Posts
From: patrickbarron@msn.com
To: letters@nytimes.com
Subject: An Efffective Policy for Iran that Will Avoid War
Date: Tue, 24 Jan 2012 10:28:18 -0500
Re: Bomb-Bomb-Bomb, Bomb-Bomb-Iran? by Bill Keller
Dear Sirs:
Mr. Keller nicely explains the situation and various options regarding a potentially nuclear-armed Iran. Although he portrays Ron Paul's position as "the let-Iran-be-Iran extreme", there is nothing extreme about it. In fact, Dr. Paul's policy is the only one that will avoid war. At the present time the U.S. and the E.U.'s harsh economic sanctions will force Iran either to accept a humbling defeat without a shot being fired (not very likely) or close the Straits of Hormuz, which would surely bring war. The West has two excellent options that avoid both scenarios--an explicit policy of nuclear retaliation should Iran use its nuclear arsenal on either the U.S. or our allies, and/or provide a missile shield to protect our forces and our allies. Secretary of State Clinton voiced the former option as a possibility over a year ago. Both policies are strictly defensive and have been proven effective in the Cold War and now in relation to North Korea. There is every reason to expect them to be just as efficacious with Iran.
Patrick Barron
Tuesday, January 24, 2012
Monday, January 23, 2012
My Letter to the NY Times re: Greeks Return to the Land
From: patrickbarron@msn.com
To: letters@nytimes.com
Subject: Greek Return to the Land
Date: Mon, 23 Jan 2012 13:36:25 -0500
Re: With Work Scarce in Athens, Greeks Go Back to the Land
Dear Sirs,
Your front page, above-the-fold article on January 9th about the Greeks returning to the land is not as sanguine as Ms. Donadio portrays it. A peoples' return to the land in large numbers is a sure sign of a regressing economy, one that is becoming less specialized, less productive, and less affluent. The myth of the happy yeoman farmer is just that--a myth. The industrial revolution broke the shackles of a large and impoverished agricultural class everywhere, releasing them to more productive and prosperous lives in the cities. The Roman Empire's final days were marked by starving city dwellers fleeing to the land in search of food. Greek citizens may not be that desperate...yet, but there is no reason to portray this development in any way except as what is really is: a horrible adverse consequence of decades' of disastrous economic policies.
Patrick Barron
To: letters@nytimes.com
Subject: Greek Return to the Land
Date: Mon, 23 Jan 2012 13:36:25 -0500
Re: With Work Scarce in Athens, Greeks Go Back to the Land
Dear Sirs,
Your front page, above-the-fold article on January 9th about the Greeks returning to the land is not as sanguine as Ms. Donadio portrays it. A peoples' return to the land in large numbers is a sure sign of a regressing economy, one that is becoming less specialized, less productive, and less affluent. The myth of the happy yeoman farmer is just that--a myth. The industrial revolution broke the shackles of a large and impoverished agricultural class everywhere, releasing them to more productive and prosperous lives in the cities. The Roman Empire's final days were marked by starving city dwellers fleeing to the land in search of food. Greek citizens may not be that desperate...yet, but there is no reason to portray this development in any way except as what is really is: a horrible adverse consequence of decades' of disastrous economic policies.
Patrick Barron
Thursday, January 5, 2012
The Real Reason that College Students Demand More Goodies from Government
Although this college professor's experiment may be shocking, I do not find it surprising. The professor blames the public schools for not teaching the great ideas of liberty and personal responsibility in a democratic republic. I do not necessarily disagree, but I think the source of the problem is much deeper. Our federal government DOES have the technical ability to shower as much fiat money on selected citizens as it wishes. There does not appear to be any practical limitation to its money printing ability. In fact Fed Chairman Bernanke famously stated this very fact in a speech a few years ago. Therefore, why should any American NOT demand that the federal government give them money for anything that they wish? The list of government largess keeps growing and will continue to grow because there is no practical or theoretical limit...as long as the government has the ability to print money. If prices go up...well, just increase the budget. Since I doubt that REAL economics is taught in the public schools and the media certainly is not interested in the consequences of increasing the American people's dependency upon government, we can expect that the public will continue to demand more and more fiat money for the same and new programs until the dollar becomes worthless.
http://www.youtube.com/watch?v=VxHfYNTrnic&feature=youtu.be
http://www.youtube.com/watch?v=VxHfYNTrnic&feature=youtu.be
Tuesday, January 3, 2012
My Letter to National Review Magazine: Tyler Cowen Does Not Understand Money
From: patrickbarron@msn.com
To: letters@nationalreview.com
Subject: Tyler Cowen Does Not Understand Money
Date: Tue, 3 Jan 2012 09:27:35 -0500
Re: The Eternal Struggle, by Tyler Cowen
Dear Sirs:
In his review of Nicholas Wapshott's new book Keynes Hayek, Tyler Cowen serves as a very poor arbiter of the monetary debate. Consider just his statement that "Whether we like it or not, the Fed has to do something (Cowen's emphasis), and letting the money supply continue to fall, in down times, is one of the worst options." This statement is followed a few paragraphs later by this one: "In essence, the American government spent almost a trillion dollars to postpone our economic pain by the grand span of two years." Is this the something that Mr. Cowen has in mind? Mr. Cowen is enamored with the discredited theory, advocated by Irving Fisher and revived by Milton Friedman, that money should be manipulated by the central bank to maintain a "stable purchasing power". This is a complete misunderstanding of what money actually is, and once one understands money's nature, one understands that pursuing a stable purchasing power is not only undesirable but also impossible. So, what is money? Money is a medium of exchange only. It is part of the market economy and is the most marketable good in an economy. Its purchasing power must be free to reflect the ever-changing ratios between itself and the thousands of an economy's vendible goods and services. As an economy gets more productive, the purchasing power of money will rise. If an economy becomes less productive--due to war, natural disaster, or anti-business government interventions--the purchasing power of money will fall. These are the signals that market participants need. The reason the money supply falls during the bust is that it was allowed to rise during the central bank initiated boom. The banks create money out of thin air during the boom. Debt created money comes into existence when they lend via the fractional reserve rules established by the Fed. But their lending is not based upon a prior act of saving, so their loans will fail. When the loan is written off, the money supply shrinks. All the Fed has accomplished by its expansion of reserves that then become money via the banking system is to create a boom/bust business cycle that destroys capital.
National Review needs to call upon some modern monetary theorists other than the likes of Mr. Cowen. Professor Joseph Salerno of Pace University, NYC, would be a good choice.
To: letters@nationalreview.com
Subject: Tyler Cowen Does Not Understand Money
Date: Tue, 3 Jan 2012 09:27:35 -0500
Re: The Eternal Struggle, by Tyler Cowen
Dear Sirs:
In his review of Nicholas Wapshott's new book Keynes Hayek, Tyler Cowen serves as a very poor arbiter of the monetary debate. Consider just his statement that "Whether we like it or not, the Fed has to do something (Cowen's emphasis), and letting the money supply continue to fall, in down times, is one of the worst options." This statement is followed a few paragraphs later by this one: "In essence, the American government spent almost a trillion dollars to postpone our economic pain by the grand span of two years." Is this the something that Mr. Cowen has in mind? Mr. Cowen is enamored with the discredited theory, advocated by Irving Fisher and revived by Milton Friedman, that money should be manipulated by the central bank to maintain a "stable purchasing power". This is a complete misunderstanding of what money actually is, and once one understands money's nature, one understands that pursuing a stable purchasing power is not only undesirable but also impossible. So, what is money? Money is a medium of exchange only. It is part of the market economy and is the most marketable good in an economy. Its purchasing power must be free to reflect the ever-changing ratios between itself and the thousands of an economy's vendible goods and services. As an economy gets more productive, the purchasing power of money will rise. If an economy becomes less productive--due to war, natural disaster, or anti-business government interventions--the purchasing power of money will fall. These are the signals that market participants need. The reason the money supply falls during the bust is that it was allowed to rise during the central bank initiated boom. The banks create money out of thin air during the boom. Debt created money comes into existence when they lend via the fractional reserve rules established by the Fed. But their lending is not based upon a prior act of saving, so their loans will fail. When the loan is written off, the money supply shrinks. All the Fed has accomplished by its expansion of reserves that then become money via the banking system is to create a boom/bust business cycle that destroys capital.
National Review needs to call upon some modern monetary theorists other than the likes of Mr. Cowen. Professor Joseph Salerno of Pace University, NYC, would be a good choice.
Sunday, January 1, 2012
My Letter to National Review Magazine re: Repo Men, by Kevin D. Williamson
From: patrickbarron@msn.com
To: letters@nationalreview.com
Subject: Repo Men
Date: Fri, 30 Dec 2011 10:16:38 -0500
Re: "Repo Men" by Kevin D. Williamson
http://www.nationalreview.com/articles/286704/repo-men-kevin-d-williamson?pg=1
Dear Sirs:
Kevin D. Williamson is giving Mark Steyn a real run for his money as best phrase-turner at National Review. His recent shocking report of how the American economy (read "us rubes in the sticks") is being bled to death by the Wall Street-Washington Axis of Evil contains dozens of memorable phrases. But the guts of his report reminded me of a story often told by Lincoln: a horse had stepped on his foot...he said he was too big to cry, but it hurt too much to laugh.
How to prevent such abuses as described by Mr. Williamson? Create another regulatory agency? Increase staffing at existing ones? Uh...sorry to say that this would be like adding to the staff of the Nazi SS in order to regulate crimes against humanity. There are two reforms that would go a long way to curing the problem or at least mitigating it greatly. One, return to sound money. Throughout Mr. Williamson's fine (if disturbing) report, one reads how Washington pored hundreds of billions of dollars into politically connected firms on Wall Street. Where does Washington get this money? It prints it, of course. Two, eliminate special rules for investment bankers. Subject them to ordinary commercial and criminal law, which requires that government prosecute fraud wherever it may be found. Sound money would make it difficult for Washington to reward its favorite cronies with actual cash, and exposure to ordinary commercial and criminal law would soon land both Washington and Wall Street "Repo Men" (aren't they really one and the same people?) in the hoosegow where they belong.
There is only one politician who champions such real reform. Does National Review dare mention his name? Ron Paul.
To: letters@nationalreview.com
Subject: Repo Men
Date: Fri, 30 Dec 2011 10:16:38 -0500
Re: "Repo Men" by Kevin D. Williamson
http://www.nationalreview.com/articles/286704/repo-men-kevin-d-williamson?pg=1
Dear Sirs:
Kevin D. Williamson is giving Mark Steyn a real run for his money as best phrase-turner at National Review. His recent shocking report of how the American economy (read "us rubes in the sticks") is being bled to death by the Wall Street-Washington Axis of Evil contains dozens of memorable phrases. But the guts of his report reminded me of a story often told by Lincoln: a horse had stepped on his foot...he said he was too big to cry, but it hurt too much to laugh.
How to prevent such abuses as described by Mr. Williamson? Create another regulatory agency? Increase staffing at existing ones? Uh...sorry to say that this would be like adding to the staff of the Nazi SS in order to regulate crimes against humanity. There are two reforms that would go a long way to curing the problem or at least mitigating it greatly. One, return to sound money. Throughout Mr. Williamson's fine (if disturbing) report, one reads how Washington pored hundreds of billions of dollars into politically connected firms on Wall Street. Where does Washington get this money? It prints it, of course. Two, eliminate special rules for investment bankers. Subject them to ordinary commercial and criminal law, which requires that government prosecute fraud wherever it may be found. Sound money would make it difficult for Washington to reward its favorite cronies with actual cash, and exposure to ordinary commercial and criminal law would soon land both Washington and Wall Street "Repo Men" (aren't they really one and the same people?) in the hoosegow where they belong.
There is only one politician who champions such real reform. Does National Review dare mention his name? Ron Paul.
Wednesday, December 21, 2011
The European Central Bank Catches the Fed Disease
From today's Open Europe news summary:
Huge demand for new ECB long-term bank lending;
The ECB this morning launched its first three-year lending operation with 523 banks requesting €489bn in loans, well above the expectations of between €250bn and €350bn. The previous largest amount requested was €442bn in one year loans back in June 2009. The aim of the long term lending operation is to provide secure long term financing for banks which can no longer gain funds from the usual avenues, in turn hopefully boosting lending in the wider economy and possibly purchases of sovereign debt. It was widely expected that demand above €400bn would prompt a positive market response. Open Europe’s briefing on the role of the ECB and the potential consequences for its long-term lending featured in the Telegraph, on EUobserver and on Zerohedge. The FT reports that US money market funds, formerly a key source of funding for European banks, have now cut their European exposure to record lows.
There is a reason that some banks "can no longer gain funds from the usual avenues.." There is only so much money that they can squander before the market has had its fill of their poor business choices. But our central bankers will not accept the legitimate judgment of those who invest their own money, so they print fiat money and make the taxpayer pay. This will lead only to higher prices and a continuation of the international raid upon capital that goes under the guise of "providing liquidity to the banking sector". It is nothing more than stealing purchase power from existing money holders in order to protect politically connected constituents. But that is not all. The real damage will be done in the years ahead as more capital is squandered in another credit-induced boom that will inevitably lead to a bust. The world need savings, real savings, not fiat money masquerading as savings.
Huge demand for new ECB long-term bank lending;
The ECB this morning launched its first three-year lending operation with 523 banks requesting €489bn in loans, well above the expectations of between €250bn and €350bn. The previous largest amount requested was €442bn in one year loans back in June 2009. The aim of the long term lending operation is to provide secure long term financing for banks which can no longer gain funds from the usual avenues, in turn hopefully boosting lending in the wider economy and possibly purchases of sovereign debt. It was widely expected that demand above €400bn would prompt a positive market response. Open Europe’s briefing on the role of the ECB and the potential consequences for its long-term lending featured in the Telegraph, on EUobserver and on Zerohedge. The FT reports that US money market funds, formerly a key source of funding for European banks, have now cut their European exposure to record lows.
There is a reason that some banks "can no longer gain funds from the usual avenues.." There is only so much money that they can squander before the market has had its fill of their poor business choices. But our central bankers will not accept the legitimate judgment of those who invest their own money, so they print fiat money and make the taxpayer pay. This will lead only to higher prices and a continuation of the international raid upon capital that goes under the guise of "providing liquidity to the banking sector". It is nothing more than stealing purchase power from existing money holders in order to protect politically connected constituents. But that is not all. The real damage will be done in the years ahead as more capital is squandered in another credit-induced boom that will inevitably lead to a bust. The world need savings, real savings, not fiat money masquerading as savings.
Saturday, December 10, 2011
Fed Money Expansion Is a Criminal Enterprise
Today we take it for granted that our central bank, the Fed, can print money out of thin air, supposedly for our own good. When I say it "can" print money, I mean that in two ways. One, that it has the technical ability to print money, and two, that it has the legal and moral right to print money. Yes, the Fed can and does create money out of thin air. But I challenge the notion that it has either the legal or moral right to do so.
What Is Theft?
I am confident that all who read this article will agree that theft is a crime. Taking something that belongs to someone else is the definition of theft. If I lift your wallet and steal your money, I have committed a crime. But what if I steal from you S-L-O-W-L-Y so that you barely notice it at the time? I could do this very carefully, so that for some time you do not know what has happened. Perhaps you may not notice that I took only part of your money, believing that you must have spent it. Nevertheless, whether or not you notice that you have been robbed, I have committed the crime of theft.
Is Inflation Theft?
Now, let's examine what happens when the central bank expands the money supply. It is the stated goal of the central bank to create some inflation. By inflation, I am not speaking in Austrian economic terms. For Austrians, inflation means only one thing--expansion of the money supply not redeemable in specie (gold, silver, etc.). For the layman and for the central bankers, inflation means higher prices.
The Fed has engaged in a systematic attempt to keep prices higher than the unhampered market would establish. Since the fall of 2008 the Fed has expanded the money supply tremendously. M1 has increased by fifty-four percent and M2 has increased by twenty-three percent. So, the question remains: does this increase in the money supply represent theft by those running the Fed?
Austrian Monetary Theory Clarifies the Issue
To answer this question, let us examine monetary theory. Money is a medium of exchange and arises spontaneously in the market. It becomes a medium of exchange by the fact that it is the market's most marketable commodity, meaning that it is accepted by most market participants first for consumption and then for exchange for some other good at a later time. Only commodities can arise spontaneously as mediums of exchange, because only commodities have prior intrinsic or industrial value. Pieces of paper with fancy ink engravings do not have intrinsic or industrial value at all. As Murray N. Rothbard has outlined in his wonderful book What Has Government Done to Our Money?,the fiat money that we all use today was gradually and systematically forced upon the public by the coercive police powers of government. Why did it do this?
The answer clearly is that government wanted to be able to expand the money supply. It especially wanted to be able to bail out the big banks when their depositors grew concerned that they would not be able to withdraw their money on demand. But the government had a problem. It could not tax the country to provide for these funds--the public would not support such a blatant act of protecting the rich from their own foolishness. So it had to eliminate the NEED to tax the public. Thusly, over several decades it eliminated gold money, that it could not expand, and replaced it with fiat money that it could expand in infinite amounts.
Ben Bernanke has famously stated that the Fed cannot go bankrupt, because it can produce legal tender in whatever amounts are necessary. His statement is prima facie evidence that the purpose of fiat money expansion is to give purchasing power to some who have done nothing to earn it. This, of course, is theft.
By lowering the interest rate or engaging in quantitative easing, the Fed allows some economic units to purchase real goods and services that they would not have been able to purchase in the absence of fiat money expansion. These are goods and services that will be denied to current money holders at the price that would have pertained in the absence of fiat money expansion. It is irrelevant to the question of whether or not the Fed has committed the crime of theft to ask if prices are higher. It is irrefutable that prices are higher than they would have been in the absence of fiat money expansion. Paying this higher price means that the public has been robbed of something real. The lowered purchasing power of the public's money means that people can buy fewer units of goods and services.
The Founding Fathers on the Crime of Money Debasement
Our Founding Fathers understood the evil of money expansion much better than our so-called sophisticated modern central bankers. The 1792 Coinage Act made it a capital crime--i.e., death penalty--for debasing money! They understood that money debasement was a crime against all the nation's citizens, not just picking one or two pockets. They were unconcerned about the price level; the crime was tied directly to money debasement, a crime against property. Notice this: money IS property.
It is no exaggeration to claim that fiat money expansion is a criminal act, conducted purposefully in order to give purchasing power to some at the expense of all others. If anyone other than the Fed prints money out of thin air, he is prosecuted for the crime of counterfeiting. So why is the same act legal when perpetrated by the Fed?
I addressed this very question to a panel of Fed representatives touring the country on a public relations campaign in the summer of 2009. My question was "If it is beneficial for the economy, as you say, for the Fed to expand the money supply, why does the government prosecute counterfeiters?" To my astonishment and delight, my question was greeted with cheers from the audience. The Fed panelists squirmed in their seats and quickly called an end to the meeting!
For the Fed to claim that it acts legally according to an act of Congress does not eliminate the crime. During the Nazi era the Germans legally and democratically passed the infamous Nuremberg Laws that persecuted the Jews. Frederic Bastiat would not have been impressed with either the acts establishing the Fed or the Nuremberg Laws. He understood that "...the law may be diverted from its true mission, that it may violate property rather than securing it,..." Such is the case with the acts establishing the Federal Reserve Bank and expanding its power to debase money.
Expanding fiat money is a criminal act and should be prosecuted as such, just as the infamous Nuremberg Laws gave no legal cover to those who persecuted the Jews. We may be reluctant to admit that our government has committed, and continues to commit, acts that our Founding Fathers would punish with the death penalty. But such is the case.
All those who have participated and continue to participate in the criminal act of robbing hundreds of millions of Americans of their rightfully earned wealth that is held in the form of dollar assets must be brought to justice.
What Is Theft?
I am confident that all who read this article will agree that theft is a crime. Taking something that belongs to someone else is the definition of theft. If I lift your wallet and steal your money, I have committed a crime. But what if I steal from you S-L-O-W-L-Y so that you barely notice it at the time? I could do this very carefully, so that for some time you do not know what has happened. Perhaps you may not notice that I took only part of your money, believing that you must have spent it. Nevertheless, whether or not you notice that you have been robbed, I have committed the crime of theft.
Is Inflation Theft?
Now, let's examine what happens when the central bank expands the money supply. It is the stated goal of the central bank to create some inflation. By inflation, I am not speaking in Austrian economic terms. For Austrians, inflation means only one thing--expansion of the money supply not redeemable in specie (gold, silver, etc.). For the layman and for the central bankers, inflation means higher prices.
The Fed has engaged in a systematic attempt to keep prices higher than the unhampered market would establish. Since the fall of 2008 the Fed has expanded the money supply tremendously. M1 has increased by fifty-four percent and M2 has increased by twenty-three percent. So, the question remains: does this increase in the money supply represent theft by those running the Fed?
Austrian Monetary Theory Clarifies the Issue
To answer this question, let us examine monetary theory. Money is a medium of exchange and arises spontaneously in the market. It becomes a medium of exchange by the fact that it is the market's most marketable commodity, meaning that it is accepted by most market participants first for consumption and then for exchange for some other good at a later time. Only commodities can arise spontaneously as mediums of exchange, because only commodities have prior intrinsic or industrial value. Pieces of paper with fancy ink engravings do not have intrinsic or industrial value at all. As Murray N. Rothbard has outlined in his wonderful book What Has Government Done to Our Money?,the fiat money that we all use today was gradually and systematically forced upon the public by the coercive police powers of government. Why did it do this?
The answer clearly is that government wanted to be able to expand the money supply. It especially wanted to be able to bail out the big banks when their depositors grew concerned that they would not be able to withdraw their money on demand. But the government had a problem. It could not tax the country to provide for these funds--the public would not support such a blatant act of protecting the rich from their own foolishness. So it had to eliminate the NEED to tax the public. Thusly, over several decades it eliminated gold money, that it could not expand, and replaced it with fiat money that it could expand in infinite amounts.
Ben Bernanke has famously stated that the Fed cannot go bankrupt, because it can produce legal tender in whatever amounts are necessary. His statement is prima facie evidence that the purpose of fiat money expansion is to give purchasing power to some who have done nothing to earn it. This, of course, is theft.
By lowering the interest rate or engaging in quantitative easing, the Fed allows some economic units to purchase real goods and services that they would not have been able to purchase in the absence of fiat money expansion. These are goods and services that will be denied to current money holders at the price that would have pertained in the absence of fiat money expansion. It is irrelevant to the question of whether or not the Fed has committed the crime of theft to ask if prices are higher. It is irrefutable that prices are higher than they would have been in the absence of fiat money expansion. Paying this higher price means that the public has been robbed of something real. The lowered purchasing power of the public's money means that people can buy fewer units of goods and services.
The Founding Fathers on the Crime of Money Debasement
Our Founding Fathers understood the evil of money expansion much better than our so-called sophisticated modern central bankers. The 1792 Coinage Act made it a capital crime--i.e., death penalty--for debasing money! They understood that money debasement was a crime against all the nation's citizens, not just picking one or two pockets. They were unconcerned about the price level; the crime was tied directly to money debasement, a crime against property. Notice this: money IS property.
It is no exaggeration to claim that fiat money expansion is a criminal act, conducted purposefully in order to give purchasing power to some at the expense of all others. If anyone other than the Fed prints money out of thin air, he is prosecuted for the crime of counterfeiting. So why is the same act legal when perpetrated by the Fed?
I addressed this very question to a panel of Fed representatives touring the country on a public relations campaign in the summer of 2009. My question was "If it is beneficial for the economy, as you say, for the Fed to expand the money supply, why does the government prosecute counterfeiters?" To my astonishment and delight, my question was greeted with cheers from the audience. The Fed panelists squirmed in their seats and quickly called an end to the meeting!
For the Fed to claim that it acts legally according to an act of Congress does not eliminate the crime. During the Nazi era the Germans legally and democratically passed the infamous Nuremberg Laws that persecuted the Jews. Frederic Bastiat would not have been impressed with either the acts establishing the Fed or the Nuremberg Laws. He understood that "...the law may be diverted from its true mission, that it may violate property rather than securing it,..." Such is the case with the acts establishing the Federal Reserve Bank and expanding its power to debase money.
Expanding fiat money is a criminal act and should be prosecuted as such, just as the infamous Nuremberg Laws gave no legal cover to those who persecuted the Jews. We may be reluctant to admit that our government has committed, and continues to commit, acts that our Founding Fathers would punish with the death penalty. But such is the case.
All those who have participated and continue to participate in the criminal act of robbing hundreds of millions of Americans of their rightfully earned wealth that is held in the form of dollar assets must be brought to justice.
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