took a breather after Sept. 11, and have gathered pace again since the spring of 2004, when the outrages at Abu Ghraib prison and the slaughter of the four U.S. contractors in Fallujah began turning large numbers of Americans against the Iraq war.

Amid all these divisions, Ron Paul could bring a message of healing — not a message of unity: The country is beyond unity at this stage of its history — and no amount of Barack Obama platitudes will change that, but a message of healing nonetheless — a message that it’s OK for diverse peoples and communities to have different values, to make different choices, to live and let live.

Chances are that’s what America is going to look like in a couple of decades anyway. If nascent secession movements in Vermont, Hawaii, and elsewhere don’t come to fruition, those states and all the rest will nonetheless have much more autonomy as, in time, power devolves from Washington. In all likelihood, the process will come about acrimoniously, perhaps even violently, as competing factions fight each other to exhaustion and our bloated domestic bureaucracy and overseas empire collapse under their own weight. But what if the process came about peacefully, as the factions come to realize as the Founders did that there’s relatively little to fight about when political power is decentralized? Ron Paul can help to bring about that realization, start changing the national dialogue and at the same time, build additional support for his presidential campaign from across the political spectrum.

Regards,
Dave Gonigam

June 21, 2007

Ron Paul’s Missed Opportunity was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

LoCascio makes a compelling case that although it’s possible to maintain the integrity of money in a fiat system, historically only the discipline of a gold standard has succeeded in preventing massive abuses by the monetary elite.

Of course, the above should be painfully obvious to everyone by now, but unfortunately it is not. I offer as proof Congressman Ron Paul’s (R-Texas) final debate with Greenspan before the House Financial Affairs Committee, July 20, 2005:

Paul: “To me, this system that we have today is a convenient way to default on our debt – to liquidate our debt after the inflationary scheme.

“Even you, in the 1960s, described the paper system as a scheme for the confiscation of wealth.

“And in many ways, I think this is exactly what has happened. We have learned to adapt to deficit financing. But in many ways, the total debt is not that bad because it goes down in real terms.

“As bad as it is, in real terms, it’s not nearly as high.

“But since we went on a total paper standard in 1971, we have increased our money supply essentially 12-fold. Debt in this country, federal debt, has gone up 19-fold – but that is in nominal dollars, not in real dollars.

“So my question is this: Is it not true that the paper system that we work with today is actually a scheme to default on our debt? And is it not true that, for this reason, that’s a good argument for people not – eventually, at some day – wanting to buy Treasury bills, because they will be paid back with cheaper dollars?

“At the same time, it hurts the people who are retired and put their money in savings.

“And aligned with this question, I would like to ask something to dealing exactly with gold — is that: If paper money – today it seems to be working rather well – but if the paper system doesn’t work, when will the time come? What will the signs be that we should reconsider gold?

“Even in 1981, when you came before the Gold Commission, people were frightened about what was happening – and that’s not too many years ago. And you testified that it might not be a bad idea to back our government bonds with gold in order to bring down interest rates.

“So what are the conditions that might exist for the central bankers of the world to reconsider gold?

“We do know that they haven’t given up on gold. They haven’t gotten rid of their gold. They’re holding it there for some reason.

“So what’s the purpose of the gold if it isn’t with the idea that some day they might need it? They don’t hold lead or pork bellies. They hold gold.

“So what are the conditions that you might anticipate when the world may reconsider gold?”

“And the answer is: I don’t think so, because we’re acting as though we were there…

“So I think central banking, I believe, has learned the dangers of fiat money, and I think, as a consequence of that, we’ve behaved as though there are, indeed, real reserves underneath the system.”
As for me, I cannot believe Paul let Greenspan get away with that response so easily. Perhaps his time was up or perhaps he was too staggered by the silliness of Greenspan’s reply to fire off another round of questions.

No matter how one slices it, money supply going up 12-fold and debt 19-fold since Nixon defaulted on the gold standard is hardly acting as if we were still on the gold standard. Indeed, what little discipline we once had was thrown out the window long ago and has not been seen since.

LoCascio writes:

With debt up 19-fold in conjunction with Greenspan’s latest and all-time biggest bubble, otherwise known as housing, exactly where do we go from here? Given the illiquidity of housing, I am inclined to believe housing is the “bubble of last resort.” With global wage arbitrage, outsourcing, and rampant speculation in housing and the credit markets, this is the end of the line. There are no bigger bubbles to be blown.

The picture in my mind at this point is that of Greenspan playing The Sorcerer’s Apprentice. (If you have not yet seen Fantasia, I highly recommend doing so.)

At any rate, if you can relate to the scene in Fantasia where buckets of water were splashing around everywhere as the apprentice unleashed a “nightmare of liquidity,” then you have the right image in your head.

OK Mish, where to from here?

Vincent Locascio: The Wisdom of Ludwig von Mises

“The boom squanders through malinvestment scarce factors of production and reduces the stock available through overconsumption; its alleged blessings are paid for by impoverishment.”

“He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about.”

“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands, it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.”

I had to laugh when I saw that Von Mises quote referring to “the magic wand.” Indeed, history will not be so kind to Greenspan. He will be not be remembered as “The Maestro,” but as “The Sorcerer’s Apprentice,” looking for the easy way out of every problem, to the point of his undoing.

Back to the book… LoCascio explains:

Obviously, LoCascio is an optimist. I think it is far too late to prevent a calamity that wipes out the malinvestments and excesses of a 20-year boom that were built upon bubble after bubble of reckless credit expansion.

Nonetheless, LoCascio attempts to address the challenge of creating a “moral monetary system.” He argues that the root of the current problem is that inflation is perverse because increases in the money supply are distributed unevenly and unfairly. Any solution must remove the ability of the Fed to create and distribute money. He also mentions two related problems that must be rectified: First, our monetary unit must be defined; second, money needs to be distinguished from credit.

I will save a discussion of money supply for a later date, but LoCascio, as others before him, have pointed out numerous flaws with current measures such as M1, M2, M3, MZM, etc. The preceding measures blur credit with money in varying degrees and have other flaws as well that will be a subject for further discussion at a later date. For now, let’s just say that credit is so often blurred with money in our current system that it is hard not to be confused.

The heart of his proposal is to use money that has 100% backing with no more fractional reserves on demand deposits (checking accounts). Thus, money cannot be at one’s disposal in a checking account while simultaneously being lent to someone else. “Money is only money if it is available to the owner on demand at face value.” Finally, money would once again be backed by gold.

To date, no one has put together a way to get from here to there. LoCascio attempts to do just that with an eight-step program in which:

1.) Credit is distinguished from money.

2.) A preliminary money supply figure, based on step 1, is determined and published.

3.) A day of reckoning (DOR) will be announced on which money supply would be “corrected.”

4.) Fractional reserve banks will cease to exist.

5.) Time deposits will be kept distinct from demand deposits.

6.) Leading up to the DOR, money totals and credit totals will be fine-tuned.

7.) On the DOR, existing Federal Reserve notes (dollars) will be replaced with Treasury certificates (TC) that are payable on demand in gold.

8.) Taking the number of ounces of gold held by the Treasury and dividing that by the TCs, one gets a price value for gold, and notes are redeemable at that price. A dollar once again has a value associated with it.

One such difficulty that LoCascio did not deeply delve into is the global problem required in getting all the central bankers to agree to carry out such a plan simultaneously. Also, given our current trade imbalances, there would be huge pains for the United States to go back to an honest system right now.

While I think LoCascio underestimates the theoretical difficulties of such an endeavor, it is very clear that the current system is broken beyond repair. In that regard, I am more of an optimist than LoCascio. Something will have to replace Bretton Woods II, given that the current system is clearly not sustainable. Why not use the ideas outlined in his book as a starting point?

Like it or not, the United States will have to start thinking about long-term consequences, or the markets will eventually force the issue. My guess by now should be obvious. Time will be ripe for a “fresh honest start,” after the repudiation of Greenspan’s wizardry comes via an enormous deflationary collapse. Unfortunately, that final collapse may be years away if we follow the Japanese model.

Regardless of whether or not one thinks it is either desirable or even possible to return to a gold standard as described, the book is a very good read on the problems of the current fiat system, in which money, backed by nothing, can be created at will by the elite for the sole benefit of the elite.

Regards,
Mike “Mish” Shedlock
August 16, 2005

Vincent Locascio: Gold’s Honest Discipline was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.