Lessons from 1946

I'll start a new series next week, quoting short passages from Henry Hazlitt's Economics in One Lesson—a simple book that shows how modern economics so often relies on one simple fallacy. Here's a message pertinent to today's economy:

There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: "In the long run we are all dead." And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economics of yesterday urged us to ignore.

Credit card debt, ARM mortgages, negative savings rate—it's no surprise that John "instant gratification" Keynes has an audience in our society today. And just as we're paying for the follies of the New Deal and the Great Society, our kids will pay for this social experiment, no matter what happy-sounding name they apply to it. In the long run, we're all dead, it's true... but dead also will be the economy and society we leave for posterity if we don't get our heads out of the sand.

A new old essay

I just added Albert Jay Nock's "Isaiah's Job" (1936) to the sidebar. An excellent essay, for these depressing times. The first paragraph describes something familiar to me:

One evening last autumn, I sat long hours with a European acquaintance while he expounded a political-economic doctrine which seemed sound as a nut and in which I could find no defect. At the end, he said with great earnestness: "I have a mission to the masses. I feel that I am called to get the ear of the people. I shall devote the rest of my life to spreading my doctrine far and wide among the population. What do you think?"

I didn't expect Nock's response.

Not pure evil?!?!

This isn't something you're supposed to admit if you make more than the minimum wage, but...

I shop at Wal-Mart.

And I'm proud to do it. The way I figure, I'm a) saving a bundle of money and b) supporting a business that hires unskilled people who can't get better jobs elsewhere.

So naturally, when Insty links to Charles Platt's experience as a Walmartian (ha!), I feel vindicated.

Wal-Mart: Save money, support the hardworking poor, and laugh at crybaby unions.

It's official

I found a sign of how bad things are in a Foxnews.com headline:

White House claims only tiny fraction of bailout package is being debated, but key Democratic senator tells FOX News he wants to strip 'tens of billions' from proposal.

You know it's bad when the two people making these statements are both completely correct.

Ah, elitism...

Tam 1, Mr. Messiah 0.

Where oh where are the media's veiled insinuations of the evilness of the president for doing something so anti-environment? Oh that's right, they're too busy extolling the new White House culture—it's much less harsh now, much more smiley and happy and fuzzy. And warm.

I can't put Heinlein down...

I tore through two Heinlein novels this weekend, to the chagrin of my sleep schedule. Glory Road didn't impress me—it was funny in a few places and in general a compelling story, but it didn't have enough meat to it to satisfy me. There was a classic Heinleinian critique of democracy at the end, however:

Democracy can't work. Mathematicians, peasants, and animals, that's all there is—so democracy, a theory based on the assumption that mathematicians and peasants are equal, can never work. Wisdom is not additive; its maximum is that of the wisest man in a given group.

But a democratic form of government is okay, as long as it doesn't work. Any social organization does well enough if it isn’t rigid. The framework doesn’t matter as long as there is enough looseness to permit that one man in a multitude to display his genius. Most so-called social scientists seem to think that organization is everything. It is almost nothing—except when it is a straitjacket. It is the incidence of heroes that counts, not the pattern of zeros.

Citizen of the Galaxy, on the other hand, was much more thought-provoking. The protagonist is repeatedly ripped from his comfort zone and forced to adapt to new situations and cultures, and yet through it all he manages to succeed and find his calling. Not as much knock-down drag-out fighting action as in Glory Road, but it's an enjoyable, uplifting, and moderately paced bildungsroman.

Atlas is shrugging

"We don't need to make a movie out of the book. We are living it right now."

I've added Ayn Rand's Atlas Shrugged to the sidebar, because it does what a good novel should—through a thrilling story, it tell us about ourselves. I finished reading it for the first time only recently, amidst the bailout extravaganza that has overtaken Washington. Comparing Rand's "fiction" to the "fact" all around me was inevitable; Stephen Moore does the same in his recent WSJ opinion piece, and follows it up with an excellent interview (in which he quotes Hayek!):

Perhaps I'm overly cynical, but I don't share Moore's optimism, and neither do I share Rand's. How will we learn when the lessons have been staring us in the face for years, in the forms of books written by thinkers like Tocqueville, Hayek, and Rand? I don't know, but nonetheless I hope that John Galt will appear when we finally realize how badly we need him.

H/T RightCoast, via Insty.

New resources

I found two great websites today—LibertarianPapers.org and LibertarianChristians.com. The first is a brand new online peer-reviewed journal, and based on the first seven offerings, it looks like it's going to be a great resource. The fact that it's licensed with a Creative Commons Attribution license makes it even better.

The second is a blog by a libertarian Christian, so naturally I'm intrigued. Turns out that the author wrote a lengthy article defending libertarianism in light of several passages from the Bible, including Romans 13... which is something I've been thinking about a lot lately. So if you're as interested in reading it as I am, take a look at part one and part two of his work.

So much to read, so little time...

Darker days are coming

On this, the eve of the ascension of the Obamamessiah and the final day of Bush's presidency, Donald Sensing's words from 2003 ring true:

The Bush administration will be seen by freedom-wishing Americans a generation or two hence as the hinge on the cell door locking up our freedom. When my children are my age, they will not be free in any recognizably traditional American meaning of the word. I’d tell them to emigrate, but there’s nowhere left to go. I am left with nauseating near-conviction that I am a member of the last generation in the history of the world that is minimally truly free.

There were no viable options in the 2008 election, either, and this time the American populace picked the greater of two evils. Even darker days for liberty are coming, but it's a mistake to give up. Liberty is worth fighting for.

It's not my fault!

This isn't a financial blog, but bear with me for a bit. From the Wall Street Journal comes the following tale of woe:

After watching her account drop 44% last year, Kristine Gardner, a 35-year-old information-technology project manager in Longview, Wash., feels no sense of security. "There's just no guarantee that when you're ready to retire you're going to have the money," she says. "You either put it in a money market which pays 1%, which isn't enough to retire, or you expose yourself to huge market risk and you can lose half your retirement in one year."

A lot of people are feeling the same way Kristine is feeling. They've heard the financial media tell them how to get rich by investing in real estate or the stock market or whatever. They've had financial advisers tell them where to put their money to get the best return. They've thought, "I want to retire in 2015, so I'll put my entire savings into this Target Retirement 2015 mutual fund."

And sizable portions of their money have vanished into thin air, just like that.

Now, they're searching for the culprit, the evil thief who stole nearly half of their retirement savings and who is forcing them to work an extra five years. They're blaming the evil bank CEOs for not lending money. They're blaming the evil president for "deregulating" the financial industry. They're blaming their evil financial advisers, who should have foreseen all this. They're blaming the evil government for not adequately protecting them.

But in the midst of all this blaming, whose fault is it, really? The bankers? The president? The financial advisers? The government?

Nope. They, individually, are the ones who deserve the blame. They made the decision to invest or not to invest. They made the decision where to invest. They made the decision of who to trust. They made free choices, under no coercion, and are now suffering as a direct result of those choices.

Harsh? Yes. Unfair? No. Look, Kristine, I'm sorry you lost money in the stock market. I'm sorry that you didn't realize that the stock market doesn't automatically bounce back up every time it goes down by 10%. I'm sorry you thought "it'll never happen to me." I'm sorry you weren't aware of the risks. But who made the decision to not spend 10-20 hours doing research and reading a good investing book, like The Bogleheads' Guide to Investing or The Four Pillars of Investing? You did. Who made the decision to not evaluate your risk tolerance? You did. Who made the decision to not read and understand your mutual fund prospectus? You did.

Everything you needed to know was out there; all you needed to do was invest a little money and time to learn about it. You would have found out that market crashes are rather common events. You would have found out that, historically, bonds have been less risky than stocks. You would have discovered that there are a lot of scary scenarios that could happen in the future, and you would have learned that there are different ways to prepare for them.

You would have learned that life is risk. You can't avoid it. All you can do is mitigate it and handle it. You must decide, consciously or unconsciously, which bad scenarios you are going to prepare for and how you will prepare for them. If you fail to prepare for the bad scenario that actually befalls you, that's not the government's fault, it's not your parents' fault, it's not your kindergarten teacher's fault. It's your fault. You are responsible for yourself. If you make a bad decision, you are not entitled to demand help from those who made good decisions. Learn from your mistake, make better decisions next time, and teach others not to make your mistake.

It's impossible to be justified in having a sense of security, because if you're alive, there's no such thing as security, and if you're dead, there's no such thing as a sense. Complete security is impossible. All you can do, all anyone can do, is evaluate which risks are most dangerous, make what you believe are appropriate preparations, and then live your life. If you evaluated poorly or just got unlucky, that's unfortunate, but you made the choice, and you must live with the consequences.

Sorry Kristine, but the bottom line is that you're an adult—put on your big-girl pants and take responsibility for your own decisions.

Children citizens

I am trying to imagine what new features despotism might have in today's world: I see an innumerable host of men, all alike and equal, endlessly hastening after petty and vulgar pleasures with which they fill their souls. Each of them, withdrawn into himself, is virtually a stranger to the fate of all the others. For him, his children and personal friends comprise the entire human race. As for the remainder of his fellow citizens, he lives alongside them but does not see them. He touches them but does not feel them. He exists only in himself and for himself, and if he still has a family, he no longer has a country.

Over these men stands an immense tutelary power, which assumes sole responsibility for securing their pleasure and watching over their fate. It is absolute, meticulous, regular, provident, and mild. It would resemble paternal authority if only its purpose were the same, namely, to prepare men for manhood. But on the contrary, it seeks only to keep them in childhood irrevocably. It likes citizens to rejoice, provided they think only of rejoicing. It works willingly for their happiness but wants to be the sole agent and only arbiter of that happiness. It provides for their security, foresees and takes care of their needs, facilitates their pleasures, manages their most important affairs, directs their industry, regulates their successions, and divides their inheritances. Why not relieve them entirely of the trouble of thinking and the difficulty of living?

Unfortunately, we don't have to imagine.

Promoting bad ideology

Lew Rockwell:

The most recent financial meltdown [...] has unleashed a fury of socialistic blather and Keynesian central-planning mythology.

We have politicians and central bankers telling us that more paper money and bank nationalization will save us. Others say that capitalism has completely failed so we need to try socialism.

You would swear that these people were born yesterday, had never read a lick of history, and were wholly ignorant of economic logic. All of that is probably true. But here is what people don't entirely understand: it is in the interest of our rulers to promote bad ideology.

Who wins from bailouts, regulations, and inflation? It's not the middle class, taxpayers, or the businesses we know and love. It is the state, the bureaucrats, the megabankers, and the entire crew of connected interest groups who live at our expense.

This is the real basis of socialism and Keynesianism: ideologies that benefit the elites at the expense of everyone else.

In other news, I just found hours upon hours of lectures on economics, liberty, and history just waiting for me at mises.org. Time to load up the mp3 player!

Let. Them. Rot.

Guess what happens when you reward failed business models by shoveling money at them—other people (who also have failed business models) want some of that money too! The next group of thieves begging for a bailout is the UAW, since they're not happy with the $73/hour that they're making and instead want to either bankrupt GM/Ford/Chrysler or bankrupt America. The AP reports:

Even as Detroit's Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that workers will not make any more concessions.

Shut 'em down and send 'em home. I don't want to pay for their lousy cars, whether at the dealership or through the IRS.

What a mess...

Why am I so frustrated by this stupid election? Tocqueville knows why:

The greater the role that the executive power plays in directing the affairs of government, the greater and more necessary its habitual functions, the more dangerous such a state of affairs becomes. In a nation that has become used to being governed by the executive, and still more in a nation that has become accustomed to being administered by it, elections are invariably sources of profound disruption.

That explains the record election spending, among other things. So what's the solution? Heinlein puts it in perspective:

Certainly the game is rigged. Don’t let that stop you; if you don’t bet, you can’t win.

Vote.

"not intended to take over the free market but to preserve it."

When words lose their meaning...

Hear that? That's the sound of weary travelers pounding the dusty road that leads to serfdom. Bush clearly understands nothing of economics or history or political science, even though dozens of authors (Hayek and Friedman would be a nice start, though at this point George Orwell shouldn't be neglected either) could easily explain it to him if he'd just tell Paulson to stuff the scare tactics.

The worst part is that this is the guy who supposedly supported limited government. Now he's engineering the greatest government intervention since FDR. Next, he'll wonder why private businesses are continuing to take absurd risks and then asking for bailouts.

This president is an absolute disgrace.

Remaining free

From Isaac Morehouse comes an valuable article on keeping the right perspective on elections and the continuous destruction of liberty:

An individual who wants to be free can be, no matter what the world brings. An individual who has let the spirit of freedom die will never be free, no matter what the world brings.

The idea that freedom is simply a state of mind may sound trifling, especially when considering some of the unimaginable horrors faced by unfree peoples across the globe. But even political freedom cannot be had without a people who keep the spirit of freedom alive within themselves; and if they do, political freedom is often not far behind.

And the takeaway:

Keep this in mind as America's government changes with each election. Remember this when you see government expanding its reach into your life. Rather than looking to political leaders to protect or expand our freedom we should cultivate the seeds of freedom in our own spirits, and inspire others to do the same. Nothing government can do can take away our freedom; and if we are a people who are truly free, the government will have to follow.

Willful ignorance

That's the only excuse for Bob Casey, in his defense of his vote for the even-worse bailout package the Senate passed Wednesday and the House will pass Friday (how can it not, with all those yummy sweeteners?):

I am not happy with the current crisis, and I'm angry about the climate of deregulation and deference to Wall Street over the last eight years that got us into this mess.

Uh, yeah. "Deregulation"? I thought that meant reduction of rules and less government oversight. The kind of thing democrats have been fighting for years with respect to Fannie Mae and Freddie Mac. You're new to this "Senator" thing, so the Wall Street Journal has kindly provided a history lesson. Note the little letters after the names. "D" means democrat—i.e. the party you belong to. I'm sorry that all of the "R" names are people supporting the regulations you now seem to support, but them's the facts.

You should know that Congress has significantly improved the original proposal presented by the Bush administration.

I should, huh? Yeah, all those great improvements like increasing the FDIC insurance to $250k? Because we need to save the morons who like making 0.9% interest on their life savings. Or because we're going to have to monetize our growing debt and what I can buy for $100k today will soon cost $250k. Or because $700 billion in liabilities wasn't enough for you.

As improved by the Senate, the legislation also requires participating companies to provide warrants and other forms of equity so that taxpayers will share in the profits if the stock of these companies goes up as a result of Treasury Department intervention.

This one is especially juicy. I'm not sure how much education you've had in this whole "free market" thing (you really ought to read more), but here's a hint—if no one wants to buy these things that the FedGov is about to buy, it's not because they're big money makers. Investors aren't stupid; bad debt isn't attractive because it's expected to lose money. Sorry—there's just no way the American taxpayer is going to come out of this ahead.

But that's not really the point, is it? It's nice the the FedGov is already in the mortgage business (Fannie Mae, Freddie Mac) and now the insurance business (AIG), so why not expand things? Fannie Mae and Freddie Mac were run with such openness, such lack of corruption, clearly, this is the model for the future! The FedGov ought to get into all sorts of other businesses, and what better time than now, when companies want to unload their bad debt.

F. A. Hayek had a name for this. It's called collectivism, and it's the root of high unemployment in Europe, crappy health care in Canada, and oppression in China.

Buckle up folks. It's The Road to Serfdom, and we're on it.

"the largest one-week push for socialism in US history..."

... has ended in epic failure. Of course, this probably increases the chance of electing a socialist president, but we're going to get one of those either way. Jeffrey Tucker has it right: this is a glorious moment for freedom, but perhaps not much more than a moment.

I, for one, welcome the lower taxes, inflation, and gas prices. Thank you, House Republicans. May the next five weeks prove you right.

Now is the crisis?

Though he spoke of a different crisis, over 200 years ago, the Federal Farmer's words remain relevant:

It is natural for men, who wish to hasten the adoption of a measure, to tell us, now is the crisis—now is the critical moment which must be seized, or all will be lost: and to shut the door against free enquiry, whenever conscious the thing presented has defects in it, which time and investigation will probably discover. This has been the custom of tyrants and their dependants in all ages.

Please keep fighting, House Republicans.

The blame game

Whose deserves the blame, really, for all this financial chaos? George Bush? Ben Bernanke? Henry Paulson? Big bad corporations? Greed?

Maybe it's our own fault, for not heeding the advice of Milton Friedman:

[G]overnmental measures constitute the major impediments to economic growth in the United States. Tariffs and other restrictions on international trade, high tax burdens and a complex and inequitable tax structure, regulatory commissions, government price and wage fixing, and a host of other measures give individuals an incentive to misuse and misdirect resources, and distort the investment of new savings. What we urgently need, for both economic stability and growth, is a reduction of government intervention not an increase.

From Capitalism and Freedom.