Friday, December 15, 2017

Limits on Power Are Limits on Oppression

Limits on Power Are Limits on Oppression

December 19 marks the birth of John Taylor of Caroline, who remains virtually unknown, despite being called “the most impressive political theorist that America has produced.”

Taylor, who served in the Continental Army, Virginia Legislature and U.S. Senate, was an Antifederalist, opposed to the overpowering central government he believed the Constitution would create. As F. Thornton Miller put it, “For Taylor, the Constitution was of worth only if it could serve the more fundamental cause of liberty.”

Taylor defended liberty and states’ rights, advocated a strict interpretation of the Constitution’s terms against federal overreaching, and vigorously opposed government favors and protectionism, which he called “the most efficacious system of tyranny practicable over civilized nations.”  

Taylor’s positions stand abandoned today. Government has become ever more the dispenser of special treatment at others’ expense. That is why Taylor’s 1822 Tyranny Unmasked merits revisiting.
Political liberty consists only in a government constituted to preserve and not to defeat the natural capacity of providing for our own good.

Governments able to do so uniformly sacrifice the national interest to their own.

As no government can patronize one class but at the expense of others…Is not their discord the universal consequence of the fraudulent power assumed by governments of allotting to classes and individuals indigence or wealth.

Payments…extorted to feed either an oppressive government or exclusive privileges… degenerate into actual tyranny.

The only reciprocity produced by [legislative favors] is between the corrupters and corrupted.

If a man should combine with a government to take away another’s property, the tyranny of the act would not be obliterated by the power of an accomplice.

The nation which imagines that… government can by provisions convert fraud into honesty relies upon a moral impossibility for the preservation of its liberty.

Governments, under pretense of supervising the affairs of individuals… enrich themselves and their instruments of oppression.

The treasure extorted beyond the line of honest frugality is uniformly diverted from the end of defending to that of transferring property.

The wealth of nations is best secured by allowing every person, as long as he adheres to the rules of justice, to pursue his own interest in his own way.

Liberty can only be preserved by a frugal government and by excluding frauds for transferring property from one man to another.

How then is tyranny to be ascertained… except as something which takes away our money, transfers our property and comforts to those who did not earn them, and eats the food belonging to others.

The transferring policy seems to suppose that the public has no property; and though legislatures have no moral or constitutional right to give one man’s property to another; yet that by combining the property of all men under the appellation “public,” they acquire both a moral and constitutional right to give the property of all men to one man.

There are two kinds of political economy. One consists of a frugal government, and an encouragement of individuals to earn, by suffering them to use; the other of contrivances for feeding an extravagant government, its parasites and partisans, its sinecures and exclusive privileges… [one] is liberty; the other is tyranny

Government… founded upon a supposed necessity that men must be robbed of their property to preserve social order… invariably terminates in despotism.

A government… able to oppress, must… be weak for the object of preserving liberty…Every innovation which weakens the limitations and divisions of power, alone able to make a government strong for the object of preserving liberty, makes it strong for the object of oppression.
John Taylor of Caroline deserves renewed attention, particularly for his overwhelming arguments derived from what Joseph Stromberg termed “the contrast between those whose property was the creature of political force and fraud and those who earned their property through productive work on the free market.”

As F. Thornton Miller wrote, “Most of Taylor’s world is gone. But, with the continued increase in the power of the federal government and the pursuit of policies that benefit specific constituencies, the principles set out in Tyranny Unmasked are as relevant today as they were in 1822.”


Gary M. Galles


Gary M. Galles is a professor of economics at Pepperdine University. His recent books include Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013). He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.



Wednesday, December 13, 2017

What Really Matters about Bitcoin

What Really Matters about Bitcoin

After Bitcoin hit $10,000, it, at last, seemed to dawn on the mainstream financial press that this thing matters. There has been a panic rush to catch up on the meaning of it all. Some have doubled down on the claim that the whole thing is a hoax. Others dismiss it as a bubble (indeed, all financial models would suggest that a correction is needed). Some bigshots have called for it to be banned as if it is even possible to ban a mathematical protocol.

So much confusion out there! Having followed this technology from 2010, here are the ten points I find most salient about Bitcoin and the entire cryptoasset sector.

1. It was not invented by government. From the ancient world, it has been claimed that money (right and proper money) is the domain of government, at the very least to guard but also to invent, impose, and manage. In the late 19th century, an entire school of economic thought grew up around it: the State Theory of Money. Georg Friedrich Knapp’s treatise by that name came out in 1905 (English translation 1924) and helped entrench the nationalization of money in central banks. Bitcoin shows that the theory is wrong. Good money emerges from exchange and entrepreneurship, as Carl Menger said.

2. It was not invented by academia. The Bitcoin protocol was released by an anonymous programmer on a small email list and then put into the commons. Economists – to say nothing of political scientists and sociologists – were entirely out of the loop. This is fascinating because mainstream intellectual hierarchy puts academia at the top and everyone else underneath. The black robes rule the course of history and everyone else is their benefactor, it is said, as if there were a structure of production for ideas. The problem with this theory emerged in the age of capitalism, when the practitioners, not the theorists, starting getting all the good ideas. Then the backlash came in the 20th century: the experts would manage society. Now we are finding out something amazing: the best ideas come from those with boots on the ground.

3. It’s not all about Bitcoin. In some ways, the high-flying returns on the headline cryptocurrency are a distraction from the genius of the underlying technology: the distributed ledger called the Blockchain. This technology has spawned a financial sector just as large as Bitcoin itself, with thousands of applications, including every form of contracting. Blockchain could even lead to an upheaval in the relationship between the individual and the state. The critical thing to understand about the technology is this: it is a better way than we’ve ever had to document and enforce ownership claims. If you do not understand what this sentence means, I’m sorry but you do not understand the value of this technology.

4. The old regulations won’t work. This technology is completely new, whereas all existing financial and regulatory machinery is based on muscling legacy technology to perform in a certain way. Retooling the regulations to fit simply won’t work. It is only going to create messes, slowing down but not stopping, progress. Legacy bureaucracies and stakeholders will fight and fight but nothing can stop this revolution, which is borderless and digital, making it impossible to control. Moreover, every regulation reduces competitiveness and entrenches incumbent firms. Do you think if government had banned, for example, horseshoes, electricity, internal combustion, or flight that this would have actually stopped these ideas from becoming reality? Governments are an annoyance, not the authors of history.

5. Money will be competitive. Many people see the current goings-on as a struggle between the dollar and Bitcoin. That is too simplified. The real struggle is between national money monopolies and a newly competitive system. That competition occurs between cryptocurrencies and cryptoassets. People want to know who the winner will be. This too is old-world thinking. The competitive process will never stop. Winning will be temporary, and a new challenger will rise up and take the top spot. This is a new world. No living person knows what this is like because money has been protected from market pressure for so long. In particular, Americans are going to have to get used to a world in which the dollar is no longer king.

6. Banking and credit will change. The whole institution of central banking is premised on the idea of a money monopoly which thereby enables full control and macroeconomic management. Crypto doesn’t have to be number one in order to wreck this presumption. It only needs to bust the monopoly. With a market cap of half a trillion dollars, this might have already happened. Moreover, distributed networks weave together money and payment systems, so old-world payment processors will be next to fall. New players are crawling out of the woodwork by the day.

7. The unbanked have rights. Some people estimate that the unbanked of the world population is two billion. That is surely an underestimate. Think of the developing world but don’t limit it to that. Where I live, the unbanked are everywhere, and they are that way for a variety of reasons. Maybe they fear the privacy intrusions. They have lifestyles and sources of income that fall out of the mainstream. They might have sketchy professions. Or they are too young. Maybe it is a family issue or they fear getting roped into the system. Whatever the case, they still retain economic rights, and Blockchain tech gives them options for the first time. This is the population that will fuel the entrepreneurship in this sector.

8. No one will be in charge. Blockchain has no central point of failure and no overarching controlling force. Financial intermediaries are not out of the picture but they are not essential. The systems of the past evolved into cartels; the systems of the future will be increasingly decentralized with non-stop disintermediation. Anyone who seeks full control will wake every day to the reality of shattered illusions. This goes for huge financial firms and also governments. Traditional policy rationale is rooted in the presumption of the preeminence of a single vision. The decentralized future will be rooted in the reality of nonstop disruption. No ideology can stop this.

9. It’s a template for everything. Bitcoin isn’t really about Bitcoin. It’s about human liberty. We are not happy to live in cages of anyone’s construction. The goal of human life is to find a way to freedom. Governments and their lackeys laughed and dismissed this whole revolution, circa 2009 to 2017. There is no way the bird can escape, they said. Now it is too late.

10. No one knows the future. No one could have anticipated this would happen. No one can know what lies in store for us. The future will be crowdsourced. This seeming chaos will find itself toward orderliness, and massively improve life on earth. That is how it should be.


Jeffrey A. Tucker


Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, economics adviser to FreeSociety.com, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books, most recently Right-Wing Collectivism: The Other Threat to Liberty, with a preface by Deirdre McCloskey (FEE 2017). He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press. He is available for press interviews via his email.

This article was originally published on FEE.org. Read the original article.



Monday, December 11, 2017

Reel Fishing (PlayStation)

Reel Fishing (PlayStation)




Millennials Get It Wrong about Socialism

Millennials Get It Wrong about Socialism

Last month’s 100th anniversary of the Russian Revolution is an appropriate occasion to remind us of the human atrocities committed by communist regimes. But we also should take time to reflect on the progress that has occurred since the fall of the Soviet Union and its socialist economic system in 1991.

A recent poll of Millennials found that 51 percent of them identified socialism as their favored socioeconomic system, with an additional 7 percent identifying communism as their favored system. Only 42 percent favored capitalism.

Socialism Kills, Always

Most Millennials I’ve met—and I meet quite a few as a college professor—are nice enough people. Most have no desire to see their fellow humans suffer. So I’m left to conclude that they have no appreciation for how socialism actually works in the real world.

Socialist regimes—through executions, intentional starvation, and brutal prison-work camps—killed more than 100 million of their own citizens in the 20th century. In places such as Cuba, North Korea, and Venezuela the atrocities continue.

Such atrocities are no accident. The nature of a centrally planned economy reduces humans to labor inputs who must be coerced to perform a part of someone else’s economic plan. If people are permitted to make their own choices, no economic plan is possible. A socialist system naturally selects leaders willing to exercise coercion to see that the plans are carried out.

The economic track record of socialism is as dismal as its human rights record. But we need not direct Millennials to history books to see it. They need only look at what has happened to former socialist countries during their own lifetimes, as these countries have moved away from socialism and towards capitalism.

Economic Freedom Leads to Better Outcomes

The Economic Freedom of the World Annual Report provides the best measure of the degree to which a country is relatively capitalist or socialist. The index relies, of course, on the availability of reliable data. Consequently, socialist regimes, like Cuba and North Korea, are unranked because of the lack of such data. But the index does allow us to assess changes in former socialist countries since they abandoned socialism.

Russia, for example, scored only 4.3 on the index’s 10-point scale in 1995, when it was first ranked. It has since improved its score by 52 percent and now ranks in the top 50 percent of all countries included in the index.

Other former Soviet-bloc countries moved toward capitalism more quickly. In the rankings in 1995, Estonia scored a 6.2 and Latvia a 5.7, ranking 57th and 75th, respectively. Since then, Estonia has moved up in the rankings to 17th place, and Latvia has jumped from 75th-freest economy in the world to 26th.

Outside the former Soviet bloc, China began its move away from socialism in 1978, just before the first Millennials were born. China’s first score was 3.6 in 1980. China has since improved by 76 percent and even this improvement understates China’s reforms as many special enterprise zones within China are much freer than the country as a whole.

But the rankings don’t tell the entire story. The result of the move toward capitalism has been increased prosperity: The people are better off. Average incomes have increased 250 percent in Russia since 1995. In more economically free Latvia and Estonia, incomes are up 487 percent and 461 percent, respectively. And it’s not just the rich getting richer. The percent of the population living on less than $5.50 per day has dropped 23 percent in Russia, 19 percent in Latvia, and 22 percent in Estonia.

The changes in China are even more striking. Average incomes are 12 times greater now than in 1995. More than 90 percent of the population lived on less than $5.50 a day back then; today, only about one-third of the population does.

Millennials could delve into history books to learn about Socialist atrocities. But they could also just look at the facts of the world and see how prosperity has increased as the former socialist countries have begun embracing capitalism. If they’d do either, I doubt you’d find many socialists among them.

Reprinted from the Independent Institute


Benjamin Powell


Benjamin Powell is the Director of the Free Market Institute at Texas Tech University and a Senior Fellow with the Independent Institute. He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.



Friday, December 8, 2017

Commodore Power Play – Winter 1982

Commodore Power Play – Winter 1982




In Defense of Bitcoin Hoarding

In Defense of Bitcoin Hoarding

In Internet slang, they are called the HODLers, the people who are clinging to their Bitcoin and refusing to spend it. Instead, they just refresh their wallet apps, feeling richer by day while deferring consumption. Many of these burgeoning millionaires live like paupers. I’ve met many of them: all over the U.S., in Israel, in Brazil. They believe that every dollar they spend today is two dollars they won’t make in a few months. Probably they are right.

Bitcoin is undergoing a historic deflation, which simply means that its value is growing relative to the goods and services it can purchase. This is in contrast to inflation, in which the value of the currency falls relative to its purchasing power. Inflation inspires spending – better to get rid of the money while it is more valuable. Deflation inspires saving – better to keep it so that your wealth rises over time.

So there is nothing selfish, strange, or weird about holding an asset that is rising in value. It would be irrational to do otherwise. And there is nothing odd about spending like mad in an inflation either. Our expectations of the future determine what we do today in every life and especially in monetary economics.

Some Money! 

This tendency to hold rather than spend is giving rise to a new claim. Bitcoin isn’t really a viable medium exchange, they say. You can’t buy a sandwich with it. Few people are paid in it. Adoption in the retail sector is slow. The total market capitalization is $219 billion and yet the trade volume nowhere near reflects that.

And it is true that most of the big money people are just holding it. James Mackintosh, writing in the Wall Street Journal, summarizes the conclusion: “It has become a vehicle for hoarding by libertarians for gambling by hordes of speculators attracted to its wild price swings.”

I’m looking now at the total market capitalization of the entire sector of cryptoassets: it approaches $400 billion. That is larger than the market cap of JP Morgan, by the way. That valuation is in private hands, growing in value at incredible rates. It’s risen 1,000% in 2017, and many people are predicting much higher growth in 2018.

The Implications

Under old-style Keynesian theory, economic growth is driven by consumer spending, not saving, so anyone who is hoarding money under the mattress is holding back progress. Hoarders are the enemy. “Every such attempt to save more by reducing consumption will so affect incomes,” wrote J.M Keynes, “that the attempt necessarily defeats itself.” He popularized what became known as the “Paradox of Thrift.”

It’s supposed to be counterintuitive. You think that saving up for the future is a good thing. Whoops, you are hurting others and, in the long run, hurting yourself. You should be spending, even going into debt to spend.

But sometimes “counterintuitive” is just wrong. That is the case here. There is no paradox. The intuition is right. Thrift is a good thing, on the individual level or for the whole society. Deferring consumption is the necessary precondition to permit saving. Saving is never wasteful. It’s true that infinite saving is pointless but that’s not how this works.

You are always saving for something. The end of saving is eventual consumption in some form. More importantly for economic growth, saving is the precondition for investment. Investment is what extends the complexity of the structure of production. This leads to employment, expansion of the division of labor, and the eventual rise of wealth.

Consider the classic case of Crusoe on the island. Every day he is out catching fish to eat. He doesn’t have time to weave a net because he is always fishing with a pole. But at some point, he realizes that he could catch more with a net. In order to gain time, he has to stop fishing. So he saves up a few days of fish so he can eat without fishing, during which time he weaves a net. That net allows him to multiply his catch by 10 times. The deferring of today’s consumption for great overall wealth later is what makes progress possible.

The Policy of Pillage

Once the wrong (Keynesian) theory took hold in the 1930s, it became national policy to incentivize consumption over spending. Gold was confiscated from people. Government spending, it was believed, would goose the economy to make up for the ability or willingness of people to spend. The gold standard itself was destroyed in order to build a monetary system that could be inflationary – so that the money would be worth less in the future than it is today, thereby motivating the desire to spend.

This whole policy became a disaster for economic growth. After World War II, the US underwent a huge expansion as a result of the hoarding that occurred throughout the Depression and the War, and this was despite (and not because of) federal policy.

After the initial boost in economic growth, the Federal Reserve began its inflationary path. The personal savings rate peaked at 15% but then savers were blindsided by a wicked hyperinflation that hit in the late seventies, pillaging the savings that had been built up for the last two decades. No surprise: personal saving fell and fell, incomes flattened, and economic growth became ever more of an uphill climb. In our own times, inflation has been fixed but now we deal with near-zero interest rates, which harms saving as well.



As you can see in the chart, the economic crisis of 2008 traumatized a generation to the point that people began to save at much greater rates. No more would be trust the system to take care of them. It was exactly at this point that Bitcoin came into being, and created something that is really the opposite of the dollar: a currency designed to rise in value over time.

Many of the metaphors surrounding Bitcoin were drawn from the old-world gold standard. We speak of mining, for example, and proof of work (think of miners wearing jeans, panning gold from stream or banging picks into mountains). As with gold, there is a limit on the amount that can be created. And there are multiple levels of standards to determine authenticity and truth in accounting. In some ways, Bitcoin was invented to be the ultimate anti-Keynesian monetary praxis.

Up with Thrift

Now we see the results. Bitcoiners are HODLers. They save. They hoard. They have turned against consumption in favor of saving. I see it myself all around me. Young people who are invested in Bitcoin turn down luxury consumption. They don’t own cars. They bike and walk. They don’t spend big on dinners. They live off cheap groceries. They know that everything they consume today eats into their capacity for consumption, investment, and building wealth for the future.

So much for the Paradox of Thrift. Bitcoin is about the Virtue of Thrift. The pundits can decry it all day. Bitcoin doesn’t care. What’s more, you don’t need economic theory to understand this. You only have to follow the money.

If you ever despair of the future, just consider how much capital is currently being built up in the crypto sector. There will come a time, maybe in five to 15 years, when all this deferred consumption is going to be unleashed on the world economy in the form of real capital to build wealth and prosperity. And consider too: this is not about one economy, not about one nation. It’s about the whole world, capital and prosperity without borders.

The pundits can fulminate all they want. Technology doesn’t care.


Jeffrey A. Tucker


Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, economics adviser to FreeSociety.com, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books, most recently Right-Wing Collectivism: The Other Threat to Liberty, with a preface by Deirdre McCloskey (FEE 2017). He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press. He is available for press interviews via his email.
This article was originally published on FEE.org. Read the original article.