Tag: Mises Does Not Approve

The Violence Economy

Recently I’ve been working on an economic idea of sorts, one on the economy of the state, or as I like to call it the violence economy. It’s an expansion of my previous idea regarding the value of fiat currency.

The base of the idea is the fact that the state is an entity that exists entirely by violence. As explained by Albert J. Nock in his book Our Enemy, the State there are two means of obtaining wants, the political means and the economic means. The political means is voluntary trade amongst individuals whereas the political means it the use of the state’s violence to extract wealth from others.

Because of the state’s method of obtaining wealth it has a keen interest in helping and protecting the wealthy. Likewise the wealthy have a keen interest in protecting the state. The state requires the wealthy to leech off of while the wealthy desire the state’s gun to prevent competition and otherwise increase their wealth through political means. A good demonstration of this is how the state treats the poor.

Many people on the political “left” demand the state help the poor. This isn’t surprising as it is typical of a cooperative species such as our own to help those in need. The “left” believe the state is the best mechanism to assist those in need. Their belief is a mistake though because the state has no interest in the poor since the poor have nothing to take. Of course this doesn’t stop the state from claiming to help the poor, after all they are able to gain popular support for wealth stealing programs if they are disguised as methods of assisting those in need. With such justification the state is able to get public acceptance for new taxes, fees, subsidies, and other wealth stealing mechanisms.

Let’s look at subsidies for a second. During the New Deal the Agricultural Adjustment Act of 1938 was passed into law. This act established subsidies for various agricultural goods. One of the provisions of the act was to limit the area farmers could dedicate to growing wheat. This restriction created an artificial shortage of wheat, which increased the price. The act was passed under the guise of helping poor farmers eek out a better living but the shortage it created meant many could not afford wheat-based products such as bread. The Supreme Court upheld the law, claiming it was Constitutional under the Commerce Clause in Wickard v. Filburn.

What benefit did the subsidies have? Making the farmers money. Why would the state want to make farmers money? To take a portion of that wealth. Farmers are producers of a needed good so it’s a safe assumption that they will continue to generate wealth. The more wealth they can generate the more wealth they have for the state to take. To ensure the farmers continue to give wealth to the state they are allowed to keep a portion of what they make (usually a greater portion). The state learned its lesson during feudal times when the nobility took almost everything form the peasants causing them to revolt periodically.

Looking at the economy of any developed nation leads one to realize how tightly the state and big producers are tied together. Every industry eventually gets regulated in such a way as to protect established producers. In turn more wealth is given to the protected businesses, a portion of which the state takes as “protection” money.

What we end up with is a vicious cycle, a violence economy. I plan to expand on this idea over time but I think the foundation of this idea is pretty solid at this point.

Some Economists are Simply Insane

They say a sign of insanity is doing the same thing over and over again while expecting different results. By that definition many of today’s so-called economists are insane:

Inflation occurs when there is too much money chasing too few goods. Deflation occurs when there is not enough money. For years, inflation alarmists have been forecasting runaway prices as a result of the Fed’s efforts to expand the money supply. But prices have remained stable, with the Consumer Price Index down last month and up just 1.7 percent in the past year.

There is so much wrong with this paragraph that I’m not entirely sure where to begin. First of all the Consumer Price Index (CPI), which is used to “measure” inflation, is crap:

The first thing to keep in mind is that the CPI is not an economic variable. It is a statistic that at best gives an inaccurate picture of an economic phenomenon: inflation. To calculate the monthly CPI, the USDepartment of Labor takes a weighted average of prices of various things that consumers purchase, and then its statisticians try to figure out the various proportions of different items in a “mythical” household budget. For example, the statisticians may hold that housing costs are 30 percent of household expenditures, food costs 20 percent, gasoline another 15 percent, and so on.

Armed with the proportional spending of the “average” household, the statisticians then assign that percentage to price changes of each item. Obviously, the higher the percentage of a household budget for a certain item, the more “influential” that item may be. For example, if gasoline prices rise sharply, then those particular price increases are seen as “fueling inflation” (no pun intended).

CPI isn’t some kind of fixed economic variable, it’s a statistic. Statistics is the best mechanism available to lie through numbers. A practically infinite number of variable can be manipulated to get the result you want. Do you want to make it appear as though the rate of inflation is minor? Simply give less weight to items that are increasing in price such as gasoline and food. Do you want to make it appear as though the rate of inflation is actually negative? Give more weight to items that exist in a mostly free market, such as electronics, since their prices generally trend down overtime. Do you want to show a massive increase in the rate of inflation? Give the more weight to food and gasoline.

Let’s talk about inflation. According to the article author, inflation means there is too much money in circulation. That’s not an accurate definition:

As economists and others of the Austrian School understand, inflation occurs when the value of money declines relative to the goods and services it can purchase. In other words, inflation is a monetary phenomenon, not a price phenomenon. Prices go up because inflation is happening, not the other way around.

Putting more money into circulation causes the value of that money to decline because it is less scarce. That value can also be affected by other things. What would happen if the oil producing nations in the Middle East decided they no longer valued American dollars and demanded all payments for oil be made in gold? We would see the value of the dollar plumet while the value of gold would jump.

The third point I want to address is the claim by the author that, according to CPI, inflation was up by just 1.7 percent. If, as the author claims, inflation is caused by too much money entering the market then any inflation rate above 0 would indicate the money supply must be retracted.

His remark about the low rate of inflation combined with his remark about inflation being caused by too much money in circulation also means he has admitted, indirectly, that he wants to rob holders of dollars. He admitted that inflation is the result of too much money in circulation, he admits that there is inflation meaning that there must be too much money in circulation now, and he wants the Federal Reserve to inject more money into the system. Since there is already too much money in the system a further increase in the money supply can only result in more inflation, meaning that current holders of dollars will be able to purchase less. By the author’s own statement he is advocating the state steal purchasing power from people who current hold dollars.

The author then moves on to use another set of numbers of prove his claim:

Don’t believe the official numbers? The Billion Prices Project at MIT says that lately inflation is actually lower than the government estimates.

That’s interesting, because last year the Billion Prices Project showed that inflation was higher than CPI:

The price of everything seems to have skyrocketed. Only housing, the dollar, and inflation-adjusted income are negative. World food and commodity prices are up 28 percent over the last 6 months. The MIT “Billion Prices Project” confirms that prices have been surging higher than indicated by the consumer price index. Entrepreneurs tell me that big price increases are already planned for everything from vegetables to blue jeans.

In fact, if you look at the data, the correlation between MIT’s Billion Prices Project and CPI is nonexistent. Often the rate of inflation according to the Billion Prices Project is higher than CPI and often the rate of inflation according to CPI is higher than Billion Prices Project.

Regardless of that fact the author still admits that according to the Billion Prices Project there is still inflation, which indicates that there is too much money chasing too few goods and services already.

The stupid doesn’t stop there:

The commodity price index is down 7 percent from a year ago. Home sales have been tepid despite mortgage rates lower than anyone could ever have dreamed.

Funny thing about home sales, there was a recent crash caused by a Federal Reserve created bubble. Home sales were through the roof a short while ago, before everybody started losing those houses. On top of that actual unemployed is hover over 20 percent so nobody could afford a new home even if you inject a few trillion more dollars into the economy. More money in circulation doesn’t help those who don’t have jobs to acquire that money.

The central banks have performed three rounds of quantitative easing (basically printing money) already and we’re still in a rut. How is printing more money going to magically cure our economic woes? If printing money fixed economic problems then the Weimar Republic should have been the epitome of economic health when it decided to try printing its way out of debt. Instead they experience hyperinflation, their economy tanked even harder, and the Nazi Party was able to sieze control of Germany.

Every nation that has attempted to print its way out of debt has experienced nothing by hardship. Printing money doesn’t work, it can’t work. When you hear somebody say the problem with our economy is the fact that there isn’t enough money in circulation just walk away because you’re dealing with an individual that has no understanding of economics.

It’s Like Watching Children Argue

What do you get when you get to individuals who are entirely oblivious to economics arguing about economics? A presidential debate:

Taking the stage near Cleveland in Cuyahoga County, Mr Obama pitted his economic plan against Mr Romney’s “top-down” vision, saying Mr Romney would lead the economy down the path it had taken for the last 10 years.

Mr Obama said his vision of the economy saw growth coming from the middle class and that voters had “two very different visions to choose from”.

You know how you can tell when a presidential candidate is clueless about economics? When they talk about how the president can fix the economy. The president has as much ability to fix the economy as I do… scratch that, I actually have enough knowledge to advise people on economic issues with some competency (not much mind you, but more than either Obama or Romney).

Raising taxes isn’t going to fix the economy. Giving tax incentives isn’t going to fix the economy. Increasing regulations isn’t going to fix the economy. Reducing regulations isn’t going to fix the economy. There are only two ways to fix our economic woes, either the state must remove itself entirely from economic issues (I’ll see a leprechaun riding a unicorn before that happens) of the economy removes itself entirely from the state (this would be known as agorism).

The United States and most of Europe are learning the same lesson the Soviet Union did no so long ago, centrally planned economies fail. A centrally planned economy cannot work because it’s impossible to plan for the wants of other individuals. I cannot know what you want and you cannot know what I want, we must be allowed to employ our own means to obtain our own ends. This is what neither Romney or Obama understand, they both think the economy must be “helped” by the state.

How the Regulation Game Works

It seems you need a license to do anything in this country. So many career paths require a stamp of approval from the state that starting a personal business is becoming harder and harder. In fact this licensing craze has reached such an absurd level that it’s actually illegal to braid hair in Utah without a license:

Then, one day, she got an email from a stranger. “It is illegal in the state of Utah to do any form of extensions without a valid cosmetology license,” the e-mail read. “Please delete your ad, or you will be reported.”

It takes nearly two years of school and about $16,000 in tuition to get a cosmetology license in Utah. And schools teach little or nothing about African hair braiding.

This article is a good read because it explains how the licensing game works:

But it’s also been driven by a push from professions themselves. Licensing rules make it harder for new people to enter a field. That’s good for people who are already in the profession, because it limits competition and allows them to raise prices. So professions go to lawmakers and say: You need to regulate us.

“Everyone assumes that private interests fight like crazy not to be regulated,” Charles Wheelan, who teaches public policy at the University of Chicago, told me. “But often, for businesses, regulation is your friend.”

Whenever you hear a business owner demanding the state regulation his industry don’t cheer him for being “socially responsible” because he’s merely trying to push competitors out of his market. The biggest threat to an established business are new startups entering the market. This is why taxicab companies demanded cities put a cap on the number of taxicabs that can operate within city limits. Such limits allow taxicab operators to charge absurd amounts of money knowing that there is a permanently fixed supply and a demand that increases with population.

Let’s face it, braiding hair isn’t rocket science and you don’t need a college degree to do it. The worst outcome of braiding hair incorrectly is a tangled mess of hair. The only reason the state of Utah requires a cosmetology license to braid hair is because cosmetologists wanted to prevent new competitors from entering the market, and $16,000 in tuition is a pretty big barrier to entry.

The next time you heard some business owner telling the state, “Regulated me!” give him a one finger salute. He’s trying to use the state’s gun to prevent competitors from entering his market so he can charge more for his services. There is no altruism going on, he’s merely trying to enrich himself at your expense.

Like Rats Feeling a Sinking Ship

Like California, New York has been gouging the people living within its borders for more and more tax money and like the people of California the people of New York are fleeing the state:

New York State accounted for the biggest migration exodus of any state in the nation between 2000 and 2010, with 3.4 million residents leaving over that period, according to the Tax Foundation.

Over that decade the state gained 2.1 million, so net migration amounted to 1.3 million, representing a loss of $45.6 billion in income.

Where are they escaping to? The Tax Foundation found that more than 600,000 New York residents moved to Florida over the decade – opting perhaps for the Sunshine State’s more lenient tax system – taking nearly $20 billion in adjusted growth income with them.

Once again we return to the fact that demanding more from the wealthy accomplishes nothing because they are also the individuals most able to flee. Some of the wealthiest individuals have been abandoning the United States because of the oppressive tax system, which is why the state is now pushing for a Nazi-esque tax for those leaving the country (and before somebody claims Godwin’s Law note that said law doesn’t apply when one is making an accurate historical reference).

As our cracking economy beings to come apart entirely we can look forward to more individual states increasing tax rates and implementing taxes for leaving. No country can tax its way to prosperity because those being taxes will eventually get sick enough of having their wealth stolen and either leave, abandon all productive endeavors (often referred to as going Galt), or do business exclusively in the “unofficial” economy (often called the black market by racist propagandists (that was hyperbole, clam down) who believe such a label makes it sound sinister). Either way money is kept from the state, which causes the state to lash out more violently as it dies a slow death.

The Folies of Rent-Seeking

In economics the term rent-seeking is used to define actions where economic rent is sought by manipulating the social or political landscape instead of mutual trade. The classic example of this practice are patent trolls, companies that either buy or register patents for ideas they have no intention of manufacturing so they can sue another company that does attempt to manufacture a good that is covered by said patents. This has become very easy in today’s environment because almost anything is allowed to be patented including software and business models.

Microsoft has just be smacked upside the head because a judge has determined the Xbox 360 S violates the patent of another company and has recommended an import ban on the console:

An administrative law judge for the International Trade Commission issued a recommendation that the commission ban 4GB and 250 GB Xbox gaming consoles from import to the United States. The recommendation(PDF) was released to the public on Monday, and would punish Microsoft for infringing against some of Motorola’s patents. The patents permit video transmission and compression on the console and between the console and its controllers.

Right now it’s up to the International Trade Commission (ITC) to either agree with the judge and order the import ban or disagree with the judge and overrule the ban. Of course this case is really payback for the import ban Microsoft got enacted against Motorola:

The US International Trade Commission today ordered an import ban on Motorola Mobility Android products, agreeing with Microsoft that the devices infringe a Microsoft patent on “generating meeting requests” from a mobile device.

Payback is a bitch, especially when dealing with rent-seeking. Instead of spending money on research and development to introduce newer and better products for consumers to buy Motorola and Microsoft have instead opted to sink money into costly court battles. It is becoming more common in the business world to rely on suing violators of held patents to make money instead of selling goods and services, in fact an entirely business model has developed around the process.

The patent system is a mechanism used by the state to grant monopolies over ideas. Ideas, not being scarce resources (in other words if I tell you my idea I haven’t lost my idea, we both have it), should not be artificially restricted through the state’s monopoly on violence. Unfortunately the state does grant monopolies on ideas and they do enforce those monopolies through force. Instead of fostering an environment of innovation as the founders of this country believed they were doing when implementing the patent system, an environment of liability has been created. Innovation has taken a backseat to lawsuits, after all suing somebody is still a cheaper and less risky process then researching and developing new products.

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.

Preventing You from Leaving

Last week I gave my predictions for France, most of which were pulled from the book Pictures of a Socialistic Future [PDF]. Pictures of a Socialistic Future was a took written at the end of the 1800s that property predicted many things that would happen in socialist countries. One of the predictions was the socialist state would face a massive exodus of people and would implement laws preventing unapproved departures from the country. Such laws have been implemented in many socialist countries and are put into place to keep wealth and labor in the country by force. Guess what? The United States is officially announcing plans to implement such laws:

Sen. Chuck Schumer, D-N.Y., has a status update for Facebook co-founder Eduardo Saverin: Stop attempting to dodge your taxes by renouncing your U.S. citizenship or never come to back to the U.S. again.

[…]

At a news conference this morning, Sens. Schumer and Bob Casey, D-Pa., will unveil the “Ex-PATRIOT” – “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” – Act to respond directly to Saverin’s move, which they dub a “scheme” that would “help him duck up to $67 million in taxes.”

The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.

The process of preventing people from leaving the United States has been underway for a while. Earlier this year legislation was announced that would prevent those who owe taxes from leaving the country. Now the state is moving to make laws that will make it legal for the state to plunder a great deal of your wealth if you decide to renounce your citizenship. Ladies and gentlemen, it doesn’t get much more blatant than this.

You are not a citizen, you are not a free individual, you are a slave according to the state. In their eyes they own you, you are their property. Honestly, if you have any wealth whatsoever get the fuck out of this country now. The ship is sinking and the state is looking to transfer any and all wealth from the people to its cronies and agents before there is no wealth left to take. Eugene Richter warned us what socialism would bring in Pictures of a Socialistic Future and nobody felt it was worth heading his warning. Right now the state is targeting the wealthy because they have the most to take but you can rest assured that laws preventing the departure from the United States will only expand.

Also, the the Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act? EX-PATRIOT Act? Really? Really?! Who the fuck is paid to come up with these acronyms?

I hat tip to Snarky Bytes for this revealing story.

Verizon to End all Unlimited Data Plans

Apparently Verizon is sick of playing second fiddle to AT&T’s general dickery. During an investor conference call Verizon announced that they would be eliminating unlimited data plans, even for customers who have been grandfathered in:

Verizon Wireless subscribers who have held onto their $30-a-month unlimited data plans will soon be forced to upgrade to a new tiered offering the company plans to launch this summer, according to the Web site Fierce Wireless.

Speaking at the J.P. Morgan Technology Media and Telecom conference today, Verizon Communications CFO Fran Shammo told investors that the company’s 3G unlimited data plans that customers were allowed to hang onto last year when Verizon switched to a tiered offering will soon go away entirely. Instead, the company will migrate its existing and new 4G LTE customers to a new “data share plan.”

Way to go guys, I think you’ve finally made a move that will gain you more hatred than AT&T generally receives. I really hope the big four carriers; AT&T, Sprint, T-Mobile, and Verizon; thank the Federal Communications Commission (FCC) for enforcing the current monopoly of cell phone service in the United States.

If the FCC didn’t maintain a monopoly on spectrum and dole it out in auctions that bring in billions of dollars the current large carriers would actually have to face competition. Unfortunately no small company can enter the cell phone market because they can’t afford the billions of dollars needed to license spectrum from the FCC so we’re stuck with a cartel of four big assholes and a small handful of other carriers (who usually license the rights to use the big fours’ towers).


Image obtained from Chris Lyspooner’s Facebook page

Brining Hope and Change Again

Obama is running on his hope and change platform again. He hopes that people will just forget about his last four years of stomping the gas pedal to tyranny and accept him as a freedom loving president who supports the rights of individuals. When his campaign is having protesters arrested that message becomes a bit more difficult to swallow:

Though the NATO summit won’t officially begin until later this week, police have already ramped up their presence in downtown Chicago and, on Monday morning, they made a number of arrests at President Obama’s campaign headquarters.

After a group of demonstrators rushed into Prudential Plaza, the building where Obama’s re-election campaign is based, eight protesters were led away in handcuffs when they refused to leave the building’s lobby, the Chicago Tribune reports. Police said the arrested demonstrators would likely be charged with criminal trespass.

The group was organized by the Catholic Worker movement and, according to Fox Chicago, was attempting to open up a dialogue around ending the U.S. occupation in Afghanistan. The action is part of what activists are calling a “week without capitalism.”

While those protesters may never get their wish of ending the occupation of Afghanistan at least they’re getting their goal of a week without capitalism. As I’ve explains the only alternative to capitalism is force. Instead of mutually beneficial relationships built upon voluntary trade those protesters are getting a taste of the alternative, the force of the state, and they don’t seem to be enjoying it.

Capitalism is a beautiful system that achieves mutual benefit by relying on self-interest. People are compelled to help each other because by doing so they are also helping themselves. If you make shoes and you need bread then you and the baker can make a mutually beneficial trade, shoes for bread. Those who perform the job of satisfying fellow individuals are rewarded so they may expand their operations and satisfy even more individuals’ needs. Capitalism stands as a stark opposition to the state’s violence where mutual benefit doesn’t arise because one party, the state, steals from the other party. Instead of mutual cooperation you have threats and acts of violence.

You want a world without capitalism? Good news, we already have it and it’s called the state. There is no need to protest or demonstrate because that goal has already been achieved. Instead of entering voluntary agreements with your fellow people you now have great portions of your wealth stolen from you so that it may be redistributed to those in the state’s favor. No need to trade for the people of Afghanistan exists because the United States government is there forcefully taking the desirable natural resources. Do you know what the best part is? You don’t have to limit yourself to a week without capitalism, you get to suffer your entire life without capitalism. Congratulations, your deepest desires have been fulfilled.