“All socialism involves slavery.”
Apparently the creeping tyranny of the welfare state has been going on for a while.
“All socialism involves slavery.”
Apparently the creeping tyranny of the welfare state has been going on for a while.
Stars in the Night Sky
The U.S. stock market’s recent zigs and zags have provoked much squawking and screeching. Wall Street pros, private money managers, and Millennial index fund enthusiasts all find themselves on the wrong side of the market’s swift movements. Even the best and brightest can’t escape President Trump’s tweet precipitated short squeezes.
The Donald mercilessly hits the shorts with a well-timed tweet. But as it turns out, this market is in a really bad mood at the moment. [PT]
The short-term significance of the DJIA’s 8 percent decline since early-October is uncertain. For all we know, stocks could run up through the end of the year. Stranger things have happened.
What is also uncertain is the nature of this purge: Is this another soft decline like that of mid-2015 to early-2016, when the DJIA fell 12 percent before quickly resuming its uptrend? Or is this the start of a brutal bear market – the kind that wipes out portfolios and blows up investment funds?
The stars in the night sky tell us this is the latter. For example, when peering out into the night sky even the most untrained eye can identify the three ominous stars that are lining up with mechanical precision.
These stars include a stock market top, followed by a monster corporate debt buildup, and a fading economy. In short, the stock market’s latest break is presaging a corporate credit crisis and global recession.
BofA/Merrill Lynch US high yield Master II Index yield – this looks like a quite convincing breakout, impossible to tweet down. In other words, the corporate debt build-up is beginning to bite back – and rather bigly, if we may say so (ed note, in case you’re wondering: the little poems are from a Spectator competition in which people used phrases from actual tweets to put together Donald haikus and poems). [PT]
The last time these three stars aligned in this sequence was roughly a decade ago. If you recall, that was when the DJIA crashed 50 percent coincident with a mega credit crisis and recession. We suspect that the disaster that’s approaching will be much larger, and much more destructive than the disaster of a decade ago.
Astute readers will be quick to point out that government debt was not identified as one of the three ominous stars lining up in the night sky. This is not an oversight. Rather, it is an insight.
Without question, government debt has burgeoned way beyond what even the most doom and gloom pessimists could have envisioned just a decade ago. In fact, November marked the widest one month budget deficit in U.S. history.
Over a one month period – a month with just 30 days, not 31 – the U.S. government spent $411 billion while it only received $206 billion. By our rough back of the napkin calculation, the U.S. government spent nearly double what it took in. That difference, of course, was made up with debt. Roughly, $6.83 billion of new debt was added each and every day.
At best, spending more than one makes, like smoking or swearing, is a bad habit. However, spending more than one makes with no intention to pay it back is a moral failing. What’s more, running up untenable levels of government debt with the implied intent of inflating it away at the expense of the citizenry is downright evil.
It’s definitely a tremendous pile of debt… and the slope of the mountain has steepened quite dramatically in recent years… [PT]
Day after day, month after month, year after year, decade after decade, the U.S. government has racked up close to $22 trillion in debt. Throw in unfunded liabilities of social security, Medicare (Parts A, B, and D), federal debt held by the public, and federal employee and veteran benefits, and the U.S. government’s on the hook for over $115.8 trillion in debt – or nearly $1 million per taxpayer. How about that?
Of course, as the population ages, and the ratio of workers to retirees balances, these debt figures will go vertical. As you can see, government debt is more than just an ominous star. It’s the essential star. Moreover, it is a dying star on the verge of collapse. Quite frankly, it may not have enough energy to backstop the financial system during the next downturn. Here’s why…
How Faux Capitalism Works in America
Our guess is that the real squawking from investors won’t begin until mid-2019. That’s about the time corporate America becomes acutely aware that pumping gobs of borrowed money into grossly overvalued stocks was an act of financial suicide.
Just look to General Electric, IBM, and Citigroup for an early indication of the forthcoming catastrophe. For instance, over the last decade GE spent $46 billion buying back its shares. In 2016 and 2017 alone, at a time of mushrooming debt, GE pumped $24 billion into share buybacks.
GE wasted $46 billion on buying back its shares – with nothing to show for it except a collapsing share price. This was an astonishing misallocation of capital – very likely the company will eventually have issue new shares to prop up its equity, at prices far below the prices it paid for buying them back. [PT]
Over this time, the price of these shares dropped from about $30 to $16. And even with Thursday’s 7.3 percent boost, on word of a surprise JPMorgan upgrade, GE shares trade at $7.20. In other words, shares GE bought back during the early part of 2016 have lost 75 percent of their value. What to make of it?
The 2008 financial crisis helped clarify how faux capitalism works in America. That when the big corporations and the big banks get in trouble, the people on top quickly absolve culpability while appropriating public funds from their friends at the Treasury for the purpose of private bailouts. This, in effect, socializes the losses across bottom rungs of society and concentrates profits across the top.
No doubt, the aftermath of the great corporate stock buyback craze of 2009 to 2017 will be a text book example of faux capitalism in action. First, massive financial bailouts will be disseminated to crony banks and corporations with purpose and intent. Then, a colossal river of monetary liquidity from the Fed will be diverted into credit markets, and into direct stock purchases of government preferred corporations.
Bailout progression – it continues until it cannot continue anymore, i.e., until the “running out of other people’s money” moment arrives. [PT]
The size and scope of these fiscal and monetary bailouts will utterly dwarf the TARP, ZIRP, and QE policies of the last crisis. Assuming this doesn’t blow up the Treasury’s balance sheet, or vaporize what’s left of the dollar’s value, a certain end effect will take shape. The middle class will be reduced to a notch or two above poverty, and wealth will be further concentrated into fewer and fewer hands.
We don’t like it. We don’t agree with it. But we can’t stop it. This is the world we live in. A world where justice has been debased and rectitude has been sullied.
Every attempt at socialism has failed miserably. Venezuela is only the latest country that has tried to implement a socialist paradise, only to inevitably crumble and crash before our eyes. Socialism, and its natural progression, communism, has caused the deaths of 100 million people since its inception 100 years ago.
Just a few decades ago, Venezuela had massive oil reserves and an abundance of other resources. It enjoyed wealth and an excellent standard of living. Today, Venezuelans have no food, no medicine, and the country is driven by corruption and fear. While a starving population is in despair, many are desperately trying to flee paradise. The army, supported by President Madero, is in the street, ready to brutalize any dissenters. Madero and the military are not starving.
Socialism can only survive through corruption and intimidation. It’s a system tailor-made for corruption. And corruption may be Venezuela’s largest industry.
Despite that fact that every socialist paradise on earth has turned into hell, many American politicians, and their supporters are calling for socialism for America. Senators Bernie Sanders, Elizabeth Warren, and Kamala Harris are self-declared proud socialist, loudly singing its praises. Younger newcomers such as Alexandria Ocasio-Cortez and Andrew Gillum are joining the chorus.
[Originally published August 02, 2003.]
For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.
The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”
The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.
In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that “Hitler found a cure against unemployment before Keynes was finished explaining it.”
What were those economic policies? He suspended the gold standard, embarked on huge public-works programs like autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national healthcare and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime’s rejection of the market economy and its embrace of socialism in one country.
Such programs remain widely praised today, even given their failures. They are features of every “capitalist” democracy. Keynes himself admired the Nazi economic program, writing in the foreword to the German edition to the General Theory: “[T]he theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire.”
Keynes’s comment, which may shock many, did not come out of the blue. Hitler’s economists rejected laissez-faire, and admired Keynes, even foreshadowing him in many ways. Similarly, the Keynesians admired Hitler (see George Garvy, “Keynes and the Economic Activists of Pre-Hitler Germany,” The Journal of Political Economy, Volume 83, Issue 2, April 1975, pp. 391–405).
Even as late as 1962, in a report written for President Kennedy, Paul Samuelson had implicit praise for Hitler: “History reminds us that even in the worst days of the great depression there was never a shortage of experts to warn against all curative public actions.… Had this counsel prevailed here, as it did in the pre-Hitler Germany, the existence of our form of government could be at stake. No modern government will make that mistake again.”
On one level, this is not surprising. Hitler instituted a New Deal for Germany, different from FDR and Mussolini only in the details. And it worked only on paper in the sense that the GDP figures from the era reflect a growth path. Unemployment stayed low because Hitler, though he intervened in labor markets, never attempted to boost wages beyond their market level. But underneath it all, grave distortions were taking place, just as they occur in any non-market economy. They may boost GDP in the short run (see how government spending boosted the US Q2 2003 growth rate from 0.7 to 2.4 percent), but they do not work in the long run.
“To write of Hitler without the context of the millions of innocents brutally murdered and the tens of millions who died fighting against him is an insult to all of their memories,” wrote the ADL in protest of the analysis published by the Glenview State Bank. Indeed it is.
But being cavalier about the moral implications of economic policies is the stock-in-trade of the profession. When economists call for boosting “aggregate demand,” they do not spell out what this really means. It means forcibly overriding the voluntary decisions of consumers and savers, violating their property rights and their freedom of association in order to realize the national government’s economic ambitions. Even if such programs worked in some technical economic sense, they should be rejected on grounds that they are incompatible with liberty.
Read More: https://mises.org/library/hitlers-economics
Has Socialism ever actually worked?
How did our politics abandon evidence and reason for low-information emotional consensus?
In the light of recent history it is somewhat curious that this decisive power of the professional secondhand dealers in ideas should not yet be more generally recognized. The political development of the Western World during the last hundred years furnishes the clearest demonstration. Socialism has never and nowhere been at first a working-class movement. It is by no means an obvious remedy for the obvious evil which the interests of that class will necessarily demand. It is a construction of theorists, deriving from certain tendencies of abstract thought with which for a long time only the intellectuals were familiar; and it required long efforts by the intellectuals before the working classes could be persuaded to adopt it as their program.
In every country that has moved toward socialism, the phase of the development in which socialism becomes a determining influence on politics has been preceded for many years by a period during which socialist ideals governed the thinking of the more active intellectuals. In Germany this stage had been reached toward the end of the last century; in England and France, about the time of the first World War. To the casual observer it would seem as if the United States had reached this phase after World War II and that the attraction of a planned and directed economic system is now as strong among the American intellectuals as it ever was among their German or English fellows. Experience suggests that, once this phase has been reached, it is merely a question of time until the views now held by the intellectuals become the governing force of politics….
Just because our system of government and capitalism isn’t perfect, that doesn’t mean we should return to a feudal system, which is what centralized Socialism leads to.
There is going to be inequalities in any system, including America, but at least in we still take care of our people and even illegal residents.
By Andrew Moran | Jul 5, 2018
Let’s look at what it’s really like to be poor in the Land of the Free:
What about the basic essentials, like food and housing? That’s easy enough:
Moreover, the average poor American has more living space than the average middle- or high-income person in the U.K., France, and Sweden. Also, consumption of vitamins and minerals is the same as the those in the wealthier brackets.
Should an American fall on hard times, they have access to a generous welfare system, paid for by the capitalist model. Despite claims that the U.S. allows the impecunious to perish on the streets or starve in their homes, the government has spent trillions of dollars over the last 50 years on entitlements, healthcare, and social-benefits programs that can easily surpass those of Scandinavian states.
The rectitude and efficacy of welfare can be debated, but the government gives citizens money to purchase unhealthy food and smartphones – and a basic income guarantee is all but inevitable. That’s how wealthy the U.S. is.
What prompted the 16,000 primary voters (out of 292,000 eligible in the Queens/Bronx 14th district) to vote for Ocasio-Cortez over her competitor, who only got 11,800 votes? Free stuff and anti-Trump rhetoric. Free education, medical care and a federal jobs guarantee (free stuff), as well as the abolishment of Immigration and Customs Enforcement or ICE (anti-Trump).
“I understand the economic crises people are facing in New York City; we can’t afford to live in the neighborhoods that our families have called home for generations, including my own family,” she told Vice News.
But her own family background is far from “working class” as she describes on her campaign page, as the Daily Mail reports. Although Cortez was born in the Bronx and lived there until age 5, her father—an architect who ran his own business—moved the family to posh Westchester County, where she attended Yorktown high school. Cortez, who attended Boston University, only moved back to the Bronx after her father died, making money as a waitress and bartender—working class after all.
Either way, for her and her family, the days of not being able to afford to live in the Bronx, or anywhere else for that matter are most likely over. If elected representative, Cortez will enjoy the benefits of “earning” $174,000 base pay for 120-150 days of “work,” a budget of $1.2 million for staff and travel expenses, as well as insider trading privileges.
If she is smart, she can use some of that free time to take lessons from Democratic Rep. Judy Chu from California, who built up a net worth of more than $3 million day-trading the S&P 500 with call and put options since her first election in 2009.
Not bad for 16,000 votes; and at least one Bronx family won’t have economic issues again for the near future. Of course, it remains to be seen how many people turn out for her in this year’s midterm election.
As for her politics, Cortez demonstrates the same delusional lack of understanding of history and economics that other socialists exhibit, most recently and notably Bernie Sanders.
“I don’t believe that in a moral and wealthy America, people should be too poor to live,” she told Qatari-funded AJ+.
This is why she promises the free stuff to poor people, as well as government job guarantees. “I will not compromise on the future that I think is best for this country,” she tells Vice. Given these statements, it sounds awfully like she thinks she is the wise central planner who knows what’s best for everybody. The wise central planner who so far has never materialized for all socialist and communist societies and has brought about misery and death. That this lesson of history is lost on Cortez and her backers of the Democratic Socialists who openly state that “communism is good,” is sad but hardly surprising.
It is more surprising Cortez hasn’t noticed that the city of New York, where all those poor people who can’t afford to live in the houses they wish to live in, has mostly been ruled by democratic mayors since the 1850s, with the occasional Republican in between, —mayor Bloomberg notwithstanding. It is similar though less clear cut for New York State.
Or may we say she hasn’t noticed because she lived most of her life in Westchester County rather than the Bronx?
Either way, her policies reflect the same socialist delusion, whether it’s on the local or federal level: The problems of poverty and unaffordable housing, according to Cortez, don’t exist because of the thousands of failed government initiatives but because there hasn’t been enough of them.
Of course, the subtleties of supply and demand, as well as investment and production, are probably lost on Cortez, but let’s go through the example of real estate, which is a good one.
Let’s start with the basics. Real estate prices are high because of a corrupt monetary system, supported and sanctioned by the state. The Fed and private banks print money out of nothing which goes to them and their cronies first. They buy up assets like stocks and real estate on the cheap while the working man’s wages go up last, if at all.
Because money can be created out of thin air by private banks, and the state accepts it as payment for taxes, this is not free-market banking, but rather a corrupt private-public hybrid more akin to Marx’s centralization of money and credit than to Rothbardian free and fully-reserved banking.
In case something goes wrong in this operation, like it did in 2008, the state stands ready to bail out the private banking system with taxpayer money voted for by Democrats and Republicans alike. Although Cortez is critical of Wall Street, her vision of the banking system probably will eliminate private banks altogether and fuse them with the state. The outcome of that operation certainly won’t be pretty either.
Second, decades of city interference in the housing market has punished private developers who want to build affordable housing of lower quality. Why? Because the city, through rent controls, sets prices too low which always and by definition leads to shortages in supply of the desired product. Let’s say to recoup investment and make a modest profit, a developer needs $100 in rent per month from an affordable housing unit. If the city says the maximum he can charge is $50, there won’t be any development of affordable housing.
Since the developer doesn’t want to give up his job, there will be more development of real estate where the regulations don’t apply, like the thousands of luxury condos currently under construction in Manhattan funded by money created out of nothing in the state-sanctioned, fractional-reserve banking system.
While the Merriam-Webster dictionary may define Socialism as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods” – the practical reality is much different. Stefan Molyneux outlines the basic logical flaws in socialist theory which dooms its implementation.
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One of the most favored propaganda tactics of establishment elites and the useful idiots they employ in Marxist and cultural-Marxist circles is to relabel or redefine an opponent before they can solidly define themselves. In other words, elites and Marxists will seek to “brand” you (just as corporations use branding) in the minds of the masses so that they can take away your ability to define yourself as anything else.
Think of it this way: Say you want to launch an organization called “Movement Blue,” and you and others have gone through great struggle to grow this organization from the ground up. However, just as your movement is about to achieve widespread recognition, someone else comes along, someone with extensive capital and media influence, and they saturate every outlet with the narrative that your movement is actually more like “Movement Red,” and that Movement Red is a terrible, no-good, bad idea. They do such a good job, in fact, that millions and millions of people start calling you “Movement Red” without even knowing why, and they begin to believe all the negative associations that this label entails.
Through the art of negative branding, your enemy has stolen your most precious asset — the ability to present yourself to the public as you really are.
Negative branding is a form of psychological inoculation. It is designed to close people’s minds to particular ideas before they actually hear those ideas presented by a true proponent of the ideas. But beyond that, negative branding can also be used to trick groups and movements into abandoning their original identity.
For example, the concept of economic freedom for individuals –the freedom from overt government interference or government favoritism for certain people over others, the freedom to compete with ideas and ingenuity to build a better business and a better product, the freedom to retain the fruits of one’s labor — used to be widely referred to as “free markets”, as defined by Adam Smith. The very basis of free market philosophy was to remove obstruction and economic oppression from the common man in order to inspire a renaissance in innovation and prosperity. The problem is, you rarely hear anyone but libertarians talk about traditional “free markets” anymore.
Though Karl Marx did not coin the term “capitalism,” he and his followers (and editors) are indeed guilty of the pejorative version now used. It has always been Marxist propagandists who have sought to redefine the idea of “free markets” in a negative way, and the use of the term capitalism is how they did it. They have been so effective in their efforts that today even some free market proponents instead refer to themselves as “capitalists.”
While “free markets” denote freedom of the common man to pursue a better life through productivity and intelligence and merit, “capitalism” denotes a monstrous and blind pursuit of wealth and power without moral regard. One gives the impression of fairness, the other gives the impression of tyranny.
About 40 years ago, economist Bruce Yandle went to Washington to work for the Council on Wage and Price Stability, ready to apply his knowledge of economics and educate his fellow workers. After all, he reminisces, one eye-rolling, head-scratching decision after another was coming from government regulators that surely someone versed in economics could expose as stupid, wasteful, and downright ridiculous.
At some point, Yandle realized that the lay of the regulatory land looked quite different in Washington than it did in Clemson, South Carolina, where he was on the faculty at Clemson University. Regulators — and the representatives of the enterprises they regulated — were not looking to create an atmosphere in which the government tried to find the “optimal” set of regulatory policies that both minimized regulatory costs and allowed for the maximum removal of whatever “externalities” were created.
No, as Yandle writes:
… instead of assuming that regulators really intended to minimize costs but somehow proceeded to make crazy mistakes, I began to assume that they were not trying to minimize costs at all — at least not the costs I had been concerned with. They were trying to minimize their costs, just as most sensible people do.
The more he examined the situation, the more he realized that all of the various actors in the system were acting in their own perceived self-interests — regulators, politicians, and those being regulated — and the combination of their interests created perverse outcomes. The “big picture” view that those on the outside of the situation might have is irrelevant to what actually happens, and understandably so.
Far from the stated goals of the regulators and those involved in the process — that regulation was pursued in order to promote a lofty “public interest” — the real purpose of the regulatory apparatus is the promotion of the regulatory apparatus. The system exists to preserve and protect itself.
As I observe (and participate in) a few discussions on Facebook and elsewhere about socialism, I have come to a few conclusions about the nature of the arguments and the reasons why socialists remain socialists even as we see the utter failure of socialist economies throughout history. Maybe the meme that appears once in a while — “If socialists understood economics, they wouldn’t be socialists” — might be true, but I doubt it. As I see it, the purpose of establishing socialism is to further promote socialism, not improve the lot of a society and certainly not to promote prosperity.
First, and most important, the minds of socialists work differently than do the minds of economists that see an economy as a mix of factors of production, prices, final goods, markets, and entrepreneurs that drive the whole route. Those of us who are economists are fascinated by this process because we see human ingenuity, the coordination of the goals of numerous people, and, when the system works, a higher standard of living for most people.
Socialists, however, don’t see what we see. Instead, they see chaos and unequal outcomes. Not everyone benefits, right? In some situations, someone may lose a job or a way of doing things becomes obsolete. In the end, some people won’t be helped at all, at least not directly, and in the mind of someone that has an organic view of society, the fact that certain entrepreneurial actions taken by some individuals have created goods that meet the needs of others is irrelevant. Society should be providing those goods for free! People should not have to pay for what they need!
Are you a surgeon who had done well financially because you have performed medical miracles for people who desperately needed your services? You have exploited sick people! Are you like Martha Stewart, who became wealthy in part by showing people how to make holiday celebrations better? What about the poor? They don’t have nice houses!
When I first started writing about economics nearly 40 years ago, I was like Bruce Yandle, believing that all that was needed to convince socialists to stop being socialists was a well-reasoned economic argument. You know, explain that entrepreneurs don’t earn profits by exploiting workers, but rather entrepreneurs make workers better off by directing resources to their highest-valued uses. You know, explain how a price system really does result in morally-just outcomes because, in the end, it directs resources toward fulfilling the needs of consumers. And so on.
I still believe the arguments, and over the years have come to understand them even better than I did when I wrote my first article for The Freeman in 1981. (It’s funny how Economics in One Lesson continues to become increasingly relevant to my thinking each time I read it.) However, I believe that the end of all of this activity is — or should be — the improvement of life for people in a way that is not predatory and brings about voluntary cooperation among economic actors. In other words, economic activity is a means to an end, and the end is free people gaining in wealth and standards of living.
A socialist does not and will not see things this way. The end of socialism is not a higher living standard or even making life better for the poor, as much as a socialist will talk about the well-being of poor people. No, the end of socialism is socialism, or to better put it, the ideal of socialism. Once socialism is established, as it was in Venezuela or in the former USSR or Cuba, the social ideal had been met no matter what the actual outcome might be.