The Problems with Keynesian Solutions to the Current Depression

I apologize but real life has been interfering with this blog quite frequently as of late. As you can guess it’s interfering again today so instead of a critique of a story, a discussion on anarchism, or other such common content I’m going to be lazy and let Robert Murphy explain why Keynesian solutions to the current depression are wrong:

Socialized Medicine

Yuri Maltsev is one of my favorite contributors at the Ludwig von Mises Institute. He lived in the Soviet Union and was one of the members of Gorbachev’s team that was looking into economic reform. Unlike many critics of the Soviet Union, Yuri lived there and thus has firsthand experience. Part of the The 30 Day Reading List that will Lead You to Becoming a Knowledgeable Libertarian includes Maltsev’s article that discusses socialized medicine:

In 1918, the Soviet Union became the first country to promise universal “cradle-to-grave” healthcare coverage, to be accomplished through the complete socialization of medicine. The “right to health” became a “constitutional right” of Soviet citizens.

The proclaimed advantages of this system were that it would “reduce costs” and eliminate the “waste” that stemmed from “unnecessary duplication and parallelism” — i.e., competition.

What happens when you remove competition from a market? The market stagnates. The Soviet Healthcare system was a wreck and far behind the technological and basica sanitary conditions of other industrialized nations:

The system had many decades to work, but widespread apathy and low quality of work paralyzed the healthcare system. In the depths of the socialist experiment, healthcare institutions in Russia were at least a hundred years behind the average US level. Moreover, the filth, odors, cats roaming the halls, drunken medical personnel, and absence of soap and cleaning supplies added to an overall impression of hopelessness and frustration that paralyzed the system. According to official Russian estimates, 78 percent of all AIDS victims in Russia contracted the virus through dirty needles or HIV-tainted blood in the state-run hospitals.

Irresponsibility, expressed by the popular Russian saying “They pretend they are paying us and we pretend we are working,” resulted in appalling quality of service, widespread corruption, and extensive loss of life.

Everything humans, and every other creature on the planet, does is done in self-interest. Collectivists do not like this idea and instead try to encourage people to perform acts of altruism instead of acts of self-interest. This is where the collectivist philosophy hits a wall since acts of altruism ultimate have to be based on self-interest.

Medical professionals weren’t hardly motivated to do their best since the pay they were receiving didn’t match the work they were supposed to perform. Instead of providing healthcare altruistically, the medical professionals fo the Soviet Union apathetically stood aside as people died… unless they were paid by the patients:

In order to receive minimal attention by doctors and nursing personnel, patients had to pay bribes. I even witnessed a case of a “nonpaying” patient who died trying to reach a lavatory at the end of the long corridor after brain surgery. Anesthesia was usually “not available” for abortions or minor ear, nose, throat, and skin surgeries. This was used as a means of extortion by unscrupulous medical bureaucrats.

Isn’t it strange how medical care could be found if one was willing to pay? There was another exception as well, if you were an employee of the state:

Not surprisingly, government bureaucrats and Communist Party officials, as early as 1921 (three years after Lenin’s socialization of medicine), realized that the egalitarian system of healthcare was good only for their personal interest as providers, managers, and rationers — but not as private users of the system.

So, as in all countries with socialized medicine, a two-tier system was created: one for the “gray masses” and the other, with a completely different level of service, for the bureaucrats and their intellectual servants. In the USSR, it was often the case that while workers and peasants were dying in the state hospitals, the medicine and equipment that could save their lives was sitting unused in the nomenklatura system.

Marx’s theory always fell apart around the whole “eventually the all powerful state will dissolve and the communist society will be left in the socialist society’s place.” Power corrupts and the more power that is available the more it corrupts. The problem with socialism is the fact that it relies on an all powerful state to control everything. Ideally the state educations people on the wonders of communism and brings in the next era of human society, in reality corrupt power hungry psychopaths seek the positions of power and use them to rule over the proletariat.

The Soviet Union was a classic example of this fact. There were two classes in the Soviet Union, not bourgeoisie and proletariat as Marx claimed, but the state and everybody else. If you were part of the state you received better food, medical care, transportation, alcohol, etc., while everybody else suffered long breadlines, deplorable healthcare, a horribly dilapidated transportation system, poor liquor, etc.

What did socialized medicine get the Soviet Union? Horrible infant fatality rates for starters:

At the end of the socialist experiment, the official infant-mortality rate in Russia was more than 2.5 times as high as in the United States and more than 5 times that of Japan. The rate of 24.5 deaths per 1,000 live births was questioned recently by several deputies to the Russian Parliament, who claim that it is 7 times higher than in the United States. This would make the Russian death rate 55 compared to the US rate of 8.1 per 1,000 live births.

OK, the Soviet Union falled to provide proper medical care. What about the medical paradises of other nations that have implemented socialized medical care? We all know that places like the United Kingdom (UK) have far better medical care than the United States because the healthcare industry in that country is socialized, right? Wrong:

In “civilized” England, for example, the waiting list for surgeries is nearly 800,000 out of a population of 55 million. State-of-the-art equipment is nonexistent in most British hospitals. In England, only 10 percent of the healthcare spending is derived from private sources.

Britain pioneered in developing kidney-dialysis technology, and yet the country has one of the lowest dialysis rates in the world. The Brookings Institution (hardly a supporter of free markets) found that every year 7,000 Britons in need of hip replacements, between 4,000 and 20,000 in need of coronary bypass surgery, and some 10,000 to 15,000 in need of cancer chemotherapy are denied medical attention in Britain.

Age discrimination is particularly apparent in all government-run or heavily regulated systems of healthcare. In Russia, patients over 60 are considered worthless parasites and those over 70 are often denied even elementary forms of healthcare.

In the United Kingdom, in the treatment of chronic kidney failure, those who are 55 years old are refused treatment at 35 percent of dialysis centers. Forty-five percent of 65-year-old patients at the centers are denied treatment, while patients 75 or older rarely receive any medical attention at these centers.

Socialized medical systems have a major issue, shortages of critical medical supplies and technologies. Shortages are unavoidable, it’s a harsh reality that manifests in the fact that there is only a limited amount of resources on the planet. By resources I mean not only the chemicals that are used in the production of medicine but also the labor. Research and development isn’t easy and people need a way to know what is needed and what isn’t needed by society. The government tries determining such things by toiling over statistics, gathered data, and future predictions. Markets accomplish this through the price mechanism. If the price of something goes up is indicates there is a greater demand than supply so companies, hoping to cash in on the profits, start producing more of that thing.

The state doesn’t work on the price mechanism, they don’t receive profits from selling goods and services, so when they see a shortage they merely started regulating who gets access. Suddenly society is divided into groups that receive priority on medical care. If you’re elderly you’ll find yourself without treatment, unless you go to another country that has some semblance of a free market in healthcare and buy your medical needs. Collectivists decry free market medicine because the “poor” have to go without, but the exact same problem occurs under socialized medicine with the exception of who is made to go without. Of course free markets are usually able to take care of the “poor” through mutual aid, which is an option that isn’t usually available in under socialized medicine because mutual aid societies get legislated out of existence due to their “inefficiency” and “parallelism” with state controlled healthcare.

What about the paradise of Canada? Turns out that it’s not as much of a paradise as people make it out to be:

In Canada, the population is divided into three age groups in terms of their access to healthcare: those below 45, those 45–65, and those over 65. Needless to say, the first group, which could be called the “active taxpayers,” enjoys priority treatment.

The state, like individuals, works off of self-interest. If you’re an active taxpayer you get preferential treatment, if you’re collecting welfare or otherwise costing the state money you get substandard treatment.

Socialized healthcare is yet another ploy by the collectivists to hand power over to the state. History has proven it to be a bad idea time and time again but they refuse to listen. In their eyes self-interest is evil and thus they must abolish self-interest. It never dawns on them that their act of abolishing self-interest is an act of self-interest in of itself. They don’t see that they are the thing they claim to be fighting. Because they can’t bring themselves to face such a reality they continue pushing the same ideas that have historically failed. Don’t fall for the ploy the socialized medicine is a good thing, it’s not.

The Failure of Centralizing Power

I live in a country where power is becoming increasingly centralized. More and more decisions are being made on the federal level while fewer and allowed to be made at the state, county, city, and individual level. The banning of gay marriage in North Carolina demonstrates the flaw with centralized power quite effectively:

Earlier this month, Amendment 1 — an amendment to the North Carolina state constitution that precludes the state from recognizing gay marriage, among various other kinds of domestic partnership — was passed by voters. Much has already been made of the bill’s discriminatory content, the former need to “vote against,” and the current need for repeal, but much of this looks more like an exercise in missing the point than anything else.

In the end, the problem with Amendment 1 is not so much that this election was decided in one direction and not the other, but rather that we live in a society content to employ statewide voting as a means of collective decision making in the first place.

One of the problems with a statewide referendum on the issue of gay marriage, or any domestic matter, is that it implicitly assumes that the state — as opposed to the county, city, neighborhood, place of business, or any other pool of people — is the appropriate unit for collective decision making. It suggests that state residency is a common denominator fundamental enough to bind 9.7 million people to one another’s opinions, interests, and backgrounds — complex, diverse, and contradictory though they may be. It contends that it is morally acceptable for 93 counties to decide an issue not only for themselves but for the remaining seven as well. And it denies a man — or two, or several — the opportunity to lead his life as he, and not as his distant neighbors, sees fit.

The larger the collective decision making group is the worse things get. Most countries define decision making groups on arbitrary borders. In the United States decisions made on a federal level affect over 300 million individuals. Decisions made on a state level in Minnesota affect 5 million people. Any decision made by the city of Minneapolis affects almost 400,000 people. To many this doesn’t seem like a bad thing, after all they wish to push their morals onto as many people as possible. There are many religious individuals who would love to pass a law that established their religion as the state religion on a federal level. They don’t care about the, likely, hundreds of millions of individuals who don’t share their religious beliefs.

Collective decision making fails due to the fact human beings are not insects, as much as the collectivists wish we were. There is no human hive, individuals do not mindlessly follow the orders of a queen be. We are each rational beings capable of making decisions independent of one another. As a group of individuals becomes larger the chances of successful collective decision making decreases.

It is the epitome of arrogance to believe you know what is best for another individual. That arrogance doesn’t go away simply because an arbitrary number of people agree with one another. Every person who voted on Amendment 1 in North Carolina was saying, “I know what’s best for everybody in this state.” When somebody advocates for collectivist philosophies they are saying the previously mentioned arrogance goes away when decisions are made by groups. If the group decides to ban gay marriage then it must obviously be the correct decision, right? No, in fact making an argument on such grounds is a logical fallacy known as argumentum ad populum.

The United States needs to wrestle power from the federal government and return it to the hands of the individual states. Once the individual states have the ability to make decisions that power must be wrestled away from them and returned to the counties. This process needs to continue until decision making power is put into the hands of individuals.

The Manipulation of the Sugar Market

If you go to grocery stores that cater to international tastes you’ll usually run across what is most often referred to say “Mexican Coke.” Truthfully it should be called international Coke because the drink people are often seeking out isn’t just available in Mexico, it’s available in many other countries. Why? Because “Mexican Coke” is made with real sugar so it tastes far different that the crape we can buy in bulk here in the United States. The sugar market, like so many other markets, has been manipulated by the state to such an extent that high fructose corn syrup is more economical than pure natural sugar:

When a government guarantees profits to those large corporations with powerful lobbies, the market loses its natural regulating mechanism. Instead of weeding out the most inefficient companies, the state subverts the consumer and keeps these companies propped up with corporate welfare. This is particularly true with respect to the agricultural industry.

In the absence of tariffs, importation quotas, and subsidies, the natural tendency of the market would be to produce cheap foreign sugar, which soda manufacturers would then import to sweeten their product. Domestic farmers are naturally opposed to this system because they cannot compete with more-efficient foreign firms. So, instead of competing for the dollar votes of the millions of individuals who form the free market, these large corporations have the power to lobby a select group of politicians to confer them special privilege. When a businessman tries to secure his profits not through free competition but through state privilege, he is not acting as a market entrepreneur but rather as a political, rent-seeking one.

In this case, the political entrepreneur was Archer Daniels Midland, a company that lobbied Congress to pass draconian quotas on sugar importation. But why would ADM, a corn producer, want to artificially raise the price of foreign sugar? A basic lesson of economics is this: when the price of a good is raised, all other things being equal, people cut back on their consumption, and (depending on the elasticity of demand) they look for substitutes.

High-fructose corn syrup, which is made from cornstarch, which ADM grows, is such a substitute.

Sugar doesn’t grow well in the United States so producing it cheaply is impractical. Because of this consumers of sugar usually import it from foreign produces. This isn’t a problem in a free market because farmers in the United States are able to grow crops that don’t do well in areas favorable to sugar cane so trade can go both ways. Unfortunately when given the option to hinder competition through the political process most economic actors will jump on the opportunity.

In this case an individual who produced a corn-based sweetener wanted to push out competing foreign sugar producers. Doing this is easy when there is a state that can impose import restrictions (and also subsidize corn producers to encourage more of the crop to be grown, thus reducing the cost). Tariffs, import quotas, and subsidies are nothing more than mechanisms available to the state to grant its cronies monopolies. If a domestic producer is having difficulties selling their produce because of a superior foreign competitor the state will happily intervene and push out the foreign competitor so long as the domestic producer has something of value to offer the politicians. In fact this demonstrates the fact that we never moved away from mercantilism. The state still controls foreign trade, they are just less overt about it. Instead of a king openly granting a monopoly to a favored merchant the state now hides those grants of monopolies behind tariffs, import restrictions, regulations, subsidies, government contracts, etc. Even though the rules of the game have changed the game itself hasn’t.

Some people are probably curious about why this matters. It matters because market interventions come at a costs to your and me, the consumers. Our choices are artificially restricted and the lack of competition ensures prices will remain higher than they would otherwise. We end up having to pay a higher price for an inferior product. While producers of high fructose corn syrup will claim it tastes the same as sugar anybody who has had a “Mexican Coke” and a domestic Coke will let you know such claims are bullshit.


I spend a great deal of my time writing posts talking about the benefits of capitalism. My primary goals in doing so are to explain why there is no need for a coercive state and to couter all the socialists out there that claim capitalism is some kind of evil blight upon the Earth. Capitalism is a workable solution because it relies on the self-interest of individuals whereas socialism relies on the altruism of individuals. Unfortunately for the socialists altruism isn’t a common human trait, even apparently altruistic acts are usually ones of self-interest.

The Mises Institute website has a good article titled Another Case of the Anticapitalistic Mentality It’s a criticism of Michael Sandel’s book What Money Can’t Buy: The Moral Limits of Markets. In it Sandel makes several common socialist claims against the free market, basically claiming the introduction of money into a situation somehow corrupts it. An excerpt from the book that was discussed in the article deals with blood donations:

The answer [to Arrow’s objection] is that commercializing blood changes the meaning of donating it. For consider: in a world where blood is routinely bought and sold, is donating a pint of blood at your local Red Cross still an act of generosity? Or is it an unfair labor practice that deprives needy persons of gainful employment selling their blood? (p. 126)

This is a common criticism of the free market by those who oppose the idea of capitalism. Somehow receiving compensation for donations changes the meaning and that change of meaning is undesirable. What these people fail to realize is that gifting blood is no more altruistic than selling it. I know that’s a pretty bold claim but bear with me.

Throughout most of your life you’ve been taught that it’s better to give than receive, that sharing is caring, and that the highest honor one can attain is sacrificing self for another. It’s beat into us that giving is the ultimate act of good. Therefore, societally speaking, we can achieve the most recognition and congratulations by giving something to another. What do people generally want in life? Acceptance and recognition by their fellow man.

Of course everybody believes they are above that. They want no recognition from society, they merely want to help somebody in need because that person is in need. We still return to the fact that acts performed to help another without any expectation of recognition are acts performed in self-interest. Humans act to alleviate discomfort. Everything we do ultimate derives from discomfort. If we were entirely comfortable, if all our needs were met and we were entirely content, we would not act. To alleviate the discomfort of hunger we eat, of bordom we read or socialize, of sickness we take medication, etc. Empathy, being able to share the feeling of others, causes discomfort. When you see somebody suffering and you are able to emphasize the feelings you experience are discomforting so you move to alleviate the sufferer’s discomfort to alleviate your own. Seeing a beggar on the street can stir different emotions in people. Some will think about the hungry state of the beggar and through their empathy they will be discomforted and desire to help that person. Others will experience guilt, one of the most discomforting feelings humans can experience, for having more than the beggar and move to alleviate their discomfort by giving money to the beggar. We seek to relieve our own discomfort by relieving another’s.

Whether it is to gain societal recognition or to alleviate discomfort caused by empathy, acts of altruism are performed in self-interest. Socialists will often claim that self-interest is evil and that relying on self-interest is what causes all problems for humanity. Self-interest isn’t good or evil, it’s merely the nature of all living creatures. Working entirely in self-interest at the cost of others isn’t good for society but humans have developed empathy that balances the scale of self-interest vs. society. There are those who lack empathy and do things that most of us find deplorable but the majority of us have some ability to empathize (and society ostracization of those without is often enough to prevent them from harming others). I don’t think society would work if a vast majority of people were without empathy. Hell, societies themselves are built upon self-interest. Humans are generally social creatures and desire to be around other humans and we also wish to take advantage of dividing labor.

The bottom line is humans act based on self-interest. Whether that self-interest comes from compensation, social recognition, or to alleviate our own discomfort is irrelevant. I would argue that there is no altruism, at least not the type socialists generally advocate. The idea that acts performed out of self-interest instead of altruism are somehow dirty or evil is absurd because that would mean all acts are dirty or evil. We need to get away from the idea that self-interest is undesirable.

An obvious criticism by those who oppose acts of self-interest is that advocating people act in self-interest will justify acts of self-interest at the expense of others. Fortunately acting in self-interest at the expense of others isn’t a common desire for humans so we needn’t worry heavily about such issues. Think about the vast amount justifications most people have to make in order to overcome their internal feelings against harming others in order to harm others. People have to convince themselves that acts harmful to others are for some kind of “greater good” or that the person they’re harming is bad in some way. When somebody smashes the window of a bank they justify the action to themselves by claiming the bank owners are evil. When somebody murders another they often justify the act by claiming their victim was evil. When politicians rob from people they claim it’s for the greater good. We spend great deals of time twisting our beliefs so that we can justify acts that are harmful to others because human nature is to do the opposite, we desire to help each other because seeing suffering in others causes discomfort to ourselves.

Still we’ve developed safeties against those who would harm others. Self-defense comes in physical and societal forms. If somebody attacks you you flee or fight back. If somebody steals from you you either take your property back or seek compensation through the legal system. We’ve attempted to make acting in self-interest at the expense of others costly so that it’s no longer in one’s self-interest to act at the expense of another.

Capitalism works because it relies on our inherit self-interest while socialism has failed time and time again because it relies on altruism. Implementing a system that requires us to oppose our very nature is destined to fail. Trying to regulate the free market by restricting what can and can’t be sold can never work. If there is a market it will be fulfilled, if not by the regulated market then it will be by the black market.

Government Monopolies are Malinvestments

Since the turn of the century it has become common practice for the state to use its monopoly on force to expand its monopoly on natural resources. Canada and Norway both maintain a monopoly on minerals through state ownership of extraction companies and required licensing for any extraction by third-parties. Even the State of Minnesota has maintained mineral rights on most property sold after the state of the 20th century. Unfortunately the state, lacking the market feedback system, is unable to extract resources efficiently and usually squander any monetary gains from resource extraction on nonproductive uses such as expanding bureaucracy, maintaining a powerful military, and giving handouts to cronies. In fact many countries with abundant natural resources end up in worse positions than countries without such resources, a happening so common the term resource curse was coined to describe it.

Peru is a perfect example of this. During the 1840s an island off of Peru was discovered than held a great deal of guano:

In 1839, Peru was a devastated nation. Debt and destruction in the aftermath of both the War of the Confederation (1836–1839) and the War of Independence (1822–1825), a crushing debt default in 1826, and several hundred years as a Spanish colony had left its economy small and craft dominated, without even a banking system.

But in the early 1840s, explorers made an exciting discovery. Due to an uncharacteristic lack of rainfall and the unique variety of birds nesting there, Peru’s Chincha Islands were found to be covered by mountains of bird excrement several hundred feet high in places, which had accumulated over many centuries. They were thought to be the most enormous guano deposits in the world — and of a particularly high quality — at a time when guano was used worldwide for fertilizer. So, out of nowhere, a valuable natural resource was found, one which promised — if managed properly — to produce wealth that could “stagger the dreams of Oriental imagination,” possibly ushering in a new era of development and progress.

At the time guano was almost like gold since it was used by almost everybody as fertilizer. Guano was so valuable that the United States passed the Guano Islands Act:

Whenever any citizen of the United States discovers a deposit of guano on any island, rock, or key, not within the lawful jurisdiction of any other Government, and not occupied by the citizens of any other Government, and takes peaceable possession thereof, and occupies the same, such island, rock, or key may, at the discretion of the President, be considered as appertaining to the United States.

The act was used by the United States to lay claim to some 100 islands, so this wasn’t a law used sparingly to claim one or two islands. Needless to say with guano being such a valuable resource at the time the Peruvian government decided to law monopoly claim to their newly discovered treasure trove. Money made from selling the guano was used as money obtained by a state is usually used, for mostly frivolous projects:

Public works and private prebends remade the city … with stately museums, parks, plazas, academies, boulevards, mansions, and theaters, not to mention the latest in potable water systems and Italian opera. Imports — everything from workaday textiles to lavish accessories and vintage French wines [arrived in the city].

Since the state doesn’t have to concern itself with market feedback it is always apt to dump great deals of money into unwanted projects. How useful is a museum, mansion, or theater in a country where a majority of the population live in poverty? No very useful, which is noted by the fact no entrepreneur invested money in any of those enterprises. Unfortunately the more of those things a country has the longer its political dick is and countries love political dick measure competitions.

As these investments never return any profit they lead to economic ruin. We see this in the United States today with all the spending on Medicare, Medicaid, offense defense, bailouts, etc. have failed to return any profit and are leading to the slow collapse of our sham economy. When you keep dumping money into failed enterprises the only possible outcome is total failure, something Peru experienced when that state’s meddling in the guano market lead to other sources of fertilizer being sought out. At some point all resources become more expensive than people are willing to pay and at those times alternatives are researched by individuals wanting a piece of the pie from currently disgruntled consumers. When you can pay $5.00 for a pound of fertilizer or $50.00 for a pound of fertilize the choice of which one to choose becomes obvious:

The European crisis hammered the Peruvian economy in two ways: first, because the Peruvian government had incrementally (and with disregard for competitive substitutions) increased guano prices so much, stricken farmers turned to other, lower-priced fertilizers; demand for shipments from the Chincha Islands dried up. Second, with London money and commodity markets frozen, lenders had little appetite for extending additional credit to once-again-debt-encumbered Peru.

Peru’s gravy train came to a screeching halt. All of the sudden the worthless investments being made by the state became impossible to continue as money was drying up. What’s a state to do in such a situation? The only thing a state knows how to do, use violence in an attempt to maintain its monopoly:

In response to the economic crisis, in 1875, Pardo — now president of Peru — ordered the military to seize the southern nitrate fields on the border with Chile in an effort to offset the decline of the guano business with another source of fertilizer revenues. Even though the state hastily expropriated land and facilities from private investors, it was too little too late. Work on the railroad projects halted in August of 1875. Over the next few months, a variety of other government projects defaulted amid a widening financial contagion culminating in January 1876, as Peru defaulted on its sovereign debt for the second time in a century: mountains of loans from European banks in stark juxtaposition against diminished avian dung heaps.

This should be a familiar formula for anybody who pays attention to foreign affairs. Saddam Hussein ordered the invasion of Kuwait because their cheap oil flooded the market and challenge Iraq’s primary source of income. The United States has a history of invading or otherwise intervening in countries with vast natural resources including Iran, Iraq, Afghanistan. In fact the British and United States lead overthrow of the Iranian government in 1953 happened shortly after the country nationalized its oil resources (which was previously controlled by Anglo-Iranian Oil Company, a British owned company). Peru demonstrates such tactics are nothing new, the state has a long history of military invasions to seize natural resources.

Meanwhile the free market allows for peaceful distribution of natural resources to productive uses, since entities that invest resources into unproductive uses face insolvency in a hurry. On top of that the threat of insolvency prevents private entities from squandering resources on massive frivolous endeavors. The state, being free of market feedback, has no such worries and thus ends up dumping massive amounts of money into enriching itself:

In hindsight, “guano … proved a great ‘lost opportunity’ for [Peruvian] development … [as] state investments stymied possibilities for national entrepreneurs, diversification, and gains in domestic productivity.” In roughly four decades, under the supervision and at the direction of the government, between 11 and 12 million tons of excrement fertilizer were shipped, earning $500 million in revenues. (Another estimate holds the number at more than 20 million tons shipped and $2 billion in revenue.) But in the end, 53 percent of all of the guano revenue was spent on expanding the bureaucracy and the military, 12 percent on direct transfer payments, and 7 percent on reducing tributary impositions. Twenty percent had been spent on railroads.

Peru’s politicians spent 53 percent of all guano revenues on enriching themselves, creating more dependency on the state, and enhancing the military so they could steal other country’s stuff. None of these things are valuable for anybody besides the state and its cronies. That’s what states do and we should keep it in mind. It doesn’t matter where the money comes from either. Whether the state gets money from a monopoly on resources, taxation, or tariffs it will be spent mostly on worthless things. If we listen to those demanding the rich be taxed heavier where do you think that additional money will go? It won’t be Medicare, Medicaid, or Social Security; it’ll go to funding the military, hiring more government employees, and lining the pockets of state cronies.

When the state gets money it’s lose/lose unless you’re tied to the state. This is because any money obtained by the state is stolen. In the case of Peru’s claim of the guano filled island the property was stolen from individuals who could have put the guano to productive uses in the free market.

According to Krugman We Need More Inflation

Paul Krugman decided to make a fool of himself again by claiming we don’t have enough inflation. The man is an idiot but I repeat myself. Thankfully the boys over at the Mises Institute website called Krugman out on his idiotic rambling:

In an Austrian framework, as in a natural-rate-of-unemployment model, monetary expansion and a low (relative to the natural rate) interest rate may increase employment; the policy may appear to succeed. But, as Hayek and Mises emphasized long before the development of modern macroeconomics, the employment created by stimulus, whether monetary or fiscal, and whether implemented when an economy is near full employment or initiated at a point where significant unemployed resources are available (Hayek 1939 and Ravier 2011) is unstable. Such employment, if it is to be maintained, will require ever-increasing distortions to the spending stream. A policy that uses inflation to generate employment hence contains the seeds of a return to stagflation, and if continually attempted every time unemployment begins to increase, ultimately, to the choice whether to end the inflation or move forward on a wrong path to a eventual crack-up boom.


More inflation now would just repeat the mistake, trading some lower unemployment now for more unemployment and more inflation in the future. To avoid holding a tiger by the tail avoid inflation now. The crisis and slow recovery should not be an excuse to revive failed Keynesian policies but instead to examine critically a denationalization of money.

Krugman continues to be the idiots’ goto person for economic advice. Mind you the man has been wrong about almost everything he’s stated.

Let’s consider inflation for a moment. Very few people ever take the time to analyze what inflation is, they usually just accept it as a natural thing that happens and is unavoidable. Inflation is theft performed by the state, plain and simple. Scarce goods have a tendency to be worth more than abundant goods and money is no different. If there exists only 100 ounces of gold in the world then each ounce is going to be valued extremely high whereas if gold was as abundant as water nobody would give it much thought. The United States dollar is similar, when the state prints more of them each dollar becomes less valuable as they are now more abundant. The inflation of the United States dollar is directly controlled by the state who could choose never to expand the supply and thus save those holding dollars from having that holding constantly devalued. Instead the state prints money willy nilly, which devalues the value of dollars and thus punishes those who hold them.

Why does the state do this? Easy, their cronies don’t suffer the affects of inflation. Inflation of the dollar doesn’t kick in until those dollars begin to circulate. The first receiver of newly printed dollars actually has more purchasing power since the supply hasn’t increased as those dollars haven’t begun circulating. Once the first receiver spends those newly printed dollars they being entering circulation and that is when they devalue already circulating dollars. Basically, if you’re the first receiver of newly printed dollars you have a tremendous advantage and the first receivers are those politically well-connected. It’s a corrupt little system where politicians can exchange purchasing power for whatever it is they desire at the expense of everybody else.

This is why it’s smart to convert your dollars into something valuable. Every day you hold a dollar its purchasing power is reduced. Keynesian economists like Krugman claim constant devaluation of money urges people to spend it more quickly and that somehow is better for the economy. What those idiots don’t see is that inflation discourages individuals from saving money to be invested in larger projects down the road. Instead of relying on debt individuals would have the option to save their money unti they have enough to make a big purchase such as a home or factory.

When Krugman says we need more inflation he really means we need more theft. What he advocates is stealing purchasing power from individuals who hold savings of any amount. Policies like this encourage debt spending. Why save money to purchase a television if that money is constantly going to be worth less and less? Why not just put that purchase on a television and repay the debt over time with constantly devaluing money? Keynesian ideas are what got us into our current economic mess and if we continue following those ideas we’ll be in complete economic collapse before we know it.

The Mises Institute Website is Available in Torrent Form

Do you have 211GB of hard drive space free? Do you want a collection of some of the greatest pieces of literature, audio, and video ever made on the subjects of liberty and Austrian economics? Well I just found out that the Mises Institute website is available in torrent form. The latest torrents can be found in this directory and include separate torrent files for books, journals, media, PDF documents, papers published in Reason, and one giant monster with everything.

This is one great thing about websites being published under the Creative Commons (the same license I use on this webpage), people are able to legally consume it in any form they damn well feel like. It also ensures that even if the Mises website is taken down all of their great information can live on.